SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
Amendment No. 3
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
Commission File No. 1-3660
Owens Corning
Fiberglas Tower, Toledo, Ohio 43659
Area Code (419) 248-8000
A Delaware Corporation
I.R.S. Employer Identification No. 34-4323452
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which Registered
Common Stock - $.10 Par Value New York Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Participating Preferred
Stock, no par value, of the
Registrant
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes / X /
No / /
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
At December 31, 1995, the aggregate market value of
Registrant's $.10 par value common stock (Registrant's voting
stock) held by non-affiliates was $2,289,208,060, assuming
for purposes of this computation only that all directors and
executive officers are considered affiliates.
At December 31, 1995, there were outstanding 51,389,618
shares of Registrant's $.10 par value common stock.
Parts of Registrant's definitive 1996 proxy statement filed
or to be filed pursuant to Regulation 14A (the "1996 Proxy
Statement") are incorporated by reference into Part III of
this Form 10-K.
Owens Corning's Form 10-K for the year ended December 31, 1995,
filed on February 23, 1996 as amended by Forms 10-K/A filed on
February 23, 1996 and March 5, 1996, is hereby further amended by amending
Item 6 "Selected Financial Data", Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations",
and Item 14 "Exhibits, Financial Statement Schedules, and Reports
on Form 8-K", to read as set forth below:
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ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain financial information of the
Company.
<TABLE>
<S> <C> <C> <C> <C> <C>
1995(a) 1994(b) 1993(c) 1992(d) 1991(e)
(In millions of dollars, except per share data and where noted)
Net sales $ 3,612 $3,351 $2,944 $2,878 $2,783
Cost of sales 2,670 2,536 2,266 2,234 2,186
Marketing, administrative
and other expenses 454 429 350 350 1,171
Science and technology expenses 76 71 69 65 54
Restructure costs - 89 23 16 -
Income (loss) from operations 412 226 236 213 (628)
Cost of borrowed funds 87 94 89 110 131
Income (loss) before provision
for income taxes 325 132 147 103 (759)
Provision (credit) for
income taxes 106 58 47 33 (238)
Net income (loss) 231 159 131 73 (742)
Net income (loss) per share
Primary 4.64 3.61 3.00 1.70 (18.13)
Fully diluted 4.40 3.35 2.81 1.67 (18.13)
Dividends per share on common
stock
Declared - - - - -
Paid - - - - -
Weighted average number of shares
outstanding (in thousands)
Primary 49,711 44,209 43,593 43,013 40,924
Fully diluted 54,106 50,025 49,410 48,844 42,924
Net cash flow from operations 285 233 253 192 253
Capital spending 276 258 178 144 114
Total assets (f) 3,261 3,274 3,013 3,162 3,511
Long-term debt 794 1,037 898 1,018 1,148
Average number of employees
(in thousands) 17 17 17 17 17
</TABLE>
(a) During 1995, the Company recorded a one time $8 million
tax credit as a result of a tax loss carryback.
(b) During 1994, the Company recorded a $117 million charge
($85 million after-tax) for productivity initiatives
and other actions. The Company also recorded a $10
million after-tax charge for the adoption of Statement
of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits
Other Than Pensions" for its non-U.S. plans, a $28
million after-tax charge for the adoption of SFAS No.
112, "Employers' Accounting for Postemployment
Benefits," and a $123 million after-tax credit for the
change in accounting method for rebuilding furnaces.
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(c) During 1993, the Company recorded a $23 million charge
for the restructuring of its European operations, an $8
million charge ($5 million after-tax) for the writedown
of its hydrocarbon ventures to their net realizable
value, a $26 million credit for the adoption of SFAS
No. 109, "Accounting for Income Taxes," and a $14
million credit for the revaluation of deferred taxes.
(d) During 1992, the Company recorded a $16 million charge
($11 million after-tax) to reorganize the Company's
Building Materials segment and to centralize the
Company's accounting and information systems. The
Company also recorded a net extraordinary gain of $1
million resulting from the utilization of tax loss
carryforwards, partially offset by a loss on the early
retirement of debt.
(e) During 1991, the Company recorded a non-recurring $800
million charge for unasserted asbestos litigation
claims and a $227 million after-tax charge, or $5.55
per share, for the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits
Other Than Pensions" for its U.S. plans.
(f) During 1993, the Company adopted the provisions of FIN
39 which require the Company to present separately in
its balance sheet its estimated contingent liabilities
and related insurance assets. 1992 and 1991 assets
have been restated to conform with the 1995, 1994, and
1993 presentations.
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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All per share information in Item 7 is on a fully diluted
basis.)
RESULTS OF OPERATIONS
Net income for the year ended December 31, 1995 was $231
million, or $4.40 per share, compared to net income of $159
million, or $3.35 per share, and net income of $131 million,
or $2.81 per share, for the years ended December 31, 1994
and 1993, respectively. The 1995 earnings growth reflects
pricing gains and the benefits of acquisitions, as well as a
one time gain of $8 million or $.15 per share which was the
result of a tax loss carryback. Excluding the impact of the
tax benefit, net income for the year ended December 31,
1995, was $223 million, or $4.25 per share. Please see Note
8 to the Consolidated Financial Statements.
Net income of $159 million for the year ended December 31,
1994, included the following offsetting special items: an
after-tax gain of $123 million, or $2.45 per share,
reflecting a change to the capital method of accounting for
the rebuilding of glass melting facilities; an after-tax
charge of $85 million, or $1.69 per share, for productivity
initiatives and other actions; a non-cash, after-tax charge
of $10 million, or $.20 per share, to reflect adoption of
Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other
Than Pensions," for plans outside the United States; and a
non-cash, after-tax charge of $28 million, or $.56 per
share, to reflect adoption of SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." Please see Notes
6, 16 and 17 to the Consolidated Financial Statements.
Excluding special items, net income for the year ended
December 31, 1993 was $118 million, or $2.56 per share. The
1993 special items included a credit of $26 million, or $.53
per share, for the cumulative effect of adopting the
accounting standard for income taxes (SFAS No. 109); a one
time gain of $14 million, or $.29 per share, reflecting a
tax benefit resulting from a revaluation of deferred taxes,
offset in part by an increase in the Company's corporate tax
liability, necessitated by the increase in the federal
statutory tax rate; an after-tax charge of $5 million, or
$.10 per share, for the write-down of the Company's
hydrocarbon ventures to their net realizable value; and a
charge of $23 million, or $.47 per share, for the
restructuring of the Company's European operations. Please
see Notes 8 and 16 to the Consolidated Financial Statements.
Net sales were $3.612 billion for the year ended December
31, 1995, reflecting an 8% increase from the 1994 level of
$3.351 billion. Net sales in 1993 were $2.944 billion.
Most of the 1995 growth is attributable to pricing gains
achieved worldwide, with incremental growth resulting from
acquisitions, which occurred mid year 1994 and throughout
1995. Please see Note 5 to the Consolidated Financial
Statements. Sales outside the U.S. represented 27% of the
total sales for the year ended December 31, 1995 compared to
24% for the years 1994 and 1993. Gross margin for the year
ended December 31, 1995 increased to 26%, compared to 24%
and 23% in 1994 and 1993, respectively, reflecting primarily
pricing gains worldwide.
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In the Building Materials segment, sales increased 6% for
the year ended December 31, 1995 compared to 1994. This
growth reflects pricing gains, and incremental sales from
the 1995 acquisitions partially offset by a decline in
volume, particularly in the Canadian markets. Income from
operations for Building Materials decreased 9% from 1994
levels, after excluding the 1994 charge for restructure and
other initiatives, primarily due to the weak economic
conditions in Canada and start up costs associated with the
Company's new insulation plant in Guangzhou, China.
Building Materials sales in Europe increased 45% over the
1994 level, primarily resulting from a full year of sales
from the June 1994 acquisition of the United Kingdom based
insulation and industrial supply businesses of Pilkington
plc (the "U.K. Acquisition"), and the addition of a second
production line at the Company's insulation plant in Vise,
Belgium. Late in the third quarter of 1995, the Company
began shipping product from its insulation manufacturing
facility in Guangzhou, China and announced plans for the
construction of its second insulation plant in China, to be
built in Shanghai. Roofing margins improved in 1995, driven
primarily by improved pricing, and volume growth, including
the successful introduction of Prominence(R) roofing shingles.
The window business achieved significant sales growth and
productivity improvements during the year, but has not yet
reached break-even. In the foam insulation and related
product markets, the Company has expanded its position with
the acquisition of Falcon Manufacturing of Michigan, Inc.
The Company also completed four other acquisitions in 1995
which are expected to contribute to the Company's overall
growth strategy. These acquisitions increased the Company's
small furnace technology base, as well as expanded its
position in fabricated systems for the original equipment
manufacturing market and its product offering for the window
market. The Company further expanded its Building Materials
multi-product offering in 1995 with the introduction of two
branded products, Transitions(T) vinyl siding and
PinkWrap(T) housewrap.
In 1995 Miraflex(T), the revolutionary new form of glass fiber
developed by Owens Corning which combines two different
glass compositions into one fiber, was successfully
introduced to North American markets in its first commercial
application, PinkPlus(R) insulation featuring Miraflex(T) fiber.
The Miraflex(T) fibers are flexible, soft to the touch,
virtually itch-free, resilient and form-filling,
characteristics not normally associated with glass or
inorganic fibers, which is driving the success of the new
fiber.
In the Composite Materials segment, sales increased 12% for
the year ended December 31, 1995, or approximately 20%
excluding the Company's previously consolidated polyester
resins business, discussed below. The Composite Materials
sales increase, driven by strong worldwide market demand, is
attributable to volume and pricing gains, coupled with
favorable currency impact from European markets. In the
U.S., sales increased slightly, while in Europe, the
Company's composites operations benefited from European
economic improvement which resulted in increased demand,
coupled with the positive effects of productivity
initiatives.
In 1995 the Company announced plans to expand global
composites capacity by 135,000 metric tons by 1997, with a
significant portion of the new capacity coming from the
refiring of the second furnace at the Company's Jackson,
Tennessee facility. The remaining expansion will be at
other existing facilities in the U.S., Europe, Asia and
Latin America. The Company in 1995 began a new large
diameter glass reinforced plastic (GRP) pipe facility in
China, pipe joint ventures in Spain and Argentina, as well
as a composite materials service center in Colombia. Early
in 1996 the Company announced the formation of a pipe joint
venture in Colombia, increasing the Company's global
presence.
