SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 20, 1996
OWENS CORNING
A Delaware Corporation
Commission File No. 1-3660 IRS Employer Identification
No. 34-4323452
Fiberglas Tower, Toledo, Ohio 43659
Telephone No. (419) 248-8000
ITEM 5. OTHER EVENTS
On June 20, 1996, Owens Corning issued the press releases
attached hereto as Exhibits A and B. Certain sections of
such press releases contain statements as to, without
limitation, a lawsuit, alleging false medical test results
potentially affecting tens of thousands of asbestos claims,
filed by the Company on June 19, 1996 in the United States
District Court for the Eastern District of Louisiana,
against the owners and operators of three pulmonary function
testing laboratories; a planned $1.1 billion charge relating
to asbestos claims received after 1999 and a probable $225
million recovery from excess level non-products insurance
carriers, having a combined impact after taxes of $545
million (or $9.56 per fully diluted share), to be reflected
on the Company's June 30, 1996 financial statements; and
discussions with a group of law firms representing
plaintiffs in the Company's pending asbestos cases. Any
forward-looking statements contained in such press releases
are made based on management's current expectations and
beliefs concerning future events. There can be no assurance
that such events will occur or that financial results,
including the impact on such results of asbestos claims,
will be as estimated.
Set forth below is further information relating to the
matters referred to above:
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.
Status
As of May 31, 1996, approximately 146,000 asbestos personal
injury claims were pending against the Company, of which
21,200 were received in the first five months of 1996. The
Company received approximately 55,900 such claims in 1995,
29,100 in 1994, and 32,400 in 1993.
Many of the recent claims appear to be the product of mass
screening programs and not to involve malignancies or other
significant asbestos related impairment. The Company
believes that as many as 40,000 of the recent claims involve
plaintiffs whose pulmonary function tests ("PFTs") were
improperly administered or manipulated by the testing
laboratory or otherwise inconsistent with proper medical
practice, and it is investigating a number of testing
organizations and their methods. On June 19, 1996 the
Company filed suit in federal court in New Orleans against
the owners and operators of certain lab facilities in the
southeastern US challenging such improper testing practices.
The Company is engaging in discussions with a group of
approximately 30 leading plaintiffs' law firms to explore
approaches toward resolution of its asbestos liability. The
discussions are expected to cover the possible resolution of
both pending claims and claims that may be filed in the
future. While discussions are ongoing, the law firms
involved in the talks have agreed to refrain from serving
any further asbestos claims on the Company unless they
involve malignancies. This agreement may have impacted the
number of cases received by the Company during the second
quarter.
Through May 31, 1996, the Company had resolved (by
settlement or otherwise) approximately 180,000 asbestos
personal injury claims, including the dismissal in May 1996
of approximately 15,000 maritime cases, which named Owens
Corning as a defendant, for lack of medical proof. During
1993, 1994, and 1995, the Company resolved approximately
60,000 such claims, over 99% without trial, and incurred
total indemnity payments of $641 million (an average of
about $10,700 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.
Insurance
The Company estimates that, as of June 30, 1996, it will
have approximately $367 million in unexhausted insurance
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. This insurance, which is substantially
confirmed, includes both products hazard coverage and
primary level non-products coverage. Portions of this
coverage are not available until 1997 and beyond under
agreements with the carriers confirming such coverage. All
of the Company's liability insurance policies cover
indemnity payments and defense fees and expenses subject to
applicable policy limits.
In addition to its confirmed primary level non-products
insurance, the Company has a significant amount of
unconfirmed potential non-products coverage with excess
level carriers. For purposes of calculating the amount of
insurance applicable to asbestos liabilities, the Company
has estimated its probable recoveries in respect of this
additional non-products coverage at $225 million, which
amount will be recorded in the second quarter of 1996. This
coverage is unconfirmed and the amount and timing of
recoveries from these excess level policies will depend on
subsequent negotiations or proceedings.
Reserve
The Company's 1995 financial statements included a reserve
for the estimated cost associated with asbestos personal
injury claims that may be received through the year 1999.
