<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-8247
Johns Manville Corporation
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 84-0856796
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
717 17th Street, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (303) 978-2000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- ---------------------
<S> <C>
Common Stock ($.01 par value) New York Stock Exchange, Inc.
</TABLE>
- -------------------------------------------------------------------------------
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes [_] No [X]
Based solely on the New York Stock Exchange, Inc. closing price as of March 1,
2000, the aggregate market value of the common stock held by non-affiliates of
the registrant was approximately $287,666,598.
As of March 1, 2000, there were 147,578,266 shares of the registrant's sole
class of common stock outstanding.
Documents Incorporated by References
The following documents or portions thereof filed with the Securities and
Exchange Commission are incorporated herein by reference:
The Selected Five-Year Financial Data, Management's Discussion and Analysis
of Financial Condition and Results of Operations, Financial Statements and
Selected Quarterly Financial Data contained in the Company's 1999 Annual
Report to security holders are incorporated by reference into Parts I, II
and IV of this report.
The Annual Report to security holders, except for portions thereof that have
been specifically incorporated by reference, shall not be deemed filed as part
of this Annual Report on Form 10-K.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ITEM 1. BUSINESS...................................................... 1
Introduction and Description of the Business.................. 1
Insulation.................................................... 1
Roofing Systems............................................... 3
Engineered Products........................................... 4
Materials..................................................... 5
Research and Development...................................... 5
Patents....................................................... 5
Labor Relations............................................... 5
Seasonality................................................... 5
Environmental Regulations..................................... 6
Occupational Health and Safety Aspects of the Company's
Products...................................................... 6
ITEM 2. PROPERTIES.................................................... 7
Headquarters.................................................. 7
Manufacturing and Development Facilities...................... 7
ITEM 3. LEGAL PROCEEDINGS............................................. 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 8
Executive Officers of the Company............................. 8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS....................................................... 9
ITEM 6. SELECTED FINANCIAL DATA....................................... 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................... 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...................................... 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 10
ITEM 11. EXECUTIVE COMPENSATION........................................ 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................... 10
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K................................................... 11
</TABLE>
The "Company" or "Johns Manville" when used in this Form 10-K refers to
Johns Manville Corporation, incorporated in the State of Delaware in 1981,
including, where applicable, its consolidated subsidiaries.
i
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction and Description of the Business
Johns Manville is a leading manufacturer of insulation and building
products, with 1999 net sales of $2,161.8 million. Johns Manville manufactures
and markets products for building and equipment insulation, commercial and
industrial roofing systems, high-efficiency filtration media, and fibers and
nonwoven mats used as reinforcements in building and industrial applications.
Johns Manville operates manufacturing facilities in North America, Europe and
China and is comprised of three principal business segments, as set forth
below.
Johns Manville Corporation was incorporated in Delaware in 1981 to continue
businesses begun by its predecessors in 1858.
<TABLE>
<CAPTION>
Product Groups by Business Segment(1) Products and Applications
------------------------------------- -------------------------
<C> <S>
Insulation
Building Fiber glass wool insulation for walls,
attics and floors in commercial and
residential buildings; residential foam
sheathing
Commercial and Industrial Pipe and duct insulation and fire
protection systems for use in various
commercial and industrial applications
OEM Thermal and acoustical insulation for
aircraft; marine vessels; automobiles;
heating, ventilating and air
conditioning ("HVAC"); and other
equipment
Roofing Systems Commercial and industrial roofing
systems, including membranes,
insulations, accessories and related
guarantees
Engineered Products
Mats and Fibers Continuous filament fiber glass and
nonwoven fiber glass mats for roofing,
flooring and specialty substrates and
reinforcement of plastics and gypsum
products; woven fiber glass fabrics for
wall coverings and roofing; polyester
spunbond mats for roofing and flooring;
monofilaments used in the paper industry
Filtration Air filtration media for buildings;
ultra-fine fibers for clean room air
filters and battery separators; liquid
filtration cartridge and media; and
industrial oil sorbent products
</TABLE>
- --------
(1) For additional business segment information and geographical data, see
Note 24 to the Company's Consolidated Financial Statements contained in
the Company's Annual Report to security holders which is incorporated by
reference into this report.
Insulation
Johns Manville's insulation segment, with 1999 net sales of $816.7 million,
or 38 percent of Johns Manville's total net sales (before elimination of
intersegment sales), is comprised of the building, commercial and industrial
and OEM product groups.
1
<PAGE>
Building
Products. Johns Manville's building insulation business manufactures a
complete line of fiber glass wool insulation products for walls, attics and
floors in commercial and residential buildings. Johns Manville's building
insulation products include fiber glass batts, rolls, blowing wool and related
products. Johns Manville also produces polyisocyanurate foam sheathing for use
in residential structures.
Johns Manville manufactures building insulation products at nine
manufacturing facilities in North America to serve regional population and
construction centers. This regional structure, which keeps most shipping
distances within a 500-mile radius, improves Johns Manville's customer service
and reduces its total transportation costs.
Markets and Distribution. Demand for Johns Manville's building insulation
products is driven by North American housing starts, demand in the
repair/remodel market and rates of commercial construction of warehouses and
light manufacturing facilities. In addition, implementation of various federal
and state energy conservation codes serves to increase the amount of
insulation per unit built.
Building insulation products typically reach end users through contractors,
retailers, fabricators and distributors. John Manville's marketing efforts are
normally directed toward insulation contractors and national retailers.
Competition. Johns Manville's building insulation business competes
primarily with a few other large manufacturers of building insulation, as well
as a few smaller regional manufacturers. Johns Manville competes in the
building insulation business primarily on the basis of price, product
differentiation, packaging/merchandising and service.
Commercial and Industrial
Products. Johns Manville's commercial and industrial insulation business
manufactures pipe and duct insulation for use in commercial buildings,
factories, refineries and other industrial applications. In response to
industry attention to indoor environmental quality, Johns Manville offers
EnviroSystem(TM), a group of products sold together aimed at indoor
environmental quality improvement. Such products include duct insulation with
enhanced thermal and acoustical properties with an antimicrobial agent for
improved air filtration. In addition, through a joint venture in Canada, Johns
Manville offers fire protection products.
Johns Manville manufactures commercial and industrial insulation products at
seven facilities in North America.
Markets and Distribution. Demand for Johns Manville's commercial and
industrial insulation and fire protection products is driven primarily by
commercial construction activity and by demand in the remodel/retrofit market,
and in the case of fire protection products, by increasing awareness and
enforcement of building codes which require insulation of firestop and other
fire protection systems. Commercial and industrial products reach the market
through John Manville's network of distributors, contractors and fabricators.
Competition. Johns Manville's commercial and industrial insulation business
primarily competes with other large domestic and foreign manufacturers. Johns
Manville competes in the commercial and industrial insulation business
primarily on the basis of price, breadth of product line, service and strength
of fabricator and distributor networks. Johns Manville's fire protection
products primarily compete with other large and small producers of fire
protection products. Johns Manville competes in the fire protection products
market on the basis of technological superiority and price.
2
<PAGE>
OEM
Products. Johns Manville's OEM insulation business produces thermal and
acoustic insulation for aircraft, marine vessels, automobiles, HVAC and other
equipment. OEM insulation products generally require extremely fine and
uniform fibers to provide the required insulating properties, and therefore
command higher prices than other fiber glass products.
Johns Manville manufactures OEM insulation products at nine facilities in
the United States.
Markets and Distribution. Demand for Johns Manville's OEM insulation
products is driven primarily by the production of aircraft, marine vessels and
automobiles and by commercial construction (for HVAC and other insulations).
Johns Manville typically sells OEM insulation products to distributors and
fabricators who, in turn, sell to original equipment manufacturers.
Competition. Johns Manville's OEM insulation business competes with a
variety of large and small companies in its various niche markets. Johns
Manville competes in the OEM insulation business primarily on the basis of
price, quality and product customization.
Roofing Systems
In 1999, Johns Manville's Roofing Systems segment had net sales of $606.5
million, or 28 percent of the Company's total net sales (before elimination of
intersegment sales).
Products. Johns Manville is a full-line supplier of roofing systems and
components for low-slope commercial and industrial roofs, including a wide
range of membranes, insulations, accessories and roofing systems guarantees.
Johns Manville's commercial/industrial roofing systems business operates 20
manufacturing facilities in the United States and has three additional plants
located in Altamira, Mexico; Cornwall, Ontario, Canada; and Verona, Italy.
In September 1999, the Company purchased certain of the polyisocyanurate
foam insulation manufacturing facilities of Apache Products, Inc., ("Apache")
including plants located in Belvidere, Illinois and Anderson, South Carolina.
In addition, the Company entered into long term lease agreements for
facilities located in Riverside, California and Linden, New Jersey. As part of
the acquisition, the Company entered into a long term agreement to supply
Apache with polyisocyanurate foam insulation products.
Markets and Distribution. Demand for Johns Manville's roofing systems
products is driven primarily by commercial and industrial reroofing needs.
Johns Manville estimates that approximately 75 percent of its roofing material
sales during 1999 were attributable to reroofing, with the balance
attributable to new construction. While sales of roofing systems are affected
by levels of new construction and general economic conditions, sales
attributable to reroofing are less sensitive to these factors, thus mitigating
the adverse effect of recessionary periods.
Johns Manville's marketing focus is directed to roofing contractors and
distributors, building owners, architects and roofing consultants who
generally recommend premium roofing systems. Approximately 95 percent of Johns
Manville's roofing systems sales during 1999 were sold through wholesale
distributors; the remainder was sold through roofing contractors.
Competition. The commercial and industrial roofing business is a highly
fragmented market. Competitors include several large national participants and
various smaller regional companies. Johns Manville competes in the commercial
and industrial roofing business primarily on the basis of breadth of product
line, specifications, guarantees, systems reliability and value.
3
<PAGE>
Engineered Products
Johns Manville's Engineered Products segment had 1999 net sales of $782.7
million, or 34 percent of Johns Manville's total net sales (before elimination
of intersegment sales). The Engineered Products segment is comprised of the
mats and fibers and filtration product groups.
Mats and Fibers
Products. Johns Manville's mats and fibers business manufactures mats and
fibers, glass fabrics and continuous filament fiber glass-based products that
are used in a variety of applications. Johns Manville is a worldwide supplier
of base fiber, nonwoven fiber glass and polyester spunbond mat products, which
are used as substrates in roofing, flooring and specialty applications and
monofilament used in the paper industry. Johns Manville also sells fiber glass
products (chopped fiber and rovings) for reinforcing plastics and gypsum
products and for use in fiber glass wall coverings.
The mats and fibers business operates four manufacturing plants and one
support facility in the United States. Johns Manville's German subsidiaries
operate five plants in Germany, one plant in Poland and one plant in China.
Schuller GmbH was the pioneer in wet fiber glass mat technology and also
developed the unique silver fiber glass process, which created the market for
fiber glass wall coverings in Europe. Johns Manville's Mitex subsidiaries
operate two manufacturing facilities in Sweden and one in the United Kingdom.
In January 1999, the Company acquired the Spunbond/Monofilament operations
of Hoechst's polyester business. The Company acquired five manufacturing
plants located in Spartanburg, South Carolina; Bobingen, Germany; Berlin,
Germany; Limavady, Northern Ireland and Quin Pu City, China.
Markets and Distribution. Demand for Johns Manville's mats and fibers
products is driven primarily by the worldwide commercial construction and
retrofit markets, as well as by U.S. residential construction and reroofing
markets. Mats and fibers products are sold directly to roofing and flooring
manufacturers and to Johns Manville's Mitex subsidiaries as well as to other
European textile weavers. Johns Manville's U.S. mats and fibers business
provides fiber glass mat to Johns Manville's commercial roofing systems
business for its fiber glass-based roofing products.
Competition. Johns Manville's primary competitors in the worldwide mats and
fibers business are other large manufacturers of mats and fibers. Johns
Manville competes in the mats and fibers business primarily on the basis of
quality and service.
Filtration
Products. Johns Manville's filtration businesses produce air filtration
media for commercial and industrial buildings for HVAC and other equipment and
ultra-fine fibers for clean room air filters. The Company also manufactures
liquid filtration cartridges and media for use in commercial and industrial
applications. As with OEM insulation, filtration products generally require
extremely fine and uniform fibers to provide the required filtration
properties, and therefore command higher prices than other fiber glass
products.
The Company manufactures filtration products at five of Johns Manville's
U.S. facilities.
Markets and Distribution. Demand for Johns Manville's filtration products is
driven primarily by commercial construction and commercial building occupancy
(air filtration media); the construction of clean rooms requiring dust-free
environments which are primarily used by the pharmaceutical and semiconductor
industries (ultra-fine fibers); and the need for high efficiency filtration of
water, paints, inks, chemicals, resins and oils in industrial manufacturing
operations (liquid filtration media). Increasing public attention to
environmental issues also stimulates demand for filtration media and
industrial oil sorbent products.
4
<PAGE>
Johns Manville typically sells air filtration media products to producers of
air filtration systems for use in commercial buildings. The Company sells
liquid filtration media products to producers of liquid filtration systems and
products for use in commercial and industrial manufacturing operations. Johns
Manville also sells finished cartridges for use in high-efficiency liquid
filtration applications and ultra-fine fibers to specialty filtration paper
manufacturers. Johns Manville sells its synthetic nonwoven products primarily
to distributors and fabricators.
Competition. Johns Manville's filtration business competes with a variety of
large and small companies in its various niche markets. Johns Manville
competes in the filtration business primarily on the basis of quality and
product customization.
MATERIALS
Fiber glass is the basic material in a significant number of Johns
Manville's products. The principal raw materials used to manufacture fiber
glass products include sand, soda ash, lime, borate minerals and aluminous
materials. Phenol-formaldehyde, urea extended phenol-formaldehyde, urea-
formaldehyde, melamine-formaldehyde and other resins are also used to bind
glass fibers. All of these raw materials are readily available in sufficient
quantities from various sources for Johns Manville to maintain and expand its
current production levels.
Johns Manville's products contain materials other than fiber glass to
satisfy the broader needs of its customers. For example, calcium silicate pipe
insulation products and plastic accessories complement Johns Manville's
product offerings to commercial/industrial insulation customers.
Commercial/industrial roofing systems use perlite insulation board, modified
bitumen and single ply membranes with polyester substrates. In addition, the
Company uses several advanced polymers in roll goods. The Company manufactures
polyisocyanurate foam roof insulation and residential sheathing using liquid
chemicals comprised primarily of polyol and polyisocyanate. Johns Manville has
broadened its product lines into certain polymer fiber applications for
filtration, substrates, and equipment insulation, apparel and industrial oil
sorbents. The raw materials used in these various products are readily
available in sufficient quantities from various sources for Johns Manville to
maintain and expand its current production levels.
RESEARCH AND DEVELOPMENT
The Company carries out research and development activities at its
facilities in Littleton, Colorado; Mesa County, Colorado; Waterville, Ohio;
Richmond, Indiana; Wertheim, Germany; and Helsingborg, Sweden. Research,
development and engineering expenses for the years ended December 31, 1999,
1998 and 1997 were approximately $39.8 million, $32.8 million and $31.2
million, respectively.
PATENTS
The Company presently owns or controls 1,207 U.S. and foreign patents and
patent applications. The Company also holds negotiated licenses under various
patents owned by others. While the Company regards its patents and licenses as
valuable, it does not consider any of its businesses to be materially
dependent upon any single patent or license.
LABOR RELATIONS
At December 31, 1999, the Company employed approximately 9,740 persons
worldwide, of whom approximately 4,475 were covered by collective bargaining
agreements. The Company has experienced a long history of good working
relationships with its employees and labor unions.
SEASONALITY
The Company's quarterly results of operations are moderately seasonal due to
increases in construction activity that typically occur in the second and
third quarters of the calendar year, thereby increasing sales and gross
profits in those periods.
5
<PAGE>
Environmental Regulations
All of the Company's domestic operations are subject to a variety of
federal, state and local environmental laws and regulations. These laws and
regulations regulate the discharge of materials into the air, land and water
and govern the use and disposal of hazardous substances. The most significant
of the federal laws are the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Resource Conservation and Recovery Act ("RCRA")
and the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"). These environmental regulatory programs are administered
by the federal Environmental Protection Agency ("EPA"). In addition, state and
local jurisdictions have adopted equivalent or more stringent environmental
laws and regulations, or have enacted their own parallel environmental
programs, which are enforced through various state and local administrative
agencies. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--Environmental
Contingencies" and Note 8 to the Company's Consolidated Financial Statements,
each incorporated by reference herein.
Occupational Health and Safety Aspects of the Company's Products
The Company manufactures, processes and sells products, and has in the past
manufactured, processed and sold products, that contain certain chemicals or
substances, including man-made mineral fibers (now referred to as synthetic
vitreous fibers ("SVF")), classified by the International Agency for Research
on Cancer ("IARC") in 1987 as possible human carcinogens. For purposes of
occupational exposure, the Occupational Safety and Health Administration
("OSHA") regulates all SVF as nuisance dusts. On May 18, 1999, OSHA removed
SVF (e.g., fiber glass, rock wool and slag wool) as a regulatory priority
based on the agreement by the Company and other fiber glass manufacturers to
adopt certain work practices and exposure limits at their facilities. The
Company believes that it is and has been in compliance with all applicable
workplace exposure regulations. In 2001 IARC will reconsider its 1987
classification of fiber glass as "possibly carcinogenic." This reconsideration
will take into account many recent peer-reviewed studies published since 1987
such as the U.S. epidemiology study (updated in 1990 and again in 2000) by
University of Pittsburgh researcher Dr. G. Marsh.
Labels and other hazard communication materials reflecting the potential
cancer risk have been developed and are used by the Company to address the
proper handling of fiber glass wool products by employees and customers. In
addition, the Company has agreed to indemnify certain purchasers, under
certain circumstances, for personal injury claims arising out of exposure to
the Company's fiber glass wool products.
Crystalline silica exists in trace amounts in the Company's calcium silicate
insulation products and is a major constituent of the diatomaceous earth
products produced by a former subsidiary and in industrial sands used in the
Company's direct melt operations, marble forming and roofing plants. In 1996,
the IARC classified crystalline silica as "known carcinogenic to humans."
Occupational exposures to crystalline silica within the Company's facilities
are documented and controlled through exhaust ventilation or personal
protective equipment. Products containing this substance comply with OSHA
hazard communication requirements.
In addition, asphalt used by the Company's roofing operations presently is
being evaluated by the National Institute of Occupational Safety and Health to
determine its carcinogenic potential.
Based upon its analysis to date, the Company does not believe that the IARC
classifications or any action taken by federal and state regulatory agencies
will have a material adverse effect on the Company. However the Company's
analysis of available data and its expectations concerning human health
hazards associated with its products are subject to risks and uncertainties.
Because domestic and international regulatory and scientific authorities are
involved on an ongoing basis in the assessment of potential human health
hazards, there can, therefore, be no assurance that future actions taken by
such authorities or other developments relating to the Company's liability for
its products will not have an adverse effect on the Company. The foregoing
statements constitute "forward-looking statements" under federal securities
laws.
6
<PAGE>
ITEM 2. PROPERTIES
Headquarters
The Company's headquarters are located in Denver, Colorado. The Company
leases approximately 161,000 square feet of office space at Johns Manville
Plaza in downtown Denver.
Manufacturing and Development Facilities
The following table sets forth certain information with respect to the
Company's major manufacturing and development plants and buildings. All of the
buildings are adequate and suitable for the business of the Company, have been
well maintained and are in sound operating condition and regular use.
<TABLE>
<CAPTION>
Location Business Segment
-------- ----------------
<S> <C>
UNITED STATES AND CANADA
Innisfail, Alberta, Canada................ Insulation
Cornwall, Ontario, Canada................. Roofing Systems and Insulation
Tucson, Arizona........................... Insulation and Engineered Products
Little Rock, Arkansas..................... Roofing Systems
Corona, California........................ Insulation
Pittsburg, California..................... Roofing Systems
Riverside, California*.................... Roofing Systems
South Gate, California*................... Roofing Systems
Willows, California....................... Insulation
Lakewood, Colorado*....................... Insulation
Littleton, Colorado....................... Engineered Products
Mesa County, Colorado..................... Insulation
Jacksonville, Florida..................... Roofing Systems and Insulation
Macon, Georgia............................ Roofing Systems
Winder, Georgia........................... Insulation
Belvidere, Illinois....................... Roofing Systems
Rockdale, Illinois........................ Roofing Systems
Bremen, Indiana........................... Roofing Systems and Insulation
Richmond, Indiana......................... Insulation
Kansas City, Kansas*...................... Roofing Systems
McPherson, Kansas......................... Insulation
Florence, Kentucky........................ Roofing Systems
Lewiston, Maine........................... Roofing Systems
Saco, Maine............................... Roofing Systems and Insulation
Natchez, Mississippi...................... Roofing Systems
Richland, Mississippi..................... Engineered Products
Edison, New Jersey........................ Insulation
Penbryn, New Jersey....................... Insulation
Plattsburgh, New York..................... Roofing Systems
Defiance, Ohio............................ Insulation and Engineered Products
Waterville, Ohio.......................... Engineered Products
Oklahoma City, Oklahoma................... Roofing Systems
Hazleton, Pennsylvania.................... Roofing Systems and Insulation
Anderson, South Carolina.................. Roofing Systems
Spartanburg, South Carolina............... Engineered Products
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
LOCATION BUSINESS SEGMENT
-------- ----------------
<S> <C>
Etowah, Tennessee........................ Engineered Products
Cleburne, Texas.......................... Insulation and Engineered Products
Edinburg, Virginia....................... Roofing Systems
Richmond, Virginia....................... Insulation
Kent, Washington*........................ Roofing Systems and Insulation
Parkersburg, West Virginia............... Insulation and Engineered Products
INTERNATIONAL
Changzhou, Jiangsu, China................ Engineered Products
Quin Pu City, China...................... Engineered Products
St. Helens, England...................... Engineered Products
Berlin, Germany*......................... Engineered Products
Bobingen, Germany........................ Engineered Products
Karlstein, Bavaria, Germany.............. Engineered Products
Steinach, Thuringen, Germany............. Engineered Products
Wertheim, Baden-Wuerttemberg, Germany.... Engineered Products
Verona, Italy............................ Roofing Systems
Altamira, Mexico*........................ Roofing Systems
Lubliniec, Poland........................ Engineered Products
Helsingborg, Sweden...................... Engineered Products
Oskarstrom, Sweden....................... Engineered Products
</TABLE>
--------
*Indicates the facility is leased.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal actions occurring in the normal
course of its business. In the opinion of the Company's management, adequate
provision has been made for losses which may result from these actions and,
accordingly, the outcome of these proceedings is not expected to have a
material adverse effect on the financial condition of Johns Manville. For
additional information concerning certain of these proceedings, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Contingent Product Liability
and--Environmental Contingencies."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, there were no matters submitted to a vote
of security holders.
EXECUTIVE OFFICERS OF THE COMPANY
The names, ages and offices of the Chief Executive Officer and other
executive officers of the Company are listed below. Each of the executive
officers holds office until the Board of Directors meeting following the
Annual Meeting of Stockholders unless previously removed by the Board of
Directors. Each of Messrs. Perry and Jensen has been an officer or executive
officer of the Company or its subsidiaries during the past five years. Messrs.
Henry, Caltrider and Klocko have been executive officers of the Company from
the respective dates indicated below. For at least the past five years, prior
to his joining the Company, Mr. Henry served in various executive positions
with E.I. du Pont de Nemours and Company ("DuPont"). Between 1993 and 1995,
Mr. Caltrider served as President and Chief Executive Officer of Gundle
Environmental Systems, Inc. Between 1995 and the time he joined the Company,
Mr. Klocko served as Associate General Counsel of DuPont.
8
<PAGE>
<TABLE>
<CAPTION>
Executive Officer
Name and Title Age Since
-------------- --- -----------------
<S> <C> <C>
Charles L. Henry......................................... 58 1996
Chairman of the Board, President and Chief Executive
Officer
John J. Klocko, III ..................................... 60 1998
Senior Vice President and General Counsel
Harvey L. Perry, Jr. .................................... 45 1996
Senior Vice President, Engineered Products Group
Thomas L. Caltrider...................................... 49 1997
Senior Vice President, Insulation Group
Kenneth L. Jensen........................................ 48 2000
Senior Vice President and Chief Financial Officer
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company had 8,844 common stockholders of record at March 1, 2000. The
Common Stock is listed and traded on the New York Stock Exchange, Inc. (symbol
JM). The Company has scheduled its 2000 Annual Meeting of Stockholders for May
12, 2000 in Denver, Colorado.
A two-year history of high and low sale prices for the Common Stock based on
the sales transactions reported by the New York Stock Exchange, Inc. is
provided below.
On March 6, 1998, the Company's Board of Directors declared a dividend of
$.04 per share on the Common Stock for the first quarter of 1998 which was
paid on April 10, 1998. On April 24, 1998, the Company's Board of Directors
declared a dividend of $.04 per share on the Common Stock for the second
quarter of 1998 which was paid on July 10, 1998. In July 1998, the Board of
Directors increased the quarterly dividend to $.06 per share on the Common
Stock, and accordingly declared dividends of $.06 per share on July 17, 1998
and December 11, 1998 for the third and fourth quarters of 1998, which were
paid on October 9, 1998 and January 8, 1999, respectively. The Company's Board
of Directors declared dividends of $.06 per share on March 5, 1999, April 23,
1999, July 16, 1999 and December 10, 1999 for the first, second, third and
fourth quarters of 1999, which were paid on April 9, 1999, July 9, 1999,
October 8, 1999 and January 7, 2000, respectively.
Market Prices Per Share
<TABLE>
<CAPTION>
1999 1998
Common Stock Common Stock
--------------- -----------------
For the Quarters Ended High Low High Low
---------------------- -------- ------ -------- --------
<S> <C> <C> <C> <C>
March 31................................... 18 1/4 15 1/4 13 5/8 9 13/16
June 30.................................... 17 1/8 12 1/2 16 7/8 12 3/4
September 30............................... 14 13/16 12 7/8 17 13/16 11 3/8
December 31................................ 14 10 1/2 16 7/16 10 15/16
</TABLE>
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item is incorporated by reference to
Selected Five-Year Financial Data in the Company's 1999 Annual Report to
security holders included in Exhibit 13 to this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information with respect to this item is incorporated by reference to
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's 1999 Annual Report to security holders included in
Exhibit 13 to this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is incorporated by reference to the
Financial Statements and Selected Quarterly Financial Data in the Company's
1999 Annual Report to security holders included in Exhibit 13 to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in the Company's accountants during the two most
recent fiscal years. There were also no disagreements with accountants on
accounting or financial disclosures during such period.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the information set forth under the caption "Executive
Officers of the Company" in Part I of this Form 10-K, the information required
by this item is incorporated by reference to the Company's 2000 Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference to the
Company's 2000 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference to the
Company's 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated by reference to the
Company's 2000 Proxy Statement.
