<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark one)
X Annual Report pursuant to 15(d) of the Securities Exchange Act of 1934
- ---- (Fee required)
For the fiscal year ended December 31, 1999.
OR
Transition report pursuant to Section 15(d) of the Securities Exchange Act
- ---- of 1934 (No fee required)
For the transition period from to
----------------- --------------
Commission file number 1-8864.
A. Full title of the Plan:
USG CORPORATION INVESTMENT PLAN (Formerly USG
CORPORATION INVESTMENT PLAN FOR SALARIED EMPLOYEES)
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
USG CORPORATION, 125 SOUTH FRANKLIN STREET, CHICAGO,
ILLINOIS 60606
<PAGE> 2
REQUIRED INFORMATION
Financial Statements:
Plan financial statements and schedules prepared in accordance with the
financial reporting requirements of ERISA attached hereto, including a Consent
of Independent Public Auditors with respect to Form S-8 for 1999.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
members of the Pension and Investment Committee administering the Plan have duly
caused this annual report to be signed by the undersigned thereunto duly
authorized.
USG CORPORATION INVESTMENT PLAN
By:
----------------------------------
Brian J. Cook
Member of Pension and Investment
Committee
Date: March , 2000
-----
<PAGE> 3
USG CORPORATION
INVESTMENT PLAN
REPORT ON AUDITED
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available
for Benefits 2
Statements of Changes in Net Assets
Available for Benefits 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULES:
I. Schedule of Investments Held
at Year End 11
II. Schedule of Reportable Transactions 12
</TABLE>
<PAGE> 5
MEMBER OF THE MEMBER OF THE
ILLINOIS CPA AMERICAN INSTITUTE
SOCIETY OF CERTIFIED
PUBLIC ACCOUNTANTS
HILL, TAYLOR LLC
CERTIFIED PUBLIC ACCOUNTANTS
116 South Michigan Avenue - 11th Floor
Chicago, Illinois 60603
312-332-4964
Fax: 312-332-0181
INDEPENDENT AUDITORS' REPORT
PENSION AND INVESTMENT COMMITTEE
USG CORPORATION
We have audited the accompanying statements of net assets available for benefits
of the USG Corporation Investment Plan as of December 31, 1999 and 1998, and the
related statements of changes in net assets available for benefits for the years
then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the years then ended in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of investments
held at year end as of December 31, 1999, and reportable transactions for the
year ended December 31, 1999, are presented for purpose of additional analysis
and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
March 10, 2000
<PAGE> 6
USG CORPORATION INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS:
Investments, at market $388,432,770 $319,106,678
Receivables:
Employer contributions
receivable 17,680,587 10,940,048
Employee loans
receivable 20,213,688 16,465,003
Interest and
dividends receivable 83,928 60,276
Pending transactions due
to loans --- 68,400
------------ ------------
Total Receivables 37,978,203 27,533,727
------------ ------------
Total Assets 426,410,973 346,640,405
------------ ------------
LIABILITIES:
Pending transactions due
to loans 14,347 ---
Accrued Administrative
Fees 74,600 22,199
------------ ------------
Total Liabilities 88,947 22,199
------------ ------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $426,322,026 $346,618,206
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
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<PAGE> 7
USG CORPORATION INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 346,618,206 $ 287,586,645
------------- -------------
ADD (DEDUCT):
Corporation contributions 22,731,532 15,419,180
Employee contributions 30,337,373 26,378,806
------------- -------------
53,068,905 41,797,986
------------- -------------
Income from investments:
Dividend income 3,907,453 5,871,392
Interest income 9,931,703 9,067,730
Realized gain (loss) on
sale of investments 11,556,860 3,065,433
Unrealized appreciation
for the year 22,582,166 20,267,520
------------- -------------
47,978,182 38,272,075
------------- -------------
Benefit payments and
participant withdrawals (20,808,916) (20,628,734)
Administrative expenses (534,351) (409,766)
------------- -------------
Net increase in
assets during the year 79,703,820 59,031,561
------------- -------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 426,322,026 $ 346,618,206
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
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<PAGE> 8
USG CORPORATION
INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF THE PLAN
The USG Corporation Investment Plan, also known as the USG Corporation
Investment Plan for Salaried Employees prior to January 1, 1989 ("The
Plan"), was approved by the stockholders of the Corporation on May 11,
1977, and became effective on July 1, 1977. The Plan was subsequently
amended and completely restated effective as of January 1, 1989 and
most recently as of July 1, 1997 ("restated Plan"). The amendments and
restatements incorporate all prior amendments to the Plan and make
changes to reflect the merger of the USG Corporation Savings Plan for
Hourly Employees and change the name of the Plan to the USG Corporation
Investment Plan, effective January 1, 1989; and to implement the daily
valuation of investments in the participants? accounts at fair market
value on each business day effective July 1, 1997.
