<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 1-8247
JOHNS MANVILLE CORPORATION
----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-0856796
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 17th Street
Denver, Colorado 80202
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 978-2000
(Registrant's telephone number, including area code)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
At November 7, 1997, there were 161,563,156 shares of the
registrant's common stock outstanding.
<PAGE> 2
*PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
* "JM" OR THE "COMPANY" WHEN USED IN THIS REPORT REFERS TO JOHNS
MANVILLE CORPORATION, INCORPORATED IN THE STATE OF DELAWARE IN 1991,
AND INCLUDES, WHERE APPLICABLE, ITS CONSOLIDATED SUBSIDIARIES.
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JOHNS MANVILLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
- ------ ------------- ------------
<S> <C> <C>
Current Assets
Cash and equivalents $ 122,777 $ 206,605
Marketable securities, at cost, which
approximates market 21,796 42,690
Receivables 290,807 229,665
Inventories 117,449 101,041
Prepaid expenses 11,116 7,921
Deferred tax assets 24,842 30,001
---------- ----------
Total Current Assets 588,787 617,923
Property, Plant and Equipment,
net of accumulated depreciation
of $631,685 and $630,338, respectively 797,586 770,420
Deferred Tax Assets 226,321 212,161
Goodwill 210,380 127,994
Other Assets 213,905 218,228
---------- ----------
$2,036,979 $1,946,726
========== ==========
LIABILITIES
- -----------
Current Liabilities
Short-term debt $ 2,340 $ 31,748
Accounts payable 114,501 120,851
Compensation and employee benefits 89,050 105,629
Income taxes 35,782 35,837
Other accrued liabilities 88,010 68,888
---------- ----------
Total Current Liabilities 329,683 362,953
Long-Term Debt, less current portion 475,795 428,160
Postretirement Benefits Other Than Pensions 202,532 200,822
Deferred Income Taxes and Other Noncurrent
Liabilities 352,154 374,329
---------- ----------
1,360,164 1,366,264
---------- ----------
STOCKHOLDERS' EQUITY
- --------------------
Common Stock 1,628 1,627
Capital in Excess of Par Value 539,654 539,423
Treasury Stock, at cost (16,349) (16,241)
Unearned Stock Compensation (7,106) (9,124)
Retained Earnings 144,951 38,106
Cumulative Currency Translation Adjustment 14,037 26,671
---------- ----------
676,815 580,462
---------- ----------
$2,036,979 $1,946,726
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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JOHNS MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
(Thousands of dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------- ----------------------------
1997 1996 1997 1996
-------------------------- ----------------------------
<S> <C> <C> <C> <C>
Net Sales $438,122 $422,978 $1,245,168 $1,130,490
Cost of Sales 325,251 301,539 913,702 806,990
Selling, General and Administrative 42,895 42,633 127,398 121,660
Research, Development
and Engineering 7,804 8,550 22,692 24,133
Other Income (Expense), net (4,266) (2,641) (10,740) 1,498
-------- -------- ---------- ----------
Income from Operations 57,906 67,615 170,636 179,205
Interest Income 2,551 2,868 7,304 15,759
Interest Expense 11,991 12,384 37,090 37,336
Profit Sharing Expense 6,648
-------- -------- ---------- ----------
Income from Continuing Operations
before Income Taxes 48,466 58,099 140,850 150,980
Income Tax Expense (Benefit) 9,608 24,181 37,325 (39,466)
-------- -------- ---------- ----------
Income from Continuing Operations 38,858 33,918 103,525 190,446
Gain on Disposal of Discontinued
Operations, net of tax 19,471 19,471 177,159
-------- -------- ---------- ----------
Income before Extraordinary Items 58,329 33,918 122,996 367,605
Extraordinary Items (316,285)
-------- -------- ---------- ----------
Net Income 58,329 33,918 122,996 51,320
Preference Stock Redemption
Premium/Dividends (60,341)
-------- -------- ---------- ----------
Net Income (Loss) Applicable to
Common Stock $ 58,329 $ 33,918 $ 122,996 $ (9,021)
======== ======== ========== ==========
EARNINGS (LOSS) PER COMMON SHARE
- --------------------------------
Primary and Fully Diluted:
Income from Continuing Operations $ .24 $ .21 $ .63 $ .87
Gain on Disposal of Discontinued
Operations, net of tax .12 .12 1.19
-------- -------- ---------- ----------
Income before Extraordinary Items .36 .21 .75 2.06
Extraordinary Items (2.12)
-------- -------- ---------- ----------
Net Income (Loss) Applicable to
