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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, 1997
Commission File No. 1-3660
Owens Corning
One Owens Corning Parkway
Toledo, Ohio 43659
Area Code (419) 248-8000
A Delaware Corporation
I.R.S. Employer Identification No. 34-4323452
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. [ X ]
At February 17, 1998, the aggregate market value of
Registrant's $.10 par value common stock (Registrant's
voting stock) held by non-affiliates was $1,493,937,563,
assuming for purposes of this computation only that all
directors and executive officers are considered affiliates.
At February 17, 1998, there were outstanding 53,496,970
shares of Registrant's $.10 par value common stock.
Parts of Registrant's definitive 1998 proxy statement filed
or to be filed pursuant to Regulation 14A (the "1998 Proxy
Statement") are incorporated by reference into Part III of
this Form 10-K.
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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
building materials systems and 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) and/or
the color PINK trademark.
Approximately eighty percent of Owens Corning's sales are
related to home improvement, sales of composite materials
and sales outside U.S. markets. Approximately twenty
percent of the Company's sales are related to new U.S.
residential construction.
Owens Corning's executive offices are at One Owens Corning
Parkway, 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. In 1997, the Building
Materials segment accounted for 74% of the Company's total
sales while Composite Materials accounted for 26% of total
sales. Owens Corning acquired Fibreboard Corporation and
AmeriMark Building Products, Inc. in 1997, making Owens
Corning the leader in the U.S. vinyl siding, siding
accessories and cast stone markets, as well as providing the
Company with a large network of company-owned specialty
distribution centers. These operations are included in the
Building Materials 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 Owens Corning'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 1997, 1996, and 1995, are
contained in Note 1 to Owens Corning's Consolidated
Financial Statements, entitled "Segment Data", on pages 37
through 42 hereof.
BUILDING MATERIALS
Principal Products And Methods Of Distribution
The Building Materials segment 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
the major categories: (i) glass fiber, foam and mineral wool
insulation,(ii) roofing materials, and (iii) exterior products
for home, such as vinyl and metal siding and accessories,
vinyl windows and patio doors, rainwear (consisting primarily
of gutters and downspouts), cast stone building products and
rebranded housewrap. The businesses responsible for these
products and markets include: Insulating Systems, Roofing
Systems, Exterior Systems, System Thinking Sales and
Distribution and International Building Materials Systems.
-3-
Principal Products And Methods Of Distribution (Continued)
In 1997 Owens Corning became the industry leader in the
vinyl siding market with its acquisitions of Fibreboard
Corporation and AmeriMark Building Products, Inc. Together,
these acquisitions represent well over $1 billion in
residential exterior building product sales, including vinyl
siding, vinyl windows and patio doors, aluminum products and
cast stone products. The Company now has eight vinyl siding
manufacturing plants, five aluminum products manufacturing
plants and nearly 200 company-owned specialty distribution
centers. Almost all siding is sold through distribution,
mostly specialty distributors who cater to exterior
contractors by providing siding, siding accessories,
aluminum rainwear and often windows and patio doors. Owens
Corning's network of company-owned outlets accounts for over
half of the Company's siding sales. Cast stone is sold
primarily through independent dealers and masonry suppliers.
The Company's System Thinking Sales and Distribution
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 1997, approximately twenty percent
of the Company's sales were related to new construction
activities in the United States, while home improvement and
remodeling accounted for approximately forty-two percent.
Other channels of distribution for the Company's building
materials include sales of insulation products in North
America to insulation contractors, wholesalers, specialty
distributors, manufacturers and 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, Asia and Latin America building techniques do not
employ as much open-cavity construction as in North America,
which represents a greater opportunity for growth in foam
insulation over glass fiber. In developing markets, both
foam and fiberglass are opportunities. In Europe, the
Company sells building insulation to large insulation
wholesalers, builder 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. The Company has foam plants in
the U.K., Spain and Italy and has licensed others for the
manufacture of foam products at locations in Europe, the
Middle East and Asia. The Company sells foam products
through traditional agents and distributors where licensing
does not exist.
In Latin America, the Company produces and sells building
and mechanical insulation primarily through an affiliate
joint venture in Mexico, as well as exports from U.S.
plants. In Asia Pacific, the Company sells primarily
mechanical insulation through joint venture businesses,
including two majority owned insulation plants and an
insulation fabrication center in China, two minority owned
joint ventures, one in Saudi Arabia and one in Thailand, and
four licensees.
-4-
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. Owens Corning
also sells residential shingles through exports from the
U.S. to East European, Latin American and Asia Pacific
countries.
The Company sells non-paving asphalt products, including
industrial and specialty applications, under the TrumbullT
brand name. There are three principal kinds of industrial
asphalt: Built-Up Roofing Asphalt (BURA), used in
commercial flat roof systems to provide waterproofing and
adhesion; saturants or coating asphalt, used to manufacture
roofing mats, felts and residential shingles; and industrial
specialty asphalt, used by manufacturers in a variety of
products such as waterproofing systems, adhesives, coatings,
dyes, and product extenders, as well as in various
automotive applications.
There are several 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.
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 accounted for
more than four percent of the segment's sales in 1997.
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 Systems and Engineered Pipe Systems.
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 transportation, building
construction, electrical/electronics, consumer recreational
and infrastructure and other. Overall, approximately 65
percent of production is sold directly to external customers,
mostly plastics or roofing companies, approximately 20
percent is used
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internally in the roofing and pipe operations and the
remainder is sold to specialized industrial distributors,
most often those who cater specifically to the plastics
industry.
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 and trucking
industry, which continues to grow as the amount of composite
materials used per vehicle increases. There are hundreds of
composites applications, including instrument panels;
exterior and interior body panels such as fenders, doors and
hoods, instrument panels, bumpers, lamp housings and
headliners; valve covers; luggage racks; distributor caps;
timing belts; packaging for electronics; 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 sold mostly to first-tier and
second-tier OEM suppliers. Non-automotive transportation
applications include heavy trucks, 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 their products
to the circuit board industry. Glass fiber composites are
also used to protect and reinforce fiber optic and copper
cables. Through the 1997 acquisition of The Stewart Group,
Inc. the Company is now a producer of the central strength
member of fiber optic cables. Applications also include
connectors, circuit breaker boxes, computer housings,
electricians' safety ladders, and hundreds of various
electro/mechanical components.
The consumer recreational markets are sporting goods and
marine. The Company sells composites materials to OEMs
Equipment Manufacturers and boat builders, both directly and
through distributors.
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,
Egypt, Turkey and Colombia, 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 accounted for
more than five percent of the segment's sales in 1997.
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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 (glass fiber and foam insulation and glass fiber
reinforcements) relating to both industry segments.
Including registered trademarks for the Owens Corning logo,
the Color Pink, and Fiberglas, the Company has approximately
225 trademarks registered in the United States and
approximately 925 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.
Research And Development
During 1997, 1996 and 1995, the Company spent approximately
$69 million, $78 million, and $69 million, respectively, for
research and development activities. Research and
development costs included continuing commercial activities
such as engineering and product modifications for special
applications and testing in 1996 and 1995. 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
$16 million in 1997. The Company currently estimates that
such capital expenditures will be approximately $17 million
in 1998 and $17 million in 1999.
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
$54 million in 1997. 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 to which the Act will
affect it. The Company anticipates that its sources to be
regulated will include wool fiberglass, mineral wool,
asphalt roofing and processing, and metal coil coating. The
EPA's currently announced schedule is to issue regulations
covering wool fiberglass and mineral wool in
-7-
1998 and asphalt roofing and processing in 1999, and metal
coil coating in 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.
Number Of Employees
Owens Corning averaged approximately 22,000 employees during
1997 and had approximately 24,000 employees at December 31,
1997.
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,
vinyl siding, windows and patio doors and other products.
Methods of competition include product performance, price,
terms, service and warranty.
ITEM 2. PROPERTIES
PLANTS
Owens Corning's plants as of February 1, 1998 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.
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Thermal And Acoustical Insulation
Delmar, New York Palestine, Texas
Eloy, Arizona Phenix City, Alabama (1)
Fairburn, Georgia Salt Lake City, Utah
Kansas City, Kansas Santa Clara, California
Mount Vernon, Ohio Waxahachie, Texas
Newark, Ohio
Babelegi, South Africa Queensferry, United Kingdom
Candiac, Canada Ravenhead, United Kingdom
Edmonton, Canada Scarborough, Canada
Guangzhou, China Shanghai, China
Pontyfelin, United Kingdom Springs, South Africa
Vise, Belgium
(1) Facility is leased.
Foam Insulation
Byron Center, Michigan Rockford, Illinois
Carson, California Tallmadge, Ohio
Los Angeles, California (1)
Barcelona, Spain Santa Perpetua, Spain
Grande-Lle, Quebec Turin, Italy
Hartlepool, United Kingdom Valleyfield, Canada
Nanjing, China (2)
(1) Facility is leased.
(2) Under construction.
Roofing And Asphalt Processing (one of each at every
location, except as noted).
Atlanta, Georgia (1) 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) (4)
Houston, Texas Oklahoma City, Oklahoma (2)
Irving, Texas Portland, Oregon (5)
Jacksonville, Florida Savannah, Georgia (1)
Jessup, Maryland Summit, Illinois (3)
(1) Roofing plant only.
(2) Asphalt processing plant only.
(3) Facility is partially leased.
(4) Facility is leased.
(5) Two asphalt processing plants, as well as one roofing plant.
-9-
Fabrication Centers
Angola, Indiana Hebron, Ohio
Athens, Alabama Indianapolis, Indiana (1)
Atlanta, Georgia (1) Johnson City, Tennessee (1)
Cleveland, Tennessee (1) Los Angeles, California (1)
Columbus, Ohio (1) Montgomery, Alabama (1)
Coopersville, Michigan (1) Shelbyville, Kentucky (1)
Dallas, Texas (1) Springfield, Tennessee (1)
Grand Rapids, Michigan (1) Tiffin, Ohio (1)
Hazelton, Pennsylvania (1) Van Buren, Arkansas (1)
Brantford, Canada
(1) Facility is leased.
Manufactured Housing/Recreational Vehicles Specialty Parts
Douglas, Georgia Nappanee, Indiana
Elkhart, Indiana (1) (2) Plant City, Florida (1)
Goshen, Indiana Waco, Texas (1)
Miami, Florida (1)
(1) Facility is leased.
(2) Two facilities.
Metal Rainwear
Ashville, Ohio Richmond, Virginia
Beloit, Wisconsin (1) Roxboro, North Carolina
Lincoln Park, Michigan
(1) Facility is leased.
Cast Stone Products
Napa, California (1)
Navarre, Ohio
(1) Facility is leased.
Vinyl Siding
Atlanta, Georgia (1) Joplin, Missouri
Claremont, North Carolina Lynchburg, Virginia
Fair Bluff, North Carolina Olive Branch, Mississippi
London, Ontario Mission, British Columbia
(1) Facility is leased.
-10-
Windows/Patio Doors
Hazelton, Pennsylvania
Martinsville, Virginia (1)
St. Louis, Missouri (1)
(1) Facility is leased
In addition, Owens Corning has 198 Specialty Distribution
Centers in 36 states in the U.S.
COMPOSITE MATERIALS SEGMENT
Textiles And Reinforcements
Aiken, South Carolina Huntingdon, Pennsylvania
Amarillo, Texas Jackson, Tennessee (1)
Anderson, South Carolina New Braunfels, Texas (1)
Fort Smith, Arkansas South Hill, Virginia (2)
Duncan, South Carolina (1)
Apeldoorn, The Netherlands Markham, Canada (1)
Battice, Belgium Rio Claro, Brazil
Birkeland, Norway San Vincente deCastellet/
Guelph, Canada Barcelona, Spain
L'Ardoise, France Springs, South Africa
Liversedge, United Kingdom Wrexham, United Kingdom
(1) Facility is leased.
(2) Under construction.
Engineered Pipe Systems
Changchun, China
Sandefjord, Norway
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OTHER PROPERTIES
Owens Corning's general offices of approximately 400,000
square feet are located in the Owens Corning World
Headquarters, Toledo, Ohio. The lease for this facility
terminates May 31, 2015, with options to extend through May
31, 2030.
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. The Company also has Application
Development Centers in Battice, Belgium and Bangalore,
India.
ITEM 3. LEGAL PROCEEDINGS
The paragraphs in Note 22 to the Company's Consolidated
Financial Statements, entitled "Contingent Liabilities", on
pages 67 through 73 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, 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 at which the Company was the primary generator. Based
upon the completed remedial investigation, the Tennessee
Division of Superfund has delisted the two sites as state
Superfund sites.
Also as previously reported, in August 1996 the Company
voluntarily reported to the United States Environmental
Protection Agency (EPA) that, pursuant to a change in
assumptions regarding the formation of a reportable
pollutant, the Company had concluded that reporting
deficiencies for such pollutant had occurred at three
plants. The Company has since filed all required reports
with the EPA, which has determined it will not seek
penalties in this matter.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Owens Corning has nothing to report under this Item.
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Executive Officers of the Company
(as of March 1, 1998)
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 (63) Chairman of the Board and Chief
Executive Officer since January
1992. Director since 1992.
Maura J. Abeln (42) Senior Vice President, General
Counsel and Secretary since February
1998; formerly Vice President and
General Counsel of GE Plastics
(1991).
Rhonda L. Brooks (46) Vice President and President, Roofing
System Business since January 1998;
formerly Vice President, Investor
Relations (1997); Vice President,
Marketing, Composites (1995), and
Senior Vice President and General
Manager of Ply Gem Industries (1994),
and various Vice President positions
at Warner-Lambert (1990).
David T. Brown (49) Vice President and President,
Insulating System Business since
January 1998; formerly Vice
President and President, Building
Materials Sales and Distribution-
North America (1996) Vice President
and President, Roofing/Asphalt
(1994), and Vice President,
Roofing/Asphalt Division (1993).
