SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Quarter Ended
March 31,
1996 1995
(In millions of dollars,
except share data)
<TABLE>
<S> <C> <C>
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.
-3-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<S> <C> <C>
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)
March 31, December 31,
1996 1995
(In millions of dollars)
<TABLE>
<S> <C> <C>
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.
-5-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Quarter Ended
March 31,
1996 1995
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
<TABLE>
<S> <C> <C>
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)
Other (37) (29)
Net cash flow from operations (102) (56)
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.
-6-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
Quarter Ended
March 31,
1996 1995
(In millions of dollars)
<TABLE>
<S> <C> <C>
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
NET CASH FLOW FROM ASBESTOS-RELATED
ACTIVITIES (Note 6)
Proceeds from insurance for asbestos
litigation claims 30 48
Payments for asbestos litigation claims (35) (98)
Net cash flow from asbestos-related
activities (5) (50)
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
</TABLE>
The accompanying notes are an integral part of this statement.
-7-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended
1. SEGMENT DATA March 31,
1996 1995
NET SALES (In millions of dollars)
Industry Segments
<TABLE>
<S> <C> <C>
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>
-8-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Quarter Ended
1. SEGMENT DATA (Continued) March 31,
1996 1995
(In millions of dollars)
INCOME FROM OPERATIONS
Industry Segments
<TABLE>
<S> <C> <C>
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.
-9-
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:
<TABLE>
<S> <C> <C>
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%
</TABLE>
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)
<TABLE>
<S> <C> <C>
Finished goods $ 253 $ 210
Materials and supplies 136 127
FIFO inventory 389 337
Less: Reduction to LIFO basis (85) (84)
Inventories $ 304 $ 253
</TABLE>
Approximately $204 million and $175 million of FIFO
inventories were valued using the LIFO method at March 31,
1996 and December 31, 1995, respectively.
-10-
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)
<TABLE>
<S> <C> <C>
Income taxes $(17) $ 1
Cost of borrowed funds 6 9
</TABLE>
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-
-11-
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:
Asbestos Litigation Claims
March 31, December 31,
1996 1995
Reserve for asbestos litigation claims (In millions of dollars)
<TABLE>
<S> <C> <C>
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>
-12-
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.
-13-
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, 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.
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.
-14-
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS 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. Earnings
before interest and taxes (EBIT) from ongoing operations
increased seven percent to $77 million in the first quarter
of 1996, from $72 million in the first quarter of 1995.
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(TM), to all
of its North American markets in its first commercial
application, PinkPlus(R) insulation featuring Miraflex(TM)
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.
-15-
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.
-16-
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.
-17-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the paragraphs in Note 6, Contingent Liabilities, to the
Consolidated Financial Statements above, which are
incorporated here by reference.
ITEM 2. CHANGES IN SECURITIES
(a) None of the constituent instruments defining the rights
of the holders of any class of the Company's registered
securities was materially modified in the quarter ended
March 31, 1996.
(b) None of the rights evidenced by any class of the
Company's registered securities was materially limited or
qualified in the quarter ended March 31, 1996 by the
issuance or modification of any other class of
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) During the quarter ended March 31, 1996, there was no
material default in the payment of principal, interest,
sinking or purchase fund installments, or any other
material default not cured within 30 days, with respect
to any indebtedness of the Company or any of its
significant subsidiaries exceeding 5 percent of the total
assets of the Company and its consolidated subsidiaries.
(b) During the quarter ended March 31, 1996, no material
arrearage in the payment of dividends occurred, and there
was no other material delinquency not cured within 30
days, with respect to any class of preferred stock of the
Company which is registered or which ranks prior to any
class of registered securities, or with respect to any
class of preferred stock of any significant subsidiary of
the Company.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the quarter ended March 31, 1996.
ITEM 5. OTHER INFORMATION
The Company does not elect to report any information under
this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See Exhibit Index below, which is incorporated here by
reference.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the quarter ended March 31, 1996.
-18-
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 May 15, 1996 By /s/David W. Devonshire
David W. Devonshire
Senior Vice President and
Chief Financial Officer (as
both duly authorized officer
and principal financial officer)
-19-
EXHIBIT INDEX
Exhibit
Number Document Description
(3) Articles of Incorporation and By-Laws.
Certificate of Incorporation of Owens Corning, as
amended (incorporated herein by reference to
Exhibit (3) to the Company's annual report on Form
10-K for 1995 (File No. 1-3660)).
By-Laws of Owens Corning, as amended (incorporated
herein by reference to Exhibit (3) to the Company's
annual report on Form 10-K for 1995 (File No. 1-
3660)).
(10) Material Contracts.
