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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
Commission File No. 1-3660
Owens Corning
Fiberglas Tower, Toledo, Ohio 43659
Area Code (419) 248-8000
A Delaware Corporation
I.R.S. Employer Identification No. 34-4323452
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which Registered
Common Stock - $.10 Par Value New York Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Participating Preferred
Stock, no par value, of the
Registrant
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes / X /
No / /
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
At December 31, 1995, the aggregate market value of
Registrant's $.10 par value common stock (Registrant's voting
stock) held by non-affiliates was $2,289,208,060, assuming
for purposes of this computation only that all directors and
executive officers are considered affiliates.
At December 31, 1995, there were outstanding 51,389,618
shares of Registrant's $.10 par value common stock.
Parts of Registrant's definitive 1996 proxy statement filed
or to be filed pursuant to Regulation 14A (the "1996 Proxy
Statement") are incorporated by reference into Part III of
this Form 10-K.
-2-
PART I
ITEM 1. BUSINESS
Owens Corning (formerly known as Owens-Corning Fiberglas
Corporation), a global company incorporated in Delaware in
1938, serves consumers and industrial customers with high
performance glass composites and building materials systems.
These products are used in industries such as home
improvement, new construction, transportation, marine,
aerospace, energy, appliance, packaging and electronics.
Many of these products are marketed under the trademark
FIBERGLAS(R).
Approximately eighty-two percent of the Company's sales are
related to home improvement, sales of composite materials
and sales outside U.S. markets. Approximately eighteen
percent of the Company's sales are related to new U.S.
residential construction.
Owens Corning's executive offices are at Fiberglas Tower,
Toledo, Ohio 43659; telephone (419) 248-8000. Unless the
context requires otherwise, the terms "Owens Corning" and
"Company" in this report refer to Owens Corning and its
subsidiaries.
The Company operates in two industry segments - Building
Materials and Composite Materials - divided into eleven
businesses. As a general rule, there is a commonality of
process equipment and/or products within each industry
segment.
The Company also has affiliate companies in a number of
countries. Affiliated companies' sales, earnings and assets
are not included in either industry segment unless the
Company owns more than 50% of the affiliate.
Revenue, operating profit, and identifiable assets
attributable to each of the Company's industry and
geographic segments, as well as information concerning the
dependence of the Company's industry segments on foreign
operations, for each of the years 1995, 1994 and 1993, are
contained in Note 1 to Owens Corning's Consolidated
Financial Statements, entitled "Segment Data", on pages 34
through 39 hereof.
BUILDING MATERIALS
Principal Products And Methods Of Distribution
Building Materials operates primarily in North America and
Europe. It also has a growing presence in Latin America and
Asia Pacific. Building Materials sells a variety of
building and home improvement products in three major
categories: glass fiber and foam insulation, roofing
materials, and other specialty products for the home, such
as housewrap, vinyl windows and patio doors, and vinyl
siding. The businesses responsible for these products and
markets include: Insulation - North America, Building
Materials Sales and Distribution - North America, Building
Materials - Europe, Roofing/Asphalt, Specialty and Foam
Products, Western Fiberglass Group, Miraflex(TM) Products,
Latin America, and Asia Pacific.
-3-
The Company's Building Materials Sales and Distribution -
North America business is a major source of sales of
building insulation products to lumber yards and home
centers, and roofing shingles, housewrap, windows/patio
doors, and vinyl siding to retailers and
distributors. These products are used primarily in the home
improvement and new residential construction markets. In
1995, the retail channel accounted for 40% of all of the
Company's building material sales and over 25% of total
overall corporate sales, including glass fiber and foam
insulation products, asphalt roofing shingles, shingle
underlayment, windows and patio doors, vinyl siding, and
housewrap. More than 75% of the Company's retail channel
sales are related to repair and remodeling activity within
the home improvement industry.
Other channels for the Company's building materials include
sales of insulation products in North America to insulation
contractors, metal building insulation laminators,
mechanical insulation distributors and fabricators,
manufactured housing producers, and appliance, office
products and automotive manufacturers. Foam insulation and
related products are sold to distributors and retailers who
resell to residential builders, remodelers and do-it-
yourself customers; commercial and industrial markets
through specialty distributors; and, in some cases, large
contractors, particularly in the agricultural and cold
storage markets.
In Europe, the Company sells building insulation to large
insulation wholesalers, builders, merchants, contractors,
distributors, and retailers. The Company sells mechanical
insulation products to distributors, fabricators, and
manufacturers in the heating, ventilation, power and
process, appliance and fire protection industries.
In Latin America, the Company produces and sells building
and mechanical insulation through joint venture and licensee
relationships. In Asia Pacific, the Company sells primarily
mechanical insulation through joint venture businesses,
including a new insulation plant in China, and licensees.
The Company has licensed others for the manufacture of foam
products at locations in Canada, Europe, the Middle East and
Asia. The Company sells foam products through traditional
agents and distributors where licensing does not exist.
The Company sells roofing shingles to distributors and
retailers, who resell them to residential roofing and
remodeling contractors, as well as to do-it-yourself
customers. Approximately 80% of roofing shingles sold in
North America are used for reroofing, with new residential
construction accounting for the remainder.
The Company sells industrial asphalt under the Trumbull(TM)
brand name. There are three principal kinds of industrial
asphalt: Built-Up Roofing Asphalt (BURA), used in
commercial roofing systems to provide waterproofing and
adhesion; saturants or coating asphalt, used to manufacture
roofing mats, felts and shingles; and industrial specialty
asphalt, used by manufacturers in a variety of products such
as waterproofing systems, adhesives, coatings, and product
extenders, as well as in various automotive applications.
There are various channels of distribution for the Company's
asphalt products. The Company's asphalt products are used
internally in the manufacture of the Company's residential
roofing products and are also sold to other shingle
manufacturers. In addition, asphalt is sold to roofing
contractors and distributors for BURA systems and to
manufacturers in a variety of other industries, including
automotive, chemical, rubber and construction.
-4-
Seasonality
Sales in the Building Materials segment tend to follow
seasonal home improvement, remodeling and renovation, and
new construction industry patterns. Sales levels for the
segment, therefore, are typically lower in the winter
months.
Major Customers
No customer in the Building Materials segment accounts for
more than three percent of the segment's sales.
COMPOSITE MATERIALS
Principal Products and Methods of Distribution
Composite Materials operates in North America, Europe and
Latin America, with affiliates and licensees around the
world, including a growing presence in Asia Pacific. The
businesses responsible for these products include:
Composites, Latin America, Pipe, and Asia Pacific.
The Company is the world's leading producer of glass fiber
materials used in composites. Composites are fabricated
material systems made up of two or more components (e.g.,
plastic resin and glass fiber) used in various applications
to replace traditional materials, such as aluminum, wood,
and steel. The global composites industry has expanded to
include more than 40,000 end-use applications. Worldwide,
the composites industry has relatively few raw material
component suppliers (glass fiber, resin and additives)
delivering to thousands of industrial customers through
various channels. Depending on the end-use application,
these raw materials move through different manufacturing
process chains, ultimately finding their way to consumers
through myriad markets worldwide. The primary end use
markets that the Company serves are construction,
transportation, and electrical/electronics.
Within the construction market, the major end-use
application for glass fiber is asphaltic roofing shingles,
where glass fiber is used to provide fire and mildew
resistance in 95% of all shingles produced in North America.
The Company sells glass fiber and/or mat directly to a small
number of major shingle manufacturers (including the
Company's own roofing business).
Tubs, showers and other related internal building components
used for both remodeling and new construction are also major
applications of glass fiber materials in the construction
market. These end-use products are some of the first
successful material substitution conversions normally
encountered in developing countries. Glass fiber for these
markets is sold to direct accounts, and also to distributors
around the world, who in turn service thousands of
customers.
The most significant use of glass fibers within the
transportation market is the automotive industry, which
continues to grow as the amount of composite materials used
per vehicle increases. There are hundreds of composites
applications, including exterior and interior body panels,
instrument panels, bumpers, lamp housings, headliners,
packaging for electronics, valve covers, luggage racks,
distributor caps, timing belts, mufflers and tanks for
alternative fuel vehicles. These composite parts are either
produced by original equipment manufacturers (OEMs), or are
purchased by OEMs from first-tier suppliers. Glass fibers
for these parts are
-5-
sold mostly to first-tier and second-tier OEM suppliers.
Non-automotive transportation applications include railcars,
shipping containers, intermodal refrigerated containers,
trailers and commercial ships.
Within the electrical/electronics markets, glass fiber is
used extensively in printed circuit boards made for the
consumer electronics, transportation, and telecommunications
industries. The Company sells glass fiber to a small number
of large fabric weavers, who, in turn, supply the rest of
the circuit board production value chain. Applications also
include fiber optics and copper cable reinforcement
connectors, circuit breaker boxes, computer housings,
electricians' safety ladders, and hundreds of various
electro/mechanical components.
The Company manufactures large diameter glass-reinforced
plastic (GRP) pipe designed for use in underground pressure
and gravity fluid handling systems. The pipe is a filament-
wound structural composite made with glass fiber and
polyester resins. The Company has pipe joint ventures in
Thailand, Saudi Arabia, Germany, Spain, Botswana, Argentina,
and Colombia (1996 start up), and wholly-owned pipe plants
in Norway and China. The Company, directly and with joint
venture partners around the world, manufactures and sells
GRP pipe directly to governments and private industry for
major infrastructure projects primarily for the safe and
efficient transport of water and waste.
Major Customers
No customer in the Composite Materials segment accounts for
more than four percent of the segment's sales.
GENERAL
Raw Materials And Patents
Owens Corning considers the sources and availability of raw
materials, supplies, equipment and energy necessary for the
conduct of its business in each industry segment to be
adequate.
The Company has numerous U.S. and foreign patents issued and
applied for relating to its products and processes in each
industry segment resulting from research and development
efforts. The Company has issued royalty-bearing patent
licenses to companies in several foreign countries. The
licenses cover technology relating to both industry
segments.
Including the registered trademark Fiberglas, the Company
has approximately 95 trademarks registered in the United
States and approximately 400 trademarks registered in other
countries.
The Company considers its patent and trademark positions to
be adequate for the present conduct of its business in each
of its industry segments.
Working Capital
Owens Corning's manufacturing operations in each of its
industry segments are generally continuous in nature and it
warehouses much of its production prior to sale since it
operates primarily with short delivery cycles. Inventories
of finished goods, materials and supplies were within
historical ranges at year-end 1995, when expressed as a
percentage of fourth quarter annualized sales.
-6-
Research And Development
During 1995, 1994 and 1993, the Company spent approximately
$69 million, $64 million, and $61 million, respectively, for
research and development activities. Customer sponsored
research and development was not material in any of the last
three years.
Environmental Control
Owens Corning's capital expenditures relating to compliance
with environmental control requirements were approximately
$14 million in 1995. The Company currently estimates that
such capital expenditures will be approximately $19 million
in 1996 and $25 million in 1997.
The Company does not consider that it has experienced a
material adverse effect upon its capital expenditures or
competitive position as a result of environmental control
legislation and regulations. Operating costs of
environmental control equipment, however, were approximately
$55 million in 1995. Owens Corning continues to invest in
equipment and process modifications to remain in compliance
with applicable environmental laws and regulations.
The 1990 Clean Air Act Amendments (Act) provide that the
United States Environmental Protection Agency (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 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 material adverse effect on the Company's results of
operations, financial condition, or long-term liquidity.
Number Of Employees
Owens Corning averaged approximately 17,300 employees during
1995 and had approximately 17,300 employees at December 31,
1995.
Competition
Owens Corning's products compete with a broad range of
products made from numerous basic, as well as high-
performance, materials.
The Company competes with a number of manufacturers in the
United States of glass fibers in primary forms, not all of
which produce a broad line of glass fiber products.
Approximately one-half of these producers compete with the
Company's Building Materials industry segment in the sale of
glass fibers in primary form. A similar number compete with
the Company's Composite Materials industry segment.
Companies in other countries, primarily Japan, export glass
fiber products to the United States. The Company also
competes outside the United States against a number of
manufacturers of glass fibers in primary forms.
Owens Corning also competes with many manufacturers,
fabricators and distributors in the sale of products made
from glass fibers. In addition, the Company competes with
many other manufacturers in the sale of industrial asphalts
and other products.
Methods of competition include product performance, price,
terms, service and warranty.
-7-
ITEM 2. PROPERTIES
PLANTS
Owens Corning's plants as of February 1, 1996 are listed
below by industry segment and primary products, and are
owned except as noted. The Company considers that these
properties are in good condition and well maintained, and
are suitable and adequate to carry on the Company's
business. The capacity of each plant varies depending upon
product mix.
BUILDING MATERIALS SEGMENT
Thermal And Acoustical Insulation
Delmar, New York Newark, Ohio
Eloy, Arizona Palestine, Texas*
Fairburn, Georgia Salt Lake City, Utah
Kansas City, Kansas Santa Clara, California
Mount Vernon, Ohio Waxahachie, Texas
Candiac, Canada Ravenhead, United
Kingdom
Edmonton, Canada Scarborough, Canada
Guangzhou, China Shanghai, China*
Pontyfelin, United Kingdom Vise, Belgium
Queensferry, United Kingdom
*Under construction.
Roofing And Asphalt Processing (one of each at every
location, except as noted)
Atlanta, Georgia Kearney, New Jersey
Brookville, Indiana (1) Medina, Ohio
Channelview, Texas (2) Memphis, Tennessee
Compton, California Minneapolis, Minnesota
Denver, Colorado Morehead City, North
Detroit, Michigan (2) Carolina (2) (3)
Houston, Texas Oklahoma City,
Oklahoma (2)
Irving, Texas Portland, Oregon (4)
Jacksonville, Florida (3) Savannah, Georgia
Jessup, Maryland Summit, Illinois (3)
(1) Roofing plant only.
(2) Asphalt processing plant only.
(3) Facility is partially leased.
(4) Two asphalt processing plants, as well as one roofing
plant.
-8-
Specialty and Foam Products
Byron Center, Michigan Rockford, Illinois
Hazleton, Pennsylvania St. Louis, Missouri
Martinsville, Virginia* Tallmadge, Ohio
*Facility is leased.
