SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1994
Commission File No. 1-3660
Owens-Corning Fiberglas Corporation
Fiberglas Tower, Toledo, Ohio 43659
Area Code (419)248-8000
A Delaware Corporation
I.R.S. Employer Identification No. 34-4323452
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
Registered
Common Stock - $.10 Par Value New York Stock Exchange
9-1/2% Sinking Fund Debentures New York Stock Exchange
due January 1, 2000
Rights to Purchase Series A New York Stock Exchange
Participating Preferred
Stock, no par value, of the
Registrant
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (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 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. [ X ]
At February 21, 1995, the aggregate market value of Registrant's $.10 par
value common stock (Registrant's voting stock) held by non-affiliates was
$1,502,305,031, assuming for purposes of this computation only that all
directors and executive officers (except Controller) are considered
affiliates.
At February 21, 1995, there were outstanding 44,822,068 shares of
Registrant's $.10 par value common stock.
Parts of Registrant's definitive 1995 proxy statement filed or to be filed
pursuant to Regulation 14A (the "1995 Proxy Statement") are incorporated by
reference into Part III of this Form 10-K.<PAGE>
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PART I
ITEM 1. BUSINESS
Owens-Corning Fiberglas Corporation, a Delaware corporation incorporated in
1938, is a world leader in advanced glass and composite materials. These
products are used in industries such as home improvement, new construction,
transportation, marine, aerospace, energy, appliance, packaging and
electronics. Many of these products are marketed under the trademark
FIBERGLAS.
Approximately eighty percent of the Company's sales are related to home
improvements in the U.S., sales of composite materials and sales outside
U.S. markets. Approximately twenty percent of the Company's sales are
related to new U.S. residential construction.
Owens-Corning Fiberglas Corporation's executive offices are at Fiberglas
Tower, Toledo, Ohio 43659; telephone (419) 248-8000. Unless the context
requires otherwise, the terms "Owens-Corning" and "Company" in this report
refer to Owens-Corning Fiberglas Corporation and its subsidiaries.
The Company operates in two industry segments -- Building Products and
Industrial Materials -- divided into eleven strategic businesses. As a
general rule, there is a commonality of process equipment and/or products
within each industry segment.
The Company also has affiliate companies in a number of countries.
Affiliated companies' sales, earnings and assets are not included in either
industry segment unless the Company owns more than 50% of the affiliate.
Revenue, operating profit, and identifiable assets attributable to each of
the Company's industry and geographic segments, as well as information
concerning the dependence of the Company's industry segments on foreign
operations, for each of the years 1994, 1993 and 1992, are contained in Note
1 to Owens-Corning's Consolidated Financial Statements, entitled "Industry
Segments", on pages 35 through 40 hereof.
BUILDING PRODUCTS
Principal Products And Methods Of Distribution
Building Products operates primarily in North America and Europe. It also
has a growing presence in Latin America and Asia/Pacific, through joint
venture and licensee relationships. Building Products sells a variety of
building and home improvement products in three major categories:
insulation, roofing materials, and windows/patio doors and other specialty
products for the home exterior, such as PinkWrap(TM). The strategic
businesses responsible for these products and markets include: Insulation -
North America, Building Products-Europe, Retail/ Distribution,
Roofing/Asphalt, Specialty and Foam Products, Western Fiberglass Group,
Latin America, and Asia/Pacific.
<PAGE>
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The Company's Retail/Distribution business is a major source of sales of
building insulation products to lumber yards and home centers, and roofing
shingles and windows/patio doors to retailers and distributors. These
products are used in the home improvement and new residential construction
markets. In 1994, this distribution channel accounted for nearly 40% of all
of the Company's building product sales and 25% of total overall corporate
sales. More than 75% of the Company's Retail/Distribution sales are related
to repair and remodeling activity within the home improvement industry.
Other channels for the Company's building products include sales of
insulation products in North America to insulation contractors, metal
building insulation fabricators and distributors, specialty insulation
contractors, manufactured housing producers, and appliance and equipment
manufacturers. In Europe, the Company sells building insulation to large
insulation wholesalers, builders/merchants, distributors and retailers. The
Company sells mechanical insulation products to distributors, fabricators,
and manufacturers for use in the heating, ventilation, power and process,
appliance, and fire protection industries. Fabrication centers fabricate
and sell insulation products to original equipment manufacturers and metal
building erectors and provide fabrication services for other Owens-Corning
marketing organizations.
In Latin America, the Company produces and sells building and mechanical
insulation through joint venture and licensee relationships. In the
Asia/Pacific region, the Company sells primarily mechanical insulation
through licensees and joint venture businesses.
In North America, the Company sells foam products to distributors and
retailers who resell to residential builders, remodelers and do-it-yourself
customers. The Company serves the commercial and industrial markets through
specialty distributors. The Company has licensed others for the manufacture
of foam products in nine locations globally in Canada, Europe, the Middle
East and Asia. The Company sells foam products through traditional agents
and distributors where licensing does not exist.
The Company sells windows and patio doors to retailers for re-sale to
contractors and do-it-yourself customers in the replacement and new
construction markets.
The Company sells roofing shingles to distributors and retailers, who resell
them to residential roofing and remodeling contractors, as well as to do-it-
yourself customers. Approximately 75% of roofing shingles sold in North
America are used for re-roofing, with new residential construction
accounting for the remainder.
The Company sells industrial asphalt under the Trumbull(TM) brand name.
There are three principal kinds of industrial asphalt: Built-Up Roofing
Asphalt (BURA), used in commercial roofing systems to provide waterproofing
and adhesion; saturants or coating asphalt, used to manufacture roofing
felts and shingles; and industrial specialty asphalt, used by manufacturers
in a variety of products such as waterproofing systems, adhesives, coatings,
and product extenders, as well as in various automotive applications.
<PAGE>
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There are various channels of distribution for the Company's asphalt
products. The Company's asphalt products are used internally in the
manufacture of the Company's residential roofing products and are also sold
to other shingle manufacturers. In addition, asphalt is sold to roofing
contractors and distributors for BURA systems and to manufacturers in a
variety of other industries, including automotive, chemical, rubber, and
construction.
Seasonality
Sales in the Building Products segment tend to follow seasonal home
improvement, remodeling and renovation, and new construction industry
patterns. Sales levels for the segment, therefore, are typically lower in
the winter months.
Major Customers
No customer in the Building Products segment accounts for more than three
percent of the segment's sales.
INDUSTRIAL MATERIALS
Principal Products and Methods of Distribution
Industrial Materials operates primarily in North America with subsidiaries
in Europe and Latin America, affiliates and licensees around the world, and
a growing presence in Asia/Pacific. The strategic businesses responsible
for these products include: Composites, Latin America, Pipe, and
Asia/Pacific.
The Company is the world's leading producer of glass fiber materials used in
composites. Composites are fabricated material systems made up of two or
more components (e.g., plastic resin and glass fiber) used in various
applications to replace traditional materials, such as aluminum, wood, and
steel. The global composites industry has expanded to include more than
40,000 end-use products. Worldwide, the composites industry has relatively
few raw material component suppliers (glass fiber, resin and additives)
delivering to thousands of industrial customers through various channels.
Depending on the end-use application, these raw materials move through
different manufacturing process chains, ultimately finding their way to
consumers through myriad markets covering all regions of the world.
A major end-use application for glass fiber is asphaltic roofing shingles,
where glass fiber is used to provide fire and mildew resistance in 95% of
all shingles produced in North America. The Company sells glass fiber
and/or mat directly to a small number of major shingle manufacturers
(including the Company's own roofing business).
Tubs, showers and other related internal building components used for both
remodeling and new construction are also major applications of glass fiber
materials. These end-use products are some of the first successful material
substitution conversions normally encountered in developing countries.
Glass fiber for these markets is sold to direct accounts, and also to
distributors around the world, who in turn service thousands of customers.
<PAGE>
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The use of glass fibers within the automotive industry continues to grow as
the amount of composite materials used per vehicle increases. There are
hundreds of composites applications, including exterior and interior body
panels, instrument panels, bumpers, lamp housings, headliners, packaging for
electronics, valve covers, luggage racks, distributor caps, timing belts,
mufflers and tanks for alternative fuel vehicles. These composite parts are
either produced by the original equipment manufacturer (OEM), or are
purchased by the OEMs from first-tier suppliers. Glass fibers for these
parts are sold mostly to first-tier and second-tier OEM suppliers.
Glass fiber is used extensively in printed circuit boards made for the
consumer electronics, transportation, and telecommunications industries.
The Company sells glass fiber to a small number of major fabric weavers,
who, in turn, supply the rest of the circuit board production value chain.
Applications also include connectors, circuit breaker boxes, computer
housings, electricians' safety ladders, and hundreds of various
electro/mechanical components.
The Company manufactures glass-reinforced plastic pipe designed for use in
underground pressure and gravity fluid handling systems. The pipe is a
structural composite incorporating glass fiber, polyester resins, and other
component materials.
The Company has established a Center of Excellence for its pipe business in
Sandefjord, Norway. In addition to manufacturing pipe, this operation
provides technical and manufacturing support for the Company's joint
ventures and wholly-owned pipe operations around the world. The Company has
pipe joint ventures in Thailand, Saudi Arabia, Germany, Spain and Botswana.
In China, a wholly-owned pipe plant is currently under construction in
Changchun. Through its pipe business and technology licensees around the
world, the Company sells its pipe directly to governments and private
industry for major infrastructure projects, such as water and sewage
transport systems.
Major Customers
No customer in the Industrial Materials segment accounts for more than four
percent of the segment's sales.
GENERAL
Raw Materials And Patents
Owens-Corning considers the sources and availability of raw materials,
supplies, equipment and energy necessary for the conduct of its business in
each industry segment to be adequate.
The Company has numerous U.S. and foreign patents issued and applied for
relating to its products and processes in each industry segment resulting
from research and development efforts. The Company has issued royalty-
bearing patent licenses to companies in several foreign countries. The
licenses cover technology relating to both industry segments.
Including the registered trademark Fiberglas, the Company has approximately
82 trademarks registered in the United States and approximately 339
trademarks registered in other countries.
<PAGE>
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The Company considers its patent and trademark positions to be adequate for
the present conduct of its business in each of its industry segments.
Working Capital
Owens-Corning's manufacturing operations in each of its industry segments
are generally continuous in nature and it warehouses much of its production
prior to sale since it operates primarily with short delivery cycles.
Inventories of finished goods, materials and supplies were within historical
ranges at year-end 1994, when expressed as a percentage of fourth quarter
annualized sales.
Research And Development
During 1994, 1993 and 1992, the Company spent approximately $64 million, $61
million, and $55 million, respectively, for research and development
activities. Customer sponsored research and development was not material in
any of the last three years.
Environmental Control
Owens-Corning's capital expenditures relating to compliance with
environmental control requirements were approximately $15 million in 1994.
The Company currently estimates that such capital expenditures will be
approximately $21 million in 1995 and $20 million in 1996.
The Company does not consider that it has experienced a material adverse
effect upon its capital expenditures or competitive position as a result of
environmental control legislation and regulations. Operating costs of
environmental control equipment, however, were approximately $57 million in
1994. Owens-Corning continues to invest in equipment and process
modifications to remain in compliance with applicable environmental laws and
regulations.
The 1990 Clean Air Act Amendments (Act) provide that the United States
Environmental Protection Agency will issue regulations on a number of air
pollutants over a period of years. Until these regulations are developed,
the Company cannot determine the extent the Act will affect it. The Company
anticipates that its sources to be regulated will include glass fiber
manufacturing and asphalt processing activities. The Company currently
expects glass fiber manufacturing to be regulated by 1997. Based on
information now known to the Company, including the nature and limited
number of regulated materials it emits, the Company does not expect the Act
to have a material adverse effect on the Company's results of operations,
financial condition, or long-term liquidity.
Number Of Employees
During 1994 Owens-Corning averaged approximately 17,200 employees. The
Company had approximately 17,000 employees at December 31, 1994.
Competition
Owens-Corning's products compete with a broad range of products made from
numerous basic, as well as high-performance, materials.
<PAGE>
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The Company competes with a number of manufacturers in the United States of
glass fibers in primary forms, not all of which produce a broad line of
glass fiber products. Approximately one-half of these producers compete
with the Company's Building Products industry segment in the sale of glass
fibers in primary form. A similar number compete with the Company's
Industrial Materials industry segment. Companies in other countries,
primarily Japan, export glass fiber products to the United States. The
Company also competes outside the United States against a number of
manufacturers of glass fibers in primary forms.
Owens-Corning also competes with many manufacturers, fabricators and
distributors in the sale of products made from glass fibers. In addition,
the Company competes with many other manufacturers in the sale of industrial
asphalts and other products.
Methods of competition include product performance, price, terms, service
and warranty.
ITEM 2. PROPERTIES
PLANTS
Owens-Corning's plants as of March 1, 1995 are listed below by industry
segment and primary products, and are owned except as noted. The Company
considers that these properties are in good condition and well maintained,
and are suitable and adequate to carry on the Company's business. The
capacity of each plant varies depending upon product mix.
BUILDING PRODUCTS SEGMENT
Thermal And Acoustical Insulation
Barrington, New Jersey* Newark, Ohio
Delmar, New York Palestine, Texas*
Eloy, Arizona Salt Lake City, Utah
Fairburn, Georgia Santa Clara, California
Kansas City, Kansas Waxahachie, Texas
Mount Vernon, Ohio
Candiac, Canada Queensferry, United Kingdom
Edmonton, Canada Ravenhead, United Kingdom
Guangzhou, China** Scarborough, Canada
Pontyfelin, United Kingdom Vise, Belgium
*Facility is mothballed.
**Under construction.
<PAGE>
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Roofing And Asphalt Processing (one of each at every location, except as
noted)
Atlanta, Georgia Medina, Ohio
Brookville, Indiana (1) Memphis, Tennessee
Compton, California Minneapolis, Minnesota
Denver, Colorado Morehead City, North
Detroit, Michigan (2) Carolina (2) (3)
Houston, Texas Oklahoma City, Oklahoma (2)
Irving, Texas Portland, Oregon (4)
Jacksonville, Florida (3) Savannah, Georgia
Jessup, Maryland Summit, Illinois (3)
Kearney, New Jersey
(1) Roofing plant only.
(2) Asphalt processing plant only.
(3) Facility is partially leased.
(4) Two asphalt processing plants, as well as one roofing plant.
Specialty and Foam Products
Hazleton, Pennsylvania Rockford, Illinois
Martinsville, Virginia* Tallmadge, Ohio
*Facility is leased.
INDUSTRIAL MATERIALS SEGMENT
Textiles And Reinforcements
Aiken, South Carolina Fort Smith, Arkansas
Amarillo, Texas Huntingdon, Pennsylvania
Anderson, South Carolina Jackson, Tennessee*
Apeldoorn, The Netherlands Liversedge, United Kingdom
Battice, Belgium Rio Claro, Brazil
Birkeland, Norway San Vincente deCastellet/
Guelph, Canada Barcelona, Spain
L'Ardoise, France Wrexham, United Kingdom
*Facility is leased.
Pipe
Changchun, China** Sandefjord, Norway*
*Facility is leased.
**Under construction.
OTHER PROPERTIES
Owens-Corning's general offices of approximately 300,000 square feet are
located in the Fiberglas Tower, Toledo, Ohio. The lease for these offices
terminates December 31, 1996. Under separate leases, the Company has
additional general office space of approximately 145,000 square feet, and
warehouse space of approximately 100,000 square feet, located in other
buildings in Toledo. <PAGE>
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The Company's research and development function is conducted at its Science
and Technology Center, located on approximately 500 acres of land outside
Granville, Ohio. It consists of twenty-three structures totaling
approximately 635,000 square feet, of which 25,000 square feet were
mothballed at the end of 1994.
ITEM 3. LEGAL PROCEEDINGS
The paragraphs in Note 21 to the Company's Consolidated Financial
Statements, entitled "Contingent Liabilities", on pages 64 through 69
hereof, are incorporated here by reference.
Securities and Exchange Commission rules require the Company to describe
certain governmental proceedings arising under federal, state or local
environmental provisions unless the Company reasonably believes that the
proceeding will result in monetary sanctions of less than $100,000. The
following proceedings are reported in response to this requirement. Based
on the information presently available to it, however, the Company believes
that the costs which may be associated with these matters will not have a
materially adverse effect on the Company's financial position or results of
operations.
As previously reported, the Company and more than 100 other companies have
signed individual agreements with the United States Environmental Protection
Agency (EPA) to conduct a Toxic Substance Control Act (TSCA) Audit Program
to determine compliance status under TSCA section 8(e). The agreement
provides that the Company will audit its records and report to the EPA any
reportable matters which were not reported or which were reported late. The
Company will pay stipulated penalties of up to $15,000 for each matter not
timely reported, with a maximum penalty of $1 million in the aggregate. The
Company has completed the portion of the audit dealing with substantial risk
of injury to health. It has not been notified as to the amount of penalties
it will be required to pay but estimates that the penalty for health related
filings will be less than $150,000. The final report to the EPA, regarding
environmental issues, is due six months after the EPA publishes final
refined guidance on such reporting.
In the third quarter of 1994, the Company reported to the Texas Natural
Resource Conservation Commission (TNRCC) that it had discovered that the
glass forming areas of its Amarillo, Texas plant were operating without
certain required air permits. The TNRCC and the Company are working
together to resolve this matter. The Company is unable at this time to
determine the amount of penalties that may be sought by the TNRCC.