Credit Agreement, dated as of November 2, 1993,
among the Company, 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 (File
No. 1-3660) 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
(File No. 1-3660) for the quarter ended June 30,
1994) and by Amendment No. 2 and Amendment No. 3
thereto (incorporated herein by reference to
Exhibit (4) to the Company's annual report on Form
10-K for 1995 (File No. 1-3660)).
Corporate Incentive Plan Terms Applicable to
Certain Executive Officers (filed herewith).
The following documents are incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K for 1995 (File No. 1-3660):
*Corporate Incentive Plan Terms Applicable to Key Employees Other
Than Certain Executive Officers.
*Long-Term Performance Incentive Plan Terms Applicable to Certain
Executive Officers.
*Long-Term Performance Incentive Plan Terms Applicable to Officers
Other Than Certain Executive Officers.
* Stock Performance Incentive Plan, as amended.
(11) Statement re Computation of Per Share Earnings
(filed herewith).
(27) Financial Data Schedule (filed herewith).
(99) Additional Exhibits
Subsidiaries of Owens Corning, as amended (filed
herewith).
Exhibit (10)
OWENS CORNING
Corporate Incentive Plan Terms Applicable to Certain Executive
Officers
1. Application
Set forth below are the annual incentive plan terms applicable
to those employees of Owens-Corning Fiberglas Corporation
(the"Company") and its subsidiaries who are executive officers of
the Company and whose annual incentive compensation for any
taxable year of the Company commencing on or after January 1,
1995 the Committee (as hereafter defined) anticipates would not
be deductible by the Company in whole or in part but for
compliance with section 162(m)(4)(C) of the Internal Revenue Code
of 1986 as amended ("162(m) Covered Employee"), including members
of the Board of Directors who are such employees. Such terms are
hereafter referred to as the "Plan" or "Corporate Incentive
Plan".
2. Eligibility
All 162(m) Covered Employees shall be eligible to be selected to
participate in this Corporate Incentive Plan. The Committee shall
select the 162(m) Covered Employees who shall participate in this
Plan in any year no later than 90 days after the commencement of
the year (or no later than such earlier or later date as may be
the applicable deadline for the compensation payable to such
162(m) Covered Employee for such year hereunder to qualify as
"performance-based" under section 162(m)(4)(C) of the Internal
Revenue Code of 1986 as amended (the "Code")). Selection to
participate in this Plan in any year does not require the
Committee to, or imply that the Committee will, select the same
person to participate in the Plan in any subsequent year.
3. Administration
The Plan shall be administered by the Compensation Committee of
the Board of Directors (the "Board"), or by another committee
appointed by the Board consisting of not less than two (2)
Directors who are not Employees (the "Committee"). The Committee
shall be comprised exclusively of Directors who are not Employees
and who are "outside directors" within the meaning of Section
162(m)(4)(C) of the Code. The Committee shall, subject to the
provisions herein, select employees to participate herein;
establish and administer the performance goals and the award
opportunities applicable to each participant and certify whether
the goals have been attained; construe and interpret the Plan and
any agreement or instrument entered into under the Plan;
establish, amend, or waive rules and regulations for the Plan's
administration; and make all other determinations which may be
necessary or advisable for the administration of the Plan. Any
determination by the Committee pursuant to the Plan shall be
final, binding and conclusive on all employees and participants
and anyone claiming under or through any of them.
4. Establishment of Performance Goals and Award Opportunities
No later than 90 days after the commencement of each year
commencing on or after January 1, 1995 (or than such earlier or
later date as may be the applicable deadline for compensation
payable hereunder for such year to qualify as "performance-based"
under section 162(m)(4)(C) of the Code), the Committee shall
establish in writing the method for computing the amount of
compensation which will be payable under the Plan to each
participant in the Plan for such year if the performance goals
established by the Committee for such year are attained in whole
or in part and if the participant's employment by the Company,
its subsidiaries and affiliates continues without interruption
during that year. Such method shall be stated in terms of an
objective formula or standard that precludes discretion to
increase the amount of the award that would otherwise be due upon
attainment of the goals. No provision hereof is intended to
preclude the Committee from exercising negative discretion with
respect to any award hereunder, within the meaning of the
Treasury regulations under Code section 162(m).
