SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 15, 1999.
OWENS CORNING
(Exact name of registrant as specified in its charter)
Delaware 1-3660 34-4323452
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Owens Corning Parkway
Toledo, Ohio 43659
(Address of principal executive offices) (Zip Code)
(419) 248-8000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
(a) April 15, 1999 Press Release. On April 15, 1999, Owens
Corning issued the press release attached hereto as Exhibit 99.
Such press release is incorporated herein by this reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
The exhibit accompanying this report is listed in the
accompanying Exhibit Index.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
OWENS CORNING
Registrant
By: /s/ Steven J. Strobel
Steven J. Strobel
Vice President and Controller
Dated: April 15, 1999
<PAGE>
EXHIBIT INDEX
The following exhibit is filed herewith:
Exhibit No. 99. Press Release of Owens Corning
dated April 15, 1999.
<PAGE>
Owens Corning Reports Strong First Quarter Results
TOLEDO, Ohio, April 15, 1999 - Owens Corning (NYSE: OWC) today
reported record earnings on strong sales for the first quarter of
1999.
Net income was $44 million, a record for the first quarter.
Earnings per share on a diluted basis were $0.77. This
represents an increase of $36 million over 1998 first quarter
results of $8 million or $0.16 per diluted share. Income was
driven by increased volume in the company's Building Materials
businesses, continuing improvement in productivity, incremental
restructuring benefits and increases in market pricing.
Net sales for the quarter were $1.130 billion, down slightly
compared to $1.137 billion in the first quarter of 1998.
However, sales in the first quarter were up 6 percent over last
year when adjusted for the Yarns business, which transferred into
a joint venture during the third quarter of 1998.
"We are extremely pleased with the solid performance of our
businesses in the first quarter," said Glen H. Hiner, Owens
Corning chairman and chief executive officer. "Building
Materials had an exceptional quarter, and two units within that
business - Insulating Systems and Roofing Systems - had all time
record first quarters. In addition, all of our businesses
continued to benefit from company-wide productivity initiatives.
On the strategic front, we are encouraged by the initial results
of our National Settlement Program, which is making our future
more predictable."
Building Materials
Building Materials income from operations was $76 million during
the quarter, compared to a loss of $10 million during the first
quarter of 1998. The improvement was due to strength in the
roofing and insulation markets and the success of productivity
initiatives.
Sales in Building Materials were $925 million during the first
quarter of 1999, up 8 percent compared to the prior-year period.
Demand for Insulation Systems continued at a record pace in the
quarter, and unseasonably mild weather helped drive demand for
Roofing Systems. Exterior Systems vinyl siding unit volumes were
up 8 percent compared to the first quarter of 1998.
Composite Materials
Composite Materials income from operations was $31 million, down
from $52 million in the first quarter of 1998, due largely to the
transfer of the Yarns business into a joint venture in the third
quarter of 1998. This unit had good productivity in the quarter,
which offset slightly lower volume.
Composite sales in the first quarter of 1999 were $236 million,
compared to $312 million in the prior-year period. On a
comparative basis, adjusted for the transfer of the Yarns
business, sales were down 4 percent for the quarter. High demand
globally for polymer reinforcement products was offset by volume
declines in the United States.
First Quarter Highlights
* In January, Owens Corning announced the formation of a
dedicated Acoustic Systems Business to capitalize on the strength
of its brand, its long history of acoustic research, and its
expanding acoustics product offering. The company is committed
to taking a leadership position in this growing and fragmented
market segment, which is estimated to be in excess of $3 billion.
* Owens Corning issued $250 million of 10-year senior notes
with a 7.037 percent yield and a 7.0 percent coupon rate. The
offering was oversubscribed. Proceeds were used to reduce the
company's borrowings under Owens Corning's U.S. Bank Credit
Facility.
* The company expanded its global network of manufacturing
plants making glass fiber reinforcements for composites
applications. In India, Owens Corning dedicated a new plant
which manufactures Advantex glass fiber reinforcements. In
Korea, the company acquired a majority share of its glass fiber
reinforcements joint venture, now called Owens Corning Korea.