Domenico Cecere (48) Senior Vice President and Chief
Financial Officer since January
1998; formerly Vice President and
President, Roofing/Asphalt (1996),
and Vice President and Controller
(1993).
Charles H. Dana (58) Executive Vice President since
January 1994; formerly Senior Vice
President and President - Industrial
Materials Group (1989).
Carl B. Hedlund (50) Vice President and President,
International Building Materials
Systems Business since January 1998;
formerly Vice President and
President, Asia Pacific (1995), Vice
President and President,
Retail/Distribution (1994), and Vice
President, Retail and Distribution,
Construction Products Group (1993).
Richard D. Lantz (46) Vice President and President, System
Thinking Sales and Distribution
Business since January 1998;
formerly Vice President - Marketing,
Insulation Business (1997), Vice
President, Marketing and Sales
Support, Building Materials Sales
and Distribution (1996), Vice
President, Marketing, Roofing and
Asphalt (1995), and Business
Development Manager, Roofing and
Asphalt (1992).
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Name and Age Position*
Robert C. Lonergan (54) Senior Vice President, Strategic
Resources since January 1998;
formerly Vice President, Science and
Technology (1995), and President,
Windows (1993).
Heinz-J. Otto (48) Vice President and President,
Composites System Business since
January 1998; formerly Vice
President and President, Composites
(1996), and Head of Region Europe
and Executive Board Member, Landis &
Gyr Corp. (1992).
Bradford C. Oelman (60) Senior Vice President, Governmental
Affairs since April 1996; formerly
Vice President-Corporate Relations
(1986).
J. Thurston Roach (56) Senior Vice President and
President, North American Building
Materials Systems Business since
March 1998; formerly Vice Chairman
of Simpson Investment Company
(1997), and President of Simpson
Timber Company (1996).
Steven J. Strobel (40) Vice President and Controller since
September 1996; formerly Chief
Financial Officer of Kraft Canada,
Inc. (1994) and Vice President and
Controller of Kraft USA Operations
(1991).
Jerry L. Weinstein (62) Vice President and President,
Exterior System Business since May
1994; formerly President of UC
Industries (1979).
*Information in parentheses indicates year in which service in position began.
-15-
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 1997 and 1996 are set forth
in the following tables.
1997 High Low 1996 High Low
First Quarter 49-7/8 40 First Quarter 46 39-3/4
Second Quarter 45 36-7/8 Second Quarter 43-1/8 37-5/8
Third Quarter 44-3/16 34-11/16 Third Quarter 43 36
Fourth Quarter 37-13/16 31-7/8 Fourth Quarter 43-1/2 36-1/4
The number of stockholders of record of the Company's common
stock on February 17, 1998 was 7,012.
In June 1996, the Board of Directors of the Company approved
an annual dividend policy of $.25 per share of common stock
and declared a dividend of $.0625 per share of common stock
to stockholders of record on September 30, 1996, paid on
October 15, 1996. The company had not previously declared
any dividends since 1986. In December 1996, February 1997
and April 1997 the Board of Directors of the Company
declared a dividend of $.0625 per share of common stock. In
June 1997 and December 1997 the Board of Directors declared
a dividend of $.075 per share of common stock. 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, 1998, these
restrictions limited funds available for the payment of cash
dividends by the Company to approximately $95 million.
On August 30, 1996, the Company issued 472,250 shares of its
common stock, par value $.10 per share (Common Stock), to
Celfort Construction Materials Inc. (the "Seller") in
connection with the acquisition of substantially all of the
assets of the extruded polystyrene insulation products
business of Seller. On January 15, 1997, the Company issued
49,999 shares of Common Stock to the sellers of the Western
Fiberglass entities, acquired in January of 1995, in
settlement of amounts due under the acquisition agreements.
On March 28, 1997, the Company issued 340,000 shares of
Common Stock to Falcon Mfg. Of Calif., Inc. and related
companies in connection with the acquisition of
substantially all of the assets of the expanded polystyrene
foam business of the sellers. On December 19, 1997, the
Company issued 178,219 shares of Common Stock to the sellers
of the Fiber-Lite Corporation, acquired in 1995, in
settlement of amounts due under the acquisition agreement.
All of such shares were issued without registration under
the Securities Act of 1933 in reliance upon Regulation D
promulgated under the Securities Act or the exemption
provided by Section 4(2) of the Securities Act.
-16-
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain financial information of the
Company.
1997(a) 1996(b) 1995(c) 1994(d) 1993(e)
(In millions of dollars, except per share data and where noted)
Net sales $4,373 $3,832 $3,612 $3,351 $2,944
Cost of sales 3,446 2,840 2,670 2,536 2,266
Marketing, administrative
and other expenses 608 1,361 444 429 350
Science and technology expenses 69 84 78 71 69
Restructure costs 68 38 - 89 23
Income (loss) from operations 182 (491) 420 226 236
Cost of borrowed funds 111 77 87 94 89
Income (loss) before provision
for income taxes 71 (568) 333 132 147
Provision (credit) for income taxes 9 (283) 109 58 47
Net income (loss) 47 (284) 231 159 131
Net income (loss) per share
Basic .89 (5.54) 4.73 3.65 3.06
Diluted .88 (5.54) 4.41 3.35 2.81
Dividends per share on common
stock
Declared .2750 .1250 - - -
Paid .2625 .0625 - - -
Weighted average number of shares
outstanding (in thousands)
Basic 52,860 51,349 48,744 43,647 42,734
Diluted 53,546 51,349 53,918 50,007 49,391
Net cash flow from operations 131 335 285 233 253
Capital spending 227 325 276 258 178
Total assets 4,996 3,913 3,261 3,274 3,013
Long-term debt 1,595 818 794 1,037 898
Average number of employees
(in thousands) 22 19 17 17 17
(a) During 1997, the Company recorded a pre-tax charge of
$143 million ($104 million after-tax) for restructuring
and other actions as well as a $15 million after-tax
charge for the cumulative effect of the change in
method of accounting for business process reengineering
costs. The incremental sales from 1997 acquisitions
were $534 million.
(b) During 1996, the Company recorded a net pre-tax charge
of $875 million ($542 million after-tax) for asbestos
litigation claims that may be received after 1999 and
probable additional insurance recovery; special charges
totaling $42 million ($27 million after-tax) including
valuation adjustments associated with prior
divestitures, major product line productivity
initiatives and a contribution to the Owens-Corning
Foundation; a pre-tax charge of $43 million ($26
million after-tax) for restructuring and other actions;
a $27 million reduction of tax reserves due to
favorable legislation; and a pre-tax gain of $37
million ($27 million after-tax) from the sale of the
Company's ownership interest in its former Japanese
affiliate, Asahi Fiber Glass Co. Ltd.
(c) During 1995, the Company recorded a one time $8 million
tax credit as a result of a tax loss carryback.
-17-
ITEM 6. SELECTED FINANCIAL DATA (Continued)
(d) 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.
(e) 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.
-18-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All per share information in Item 7 is on a diluted basis.)
RESULTS OF OPERATIONS
Net sales were $4.373 billion for the year ended December
31, 1997, reflecting a 14% increase from the 1996 level of
$3.832 billion. Net sales in 1995 were $3.612 billion.
Growth in 1997 is mostly attributable to the acquisition of
Fibreboard Corporation ("Fibreboard") that was completed at
the end of the second quarter and the acquisition of
AmeriMark Building Products, Inc. ("AmeriMark") that was
completed early in the fourth quarter of 1997. Volume
increases in composites were partially offset by declines in
worldwide composites pricing. The decline in composites
pricing was most notable in Europe and primarily reflects an
overall weak economic climate. The sales results also
reflect a decline in insulation prices worldwide.
Additionally, sales were adversely affected by the
translation impact of a stronger U.S. dollar on sales in
foreign currencies. Please see Notes 1 and 5 to the
Consolidated Financial Statements. Sales outside the U.S.
represented 24% of total sales for the year ended December
31, 1997, compared to 25% and 27% for the years 1996 and
1995, respectively. Gross margin for the year ended December
31, 1997 was 21%, down from 26% in 1996 and 1995. The
decline in the 1997 gross margin primarily reflects lower
prices in insulation and composites worldwide.
For the year ended December 31, 1997, the Company reported
net income of $47 million, or $.88 per diluted share,
compared to a net loss of $284 million, or $5.54 per share,
for the year ended December 31, 1996, and net income of $231
million, or $4.41 per share, for the year ended December 31,
1995. Net income for 1997 includes a pretax charge of $143
million ($104 million after-tax) for restructuring and other
actions. Net income for 1997 also reflects increased cost
of borrowed funds and minority interest expense, due
primarily to the financing of the Fibreboard and AmeriMark
acquisitions; a $10 million after-tax credit resulting from
the modification of certain employee benefits in the second
quarter; as well as a $15 million after-tax charge for the
cumulative effect of the change in method of accounting for
business process reengineering costs. Please see Notes 4, 5,
6 and 8 to the Consolidated Financial Statements.
The 1996 net loss reflects a net after-tax charge of $542
million for asbestos litigation claims that may be received
after 1999; after-tax special charges totaling $27 million
including valuation adjustments associated with prior
divestitures, major product line productivity initiatives
and a contribution to the Owens-Corning Foundation; an after-
tax charge of $26 million for restructuring and other
actions; a $27 million reduction of tax reserves due to
favorable legislation; and an after-tax gain of $27 million
from the sale of the Company's ownership interest in its
former Japanese affiliate, Asahi Fiber Glass Co. Ltd.
Please see Notes 4, 15 and 22 to the Consolidated Financial
Statements. Net income for the year ended December 31, 1995
includes a one-time gain of $8 million resulting from a tax
loss carryback.
Marketing and administrative expenses were $580 million in
1997 compared to $500 million in 1996. The increase in
marketing and administrative expenses is due to the
incremental costs from acquisitions.
The Company's cost of borrowed funds for the year ended
December 31, 1997 was $111 million, $34 million higher than
1996. This increase is primarily related to the Company's
borrowings to finance the acquisition of Fibreboard. The
remainder of the increase is due to borrowings related to
the Company's working capital requirements. Please see
Notes 2, 3 and 5 to the Consolidated Financial Statements.
-19-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
At December 31, 1997, the Company has $488 million in net
deferred tax assets, all of which management expects will be
realized through future income from operations. Please see
Note 11 to the Consolidated Financial Statements.
The $143 million pretax charge referred to above for
restructuring and other actions was the first phase of the
Company's strategic program to reduce overhead, enhance
manufacturing productivity and close manufacturing
facilities. The Company estimates that the total cost of
this program and other costs will approximate $250 million,
with the remainder of the actions to be taken in the first
quarter of 1998. Based upon expected economic conditions
over the next few years, including labor, material and other
costs, the Company expects to be able to decrease operating
costs by approximately $100 million in 1998, and by an
additional $75 million when fully implemented in 1999,
resulting in ongoing savings of $175 million per year.
Building Materials
In the Building Materials segment, sales increased 20% in
1997 compared to 1996. This growth reflects the incremental
sales from acquisitions as well as volume increases
worldwide, resulting from the integration of the Company's
expanded product line. The benefits of acquisitions and
volume growth were reduced by a decline in prices and the
adverse impact of a stronger dollar. Income from operations
for Building Materials was $123 million in 1997, a 44%
decrease from the 1996 level of $219 million. This decrease
is due to insulation pricing pressures as well as a portion
of the special charges described above. Please see Notes 1
and 4 to the Consolidated Financial Statements.
During 1997, 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, cash, and trust preferred
hybrid securities. The largest of these were the
acquisitions of Fibreboard and AmeriMark, which were
completed at the end of the second quarter and early in the
fourth quarter, respectively. With these acquisitions, the
Company has obtained the leading North American sales
position in vinyl siding as well as broad distribution
capabilities. Please see Note 5 to the Consolidated
Financial Statements.
The consolidated results of the Company include the results
of operations of Fibreboard and AmeriMark beginning with the
third and fourth quarters of 1997, respectively. To enhance
comparability, certain information below is presented on a
"pro forma" basis and reflects the acquisitions of
Fibreboard (excluding Pabco and operations that were
discontinued by Fibreboard prior to the acquisition) and
AmeriMark as though they had occurred at the beginning of
the periods presented. (The pro forma impact of all other
acquisitions during 1997, excluding Fibreboard and
AmeriMark, was not material to the Company's results of
operations for the year ended December 31, 1997 or 1996.)
The pro forma results include certain adjustments, primarily
for depreciation and amortization, interest and other
expenses directly attributable to the acquisitions, and are
not necessarily indicative of the combined results that
would have occurred had the acquisitions occurred at the
beginning of those periods.
-20-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
PRO FORMA AS REPORTED
Year Ended Year Ended
December 31, December 31,
1997 1996 1997 1996
(In millions of dollars,except share data)
Net sales $5,041 $4,932 $4,373 $3,832
Income (loss) from
continuing operations 46 (301) 62 (284)
Diluted earnings per share
from continuing operations $ .86 $(5.86) $1.17 $(5.54)
Composite Materials
In the Composite Materials segment, sales were up slightly
for the year ended December 31, 1997 compared to 1996.
Volume increases, particularly in Europe, were largely
offset by pricing pressures globally as well as the impact
of a stronger dollar on sales in foreign currencies. Income
from operations was $165 million in 1997, down 26% from $222
million in 1996. This decline largely reflects the decline
in price globally. Income from operations also includes a
portion of the special charges described above. Please see
Notes 1 and 4 to the Consolidated Financial Statements.
