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					                                                                                            Company Report
                                                                                            September 6, 2013




  USG Corp.                                                                                 Buy
  Assumed Wallboard Price Increases Lead Us to Raise                                        USG
  Estimates and Upgrade USG to Buy                                                          Price: Last $23.93
  Our Call                                                                                  Price Target $32.00
  We are upgrading USG to Buy after increasing our estimates significantly, based
  on higher assumed wallboard pricing. We continue to think the U.S. construction
                                                                                            Construction Materials &
  recovery is in the early innings, and believe that the recent pullback in USG's share
                                                                                            Diversified Industrials
  price offers a compelling entry point.
  RAISING ESTIMATES. Following a day on the road with USG management and                    Todd Vencil, CFA
                                                                                            (804) 282-7385
  various channel checks, we are increasing our assumed wallboard price for USG             tvencil@sterneagee.com
  to include a 10% price increase at the beginning of 2014 and 5% price increases
  in 2015 and 2016. This raises our EBITDA estimates for 2014 from $523MM to                Kevin Bennett, CFA
                                                                                            (804) 282-4506
  $590MM, 2015 from $629MM to $733MM, and 2016 from $726MM to $881MM.
                                                                                            kbennett@sterneagee.com
  Our EPS estimate for 2014 goes from $1.27 to $1.79, our 2015 estimate goes from
  $2.06 to $2.77, and our 2016 estimate goes from $2.72 to $3.78.
                                                                                            Company Data
  CONDITIONS APPEAR RIGHT FOR A 2014 WALLBOARD PRICE                                        Rating                                      Buy
  INCREASE. Management was mum on the level of any proposed price increases                 Price: Last                               $23.93
  for next year, following their usual practice of not commenting on future industry        Price Target                              $32.00
                                                                                            52-Week Range                    $20.41 - $30.97
  pricing trends. However, remember that earlier this year Eagle Materials (EXP             Market Capitalization (M)              $2,598.2
  - $64.34 – Buy) announced a 20% wallboard price increase for the beginning                Shares Outstanding (M)                     108.6
  of 2014, and we believe conditions are right to allow for additional increases            Avg. Daily Vol. (000)                    1,725.3
  in the coming years (though they may be more modest than those achieved in                Dividend                                   $0.00
                                                                                            Dividend Yield                             0.0%
  2012 and 2013). Those conditions include apparent customer acquiescence -- most           Assets (M)                             $3,723.0
  distributors we speak with anticipate price increases next year, even if they haven't     Net Debt/Total Cap                        99.1%
  been informed of specifics by the producers -- and anticipated higher volumes.            Short Interest                            15.6%
                                                                                            Total EV                                   4,116
  HIGHER VOLUMES = HIGHER PRICES? On this last point, USG noted
  that the company's wallboard price has moved in the same direction as housing             EBITDA (M) 2013E 2014E 2015E
                                                                                            FY                 438.2       589.8      733.3
  starts in 40 of the last 41 years. This correlation certainly jibes with the industry's
                                                                                             (Prev)               -        523.3      628.6
  experience of the last couple of years, explaining recent reality better than the         EV/EBITDA           9.4x        7.0x       5.6x
  capacity utilization-based arguments we've previously relied on. It also suggests
  that since we expect housing starts and wallboard volume to rise over the next few        Revenue ($M) 2013E 2014E 2015E
  years, we ought to be looking for higher prices, too.                                     FY                3,522.3      3,850.0    4,277.1
                                                                                             (Prev)              -         3,819.3    4,222.1
  UPGRADING TO BUY, SETTING $32 PRICE TARGET. We are establishing
  a 12-month price target of $32 on USG's shares, representing 6.5x our new FY2016
  EBITDA estimate, giving USG credit for cash flow generated between now and
  the end of 2015, and discounting back. This is the same methodology we had
  previously used to think about implied targets for USG, which would have been
  $27 using our old, lower estimate.

                                                                                            Price Performance
  FYE Dec                      2013E       2014E       2014E       2015E       2015E            32
                                                                                                30
                               (Curr)      (Prev)      (Curr)      (Prev)      (Curr)
                                                                                                28
  EPS ($)
                                                                                                26
  Q1 (Mar)                      0.01A        0.18        0.30                      -            24
  Q2 (Jun)                      0.23A        0.37        0.48                      -            22
  Q3 (Sept)                      0.32        0.44        0.56                      -            20
  Q4 (Dec)                       0.13        0.33        0.45                      -            18
                                                                                                Sep-12  Dec-12    Mar-13     Jun-13    Sep-13
  FY EPS                         0.79        1.27        1.79        2.06        2.77               USG Corp.
  P/E                           30.3x                   13.4x                    8.6x               S&P 500 (SPX)

                                                                                            Source: FactSet

   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
                    800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500
                                   Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
                                                                              September 6, 2013

RISKS. Risks to our investment thesis and price target include economic conditions and the level of
construction activity, especially housing starts which are a significant driver of wallboard demand.
Interest rates, raw material costs, and geopolitical issues are also potential risks.




