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IAMC Local Event

IAMC Local Event. October 29, 2013. CAUTIONARY STATEMENTS.

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IAMC Local Event

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  1. IAMC Local Event October 29, 2013

  2. CAUTIONARY STATEMENTS This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 related to management’s expectations about future conditions. Actual business, market or other conditions may differ materially from management’s expectations and, accordingly, may affect our sales and profitability or other results and liquidity. Actual results may differ materially due to various other factors, including: economic conditions, such as the levels of new home and other construction activity, employment levels, the availability of mortgage, construction and other financing, mortgage and other interest rates, housing affordability and supply, the levels of foreclosures and home resales, currency exchange rates and consumer confidence; capital markets conditions and the availability of borrowings under our credit agreement or other financings; our substantial indebtedness and our ability to incur substantial additional indebtedness; competitive conditions, such as price, service and product competition; shortages in raw materials; changes in raw material and energy costs; volatility in the assumptions used to determine the funded status of our pension plans; the loss of one or more major customers and our customers’ ability to meet their financial obligations to us; capacity utilization rates for us and the industry; our ability to expand into new geographic markets and the stability of such markets; our ability to successfully enter into and operate the joint venture with Boral Limited, including risks that our joint venture partner, Boral Limited, may not fulfill its obligations as an investor or may take actions that are inconsistent with our objectives; our ability to protect our intellectual property and other proprietary rights; changes in laws or regulations, including environmental and safety regulations; the satisfactory performance of certain business functions by third party service providers; our ability to achieve anticipated savings from cost reduction programs; the outcome in contested litigation matters; the effects of acts of terrorism or war upon domestic and international economies and financial markets; and acts of God. We assume no obligation to update any forward-looking information contained in this presentation. Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” in our most recent Annual Report on Form 10-K.

  3. TODAY’S AGENDA • 10:00 am Introductions • 10:15 am Overview of USG Business/CRE • 11:00 am Strategic Plan Discussion • 12:00 pm Lunch • 12:45 pm Differentiating Through Innovation • 1:15 pm Tour of USG CIC Facility • 2:30 pm Get Some Help

  4. USG PROFILE • FOUNDED: • 1902 • NYSE: • USG • LISTED: • 1931 • Industry Leader • #1 or #2 in all Core Businesses • $3.2 Billion – 2012 Sales • Vertically Integrated • Over 75 Production Facilities • Over 140 Distribution Branches in 36 states • Sales and Operations in over 20 countries* *Subject to finalization of joint venture with Boral Gypsum

  5. USG OVERVIEW Net Sales Split* Rest of World Specialty Distribution Building Products Manufacturing United States * Four quarters 2012, before inter-segment eliminations of $484 million

  6. NORTH AMERICAN GYPSUMWallboard • North American wallboard leader • Leader in Quality, Service and Innovation • Sheetrock® is the most recognized, trusted and specified wallboard brand • Most extensive portfolio of commercial and residential products

  7. NORTH AMERICAN GYPSUMPerformance Surfaces • Profitable business with stable margins through the cycle • Only manufacturer with a nationwide footprint of plants • Contractor focus – Key to success • Innovative focus across the portfolio

  8. NORTH AMERICAN GYPSUMPerformance Substrates • Diverse portfolio of products with multiple uses and markets • Innovative focus across the portfolio • Profitable business with stable margins through the cycle • First or second market share in all core products

  9. WORLDWIDE CEILINGS • #2 Position in consolidated industry with leading brands • International manufacturing and market coverage • Profitable business with stable margins through the cycle • Solutions focused on performance, sustainability, and aesthetics

  10. BUILDING PRODUCTS DISTRIBUTION • Building Materials Wholesaler with industry leading service, a broad portfolio of high performance products and a wide array of business solutions • Last mile logistics…safely to the jobsite • Focused on making our +30,000 contractor customers successful everyday • 70% of revenue from core products beyond wallboard • Share-of-wallet focus across 7 core product categories • Two-thirds of revenue is from commercial construction (new and tenant improvement)

  11. 2012 AVERAGE U.S. MARKET SHARE Wallboard & Gypsum Panels Industry Capacity (BSF) Continental Building Products (Lone Star) PABCO USG Eagle Materials Saint Gobain National Georgia-Pacific Source: Gypsum Association, Company Sources

