SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1997
Commission File No. 1-3660
Owens Corning
One Owens Corning Parkway
Toledo, Ohio 43659
Area Code (419) 248-8000
A Delaware Corporation
I.R.S. Employer Identification No. 34-4323452
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes / X / No / /
Shares of common stock, par value $.10 per share,
outstanding at March 31, 1997
53,263,731
<PAGE> - 2 -
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1997 1996
(In millions of dollars,
except share data)
NET SALES $ 875 $ 849
COST OF SALES 652 632
Gross margin 223 217
OPERATING EXPENSES
Marketing and administrative expenses 122 127
Science and technology expenses 17 21
Other 7 (3)
Total operating expenses 146 145
INCOME FROM OPERATIONS 77 72
Cost of borrowed funds 19 18
INCOME BEFORE PROVISION
FOR INCOME TAXES 58 54
Provision for income taxes (Note 3) 19 16
INCOME BEFORE EQUITY
IN NET INCOME OF AFFILIATES 39 38
Equity in net income of affiliates 3 1
NET INCOME $ 42 $ 39
NET INCOME PER COMMON SHARE
Primary net income per share $ .79 $ .75
Fully diluted net income per share $ .76 $ .73
Weighted average number of common
shares outstanding and common equivalent
shares during the period (in millions)
Primary 53.5 52.3
Assuming full dilution 58.1 56.9
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> - 3 -
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<S> <C> <C>
March 31,December 31,
1997 1996
ASSETS (In millions of dollars)
CURRENT
Cash and cash equivalents $ 13 $ 45
Receivables 425 314
Inventories (Note 4) 430 340
Insurance for asbestos litigation
claims - current portion (Note 7) 75 100
Deferred income taxes 106 106
VEBA trust 11 19
Income tax receivable 4 4
Other current assets 43 30
Total current 1,107 958
OTHER
Insurance for asbestos litigation
claims (Note 7) 439 454
Deferred income taxes 457 474
Goodwill 301 286
Investments in affiliates 66 64
Other noncurrent assets 182 155
Total other 1,445 1,433
PLANT AND EQUIPMENT, at cost
Land 57 58
Building and leasehold improvements 615 614
Machinery and equipment 2,382 2,384
Construction in progress 268 285
3,322 3,341
Less--Accumulated depreciation (1,767) (1,819)
Net plant and equipment 1,555 1,522
TOTAL ASSETS $ 4,107 $3,913
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> - 4 -
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
<TABLE>
<S> <C> <C>
March 31,December 31,
1997 1996
(In millions of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 633 $ 705
Reserve for asbestos litigation claims -
current portion (Note 7) 275 300
Short-term debt 114 96
Long-term debt - current portion 22 20
Total current 1,044 1,121
LONG-TERM DEBT 1,099 818
OTHER
Reserve for asbestos litigation claims
(Note 7) 1,600 1,670
Other employee benefits liability 339 349
Pension plan liability 61 63
Other 158 161
Total other 2,158 2,243
COMPANY OBLIGATED CONVERTIBLE
SECURITY OF SUBSIDIARY HOLDING
SOLELY PARENT DEBENTURES (MIPS) 194 194
MINORITY INTEREST 26 21
STOCKHOLDERS' EQUITY
Common stock 647 606
Deficit (1,035) (1,072)
Foreign currency translation adjustments (7) (1)
Other (19) (17)
Total stockholders' equity (414) (484)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 4,107 $3,913
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> - 5 -
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1997 1996
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
Net income $ 42 $ 39
Reconciliation of net cash provided
by operating activities:
Noncash items:
Provision for depreciation and
amortization 37 33
Provision for deferred income taxes 17 -
Other (1) 1
(Increase) decrease in receivables (107) (67)
(Increase) decrease in inventories (91) (51)
Increase (decrease) in accounts
payable and accrued liabilities (59) (68)
Increase (decrease) in accrued
income taxes (11) 48
Proceeds from insurance for asbestos
litigation claims 40 30
Payments for asbestos litigation claims (95) (35)
Other (19) (37)
Net cash flow from operations (247) (107)
NET CASH FLOW FROM INVESTING
Additions to plant and equipment (74) (77)
Investment in subsidiaries, net of
cash acquired (Note 6) (20) -
Proceeds from the sale of affiliate - 55
Other (5) (6)
Net cash flow from investing $ (99) $ (28)
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> - 6 -
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1997 1996
(In millions of dollars)
NET CASH FLOW FROM FINANCING
Net additions to long-term credit facilities $ 257 $ 98
Other additions to long-term debt 28 -
Other reductions to long-term debt (2) (12)
Net increase in short-term debt 17 41
Dividends paid (3) -
Other 19 2
Net cash flow from financing 316 129
Effect of exchange rate changes on cash (2) 1
Net increase (decrease) in cash
and cash equivalents (32) (5)
Cash and cash equivalents at
beginning of period 45 18
Cash and cash equivalents at end
of period $ 13 $ 13
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> - 7 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
Quarter Ended
1. SEGMENT DATA March 31,
1997 1996
(In millions of dollars)
NET SALES
Industry Segments
Building Materials
United States $ 500 $ 470
Europe 74 64
Canada and other 31 24
Total Building Materials 605 558
Composite Materials
United States 138 150
Europe 97 108
Canada and other 35 33
Total Composite Materials 270 291
Intersegment sales
Building Materials - -
Composite Materials 27 25
Eliminations (27) (25)
Net sales $ 875 $ 849
Geographic Segments
United States $ 638 $ 620
Europe 171 172
Canada and other 66 57
Total 875 849
Intersegment sales
United States 29 17
Europe 9 8
Canada and other 22 21
Eliminations (60) (46)
Net sales $ 875 $ 849
</TABLE>
<PAGE> - 8 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<S> <C> <C>
Quarter Ended
1. SEGMENT DATA (Continued) March 31,
1997 1996
(In millions of dollars)
INCOME FROM OPERATIONS (1)
Industry Segments
Building Materials
United States $ 37 $ 15
Europe 5 5
Canada and other 4 (4)
Total Building Materials 46 16
Composite Materials
United States 40 32
Europe 7 19
Canada and other 2 3
Total Composite Materials 49 54
General corporate expense (18) 2
Income from operations 77 72
Cost of borrowed funds (19) (18)
Income before provision
for income taxes $ 58 $ 54
Geographic Segments
United States $ 77 $ 47
Europe 12 24
Canada and other 6 (1)
General corporate expense (18) 2
Income from operations 77 72
Cost of borrowed funds (19) (18)
Income before provision
for income taxes $ 58 $ 54
</TABLE>
(1)Income from operations for the quarter ended March 31,
1996 includes a pretax gain of $37 million from the sale
of the Company's interest in its former Japanese
affiliate Asahi Fiber Glass Co. Ltd. and charges
totaling $42 million including valuation adjustments
associated with prior divestitures, major product line
productivity initiatives and a contribution to the Owens-
Corning Foundation. The impact of these special items
was to reduce income from operations for Building
Materials in the United States, Europe, and Canada and
other by $19 million, $1 million and $2 million,
respectively; Composite Materials in the United States
and Europe by $3 million and $2 million, respectively;
and also reduce general corporate expense by $22
million.
<PAGE> - 9 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. GENERAL
The financial statements included in this Report are
condensed and unaudited, pursuant to certain Rules and
Regulations of the Securities and Exchange Commission, but
include, in the opinion of the Company, adjustments
necessary for a fair statement of the results for the
periods indicated, which, however, are not necessarily
indicative of results which may be expected for the full
year.
In connection with the condensed financial statements and
notes included in this Report, reference is made to the
financial statements and notes thereto contained in the
Company's 1996 Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission.
3. INCOME TAXES
The reconciliation between the U.S. federal statutory rate
and the Company's effective income tax rate is:
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1997 1996
U.S. federal statutory rate 35% 35%
Adjustment of deferred tax asset
allowance (12) (13)
State and local income taxes 2 2
Other 8 6
Effective tax rate 33% 30%
</TABLE>
During the first quarter of 1996, the Company reversed
approximately $7 million of its valuation allowances on the
operating loss carryforwards of a foreign subsidiary as
management determined that the loss carryforwards would be
realizable. In 1997, the Company reversed the remaining $7
million valuation allowance on this loss carryforward.
4. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<S> <C> <C>
March 31, December 31,
1997 1996
(In millions of dollars)
Finished goods $ 338 $ 273
Materials and supplies 176 149
FIFO inventory 514 422
Less: Reduction to LIFO basis (84) (82)
$ 430 $ 340
</TABLE>
Approximately $276 million and $216 million of FIFO
inventories were valued using the LIFO method at March 31,
1997 and December 31, 1996, respectively.
<PAGE> - 10 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. CONSOLIDATED STATEMENT OF CASH FLOWS
Cash payments for income taxes, net of refunds, and cost of
borrowed funds are summarized as follows:
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1997 1996
(In millions of dollars)
Income taxes $ 6 $ (17)
Cost of borrowed funds 13 6
</TABLE>
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
6. ACQUISITIONS
During the first quarter of 1997, the Company completed
acquisitions in the Building Materials segment, one in
Europe, the other in the U.S. and an acquisition in the U.S.
Composite Materials segment. The aggregate purchase price
including possible subsequent contingent consideration was
$49 million. These 1997 acquisitions exchanged 340,000
shares of the Company's common stock and $20 million in
cash.
These 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 of the acquisitions have been
included in the Company's consolidated financial statements
subsequent to the acquisitions' dates.
The purchase price allocations were based on preliminary
estimates of fair market value and are subject to revision.
The 1997 acquisitions include goodwill of $20 million, which
is being amortized over 40 years. The pro forma effect of
the acquisitions was not material to net income for the
quarters ended March 31, 1997 and 1996.