                                                                                           Page 2
                                                                                                                                                                                                                                                                   September 6, 2013



USG Corp. (USG)                                                                                                                                                                                                              L. Todd Vencil, CFA - (804) 282-7385 - tvencil@sterneagee.com
EARNINGS MODEL                                                                                                                                                                                                           Kevin C. Bennett, CFA - (804) 282-4506 - kbennett@sterneagee.com

                                                                period:   FY2011     1Q2012     2Q2012     3Q2012     4Q2012     FY2012     1Q2013     2Q2013     3Q2013E     4Q2013E     FY2013E     1Q2014E     2Q2014E     3Q2014E     4Q2014E      FY2014E     FY2015E      FY2016E
                                                                ended:    Dec-11     Mar-12     Jun-12     Sep-12     Dec-12     Dec-12     Mar-13     Jun-13      Sep-13      Dec-13      Dec-13      Mar-14      Jun-14      Sep-14      Dec-14       Dec-14      Dec-15       Dec-16
INCOME STATEMENT
Net sales                                                                  $3,024      $812       $825       $828       $815      $3,280       $814       $916       $914        $879       $3,522       $891        $989       $1,004        $967       $3,850       $4,277      $4,733
Cost of products sold                                                      (2,839)     (702)      (716)      (722)      (730)     (2,870)      (690)      (765)      (745)       (727)      (2,927)      (725)       (792)        (795)       (772)      (3,084)      (3,353)     (3,647)
    Gross profit                                                              185       110        109        106         85         410        124        151        168         152          596        166         197          209         195          766          924       1,086
Selling and administrative expenses                                          (307)      (81)       (78)       (74)       (80)       (313)       (73)       (76)       (80)        (85)        (314)       (80)        (84)         (85)        (87)        (337)        (351)       (364)
    Operating profit                                                         (122)       29         31         32          5          97         51         75         88          67          282         86         113          124         108          430          573         721
Interest expense                                                             (211)      (52)       (52)       (50)       (52)       (206)       (50)       (50)       (40)        (50)        (190)       (40)        (40)         (40)        (40)        (160)        (160)       (160)
Interest income                                                                 6         1          1          1          1           4          1          1          1           1            4          1           1            1           1            4            4           4
Other income, net                                                               2        (1)         2          1         (2)          0         (1)         2          0           0            1          0           0            0           0            0            0           0
    Pretax income                                                            (325)      (23)       (18)       (16)       (48)       (105)         1         28         49          18           97         47          74           85          69          274          417         565
Income taxes                                                                   10        (2)         2        (11)        (3)        (14)         0         (2)        (3)         (3)          (8)        (3)         (3)          (3)         (3)         (12)         (12)        (12)
    Net income                                                              ($315)     ($25)      ($16)      ($27)      ($51)      ($119)        $1        $26        $46         $15          $88        $44         $71          $82         $66         $262         $405        $553

EPS                                                                        ($3.03)    ($0.24)    ($0.15)    ($0.25)    ($0.47)    ($1.11)     $0.01      $0.23       $0.32       $0.13       $0.79       $0.30       $0.48       $0.56        $0.45       $1.79        $2.77        $3.78
Average shares out                                                            104        106        106        107        108        107        111        111         146         111         111         146         146         146          146         146          146          146

Margin analysis
Gross margin                                                                 6.1%     13.5%       13.2%      12.8%      10.4%      12.5%      15.2%      16.5%       18.4%       17.3%       16.9%       18.6%       19.9%       20.8%        20.1%       19.9%        21.6%        22.9%
SG&A/sales                                                                  10.2%     10.0%        9.5%       8.9%       9.8%       9.5%       9.0%       8.3%        8.8%        9.7%        8.9%        9.0%        8.5%        8.5%         9.0%        8.7%         8.2%         7.7%
Operating margin                                                            -4.0%      3.6%        3.8%       3.9%       0.6%       3.0%       6.3%       8.2%        9.7%        7.6%        8.0%        9.6%       11.4%       12.3%        11.1%       11.2%        13.4%        15.2%
Net interest expense/sales                                                   6.8%      6.3%        6.2%       5.9%       6.3%       6.2%       6.0%       5.3%        4.3%        5.6%        5.3%        4.4%        3.9%        3.9%         4.0%        4.1%         3.6%         3.3%
Pre-tax margin                                                             -10.7%     -2.8%       -2.2%      -1.9%      -5.9%      -3.2%       0.1%       3.1%        5.4%        2.0%        2.8%        5.3%        7.5%        8.4%         7.1%        7.1%         9.8%        11.9%
Tax rate                                                                     3.1%     -8.7%       11.1%     -68.8%      -6.3%     -13.3%       0.0%       7.1%        6.1%       16.9%        8.2%        6.4%        4.1%        3.5%         4.4%        4.4%         2.9%         2.1%
After-tax margin                                                           -10.4%     -3.1%       -1.9%      -3.3%      -6.3%      -3.6%       0.1%       2.8%        5.1%        1.7%        2.5%        4.9%        7.2%        8.1%         6.8%        6.8%         9.5%        11.7%