No later than 90 days after the commencement of each year
commencing on or after January 1, 1995 (or than such earlier or
later date as may be the applicable deadline for compensation
payable hereunder for such year to qualify as "performance-based"
under section 162(m)(4)(C) of the Code), the Committee shall
establish in writing the performance goals for such year, which
shall be based on any of the following performance criteria,
either alone or in any combination, and on either a consolidated
or business unit level, as the Committee may determine: sales,
net asset turnover, earnings per share, cash flow, cash flow from
operations, operating profit, net income, operating margin, net
income margin, return on net assets, return on total assets,
return on common equity, return on total capital, and total
shareholder return. The foregoing criteria shall have any
reasonable definitions that the Committee may specify, which may
include or exclude any or all of the following items as the
Committee may specify: extraordinary, unusual or non-recurring
items; effects of accounting changes; effects of currency
fluctuations; effects of financing activities (e.g., effect on
earnings per share of issuance of convertible debt securities);
expenses for restructuring or productivity initiatives; other non-
operating items; spending for acquisitions; effects of
divestitures; and effects of asbestos activities and settlements.
Any such performance criterion or combination of such criteria
may apply to the participant's award opportunity in its entirety
or to any designated portion or portions of the award
opportunity, as the Committee may specify. Unless the Committee
determines otherwise at any time prior to payment of a
participant's award hereunder for any year, extraordinary items,
such as capital gains and losses, which affect any performance
criterion applicable to the award (including but not limited to
the criterion of net income) shall be excluded or included in
determining the extent to which the corresponding performance
goal has been achieved, whichever will produce the higher award.
5. Maximum Award
The maximum dollar amount that may be paid to any participant
under the Plan for any year is equal to the excess of (a) an
amount equal to 200% of the participant's annual rate of salary
at the time the performance goal is established by the Committee
for such year or, if later, on January 1 of such year, over (b)
the amount of any annual incentive compensation to which the
participant is contractually entitled for such year pursuant to
any employment agreement with the Company, and may not exceed
$1.9 million.
6. Attainment of Performance Goals Required
Awards shall be paid under this Plan for any year solely on
account of the attainment of the performance goals established by
the Committee with respect to such year, within the meaning of
applicable Treasury regulations. Awards shall also be
contingent on continued employment by the Company, its
subsidiaries and affiliates during such year. The only
exceptions to these rules apply in the event of termination of
employment by reason of death or Disability, or in the event of a
Change of Control of the Company (as such terms are defined in
the Company's Stock Performance Incentive Plan as amended on June
15, 1995 ("SPIP")), during such year, in which case the following
provisions shall apply. In the event of termination of
employment by reason of death or Disability during a Plan year,
an award shall be payable under this Plan to the participant or
the participant's estate for such year, which shall be adjusted,
pro-rata, for the period of time during the Plan year the
participant actually worked. In the event of a Change of Control
during a Plan year and prior to any termination of employment,
incentive awards shall be paid under the Plan at the higher of (a)
one half of participating salary for such year (as determined by
the Committee), or (b) projected performance for the year,
determined at the time the Change of Control occurs. An
additional exception shall apply in the event of termination of
employment by reason of Retirement (as defined in the SPIP)
during a Plan year, but only if and to the extent it will not
prevent any award payable hereunder (other than an award payable
in the event of death, Disability, Change of Control or
Retirement) from qualifying as "performance-based compensation"
under section 162(m)(4)(C) of the Code. Subject to the preceding
sentence, in the event of termination of employment by reason of
Retirement during a Plan year an award may but need not (as the
Committee may determine) be payable under this Plan to the
participant, which shall be adjusted, pro-rata, for the period of
time during the Plan year the participant actually worked. A
participant whose employment terminates prior to the end of a
Plan year for any reason not excepted above shall not be entitled
to any award under the Plan for that year.
7. Shareholder Approval and Committee Certification
Contingencies; Payment of Awards
Payment of any awards under this Plan shall be contingent upon
shareholder approval, prior to payment, of the material terms of
the performance goals under which the awards are to be paid, in
accordance with applicable Treasury regulations under Code
section 162(m). Unless and until such shareholder approval is
obtained, no award shall be paid pursuant to this Plan. Subject
to the provisions of paragraph 6 above relating to death,
Disability, Change of Control and Retirement, payment of any
award under this Plan shall also be contingent upon the
Compensation Committee's certifying in writing that the
performance goals and any other material terms applicable to such
award were in fact satisfied, in accordance with applicable
Treasury regulations under Code section 162(m). Unless and until
the Committee so certifies, such award shall not be paid. Unless
the Committee provides otherwise, (a) earned awards shall be paid
promptly following such certification, and (b) such payment shall
be made in cash (subject to any payroll tax withholding the
Company may determine applies). Any amount payable to a
participant hereunder shall be in addition to any annual
incentive compensation to which the participant may be
contractually entitled for such year pursuant to an employment
agreement with the Company, unless such employment agreement
provides otherwise.
8. Amendment or Termination
The Committee may amend, modify or terminate this Plan at any
time, provided that 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 the participant would have
been otherwise entitled but for such termination or modification,
pro-rata for the period of the Plan year prior to the termination
or modification.