During the first quarter of 1995, the Company signed a consent order with
the Tennessee Department of Environment and Conservation, providing for a
remedial investigation and feasibility study for two state Superfund sites.
The Company is the primary generator in both sites.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Owens-Corning has nothing to report under this Item.
<PAGE>
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Executive Officers of the Company
(as of March 1, 1995)
The term of office for elected officers is one year from the annual election
of officers by the Board of Directors following the Annual Meeting of
Stockholders on the third Thursday of April. All those listed have been
employees of Owens-Corning during the past five years except as indicated.
Name and Age Position*
Glen H. Hiner (60) Chairman of the Board and Chief
Executive Officer since January
1992; formerly Senior Vice
President - G.E. Plastics at
General Electric Company (1983).
Director since 1992.
Alan D. Booth (52) Vice President and President,
Insulation - North America since
January 1994; formerly Vice
President, Insulation Division,
Construction Products Group
(1993) and Vice President,
Mechanical Products Division
(1986).
David T. Brown (46) Vice President and President,
Roofing/Asphalt since January
1994; formerly Vice President,
Roofing/Asphalt Division (1993)
and Vice President, Atlanta
Regional Sales, Building
Materials (1986).
Christian L. Campbell (44) Senior Vice President, General
Counsel and Secretary since
January 1995; formerly Vice
President, General Counsel and
Secretary at Nalco Chemical
(1990).
Domenico Cecere (45) Vice President and Controller
since November 1993; formerly
Vice President, Finance and
Administration, Europe (1992),
Vice President and Assistant
Controller (1991) and Vice
President, Finance, Industrial
Business (1990) at Honeywell,
Inc.
Charles H. Dana (55) Executive Vice President since
January 1994; formerly Senior
Vice President, OCF, and
President - Industrial Materials
Group (1989).
<PAGE>
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Name and Age Position*
David W. Devonshire (49) Senior Vice President and Chief
Financial Officer since July
1993; formerly Corporate Vice
President, Finance (1992) and
Corporate Vice President and
Controller (1990) at Honeywell,
Inc.
Carl B. Hedlund (47) Vice President and President,
Retail/Distribution since January
1994; formerly Vice President,
Retail and Distribution,
Construction Products Group
(1993), Vice President, Roofing
Products Operating Division
(1989).
Robert C. Lonergan (51) Vice President and President,
Science and Technology since
January 1995; formerly President,
Windows (1993); and President of
Reb Plastics, Inc. (1984).
Bradford C. Oelman (57) Vice President - Corporate
Relations since November 1986.
Gregory M. Thomson (47) Senior Vice President, Human
Resources since October 1994;
formerly Vice President, Human
Resources, Public Service
Electric & Gas (1988).
Efthimios O. Vidalis (40) Vice President and President,
Composites since January 1994;
formerly Vice President,
Reinforcements Division, Europe
(1986).
*Information in parentheses indicates year in which service in position
began.
<PAGE>
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Part II
ITEM 5. MARKET FOR OWENS-CORNING'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market on which Owens-Corning's common stock is traded is the
New York Stock Exchange. The high and low sales prices in dollars per share
for Owens-Corning's common stock as reported in the consolidated transaction
reporting system for each quarter during 1994 and 1993 are set forth in the
following tables.
1994 High Low 1993 High Low
First Quarter 46 33-1/2 First Quarter 47 34-3/8
Second Quarter 36-1/8 30-1/2 Second Quarter 45-1/4 36-1/4
Third Quarter 36-1/4 30-1/8 Third Quarter 45-5/8 40-1/4
Fourth Quarter 33-1/2 27-3/4 Fourth Quarter 49-1/8 42-1/2
The number of stockholders of record of the Company's common stock on
February 21, 1995 was 7,358.
No dividends have been declared by the Company since the Company's November
5, 1986 recapitalization. In connection with certain of its current bank
credit facilities, the Company has agreed to restrictions affecting the
payment of cash dividends. As of January 1, 1995, these restrictions
limited funds available for the payment of cash dividends by the Company to
approximately $38 million. While the Company periodically evaluates the
advisability of paying dividends, it currently does not anticipate paying
dividends during 1995.
<PAGE>
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<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain financial information of the Company.
1994(a) 1993(b) 1992(c) 1991(d) 1990(e)
(In millions of dollars, except per share data and where noted)
<S> <C> <C> <C> <C> <C>
Net sales $ 3,351 $ 2,944 $ 2,878 $ 2,783 $ 3,069
Cost of sales 2,536 2,266 2,234 2,186 2,304
Marketing, administrative
and other expenses 429 350 350 1,171 349
Science and technology expenses 71 69 65 54 58
Restructure costs 89 23 16 - 65
Income (loss) from operations 226 236 213 (628) 293
Cost of borrowed funds 94 89 110 131 165
Income (loss) before provision
for income taxes 132 147 103 (759) 128
Provision (credit) for income taxes 58 47 33 (238) 58
Net income (loss) 159 131 73 (742) 73
Net income (loss) per share
Primary 3.61 3.00 1.70 (18.13) 1.73
Fully diluted 3.35 2.81 1.67 (18.13) 1.73
Dividends per share on common
stock
Declared - - - - -
Paid - - - - -
Weighted average number of shares
outstanding (in thousands)
Primary 44,209 43,593 43,013 40,924 42,019
Fully diluted 50,025 49,410 48,844 40,924 42,019
Net cash flow from operations 361 312 184 264 361
Capital spending 258 178 144 114 146
Total assets (f) 3,274 3,013 3,162 3,511 1,807
Long-term debt 1,037 898 1,018 1,148 1,086
Average number of employees
(in thousands) 17 17 17 17 18
<PAGE>
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(a) During the first quarter of 1994, the Company recorded a $117
million charge ($85 million after-tax) for productivity initiatives
and other actions. The Company also recorded a $10 million after-
tax charge for the adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" for its non-U.S. plans,
a $28 million after-tax charge for the adoption of SFAS 112,
"Employers' Accounting for Postemployment Benefits," and a $123
million after-tax credit for the change in accounting method for
rebuilding furnaces.
(b) During 1993, the Company recorded a $23 million charge for the
restructuring of its European operations, an $8 million charge ($5
million after-tax) for the writedown of its hydrocarbon ventures to
their net realizable value, a $26 million credit for the adoption
of SFAS 109, "Accounting for Income Taxes," and a $14 million credit
for the revaluation of deferred taxes.
(c) During 1992, the Company recorded a $16 million charge ($11 million
after-tax) to reorganize the Company's Building Products segment and
to centralize the Company's accounting and information systems. The
Company also recorded a net extraordinary gain of $1 million
resulting from the utilization of tax loss carryforwards, partially
offset by a loss on the early retirement of debt.
(d) During 1991, The Company recorded a non-recurring $800 million
charge for unasserted asbestos litigation claims and a $227 million
after-tax charge, or $5.55 per share, for the adoption of SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" for its U.S. plans.
(e) During 1990, the Company recorded a $65 million restructuring
charge.
(f) During 1993, the Company adopted the provisions of FIN 39 which
require the Company to present separately in its balance sheet its
estimated contingent liabilities and related insurance assets. 1992
and 1991 assets have been restated to conform with the 1994 and 1993
presentations.
/TABLE
<PAGE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All per share information in Item 7 is on a fully diluted basis.)
RESULTS OF OPERATIONS
Net income for the year ended December 31, 1994 was $159 million, or $3.35
per share, compared to net income of $131 million, or $2.81 per share, and
net income of $73 million, or $1.67 per share, for the years ended December
31, 1993 and 1992, respectively. The 1994 earnings growth reflects volume,
price and productivity gains, as well as the benefits of 1994 acquisitions.
Net income of $159 million for the year ended December 31, 1994 includes the
following offsetting special items from the first quarter: an after-tax
gain of $123 million, or $2.45 per share, reflecting a change to the capital
method of accounting for the rebuilding of glass melting facilities; an
after-tax charge of $85 million, or $1.69 per share, for productivity
initiatives and other actions; a non-cash, after-tax charge of $10 million,
or $.20 per share, to reflect adoption of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," for plans outside the United States; and a non-cash,
after-tax charge of $28 million, or $.56 per share, to reflect adoption of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits." Please
see notes 5, 6 and 7 to the Consolidated Financial Statements.
Excluding special items, net income for the year ended December 31, 1993 was
$118 million, or $2.56 per share. The 1993 special items included a credit
of $26 million, or $.53 per share, for the cumulative effect of adopting the
accounting standard for income taxes (SFAS No. 109); a one-time gain of $14
million, or $.29 per share, reflecting a tax benefit resulting from a
revaluation of deferred taxes, offset, in part, by an increase in the
Company's corporate tax liability, necessitated by the increase in the
federal statutory tax rate; an after-tax charge of $5 million, or $.10 per
share, for the write-down of the Company's hydrocarbon ventures to their net
realizable value; and a charge of $23 million, or $.47 per share, for the
restructuring of the Company's European operations. Please see notes 5 and
9 to the Consolidated Financial Statements.
Excluding special items, net income for the year ended December 31, 1992 was
$83 million, or $1.87 per share. The 1992 special items included an after-
tax charge of $11 million, or $.22 per share, to reorganize the Company's
Building Products segment and to centralize the Company's accounting and
information systems, and a net extraordinary gain of $1 million, or $.02 per
share, resulting from the utilization of tax loss carryforwards, partially
offset by a loss on the early retirement of debt. Please see notes 2, 5 and
9 to the Consolidated Financial Statements.
<PAGE>
-16-
Net sales were $3.351 billion for the year ended December 31, 1994,
reflecting a 14% increase from the 1993 level of $2.944 billion. Net sales
in 1992 were $2.878 billion. Approximately 10% of the 1994 growth in sales
resulted from volume and pricing gains, while the balance came from
acquisitions. Please see note 4 to the Consolidated Financial Statements.
Gross margin for the year ended December 31, 1994 increased to 24%, compared
to 23% and 22% in 1993 and 1992, respectively, reflecting volume and pricing
gains, as well as productivity improvements. Earnings before interest and
taxes (EBIT) from ongoing operations increased to $343 million in 1994, from
$267 million in 1993 and $229 million in 1992.
Operating expenses increased by $147 million in 1994 due to restructure
costs of $89 million, final costs of approximately $20 million associated
with the administration of the Company's former commercial roofing business,
marketing and administrative costs from acquired businesses of approximately
$20 million, marketing costs associated with the Company's new global brand
awareness program, and additional costs of expanding into new global
markets.
In the Building Products segment, sales increased 17% for the year ended
December 31, 1994 compared to 1993. This growth reflects increased demand
and pricing, as well as increased sales ($134 million) resulting from the
second quarter 1994 acquisitions of UC Industries, Inc. and the United
Kingdom-based insulation and industrial supply businesses of Pilkington plc
("the U.K. acquisition"). Excluding the charge for restructure and other
initiatives, income from operations for Building Products increased 47
percent in 1994, reflecting earnings growth in the United States, Europe and
Canada.
Building Products sales in the United States increased 15% over the 1993
level, led by an increase in the Company's home improvement and new
construction insulation businesses. The Company is completing the
integration of its June 1994 U.K. acquisition, and is adding a second
production line at its insulation plant in Vise, Belgium, which is scheduled
for completion during the first half of 1995. In January 1994, the Company
exchanged its commercial roofing business for Schuller International's
residential roofing business. This transaction tripled the Company's
capacity to produce high-style laminate shingles. Roofing sales volume
increased during 1994 while earnings were disappointing due to price
weakness in that market. The window business achieved sales gains and
productivity improvements during the year, but has not yet reached break-
even. During the second quarter of 1994, the Company established a joint
venture to manufacture insulation products in Guangzhou, The People's
Republic of China.
<PAGE>
-17-
In the Industrial Materials segment, sales increased 8% during 1994 compared
to the 1993 level. U. S. composites sales grew 13%, driven by continued
demand in the automotive sector and a broad range of the Company's
industrial markets. While the April 1994 reactivation of the Company's
Jackson, Tennessee plant increased the Company's capacity, the Company
continues to import products into the U.S. from other worldwide operations,
in order to meet North American demand for the Company's glass fiber
reinforcements. During the third quarter of 1994, the Company entered into
a joint venture with Alpha Corporation of Tennessee, whereby the two
companies combined their existing resin businesses to form Alpha/Owens-
Corning, L.L.C., the largest manufacturer of polyester resins in North
America. The Company contributed two manufacturing plants (Valparaiso,
Indiana and Guelph, Ontario) and owns a fifty percent interest in the joint
venture. Please see note 4 to the Consolidated Financial Statements.
In Europe, the Company's composites operations benefited from economic
improvement. Increased demand and the effects of productivity initiatives
resulted in positive income from operations for the fourth quarter of 1994.
The Company expects the European economic recovery to continue in 1995.
During the second quarter of 1994 the Company dedicated a new joint venture
manufacturing plant for glass-reinforced plastic pipe in Mochau, Germany.
Construction is currently underway on a new manufacturing plant for glass-
reinforced plastic pipe in Changchun, The People's Republic of China. The
Company also announced the formation of a new joint venture manufacturing
plant for glass-reinforced plastic pipe in Camarles, Spain.
Late in the fourth quarter of 1994, the Company completed the sale of its
underground storage tank manufacturing business. This sale, combined with
the closing of the Company's Resol product line, the exchange of the
commercial roofing business for Schuller International's residential roofing
business, and the establishment of a resins and coatings joint venture,
completes the Company's previously announced portfolio realignment and
allows the Company to focus its resources and attention on core businesses
and global growth. Please see note 4 to the Consolidated Financial
Statements.
The Company's cost of borrowed funds for the year ended December 31, 1994
was $5 million higher than 1993 due to increased borrowing and higher
interest rates during 1994. Please see notes 2 and 3 to the Consolidated
Financial Statements.
During 1994, the Company's Canadian operations generated operating income
sufficient to utilize all Canadian tax net operating loss carryforwards.
At December 31, 1994, certain of the Company's foreign subsidiaries have tax
net operating loss carryforwards of approximately $27 million. At December
31, 1994, the Company has $464 million in net deferred tax assets, all of
which management expects to realize through income from future operations.
Please see note 9 to the Consolidated Financial Statements.
In September 1994, the Company announced the development of Miraflex (TM)
fiber, a new form of glass fiber developed by combining two different glass
compositions into one fiber. Miraflex (TM) fibers are flexible, soft to the
touch, virtually itch-free, resilient and form-filling, characteristics not
normally associated with glass or inorganic fibers. The first application
of Miraflex (TM) fiber is a home attic insulation and is being introduced in
select North American markets during the first quarter of 1995.<PAGE>
-18-
During the first quarter of 1994, the Company announced productivity
initiatives and other actions aimed at reducing costs and enhancing speed,
focus and efficiency. These initiatives included eliminating nearly 400
positions worldwide, consolidating the corporate engineering and research
and development functions at the Company's Science and Technology Center in
Granville, Ohio, and consolidating the Company's field sales and
administrative operations. Other actions included exiting approximately 60
leased facilities worldwide, continuing the realignment of the Company's
product lines and manufacturing facilities worldwide, outsourcing various
corporate activities, and exiting non-strategic businesses. The Company
expects to realize the full benefit of these initiatives beginning in 1995.
Please see notes 1 and 5 to the Consolidated Financial Statements.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Cash flow from operations, excluding asbestos-related activities, was $361
million for 1994, compared to $312 million for 1993. Total receivables at
December 31, 1994 were $5 million higher than the December 31, 1993 level
due to an increase in sales, offset in part by the sale of $50 million in
receivables which occurred late in December 1994. An additional sale of $50
million in receivables was completed early in 1995. Please see note 20 to
the Consolidated Financial Statements.
At December 31, 1994, the Company's net working capital was negative $143
million and its current ratio was .87 compared to negative $49 million and
.94 at December 31, 1993, and $123 million and 1.2 at December 31, 1992,
respectively. The decrease in 1994 was primarily due to increased short-
term borrowings to finance the U.K. acquisition. Excluding the impact of
the short-term borrowings to finance the U.K. acquisition, the Company's net
working capital was negative $33 million and its current ratio was .97 at
December 31, 1994.
The Company's total borrowings at December 31, 1994 were $208 million higher
than at year-end 1993, primarily due to the U.K. acquisition, capital
expenditures, and asbestos payments (net of insurance proceeds and taxes).
In connection with the second quarter 1994 U.K. acquisition, the Company
established, effective June 1, 1994, a $110 million 364-day credit facility
with a syndicate of banks led by the Bank of New York. In the third quarter
of 1994, the Company amended its long-term U.S. loan facility, led by Credit
Suisse, to increase the available lines of credit by $100 million and also
established a Canadian credit facility with a syndicate of banks, led by
Credit Suisse Canada, serving as agent, replacing the previous facility
which expired in July 1994. The new facility has a commitment of 95 million
Canadian dollars (68 million U.S. dollars) and expires in October 1997. As
of December 31, 1994, the Company had unused lines of credit of $293 million
available under long-term bank loan facilities and an additional $91 million
under short-term facilities, compared to $376 million and $115 million,
respectively, at year-end 1993. The decline in unused available lines of
credit reflects the Company's higher borrowings and an increase in
outstanding letters of credit, supporting appeals from asbestos trials,
which reduce credit availability under the Company's long-term U.S. loan
facility. During the fourth quarter, the Company issued $140 million in 25-
year bonds at an interest rate of 9.814%. Subsequently, in a separate
transaction, the Company sold a put option to the holder of the bonds
allowing the option holder to require the Company to purchase a portion of
the bonds for $79 million on May 28, 1995. During January 1995, the Company
-19-
received, from an option holder, a notice of intent to exercise
approximately 30% of these put options. Please see notes 2, 3 and 16 to the
Consolidated Financial Statements.