  12. STRATEGIC PRIORITIES • Strengthen our core businesses • Diversify the sources of our earnings • Select emerging markets • Adjacent products/systems • Differentiate through innovation

  13. STRENGTHEN THE CORE Streamlining Operations CREATING OUR OWN RECOVERY 2007 2013 Manufacturing Distribution Mining/Shipping Workforce • 3.8 BSF capacity reduction • 14 wallboard lines idled • 4 paper mills idled • Focus on Lean Six Sigma to lower cost • Record levels of safety and quality • Closed over 125 L&W Supply branches • Structure of organization better aligned with customer needs • Leveraged nationwide strength in sourcing • Increased focus on non-wallboard products • Idled/closed 3 quarries • Repurposed ships to generate revenue • Reduction of 4,830 positions • Changed retiree medical benefit • Outsourcing functions to lower cost • Align organization structure with strategy $516MM in cost reductions – SG&A at 2002 levels

  14. STRENGTHEN THE CORE Synthetic Gypsum Synthetic Gypsum provides strategic value for USG • 38% of USG’s total 2012 gypsum usage was synthetic gypsum • USG’s rock reserves among the largest in the industry • 7 of 19 wallboard plants use synthetic gypsum for all of their needs, 5 additional use it for some production • Synthetic gypsum contracts are of varying durations, up to 20+ years • Financial assurances from utilities exist in most of our major agreements for a steady supply • Most plants are located near rail or waterways to allow for supply from multiple sources • Utilities are switching to lower cost, higher sulfur coal and running their higher efficiency plants with scrubbers more; this drives more synthetic gypsum production

  15. DIVERSIFY EARNINGSProduct Adjacencies • Strategic objective of diversifying earnings through low-cost product adjacencies • L&W Supply • 7 Core Product Strategy • Insulation • Wallboard • Steel • New Product Introductions • Commercial Roofing Products: • Leverage existing product technologies through new channels • Have superior performance attributes over existing product /technologies • Shower System: • USG Durock ® Shower System • Flooring: • Durock ® Self Leveling Underlayment • Joint Treatment • Exteriors • Ceilings • Fasteners

  16. DIVERSIFY EARNINGSBuild Critical Mass Outside of North America USG USG Boral Building Products CANADA UNITED STATES CHINA SOUTH KOREA SAUDI ARABIA MEXICO INDIA PHILIPPINES OMAN THAILAND VIETNAM MALAYSIA INDONESIA PERU AUSTRALIA URUGUAY ARGENTINA NEW ZEALAND • Expected to help dampen some cyclicality in future earnings • Total JV wallboard capacity of ~7 BSF • 12 Countries with USG/Boral JV presence

  17. USG / BORAL Joint Venture

  18. DIFFERENTIATE THROUGH INNOVATION 1980 1900 1920 1940 1960 2000 2010 • Sheetrock® • Sheetrock Gypsum Panels • Pyrobar Gypsum Partition Tile • Acoustone® • Rocklath® • Gyplap® Gypsum Sheathing • Rocklath Gypsum Lath • Acoustone Ceiling Tiles • Perf-A-Tape® Joint Reinforcement • Pyrofill® • Firecode® • Structo-Gauge® Gauging Plaster • Pyrofill® Poured Gypsum Roof Deck • Water Repellent Wallboard • Structo-Lite Perlited Plaster • Sheetrock Firecode Core (Type X) • Tapered Edge Panels • Ready-Mixed Joint Compound • 2" Solid Gypsum Wall Board System • Ultrawall® • Structocore • Structocore™ Wall System • First Metal Stud Drywall System • RC-1 Channel • Sheetrock WR Gypsum Panels • Chemically Hardening Joint Compound • SW Gypsum Panels • Blendtex Gypsum Panels • Exterior Ceiling Board • Ultrawall Relocatable Wall System • USG Shaft Wall System • Textone SW Gypsum Panels • Area Separation Wall System • Light Steel Framing • Durock® • Fiberock® • Structocore Security System • Durock Cement Board • Sheetrock Plus 3™ Joint Compound • X-Technology Ceiling Panels • Firecode® Compound • 3/4" Ultracode® Core Gypsum Panels • Compässo™ Suspension Trim • Quick Release II Clip • Cuvatura™3-D System • Radar™ ClimaPlus™ Ceiling Panels • Fiberock Panels • USG Drywall Suspension System • Humitek® • Levelrock® • Next Generation Gypsum Panels • Levelrock Floor Underlayment System • USG™ Decorative Interior Finish System • Geometrix™ Metal Ceiling Panels • Astro™ ClimaPlus™ Ceiling Panels • Translucents™ Luminous Panels • Topo™ 3-D Ceiling Panels • Humitek Gypsum Panels • Securock® Roof Board • Sheetrock® All Purpose Joint Compound with Dust Control • Sheetrock® Mold-Tough panels • Zero-emitting ceiling tiles • High Recycled Content Suspension Systems • True Wood Ceiling Panels • Securock® Glass-Mat Sheathing • Securock® Glass-Mat Liner Panels • Sheetrock® Brand UltraLight Panel • Securock® Glass-Mat Roof Board USG has led every major industry innovation 2000–2012:1,100+ US Patents

