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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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.)
125 S. Franklin Street, Chicago, Illinois 60606-4678
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (312) 606-4000
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Securities Registered Pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of Each Class Which Registered
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New York Stock Exchange
Common Stock, $0.10 par value Midwest Stock Exchange
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New York Stock Exchange
Preferred Share Purchase Rights Midwest Stock Exchange
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8.5% Senior Notes, Due 2005 New York Stock Exchange
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New York Stock Exchange
Warrants Midwest Stock Exchange
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Securities Registered Pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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 |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes |X| No |_|
As of January 31, 1997, the aggregate market value of USG Corporation
common stock held by nonaffiliates (based upon the New York Stock Exchange
("NYSE") closing prices) was approximately $1,629,794,000.
As of January 31, 1997, 45,930,559 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Corporation's 1996 Annual Report to Stockholders are
incorporated by reference in Parts I, II and IV of this Form 10-K Report.
2. The Corporation's definitive Proxy Statement for use in connection with
the Annual Meeting of Stockholders to be held on May 14, 1997 is
incorporated by reference in Part III of this Form 10-K Report.
3. A list of exhibits incorporated by reference is presented in this Form
10-K Report beginning on page 13.
TABLE OF CONTENTS
PART I Page
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Item 1. Business........................................................................................ 3
Item 2. Properties...................................................................................... 8
Item 3. Legal Proceedings............................................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders............................................. 9
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters........................ 10
Item 6. Selected Financial Data......................................................................... 10
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition........... 10
Item 8. Financial Statements and Supplementary Data..................................................... 10
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 10
PART III
Item 10. Directors and Executive Officers of the Registrant.............................................. 11
Item 11. Executive Compensation.......................................................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................. 12
Item 13. Certain Relationships and Related Transactions.................................................. 13
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.................................. 13
Signatures.................................................................................................... 21
PART I
Item 1. BUSINESS
(a) General Development of Business
United States Gypsum Company ("U.S. Gypsum") was incorporated in 1901. USG
Corporation (together with its subsidiaries, called "USG" or the "Corporation")
was incorporated in Delaware on October 22, 1984. By a vote of stockholders on
December 19, 1984, U.S. Gypsum became a wholly owned subsidiary of the
Corporation and the stockholders of U.S. Gypsum became the stockholders of the
Corporation, all effective January 1, 1985.
In 1988, the Corporation incurred approximately $2.5 billion in debt
primarily to finance a plan of recapitalization in response to an unsolicited
takeover attempt. As a result of high leverage and a severe cyclical downturn in
its construction-based markets, the Corporation initiated a comprehensive
restructuring of its debt (the "Restructuring") in 1990 that was completed on
May 6, 1993, through implementation of a "prepackaged" plan of reorganization
under United States bankruptcy law. In accordance with the prepackaged plan,
$1.4 billion of debt and accrued interest was converted into equity and interest
expense was significantly reduced. The Corporation accounted for the
Restructuring using the principles of fresh start accounting as required by
AICPA Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." Pursuant to such principles,
individual assets and liabilities were adjusted to fair market values as of May
6, 1993. Excess reorganization value, the portion of the reorganization value
not attributable to specific assets, amounted to $851 million and is currently
being amortized over a five-year period through April 1998. Due to the
Restructuring and implementation of fresh start accounting, financial statements
subsequent to May 6, 1993, are not comparable to financial statements through
that date.
In 1994, the Corporation implemented a refinancing that included (i) a
public offering of common stock and (ii) the issuance of $150 million of 9.25%
senior notes due 2001 in exchange for cash and 8.0% senior notes due 1996 and
1997. In 1995, the Corporation completed a refinancing that included: (i) the
establishment of a new seven-year revolving credit facility to replace the
existing bank credit agreement (ii) the sale of $150 million aggregate principal
amount of 8.5% senior notes due 2005 and (iii) the redemption of the
Corporation's 10.25% senior notes due 2002. As a result of refinancings and debt
repayments, the Corporation reduced its principal amount of total debt to $772
million as of December 31, 1996, from $1,556 million as of May 6, 1993.
In the fourth quarter of 1996, the Corporation purchased the minority
interest in its Canadian subsidiary, CGC Inc. ("CGC"). The common shares which
had been publicly held totaled approximately 6 million and were acquired at a
price of $11 (Canadian) per share. The total amount paid in U.S. dollars for the
shares was $49 million.
(b) Financial Information About Industry Segments
Financial information and other related disclosure pertaining to the
Corporation's industry segments set forth under "Notes to Financial Statements -
Note 14. Industry and Geographic Segments" of the Corporation's 1996 Annual
Report to Stockholders is incorporated herein by reference.
(c) Narrative Description of Business
Through its subsidiaries, USG is a leading manufacturer and distributor of
building materials producing a wide range of products for use in new residential
and nonresidential construction and repair and remodel, as well as products used
in certain industrial processes. USG's operations are organized into two core
businesses: North American Gypsum and Worldwide Ceilings.