Capital spending for property, plant and equipment, excluding acquisitions,
was $258 million during 1994. At the end of 1994, approved capital projects
were $98 million. The Company expects that funding for these expenditures
will be from the Company's operations and external sources as required.
Gross payments for asbestos litigation claims during 1994, including $56
million in defense costs, were $215 million. Proceeds from insurance were
$87 million, resulting in a net pretax cash outflow of $128 million, or $77
million after-tax. During 1994, the Company received approximately 27,500
new asbestos personal injury cases and closed approximately 18,300 cases.
Over the next twelve months, the Company's total payments for asbestos
litigation claims, including defense costs, are expected to be approximately
$300 million. Proceeds from insurance of $125 million are expected to be
available to cover these costs, resulting in a net pretax cash outflow of
$175 million, or $105 million after-tax. Please see note 21 to the
Consolidated Financial Statements.
The Company expects funds generated from operations, together with funds
available under long and short term bank loan facilities, to be sufficient
to satisfy its debt service obligations under its existing indebtedness, as
well as its contingent liabilities for uninsured asbestos personal injury
claims.
The Company's 8% Convertible Junior Subordinated Debentures (Debentures) are
redeemable, at a premium, at the Company's option and are also convertible,
at the holder's option, into shares of Company common stock at a conversion
price of $29.75 per share until maturity or earlier redemption. At December
31, 1994, $172.5 million of these Debentures were outstanding and were
convertible into approximately 5.8 million shares of common stock, which
shares were reflected in the Company's fully diluted earnings per share
calculation. Less than $1 million of Debentures were redeemed by the
Company as a result of completion of its redemption on March 13, 1995 of all
outstanding Debentures held in bearer form. As of March 14, 1995,
approximately $72 million of the Debentures had been converted by the
holders into approximately 2.4 million shares of Company common stock and
the Company announced its call for redemption on April 13, 1995 of the $99.8
million of Debentures that remained outstanding. Provided the price of
Company common stock exceeds $32.10 (Cash Equivalent Price) at the time of
conversion, Debenture holders who convert will receive stock (plus cash for
fractional shares) with a market value greater than the cash payable upon
redemption. To fund any cash redemptions, the Company has entered into an
arrangement with an unaffiliated financial institution, giving the Company
the option to sell to such institution, at the Cash Equivalent Price, any
balance of the common shares into which the outstanding Debentures are
convertible (approximately 3.4 million shares) which are not used for
conversion.
<PAGE>
-20-
The Company has been deemed by the Environmental Protection Agency (EPA) to
be a potentially responsible party (PRP) with respect to certain sites under
the Comprehensive Environmental Response, Compensation and Liability Act
(Superfund). The Company has also been deemed a PRP under similar state or
local laws, including two state Superfund sites where the Company is the
primary generator. In other instances, other PRPs have brought suits or
claims against the Company as a PRP for contribution under such federal,
state or local laws. During 1994, the Company was designated as a PRP in
such federal, state, local or private proceedings for five additional sites.
At December 31, 1994, a total of 38 such PRP designations remained
unresolved by the Company, some of which designations the Company believes
to be erroneous. The Company is also involved with environmental
investigation or remediation at a number of other sites at which it has not
been designated a PRP. The Company has established a $23 million reserve
for its Superfund (and similar state, local and private action) contingent
liabilities. In addition, based upon information presently available to the
Company, and without regard to the application of insurance, the Company
believes that, considered in the aggregate, the additional costs associated
with such contingent liabilities, including any related litigation costs,
will not have a materially adverse effect on the Company's financial
position or results of operations.
The 1990 Clean Air Act Amendments (Act) provide that the EPA will issue
regulations on a number of air pollutants over a period of years. Until
these regulations are developed, the Company cannot determine the extent to
which the Act will affect it. The Company anticipates that its sources to
be regulated will include glass fiber manufacturing and asphalt processing
activities. The Company currently expects glass fiber manufacturing to be
regulated by 1997. Based on information now known to the Company, including
the nature and limited number of regulated materials it emits, the Company
does not expect the Act to have a materially adverse effect on the Company's
results of operations, financial condition or long-term liquidity.
<PAGE>
-21-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 24 through 71 hereof are incorporated here by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Owens-Corning has nothing to report under this Item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OWENS-CORNING
The information required by this Item is incorporated by reference from the
Company's 1995 Proxy Statement except that certain information concerning
Owens-Corning's executive officers is included on pages 10 through 11
hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the
Company's 1995 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by reference from the
Company's 1995 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from the
Company's 1995 Proxy Statement.
<PAGE>
-22-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. See Index to Financial Statements on page 24 hereof
2. See Index to Financial Statement Schedules on page 72 hereof
3. See Exhibit Index beginning on page 74 hereof
Management contracts and compensatory plans and arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form
10-K are denoted in the Exhibit Index by an asterisk ("*").
(b) REPORTS ON FORM 8-K
No report on Form 8-K was filed during the fourth quarter of 1994.
<PAGE>
-23-
<TABLE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<S> <C>
OWENS-CORNING FIBERGLAS CORPORATION
By /s/ G. H. Hiner Date March 23, 1995
Glen H. Hiner, Chairman of the Board
and Chief Executive Officer
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 and in the capacities and on the dates indicated.
/s/ G. H. Hiner Date March 23, 1995
Glen H. Hiner, Chairman of the Board,
Chief Executive Officer and Director
/s/ David W. Devonshire Date March 28, 1995
David W. Devonshire, Senior Vice
President and Chief Financial Officer
/s/ Domenico Cecere Date March 24, 1995
Domenico Cecere, Vice President and
Controller
/s/ Norman P. Blake Date March 22, 1995
Norman P. Blake, Jr., Director
/s/ W. W. Boeschenstein Date March 25, 1995
William W. Boeschenstein, Director
/s/ Landon Hilliard Date March 27, 1995
Landon Hilliard, Director
/s/ Trevor Holdsworth Date March 24, 1995
Trevor Holdsworth, Director
/s/ Jon M. Huntsman, Jr. Date March 24, 1995
Jon M. Huntsman, Jr., Director
/s/ W. Walker Lewis Date March 22, 1995
W. Walker Lewis, Director
/s/ David T. McGovern Date March 28, 1995
David T. McGovern, Director
/s/ Furman C. Moseley Date March 24, 1995
Furman C. Moseley, Jr., Director
/s/ W. Ann Reynolds Date March 21, 1995
W. Ann Reynolds, Director
<PAGE>
-24-
INDEX TO FINANCIAL STATEMENTS
Item Page
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . 25
Summary of Significant Accounting Policies . . . . . . . . . . . . . . .26-27
Consolidated Statement of Income - for the
years ended December 31, 1994, 1993 and 1992. . . . . . . . . . . . . .28-29
Consolidated Balance Sheet - December 31, 1994 and 1993 . . . . . . . .30-31
Consolidated Statement of Stockholders' Equity - . . . . . . . . . . . . . 32
for the years ended December 31, 1994, 1993 and 1992
Consolidated Statement of Cash Flows - for the years
ended December 31, 1994, 1993 and 1992. . . . . . . . . . . . . . . . .33-34
Notes to Consolidated Financial Statements
Notes 1 through 22. . . . . . . . . . . . . . . . . . . . . . . . . . .35-71
<PAGE>
-25-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Owens-Corning Fiberglas Corporation:
We have audited the accompanying consolidated balance sheet of OWENS-CORNING
FIBERGLAS CORPORATION (a Delaware corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Owens-Corning Fiberglas
Corporation and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Notes 6, 7, and 9 to the consolidated financial statements,
effective January 1, 1994, the Company changed its methods of accounting for
furnace rebuilds, postretirement benefits other than pensions for its non-
U.S. plans, and postemployment benefits, and effective January 1, 1993, the
Company changed its method of accounting for income taxes.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Financial Statement Schedules is presented for the purposes of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
January 21, 1995
Toledo, Ohio<PAGE>
-26-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of subsidiaries.
Significant intercompany accounts and transactions are eliminated.
Net Income per Share
Primary net income per share is computed using the weighted average number
of common shares outstanding and common equivalent shares during the period.
Fully diluted net income per share reflects the dilutive effect of increased
shares that would result from the conversion of debt and equity securities
which are not treated as common stock equivalents. Unless otherwise
indicated, all per share information included in the notes to the Company's
consolidated financial statements is presented on a fully diluted basis.
Inventory Valuation
Inventories are stated at cost, which is less than market value, and include
material, labor, and manufacturing overhead. U.S. inventories are primarily
valued using the last-in, first-out (LIFO) method and the balance of
inventories are generally valued using the first-in, first-out (FIFO)
method.
Intangible Assets
Intangible assets consist primarily of goodwill, patents, and covenants not
to compete and are carried at cost less accumulated amortization. Goodwill
is amortized on a straight-line basis over a period of forty years. Other
intangible assets are amortized over their estimated useful lives or actual
contractual lives. The Company continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated useful
lives of intangible assets may warrant revision or that the remaining
balance of these intangible assets may not be recoverable. When factors
indicate that intangible assets should be evaluated for possible impairment,
the Company uses an estimate of the related business segment's undiscounted
net income over the remaining life of the intangible asset in measuring
whether the intangible asset is recoverable.
Investments in Affiliates
Investments in affiliates are accounted for using the equity method, under
which the Company's share of earnings of these affiliates is reflected in
income as earned and dividends are credited against the investment in
affiliates when received.
<PAGE>
-27-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Depreciation
For assets placed in service prior to January 1, 1992, the Company's plant
and equipment is depreciated primarily using the double-declining balance
method for the first half of an asset's estimated useful life and the
straight-line method is used thereafter. For assets placed in service after
December 31, 1991, the Company's plant and equipment is depreciated using
the straight-line method.
Rebuilding of Glass Melting Furnaces
The Company's glass melting furnaces periodically require substantial
rebuilding. As discussed in Note 6 to the consolidated financial
statements, effective January 1, 1994, the Company adopted the capital
method of accounting for the cost of rebuilding glass melting furnaces.
Under this method, costs are capitalized when incurred and depreciated over
the estimated useful lives of the rebuilt furnaces.
Derivative Financial Instruments
Gains and losses on hedges of existing assets or liabilities are included in
the carrying amount of those assets or liabilities and are ultimately
recognized in income as part of those carrying amounts. Gains and losses on
hedges of net investments in foreign subsidiaries are included in
stockholders' equity. Gains and losses related to qualifying hedges of firm
commitments or anticipated transactions also are deferred and are recognized
in income or as adjustments of carrying amounts when the hedged transaction
occurs. Gains and losses on forward currency exchange contracts that do not
qualify as hedges are recognized as other income or expense.
Reclassifications
Certain reclassifications have been made to 1993 and 1992 to conform with
the classifications used in 1994.
<PAGE>
-28-
</TABLE>
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
(In millions of dollars,
except share data)
<S> <C> <C> <C>
NET SALES $ 3,351 $ 2,944 $ 2,878
COST OF SALES 2,536 2,266 2,234
-------- -------- --------
Gross margin 815 678 644
-------- -------- --------
OPERATING EXPENSES
Marketing and administrative expenses 386 324 334
Science and technology expenses
(Note 11) 71 69 65
Restructure costs (Note 5) 89 23 16
Other (Note 5) 43 26 16
-------- -------- --------
Total operating expenses 589 442 431
-------- -------- --------
INCOME FROM OPERATIONS 226 236 213
Cost of borrowed funds (Notes 2 and 3) 94 89 110
-------- -------- -------
INCOME BEFORE PROVISION FOR
INCOME TAXES 132 147 103
Provision for income taxes (Note 9) 58 47 33
-------- -------- --------
INCOME BEFORE EQUITY IN NET
INCOME OF AFFILIATES 74 100 70
Equity in net income of affiliates
(Note 13) - 5 2
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGES 74 105 72
Extraordinary items (Notes 2 and 9) - - 1
Cumulative effect of accounting changes
(Notes 6, 7, and 9) 85 26 -
-------- -------- --------
NET INCOME $ 159 $ 131 $ 73
======== ======== ========
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
/TABLE
<PAGE>
-29-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Continued)
1994 1993 1992
NET INCOME PER COMMON SHARE (In millions of dollars,
except share data)
<S> <C> <C> <C>
Primary:
Income before extraordinary
items and cumulative effect of
accounting changes $ 1.70 $ 2.40 $ 1.68
Extraordinary items - - .02
Cumulative effect of accounting changes 1.91 .60 -
------- ------- -------
Net income per share $ 3.61 $ 3.00 $ 1.70
======= ======= =======
Assuming full dilution:
Income before extraordinary
items and cumulative effect of
accounting changes $ 1.66 $ 2.28 $ 1.65
Extraordinary items - - .02
Cumulative effect of accounting changes 1.69 .53 -
------- ------- -------
Net income per share $ 3.35 $ 2.81 $ 1.67
======= ======= =======
Weighted average number of common shares
outstanding and common equivalent
shares during the period (in millions)
Primary: 44.2 43.6 43.0
Assuming full dilution: 50.0 49.4 48.8
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
/TABLE
<PAGE>
-30-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1994 AND 1993
ASSETS 1994 1993
(In millions of dollars)
<S> <C> <C>
CURRENT
Cash and cash equivalents $ 59 $ 3
Receivables, less allowances of
$16 million in 1994 and 1993 (Note 20) 329 324
Inventories (Note 12) 223 221
Deferred income taxes (Note 9) 156 136
Insurance for asbestos litigation claims
- current portion (Note 21) 125 125
Other current assets 38 18
-------- --------
Total current 930 827
-------- --------
OTHER
Goodwill, less accumulated amortization
of $14 million in 1994 and $12 million
in 1993 (Note 4) 151 77
Investments in affiliates (Note 13) 74 63
Deferred income taxes (Note 9) 308 428
Insurance for asbestos litigation claims
(Note 21) 556 643
Other noncurrent assets 122 81
-------- --------
Total other 1,211 1,292
-------- --------
PLANT AND EQUIPMENT, at cost
Land 51 44
Buildings and leasehold improvements 553 559
Machinery and equipment (Note 6) 2,172 1,978
Construction in progress 125 88
-------- --------
2,901 2,669
Less: Accumulated depreciation (Note 6) (1,768) (1,775)
-------- --------
Net plant and equipment 1,133 894
-------- --------
TOTAL ASSETS $ 3,274 $ 3,013
======== ========
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
/TABLE
<PAGE>
-31-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1994 AND 1993
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
(In millions of dollars)
<S> <C> <C>
CURRENT
Accounts payable and accrued
liabilities (Note 14) $ 598 $ 495
Reserve for asbestos litigation claims -
current portion (Note 21) 300 275
Short-term debt (Note 3) 155 77
Long-term debt - current portion (Note 2) 20 29
-------- --------
Total current 1,073 876
-------- --------
LONG-TERM DEBT (Note 2) 1,037 898
-------- --------
OTHER
Reserve for asbestos litigation claims
(Note 21) 1,145 1,385
Other employee benefits liability
(Note 7) 390 346
Reserve for rebuilding furnaces (Note 6) - 124
Pension plan liability (Note 8) 77 78
Other 232 175
-------- --------
Total other 1,844 2,108
-------- --------
COMMITMENTS AND CONTINGENCIES
(Notes 16, 19, and 21)
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized
8 million shares, none outstanding (Note 18)
Common stock, par value $.10 per share;
authorized 100 million shares; issued
1994--44.2 million and 1993--43.2 million
shares (Notes 4 and 17) 348 315
Deficit (1,012) (1,171)
Foreign currency translation adjustments (1) 5
Other (Note 8) (15) (18)
-------- --------
Total stockholders' equity (680) (869)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,274 $ 3,013
======== ========
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
/TABLE
<PAGE>
-32-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
COMMON STOCK
Balance beginning of year $ 315 $ 299 $ 285
Issuance of stock, including awards
under stock compensation plans
(Notes 4 and 17) 33 16 14
-------- -------- --------
Balance end of year 348 315 299
-------- -------- --------
DEFICIT
Balance beginning of year (1,171) (1,302) (1,375)
Net income 159 131 73
-------- -------- --------
Balance end of year (1,012) (1,171) (1,302)
-------- -------- --------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Balance beginning of year 5 4 24
Translation adjustments (6) 1 (20)
-------- -------- --------
Balance end of year (1) 5 4
-------- -------- --------
OTHER
Balance beginning of year (18) (9) (10)
Net increase (decrease) 3 (9) 1
-------- -------- --------
Balance end of year (15) (18) (9)
-------- -------- --------
STOCKHOLDERS' EQUITY $ (680) $ (869) $ (1,008)
======== ======== ========
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
/TABLE
<PAGE>
-33-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
NET CASH FLOW FROM OPERATIONS
Net income $ 159 $ 131 $ 73
Reconciliation of net cash provided
by operating activities:
Noncash items:
Cumulative effect of accounting
changes (Notes 6, 7, and 9) (85) (26) -
Provision for depreciation,
amortization, and rebuilding
furnaces (Notes 6 and 10) 118 121 150
Provision (credit) for deferred
income taxes (Note 9) 59 10 (21)
Other 9 10 5
(Increase) decrease in receivables
(Note 20) 21 (22) (9)
(Increase) decrease in inventories 17 4 (17)
Increase (decrease) in accounts
payable and accrued liabilities 53 114 (9)
Increase (decrease) in accrued
income taxes (8) (21) (2)
Other 18 (9) 14
-------- -------- --------
Net cash flow from operations 361 312 184
-------- -------- --------
NET CASH FLOW FROM INVESTING
Additions to plant and equipment
(Note 6) (258) (178) (144)
Investment in subsidiaries, net
of cash acquired (Note 4) (120) - -
Other 23 - 10
-------- -------- --------
Net cash flow from investing (355) (178) (134)
-------- -------- --------
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
/TABLE
<PAGE>
-34-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Continued)
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
NET CASH FLOW FROM FINANCING
(Notes 2 and 3)
Net additions (reductions) to
long-term credit facilities $ 10 $ (90) $ (123)
Other additions to long-term debt 145 - 337
Other reductions to long-term debt (51) (21) (330)
Net increase in short-term debt 69 26 50
Other 5 11 7
-------- -------- --------
Net cash flow from financing 178 (74) (59)
-------- -------- --------
NET CASH FLOW FROM ASBESTOS-RELATED
ACTIVITIES (Note 21)
Proceeds from insurance for asbestos
litigation claims 87 224 413
Payments for asbestos litigation claims (215) (283) (405)
-------- -------- --------
Net cash flow from asbestos-
related activities (128) (59) 8
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 56 1 (1)
Cash and cash equivalents at beginning
of year 3 2 3
-------- -------- --------
Cash and cash equivalents at end
of year (Note 15) $ 59 $ 3 $ 2
======== ======== ========
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
/TABLE
<PAGE>
-35-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Segment Data
The Company operates in two industry segments, Building Products and
Industrial Materials, and reports its results in two ways: by industry
segment and by geographic segment. See Note 4 for detail of 1994
acquisitions and divestitures of businesses.
