UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File Number 1-7518
December 31, 1993
DOW CORNING CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-0495575
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 West Salzburg Road, Midland, Michigan 48686-0994
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 517-496-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------------------ -----------------------
9.625% Sinking Fund Debentures New York Stock Exchange
Due April 1, 2005
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days. Yes X . No .
State the aggregate market value of the voting stock held by
non-affiliates of the registrant: The registrant has only one
class of shares outstanding. The voting common shares are held
in equal portions by Corning Incorporated and Dow Holdings Inc.,
a wholly-owned subsidiary of The Dow Chemical Company. None of
the registrant's common stock has been sold or traded since the
registrant's incorporation.
Number of shares outstanding of common stock: 2,500,000
Documents incorporated by reference:
None.
The registrant qualifies under General Instruction J(1)(a) and
(b) of Form 10-K and is filing this Form using the reduced
disclosure format described in General Instruction J(2).
<PAGE>2
PART I
ITEM 1. BUSINESS
- -----------------
Dow Corning Corporation (Dow Corning or the Company) was
incorporated in 1943 by Corning Glass Works (now Corning
Incorporated) and The Dow Chemical Company (Dow Chemical) to
develop, produce and market silicones. Corning Incorporated
provided the basic silicone technology and Dow Chemical supplied
the chemical processing and manufacturing know-how. Both
companies provided initial key employees.
Dow Corning built a new business based on silicone
chemistry. The starting point is quartz rock, a form of silica.
The silicon-oxygen-silicon polymer chain, the backbone of all
silicones, is derived from a series of chemical processes.
Various organic groups attached to this polymer chain can modify
properties and alter physical form.
Regardless of form, most silicones share a combination of
properties, including electrical resistance, ability to maintain
performance across a broad range of temperatures, resistance to
aging, water repellency, lubricating characteristics and relative
chemical and physiological inertness. The versatility of
silicones has led to a wide variety of applications across a
broad spectrum of industries in all major countries.
Dow Corning has supplemented its product line with selected
silicone modified organic and non-silicone products, including
reactive chemicals based upon silicon. In addition to silicone
lubricants, Dow Corning makes and sells specialty lubricants
based on molybdenum disulfide, principally under the trademark
MOLYKOTE(R). Hemlock Semiconductor Corporation, a subsidiary in
which Dow Corning has a 63.25% interest, produces polycrystalline
silicon which is the basic material for most semiconductor
devices. Polycrystalline silicon is also used to manufacture
solar cells.
Today, Dow Corning manufactures and sells more than 4,500
products to over 45,000 customers throughout the world. No one
customer accounts for more than 3% of net sales.
Raw Materials
- -------------
The principal raw material used in the production of Dow
Corning products is elemental silicon, which is produced and sold
by a number of U.S. and non-U.S. firms. Dow Corning currently
purchases silicon from various domestic and foreign producers.
Dow Corning is a party to a number of silicon supply contracts
which cover the majority of anticipated annual requirements.
Worldwide production capacity is judged to be adequate to meet
expected demand and shortages appear unlikely. Therefore, Dow
Corning believes that it has adequate sources of supply of
silicon.
Dow Corning also purchases substantial quantities, and
believes it has adequate sources of supply, of methyl alcohol,
methyl chloride, and other raw materials required for its
manufacturing operations. Although from time to time temporary
shortages of particular raw materials may exist, Dow Corning
believes that it has adequate sources of raw materials required
to maintain its operations.
<PAGE>3
Foreign Operations
- ------------------
The foreign operations of Dow Corning, principally in Europe
and Asia, are conducted primarily through wholly-owned
subsidiaries and involve sales of substantially all Dow Corning
products. These products are manufactured either domestically or
by one of the Company's foreign subsidiaries. See Note 16 of
Notes to Consolidated Financial Statements included in this
report for financial information relating to foreign operations.
Foreign business is subject to special considerations,
including exchange controls, fluctuations in currency values,
dividend and payment restrictions, political instability and
international credit or financial problems. While these
conditions associated with foreign business involve risks
different from those associated with domestic business
activities, Dow Corning does not regard the overall risks of its
foreign operations, on the whole, to be materially greater than
those of its operations in the United States.
Competition
- -----------
Dow Corning is a leader among the various companies which
produce silicone products throughout the world. Substantial
competition for Dow Corning products both in the United States
and abroad comes from other manufacturers of silicone products.
In addition, virtually all silicone products compete with non-
silicone products in specific applications. The risk of product
substitution is common to all Dow Corning products. The
principal competitive elements in the sale of Dow Corning
products are: product quality and performance, responsive
customer service, new product development, cost effectiveness,
and application expertise.
Research and Development
- ------------------------
Since its inception, Dow Corning has been engaged in a
continuous program of basic and applied research on silicon-based
materials to develop new products and processes, to improve and
refine existing products and processes, and to develop new
applications for existing products. The Company also provides a
wide variety of technical services to its customers. Research
and development expenditures totalled (in millions of dollars)
$163.9 in 1993, $161.2 in 1992, and $148.7 in 1991.
Patents and Licenses
- --------------------
Dow Corning consistently applies for United States and
foreign patents and owns, directly or indirectly, a substantial
number of such patents. The Company is a licensor under a number
of patent licenses and technology agreements. While Dow Corning
considers its patents and licenses a valuable asset, it does not
regard its business as being materially dependent on any single
patent or license or any group of related patents or licenses.
<PAGE>4
Protection of the Environment
- -----------------------------
Dow Corning has set a goal to reduce within the United
States its toxic releases by 80% in 1995 compared to 1987. This
goal is consistent with voluntary commitments made by the Company
under two programs with the U.S. Environmental Protection Agency
- - the 33/50 Voluntary Reduction Program under which the Company
has committed to reductions of all of its toxic chemical
releases, and the Clean Air Act Early Reduction Credit Program
under which the Company has committed to major reductions in
methyl chloride releases at its largest U.S. manufacturing
facilities. As a member of the Chemical Manufacturers
Association, the Company is also committed to and is implementing
the codes of management practices specified in Responsible
Care(R).
Dow Corning expends funds consistent with its commitments to
limit the discharge of materials into the environment. It is
expected that Dow Corning's pollution control related
expenditures will be partially offset through the recovery of raw
materials in the pollution control process. These expenditures
should not materially affect Dow Corning's earnings or
competitive position.
The Company records a charge to earnings for environmental
matters when it is probable that a liability has been incurred
and the Company's costs can be reasonably estimated. For
information concerning environmental liabilities, see Note 2 of
Notes to Consolidated Financial Statements.
Employees
- ---------
Dow Corning's average employment for 1993 was 8,600 persons.
Average employment for 1992, determined on a comparable basis,
was 9,000 persons.
ITEM 2. PROPERTIES
- -------------------
Dow Corning owns or leases extensive property for use in its
business and believes that its properties are in good operating
condition and are generally suited for the purposes for which
they are presently being used.
Principal United States production plants are located in
Kentucky, Michigan and North Carolina. Principal foreign
manufacturing plants are located in Australia, Belgium, Germany,
Japan, South Korea and the United Kingdom. Dow Corning owns
substantially all of its manufacturing facilities. Approximately
62% of Dow Corning's aggregate investment in plant and equipment
is represented by its United States facilities.
Dow Corning owns its executive and corporate offices, which
are located near Midland, Michigan, and certain foreign offices.
The Company also owns research and development facilities in the
United States, Europe and Asia. Domestic and foreign sales
offices are primarily in leased facilities. Dow Corning leases
most of its computers and communications equipment. For
information concerning lease commitments, see Note 15 of Notes to
Consolidated Financial Statements.
<PAGE>5
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
ENVIRONMENTAL MATTERS
The Company has agreed to participate in the Toxic
Substances Control Act (TSCA) Section 8(e) compliance audit
program. The Company expects to pay a civil penalty which will
exceed $100,000. While the exact amount of the civil penalty is
not yet known, the United States Environmental Protection Agency
(EPA) has put a limit of $1 million on any civil penalty to be
paid.
On September 26, 1991, the EPA filed an administrative
complaint against the Company under TSCA alleging that, from 1988
to 1990, the Company had imported a chemical substance that did
not appear on the TSCA Inventory of Existing Chemical Substances.
EPA proposed a civil penalty of $230,000 for the violations
alleged in the complaint, but reduced the amount to $172,500
because the Company had voluntarily disclosed the situation to
the EPA immediately upon discovering it. On July 13, 1993, the
Company finalized a consent agreement with the EPA. Under this
agreement, the Company agreed to pay a civil penalty of $46,000
and complete a supplemental enforcement project at its
Carrollton, Kentucky Facility.
BREAST IMPLANT LITIGATION
Breast Implant Products Liability Purported Class Action Lawsuits
- -----------------------------------------------------------------
As of January 20, 1994, the Company had been named,
generally as one of several defendants, in 41 purported breast
implant products liability class action lawsuits filed on behalf
of individuals who claim to have or have had silicone gel breast
implants. Of these lawsuits, 30 have been brought in various
Federal District Courts, 9 have been brought in various state
courts, and 2 have been brought in courts in Canada.
Among the Federal District Court class action lawsuits, 20
were filed in the first quarter of 1992, 4 were filed in the
second quarter of 1992, 1 was filed in the third quarter of 1992,
2 were filed in the fourth quarter of 1992, 1 was filed in the
first quarter of 1993, 1 was filed in the second quarter of 1993,
and 1 was filed in the third quarter of 1993. These cases have
been filed in the Federal District Courts for the District of
Arizona, the Northern District of California (3 cases), the
Central District of California, the Southern District of
California, the District of Hawaii, the Northern District of
Illinois, the Eastern District of Kentucky, the Northern District
of Louisiana, the Eastern District of Michigan, the District of
Minnesota (2 cases), the Eastern District of New York (2 cases),
the Northern District of Ohio (3 cases), the Southern District of
Ohio (7 cases), the Eastern District of Pennsylvania, the Western
District of Pennsylvania (2 cases), the District of Utah and the
Eastern District of Virginia. In the purported class action case
filed in the Federal District Court for the Eastern District of
Virginia, all proceedings have been stayed and class
certification has been denied. All of these federal purported
breast implant products liability class action lawsuits have been
transferred to the Federal District Court for the Northern
District of Alabama for discovery purposes (see "Consolidation of
Breast Implant Products Liability Lawsuits" below).
In one of the federal class actions filed in the Southern
District of Ohio (later transferred to the Northern District of
Alabama), a class action was conditionally certified on behalf of
all breast implant recipients in the United States (and their
spouses). The Federal District Court in Alabama has announced
that this certification order will be reconsidered and could be
confirmed, modified, or vacated. In the class action
<PAGE>6
filed in the District of Utah, a class certification motion has
been denied. In the class action filed in the Eastern District
of Michigan, the Court was asked to certify a class action on
behalf of breast implant recipients residing outside the United
States; this motion was denied, but class certification may be
sought again in the future.
Among the 9 purported class action lawsuits brought in
various state courts, 6 were filed in the first quarter of 1992,
1 was filed in the second quarter of 1992, 1 was filed in the
third quarter of 1992, and 1 was filed in the fourth quarter of
1992. These cases have been filed in the following state courts:
The Dade County, Florida Eleventh Judicial Circuit Court; the
District Court for the Third Judicial District of Utah; the
Philadelphia County, Pennsylvania Court of Common Pleas; the
Dauphin County, Pennsylvania Court of Common Pleas; the Cook
County, Illinois Circuit Court (2 cases); the Marion County,
Indiana Superior Court; the Civil District Court for the Parish
of Orleans, Louisiana; and the District Court for Douglas County,
Nebraska. In 5 of these cases (the 2 cases in the Cook County,
Illinois Circuit Court, the case in the District Court for the
Third Judicial District of Utah, the case in the Philadelphia
County, Pennsylvania Court of Common Pleas and the case in the
Dauphin County, Pennsylvania Court of Common Pleas), either the
purported class action claims have been dismissed or class
certification has been denied. The case filed in Douglas County,
Nebraska was removed from state to federal court and was then
transferred to the Federal District Court for the Northern
District of Alabama; the purported class action claims in this
case have been withdrawn. In the case filed in the Civil
District Court for the Parish of Orleans, Louisiana, the Court
certified a class of women with silicone breast implants who
either reside in or received their implants in the State of
Louisiana; this order certifying a class action has been upheld
on appeal. Three of these state purported class action cases
remain active.
A purported class action was filed in Ontario, Canada,
during the first quarter of 1993 against Dow Corning Canada,
Inc., a wholly-owned subsidiary of the Company. The Judge has
entered an order certifying a class of breast implant recipients
in the Province of Ontario, Canada; the Ontario Court of Appeals
has declined to hear an appeal from this class certification
order. In the third quarter of 1993, a petition was filed in
Montreal, Canada, seeking authorization to institute a class
action on behalf of a purported class of breast implant
recipients in the Province of Quebec, Canada, against Dow Corning
Corporation and Dow Corning Canada, Inc. The court has not yet
decided whether to authorize such a class action.
The typical alleged factual bases for these lawsuits include
allegations that the plaintiffs' breast implants caused specified
ailments, including, among other things, autoimmune disease,
scleroderma, systemic disorders, joint swelling and chronic
fatigue. The Company is sometimes named as the manufacturer of
silicone gel breast implants, and other times the Company is
named as the supplier of silicone materials to other breast
implant manufacturers.
Plaintiffs in these cases typically seek relief in the form
of monetary damages, often in unspecified amounts, and have also
asked for certain types of equitable relief such as requiring the
Company to fund the removal of the breast implants of the class
members, to fund medical research into any ailments caused by
silicone gel breast implants and to fund periodic medical
checkups for the class members. The purported federal class
action in the Federal District Court for the Eastern District of
Pennsylvania claims monetary damages of more than $75,000 for
each plaintiff. One of the purported federal class actions in
the Federal District Court for the Southern District of Ohio
claims monetary damages of more than $50,000 for each plaintiff.
One of the purported federal class actions in the Federal
District Court for the District of Minnesota claims an
unspecified amount of monetary damages, but claims less than
$50,000 for each
<PAGE>7
plaintiff on fraud claims. The purported federal class action in
the Federal District Court for the Southern District of
California claims more than $50,000 for each plaintiff. One of
the purported federal class actions in the Federal District Court
for the Western District of Pennsylvania claims damages of
$50,000 compensatory and $50,000 punitive damages for each
plaintiff. Each other purported federal class action specifies
monetary damages in an unspecified amount except that they claim
the minimal jurisdictional amount. The purported state class
action in the Dade County, Florida Eleventh Judicial Circuit
Court claims $500,000,000 in punitive damages and unspecified
compensatory damages for the class. Each other purported state
class action specifies monetary damages in an unspecified amount
except that they claim the minimal jurisdictional amounts. The
purported class action in Ontario, Canada, claims $80,000 in
monetary damages for each named plaintiff and unspecified
monetary damages for other members of the purported class.
Monetary damages claimed in these cases in the aggregate may
be substantial; however, the Company does not consider the
monetary damages claimed to be a realistic measure of the
Company's ultimate resolution costs.
Individual Breast Implant Products Liability Lawsuits
- -----------------------------------------------------
As of January 20, 1994, the Company has been named, often
along with other defendants, in approximately 11,800 individual
breast implant products liability lawsuits filed in federal
courts and state courts in many different jurisdictions; many
of these cases involve multiple plaintiffs. The typical alleged
factual bases for these lawsuits include allegations that the
plaintiffs' breast implants caused specified ailments, including,
among others, autoimmune disease, scleroderma, systemic
disorders, joint swelling and chronic fatigue. The Company is
sometimes named as the manufacturer of silicone gel breast
implants, and other times the Company is named as the supplier of
silicone raw materials to other breast implant manufacturers.
Plaintiffs in these cases typically seek relief in the form
of monetary damages, often in unspecified amounts. In those
individual breast implant cases where management is aware that
monetary damages are specified, the amount of monetary damages
alleged ranges from approximately $100,000 to approximately
$140,000,000. Also, many of these cases only specify as monetary
damages an amount in excess of the jurisdictional minimum for the
courts in which such cases are filed. Monetary damages claimed
in these cases in the aggregate may be substantial; however, the
Company does not consider the monetary damages claimed to be a
realistic measure of the Company's ultimate resolution costs.
Consolidation of Breast Implant Products Liability Lawsuits
- -----------------------------------------------------------
Many of these breast implant products liability cases have
been or are in the process of being consolidated for purposes of
case management in federal and state courts. As previously
reported, on June 25, 1992, the Judicial Panel on Multidistrict
Litigation in "In Re Silicone Gel Breast Implants Products
Liability Litigation" consolidated all federal breast implant
cases for discovery purposes in the Federal District Court for
the Northern District of Alabama under the multidistrict
litigation rules "in order to avoid duplication of discovery,
prevent inconsistent pretrial rulings, and preserve the resources
of the parties, their counsel and the judiciary." Substantially
all federal breast implant cases have been consolidated or are in
the process of transfer, or are likely to be transferred, to the
Federal District Court for the Northern
<PAGE>8
District of Alabama. A substantial number of breast implant
cases originally filed in state courts have been removed to
federal court and either have been or are likely to be similarly
transferred and consolidated. The Company anticipates that any
federal breast implant products liability cases filed after
June 25, 1992, as well as some state breast implant cases removed
to federal courts, will be transferred to the Federal District
Court for the Northern District of Alabama for discovery purposes
under the multidistrict litigation rules. In addition, the
consolidation of many state breast implant products liability
cases has proceeded in many jurisdictions where a substantial
number of state breast implant lawsuits have been filed; however,
this consolidation of state cases has not occurred in all
jurisdictions. As of December 31, 1993, substantially more than
half of all breast implant cases were consolidated for pretrial
purposes at the federal and state levels. The Company views
these case consolidation measures as positive steps toward the
management of these various lawsuits and anticipates that current
and future breast implant lawsuit consolidations will result in a
reduction of litigation defense costs per case. For more
information on these matters, see Note 2 of Notes to Consolidated
Financial Statements.
Settlement Proposed to Resolve Breast Implant Claims
- ----------------------------------------------------
On September 9, 1993, the Company announced that
representatives of plaintiffs and defendants involved with
silicone breast implant litigation have developed a "Statement of
Principles for Global Resolution of Breast Implant Claims" (the
"Statement of Principles"). The Statement of Principles
summarizes a proposed claims based structured resolution of
claims arising out of breast implants which have been or could be
asserted against various implant manufacturers, suppliers,
physicians and hospitals (the "Proposed Settlement").
Under the Proposed Settlement, if implemented, industry
participants (the "Funding Participants") would contribute up to
$4.75 billion over a period of thirty years to establish several
special purpose funds. The Proposed Settlement would define the
circumstances under which payments from the funds would be made.
The Proposed Settlement includes provisions for (a) class
membership and the ability of plaintiffs to opt out of the class,
(b) the establishment of defined funds for medical
diagnostic/evaluation procedures, explantation, ruptures,
compensation for specific diseases and administration, (c)
payment terms and timing and (d) claims administration. The
Proposed Settlement defines periods during which breast implant
plaintiffs may elect not to settle their claims by way of the
Proposed Settlement and continue their individual breast implant
litigation against manufacturers and other defendants (the "Opt
Out Plaintiffs"). In certain circumstances, if any defendant who
is a Funding Participant considers the number of Opt Out
Plaintiffs maintaining lawsuits against such defendant to be
excessive, such defendant may decide to exercise the option to
withdraw from participation in the Proposed Settlement. For more
information on these matters, see Note 2 of Notes to Consolidated
Financial Statements.