YOY change
Net sales                                                                    2.9%      12.6%       8.4%       4.5%       8.7%       8.5%        0.2%      11.0%      10.3%        7.8%        7.4%        9.4%        8.0%        9.8%        10.0%        9.3%        11.1%        10.7%
Gross profit                                                                12.8%     205.6%     105.7%     100.0%      97.7%     121.6%       12.7%      38.5%      58.9%       78.6%       45.4%       33.9%       30.4%       24.1%        28.2%       28.5%        20.6%        17.5%
Selling and administrative expenses                                         -2.2%      -4.7%       8.3%       5.7%       0.0%       2.0%       -9.9%      -2.6%       8.1%        6.3%        0.3%        9.8%       10.6%        6.6%         2.4%        7.2%         4.2%         3.9%
Operating profit                                                           -18.7%    -159.2%    -263.2%    -288.2%    -113.5%    -179.5%       75.9%     141.9%     176.2%     1235.5%      190.9%       68.3%       50.4%       39.9%        61.0%       52.3%        33.4%        25.8%
Interest expense                                                            15.3%       0.0%       0.0%      -7.4%      -1.9%      -2.4%       -3.8%      -3.8%     -20.0%       -3.8%       -7.8%      -20.0%      -20.0%        0.0%       -20.0%      -15.8%         0.0%         0.0%
Pretax income                                                               -1.2%     -76.8%     -73.1%     -77.1%     -46.1%     -67.7%     -104.3%    -255.6%    -408.7%     -137.0%     -192.5%     4582.5%      163.7%       71.3%       285.6%      181.8%        52.4%        35.4%
Net income                                                                   6.8%     -74.0%     -76.5%     -51.8%     -46.3%     -62.2%     -104.0%    -262.5%    -271.8%     -129.0%     -174.1%     4282.5%      172.4%       75.9%       343.6%      197.0%        54.8%        36.5%
EPS                                                                          3.3%     -74.6%     -77.0%     -52.7%     -47.5%     -63.2%     -103.8%    -255.2%    -226.2%     -128.1%     -171.2%     3238.5%      107.0%       75.9%       237.0%      125.8%        54.7%        36.5%

CASH FLOW and EBITDA
Net income                                                                  ($315)     ($25)       ($16)      ($27)      ($51)     ($119)        $1        $26         $46         $15         $88         $44         $71         $82          $66        $262         $405         $553
Plus: DD&A                                                                    166        40          39         37         40        156         38         39          40          40         157          40          40          40           40         160          160          160
Less: capex                                                                   (55)      (14)        (14)       (13)       (29)       (70)       (25)       (21)        (28)        (28)       (101)        (29)        (29)        (29)         (29)       (115)        (120)        (125)
   Free cash flow                                                           ($204)       $1          $9        ($3)      ($40)      ($33)       $14        $44         $59         $27        $144         $55         $82         $93          $77        $307         $445         $588
   /share                                                                  ($1.96)    $0.01       $0.08     ($0.03)    ($0.37)    ($0.31)     $0.13      $0.40       $0.40       $0.25       $1.30       $0.38       $0.56       $0.64        $0.53       $2.10        $3.05        $4.02

EBITDA                                                                        $44       $69         $70        $69        $45      $253         $89       $114        $128        $107        $438        $126        $153        $164         $148        $590         $733         $881
margin                                                                       1.5%      8.5%        8.5%       8.3%       5.5%      7.7%       10.9%      12.4%       14.1%       12.2%       12.4%       14.1%       15.5%       16.3%        15.3%       15.3%        17.1%        18.6%

NOTES
Published: September 6, 2013.
Values in millions except per share data or as otherwise indicated.
Quarters may not add to year due to share count differences.
Source: Company reports and Sterne, Agee & Leach estimates.




                                                                                                                                                                                                                                                                                      Page 3
                                                                                                                                                                                                                                                                      September 6, 2013



USG Corp. (USG)                                                                                                                                                                                                               L. Todd Vencil, CFA - (804) 282-7385 - tvencil@sterneagee.com
SEGMENT MODEL                                                                                                                                                                                                             Kevin C. Bennett, CFA - (804) 282-4506 - kbennett@sterneagee.com

                                                                  period:   FY2011     1Q2012    2Q2012     3Q2012     4Q2012     FY2012     1Q2013     2Q2013     3Q2013E    4Q2013E    FY2013E     1Q2014E    2Q2014E      3Q2014E      4Q2014E      FY2014E      FY2015E     FY2016E
                                                                  ended:    Dec-11     Mar-12     Jun-12    Sep-12     Dec-12     Dec-12     Mar-13      Jun-13     Sep-13     Dec-13     Dec-13      Mar-14     Jun-14       Sep-14       Dec-14       Dec-14       Dec-15      Dec-16
OPERATING DATA
United States Gypsum Co.
USGC average wallboard price / MSF                                          $111.27    $130.43    $132.09   $131.97    $132.26    $131.70    $153.07     $153.77    $153.77    $153.77    $153.62     $169.15    $169.15       $169.15     $169.15      $169.15      $177.60      $186.48
    YOY change                                                                -0.3%      19.5%      18.4%     18.2%      17.5%      18.4%      17.4%       16.4%      16.5%      16.3%      16.6%       10.5%      10.0%         10.0%       10.0%        10.1%         5.0%         5.0%
    Sequential change                                                                    15.8%       1.3%     -0.1%       0.2%                 15.7%        0.5%       0.0%       0.0%                  10.0%       0.0%          0.0%        0.0%