The Plan was established to provide a means for eligible hourly and
salaried employees to participate in the earnings of the Corporation,
to build a supplemental retirement fund and to provide additional
disability and death benefits.
The Plan provides, among other things, that participants may contribute
up to 15% (9% for highly compensated employees) of their eligible pay
to the Plan through payroll deductions on a before-tax basis during the
year effective January 1, 1998, 12% from July 1, 1997 to December 31,
1997, 9% from January 1, 1989 to June 30, 1997, 15% from October 1,
1985 to December 31, 1988 and 12% prior to October 15, 1985. The amount
of distributions to be made upon withdrawal from the Plan is dependent
upon the participant's and the Corporation's contributions. The Plan
requires completion of five years of credited service in order to be
100% vested in the Corporation contribution. Employee contributions are
always 100% vested. In addition, the Plan contains provisions under
which the entire amount credited to a participant's account is
distributable upon a participant's retirement, disability, or death.
Employee contributions are invested by the Trustee in any one or a
combination of eight funds: (a) common stock of USG Corporation (USG
Common Stock Fund), (b) an equity index fund which provides investment
results that are designed to correspond to the performance of publicly
traded common stocks, as represented by the Standard & Poor's 500
Composite Stock Price Index (Equity Index Fund), (c) a balanced fund
which invests in several broadly diversified asset classes, including
domestic and foreign common stock and bonds, preferred stocks and cash
(Balanced Fund), (d) a growth fund which invests primarily in equity
securities of large market capitalization companies with earnings that
are expected to grow at an above-average rate, but may be further
diversified by investment of a small portion of the assets in domestic
bonds, foreign common stocks and bonds, and cash (Growth Fund), (e) a
small cap equity fund which seeks maximum long-term growth of capital
by investing in common stock of rapidly growing U.S. companies with
market capitalization of less than $1 billion at the time of initial
investment (Small Cap Equity Fund), (f) an international equity fund
which seeks long-term capital appreciation through investments in
common stock of established non-U.S.
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<PAGE> 9
companies (International Equity Fund), (g) a bond fund which seeks to
provide current income and preservation of capital by investing in
investment grade corporate debt securities, government bonds and
mortgages in both U.S. and foreign markets, (Bond Fund) or (h) a
managed separate account which seeks to preserve principal and income
while maximizing current income by investing in a diversified pool of
Guaranteed Investment Contracts (GICs), separate account GICs,
synthetic GICs or Structured Investment Contracts (SICs) and Bank
Investment Contracts (BICs) of varying maturity, size and yield (Stable
Value Fund).
The Equity Index Fund is invested in the Vanguard Institutional Index
Fund.
The Balanced Fund is invested in the Fidelity Puritan Fund.
The Growth Fund is invested in the American Express/IDS New Dimensions
Fund - Class Y.
The Small Cap Equity Fund is invested in the Franklin Small Cap Growth
Fund - Class A.
The International Equity Fund is invested in the Templeton Foreign Fund
- Class A.
The Bond Fund is invested in the PIMCO Total Return Fund -
Institutional Class.
The Stable Value Fund is managed by PRIMCO Capital Management. At
December 31, 1999, the Stable Value Fund was primarily composed of
group annuity contracts maintained by banks and insurance companies.
