-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RQ5yALBE4D6aiwfe6WFWpEYYaBk15eHt5leLXbkS/fFHs5WJXkiJT9HWJg0+SO6z Wnb4DjA9i+aEIUtDwx5lnA== 0000075234-96-000036.txt : 19961224 0000075234-96-000036.hdr.sgml : 19961224 ACCESSION NUMBER: 0000075234-96-000036 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19961223 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OWENS CORNING CENTRAL INDEX KEY: 0000075234 STANDARD INDUSTRIAL CLASSIFICATION: ABRASIVE ASBESTOS & MISC NONMETALLIC MINERAL PRODUCTS [3290] IRS NUMBER: 344323452 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03660 FILM NUMBER: 96684932 BUSINESS ADDRESS: STREET 1: OWENS CORNING WORLD HEADQUARTERS STREET 2: ONE OWENS CORNING PARKWAY CITY: TOLEDO STATE: OH ZIP: 43659 BUSINESS PHONE: 4192488000 MAIL ADDRESS: STREET 1: OWENS CORNING WORLD HEADQUARTERS STREET 2: ONE OWENS CORNING PARKWAY CITY: TOLEDO STATE: OH ZIP: 43659 FORMER COMPANY: FORMER CONFORMED NAME: OWENS CORNING FIBERGLAS CORP DATE OF NAME CHANGE: 19920703 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q/A Amendment No. 2 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 1996 Commission File No. 1-3660 Owens Corning Fiberglas Tower, Toledo, Ohio 43659 Telephone No. (419) 248-8000 A Delaware Corporation I.R.S. Employer Identification No. 34-4323452 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Shares of common stock, par value $.10 per share, outstanding at April 30, 1996 51,533,673 Owens Corning's Form 10-Q for the quarter ended March 31, 1996, filed on May 15, 1996 as amended by Form 10-Q/A filed on May 21, 1996, is hereby further amended by amending Item 1 "Financial Statements" and Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Part I, to read as set forth below: -2- PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OWENS CORNING AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME Quarter Ended March 31, 1996 1995 (In millions of dollars, except share data) NET SALES $ 849 $ 844 COST OF SALES 631 630 Gross margin 218 214 OPERATING EXPENSES Marketing and administrative expenses 128 113 Science and technology expenses 21 18 Other (3) 11 Total operating expenses 146 142 INCOME FROM OPERATIONS 72 72 Cost of borrowed funds 18 26 INCOME BEFORE PROVISION FOR INCOME TAXES 54 46 Provision for income taxes (Note 3) 16 16 INCOME BEFORE EQUITY IN NET INCOME OF AFFILIATES 38 30 Equity in net income of affiliates 1 3 NET INCOME $ 39 $ 33 NET INCOME PER COMMON SHARE Primary net income per share $ .75 $ .71 Fully diluted net income per share $ .73 $ .68 Weighted average number of common shares outstanding and common equivalent shares during the period (in millions) Primary 52.3 45.7 Assuming full dilution 56.9 50.8
The accompanying notes are an integral part of this statement. -3- OWENS CORNING AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET March 31, December 31, 1996 1995 ASSETS (In millions of dollars) CURRENT Cash and cash equivalents $ 13 $ 18 Receivables 382 314 Inventories (Note 4) 304 253 Insurance for asbestos litigation claims - current portion (Note 6) 100 100 Deferred income taxes 69 70 VEBA trust 62 51 Income tax receivable 1 50 Investment in affiliate held for sale - 36 Other current assets 46 35 Total current 977 927 OTHER Goodwill 251 249 Investments in affiliates 52 50 Deferred income taxes 253 252 Insurance for asbestos litigation claims (Note 6) 300 330 Other noncurrent assets 143 147 Total other 999 1,028 PLANT AND EQUIPMENT, at cost Land 54 52 Building and leasehold improvements 576 581 Machinery and equipment 2,274 2,266 Construction in progress 210 168 3,114 3,067 Less--Accumulated depreciation (1,782) (1,761) Net plant and equipment 1,332 1,306 TOTAL ASSETS $ 3,308 $ 3,261
The accompanying notes are an integral part of this statement. -4- OWENS CORNING AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Continued) March 31, December 31, 1996 1995 (In millions of dollars) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities $ 514 $ 587 Reserve for asbestos litigation claims - current portion (Note 6) 300 250 Short-term debt 107 64 Long-term debt - current portion 38 35 Total current 959 936 LONG-TERM DEBT 875 794 OTHER Reserve for asbestos litigation claims (Note 6) 802 887 Other employee benefits liability 363 367 Pension plan liability 73 75 Other 233 220 Total other 1,471 1,549 COMMITMENTS AND CONTINGENCIES (Note 6) COMPANY OBLIGATED CONVERTIBLE SECURITY OF SUBSIDIARY HOLDING SOLELY PARENT DEBENTURES (MIPS) 194 194 STOCKHOLDERS' EQUITY Common stock 581 579 Deficit (743) (781) Foreign currency translation adjustments (8) 9 Other (21) (19) Total stockholders' equity (191) (212) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,308 $ 3,261
The accompanying notes are an integral part of this statement. -5- OWENS CORNING AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Quarter Ended March 31, 1996 1995 (In millions of dollars) NET CASH FLOW FROM OPERATIONS Net income $ 39 $ 33 Reconciliation of net cash provided by operating activities: Noncash items: Provision for depreciation and amortization 31 30 Provision for deferred income taxes - 14 Other 3 9 (Increase) decrease in receivables (67) 1 Increase in inventories (51) (40) (Decrease) in accounts payable and accrued liabilities (68) (68) Increase (decrease) in accrued income taxes 48 (6) Proceeds from insurance for asbestos litigation claims 30 48 Payments for asbestos litigation claims (35) (98) Other (37) (29) Net cash flow from operations (107) (106) NET CASH FLOW FROM INVESTING Additions to plant and equipment (77) (59) Proceeds from the sale of affiliate 55 - Other (6) (2) Net cash flow from investing (28) (61)
