avatar USG Corporation Manufacturing
  • Location: Illinois 
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    SHAREHOLDER INFORMATION ANNUAL MEETING OF Corporate Security, USG INQUIRIES STOCKHOLDERS Corporation, P.O. Box 6721, Chicago, Investment community: The 2016 annual meeting of USG IL 60680-6721. Investor Relations Corporation stockholders will be 312.436.5304 held at 9:00 a.m. on Wednesday, STOCK TRANSFER AGENT May 11, 2016 at USG Corporation AND REGISTRAR Media: Headquarters: 550 West Adams Computershare Trust Company Corporate Communications Street, Chicago, IL. 60661-3676 877.360.5385 312.436.6511 AVAILABLE INFORMATION For regular mail: GENERAL OFFICES Financial and other information P.O. Box 30170 Mailing address: about the Corporation can be found College Station, TX 77842-3170 P.O. Box 6721 at its website: www.usg.com. The Chicago, IL 60680-6721 Corporation has made available Street address for overnight delivery: on its website its annual report on 211 Quality Circle, Suite 210 Street address: Form 10-K, quarterly reports on College Station, TX 77845 550 West Adams Street Form 10-Q, current reports on Form Chicago, IL 60661-3676 8-K and all amendments to those Lockbox address for reports as soon as possible after voluntary contributions: Telephone: such material is electronically filed P.O. Box 43081 312.436.4000 with or furnished to the Securities Providence, RI 02940-3081 and Exchange Commission. If you wish to receive a paper copy of STOCK LISTINGS any exhibit to the Corporation USG Corporation common stock is reports filed with or furnished listed on the New York and Chicago to the Securities and Exchange stock exchanges and is traded under Commission, such exhibit may be the symbol USG. obtained, upon payment of reasonable expenses, by writing to:

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    IT’S YOUR WORLD. BUILD IT.® 2015 ANNUAL REPORT 2 Letter from the Chairman 4 Progress in 2015: Key Accomplishments 6 Our Plan to Win 8 Strengthen Our North American Manufacturing and Distribution Business 10 Diversify Our Earnings in International Markets 11 Differentiate Our Products and Services Through Innovation 12 Our Leadership 14 Putting Customers at the Center of our Business 16 Focusing on Safety 17 High-Quality, Innovative Products 18 Our People 20 Valuing Diverse Experiences and Perspectives 21 Leadership at Every Level 22 Our Citizenship 24 Reducing Our Environmental Footprint 25 A Positive Force in Our Communities ® ® 26 Celebrating Employee Excellence The trademarks SHEETROCK, DUROCK, ECOBLUEPRINT, ECOCAP, PLUS 3, SECUROCK, 28 Directors and Executive Officers and ULTRACODE, the USG logo, IT’S YOUR WORLD. BUILD IT., and related marks are trademarks of USG Corporation or 29 Shareholder Information its affiliates. The trademark ExoAir is a trademark of Tremco Incorporated. © 2016 USG Corporation and/or its affiliates. All rights reserved.

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    2 \ USG ANNUAL REPORT 2015 DEAR FELLOW SHAREHOLDERS When I became your CEO in 2011, our company was Our Plan to Win facing a business environment that made recovery from the recession in the building industry difficult to envision. We Strengthened the Core with targeted investments In my letter to you that year, I said I was confident we such as the expansion of our Plaster City manufacturing would emerge from the recession a stronger company. plant, which enabled us to better serve customers on the To make that goal a reality, we developed Our Plan to West Coast with Glass-Mat and specialty panels, and the Win, a three-pronged strategy focused on Strengthening Order-to-Cash technology project that will help make our Core, Diversifying our Earnings and Differentiating us even easier to do business with by simplifying our through Innovation. order and payment process. We had an intense focus on process efficiency and cost reduction. Working Capital Five years later, I am pleased to tell you USG is, indeed, initiatives saved approximately $50 million in cash. We a stronger company and we are winning. We are more Diversified our Earnings as we completed our first full efficient, more focused on the growth of our businesses calendar year with USG Boral as a part of our portfolio, and we are paving the path for even greater success. earning $48 million in equity income. We experienced We created new products, forged new partnerships and rapid growth in our Substrates business, especially with we are leading the industry in developing advanced our roofing and flooring products and systems. And, manufacturing strategies that we anticipate will we Differentiated through Innovation with more than 25 transform our company. new products to meet our customers’ evolving needs, including our Securock® ExoAir® 430 System. We also 2015 was a year of progress. Our operational performance launched four high-performance ceilings products and — safety, quality and customer service — was excellent, expanded our structural panel line with dramatic growth and we executed on the strategic priorities in Our Plan in revenue and profitability. Our Plan to Win guides our to Win. Adjusted net income* increased more than 75 priorities and focuses our efforts — and it showed in our percent to $259 million, and we expanded operating strong results for 2015. margins in all of our core segments. A great example of how we are making our business leaner and more Our Leadership profitable is that we earned $381 million of operating profit in a year that saw 1.1 million housing starts. That We have a legacy of industry leadership in our is the highest level of operating profit since 2006 when technology, our products and our service — and we there was 1.8 million housing starts. continued to build on that track record this year. I’m proud to say that our efforts did not go unnoticed. The growth of our business and improved profitability Among the many recognitions we received were is the result of the hard work and commitment to “Innovator of the Year” by the Executives’ Club of continuous improvement on the part of every member of Chicago for USG Durock™ Brand EcoCap™ Self-Leveling the USG team. We are becoming ambidextrous — funding Underlayment, a product that offers a significant key growth initiatives and lowering our breakeven at reduction in several environmental impacts, and “Preferred the same time. Innovative programs such as Lean Six Wallboard” for our USG Sheetrock® Brand UltraLight by Sigma allow us to be more efficient and reduce costs. Home Depot’s magazine, Pro Construction Guide. We Our transformation into a leaner, more agile organization were also ranked the number one brand in wallboard and enhances our position as the industry leader in building underlayments in a 2015 brand use study by Builder, the materials and technologies. National Association of Home Builders’ magazine. This annual report will provide an overview of Our People accomplishments over the past year in four important areas: Our Plan to Win, Our Leadership, Our People and Our employees are the heart of our company and we Our Citizenship. are working hard to make USG a great place to work for an increasingly diverse workforce. We launched our *Adjusted net income and free cash flow are non-GAAP financial measures. Please refer to “Reconciliation of GAAP and Non-GAAP Information” on page 29 of this Annual Report for a reconciliation to the most directly comparable financial measures in accordance with GAAP.