<PAGE>
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During the third quarter of 1994, the Company entered into a
joint venture with Alpha Corporation of Tennessee, whereby
the two companies combined their existing resin businesses
for fifty percent interests in Alpha/Owens-Corning, L.L.C.,
the largest manufacturer of polyester resins in North
America. Please see Note 5 to the Consolidated Financial
Statements.
The Company's cost of borrowed funds for the year ended
December 31, 1995 was $7 million lower than 1994, reflecting
decreased borrowings resulting from the conversion of the
Company's 8% convertible junior subordinated debentures into
shares of common stock. Additionally, the proceeds from the
issuance of $200 million of convertible preferred securities
were partially used to pay off the Company's short-term
credit facility, established during the second quarter of
1994 to finance the U.K. Acquisition. Please see Notes 2, 3
and 4 to the Consolidated Financial Statements.
At December 31, 1995, certain of the Company's foreign
subsidiaries have tax net operating loss carryforwards of
approximately $27 million. The Company has $322 million in
net deferred tax assets at December 31, 1995, all of which
management expects will be realized through future income
from operations. Please see Note 8 to the Consolidated
Financial Statements.
Early in the first quarter of 1996, the Company completed
the sale of its share in a Japanese affiliate, Asahi Fiber
Glass Co. Ltd., to its partner Asahi Glass Company for
approximately $50 million and realized a pretax gain in
excess of $25 million. Please see Note 12 to the
Consolidated Financial Statements.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Cash flow from operations, excluding asbestos-related
activities, was $342 million for 1995, compared to $361
million for 1994. The decline in cash flow from
operations from 1994 to 1995 was due in part to funding of a
Voluntary Employee's Beneficiary Association trust for tax
planning purposes. Total receivables at December 31, 1995
were $15 million lower than the December 31, 1994 level due
to the sale of $50 million in receivables early in 1995,
resulting in a total of $100 million of receivables sold
under the 1994 sales agreement. The receivables sold were
largely offset by increased sales in 1995. Please see Notes
6 and 10 to the Consolidated Financial Statements.
At December 31, 1995, the Company's net working capital was
negative $9 million and its current ratio was .99, compared
to negative $143 million and .87 at December 31, 1994, and
negative $49 million and .94 at December 31, 1993,
respectively. The increase in 1995 was due in part to
decreased short-term borrowings as a result of the
repayment of the financing used for the U.K.
Acquisition. Excluding the impact of the short-term
borrowings used to finance the U.K. Acquisition, the
Company's net working capital was negative $33 million and
its current ratio was .97 at December 31, 1994.
During 1995, virtually all of the Company's $173 million
issue of 8% convertible junior subordinated debentures
were converted. Debentures not converted were redeemed
for cash. The conversion resulted in the issuance of 5.8
million new shares of common stock. Also in 1995, Owens-
Corning Capital, L.L.C., a Delaware limited liability
company, of which all of the common limited company
interests are indirectly owned by the Company, issued $200
million of 6.5% cumulative convertible preferred securities.
The proceeds from the issuance were loaned to the Company
and partially used to repay its short-term credit facility.
Please see Notes 2 and 4 to the Consolidated Financial
Statements.
<PAGE>
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The Company's total borrowings at December 31, 1995 were
$893 million, $319 million lower than at year-end 1994,
primarily due to the conversion of its 8% convertible junior
subordinated debentures, and the repayment of debt through
the issuance of the above mentioned preferred securities.
As of December 31, 1995, the Company had unused lines of
credit of $358 million available under long-term bank loan
facilities and an additional $239 million under short-term
facilities, compared to $293 million and $91 million,
respectively, at year-end 1994. The increase in unused
available lines of credit reflects increased availability,
primarily in foreign credit facilities, a decrease in
borrowings and a decrease in outstanding letters of credit
supporting appeals from asbestos trials. Such letters of
credit reduce credit availability under the Company's long-
term U.S. loan facility.
Capital spending for property, plant and equipment,
excluding acquisitions, was $276 million during 1995. At
the end of 1995, approved capital projects were $134
million. The Company expects that funding for these
expenditures will be from the Company's operations and
external sources as required.
Gross payments for asbestos litigation claims during 1995,
including $48 million in defense costs and $6 million for
appeal bond and other costs, were $308 million. Proceeds
from insurance were $251 million, $100 million of which was
received as a prepayment of a third quarter 1995 settlement
with a major insurer, which confirmed the Company's access
to $330 million of insurance for payment of asbestos
litigation claims. Excluding the impact of the $100 million
prepayment by the carrier, cash flow from asbestos related
activities was a net pretax cash outflow of $157 million, or
$94 million after-tax. During 1995, the Company received
approximately 55,900 new asbestos personal injury cases and
closed approximately 21,900 cases. Over the next twelve
months total payments for asbestos litigation claims,
including defense costs, are expected to be approximately
$250 million. Proceeds from insurance of $100 million are
expected to be available to cover these costs, resulting in
a net pretax cash outflow of $150 million, or $90 million
after-tax. Please see Note 21 to the Consolidated Financial
Statements.
The Company expects funds generated from operations,
together with funds available under long and short term bank
loan facilities, to be sufficient to satisfy its debt
service obligations under its existing indebtedness, as well
as its contingent liabilities for uninsured asbestos
personal injury claims.
The Company 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 1995, the Company was
designated as a PRP in such federal, state, local or private
proceedings for nine additional sites. At December 31,
1995, 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.
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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>
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. See Index to Financial Statements on page 23 hereof
2. See Index to Financial Statement Schedules on page 69 hereof
3. See Exhibit Index beginning on page 71 hereof
Management contracts and compensatory plans and arrangements required
to be filed as an exhibit pursuant to Item 14(c) of Form 10-K are
denoted in the Exhibit Index by an asterisk ("*").
(b) REPORTS ON FORM 8-K
No report on Form 8-K was filed during the fourth quarter of 1995.
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OWENS CORNING
By /s/ G. H. Hiner Date February 14, 1996
Glen H. Hiner, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ G. H. Hiner Date February 14, 1996
Glen H. Hiner, Chairman of the Board
and Chief Executive Officer and Director
/s/ David W. Devonshire Date February 14, 1996
David W. Devonshire, Senior Vice
President and Chief Financial Officer
/s/ Domenico Cecere Date February 14, 1996
Domenico Cecere, Vice President and
President, Roofing/Asphalt, and Controller
(Interim)
/s/ Norman P. Blake Date February 20, 1996
Norman P. Blake, Jr., Director
/s/ William Colville Date February 15, 1996
William W. Colville, Director
/s/ Landon Hilliard Date February 15, 1996
Landon Hilliard, Director
/s/ Trevor Holdsworth Date February 19, 1996
Trevor Holdsworth, Director
/s/ Jon M. Huntsman, Jr. Date February 16, 1996
Jon M. Huntsman, Jr., Director
Date
W. Walker Lewis, Director
/s/ David T. McGovern Date February 20, 1996
David T. McGovern, Director
/s/ Furman C. Mosely Date February 19, 1996
Furman C. Mosely, Jr., Director
/s/ W. Ann Reynolds Date February 15, 1996
W. Ann Reynolds, Director
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INDEX TO FINANCIAL STATEMENTS
Item Page
Report of Independent Public Accountants 24
Summary of Significant Accounting Policies 25-26
Consolidated Statement of Income - for the
years ended December 31, 1995, 1994 and 1993 27-28
Consolidated Balance Sheet - December 31, 1995 and 1994 29-30
Consolidated Statement of Stockholders' Equity -
for the years ended December 31, 1995, 1994, and 1993 31
Consolidated Statement of Cash Flows - for the years
ended December 31, 1995, 1994 and 1993 32-33
Notes to Consolidated Financial Statements
Notes 1 through 22 34-68
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Owens Corning:
We have audited the accompanying consolidated balance sheet
of OWENS CORNING (a Delaware corporation) and subsidiaries
as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Owens Corning and subsidiaries as of December
31, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes 6, 8 and 17 to the consolidated
financial statements, effective January 1, 1994, the Company
changed its methods of accounting for furnace rebuilds,
postretirement benefits other than pensions for its non-U.S.
plans, and postemployment benefits, and effective January 1,
1993, the Company changed its method of accounting for
income taxes.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The
schedule listed in the Index to Financial Statement
Schedules is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required
to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
January 20, 1996
Toledo, Ohio
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OWENS CORNING AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts
of majority owned subsidiaries. Significant intercompany
accounts and transactions are eliminated.
Net Income per Share
Primary net income per share is computed using the weighted
average number of common shares outstanding and common
equivalent shares during the period. Fully diluted net
income per share reflects the dilutive effect of increased
shares that would result from the conversion of debt and
equity securities which are not treated as common stock
equivalents. Unless otherwise indicated, all per share
information included in the notes to the Owens Corning and
subsidiaries' (the "Company") consolidated financial
statements is presented on a fully diluted basis.
Inventory Valuation
Inventories are stated at cost, which is less than market
value, and include material, labor, and manufacturing
overhead. The majority of U.S. inventories are valued using
the last-in, first-out (LIFO) method and the balance of
inventories are generally valued using the first-in, first-
out (FIFO) method.
Intangible Assets
Intangible assets consist primarily of goodwill, patents,
and covenants not to compete and are carried at cost less
accumulated amortization. Goodwill is amortized on a
straight-line basis over a period of forty years. Other
intangible assets are amortized over their estimated useful
lives or actual contractual lives. The Company continually
evaluates whether events and circumstances have occurred
that indicate the remaining estimated useful lives of
intangible assets may warrant revision or that the remaining
balance of these intangible assets may not be recoverable.
When factors indicate that intangible assets should be
evaluated for possible impairment, the Company uses an
estimate of the related business segment's undiscounted net
income over the remaining life of the intangible asset in
measuring whether the intangible asset is recoverable.
Investments in Affiliates
Investments in affiliates are accounted for using the equity
method, under which the Company's share of earnings of these
affiliates is reflected in income as earned and dividends
are credited against the investment in affiliates when
received.