SECURITIES LAWS AND SHAREHOLDER DERIVATIVE LAWSUITS
Securities Laws Purported Class Action Lawsuits
- -----------------------------------------------
As of January 20, 1994, the Company and certain of its
directors and officers were named, as defendants with others, in
two purported securities laws class action lawsuits filed by
purchasers of stock of Corning Incorporated (Corning) and The Dow
Chemical Company (Dow Chemical). These cases were originally
filed as several separate cases in the Federal District Court for
the Southern District of New York
<PAGE>9
in the first quarter of 1992; these cases were consolidated in
the second quarter of 1992 so that there is one case involving
claims on behalf of purchasers of stock of Corning and one case
involving claims on behalf of purchasers of stock of Dow
Chemical. The plaintiffs in these cases allege, among other
things, misrepresentations and omissions of material facts and
breach of duty with respect to purchasers of stock of Corning and
Dow Chemical relative to the breast implant issue. The relief
sought in these cases is monetary damages in unspecified amounts.
Motions to dismiss both cases have been filed by all defendants.
Shareholder Derivative Lawsuits
- -------------------------------
As of January 20, 1994, the Company and/or certain of its
directors and officers were named in three shareholder derivative
lawsuits filed by shareholders of Corning and Dow Chemical. The
plaintiffs in these cases allege various breaches of fiduciary
duties claimed to be owed by the defendants relative to the
breast implant issue. The relief sought by the shareholders
filing these suits on behalf of Dow Chemical and Corning is
monetary damages in unspecified amounts. Motions to dismiss
these cases have been filed by all defendants.
GRAND JURY INVESTIGATION
On February 8, 1993, the Company received two federal grand
jury subpoenas initiated by the Assistant U.S. Attorney in
Baltimore, Maryland, seeking documents and information related to
silicone breast implants. The Company has provided information
in response to the subpoenas and continues to cooperate with the
Assistant U.S. Attorney's requests.
LAWSUIT AGAINST INSURANCE CARRIERS
On June 30, 1993, the Company filed a complaint, which was
subsequently amended, in the Superior Court of California against
99 insurance companies which issued occurrence based products
liability insurance policies to the Company from 1962 through
1985 ("Insurers"). The complaint also names as defendants three
state insurance guaranty funds. This action (the "California
Action") resulted from an inability of some of the Insurers to
reach an agreement with the Company on a formula for the
allocation among the Insurers of payments of defense and
indemnity expenses submitted by the Company related to breast
implant products liability lawsuits and claims ("Insurance
Allocation Agreement"). The California Action was filed to seek,
among other things, a judicial enforcement of the obligations of
the Insurers under the relevant insurance policies.
On September 10, 1993, several of the Company's insurers
filed a complaint against the Company and other insurers for
declaratory relief in Wayne County Michigan Circuit Court (the
"Michigan Action"). This complaint named additional insurers,
particularly the insurers that provided coverage on a claims-made
basis subsequent to 1985, and raised issues similar to those
described above for determination by the courts.
<PAGE>10
On September 13, 1993, plaintiff insurers in the Michigan
Action brought a motion in the California Action for the
California Action to be stayed or dismissed in favor of the
Michigan Action on the grounds of inconvenient forum. On
October 1, 1993, the California Court dismissed the California
Action on the grounds of inconvenient forum. In light of this
ruling, the Company has elected to litigate the coverage issues
on breast implant product liability lawsuits and claims in the
Michigan Action.
Notwithstanding this litigation, the Company is continuing
its negotiations with the Insurers to obtain an Insurance
Allocation Agreement as described above.
SECURITIES AND EXCHANGE COMMISSION INFORMAL INVESTIGATION
The Company received a request, dated July 9, 1993, from the
Boston Regional Office of the Securities and Exchange Commission
for certain documents and information related to silicone breast
implants. The request states that an informal investigation of
the Company and its equity owners is being conducted by the
Boston Regional Office. On July 30, 1993, the Company responded
to this request enclosing the documents and information requested
along with related information. The Company will continue to
cooperate with the Boston Regional Office.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Item omitted in accordance with provisions of General
Instruction J of Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
- ---------------------------------------------------------
The Company's common stock is owned in equal portions by
Corning Incorporated and Dow Holdings Inc., a wholly-owned
subsidiary of The Dow Chemical Company. None of the Company's
common stock has been sold or traded since the Company's
inception in 1943.
The Company did not pay dividends in 1993. In the first
quarter of 1992, the Company paid a dividend of $8.20 per common
share. The Company paid a dividend of $6.00 per common share in
each of the remaining quarters of 1992.
Under the provisions of the Revolving Credit Agreement
(which is described in Note 8 of Notes to Consolidated Financial
Statements) the Company is subject to certain restrictions as to
the payment of dividends. The amount of the restriction is based
on a formula which considers, among other things, the income
before income taxes for the most recent fiscal year. Based on
the computation completed for the year ended December 31, 1993,
the Company is restricted from issuing dividends in 1994.
<PAGE>11
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
<TABLE>
<CAPTION>
Year ended
December 31,
-----------------------------------------
- -------------------------
1993 1992 1991
1990 1989
---- ---- ----
---- ----
(in millions of dollars, except
per share amounts)
<S> <C> <C> <C>
<C> <C>
Operating Results:
Net sales $2,043.7 $1,955.7 $1,845.4
$1,718.3 $1,574.5
Net income (loss) (287.0)<F1> (72.0)<F3>
152.9<F4> 171.1 162.8
Net income (loss) per
common share<F5> (114.80) (28.80) 61.16
68.44 65.12
Financial Statistics:
Total assets $3,262.3<F1> $2,190.7 $2,119.9
$1,922.4 $1,678.1
Long-term debt 314.7 298.0 286.8
267.7 274.3
Cash dividends per
common share<F5> - 26.20 31.00
28.60 26.80
Working capital 298.6 258.8 361.1
319.1 330.6
Current assets to
current liabilities 1.4 to 1 1.5 to 1 1.8 to 1
1.8 to 1 2.2 to 1
Long-term debt as a
percentage of stock-
holders' equity 49% 32% 26%
27% 31%
Net income (loss) as a
percentage of average
stockholder's equity (36%) (7%) 15%
18% 20%
Ratio of earnings to
fixed charges <F2> 1.9 5.2
6.3 8.0
<FN>
<F1> The net loss in 1993 includes a pretax charge related to
breast implants of $640.0 ($415.0 net of income tax benefit).
The increase in total assets in 1993 is primarily attributable to
the recognition of an implant insurance receivable of $600.0 and
a deferred tax asset of $225.0 associated with this charge. See
Note 2 of Notes to Consolidated Financial Statements for a
discussion of this matter.
<F2> Earnings are inadequate to cover fixed charges. The amount
of the coverage deficiency for the year ended December 31, 1993
was $424.7.
<F3> Includes pretax charges related to breast implants and
special items of $109.0 ($71.9 net of income tax benefit); see
Notes 2 and 3 of Notes to Consolidated Financial Statements for a
discussion of these matters. Also in 1992, the Company adopted
Statements of Financial Accounting Standards No. 106 and 109,
which changed its methods of accounting for postretirement
benefits other than pensions and deferred income taxes. The
cumulative effect of these changes as of January 1, 1992 reduced
net income by $100.4 in 1992. The effect of adopting these new
rules also reduced pretax earnings by $17.4 ($11.5 net of income
tax benefit) in 1992 by increasing the recorded costs of retiree
health care and life insurance benefits.
<F4> Includes pretax charges related to breast implants and
special items of $54.0 ($35.6 net of income tax benefit); see
Notes 2 and 3 of Notes to Consolidated Financial Statements for a
discussion of these matters. Also in 1991, the Company changed
its method of applying fixed costs to inventory. The cumulative
effect of the change increased net income by $16.3 in 1991.
Except for the cumulative effect, the change did not have a
material effect on operating results for the periods presented.
<F5> Per share information is based upon 2,500,000 shares
outstanding for all periods presented.
The Selected Financial Data should be read in conjunction
with the consolidated financial statements and accompanying
notes.
</TABLE>
<PAGE>12
ITEM 7. MANAGEMENT'S NARRATIVE ANALYSIS
- ----------------------------------------
(all amounts in millions of dollars)
Results of Operations
- ---------------------
1993 Compared to 1992
---------------------
1993 net sales increased $88.0 or 4.5% over levels reported
for 1992. The increase for 1993 was principally attributable to
higher sales volumes, particularly in Asia, offset slightly by
lower selling prices, and unfavorable currency effects in Europe.
Manufacturing cost of sales, as a percent of net sales, was
relatively unchanged for 1993 as compared to 1992.
Marketing and administrative expenses, as a percent of net
sales, were 19.8% in 1993 compared to 21.0% in 1992. This
decrease is attributable to lower freight costs, commissions and
allowances.
Implant costs of $640.0 in 1993 and $69.0 in 1992 represent
provisions for costs associated with breast implant litigation,
claims and related matters, as further described in Note 2 of
Notes to Consolidated Financial Statements. These costs were
reported separately to better identify the Company's
profitability from ongoing operations and the financial impact
resulting from breast implant litigation.
Special items of $40.0 in 1992 relate to provisions for
restructuring activities, consisting largely of costs associated
with the cessation of manufacturing activities at a subsidiary in
Brazil and costs involved in global expense reduction, including
elimination of low-priority activities, redeployment of people
and reduction in the value of affected facilities.
The Company incurred an operating loss in 1993 of $404.1,
compared to operating income of $93.1 in 1992. Operating results
in both years have been negatively impacted by breast implant
related charges of $640.0 in 1993 and $69.0 in 1992. Operating
results were also negatively impacted in 1992 due to special
items of $40.0 described above.
Other income was $15.4 in 1993 compared to other expense of
$20.6 in 1992. As a result of the turmoil in European financial
markets in September 1992, the Company incurred losses in 1992
related to positions taken in several financial instruments.
These losses were generated as the market values of these
instruments were sensitive to movements in cross-currency
exchange rates and interest rates in certain foreign markets.
During September 1992, the Company offset these positions and
reduced its exposure to the effects of further instability in the
European markets.
Implant costs of $640.0 described above were offset by a
related tax benefit of $225.0. Excluding the impact of this
charge and the related tax benefit, the effective tax rate was
34.0% in 1993 compared to 20.2% in 1992. The higher effective
rate in 1993 is due to lower foreign tax credits.
During 1992, the Company adopted Statements of Financial
Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, and No. 109,
Accounting for Income Taxes. The impact of these changes, as
further explained in Notes 11 and 13 of Notes to Consolidated
Financial Statements, reduced 1992 net income by $111.9, $100.4
of which represented the cumulative effect of these changes for
years prior to 1992.
<PAGE>13
1992 Compared to 1991
---------------------
1992 net sales increased $110.3 or 6.0% over levels reported
for 1991. The increase for 1992 was principally attributable to
higher sales volumes. The effects of currencies strengthening in
Europe and Asia have also contributed to this increase. Weak
economic conditions in most industrialized countries were the
major reasons for low volume growth in 1992. Economic conditions
and competitive pressures limited opportunities for price
improvements and selling prices were lower in 1992 than in 1991.
Manufacturing cost of sales, as a percent of net sales, was
68.7% in 1992 compared to 64.8% for 1991. These increases, in
large part, reflect the effects of lower selling prices on
products sold and growth in employee costs, the latter partially
attributable to effects related to the adoption of Statement of
Financial Accounting Standards No. 106 and to increases in
staffing levels associated with the operation of new facilities.
For 1992, manufacturing costs were also unfavorably affected by
higher purchased material costs, faster sales growth in lower
margin products and higher depreciation charges.
Marketing and administrative expenses, as a percent of net
sales, were relatively unchanged for 1992 as compared to 1991.
Implant costs of $69.0 in 1992 and $25.0 in 1991 represent
provisions for costs associated with discontinued breast implant
products, as further described in Note 2 of Notes to Consolidated
Financial Statements. These costs were reported separately to
better identify the financial impact of the breast implant
controversy and the Company's profitability from ongoing
operations.
Special items of $40.0 in 1992 relate to provisions for
restructuring activities, consisting largely of costs associated
with the cessation of manufacturing activities at a subsidiary in
Brazil and costs involved in global expense reduction, including
elimination of low-priority activities, redeployment of people
and reduction in the value of affected facilities. Special items
of $29.0 in 1991 represent provisions for costs of certain legal
contract disputes and recognition of partial impairment in the
value of certain foreign assets.
Operating income for 1992 was down $105.5 or 53.1% from
prior year levels. Results have been negatively impacted by
charges relating to the breast implant controversy and
restructuring activities, weak economic conditions, competitive
pricing pressure and expense growth.
Other expense for 1992 increased significantly from levels
for 1991. As a result of the turmoil in European financial
markets in September 1992, the Company incurred losses related to
positions taken in several financial instruments. These losses
were generated as the market values of these instruments were
sensitive to movements in cross-currency exchange rates and
interest rates in certain foreign markets. During September
1992, the Company offset these positions and reduced its exposure
to the effects of further instability in the European markets.
The Company's use of interest and currency rate derivatives is
described in Note 10 of Notes to Consolidated Financial
Statements. Interest income was also down slightly from 1991
reflecting lower average invested cash balances and lower
interest rates.
The effective tax rate in 1992 was 20.2%, compared to 27.9%
for 1991. The lower effective rate in 1992 was due to higher
levels of foreign tax credit utilization.
During 1992, the Company elected to adopt Statements of
Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, and No. 109,
Accounting for Income Taxes. The impact of these changes, as
further explained in Notes 11 and 13 of Notes to Consolidated
Financial Statements, reduced 1992 net income by $111.9, $100.4
of which represented the cumulative effect of these changes for
years prior to 1992.
<PAGE>14
Credit Availability
- -------------------
During 1993, the Company terminated a revolving credit
agreement which was in place at December 31, 1992, and replaced
it with a revolving credit agreement with 16 domestic and foreign
banks which provides for borrowings on a revolving credit basis
until November, 1997 of up to $400.0. At December 31, 1993,
there was $150.0 outstanding under this facility. Availability
of credit under this facility may be affected by certain debt
restrictions and provisions as described in Note 8 of Notes to
Consolidated Financial Statements.
Additionally, the Company has agreements in place whereby it
may sell on an ongoing basis fractional ownership interests in a
designated pool of U.S. trade receivables, with limited recourse,
in amounts up to $65.0. As of December 31, 1993, the Company had
no amounts outstanding under these agreements. Under other
agreements, $63.2 of foreign trade receivables had been sold and
remained uncollected at December 31, 1993.
The Company also has agreements with several banks whereby
it may borrow up to $269.5 under short-term lines of credit. The
Company pays a fixed service fee for certain of these facilities
in lieu of any compensating cash balances. Included in
short-term borrowings are amounts outstanding under these
facilities at December 31, 1993, of $83.7.
The Company has registered with the Securities and Exchange
Commission $400.0 of debt securities. As of December 31, 1993,
$275.0 of these registered securities had been designated to
medium-term note programs with $100.0 issued, and $125.0 had been
issued in debentures.
During 1993, the Company obtained long-term financing
totalling $58.8 ($28.6 of which is denominated in foreign
currencies) bearing interest at rates ranging from 4.1% to 11.5%
at December 31, 1993 and with maturities ranging from two to five
years.
Management believes that, in light of the Company's positive
operating cash flow, the credit facilities currently in place are
adequate to meet the short-term financing needs of the Company.
Management also believes that the Company will generate the
financial liquidity required to meet ongoing operational needs
and to participate in the breast implant litigation settlement
currently being negotiated (as described in Note 2 of Notes to
Consolidated Financial Statements). This belief is based on,
among other things, management's estimate of future operational
cash flows, its assessment that recovery of substantial amounts
of settlement obligations from its insurance carriers is
probable, and its evaluation of current financing arrangements.
Inflation
- ---------
The impact of inflation on the Company's financial position
and results of operations has been minimal. The Company expects
that future impacts of inflation will be offset by increased
prices and productivity gains.
Contingencies
- -------------
For information regarding contingencies, including a
discussion of breast implant litigation and the Company's
environmental liabilities, see Note 2 of Notes to Consolidated
Financial Statements.
<PAGE>15
Management Changes
- ------------------
On June 25, 1993, the Company's Board of Directors elected
Richard A. Hazleton, President of the Company, to the additional
position of Chief Executive Officer. Keith R. McKennon, formerly
Chief Executive Officer, continues as the Chairman of the Board
of Directors.
On December 10, 1993, the Company's Board of Directors
elected John W. Churchfield, formerly the Assistant Chief
Financial Officer, to the position of Vice President for Planning
and Finance and Chief Financial Officer. Edward Steinhoff,
formerly Vice President for Finance and Chief Financial Officer,
announced in early 1993 his intention to retire and retired
December 31, 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
See the "Index to Financial Statements" which is located in
the section entitled "Financial Statements for the Year Ended
December 31, 1993" included in this report, as well as the
"Report of Independent Accountants."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- ---------------------------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Item omitted in accordance with provisions of General
Instruction J of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Item omitted in accordance with provisions of General
Instruction J of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
- -------------------------------------------------------------
Item omitted in accordance with provisions of General
Instruction J of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Item omitted in accordance with provisions of General
Instruction J of Form 10-K.
<PAGE>16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
- -----------------------------------------------------------------
Documents filed as part of Form 10-K for the year ended
December 31, 1993 are as follows:
(a) Financial Statements and Financial Statement
Schedules:
See the "Index to Financial Statements" which is
located in the section entitled "Financial Statements for the
Year Ended December 31, 1993" included in this report, as well as
the "Report of Independent Accountants."
(b) Reports on Form 8-K:
A report on Form 8-K dated January 14, 1994, was filed
in connection with a special charge to reflect the Company's best
estimate of the costs of resolving breast implant litigation and
related matters.
(c) Exhibits:
See the "Exhibit Index" which is located on page 52.
<PAGE>17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DOW CORNING CORPORATION
Date January 28, 1994 By R. A. Hazleton
---------------- ------------------------
R. A. Hazleton
President and Chief
Executive Officer
Date January 28, 1994 By J. W. Churchfield
---------------- ------------------------
J. W. Churchfield
Vice President for
Planning and Finance and
Chief Financial Officer
Date January 28, 1994 By G. P. Callaghan
---------------- ------------------------
G. P. Callaghan
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons (a majority of the Board of Directors) on behalf of the
registrant and in the capacities and on the dates indicated.
Date January 28, 1994 By G. E. Anderson
---------------- ------------------------
G. E. Anderson
Director, Dow Corning
Corporation
Date January 28, 1994 By V. C. Campbell
---------------- ------------------------
V. C. Campbell
Director, Dow Corning
Corporation
Date January 28, 1994 By D. A. Duke
---------------- ------------------------
D. A. Duke
Director, Dow Corning
Corporation
Date January 28, 1994 By E. C. Falla
---------------- ------------------------
E. C. Falla
Director, Dow Corning
Corporation
Date January 28, 1994 By R. A. Hazleton
---------------- ------------------------
R. A. Hazleton
Director, Dow Corning
Corporation
Date January 28, 1994 By K. R. McKennon
---------------- ------------------------
K. R. McKennon
Director, Dow Corning
Corporation
Date January 28, 1994 By L. A. Reed
---------------- ------------------------
L. A. Reed
Director, Dow Corning
Corporation
Date January 28, 1994 By D. R. Weyenberg
---------------- ------------------------
D. R. Weyenberg
Director, Dow Corning
Corporation
<PAGE>18
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR CORPORATIONS
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1993
DOW CORNING CORPORATION
MIDLAND, MICHIGAN 48686-0994
<PAGE>19
STATEMENT OF MANAGEMENT RESPONSIBILITY FOR
------------------------------------------
FINANCIAL STATEMENTS
--------------------
The management of Dow Corning Corporation is responsible for
the preparation, presentation and integrity of the consolidated
financial statements and other information included in this
annual report on Form 10-K. The financial statements have been
prepared in conformity with generally accepted accounting
principles appropriate in the circumstances and necessarily
include amounts based on management's best estimates and
judgments.
