10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8864

USG CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-3329400
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
550 West Adams Street, Chicago, Illinois	60661-3676
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code (312) 436-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares of the registrant’s common stock outstanding as of June 30, 2016 was 145,954,194.

Table of Contents

		Page
PART I  FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Consolidated Statements of Income: Three and Six Months Ended June 30, 2016 and 2015	3
	Consolidated Statements of Comprehensive Income (Loss): Three and Six Months Ended June 30, 2016 and 2015	4
	Consolidated Balance Sheets: As of June 30, 2016 and December 31, 2015	5
	Consolidated Statements of Cash Flows: Six Months Ended June 30, 2016 and 2015	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 4.	Mine Safety Disclosures	41
Item 6.	Exhibits	42
	Signatures	43

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

USG CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(millions, except per-share and share data)	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Net sales	$	1,002		$	970		$	1,972		$	1,879
Cost of products sold	790			787			1,565			1,543
Gross profit	212			183			407			336
Selling and administrative expenses	79			79			150			156
Recovery of receivable	—			—			(3		)	—
Gain on disposal of shipping operations, net	—			(1		)	—			(1		)
Operating profit	133			105			260			181
Income from equity method investments	16			14			23			22
Interest expense	(38		)	(40		)	(78		)	(83		)
Interest income	1			—			3			1
Loss on extinguishment of debt	(2		)	—			(4		)	(19		)
Other income, net	2			1			5			—
Income before income taxes	112			80			209			102
Income tax (expense) benefit	(38		)	(1		)	(68		)	1
Net income	$	74		$	79		$	141		$	103
Basic earnings per average common share	$	0.50		$	0.54		$	0.96		$	0.70
Diluted earnings per average common share	$	0.50		$	0.54		$	0.95		$	0.70
Average common shares	145,933,165			145,424,853			145,856,220			145,393,548
Average diluted common shares	147,994,032			146,990,178			147,321,420			147,167,248

See accompanying Notes to Consolidated Financial Statements.

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USG CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
(millions)
	2016			2015			2016			2015
Net income	$	74		$	79		$	141		$	103
Other comprehensive income (loss), net of tax:
Derivatives qualifying as cash flow hedges:
Gain (loss) on derivatives qualifying as cash flow hedges, net of tax (benefit) of $3, ($1), 0, and $0, respectively	4			—			(4		)	(1		)
Less: Reclassification adjustment for loss on derivatives included in net income, net of tax (benefit) of ($1), $0, ($2), and $0, respectively	(2		)	(3		)	(4		)	(5		)
Net derivatives qualifying as cash flow hedges	6			3			—			4
Pension and postretirement benefits:
Changes in pension and postretirement benefits, net of tax (benefit) of ($2), $0, ($3), and $1, respectively	(3		)	(8		)	(6		)	(2		)
Less: Amortization of prior service credit (cost) included in net periodic pension cost, net of tax (benefit) of ($1), $0, ($1), and ($1), respectively	(1		)	(2		)	(1		)	(3		)
Net pension and postretirement benefits	(2		)	(6		)	(5		)	1
Foreign currency translation:
Changes in foreign currency translation, net of tax of $0 in all periods	(36		)	(5		)	(12		)	(39		)
Other comprehensive loss, net of tax	$	(32	)	$	(8	)	$	(17	)	$	(34	)
Comprehensive income	$	42		$	71		$	124		$	69

See accompanying Notes to Consolidated Financial Statements.

4

USG CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions, except share and per share data)	June 30, 2016			December 31, 2015
	(Unaudited)
Assets
Cash and cash equivalents	$	479		$	442
Short-term marketable securities	208			194
Restricted cash	—			9
Receivables (net of reserves - $12 and $14)	433			391
Inventories	331			314
Income taxes receivable	5			5
Other current assets	35			45
Total current assets	1,491			1,400
Long-term marketable securities	2			36
Property, plant and equipment (net of accumulated depreciation and depletion - $2,003 and $1,936)	1,749			1,788
Deferred income taxes	658			728
Equity method investments	648			682
Other assets	97			102
Total assets	$	4,645		$	4,736
Liabilities and Stockholders’ Equity
Accounts payable	$	287		$	259
Accrued expenses	184			214
Current portion of long-term debt	363			500
Income taxes payable	6			9
Litigation settlement accrual	—			9
Total current liabilities	840			991
Long-term debt	1,676			1,675
Deferred income taxes	4			5
Pension and other postretirement benefits	347			392
Other liabilities	212			237
Total liabilities	3,079			3,300
Preferred stock – $1 par value, authorized 36,000,000 shares; outstanding - none	—			—
Common stock – $0.10 par value; authorized 200,000,000 shares; issued: 2016 - 145,954,000 shares; 2015 - 145,667,000 shares	15			15
Additional paid-in capital	3,033			3,027
Accumulated other comprehensive loss	(331		)	(314		)
Retained earnings (accumulated deficit)	(1,151		)	(1,292		)
Total stockholders’ equity	1,566			1,436
Total liabilities and stockholders’ equity	$	4,645		$	4,736

See accompanying Notes to Consolidated Financial Statements.

5

USG CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(millions)	Six months ended June 30,
	2016			2015
Operating Activities
Net income	$	141		$	103
Adjustments to reconcile net income to net cash:
Depreciation, depletion and amortization	72			72
Loss on extinguishment of debt	4			19
Recovery of receivable	(3		)	—
Share-based compensation expense	9			6
Deferred income taxes	66			1
Gain on asset dispositions	(11		)	(7		)
Income from equity method investments	(23		)	(22		)
Dividends received from equity method investments	18			18
Pension settlement	2			—
(Increase) decrease in working capital:
Receivables	(40		)	(66		)
Income taxes receivable	1			(1		)
Inventories	(17		)	6
Other current assets	5			1
Payables	25			(33		)
Accrued expenses	(20		)	(25		)
Decrease in other assets	1			1
Decrease in pension and other postretirement benefits	(51		)	(40		)
Decrease in other liabilities	(3		)	(4		)
Other, net	(12		)	5
Net cash provided by operating activities	$	164		$	34
Investing Activities
Purchases of marketable securities	(167		)	(32		)
Sales or maturities of marketable securities	187			103
Capital expenditures	(28		)	(48		)
Net proceeds from asset dispositions	12			42
Return of capital	1			—
Insurance proceeds	—			2
Release (deposit) of restricted cash	9			(49		)
Net cash provided by investing activities	$	14		$	18
Financing Activities
Issuance of debt	—			350
Repayment of debt	(141		)	(386		)
Payment of debt issuance fees	—			(6		)
Issuance of common stock	2			4
Repurchases of common stock to satisfy employee tax withholding obligations	(2		)	(8		)
Net cash used for financing activities	$	(141	)	$	(46	)
Effect of exchange rate changes on cash	—			(3		)
Net increase in cash and cash equivalents	$	37		$	3
Cash and cash equivalents at beginning of period	442			228
Cash and cash equivalents at end of period	$	479		$	231
Supplemental Cash Flow Disclosures:
Interest paid, net of capitalized interest	$	76		$	80
Income taxes paid, net of refunds received	5			1
Noncash Investing and Financing Activities:
Amount in accounts payable for capital expenditures	4			6
Reversal of USG Boral Building Products earnout	(24		)	—

See accompanying Notes to Consolidated Financial Statements.

6

USG CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. Organization, Consolidation and Presentation of Financial Statements

PREPARATION OF FINANCIAL STATEMENTS

We prepared the accompanying unaudited consolidated financial statements of USG Corporation in accordance with applicable United States Securities and Exchange Commission, or SEC, guidelines pertaining to interim financial information. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ materially from those estimates. In the opinion of our management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our financial results for the interim periods. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results of operations to be expected for the entire year.

Our segments are structured around our key products and business units: Gypsum, Ceilings, Distribution and USG Boral Building Products, or UBBP.

Our Gypsum reportable segment is an aggregation of the operating segments of the gypsum businesses in the United States, Canada, Mexico, and Latin America, our mining operation in Canada, and our shipping operations, which we exited in the second quarter of 2015. Gypsum manufactures products throughout the United States, Canada, Mexico and Latin America. These products include USG Sheetrock^® brand gypsum wallboard, Sheetrock^® brand joint compound, Durock^® brand cement board, Levelrock^® brand gypsum underlayment, Fiberock^® brand backerboard, Securock^® brand glass mat sheathing used for building exteriors, Securock^® brand gypsum fiber and glass mat panels used as roof cover board and structural panel concrete roofing.

Our Ceilings reportable segment is an aggregation of the operating segments of the ceilings businesses in the United States, Canada, Mexico, and Latin America. Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States and Canada.

Our Distribution reportable segment delivers gypsum wallboard, drywall metal, ceilings products, joint compound and other building products throughout the United States.

UBBP is our 50/50 joint ventures with Boral Limited. UBBP manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East.

These financial statements and notes are to be read in conjunction with the financial statements and notes included in USG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which we filed with the SEC on February 10, 2016.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

• Excess tax benefits and deficiencies related to stock compensation will be prospectively recognized in income tax expense instead of in equity when the awards vest or are settled. For the six months ended June 30, 2016 and 2015, we recorded a reduction to tax benefits to equity of $3 million and $0 million, respectively, that would have been recognized in tax expense under the new standard.

• Excess tax benefits that were previously unrecognized because the related tax deduction had not been realized through a reduction in taxes payable will be recorded on a modified retrospective basis. If we had early adopted this standard, we would have recorded a cumulative-effect adjustment to opening retained earnings of $25 million on our June 30, 2016 consolidated balance sheet.

7

• An accounting policy will be elected to either estimate forfeitures on awards, as previously required, or to recognize forfeitures as they occur. Upon adoption, we will recognize forfeitures as they occur and will record a cumulative-effect change to retained earnings in accordance with the modified retrospective adoption requirements. If we had early adopted this standard, we would have recorded an immaterial cumulative-effect adjustment to opening retained earnings on our June 30, 2016 consolidated balance sheet.

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

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires that most equity instruments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts the financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU does not apply to equity method investments or investments in consolidated subsidiaries. The new standard will be effective for us in the first quarter of 2018 and will be applied as a cumulative-effect adjustment to the balance sheet in the year of adoption. We do not expect the adoption of ASU 2016-01 will have a significant impact to our consolidated financial statements or disclosures.

In July 2015, the FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory," which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value for entities that measure inventory using the first-in, first-out (FIFO) or average cost method. The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard will be effective for us in the first quarter of 2017 and will be applied prospectively. We do not expect the adoption of ASU 2015-11 will have a significant impact to our consolidated financial statements or disclosures.

In May 2015, the FASB issued ASU 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)," which updates the disclosure requirements for investments that are measured at net asset value using the practical expedient. These investments are to be removed from the fair value hierarchy and shown as a reconciling item. The standard was effective for us in the first quarter of 2016 and will be applied retrospectively. The update will be reflected in our disclosure for our December 31, 2016 Annual Report on Form 10-K.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net),” which clarifies gross versus net revenue reporting when another party is involved in the transaction. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” and in May 2016, ASU 2016-12, “Revenues from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” both of which provide supplemental adoption guidance and clarification to ASU 2014-09. The standard will be effective for us in the first quarter of 2018, and we will adopt the new standard using the retrospective approach with practical expedients. We do not expect that the adoption of ASU 2014-09, ASU 2016-08, ASU 2016-10 or ASU 2016-12 will have a significant impact to our consolidated financial statements or disclosures.

8

2.    Equity Method Investments

Equity method investments as of June 30, 2016 and December 31, 2015, were as follows:

	June 30, 2016			December 31, 2015
(dollars in millions)	Carrying Value		Ownership Percentage	Carrying Value		Ownership Percentage
USG Boral Building Products	$	641	50%	$	675	50%
Other equity method investments	7		33% - 50%	7		33% - 50%
Total equity method investments	$	648		$	682

Investment in USG Boral Building Products

UBBP is our 50/50 joint ventures with Boral Limited, or Boral, and consists of USG Boral Building Products Pte. Limited, a company organized under the laws of Singapore, and USG Boral Building Products Pty Limited, a company organized under the laws of Australia. It manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East (the Territory). The products that UBBP manufactures and distributes include products for wall, ceiling, floor lining and exterior systems that utilize gypsum, wallboard, referred to as plasterboard in the Territory, mineral fiber ceiling tiles, steel grid and joint compound. We account for our investment in UBBP using the equity method of accounting. During the second quarter of 2016, UBBP paid cash dividends on earnings through March 2016 of which our 50% share totaled $18 million. We recorded the cash dividend in operating activities on our statements of cash flows. As of June 30, 2016, the amount of our consolidated retained earnings which represents undistributed earnings from UBBP is $46 million.

We formed the joint ventures with Boral on February 27, 2014. In the second quarter of 2016, we received $1 million from Boral for final customary working capital adjustments which resulted in a reduction of our investment. We recorded the working capital payment in investing activities on our statement of cash flows. In the event certain U.S. Dollar denominated performance targets are satisfied by UBBP, we will be obligated to pay Boral scheduled earnout payments in an aggregate amount up to $75 million, comprised first of $25 million based on performance during the first three years after closing and then up to $50 million based on performance during the first five years after closing. Upon inception of the joint ventures, we recorded a liability representing the present value of the first earnout payment. As of June 30, 2016, we concluded that it was no longer probable that the three-year performance target will be achieved primarily due to the strengthening of the U.S. Dollar against UBBP's functional currencies. As a result, we reversed the liability with a corresponding reduction to our investment. We have not recorded a liability for the second earnout payment as we have concluded that it is currently not probable that the five-year performance target will be achieved. If our conclusion on the probability of achievement were to change, we will record a liability representing the present value of the earnout payments with a corresponding increase to our investment. As of June 30, 2016 and December 31, 2015, our liability for the earnout payments was $0 million and $24 million, respectively. As of December 31, 2015, the liability is included in "Other liabilities" on our accompanying consolidated balance sheet.

All of our investments accounted for under the equity method of accounting are initially recorded at cost, and subsequently adjusted for our share of the net income or loss and cash contributions and distributions to or from these entities. Because the underlying net assets in our investments are denominated in a foreign currency, translation gains or losses will impact the recorded value of our investments. Translation gains or losses recorded in other comprehensive income were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Translation loss	$	(30	)	$	(3	)	$	(13	)	$	(19	)

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

	Three months ended June 30,				Six months ended June 30,
(millions)	2016		2015		2016		2015
USG Boral Building Products:
Net sales	$	273	$	264	$	502	$	492
Gross profit	86		70		151		131
Operating profit	41		34		64		57
Income from continuing operations before income taxes	46		36		70		62
Net income	34		28		49		46
Net income attributable to USG Boral Building Products	32		26		46		42
USG share of income from investment accounted for using the equity method	16		13		23		21
Other equity method investments:
USG share of income from investments accounted for using the equity method	—		1		—		1
Total income from equity method investments	$	16	$	14	$	23	$	22

Transactions with UBBP

Our Gypsum segment sells products to UBBP. Total sales to UBBP for the three and six months ended June 30, 2016 and June 30, 2015 were immaterial.

In 2014, in connection with the formation of UBBP, we contributed our ownership interest in a joint venture in China to UBBP, but retained our loan receivable from this joint venture. As of June 30, 2016 and December 31, 2015, the loan receivable, including interest, totaled $15 million and $14 million, respectively, and is included in "Other assets" on our accompanying consolidated balance sheets.

3.     Segments

Our operations are organized into four reportable segments: Gypsum, Ceilings, Distribution and UBBP. See Note 2 for segment results for UBBP. Segment results for our Gypsum, Ceilings and Distribution segments were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Net Sales:
Gypsum	$	635		$	617		$	1,270		$	1,194
Ceilings	137			131			262			254
Distribution	386			364			743			698
Eliminations	(156		)	(142		)	(303		)	(267		)
Total	$	1,002		$	970		$	1,972		$	1,879
Operating Profit (Loss):
Gypsum	$	113		$	98		$	224		$	166
Ceilings	33			25			62			46
Distribution	15			9			26			13
Corporate	(26		)	(24		)	(47		)	(47		)
Eliminations	(2		)	(3		)	(5		)	3
Total	$	133		$	105		$	260		$	181

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4. Earning Per Share

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

The reconciliation of basic earnings per share to diluted earnings per share is shown in the following table.

	Three months ended June 30,				Six months ended June 30,
(millions, except per-share data)	2016		2015		2016		2015
Net income	$	74	$	79	$	141	$	103
Effect of dilutive securities - Deferred compensation program for non-employee directors	—		—		—		—
Income available to shareholders	$	74	$	79	$	141	$	103
Average common shares	145.9		145.4		145.9		145.4
Dilutive RSUs, MSUs, performance shares and stock options	2.1		1.6		1.4		1.6
Deferred shares associated with a deferred compensation program for non-employee directors	—		—		—		0.2
Average diluted common shares	148.0		147.0		147.3		147.2
Earnings per average common share	$	0.50	$	0.54	$	0.96	$	0.70
Earnings per average diluted common share	$	0.50	$	0.54	$	0.95	$	0.70

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

	Three months ended June 30,		Six months ended June 30,
(millions, common shares)	2016	2015	2016	2015
MSUs, performance shares, RSUs and stock options	1.7	1.8	1.7	1.9
Deferred shares associated with a deferred compensation program for non-employee directors	0.2	0.2	0.2	—

5. Marketable Securities

Marketable securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive loss on our accompanying consolidated balance sheets. Proceeds received from sales or maturities of marketable securities were $187 million for the six months ended June 30, 2016. Our investments in marketable securities consisted of the following:

	As of June 30, 2016				As of December 31, 2015
(millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate debt securities	$	136	$	136	$	134	$	134
U.S. government and agency debt securities	51		51		57		57
Asset-backed debt securities	2		2		21		21
Certificates of deposit	21		21		15		15
Municipal debt securities	—		—		3		3
Total marketable securities	$	210	$	210	$	230	$	230

The realized and unrealized gains and losses for the three and six months ended June 30, 2016 and 2015 were immaterial. Cost basis for securities sold are determined on a first-in-first-out basis.

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Contractual maturities of marketable securities as of June 30, 2016 were as follows:

(millions)	Amortized Cost		Fair Value
Due in 1 year or less	$	208	$	208
Due in 1-5 years	2		2
Total marketable securities	$	210	$	210

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

6.    Intangible Assets

Intangible assets are included in "Other assets" on our accompanying consolidated balance sheets. Intangible assets with definite lives are amortized. These assets are summarized as follows:

	As of June 30, 2016							As of December 31, 2015
(millions)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Intangible Assets with Definite Lives:
Customer relationships	$	70	$	(65	)	$	5	$	70	$	(61	)	$	9
Other	9		(8		)	1		9		(8		)	1
Total	$	79	$	(73	)	$	6	$	79	$	(69	)	$	10

Total amortization expense was $2 million and $4 million for the three and six months ended June 30, 2016 and 2015, respectively. Estimated amortization expense for the remainder of 2016 and for future years is as follows:

(millions)	2016		2017		2018 and thereafter
Estimated future amortization expense	$	3	$	2	$	1

Intangible assets with indefinite lives are not amortized. The gross carrying amount of these assets are as follows:

(millions)	June 30, 2016		December 31, 2015
Intangible Assets with Indefinite Lives:
Trade names	$	22	$	22
Other	8		8
Total	$	30	$	30

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7.     Debt

Total debt, including the current portion of long-term debt, consisted of the following:

(millions)	June 30, 2016		December 31, 2015
5.5% senior notes due 2025	$	350	$	350
5.875% senior notes due 2021	350		350
6.3% senior notes due 2016	363		500
7.75% senior notes due 2018	500		500
7.875% senior notes due 2020, net of discount	249		249
Industrial revenue bonds (due 2028 through 2034)	239		239
Total	$	2,051	$	2,188
Less: Unamortized debt issuance costs	12		13
Total	$	2,039	$	2,175

REPURCHASE OF SENIOR NOTES

In the first six months of 2016, we repurchased $137 million of our 6.3% Senior Notes due in 2016, referred to as the 6.3% Notes, on the open market. The transaction included premiums of $4 million and accrued interest of $3 million for aggregate consideration of $144 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt, before tax, of $4 million including premiums, write-off of deferred financing fees and broker fees, of which $2 million occurred in the second quarter.

Subsequent to quarter end, we repurchased an additional $40 million of the 6.3% Notes. The transaction included $1 million for premiums for an aggregate consideration of $41 million. These notes are recorded in "Current portion of long-term debt" on our accompanying consolidated balance sheets.

In the first quarter of 2015, we repurchased $350 million of our 8.375% Senior Notes due in 2018, referred to as the 8.375% Notes, through both a cash tender offer and a subsequent notice of redemption of the remaining 8.375% Notes. We completed a cash tender offer pursuant to which we repurchased $126 million of the 8.375% Notes for aggregate consideration, including tender offer premium and accrued and unpaid interest, of $135 million. We repurchased the remaining $224 million of the 8.375% Notes for aggregate consideration, including premiums and accrued and unpaid interest, of $242 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt of $19 million including premiums and write-off of deferred financing fees.