Fabrication Centers
Angola, Indiana Los Angeles,
California*
Athens, Alabama Memphis, Tennessee*
Atlanta, Georgia* Montgomery, Alabama*
Cleveland, Tennessee* Newark, New Jersey*
Columbus, Ohio* Orlando, Florida*
Dallas, Texas* Sacramento, California*
Grand Rapids, Michigan* Shelbyville, Kentucky*
Hebron, Ohio Springfield, Tennessee*
Johnson City, Tennessee* Tiffin, Ohio*
Laredo, Texas*
Brantford, Canada
*Facility is leased.
COMPOSITE MATERIALS SEGMENT
Textiles And Reinforcements
Aiken, South Carolina Fort Smith, Arkansas
Amarillo, Texas Huntingdon,
Pennsylvania
Anderson, South Carolina Jackson, Tennessee*
Apeldoorn, The Netherlands Liversedge, United
Kingdom
Battice, Belgium Rio Claro, Brazil
Birkeland, Norway San Vincente deCastellet/
Guelph, Canada Barcelona, Spain
L'Ardoise, France Wrexham, United Kingdom
*Facility is leased.
Pipe
Changchun, China Sandefjord, Norway*
*Facility is leased.
-9-
OTHER PROPERTIES
Owens Corning's general offices of approximately 300,000
square feet are located in the Fiberglas Tower, Toledo,
Ohio. The lease for these offices terminates December 31,
1996. The Company has entered into lease arrangements for a
new world headquarters facility of approximately 400,000
square feet, currently under construction in downtown
Toledo. The lease for this facility terminates May 31,
2015, with options to extend through May 31, 2030. Under
separate leases, the Company has additional general office
space of approximately 145,000 square feet, and warehouse
space of approximately 100,000 square feet, located in other
buildings in Toledo.
The Company's research and development function is conducted
at its Science and Technology Center, located on
approximately 500 acres of land outside Granville, Ohio. It
consists of twenty-three structures totaling approximately
635,000 square feet, of which 25,000 square feet were
mothballed at the end of 1995.
ITEM 3. LEGAL PROCEEDINGS
The paragraphs in Note 21 to the Company's Consolidated
Financial Statements, entitled "Contingent Liabilities", on
pages 63 through 67 hereof, are incorporated here by
reference.
Securities and Exchange Commission rules require the Company
to describe certain governmental proceedings arising under
federal, state or local environmental provisions unless the
Company reasonably believes that the proceeding will result
in monetary sanctions of less than $100,000. The following
proceedings are reported in response to this requirement.
Based on the information presently available to it, however,
the Company believes that the costs which may be associated
with these matters will not have a materially adverse effect
on the Company's financial position or results of
operations.
As previously reported, the Company and more than 100 other
companies have signed individual agreements with the United
States Environmental Protection Agency (EPA) to conduct a
Toxic Substance Control Act (TSCA) Audit Program to
determine compliance status under TSCA section 8(e). The
agreement provides that the Company will audit its records
and report to the EPA any reportable matters which were not
reported or which were reported late. The Company will pay
stipulated penalties of up to $15,000 for each matter not
timely reported, with a maximum penalty of $1 million in the
aggregate. The Company has completed the portion of the
audit dealing with substantial risk of injury to health. It
has not been notified as to the amount of penalties it will
be required to pay but estimates that the penalty for health
related filings will be less than $150,000. The final
report to the EPA, regarding environmental issues, is due
six months after the EPA publishes final refined guidance on
such reporting.
During the first quarter of 1995, the Company signed a
consent order with the Tennessee Department of Environment
and Conservation, providing for a remedial investigation and
feasibility study for two state Superfund sites. The
Company is the primary generator in both sites.
-10-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Owens Corning has nothing to report under this Item.
-11-
Executive Officers of the Company
(as of February 1, 1996)
The term of office for elected officers is one year from the
annual election of officers by the Board of Directors
following the Annual Meeting of Stockholders on the third
Thursday of April. All those listed have been employees of
Owens Corning during the past five years except as
indicated.
Name and Age Position*
Glen H. Hiner (61) Chairman of the Board and Chief
Executive Officer since January
1992; formerly Senior Vice President
- G.E. Plastics at General Electric
Company (1983). Director since
1992.
Alan D. Booth (52) Vice President and President,
Insulation - North America since
January 1994; formerly Vice
President, Insulation Division,
Construction Products Group (1993)
and Vice President, Mechanical
Products Division (1986).
David T. Brown (47) Vice President and President,
Building Materials Sales and
Distribution-North America since
January 1996; formerly Vice
President and President,
Roofing/Asphalt (1994), Vice
President, Roofing/Asphalt Division
(1993) and Vice President, Atlanta
Regional Sales, Building Materials
(1986).
Christian L. Senior Vice President,
Campbell (45) General Counsel and Secretary since
January 1995; formerly Vice
President, General Counsel and
Secretary at Nalco Chemical (1990).
Domenico Cecere (46) Vice President and President,
Roofing/Asphalt since January 1996;
formerly Vice President and
Controller (1993); and Vice
President, Finance and
Administration, Europe (1992), Vice
President and Assistant Controller
(1991) and Vice President, Finance,
Industrial Business (1990) at
Honeywell, Inc.
Charles H. Dana (56) Executive Vice President since
January 1994; formerly Senior Vice
President, and President -
Industrial Materials Group (1989).
David W. Senior Vice President
Devonshire (50) and Chief Financial Officer since
July 1993; formerly Corporate Vice
President, Finance (1992) and
Corporate Vice President and
Controller (1990) at Honeywell, Inc.
-12-
Name and Age Position*
Carl B. Hedlund (48) Vice President and President, Asia
Pacific since December 1995;
formerly Vice President and
President, Retail/Distribution
(1994), Vice President, Retail and
Distribution, Construction Products
Group (1993) and Vice President,
Roofing Products Operating Division
(1989).
Robert C. Vice President and President,
Lonergan (52) Science & Technology since January
1995; formerly President, Windows
(1993); and President of Reb
Plastics, Inc. (1984).
Bradford C. Vice President - Corporate Relations
Oelman (58) since November 1986.
Gregory M. Senior Vice President, Human
Thomson (48) Resources since October 1994;
formerly Vice President, Human
Resources, Public Service Electric &
Gas (1988).
Efthimios O. Vice President and
Vidalis (41) President, Composites since January
1994; formerly Vice President,
Reinforcements Division, Europe
(1986).
*Information in parentheses indicates year in which service
in position began.
-13-
Part II
ITEM 5. MARKET FOR OWENS CORNING'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market on which Owens Corning's common stock
is traded is the New York Stock Exchange. The high and low
sales prices in dollars per share for Owens Corning's common
stock as reported in the consolidated transaction reporting
system for each quarter during 1995 and 1994 are set forth
in the following tables.
1995 High Low 1994 High Low
First Quarter 36-1/4 30-1/4 First Quarter 46 33-1/2
Second Quarter 40 34-5/8 Second Quarter 36-1/8 30-1/2
Third Quarter 47-1/8 36-1/2 Third Quarter 36-1/4 30-1/8
Fourth Quarter 46-3/4 40-3/8 Fourth Quarter 33-1/2 27-3/4
The number of stockholders of record of the Company's common
stock on December 31, 1995 was 6,936.
No dividends have been declared by the Company since the
Company's November 5, 1986 recapitalization. In connection
with certain of its current bank credit facilities, the
Company has agreed to restrictions affecting the payment of
cash dividends. As of January 1, 1996, these restrictions
limited funds available for the payment of cash dividends by
the Company to approximately $77 million. While the Company
periodically evaluates the advisability of paying dividends,
it currently does not anticipate paying dividends during
1996.
-14-
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain financial information of the
Company.
1995(a) 1994(b)1993(c) 1992(d)1991(e)
(In millions of dollars, except per share data and where noted)
Net sales $ 3,612$ 3,351 $ 2,944$ 2,878 $ 2,783
Cost of sales 2,670 2,536 2,266 2,234 2,186
Marketing, administrative
and other expenses 454 429 350 350 1,171
Science and technology
expenses 76 71 69 65 54
Restructure costs - 89 23 16 -
Income (loss) from
operations 412 226 236 213 (628)
Cost of borrowed funds 87 94 89 110 131
Income (loss) before
provision for
income taxes 325 132 147 103 (759)
Provision (credit)
for income taxes 106 58 47 33 (238)
Net income (loss) 231 159 131 73 (742)
Net income (loss) per share
Primary 4.64 3.61 3.00 1.70 (18.13)
Fully diluted 4.40 3.35 2.81 1.67 (18.13)
Dividends per share on common
stock
Declared - - - - -
Paid - - - - -
Weighted average number of shares
outstanding (in thousands)
Primary 49,711 44,209 43,593 43,013 40,924
Fully diluted 54,106 50,025 49,410 48,844 42,924
Net cash flow from
operations 342 361 312 184 264
Capital spending 276 258 178 144 114
Total assets (f) 3,261 3,274 3,013 3,162 3,511
Long-term debt 794 1,037 898 1,018 1,148
Average number of employees
(in thousands) 17 17 17 17 17
(a) During 1995, the Company recorded a one time $8 million
tax credit as a result of a tax loss carryback.
(b) During 1994, the Company recorded a $117 million charge
($85 million after-tax) for productivity initiatives
and other actions. The Company also recorded a $10
million after-tax charge for the adoption of Statement
of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits
Other Than Pensions" for its non-U.S. plans, a $28
million after-tax charge for the adoption of SFAS No.
112, "Employers' Accounting for Postemployment
Benefits," and a $123 million after-tax credit for the
change in accounting method for rebuilding furnaces.
-15-
(c) During 1993, the Company recorded a $23 million charge
for the restructuring of its European operations, an $8
million charge ($5 million after-tax) for the writedown
of its hydrocarbon ventures to their net realizable
value, a $26 million credit for the adoption of SFAS
No. 109, "Accounting for Income Taxes," and a $14
million credit for the revaluation of deferred taxes.
(d) During 1992, the Company recorded a $16 million charge
($11 million after-tax) to reorganize the Company's
Building Materials segment and to centralize the
Company's accounting and information systems. The
Company also recorded a net extraordinary gain of $1
million resulting from the utilization of tax loss
carryforwards, partially offset by a loss on the early
retirement of debt.
(e) During 1991, the Company recorded a non-recurring $800
million charge for unasserted asbestos litigation
claims and a $227 million after-tax charge, or $5.55
per share, for the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits
Other Than Pensions" for its U.S. plans.
(f) During 1993, the Company adopted the provisions of FIN
39 which require the Company to present separately in
its balance sheet its estimated contingent liabilities
and related insurance assets. 1992 and 1991 assets
have been restated to conform with the 1995, 1994, and
1993 presentations.
-16-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All per share information in Item 7 is on a fully diluted
basis.)
RESULTS OF OPERATIONS
Net income for the year ended December 31, 1995 was $231
million, or $4.40 per share, compared to net income of $159
million, or $3.35 per share, and net income of $131 million,
or $2.81 per share, for the years ended December 31, 1994
and 1993, respectively. The 1995 earnings growth reflects
pricing gains and the benefits of acquisitions, as well as a
one time gain of $8 million or $.15 per share which was the
result of a tax loss carryback. Excluding the impact of the
tax benefit, net income for the year ended December 31,
1995, was $223 million, or $4.25 per share. Please see Note
8 to the Consolidated Financial Statements.
Net income of $159 million for the year ended December 31,
1994, included the following offsetting special items: an
after-tax gain of $123 million, or $2.45 per share,
reflecting a change to the capital method of accounting for
the rebuilding of glass melting facilities; an after-tax
charge of $85 million, or $1.69 per share, for productivity
initiatives and other actions; a non-cash, after-tax charge
of $10 million, or $.20 per share, to reflect adoption of
Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other
Than Pensions," for plans outside the United States; and a
non-cash, after-tax charge of $28 million, or $.56 per
share, to reflect adoption of SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." Please see Notes
6, 16 and 17 to the Consolidated Financial Statements.
Excluding special items, net income for the year ended
December 31, 1993 was $118 million, or $2.56 per share. The
1993 special items included a credit of $26 million, or $.53
per share, for the cumulative effect of adopting the
accounting standard for income taxes (SFAS No. 109); a one
time gain of $14 million, or $.29 per share, reflecting a
tax benefit resulting from a revaluation of deferred taxes,
offset in part by an increase in the Company's corporate tax
liability, necessitated by the increase in the federal
statutory tax rate; an after-tax charge of $5 million, or
$.10 per share, for the write-down of the Company's
hydrocarbon ventures to their net realizable value; and a
charge of $23 million, or $.47 per share, for the
restructuring of the Company's European operations. Please
see Notes 8 and 16 to the Consolidated Financial Statements.
Net sales were $3.612 billion for the year ended December
31, 1995, reflecting an 8% increase from the 1994 level of
$3.351 billion. Net sales in 1993 were $2.944 billion.
Most of the 1995 growth is attributable to pricing gains
achieved worldwide, with incremental growth resulting from
acquisitions, which occurred mid year 1994 and throughout
1995. Please see Note 5 to the Consolidated Financial
Statements. Sales outside the U.S. represented 27% of the
total sales for the year ended December 31, 1995 compared to
24% for the years 1994 and 1993. Gross margin for the year
ended December 31, 1995 increased to 26%, compared to 24%
and 23% in 1994 and 1993, respectively, reflecting primarily
pricing gains worldwide. Earnings before interest and taxes
(EBIT) from ongoing operations increased to $412 million in
1995, from $343 million in 1994 and $267 million in 1993.
-17-
In the Building Materials segment, sales increased 6% for
the year ended December 31, 1995 compared to 1994. This
growth reflects pricing gains, and incremental sales from
the 1995 acquisitions partially offset by a decline in
volume, particularly in the Canadian markets. Income from
operations for Building Materials decreased 9% from 1994
levels, after excluding the 1994 charge for restructure and
other initiatives, primarily due to the weak economic
conditions in Canada and start up costs associated with the
Company's new insulation plant in Guangzhou, China.