10
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. Financial statements, financial statement schedules and exhibits filed in
this report:
1. Information with respect to financial statements is incorporated by
reference to the Financial Statements and Selected Quarterly Financial
Data in the Company's 1999 Annual Report to security holders.
2. The Company is filing herewith Schedule II--Valuation and Qualifying
Accounts.
b. No reports on Form 8-K were filed during the last quarter of 1999.
c. Exhibit Index to Johns Manville Corporation Annual Report on Form 10-K
for Fiscal Year Ended December 31, 1999:
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<C> <C> <C> <S>
2. Second Amended and Restated Plan of Refiled as an exhibit to
Reorganization confirmed by the United the Company's 1992 Annual
States Bankruptcy Court for the Report on Form 10-K filed
Southern District of New York on March 30, 1993, and
December 22, 1986. incorporated herein by
reference.
3. (a) Restated Certificate of Incorporation. Filed as an exhibit to the
Company's 1995 Annual
Report on Form 10-K filed
April 11, 1996, and
incorporated herein by
reference.
(b) Certificate of Amendment to Restated Filed as an exhibit to the
Certificate of Incorporation. Company's 1995 Annual
Report on Form 10-K filed
April 11, 1996, and
incorporated herein by
reference.
(c) Certificate of Amendment to Restated Filed as an exhibit to the
Certificate of Incorporation. Company's Form 10-Q for
the quarter ended March
31, 1997, and incorporated
herein by reference.
(d) Amended and Restated Bylaws. Filed as an exhibit to the
Company's 1996 Annual
Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
10. (a) Johns Manville International Employees Filed as an exhibit to the
Retirement Plan.* Company's 1994 Annual
Report on Form 10-K filed
March 31, 1995, and
incorporated herein by
reference.
(b) Supplemental Pension Plan.* Refiled as an exhibit to
the Company's 1992 Annual
Report on Form 10-K filed
March 30, 1993, and
incorporated herein by
reference.
(c) Executive Long-Term Disability Plan.* Refiled as an exhibit to
the Company's 1992 Annual
Report on Form 10-K filed
March 30, 1993, and
incorporated herein by
reference.
(d) Long-Term Incentive Stock Plan.* Refiled as an exhibit to
the Company's 1992 Annual
Report on Form 10-K filed
March 30, 1993, and
incorporated herein by
reference.
(e) Amendment to Long-Term Incentive Stock Refiled as an exhibit to
Plan.* the Company's 1992 Annual
Report on Form 10-K filed
March 30, 1993, and
incorporated herein by
reference.
(f) Amendment No. 2 to Long-Term Incentive Filed as an exhibit to the
Stock Plan.* Company's Form 10-Q for
the quarter ended June 30,
1995, and incorporated
herein by reference.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<C> <C> <C> <S>
(g) Johns Manville Corporation Deferred Filed as an exhibit to the
Compensation Plan.* Company's Form S-8 filed
June 19, 1996, and
incorporated herein by
reference.
(h) Johns Manville Corporation Non- Filed as an exhibit to the
Employee Directors' Deferred Company's 1996 Annual
Compensation Plan.* Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
(i) Johns Manville Corporation 1996 Stock Filed as an exhibit to the
Award Plan.* Company's Form S-8 filed
June 19, 1996, and
incorporated herein by
reference.
(j) Johns Manville Corporation 1996 Filed as an exhibit to the
Executive Incentive Compensation Company's Form S-8 filed
Plan.* June 20, 1996, and
incorporated herein by
reference.
(k) Employment Agreement between Charles Filed as an exhibit to the
L. Henry and the Company.* Company's Form 10-Q for
the quarter ended
September 30, 1996, and
incorporated herein by
reference.
(l) Amendment to Employment Agreement Filed as an exhibit to the
between Charles L. Henry and the Company's Form 10-Q for
Company.* the quarter ended June 30,
1998, and incorporated
herein by reference.
(m) Transition and Retirement Agreement Filed herewith.
between Charles L. Henry and the
Company, dated February 3, 2000.*
(n) Employment Agreement between John J. Filed as an exhibit to the
Klocko, III and the Company.* Company's Form 10-Q for
the quarter ended
September 30, 1998, and
incorporated herein by
reference.
(o) Employment Agreement between Harvey L. Filed as an exhibit to the
Perry, Jr. and the Company.* Company's 1996 Annual
Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
(p) Amendment to Employment Agreement Filed as an exhibit to the
between Harvey L. Perry, Jr. and the Company's 1996 Annual
Company.* Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
(q) Amendment to Employment Agreement Filed as an exhibit to the
between Harvey L. Perry, Jr. and the Company's 1996 Annual
Company.* Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
(r) Amendment to Employment Agreement Filed as an exhibit to the
between Harvey L. Perry, Jr. and the Company's 1996 Annual
Company.* Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
(s) Amendment to and Extension of Filed as an exhibit to the
Employment Agreement between Harvey L. Company's Form 10-Q for
Perry, Jr. and the Company.* the quarter ended June 30,
1998, and incorporated
herein by reference.
(t) Employment Agreement between Thomas L. Filed as an exhibit to the
Caltrider and the Company.* Company's Form 10-Q for
the quarter ended June 30,
1997, and incorporated
herein by reference.
(u) Amendment to and Extension of Filed as an exhibit to the
Employment Agreement between Thomas L. Company's Form 10-Q for
Caltrider and the Company.* the quarter ended June 30,
1998, and incorporated
herein by reference.
(v) Employment Agreement between Kenneth Filed as an exhibit to the
L. Jensen and the Company.* Company's 1996 Annual
Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
------- ---------
<C> <C> <C> <S>
(w) Amendment to Employment Agreement Filed as an exhibit to
between Kenneth L. Jensen and the the Company's 1996 Annual
Company.* Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
(x) Amendment to and Extension of Filed as an exhibit to
Employment Agreement between Kenneth the Company's 1996 Annual
L. Jensen and the Company.* Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
</TABLE>
(y) Amendment to Employment Agreement Filed as an exhibit to
between Kenneth L. Jensen and the the Company's 1996 Annual
Company.* Report on Form 10-K filed
March 31, 1997, and
incorporated herein by
reference.
(z) Amendment to and Extension of Filed herewith.
Employment Agreement between Kenneth
L. Jensen and the Company.*
(aa) Second Amended and Restated Filed as an exhibit to
Supplemental Agreement between the the Company's 1995 Annual
Company and the Trust, dated as of Report on Form 10-K filed
April 5, 1996. April 11, 1996, and
incorporated herein by
reference.
(ab) Amended and Restated Manville Personal Filed as an exhibit to
Injury Settlement Trust Agreement the Company's Form 10-Q
dated as of April 29, 1997. for the quarter ended
June 30, 1997, and
incorporated herein by
reference.
(ac) $725,000,000 Revolving Multicurrency Filed as an exhibit to
Credit Agreement, dated as of May 15, the Company's Form 10-Q
1998, among Johns Manville Corporation for the quarter ended
and Johns Manville International, June 30, 1998, and
Inc., as Borrowers, Bank of America incorporated herein by
National Trust and Savings reference.
Association, as Agent, BancAmerica
Robertson Stephens and the Bank of New
York, as Syndication Agents, and the
other financial institutions party
thereto.
(ad) First Amendment to Revolving Filed herewith.
Multicurrency Credit Agreement, dated
March 29, 1999, among Johns Manville
Corporation and Johns Manville
International, Inc., as Borrowers,
Bank of America National Trust and
Savings Association, as Swingline Bank
and administrative agent, and other
financial institutions party thereto.
(ae) Second Amendment to Revolving Filed herewith.
Multicurrency Credit Agreement, dated
as of November 30, 1999, among Johns
Manville Corporation and Johns
Manville International, Inc., as
Borrowers, Bank of America, N.A.
(successor to Bank of America National
Trust and Savings Association), as
Agent, BancAmerica Robertson Stephens
and the Bank of New York, as
Syndication Agents, and the other
financial institutions party thereto.
13
<PAGE>
<TABLE>
<CAPTION>
Exhibit Reference
------- ---------
<C> <C> <C> <S>
(af) CDN 40,000,000 Revolving Credit Filed as an exhibit to
Agreement, dated as of June 17, 1998, the Company's Form 10-Q
among Johns Manville Canada Inc., as for the quarter ended
Borrower, and Johns Manville June 30, 1998, and
Corporation and Johns Manville incorporated herein by
International, Inc., as Guarantors, reference.
Bank of Montreal, as Agent and
Arranger, and the other financial
institutions Party thereto.
13. 1999 Annual Report. Pages 13 through 57 of
the Company's 1999 Annual
Report to security
holders are filed
herewith and are
incorporated herein by
reference.
21. Subsidiaries of the Registrant. Filed herewith on Page
18.
23. Consent of PricewaterhouseCoopers LLP. Filed herewith.
24. Powers of Attorney. Page 19 (included on
signature page to this
report).
27. Financial Data Schedule. Filed herewith.
- --------
*Management contract or compensatory plan or arrangements.
</TABLE>
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of Johns Manville Corporation:
Our audits of the consolidated financial statements referred to in our
report dated January 28, 2000, appearing on page 56 of the 1999 Annual Report
to Shareholders of Johns Manville Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the financial statement schedule listed
in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
Denver, Colorado
January 28, 2000
15
<PAGE>
JOHNS MANVILLE CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULE
to Form 10-K for the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Schedule Page
-------- ----
<C> <S> <C>
Valuation and qualifying accounts, for each of the three years
II in the period ended December 31.............................. 17
</TABLE>
16
<PAGE>
JOHNS MANVILLE CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
for the Years Ended December 31
(In thousands of dollars)
<TABLE>
<CAPTION>
Additions
------------------------
Charged Charged
Balance at (Credited) (Credited) Balance at
Beginning to Costs and to Other End of
Classification of Year Expenses Accounts(a) Deductions(b) Year
-------------- ---------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1999
Allowances Reducing the
Assets in the Balance
Sheet:
Doubtful accounts
receivable........... $ 4,992 $ 902 $ (1,528) $ 475 $ 3,891
Cash discounts........ 2,742 -- 25,832 26,788 1,786
Other allowances...... 33,941 1,000 104,952 97,601 42,292
Deferred tax assets... -- 10,243 -- -- 10,243
------- ------- -------- -------- -------
Total............... $41,675 $12,145 $129,256 $124,864 $58,212
======= ======= ======== ======== =======
1998
Allowances Reducing the
Assets in the Balance
Sheet:
Doubtful accounts
receivable........... $ 6,005 $ 402 $ (557) $ 858 $ 4,992
Cash discounts........ 2,257 -- 29,679 29,194 2,742
Other allowances...... 28,518 -- 80,471 75,048 33,941
Deferred tax assets... -- -- -- -- --
------- ------- -------- -------- -------
Total............... $36,780 $ 402 $109,593 $105,100 $41,675
======= ======= ======== ======== =======
1997
Allowances Reducing the
Assets in the Balance
Sheet:
Doubtful accounts
receivable........... $ 7,570 $ (243) $ 908 $ 2,230 $ 6,005
Cash discounts........ 1,278 -- 26,110 25,131 2,257
Other allowances...... 21,168 -- 52,904 45,554 28,518
Deferred tax assets... 18,188 -- -- 18,188 --
------- ------- -------- -------- -------
Total............... $48,204 $ (243) $ 79,922 $ 91,103 $36,780
======= ======= ======== ======== =======
</TABLE>
- --------
Notes:
(a) Principally charges against sales and additions due to acquisitions.
(b) Principally charges for which reserves were provided, net of recoveries.
17
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Direct and indirect subsidiaries of the Company, including subsidiaries
which the Company owns 50% or more of the equity interest, and the
jurisdiction in which each company was incorporated are listed below. Certain
companies not important to an understanding of the Company's businesses have
been omitted and which, if aggregated, would not constitute a significant
subsidiary.
<TABLE>
<CAPTION>
Jurisdiction of
Subsidiary Incorporation
- ---------- ---------------
<S> <C>
CHANGZHOU SCHULLER ZHONGXIN TIANMA FIBER GLASS PROD. CO.,
LTD.* ....................................................... China
EAGLE POLYISO CORPORATION..................................... Delaware
JOHNS MANVILLE AB............................................. Sweden
JOHNS MANVILLE CANADA INC. ................................... Canada
JOHNS MANVILLE CHINA LTD. .................................... Delaware
JOHNS MANVILLE EUROPEAN INVESTMENTS B.V. ..................... Netherlands
JOHNS MANVILLE EUROPE GmbH.................................... Germany
JOHNS MANVILLE GmbH........................................... Germany
JOHNS MANVILLE INTERNATIONAL B.V. ............................ Netherlands
JOHNS MANVILLE INTERNATIONAL GROUP, INC. ..................... Delaware
JOHNS MANVILLE INTERNATIONAL, INC. ........................... Delaware
JOHNS MANVILLE SHANGHAI NONWOVENS, LTD. ...................... China
MESA INSULATION, INC. ........................................ Delaware
MITEX AB...................................................... Sweden
MITEX GLASSFIBRE LIMITED...................................... England
NORD BITUMI SpA............................................... Italy
PASSIVE FIRE PROTECTION PARTNERS**............................ Canada
SCHULLER GmbH................................................. Germany
SKANDINAVISKA JUTE AB......................................... Sweden
TASSO AB...................................................... Sweden
UK GLASSFIBRE LIMITED......................................... England
</TABLE>
- --------
* 60% ownership
** 50% ownership
18
<PAGE>
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 as of the 30th day
of March, 2000.
JOHNS MANVILLE CORPORATION
(Registrant)
/s/ Charles L. Henry
By: _________________________________
Charles L. Henry
Chairman of the Board, President
and
Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents that each person whose signature appears
below does hereby constitute and appoint Kenneth L. Jensen and Dion Persson,
and each of them, with full power to act without the other, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign all amendments to this report, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission granting unto said attorney-in-fact and
agent, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or his substitute or substitutes, lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated as of March 30, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
/s/ Charles L. Henry Chairman of the Board, President and
______________________________________ Chief Executive Officer
Charles L. Henry (Principal Executive Officer)
/s/ Kenneth L. Jensen Senior Vice President and Chief
______________________________________ Financial Officer
Kenneth L. Jensen (Principal Financial and Accounting
Officer)
/s/ Leo Benatar Director
______________________________________
Leo Benatar
/s/ Ernest H. Drew Director
______________________________________
Ernest H. Drew
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
/s/ Robert A. Falise Director
______________________________________
Robert A. Falise
/s/ Todd Goodwin Director
______________________________________
Todd Goodwin
/s/ Michael N. Hammes Director
______________________________________
Michael N. Hammes
/s/ Kathryn R. Harrigan Director
______________________________________
Kathryn R. Harrigan
/s/ Louis Klein, Jr. Director
______________________________________
Louis Klein, Jr.
/s/ Christian E. Markey, Jr. Director
______________________________________
Christian E. Markey, Jr.
/s/ William E. Mayer Director
______________________________________
William E. Mayer
</TABLE>
20
<PAGE>
ADDITIONAL INFORMATION
Individuals interested in receiving additional information may contact the
following:
<TABLE>
<CAPTION>
<S> <C>
For Company Information For Product Information
Call (303) 978-3117 Call (303) 978-4900 or (800) 654-3103
or write to: or write to:
Johns Manville
Corporation Johns Manville Corporation
Investor Relations Product Information
P.O. Box 5108 P.O. Box 5108
Denver, CO 80217-5108 Denver, CO 80217-5108
Transfer Agent and
Registrar Independent Accountants
First Chicago Trust
Company of New York PricewaterhouseCoopers LLP
c/o Equiserve 370 Seventeenth Street, Suite 3300
P.O. Box 2500 Denver, CO 80202-5633
Jersey City, NJ 07303
Call: 1-800-756-8200
Hearing Impaired: TDD:
(201) 222-4955
Internet Information:
Website:
http://www.equiserve.com
E-mail:
[email protected]
(send stockholder
address changes to the
above address)
</TABLE>
21
<PAGE>
EXHIBIT 10(m)
TRANSITION AND RETIREMENT AGREEMENT
-----------------------------------
This TRANSITION AND RETIREMENT AGREEMENT (the "Agreement") is entered
into as of the 3rd day of February, 2000, by and between JOHNS MANVILLE
CORPORATION, a Delaware corporation (the "Company"), and CHARLES L. HENRY (the
"Executive").
WHEREAS, the Executive is currently employed by the Company as
Chairman of the Company's Board of Directors ("Chairman"), President and Chief
Executive Officer ("CEO") pursuant to an Employment Agreement dated as of
September 9, 1996, as amended as of April 1, 1998, between the Company and the
Executive (the "Employment Agreement"); and
WHEREAS, Executive having decided to retire as Chairman, President and
CEO, the Company and Executive desire to enter into the following agreement in
settlement and cancellation, except as otherwise provided herein, of all
existing and prior agreements between them (including the Employment Agreement)
concerning Executive's employment by the Company; and
WHEREAS, the Company desires to ensure a smooth transition of
Executive's duties and responsibilities, to recognize Executive's outstanding
leadership of the Company and to ensure Executive's continued contribution to
the Company during the Transition Period and the Post-Transition Period (as such
terms are hereinafter defined); and
WHEREAS, the Executive is desirous of continuing to serve the Company
during the Transition Period and the Post-Transition Period on the terms and
conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. TRANSITION AND POST-TRANSITION PERIODS. (a) The Company shall
--------------------------------------
continue to employ the Executive, and the Executive shall continue to serve
the Company, as Chairman, President and CEO, subject to the terms and
conditions set forth in this Agreement, for a period (the "Transition
Period") commencing as of the date hereof (the "Effective Date") and ending
on March 31, 2000 or such earlier date as the Executive's
1
<PAGE>
non-interim successor shall have taken office. Upon the end of the
Transition Period, Executive shall step down as Chairman, President and
CEO, as a director of the Company and as an officer and director of all of
the subsidiaries and affiliates of the Company.
(b) Without limiting Executive's duties and responsibilities as
Chairman, President and CEO during the Transition Period, during the
Transition Period and thereafter through July 31, 2000 (the "Post-
Transition Period"), Executive shall reasonably cooperate with the Company
with regard to management transition and succession (including, but not
limited to, reasonably cooperating with the Company in the search for his
successor as CEO and reasonably cooperating with such successor and the
Company in the transition process). Any such services to be performed by
Executive during the Post-Transition Period shall take into consideration
Executive's other obligations and shall not involve unreasonable time or
travel obligations on the part of the Executive. The Company shall
reimburse Executive, in accordance with standard Company policy, for all
expenses incurred by him in connection with performing such services, upon
submission of appropriate documentation by Executive.
2. COMPENSATION DURING TRANSITION PERIOD.
-------------------------------------
(a) Base Salary. During the Transition Period, Executive shall
-----------
continue to receive Base Salary at an annual rate of $725,000 ("Base
Salary"), which Base Salary shall be payable in accordance with the
Company's regular payroll practice, as in effect from to time to time.
(b) 1999 and 2000 Bonuses.
---------------------
(1) Executive shall be entitled to receive an annual bonus
in respect of the Company's 1999 fiscal year (the "1999 Annual
Bonus"), which 1999 Annual Bonus shall be determined and payable in
accordance with the Company's 1999 Executive Incentive Compensation
Plan and the Company's past practice thereunder, provided that any
right of the Compensation Committee to reduce the amount due shall not
apply.
(2) Unless Executive's employment is terminated for Cause
(as defined in Section 7(c) of the Employment Agreement) or Executive
voluntarily terminates his employment other than for Good Reason (as
such term is defined in Section 3(b) hereof) prior to the end of the
Transition Period, Executive shall be entitled to a pro rata bonus
2
<PAGE>
in respect of the Company's 2000 fiscal year (the "Pro Rata Bonus")
under the Company's annual bonus plan for such year, based upon the
portion of such year represented by the Transition Period. The Pro
Rata bonus shall be based upon actual performance of the Company for
its 2000 fiscal year, excluding, however, the effects of extraordinary
items as determined by the Committee (as defined in Section 3(a)(5)
hereof), and shall be paid at the time bonuses for such fiscal year
would normally be paid in accordance with the Company's past practice.
(c) Other Benefits. During the Transition Period, Executive shall
--------------
continue to participate in employee benefit plans maintained by the Company
and its affiliates and shall continue to receive such fringe benefits and
perquisites as he was receiving immediately prior to the Effective Date.
Reasonable business expenses incurred by Executive during the Transition
Period shall be reimbursed in accordance with Company policies.
3. COMPENSATION, ETC. FOLLOWING TRANSITION PERIOD OR UPON EARLIER
--------------------------------------------------------------
TERMINATION. Subject to Executive's compliance with Section 5 hereof, in
-----------
satisfaction of all amounts and benefits to which Executive is or may be
entitled under the Employment Agreement or any compensation or benefit plan
of the Company or any agreement thereunder with respect to Executive,
Executive and the Company agree that:
(a) Upon Executive's termination of employment at the end of the
Transition Period:
(1) Accrued Benefits. Executive shall be entitled to receive
----------------
his Base Salary, benefits and perquisites through the end of the
Transition Period.
(2) Annual Bonuses. Executive shall be entitled to receive the
--------------
1999 Annual Bonus and the Pro Rata Bonus in accordance with Section
2(b) hereof.
(3) Equity Awards.
-------------
(A) Deferred Stock. All then outstanding shares of deferred
--------------
stock which have not previously become vested shall be forfeited and
canceled, except that, with respect to the grant to the Executive of
47,059 deferred shares scheduled to vest on December 31, 2000 (as
reflected in the Deferred Stock Grant Agreement dated as of September
9, 1996, between the Company and Executive (the "Deferred Stock
Agreement")),
3
<PAGE>
the termination of Executive's employment shall, subject to
Executive's compliance with his obligations under Section 1 hereof, be
treated as a "Protected Termination" within the meaning of Section
5(b) of the Deferred Stock Agreement, such that, as of the end of the
Transition Period, one-twelfth of such deferred shares (or an
aggregate of 3,922 deferred shares) shall vest for each whole or
partial month subsequent to December 1999 during which the Transition
Period remains in effect. The portion of such deferred shares which
becomes so vested shall be payable in shares of common stock of the
Company in accordance with the terms of the Deferred Stock Agreement.
(B) Stock Options. For purposes of the various stock option
-------------
agreements in effect between the Company and the Executive, the
termination of Executive's employment at the end of the Transition
Period shall, subject to Executive's compliance with his obligations
under Section 1 hereof, be treated as a "Retirement," such that all
outstanding stock options granted to Executive, to the extent fully
vested and exercisable at the end of the Transition Period, shall
remain exercisable until the first anniversary of the end of the
Transition Period at which time such options shall expire and cease to
be exercisable (or, in the event of Executive's failure to comply with
such obligations, such options shall expire and cease to be
exercisable three months following the end of the Transition Period,
unless such failure is a basis for a termination for Cause, in which
case such options shall expire and cease to be exercisable as of the
date of Executive's termination of employment for Cause). All
outstanding stock options granted to Executive, to the extent not
fully vested and exercisable at the end of the Transition Period,
shall be forfeited and canceled as of the end of the Transition
Period. A schedule of vested and non-vested stock options, determined
as of March 31, 2000, is annexed hereto as Exhibit A.
(C) Deferred Compensation Plan Shares. For purposes of the
---------------------------------
Company's Deferred Compensation Plan (the "Deferred Compensation
Plan"), the termination of Executive's employment at the end of the
Transition Period shall be treated as a "Retirement", such that
amounts credited, as of the end of the Transition Period, to
Executive's Deferral Account under such Plan in the form of shares of
common stock of the Company shall be treated as follows:
(i) with respect to (X) an aggregate of 143,375.5798 shares
credited to Executive's Deferral Account as of September 30, 1999,
which are attributable to the deferral of Executive's variable
incentive
4
<PAGE>
awards for the 1996-1998 fiscal years (the "Deferred Bonus Shares"),
and (Y) 4,187.0659 shares credited to Executive's Deferral Account as
of September 30, 1999, which represent "premium shares" attributable
to the deferral of Executive's 1996 variable incentive award (the
"1996 Premium Shares"), the Deferred Bonus Shares and the 1996 Premium
Shares (together with any additional shares credited from October 1,
1999 through the end of the Transition Period which are attributable
to the reinvestment of dividend equivalents with respect to the
Deferred Bonus Shares and the 1996 Premium Shares) shall be delivered
to Executive in accordance with the terms of the Deferred Compensation
Plan and the Executive's outstanding elections thereunder;
(ii) with respect to 8,402.3623 shares credited to Executive's
Deferral Account as of September 30, 1999, which represent "premium
shares" attributable to the deferral of Executive's 1997 variable
incentive award (the "1997 Premium Shares"), the 1997 Premium Shares
(together with any additional shares credited from October 1, 1999
through the end of the Transition Period which are attributable to the
reinvestment of dividend equivalents with respect to the 1997 Premium
Shares) shall, subject to Executive's compliance with his obligations
under Section 1 hereof, become vested and nonforfeitable as of the end
of the Transition Period and shall be delivered to Executive in
accordance with the terms of the Deferred Compensation Plan and the
Executive's outstanding elections thereunder;
(iii) with respect to 8,916.9089 shares credited to Executive's
Deferral Account as of September 30, 1999, which represent "premium
shares" attributable to the deferral of Executive's 1998 variable
incentive award (the "1998 Premium Shares"), the 1998 Premium Shares
(together with any additional shares credited from October 1, 1999
through the end of the Transition Period which are attributable to the
reinvestment of dividend equivalents with respect to the 1998 Premium
Shares) shall be forfeited and canceled as of the end of the
Transition Period.
Executive shall not make any election under the Deferred Compensation
Plan to reallocate any amounts credited to his Deferred Account
thereunder to any alternative investment vehicle.