Common Stock $ .36 $ .21 $ .75 $ (.06)
======== ======== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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JOHNS MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
- ------------------------------------- --------- -----------
<S> <C> <C>
Net income $ 122,996 $ 51,320
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 60,208 51,761
Deferred taxes 192 (99,698)
Gain on disposal of discontinued operations (19,471) (177,159)
Extraordinary loss on trust settlements 314,296
Other, net 27,736 51,428
Profit sharing paid (34,309)
(Increase) decrease in current assets:
Receivables (46,064) (25,026)
Inventories (8,507) (17,047)
Prepaid expenses (3,711) (1,453)
Increase (decrease) in current liabilities:
Accounts payable (5,617) (12,177)
Compensation and employee benefits (6,725) (18,703)
Income taxes (3,155) 38,822
Other accrued liabilities 24,650 (30,140)
Change in other noncurrent liabilities (48,260) (23,640)
--------- -----------
Net cash provided by operating activities 94,272 68,275
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Purchases of property, plant and equipment (67,906) (76,907)
Acquisitions (136,521) (151,555)
Proceeds from sales of assets 9,331 2,896
Proceeds from disposition of Riverwood 1,081,341
Purchases of held-to-maturity securities (490) (33,359)
Purchases of available-for-sale securities (1,188) (30,956)
Proceeds from maturities of held-to-maturity
securities 1,997 83,946
Proceeds from sales and maturities of
available-for-sale securities 21,042 55,035
(Increase) decrease in other assets (3,803) 8,222
--------- -----------
Net cash provided by (used in) investing activities (177,538) 938,663
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Issuance of debt 56,636 724
Payments on debt (40,476) (29,890)
Dividends on common stock (14,533) (968,141)
Redemption of/dividends on preference stock (241,056)
Stock warrants exercised 64,794
Treasury and other stock transactions 225 (11,479)
--------- -----------
Net cash provided by (used in) financing activities 1,852 (1,185,048)
--------- -----------
Effect of Exchange Rate Changes on Cash (2,414) (1,336)
--------- -----------
Net Decrease in Cash and Equivalents (83,828) (179,446)
Cash and Equivalents at Beginning of Period 206,605 310,809
--------- -----------
Cash and Equivalents at End of Period $ 122,777 $ 131,363
========= ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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JOHNS MANVILLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The condensed consolidated financial statements of Johns Manville Corporation
(the "Company") as of September 30, 1997 and December 31, 1996 and for the
three and nine month periods ended September 30, 1997 and 1996 reflect all
normal, recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial condition and the results of
operations for the periods presented. The year-end condensed consolidated
balance sheet was derived from audited financial statements, and as presented
does not include all disclosures required by generally accepted accounting
principles. The Company has reclassified the presentation of certain prior
period information to conform with the current presentation format. Additional
information regarding the Company's accounting policies, operations and
financial position is contained or incorporated in the Company's Form 10-K for
the year ended December 31, 1996 filed with the Securities and Exchange
Commission.
Note 1 - Inventories
The major classes of inventories were as follows:
<TABLE>
<CAPTION>
(Thousands of dollars)
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Finished goods $ 75,365 $ 60,456
Raw materials and supplies 31,293 32,113
Work-in-process 10,791 8,472
------------ -----------
$117,449 $101,041
============ ===========
</TABLE>
Note 2 - Income Taxes
The Company's 1997 estimated effective income tax rate is lower in the third
quarter of 1997 than in previous quarters primarily due to the increased impact
of utilizing prior years' general business credits and the increase in the
Company's quarterly dividend rate. For the nine months ended September 30,
1996, the net income tax benefit of $39.5 million included a $104.5 million tax
benefit on the portion of a special cash dividend that was paid to the Manville
Personal Injury Settlement Trust (the "Trust"). Exclusive of the tax benefit
on the special cash dividend, the Company's tax rate was 43 percent for the
first nine months of 1996.