7. 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
<PAGE> - 11 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. CONTINGENT LIABILITIES (Continued)
well as compensatory damages. The property damage claims
generally allege property damage to school, public and
commercial buildings resulting from the presence of products
containing asbestos. Virtually all of the asbestos-related
lawsuits against the Company arise out of its manufacture,
distribution, sale or installation of an asbestos-containing
calcium silicate, high temperature insulation product,
the manufacture of which was discontinued in 1972.
Status
As of March 31, 1997, approximately 159,200 asbestos
personal injury claims were pending against the Company, of
which 7,000 were received in the first quarter of 1997. The
Company received approximately 36,400 such claims in 1996
and 55,900 in 1995.
Many of the recent claims appear to be the product of mass
screening programs and not to involve malignancies or other
significant asbestos related impairment. The Company
believes that at least 40,000 of the recent claims involve
plaintiffs whose pulmonary function tests (PFTs) were
improperly administered or manipulated by the testing
laboratory or otherwise inconsistent with proper medical
practice, and it is investigating a number of testing
organizations and their methods. In 1996 the Company filed
suit in federal court against the owners and operators of
certain pulmonary function testing laboratories in the
southeastern U.S. challenging such improper testing
practices. This matter is now in active pre-trial discovery.
In January 1997, the Company filed a similar suit in federal
court in Mississippi naming the owner of an additional
testing laboratory.
During 1996 the Company was engaged in discussions with a
group of approximately 30 leading plaintiffs' law firms to
explore approaches toward resolution of its asbestos
liability. The discussions involved the possible resolution
of both pending claims and claims that may be filed in the
future. The law firms involved in the talks agreed to
refrain from serving any further asbestos claims on the
Company unless they involved malignancies. This agreement
expired as to certain of the firms on November 1, 1996, and
as to other firms, representing a substantial majority of
the cases historically filed by the group, on January 1,
1997. This agreement may have impacted the number of cases
received by the Company during 1996 and the first quarter of
1997.
<PAGE> - 12 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. CONTINGENT LIABILITIES (Continued)
Through March 31, 1997, the Company had resolved (by
settlement or otherwise) approximately 188,900 asbestos
personal injury claims. This number includes cases resolved
by two orders of dismissal for lack of medical proof,
covering approximately 18,900 federal maritime cases which
named Owens Corning as a defendant, resulting in a 15,600
case reduction in the backlog after reduction for duplicate
cases and cases previously settled. Of these cases,
approximately 11,700 were dismissed in 1996, with the
remaining 3,900 being dismissed in the first quarter of
1997. During 1994, 1995 and 1996, the Company resolved
approximately 60,600 asbestos personal injury claims, over
99% without trial, and incurred total indemnity payments of
$626 million (an average of about $10,300 per case).
The Company's indemnity payments have varied considerably
over time and from case to case, and are affected by a
multitude of factors. These include the type and severity
of the disease sustained by the claimant (i.e.,
mesothelioma, lung cancer, other types of cancer, asbestosis
or pleural changes); the occupation of the claimant; the
extent of the claimant's exposure to asbestos-containing
products manufactured, sold or installed by the Company; the
extent of the claimant's exposure to asbestos-containing
products manufactured, sold or installed by other Producers;
the number and financial resources of other Producer
defendants; the jurisdiction of suit; the presence or
absence of other possible causes of the claimant's illness;
the availability or not of legal defenses such as the
statute of limitations or state of the art; whether the
claim was resolved on an individual basis or as part of a
group settlement; and whether the claim proceeded to an
adverse verdict or judgment.
Insurance
As of March 31, 1997, the Company had approximately $289
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 1998 and beyond under agreements with the
carriers confirming such coverage. All of the Company's
liability insurance policies cover indemnity payments and
defense fees and expenses subject to applicable policy
limits.
In addition to its confirmed primary level non-products
insurance, the Company has a significant amount of
unconfirmed potential non-products coverage with excess
level carriers. For purposes of calculating the amount of
insurance applicable to asbestos liabilities, the Company
has estimated its probable recoveries in respect of this
additional non-products coverage at $225 million, which
amount was recorded in the second quarter of 1996. This
coverage is unconfirmed and the amount and timing of
recoveries from these excess level policies will depend on
subsequent negotiations or proceedings.
<PAGE> - 13 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. CONTINGENT LIABILITIES (Continued)
Reserve
The Company's financial statements include a reserve for the
estimated cost associated with asbestos personal injury
claims. This reserve was established principally through a
charge to income in 1991 for the costs of asbestos claims
expected to be received through 1999 and an additional $1.1
billion non-recurring, noncash charge to income (before
taking into account the probable non-products insurance
recoveries) during the second quarter of 1996 for cases that
may be received subsequent to 1999. In establishing the
reserve, the Company took into account, among other things,
the effect of federal court decisions relating to punitive
damages and the certification of class actions in asbestos
cases, the discussions with the group of plaintiffs' law
firms referred to above, the results of its continuing
investigations of medical screening practices of the kind at
issue in the federal PFT lawsuits, recent developments as to
the prospects for federal and state tort reform, the
continued rate of case filings at historically high levels,
additional information on filings received during the 1993-
1995 period and other factors. The combined effect of the
$1.1 billion charge and the $225 million probable additional
non-products insurance recovery was an $875 million charge
in the second quarter of 1996.
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 in the future, and its estimated insurance
recoveries in respect of such claims, are reported
separately as follows:
<TABLE>
<S> <C> <C>
March 31,December 31,
1997 1996
(In millions of dollars)
Reserve for asbestos
litigation claims
Current $ 275 $ 300
Other 1,600 1,670
Total Reserve 1,875 1,970
Insurance for asbestos
litigation claims
Current 75 100
Other 439 454
Total Insurance 514 554
Net Asbestos Liability $1,361 $1,416
</TABLE>
The Company cautions that such factors as the number of
future asbestos personal injury claims received by it, the
rate of receipt of such claims, and the indemnity and
defense costs associated with asbestos personal injury
claims, as well as the prospects for confirming additional
insurance, including the additional $225 million in non-
products coverage referenced above, are influenced by
numerous variables that are difficult to predict, and that
estimates, such as the Company's, which attempt to take
account of such variables, are subject to considerable
<PAGE> - 14 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. CONTINGENT LIABILITIES (Continued)
uncertainty. The Company believes that its estimate of
liabilities and insurance will be sufficient to provide for
the costs of all pending and future asbestos personal injury
claims that involve malignancies or significant asbestos-
related functional impairment. While such estimates cover
unimpaired claims, the number and cost of unimpaired claims
are much harder to predict and such estimates reflect the
Company's belief that such claims have little or no value.
The Company will continue to review the adequacy of its
estimate of liabilities and insurance on a periodic basis
and make such adjustments as may be appropriate.
Management Opinion
Although any opinion is necessarily judgmental and must be
based on information now known to the Company, in the
opinion of management, while any additional uninsured and
unreserved costs which may arise out of pending personal
injury and property damage asbestos claims and additional
similar asbestos claims filed in the future may be
substantial over time, management believes that any such
additional costs will not impair the ability of the Company
to meet its obligations, to reinvest in its businesses or to
take advantage of attractive opportunities for growth.
NON-ASBESTOS LIABILITIES
Various other lawsuits and claims arising in the normal
course of business are pending against the Company, some of
which allege substantial damages. Management believes that
the outcome of these lawsuits and claims will not have a
materially adverse effect on the Company's financial
position or results of operations.
<PAGE> - 15 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All per share information in Item 2 is on a fully diluted
basis. All references to results from ongoing operations
exclude the impact of special items reported for the
relevant period.)
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1997 was $42
million, or $.76 per share, compared to net income of $39
million, or $.73 per share, for the quarter ended March 31,
1996. The 1997 earnings growth reflects the benefits of
acquisitions and productivity gains experienced in the
Building Materials segment and the improved performance of
our unconsolidated affiliates.
Net sales were $875 million for the quarter ended March 31,
1997, a three percent increase from the 1996 level of $849
million. Most of the first quarter 1997 growth is
attributable to increased volumes in the Building Materials
segment, where niche acquisitions and the integration of
their products into the Company's existing channels of
distribution continue to grow the Company's volumes both in
the U.S. and Europe. These volume increases were offset in
part by decreasing volumes in the Composite Materials
segment, particularly in the U.S., coupled with a worldwide
decline in Composite Materials pricing. Gross margin for
the quarter ended March 31, 1997 was 26%, the same as in
first quarter 1996.
Marketing and administrative expenses were $122 million for
the quarter ended March 31, 1997, compared to marketing and
administrative expenses from ongoing operations of $119
million in the same period in 1996. The slight increase is
the result of incremental administrative expenses from
acquisitions.
Results for the first quarter of 1996 included a $37 million
pretax gain from the sale of the Company's minority interest
in Asahi Fiber Glass Co. Ltd. in Japan and several one-time
special charges, including valuation adjustments associated
with prior divestitures, major product line productivity
initiatives and a contribution to the Owens-Corning
Foundation. The impact of the gain on net income was
reduced to near zero by these special items.
In the Building Materials segment, sales increased eight
percent for the quarter ended March 31, 1997 compared to
1996. This growth reflects the incremental sales from
acquisitions (which have been supported by the Company's
existing channels of distribution) as well as an increase in
volume, particularly in the roofing and specialty and foam
businesses. Income from ongoing operations for Building
Materials increased 21% from 1996 levels, climbing from 7%
to 8% of sales, primarily the result of productivity gains
and incremental amounts derived from acquisitions.