(4) Retirement Benefits. The Retirement Benefit (as defined
-------------------
in the Employment Agreement) to which Executive shall be entitled upon
his termination of employment at the end of the Transition Period
shall be the Retirement Benefit determined pursuant to Section 6(c) of
5
<PAGE>
the Employment Agreement. An estimate of such Retirement Benefit as of
March 31, 2000 (based upon certain assumptions as to discount rates)
is attached hereto as Exhibit B. The actual Retirement Benefit
determined pursuant to said Section 6(c) (including the lump sum
equivalent thereof determined pursuant to Section 6(d) of the
Employment Agreement) shall be computed by William M. Mercer
("Mercer"), consultants to the Company, at the Company's expense, as
of the end of the Transition Period in accordance with the methodology
utilized in said Exhibit B, except that, in determining present
values, Mercer shall utilize the discount rate in effect at January
31, 2000 (or such earlier date on which the Transition Period ends),
as set forth in the footnote to said Exhibit B. Such calculation shall
be performed by Mercer within ten days after the end of the Transition
Period and shall be provided (with backup) to the Company and the
Executive. So long as the appropriate discount rate has been utilized,
such computation by Mercer shall be binding and conclusive on the
parties hereto, except for mathematical errors. Executive's
entitlement to the Retirement Benefit shall be subject to the
provisions of Section 12(f)(ii) of the Employment Agreement. In
accordance with Section 6(d) of the Employment Agreement, the amount
of the Retirement Benefit hereunder shall be paid to Executive in a
lump sum within five days after delivery of Mercer's final computation
of the Retirement Benefit (but in no event prior to the effective date
of the Release executed by the Executive, as contemplated by Section 5
hereof).
(5) Additional Payment. Subject to Executive's compliance with
------------------
his obligations under Section 1 hereof and subject to the provisions
of Section 12(f)(ii) of the Employment Agreement, the Company shall
pay the Executive an aggregate amount equal to the excess of (1) the
lump sum equivalent (determined pursuant to Section 6(d) of the
Employment Agreement) of the Retirement Benefit which would have been
payable under Section 6(b) of the Employment Agreement (calculated as
of the end of the Transition Period as if Executive were entitled to
such Retirement Benefit) over (2) the lump sum Retirement Benefit
payable pursuant to Section 3(a)(4) hereof (such excess being
hereinafter referred to as the "Payment"). An estimate of the Payment
as of March 31, 2000 (based upon certain assumptions as to discount
rates) is attached hereto as Exhibit C. The actual amount of the
Payment shall be determined by Mercer, at the Company's expense, in
accordance with the methodology utilized in said Exhibit C, except
that, in determining present values, Mercer shall utilize the discount
rate in effect at January 31, 2000 (or such earlier date on which the
Transition Period ends), as
6
<PAGE>
set forth in the footnote to said Exhibit C. Such calculation shall be
performed by Mercer within ten days after the end of the Transition
Period and shall be provided (with backup) to the Company and the
Executive. So long as the appropriate discount rate has been utilized,
such computation by Mercer shall be binding and conclusive on the
parties hereto, except for mathematical errors. The portion of the
Payment in excess of one million dollars ($1,000,000) shall be paid to
Executive in a lump sum within five days after delivery of Mercer's
final computation of the Payment (but in no event prior to the
effective date of the Release executed by the Executive, as
contemplated by Section 5 hereof). The remaining one million dollars
($1,000,000), together with interest thereon from the end of the
Transition Period to the date of payment at the rate announced by Bank
of America as its "prime rate" as in effect at January 31, 2000 (or
such earlier date on which the Transition Period ends) (the "Prime
Rate") (such one million dollars plus interest being referred to as
the "Holdback Amount"), shall be paid to Executive, as soon as
practicable following the end of the Post-Transition Period, unless a
two-person committee (the "Committee") of Company directors,
consisting of Messrs. Ernest Drew and Michael Hammes (or, in the event
of the death or incapacity or resignation of either or both of such
individuals, another Company director or directors acceptable to the
Executive), shall have theretofore determined in good faith that the
Executive failed to perform his obligations under Section 1 of this
Agreement or materially failed to comply with the provisions of
Section 12(c)(i) of the Employment Agreement. Any determination of
nonpayment by the Committee shall be delivered in writing by the
Committee to the Company and the Executive within fifteen (15) days
after such determination is made (but in no event later than fifteen
(15) days after the end of the Post-Transition Period) and shall
specify with detail the reasons therefor. If the Executive challenges
the Committee's determination, resolution of the dispute shall be by
arbitration in accordance with Section 13(g) of the Employment
Agreement. In the event that, prior to the end of the Post-Transition
Period, the Company (to which actions of any director shall be
attributed for purposes of Section 12(c)(ii) of the Employment
Agreement, without otherwise limiting the meaning of such Section)
materially breaches its obligations under Section 12(c)(ii) of the
Employment Agreement, then the Company shall immediately pay the
Holdback Amount to the Executive and such amount shall no longer be
subject to any further risk of forfeiture. Any assertion by the
Executive of any such breach by the Company shall be delivered in
writing by the Executive to the Company and the Committee within
fifteen (15) days after Executive has actual
7
<PAGE>
knowledge of the event or events giving rise to such assertion and
shall specify in detail the basis therefor. If the Company challenges
Executive's assertion as provided in the prior sentence, resolution of
the dispute shall be by arbitration in accordance with Section 13(g)
of the Employment Agreement, provided that, if Executive is successful
in such arbitration, the Holdback Amount shall not be subject to
forfeiture after the date of the Company's material breach of its
obligations under Section 12(c)(ii) of Employment Agreement and the
Holdback Amount shall become payable only after determination of the
arbitrator (or, if earlier and the Executive otherwise qualifies to
receive the Holdback Amount, promptly following the end of the Post-
Transition Period).
(6) No Rights to Severance, etc. Executive shall have no right
----------------------------
to receive (and the Company shall be under no obligation to pay) any
severance, separation pay, salary continuation or similar benefits
(including, but not limited to, the severance benefits set forth in
Section 7(d)(i) of the Employment Agreement), nor shall Executive be
entitled to receive (nor shall the Company be under any obligation to
provide) any of the benefits contemplated by Sections 7(d)(ii),
7(d)(iii) or 7(d)(v) of the Employment Agreement.
(b) In the event that, prior to the end of the Transition Period,
Executive's employment is terminated by the Company for Cause (as defined
in Section 7(c) of the Employment Agreement), or Executive voluntarily
terminates his employment (other than for Good Reason, as defined in
Section 7(e) of the Employment Agreement, except that (1) the actions
contemplated by Section 1(a) hereof shall not constitute Good Reason) and
(2) any claim by the Executive that Good Reason exists shall be based
solely on acts or omissions occurring on or after the Effective Date),
Executive's rights shall be limited to (1) his receipt of Base Salary,
benefits and perquisites to the date of termination, (2) payment of the
Retirement Benefit determined as of the date of termination pursuant to
Sections 6(c) and 6(d) of the Employment Agreement, (3) treatment of
Executive's vested and exercisable stock options in accordance with the
parenthetical language in Section 3(a)(3)(B) hereof, and (4) such other
payments and benefits as are determined in accordance with the terms of the
applicable agreements (other than the Employment Agreement), plans,
policies and practices of the Company.
(c) In the event that prior to the end of the Transition Period,
Executive dies while in the employ of the Company, Executive's employment
is terminated by the Company without Cause, or Executive voluntarily
terminates his employment for Good Reason (as defined in paragraph (b)
8
<PAGE>
above), Executive shall be treated as if he had remained in employment
until March 31, 2000, and the rights of Executive (or, in the event of his
death, his beneficiary or estate) shall be as set forth in Section 3(a)
above.
(d) Notwithstanding the preceding paragraphs (a) through (c) of this
Section, in the event that, prior to the end of the Transition Period and
while Executive is (or is deemed to be) in the employ of the Company, (1) a
Change in Control (as defined in Section 8(g) of the Employment Agreement)
shall occur or (2) a definitive agreement (a "Change in Control Agreement")
is entered into by the Company consummation of the transaction contemplated
by which would constitute a Change in Control, then (A) as of the date of
such Change in Control (but in the case of a Change in Control described in
clause (i) of Section 8(g) of the Employment Agreement which results from
determining beneficial ownership without regard to the sixty day period
referred to in Rule 13d-3 under the Securities Exchange Act of 1934 (a
"Special Change in Control"), as of the date of consummation of the
transaction contemplated by such Special Change in Control) but in any
event not later than March 31, 2000, Executive's employment shall be deemed
to have terminated under circumstances entitling him to the payments and
benefits set forth in Section 8(d) (and, if applicable, Section 9(b) of the
Employment Agreement, (B) Executive shall have no further obligations under
Section 1 hereof after consummation of such Change in Control (or, in the
event of a Special Change in Control or in the event of the Company enters
into a Change in Control Agreement, after consummation of the transaction
contemplated by such Special Change in Control or Change in Control
Agreement), and (C) in lieu of the payments and benefits otherwise provided
under this Agreement and subject to the succeeding provisions of this
paragraph, Executive's rights shall be limited to receipt of the payments
and benefits set forth in said Section 8(d) (and, if applicable, Section
9(b), provided, however, that in the event of a Special Change in Control
-------- -------
or in the event the Company enters into a Change in Control Agreement, the
Company's obligation to make or provide the foregoing payments and benefits
shall apply only upon consummation of the transaction contemplated by the
Special Change in Control or Change in Control Agreement (as the case may
be) and in the event such transaction is abandoned or not otherwise
consummated for any reason, then this paragraph (d) shall not apply and
Executive's rights shall be determined pursuant to paragraph (a), (b) or
(c) of this Section 3, whichever paragraph is applicable. Notwithstanding
the foregoing, pending consummation of any such transaction, the amounts
and benefits to which Executive is otherwise entitled under paragraph (a),
(b) or (c) of this Section 3 shall be paid or provided in accordance with
the provisions of the applicable paragraph (and Executive shall be under no
obligation to return any such amounts or benefits received to which he is
otherwise entitled),
9
<PAGE>
subject to supplemental amounts and benefits being paid or provided by the
Company under Sections 8(d) and 9(b) of the Employment Agreement upon
consummation of such transaction, it being understood, however, that the
Company shall be under no obligation to make payments or provide benefits
under said Section 8(d) or 9(b) to the extent such payments or benefits are
duplicative of payments or benefits theretofore made or provided to
Executive hereunder. Further, nothing herein shall limit Executive's rights
which arise under any Company plan or grant upon the occurrence of a Change
in Control prior to the end of the Transition Period while Executive is in
the employ of the Company.
(e) Executive shall not be deemed to have failed to comply with his
obligations under Section 1 hereof, nor shall Executive be deemed to have
voluntarily terminated his employment, solely by reason of Executive being
unable to perform any obligations hereunder as a result of mental or
physical incapacity. Further, such inability shall not serve as the basis
for a termination for Cause hereunder.
(f) The Company may assert a violation by Executive of his
obligations under Section 1 this Agreement only if such assertion has been
approved by the Committee.
4. PUBLIC ANNOUNCEMENTS. Executive and the Company shall cooperate
--------------------
with each other in the preparation and issuance of any press release or
other public announcement pertaining to Executive's plans to retire.
5. RELEASE. In connection with Executive's termination of
-------
Employment and as a condition to any payments or benefits hereunder,
Executive or his personal or legal representative shall execute a Release,
in the form of Exhibit D hereto.
6. SUCCESSORS.
----------
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's estate and legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
10
<PAGE>
7. APPLICATION OF CERTAIN PROVISIONS OF EMPLOYMENT AGREEMENT. The
---------------------------------------------------------
provisions of Sections 7(c), 7(e), 8(d), 8(g), 9, 10 and 12 (other than
paragraph (e) thereof) of the Employment Agreement are incorporated herein
by reference as if fully set forth herein. The parties further agree to
submit all controversies, claims and matters of difference in any way
related to this Agreement, other than the seeking of injunctive relief
pursuant to Section 12(f) of the Employment Agreement as incorporated
herein, to arbitration in accordance with the provisions of Section 13(g)
of the Employment Agreement (which provisions are incorporated herein by
reference as if fully set forth herein).
8. LEGAL FEES. In the event of a dispute between Executive and the
----------
Company with respect to any of Executive's rights under this Agreement, the
Company shall reimburse Executive for any and all reasonable legal fees and
related expenses incurred by him in connection with enforcing such rights,
including the costs of arbitration, if and to the extent provided by the
arbitral tribunal resolving such dispute, or if such dispute is resolved
without arbitration, if Executive is successful in enforcing any material
rights originally disputed by the Company. The Company shall pay
Executive's reasonable legal fees (but not in excess of $30,000) incurred
in connection with entering into this Agreement.
9. MISCELLANEOUS.
-------------
(a) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Colorado without reference to
principles of conflict of laws.
(b) Entire Agreement. Except to the extent the context otherwise
----------------
requires or as otherwise provided herein, this Agreement shall supersede
any and all existing employment, change-in-control or severance agreements
between Executive and the Company or any of its affiliates (including, but
not limited to, the Employment Agreement) and contains the entire
understanding of the parties with respect to the subject matter hereof.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein. ANY AMENDMENT HERETO SHALL BE
IN WRITING AND SHALL NOT BE EFFECTIVE UNLESS AND UNTIL SIGNED BY EXECUTIVE
AND THE CHAIRMAN OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
THE COMPANY AND ATTESTED TO BY THE SECRETARY OF THE COMPANY.
11
<PAGE>
(c) No Waiver. The failure of a party to insist upon strict adherence
---------
to any term of this Agreement on any occasion shall not be considered a
waiver of such party's rights or deprive such party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
(d) Severability. It is expressly understood and agreed that although
------------
Executive and the Company consider the restrictions contained in this
Agreement to be reasonable, if a final judicial determination is made by a
tribunal of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction
against Executive, the provisions of this Agreement shall not be rendered
void but shall be deemed amended to apply as to such maximum time and
territory and to such maximum extent as such tribunal may determine or
indicate to be enforceable. Alternatively, if any tribunal of competent
jurisdiction finds that any restriction contained in this Agreement is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein. In the event that any one or more of
the provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected thereby.
(e) Withholding Taxes. The Company may withhold from any and all
-----------------
amounts payable under this Agreement such Federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or
regulation.
(f) Counterparts. This Agreement may be signed in several
------------
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
10. SURVIVAL. The respective rights of the parties and their
--------
successors and permitted assigns under the provisions of Sections 3, 7, 8
and 9 hereof (and the associated provisions of the Employment Agreement
referred to therein or incorporated herein by reference) shall survive the
expiration of the Transition Period to the extent necessary to give effect
to such provisions.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
JOHNS MANVILLE CORPORATION
ATTEST By: /s/ Todd Goodwin
----------------------------------
Chairman: Compensation
Committee
/s/ Dion Persson
- -----------------------------
Corporate Secretary
/s/ C. L. Henry
------------------------------------
Executive
13
<PAGE>
Exhibit A
---------
Stock Options
-------------
Grant Date Vesting Status at 3/31/2000
---------- ---------------------------
1. September 9, 1996
-----------------
. Option for 519,500 shares at . fully vested
exercise price of $10.625 per share
. Option for 346,330 shares at . fully vested
exercise price of $13.281 per share
2. December 10, 1988
-----------------
. Option for 125,000 shares at . 1/3 vested (41,667 shares);
exercise price of $15.1875 per share 2/3 non-vested (83,333 shares)
14
<PAGE>
Exhibit B
---------
Estimated Retirement Benefit
Pursuant to Section 6(c) of Employment
Agreement (as of March 31, 2000)
----------------------------------------
<TABLE>
<S> <C>
Target Benefit $ 932,740
DuPont Benefit (396,194)
------------
Benefit Based on 79 months of Employment $ 536,546
Completed Months of Employment 42
Reduction for Service Less than 79 Months 53.165 %
Pro Rated Target Benefit $ 285,254.68
Benefit Payable from
Company Plans Commencing at Age 62 (54,455.04)
------------
Annual Benefit Under Section 6(c)
Commencing at age 62 $ 230,799.64
============
Estimated Present Value of Annual Benefit
Under Section 6(c) [Interest @ 5.00%]* $ 2,790,866
============
</TABLE>
________________
* Actual Present Value to reflect the average of Moody's AAA 10-Year Municipal
Bond Rates for the 13 weeks ending on the earlier of 1/31/2000 or the end of
the Transition Period.
15
<PAGE>
Exhibit C
---------
Estimated Payment (as of March 31, 2000)
----------------------------------------
Estimated Benefit Per Section 6(b) of
- -------------------------------------
Employment Agreement
- --------------------
<TABLE>
<S> <C>
Target Benefit $ 932,740
DuPont Benefit (396,194)
------------
Annual Benefit Payable by Company $ 536,546.00
Annual Benefit Payable from Company Plans
Commencing at Age 62 (54,455.04)
------------
Annual Benefit Under Section 6(b) at Age 62 $ 482,090.96
Reduction for Commencement at Age 58.9194 84.597 %
Reduced Annual Benefit Under Section 6(b)
Commencing at Age 58.9194 $ 407,834.49
============
Estimated Present Value of Reduced Annual
Benefit Under Section 6(b)
[Interest @ 5.00%]* $ 4,931,598
Estimated Present Value of Annual Benefit
- -----------------------------------------
Under Section 6(c) per Exhibit B* (2,790,866)
--------------------------------- ------------
Estimated Payment $ 2,140,732
- ----------------- ============
</TABLE>
_________________
* Actual Present Values to reflect the average of Moody's AAA 10-year
Municipal Bond Rates for the 13 weeks ending on the earlier of 1/31/2000 or
the end of the Transition Period.
16
<PAGE>
Exhibit D
---------
RELEASE
-------
(a) In consideration of the agreement by Johns Manville Corporation (the
"Company") to make payment of the amounts contemplated by the Transition and
Retirement Agreement dated as of February 3, 2000, between Charles L. Henry
("Executive") and the Company (the "Transition Agreement"), Executive hereby
agrees to and does fully and completely release, discharge and waive any and all
claims, complaints, causes of action, actions, suits, debts, sums of money,
contracts, controversies, agreements, promises, or demands of whatever kind, in
law or in equity, which he ever had, now has or which he, his heirs, executors
or administrators may have against the Company and its subsidiaries,
predecessors, affiliates, successors and assigns, and each and all of their
officers and directors, in their capacities as such (collectively, the
"Releasees"), by reason of any event, matter, cause or thing which has occurred
to the date of execution of this Release. relating in any way to the Executive's
employment relationship with the Company or to his termination thereof, whether
for severance or based on statutory or common law claims for employment
discrimination, wrongful discharge, breach of contract or any other theory,
whether legal or equitable, or arising under any statute or regulation,
including the Age Discrimination in Employment Act of 1967, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with
Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974,
and the Family Medical Leave Act of 1993, each as amended, or any other federal,
state or local law, regulation, ordinance or common law.
(b) Nothing herein shall be deemed to release (i) any of the Executive's
rights under the Transition Agreement (including those rights under the
Employment Agreement which survive under, or are incorporated in, the Transition
Agreement (ii) any of the benefits that the Executive has accrued prior to the
date this Release is executed by the Executive and to which Executive is
entitled under the Company's various employee benefit plans, programs and
policies or (iii) any rights to indemnification or to directors and officers
liability insurance under the Certificates of Incorporation or By-laws or the
Company or any affiliate or pursuant to the provisions of any plan or agreement.
17
<PAGE>
(c) The Executive represents that the Company has advised him to consult
with an attorney of his choosing prior to signing this Release. The Executive
further represents that he understands and agrees that he has the right to and
has in fact reviewed this Release with an attorney of the Executive's choice.
The Executive further represents that he understands and agrees that the Company
is under no obligation to offer him this Release, that the Executive is under no
obligation to consent to this Release, and that he has entered into this Release
freely and voluntarily.
(d) The Executive shall have twenty-one (21) days to consider this Release
and once he has signed this Release, the Executive shall have seven (7)
additional days from the date of execution to revoke his consent to this
Release. Any such revocation shall be made by delivering written notification to
the Company and upon such revocation, the Executive shall immediately repay to
the Company any amounts theretofore paid to him pursuant to the Transition
Agreement and shall have no further right to receive any amounts or benefits
pursuant to the Transition Agreement. Unless previously revoked, this Release
shall become effective as of the eighth (8th) day after the date the Executive
signs this Release.
IN WITNESS WHEREOF, the Executive has executed this Release as of the
___ of ____________________, 2000.
______________________________
Executive
18
<PAGE>
EXHIBIT 10(z)
AMENDMENT TO AND EXTENSION OF EMPLOYMENT AGREEMENT
BETWEEN JOHNS MANVILLE INTERNATIONAL, INC.
AND KENNETH L. JENSEN
This AMENDMENT AND EXTENSION, dated as of April 1, 1998, is by and between
JOHNS MANVILLE CORPORATION, a Delaware corporation (the "Company"), and KENNETH
L. JENSEN (the "Executive"), and amends and extends the EMPLOYMENT AGREEMENT,
dated April 10, 1992, between the Company (f/k/a Schuller International, Inc.)
and the Executive (as previously amended and extended, the "Employment
Agreement").
WHEREAS, the Company and the Executive have agreed to amend and extend the
Employment Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 1 of the Employment Agreement is hereby amended to read as
follows:
1. Term of Employment. The Executive's period of employment
------------------
hereunder shall extend from April 10, 1992 through April 10,
2001; provided, however, that commencing April 10, 1999 and each
April 10 thereafter if this Agreement is still in effect, the
period of employment shall automatically be extended for one
additional year unless, not later than March 1 of such year, the
Company or the Executive has given written notice to the other
party that such term of employment shall not be so extended. The
period of Executive's employment hereunder, including any
extension or extensions pursuant to the foregoing sentence, is
referred to hereafter as the "Employment Term."
2. The first sentence of Section 2 of the Employment Agreement is hereby
amended to read as follows: While employed hereunder, Executive shall
serve as Senior Vice President, Corporate Development and Investor
Relations of the Company.
3. The lead-in paragraph of Section 7(d) of the Employment Agreement is
hereby amended to read as follows:
(d) Subject to Section 7(g), if during the Employment Term and prior
to a Change in Control Executive's employment hereunder is
terminated by the Company without Cause (other than by reason of
death or
1
<PAGE>
Disability) or by Executive with "Good Reason" (as defined in
Section 7(e) below) asserted in a Notice of Termination pursuant
to Section 13(f) within one year of the event alleged to
constitute such Good Reason, Executive shall be entitled to
receive the following benefits:
4. Section 7(d)(i) of the Employment Agreement is hereby amended to read
as follows:
(i) The Company shall pay Executive in equal monthly cash payments,
beginning on the fifth day of the month following such termination and
continuing on the fifth day of each month thereafter for a period of
24 months, an aggregate amount equal to two times Executive's Base
Salary in effect at the time of such termination or, in the event of
termination by Executive on account of an event described in Section
7(e)(iv) below, the Base Salary as in effect prior to the reduction or
reductions referred to therein plus the bonus Executive would have
earned in respect of the year of termination under the Company's
annual incentive compensation plan, if any, in effect at the date of
termination or, in the event of a termination by Executive by reason
of an event described in Section 7(e)(vi), the plan in effect prior to
the elimination referred to therein, determined as if Executive had
been employed by the Company for the full year and without regard to
any right reserved by the Company to decrease or eliminate such bonus,
and assuming actual performance had equaled 100% of the performance
objective established for such year pursuant to the terms of such
plan. In the event of a Change in Control following such termination,
all remaining amounts then payable pursuant to this Section 7(d)(i)
shall be paid in a lump sum in cash within 15 days of the date of the
event giving rise to the Change in Control.
5. The Employment Agreement is hereby amended to add a new Section 7(g)
and (h) to read as follows:
(g) Notwithstanding any other provision of this Agreement, in
the event (i) Executive's employment hereunder is terminated by
the Company without Cause prior to a Change in Control pursuant
to which payments are payable pursuant to Section 7(d) and (ii)
such termination is the result of a Performance Related
Termination Event (as defined in Section 7(g) below), then (x)
the benefits and perquisites provided pursuant to Sections
7(d)(ii) and 7(d)(iii) shall be provided for a 12-month period
after such termination in lieu of a 24-month period, (y) the
benefits and services provided pursuant to Sections 7(d)(iv) and
7(d)(v) shall remain unchanged and (z) the amount payable
pursuant to Section 7(d)(i) shall be reduced to the amount
provided in Section 7(g)(i) below:
2
<PAGE>
(i) The Company shall pay Executive in equal monthly cash
payments beginning on the fifth day of the month
following such termination and continuing on the fifth
day of each month thereafter for a period of 24 months,
an aggregate cash amount equal to one times his Base
Salary in effect at the time of such termination plus a
fraction of the annual bonus which (absent such
termination and without regard to any right reserved by
the Company to decrease or eliminate such bonus)
Executive would have earned in respect of the year of
termination under the JM annual incentive compensation
plan, if any, in effect at the date of termination,
assuming actual performance had equaled 100% of the
performance objective established for such year
pursuant to the terms of such plan, the numerator of
which fraction is the number of days in such year
during which the Executive was employed by the Company
and the denominator of which is 365.
(h) For purposes of the foregoing, "Performance Related
Termination Event" shall mean Executive's failure to meet in
any material respect the expectations of the Company which
have been communicated to Executive and which are reasonable
and material in light of Executive's position after a
written notice specifying this Section and identifying such
failure is delivered to Executive and Executive shall have
failed during the 60-day period following such written
demand to have corrected such failure (other than as a
result of total or partial incapacity due to physical or
mental illness or as a result of termination by Executive
for Good Reason).
6. The lead-in paragraph of Section 8(d) of the Employment Agreement
is hereby amended to read as follows:
(d) If during the Employment Term Executive's employment
hereunder is terminated by the Company following a Change in
Control without Cause (other than by reason of death or
Disability) or by Executive with "Good Reason" (which following a
Change in Control shall have the meaning set forth in Section
8(e) below) asserted in a Notice of Termination pursuant to
Section 13(f) within two years of the event alleged to constitute
such Good Reason, Executive shall be entitled to receive the
following benefits:
3
<PAGE>
7. Section 8(d)(i) of the Employment Agreement is hereby amended to
read as follows:
(i) The Company shall pay Executive at the time of termination
in a lump sum a cash amount equal to three times the sum of (A)
Executive's Base Salary in effect at the time of such termination
or, in the event of termination by Executive by reason of an
event described in Section 8(e)(iv) below, the Base Salary as in
effect prior to the reduction or reductions referred to therein
plus (B) the bonus Executive would have earned in respect of the
year of termination under the Company's annual incentive
compensation plan, if any, in effect at the date of termination
or, in the event of a termination by Executive by reason of an
event described in Section 8(e)(v), the plan in effect
immediately prior to the reduction or reductions referred to
therein, determined as if Executive had been employed by the
Company for the full year and without regard to any right
reserved by the Company to decrease or eliminate such bonus, and
assuming actual performance had equaled 100% of the performance
objective established for such year pursuant to the terms of such
plan.
8. Section 9 of the Employment Agreement is hereby amended to read
as follows:
9. Golden Parachute Tax.
--------------------
(a) Anything herein to the contrary notwithstanding, in the
event that it is determined that any payment or distribution
by the Company to or for Executive's benefit, whether paid
or payable or distributed or distributable pursuant to the
terms hereof or otherwise, other than any payment pursuant
to this Section 9(a) (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") or any interest or
penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"),
then Executive shall be entitled to receive, within 15 days
following the determination described in Section 9(b) below,
an additional payment ("Excise Tax Adjustment Payment") in
an amount such that after payment by Executive of all
applicable Federal, state and local taxes (computed at the
maximum marginal rates and including any interest or
penalties imposed with respect to such taxes), including any
Excise Tax, imposed upon the Excise Tax Adjustment Payment,
Executive shall retain an amount of the Excise Tax
Adjustment Payment equal to the Excise Tax imposed upon the
payments.