North American Gypsum
Business
North American Gypsum, which manufactures and markets gypsum and related
products in the United States, Canada and Mexico, includes U.S. Gypsum and L&W
Supply Corporation ("L&W Supply") in the United States, the gypsum business of
CGC in Canada and Yeso Panamericano S.A. de C.V. in Mexico. U.S. Gypsum is the
largest producer of gypsum wallboard in the United States and accounted for
nearly one-third of total domestic gypsum wallboard sales in 1996. L&W Supply is
the country's largest distributor of wallboard and related products and in 1996
distributed approximately 9.5% of all gypsum wallboard in the United States
(including approximately 25% of U.S. Gypsum's wallboard production).
Products
North American Gypsum manufactures and markets building and industrial
products used in a variety of applications. Gypsum panel products are used to
finish the interior walls and ceilings in residential, commercial and mobile
home construction. These products provide aesthetic as well as sound-dampening
and fire-retarding value. The majority of these products are sold under the
SHEETROCK brand name. Also sold under the SHEETROCK brand name is a line of
joint compounds used for finishing wallboard joints. The DUROCK line of cement
board and accessories provides fire-resistant and water-damage resistant
assemblies for both interior and exterior construction. The Corporation also
produces a variety of plaster products used to provide a custom finish for
residential and commercial interiors. Like SHEETROCK brand wallboard, these
products provide aesthetic, sound-dampening and fire-retarding value. Plaster
products are sold under the trade names of RED TOP, IMPERIAL and DIAMOND. The
Corporation also produces gypsum-based products for agricultural and industrial
customers to use in a number of applications, including soil conditioning, road
repair, fireproofing and ceramics.
Manufacturing
North American Gypsum's products are manufactured at 43 plants located
throughout the United States, eastern Canada and in central Mexico. In November
1996, the Corporation announced a plan to build a new plant at a cost of $110
million to manufacture SHEETROCK brand wallboard in Bridgeport, Ala., to serve
growing construction markets in the southeastern United States. The Bridgeport
plant, when fully operational, will have annual capacity of 700 million square
feet and will use 100% synthetic gypsum in its production of SHEETROCK
wallboard. It is scheduled to begin operation in 1999 and will replace 350
million square feet of high-cost capacity at the Plasterco, Va., facility, which
will cease wallboard production at that time.
Gypsum rock is mined or quarried at 14 company-owned locations in the
United States and Canada. In 1996, these facilities provided approximately 91%
of the gypsum used by the Corporation's plants in North America. Certain plants
purchase synthetic gypsum or natural gypsum rock from sources other than
company-owned mines and quarries. Such purchases accounted for approximately 9%
of gypsum used in the Corporation's North American plants. The Corporation's
geologists estimate that recoverable rock reserves are sufficient for more than
30 years of operation based on the Corporation's average annual production of
crude gypsum during the past five years. Proven reserves contain approximately
228 million tons, of which approximately 66% are located in the United States
and 34% in Canada. Additional reserves of approximately 153 million tons are
found on three properties not in operation. The Corporation's total average
annual production of crude gypsum in the United States and Canada during the
past five years was 9.8 million tons.
The Corporation owns and operates seven paper mills located across the
United States. Vertical integration in paper ensures a continuous supply of
high-quality paper that is tailored to the specific needs of USG's wallboard
production processes.
The Corporation does research and development at the USG Research and
Technology Center in Libertyville, Ill. The staff at this center provide
specialized technical services to the operating units and do product and process
research and development. The center is especially well-equipped for carrying
out fire, acoustical, structural and environmental evaluations of products and
building assemblies. The center also has an analytical laboratory for chemical
analysis and characterization of materials. Development activities can be taken
to the pilot plant level before being transferred to a full-size plant.
Marketing and Distribution
Distribution is carried out through L&W Supply, building materials dealers,
home improvement centers and other retailers, contractors and specialty
wallboard distributors. Sales of gypsum products are seasonal to the extent that
sales are generally greater from spring through the middle of autumn than during
the remaining part of the year. Based on the Corporation's estimates using
publicly available data, internal surveys, and gypsum wallboard shipment data
from the Gypsum Association, management estimates that during 1996, about 47% of
total industry volume demand for gypsum wallboard was generated by new
residential construction activity, 36% of volume demand was generated by
residential and nonresidential repair and remodel activity, 10% of volume demand
was generated by new nonresidential construction activity and the remaining 7%
of volume demand was generated by other activities such as exports and temporary
construction.
L&W Supply, which was organized in 1971 by U.S. Gypsum, currently has 161
distribution centers in 34 states. It is a service-oriented organization that
stocks a wide range of construction materials and delivers less than truckload
quantities of construction materials to a job site and places them in areas
where work is being done, thereby reducing or eliminating the need for handling
by contractors. Although L&W Supply specializes in distribution of gypsum
wallboard (which accounts for approximately 50% of its total net sales), joint
compound and other products manufactured primarily by U.S. Gypsum, it also
distributes products manufactured by USG Interiors such as acoustical ceiling
tile and ceiling grid and products of other manufacturers, including drywall
metal, insulation, roofing products and accessories. L&W Supply leases
approximately 87% of its facilities from third parties. Usually, initial leases
run from three to five years with a five-year renewal option.