During the first quarter of 1997, the Company acquired
Polypan Nord S.P.A., a manufacturer of extruded polystyrene
foam (XPS) insulation products based in Italy. This
acquisition further expands the Company's presence in the
Building Materials segment, particularly the XPS foam
business, and will help to reinforce the Company's brand
identity established in Europe. Also in the first quarter
of 1997, the Company acquired Falcon Manufacturing of
California, Inc., a U.S. producer of expanded polystyrene
(EPS) foam insulation products. The EPS manufacturing
acquisition supports the Company's overall growth agenda and
complements the Company's line of energy-efficient rigid
foam insulation products.
<PAGE> - 16 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Shanghai, China insulation plant, which produces glass
fiber insulation materials for thermal and acoustical
applications, shipped its first product in March. This
represents the Company's second glass fiber insulation plant
in China, following the 1996 startup of our first insulation
plant in Guangzhou.
In the Composite Materials segment, sales decreased seven
percent for the quarter ended March 31, 1997, versus the
first quarter of 1996. The sales decline is attributable to
pricing weakness in Europe, along with customer inventory
adjustments and increased competition in the U.S. Composite
Materials income from operations in the first quarter of
1997 experienced a 17% decline when compared to income from
ongoing operations for the first quarter of 1996. The
decline is primarily attributable to the pricing weakness
being experienced in Europe as well as lower U.S. volumes.
For the balance of 1997, the Company does not expect the
Composite Materials segment to improve significantly over
the first quarter.
In the first quarter of 1997, the Company completed the
previously announced acquisition of Knytex Company, a
manufacturer of specialty glass fiber fabrics. This
business, which knits, weaves, stitches or bonds glass fiber
to provide value-added performance characteristics, will be
combined with the Company's existing European specialty
fabrics business to form Owens Corning Fabrics.
The Company's cost of borrowed funds for the quarter ended
March 31, 1997 was $1 million higher than during first
quarter 1996, due to increased borrowings used to fund
working capital increases.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Cash flow from operations, excluding asbestos-related
activities, was negative $192 million for the first quarter
of 1997, compared to negative $102 million for first quarter
1996. The decline from 1996 to 1997 is primarily
attributable to the collection of a tax receivable in 1996
and increased growth in inventories and receivables in 1997.
Inventories at March 31, 1997 increased 26% over December
31, 1996 levels due to the Company's seasonal inventory
build in the first half of the year as well as higher
inventories due to a slower than anticipated building
materials retail sector and a slowdown in the composites
business. Please see Notes 4 and 5 to the Consolidated
Financial Statements.
At March 31, 1997, the Company's net working capital was $63
million and its current ratio was 1.06, compared to negative
$163 million and .85, respectively, at December 31, 1996.
The increase in 1997 is the result of increased working
capital, driven by higher inventories and receivables as
discussed above, as well as a decline in accounts payable
and accrued liabilities.
The Company's total borrowings at March 31, 1997 were $1.235
billion, $301 million higher than at year-end 1996.
Typically, the Company reports greater cash usage during the
first half of the year as the Company builds inventories and
other working capital.
As of March 31, 1997, the Company had unused lines of credit
of $195 million available under long-term bank loan
facilities and an additional $171 million under short-term
facilities, compared to $440 million and $195 million,
respectively, at year-end 1996. The decrease in available
lines of credit is primarily the result of increased
borrowings. Letters of credit issued under the Company's
long-term U.S. loan facility, most of which support appeals
from asbestos trials, reduce the available credit of that
facility. The impact of such reduction is reflected in the
unused lines of credit discussed above.
<PAGE> - 17 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Capital spending for property, plant and equipment,
excluding acquisitions and investments in affiliates, was
$74 million during the first quarter of 1997. For the year
1997, the Company anticipates capital spending, exclusive of
acquisitions and investments in affiliates, to be
approximately $250 million, the majority of which is
uncommitted. The Company expects that funding for these
expenditures will be from the Company's operations and
external sources as required.
Gross payments for asbestos litigation claims during the
first quarter of 1997, including $11 million in defense
costs and $3 million for appeal bond and other costs, were
$95 million. Proceeds from insurance were $40 million,
resulting in a net pretax cash outflow of $55 million, or
$33 million after-tax. During the first quarter of 1997,
the Company received approximately 7,000 new asbestos
personal injury cases and closed approximately 5,700 cases.
Over the next twelve months, the Company's total payments
for asbestos litigation claims, including defense costs, are
expected to be approximately $275 million. Proceeds from
insurance of $75 million are expected to be available to
cover these costs, resulting in a net pretax cash outflow of
$200 million, or $120 million after-tax. Please see Note 7
to the Consolidated Financial Statements.
The Company expects funds generated from operations,
together with funds available under long and short term bank
loan facilities, to be sufficient to satisfy its debt
service obligations under its existing indebtedness, as well
as its contingent liabilities for uninsured asbestos
personal injury claims.
The Company has been deemed by the Environmental Protection
Agency (EPA) to be a potentially responsible party (PRP)
with respect to certain sites under the Comprehensive
Environmental Response, Compensation and Liability Act
(Superfund). The Company has also been deemed a PRP under
similar state or local laws, including two state Superfund
sites where the Company is the primary generator. In other
instances, other PRPs have brought suits or claims against
the Company as a PRP for contribution under such federal,
state or local laws. During the first quarter of 1997, the
Company was not designated a PRP in such federal, state,
local or private proceedings for any additional sites. At
March 31, 1997, a total of 39 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 $17 million reserve
for its Superfund (and similar state, local and private
action) contingent liabilities. 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 results of operations, financial condition
or long-term liquidity.
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> - 18 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
FUTURE REQUIRED ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
Earnings per Share (SFAS No.128). This statement introduces
new methods for calculating earnings per share. The
adoption of this standard will not impact results from
operations, financial condition, or long-term liquidity, but
will require the Company to restate earnings per share
reported in prior periods to conform with this statement.
The Company is required to adopt the new standard for
periods ending after December 15, 1997. The Company
believes that the adoption of this standard will result in
slightly higher earnings per share when comparing the
current fully diluted earnings per share calculation to the
calculation of diluted earnings per share required by SFAS
No. 128.
<PAGE> - 19 -
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the paragraphs in Note 7, Contingent Liabilities, to the
Company's Consolidated Financial Statements above, which are
incorporated here by reference.
ITEM 2. CHANGES IN SECURITIES
(a) None of the constituent instruments defining the rights
of the holders of any class of the Company's registered
securities was materially modified in the quarter ended
March 31, 1997.
(b) None of the rights evidenced by any class of the
Company's registered securities was materially limited or
qualified in the quarter ended March 31, 1997 by the
issuance or modification of any other class of securities.
(c) On January 15, 1997, the Company issued a total of
49,999 shares of its common stock, par value $.10 per
share, as part of final contingency payments to the
sellers under several 1995 agreements pursuant to which
the Company acquired certain of the operations of its
Western Fiberglass business. On March 28, 1997, the
Company issued 340,000 shares of its common stock in
connection with the acquisition from the sellers of
substantially all of the operations of Falcon
Manufacturing of California, Inc. and Falcon Foam
Plastics, Inc. Such shares were issued without
registration under the Securities Act of 1933 in reliance
upon Regulation D promulgated under the Securities Act or
the exemption provided by Section 4(2) of the Securities
Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) During the quarter ended March 31, 1997, there was no
material default in the payment of principal, interest,
sinking or purchase fund installments, or any other
material default not cured within 30 days, with respect
to any indebtedness of the Company or any of its
significant subsidiaries exceeding 5 percent of the total
assets of the Company and its consolidated subsidiaries.
(b) During the quarter ended March 31, 1997, no material
arrearage in the payment of dividends occurred, and there
was no other material delinquency not cured within 30
days, with respect to any class of preferred stock of the
Company which is registered or which ranks prior to any
class of registered securities, or with respect to any
class of preferred stock of any significant subsidiary of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the quarter ended March 31, 1997.
ITEM 5. OTHER INFORMATION
The Company does not elect to report any information under
this item.
<PAGE> - 20 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See Exhibit Index below, which is incorporated here by reference.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the quarter ended March 31, 1997.
<PAGE> - 21 -
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: April 30, 1997 By: /s/ David W. Devonshire
David W. Devonshire
Senior Vice President and
Chief Financial Officer
(as duly authorized officer)
Date: April 30, 1997 By: /s/ Steven J. Strobel
Steven J. Strobel
Vice President and Controller
<PAGE> - 22 -
EXHIBIT INDEX
Exhibit
Number Document Description
(3) Articles of Incorporation and By-Laws.
(i) Certificate of Incorporation of Owens
Corning, as amended (filed herewith).
(ii) By-Laws of Owens Corning, as amended
(incorporated herein by reference to Exhibit (3)
to the Company's annual report on Form 10-K (File
No. 1-3660) for 1995).
(11) Statement re Computation of Per Share Earnings
(filed herewith).
(27) Financial Data Schedule (filed herewith).
CERTIFICATE OF INCORPORATION
OF
OWENS CORNING
We, the undersigned, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the
General Corporation Law of the State of Delaware, do hereby certify
as follows:
FIRST. The name of this corporation is
Owens Corning
SECOND. Its principal office in the State of Delaware is located at
1209 Orange Street, City of Wilmington, County of New Castle, State
of Delaware. The name and address of its resident agent is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware.