* Following a licensee's decision to close an Australian
reinforcements plant, Owens Corning established Owens Corning
Australia to serve the former licensee's customer base and to
develop and grow the market for composite systems in Australia
and New Zealand.
* Plans were announced to install a continuous filament mat
(CFM) line at the company's plant in Guelph, Ontario, Canada.
The new line will add approximately 8,000 metric tons of CFM
capacity and is expected to be operational in the first quarter
of 2000. The investment follows recent increases of CFM capacity
at Owens Corning's facilities in Battice, Belgium, and
Huntingdon, Penn., and it will enable the company to better serve
the needs of this growing market worldwide.
* During the first quarter of 1999, 25 additional law firms
joined the National Settlement Program (NSP), bringing the total
number of firms in the program to approximately 80, and the total
asbestos personal injury cases settled to over 188,000. The NSP
was announced in December 1998, to settle the company's pending
asbestos cases and to establish a framework for resolving cases
in the future without litigation. Under NSP agreements, Owens
Corning will pay both current and future claimants through an
administrative procedure using compensation schedules that take
into account each claimant's type and severity of asbestos-
related disease, and the extent of exposure to Owens Corning's
former products. New claims being filed in the court system
generally do not list Owens Corning as a defendant; an indication
that the program is working. Please see the addendum to this
press release for more information about the progress of the
company's National Settlement Program.
Outlook
"The strong results in our businesses this quarter are very
satisfying, and we believe that our momentum will continue,"
Hiner said. "We are working to realize double-digit earnings
growth through all of our System Thinking initiatives, while
focusing on achieving additional cost savings from the
restructuring program we implemented last year."
Owens Corning is a world leader in high performance building
materials systems and glass fiber composites with approximately
20,000 employees worldwide.
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those projected in these statements. Further
information on factors that could affect the company's financial
and other results are included in the company's Form 10-Q and 10-
K, filed with the Securities and Exchange Commission.
Tables Follow
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1999 1998
(In millions of dollars,
except share data)
NET SALES $ 1,130 $ 1,137
COST OF SALES (1) 871 938
Gross margin 259 199
OPERATING EXPENSES
Marketing and administrative expenses (1) 136 129
Science and technology expenses 14 15
Restructure costs (1) - 87
Other (1) 13
Total operating expenses 149 244
Gain on sale of assets (2) - 84
INCOME FROM OPERATIONS 110 39
Cost of borrowed funds 33 37
INCOME BEFORE PROVISION (CREDIT)
FOR INCOME TAXES 77 2
Provision (credit) for income taxes 27 (7)
INCOME BEFORE MINORITY
INTEREST AND EQUITY
IN NET INCOME OF AFFILIATES 50 9
Minority interest (2) (5)
Equity in net income (loss) of affiliates (4) 4
NET INCOME $ 44 $ 8
NET INCOME PER COMMON SHARE
Basic net income per share $ .81 $ .16
Diluted net income per share $ .77 $ .16
Weighted average number of common
shares outstanding and common equivalent
shares during the period (in millions)
Basic 53.9 53.4
Diluted 59.3 53.8
</TABLE>
(1) During the first quarter of 1998, the Company recorded a $95
million pretax charge for restructuring and other actions, of
which $87 million was recorded as restructure costs, $5 million as
cost of sales, and $3 million as marketing and administrative
expenses.
(2) During the first quarter of 1998, the Company recorded an $84
million pretax gain from the sale of its 50% ownership interest in
Alpha/Owens-Corning.