USGC wallboard shipments (MSF)                                                4,114     1,160       1,150     1,200      1,220      4,730      1,110       1,290      1,332      1,354      5,086       1,221      1,419         1,465        1,490        5,595        6,266       7,018
  YOY change                                                                  -1.9%     16.9%       16.6%     14.7%      11.9%      15.0%      -4.3%       12.2%      11.0%      11.0%       7.5%       10.0%      10.0%         10.0%        10.0%        10.0%        12.0%       12.0%
  Sequential change                                                                      6.4%       -0.9%      4.3%       1.7%                 -9.0%       16.2%       3.3%       1.7%                  -9.8%      16.2%          3.3%         1.7%

NET SALES
USGC wallboard sales                                                          $458       $151       $152       $158       $161       $623       $170       $198       $205       $208        $781       $207       $240           $248        $252          $946      $1,113       $1,309
USGC other product sales                                                        839       230        216        224        220        889        232        248        246        237         963        255        272            271         261         1,059       1,186        1,329
    Total USGC                                                                1,297       381        368        382        381      1,512        402        446        451        445       1,744        462        512            518         513         2,006       2,299        2,637
CGC Inc. (gypsum)                                                               307        84         83         81         88        336         78         90         87         92         348         84         97             94         100           376         421          467
USG Mexico, S.A. de C.V.                                                        161        40         40         42         44        166         43         45         45         46         180         46         49             49          50           194         211          228
Other subsidiaries                                                               32         8         11         20         24         63         14         23         20         20          77         15         20             20          20            75          85           95
Eliminations                                                                   (102)      (27)       (29)       (29)       (29)      (114)       (28)       (31)       (33)       (33)       (125)       (33)       (37)           (38)        (38)         (146)       (166)        (189)
    Total North American Gypsum                                               1,695       486        473        496        508      1,963        509        573        570        571       2,223        574        641            644         645         2,504       2,850        3,239

Building Products Distribution - L&W Supply Corp.                             1,060       270        293        300        282      1,145        281        319        327        307       1,234        306        348            356          335        1,345        1,480        1,613

USG Interiors, Inc.                                                            448        119        113        121        102        455        115        120        126        106        467         120        125            131          110          486         510          535
USG International                                                              231         59         60         32         33        184         34         36         35         36        142          38         40             39           40          157         176          195
CGC Inc. (ceilings)                                                             67         18         16         15         15         64         16         16         15         15         63          17         17             16           16           65          69           72
Eliminations                                                                   (49)       (13)       (12)       (13)        (9)       (47)       (12)       (13)       (11)       (10)       (47)        (11)       (12)           (12)         (11)         (46)        (49)         (52)
    Total Worldwide Ceilings                                                   697        183        177        155        141        656        153        159        165        148        624         163        170            174          156          662         705          750

Eliminations                                                                   (428)     (127)      (118)      (123)      (116)      (484)      (129)      (135)      (149)      (147)       (560)      (152)      (169)          (171)       (169)         (662)       (759)        (870)
    Total                                                                    $3,024      $812       $825       $828       $815     $3,280       $814       $916       $914       $879      $3,522       $891       $989         $1,004        $967        $3,850      $4,277       $4,733

YOY Change
USGC wallboard sales                                                          -2.3%     39.7%       38.1%     35.6%      31.5%      36.1%      12.3%       30.6%      29.3%      29.1%      25.4%       21.6%      21.0%         21.0%        21.0%        21.1%        17.6%       17.6%
USGC other product sales                                                       1.5%      9.5%        1.9%      3.9%       8.6%       5.9%       1.0%       14.6%      10.0%       8.0%       8.3%       10.0%      10.0%         10.0%        10.0%        10.0%        12.0%       12.0%
Total USGC                                                                     0.2%     19.8%       14.3%     15.1%      17.2%      16.6%       5.5%       21.2%      18.0%      16.9%      15.4%       14.9%      14.9%         15.0%        15.1%        15.0%        14.6%       14.7%
CGC Inc. (gypsum)                                                              5.9%     10.5%        9.2%      3.8%      14.3%       9.4%      -7.1%        8.4%       8.0%       5.0%       3.5%        8.0%       8.0%          8.0%         8.0%         8.0%        12.0%       11.0%
USG Mexico, S.A. de C.V.                                                       6.6%     -2.4%        0.0%      0.0%      15.8%       3.1%       7.5%       12.5%       8.0%       5.0%       8.2%        8.0%       8.0%          8.0%         8.0%         8.0%         9.0%        8.0%
Other subsidiaries                                                            -3.0%     14.3%       57.1%    100.0%     200.0%      96.9%      75.0%      109.1%       0.0%     -16.7%      22.2%        7.1%     -13.0%          0.0%         0.0%        -2.6%        13.3%       11.8%
Total North American Gypsum                                                    2.2%     16.8%       12.6%     13.5%      20.4%      15.8%       4.7%       21.1%      15.0%      12.4%      13.3%       12.8%      11.9%         13.0%        13.0%        12.6%        13.8%       13.6%