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    USG ANNUAL REPORT 2015 / 3 inaugural Diversity & Inclusion Report in 2015, which showcases the progress we are making in this area. We are pleased to be recognized for many of our workplace programs, such as being named a “Top Employer” at several of our manufacturing locations. We have teams of employees who are committed to working safely every minute, every task and every day. More than half of our manufacturing operations surpassed 1 million hours without a lost time injury and many of our distribution branches have operated for years without a lost time injury. Our dedication to safety earned us the recognition of one of “America’s Safest Companies” by Environmental, Health and Safety Today. Our Citizenship We are dedicated to being a positive force in the communities where we operate and where our employees live and work. We are focused on creating sustainable products and manufacturing processes. Our Ecoblueprint® outlines our strategy for environmental sustainability. We have a great story to tell about the environmentally responsible way we manufacture and distribute our products and solutions to help customers meet their environmental goals. We support our communities through philanthropy, volunteerism and community service, such as our incredibly successful nationwide food drive, during which our employees across the country donated 125,000 pounds of food to people in need in their local communities. We are working to raise awareness on issues important to our industry and our communities such as Science, Technology, Engineering and Math (STEM) education and opportunities for women in manufacturing. Looking Ahead As I reflect on the year, I am proud of our many accomplishments. They demonstrate that Our Plan to Win is working. As pleased James S. Metcalf as I am with 2015, I am even more excited about our future. Chairman of the Board, Our tagline — It’s Your World, Build It.® — is a reflection of our President and commitment to helping our shareholders, customers, employees Chief Executive Officer and communities build a bright future. Thank you for your continued support.

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    4 \ USG ANNUAL REPORT 2015 PROGRESS IN 2015: KEY ACCOMPLISHMENTS OUR PLAN TO WIN ADJUSTED NET INCOME* FREE CASH FLOW* 75+% 478% INCREASE INCREASE 2015 $146M $259M $41M $237M 2014 2015 2014 2015 2015 OPERATING PROFIT $381M GENERATED THE MOST Realized OPERATING MARGIN 135% OPERATING PROFIT SINCE 2006 EXPANSION INCREASE over 2014 when demand in ALL was segments 50% HIGHER $ USG BORAL GENERATED Working capital initiatives $38M $48M saved approximately of cash equity method dividends paid to USG income $50MIN CASH *Adjusted net income and free cash flow are non-GAAP financial measures. Please refer to “Reconciliation of GAAP and Non-GAAP Information” on page 29 of this Annual Report for a reconciliation to the most directly comparable financial measures in accordance with GAAP.

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    USG ANNUAL REPORT 2015 / 5 S OUR LEADERSHIP ACHIEVED RECORD LOST 1 TIME INJURY PERFORMANCE NAMED INNOVATOR Launched OF THE YEAR MANUFACTURING DISTRIBUTION by the Executives’ Club of Chicago CHOSEN AS 25 NEW PRODUCTS RANKED #1 BRAND in wallboard and underlayments 17x lower than industry norms 6x lower than industry norms PREFERRED in 2015 2015 BUILDER WALLBOARD brand use study by Pro Construction Guide, Home Depot’s magazine OUR PEOPLE Increased the number of Celebrated diversity and Named one of NEW FEMALE inclusion through our “AMERICA’S SAFEST Named one of the ENGINEERS HIRED COMPANIES” By Environmental, Health and Safety Today “TOP WORKPLACES” By Detroit Free Press on college campuses by 300% 6 EMPLOYEE RESOURCE GROUPS since 2009 OUR CITIZENSHIP UP Started 11% MATCHING 100% from 112k EMPLOYEE of our wallboard in 2014 VOLUNTEER Member of the paper faces are from COLLECTED HOURS ASTM INTERNATIONAL recycled paper 125k lbs of food in our company-wide with a donation to the respective COMMITTEE E60 on Sustainability food drive across 90 locations organization throughout North America

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    6 \ USG ANNUAL REPORT 2015 OUR PLAN TO WIN Strengthen, Diversify, Differentiate Delivering value for our customers, shareholders The first full year of USG Boral made a substantial and employees requires a deep commitment to impact on our strategy to Diversify Earnings in continuous improvement and a steadfast belief there international markets, as we were able to capture is always opportunity to grow. Each and every day, growth. We launched USG Sheetrock® brand our employees look for ways to increase the efficiency wallboard in several Asian countries, including of our processes and enhance the services we provide Vietnam, and we inspired builders in Indonesia to to customers. Our Plan to Win guides our efforts and change from block walls to plasterboard. centers around three fundamental pillars: We also saw success in diversifying our earnings through product adjacencies, with our substrates and STRENGTHEN surfaces lines realizing significant growth. the core of our North American manufacturing and distribution business; Our efforts to Differentiate through Innovation are paying off as we continue to develop new building DIVERSIFY materials and technologies. We know a sustained our earnings in international markets investment in innovation – which is one of our core and through product adjacencies; and values – will be essential to continue improving the way we do business. We commercialized the Securock® ExoAir® 430 System, the first-ever barrier DIFFERENTIATE panel that fully protects buildings from air, water, our products and services through innovation. vapor and thermal factors. In addition, we established a Building Science & Technology Commercialization team to accelerate big ideas now and in the years to come. To Strengthen the Core, we focused on safety, quality Through the joint efforts of our teams, customers and and cost performance, and saw improvement in all communities, it is clear we made great progress on three areas. U.S. Gypsum wallboard sales was up each of the pillars of Our Plan to Win in 2015, which nearly 4 percent, and we saw strong growth in our has helped us profitably grow our business. The specialty panels division. We also leveraged our high following pages will take you through some of our key performance ceilings line to fuel interiors growth. achievements and milestones and introduce you to We invested in the safety and development of our the people who made it all possible. people through ongoing training and professional development programs. We are already seeing solid results from these investments.

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    USG ANNUAL REPORT 2015 / 7 52 MANUFACTURING LOCATIONS NEARLY 2,000 142 DISTRUBUTION BRANCHES IN ACTIVE U.S. AND INTERNATIONAL 35 STATES PATENTS USG BORAL OPERATIONS Established the Oman 25 plasterboard lines plant, our first plasterboard plant outside of North America in over 37 manufacturing operations 20 YEARS 12 countries in Asia, Australasia and the Middle East Launched a number of new products, including • Securock® Exoair® 430 System Introduced “USG Testing • USG Durock™ Brand UltraLight Services” through the Foam Tile Backerboard Corporate Innovation Center, • Four new Glass-Mat Products using state-of-the-art facilities to provide testing and • High-Performance Ceilings certification services to customers, suppliers and companies in related industries Established the Eureka Grant Program at our Corporate Innovation Center to foster new ways of thinking by granting initial funding for new concepts that have the potential to generate sustainable competitive advantages for us