Note 3 - Discontinued Operations
During the third quarter of 1997, the Company adjusted the estimated gain
recognized in 1996 on the disposition of Riverwood International Corporation
("Riverwood"). The adjustment, resulting in an additional net gain on disposal
of discontinued operations of $19.5 million, of which $8.2 million related to
income taxes, arose from the termination of certain indemnification obligations
to the purchaser of Riverwood and from the determination of certain income tax
consequences of the disposition, which were finalized with the completion of
the Company's 1996 income tax returns.
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<PAGE> 7
During the first quarter of 1996, the Company disposed of its 81.3 percent
interest in Riverwood and received gross cash proceeds of $1.08 billion and
recorded a gain of $177.2 million, net of taxes of $177.8 million. In the
fourth quarter of 1996, an additional gain of $39.1 million was recognized,
adjusting the estimated taxes previously recorded from $177.8 million to $138.7
million, as the Company determined that it would be able to utilize foreign tax
credits applicable to the gain and other tax adjustments of the transaction.
Accordingly, the Company recognized a gain of $216.2 million, net of tax, for
the full year of 1996.
Note 4 - Extraordinary Losses
During the second quarter of 1996, the Company redeemed its 9 Percent Sinking
Fund Debentures, due through 2003. The prepayment of the debentures at 100
percent of the principal amount of $27.7 million resulted in an extraordinary
loss on early extinguishment of debt of $2 million, net of taxes of $1.1
million.
During the first quarter of 1996, the Company recorded an extraordinary loss of
$314.3 million, net of taxes of $169.2 million, as the Company exchanged
approximately 32.5 million shares of its common stock for the settlement of the
Trust's profit sharing right to 20 percent of the Company's adjusted net
earnings.
Note 5 - Redemption of Cumulative Preference Stock, Series B
During the second quarter of 1996, the Company redeemed its Cumulative
Preference Stock, Series B, with cash of $230.8 million. The premium, or
excess of the redemption price over the carrying value, of $52.1 million was
charged directly to Capital in Excess of Par Value and was deducted from net
income to compute earnings and earnings per share applicable to common
stockholders.
Note 6 - Earnings (Loss) Per Common Share and Dividends
Primary and fully diluted earnings per common share amounts were determined
using the following common equivalent shares:
<TABLE>
<CAPTION>
Third Quarter First Nine Months
1997 1996 1997 1996
---------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Primary 163,294,000 162,620,000 163,111,000 149,069,000
Fully Diluted 163,294,000 162,623,000 163,266,000 149,097,000
</TABLE>
Earnings (loss) per share amounts during 1996 were calculated after the
deduction for preference stock dividends and the premium on the redemption of
preference stock. The Company paid regular dividends of $.03 per common share
totaling $4.8 million, and $.09 per common share totaling $14.5 million, for
the third quarter and first nine months of 1997, respectively. In the third
quarter of 1997, the quarterly dividend (payable October 10, 1997) increased
from $.03 to $.04 per common share. During the second quarter of 1996, the
Company paid a special cash dividend of $6.00 per common share totaling $968.1
million.
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Note 7 - Acquisitions
During the third quarter of 1997, the Company completed the acquisition of the
roofing business of HPG International, Inc., a manufacturer of thermoplastic
membranes. During the second quarter of 1997, the Company acquired the Mitex
group of companies. Mitex manufactures fiber glass wall covering fabrics used
primarily in commercial and industrial buildings, and has manufacturing
facilities in Sweden and the United Kingdom. During the first quarter of 1997,
the Company acquired the assets of Ergon Nonwovens, Inc., a manufacturer of
synthetic meltblown nonwoven products. The Mitex and Ergon acquisitions are
associated with businesses of the Engineered Products segment.