Building Materials sales in Europe increased 45% over the
1994 level, primarily resulting from a full year of sales
from the June 1994 acquisition of the United Kingdom based
insulation and industrial supply businesses of Pilkington
plc (the "U.K. Acquisition"), and the addition of a second
production line at the Company's insulation plant in Vise,
Belgium. Late in the third quarter of 1995, the Company
began shipping product from its insulation manufacturing
facility in Guangzhou, China and announced plans for the
construction of its second insulation plant in China, to be
built in Shanghai. Roofing margins improved in 1995, driven
primarily by improved pricing, and volume growth, including
the successful introduction of Prominence(R) roofing
shingles. The window business achieved significant sales
growth and productivity improvements during the year, but
has not yet reached break-even. In the foam insulation and
related product markets, the Company has expanded its
position with the acquisition of Falcon Manufacturing of
Michigan, Inc. The Company also completed four other
acquisitions in 1995 which are expected to contribute to the
Company's overall growth strategy. These acquisitions
increased the Company's small furnace technology base, as
well as expanded its position in fabricated systems for the
original equipment manufacturing market and its product
offering for the window market. The Company further
expanded its Building Materials multi-product offering in
1995 with the introduction of two branded products,
Transitions(TM) vinyl siding and PinkWrap(TM) housewrap.
In 1995 Miraflex(TM), the revolutionary new form of glass
fiber developed by Owens Corning which combines two
different glass compositions into one fiber, was
successfully introduced to North American markets in its
first commercial application, PinkPlus(R) insulation
featuring Miraflex fiber. The Miraflex fibers are flexible,
soft to the touch, virtually itch-free, resilient and form-
filling, characteristics not normally associated with glass
or inorganic fibers, which is driving the success of the new
fiber.
In the Composite Materials segment, sales increased 12% for
the year ended December 31, 1995, or approximately 20%
excluding the Company's previously consolidated polyester
resins business, discussed below. The Composite Materials
sales increase, driven by strong worldwide market demand, is
attributable to volume and pricing gains, coupled with
favorable currency impact from European markets. In the
U.S., sales increased slightly, while in Europe, the
Company's composites operations benefited from European
economic improvement which resulted in increased demand,
coupled with the positive effects of productivity
initiatives.
In 1995 the Company announced plans to expand global
composites capacity by 135,000 metric tons by 1997, with a
significant portion of the new capacity coming from the
refiring of the second furnace at the Company's Jackson,
Tennessee facility. The remaining expansion will be at
other existing facilities in the U.S., Europe, Asia and
Latin America. The Company in 1995 began a new large
diameter glass reinforced plastic (GRP) pipe facility in
China, pipe joint ventures in Spain and Argentina, as well
as a composite materials service center in Colombia. Early
in 1996 the Company announced the formation of a pipe joint
venture in Colombia, increasing the Company's global
presence.
-18-
During the third quarter of 1994, the Company entered into a
joint venture with Alpha Corporation of Tennessee, whereby
the two companies combined their existing resin businesses
for fifty percent interests in Alpha/Owens-Corning, L.L.C.,
the largest manufacturer of polyester resins in North
America. Please see Note 5 to the Consolidated Financial
Statements.
The Company's cost of borrowed funds for the year ended
December 31, 1995 was $7 million lower than 1994, reflecting
decreased borrowings resulting from the conversion of the
Company's 8% convertible junior subordinated debentures into
shares of common stock. Additionally, the proceeds from the
issuance of $200 million of convertible preferred securities
were partially used to pay off the Company's short-term
credit facility, established during the second quarter of
1994 to finance the U.K. Acquisition. Please see Notes 2, 3
and 4 to the Consolidated Financial Statements.
At December 31, 1995, certain of the Company's foreign
subsidiaries have tax net operating loss carryforwards of
approximately $27 million. The Company has $322 million in
net deferred tax assets at December 31, 1995, all of which
management expects will be realized through future income
from operations. Please see Note 8 to the Consolidated
Financial Statements.
Early in the first quarter of 1996, the Company completed
the sale of its share in a Japanese affiliate, Asahi Fiber
Glass Co. Ltd., to its partner Asahi Glass Company for
approximately $50 million and realized a pretax gain in
excess of $25 million. Please see Note 12 to the
Consolidated Financial Statements.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Cash flow from operations, excluding asbestos-related
activities, was $342 million for 1995, compared to $361
million for 1994. The decline in cash flow from
operations from 1994 to 1995 was due in part to funding of a
Voluntary Employee's Beneficiary Association trust for tax
planning purposes. Total receivables at December 31, 1995
were $15 million lower than the December 31, 1994 level due
to the sale of $50 million in receivables early in 1995,
resulting in a total of $100 million of receivables sold
under the 1994 sales agreement. The receivables sold were
largely offset by increased sales in 1995. Please see Notes
6 and 10 to the Consolidated Financial Statements.
At December 31, 1995, the Company's net working capital was
negative $9 million and its current ratio was .99, compared
to negative $143 million and .87 at December 31, 1994, and
negative $49 million and .94 at December 31, 1993,
respectively. The increase in 1995 was due in part to
decreased short-term borrowings as a result of the
repayment of the financing used for the U.K.
Acquisition. Excluding the impact of the short-term
borrowings used to finance the U.K. Acquisition, the
Company's net working capital was negative $33 million and
its current ratio was .97 at December 31, 1994.
During 1995, virtually all of the Company's $173 million
issue of 8% convertible junior subordinated debentures
were converted. Debentures not converted were redeemed
for cash. The conversion resulted in the issuance of 5.8
million new shares of common stock. Also in 1995, Owens-
Corning Capital, L.L.C., a Delaware limited liability
company, of which all of the common limited company
interests are indirectly owned by the Company, issued $200
million of 6.5% cumulative convertible preferred securities.
The proceeds from the issuance were loaned to the Company
and partially used to repay its short-term credit facility.
Please see Notes 2 and 4 to the Consolidated Financial
Statements.
-19-
The Company's total borrowings at December 31, 1995 were
$893 million, $319 million lower than at year-end 1994,
primarily due to the conversion of its 8% convertible junior
subordinated debentures, and the repayment of debt through
the issuance of the above mentioned preferred securities.
As of December 31, 1995, the Company had unused lines of
credit of $358 million available under long-term bank loan
facilities and an additional $239 million under short-term
facilities, compared to $293 million and $91 million,
respectively, at year-end 1994. The increase in unused
available lines of credit reflects increased availability,
primarily in foreign credit facilities, a decrease in
borrowings and a decrease in outstanding letters of credit
supporting appeals from asbestos trials. Such letters of
credit reduce credit availability under the Company's long-
term U.S. loan facility.
Capital spending for property, plant and equipment,
excluding acquisitions, was $276 million during 1995. At
the end of 1995, approved capital projects were $134
million. The Company expects that funding for these
expenditures will be from the Company's operations and
external sources as required.
Gross payments for asbestos litigation claims during 1995,
including $54 million in defense costs, were $308 million.
Proceeds from insurance were $251 million, $100 million of
which was received as a prepayment of a third quarter 1995
settlement with a major insurer, which confirmed the
Company's access to $330 million of insurance for payment of
asbestos litigation claims. Excluding the impact of the $100
million prepayment by the carrier, cash flow from asbestos
related activities was a net pretax cash outflow of $157
million, or $94 million after-tax. During 1995, the Company
received approximately 55,900 new asbestos personal
injury cases and closed approximately 21,900 cases.
Over the next twelve months total payments for asbestos
litigation claims, including defense costs, are expected to
be approximately $250 million. Proceeds from insurance of
$100 million are expected to be available to cover these
costs, resulting in a net pretax cash outflow of $150
million, or $90 million after-tax. Please see Note 21 to
the Consolidated Financial Statements.
The Company expects funds generated from operations,
together with funds available under long and short term bank
loan facilities, to be sufficient to satisfy its debt
service obligations under its existing indebtedness, as well
as its contingent liabilities for uninsured asbestos
personal injury claims.
The Company has been deemed by the Environmental Protection
Agency (EPA) to be a potentially responsible party (PRP)
with respect to certain sites under the Comprehensive
Environmental Response, Compensation and Liability Act
(Superfund). The Company has also been deemed a PRP under
similar state or local laws, including two state Superfund
sites where the Company is the primary generator. In other
instances, other PRPs have brought suits or claims against
the Company as a PRP for contribution under such federal,
state or local laws. During 1995, the Company was
designated as a PRP in such federal, state, local or private
proceedings for nine additional sites. At December 31,
1995, a total of 42 such PRP designations remained
unresolved by the Company, some of which designations the
Company believes to be erroneous. The Company is also
involved with environmental investigation or remediation at
a number of other sites at which it has not been designated
a PRP. The Company has established a $20 million reserve
for its Superfund (and similar state, local and private
action) contingent liabilities. In addition, based upon
information presently available to the Company, and without
regard to the application of insurance, the Company believes
that, considered in the aggregate, the additional costs
associated with such contingent liabilities, including any
related litigation costs, will not have a materially adverse
effect on the Company's financial position or results of
operations.
-20-
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 23 through 68 hereof are incorporated here by
reference.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Owens Corning has nothing to report under this Item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OWENS CORNING
The information required by this Item is incorporated by
reference from the Company's 1996 Proxy Statement except
that certain information concerning Owens Corning's
executive officers is included on pages 11 through 12
hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by
reference from the Company's 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by
reference from the Company's 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by
reference from the Company's 1996 Proxy Statement.
-21-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. See Index to Financial Statements on page 23 hereof
2. See Index to Financial Statement Schedules on page 69
hereof
3. See Exhibit Index beginning on page 71 hereof
Management contracts and compensatory plans and
arrangements required to be filed as an exhibit pursuant
to Item 14(c) of Form 10-K are denoted in the Exhibit
Index by an asterisk ("*").
(b) REPORTS ON FORM 8-K
No report on Form 8-K was filed during the fourth
quarter of 1995.
-22-
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
OWENS CORNING
By /s/ G. H. Hiner Date February 14, 1996
Glen H. Hiner, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
/s/ G. H. Hiner Date February 14, 1996
Glen H. Hiner, Chairman of the Board,
Chief Executive Officer and Director
/s/ David W. Devonshire Date February 14, 1996
David W. Devonshire, Senior Vice
President and Chief Financial Officer
/s/ Domenico Cecere Date February 14, 1996
Domenico Cecere, Vice President and
President, Roofing/Asphalt, and Controller
(Interim)
/s/ Norman P. Blake Date February 20, 1996
Norman P. Blake, Jr., Director
/s/ William Colville Date February 15, 1996
William W. Colville, Director
/s/ Landon Hilliard Date February 15, 1996
Landon Hilliard, Director
/s/ Trevor Holdsworth Date February 19, 1996
Trevor Holdsworth, Director
/s/ Jon M. Huntsman, Jr. Date February 16, 1996
Jon M. Huntsman, Jr., Director
W. Walker Lewis, Director Date
/s/ David T. McGovern Date February 20, 1996
David T. McGovern, Director
/s/ Furman C. Moseley Date February 19, 1996
Furman C. Moseley, Jr., Director
/s/ W. Ann Reynolds Date February 15, 1996
W. Ann Reynolds, Director
-23-
INDEX TO FINANCIAL STATEMENTS
Item Page
Report of Independent Public Accountants 24
Summary of Significant Accounting Policies 25-26
Consolidated Statement of Income - for the
years ended December 31, 1995, 1994 and 1993 27-28
Consolidated Balance Sheet - December 31, 1995
and 1994 29-30
Consolidated Statement of Stockholders' Equity -
for the years ended December 31, 1995, 1994 and 1993 31
Consolidated Statement of Cash Flows - for the years
ended December 31, 1995, 1994 and 1993 32-33
Notes to Consolidated Financial Statements
Notes 1 through 22 34-68
-24-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Owens Corning:
We have audited the accompanying consolidated balance sheet
of OWENS CORNING (a Delaware corporation) and subsidiaries
as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Owens Corning and subsidiaries as of December
31, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes 6, 8 and 17 to the consolidated
financial statements, effective January 1, 1994, the Company
changed its methods of accounting for furnace rebuilds,
postretirement benefits other than pensions for its non-U.S.
plans, and postemployment benefits, and effective January 1,
1993, the Company changed its method of accounting for
income taxes.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The
schedule listed in the Index to Financial Statement
Schedules is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required
to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
January 20, 1996
Toledo, Ohio
-25-
OWENS CORNING AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts
of majority owned subsidiaries. Significant intercompany
accounts and transactions are eliminated.
Net Income per Share
Primary net income per share is computed using the weighted
average number of common shares outstanding and common
equivalent shares during the period. Fully diluted net
income per share reflects the dilutive effect of increased
shares that would result from the conversion of debt and
equity securities which are not treated as common stock
equivalents. Unless otherwise indicated, all per share
information included in the notes to the Owens Corning and
subsidiaries' (the "Company") consolidated financial
statements is presented on a fully diluted basis.
Inventory Valuation
Inventories are stated at cost, which is less than market
value, and include material, labor, and manufacturing
overhead. The majority of U.S. inventories are valued using
the last-in, first-out (LIFO) method and the balance of
inventories are generally valued using the first-in, first-
out (FIFO) method.
Intangible Assets
Intangible assets consist primarily of goodwill, patents,
and covenants not to compete and are carried at cost less
accumulated amortization. Goodwill is amortized on a
straight-line basis over a period of forty years. Other
intangible assets are amortized over their estimated useful
lives or actual contractual lives. The Company continually
evaluates whether events and circumstances have occurred
that indicate the remaining estimated useful lives of
intangible assets may warrant revision or that the remaining
balance of these intangible assets may not be recoverable.
When factors indicate that intangible assets should be
evaluated for possible impairment, the Company uses an
estimate of the related business segment's undiscounted net
income over the remaining life of the intangible asset in
measuring whether the intangible asset is recoverable.
Investments in Affiliates
Investments in affiliates are accounted for using the equity
method, under which the Company's share of earnings of these
affiliates is reflected in income as earned and dividends
are credited against the investment in affiliates when
received.