THIRD. The nature of the business and the objects and purposes to be
transacted, promoted and carried on by the corporation are as
follows:
A. To manufacture, fabricate, buy, sell and deal in all
kinds, forms and combinations of fibres composed of glass,
minerals or any other substance and in the products thereof
or in which such fibres form a part; and machinery, tools,
implements, materials and supplies for the manufacture
thereof; and to acquire, construct, equip, operate,
maintain and dispose of factories, laboratories and all
other things necessary or convenient for manufacturing and
dealing in such fibres and substances and products thereof,
and such machinery, tools, implements, materials and
supplies;
B. To manufacture, purchase or otherwise acquire, own,
mortgage, pledge, sell, assign and transfer, or otherwise
dispose of, and to invest, trade, deal in and deal with
goods, wares and merchandise, and real and personal
property of every class and description;
C. To apply for, purchase or otherwise acquire patents,
licenses, inventions, improvements, processes, copyrights,
trade systems, trademarks and trade names and any secret or
other information and any right, option, or contract in
relation thereto, and to fulfill the terms and conditions
thereof, and to maintain, lease, license, sell, transfer or
otherwise dispose of and turn to account and deal in the
same;
D. To enter into any agreement for the sharing of profits,
union of interest, cooperation or joint adventure, or
otherwise, with any person, partnership, trustee, joint
stock association, or corporation, or any business or
transaction capable of being conducted so as, directly or
indirectly, to benefit this corporation;
E. To establish, support, maintain and operate or aid in
the establishment, support, maintenance and operation of
associations, institutions, funds, trusts and conveniences
calculated to benefit employees or the ex employees of the
corporation or the dependents or connections of such
persons; and to grant pensions and allowances, and to make
payments for insurance, and to subscribe or guarantee money
for any charitable or benevolent objects, or for any
exhibition, or for any public, general or useful objects;
F. To promote and organize any corporation or corporations
for the purpose of acquiring or owning any of the
properties, rights and liabilities of this corporation, or
for any other purpose which may seem directly or indirectly
calculated to benefit this corporation;
G. To acquire the goodwill, rights, and properties and
the whole or any part of the assets, tangible or
intangible, and to undertake or in any way assume the
liabilities of any person, firm, association or corporation,
or to purchase the shares of or any other interest in any
firm, association or corporation; to pay for said goodwill,
rights, properties, assets, shares or other interest in
cash, the shares of this company, bonds or other
obligations of this corporation, or any other consideration,
or by undertaking the whole or any part of the liabilities
of the transferors; to hold or in any manner dispose of the
whole or any part of such property so purchased; to conduct
the whole or any part of any business so acquired; and to
exercise all the powers necessary or convenient in and
about the conduct and management of such business;
H. To guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of shares of the
capital stock of, or any bonds, securities or evidences of
indebtedness created by any other corporation or
corporations organized under the laws of this state or any
other state, country, nation or government, and while the
owner thereof to exercise all the rights, powers and
privileges of ownership;
I. To enter into, make and perform contracts of every kind
and description with any person, firm, association,
corporation, municipality, county, state, body politic or
government or colony or dependency thereof;
J. To borrow or raise moneys for any of the purposes of the
corporation and from time to time, without limit as to
amount, to draw, make, accept, endorse, execute and issue
promissory notes, drafts, bills of exchange, warrants, bonds,
debentures and other negotiable or non negotiable
instruments and evidences of indebtedness and to secure the
payment of any thereof and of the interest thereon by
mortgage upon or pledge, conveyance or assignment in trust
of the whole or any part of the property of the corporation,
whether at the time owned or thereafter acquired, and to
sell, pledge or otherwise dispose of such bonds or other
obligations of the corporation for its corporate purposes;
K. To purchase, hold, sell and transfer the shares of its
own capital stock provided it shall not use its funds or
property for the purchase of its own shares of capital stock
when such use would cause any impairment of its capital
except as otherwise permitted by law and provided further
that shares of its own capital stock belonging to it shall
not be voted upon directly or indirectly;
L. To have one or more offices and to conduct any or all of
its operations or business and to promote its objects within
and without the State of Delaware without restriction as to
place or amount;
M. To have and to exercise any and all powers and
privileges now or hereafter conferred by the laws of
Delaware and all extensions thereof by amendments thereto
hereafter made;
N. To do all or any of the above things in any part of the
world as principal, agent, contractor or otherwise, and by
or through trustees, agents or otherwise, and either alone
or in conjunction with others, and to do all such other
things as are necessary, convenient or expedient to the
above purposes.
And it is hereby expressly provided that the enumeration herein of specific
purposes or powers shall not be held to limit or restrict in any manner the
general powers of the corporation; and it is further provided that any and
all of the foregoing objects, powers or purposes may at any time and from
time to time be changed, altered or amended in the manner provided by law
for the amendment of certificates of incorporation, and none of the above
clauses or the purposes therein specified or the powers thereby conferred
shall be deemed subsidiary or auxiliary merely to the purposes mentioned in
the first or any other clause of this article, but the company shall have
full power to exercise all or any of the powers conferred by any part of
this article in any part of the world.
FOURTH. The total number of shares of stock which the Corporation is
authorized to issue is 108,000,000 shares of which:
(a) 8,000,000 shares shall be Preferred Stock, issuable in series, of no
par value per share, and
(b) 100,000,000 shares shall be Common Stock of par value of $.10 per
share.
The designations, powers, preferences and rights, and the qualifications,
limitations or restrictions of the Preferred Stock and the Common Stock are
as follows:
A. Preferred Stock
The Preferred Stock may be issued from time to time in one or more
series and with such designation for each such series as shall be
stated and expressed in the resolution or resolutions providing for
the issue of each such series adopted by the Board of Directors.
The Board of Directors in any such resolution or resolutions is
expressly authorized to state and express for each such series:
(i) Voting rights, if any, including, without limitation, the
authority to confer multiple votes per share, voting rights as
to specified matters or issues or, subject to the provisions of
this Certificate of Incorporation, as amended, voting rights to
be exercised either together with holders of Common Stock as a
single class, or independently as a separate class;
(ii) The rate per annum and the times at and conditions upon
which the holders of shares of such series shall be entitled to
receive dividends, the conditions and the dates upon which such
dividends shall be payable and whether such dividends shall be
cumulative or noncumulative, and, if cumulative, the terms upon
which such dividends shall be cumulative;
(iii) Redemption, repurchase, retirement and sinking fund
rights, preferences and limitations, if any, the amount payable
on shares of such series in the event of such redemption,
repurchase or retirement, the terms and conditions of any
sinking fund, the manner of creating such fund or funds and
whether any of the foregoing shall be cumulative or
noncumulative;
(iv) The rights to which the holders of the shares of such
series shall be entitled upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(v) The terms, if any, upon which the shares of such series
shall be convertible into, or exchangeable for, shares of stock
of any other class or classes or of any other series of the
same or any other class or classes, including the price or
prices or the rate or rates of conversion or exchange and the
terms of adjustment, if any; and
(vi) Any other designations, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof so far as
they are not inconsistent with the provisions of this
Certificate of Incorporation, as amended, and to the full
extent now or hereafter permitted by the laws of the State of
Delaware.
All shares of the Preferred Stock of any one series shall be identical to
each other in all respects, except that shares of any one series issued
at different times may differ as to the dates from which dividends
thereon, if cumulative, shall be cumulative.
B. Common Stock
(i) Whenever dividends upon the Preferred Stock at the time
outstanding shall have been paid in full for all past dividend
periods or declared and set apart for payment, such dividends
as may be determined by the Board of Directors may be declared
by the Board of Directors and paid from time to time to the
holders of the Common Stock.
(ii) In the event of any liquidation, dissolution or winding
up of the affairs of the Corporation, whether voluntary or
involuntary, the assets and funds of the Corporation remaining
after the payment to the holders of the Preferred Stock at the
time outstanding of the full amounts to which they shall be
entitled shall be distributed among the holders of the Common
Stock according to their respective shares.
(iii) The shares of Common Stock shall entitle the holders of
record thereof to one vote for each share upon all matters
upon which stockholders have the right to vote, subject only
to any exclusive voting rights which may vest in holders of
the Preferred Stock under the provisions of any series of the
Preferred Stock established by the Board of Directors pursuant
to the authority provided in this Article Fourth.
FIFTH. The minimum amount of capital with which the corporation will
commence business is One Thousand Dollars ($1,000.00).
SIXTH. The name and place of residence of each of the incorporators
are as follows:
Names Residence
L.E. Gray............... Wilmington, Delaware
L.H. Herman..............Wilmington, Delaware
Walter Lenz..............Wilmington, Delaware
SEVENTH. The private property of the stockholders shall not be subject
to the payment of corporate debts to any extent whatever.
EIGHTH. In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is
expressly authorized:
A. To authorize and cause to be executed mortgages and liens,
without limit as to amount, upon the real and personal
property of the corporation, including after-acquired
property;
B. From time to time without the assent or vote of the
stockholders, to fix the times for the declaration and
payment of dividends; to fix and vary the amount to be
reserved as working capital; to set apart out of any of the
funds of the corporation available for dividends a reserve or
reserves for any proper purpose and to abolish any reserve so
created; to fix and determine, subject to the limitations
imposed by law, what portion of the consideration received
upon any issue of stock shall constitute capital and what
portion, if any, paid-in surplus; to cause dividends to be
paid from such paid-in surplus or from any surplus due to
appreciation in value of any property of the corporation in
the same manner as though the same were net profits or earned
surplus; to determine whether dividends shall be declared and
paid in cash or capital stock of the corporation or in other
property; to determine the use and disposition of any surplus
or net profits of the corporation and to use and apply any
such surplus or net profits for the purchase or acquisition
of bonds or other obligations or shares of stock of the
corporation to such extent and in such manner and upon such
terms as the Board of Directors shall deem expedient, and
shares of stock of the corporation so purchased or acquired
may be resold unless such shares have been canceled and
retired for the purpose of decreasing the stock of the
corporation as provided by law;
C. Without the assent or vote of the stockholders, from time
to time, to authorize and put into operation a plan or plans
whereby the officers and employees of the corporation, or any
of them, shall participate in the earnings and profits of the
corporation; and pursuant to any plan so adopted, the Board
of Directors shall have power to authorize the payment of
extra compensation to any officer or employee and in the
discretion of the Board of Directors such payment may be made
in cash or in full-paid shares of the capital stock of the
corporation or otherwise.