9. Interpretation and Construction
Any provision of this Plan to the contrary notwithstanding, (a)
awards under this Plan are intended to qualify as performance-
based compensation under Code Section 162(m)(4)(C), and (b) any
provision of the Plan that would prevent an award under the Plan
from so qualifying shall be administered, interpreted and
construed to carry out such intention and any provision that
cannot be so administered, interpreted and construed shall to
that extent be disregarded. No provision of the Plan, nor the
selection of any eligible employee to participate in the Plan,
shall constitute an employment agreement or affect the duration
of any participant's employment, which shall remain "employment
at will" unless an employment agreement between the Company and
the participant provides otherwise. Both the participant and the
Company shall remain free to terminate employment at any time to
the same extent as if the Plan had not been adopted.
10. Governing Law
The terms of this Plan shall be governed by the laws of the State
of Delaware, without reference to the conflicts of laws
principles of that state.
-20- Exhibit (11)
OWENS CORNING AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Quarter Ended
March 31,
1996 1995
(In millions of dollars
except share data)
<TABLE>
<S> <C> <C>
Primary:
Net income $ 39 $ 33
Weighted average number of shares
outstanding (thousands) 51,490 45,394
Weighted average common equivalent
shares (thousands):
Deferred awards 15 15
Stock options using weighted average
market price 796 284
Primary weighted average number of
common shares outstanding and
common equivalent shares (thousands) 52,301 45,693
Primary per share amount $ .75 $ .71
Fully Diluted:
Net income $ 41 $ 34
Weighted average number of shares
outstanding (thousands) 51,490 45,394
Weighted average common equivalent
shares (thousands):
Deferred awards 15 15
Stock options using the higher of
average market price or market
price at end of period 821 327
Shares from assumed conversion
of debt - 5,078
Shares from assumed conversion
of preferred securities 4,566 -
Fully diluted weighted average number
of common shares outstanding and
common equivalent shares (thousands) 56,892 50,814
Fully diluted per share amount $ .73 $ .68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
SEC form 10-Q/A and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 402
<ALLOWANCES> 20
<INVENTORY> 304
<CURRENT-ASSETS> 977
<PP&E> 3,114
<DEPRECIATION> 1,782
<TOTAL-ASSETS> 3,308
<CURRENT-LIABILITIES> 959
<BONDS> 875
<COMMON> 581
0
0
<OTHER-SE> (772)
<TOTAL-LIABILITY-AND-EQUITY> 3,308
<SALES> 849
<TOTAL-REVENUES> 849
<CGS> 631
<TOTAL-COSTS> 631
<OTHER-EXPENSES> 143
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 55
<INCOME-TAX> 16
<INCOME-CONTINUING> 39
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39
<EPS-PRIMARY> .75
<EPS-DILUTED> .73
</TABLE>
-21- Exhibit (99)
State or Other
Jurisdiction
Under the Laws of
Subsidiaries of Owens Corning
(3/31/96) Which Organized
Barbcorp, Inc. Delaware
Crown Manufacturing Inc. Canada
Dansk-Svensk Glasfiber A/S Denmark
Deutsche Owens-Corning Glasswool GmbH Germany
Eric Company Delaware
European Owens-Corning Fiberglas, S.A. Belgium
Falcon Manufacturing Acquisition
Corporation Delaware
Fiber-flex Co., Inc. New Jersey
Fiberflex Incorporated Georgia
Fiber-Lite Corporation Delaware
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
OCW Corporation (dba, Delsan) Delaware
Owens-Corning A/S Norway
Owens-Corning Building Products (U.K.)
Ltd. United Kingdom
Owens-Corning Canada Inc. Canada
Owens-Corning Capital Holdings I, Inc. Delaware
Owens-Corning Capital Holdings II, Inc. Delaware
Owens-Corning Capital L.L.C. Delaware
Owens Corning Cayman (China) Holdings Cayman Islands
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
-22- State or Other
Jurisdiction
Under the Laws of
Subsidiaries of Owens Corning
(3/31/96) Which Organized
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 (Jiangsu) XPS Foam Co.,
Ltd. PRC China
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 (Shanghai) Fiberglas Co.,
Ltd. PRC China
Owens-Corning Trading, Ltd. British Virgin Islands
Owens-Corning UK Holdings Limited United Kingdom
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
SFF Acquisition Corp. Tennessee
SFF2 Acquisition Corp. Kentucky
Soltech, Inc. Kentucky
UC Industries, Inc. Delaware
WD s.a. Belgium
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
Zola Castor Holding Corporation Delaware
1053051 Ontario Inc. Canada
1086269 Ontario Inc. Canada
