SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
Amendment No. 2
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1996
Commission File No. 1-3660
Owens Corning
Fiberglas Tower, Toledo, Ohio 43659
Telephone No. (419) 248-8000
A Delaware Corporation
I.R.S. Employer Identification No. 34-4323452
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 [ ]
Shares of common stock, par value $.10 per share,
outstanding at April 30, 1996
51,533,673
Owens Corning's Form 10-Q for the quarter ended March 31, 1996, filed
on May 15, 1996 as amended by Form 10-Q/A filed on May 21, 1996, is
hereby further amended by amending Item 1 "Financial Statements" and
Item 2 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of Part I, to read as set forth below:
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
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Quarter Ended
March 31,
1996 1995
(In millions of dollars,
except share data)
NET SALES $ 849 $ 844
COST OF SALES 631 630
Gross margin 218 214
OPERATING EXPENSES
Marketing and administrative expenses 128 113
Science and technology expenses 21 18
Other (3) 11
Total operating expenses 146 142
INCOME FROM OPERATIONS 72 72
Cost of borrowed funds 18 26
INCOME BEFORE PROVISION FOR
INCOME TAXES 54 46
Provision for income taxes (Note 3) 16 16
INCOME BEFORE EQUITY IN NET
INCOME OF AFFILIATES 38 30
Equity in net income of affiliates 1 3
NET INCOME $ 39 $ 33
NET INCOME PER COMMON SHARE
Primary net income per share $ .75 $ .71
Fully diluted net income per share $ .73 $ .68
Weighted average number of common shares outstanding
and common equivalent shares during the period
(in millions)
Primary 52.3 45.7
Assuming full dilution 56.9 50.8
</TABLE>
The accompanying notes are an integral part of this statement.
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OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
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March 31, December 31,
1996 1995
ASSETS (In millions of dollars)
CURRENT
Cash and cash equivalents $ 13 $ 18
Receivables 382 314
Inventories (Note 4) 304 253
Insurance for asbestos litigation
claims - current portion (Note 6) 100 100
Deferred income taxes 69 70
VEBA trust 62 51
Income tax receivable 1 50
Investment in affiliate held for sale - 36
Other current assets 46 35
Total current 977 927
OTHER
Goodwill 251 249
Investments in affiliates 52 50
Deferred income taxes 253 252
Insurance for asbestos litigation
claims (Note 6) 300 330
Other noncurrent assets 143 147
Total other 999 1,028
PLANT AND EQUIPMENT, at cost
Land 54 52
Building and leasehold improvements 576 581
Machinery and equipment 2,274 2,266
Construction in progress 210 168
3,114 3,067
Less--Accumulated depreciation (1,782) (1,761)
Net plant and equipment 1,332 1,306
TOTAL ASSETS $ 3,308 $ 3,261
</TABLE>
The accompanying notes are an integral part of this statement.
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OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
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March 31, December 31,
1996 1995
(In millions of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 514 $ 587
Reserve for asbestos litigation claims -
current portion (Note 6) 300 250
Short-term debt 107 64
Long-term debt - current portion 38 35
Total current 959 936
LONG-TERM DEBT 875 794
OTHER
Reserve for asbestos litigation claims
(Note 6) 802 887
Other employee benefits liability 363 367
Pension plan liability 73 75
Other 233 220
Total other 1,471 1,549
COMMITMENTS AND CONTINGENCIES (Note 6)
COMPANY OBLIGATED CONVERTIBLE
SECURITY OF SUBSIDIARY HOLDING
SOLELY PARENT DEBENTURES (MIPS) 194 194
STOCKHOLDERS' EQUITY
Common stock 581 579
Deficit (743) (781)
Foreign currency translation adjustments (8) 9
Other (21) (19)
Total stockholders' equity (191) (212)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,308 $ 3,261
</TABLE>
The accompanying notes are an integral part of this statement.
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OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
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Quarter Ended
March 31,
1996 1995
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
Net income $ 39 $ 33
Reconciliation of net cash provided
by operating activities:
Noncash items:
Provision for depreciation and amortization 31 30
Provision for deferred income taxes - 14
Other 3 9
(Increase) decrease in receivables (67) 1
Increase in inventories (51) (40)
(Decrease) in accounts payable
and accrued liabilities (68) (68)
Increase (decrease) in accrued income taxes 48 (6)
Proceeds from insurance for asbestos
litigation claims 30 48
Payments for asbestos litigation claims (35) (98)
Other (37) (29)
Net cash flow from operations (107) (106)
NET CASH FLOW FROM INVESTING
Additions to plant and equipment (77) (59)
Proceeds from the sale of affiliate 55 -
Other (6) (2)
Net cash flow from investing (28) (61)
</TABLE>
The accompanying notes are an integral part of this statement.