-26-
OWENS CORNING AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Depreciation
For assets placed in service prior to January 1, 1992, the
Company's plant and equipment is depreciated primarily using
the double-declining balance method for the first half of an
asset's estimated useful life and the straight-line method
is used thereafter. For assets placed in service after
December 31, 1991, the Company's plant and equipment is
depreciated using the straight-line method.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Rebuilding of Glass Melting Furnaces
The Company's glass melting furnaces periodically require
substantial rebuilding. As discussed in Note 17 to the
consolidated financial statements, effective January 1,
1994, the Company adopted the capital method of accounting
for the cost of rebuilding glass melting furnaces. Under
this method, costs are capitalized when incurred and
depreciated over the estimated useful lives of the rebuilt
furnaces.
Derivative Financial Instruments
Gains and losses on hedges of existing assets or liabilities
are included in the carrying amount of those assets or
liabilities and are ultimately recognized in income as part
of those carrying amounts. Gains and losses on hedges of
net investments in foreign subsidiaries are included in
stockholders' equity. Gains and losses related to
qualifying hedges of firm commitments or anticipated
transactions also are deferred and are recognized in income
or as adjustments of carrying amounts when the hedged
transaction occurs. Gains and losses on forward currency
exchange contracts that do not qualify as hedges are
recognized as other income or expense.
Reclassifications
Certain reclassifications have been made to 1994 and 1993 to
conform with the classifications used in 1995.
-27-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
(In millions of dollars, except share data)
NET SALES $ 3,612 $ 3,351 $ 2,944
COST OF SALES 2,670 2,536 2,266
Gross margin 942 815 678
OPERATING EXPENSES
Marketing and administrative
expenses 444 391 327
Science and technology
expenses (Note 9) 76 71 69
Restructure costs (Note 16) - 89 23
Other (Notes 2, 4, 10 and 16) 10 38 23
Total operating expenses 530 589 442
INCOME FROM OPERATIONS 412 226 236
Cost of borrowed funds
(Notes 2 and 3) 87 94 89
INCOME BEFORE PROVISION FOR
INCOME TAXES 325 132 147
Provision for income taxes
(Note 8) 106 58 47
INCOME BEFORE EQUITY IN NET
INCOME OF AFFILIATES 219 74 100
Equity in net income of affiliates
(Notes 5 and 12) 12 - 5
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 231 74 105
Cumulative effect of accounting changes
(Notes 6, 8 and 17) - 85 26
NET INCOME $ 231 $ 159 $ 131
The accompanying summary of significant accounting policies and
notes
are an integral part of this statement.
-28-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
1995 1994 1993
(In millions of dollars, except share data)
NET INCOME PER COMMON SHARE:
Primary:
Income before cumulative effect of
accounting changes $ 4.64 $ 1.70 $ 2.40
Cumulative effect of
accounting changes - 1.91 .60
Net income per share $ 4.64 $ 3.61 $ 3.00
Assuming full dilution:
Income before cumulative effect of
accounting changes $ 4.40 $ 1.66 $ 2.28
Cumulative effect of accounting
changes - 1.69 .53
Net income per share $ 4.40 $ 3.35 $ 2.81
Weighted average number of common shares
outstanding and common equivalent shares
during the period (in millions)
Primary 49.7 44.2 43.6
Assuming full dilution 54.1 50.0 49.4
The accompanying summary of significant accounting policies and
notes
are an integral part of this statement.
-29-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
(In millions of dollars)
CURRENT
Cash and cash equivalents $ 18 $ 59
Receivables, less allowances of
$19 million in 1995 and $16
million in 1994 (Note 10) 314 329
Inventories (Note 11) 253 223
Insurance for asbestos
litigation claims - current
portion (Note 21) 100 125
Deferred income taxes (Note 8) 70 156
VEBA trust (Note 6) 51 -
Income tax receivable 50 12
Investment in affiliate held
for sale (Note 12) 36 -
Other current assets 35 26
Total current 927 930
OTHER
Insurance for asbestos
litigation claims (Note 21) 330 556
Deferred income taxes (Note 8) 252 308
Goodwill, less accumulated
amortization of $19 million
in 1995 and $14 million in 1994
(Note 5) 249 151
Investments in affiliates
(Notes 5 and 12) 50 74
Other noncurrent assets (Note 6) 147 122
Total other 1,028 1,211
PLANT AND EQUIPMENT, at cost
Land 52 51
Buildings and leasehold
improvements 581 553
Machinery and equipment 2,266 2,172
Construction in progress 168 125
3,067 2,901
Less: Accumulated
depreciation (1,761) (1,768)
Net plant and equipment 1,306 1,133
TOTAL ASSETS $ 3,261 $ 3,274
The accompanying summary of significant accounting policies and
notes
are an integral part of this statement.
-30-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1995 AND 1994
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
(In millions of dollars)
CURRENT
Accounts payable and accrued
liabilities (Note 13) $ 587 $ 598
Reserve for asbestos
litigation claims -
current portion (Note 21) 250 300
Short-term debt (Note 3) 64 155
Long-term debt - current
portion (Note 2) 35 20
Total current 936 1,073
LONG-TERM DEBT (Note 2) 794 1,037
OTHER
Reserve for asbestos litigation
claims (Note 21) 887 1,145
Other employee benefits liability
(Note 6) 367 390
Pension plan liability (Note 7) 75 77
Other 220 232
Total other 1,549 1,844
COMMITMENTS AND CONTINGENCIES
(Notes 15, 20 and 21)
COMPANY OBLIGATED CONVERTIBLE
SECURITY OF SUBSIDIARY HOLDING
SOLELY PARENT DEBENTURES
(MIPS, Note 4) 194 -
STOCKHOLDERS' EQUITY
Preferred stock, no par value;
authorized 8 million shares,
none outstanding (Note 19)
Common stock, par value $.10
per share; authorized 100
million shares; issued
1995--51.4 million and
1994--44.2 million shares
(Notes 2, 5 and 18) 579 348
Deficit (781) (1,012)
Foreign currency translation
adjustments 9 (1)
Other (Note 7) (19) (15)
Total stockholders' equity (212) (680)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,261 $ 3,274
The accompanying summary of significant accounting policies and
notes
are an integral part of this statement.
-31-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
(In millions of dollars)
COMMON STOCK
Balance beginning of year $ 348 $ 315 $ 299
Issuance of stock for:
Conversion of debt
(Note 2) 173 - -
Acquisitions (Note 5) 42 27 -
Awards under stock
compensation plans (Note 18) 16 6 16
Balance end of year 579 348 315
DEFICIT
Balance beginning of year (1,012) (1,171) (1,302)
Net income 231 159 131
Balance end of year (781) (1,012) (1,171)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS
Balance beginning of year (1) 5 4
Translation adjustments 10 (6) 1
Balance end of year 9 (1) 5
OTHER
Balance beginning of year (15) (18) (9)
Net increase (decrease) (4) 3 (9)
Balance end of year (19) (15) (18)
STOCKHOLDERS' EQUITY $ (212) $ (680) $ (869)
The accompanying summary of significant accounting policies and
notes
are an integral part of this statement.
-32-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
Net income $ 231 $ 159 $ 131
Reconciliation of net cash provided
by operating activities:
Noncash items:
Cumulative effect of
accounting changes
(Notes 6, 8 and 17) - (85) (26)
Provision for depreciation,
amortization, and
rebuilding furnaces
(Note 17) 125 118 121
Provision for deferred
income taxes
(Note 8) 142 59 10
Other 5 9 10
(Increase) decrease in
receivables (Note 10) 36 21 (22)
(Increase) decrease in
inventories (15) 17 4
Increase (decrease) in
accounts payable
and accrued liabilities (50) 53 114
Funding of VEBA trust (Note 6) (64) - -
Other (68) 10 (30)
Net cash flow from
operations 342 361 312
NET CASH FLOW FROM INVESTING
Additions to plant and
equipment (276) (258) (178)
Investment in subsidiaries,
net of cash acquired
(Note 5) (81) (120) -
Other (4) 23 -
Net cash flow from
investing (361) (355) (178)
The accompanying summary of significant accounting policies and
notes
are an integral part of this statement.
-33-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
1995 1994 1993
(In millions of dollars)
NET CASH FLOW FROM FINANCING
(Notes 2, 3 and 4)
Net additions (reductions)
to long-term credit
facilities $ 55 $ 10 $ (90)
Other additions to
long-term debt 9 145 -
Other reductions to
long-term debt (128) (51) (21)
Net increase (decrease)
in short-term debt (94) 69 26
Issuance of preferred
stock of subsidiary,
net of fees 194 - -
Other - 5 11
Net cash flow from
financing 36 178 (74)
NET CASH FLOW FROM ASBESTOS-
RELATED ACTIVITIES (Note 21)
Proceeds from insurance for
asbestos litigation claims 251 87 224
Payments for asbestos
litigation claims (308) (215) (283)
Net cash flow from
asbestos-related
activities (57) (128) (59)
Effect of exchange rate
changes on cash (1) - -
Net increase (decrease) in
cash and cash equivalents (41) 56 1
Cash and cash equivalents
at beginning of year 59 3 2
Cash and cash equivalents
at end of year $ 18 $ 59 $ 3
The accompanying summary of significant accounting policies and
notes
are an integral part of this statement.
-34-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Segment Data
The Company operates in two industry segments, Building
Materials and Composite Materials, and reports its results
in two ways: by industry segment and by geographic segment.
See Note 5 for detail of 1995 and 1994 acquisitions and
divestitures of businesses.
The industry segments are defined as follows:
Building Materials
Production and sale of glass wool fibers formed
into thermal and acoustical insulation and air
ducts; extruded and expanded polystyrene
insulation; roofing shingles and asphalt materials;
underground storage tanks; windows; and the
rebranded sale of patio doors; vinyl siding and
housewrap.
Composite Materials
Production and sale of glass fiber yarns; rovings,
mats and veils; strand and reinforcement products;
fiber reinforced plastic pipe; and polyester and
vinyl ester resins.
The geographic segment reporting combines the two industry
segments within the major regions: United States, Europe,
and Canada and other.
Intersegment sales are generally recorded at market or
equivalent value. Income (loss) from operations by industry
and geographic segment consists of net sales less related
costs and expenses. In computing income (loss) from
operations by segment, cost of borrowed funds and other
general corporate income and expenses have been excluded.
Certain corporate operating expenses directly traceable to
industry and geographic segments have been allocated to
those segments.
During the first quarter of 1994, the Company recorded a
$117 million pretax charge for productivity initiatives and
other actions (Note 16). The impact of this charge was to
reduce income from operations for Building Materials and
Composite Materials by $70 million and $22 million,
respectively, and to increase general corporate expense by
$25 million. Geographically, income from operations for
Building Materials in the United States and Canada and other
was reduced by $50 million and $20 million, respectively.
Income from operations for Composite Materials in the United
States, Europe, and Canada and other was reduced by $6
million, $13 million, and $3 million, respectively. During
the first quarter of 1993, the Company recorded a $23
million charge to reorganize its European operations, the
full impact of which was reflected as a reduction to income
from operations for the Composite Materials segment (Note
16).
-35-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
Identifiable assets by industry and geographic segment are
those assets that are used in the Company's operations in
each industry and geographic segment and do not include
general corporate assets. General corporate assets consist
primarily of cash and cash equivalents, VEBA trust, deferred
taxes, asbestos insurance, and corporate property and
equipment.
NET SALES 1995 1994 1993
(In millions of dollars)
Industry Segments
Building Materials
United States $ 2,033 $ 1,952 $ 1,699
Europe 264 182 97
Canada and other 107 139 150
Total Building Materials 2,404 2,273 1,946
Composite Materials
United States 610 595 528
Europe 459 355 346
Canada and other 139 128 124
Total Composite Materials 1,208 1,078 998
Intersegment sales
Building Materials - - -
Composite Materials 96 99 85
Eliminations (96) (99) (85)
Net sales $ 3,612 $ 3,351 $ 2,944
Geographic Segments
United States $ 2,643 $ 2,547 $ 2,227
Europe 723 537 443
Canada and other 246 267 274
3,612 3,351 2,944
Intersegment sales
United States 54 43 42
Europe 21 22 15
Canada and other 88 91 66
Eliminations (163) (156) (123)
Net sales $ 3,612 $ 3,351 $ 2,944
-36-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
INCOME (LOSS) FROM OPERATIONS 1995 1994 1993
(In millions of dollars)
Industry Segments
Building Materials
United States $ 195 $ 145 $ 153
Europe 29 26 16
Canada and other 13 18 6
Total Building Materials 237 189 175
Composite Materials
United States 135 108 101
Europe 64 (8) (15)
Canada and other 26 9 12
Total Composite Materials 225 109 98
General corporate expense (50) (72) (37)
Income from operations 412 226 236
Cost of borrowed funds (87) (94) (89)
Income before provision
for income taxes $ 325 $ 132 $ 147
Geographic Segments
United States $ 330 $ 253 $ 254
Europe 93 18 1
Canada and other 39 27 18
General corporate expense (50) (72) (37)
Income from operations 412 226 236
Cost of borrowed funds (87) (94) (89)
Income before provision
for income taxes $ 325 $ 132 $ 147
-37-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
IDENTIFIABLE ASSETS AT 1995 1994 1993
DECEMBER 31, (In millions of dollars)
Industry Segments
Building Materials
United States $ 893 $ 718 $ 596
Europe 170 162 46
Canada and other 194 136 155
Total Building Materials 1,257 1,016 797
Composite Materials
United States 361 326 302
Europe 388 335 256
Canada and other 145 160 157
Total Composite Materials 894 821 715
General corporate 1,024 1,363 1,438
3,175 3,200 2,950
Investments in affiliates
accounted for under the
equity method 86 74 63
Total assets $ 3,261 $ 3,274 $ 3,013
Geographic Segments
United States $ 1,254 $ 1,044 $ 898
Europe 558 497 302
Canada and other 339 296 312
General corporate 1,024 1,363 1,438
3,175 3,200 2,950
Investments in affiliates
accounted for under the
equity method 86 74 63
Total assets $ 3,261 $ 3,274 $ 3,013
-38-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
PROVISION FOR DEPRECIATION, 1995 1994 1993
AMORTIZATION, AND REBUILDING (In millions of dollars)
FURNACES
Industry Segments
Building Materials
United States $ 49 $ 48 $ 47
Europe 11 6 2
Canada and other 8 8 11
Total Building Materials 68 62 60
Composite Materials
United States 22 22 24
Europe 18 17 16
Canada and other 7 8 10
Total Composite Materials 47 47 50
General corporate 10 9 11
Total provision for
depreciation, amortization,
and rebuilding furnaces $ 125 $ 118 $ 121
Geographic Segments
United States $ 71 $ 70 $ 71
Europe 29 23 18
Canada and other 15 16 21
General corporate 10 9 11
Total provision for
depreciation, amortization,
and rebuilding furnaces $ 125 $ 118 $ 121
-39-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
ADDITIONS TO PLANT AND EQUIPMENT 1995 1994 1993
(In millions of dollars)
Industry Segments
Building Materials
United States $ 60 $ 85 $ 82
Europe 36 41 2
Canada and other 33 7 5
Total Building Materials 129 133 89
Composite Materials
United States 37 41 31
Europe 39 35 32
Canada and other 18 26 7
Total Composite Materials 94 102 70
General corporate 53 23 19
Total additions $ 276 $ 258 $ 178
Geographic Segments
United States $ 97 $ 126 $ 113
Europe 75 76 34
Canada and other 51 33 12
General corporate 53 23 19
Total additions $ 276 $ 258 $ 178
-40-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt
1995 1994
(In millions of dollars)
Unsecured U.S. credit facility
due in 1997, variable $ 55 $ 35
Unsecured European credit
facilities due through
2002, variable 40 -
Unsecured Canadian credit
facility due in 1997,
variable - 4
Guaranteed debentures due
in 2001, 10% 150 150
Debentures due in 2002, 8.875% 150 150
Debentures due in 2012, 9.375% 150 149
Guaranteed debentures due in
1998, 9.8% 100 100
Eurobonds due through 2001,
9.814% (Note 20) 63 140
Bonds due in 2000, 7.25%,
payable in Deutsche marks
(Note 20) 50 50
Convertible junior subordinated
debentures due in 2005, 8%,
convertible at $29.75 per
share - 173
Notes due through 2002, 6.06%
to 8.50%, payable in
foreign currencies 26 38
Other long-term debt due
through 2012, at rates from
5.375% to 12.47% 45 68
829 1,057
Less: Current portion (35) (20)
Total long-term debt $ 794 $ 1,037
The U.S. credit facility has a maximum commitment of $475
million at December 31, 1995, of which $176 million was used
for standby letters of credit and $244 million was unused.