D. The Corporation may in its By-Laws confer powers upon its
Board of Directors in addition to the foregoing and in
addition to the powers and authorities expressly conferred
upon it by statute.
NINTH. The fact that the stockholders or directors or officers of the
corporation are, in whole or in part, the same as those of any other
corporation shall not in any way affect the validity and
enforceability of any agreement or transaction between the two
corporations.
TENTH. The stockholders and directors shall have the power to hold
their meetings, to have an office or offices and to keep the books of
this corporation (subject to the provisions of the statutes) outside
of the State of Delaware at such places as may from time to time be
designated by the By-Laws or by resolution of the Board of Directors.
ELEVENTH.
(a) Elections for directors shall not be by ballot unless demand
is made for election by ballot by a stockholder entitled to vote
for the election of directors.
(b) The business and affairs of the Corporation shall be managed
by a Board of Directors consisting of not less than nine nor more
than fourteen persons. The exact number of directors within the
minimum and maximum limitations specified in the preceding sentence
shall be fixed from time to time by the Board of Directors pursuant
to a resolution adopted by the affirmative vote of a majority of
the entire Board of Directors; and such exact number shall be
eleven unless otherwise determined by resolution so adopted by a
majority of the entire Board of Directors. As used in this
Certificate of Incorporation, the term "entire Board of Directors"
means the total authorized number of directors which the
Corporation would have if there were no vacancies.
At the 1984 Annual Meeting of Stockholders, the directors shall be
divided into three classes, as nearly equal in number as possible,
with the term of office of the first class to expire at the 1985
Annual Meeting of Stockholders, the term of office of the second
class to expire at the 1986 Annual Meeting of Stockholders and the
term of office of the third class to expire at the 1987 Annual
Meeting of Stockholders. Commencing with the 1985 Annual Meeting of
Stockholders, directors elected to succeed those directors whose
terms have thereupon expired shall be elected for a term of office
to expire at the third succeeding Annual Meeting of Stockholders
after their election. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as
to maintain, if possible, the equality of the number of directors
in each class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. If such
equality is not possible, the increase or decrease shall be
apportioned among the classes in such a way that the difference in
the number of directors in any two classes shall not exceed one.
(c) Subject to the rights of the holders of any series of
Preferred Stock or any other class of capital stock of the
Corporation (other than the Common Stock) then outstanding, newly-
created directorships resulting from an increase in the authorized
number of directors in any class of directors or vacancies in any
such class resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall, if
occurring prior to the expiration of the term of office of such
class, be filled only by the affirmative vote of a majority of the
remaining directors of the entire Board of Directors then in
office, although less than a quorum, or by the sole remaining
director. Any director of any class so elected shall hold office
for a term that shall coincide with the remaining term of that
class. His successor shall be elected by the stockholders at the
same time and for the same term as the other directors of that
class.
(d) Whenever the holders of any one or more series of Preferred
Stock issued by the Corporation shall have the right, voting
separately by series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be
governed by this Article Eleventh unless expressly otherwise
provided by the resolution or resolutions providing for the
creation of such series.
(e) Notwithstanding any other provision of this Certificate of
Incorporation and subject to the other provisions of this Article
Eleventh, the Board of Directors shall determine the rights, powers,
duties, rules and procedures that shall affect the directors' power
to manage and direct the business and affairs of the Corporation.
Without limiting the foregoing, the Board of Directors shall
designate and empower committees of the Board of Directors, shall
elect and empower the officers of the Corporation, may appoint and
empower other officers and agents of the Corporation, and shall
determine the time and place of, and the notice requirements for,
Board meetings, as well as quorum and voting requirements for, and
the manner of taking, Board action.
TWELFTH. Any action required or permitted to be taken by the stockholders
of the corporation must be effected at a duly called annual or special
meeting of such holders and may not be effected by any consent in writing
by such holders. Except as otherwise required by law and subject to the
rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the corporation may be called only by the
Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors.
THIRTEENTH.
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-Laws of the corporation,
and except as otherwise expressly provided in Section B of this
Article THIRTEENTH, a Business Combination (as hereinafter
defined) with, or proposed by or on behalf of, an Interested
Stockholder (as hereinafter defined) or any Affiliate or
Associate (as hereinafter defined) of such Interested
Stockholder or any person who thereafter would be an Affiliate
or Associate of such Interested Stockholder shall require the
affirmative vote of not less than sixty-six and two-thirds
percent (66 2/3%) of the votes entitled to be cast by the
holders of all the then outstanding shares of Voting Stock (as
hereinafter defined), voting together as a single class,
excluding Voting Stock beneficially owned by such Interested
Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that
a lesser percentage or separate class vote may be specified, by
law or in any agreement with any national securities exchange
or otherwise.
B. The provisions of Section A of this Article THIRTEENTH
shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such
affirmative vote, if any, as is required by law or by any other
provision of this Certificate of Incorporation or the By-Laws
of the corporation, or any agreement with any national
securities exchange, if all of the conditions specified in
either of the following Paragraphs 1 or 2 are met or, in the
case of a Business Combination not involving the payment of
consideration to the holders of the corporation's outstanding
Capital Stock (as hereinafter defined), if the condition
specified in the following Paragraph 1 is met:
1. The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved
category of transactions, by a majority (whether such
approval is made prior to or subsequent to the acquisition of,
or announcement or public disclosure of the intention to
acquire, beneficial ownership of the Voting Stock that caused
the Interested Stockholder to become an Interested
Stockholder) of the Continuing Directors (as hereinafter
defined).
2. All of the following conditions shall have been met:
a. The aggregate per share amount of cash and the Fair
Market Value (as hereinafter defined), as of the date of
the consummation of the Business Combination, of
consideration other than cash to be received by holders of
Common Stock in such Business Combination shall be at
least equal to the highest amount determined under clauses
(i), (ii), (iii) and (iv) below;
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the
Interested Stockholder for any share of Common Stock in
connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of Common
Stock (x) within the two-year period immediately prior
to the first public announcement of the proposed
Business Combination (the "Announcement Date") or (y) in
the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as
adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification affecting or relating to
the Common Stock;
(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the
Interested Stockholder became an Interested Stockholder
(the "Determination Date"), whichever is higher, as
adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification affecting or relating to
the Common Stock;
(iii) (if applicable) the price per share equal to the
Fair Market Value per share of Common Stock determined
pursuant to the immediately preceding clause (ii),
multiplied by the ratio of (x) the highest per share
price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by or on behalf
of the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares
of Common Stock within the two-year period immediately
prior to the Announcement Date, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification affecting or relating to the Common
Stock to (y) the Fair Market Value per share of Common
Stock on the day immediately preceding the first day in
such two-year period on which the Interested Stockholder
acquired beneficial ownership of any share of Common
Stock, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification affecting or
relating to the Common Stock; and
(iv) the corporation's net income per share of Common
Stock for the four full consecutive fiscal quarters
immediately preceding the Announcement Date, multiplied
by the higher of the then price/earnings multiple (if
any) of such Interested Stockholder or the highest
price/earnings multiple of the Corporation within the
two-year period immediately preceding the Announcement
Date (such price/earnings multiples being determined as
customarily computed and reported in the financial
community).
b. The aggregate amount per share of cash and the Fair
Market Value, as of the date of the consummation of the
Business Combination, of consideration other than cash to be
received by holders of shares of any class or series of
outstanding Capital Stock, other than Common Stock, shall be
at least equal to the highest amount determined under
clauses (i), (ii), (iii) and (iv) below:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the
Interested Stockholder for any share of such class or
series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial
ownership of shares of such class or series of Capital
Stock (x) within the two-year period immediately prior
to the Announcement Date or (y) in the transaction in
which it became an Interested Stockholder, whichever is
higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or
reclassification affecting or relating to such class or
series of Capital Stock;
(ii) the Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date or on
the Determination Date, whichever is higher, as adjusted
for any subsequent stock split, stock dividend,
subdivision or reclassification affecting or relating to
such class or series of Capital Stock;
(iii) (if applicable) the price per share equal to the
Fair Market Value per share of such class or series of
Capital Stock determined pursuant to the immediately
preceding clause (ii), multiplied by the ratio of (x)
the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers'fees)
paid by or on behalf of the Interested Stockholder for
any share of such class or series of Capital Stock in
connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of such
class or series of Capital Stock within the two year
period immediately prior to the Announcement Date, as
adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification affecting or relating to
such class or series of Capital Stock to (y) the Fair
Market Value per share of such class or series of
Capital Stock on the day immediately preceding the first
day in such two year period on which the Interested
Stockholder acquired beneficial ownership of any share
of such class or series of Capital Stock, as adjusted
for any subsequent stock split, stock dividend,
subdivision or reclassification affecting or relating to
such class or series of Capital Stock; and
(iv) (if applicable) the highest preferential amount
per share to which the holders of shares of such class
or series of Capital Stock would be entitled in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the
corporation regardless of whether the Business
Combination to be consummated constitutes such an event.