The industry segments are defined as follows:
Building Products
Production and sale of glass wool fibers formed into thermal
and acoustical insulation and air ducts; extruded polystyrene
insulation; roofing shingles and asphalt materials;
underground storage tanks; windows; and patio doors.
Industrial Materials
Production and sale of glass fiber yarns; rovings, mats and
veils; strand and reinforcement products; fiber reinforced
plastic pipe; and polyester and vinyl ester resins.
The geographic segment reporting combines the two industry segments within
the major regions: United States, Europe, and Canada and other.
Intersegment sales are generally recorded at market or equivalent value.
Income (loss) from operations by industry and geographic segment consists of
net sales less related costs and expenses. In computing income (loss) from
operations by segment, cost of borrowed funds and other general corporate
income and expenses have been excluded. Certain corporate operating
expenses directly traceable to industry and geographic segments have been
allocated to those segments.
During the first quarter of 1994, the Company recorded a $117 million pretax
charge for productivity initiatives and other actions. The impact of this
charge was to reduce income from operations for Building Products and
Industrial Materials by $70 million and $22 million, respectively, and to
increase general corporate expense by $25 million. Geographically, income
from operations in the United States, Canada and other, and Europe was
reduced by $56 million, $23 million, and $13 million, respectively. During
the first quarter of 1993, the Company recorded a $23 million charge to
reorganize its European operations, the full impact of which was reflected
as a reduction to income from operations for the Industrial Materials
segment. In addition, the 1993 change in estimate of fixed asset lives
reduced 1993 depreciation expense for Building Products, Industrial
Materials, and general corporate expense by $9 million, $4 million, and $1
million, respectively. During the fourth quarter of 1992, the Company
recorded a $16 million charge to reorganize its Building Products segment
and to centralize its accounting and information systems. The impact of
this charge was to reduce income from operations for Building Products by $9
million and to increase general corporate expense by $7 million.
Geographically, income from operations in the United States and Canada and
other was reduced by $8 million and $1 million, respectively (Notes 5 and
10).<PAGE>
-36-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
Identifiable assets by industry and geographic segment are those assets that
are used in the Company's operations in each industry and geographic segment
and do not include general corporate assets. General corporate assets
consist primarily of cash and cash equivalents, deferred taxes, asbestos
insurance, and corporate property and equipment.
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
NET SALES
Industry Segments
Building Products
United States $ 1,952 $ 1,699 $ 1,636
Europe 182 97 91
Canada and other 139 150 172
-------- -------- --------
Total Building Products 2,273 1,946 1,899
-------- -------- --------
Industrial Materials
United States 595 528 479
Europe 355 346 373
Canada and other 128 124 127
-------- -------- --------
Total Industrial Materials 1,078 998 979
-------- -------- --------
Intersegment sales
Building Products - - -
Industrial Materials 99 85 88
Eliminations (99) (85) (88)
-------- -------- --------
Net sales $ 3,351 $ 2,944 $ 2,878
======== ======== ========
Geographic Segments
United States $ 2,547 $ 2,227 $ 2,115
Europe 537 443 464
Canada and other 267 274 299
-------- -------- --------
3,351 2,944 2,878
-------- -------- --------
Intersegment sales
United States 43 42 42
Europe 22 15 7
Canada and other 91 66 42
Eliminations (156) (123) (91)
-------- -------- --------
Net sales $ 3,351 $ 2,944 $ 2,878
======== ======== ========
/TABLE
<PAGE>
-37-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
INCOME (LOSS) FROM OPERATIONS
Industry Segments
Building Products
United States $ 145 $ 153 $ 94
Europe 26 16 10
Canada and other 18 6 5
-------- -------- --------
Total Building Products 189 175 109
-------- -------- --------
Industrial Materials
United States 108 101 99
Europe (8) (15) 26
Canada and other 9 12 13
-------- -------- --------
Total Industrial Materials 109 98 138
-------- -------- --------
General corporate expense (72) (37) (34)
-------- -------- --------
Income from operations 226 236 213
Cost of borrowed funds (94) (89) (110)
-------- -------- --------
Income before provision
for income taxes $ 132 $ 147 $ 103
======== ======== ========
Geographic Segments
United States $ 253 $ 254 $ 193
Europe 18 1 36
Canada and other 27 18 18
General corporate expense (72) (37) (34)
-------- -------- --------
Income from operations 226 236 213
Cost of borrowed funds (94) (89) (110)
-------- -------- --------
Income before provision
for income taxes $ 132 $ 147 $ 103
======== ======== ========
/TABLE
<PAGE>
-38-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS AT DECEMBER 31
Industry Segments
Building Products
United States $ 718 $ 596 $ 580
Europe 162 46 35
Canada and other 136 155 151
-------- -------- --------
Total Building Products 1,016 797 766
-------- -------- --------
Industrial Materials
United States 326 302 295
Europe 335 256 259
Canada and other 160 157 157
-------- -------- --------
Total Industrial Materials 821 715 711
-------- -------- --------
General corporate 1,363 1,438 1,636
-------- -------- --------
3,200 2,950 3,113
Investments in affiliates
accounted for under the
equity method 74 63 49
-------- -------- --------
Total assets $ 3,274 $ 3,013 $ 3,162
======== ======== ========
Geographic Segments
United States $ 1,044 $ 898 $ 875
Europe 497 302 294
Canada and other 296 312 308
General corporate 1,363 1,438 1,636
-------- -------- --------
3,200 2,950 3,113
Investments in affiliates
accounted for under the
equity method 74 63 49
-------- -------- --------
Total assets $ 3,274 $ 3,013 $ 3,162
======== ======== ========
/TABLE
<PAGE>
-39-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
PROVISION FOR DEPRECIATION,
AMORTIZATION, AND REBUILDING
FURNACES
Industry Segments
Building Products
United States $ 48 $ 47 $ 68
Europe 6 2 3
Canada and other 8 11 10
-------- -------- --------
Total Building Products 62 60 81
-------- -------- --------
Industrial Materials
United States 22 24 32
Europe 17 16 21
Canada and other 8 10 10
-------- -------- --------
Total Industrial Materials 47 50 63
-------- -------- --------
General corporate 9 11 6
-------- -------- --------
Total provision for
depreciation, amortization,
and rebuilding furnaces $ 118 $ 121 $ 150
======== ======== ========
Geographic Segments
United States $ 70 $ 71 $ 100
Europe 23 18 24
Canada and other 16 21 20
General corporate 9 11 6
-------- -------- --------
Total provision for
depreciation, amortization,
and rebuilding furnaces $ 118 $ 121 $ 150
======== ======== ========
/TABLE
<PAGE>
-40-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
ADDITIONS TO PLANT AND EQUIPMENT
Industry Segments
Building Products
United States $ 85 $ 82 $ 76
Europe 41 2 4
Canada and other 7 5 6
-------- -------- --------
Total Building Products 133 89 86
-------- -------- --------
Industrial Materials
United States 41 31 30
Europe 35 32 18
Canada and other 26 7 5
-------- -------- --------
Total Industrial Materials 102 70 53
-------- -------- --------
General corporate 23 19 5
-------- -------- --------
Total additions $ 258 $ 178 $ 144
======== ======== ========
Geographic Segments
United States $ 126 $ 113 $ 106
Europe 76 34 22
Canada and other 33 12 11
General corporate 23 19 5
-------- -------- --------
Total additions $ 258 $ 178 $ 144
======== ======== ========
/TABLE
<PAGE>
-41-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt
1994 1993
(In millions of dollars)
<S> <C> <C>
Unsecured credit facility due in
1997, variable $ 35 $ 30
Unsecured credit facility due in
1997, variable, payable in
Canadian dollars 4 -
Convertible junior subordinated
debentures due in 2005, 8%,
convertible at $29.75 per share 173 173
Guaranteed debentures due in 2001, 10% 150 150
Debentures due in 2002, 8.875% 150 150
Debentures due in 2012, 9.375% 149 149
Guaranteed bonds due in 2019, 9.814%
(Note 19) 140 -
Guaranteed debentures due in 1998, 9.8% 100 100
Bonds due in 2000, 7.25%, payable
in Deutsche marks (Note 19) 50 50
Notes due through 1997, 6.375% to
8.50%, payable in foreign
currencies 38 77
Other long-term debt due through 2012,
at rates from 5.375% to 12.47% 68 48
-------- --------
1,057 927
Less: Current portion (20) (29)
-------- --------
Total long-term debt $ 1,037 $ 898
======== ========
</TABLE>
The Company has two unsecured, variable rate, long-term bank credit
facilities. The first facility was amended in July 1994 and has a maximum
commitment of $475 million at December 31, 1994, of which $211 million was
used for standby letters of credit and $229 million was unused. The rate of
interest is either the bank's base rate, or 13/16% over the certificate of
deposit rate, or 11/16% over the London Interbank Offered Rate (LIBOR).
The rate of interest on borrowings under this facility was 6.8125% at
December 31, 1994. A commitment fee of 1/4 of 1% is charged on the unused
portions of this facility.
The second long-term facility is payable in Canadian dollars and has a
maximum commitment of 95 million Canadian dollars (68 million U.S. dollars)
at December 31, 1994, of which 89 million Canadian dollars (64 million U.S.
dollars) was unused. This facility replaced the previous Canadian facility
which expired in July 1994. The rate of interest is either 11/16% over the
Canadian cost of funds rate, or 11/16% over the LIBOR rate on U.S. deposits,
or .7875% over the Canadian bankers' acceptance rate. The rate of interest
on borrowings under this facility was 8.0% at December 31, 1994. A
commitment fee of 1/4 of 1% is charged on the unused portions of this
facility.<PAGE>
-42-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt (Continued)
As is typical for bank credit facilities, the agreements relating to the
facilities described above contain restrictive covenants, including
requirements for the maintenance of working capital, interest coverage, and
minimum coverage of fixed charges; and limitations on the early retirement
of subordinated debt, additional borrowings, certain investments, payment of
dividends, and purchase of Company stock. The agreements include a
provision which would result in all of the unpaid principal and accrued
interest of the facilities becoming due immediately upon a change of control
in ownership of the Company. A material adverse change in the Company's
business, assets, liabilities, financial condition or results of operations
constitutes a default under the agreements.
The convertible junior subordinated debentures are subordinated to all
present and future indebtedness of the Company and may be redeemed at any
time, at a premium, at the option of the Company. The debentures are
convertible at any time into shares of common stock of the Company at a
conversion price of $29.75 per share. The Company has reserved
approximately six million additional shares of common stock necessary for
conversion.
In November 1994, Owens-Corning Finance (U.K.) PLC, a newly formed wholly-
owned subsidiary of the Company, issued $140 million of Eurobonds. These
bonds bear a coupon rate of interest of 9.814%, payable semiannually, and
mature in 2019. These bonds are convertible into fixed rate preference
shares of Owens-Corning Finance (U.K.) PLC in November 2004 and may be
redeemed at any time, at a premium, at the option of the Company. The bonds
are guaranteed by the Company as to payments of principal and interest and
rank similarly with all other senior unsecured debt of the Company (Note
19). Subsequently, in a separate transaction, the Company sold a put option
to the holder of the bonds allowing the option holder to require the Company
to purchase a portion of the bonds for $79 million on May 28, 1995. During
January 1995, the Company received, from an option holder, a notice of
intent to exercise approximately 30% of these put options.
During 1992, the Company called, prior to maturity, its 12% sinking fund
debentures having a face value of $46 million at a price in excess of book
value, which resulted in an extraordinary loss of $1 million, or $.02 per
share, net of related income taxes of $1 million.
In June 1992, the Company called, prior to maturity, its senior subordinated
debentures having a face value of $240 million, which resulted in an
extraordinary loss of approximately $2 million, or $.05 per share, net of
related income taxes of $1 million. <PAGE>
-43-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt (Continued)
The aggregate maturities and sinking fund requirements for all long-term
debt issues for each of the five years following December 31, 1994 are:
<TABLE>
Credit Other Long-
Year Facilities Term Debt
(In millions of dollars)
<S> <C> <C>
1995 $ - $ 20
1996 - 35
1997 39 12
1998 - 104
1999 - 3
</TABLE>
3. Short-Term Debt
<TABLE>
1994 1993
(In millions of dollars)
<S> <C> <C>
Balance outstanding at December 31 $ 155 $ 77
Weighted average interest rates
on short-term debt outstanding
at December 31 6.6% 6.6%
</TABLE>
During 1994, the Company established an unsecured, variable rate, short-term
bank credit facility in order to finance the 1994 acquisition of Pilkington
(Note 4). This facility has a maximum commitment of $110 million at
December 31, 1994, all of which was used. This facility expires on May 31,
1995 and carries an interest rate of 1/2 of 1% over the LIBOR rate. The
rate of interest on borrowings under this facility was 6.6875% at December
31, 1994.
The Company had unused short-term lines of credit totalling $91 million and
$115 million at December 31, 1994 and 1993, respectively.
4. Acquisitions and Divestitures of Businesses
On May 31, 1994, the Company acquired UC Industries, Inc. ("UCI"), a
privately held foam board insulation manufacturer based in New Jersey. UCI
has two manufacturing facilities which are located in Ohio and Illinois.
<PAGE>
-44-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Acquisitions and Divestitures of Businesses (Continued)
The purchase price of UCI was $45 million. This business combination was
consummated by the exchange of 855,556 shares of the Company's common stock
for all of the capital stock of UCI, as well as an $18 million cash payment,
$6 million of which was paid to acquire the cash of UCI. The remaining $12
million cash payment represents a stock value settlement and was paid during
the fourth quarter of 1994.
On June 2, 1994, the Company acquired Pilkington Insulation Limited and
Kitsons Insulation Products Limited (collectively, "Pilkington"), the United
Kingdom-based insulation manufacturing and distribution businesses of the
Pilkington Group. With two fiber glass insulation manufacturing facilities
and one rock wool manufacturing facility, Pilkington Insulation Limited is
the United Kingdom's largest manufacturer of fiber glass and rock wool
insulation. Kitsons Insulation Products Limited is a major supplier of
thermal and acoustical insulation products to the United Kingdom
construction industry and is comprised of 14 distribution centers.
The purchase price of Pilkington was $110 million and was financed with
borrowings from the Company's short-term bank credit facility (Note 3).
These acquisitions were accounted for using the purchase method of
accounting. Accordingly, the assets acquired and liabilities assumed have
been recorded at their fair values and the results of operations of UCI and
Pilkington have been included in the Company's consolidated financial
statements subsequent to May 31, 1994 and June 2, 1994, respectively.
The purchase price allocations were based on preliminary estimates of fair
market value and are subject to revision. The estimated fair value of
assets acquired from UCI, including goodwill and a non-competition
agreement, was $72 million, and liabilities assumed, including $14 million
in debt, totalled $27 million. The estimated fair value of assets acquired
from Pilkington, including goodwill, was $165 million, and liabilities
assumed, including $7 million in debt, totalled $55 million. Goodwill of
$78 million and the non-competition agreement of $6 million are being
amortized over 40 years and 7 years, respectively, on a straight-line basis.
UCI and Pilkington added $134 million in post-acquisition sales for the
Company during 1994. The pro forma effect of these acquisitions was not
material to net income for the year ended December 31, 1994 or 1993.