The rate of interest is either the bank's base rate, or
13/16% over the certificate of deposit rate, or 11/16% over
the London Interbank Offered Rate (LIBOR). The weighted
average rate of interest paid on borrowings under this
facility during 1995 was 6.9%, (8.5% at December 31, 1995).
A commitment fee of 1/4 of 1% is charged on the unused
portions of this facility.
The Canadian credit facility is payable in Canadian dollars
and has a maximum commitment of 135 million Canadian dollars
($99 million U.S. dollars), all of which was unused at
December 31, 1995. The rate of interest is either 11/16%
over the Canadian cost of funds rate, or 11/16% over LIBOR
on U.S. deposits, or .7875% over the Canadian bankers'
acceptance rate. A commitment fee of 1/4 of 1% is charged on
the unused portions of this facility.
-41-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt (Continued)
The European credit facilities, payable in Belgian francs,
have an aggregate commitment of 1.6 billion Belgian francs
($55 million U.S. dollars) of which 400 million Belgian
francs ($15 million U.S. dollars) was unused at December 31,
1995. The rate of interest on the facilities ranges from
4.28% to 4.51% at December 31, 1995. The commitment fee on
the unused portions of the facilities range from 3/20 to 1/4
of 1%.
As is typical for bank credit facilities, the agreements
relating to the facilities described above contain
restrictive covenants, including requirements for the
maintenance of working capital, interest coverage, and
minimum coverage of fixed charges; and limitations on the
early retirement of subordinated debt, additional
borrowings, certain investments, payment of dividends, and
purchase of Company stock. The agreements include a
provision which would result in all of the unpaid principal
and accrued interest of the facilities becoming due
immediately upon a change of control in ownership of the
Company. A material adverse change in the Company's
business, assets, liabilities, financial condition or
results of operations constitutes a default under the
agreements.
During 1995, the Company's $173 million issue of 8%
convertible junior subordinated debentures were converted.
The conversion resulted in the issuance of 5.8 million new
shares of common stock. In conjunction with the conversion
of the debentures, the Company paid fees of approximately $3
million which are reflected as other expenses on the
Company's consolidated statement of income for the year
ended December 31, 1995.
In November 1994, Owens-Corning Finance (U.K.) PLC, a wholly-
owned subsidiary of the Company, issued $140 million of
Eurobonds. These bonds are convertible into fixed rate
preference shares of Owens-Corning Finance (U.K.) PLC in
November 2004 and may be redeemed at any time, at a premium,
at the option of the Company. The bonds are guaranteed by
the Company as to payments of principal and interest and
rank similarly with all other senior unsecured debt of the
Company. Subsequently, in a separate transaction, the
Company sold a put option to the holder of the bonds
allowing the option holder to require the Company to
purchase a portion of the bonds. As a result of the
holder's exercise of the put option, in May 1995, the
Company repurchased a portion of the $140 million issue of
Eurobonds for $77 million.
-42-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt (Continued)
The aggregate maturities and sinking fund requirements for
all long-term debt issues for each of the five years
following December 31, 1995 are:
Credit Other Long-
Year Facilities Term Debt
(In millions of dollars)
1996 $ - $ 35
1997 63 19
1998 8 112
1999 8 12
2000 6 75
3.Short-Term Debt
1995 1994
(In millions of dollars)
Balance outstanding at
December 31 $ 64 $ 155
Weighted average
short-term borrowings $ 184 $ 165
Weighted average interest
rates on short-term debt
outstanding at December 31 7.5% 6.6%
In May 1995 the Company repaid its unsecured, variable rate,
short-term bank credit facility that was used to finance the
1994 U.K. acquisition (Note 5). This facility had a maximum
commitment of $110 million at December 31, 1994, all of
which was used. The rate of interest on borrowings under
this facility was 1/2 of 1% over LIBOR, or 6.6875% at
December 31, 1994.
In December 1995 the Company entered into two revolving
credit agreements. Each quarter during 1996, the Company
may borrow up to a predetermined amount from $13 million to
$16 million. The amount borrowed may be repaid in U.S.
dollars at less than or equal to the original borrowing,
based upon predetermined British pound or Belgian franc
currency exchange rates. The agreements are in effect
through 1996 and bear interest at market rates in effect at
the time of each borrowing.
The Company had unused short-term lines of credit totalling
$239 million and $91 million at December 31, 1995 and 1994,
respectively.
-43-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Convertible Monthly Income Preferred Securities (MIPS)
In May 1995, Owens-Corning Capital, L.L.C. ("OC Capital"), a
Delaware limited liability company, all of the common
limited liability company interests in which are owned
indirectly by the Company, completed a private offering of 4
million shares of Convertible Monthly Income Preferred
Securities ("preferred securities"). The aggregate purchase
price for the offering was $200 million. In conjunction
with the offering, the Company incurred $6 million in
issuance costs.
The preferred securities are guaranteed in certain respects
by the Company and are convertible, at the option of the
holders, into Company common stock at the rate of 1.1416
shares of Company common stock for each preferred security
(equivalent to a conversion price of $43.80 per common
share). OC Capital cannot initiate any action relating to
conversion until after June 1, 1998. Distributions on the
preferred securities are cumulative and are payable at the
annual rate of 6-1/2 percent of the liquidation preference
of $50 per preferred security. Distributions of $8 million
have been recorded as other expenses on the Company's
consolidated statement of income for the year ended December
31, 1995.
The Company issued $200 million of 6-1/2 percent Convertible
Subordinated Debentures due 2025 to OC Capital, which
represents the sole asset of OC Capital, in exchange for the
proceeds of the offering. The Company used the proceeds to
repay the $110 million short-term bank credit facility
utilized for the 1994 U.K. acquisition (Note 5), with the
balance used to reduce borrowings under the Company's
revolving credit facilities.
5. Acquisitions and Divestitures of Businesses
During 1995 and 1994, the Company made several acquisitions
in the Building Materials segment in the United States and
Europe, which were consummated through the exchange of
various combinations of common stock and cash. The
aggregate purchase price including possible subsequent
contingent consideration was $126 million and $155 million
for 1995 and 1994, respectively. The 1995 acquisitions
exchanged 946,922 shares of the Company's common stock and
$82 million in cash which includes $1 million to be paid in
the first quarter of 1996 and the 1994 acquisitions
exchanged 855,556 shares of the Company's common stock and
$120 million in cash, net of cash acquired, for all of the
assets and liabilities of the companies acquired. The
incremental sales from the acquisitions, in the year of
acquisition, were $41 million and $134 million for the years
ended December 31, 1995 and 1994, respectively.
The largest of these acquisitions was the 1994 second
quarter acquisition of Pilkington Insulation Limited and
Kitsons Insulation Products Limited (collectively, "the U.K.
acquisition"), the United Kingdom based insulation
manufacturing and industrial supply businesses of Pilkington
PLC. Acquiring two glass fiber insulation manufacturing
facilities, one rock wool manufacturing facility and 14
distribution centers, the Company now represents the United
Kingdom's largest manufacturer of glass fiber and rock wool
insulation is a major
-44-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Acquisitions and Divestitures of Businesses (Continued)
supplier of thermal and acoustical insulation products to
the United Kingdom construction industry. The purchase
price of the U.K. acquisition was $110 million and was
financed with borrowings from the Company's short-term bank
credit facility (Note 3).
All acquisitions were accounted for under the purchase
method of accounting, whereby the assets acquired and
liabilities assumed have been recorded at their fair values
and the results of operations for the acquisitions have been
included in the Company's consolidated financial statements
subsequent to the acquisition dates.
The purchase price allocations were based on preliminary
estimates of fair market value and are subject to revision.
The 1995 acquisitions included goodwill of $97 million and
non-competition agreements of $3 million. The 1994
acquisitions included goodwill of $78 million and non-
competition agreements of $6 million.
The goodwill and non-competition agreements are being
amortized on a straight-line basis over 40 years and 7
years, respectively. The pro forma effect of the
acquisitions was not material to net income for the years
ended December 31, 1995, 1994 or 1993.
On September 30, 1994, the Company entered into a joint
venture with Alpha Corporation of Tennessee, whereby the two
companies combined their existing resin businesses to form
Alpha/Owens-Corning, L.L.C., the largest manufacturer of
polyester resins in North America. The Company contributed
two manufacturing plants (Valparaiso, Indiana and Guelph,
Ontario) and owns a 50 percent interest in the joint
venture. This joint venture is being accounted for under
the equity method. For the nine months ended September 30,
1994 and the year ended December 31, 1993, resin sales
totaled $58 million and $63 million, respectively, and were
included in the Composite Materials segment.
Late in the fourth quarter of 1994, the Company completed
the sale of its underground storage tank manufacturing
business. Sales for this business totaled $41 million and
$43 million in 1994 and 1993, respectively, and were
included in the Building Materials segment.
6. Postemployment and Postretirement Benefits Other Than
Pensions
The Company and its subsidiaries maintain health care and
life insurance benefit plans for certain retired employees
and their dependents. The health care plans in the U.S. are
unfunded and pay either 1) stated percentages of covered
medically necessary expenses, after subtracting payments by
Medicare or other providers and after stated deductibles
have been met or, 2) fixed amounts of medical expense
reimbursement. Employees become eligible to participate in
the health care plans upon retirement under one of the
Company's pension plans if they have accumulated 10
years of service after age 45. Some of the plans
are
-45-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Postemployment and Postretirement Benefits Other Than
Pensions (Continued)
contributory, with some retiree contributions adjusted
annually. The Company has reserved the right to change or
eliminate these benefit plans subject to the terms of
collective bargaining agreements during their term.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions"
for its non-U.S. plans. Accordingly, the projected cost of
postretirement benefits is charged to expense during the
years in which eligible employees render service. The
cumulative effect of the adoption of this standard was a
charge of $10 million, or $.20 per share. (The Company
adopted Statement No. 106 for its U.S. plans effective
January 1, 1991.)
During 1993, the Company approved changes in its
postretirement health care plans for retirees and active
employees. These changes, which reduced the accumulated
benefit obligation by $120 million and 1993 expense by $18
million, resulted in an unrecognized net reduction in prior
service cost which will be amortized through 1999.
The following table reconciles the status of the accrued
postretirement benefits cost liability at October 31, 1995
and 1994, as reflected on the balance sheet as of December
31, 1995 and 1994:
1995 1994
(In millions of dollars)
Accumulated Postretirement
Benefits Obligation:
Retirees $ (194) $ (176)
Fully eligible active
plan participants (21) (24)
Other active plan
participants (54) (46)
Funded status (269) (246)
Unrecognized net gain (11) (39)
Unrecognized net reduction
in prior service cost (72) (88)
Benefit payments subsequent to
the valuation date
(October 31) 3 3
Accrued postretirement benefits
cost liability (includes
current liabilities of
$19 million in 1995 and
1994) $ (349) $ (370)
-46-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Postemployment and Postretirement Benefits Other Than
Pensions (Continued)
For measurement purposes, a 10.5% annual rate of increase in
the per capita cost of covered health care claims was
assumed for 1996. The rate was assumed to decrease to 10%
for 1997, then decrease gradually to 6.0% by 2005. The
health care cost trend rate assumption has a significant
effect on the amounts reported. To illustrate, increasing
the assumed health care cost trend rate by one percentage
point in each year would increase the accumulated
postretirement benefits obligation as of October 31, 1995,
by $14 million and the aggregate of the service and interest
cost components of net postretirement benefits cost for the
year then ended by $2 million. The discount rate used in
determining the accumulated postretirement benefits
obligation was 7.5% in 1995, 8.5% in 1994, and 7.5% in 1993.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits." This standard
requires the Company to recognize the obligation to provide
benefits to former or inactive employees after employment
but before retirement under certain conditions. These
benefits include, but are not limited to, salary
continuation, supplemental unemployment benefits, severance
benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation
of benefits such as health care and life insurance coverage.
The cumulative effect of the adoption of this standard,
recorded in 1994, was an undiscounted charge of $28 million,
or $.56 per share, net of related income taxes of $18
million.