The provisions of this Paragraph 2 shall be required to be met with
respect to every class or series of outstanding Capital Stock, whether
or not the Interested Stockholder has previously acquired beneficial
ownership of any shares of a particular class or series of Capital Stock.
c. The consideration to be received by holders of a
particular class or series of outstanding Capital Stock shall
be in cash or in the same form as previously has been paid by
or on behalf of the Interested Stockholder in connection with
its direct or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If the
consideration so paid for shares of any class or series of
Capital Stock varied as to form, the form of consideration
for such class or series of Capital Stock shall be either cash
or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital
Stock previously acquired by the
Interested Stockholder.
d. After the Determination Date and prior to the consummation
of such Business Combination: (i) except as approved by a
majority of the Continuing Directors, there shall have been no
failure to declare and pay at the regular dates therefor any
full quarterly dividends (whether or not cumulative) payable
in accordance with the terms of any outstanding Capital Stock;
(ii) there shall have been no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to
reflect any stock split, stock dividend or subdivision of the
Common Stock), except as approved by a majority of the
Continuing Directors; (iii) there shall have been an increase
in the annual rate of dividends paid on the Common Stock as
necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any
similar transaction that has the effect of reducing the number
of outstanding shares of Common Stock, unless the failure so
to increase such annual rate is approved by a majority of the
Continuing Directors; and (iv) such Interested Stockholder
shall not have become the beneficial owner of any additional
shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested
Stockholder and except in a transaction that, after giving
effect thereto, would not result in any increase in the
Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
e. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of
the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act") or, any
subsequent provisions replacing the Exchange Act, shall be
mailed to all stockholders of the corporation at least 30 days
prior to the consummation of such Business Combination
(whether or not such proxy or information statement is
required to be mailed pursuant to the Exchange Act or
subsequent provisions). The proxy or information statement
shall contain on the first page thereof, in a prominent place,
any statement as to the advisability (or inadvisability) of
the Business Combination that the Continuing Directors, or any
of them, may choose to make and, if deemed advisable by a
majority of the Continuing Directors, the opinion of an
investment banking firm selected by a majority of the
Continuing Directors as to the fairness (or absence thereof)
of the terms of the Business Combination from a financial
point of view to the holders of the outstanding shares of
Capital Stock other than the Interested Stockholder and its
Affiliates or Associates, such investment banking firm to be
paid a reasonable fee for its services by the corporation.
f. Such Interested Stockholder shall not have made any major
change in the corporation's business or equity capital
structure without the approval of a majority of the Continuing
Directors.
C. The following definitions shall apply with respect to this Article
THIRTEENTH:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the corporation or any
Subsidiary (as hereinafter defined) with (i) any
Interested Stockholder or (ii) any other company (whether
or not itself an Interested Stockholder) which is or
after such merger or consolidation would be an Affiliate
or Associate of an Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer
or other disposition or security arrangement, investment,
loan, advance, guarantee, agreement to purchase,
agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or
a series of transactions) with or for the benefit of any
Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder involving any assets,
securities, obligations or commitments of the corporation,
any Subsidiary or any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder
which has an aggregate Fair Market Value and/or involves
aggregate commitments of $2,500,000 or more or
constitutes more than 5 percent of the book value of the
total assets (in the case of transactions involving
assets or commitments other than capital stock) or 5
percent of the stockholders' equity (in the case of
transactions in capital stock) of the entity in question
(the "Substantial Part"), as reflected in the most
recent fiscal year-end consolidated balance sheet of such
entity existing at the time the stockholders of the
corporation would be required to approve or authorize the
Business Combination involving the assets, securities,
obligations and/or commitments constituting any
Substantial Part, provided that any arrangement, whether
as employee, consultant or otherwise, other than as a
director, pursuant to which any Interested Stockholder or
any Affiliate or Associate thereof shall, directly or
indirectly, have any control over or management of any
aspect of the business or affairs of the corporation,
shall be deemed to be a "Business Combination"
irrespective of the value test set forth above; or
c. the adoption of any plan or proposal for the
liquidation or dissolution of the corporation or for any
amendment to the corporation's By-Laws; or
d. any reclassification of securities (including any
reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the
corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving
an Interested Stockholder) that has the effect, directly
or indirectly, of increasing the proportionate share of
any class or series of Capital Stock, or any securities
convertible into Capital Stock or into equity securities
of any Subsidiary, that is beneficially owned by any
Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder; or
e. any agreement, contract or other arrangement
providing for any one or more of the actions specified in
the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of
the corporation authorized to be issued from time to time
under Article FOURTH of this Certificate of Incorporation,
and the term "Voting Stock" shall mean all Capital Stock
which by its terms may be voted on all matters submitted to
stockholders of the corporation generally.
3. The term "person" shall mean any individual, firm,
company or other entity and shall include any group comprised
of any person and any other person with whom such person or
any Affiliate or Associate of such person has any agreement,
arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital
Stock.
4. The term "Interested Stockholder" shall mean any person
(other than the corporation or any Subsidiary and other than
any profit-sharing, employee stock ownership or other
employee benefit plan of the corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan
when acting in such capacity) who (a) is or has announced or
publicly disclosed a plan or intention to become the
beneficial owner of Voting Stock representing ten percent
(10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the corporation and at any time
within the two-year period immediately prior to the date in
question was the beneficial owner of Voting Stock
representing ten percent (10%) or more of the votes entitled
to be cast by the holders of all then outstanding shares of
Voting Stock.
5. A person shall be a "beneficial owner" of any Capital
Stock (a) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; (b)
which such person or any of its Affiliates or Associates has,
directly or indirectly, (i) the right to acquire (whether
such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which are beneficially owned, directly
or indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Capital Stock.
For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this
Section C, the number of shares of Capital Stock deemed to be
outstanding shall include shares deemed beneficially owned by
such person through application of this Paragraph 5 of
Section C, but shall not include any other shares of Capital
Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
6. The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2
under the Exchange Act as in effect on July 24, 1986 (the
term "registrant" in said Rule 12b-2 meaning in this case the
corporation).
7. The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially
owned by the corporation; provided, however, that for the
purposes of the definition of Interested Stockholder set
forth in Paragraph 4 of this Section C, the term "Subsidiary"
shall mean only a company of which a majority of each class of
equity security is beneficially owned by the corporation.
8. The term "Continuing Director" means (i) any member of the
Board of Directors of the corporation (the "Board of
Directors"), while such person is a member of the Board of
Directors, who is not an Interested Stockholder or an
Affiliate or Associate or representative of the Interested
Stockholder and was a member of the Board of Directors prior
to the time that the Interested Stockholder became an
Interested Stockholder, and (ii) any person who subsequently
becomes a member of the Board of Directors, while such person
is a member of the Board of Directors, who is not an
Interested Stockholder or an Affiliate or Associate or
representative of the Interested Stockholder, if such person's
nomination for election or election to the Board of Directors
is recommended or approved by a majority of the Continuing
Directors then in office.
9. The term "Fair Market Value" means (a) in the case of cash,
the amount of such cash; (b) in the case of stock, the highest
closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange- Listed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New
York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange
registered under the Exchange Act on which such stock is
listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of
such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any similar system then
in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock
as determined by a majority of the Continuing Directors in
good faith; and (c) in the case of property other than cash
or stock, the fair market value of such property on the date
in question as determined in good faith by a majority of the
Continuing Directors.
10. In the event of any Business Combination in which the
corporation survives, the phrase "consideration other than
cash to be received" as used in Paragraphs 2.a and 2.b of
Section B of this Article THIRTEENTH shall include the shares
of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such
shares.
D. A majority to the Continuing Directors shall have the power
and duty to determine for the purposes of this Article THIRTEENTH,
on the basis of information known to them after reasonable
inquiry, all questions arising under this Article THIRTEENTH,
including without limitation, (a) whether a person is an
Interested Stockholder, (b) the number of shares of Capital Stock
or other securities beneficially owned by any person, (c) whether
a person is an Affiliate or Associate of another, (d) whether a
Proposed Action (as hereinafter defined) is with, or proposed by,
or on behalf of an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder, (e) whether the assets
that are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of
securities by the corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $2,500,000 or
more, and (f) whether the assets or securities that are the
subject of any Business Combination constitute a Substantial Part.
Any such determination made in good faith shall be binding and
conclusive on all parties.
E. Nothing contained in this Article THIRTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary
obligation imposed by law.
F. The fact that any Business Combination complies with the
provisions of Section B of this Article THIRTEENTH shall not be
construed to impose any fiduciary duty, obligation or
responsibility on the Board of Directors, or any member thereof,
to approve such Business Combination or recommend its adoption or
approval to the stockholders of the corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to
evaluations of or actions and responses taken with respect to such
Business Combination.
G. For the purposes of this Article THIRTEENTH, a Business
Combination or any proposal to amend, repeal or adopt any
provision of this Certificate of Incorporation inconsistent with
this Article THIRTEENTH (collectively, "Proposed Action") is
presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested
Stockholder or a person who thereafter would become such if (1)
after the Interested Stockholder became such, the Proposed Action
is proposed following the election of any director of the
corporation who with respect to such Interested Stockholder, would
not qualify to serve as a Continuing Director, or (2) such
Interested Stockholder, Affiliate, Associate or person votes for
or consents to the adoption of any such Proposed Action, unless as
to such Interested Stockholder, Affiliate, Associate or person a
majority of the Continuing Directors makes a good faith
determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or
person, based on information known to them after reasonable
inquiry.
H. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the corporation (and
notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, this Certificate of
Incorporation or the By-Laws of the corporation), any proposal to
amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article THIRTEENTH which is
proposed by or on behalf of an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder shall require
the affirmative vote of the holders of not less than sixty-six and
two-thirds percent (66 2/3%) of the votes entitled to be cast by
the holders of all the then outstanding shares of Voting Stock,
voting together as a single class, excluding Voting Stock
beneficially owned by such Interested Stockholder; provided,
however, that this Section H shall not apply to, and such
sixty-six and two-thirds percent (66 2/3%) vote shall not be
required for, any amendment, repeal or adoption unanimously
recommended by the Board of Directors if all of such directors are
persons who would be eligible to serve as Continuing Directors
within the meaning of Section C, Paragraph 8 of this Article
THIRTEENTH.