<PAGE>
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OWENS CORNING AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Depreciation
For assets placed in service prior to January 1, 1992, the
Company's plant and equipment is depreciated primarily using
the double-declining balance method for the first half of an
asset's estimated useful life and the straight-line method
is used thereafter. For assets placed in service after
December 31, 1991, the Company's plant and equipment is
depreciated using the straight-line method.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Rebuilding of Glass Melting Furnaces
The Company's glass melting furnaces periodically require
substantial rebuilding. As discussed in Note 17 to the
consolidated financial statements, effective January 1,
1994, the Company adopted the capital method of accounting
for the cost of rebuilding glass melting furnaces. Under
this method, costs are capitalized when incurred and
depreciated over the estimated useful lives of the rebuilt
furnaces.
Derivative Financial Instruments
Gains and losses on hedges of existing assets or liabilities
are included in the carrying amount of those assets or
liabilities and are ultimately recognized in income as part
of those carrying amounts. Gains and losses on hedges of
net investments in foreign subsidiaries are included in
stockholders' equity. Gains and losses related to
qualifying hedges of firm commitments or anticipated
transactions also are deferred and are recognized in income
or as adjustments of carrying amounts when the hedged
transaction occurs. Gains and losses on forward currency
exchange contracts that do not qualify as hedges are
recognized as other income or expense.
Reclassifications
Certain reclassifications have been made to 1994 and 1993 to
conform with the classifications used in 1995.
<PAGE>
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OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars, except share data)
NET SALES $3,612 $3,351 $2,944
COST OF SALES 2,670 2,536 2,266
Gross margin 942 815 678
OPERATING EXPENSES
Marketing and administrative
expenses 444 391 327
Science and technology
expenses (Note 9) 76 71 69
Restructure costs (Note 16) - 89 23
Other (Notes 2, 4, 10 and 16) 10 38 23
Total operating expenses 530 589 442
INCOME FROM OPERATIONS 412 226 236
Cost of borrowed funds
(Notes 2 and 3) 87 94 89
INCOME BEFORE PROVISION FOR
INCOME TAXES 325 132 147
Provision for income taxes
(Note 8) 106 58 47
INCOME BEFORE EQUITY IN NET
INCOME OF AFFILIATES 219 74 100
Equity in net income of affiliates
(Notes 5 and 12) 12 - 5
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 231 74 105
Cumulative effect of accounting
changes (Notes 6, 8 and 17) - 85 26
NET INCOME $231 $159 $131
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE>
-28-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars, except share data)
NET INCOME PER COMMON SHARE:
Primary:
Income before cumulative effect
of accounting changes $ 4.64 $ 1.70 $ 2.40
Cumulative effect of
accounting changes - 1.91 .60
Net income per share $ 4.64 $ 3.61 $ 3.00
Assuming full dilution:
Income before cumulative effect
of accounting changes $ 4.40 $ 1.66 $ 2.28
Cumulative effect of
accounting changes - 1.69 .53
Net income per share $ 4.40 $ 3.35 $ 2.81
Weighted average number of
common shares outstanding and
common equivalent shares during
the period (in millions)
Primary 49.7 44.2 43.6
Assuming full dilution 54.1 50.0 49.4
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE>
-29-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1995 AND 1994
<TABLE>
<S> <C> <C>
ASSETS 1995 1994
(In millions of dollars)
CURRENT
Cash and cash equivalents $ 18 $ 59
Receivables, less allowances
of $19 million in 1995 and
$16 million in 1994 (Note 10) 314 329
Inventories (Note 11) 253 223
Insurance for asbestos litigation
claims - current portion (Note 21) 100 125
Deferred income taxes (Note 8) 70 156
VEBA trust (Note 6) 51 -
Income tax receivable 50 12
Investment in affiliate held for
sale (Note 12) 36 -
Other current assets 35 26
Total current 927 930
OTHER
Insurance for asbestos litigation
claims (Note 21) 330 556
Deferred income taxes (Note 8) 252 308
Goodwill, less accumulated
amortization of $19 million in
1995 and $14 million in 1994
(Note 5) 249 151
Investments in affiliates
(Notes 5 and 12) 50 74
Other noncurrent assets (Note 6) 147 122
Total other 1,028 1,211
PLANT AND EQUIPMENT, at cost
Land 52 51
Buildings and leasehold
improvements 581 553
Machinery and equipment 2,266 2,172
Construction in progress 168 125
3,067 2,901
Less: Accumulated depreciation (1,761) (1,768)
Net plant and equipment 1,306 1,133
TOTAL ASSETS $3,261 $3,274
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE>
-30-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1995 AND 1994
(Continued)
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
(In millions of dollars)
CURRENT
Accounts payable and accrued
liabilities (Note 13) $ 587 $ 598
Reserve for asbestos litigation claims
- current portion (Note 21) 250 300
Short-term debt (Note 3) 64 155
Long-term debt - current portion
(Note 2) 35 20
Total current 936 1,073
LONG-TERM DEBT (Note 2) 794 1,037
OTHER
Reserve for asbestos litigation claims
(Note 21) 887 1,145
Other employee benefits liability
(Note 6) 367 390
Pension plan liability (Note 7) 75 77
Other 220 232
Total other 1,549 1,844
COMMITMENTS AND CONTINGENCIES
(Notes 15, 20 and 21)
COMPANY OBLIGATED CONVERTIBLE
SECURITY OF SUBSIDIARY HOLDING
SOLELY PARENT DEBENTURES
(MIPS, Note 4) 194 -
STOCKHOLDERS' EQUITY
Preferred stock, no par value;
authorized 8 million shares, none
outstanding (Note 19)
Common stock, par value $.10 per share;
authorized 100 million shares; issued
1995--51.4 million and
1994--44.2 million shares
(Notes 2, 5 and 18) 579 348
Deficit (781) (1,012)
Foreign currency translation
adjustments 9 (1)
Other (Note 7) (19) (15)
Total stockholders' equity (212) (680)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $3,261 $3,274
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE>
-31-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
COMMON STOCK
Balance beginning of year $ 348 $ 315 $ 299
Issuance of stock for:
Conversion of
debt (Note 2) 173 - -
Acquisitions (Note 5) 42 27 -
Awards under stock
compensation plans (Note 18) 16 6 16
Balance end of year 579 348 315
DEFICIT
Balance beginning of year (1,012) (1,171) (1,302)
Net income 231 159 131
Balance end of year (781) (1,012) (1,171)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS
Balance beginning of year (1) 5 4
Translation adjustments 10 (6) 1
Balance end of year 9 (1) 5
OTHER
Balance beginning of year (15) (18) (9)
Net increase (decrease) (4) 3 (9)
Balance end of year (19) (15) (18)
STOCKHOLDERS' EQUITY $ (212) $ (680) $ (869)
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE>
-32-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
Net income $ 231 $ 159 $ 131
Reconciliation of net cash provided
by operating activities:
Noncash items:
Cumulative effect of accounting
changes (Notes 6, 8 and 17) - (85) (26)
Provision for depreciation,
amortization, and rebuilding
furnaces (Note 17) 125 118 121
Provision for deferred income taxes
(Note 8) 142 59 10
Other 5 9 10
(Increase) decrease in
receivables (Note 10) 36 21 (22)
(Increase) decrease in inventories (15) 17 4
Increase (decrease) in accounts
payable and accrued liabilities (50) 53 114
Funding of VEBA trust (Note 6) (64) - -
Proceeds from insurance for asbestos
litigation claims 251 87 224
Payments for asbestos litigation
claims (308) (215) (283)
Other (68) 10 (30)
Net cash flow from operations 285 233 253
NET CASH FLOW FROM INVESTING
Additions to plant and equipment (276) (258) (178)
Investment in subsidiaries, net of
cash acquired (Note 5) (81) (120) -
Other (4) 23 -
Net cash flow from investing (361) (355) (178)
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE>
-33-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
NET CASH FLOW FROM FINANCING
(Notes 2, 3 and 4)
Net additions (reductions) to
long-term credit facilities $ 55 $ 10 $ (90)
Other additions to long-term debt 9 145 -
Other reductions to long-term
debt (128) (51) (21)
Net increase (decrease) in
short-term debt (94) 69 26
Issuance of preferred stock of
subsidiary, net of fees 194 - -
Other - 5 11
Net cash flow from financing 36 178 (74)
Effect of exchange rate changes on
cash (1) - -
Net increase (decrease) in cash and
cash equivalents (41) 56 1
Cash and cash equivalents at
beginning of year 59 3 2
Cash and cash equivalents at
end of year $ 18 $ 59 $ 3
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE>
-34-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Segment Data
The Company operates in two industry segments, Building
Materials and Composite Materials, and reports its results
in two ways: by industry segment and by geographic segment.
See Note 5 for detail of 1995 and 1994 acquisitions and
divestitures of businesses.
The industry segments are defined as follows:
Building Materials
Production and sale of glass wool fibers formed
into thermal and acoustical insulation and air
ducts; extruded and expanded polystyrene
insulation; roofing shingles and asphalt materials;
underground storage tanks; windows; and the
rebranded sale of patio doors; vinyl siding and
housewrap.
Composite Materials
Production and sale of glass fiber yarns; rovings,
mats and veils; strand and reinforcement products;
fiber reinforced plastic pipe; and polyester and
vinyl ester resins.
The geographic segment reporting combines the two industry
segments within the major regions: United States, Europe,
and Canada and other.
Intersegment sales are generally recorded at market or
equivalent value. Income (loss) from operations by industry
and geographic segment consists of net sales less related
costs and expenses. In computing income (loss) from
operations by segment, cost of borrowed funds and other
general corporate income and expenses have been excluded.
Certain corporate operating expenses directly traceable to
industry and geographic segments have been allocated to
those segments.
During the first quarter of 1994, the Company recorded a
$117 million pretax charge for productivity initiatives and
other actions (Note 16). The impact of this charge was to
reduce income from operations for Building Materials and
Composite Materials by $70 million and $22 million,
respectively, and to increase general corporate expense by
$25 million. Geographically, income from operations for
Building Materials in the United States and Canada and other
was reduced by $50 million and $20 million, respectively.
Income from operations for Composite Materials in the United
States, Europe, and Canada and other was reduced by $6
million, $13 million, and $3 million, respectively. During
the first quarter of 1993, the Company recorded a $23
million charge to reorganize its European operations, the
full impact of which was reflected as a reduction to income
from operations for the Composite Materials segment (Note
16).
<PAGE>
-35-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
Identifiable assets by industry and geographic segment are
those assets that are used in the Company's operations in
each industry and geographic segment and do not include
general corporate assets. General corporate assets consist
primarily of cash and cash equivalents, VEBA trust, deferred
taxes, asbestos insurance, and corporate property and
equipment.