The Company completed two acquisitions in the Composite
Materials segment during 1997, including the acquisition of
the remainder of the Company's equity interest in Knytex, a
manufacturer of specialty glass fiber fabrics. The
Company's other acquisition was that of the assets of The
Stewart Group, Inc., a manufacturer and marketer of a
composite central strength member for telecommunication
cable using proprietary technology. With this acquisition,
the Company now markets a complete line of glass fiber
products that protect and reinforce fiber optic and copper
telecommunications cable.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Cash flow from operations, excluding proceeds from insurance
and payments for asbestos litigation claims, was $334
million for 1997, compared to $501 million for 1996. The
decrease in cash flow from operations in 1997 is largely
attributable to the Company's lower earnings in 1997. Cash
flow from operations also reflects the Company's substantial
income tax receivable as of December 31, 1997, which will be
received early in 1998. Decreases in receivables and
inventories, excluding those acquired during 1997, were
largely offset by a decline in accounts payable and accrued
liabilities. The 1996 cash flow from operations reflects an
inflow due to a higher level of disbursements for benefits
from the Voluntary Employees' Beneficiary Association trust
(VEBA) in 1996 compared to 1997.
The Company's net working capital and current ratio were
$121 million and 1.09 compared to negative $163 million and
.85, at December 31, 1997 and 1996, respectively. The
increase in 1997 was primarily due to increased receivables
and inventories as well as an increase in income taxes
receivable.
-21-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company's total borrowings at December 31, 1997, were
$1,738 million, $804 million higher than at year-end 1996.
The increase in debt is primarily the result of the
financing of the Fibreboard acquisition as well as increases
in working capital.
As of December 31, 1997, the Company had unused lines of
credit of $884 million available under long-term bank credit
facilities and an additional $224 million under short-term
facilities, compared to $440 million and $195 million,
respectively, at year-end 1996. The increase in unused
available lines of credit reflects primarily the
establishment of a new $2 billion credit facility in June,
1997. Letters of credit issued under the facility, most of
which support appeals from asbestos trials, reduce the
available credit. The impact of such reduction is reflected
in the unused lines of credit discussed above.
Capital spending for property, plant and equipment,
excluding acquisitions, was $227 million in 1997. The
Company anticipates 1998 capital spending, exclusive of
acquisitions and investments in affiliates, will be
approximately $220 million, the majority of which is
uncommitted. The Company expects that funding for these
expenditures will be from the Company's operations and
external sources as required.
Gross payments for asbestos litigation claims during 1997,
including amounts deferred from prior years and excluding
amounts deferred to future years, were $300 million. The
1997 expenditures include $51 million in defense costs and
$7 million for appeal bond and other costs. Proceeds from
insurance were $97 million resulting in a net pretax cash
outflow of $203 million, or $122 million after-tax. During
1997, the Company received approximately 35,300 new asbestos
personal injury cases and closed approximately 19,200 cases.
During 1998, the Company's total payments for asbestos
litigation claims, including defense costs, are expected to
be approximately $350 million. Proceeds from insurance of
$100 million are expected to be available to cover these
costs, resulting in a net pretax cash outflow of $250
million, or $150 million after-tax. Please see Note 22 to
the Consolidated Financial Statements.
Gross payments for asbestos litigation claims against
Fibreboard for the six months ended December 31, 1997 were
approximately $126 million, all of which was paid directly
by Fibreboard's insurers or from the escrow account to
claimants on Fibreboard's behalf. During the year,
Fibreboard received approximately 33,000 new asbestos
personal injury claims, and resolved approximately 2,800
claims. During the next twelve months, any payments for
asbestos claims against Fibreboard are expected to be paid
by Fibreboard's insurers or from the escrow account. Please
see Notes 17 and 22 to the Consolidated Financial
Statements.
The Company expects funds generated from operations,
together with funds available under long and short term bank
credit 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.
-22-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
During 1997, the Company was designated as a PRP in such
federal, state, local or private proceedings for two
additional sites. At December 31, 1997, 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 $31 million reserve, of which $15 million
relates to Fibreboard, for its Superfund (and similar state,
local and private action) contingent liabilities. Based upon
information presently available to the Company, and without
regard to the application of insurance, the Company believes
that, considered in the aggregate, the additional costs
associated with such contingent liabilities, including any
related litigation costs, will not have a materially adverse
effect on the Company's results of operations, financial
condition or long-term liquidity.
The 1990 Clean Air Act Amendments (Act) provide that the EPA
will issue regulations on a number of air pollutants over a
period of years. Until these regulations are developed, the
Company cannot determine the extent to which the Act will
affect it. The Company anticipates that its sources to be
regulated will include wool fiberglass, mineral wool,
asphalt roofing and processing, and metal coil coating. The
EPA's currently announced schedule is to issue regulations
covering wool fiberglass and mineral wool in 1998, asphalt
roofing and processing in 1999, and metal coil coating in
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.
Year 2000 Compliance
The Company has been actively implementing new systems and
technology since 1995 as part of the Advantage 2000 program.
A key objective of this initiative is to ensure all business
transactions are compliant with requirements to process
accurately in the year 2000 and beyond. The scope of this
program has been continuously expanded to include each of
the seventeen acquisitions made by the Company during the
past four years. To date, over 50% of the Company's systems
have been replaced and are in operation for daily business
transaction processing. All remaining system updates will
be implemented throughout the period ending July 1, 1999.
The cumulative cost of business systems replacement from
1995 through the end of 1997 has been $139 million,
including $97 million for information technology and $42
million for related training and deployment in various
business locations. The current estimates for all remaining
locations range from approximately $35 million to $45
million for information technology, manufacturing
technology, and training and deployment costs.
The Company is also working with all suppliers to ensure
their systems are year 2000 compliant as well. All costs
associated with supplier compliance will be borne by them.
In the event that some suppliers are unable to convert or
replace systems appropriately, the Company will switch
suppliers to those that are able to provide compliant
transaction processing.
Item 7 contains forward-looking statements. These forward-
looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from
those projected in these statements. Some of the important
factors that may influence possible differences are
continued competitive factors and pricing pressures,
construction activity, interest rate movements, issues
involving implementation of new business systems,
achievement of expected cost reductions and asbestos
litigation.
-23-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 26 through 75 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 1998 Proxy Statement except
that certain information concerning Owens Corning's
executive officers is included on pages 13 through 14
hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by
reference from the Company's 1998 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 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by
reference from the Company's 1998 Proxy Statement.
-24-
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 26 hereof
2. See Index to Financial Statement Schedules on page 76 hereof
3. See Exhibit Index beginning on page 78-80 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
Owens Corning filed a Current Report Dated October 1,
1997 on Form 8-K to report that it had acquired
substantially all of the assets, properties and business
of AmeriMark Building Products, Inc., Wolverine Coil
Coating, Inc. and RBP, Inc. on that date.
-25-
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OWENS CORNING
By /s/ G. H. Hiner Date March 11, 1998
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: March 11, 1998
Glen H. Hiner, Chairman of the Board,
Chief Executive Officer and Director
/s/ Domenico Cecere Date: March 11, 1998
Domenico Cecere, Senior Vice
President and Chief Financial Officer
/s/ Steven J. Strobel Date: March 9, 1998
Steven J. Strobel, Vice President and
Controller
/s/ Norman P. Blake Jr. Date: March 9, 1998
Norman P. Blake, Jr., Director
Date: March , 1998
Gaston Caperton, Director
/s/ Leonard S. Coleman Jr. Date: March 12, 1998
Leonard S. Coleman, Jr., Director
/s/ William W. Colville Date: March 9, 1998
William W. Colville, Director
/s/ John H. Dasburg Date: March 9, 1998
John H. Dasburg, Director
/s/ Landon Hilliard Date: March 10, 1998
Landon Hilliard, Director
/s/ Trevor Holdsworth Date: March 9, 1998
Trevor Holdsworth, Director
/s/ Jon M. Huntsman, Jr. Date: March 13, 1998
Jon M. Huntsman, Jr., Director
/s/ Ann Iverson Date: March 11, 1998
Ann Iverson, Director
/s/ W. Walker Lewis Date: March 9, 1998
W. Walker Lewis, Director
/s/ Furman C. Moseley Date: March 13, 1998
Furman C. Moseley, Jr., Director
/s/ W. Ann Reynolds Date: March 11, 1998
W. Ann Reynolds, Director
-26-
INDEX TO FINANCIAL STATEMENTS
Item Page
Report of Independent Public Accountants............................27
Summary of Significant Accounting Policies.......................28-29
Consolidated Statement of Income - for the
years ended December 31, 1997, 1996 and 1995....................30-31
Consolidated Balance Sheet-December 31, 1997 and 1996............32-33
Consolidated Statement of Stockholders' Equity -
for the years ended December 31, 1997, 1996 and 1995...............34
Consolidated Statement of Cash Flows - for the years
ended December 31, 1997, 1996 and 1995..........................35-36
Notes to Consolidated Financial Statements
Notes 1 through 24..............................................37-75
-27-
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, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended
December 31, 1997. 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, 1997 and 1996, and the results of their operations and
their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally
accepted accounting principles.
As discussed in Note 6 to the consolidated financial
statements, during the fourth quarter of 1997, the Company
changed its method of accounting for business process
reengineering costs.
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 27, 1998
Toledo, Ohio
-28-
OWENS CORNING AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Owens Corning and subsidiaries' (the "Company") consolidated
financial statements include the accounts of majority owned
subsidiaries, unless ownership is considered temporary.
Significant intercompany accounts and transactions are
eliminated.
Net Income per Share
Basic net income per share is computed using the weighted
average number of common shares outstanding during the
period. Diluted net income per share reflects the dilutive
effect of common equivalent shares and increased shares that
would result from the conversion of debt and equity
securities. The effects of anti-dilution are not presented.
Unless otherwise indicated, all per share information
included in the notes to the consolidated financial
statements is presented on a diluted basis. The 1996 and
1995 earnings per share calculations have been restated in
accordance with Statement of Financial Accounting Standards
No. 128.
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.
Goodwill
Goodwill is carried at cost, less accumulated amortization,
and is amortized on a straight-line basis over a period of
forty years. The Company continually evaluates whether
events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant
revision or that the remaining balance may not be
recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an
estimate of the related business segment's undiscounted cash
flows over the remaining life of the goodwill in measuring
whether the goodwill 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.
Capitalization of Software Developed for Internal Use
The Company capitalizes the direct external and internal
costs incurred in connection with the development, testing
and installation of software for internal use. Internally
developed software is included in plant and equipment and is
amortized over its estimated useful life using the straight-
line method.
-29-
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.
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.
Stock Based Compensation Plans
The Company applies Statement of Financial Accounting
Standards No. 123 (SFAS 123) in accounting for its stock
based compensation plans. In accordance with SFAS 123 the
Company applies Accounting Principles Board Opinion No. 25
and related Interpretations for expense recognition.
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.
Reclassifications
Certain reclassifications have been made to 1996 and 1995 to
conform with the classifications used in 1997.