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    8 \ USG ANNUAL REPORT 2015 OUR PLAN TO WIN Strengthen Our North American Manufacturing and Distribution Business Investing in Next Generation Manufacturing We constantly search for ways to be more efficient for our customers,” said Dominic Dannessa, executive and effective in our processes, and our advanced vice president, chief operations and innovation manufacturing platform is helping to guide these officer. “With the establishment of the Center for efforts. We created our Center for Manufacturing Manufacturing Excellence and our engineering Excellence at our East Chicago, Indiana, manufacturing expertise, we can do just that. The combination of plant last October to pilot “next generation” these strengths accelerates our development of manufacturing strategies. These strategies allow us to proprietary technologies, and we are excited to see the produce higher quality products faster, safer and at a great work that results from this collaboration.” lower cost. Our Center for Manufacturing Excellence offers a glimpse into the future of our Innovation and Technology group, which will focus on advanced manufacturing, open innovation, R&D, forward thinking process development and increased speed-to-market for new products. Completed wallboard rolls off the manufacturing line at the East Chicago plant in Indiana. Employees at the East Chicago Center for Manufacturing Excellence review advanced controls that help monitor production. To launch our Center for Manufacturing Excellence, the plant team is working closely with our Innovation and Technology experts to deploy advanced controls that use real-time production data to reduce waste, downtime, energy and effort. The outputs give us the operational flexibility we need to meet increasing customer demands by speeding up our ability to design, manufacture and deliver to our customers. “We strive to deliver stronger results for our shareholders, as well as new and innovative products

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    USG ANNUAL REPORT 2015 / 9 Driving Operational Efficiencies Through our L&W Dispatch & Delivery Project Strengthening Our Core is about doing what we do The technology also provides reporting to L&W’s best while finding ways to be smarter, faster and leadership team for use as a real-time management more cost effective. In our L&W Supply distribution tool to drive operational efficiencies and fleet business, we used Lean Six Sigma to do just that. optimization. Our new process shortens delivery times, The L&W Dispatch and Delivery Project centered on getting our products into customers’ hands faster, and finding opportunities to increase truck utilization while allows our teams to proactively contact our customers reducing delivery costs. when their delivery is on its way and completed. This strategic solution is one of many that represent the talent of our teams and their ability to differentiate us in the marketplace by delivering a consistently superior $ experience to our customers. When the project reaches completion in the second quarter of 2016, we expect the new dispatch and delivery process and technology will increase average truck utilization from 75 percent to over 80 percent. We anticipate this will realize an annual savings of nearly $1 million in 2016, $2.2 million in 2017 and $3-3.5 million in 2018. New technology provides L&W Dispatch with real-time delivery data for job sites like this one in Seattle. The project team collaborated to identify a way to leverage a forward-looking dispatch and delivery system to better plan deliveries, improve truck capacity utilization and drive profitable growth. We unveiled our revitalized packaging to reflect our brand identity and our commitment to safety. The new packaging is easier for our customers to find and use, and it meets Occupational Safety and Health Administration’s (OSHA) Globally Harmonized System of Classification and Labeling.

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    10 \ USG ANNUAL REPORT 2015 OUR PLAN TO WIN Diversify Our Earnings in International Markets Tapping Our Global Team to Grow Our Business in Asia and Australia We formed USG Boral in 2014 to combine our best-in- Another cross-border team worked together to class building products and technologies with Boral’s implement our manufacturing technology in key leading plasterboard manufacturing and distribution plants across Australia and Asia. footprint in Asia and Australia. This strategic 50/50 joint venture, USG Boral, is now a successful part As a result of these and other initiatives, we are of our business that helps expand our international capturing new business and growing our company. footprint and Diversify Our Earnings. Our network of experts and the their ability to collaborate across boarders will help enable us to We are committed to USG Boral’s growth and making flourish in the future as we continue to grow our a strong impact on our new market. For example, we global presence. partnered with Zawawi Minerals LLC on joint ventures for gypsum mining and processing in the Sultanate of Oman. As part of this collaboration, a team from North America helped establish a new wallboard plant in Oman, the first non-North American plant opened in the last 20 years. Led by start-up manager Todd McMichael, the new wallboard plant was built and launched with an Overall Equipment Effectiveness exceeding 90 percent from the first day of operation. The plant has full capabilities to make specialty boards with an annual capacity of 8 million square meters. It qualifies Todd McMichael, start-up manager, joins his team to celebrate the opening of our plant in Oman. as the first UL certified plant within the USG Boral manufacturing network. USG Boral ceilings are featured in one of the world’s largest construction projects, the Wheatstone Project in Onslow, Western Australia. Pas Daskalakis, architectural and specifications manager for USG Boral, blended function and design to give a bomb-proof bunker at this liquefied natural gas plant a stunning ceiling.

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    USG ANNUAL REPORT 2015 / 11 Differentiate Our Products and Services Through Innovation Driving the Industry’s Future at Our Corporate Innovation Center From USG Sheetrock® Brand Panels in the early 1900s to the USG Sheetrock® Brand UltraLight Gypsum Panels of today, we have been leaders in bringing innovative building materials and technologies to the residential and commercial construction industry for more than 110 years. Developing groundbreaking solutions is how we pave the way, and it’s how we do things better, smarter and faster for our customers. We have a strong team of scientists and researchers dedicated to living our core value of innovation at our Corporate Innovation Center (CIC) in Libertyville, Illinois. It is there that our team of forward-thinking professionals from the fields of materials science, engineering, analytical chemistry and architecture create products and technologies that will define our industry well into the future. The CIC also plays a key role in another one of our core values: safety. Our team of experts is instrumental in ensuring all of our products are safe well before they go to market through vigorous testing. They use unique fire, acoustical, structural and environmental testing capabilities to evaluate products and systems while doing chemical analysis to ensure product safety and quality. We have over 1,500 years of combined experience, hold approximately 2,000 active U.S. and international patents and over half of our CIC employees hold advanced degrees in their fields. Our current focus at the CIC is accelerating commercialization of our innovation initiatives to meet our customers’ needs. We are constantly enriching our robust pipeline of ideas which drives differentiation and provides us with competitive advantage. Our teams at the CIC and throughout the business are focused on collaboration, efficiency and new ideas which further align to Our Plan to Win and its successful execution. “Our CIC teams are rich in diversity of thought and experience, which is what we need to develop game-changing ideas. We work hand-in-hand with partners throughout our company to think ahead for our customers and develop innovative products to help them succeed.” — Dr. Srinivas Veeramasuneni, vice president, Corporate Innovation Center