FOURTEENTH. The corporation shall indemnify to the full extent authorized
or permitted by law any person made, or threatened to be made, a party to
any action or proceeding (whether civil or criminal or otherwise) by
reason of the fact that he, his testator or intestate, is or was a
director or officer of the corporation or by reason of the fact that such
director or officer, at the request of the corporation, is or was serving
any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, in any capacity. Nothing contained herein shall
affect any rights to indemnification to which employees other than
directors and officers may be entitled by law. No director of the
corporation shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which such director derived an improper personal
benefit. No amendment to or repeal of this Article FOURTEENTH shall apply
to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment.
FIFTEENTH. The By-Laws of this corporation may be amended by the
affirmative vote of a majority of the whole Board of Directors or by the
affirmative vote of the holders of a majority of the issued and
outstanding common stock of this corporation. Any provision of the By-Laws
adopted or amended by the stockholders may be amended by the Board of
Directors except that the stockholders may
from time to time specify particular provisions
thereof which shall not be amended by the Board
of Directors.
SIXTEENTH.
(a) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, Article ELEVENTH, Article
TWELFTH and Article FOURTEENTH hereof shall not be altered,
amended or repealed and no provision inconsistent therewith
shall be adopted without the affirmative vote of the holders of
at least 66 2/3% of the voting power of all the shares of the
corporation entitled to vote generally in the election of directors,
voting together as a single class. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 66 2/3% of the voting
power of all the shares of the corporation entitled to vote generally
in the election of directors, voting together as a single class,
shall be required to alter, amend, adopt any provision inconsistent
with or repeal this paragraph (a) of Article SIXTEENTH.
(b) The corporation reserves the right to amend, alter, change or
repeal any provision contained in its Certificate of
Incorporation, or any amendment thereof, in the manner now or
hereafter prescribed by the laws of the State of Delaware or
this Certificate of Incorporation, and all rights conferred upon
the stockholders of the corporation are granted subject to
this reservation.
SEVENTEENTH. The rights of the holders of the Common Stock, the
Preferred Stock or other capital stock of the corporation,
whenever acquired, shall be subordinate to the rights of all holders
of indebtedness in the event of any reorganization or
liquidation of the corporation, even if the claim for such indebtedness
is disallowed, avoided or subordinated pursuant to the
provisions of Title 11 of the United States Code, as in effect from
time to time, or other applicable laws.
EIGHTEENTH. The corporation is to have perpetual existence.
In Witness Whereof, we have hereunto set our hands and seals this
31st day of October, 1938.
L. E. Gray (L.S.)
L. H. Herman (L.S.)
Walter Lenz (L.S.)
In Presence of:
Harold E. Grantland
State of Delaware,
County of New Castle, }ss
Be it remembered that on the 31st day of October, 1938, personally came
before me, a Notary Public in and for the County and State aforesaid,
L. E. Gray, L. H. Herman and Walter Lenz, all of the parties to the
foregoing Certificate of Incorporation, known to me personally to be
such, and severally acknowledged said Certificate to
be the act and deed of the signers respectively and that the facts herein
stated are truly set forth.
Given under my hand and seal the day and year aforesaid,
Harold E. Grantland
Notary Public
Harold E. Grantland Notary
Public Appointed Jan. 11, 1937
State of Delaware
Term Two Years
CERTIFICATE OF DESIGNATION OF SERIES A
PARTICIPATING PREFERRED STOCK
No Par Value
of
Owens-Corning Fiberglas Corporation
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
We, William Colville, Senior Vice President, and
Dennis Jarvela, Assistant Secretary, of Owens-Corning Fiberglas
Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance
with the provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the
Board of Directors by the Restated Certificate of Incorporation of
the said Corporation, the said Board of Directors on December
18, 1986, adopted the following resolution creating a series of
four hundred fifty thousand (450,000) shares of Preferred Stock
designated as Series A Participating Preferred Stock, no Par
Value;
RESOLVED, that pursuant to the authority vested in
the Board of Directors of this Corporation in accordance with the
provisions of its Restated Certificate of Incorporation, a series of
Preferred Stock of the Corporation be, and it hereby is, created,
and that the designation and amount thereof and the voting
powers, preferences and relative participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of
such series shall be designated as Series A Participating
Preferred Stock, no par value (the "Series A Preferred
Stock") and the number of shares constituting such series
shall be 400,000. Such number of shares may be increased
or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than
the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the
conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of
any shares of any series of Preferred Stock
(or any similar stock) ranking prior and
superior to the Series A Preferred Stock with
respect to dividends, the holders of shares
of Series A Preferred Stock, in preference to
the holders of Common Stock, $.10 par value
of the Corporation (the "Common Stock") and
of any other junior stock which may be
outstanding, shall be entitled to receive,
when, as and if declared by the Board of
Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the
first day of January, April, July and October
in each year (each such date being referred
to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly
Dividend Payment Date after the first
issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to
the greater of (a) $2.50 per share ($10.00
per annum), or (b) subject to the provision
for adjustment hereinafter set forth, 100
times the aggregate per share amount of all
cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all
noncash dividends or other distributions,
other than a dividend payable in shares of
Common Stock or a subdivision of the
outstanding shares of Common Stock (by
reclassification or otherwise), declared on
the Common Stock since the immediately
preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly
Dividend Payment Date, since the first
issuance of any share or fraction of a share
of Series A Preferred Stock. In the event
the Corporation shall at any time declare
or pay any dividend on Common Stock payable
in shares of Common Stock, or effect a
subdivision or combination or consolidation
of the outstanding shares of Common Stock
(by reclassification or otherwise than by
payment of a dividend in shares of Common
Stock) into a greater or lesser number of
shares of Common Stock, then in each such
case the amount to which holders of shares
of Series A Preferred Stock were entitled
immediately prior to such event under clause
(b) of the preceding sentence shall be
adjusted by multiplying such amount by a
fraction, the numerator of which is the
number of shares of Common Stock outstanding
immediately after such event and the denominator
of which is the number of shares of Common
Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend
or distribution on the Series A Preferred Stock
as provided in paragraph (A) of this Section
immediately after it declares a dividend or
distribution on the Common Stock (other than a
dividend payable in shares of Common Stock);
provided that, in the event no dividend or
distribution shall have been declared on the
Common Stock during the period between any
Quarterly Dividend Payment date and the next
subsequent Quarterly Dividend Payment Date, a
dividend of $2.50 per share ($10.00 per annum)
on the Series A Preferred Stock shall
nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue
and be cumulative on outstanding
shares of Series A Preferred Stock from the
Quarterly Dividend Payment
Date next preceding the date of issue of such
shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to
the record date for the first Quarterly
Dividend Payment Date, in which case
dividends on such shares shall begin to
accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the
record date for the determination of holders
of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date,
in either of which events such dividends
shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall accumulate
but shall not bear interest. Dividends paid
on the shares of Series A Preferred Stock in
an amount less than the total amount of such
dividends at the time accrued and payable on
such shares shall be allocated pro rata on a
share-by-share basis among all such shares at
the time outstanding. The Board of Directors
may fix a record date for the determination
of holders of shares of Series A Preferred
Stock entitled to receive payment of a
dividend or distribution declared thereon,
which record date shall be not more than 60
days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of
shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provisions
for adjustment as hereinafter set forth, each
share of Series A Preferred Stock shall
entitle the holder thereof to 100 votes (and
each one one-hundredth of a share of Series A
Preferred Stock shall entitle the holder
thereof to one vote) on all matters submitted
to a vote of the stockholders of the
Corporation. In the event the Corporation
shall at any time declare or pay any dividend
on Common Stock payable in shares of Common
Stock or effect a subdivision or combination
or consolidation of the outstanding shares of
Common Stock (by reclassification or
otherwise than by payment of a dividend in
shares of Common Stock into a greater or
lesser number of shares of Common Stock, then
in each such case the number of votes per
share to which holders of shares of Series A
Preferred Stock were entitled immediately
prior to such event shall be adjusted by
multiplying such number by a fraction, the
numerator of which is the number of shares of
Common Stock outstanding immediately after
such event and the denominator of which is
the number of shares of Common Stock that
were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein,
in the Restated Certificate of Incorporation,
in any other certificate of designation
creating a series of preferred stock or any
similar stock, or by law, the holders of
shares of Series A Preferred Stock and the
holders of shares of Common
Stock and any other capital stock of the
Corporation having general voting rights
shall vote together as one class on all matters
submitted to a vote of stockholders of the
Corporation.
(C) If at the time of any annual
meeting of stockholders for the election of
directors, the equivalent of six quarterly
dividends (whether or not consecutive)
payable on any share or shares of Series A
Preferred Stock are in default, the number of
directors constituting the Board of Directors
of the Corporation shall be increased by two.
In addition to voting together with the
holders of Common Stock for the election of
other directors of the Corporation, the
holders of record of the Series A Preferred
Stock, voting separately
as a class to the exclusion of the holders of
Common Stock, shall be entitled at said
meeting of stockholders
(and at each subsequent annual meeting of
stockholders), unless all dividends in
arrears have been paid or declared and set
apart for payment prior thereto, to vote for
the election of two directors of the
Corporation. Until the default in payments of
all dividends which permitted the election of
said directors shall cease to exist any
director who shall have been so elected
pursuant to the next preceding sentence may
be removed at any time, either with or
without cause, only by the affirmative vote
of the holders of the shares at the time
entitled to cast a majority of the votes
entitled to be cast, for the election of any
such director at a special meeting of such
holders called for that purpose, and any vacancy
thereby created may be filled by the vote of
such holders. If and when such default shall
cease to exist, the holders of the Series A
Preferred Stock shall be divested
of the foregoing special voting rights,
subject to revesting in the event of each and
every subsequent like default in payments of
dividends. Upon the termination of the
foregoing special voting rights, the terms of
office of all persons who may have been
elected directors pursuant to said special
voting rights shall forthwith terminate, and
the number of directors constituting the
Board of Directors shall be reduced by two.