Also in the first quarter of 2015, we issued $350 million of 5.5% Senior Notes due March 1, 2025. The net proceeds from the issuance of these notes and cash on hand were used to fund the repurchases of the 8.375% Notes and all related costs and expenses. We deferred approximately $6 million of debt issuance costs that are being amortized to interest expense over the term of the notes. As of June 30, 2016 and December 31, 2015, these notes, net of unamortized debt issuances costs, were recorded on our accompanying consolidated balance sheets at $345 million and $344 million, respectively.

CREDIT FACILITY

Taking into account the most recent borrowing base calculation delivered under the credit facility, which reflects trade receivables and inventory as of June 30, 2016, and outstanding letters of credit, borrowings available under the credit facility were approximately $341 million, including $50 million for CGC. As of June 30, 2016 and during the quarter then-ended, there were no borrowings under the facility. Had there been any borrowings as of that date, the applicable interest rate would have been 1.90% for loans in the US and 2.13% for loans in Canada. Outstanding letters of credit totaled $47 million as of June 30, 2016.

The fair value of our debt was approximately $2.153 billion as of June 30, 2016 and $2.295 billion as of December 31, 2015. The fair values were based on quoted prices for identical or similar liabilities in markets that are not active or valuation models in which all significant inputs are observable and, as a result, are classified as Level 2 inputs. See Note 9 for further discussion on fair value measurements and classifications.

As of June 30, 2016, we were in compliance with the covenants contained in our credit facilities.

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8. Derivative Instruments

We use derivative instruments to manage selected commodity price and foreign currency exposures as described below. We do not use derivative instruments for speculative trading purposes, and we typically do not hedge beyond three years. Cash flows from derivative instruments are included in net cash provided by operating activities in the consolidated statements of cash flows.

COMMODITY DERIVATIVE INSTRUMENTS

As of June 30, 2016, we had outstanding natural gas swap contracts to hedge forecasted purchases with an aggregate notional amount of 29 million mmBTUs (millions of British Thermal Units). All of these contracts mature by December 31, 2019. For contracts designated as cash flow hedges, the pre-tax net unrealized loss that remained in accumulated other comprehensive income (loss), or AOCI, as of June 30, 2016 was $5 million and as of December 31, 2015 was $19 million. No ineffectiveness was recorded on contracts designated as cash flow hedges in the first six months of both 2016 and 2015. Gains and losses on contracts designated as cash flow hedges are reclassified into earnings when the underlying forecasted transactions affect earnings. For contracts designated as cash flow hedges, we reassess the probability of the underlying forecasted transactions occurring on a quarterly basis.

Changes in fair value on contracts not designated as cash flow hedges are recorded to earnings. The fair value of those contracts not designated as cash flow hedges was $0 million as of June 30, 2016 and a $2 million unrealized loss as of December 31, 2015.

FOREIGN EXCHANGE DERIVATIVE INSTRUMENTS

We have foreign exchange forward contracts to hedge forecasted purchases of products and services denominated in foreign currencies. The notional amount of these contracts was $122 million as of June 30, 2016, and they mature by December 31, 2017. These forward contracts are designated as cash flow hedges and no ineffectiveness was recorded in the first six months of both 2016 and 2015. Gains and losses on the contracts are reclassified into earnings when the underlying forecasted transactions affect earnings. The fair value of these contracts that remained in AOCI was an unrealized net pre-tax loss of $2 million as of June 30, 2016 and an unrealized net pre-tax gain of $8 million as of December 31, 2015.

COUNTERPARTY RISK, MASTER NETTING ARRANGEMENTS AND BALANCE SHEET OFFSETTING

We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instruments. As of June 30, 2016, our derivatives were in a $7 million net liability position. All of our counterparties have investment grade credit ratings; accordingly, we anticipate that they will be able to fully satisfy their obligations under the contracts.

All of our derivative contracts are governed by master netting agreements negotiated between us and the counterparties that reduce our counterparty credit exposure. The agreements outline the conditions (such as credit ratings and net derivative fair values) upon which we, or the counterparties, are required to post collateral. As required by certain of our agreements, we had $13 million of collateral posted with our counterparties related to our derivatives as of June 30, 2016. Amounts paid as cash collateral are included in "Receivables" on our accompanying consolidated balance sheets.

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

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FINANCIAL STATEMENT INFORMATION

The following are the pretax effects of derivative instruments on the consolidated statements of income for the three months ended June 30,2016 and 2015.

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)					Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016		2015				2016			2015
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	$	7	$	1		Cost of products sold	$	(5	)	$	(4	)
Foreign exchange contracts	—		(2		)	Cost of products sold	2			1
Total	$	7	$	(1	)		$	(3	)	$	(3	)

	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	1	$	—
Total		$	1	$	—

The following are the pretax effects of derivative instruments on the consolidated statements of income for the six months ended June 30,2016 and 2015.

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)						Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016			2015				2016			2015
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	$	2		$	(4	)	Cost of products sold	$	(10	)	$	(7	)
Foreign exchange contracts	(6		)	3			Cost of products sold	4			2
Total	$	(4	)	$	(1	)		$	(6	)	$	(5	)

	Location of Gain or (Loss)  Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	—	$	(1	)
Total		$	—	$	(1	)

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The following are the fair values of derivative instruments and the location on our accompanying consolidated balance sheets as of June 30, 2016 and December 31, 2015.

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		6/30/16		12/31/15			6/30/16		12/31/15
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	Other current assets	$	3	$	1	Accrued expenses	$	7	$	15
Commodity contracts	Other assets	3		—		Other liabilities	4		5
Foreign exchange contracts	Other current assets	1		8		Accrued expenses	2		—
Foreign exchange contracts	Other assets	—		—		Other liabilities	1		—
Total derivatives in cash flow hedging relationships		$	7	$	9		$	14	$	20

Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other current assets	$	—	$	—	Accrued expenses	$	—	$	2
Total derivatives not designated as hedging instruments		$	—	$	—		$	—	$	2
Total derivatives	Total assets	$	7	$	9	Total liabilities	$	14	$	22

As of June 30, 2016, we had no derivatives designated as fair value hedges or net investment hedges.

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9.     Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value. There are three levels of inputs that may be used to measure fair value. Level 1 is defined as observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities that a company has the ability to access. Level 2 is defined as inputs, other than the quoted prices included in Level 1, which are observable for the asset or liability, either directly or indirectly. Level 3 is defined as unobservable inputs for the asset or liability which is typically based on a company's own assumptions where there is little, if any, related market data available.

The cash equivalents and equity mutual funds shown in the table below primarily consist of money market funds that are valued based on quoted prices in active markets and, as a result, are classified as Level 1. We use quoted prices, other readily observable market data and internally developed valuation models when valuing our marketable securities and derivatives and have classified them as Level 2. Marketable securities are valued using income and market value approaches and values are based on quoted prices or other observable market inputs received from data providers. The valuation process may include pricing matrices, or prices based upon yields, credit spreads or prices of securities of comparable quality, coupon, maturity and type. Derivatives are valued using the income approach including discounted-cash-flow models or a Black-Scholes option pricing model and readily observable market data. The inputs for the valuation models are obtained from data providers and include end-of-period spot and forward natural gas prices, foreign currency exchange rates, natural gas price volatility and LIBOR and swap rates for discounting the cash flows implied from the derivative contracts.

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

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)				Total
(millions)	6/30/16		12/31/15		6/30/16			12/31/15			6/30/16		12/31/15		6/30/16			12/31/15
Cash equivalents	$	232	$	223	$	59		$	25		$	—	$	—	$	291		$	248
Equity mutual funds	4		4		—			—			—		—		4			4
Marketable securities:
Corporate debt securities	—		—		136			134			—		—		136			134
U.S. government and agency debt securities	—		—		51			57			—		—		51			57
Asset-backed debt securities	—		—		2			21			—		—		2			21
Certificates of deposit	—		—		21			15			—		—		21			15
Municipal debt securities	—		—		—			3			—		—		—			3
Derivative assets	—		—		7			9			—		—		7			9
Derivative liabilities	—		—		(14		)	(22		)	—		—		(14		)	(22		)

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10.    Employee Retirement Plans

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

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Pension:
Service cost of benefits earned	$	12		$	12		$	23		$	25
Interest cost on projected benefit obligation	17			17			34			34
Expected return on plan assets	(22		)	(21		)	(44		)	(42		)
Settlement	—			—			2			—
Net amortization	4			10			9			19
Net pension cost	$	11		$	18		$	24		$	36
Postretirement:
Service cost of benefits earned	$	—		$	—		$	1		$	1
Interest cost on projected benefit obligation	2			2			3			3
Net amortization	(7		)	(8		)	(14		)	(16		)
Net postretirement benefit	$	(5	)	$	(6	)	$	(10	)	$	(12	)

During the first six months of 2016, we made cash contributions of $50 million to the USG Corporation Retirement Plan Trust, $6 million to our pension plan in Canada, and $5 million, in aggregate, to certain other domestic pension plans. We expect to make total contributions to our pension plans in 2016 of approximately $65 million.

11.    Share-Based Compensation

During the first six months of 2016, we granted share-based compensation in the form of market share units, or MSUs, performance shares, and restricted stock units, or RSUs, to eligible participants under our Long-Term Incentive Plan and 2016 Long-Term Incentive Plan that was approved at our 2016 annual meeting of stockholders. We recognize expense on all share-based grants over the service period, which is the shorter of the period until the employees’ retirement eligibility dates and the service period of the award for awards expected to vest. Expense is generally reduced for estimated forfeitures. Awards granted during the first six months of 2016, weighted average fair value, and assumptions used to determine fair value were as follows:

	MSUs			Performance Shares			RSUs
Awards granted	800,834			213,626			46,000
Weighted average fair value	$	19.59		$	21.10		$	21.84
Expected volatility	34.02		%	34.02		%	N/A
Risk-free rate (a)	0.86		%	0.86		%	N/A
Expected term (in years) (b)	2.95			2.95			N/A
Expected dividends	—			—			N/A

(a) The risk-free rate was based on zero coupon U.S. government issues at the time of grant.

(b) The expected term represents the period from the valuation date to the end of the performance period.

MARKET SHARE UNITS

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

We estimated the fair value of each MSU granted on the date of grant using a Monte Carlo simulation that used the assumptions noted in the table above. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term.

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PERFORMANCE SHARES

The performance shares granted during the first six months of 2016 generally vest after a three-year period based on our total stockholder return relative to the performance of the Dow Jones U.S. Construction and Materials Index, with adjustments to that index in certain circumstances, for the three-year period. The number of performance shares earned will vary from zero to 200% of the number of performance shares awarded depending on that relative performance. Generally, vesting will be pro-rated based on the number of full months employed during the performance period in the case of death, disability, or retirement. Each performance share earned will be settled in common stock at the end of the three-year period.

We estimated the fair value of each performance share granted on the date of grant using a Monte Carlo simulation that used the assumptions noted in the table above. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term.

RESTRICTED STOCK UNITS

The RSUs granted during the first six months of 2016 vest after a specified number of years from the date of grant or at a specified date, subject to cliff vesting. Generally, RSUs may vest earlier in the case of death, disability, or a change in control, provided that RSUs will vest upon a change in control in most circumstances only if there is also a related loss of employment or diminution of duties. Each RSU is settled in a share of our common stock after the vesting period. The fair value of each RSU granted is equal to the closing price of our common stock on the date of grant.

12.    Supplemental Balance Sheet Information

INVENTORIES

Total inventories consisted of the following:

(millions)	June 30, 2016		December 31, 2015
Finished goods	$	228	$	210
Work in progress	36		36
Raw materials	67		68
Total	$	331	$	314

ASSET RETIREMENT OBLIGATIONS

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

	Six months ended June 30,
(millions)	2016			2015
Balance as of January 1	$	119		$	123
Accretion expense	4			4
Changes in estimated cash flows	—			(1		)
Liabilities settled (a)	(2		)	(1		)
Foreign currency translation	1			(2		)
Balance as of June 30	$	122		$	123

(a) Liabilities settled for the six months ended June 30, 2016 includes a $2 million liability that was relieved in conjunction with the sale of a surplus property.

ACCRUED INTEREST

Interest accrued on our debt as of June 30, 2016 and December 31, 2015 was $44 million and $45 million, respectively, and is included in "Accrued expenses" on our accompanying consolidated balance sheets.

ASSET DISPOSITIONS

In the second quarter of 2016, we recorded a gain of $11 million, or $7 million net of tax, on the sale of a surplus property. The sale relieved the Company of an asset retirement obligation, as noted in the above table, and included the sale of raw material inventory on hand at the surplus location. The pre-tax gain was recorded in cost of products sold within our Gypsum segment.

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13.    Accumulated Other Comprehensive Income (Loss)

Changes in the balances of each component of AOCI for the six months ended June 30,2016 and 2015 were as follows:

	Derivatives						Defined Benefit Plans						Foreign Currency Translation						AOCI
(millions)	2016			2015			2016			2015			2016			2015			2016			2015
Balance as of January 1	$	20		$	16		$	(221	)	$	(302	)	$	(113	)	$	(52	)	$	(314	)	$	(338	)
Other comprehensive loss before reclassifications, net of tax	(4		)	(1		)	(6		)	(2		)	(12		)	(39		)	(22		)	(42		)
Less: Amounts reclassified from AOCI, net of tax	(4		)	(5		)	(1		)	(3		)	—			—			(5		)	(8		)
Net other comprehensive income (loss)	—			4			(5		)	1			(12		)	(39		)	(17		)	(34		)
Balance as of June 30	$	20		$	20		$	(226	)	$	(301	)	$	(125	)	$	(91	)	$	(331	)	$	(372	)

Amounts reclassified from AOCI, net of tax, for the three and six months ended June 30, 2016 and 2015, were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Derivatives
Net reclassification from AOCI for cash flow hedges included in cost of products sold	$	(3	)	$	(3	)	$	(6	)	$	(5	)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1		)	—			(2		)	—
Net amount reclassified from AOCI	$	(2	)	$	(3	)	$	(4	)	$	(5	)
Defined Benefit Plans
Net reclassification from AOCI for amortization of prior service benefit included in cost of products sold	$	(2	)	$	(1	)	$	(4	)	$	(2	)
Net reclassification from AOCI for amortization of prior service cost included in selling and administrative expenses	—			(1		)	2			(2		)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1		)	—			(1		)	(1		)
Net amount reclassified from AOCI	$	(1	)	$	(2	)	$	(1	)	$	(3	)

We estimate that we will reclassify a net $3 million after-tax loss on derivatives from AOCI to earnings within the next 12 months.

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14. Income Taxes

In the second quarter of 2016, we recorded income tax expense of approximately $38 million. The income tax expense for the three months reflects taxes from federal, foreign, state and local jurisdictions. Our effective tax rate was 33.9%. Our effective tax rate was lower than the U.S. statutory rate primarily because of earnings realized in countries that had lower statutory tax rates and because of our equity method income, which is recorded net of tax. Our effective tax rate in the future will depend on the portion of our profits earned within and outside the United States.

In the six months ended June 30, 2016, we recorded income tax expense of $68 million reflecting taxes from federal, foreign, state and local jurisdictions. Our effective tax rate for the first six months was 32.5%.

As of June 30, 2016, we had federal net operating loss, or NOL, carryforwards of approximately $1.592 billion that are available to offset future federal taxable income and will expire in the years 2026 through 2032, none of which are subject to Internal Revenue Code limitations under Section 382. In addition, as of that date, we had federal AMT credit carryforwards of approximately $40 million that are available to reduce future regular federal income taxes over an indefinite period. In order to fully realize these U.S. federal net deferred tax assets, taxable income of approximately $1.707 billion would need to be generated during the period before their expiration.

As of June 30, 2016, we had a gross deferred tax asset related to our state NOLs and tax credit carryforwards of $223 million, of which $26 million will expire in 2016. The remainder will expire if unused in years 2017 through 2035. We also had NOL and tax credit carryforwards in various foreign jurisdictions in the amount of $1 million as of June 30, 2016, against which we have maintained a valuation allowance.

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

Based on our evaluation, during the first six months of 2016, we made no adjustments to the valuation allowance against our deferred tax assets of $75 million, which relates to certain NOLs that we anticipate will not be used prior to their expiration.

The Internal Revenue Code imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change” which can result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. If we were to experience an ownership change, utilization of our NOLs would be subject to an annual limitation that may be carried over to later years within the allowed NOL carryforward period. Over the entire carryforward period, we may not be able to use all our NOLs due to the aforementioned annual limitation. If an ownership change had occurred as of June 30, 2016, our annual U.S. federal NOL utilization would have been limited to approximately $89 million per year.

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15. Litigation

WALLBOARD PRICING LAWSUITS

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

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

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

ENVIRONMENTAL LITIGATION

We have been notified by state and federal environmental protection agencies of possible involvement as one of numerous “potentially responsible parties” in a number of Superfund sites in the United States. As a potentially responsible party, we may be responsible to pay for some part of the cleanup of hazardous waste at those sites. In most of these sites, our involvement is expected to be minimal. In addition, we are involved in environmental cleanups of other property that we own or owned. As of both June 30, 2016 and December 31, 2015, we had an accrual of $16 million for our probable and reasonably estimable liability in connection with these matters. Our accruals take into account all known or estimated undiscounted costs associated with these sites, including site investigations and feasibility costs, site cleanup and remediation, certain legal costs, and fines and penalties, if any. However, we continue to review these accruals as additional information becomes available and revise them as appropriate. Based on the information known to us, we believe these environmental matters will not have a material effect on our results of operations, financial position or cash flows.

OTHER LITIGATION

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

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16. Gypsum Transportation Limited

We exited our shipping operations in the second quarter of 2015. In November 2015, we entered into a release and debt settlement agreement (Settlement Agreement) to recover a portion of our loss incurred when our former trading partner ceased performing under the contract in the fourth quarter of 2014. The Settlement Agreement required payments totaling $14 million beginning in December 2015. The payments received to settle a $9 million loss on the outstanding trade receivable was recorded as a benefit to our consolidated statements of income when we determined the payments to be probable. We recorded a recovery of $6 million in the fourth quarter of 2015 and $8 million in the first quarter of 2016. With the payments received in the first quarter, the total recovery under the Settlement Agreement is complete.

For the six months ended June 30, 2016, the recovery is presented as $3 million within "Recovery of receivable", $1 million within "Interest income" and $4 million within "Other income, net" on our consolidated statement of income.

GTL recorded operating profit of $0 million and $3 million for the three and six months ended June 30, 2016, respectively, compared with operating profit of $1 million for both the three and six months ended June 30, 2015.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, “USG,” “we,” “our” and “us” refer to USG Corporation, a Delaware corporation, and its subsidiaries included in the consolidated financial statements, except as otherwise indicated or as the context otherwise requires.

Overview

We are a leading manufacturer and distributor of building materials. We produce a wide range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction as well as products used in certain industrial processes. We estimate that during the first six months of 2016:

• residential and nonresidential repair and remodel activity accounted for approximately 49% of our net sales,

• new residential construction accounted for approximately 27% of our net sales,

• new nonresidential construction accounted for approximately 22% of our net sales, and

• other activities accounted for approximately 2% of our net sales.

SEGMENTS

Our operations are organized into four segments: Gypsum, Ceilings, Distribution and USG Boral Building Products, or UBBP.

Gypsum: Our Gypsum segment manufactures and markets gypsum and related products in the United States, Canada, Mexico and Latin America. It includes United States Gypsum Company, or U.S. Gypsum, in the United States, and the gypsum businesses of CGC Inc., or CGC, in Canada, USG Mexico, S.A. de C.V., or USG Mexico, and Latin America. Gypsum’s products are used in a variety of building applications to finish the walls, ceilings and floors in residential, commercial and institutional construction and in certain industrial applications. The major product lines within the Gypsum segment are:

Wallboard	Sheetrock® brand gypsum wallboard portfolio
Surfaces	Sheetrock® brand joint compound, corner bead, joint tape and plaster
Substrates	Durock® brand cement backerboard, Levelrock® brand gypsum underlayment, Fiberock® brand backerboard, Securock® brand glass-mat roofing and commercial roof board, Securock® glass mat sheathing, structural panel concrete roofing and industrial gypsum

Ceilings: Our Ceilings segment manufactures and markets interior systems products in the United States, Canada, Mexico and Latin America. Ceilings includes USG Interiors, LLC, or USG Interiors, and the ceilings businesses of CGC, USG Mexico and Latin America. Ceilings is a leading supplier of interior ceilings products used primarily in commercial applications. Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States and Canada. It markets ceiling tile and ceiling grid in the United States, Canada, Mexico, and Latin America.

Distribution: Our Distribution segment consists of L&W Supply Corporation and its subsidiaries, or L&W Supply, a leading distributor of gypsum wallboard and other building materials in the United States. It is a service-oriented business that stocks a wide range of construction materials. It delivers less-than-truckload quantities of construction materials to job sites and places them in areas where work is being done, thereby reducing the need for handling by contractors.