The accompanying notes are an integral part of this statement. -6- OWENS CORNING AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) Quarter Ended March 31, 1996 1995 (In millions of dollars) NET CASH FLOW FROM FINANCING Net additions to long-term credit facilities 98 106 Other additions to long-term debt - 34 Other reductions to long-term debt (12) (28) Net increase in short-term debt 41 13 Other 2 (8) Net cash flow from financing 129 117 Effect of exchange rate changes on cash 1 1 Net increase (decrease) in cash and cash equivalents (5) (49) Cash and cash equivalents at beginning of period 18 59 Cash and cash equivalents at end of period $ 13 $ 10 The accompanying notes are an integral part of this statement. -7- OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended 1. SEGMENT DATA March 31, 1996 1995 NET SALES (In millions of dollars) Industry Segments Building Materials United States $ 474 $ 456 Europe 64 65 Canada and other 18 31 Total Building Materials 556 552 Composite Materials United States 146 152 Europe 106 105 Canada and other 41 35 Total Composite Materials 293 292 Intersegment sales Building Materials - - Composite Materials 25 26 Eliminations (25) (26) Net sales $ 849 $ 844 Geographic Segments United States $ 620 $ 608 Europe 170 170 Canada and other 59 66 Total 849 844 Intersegment sales United States 16 13 Europe 10 4 Canada and other 8 20 Eliminations (34) (37) Net sales $ 849 $ 844
-8- OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Quarter Ended 1. SEGMENT DATA (Continued) March 31, 1996 1995 (In millions of dollars) INCOME FROM OPERATIONS Industry Segments Building Materials United States $ 13 $ 32 Europe 5 8 Canada and other (4) 7 Total Building Materials 14 47 Composite Materials United States 33 34 Europe 21 8 Canada and other 2 3 Total Composite Materials 56 45 General corporate expense 2 (20) Income from operations 72 72 Cost of borrowed funds (18) (26) Income before provision for income taxes $ 54 $ 46 Geographic Segments United States $ 46 $ 66 Europe 26 16 Canada and other (2) 10 General corporate expense 2 (20) Income from operations 72 72 Cost of borrowed funds (18) (26) Income before provision for income taxes $ 54 $ 46
During the first quarter of 1996, the Company recorded a pretax gain of $37 million on the sale of its ownership interest in its Japanese affiliate Asahi Fiber Glass Co. Ltd., all of which was recorded as a reduction in general corporate expense. Additionally, the Company recorded special charges totaling $42 million including valuation adjustments associated with prior divestitures, major product line productivity initiatives and a contribution to the Owens Corning Foundation. The impact of these special items was to reduce income from operations for Building Materials in the United States, Europe and Canada and other by $19 million, $1 million and $2 million, respectively, Composite Materials in the United States and Europe by $3 million and $2 million, respectively, and to increase general corporate expense by $15 million. -9- OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. GENERAL The financial statements included in this Report are condensed and unaudited, pursuant to certain Rules and Regulations of the Securities and Exchange Commission, but include, in the opinion of the Company, adjustments necessary for a fair statement of the results for the periods indicated, which, however, are not necessarily indicative of results which may be expected for the full year. In connection with the condensed financial statements and notes included in this Report, reference is made to the financial statements and notes thereto contained in the Company's 1995 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. 3. INCOME TAXES The reconciliation between the U.S. federal statutory rate and the Company's effective income tax rate is: Quarter Ended March 31, 1996 1995 U.S. federal statutory rate 35% 35% Adjustment of deferred tax asset allowance (13) - State and local income taxes 2 3 Other 6 (2) Effective tax rate 30% 36% During the first quarter of 1996, the Company reversed approximately $7 million of its valuation allowances, as management determined that the operating loss carryforwards of certain foreign subsidiaries are realizable. 