4
<PAGE>
(b) All determinations required to be made under this
Section 9, including whether an Excise Tax Adjustment
Payment is required and the amount of such Excise Tax
Adjustment Payment, shall be made by Coopers & Lybrand,
L.L.P. or such accounting firm as the Company may designate
prior to a Change of Control, which shall provide to the
Company and Executive detailed supporting calculations
within 15 business days of the date of Executive's
termination of Employment. Except as hereinafter provided,
any determination by Coopers & Lybrand, L.L.P. or such other
accounting firm as the Company may designate prior to a
Change of Control shall be binding upon the Company and
Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial
determination hereunder, it is possible that (x) Excise Tax
Adjustment Payments which should have been made will not
have been made by the Company ("Underpayment"), or (y)
certain Excise Tax Adjustment Payments will have been made
which should not have been made ("Overpayment"), consistent
with the calculations required to be made hereunder. In the
event of an Underpayment, the Company shall promptly
determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the
Company to or for Executive's benefit. In the event that
Executive discovers that an Overpayment shall have occurred,
the amount thereof shall be promptly repaid to the Employer.
9. The Employment Agreement is hereby amended to add, immediately
prior to the first sentence of Section 13(d), the following:
It is expressly understood and agreed that although Executive and
the Company consider the restrictions contained in this Agreement
to be reasonable, if a final judicial determination is made by a
tribunal of competent jurisdiction that the time or territory or
any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed
amended to apply to such maximum time and territory and to such
maximum extent as such tribunal may determine or indicate to be
enforceable.
10. The Employment Agreement is hereby amended to add a new Section
13(i), (j) and (k) to read as follows:
(i) Non-Disparagement. Executive and the Company shall each use
-----------------
all reasonable efforts not to make any statements or take
any action that may be derogatory or disparaging to the
reputation of the other or, in the case of the Executive, to
the reputation of any of the Company's
5
<PAGE>
affiliates. Notwithstanding the foregoing, nothing in this
Agreement shall preclude either party from truthful
statements or disclosures that are required by applicable
law or regulation, or from taking any position in
prosecuting or defending any judicial, administrative or
arbitration proceeding arising hereunder.
(j) Cooperation. Executive agrees that following termination of
-----------
Executive's employment with the Company prior to a Change in
Control for a period ending on the earlier to occur of the
fifth anniversary of such termination or a Change in
Control, Executive shall make himself reasonably available
to the Company and its legal counsel, taking into
consideration Executive's other obligations, and shall
cooperate with the Company in connection with any
litigation, investigation or other proceeding relating to
events occurring during Executive's employment hereunder or
facts as to which he has knowledge; provided that Executive
---------
shall be entitled to reimbursement of necessary and
reasonable expenses incurred in connection therewith subject
to provision of receipts therefor and provided further that
-------- -------
(i) nothing herein shall require Executive to make any but
truthful statements and (ii) Executive will not be required
so to cooperate to the extent his position is in conflict
with that of the Company.
(k) Non-Competition/Non-Solicitation. (i) Executive acknowledges
--------------------------------
and recognizes the highly competitive nature of the business
of the Company and its affiliates and accordingly hereby
agrees, in consideration of the agreements herein of the
Company, that from the date hereof through the termination
of Executive's employment with the Company and, if such
termination occurs prior to a Change in Control, through the
two year period following such termination of Executive's
employment, (x) Executive shall not alone, or as a partner,
member, employee, agent, director, stockholder or investor
of any corporation or other business entity or in any other
individual or representative capacity, directly or
indirectly, own, manage, operate or control, or participate
in the ownership, management, operation or control of, or
work or provide consulting services to (including, without
limitation, without receiving a fee or other compensation),
or lend money to, any business, activity or person which
competes with a business or activity in North America,
Europe and Asia in which the Company is engaged or in which
the Company or its affiliates is actively and seriously
considering engaging at the time in question in the case of
conduct during such employment or at the time of Executive's
termination of employment in the case of conduct during such
two year period; provided the foregoing shall not prohibit
--------
Executive from directly or indirectly making passive
investments of not more than one percent (1%) of the
outstanding equity interests in, or
6
<PAGE>
public debt of, any company or entity listed or traded on a
national securities exchange or an over the counter
securities market and (y) Executive shall not, directly or
indirectly, recruit, seek to recruit, or hire any present or
former employee of the Company or any of its subsidiaries
(level 30 or above) until at least one year has passed from
the date of termination of such person's employment with the
company or any of its subsidiaries.
(ii) Executive hereby acknowledges that the business of
the Company and its affiliates is international in scope and
that, accordingly, any geographical limitation on the scope
of the foregoing covenant to less than that specified
therein could be meaningless, and that, by reason thereof,
Executive acknowledges that the scope of the foregoing
covenant is reasonable and necessary in order to protect the
interests of the Company and its affiliates sought to be
protected hereby.
(iii) The parties acknowledge and agree that their
respective remedies for a breach or threatened breach of any
of the provisions of Section 13 (i), (j) or (k) would be
inadequate and, in recognition of this fact, the parties
agree that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the aggrieved
party, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be
available.
11. Except as provided by this Amendment, the Employment Agreement
shall remain in full force and effect.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to be
effective as of April 1, 1998.
/s/ Kenneth L. Jensen
----------------------------------
Kenneth L. Jensen
JOHNS MANVILLE CORPORATION
/s/ C. L. Henry
----------------------------------
C.L. Henry
Chairman, Chief Executive Officer
and President
ATTEST:
/s/ Richard B. Von Wald
- -----------------------
Richard B. Von Wald
Executive Vice President,
General Counsel and Secretary
8
<PAGE>
EXHIBIT 10(ad)
FIRST AMENDMENT TO
REVOLVING MULTICURRENCY CREDIT AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING MULTICURRENCY CREDIT AGREEMENT (this
"First Amendment to Credit Agreement" or this "Amendment") dated as of March 29,
----------------------------------- ---------
1999 is entered into among Johns Manville Corporation, a Delaware corporation
(the "Company"), Johns Manville International, Inc., a Delaware corporation
-------
("JMII"), the several financial institutions party to the Credit Agreement
----
referred to below (collectively, the "Banks"), and Bank of America National
-----
Trust and Savings Association, as Issuing Bank, Swingline Bank and as
administrative agent for itself and the other Banks (in such capacity, the
"Agent").
-----
RECITALS
A. The parties hereto have entered into a Revolving Multicurrency Credit
Agreement dated as of May 15, 1998 (as extended, renewed, amended or restated
from time to time, the "Credit Agreement"), pursuant to which the Agent and the
Banks agreed to make available to the Company and JMII a revolving multicurrency
credit facility with a letter of credit subfacility and a swingline subfacility,
under the terms and conditions set forth in the Credit Agreement.
B. The Company, JMII, the Agent and the Banks, subject to the terms and
conditions of this Amendment, have agreed to amend certain language contained in
Annex I to the Credit Agreement which heretofore did not, and in its unamended
form does not now, reflect the intent of the parties to the Credit Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto agree as follows:
1. Capitalized Terms. Capitalized terms used in this Amendment (including
-----------------
in the Recitals hereof and in the Consent and Agreement of Guarantors attached
hereto) and not otherwise defined shall have the respective meanings set forth
in the Credit Agreement.
2. Amendment. The second paragraph of text located on Annex I to the
---------
Credit Agreement is hereby amended and restated in its entirety as follows:
"If on any date (including any date during the 6-month period following
the Closing Date) the Effective Amount of all Revolving Loans plus the
----
Effective Amount of all Swingline Loans plus the Effective Amount of all
----
L/C Obligations exceeds 50% of the Aggregate Commitment then in effect, the
Applicable Margin then in effect shall be increased by 0.10% for such
date."
1
<PAGE>
3. Representations and Warranties. The Company and JMII hereby represent
------------------------------
and warrant to the Agent and each Bank as follows:
a. The execution, delivery and performance by the Company and by JMII
of this Amendment have been duly authorized by all necessary action, including
any necessary authorizations by the board of directors of the Company and by the
board of directors of JMII and do not and will not require any registration
with, consent or approval of, notice to or action by, any Person (including any
Governmental Authority) in order to be effective and enforceable.
b. This Amendment and the Loan Documents to which the Company and/or
JMII is a party constitute the legal, valid and binding obligations of the
Company and/or JMII, as the case may be, enforceable against the Company and/or
JMII in accordance with their respective terms except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by equitable principles relating to enforceability.
c. The Company and JMII are each entering into this Amendment on the
basis of its own investigations and for its own reasons, without reliance upon
the Agent, the Banks or any other Person.
4. Effective Date. This Amendment will become effective retroactively to
--------------
May 15, 1998; provide that the Agent has received from the Company, JMII and all
of the Banks an executed counterpart of this Amendment and the Consent and
Agreement of Guarantors executed by each of the Guarantors.
5. Reservation of Right. The Company and JMII each acknowledges and
--------------------
agrees that the execution and delivery by the Agent and the Banks of this
Amendment shall not be deemed to create a course of dealing or an obligation to
execute similar waivers or amendments under the same or similar circumstances in
the future.
6. Miscellaneous.
-------------
a. Except as expressly waived herein, all terms, covenants and
provisions of the Loan Documents are and shall remain in full force and effect.
b. This Amendment shall be binding upon and inure to the benefit of
the Company, JMII, the Agent and the Banks and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
c. This Amendment shall be governed by and construed in accordance
with the law of the State of California.
d. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this Amendment (and any other document required
herein) may be delivered by any party thereto either in the
2
<PAGE>
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of the Company, JMII or any Bank will have the same force
and effect as the delivery of a hard copy original. Any failure by the Agent to
receive the hard copy executed original of such document shall not diminish the
binding effect of receipt of the facsimile transmitted executed original of such
document of the party whose hard copy page was not received by the Agent.
e. This Amendment contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein. This Amendment
supersedes all prior drafts and communications with respect hereto or thereto.
This Amendment may not be amended except in accordance with the provisions of
Section 11.1 of the Credit Agreement.
f. If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Loan Documents.
g. The Company and JMII covenant to pay or reimburse the Agent, within
30 days after demand, for all reasonable costs and expenses incurred by the
Agent in connection with the development, preparation, negotiation, execution
and delivery of this Amendment.
[Signatures follow.]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Revolving Multicurrency Credit Agreement to be executed and delivered in San
Francisco, California, by their duly authorized officers as of the day and year
first written above.
JOHNS MANVILLE CORPORATION
By: /s/ W. S. Bullock
-----------------------------------------------
Title: Treasurer
JOHNS MANVILLE INTERNATIONAL, INC.
By: /s/ W. S. Bullock
-----------------------------------------------
Title: Treasurer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent, Issuing
Bank, Swingline Bank and a Bank
By: /s/ Dan Killian
-----------------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA, as Co-Agent and a Bank
By: /s/ Relationship Manager
-----------------------------------------------
Title: Relationship Manager
THE BANK OF NEW YORK
By: /s/ Robert Louk
-----------------------------------------------
Title: Vice President
4
<PAGE>
BANK ONE COLORADO, N.A.
By: /s/ William F. Walker
-----------------------------------------------
Title: Vice President
By: /s/ Mariel Keane Hirugh
-----------------------------------------------
Title: Vice President
BANQUE NATIONALE DE PARIS
By: /s/ Senior Vice President & Manager
-----------------------------------------------
Title: Senior Vice President & Manager
By: /s/ Vice President
-----------------------------------------------
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ DGM
-----------------------------------------------
Title: DGM
MELLON BANK, N.A.
By: /s/ First Vice President
-----------------------------------------------
Title: First Vice President
THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agent
and a Bank
By: /s/ Kandis A. Jaffrey
-----------------------------------------------
Title: Assistant Vice President
5
<PAGE>
FIRST UNION NATIONAL BANK, as Co- Agent
and a Bank
By: /s/ Paul L. Menconi
-----------------------------------------------
Title: Vice President
KEYBANK NATIONAL ASSOCIATION, as
Co-Agent and a Bank
By: /s/ Mary K. Young
-----------------------------------------------
Title: Assistant Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Co-Agent and a Bank
By: /s/ Robert Bottamedi
-----------------------------------------------
Title: Vice President
NATIONSBANK, N.A., as Co-Agent and a Bank
By: /s/ Dan Killian
-----------------------------------------------
Title: Vice President
6
<PAGE>
NORWEST BANK COLORADO, N.A.
By: /s/ Darlene A. Evans
-----------------------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Vice President
-----------------------------------------------
Title: Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Officer
-----------------------------------------------
Title: Officer
By: /s/ D. Armstrong
-----------------------------------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Hagop V. Jazmadarian
-----------------------------------------------
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Vice President
-----------------------------------------------
Title: Vice President
7
<PAGE>
ABN AMRO BANK N.V.
By: /s/ Brian M. Sharpe
-----------------------------------------------
Title: Vice President
By: /s/ Steven M. Buehler
-----------------------------------------------
Title: Assistant Vice President
FLEET NATIONAL BANK
By: /s/ SVP
-----------------------------------------------
Title: SVP
BW CAPITAL MARKETS, INCORPORATED
By: /s/ Robert B. Herber
-----------------------------------------------
Title: Managing Director
By: /s/ Thomas A. Lowe
-----------------------------------------------
Title: Vice President
8
<PAGE>
CONSENT AND AGREEMENT OF GUARANTORS
Each of the undersigned, in its capacity as a Guarantor, acknowledges that
its consent to the foregoing First Amendment to Revolving Multicurrency Credit
Agreement is not required, but each of the undersigned nevertheless does hereby
consent, in its capacity as a Guarantor, to the foregoing First Amendment to
Revolving Multicurrency Credit Agreement and to the documents and agreements
referred to therein. Nothing herein shall in any way limit any of the terms or
provisions of the Guaranty or Additional Guarantor Assumption Agreement, if any,
of the undersigned executed by the undersigned in the Agent's and the Banks'
favor, or any other Loan Document executed by the undersigned (as the same may
be amended from time to time), all of which are hereby ratified and affirmed in
all respects.
Guarantors:
JOHNS MANVILLE CORPORATION,
as a Guarantor
By: /s/ W. S. Bullock
------------------------------------------
Title: Treasurer
JOHNS MANVILLE INTERNATIONAL, INC.,
as a Guarantor
By: /s/ W. S. Bullock
------------------------------------------
Title: Treasurer
JOHNS MANVILLE INTERNATIONAL GROUP,
INC., as a Guarantor
By: /s/ W. S. Bullock
------------------------------------------
Title: Treasurer
9
<PAGE>
EXHIBIT 10(ae)
SECOND AMENDMENT TO
REVOLVING MULTICURRENCY CREDIT AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING MULTICURRENCY CREDIT AGREEMENT (this
"Second Amendment to Credit Agreement" or this "Amendment") dated as of November
------------------------------------ ---------
30, 1999, is entered into among Johns Manville Corporation, a Delaware
corporation (the "Company"), Johns Manville International, Inc., a Delaware
-------
corporation ("JMII"), the several financial institutions party to the Credit
----
Agreement referred to below (collectively, the "Banks"), and Bank of America,
-----
N.A. (successor to Bank of America National Trust and Savings Association), as
Issuing Bank, Swingline Bank and as administrative agent for itself and the
other Banks (in such capacity, the "Agent").
-----
RECITALS
A. The parties hereto have entered into a Revolving Multicurrency Credit
Agreement dated as of May 15, 1998 (as extended, renewed, amended or restated
from time to time, the "Credit Agreement"), pursuant to which the Agent and the
----------------
Banks agreed to make available to the Company and JMII a revolving multicurrency
credit facility with a letter of credit subfacility and a swingline subfacility,
under the terms and conditions set forth in the Credit Agreement.
B. The Company, JMII, the Agent and the Banks, subject to the terms and
conditions of this Amendment, have agreed to amend certain provisions of the
Credit Agreement to modify the Company's Minimum Consolidated Net Worth
covenant.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto agree as follows:
1. Capitalized Terms. Capitalized terms used in this Amendment (including
-----------------
in the Recitals hereof and in the Consent and Agreement of Guarantors attached
hereto) and not otherwise defined shall have the respective meanings set forth
in the Credit Agreement.
2. Amendments.
----------
a. Amendment to Section 1.1: Section 1.1 of the Credit Agreement is
------------------------
hereby amended by adding thereto in its proper alphabetical order a
new definition of "Trust Tax Benefits" to read in its entirety as
follows:
"Trust Tax Benefits means, for any fiscal period, the amount of
tax benefits attributable during such fiscal period (or if such
fiscal period is a fiscal quarter, to be attributable during the
fiscal year of which such fiscal period is a part) resulting from
(a) purchases by
<PAGE>
the Company during such fiscal year of its common stock from the
Trust, and/or (b) purchases by the Company during previous fiscal
years of its common stock from the Trust, if such benefits could
not be realized during previous fiscal years, each as determined
on a consolidated basis in accordance with GAAP.
b. Amendment to Section 8.12: Section 8.12 of the Credit Agreement
-------------------------
is hereby amended to read in its entirety as follows:
"8.12 Minimum Consolidated Net Worth. The Company shall not
------------------------------
permit, as of the last day of any fiscal quarter, Consolidated
Net Worth to be less than the sum of:
(a) $560,100,000, plus
----
(b) 50% of Consolidated Net Income after September 30,
1999, through the end of each fiscal quarter thereafter,
determined on a quarterly basis with no reduction for any
Consolidated Net Loss, plus
----
(c) 75% of the Net Securities Proceeds arising after
September 30, 1999, to the date of determination, minus
-----
(d) the amount of Trust Tax Benefits for periods after
September 30, 1999, to the date of determination.
As used herein, "Net Securities Proceeds" means, with respect to
----------------------
any sale or issuance of equity securities (whether common or
preferred, options, warrants or capital appreciation rights, but
excluding any sales or issuances of stock pursuant to employee
stock purchase plans, employee stock options plans or other
employee benefit plans), the excess of (A) the gross cash and
noncash proceeds received or receivable by the Company or any
Subsidiary from such issuance minus (B) the sum of (i) all
-----
Attorney Costs and underwriting and accounting fees and
disbursements and government fees actually paid (or reasonably
expected to be paid during the fiscal year in which such sale or
issuance occurs) in connection with such sale or issuance which
are not payable to the Company or to any Affiliate of the Company
or any Subsidiary; and (ii) all taxes actually paid in connection
with such sale or issuance."
3. Representations and Warranties. The Company and JMII hereby represent
------------------------------
and warrant to the Agent and each Bank as follows:
a. The execution, delivery and performance by the Company and by
JMII of this Amendment have been duly authorized by all necessary
action, including any necessary authorizations by the board of
directors of
2
<PAGE>
the Company and by the board of directors of JMII, and do not and will
not require any registration with, consent or approval of, notice to
or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable.
b. This Amendment and the Loan Documents to which the Company and/or
JMII is a party constitute the legal, valid and binding obligations of
the Company and/or JMII, as the case may be, enforceable against the
Company and/or JMII in accordance with their respective terms except
to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by equitable
principles relating to enforceability.
c. The Company and JMII are each entering into this Amendment on the
basis of its own investigations and for its own reasons, without
reliance upon the Agent, the Banks or any other Person.
4. Effective Date. This Amendment will become effective on November 30,
--------------
1999; provided that the Agent has received from the Company, JMII and Majority
--------
Banks an executed counterpart of this Amendment and the Consent and Agreement of
Guarantors executed by each of the Guarantors and the Company has paid an
amendment fee of 2 basis points to each consenting Bank based on such Bank's
Commitment.
5. Reservation of Rights. The Company and JMII each acknowledges and
---------------------
agrees that the execution and delivery by the Agent and the Banks of this
Amendment shall not be deemed to create a course of dealing or an obligation to
execute similar waivers or amendments under the same or similar circumstances in
the future.
6. Miscellaneous.
-------------
a. Except as expressly waived herein, all terms, covenants and
provisions of the Loan Documents are and shall remain in full force
and effect.
b. This Amendment shall be binding upon and inure to the benefit of
the Company, JMII, the Agent and the Banks and their respective
successors and assigns. No third party beneficiaries are intended in
connection with this Amendment.
c. This Amendment shall be governed by and construed in accordance
with the law of the State of California.
d. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Each of the
parties hereto understands and agrees that this Amendment (and any
other document required herein) may be delivered by any party thereto
either in
3
<PAGE>
the form of an executed original or an executed original sent by
facsimile transmission to be followed promptly by mailing of a hard
copy original, and that receipt by the Agent of a facsimile
transmitted document purportedly bearing the signature of the Company,
JMII or any Bank will have the same force and effect as the delivery
of a hard copy original. Any failure by the Agent to receive the hard
copy executed original of such document shall not diminish the binding
effect of receipt of the facsimile transmitted executed original of
such document of the party whose hard copy page was not received by
the Agent.
e. This Amendment contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein. This
Amendment supersedes all prior drafts and communications with respect
hereto or thereto. This Amendment may not be amended except in
accordance with the provisions of Section 11.1 of the Credit
Agreement.
f. If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision
shall be invalidated without affecting the remaining provisions of
this Amendment or the Loan Documents.
g. The Company and JMII covenant to pay or reimburse the Agent,
within 30 days after demand, for all reasonable costs and expenses
incurred by the Agent in connection with the development, preparation,
negotiation, execution and delivery of this Amendment.
[Signatures follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Revolving Multicurrency Credit Agreement to be executed and delivered in Dallas,
Texas, by their duly authorized officers as of the day and year first written
above.
JOHNS MANVILLE CORPORATION
By: /s/ Mary K. Rhinehart
--------------------------------
Title: VP & Treasurer
JOHNS MANVILLE INTERNATIONAL, INC.
By: /s/ Mary K. Rhinehart
--------------------------------
Title: VP & Treasurer
4
<PAGE>
BANK OF AMERICA, N.A., as Agent, Issuing
Bank, Swingline Bank and a Bank
By: /s/ Dan Killian
-----------------------------
Title: Principal
THE BANK OF NEW YORK, as Syndication
Agent and a Bank
By: /s/ Vice President
-----------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA, as Co-Agent
and a Bank
By: /s/ Director
-----------------------------
Title: Director
BANQUE NATIONALE DE PARIS
By: /s/ C. Bettles
-----------------------------
Title: Sr. V.P. & Manager
By: /s/ Tjalling Terpstra
-----------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Gregory Hong
-----------------------------
Title: Duly Authorized SIgnatory
MELLON BANK, N.A.
By: /s/ Vice President
-----------------------------
Title: Vice President
BANK ONE, N.A., as Co-Agent and a Bank
By: /s/ First Vice President
-----------------------------
Title: First Vice President
5
<PAGE>
FIRST UNION NATIONAL BANK, as Co- Agent
and a Bank
By: /s/ Peter D. Steffen
-----------------------------
Title: Senior Vice President
KEYBANK NATIONAL ASSOCIATION, as
Co-Agent and a Bank
By: /s/ Mary K. Young
-----------------------------
Title: Assistant Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Co-Agent and a Bank
By: /s/ Robert Bottamedi
-----------------------------
Title: Vice President
NORWEST BANK OF COLORADO, N.A.
By: /s/ Darlene A. Evans
-----------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Vice President
-----------------------------
Title: Vice President
SUNTRUST BANK, N.A.
By: /s/ V. P. & Director
-----------------------------
Title: V. P. & Director
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Hagop V. Jazmadarian
-----------------------------
Title: Vice President
6
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Vice President
-----------------------------
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ Mary L. Honda
-----------------------------
Title: Vice President
By: /s/ Bernard J. McGuigan
-----------------------------
Title: Group Vice President and Director
FLEET NATIONAL BANK
By: /s/ SVP
-----------------------------
Title: SVP
BW CAPITAL MARKETS, INCORPORATED
By: /s/ Thomas A. Lowe
-----------------------------
Title: Vice President
7
<PAGE>
CONSENT AND AGREEMENT OF GUARANTORS
Each of the undersigned, in its capacity as a Guarantor, acknowledges
that its consent to the foregoing Second Amendment to Revolving Multicurrency
Credit Agreement is not required, but each of the undersigned nevertheless does
hereby consent, in its capacity as a Guarantor, to the foregoing Second
Amendment to Revolving Multicurrency Credit Agreement and to the documents and
agreements referred to therein. Nothing herein shall in any way limit any of the
terms or provisions of the Guaranty or Additional Guarantor Assumption
Agreement, if any, of the undersigned executed by the undersigned in the Agent's
and the Banks' favor, or any other Loan Document executed by the undersigned (as
the same may be amended from time to time), all of which are hereby ratified and
affirmed in all respects.
Guarantors:
JOHNS MANVILLE CORPORATION,
as a Guarantor
By: /s/ Mary K. Rhinehart
-----------------------------------
Title: VP & Treasurer
JOHNS MANVILLE INTERNATIONAL, INC.,
as a Guarantor
By: /s/ Mary K. Rhinehart
-----------------------------------
Title: VP & Treasurer
JOHNS MANVILLE INTERNATIONAL
GROUP, INC.,
as a Guarantor
By: /s/ Mary K. Rhinehart
-----------------------------------
Title: VP & Treasurer
8
<PAGE>
EXHIBIT 13
<TABLE>
<CAPTION>
Selected Five-Year Financial Data
- -----------------------------------------------------------------------------------------------------------------------------------
In thousands of dollars, except per share amounts
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales (Note B) $2,161,786 $1,781,179 $1,647,645 $1,552,429 $1,391,522
Income from Operations (Notes A, B and G) 352,189 279,737 215,422 187,427 201,283
Income from Continuing Operations,
net of tax (Notes A, B and G) 261,844 185,291 130,529 190,525 122,006
Income before Extraordinary Items and
Cumulative Effect of Accounting Change (Note B) 261,844 185,291 150,000 406,771 115,995
Net Income (Notes B, D, E and F) 256,086 180,946 150,000 90,486 115,995
- -----------------------------------------------------------------------------------------------------------------------------------
Financial Position (As of December 31)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets (Note C) $2,289,633 $2,207,185 $1,980,534 $1,946,726 $2,474,059
Long-Term Debt, less current portion 503,148 587,276 456,294 428,160 447,007
Stockholders' Equity 868,300 790,108 693,083 580,462 1,181,307
- -----------------------------------------------------------------------------------------------------------------------------------
Additional Data (Note B)
- -----------------------------------------------------------------------------------------------------------------------------------
Additions to Property, Plant and Equipment $ 299,426 $ 130,336 $ 125,296 $ 153,000 $ 111,329
Research, Development and Engineering 39,837 32,823 31,174 32,663 29,988
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share Data (Note H)
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings Per Common Share
Basic:
Income from Continuing Operations,
net of tax (Notes A, B and G) $1.70 $1.16 $.81 $.86 $.79
Income before Extraordinary Items and
Cumulative Effect of Accounting Change (Note B) 1.70 1.16 .93 2.29 .74
Net Income (Notes B, D, E and F) 1.66 1.13 .93 .20 .74
Diluted:
Income from Continuing Operations,
net of tax (Notes A, B and G) 1.68 1.15 .80 .85 .78
Income before Extraordinary Items and
Cumulative Effect of Accounting Change (Note B) 1.68 1.15 .92 2.27 .73
Net Income (Notes B, D, E and F) 1.64 1.12 .92 .20 .73
Common Dividends Declared .24 .20 .14 6.06
- -----------------------------------------------------------------------------------------------------------------------------------
Pro Forma Data (Note I)
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Operations $352,189 $243,749 $215,422 $229,367 $201,283
Net Income 261,844 162,236 130,529 115,267 93,443
Earnings Per Common Share (Diluted):
Net Income $1.68 $1.00 $.80 $.71 $.57
===================================================================================================================================
</TABLE>
See notes on page 14.