Competition
The Corporation competes in North America as the largest of 15 producers of
gypsum wallboard products and in 1996 accounted for nearly one-third of total
gypsum wallboard sales in the United States. In 1996, U.S. Gypsum shipped 8.0
billion square feet of wallboard out of total domestic industry shipments
estimated at 25.7 billion square feet. Principal competitors in the United
States are: National Gypsum Company, Georgia-Pacific Corporation, The Celotex
Corporation and several smaller, regional competitors. Major competitors in
Canada include Georgia-Pacific Corporation and BPB Westroc. In Mexico, the
Corporation's major competitor is Panel Rey. In 1996 and early 1997, the
industry experienced some consolidation; the largest was Georgia-Pacific
Corporation's purchase of the gypsum business of Domtar, Inc.
L&W Supply's largest competitor, Gypsum Management Supply, is an
independent distributor with approximately 82 locations in the southern, central
and western United States. There are several regional competitors, such as,
GDMA/RINKER in the southeast (primarily in Florida) and Strober Building Supply
in the northeastern United States. L&W Supply's many local competitors include
lumber dealers, hardware stores, home improvement centers, and acoustical tile
distributors.
Worldwide Ceilings
Business
Worldwide Ceilings, which manufactures and markets interior systems
products worldwide, includes USG Interiors, Inc., the international interior
systems businesses managed as USG International ("USG International") and the
interior systems business of CGC. Worldwide Ceilings is a leading supplier of
interior ceiling products used primarily in commercial applications. In 1996,
Worldwide Ceilings was estimated to be the largest producer of ceiling grid and
the second largest producer of ceiling tile in the world.
Products
Worldwide Ceilings manufactures and markets ceiling grid, ceiling tile, and
wall systems and, in Europe and Asia Pacific, access floor systems. USG's
integrated line of ceiling products provides qualities such as sound absorption,
fire retardation, and convenient access to the space above the ceiling for
electrical and mechanical systems, air distribution and maintenance. USG
Interiors' significant trade names include the AURATONE and ACOUSTONE brands of
ceiling tile and the DX, FINELINE, CENTRICITEE, CURVATURA and DONN brands of
ceiling grid.
Manufacturing
Worldwide Ceilings' products are manufactured at 19 plants located in North
America, Europe and Asia Pacific, including 5 ceiling tile plants and 10 ceiling
grid plants. The remaining 4 plants produce other interior products and raw
materials for ceiling tile and grid. Principal raw materials used in the
production of Worldwide Ceilings' products include mineral fiber, steel,
perlite, starch and high-pressure laminates. Certain of these raw materials are
produced internally, while others are obtained from various outside suppliers.
Shortages of raw materials used in this segment are not expected. In 1996, the
Corporation: (i) completed a major expansion of its ceiling tile manufacturing
capacity to meet increasing worldwide demand and (ii) initiated a major
modernization of one of its ceiling tile plants, which will reduce manufactured
costs and add capacity to meet increasing worldwide demand.
USG Interiors maintains its own research and development facility in Avon,
Ohio, which provides product design, engineering and testing services in
addition to manufacturing development, primarily in metal forming, with tool and
machine design and construction services. Additional research and development is
carried out at the Corporation's research and development center in
Libertyville, Ill., and at its "Solutions Center"SM in Chicago, Ill.
Marketing and Distribution
Worldwide Ceilings' products are sold primarily in markets related to the
new construction and renovation of commercial buildings as well as the retail
market for small commercial contractors. Marketing and distribution to large
commercial users is conducted through a network of distributors and installation
contractors as well as through L&W Supply. In recent years, Worldwide Ceilings
has increased its emphasis on the retail market.
Competition
The Corporation estimates that it is the second largest producer/marketer
of acoustical ceiling tile sales in the world. Principal global competitors
include Armstrong World Industries, Inc. (the largest manufacturer), OWA
Faserplattenwerk GmbH (Odenwald) and The Celotex Corporation. The Corporation
estimates that it is the world's largest manufacturer of ceiling grid. Principal
competitors in ceiling grid include W.A.V.E. (a joint venture of Armstrong World
Industries, Inc. and Worthington Industries/National Rolling Mills) and Chicago
Metallic Corporation.
Other Information
The Corporation's plants are substantial users of thermal energy. Five
major fuel types are used in a mix consisting of 78% natural gas, 11%
electricity, 7% oil, 2% coke and 2% purchased hot air. With few exceptions,
plants that use natural gas are equipped with fuel stand-by systems, principally
oil. Primary fuel supplies have been adequate and no curtailment of plant
operations has resulted from insufficient supplies. Supplies are likely to
remain sufficient for projected requirements. Energy price swap agreements are
used by the Corporation to hedge the cost of certain purchased fuel.
Neither industry segment has any special working capital requirements or is
materially dependent on a single customer or a few customers on a regular basis.
No single customer of the Corporation accounted for more than 10% of the
Corporation's 1996 or 1995 consolidated net sales. Because orders are filled
upon receipt, neither industry segment has any significant backlog.