-30-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
(In millions of dollars,
except share data)
NET SALES $ 4,373 $ 3,832 $ 3,612
COST OF SALES 3,446 2,840 2,670
Gross margin 927 992 942
OPERATING EXPENSES
Marketing and administrative expenses 580 500 443
Science and technology expenses (Note 12) 69 84 78
Provision for asbestos litigation claims
(Note 22) - 875 -
Restructure costs (Note 4) 68 38 -
Other (Notes 4 and 15) 28 (14) 1
Total operating expenses 745 1,483 522
INCOME (LOSS) FROM OPERATIONS 182 (491) 420
Cost of borrowed funds (Notes 2, 3 and 21) 111 77 87
INCOME (LOSS) BEFORE PROVISION (CREDIT)
FOR INCOME TAXES 71 (568) 333
Provision (credit) for income taxes (Note 11) 9 (283) 109
INCOME (LOSS) BEFORE MINORITY INTEREST
AND EQUITY IN NET INCOME OF AFFILIATES 62 (285) 224
Minority interest (Notes 7 and 8) (11) (8) (5)
Equity in net income of affiliates (Note 15) 11 9 12
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 62 (284) 231
Cumulative effect of accounting change (Note 6) (15) - -
NET INCOME (LOSS) $ 47 $ (284) $ 231
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
-31-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Continued)
1997 1996 1995
(In millions of dollars, except share data)
NET INCOME PER COMMON SHARE (Note 19)
Basic:
Income (loss) before cumulative effect
of accounting change $ 1.18 $ (5.54) $ 4.73
Cumulative effect of accounting change
(Note 6) (.29) - -
Net income (loss) per share $ .89 $ (5.54) $ 4.73
Diluted:
Income (loss) before cumulative
effect of accounting change $ 1.17 $ (5.54) $ 4.41
Cumulative effect of accounting change
(Note 6) (.29) - -
Net income (loss) per share $ .88 $ (5.54) $ 4.41
Weighted average number of common shares
outstanding and common equivalent shares
during the period (in millions)
Basic 52.9 51.3 48.7
Diluted 53.5 51.3 53.9
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
-32-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
(In millions of dollars)
CURRENT
Cash and cash equivalents $ 58 $ 45
Receivables, less allowances of $20 million
in 1997 and $17 million in 1996 (Note 13) 432 314
Inventories (Note 14) 503 340
Insurance for asbestos litigation claims - current
portion (Note 22) 100 100
Deferred income taxes (Note 11) 160 106
Assets held for sale (Note 5) 41 -
Income tax receivable (Note 11) 96 4
Other current assets 38 49
Total current 1,428 958
OTHER
Insurance for asbestos litigation claims (Note 22) 357 454
Asbestos costs to be reimbursed - Fibreboard (Note 22) 116 -
Deferred income taxes (Note 11) 328 474
Goodwill, less accumulated amortization of $45
million in 1997 and $26 million in 1996 (Note 5) 778 286
Investments in affiliates (Notes 4 and 15) 52 64
Other noncurrent assets (Note 10) 184 155
Total other 1,815 1,433
PLANT AND EQUIPMENT, at cost
Land 66 58
Buildings and leasehold improvements 676 614
Machinery and equipment 2,629 2,384
Construction in progress 214 285
3,585 3,341
Less: Accumulated depreciation (1,832) (1,819)
Net plant and equipment 1,753 1,522
TOTAL ASSETS $ 4,996 $ 3,913
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
-33-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1997 AND 1996
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
(In millions of dollars)
CURRENT
Accounts payable and accrued liabilities
(Note 16) $ 814 $ 705
Reserve for asbestos litigation claims -
current portion (Note 22) 350 300
Short-term debt (Note 3) 23 96
Long-term debt - current portion (Note 2) 120 20
Total current 1,307 1,121
LONG-TERM DEBT (Note 2) 1,595 818
OTHER
Reserve for asbestos litigation claims (Note 22) 1,320 1,670
Asbestos-related liabilities - Fibreboard (Note 22) 123 -
Other employee benefits liability (Note 9) 335 349
Pension plan liability (Note 10) 65 63
Other 165 161
Total other 2,008 2,243
COMMITMENTS AND CONTINGENCIES
(Notes 18, 21 and 22)
COMPANY OBLIGATED SECURITIES
OF ENTITIES HOLDING SOLELY
PARENT DEBENTURES
(Notes 7 and 8) 503 194
MINORITY INTEREST 24 21
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized
8 million shares, none outstanding (Note 20)
Common stock, par value $.10 per share;
authorized 100 million shares; issued
1997-53.6 million and 1996-52.1 million
shares (Notes 2, 5 and 19) 657 606
Deficit (1,041) (1,072)
Foreign currency translation adjustments (37) (1)
Other (Notes 10 and 19) (20) (17)
Total stockholders' equity (441) (484)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 4,996 $ 3,913
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
-34-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
(In millions of dollars)
COMMON STOCK
Balance beginning of year $ 606 $ 579 $ 348
Issuance of stock for:
Conversion of debt (Note 2) - - 173
Acquisitions (Note 5) 16 20 42
Awards under stock compensation plans
(Note 19) 35 7 16
Balance end of year 657 606 579
DEFICIT
Balance beginning of year (1,072) (781) (1,012)
Net income (loss) 47 (284) 231
Cash dividends declared (16) (7) -
Balance end of year (1,041) (1,072) (781)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS
Balance beginning of year (1) 9 (1)
Translation adjustments (36) (10) 10
Balance end of year (37) (1) 9
OTHER
Balance beginning of year (17) (19) (15)
Net increase (decrease) (3) 2 (4)
Balance end of year (20) (17) (19)
STOCKHOLDERS' EQUITY $(441) $(484) $(212)
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
-35-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
Net income (loss) $ 47 $ (284) $ 231
Reconciliation of net cash provided
by operating activities:
Noncash items:
Provision for asbestos litigation
claims (Note 22) - 875 -
Cumulative effect of accounting change
(Note 6) 15 - -
Provision for depreciation and
amortization 173 141 132
Provision (credit) for deferred
income taxes (Note 11) 110 (258) 142
Other (Note 4) 49 (2) (2)
(Increase) decrease in receivables
(Note 13) 57 20 36
(Increase) decrease in inventories 60 (71) (15)
Increase (decrease) in accounts payable
and accrued liabilities (60) 103 (50)
Disbursements (funding) of VEBA trust 19 45 (64)
Proceeds from insurance for asbestos
litigation claims, excluding Fibreboard
(Note 22) 97 101 251
Payments for asbestos litigation claims,
excluding Fibreboard (Note 22) (300) (267) (308)
Other (136) (68) (68)
Net cash flow from operations 131 335 285
NET CASH FLOW FROM INVESTING
Additions to plant and equipment (227) (325) (276)
Investment in subsidiaries, net of
cash acquired (Note 5) (564) (70) (81)
Proceeds from the sale of affiliate
(Note 15) - 55 -
Other (8) (20) (4)
Net cash flow from investing $ (799) $ (360) $ (361)
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
-36-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Continued)
1997 1996 1995
(In millions of dollars)
NET CASH FLOW FROM FINANCING
(Notes 2, 3 and 7)
Net additions to long-term
credit facilities $ 796 $ 39 $ 55
Other additions to long-term debt 108 22 9
Other reductions to long-term debt (133) (43) (128)
Net increase (decrease) in short-term debt (81) 32 (94)
Issuance of preferred stock of subsidiary - - 194
Dividends paid (14) (3) -
Other 6 3 -
Net cash flow from financing 682 50 36
Effect of exchange rate changes on cash (1) 2 (1)
Net increase (decrease) in cash and
cash equivalents 13 27 (41)
Cash and cash equivalents at beginning
of year 45 18 59
Cash and cash equivalents at end of year $ 58 $ 45 $ 18
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
-37-
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 1997, 1996 and 1995 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; windows and doors;
vinyl and metal siding and accessories; cast stone
building products; and the branded sale of housewrap.
Composite Materials
Production and sale of glass fiber yarns; rovings, mats
and veils; strand and reinforcement products; glass
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.
Income from operations for the year ended December 31, 1997
includes a pretax charge of $143 million for restructuring and
other actions (Note 4). The impact of these special items was to
reduce income from operations for Building Materials in the
United States, Europe, and Canada and other by $21 million, $6
million and $62 million, respectively; Composite Materials in
the United States, Europe, and Canada and other by $5 million,
$6 million and $3 million, respectively; and to increase general
corporate expense by $40 million.
Income (loss) from operations for the year ended December 31,
1996 includes a pretax charge of $43 million for restructuring
and other actions (Note 4); a net pretax charge of $875 million
for asbestos litigation claims (Note 22); a pretax gain of $37
million from the sale of the Company's ownership interest in its
former Japanese affiliate Asahi Fiber Glass Co. Ltd. (Note 15);
and charges totaling $42 million including valuation adjustments
associated with prior divestitures, major product line
productivity initiatives and a contribution to the Owens-Corning
Foundation. The impact of these special items was to reduce
income from operations for Building Materials in the United
States, Europe, and Canada and other by $42 million, $5 million
and $3 million, respectively; Composite Materials in the United
States and Europe by $5 million and $7 million, respectively;
and to increase general corporate expense by $861 million.
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, deferred taxes, asbestos assets, and
corporate property and equipment.
-38-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
NET SALES 1997 1996 1995
(In millions of dollars)
Industry Segments
Building Materials
United States $ 2,704 $ 2,253 $ 2,033
Europe 301 284 264
Canada and other 212 145 107
Total Building Materials 3,217 2,682 2,404
Composite Materials
United States 607 613 610
Europe 392 400 459
Canada and other 157 137 139
Total Composite Materials 1,156 1,150 1,208
Intersegment sales
Building Materials - - -
Composite Materials 100 110 96
Eliminations (100) (110) (96)
Net sales $ 4,373 $ 3,832 $ 3,612
Geographic Segments
United States $ 3,311 $ 2,866 $ 2,643
Europe 693 684 723
Canada and other 369 282 246
$ 4,373 $ 3,832 $ 3,612
Intersegment sales
United States 115 98 54
Europe 31 37 21
Canada and other 86 81 88
Eliminations (232) (216) (163)
Net sales $ 4,373 $ 3,832 $ 3,612
-39-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
INCOME (LOSS) FROM OPERATIONS 1997 1996 1995
(In millions of dollars)
Industry Segments
Building Materials
United States $ 184 $ 193 $ 195
Europe (3) 16 29
Canada and other (58) 10 13
Total Building Materials 123 219 237
Composite Materials
United States 174 165 135
Europe (7) 39 64
Canada and other (2) 18 26
Total Composite Materials 165 222 225
General corporate expense (106) (932) (42)
Income (loss) from operations 182 (491) 420
Cost of borrowed funds (111) (77) (87)
Income (loss) before provision
for income taxes $ 71 $ (568) $ 333
Geographic Segments
United States $ 358 $ 358 $ 330
Europe (10) 55 93
Canada and other (60) 28 39
General corporate expense (106) (932) (42)
Income (loss) from operations $ 182 $ (491) $ 420
-40-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
IDENTIFIABLE ASSETS AT DECEMBER 31,
1997 1996 1995
(In millions of dollars)
Industry Segments
Building Materials
United States $ 2,127 $ 971 $ 893
Europe 253 239 170
Canada and other 325 243 194
Total Building Materials 2,705 1,453 1,257
Composite Materials
United States 415 385 361
Europe 260 355 388
Canada and other 166 206 145
Total Composite Materials 841 946 894
General corporate 1,398 1,450 1,024
4,944 3,849 3,175
Investments in affiliates accounted
for under the equity method 52 64 86
Total assets $ 4,996 $ 3,913 $ 3,261
Geographic Segments
United States $ 2,542 $ 1,356 $ 1,254
Europe 513 594 558
Canada and other 491 449 339
General corporate 1,398 1,450 1,024
$ 4,944 $ 3,849 $ 3,175
-41-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
PROVISION FOR DEPRECIATION
AND AMORTIZATION 1997 1996 1995
(In millions of dollars)
Industry Segments
Building Materials
United States $ 72 $ 57 $ 52
Europe 18 16 13
Canada and other 16 7 9
Total Building Materials 106 80 74
Composite Materials
United States 24 22 22
Europe 18 18 18
Canada and other 9 9 8
Total Composite Materials 51 49 48
General corporate 16 12 10
Total provision for depreciation
and amortization $ 173 $ 141 $ 132
Geographic Segments
United States $ 96 $ 79 $ 74
Europe 36 34 31
Canada and other 25 16 17
General corporate 16 12 10
Total provision for depreciation
and amortization $ 173 $ 141 $ 132
-42-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
ADDITIONS TO PLANT AND EQUIPMENT
1997 1996 1995
(In millions of dollars)
Industry Segments
Building Materials
United States $ 82 $ 95 $ 60
Europe 18 10 36
Canada and other 29 36 33
Total Building Materials 129 141 129
Composite Materials
United States 21 63 37
Europe 14 30 39
Canada and other 17 34 18
Total Composite Materials 52 127 94
General corporate 46 57 53
Total additions $ 227 $ 325 $ 276
Geographic Segments
United States $ 103 $ 158 $ 97
Europe 32 40 75
Canada and other 46 70 51
General corporate 46 57 53
Total additions $ 227 $ 325 $ 276
-43-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt
1997 1996
(In millions of dollars)
U.S. credit facility due in
2002, variable $ 899 $ -
U.S. credit facility due in
1999, variable - 35
U.K. credit facility due
through 2001, variable - 59
European credit facilities due
through 2001, variable 34 41
Guaranteed debentures due in 2001, 10% 150 150
Debentures due in 2002, 8.875% 150 150
Debentures due in 2012, 9.375% 150 150
Guaranteed debentures due in 1998, 9.8% 100 100
U.S. medium term notes due in 2000, 7.0% 60 -
Bonds due in 2000, 7.25%, payable in
Deutsche marks (Note 21) 50 50
Eurobonds due through 2001, 9.814% (Note 21) 46 54
Other long-term debt due through 2012,
at rates from 5.375% to 12.47% 76 49
1,715 838
Less: Current portion (120) (20)
Total long-term debt $ 1,595 $ 818
In the second quarter of 1997, the Company entered into a
long-term revolving credit agreement with a maximum
commitment equivalent to $2 billion, of which portions can
be denominated in Canadian dollars, Belgian francs or
British pounds. The agreement allows the Company to borrow
under multiple options, which provide for varying terms and
interest rates. The commitment fee, charged on the entire
commitment, is a sliding scale based on credit ratings and
was .15% at December 31, 1997. As of December 31, 1997,
$217 million of this facility was used for standby letters
of credit and $884 million was unused. The average rate of
interest on this facility was 6.25% at December 31, 1997.
-44-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt (Continued)
The European credit facilities are payable in Belgian francs
and U.S. dollars and have an aggregate commitment of 1.439
billion Belgian francs (39 million U.S. dollars) and 30
million U.S. dollars. The rate of interest on these
facilities at December 31, 1997 was 4.235% and 6.26%,
respectively. The commitment fee on the unused portions of
the facilities range from 1/10 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 interest coverage, a leverage ratio and
minimum coverage of fixed charges; and limitations on the
early retirement of subordinated debt, additional
borrowings, 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 was converted.
The conversion resulted in the issuance of 5.8 million new
shares of common stock.
The aggregate maturities and sinking fund requirements for
all long-term debt issues for each of the five years
following December 31, 1997 are:
Credit Other Long-
Year Facilities Term Debt
(In millions of dollars)
1998 $ 7 $ 113
1999 17 13
2000 5 132
2001 5 170
2002 899 191
-45-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Short-Term Debt
1997 1996
(In millions of dollars)
Balance outstanding at December 31 $ 23 $ 96
Weighted average interest rates on
short-term debt outstanding at
December 31 5.9% 6.2%
The Company had unused short-term lines of credit totaling
$224 million and $195 million at December 31, 1997 and 1996,
respectively.
4. Restructuring of Operations and Other Actions
During the fourth quarter of 1997, the Company recorded a
$143 million pretax charge for restructuring and other
actions to close manufacturing facilities, enhance
manufacturing productivity and reduce overhead. The $143
million pretax charge was comprised of a $68 million charge
associated with the restructuring of the Company's business
segments and a $75 million charge associated with asset
impairments, including investments in certain affiliates.
The components of the restructure charge include $25 million
for personnel reductions, $41 million for divestiture of non-
strategic businesses and facilities including the closure of
the Candiac, Quebec manufacturing facility to be completed
in 1998, and $2 million for other actions. The $25 million
for personnel reductions represents severance costs
associated with the elimination of nearly 550 positions
worldwide. The primary employee groups affected include
manufacturing and corporate administrative personnel.