Building Products Distribution - L&W Supply Corp.                             -0.1%     11.1%        8.5%      6.0%       6.8%       8.0%       4.1%        8.9%       9.0%       9.0%       7.8%        9.0%       9.0%          9.0%         9.0%         9.0%        10.0%         9.0%

USG Interiors, Inc.                                                            6.2%       8.2%       0.9%       0.0%      -2.9%       1.6%     -3.4%        6.2%       4.0%       4.0%       2.6%        4.0%       4.0%          4.0%         4.0%         4.0%         5.0%        5.0%
USG International                                                              3.1%      -3.3%       9.1%     -45.8%     -41.1%     -20.3%    -42.4%      -40.0%      10.0%      10.0%     -23.1%       11.0%      11.0%         11.0%        11.0%        11.0%        12.0%       11.0%
CGC Inc. (ceilings)                                                            8.1%      -5.3%     -11.1%       0.0%       0.0%      -4.5%    -11.1%        0.0%       2.0%       3.0%      -2.0%        4.0%       4.0%          4.0%         4.0%         4.0%         5.0%        5.0%
Total Worldwide Ceilings                                                       5.6%       3.4%       2.3%     -15.3%     -14.0%      -5.9%    -16.4%      -10.2%       6.4%       4.7%      -4.8%        6.3%       6.7%          5.4%         5.6%         6.0%         6.6%        6.4%

Total sales                                                                    2.9%     12.6%        8.4%      4.5%       8.7%       8.5%       0.2%       11.0%      10.3%       7.8%       7.4%        9.4%       8.0%          9.8%        10.0%         9.3%        11.1%       10.7%

NOTES
Published: September 6, 2013.
Values in millions except per share data or as otherwise indicated.
Source: Company reports and Sterne, Agee & Leach estimates.




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                                                                                                                                                                                                                                                                                              Page 4
                                                                                                                                                                                                                                                                          September 6, 2013



USG Corp. (USG)                                                                                                                                                                                                                   L. Todd Vencil, CFA - (804) 282-7385 - tvencil@sterneagee.com
SEGMENT MODEL                                                                                                                                                                                                                 Kevin C. Bennett, CFA - (804) 282-4506 - kbennett@sterneagee.com

                                                                  period:   FY2011     1Q2012    2Q2012      3Q2012     4Q2012     FY2012     1Q2013     2Q2013        3Q2013E    4Q2013E     FY2013E    1Q2014E    2Q2014E      3Q2014E      4Q2014E      FY2014E     FY2015E      FY2016E
                                                                  ended:    Dec-11     Mar-12     Jun-12     Sep-12     Dec-12     Dec-12     Mar-13      Jun-13        Sep-13     Dec-13      Dec-13     Mar-14     Jun-14       Sep-14       Dec-14       Dec-14      Dec-15       Dec-16
OPERATING PROFIT
USGC                                                                           ($69)      $31        $27         $23        $23       $104       $45         $55           $66        $64        $230        $75        $88           $100          $99        $361         $450         $554
CGC Inc. (gypsum)                                                                (1)        3          2           3          4         12         1           5             4          5          15          3          6              7            7          23           29           33
USG Mexico, S.A. de C.V.                                                         21         5          4           6          5         20         5           6             5          6          22          6          6              7            6          25           32           34
Other subsidiaries                                                              (20)       (5)        (1)          5         (4)        (5)       (4)          3             5         (4)          0         (4)         3              5           (4)          0            0            0
Eliminations                                                                                                      (1)                                         (1)
    Total North American Gypsum                                                 (69)       34         32          36         28        131        47          68            81         71         267         80        104            118          108          410         511          621

Building Products Distribution - L&W Supply Corp.                               (61)       (6)         (9)        (8)       (10)       (33)        (2)             1         1          (2)        (2)         0          2              2            0            4           44          81

USG Interiors, Inc.                                                             66         23         17          21         10         71        23          22            23         19          87         22         22             24           20           87          92           96
USG International                                                               12          3          2           1          1          7         1           1             1          1           4          2          2              2            2            6           8           10
CGC Inc. (ceilings)                                                             13          3          3           2          3         11         3           3             3          3          12          3          3              3            3           12          13           14
  Total Worldwide Ceilings                                                      91         29         23          24         14         89        27          26            27         23         103         26         27             28           25          106         113          120