Participants may elect to have their contributions invested in 1%
increments in any fund or combination of funds and to change their
contribution rate, suspend or resume their contributions, change their
investment allocations, transfer their investments from one fund to
another and apply for a loan by calling the USG Investment Plan
Connection, an automated telephone service, on any day. Certain
Executive officers of the Corporation must pre-clear any transfer in or
out of the USG Common Stock Fund with the USG Corporate Secretary.
The Corporation made a regular 25% matching contribution up to the
first 6% of the participants? eligible pay contributed to the Plan,
credited to the participants? accounts each pay period. In addition,
the Corporation also made an annual profit sharing matching
contribution of up to 9% of the participants? eligible pay contributed
to the Plan based on achievement of at least 80% of the corporate
consolidated earnings goal for the plan year.
The Plan was amended effective January 1, 1999 to provide for immediate
eligibility and enrollment to join the Plan for newly hired employees
and current employees who are in their one year waiting period as of
January 1, 1999, unless the employee elects not to join the Plan.
If the Trustee is unable to invest any contributions immediately, the
funds are temporarily invested in short-term investment funds and any
earnings in the fund are credited to the participants' accounts.
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<PAGE> 10
The Plan funds are administered under the terms of a Trust agreement
with The Northern Trust Company. The Trust agreement provides, among
other things, that the Trustee shall keep account of all investments,
receipts and disbursements and other transactions and shall provide
annually a report setting forth such transactions and the status of the
funds at the end of the period.
The Plan is administered by the Pension and Investment Committee, which
consists of five members appointed by the Corporation. Administrative
expenses and other fees of the Plan are shared by the Corporation and
the participants.
At December 31, 1999 and 1998, there were approximately 12,342 and
8,932 participants in the Plan, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The amounts in the accompanying statements were accumulated from the
reports of the Trustee (Note 1). The financial statements of the Plan
are prepared under the accrual method of accounting. Contributions to
the Plan are made throughout the year and adjustments are made to the
financial statements to accrue for the portion of annual contributions
unpaid at year-end.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent assets
and liabilities. Actual results could differ from those estimates.
The Plan's investments are stated at market value except for its group
annuity contracts with insurance companies, which are valued at
contract value because they are fully benefit responsive. For example,
participants may ordinarily direct the withdrawal or transfer of all or
a portion of their investment at contract value. There are no reserves
against contract value for credit risk of the contract issuers. Market
value and cost are equal for the group annuity contracts and short-term
investments. Shares of registered investment companies are valued at
quoted market prices which represent the net asset value of shares held
by the Plan at year-end. The Company stock is valued at its quoted
market price. Participant loans receivable are valued at cost which
approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date. Realized gains or losses on the sale
of investments are calculated based upon the historical average cost of
the investments. Unrealized appreciation or depreciation of investments
of the Plan represents the change between years in the difference
between the market value and cost of the investments.
The guaranteed investment contracts in the Stable Value Fund earned
guaranteed interest at rates varying from 4.92% to 6.90% at December
31, 1999. The rates for 1998 ranged from 4.33% to 6.80%. The guaranteed
investment contracts earnings are calculated net of administrative
fees.
-6-
<PAGE> 11
For the USG Common Stock Fund, cost was $53,574,063 and $50,887,831 as
of December 31, 1999 and 1998, respectively. For the Equity Index Fund,
market value exceeded cost by $33,320,876 and $26,834,737 at December
31, 1999, and 1998, respectively. For the Balanced Fund, market value
exceeded cost by $479,518 and $2,124,574 at December 31, 1999, and
1998, respectively. For the Growth Fund, market value exceeded cost by
$19,983,844 and $11,579,622 at December 31, 1999, and 1998,
respectively. For the Small Cap Equity Fund, market value exceeded cost
at December 31, 1999, and 1998, by $7,088,610 and by $23,416,
respectively. Market value exceeded cost for the International Equity
Fund at December 31, 1999 by $585,687, and cost exceeded market value
by $602,200 at December 31, 1998. For the Bond Fund, cost exceeded
market value by $203,910 and $118,327 at December 31, 1999, and 1998,
respectively.
Pending transactions due to loans represent reconciliations of the loan
amounts between the Trustee and recordkeeper at year-end, which will be
posted to the Trustee's records in the subsequent year.