The following table reconciles the status of the accrued
postemployment benefits cost liability at October 31, 1995
and 1994, as reflected on the balance sheet as of December
31, 1995 and 1994:
1995 1994
(In millions of dollars)
Funded status $ (40) $ (45)
Unrecognized net gain (2) -
Benefit payments subsequent
to the valuation date
(October 31) 1 1
Accrued postemployment benefit
cost liability (includes
current liabilities of $4
million in 1995 and $5
million in 1994) $ (41) $ (44)
The net postemployment benefits expense was $2 million and
$3 million for 1995 and 1994, the year of adoption,
respectively.
-47-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Postemployment and Postretirement Benefits Other Than
Pensions (Continued)
The net postretirement benefits cost for 1995, 1994 and 1993
included the following components:
1995 1994 1993
(In millions of dollars)
Service cost $ 7 $ 8 $ 7
Interest cost on accumulated
post-retirement benefits
obligation 19 19 23
Net amortization and deferral (24) (20) (13)
Net postretirement benefits
cost $ 2 $ 7 $ 17
In December 1995, the Company established and funded a
Voluntary Employees' Beneficiary Association (VEBA) trust to
cover certain employee welfare and postretirement benefits
in the amount of $64 million, of which $13 million has been
classified as long-term.
7. Pension Plans
The Company has several defined benefit pension plans
covering most employees. Under the plans, pension benefits
are generally based on an employee's number of years of
service. Company contributions to these pension plans are
based on the calculations of independent actuaries using the
projected unit credit method. Plan assets consist primarily
of equity securities with the balance in fixed income
investments or insurance contracts. The unrecognized cost
of retroactive amendments and actuarial gains and losses are
amortized over the average future service period of plan
participants expected to receive benefits.
In August of 1995, the Company amended the pension plan for
U.S. salaried employees to change from a final average pay
formula to a cash balance formula. The new plan provisions
become effective on January 1, 1996. The change resulted in
a reduction in the projected benefit obligation of $20
million. The change is expected to reduce pension expense
in the future through the amortization of the reduction in
the projected benefit obligation, reduced service cost and
reduced interest cost on the projected benefit obligation.
The reduction in pension expense for 1996 is expected to be
$11 million. The impact on pension expense for 1995 was a
reduction of $4 million.
-48-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Pension Plans (Continued)
Pension expense for the Company's defined benefit pension
plans includes the following:
1995 1994 1993
(In millions of dollars)
Service cost $ 20 $ 22 $ 23
Interest cost on projected
benefit obligation 64 58 62
Actual return on plan assets (114) (13) (124)
Net amortization and deferral 30 (64) 50
Net pension expense $ - $ 3 $ 11
The funded status at October 31, 1995 and 1994 is as
follows:
1995 1994
(In millions of dollars)
Over Under Over Under
Funded Funded Funded Funded
Vested benefit obligation $ 359 $ 312 $ 310 $ 273
Accumulated benefit
obligation $ 395 $ 355 $ 341 $ 343
Plan assets at fair value $ 500 $ 316 $ 466 $ 306
Projected benefit obligation 447 365 430 352
Plan assets in excess of
(less than) projected
benefit obligation 53 (49) 36 (46)
Unrecognized loss 15 59 8 55
Unrecognized prior service
cost (30) (31) (12) (24)
Unrecognized transition amount (35) (11) (39) (13)
Adjustment to minimum liability - (7) - (12)
Net pension liability (includes
current liabilities of $2 million
in 1995 and $8 million in 1994
and noncurrent assets of $41
million in 1995 and $38 million
in 1994) $ 3 $ (39) $ (7) $(40)
-49-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Pension Plans (Continued)
The 1995, 1994 and 1993 primary actuarial assumptions used
for pension plans were:
1995 1994 1993
Discount rate 7.5% 8.5% 7.5%
Expected long-term rate of
return on plan assets 9.0% 9.5% 10.0%
Rate of compensation
increase 5.1% 5.1% 4.1%
The Company also sponsors defined contribution plans
available to substantially all U.S. employees. Company
contributions for the plans are based on matching a
percentage of employee savings up to a maximum savings
level. The Company's contributions were $12 million in
1995, $10 million in 1994, and $9 million in 1993.
8. Income Taxes
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Statement No. 109 changed the criteria for
measuring the provision for income taxes and recognizing
deferred tax assets and liabilities. Deferred tax assets and
liabilities are determined based on the difference between
the financial statement and tax bases of corresponding
liabilities and assets using enacted tax rates in effect for
the year in which the differences are expected to reverse.
The cumulative effect of the adoption of this standard,
recorded in 1993, was an increase to earnings of $26
million, or $.53 per share.
-50-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Income Taxes
1995 1994 1993
(In millions of dollars)
Income (loss) before provision
(credit) for income taxes:
U.S. $ 226 $ 119 $ 163
Foreign 99 13 (16)
Total $ 325 $ 132 $ 147
Provision (credit) for income taxes:
Current
U.S. $ (45) $ (2) $ 24
State and local (4) (7) 7
Foreign 13 5 6
Total current (36) (4) 37
Deferred
U.S. 113 51 27
State and local 15 13 1
Foreign 14 (2) (4)
Total deferred 142 62 24
Adjustment to deferred tax assets and
liabilities for an increase in the U.S.
federal statutory rate - - (14)
Total provision for income
taxes $ 106 $ 58 $ 47
The reconciliation between the U.S. federal statutory rate
and the Company's effective income tax rate is:
1995 1994 1993
U.S. federal statutory rate 35% 35% 35%
Operating losses of foreign
subsidiaries - 7 10
Utilization of research and
development credits (3) - -
Utilization of operating loss
carryforwards - (7) (2)
Utilization of tax loss
carryback (2) - -
Enacted federal tax rate
change - - (10)
State and local income taxes 2 3 3
Other 1 6 (4)
Effective tax rate 33% 44% 32%
-51-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Income Taxes (Continued)
As of December 31, 1995, the Company has not provided for
withholding or U.S. federal income taxes on approximately
$196 million of accumulated undistributed earnings of its
foreign subsidiaries as they are considered by management to
be permanently reinvested. If these undistributed earnings
were not considered to be permanently reinvested,
approximately $25 million of deferred income taxes would
have been provided.
During 1995 and 1994, the Company utilized tax net operating
loss carryforwards for certain of its foreign subsidiaries
of approximately $2 million and $9 million, respectively.
At December 31, 1995 and 1994, the Company had tax net
operating loss carryforwards for certain of its foreign
subsidiaries of approximately $27 million, certain of which
expire through 1999.
The cumulative temporary differences giving rise to the
deferred tax assets and liabilities at December 31, 1995 and
1994 are as follows:
1995 1994
Deferred Deferred
Deferred Tax Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
(In millions of dollars)
Asbestos litigation
claims $ 244 $ - $ 306 $ -
Other employee
benefits 160 - 171 -
Depreciation - 116 - 138
Warranty and product
liability reserves 27 - 29 -
Operating loss
carryforwards 27 - 27 -
State and local
taxes - 21 - 20
Other 60 39 122 6
Subtotal 518 176 655 164
Valuation allowances (20) - (27) -
Total deferred $ 498 $ 176 $ 628 $ 164
Management fully expects to realize its net deferred tax
assets through income from future operations.
9. Science and Technology Expenses
Science and technology expenses include research and
development costs of $69 million in 1995, $64 million in
1994, and $61 million in 1993. In addition to research and
development costs, science and technology expenses include
continuing commercial activities such as engineering and
product modifications for special applications and testing.
-52-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Accounts Receivable Securitization
In 1994 and 1995, the Company sold certain accounts
receivable of its Building Materials operations to a 100%
owned subsidiary, Owens-Corning Funding Corporation ("OC
Funding"). In December 1994, OC Funding entered into a
three-year agreement whereby it can sell, on a revolving
basis, an undivided percentage ownership interest in a
designated pool of accounts receivable up to a maximum of
$100 million. At December 31, 1995 and 1994, $100 million
and $50 million, respectively, have been sold under this
agreement and the sale has been reflected as a reduction of
accounts receivable in the Company's consolidated balance
sheet. The discount of $6 million on the receivables sold
has been recorded as other expenses on the Company's
consolidated statement of income for the year ended December
31, 1995.
The Company maintains an allowance for doubtful accounts
based upon the expected collectibility of all consolidated
trade accounts receivable, including receivables sold by OC
Funding.
11. Inventories
Inventories are summarized as follows:
1995 1994
(In millions of dollars)
Finished goods $ 210 $ 192
Materials and supplies 127 118
FIFO inventory 337 310
Less: Reduction to LIFO basis (84) (87)
$ 253 $ 223
Approximately $175 million of FIFO inventories were valued
using the LIFO method at December 31, 1995 and 1994.
During 1995, 1994, and 1993, certain inventories were
reduced, resulting in the liquidation of LIFO inventory
layers carried at lower costs in prior years as compared
with the current cost of inventory. The effect of these
inventory reductions was to reduce 1995, 1994, and 1993 cost
of sales by $7 million, $3 million, and $1 million,
respectively.
-53-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. Investments in Affiliates
At December 31, 1995 and 1994, the Company's affiliates,
which generally are engaged in the manufacture of fibrous
glass and related products for the insulation, construction,
reinforcements, and textile markets, include:
Percent Ownership
1995 1994
COMPOSITES:
Alpha/Owens-Corning, L.L.C. (USA) 50% 50%
Knytex Company, L.L.C. (USA) 50% 50%
Vitro-Fibras, S.A. (Mexico) 40% 40%
GLOBAL PIPE:
Amiantit Fiberglass Industries,
Ltd. (Saudi Arabia) 30% 30%
Owens-Corning Eternit Rohre GmbH
(Germany) 50% 50%
Owens-Corning Pipe Botswana
(Pty.), Ltd. (Botswana) 46% 49%
Owens-Corning Tubs S.A. (Spain) 50% 50%
Owens-Corning Canos, S.A.
(Argentina) 50% -
BUILDING MATERIALS - EUROPE:
Arabian Fiberglass Insulation
Company, Ltd. (Saudi Arabia) 49% 49%
ASIA PACIFIC:
Asahi Fiber Glass Company, Ltd.
(Japan) 28% 28%
LG Owens-Corning Corp. (Korea) 31% 30%
Siam Fiberglass Co., Ltd.
(Thailand) 20% 20%
-54-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. Investments in Affiliates (Continued)
The following table provides summarized financial
information on a combined 100% basis for the Company's
affiliates accounted for under the equity method:
1995 1994 1993
(In millions of dollars)
At December 31:
Current assets $ 338 $ 328 $ 214
Noncurrent assets 472 513 387
Current liabilities 403 331 240
Noncurrent liabilities 253 250 147
For the year:
Net sales 962 630 486
Gross margin 178 96 81
Net income 47 7 16
The Company's equity in undistributed net income of
affiliates was $36 million at December 31, 1995.
Subsequent to year end, the Company sold all of its interest
in Asahi Fiber Glass Company, Ltd. for approximately $50
million, and realized a pretax gain in excess of $25
million.
13. Accounts Payable and Accrued Liabilities
1995 1994
(In millions of dollars)
Accounts payable $ 309 $ 298
Payroll and vacation pay 87 117
Payroll, property, and
miscellaneous taxes 39 30
Other employee benefits
liability (Note 6) 23 24
Other 129 129
$ 587 $ 598
-55-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. Consolidated Statement of Cash Flows
Cash payments, net of refunds, for income taxes and cost of
borrowed funds are summarized as follows:
1995 1994 1993
(In millions of dollars)
Income taxes $ (34) $ (4) $ 43
Cost of borrowed funds 94 97 95
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
See Notes 2 and 5 for supplemental disclosure of Non-cash
Investing and Financing Activities.
15. Leases
The Company leases certain manufacturing equipment and
office and warehouse facilities under operating leases, some
of which include cost escalation clauses, expiring on
various dates through 2015. Total rental expense charged to
operations was $63 million in 1995, $54 million in 1994, and
$42 million in 1993. At December 31, 1995, the minimum
future rental commitments under noncancellable leases
payable over the remaining lives of the leases are:
Minimum Future
Period Rental Commitments
(In millions of dollars)
1996 $ 52
1997 52
1998 40
1999 20
2000 18
2001 through 2015 134
$ 316
-56-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. Restructuring of Operations and Other Initiatives
During the first quarter of 1994, the Company recorded a
$117 million pretax charge for productivity initiatives and
other actions aimed at reducing costs and enhancing the
Company's speed, focus, and efficiency. This $117 million
pretax charge is comprised of an $89 million charge
associated with the restructuring of the Company's business
segments, as well as a $28 million charge, primarily
composed of final costs associated with the administration
of the Company's former commercial roofing business. The
components of the $89 million restructure include: $44
million for personnel reductions, $20 million for
divestiture of non-strategic businesses and facilities, $22
million for business realignments, and $3 million for other
actions. The $44 million cost for personnel reductions
primarily represents severance costs associated with the
elimination of nearly 400 positions worldwide. The primary
employee groups affected include science and technology
personnel, field sales personnel, corporate administrative
personnel, and commercial roofing and resin business
personnel.
As of December 31, 1995, the Company has recorded
approximately $82 million in costs against its 1994
restructure reserve, of which $67 million represents actual
cash expenditures and $15 million represents the non-cash
effects of asset write-offs and business realignments. The
$67 million cash expenditure includes severance costs of $42
million, divestiture or realignment of businesses and
facilities costs of $22 million, and $3 million for other
actions.
During the first quarter of 1993, the Company recorded a $23
million charge to reorganize its European operations. This
charge included $17 million for personnel reductions and $6
million for the writedown of fixed assets.
17. Glass Melting Furnace Rebuilds
Effective January 1, 1994, the Company adopted the capital
method of accounting for the cost of rebuilding glass
melting furnaces. Under this method, costs are capitalized
when incurred and depreciated over the estimated useful
lives of the rebuilt furnaces. Previously, the Company
established a reserve for the future rebuilding costs of its
glass melting furnaces through a charge to earnings between
dates of rebuilds. The change to the capital method
provides a more appropriate measure of the Company's capital
investment and is consistent with industry practice. The
cumulative effect of this change in accounting method was an
increase to earnings of $123 million, or $2.45 per share,
net of related income taxes of $54 million. The effect of
this change in accounting method was to increase
depreciation expense and eliminate furnace rebuild
provision. The pro forma effect of this change was not
material to net income for the year ended December 31, 1993.