  19. DIFFERENTIATE THROUGH INNOVATION“Leader in Lightweight Innovation™” 2009 2010 2011 2012 2013 • Durock® Next Gen Cement Board • ½” Sheetrock® UltraLight • Panels • ⅝” Sheetrock® UltraLight Firecode 30 • ⅝” Sheetrock® UltraLight Firecode X • Sheetrock® Ultra Lightweight All Purpose • ½” Sheetrock® UltraLight Mold Tough Panels • Up to 25% Lighter • Up to 30% Lighter • Up to 30% Lighter • Up to 15% Lighter • Up to 40% Lighter • Up to 20% Lighter 5 Years of Lightweight Product Launches

  20. Q3 2013 CONSOLIDATED FINANCIAL RESULTS $ Millions (except EPS) * See reconciliation to GAAP operating profit/(loss) on slide 42

  21. Q3 2013 CONSOLIDATED FINANCIAL RESULTS $ Millions * US GAAP measure of net cash provided by (used for) investing activities was ($75MM) in 2013 and $96MM in 2012 and includes net (purchases)/sales of marketable securities of ($7MM) in 2013 and $157MM in 2012

  22. TODAY’S AGENDA • 10:00 am Introductions • 10:15 am Overview of USG Business/CRE • 11:00 am Strategic Plan Discussion • 12:00 pm Lunch • 12:45 pm Differentiating Through Innovation • 1:15 pm Tour of USG CIC Facility • 2:30 pm Get Some Help

  23. USG VISION FOR FINANCE FOCUSING ON CUSTOMER SERVICE PROVIDING STRATEGIC VALUE • OBJECTIVE • Ensure strategy, operating plans, and capital structure are aligned to create significant shareholder value • STRATEGY • Implement new processes and tools that clearly align business initiatives with shareholder value • OBJECTIVE • Position the finance organization to be a valued business partner to Operations • STRATEGY • Create an organizational model that ties Finance activities together and creates focus for business partnership, transaction processing, and center of excellence roles DRIVING OPERATIONAL EXCELLENCE ESTABLISHING ENGAGED LEADERSHIP TEAM • OBJECTIVE • Improve the effectiveness and efficiency of Finance operations • STRATEGY • Implement processes that drive a continuous improvement culture and capabilities • Modernize IT capabilities to support a high level of automation in transaction processing and financial analysis and reporting • OBJECTIVE • Build the highest performing Finance organization • STRATEGY • Implement programs to identify, develop, and retain a high caliber staff at all levels

  24. HIGH PERFORMING FINANCE ORGANIZATIONS The targeted paradigm of leading companies is to reduce the amount of time spent on transaction processing and spend more time on value-added activities, such as decision support, control, and insightful reporting. 2018 2013 10% Finance Function as a Business Partner 30% 20% Decision Support Role Transformation 20% 30% Decision Support Control 25% Process Re-design 40% Control Reporting 25% Systems Integration Reporting Transaction Processing The overall objective of USG’s transformation initiativeshould be “to achieve the leading practice paradigm”. Transaction Processing TraditionalParadigm Reducing Cost Targeted Paradigm