USG Boral Building Products: USG Boral Building Products, or UBBP, is our 50/50 joint ventures with Boral Limited, or Boral, and consists of USG Boral Building Products Pte. Limited, a company organized under the laws of Singapore, and USG Boral Building Products Pty Limited, a company organized under the laws of Australia. UBBP manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East (the Territory). UBBP manufactures and distributes products for wall, ceiling, floor lining and exterior systems that utilize gypsum, wallboard, referred to as plasterboard in the Territory, mineral fiber ceiling tiles, steel grid and joint compound.

Geographic Information: For the first six months of 2016, we recorded $1.972 billion of net sales in our consolidated statements of income, of which approximately 86% were attributable to the United States, approximately 10% were attributable

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to Canada and other foreign countries accounted for the remaining 4%. Net sales for UBBP for the first six months of 2016 were $502 million, of which approximately 36% were attributable to Australia, 20% to South Korea, 14% to Thailand, 10% to China, and 20% to other foreign countries.

MARKET CONDITIONS AND OUTLOOK

Our businesses are cyclical in nature and sensitive to changes in general economic conditions, including conditions in the North American housing and construction-based markets and the markets in Asia and Australasia. Our expansion via UBBP into the markets of Asia, Australasia, and the Middle East has significantly increased our exposure to the economic conditions in those areas. However, the UBBP investment has helped diversify USG's overall exposure to changes in the North American economic conditions.

For the new residential construction market in the United States, housing starts are a very good indicator of demand for our gypsum products. Installation of our gypsum products into a single family home typically follows a housing start by 90 to 120 days. In June 2016, the seasonally-adjusted annualized rate of housing starts reported by the U.S. Census Bureau was 1,189,000 units. This is an increase from the May 2016 rate of 1,135,000 and the June 2015 rate of 1,174,000. In comparison, housing starts for all of 2015 were 1,111,900 units. Most industry analysts believe that the recovery in new residential construction will continue, although the recovery over the next few years may be modest, and that over the longer term housing starts will begin to reach historical averages. Industry analysts’ forecasts for 2016 housing starts in the United States included in the most recent Blue Chip Economic Indicators are 1,160,000 to 1,230,000 units, based on the average of the bottom ten and top ten forecasts included in the report, respectively. We currently estimate that 2016 housing starts in the United States will be 1,200,000.

Demand for our products from new nonresidential construction is determined by floor space for which contracts are signed. Installation of gypsum and ceilings products typically follows signing of construction contracts by about 12 to 18 months. According to the most recent construction market forecast from Dodge Data & Analytics, total floor space for which new nonresidential construction contracts were signed in the United States decreased 6% in 2015 compared with 2014. This followed a 14% increase in 2014 compared with 2013 and a 12% increase in 2013 compared with 2012. Dodge Data & Analytics forecasts that total floor space for which new nonresidential construction contracts in the United States are signed will increase approximately 6% in 2016 from the 2015 level. Dodge Data & Analytics' forecast includes several building types which do not generate significant demand for our products; therefore, we anticipate new nonresidential construction growth in our business sectors in 2016 compared to 2015 will increase at least 3%.

The repair and remodel market includes renovation of both residential and nonresidential buildings. As a result of the low levels of new home construction in recent years, this market currently accounts for the largest portion of our sales. Many buyers begin to remodel an existing home within two years of purchase. According to the National Association of Realtors, sales of existing homes in the United States were 5.26 million units in 2015, reflecting a 6% increase from the 2014 level of 4.94 million units. The seasonally adjusted annual rate of existing home sales was 5.57 million units in June 2016, which is 3% higher than the revised rate of 5.41 million in June 2015 and is the highest annual rate since February 2007. The generally rising levels of existing home sales and home resale values in recent years have contributed to an increase in demand for our products from the residential repair and remodel market. We currently estimate that overall repair and remodel spending in 2016, compared to 2015, will increase by mid single digits.

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

We expect modest improvement over the next twelve months in the construction industries of Canada and Mexico. Emerging markets, including those that are within the UBBP territory, provide opportunities for our operations to serve the increasing demand for products in these regions. Several other countries, including South Korea and Australia, are forecast to experience steady growth as well. Although the rate of growth in certain emerging markets has slowed, we expect the growth in

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these markets to exceed the improvements in North America with demand growth in the mid-single digits. We anticipate that the results from UBBP will enable us to counteract some of the potential cyclicality in our North American business.

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

Industry shipments of gypsum board in the United States (including gypsum wallboard, other gypsum-related paneling products and imports), as reported by the Gypsum Association, were an estimated 12.2 billion square feet in the first six months of 2016, up approximately 16% compared with 10.6 billion square feet in the first six months of 2015. We estimate that industry shipments in the United States for all of 2016 will be in the range of approximately 23.9 to 24.3 billion square feet, up approximately 7 to 9% from 22.3 billion square feet in 2015.

There is excess wallboard production capacity industry-wide in the United States. Industry capacity in the United States was approximately 32.8 billion square feet as of January 1, 2016. We estimate that the industry capacity utilization rate was approximately 74% and 63% during the first six months of 2016 and 2015, respectively. Based on current industry trends and forecasts, demand for gypsum wallboard is expected to increase in 2016, but the magnitude of any increase will depend on the levels of housing starts and repair and remodel activity. We project that the industry capacity utilization rate will experience a an increase of low-to-mid single digits in 2016 compared to 2015. We could experience pressure on gypsum wallboard selling prices and our gross margins at such low levels of capacity utilization.

U.S. Gypsum implemented a price increase for wallboard on March 28, 2016. However, it is uncertain that we will be able to maintain the increase in our gypsum wallboard selling prices. If we are unable to maintain our price increases, our net sales and operating profit may be materially and adversely impacted.

CURRENCY IMPACT

Currency impacts on consolidated and segment results have been derived by translating current period results at the quarter-to-date average foreign currency rates for the period ended June 30, 2015.

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Consolidated Results of Operations

(dollars in millions, except per-share data)	2016			2015			$ Favorable (Unfavorable)			% Favorable (Unfavorable)
Three months ended June 30:
Net sales	$	1,002		$	970		$	32		3	%
Cost of products sold	790			787			(3		)	—	%
Gross profit	212			183			29			16	%
Selling and administrative expenses	79			79			—			—	%
Gain on disposal of shipping operations, net	—			(1		)	(1		)	(100	)%
Operating profit	133			105			28			27	%
Income from equity method investments	16			14			2			14	%
Interest expense	(38		)	(40		)	2			5	%
Interest income	1			—			1			*
Loss on extinguishment of debt	(2		)	—			(2		)	*
Other income, net	2			1			1			100	%
Income before income taxes	112			80			32			40	%
Income tax expense	(38		)	(1		)	(37		)	*
Net income	$	74		$	79		$	(5	)	(6	)%
Diluted earnings per share	$	0.50		$	0.54		$	(0.04	)	(7	)%
Six months ended June 30:
Net sales	$	1,972		$	1,879		$	93		5	%
Cost of products sold	1,565			1,543			(22		)	(1	%)
Gross profit	407			336			71			21	%
Selling and administrative expenses	150			156			6			4	%
Recovery of receivable	(3		)	—			3			*
Gain on disposition of shipping operations, net	—			(1		)	(1		)	(100	)%
Operating profit	260			181			79			44	%
Income from equity method investments	23			22			1			5	%
Interest expense	(78		)	(83		)	5			6	%
Interest income	3			1			2			*
Loss on extinguishment of debt	(4		)	(19		)	15			79	%
Other income, net	5			—			5			*
Income before income taxes	209			102			107			*
Income tax (expense) benefit	(68		)	1			(69		)	*
Net income	$	141		$	103		$	38		37	%
Diluted earnings per share	$	0.95		$	0.70		$	0.25		36	%
*not meaningful

NET SALES

Consolidated net sales for the second quarter of 2016 increased $32 million, or 3%, from the second quarter of 2015. This reflected higher net sales across our Gypsum, Ceilings and Distribution segments due primarily to increased volumes. Sales for our Gypsum segment increased 3% which reflected higher shipments of Sheetrock^® brand gypsum wallboard, Sheetrock^® brand joint compound, Durock^® brand cement backerboard and Levelrock® brand gypsum underlayment. These increases in shipments in Gypsum were offset by a 1% reduction in average selling price for wallboard due primarily to changes in product mix and regional pricing differences. The increase in net sales of 5% for our Ceilings segment was primarily due to higher shipments of ceiling grid and increased average selling price for ceiling tile. Sales for our Distribution segment increased 6% due to higher volumes of gypsum wallboard and increased sales of metal products and adjacent products. Additionally, on a consolidated basis, we estimate that the net sales were negatively impacted by currency translation of $10 million.

Consolidated net sales for the first six months of 2016 increased $93 million, or 5%, compared with the first six months of 2015. The increase reflected higher sales for our Gypsum, Ceilings and Distribution segments. The increase of 6% in net sales for our Gypsum segment reflected higher volumes for Sheetrock^® brand gypsum wallboard, Sheetrock^® brand joint

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compound, Durock^® brand cement backerboard and Levelrock® brand gypsum underlayment. The increase in our Ceilings net sales of 3% primarily reflected higher shipments of ceiling grid. The increased sales of 6% for our Distribution segment were due to higher volumes of gypsum wallboard and increased sales of metal products and adjacent products. Additionally, on a consolidated basis, we estimate that the sales were negatively impacted by currency translation of $24 million.

GROSS PROFIT

Gross profit for the second quarter of 2016increased$29 million, or 16%, compared with the second quarter of 2015. Gross profit as a percentage of net sales was 21.2% for the second quarter of 2016, compared with 18.9% for the second quarter of 2015. The increase reflected margin expansion for our Gypsum, Ceilings, and Distribution segments driven by higher shipments and reflected higher average selling price for ceiling tile and lower per unit costs for Sheetrock^® brand joint compound and ceiling grid. Also driving the increase in gross profit was an $11 million gain on the sale of a surplus property.

Gross profit for the first six months of 2016increased$71 million, or 21%, compared with the first six months of 2015. Gross profit as a percentage of net sales was 20.6% for the first six months of 2016, compared with 17.9% for the first six months of 2015. The increase reflected higher shipments across all our Gypsum, Ceilings, and Distribution segments and an $11 million gain on the sale of surplus a property.

SELLING AND ADMINISTRATIVE EXPENSES

Selling and administrative expenses totaled $79 million in the second quarter of 2016 compared to $79 million in the second quarter of 2015. As a percentage of net sales, selling and administrative expenses decreased to 7.9% for the second quarter of 2016 from 8.1% for the second quarter of 2015. The decrease as a percentage of sales reflected lower net compensation cost, marketing costs and management's continued focus on managing discretionary spend.

Selling and administrative expenses totaled $150 million in the first six months of 2016 compared to $156 million in the first six months of 2015. As a percentage of net sales, selling and administrative expenses decreased to 7.6% for the first six months of 2016 from 8.3% for the first six months of 2015. The decrease as a percentage of sales reflected lower net compensation cost, marketing costs and management's continued focus on managing discretionary spend.

RECOVERY ON RECEIVABLE

In the first quarter of 2016, we received the remaining payments under a settlement agreement with our former trading partner of which $3 million represented a recovery of a previously deemed uncollectible receivable. The remaining payments received under the settlement agreement were recorded in "Interest income" and "Other income, net." See Note 16 to the consolidated financial statements for additional information.

GAIN ON DISPOSAL OF SHIPPING OPERATIONS, NET

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

INCOME FROM EQUITY METHOD INVESTMENTS

Income from equity method investments, primarily UBBP, in the second quarter of 2016 was $16 million, an increase of $2 million, or 14% from the second quarter of 2015. This reflected improved operating results for the USG Boral joint ventures due to higher margins in South Korea, Vietnam, and Australia and a decrease in variable costs and administrative expenses offset by an unfavorable impact of foreign currency of $1 million.

Income from equity method investments in the first six months of 2016 was $23 million, an increase of $1 million, or 5%, from the first six months of 2015. This reflected improved operating results for the USG Boral joint ventures due to higher margins in Korea, Vietnam, and Australia and a decrease in variable costs and administrative expenses offset by an unfavorable impact of foreign currency of $2 million.

INTEREST EXPENSE

Interest expense was $38 million in the second quarter of 2016, down $2 million, or 5%, from the second quarter of 2015, and was $78 million in the first six months of 2016, down $5 million, or 6%, from the first six months of 2015. The decrease in interest expense for both comparative periods was driven by the 2016 open market repurchases of our 6.3% Senior Notes due 2016, referred to as the 6.3% Notes; the February 2015 repurchase of our 8.375% Senior Notes due 2018, referred to as the 8.375% Notes; and the second quarter 2015 repayment of our ship mortgage facility offset by the issuance of our 5.5% Senior Notes due 2025 in the first quarter of 2015.

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LOSS ON EXTINGUISHMENT OF DEBT

In the second quarter and first six months of 2016, we recorded a loss of $2 million and $4 million, respectively, on the extinguishment of debt, including premiums, in connection with the open market purchases of the 6.3% Notes and write-off of deferred financing fees. In the first quarter of 2015, we recorded a $19 million loss on the extinguishment of debt in connection with the tender offer and repurchase of our 8.375% Notes. See Note 7 to the consolidated financial statements for additional information.

OTHER INCOME, NET

In the second quarter, we recorded $2 million of other income, net, which primarily reflected net gains on foreign currency transactions. In the first six months of 2016, we recorded $5 million of other income, net, which included net gains on foreign currency transactions and the receipt of the remaining payments under a settlement agreement with our former trading partner of which $4 million was recorded as other income. See Note 16 to the consolidated financial statements for additional information.

INCOME TAX (EXPENSE) BENEFIT

We recorded income tax expense of $38 million in the second quarter of 2016 from federal, foreign, state and local jurisdictions. Our effective tax rate was 33.9% for the second quarter of 2016. In the second quarter of 2015, we recorded an income tax expense of $1 million resulting in an effective tax rate of 1.3% reflecting the effects of the full valuation allowance against our U.S. deferred tax assets at that time.

We recorded income tax expense of $68 million for the first six months of 2016 from federal, foreign, state and local jurisdictions. Our effective tax rate was 32.5% for the first six months of 2016. We recorded an income tax benefit in the first six months of 2015 of $1 million resulting in an effective tax rate of (1.0)% reflecting the effects of the full valuation allowance against our U.S. deferred tax assets at the time.

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Segment Results of Operations

GYPSUM

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

	Three months ended June 30:											Six months ended June 30:
							Favorable (Unfavorable)											Favorable (Unfavorable)
(millions)	2016			2015			$			%		2016			2015			$			%
Net sales:
United States	$	538		$	516		$	22		4	%	$	1,081		$	993		$	88		9	%
Canada	86			87			(1		)	(1	)%	168			163			5			3	%
Mexico / Latin America	49			48			1			2	%	93			96			(3		)	(3	)%
Canadian Mining	—			2			(2		)	(100	)%	—			2			(2		)	(100	)%
Gypsum Transportation Limited	—			—			—			—	%	—			10			(10		)	(100	)%
Eliminations	(38		)	(36		)	(2		)	(6	)%	(72		)	(70		)	(2		)	(3	)%
Total	$	635		$	617		$	18		3	%	$	1,270		$	1,194		$	76		6	%
Operating profit (loss):
United States	$	107		$	91		$	16		18	%	$	210		$	157		$	53		34	%
Canada	5			3			2			67	%	11			4			7			*
Mexico / Latin America	4			5			(1		)	(20	)%	6			9			(3		)	(33	)%
Canadian Mining	(3		)	(2		)	(1		)	(50	)%	(6		)	(5		)	(1		)	(20	)%
Gypsum Transportation Limited	—			1			(1		)	(100	)%	3			1			2			*
Total	$	113		$	98		$	15		15	%	$	224		$	166		$	58		35	%

* Not meaningful

United States: Net sales in the second quarter of 2016 were $538 million, up $22 million, or 4%, compared with the second quarter of 2015. The increase in net sales was due to the following:

					Volume				Price
(millions)	$		%		$		%		$			%
Change to Q2 2016 from Q2 2015
Sheetrock® brand gypsum wallboard	$	3	2	%	$	6	3	%	$	(3	)	(1	)%
Sheetrock® brand joint compound	3		3	%	4		4	%	(1		)	(1	)%
Durock® brand cement board	2		8	%	2		8	%	—			—	%
Levelrock® brand gypsum underlayment	3		19	%	3		19	%	—			—	%
Other	11
Total increase in net sales	$	22	4	%

The increase of $3 million from the second quarter of 2015 to the second quarter of 2016 in Sheetrock^® brand gypsum wallboard reflected an increase in shipments offset by lower average selling price. The increased volumes were driven byhigher shipments into our core channels of distribution which includes big box retailers, specialty dealers, pro dealers, and manufactured housing. Our premium Sheetrock^® Brand UltraLight Panels accounted for 66% of all of our wallboard shipments during the second quarter of 2016, compared to 64% in the second quarter of 2015. The decrease in average selling prices primarily reflected changes in product mix and regional pricing differences.

Sales of Sheetrock^® brand joint compound increased $3 million on increased volume driven by the shipments to specialty dealers. Sales of Durock^® brand cement board increased $2 million which reflected higher volumes of 8% primarily across home improvement and tile and flooring channels. Sales of Levelrock^® brand gypsum underlayment increased by $3 million driven by higher volume. The increase in Other reflected higher sales of other surfaces and substrates products of $10 million, including Fiberock^® brand backerboard, Durock^® brand cement tile backerboard, structural panel concrete roofing, Securock^® brand glass-mat roof boards, and an increase in freight of $2 million which is reflective of higher sales offset by an adjustment of $2 million to customer reserves.

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Operating profit of $107 million was recorded in the second quarter of 2016 compared to $91 million recorded in the second quarter of 2015. The increase of $16 million in operating profit reflected the following:

				Volume		Price			Cost
(millions)	$			$		$			$
Change to Q2 2016 from Q2 2015
Sheetrock® brand gypsum wallboard	$	(2	)	$	3	$	(3	)	$	(2	)
Sheetrock® brand joint compound	2			1		(1		)	2
Durock® brand cement board	1			1		—			—
Levelrock® brand gypsum underlayment	1			3		—			(2		)
Other	14
Total increase in operating profit	$	16

The increase in operating profit reflected gross profit improvement for Sheetrock^® brand joint compound, Durock^® brand cement board and Levelrock^® brand gypsum underlayment offset by lower gross profit for Sheetrock^® brand gypsum wallboard. The decrease in gross profit for Sheetrock^® brand gypsum wallboard reflected lower average selling price and higher cost per unit offset by higher volume. The lower average selling price for Sheetrock^® brand gypsum wallboard was due to changes in product mix and regional pricing differences. The higher per unit cost for Sheetrock^® brand gypsum wallboard reflected an increase in per unit cost of 4% for raw materials driven by waste paper and rock and synthetic gypsum and 7% for conversion costs driven by higher labor costs. This was offset by a decrease in per unit cost of 13% in energy driven lower natural gas prices.

The increased gross profit for Sheetrock^® brand joint compound reflected lower per unit cost driven by raw material optimization and lower fixed costs due to increased volumes. The increase in gross profit of both Durock^® brand cement board and Levelrock^® brand gypsum underlayment was driven by higher volumes.

The increase in Other reflected the following:

• improved profitability of the portfolio of substrates products of $4 million including Securock^® brand glass mat roof boards and Fiberock^® brand backerboard,

• a gain recorded on the sale of surplus property of $11 million,

• lower selling and administrative costs of $1 million due to lower pension costs and marketing expenses offset by higher services and fees, and offset by a $2 million adjustment to customer reserves.

Canada: Net sales in the second quarter of 2016 were $86 million, a decrease of $1 million from $87 million in the second quarter of 2015. The change in sales reflected higher sales of gypsum wallboard of $2 million and other products of $1 million offset by an unfavorable impact of currency of $4 million. The increase in sales of gypsum wallboard was driven by an increase of 6% in average selling price offset by a decrease of 1% in volume. Operating profit in the second quarter of 2016 was $5 million, an increase of $2 million from the second quarter of 2015. The increase was driven by improved gross profit for gypsum wallboard of $2 million and other products of $1 million. Also impacting operating profit was lower selling and administrative costs of $1 million offset by $2 million of an unfavorable impact of currency.

Mexico / Latin America: Net sales for our gypsum businesses in Mexico and Latin America were $49 million for the second quarter of 2016, an increase of $1 million from the second quarter of 2015. The increase reflected higher sales of gypsum wallboard, joint treatment and drywall steel offset by the unfavorable impact due to fluctuations in currency of $5 million. Operating profit decreased to $4 million in the second quarter of 2016 from $5 million in the second quarter of 2015 due to the unfavorable impact of foreign currency of $1 million.

Canadian Mining: Net sales for our mining operation in Canada were $0 million for the second quarter of 2016 and $2 million for the second quarter of 2015. Operating loss was $3 million for the second quarter of 2016 and $2 million for the second quarter of 2015.

