Document QXbN1q2EeKKgbY44Ljqx6b0Y7

FILE NAME: Raybestos-Manhattan (RBM) DATE: 1994 RBM026 DOC#: RBM026 DOCUMENT DESCRIPTION: Annual Report of Raymark RAYMARK ANNUAL REPORT 1984 M I C H A E L C. D R A K E HOWARD, WEIL, LABOUISSE,PRIEDRICHS INCORPORATED MEMBERS NEW YORK STOCK EXCHANGE 12 S. PAIAEOX PIACE PENSACOT A, H . 32501 904-4JJ- 271*  . . - .-i. j* NOTE I-Litigation (000's not omitted in this Note) Since 1971, when the first daim was filed, the Com pany has been a defendant or codefendant in lawsuits alleging injury and/or death horn exposure to asbestos fibers in the air. As of January 1,1985 there were 18,667 lawsuits pending, compared with 14,936 and 11,768 as of January 1,1984 and January 1,1983, respectively. 6,059 new lawsuits were filed in 1984, compared with 5,308 and 4,494 in 1983 and 1982, respectively. As of January 1, 1985,6,206 cases have been terminated by settlements, dismissals, summary judgments and trial verdicts. Since the beginning of the litigation and through December 31,1984, settlements have averaged approximately $5,500 per case, exclusive of defense fees. Defense fees typically are less than 50% of settlem ent costs. fee Company has continuously purt**sed> in vfflyttffiamounts and from a number ofcar-' lii ^ p i ^ stB llalSlty insurance coverage totaling fcppr&dsrctfely $395 miffioft Prior to November 14,1983, conflicts among the earners relating to responsibility for coverage limited the Company's access to this pool of cov erage and forced the Company to absorb approximately 39% of the costs associated with asbestos-related litiga tion. Such conflicts are the subject of a Declaratory Judg m ent Action commenced in 1978 involving the Company and its primary and first level excess insurance carriers. In September, 1983 and June, 1984, the Court issued rulingS-currently on appeal-w hich, if sustained, will assure the Company broad access to its insurance pool and will entitle ie Company to reimbursement of more than $20 million of costs previously expended by it, together with interest. In November, 1983, February, 1984, July, 1984 and October, 1984, the Court entered interim funding orders requiring the Company's primary insurance carriers, and then its primary and first-level excess insurance carriers, to fund, on behalf of the Company, substantially all iiabib ity and defense costs associated with asbestos-related liti gation. The Company believes that the October, 1984 funding order, which by agreement was not appealed, wiH continue to provide funding of such costs pending completion of appeal of the September, 1983 and June, 1984 rulings. Based on the above, the Company will not accrue for the liability and defense costs it would have otherwise been forced to absorb or for which it might be liable if the appeal is determined adversely to the Company. Such costs approximated $7.3 million, $9.1 million and $6.4 million m 1983,1982 and 1981, respectively. Nor has the Company accrued for any reimbursement from insurance carriers of asbestos-related litigation costs previously paid by the Company. The Com pany^ aj^reg afe unused MidiOf indemnity* insurance for the period 1941 t o f f is, as of December 31,1984, approximately $360m ilfion^lftW iom parry believes that in the event the Court's rulings of Sep terr/ ber, 1983 and June, 1984 are substantially affirm ed, an d ' based on experience to date in the asbestos-related litiga tion, the Company will have sufficient insurance to cover its asbestos-related kab&ties for the foreseeable future * However, because of the uncertainty of the ultimate out come of the Company's insurance litigation and because of the uncertainty of the number erfasbestos-related law suits still to be fifed and of the cost erfdisposition erfcases, it is not possible to predict the cost after insurance recov eries erf settling and defending existing and future cases or the impact thereof e>n the Com pany's conserfidated financial position and results erf operations. As of December 31,1984, the Company has been named as a defendant in 43 property damage cases in which the plaintiffs, primarily school boards and other public entities, seek damages for removal erfasbestos-con taining products located in buildings. The cases are in their early stages. The Company believes it has policies of insurance to cover the claims. The Company is negotia ting with its insurance carriers with respect to coverage erf these claims. A $3 million note due the Company in August of 1984 in connection with the purchase in 1983 erfcertain of the Company's assets was not paid, and toe Company commenced an action to foredose cm property securing the note. The purchaser has made daim s of offset against toe note of $7.4 million and is seeking exemplary and punitive damages in an amount of not less than $10 mil lion. The Company believes that adequate reserves have been provided and that the lawsuit will not have a mate rial adverse effect cm the Company's financial position. O ther legal proceedings pending against the Com pany indude several discrimination daim s by discharged em ployees, litigation concerning the sale erffacilities, and a number of m iscellaneous product liability, commercial, and environmental proceedings. In management's opin ion, the eventual disposition of the matters referred to in this paragraph will have no material adverse effect on the Company's conserfidated financial position and results of operations. 21