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    12 \ USG ANNUAL REPORT 2015 OUR LEADERSHIP As a market leader, we need to consistently and vapor levels in buildings. By researching, testing demonstrate our value and the impact our products and developing new design solutions, we have have within our industry. It is a responsibility we take created products that are stronger, lighter and more very seriously and it is why our customers rely on us. sustainable than ever. While we have established ourselves at the forefront of the building and manufacturing industry, we are not As leaders, we go above and beyond content to sit on our past achievements. Our successful to deliver results, and we take decisive track record motivates us to forge new paths. actions to safeguard the well-being of Our commitment to customers informs our employees and the communities we every action plan we implement and every serve. By equipping ourselves with the latest safety knowledge, we act swiftly to adapt our policies and to project we undertake. We find creative ways to educate our customers and teams. Not only have our foster relationships with customers, hosting events efforts to improve safety earned us the trust of those like the first-ever Build It Marketing Tour last year. It we protect, they have distinguished us in our field. Our provided the opportunity to hear from our customers, plant in Galena Park, Texas, surpassed 9,000 days and listen to their feedback and incorporate it into our 9,000,000 hours without a lost time injury, setting a processes. Additionally, our customers interacted with new industry record. our products and saw our new innovations. Our leadership has never been stronger, and the We pride ourselves on being attuned to the needs of following stories will introduce you to a sample of our customers and respecting their trust, and always the milestones we worked hard to achieve in 2015. going the extra mile. We expanded our innovation efforts, diving into new technologies while remaining true to our longstanding 2015 also saw great strides in expanding tradition of excellent customer service. our growing portfolio of products and in Diversifying Our Earnings. Since our earliest What makes our buildings and our organization days, our passion for innovation has propelled us endure throughout the years? Any USG customer or forward, leading to nearly 2,000 active U.S. and team member will tell you that the key to success international patents that represent key milestones is a solid, resilient core. That’s why we focus on our in our industry. This year, we introduced 25 new values of safety, integrity, innovation, quality, diversity, products, including the acclaimed Securock® ExoAir® efficiency and service in every aspect of our business, 430 System, which efficiently controls the air, water giving us the best foundation to continue growing.

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    USG ANNUAL REPORT 2015 / 13 A Timeline of Our Industry Game-changers 1916 We have nearly 2,000 active U.S. and USG Sheetrock® international patents which are the result of 1960s groundbreaking innovations over the years. brand gypsum Lightweight Metal We’ve been pushing the building industry panels Framing, Shaft forward as an innovator and leader, and we Wall Systems still are today. We continue to innovate and introduce new advancements that will support the spaces where we work, the buildings where we learn and the places we call home. 1900 1940 1980 1920 1960 2000 1940s 2010s Fire Resistant USGSheetrock® gypsum panels UltraLight gypsum panels Leading the Industry in Health and Safety Operate 6-17x better than safety norms 14 MANUFACTURING LOCATIONS AND 3 have qualified as Stars under the U.S. Government Occupational DISTRIBUTION FACILITIES Safety and Health Administration’s Voluntary Protection Program Our Galena Park, Texas, plant Earned the Mine surpassed 25 YEARS WITHOUT A LOST TIME INJURY, SETTING A NEW INDUSTRY RECORD Safety and Health Administration/National Mining Association’s "SENTINELS OF CHARTER SAFETY" award MEMBER of the National 15x Safety Council

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    14 \ USG ANNUAL REPORT 2015 OUR LEADERSHIP Putting Customers at the Center of our Business Customer Focus: Golden Valley Supply Our motivation to constantly innovate and develop products, showcased in their offices. solutions that help businesses grow is driven by one thing — our customers. We approach each new Connie Larson indicates, “Passion is the backbone of customer project as a joint endeavor born from our company culture. Our team brings excitement, relationships based on trust and a shared sense of energy, service, commitment and care to everything purpose. We understand the need to empower our they do.” customers with knowledge of and confidence in As a result of that passion, every member of the GVS our products, and we are committed to fostering team is committed to superior product knowledge and relationships that can stand the test of time. ensuring they bring to life the “can-do” spirit that has Our partnership with Golden Valley Supply Co. (GVS), become the hallmark of the GVS customer experience. our largest independent ceilings distributor which Delivering that customer experience and being serves customers across North Dakota, South Dakota, knowledgeable about USG products, the industry and Iowa, Minnesota and western Wisconsin, is a prime market pricing requires close collaboration. Our strong example of how a collaborative customer relationship partnership with GVS means that we work together can yield positive results for both parties. to represent USG products and find ways to foster relationships in the market. From large-scale projects like the B.H. Whipple Federal Building in Fort Snelling, Minnesota, to working with architects on specialty designs and improving acoustics in commercial spaces, GVS and USG work together to bring sector expertise and creative solutions with USG ceiling products. The leadership and passion at every level of GVS sets the tone for a successful partnership that wins in the marketplace. GVS is not only a great customer and integral part of our broader ceilings business, but they serve as a model that we try to replicate with all of our A Wells Fargo Home Mortgage office in West Des Moines, Iowa, customers. features USG ceiling products supplied by Golden Valley Supply Co. GVS is a family-owned business spanning two generations. The company carries acoustical and specialty ceilings, acoustical wall panels and Division 10 products. GVS also carries the full line of USG ceiling

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    USG ANNUAL REPORT 2015 / 15 USG Build It Marketing Tour “The Build It Tour was a great way to connect with our customers across the country. We had the opportunity to hear their feedback about our products and solutions while introducing them to new products that boost productivity.” — Rob Waterhouse, senior vice president and general manager, L&W Supply Our marketing team launched the USG Build It Tour to connect building professionals and contractors with our high-performing products and to drive energy around our brand. The tour stopped at 25 dealer locations where customers participated in interactive events and experienced the latest innovations from USG. The product demonstrations allowed us to develop deeper relationships with our customers, while sharing and receiving key insights, which ultimately led to sales. Our team in Plaster City, California was chosen to partner with NASA, Honeybee Robotics and The Planetary Society on an innovative venture to field test — in our own gypsum quarry — a planetary deep drill that will one day be sent to Mars. As the only company in our industry to participate in this enterprise, we were honored to play a role in helping to advance the field of science and planetary exploration.

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    16 \ USG ANNUAL REPORT 2015 OUR LEADERSHIP Focusing on Safety Understanding Safety Through Employee Experience Building a safety-first culture has been a priority since single one of our employees to have the opportunity to our first years of operation. It is not only the right thing go home every day just as strong and fit as they were to do for our people, our customers and our business, when they walked in. but it is one of the single most important reasons we continue to operate. In an effort to engage our The most recognized submissions, developed by employees, we launched a company-wide initiative our manufacturing team in Gypsum, Ohio, and our asking them to help us craft a safety vision statement. distribution teams in northeast Florida, have been shared with employees as a reminder that safety is Teams from every office in every market where we our number one priority. Additionally, all submissions operate submitted videos about what safety means to inspired our new Safety Vision Statement that guides them. Each submission was inspiring and reinforced the us everyday. reason we care so much about safety. We want every Our Safety Vision Statement We will be the industry leader in health and safety by creating an injury-free workplace and modeling safe behaviors for our families, colleagues, customers and communities. We are committed to working safely every minute, every task, every day— so we can live life to the fullest with those who depend on us. The team from Gypsum, This video submission Ohio, created the most from St. Augustine and recognized plant submission. Jacksonville got right to the point.