-57-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Stock Compensation Plans
The Company's Stock Performance Incentive Plan (SPIP) and
the Owens-Corning 1995 Stock Plan, (collectively, the
"Plans"), permit up to two percent and one percent,
respectively, of common shares outstanding at the beginning
of each calendar year to be awarded as stock options and
restricted stock (with 25% of this amount as the maximum
permitted number of restricted stock awards). The Company
may carry forward, independently for each plan, unused
shares from prior years and may increase the shares
available for awards in any calendar year through an advance
of up to 25% of the subsequent year's allocation (determined
by using 25% of the current year's allocation). These
shares are also subject to the 25% limit for restricted
stock awards. During 1995, the total number of shares
available under the Plans for stock awards was 1,565,004
shares, 1,006,950 of which were awarded as stock options and
232,224 as restricted stock, which includes an advance of
54,355 shares from the 1996 allocation for SPIP. 599,840
shares are also available to be awarded under a prior plan;
however, the Company does not expect any awards to be made
under that plan.
Additionally, the Company has a plan to award stock options
and deferred stock awards to nonemployee directors, of which
95,500 shares were available for this purpose as of December
31, 1995. In 1995, 10,000 options and 4,000 stock awards
were granted, of which 2,000 were issued in conjunction with
the plan for nonemployee directors.
During 1994, the total number of shares available for stock
awards for SPIP was 1,075,752 shares, 894,000 of which were
awarded as stock options and 59,450 as restricted stock,
which included an advance of 93,478 shares from the 1995
allocation. Additionally, in 1994, 8,500 options and 4,000
stock awards were granted, of which 2,000 were issued in
conjunction with the plan for nonemployee directors.
Stock Options
Activity during 1995 and 1994 in shares under option:
1995 1994
Number Price Number Price
of Range per of Range per
Shares Share Shares Share
Beginning of year 3,290,454 $17.86-47.00 2,560,826 $17.86-47.00
Options granted 1,016,950 31.50-45.00 902,500 28.50-34.88
Options exercised (300,663) 17.86-40.50 (137,059) 18.75-30.63
Options cancelled (63,631) 30.63-40.50 (35,813) 26.75-40.50
End of year 3,943,110 $17.86-47.00 3,290,454 $17.86-47.00
Exercisable 2,107,427 $17.86-47.00 1,619,119 $17.86-47.00
-58-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Stock Compensation Plans (Continued)
Option prices represent the market price at date of grant.
Shares issued under options are recorded in the common stock
accounts at the option price. Options granted vest ratably
through 1998 for the SPIP plan and, as determined by the
compensation committee, for the Owens-Corning 1995 Stock
Plan.
Deferred Stock Awards
At December 31, 1995, the Company had 15,711 shares of
deferred stock outstanding, all of which were vested.
During 1995, 2,000 shares of deferred stock were granted,
and 2,629 shares were issued.
Compensation expense is measured based on the market price
of the stock at date of grant and is recognized on a
straight-line basis over the vesting period.
Restricted Stock Awards
At December 31, 1995, the Company had 448,973 shares of
restricted stock outstanding. Stock restrictions lapse,
subject to alternate vesting plans for approved early
retirement and involuntary termination, over various periods
ending in 2005.
19.Share Purchase Rights
Each outstanding share of the Company's common stock
includes a preferred share purchase right. Each right
entitles the holder to buy from the Company one one-
hundredth of a share of Series A Participating Preferred
Stock of the Company at a price of $50. The Board of
Directors has designated 750,000 shares of the Company's
authorized preferred stock as Series A Participating
Preferred Stock. There are currently no preferred shares
outstanding.
Rights become exercisable and detach from the common stock
ten days after a person or group acquires, or announces a
tender offer for, 20% or more of the Company's outstanding
shares of common stock. The rights expire on
December 30, 1996, unless redeemed earlier by the Company.
The rights are redeemable by the Company at one cent each at
any time prior to ten days following public announcement or
notice to the Company that an acquiring person or group has
purchased 20% or more of the Company's outstanding common
stock. If the Company is acquired in a merger or other
business combination at any time after the rights become
exercisable, each right would entitle its holder to buy
shares of the acquiring or surviving company having a market
value of twice the exercise price of the right.
-59-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of
Financial Instruments
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
help meet financing needs and to reduce exposure to
fluctuating foreign currency exchange rates and interest
rates. The Company is exposed to credit loss in the event
of nonperformance by the other parties to the financial
instruments described below. However, the Company does not
anticipate nonperformance by the other parties. The Company
does not engage in trading activities with these financial
instruments and does not generally require collateral or
other security to support these financial instruments. The
notional amounts of derivatives summarized in the foreign
exchange risk and interest rate risk management section
below do not represent the amounts exchanged by the parties
and, thus, are not a measure of the exposure of the Company
through its use of derivatives. The amounts exchanged are
calculated on the basis of the notional amounts and the
other terms of the derivatives, which relate to interest
rates, exchange rates, securities prices, or financial or
other indexes.
Foreign Exchange Risk and Interest Rate Risk Management
The Company enters into various types of derivative
financial instruments to manage its foreign exchange risk
and interest rate risk, as indicated in the following table.
Notional Amount Notional Amount
December 31, 1995 December 31, 1994
(In millions of dollars)
Forward currency exchange
contracts $ 234 $ 194
Options purchased 25 22
Currency swaps 190 190
Interest rate swaps 150 150
The Company enters into forward currency exchange contracts
to manage its exposure against foreign currency fluctuations
on certain assets and liabilities denominated in foreign
currencies. As of December 31, 1995, the Company has 21
forward currency exchange contracts maturing in 1996 which
exchange 2.7 billion Belgian francs, 19 million U.S.
dollars, 11 million British pounds, 117 million French
francs, 17 billion Italian lira, and various other
currencies. As of December 31, 1994, the Company had 29
forward currency exchange contracts which matured in 1995
and exchanged 4.4 billion Belgian francs, 23 million U.S.
dollars, 38 million British pounds, 22 million Deutsche
marks, 19 billion Italian lira, and various other
currencies. Gains and losses on these foreign currency
hedges are included in the carrying amount of the related
assets and liabilities. At December 31, 1995 and 1994,
deferred gains and losses on these foreign currency hedges
are not material to the consolidated financial statements.
-60-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
The Company enters into forward currency exchange contracts
to hedge its equity investments in certain foreign
subsidiaries and to manage its exposure against fluctuations
in foreign currency rates. As of December 31, 1995, the
Company has two forward currency exchange contracts maturing
in 1996 which exchange 1 billion Belgian francs against
approximately 34 million U.S. dollars to hedge its equity
investments in certain of its European subsidiaries. As of
December 31, 1994, the Company had two forward currency
exchange contracts which matured in 1995 and exchanged 1
billion Belgian francs against approximately 32 million U.S.
dollars to hedge its equity investments in certain of its
European subsidiaries. At December 31, 1995 and 1994,
losses of $4 million and $3 million on hedges of net
investments in foreign subsidiaries are included in
stockholders' equity, respectively.
The Company has entered into forward currency exchange
contracts to reduce its exposure to currency fluctuations on
the proceeds of the sale of its investment in Asahi Fiber
Glass Company, Ltd. (Note 12). As of December 31, 1995,
these contracts exchange 5 billion Japanese yen for 50
million U.S. dollars. At December 31, 1995, gains of $3
million are included as deferred revenue.
The Company entered into forward currency exchange contracts
to reduce its exposure to currency fluctuations on the
anticipated 1995 earnings of certain European subsidiaries.
The nine forward currency exchange contracts which matured
in 1995, exchanged 412 million Belgian francs and 8 million
British pounds against approximately 25 million U.S.
dollars. Gains and losses on these foreign currency hedges
were included in income in the period in which the exchange
rates changed. Gains on these forward currency exchange
contracts were not material to the consolidated financial
statements.
The Company enters into option contracts to hedge
anticipated transactions with certain of its foreign
subsidiaries. As of December 31, 1995, the Company has
eight currency option contracts maturing in 1996 which hedge
the 1996 royalty payments of the Company's European
subsidiaries. As of December 31, 1995, the currency option
contracts exchanged 526 million Belgian francs and 6 million
British pounds against approximately 25 million U.S.
dollars. As of December 31, 1994, the Company had six
currency option contracts which exchanged 496 million
Belgian francs and 4 million British pounds against
approximately 22 million U.S. dollars. Gains on the
Company's hedges of these anticipated transactions are
included as deferred revenue. At December 31, 1995 and
1994, deferred gains on option contracts are not material to
the consolidated financial statements.
As of December 31, 1994, the Company entered into two
currency swap transactions to manage its exposure against
foreign currency fluctuations on the principal amount of its
guaranteed .814% Eurobonds (Note 2). At December 31, 1994,
gains on these currency swaps were not material to the
consolidated financial statements. During May 1995 the
Company terminated these swaps. The termination of these
swaps exchanged 140 million U.S. dollars for approximately
89 million British pounds, resulting in a gain of
approximately 10 million U.S dollars. At that time, the
Company entered into two cross-currency interest rate swaps
from U.S. dollars into British pounds to hedge the interest
and principal payments of the remaining Eurobonds through
2002. These agreements also convert part of the fixed rate
interest into variable rate interest. The gain on the
exercised swaps is being amortized over the
-61-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
life of the original hedge. At December 31, 1995, $7
million of unamortized gain on the four cross-currency
interest rate swaps is included in other liabilities.
The Company has a cross-currency interest rate conversion
agreement from Deutsche marks into U.S. dollars to hedge the
interest and principal payments of its 7.25% Deutsche mark
bonds, due in 2000. The agreement establishes a fixed
interest rate of 11.1%.
The Company enters into interest rate swaps to manage its
interest rate risk. The Company has entered into four
interest rate swap agreements to reduce the interest rates
on its fixed rate borrowings. These agreements effectively
convert an aggregate principal amount of $150 million of
fixed rate long-term debt into variable rate borrowings with
interest rates ranging from 5.875% to 8.025% in 1995 and
5.81% to 7.96% in 1994. The agreements mature in 1998. The
differential interest to be paid or received is accrued as
interest rates change and is recognized over the life of the
agreements.
Other Financial Instruments with Off-Balance-Sheet Risk
As of December 31, 1995 and 1994, the Company is
contingently liable for guarantees of indebtedness owed by
certain unconsolidated affiliates of $71 million and $27
million, respectively. The Company is of the opinion that
its unconsolidated affiliates will be able to perform under
their respective payment obligations in connection with such
guaranteed indebtedness and that no payments will be
required and no losses will be incurred by the Company under
such guarantees.
Concentrations of Credit Risk
As of December 31, 1995 and 1994, the Company has no
significant group concentrations of credit risk.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of each category of financial instruments.
Cash and short-term financial instruments
The carrying amount approximates fair value due to the
short maturity of these instruments.
-62-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
Long-term notes receivable
The fair value has been estimated using the expected
future cash flows discounted at market interest rates.
Long-term debt
The fair value of the Company's long-term debt has been
estimated based on quoted market prices for the same or
similar issues, or on the current rates offered to the
Company for debt of the same remaining maturities.
Foreign currency swaps and interest rate swaps
The fair values of foreign currency swaps and interest
rate swaps have been estimated by traded market values
or by obtaining quotes from brokers.
Forward currency exchange contracts, option contracts,
and financial guarantees
The fair values of forward currency exchange contracts,
option contracts, and financial guarantees are based on
fees currently charged for similar agreements or on the
estimated cost to terminate these agreements or
otherwise settle the obligations with the counter
parties at the reporting date.
The estimated fair values of the Company's financial
instruments as of December 31, 1995 and 1994, which have
fair values different than their carrying amounts, are as
follows:
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
(In millions of dollars)
Assets
Long-term notes
receivable $ 24 $ 22 $ 20 $ 18
Liabilities
Long-term debt 794 875 1,037 1,076
Off-Balance-Sheet
Financial Instruments
- Unrealized gains
Foreign currency
swaps - 39 - 26
Interest rate swaps - 14 - 4
-63-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
As of December 31, 1995 and 1994, the Company is
contingently liable for guarantees of indebtedness owed by
certain unconsolidated affiliates. There is no market for
these guarantees and they were issued without explicit cost.
Therefore, it is not practicable to establish their fair
value.
As of December 31, 1995 and 1994, the Company has also
entered into certain forward currency exchange and option
contracts, the fair values of which are not material to the
consolidated financial statements.
21. Contingent Liabilities
ASBESTOS LIABILITIES
The Company is a co-defendant with other former
manufacturers, distributors and installers of products
containing asbestos and with miners and suppliers of
asbestos fibers (collectively, the Producers) in personal
injury and property damage litigation. The personal injury
claimants generally allege injuries to their health caused
by inhalation of asbestos fibers from the Company's
products. Most of the claimants seek punitive damages as
well as compensatory damages. The property damage claims
generally allege property damage to school, public and
commercial buildings resulting from the presence of products
containing asbestos. Virtually all of the asbestos-related
lawsuits against the Company arise out of its manufacture,
distribution, sale or installation of an asbestos-containing
calcium silicate, high temperature insulation product, the
manufacture of which was discontinued in 1972.
Status
As of December 31, 1995, approximately 144,200 asbestos
personal injury claims were pending against the Company,
55,900 of which were received in 1995. The Company received
approximately 29,100 such claims in 1994, and 32,400 in
1993.
Through December 31, 1995, the Company had resolved (by
settlement or otherwise) approximately 160,600 asbestos
personal injury claims. During 1993, 1994, and 1995, the
Company resolved approximately 60,000 such claims and
incurred total indemnity payments of $641 million (an
average of about $10,700 per case). The Company's indemnity
payments have varied considerably over time and from case to
case, and are affected by a multitude of factors. These
include the type and severity of the disease sustained by
the claimant (i.e., mesothelioma, lung cancer, other types
of cancer, asbestosis or pleural changes); the occupation of
the claimant; the extent of the claimant's exposure to
asbestos-containing products manufactured, sold or installed
by the Company; the extent of the claimant's exposure to
asbestos-containing products manufactured, sold or
installed by other Producers; the number and financial
resources of other Producer defendants; the
jurisdiction of suit; the
-64-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
presence or absence of other possible causes of the
claimant's illness; the availability or not of legal
defenses such as the statute of limitations or state of the
art; whether the claim was resolved on an individual basis
or as part of a group settlement; and whether the claim
proceeded to an adverse verdict or judgment.