In meeting its responsibility for the reliability of these
financial statements, Dow Corning maintains comprehensive systems
of internal accounting control. These systems are designed to
provide reasonable assurance at reasonable cost that corporate
assets are protected against loss or unauthorized use and that
transactions and events are properly recorded. Such systems are
reinforced by written policies, selection and training of
competent financial personnel, appropriate division of
responsibilities and a program of internal audits.
The financial statements have been audited by our
independent accountants, Price Waterhouse. Their responsibility
is to express an independent professional opinion with respect to
the consolidated financial statements on the basis of an audit
conducted in accordance with generally accepted auditing
standards. In addition to the audit performed by the independent
accountants, Dow Corning maintains a professional staff of
internal auditors whose audit coverage is coordinated with that
of the independent accountants.
The Board of Directors, through its Audit Committee, is
responsible for reviewing and monitoring Dow Corning's financial
reporting and accounting practices and recommending annually the
appointment of the independent accountants. The Committee,
composed of nonmanagement directors, meets periodically with
management, the internal auditors and the independent accountants
to review and assess the activities of each. Both the
independent accountants and the internal auditors meet with the
Committee, without management present, to review the results of
their audits and their assessment of the adequacy of the system
of internal accounting controls and the quality of financial
reporting.
January 20, 1994
R. A. Hazleton J. W. Churchfield
- ------------------------- ---------------------------
R. A. Hazleton J. W. Churchfield
President and Vice President for
Chief Executive Officer Planning and Finance
and Chief Financial Officer
<PAGE>20
Suite 3900 Telephone 313 259 0500
200 Renaissance Center
Detroit, MI 48243
Price Waterhouse
Report of Independent Accountants
January 20, 1994
To the Stockholders and
Board of Directors of
Dow Corning Corporation
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Dow Corning Corporation and its
subsidiaries at December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 2 to the financial statements, the Company
is involved in product liability litigation and claims related to
breast implants for which it is seeking payment from insurance
carriers. The Company has recorded an estimated liability and
insurance receivable for these matters based upon all currently
available information. As additional facts and circumstances
develop in the future, it may be necessary for the Company to
revise these estimates.
As discussed in Note 6 to the financial statements, the Company
changed its method of applying fixed costs to inventory in 1991.
In 1992, the Company changed its method of accounting for
postretirement benefits other than pensions to conform with
Statement of Financial Accounting Standards No. 106 as discussed
in Note 11 and its method of accounting for income taxes to
conform with Statement of Financial Accounting Standards No. 109
as discussed in Note 13.
Price Waterhouse
<PAGE>21
(THIS PAGE INTENTIONALLY BLANK)
<PAGE>22
DOW CORNING CORPORATION
-----------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Page
----
Consolidated balance sheets at December 31, 1993 and 1992 23
Consolidated statements of operations and retained
earnings for the years ended December 31, 1993, 1992
and 1991 25
Consolidated statements of cash flow for the years ended
December 31, 1993, 1992 and 1991 26
Notes to consolidated financial statements 28
Supplementary Data - for the years ended December 31,
1993 and 1992:
Quarterly financial information 46
Financial Statement Schedules for the years ended
December 31, 1993, 1992 and 1991:
V - Property, plant and equipment 47
VI - Accumulated depreciation and amortization of
property, plant and equipment 48
VIII - Valuation and qualifying accounts and reserves 49
IX - Short-term borrowings 50
X - Supplementary income statement information 51
All other supplementary data and financial statement
schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial
statements or the accompanying notes.
<PAGE>23
DOW CORNING CORPORATION
-----------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in millions of dollars)
ASSETS
------
December 31,
--------------------
1993 1992
-------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 263.0 $ 8.4
-------- --------
Short-term investments 0.9 -
-------- --------
Accounts and notes receivable -
Trade (less allowance for doubtful
accounts of $8.4 in 1993 and 1992) 318.5 285.9
Other receivables 54.5 53.0
-------- --------
373.0 338.9
-------- --------
Inventories 285.6 356.1
-------- --------
Other current assets -
Deferred income taxes 118.4 90.5
Other 28.3 33.8
-------- --------
146.7 124.3
-------- --------
Total current assets 1,069.2 827.7
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 130.9 119.3
Buildings 436.0 413.1
Machinery and equipment 2,011.3 1,906.5
Construction-in-progress 132.5 148.9
-------- --------
2,710.7 2,587.8
Less - Accumulated depreciation (1,544.6) (1,396.5)
-------- --------
1,166.1 1,191.3
-------- --------
OTHER ASSETS:
Implant insurance receivable 663.7 -
Deferred income taxes 229.6 31.8
Other 133.7 139.9
-------- --------
1,027.0 171.7
-------- --------
$3,262.3 $2,190.7
======== ========
The Notes to Consolidated Financial Statements are an
integral part of these financial statements.
<PAGE>24
DOW CORNING CORPORATION
-----------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in millions of dollars except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31,
--------------------
1993 1992
-------- --------
CURRENT LIABILITIES:
Notes payable $ 233.7 $ 160.0
Current portion of long-term debt 33.5 37.7
Trade accounts payable 147.1 124.7
Income taxes payable 18.6 41.1
Accrued payrolls and employee benefits 60.4 54.6
Accrued taxes, other than income taxes 19.6 17.2
Implant reserve 158.7 46.2
Other current liabilities 99.0 87.4
-------- --------
Total current liabilities 770.6 568.9
-------- --------
LONG-TERM DEBT 314.7 298.0
-------- --------
OTHER LONG-TERM LIABILITIES:
Implant reserve 1,100.0 -
Deferred income taxes 14.6 0.2
Other 311.2 306.3
-------- --------
1,425.8 306.5
-------- --------
CONTINGENT LIABILITIES (NOTE 2)
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES 102.8 85.2
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $5 par value - 2,500,000
shares authorized and outstanding 12.5 12.5
Retained earnings 604.3 891.3
Cumulative translation adjustment 31.6 28.3
-------- --------
Stockholders' equity 648.4 932.1
-------- --------
$3,262.3 $2,190.7
======== ========
The Notes to Consolidated Financial Statements are an
integral part of these financial statements.
<PAGE>25
<TABLE>
DOW CORNING CORPORATION
-----------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND
-----------------------------------------
RETAINED EARNINGS
- -----------------
(in millions of dollars except share
data)
<CAPTION>
Year
ended December 31,
- --------------------------------
1993
1992 1991
--------
-------- --------
<S> <C>
<C> <C>
NET SALES $2,043.7
$1,955.7 $1,845.4
OPERATING COSTS AND EXPENSES:
Manufacturing cost of sales 1,403.9
1,343.2 1,195.5
Marketing and administrative expenses 403.9
410.4 397.3
Implant costs 640.0
69.0 25.0
Special items -
40.0 29.0
--------
------- --------
2,447.8
1,862.6 1,646.8
--------
------- --------
OPERATING INCOME (LOSS)
(404.1) 93.1 198.6
OTHER INCOME (EXPENSE):
Interest income, currency gains (losses) and other, net 15.4
(20.6) 31.9
Interest expense
(33.3) (22.5) (21.5)
--------
------- --------
INCOME (LOSS) BEFORE INCOME TAXES
(422.0) 50.0 209.0
Income tax provision (benefit)
(150.9) 10.1 58.3
Minority interests' share in income 15.9
11.5 14.1
--------
------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES (1993 - $(114.80)
per share; 1992 - $11.36 per share; 1991 - $54.64 per
share)
(287.0) 28.4 136.6
Cumulative effect of adopting Statement of Financial
Accounting Standards No. 106 - Employers' Accounting
for Postretirement Benefits Other Than Pensions, net
of applicable income taxes ($(46.72) per share) -
(116.8) -
Cumulative effect of adopting Statement of Financial
Accounting Standards No. 109 - Accounting for Income
Taxes ($6.56 per share) -
16.4 -
Cumulative effect of a change in accounting for fixed
costs recorded in inventory, net of applicable income
taxes ($6.52 per share) -
- 16.3
--------
------- --------
NET INCOME (LOSS) (1993 - $(114.80) per share; 1992 -
$(28.80) per share; 1991 - $61.16 per share)
(287.0) (72.0) 152.9
Retained earnings at beginning of year 891.3
1,028.8 953.4
Cash dividends (1992 - $26.20 per share; 1991 -
$31.00 per share) -
(65.5) (77.5)
--------
------- --------
Retained earnings at end of year $ 604.3
$ 891.3 $1,028.8
========
======== ========
<FN>
The Notes to Consolidated Financial Statements are an
integral
part of these financial statements.
</TABLE>
<PAGE>26
<TABLE>
DOW CORNING CORPORATION
-----------------------
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
(in millions of dollars)
<CAPTION>
Year
ended December 31,
- --------------------------------
1993
1992 1991
--------
-------- --------
<S> <C>
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before cumulative effects of changes
in accounting principles $(287.0)
$ 28.4 $136.6
Adjustments to reconcile net income (loss) to net
cash provided by operating activities -
Depreciation and amortization 197.1
190.6 171.5
Deferred income taxes (211.5)
(40.7) (38.7)
Minority interests 8.2
5.7 10.4
Non-cash portion of implant charges 548.8
21.2 25.0
Special items -
40.0 29.0
Postretirement health care and life insurance (3.8)
17.4 -
Other 14.1
(5.9) (6.2)
Changes in assets and liabilities -
Accounts and notes receivable (44.8)
(7.5) (0.8)
Inventories 44.0
14.8 (38.3)
Accounts payable 18.3
(10.3) 13.4
Income taxes payable (24.7)
11.2 2.1
Other current liabilities 19.2
(8.4) 8.5
-------
------ ------
Cash provided by operating activities 277.9
256.5 312.5
-------
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (182.3)
(214.6) (224.8)
Proceeds from sale of assets 66.3
- -
Business acquisitions, net of cash acquired -
(29.8) (3.1)
Other 9.6
(5.1) (3.0)
-------
------ ------
Cash used for investing activities (106.4)
(249.5) (230.9)
-------
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 58.8
82.5 55.5
Payments on long-term debt (49.9)
(81.9) (14.0)
Payments on revolving credit agreement (100.0)
- -
Proceeds from revolving credit agreement 150.0
100.0 -
Net change in other short-term borrowings 25.0
(41.7) (46.6)
Dividends paid to stockholders -
(65.5) (77.5)
-------
------ ------
Cash provided by (used for) financing activities 83.9
(6.6) (82.6)
-------
------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (0.8)
0.1 (0.2)
-------
------ ------
CHANGES IN CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and cash equivalents 254.6
0.5 (1.2)
Cash and cash equivalents at beginning of year 8.4
7.9 9.1
-------
------ ------
Cash and cash equivalents at end of year $ 263.0
$ 8.4 $ 7.9
=======
====== ======
<FN>
The Notes to Consolidated Financial Statements are an
integral part of these
financial statements.
</TABLE>
<PAGE>27
(THIS PAGE INTENTIONALLY BLANK)
<PAGE>28
DOW CORNING CORPORATION
-----------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(in millions of dollars except where noted)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Principles of Consolidation
- ---------------------------
The accompanying consolidated financial statements include
the accounts of Dow Corning Corporation and all of its
wholly-owned and majority-owned domestic and foreign subsidiaries
(the Company). The Company's interests in 20% to 50% owned
affiliates are carried on the equity basis and are included in
other assets. Intercompany transactions and balances have been
eliminated in consolidation.
Cash Equivalents and Short-Term Investments
- -------------------------------------------
Cash equivalents include all highly liquid investments
purchased with an original maturity of ninety days or less. All
other temporary investments are classified as short-term
investments. The carrying amounts for cash equivalents and
short-term investments approximate their fair values.
The Company enters into agreements to purchase and resell
securities. As of December 31, 1993, there was approximately
$243.1 outstanding under these agreements. Of this amount,
$208.1 had been purchased from Merrill Lynch Mortgage Capital,
Inc. with a weighted average maturity of twelve days, and $35.0
had been purchased from Lehman Commercial Paper, Inc. with a
weighted average maturity of eight days. Securities purchased
under agreements to resell are included in cash and cash
equivalents in the accompanying balance sheet.
Inventories
- -----------
Inventories are stated at the lower of cost or market. The
cost of the majority of inventories is determined using the
last-in, first-out (LIFO) method and the remainder is valued
using the first-in, first-out (FIFO) method.
Property and Depreciation
- -------------------------
Property, plant and equipment are carried at cost and are
depreciated principally using accelerated methods over estimated
useful lives ranging from 10 to 20 years for land improvements,
10 to 45 years for buildings and 3 to 20 years for machinery and
equipment. Upon retirement or other disposal, the asset cost and
related accumulated depreciation are removed from the accounts
and the net amount, less any proceeds, is charged or credited to
income.
Expenditures for maintenance and repairs are charged against
income as incurred. Expenditures which significantly increase
asset value or extend useful asset lives are capitalized.
The Company follows the policy of capitalizing interest as a
component of the cost of capital assets constructed for its own
use. Interest capitalized was $12.0 in 1993, $11.8 in 1992, and
$11.8 in 1991.
<PAGE>29
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------
Intangibles
- -----------
Other assets include $27.0 and $32.7 of intangible assets at
December 31, 1993 and 1992, respectively, representing the excess
of cost over net assets of businesses acquired. These intangible
assets are being amortized on a straight-line basis over 10
years. Other identifiable intangible assets are amortized on a
straight-line basis over their estimated useful lives.
Deferred Investment Grants
- --------------------------
Included in other long-term liabilities are deferred
investment incentives (grants) which the Company has received
related to certain capital expansion projects in Belgium, Canada
and the United Kingdom. Such grants are deferred and recognized
in income over the service lives of the related assets. At
December 31, 1993 and 1992, gross deferred investment incentives
were $84.6 and $90.7 with related accumulated amortization of
$62.8 and $60.8, respectively.
Income Taxes
- ------------
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income
Taxes, effective on January 1, 1992. SFAS 109 requires a company
to recognize deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in a
company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are
expected to reverse.
Research and Development Costs
- ------------------------------
Research and development costs are charged to operations
when incurred and are included in manufacturing cost of sales.
These costs totalled $163.9 in 1993, $161.2 in 1992, and $148.7
in 1991.
Currency Translation
- --------------------
Assets and liabilities of certain foreign subsidiaries are
translated into U.S. dollars at end-of-period exchange rates;
translation gains and losses, hedging activity and related tax
effects from these subsidiaries are reported as a separate
component of stockholders' equity. Assets and liabilities of
other foreign subsidiaries are remeasured into U.S. dollars using
end-of-period and historical exchange rates; remeasurement gains
and losses, hedging activity and related tax effects for these
subsidiaries are recognized in the statement of operations.
Revenues and expenses for all foreign subsidiaries are translated
at average exchange rates during the period. Foreign currency
transaction gains and losses are included in current earnings.
<PAGE>30
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------
Interest and Currency Rate Derivatives
- --------------------------------------
The Company enters into a variety of interest rate and
currency swaps, interest rate caps and floors, options and
forward exchange contracts in its management of interest rate and
foreign currency exposures. The differential to be paid or
received on interest rate swaps, including interest rate elements
in combined currency and interest rate swaps, interest rate caps
and floors is recognized over the life of the agreements as an
adjustment to interest expense. Gains and losses on terminated
interest rate instruments that were entered into for the purpose
of changing the nature of underlying debt obligations are
deferred and amortized to income as an adjustment to interest
expense. Currency option premiums are amortized over the option
period. Gains and losses on purchased currency options that are
designated and effective as hedges are deferred and recognized in
income in the same period as the hedged transaction. Realized
and unrealized gains and losses on currency swaps, including
currency elements in combined currency and interest rate swaps,
and forward exchange contracts are recognized currently in other
income and expense, or, if such contracts are effective as net
investment hedges, in stockholders' equity.
New Accounting Standards
- ------------------------
In November 1992, Statement of Financial Accounting
Standards No. 112 "Employers' Accounting for Post-employment
Benefits" was issued. The Company will be required to adopt this
new method of accounting for benefits paid to former or inactive
employees after employment but before retirement no later than
1994. This new standard requires, among other things, that the
expected costs of these benefits be recognized when they are
earned or become payable when certain conditions are met rather
than the current method which recognizes these costs when they
are paid. The Company does not expect this standard to
materially impact its financial condition or results of
operations when it is adopted in 1994.
Reclassifications
- -----------------
Certain reclassifications of prior year amounts have been
made to conform to the presentation adopted in 1993.
NOTE 2 - CONTINGENCIES
- ----------------------
Breast Implant Business
- -----------------------
Prior to January 6, 1992, the Company, directly and through
its wholly-owned subsidiary, Dow Corning Wright Corporation, was
engaged in the manufacture and sale of silicone gel breast
implants. As part of a review process initiated in 1991 by the
United States Food and Drug Administration (FDA) of Premarket
Approval Applications (PMAA) for silicone gel breast implants, on
January 6, 1992, the FDA asked breast implant producers and
medical practitioners to voluntarily halt the sale and use of
silicone gel breast implants pending further review of the safety
and effectiveness of such devices, and the Company complied with
the FDA's request and suspended shipments of implants.
Subsequently, the Company announced that it would not resume the
production or sale of silicone gel breast implants and that it
would withdraw its PMAA for silicone gel breast implants from
consideration by the FDA. The Company also commenced a program
to provide up to $1,200 (in whole dollars) per patient to support
medical costs of removing the Company's silicone gel breast
implants from women who have a documented medical need to have
their implants removed and who cannot afford the procedure. As
of January 20, 1994, approximately 2,800 women have made use of
this program.
<PAGE>31
NOTE 2 - CONTINGENCIES (Continued)
- ----------------------
Since late 1991, there has been considerable publicity
associated with the breast implant controversy, and the Company
experienced a substantial increase in the number of lawsuits
against the Company relating to breast implants. As of
January 20, 1994, the Company has been named, often together with
other defendants, in approximately 11,800 pending breast implant
products liability lawsuits filed by or on behalf of individuals
who claim to have or have had silicone gel breast implants. Many
of these cases involve multiple plaintiffs. In addition, there
were 41 purported breast implant products liability class action
lawsuits which had been filed against the Company as of
January 20, 1994. It is anticipated that the Company will be
named as a defendant in additional breast implant lawsuits in the
future. The typical alleged factual bases for these lawsuits
include allegations that the plaintiffs' breast implants caused
specified ailments, including, among other things, autoimmune
disease, scleroderma, systemic disorders, joint swelling and
chronic fatigue. The Company is sometimes named as the
manufacturer of silicone gel breast implants, and other times the
Company is named as the supplier of silicone raw materials to
other breast implant manufacturers. Although there are
similarities among the cases, there are also differences which
can significantly affect the cost of defending and disposing of
each case, and many cases are at such a preliminary stage that
the Company has not yet been able to obtain information relevant
to the evaluation of each case. For these reasons, the amounts
involved in prior dispositions of breast implant cases are not
necessarily indicative of the amounts that may be required to
dispose of such cases in the future. The Company is vigorously
defending this litigation asserting, among other defenses, that
there is no causal connection between silicone breast implants
and the ailments alleged by the plaintiffs in these cases.
During 1992 and 1993, consolidation of a substantial number
of breast implant lawsuits for pretrial purposes occurred in
federal court (U.S. District Court for the Northern District of
Alabama) and various state courts where a substantial number of
breast implant lawsuits have been filed. As of December 31,
1993, substantially more than half of all breast implant cases
have been consolidated for pretrial purposes at the federal and
state levels. Discovery is proceeding under the supervision of
the courts. The Company anticipates that current and future
breast implant lawsuit consolidations will result in a reduction
of per case litigation defense costs.
On September 9, 1993, the Company announced that
representatives of plaintiffs and defendants involved with
silicone breast implant litigation have developed a "Statement of
Principles for Global Resolution of Breast Implant Claims" (the
"Statement of Principles"). The Statement of Principles
summarizes a proposed claims based structured resolution of
claims arising out of breast implants which have been or could be
asserted against various implant manufacturers, suppliers,
physicians and hospitals (the "Proposed Settlement").