Gypsum Transportation Limited: There were no sales for our shipping company, Gypsum Transportation Limited, or GTL, for the second quarter of 2016 or 2015, which reflected the completion of our short-term shipping contract in March 2015. No similar contract was entered into in 2016 as we sold our vessels in April 2015. GTL recorded no operating profit for the second quarter of 2016 which was a decrease of $1 million from the second quarter of 2015. The $1 million in operating profit in the

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second quarter of 2015 reflected the gain recorded on the sale of our ships offset by charges incurred to wind down our shipping operations.

CEILINGS

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

	Three months ended June 30:										Six months ended June 30:
							Favorable (Unfavorable)										Favorable (Unfavorable)
(millions)	2016			2015			$		%		2016			2015			$			%
Net sales:
United States	$	126		$	121		$	5	4	%	$	245		$	236		$	9		4	%
Canada	14			14			—		—	%	27			28			(1		)	(4	)%
Mexico / Latin America	8			8			—		—	%	16			17			(1		)	(6	)%
Eliminations	(11		)	(12		)	1		8	%	(26		)	(27		)	1			4	%
Total	$	137		$	131		$	6	5	%	$	262		$	254		$	8		3	%
Operating profit:
United States	$	30		$	23		$	7	30	%	$	57		$	42		$	15		36	%
Canada	2			1			1		100	%	3			2			1			50	%
Mexico / Latin America	1			1			—		—	%	2			2			—			—	%
Total	$	33		$	25		$	8	32	%	$	62		$	46		$	16		35	%

United States: Net sales for our domestic ceilings business in the second quarter of 2016 were $126 million, an increase of $5 million, or 4%, from the second quarter of 2015. The increase reflected the following:

					Volume				Price
(millions)	$		%		$		%		$		%
Change to Q2 2016 from Q2 2015
Ceiling grid	$	3	8	%	$	3	8	%	$	—	—	%
Ceiling tile	2		2	%	—		—	%	2		2	%
Total increase in net sales	$	5	4	%

The increase of $3 million in sales of ceiling grid reflected higher volume. The increase of $2 million in ceiling tile reflected increases in average selling price.

Operating profit was $30 million for the second quarter of 2016, an increase of $7 million, or 30%, from the second quarter of 2015. The increase reflected the following:

			Volume		Price		Cost
(millions)	$		$		$		$
Change to Q2 2016 from Q2 2015
Ceiling grid	$	4	$	1	$	—	$	3
Ceiling tile	2		1		2		(1		)
Other	1
Total increase in operating profit	$	7

The increase in operating profit reflected an increase in gross profit for both ceiling grid and ceiling tile. Improved gross profit for ceiling grid reflected higher volumes and decreased per unit costs. The decrease in cost for ceiling grid was driven by lower steel costs as a result of our advanced purchase of steel, which has partially lessened the impact of rising steel prices,and lower fixed costs due to increased volumes. The higher gross profit for ceiling tile reflected an increase in per unit average

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selling price offset by an increase in per unit cost, which was driven by higher raw material costs. Also driving an increase in operating profit was a decrease in selling and administrative expenses due primarily to lower pension and marketing costs.

Canada:  Net sales of $14 million for the second quarter of 2016 remained unchanged as compared to the second quarter of 2015. Sales of ceiling tile increased $1 million offset by an unfavorable impact of currency of $1 million. Operating profit was $2 million for the second quarter of 2016, an increase of $1 million from the second quarter of 2015, which reflected higher gross profit for ceiling tile offset by $1 million of unfavorable currency.

Mexico / Latin America: Net sales of $8 million for the second quarter of 2016 were unchanged compared to the second quarter of 2015. Operating profit of $1 million remained unchanged from the second quarter of 2015.

DISTRIBUTION

Net sales and operating profit for our Distribution segment, which consists of L&W Supply, were as follows:

	Three months ended June 30:								Six months ended June 30:
					Favorable (Unfavorable)								Favorable (Unfavorable)
(millions)	2016		2015		$		%		2016		2015		$		%
Net sales	$	386	$	364	$	22	6	%	$	743	$	698	$	45	6	%
Operating profit	15		9		6		67	%	26		13		13		100	%
*not meaningful

L&W Supply’s net sales in the second quarter of 2016 were $386 million, up $22 million or 6%, compared with the second quarter of 2015. Same store net sales for the second quarter of 2016 were up 8% compared with the second quarter of 2015. Net sales of gypsum wallboard increased $12 million, or 8% due to an 8% increase in gypsum wallboard volume. Net sales of non-wallboard products also increased over the second quarter of the prior year led by an increase in metal products of $5 million and joint treatment of $1 million. The remaining increase of $4 million reflected increases in net sales of other adjacent products.

Operating profit was $15 million in the second quarter of 2016 compared with $9 million in the second quarter of 2015. The $6 million increase in operating profit was attributable to increased gross profit of $4 million on gypsum wallboard driven by an increase in volume of 8% slightly offset by a decrease in margin of 1% and increased gross profit of $5 million for other products. While selling and administrative costs and delivery expenses increased $2 million and $1 million, respectively, as a percentage of sales, they remained flat.

L&W Supply served its customers from 136 distribution branches in the United States as of June 30, 2016.

USG BORAL BUILDING PRODUCTS

UBBP is the 50/50 joint ventures with Boral and is accounted for as equity method investments, as such net sales and operating profit are not recorded in the consolidated financial statements of USG. The following reflects the net sales and operating profit as recorded by UBBP and the equity income recorded by USG.

	Three months ended June 30:								Six months ended June 30:
					Favorable (Unfavorable)								Favorable (Unfavorable)
(millions)	2016		2015		$		%		2016		2015		$		%
Net sales	$	273	$	264	$	9	3	%	$	502	$	492	$	10	2	%
Operating profit	41		34		7		21	%	64		57		7		12	%
Income from equity method investments - UBBP	16		13		3		23	%	23		21		2		10	%
*not meaningful

Net sales for UBBP were $273 million in the second quarter of 2016 compared to $264 million for the second quarter of 2015. The increase of $9 million reflected increased plasterboard shipments in Korea, Vietnam, India and Australia offset by unfavorable impact of currency translation of $13 million and weaker economies in China, Indonesia and Thailand. Plasterboard shipments increased 5% to 1.19 billion square feet for the second quarter of 2016 from 1.13 billion square feet for

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the second quarter of 2015. Additionally, volumes of joint compound and metal studs increased 11% and 13%, respectively. Operating profit of $41 million increased $7 million in the second quarter of 2016 compared to the second quarter of 2015. Operating profit in 2016 reflected improved margins in Korea, Vietnam, and Australia and a decrease in variable costs and administrative expenses offset by an unfavorable impact of foreign currency of $2 million. Additionally, the joint venture realized synergy savings and improved market acceptance of lightweight products.

Our share of net income of UBBP, which is recorded in income from equity method investment, increased 23%. This increase reflected higher income recorded by UBBP offset by unfavorable impact of foreign currency of $1 million.

Net sales in Asia and Australasia made up approximately 65% and 35%, respectively, of total net sales for UBBP. Net sales in South Korea, China, Thailand and Indonesia represented approximately 74% of Asia's net sales and plasterboard revenue accounted for approximately 70% of Asia's net sales.

CORPORATE

The operating loss for Corporate increased to $26 million in the second quarter of 2016 compared with $24 million in the second quarter of 2015 primarily due to increased costs for long term incentive compensation.

Liquidity and Capital Resources

As of June 30, 2016, we had $689 million of cash and cash equivalents and marketable securities compared with $672 million as of December 31, 2015. See discussion below under Cash Flows for explanation of the change in cash and cash equivalents. Our total liquidity as of June 30, 2016 was $1.030 billion (including $341 million of borrowing availability under our credit facility) compared to $967 million as of December 31, 2015 (including $295 million of borrowing availability under our credit facility).

We invest in cash equivalents and marketable securities pursuant to an investment policy that has preservation of principal as its primary objective. The policy includes provisions regarding diversification, credit quality and maturity profile that are designed to minimize the overall risk profile of our investment portfolio. The securities in the portfolio are subject to normal market fluctuations. See Note 5 to the consolidated financial statements for additional information regarding our investments in marketable securities.

Total debt, consisting of senior notes and industrial revenue bonds amounted to $2.039 billion ($2.052 billion in aggregate principal amount less $13 million of unamortized original issue discount and debt issuance costs) as of June 30, 2016 and $2.175 billion ($2.189 billion in aggregate principal amount less $14 million of unamortized original issue discount and debt issuance costs) as of December 31, 2015. During the six months ended June 30, 2016, there were no borrowings under our revolving credit facility and no borrowings outstanding at period end.

Our senior notes and industrial revenue bonds are rated by the three major credit-rating agencies: Moody’s Investors Service (Moody’s), Standard & Poor’s Financial Services LLC (S&P), and Fitch Ratings, Inc. (Fitch). The ratings are typically monitored by stockholders, creditors, or suppliers as an indicator of the company's viability. Additionally, the ratings of Moody’s and S&P impact the interest rate on our 7.75% senior notes maturing in 2018. See Note 6 to the consolidated financial statements in our Annual Report on Form 10-K for additional information regarding the impact of changes to our credit ratings on interest rates. Below is a summary of the ratings published by the three agencies as of the date indicated:

	S&P	Moody's	Fitch
Corporate/Family rating	BB	B1	B+
Outlook	Positive	Positive	Positive
Guaranteed senior notes	BB	B1	BB
All other notes and bonds	B+	B3	B+
Report date	July 19, 2016	August 8, 2015	November 18, 2015

The credit agreement allows for the borrowing of revolving loans and issuance of letters of credit (up to a maximum of $200 million at any time outstanding, in aggregate) by USG and its subsidiaries. The maximum principal amount of revolving loans and letters of credit that may be borrowed by USG may not exceed the lesser of (1) $450 million less the amount of outstanding loans and letters of credit owed by CGC and (2) the excess of (a) the domestic borrowing base determined by reference to the trade receivables and inventory of USG and its significant domestic subsidiaries minus (b) the amount, if any, by which the outstanding balance of loans and letters of credit owed by CGC exceeds the CGC borrowing base determined by reference to the trade receivables and inventory of CGC and certain Canadian subsidiaries at such time. The maximum principal amount of revolving loans and letters of credit that may be borrowed by CGC at any time may not exceed the lesser of

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(1) $50 million and (2) the sum of the CGC borrowing base determined by reference to the trade receivables and inventory of CGC and certain Canadian subsidiaries, plus the domestic borrowing base determined by reference to the trade receivables and inventory of USG and its significant domestic subsidiaries, minus the amount of outstanding loans and letters of credit owed by USG at such time.

Our obligations under our credit facility are guaranteed by USG and its significant domestic subsidiaries and secured by their and USG’s trade receivables and inventory. CGC's obligations under the credit facility are secured by trade receivables and inventory of certain subsidiaries. The credit facility matures in October 2019. The credit facility is available to fund working capital needs and for other general corporate purposes.

The credit agreement contains a financial covenant that would require us to maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 if the excess of the availability (as defined in the credit agreement) is less than an amount equal to 10% of the lesser of (a) the aggregate revolving commitment at such time and (b) the aggregate borrowing base at such time. We would be required to continue to comply with such financial covenant until the availability under the credit agreement exceeds such minimum threshold for 30 consecutive calendar days thereafter. As of June 30, 2016, our fixed charge coverage ratio was 1.67-to-1.0. Because we currently satisfy the required fixed charge coverage ratio, we are not required to maintain a minimum borrowing availability under the credit facility. Taking into account the most recent borrowing base calculation, borrowings available under the credit facility were approximately $341 million.

In the first six months of 2016, we repurchased $137 million of our 6.3% Notes, in open-market purchases for an aggregate consideration, including premiums and accrued interest, of $144 million. Subsequent to June 30, 2016 and through the date of this filing, we repurchased an additional $40 million of the 6.3% Notes for an aggregate consideration of $41 million. We expect to retire all or a portion of the remaining balance of these notes with cash on hand.

Our undistributed foreign earnings as of June 30, 2016 are considered permanently reinvested with the exception of earnings associated with our shipping operations and those associated with the equity method investment in the Knauf-USG joint venture that was sold in December 2015. The amount of cash and cash equivalents held by our foreign subsidiaries was $141 million as of June 30, 2016 and would be subject to material repatriation tax effects.

CASH FLOWS

The following table presents a summary of our cash flows:

	Six months ended June 30,
(millions)	2016			2015
Net cash provided by (used for):
Operating activities	$	164		$	34
Investing activities	14			18
Financing activities	(141		)	(46		)
Effect of exchange rate changes on cash	—			(3		)
Net increase in cash and cash equivalents	$	37		$	3

Operating Activities: Net cash provided by operating activities was higher for the first six months of 2016 compared to the first six months of 2015 due to improved gross profit and lower selling and administrative expenses. Also driving the increase in operating cash flow was improved working capital. Our net cash outflow for accounts receivable, inventories, accounts payable, and accrued expenses was lower in 2016 compared to 2015. This lower outflow reflected working capital initiatives over accounts payable and accounts receivable offset by higher inventory balances driven partially by our advanced purchases of steel prices.

As of June 30, 2016, working capital (current assets less current liabilities) amounted to $651 million, and the ratio of current assets to current liabilities was 1.78-to-1. As of December 31, 2015, working capital amounted to $409 million, and the ratio of current assets to current liabilities was 1.41-to-1.

Investing Activities: Net cash provided by investing activities was $14 million for the first six months of 2016 compared to $18 million for the first six months ended June 30, 2015. The first six months of 2015 included a deposit of $48 million into a settlement fund escrow account pursuant to settlement agreements with the direct and indirect purchaser classes in the U.S. wallboard pricing class action lawsuits, which were settled in the fourth quarter of 2014.

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The cash inflow from the net activity of purchases and sales or maturities of marketable securities decreased to $20 million for the first six months ended June 30, 2016 from $71 million for the six months ended June 30, 2015. This reflected additional purchases of marketable securities in the first quarter of 2016 due to our increase in cash. Capital expenditures amounted to $28 million in the first six months of 2016 compared with $48 million in the first six months of 2015.

Approved capital expenditures for the replacement, modernization and expansion of operations totaled $64 million as of June 30, 2016 compared with $33 million as of December 31, 2015.

Financing Activities: Net cash used for financing activities for the first six months of 2016 was $141 million compared to $46 million for the first six months of 2015. The cash used in 2016 reflected $141 million paid to repurchase $137 million of our 6.3% Notes in the open market. The cash used in 2015 included $365 million paid to repurchase $350 million of our 8.375% Notes plus tender premium and $21 million paid to repay our ship mortgage facility offset by the $344 million of proceeds received from the issuance of $350 million of 5.50% Senior Notes, net of debt issuance fees.

DEFINED BENEFIT PLANS

During the first six months of 2016, we made cash contributions of $50 million to the USG Corporation Retirement Plan Trust, $6 million to our pension plan in Canada, and $5 million, in aggregate, to certain other domestic plans. We expect to make total contributions to our pension and postretirement plans in 2016 of approximately $65 million.

LIQUIDITY OUTLOOK

In the first six months of 2016, our investing cash outflows included $28 million of capital expenditures. In total for 2016, we plan to spend approximately $110 million on capital expenditures in the normal course of business. We expect to fund these expenditures with cash from operations or cash on hand, and, if determined to be appropriate and available, borrowings under our revolving credit facility.

Interest payments, based on our current level of outstanding debt, are expected to decrease to approximately $150 million in 2016 compared with $158 million in 2015 primarily due to the repurchase of $177 million of our 6.3% Notes in the first six months of 2016 and through the date of filing, repurchase of our 8.375% Senior Notes in the first quarter of 2015, and the repayment of our ship mortgage facility in the second quarter of 2015, offset by the issuance of our 5.5% Senior Notes in the first quarter of 2015. Additionally, as a result of the debt upgrade on July 19, 2016 from Standard & Poor's Financial Services LLC, the effective interest rate on our 7.75% Senior Notes due 2018 decreased from 9.75% to 9.5%.

The outstanding balance of $363 million of the 6.3% Notes is classified in the "Current portion of long-term debt" on our accompanying consolidated balance sheets. We expect to retire all or a portion of these notes with cash on hand. We expect to continue to evaluate opportunities to retire or repurchase the 6.3% Notes prior to their maturity on November 15, 2016 in open market purchases or privately negotiated transactions.

Since formation, UBBP was funded from its net cash flow from operations and third-party financing, and it is our intent that as an ongoing operation, UBBP will continue to self-fund. UBBP is targeting the distribution of 50% of combined after tax profits to USG and Boral; however, this dividend may be adjusted by the UBBP Board with unanimous resolution. During the second quarter of 2016, UBBP paid cash dividends on earnings through March 2016, of which our 50% share totaled $18 million.

In the second quarter of 2016, we received $1 million from Boral for final customary working capital adjustments which resulted in a reduction of our investment. In the event certain U.S. Dollar denominated performance targets are satisfied by UBBP, we will be obligated to pay Boral scheduled earnout payments in an aggregate amount up to $75 million, comprised first of $25 million based on performance during the first three years and then up to $50 million based on performance during the first five years. Upon inception of the joint ventures, we recorded a liability representing the present value of the first earnout payment. As of June 30, 2016, we concluded that it was no longer probable that the three-year performance target will be achieved primarily due to the strengthening of the U.S. Dollar against UBBP's functional currencies. As a result, we reversed the liability with a corresponding reduction to our investment. We have not recorded a liability for the second earnout payment as we have concluded that it is currently not probable that the five-year performance target will be achieved. See Note 2 to the consolidated financial statements for additional information.

We believe that cash on hand, cash equivalents, marketable securities, cash available from future operations and our credit facility will provide sufficient liquidity to fund our operations for at least the next 12 months. Cash requirements include, among other things, capital expenditures, working capital needs, employee retirement plans funding, debt repayment, including the 6.3% Notes, and other contractual obligations.

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Realization of Deferred Tax Asset

As of June 30, 2016, we had federal NOL carryforwards of approximately $1.592 billion that are available to offset future federal taxable income and will expire in the years 2026 through 2032. In addition, as of that date, we had federal AMT credit carryforwards of approximately $40 million that are available to reduce future regular federal income taxes over an indefinite period.

As of June 30, 2016, we had a deferred tax asset related to our state NOLs and tax credit carryforwards of $223 million, of which $26 million will expire in 2016. The remainder will expire if unused in years 2017 through 2035. We also had NOL and tax credit carryforwards in various foreign jurisdictions in the amount of $1 million as of June 30, 2016, against which we have maintained a valuation allowance.

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

As of December 31, 2015, our net deferred tax assets of $723 million were offset by a valuation allowance of $75 million. The remaining valuation allowance primarily related to certain state net operating losses that we anticipate will not be used prior to their expiration. During the first six months of 2016, consistent with the above process, we made no adjustments to the valuation allowance against our deferred tax assets of $75 million.

See Note 14 to the consolidated financial statements for additional information regarding income tax matters.

Recently Issued Accounting Pronouncements

See Part 1, Item 1, Note 1 to the consolidated financial statements for information related to new accounting standards.

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Legal Contingencies

We are named as defendants in litigation arising from our operations, including lawsuits arising from the operation of our vehicles and lawsuits arising from product performance or warranties, personal injury, and commercial disputes.

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

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

See Note 15 to the consolidated financial statements for further information regarding the foregoing lawsuits and other legal matters.

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Critical Accounting Policies

The preparation of our financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the periods presented. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which we filed with the Securities and Exchange Commission on February 10, 2016, includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the first six months of 2016.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 related to management’s expectations about future conditions. Any forward-looking statements represent our views only as of the date of this report and should not be relied upon as representing our views as of any subsequent date. We assume no obligation to update any forward-looking information contained in this report. Forward-looking statements include, but are not limited to, statements under the following headings:

• “Management’s Discussion and Analysis” about: (a) market conditions and outlook, including (i) anticipated growth in new residential and nonresidential construction, repair and remodel spending, and the construction industries in Canada, Mexico and the UBBP territory, (ii) industry shipments of gypsum, demand for gypsum wallboard and industry capacity utilization rate and (iii) our gypsum wallboard selling prices and margins; (b) expected contributions to our pension plans; (c) our liquidity outlook, including our capital expenditure plans, expected interest payments, our intention and ability to retire outstanding debt, UBBP’s dividend policy and our intended use of dividend funds received, including UBBP’s ability to self-fund, and cash requirements and adequacy of resources to fund them; and (d) the outcome and effect of ongoing and future legal and governmental proceedings; and

• “Legal Proceedings” about the outcome and effect of ongoing and future legal and governmental proceedings.

Some of the risk factors that affect our business and financial results are discussed under “Risk Factors” in our most recent Annual Report on Form 10-K. We wish to caution the reader that actual business, market or other conditions, including the “Risk Factors” discussed in our most recent Annual Report on Form 10-K and those described elsewhere in this report or in our other Securities and Exchange Commission filings, could cause our actual results to differ materially from those stated in the forward-looking statements.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes to our market risk since December 31, 2015.     

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

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

(b) Changes in internal control over financial reporting.

There were no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) promulgated under the Act) identified in connection with the evaluation required by Rule 13a-15(d) promulgated under the Act that occurred during the fiscal quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Part I, Item 1, Note 15 to the consolidated financial statements for additional information regarding legal proceedings.