The combined purchase price for these acquisitions, accounted for under the
purchase method, was $136.5 million, net of cash acquired, financed from
existing cash balances and borrowings of $45 million, net, from international
credit facilities. The excess of the combined purchase prices over the
estimated fair value of net assets acquired, or goodwill, amounted to
approximately $88 million and is being amortized over 20 years using the
straight-line method. These allocations were based on estimates and may be
revised in the future.
Note 8 - New Accounting Pronouncements
During 1997, the Financial Accounting Standards Board issued the following
Statements of Financial Accounting Standards: "Earnings Per Share" ("SFAS No.
128"); "Reporting Comprehensive Income" ("SFAS No. 130"); and "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS No. 131").
SFAS No. 128 revises the computation and disclosure of earnings per share,
principally the replacement of primary earnings per share with basic earnings
per share which does not consider common stock equivalents. SFAS No. 128 also
modifies certain dilutive computations and replaces fully diluted earnings per
share with diluted earnings per share. Disclosure requirements include dual
presentation of basic and diluted earnings per share, along with a
reconciliation of the elements used in computing basic and diluted earnings per
share. The Company does not expect the adoption of SFAS No. 128 (effective for
periods ending after December 15, 1997) to have a material impact on the
Company's reported results. SFAS No. 130 (effective for periods beginning
after December 15, 1997) establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income generally
includes changes in separately reported components of equity along with net
income. SFAS No. 131 (effective for periods beginning after December 15, 1997)
establishes standards for reporting information about operating segments, along
with related disclosures about products, services, geographic areas and major
customers, based on the Company's disaggregation of an entity for internal
operating decisions.
Note 9 - Business Segment Information
Beginning in 1997, the Company reorganized its business segments and will
report separately its operating results in the following three principal
business segments: Insulation, consisting of the residential, commercial and
industrial and original equipment manufacturer ("OEM") insulation businesses;
Roofing Systems, consisting of the commercial and industrial roofing
businesses; and Engineered Products, consisting of the mats and fibers and
filtration businesses. The 1996 results were reclassified to conform with the
current presentation format.
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<PAGE> 9
<TABLE>
<CAPTION>
(Thousands of dollars)
Three Months
Ended September 30,
----------------------
NET SALES 1997 1996
- --------- --------- ---------
<S> <C> <C>
Insulation $ 176,538 $ 182,070
Roofing Systems 145,576 125,094
Engineered Products 124,786 124,730
Corporate and Eliminations (8,778) (8,916)
--------- ---------
Net Sales $ 438,122 $ 422,978
========= =========
INCOME FROM OPERATIONS
- ----------------------
Insulation $ 25,900 $ 34,341
Roofing Systems 21,007 14,092
Engineered Products 21,303 29,516
Corporate and Eliminations (10,304) (10,334)
--------- ---------
Income from Operations $ 57,906 $ 67,615
========= =========
Nine Months
Ended September 30,
----------------------
NET SALES 1997 1996
- --------- --------- ---------
Insulation $ 527,941 $ 504,931
Roofing Systems 381,181 287,886
Engineered Products 363,127 362,608
Corporate and Eliminations (27,081) (24,935)
--------- ---------
Net Sales $1,245,168 $1,130,490
========== ==========
INCOME FROM OPERATIONS
- ----------------------
Insulation $ 79,966 $ 86,845
Roofing Systems 47,129 28,868
Engineered Products 72,396 85,238
Corporate and Eliminations (28,855) (21,746)
--------- ---------
Income from Operations $ 170,636 $ 179,205
========= =========
</TABLE>
Net sales included in Corporate and Eliminations relate principally to the
elimination of intersegment sales from the Engineered Products segment to the
Roofing Systems segment (at prices approximating market).
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<PAGE> 10
ITEM 2.