Johns Manville/13
<PAGE>
SELECTED FIVE-YEAR FINANCIAL DATA
- --------------------------------------------------------------------------------
Notes to Selected Five-Year Financial Data:
(A) During 1996 JM recorded nonrecurring charges totaling $49.2 million. These
charges included $41.7 million for the shutdown of current operations,
demolition of facilities and site restoration, and $7.5 million of asset write-
downs to estimated fair values, partially offset by a gain on the sale of other
manufacturing assets.
(B) In 1996 JM disposed of its 81.3 percent interest in Riverwood International
Corporation. Accordingly, Riverwood's operations have been reflected as
discontinued operations and its operating results have been excluded from the
determination of income from continuing operations for all periods presented.
Income from continuing operations, net of tax, includes gains on sales of equity
investments, interest income, interest expense and profit sharing expense.
Income before extraordinary items and cumulative effect of accounting change and
net income include a gain on disposal of discontinued operations of $216.2
million, net of tax, in 1996, a loss on disposal of discontinued operations of
$42.5 million, net of tax, in 1995, and income from discontinued operations of
$36.5 million in 1995, net of tax.
During 1997 JM recognized an additional net gain on disposal of discontinued
operations of Riverwood of $19.5 million, of which $8.2 million related to
income taxes.
(C) Total assets at December 31, 1998 include the acquisition deposit of $227.3
million for the January 1, 1999 acquisition of certain Spunbond/Monofilament
assets.
The $375.6 million net assets and liabilities of the discontinued operations of
Riverwood were classified as net assets held for sale at December 31, 1995.
(D) In 1996 JM recorded an extraordinary loss of $314.3 million, net of taxes
of $169.2 million, on the exchange of approximately 32.5 million shares of JM's
common stock for the termination of the Manville Personal Injury Settlement
Trust's profit sharing right to 20 percent of JM's net earnings (as adjusted).
(E) JM recorded extraordinary losses on early extinguishments of debt, net of
taxes, of $5.8 million, $31.8 million and $2 million in 1999, 1998 and 1996,
respectively.
(F) Effective January 1, 1998 JM changed its method of accounting for glass
furnace rebuild costs. The cumulative effect of this change in accounting
principle increased 1998 earnings by $27.4 million, net of taxes of $17.9
million.
(G) JM sold its 5 percent net smelter royalty on certain metals produced by the
Stillwater Mining Company for cash resulting in other income of $36 million in
1998.
(H) During 1996 JM redeemed its Cumulative Preference Stock, Series B. Earnings
per share amounts prior to 1997 were calculated after the deduction for
preference stock dividends/accretion and the $52.1 million premium on preference
stock redemption.
(I) Pro forma data has been adjusted to eliminate the effects of nonrecurring
charges, certain pension plan settlement gains, gains on sales of equity
investments, mining royalty sale proceeds, interest expense on the 9 percent
Sinking Fund Debentures, profit sharing expense, an unusual 1996 income tax
item, discontinued operations, extraordinary losses, cumulative effect of
accounting change, preference stock dividends/accretion, and premium on
preference stock redemption, on a consistent basis and adjusted for estimated
applicable tax effects. In addition, earnings per share are based on 155.7
million and 161.9 million diluted weighted average shares for 1999 and 1998,
respectively, and 163.1 million pro forma diluted weighted average shares for
the other periods presented.
Johns Manville/14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Johns Manville Corporation ("JM") manufactures and markets building and
equipment insulation; commercial and industrial roofing systems; fibers, fabric
and nonwoven mats used as reinforcements in building and industrial
applications, and high efficiency filtration media. JM operates 58 manufacturing
facilities in North America, Europe and China, and is comprised of three
principal business segments: Insulation, Roofing Systems and Engineered
Products.
The Insulation segment consists of JM's building insulation business, which
manufactures fiber glass wool insulation for walls, attics and floors in
residential and commercial buildings; commercial and industrial insulation
business, which manufactures pipe and duct insulation for use in commercial
buildings, factories, refineries and other industrial applications; and original
equipment manufacturers ("OEM") insulation business, which manufactures thermal
and acoustic insulation for aircraft, marine vessels, automobiles and heating,
ventilating and air conditioning ("HVAC") and other equipment.
The Roofing Systems segment consists of JM's commercial and industrial roofing
systems business, which supplies built-up, modified bitumen and single-ply
membranes; perlite, fiber glass and polyisocyanurate foam insulations; roof
guarantees; and accessories.
The Engineered Products segment consists of mats and fibers, which includes base
fiber, fiber to reinforce gypsum wallboard and plastics, fiber glass and
polyester spunbond mats for roofing and flooring applications and monofilament
used in the paper industry; glass fabrics for wall coverings; and fiber glass
and synthetic media for high efficiency air filtration systems, face masks,
respirators, vacuum bags, sorbents and liquid filtration applications.
Filtration also produces fine fibers for specialty manufacturers who supply
filtration media for use in clean rooms and various battery separator
applications.
Consistent with JM's internal reporting, business segments discussed below
include allocated corporate expenses. The 1998 mining royalty sale proceeds are
reported in corporate and eliminations.
1999 vs 1998
Results of Operations
JM's net sales in 1999 increased $380.6 million, or 21.4 percent, to $2,161.8
million compared with $1,781.2 million in 1998. Gross profit increased $144.4
million to $621.6 million from $477.2 million. The gross profit margin for 1999
increased to 28.8 percent from 26.8 percent for 1998 due primarily to an
improved pricing environment and strong demand in building insulation, and
contributions from acquisitions. Selling, general and administrative and
research, development and engineering expenses, combined, increased $19.4
million in 1999 largely due to acquisitions. These expenses were lower as a
percentage of sales at 11.2 percent compared with 12.5 percent for 1998.
Johns Manville/15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Other expense, net, for 1999 was $26.6 million compared with other income, net,
of $25.9 million for 1998. Other expense, net, for 1999 reflects higher pension
expenses and higher goodwill amortization due to JM's acquisition program. Other
income, net, for 1998 reflects the proceeds of $36 million from a mining royalty
sale. Income from operations for 1999 was $352.2 million, up 44.5 percent,
compared with $243.7 million for 1998, excluding the royalty gain. Results of
operations for 2000 will be affected by 1999 equity market gains for pension
plan assets, positively impacting JM's pension expense (income).
Insulation Segment
Net sales for the Insulation segment increased $82.6 million, or 11.3 percent,
to $816.7 million for 1999 from $734.1 million for 1998. Income from operations
increased $66.2 million, or 56.1 percent, to $184.2 million compared with $118
million in 1998. Reflecting strength across JM's building insulation business,
these increases are due largely to improved selling prices and volume growth, as
JM operated at full capacity for most of 1999 due to favorable North American
residential and commercial construction markets. The selling price improvements,
along with volume increases, also led to strong 1999 margins. In commercial and
industrial insulation, higher gross profits on moderate net sales increases,
compared with 1998, reflected volume growth and higher selling prices in both
mechanical and OEM products.
Roofing Systems Segment
The Roofing Systems segment's net sales increased $44.7 million to $606.5
million in 1999 from $561.8 million in 1998, an 8 percent increase. Income from
operations for 1999 was $44.7 million, a 7 percent decline compared with $48
million for 1998. Acquisition-related sales increases were more than offset by
continued pricing pressures in polyisocyanurate foam insulation and roofing
membranes products.
Engineered Products Segment
Net sales for the Engineered Products segment increased $268.6 million, or 52.2
percent, to $782.7 million in 1999 compared with $514.1 million in 1998. Income
from operations in 1999 increased $45.7 million, or 58.7 percent, to $123.4
million from $77.7 million in 1998. The incremental impacts of JM's January 1,
1999 acquisition of Spunbond/Monofilament assets ("Monobond") produced
substantial increases in net sales and operating income. The U.S. mats and
fibers business experienced significantly higher sales in 1999 on volume growth
from increased demand in roofing mats, specialty mats and base fibers. While the
higher volumes drove the sales increase for this business, results were
adversely affected by costs associated with a scheduled furnace rebuild, which
was completed in the first quarter, and raw material cost increases. Meanwhile,
sales and operating income declined for European mats and fibers business during
1999, reflecting continued softness in Europe for most of the year, which
improved in the fourth quarter. Reduced demand and competitive pressures also
led to operating income declines for the European fabrics business. While sales
in the filtration business were flat for the year, volumes in the fourth quarter
were up significantly due to improvements in microfiber demand, particularly for
battery separators, and slight increases in clean room build activity.
Johns Manville/16
<PAGE>
- --------------------------------------------------------------------------------
Other Income (Expense), net
JM sold its 5 percent net smelter royalty on certain metals produced by the
Stillwater Mining Company for cash resulting in other income of $36 million in
the second quarter of 1998.
Interest Expense, net
Interest expense, net of interest income, decreased slightly to $29.1 million in
1999, from $29.5 million in 1998. Along with strong operating cash flows,
interest expense, net, was reduced by the 1998 repurchase of substantially all
of JM's $400 million of 10.875 percent Johns Manville International Senior Notes
due 2004 using revolving credit facilities with significantly lower interest
rates and the 1999 repayment of bonds payable to the Manville Personal Injury
Settlement Trust (the "Trust").
Income Taxes
JM's effective tax rate was approximately 19 percent in 1999 and 26 percent in
1998. JM receives a tax deduction and a related reduction in its effective tax
rate when the Trust pays claimants or makes distributions to a specific
settlement fund from dividends paid on, or proceeds received from disposition
of, JM stock held by the Trust. In both 1999 and 1998, JM benefited from such
distribution of dividends and stock sale proceeds to the settlement fund. In
addition, JM's 1999 income tax expense benefited from lower effective foreign
tax rates and adjustments to prior years' provisions.
Extraordinary Loss on Early Extinguishment of Debt
In June 1999 JM prepaid bonds payable to the Trust in the principal amount of
$23.9 million, resulting in a loss on the early extinguishment of debt of $5.8
million, net of taxes of $3.6 million. These bonds consisted of fixed payments
totaling $75 million per year in 2013 and 2014 and had been discounted at 13
percent.
During the second quarter of 1998 JM repurchased substantially all of its $400
million of 10.875 percent senior notes. The repurchase resulted in an
extraordinary loss on the early extinguishment of debt of $31.8 million, net of
taxes of $18.1 million.
Cumulative Effect of Accounting Change
Effective January 1, 1998 JM changed its method of accounting for glass furnace
rebuild costs to the capitalization method from the allowance method. The
cumulative effect of this change in accounting principle increased 1998 earnings
by $27.4 million, net of taxes of $17.9 million. This change resulted in an
increase in depreciation expense but eliminated the provision for furnace
rebuilds. The pro forma effect of this change on net income was not material.
Earnings Per Common Share
Basic and diluted net earnings per common share for 1999 were $1.66 and $1.64,
respectively, as compared with basic and diluted net earnings per common share
of $1.13 and $1.12, respectively, for 1998. The extraordinary losses on early
extinguishment of debt decreased basic and diluted earnings per common share by
$0.04 and $0.20 during 1999 and 1998, respectively. The cumulative effect of a
change in accounting principle increased basic and diluted earnings per common
share by $0.17 during 1998.
Johns Manville/17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
1998 vs 1997
Results of Operations
JM's net sales for 1998 increased $133.6 million, or 8.1 percent, to $1,781.2
million compared with $1,647.6 million for 1997. Gross profit increased $45.7
million to $477.2 million from $431.5 million. The gross profit margin for 1998
increased to 26.8 percent from 26.2 percent due to volume and productivity gains
across all segments, partially offset by increased fixed costs and pricing
declines in the mats and fibers and filtration businesses. Selling, general and
administrative and research, development and engineering expenses, combined,
increased $17.6 million, or 8.6 percent, to $223.4 million and were flat as a
percentage of sales at 12.5 percent compared with 1997. Other income, net, was
$25.9 million for 1998 compared with other expense, net, of $10.3 million for
1997. Other income, net, for 1998 included proceeds of $36 million from a mining
royalty sale. Exclusive of the royalty gain, income from operations for 1998 was
$243.7 million, up 13.1 percent, compared with $215.4 million for 1997.
Insulation Segment
The Insulation segment's net sales increased $36.3 million, or 5.2 percent, to
$734.1 million in 1998 compared with $697.8 million in 1997. Income from
operations increased $31.4 million, or 36.3 percent, to $118 million compared
with $86.6 million in 1997. The 1998 results for building insulation reflect
volume increases due to strong demand, improved operating efficiencies and an
improved pricing environment, which began in the latter half of the year. While
commercial and industrial insulation businesses reflected moderately higher
sales volumes and selling prices for pipe and equipment insulation, gross
margins and operating income were negatively affected by downtime for equipment
upgrades during 1998. Also in 1998, the use of alternate materials resulted in
significantly lower sales and margins in automotive products.
Roofing Systems Segment
Net sales for the Roofing Systems segment increased $51.3 million, or 10.1
percent, to $561.8 million in 1998 compared with $510.5 million in 1997 due
primarily to incremental volume increases from thermoplastic membrane
acquisitions. Excluding the impact of acquisitions, net sales increased slightly
in 1998 compared with 1997. Income from operations, however, decreased to $48
million from $50.5 million in 1998 compared with 1997. Volume gains in 1998 were
partially offset by pricing pressures in polyisocyanurate foam products, a less
favorable product mix and acquisition-related costs. In addition, adverse
weather conditions early in the year limited roofing activity and shipments, and
negatively affected 1998 operating margins.
Engineered Products Segment
The Engineered Products segment's net sales increased $38.1 million, or 8
percent, to $514.1 million in 1998 compared with $476 million in 1997. Income
from operations decreased slightly to $77.7 million from $78.3 million for the
same periods. The sales increases are primarily due to the acquisitions of Mitex
and Tasso AB, both European manufacturers of fiber glass wall covering fabrics.
However, 1998 sales and operating income were adversely affected by slower
economic activity in Asia and Russia. Volume increases in the U.S. mats and
fibers business, net of the aforementioned weather-related declines in roofing
mat shipments, were partially offset by lower selling prices during 1998.
Results in filtration decreased in 1998 due to lower selling prices and a
worldwide slowdown in clean room builds.
Johns Manville/18
<PAGE>
- --------------------------------------------------------------------------------
Other Income (Expense), net
JM sold its 5 percent net smelter royalty on certain metals produced by the
Stillwater Mining Company for cash resulting in other income of $36 million in
1998.
Interest Expense, net
JM's interest expense, net of interest income, decreased $10.4 million, or 26.2
percent, to $29.5 million in 1998 compared with $39.9 million in 1997. This
decrease is primarily due to the repurchase of substantially all of JM's $400
million of 10.875 percent senior notes in 1998 using revolving credit facilities
with significantly lower interest rates. Also during 1998, JM used available
cash to repay borrowings under the revolving credit facilities.
Income Taxes
JM's effective tax rate was approximately 26 percent in 1998 and 1997. JM
benefited from the distribution of dividend and stock sale proceeds to the
settlement fund of the Trust and from the utilization of tax credits in both
years.
Discontinued Operations
During 1997 JM adjusted the estimated gain recognized in 1996 on the disposition
of Riverwood International Corporation. The adjustment, resulting in an
additional net gain on disposal of discontinued operations of $19.5 million,
arose from the expiration 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
JM's 1996 income tax returns.
Extraordinary Loss on Early Extinguishment of Debt
In 1998 JM repurchased substantially all of its $400 million of 10.875 percent
senior notes, resulting in an extraordinary loss on the early extinguishment of
debt of $31.8 million, net of taxes of $18.1 million.
Cumulative Effect of Accounting Change
The cumulative effect of the change in accounting for glass furnace rebuild
costs increased earnings by $27.4 million, net of taxes of $17.9 million, during
1998.
Earnings Per Common Share
Basic and diluted net earnings per common share for 1998 were $1.13 and $1.12,
respectively, as compared with basic and diluted net earnings per common share
of $0.93 and $0.92, respectively, for 1997. The extraordinary loss on early
extinguishment of debt decreased basic and diluted earnings per common share by
$0.20 during 1998. The cumulative effect of a change in accounting principle
increased basic and diluted earnings per common share by $0.17 during 1998. Gain
on disposal of discontinued operations increased basic and diluted earnings per
common share by $0.12 during 1997.
Johns Manville/19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
JM broadly defines liquidity as the ability to generate sufficient cash flow to
satisfy operating requirements, fund capital expenditures and meet existing
obligations and commitments. In addition, liquidity also includes the ability to
obtain appropriate financing and convert into cash those assets that are no
longer required to meet JM's strategic objectives. Therefore, liquidity should
not be considered separately from capital resources, which consist of currently
or potentially available funds for use in achieving long-range business
objectives and meeting debt service commitments.
JM's agreements with its lenders contain financial and general covenants. These
include, among other things, limitations on borrowings, investments and asset
dispositions and maintenance of various financial ratios. 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 JM and its subsidiaries. At December 31, 1999 JM was in compliance
with these covenants.
JM's cash and marketable securities balances increased $48.3 million during 1999
to $64.8 million at December 31, 1999 from $16.5 million at December 31, 1998.
Total cash and marketable securities located outside the U.S. and Canada were
$20.2 million. At December 31, 1999 JM had approximately $458 million available
under its $750 million unsecured multicurrency revolving credit facilities. JM's
international subsidiaries had additional borrowing and working capital
facilities totaling $19.4 million, of which $12.8 million was available at
December 31, 1999. These facilities are principally secured by certain
receivables and cash of JM's international subsidiaries.
JM's net operating activities provided $468.4 million of cash during 1999,
offset by the premium on the prepayment of bonds payable to the Trust. Operating
activities for 1998 provided $226.3 million of cash, including the gain from the
sale of the Stillwater mining royalty, partially offset by the premium on the
prepayment of the 10.875 percent senior notes. Operating activities for 1997
provided $168.7 million of cash. Cash flows from operating activities are
primarily influenced by selling prices, sales volume and working capital
requirements. As discussed in "Results of Operations," JM benefited from selling
price improvements in building insulation, contributions from acquisitions and
volume increases during 1999. Cash provided by operations during 1999 also
benefited from improved working capital management.
JM's investing activities used $158.7 million in 1999, $391.1 million during
1998 and $213.4 million during 1997. Investing activities for 1999 used $152.9
million for capital expenditures, principally to increase building insulation
capacity and to complete a furnace rebuild for mats and fibers. The 1999 capital
expenditures included approximately $60 million related to capacity expansion
projects. Cash used for investing activities in 1998 included acquisitions of
$92.2 million, net of cash acquired, and capital expenditures totaling $106.4
million, of which approximately $46 million related to capacity expansion
projects. Investing activities for 1998 also included JM's $227.3 million
deposit for the Monobond acquisition completed in 1999. Cash used in investing
activities for 1997 included acquisitions of $136.5 million, net of cash
acquired, and capital expenditures totaling $90.5 million, of which
approximately $50 million related to capacity expansion projects. Investing
activities for 1997 also included proceeds from the disposition of JM's
automotive molded parts business.
Johns Manville/20
<PAGE>
- --------------------------------------------------------------------------------
JM's financing activities for 1999 consisted of issuances of debt totaling
$212.8 million, and repayments of debt totaling $275.7 million, net. In July
1999 JM issued $200 million of unsecured senior notes to certain institutional
investors in a private debt offering in two tranches: $75 million at 7.71
percent due in 2006; and $125 million at 7.92 percent due in 2009. A portion of
the proceeds were used to finance the purchase of 12.2 million shares of JM's
common stock from the Trust at $13.675 per share, resulting in the recognition
of treasury stock, at cost, of $166.8 million in the third quarter of 1999. The
remaining proceeds were used to repay existing indebtedness including prepayment
of $23.9 million of bonds payable to the Trust discussed above. JM also repaid
$12.5 million of debt assumed in an acquisition in 1999. In December 1999 JM
called the remaining $2.5 million of 10.875 percent senior notes due 2004. The
aforementioned 1999 debt activity also included issuances of $9 million and
repayments of $16 million under foreign credit facilities. JM paid dividends
totaling $37.5 million, $28.8 million and $21 million during 1999, 1998 and
1997, respectively. JM's financing activities for 1998 reflected repayments of
debt totaling $425.9 million and issuances of debt totaling $540.3 million, net,
relating primarily to the second quarter repurchase of its 10.875 percent senior
notes. Also in 1998 JM purchased 3.6 million shares of its common stock from the
Trust at $13 per share, and recognized treasury stock, at cost, of $46.8
million. During 1997 JM repaid debt totaling $30 million assumed in connection
with 1996 acquisitions. JM also borrowed $55 million from international credit
facilities to partially finance 1997 acquisitions, of which $10 million was
repaid in 1997. The remainder was repaid in 1998.
JM believes that its current cash position, funds available under credit
facilities and cash generated from operations will enable it to satisfy its debt
service requirements, its ongoing capital expansion program and its other
ongoing operating costs. However, JM may need to access capital markets to pay
the principal of its credit facilities and senior notes, or in connection with
possible significant future acquisitions.
Cyclicality of Demand/Competitive Environment
Demand for JM's products has historically been cyclical due to macroeconomic
factors affecting residential and commercial construction markets. Due to their
specific market niches, JM's roofing systems used for replacement, and
filtration and specialty products are less sensitive to business cycles. Selling
prices are subject to factors influenced by the competitive environment in which
JM operates, including fluctuations in overall capacity utilization.
Income Taxes
The cash taxes paid by JM in the U.S. were substantially lower than statutory
rates due to JM's deductions related to payments made to the Trust and tax
credit carryforwards. JM receives a tax deduction for the amount of any
dividends paid on shares of JM's common stock held by the Trust. In addition, JM
receives a tax deduction when the Trust sells some or all of its shares of JM
common stock and distributes the proceeds to its beneficiaries or transfers the
proceeds to a specific settlement fund.
Johns Manville/21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
As of December 31, 1999 JM will need a cumulative total of approximately $520
million of U.S. federal taxable income to realize its net U.S. deferred tax
asset of $182.2 million. Based on JM's historical earnings levels, projected
future earnings and the expected timing of the taxable deductions principally
related to amounts paid by the Trust or transferred to a specific settlement
fund, JM believes it will realize its net deferred tax asset. JM estimates that,
as of December 31, 1999, $10.2 million of the gross deferred tax asset may not
be realized. This amount relates to remaining foreign tax credit carryforwards
that may expire unused. Accordingly, a full valuation allowance has been
provided for these amounts. The valuation allowance on JM's deferred tax asset
is subject to change as forecasts of future years' earnings and the estimated
timing of the utilization of JM's tax benefits and credit carryforwards are
revised, including actions by the Trust with respect to its ownership of JM
stock.
If the Trust were to sell its JM stock at a price greater than JM's carrying
value, JM may receive a tax benefit in excess of the deferred tax asset
reflected for financial reporting purposes. Likewise, if the Trust were to sell
the stock at a price lower than the carrying value, JM would receive a tax
benefit less than the deferred tax asset reflected for financial reporting
purposes. To illustrate, using the December 31, 1999 closing market price of
$13.9375 per share, the deferred tax asset related to JM's stock held by the
Trust would total approximately $550 million, which exceeds the carrying value
by nearly $415 million.
Under Section 468B of the U.S. Internal Revenue Code, JM is responsible for
income taxes on the taxable income of the Trust's specific settlement fund at a
tax rate of 15 percent. Any such taxes paid by JM will generate a tax deduction
for JM. JM cannot predict the amount of any such future tax obligations.
However, related liabilities could become material in certain situations
including the Trust monetizing, and retaining the proceeds of, a significant
portion of its investment in JM's common stock or the settlement of this
obligation between JM and the Trust. During 1999 and 1998 JM incurred
approximately $4.2 million and $3 million of these taxes, respectively, before
any U.S. federal or state benefit.
Capital Spending and Capacity Expansion
JM estimates capital spending in 2000 of approximately $178 million excluding
acquisitions, of which approximately $109 million will be used in capacity
expansion programs. During the third quarter of 1999, JM began construction on a
new two-module fiber glass insulation line to expand production capacity at its
Winder, Ga. facility. JM anticipates that one module will become operational
during the third quarter of 2000, with the second completed during 2002. Also
during the third quarter of 1999, JM began a capacity expansion at its Etowah,
Tenn. facility for mats and fibers, which is expected to become operational mid-
2000. As of December 31, 1999 outstanding purchase commitments relating to
capital spending and capacity expansion projects totaled $44 million. JM plans
to fund its capital spending from available cash balances and cash flows
generated by operations. JM's capacity expansion programs are periodically
revised to reflect changes in demand, industry capacity and the results of
productivity improvements and technological innovations.
In response to the implementation of the 1990 Amendments to the federal Clean
Air Act and requirements of various state air emissions regulations, JM may be
obligated to further monitor and reduce air emissions at its manufacturing
sites. The Title III air toxics regulations applicable to JM's fiber glass
plants were issued in proposed form in 1997. Subsequent proposed amendments to
those regulations in the first quarter of 1999 did not change the substantive
requirements related to air toxics. JM does not anticipate significant
compliance costs as a result of these regulations. Because the other anticipated
regulations have not yet been proposed, neither the costs nor timing of
compliance can be reasonably anticipated at this time, however, these
anticipated regulations could require capital expenditures in 2000 and 2001.
Johns Manville/22
<PAGE>
- --------------------------------------------------------------------------------
Acquisitions
On January 1, 1999 JM completed the Monobond acquisition. This acquisition
expands existing product lines of JM's Engineered Products segment in North
America, Europe and China. The cash payment for this acquisition, accounted for
under the purchase method, was $227.3 million, financed with borrowings from
JM's credit facilities. The acquisition borrowings, drawn during December 1998,
were shown as the acquisition deposit on the December 31, 1998 balance sheet.