Corporate                                                                       (79)      (22)       (17)        (18)       (24)       (81)      (17)        (19)          (20)       (25)        (81)       (20)       (20)           (25)        (25)         (90)         (95)        (100)
Eliminations                                                                     (4)       (6)         2          (2)        (3)        (9)       (4)         (1)            0          0          (5)         0          0              0           0            0            0            0
    Total                                                                     ($122)      $29        $31         $32         $5        $97       $51         $75           $88        $67        $282        $86       $113           $124        $108         $430         $573         $721

Operating margin
USGC                                                                          -5.3%       8.1%       7.3%       6.0%        6.0%      6.9%      11.2%       12.3%         14.6%      14.5%       13.2%      16.2%      17.2%         19.2%        19.2%        18.0%        19.6%       21.0%
CGC Inc. (gypsum)                                                             -0.3%       3.6%       2.4%       3.7%        4.5%      3.6%       1.3%        5.6%          5.0%       5.0%        4.3%       4.0%       6.5%          7.0%         7.0%         6.2%         7.0%        7.0%
USG Mexico, S.A. de C.V.                                                      13.0%      12.5%      10.0%      14.3%       11.4%     12.0%      11.6%       13.3%         12.0%      12.0%       12.2%      12.0%      13.0%         14.5%        13.0%        13.1%        15.0%       15.0%
Other subsidiaries                                                           -62.5%     -62.5%      -9.1%      25.0%      -16.7%     -7.9%     -28.6%       13.0%         25.0%     -20.0%        0.0%     -26.7%      15.0%         25.0%       -20.0%         0.0%         0.0%        0.0%
Total North American Gypsum                                                   -4.1%       7.0%       6.8%       7.3%        5.5%      6.7%       9.2%       11.9%         14.2%      12.4%       12.0%      13.9%      16.2%         18.4%        16.7%        16.4%        17.9%       19.2%

Building Products Distribution - L&W Supply Corp.                             -5.8%      -2.2%      -3.1%       -2.7%      -3.5%      -2.9%     -0.7%        0.3%          0.3%      -0.7%       -0.2%       0.0%       0.6%          0.6%         0.0%         0.3%         3.0%         5.0%

USG Interiors, Inc.                                                           14.7%     19.3%       15.0%      17.4%       9.8%      15.6%      20.0%       18.3%         18.0%      18.0%       18.6%      18.0%      18.0%         18.0%        18.0%        18.0%        18.0%       18.0%
USG International                                                              5.2%      5.1%        3.3%       3.1%       3.0%       3.8%       2.9%        2.8%          3.0%       3.0%        2.9%       4.0%       4.0%          4.0%         4.0%         4.0%         4.5%        5.0%
CGC Inc. (ceilings)                                                           19.4%     16.7%       18.8%      13.3%      20.0%      17.2%      18.8%       18.8%         19.0%      19.0%       18.9%      19.0%      19.0%         19.0%        19.0%        19.0%        19.0%       19.0%
Total Worldwide Ceilings                                                      13.1%     15.8%       13.0%      15.5%       9.9%      13.6%      17.6%       16.4%         16.1%      15.7%       16.5%      16.1%      16.1%         16.2%        15.7%        16.0%        16.0%       16.0%

Corporate/total sales                                                          2.6%      2.7%        2.1%       2.2%       2.9%       2.5%       2.1%        2.1%          2.2%       2.8%        2.3%       2.2%       2.0%          2.5%         2.6%         2.3%         2.2%         2.1%
Eliminations
Total                                                                         -4.0%      3.6%        3.8%       3.9%       0.6%       3.0%       6.3%        8.2%          9.7%       7.6%        8.0%       9.6%      11.4%         12.3%        11.1%        11.2%        13.4%       15.2%

YOY Change
USGC                                                                         -17.9%    -240.9%    -242.1%     -330.0%    -227.8%    -250.7%     45.2%      103.7%        186.8%     180.4%      121.6%      66.0%      60.0%         51.2%        52.8%       56.6%        24.7%        23.0%
CGC Inc. (gypsum)                                                           -105.9%       0.0%       0.0%     -142.9%     300.0%   -1300.0%    -66.7%      150.0%         45.8%      15.5%       25.0%     237.0%      26.4%         51.2%        51.2%       55.3%        26.5%        11.0%
USG Mexico, S.A. de C.V.                                                      23.5%       0.0%     -20.0%        0.0%       0.0%      -4.8%      0.0%       50.0%         -9.3%      10.9%        9.9%      11.5%       5.3%         30.5%        17.0%       15.9%        24.4%         8.0%
Other subsidiaries                                                           -13.0%     -37.5%     -50.0%     -171.4%      33.3%     -75.0%    -20.0%     -400.0%          0.0%       0.0%     -100.0%       0.0%       0.0%          0.0%         0.0%      #DIV/0!      #DIV/0!      #DIV/0!
Total North American Gypsum                                                   -4.2%    -254.5%    -328.6%     -300.0%    -286.7%    -289.9%     38.2%      112.5%        124.4%     152.3%      104.1%      69.4%      52.4%         46.7%        52.9%       53.2%        24.8%        21.4%