<PAGE>
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<S> <C> <C> <C>
March 31, December 31, March 31,
1999 1998 1998
ASSETS (In millions of dollars)
CURRENT
Cash and cash equivalents $ 51 $ 54 $ 115
Receivables 555 451 560
Inventories 496 437 533
Insurance for asbestos litigation
claims - current portion (1) 150 150 100
Deferred income taxes 368 293 140
Income tax receivable 30 117 108
Other current assets 25 27 51
Total current 1,675 1,529 1,607
OTHER
Insurance for asbestos litigation
claims (1) 241 260 340
Asbestos costs to be reimbursed -
Fibreboard 70 74 117
Deferred income taxes 508 608 394
Goodwill 754 762 792
Investments in affiliates 42 45 53
Other noncurrent assets 241 205 174
Total other 1,856 1,954 1,870
PLANT AND EQUIPMENT, at cost 3,572 3,498 3,603
Less--Accumulated depreciation (1,904) (1,880) (1,858)
Net plant and equipment 1,668 1,618 1,745
TOTAL ASSETS $5,199 $5,101 $5,222
</TABLE>
<PAGE>
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
(unaudited)
<TABLE>
<S> <C> <C> <C>
March 31, December 31, March 31,
1999 1998 1998
(In millions of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 755 $ 942 $ 812
Reserve for asbestos litigation claims -
current portion (1) 1,050 850 300
Short-term debt 108 69 59
Long-term debt - current portion 51 22 127
Total current 1,964 1,883 1,298
LONG-TERM DEBT 1,903 1,535 1,874
OTHER
Reserve for asbestos litigation claims (1) 1,385 1,780 1,241
Asbestos-related liabilities - Fibreboard 75 79 124
Other employee benefits liability 325 326 332
Pension plan liability 47 55 63
Other 358 364 186
Total other 2,190 2,604 1,946
COMPANY OBLIGATED SECURITIES
OF ENTITIES HOLDING SOLELY
PARENT DEBENTURES 195 194 503
MINORITY INTEREST 44 19 24
STOCKHOLDERS' EQUITY
Common stock 696 679 662
Deficit (1,723) (1,762) (1,035)
Accumulated other comprehensive income (48) (37) (33)
Other (22) (14) (17)
Total stockholders' equity (1,097) (1,134) (423)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $5,199 $ 5,101 $5,222
</TABLE>
(1) As of March 31, 1999, the current portion of the reserve for
asbestos litigation claims, net of insurance, is $900 million.
Excluding Fibreboard activity, the total reserve, net of
insurance, is $2,044 million.
<PAGE>
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1999 1998
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
Net income $ 44 $ 8
Reconciliation of net cash provided by
operating activities:
Noncash items:
Provision for depreciation and amortization 53 52
Provision (credit) for deferred income taxes 23 (45)
Gain on sale of assets - (84)
Other 5 (7)
(Increase) decrease in receivables (86) (129)
(Increase) decrease in inventories (53) (36)
Increase (decrease) in accounts
payable and accrued liabilities (181) (12)
Increase (decrease) in accrued income taxes 80 (2)
Proceeds from insurance for asbestos
litigation claims, excluding Fibreboard 19 17
Payments for asbestos litigation claims,
excluding Fibreboard (195) (129)
Other (13) 37
Net cash flow from operations (304) (330)
NET CASH FLOW FROM INVESTING
Additions to plant and equipment (40) (47)
Proceeds from the sale of affiliate or business - 134
Other (11) (19)
Net cash flow from investing $ (51) $ 68
</TABLE>
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1999 1998
(In millions of dollars)
NET CASH FLOW FROM FINANCING
Net additions to long-term
credit facilities $ 91 $ 285
Other additions to long-term debt 250 3
Net increase in short-term debt 18 36
Dividends paid (4) (4)
Other (3) -
Net cash flow from financing 352 320
Effect of exchange rate changes on cash - (1)
Net increase (decrease) in cash
and cash equivalents (3) 57
Cash and cash equivalents at
beginning of period 54 58
Cash and cash equivalents at end
of period $ 51 $ 115
</TABLE>
OWENS CORNING AND SUBSIDIARIES
QUARTERLY INFORMATION ON REPORTABLE OPERATING SEGMENTS
(unaudited)
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1999 1998
(In millions of dollars)
NET SALES
Reportable Operating Segments
Building Materials
United States $ 814 $ 739
Europe 63 65
Canada and other 48 52
Total Building Materials 925 856
Composite Materials
United States 128 182
Europe 82 97
Canada and other 26 33
Total Composite Materials 236 312
Total Reportable Operating Segments 1,161 1,168
Reconciliation to Consolidated Net Sales
Composite Materials U.S. Sales to