The Statement of Principles does not constitute an agreement
and a number of issues remain to be resolved before a tentative
settlement agreement can be reached. A number of specifics of
settlement concepts contained in the Statement of Principles
continue to be undefined and many uncertainties remain. Various
steps must be completed before a settlement can be implemented,
including review and support of the Proposed Settlement by the
boards of directors, managements and insurance carriers of
Funding Participants (as defined below) and review and acceptance
of the Proposed Settlement by breast implant plaintiffs and their
counsel. In addition, a court supervised fairness review process
of the Proposed Settlement must be completed before a final
agreement can be implemented. The timetable for the completion
of this process is currently undetermined. Once a final
agreement is approved by the court, claims can then be validated
and administered.
<PAGE>32
NOTE 2 - CONTINGENCIES (Continued)
- ----------------------
Under the Proposed Settlement, if implemented, industry
participants (the "Funding Participants") would contribute up to
$4.75 billion over a period of thirty years to establish several
special purpose funds. The specific participants and their
respective contributions to this fund are currently under
negotiation. The Proposed Settlement, if implemented, would be a
claims based structured resolution of claims arising out of
silicone breast implants, and would define the circumstances
under which payments from the funds would be made. The Proposed
Settlement includes provisions for (a) class membership and the
ability of plaintiffs to opt out of the class, (b) the
establishment of defined funds for medical diagnostic/evaluation
procedures, explantation, ruptures, compensation for specific
diseases and administration, (c) payment terms and timing and (d)
claims administration. The Proposed Settlement defines periods
during which breast implant plaintiffs may elect not to settle
their claims by way of the Proposed Settlement and continue their
individual breast implant litigation against manufacturers and
other defendants (the "Opt Out Plaintiffs"). In certain
circumstances, if any defendant who is a Funding Participant
considers the number of Opt Out Plaintiffs maintaining lawsuits
against such defendant to be excessive, such defendant may decide
to exercise the option to withdraw from participation in the
Proposed Settlement.
Management believes that a settlement incorporating concepts
underlying the Statement of Principles would be a responsible and
cost efficient approach to resolving breast implant litigation
against the Company. Management continues to evaluate the
Proposed Settlement in that light and believes that it would be
viable if, among other things, (a) an acceptable agreement as to
allocation of liability under the Proposed Settlement among
Funding Participants can be reached, (b) adequate insurance
support is provided to Funding Participants by their insurance
carriers and (c) substantially all plaintiffs participate in the
settlement.
The Company continues to negotiate with other potential
parties to the Proposed Settlement to reach a tentative
settlement agreement similar in concept to the Statement of
Principles. Since the announcement of the Statement of
Principles, the Company has participated in negotiations with
other key Funding Participants to reach an agreement regarding,
among other things, the respective contribution of each of these
Funding Participants to the settlement fund. These negotiations
are currently ongoing and have progressed to a point where the
Company believes it has sufficient information to estimate its
potential liability for breast implant litigation.
Notwithstanding the limited information available regarding
most of the claims asserted against the Company and the
uncertainties related to the eventual resolution of these claims,
the Company has made efforts in the past to reflect anticipated
financial consequences to the Company of the breast implant
situation. In December 1991, the Company recorded a $25.0 pretax
charge associated with the breast implant business to cover
implant inventories, dedicated equipment and costs associated
with confirming the safety of the product. In the first quarter
of 1992, the Company recorded $24.0 of pretax costs related to
silicone gel breast implant litigation, claims and related
matters. In the second quarter of 1992, the Company recorded a
$45.0 pretax charge associated with its discontinued breast
implant products. This charge represented management's best
estimate at the time of future costs for ongoing research
associated with breast implants; continued communication with
patients, the medical community and other interested parties; the
retrieval of breast implant inventories from the Company's
medical customers; and various legal defense matters.
<PAGE>33
NOTE 2 - CONTINGENCIES (Continued)
- ----------------------
Based on information developed in settlement negotiations,
on January 14, 1994, the Company announced a pretax charge of
$640.0 for the fourth quarter of 1993. This charge included the
Company's best current estimate of its potential liability for
breast implant litigation based on current settlement
negotiations, and also included provisions for legal,
administrative, and research costs related to breast implants,
for a total of $1.24 billion, less expected insurance recoveries
of $600.0. The amounts recorded by the Company for the estimated
cost of settling breast implant litigation and claims and
anticipated insurance reimbursements were determined on a
present-value basis using a discount rate of 7.0% over a period
of more than 30 years. The estimated liability of $1.24 billion
as described above is approximately $2.3 billion on an
undiscounted basis. The expected insurance recovery of $600.0
as described above is approximately $1.2 billion on an
undiscounted basis.
The estimated liability of $1.24 billion described above has
been combined with reserves of $18.7 remaining from breast
implant related charges recorded prior to 1993. This total
liability amount is shown opposite the captions "Implant
Reserves" in the accompanying balance sheet. The receivable of
$600.0 described above has been combined with a receivable of
$63.7 which represents breast implant related payments made prior
to December 31, 1993, for which recovery through insurance is
anticipated. This receivable is shown opposite the caption
"Implant Insurance Receivable" in the accompanying balance sheet.
The Company believes that a substantial portion of the
indemnity, settlement and defense costs related to breast implant
lawsuits and claims will be covered by the Company's products
liability insurance subject to deductibles, exclusions,
retentions and policy limits. The Company's insurers have
reserved and may reserve the right to deny coverage, in whole or
in part, due to differing theories regarding, among other things,
the applicability of coverage and when coverage may attach.
Also, a number of the breast implant lawsuits pending against the
Company request punitive damages and compensatory damages arising
out of alleged intentional torts. Depending on policy language,
applicable law and agreements with carriers, any damages which
may be awarded pursuant to such lawsuits may or may not be
covered, in whole or in part, by insurance.
As of December 31, 1993, the Company had a substantial
amount of unexhausted claims-made insurance coverage with respect
to lawsuits and claims commencing 1986 and thereafter. For
lawsuits and claims involving implant dates prior to 1986, the
Company believes substantial coverage exists under a number of
primary and excess occurrence policies having various limits.
Because the defense and disposition of particular breast implant
lawsuits and claims may be covered, in whole or in part, both by
the claims-made coverage issued from and after 1986, and one or
more of the occurrence policies issued prior to 1986,
determination of aggregate insurance coverage depends on, among
other things, how defense and indemnity costs are allocated among
the various policy periods.
Discussions among the Company and its primary insurance
carriers have occurred and are continuing with a view toward
reaching an agreement as to the allocation of costs of breast
implant litigation among the various insurance carriers issuing
products liability insurance policies to the Company relative to
breast implants and other products. The Company became
dissatisfied with the progress being made toward reaching such an
agreement. Consequently, the Company commenced a lawsuit against
certain of these insurance carriers seeking, among other things,
a judicial enforcement of the obligations of the insurance
carriers under certain of these insurance policies (for
additional information regarding this lawsuit, see Legal
Proceedings, Part I, Item 3). Management continues to believe
that it is probable that the Company
<PAGE>34
NOTE 2 - CONTINGENCIES (Continued)
- ----------------------
will recover from its insurance carriers a substantial amount of
breast implant related payments which have been or may be made by
the Company. In reaching this belief, the Company has analyzed
its insurance policies, considered its history of coverage and
insurance reimbursement for these types of claims, and consulted
with knowledgeable third parties with significant experience in
insurance coverage matters. The amount recorded by the Company
as an insurance receivable is substantially less than the amount
for which the Company would seek reimbursement if a settlement
proceeds.
Management believes that the Company will generate the
financial liquidity required to meet ongoing operational needs
and to participate in the settlement currently being negotiated.
This belief is based on, among other things, management's
estimate of future operational cash flows, its assessment that
recovery of substantial amounts of settlement obligations from
its insurance carriers is probable, and its evaluation of current
financing arrangements.
The Implant Reserves less the Implant Insurance Receivable
reflects management's best current estimate of the cost of
ultimate resolution of breast implant litigation. As breast
implant litigation settlement negotiations continue, additional
circumstances may develop which could affect the reliability and
precision of the current estimate. Those circumstances include,
among other things, development of additional information
regarding the allocation of settlement payments among the Funding
Participants, any revisions to the timing of those payments, the
number and extent of claims not covered by a settlement, the
amount and timing of insurance recoveries and the allocation of
insurance payments among the Company's insurance carriers, and
the possibility of resolution of the litigation through
alternatives to a settlement of the type currently proposed. As
additional facts and circumstances develop, the estimate may be
revised, or provisions may be necessary to reflect any additional
costs of resolving breast implant litigation and claims not
covered by a settlement. Future charges resulting from any
revisions or provisions, if required, could have a material
adverse effect on Dow Corning's financial position or results of
operations in the period or periods in which such charges are
recorded.
Environmental Matters
- ---------------------
The Company has been advised by the United States
Environmental Protection Agency (EPA) that the Company, together
with others, is a Potentially Responsible Party (PRP) with
respect to a portion of the cleanup costs and other related
matters involving a number of abandoned hazardous waste disposal
facilities. Management believes that there are 12 sites at which
the Company may have some liability, although management
currently expects to settle the Company's liability for a
majority of these sites for de minimis amounts. Based upon
preliminary estimates by the EPA or the PRP groups formed with
respect to these sites, the aggregate liabilities for all PRPs at
these sites at which management currently believes the Company
may have more than the de minimis liability is $33.0. Management
cannot currently estimate the aggregate liability for all PRPs at
those sites at which management expects the Company has a de
minimis liability.
<PAGE>35
NOTE 2 - CONTINGENCIES (Continued)
- ----------------------
The Company records a charge to earnings for sites when it
is probable that a liability has been incurred and the Company's
costs can be reasonably estimated. The Company has accrued for
its estimated liabilities with respect to these sites; such
accrual is substantially less than the estimated aggregate
liability for all PRPs at these sites as it reflects the
Company's estimated share of total remaining cleanup costs.
While there are a number of uncertainties with respect to the
Company's estimate of its ultimate liability for cleanup costs at
these sites, it is the opinion of the Company that these matters
will not materially adversely affect the Company's consolidated
financial position or results of operations. This opinion is
based upon the number of identified PRPs at each site, the number
of such PRPs that are believed by management to be solvent, and
the portion of waste sent to the sites for which management
believes the Company might be held responsible based on available
records.
Receivables Sold
- ----------------
The Company has sold certain receivables subject to recourse
provisions. The Company has agreements in place whereby it may
sell on an ongoing basis fractional ownership interests in a
designated pool of U.S. trade receivables, with limited recourse,
in amounts up to $65.0. As of December 31, 1993, the Company had
no amounts outstanding under these agreements. The amount of
receivables sold under these agreements which remained
uncollected at December 31, 1992 was $49.0. In addition, another
$63.2 and $25.1 of receivables had been sold at December 31, 1993
and 1992, respectively, under other agreements. During 1993 and
1992, net proceeds of approximately $74.7 and $73.5,
respectively, were received upon the sale of receivables.
DOW CORNING FIRE STOP(R)
- ------------------------
In May, 1993, the Company began communicating additional
information and test results to the owners of buildings which
contain DOW CORNING FIRE STOP(R) Intumescent Wrap Strip 2002,
recommending that the owners conduct a review with a qualified
Fire Protection Engineer to determine whether remedial action is
warranted, including possible replacement of the product due to
uncertainty about its ability to perform consistently and
predictably over time. DOW CORNING FIRE STOP(R) Intumescent Wrap
Strip 2002 is a non-silicone, resin-based fire stop product which
was installed in buildings as a passive fire protection product.
The Company ceased the sale of this product in 1992. The
potential liability associated with replacement of this product
cannot be estimated at this time. However, management believes
that the ultimate resolution of this issue will not have a
material adverse effect on the Company's consolidated financial
position or results of operations.
NOTE 3 - SPECIAL ITEMS
- ----------------------
Charges of $40.0 in 1992 relate to provisions for
restructuring activities, consisting largely of costs associated
with the cessation of manufacturing activities at a subsidiary in
Brazil and costs involved in global expense reduction, including
elimination of low-priority activities, redeployment of people
and reduction in the value of affected facilities. Charges of
$29.0 in 1991 represent provisions for costs of certain legal
contract disputes and recognition of partial impairment in the
value of certain foreign assets.
<PAGE>36
NOTE 4 - SALE OF ASSETS AND ACQUISITIONS
- ----------------------------------------
In June 1992, the Company announced its intent to offer for
sale its medical device business, which principally included
metal orthopedic implant devices and other specialty devices.
Subsequent to that decision, management decided to retain most of
the specialty device product lines and offer for sale principally
the metal orthopedic device business. On July 1, 1993, the
Company sold the metal orthopedic device assets for approximately
$66.3 in cash. The Company's investment in assets was
approximately $70.0, most of which represented current assets.
The sale of the metal orthopedic device business did not have a
material effect on the Company's consolidated net sales,
financial position or results of operations.
On July 14, 1992, the Company acquired ARA - Werk Kraemer
GmbH (ARA), a German supplier of sealants, polyurethane foam
products and related application tools. The purchase price
included $18.9 of cash and $19.2 in notes to be paid within one
year of the acquisition date. The acquisition was accounted for
by the purchase method of accounting, and, accordingly, the
purchase price has been allocated to the assets acquired and the
liabilities assumed based on their estimated fair values at date
of acquisition. The excess of purchase price over estimated fair
values of the net assets acquired was $25.6 and has been recorded
as goodwill, which will be amortized over 10 years. The
operating results of ARA are included in the Company's
consolidated results from the acquisition date. Consolidated net
sales, net income and related per share amounts for the years
ended December 31, 1992 and 1991, respectively, would not have
been materially different had this acquisition taken place at the
beginning of 1991.
On November 2, 1992, the Company acquired for $12.8 an
additional 40% interest in Lucky-DC Silicone Co., Ltd.
(Lucky-DC), a company in which Dow Corning previously had held a
50.0% interest. In addition, under the terms of the agreement
with the partner, Lucky Ltd., the Company will acquire for $3.2
the remaining 10% interest by November 1995, subject to the
approval by the Government of South Korea. Consolidated net
sales, net income and related per share amounts for the years
ended December 31, 1992 and 1991, respectively, would not have
been materially different had this acquisition taken place at the
beginning of 1991.
NOTE 5 - FOREIGN CURRENCY
- -------------------------
Following is an analysis of the changes in the cumulative
translation adjustment:
1993 1992 1991
----- ----- -----
Balance, beginning of year $28.3 $66.2 $32.5
Translation adjustments and gains
(losses) from certain hedges and
intercompany balances (0.2) (37.5) 30.5
Income tax effect of current year
activity 3.5 (0.4) 3.2
----- ----- -----
Balance, end of year $31.6 $28.3 $66.2
===== ===== =====
Net foreign currency gains (losses) currently recognized in
income amounted to $(8.1) in 1993, $(35.2) in 1992, and $11.1 in
1991. In 1991, the Company changed functional currencies of
certain subsidiary companies in Europe. This change did not
materially impact the Company's consolidated financial position
or results of operations.
<PAGE>37
NOTE 6 - INVENTORIES
- --------------------
Following is a summary of inventories by costing method at
December 31:
1993 1992
------ ------
Raw material, work-in-process and
finished goods:
Valued at LIFO $197.0 $224.9
Valued at FIFO 88.6 131.2
------ ------
$285.6 $356.1
====== ======
Under the dollar value LIFO method used by the Company, it
is impracticable to separate inventory values by classifications.
Inventories valued using LIFO at December 31, 1993 and 1992 are
stated at approximately $70.9 and $96.1, respectively, less than
they would have been if valued at replacement cost. Reduction in
LIFO reserves in 1993 did not have a material impact on results
of operations.
In 1991, the Company changed its method of applying fixed
costs to inventory by using actual production volumes as a basis
for allocating these costs to inventory rather than practical
capacity volumes. Management believes this change will result in
a better matching of product costs with related sales in reported
operating results. The $16.3 cumulative effect of the change on
prior years, net of income taxes of $8.4, is included in net
income for 1991. The change also increased inventories, net of
an adjustment for LIFO valuation, by $24.7. Except for the
cumulative effect, the change did not have a material effect on
operating results for the periods presented.
NOTE 7 - INVESTMENTS AND LOANS
- ------------------------------
At December 31, 1993 and 1992, the carrying amounts for
investments of $24.6 and $20.4, respectively, which excludes
those investments accounted for on the equity basis, and loans of
$10.0 and $15.0, respectively, approximate their fair value.
Fair values are determined based on quoted market prices or, if
quoted market prices are not available, on market prices of
comparable instruments. Investments and loans are included in
short-term investments and other assets in the accompanying
consolidated balance sheets.
NOTE 8 - NOTES PAYABLE AND CREDIT FACILITIES
- --------------------------------------------
Notes payable at December 31 consisted of:
1993 1992
------ ------
Revolving Credit Agreement $150.0 $100.0
Other bank borrowings 83.7 60.0
------ ------
$233.7 $160.0
====== ======
<PAGE>38
NOTE 8 - NOTES PAYABLE AND CREDIT FACILITIES (Continued)
- --------------------------------------------
During 1993, the Company terminated a revolving credit
agreement which was in place at December 31, 1992, and replaced
it with a Revolving Credit Agreement with 16 domestic and foreign
banks which provides for borrowings on a revolving credit basis
until November, 1997, of up to $400.0. The Company also has
agreements with several other banks whereby it may borrow up to
$269.5 under short-term lines of credit. The Company pays a fixed
service fee for certain of these facilities in lieu of any
compensating cash balances. Included in other bank borrowings
are amounts outstanding under these other facilities at
December 31, 1993 and 1992 of $83.7 and $34.4, respectively. The
carrying amounts of the Company's short-term borrowings
approximate their fair value.
Various debt agreements, the Revolving Credit Agreement
included, contain various debt restrictions and provisions
relating to property liens, sale and leaseback transactions, debt
to tangible capital ratio, and funds flow. In addition, the
Revolving Credit Agreement provides creditors the right, subject
to a majority vote, to demand payment in the event that uninsured
breast implant litigation expenditures and judgments exceed
certain limits. A settlement agreement of the type currently
being negotiated (as described in Note 2 of Notes to Consolidated
Financial Statements) would likely exceed these limits. At
December 31, 1993, the Company was in compliance with all debt
restrictions and provisions.
Under the provisions of the Revolving Credit Agreement, the
Company is subject to certain restrictions as to the payment of
dividends. The amount of the restriction is based on a formula
which considers, among other things, the income before income
taxes for the most recent fiscal year. Based on the computation
completed for the year ended December 31, 1993, the Company is
restricted from issuing dividends in 1994.
NOTE 9 - LONG-TERM DEBT
- -----------------------
Long-term debt at December 31 consisted of:
1993 1992
------ ------
9.625% Sinking Fund Debentures due 2005 $ 4.8 $ 4.8
9.375% Debentures due 2008 75.0 75.0
8.15% Debentures due 2029 50.0 50.0
7.61%-9.50% Medium-term Notes due 1994-2001,
8.68% average rate at December 31, 1993 54.5 80.0
5.76% Term Loans, maturing serially 1994-1999 32.1 37.2
Variable-rate Notes due 1994-1998,
5.39% at December 31, 1993 55.2 35.0
Variable-rate Note, maturing serially 1997-1999,
4.1% at December 31, 1993 20.0 -
3.58%-6.50% Japanese yen Notes due 1994-1998 33.4 33.2
Other obligations due 1994-2001 23.2 20.5
------ ------
348.2 335.7
Less - Payments due within one year 33.5 37.7
------ ------
$314.7 $298.0
====== ======
<PAGE>39
NOTE 9 - LONG-TERM DEBT (Continued)
- -----------------------
The fair value of the Company's long-term debt was
approximately $45.0 higher than book value at December 31, 1993
and $38.0 higher than book value at December 31, 1992. The fair
value was based largely on interest rates offered on U.S.