During the fourth quarter of 1996, the Company recorded a
$43 million pretax charge for restructuring and other
actions which included the costs associated with a work
force realignment, a replacement of computer technology as
well as asset valuations and expenses related to exited
businesses. The $43 million pretax charge was comprised of
a $38 million restructure charge and a $5 million charge
related to an exited business. The components of the
restructure charge included $20 million for personnel
reductions, $8 million in computer technology and $10
million for asset valuations and exited businesses.
The $20 million for personnel reductions represented
severance costs associated with the elimination of nearly
400 positions worldwide. The primary employee group affected
was manufacturing personnel. At December 31, 1997, the
balance remaining in the reserve is approximately $3
million.
-46-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Acquisitions and Divestitures of Businesses
During 1997, the Company made several acquisitions in the
Building Materials segment in the United States and Europe
as well as two acquisitions in the Composite Materials
segment in the United States and Canada, which were
consummated through the exchange of various combinations of
common stock, cash, and trust preferred hybrid securities
(Note 8). The aggregate purchase price was $886 million for
1997. On June 27, 1997, the Company acquired Fibreboard
Corporation, a North American manufacturer of vinyl siding
and accessories, as well as manufactured stone. Fibreboard
operates more than 130 company-owned distribution centers in
32 states. The purchase price of this acquisition was $660
million, including debt assumed of $138 million and was
consummated by the exchange of cash for all of the
outstanding common shares of Fibreboard at a price of $55
per share. At the time of acquisition, management
formulated a plan to divest Fibreboard's calcium silicate
insulation and metal jacket business (Pabco). Pabco's net
assets are included in assets held for sale on the Company's
consolidated balance sheet.
On October 1, 1997, the Company completed the asset
acquisition of AmeriMark Building Products, Inc., a
specialty building products company which serves the
exterior residential housing industry. The acquisition was
completed for a purchase price of $309 million in trust
preferred hybrid securities and $8 million in cash.
The Company completed four additional acquisitions during
1997 in the U.S., Europe and Canada. The aggregate purchase
price of these acquisitions was $47 million. These
acquisitions exchanged 340,000 shares of the Company's
common stock and $34 million in cash. The pro forma effect
of these acquisitions, except for the acquisitions of
Fibreboard and AmeriMark, was not material to net income for
the year ended December 31, 1997 or 1996.
During 1996 and 1995, the Company also made several
acquisitions in the Building Materials segment in the United
States, Canada and Europe. The 1996 acquisitions exchanged
472,250 shares of the Company's common stock and $69 million
in cash. The 1995 acquisitions exchanged 1,125,140 shares
of the Company's common stock and $82 million in cash, of
which $1 million was paid in the first quarter of 1996 and
228,218 shares were issued during 1997.
The incremental sales from the acquisitions, in the year of
acquisition, were $534 million, $47 million and $41 million
for the years ended December 31, 1997, 1996 and 1995,
respectively.
The initial purchase price allocations were based on
preliminary estimates of fair market value and are subject
to revision. The estimated fair value of assets acquired
during 1997, including goodwill of $518 million, was $1.404
billion, and liabilities assumed, including $150 million in
debt, totaled $518 million. The 1996 acquisitions included
goodwill of $32 million. The 1995 acquisitions included
goodwill of $97 million.
-47-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Acquisitions and Divestitures of Businesses (Continued)
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 dates of acquisition.
The following unaudited table presents the pro forma results
of operations for the years ended December 31, 1997 and
1996, assuming the acquisitions of Fibreboard and AmeriMark
occurred at the beginning of each period presented. These
results include certain adjustments, primarily for
depreciation and amortization, interest and other expenses
directly attributable to the acquisition and are not
necessarily indicative of what the results would have been
had the transactions actually occurred at the beginning of
the periods presented. The pro forma results do not include
operations that were discontinued by Fibreboard prior to the
acquisition, or Pabco.
Year Ended
December 31,
1997 1996
(In millions of dollars,
except share data)
Net sales $ 5,041 $ 4,932
Income (loss) from continuing operations 46 (301)
Diluted earnings per share from
continuing operations $ .86 $ (5.86)
6. Business Process Reengineering Costs
In the fourth quarter of 1997, the Company recorded a $15
million charge, or $.29 per share, net of related income
taxes of $10 million, to comply with a new required
accounting interpretation announced November 20, 1997. The
Emerging Issues Task Force (EITF), a subcommittee of the
Financial Accounting Standards Board (FASB), requires that
the cost of business process reengineering activities that
are part of a systems development project be expensed as
those costs are incurred. Any unamortized costs that were
previously capitalized must be written off as a cumulative
adjustment in the quarter containing November 20, 1997.
7. Convertible Monthly Income Preferred Securities (MIPS)
In 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.
-48-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Convertible Monthly Income Preferred Securities (MIPS) (Continued)
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% of the liquidation preference of $50
per Preferred Security. Distributions of $13 million, $13
million, and $8 million have been recorded net of tax as
minority interest on the Company's consolidated statement of
income for the years ended December 31, 1997, 1996 and 1995,
respectively.
The Company issued $200 million of 6-1/2% Convertible
Subordinated Debentures due 2025 to OC Capital, which
represents the sole asset of OC Capital, in exchange for the
proceeds of the offering.
8. Trust Preferred Hybrid Securities
In 1997, the Company delivered 6,180,000 7% Income PRIDES
securities ("Hybrid Securities") in payment of $309 million
of the purchase price for the Company's acquisition of the
assets of AmeriMark Building Products, Inc. (Note 5). Each
Hybrid Security represents (i) beneficial ownership by the
holder of one 7% Trust Preferred Security ("Trust Preferred
Security") of Owens Corning Capital III, a Delaware
statutory business trust all of the common securities of
which are owned by the Company (the "Trust"), having a
liquidation amount of $50, providing for cumulative
distributions at the rate of 7% per annum through November
15, 2000 and at a reset rate thereafter, and guaranteed in
certain respects by the Company, and (ii) the obligation of
the holder under a contract with the Company for the
purchase on November 16, 2000, at a price of $50, of a
number of shares of the Company's common stock as determined
by a formula based on the market price of common stock. The
aggregate number of shares issuable under such formula
ranges from 6.2 million to 8.5 million.
In connection with delivery of the Hybrid Securities, the
Company entered into a Registration Rights Agreement
providing for, among other things, (i) the Company to
register the Hybrid Securities so as to permit them to be
resold to the public, (ii) in the event that the Hybrid
Securities are not registered and sold by October 1, 1999
(subject to acceleration in certain events), the Company
either to arrange for the sale of such securities to a third
party or to cause the Trust to redeem the Trust Preferred
Securities, (iii) in the event the Hybrid Securities are
sold to a third party for a net amount less than $50 plus
accrued and unpaid distributions, the Company's payment of a
deficiency amount, and (iv) so long as the original holder
holds the Hybrid Securities, the Company's payment of an
additional amount, per security held, of up to 2% per annum.
Distributions of $5 million in the fourth quarter of 1997
pursuant to the Trust Preferred Securities have been
recorded net of tax as minority interest.
The Company issued $319 million of 7% Debentures due
November 15, 2002 to the Trust, which represents the sole
asset of the Trust, in exchange for the Trust Preferred
Securities and the common securities of the Trust.
-49-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. 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 the Company's pension plans if
they have accumulated 10 years of service after age 45.
Some of the plans are 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.
The following table reconciles the status of the accrued
postretirement benefits cost liability at October 31, 1997
and 1996, as reflected on the balance sheet at December 31,
1997 and 1996:
1997 1996
(In millions of dollars)
Accumulated Postretirement Benefits Obligation:
Retirees $ (225) $ (191)
Fully eligible active plan participants (44) (28)
Other active plan participants (59) (58)
Funded status (328) (277)
Unrecognized net (gain) loss 30 (10)
Unrecognized net reduction in prior service cost (32) (52)
Benefit payments subsequent to the valuation date 4 4
Accrued postretirement benefits cost liability
(includes current liabilities of $24 million and
$22 million in 1997 and 1996, respectively) $ (326) $ (335)
The net postretirement benefits cost for 1997, 1996 and 1995 included the
following components:
1997 1996 1995
(In millions of dollars)
Service cost $ 7 $ 8 $ 7
Interest cost on accumulated post-
retirement benefits obligation 20 19 19
Net amortization and deferral (20) (20) (24)
Net postretirement benefits cost $ 7 $ 7 $ 2
-50-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Postemployment and Postretirement Benefits Other Than Pensions (Continued)
For measurement purposes, an 8% annual rate of increase in
the per capita cost of covered health care claims was
assumed for 1998. The rate was assumed to decrease to 7%
for 1999, then decrease to 6% by 2000. 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, 1997, by $45 million and the
aggregate of the service and interest cost components of net
postretirement benefits cost for the year then ended by $5
million. The discount rate used in determining the
accumulated postretirement benefits obligation was 7.25% in
1997, 7.75% in 1996 and 7.5% in 1995.
The Company also recognizes 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 accrued postemployment benefits cost liability at
October 31, 1997 and 1996, as reflected on the balance sheet
at December 31, 1997 and 1996 was $37 million and $40
million, respectively, including current liabilities of $4
million in each year. The net postemployment benefits
expense was less than $1 million for 1997 and $2 million for
1996 and 1995.
10. 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 pay and 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. 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.
Pension expense for the Company's defined benefit pension
plans includes the following:
1997 1996 1995
(In millions of dollars)
Service cost $ 23 $ 14 $ 20
Interest cost on projected benefit obligation 64 62 64
Actual return on plan assets (160) (106) (114)
Net amortization and deferral 75 25 30
Curtailment gain (4) - -
Net pension expense $ (2) $ (5) $ -
-51-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Pension Plans (Continued)
The funded status at October 31, 1997 and 1996 is as
follows:
1997 1996
(In millions of dollars)
Over Under Over Under
Funded Funded Funded Funded
Vested benefit obligation $273 $649 $ 679 $ 19
Accumulated benefit obligation $275 $706 $ 757 $ 21
Plan assets at fair value $378 $681 $ 839 $ 10
Projected benefit obligation 286 711 805 29
Plan assets in excess of (less than)
projected benefit obligation 92 (30) 34 (19)
Unrecognized (gain) loss (21) 37 53 9
Unrecognized prior service cost 1 (49) (55) 1
Unrecognized transition amount (16) (22) (41) -
Adjustment to minimum liability - (4) - (5)
Net pension liability (includes current
liabilities of less than $1 million in 1997
and $3 million in 1996 and noncurrent
assets of $53 million in 1997 and
$43 million in 1996) $ 56 $(68) $ (9) $(14)
The 1997, 1996 and 1995 primary actuarial assumptions used
for pension plans were:
1997 1996 1995
Discount rate 7.25% 7.75% 7.50%
Expected long-term rate of return
on plan assets 9.00% 9.00% 9.00%
Rate of compensation increase 5.00% 5.10% 5.10%
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 $13 million in
1997, $10 million in 1996, and $12 million in 1995.
-52-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. Income Taxes
1997 1996 1995
(In millions of dollars)
Income (loss) before provision
(credit) for income taxes:
U.S. $ 151 $ (609) $ 234
Foreign (80) 41 99
Total $ 71 $ (568) $ 333
Provision (credit) for income taxes:
Current
U.S. $ (123) $ (31) $ (42)
State and local 1 (6) (4)
Foreign 21 12 13
Total current (101) (25) (33)
Deferred
U.S. 151 (211) 113
State and local (3) (48) 15
Foreign (38) 1 14
Total deferred 110 (258) 142
Total provision (credit) for income taxes: $ 9 $(283) $ 109
The reconciliation between the U.S. federal statutory rate
and the Company's effective income tax rate is:
1997 1996 1995
U.S. federal statutory rate 35% (35)% 35%
State and local income taxes 5 (6) 2
Adjustment of tax reserves due to
favorable legislation - (5) -
Operating losses of foreign subsidiaries 24 - -
Foreign tax credits (6) - -
Change in effective state income tax rate (9) - -
Conclusion of prior year tax audits (4) - -
Utilization of tax loss carrybacks (20) - (2)
Adjustment of valuation allowances (10) (1) -
Other (3) (3) (2)
Effective tax rate 12% (50)% 33%
-53-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. Income Taxes (Continued)
As of December 31, 1997, the Company has not provided for
withholding or U.S. federal income taxes on approximately
$244 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 $28 million of deferred income taxes would
have been provided.
At December 31, 1997, the Company had net operating loss
carryforwards for certain of its foreign subsidiaries and
certain of its state tax jurisdictions, the tax benefit of
which is approximately $101 million. Tax benefits of $62
million expire over the period from 1998 through 2012, and
the remaining $39 million have an indefinite carryforward.
The cumulative temporary differences giving rise to the
deferred tax assets and liabilities at December 31, 1997 and
1996 are as follows:
1997 1996
Deferred Deferred
Deferred Tax Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
(In millions of dollars)
Asbestos litigation claims $ 455 $ - $ 525 $ -
Other employee benefits 152 - 157 -
Pension plans 24 14 22 11
Depreciation - 233 - 200
Operating loss carryforwards 101 - 63 -
State and local taxes - 43 - 38
Other 190 110 140 56
Subtotal 922 400 907 305
Valuation allowances (34) - (22) -
Total deferred taxes $ 888 $ 400 $ 885 $ 305
Management fully expects to realize its net deferred tax
assets through income from future operations.
12. Science and Technology Expenses
Science and technology expenses include research and
development costs of $69 million in 1997, $78 million in
1996, and $69 million in 1995. 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
in 1996 and 1995.
-54-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Accounts Receivable Securitization
In 1997, 1996 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 could sell, on a revolving basis,
an undivided percentage ownership interest in a designated
pool of accounts receivable up to a maximum of $100 million.
In November 1997, the agreement was amended to extend its
term by 2 years and to increase the maximum to $125 million.
At December 31, 1997 and 1996, $100 million 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 years
ended December 31, 1997, 1996, and 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.