JOHNS MANVILLE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's net sales for the third quarter of 1997 increased $15.1 million,
or 3.6 percent, to $438.1 million from $423 million for the same period of 1996.
Gross profit of $112.9 million for the third quarter of 1997 decreased $8.6
million, or 7.1 percent, from $121.4 million compared with the third quarter of
1996. The gross profit percentage declined 2.9 percentage points to 25.8
percent for the third quarter of 1997 due to lower selling prices, principally
in residential insulation. Selling, general, administrative and research,
development and engineering expenses, combined, decreased slightly and were
lower as a percentage of sales for 1997. Income from operations for the third
quarter of 1997 was $57.9 million, down 14.4 percent, compared with $67.6
million for the third quarter of 1996.
The Company's net sales for the first nine months of 1997 increased $114.7
million, or 10.1 percent, to $1.25 billion from $1.13 billion for the same
period of 1996. While gross profit of $331.5 million increased $8 million, or
2.5 percent, for the first nine months of 1997, lower selling prices reduced
the 1997 gross profit percentage to 26.6 percent from 28.6 percent in 1996.
Selling, general, administrative and research, development and engineering
expenses, combined, increased $4.3 million, or 2.9 percent, to $150.1 million,
reflecting expenses of acquired companies. These expenses, however, decreased
as a percentage of sales in 1997 to 12.1 percent, compared with 12.9 percent in
1996. Income from operations for the first nine months of 1997 decreased to
$170.6 million from $179.2 million in 1996 which included first quarter 1996
other income of $7.2 million from the settlement of certain pension plans.
Insulation Segment
The Insulation segment's net sales decreased $5.5 million, or 3 percent, and
increased $23 million, or 4.6 percent, for the third quarter and first nine
months of 1997, respectively, compared with the same periods of 1996. Income
from operations for this segment decreased $8.4 million, or 24.6 percent, and
$6.9 million, or 7.9 percent, for the third quarter and the first nine months of
1997, respectively. During 1997, capacity-related selling price and other
competitive pressures reduced third quarter net sales and led to lower margins
and decreases in operating income for the residential insulation business
compared with both corresponding 1996 periods. These selling price decreases
were partially offset by volume increases experienced by the residential, and
commercial and industrial businesses. Despite lower 1997 net sales in automotive
primarily due to the disposition of the molded parts business, operating income
for OEM insulation increased for the three and nine months of 1997 compared with
1996, reflecting strength in aerospace and speciality insulations.
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<PAGE> 11
Roofing Systems Segment
Net sales for the Roofing Systems segment increased $20.5 million, or 16.4
percent, and $93.3 million, or 32.4 percent, for the third quarter and first
nine months of 1997, respectively, compared with the same periods of 1996
primarily due to increased volumes from acquisitions, partially offset by
unfavorable product mix. Operating income, which increased $6.9 million and
$18.3 million for the 1997 periods, along with strong margins compared with
1996, reflected the integration of acquisitions, improved productivity and
favorable raw material costs.
Engineered Products Segment
The Engineered Products segment's net sales were essentially flat at $124.8
million, and $363.1 million, for the three and nine month periods ended
September 30, 1997, respectively. Income from operations of $21.3 million
decreased $8.2 million, or 27.8 percent, for the third quarter, and $12.8
million, or 15.1 percent, to $72.4 million for the first nine months of 1997.
Net sales and operating income for the U.S. mats and fibers business decreased
for the three and nine months of 1997 as reduced costs were more than offset by
declining volumes and selling prices due to competitive pressures. Moderate
improvements for the Company's European operations, which includes the Mitex
acquisition, on higher sales volumes were partially offset by the impacts of
unfavorable currency comparisons on reported results. Net sales for filtration
increased for both 1997 periods on higher volumes due to recent acquisitions in
the synthetic filtration media markets. These improvements in filtration were
offset by competitive pricing pressures and higher acquisition-related costs
which led to decreased operating income and margins for both periods of 1997.
Compared with the corresponding quarter and nine month periods of 1996, the
Company's interest income decreased $.3 million and $8.5 million, respectively,
primarily due to lower average cash and marketable securities balances.