Building Products Distribution - L&W Supply Corp.                            -25.6%     -71.4%     -35.7%      -20.0%     -37.5%     -45.9%    -66.7%     -111.1%       -112.5%     -80.0%      -93.9%    -100.0%     100.0%        100.0%      -100.0%      -300.0%     1010.0%        81.7%

USG Interiors, Inc.                                                           15.8%      27.8%      13.3%       16.7%     -33.3%       7.6%      0.0%       29.4%          7.9%      90.9%       22.2%      -6.4%       2.1%          4.0%         4.0%         0.8%         5.0%        5.0%
USG International                                                             71.4%     -25.0%     -33.3%      -75.0%       0.0%     -41.7%    -66.7%      -50.0%          5.6%       8.9%      -40.8%      51.0%      59.8%         48.0%        48.0%        51.6%        26.0%       23.3%
CGC Inc. (ceilings)                                                           30.0%     -25.0%     -25.0%      -33.3%      50.0%     -15.4%      0.0%        0.0%         45.4%      -2.2%        7.7%       5.4%       5.4%          4.0%         4.0%         4.7%         5.0%        5.0%
Total Worldwide Ceilings                                                      21.3%      11.5%       4.5%       -4.0%     -22.2%      -2.2%     -6.9%       13.0%         10.9%      65.1%       15.4%      -3.0%       4.7%          5.7%         6.1%         3.3%         6.2%        6.3%

Corporate                                                                     16.2%     -21.4%      13.3%      12.5%      20.0%       2.5%     -22.7%       11.8%         11.1%       4.2%        0.0%      17.6%       5.3%         25.0%         0.0%        11.1%         5.6%         5.3%
Restructuring
Chapter 11 reorg expenses
Total                                                                        -18.7%    -159.2%    -263.2%     -288.2%    -113.5%    -179.5%     75.9%      141.9%        176.2%    1235.5%      190.9%      68.3%      50.4%         39.9%        61.0%        52.3%        33.4%       25.8%

NOTES
Published: September 6, 2013.
Values in millions except per share data or as otherwise indicated.
Source: Company reports and Sterne, Agee & Leach estimates.




                                                                                                                                                                                                                                                                                            Page 3 of 3


                                                                                                                                                                                                                                                                                                  Page 5
                                                                                                                       September 6, 2013


                                                       APPENDIX SECTION
Company Description:
USG Corp., headquartered in Chicago, IL, is the world's leading producer of gypsum wallboard and joint compound, a global leader in
ceiling suspension systems, and the nation's largest distributor of wallboard and related building materials. USG invented wallboard in
1917 and continues to sell it under its flagship SHEETROCK brand. The company operates in three core businesses: North American
Gypsum, Worldwide Ceilings, and Specialty Distribution.

IMPORTANT DISCLOSURES:
Regulation Analyst Certification:
I, Todd Vencil and Kevin Bennett, hereby certify the views expressed in this research report accurately reflect my personal views about
the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or views expressed by me in this report.

Research Disclosures:
Sterne, Agee & Leach, Inc. makes a market in the following subject companies USG Corp. and Eagle Materials, Inc.
Sterne, Agee & Leach, Inc. provided and received compensation for providing non-investment banking securities related services for
the following subject company within the past 12 months: USG Corp..
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach,
Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company
and/or companies in the next three months.

Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve Sterne,
Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect demand for a
company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or industry; intense
and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability to recruit and retain
competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could affect the market price of
a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities Exchange Commission.
Company Specific Risks:
Risks to our investment thesis and price target include: economic conditions and levels of construction activity, energy costs, raw material
costs, weather/seasonality, and environmental regulations.

Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects
the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.
Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.

Company Specific Valuation:
Our target represents 6.5x our FY2016 EBITDA estimate, giving USG credit for cash flow generated between now and the end of 2015,
and discounting back.

Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.




                                                                                                             Appendix Section, Page I
                                                                                                                    September 6, 2013

Ratings Distribution:
                                                                                                       IB Serv./ Past 12Mos.
Rating Category                       Count                     Percent                  Count                    Percent
Buy                                   221                       47.02%                   30                       13.57%
Neutral                               228                       48.51%                   14                       6.14%
Underperform                          21                        4.47%                    1                        4.76%

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.
Copyright © 2013 Sterne, Agee & Leach, Inc. All Rights Reserved.




To receive price charts or other disclosures on the companies mentioned in this report, please visit our website at https://
sterneagee.bluematrix.com/sellside/Disclosures.action or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or (205)
949-3689.