During 1999 the allocated purchase price was adjusted to $209 million,
reflecting adjustments for preacquisition and purchase price contingencies.
On September 2, 1999 JM acquired certain polyisocyanurate roofing insulation and
sheathing foam business operations. In connection with this acquisition, JM
assumed, and subsequently repaid, $12.5 million of debt. This acquisition
complements existing JM product lines and is accounted for under the purchase
method.
Contingent Product Liability
Between 1988 and 1992 JM manufactured phenolic roofing insulation which may,
under certain circumstances, contribute to the corrosion of metal decks on which
it is installed. Since 1993 JM has had a program to voluntarily inspect such
metal decks and remediate where appropriate. JM has accrued for costs relating
to future inspections, remediation and anticipated claims. These accruals are
based on JM's historical experience regarding the incidence of corrosion and the
cost of remediation and include a number of assumptions related to the types and
remaining expected lives of roofs on which phenolic insulation has been
installed. Further, these accruals reflect JM's recent experience and
expectations for the future inspection and remediation program.
Pursuant to reimbursement agreements with JM's liability carriers and the former
owner of the phenolic roofing insulation business, JM is entitled to receive
reimbursement for a substantial portion of future costs to be incurred by JM for
inspection and remediation.
In 1996 JM and a third party were named as defendants in two class action cases,
now consolidated, filed in U.S. District Court in Boston, Mass. The plaintiffs
purport to represent all building owners in the U.S. with phenolic insulation
installed on their roof decks and seek damages and injunctive relief, including
an order requiring the removal and replacement of the phenolic insulation and
remediation of any deck corrosion. JM has reached a conditional agreement in
principle with respect to the settlement of these cases.
JM has reviewed its historical inspection and remediation experience, its
expectations for the future inspection and remediation program, the terms and
collectibility of amounts under the reimbursement agreements, and the terms and
probability of concluding the conditional settlement agreement in principle
discussed above. Based on the information available to date and subject to the
assumptions described above, if additional costs are incurred in excess of the
accrued and reimbursable amounts, such costs are not expected to have a material
adverse effect on JM's financial condition, liquidity or results of operations.
Johns Manville/23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Environmental Contingencies
At December 31, 1999 JM had remediation activities in progress at four sites,
out of a total of 15 such sites for which JM has identified environmental
conditions requiring remediation. In addition, JM has been identified as a
potentially responsible party at 13 non-Company owned or operated sites under
the federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or similar state legislation. Of these 13 sites, JM's potential
liability for 11 sites will be determined pursuant to a global CERCLA order (the
"Order") described in the following paragraph. Two of the sites may not be
subject to the Order and, accordingly, JM could be jointly and severally liable
for costs of remediating these sites. However, both sites have multiple
potentially responsible parties working with the regulatory agencies. In
addition, JM's disposal percentage is at or near the de minimis level at both
sites. During 1999 JM settled its CERCLA and Resource Conservation and Recovery
Act ("RCRA") liability at three sites under the Order, of which one is final.
In 1994 the U.S. government and JM settled certain litigation concerning JM's
disposal activities prior to consummation of its plan of reorganization. The
Order, which was made a court order, limits JM's future liability under both
CERCLA and RCRA to 55 percent of its share of site-wide response costs and
natural resources damages without regard to joint and several liability for
disposals made by JM prior to consummation of JM's plan of reorganization. The
Order resolved JM's liability at certain historical sites and also covers CERCLA
and RCRA liability for other disposal sites at which the U.S. Environmental
Protection Agency ("EPA") has incurred or may incur response costs and which
were used by JM prior to consummation of the plan of reorganization. The Order
provides that the amount JM will be obligated to pay, in the aggregate, for such
sites shall never exceed $850,000 during any given year. The EPA and others from
time to time commence cleanup activities at such sites and in the future the EPA
and others may assert claims against JM with respect to such sites. JM believes
that all such activities and claims, if any, will be subject to the Order.
At December 31, 1999 and 1998 JM's balance sheet included undiscounted accruals
for environmental remediation costs, including ongoing compliance, maintenance
and monitoring costs, of $31.1 million and $34.8 million, respectively. JM paid
$3.9 million and $1.7 million for environmental cleanup in 1999 and 1998,
respectively. JM believes that amounts paid in 1999 are representative of JM's
2000 environmental cleanup costs. JM further anticipates expenditures relating
to costs currently accrued to be made over approximately the next 15 years.
In addition, JM's December 31, 1999 balance sheet included a liability of $21.9
million related to the demolition and restoration of a previously closed
manufacturing facility. JM spent $0.6 million in 1999 and expects to spend
approximately $7.1 million in 2000, pending federal and state regulatory agency
approval. The demolition and restoration is expected to be completed in 2002,
with the majority of the liabilities settled by that time.
As a result of factors such as changes in federal and state regulations, the
application and effectiveness of remedial actions, the difficulty in assessing
the extent of environmental contamination, and the allocation of costs among
potentially responsible parties, actual costs to be incurred for environmental
cleanup may vary from previous estimates. Subject to the uncertainties inherent
in evaluating environmental exposures, and based on information presently
available, including JM's historical remediation experience, currently enacted
environmental laws and regulations, the Order and existing remediation
technology, JM believes that if additional costs are incurred in excess of the
accrued amounts, such costs are not expected to have a material adverse effect
on JM's financial condition, liquidity or results of operations.
Johns Manville/24
<PAGE>
- --------------------------------------------------------------------------------
Year 2000 Compliance
JM engaged in a comprehensive project to modify its systems for year 2000
compliance. To date, JM has not incurred any significant problems related to
year 2000. JM spent $3.6 million on year 2000 projects and activities through
December 31, 1999.
Introduction of the Euro
On January 1, 1999, 11 countries of the European Union established a new single
European currency (the "Euro"). The Euro will become a currency in its own right
and will completely replace the currencies of the participating countries by
2002. This conversion may affect, among other things, cross-border competition
among member countries, product pricing, exchange rate risk and derivatives
exposure, and information technology and systems. JM's European businesses,
primarily in the Engineered Products segment, accounted for approximately 16
percent of total sales during 1999. JM is addressing issues related to the
conversion and, at this time, is not expecting material adverse effects on its
financial condition, liquidity or results of operations.
New Accounting Pronouncements
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement, along with Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" issued in July 1999, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000 and establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that JM recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. At this time, JM cannot determine the effects, if any, adopting
this statement will have on its financial condition presentation or results of
operations.
Market Risk
JM is exposed to, among other things, the impact of interest rate changes,
foreign currency fluctuations, and changes in commodity prices related to
energy. JM is also exposed to political and related economic risks associated
with certain of the countries in which it operates. JM employs established
policies and procedures to manage its exposure and minimize volatility in
earnings and cash flows, lower costs and protect the value of certain foreign
currency denominated assets, liabilities and anticipated transactions. To
achieve these objectives JM enters into interest rate swaps to manage net
exposure to interest rate changes related to its debt obligations, foreign
currency contracts that change in value as foreign exchange rates fluctuate and
contracts to purchase certain quantities of goods at fixed prices. It is JM's
policy to enter into these derivative transactions only to the extent necessary
to meet the objectives stated above. Consequently, JM does not enter into these
transactions for speculative purposes.
Based on a one percentage point increase in applicable interest rates, the
hypothetical pretax loss in earnings on an annual basis related to JM's debt and
derivative financial instruments subject to interest rate risk at December 31,
1999 would be approximately $2 million. At December 31, 1999 JM had interest
rate swap transactions with notional values totaling approximately $99 million.
At December 31, 1999 JM did not have any significant outstanding forward
exchange or commodity contracts.
Johns Manville/25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Forward-Looking Statements
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements of JM contained in
this report concerning matters that are not historical facts, including, without
limitation, statements concerning:
. the ability to realize its net deferred tax asset,
. expectations related to the start of operations for the capacity expansions
at its Winder, Ga. and Etowah, Tenn. facilities,
. expected levels of capital spending,
. expectations as to contingencies related to taxes, phenolic roofing
insulation and environmental liabilities,
. expectations regarding the Euro conversion, and
. the ability to satisfy its debt service requirements, its ongoing capital
expansion program and its other ongoing operating costs,
constitute such forward-looking statements. See "Liquidity and Capital
Resources."
Forward-looking statements of JM 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 JM's products and to overall capacity levels in the industry.
Demand for such products is generally cyclical and is influenced by
macroeconomic factors that affect demand in residential and commercial
construction and replacement markets and demand from original equipment
manufacturers, including the general rate of inflation, interest rates,
employment rates and overall consumer confidence. Approximately 75 percent of
JM's annual sales are made to customers in commercial and industrial markets,
while the remainder are to residential construction markets.
Overall capacity levels in the industry directly affect prices and the need for
capacity for JM's products. Other factors that may affect prices and capacity
levels include the overall competitive environment in which JM operates, the
availability and pricing of raw materials, rates of technological development
and changes in productivity. In addition, overall demand for JM's products could
be affected by the factors described in "BUSINESS - Occupational Health and
Safety Aspects of the Company's Products" in JM's Annual Report on Form 10-K for
the year ended December 31, 1999. Capacity expansion is also subject to
construction and permitting risks.
Factors relating to JM's net deferred tax asset are discussed in "Liquidity and
Capital Resources-Income Taxes." For a discussion of factors concerning
contingencies related to taxes, phenolic roofing insulation, environmental
matters and the introduction of the Euro, see "Results of Operations - Income
Taxes" and "Liquidity and Capital Resources-Contingent Product Liability,
Environmental Contingencies, and Introduction of the Euro."
Other factors also could affect JM's expected levels of capital spending and
funding of current operations, debt service and dividends, including, without
limitation, the contingencies and commitments discussed in JM's financial
statements included in this report for the year ended December 31, 1999.
Johns Manville/26
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------------------------------------------
In thousands of dollars
- --------------------------------------------------------------------------------------------------------------------
December 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and equivalents $ 61,140 $ 12,350
Marketable securities, at cost, which approximates market 3,633 4,168
Receivables 283,102 264,407
Inventories 160,340 131,709
Prepaid expenses 10,714 12,560
Deferred tax assets 39,750 36,648
- --------------------------------------------------------------------------------------------------------------------
Total Current Assets 558,679 461,842
- --------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, at cost
Land and improvements 59,067 55,747
Buildings 288,762 256,153
Machinery and equipment 1,411,059 1,243,593
- --------------------------------------------------------------------------------------------------------------------
1,758,888 1,555,493
Less accumulated depreciation and depletion 718,545 691,335
- --------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, net 1,040,343 864,158
- --------------------------------------------------------------------------------------------------------------------
Deferred Tax Assets 144,027 164,024
Goodwill, net of accumulated amortization of $43,447 and $27,166, respectively 289,582 248,692
Acquisition Deposit (Note 22) 227,300
Other Assets 257,002 241,169
- --------------------------------------------------------------------------------------------------------------------
Total Assets $ 2,289,633 $ 2,207,185
====================================================================================================================
Liabilities
Current Liabilities
Short-term debt $ 10,096 $ 4,641
Accounts payable 169,747 128,688
Compensation and employee benefits 117,255 99,320
Income taxes 16,065 16,539
Other accrued liabilities 97,847 68,781
- --------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 411,010 317,969
Long-Term Debt, less current portion 503,148 587,276
Deferred Income Taxes 34,184 43,927
Postretirement Benefits Other Than Pensions 177,836 186,949
Other Noncurrent Liabilities 295,155 280,956
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,421,333 1,417,077
- --------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 2, 8, and 16)
- --------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Cumulative Preference Stock, Series B, redeemed 1996
Common Stock, $.01 par value, authorized 300,000,000 shares;
issued and outstanding 164,565,507 shares and 147,552,461 shares,
respectively, in 1999; and issued and outstanding 163,814,572 shares
and 158,997,817 shares, respectively, in 1998 1,646 1,638
Treasury Stock, at cost, 17,013,046 shares in 1999 and 4,816,755 shares in 1998 (229,851) (63,067)
Capital in Excess of Par Value 552,549 544,667
Unearned Stock Compensation (2,511) (4,836)
Retained Earnings 533,879 314,605
Accumulated Other Comprehensive Income (Note 20) 12,588 (2,899)
- --------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 868,300 790,108
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 2,289,633 $ 2,207,185
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Johns Manville/27
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
In thousands of dollars, except per share amounts
- -----------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 2,161,786 $ 1,781,179 $ 1,647,645
Cost of Sales 1,540,206 1,303,958 1,216,135
Selling, General and Administrative 202,991 190,562 174,573
Research, Development and Engineering 39,837 32,823 31,174
Other Income (Expense), net (26,563) 25,901 (10,341)
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Operations 352,189 279,737 215,422
Interest Income 2,917 6,433 10,263
Interest Expense 31,968 35,912 50,205
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before Income Taxes 323,138 250,258 175,480
Income Tax Expense 61,294 64,967 44,951
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 261,844 185,291 130,529
Gain on Disposal of Discontinued Operations, net of tax (Note 17) 19,471
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Items and Cumulative Effect of Accounting Change 261,844 185,291 150,000
Extraordinary Losses, net of tax (Note 18) (5,758) (31,754)
Cumulative Effect of a Change in Accounting for Furnace Rebuilds,
net of tax (Note 19) 27,409
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 256,086 180,946 150,000
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Currency Translation Adjustments, net of tax 15,692 (12,186) (17,384)
Pension Liability Adjustment, net of tax (205)
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive Income $ 271,573 $ 168,760 $ 132,616
===================================================================================================================================
Earnings Per Common Share (Note 11)
- -----------------------------------------------------------------------------------------------------------------------------------
Basic:
Income from Continuing Operations $ 1.70 $ 1.16 $ .81
Gain on Disposal of Discontinued Operations, net of tax (Note 17) .12
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Items and Cumulative Effect of Accounting Change 1.70 1.16 .93
Extraordinary Losses, net of tax (Note 18) (.04) (.20)
Cumulative Effect of a Change in Accounting for Furnace Rebuilds,
net of tax (Note 19) .17
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 1.66 $ 1.13 $ .93
===================================================================================================================================
Diluted:
Income from Continuing Operations $ 1.68 $ 1.15 $ .80
Gain on Disposal of Discontinued Operations, net of tax (Note 17) .12
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Items and Cumulative Effect of Accounting Change 1.68 1.15 .92
Extraordinary Losses, net of tax (Note 18) (.04) (.20)
Cumulative Effect of a Change in Accounting for Furnace Rebuilds,
net of tax (Note 19) .17
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 1.64 $ 1.12 $ .92
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Johns Manville/28
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------------
In thousands of dollars
- -----------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 256,086 $ 180,946 $ 150,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 114,637 93,811 80,163
Deferred taxes 20,619 17,099 11,571
Product guarantee income 2,271 2,283 4,961
Provision for furnace rebuilds 11,264
Pension and postretirement benefits, net 20,069 (1,036) 6,607
Interest accretion 1,436 2,626 2,318
Gain on disposal of discontinued operations (19,471)
Cumulative effect of accounting change (27,409)
Other, net 7,273 10,638 9,721
(Increase) decrease in current assets:
Receivables 35,225 (30,984) 22,985
Inventories (851) 7,931 (18,423)
Prepaid expenses 1,744 965 (4,165)
Increase (decrease) in current liabilities:
Accounts payable 30,799 7,171 (5,217)
Compensation and employee benefits 17,952 12,617 (11,373)
Income taxes 1,917 11,314 (24,701)
Other accrued liabilities (1,056) (19,431) 23,264
Decrease in postretirement benefits other than pensions (23,017) (23,822) (16,363)
Decrease in other noncurrent liabilities (16,709) (18,381) (54,420)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 468,395 226,338 168,721
- -----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchases of property, plant and equipment (152,918) (106,372) (90,528)
Acquisition deposit (227,300)
Acquisitions 1,461 (92,205) (136,521)
Proceeds from sales of assets 1,817 6,314 9,351
Purchases of available-for-sale marketable securities (9,188) (8,388) (27,664)
Purchases of held-to-maturity marketable securities (1,513) (2,033) (14,042)
Proceeds from sales of available-for-sale marketable securities 9,725 30,154 45,712
Proceeds from maturities of held-to-maturity marketable securities 5,196 15,018 2,538
Increase in other assets (13,253) (6,322) (2,233)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (158,673) (391,134) (213,387)
- -----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Revolving credit facilities, net (219,904) 535,756
Issuance of debt 212,821 4,560 56,637
Payments on debt (55,820) (425,901) (61,170)
Dividends on common stock (37,480) (28,775) (20,995)
Treasury stock transactions (166,784) (46,545) (281)
Other stock transactions 6,153 5,226 330
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (261,014) 44,321 (25,479)
- -----------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash 82 688 (4,323)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Equivalents 48,790 (119,787) (74,468)
Cash and Equivalents at Beginning of Year 12,350 132,137 206,605
- -----------------------------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 61,140 $ 12,350 $ 132,137
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Johns Manville/29
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Treasury
Stock Stock
- --------------------------------------------------------------------------------
<S> <C> <C>
Balances at December 31, 1996 $ 1,627 $ (16,241)
Net income for the year
Currency translation
Stock compensation plan transactions 1
Common stock dividends
Purchase of treasury stock (281)
- --------------------------------------------------------------------------------
Balances at December 31, 1997 1,628 (16,522)
Net income for the year
Currency translation
Stock compensation plan transactions 10
Common stock dividends
Purchase of treasury stock (46,545)
- --------------------------------------------------------------------------------
Balances at December 31, 1998 1,638 (63,067)
Net income for the year
Currency translation
Stock compensation plan transactions 8
Common stock dividends
Purchase of treasury stock (166,784)
Pension liability adjustment
- --------------------------------------------------------------------------------
Balances at December 31, 1999 $ 1,646 $(229,851)
================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Johns Manville/30
<PAGE>
- ------------------------------------------------------------------------------
In thousands of dollars
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Capital in Unearned Other Total
Excess of Stock Retained Comprehensive Stockholders'
Par Value Compensation Earnings Income Equity
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 539,423 $ (9,124) $ 38,106 $ 26,671 $ 580,462
150,000 150,000
(17,384) (17,384)
999 1,900 2,900
(22,614) (22,614)
(281)
- ------------------------------------------------------------------------------
540,422 (7,224) 165,492 9,287 693,083
180,946 180,946
(12,186) (12,186)
4,245 2,388 6,643
(31,833) (31,833)
(46,545)
- ------------------------------------------------------------------------------
544,667 (4,836) 314,605 (2,899) 790,108
256,086 256,086
15,692 15,692
7,882 2,325 10,215
(36,812) (36,812)
(166,784)
(205) (205)
- ------------------------------------------------------------------------------
$ 552,549 $ (2,511) $533,879 $ 12,588 $ 868,300
==============================================================================
</TABLE>
Johns Manville/31
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 1:
Summary of Significant Accounting Policies
Johns Manville Corporation ("JM") manufactures and markets building and
equipment insulation; commercial and industrial roofing systems; fibers, fabric
and nonwoven mats used as reinforcements in building and industrial
applications, and high efficiency filtration media. JM estimates that
approximately 75 percent of its annual sales are to commercial and industrial
markets, while the remainder are to residential construction markets. JM's
products are sold to contractors, mass merchants, wholesale distributors and
fabricators throughout North America, Europe and Asia.
The Manville Personal Injury Settlement Trust (the "Trust") owns approximately
76 percent of JM's common stock.
(A) Principles of Consolidation
The consolidated financial statements include the accounts of JM and its
majority-owned subsidiaries. All significant intercompany transactions have been
eliminated.
(B) Use of Estimates
The preparation of JM's consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in these financial statements,
including disclosures of contingent liabilities.
(C) Cash and Equivalents
Cash and equivalents include money market mutual funds, time deposits and
marketable securities with original maturities of three months or less.
Included in accounts payable and compensation and employee benefits are
temporary book overdrafts totaling $30 million and $3.9 million, respectively,
at December 31, 1999; and $27.5 million and $3.2 million, respectively, at
December 31, 1998; due to JM's use of zero-balance cash disbursement accounts
funded by separate master accounts.
(D) Financial Instruments
JM uses the amortized cost method of accounting for investments in held-to-
maturity debt securities for which it has the positive intent and ability to
hold to maturity. Fair value accounting is used for debt securities that are
classified as available-for-sale securities. Realized gains and losses are
computed on the specific identification method.
Gains and losses on foreign currency transactions and related forward exchange
contracts are included in other income (expense), net, for the period in which
the exchange rate changes. The discount or premium on forward contracts is
accounted for separately from the gain or loss on the contracts and is amortized
to other income (expense), net, over the life of the contract.
Amounts related to interest swap transactions qualifying for hedge accounting,
payable or receivable, are accrued on a current basis as adjustments to interest
expense. Any gains (losses) on the termination of the interest rate swaps are
deferred and recognized over periods corresponding to the related obligation
being hedged.
(E) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally on the last-in, first-out (LIFO) basis for all domestic
subsidiaries. The first-in, first-out (FIFO) basis is used to determine the cost
of inventories for all foreign subsidiaries.
(F) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation expense is
computed using the straight-line method, based upon the estimated useful lives
of the assets. Buildings are depreciated principally over 20 to 40 years, and
machinery and equipment are depreciated principally over 20 years. JM evaluates
the recoverability of property, plant and equipment through its ongoing
strategic planning process.
Maintenance and repairs are charged to current period earnings, while
replacements and betterments are capitalized.
Johns Manville/32
<PAGE>
- -------------------------------------------------------------------------------
JM capitalizes the cost of certain internally and externally developed computer
software. These capitalized costs, included in other assets, are amortized over
three to seven years, using the straight-line method.
(G) Goodwill
Goodwill associated with acquisitions in excess of fair value of net assets
acquired is amortized on a straight-line basis generally over 20 years. JM
evaluates the recoverability of goodwill through its ongoing strategic planning
process.
(H) Revenue Recognition
JM recognizes revenue from product sales upon shipment. JM estimates and records
provisions for cash discounts, customer incentives, sales returns, allowances
and original warranties in the period the sale is reported, based on its
experience.
JM also sells extended roofing product guarantees for periods of 10 to 20 years.
These extended guarantees cover the water tightness of roofing systems resulting
from defects in materials or deficiencies in workmanship. Revenue on these
product guarantees is recognized over the contract period in proportion to costs
incurred.
(I) Workers' Compensation
JM accrues a liability for workers' compensation claims at present value, due to
the fixed and determinable nature of the claim payments, based upon an
evaluation of historical claims data and expected future claims. In addition, JM
records a receivable at present value for the portion of outstanding claims
covered by third-party insurers.
(J) Advertising Costs
Advertising costs are expensed as incurred and totaled $11.7 million, $11.3
million and $9.8 million in 1999, 1998 and 1997, respectively.
(K) Income Taxes
General business tax credits are accounted for as reductions of income tax
expense in the year in which the related expenditures become eligible for
investment benefit under applicable tax regulations.
(L) Reclassifications
Certain prior year information has been reclassified to conform with the current
year presentation.
Note 2:
Financial Instruments
JM has had limited involvement with derivative financial instruments and does
not use them for trading purposes. In order to fix a portion of JM's variable
interest rate debt and reduce the aggregate risk to movements in interest rates,
JM entered into interest rate swap transactions with notional values totaling
approximately $99 million.
In addition to reducing risk, the interest rate swaps have a correlation to the
underlying debt obligation, and therefore, qualify for hedge accounting. At
December 31, 1999 the fair market value of these instruments reflected
unrecognized losses of $0.3 million. (For additional information on fair market
value disclosures, see Note 7.)
JM enters into foreign exchange forward contracts to hedge against currency
fluctuations on certain material foreign currency exposures and records a
receivable/payable which is classified consistently with the related outstanding
foreign currency exposure. JM did not have any significant forward exchange or
commodity contracts outstanding at December 31, 1999 or 1998.
JM had outstanding letters of credit totaling $14.5 million and $16.5 million as
of December 31, 1999 and 1998, respectively. The majority of the outstanding
letters of credit at December 31, 1999 were issued under JM's revolving credit
facilities (see Note 7), with the remainder collateralized by cash. Of the
outstanding letters of credit, $8.5 million relate to JM's guaranty of
indebtedness of a joint venture in China, of which JM has a 60 percent interest.
JM maintains cash and cash equivalents and certain other financial instruments
with various financial institutions throughout the world. JM invests excess cash
in a diversified portfolio of high-quality money market instruments
Johns Manville/33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
consistent with the preservation of capital and the maintenance of liquidity.
JM's investment policies require diversification of investments and include
restrictions on maturity and credit quality. JM monitors compliance with these
restrictions on an ongoing basis. JM has not experienced any material losses
related to these investments.
JM does not obtain collateral or other security to support financial instruments
subject to credit risk, but monitors the credit standing of counterparties. JM
is exposed to credit losses in the event of nonperformance by the counterparties
to its financial instruments, but does not anticipate any significant
off-balance-sheet credit risk of accounting loss. JM anticipates that
counterparties will be able to fully satisfy their obligations under the
contracts.
At December 31, 1999 JM held investments in debt securities that were classified
as held-to-maturity with an amortized cost basis of $7.2 million, which
approximated fair value. JM's investments in held-to-maturity debt securities at
December 31, 1999 were classified on the balance sheet as marketable securities
of $3.6 million and other assets of $3.6 million, depending upon the nature and
maturity of the investments. Of these securities, $3.6 million had contractual
maturities within one year; the remainder mature in one to five years.
Additionally, at December 31, 1999 JM had investments in available- for-sale
debt securities, principally escrowed funds, that were classified on the balance
sheet as other assets of $4.7 million. The amortized cost basis of these
securities approximated fair value. Of these securities, $4.7 million had
contractual maturities within one year.
At December 31, 1998 JM held investments in debt securities that were classified
as held-to-maturity with an amortized cost basis of $10.9 million, which
approximated fair value. JM's investments in held-to-maturity debt securities at
December 31, 1998 were classified on the balance sheet as marketable securities
of $4.2 million and other assets of $6.7 million, depending upon the nature and
maturity of the investments. Of these securities, $4.2 million had contractual
maturities within one year; the remainder mature in one to five years.
Additionally, at December 31, 1998, JM had investments in available- for-sale
debt securities, principally escrowed funds, that were classified on the balance
sheet as other assets of $5.2 million. The amortized cost basis of these
securities approximated fair value. Of these securities, $5.1 million had
contractual maturities within one year.
During 1999, 1998 and 1997 JM sold securities that had been classified as
available-for-sale, resulting in proceeds of $9.7 million, $30.2 million and
$45.7 million, respectively, which approximated the carrying value each year.