Loss of one or more of the patents or licenses held by the Corporation
would not have a major impact on the Corporation's business or its ability to
continue operations. No material part of any of the Corporation's business is
subject to renegotiation of profits or termination of contracts or subcontracts
at the election of the government.
All of the Corporation's products regularly require improvement to remain
competitive. The Corporation also develops and produces comprehensive systems
employing several of its products. In order to maintain its high standards and
remain a leader in the building materials industry, the Corporation performs on
an on-going basis extensive research and development activities and makes the
necessary capital expenditures to maintain production facilities in sufficient
operating condition.
One of the Corporation's subsidiaries, U.S. Gypsum, is a defendant in
asbestos lawsuits alleging both property damage and personal injury. Information
pertaining to the Corporation's legal proceedings is set forth under "Notes to
Financial Statements - Note 15. Litigation" of the Corporation's 1996 Annual
Report to Stockholders and is incorporated herein by reference.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
Financial information and other related disclosure pertaining to the
Corporation's foreign and domestic operations and export sales set forth under
"Notes to Financial Statements - Note 14. Industry and Geographic Segments" of
the Corporation's 1996 Annual Report to Stockholders is incorporated herein by
reference.
Item 2. PROPERTIES
The Corporation's plants, mines, quarries, transport ships and other
facilities are located in North America, Europe, and Asia Pacific. Many of these
facilities are operating at or near full capacity. All facilities and equipment
are in good operating condition, and in management's judgment, sufficient
expenditures have been made annually to maintain them. The locations of the
production properties of the Corporation's subsidiaries, grouped by industry
segment, are as follows (plants are owned unless otherwise indicated):
North American Gypsum
Gypsum Wallboard and Other Gypsum Products
United States Canada
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Baltimore, Md. Norfolk, Va. Hagersville, Ontario
Boston (Charlestown), Mass. Oakfield, N.Y. Montreal, Quebec
Detroit (River Rouge), Mich. Plaster City, Calif. St. Jerome, Quebec (currently idle)
East Chicago, Ind. Plasterco (Saltville), Va.
Empire, Nev. Santa Fe Springs, Calif. Mexico
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Fort Dodge, Iowa Shoals, Ind. Puebla, Puebla
Fremont, Calif. Sigurd, Utah
Galena Park, Texas Southard, Okla.
Gypsum, Ohio Sperry, Iowa
Jacksonville, Fla. Stony Point, N.Y.
New Orleans, La. Sweetwater, Texas
Joint Compound
Surface preparation and joint treatment products are produced in plants
located at Chamblee, Ga.; Dallas, Texas; East Chicago, Ind.; Fort Dodge, Iowa;
Gypsum, Ohio; Jacksonville, Fla.; Port Reading, N.J. (leased); Sigurd, Utah;
Tacoma, Wash. (leased); Torrance, Calif.; Hagersville, Ontario, Canada;
Montreal, Quebec, Canada; Puebla, Mexico; and Port Klang, Malaysia (leased).
Gypsum Rock
Gypsum rock is mined or quarried at Alabaster (Tawas City), Mich.; Empire,
Nev.; Fort Dodge, Iowa; Oakfield, N.Y.; Plaster City, Calif.; Plasterco
(Saltville), Va.; Shoals, Ind.; Sigurd, Utah; Southard, Okla.; Sperry, Iowa;
Sweetwater, Texas; Hagersville, Ontario, Canada; Little Narrows, Nova Scotia,
Canada; and Windsor, Nova Scotia, Canada. Synthetic gypsum is processed at
Belledune, New Brunswick, Canada.
Paper
Paper for gypsum wallboard is manufactured at Clark, N.J.; Galena Park,
Texas; Gypsum, Ohio; Jacksonville, Fla.; North Kansas City, Mo.; Oakfield, N.Y.;
and South Gate, Calif.
Ocean Vessels
Gypsum Transportation Limited, a wholly owned subsidiary of the
Corporation, headquartered in Bermuda, owns and operates a fleet of three
self-unloading ocean vessels. Under contract of affreightment, these vessels
transport gypsum rock from Nova Scotia to the East Coast and Gulf port plants of
U.S. Gypsum. Excess ship time, when available, is offered for charter on the
open market.
Other Products
A mica-processing plant is located at Spruce Pine, N.C.; perlite ore is
produced at Grants, N.M.; and drywall metal products are manufactured at Medina,
Ohio (leased). Metal lath, plaster and drywall accessories and light gauge steel
framing products are manufactured at Puebla, Mexico. Various other products are
manufactured at La Mirada, Calif. (adhesives and finishes); and New Orleans, La.
(lime products).
Worldwide Ceilings
Ceiling Tile
Acoustical ceiling tile and panels are manufactured at Cloquet, Minn.;
Greenville, Miss.; Walworth, Wis.; San Juan Ixhuatepec, Mexico; and Aubange,
Belgium.
Ceiling Grid
Ceiling grid products are manufactured at Cartersville, Ga.; Stockton,
Calif.; Westlake, Ohio; Auckland, New Zealand (leased); Dreux, France; Oakville,
Ontario, Canada; Peterlee, England (leased); Port Klang, Malaysia (leased);
Viersen, Germany; and Taipei, Taiwan. A coil coater and slitter plant used in
the production of ceiling grid is also located in Westlake, Ohio.