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OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
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Quarter Ended
March 31,
1996 1995
(In millions of dollars)
NET CASH FLOW FROM FINANCING
Net additions to long-term credit
facilities 98 106
Other additions to long-term debt - 34
Other reductions to long-term debt (12) (28)
Net increase in short-term debt 41 13
Other 2 (8)
Net cash flow from financing 129 117
Effect of exchange rate changes on cash 1 1
Net increase (decrease) in cash and cash
equivalents (5) (49)
Cash and cash equivalents at beginning
of period 18 59
Cash and cash equivalents at end of period $ 13 $ 10
The accompanying notes are an integral part of this statement.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
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Quarter Ended
1. SEGMENT DATA March 31,
1996 1995
NET SALES (In millions of dollars)
Industry Segments
Building Materials
United States $ 474 $ 456
Europe 64 65
Canada and other 18 31
Total Building Materials 556 552
Composite Materials
United States 146 152
Europe 106 105
Canada and other 41 35
Total Composite Materials 293 292
Intersegment sales
Building Materials - -
Composite Materials 25 26
Eliminations (25) (26)
Net sales $ 849 $ 844
Geographic Segments
United States $ 620 $ 608
Europe 170 170
Canada and other 59 66
Total 849 844
Intersegment sales
United States 16 13
Europe 10 4
Canada and other 8 20
Eliminations (34) (37)
Net sales $ 849 $ 844
</TABLE>
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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Quarter Ended
1. SEGMENT DATA (Continued) March 31,
1996 1995
(In millions of dollars)
INCOME FROM OPERATIONS
Industry Segments
Building Materials
United States $ 13 $ 32
Europe 5 8
Canada and other (4) 7
Total Building Materials 14 47
Composite Materials
United States 33 34
Europe 21 8
Canada and other 2 3
Total Composite Materials 56 45
General corporate expense 2 (20)
Income from operations 72 72
Cost of borrowed funds (18) (26)
Income before provision for income taxes $ 54 $ 46
Geographic Segments
United States $ 46 $ 66
Europe 26 16
Canada and other (2) 10
General corporate expense 2 (20)
Income from operations 72 72
Cost of borrowed funds (18) (26)
Income before provision for income taxes $ 54 $ 46
</TABLE>
During the first quarter of 1996, the Company recorded a
pretax gain of $37 million on the sale of its ownership
interest in its Japanese affiliate Asahi Fiber Glass Co.
Ltd., all of which was recorded as a reduction in general
corporate expense. Additionally, the Company recorded
special charges totaling $42 million including valuation
adjustments associated with prior divestitures, major
product line productivity initiatives and a contribution to
the Owens Corning Foundation. The impact of these special
items was to reduce income from operations for Building
Materials in the United States, Europe and Canada and other
by $19 million, $1 million and $2 million, respectively,
Composite Materials in the United States
and Europe by $3 million and $2 million, respectively, and
to increase general corporate expense by $15 million.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. GENERAL
The financial statements included in this Report are
condensed and unaudited, pursuant to certain Rules and
Regulations of the Securities and Exchange Commission, but
include, in the opinion of the Company, adjustments
necessary for a fair statement of the results for the
periods indicated, which, however, are not necessarily
indicative of results which may be expected for the full
year.
In connection with the condensed financial statements and
notes included in this Report, reference is made to the
financial statements and notes thereto contained in the
Company's 1995 Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission.
3. INCOME TAXES
The reconciliation between the U.S. federal statutory rate
and the Company's effective income tax rate is:
Quarter Ended
March 31,
1996 1995
U.S. federal statutory rate 35% 35%
Adjustment of deferred tax asset allowance (13) -
State and local income taxes 2 3
Other 6 (2)
Effective tax rate 30% 36%
During the first quarter of 1996, the Company reversed
approximately $7 million of its valuation allowances, as
management determined that the operating loss carryforwards
of certain foreign subsidiaries are realizable.
4. INVENTORIES
Inventories are summarized as follows:
March 31, December 31,
1996 1995
(In millions of dollars)
Finished goods $ 253 $ 210
Materials and supplies 136 127
FIFO inventory 389 337
Less: Reduction to LIFO basis (85) (84)
Inventories $ 304 $ 253
Approximately $204 million and $175 million of FIFO
inventories were valued using the LIFO method at March 31,
1996 and December 31, 1995, respectively.
<PAGE>
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. CONSOLIDATED STATEMENT OF CASH FLOWS
Cash payments, net of refunds, for income taxes and cost of
borrowed funds are summarized as follows:
Quarter Ended
March 31,
1996 1995
(In millions of dollars)
Income taxes $ (17) $ 1
Cost of borrowed funds 6 9
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
6. 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.