On September 30, 1994, the Company entered into a joint venture with Alpha
Corporation of Tennessee, whereby the two companies combined their existing
resin businesses to form Alpha/Owens-Corning, L.L.C., the largest
manufacturer of polyester resins in North America. The Company contributed
two manufacturing plants (Valparaiso, Indiana and Guelph, Ontario) and owns
a 50 percent interest in the joint venture. This joint venture is being
accounted for under the equity method. For the nine months ended September
30, 1994 and the years ended December 31, 1993 and 1992, resin sales
totalled $58 million, $63 million, and $56 million, respectively, and were
included in the Industrial Materials segment.
<PAGE>
-45-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Acquisitions and Divestitures of Businesses (Continued)
Late in the fourth quarter of 1994, the Company completed the sale of its
underground storage tank manufacturing business. Sales for this business
totalled $41 million, $43 million, and $48 million in 1994, 1993, and 1992,
respectively, and were included in the Building Products segment.
5. Restructuring of Operations and Other Initiatives
During the first quarter of 1994, the Company recorded a $117 million pretax
charge for productivity initiatives and other actions aimed at reducing
costs and enhancing the Company's speed, focus, and efficiency. This $117
million pretax charge is comprised of an $89 million charge associated with
the restructuring of the Company's business segments, as well as a $28
million charge, primarily composed of final costs associated with the
administration of the Company's former commercial roofing business. The
components of the $89 million restructure charge include: $48 million for
personnel reductions, $22 million for divestiture of non-strategic
businesses and facilities, $16 million for business realignments, and $3
million for other actions. The $48 million cost for personnel reductions
primarily represents severance costs associated with the elimination of
nearly 400 positions worldwide. The primary employee groups affected
include science and technology personnel, field sales personnel, corporate
administrative personnel, and commercial roofing and resin business
personnel.
As of December 31, 1994, the Company has recorded approximately $50 million
in costs against its 1994 restructure reserve, of which $35 million
represents actual cash expenditures and $15 million represents the non-cash
effects of asset write-offs and business realignments. The $35 million cash
expenditure includes personnel reduction costs of $22 million, primarily
composed of partial payments of severance costs for over 300 employees. The
remaining $13 million cash expenditure represents costs associated with the
divestiture or realignment of businesses and facilities.
During the first quarter of 1993, the Company recorded a $23 million charge
to reorganize its European operations. This charge included $17 million for
personnel reductions and $6 million for the writedown of fixed assets.
During the fourth quarter of 1992, the Company recorded a $16 million charge
to reorganize its Building Products segment and to centralize its accounting
and information systems. This charge included $14 million for personnel
reductions and $2 million for the writedown of assets.
<PAGE>
-46-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Glass Melting Furnace Rebuilds
Effective January 1, 1994, the Company adopted the capital method of
accounting for the cost of rebuilding glass melting furnaces. Under this
method, costs are capitalized when incurred and depreciated over the
estimated useful lives of the rebuilt furnaces. Previously, the Company
established a reserve for the future rebuilding costs of its glass melting
furnaces through a charge to earnings between dates of rebuilds. The change
to the capital method provides a more appropriate measure of the Company's
capital investment and is consistent with industry practice. The cumulative
effect of this change in accounting method was an increase to earnings of
$123 million, or $2.45 per share, net of related income taxes of $54
million. The effect of this change in accounting method was to increase
depreciation expense and eliminate furnace rebuild provision. The pro forma
effect of this change was not material to net income for the year ended
December 31, 1993 and was $7 million, or $.15 per share, for the year ended
December 31, 1992.
7. Postemployment and Postretirement Benefits Other Than Pensions
The Company and its subsidiaries maintain health care and life insurance
benefit plans for certain retired employees and their dependents. The
health care plans in the U.S. are unfunded and pay either 1) stated
percentages of covered medically necessary expenses, after subtracting
payments by Medicare or other providers and after stated deductibles have
been met, or 2) fixed amounts of medical expense reimbursement. Employees
become eligible to participate in the health care plans upon retirement
under one of the Company's pension plans if they have accumulated 10 years
of service after age 45. Some of the plans are contributory, with some
retiree contributions adjusted annually. The Company has reserved the right
to change or eliminate these benefit plans subject to the terms of
collective bargaining agreements during their term. During 1993, the
Company approved changes in its postretirement health care plans for
retirees and active employees. These changes, which reduced the accumulated
benefit obligation by $120 million and 1993 expense by $18 million, resulted
in an unrecognized net reduction in prior service cost which will be
amortized through 1999.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" for its non-U.S. plans. Accordingly, the
expected cost of postretirement benefits is charged to expense during the
years in which eligible employees render service. The cumulative effect of
the adoption of this standard was a charge of $10 million, or $.20 per
share. (The Company adopted Statement No. 106 for its U.S. plans effective
January 1, 1991.)
The following table reconciles the status of the accrued postretirement
benefits cost liability at October 31, 1994 and 1993, as reflected on the
balance sheet as of December 31, 1994 and 1993:
<PAGE>
-47-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Postemployment and Postretirement Benefits Other Than Pensions
(Continued)
<TABLE>
1994 1993
(In millions of dollars)
<S> <C> <C>
Accumulated Postretirement Benefits Obligation:
Retirees $ (173) $ (182)
Fully eligible active plan participants (24) (32)
Other active plan participants (46) (39)
-------- --------
Funded status (243) (253)
Unrecognized net gain (39) (12)
Unrecognized net reduction in prior
service cost (88) (106)
-------- --------
Accrued postretirement benefits
cost liability (includes current
liabilities of $19 million in 1994
and $25 million in 1993) $ (370) $ (371)
======== ========
</TABLE>
<TABLE>
The net postretirement benefits cost for 1994, 1993 and 1992 included the
following components:
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
Service cost $ 8 $ 7 $ 7
Interest cost on accumulated
postretirement benefits
obligation 19 23 30
Net amortization and deferral (20) (13) -
-------- -------- --------
Net postretirement benefits
cost $ 7 $ 17 $ 37
======== ======== ========
</TABLE>
For measurement purposes, an 11% annual rate of increase in the per capita
cost of covered health care claims was assumed for 1995. The rate was
assumed to decrease to 10.5% for 1996, then decrease gradually to 6% by
2005. The health care cost trend rate assumption has a significant effect
on the amounts reported. To illustrate, increasing the assumed health care
cost trend rate by one percentage point in each year would increase the
accumulated postretirement benefits obligation as of October 31, 1994, by
$13 million and the aggregate of the service and interest cost components of
net postretirement benefits cost for the year then ended by $2 million. The
discount rate used in determining the accumulated postretirement benefits
obligation was 8.5% in 1994, 7.5% in 1993, and 8.25% in 1992.
<PAGE>
-48-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Postemployment and Postretirement Benefits Other Than Pensions
(Continued)
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." This standard requires the Company to recognize the obligation
to provide benefits to former or inactive employees after employment but
before retirement under certain conditions. These benefits include, but are
not limited to, salary continuation, supplemental unemployment benefits,
severance benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation of benefits
such as health care and life insurance coverage. The cumulative effect of
the adoption of this standard was an undiscounted charge of $28 million, or
$.56 per share, net of related income taxes of $18 million. At December 31,
1994, the Company's liability for postemployment benefits totalled $44
million, including current liabilities of $5 million, and is included in
other employee benefits liability in the Company's consolidated balance
sheet. Postemployment benefits expense was $3 million for the year ended
December 31, 1994.
8. Pension Plans
The Company has several defined benefit pension plans covering most
employees. Under the plans, pension benefits are generally based on an
employee's number of years of service. Company contributions to these
pension plans are based on the calculations of independent actuaries using
the projected unit credit method. Plan assets consist primarily of equity
securities with the balance in fixed income investments or insurance
contracts. The unrecognized cost of retroactive amendments and actuarial
gains and losses are amortized over the average future service period of
plan participants expected to receive benefits.
<TABLE>
Pension expense for the Company's defined benefit pension plans includes the
following:
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
Service cost $ 22 $ 23 $ 21
Interest cost on projected
benefit obligation 58 62 59
Actual return on plan assets (13) (124) (51)
Net amortization and deferral (64) 50 (20)
-------- -------- --------
Net pension expense $ 3 $ 11 $ 9
======== ======== ========
/TABLE
<PAGE>
-49-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Pension Plans (Continued)
<TABLE>
The funded status at October 31, 1994 and 1993 is as follows:
1994 1993
(In millions of dollars)
Over Under Over Under
Funded Funded Funded Funded
<S> <C> <C> <C> <C>
Vested benefit obligation $ 310 $ 273 $ 288 $ 305
======= ======= ======= =======
Accumulated benefit obligation $ 341 $ 343 $ 323 $ 370
======= ======= ======= =======
Plan assets at fair value $ 466 $ 306 $ 444 $ 335
Projected benefit obligation 430 352 398 382
------- ------- ------- -------
Plan assets in excess of (less
than) projected benefit
obligation 36 (46) 46 (47)
Unrecognized loss (gain) 8 55 (12) 56
Unrecognized prior service cost (12) (24) (13) (25)
Unrecognized transition amount (39) (13) (45) (14)
Adjustment to minimum liability - (12) - (11)
------- ------- ------- -------
Net pension liability (includes
current liabilities of $8
million in 1994 and $7 million
in 1993 and noncurrent
assets of $38 million in
1994 and $20 million in 1993) $ (7) $ (40) $ (24) $ (41)
======= ======= ======= =======
/TABLE
<PAGE>
-50-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Pension Plans (Continued)
The 1994, 1993 and 1992 primary actuarial assumptions used for pension plans
were:
1994 1993 1992
<S> <C> <C> <C>
Discount rate 8.50% 7.50% 8.25%
Expected long-term rate of
return on plan assets 9.50% 10.00% 10.00%
Rate of compensation
increase 5.10% 4.10% 4.50%
</TABLE>
The Company also sponsors defined contribution plans available to
substantially all U.S. employees. Company contributions for the plans are
based on matching a percentage of employee savings up to a maximum savings
level. The Company's contributions were $10 million in 1994, $9 million in
1993, and $7 million in 1992.
9. Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Statement No.
109 changes the criteria for measuring the provision for income taxes and
recognizing deferred tax assets and liabilities. Deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of corresponding liabilities and assets using
enacted tax rates in effect for the year in which the differences are
expected to reverse. The cumulative effect of the adoption of this standard
was an increase to earnings of $26 million, or $.53 per share.
<PAGE>
-51-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Income Taxes (Continued)
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
Income (loss) before provision
(credit) for income taxes:
U.S. $ 119 $ 163 $ 107
Foreign 13 (16) (4)
-------- -------- --------
Total $ 132 $ 147 $ 103
======== ======== ========
Provision (credit) for income taxes:
Current
U.S. $ (2) $ 24 $ 41
State and local (7) 7 5
Foreign 5 6 8
-------- -------- --------
Total current (4) 37 54
-------- -------- --------
Deferred
U.S. 51 27 (5)
State and local 13 1 (4)
Foreign (2) (4) (12)
-------- -------- --------
Total deferred 62 24 (21)
-------- -------- --------
Adjustment to deferred tax
assets and liabilities for
an increase in the U.S.
federal statutory rate from
34% to 35% - (14) -
-------- -------- --------
Total provision for income taxes $ 58 $ 47 $ 33
======== ======== ========
/TABLE
<PAGE>
-52-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Income Taxes (Continued)
The reconciliation between the U.S. federal statutory rate and the Company's
effective income tax rate is:
1994 1993 1992
<S> <C> <C> <C>
U.S. federal statutory rate 35% 35% 34%
Operating losses of foreign
subsidiaries 7 10 6
Utilization of losses of foreign
subsidiaries (7) (2) -
Enacted federal tax rate change - (10) -
Difference between foreign tax
rates and U.S. statutory rate 1 - (2)
Provision (credit) for taxes on
undistributed earnings of foreign
subsidiaries - (2) (6)
State and local income taxes 3 3 1
Other 5 (2) (1)
----- ----- -----
Effective tax rate 44% 32% 32%
===== ===== =====
</TABLE>
As of December 31, 1994, the Company has not provided for withholding or
U.S. federal income taxes on approximately $124 million of accumulated
undistributed earnings of its foreign subsidiaries as they are considered by
management to be permanently reinvested. If these undistributed earnings
were not considered to be permanently reinvested, approximately $11 million
of deferred income taxes would have been provided.
During 1994, the Company utilized tax net operating loss carryforwards for
certain of its foreign subsidiaries of approximately $9 million. At
December 31, 1994, the Company had tax net operating loss carryforwards for
certain of its foreign subsidiaries of approximately $27 million, certain of
which expire through 1999.
For the year ended December 31, 1992, the Company utilized book net
operating loss carryforwards which resulted in an extraordinary credit of
approximately $4 million, or $.08 per share.
<PAGE>
-53-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Income Taxes (Continued)
The cumulative temporary differences giving rise to the deferred tax assets
and liabilities at December 31, 1994 and 1993 are as follows:
<TABLE>
1994 1993
Deferred Deferred
Deferred Tax Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
(In millions of dollars)
<S> <C> <C> <C> <C>
Asbestos litigation claims $ 306 $ - $ 363 $ -
Other employee benefits 171 - 148 -
Depreciation - 138 - 75
Furnace rebuild reserves - - 45 -
Warranty and product
liability reserves 29 - 25 -
Operating loss carryforwards 27 - 35 -
State and local taxes - 20 - 23
Other 122 6 90 4
-------- -------- -------- --------
Subtotal 655 164 706 102
-------- -------- -------- --------
Valuation allowances (27) - (40) -
-------- -------- -------- --------
Total deferred taxes $ 628 $ 164 $ 666 $ 102
======== ======== ======== ========
</TABLE>
Management fully expects to realize its net deferred tax assets through
income from future operations.
<TABLE>
During 1992, deferred income taxes were provided for timing differences in
the recognition of certain items for income tax and financial statement
purposes, in accordance with Accounting Principles Board Opinion No. 11.
These items consisted of the following:
1992
(In millions of dollars)
<S> <C>
Asbestos litigation claims $ 2
Depreciation (9)
Furnace rebuild reserves (3)
Interest expense (1)
Undistributed earnings of
foreign subsidiaries (8)
State and local taxes 2
Warranty and product liability
reserves 1
Other postretirement benefits (6)
Other 1
--------
Deferred tax credit $ (21)
========
/TABLE
<PAGE>
-54-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Depreciation of Plant and Equipment
During 1993, the Company completed a review of its fixed asset lives. The
Company determined that as a result of actions taken to increase its
preventative maintenance and programs initiated with its equipment suppliers
to increase the quality of their products, actual lives for certain asset
categories were generally longer than the useful lives for depreciation
purposes. Therefore, effective April 1, 1993, the Company extended the
estimated useful lives of certain categories of plant and equipment. The
effect of this change in estimate reduced depreciation expense for the year
ended December 31, 1993 by $14 million and increased income before
cumulative effect of accounting change by $8 million, or $.16 per share.
11. Science and Technology Expenses
Science and technology expenses include research and development costs of
$64 million in 1994, $61 million in 1993, and $55 million in 1992. In
addition to research and development costs, science and technology expenses
include continuing commercial activities such as engineering and product
modifications for special applications and testing.
<TABLE>
12. Inventories
Inventories are summarized as follows:
1994 1993
(In millions of dollars)
<S> <C> <C>
Finished goods $ 192 $ 195
Materials and supplies 118 117
-------- --------
310 312
Less: Reduction to LIFO basis (87) (91)
-------- --------
$ 223 $ 221
======== ========
/TABLE
<PAGE>
-55-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. Inventories (Continued)
Approximately $88 million and $87 million of net inventories were valued
using the LIFO method at December 31, 1994 and 1993, respectively.
During 1994, 1993, and 1992, certain inventories were reduced, resulting in
the liquidation of LIFO inventory layers carried at lower costs in prior
years as compared with the current cost of inventory. The effect of these
inventory reductions was to reduce 1994, 1993, and 1992 cost of sales by $3
million, $1 million, and $4 million, respectively.
13. Investments in Affiliates
At December 31, 1994 and 1993, the Company's affiliates, which generally are
engaged in the manufacture of fibrous glass and related products for the
insulation, construction, reinforcements, and textile markets, include:
<TABLE>
Percent Ownership
1994 1993
<S> <C> <C>
COMPOSITES:
Alpha/Owens-Corning, L.L.C. (USA) 50% -
Knytex Company, L.L.C. (USA) 50% 50%
Vitro-Fibras, S.A. (Mexico) 40% 40%
GLOBAL PIPE:
Amiantit Fiberglass Industries, Ltd.
(Saudi Arabia) 30% 30%
Owens-Corning Eternit Rohre GmbH (Germany) 50% 50%
Owens-Corning Pipe Botswana (Pty.), Ltd.
(Botswana) 49% 49%
Owens-Corning Tubs S.A. (Spain) 50% -
BUILDING PRODUCTS - EUROPE:
Arabian Fiberglass Insulation Company, Ltd.
(Saudi Arabia) 49% 49%
ASIA PACIFIC:
Asahi Fiber Glass Company, Ltd. (Japan) 28% 28%
Lucky Owens-Corning Corp. (Korea) 30% 30%
Siam Fiberglass Co., Ltd. (Thailand) 20% 20%
BUILDING PRODUCTS - NORTH AMERICA:
CAE Fiberglass, Ltd. (Canada) - 25%
/TABLE
<PAGE>
-56-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Investments in Affiliates (Continued)
The following table provides summarized financial information on a combined
100% basis for the Company's affiliates accounted for under the equity
method:
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
At December 31:
Current assets $ 328 $ 214 $ 198
Noncurrent assets 513 387 320
Current liabilities 331 240 233
Noncurrent liabilities 250 147 130
For the year:
Net sales 630 486 455
Gross margin 96 81 82
Net income 7 16 16
</TABLE>
The Company's equity in undistributed net income of affiliates was $32
million at December 31, 1994.