<TABLE>
<S> <C> <C> <C>
NET SALES 1995 1994 1993
(In millions of dollars)
Industry Segments
Building Materials
United States $2,033 $1,952 $1,699
Europe 264 182 97
Canada and other 107 139 150
Total Building Materials 2,404 2,273 1,946
Composite Materials
United States 610 595 528
Europe 459 355 346
Canada and other 139 128 124
Total Composite Materials 1,208 1,078 998
Intersegment sales
Building Materials - - -
Composite Materials 96 99 85
Eliminations (96) (99) (85)
Net sales $3,612 $3,351 $2,944
Geographic Segments
United States $2,643 $2,547 $2,227
Europe 723 537 443
Canada and other 246 267 274
3,612 3,351 2,944
Intersegment sales
United States 54 43 42
Europe 21 22 15
Canada and other 88 91 66
Eliminations (163) (156) (123)
Net sales $3,612 $3,351 $2,944
</TABLE>
<PAGE>
-36-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
<TABLE>
<S> <C> <C> <C>
INCOME (LOSS) FROM OPERATIONS 1995 1994 1993
(In millions of dollars)
Industry Segments
Building Materials
United States $195 $145 $153
Europe 29 26 16
Canada and other 13 18 6
Total Building Materials 237 189 175
Composite Materials
United States 135 108 101
Europe 64 (8) (15)
Canada and other 26 9 12
Total Composite Materials 225 109 98
General corporate expense (50) (72) (37)
Income from operations 412 226 236
Cost of borrowed funds (87) (94) (89)
Income before provision
for income taxes $325 $132 $147
Geographic Segments
United States $330 $253 $254
Europe 93 18 1
Canada and other 39 27 18
General corporate expense (50) (72) (37)
Income from operations 412 226 236
Cost of borrowed funds (87) (94) (89)
Income before provision
for income taxes $325 $132 $147
</TABLE>
<PAGE>
-37-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
<TABLE>
<S> <C> <C> <C>
IDENTIFIABLE ASSETS AT 1995 1994 1993
DECEMBER 31, (In millions of dollars)
Industry Segments
Building Materials
United States $ 893 $ 718 $ 596
Europe 170 162 46
Canada and other 194 136 155
Total Building Materials 1,257 1,016 797
Composite Materials
United States 361 326 302
Europe 388 335 256
Canada and other 145 160 157
Total Composite Materials 894 821 715
General corporate 1,024 1,363 1,438
3,175 3,200 2,950
Investments in affiliates
accounted for under the
equity method 86 74 63
Total assets $3,261 $3,274 $3,013
Geographic Segments
United States $1,254 $1,044 $ 898
Europe 558 497 302
Canada and other 339 296 312
General corporate 1,024 1,363 1,438
3,175 3,200 2,950
Investments in affiliates
accounted for under the
equity method 86 74 63
Total assets $3,261 $3,274 $3,013
</TABLE>
<PAGE>
-38-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
<TABLE>
<S> <C> <C> <C>
PROVISION FOR DEPRECIATION, 1995 1994 1993
AMORTIZATION, AND REBUILDING (In millions of dollars)
FURNACES
Industry Segments
Building Materials
United States $ 49 $ 48 $ 47
Europe 11 6 2
Canada and other 8 8 11
Total Building Materials 68 62 60
Composite Materials
United States 22 22 24
Europe 18 17 16
Canada and other 7 8 10
Total Composite Materials 47 47 50
General corporate 10 9 11
Total provision for
depreciation, amortization,
and rebuilding furnaces $125 $118 $121
Geographic Segments
United States $ 71 $ 70 $ 71
Europe 29 23 18
Canada and other 15 16 21
General corporate 10 9 11
Total provision for
depreciation, amortization,
and rebuilding furnaces $125 $118 $121
</TABLE>
<PAGE>
-39-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
<TABLE>
<S> <C> <C> <C>
ADDITIONS TO PLANT AND EQUIPMENT 1995 1994 1993
(In millions of dollars)
Industry Segments
Building Materials
United States $ 60 $ 85 $ 82
Europe 36 41 2
Canada and other 33 7 5
Total Building Materials 129 133 89
Composite Materials
United States 37 41 31
Europe 39 35 32
Canada and other 18 26 7
Total Composite Materials 94 102 70
General corporate 53 23 19
Total additions $ 276 $ 258 $ 178
Geographic Segments
United States $ 97 $ 126 $ 113
Europe 75 76 34
Canada and other 51 33 12
General corporate 53 23 19
Total additions $ 276 $ 258 $ 178
</TABLE>
<PAGE>
-40-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt
<TABLE>
<S> <C> <C>
1995 1994
(In millions of dollars)
Unsecured U.S. credit facility due in
1997, variable $ 55 $ 35
Unsecured European credit facilities due
through 2002, variable 40 -
Unsecured Canadian credit facility due in
1997, variable - 4
Guaranteed debentures due in 2001, 10% 150 150
Debentures due in 2002, 8.875% 150 150
Debentures due in 2012, 9.375% 150 149
Guaranteed debentures due in 1998, 9.8% 100 100
Eurobonds due through 2001, 9.814%
(Note 20) 63 140
Bonds due in 2000, 7.25%, payable in
Deutsche marks (Note 20) 50 50
Convertible junior subordinated debentures
due in 2005, 8%, convertible at $29.75
per share - 173
Notes due through 2002, 6.06% to 8.50%,
payable in foreign currencies 26 38
Other long-term debt due through 2012, at
rates from 5.375% to 12.47% 45 68
829 1,057
Less: Current portion (35) (20)
Total long-term debt $ 794 $1,037
</TABLE>
The U.S. credit facility has a maximum commitment of $475
million at December 31, 1995, of which $176 million was used
for standby letters of credit and $244 million was unused.
The rate of interest is either the bank's base rate, or
13/16% over the certificate of deposit rate, or 11/16% over
the London Interbank Offered Rate (LIBOR). The weighted
average rate of interest paid on borrowings under this
facility during 1995 was 6.9%, (8.5% at December 31, 1995).
A commitment fee of 1/4 of 1% is charged on the unused
portions of this facility.
The Canadian credit facility is payable in Canadian dollars
and has a maximum commitment of 135 million Canadian dollars
($99 million U.S. dollars), all of which was unused at
December 31, 1995. The rate of interest is either 11/16%
over the Canadian cost of funds rate, or 11/16% over LIBOR
on U.S. deposits, or .7875% over the Canadian bankers'
acceptance rate. A commitment fee of 1/4 of 1% is charged on
the unused portions of this facility.
<PAGE>
-41-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt (Continued)
The European credit facilities, payable in Belgian francs,
have an aggregate commitment of 1.6 billion Belgian francs
($55 million U.S. dollars) of which 400 million Belgian
francs ($15 million U.S. dollars) was unused at December 31,
1995. The rate of interest on the facilities ranges from
4.28% to 4.51% at December 31, 1995. The commitment fee on
the unused portions of the facilities range from 3/20 to 1/4
of 1%.
As is typical for bank credit facilities, the agreements
relating to the facilities described above contain
restrictive covenants, including requirements for the
maintenance of working capital, interest coverage, and
minimum coverage of fixed charges; and limitations on the
early retirement of subordinated debt, additional
borrowings, certain investments, payment of dividends, and
purchase of Company stock. The agreements include a
provision which would result in all of the unpaid principal
and accrued interest of the facilities becoming due
immediately upon a change of control in ownership of the
Company. A material adverse change in the Company's
business, assets, liabilities, financial condition or
results of operations constitutes a default under the
agreements.
During 1995, the Company's $173 million issue of 8%
convertible junior subordinated debentures were converted.
The conversion resulted in the issuance of 5.8 million new
shares of common stock. In conjunction with the conversion
of the debentures, the Company paid fees of approximately $3
million which are reflected as other expenses on the
Company's consolidated statement of income for the year
ended December 31, 1995.
In November 1994, Owens-Corning Finance (U.K.) PLC, a wholly-
owned subsidiary of the Company, issued $140 million of
Eurobonds. These bonds are convertible into fixed rate
preference shares of Owens-Corning Finance (U.K.) PLC in
November 2004 and may be redeemed at any time, at a premium,
at the option of the Company. The bonds are guaranteed by
the Company as to payments of principal and interest and
rank similarly with all other senior unsecured debt of the
Company. Subsequently, in a separate transaction, the
Company sold a put option to the holder of the bonds
allowing the option holder to require the Company to
purchase a portion of the bonds. As a result of the
holder's exercise of the put option, in May 1995, the
Company repurchased a portion of the $140 million issue of
Eurobonds for $77 million.
<PAGE>
-42-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt (Continued)
The aggregate maturities and sinking fund requirements for
all long-term debt issues for each of the five years
following December 31, 1995 are:
<TABLE>
<S> <C> <C>
Credit Other Long-
Year Facilities Term Debt
(In millions of dollars)
1996 $ - $ 35
1997 63 19
1998 8 112
1999 8 12
2000 6 75
</TABLE>
3. Short-Term Debt
<TABLE>
<S> <C> <C>
1995 1994
(In millions of dollars)
Balance outstanding at December 31 $ 64 $ 155
Weighted average short-term
borrowings $ 184 $ 165
Weighted average interest rates on
short-term debt outstanding at
December 31 7.5% 6.6%
</TABLE>
In May 1995 the Company repaid its unsecured, variable rate,
short-term bank credit facility that was used to finance the
1994 U.K. acquisition (Note 5). This facility had a maximum
commitment of $110 million at December 31, 1994, all of
which was used. The rate of interest on borrowings under
this facility was 1/2 of 1% over LIBOR, or 6.6875% at
December 31, 1994.
In December 1995 the Company entered into two revolving
credit agreements. Each quarter during 1996, the Company
may borrow up to a predetermined amount from $13 million to
$16 million. The amount borrowed may be repaid in U.S.
dollars at less than or equal to the original borrowing,
based upon predetermined British pound or Belgian franc
currency exchange rates. The agreements are in effect
through 1996 and bear interest at market rates in effect at
the time of each borrowing.
The Company had unused short-term lines of credit totalling
$239 million and $91 million at December 31, 1995 and 1994,
respectively.