Status
As of March 31, 1996, approximately 156,000 asbestos
personal injury claims were pending against the Company,
12,900 of which were received in the first quarter of 1996.
The Company received approximately 55,900 such claims in
1995, and 29,100 in 1994.
Through March 31, 1996, the Company had resolved (by
settlement or otherwise) approximately 161,700 asbestos
personal injury claims. During 1994, 1995, and the first
quarter of 1996, the Company resolved approximately 39,000
such claims and incurred total indemnity payments of $437
million (an average of about $11,200 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 avail-
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. CONTINGENT LIABILITIES (Continued)
ability 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
As of March 31, 1996, the Company had approximately $400
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 non-products insurance, the
Company has a significant amount of potential non-products
coverage with excess level carriers. The Company cautions,
however, that this coverage is unconfirmed and that the
amount and timing of additional recovery from these
policies, if any, will depend on subsequent negotiations or
proceedings.
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:
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Asbestos Litigation Claims
March 31, December 31,
1996 1995
Reserve for asbestos litigation claims (In millions of dollars)
Current $ 300 $ 250
Other 802 887
Total Reserve 1,102 1,137
Insurance for asbestos litigation claims
Current 100 100
Other 300 330
Total Insurance 400 430
Net Asbestos Liability $ 702 $ 707
</TABLE>
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. CONTINGENT LIABILITIES (Continued)
Case filing rates have continued at historically high levels
with the receipt of approximately 12,900 new claims during
the first quarter of 1996, following the receipt of
approximately 55,900 claims in 1995 and approximately 29,100
claims in 1994. 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.
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 U.S. Court of Appeals recently overturned the proposed
settlement based on failure to satisfy class action
certification requirements, but did not address issues
relating to medical criteria. The Company is using similar
medical 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.
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 $400 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.
<PAGE>
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. CONTINGENT LIABILITIES (Continued)
Cash Expenditures
The Company's anticipated cash expenditures for uninsured
asbestos-related costs of claims received through 1999 are
expected to approximate $702 million, the Company's
Liabilities, net of Insurance, before tax benefits. 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,
while 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 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.
NON-ASBESTOS LIABILITIES
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(All per share information in Item 2 is on a fully diluted basis.)
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1996 was $39
million, or $.73 per share, compared to net income of $33
million, or $.68 per share, for the quarter ended March 31,
1995. The 1996 earnings growth reflects pricing gains, the
benefits of acquisitions, and reduced cost of borrowed funds
related to 1995 balance sheet improvements.
Net sales were $849 million for the quarter ended March 31,
1996, a one percent increase from the 1995 level of $844
million. Most of the first quarter 1996 growth is
attributable to incremental sales resulting from 1995
acquisitions as well as pricing gains, offset by a decline
in volume. Gross margin from ongoing operations for the
quarter ended March 31 increased to 27% in 1996, from 25% in
1995, primarily as the result of pricing gains.
During the first quarter of 1996, the Company recorded a
pretax gain of $37 million on the sale of its ownership
interest in its Japanese affiliate Asahi Fiber Glass Co.
Ltd., which was offset by special charges totaling $42
million including valuation adjustments associated with
prior divestitures, major product line productivity
initiatives and a contribution to the Owens Corning
Foundation. The impact of the gain on net income was
reduced to near zero by these offsetting special charges.
Marketing and administrative expenses from ongoing
operations increased approximately six percent over the
first quarter of 1995. The incremental administrative
expenses from the acquisitions late in 1995 as well as an
impact from the continuing implementation of the Company's
Advantage 2000 program are primarily responsible for the
increase. Advantage 2000 is a business system designed to
accelerate the speed and simplify the processes of doing
business globally. When fully implemented, the Advantage
2000 program will replace over 200 fragmented information
systems with a fully integrated system, leading to increased
productivity and cost savings.
In the Building Materials segment, sales increased one
percent for the quarter ended March 31, 1996 compared to
1995. This growth reflects the incremental sales from 1995
acquisitions offset by a decline in volume, particularly in
the North American markets as the result of a weak Canadian
economy and severe weather in the U.S. during the first
quarter of 1996. Income from ongoing operations for
Building Materials decreased 23% from 1995 levels, primarily
due to the weak economic conditions in Canada.
In the first quarter of 1996, the Company announced plans
for the construction of its fourth plant in the People's
Republic of China. The new 51% owned joint venture
facility, to be constructed in Nanjing, will produce
Foamular(R) extruded polystyrene. In conjunction with the two
glass fiber insulation facilities and the glass reinforced
plastic (GRP) pipe facility, this newly formed joint venture
further expands the Company's presence in the Asia Pacific
region.
The Company also announced the availability of its
revolutionary new form of glass fiber, Miraflex(T), to all of
its North American markets in its first commercial
application, PinkPlus(R) insulation featuring Miraflex(T) fiber.