ITEM 1A. RISK FACTORS

There is no material change in the information reported under "Part I-Item 1A-Risk Factors" contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Pursuant to our Deferred Compensation Program for Non-Employee Directors, two of our non-employee directors deferred all or a portion of their quarterly retainer for service as a director that was payable on June 30, 2016 into a total of approximately 1,579 deferred stock units. These units will increase or decrease in value in direct proportion to the market value of our common stock and will be paid in cash or shares of common stock, at the director’s option, following termination of service as a director. The issuance of these deferred stock units was effected through a private placement under Section 4(2) of the Securities Act of 1933, as amended, and was exempt from registration under Section 5 of that Act.

ITEM 4. MINE SAFETY DISCLOSURES

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

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ITEM 6. EXHIBITS

3.1	Amendment to Restated Certificate of Incorporation of USG Corporation (incorporated by reference to Exhibit 3.1 to USG Corporation's Current Report on Form 8-K dated May 12, 2016)
4.1	Form of Common Stock certificate (incorporated by reference to Exhibit 4.1 to USG Corporation's Current Report on Form 8-K dated May 12, 2016)
10.1	USG Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Annex A to the Proxy Statement for the Annual Meeting of Stockholders of USG Corporation held on May 11, 2016 filed with the Securities and Exchange Commission on March 31, 2016)
31.1	Rule 13a-14(a) Certifications of USG Corporation’s Chief Executive Officer *
31.2	Rule 13a-14(a) Certifications of USG Corporation’s Chief Financial Officer *
32.1	Section 1350 Certifications of USG Corporation’s Chief Executive Officer *
32.2	Section 1350 Certifications of USG Corporation’s Chief Financial Officer *
95	Mine Safety Disclosures *
101	The following financial information from USG Corporation’s Quarterly Report on Form 10-Q for the three months ended June 30, 2016, formatted in XBRL (Extensible Business Reporting Language): (1) the consolidated statements of income for the three and six months ended June 30, 2016 and 2015, (2) the consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2016 and 2015, (3) the consolidated balance sheets as of June 30, 2016 and December 31, 2015, (4) the consolidated statements of cash flows for the six months ended June 30, 2016 and 2015 and (5) notes to the consolidated financial statements. *

* Filed or furnished herewith

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SIGNATURES

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

	USG CORPORATION
	By	/s/ James S. Metcalf
		James S. Metcalf,
		Chairman, President and Chief Executive Officer
	By	/s/ Matthew F. Hilzinger
		Matthew F. Hilzinger,
		Executive Vice President and Chief Financial Officer
	By	/s/ Jeanette A. Press
		Jeanette A. Press,
		Vice President, Controller and Principal Accounting Officer
July 26, 2016

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EXHIBIT INDEX

Exhibit Number	Exhibit
3.1	Amendment to Restated Certificate of Incorporation of USG Corporation (incorporated by reference to Exhibit 3.1 to USG Corporation's Current Report on Form 8-K dated May 12, 2016)
4.1	Form of Common Stock certificate (incorporated by reference to Exhibit 4.1 to USG Corporation's Current Report on Form 8-K dated May 12, 2016)
10.1	USG Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Annex A to the Proxy Statement for the Annual Meeting of Stockholders of USG Corporation held on May 11, 2016 filed with the Securities and Exchange Commission on March 31, 2016)
31.1	Rule 13a-14(a) Certifications of USG Corporation’s Chief Executive Officer *
31.2	Rule 13a-14(a) Certifications of USG Corporation’s Chief Financial Officer *
32.1	Section 1350 Certifications of USG Corporation’s Chief Executive Officer *
32.2	Section 1350 Certifications of USG Corporation’s Chief Financial Officer *
95	Mine Safety Disclosures *
101	The following financial information from USG Corporation’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2016, formatted in XBRL (Extensible Business Reporting Language): (1) the consolidated statements of income for the three and six months ended June 30, 2016 and 2015, (2) the consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2016 and 2015, (3) the consolidated balance sheets as of June 30, 2016 and December 31, 2015, (4) the consolidated statements of cash flows for the three months ended June 30, 2016 and 2015 and (5) notes to the consolidated financial statements. *

* Filed or furnished herewith

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, James S. Metcalf, certify that:

1. I have reviewed this quarterly report on Form 10-Q of USG Corporation (the “Corporation”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation as of, and for, the periods presented in this report;

4. The Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15(d)-15(f)) for the Corporation and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s most recent fiscal quarter (the Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting; and

5. The Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation’s auditors and the audit committee of the Corporation’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal control over financial reporting.

July 26, 2016	/s/ James S. Metcalf
	James S. Metcalf
	Chairman, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Matthew F. Hilzinger, certify that:

1. I have reviewed this quarterly report on Form 10-Q of USG Corporation (the “Corporation”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation as of, and for, the periods presented in this report;

4. The Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15(d)-15(f)) for the Corporation and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s most recent fiscal quarter (the Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting; and

5. The Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation’s auditors and the audit committee of the Corporation’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal control over financial reporting.

July 26, 2016	/s/ Matthew F. Hilzinger
	Matthew F. Hilzinger
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report of USG Corporation (the “Corporation”) on Form 10-Q, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James S. Metcalf, Chairman, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

July 26, 2016	/s/ James S. Metcalf
	James S. Metcalf
	Chairman, President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report of USG Corporation (the “Corporation”) on Form 10-Q, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew F. Hilzinger, Executive Vice President and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

July 26, 2016	/s/ Matthew F. Hilzinger
	Matthew F. Hilzinger
	Executive Vice President and Chief Financial Officer

EX-95

EXHIBIT 95

Mine Safety Disclosures

The operation of our ten mines and quarries in the United States is subject to regulation and inspection under the Federal Mine Safety and Health Act of 1977, or Safety Act. From time to time, inspection of our mines and quarries and their operation results in our receipt of citations or orders alleging violations of health or safety standards or other violations under the Safety Act. We are usually able to resolve the matters identified in the citations or orders with little or no assessments or penalties.

Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and rules promulgated by the Securities and Exchange Commission, or SEC, to implement that Section require that we disclose specified information about mine health and safety in our periodic reports filed with the SEC. The disclosure requirements set forth in Section 1503 and the SEC rules refer to, and are based on, the safety and health requirements applicable to mines under the Safety Act which is administered by the U.S. Labor Department's Mine Safety and Health Administration, or MSHA. Under the Safety Act, MSHA is required to inspect surface mines at least twice a year and underground mines at least four times a year to determine whether there is compliance with health and safety standards or with any citation, order or decision issued under the Safety Act and whether an imminent danger exists. MSHA also conducts spot inspections and inspections pursuant to miners' complaints.

If violations of safety or health standards are found, MSHA inspectors will issue citations to the mine operators. Among other activities under the Safety Act, MSHA also assesses and collects civil monetary penalties for violations of mine safety and health standards.

In addition, an independent adjudicative agency, the Federal Mine Safety and Health Review Commission, or FMSHRC, provides administrative trial and appellate review of legal disputes arising under the Safety Act. Most cases deal with civil penalties proposed by MSHA to be assessed against mine operators and address whether the alleged safety and health violations occurred, as well as the appropriateness of proposed penalties.

During the quarter ended June 30, 2016, we received no citations alleging health and safety violations that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard under the Safety Act, or S&S violations, and 14 citations alleging other health and safety violations. No assessments have yet been made by MSHA with respect to the 14 citations. Set forth below is information with respect to the gypsum mines for which citations were received during the quarter ended June 30, 2016:

Location of Mines/Quarries	Number of Citations for S&S Violations	Number of Citations for Non S&S Violations	Total Proposed Assessments
Alabaster, Michigan	—	1	—
Empire, Nevada	—	—	—
Fort Dodge, Iowa	—	—	—
Plaster City, California	—	2	—
Shoals, Indiana	—	2	—
Sigurd, Utah	—	—	—
Southard, Oklahoma	—	—	—
Sperry, Iowa	—	9	—
Spruce Pine, North Carolina	—	—	—
Sweetwater, Texas	—	—	—
Totals	—	14	$—

We did not receive any citations or orders for unwarrantable failure to comply with mandatory health and safety standards under the Safety Act, any orders under the Safety Act regarding withdrawal from a mine as a result of failure to abate in a timely manner a health and safety violation for which a citation was issued, any imminent danger orders under the Safety Act, any written notice from MSHA of a pattern of violations of mandatory health or safety standards that are of such a nature as could significantly and substantially contribute to the cause and effect of mine health and safety hazards under the Safety Act or any written notice from MSHA of the potential to have such a pattern during the quarter ended June 30, 2016. Also, there were no flagrant violations under the Safety Act and no mining-related fatalities during the quarter ended June 30, 2016, and no legal actions before the FMSHRC were instituted during the quarter ended June 30, 2016 or pending as of June 30, 2016.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2016 shares
Document and Entity Information [Abstract]
Entity Registrant Name	USG CORP
Entity Central Index Key	0000757011
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	145,954,194

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Consolidated Statements of Operations (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Net sales	$ 1,002	$ 970	$ 1,972	$ 1,879
Cost of products sold	790	787	1,565	1,543
Gross profit	212	183	407	336
Selling and administrative expenses	79	79	150	156
Recovery of receivable	0	0	(3)	0
Gain on disposal of shipping operations, net	0	(1)	0	(1)
Operating profit	133	105	260	181
Income from equity method investments	16	14	23	22
Interest expense	(38)	(40)	(78)	(83)
Interest income	1	0	3	1
Loss on extinguishment of debt	(2)	0	(4)	(19)
Other income (expense), net	2	1	5	0
Income (loss) from continuing operations before income taxes	112	80	209	102
Income tax (expense) benefit	(38)	(1)	(68)	1
Net income	$ 74	$ 79	$ 141	$ 103
Earnings (loss) per common share - basic:
Earnings per average common share	$ 0.50	$ 0.54	$ 0.96	$ 0.70
Earnings (loss) per common share - diluted:
Earnings per average diluted common share	$ 0.50	$ 0.54	$ 0.95	$ 0.70
Average common shares	145,933,165	145,424,853	145,856,220	145,393,548
Average diluted common shares	147,994,032	146,990,178	147,321,420	147,167,248

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 74	$ 79	$ 141	$ 103
Derivatives qualifying as cash flow hedges:
Gain (loss) on derivatives qualifying as cash flow hedges, net of tax (benefit) of $3, ($1), 0, and $0, respectively	4	0	(4)	(1)
Less: Reclassification adjustment for loss on derivatives included in net income, net of tax (benefit) of ($1), $0, ($2), and $0, respectively	(2)	(3)	(4)	(5)
Net derivatives qualifying as cash flow hedges	6	3	0	4
Pension and postretirement benefits:
Changes in pension and postretirement benefits, net of tax (benefit) of ($2), $0, ($3), and $1, respectively	(3)	(8)	(6)	(2)
Less: Amortization of prior service credit (cost) included in net periodic pension cost, net of tax (benefit) of ($1), $0, ($1), and ($1), respectively	(1)	(2)	(1)	(3)
Net pension and postretirement benefits	(2)	(6)	(5)	1
Foreign currency translation:
Changes in foreign currency translation, net of tax of $0 in all periods	(36)	(5)	(12)	(39)
Other comprehensive income (loss), net of tax	(32)	(8)	(17)	(34)
Comprehensive income	$ 42	$ 71	$ 124	$ 69

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parentheticals) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Derivatives Qualifying as Hedges, Tax:
Loss on derivatives qualifying as cash flow hedges, tax expense (benefit)	$ 3	$ (1)	$ 0	$ 0
Less: Reclassification adjustment for loss on derivatives included in net income, tax expense (benefit)	(1)	0	(2)	0
Pension and Other Postretirement Benefit Plans, Tax:
Changes in pension and postretirement benefits, tax expense (benefit)	(2)	0	(3)	1
Less: Amortization of prior service benefit (cost) included in net periodic pension cost, tax expense (benefit)	(1)	0	(1)	(1)
Foreign Currency Translation Adjustment, Tax:
Changes in foreign currency translation, tax expense (benefit)	0	0	0	0
Less: Translation gains realized upon sale of foreign entities, tax expense (benefit)	$ 0	$ 0	$ 0	$ 0

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Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 479	$ 442
Short-term marketable securities	208	194
Restricted cash	0	9
Receivables (net of reserves - $12 and $14)	433	391
Inventories	331	314
Income taxes receivable	5	5
Other current assets	35	45
Total current assets	1,491	1,400
Long-term marketable securities	2	36
Property, plant and equipment (net of accumulated depreciation and depletion - $2,003 and $1,936)	1,749	1,788
Deferred income taxes	658	728
Equity method investments	648	682
Other assets	97	102
Total assets	4,645	4,736
Liabilities and Stockholders’ Equity
Accounts payable	287	259
Accrued expenses	184	214
Current portion of long-term debt	363	500
Income taxes payable	6	9
Litigation settlement accrual	0	9
Total current liabilities	840	991
Long-term debt	1,676	1,675
Deferred income taxes	4	5
Pension and other postretirement benefits	347	392
Other liabilities	212	237
Total liabilities	3,079	3,300
Preferred stock – $1 par value, authorized 36,000,000 shares; outstanding - none	0	0
Common stock – $0.10 par value; authorized 200,000,000 shares; issued: 2016 - 145,954,000 shares; 2015 - 145,667,000 shares	15	15
Additional paid-in capital	3,033	3,027
Accumulated other comprehensive loss	(331)	(314)
Retained earnings (accumulated deficit)	(1,151)	(1,292)
Total stockholders’ equity	1,566	1,436
Total liabilities and stockholders’ equity	$ 4,645	$ 4,736

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Reserves on receivables	$ 12	$ 14
Accumulated depreciation	$ 2,003	$ 1,936
Preferred stock - par value	$ 1	$ 1
Preferred stock - authorized shares	36,000,000	36,000,000
Preferred stock - outstanding shares	0	0
Common stock - par value	$ 0.1	$ 0.1
Common stock - authorized shares	200,000,000	200,000,000
Common stock - issued shares	145,954,000	145,667,000

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Operating Activities
Net income	$ 141	$ 103
Adjustments to reconcile net income to net cash:
Depreciation, depletion and amortization	72	72
Loss on extinguishment of debt	4	19
Recovery of receivable	(3)	0
Share-based compensation expense	9	6
Deferred income taxes	66	1
Gain on asset dispositions	(11)	(7)
Income from equity method investments	(23)	(22)
Proceeds from Equity Method Investment, Dividends or Distributions	18	18
Pension settlement	2	0
(Increase) decrease in working capital:
Receivables	(40)	(66)
Income taxes receivable	1	(1)
Inventories	(17)	6
Other current assets	5	1
Payables	25	(33)
Accrued expenses	(20)	(25)
Decrease in other assets	1	1
Decrease in pension and other postretirement benefits	(51)	(40)
Decrease in other liabilities	(3)	(4)
Other, net	(12)	5
Net cash provided by operating activities	164	34
Investing Activities
Purchases of marketable securities	(167)	(32)
Sales or maturities of marketable securities	187	103
Capital expenditures	(28)	(48)
Net proceeds from asset dispositions	12	42
Proceeds from Equity Method Investment, Dividends or Distributions, Return of Capital	1	0
Proceeds from Insurance Settlement, Investing Activities	0	2
Release (deposit) of restricted cash	9	(49)
Net cash provided by investing activities	14	18
Financing Activities
Issuance of debt	0	350
Repayment of debt	(141)	(386)
Payment of debt issuance fees	0	(6)
Issuance of common stock	2	4
Repurchases of common stock to satisfy employee tax withholding obligations	(2)	(8)
Net cash used for financing activities	(141)	(46)
Effect of exchange rate changes on cash	0	(3)
Net increase in cash and cash equivalents	37	3
Cash and cash equivalents at beginning of period	442	228
Cash and cash equivalents at end of period	479	231
Supplemental Cash Flow Disclosures:
Interest paid, net of capitalized interest	76	80
Income taxes paid, net of refunds received	5	1
Noncash Investing and Financing Activities:
Amount in accounts payable for capital expenditures	4	$ 6
Noncash reversal of equity method investment contingent consideration	$ (24)

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Organization, Consolidation and Presentation of Financial Statements

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements

Organization, Consolidation and Presentation of Financial Statements

PREPARATION OF FINANCIAL STATEMENTS

We prepared the accompanying unaudited consolidated financial statements of USG Corporation in accordance with applicable United States Securities and Exchange Commission, or SEC, guidelines pertaining to interim financial information. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ materially from those estimates. In the opinion of our management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our financial results for the interim periods. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results of operations to be expected for the entire year.

Our segments are structured around our key products and business units: Gypsum, Ceilings, Distribution and USG Boral Building Products, or UBBP.

Our Gypsum reportable segment is an aggregation of the operating segments of the gypsum businesses in the United States, Canada, Mexico, and Latin America, our mining operation in Canada, and our shipping operations, which we exited in the second quarter of 2015. Gypsum manufactures products throughout the United States, Canada, Mexico and Latin America. These products include USG Sheetrock^® brand gypsum wallboard, Sheetrock^® brand joint compound, Durock^® brand cement board, Levelrock^® brand gypsum underlayment, Fiberock^® brand backerboard, Securock^® brand glass mat sheathing used for building exteriors, Securock^® brand gypsum fiber and glass mat panels used as roof cover board and structural panel concrete roofing.

Our Ceilings reportable segment is an aggregation of the operating segments of the ceilings businesses in the United States, Canada, Mexico, and Latin America. Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States and Canada.

Our Distribution reportable segment delivers gypsum wallboard, drywall metal, ceilings products, joint compound and other building products throughout the United States.

UBBP is our 50/50 joint ventures with Boral Limited. UBBP manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East.

These financial statements and notes are to be read in conjunction with the financial statements and notes included in USG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which we filed with the SEC on February 10, 2016.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

• Excess tax benefits and deficiencies related to stock compensation will be prospectively recognized in income tax expense instead of in equity when the awards vest or are settled. For the six months ended June 30, 2016 and 2015, we recorded a reduction to tax benefits to equity of $3 million and $0 million, respectively, that would have been recognized in tax expense under the new standard.

• Excess tax benefits that were previously unrecognized because the related tax deduction had not been realized through a reduction in taxes payable will be recorded on a modified retrospective basis. If we had early adopted this standard, we would have recorded a cumulative-effect adjustment to opening retained earnings of $25 million on our June 30, 2016 consolidated balance sheet.

• An accounting policy will be elected to either estimate forfeitures on awards, as previously required, or to recognize forfeitures as they occur. Upon adoption, we will recognize forfeitures as they occur and will record a cumulative-effect change to retained earnings in accordance with the modified retrospective adoption requirements. If we had early adopted this standard, we would have recorded an immaterial cumulative-effect adjustment to opening retained earnings on our June 30, 2016 consolidated balance sheet.

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

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires that most equity instruments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts the financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU does not apply to equity method investments or investments in consolidated subsidiaries. The new standard will be effective for us in the first quarter of 2018 and will be applied as a cumulative-effect adjustment to the balance sheet in the year of adoption. We do not expect the adoption of ASU 2016-01 will have a significant impact to our consolidated financial statements or disclosures.

In July 2015, the FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory," which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value for entities that measure inventory using the first-in, first-out (FIFO) or average cost method. The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard will be effective for us in the first quarter of 2017 and will be applied prospectively. We do not expect the adoption of ASU 2015-11 will have a significant impact to our consolidated financial statements or disclosures.

In May 2015, the FASB issued ASU 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)," which updates the disclosure requirements for investments that are measured at net asset value using the practical expedient. These investments are to be removed from the fair value hierarchy and shown as a reconciling item. The standard was effective for us in the first quarter of 2016 and will be applied retrospectively. The update will be reflected in our disclosure for our December 31, 2016 Annual Report on Form 10-K.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net),” which clarifies gross versus net revenue reporting when another party is involved in the transaction. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” and in May 2016, ASU 2016-12, “Revenues from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” both of which provide supplemental adoption guidance and clarification to ASU 2014-09. The standard will be effective for us in the first quarter of 2018, and we will adopt the new standard using the retrospective approach with practical expedients. We do not expect that the adoption of ASU 2014-09, ASU 2016-08, ASU 2016-10 or ASU 2016-12 will have a significant impact to our consolidated financial statements or disclosures.

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Equity Method Investments

6 Months Ended

Jun. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Equity Method Investments

Equity method investments as of June 30, 2016 and December 31, 2015, were as follows:

	June 30, 2016			December 31, 2015
(dollars in millions)	Carrying Value		Ownership Percentage	Carrying Value		Ownership Percentage
USG Boral Building Products	$	641	50%	$	675	50%
Other equity method investments	7		33% - 50%	7		33% - 50%
Total equity method investments	$	648		$	682

Investment in USG Boral Building Products

UBBP is our 50/50 joint ventures with Boral Limited, or Boral, and consists of USG Boral Building Products Pte. Limited, a company organized under the laws of Singapore, and USG Boral Building Products Pty Limited, a company organized under the laws of Australia. It manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East (the Territory). The products that UBBP manufactures and distributes include products for wall, ceiling, floor lining and exterior systems that utilize gypsum, wallboard, referred to as plasterboard in the Territory, mineral fiber ceiling tiles, steel grid and joint compound. We account for our investment in UBBP using the equity method of accounting. During the second quarter of 2016, UBBP paid cash dividends on earnings through March 2016 of which our 50% share totaled $18 million. We recorded the cash dividend in operating activities on our statements of cash flows. As of June 30, 2016, the amount of our consolidated retained earnings which represents undistributed earnings from UBBP is $46 million.