4. INVENTORIES Inventories are summarized as follows: March 31, December 31, 1996 1995 (In millions of dollars) Finished goods $ 253 $ 210 Materials and supplies 136 127 FIFO inventory 389 337 Less: Reduction to LIFO basis (85) (84) Inventories $ 304 $ 253 Approximately $204 million and $175 million of FIFO inventories were valued using the LIFO method at March 31, 1996 and December 31, 1995, respectively. -10- OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. CONSOLIDATED STATEMENT OF CASH FLOWS Cash payments, net of refunds, for income taxes and cost of borrowed funds are summarized as follows: Quarter Ended March 31, 1996 1995 (In millions of dollars) Income taxes $ (17) $ 1 Cost of borrowed funds 6 9 The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 6. CONTINGENT LIABILITIES ASBESTOS LIABILITIES The Company is a co-defendant with other former manufacturers, distributors and installers of products containing asbestos and with miners and suppliers of asbestos fibers (collectively, the Producers) in personal injury and property damage litigation. The personal injury claimants generally allege injuries to their health caused by inhalation of asbestos fibers from the Company's products. Most of the claimants seek punitive damages as well as compensatory damages. The property damage claims generally allege property damage to school, public and commercial buildings resulting from the presence of products containing asbestos. Virtually all of the asbestos-related lawsuits against the Company arise out of its manufacture, distribution, sale or installation of an asbestos-containing calcium silicate, high temperature insulation product, the manufacture of which was discontinued in 1972. Status As of March 31, 1996, approximately 156,000 asbestos personal injury claims were pending against the Company, 12,900 of which were received in the first quarter of 1996. The Company received approximately 55,900 such claims in 1995, and 29,100 in 1994. Through March 31, 1996, the Company had resolved (by settlement or otherwise) approximately 161,700 asbestos personal injury claims. During 1994, 1995, and the first quarter of 1996, the Company resolved approximately 39,000 such claims and incurred total indemnity payments of $437 million (an average of about $11,200 per case). The Company's indemnity payments have varied considerably over time and from case to case, and are affected by a multitude of factors. These include the type and severity of the disease sustained by the claimant (i.e., mesothelioma, lung cancer, other types of cancer, asbestosis or pleural changes); the occupation of the claimant; the extent of the claimant's exposure to asbestos-containing products manufactured, sold or installed by the Company; the extent of the claimant's exposure to asbestos-containing products manufactured, sold or installed by other Producers; the number and financial resources of other Producer defendants; the jurisdiction of suit; the presence or absence of other possible causes of the claimant's illness; the avail- -11- OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. CONTINGENT LIABILITIES (Continued) ability or not of legal defenses such as the statute of limitations or state of the art; whether the claim was resolved on an individual basis or as part of a group settlement; and whether the claim proceeded to an adverse verdict or judgment. Insurance As of March 31, 1996, the Company had approximately $400 million in unexhausted insurance coverage (net of deductibles and self-insured retentions and excluding coverage issued by insolvent carriers) under its liability insurance policies applicable to asbestos personal injury claims. This insurance, which is substantially confirmed, includes both products hazard coverage and primary level non- products coverage. Portions of this coverage are not available until 1997 and beyond under agreements with the carriers confirming such coverage. All of the Company's liability insurance policies cover indemnity payments and defense fees and expenses subject to applicable policy limits. In addition to its confirmed non-products insurance, the Company has a significant amount of potential non-products coverage with excess level carriers. The Company cautions, however, that this coverage is unconfirmed and that the amount and timing of additional recovery from these policies, if any, will depend on subsequent negotiations or proceedings. Reserve The Company's estimated total liabilities in respect of indemnity and defense costs associated with pending and unasserted asbestos personal injury claims that may be received through the year 1999 (the `Liabilities"), and its estimated insurance recoveries in respect of such claims (the "Insurance"), are reported separately as follows: Asbestos Litigation Claims March 31, December 31, 1996 1995 Reserve for asbestos litigation claims (In millions of dollars) Current $ 300 $ 250 Other 802 887 Total Reserve 1,102 1,137 Insurance for asbestos litigation claims Current 100 100 Other 300 330 Total Insurance 400 430 Net Asbestos Liability $ 702 $ 707