<PAGE>
-43-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Convertible Monthly Income Preferred Securities (MIPS)
In May 1995, Owens-Corning Capital, L.L.C. ("OC Capital"), a
Delaware limited liability company, all of the common
limited liability company interests in which are owned
indirectly by the Company, completed a private offering of 4
million shares of Convertible Monthly Income Preferred
Securities ("preferred securities"). The aggregate purchase
price for the offering was $200 million. In conjunction
with the offering, the Company incurred $6 million in
issuance costs.
The preferred securities are guaranteed in certain respects
by the Company and are convertible, at the option of the
holders, into Company common stock at the rate of 1.1416
shares of Company common stock for each preferred security
(equivalent to a conversion price of $43.80 per common
share). OC Capital cannot initiate any action relating to
conversion until after June 1, 1998. Distributions on the
preferred securities are cumulative and are payable at the
annual rate of 6-1/2 percent of the liquidation preference
of $50 per preferred security. Distributions of $8 million
have been recorded as other expenses on the Company's
consolidated statement of income for the year ended December
31, 1995.
The Company issued $200 million of 6-1/2 percent Convertible
Subordinated Debentures due 2025 to OC Capital, which
represents the sole asset of OC Capital, in exchange for the
proceeds of the offering. The Company used the proceeds to
repay the $110 million short-term bank credit facility
utilized for the 1994 U.K. acquisition (Note 5), with the
balance used to reduce borrowings under the Company's
revolving credit facilities.
5. Acquisitions and Divestitures of Businesses
During 1995 and 1994, the Company made several acquisitions
in the Building Materials segment in the United States and
Europe, which were consummated through the exchange of
various combinations of common stock and cash. The
aggregate purchase price including possible subsequent
contingent consideration was $126 million and $155 million
for 1995 and 1994, respectively. The 1995 acquisitions
exchanged 946,922 shares of the Company's common stock and
$82 million in cash which includes $1 million to be paid in
the first quarter of 1996 and the 1994 acquisitions
exchanged 855,556 shares of the Company's common stock and
$120 million in cash, net of cash acquired, for all of the
assets and liabilities of the companies acquired. The
incremental sales from the acquisitions, in the year of
acquisition, were $41 million and $134 million for the years
ended December 31, 1995 and 1994, respectively.
The largest of these acquisitions was the 1994 second
quarter acquisition of Pilkington Insulation Limited and
Kitsons Insulation Products Limited (collectively, "the U.K.
acquisition"), the United Kingdom based insulation
manufacturing and industrial supply businesses of Pilkington
PLC. Acquiring two glass fiber insulation manufacturing
facilities, one rock wool manufacturing facility and 14
distribution centers, the Company now represents the United
Kingdom's largest manufacturer of glass fiber and rock wool
insulation is a major
<PAGE>
-44-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Acquisitions and Divestitures of Businesses (Continued)
supplier of thermal and acoustical insulation products to
the United Kingdom construction industry. The purchase
price of the U.K. acquisition was $110 million and was
financed with borrowings from the Company's short-term bank
credit facility (Note 3).
All acquisitions were accounted for under the purchase
method of accounting, whereby the assets acquired and
liabilities assumed have been recorded at their fair values
and the results of operations for the acquisitions have been
included in the Company's consolidated financial statements
subsequent to the acquisition dates.
The purchase price allocations were based on preliminary
estimates of fair market value and are subject to revision.
The 1995 acquisitions included goodwill of $97 million and
non-competition agreements of $3 million. The 1994
acquisitions included goodwill of $78 million and non-
competition agreements of $6 million.
The goodwill and non-competition agreements are being
amortized on a straight-line basis over 40 years and 7
years, respectively. The pro forma effect of the
acquisitions was not material to net income for the years
ended December 31, 1995, 1994 or 1993.
On September 30, 1994, the Company entered into a joint
venture with Alpha Corporation of Tennessee, whereby the two
companies combined their existing resin businesses to form
Alpha/Owens-Corning, L.L.C., the largest manufacturer of
polyester resins in North America. The Company contributed
two manufacturing plants (Valparaiso, Indiana and Guelph,
Ontario) and owns a 50 percent interest in the joint
venture. This joint venture is being accounted for under
the equity method. For the nine months ended September 30,
1994 and the year ended December 31, 1993, resin sales
totaled $58 million and $63 million, respectively, and were
included in the Composite Materials segment.
Late in the fourth quarter of 1994, the Company completed
the sale of its underground storage tank manufacturing
business. Sales for this business totaled $41 million and
$43 million in 1994 and 1993, respectively, and were
included in the Building Materials segment.
6. Postemployment and Postretirement Benefits Other Than Pensions
The Company and its subsidiaries maintain health care and
life insurance benefit plans for certain retired employees
and their dependents. The health care plans in the U.S. are
unfunded and pay either 1) stated percentages of covered
medically necessary expenses, after subtracting payments by
Medicare or other providers and after stated deductibles
have been met or, 2) fixed amounts of medical expense
reimbursement. Employees become eligible to participate in
the health care plans upon retirement under one of the
Company's pension plans if they have accumulated 10
years of service after age 45. Some of the plans
are
<PAGE>
-45-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Postemployment and Postretirement Benefits Other Than Pensions (Continued)
contributory, with some retiree contributions adjusted
annually. The Company has reserved the right to change or
eliminate these benefit plans subject to the terms of
collective bargaining agreements during their term.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions"
for its non-U.S. plans. Accordingly, the projected cost of
postretirement benefits is charged to expense during the
years in which eligible employees render service. The
cumulative effect of the adoption of this standard was a
charge of $10 million, or $.20 per share. (The Company
adopted Statement No. 106 for its U.S. plans effective
January 1, 1991.)
During 1993, the Company approved changes in its
postretirement health care plans for retirees and active
employees. These changes, which reduced the accumulated
benefit obligation by $120 million and 1993 expense by $18
million, resulted in an unrecognized net reduction in prior
service cost which will be amortized through 1999.
The following table reconciles the status of the accrued
postretirement benefits cost liability at October 31, 1995
and 1994, as reflected on the balance sheet as of December
31, 1995 and 1994:
<TABLE>
<S> <C> <C>
1995 1994
(In millions of dollars)
Accumulated Postretirement Benefits Obligation:
Retirees $ (194) $ (176)
Fully eligible active plan participants (21) (24)
Other active plan participants (54) (46)
Funded status (269) (246)
Unrecognized net gain (11) (39)
Unrecognized net reduction in prior service
cost (72) (88)
Benefit payments subsequent to the valuation
date (October 31) 3 3
Accrued postretirement benefits cost liability
(includes current liabilities of $19 million
in 1995 and 1994) $ (349) $ (370)
</TABLE>
<PAGE>
-46-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Postemployment and Postretirement Benefits Other Than Pensions (Continued)
For measurement purposes, a 10.5% annual rate of increase in
the per capita cost of covered health care claims was
assumed for 1996. The rate was assumed to decrease to 10%
for 1997, then decrease gradually to 6.0% by 2005. The
health care cost trend rate assumption has a significant
effect on the amounts reported. To illustrate, increasing
the assumed health care cost trend rate by one percentage
point in each year would increase the accumulated
postretirement benefits obligation as of October 31, 1995,
by $14 million and the aggregate of the service and interest
cost components of net postretirement benefits cost for the
year then ended by $2 million. The discount rate used in
determining the accumulated postretirement benefits
obligation was 7.5% in 1995, 8.5% in 1994, and 7.5% in 1993.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits." This standard
requires the Company to recognize the obligation to provide
benefits to former or inactive employees after employment
but before retirement under certain conditions. These
benefits include, but are not limited to, salary
continuation, supplemental unemployment benefits, severance
benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation
of benefits such as health care and life insurance coverage.
The cumulative effect of the adoption of this standard,
recorded in 1994, was an undiscounted charge of $28 million,
or $.56 per share, net of related income taxes of $18
million.
The following table reconciles the status of the accrued
postemployment benefits cost liability at October 31, 1995
and 1994, as reflected on the balance sheet as of December
31, 1995 and 1994:
<TABLE>
<S> <C> <C>
1995 1994
(In millions of dollars)
Funded status $ (40) $ (45)
Unrecognized net gain (2) -
Benefit payments subsequent to the
valuation date (October 31) 1 1
Accrued postemployment benefit cost
liability (includes current liabilities
of $4 million in 1995 and $5 million
in 1994) $ (41) $ (44)
</TABLE>
The net postemployment benefits expense was $2 million and
$3 million for 1995 and 1994, the year of adoption,
respectively.
<PAGE>
-47-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Postemployment and Postretirement Benefits Other Than Pensions (Continued)
The net postretirement benefits cost for 1995, 1994 and 1993
included the following components:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
Service cost $ 7 $ 8 $ 7
Interest cost on accumulated post-
retirement benefits obligation 19 19 23
Net amortization and deferral (24) (20) (13)
Net postretirement benefits cost $ 2 $ 7 $ 17
</TABLE>
In December 1995, the Company established and funded a
Voluntary Employees' Beneficiary Association (VEBA) trust to
cover certain employee welfare and postretirement benefits
in the amount of $64 million, of which $13 million has been
classified as long-term.
7. Pension Plans
The Company has several defined benefit pension plans
covering most employees. Under the plans, pension benefits
are generally based on an employee's number of years of
service. Company contributions to these pension plans are
based on the calculations of independent actuaries using the
projected unit credit method. Plan assets consist primarily
of equity securities with the balance in fixed income
investments or insurance contracts. The unrecognized cost
of retroactive amendments and actuarial gains and losses are
amortized over the average future service period of plan
participants expected to receive benefits.
In August of 1995, the Company amended the pension plan for
U.S. salaried employees to change from a final average pay
formula to a cash balance formula. The new plan provisions
become effective on January 1, 1996. The change resulted in
a reduction in the projected benefit obligation of $20
million. The change is expected to reduce pension expense
in the future through the amortization of the reduction in
the projected benefit obligation, reduced service cost and
reduced interest cost on the projected benefit obligation.
The reduction in pension expense for 1996 is expected to be
$11 million. The impact on pension expense for 1995 was a
reduction of $4 million.