We formed the joint ventures with Boral on February 27, 2014. In the second quarter of 2016, we received $1 million from Boral for final customary working capital adjustments which resulted in a reduction of our investment. We recorded the working capital payment in investing activities on our statement of cash flows. In the event certain U.S. Dollar denominated performance targets are satisfied by UBBP, we will be obligated to pay Boral scheduled earnout payments in an aggregate amount up to $75 million, comprised first of $25 million based on performance during the first three years after closing and then up to $50 million based on performance during the first five years after closing. Upon inception of the joint ventures, we recorded a liability representing the present value of the first earnout payment. As of June 30, 2016, we concluded that it was no longer probable that the three-year performance target will be achieved primarily due to the strengthening of the U.S. Dollar against UBBP's functional currencies. As a result, we reversed the liability with a corresponding reduction to our investment. We have not recorded a liability for the second earnout payment as we have concluded that it is currently not probable that the five-year performance target will be achieved. If our conclusion on the probability of achievement were to change, we will record a liability representing the present value of the earnout payments with a corresponding increase to our investment. As of June 30, 2016 and December 31, 2015, our liability for the earnout payments was $0 million and $24 million, respectively. As of December 31, 2015, the liability is included in "Other liabilities" on our accompanying consolidated balance sheet.

All of our investments accounted for under the equity method of accounting are initially recorded at cost, and subsequently adjusted for our share of the net income or loss and cash contributions and distributions to or from these entities. Because the underlying net assets in our investments are denominated in a foreign currency, translation gains or losses will impact the recorded value of our investments. Translation gains or losses recorded in other comprehensive income were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Translation loss	$	(30	)	$	(3	)	$	(13	)	$	(19	)

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

	Three months ended June 30,				Six months ended June 30,
(millions)	2016		2015		2016		2015
USG Boral Building Products:
Net sales	$	273	$	264	$	502	$	492
Gross profit	86		70		151		131
Operating profit	41		34		64		57
Income from continuing operations before income taxes	46		36		70		62
Net income	34		28		49		46
Net income attributable to USG Boral Building Products	32		26		46		42
USG share of income from investment accounted for using the equity method	16		13		23		21
Other equity method investments:
USG share of income from investments accounted for using the equity method	—		1		—		1
Total income from equity method investments	$	16	$	14	$	23	$	22

Transactions with UBBP

Our Gypsum segment sells products to UBBP. Total sales to UBBP for the three and six months ended June 30, 2016 and June 30, 2015 were immaterial.

In 2014, in connection with the formation of UBBP, we contributed our ownership interest in a joint venture in China to UBBP, but retained our loan receivable from this joint venture. As of June 30, 2016 and December 31, 2015, the loan receivable, including interest, totaled $15 million and $14 million, respectively, and is included in "Other assets" on our accompanying consolidated balance sheets.

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Segments

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segments

Segments

Our operations are organized into four reportable segments: Gypsum, Ceilings, Distribution and UBBP. See Note 2 for segment results for UBBP. Segment results for our Gypsum, Ceilings and Distribution segments were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Net Sales:
Gypsum	$	635		$	617		$	1,270		$	1,194
Ceilings	137			131			262			254
Distribution	386			364			743			698
Eliminations	(156		)	(142		)	(303		)	(267		)
Total	$	1,002		$	970		$	1,972		$	1,879
Operating Profit (Loss):
Gypsum	$	113		$	98		$	224		$	166
Ceilings	33			25			62			46
Distribution	15			9			26			13
Corporate	(26		)	(24		)	(47		)	(47		)
Eliminations	(2		)	(3		)	(5		)	3
Total	$	133		$	105		$	260		$	181

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Earnings Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Earning Per Share

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

The reconciliation of basic earnings per share to diluted earnings per share is shown in the following table.

	Three months ended June 30,				Six months ended June 30,
(millions, except per-share data)	2016		2015		2016		2015
Net income	$	74	$	79	$	141	$	103
Effect of dilutive securities - Deferred compensation program for non-employee directors	—		—		—		—
Income available to shareholders	$	74	$	79	$	141	$	103
Average common shares	145.9		145.4		145.9		145.4
Dilutive RSUs, MSUs, performance shares and stock options	2.1		1.6		1.4		1.6
Deferred shares associated with a deferred compensation program for non-employee directors	—		—		—		0.2
Average diluted common shares	148.0		147.0		147.3		147.2
Earnings per average common share	$	0.50	$	0.54	$	0.96	$	0.70
Earnings per average diluted common share	$	0.50	$	0.54	$	0.95	$	0.70

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

	Three months ended June 30,		Six months ended June 30,
(millions, common shares)	2016	2015	2016	2015
MSUs, performance shares, RSUs and stock options	1.7	1.8	1.7	1.9
Deferred shares associated with a deferred compensation program for non-employee directors	0.2	0.2	0.2	—

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Marketable Securities

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Marketable Securities

Marketable securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive loss on our accompanying consolidated balance sheets. Proceeds received from sales or maturities of marketable securities were $187 million for the six months ended June 30, 2016. Our investments in marketable securities consisted of the following:

	As of June 30, 2016				As of December 31, 2015
(millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate debt securities	$	136	$	136	$	134	$	134
U.S. government and agency debt securities	51		51		57		57
Asset-backed debt securities	2		2		21		21
Certificates of deposit	21		21		15		15
Municipal debt securities	—		—		3		3
Total marketable securities	$	210	$	210	$	230	$	230

The realized and unrealized gains and losses for the three and six months ended June 30, 2016 and 2015 were immaterial. Cost basis for securities sold are determined on a first-in-first-out basis.

Contractual maturities of marketable securities as of June 30, 2016 were as follows:

(millions)	Amortized Cost		Fair Value
Due in 1 year or less	$	208	$	208
Due in 1-5 years	2		2
Total marketable securities	$	210	$	210

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

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Intangible Assets

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

Intangible assets are included in "Other assets" on our accompanying consolidated balance sheets. Intangible assets with definite lives are amortized. These assets are summarized as follows:

	As of June 30, 2016							As of December 31, 2015
(millions)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Intangible Assets with Definite Lives:
Customer relationships	$	70	$	(65	)	$	5	$	70	$	(61	)	$	9
Other	9		(8		)	1		9		(8		)	1
Total	$	79	$	(73	)	$	6	$	79	$	(69	)	$	10

Total amortization expense was $2 million and $4 million for the three and six months ended June 30, 2016 and 2015, respectively. Estimated amortization expense for the remainder of 2016 and for future years is as follows:

(millions)	2016		2017		2018 and thereafter
Estimated future amortization expense	$	3	$	2	$	1

Intangible assets with indefinite lives are not amortized. The gross carrying amount of these assets are as follows:

(millions)	June 30, 2016		December 31, 2015
Intangible Assets with Indefinite Lives:
Trade names	$	22	$	22
Other	8		8
Total	$	30	$	30

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Debt

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Debt

Debt

Total debt, including the current portion of long-term debt, consisted of the following:

(millions)	June 30, 2016		December 31, 2015
5.5% senior notes due 2025	$	350	$	350
5.875% senior notes due 2021	350		350
6.3% senior notes due 2016	363		500
7.75% senior notes due 2018	500		500
7.875% senior notes due 2020, net of discount	249		249
Industrial revenue bonds (due 2028 through 2034)	239		239
Total	$	2,051	$	2,188
Less: Unamortized debt issuance costs	12		13
Total	$	2,039	$	2,175

REPURCHASE OF SENIOR NOTES

In the first six months of 2016, we repurchased $137 million of our 6.3% Senior Notes due in 2016, referred to as the 6.3% Notes, on the open market. The transaction included premiums of $4 million and accrued interest of $3 million for aggregate consideration of $144 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt, before tax, of $4 million including premiums, write-off of deferred financing fees and broker fees, of which $2 million occurred in the second quarter.

Subsequent to quarter end, we repurchased an additional $40 million of the 6.3% Notes. The transaction included $1 million for premiums for an aggregate consideration of $41 million. These notes are recorded in "Current portion of long-term debt" on our accompanying consolidated balance sheets.

In the first quarter of 2015, we repurchased $350 million of our 8.375% Senior Notes due in 2018, referred to as the 8.375% Notes, through both a cash tender offer and a subsequent notice of redemption of the remaining 8.375% Notes. We completed a cash tender offer pursuant to which we repurchased $126 million of the 8.375% Notes for aggregate consideration, including tender offer premium and accrued and unpaid interest, of $135 million. We repurchased the remaining $224 million of the 8.375% Notes for aggregate consideration, including premiums and accrued and unpaid interest, of $242 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt of $19 million including premiums and write-off of deferred financing fees.

Also in the first quarter of 2015, we issued $350 million of 5.5% Senior Notes due March 1, 2025. The net proceeds from the issuance of these notes and cash on hand were used to fund the repurchases of the 8.375% Notes and all related costs and expenses. We deferred approximately $6 million of debt issuance costs that are being amortized to interest expense over the term of the notes. As of June 30, 2016 and December 31, 2015, these notes, net of unamortized debt issuances costs, were recorded on our accompanying consolidated balance sheets at $345 million and $344 million, respectively.

CREDIT FACILITY

Taking into account the most recent borrowing base calculation delivered under the credit facility, which reflects trade receivables and inventory as of June 30, 2016, and outstanding letters of credit, borrowings available under the credit facility were approximately $341 million, including $50 million for CGC. As of June 30, 2016 and during the quarter then-ended, there were no borrowings under the facility. Had there been any borrowings as of that date, the applicable interest rate would have been 1.90% for loans in the US and 2.13% for loans in Canada. Outstanding letters of credit totaled $47 million as of June 30, 2016.

The fair value of our debt was approximately $2.153 billion as of June 30, 2016 and $2.295 billion as of December 31, 2015. The fair values were based on quoted prices for identical or similar liabilities in markets that are not active or valuation models in which all significant inputs are observable and, as a result, are classified as Level 2 inputs. See Note 9 for further discussion on fair value measurements and classifications.

As of June 30, 2016, we were in compliance with the covenants contained in our credit facilities.

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Derivative Instruments

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

We use derivative instruments to manage selected commodity price and foreign currency exposures as described below. We do not use derivative instruments for speculative trading purposes, and we typically do not hedge beyond three years. Cash flows from derivative instruments are included in net cash provided by operating activities in the consolidated statements of cash flows.

COMMODITY DERIVATIVE INSTRUMENTS

As of June 30, 2016, we had outstanding natural gas swap contracts to hedge forecasted purchases with an aggregate notional amount of 29 million mmBTUs (millions of British Thermal Units). All of these contracts mature by December 31, 2019. For contracts designated as cash flow hedges, the pre-tax net unrealized loss that remained in accumulated other comprehensive income (loss), or AOCI, as of June 30, 2016 was $5 million and as of December 31, 2015 was $19 million. No ineffectiveness was recorded on contracts designated as cash flow hedges in the first six months of both 2016 and 2015. Gains and losses on contracts designated as cash flow hedges are reclassified into earnings when the underlying forecasted transactions affect earnings. For contracts designated as cash flow hedges, we reassess the probability of the underlying forecasted transactions occurring on a quarterly basis.

Changes in fair value on contracts not designated as cash flow hedges are recorded to earnings. The fair value of those contracts not designated as cash flow hedges was $0 million as of June 30, 2016 and a $2 million unrealized loss as of December 31, 2015.

FOREIGN EXCHANGE DERIVATIVE INSTRUMENTS

We have foreign exchange forward contracts to hedge forecasted purchases of products and services denominated in foreign currencies. The notional amount of these contracts was $122 million as of June 30, 2016, and they mature by December 31, 2017. These forward contracts are designated as cash flow hedges and no ineffectiveness was recorded in the first six months of both 2016 and 2015. Gains and losses on the contracts are reclassified into earnings when the underlying forecasted transactions affect earnings. The fair value of these contracts that remained in AOCI was an unrealized net pre-tax loss of $2 million as of June 30, 2016 and an unrealized net pre-tax gain of $8 million as of December 31, 2015.

COUNTERPARTY RISK, MASTER NETTING ARRANGEMENTS AND BALANCE SHEET OFFSETTING

We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instruments. As of June 30, 2016, our derivatives were in a $7 million net liability position. All of our counterparties have investment grade credit ratings; accordingly, we anticipate that they will be able to fully satisfy their obligations under the contracts.

All of our derivative contracts are governed by master netting agreements negotiated between us and the counterparties that reduce our counterparty credit exposure. The agreements outline the conditions (such as credit ratings and net derivative fair values) upon which we, or the counterparties, are required to post collateral. As required by certain of our agreements, we had $13 million of collateral posted with our counterparties related to our derivatives as of June 30, 2016. Amounts paid as cash collateral are included in "Receivables" on our accompanying consolidated balance sheets.

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

FINANCIAL STATEMENT INFORMATION

The following are the pretax effects of derivative instruments on the consolidated statements of income for the three months ended June 30,2016 and 2015.

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)					Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016		2015				2016			2015
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	$	7	$	1		Cost of products sold	$	(5	)	$	(4	)
Foreign exchange contracts	—		(2		)	Cost of products sold	2			1
Total	$	7	$	(1	)		$	(3	)	$	(3	)

	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	1	$	—
Total		$	1	$	—

The following are the pretax effects of derivative instruments on the consolidated statements of income for the six months ended June 30,2016 and 2015.

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)						Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016			2015				2016			2015
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	$	2		$	(4	)	Cost of products sold	$	(10	)	$	(7	)
Foreign exchange contracts	(6		)	3			Cost of products sold	4			2
Total	$	(4	)	$	(1	)		$	(6	)	$	(5	)

	Location of Gain or (Loss)  Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	—	$	(1	)
Total		$	—	$	(1	)

The following are the fair values of derivative instruments and the location on our accompanying consolidated balance sheets as of June 30, 2016 and December 31, 2015.

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		6/30/16		12/31/15			6/30/16		12/31/15
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	Other current assets	$	3	$	1	Accrued expenses	$	7	$	15
Commodity contracts	Other assets	3		—		Other liabilities	4		5
Foreign exchange contracts	Other current assets	1		8		Accrued expenses	2		—
Foreign exchange contracts	Other assets	—		—		Other liabilities	1		—
Total derivatives in cash flow hedging relationships		$	7	$	9		$	14	$	20

Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other current assets	$	—	$	—	Accrued expenses	$	—	$	2
Total derivatives not designated as hedging instruments		$	—	$	—		$	—	$	2
Total derivatives	Total assets	$	7	$	9	Total liabilities	$	14	$	22

As of June 30, 2016, we had no derivatives designated as fair value hedges or net investment hedges.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value. There are three levels of inputs that may be used to measure fair value. Level 1 is defined as observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities that a company has the ability to access. Level 2 is defined as inputs, other than the quoted prices included in Level 1, which are observable for the asset or liability, either directly or indirectly. Level 3 is defined as unobservable inputs for the asset or liability which is typically based on a company's own assumptions where there is little, if any, related market data available.

The cash equivalents and equity mutual funds shown in the table below primarily consist of money market funds that are valued based on quoted prices in active markets and, as a result, are classified as Level 1. We use quoted prices, other readily observable market data and internally developed valuation models when valuing our marketable securities and derivatives and have classified them as Level 2. Marketable securities are valued using income and market value approaches and values are based on quoted prices or other observable market inputs received from data providers. The valuation process may include pricing matrices, or prices based upon yields, credit spreads or prices of securities of comparable quality, coupon, maturity and type. Derivatives are valued using the income approach including discounted-cash-flow models or a Black-Scholes option pricing model and readily observable market data. The inputs for the valuation models are obtained from data providers and include end-of-period spot and forward natural gas prices, foreign currency exchange rates, natural gas price volatility and LIBOR and swap rates for discounting the cash flows implied from the derivative contracts.

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

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)				Total
(millions)	6/30/16		12/31/15		6/30/16			12/31/15			6/30/16		12/31/15		6/30/16			12/31/15
Cash equivalents	$	232	$	223	$	59		$	25		$	—	$	—	$	291		$	248
Equity mutual funds	4		4		—			—			—		—		4			4
Marketable securities:
Corporate debt securities	—		—		136			134			—		—		136			134
U.S. government and agency debt securities	—		—		51			57			—		—		51			57
Asset-backed debt securities	—		—		2			21			—		—		2			21
Certificates of deposit	—		—		21			15			—		—		21			15
Municipal debt securities	—		—		—			3			—		—		—			3
Derivative assets	—		—		7			9			—		—		7			9
Derivative liabilities	—		—		(14		)	(22		)	—		—		(14		)	(22		)

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Employee Retirement Plans

6 Months Ended

Jun. 30, 2016

Compensation and Retirement Disclosure [Abstract]

Employee Retirement Plans

Employee Retirement Plans

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

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Pension:
Service cost of benefits earned	$	12		$	12		$	23		$	25
Interest cost on projected benefit obligation	17			17			34			34
Expected return on plan assets	(22		)	(21		)	(44		)	(42		)
Settlement	—			—			2			—
Net amortization	4			10			9			19
Net pension cost	$	11		$	18		$	24		$	36
Postretirement:
Service cost of benefits earned	$	—		$	—		$	1		$	1
Interest cost on projected benefit obligation	2			2			3			3
Net amortization	(7		)	(8		)	(14		)	(16		)
Net postretirement benefit	$	(5	)	$	(6	)	$	(10	)	$	(12	)

During the first six months of 2016, we made cash contributions of $50 million to the USG Corporation Retirement Plan Trust, $6 million to our pension plan in Canada, and $5 million, in aggregate, to certain other domestic pension plans. We expect to make total contributions to our pension plans in 2016 of approximately $65 million.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

During the first six months of 2016, we granted share-based compensation in the form of market share units, or MSUs, performance shares, and restricted stock units, or RSUs, to eligible participants under our Long-Term Incentive Plan and 2016 Long-Term Incentive Plan that was approved at our 2016 annual meeting of stockholders. We recognize expense on all share-based grants over the service period, which is the shorter of the period until the employees’ retirement eligibility dates and the service period of the award for awards expected to vest. Expense is generally reduced for estimated forfeitures. Awards granted during the first six months of 2016, weighted average fair value, and assumptions used to determine fair value were as follows:

	MSUs			Performance Shares			RSUs
Awards granted	800,834			213,626			46,000
Weighted average fair value	$	19.59		$	21.10		$	21.84
Expected volatility	34.02		%	34.02		%	N/A
Risk-free rate (a)	0.86		%	0.86		%	N/A
Expected term (in years) (b)	2.95			2.95			N/A
Expected dividends	—			—			N/A

(a) The risk-free rate was based on zero coupon U.S. government issues at the time of grant.

(b) The expected term represents the period from the valuation date to the end of the performance period.

MARKET SHARE UNITS

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

We estimated the fair value of each MSU granted on the date of grant using a Monte Carlo simulation that used the assumptions noted in the table above. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term.

PERFORMANCE SHARES

The performance shares granted during the first six months of 2016 generally vest after a three-year period based on our total stockholder return relative to the performance of the Dow Jones U.S. Construction and Materials Index, with adjustments to that index in certain circumstances, for the three-year period. The number of performance shares earned will vary from zero to 200% of the number of performance shares awarded depending on that relative performance. Generally, vesting will be pro-rated based on the number of full months employed during the performance period in the case of death, disability, or retirement. Each performance share earned will be settled in common stock at the end of the three-year period.

We estimated the fair value of each performance share granted on the date of grant using a Monte Carlo simulation that used the assumptions noted in the table above. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term.

RESTRICTED STOCK UNITS

The RSUs granted during the first six months of 2016 vest after a specified number of years from the date of grant or at a specified date, subject to cliff vesting. Generally, RSUs may vest earlier in the case of death, disability, or a change in control, provided that RSUs will vest upon a change in control in most circumstances only if there is also a related loss of employment or diminution of duties. Each RSU is settled in a share of our common stock after the vesting period. The fair value of each RSU granted is equal to the closing price of our common stock on the date of grant.

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Supplemental Balance Sheet Information

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supplemental Balance Sheet Information

Supplemental Balance Sheet Information

INVENTORIES

Total inventories consisted of the following:

(millions)	June 30, 2016		December 31, 2015
Finished goods	$	228	$	210
Work in progress	36		36
Raw materials	67		68
Total	$	331	$	314

ASSET RETIREMENT OBLIGATIONS

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

	Six months ended June 30,
(millions)	2016			2015
Balance as of January 1	$	119		$	123
Accretion expense	4			4
Changes in estimated cash flows	—			(1		)
Liabilities settled (a)	(2		)	(1		)
Foreign currency translation	1			(2		)
Balance as of June 30	$	122		$	123

(a) Liabilities settled for the six months ended June 30, 2016 includes a $2 million liability that was relieved in conjunction with the sale of a surplus property.