Such financial statements did not include any provision for
the cost of unasserted claims which might be received in
years subsequent to 1999 because management was unable to
predict the number of such claims and other factors which
would affect the cost of such claims. Throughout 1996, the
Company continued to review the feasibility of making
provision for the cost of unasserted asbestos personal
injury claims with respect to claims which may be received
by the Company during and after the year 2000. In
conducting such review the Company took into account, among
other things, the effect of recent federal court decisions
relating to punitive damages and the certification of class
actions in asbestos cases, the pendency of the discussions
with the group of plaintiffs' law firms referred to above,
the results of its continuing investigations of medical
screening practices of the kind at issue in the New Orleans
PFT law suit, recent developments as to the prospects for
federal and state tort reform, the continued rate of case
filings at historically high levels, additional information
on filings made during the 1993-1995 period and other
factors. As a result of the review, the Company will take a
non-recurring, noncash charge to earnings of $1.1 billion in
the second quarter of 1996. This charge represents the
Company's estimate of the indemnity and defense costs
associated with unasserted asbestos personal injury claims
that may be received by the Company in years subsequent to
1999.
The combined effect of the $1.1 billion charge and the $225
million probable additional non-products insurance recovery
will be an $875 million charge in the second quarter of
1996.
The Company estimates that, as of June 30, 1996, its total
liabilities in respect of indemnity and defense costs
associated with pending and unasserted asbestos personal
injury claims that may be received in the future (the
"Liabilities"), and its estimated insurance recoveries in
respect of such claims (the "Insurance"), will be as
follows:
<TABLE>
Asbestos Litigation Claims
Estimated
June 30, 1996 December 31, 1995
(In millions of dollars)
<S> <C> <C>
Reserve for asbestos
litigation claims
Current $ 275 $ 250
Other 1,858 887
2,133 1,137
Insurance for asbestos
litigation claims
Current $ 75 $ 100
Other 517 330
Total Insurance 592 430
Net Asbestos Liability $ 1,541 $ 707
</TABLE>
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
insurance, including the additional $225 million in non-
products coverage 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. The Company believes that its estimate of
Liabilities and Insurance will be sufficient to provide for
the costs of all pending and future asbestos personal injury
claims that involve malignancies or significant asbestos-
related functional impairment. While such estimates cover
unimpaired claims, the number and cost of unimpaired claims
are much harder to predict and such estimates reflect the
Company's belief that such claims have little or no value.
The Company 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.
Management Opinion
Although any opinion is subject to the uncertainties
described above and must be based on information now known
to the Company, in the opinion of management, any 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. Management believes that any such
additional costs would not impair the ability of the Company
to meet its obligations, to reinvest in its business or to
take advantage of attractive opportunities for growth.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, hereunto duly
authorized.
OWENS CORNING
Registrant
Date June 20, 1996 By /s/ David W. Devonshire
David W. Devonshire
Senior Vice President and
Chief Financial Officer
EXHIBIT-A
Contact: Bradley D. Johnson William K. Hamilton
Investor Relations Media Relations
(419) 248-6952 (212) 765-8800
(419) 248-6190
For Immediate Release
Owens Corning Initiates Federal Lawsuit, Records Post-1999
Asbestos Provisions and Announces Dividend.
NEW YORK, New York, June 20, 1996 -- A Federal lawsuit aimed
at fraudulent testing procedures for asbestos-related
illnesses, involving tens of thousands of pending cases, was
filed yesterday by Owens Corning. The company also
announced the quantification of liabilities relating to post-
1999 asbestos claims, the reinstatement of an annual
dividend and a sales goal of $5 billion by 1999.
The specific announcements are as follows:
A lawsuit, alleging falsified medical test results in tens
of thousands of asbestos claims, was filed on June 19,
1996 in the U. S. District Court for the Eastern District
of Louisiana against the owners and operators of three
pulmonary function testing laboratories. Overall, a total
of 40,000 cases may be impacted by the investigation for
fraudulent testing procedures. The lawsuit is the subject
of a separate press release also disseminated this
morning.
A net, after-tax charge of $545 million or $9.56 per
fully diluted share for asbestos claims -- received after
1999 -- will be recorded in the second quarter of 1996, as
detailed in a Form 8-K filed this morning with the SEC.
Cash payments associated with this charge will begin after
the year 2000 and will be spread out over 15 years or
more.