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    USG ANNUAL REPORT 2015 / 17 High-Quality, Innovative Products Securock® ExoAir® 430 System Our philosophy on customer service is simple: we try efficient, which reduces heating and cooling costs for to anticipate their needs to enable their success. We occupants, the Securock® ExoAir® 430 System benefits identified an opportunity to address unmet needs the environment by reducing worksite waste. when contractors spoke of the difficulties involved with installing air and moisture barriers in buildings. Thanks to the efforts of Account Representative Ross Stenzel, the Securock® ExoAir® 430 System Air barriers control airflow to make buildings energy received a positive reception in the St. Louis, Missouri, efficient, but installation is not only time intensive marketplace. Through his enthusiastic promotion and cumbersome, but also requires careful attention of the new product and strong relationships with to details around safety and health concerns. To help contractors and distributors, Stenzel secured mitigate the concerns and effectively inhibit airflow, opportunities for Securock® ExoAir® 430 in two key we teamed up with Tremco Commercial Sealants & 2015 projects, the Lincoln Sparta Elementary School Waterproofing to create a building envelope system. and Sarah Bush Cancer Research Center. After four years of research and development, our partnership paid off with the launch of the Securock® The launch of Securock® ExoAir® 430 is a testament ExoAir® 430 System. of Our Plan to Win strategy, demonstrating that strong execution and a long-term vision for our high- This integrated system combines USG’s Securock® quality product allows our customers to succeed. brand Glass-Mat Sheathing and Tremco’s fluid It helped diversify our earnings by significantly applied air/water barrier membrane into one effective increasing our presence and credibility in the building barrier panel. Once installed, the system regulates envelope market. air movement throughout the building and serves as a weather-resistant barrier, keeping water out while allowing water vapor to pass through. The system’s Sarah Bush Cancer new technology enhances convenience, simplifies Research Center, installation and results in impressive control of air, Effingham, Illinois water and vapor. Besides making buildings energy Working Together: Creating the USG Durock™ Brand Glass-Mat Tile Backerboard Employees from across our business demonstrated the power of collaboration by creating our new Durock™ Glass-Mat Tile Backerboard, a water-resistant, easy-to-use panel for walls, floors and ceilings. Combining their unique areas of expertise, we were able to create a successful product designed to meet our customers’ needs.

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    18 \ USG ANNUAL REPORT 2015 OUR PEOPLE We know that building great products takes great industry-changing opportunities and innovations. people. That’s why we seek out and cultivate talented Whether it’s helping to build-up our communities or minds to bring new perspectives and passion to our envisioning the cities and skylines of the future, the company. For more than a century, we have developed individual contributions of our employees is advancing technologies that have revolutionized our industry, and our culture and helping us build a better world. during this time, we saw several generations of families work with us, often contributing to our many industry- This year, we were honored to receive a number leading products and innovations over the years. of accolades recognizing our people, our practices and our dedication to safety. Many of our plants Our dedication to our core values - safety, innovation, were recognized for being great places to work integrity, diversity, service, quality and efficiency - is because of employee engagement, strong internal what makes us a great company for our employees, communications and their dedication to others. Our our customers and our communities. One of these leading safety practices – reinforced through our safety values - diversity - is crucial to our ability to attract and vision statement – were also recognized and honored. retain talented employees, connect with an increasingly diverse customer base and be a more effective We are excited at the progress we have made to build competitor in the global marketplace. a workforce and workplace that is more flexible, more diverse and more intellectually curious. Across the We honored the diversity of our employees, customers, board – in our headquarters, our Corporate Innovation shareholders and suppliers in a new way through Center, our manufacturing plants and distributions our 2015 Diversity & Inclusion report. As an Equal branches – we are thinking differently about the future. Opportunity Employer committed to a culturally rich We are inspiring our teams to succeed and we are workforce, we’re proud of the diversity initiatives driving business performance for our customers and we’ve implemented to raise the quality of our work shareholders. environment and employee well-being. It’s a way-of-life that directly affects our success. We are inspiring our teams to succeed and we are driving business performance for our customers and In addition to our diversity initiatives, we are shareholders. empowering employees at every level to uncover Formation of Women in Manufacturing forum to support females in science, technology, engineering and mathematics Incorporation of Diversity as a core value Initiation of Diversity and Inclusion Champion Recognition ceremony Creation of Diversity and Inclusion Strategy Council (DISC) Completion of first all-company Addition of Domestic diversity event: Food drive raising more Partner benefits than 112,000 pounds of food for local communities

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    USG ANNUAL REPORT 2015 / 19 Our workforce represents employees with a wide variety of backgrounds, talent, interests, 8,900+ Employees knowledge, experience and cultures. 32.2% of our top 231 leaders are diverse 6 Employee Resource Groups supporting the diversity & inclusion initiative • African American Network • Latino Employee Network • Asian Employee Network • USG New Talent • Defend the Rock Military ERG • Women Rock! 330 EMPLOYEES have been trained as Lean Six Sigma green, black or master black belts, supporting efficiencies in our manufacturing, distribution and corporate areas

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    20 \ USG ANNUAL REPORT 2015 OUR PEOPLE Samar Emami, senior researcher at our Corporate Innovation Center, works with the Scanning Electron Microscope that allows us to check the quality of our Valuing Diverse Experiences products at the molecular level. and Perspectives Inspiring Innovation Through Inclusion: Our 2015 Diversity & Inclusion Report Forging connections across our teams and engaging with diverse perspectives are integral to who we are as a company. Over the last 20 years, we’ve made great progress enhancing our Diversity & Inclusion efforts. We believe that collectively who we are, where we come from and what we’ve experienced as individuals positively influences the way we look at issues and solve problems as a business. We know that leveraging our diversity makes our business stronger. This is reflected in a variety of ways, including seeking out new talent, supporting our communities and developing innovative programs. We value people with interesting perspectives, leadership skills and a strong curiosity to find ways to do things better. And as part of our commitment to our people, we foster an environment of respect by recruiting and retaining high-caliber employees. Today, 55 percent of our salaried full-time hires are diverse, and since 2009, we have increased the number of female engineers hired on college campuses by 300 percent. As we invest in and focus on Diversity & Inclusion, we will continue to use our range of thoughts, talents, interests, experiences, cultures and backgrounds to do things better, smarter and faster for our customers and for each other. “We want our employees to bring their authentic selves to work so we can nurture inclusion and push the envelope. That’s what brings our core values to life.” USG employees and family members show their pride — Gina Max, senior director, Talent Management & Diversity after volunteering with Chicago Cares.