14. Inventories
Inventories are summarized as follows:
1997 1996
(In millions of dollars)
Finished goods $ 363 $ 273
Materials and supplies 214 149
FIFO inventory 577 422
Less: Reduction to LIFO basis (74) (82)
$ 503 $ 340
Approximately $365 million and $216 million of FIFO
inventories were valued using the LIFO method at December
31, 1997 and 1996, respectively.
During 1995, 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 cost of sales by $7 million.
-55-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. Investments in Affiliates
At December 31, 1997 and 1996, 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
1997 1996
Alpha/Owens-Corning, L.L.C. (USA) 50% 50%
Amiantit Fiberglass Industries, Ltd.
(Saudi Arabia) 30% 30%
Arabian Fiberglass Insulation Company,
Ltd. (Saudi Arabia) 49% 49%
* Knytex Company, L.L.C. (USA) 100% 50%
LG Owens-Corning Corporation (Korea) 30% 30%
OC Andercol Tuberias S.A. (Colombia) 50% 50%
Owens-Corning (India) Limited 49% 49%
Owens-Corning Yapi Merkezi Boru
Sanayi VeTicaret A.S.(Turkey) 50% 50%
* Owens-Corning Canos, S.A. (Argentina) 100% 50%
Owens-Corning Eternit Rohre GmbH (Germany) 50% 50%
Owens-Corning Pipe Botswana (Proprietary)
Limited (Botswana) 49% 49%
* Owens-Corning Tubs S.A. (Spain) 100% 50%
Siam Fiberglass Co., Ltd. (Thailand) 17% 17%
Vitro-Fibras, S.A. (Mexico) 40% 40%
Early in 1996, the Company sold its ownership interest in
its Japanese affiliate Asahi Fiber Glass Co. Ltd., and
recorded a pretax gain of $37 million.
* The Company's consolidated financial statements include the
January 1997 acquisition of the remaining 50% interest in
Knytex. The Company considers its 100% ownership of Owens-
Corning Canos, S.A. and Owens-Corning Tubs S.A. to be
temporary and therefore continues to account for them as
unconsolidated affiliates under the equity method.
The following table provides summarized financial
information on a combined 100% basis for the Company's
affiliates accounted for under the equity method:
1997 1996 1995
(In millions of dollars)
At December 31:
Current assets $ 227 $ 200 $ 338
Noncurrent assets 289 259 503
Current liabilities 145 149 340
Noncurrent liabilities 287 168 236
For the year:
Net sales 535 516 962
Gross margin 133 126 178
Net income 21 36 47
The Company's equity in undistributed net income of affiliates
was $3 million at December 31, 1997.
-56-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. Accounts Payable and Accrued Liabilities
1997 1996
(In millions of dollars)
Accounts payable $ 436 $ 379
Payroll and vacation pay 61 84
Payroll, property, and miscellaneous taxes 27 35
Other employee benefits liability (Note 9) 28 26
Restructure costs (Note 4) 44 34
Other 218 147
$ 814 $ 705
17. Consolidated Statement of Cash Flows
Cash payments for income taxes, net of refunds, and cost of
borrowed funds are summarized as follows:
1997 1996 1995
(In millions of dollars)
Income taxes $ (6) $ (25) $ (34)
Cost of borrowed funds 123 86 94
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
During the six months ended December 31, 1997, gross
payments for asbestos litigation claims filed against
Fibreboard were approximately $126 million, all of which was
paid directly by Fibreboard's insurers or from the escrow
account to claimants on Fibreboard's behalf. During the six
months ended December 31, 1997, Fibreboard also recorded
settlements with plaintiffs for amounts totaling
approximately $132 million. Fibreboard settlement agreements
are reflected on the Company's consolidated balance sheet as
an increase in both the Fibreboard asbestos costs to be
reimbursed and Fibreboard asbestos-related liabilities when
the agreements are reached.
See Notes 5 and 8 for supplemental disclosure of non-cash
investing and financing activities.
-57-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. 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 $124 million in 1997, $87 million in 1996,
and $63 million in 1995. At December 31, 1997, 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)
1998 $ 90
1999 58
2000 31
2001 22
2002 16
2003 through 2015 113
$ 330
19. Stock Compensation Plans
The Company has four stock-based compensation plans. The
Company's Stock Performance Incentive Plan ("SPIP") grants
stock options, restricted stock, performance restricted
stock and phantom performance units. The Owens Corning 1995
Stock Plan ("95 Stock Plan") grants options, restricted
stock and performance stock awards. The SPIP and the 95
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 1997 the
maximum number of shares available under the Plans for stock
awards was 2,236,576 shares. The following are descriptions
of the awards granted under the Plans:
Stock Options
Under the Plans, the exercise prices of each option equal
the market price of the Company's common stock on the date
of grant and an option's maximum term is 10 years. Shares
issued from the exercise of options are recorded in the
common stock accounts at the option price. The awards and
vesting periods of such awards are determined at the
discretion of the compensation committee of the board of
directors. During 1997, 1996 and 1995, respectively,
1,103,027, 1,102,510 and 1,006,950 stock options were
awarded under the Plans.
-58-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
Restricted Stock Awards
Under the Plans, 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. Stock restrictions lapse, subject to alternate
vesting plans for death, disability, approved early
retirement and involuntary termination, over various
periods ending in 2005. At December 31, 1997, the Company
had 302,182 shares of restricted stock outstanding.
During 1997, 1996 and 1995, 77,250, 78,510 and 148,924
shares of restricted stock were granted, respectively. The
weighted-average grant-date fair value for shares granted
was $44.66, $42.67 and $40.78 for 1997, 1996 and 1995,
respectively.
Performance Restricted Stock Awards
Under the Plans, certain officers are awarded performance
shares. Performance shares represent the opportunity to
earn up to a specified number of shares of the Company's
common stock, if the Company achieves specified
performance goals during the designated performance
period. Officers other than the Chief Executive Officer,
earn any portion of their award not earned during the
performance period seven years after the end of the
performance period, if their employment continues until
that time. Compensation expense is measured based on
market price of the Company's common stock on the date of
grant and is amortized over the performance period,
approximately three years. At December 31, 1997, the
Company had 96,400 units outstanding. During 1997, 1996
and 1995, respectively, 37,100, 38,200 and 27,300
performance shares were granted. The weighted-average
grant-date fair value for shares granted was $44.61,
$43.79 and $45.00 for 1997, 1996 and 1995, respectively.
Phantom Performance Units
Under the Plans, certain officers are awarded phantom
performance units. Each unit provides the holder the
opportunity to earn a cash award equal to the fair market
value of the Company's common stock upon the attainment of
certain performance goals. Officers, other than the Chief
Executive Officer, earn any portion of their award not
earned during the performance period seven years after the
end of the performance period, if their employment
continues until that time. Compensation expense is
measured based on market price of the Company's common
stock and is amortized over the performance period,
approximately three years. At December 31, 1997, the
Company had 184,250 phantom performance units outstanding.
During 1997, 1996 and 1995, 77,850, 79,600 and 56,000
units, respectively, were awarded.
Performance Stock Awards
Under the Plans, certain employees are awarded
unrestricted stock based upon achievement of certain goals
within a designated performance period. Compensation cost
for these awards is accrued over the performance period
based upon a base compensation level and the performance
level achieved. Stock awards are issued in the year
subsequent to the performance period. The number of
shares issued is based upon the market price of the stock
on date of issuance and the level of compensation earned.
In 1997, 122,362 shares were issued to employees.
-59-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
The Company also has a plan to award stock and stock options
to nonemployee directors. The receipt of the stock awards
may be deferred at the discretion of the directors.
Approximately 351,000 shares were available under this plan
at December 31, 1997. As of December 31, 1997, 15,500
deferred awards were outstanding. In 1997, 10,000 options
and 5,500 stock awards were granted, 1,500 of which were
issued. In 1996, 30,000 options and 4,000 stock awards were
granted, of which 1,000 were issued. In 1995, 10,000
options and 4,000 stock awards were granted of which 2,000
were issued. The weighted-average grant-date fair value for
shares granted was $39.13, $39.63 and $35.25 for 1997, 1996
and 1995, respectively.
Under a prior plan, the Company had 5,417 deferred stock
awards outstanding at December 31, 1996. No awards were
outstanding under this plan at December 31, 1997. Under the
terms of this plan, no further awards may be made.
The Company applies Financial Accounting Standards Board
Statement No. 123 (SFAS 123) in accounting for its stock
based compensation plans. In accordance with SFAS 123 the
Company applies Accounting Principles Board Opinion No. 25
and related Interpretations for expense recognition. All
stock options issued by the Company are exercisable at a
price equal to the market price at the date of grant.
Accordingly, no compensation cost has been recognized for
any of the options granted under the Plans. The
compensation cost that has been recorded for awards other
than options was $12 million, $17 million and $3 million in
1997, 1996 and 1995, respectively.
A summary of the status of the Company's plans that issue
options as of December 31, 1997, 1996, and 1995 and changes
during the years ending on those dates is presented below:
1997 1996 1995
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
Beginning of year 4,894,439 $ 35.59 3,943,110 $ 33.34 3,290,454 $ 31.55
Options granted 1,113,027 $ 44.80 1,132,510 $ 42.92 1,016,950 $ 37.46
Options exercised (724,661) $ 30.29 (142,232) $ 30.60 (300,663) $ 27.18
Options canceled (156,647) $ 41.63 (38,949) $ 41.01 (63,631) $ 35.67
End of year 5,126,158 $ 38.15 4,894,439 $ 35.59 3,943,110 $ 33.34
Exercisable 3,047,126 $ 34.78 2,872,156 $ 32.66 2,107,427 $ 30.97
Weighted-average
fair-value of
options granted
during the year $14.29 $ 12.50 $ 11.24
-60-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
The following table summarizes information about options
outstanding at December 31, 1997:
Options Outstanding Options Exercisable
=============================== ===================
Number Remaining Number Weighted-Average Number Weighted
Range of Outstanding Contractual Exercisable Exercise
Exercise Prices at 12/31/97 Life Price at 12/31/97 Price
=============== =========== ========== ======= =========== ================
$17.860 - 26.790 398,907 3.1 $23.30 398,907 $23.30
$28.500 - 30.625 399,115 4.2 $30.60 399,115 $30.60
$32.125 - 36.125 729,230 6.0 $32.31 717,730 $32.26
$36.875 - 39.125 868,674 7.2 $37.50 549,665 $37.50
$39.625 - 47.000 2,730,232 7.7 $43.19 981,709 $41.47
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted average assumptions by year:
Assumptions 1997 1996 1995
Risk-free interest rate 6.31% 6.04% 5.96%
Expected life (in years) 5 5 5
Expected volatility 24.64% 24.39% 26.25%
Expected dividends .82% 1.43% 1.43%
Had compensation cost for the Plans been determined based on
the fair value at the grant dates for awards under those
plans consistent with the method described in SFAS 123,
Accounting for Stock-Based Compensation, the Company's net
income and earnings per share would have been reduced to the
pro forma amounts indicated below:
1997 1996 1995
(In millions of dollars,
except share data)
Net income As reported $ 47 $ (284) $ 231
Pro forma $ 40 $ (288) $ 230
Basic earnings per share As reported $ .89 $(5.54) $ 4.73
Pro forma $ .76 $(5.61) $ 4.71
Diluted earnings per share As reported $ .88 $(5.54) $ 4.41
Pro forma $ .75 $(5.61) $ 4.39
The Company cautions that the pro forma impact in the
initial years of adoption of this disclosure distorts what
may be the pro forma impact on future years due to the
recognition of pro forma compensation cost over the vesting
period.
-61-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
The following table reconciles the net income (loss) and
weighted average number of shares used in the basic earnings
per share calculation to the net income (loss) and weighted
average number of shares used to compute diluted earnings
per share.
1997 1996 1995
(In millions of dollars,
except share data)
Net income (loss) used for basic
earnings per share $ 47 $ (284) $ 231
Net income (loss) effect of assumed
conversion of debt and preferred
securities - - 7
Net income (loss) used for diluted
earnings per share $ 47 $ (284) $ 238
Weighted average number of shares
outstanding used for basic earnings
per share (thousands) 52,860 51,349 48,744
Deferred awards and stock options 686 - 802
Shares from assumed conversion of debt and
preferred securities - - 4,372
Weighted average number of shares outstanding
and common equivalent shares used for
diluted earnings per share (thousands) 53,546 51,349 53,918
20. 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 $190. The Board of
Directors has designated 750,000 shares of the Company's
authorized preferred stock as Series A Participating
Preferred Stock. There were no preferred shares outstanding
at December 31, 1997.
Rights become exercisable and detach from the common stock
ten business days after a person or group acquires, or
announces a tender offer for, 15% or more of the Company's
outstanding shares of common stock. The rights expire on
December 30, 2006, unless redeemed earlier by the Company.
The rights are redeemable by the Company at one cent each at
any time prior to public announcement or notice to the
Company that an acquiring person or group has purchased 15%
or more of the Company's outstanding common stock (an
"Acquisition Event"). At any time after an Acquisition
Event and prior to the acquisition by such person or group
of 50% or more of the Company's outstanding common stock, the
-62-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. Share Purchase Rights (Continued)
Board of Directors may exchange one share of common stock
for each right outstanding, other than rights held by the
acquiring person or group. At any time after an Acquisition
Event and the rights become exercisable, each right, other
than rights held by the acquiring person or group, would
entitle its holder to buy common stock of the Company having
a market value of twice the exercise price of the right (or,
if the Company is subsequently acquired in a merger or other
business combination, such shares of the acquiring or
surviving company). Until the rights detach from the common
stock (or the earlier termination or redemption of the
rights), an additional right will be issued with every share
of newly issued common stock.