<TABLE>
14. Accounts Payable and Accrued Liabilities
1994 1993
(In millions of dollars)
<S> <C> <C>
Accounts payable $ 298 $ 244
Payroll and vacation pay 91 74
Payroll, property, and miscellaneous
taxes 30 33
Other employee benefits liability
(Note 7) 24 25
1994 restructure reserve (Note 5) 34 -
Other 121 119
-------- --------
$ 598 $ 495
======== ========
/TABLE
<PAGE>
-57-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. Consolidated Statement of Cash Flows
Cash payments, net of refunds, for income taxes and cost of borrowed funds
are summarized as follows:
<TABLE>
1994 1993 1992
(In millions of dollars)
<S> <C> <C> <C>
Income taxes $ (4) $ 43 $ 49
Cost of borrowed funds 97 95 125
</TABLE>
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
See Note 4 for supplemental disclosure of Non-cash Investing and Financing
Activities.
16. Leases
The Company leases certain manufacturing equipment and office and warehouse
facilities under operating leases, some of which include cost escalation
clauses, expiring on various dates through 2014. Total rental expense
charged to operations was $54 million in 1994, $42 million in 1993, and $44
million in 1992. At December 31, 1994, the minimum future rental
commitments under noncancellable leases payable over the remaining lives of
the leases are:
<TABLE>
Minimum Future
Period Rental Commitments
(In millions of dollars)
<S> <C>
1995 $ 38
1996 32
1997 20
1998 11
1999 6
2000 through 2014 27
-------
$ 134
=======
</TABLE>
The minimum future rental commitments reflected in the above table include
approximately $4 million per year for the lease of the Company's corporate
headquarters facility in Toledo, Ohio through 1996. The Company is
currently negotiating the lease of a new headquarters facility which would
result in an operating lease beginning in late 1996, which is not reflected
above. This operating lease would result in future rental commitments of
approximately $12 million per year through 2006, $8 million per year through
2015, and, upon renewal, $2 million per year through 2020.
<PAGE>
-58-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
17. Stock Compensation Plans
The Company's Stock Performance Incentive Plan (SPIP), approved by
shareholders in 1992, permits up to two percent of common shares outstanding
at the beginning of each calendar year to be awarded as stock options and
restricted stock (with 25% of this amount as the maximum permitted number of
restricted stock awards). The Company may carry forward unused shares from
prior years and may increase the shares available for awards in any calendar
year through an advance of up to 25% of the subsequent year's allocation
(determined by using 25% of the current year's allocation). These shares
are also subject to the 25% limit for restricted stock awards. During 1994,
the total number of shares available for stock awards was 953,450 shares,
894,000 of which were awarded as stock options and 59,450 as restricted
stock, which includes an advance of 93,478 shares from the 1995 allocation.
598,678 shares are also available to be awarded under a prior plan; however,
the Company does not expect any awards to be made under that plan.
Additionally, the Company has a plan to award stock options and deferred
stock awards to nonemployee directors, of which 109,500 shares were
available for this purpose as of December 31, 1994.
During 1993, the total number of shares available for stock awards was
868,215 shares, 813,900 of which were awarded as stock options and 54,315 as
restricted stock, which included an advance of 3,149 shares from the 1994
allocation.
<TABLE>
Stock Options
Activity during 1994 and 1993 in shares under option:
1994 1993
Number Price Number Price
of Range per of Range per
Shares Share Shares Share
<S> <C> <C> <C> <C>
Beginning of
year 2,560,826 $17.86 - 47.00 2,171,251 $12.13 - 33.63
Options granted 902,500 28.50 - 34.88 845,400 39.50 - 47.00
Options exercised (137,059) 18.75 - 30.63 (413,269) 12.13 - 30.63
Options cancelled (35,813) 26.75 - 40.50 (42,556) 18.75 - 40.50
--------- -------------- --------- --------------
End of year 3,290,454 $17.86 - 47.00 2,560,826 $17.86 - 47.00
========= ============== ========= ==============
Exercisable 1,619,119 $17.86 - 47.00 987,089 $17.86 - 40.50
========= ============== ========= ==============
</TABLE>
Option prices represent the market price at date of grant. Shares issued
under options are recorded in the common stock accounts at the option price.
Options granted vest ratably through 1997.
<PAGE>
-59-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
17. Stock Compensation Plans (Continued)
Deferred Stock Awards
At December 31, 1994, the Company had 16,340 shares of deferred stock
outstanding, all of which were vested. During 1994, 2,000 shares of
deferred stock were granted, and 16,893 shares were issued.
Compensation expense is measured based on the market price of the stock at
date of grant and is recognized on a straight-line basis over the vesting
period.
Restricted Stock Awards
At December 31, 1994, the Company had 367,282 shares of restricted stock
outstanding. Stock restrictions lapse, subject to alternate vesting plans
for approved early retirement and involuntary termination, over various
periods ending in 2004.
18. Share Purchase Rights
Each outstanding share of the Company's common stock includes a preferred
share purchase right. Each right entitles the holder to buy from the
Company one one-hundredth of a share of Series A Participating Preferred
Stock of the Company at a price of $50. The Board of Directors has
designated 750,000 shares of the Company's authorized preferred stock as
Series A Participating Preferred Stock. There are currently no preferred
shares outstanding.
Rights become exercisable and detach from the common stock ten days after a
person or group acquires, or announces a tender offer for, 20% or more of
the Company's outstanding shares of common stock. The rights expire on
December 30, 1996, unless redeemed earlier by the Company. The rights are
redeemable by the Company at one cent each at any time prior to ten days
following public announcement or notice to the Company that an acquiring
person or group has purchased 20% or more of the Company's outstanding
common stock. If the Company is acquired in a merger or other business
combination at any time after the rights become exercisable, each right
would entitle its holder to buy shares of the acquiring or surviving company
having a market value of twice the exercise price of the right.
<PAGE>
-60-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Derivative Financial Instruments and Fair Value of Financial
Instruments
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to help meet financing needs and to reduce
exposure to fluctuating foreign currency exchange rates and interest rates.
The Company is exposed to credit loss in the event of nonperformance by the
other parties to the financial instruments described below. However, the
Company does not anticipate nonperformance by the other parties. The
Company does not engage in trading activities with these financial
instruments and does not generally require collateral or other security to
support these financial instruments. The notional amounts of derivatives
summarized in the foreign exchange risk and interest rate risk management
section below do not represent the amounts exchanged by the parties and,
thus, are not a measure of the exposure of the Company through its use of
derivatives. The amounts exchanged are calculated on the basis of the
notional amounts and the other terms of the derivatives, which relate to
interest rates, exchange rates, securities prices, or financial or other
indexes.
Foreign Exchange Risk and Interest Rate Risk Management
The Company enters into various types of contracts to manage its foreign
exchange risk and interest rate risk, as indicated in the following table.
<TABLE>
Notional Amount Notional Amount
December 31, 1994 December 31, 1993
(In millions of dollars)
<S> <C> <C>
Forward currency exchange
contracts $ 194 $ 200
Options purchased 22 -
Currency swaps 190 50
Interest rate swaps 150 150
The Company enters into forward currency exchange contracts to manage its
exposure against foreign currency fluctuations on certain assets and
liabilities denominated in foreign currencies. As of December 31, 1994, the
Company has 29 forward currency exchange contracts maturing in 1995 which
exchange 4.4 billion Belgian francs, 23 million U.S. dollars, 38 million
British pounds, 22 million Deutsche marks, 19 billion Italian lira, and
various other currencies. As of December 31, 1993, the Company had 40
forward currency exchange contracts which matured in 1994 and exchanged 4.9
billion Belgian francs, 52 million U.S. dollars, 73 million French francs,
19 million British pounds, 30 million Dutch guilders, and various other
currencies. Gains and losses on these foreign currency hedges are included
in the carrying amount of the related assets and liabilities. At December
31, 1994 and 1993, deferred gains and losses on these foreign currency
hedges are not material to the consolidated financial statements.
<PAGE>
-61-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Derivative Financial Instruments and Fair Value of Financial
Instruments (Continued)
The Company has entered into forward currency exchange contracts to reduce
its exposure to currency fluctuations on the anticipated 1995 earnings of
certain European subsidiaries. As of December 31, 1994, the Company has 9
forward currency exchange contracts which exchange 412 million Belgian
francs and 8 million British pounds against approximately 25 million U.S.
dollars. Gains and losses on these foreign currency hedges are included in
income in the year in which the exchange rates change. At December 31,
1994, gains on these forward currency exchange contracts are not material to
the consolidated financial statements.
The Company enters into forward currency exchange contracts to hedge its
equity investments in certain foreign subsidiaries and to manage its
exposure against fluctuations in foreign currency rates. As of December 31,
1994, the Company has two forward currency exchange contracts maturing in
1995 which exchange 1.0 billion Belgian francs against approximately 32
million U.S. dollars to hedge its equity investments in certain of its
European subsidiaries. As of December 31, 1993, the Company had three
forward currency exchange contracts which matured in 1994 and exchanged 150
million Swedish krona and 1.6 billion Belgian francs against approximately
64 million U.S. dollars to hedge its equity investments in certain of its
European subsidiaries. At December 31, 1994, losses of $3 million on hedges
of net investments in foreign subsidiaries are included in stockholders'
equity.
The Company enters into option contracts to hedge anticipated transactions
with certain of its foreign subsidiaries. As of December 31, 1994, the
Company has six currency option contracts maturing in 1995 which hedge the
1995 royalty payments of the Company's European subsidiaries. The six
currency option contracts exchange 496 million Belgian francs and 4 million
British pounds against approximately 22 million U.S. dollars. Gains on the
Company's hedges of these anticipated transactions are included as deferred
revenue in accounts payable and accrued liabilities. At December 31, 1994,
deferred gains on option contracts are not material to the consolidated
financial statements.
As of December 31, 1994, the Company has entered into two currency swap
transactions to manage its exposure against foreign currency fluctuations on
the principal amount of its guaranteed Eurobonds (Note 2). These currency
swaps mature in 2004 and exchange 140 million U.S. dollars against
approximately 89 million British pounds. Gains and losses on the currency
swaps are included as deferred revenue in other liabilities. At December
31, 1994, gains on the currency swaps are not material to the consolidated
financial statements.
The Company has a cross-currency interest rate conversion agreement from
Deutsche marks into U.S. dollars to hedge the interest and principal
payments of its 7.25% Deutsche mark bonds, due in 2000. The agreement
establishes a fixed interest rate of 11.1%.
<PAGE>
-62-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Derivative Financial Instruments and Fair Value of Financial
Instruments (Continued)
The Company enters into interest rate swaps to manage its interest rate
risk. The Company has entered into four interest rate swap agreements to
reduce the interest rates on its fixed rate borrowings. These agreements
effectively convert an aggregate principal amount of $150 million of fixed
rate long-term debt into variable rate borrowings with interest rates
ranging from 5.81% to 7.96% in 1994 and 3.5% to 5.65% in 1993. The
agreements mature in 1998. The differential interest to be paid or received
is accrued as interest rates change and is recognized over the life of the
agreements.
Other Financial Instruments with Off-Balance-Sheet Risk
As of December 31, 1994 and 1993, the Company is contingently liable for
guarantees of indebtedness owed by certain unconsolidated affiliates of $27
million. The Company is of the opinion that its unconsolidated affiliates
will be able to perform under their respective payment obligations in
connection with such guaranteed indebtedness and that no payments will be
required and no losses will be incurred by the Company under such
guarantees.
Concentrations of Credit Risk
As of December 31, 1994 and 1993, the Company has no significant group
concentrations of credit risk.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each category of financial instruments.
Cash and short-term financial instruments
The carrying amount approximates fair value due to the short maturity
of these instruments.
Long-term notes receivable
The fair value has been estimated using the expected future cash
flows discounted at market interest rates.
Long-term debt
The fair value of the Company's long-term debt has been estimated
based on quoted market prices for the same or similar issues, or on
the current rates offered to the Company for debt of the same
remaining maturities.
<PAGE>
-63-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Derivative Financial Instruments and Fair Value of Financial
Instruments (Continued)
Foreign currency swaps and interest rate swaps
The fair values of foreign currency swaps and interest rate swaps
have been estimated by traded market values or by obtaining quotes
from brokers.
Forward currency exchange contracts,
option contracts, and financial guarantees
The fair values of forward currency exchange contracts, option
contracts, and financial guarantees are based on fees currently
charged for similar agreements or on the estimated cost to terminate
these agreements or otherwise settle the obligations with the counter
parties at the reporting date.
The estimated fair values of the Company's financial instruments as of
December 31, 1994 and 1993, which have fair values different than their
carrying amounts, are as follows:
</TABLE>
<TABLE>
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
(In millions of dollars)
<S> <C> <C> <C> <C>
Assets:
Long-term notes receivable $ 20 $ 18 $ 7 $ 5
Liabilities:
Long-term debt 1,037 1,076 898 1,063
Off-Balance-Sheet Financial
Instruments - Unrealized
gains:
Foreign currency swaps - 26 - 17
Interest rate swaps - 4 - 22
Option contracts - 1 - -<PAGE>
-64-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Derivative Financial Instruments and Fair Value of Financial
Instruments (Continued)
As of December 31, 1994 and 1993, the Company is contingently liable for
guarantees of indebtedness owed by certain unconsolidated affiliates. There
is no market for these guarantees and they were issued without explicit
cost. Therefore, it is not practicable to establish their fair value.
As of December 31, 1994 and 1993, the Company has also entered into certain
forward currency exchange contracts, the fair values of which are not
material to the consolidated financial statements.
20. Accounts Receivable Securitization
In 1994, the Company sold certain accounts receivable of its Building
Products North American operations to a 100% owned subsidiary, Owens-Corning
Funding Corporation (OC Funding). In December 1994, OC Funding entered into
a three-year agreement whereby it can sell, on a revolving basis, an
undivided percentage ownership interest in a designated pool of accounts
receivable up to a maximum of $100 million. As of December 31, 1994, $50
million has been sold under this agreement and the sale has been reflected
as a reduction of accounts receivable in the Company's consolidated balance
sheet. The discount recorded on the sale of receivables is recorded as an
increase in other expenses on the Company's consolidated statement of
income.
The Company maintains an allowance for doubtful accounts based upon the
expected collectibility of all consolidated trade accounts receivable,
including receivables sold by OC Funding.
21. Contingent Liabilities
ASBESTOS LIABILITIES
The Company is a co-defendant with other former manufacturers, distributors
and installers of products containing asbestos and with miners and suppliers
of asbestos fibers (collectively, the Producers) in personal injury and
property damage litigation. The personal injury claimants generally allege
injuries to their health caused by inhalation of asbestos fibers from the
Company's products. Most of the claimants seek punitive damages as well as
compensatory damages. The property damage claims generally allege property
damage to school, public and commercial buildings resulting from the
presence of products containing asbestos. Virtually all of the asbestos-
related lawsuits against the Company arise out of its manufacture,
distribution, sale or installation of an asbestos-containing calcium
silicate, high temperature insulation product, the manufacture of which was
discontinued in 1972.
<PAGE>
-65-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
Status
As of December 31, 1994, approximately 107,200 asbestos personal injury
claims were pending against the Company, 27,500 of which were received in
1994. The Company received approximately 31,700 such claims in 1993, and
26,600 in 1992. Through December 31, 1994, the Company had resolved (by
settlement or otherwise) approximately 139,000 asbestos personal injury
claims, 18,300 of which were resolved in 1994. During 1992, 1993 and 1994,
the Company resolved approximately 66,400 such claims and incurred total
indemnity payments of $639 million (an average of about $10,000 per case).
The Company's indemnity payments have varied considerably over time and from
case to case, and are affected by a multitude of factors. These include the
type and severity of the disease sustained by the claimant (i.e.,
mesothelioma, lung cancer, other types of cancer, asbestosis or pleural
changes); the occupation of the claimant; the extent of the claimant's
exposure to asbestos-containing products manufactured, sold or installed by
the Company; the extent of the claimant's exposure to asbestos-containing
products manufactured, sold or installed by other Producers; the number and
financial resources of other Producer defendants; the jurisdiction of suit;
the presence or absence of other possible causes of the claimant's illness;
the availability or not of legal defenses such as the statute of limitations
or state of the art; whether the claim was resolved on an individual basis
or as part of a group settlement; and whether the claim proceeded to an
adverse verdict or judgment.
Certain of the Company's principal co-defendants, the 20 members of the
Center for Claims Resolution, have entered into a proposed "global"
settlement which would require future claimants to satisfy certain medical
criteria indicative of significant asbestos-related impairment as a pre-
condition to their eligibility for settlement payments. The Company is
using similar criteria in the implementation of its own settlement and
litigation strategy and is also seeking to require more careful proof than
in the past that claimants had significant exposure to the Company's
asbestos-containing product or operations. The Company believes that this
strategy will reduce the overall cost of asbestos personal injury claims in
the long run by channeling indemnity payments to claimants who can establish
significant asbestos-related impairment and exposure to the Company's
asbestos-containing product or operations and by substantially reducing
indemnity payments to individuals who are unimpaired or who did not have
significant such exposure. The Company's strategy has resulted in an
increased level of trial activity and an increase in the number and amount
of compensatory and punitive damage verdicts and judgments against the
Company. This strategy may have the effect of increasing average per-case
indemnity costs for claims resolved with payment, while also increasing the
number of claims dismissed without payment.