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    USG ANNUAL REPORT 2015 / 21 Leadership at Every Level Recognizing the Impact of Our People By motivating and engaging our teams, we maintain best- The plant supports its team members by providing special in-class safety programs, achieve operational efficiencies, training to help employees expand their skills, while deliver higher quality products and services, and become also focusing on engagement through monthly all-plant an employer of choice. meetings and a peer review process to resolve conflicts. The Sweetwater team is also positively impacting the To us, this instills a “leadership at every level” mentality community by providing summer jobs and internships for that we exhibit across our business. recent graduates, partnering with area school districts and sponsoring charitable events for organizations like Autism “We develop and adhere to safety guidelines that exceed Speaks. industry standards,” said Brian Cook, executive vice president, chief administrative officer and president of the USG Foundation. “We strive to create an injury-free workplace so we can live life to the fullest with those who “We are so proud of our depend on us.” team and of our entire plant Recently, our plants in Alabaster, Detroit and Otsego, Michigan, were recognized as Top Workplaces by the network. It’s an honor to be Detroit Free Press for the second consecutive year. These locations demonstrate how trust and teamwork lead to recognized in the industry as operational excellence and higher employee satisfaction. The award identifies high-performing organizations based a great place to work, and to solely on employee surveys that measure factors like leadership, communication, career opportunities and work make a positive difference with environment. our high-quality products.” Our Sweetwater, Texas, plant was also named an Employer — Jeff Grimland, plant manager, Sweetwater of the Year by the Texas Workforce Commission for its outstanding commitment to employees and communities. A Family Tradition There is no greater testament to our ability to create a long-lasting legacy as a great place to work than seeing several generations of families serve in our workforce. We are proud of the family culture we have created and are even prouder of those whose time with us spans generations. Here are a few examples: The Dearman family of Windsor, Nova Scotia, In Baltimore, Maryland, 13 members The Houck family has a combined 131 years Canada has contributed a combined 160 years of the Bullock family have worked at of experience at USG. Leon, Rodney, Les and of total service at USG. Dumps Dearman, above, USG since 1950, including (clockwise Nathan are just a few of the family members proudly wears his grandfather’s hardhat. Both of from top left) Robert Bullock, who continue the tradition. his grandfathers, Maurice Dearman and Gordon Raymond Bullock, James Elliot and Caldwell, and several brothers and uncles have all Joe Bullock. been a valuable part of our company.

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    22 \ USG ANNUAL REPORT 2015 OUR CITIZENSHIP We are committed to being good corporate citizens in energy. Following the successful installation of an the communities where we live and work. Our mission eight-acre, one-megawatt solar field at our Plaster is to leave the world a better place than we found it by City plant in California, we saw an opportunity to do supporting our local communities and implementing even more and this year added a second solar field. responsible environmental practices. Long before environmentalism became mainstream, Although we dedicate much of our time and energy to we took measures to improve resource utilization in improving built environments, we respect the natural our business practices. Over the years, we pioneered environment as well. Our Ecoblueprint® program ways to use water and other resources more guides our strategy for environmental sustainability, efficiently, reduce and reuse waste, and transform helping us to efficiently use energy and conserve finite manufacturing secondary waste (byproducts) into resources in every aspect of our business operations. valuable new resources. This year, our Rainier plant in These goals help us meet current needs of our Oregon installed a waste reclaim system, which both customers without compromising the needs of future reduces our eco-footprint and saves us operating generations. costs. Ecoblueprint® identifies three corporate priorities Along with sustainability, service is one of our core where we believe we can make the greatest impact on values and a personal priority for the compassionate sustainability and the world around us: individuals that work here. Our employees donate their time and energy to an abundance of worthy causes like Engineers Without Borders, Chicago 1. Develop responsible solutions Cares, American Red Cross, Heartwalk and Habitat for Humanity. Working together, our employees have the 2. Enhance energy management power to create a positive impact. More than 6,000 employees at 80 USG locations collected 125,000 3. Improve resource utilization pounds of food for our second annual food drive. To develop responsible solutions, our highly-trained Additionally, we offer philanthropic support to our researchers assess our environmental impact at communities where we live, work and play through every step of the production process: from product the USG Foundation and Matching Gift Program. Over development to design and distribution to customer the years, the foundation has partnered with many support and vendor relations. Through continual local and national charitable organizations focusing measurements, we hold ourselves accountable as our on health, social and educational initiatives. We also business model evolves. contribute to building durable communities around Our philosophy of continuous improvement the globe and meet the specific regional needs of our also extends to our efforts in enhancing energy various markets meeting. management and exploring alternative sources of

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    USG ANNUAL REPORT 2015 / 23 200+ products are certified as GREENGUARD Gold Founding member of the low-emitting products UNITED STATES GREEN BUILDING COUNCIL Reduced our total energy usage by > 11% since 2008 The Corporate Innovation Our annual campaign raised nearly Center began a relationship with Busy Brains Children’s Museum TO PROMOTE STEM EDUCATION $150,000 to support community programs through and enthusiasm at an early age United Way of Metropolitan Chicago and United Way of Lake County, including a matching donation from the USG Foundation

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    24 \ USG ANNUAL REPORT 2015 OUR CITIZENSHIP Reducing Our Environmental Footprint Rainier Waste Reclaim Accomplishes Environmental and Economic Goals As a company that helps create unique and inspiring We believe that going green is the right thing for our spaces, we are dedicated to caring for the most special customers, our environment and our business. The new place of all: our planet. At every step in our business, waste reclaim system at our plant in Rainier, Oregon, is from formulating our products to incorporating them a prime example of our success in accomplishing both in eco-conscious projects, we lead the industry with our environmental and economic goals. decisions that benefit the environment. The Rainier plant receives new construction waste from an outside source and is partnering with L&W Supply to start a job site pick up program in the Portland, Oregon, area. The waste reclaim system allows the plant to run a higher percentage of waste wallboard, offsetting rock costs and minimizing our global footprint. We make it our responsibility to act with integrity and to respect the environment we call home. Our Rainier plant is an example of how we successfully live this belief through action. The reclaim system in Rainier, Oregon, which reduces our environmental footprint by recycling waste wallboard. Solar Power in Plaster City Reduces Electric Costs by Over $2 Million As a result of a partnership with Green Light Energy Imperial LLC, our Plaster City plant in California last year added a second solar field to provide renewable solar energy to our operations. Combined, the solar fields generate two megawatts of power, which account for approximately 20 percent of the plant’s electricity consumption and represent enough energy to power 2,000 homes. In addition to supplying our plants with renewable, green energy, we anticipate this initiative will reduce electricity costs by over $2 million. “We are always looking at opportunities for our plants to use solar energy, and it made a lot of sense to move forward with this renewable energy investment at our manufacturing plant in Plaster City. This is an exciting project that demonstrates our environmental stewardship and commitment to maintain Solar panels in environmentally-friendly operations.” Plaster City help us offset energy use by approximately 20 — Al Zucco, senior director, Energy and Sustainability percent.