                                                                                                         Appendix Section, Page II
                       Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the
                       early years, our founders prominently established themselves in the financial securities industry in the southeastern United States. Today, we
                       have expanded to serve all regions of the country. Sterne, Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne
                       Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also
                       includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee
                       Financial Services, Inc.—www.sterneagee.com

                                                              EQUITY CAPITAL MARKETS
                                          Ryan Medo            Managing Dir., Eq. Cap. Mkts.              (205) 949-3623


                         INSTITUTIONAL SALES                                                                  INSTITUTIONAL TRADING
William Jump          Director of Institutional Sales         (404) 814-3960           JT Cacciabaudo        Head of Trading                           (212) 763-8288
Jon Schenk            Assoc. Director of Inst. Sales          (212) 763-8221

                                                                    EQUITY RESEARCH
                                          Robert Hoehn          Director of Research                      (212) 338-4731
CHIEF ECONOMIST                                                                           Property/Casualty Insurance
  Lindsey M. Piegza                    Mng. Dir.              (312) 924-0607              Dan Farrell                          Mng. Dir.               (212) 338-4782
                                                                                          Nitin Chhabra, FCAS                  Analyst                 (212) 338-4779
CONSUMER
 Broadlines / Health & Wellness Retailing                                              HEALTHCARE
  Charles Grom, CFA                    Mng. Dir.              (646) 376-5373             Pharmaceutical Services
  Renato Basanta, CFA                  VP, Analyst            (646) 376-5317              Gregory Bolan                        Mng. Dir.              (615) 760-1469

  Footwear & Apparel                                                                   INDUSTRIALS
  Sam Poser                            Mng. Dir.              (212) 763-8226             Aerospace & Defense
  Ben Shamsian                         Analyst                (212) 338-4721              Peter Arment                         Mng. Dir.               (646) 376-5336
  Leisure & Entertainment                                                                 Josh W. Sullivan                     Sr. Analyst             (646) 376-5337
  David Bain                           Mng. Dir.              (949) 721-6651
                                                                                          Auto, Auto Parts and Auto Retailers
  Media & Entertainment                                                                   Michael P. Ward, CFA                 Mng. Dir.               (646) 376-5375
  Vasily Karasyov                      Mng. Dir.              (646) 376-5362
                                                                                          Coal, Metals & Mining, Engineering & Construction
  Kutgun Maral                         VP, Analyst            (646) 376-5372
                                                                                          Michael S. Dudas, CFA                Mng. Dir.               (646) 376-5329
  Restaurants                                                                             Satyadeep Jain, CFA                  Analyst                 (646) 376-5357
  Lynne Collier                        Mng. Dir.              (214) 702-4045              Patrick Uotila, CPA                  Analyst                 (646) 376-5358

  Specialty Retail                                                                        Construction Materials & Diversified Industrials
  Ike Boruchow, Jr.                    Sr. VP, Sr. Analyst    (212) 338-4756              Todd Vencil, CFA                     Mng. Dir.              (804) 282-7385
  Tom Nikic, CFA                       Analyst                (212) 338-4784              Kevin Bennett, CFA                   VP, Analyst            (804) 282-4506

ENERGY                                                                                    Homebuilding
  Exploration & Production                                                                Jay McCanless                        VP, Sr. Analyst        (615) 760-1475
  Tim Rezvan, CFA                       VP, Sr. Analyst       (212) 338-4736
                                                                                       TECHNOLOGY
  Truman Hobbs                          Analyst               (212) 338-4767
                                                                                         Data Networking and Storage
  Oilfield Services & Equipment                                                           Alex Kurtz                           Mng. Dir                (415) 402-6015
  Stephen D. Gengaro                   Mng. Dir.              (646) 376-5331              Amelia Harris                        Analyst                 (415) 402-6018
                                                                                          Craig Jones                          Analyst                 (415) 402-6024
FINANCIAL SERVICES
  Asset Management                                                                        Financial Technology
  Jason Weyeneth, CFA                  SVP, Sr. Analyst       (212) 763-8293              Greg Smith                           Mng. Dir                (818) 615-2029
                                                                                          Jennifer Dugan                       Analyst                 (415) 402-6051
  Banks & Thrifts
  Matthew Kelley                        Mng. Dir.             (207) 699-5800              Interactive Entertainment / Internet
  Matthew Breese                        VP, Sr. Analyst       (207) 699-5800              Arvind Bhatia, CFA                   Mng. Dir.              (214) 702-4001
  Brett Rabatin, CFA                    Mng. Dir.             (615) 760-1466              Brett Strauser                       VP, Analyst            (214) 702-4009
  Kenneth James                         VP, Sr. Analyst       (615) 760-1474
  Nathan Race                           Analyst               (615) 760-1477              LED Supply Chain
  Peyton Green                          Mng. Dir.             (877) 492-2663              Andrew Huang                         Mng. Dir.               (415) 362-6143
  Todd L. Hagerman                      Mng. Dir.             (212) 338-4744              John Shen                            Analyst                 (415) 402-6052
  Robert Greene                         VP, Analyst           (212) 763-8296
                                                                                          Semiconductors
  Life Insurance                                                                          Vijay Rakesh                         Mng. Dir.               (312) 525-8431
  John M. Nadel                         Mng. Dir.             (212) 338-4717
  Alex Levine                           Analyst               (212) 338-4748           TRANSPORTATION, SERVICES & EQUIPMENT
                                                                                          Sal Vitale                           VP, Sr. Analyst         (212) 338-4766
  Mortgage Finance & Specialty Finance
  Henry J. Coffey, Jr., CFA             Mng. Dir.             (615) 760-1472
  Calvin Hotrum                         Analyst               (615) 760-1476


Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

				
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