Treasury obligations with comparable maturities using discounted
cash flow analysis. These rates were not adjusted to reflect the
premium that the Company might pay over U.S. Treasury rates. A
one percentage point increase in these rates would decrease the
fair value by approximately $15.0.
The Company has $400.0 of debt securities registered with
the Securities and Exchange Commission at December 31, 1993, of
which $275.0 had been designated to medium-term note programs and
another $125.0 had been issued in debentures. At December 31,
1993, $100.0 had been issued under the medium-term note programs,
of which $54.5 was still outstanding.
The 9.625% debentures, which mature in 2005, require the
Company to make annual sinking fund payments of not less than
$2.5 nor more than $5.0 through 2004. The Company held $21.9 of
these debentures for redemption requirements as of December 31,
1993. The 9.375% and 8.15% debentures are not redeemable by the
Company prior to their maturity; however, the holders of the
8.15% debentures may elect to have all or a portion of their
debentures repaid on October 15, 1996, at 100% of the principal
amount.
Aggregate annual maturities of long-term debt are: $33.5 in
1994, $47.9 in 1995, $24.2 in 1996, $23.4 in 1997, $60.7 in 1998
and $108.5 thereafter. Excluded from such maturities are $50.0
of 8.15% debentures, due in 2029, which are subject to early
redemptions at the holders' option in 1996. Cash paid during the
year for interest, net of amounts capitalized, was $31.8 in 1993,
$20.8 in 1992, and $21.1 in 1991.
NOTE 10 - INTEREST AND CURRENCY RATE DERIVATIVES
- ------------------------------------------------
The Company utilizes a variety of financial instruments,
several with off-balance sheet risks, in its management of
current and future interest rate and foreign currency exposures.
These financial instruments include interest rate and currency
swaps, interest rate caps and floors, options and forward
exchange contracts. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of
the amount recognized in the consolidated balance sheet. The
contract or notional amounts of these instruments are used to
measure the volume of these agreements and do not represent
exposure to credit loss. The notional amounts, book values and
fair values of these instruments were:
<TABLE>
<CAPTION>
December 31, 1993
December 31, 1992
------------------------
- -----------------------
Fair Book Notional
Fair Book Notional
Value Value Amount
Value Value Amount
------- ------ --------
- ------- ------ --------
<S> <C> <C> <C>
<C> <C> <C>
Interest rate derivative instruments $(22.7) $(1.7) $620.0
$(11.3) $(0.8) $770.0
Currency rate derivative instruments (21.2) (21.2) 126.8
(8.5) (8.7) 190.0
Forward exchange contracts
-to purchase foreign currencies (3.9) (3.9) 136.5
(1.5) (1.5) 71.6
-to sell foreign currencies (0.4) (0.4) 129.9
3.1 3.1 138.7
-to exchange foreign currencies - - -
0.2 0.2 63.5
</TABLE>
<PAGE>40
NOTE 10 - INTEREST AND CURRENCY RATE DERIVATIVES (Continued)
- ------------------------------------------------
The Company enters into interest rate swaps to exchange
fixed and variable rate interest payment obligations without the
exchange of the underlying principal amounts in order to manage
interest rate exposures. The Company also enters into interest
rate caps, floors, and swaptions in order to transfer, modify, or
reduce interest rate risk. These instruments are used to hedge
the Company's debt portfolio and hedge accounting is used to
recognize the differential to be paid or received as an
adjustment to interest expense over the life of the agreements.
At December 31, 1993, these instruments had a weighted average
remaining life of 4.1 years.
The Company enters into currency swaps and options and
forward exchange contracts to hedge some of its foreign currency
exposures. Gains and losses on these contracts are recognized
concurrent with the transaction gains and losses from the
associated exposures. At December 31, 1993, currency swaps and
options had a weighted average remaining life of 2.4 years, and
forward exchange contracts had a weighted average remaining life
of less than one year.
The fair values are estimated based on quoted market prices
of comparable instruments adjusted through interpolation where
necessary for maturity differences. The book values of these
instruments approximate their fair values, except for interest
rate instruments which were entered into for the purpose of
changing the nature of underlying debt obligations.
The risks involved with these instruments have been
significantly mitigated by the Company entering into offsetting
positions. In the event of default by a counterparty, the risk
in these transactions is limited to the cost of replacing the
instrument at current market rates. All transactions are with
major banks and other substantial financial institutions.
Although the Company may be exposed to losses in the event of
nonperformance by counterparties and interest and currency rate
movements, it does not anticipate significant losses due to these
financial arrangements.
NOTE 11 - POST EMPLOYMENT BENEFITS
- ----------------------------------
The Company maintains defined benefit employee retirement
plans covering most domestic and certain foreign employees. The
Company also has various defined contribution and savings plans
covering certain employees. Plan benefits for defined benefit
employee retirement plans are based primarily on years of service
and compensation. The Company's funding policy is consistent
with national laws and regulations. Plan assets include
marketable equity securities, insurance contracts, corporate and
government debt securities, real estate and cash.
The components of pension expense for the Company's domestic
and foreign plans are set forth below.
<TABLE>
<CAPTION>
1993
1992 1991
-----
- ----- -----
<S> <C>
<C> <C>
Defined benefit plans:
Service cost (benefits earned during the period) $16.1
$14.1 $13.1
Interest cost on projected benefit obligations 38.0
35.4 31.2
Actual return on plan assets (73.4)
(24.7) (74.8)
Net amortization 1.6
1.2 1.1
Deferred investment gain (loss) 35.0
(8.6) 45.2
-----
- ----- -----
17.3
17.4 15.8
-----
- ----- -----
Defined contribution and savings plans 10.1
12.6 11.5
-----
- ----- -----
$27.4
$30.0 $27.3
=====
===== =====
</TABLE>
<PAGE>41
NOTE 11 - POST EMPLOYMENT BENEFITS (Continued)
- ----------------------------------
The following table presents reconciliations of defined
benefit plans' funded status with amounts recognized in the
Company's consolidated balance sheets as part of other assets and
other long-term liabilities. Plans with assets exceeding the
accumulated benefit obligation (ABO) are segregated by column
from plans with ABO exceeding assets. Assets exceed ABO for all
domestic plans.
<TABLE>
<CAPTION>
1993
1992
-----------------
- ------------------
Assets ABO
Assets ABO
exceed exceeds
exceed exceeds
ABO assets
ABO assets
------ -------
- ------ -------
<S> <C> <C>
<C> <C>
Actuarial present value
of benefit obligations:
Vested $396.9 $ 32.9
$322.8 $ 28.4
Nonvested 25.2 5.3
19.0 5.4
------ ------
- ------ ------
Accumulated benefit obligation 422.1 38.2
341.8 33.8
Provision for future salary increases 104.3 13.1
68.9 10.9
------ ------
- ------ ------
Projected benefit obligation 526.4 51.3
410.7 44.7
Plan assets at fair value 484.9 6.4
420.5 5.8
------ ------
- ------ ------
Plan assets in excess of (less than)
projected benefit obligation (41.5) (44.9)
9.8 (38.9)
Unrecognized net loss (gain) 20.2 8.9
2.3 3.5
Unrecognized (negative) prior service
costs 43.7 (5.3)
9.4 (0.4)
Unrecognized net transition obligation 6.5 1.9
6.3 1.8
------ ------
----- ------
Prepaid (accrued) pension cost $ 28.9 $(39.4)
$ 27.8 $(34.0)
====== ======
====== ======
</TABLE>
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation for
defined benefit plans was 7.3% in 1993 and 8.2% in 1992. The
weighted average rate of increase in future compensation levels
was determined using an age specific salary scale and was 5.6% in
1993 and 5.7% in 1992. The weighted average expected long-term
rate of return on plan assets was 8.6% in 1993 and 8.5% in 1992.
In addition to providing pension benefits, the Company,
primarily in the United States, provides certain health care and
life insurance benefits for most retired employees. In 1992, the
Company adopted Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other Than
Pensions. The Company elected to immediately recognize the
cumulative effect of the change in accounting for postretirement
benefits of $176.9 ($116.8 net of income tax benefit) which
represents the accumulated postretirement benefit obligation
existing at January 1, 1992. In addition, the effect of adopting
the new rules increased 1992 net periodic postretirement benefit
cost by $17.4 ($11.5 net of income tax benefit). Prior to 1992,
the cost of retiree health care and life insurance benefits was
recognized as an expense as benefits were incurred. The cost of
providing these benefits in the United States was $3.4 in 1991.
The cost of providing these benefits to retirees outside the
United States was not significant. Net periodic postretirement
benefit cost includes the following components:
<PAGE>42
NOTE 11 - POST EMPLOYMENT BENEFITS (Continued)
- ----------------------------------
1993 1992
----- -----
Service cost $ 6.0 $ 6.6
Interest cost 10.3 15.6
Amortization of negative
prior service cost (14.3) -
----- -----
$ 2.0 $22.2
===== =====
The following table presents the plan's funded status
reconciled with amounts recognized in the Company's consolidated
balance sheets as part of other long-term liabilities:
December 31, December 31,
1993 1992
------------ ------------
Accumulated postretirement benefit
obligation:
Retirees $ 55.5 $ 49.1
Fully eligible, active plan participants 52.6 41.3
Other active plan participants 37.7 30.8
----- ------
145.8 121.2
Unrecognized negative prior service cost 61.5 76.2
Unrecognized net loss (16.8) (3.1)
----- ------
Accrued postretirement benefit cost $190.5 $194.3
====== ======
In December 1992, the Company amended its retiree health
care benefit plan to require that, beginning in 1994, employees
have a certain number of years of service to be eligible for any
retiree health care benefit. The retiree health care plan
anticipates certain cost-sharing changes that will go into effect
in 1995 which limit the annual increase in the Company's share of
retiree health care costs. The Company continues to fund benefit
costs on a pay-as-you-go basis with the retiree paying a portion
of the costs.
The health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 11.1% in 1993
and was assumed to decrease gradually to 5.75% in 2005 and remain
at that level thereafter. For retirees under age 65, plan
features limit the health care cost trend rate assumption to a
maximum of 8% for years 1994 and later. The health care cost
trend rate assumption has a significant effect on the amounts
reported. Increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated
postretirement benefit obligation by 13% and the aggregate of the
service and interest cost components of net periodic
postretirement benefit cost for 1993 by 11%.
The discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 31, 1993
and 8.25% at December 31, 1992.
<PAGE>43
NOTE 12 - RELATED PARTY TRANSACTIONS
- ------------------------------------
The Company purchased raw materials and services totalling
$39.4 in 1993, $43.5 in 1992, and $44.4 in 1991 from The Dow
Chemical Company and its affiliates. The Company believes that
the costs of such purchases were competitive with alternative
sources of supply. Other transactions between the Company and
related parties were not material.
NOTE 13 - INCOME TAXES
- ----------------------
The components of income (loss) before income taxes are as
follows:
1993 1992 1991
-------- ------- ------
U.S. companies $(516.7) $(20.8) $115.4
Non-U.S. companies 94.7 70.8 93.6
------- ------ ------
$(422.0) $ 50.0 $209.0
======= ====== ======
The components of the income tax provision (benefit) are as
follows:
1993 1992 1991
-------- ------- ------
Current
U.S. federal $ 11.7 $ 2.2 $25.7
U.S. state 2.6 2.5 6.3
Non-U.S. 37.9 59.9 56.6
------- ----- -----
52.2 64.6 88.6
------- ----- -----
Deferred
U.S. federal (205.4) (26.7) (16.1)
Non-U.S. 2.3 (27.8) (14.2)
------- ----- -----
(203.1) (54.5) (30.3)
------- ----- -----
$(150.9) $10.1 $58.3
======= ===== =====
The tax effects of the principal temporary differences
giving rise to deferred tax assets and liabilities were as
follows:
December 31, December 31,
1993 1992
------------ ------------
Implant costs $225.0 $ 15.7
Accrued expenses 62.8 45.8
Postretirement health care and life
insurance 63.0 66.0
Basis in inventories 24.8 25.3
Tax credit and net operating loss
carry forwards 5.6 22.7
Other 20.9 17.5
------ -----
402.1 193.0
Valuation allowance (3.5) (3.5)
------ -----
398.6 189.5
------ -----
Property, plant and equipment (60.1) (64.3)
Other (5.8) (4.2)
------ -----
(65.9) (68.5)
------ -----
Net deferred tax asset $332.7 $121.0
====== ======
<PAGE>44
NOTE 13 - INCOME TAXES (Continued)
- ----------------------
At December 31, 1993, income and remittance taxes have not
been recorded on $198.7 of undistributed earnings of foreign
subsidiaries, either because any taxes on dividends would be
offset substantially by foreign tax credits or because the
Company intends to indefinitely reinvest those earnings. Cash
paid during the year for income taxes, net of refunds received,
was $72.5 in 1993, $68.2 in 1992, and $90.9 in 1991.
The effective rates of (35.8)% for 1993, 20.2% for 1992, and
27.9% for 1991 differ from the U.S. federal statutory income tax
rate in effect during those years for the following reasons:
Year ended December 31,
1993 1992 1991
------ ------ ------
Statutory rate (35.0)% 34.0% 34.0%
Foreign taxes, net 0.1 (16.4) (8.0)
Foreign sales corporation (0.5) (1.9) (1.7)
State income taxes 0.4 3.2 2.0
Other, net (0.8) 1.3 1.6
----- ----- ----
Effective rate (35.8)% 20.2% 27.9%
===== ==== ====
In the first quarter of 1992, the Company adopted Statement
of Financial Accounting Standards No. 109 (SFAS 109), Accounting
for Income Taxes, which requires an asset and liability approach
in the measurement of deferred taxes. Financial statements prior
to 1992 have not been restated for this change in accounting
principle. The cumulative effect of adopting SFAS 109 as of
January 1, 1992, increased 1992 net income by $16.4. Except for
the cumulative effect, the change did not have a material effect
on operating results for the periods presented.
On August 11, 1993, the Revenue Reconciliation Act of 1993
was signed into law. The Act increased the U.S. corporate
statutory tax rate from 34% to 35% for years beginning after
December 31, 1992, changed the deductibility of certain expenses
and extended certain tax credits. The effect of this retroactive
increase in the statutory tax rate on 1993 earnings was offset by
a gain from the revaluation of net deferred tax assets, and the
net impact of these changes did not have a material impact on the
Company's effective tax rate for 1993.
NOTE 14 - COMMON STOCK
- ----------------------
The outstanding shares of the Company's common stock are
held in equal portions by Corning Incorporated and Dow Holdings
Inc., a wholly-owned subsidiary of The Dow Chemical Company.
There were no changes in outstanding shares during 1993, 1992 or
1991.
NOTE 15 - COMMITMENTS AND GUARANTEES
- ------------------------------------
The Company leases certain real and personal property under
agreements which generally require the Company to pay for
maintenance, insurance and taxes. Rental expense was $46.2 in
1993, $48.4 in 1992, and $46.9 in 1991. The minimum future
rental payments required under noncancellable operating leases at
December 31, 1993, in the aggregate are $129.2, including the
following amounts due in each of the next five years: 1994 -
$33.8, 1995 - $24.4, 1996 - $17.1, 1997 - $15.0, and 1998 -
$12.8.
At December 31, 1993, the Company had issued financial
guarantees with off-balance sheet risk, which total approximately
$11.1. These guarantees are issued primarily to support employee
housing programs. The Company believes it will not have to
perform under these agreements as the likelihood of default by
the primary parties is remote.
<PAGE>45
NOTE 16 - INDUSTRY SEGMENT AND FOREIGN OPERATIONS
- -------------------------------------------------
The Company's operations are classified as a single industry
segment. Financial data by geographic area are presented below:
1993 1992 1991
-------- -------- --------
Net sales to customers:
United States $ 830.6 $ 822.6 $ 797.8
Europe 490.9 528.7 476.8
Asia 619.9 500.8 467.4
Other 102.3 103.6 103.4
-------- -------- --------
Net sales $2,043.7 $1,955.7 $1,845.4
======== ======== ========
Interarea sales:
United States $ 219.6 $ 228.3 $ 224.7
Europe 54.7 45.1 42.7
Asia 34.7 25.2 23.6
Other 0.3 1.9 0.6
-------- -------- --------
Total interarea sales $ 309.3 $ 300.5 $ 291.6
======== ======== ========
Operating profit:
United States $ 187.5 $ 143.7 $ 185.6
Europe 57.8 38.1 56.5
Asia 73.3 74.0 70.8
Other and eliminations 7.4 (2.4) 12.5
-------- -------- --------
326.0 253.4 325.4
General corporate expenses (722.1) (163.4) (116.6)
Unallocated income (expense), net (25.9) (40.0) 0.2
-------- -------- --------
Income before income taxes $ (422.0) $ 50.0 $ 209.0
======== ======== ========
Identifiable assets:
United States $1,525.8 $1,297.8 $1,271.4
Europe 460.3 488.9 510.6
Asia 586.2 507.7 466.9
Other and eliminations (253.4) (199.7) (204.2)
-------- -------- --------
2,318.9 2,094.7 2,044.7
Corporate assets 943.4 96.0 75.2
-------- -------- --------
Total assets $3,262.3 $2,190.7 $2,119.9
======== ======== ========
Interarea sales are made on the basis of arm's length
pricing. Operating profit is total sales less certain operating
expenses. Special items have been identified principally with
the United States and Europe in computing operating profit for
each area. General corporate expenses, equity in earnings of
associated companies, interest income and expense, certain
currency gains (losses), minority interests' share in income, and
income taxes have not been reflected in computing operating
profit.
General corporate expenses include certain research and
development costs, corporate administrative personnel and
facilities costs not specifically identified with a geographic
area, and implant costs. Identifiable assets are those operating
assets identified with the operations in each geographic area.
Corporate assets are principally cash and cash equivalents,
short-term investments, intangible assets, investments accounted
for on the equity basis, corporate facilities and implant
insurance receivable.
<PAGE>46
<TABLE>
DOW CORNING CORPORATION
-----------------------
SUPPLEMENTARY DATA - QUARTERLY FINANCIAL
INFORMATION
- ----------------------------------------------------
YEARS ENDED DECEMBER 31, 1993 AND 1992 (Unaudited)
--------------------------------------------------
(in millions of dollars, except per share amounts)
<CAPTION>
QUARTER ENDED: March 31 June 30
September 30 December 31
-------- -------
- ------------ -----------
<S> <C> <C>
<C> <C>
1993:
Net sales $490.8 $519.9
$512.0 $521.0
Gross profit 161.2 166.9
162.6 149.1
Income (loss) before cumulative
effects of changes in
accounting principles 30.7 36.3
30.2 (384.2)
Net income (loss) 30.7 36.3
30.2 (384.2)<F1>
Net income (loss) per share:
Income (loss) before cumulative
effects of changes in
accounting principles 12.28 14.52
12.08 (153.68)
Net income (loss) 12.28 14.52
12.08 (153.68)
1992:<F2>
Net sales $484.0 $488.4
$500.6 $482.7
Gross profit 154.2 162.1
151.9 144.3
Income (loss) before cumulative
effects of changes in
accounting principles 17.0 3.4
13.5 (5.5)
Net income (loss) (83.4)<F3> 3.4<F3>
13.5 (5.5)<F4>
Net income (loss) per share:
Income (loss) before cumulative
effects of changes in
accounting principles 6.80 1.36
5.40 (2.20)
Net income (loss) (33.36) 1.36
5.40 (2.20)
<FN>
<F1> Includes a pretax charge related to breast implants of
$640.0 ($415.0 net of income
tax benefit); see Note 2 of Notes to Consolidated Financial
Statements for a discussion
of this matter.
<F2> In December 1992, the Company announced its decision to
adopt Statement of Financial
Accounting Standards No. 106 effective as of January 1, 1992.