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    USG ANNUAL REPORT 2015 / 25 A Positive Force in Our Communities Engineers Without Borders Supporting the communities we serve is an important part Through EWB, Aaron has worked on bridges, schools, of life at USG, whether it’s our community of coworkers, wells and water distribution projects, and has been on 12 our local neighborhoods or the natural environment. We trips to Guatemala, Honduras and Peru. Aaron spends time aim to go above and beyond as corporate citizens, and that volunteering at the Chicagoland Professional Chapter of means working together with the people and businesses EWB and serving as a mentor for the Vanderbilt University that live, work and play side-by-side with us. We show our Student Chapter. At USG, Aaron often works with project support through volunteer efforts, sustainable development, engineers, who tend to be college students or recent philanthropic partnerships, charitable donations and local graduates. sponsorships. “I enjoy walking them through the projects, helping them The spirit of integrity and service we have is the result of the better understand the goals they’re trying to achieve and efforts of our dedicated USG teams who volunteer their time supporting them as they develop their engineering abilities,” to meaningful causes. Aaron Neuman is one such individual. Aaron said. “I feel empowered knowing that the mentoring Aaron spends his days as a structural design supervisor, but we provide is building a new generation of engineers who outside of work, he uses his engineering abilities for the have a love for solving the world’s problems.” greater good. Since 2006, Aaron has volunteered his time and talents to Engineers Without Borders (EWB), a non- Aaron’s experiences with EWB were showcased at a Lunch profit humanitarian organization. EWB supports community- & Learn with his colleagues to highlight opportunities for his driven development programs worldwide through co-workers to become involved. partnerships that help community members tackle challenges such as water supply, sanitation, energy, agriculture, civil works and structures. Combining efforts, engineers supply the project’s design and most of the fundraising and communities provide labor to carry it out. Aaron Neuman leads a team of volunteers on a trip to Central America with Engineers Without Borders. Aliquippa Gas Telemetry Project We recently outfitted a natural gas pipeline at our plant in Aliquippa, Pennsylvania, with telemetry equipment that allows our team to remotely monitor pipeline conditions with precision and efficiency. If any problematic situations arise on the 2.4 mile pipeline, the telemetry system immediately sends an alert and automatically responds to emergencies. We are proud to have collected over This equals roughly Our Second Annual Food Drive 125,000 104,000 MEALS Nearly 6,000 employees in over 80 P O U N DS of our locations participated in this important event that helped people of food, compared to 112,000 10,000 more meals than all over North America enjoy meals pounds in 2014. in the 2014 food drive. during the holiday season.

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    26 \ USG ANNUAL REPORT 2015 CELEBRATING EMPLOYEE EXCELLENCE Our employees are the core of our success, and we develop leaders at every level who have a relentless desire to serve our customers and uncover new opportunities. We value people with diverse experiences and perspectives who are committed to our core values, possess an intellectual curiosity to meet new challenges and solve complex problems. We continue to focus on being a great place to work, and we celebrate our teams’ accomplishments with a variety of awards and recognition. VIP AWARDS The VIP Program recognizes and rewards employees for exceptional contributions to our Values, Innovation and Profitability. The highest level of recognition in the VIP program is the CEO Award, given to those members of our team who demonstrate above-and-beyond dedication to improving our business. • Tom Foley - Director, Employee • Raymond Kaligian - Director, Benefits Business Management • Jared Fry - Product Manager, • Brook Klawitter - Director, CGC Financial Shared Services • Scott Grieve - Sales Manager, • Tami Kucera, Director, Employee South Central Region, L&W Benefits Supply DIVERSITY & INCLUSION AWARDS Our Diversity & Inclusion Strategy Council recognizes individuals or teams that demonstrate an outstanding commitment to promoting diversity of thought, culture, experience, background and knowledge in the workplace. They help ensure everyone feels welcome regardless of age, gender, gender identity, ethnicity, religion or sexual orientation. • African American Network MVP • USG New Talent MVP • L&W Supply Branch of the Year Lisa Jones, Associate, General Christian Shonkwiler, Analyst, CALPLY: Nigel Smith, Branch Plant Finance Finance Shared Services Manager, San Diego, CA • Asian Employee Network MVP • WomenRock! MVP • Leadership at Every Level Dave Song, Director, Gypsum Kaitlyn Henderson, Specialist, Victoria Gutowski, Manager, Travel Panels Lab Corporate Communications and Food Services Sarah Messa, Loading Manager, • Defend the Rock MVP • Manufacturing Mill and Packing Paul Furman, Manager, National Facilities of the Year Accounts Bridgeport, AL: Matt Taylor, Plant • Luminary of the Year Manager Pete Savu, Senior Vice President, • Latino Employee Network MVP Libertyville, IL: Dr. Srinivas Manufacturing & Global Supply Yecenia Zamorano, Administrative Veeramasuneni, Vice President, Chain Manager, Sales & Marketing Corporate Innovation Center Services