The Company's 1997 estimated effective income tax rate is lower in the third
quarter of 1997 than in previous quarters primarily due to the increased impact
of utilizing prior years' general business credits and the increase in the
Company's quarterly dividend rate. For the nine months ended September 30,
1996, the Company reported a net income tax benefit of $39.5 million, which
included a $104.5 million tax benefit on the portion of the special cash
dividend that was paid to the Trust. Exclusive of the tax benefit on the
special cash dividend, the Company's tax rate for the first nine months of 1996
was 43 percent.
During the third quarter of 1997, the Company adjusted the estimated gain
recognized in 1996 on the disposition of Riverwood International Corporation
("Riverwood"). The adjustment, resulting in an additional net gain on disposal
of discontinued operations of $19.5 million ($.12 per common share), of which
$8.2 million related to income taxes, arose from the termination of certain
indemnification obligations to the purchaser of Riverwood and from the
determination of certain income tax consequences of the disposition, which were
finalized with the completion of the Company's 1996 income tax returns.
During the first quarter of 1996, the Company disposed of its 81.3 percent
interest in Riverwood and received gross cash proceeds of $1.08 billion and
recorded a gain of $177.2 million ($1.19 per common share), net of taxes of
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<PAGE> 12
$177.8 million. In the fourth quarter of 1996, an additional gain of $39.1
million was recognized, adjusting the estimated taxes previously recorded from
$177.8 million to $138.7 million, as the Company determined that it would be
able to utilize foreign tax credits applicable to the gain and other tax
adjustments of the transaction. Accordingly, the Company recognized a gain of
$216.2 million, net of tax, for the full year of 1996.
During the second quarter of 1996, the Company redeemed its 9 Percent Sinking
Fund Debentures with cash of $27.7 million resulting in a net extraordinary
loss on early extinguishment of debt of $2 million ($.01 per common share).
During the first quarter of 1996, the Company recorded an extraordinary net
loss of $314.3 million ($2.11 per common share) on the settlement of the
Trust's profit sharing right to 20 percent of the Company's adjusted net
earnings.
Also during the second quarter of 1996, the Company redeemed its cumulative
preference stock, with cash of $230.8 million. The premium, or excess of the
redemption price over the carrying value of the preference stock, of $52.1
million was charged directly to Capital in Excess of Par Value and was deducted
from net income to compute earnings and earnings per share applicable to common
stockholders during 1996.
Due to the factors discussed above, net income applicable to common stock for
the third quarter of 1997 was $58.3 million, or $.36 per share based on 163.3
million weighted average shares, compared with net income for the third quarter
of 1996 of $33.9 million, or $.21 per share based on 162.6 million weighted
average shares. Year-to-date net income applicable to common stock for 1997
was $123 million, or $.75 per share based on 163.3 million weighted average
shares, compared with a net loss for the same period of 1996 of $9 million, or
$.06 per share based on 149.1 million weighted average shares.
LIQUIDITY AND CAPITAL RESOURCES
The Company's agreements with its lenders contain a number of financial and
general covenants. These include, among other things, restrictions on
borrowings, investments, stock issuances and repurchases, dividends and other
distributions by Johns Manville International Group, Inc., the Company's wholly
owned subsidiary that owns substantially all of the consolidated operating
companies, and restrictions on intercompany transactions, including transfers
of cash. As of September 30, 1997, the maximum amount available for dividends
to be paid to the Company by Johns Manville International Group, Inc. under
debt covenants of the Senior Notes was approximately $260 million.
Noncompliance with these or other covenants, or the occurrence of any other
event of default, could result in the termination of existing credit agreements
and the acceleration of debt owed by the Company and its subsidiaries. At
September 30, 1997, the Company was in compliance with these covenants.