Previous 1992 interim
period results were restated as a result of the adoption. This
restatement had the effect
of reducing originally reported gross profits by $3.5 and income
before cumulative effects
of changes in accounting principles by $2.9 in each of the first
three quarters of 1992.
In addition, the restatement reduced net income in the first
quarter of 1992 by $116.8 for
the cumulative effect of the change in accounting principle for
periods prior to 1992.
<F3> Includes pretax charges related to breast implants of $24.0
in the first quarter of
1992 ($15.8 net of income tax benefit), and $45.0 in the second
quarter of 1992 ($29.7 net
of income tax benefit); see Note 2 of Notes to Consolidated
Financial Statements for a
discussion of these matters.
<F4> Includes pretax charges related to special items of $40.0
($26.4 net of income tax
benefit); see Note 3 of Notes to Consolidated Financial
Statements for a discussion of
these matters.
The Notes to Consolidated Financial Statements are an
integral part of these
financial statements.
</TABLE>
<PAGE>47
<TABLE>
DOW CORNING CORPORATION
-----------------------
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
------------------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
--------------------------------------------
(in millions of dollars)
<CAPTION>
Adjustment
Sales
Balance at for fully
and Balance
beginning Additions depreciated
Retire- SFAS No. 52 at end
of year at cost<F1> assets<F2>
ments adjustments of year
---------- ----------- ----------- ---
- ---- ----------- -------
<S> <C> <C> <C> <C>
<C> <C>
1993:
Land $ 65.5 $ 1.8 $ - $
0.3 $ 4.6 $ 71.6
Land improvements 53.8 5.7 -
1.0 0.8 59.3
Buildings 413.1 18.0 -
7.7 12.6 436.0
Machinery and equipment 1,906.5 164.2 -
61.5 2.1 2,011.3
Construction-in-progress 148.9 (7.4) -
7.4 (1.6) 132.5
-------- -------- ------- ----
- ---- ------- --------
$2,587.8 $ 182.3 $ - $
77.9 $ 18.5 $2,710.7
======== ======== =======
======== ======== ========
1992:
Land $ 57.5 $ 7.3 $ - $
1.5 $ 2.2 $ 65.5
Land improvements 49.9 3.0 4.7
1.4 (2.4) 53.8
Buildings 391.3 31.1 18.5
15.1 (12.7) 413.1
Machinery and equipment 1,533.9 226.6 262.1
81.5 (34.6) 1,906.5
Construction-in-progress 179.4 (35.3) -
0.1 4.9 148.9
-------- -------- ------- ----
- ---- ------- --------
$2,212.0 $ 232.7 $ 285.3 $
99.6 $ (42.6) $2,587.8
======== ======== =======
======== ======== ========
1991:
Land $ 55.4 $ 2.2 $ - $
2.0 $ 1.9 $ 57.5
Land improvements 40.4 10.4 -
0.6 (0.3) 49.9
Buildings 354.3 28.3 -
2.0 10.7 391.3
Machinery and equipment 1,272.3 261.0 -
55.0 55.6 1,533.9
Construction-in-progress 235.9 (57.9) -
- - 1.4 179.4
-------- -------- ------- ----
- ---- ------- --------
$1,958.3 $ 244.0 $ - $
59.6 $ 69.3 $2,212.0
======== ======== =======
======== ======== ========
<FN>
<F1> Includes transfers of completed construction to
depreciating asset accounts listed and property of newly acquired
companies.
<F2> In the first quarter of 1992, the Company discontinued its
practice in the United States of writing off fully depreciated
assets which remain in service. This change enables the Company
to follow one practice worldwide of writing off these assets only
upon their retirement or other disposal. In conjunction with
this change, the Company wrote back on its books those assets
still in service which were previously written off.
</TABLE>
<PAGE>48
<TABLE>
DOW CORNING CORPORATION
-----------------------
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
------------------------------------------
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
---------------------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
--------------------------------------------
(in millions of dollars)
<CAPTION>
Additions
charged to Adjustment
Sales
Balance at operating for fully
and Balance
beginning costs and depreciated
Retire- SFAS No. 52 at end
of year expenses<F1> assets<F2>
ments adjustments of year ----------
- ------------ ----------- ------- ----------- -------
<S> <C> <C> <C>
<C> <C> <C>
1993:
Land improvements $ 31.6 $ 3.8 $ - $
0.5 $(0.2) $ 34.7
Buildings 167.9 18.7 -
3.4 5.4 188.6
Machinery and equipment 1,197.0 168.2 -
47.1 3.2 1,321.3
-------- ------ ------- --
- --- ----- --------
$1,396.5 $190.7 $ -
$51.0 $ 8.4 $1,544.6
======== ====== =======
===== ====== ========
1992:
Land improvements $ 23.8 $ 4.1 $ 4.7 $
0.8 $(0.2) $ 31.6
Buildings 142.7 19.1 18.5
6.0 (6.4) 167.9
Machinery and equipment 833.6 161.9 262.1
50.0 (10.6) 1,197.0
-------- ------ ------- --
- --- ----- --------
$1,000.1 $185.1 $ 285.3
$56.8 $(17.2) $1,396.5
======== ====== =======
===== ====== ========
1991:
Land improvements $ 20.1 $ 4.1 $ - $
0.5 $ 0.1 $ 23.8
Buildings 122.7 16.7 -
1.7 5.0 142.7
Machinery and equipment 703.8 146.7 -
51.7 34.8 833.6
-------- ------ ------- --
- --- ----- --------
$ 846.6 $167.5 $ -
$53.9 $39.9 $1,000.1
======== ====== =======
===== ====== ========
<FN>
<F1> The methods and rates used in computing the annual
provision for depreciation are described in Note 1 of
accompanying Notes to Consolidated Financial Statements.
<F2> In the first quarter of 1992, the Company discontinued its
practice in the United States of writing off fully depreciated
assets which remain in service. This change enables the Company
to follow one practice worldwide of writing off these assets only
upon their retirement or other disposal. In conjunction with
this change, the Company wrote back on its books those assets
still in service which were previously written off.
</TABLE>
<PAGE>49
<TABLE>
DOW CORNING CORPORATION
-----------------------
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
--------------------------------------------------------
- ------
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
--------------------------------------------
(in millions of dollars)
<CAPTION>
Additions
charged to
Balance at operating
Uncollectible Balance
beginning costs and accounts
SFAS No. 52 at end
of year expenses written
off adjustments of year
--------- --------- ----------
- - ----------- -------
<S> <C> <C> <C>
<C> <C>
Description
- -----------
Allowance for doubtful
accounts - deducted
from accounts and
notes receivable in
the balance sheet
1993 $ 8.4 $ 0.9 $ 0.9
$ - $ 8.4 ======
====== ====== ====== ======
1992 $ 7.7 $ 2.3 $ 1.0
$ (0.6) $ 8.4
====== ====== ======
====== ======
1991 $ 6.1 $ 3.9 $ 2.4
$ 0.1 $ 7.7
====== ====== ======
====== ======
</TABLE>
<PAGE>50
<TABLE>
DOW CORNING CORPORATION
-----------------------
SCHEDULE IX - SHORT-TERM BORROWINGS
-----------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
--------------------------------------------
(in millions of dollars)
<CAPTION>
Weighted Maximum
average amount Average
Weighted
Balance interest outstanding amount
average
at end at end at any
outstanding interest rate
of year of year month end during
year during year
------- -------- ----------- ---------
- -- -------------
<S> <C> <C> <C> <C>
<C>
1993:
Banks $233.7 3.8% $258.5 $181.1
3.8%
1992:
Banks $160.0 4.6% $193.0 $144.0
4.7%
Commercial paper - - 223.4 32.2
4.3
------
$160.0
======
1991:
Banks $ 37.4 7.3% $ 68.3 $ 41.6
7.8%
Commercial paper 21.9 5.5 173.8 151.6
6.0
------
$ 59.3
======
<FN>
Average short-term borrowings were determined based on the
average amounts outstanding during each month. The weighted
average interest rate during the year was computed by dividing
actual interest expense in each year by average short-term
borrowings in such year. At December 31, 1991, all short-term
borrowings outstanding from banks were incurred by foreign
subsidiaries and were payable in foreign currencies.
</TABLE>
<PAGE>51
DOW CORNING CORPORATION
-----------------------
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
-------------------------------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
--------------------------------------------
(in millions of dollars)
Charged to operating costs and
expenses for year ended December 31,
------------------------------------
1993 1992 1991
---- ---- ----
Depreciation and amortization $197.1 $190.6 $171.5
Maintenance and repairs 88.6 91.3 82.9
Advertising costs 11.7 14.0 15.6
<PAGE>52
DOW CORNING CORPORATION
-----------------------
EXHIBIT INDEX
-------------
These exhibits are numbered in accordance
with Exhibit Table I of Item 601 of Regulation S-K
Exhibit # Description Page Number
--------- ----------- -----------
3.1 Restated Articles of Incorporation 53
of Dow Corning Corporation dated
March 25, 1988
3.2 By-Laws of Dow Corning Corporation
dated June 25, 1993 66
4 Dow Corning Corporation agrees to
furnish the Securities and Exchange
Commission upon its request a copy
of any instrument which defines the
rights of holders of long-term debt
of the registrant and all of its
subsidiaries for which consolidated
or unconsolidated financial statements
are required to be filed.
12 Computation of ratio of earnings to
fixed charges 102
21 Subsidiaries of the Registrant --
has been omitted in accordance with
provisions of General Instruction J
of Form 10-K.
23 Consent of Price Waterhouse 103
C&S-510 (Rev. 1-84) EXHIBIT 3.1
-----------
MICHIGAN DEPARTMENT OF COMMERCE-CORPORATION AND SECURITIES
BUREAU
(FOR BUREAU USE ONLY) Date Received
APR 14 1988
FILED (date stamped)
APR 19 1988
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
(stamped)
RESTATED ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
(Please read instructions and Paperwork Reduction Act notice on
last page)
Pursuant to the provisions of Act 284, Public Acts of 1972,
as amended, the undersigned corporation executes the following
Articles:
1. The present name of the corporation is:
DOW CORNING CORPORATION
2. The corporation identification number (CID) assigned by
the Bureau is:
158-765
3. All former names of the corporation are:
4. The date of filing the original Articles of Incorporation
was:
February 17, 1943
The following Restated Articles of Incorporation supersede
the Articles of Incorporation as amended and shall be the
Articles of Incorporation for the corporation:
ARTICLE I
The name of the corporation is:
DOW CORNING CORPORATION
ARTICLE II
The purpose or purposes for which the corporation is organized
are:
The purpose or purposes for which the corporation is
organized are:
1. To engage in any activity within the purposes for which
corporations may be organized under the Michigan
Business Corporation Act.
(See attached sheets for continuation)
ARTICLE III
The total authorized capital stock is:
1. Common shares 2,500,000 Par Value Per Share $ 5.00
---------------- --------
Preferred shares Par Value Per Share $
------------- --------
and/or shares without par value as follows:
2. Common shares Stated Value Per Share $
---------------- --------
Preferred shares Stated Value Per Share $
------------- --------
3. A statement of all or any of the relative rights, preferences
and limitations of the shares of each class is as follows:
The shares of stock shall all be of one and the same
class and each shall have full voting powers and each
shareholder shall be entitled to a number of votes
equal to the number of shares held by him.
ARTICLE IV
1. The address of the current registered office is:
615 Griswold Street Detroit, Michigan 48226
--------------------------------------- ----------
(Street Address) (City) (Zip Code)
2. The mailing address of the current registered office if
different than above:
----------------------------------------, Michigan ----------
(P.O. Box) (City) (Zip Code)
3. The name of the current resident agent is:
CT Corporation System (line drawn through) The Corporation
Company (handwritten)
ARTICLE V (Optional. Delete if not applicable.) SEE ATTACHED
------------
*****************************************************************
When a compromise or arrangement or a plan of reorganization
of this corporation is proposed between this corporation and its
creditors or any class of them or between this corporation and
its shareholders or any class of them, a court of equity
jurisdiction within the state, on application of this corporation
or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of
the creditors or class of creditors or of the shareholders or
class of shareholders to be affected by the proposed compromise
or arrangement or reorganization, to be summoned in such manner
as the court directs. If a majority in number representing 3/4
in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the
proposed compromise or arrangement or a reorganization, agree to
a compromise or arrangement or a reorganization of this
corporation as a consequence of the compromise or arrangement,
the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made,
shall be binding on all the creditors or class of creditors, or
on all the shareholders or class of shareholders and also on this
corporation.
(See Attached Sheet)
*****************************************************************
THE ABOVE PARAGRAPH WAS CROSSED OUT AND "DELETE" TYPED AT THE
LEFT-HAND MARGIN.
ARTICLE VI (Optional. Delete if not applicable.) SEE ATTACHED
------------
*****************************************************************
Any action required or permitted by the act to be taken at
an annual or special meeting of shareholders may be taken without
a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote thereon
were present and voted.
Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given
to shareholders who have not consented in writing.
(See attached Sheet)
*****************************************************************
THE ABOVE PARAGRAPH WAS CROSSED OUT AND "DELETE" TYPED AT THE
LEFT-HAND MARGIN.
ARTICLE VII (Additional provisions, if any, may be inserted
here; attach additional pages if needed.) SEE ATTACHED
*****************************************************************
The shareholders of this corporation shall have a preemptive
right to subscribe for any additional shares of capital stock
(whether unissued or treasury shares), option rights, or
securities having conversion or option rights into capital stock
that may from time
(See Attached Sheet)
*****************************************************************
THE ABOVE PARAGRAPH WAS CROSSED OUT AND "DELETE" TYPED AT THE
LEFT-HAND MARGIN.
5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY
THE UNANIMOUS CONSENT OF THE INCORPORATORS BEFORE THE FIRST
MEETING OF THE BOARD OF DIRECTORS; OTHERWISE, COMPLETE
SECTION (b)
a. [ ] These Restated Articles of Incorporation were duly
adopted on the _____ day of __________, 19_____, in
accordance with the provisions of Section 642 of the
Act by the unanimous consent of the incorporators
before the first meeting of the Board of Directors.
Signed this _____ day of ________________________,
19____________________ ____________________________
______________________ ____________________________
(Signatures of all incorporators; type or print name
under each signature)
b. [X] These Restated Articles of Incorporation were duly
adopted on the 25th day of March , 19 88 , in
-------- -------- ----
accordance with the provisions of Section 642 of the
Act and: (check one of the following)
[ ] were duly adopted by the Board of Directors
without a vote of the shareholders. These
Restated Articles of Incorporation only restate
and integrate and do not further amend the
provisions of the Articles of Incorporation as
heretofore amended and there is no material
discrepancy between those provisions and the
provisions of these Restated Articles.
[x] were duly adopted by the shareholders. The
necessary number of shares as required by statute
were voted in favor of these Restated Articles.
[ ] were duly adopted by the written consent of the
shareholders having not less than the minimum
number of votes required by statute in accordance
with Section 407(1) and (2) of the Act. Written
notice to shareholders who have not consented in
writing has been given. (Note: Written consent
by less than all of the shareholders is permitted
only if such provision appears in the Articles of
Incorporation.)
[ ] were duly adopted by the written consent of all
the shareholders entitled to vote in accordance
with Section 407(3) of the Act.
Signed this 13th day of April , 19 88
-------- -------------- ----
By James R. Jenkins (signed)
-----------------------------------------------
(signature)
J. R. Jenkins, Vice President, Secretary &
-------------------------------------------------
(Type or Print Name and Title) General Counsel
DOCUMENT WILL BE RETURNED TO NAME AND Name of person or
MAILING ADDRESS INDICATED IN THE BOX BELOW. organization
Include name, street and number or P.O. remitting fees:
box), city, state and ZIP code.
DOW CORNING CORPORATION
-----------------------
Dow Corning Corporation -----------------------
Legal Department CO1222 Preparer's name and
P.O. Box 994 business telephone
Midland, MI 48686-0994 number:
Attention: J.R. Jenkins James R. Jenkins
-----------------------
(517) 496-4287
-----------------------
INFORMATION AND INSTRUCTIONS
1. This form is issued under the authority of Act 284, P.A. of
1972, as amended. The articles of incorporation cannot be
restated until this form, or a comparable document, is
submitted.
2. Submit one original copy of this document. Upon filing, a
microfilm copy will be prepared for the records of the
Corporation and Securities Bureau. The original copy will
be returned to the address appearing in the box above as
evidence of filing.
Since this document must be microfilmed, it is important
that the filing be legible. Documents with poor black and
white contrast, or otherwise illegible, will be rejected.
3. This document is to be used pursuant to sections 641 through
643 of the Act for the purpose of restating the articles of
incorporation of a domestic profit corporation. Restated
articles of incorporation are an integration into a single
instrument of the current provisions of the corporation's
articles of incorporation, along with any desired amendments
to those articles.
4. Restated articles of incorporation which do not amend the
articles of incorporation may be adopted by the board of
directors without a vote of the shareholders. Restated
articles of incorporation which amend the articles of
incorporation require adoption by the shareholders.
Restated articles of incorporation submitted before the
first meeting of the board of directors require adoption by
all of the incorporators.
5. Item 2 - Enter the identification number previously assigned
by the Bureau. If this number is unknown, leave it blank.
6. The duration of the corporation should be stated in the
restated articles of incorporation only if it is not
perpetual.
7. This document is effective on the date approved and filed by
the Bureau. A later effective date, no more than 90 days
after the date of delivery, may be stated.
8. If the restated articles are adopted before the first
meeting of the board of directors, this document must be
signed in ink by all of the incorporators. If the restated
articles merely restate and integrate the articles, but do
not amend, this document must be signed in ink by an
authorized officer or agent of the corporation. If the
restated articles amend the articles of incorporation, this
document must be signed in ink by the president, vice-
president, chairperson, or vice-chairperson.
9. FEES: Filing fee (Make remittance payable to State of
Michigan)...$10.00
Franchise fee (payable only if authorized capital
stock has increased) - 1/2 mill (.0005) on each
dollar of increase over highest previous authorized
capital stock.
10. Mail form and fee to:
Michigan Department of Commerce, Corporation and Securities
Bureau, Corporation Division, P.O. Box 30054, Lansing, MI
48909, Telephone (517) 373-0493
ARTICLE II
(Continued)
2. To manufacture, sell and deal in silicon metal, organo-
silicon compounds and other chemicals of all kinds and all
products manufactured or derived therefrom and to do all things
incidental thereto, and to acquire, hold and dispose of all
property necessary or convenient therefor.
3. To manufacture, purchase or otherwise acquire, own,
mortgage, pledge, sell, assign, and transfer, or otherwise
dispose of, to invest, trade, deal in and deal with goods, wares
and merchandise of every class and description.
4. To acquire, purchase, hold and convey real and personal
estate and to mortgage or lease any such real and personal estate
with or without any of its franchises, corporate or otherwise;
the power to hold real and personal estate shall include the
power to take the same by gift, devise or bequest.
5. To acquire, and pay for in cash, stock or bonds of this
corporation or otherwise, the goodwill, rights, assets and
property, and to undertake or assume the whole or any part of the
obligations or liabilities of any person, firm, association, or
corporation.
6. To acquire, hold, use, sell, assign, lease, grant licenses
in respect of, mortgage or otherwise dispose of letters patent of
the United States or any foreign country, patent rights, licenses
and privileges, inventions, improvements and processes,
copyrights, trademarks and tradenames, relating to or useful in
connection with any business of this corporation.
7. To guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the
capital stock of, or any bonds, securities or evidences of
indebtedness created by any other corporation or corporations of
this state or any other state, country, nation or government,
banking corporations or trust companies (provided such stock of
banking corporations or trust companies is acquired as a part of
a plan of reorganization of such banking corporation or trust
company) and, while the owner of the same, to exercise all the
rights, powers and privileges of ownership including the right to
vote thereon if such right be an incident of the same.