Benefits are recorded when paid.
Certain amounts in the Plan's 1998 financial statements have been
reclassified to conform with the 1999 financial statement presentation
as a result of adopting SOP 99-3, Accounting for and Reporting of
Certain Defined Contribution Plan Investments and Other Disclosure
Matters, in 1999.
3. TAX STATUS
The Plan, as amended and restated, effective July 1, 1997, meets the
requirements of Section 401(a) of the Internal Revenue Code and,
accordingly, its income is exempt from Federal income tax under Section
501(a). Employer contributions and the income of the Plan are not
taxable to the participants until distributions are made.
4. EMPLOYER CONTRIBUTIONS
The Corporation will make a formula matching contribution with respect
to each eligible participant only if at least 80% of the Corporation's
consolidated earnings goal is met.
The Corporation formula matching contribution schedule was changed for
the 1995 Plan year. Beginning January 1, 1995, each 1% increase in goal
attainment from 80% to 100% of goal results in a corresponding 1.5%
increase in the profit sharing match, starting at a 10% match with the
attainment of 80% of earnings goal. Each 1% increase in goal attainment
from 100% to 140% of goal will result in a 1% increase in the profit
sharing match, starting from a 40% match with attainment of 100% of
goal earnings. And each 1% increase in goal attainment above 140%
results in a 2% increase in the profit sharing match, starting from 80%
matching with attainment of 140% of goal earnings.
Employer contribution amounts forfeited by terminated employees are
applied as a credit against future Corporate contributions or used to
pay administrative expenses and other fees of the plan and are held in
the Forfeiture Cash Account.
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<PAGE> 12
5. DISTRIBUTION ON TERMINATION OF THE PLAN
In the event of any termination of the Plan, the account balances of
all affected participants shall become non-forfeitable.
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<PAGE> 13
6. INVESTMENTS
The following is a summary of the Plan's investments as well as the net
realized and unrealized appreciation (depreciation) for 1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------- -------------------------------
NET NET
APPRECIATION APPRECIATION
FAIR (DEPRECIATION) FAIR (DEPRECIATION)
VALUE IN FAIR VALUE VALUE IN FAIR VALUE
---------- ----------------- -------- -----------------
<S> <C> <C> <C> <C>
Common Stock:
USG Common
Stock $ 41,824,663 ($ 2,375,345) $ 37,948,896 $ 1,319,485
Mutual Funds:
Vanguard Index
Trust 83,214,189 13,484,628 68,948,314 14,147,223
Fidelity Puritan
Fund 20,897,409 ( 300,641) 21,338,448 765,501
IDS New Dimension
Fund 64,363,112 14,290,871 44,834,896 7,024,648
Franklin Small Cap
Growth Fund 19,154,114 8,128,960 6,094,338 185,567
Templeton Foreign
Fund 6,094,843 1,219,397 2,462,450 ( 233,854)
PIMCO Total Return
Fund 4,445,160 ( 308,844) 5,656,053 124,383
------------- ------------- ------------- -------------
198,168,827 36,514,371 149,334,499 22,013,468
============= ============= ============= =============
Mortgages, Notes,
Contracts 128,345,349 --- 125,741,562 ---
Collective Short-Term
Investment Fund 20,093,931 --- 6,081,721 ---
------------- ------------- ------------- -------------
TOTAL
INVESTMENTS $ 388,432,770 $ 34,139,026 $ 319,106,678 $ 23,332,953
============= ============= ============= =============
</TABLE>
All investments in the Plan are participant-directed investments.