The Board of Directors has approved an annual dividend
policy of 25 cents per share and declared a quarterly
dividend of 6-1/4 cents per share payable on October 15,
1996 to shareholders of record as of September 30, 1996.
The company expects to reach its sales goal of $5 billion
in 1999 -- a full year ahead of the original goal.
"The asbestos charge quantifies what we expect to be the
cost to Owens Corning of post-1999 claims," stated Glen H.
Hiner, chairman and chief executive officer. "We further
believe that the present value of the Owens Corning
asbestos liability, including the current charge, is less
than the current discount in our stock price."
In addition to these developments, Owens Corning announced
it is engaged in substantive discussions with 30 of the
principal plaintiff law firms in an effort to obtain further
resolution of its asbestos liability. These discussions
have encompassed the possibility of global as well as
individual law firm settlements.
"These meetings are by mutual consent," stated Hiner. "The
discussions will continue and we expect to know by year end
whether we can achieve further agreement. Plaintiff
attorneys involved in the talks stated they will not serve
any more non-malignancy claims on Owens Corning while
negotiations continue."
In reference to the dividend, Hiner stated, "we were able to
initiate this action because debt has been reduced to target
levels and cash flow from operations will be in excess of
internal funding requirements.
"We are delighted to be able to reward our shareholders with
a dividend," said Hiner . "Reinstating the dividend has
been a priority of mine since joining the company and I am
pleased that we now are in a position to set the date."
The Toledo-based company had 1995 sales of $3.6 billion and
employs 18,000 people in more than 30 countries.
# # # # #
EXHIBIT-B
Contact: William K. Hamilton
Media Relations
(212) 765-8800
(419) 248-6190
Owens Corning Initiates Lawsuit Against Testing Laboratories
NEW YORK, New York. June 20,1996 -- Owens Corning today
announced that it has filed a lawsuit charging a massive
scheme to defraud the company in connection with asbestos
litigation cases.
The lawsuit, filed on June 19, 1996 in the U. S. District
Court for the Eastern district of Louisiana, New Orleans,
claims that the scheme was carried out by operators of three
testing laboratories doing business throughout the Southeastern
United States.
Named as defendants were Glenn E. Pitts, of Brandon, Mississippi,
and his cousin Jewel D. "Jerry" Pitts, of Grand Bay, Alabama,
at various times owners, officers or consultants of Pulmonary
Advisory Services, Inc., Pulmonary Advisory Services of
Louisiana, Inc., and Pulmonary Testing Services, Inc.
Also named were Larry M. Mitchell, M.D., of Franklin, Tennessee,
who was employed from 1990 through early 1995 to oversee the
administration of the labs, and Leon Hammonds, of Grand Bay,
Alabama, who was the chief test operator for the labs from
1990 through January, 1994.
According to the lawsuit, these laboratories generated false
medical test results involving tens of thousands of claims.
The lawsuit is part of a larger investigation, which may
impact a total of 40,000 cases. The complaint, filed under
the Racketeer Influenced and Corrupt Organization Act
(RICO), states that the operators of these testing
laboratories engaged in a deliberate scheme to solicit
potential claimants for testing and then manipulated and
falsified test results to support claims against Owens
Corning.
The complaint charges that the defendants have engaged in
this unlawful scheme for the purpose of creating fraudulent
medical documentation to (a) make individuals appear to
suffer from asbestos-related pulmonary impairment or (b)
make individuals falsely appear to suffer from a more severe
pulmonary impairment.
The complaint goes on to state that the fraudulent scheme
took place over several years and was intended to defraud
Owens Corning out of tens of millions of dollars.
Owens Corning is represented in the lawsuit by Dan Webb and
former Illinois Governor James R. Thompson of the law firm of
Winston & Strawn in Chicago. Webb is the former United
States Attorney for the Northern District of Illinois.
Owens Corning also announced that approximately 15,000
maritime claims, in which it was named in federal district
court in Philadelphia, were dismissed last month by Judge
Charles R. Weiner. "This development, coupled with the 40,000 cases
under investigation, reflects a positive impact on the
existing backlog," stated Glen H. Hiner, chairman and chief
executive officer.
# # # # #