<PAGE>
-48-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Pension Plans (Continued)
Pension expense for the Company's defined benefit pension
plans includes the following:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
Service cost $ 20 $ 22 $ 23
Interest cost on projected benefit
obligation 64 58 62
Actual return on plan assets (114) (13) (124)
Net amortization and deferral 30 (64) 50
Net pension expense $ - $ 3 $ 11
</TABLE>
The funded status at October 31, 1995 and 1994 is as
follows:
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
(In millions of dollars)
Over Under Over Under
Funded Funded Funded Funded
Vested benefit obligation $ 359 $ 312 $ 310 $ 273
Accumulated benefit obligation $ 395 $ 355 $ 341 $ 343
Plan assets at fair value $ 500 $ 316 $ 466 $ 306
Projected benefit obligation 447 365 430 352
Plan assets in excess of (less than)
projected benefit obligation 53 (49) 36 (46)
Unrecognized loss 15 59 8 55
Unrecognized prior service cost (30) (31) (12) (24)
Unrecognized transition amount (35) (11) (39) (13)
Adjustment to minimum liability - (7) - (12)
Net pension liability (includes
current liabilities of $2 million
in 1995 and $8 million in 1994
and noncurrent assets of $41
million in 1995 and $38 million
in 1994) $ 3 $ (39) $ (7) $ (40)
</TABLE>
<PAGE>
-49-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Pension Plans (Continued)
The 1995, 1994 and 1993 primary actuarial assumptions used
for pension plans were:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Discount rate 7.5% 8.5% 7.5%
Expected long-term rate of return
on plan assets 9.0% 9.5% 10.0%
Rate of compensation increase 5.1% 5.1% 4.1%
</TABLE>
The Company also sponsors defined contribution plans
available to substantially all U.S. employees. Company
contributions for the plans are based on matching a
percentage of employee savings up to a maximum savings
level. The Company's contributions were $12 million in
1995, $10 million in 1994, and $9 million in 1993.
8. Income Taxes
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Statement No. 109 changed the criteria for
measuring the provision for income taxes and recognizing
deferred tax assets and liabilities. Deferred tax assets and
liabilities are determined based on the difference between
the financial statement and tax bases of corresponding
liabilities and assets using enacted tax rates in effect for
the year in which the differences are expected to reverse.
The cumulative effect of the adoption of this standard,
recorded in 1993, was an increase to earnings of $26
million, or $.53 per share.
<PAGE>
-50-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Income Taxes
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
Income (loss) before provision
(credit) for income taxes:
U.S. $ 226 $ 119 $ 163
Foreign 99 13 (16)
Total $ 325 $ 132 $ 147
Provision (credit) for income taxes:
Current
U.S. $ (45) $ (2) $ 24
State and local (4) (7) 7
Foreign 13 5 6
Total current (36) (4) 37
Deferred
U.S. 113 51 27
State and local 15 13 1
Foreign 14 (2) (4)
Total deferred 142 62 24
Adjustment to deferred tax assets and
liabilities for an increase in the U.S.
federal statutory rate - - (14)
Total provision for income taxes $ 106 $ 58 $ 47
</TABLE>
The reconciliation between the U.S. federal statutory rate
and the Company's effective income
tax rate is:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
U.S. federal statutory rate 35% 35% 35%
Operating losses of foreign subsidiaries - 7 10
Utilization of research and development
credits (3) - -
Utilization of operating loss carryforwards - (7) (2)
Utilization of tax loss carryback (2) - -
Enacted federal tax rate change - - (10)
State and local income taxes 2 3 3
Other 1 6 (4)
Effective tax rate 33% 44% 32%
</TABLE>
<PAGE>
-51-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Income Taxes (Continued)
As of December 31, 1995, the Company has not provided for
withholding or U.S. federal income taxes on approximately
$196 million of accumulated undistributed earnings of its
foreign subsidiaries as they are considered by management to
be permanently reinvested. If these undistributed earnings
were not considered to be permanently reinvested,
approximately $25 million of deferred income taxes would
have been provided.
During 1995 and 1994, the Company utilized tax net operating
loss carryforwards for certain of its foreign subsidiaries
of approximately $2 million and $9 million, respectively.
At December 31, 1995 and 1994, the Company had tax net
operating loss carryforwards for certain of its foreign
subsidiaries of approximately $27 million, certain of which
expire through 1999.
The cumulative temporary differences giving rise to the
deferred tax assets and liabilities at December 31, 1995 and
1994 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
Deferred Deferred
Deferred Tax Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
(In millions of dollars)
Asbestos litigation claims $ 244 $ - $ 306 $ -
Other employee benefits 160 - 171 -
Depreciation - 116 - 138
Warranty and product liability
reserves 27 - 29 -
Operating loss carryforwards 27 - 27 -
State and local taxes - 21 - 20
Other 60 39 122 6
Subtotal 518 176 655 164
Valuation allowances (20) - (27) -
Total deferred $ 498 $ 176 $ 628 $ 164
Management fully expects to realize its net deferred tax
assets through income from future operations.
</TABLE>
9. Science and Technology Expenses
Science and technology expenses include research and
development costs of $69 million in 1995, $64 million in
1994, and $61 million in 1993. In addition to research and
development costs, science and technology expenses include
continuing commercial activities such as engineering and
product modifications for special applications and testing.
<PAGE>
-52-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Accounts Receivable Securitization
In 1994 and 1995, the Company sold certain accounts
receivable of its Building Materials operations to a 100%
owned subsidiary, Owens-Corning Funding Corporation ("OC
Funding"). In December 1994, OC Funding entered into a
three-year agreement whereby it can sell, on a revolving
basis, an undivided percentage ownership interest in a
designated pool of accounts receivable up to a maximum of
$100 million. At December 31, 1995 and 1994, $100 million
and $50 million, respectively, have been sold under this
agreement and the sale has been reflected as a reduction of
accounts receivable in the Company's consolidated balance
sheet. The discount of $6 million on the receivables sold
has been recorded as other expenses on the Company's
consolidated statement of income for the year ended December
31, 1995.
The Company maintains an allowance for doubtful accounts
based upon the expected collectibility of all consolidated
trade accounts receivable, including receivables sold by OC
Funding.
11. Inventories
Inventories are summarized as follows:
<TABLE>
<S> <C> <C>
1995 1994
(In millions of dollars)
Finished goods $ 210 $ 192
Materials and supplies 127 118
FIFO inventory 337 310
Less: Reduction to LIFO basis (84) (87)
$ 253 $ 223
</TABLE>
Approximately $175 million of FIFO inventories were valued
using the LIFO method at December 31, 1995 and 1994.
During 1995, 1994, and 1993, certain inventories were
reduced, resulting in the liquidation of LIFO inventory
layers carried at lower costs in prior years as compared
with the current cost of inventory. The effect of these
inventory reductions was to reduce 1995, 1994, and 1993 cost
of sales by $7 million, $3 million, and $1 million,
respectively.
<PAGE>
-53-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. Investments in Affiliates
At December 31, 1995 and 1994, the Company's affiliates,
which generally are engaged in the manufacture of fibrous
glass and related products for the insulation, construction,
reinforcements, and textile markets, include:
<TABLE>
<S> <C> <C>
Percent Ownership
1995 1994
COMPOSITES:
Alpha/Owens-Corning, L.L.C. (USA) 50% 50%
Knytex Company, L.L.C. (USA) 50% 50%
Vitro-Fibras, S.A. (Mexico) 40% 40%
GLOBAL PIPE:
Amiantit Fiberglass Industries, Ltd. (Saudi Arabia) 30% 30%
Owens-Corning Eternit Rohre GmbH (Germany) 50% 50%
Owens-Corning Pipe Botswana (Pty.), Ltd.
(Botswana) 46% 49%
Owens-Corning Tubs S.A. (Spain) 50% 50%
Owens-Corning Canos, S.A. (Argentina) 50% -
BUILDING MATERIALS - EUROPE:
Arabian Fiberglass Insulation Company, Ltd.
(Saudi Arabia) 49% 49%
ASIA PACIFIC:
Asahi Fiber Glass Company, Ltd. (Japan) 28% 28%
LG Owens-Corning Corp. (Korea) 31% 30%
Siam Fiberglass Co., Ltd. (Thailand) 20% 20%
</TABLE>
<PAGE>
-54-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. Investments in Affiliates (Continued)
The following table provides summarized financial
information on a combined 100% basis for the Company's
affiliates accounted for under the equity method:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
At December 31:
Current assets $ 338 $ 328 $ 214
Noncurrent assets 472 513 387
Current liabilities 403 331 240
Noncurrent liabilities 253 250 147
For the year:
Net sales 962 630 486
Gross margin 178 96 81
Net income 47 7 16
</TABLE>
The Company's equity in undistributed net income of
affiliates was $36 million at December 31, 1995.
Subsequent to year end, the Company sold all of its interest
in Asahi Fiber Glass Company, Ltd. for approximately $50
million, and realized a pretax gain in excess of $25
million.
13. Accounts Payable and Accrued Liabilities
<TABLE>
<S> <C> <C>
1995 1994
(In millions of dollars)
Accounts payable $ 309 $ 298
Payroll and vacation pay 87 117
Payroll, property, and miscellaneous
taxes 39 30
Other employee benefits liability (Note 6) 23 24
Other 129 129
$ 587 $ 598
</TABLE>
<PAGE>
-55-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. Consolidated Statement of Cash Flows
Cash payments, net of refunds, for income taxes and cost of
borrowed funds are summarized as follows:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
(In millions of dollars)
Income taxes $ (34) $ (4) $ 43
Cost of borrowed funds 94 97 95
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
See Notes 2 and 5 for supplemental disclosure of Non-cash
Investing and Financing Activities.
15. Leases
The Company leases certain manufacturing equipment and
office and warehouse facilities under operating leases, some
of which include cost escalation clauses, expiring on
various dates through 2015. Total rental expense charged to
operations was $63 million in 1995, $54 million in 1994, and
$42 million in 1993. At December 31, 1995, the minimum
future rental commitments under noncancellable leases
payable over the remaining lives of the leases are:
</TABLE>
<TABLE>
<S> <C>
Minimum Future
Period Rental Commitments
(In millions of dollars)
1996 $ 52
1997 52
1998 40
1999 20
2000 18
2001 through 2015 134
$ 316
</TABLE>
<PAGE>
-56-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. Restructuring of Operations and Other Initiatives
During the first quarter of 1994, the Company recorded a
$117 million pretax charge for productivity initiatives and
other actions aimed at reducing costs and enhancing the
Company's speed, focus, and efficiency. This $117 million
pretax charge is comprised of an $89 million charge
associated with the restructuring of the Company's business
segments, as well as a $28 million charge, primarily
composed of final costs associated with the administration
of the Company's former commercial roofing business. The
components of the $89 million restructure include: $44
million for personnel reductions, $20 million for
divestiture of non-strategic businesses and facilities, $22
million for business realignments, and $3 million for other
actions. The $44 million cost for personnel reductions
primarily represents severance costs associated with the
elimination of nearly 400 positions worldwide. The primary
employee groups affected include science and technology
personnel, field sales personnel, corporate administrative
personnel, and commercial roofing and resin business
personnel.