-12- OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. CONTINGENT LIABILITIES (Continued) Case filing rates have continued at historically high levels with the receipt of approximately 12,900 new claims during the first quarter of 1996, following the receipt of approximately 55,900 claims in 1995 and approximately 29,100 claims in 1994. Many of these new claims appear to be the product of mass screening programs and not to involve significant asbestos-related impairment. The large number of recent filings and the uncertain value of these claims have added to the uncertainties involved in estimating the Company's asbestos liabilities. Certain of the Company's principal co-defendants, the 20 members of the Center for Claims Resolution, have entered into a proposed "global" settlement which would require future claimants to satisfy certain medical criteria indicative of significant asbestos-related impairment as a pre-condition to their eligibility for settlement payments. The U.S. Court of Appeals recently overturned the proposed settlement based on failure to satisfy class action certification requirements, but did not address issues relating to medical criteria. The Company is using similar medical criteria in the implementation of its own settlement and litigation strategy and is also seeking to require more careful proof than in the past that claimants had significant exposure to the Company's asbestos-containing product or operations. The Company believes that this strategy will reduce the overall cost of asbestos personal injury claims in the long run by channeling indemnity payments to claimants who can establish significant asbestos- related impairment and exposure to the Company's asbestos- containing product or operations and by substantially reducing indemnity payments to individuals who are unimpaired or who did not have significant such exposure. The Company's strategy has resulted in an increased level of trial activity and an increase in the number and amount of compensatory and punitive damage verdicts and judgments against the Company. This strategy may have the effect of increasing average per-case indemnity costs for claims resolved with payment, while also increasing the number of claims dismissed without payment. The Company cautions that such factors as the number of future asbestos personal injury claims received by it, the rate of receipt of such claims, and the indemnity and defense costs associated with asbestos personal injury claims, as well as the prospects for confirming additional, applicable insurance coverage beyond the $400 million referenced above, are influenced by numerous variables that are difficult to predict, and that estimates, such as the Company's, which attempt to take account of such variables, are subject to considerable uncertainty. Depending upon the outcome of the various uncertainties described above, particularly as they relate to unimpaired claims, it may be necessary at some point in the future for the Company to make additional provision for the uninsured costs of asbestos personal injury claims received through the year 1999 (although no such amounts are reasonably estimable at this time). The Company remains confident that its estimate of Liabilities and Insurance will be sufficient to provide for the costs of all such claims that involve malignancies or significant asbestos-related functional impairment. The Company has reviewed and will continue to review the adequacy of its estimate of Liabilities and Insurance on a periodic basis and make such adjustments as may be appropriate. The Company cannot estimate and is not providing for the cost of unasserted claims which may be received by the Company after the year 1999 because management is unable to predict the number of claims to be received after 1999, the severity of disease which may be involved and other factors which would affect the cost of such claims. -13- OWENS CORNING AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. CONTINGENT LIABILITIES (Continued) Cash Expenditures The Company's anticipated cash expenditures for uninsured asbestos-related costs of claims received through 1999 are expected to approximate $702 million, the Company's Liabilities, net of Insurance, before tax benefits. Cash payments will vary annually depending upon a number of factors, including the pace of the Company's resolution of claims and the timing of payment of its Insurance. Management Opinion Although any opinion is necessarily judgmental and must be based on information now known to the Company, in the opinion of management, while any additional uninsured and unreserved costs which may arise out of pending personal injury and property damage asbestos claims and additional similar asbestos claims filed in the future may be substantial over time, management believes that any such additional costs will not impair the ability of the Company to meet its obligations, to reinvest in its businesses or to take advantage of attractive opportunities for growth. NON-ASBESTOS LIABILITIES Various other lawsuits and claims arising in the normal course of business are pending against the Company, some of which allege substantial damages. Management believes that the outcome of these lawsuits and claims will not have a materially adverse effect on the Company's financial position or results of operations. -14- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (All per share information in Item 2 is on a fully diluted basis.) RESULTS OF OPERATIONS Net income for the quarter ended March 31, 1996 was $39 million, or $.73 per share, compared to net income of $33 million, or $.68 per share, for the quarter ended March 31, 1995. The 1996 earnings growth reflects pricing gains, the benefits of acquisitions, and reduced cost of borrowed funds related to 1995 balance sheet improvements. Net sales were $849 million for the quarter ended March 31, 1996, a one percent increase from the 1995 level of $844 million. Most of the first quarter 1996 growth is attributable