ACCRUED INTEREST

Interest accrued on our debt as of June 30, 2016 and December 31, 2015 was $44 million and $45 million, respectively, and is included in "Accrued expenses" on our accompanying consolidated balance sheets.

ASSET DISPOSITIONS

In the second quarter of 2016, we recorded a gain of $11 million, or $7 million net of tax, on the sale of a surplus property. The sale relieved the Company of an asset retirement obligation, as noted in the above table, and included the sale of raw material inventory on hand at the surplus location. The pre-tax gain was recorded in cost of products sold within our Gypsum segment.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Changes in the balances of each component of AOCI for the six months ended June 30,2016 and 2015 were as follows:

	Derivatives						Defined Benefit Plans						Foreign Currency Translation						AOCI
(millions)	2016			2015			2016			2015			2016			2015			2016			2015
Balance as of January 1	$	20		$	16		$	(221	)	$	(302	)	$	(113	)	$	(52	)	$	(314	)	$	(338	)
Other comprehensive loss before reclassifications, net of tax	(4		)	(1		)	(6		)	(2		)	(12		)	(39		)	(22		)	(42		)
Less: Amounts reclassified from AOCI, net of tax	(4		)	(5		)	(1		)	(3		)	—			—			(5		)	(8		)
Net other comprehensive income (loss)	—			4			(5		)	1			(12		)	(39		)	(17		)	(34		)
Balance as of June 30	$	20		$	20		$	(226	)	$	(301	)	$	(125	)	$	(91	)	$	(331	)	$	(372	)

Amounts reclassified from AOCI, net of tax, for the three and six months ended June 30, 2016 and 2015, were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Derivatives
Net reclassification from AOCI for cash flow hedges included in cost of products sold	$	(3	)	$	(3	)	$	(6	)	$	(5	)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1		)	—			(2		)	—
Net amount reclassified from AOCI	$	(2	)	$	(3	)	$	(4	)	$	(5	)
Defined Benefit Plans
Net reclassification from AOCI for amortization of prior service benefit included in cost of products sold	$	(2	)	$	(1	)	$	(4	)	$	(2	)
Net reclassification from AOCI for amortization of prior service cost included in selling and administrative expenses	—			(1		)	2			(2		)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1		)	—			(1		)	(1		)
Net amount reclassified from AOCI	$	(1	)	$	(2	)	$	(1	)	$	(3	)

We estimate that we will reclassify a net $3 million after-tax loss on derivatives from AOCI to earnings within the next 12 months.

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

In the second quarter of 2016, we recorded income tax expense of approximately $38 million. The income tax expense for the three months reflects taxes from federal, foreign, state and local jurisdictions. Our effective tax rate was 33.9%. Our effective tax rate was lower than the U.S. statutory rate primarily because of earnings realized in countries that had lower statutory tax rates and because of our equity method income, which is recorded net of tax. Our effective tax rate in the future will depend on the portion of our profits earned within and outside the United States.

In the six months ended June 30, 2016, we recorded income tax expense of $68 million reflecting taxes from federal, foreign, state and local jurisdictions. Our effective tax rate for the first six months was 32.5%.

As of June 30, 2016, we had federal net operating loss, or NOL, carryforwards of approximately $1.592 billion that are available to offset future federal taxable income and will expire in the years 2026 through 2032, none of which are subject to Internal Revenue Code limitations under Section 382. In addition, as of that date, we had federal AMT credit carryforwards of approximately $40 million that are available to reduce future regular federal income taxes over an indefinite period. In order to fully realize these U.S. federal net deferred tax assets, taxable income of approximately $1.707 billion would need to be generated during the period before their expiration.

As of June 30, 2016, we had a gross deferred tax asset related to our state NOLs and tax credit carryforwards of $223 million, of which $26 million will expire in 2016. The remainder will expire if unused in years 2017 through 2035. We also had NOL and tax credit carryforwards in various foreign jurisdictions in the amount of $1 million as of June 30, 2016, against which we have maintained a valuation allowance.

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

Based on our evaluation, during the first six months of 2016, we made no adjustments to the valuation allowance against our deferred tax assets of $75 million, which relates to certain NOLs that we anticipate will not be used prior to their expiration.

The Internal Revenue Code imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change” which can result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. If we were to experience an ownership change, utilization of our NOLs would be subject to an annual limitation that may be carried over to later years within the allowed NOL carryforward period. Over the entire carryforward period, we may not be able to use all our NOLs due to the aforementioned annual limitation. If an ownership change had occurred as of June 30, 2016, our annual U.S. federal NOL utilization would have been limited to approximately $89 million per year.

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Litigation

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

WALLBOARD PRICING LAWSUITS

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

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

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

ENVIRONMENTAL LITIGATION

We have been notified by state and federal environmental protection agencies of possible involvement as one of numerous “potentially responsible parties” in a number of Superfund sites in the United States. As a potentially responsible party, we may be responsible to pay for some part of the cleanup of hazardous waste at those sites. In most of these sites, our involvement is expected to be minimal. In addition, we are involved in environmental cleanups of other property that we own or owned. As of both June 30, 2016 and December 31, 2015, we had an accrual of $16 million for our probable and reasonably estimable liability in connection with these matters. Our accruals take into account all known or estimated undiscounted costs associated with these sites, including site investigations and feasibility costs, site cleanup and remediation, certain legal costs, and fines and penalties, if any. However, we continue to review these accruals as additional information becomes available and revise them as appropriate. Based on the information known to us, we believe these environmental matters will not have a material effect on our results of operations, financial position or cash flows.

OTHER LITIGATION

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

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Gypsum Transportation Limited

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Gypsum Transportation Limited

We exited our shipping operations in the second quarter of 2015. In November 2015, we entered into a release and debt settlement agreement (Settlement Agreement) to recover a portion of our loss incurred when our former trading partner ceased performing under the contract in the fourth quarter of 2014. The Settlement Agreement required payments totaling $14 million beginning in December 2015. The payments received to settle a $9 million loss on the outstanding trade receivable was recorded as a benefit to our consolidated statements of income when we determined the payments to be probable. We recorded a recovery of $6 million in the fourth quarter of 2015 and $8 million in the first quarter of 2016. With the payments received in the first quarter, the total recovery under the Settlement Agreement is complete.

For the six months ended June 30, 2016, the recovery is presented as $3 million within "Recovery of receivable", $1 million within "Interest income" and $4 million within "Other income, net" on our consolidated statement of income.

GTL recorded operating profit of $0 million and $3 million for the three and six months ended June 30, 2016, respectively, compared with operating profit of $1 million for both the three and six months ended June 30, 2015.

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Equity Method Investments (Tables)

6 Months Ended

Jun. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

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

	Three months ended June 30,				Six months ended June 30,
(millions)	2016		2015		2016		2015
USG Boral Building Products:
Net sales	$	273	$	264	$	502	$	492
Gross profit	86		70		151		131
Operating profit	41		34		64		57
Income from continuing operations before income taxes	46		36		70		62
Net income	34		28		49		46
Net income attributable to USG Boral Building Products	32		26		46		42
USG share of income from investment accounted for using the equity method	16		13		23		21
Other equity method investments:
USG share of income from investments accounted for using the equity method	—		1		—		1
Total income from equity method investments	$	16	$	14	$	23	$	22

Equity method investments as of June 30, 2016 and December 31, 2015, were as follows:

	June 30, 2016			December 31, 2015
(dollars in millions)	Carrying Value		Ownership Percentage	Carrying Value		Ownership Percentage
USG Boral Building Products	$	641	50%	$	675	50%
Other equity method investments	7		33% - 50%	7		33% - 50%
Total equity method investments	$	648		$	682

Translation gains or losses recorded in other comprehensive income were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Translation loss	$	(30	)	$	(3	)	$	(13	)	$	(19	)

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Segments (Tables)

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Net sales and operating profit (loss) by segment

Segment results for our Gypsum, Ceilings and Distribution segments were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Net Sales:
Gypsum	$	635		$	617		$	1,270		$	1,194
Ceilings	137			131			262			254
Distribution	386			364			743			698
Eliminations	(156		)	(142		)	(303		)	(267		)
Total	$	1,002		$	970		$	1,972		$	1,879
Operating Profit (Loss):
Gypsum	$	113		$	98		$	224		$	166
Ceilings	33			25			62			46
Distribution	15			9			26			13
Corporate	(26		)	(24		)	(47		)	(47		)
Eliminations	(2		)	(3		)	(5		)	3
Total	$	133		$	105		$	260		$	181

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Reconciliation of basic earnings per share to diluted earnings per share

The reconciliation of basic earnings per share to diluted earnings per share is shown in the following table.

	Three months ended June 30,				Six months ended June 30,
(millions, except per-share data)	2016		2015		2016		2015
Net income	$	74	$	79	$	141	$	103
Effect of dilutive securities - Deferred compensation program for non-employee directors	—		—		—		—
Income available to shareholders	$	74	$	79	$	141	$	103
Average common shares	145.9		145.4		145.9		145.4
Dilutive RSUs, MSUs, performance shares and stock options	2.1		1.6		1.4		1.6
Deferred shares associated with a deferred compensation program for non-employee directors	—		—		—		0.2
Average diluted common shares	148.0		147.0		147.3		147.2
Earnings per average common share	$	0.50	$	0.54	$	0.96	$	0.70
Earnings per average diluted common share	$	0.50	$	0.54	$	0.95	$	0.70

Schedule of anti-dilutive securities excluded from computation of earnings per share

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

	Three months ended June 30,		Six months ended June 30,
(millions, common shares)	2016	2015	2016	2015
MSUs, performance shares, RSUs and stock options	1.7	1.8	1.7	1.9
Deferred shares associated with a deferred compensation program for non-employee directors	0.2	0.2	0.2	—

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Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Investments in marketable securities

Our investments in marketable securities consisted of the following:

	As of June 30, 2016				As of December 31, 2015
(millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate debt securities	$	136	$	136	$	134	$	134
U.S. government and agency debt securities	51		51		57		57
Asset-backed debt securities	2		2		21		21
Certificates of deposit	21		21		15		15
Municipal debt securities	—		—		3		3
Total marketable securities	$	210	$	210	$	230	$	230

Contractual maturities of marketable securities

Contractual maturities of marketable securities as of June 30, 2016 were as follows:

(millions)	Amortized Cost		Fair Value
Due in 1 year or less	$	208	$	208
Due in 1-5 years	2		2
Total marketable securities	$	210	$	210

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets with definitive lives

Intangible assets with definite lives are amortized. These assets are summarized as follows:

	As of June 30, 2016							As of December 31, 2015
(millions)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Intangible Assets with Definite Lives:
Customer relationships	$	70	$	(65	)	$	5	$	70	$	(61	)	$	9
Other	9		(8		)	1		9		(8		)	1
Total	$	79	$	(73	)	$	6	$	79	$	(69	)	$	10

Estimated annual amortization expense intangible assets

Estimated amortization expense for the remainder of 2016 and for future years is as follows:

(millions)	2016		2017		2018 and thereafter
Estimated future amortization expense	$	3	$	2	$	1

Schedule of indefinite-lived intangible assets

Intangible assets with indefinite lives are not amortized. The gross carrying amount of these assets are as follows:

(millions)	June 30, 2016		December 31, 2015
Intangible Assets with Indefinite Lives:
Trade names	$	22	$	22
Other	8		8
Total	$	30	$	30

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Debt (Tables)

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Schedule of long-term debt instruments

Total debt, including the current portion of long-term debt, consisted of the following:

(millions)	June 30, 2016		December 31, 2015
5.5% senior notes due 2025	$	350	$	350
5.875% senior notes due 2021	350		350
6.3% senior notes due 2016	363		500
7.75% senior notes due 2018	500		500
7.875% senior notes due 2020, net of discount	249		249
Industrial revenue bonds (due 2028 through 2034)	239		239
Total	$	2,051	$	2,188
Less: Unamortized debt issuance costs	12		13
Total	$	2,039	$	2,175

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Pretax effects of derivative instruments on consolidated statements of operations

The following are the pretax effects of derivative instruments on the consolidated statements of income for the three months ended June 30,2016 and 2015.

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)					Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016		2015				2016			2015
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	$	7	$	1		Cost of products sold	$	(5	)	$	(4	)
Foreign exchange contracts	—		(2		)	Cost of products sold	2			1
Total	$	7	$	(1	)		$	(3	)	$	(3	)

	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	1	$	—
Total		$	1	$	—

The following are the pretax effects of derivative instruments on the consolidated statements of income for the six months ended June 30,2016 and 2015.

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)						Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016			2015				2016			2015
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	$	2		$	(4	)	Cost of products sold	$	(10	)	$	(7	)
Foreign exchange contracts	(6		)	3			Cost of products sold	4			2
Total	$	(4	)	$	(1	)		$	(6	)	$	(5	)

	Location of Gain or (Loss)  Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	—	$	(1	)
Total		$	—	$	(1	)

Fair values of derivative instruments and the location on the consolidated balance sheets

he following are the fair values of derivative instruments and the location on our accompanying consolidated balance sheets as of June 30, 2016 and December 31, 2015.

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		6/30/16		12/31/15			6/30/16		12/31/15
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	Other current assets	$	3	$	1	Accrued expenses	$	7	$	15
Commodity contracts	Other assets	3		—		Other liabilities	4		5
Foreign exchange contracts	Other current assets	1		8		Accrued expenses	2		—
Foreign exchange contracts	Other assets	—		—		Other liabilities	1		—
Total derivatives in cash flow hedging relationships		$	7	$	9		$	14	$	20

Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other current assets	$	—	$	—	Accrued expenses	$	—	$	2
Total derivatives not designated as hedging instruments		$	—	$	—		$	—	$	2
Total derivatives	Total assets	$	7	$	9	Total liabilities	$	14	$	22

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value on a recurring basis

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

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)				Total
(millions)	6/30/16		12/31/15		6/30/16			12/31/15			6/30/16		12/31/15		6/30/16			12/31/15
Cash equivalents	$	232	$	223	$	59		$	25		$	—	$	—	$	291		$	248
Equity mutual funds	4		4		—			—			—		—		4			4
Marketable securities:
Corporate debt securities	—		—		136			134			—		—		136			134
U.S. government and agency debt securities	—		—		51			57			—		—		51			57
Asset-backed debt securities	—		—		2			21			—		—		2			21
Certificates of deposit	—		—		21			15			—		—		21			15
Municipal debt securities	—		—		—			3			—		—		—			3
Derivative assets	—		—		7			9			—		—		7			9
Derivative liabilities	—		—		(14		)	(22		)	—		—		(14		)	(22		)

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Employee Retirement Plans (Tables)

6 Months Ended

Jun. 30, 2016

Compensation and Retirement Disclosure [Abstract]

Components of net pension and postretirement benefits costs

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

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Pension:
Service cost of benefits earned	$	12		$	12		$	23		$	25
Interest cost on projected benefit obligation	17			17			34			34
Expected return on plan assets	(22		)	(21		)	(44		)	(42		)
Settlement	—			—			2			—
Net amortization	4			10			9			19
Net pension cost	$	11		$	18		$	24		$	36
Postretirement:
Service cost of benefits earned	$	—		$	—		$	1		$	1
Interest cost on projected benefit obligation	2			2			3			3
Net amortization	(7		)	(8		)	(14		)	(16		)
Net postretirement benefit	$	(5	)	$	(6	)	$	(10	)	$	(12	)

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Awards granted during the period and assumptions used to determine fair value

Awards granted during the first six months of 2016, weighted average fair value, and assumptions used to determine fair value were as follows:

	MSUs			Performance Shares			RSUs
Awards granted	800,834			213,626			46,000
Weighted average fair value	$	19.59		$	21.10		$	21.84
Expected volatility	34.02		%	34.02		%	N/A
Risk-free rate (a)	0.86		%	0.86		%	N/A
Expected term (in years) (b)	2.95			2.95			N/A
Expected dividends	—			—			N/A

(a) The risk-free rate was based on zero coupon U.S. government issues at the time of grant.

(b) The expected term represents the period from the valuation date to the end of the performance period.

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Supplemental Balance Sheet Information (Tables)

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of inventories

Total inventories consisted of the following:

(millions)	June 30, 2016		December 31, 2015
Finished goods	$	228	$	210
Work in progress	36		36
Raw materials	67		68
Total	$	331	$	314

Changes in the liability for asset retirement obligations

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

	Six months ended June 30,
(millions)	2016			2015
Balance as of January 1	$	119		$	123
Accretion expense	4			4
Changes in estimated cash flows	—			(1		)
Liabilities settled (a)	(2		)	(1		)
Foreign currency translation	1			(2		)
Balance as of June 30	$	122		$	123

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Changes in the balances of each component of AOCI

Changes in the balances of each component of AOCI for the six months ended June 30,2016 and 2015 were as follows:

	Derivatives						Defined Benefit Plans						Foreign Currency Translation						AOCI
(millions)	2016			2015			2016			2015			2016			2015			2016			2015
Balance as of January 1	$	20		$	16		$	(221	)	$	(302	)	$	(113	)	$	(52	)	$	(314	)	$	(338	)
Other comprehensive loss before reclassifications, net of tax	(4		)	(1		)	(6		)	(2		)	(12		)	(39		)	(22		)	(42		)
Less: Amounts reclassified from AOCI, net of tax	(4		)	(5		)	(1		)	(3		)	—			—			(5		)	(8		)
Net other comprehensive income (loss)	—			4			(5		)	1			(12		)	(39		)	(17		)	(34		)
Balance as of June 30	$	20		$	20		$	(226	)	$	(301	)	$	(125	)	$	(91	)	$	(331	)	$	(372	)

Amounts reclassified from AOCI, net of tax

Amounts reclassified from AOCI, net of tax, for the three and six months ended June 30, 2016 and 2015, were as follows:

	Three months ended June 30,						Six months ended June 30,
(millions)	2016			2015			2016			2015
Derivatives
Net reclassification from AOCI for cash flow hedges included in cost of products sold	$	(3	)	$	(3	)	$	(6	)	$	(5	)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1		)	—			(2		)	—
Net amount reclassified from AOCI	$	(2	)	$	(3	)	$	(4	)	$	(5	)
Defined Benefit Plans
Net reclassification from AOCI for amortization of prior service benefit included in cost of products sold	$	(2	)	$	(1	)	$	(4	)	$	(2	)
Net reclassification from AOCI for amortization of prior service cost included in selling and administrative expenses	—			(1		)	2			(2		)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1		)	—			(1		)	(1		)
Net amount reclassified from AOCI	$	(1	)	$	(2	)	$	(1	)	$	(3	)

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Presentation of Financial Statements (Details) - Accounting Standards Update 2016-09 - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Income tax benefits on share based arrangements	$ 3	$ 0
Unrecognized tax benefits	$ 25

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Equity Method Investments (Details) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
Equity method investments	$ 648	$ 682
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Equity method investments	$ 641	$ 675
Ownership percentage	50.00%	50.00%
Other equity method investments
Schedule of Equity Method Investments [Line Items]
Equity method investments	$ 7	$ 7
Other equity method investments | Minimum
Schedule of Equity Method Investments [Line Items]
Ownership percentage	33.00%	33.00%
Other equity method investments | Maximum
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%	50.00%

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Equity Method Investments (Details 1) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Schedule of Equity Method Investments [Line Items]
Translation loss	$ (36)	$ (5)	$ (12)	$ (39)
USG Boral Building Products [Member]
Schedule of Equity Method Investments [Line Items]
Translation loss	$ (30)	$ (3)	$ (13)	$ (19)

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Equity Method Investments (Details 2) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Schedule of Equity Method Investments [Line Items]
USG share of income from investment accounted for using the equity method	$ 16	$ 14	$ 23	$ 22
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Gross profit	86	70	151	131
Income from continuing operations before income taxes	46	36	70	62
Net income	34	28	49	46
Net income attributable to USG Boral Building Products	32	26	46	42
USG share of income from investment accounted for using the equity method	16	13	23	21
Other equity method investments
Schedule of Equity Method Investments [Line Items]
USG share of income from investment accounted for using the equity method	0	1	0	1
USG Boral Building Products | USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Net sales	273	264	502	492
Operating profit	$ 41	$ 34	$ 64	$ 57

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Equity Method Investments (Details Textual) - USD ($)		3 Months Ended	6 Months Ended
	Feb. 27, 2014	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
Proceeds from Equity Method Investment, Dividends or Distributions			$ 18,000,000	$ 18,000,000
Present value of contingent liability for contingent consideration for equity method investment		$ 0	$ 0		$ 24,000,000
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Ownership percentage		50.00%	50.00%		50.00%
Proceeds from Equity Method Investment, Dividends or Distributions			$ 18,000,000
Undistributed earnings		$ 46,000,000	46,000,000
Payments to Acquire Interest in Joint Venture		1,000,000
Range of outcomes in contingent consideration arrangements, value, high	$ 75,000,000
Contingent consideration for first performance period	$ 25,000,000
First performance period for contingent consideration	3 years
Contingent consideration for second performance period	$ 50,000,000
Second performance period for contingent consideration	5 years
Boral Limited | USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Ownership percentage by joint venture partner of equity method investment	50.00%
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Loan receivable from related party		$ 15,000,000	$ 15,000,000		$ 14,000,000