At September 30, 1997, the Company had net working capital of $259.1 million,
including cash and marketable securities totaling $144.6 million. Total cash
and marketable securities located outside the U.S. and Canada were
approximately $47.1 million. At December 31, 1996, the Company's cash and
marketable securities totaled $249.3 million. The decrease is due primarily to
cash used to make acquisitions. At September 30, 1997, the Company had $100
million available under a receivables sale facility for its domestic short-term
working
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<PAGE> 13
capital requirements. In addition, the Company's international subsidiaries
had borrowing and working capital facilities totaling $85 million, of which
approximately $31 million was available at September 30, 1997. Under these
facilities, $45 million, net, was borrowed to partially finance acquisitions.
The Company's net operating activities provided $94.3 million of cash during
the first nine months of 1997. Net operating activities provided $68.3 million
for the same period of 1996 as continuing operations and proceeds from the
settlement of pension plans were offset by cash disbursements relating to final
profit sharing obligations and expenses associated with the Riverwood
divestment. The Company's cash flows from operating activities are primarily
influenced by sales volume and selling prices. As discussed in "Results of
Operations," sales volume increases during the first nine months of 1997 were
offset by selling price declines. Operating activities also included cash
usages for net working capital builds for the construction season. For the
remainder of 1997, the Company's operating results are expected to benefit from
the integration of acquisitions, strong U.S. construction markets, and U.S.
housing starts which are comparable to 1996 levels. However, the Company's
operating results continue to be adversely affected by capacity-related selling
price and other competitive pressures which are expected to continue, at least
for the near term, for several of the Company's businesses, particularly
residential insulation.
The Company's investing activities for the first nine months of 1997 consisted
of $136.5 million for acquisitions, net of cash acquired. The Company's
capital expenditures totaled $67.9 million for the first nine months of 1997.
The Company estimates 1997 capital expenditures of approximately $90 million to
$100 million, of which approximately $40 million relate to capacity expansion
projects principally to increase mats and fibers production. As of September
30, 1997, outstanding purchase commitments for capital projects totaled $20.4
million. Investing activities for 1997 also included proceeds from the
Company's June 30, 1997 disposition of its automotive molded parts business.
Investing activities for 1996 included the combined purchase prices for
acquisitions of $151.6 million and capital expenditures totaling $76.9 million.
Investing activities for 1996 also reflected $1.08 billion of proceeds from the
disposition of Riverwood.
In addition to borrowings to partially finance 1997 acquisitions, the Company's
financing activities for 1997 included repayments of debt totaling $30 million
assumed in connection with 1996 acquisitions. Also during 1997, the Company
paid three quarterly dividends, totaling $14.5 million, on its common stock. In
the third quarter of 1997, the quarterly dividend (payable October 10, 1997)
increased from $.03 to $.04 per common share. Financing activities for 1996
included payment of a special common stock dividend of $968.1 million;
redemption of the Company's preference stock and related final dividend payment
of $230.8 million and $10.3 million, respectively; proceeds totaling $64.8
million from exercises of warrants to purchase common stock; and the redemption
of $27.7 million of 9 Percent Sinking Fund Debentures.
The Company believes that its current cash position, cash generated from
operations, and funds available under a receivables facility and foreign working
capital facilities will enable it to satisfy its debt service requirements, its
ongoing capital expansion program and its other ongoing operating costs.
However, the Company may need to access capital markets to pay the principal of
the $400 million Senior Notes, or in connection with possible significant future
acquisitions.
I-12
<PAGE> 14
FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements of the Company
contained in this report concerning matters that are not historical facts,
including, without limitation, statements concerning (i) expected benefits from
the continuing integration of acquisitions and capacity expansions, (ii) the
effect on operating results resulting from the strength of construction markets
and 1997 U.S. housing starts, (iii) adverse effect on operating earnings of
capacity-related and other competitive pressures in most of the Company's
businesses, particularly residential insulation and (iv) the Company's
expectations concerning levels of capital spending and funding of current
operations, debt service and future acquisitions, constitute such
forward-looking statements. See "Liquidity and Capital Resources."
Forward-looking statements of the Company are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in such statements. Important factors relating to such risks and
uncertainties are set forth below.