  25. COST OF FINANCE AS A PERCENT OF REVENUE • USG = Total cost of finance / market case revenue • Benchmark data per Hackett Group analysis October 2012

  26. PROPERTY DEPARTMENT CHARTER The USG Property Department is responsible for the direction and management of USG’s corporate real estate needs across all business units, including transaction management, contract administration, property taxes, planning and development. The Department develops and executes an enterprise delivery system for all real estate programs and vendor relationships in support of the Corporation’s operational goals and strategic objectives. In addition to site selection project management, the Department also coordinates with local and state government officials in the negotiation of economic incentives for the Corporation’s benefit. To fulfill its mission, the Property Department employs best-in-class service providers and consultants in the following areas: • Corporate Real Estate Portfolio Services  • Strategic Planning & Development • Property Tax Appeals & Administration • Economic Development Consulting & Leadership • Lease and Contract Database Management

  27. USG PORTFOLIO OVERVIEW • Over 75 Production Facilities • 143 Distribution Branches • 14 Mines & Quarries • 8 Regional Sales Offices • 18 MM - Total Building Sq. Ft. • 40,000 - Total Acreage • $** MM - Annual Rent Spend • $** MM - Annual Property Taxes

  28. USG HEADQUARTERS – 550 West Adams • Relocated Headquarters from 125 Franklin to 550 West Adams in March 2007 • USG Customer Service consolidated into 550 West Adams HQ in 2011 • Current leased square footage 275,000 • Current HQ headcount: • 670 FTEs and 130 consultants • USG receives TIF incentive through 2016 • 9th Floor subleased to Neutral Tandem Headquarters: Chicago Worldwide employees: 9,000 LEED CI Gold Certified Project* (*Currently LEED CI Gold Register Project awaiting approval)

  29. PREFERRED VENDORS Property Tax Administration & Appeals Brokerage & Corporate Services Economic Incentive & Tax Consulting Lease Database Management Property Appraisal Services

  30. NORTH AMERICAN GYPSUM Manufacturing Plant Locations Rainier Sty Point ALIQUIPPA Surrey Calgary Auburn Montreal Hagersville FT DODGE Detroit Oakfield Empire Port Reading Clark Gypsum SPERRY E CHGO Sigurd Baltimore North Kansas City SHOALS Torrance Norfolk SOUTHARD Glendale Chamblee Bridgeport Plaster City Dallas Sweetwater USG Board Plants Galena Park Jacksonville USG Cement Board Plants USG Joint Treatment Plants New Orleans USG Paper Mills USG Gypsum Fiber Plant Monterrey Puebla

  31. USG INTERIORS – Manufacturing Plant Locations Cloquet Walworth Westlake Stockton Cartersville Greenville Grid Plant Ceiling Tile Plant

  32. USG Quarries and Mine Locations Little Narrows Fundy (Idle) Hagersville Empire (Idle) Ft Dodge Sperry Shoals Sigurd Plaster City Southard Sweetwater Monterrey Quarry San Luis Potosi Mine Tecoman

  33. L&W SUPPLY / Region Structure – 143 Branches Nationwide Tracy Hein CENTRAL Kevin Bushman Chad Popma Mike Guido Ben Fredal Kirk Sundquist John Canick Colin Fogarty Steve Miller Don Wolf Rich Delaney Bill Giuliano Matt Myers Craig Peyton Judd Guldberg Brian Murphy EAST Jimmy Nix David Johnson Luke Godfrey Chris Evans Alex Gavrelis Kim Gonzalez Bobby Hoover Open (TBD) Scott Creeger Scott Sonneveldt Tiny Moore Steve Ham Barry Lockwood Ray Bingham Marty Brand WEST Bruce Neiswander Jeff Wilson Steve Layman Curt Jenkins Ryan Gillenwater Will Pape Nathan Ramsey Regie Shelley Tim Mahaffey SOUTH Larry McDowell Anebel Hernandez

  34. SURPLUS PROPERTY DISPOSITIONS Recent Transactions Galena Park, TX 72 acres $18.0 million South Gate, CA Paper plant $6.45 million Santa Fe Springs, CA Wallboard plant $10.46 million A.V. Kastner Bulk carrier $3.5 million South Gate, CA Water rights $3.1 million L&W Supply Macedonia / Dayton $835,000 CGC / Oakville, ON Excess land $200,000 $42.55 million In Contract Clark, NJ Paper plant Confidential Fremont, CA Wallboard plant Confidential CGC / Oakville, ON Excess land Confidential Note: All numbers reflect gross sales prices before transaction costs.