Note 3:
Receivables
In thousands of dollars
- ---------------------------------------------
1999 1998
- ---------------------------------------------
Trade $291,784 $281,389
Less allowances 44,305 41,528
- ---------------------------------------------
247,479 239,861
Other 35,623 24,546
- ---------------------------------------------
$283,102 $264,407
=============================================
Included in allowances are doubtful accounts of $3.9 million and $5 million at
December 31, 1999 and 1998, respectively. JM generally requires no collateral on
receivables. The provision for doubtful accounts charged (credited) to costs and
expenses related to continuing operations was $0.9 million for 1999, $0.4
million for 1998 and $(0.2) million for 1997.
Note 4:
Inventories
In thousands of dollars
- ---------------------------------------------
1999 1998
- ---------------------------------------------
Finished goods $102,924 $ 84,393
Work-in-process 12,542 13,945
Raw materials 34,309 23,813
Supplies 10,565 9,558
- ---------------------------------------------
$160,340 $131,709
=============================================
Johns Manville/34
<PAGE>
- --------------------------------------------------------------------------------
Inventories in the amounts of $42.7 million and $31.1 million at December 31,
1999 and 1998, respectively, were valued using FIFO. The balance of the
inventories was valued using LIFO. The excess of current values over amounts for
financial reporting purposes was $50.9 million and $49.8 million at December 31,
1999 and 1998, respectively.
Note 5:
Short-Term Debt and Credit Facilities
<TABLE>
<CAPTION>
In thousands of dollars
- ------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 6,683 $ 4,074
Current portion of long-term debt 3,413 567
- ------------------------------------------------------------------------------------
$10,096 $ 4,641
====================================================================================
</TABLE>
JM's international subsidiaries had borrowing and working capital facilities
totaling $19.4 million, of which $12.8 million was available at December 31,
1999 (also see Note 7: Long-Term Debt - "Revolving Credit Facilities"). These
facilities are principally secured by certain receivables and cash of JM's
international subsidiaries.
Note 6:
Compensation and Employee Benefits
<TABLE>
<CAPTION>
In thousands of dollars
- ------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Compensation and
payroll deductions $ 45,767 $ 38,603
Self insured medical and
group life coverage 38,806 30,678
Accrued vacation 26,062 24,486
Other 6,620 5,553
- ------------------------------------------------------------------------------------
$117,255 $ 99,320
====================================================================================
</TABLE>
Note 7:
Long-Term Debt
<TABLE>
<CAPTION>
In thousands of dollars
- ------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Unsecured
Revolving credit facilities $285,050 $550,007
Johns Manville International
Senior Notes 200,000
Notes payable with interest from
6.03 percent to 8.13 percent,
payable through 2007 10,078 3,377
Bonds payable to the Trust 22,446
10.875 percent Johns Manville
International Senior Notes 2,525
Collateralized
Industrial revenue bonds
with interest at floating rates, from
2.45 percent to 8.625 percent, payable
through 2009, collateralized by a
letter of credit, real property and equipment 8,700 9,488
Computer capital lease obligations,
6.0 percent payable through 2003 2,733
- ------------------------------------------------------------------------------------
506,561 587,843
Less current portion 3,413 567
- ------------------------------------------------------------------------------------
$503,148 $587,276
====================================================================================
</TABLE>
Revolving Credit Facilities
In 1998 JM arranged unsecured multicurrency revolving credit facilities totaling
approximately $750 million at a floating interest rate of LIBOR plus a margin
with a termination date of May 15, 2003. The credit facilities were used in May
1998 to repurchase substantially all of the $400 million of 10.875 percent Johns
Manville International Senior Notes. The deposit of $227.3 million for the
acquisition of Spunbond/Monofilament assets ("Monobond") drawn during December
1998 was also borrowed from the credit facilities. At December 31, 1999 $285.1
million of borrowings under the credit facilities were outstanding at interest
rates ranging from 3.82 percent to 6.5 percent. The remaining credit facilities
are available for funding acquisitions and capital expenditures, and other
corporate purposes.
Johns Manville/35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
$200 Million Senior Notes
In July 1999 JM issued $200 million of unsecured senior notes to certain
institutional investors in a private debt offering in two tranches: $75 million
at 7.71 percent due in 2006; and $125 million at 7.92 percent due in 2009. The
proceeds were used to repurchase shares from the Trust (see Note 9) and repay
bonds payable to the Trust.
Bonds Payable to the Trust
On June 30, 1999 JM prepaid bonds payable to the Trust in the principal amount
of $23.9 million (see Note 18). These bonds consisted of a series of fixed
payments totaling $75 million per year in 2013 and 2014, discounted at 13
percent.
10.875 Percent Senior Notes
In December 1999 JM called the remaining $2.5 million principal amount of its
10.875 percent Johns Manville International Senior Notes due 2004.
Long-term debt maturities at December 31, 1999 are as follows:
In thousands of dollars
- ----------------------------------------------------------
2000 $ 3,413
2001 5,482
2002 5,444
2003 285,322
2004 --
Thereafter 206,900
- ----------------------------------------------------------
Total $ 506,561
==========================================================
JM's agreements with its lenders contain financial and general covenants. These
include, among other things, limitations on borrowings, investments and asset
dispositions, and maintenance of various financial ratios. 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 JM and its subsidiaries. At December 31, 1999 JM was in compliance
with these covenants.
At December 31, 1999 JM's long-term debt totaled $506.6 million, which
approximated fair value. At December 31, 1998 JM's long-term debt totaled $587.8
million and had an estimated fair value of $603.3 million. Generally the fair
value of JM's long-term debt is an estimate based on quoted market prices, when
available, or the discounted cash flow method.
Note 8:
Commitments and Contingencies
Total rental expense related to continuing operations was $13.4 million in 1999,
$14 million in 1998 and $12.5 million in 1997.
At December 31, 1999 minimum rental commitments of JM under long-term,
noncancelable operating leases are as follows:
In thousands of dollars
- ----------------------------------------------------------
2000 $ 4,564
2001 4,172
2002 3,710
2003 3,493
2004 1,062
Thereafter 1,050
- ----------------------------------------------------------
$18,051
==========================================================
JM has various commitments for sales and purchases in the ordinary conduct of
business. In the aggregate, such commitments do not differ significantly from
current market prices or anticipated usage requirements.
Contingent Product Liability
Between 1988 and 1992 JM manufactured phenolic roofing insulation
which may, under certain circumstances, contribute to the corrosion of metal
decks on which it is installed. Since 1993 JM has had a program to voluntarily
inspect such metal decks and remediate where appropriate. JM has accrued for
costs relating to future inspections, remediation and anticipated claims. These
accruals are based on JM's historical experience regarding the incidence of
corrosion and the cost of remediation and include a number of assumptions
related to the types
Johns Manville/36
<PAGE>
- --------------------------------------------------------------------------------
and remaining expected lives of roofs on which phenolic insulation has been
installed. Further, these accruals reflect JM's recent experience and
expectations for the future inspection and remediation program.
Pursuant to reimbursement agreements with JM's liability carriers and the former
owner of the phenolic roofing insulation business, JM is entitled to receive
reimbursement for a substantial portion of future costs to be incurred by JM for
inspection and remediation.
In 1996 JM and a third party were named as defendants in two class action cases,
now consolidated, filed in U.S. District Court in Boston, Mass. The plaintiffs
purport to represent all building owners in the U.S. with phenolic insulation
installed on their roof decks and seek damages and injunctive relief, including
an order requiring the removal and replacement of the phenolic insulation and
remediation of any deck corrosion. JM has reached a conditional agreement in
principle with respect to the settlement of these cases.
JM has reviewed its historical inspection and remediation experience, its
expectations for the future inspection and remediation program, the terms and
collectibility of amounts under the reimbursement agreements, and the terms and
probability of concluding the conditional settlement agreement in principle
discussed above. Based on the information available to date and subject to the
assumptions described above, if additional costs are incurred in excess of the
accrued and reimbursable amounts, such costs are not expected to have a material
adverse effect on JM's financial condition, liquidity or results of operations.
Environmental Contingencies
At December 31, 1999 JM had remediation activities in progress at four sites,
out of a total of 15 such sites for which JM has identified environmental
conditions requiring remediation. In addition, JM has been identified as a
potentially responsible party at 13 non-Company owned or operated sites under
the federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or similar state legislation. Of these 13 sites, JM's potential
liability for 11 sites will be determined pursuant to a global CERCLA order (the
"Order") described in the following paragraph. Two of the sites may not be
subject to the Order and, accordingly, JM could be jointly and severally liable
for costs of remediating these sites. However, both sites have multiple
potentially responsible parties working with the regulatory agencies. In
addition, JM's disposal percentage is at or near the de minimis level at both
sites. During 1999 JM settled its CERCLA and Resource Conservation and Recovery
Act ("RCRA") liability at three sites under the Order, of which one is final.
In 1994 the U.S. government and JM settled certain litigation concerning JM's
disposal activities prior to consummation of its plan of reorganization. The
Order, which was made a court order, limits JM's future liability under both
CERCLA and RCRA to 55 percent of its share of site-wide response costs and
natural resources damages without regard to joint and several liability for
disposals made by JM prior to consummation of JM's plan of reorganization. The
Order resolved JM's liability at certain historical sites and also covers CERCLA
and RCRA liability for other disposal sites at which the U.S. Environmental
Protection Agency ("EPA") has incurred or may incur response costs and which
were used by JM prior to consummation of the plan of reorganization. The Order
provides that the amount JM will be obligated to pay, in the aggregate, for such
sites shall never exceed $850,000 during any given year. The EPA and others from
time to time commence cleanup activities at such sites and in the future the EPA
and others may assert claims against JM with respect to such sites. JM believes
that all such activities and claims, if any, will be subject to the Order.
At December 31, 1999 and 1998 JM's balance sheet included undiscounted accruals
for environmental remediation costs, including ongoing compliance, maintenance
and monitoring costs, of $31.1 million and
Johns Manville/37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
$34.8 million, respectively. JM paid $3.9 million and $1.7 million for
environmental cleanup in 1999 and 1998, respectively. JM believes that amounts
paid in 1999 are representative of JM's 2000 environmental cleanup costs. JM
further anticipates expenditures relating to costs currently accrued to be made
over approximately the next 15 years.
In addition, JM's December 31, 1999 balance sheet included a liability of $21.9
million related to the demolition and restoration of a previously closed
manufacturing facility. JM spent $0.6 million in 1999 and expects to spend
approximately $7.1 million in 2000, pending federal and state regulatory agency
approval. The demolition and restoration is expected to be completed in 2002,
with the majority of the liabilities settled by that time.
As a result of factors such as changes in federal and state regulations, the
application and effectiveness of remedial actions, the difficulty in assessing
the extent of environmental contamination, and the allocation of costs among
potentially responsible parties, actual costs to be incurred for environmental
cleanup may vary from previous estimates. Subject to the uncertainties inherent
in evaluating environmental exposures, and based on information presently
available, including JM's historical remediation experience, currently enacted
environmental laws and regulations, the Order and existing remediation
technology, JM believes that if additional costs are incurred in excess of the
accrued amounts, such costs are not expected to have a material adverse effect
on JM's financial condition, liquidity or results of operations.
Note 9:
Stockholders' Equity
In July 1999 JM purchased 12.2 million shares of its common stock from the Trust
at $13.675 per share. Accordingly, treasury stock, at cost, of $166.8 million
was recorded. In the second quarter of 1998, JM purchased 3.6 million shares of
its common stock from the Trust at $13 per share and recorded treasury stock, at
cost, of $46.8 million.
The following is a summary of shares outstanding:
<TABLE>
<CAPTION>
Common
Stock
- ----------------------------------------------------------------------------
<S> <C>
Balance at December 31, 1996 161,495,930
Issuance of common stock in
connection with compensation plans 109,964
Treasury stock acquired (25,305)
- ----------------------------------------------------------------------------
Balance at December 31, 1997 161,580,589
Issuance of common stock in
connection with compensation plans 1,022,242
Treasury stock acquired (3,605,014)
- ----------------------------------------------------------------------------
Balance at December 31, 1998 158,997,817
Issuance of common stock in
connection with compensation plans 750,935
Treasury stock acquired (12,196,291)
- ----------------------------------------------------------------------------
Balance at December 31, 1999 147,552,461
============================================================================
</TABLE>
Note 10:
Stock Compensation Plans
General
JM's stock compensation plans grant eligible employees deferred stock rights and
options to purchase shares of JM's common stock. JM also has a noncompensatory
employee stock ownership plan for its worldwide employees. This plan includes
options granted in 1997 and also enables employees to purchase stock directly
from the market and through JM savings plans. At December 31, 1999 approximately
2 million and 3.7 million shares were reserved for issuance under stock
compensation and noncompensatory plans, respectively.
Johns Manville/38
<PAGE>
- --------------------------------------------------------------------------------
The amount of compensation expense recognized for all stock-based compensation
plans was $0.8 million, $6.2 million and $2.7 million for the years ended
December 31, 1999, 1998 and 1997, respectively.
Deferred Stock Rights
Deferred stock rights entitle participants to the receipt of shares of common
stock upon vesting and dividend equivalents, but no voting rights prior to
vesting. The deferred stock rights are restricted as to disposition and are
subject to forfeiture prior to vesting upon certain circumstances. At December
31, 1999 there were 234,834 deferred stock rights outstanding, with vesting
through December 31, 2000. Deferred stock rights were granted as follows:
<TABLE>
<CAPTION>
Deferred Weighted average
stock rights market value
granted at grant date
- ---------------------------------------------------
<S> <C> <C>
1999 42,150 $ 13.77
1998 50,046 $ 13.28
1997 128,000 $ 11.36
===================================================
</TABLE>
Stock Options
JM applies APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
No. 25") and related interpretations in accounting for its fixed stock options.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") was issued in 1995, and if fully adopted would
change, among other things, the methods for recognition of expense on JM's plans
involving stock options. JM's stock options were granted at exercise prices
equal to, or in excess of, market prices on the grant dates, and therefore no
compensation cost was recognized in accordance with APB No. 25.
The substantial majority of the options outstanding at December 31, 1999, other
than those granted under the noncompensatory plan, vested by December 31, 1997
with the remainder vesting through December 10, 2001. These options expire
between December 31, 2005 and December 10, 2008.
Under the noncompensatory plan, JM granted approximately 1.6 million options to
employees at $12.19 per share in 1997, of which 1.2 million were outstanding at
December 31, 1999. Half of these options vest on July 1, 2000, with the
remainder vesting in 2002. These options expire on December 31, 2002.
A summary of the status of JM's stock option plans as of December 31, 1999, 1998
and 1997 is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Year 7,050,916 $ 12.37 6,981,862 $ 11.76 5,235,225 $ 11.51
Granted 252,700 $ 14.51 1,051,861 $ 15.01 2,234,295 $ 12.29
Exercised (549,368) $ 11.73 (811,958) $ 10.61 (44,242) $ 8.62
Forfeited (193,280) $ 13.03 (170,849) $ 12.18 (443,416) $ 11.70
- -------------------------------------------------------------------------------------------------------------
Outstanding at End of Year 6,560,968 $ 12.49 7,050,916 $ 12.37 6,981,862 $ 11.76
- -------------------------------------------------------------------------------------------------------------
Options Exercisable at End of Year 4,432,100 4,327,708 4,685,108
=============================================================================================================
</TABLE>
Johns Manville/39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
--------------------------------------------------- -------------------------------
Weighted Average
Range of Number Remaining Weighted Average Number Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.00 35,000 5.3 years $ 4.00 35,000 $ 4.00
$ 9.88 - 14.69 5,454,374 5.3 years $11.93 4,023,360 $11.84
$14.70 - 20.39 1,071,594 8.3 years $15.57 373,740 $15.55
- --------------------------------------------------------------------------------------------------------
6,560,968 5.8 years $12.49 4,432,100 $12.09
========================================================================================================
</TABLE>
Recognition of compensation expense under SFAS No. 123 is optional. However, had
compensation cost been determined based on the fair value at grant dates for
stock option awards consistent with SFAS No. 123, JM's net income and earnings
per share for the years ended December 31, 1999, 1998 and 1997 would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
In thousands of dollars, except per share amounts
- -----------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Net income:
As reported $ 256,086 $180,946 $150,000
Pro forma $ 255,581 $179,406 $144,476
Basic earnings per share:
As reported $ 1.66 $ 1.13 $ .93
Pro forma $ 1.66 $ 1.12 $ .89
Diluted earnings per share:
As reported $ 1.64 $ 1.12 $ .92
Pro forma $ 1.64 $ 1.11 $ .89
===========================================================
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
necessarily indicative of future amounts.
The fair value of options granted is estimated on the grant date using the
Black-Scholes option-pricing model. The weighted average fair values and related
assumptions used in determining pro forma compensation expense are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Grant date fair value:
Exercise price equals market $ 3.51 $ 4.41 $ 3.84
Exercise price exceeds market $ 3.18 $ 3.35 $ 2.81
Assumptions:
Dividend yield per share $ 0.24 $ 0.24 $ 0.16
Expected volatility 37.8% 36.1% 31.4%
Risk free rate of return 5.8% 4.5% 6.3%
Expected life of options
in years 4.1 3.9 4.5
=======================================================================
</TABLE>
Johns Manville/40
<PAGE>
- --------------------------------------------------------------------------------
Note 11:
Earnings per Common Share
Basic earnings per common share amounts are based on the weighted average number
of common shares outstanding during the year. The diluted earnings per common
share computation further includes all dilutive potential common shares
outstanding during the year. The basic and diluted earnings per common share
amounts are determined using the reported net income and the following common
equivalent shares:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
Basic Diluted Basic Diluted Basic Diluted
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock 165,009,000 165,009,000 163,822,000 163,822,000 162,768,000 162,768,000
Dilutive potential common shares:
Stock options and deferred
stock rights 1,382,000 1,895,000 1,594,000
Treasury stock (10,731,000) (10,731,000) (3,799,000) (3,799,000) (1,226,000) (1,226,000)
- -------------------------------------------------------------------------------------------------------------------------------
154,278,000 155,660,000 160,023,000 161,918,000 161,542,000 163,136,000
===============================================================================================================================
</TABLE>
Stock options to purchase 0.2 million, 1 million and 2.3 million common shares
in 1999, 1998 and 1997, respectively, were not included in the computation of
diluted earnings per common share because the stock options' exercise prices
were greater than the average market price of the common shares.
Johns Manville/41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 12:
Pensions
U.S. Pension Plans
JM's pension expense (income) related to the U.S. defined benefit pension plans
for the years ended December 31 consists of the following:
In thousands of dollars
- ---------------------------------------------------------------
1999 1998 1997
- ---------------------------------------------------------------
Service cost $ 8,995 $ 7,985 $ 7,399
Interest cost 45,361 46,158 45,254
Expected return on
plan assets (57,718) (64,330) (54,903)
Amortization of
prior service cost 1,836 1,632 1,545
Amortization of
transition amount (3,892) (8,165) (8,161)
Recognized actuarial loss 9,011 126
- ---------------------------------------------------------------
Total pension expense
(income) $ 3,593 $(16,720) $ (8,740)
- ---------------------------------------------------------------
Assumptions used in determining the pension expense (income) for the years ended
December 31 are as follows:
1999 1998 1997
- ----------------------------------------------------------------
Discount rates 7.00% 7.50% 7.50%
Rates of increase in future
compensation levels 4.50% 5.50% 5.50%
Expected long-term rates
of return on assets 9.00% 9.00% 8.25%
- ----------------------------------------------------------------
The status of JM's defined benefit plans as of December 31 are as follows:
In thousands of dollars
- -------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------
Change in Projected Benefit Obligation
Beginning benefit obligation $ 673,997 $ 641,560
Service cost 8,995 7,985
Interest cost 45,361 46,158
Amendments 7,165 1,993
Actuarial (gains) losses (24,845) 27,644
Benefits paid (52,119) (51,343)
Settlements (1,056)
- -------------------------------------------------------------------
Ending benefit obligation $ 657,498 $ 673,997
===================================================================
Change in Plan Assets
Fair value of plan assets
at beginning of year $ 667,377 $ 741,007
Actual return on plan assets 136,295 (22,303)
Settlements (1,056)
Employer contributions 1,137 16
Benefits paid (52,119) (51,343)
- -------------------------------------------------------------------
Fair value of plan assets
at end of year $ 751,634 $ 667,377
===================================================================
Reconciliation of Funded Status
Funded status $ 94,136 $ (6,620)
Unrecognized net actuarial loss 31,905 144,490
Unrecognized prior service cost 17,199 11,870
Unrecognized transition amount 44 (3,848)
- -------------------------------------------------------------------
Prepaid pension asset $ 143,284 $ 145,892
- -------------------------------------------------------------------
The prepaid pension asset is included in other assets. The projected benefit
obligations for the U.S. plans were determined as of December 31, 1999 and 1998
using discount rates of 7.5 percent and 7 percent, respectively, and rates of
increase in future compensation levels for salary-related plans of 4.5 percent
for both years.
Johns Manville/42
<PAGE>
- --------------------------------------------------------------------------------
German Pension Plans
Pension expense for the years ended December 31 consists of the following:
In thousands of dollars
- ------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------
Service cost $ 719 $ 665 $ 567
Interest cost 1,553 1,727 1,529
Amortization of
transition amount 98 114 106
Recognized actuarial gain (96) (134) (140)
- ------------------------------------------------------------------
Total pension expense $ 2,274 $ 2,372 $ 2,062
- ------------------------------------------------------------------
Assumptions used in determining the pension expense include discount rates of
6.5 percent in 1999 and 7 percent in 1998 and 1997; and rates of increase in
future compensation of 3 percent in 1999, 4 percent in 1998 and 5 percent in
1997.
The status of JM's unfunded German plans as of December 31 is as follows:
In thousands of dollars
- ------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------
Change in Projected Benefit Obligation
Beginning benefit obligation $ 26,484 $ 23,421
Acquisition assumption 2,212
Service cost 719 665
Interest cost 1,553 1,727
Actuarial (gains) losses 1,681 (16)
Foreign currency exchange
rate changes (4,067) 1,857
Benefits paid (1,092) (1,170)
- ------------------------------------------------------------------
Ending benefit obligation $ 27,490 $ 26,484
==================================================================
Reconciliation of Funded Status
Funded status $(27,490) $(26,484)
Unrecognized net actuarial gain (1,945) (4,363)
Unrecognized transition amount 390 570
- ------------------------------------------------------------------
Pension obligation $(29,045) $(30,277)
- ------------------------------------------------------------------
Projected benefit obligations were determined using a discount rate of 6.5
percent in 1999 and 7 percent in 1998. The rate of increase in future
compensation levels for salary-related plans was 3 percent in 1999 and 4 percent
in 1998.
Pension expense and projected benefit obligations under each of these
plans are determined using assumptions regarding discount rates, rates of
increase in future compensation levels and expected long-term rates of return on
assets. These assumptions are subject to prevailing economic conditions and,
accordingly, JM believes it is reasonably possible that a change in these
assumptions may occur in the near term.
Voluntary Savings Plans
JM provides voluntary savings plans in which eligible U.S. employees of JM may
participate. Employees may make contributions of up to 16 percent of their
compensation. JM matches up to six percent of certain contributions at rates
ranging from 15 percent to 100 percent, depending on JM's performance. JM's
contributions to the savings plans were $10.2 million in 1999, $8.8 million in
1998, and $7.1 million in 1997.
Note 13:
Other Postretirement Benefits
Medical and life insurance coverage is provided to eligible U.S. and Canadian
retirees of JM and their dependents under defined benefit plans. The
postretirement benefit expense for the years ended December 31 consists of the
following:
In thousands of dollars
- --------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------
Service cost $ 1,752 $ 1,530 $ 1,390
Interest cost 13,631 13,488 13,210
Amortization of
prior service cost (1,838) (1,838) (1,838)
Amortization of
actuarial loss 94 185 198
- --------------------------------------------------------------
Total postretirement
benefit expense $ 13,639 $ 13,365 $ 12,960
- --------------------------------------------------------------
Johns Manville/43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The postretirement benefit expense was calculated using a discount rate of 7
percent in 1999 and 7.5 percent in 1998 and 1997.
JM's unfunded postretirement benefit obligation reconciled with the amounts
shown in JM's consolidated balance sheet as of December 31, is as follows:
In thousands of dollars
- -------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------
Change in Postretirement Obligation
Beginning benefit obligation $ 204,200 $ 188,831
Service cost 1,752 1,530
Interest cost 13,631 13,488
Amendments (1,288)
Actuarial losses 26,400 16,173
Foreign currency exchange
rate changes 118 (435)
Benefits paid (21,745) (15,387)
- -------------------------------------------------------------------------
Ending benefit obligation $ 223,068 $ 204,200
=========================================================================
Reconciliation of Funded Status
Funded status $(223,068) $(204,200)
Unrecognized net actuarial loss 35,595 9,172
Unrecognized prior service
adjustment (22,151) (22,700)
Fourth quarter benefits paid 10,103 10,057
- -------------------------------------------------------------------------
Postretirement benefit
obligation $(199,521) $(207,671)
- -------------------------------------------------------------------------
The current portions of $21.7 million and $20.7 million of the postretirement
benefit obligation are reflected in compensation and employee benefits as of
December 31, 1999 and 1998, respectively. The accumulated postretirement benefit
obligations were determined as of December 31, 1999 and 1998 using discount
rates of 7.5 percent and 7 percent, respectively. JM utilizes a discount rate
based on available high-quality corporate bonds. For measurement purposes, a 7
percent annual rate of increase in the per capita cost of covered medical
benefits was assumed for 2000; the rate was assumed to decrease gradually to 5.5
percent in 2003 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for health care plans. Increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
benefit obligation as of December 31, 1999 by $11.3 million, and the aggregate
of the service and interest cost components of the periodic cost for the year
then ended by $0.9 million. Meanwhile, decreasing the assumed health care cost
trend rates by one percentage point in each year would decrease the accumulated
benefit obligation as of December 31, 1999 by $10 million, and the aggregate of
the service and interest cost components of the periodic cost for the year then
ended by $0.8 million.
JM's assumptions regarding the discount rate and annual rate of increase in the
per capita cost of covered medical benefits are subject to prevailing economic
conditions. Accordingly, JM believes it is reasonably possible that a change in
these assumptions may occur in the near term.
Note 14:
Workers' Compensation
The workers' compensation liability and related receivable at gross and present
value at December 31 are:
In thousands of dollars
- -------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------
Workers' Compensation Liability:
Gross $107,555 $112,069
Present Value 63,117 64,709
Insurance Receivable:
Gross $ 6,843 $ 7,740
Present Value 4,145 4,652
- -------------------------------------------------------------------
The present value of the liability is reflected in other accrued liabilities and
other noncurrent liabilities. The liability and receivable were measured using
risk-free discount rates of 6 percent and 5 percent at December 31, 1999 and
1998, respectively, which reflect rates of return on available U.S. Treasury
securities with maturities similar to the timing of expected claim payments.