<PAGE>
-66-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
Insurance
As of December 31, 1994, the Company had approximately $341 million in
unexhausted products hazard coverage (net of deductibles and self-insured
retentions and excluding coverage issued by insolvent carriers) under its
liability insurance policies applicable to asbestos personal injury claims.
Of this amount, $144 million will not be available until the years 1996
through 2000 under an agreement with the carrier confirming such insurance.
An additional $24 million (out of the $341 million coverage) is presently
the subject of coverage litigation or alternate dispute resolution
procedures. All of the Company's liability insurance policies cover
indemnity payments and defense fees and expenses subject to applicable
policy limits.
In addition, the Company has substantial unexhausted non-products coverage
under such liability insurance policies; an as yet undetermined amount of
such non-products coverage is expected to be available for payment of
asbestos personal injury claims and associated defense fees and expenses.
The Company has commenced arbitration with its primary level insurance
carrier seeking to confirm the availability of certain of its non-products
coverage for payment of certain asbestos personal injury liabilities,
involving the activities of the Company's former insulation contracting
business. The Company is seeking prompt rulings on the issues presented.
For purposes of calculating the amount of insurance applicable to asbestos
liabilities, the Company has estimated its recoveries in respect of non-
products coverage for claims received through 1999 at approximately $310
million, which represents the Company's best estimate of such recoveries for
such claims. The Company cautions, however, that this coverage is
unconfirmed and that the actual amounts recovered by the Company could,
depending upon the outcome of the arbitration, be much higher or much lower.
<PAGE>
-67-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
Reserve
The Company's estimated total liabilities in respect of indemnity and
defense costs associated with pending and unasserted asbestos personal
injury claims that may be received through the year 1999 (the
"Liabilities"), and its estimated insurance recoveries in respect of such
claims (the "Insurance"), are reported separately as follows:
</TABLE>
<TABLE>
Asbestos Litigation Claims
December 31, December 31,
1994 1993
(In millions of dollars)
<S> <C> <C>
Reserve for asbestos litigation claims
Current $ 300 $ 275
Other 1,145 1,385
------- -------
Total Reserve 1,445 1,660
Insurance for asbestos litigation claims
Current 125 125
Other 556 643
------- -------
Total Insurance 681 768
------- -------
Net Asbestos Liability $ 764 $ 892
======= =======
</TABLE>
Case filing rates continued at historically high levels in 1994
(approximately 27,500 new claims) following receipt of 31,700 claims in 1993
and 26,600 claims in 1992. Many of these new claims appear to be the
product of mass screening programs and not to involve significant asbestos-
related impairment. The large number of recent filings and the uncertain
value of these claims have added to the uncertainties involved in estimating
the Company's asbestos Liabilities.
<PAGE>
-68-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
The Company cautions that such factors as the number of future asbestos
personal injury claims received by it, the rate of receipt of such claims,
and the indemnity and defense costs associated with asbestos personal injury
claims, as well as the prospects for confirming additional, applicable
insurance coverage beyond the $341 million referenced above, are influenced
by numerous variables that are difficult to predict, and that estimates,
such as the Company's, which attempt to take account of such variables, are
subject to considerable uncertainty. Depending upon the outcome of the
various uncertainties described above, particularly as they relate to
unimpaired claims, it may be necessary at some point in the future for the
Company to make additional provision for the uninsured costs of asbestos
personal injury claims received through the year 1999 (although no such
amounts are reasonably estimable at this time). The Company remains
confident that its estimate of Liabilities and Insurance will be sufficient
to provide for the costs of all such claims that involve malignancies or
significant asbestos-related functional impairment. The Company has
reviewed and will continue to review the adequacy of its estimate of
Liabilities and Insurance on a periodic basis and make such adjustments as
may be appropriate.
The Company cannot estimate and is not providing for the cost of unasserted
claims which may be received by the Company after the year 1999 because
management is unable to predict the number of claims to be received after
1999, the severity of disease which may be involved and other factors which
would affect the cost of such claims.
Cash Expenditures
The Company's anticipated cash expenditures for uninsured asbestos-related
costs of claims received through 1999 are expected to approximate $764
million, the Company's Liabilities, net of Insurance. Cash payments will
vary annually depending upon a number of factors, including the pace of the
Company's resolution of claims and the timing of payment of its Insurance.
Management Opinion
Although any opinion is necessarily judgmental and must be based on
information now known to the Company, in the opinion of management, the
additional uninsured and unreserved costs which may arise out of pending
personal injury and property damage asbestos claims and additional similar
asbestos claims filed in the future will not have a materially adverse
effect on the Company's financial position. While such additional uninsured
and unreserved costs incurred in and after the year 2000 may be substantial
over time, management believes that any such additional costs will not
impair the ability of the Company to meet its obligations, to reinvest in
its businesses or to take advantage of attractive opportunities for growth.
<PAGE>
-69-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
NON-ASBESTOS LIABILITIES
In October 1991, the Company and certain of its officers and directors were
named as defendants in a lawsuit captioned Gaetana Lavalle v. Owens-Corning
Fiberglas Corporation, et al. in the United States District Court for the
Northern District of Ohio. Lavalle purports to be a securities class action
on behalf of all purchasers of the Company's common stock during the period
November 1, 1988 through October 18, 1991. The complaint alleges that the
Company's disclosures during the alleged class period contained material
misstatements and omissions concerning its contingent liabilities for
asbestos claims. The complaint seeks an unspecified amount of damages
(including punitive damages) on the theory that such alleged misstatements
and omissions artificially inflated the price of the Company's stock.
Various other lawsuits and claims arising in the normal course of business
are pending against the Company, some of which allege substantial damages.
Management believes that the outcome of these lawsuits and claims will not
have a materially adverse effect on the Company's financial position or
results of operations.
<PAGE>
-70-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Quarterly Financial Information (Unaudited)
Quarter
First Second Third Fourth
(In millions of dollars,
except share data)
1994
Net sales $ 677 $ 852 $ 936 $ 886
Cost of sales 523 644 705 664
------- ------- ------- -------
Gross margin $ 154 $ 208 $ 231 $ 222
======= ======= ======= =======
Income (loss) before cumulative
effect of accounting changes $ (67) $ 45 $ 53 $ 43
Cumulative effect of accounting
changes (Notes 6 and 7) 85 - - -
------- ------- ------- -------
Net income $ 18 $ 45 $ 53 $ 43
======= ======= ======= =======
Net income per share:
Primary
Income (loss) before cumulative
effect of accounting changes $ (1.52) $ 1.03 $ 1.19 $ .98
Cumulative effect of accounting
changes 1.93 - - -
------- ------- ------- -------
Net income per share $ .41 $ 1.03 $ 1.19 $ .98
======= ======= ======= =======
Fully diluted
Income (loss) before cumulative
effect of accounting changes $ (1.30) $ .95 $ 1.09 $ .91
Cumulative effect of accounting
changes 1.70 - - -
------- ------- ------- -------
Net income per share $ .40 $ .95 $ 1.09 $ .91
======= ======= ======= =======
<PAGE>
-71-
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Quarterly Financial Information (Unaudited) (Continued)
Quarter
First Second Third Fourth
(In millions of dollars,
except share data)
1993
Net sales $ 651 $ 754 $ 785 $ 754
Cost of sales 512 578 606 570
------- ------- ------- -------
Gross margin $ 139 $ 176 $ 179 $ 184
======= ======= ======= =======
Income (loss) before cumulative
effect of accounting change $ (9) $ 33 $ 48 $ 33
Cumulative effect of accounting
change for income taxes
(Note 9) 26 - - -
------- ------- ------- -------
Net income $ 17 $ 33 $ 48 $ 33
======= ======= ======= =======
Net income per share:
Primary
Income (loss) before cumulative
effect of accounting change $ (.20) $ .76 $ 1.09 $ .75
Cumulative effect of accounting
change for income taxes .60 - - -
------- ------- ------- -------
Net income per share $ .40 $ .76 $ 1.09 $ .75
======= ======= ======= =======
Fully diluted
Income (loss) before cumulative
effect of accounting change $ (.13) $ .71 $ 1.01 $ .70
Cumulative effect of accounting
change for income taxes .53 - - -
------- ------- ------- -------
Net income per share $ .40 $ .71 $ 1.01 $ .70
======= ======= ======= =======
Net income per share and primary and fully diluted weighted average shares
are computed independently for each of the quarters presented. Therefore,
the sum of the quarterly net income per share may not equal the per share
total for the year.
<PAGE>
-72-
INDEX TO FINANCIAL STATEMENT SCHEDULES
Number Description Page
II Valuation and Qualifying Accounts and Reserves -
for the years ended December 31, 1994, 1993 and 1992. . . . .73
<PAGE>
-73-
<TABLE>
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AS OF DECEMBER 31, 1994, 1993 AND 1992
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Classification of Period Expenses Accounts Deductions of Period
(In millions of dollars)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1994:
Allowance deducted from
asset to which it
applies -
Doubtful Accounts $ 16 $ 5 $ - $ 5(A) $ 16
Shown separately -
Rebuilding furnaces 124 - - 124(C) -
FOR THE YEAR ENDED DECEMBER 31, 1993:
Allowance deducted from
asset to which it
applies -
Doubtful Accounts $ 20 $ 1 $ - $ 5(A) $ 16
Shown separately -
Rebuilding furnaces 124 17 - 17(B) 124
FOR THE YEAR ENDED DECEMBER 31, 1992:
Allowance deducted from
asset to which it
applies -
Doubtful Accounts $ 18 $ 11 $ - $ 9(A) $ 20
Shown separately -
Rebuilding furnaces 113 27 - 16(B) 124
Notes:
(A) Uncollectible accounts written off, net of recoveries.
(B) Expenditures for purposes for which reserve was created.
(C) Effective January 1, 1994, the Company adopted the capital method for
rebuilding furnaces. See Note 6 to the Consolidated Financial
Statements.
/TABLE
<PAGE>
-74-
EXHIBIT INDEX
Exhibit
Number Document Description
(3) Articles of Incorporation and By-Laws.
Certificate of Incorporation of Owens-Corning Fiberglas
Corporation, as amended (incorporated herein by reference
to Exhibit (3) to the Company's annual report on Form 10-K
for 1986).
By-Laws of Owens-Corning Fiberglas Corporation, as amended
(incorporated herein by reference to Exhibit (19) to the
Company's quarterly report on Form 10-Q for the quarter
ended March 31, 1988).
(4) Instruments Defining the Rights of Security Holders,
Including Indentures.
Credit Agreement, dated as of November 2, 1993, among
Owens-Corning Fiberglas Corporation, the Banks listed on
Annex A thereto, and Credit Suisse, as Agent for the Banks
(incorporated herein by reference to Exhibit (4) to the
Company's quarterly report on Form 10-Q for the quarter
ended September 30, 1993), as amended by Amendment No. 1
thereto (incorporated herein by reference to Exhibit (10)
to the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1994).
The Company agrees to furnish to the Securities and
Exchange Commission, upon request, copies of all
instruments defining the rights of holders of long-term
debt of the Company where the total amount of securities
authorized under each issue does not exceed ten percent of
the Company's total assets.
(10) Material Contracts.
Credit Agreement, dated as of November 2, 1993, among
Owens-Corning Fiberglas Corporation, the Banks listed on
Annex A thereto, and Credit Suisse, as Agent for the Banks
(incorporated herein by reference to Exhibit (4) to the
Company's quarterly report on Form 10-Q for the quarter
ended September 30, 1993), as amended by Amendment No. 1
thereto (incorporated herein by reference to Exhibit (10)
to the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1994).
Rights Agreement, dated as of December 18, 1986, between
Owens-Corning Fiberglas Corporation and Manufacturers
Hanover Trust Company, as Rights Agent, including, as
Exhibit B of such Rights Agreement, the form of Right
Certificate (incorporated herein by reference to Exhibits
1 and 2 to the Company's Registration Statement on Form 8-
A, dated December 23, 1986).
<PAGE>
-75-
EXHIBIT INDEX
Exhibit
Number Document Description
* 1995 Corporate Incentive Plan - General Terms (filed
herewith).
* Agreement, dated as of January 1, 1995, with William
W. Colville (filed herewith).
* Agreement, dated June 16, 1993, with David W.
Devonshire (filed herewith).
* Owens-Corning Fiberglas Corporation Director's
Charitable Award Program (incorporated herein by
reference to Exhibit (10) to the Company's quarterly
report on Form 10-Q for the quarter ended September
30, 1993).
* Owens-Corning Fiberglas Corporation Executive
Supplemental Benefit Plan, as amended (incorporated
herein by reference to Exhibit (10) to the Company's
quarterly report on Form 10-Q for the quarter ended
March 31, 1993).
* Employment Agreement, dated as of December 15, 1991,
with Glen H. Hiner (incorporated herein by reference
to Exhibit (10) to the Company's annual report on
Form 10-K for 1991), as amended by First Amending
Agreement made as of April 1, 1992 (incorporated
herein by reference to Exhibit (19) to the Company's
quarterly report on Form 10-Q for the quarter ended
June 30, 1992).
* Owens-Corning Fiberglas Corporation Stock Performance
Incentive Plan (incorporated herein by reference to
Exhibit (19) to the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1992).
* Owens-Corning Fiberglas Corporation 1987 Stock Plan
for Directors, as amended (incorporated herein by
reference to Exhibit (19) to the Company's quarterly
report on Form 10-Q for the quarter ended March 31,
1992).
* Form of Key Management Severance Benefits Agreement
(incorporated herein by reference to Exhibit (10) to
the Company's annual report on Form 10-K for 1991).
* Agreement, dated September 27, 1990, with William W.
Boeschenstein (incorporated herein by reference to
Exhibit (10) to the Company's annual report on Form
10-K for 1990).
<PAGE>
-76-
EXHIBIT INDEX
Exhibit
Number Document Description
* Owens-Corning Fiberglas Corporation 1986 Equity
Partnership Plan, as amended (incorporated herein by
reference to Exhibit (19) to the Company's quarterly
report on Form 10-Q for the quarter ended March 31,
1988), as amended by Amendment 1 thereto
(incorporated herein by reference to Exhibit (19) to
the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1989), by Amendment 2 thereto
(incorporated herein by reference to Exhibit (10) to
the Company's annual report on Form 10-K for 1989)
and by Amendment 3 thereto (incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K for 1990).
The following documents are incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K for 1989:
* - Pension Agreement, dated April 16, 1984, with
William W. Colville.
* - Form of Directors' Indemnification Agreement.
The following documents are incorporated herein by
reference to Exhibit (10) to the Company's annual report
on Form 10-K for 1987:
* - Owens-Corning Fiberglas Corporation Officers
Deferred Compensation Plan.
* - Owens-Corning Fiberglas Corporation Deferred
Compensation Plan for Directors, as amended.
(11) Statement re Computation of Per Share Earnings (filed
herewith).
(21) Subsidiaries of Owens-Corning Fiberglas Corporation (filed
herewith).
(23) Consent of Arthur Andersen LLP (filed herewith).
(27) Financial Data Schedule (filed herewith).
* Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
Exhibit (10)
OWENS-CORNING
1995 CORPORATE INCENTIVE PLAN
GENERAL TERMS - OFFICERS
I. PURPOSE
The Plan's purpose is to provide an opportunity for eligible employees
to earn incentive compensation in addition to their base salary as a
result of attainment of Company Performance Objectives and as a result
of their Business Unit contribution. Participation in the Plan
provides the opportunity, not the certainty, of receiving an incentive
compensation award. If a Business Unit earns an incentive fund,
individual payouts are based on levels of contribution, as determined
by management.
II. PARTICIPATION IN THE PLAN
A. Participants are selected based upon criteria established from
time to time upon the recommendation of Business Unit
Management.
B. Participants will be advised of their incentive opportunity in
terms of their Participating Salary (PS), expressed as a
percentage of actual base earnings.
C. If the employment of any participant terminates because of job
elimination, retirement, disability, death, sale of a business
unit or establishment of a joint venture during a Plan year, the
incentive compensation payable to the participant or the
participant's estate will be adjusted, pro-rata, for the period
of time during the Plan year the participant actually worked.
D. Employees who become participants in the Plan after the year has
begun will have their Participating Salary (PS) adjusted, pro-
rata, for the portion of the period that they participate.
E. Participants who change Business Units during the plan year will
have their incentive payment determined by management of each
Business Unit in proportion to the time served in each Business
Unit.
F. A Participant whose employment terminates either voluntarily or
involuntarily (excluding job elimination, retirement,
disability, death, sale of a business unit or establishment of
a joint venture) prior to the end of the Plan shall not be
entitled to any incentive compensation for the period covered by
the Plan.
G. Participation in the Plan does not affect the duration of a
participant's employment, which remains "employment at will".
Either the participant or the Company may terminate employment
at any time.
<PAGE>
III. INCENTIVE COMPENSATION FUND
A. An Incentive Compensation Fund (the "Fund") will be created
based upon achievement of the Performance Objectives. Each
measure funds the pool separately, so it is possible to have the
pool funded by only one or two measures.