  35. INDIA SITE SELECTION

  36. TODAY’S AGENDA • 10:00 am Introductions • 10:15 am Overview of USG Business/CRE • 11:00 am Strategic Plan Discussion • 12:00 pm Lunch • 12:45 pm Differentiating Through Innovation • 1:15 pm Tour of USG CIC Facility • 2:30 pm Get Some Help

  37. Franksen’s 2013 Goals 1. STRENGTHEN THE CORE • Rebid of Property Tax Contract • L&W Supply – Lease vs. Own Analysis Continued • Refinement of Preferred Service Provider Relationship • USG Latin America/Caribbean – Supply Chain Evaluation • East Chicago – Property Tax and TIF Evaluation • MacMunnis – Full Lease Administration Outsourcing Initiative 2. DIVERSIFY EARNINGS • Project Garnet – India Site Selection • Surplus Property Dispositions – Fremont, Clark, Stony Point & Empire 3. DIFFERENTIATE THROUGH INNOVATION • Libertyville Facility Analysis and Chicago Site Relocation

  38. Franksen’s 2014 Goals – Draft / Proposed 1. STRENGTHEN THE CORE • 2014 Capital Projects – Incentives Evaluation Initiative • L&W Supply – Lighting / Energy Portfolio Initiative • “Project Manila” – USG Paper Capacity Evaluation • L&W Supply – California Sales Tax Incentive 2. DIVERSIFY EARNINGS • Surplus Property Dispositions – Unmarketable/Idled Property Evaluation 3. DIFFERENTIATE THROUGH INNOVATION • “Project Wildcat” – Libertyville R&D Relocation Continued

  39. IAMC “LIGHTNING ROUND” Six strategic questions 10 minutes each All answers are valued RESPECT THE RED TULIP!

  40. Strategic Question of The Day - #1 What is your corporate real estate strategy?

  41. Strategic Question of The Day - #2 How can corporate real estate enhance shareholder value?

  42. Strategic Question of The Day - #3 What is getting in the way of CRE creating shareholder value?

  43. Strategic Question of The Day - #4 How does CRE help drive corporate strategy?

  44. Strategic Question of The Day - #5 How do service providers help drive (or get in the way) of strategy?

  45. Strategic Question of The Day - #6 What does your CFO want more from corporate real estate?

  46. TODAY’S AGENDA • 10:00 am Introductions • 10:15 am Overview of USG Business/CRE • 11:00 am Strategic Plan Discussion • 12:00 pm Lunch • 12:45 pm Differentiating Through Innovation • 1:15 pm Tour of USG CIC Facility • 2:30 pm Get Some Help

  47. TODAY’S AGENDA • 10:00 am Introductions • 10:15 am Overview of USG Business/CRE • 11:00 am Strategic Plan Discussion • 12:00 pm Lunch • 12:45 pm Differentiate Through Innovation • 1:15 pm Tour of USG CIC Facility • 2:30 pm Get Some Help

  48. TODAY’S AGENDA • 10:00 am Introductions • 10:15 am Overview of USG Business/CRE • 11:00 am Strategic Plan Discussion • 12:00 pm Lunch • 12:45 pm Differentiating Through Innovation • 1:15 pm Tour of USG CIC Facility • 2:30 pm Get Some Help

  49. TODAY’S AGENDA • 10:00 am Introductions • 10:15 am Overview of USG Business/CRE • 11:00 am Strategic Plan Discussion • 12:00 pm Lunch • 12:45 pm Differentiating Through Innovation • 1:15 pm Tour of USG CIC Facility • 2:30 pm Get Some Help

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