Other Products
Access floor systems products are manufactured at Peterlee, England
(leased); and Port Klang, Malaysia (leased). Mineral fiber products are
manufactured at Red Wing, Minn. and Walworth, Wis. Wall system products are
manufactured at Medina, Ohio (leased). Drywall metal products are manufactured
at Prestice, Czech Republic (leased) and Oakville, Ontario, Canada.
In 1996, the Corporation divested its United States insulation
manufacturing business.
Item 3. LEGAL PROCEEDINGS
Information pertaining to the Corporation's legal proceedings set forth
under "Notes to Financial Statements - Note 15. Litigation" of the Corporation's
1996 Annual Report to Stockholders is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1996.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Information with respect to the principal market on which the Corporation's
common stock is traded, the range of high and low market prices and number of
stockholders of record set forth under "Selected Quarterly Financial Data" of
the Corporation's 1996 Annual Report to Stockholders is incorporated herein by
reference.
There have been no dividends declared since the third quarter of 1988. Bank
credit agreements and other debt instruments have previously prohibited or
restricted the payment of cash dividends. Although currently permitted within
certain limits under the Corporation's existing debt agreements, the Corporation
has announced an intention not to consider payment of dividends until it has
achieved investment grade status with respect to its senior public debt issues.
On November 22, 1996, the Corporation entered into a retention agreement
with an employee whereby the Corporation agreed to grant shares of unregistered
common stock, $0.10 par value, having an aggregate value equal to $250,000 in
five separate installments each having a value equal to $50,000 in reliance on
the private offering exemption afforded by Section 4 (2) of the Securities Act
of 1933, as amended. The first grant in the amount of 1,650 shares was made on
the date of the agreement and the remaining grants will be made on each of the
first four anniversaries thereof. The employee has agreed in return to provide
management expertise and advice for five years from the date of the agreement
with respect to certain assets acquired by the Corporation that were previously
owned by a corporation of which the employee was the principal stockholder. The
unregistered common stock is restricted from transfer, resale or other
disposition until November 22, 2001.
Item 6. SELECTED FINANCIAL DATA
Information with respect to selected financial data set forth under
"Comparative Five-Year Summary" of the Corporation's 1996 Annual Report to
Stockholders is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" of the Corporation's 1996 Annual Report to Stockholders is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to financial statements and supplementary data set
forth under "Consolidated Statement of Earnings," "Consolidated Balance Sheet,"
"Consolidated Statement of Cash Flows," "Notes to Financial Statements" and
"Report of Independent Public Accountants" of the Corporation's 1996 Annual
Report to Stockholders is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
A Form 8-K reporting a change of accountants has not been filed within 24
months prior to the date of the most recent financial statements.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about directors has been omitted from this report as it will be
filed with the Securities and Exchange Commission (the "SEC") in a definitive
proxy statement pursuant to Regulation 14A, which definitive proxy statement is
incorporated herein by reference.
Executive Officers of the Registrant (as of February 1, 1997)
Has Held
Name, Age Present
and Present Position Prior Business Experience in Past Five Years Position Since
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William C. Foote, 45 President and Chief Executive Officer, L&W Supply Corporation April 1996
Chairman, President and Chief from September 1991 to January 1994; President and Chief
Executive Officer Executive Officer, USG Interiors, Inc. from January 1993 to
January 1994; President and Chief Operating Officer from
January 1994 to January 1996; President and Chief Executive
Officer to April 1996.
P. Jack O'Bryan, 61 President and Chief Executive Officer, United States Gypsum September 1996
Executive Vice President- Company to January 1993; Senior Vice President and Chief
Operations; President and Chief Technology Officer, USG Corporation to August 1994; Senior
Executive Officer, United States Vice President - Worldwide Manufacturing and Technology to
Gypsum Company; President and October 1995; Executive Vice President- Worldwide Ceilings to
Chief Executive Officer, USG September 1996; President and Chief Executive Officer, USG
Interiors, Inc. Interiors, Inc. since October 1995.
J. Bradford James, 50 Vice President and Chief Financial Officer, USG Corporation to November 1996
Executive Vice President-Corporate March 1993; Senior Vice President and Chief Financial Officer,
Development and Distribution USG Corporation to January 1994; Vice President, USG
Corporation, President and Chief Executive Officer, USG
Interiors, Inc. to January 1995; Group Vice President, Worldwide
Ceilings & International, USG Corporation, President and Chief
Executive Officer, USG Interiors, Inc. to October 1995; Executive
Vice President - International Development and Distribution to
November 1996.
Richard H. Fleming, 49 Vice President and Treasurer to January 1994; Vice President and January 1995
Senior Vice President and Chief Chief Financial Officer to January 1995.
Financial Officer
Arthur G. Leisten, 55 Senior Vice President and General Counsel to March 1993; February 1994
Senior Vice President and General Senior Vice President, General Counsel and Secretary to February
Counsel 1994.