8. To enter into, make and perform contracts of every kind and
description with any person, firm, association, corporation,
municipality, county, state, body politic or government or colony
or dependency thereof.
9. To borrow money and issue, sell, or pledge bonds, promissory
notes, bills of exchange, debentures, and other obligations and
evidences of indebtedness whether secured by mortgage, pledge or
otherwise, or unsecured.
10. To acquire, purchase, hold, sell and transfer the shares of
its own capital stock; provided it shall not use its funds or
property for the purchase of its own shares of capital stock when
such use would cause any impairment of the capital of the
corporation, and provided further that shares of its own capital
stock shall not be voted directly or indirectly.
11. To conduct its business in this state, other states, the
District of Columbia, the territories and colonies of the United
States and in foreign countries and the territories and colonies
thereof and have one or more offices out of this state and to
acquire, purchase, hold, mortgage, pledge, assign, transfer and
convey real and personal property out of this state.
12. In general to engage in any business in connection therewith
and incident thereto not forbidden by the laws of the State of
Michigan and with all the powers conferred upon corporations by
the laws of the State of Michigan.
ARTICLE V
The duration of the corporation is perpetual.
ARTICLE VI
The shareholder entitled to vote at an election for
directors may vote, in person or by proxy, the number of shares
owned by him for as many persons as there are directors to be
elected and for whose election he has a right to vote, or to
cumulate his votes by giving one candidate as many votes as the
number of such directors multiplied by the number of his shares,
or by distributing his votes on the same principle among any
member of the candidates.
ARTICLE VII
The shareholders of this corporation shall have a preemptive
right to subscribe for any additional shares of capital stock
(whether unissued or treasury shares), option rights, or
securities having conversion or option rights into capital stock
that may from time to time be issued by this corporation.
ARTICLE VIII
When a compromise or arrangement or a plan of reorganization
of this corporation is proposed between this corporation and its
creditors or any class of them or between this corporation and
its shareholders or any class of them a court of equity
jurisdiction within the state, on application of this corporation
or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of
the creditors or class of creditors or of the shareholders or
class of shareholders to be affected by the proposed compromise
or arrangement or reorganization, to be summoned in such manner
as the court directs. If a majority in number representing 3/4
in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the
proposed compromise or arrangement or a reorganization, agree to
a compromise or arrangement or a reorganization of this
corporation as a consequence of the compromise or arrangement,
the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made,
shall be binding on all the creditors or class of creditors, or
on all the shareholders or class of shareholders and also on this
corporation.
ARTICLE IX
Section 1 - Action or Suit by Others Than the Corporation
---------------------------------------------
The board of directors may authorize the indemnification of
any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the full extent provided by the
Michigan Business Corporation Act from time to time in effect; if
he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation or
its shareholders, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to be
the best interests of the corporation or its shareholders, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful; provided,
however, that except with respect to actions, suits or
proceedings initiated by any such person to enforce his or her
rights to indemnification or advancement of expenses under this
Article or otherwise, the corporation shall indemnify any such
person in connection with an action, suit or proceeding initiated
by such person only if such action, suit or proceeding was
authorized or ratified by the Board of Directors of the
corporation. "Proceeding" as used in this Article shall include
any proceeding within an action or suit.
Section 2 - Action or Suit by the Corporation
---------------------------------
A director of the corporation shall not be personally liable
to the corporation or its shareholders for monetary damages for
breach of his or her, fiduciary duty as a director except for
liability (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for a violation of Section 551(1)
of the Michigan Business Corporation Act, (iv) for any
transaction from which the director derived an improper personal
benefit, or (v) for an act or omission occurring before the date
that this amendment to the Articles of Incorporation becomes
effective in accordance with the pertinent provisions of the
Michigan Business Corporation Act. In addition to the
circumstances in which a director of the Corporation is not
personally liable as set forth in the preceding sentence, a
director shall not be liable to the fullest extent permitted by
any amendment to the Michigan Business Corporation Act hereafter
enacted that further limits the liability of a director. Any
repeal, amendment or other modification of this section shall
not adversely affect any right or protection of any director of
the corporation existing at the time of such repeal, amendment or
other modification for or with respect to any act or omission
occurring prior to the time of such repeal amendment or other
modification.
The board of directors may authorize the indemnification of
any person who was or is a party to or is threatened to be made a
party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was an officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit, or proceeding to
the full extent provided by the Michigan Business Corporation Act
from time to time in effect; if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders and except that
no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his
duty to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such
court shall deem proper.
Section 3 - Indemnification Against Expenses
--------------------------------
(1) To the extent that a director, officer, employee or agent of
a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section
1 or 2 of this Article, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
(2) Any indemnification under Section 1 or 2 of this Article
(unless ordered by a court) shall be made only as authorized in
the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of
conduct set forth in Section 1 and 2 of this Article. Such
determination shall be made in either of the following ways:
(a) By a majority vote of a quorum of the board consisting
of directors who were not parties to the action, suit or
proceeding.
(b) If such quorum described in subdivision (a) is not
obtainable, then by a majority vote of a committee of directors
who are not parties to the action. The committee shall consist
of not less than 2 disinterested directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
ARTICLE X
The corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights, conferred upon shareholders herein are
granted subject to this reservation.
DOW CORNING CORPORATION EXHIBIT 3.2
-----------
BY-LAWS
Adopted at
Annual Shareholders' Meeting
June 12, 1973
As Amended
December 13, 1974
October 1, 1975
February 2, 1977
March 3, 1978
March 23, 1981
March 2, 1984
March 25, 1988
February 6, 1992
February 12, 1992
December 4, 1992
June 25, 1993
DOW CORNING CORPORATION
BY-LAWS
TABLE OF CONTENTS
ARTICLE I - LOCATION OF OFFICES . . . . . . . . . . . . . PAGE 1
ARTICLE II - NOTICES. . . . . . . . . . . . . . . . . . . PAGE 1
SECTION 1 - DELIVERY. . . . . . . . . . . . . . . . . . PAGE 1
SECTION 2 - WAIVER. . . . . . . . . . . . . . . . . . . PAGE 2
ARTICLE III - SHAREHOLDERS . . . . . . . . . . . . . . . PAGE 2
SECTION 1 - PLACE OF MEETINGS . . . . . . . . . . . . . PAGE 2
SECTION 2 - ANNUAL MEETING. . . . . . . . . . . . . . . PAGE 2
SECTION 3 - NOTICE OF ANNUAL MEETING. . . . . . . . . . PAGE 3
SECTION 4 - SPECIAL MEETINGS. . . . . . . . . . . . . . PAGE 3
SECTION 5 - NOTICE OF SPECIAL MEETINGS. . . . . . . . . PAGE 4
SECTION 6 - ACTION WITHOUT A MEETING. . . . . . . . . . PAGE 4
SECTION 7 - FIXING OF RECORD DATE . . . . . . . . . . . PAGE 4
SECTION 8 - VOTING LISTS. . . . . . . . . . . . . . . . PAGE 5
SECTION 9 - QUORUM. . . . . . . . . . . . . . . . . . . PAGE 6
SECTION 10 - PROXIES. . . . . . . . . . . . . . . . . . PAGE 6
SECTION 11 - VOTING OF SHARES - . . . . . . . . . . . . PAGE 7
ELECTION OF DIRECTORS
SECTION 12 - VOTING OF SHARES - . . . . . . . . . . . . PAGE 7
OTHER THAN ELECTION OF DIRECTORS
SECTION 13 - REQUEST FOR FINANCIAL STATEMENT. . . . . . PAGE 7
SECTION 14 - REMOVAL OF DIRECTORS . . . . . . . . . . . PAGE 8
ARTICLE IV - BOARD OF DIRECTORS . . . . . . . . . . . . . PAGE 8
SECTION 1 - GENERAL POWERS. . . . . . . . . . . . . . . PAGE 8
SECTION 2 - NUMBER, TENURE AND QUALIFICATIONS . . . . . PAGE 9
SECTION 3 - REGULAR MEETINGS . . . . . . . . . . . . . PAGE 9
SECTION 4 - SPECIAL MEETINGS. . . . . . . . . . . . . . PAGE 10
SECTION 5 - NOTICE OF SPECIAL MEETINGS. . . . . . . . . PAGE 10
SECTION 6 - PARTICIPATION . . . . . . . . . . . . . . . PAGE 10
SECTION 7 - ACTION WITHOUT A MEETING. . . . . . . . . . PAGE 11
SECTION 8 - QUORUM AND MANNER OF ACTING . . . . . . . . PAGE 11
SECTION 9 - VACANCIES . . . . . . . . . . . . . . . . . PAGE 11
SECTION 10 - COMPENSATION . . . . . . . . . . . . . . . PAGE 12
SECTION 11 - COMMITTEES OF THE BOARD. . . . . . . . . . PAGE 12
SECTION 12 - POWERS OF COMMITTEES . . . . . . . . . . . PAGE 13
SECTION 13 - DIRECTORS' ANNUAL STATEMENT. . . . . . . . PAGE 14
ARTICLE V - OFFICERS. . . . . . . . . . . . . . . . . . . PAGE 14
SECTION 1 - ELECTION AND TERM OF OFFICE . . . . . . . . PAGE 14
SECTION 2 - OFFICES . . . . . . . . . . . . . . . . . . PAGE 15
SECTION 3 - VACANCIES . . . . . . . . . . . . . . . . . PAGE 15
SECTION 4 - CHAIRMAN OF THE BOARD . . . . . . . . . . . PAGE 15
SECTION 5 - PRESIDENT . . . . . . . . . . . . . . . . . PAGE 16
SECTION 6 - VICE PRESIDENTS . . . . . . . . . . . . . . PAGE 16
SECTION 7 - SECRETARY . . . . . . . . . . . . . . . . . PAGE 17
SECTION 8 - TREASURER . . . . . . . . . . . . . . . . . PAGE 17
SECTION 9 - GENERAL COUNSEL . . . . . . . . . . . . . . PAGE 18
SECTION 10 - CONTROLLER . . . . . . . . . . . . . . . . PAGE 18
SECTION 11 - AUDITOR. . . . . . . . . . . . . . . . . . PAGE 19
SECTION 12 - ASSISTANT OFFICERS . . . . . . . . . . . . PAGE 19
ARTICLE VI - EXECUTION OF INSTRUMENTS AND APPOINTMENT
OF PROXIES AND AGENTS . . . . . . . . . . . PAGE 20
SECTION 1 - CONTRACTS AND CONVEYANCES . . . . . . . . . PAGE 20
SECTION 2 - LOANS . . . . . . . . . . . . . . . . . . . PAGE 20
SECTION 3 - CHECKS, DRAFTS AND SO FORTH . . . . . . . . PAGE 20
SECTION 4 - APPOINTMENT OF PROXIES AND AGENTS . . . . . PAGE 21
ARTICLE VII - SEAL. . . . . . . . . . . . . . . . . . . . PAGE 21
ARTICLE VIII - CERTIFICATES OF SHARES AND
THEIR TRANSFER . . . . . . . . . . . . . . PAGE 21
SECTION 1 - SHARE CERTIFICATES. . . . . . . . . . . . . PAGE 21
SECTION 2 - TRANSFER OF SHARES -. . . . . . . . . . . . PAGE 23
ONLY ON BOOKS OF CORPORATION
SECTION 3 - REGISTERED SHAREHOLDERS . . . . . . . . . . PAGE 24
ARTICLE IX - FISCAL YEAR. . . . . . . . . . . . . . . . . PAGE 24
ARTICLE X - DIVIDENDS AND RESERVES. . . . . . . . . . . . PAGE 24
SECTION 1 - DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . PAGE 24
SECTION 2 - SOURCE OF DIVIDENDS . . . . . . . . . . . . PAGE 25
SECTION 3 - RESERVES. . . . . . . . . . . . . . . . . . PAGE 26
ARTICLE XI - INDEMNIFICATION OF OFFICERS,
DIRECTORS AND EMPLOYEES . . . . . . . . . . PAGE 26
SECTION 1 - ACTION OR SUIT BY OTHERS THAN
THE CORPORATION . . . . . . . . . . . . . . PAGE 26
SECTION 2 - ACTION OR SUIT BY THE CORPORATION . . . . . PAGE 28
SECTION 3 - INDEMNIFICATION AGAINST EXPENSES. . . . . . PAGE 30
SECTION 4 - REIMBURSEMENT OF EXPENSES . . . . . . . . . PAGE 31
SECTION 5 - RIGHT NOT EXCLUSIVE . . . . . . . . . . . . PAGE 31
SECTION 6 - RIGHT TO INDEMNIFICATION SURVIVES . . . . . PAGE 32
SECTION 7 - INSURANCE TO PROTECT OFFICERS,
DIRECTORS, EMPLOYEES, AND AGENTS. . . . . . PAGE 32
SECTION 8 - MERGED AND REORGANIZED CORPORATION. . . . . PAGE 33
ARTICLE XII - AMENDMENT OF BY-LAWS. . . . . . . . . . . . PAGE 33
DOW CORNING CORPORATION
BY-LAWS
ARTICLE I - LOCATION OF OFFICES
The registered office shall be at the offices of The
Corporation Company, 615 Griswold Street, Detroit, Michigan
48226. The principal office for the transaction of business
shall be at the Dow Corning Center in Williams Township, Bay
County, State of Michigan. The corporation may also have offices
at such other places as the Board of Directors may from time to
time appoint or the business of the corporation may require.
ARTICLE II - NOTICES
Section l - Delivery
--------
Whenever under the provisions of these By-Laws, notice is
required to be given to any director or shareholder, it shall not
be construed to mean personal notice, but such notice may also be
given in writing, by mail, by depositing the same in a post
office or letter box, in a post-paid sealed wrapper, addressed to
such director or shareholder, at the address designated by him
for that purpose, or, if none is designated, at his last known
address and such notice shall be deemed to be given at the time
when the same shall be deposited.
Section 2 - Waiver
------
When the corporation, board or committee thereof may take
action after notice to any person or after lapse of a prescribed
period of time, the action may be taken without notice and
without lapse of the period of time, if at any time before or
after the action is completed the person entitled to notice or to
participate in the action to be taken submits a signed waiver of
such requirements.
ARTICLE III - SHAREHOLDERS
Section l - Place of Meetings
-----------------
Meetings of the shareholders shall be held at Dow Corning
Center in Williams Township, Bay County, State of Michigan, or at
such other place either within or without the State of Michigan
as shall be stated in the notice of meeting.
Section 2 - Annual Meeting
--------------
Unless otherwise agreed to by unanimous consent of the
shareholders, the annual meeting of shareholders shall be held on
the first Friday following the first Wednesday of March in each
year, if not a legal holiday, and if a legal holiday, then on the
next business day following, at 9:00 a.m., for the purpose of
electing, by a plurality vote, a board of directors to serve
until the next annual meeting of shareholders and until their
successors are elected or chosen and qualify, and for the
transaction of such other business as may properly come before
the meeting.
Section 3 - Notice of Annual Meeting
------------------------
Written notice of the time, place and purposes of the annual
meeting shall be given to each shareholder entitled to vote at
the meeting, not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4 - Special Meetings
----------------
Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called
by the chairman of the board or the president, and shall be
called by the chairman of the board or the president or secretary
at the request in writing by shareholders owning 50 percent in
amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting. Business transacted
at all special meetings shall be confined to the purpose or
purposes stated in the call.
Section 5 - Notice of Special Meetings
--------------------------
Written notice of a special meeting of shareholders stating
the time, place and purposes thereof, shall be given not less
than ten (10) nor more than sixty (60) days before the date of
the meeting, to each shareholder entitled to vote at the meeting.
Section 6 - Action Without a Meeting
------------------------
Any action required or permitted to be taken at an annual or
special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote, if all the shareholders
entitled to vote thereon consent thereto in writing.
Section 7 - Fixing of Record Date
---------------------
(1) For the purpose of determining shareholders entitled to
notice of and to vote at a meeting of shareholders or an
adjournment thereof, or to express consent or to dissent from a
proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of a dividend or
allotment of a right, or for the purpose of any other action, the
board of directors may fix, in advance, a date as the record date
for any such determination of shareholders. The date shall not
be more than sixty (60) nor less than ten (10) days before the
date of the meeting, nor more than sixty (60) days before any
other action.
(2) If a record date is not fixed (a) the record date for
determination of shareholders entitled to notice of or to vote at
a meeting of shareholders shall be the close of business on the
day next preceding the day on which notice is given, or, if no
notice is given, the day next preceding the day on which the
meeting is held, and (b) the record date for determining
shareholders for any purpose other than that specified in
subdivision (a) shall be the close of business on the day on
which the resolution of the board relating thereto is adopted.
Section 8 - Voting Lists
------------
The secretary shall make and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or any
adjournment thereof. The list shall:
(a) Be arranged alphabetically within each class and
series, with the address of, and the number of shares
held by, each shareholder.
(b) Be produced at the time and place of the meeting.
(c) Be subject to inspection by any shareholder during the
whole time of the meeting.
(d) Be prima facie evidence as to who are the shareholders
entitled to examine the list or to vote at the meeting.
Section 9 - Quorum
------
Shares entitled to cast a majority of the votes at a meeting
constitute a quorum at the meeting. The shareholders present in
person or by proxy at such meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum. Whether or not a
quorum is present, the meeting may be adjourned by a vote of the
shares present.
Section 10 - Proxies
-------
A shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize
other persons to act for him by proxy. A proxy shall be signed
by the shareholder or his authorized agent or representative and
filed with the secretary before or at the time of the meeting or
action. A proxy is not valid after the expiration of three (3)
years from its date unless otherwise provided in the proxy.
Section 11 - Voting of Shares - Election of Directors
-----------------------------------------
Every shareholder entitled to vote at an election for
directors may vote in person or by proxy the number of shares of
stock owned by him for as many persons as there are directors to
be elected and for whose election he has the right to vote or to
cumulate his votes by giving one (1) candidate as many votes as
the number of such directors multiplied by the number of his
shares, or by distributing his votes on the same principle among
any number of the candidates. The entire number of directors to
be elected shall be balloted for at one and the same time and not
separately.
Section 12 - Voting of Shares - Other than Election of Directors
---------------------------------------------------
Each outstanding share entitled to vote shall be entitled to
one (1) vote upon each matter submitted to a vote at a meeting of
shareholders.
Section 13 - Request for Financial Statement
-------------------------------
(1) Upon written request of a shareholder, the secretary
shall mail to the shareholder its balance sheet as at the end of
the preceding fiscal year; its statement of income for such
fiscal year; and, if prepared by the corporation, its statement
of source and application of funds for such fiscal year.
(2) A person who is a shareholder of record of the
corporation, upon at least ten (10) days' written demand may
examine for any proper purpose in person or by agent or attorney,
during usual business hours, its minutes of shareholders'
meetings and record of shareholders and make extracts therefrom.
Section 14 - Removal of Directors
--------------------
At any meeting of shareholders a director may, by a vote of
a majority of shares entitled to vote at an election of
directors, be removed from office, with or without cause and
another elected in his place. If the shareholders remove a
director and fail to elect another in his place the vacancy may
be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the board.
ARTICLE IV - BOARD OF DIRECTORS
Section 1 - General Powers
--------------
The business and affairs of the corporation shall be managed
by its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not
by statute or by the Articles of Incorporation or by these By-
Laws directed or required to be exercised or done by the
shareholders.
Section 2 - Number, Tenure and Qualifications
---------------------------------
The maximum number of directors which shall constitute the
whole board shall be seventeen (17). Directors need not be
shareholders. Directors shall be elected by the shareholders at
the annual meeting of shareholders of the corporation, and each
director shall be elected to serve until the next annual meeting
of shareholders and until his successor shall be elected and
shall qualify.