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Segments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net Sales:
Net sales	$ 1,002	$ 970	$ 1,972	$ 1,879
Operating Profit (Loss):
Operating profit	133	105	260	181
Operating segments | Gypsum
Net Sales:
Net sales	635	617	1,270	1,194
Operating Profit (Loss):
Operating profit	113	98	224	166
Operating segments | Ceilings
Net Sales:
Net sales	137	131	262	254
Operating Profit (Loss):
Operating profit	33	25	62	46
Operating segments | Distribution
Net Sales:
Net sales	386	364	743	698
Operating Profit (Loss):
Operating profit	15	9	26	13
Corporate
Operating Profit (Loss):
Operating profit	(26)	(24)	(47)	(47)
Eliminations
Net Sales:
Net sales	(156)	(142)	(303)	(267)
Operating Profit (Loss):
Operating profit	$ (2)	$ (3)	$ (5)	$ 3

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Earnings Per Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net income	$ 74,000,000	$ 79,000,000	$ 141,000,000	$ 103,000,000
Effect of dilutive securities - Deferred compensation program for non-employee directors	0	0	0	0
Income available to shareholders	$ 74,000,000	$ 79,000,000	$ 141,000,000	$ 103,000,000
Average common shares	145,933,165	145,424,853	145,856,220	145,393,548
Dilutive RSUs, MSUs, performance shares and stock options	2,100,000	1,600,000	1,400,000	1,600,000
Deferred shares associated with a deferred compensation program for non-employee directors	0	0	0	200,000
Average diluted common shares	147,994,032	146,990,178	147,321,420	147,167,248
Earnings per average common share	$ 0.50	$ 0.54	$ 0.96	$ 0.70
Earnings per average diluted common share	$ 0.50	$ 0.54	$ 0.95	$ 0.70

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Earnings Per Share (Details 1) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
MSUs, performance shares, RSUs and stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	1.7	1.8	1.7	1.9
Deferred shares associated with a deferred compensation program for non-employee directors
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	0.2	0.2	0.2	0.0

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Marketable Securities (Details) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Investments in marketable securities
Amortized Cost	$ 210	$ 230
Fair Value	210	230
Corporate debt securities
Investments in marketable securities
Amortized Cost	136	134
Fair Value	136	134
U.S. government and agency debt securities
Investments in marketable securities
Amortized Cost	51	57
Fair Value	51	57
Asset-backed debt securities
Investments in marketable securities
Amortized Cost	2	21
Fair Value	2	21
Certificates of deposit
Investments in marketable securities
Amortized Cost	21	15
Fair Value	21	15
Municipal debt securities
Investments in marketable securities
Amortized Cost	0	3
Fair Value	$ 0	$ 3

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Marketable Securities (Details 1) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Contractual maturities of marketable securities
Due in 1 year or less, amortized cost	$ 208
Due in 1-5 years, amortized cost	2
Marketable securities, amortized cost	210	$ 230
Due in 1 year or less, fair value	208
Due in 1-5 years, fair value	2
Marketable securities, fair value	$ 210	$ 230

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Marketable Securities (Details Textual) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Investments, Debt and Equity Securities [Abstract]
Sales or maturities of marketable securities	$ 187	$ 103

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Intangible Assets (Details) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Intangible assets with definite lives
Gross Carrying Amount	$ 79	$ 79
Accumulated Amortization	(73)	(69)
Net	6	10
Customer relationships
Intangible assets with definite lives
Gross Carrying Amount	70	70
Accumulated Amortization	(65)	(61)
Net	5	9
Other
Intangible assets with definite lives
Gross Carrying Amount	9	9
Accumulated Amortization	(8)	(8)
Net	$ 1	$ 1

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Intangible Assets (Details 1) $ in Millions	Jun. 30, 2016 USD ($)
Estimated annual amortization expense intangible assets
Estimated future amortization expense, 2016	$ 3
Estimated future amortization expense, 2017	2
Estimated future amortization expense, 2018 and thereafter	$ 1

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Intangible Assets (Details 2) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Intangible assets with indefinite lives
Indefinite-lived intangible assets	$ 30	$ 30
Trade names
Intangible assets with indefinite lives
Indefinite-lived intangible assets	22	22
Other
Intangible assets with indefinite lives
Indefinite-lived intangible assets	$ 8	$ 8

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Intangible Assets (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense of intangible assets	$ 2	$ 2	$ 4	$ 4

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Debt (Details) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015	Feb. 24, 2015
Debt Instrument [Line Items]
Total debt	$ 2,051	$ 2,188
Deferred financing fees	12	13
Long term debt net of unamortized debt issuance costs	$ 2,039	$ 2,175
5.5% senior notes due 2025
Debt Instrument [Line Items]
Debt instrument interest rate	5.50%	5.50%
Total debt	$ 350	$ 350
Deferred financing fees			$ 6
Long term debt net of unamortized debt issuance costs	$ 345	$ 344
5.875% senior notes due 2021
Debt Instrument [Line Items]
Debt instrument interest rate	5.875%	5.875%
Total debt	$ 350	$ 350
6.3% senior notes due 2016
Debt Instrument [Line Items]
Debt instrument interest rate	6.30%	6.30%
Total debt	$ 363	$ 500
7.75% senior notes due 2018
Debt Instrument [Line Items]
Debt instrument interest rate	7.75%	7.75%
Total debt	$ 500	$ 500
7.875% senior notes due 2020, net of discount
Debt Instrument [Line Items]
Debt instrument interest rate	7.875%	7.875%
Total debt	$ 249	$ 249
Industrial revenue bonds (due 2028 through 2034)
Debt Instrument [Line Items]
Total debt	$ 239	$ 239

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Debt (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jul. 26, 2016	Dec. 31, 2015	Mar. 31, 2015	Mar. 26, 2015	Feb. 24, 2015
Debt Instrument [Line Items]
Loss on extinguishment of debt	$ (2)	$ 0	$ (4)	$ (19)
Deferred financing fees	12		12			$ 13
Long term debt net of unamortized debt issuance costs	2,039		2,039			2,175
Fair value of debt	2,153		2,153			$ 2,295
Credit facility
Debt Instrument [Line Items]
Borrowing available under credit facility	341		341
Outstanding lines of credit	$ 0		$ 0
Interest rate at period end for line of credit facility	1.90%		1.90%
Amount of letters of credit outstanding	$ 47		$ 47
CGC Credit Facility CAD
Debt Instrument [Line Items]
Interest rate at period end for line of credit facility	2.13%		2.13%
CGC credit facility USD
Debt Instrument [Line Items]
Borrowing available under credit facility	$ 50		$ 50
8.375% senior notes due 2018
Debt Instrument [Line Items]
Repurchase of outstanding debt							$ 350	$ 224	$ 126
Debt instrument interest rate	8.375%		8.375%
Amount paid in consideration of debt repurchase								$ 242	135
6.3% senior notes due 2016
Debt Instrument [Line Items]
Repurchase of outstanding debt	$ 137		$ 137
Debt instrument interest rate	6.30%		6.30%			6.30%
Premiums paid on repurchased debt	$ 4		$ 4
Accrued interest paid on repurchased debt	3		3
Amount paid in consideration of debt repurchase	$ 144		$ 144
5.5% senior notes due 2025
Debt Instrument [Line Items]
Debt instrument interest rate	5.50%		5.50%			5.50%
Face amount of debt									350
Deferred financing fees									$ 6
Long term debt net of unamortized debt issuance costs	$ 345		$ 345			$ 344
Subsequent Event [Member] | 6.3% senior notes due 2016
Debt Instrument [Line Items]
Repurchase of outstanding debt					$ 40
Premiums paid on repurchased debt					1
Amount paid in consideration of debt repurchase					$ 41

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Derivative Instruments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Derivatives in Cash Flow Hedging Relationships
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)			$ (4)	$ (1)
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)			(6)	(5)
Derivatives in Cash Flow Hedging Relationships | Cash flow hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)	$ 7	$ (1)
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	(3)	(3)
Derivatives in Cash Flow Hedging Relationships | Commodity contracts | Cash flow hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)	7	1	2	(4)
Derivatives in Cash Flow Hedging Relationships | Commodity contracts | Cost of products sold | Cash flow hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	(5)	(4)	(10)	(7)
Derivatives in Cash Flow Hedging Relationships | Foreign exchange contracts | Cash flow hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)	0	(2)	(6)	3
Derivatives in Cash Flow Hedging Relationships | Foreign exchange contracts | Cost of products sold | Cash flow hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	2	1	4	2
Derivatives Not Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives	1	0	0	(1)
Derivatives Not Designated as Hedging Instruments | Commodity contracts | Cost of products sold
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives	$ 1	$ 0	$ 0	$ (1)

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Derivative Instruments (Details 1) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Derivatives, Fair Value [Line Items]
Derivative assets	$ 7	$ 9
Derivative liabilities	14	22
Derivatives Not Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Derivative assets	0	0
Derivative liabilities	0	2
Derivatives Not Designated as Hedging Instruments | Commodity contracts | Other current assets
Derivatives, Fair Value [Line Items]
Derivative assets	0	0
Derivatives Not Designated as Hedging Instruments | Commodity contracts | Accrued expenses
Derivatives, Fair Value [Line Items]
Derivative liabilities	0	2
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships
Derivatives, Fair Value [Line Items]
Derivative assets	7	9
Derivative liabilities	14	20
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Commodity contracts | Other current assets
Derivatives, Fair Value [Line Items]
Derivative assets	3	1
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Commodity contracts | Other assets
Derivatives, Fair Value [Line Items]
Derivative assets	3	0
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Commodity contracts | Accrued expenses
Derivatives, Fair Value [Line Items]
Derivative liabilities	7	15
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Commodity contracts | Other liabilities
Derivatives, Fair Value [Line Items]
Derivative liabilities	4	5
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Foreign exchange contracts | Other current assets
Derivatives, Fair Value [Line Items]
Derivative assets	1	8
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Foreign exchange contracts | Other assets
Derivatives, Fair Value [Line Items]
Derivative assets	0	0
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Foreign exchange contracts | Accrued expenses
Derivatives, Fair Value [Line Items]
Derivative liabilities	2	0
Cash flow hedging | Derivatives in Cash Flow Hedging Relationships | Foreign exchange contracts | Other liabilities
Derivatives, Fair Value [Line Items]
Derivative liabilities	$ 1	$ 0

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Derivative Instruments (Details Textual) MMBTU in Millions	6 Months Ended
	Jun. 30, 2016 USD ($) MMBTU	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Derivative Instruments, Gain (Loss) [Line Items]
Typical hedging period	3 years
Net liability aggregate fair value	$ (7,000,000)
Collateral provided to counterparties related to derivatives	$ 13,000,000
Commodity contracts
Derivative Instruments, Gain (Loss) [Line Items]
Nonmonetary notional amount of derivatives | MMBTU	29
Fair value of contracts not designated as cash flow hedges	$ 0		$ 2,000,000
Cash flow hedging | Commodity contracts
Derivative Instruments, Gain (Loss) [Line Items]
Loss on cash flow hedge ineffectiveness	0	$ 0
Cash flow hedging | Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Loss on cash flow hedge ineffectiveness	0	$ 0
Notional amounts of foreign exchange forward contracts	122,000,000
Cash flow hedging | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Commodity contracts
Derivative Instruments, Gain (Loss) [Line Items]
Unrealized gain (loss) that remained in AOCI from cash flow hedges, net of tax	(5,000,000)		(19,000,000)
Cash flow hedging | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Unrealized gain (loss) that remained in AOCI from cash flow hedges, net of tax	$ (2,000,000)		$ 8,000,000

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Fair Value Measurements (Details) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Assets and liabilities measured at fair value on a recurring basis
Cash equivalents	$ 291	$ 248
Equity mutual funds	4	4
Marketable securities	210	230
Derivative assets	7	9
Derivative liabilities	(14)	(22)
Corporate debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	136	134
U.S. government and agency debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	51	57
Asset-backed debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	2	21
Certificates of deposit
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	21	15
Municipal debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	3
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets and liabilities measured at fair value on a recurring basis
Cash equivalents	232	223
Equity mutual funds	4	4
Derivative assets	0	0
Derivative liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government and agency debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Asset-backed debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Certificates of deposit
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Municipal debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Significant Other Observable Inputs (Level 2)
Assets and liabilities measured at fair value on a recurring basis
Cash equivalents	59	25
Equity mutual funds	0	0
Derivative assets	7	9
Derivative liabilities	(14)	(22)
Significant Other Observable Inputs (Level 2) | Corporate debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	136	134
Significant Other Observable Inputs (Level 2) | U.S. government and agency debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	51	57
Significant Other Observable Inputs (Level 2) | Asset-backed debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	2	21
Significant Other Observable Inputs (Level 2) | Certificates of deposit
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	21	15
Significant Other Observable Inputs (Level 2) | Municipal debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	3
Significant Unobservable Inputs (Level 3)
Assets and liabilities measured at fair value on a recurring basis
Cash equivalents	0	0
Equity mutual funds	0	0
Derivative assets	0	0
Derivative liabilities	0	0
Significant Unobservable Inputs (Level 3) | Corporate debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | U.S. government and agency debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | Asset-backed debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | Certificates of deposit
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | Municipal debt securities
Assets and liabilities measured at fair value on a recurring basis
Marketable securities	$ 0	$ 0

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Employee Retirement Plans (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Pension
Components of net pension and postretirement benefits costs
Service cost of benefits earned	$ 12	$ 12	$ 23	$ 25
Interest cost on projected benefit obligation	17	17	34	34
Expected return on plan assets	(22)	(21)	(44)	(42)
Settlement	0	0	2	0
Net amortization	4	10	9	19
Net pension cost	11	18	24	36
Postretirement
Components of net pension and postretirement benefits costs
Service cost of benefits earned	0	0	1	1
Interest cost on projected benefit obligation	2	2	3	3
Net amortization	(7)	(8)	(14)	(16)
Net pension cost	$ (5)	$ (6)	$ (10)	$ (12)

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Employee Retirement Plans (Details Textual) $ in Millions	6 Months Ended
	Jun. 30, 2016 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Estimated total contributions in current year	$ 65
United States pension plan
Defined Benefit Plan Disclosure [Line Items]
Contribution by employer	50
Canada pension plan
Defined Benefit Plan Disclosure [Line Items]
Contribution by employer	6
Other domestic pension plan
Defined Benefit Plan Disclosure [Line Items]
Contribution by employer	$ 5

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Share-Based Compensation (Details)	6 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares
MSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	800,834
Weighted average fair value | $ / shares	$ 19.59
Expected volatility	34.02%
Risk-free rate	0.86%	[1]
Expected term (in years)	2 years 11 months 13 days	[2]
Expected dividends | $	$ 0
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	213,626
Weighted average fair value | $ / shares	$ 21.10
Expected volatility	34.02%
Risk-free rate	0.86%	[1]
Expected term (in years)	2 years 11 months 13 days	[2]
Expected dividends | $	$ 0
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	46,000
Weighted average fair value | $ / shares	$ 21.84

[1] The risk-free rate was based on zero coupon U.S. government issues at the time of grant.

[2] The expected term represents the period from the valuation date to the end of the performance period.

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Share-Based Compensation (Details Textual)	6 Months Ended
	Jun. 30, 2016
MSUs
Share Based Compensation [Abstract]
Vesting period	3 years
Minimum of range for number of shares earned	0.00%
Maximum of range for number of shares earned	150.00%
Performance Shares
Share Based Compensation [Abstract]
Vesting period	3 years
Minimum of range for number of shares earned	0.00%
Maximum of range for number of shares earned	200.00%

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Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Inventories
Finished goods	$ 228	$ 210
Work in process	36	36
Raw materials	67	68
Total	$ 331	$ 314

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Supplemental Balance Sheet Information (Details 1) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2016		Jun. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Liabilities settled on sale of surplus property	$ 2
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]
Beginning balance	119		$ 123
Accretion expense	4		4
Changes in estimated cash flows	0		(1)
Liabilities settled	(2)	[1]	(1)
Foreign currency translation	1		(2)
Ending balance	$ 122		$ 123

[1] (a) Liabilities settled for the six months ended June 30, 2016 includes a $2 million liability that was relieved in conjunction with the sale of a surplus property.

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Supplemental Balance Sheet Information (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Supplemental Balance Sheet Information [Abstract]
Interest accrued on debt	$ 44	$ 45
Pretax gain on surplus property	11
Net gain on surplus property	$ 7

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Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			$ (314)	$ (338)
Other comprehensive loss before reclassifications, net of tax			(22)	(42)
Less: Amounts reclassified from AOCI, net of tax			(5)	(8)
Other comprehensive income (loss), net of tax	$ (32)	$ (8)	(17)	(34)
Ending balance	(331)	(372)	(331)	(372)
Derivatives
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			20	16
Other comprehensive loss before reclassifications, net of tax			(4)	(1)
Less: Amounts reclassified from AOCI, net of tax			(4)	(5)
Other comprehensive income (loss), net of tax			0	4
Ending balance	20	20	20	20
Defined Benefit Plans
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			(221)	(302)
Other comprehensive loss before reclassifications, net of tax			(6)	(2)
Less: Amounts reclassified from AOCI, net of tax			(1)	(3)
Other comprehensive income (loss), net of tax			(5)	1
Ending balance	(226)	(301)	(226)	(301)
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			(113)	(52)
Other comprehensive loss before reclassifications, net of tax			(12)	(39)
Less: Amounts reclassified from AOCI, net of tax			0	0
Other comprehensive income (loss), net of tax			(12)	(39)
Ending balance	$ (125)	$ (91)	$ (125)	$ (91)

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Accumulated Other Comprehensive Income (Loss) (Details 1) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net reclassification from AOCI included in cost of products sold	$ 790	$ 787	$ 1,565	$ 1,543
Net reclassification from AOCI included in selling and administrative expenses	79	79	150	156
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(38)	(1)	(68)	1
Net amount reclassified from AOCI	74	79	141	103
Derivatives | Amounts reclassified from AOCI, net of tax
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net reclassification from AOCI included in cost of products sold	(3)	(3)	(6)	(5)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1)	0	(2)	0
Net amount reclassified from AOCI	(2)	(3)	(4)	(5)
Defined Benefit Plans | Amounts reclassified from AOCI, net of tax
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net reclassification from AOCI included in cost of products sold	(2)	(1)	(4)	(2)
Net reclassification from AOCI included in selling and administrative expenses	0	(1)	2	(2)
Less: Income tax benefit on reclassification from AOCI included in income tax (expense) benefit	(1)	0	(1)	(1)
Net amount reclassified from AOCI	$ (1)	$ (2)	$ (1)	$ (3)

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Accumulated Other Comprehensive Income (Loss) (Details Textual) $ in Millions	6 Months Ended
	Jun. 30, 2016 USD ($)
Equity [Abstract]
Estimated after-tax loss on derivatives to be reclassified from AOCI to earnings within the next 12 months	$ (3)

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Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Income tax (expense) benefit	$ (38,000,000)	$ (1,000,000)	$ (68,000,000)	$ 1,000,000
Effective tax rate	33.90%		32.50%
Federal net operating loss carryforwards	$ 1,592,000,000		$ 1,592,000,000
Federal alternative minimum tax credit carryforwards	40,000,000		40,000,000
Minimum taxable income needed to fully realize the U.S. federal net deferred tax assets	1,707,000,000		1,707,000,000
Deferred tax assets related to state net operating loss and tax credit carryforwards	223,000,000		223,000,000
Gross deferred tax assets related to state net operating loss and tax credit carry forwards that will expire in current year	26,000,000		26,000,000
Net operating loss and tax credit carryforwards in various foreign jurisdictions	1,000,000		1,000,000
Increase (decrease) in valuation allowance against deferred tax asset			0
Valuation allowance on deferred tax assets	75,000,000		$ 75,000,000
Percentage of change in ownership			50.00%
Period of change in ownership			3 years
Approximate annual NOL utilization had an ownership change occurred	$ 89,000,000		$ 89,000,000

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Litigation (Details Textual) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Accrual for probable and reasonably estimable liability for environmental cleanup	$ 16	$ 16

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Gypsum Transportation Limited (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Long Lived Assets Held-for-sale [Line Items]
Receivable per release and debt settlement agreement		$ 14
Loss on trade receivable from release and debt settlement agreement		9
Recovered receivable per release and debt settlement agreement	$ 8	$ 6
Recovery of receivable	0		$ 0	$ (3)	$ 0
Recovered receivable recorded in interest income				1
Recovered receivable recorded in other income				4
Operating profit	$ 133		$ 105	260	181
Gypsum Transportation Limited
Long Lived Assets Held-for-sale [Line Items]
Operating profit				$ 3	$ 1