to incremental sales resulting from 1995 acquisitions as well as pricing gains, offset by a decline in volume. Gross margin from ongoing operations for the quarter ended March 31 increased to 27% in 1996, from 25% in 1995, primarily as the result of pricing gains. During the first quarter of 1996, the Company recorded a pretax gain of $37 million on the sale of its ownership interest in its Japanese affiliate Asahi Fiber Glass Co. Ltd., which was offset by special 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 the gain on net income was reduced to near zero by these offsetting special charges. Marketing and administrative expenses from ongoing operations increased approximately six percent over the first quarter of 1995. The incremental administrative expenses from the acquisitions late in 1995 as well as an impact from the continuing implementation of the Company's Advantage 2000 program are primarily responsible for the increase. Advantage 2000 is a business system designed to accelerate the speed and simplify the processes of doing business globally. When fully implemented, the Advantage 2000 program will replace over 200 fragmented information systems with a fully integrated system, leading to increased productivity and cost savings. In the Building Materials segment, sales increased one percent for the quarter ended March 31, 1996 compared to 1995. This growth reflects the incremental sales from 1995 acquisitions offset by a decline in volume, particularly in the North American markets as the result of a weak Canadian economy and severe weather in the U.S. during the first quarter of 1996. Income from ongoing operations for Building Materials decreased 23% from 1995 levels, primarily due to the weak economic conditions in Canada. In the first quarter of 1996, the Company announced plans for the construction of its fourth plant in the People's Republic of China. The new 51% owned joint venture facility, to be constructed in Nanjing, will produce Foamular(R) extruded polystyrene. In conjunction with the two glass fiber insulation facilities and the glass reinforced plastic (GRP) pipe facility, this newly formed joint venture further expands the Company's presence in the Asia Pacific region. The Company also announced the availability of its revolutionary new form of glass fiber, Miraflex(T), to all of its North American markets in its first commercial application, PinkPlus(R) insulation featuring Miraflex(T) fiber. The fiber was first made available to selected markets in 1995, and is expected to be a contributing factor to the Company's overall growth strategy. -15- In the Composite Materials segment, sales increased slightly for the quarter ended March 31, 1996, over the 1995 first quarter. The sales increase is attributable to gains in the Latin American markets as well as continued strength and improved pricing in the European markets, where prices may be peaking. These sales gains were offset by the impact of severe weather conditions in the northeastern U.S. which caused temporary shut-downs of the Company's Huntingdon, PA facility, as well as the impact of a strike at General Motors. Composite Materials' income from ongoing operations in the first quarter of 1996 was 36% above the first quarter of 1995 primarily due to the improvement in pricing coupled with productivity initiatives. The Company also announced plans for a new large-diameter GRP pipe joint venture in Colombia, with completion anticipated in September 1996. Generally, the Company's GRP pipe is marketed to governments and private industry for major infrastructure projects for the transport of water and waste. The Company's Botswana pipe venture established in 1993 was awarded one of the Company's largest single orders to date, a $75 million contract to supply GRP pipe for the North-South Carrier pipeline in Botswana. The Company's cost of borrowed funds for the quarter ended March 31, 1996 was $8 million lower than during first quarter 1995, reflecting decreased borrowings resulting from the first half 1995 conversion of $173 million of the Company's 8% convertible junior subordinated debentures into shares of common stock as well as the issuance of $200 million of convertible monthly income preferred securities in the second quarter of 1995. LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS Cash flow from operations, excluding asbestos-related activities, was negative $102 million for the first quarter of 1996, compared to negative $56 million for first quarter 1995. The decline from 1995 to 1996 is primarily attributable to the first quarter 1995 cash inflow generated by the sale of $50 million of receivables under an agreement established in late 1994. Inventories at March 31, 1996 increased 20% over December 31, 1995 levels due to the Company's seasonal inventory build in the first half of the year, and a slower than expected building materials retail environment. Please see Notes 4 and 5 to the Consolidated Financial Statements. At March 31, 1996, the Company's net working capital was $18 million and its current ratio was 1.02 compared to negative $9 million and .99, respectively, at December 31, 1995. During the first quarter of 1996, the Company established a new long-term revolving credit