Section 3 - Regular Meetings
----------------
A regular meeting of the board of directors shall be held
without other notice than this by-law immediately after, and at
the same place as, the annual meeting of shareholders. The board
of directors may provide, by resolution, the time and place,
either within or without the State of Michigan for the holding of
additional regular meetings without other notice than such
resolution.
Section 4 - Special Meetings
----------------
Special meetings of the board of directors may be called by
or at the request of the chairman, the president, the secretary,
or any two directors. The person or persons authorized to call
special meetings of the board of directors may fix any place,
either within or without the State of Michigan, as the place for
holding any special meeting of the board of directors called by
them.
Section 5 - Notice of Special Meetings
--------------------------
Written or telegraphic notice of any special meeting shall
be given to each director at least five (5) days prior thereto.
The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends
a meeting for the express purpose of objecting to the transaction
of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
Section 6 - Participation
-------------
A member of the board or a committee designated by the board
may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation
in a meeting pursuant to this Section constitutes presence in
person at the meeting.
Section 7 - Action Without a Meeting
------------------------
Action required or permitted to be taken pursuant to
authorization voted at a meeting of the board or a committee
thereof, may be taken without a meeting if, before or after the
action, all members of the board or of the committee consent
thereto in writing. The written consents shall be filed with the
minutes of the proceedings of the board or committee. The
consent has the same effect as a vote of the board or committee
for all purposes.
Section 8 - Quorum and Manner of Acting
---------------------------
A majority of the directors then in office shall constitute
a quorum. The acts of a majority of the directors present at any
meeting at which a quorum is present shall be the acts of the
board of directors, except as may be otherwise specifically
provided by statute or by the Articles of Incorporation or by
these By-Laws.
Section 9 - Vacancies
---------
Vacancies in the board of directors may be filled by the
affirmative vote of a majority of the remaining directors and
each person so elected to fill a vacancy shall be a director
until his successor is elected by the shareholders who may make
such election at the next annual meeting of the shareholders or
any special meeting duly called for that purpose and held prior
thereto.
Section 10 - Compensation
------------
Directors shall receive such salary for their services as
shall from time to time be determined by resolution of the board,
provided that nothing herein contained shall be construed to
preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 11 - Committees of the Board
-----------------------
(1) The board may designate one (1) or more committees;
each committee to consist of one (1) or more of the directors of
the corporation. The board may designate one (1) or more
directors as alternate members of a committee, who may replace an
absent or disqualified member at a meeting of the committee.
In the absence or disqualification of a member of the committee,
the members thereof present at a meeting and not disqualified
from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the board to act at the
meeting in place of such an absent or disqualified member.
(2) A committee, and each member thereof, shall serve at
the pleasure of the board.
Section 12 - Powers of Committees
--------------------
A committee designated pursuant to Article IV, Section 11 to
the extent provided in the resolution of the board, may exercise
all powers and authority of the board in management of the
business and affairs of the corporation. However, such a
committee does not have power or authority to:
(a) Amend the Articles of Incorporation.
(b) Adopt an agreement of merger or consolidation.
(c) Recommend to shareholders the sale, lease or exchange
of all or substantially all of the corporation's
property and assets.
(d) Recommend to shareholders a dissolution of the
corporation or a revocation of a dissolution.
(e) Amend the By-laws of the corporation.
(f) Fill vacancies in the board.
(g) Fix compensation of the directors for serving on the
board or on a committee.
(h) Declare a dividend or to authorize the issuance of
stock.
(i) Elect or appoint a chairman, president, vice presi-
dents, secretary or treasurer.
Section 13 - Directors' Annual Statement
---------------------------
The directors shall at least once in each year cause a
financial report of the corporation for the preceding fiscal year
to be made and distributed to each shareholder thereof
within four (4) months after the end of the fiscal year. The
report shall include the corporation's statement of income, its
year-end balance sheet and, if prepared by the corporation, its
statement of source and application of funds and such other
information required by law.
ARTICLE V - OFFICERS
Section 1 - Election and Term of Office
---------------------------
The officers of the corporation shall be elected or
appointed by the directors immediately after the annual meeting
of shareholders. The officers shall hold office until the first
meeting of the board of directors following the next annual
meeting of shareholders and until their respective successors are
chosen and qualify, or until their resignation or removal. Any
officer elected or appointed by the board may be removed at any
time by the board with or without cause. An officer may resign
by written notice to the corporation. The resignation is
effective upon its receipt by the corporation or at a subsequent
time specified in the notice of resignation.
Section 2 - Offices
-------
The officers of the corporation shall be a chairman of the
board, a president, a secretary, and a treasurer. Other officers
if desired shall be one or more vice presidents (the number
thereof to be determined by the board of directors), a general
counsel, controller and an auditor. Such other officers and
assistant officers as may be deemed necessary may be elected or
appointed by the board of directors. Any three of the aforesaid
offices may be held by the same person, but no officer may
execute, acknowledge or verify any instrument in more than one
capacity.
Section 3 - Vacancies
---------
A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term.
Section 4 - Chairman of the Board
---------------------
The chairman of the board shall, under the direction of the
board, have general management and direction of the affairs and
business of the corporation. He shall, when present, preside at
all meetings of the shareholders and of the board of directors.
Section 5 - President
---------
The president shall be the chief executive officer of the
corporation and under the direction of the chairman of the board,
shall have general management and direction of the affairs and
business of the Corporation. He shall also perform assignments
from time to time as delegated by the chairman of the board and
board of directors. In the absence of the chairman of the board,
he shall preside at all meetings of the shareholders and of the
board of directors.
Section 6 - Vice Presidents
---------------
The vice presidents shall perform the function and duties
delegated to them by the board of directors, the chairman of the
board, or the president. The board may designate one or more
vice presidents as executive vice presidents for the purpose of
assisting the chairman of the board or the president in the
management of the business and affairs of the corporation.
Section 7 - Secretary
---------
The secretary shall attend all meetings of the shareholders
and board of directors, and when directed by the board, of other
committees, and preserve in books of the company true minutes of
all proceedings, including a record of all votes. He shall give
all notices required by statute, by-law or resolution. He shall
safely keep in his custody the seal of the corporation and shall
have authority to affix the same to all instruments where its use
is required. He shall perform such other duties as may be
delegated to him by the board of directors or the chairman of the
board, under whose supervision he shall be.
Section 8 - Treasurer
---------
The treasurer shall have the custody of all corporate funds
and securities and shall keep in books belonging to the
corporation full and accurate accounts of all receipts and
disbursements; he shall deposit all moneys, securities and other
valuable effects in the name of the corporation in such
depositories as may be designated for that purpose by the board
of directors. He shall disburse the funds of the corporation as
may be ordered by the board, taking proper vouchers for such
disbursements, and shall render to the chairman of the board, the
president, and the directors at the regular meetings of the
board, and whenever requested by them, an account of all his
transactions as treasurer and of the financial condition of the
corporation. He shall perform such other and further duties as
may be assigned to him by the board of directors, the chairman of
the board, or the president. The board of directors may secure
the fidelity of the treasurer or any assistant treasurer by bond
or otherwise.
Section 9 - General Counsel
---------------
The general counsel shall act as attorney, legal advisor to,
and counsel for the corporation, the board of directors, the
chairman of the board, the president and other officers in
matters relating to the business, properties and affairs of the
corporation, and shall, when authorized by the corporation,
institute, prosecute and defend on its behalf suits and other
proceedings before the courts and administrative agencies. He
may employ or retain special counsel to assist in the above.
Section 10 - Controller
----------
The controller shall be in charge of the accounts of the
corporation. He shall have such powers and perform such duties
as may be assigned to him by the board of directors, chairman of
the board, or the president. He shall submit such reports and
records to the board of directors as may be requested by it.
Section 11 - Auditor
-------
The auditor shall be in charge of the internal auditing of
the corporation. He shall report to the Audit Committee of the
board of directors. He shall have such powers and perform such
duties as may be assigned to him by the board of directors,
chairman of the board, or the president. He shall submit such
reports and records to the board of directors as may be requested
by it.
Section 12 - Assistant Officers
------------------
There may be appointed one or more assistant secretaries,
assistant treasurers, and assistant controllers each of whom
shall perform such duties as shall be assigned to them by the
secretary, the treasurer, the controller, or the board of
directors.
ARTICLE VI - EXECUTION OF INSTRUMENTS AND APPOINTMENT OF
PROXIES AND AGENTS
Section l - Contracts and Conveyances
-------------------------
Except as otherwise prescribed by the board of directors,
the officers of the corporation shall sign and execute all
contracts, instruments, conveyances and documents in the name of
the corporation.
Section 2 - Loans
-----
No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the board of directors.
Such authority may be general or confined to specific instances.
Section 3 - Checks, Drafts and So Forth
---------------------------
All checks, drafts and orders of payment of money shall be
signed in the name of the corporation by either the chairman, the
president, the treasurer or such other officer or officers or
such other person or persons as the board of directors may from
time to time designate, provided, however, that the board of
directors may authorize the treasurer to change the authorized
signatories for any bank account of the corporation. No check,
draft, or orders for payment of money shall be signed in blank.
Section 4 - Appointment of Proxies and Agents
---------------------------------
The board may by resolution appoint proxies to vote shares
owned by the corporation in another corporation. In the absence
of such resolution shares owned by the corporation in another
corporation may be voted by the chairman of the board or
president or by proxy appointed by either. The board may appoint
such agents as they deem necessary for the transaction of the
business of the corporation.
ARTICLE VII - SEAL
The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words
"Corporate Seal, Michigan." The seal may be used by causing it
or a facsimile thereof to be impressed or reproduced.
ARTICLE VIII - CERTIFICATES OF SHARES AND THEIR TRANSFER
Section 1 - Share Certificates
------------------
(1) The shares of the corporation shall be represented by
certificates signed by the chairman of the board, president or a
vice president and by the treasurer, assistant treasurer,
secretary or assistant secretary of the corporation, and may be
sealed with the seal of the corporation or a facsimile thereof.
The signatures of the officers may be facsimiles if the certif-
icate is countersigned by the transfer agent or registered by a
registrar other than the corporation itself or its employee. In
case an officer who has signed or whose facsimile signature has
been placed upon a certificate ceases to be such officer before
the certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the date of
issue.
(2) A certificate representing shares shall state upon its
face:
(a) That the corporation is formed under the laws of
this state.
(b) The name of the person to whom issued.
(c) The number and class of shares, and the
designation of the series, if any, which the
certificate represents.
(d) The par value of each share represented by the
certificate, or a statement that the shares are
without par value.
(3) A certificate representing shares shall set forth on
its face or back or state that the corporation will furnish to a
shareholder upon request and without charge a full statement of
the designation, relative rights, preferences and limitations of
the shares of each class authorized to be issued, and if the
corporation is authorized to issue any class of shares in series,
the designation, relative rights, preferences and limitations of
each series so far as the same have been prescribed and the
authority of the board to designate and prescribe the relative
rights, preferences and limitations of other series.
(4) Each certificate representing shares of the corporation
shall, among other things contain substantially the following
notice: "The shares represented by this certificate cannot be
mortgaged, pledged or otherwise encumbered and are held and may
be sold, assigned, or transferred only subject to the terms and
conditions of an agreement between Corning Glass Works and The
Dow Chemical Company, dated February 9, 1943, a copy of which is
lodged with this corporation."
Section 2 - Transfer of Shares - Only on Books of Corporation
-------------------------------------------------
Shares shall be transferable only on the books of the
corporation by the person named in the certificate, or by his
attorney-in-fact lawfully constituted in writing, and upon
surrender of the certificate therefor. A record shall be made of
each such transfer and issue. Upon surrender to the corporation
or the transfer agent of the corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the
transfer upon its books.
Section 3 - Registered Shareholders
-----------------------
The corporation shall have the right to treat the registered
holder of any share as the absolute owner thereof, and shall not
be bound to recognize any equitable or other claim to, or
interest in, such share on the part of any other person, whether
or not the corporation shall have express or other notice
thereof, save as may be otherwise provided by the statutes of
Michigan.
ARTICLE IX - FISCAL YEAR
The fiscal year of the corporation shall begin the first day
of January and terminate on the thirty-first day of December each
year.
ARTICLE X - DIVIDENDS AND RESERVES
Section 1 - Dividends and Other Distributions
---------------------------------
The board of directors of this corporation may declare and
pay dividends or make other distribution in cash, its bonds or
its property, including the shares or bonds of other corpora-
tions, on its outstanding shares, except when currently the
corporation is insolvent or would thereby be made insolvent, or
when the declaration, payment or distribution would be contrary
to any restriction contained in the Articles of Incorporation.
Section 2 - Source of Dividends
-------------------
Dividends may be declared or paid and other distributions
may be made out of surplus only. "Surplus" is the excess of the
net assets of the corporation over its stated capital. In
determining surplus either the book value or the current fair
market value of the properties and rights of the corporation may
be included whether or not realized. A dividend paid or any
other distribution made, in any part, from sources other than
earned surplus, shall be accompanied by a written notice (a)
disclosing the amounts by which the dividend or distribution
affects stated capital, capital surplus and earned surplus, or
(b) if such amounts are not determinable at the time of the
notice, disclosing the approximate effect of the dividend or
distribution upon stated capital, capital surplus and earned
surplus and stating that the amounts are not yet determinable.
Section 3 - Reserves
--------
Before the payment of any dividends the directors may set
apart out of any funds of the corporation available for dividends
a reserve or reserves for any proper purpose and may abolish any
such reserve created by the board.
ARTICLE XI - INDEMNIFICATION OF OFFICERS, DIRECTORS AND
EMPLOYEES
Section 1 - Action or Suit by Others Than the Corporation
---------------------------------------------
The board of directors may authorize the indemnification of
any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the full extent provided by the
Michigan Business Corporation Act from time to time in effect; if
he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation or
its shareholders, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to be
the best interests of the corporation or its shareholders, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful; provided,
however, that except with respect to actions, suits or
proceedings initiated by any such person to enforce his or her
rights to indemnification or advancement of expenses under this
Article or otherwise, the corporation shall indemnify any such
person in connection with an action, suit or proceeding initiated
by such person only if such action, suit or proceeding was
authorized or ratified by the Board of Directors of the
corporation. "Proceeding" as used in this Article shall include
any proceeding within an action or suit.
Section 2 - Action or Suit by the Corporation
---------------------------------
A director of the corporation shall not be personally liable
to the corporation or its shareholders for monetary damages for
breach of his or her, fiduciary duty as a director except for
liability (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for a violation of Section 551(1)
of the Michigan Business Corporation Act, (iv) for any
transaction from which the director derived an improper personal
benefit, or (v) for an act or omission occurring before the date
that this amendment to the Articles of Incorporation becomes
effective in accordance with the pertinent provisions of the
Michigan Business Corporation Act. In addition to the circum-
stances in which a director of the Corporation is not personally
liable as set forth in the preceding sentence, a director shall
not be liable to the fullest extent permitted by any amendment to
the Michigan Business Corporation Act hereafter enacted that
further limits the liability of a director. Any repeal,
amendment or other modification of this section shall not
adversely affect any right or protection of any director of the
corporation existing at the time of such repeal, amendment or
other modification for or with respect to any act or omission
occurring prior to the time of such repeal amendment or other
modification.
The board of directors may authorize the indemnification of
any person who was or is a party to or is threatened to be made a
party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was an officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit, or proceeding to
the full extent provided by the Michigan Business Corporation Act
from time to time in effect; if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders and except that
no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his
duty to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly
and reasonable entitled to indemnity for such expenses which such
court shall deem proper.
Section 3 - Indemnification Against Expenses
--------------------------------
(1) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in Section 1 or 2 of this Article, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
(2) Any indemnification under Section 1 or 2 of this
Article (unless ordered by a court) shall be made only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 1 and 2 of this Article.
Such determination shall be made in either of the following ways:
(a) By a majority vote of a quorum of the board
consisting of directors who were not parties to
the action, suit or proceeding.
(b) If such quorum described in subdivision (a) is not
obtainable, then by a majority vote of a committee
of directors who are not parties to the action.
The committee shall consist of not less than 2
disinterested directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
Section 4 - Reimbursement of Expenses
-------------------------
If authorized by the board of directors, expenses incurred
in defending a civil or criminal action, suit or proceeding
described in Section 1 or 2 of this Article may be paid in
advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in subsection (2)
of Section 3 of this Article upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation.
Section 5 - Right Not Exclusive
-------------------
Nothing contained in Sections 1 through 4 of this Article
shall affect any rights to indemnification to which persons other
than directors and officers may be entitled by contract or
otherwise by law.
Section 6 - Right to Indemnification Survives
---------------------------------
The indemnification provided in Sections 1 through 4 of this
Article continues as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Section 7 - Insurance to Protect Officers, Directors, Employees,
and Agents
----------------------------------------------------
The board of directors may authorize the purchase and
maintenance of insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation
would have power to indemnify him against such liability under
the laws of the State of Michigan.
Section 8 - Merged and Reorganized Corporations
-----------------------------------
For the purposes of Sections 1 through 7 of this Article
references to the corporation include all constituent corpora-
tions absorbed in a consolidation or merger and the resulting or
surviving corporation, so that a person who is or was a director,
officer, employee or agent of such constituent corporation or is
or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this section with
respect to the resulting or surviving corporation as he would if
he had served the resulting or surviving corporation in the same
capacity.
ARTICLE XII - AMENDMENT OF BY-LAWS
These by-laws may be altered or amended or repealed by the
affirmative vote of a majority of the shares entitled to vote at
any regular or special meeting of the shareholders, or by the
affirmative vote of a majority of the members of the board then
in office; provided that the board of directors shall not make or
alter any by-laws fixing their qualifications, or term of office
or the number of shares which shall constitute a quorum at a
meeting of shareholders.
<TABLE>
EXHIBIT 12
----------
DOW CORNING CORPORATION
-----------------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED
CHARGES
- -------------------------------------------------
(in millions of dollars)
<CAPTION>
Year
ended December 31,
- -----------------------------------------
1993 1992
1991 1990 1989
---- ----
- ---- ---- ----
<S> <C> <C>
<C> <C> <C>
Earnings:
Income from continuing operations
before income taxes, minority interest
and cumulative effects of changes in
accounting principles $(422.0) $ 50.0
$209.0 $261.0 $266.6
Less:
Equity in earnings (losses) of
less than 50%-owned companies
in excess of distributed income (0.3) (1.9)
(1.8) (4.1) (4.4)
Add:
Fixed charges 61.3 51.2
49.2 48.5 37.7
Amortization of capitalized interest 9.0 8.4
7.2 5.7 5.2
Deduct:
Interest capitalized during the period 12.0 11.8
11.8 15.7 11.4
------- ------
- ------ ------ ------
Earnings for computation purposes $(363.4) $ 99.7
$255.4 $303.6 $302.5
======= ======
====== ====== ======
Fixed charges:
Interest, expensed or capitalized $ 45.3 $ 34.2
$ 33.3 $ 34.4 $ 24.8
Amortization of debt expense 0.6 0.9
0.3 0.3 0.3
Portion of rents representative of
the interest factor 15.4 16.1
15.6 13.8 12.6
------- ------
- ------ ------ ------
Fixed charges for computation purposes $ 61.3 $ 51.2
$ 49.2 $ 48.5 $ 37.7
======= ======
====== ====== ======
Ratio of earnings to fixed charges $ <F1> 1.9
5.2 6.3 8.0
======= ======
====== ====== ======
<FN>
<F1> Earnings are inadequate to cover fixed charges. The amount
of the coverage
deficiency for the year ended December 31, 1993 was $424.7.
</TABLE>
EXHIBIT 23
----------
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-3 (No. 33-13496) of Dow Corning Corporation of our report
dated January 20, 1994 appearing on page 20 of this Form 10-K.
Price Waterhouse
Detroit, Michigan
February 11, 1994