Building Materials U.S. (31) (31)
Net sales $1,130 $1,137
External Customer Sales by Geographic Region
United States $ 911 $ 890
Europe 145 162
Canada and other 74 85
Net Sales $1,130 $1,137
</TABLE>
OWENS CORNING AND SUBSIDIARIES
QUARTERLY INFORMATION ON REPORTABLE OPERATING SEGMENTS (Continued)
(unaudited)
<TABLE>
<S> <C> <C>
Quarter Ended
March 31,
1999 1998
(In millions of dollars)
INCOME (LOSS) FROM OPERATIONS
Reportable Operating Segments
Building Materials
United States $ 67 $ (6)
Europe 3 (4)
Canada and other 6 -
Total Building Materials 76 (10)
Composite Materials
United States 28 42
Europe - 9
Canada and other 3 1
Total Composite Materials 31 52
Total Reportable Operating Segments $ 107 $ 42
Geographic Regions
United States $ 95 $ 36
Europe 3 5
Canada and other 9 1
Total Reportable Operating Segments $ 107 $ 42
Reconciliation to Consolidated Income Before
Provision for Income Taxes
Restructuring and other charges - (95)
Gain on sale of affiliate or business - 84
General corporate income (expense) 3 8
Cost of borrowed funds (33) (37)
Consolidated Income before provision $ 77 $ 2
for income taxes
</TABLE>
Addendum To Owens Corning's First Quarter Earnings Release
National Settlement Program Update
During the first quarter of 1999, 25 additional law firms joined
the National Settlement Program (NSP), bringing the total number
of firms in the program to approximately 80, and the total
asbestos personal injury cases settled to over 188,000. The NSP,
announced in December of 1998, also settles a similar number of
pending claims and currently barred claims that would be filed
against its Fibreboard subsidiary in the event that the U.S.
Supreme Court strikes down Fibreboard's global settlement. A
Supreme Court decision is expected sometime in the second quarter
of 1999.
In the first quarter the company paid approximately $40 million
for claims settled under the NSP. The company estimates that it
will pay an additional $610 million for claims resolved under the
NSP in 1999, primarily in the third and fourth quarters. Other
payments related to non-NSP cases, including verdicts and defense
costs, as well as the cost of pursuing recoveries from tobacco
companies, PFT laboratories and insurance companies, are expected
to be approximately $125 million in 1999, of which $27 million
was spent in the first quarter. This projected annual amount
could be reduced, and NSP payments in 1999 and 2000 increased,
depending on the number of additional law firms and claims
resolved under the NSP in the next several quarters. Also, the
costs of litigation, as well as future indemnity payments, could
be offset by positive results in our proactive litigation efforts
listed above. All such estimated amounts are before tax and
before insurance recoveries.
As a result of the National Settlement Program and the company's
ability to focus on fewer remaining cases, Owens Corning took no
adverse verdicts in the first quarter. The company went to trial
18 times, and in four cases it paid no money. In the remainder
of those cases, it agreed to settle prior to a jury decision at
values consistent with values in the NSP. These positive results
were achieved while paying only $8 million in the first quarter
in ongoing asbestos-related defense costs. This is a substantial
reduction from prior quarters.
Finally, in 1999, the company expects to pay approximately $200
million to resolve a substantial majority of all pre-NSP
verdicts, settlements and appeals from 1993 through 1997, of
which approximately $120 million was paid in the first quarter.
With these payments, the company will be able to proceed with the
NSP, and minimize ongoing litigation costs, appealing only those
adverse verdicts where the company believes there has been an
unjust result.
The Owens Corning National Settlement Program was created in 1998
to settle the company's pending asbestos cases and to establish a
framework for resolving cases in the future without litigation.
Under NSP agreements, Owens Corning will pay both current and
future claimants through an administrative procedure using
compensation schedules that take into account each claimant's
type and severity of asbestos-related disease, and the extent of
exposure to Owens Corning's former products.
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