Net sales and net earnings for all of 2002 were $3,468 million and $43 million, respectively. Diluted earnings per share for the year were $1.00.

Net earnings in 2002 included a non-cash, non-taxable goodwill impairment charge of $96 million, or $2.22 per share. Net sales and net earnings were $3,296 million and $16 million, respectively, in 2001. Diluted earnings per share totaled $0.36. Net earnings in 2001 included after-tax impairment charges of $25 million, or $0.56 per share.

While USG remained focused on its businesses and customers, it was also working to resolve its Chapter 11 restructuring, which was caused by asbestos litigation. The central issue in the restructuring is the amount of U.S. Gypsum's asbestos liability, and USG has asked the court to adopt procedures for quantifying that liability. The company would then be able to determine its ability to satisfy both asbestos and non-asbestos claims and whether any value would remain for current shareholders.

The outlook for the corporation's markets in 2003 is mixed. Demand for gypsum board is expected to remain strong, primarily due to continued high demand for new homes. Despite the strong demand, the wallboard industry is expected to continue to have a large amount of excess capacity, USG says. Non-residential construction, the principal market for the corporation's ceiling products and a major market for its distribution business, is likely to remain weak.

USG's North American Gypsum business recorded net sales of $523 million and operating profit of $59 million in the fourth quarter. Net sales increased by 4 percent compared to the fourth quarter of 2001, while operating profit increased by $1 million. Most of the increase in sales came from higher prices for USG's Sheetrock Brand gypsum wallboard, and record fourth quarter shipments of Sheetrock Brand joint compounds and Durock Brand cement board products.

United States Gypsum Co. had net sales of $474 million and operating profit of $47 million in the fourth quarter. Compared to the fourth quarter of 2001, net sales increased by 3 percent and operating profit rose $1 million. The sales increase was primarily due to higher realized selling prices for gypsum wallboard and record sales of joint compounds and cement board products.

The company's operating profit margin in the quarter was similar to the level in last year's fourth quarter. U.S. Gypsum's shipments of gypsum wallboard for the quarter totaled 2.4 billion square feet. Shipments were 6 percent lower than shipments in the fourth quarter of 2001, when the company achieved the largest volume of fourth quarter shipments in its history. U.S. Gypsum's wallboard plants operated at 89 percent of capacity in the fourth quarter compared to 92 percent of capacity in the fourth quarter of 2001.

U.S. Gypsum's nationwide average realized price of wallboard was $102.98 per thousand square feet during the fourth quarter. This is 7 percent higher than the same period a year ago. Prices are currently averaging about $100 per thousand square feet.

Manufacturing costs for wallboard in the fourth quarter increased versus the fourth quarter in 2001, primarily due to higher waste paper costs and the unfavorable impact of lower production volumes. Prices for waste paper, an important raw material in wallboard, were 15 percent higher in the fourth quarter compared to the same period a year earlier. Prices declined during the quarter, but at the start of 2003, were still above levels experienced in the first quarter of 2002.

L&W Supply, USG's building products distribution subsidiary, reported fourth quarter 2002 net sales of $302 million, compared to $285 million in the same period a year ago. The 6 percent increase in revenues was primarily due to increased wallboard shipments and complementary product sales in the quarter, as well as increased wallboard selling prices.

Operating profit for L&W Supply was $13 million in the quarter versus $11 million in the fourth quarter of 2001. Profitability increased largely due to increased sales of complementary building products and reduced operating expenses. As of December 31, 2002, L&W operated 181 locations in the U.S., distributing gypsum wallboard, metal studs, ceiling tile and grid, and other related building materials.