21. 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 generally 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 were 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, 1997 December 31, 1996
(In millions of dollars)
Forward currency exchange contracts $ 154 $ 128
Combined interest rate currency swaps 120 120
Options purchased 35 22
Currency swaps 145 120
Interest rate swaps 550 50
Treasury rate locks - 29
-63-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Derivative Financial Instruments and Fair Value of Financial
Instruments (Continued)
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, 1997, the Company has 32
forward currency exchange contracts maturing in 1998 which
exchange 1.4 billion Belgian francs, 36 million U.S.
dollars, 11 million British pounds, 105 million French
francs, 198 million Norwegian krone, and various other
currencies. As of December 31, 1996, the Company had 31
forward currency exchange contracts maturing in 1997 which
exchanged 3.9 billion Belgian francs, 33 million U.S.
dollars, 17 million British pounds, 89 million French
francs, 12 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, 1997 and 1996,
deferred gains and losses on these foreign currency hedges
were not material to the consolidated financial statements.
During 1997, the Company entered into forward currency
exchange contracts to reduce its exposure to currency
fluctuations on the anticipated 1998 net sales of certain
Canadian subsidiaries. The seven forward currency exchange
contracts which mature in 1998, exchange 10 million Canadian
dollars against 7 million U.S. dollars. At December 31,
1997, the deferred losses on these forward currency exchange
contracts were not material to the consolidated financial
statements.
During 1996, the Company 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 15). Gains of $4
million were included in other income in 1996 as part of the
total gain on the sale.
The Company enters into combined interest rate currency
swaps to hedge its equity investments in certain foreign
subsidiaries to manage its exposure against fluctuations in
foreign currency rates. As of December 31, 1997 and 1996,
the Company had three combined interest rate currency swaps
maturing in 1999 to manage this exposure. These contracts
exchange 921 million Belgian francs, 50 million French
francs, 17 million Dutch guilders and 50 million U.S.
dollars. Gains and losses on the currency swap portions of
these contracts are included in stockholders' equity. The
differential interest to be paid or received on the interest
rate swap portion of these contracts is accrued as interest
rates change and is recognized over the life of these
agreements. At December 31, 1997, deferred gains of $10
million are included as a component of shareholders' equity.
At December 31, 1996, deferred gains and losses on these
foreign currency hedges were not material to the
consolidated financial statements.
During 1996, the Company entered into option contracts to
hedge 1997 royalty payments of the Company's European
subsidiaries. At December 31, 1996, the currency option
contracts exchanged 446 million Belgian francs and 5 million
British pounds against approximately 22 million U.S.
dollars. At December 31, 1996, deferred gains on option
contracts were not material to the consolidated financial
statements.
-64-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
In 1994, the Company entered into two currency swap
transactions to manage its exposure against foreign currency
fluctuations on the principal amount of its guaranteed
9.814% Eurobonds (Note 2). During 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 a combined interest rate currency swap and a currency
swap exchanging U.S. dollars into British pounds to hedge
the interest and principal payments of the Eurobonds. 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 life of the original hedge. At
December 31, 1997 and 1996, $3 million and $5 million,
respectively, of unamortized gain on the four cross-currency
interest rate swaps is included in other liabilities.
The Company has a cross-currency swap converting 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. As of December 31, 1997, the Company
has seven ordinary interest rate swaps that effectively
convert an aggregate principal amount of $350 million of
variable rate long-term debt into fixed rate borrowings.
For the year ended December 31, 1997, losses of $8 million
related to these swaps have been recorded as a component of
interest expense.
During 1997, the Company entered into three interest rate
swaps as a hedge against interest rate fluctuation on an
anticipated refinancing of the Trust Preferred Hybrid
Securities (See Note 8). These swaps effectively lock in an
interest rate of 6.3% on a notional amount of $150 million.
As of December 31, 1997, deferred losses on these contracts
are not material to the consolidated financial statements.
As of December 31, 1997, the Company has an interest rate
swap to convert $50 million in equipment lease payments from
a floating LIBOR to a fixed rate of 5.52%. The differential
interest to be paid or received is accrued as interest rates
change and is recognized over the life of the agreement. As
of December 31, 1997 and 1996, this amount was not material
to the consolidated financial statements.
As of December 31, 1996, the Company had one cash-settled
treasury rate lock as a hedge against interest rate
fluctuations on a lease commitment. This contract
effectively locked in an interest rate of 6.015% on a
notional amount of $29 million. This contract was settled in
1997. The loss on the contract is being amortized over the
life of the lease and is not material to the consolidated
financial statements.
At December 31, 1995, the Company had four interest rate
swaps to reduce the interest rates on its fixed rate
borrowings. These agreements, which were terminated in
1996, effectively converted an aggregate principal amount of
$150 million of fixed rate long-term debt into variable rate
borrowings. The $8 million gain recognized from the
termination of these swaps is being amortized over the
remaining life of the debt.
-65-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
Other Financial Instruments with Off-Balance-Sheet Risk
As of December 31, 1997 and 1996, the Company is
contingently liable for guarantees of indebtedness owed by
certain unconsolidated affiliates of $84 million and $57
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, 1997 and 1996, 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.
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.
-66-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
The estimated fair values of the Company's financial
instruments as of December 31, 1997 and 1996, which have
fair values different than their carrying amounts, are as
follows:
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
(In millions of dollars)
Assets:
Long-term notes receivable $ 18 $ 17 $ 23 $ 21
Liabilities:
Long-term debt 1,595 1,659 818 881
Off-Balance-Sheet Financial
Instruments - Unrealized gains:
Foreign currency swaps - 21 - 32
Interest rate swaps - (9) - 1
Combined interest rate
currency swaps - 13 - 1
Options - 2 - -
As of December 31, 1997 and 1996, 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, 1997 and 1996, the Company has also
entered into certain treasury rate locks, the fair values of
which are not material to the consolidated financial
statements.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities
ASBESTOS LIABILITIES
ITEM A. OWENS CORNING (EXCLUDING FIBREBOARD)
Owens Corning 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 litigation. The personal injury claimants generally
allege injuries to their health caused by inhalation of
asbestos fibers from Owens Corning's products. Most of the
claimants seek punitive damages as well as compensatory
damages. Virtually all of the asbestos-related lawsuits
against Owens Corning 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, 1997, approximately 173,800 asbestos
personal injury claims were pending against Owens Corning,
of which 35,300 were received in 1997, 36,300 were received
in 1996 and 55,800 in 1995.
Many of the recent claims appear to be the product of mass
screening programs and not to involve malignancies or other
significant asbestos related impairment. Owens Corning
believes that at least 40,000 of the recent claims involve
plaintiffs whose pulmonary function tests ("PFTs") were
improperly administered or manipulated by the testing
laboratory or otherwise inconsistent with proper medical
practice. In 1996 Owens Corning filed suit in federal court
in New Orleans, Louisiana against the owners and operators
of certain pulmonary function testing laboratories in the
southeastern U.S. challenging such improper testing
practices. This matter is now in active pre-trial discovery.
In January 1997, Owens Corning filed a similar suit in
federal court in Jackson, Mississippi against the owner of
an additional testing laboratory.
Through December 31, 1997, Owens Corning had resolved (by
settlement or otherwise) approximately 202,500 asbestos
personal injury claims. During 1995, 1996 and 1997, Owens
Corning resolved approximately 63,700 asbestos personal
injury claims, over 99% without trial. Total indemnity
payments for these 63,700 claims, including future
installment payments, are expected to be $858 million (an
average of $13,500 per claim).
Owens Corning'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 Owens Corning;
the extent of the claimant's exposure to asbestos-containing
products manufactured, sold or installed by other Producers;
the number and financial resources of other Producer
defendants; the jurisdiction of suit; the presence or
absence of other possible causes of the claimant's illness;
the availability or not of legal defenses such as the
statute of limitations or state of the art; whether the
claim was resolved on an individual basis or as part of a
group settlement; and whether the claim proceeded to an
adverse verdict or judgment.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities (Continued)
Owens Corning's total indemnity and defense payments (before
application of insurance recoveries) for asbestos personal
injury claims were $300 million in 1997 and are expected to
be approximately $350 million in 1998. This high level of
expenditures, and the anticipated increase in 1998, are
attributable in large measure to two factors: payments
associated with adverse judgments (particularly in
mesothelioma cases), and significant recent increases in the
cost of settlement of mesothelioma claims. The Company is
addressing these developments by refocusing its defense
resources upon the early identification and evaluation of
mesothelioma claims and, where such claims cannot be
resolved by settlement, upon more thorough preparation and
work-up of such claims for trial. The Company believes that
these measures should prove effective in controlling the
costs of resolving such claims. However, the increased cost
of resolution of mesothelioma claims has added to the
difficulty of estimating the Company's future asbestos
liabilities. The Company cautions that if the cost of
mesothelioma settlements and judgments is not controlled and
if future annual expenditures for asbestos personal injury
claims are not reduced, the Company may be required to make
additional provision for the anticipated costs of asbestos
personal injury claims.
Tobacco
The Company is closely monitoring the proposed federal
legislation to implement a nationwide tobacco settlement.
Several bills have been introduced in Congress. One,
introduced by Senator Hatch, makes provision for payment of
$4.8 billion over 25 years for programs and activities to be
conducted by the Secretary of Labor relating to asbestos-
related injuries for which use of tobacco is determined to
be a significant contributing factor. Owens Corning,
Fibreboard and other asbestos defendants have collectively
spent billions of dollars to resolve asbestos personal
injury claims to which smoking was a substantial causal or
contributing factor. The Company believes that any federal
legislation implementing the proposed tobacco settlement
must make adequate financial provision for compensating
asbestos personal injury claimants for the role tobacco use
played in their injuries and for reimbursing asbestos
defendants, in whole or in part, for past payments that have
been made to asbestos personal injury claimants who were
also smokers. The Company is directing its legislative
lobbying efforts toward achievement of this objective.
Owens Corning and Fibreboard have filed suit in the Superior
Court for Alameda County, California against seven leading
manufacturers of tobacco products. The complaint alleges
that cigarette smoking causes or contributes to lung cancer,
a variety of other cancers and chronic obstructive pulmonary
disease. The complaint seeks to require the defendants to
reimburse Owens Corning and Fibreboard for all or part of
the amounts which they have spent in resolving the personal
injury claims of asbestos plaintiffs whose injuries were
caused or contributed to by cigarette smoking.
Fibreboard
As described in greater detail below, Fibreboard is a party
to two class action settlements relating to asbestos
personal injury claims - the Global Settlement and the
Insurance Settlement. If the Global Settlement is approved,
Fibreboard will be protected by an injunction from asbestos
personal injury claims and should have no further asbestos
personal injury liabilities.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities (Continued)
If the Global Settlement is not approved, the Insurance
Settlement will become effective. In such event, Fibreboard
will receive the payments from its insurance carriers due
under the Insurance Settlement, the injunction protecting
Fibreboard from asbestos personal injury claims will be
dissolved, and Fibreboard will return to the tort system as
a defendant. Should the Insurance Settlement come into
effect, Owens Corning and Fibreboard anticipate establishing
a joint facility that would provide, consistent with
Fibreboard's contractual obligations under the Insurance
Settlement, for the joint defense and settlement of asbestos
personal injury claims against the two defendants. Such a
joint facility would have the potential for achieving
synergistic savings in defense and settlement costs compared
to the costs either Company would otherwise likely incur.
Insurance
As of December 31, 1997, Owens Corning had approximately
$232 million in unexhausted insurance coverage (net of
deductibles and self-insured retentions and excluding
coverage issued by insolvent carriers) under its liability
insurance policies applicable to asbestos personal injury
claims. This insurance, which is substantially confirmed,
includes both products hazard coverage and primary level non-
products coverage. Portions of this coverage are not
available until 1998 and beyond under agreements with the
carriers confirming such coverage. All of Owens Corning's
liability insurance policies cover indemnity payments and
defense fees and expenses subject to applicable policy
limits.
In addition to its confirmed primary level non-products
insurance, Owens Corning has a significant amount of
unconfirmed potential non-products coverage with excess
level carriers. For purposes of calculating the amount of
insurance applicable to asbestos liabilities, Owens Corning
has estimated its probable recoveries in respect of this
additional non-products coverage at $225 million, which
amount was recorded in 1996. This coverage is unconfirmed
and the amount and timing of recoveries from these excess
level policies will depend on subsequent negotiations or
proceedings.
Reserve
The Company's financial statements include a reserve for the
estimated cost associated with Owens Corning's asbestos
personal injury claims. This reserve was established
principally through a charge to income in 1991 for the costs
of asbestos claims expected to be received through 1999 and
an additional $1.1 billion charge to income (before taking
into account the probable non-products insurance recoveries)
during 1996 for cases that may be received subsequent to
1999. In establishing the reserve, Owens Corning took into
account, among other things, the effect of federal court
decisions relating to punitive damages and the certification
of class actions in asbestos cases, the discussions with a
substantial group of plaintiffs' law firms in connection
with global settlement negotiations, the results of its
continuing investigations of medical screening practices of
the kind at issue in the federal PFT lawsuits, recent
developments as to the prospects for federal and state tort
reform, the continued rate of case filings at historically
high levels, additional information on filings received
during the 1993-1995 period and other factors. The combined
effect of the $1.1 billion charge and the $225 million
probable additional non-products insurance recovery was an
$875 million charge in the second quarter of 1996.