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<PAGE> 14
At December 31, 1999 and 1998, the following investments
(participant-directed) exceeded 5% of the net assets available for the
Plan benefits:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
USG Corporation Common Stock $41,824,663 $37,948,896
Allstate Insurance Company
Contract 77032 24,052,589 22,018,078
Jackson National Life Insurance
Contract S-1129-1 --- 22,965,801
SunAmerica Life Insurance
Company, GAC 4653 --- 23,611,436
UBS, 5021 19,648,352 ---
Vanguard Index Trust 83,214,189 68,948,314
IDS New Dimension Fund 64,363,112 44,834,896
Fidelity Puritan Fund 20,897,409 21,338,448
</TABLE>
7. PARTICIPANT LOANS
Effective October 1, 1993, and as revised on July 1, 1997, a
participant can obtain loans from the Plan. Under the Plan's loan
provisions, the maximum loan allowable is one half of a participant's
vested account balance or $50,000, whichever is less. The minimum loan
amount is $1,000. Additional amounts can be taken in $1 increments. A
participant must have a vested account balance of at least $2,000
before he or she can apply for a loan. The Plan restricts the
participant to no more than two loans outstanding at a time. Most loans
can be repaid by the participant over a five-year period, or sooner, in
full, with interest at the prime rate in effect at the time of
requesting the loan. A residential loan can be repaid over a period of
up to 30 years. Default on a loan by a participant is treated as a
hardship withdrawal and subject to IRS penalties.
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<PAGE> 15
SCHEDULE I
USG CORPORATION
INVESTMENT PLAN
SCHEDULE OF INVESTMENTS HELD AT YEAR END
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/NUMBER OF FAIR
SHARES COST VALUE
------------ ------------ ------------
<S> <C> <C> <C>
COMMON STOCK
USG Corporation 887,526 $ 53,574,063 $ 41,824,663
Vanguard Index Trust 620,955 49,893,313 83,214,189
Fidelity Puritan Fund 1,098,130 20,417,891 20,897,409
IDS New Dimension Fund 1,797,350 44,379,268 64,363,112
Franklin Small Cap
Growth Fund 434,038 12,065,504 19,154,114
Templeton Foreign Fund 543,212 5,509,156 6,094,843
------------ ------------ ------------
TOTAL COMMON STOCK 185,839,195 235,548,330
------------ ------------
CORPORATE BONDS
PIMCO Total Return Fund 449,006 4,649,070 4,445,160
------------ ------------ ------------
CONTRACTS
Aetna Life & Casualty
Company, GAC 14621 $ 3,418,862 3,418,862 3,418,862
Allstate, 77032 $ 24,052,589 24,052,589 24,052,589
Bank Of America, 99-061 $ 7,542,931 7,542,931 7,542,931
Bankers Trust, GAC 97-157 $ 12,414,394 12,414,394 12,414,394
Chase, 401748 $ 1,033,864 1,033,864 1,033,864
John Hancock Mutual Life
Insurance Co., GAC 8396-1 $ 6,061,386 6,061,386 6,061,386
John Hancock Mutual Life
Insurance Co., GAC 9532 $ 11,966,310 11,966,310 11,966,310
Metropolitan Life, 25287 $ 4,016,854 4,016,854 4,016,854
Monumental Life Insurance
Company, GAC ADA00259TR $ 15,382,950 15,382,950 15,382,950
State Street Bank & Trust,
Contract 98203 $ 2,126,670 2,126,670 2,126,670
State Street Bank & Trust,
Contract 99010 $ 10,567,031 10,567,031 10,567,031
Transamerica Life
& Annuity, GAC 76879 $ 1,056,291 1,056,291 1,056,291
Transamerica Life
& Annuity, 76912 $ 9,056,865 9,056,865 9,056,865
UBS, 5021 $ 19,648,352 19,648,352 19,648,352
------------ ------------ ------------
TOTAL CONTRACTS $128,345,349 128,345,349 128,345,349
------------ ------------ ------------
SHORT-TERM INVESTMENTS
Collective Short-Term
Investment Fund $ 20,093,931 20,093,931 20,093,931
------------ ------------ ------------
TOTAL INVESTMENTS $338,927,545 $388,432,770
============ ============
</TABLE>
-11-
<PAGE> 16
SCHEDULE II
USG CORPORATION
INVESTMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
SERIES OF TRANSACTIONS IN THE SAME SECURITY:
<TABLE>
<CAPTION>
TOTAL COST TOTAL CURRENT
DESCRIPTION OF NUMBER OF OF NUMBER OF VALUE OF
SECURITY PURCHASES ASSET SALES SALES
--------------- --------- -------- --------- --------
<S> <C> <C> <C> <C>
None
</TABLE>
-12-