Harold E. Pendexter, Jr., 62 Same position. January 1991
Senior Vice President and Chief
Administrative Officer
Raymond T. Belz, 56 Vice President Financial Services and Financial Administration, September 1996
Vice President and Controller; United States Gypsum Company to January 1994; Vice President and
Vice President Financial Controller, USG Corporation, Vice President Financial Services,
Operations, North American United States Gypsum Company to January 1995; Vice President and
Gypsum and Worldwide Ceilings and Chief Financial Officer, North American Gypsum from January
1995 to September 1996; Vice President and Controller since January
1995.
Brian W. Burrows, 57 Same position. March 1987
Vice President, Research and
Technology
Matthew P. Gonring, 42 Director, Corporate Communications to March 1993. March 1993
Vice President, Corporate
Communications
John E. Malone, 53 Vice President and Controller, USG Corporation to January 1994; January 1994
Vice President and Treasurer Vice President - Finance, USG International, From March 1993
to February 1995.
Robert B. Sirgant, 56 Director, Marketing - East Region, United States Gypsum January 1995
Vice President, Corporate Accounts Company to November 1992; Vice President, National Accounts
and Marketing - East, United States Gypsum Company to July
1994; Vice President, National Accounts, United States Gypsum
Company to January 1995.
S. Gary Snodgrass, 45 Director, Human Resources, USG Corporation to September April 1996
Vice President, Human Resources- 1992; Vice President, Management Resources and Employee
Operations Relations to January 1994; Vice President, Human Resources -
Operations to February 1995; Vice President, Human Resources -
Operations; Vice President, Human Resources, Worldwide
Ceilings to April 1996.
Dean H. Goossen, 49 Vice President, General Counsel and Secretary, Xerox Financial February 1994
Corporate Secretary Services Life Insurance Company to February 1993; Assistant
Secretary, USG Corporation to February 1994.
Item 11. EXECUTIVE COMPENSATION
Information required by Item 11 has been omitted from this report as it will
be filed with the SEC in a definitive proxy statement pursuant to Regulation
14A, which definitive proxy statement is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 has been omitted from this report as it
will be filed with the SEC in a definitive proxy statement pursuant to
Regulation 14A, which definitive proxy statement is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 has been omitted from this report as it
will be filed with the SEC in a definitive proxy statement pursuant to
Regulation 14A, which definitive proxy statement is incorporated herein by
reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this 10-K Report:
1. The consolidated financial statements, notes to financial statements
and report of independent public accountants included in the
Corporation's 1996 Annual Report to Stockholders and listed below are
incorporated herein by reference.
Consolidated Statement of Earnings - Years ended December 31, 1996,
1995 and 1994.
Consolidated Balance Sheet - As of December 31, 1996 and 1995.
Consolidated Statement of Cash Flows - Years ended December 31, 1996,
1995 and 1994.
Notes to Financial Statements.
Report of Independent Public Accountants.
2. Supplemental Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Report of Independent Public Accountants With Respect to Financial
Statement Schedule.
All other schedules have been omitted because they are not required,
are not applicable, or the information is included in the financial
statements or notes thereto.
3. Exhibits (Reg. S-K, Item 601):
Exhibit
No. Page
----
3 Articles of incorporation and by-laws:
(a) Restated Certificate of Incorporation of USG Corporation
(incorporated by reference to Exhibit 3.1 of USG Corporation's
Form 8-K, dated May 7, 1993).
(b) Amended and Restated By-Laws of USG Corporation, dated
as of May 12, 1993 (incorporated by reference to Exhibit
3(b) of Amendment No. 1 to USG Corporation's
Registration Statement No. 33-61162 on Form S-1, dated
June 16, 1993).
4 Instruments defining the rights of security holders, including
indentures:
(a) Indenture dated as of October 1, 1986 between USG
Corporation and Harris Trust and Savings Bank, Trustee
(incorporated by reference to Exhibit 4(a) of USG
Corporation's Registration Statement No. 33-9294 on Form
S-3, dated October 7, 1986).
(b) Resolutions dated March 5, 1987 of a Special Committee
created by the Board of Directors of USG Corporation
relating to USG Corporation's 8.75% Debentures due 2017
(incorporated by reference to Exhibit 4(c) of USG
Corporation's 1993 Annual Report on Form 10-K, dated
March 14, 1994).
(c) Resolutions dated March 6, 1987 of a Special Committee
created by the Board of Directors of USG Corporation
relating to USG Corporation's 8% Senior Notes due 1997
(incorporated by reference to Exhibit 4(d) of USG
Corporation's 1993 Annual Report on Form 10-K, dated
March 14, 1994).
(d) Resolutions dated February 1, 1994 of a Special
Committee created by the Board of Directors of USG
Corporation relating to USG Corporation's 9.25% Senior
Notes due 2001 (incorporated by reference to Exhibit
4(f) of USG Corporation's Registration No. 33-51845 on
Form S-1, dated February 16, 1994).