-70-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities (Continued)
Owens Corning's estimated total liabilities in respect of
indemnity and defense costs associated with pending and
unasserted asbestos personal injury claims that may be
received in the future, and its estimated insurance
recoveries in respect of such claims, are reported
separately as follows:
December 31, December 31,
1997 1996
(In millions of dollars)
Reserve for asbestos
litigation claims
Current $ 350 $ 300
Other 1,320 1,670
Total Reserve 1,670 1,970
Insurance for asbestos
litigation claims
Current 100 100
Other 357 454
Total Insurance 457 554
Net Owens Corning Asbestos Liability $1,213 $1,416
Owens Corning 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, are influenced by numerous variables that are
difficult to predict, and that estimates, such as Owens
Corning's, which attempt to take account of such variables,
are subject to considerable uncertainty. Included among
these variables are Owens Corning's future success in
controlling the costs of resolving mesothelioma claims, the
outcome of the Company's litigation against the tobacco
companies and of the appellate proceedings related to the
Fibreboard Global Settlement and Insurance Settlement, and
federal legislative developments concerning asbestos and/or
tobacco. Owens Corning believes that its estimate of
liabilities and insurance will be sufficient to provide for
the costs of all pending and future asbestos personal injury
claims that involve malignancies or significant asbestos-
related functional impairment. While such estimates cover
unimpaired claims, the number and cost of unimpaired claims
are much harder to predict and such estimates reflect Owens
Corning's belief that such claims have little or no value.
Owens Corning will continue to review the adequacy of its
estimate of liabilities and insurance on a periodic basis
and make such adjustments as may be appropriate.
Management Opinion
Although any opinion is necessarily judgmental and must be
based on information now known to Owens Corning, in the
opinion of management, while any additional uninsured and
unreserved costs which may arise out of pending personal
injury asbestos claims and additional similar asbestos
claims filed in the future may be substantial over time,
management believes that any such additional costs will not
impair the ability of the Company to meet its obligations,
to reinvest in its businesses or to take advantage of
attractive opportunities for growth.
-71-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities (Continued)
ITEM B. FIBREBOARD (EXCLUDING OWENS CORNING)
Prior to 1972, Fibreboard manufactured insulation products
containing asbestos. Fibreboard has since been named as a
defendant in many thousands of personal injury claims for
injuries allegedly caused by asbestos exposure.
Status
As of December 31, 1997, approximately 108,400 asbestos
personal injury claims were pending against Fibreboard.
Fibreboard received approximately 33,000 such claims in
1997, 32,900 in 1996 and 20,700 in 1995. These claims and
most of the pending claims are made against the Fibreboard
Global Settlement Trust and are subject to the Global
Settlement injunction discussed below. During 1995, 1996 and
1997, Fibreboard resolved (by settlement or otherwise)
approximately 20,100 asbestos personal injury claims and
incurred indemnity payments of $257 million (an average of
about $12,800 per case).
The average cost per claim has increased recently from the
historical average cost of $11,000 per claim. This is due to
the absence of group settlements, where large numbers of low
value cases are traditionally settled along with higher
value cases, and due to the fact that in 1996 and 1997 a
relatively small number of individual cases involving more
seriously injured plaintiffs were settled as exigent claims
(all of which are malignancy claims) during the pendency of
the Global Settlement injunction discussed below.
As of December 31, 1997, amounts payable under various
asbestos claim settlement agreements were $123 million.
These amounts are payable either from the Settlement Trust
discussed below or directly by the insurers. Amounts due
from insurers in payment of these or past claims paid
directly by Fibreboard, as of December 31, 1997 are $116
million.
Insurance Arrangements
Fibreboard has unique insurance arrangements for personal
injury claims. During 1993, Fibreboard and its insurers,
Continental Casualty Company (Continental) and Pacific
Indemnity Company (Pacific), entered into the Insurance
Settlement, and Fibreboard, its insurers and representatives
of a class of future asbestos plaintiffs who have claims
arising from exposure to asbestos prior to August 27, 1993,
entered into the Global Settlement. These agreements are
interrelated and require final court approval. On July 26,
1996, the U.S. Fifth Circuit Court of Appeals affirmed the
Global Settlement by a majority decision and the Insurance
Settlement by a unanimous decision.
-72-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities (Continued)
The parties opposing the Global Settlement filed petitions
seeking review with the U.S. Supreme Court. On June 27,
1997, the Supreme Court granted the petition, vacated the
judgment and remanded the case to the Fifth Circuit for
further consideration in light of the Supreme Court's
decision in the Amchem Products, Inc. V. Windsor case.
Amchem involved a proposed nationwide class action
settlement of future asbestos personal injury claims against
the members of the Center for Claims Resolution. The
Supreme Court, affirming the intermediate appellate court,
disapproved and vacated the Amchem class action settlement,
determining that the Amchem class action failed to meet the
requirements of Federal Rule of Civil Procedure 23. On
January 27, 1998, a panel of the Fifth Circuit reaffirmed by
majority vote, its prior decision, and again approved the
Global Settlement. It is anticipated that the parties
opposing the Global Settlement will seek further review of
this decision - by a petition for rehearing en banc by the
Fifth Circuit, and/or a petition for certiorari to the U.
S. Supreme Court. In light of this decision by the Fifth
Circuit, final resolution of the Global Settlement may not
be known until the second half of 1998 or later.
On October 24, 1996, the statutory time period for objectors
to seek further judicial review of the Insurance Settlement
lapsed with no petition for review having been filed with
the U.S. Supreme Court. Therefore, the Insurance
Settlement is now final and not subject to further appeal.
The parties will continue to seek approval of the Global
Settlement. If the Global Settlement becomes effective, all
asbestos-related personal injury liabilities of Fibreboard
will be resolved through insurance funds and existing
corporate reserves. A permanent injunction barring the
filing of any further claims against Fibreboard or its
insurers is included as part of the Global Settlement. Upon
final approval, Fibreboard's insurers are required to pay
existing settlements and assume full responsibility for any
claims filed before August 27, 1993, the date the settling
parties reached agreement on the terms of the Global
Settlement. A court-supervised claims processing trust
("Settlement Trust") will be responsible for resolving
claims which were not filed against Fibreboard before August
27, 1993, and any further claims that might otherwise be
asserted against Fibreboard in the future by members of the
class.
The Settlement Trust will be funded principally by
Continental and Pacific. These insurers have placed $1,525
million in an interest-bearing escrow account pending court
approval of the settlements. Fibreboard is responsible for
contributing $10 million plus accrued interest toward the
Settlement Trust, which it will obtain from other remaining
insurance sources and existing reserves. The Home Insurance
Company has already paid $9.9 million into the escrow
account on behalf of Fibreboard, in satisfaction of an
earlier settlement agreement. The balance of the escrow
account was $1,689 million at December 31, 1997, after
payment of interim expenses and exigent claims associated
with the Global Settlement.
If the Global Settlement becomes effective, Fibreboard would
have no on-going or future liabilities for asbestos personal
injury claims in excess of the $10 million currently
reserved in accrued liabilities.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities (Continued)
The Insurance Settlement is structured as an alternative
solution in the event the Global Settlement fails to receive
final approval. Under the Insurance Settlement, Continental
and Pacific will pay in full settlements reached as of
August 27, 1993 and provide Fibreboard with the remaining
balance of the Global Settlement escrow account for claims
filed after August 27, 1993, plus an additional $475
million, less amounts paid since August 27, 1993 for claims
which were pending but not settled at that date. Upon
fulfillment of their obligations under the Insurance
Settlement, Continental and Pacific will be discharged from
any further obligations to Fibreboard under their insurance
policies and will be protected by an injunction against any
claims of asbestos personal injury claimants based upon
those insurance policies. Under the Insurance Settlement,
Fibreboard will manage the defense and resolution of
asbestos-related personal injury claims and will remain
subject to suit by asbestos personal injury claimants.
The Insurance Settlement will not be fully funded until such
time as the Global Settlement has been finally resolved. In
the event the Global Settlement is finally approved, the
Insurance Settlement will not be funded.
Management Opinion
While there are various uncertainties regarding whether the
Global Settlement or the Insurance Settlement will be in
effect, and these may ultimately impact Fibreboard's
liability for asbestos personal injury claims, the Company
believes the amounts available under the Insurance
Settlement will be adequate to fund the ongoing defense and
indemnity costs associated with asbestos-related personal
injury claims for the foreseeable future.
OTHER 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.
-74-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
23. Subsequent Event (Unaudited)
Subsequent to December 31, 1997, the Company announced a
strategic restructuring program to reduce overhead, enhance
manufacturing productivity and close manufacturing
facilities. The Company estimates that the cost of this
program and other costs will approximate $250 million.
Certain of these actions were initiated in December 1997 and
are reflected in the results of operations for the year
ended December 31, 1997 (Note 4). The remainder of the
actions will be taken in the first quarter of 1998.
24. Quarterly Financial Information (Unaudited)
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1997
Net sales $ 875 $ 1,017 $ 1,238 $ 1,243
Cost of sales 652 778 953 1,063
Gross margin $ 223 $ 239 $ 285 $ 180
Income (loss) before cumulative
effect of accounting change 42 63 59 (102)
Cumulative effect of accounting
change (Note 6) - - - (15)
Net income (loss) $ 42 $ 63 $ 59 $ (117)
Net income (loss) per share:
Basic net income (loss) per
share
Income (loss) before
cumulative effect of
accounting change $ .80 $ 1.19 $ 1.11 $ (1.91)
Cumulative effect of
accounting change - - - (.29)
Net income (loss) per share $ .80 $ 1.19 $ 1.11 $ (2.20)
Diluted net income (loss) per share
Income (loss) before cumulative
effect of accounting change $ .76 $ 1.11 $ 1.05 $ (1.91)
Cumulative effect of accounting
change (Note 6) - - - (.29)
Net income (loss) per share $ .76 $ 1.11 $ 1.05 $ (2.20)
-75-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
24. Quarterly Financial Information (Unaudited)
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1996
Net sales $ 849 $ 956 $ 1,025 $ 1,002
Cost of sales 632 702 754 752
Gross margin $ 217 $ 254 $ 271 $ 250
Net income (loss) $ 39 $ (473) $ 80 $ 70
Net income (loss) per share:
Basic net income (loss)
per share $ .77 $ (9.25) $ 1.56 $ 1.35
Diluted net income (loss)
per share $ .73 $ (9.25) $ 1.45 $ 1.26
Net income per share and basic and 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.
-76-
INDEX TO FINANCIAL STATEMENT SCHEDULES
Number Description Page
II Valuation and Qualifying Accounts and Reserves -
for the years ended December 31, 1997, 1996,
and 1995...........................................77
-77-
OWENS CORNING AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Classification of Period Expenses Accounts Deductions of Period
(In millions of dollars)
FOR THE YEAR ENDED DECEMBER 31, 1997:
Allowance
deducted from
asset to which
it applies -
Doubtful Accounts $ 17 $ 3 $ 6(A) $ 6(B) $ 20
FOR THE YEAR ENDED DECEMBER 31, 1996:
Allowance
deducted from
asset to which
it applies -
Doubtful Accounts $ 19 $ 3 $ - $ 5(B) $ 17
FOR THE YEAR ENDED DECEMBER 31, 1995:
Allowance
deducted from
asset to which
it applies -
Doubtful Accounts $ 16 $ 5 $ - $ 2(B) $ 19
Notes:
(A) Allowances of subsidiaries acquired.
(B) Uncollectible accounts written off, net of recoveries.
-78-
EXHIBIT INDEX
Exhibit
Number Document Description
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession.
Agreement and Plan of Merger, dated as of May 27,
1997, among Owens Corning, Sierra Corp. and
Fibreboard Corporation (incorporated herein by
reference to Exhibit 2(a) to the Company's current
report on Form 8-K (File No. 1-3660), filed May 28,
1997).
(3) Articles of Incorporation and By-Laws.
(i) Certificate of Incorporation of Owens
Corning, as amended (incorporated herein by
reference to Exhibit (3) to the Company's
quarterly report on Form 10-Q (File No. 1-3660)
for the quarter ended March 31, 1997).
(ii) By-Laws of Owens Corning, as amended
(incorporated herein by reference to Exhibit (3)
to the Company's annual report on Form 10-K (File
No. 1-3660) for 1995).
(4) Instruments Defining the Rights of Security Holders,
Including Indentures.
Credit Agreement, dated as of June 26, 1997, among
Owens Corning, other Borrowers and Guarantors, the
Banks listed on Annex A thereto, and Credit Suisse
First Boston, as Agent (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 June 30, 1997), as amended by
Amendment No. 1 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 June 26, 1997, among
Owens Corning, other Borrowers and Guarantors, the
Banks listed on Annex A thereto, and Credit Suisse
First Boston, as Agent (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 June 30, 1997), as amended by
Amendment No. 1 thereto (filed herewith).
Rights Agreement, dated as of December 12, 1996
(incorporated herein by reference to Exhibit 1 to
the Company's Registration Statement on Form 8-A
(File No. 1-3660), dated December 19, 1996).
The following documents are 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, 1996:
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EXHIBIT INDEX
* -Long-Term Performance Incentive Plan Terms Applicable
to Certain Executive Officers.
* -Long-Term Performance Incentive Plan Terms Applicable
to Officers Other Than Certain Executive Officers.
* -Stock Performance Incentive Plan, as amended.
* Corporate Incentive Plan Terms Applicable to
Certain Executive Officers (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, 1996).
* Corporate Incentive Plan Terms Applicable to Key
Employees Other Than Certain Executive Officers
(incorporated herein by reference to Exhibit (10)
to the Company's annual report on Form 10-K (File
No. 1-3660) for 1995):
* Agreement, dated as of January 1, 1995, with
William W. Colville (incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K (File No. 1-3660) for 1994)
and amendment dated September 29, 1997 (filed
herewith).
* Agreement dated June 16, 1993, with David W.
Devonshire (incorporated herein by reference to
Exhibit (10) to the Company's annual report on
Form 10-K (File No. 1-3660) for 1994).
* 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).
* Renewal Agreement, effective as of July 31, 1999,
with Glen H. Hiner (filed herewith).
* Agreement with Domenico Cecere (filed herewith).
* 1987 Stock Plan for Directors, 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 June 30,
1997).
* 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).
-80-
EXHIBIT INDEX
* 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.