Factors that could affect the forward-looking statements generally are related
to demand for the Company's products, overall capacity levels in the industry
and the overall competitive environment in which the Company operates. These
factors are discussed in detail in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
Factors that could affect the Company's expected levels of capital spending and
funding of current operations, debt service and dividends, include, without
limitation, the general factors noted above, the level of cash flow generated
by the Company and the ability of the Company to otherwise fund such
commitments, which in turn could be affected by general U.S. and international
economic conditions as well as financial market conditions. Other factors
include the contingencies and commitments discussed in the notes to the
Company's financial statements incorporated in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
The Company's ability to realize expected benefits from acquisitions depends on
a number of factors including, without limitation, successful integration of
newly acquired operations, technology, products, employees and the overall
economic factors referred to above. In addition, the Company's ability to make
future acquisitions depends upon the ability of the Company to identify and
reach agreement with viable acquisition candidates and the availability of
sources of financing for such acquisitions on terms which are acceptable to the
Company.
I-13
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
NOT APPLICABLE.
ITEM 2. CHANGES IN SECURITIES.
NOT APPLICABLE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NOT APPLICABLE.
ITEM 5. OTHER INFORMATION.
NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits.
Exhibit 27.1, Financial Statement Schedules.
Exhibit 27.2, Financial Statement Schedules.
(B) Form 8-k.
None.
II-1
<PAGE> 16
SIGNATURE
Pursuant to the requirements 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.
JOHNS MANVILLE CORPORATION
--------------------------
(Registrant)
Date: November 11, 1997 By: R. B. Von Wald
----------------------------------
R. B. Von Wald
Executive Vice President,
General Counsel and Secretary
Date: November 11, 1997 By: K. L. Jensen
----------------------------------
K. L. Jensen
Senior Vice President and
Chief Financial Officer
II-2
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
<C> <S>
27.1 Financial Statement Schedules.
27.2 Financial Statement Schedules.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 FORM 10Q OF JOHNS MANVILLE CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 122,777
<SECURITIES> 21,796
<RECEIVABLES> 294,689
<ALLOWANCES> 8,324
<INVENTORY> 117,449
<CURRENT-ASSETS> 588,787
<PP&E> 1,429,271
<DEPRECIATION> 631,685
<TOTAL-ASSETS> 2,036,979
<CURRENT-LIABILITIES> 329,683
<BONDS> 475,795
0
0
<COMMON> 1,628
<OTHER-SE> 675,187
<TOTAL-LIABILITY-AND-EQUITY> 2,036,979
<SALES> 1,245,168
<TOTAL-REVENUES> 1,245,168
<CGS> 913,702
<TOTAL-COSTS> 913,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 706
<INTEREST-EXPENSE> 37,090
<INCOME-PRETAX> 140,850
<INCOME-TAX> 37,325
<INCOME-CONTINUING> 103,525
<DISCONTINUED> 19,471
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 122,996
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 FORM 10-Q OF JOHNS MANVILLE CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 131,363
<SECURITIES> 42,404
<RECEIVABLES> 286,062
<ALLOWANCES> 8,421
<INVENTORY> 111,787
<CURRENT-ASSETS> 585,167
<PP&E> 1,406,934
<DEPRECIATION> 618,694
<TOTAL-ASSETS> 1,919,417
<CURRENT-LIABILITIES> 387,185
<BONDS> 435,100
0
0
<COMMON> 1,625
<OTHER-SE> 544,788
<TOTAL-LIABILITY-AND-EQUITY> 1,919,417
<SALES> 1,130,490
<TOTAL-REVENUES> 1,130,490
<CGS> 806,990
<TOTAL-COSTS> 806,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,509
<INTEREST-EXPENSE> 37,336
<INCOME-PRETAX> 150,980
<INCOME-TAX> (39,466)
<INCOME-CONTINUING> 190,446
<DISCONTINUED> 177,159
<EXTRAORDINARY> (316,285)
<CHANGES> 0
<NET-INCOME> 51,320
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