The voting rights granted by this Section
3(c) shall be in addition to any other voting
rights granted to the holders of the Series B
Preferred Stock in this Section 3.
(D) Except as provided herein, in Section
10 or by applicable law, holders of Series A
Preferred Stock shall have no special voting
rights and their consent shall not be
required (except to the extent they
are entitled to vote with holders of Common
Stock as set forth herein) for authorizing or
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the
Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and
distributions, whether or not declared, on
shares of Series A Preferred Stock
outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any
other distributions on any shares or stock
ranking junior (either as to dividends or
upon liquidation, dissolution or windingup)
to the Series A Preferred Stock;
(ii) declare or pay dividends,
or make any other distributions, on any
shares of stock ranking on a parity (either
as to dividends or upon liquidation,
dissolution or winding up) with the Series A
Preferred Stock except dividends paid ratably
on the Series A Preferred Stock, and all such
parity stock on which dividends are payable
or in arrears in proportion to the total
amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock
ranking on a parity (either as to dividends
or upon liquidation, dissolution
or winding-up) with the Series A Preferred
Stock, provided that the Corporation may at
any time redeem, purchase or otherwise
acquire shares of any such parity stock in
exchange for shares of any stock of the
Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock;
or
(iv) purchase or otherwise
acquire for consideration any shares of
Series A Preferred Stock, or any shares of
stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or
windingup) with the Series A Preferred Stock,
except in accordance with a purchase offer
made in writing or by publication (as
determined by the Board of Directors) to all
holders of such shares upon such terms as the
Board of Directors, after consideration of
the respective annual dividend rates and
other relative rights and preferences of the
respective series and classes, shall
determine in good faith will result in fair
and equitable treatment among the respective
series or classes.
(B) The Corporation shall not
permit any subsidiary of the Corporation to
purchase or otherwise acquire for
consideration any shares of stock of the
Corporation unless the Corporation could,
under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at
such time and in such manner.
Section 5. Reacquired Shares.
Any shares of Series A Preferred Stock
purchased or otherwise acquired by the
Corporation in any manner whatsoever, shall
be retired and cancelled promptly after the
acquisition thereof. All such shares shall
upon their cancellation become authorized but
unissued shares of preferred stock, without
designation as to series, and may be reissued
as part of a new series of preferred stock to
be created by resolution or resolutions of
the Board of Directors, subject to the
conditions and restrictions on issuance set
forth herein, in the Restated Certificate of
Incorporation, in any other certificate of
designation creating a series of preferred
stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding-Up.
Upon any voluntary or involuntary
liquidation, dissolution or windingup of the
Corporation, no distribution shall be made
(A) to the holders of shares of stock ranking
junior (either as to dividends or upon
liquidation, dissolution or winding-up) to
the Series A Preferred Stock unless prior
thereto, the holders of shares of Series A
Preferred Stock shall have received the
higher of (i) $100 per share, plus an amount
equal to accrued and unpaid dividends and
distributions thereon, whether or not
declared, to the date of such payment, or
(ii) an aggregate amount per share, subject
to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate
amount to be distributed per share to holders
of Common Stock; nor shall any distribution
be made (B) to the holders of stock ranking
on a parity (either as to dividends or upon
liquidation, dissolution or winding-up) with
the Series A Preferred Stock, except
distributions made ratably on the Series A
Preferred Stock and all other such parity
stock in proportion to the total amounts to which the
holders of all such shares are entitled upon
such liquidation, dissolution or winding-up.
In the event the Corporation shall at any
time declare or pay any dividend on Common
Stock payable in shares of Common Stock, or
effect a subdivision or combination or
consolidation of the outstanding shares of
Common Stock (by reclassification or
otherwise than by payment of a dividend in
shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then
in each such case the aggregate amount to
which holders of shares of Series A Preferred
Stock were entitled immediately prior to such
event under the provision in clause (A) of
the preceding sentence shall be adjusted by
multiplying such amount by a fraction the
numerator of which is the number of shares of
Common Stock outstanding immediately after
such event and the denominator of which is
the number of shares of Common Stock that
were outstanding immediately prior to such
event.
Section 7. Consolidation,
Merger, etc. In case the Corporation shall
enter into any consolidation, merger,
combination or other transaction in which the
shares of Common Stock are exchanged for or
changed into other stock or securities, cash
and/or any other property, or otherwise
changed, then in any such case each share of
Series A Preferred Stock shall at the same
time be similarly exchanged
or changed into an amount per share (subject
to the provision for adjustment hereinafter
set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any
other property (payable in kind), as the case
may be, into which or for which each share of
Common Stock is changed or exchanged. In the
event the Corporation shall at any time
declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect
a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into
a greater or lesser number of shares of
Common Stock, then in each such case the
amount set forth in the preceding sentence
with respect to the exchange or change of
shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a
fraction the numerator of which is the number
of shares of Common Stock outstanding
immediately after such event and the
denominator of which is the number of shares
of Common Stock that were outstanding
immediately prior to such event.
Section 8. No Redemption. The shares of Series A
Preferred Stock shall not be redeemable.
Section 9. Rank. Unless otherwise
provided in the Restated Certificate of
Incorporation of the Corporation or a
Certificate of Designation relating to a
subsequent series of preferred stock of the
Corporation, the Series A Preferred Stock
shall rank junior to all other series
of the Corporation's preferred stock as to
the payment of dividends and the distribution
of assets on liquidation, dissolution or
winding-up, and senior to the Common Stock of
this Corporation.
Section 10. Amendment. The
Restated Certificate of Incorporation of the
Corporation, as amended, shall not be amended
in any manner which
would materially alter or change the
powers, preferences or special rights of
the Series A Preferred Stock so as to
affect them adversely without the
affirmative vote of the holders of at least twothirds
of the outstanding shares of Series A
Preferred Stock, voting together as a single series.
Section 11. Fractional Shares. Series A
Preferred Stock may be issued in fractions
of a share (in one one-hundredths (1/100)
of a share and integral multiples thereof)
which shall be entitle the holder, in
proportion to such holder's fractional
shares, to exercise voting rights, receive
dividends, participate in distributions
and to have the benefit of all other
rights of holders of Series A Preferred
Stock.
IN WITNESS WHEREOF, this Certificate of
Designation is executed on behalf of the
Corporation by its Senior Vice President
and attested by its Assistant Secretary
this 19th day of December, 1986.
/s/ William Colville
Senior Vice President
ATTEST:
/s/ D. L. Jarvela
Assistant Secretary
CERTIFICATE OF INCREASE OF DESIGNATION
OF SERIES A
PARTICIPATING PREFERRED
STOCK
No Par Value
of
Owens-Corning Fiberglas Corporation
Pursuant to Section 151 of the General
Corporation Law of the
State of Delaware
We, William W. Colville, Senior Vice
President, and Dennis L. Jarvela,
Assistant Secretary, of Owens-Corning
Fiberglas Corporation (the "Corporation"),
a corporation organized and existing under
the General Corporation Law of the State of
Delaware, in accordance with the
provisions of Section 103 thereof, DO
HEREBY CERTIFY that:
Pursuant to the authority conferred upon
the Board of Directors by the provisions of
Section 1 of the resolutions set forth in the
Corporation's Certificate of Designation of a Series A
Participating Preferred Stock, which certificate was filed in
the Office of the Secretary of State
of the State of Delaware on December
24, 1986, an increase of 300,000
shares in the number of shares of
Preferred Stock designated as and
constituting the Corporation's Series A
Participating Preferred Stock, no par value,
has been authorized
and directed by a resolution adopted
by the Board of Directors, resulting in a total of
750,000 shares of such Preferred Stock so
designated.
IN WITNESS WHEREOF, this Certificate is
executed on behalf of the Corporation by
its Senior Vice President and
attested by its Assistant Secretary the 8th
day of June, 1994.
/s/ William Colville
Senior Vice President
Attest:
/s/ D. L. Jarvela
Assistant Secretary
Exhibit (11)
OWENS CORNING AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1997 1996
(In millions of dollars
except share data)
Primary:
Net income $ 42 $ 39
Weighted average number of shares
outstanding (thousands) 52,761 51,490
Weighted average common equivalent
shares (thousands):
Deferred awards 15 15
Stock options using weighted average
market price 689 796
Primary weighted average number of
common shares outstanding and
common equivalent shares (thousands) 53,465 52,301
Primary per share amount $ .79 $ .75
Fully Diluted:
Net income $ 44 $ 41
Weighted average number of shares
outstanding (thousands) 52,761 51,490
Weighted average common equivalent
shares (thousands):
Deferred awards 15 15
Stock options using the higher of
average market price or market
price at end of period 760 821
Shares from assumed conversion
of preferred securities 4,566 4,566
Fully diluted weighted average number
of common shares outstanding and
common equivalent shares (thousands) 58,102 56,892
Fully diluted per share amount $ .76 $ .73
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
SEC form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 442
<ALLOWANCES> 17
<INVENTORY> 430
<CURRENT-ASSETS> 1,107
<PP&E> 3,322
<DEPRECIATION> 1,767
<TOTAL-ASSETS> 4,107
<CURRENT-LIABILITIES> 1,044
<BONDS> 1,099
<COMMON> 647
0
0
<OTHER-SE> (1,061)
<TOTAL-LIABILITY-AND-EQUITY> 4,107
<SALES> 875
<TOTAL-REVENUES> 875
<CGS> 652
<TOTAL-COSTS> 652
<OTHER-EXPENSES> 7
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 58
<INCOME-TAX> 19
<INCOME-CONTINUING> 42
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42
<EPS-PRIMARY> .79
<EPS-DILUTED> .76
</TABLE>