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    USG ANNUAL REPORT 2015 / 27 PRESIDENT’S CLUB OPERATIONS The President’s Club represents a milestone in a sales representative’s career. EXCELLENCE This award honors those who have strong success in the promotion and sale The L&W Supply Operations of new products, achieve and exceed their operational targets, grow their Excellence Awards are given to customer relationships and exhibit a commitment to excellence. branch managers who go above and beyond in their commitment Building Systems • Hector Pupo • Mark Lofthus to safety, customer service and • Bryan Asci Coral Springs, FL Burnsville, MN efficiency. The outstanding Orchard Park, NY • Tera Sargant • Tom Martin managers selected for this honor Alpharetta, GA Huntington Beach, CA represent the highest-performing • Garry Burns of our distribution branches in Chapin, SC • Ernesto Villalobos • Michelle Olivero quality and efficiency. • Rich Ferrara Granada Hills, CA Miami, FL New Milford, CT • Jason Stocker • Joel Alberts L&W Supply • Johnny Hayes Irmo, SC St. George, UT • Roger Barton Murphy, TX • Tom Stokley • Lincoln Glasscock Algondones, NM • Tom Jameson Reno, NV Mobile, AL • Chris Bomar Merrick, NY • Tony Welch • Bob LaCorte Louisville, KY • Eddie Lopez Edmond, OK South Hackensack, NJ • Sandy Chavez Chicago, IL • Greg Pielech Vernon Hills, IL Canada, Mexico and • Alex MacDonald Latin America North Haven, CT • Joe Desimone Gulf Shores, AL • Robert Roman East Amherst, NY • Federico Cal • Ron McIntire Montevideo, Uruguay Port St. Lucie, FL • Sean Feasel McKinney, TX • Carl Roy Round Rock, TX • Luis Campa • David Mills Mexico City, DF, Mexico Livonia, MI • David Haun Parker, CO • Norma Serrato Palmetto, FL • John D’Agata • Blake Panno Montréal, QC, Canada Redlands, CA • Jeff Jacobus Altoona, IA • Scott Thomas Bangor, PA • Jon Passerino • Chuck Peo Mississauga, ON, Canada Oklahoma City, OK • Marshall Lee Brea, CA • Cary Weatherly Holladay, UT Norfolk, VA • Jeff Willhite Bend, OR THE HELPING HANDS PROGRAM The Helping Hands program recognizes outstanding employees who are a positive force in the communities we serve by volunteering their time with local organizations. • Chuck Arvia, Senior Manager, IT - • William Krizak, Storeroom • Fred Washington, Manufacturing Chicago Cares Supervisor, Galena Park, TX - Boy Regional Technical Manager – Scouts of America Troop 293 Harvesters Community Food • Kirk Kazienko, Manager, Flooring - Network Bernie’s Kids • Vicki Small, Branch Supervisor, San Jose, CA – Furry Friends Pet • Chris Vana, Business Analyst, IT - • Sylvia Kellogg, Manager, Research Assisted Therapy Lost Boyz - Forest Preserve District of DuPage County • Eric Reitz, Regional Manager, • Ronda Wright, Specialist, Financial Planning and Analysis - Operations Process - Midwest • Sandy Krajecki, Administrative Forest Hill Rec Council Rescue of Illinois Coordinator, Corporate Innovation Center - Save-A-Pet

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    28 \ USG ANNUAL REPORT 2015 DIRECTORS AND EXECUTIVE OFFICERS BOARD OF DIRECTORS Jose Armario (1, 2) Gretchen R. Haggerty (1, 3) Steven F. Leer + (2, 4*) Retired Executive Vice President Retired Executive Vice President and Retired Chairman, Arch Coal, Inc. of Worldwide Supply Chain, Chief Financial Officer, United States Development and Franchising, Steel Corporation James S. Metcalf McDonald’s Corporation Chairman, President and Chief William H. Hernandez (1*, 3) Executive Officer, USG Corporation Thomas A. Burke (1, 4) Retired Senior Vice President, President and Chief Executive Finance and Chief Financial Officer, Committees of the Board of Officer, Modine Manufacturing PPG Industries, Inc. Directors Company Brian A. Kenney (3*, 4) 1. Audit Matthew Carter, Jr. (2, 4) Chairman, President and Chief 2. Compensation and Organization President and Chief Executive Executive Officer, GATX Corporation 3. Finance Officer, Inteliquent, Inc. 4. Governance Richard P. Lavin (2*, 3) *Denotes Chair Former President and Chief +Denotes Lead Director Executive Officer, Commercial Vehicle Group, Inc. CORPORATE OFFICERS James S. Metcalf Chris A. Rosenthal Jeanette A. Press Chairman, President and Chief Senior Vice President, Human Vice President and Controller Executive Officer Resources Srinivas Veeramasuneni Brian J. Cook Gregory D. Salah Vice President, Corporate Innovation Executive Vice President and Chief Senior Vice President and President, Center Administrative Officer North America A special note of thanks to Dominic A. Dannessa Michelle M. Warner Stanley L. Ferguson. We greatly Executive Vice President, Chief Senior Vice President, General appreciate his contributions, Operations and Innovation Officer Counsel and Corporate Secretary dedication and leadership during his tenure with USG. Matthew F. Hilzinger Kenneth R. Banas Executive Vice President and Chief Vice President and Treasurer Financial Officer Mary A. Martin Jennifer F. Scanlon Vice President and Associate Executive Vice President; President, General Counsel International and President, L&W Supply Corporation

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    USG ANNUAL REPORT 2015 / 29 Reconciliation of GAAP and Non-GAAP Information In this annual report, our financial results include the non-GAAP financial measures adjusted net income and free cash flow. These non-GAAP financial measures are included because management believes they help investors’ ability to analyze underlying trends in our business, evaluate our performance relative to other companies in our industry and provide useful information to both management and investors by excluding certain items that may not be indicative of our core operating results. The non-GAAP measures should not be considered a substitute for or superior to GAAP results and may vary from others in the industry. For further information related to the corporation’s use of non-GAAP financial measures, and the reconciliations to the nearest GAAP measures, see the below: Adjusted Net Income For the year ended December 31, (millions) 2015 2014 Net income attributable to USG – GAAP measure $ 991 $ 37 Gain on sale of surplus property, net of tax (7) (12) Gain on sale of equity method investment, net of tax (6) - Long-lived asset impairment charges - 90 Contract termination charge (recovery) loss on receivable (6) 15 Pension settlement charge - 13 GTL – Shipping operations (a) (1) (22) Reduction in valuation allowance for deferred tax assets (731) - Loss from discontinued operations - 1 Litigation settlement charge - 48 USG’s share of UBBP restructuring charges, net of tax - 2 Gain on deconsolidation of subsidiaries and joint venture - (27) Withholding tax on property contributed to UBBP - 1 Loss on extinguishment of debt 19 - Adjusted net income attributable to USG – Non-GAAP measure $ 259 $ 146 (a) Adjusted results for the twelve months ended December 31, 2014 have been adjusted to exclude the results from GTL. Free Cash Flow For the year ended December 31, (millions) 2015 2014 Net cash provided by operating activities - GAAP measure $ 331 $ 173 Less: capital expenditures (94) (132) Free cash flow - Non-GAAP measure $ 237 $ 41 Information Date Unless otherwise noted, the factual statements contained in this report are as of December 31, 2015. Forward-Looking Statements This annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 related to management’s expectations about future conditions, including but not limited to management’s expectations about future projects and initiatives. Actual business, market or other conditions may differ materially from management’s expectations and, accordingly, may affect our sales and profitability or other results. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Actual results may differ materially due to various other factors, including those found in the “Risk Factors” section in our most recent Annual Report on Form 10-K. We assume no obligation to update any forward-looking information contained in this document.

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    IT’S YOUR WORLD. BUILD IT.® ® USG Corporation 550 West Adams Street Chicago, IL 60661-3676 usg.com

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