Although JM is exposed to credit losses in the event of nonperformance by its
insurers, JM anticipates claims for insurance coverage will be fully satisfied.
Johns Manville/44
<PAGE>
- --------------------------------------------------------------------------------
Discount rates of 5 percent, 6 percent and 6.4 percent were used to measure
expense for 1999, 1998 and 1997, respectively.
JM expects to pay the following amounts for its workers' compensation
obligations:
In thousands of dollars
- ------------------------------------------------------
2000 $ 6,500
2001 6,400
2002 6,300
2003 6,200
2004 6,000
Thereafter 76,155
- ------------------------------------------------------
$ 107,555
======================================================
Note 15:
Other Income (Expense), net
In thousands of dollars
- -------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------
Amortization of
intangible assets $ (17,345) $ (13,425) $ (10,516)
Pension and
postretirement benefits (6,447) 59 (2,068)
Interest accretion on
workers' compensation
liabilities (2,724) (2,910) (3,072)
Sale of mining royalty 35,988
Other (47) 6,189 5,315
- -------------------------------------------------------------------
$ (26,563) $ 25,901 $ (10,341)
===================================================================
Pension and postretirement benefits are attributable to retirees of JM's former
business operations. Interest accretion on workers' compensation liabilities
primarily relates to previous asbestos operations.
Note 16:
Income Taxes
Income taxes payable consists of the following:
In thousands of dollars
- --------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------
U.S. federal and foreign
income taxes $14,945 $15,961
State and local taxes 1,120 578
- --------------------------------------------------------------------------
$16,065 $16,539
==========================================================================
The tax effect of the temporary differences and carryforwards giving rise to the
net deferred tax asset is as follows:
In thousands of dollars
- --------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------
U.S. Deferred Tax Assets:
Trust deductions $134,948 $158,279
Employee benefit accruals 103,062 103,865
Other accrued liabilities 52,927 50,775
Credit for prior year minimum
tax carryforward 24,071 21,391
Capitalized research, development
and engineering 15,929 6,334
Foreign tax credit carryforward 10,243
Deferred compensation 9,559 9,106
Deferred state and local taxes 3,214 1,960
Other 11,908 13,162
- --------------------------------------------------------------------------
365,861 364,872
- --------------------------------------------------------------------------
Foreign Deferred Tax Assets 1,544 2,252
- --------------------------------------------------------------------------
Total Deferred Tax Assets 367,405 367,124
- --------------------------------------------------------------------------
U.S. Deferred Tax Liabilities:
Property, plant and equipment 116,905 109,440
Prepaid pension asset 50,402 51,138
Other 6,078 5,874
- --------------------------------------------------------------------------
Total Deferred Tax Liabilities 173,385 166,452
- --------------------------------------------------------------------------
Net Deferred Tax Asset, before
valuation allowance 194,020 200,672
Valuation Allowance (10,243)
- --------------------------------------------------------------------------
Net Deferred Tax Asset $183,777 $200,672
==========================================================================
Johns Manville/45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred tax asset related to Trust deductions primarily represents common
stock held by the Trust that is not yet deductible for income tax purposes. The
deferred tax asset related to Trust deductions includes $134.9 million generated
from the issuance of stock to the Trust. JM receives a tax deduction for the
amount of any dividends paid on shares of JM's common stock held by the Trust.
In addition, JM receives a tax deduction when the Trust sells some or all of its
shares of JM common stock and distributes the proceeds to its beneficiaries or
transfers the proceeds to a specific settlement fund. If the Trust were to sell
its JM stock at a price greater than JM's carrying value, JM may receive a tax
benefit in excess of the deferred tax asset reflected for financial reporting
purposes. Likewise, if the Trust were to sell the stock at a price lower than
the carrying value, JM would receive a tax benefit less than the deferred tax
asset reflected for financial reporting purposes.
Under Section 468B of the U.S. Internal Revenue Code, JM is responsible for
income taxes on the taxable income of the Trust's specific settlement fund at a
tax rate of 15 percent. Any such taxes paid by JM will generate a tax deduction
for JM. JM cannot predict the amount of any such future tax obligations.
However, related liabilities could become material in certain situations
including the Trust monetizing, and retaining the proceeds of, a significant
portion of its investment in JM's common stock or the settlement of this
obligation between JM and the Trust. During 1999 and 1998 JM incurred
approximately $4.2 million and $3 million of these taxes, respectively, before
any U.S. federal or state benefit.
The Trust transferred approximately $234.6 million and $69.2 million in 1999 and
1998, respectively, to the specific settlement fund within the Trust or to
claimants generating corresponding current tax deductions for JM. The cash taxes
paid by JM in the U.S. were substantially lower than statutory rates due to JM's
deductions related to payments made to the Trust and tax credit carryforwards.
During 1999 JM realized $7.1 million of foreign tax credit carryforwards, which
were not previously recognized as JM considered realization remote. JM estimates
that, as of December 31, 1999, $10.2 million of the gross deferred tax asset may
not be realized. This amount relates to remaining foreign tax credit
carryforwards that may expire unused. Accordingly, a full valuation allowance
has been provided for these amounts. The 1997 valuation allowance reflected an
$18.2 million decrease primarily due to the utilization of general business
credit carryforwards that JM previously believed would expire unused. In
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," the valuation allowance on JM's deferred tax asset is subject
to change as forecasts of future years' earnings and the estimated timing of the
utilization of JM's tax benefits and credit carryforwards are revised, including
actions by the Trust with respect to its ownership of JM stock.
The tax effect of the temporary differences giving rise to the noncurrent net
deferred tax liability is as follows:
In thousands of dollars
- ------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------
Foreign Deferred Tax Assets $ 7,409 $ 2,376
- ------------------------------------------------------------------------
Foreign Deferred Tax Liabilities:
Property, plant and equipment 38,365 43,327
Other 3,228 2,976
- ------------------------------------------------------------------------
Total Deferred Tax Liabilities 41,593 46,303
- ------------------------------------------------------------------------
Net Deferred Tax Liability $34,184 $43,927
========================================================================
The U.S. and foreign components of income from continuing operations before
income taxes consist of the following:
In thousands of dollars
- --------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------
U.S. $262,555 $215,427 $136,277
Foreign 60,583 34,831 39,203
- --------------------------------------------------------------------
$323,138 $250,258 $175,480
====================================================================
Johns Manville/46
<PAGE>
- --------------------------------------------------------------------------------
The provision for income tax expense on continuing operations consists of the
following:
In thousands of dollars
- --------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------
Current:
U.S. federal $ 15,684 $ 25,422 $ 12,875
U.S. state and local 3,397 4,530 2,887
Foreign 21,594 17,916 17,618
- --------------------------------------------------------------------------
40,675 47,868 33,380
- --------------------------------------------------------------------------
Deferred:
U.S 16,916 16,849 13,044
Foreign 3,703 250 (1,473)
- --------------------------------------------------------------------------
20,619 17,099 11,571
- --------------------------------------------------------------------------
$ 61,294 $ 64,967 $ 44,951
==========================================================================
The reported amount of income tax expense on consolidated pretax income from
continuing operations differs from the amount of income tax expense that would
result from applying the U.S. federal statutory tax rate to consolidated pretax
income from continuing operations for the following reasons:
<TABLE>
<CAPTION>
In thousands of dollars
- ---------------------------------------------------------------------------------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory expense $ 113,099 $ 87,588 $ 61,420
Increase (decrease) resulting from:
Deduction for shares of stock repurchased from the Trust (43,673) (12,045)
Deduction for dividends paid to the Trust (9,982) (8,795) (6,298)
U.S. state and local taxes, net of federal benefit 2,429 3,600 1,913
Adjustment of estimated income tax (benefit) expense for prior years (4,059) (3,352) 825
Foreign income taxes, net of credits (78) (451) 3,924
Utilization of general business credits (18,188)
Other, net 3,558 (1,578) 1,355
- ---------------------------------------------------------------------------------------------------------
$ 61,294 $ 64,967 $ 44,951
=========================================================================================================
</TABLE>
As of December 31, 1999 JM had $24.1 million of U.S. federal credit for prior
year minimum tax carryforwards and $10.2 million of U.S. foreign tax credit
carryforwards. There is no expiration date on the prior year minimum tax credit;
however, it can only be applied against regular tax. The foreign tax credits
expire December 31, 2003.
Undistributed earnings intended to be reinvested indefinitely by the foreign
subsidiaries totaled $72.6 million at December 31, 1999. The determination of
the deferred tax liability related to these undistributed earnings is not
practicable.
Johns Manville/47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 17:
Discontinued Operations
During 1997 JM adjusted the estimated gain recognized in 1996 on the disposition
of Riverwood International Corporation. The adjustment, resulting in an
additional net gain on disposal of discontinued operations of $19.5 million,
arose from the expiration 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
JM's 1996 income tax returns.
Note 18:
Early Extinguishment of Debt
On June 30, 1999 JM prepaid bonds payable to the Trust in the principal amount
of $23.9 million, resulting in a loss on the early extinguishment of debt of
$5.8 million, net of taxes of $3.6 million.
In 1998 JM repurchased, through a cash tender offer, substantially all of the
$400 million of 10.875 percent Johns Manville International Senior Notes due
2004. This transaction resulted in an extraordinary loss on the early
extinguishment of debt of $31.8 million, net of taxes of $18.1 million.
Note 19:
Cumulative Effect of Accounting Change
Effective January 1, 1998 JM changed its method of accounting for glass furnace
rebuild costs to the capitalization method from the allowance method. Under the
capitalization method, costs to periodically rebuild the refractory components
of the glass furnaces are capitalized when incurred and depreciated on a
straight-line basis over the estimated useful life of the rebuild. The
capitalization method provides an improved measure of JM's capital investment
and is consistent with industry practice. Previously, estimated costs to rebuild
furnaces were credited to an allowance and charged to operations over the
estimated period to the next rebuild date. The cumulative effect of this change
in accounting principle increased 1998 earnings by $27.4 million, net of taxes
of $17.9 million. This change resulted in an increase in depreciation expense
but eliminated the provision for furnace rebuilds. The pro forma effect of this
change on net income was not material.
Note 20:
Comprehensive Income
Comprehensive income generally includes changes in separately reported
components of equity along with net income. Components of equity included in
comprehensive income were as follows:
In thousands of dollars
- ---------------------------------------------------------------------
1999 1998 1997
- ---------------------------------------------------------------------
Foreign currency
translation adjustments $ 25,663 $ (22,156) $ (28,973)
Pension liability adjustment (339)
- ---------------------------------------------------------------------
25,324 (22,156) (28,973)
Income tax
(expense) benefit (9,837) 9,970 11,589
- ---------------------------------------------------------------------
Other comprehensive
income, net of tax $ 15,487 $ (12,186) $ (17,384)
=====================================================================
Johns Manville/48
<PAGE>
- --------------------------------------------------------------------------------
Note 21:
Supplemental Cash Flow Information
In connection with the consolidated statement of cash flows, cash paid for
interest related to continuing operations during 1999, 1998 and 1997 was $23.7
million, $33.9 million and $48.1 million, respectively. Cash paid for income
taxes during 1999, 1998 and 1997 was $34.8 million, $23.5 million and $48.7
million, respectively.
Note 22:
Acquisitions
Engineered Products Segment
On January 1, 1999 JM completed the acquisition of Monobond. This acquisition
expands existing product lines of JM's Engineered Products segment in North
America, Europe and China. The cash payment for this acquisition, accounted for
under the purchase method, was $227.3 million. The acquisition was financed with
borrowings from JM's credit facilities drawn during 1998, shown as the
acquisition deposit on JM's December 31, 1998 balance sheet. During 1999 the
allocated purchase price was adjusted to reflect the completion of asset
valuations, and the determination of preacquisition and purchase price
contingencies. The allocation includes the transfer of ownership of a plant
located in China, and adjustment of the value of working capital received, which
will be finalized in early 2000, pursuant to the purchase contract. JM's
December 31, 1999 balance sheet reflects the following purchase price
allocation:
In thousands of dollars
- --------------------------------------------------------------------
Current Assets $ 68,640
Noncurrent Assets (including Goodwill) 194,827
Liabilities Assumed (54,495)
- --------------------------------------------------------------------
Allocated Purchase Price $ 208,972
====================================================================
The consolidated results of operations for 1998 on a pro forma basis as if the
operations had been acquired as of the beginning of the year are as follows
(unaudited):
In millions of dollars, except per share amounts
- ------------------------------------------------------------------------------
Net Sales $2,013
Income before Extraordinary Item and
Cumulative Effect of Accounting Change $ 196
Net Income $ 191
Diluted Earnings Per Share:
Income before Extraordinary Item and
Cumulative Effect of Accounting Change $ 1.21
Net Income $ 1.18
==============================================================================
The estimated pro forma information is presented for informational purposes only
and is not necessarily indicative of the results of operations that would have
occurred had the acquisition been completed as of the above date, nor are they
necessarily indicative of future results of operations.
Roofing Systems Segment
On September 2, 1999 JM acquired certain polyisocyanurate roofing insulation and
sheathing foam business operations. In connection with this acquisition, JM
assumed, and subsequently repaid, $12.5 million of debt. This acquisition
complements existing JM product lines and is accounted for under the purchase
method.
Johns Manville/49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 23:
New Accounting Pronouncements
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement, along with Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" issued in July 1999, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000 and establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that JM recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. At this time, JM cannot determine the effects, if any, adopting
this statement will have on its financial condition presentation or results of
operations.
Note 24:
Business Segments and Geographic Area Information
JM reports separately its operating results in the following three principal
business segments: Insulation, Roofing Systems and Engineered Products. JM's
reportable business segments are strategic business units organized by product.
Consistent with JM's internal reporting, business segments include allocated
corporate expenses. The 1998 mining royalty sale proceeds are reported in
corporate and eliminations.
The Insulation segment consists of JM's building insulation business, which
manufactures fiber glass wool insulation for walls, attics and floors in
residential and commercial buildings; commercial and industrial insulation
business, which manufactures pipe and duct insulation for use in commercial
buildings, factories, refineries and other industrial applications; and original
equipment manufacturers ("OEM") insulation business, which manufactures thermal
and acoustic insulation for aircraft, marine vessels, automobiles and heating,
ventilating and air conditioning ("HVAC") and other equipment.
The Roofing Systems segment consists of JM's commercial and industrial roofing
systems business, which supplies built-up, modified bitumen and single-ply
membranes; perlite, fiber glass and polyisocyanurate foam insulations; roof
guarantees; and accessories.
The Engineered Products segment consists of mats and fibers, which includes base
fiber, fiber to reinforce gypsum wallboard and plastics, fiber glass and
polyester spunbond mats for roofing and flooring applications and monofilament
used in the paper industry; glass fabrics for wall coverings; and fiber glass
and synthetic media for high efficiency air filtration systems, face masks,
respirators, vacuum bags, sorbents and liquid filtration applications.
Filtration also produces fine fibers for specialty manufacturers who supply
filtration media for use in clean rooms and various battery separator
applications.
Johns Manville/50
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------
In thousands of dollars
- -----------------------------------------------------------------------------------------------
December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Assets (Note B)
Insulation $ 539,035 $ 512,428 $ 467,828
Roofing Systems 462,335 429,342 368,051
Engineered Products 775,637 591,839 551,517
Corporate (27,325) (39,216) (46,756)
- -----------------------------------------------------------------------------------------------
Total Operating Assets 1,749,682 1,494,393 1,340,640
Assets Not Directly Assigned to Business Segments 539,951 712,792 639,894
- -----------------------------------------------------------------------------------------------
Total Assets $ 2,289,633 $ 2,207,185 $ 1,980,534
===============================================================================================
Years Ended December 31,
- -----------------------------------------------------------------------------------------------
Depreciation, Depletion and Amortization
Insulation $ 38,066 $ 36,146 $ 34,031
Roofing Systems 20,139 17,624 16,197
Engineered Products 56,432 40,041 29,935
- -----------------------------------------------------------------------------------------------
Total $ 114,637 $ 93,811 $ 80,163
===============================================================================================
Additions to Property, Plant and Equipment (Note D)
Insulation $ 87,880 $ 65,216 $ 34,687
Roofing Systems 19,736 25,154 7,945
Engineered Products 185,215 37,803 81,715
Corporate 6,595 2,163 949
- -----------------------------------------------------------------------------------------------
Total $ 299,426 $ 130,336 $ 125,296
- -----------------------------------------------------------------------------------------------
</TABLE>
See notes on page 54.
Johns Manville/51
<PAGE>
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------
In thousands of dollars
- ------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insulation
Net Sales $ 814,205 $ 731,087 $ 694,606
Intersegment Net Sales 2,509 3,004 3,239
Costs and Expenses 630,926 619,973 611,195
Other Income (Expense), net (1,623) 3,864 (77)
- ------------------------------------------------------------------------------------------------------------------
Income from Operations $ 184,165 $ 117,982 $ 86,573
- ------------------------------------------------------------------------------------------------------------------
Roofing Systems
Net Sales $ 606,458 $ 561,787 $ 510,460
Costs and Expenses 553,614 506,127 457,108
Other Income (Expense), net (8,174) (7,618) (2,841)
- ------------------------------------------------------------------------------------------------------------------
Income from Operations $ 44,670 $ 48,042 $ 50,511
- ------------------------------------------------------------------------------------------------------------------
Engineered Products
Net Sales $ 741,123 $ 488,305 $ 442,579
Intersegment Net Sales 41,603 25,843 33,375
Costs and Expenses 650,286 432,648 393,589
Other Income (Expense), net (9,086) (3,775) (4,027)
- ------------------------------------------------------------------------------------------------------------------
Income from Operations $ 123,354 $ 77,725 $ 78,338
- ------------------------------------------------------------------------------------------------------------------
Corporate and Eliminations
Intersegment Net Sales (Note A) $ (44,112) $ (28,847) $ (36,614)
Costs and Expenses (51,792) (31,405) (40,010)
Other Income (Expense), net (Note C) (7,680) 33,430 (3,396)
- ------------------------------------------------------------------------------------------------------------------
Income from Operations $ -- $ 35,988 $ --
- ------------------------------------------------------------------------------------------------------------------
Consolidated Total Company
Net Sales $ 2,161,786 $ 1,781,179 $ 1,647,645
Costs and Expenses 1,783,034 1,527,343 1,421,882
Other Income (Expense), net (26,563) 25,901 (10,341)
- ------------------------------------------------------------------------------------------------------------------
Income from Operations 352,189 279,737 215,422
Interest Income 2,917 6,433 10,263
Interest Expense 31,968 35,912 50,205
- ------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before Income Taxes $ 323,138 $ 250,258 $ 175,480
==================================================================================================================
</TABLE>
See notes on page 54.
Johns Manville/52
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
In thousands of dollars
Years Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
United States $ 1,736,482 $ 1,508,096 $ 1,426,609
Germany 251,372 120,316 126,217
Other International 177,806 158,103 105,541
Eliminations (Note A) (3,874) (5,336) (10,722)
- ------------------------------------------------------------------------------
Consolidated Total Company $ 2,161,786 $ 1,781,179 $ 1,647,645
==============================================================================
December 31,
- ------------------------------------------------------------------------------
Property, Plant and Equipment, net
United States $ 785,017 $ 679,817 $ 637,638
Germany 153,716 106,566 103,881
Other International 78,875 62,103 51,216
Corporate 22,735 15,672 5,024
- ------------------------------------------------------------------------------
Total $ 1,040,343 $ 864,158 $ 797,759
==============================================================================
</TABLE>
See notes on page 54.
Johns Manville/53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Notes to Business Segments and Geographic Area Information:
(A) Net sales included in eliminations relate principally to the elimination of
intersegment and intergeographic sales (at prices approximating market).
Intersegment sales principally relate to sales from the Engineered Products
segment to the Roofing Systems segment. Intergeographic sales principally relate
to insulation shipments from the U.S.
(B) Operating assets primarily include amounts directly assigned to each
segment. These include trade receivables; inventory (at standard cost);
goodwill; property, plant and equipment; and capitalized software. Capitalized
software included in operating assets was $12 million, $10 million and $12
million in 1999, 1998 and 1997, respectively. Corporate operating assets relate
principally to the adjustment of business segment inventories to a LIFO basis.
Assets not directly assigned to business segments principally include cash and
equivalents, marketable securities, deferred tax assets, acquisition deposit and
other assets.
(C) Other income (expense), net, in corporate and eliminations for 1998 includes
the mining royalty sale proceeds.
(D) Includes property, plant and equipment purchases and additions to property,
plant and equipment from acquisitions. Additions to property, plant and
equipment from acquisitions were $146.5 million, $24 million and $34.8 million
in 1999, 1998 and 1997, respectively.
Johns Manville/54
<PAGE>
MANAGEMENT'S REPORT
- --------------------------------------------------------------------------------
The accompanying consolidated financial statements have been prepared by
management in conformity with generally accepted accounting principles
appropriate under the circumstances. The representations in the financial
statements and the fairness and integrity of such statements are the
responsibility of management. All of the other financial information in the
Annual Report and Form 10-K is consistent with that in the financial statements.
JM maintains internal accounting control systems to provide reliable financial
information for the preparation of financial statements, to safeguard assets
against loss or unauthorized use and to ensure proper authorization and
accounting for all transactions. Management is responsible for maintenance of
these systems, which is accomplished through communication of established
written codes of conduct, systems, policies and procedures; employee training;
and appropriate delegation of authority and segregation of responsibilities. To
further ensure compliance with established standards and procedures, JM
maintains a substantial program of internal audits. Oversight of management's
financial reporting and internal accounting control responsibilities is
exercised by the Board of Directors, through an Audit Committee that consists
solely of outside directors.
/s/C.L. (Jerry) Henry /s/J.P. Murphy
C.L. (Jerry) Henry J.P. Murphy
Chairman of the Board, Senior Vice President and
President and Chief Executive Officer Chief Financial Officer
Johns Manville/55
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Stockholders and Directors of Johns Manville Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income and stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of Johns Manville Corporation and its subsidiaries at December 31, 1999
and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States, 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.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
January 28, 2000
Johns Manville/56
<PAGE>
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
- --------------------------------------------------------------------------------------------------------------
In thousands of dollars, except per share amounts
- --------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999
Net Sales $ 495,758 $ 558,852 $ 569,331 $ 537,845 $2,161,786
Gross Profit 135,829 161,899 165,623 158,229 621,580
Income from Operations 65,007 99,176 98,536 89,470 352,189
Income before Extraordinary Items (Note A) 37,694 80,395 73,191 70,564 261,844
Net Income (Notes A and B) 37,694 74,637 73,191 70,564 256,086
- --------------------------------------------------------------------------------------------------------------
Basic Earnings Per Common Share
Income before Extraordinary Items (Note A) $ .24 $ .51 $ .49 $ .48 $ 1.70
Net Income (Notes A and B) .24 .47 .49 .48 1.66
Diluted Earnings Per Common Share
Income before Extraordinary Items (Note A) $ .23 $ .50 $ .49 $ .47 $ 1.68
Net Income (Notes A and B) .23 .46 .49 .47 1.64
- --------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998
Net Sales $ 389,336 $ 445,224 $ 488,232 $ 458,387 $1,781,179
Gross Profit 95,748 119,848 130,164 131,461 477,221
Income from Operations 45,130 100,988 72,361 61,258 279,737
Income before Extraordinary Items and
Cumulative Effect of Accounting Change 26,030 64,968 50,671 43,622 185,291
Net Income (Notes C and D) 53,439 33,214 50,671 43,622 180,946
- ----------------------------------------------------------------------------------------------------------------
Basic Earnings Per Common Share
Income before Extraordinary Items and
Cumulative Effect of Accounting Change $ .16 $ .41 $ .32 $ .27 $ 1.16
Net Income (Notes C and D) .33 .21 .32 .27 1.13
Diluted Earnings Per Common Share
Income before Extraordinary Items and
Cumulative Effect of Accounting Change $ .16 $ .40 $ .31 $ .27 $ 1.15
Net Income (Notes C and D) .33 .20 .31 .27 1.12
================================================================================================================
</TABLE>
(A) JM's first quarter 1999 income tax expense at an effective rate of 35
percent did not reflect the July 1999 Trust stock sale proceeds benefit as such
proceeds were not anticipated at that time. For the second, third and fourth
quarters, the effective tax rates were approximately 13 percent, 19 percent and
15 percent, respectively, reflecting the stock sale proceeds.
(B) On June 30, 1999 JM prepaid bonds payable to the Trust in the principal
amount of $23.9 million, resulting in a loss on the early extinguishment of debt
of $5.8 million, net of taxes of $3.6 million.
(C) In the second quarter of 1998 JM repurchased, through a cash tender offer,
substantially all of its $400 million of 10.875 percent Johns Manville
International Senior Notes due 2004. This transaction resulted in an
extraordinary loss on the early extinguishment of debt of $31.8 million, net of
taxes of $18.1 million.
(D) Effective January 1, 1998 JM changed its method of accounting for glass
furnace rebuild costs to the capitalization method from the allowance method.
The cumulative effect of this change in accounting principle increased 1998 net
income by $27.4 million, net of taxes of $17.9 million.
Johns Manville/57
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-29389, 333-06313, 333-06321, 333-06375, 333-24253
and 333-31007) of Johns Manville Corporation of our report dated January 28,
2000 relating to the financial statements, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated January 28, 2000
relating to the financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Denver, CO
March 29, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1999 FORM 10K OF JOHNS MANVILLE CORPORATION AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 61,140
<SECURITIES> 3,633
<RECEIVABLES> 291,784
<ALLOWANCES> 3,891
<INVENTORY> 160,340
<CURRENT-ASSETS> 558,679
<PP&E> 1,758,888
<DEPRECIATION> 718,545
<TOTAL-ASSETS> 2,289,633
<CURRENT-LIABILITIES> 411,010
<BONDS> 503,148
0
0
<COMMON> 1,646
<OTHER-SE> 866,654
<TOTAL-LIABILITY-AND-EQUITY> 2,289,633
<SALES> 2,161,786
<TOTAL-REVENUES> 2,161,786
<CGS> 1,540,206
<TOTAL-COSTS> 1,540,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 902
<INTEREST-EXPENSE> 31,968
<INCOME-PRETAX> 323,138
<INCOME-TAX> 61,294
<INCOME-CONTINUING> 261,844
<DISCONTINUED> 0
<EXTRAORDINARY> (5,758)
<CHANGES> 0
<NET-INCOME> 256,086
<EPS-BASIC> 1.66
<EPS-DILUTED> 1.64
</TABLE>