(e) Resolutions dated August 3, 1995 of a Special Committee
created. by the Board of Directors of USG Corporation
relating to USG Corporation's 8.5% Senior Notes due
2005 (incorporated by reference to Exhibit 4(b) of
Amendment No. 3 to USG Corporation's Registration
Statement No. 33-60563 on Form S-3, dated July 28,
1995).
(f) Warrant Agreement dated May 6, 1993 between USG
Corporation and Harris Trust and Savings Bank, as
Warrant Agent, relating to USG Corporation's Warrants
(incorporated by reference to Exhibit 4.3 of USG
Corporation's Form 8-K, dated May 7, 1993).
(g) Form of Warrant Certificate (incorporated by reference
to Exhibit 4(g) of Amendment No. 4 to USG Corporation's
Registration Statement No. 33-40136 on Form S-4, dated
November 12, 1992).
(h) Rights Agreement dated May 6, 1993 between USG
Corporation and Harris Trust and Savings Bank, as
Rights Agent (incorporated by reference to Exhibit 10.1
of USG Corporation's Form 8-K, dated May 7, 1993).
(i) Form of Common Stock certificate (incorporated by
reference to Exhibit 4.4 to USG Corporation's Form 8-K,
dated May 7, 1993).
The Corporation and certain of its consolidated
subsidiaries are parties to long-term debt instruments
under which the total amount of securities authorized
does not exceed 10% of the total assets of the
Corporation and its subsidiaries on a consolidated
basis. Pursuant to paragraph (b)(4)(iii)(A) of Item 601
of Regulation S-K, the Corporation agrees to furnish a
copy of such instruments to the Securities and Exchange
Commission upon request.
10 Material contracts:
(a) Management Performance Plan of USG Corporation
(incorporated by reference to Annex C of Amendment No. 8
to USG Corporation's Registration Statement No. 33-40136
on Form S-4, dated February 3, 1993).
(b) Form of Nonqualified Stock Option Agreement relating to
stock option grants dated June 1, 1993, February 9, 1994
and August 10, 1994 (incorporated by reference to
Exhibit 10(l) of Amendment No. 1 on USG Corporation's
Registration Statement No. 33-61152 on Form S-1).
(c) Amendment and Restatement of USG Corporation
Supplemental Retirement Plan, effective as of July 1,
1993 and dated November 30, 1993 (incorporated by
reference to Exhibit 10(c) of USG Corporation's
Registration No. 33-51845 on Form S-1).
(d) First Amendment of USG Corporation Supplemental
Retirement Plan, effective as of November 15, 1993 and
dated December 2, 1993 (incorporated by reference to
Exhibit 10(d) of USG Corporation's Registration No.
33-51845 on Form S-1).
(e) Termination Compensation Agreements (incorporated by
reference to Exhibit 10(h) of USG Corporation's 1991
Annual Report on Form 10-K, dated March 5, 1992).
(f) Indemnification Agreements (incorporated by reference to
Exhibit 10(g) of Amendment No. 1 to USG Corporation's
Registration No. 33-51845 on Form S-1).
(g) Agreement, dated August 31, 1992 among USG Corporation
and the Ad Hoc Committee of Holders of 13.25% Senior
Subordinated Debentures of USG Corporation due 2000
(incorporated by reference to Exhibit 10(aq) of
Amendment No. 4 to USG Corporation's Registration
Statement No. 33-40136 on Form S-4).
(h) Bankruptcy Court Order issued April 23, 1993 confirming
USG Corporation's Prepackaged Plan of Reorganization
(incorporated by reference to Exhibit 28.1 of Form 8-K
filed by USG Corporation on May 7, 1993).
(i) Consulting Agreement dated August 11, 1993 between USG
Corporation and James W. Cozad (incorporated by
reference to Exhibit 10(aw) in USG Corporation's
Registration Statement 33- 51845, on Form S-1).
(j) Form of Employment Agreement dated May 12, 1993
(incorporated by reference to Exhibit 10(h) of
Amendment No. 1 to USG Corporation's Registration
Statement No. 33-61152 on Form S-1).
(k) Amendment of Termination Compensation Agreements
(incorporated by reference to Exhibit 10(j) of
Amendment No. 1 to USG Corporation's Registration
Statement No. 33-61152 on Form S-1).
(l) First Amendment to Management Performance Plan,
effective November 15, 1993 and dated February 1, 1994
(incorporated by reference to Exhibit 10(aq) of
Amendment No. 1 of USG Corporation's Registration
Statement No. 33-51845 on Form S-1).
(m) Credit Agreement dated as of July 27, 1995 among USG
Corporation and the Banks listed on the signature page
thereto and Chemical Bank as Agent (incorporated by
reference to Exhibit 99(a) of Amendment No. 3 to USG
Corporation's Registration Statement No. 33-60563 on
Form S-3, dated July 28, 1995).
(n) Amendment No. 1, dated as of February 1, 1996 to the
Credit Agreement (incorporated by reference to Exhibit
10(q) of USG Corporation's 1995 Annual Report on Form
10-K, dated February 29, 1996).