B. The Fund has no maximum limit, although only 100% of aggregate
Participating Salaries may be paid as incentive compensation for
the year. Any excess, or any portion of the Fund not awarded,
will carry over to future years.
C. The Compensation Committee may increase or decrease the total
amount of incentive compensation earned to account for
exceptional events that affect the Performance Objectives.
IV. PERFORMANCE OBJECTIVES
The Performance Objectives for 1995 are Earnings Per Share (60%
weighting), Cash Flow (30% weighting), and Sales (10% weighting).
Charts for each of these Performance Objectives are attached. The
Company's financial records are used to measure achievement of
Performance Objectives.
V. PAYMENT OF INCENTIVE COMPENSATION
The amount of the whole Fund for all Plan Participants is determined
by the Compensation Committee of the Board of Directors, while the
portion of the Fund to be allocated to each Business Unit is
determined by Management. Management determines individual incentive
payouts as soon as possible following determination of the Incentive
Compensation Fund. The actual incentives awarded are paid to partici-
pants in cash as soon thereafter as possible, less any required
withholdings. However, Participants who have not yet met their stock
ownership targets will receive 25% of their net incentive payment in
the form of the company's common stock.
VI. CHANGE OF CONTROL
In the event of a Change of Control of Owens-Corning Fiberglas during
a Plan year, incentive awards shall be paid at the higher of:
- one half of Participating Salary;
- projected performance for the year, determined at the time
the Change of Control occurs.
<PAGE>
VII. GENERAL PROVISIONS
The Company may amend, modify, or terminate this Plan at any time and
will determine whether or not a Plan will be established for future
years, and the terms of any future plan. A termination or
modification shall only become effective 30 days after written notice
thereof is given to each participant. Each participant shall be
eligible to receive the incentive compensation to which he/she would
have been otherwise entitled but for such termination or modifica-
tion, pro-rata for the period of the plan year prior to the
termination or modification.
Exhibit (10)
January 1, 1995
William W. Colville
Management Practice, Inc.
342 Madison Avenue
Suite 1230
New York, NY 10173
Consulting Agreement
Dear Bill:
The Board of Directors has approved a consulting agreement with you to begin
following your retirement from active employment on December 31, 1994. This
will confirm our agreement as to the terms upon which Owens-Corning
Fiberglas Corporation (the "Corporation") shall retain you as a consultant.
1. Scope of Consultation
During the term of this agreement you shall consult with the
Corporation and render such general consultative and legal
advisory services in matters relating to the business of the
Corporation and its subsidiaries and affiliates as may be
reasonably requested. Such services may include, but need not
be limited to, conferring with employees and other advisors of
the Corporation and its subsidiaries and affiliates.
You shall be free to engage in any other activities which do not
unreasonably interfere with your ability to render services
hereunder, provided that, without the Corporation's consent, you
shall not directly or indirectly engage in, or render services
to, any person or firm engaged in any activity competitive with
the business of the Corporation, its subsidiaries and
affiliates.
If you should become disabled during the term of this Agreement,
your obligation to provide services shall be limited to those
services, if any, which are reasonable in light of the nature of
the disability.
2. Term of Agreement
The term of this Agreement shall commence on January 1, 1995 and
shall continue until December 31, 1995. The term shall be
extended for an additional one year period at the end of each
year through 1998 unless mutually agreed by you and the
Corporation.
<PAGE>
William W. Colville
January 1, 1995
Page 2
3. Compensation
The Corporation shall pay you a monthly fee of $14,583.00 as
compensation for your services under this Agreement on or before
the last day of each month. For each of the first three months
of this Agreement, your fee will be $27,917.00.
4. Expenses
Throughout the term of this Agreement, you shall be reimbursed
for reasonable traveling and business expenses actually incurred
in the performance of your services hereunder, upon presentation
of adequate substantiation. The Company will also make
available to you (at the Corporation's expense) such office
space, secretarial and other support services, as designated by
you, as shall be necessary or appropriate to carry out your
duties under this Agreement.
5. Confidentiality
You shall hold in strict confidence and not disclose to any
other person during the term of this Agreement, or thereafter,
any confidential information relating to the business, employees
and customers of the Corporation and its subsidiaries and
affiliates, and shall maintain the attorney-client privilege
with respect to legal consultation services, except (a) to the
extent required by law, or (b) with the consent of the
Corporation. Upon termination of your consulting, you shall
deliver to the Corporation all files of the Corporation and its
subsidiaries and affiliates containing data, correspondence,
books, notes and other written or graphic records under your
control, regardless of the media in which they are embodied or
contained, relating to the business or employees of the
Corporation and its subsidiaries and affiliates.
6. Independent Contractor
In performing services under this Agreement, you are an
independent contractor. You are not, nor shall you hold
yourself out to be, an agent or employee of the Corporation, or,
except as authorized, a representative of the Corporation, and
you shall have no authority to take any action binding upon the
Corporation.
<PAGE>
William W. Colville
January 1, 1995
Page 3
Without limiting the generality of the foregoing, the Company
shall furnish to Consultant within 60 days following the last
day of each calendar year this Agreement is in force, a Form
1099 reporting all fees paid to Consultant hereunder during the
affected calendar year. Consultant shall be solely responsible
for the filing of all federal, state and local income tax
returns and for the payment of all taxes reported due thereon.
The Company shall not be responsible for nor pay any federal or
state unemployment, social security, income or other employee
payroll taxes on account of Consultant's services hereunder.
Consultant, as an independent contractor to the Company, shall
not be entitled to participate in nor to receive any benefits
from the Company's employee pension benefit plans or employee
welfare benefit plans as a result of this Agreement.
7. Death
If you should die following commencement of the term of this
Agreement but prior to expiration of such term, your spouse (if
then living) or your estate shall receive the compensation
otherwise due to you until the next succeeding anniversary of
the commencement of the term.
8. Retirement Supplement
When your services as a Consultant to the Corporation end, the
supplemental pension benefit payable to you under the Pension
Agreement dated April 10, 1984, will be recomputed to include
the maximum term hereunder (five years) as if it were employment
by the Corporation under the Agreement, and the additional
supplemented pension will begin at that time. At your request,
this may be paid as a lump sum of $164,327.00.
9. The Corporation shall indemnify you to the fullest extended
permitted by applicable law for any losses or liabilities
incurred by you in connection with your services under this
Agreement, and shall likewise advance legal and other fees to
you in such regard to the fullest extent permitted. The
forgoing sentence shall survive any expiration or termination of
this Agreement.
<PAGE>
William W. Colville
January 1, 1995
Page 4
10. Miscellaneous
This Agreement embodies the entire agreement and understanding
between you and the Corporation with respect to the consulting
services described hereunder and supersedes all prior
understandings or agreements between you and the Corporation
relating to your consulting services to the Corporation.
Neither this Agreement nor any term hereof may be changed,
waived or terminated except by an instrument in writing signed
by the party against which enforcement of the change, waiver or
termination is sought. Notices required to be given under this
Agreement shall be given (a) if to the Corporation, to the
Secretary at the Corporation's address set forth above, (b) if
to you, at your address set forth above, or (c) in either case,
at such other place as you or the Corporation shall notify the
other in writing. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio.
11. Governing Law
This Agreement and all issues relating to its validity,
interpretation, performance and enforcement shall be governed by
and construed in accordance with the laws of the State of Ohio
as applied to contracts executed, delivered and performed wholly
within the State of Ohio.
If the foregoing is in accordance with your understanding, please sign the
enclosed copy of this letter in the space provided below at which point it
will be a binding agreement between you and the Corporation.
Very truly yours,
Glen H. Hiner
Chairman and Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/William W. Colville
--------------------------
William W. Colville
Exhibit (10)
June 16, 1993
Mr. David W. Devonshire
460 Highcraft Road
Wayzata, Minnesota 55391
Dear David:
This letter will confirm the offer made to you for the position of Senior
Vice President & Chief Financial Officer for Owens-Corning reporting to
me. The specifics of the employment offer are as follows:
- Your starting annual base salary will be $275,000 subject to
regular review by the Board Compensation Committee.
- You will participate in the Annual Corporate Incentive
Compensation Plan which is presently based upon corporate
earnings per share and net asset turnover. Your participation
in this plan will be 100% of your base salary and your target
award will be 50% of base salary. Obviously, corporate
business results will determine actual payments but you will
be guaranteed $150,000 for 1993. $75,000 of this payment is
for the incentive compensation that you will lose at your
current employer, and the remaining $75,000 will be a minimum
guaranteed payment from Owens-Corning's 1993 plan. This
payment will be made at the same time as our annual incentive
payments are normally made, which is the last day in February
of 1994.
- You will be awarded 17,000 stock options and 2,400 restricted
stock shares upon your initial day of employment. The price
of the options will be based on the closing price of Owens-
Corning stock on the date of your hire. The options will vest
one third each year for three years. The restricted shares
will vest 50% in five years and the remaining 50% in ten years
from date of grant. These restricted shares will be valued at
vesting based upon their market value at that time.
- To address your concern of losing 5,000 restricted shares of
Honeywill stock, you will be given 4,500 shares of Owens-
Corning restricted stock. At today's value, the Owens-Corning
stock is greater than the value of your current stock, but all
4,500 shares will vest on December 31, 1993.
- You will be given a one time "sign-on" bonus of $50,000 (net
of applicable taxes) on your first day of employment. This
will address certain perquisites in which you currently
participate, such as car allowances, club memberships, etc.
- You will have four weeks of vacation with Owens-Corning.
<PAGE>
Mr. David W. Devonshire
June 16, 1993
Page 2
- You will be eligible for tax preparation/planning assistance,
financial counseling, personal liability insurance and other
benefits accorded Leadership Council participants. In
addition, you will be given a membership in the Toledo Club
(or equivalent) which is a prestigious downtown dining and
exercise club which can be utilized for business entertainment
associated with your position.
- For relocation purposes, you will be treated as a transferring
employee, which means that we will purchase your home if you
are unable to sell it. Specifics of our plan would be
communicated upon acceptance of our offer.
- For pension purposes, once you reach age 53 you will be given
credit for two years of service for every year of completed
service from that point until your retirement. This service
will be used for both vesting and credited service in our
formula. Please note that the earliest age for retirement
based upon your birth year is 56 under our Plan. Also, any
monies payable to you through this agreement not payable from
the Pension Plan will come from the Company's Supplemental
Retirement Plan.
- In addition to the above items, you will also be entitled to
Owens-Corning's full benefits package, which includes a health
care plan, Savings and Deferral Investment Plan (401(k)), life
insurance plan, salary continuation and long-term disability
plan.
Employment is contingent upon successful completion of a physical
examination (which includes a drug screening) and reference checking. You
may contact Juanita Kesler (in Corporate Human Resources) at (419) 248-
7414 to arrange a physical examination. The enclosed severance agreement
should be executed upon your acceptance of this offer.
If you have any questions regarding the above offer or any benefits,
please call me at (419) 248-6518 or Bob Heddens at (419) 248-7272.
Yours truly,
Glen H. Hiner
AGREED TO AND ACCEPTED:
/s/David W. Devonshire June 16, 1993
--------------------------------------- --------------------
David W. Devonshire Date
<TABLE>
Exhibit (11)
OWENS-CORNING FIBERGLAS CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Primary:
1994 1993 1992
(In millions of dollars,
except share data)
<S> <C> <C> <C>
Net income $ 159 $ 131 $ 73
======== ======== ========
Weighted average number of shares
outstanding (thousands) 43,647 42,734 41,973
Weighted average common
equivalent shares (thousands):
Deferred awards 21 264 617
Stock options using weighted
average market price 541 595 423
-------- -------- --------
Primary weighted average number of
common shares outstanding and
common equivalent shares (thousands) 44,209 43,593 43,013
======== ======== ========
Primary per share amount $ 3.61 $ 3.00 $ 1.70
======== ======== ========
Fully Diluted:
Net income $ 168 $ 139 $ 82
======== ======== ========
Weighted average number of shares
outstanding (thousands) 43,647 42,734 41,973
Weighted average common
equivalent shares (thousands):
Deferred awards 21 265 617
Stock options using the higher of
average market price or market
price at end of period 559 613 456
Shares from assumed conversion
of debt 5,798 5,798 5,798
-------- -------- --------
Fully diluted weighted average
number of common shares
outstanding and common
equivalent shares (thousands) 50,025 49,410 48,844
======== ======== ========
Fully diluted per share amount $ 3.35 $ 2.81 $ 1.67
======== ======== ========
</TABLE>
<TABLE>
Exhibit (21)
<S> <C>
State or Other
Jurisdiction
Under the Laws
Subsidiaries of Owens-Corning of
Fiberglas Corporation (1/31/95) Which Organized
Barbcorp, Inc. Delaware
Dansk-Svensk Glasfiber A/S Denmark
Deutsche Owens-Corning Glasswool GmbH Germany
Eric Company Delaware
European Owens-Corning Fiberglas S.A. Belgium
Fiberglas Comercial Exportadora Brazil
e Importadora Ltda.
IPM Inc. Delaware
Kitsons Insulation Products Ltd. United Kingdom
Matcorp, Inc. Delaware
N. V. Owens-Corning S.A. Belgium
O/C/FIRST CORPORATION Ohio
OCFOGO, Inc. Delaware
O.C. Funding B.V. The Netherlands
O/C/SECOND CORPORATION Delaware
OC Utah Four Corporation Utah
Owens-Corning A/S Norway
Owens-Corning Building Products (U.K.) Ltd. United Kingdom
Owens-Corning Canada Inc. Canada
Owens-Corning Cayman Limited Cayman Islands
Owens-Corning Changchun Guan Dao Company Ltd. PRC China
Owens-Corning Fiberglas A.S. Limitada Brazil
Owens-Corning Fiberglas Deutschland GmbH Germany
Owens-Corning Fiberglas Espana, S.A. Spain
Owens-Corning Fiberglas France S.A. France
Owens-Corning Fiberglas (G.B.) Ltd. United Kingdom
Owens-Corning Fiberglas (Italy) S.r.l. Italy
Owens-Corning Fiberglas Norway A/S Norway
Owens-Corning Fiberglas S.A. Uruguay
Owens-Corning Fiberglas Sweden AB Sweden
Owens-Corning Fiberglas Sweden Inc. Delaware
Owens-Corning Fiberglas Technology Inc. Illinois
Owens-Corning Fiberglas (U.K.) Ltd. United Kingdom
Owens-Corning Finance (U.K.) plc United Kingdom
Owens-Corning FSC, Inc. Barbados
Owens-Corning Funding Corporation Delaware
Owens-Corning (Guangzhou) Fiberglas Co. Ltd. PRC China
Owens-Corning Holdings Limited Cayman Islands
Owens-Corning Isolation France S.A. France
Owens-Corning Ontario Holdings Inc. Canada
Owens-Corning Overseas Holdings, Inc. Delaware
Owens-Corning (Overseas) Management Limited Cyprus
Owens-Corning Real Estate Corporation Ohio
Owens-Corning Trading, Ltd. British Virgin Islands
Owens-Corning Veil Netherlands B.V. The Netherlands
Owens-Corning Veil U.K. Ltd. United Kingdom
Owens-Corning Vertriebs GmbH Germany
Palmetto Products, Inc. Delaware
Scanglas Ltd. United Kingdom
/TABLE
<PAGE>
<TABLE>
Exhibit (21)
<S> <C>
State or Other
Jurisdiction
Subsidiaries of Owens-Corning Under the Laws of
Fiberglas Corporation (1/31/95) Which Organized
THB Development Inc. Delaware
UC Industries, Inc. Delaware
Western Fiberglass, Inc. Utah
Western Fiberglass of Arizona Utah
Western Fiberglass of Texas, Inc. Utah
Willcorp, Inc. Delaware
Wrexham A.R. Glass Ltd. United Kingdom
</TABLE>
Exhibit (23)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated January 21, 1995, included in Owens-Corning
Fiberglas Corporation's annual report on Form 10-K for the year ended
December 31, 1994, into the Company's previously filed Registration
Statements, File Nos. 33-9563, 33-9986, 33-9987, 33-18262, 33-20997, 33-
27209, 33-31687, 33-48707, 33-57886 and 33-55163.
ARTHUR ANDERSEN LLP
Toledo, Ohio
March 29, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
SEC form 10-K and is qualified in its entirety by reference to such
financial statements. This schedule was previously filed with Form
8-K dated January 21, 1995, and contains identical summary financial
data for the year ended December 31, 1994.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 59
<SECURITIES> 0
<RECEIVABLES> 296
<ALLOWANCES> 16
<INVENTORY> 223
<CURRENT-ASSETS> 930
<PP&E> 2,901
<DEPRECIATION> 1,768
<TOTAL-ASSETS> 3,274
<CURRENT-LIABILITIES> 1,073
<BONDS> 1,037
<COMMON> 348
0
0
<OTHER-SE> (1,028)
<TOTAL-LIABILITY-AND-EQUITY> 3,274
<SALES> 3,351
<TOTAL-REVENUES> 3,351
<CGS> 2,536
<TOTAL-COSTS> 2,536
<OTHER-EXPENSES> 584
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> 132
<INCOME-TAX> 58
<INCOME-CONTINUING> 74
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 85
<NET-INCOME> 159
<EPS-PRIMARY> 3.61
<EPS-DILUTED> 3.35
</TABLE>