Insurance
As of December 31, 1995, the Company had approximately $430
million in unexhausted insurance coverage (net of
deductibles and self-insured retentions and excluding
coverage issued by insolvent carriers) under its liability
insurance policies applicable to asbestos personal injury
claims. This insurance, which is substantially confirmed,
includes both products hazard coverage and primary level non-
products coverage. Portions of this coverage are not
available until 1997 and beyond under agreements with the
carriers confirming such coverage. All of the Company's
liability insurance policies cover indemnity payments and
defense fees and expenses subject to applicable policy
limits.
In addition to its confirmed non-products insurance, the
Company has a significant amount of potential non-products
coverage with excess level carriers. The Company cautions,
however, that this coverage is unconfirmed and that the
amount and timing of additional recovery from these
policies, if any, will depend on subsequent negotiations or
proceedings.
Reserve
The Company's estimated total liabilities in respect of
indemnity and defense costs associated with pending and
unasserted asbestos personal injury claims that may be
received through the year 1999 (the "Liabilities"), and its
estimated insurance recoveries in respect of such claims
(the "Insurance"), are reported separately as follows:
-65-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
Asbestos Litigation Claims
December 31, December 31,
1995 1994
(In millions of dollars)
Reserve for asbestos litigation claims
Current $ 250 $ 300
Other 887 1,145
Total Reserve 1,137 1,445
Insurance for asbestos litigation claims
Current 100 125
Other 330 556
Total Insurance 430 681
Net Asbestos Liability $ 707 $ 764
Case filing rates have continued at historically high levels
with the receipt of approximately 55,900 new claims during
1995, following the receipt of approximately 29,100 claims
in 1994 and approximately 32,400 claims in 1993. Many of
these new claims appear to be the product of mass screening
programs and not to involve significant asbestos-related
impairment. The large number of recent filings and the
uncertain value of these claims have added to the
uncertainties involved in estimating the Company's asbestos
liabilities.
Certain of the Company's principal co-defendants, the 20
members of the Center for Claims Resolution, have entered
into a proposed "global" settlement which would require
future claimants to satisfy certain medical criteria
indicative of significant asbestos-related impairment as a
pre-condition to their eligibility for settlement payments.
The Company is using similar criteria in the implementation
of its own settlement and litigation strategy and is also
seeking to require more careful proof than in the past that
claimants had significant exposure to the Company's asbestos-
containing product or operations. The Company believes that
this strategy will reduce the overall cost of asbestos
personal injury claims in the long run by channeling
indemnity payments to claimants who can establish
significant asbestos-related impairment and exposure to the
Company's asbestos-containing product or operations and by
substantially reducing indemnity payments to individuals who
are unimpaired or who did not have significant such
exposure. The Company's strategy has resulted in an
increased level of trial activity and an increase in the
number and amount of compensatory and punitive damage
verdicts and judgments against the Company. This strategy
may have the effect of increasing average per-case indemnity
costs for claims resolved with payment, while also
increasing the number of claims dismissed without payment.
-66-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
The Company cautions that such factors as the number of
future asbestos personal injury claims received by it, the
rate of receipt of such claims, and the indemnity and
defense costs associated with asbestos personal injury
claims, as well as the prospects for confirming additional,
applicable insurance coverage beyond the $430 million
referenced above, are influenced by numerous variables that
are difficult to predict, and that estimates, such as the
Company's, which attempt to take account of such variables,
are subject to considerable uncertainty. Depending upon the
outcome of the various uncertainties described above,
particularly as they relate to unimpaired claims, it may be
necessary at some point in the future for the Company to
make additional provision for the uninsured costs of
asbestos personal injury claims received through the year
1999 (although no such amounts are reasonably estimable at
this time). The Company remains confident that its estimate
of Liabilities and Insurance will be sufficient to provide
for the costs of all such claims that involve malignancies
or significant asbestos-related functional impairment. The
Company has reviewed and will continue to review the
adequacy of its estimate of Liabilities and Insurance on a
periodic basis and make such adjustments as may be
appropriate.
The Company cannot estimate and is not providing for the
cost of unasserted claims which may be received by the
Company after the year 1999 because management is unable to
predict the number of claims to be received after 1999, the
severity of disease which may be involved and other factors
which would affect the cost of such claims.
Cash Expenditures
The Company's anticipated cash expenditures for uninsured
asbestos-related costs of claims received through 1999 are
expected to approximate $707 million, the Company's
Liabilities, net of Insurance, before tax benefits. Cash
payments will vary annually depending upon a number of
factors, including the pace of the Company's resolution of
claims and the timing of payment of its Insurance.
Management Opinion
Although any opinion is necessarily judgmental and must be
based on information now known to the Company, in the
opinion of management, the additional uninsured and
unreserved costs which may arise out of pending personal
injury and property damage asbestos claims and additional
similar asbestos claims filed in the future will not have a
materially adverse effect on the Company's financial
position. While such additional uninsured and unreserved
costs incurred in and after the year 2000 may be substantial
over time, management believes that any such additional
costs will not impair the ability of the Company to meet its
obligations, to reinvest in its businesses or to take
advantage of attractive opportunities for growth.
-67-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Contingent Liabilities (Continued)
NON-ASBESTOS LIABILITIES
Various other lawsuits and claims arising in the normal
course of business are pending against the Company, some of
which allege substantial damages. Management believes that
the outcome of these lawsuits and claims will not have a
materially adverse effect on the Company's financial
position or results of operations.
22.Quarterly Financial Information (Unaudited)
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1995
Net sales $ 844 $ 877 $ 927 $ 964
Cost of sales 630 639 684 717
Gross margin $ 214 $ 238 $ 243 $ 247
Net income $ 33 $ 63 $ 70 $ 66
Net income per share:
Primary net income
per share $ .71 $ 1.25 $ 1.35 $ 1.27
Fully diluted net
income per share $ .68 $ 1.20 $ 1.28 $ 1.21
-68-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Quarterly Financial Information (Unaudited) (Continued)
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1994
Net sales $ 677 $ 852 $ 936 $ 886
Cost of sales 523 644 705 664
Gross margin $ 154 $ 208 $ 231 $ 222
Income (loss) before
cumulative effect
of accounting changes $ (67) $ 45 $ 53 $ 43
Cumulative effect of
accounting changes
(Notes 6 and 17) 85 - - -
Net income $ 18 $ 45 $ 53 $ 43
Net income per share:
Primary
Income (loss) before
cumulative effect
of accounting
changes $ (1.52) $ 1.03 $ 1.19 $ .98
Cumulative effect of
accounting changes 1.93 - - -
Net income per
share $ .41 $ 1.03 $ 1.19 $ .98
Fully diluted
Income (loss) before
cumulative effect
of accounting
changes $ (1.30) $ .95 $ 1.09 $ .91
Cumulative effect
of accounting
changes 1.70 - - -
Net income per
share $ .40 $ .95 $ 1.09 $ .91
Net income per share and primary and fully diluted weighted
average shares are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly net
income per share may not equal the per share total for the
year.
-69-
INDEX TO FINANCIAL STATEMENT SCHEDULES
Number Description Page
II Valuation and Qualifying Accounts and Reserves -
for the years ended December 31, 1995, 1994,
and 1993 70
-70-
OWENS CORNING AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Classification of Period Expenses Accounts Deductions of Period
(In millions of dollars)
FOR THE YEAR ENDED DECEMBER 31, 1995:
Allowance deducted from
asset to which it
applies - Doubtful
Accounts $ 16 $ 5 $ - $ 2(A) $ 19
FOR THE YEAR ENDED DECEMBER 31, 1994:
Allowance deducted from
asset to which it
applies - Doubtful
Accounts $ 16 $ 5 $ - $ 5(A) $ 16
Shown separately -
Rebuilding
furnaces 124 - - 124(C) -
FOR THE YEAR ENDED DECEMBER 31, 1993:
Allowance deducted from
asset to which it
applies - Doubtful
Accounts $ 20 $ 1 $ - $ 5(A) $ 16
Shown separately -
Rebuilding
furnaces 124 17 - 17(B) 124
Notes:
(A) Uncollectible accounts written off, net of recoveries.
(B) Expenditures for purposes for which reserve was created.
(C) Effective January 1, 1994, the Company adopted the
capital method for rebuilding furnaces. See Note 17 to
the Consolidated Financial Statements.
-71-
EXHIBIT INDEX
Exhibit
Number Document Description
(3) Articles of Incorporation and By-Laws.
Certificate of Incorporation of Owens Corning, as
amended (filed herewith).
By-Laws of Owens Corning, as amended (filed
herewith).
(4) Instruments Defining the Rights of Security Holders,
Including Indentures.
Credit Agreement, dated as of November 2, 1993,
among Owens-Corning Fiberglas Corporation**, the
Banks listed on Annex A thereto, and Credit Suisse,
as Agent for the Banks (incorporated herein by
reference to Exhibit (4) to the Company's quarterly
report on Form 10-Q (File No. 1-3660) for the
quarter ended September 30, 1993), as amended by
Amendment No. 1 thereto (incorporated herein by
reference to Exhibit (10) to the Company's quarterly
report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1994) and by Amendment No. 2
and Amendment No. 3 thereto (filed herewith).
The Company agrees to furnish to the Securities and
Exchange Commission, upon request, copies of all
instruments defining the rights of holders of long-
term debt of the Company where the total amount of
securities authorized under each issue does not
exceed ten percent of the Company's total assets.
(10) Material Contracts.
Credit Agreement, dated as of November 2, 1993,
among Owens-Corning Fiberglas Corporation**, the
Banks listed on Annex A thereto, and Credit Suisse,
as Agent for the Banks (incorporated herein by
reference to Exhibit (4) to the Company's quarterly
report on Form 10-Q (File No. 1-3660) for the
quarter ended September 30, 1993), as amended by
Amendment No. 1 thereto (incorporated herein by
reference to Exhibit (10) to the Company's quarterly
report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1994) and by Amendment No. 2
and Amendment No. 3 thereto (filed as Exhibit (4) to
this annual report on Form 10-K).
Rights Agreement, dated as of December 18, 1986,
between Owens-Corning Fiberglas Corporation** and
Manufacturers Hanover Trust Company, as Rights
Agent, including, as Exhibit B of such Rights
Agreement, the form of Right Certificate
(incorporated herein by reference to Exhibits 1 and
2 to the Company's Registration Statement on Form 8-
A (File No. 1-3660), dated December 23, 1986).
-72-
EXHIBIT INDEX
Exhibit
Number Document Description
*Corporate Incentive Plan Terms Applicable to
Certain Executive Officers (filed herewith).
*Corporate Incentive Plan Terms Applicable to Key
Employees Other Than Certain Executive Officers
(filed herewith).
*Long-Term Performance Incentive Plan Terms
Applicable to Certain Executive Officers (filed
herewith).
*Long-Term Performance Incentive Plan Terms
Applicable to Officers Other Than Certain Executive
Officers (filed herewith).
*Stock Performance Incentive Plan, as amended (filed
herewith).
*Agreement, dated December 2, 1994, with Christian
L. Campbell (filed herewith).
The following documents are incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K (File No. 1-3660) for 1994:
* - Agreement, dated as of January 1, 1995, with
William W. Colville.
* - Agreement, dated June 16, 1993, with David W.
Devonshire.
*Director's Charitable Award Program (incorporated
herein by reference to Exhibit (10) to the Company's
quarterly report on Form 10-Q (File No. 1-3660) for
the quarter ended September 30, 1993).
*Executive Supplemental Benefit Plan, as amended
(incorporated herein by reference to Exhibit (10) to
the Company's quarterly report on Form 10-Q (File
No. 1-3660) for the quarter ended March 31, 1993).
*Employment Agreement, dated as of December 15,
1991, with Glen H. Hiner (incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K (File No. 1-3660) for 1991), as
amended by First Amending Agreement made as of April
1, 1992 (incorporated herein by reference to Exhibit
(19) to the Company's quarterly report on Form 10-Q
(File No. 1-3660) for the quarter ended June 30,
1992).
*1987 Stock Plan for Directors, as amended
(incorporated herein by reference to Exhibit (19) to
the Company's quarterly report on Form 10-Q (File
No. 1-3660) for the quarter ended March 31, 1992).
*Form of Key Management Severance Benefits Agreement
(incorporated herein by reference to Exhibit (10) to
the Company's annual report on Form 10-K (File No. 1-
3660) for 1991).
-73-
EXHIBIT INDEX
Exhibit
Number Document Description
*1986 Equity Partnership Plan, as amended
(incorporated herein by reference to Exhibit (19) to
the Company's quarterly report on Form 10-Q (File
No. 1-3660) for the quarter ended March 31, 1988),
as amended by Amendment 1 thereto (incorporated
herein by reference to Exhibit (19) to the Company's
quarterly report on Form 10-Q (File No. 1-3660) for
the quarter ended March 31, 1989), by Amendment 2
thereto (incorporated herein by reference to Exhibit
(10) to the Company's annual report on Form 10-K
(File No. 1-3660) for 1989) and by Amendment 3
thereto (incorporated herein by reference to Exhibit
(10) to the Company's annual report on Form 10-K
(File No. 1-3660) for 1990).
*Form of Directors' Indemnification Agreement
(incorporated herein by reference to Exhibit (10) to
the Company's annual report on Form 10-K (File No. 1-
3660) for 1989).
The following documents are incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K (File No. 1-3660) for 1987:
* - Officers Deferred Compensation Plan.
* - Deferred Compensation Plan for Directors, as
amended.
(11) Statement re Computation of Per Share Earnings
(filed herewith).
(21) Subsidiaries of Owens Corning (filed herewith).
(23) Consent of Arthur Andersen LLP (filed herewith).
(27) Financial Data Schedule (filed herewith).
* Denotes management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant
to Item 14(c) of Form 10-K.
** Now known as Owens Corning.