(o) Collateral Trust Agreement dated as of July 27, 1995
between USG Corporation, certain of its subsidiaries
and Wilmington Trust Company and William J. Wade, as
Trustee (incorporated by reference to Exhibit 99(b) of
Amendment No. 3 to USG Corporation's Registration
Statement No. 33-60563 on Form S-3, dated July 28,
1995).
(p) Company Pledge Agreement dated as of July 27, 1995
among USG Corporation, as Pledgor, and Wilmington Trust
Company and William J. Wade, as Trustee (incorporated
by reference to Exhibit 99(c) of Amendment No. 3 to USG
Corporation's Registration Statement No. 33-60563 on
Form S-3, dated July 28, 1995).
(q) Stock Compensation Program for Non-Employee Directors of
USG Corporation, dated May 10, 1995 (incorporated by
reference to Exhibit 10(t) of USG Corporation's 1995
Annual Report on Form 10-K, dated February 29, 1996).
(r) 1995 Long-Term Equity Plan of USG Corporation
(incorporated by reference to Annex A to USG
Corporation's Proxy Statement and Proxy dated March 31,
1995).
(s) Form of Nonqualified Stock Option Agreement, pursuant to
the 1995 Long-Term Equity Plan (incorporated by
reference to Exhibit 10(v) of USG Corporation's 1995
Annual Report on Form 10-K, dated February 29, 1996).
(t) Form of Performance-Based Restricted Stock Award
Agreement, pursuant to the 1995 Long-Term Equity Plan
(incorporated by reference to Exhibit 10(w) of USG
Corporation's 1995 Annual Report on Form 10-K, dated
February 29, 1996).
(u) Form of Restricted Stock Award Agreement, pursuant to
the 1995 Long-Term Equity Plan (incorporated by
reference to Exhibit 10(x) of USG Corporation's 1995
Annual Report on Form 10-K, dated February 29, 1996).
(v) 1996 Annual Management Incentive Program - USG
Corporation. 22
11 Computation of Earnings/(Loss) Per Common Share 31
13 Portions of USG Corporation's 1996 Annual Report to
Stockholders. (Such 32 report is not deemed to be filed with the
Commission as part of this Annual Report on Form 10-K, except
for the portions thereof expressly incorporated by reference.) 32
21 Subsidiaries 62
23 Consents of Experts and Counsel 63
24 Power of Attorney 64
27 Financial Data Schedule 66
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of 1996.
Index to exhibits filed
with the Annual Report on Form 10-K
for the year ended December 31, 1996
Exhibit Page
10(v) 1996 Annual Management Incentive Program - USG Corporation 22
11 Computation of Earnings/(Loss) Per Common Share 31
13 Portions of USG Corporation's 1996 Annual Report to Stockholders 32
21 Subsidiaries 62
23 Consent of Experts 63
24 Power of Attorney 64
27 Financial Data Schedule 66
If you wish to receive a copy of any exhibit, it may be obtained, upon payment
of reasonable expenses, by writing to:
Dean H. Goossen, Corporate Secretary
USG Corporation
Department #188
P.O. Box 6721
Chicago, IL 60680-6721
USG CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Provision Receivables
Charged to Written Off
Beginning Costs and and Discounts Ending
Balance Expenses Allowed Balance
Year ended December 31, 1996:
Doubtful accounts................................. $ 11 $ 7 $ (4) $ 14
Cash discounts.................................... 3 46 (46) 3
Year ended December 31, 1995:
Doubtful accounts................................. 11 6 (6) 11
Cash discounts.................................... 3 44 (44) 3
Year ended December 31, 1994:
Doubtful accounts................................. 11 7 (7) 11
Cash discounts.................................... 2 40 (39) 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
WITH RESPECT TO FINANCIAL STATEMENT SCHEDULE
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in USG Corporation's annual
report to stockholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 27, 1997. Our audit was made for the
purpose of forming an opinion on the consolidated financial statements taken as
a whole. The financial statement schedule on page 19 is the responsibility of
the Corporation's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the consolidated
financial statements. The financial statement schedule has been subjected to the
auditing procedures applied in the audit of the consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the consolidated
financial statements taken as a whole.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 27, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 5, 1997
By: /s/ Richard H. Fleming
---------------------------
Richard H. Fleming
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ William C. Foote March 5, 1997
- --------------------
WILLIAM C. FOOTE
Chairman, President and Chief Executive
Officer
(Principal Executive Officer)
/s/ Richard H. Fleming March 5, 1997
- ----------------------
RICHARD H. FLEMING
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Raymond T. Belz March 5, 1997
- -------------------
RAYMOND T. BELZ
Vice President and Controller
(Principal Accounting Officer)
ROBERT L. BARNETT, KEITH A. BROWN, ) By:/s/ Richard H. Fleming
W.H. CLARK, W. DOUGLAS FORD, ) -------------------------
JAMES C. COTTING, LAWRENCE ) Richard H. Fleming
M. CRUTCHER, DAVID W. FOX, ) Attorney-in-fact
PHILIP C. JACKSON, JR., MARVIN E. LESSER, ) Pursuant to Power of Attorney
JOHN B. SCHWEMM, JUDITH A. SPREISER, Directors ) (Exhibit 24 hereto)
) March 5, 1997