The fiber was first made available to selected markets in
1995, and is expected to be a contributing factor to the
Company's overall growth strategy.
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In the Composite Materials segment, sales increased slightly
for the quarter ended March 31, 1996, over the 1995 first
quarter. The sales increase is attributable to gains in the
Latin American markets as well as continued strength and
improved pricing in the European markets, where prices may
be peaking. These sales gains were offset by the impact of
severe weather conditions in the northeastern U.S. which
caused temporary shut-downs of the Company's Huntingdon, PA
facility, as well as the impact of a strike at General
Motors. Composite Materials' income from ongoing operations
in the first quarter of 1996 was 36% above the first quarter
of 1995 primarily due to the improvement in pricing coupled
with productivity initiatives.
The Company also announced plans for a new large-diameter
GRP pipe joint venture in Colombia, with completion
anticipated in September 1996. Generally, the Company's GRP
pipe is marketed to governments and private industry for
major infrastructure projects for the transport of water and
waste. The Company's Botswana pipe venture established in
1993 was awarded one of the Company's largest single orders
to date, a $75 million contract to supply GRP pipe for the
North-South Carrier pipeline in Botswana.
The Company's cost of borrowed funds for the quarter ended
March 31, 1996 was $8 million lower than during first
quarter 1995, reflecting decreased borrowings resulting from
the first half 1995 conversion of $173 million of the
Company's 8% convertible junior subordinated debentures into
shares of common stock as well as the issuance of $200
million of convertible monthly income preferred securities
in the second quarter of 1995.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Cash flow from operations, excluding asbestos-related
activities, was negative $102 million for the first quarter
of 1996, compared to negative $56 million for first quarter
1995. The decline from 1995 to 1996 is primarily
attributable to the first quarter 1995 cash inflow generated
by the sale of $50 million of receivables under an agreement
established in late 1994. Inventories at March 31, 1996
increased 20% over December 31, 1995 levels due to the
Company's seasonal inventory build in the first half of the
year, and a slower than expected building materials retail
environment. Please see Notes 4 and 5 to the Consolidated
Financial Statements.
At March 31, 1996, the Company's net working capital was $18
million and its current ratio was 1.02 compared to negative
$9 million and .99, respectively, at December 31, 1995.
During the first quarter of 1996, the Company established a
new long-term revolving credit facility in the U.K. which
replaced several short-term debt instruments in Europe. The
U.K. facility has a commitment of 35 million British pounds
(54 million U.S. dollars), all of which was outstanding as
of March 31, 1996. The improvement in working capital from
this refinancing was partially reduced by the sale of Asahi
Fiber Glass Co. Ltd.
The Company's total borrowings at March 31, 1996 were $1.020
billion, $127 million higher than at year-end 1995.
Typically, the Company reports greater cash usage during the
first half of the year as the Company builds inventories and
other working capital. As of March 31, 1996, the Company
had unused lines of credit of $305 million available under
long-term bank loan facilities and an additional $210
million under short-term facilities, compared to $358
million and $239 million, respectively, at year-end 1995.
The decrease in available lines of credit is primarily the
result of increased borrowings. Letters of credit issued
under the Company's long-term U.S. loan facility, most of
which support appeals from asbestos trials, reduce credit
availability of that facility. The impact of such reduction
is reflected in the unused lines of credit discussed above.
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Capital spending for property, plant and equipment,
excluding acquisitions and investments in affiliates, was
$77 million during the first quarter of 1996. For the year
1996, the Company anticipates capital spending, exclusive of
acquisitions and investments in affiliates, to be
approximately $313 million, the majority of which is
uncommitted. 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 1996,
including $9 million in defense costs and $2 million for
appeal bond and other costs, were $35 million. Proceeds
from insurance were $30 million, resulting in a net pretax
cash outflow of $5 million, or $3 million after-tax. During
the first quarter of 1996, the Company received
approximately 12,900 new asbestos personal injury cases and
closed approximately 1,100 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 $100
million are expected to be available to cover these costs,
resulting in a net pretax cash outflow of $200 million, or
$120 million after-tax. Please see Note 6 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 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 the first quarter of 1996, the
Company was not designated a PRP in such federal, state,
local or private proceedings for any additional sites. At
March 31, 1996, a total of 42 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 $20 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 EPA's announced schedule is to
issue regulations covering glass fiber manufacturing by late
1997 and asphalt processing activities by late 2000, with
implementation as to existing sources up to three years
thereafter. 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>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
OWENS CORNING
Registrant
Date December 20, 1996 By /s/David W. Devonshire
David W. Devonshire
Senior Vice President and
Chief Financial Officer
(as duly authorized officer)