As of December 31, 1995, the Company has recorded
approximately $82 million in costs against its 1994
restructure reserve, of which $67 million represents actual
cash expenditures and $15 million represents the non-cash
effects of asset write-offs and business realignments. The
$67 million cash expenditure includes severance costs of $42
million, divestiture or realignment of businesses and
facilities costs of $22 million, and $3 million for other
actions.
During the first quarter of 1993, the Company recorded a $23
million charge to reorganize its European operations. This
charge included $17 million for personnel reductions and $6
million for the writedown of fixed assets.
17. Glass Melting Furnace Rebuilds
Effective January 1, 1994, the Company adopted the capital
method of accounting for the cost of rebuilding glass
melting furnaces. Under this method, costs are capitalized
when incurred and depreciated over the estimated useful
lives of the rebuilt furnaces. Previously, the Company
established a reserve for the future rebuilding costs of its
glass melting furnaces through a charge to earnings between
dates of rebuilds. The change to the capital method
provides a more appropriate measure of the Company's capital
investment and is consistent with industry practice. The
cumulative effect of this change in accounting method was an
increase to earnings of $123 million, or $2.45 per share,
net of related income taxes of $54 million. The effect of
this change in accounting method was to increase
depreciation expense and eliminate furnace rebuild
provision. The pro forma effect of this change was not
material to net income for the year ended December 31, 1993.
<PAGE>
-57-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Stock Compensation Plans
The Company's Stock Performance Incentive Plan (SPIP) and
the Owens-Corning 1995 Stock Plan, (collectively, the
"Plans"), permit up to two percent and one percent,
respectively, of common shares outstanding at the beginning
of each calendar year to be awarded as stock options and
restricted stock (with 25% of this amount as the maximum
permitted number of restricted stock awards). The Company
may carry forward, independently for each plan, unused
shares from prior years and may increase the shares
available for awards in any calendar year through an advance
of up to 25% of the subsequent year's allocation (determined
by using 25% of the current year's allocation). These
shares are also subject to the 25% limit for restricted
stock awards. During 1995, the total number of shares
available under the Plans for stock awards was 1,565,004
shares, 1,006,950 of which were awarded as stock options and
232,224 as restricted stock, which includes an advance of
54,355 shares from the 1996 allocation for SPIP. 599,840
shares are also available to be awarded under a prior plan;
however, the Company does not expect any awards to be made
under that plan.
Additionally, the Company has a plan to award stock options
and deferred stock awards to nonemployee directors, of which
95,500 shares were available for this purpose as of December
31, 1995. In 1995, 10,000 options and 4,000 stock awards
were granted, of which 2,000 were issued in conjunction with
the plan for nonemployee directors.
During 1994, the total number of shares available for stock
awards for SPIP was 1,075,752 shares, 894,000 of which were
awarded as stock options and 59,450 as restricted stock,
which included an advance of 93,478 shares from the 1995
allocation. Additionally, in 1994, 8,500 options and 4,000
stock awards were granted, of which 2,000 were issued in
conjunction with the plan for nonemployee directors.
Stock Options
Activity during 1995 and 1994 in shares under option:
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
Number Price Number Price
of Range per of Range per
Shares Share Shares Share
Beginning of year 3,290,454 $17.86-47.00 2,560,826 $17.86-47.00
Options granted 1,016,950 31.50-45.00 902,500 28.50-34.88
Options exercised (300,663) 17.86-40.50 (137,059) 18.75-30.63
Options cancelled (63,631) 30.63-40.50 (35,813) 26.75-40.50
End of year 3,943,110 $17.86-47.00 3,290,454 $17.86-47.00
Exercisable 2,107,427 $17.86-47.00 1,619,119 $17.86-47.00
</TABLE>
-58-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Stock Compensation Plans (Continued)
Option prices represent the market price at date of grant.
Shares issued under options are recorded in the common stock
accounts at the option price. Options granted vest ratably
through 1998 for the SPIP plan and, as determined by the
compensation committee, for the Owens-Corning 1995 Stock
Plan.
Deferred Stock Awards
At December 31, 1995, the Company had 15,711 shares of
deferred stock outstanding, all of which were vested.
During 1995, 2,000 shares of deferred stock were granted,
and 2,629 shares were issued.
Compensation expense is measured based on the market price
of the stock at date of grant and is recognized on a
straight-line basis over the vesting period.
Restricted Stock Awards
At December 31, 1995, the Company had 448,973 shares of
restricted stock outstanding. Stock restrictions lapse,
subject to alternate vesting plans for approved early
retirement and involuntary termination, over various periods
ending in 2005.
19. Share Purchase Rights
Each outstanding share of the Company's common stock
includes a preferred share purchase right. Each right
entitles the holder to buy from the Company one one-
hundredth of a share of Series A Participating Preferred
Stock of the Company at a price of $50. The Board of
Directors has designated 750,000 shares of the Company's
authorized preferred stock as Series A Participating
Preferred Stock. There are currently no preferred shares
outstanding.
Rights become exercisable and detach from the common stock
ten days after a person or group acquires, or announces a
tender offer for, 20% or more of the Company's outstanding
shares of common stock. The rights expire on
December 30, 1996, unless redeemed earlier by the Company.
The rights are redeemable by the Company at one cent each at
any time prior to ten days following public announcement or
notice to the Company that an acquiring person or group has
purchased 20% or more of the Company's outstanding common
stock. If the Company is acquired in a merger or other
business combination at any time after the rights become
exercisable, each right would entitle its holder to buy
shares of the acquiring or surviving company having a market
value of twice the exercise price of the right.
<PAGE>
-59-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of Financial Instruments
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
help meet financing needs and to reduce exposure to
fluctuating foreign currency exchange rates and interest
rates. The Company is exposed to credit loss in the event
of nonperformance by the other parties to the financial
instruments described below. However, the Company does not
anticipate nonperformance by the other parties. The Company
does not engage in trading activities with these financial
instruments and does not generally require collateral or
other security to support these financial instruments. The
notional amounts of derivatives summarized in the foreign
exchange risk and interest rate risk management section
below do not represent the amounts exchanged by the parties
and, thus, are not a measure of the exposure of the Company
through its use of derivatives. The amounts exchanged are
calculated on the basis of the notional amounts and the
other terms of the derivatives, which relate to interest
rates, exchange rates, securities prices, or financial or
other indexes.
Foreign Exchange Risk and Interest Rate Risk Management
The Company enters into various types of derivative
financial instruments to manage its foreign exchange risk
and interest rate risk, as indicated in the following table.
<TABLE>
<S> <C> <C>
Notional Amount Notional Amount
December 31, 1995 December 31, 1994
(In millions of dollars)
Forward currency exchange
contracts $ 234 $ 194
Options purchased 25 22
Currency swaps 190 190
Interest rate swaps 150 150
</TABLE>
The Company enters into forward currency exchange contracts
to manage its exposure against foreign currency fluctuations
on certain assets and liabilities denominated in foreign
currencies. As of December 31, 1995, the Company has 21
forward currency exchange contracts maturing in 1996 which
exchange 2.7 billion Belgian francs, 19 million U.S.
dollars, 11 million British pounds, 117 million French
francs, 17 billion Italian lira, and various other
currencies. As of December 31, 1994, the Company had 29
forward currency exchange contracts which matured in 1995
and exchanged 4.4 billion Belgian francs, 23 million U.S.
dollars, 38 million British pounds, 22 million Deutsche
marks, 19 billion Italian lira, and various other
currencies. Gains and losses on these foreign currency
hedges are included in the carrying amount of the related
assets and liabilities. At December 31, 1995 and 1994,
deferred gains and losses on these foreign currency hedges
are not material to the consolidated financial statements.
<PAGE>
-60-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of Financial Instruments
(Continued)
The Company enters into forward currency exchange contracts
to hedge its equity investments in certain foreign
subsidiaries and to manage its exposure against fluctuations
in foreign currency rates. As of December 31, 1995, the
Company has two forward currency exchange contracts maturing
in 1996 which exchange 1 billion Belgian francs against
approximately 34 million U.S. dollars to hedge its equity
investments in certain of its European subsidiaries. As of
December 31, 1994, the Company had two forward currency
exchange contracts which matured in 1995 and exchanged 1
billion Belgian francs against approximately 32 million U.S.
dollars to hedge its equity investments in certain of its
European subsidiaries. At December 31, 1995 and 1994,
losses of $4 million and $3 million on hedges of net
investments in foreign subsidiaries are included in
stockholders' equity, respectively.
The Company has entered into forward currency exchange
contracts to reduce its exposure to currency fluctuations on
the proceeds of the sale of its investment in Asahi Fiber
Glass Company, Ltd. (Note 12). As of December 31, 1995,
these contracts exchange 5 billion Japanese yen for 50
million U.S. dollars. At December 31, 1995, gains of $3
million are included as deferred revenue.
The Company entered into forward currency exchange contracts
to reduce its exposure to currency fluctuations on the
anticipated 1995 earnings of certain European subsidiaries.
The nine forward currency exchange contracts which matured
in 1995, exchanged 412 million Belgian francs and 8 million
British pounds against approximately 25 million U.S.
dollars. Gains and losses on these foreign currency hedges
were included in income in the period in which the exchange
rates changed. Gains on these forward currency exchange
contracts were not material to the consolidated financial
statements.
The Company enters into option contracts to hedge
anticipated transactions with certain of its foreign
subsidiaries. As of December 31, 1995, the Company has
eight currency option contracts maturing in 1996 which hedge
the 1996 royalty payments of the Company's European
subsidiaries. As of December 31, 1995, the currency option
contracts exchanged 526 million Belgian francs and 6 million
British pounds against approximately 25 million U.S.
dollars. As of December 31, 1994, the Company had six
currency option contracts which exchanged 496 million
Belgian francs and 4 million British pounds against
approximately 22 million U.S. dollars. Gains on the
Company's hedges of these anticipated transactions are
included as deferred revenue. At December 31, 1995 and
1994, deferred gains on option contracts are not material to
the consolidated financial statements.