facility in the U.K. which replaced several short-term debt instruments in Europe. The U.K. facility has a commitment of 35 million British pounds (54 million U.S. dollars), all of which was outstanding as of March 31, 1996. The improvement in working capital from this refinancing was partially reduced by the sale of Asahi Fiber Glass Co. Ltd. The Company's total borrowings at March 31, 1996 were $1.020 billion, $127 million higher than at year-end 1995. Typically, the Company reports greater cash usage during the first half of the year as the Company builds inventories and other working capital. As of March 31, 1996, the Company had unused lines of credit of $305 million available under long-term bank loan facilities and an additional $210 million under short-term facilities, compared to $358 million and $239 million, respectively, at year-end 1995. The decrease in available lines of credit is primarily the result of increased borrowings. Letters of credit issued under the Company's long-term U.S. loan facility, most of which support appeals from asbestos trials, reduce credit availability of that facility. The impact of such reduction is reflected in the unused lines of credit discussed above. -16- Capital spending for property, plant and equipment, excluding acquisitions and investments in affiliates, was $77 million during the first quarter of 1996. For the year 1996, the Company anticipates capital spending, exclusive of acquisitions and investments in affiliates, to be approximately $313 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 1996, including $9 million in defense costs and $2 million for appeal bond and other costs, were $35 million. Proceeds from insurance were $30 million, resulting in a net pretax cash outflow of $5 million, or $3 million after-tax. During the first quarter of 1996, the Company received approximately 12,900 new asbestos personal injury cases and closed approximately 1,100 cases. Over the next twelve months, the Company's total payments for asbestos litigation claims, including defense costs, are expected to be approximately $300 million. Proceeds from insurance of $100 million are expected to be available to cover these costs, resulting in a net pretax cash outflow of $200 million, or $120 million after-tax. Please see Note 6 to the Consolidated Financial Statements. The Company expects funds generated from operations, together with funds available under long and short term bank loan facilities, to be sufficient to satisfy its debt service obligations under its existing indebtedness, as well as its contingent liabilities for uninsured asbestos personal injury claims. The Company has been deemed by the Environmental Protection Agency (EPA) to be a potentially responsible party (PRP) with respect to certain sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund). The Company has also been deemed a PRP under similar state or local laws, including two state Superfund sites where the Company is the primary generator. In other instances, other PRPs have brought suits or claims against the Company as a PRP for contribution under such federal, state or local laws. During the first quarter of 1996, the Company was not designated a PRP in such federal, state, local or private proceedings for any additional sites. At March 31, 1996, a total of 42 such PRP designations remained unresolved by the Company, some of which designations the Company believes to be erroneous. The Company is also involved with environmental investigation or remediation at a number of other sites at which it has not been designated a PRP. The Company has established a $20 million reserve for its Superfund (and similar state, local and private action) contingent liabilities. In addition, based upon information presently available to the Company, and without regard to the application of insurance, the Company believes that, considered in the aggregate, the additional costs associated with such contingent liabilities, including any related litigation costs, will not have a materially adverse effect on the Company's financial position or results of operations. The 1990 Clean Air Act Amendments (Act) provide that the EPA will issue regulations on a number of air pollutants over a period of years. Until these regulations are developed, the Company cannot determine the extent to which the Act will affect it. The Company anticipates that its sources to be regulated will include glass fiber manufacturing and asphalt processing activities. The EPA's announced schedule is to issue regulations covering glass fiber manufacturing by late 1997 and asphalt processing activities by late 2000, with implementation as to existing sources up to three years thereafter. Based on information now known to the Company, including the nature and limited number of regulated materials it emits, the Company does not expect the Act to have a materially adverse effect on the Company's results of operations, financial condition or long-term liquidity. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OWENS CORNING Registrant Date December 20, 1996 By /s/David W. Devonshire David W. Devonshire Senior Vice President and Chief Financial Officer (as duly authorized officer) -----END PRIVACY-ENHANCED MESSAGE-----