As of December 31, 1994, the Company entered into two
currency swap transactions to manage its exposure against
foreign currency fluctuations on the principal amount of its
guaranteed .814% Eurobonds (Note 2). At December 31, 1994,
gains on these currency swaps were not material to the
consolidated financial statements. During May 1995 the
Company terminated these swaps. The termination of these
swaps exchanged 140 million U.S. dollars for approximately
89 million British pounds, resulting in a gain of
approximately 10 million U.S dollars. At that time, the
Company entered into two cross-currency interest rate swaps
from U.S. dollars into British pounds to hedge the interest
and principal payments of the remaining Eurobonds through
2002. These agreements also convert part of the fixed rate
interest into variable rate interest. The gain on the
exercised swaps is being amortized over the
<PAGE>
-61-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of Financial Instruments
(Continued)
life of the original hedge. At December 31, 1995, $7
million of unamortized gain on the four cross-currency
interest rate swaps is included in other liabilities.
The Company has a cross-currency interest rate conversion
agreement from Deutsche marks into U.S. dollars to hedge the
interest and principal payments of its 7.25% Deutsche mark
bonds, due in 2000. The agreement establishes a fixed
interest rate of 11.1%.
The Company enters into interest rate swaps to manage its
interest rate risk. The Company has entered into four
interest rate swap agreements to reduce the interest rates
on its fixed rate borrowings. These agreements effectively
convert an aggregate principal amount of $150 million of
fixed rate long-term debt into variable rate borrowings with
interest rates ranging from 5.875% to 8.025% in 1995 and
5.81% to 7.96% in 1994. The agreements mature in 1998. The
differential interest to be paid or received is accrued as
interest rates change and is recognized over the life of the
agreements.
Other Financial Instruments with Off-Balance-Sheet Risk
As of December 31, 1995 and 1994, the Company is
contingently liable for guarantees of indebtedness owed by
certain unconsolidated affiliates of $71 million and $27
million, respectively. The Company is of the opinion that
its unconsolidated affiliates will be able to perform under
their respective payment obligations in connection with such
guaranteed indebtedness and that no payments will be
required and no losses will be incurred by the Company under
such guarantees.
Concentrations of Credit Risk
As of December 31, 1995 and 1994, the Company has no
significant group concentrations of credit risk.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of each category of financial instruments.
Cash and short-term financial instruments
The carrying amount approximates fair value due to the
short maturity of these instruments.
<PAGE>
-62-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of Financial Instruments
(Continued)
Long-term notes receivable
The fair value has been estimated using the expected
future cash flows discounted at market interest rates.
Long-term debt
The fair value of the Company's long-term debt has been
estimated based on quoted market prices for the same or
similar issues, or on the current rates offered to the
Company for debt of the same remaining maturities.
Foreign currency swaps and interest rate swaps
The fair values of foreign currency swaps and interest
rate swaps have been estimated by traded market values
or by obtaining quotes from brokers.
Forward currency exchange contracts, option contracts,
and financial guarantees
The fair values of forward currency exchange contracts,
option contracts, and financial guarantees are based on
fees currently charged for similar agreements or on the
estimated cost to terminate these agreements or
otherwise settle the obligations with the counter
parties at the reporting date.
The estimated fair values of the Company's financial
instruments as of December 31, 1995 and 1994, which have
fair values different than their carrying amounts, are as
follows:
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
(In millions of dollars)
Assets
Long-term notes receivable $ 24 $ 22 $ 20 $ 18
Liabilities
Long-term debt 794 875 1,037 1,076
Off-Balance-Sheet Financial
Instruments - Unrealized gains
Foreign currency swaps - 39 - 26
Interest rate swaps - 14 - 4
</TABLE>
<PAGE>
-63-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of Financial Instruments
(Continued)
As of December 31, 1995 and 1994, the Company is
contingently liable for guarantees of indebtedness owed by
certain unconsolidated affiliates. There is no market for
these guarantees and they were issued without explicit cost.
Therefore, it is not practicable to establish their fair
value.
As of December 31, 1995 and 1994, the Company has also
entered into certain forward currency exchange and option
contracts, the fair values of which are not material to the
consolidated financial statements.
21. Contingent Liabilities
ASBESTOS LIABILITIES
The Company is a co-defendant with other former
manufacturers, distributors and installers of products
containing asbestos and with miners and suppliers of
asbestos fibers (collectively, the Producers) in personal
injury and property damage litigation. The personal injury
claimants generally allege injuries to their health caused
by inhalation of asbestos fibers from the Company's
products. Most of the claimants seek punitive damages as
well as compensatory damages. The property damage claims
generally allege property damage to school, public and
commercial buildings resulting from the presence of products
containing asbestos. Virtually all of the asbestos-related
lawsuits against the Company arise out of its manufacture,
distribution, sale or installation of an asbestos-containing
calcium silicate, high temperature insulation product, the
manufacture of which was discontinued in 1972.
Status
As of December 31, 1995, approximately 144,200 asbestos
personal injury claims were pending against the Company,
55,900 of which were received in 1995. The Company received
approximately 29,100 such claims in 1994, and 32,400 in
1993.
Through December 31, 1995, the Company had resolved (by
settlement or otherwise) approximately 160,600 asbestos
personal injury claims. During 1993, 1994, and 1995, the
Company resolved approximately 60,000 such claims 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
<PAGE>
-64-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
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
As of December 31, 1995, the Company had approximately $430
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:
<PAGE>
-65-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
<TABLE>
<S> <C> <C>
Asbestos Litigation Claims
December 31, December 31,
1995 1994
(In millions of dollars)
Reserve for asbestos litigation claims
Current $ 250 $ 300
Other 887 1,145
Total Reserve 1,137 1,445
Insurance for asbestos litigation claims
Current 100 125
Other 330 556
Total Insurance 430 681
Net Asbestos Liability $ 707 $ 764
</TABLE>
Case filing rates have continued at historically high levels
with the receipt of approximately 55,900 new claims during
1995, following the receipt of approximately 29,100 claims
in 1994 and approximately 32,400 claims in 1993. 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 Company is using similar criteria in the implementation
of its own settlement and litigation strategy and is also
seeking to require more careful proof than in the past that
claimants had significant exposure to the Company's asbestos-
containing product or operations. The Company believes that
this strategy will reduce the overall cost of asbestos
personal injury claims in the long run by channeling
indemnity payments to claimants who can establish
significant asbestos-related impairment and exposure to the
Company's asbestos-containing product or operations and by
substantially reducing indemnity payments to individuals who
are unimpaired or who did not have significant such
exposure. The Company's strategy has resulted in an
increased level of trial activity and an increase in the
number and amount of compensatory and punitive damage
verdicts and judgments against the Company. This strategy
may have the effect of increasing average per-case indemnity
costs for claims resolved with payment, while also
increasing the number of claims dismissed without payment.
<PAGE>
-66-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
The Company cautions that such factors as the number of
future asbestos personal injury claims received by it, the
rate of receipt of such claims, and the indemnity and
defense costs associated with asbestos personal injury
claims, as well as the prospects for confirming additional,
applicable insurance coverage beyond the $430 million
referenced above, are influenced by numerous variables that
are difficult to predict, and that estimates, such as the
Company's, which attempt to take account of such variables,
are subject to considerable uncertainty. Depending upon the
outcome of the various uncertainties described above,
particularly as they relate to unimpaired claims, it may be
necessary at some point in the future for the Company to
make additional provision for the uninsured costs of
asbestos personal injury claims received through the year
1999 (although no such amounts are reasonably estimable at
this time). The Company remains confident that its estimate
of Liabilities and Insurance will be sufficient to provide
for the costs of all such claims that involve malignancies
or significant asbestos-related functional impairment. The
Company has reviewed and will continue to review the
adequacy of its estimate of Liabilities and Insurance on a
periodic basis and make such adjustments as may be
appropriate.
The Company cannot estimate and is not providing for the
cost of unasserted claims which may be received by the
Company after the year 1999 because management is unable to
predict the number of claims to be received after 1999, the
severity of disease which may be involved and other factors
which would affect the cost of such claims.
Cash Expenditures
The Company's anticipated cash expenditures for uninsured
asbestos-related costs of claims received through 1999 are
expected to approximate $707 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.
<PAGE>
-67-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
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.
22. Quarterly Financial Information (Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1995
Net sales $ 844 $ 877 $ 927 $ 964
Cost of sales 630 639 684 717
Gross margin $ 214 $ 238 $ 243 $ 247
Net income $ 33 $ 63 $ 70 $ 66
Net income per share:
Primary net income per share $ .71 $ 1.25 $ 1.35 $ 1.27
Fully diluted net income
per share $ .68 $ 1.20 $ 1.28 $ 1.21
</TABLE>
<PAGE>
-68-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Quarterly Financial Information (Unaudited) (Continued)
<TABLE>
<S> <C> <C> <C> <C>
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1994
Net sales $ 677 $ 852 $ 936 $ 886
Cost of sales 523 644 705 664
Gross margin $ 154 $ 208 $ 231 $ 222
Income (loss) before cumulative
effect of accounting changes $ (67) $ 45 $ 53 $ 43
Cumulative effect of accounting
changes (Notes 6 and 17) 85 - - -
Net income $ 18 $ 45 $ 53 $ 43
Net income per share:
Primary
Income (loss) before cumulative
effect of accounting changes $(1.52) $ 1.03 $ 1.19 $ .98
Cumulative effect of accounting
changes 1.93 - - -
Net income per share $ .41 $ 1.03 $ 1.19 $ .98
Fully diluted
Income (loss) before cumulative
effect of accounting
changes $(1.30) $ .95 $ 1.09 $ .91
Cumulative effect of
accounting changes 1.70 - - -
Net income per share $ .40 $ .95 $ 1.09 $ .91
</TABLE>
Net income per share and primary and fully diluted weighted
average shares are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly net
income per share may not equal the per share total for the
year.
<PAGE>
-69-
INDEX TO FINANCIAL STATEMENT SCHEDULES
Number Description Page
II Valuation and Qualifying Accounts and Reserves -
for the years ended December 31, 1995, 1994,
and 1993 70
<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
Senior Vice President and
Chief Financial Officer
(as duly authorized officer)
