Document a1n48o14zYVxw6X0b5ROV5mBN

Owens-Coming Fiberglas Corporation 1994 Annual Report PLAINTIFFS EXHIBIT Wy-03712 PLAINTIFFS EXHIBIT W7.r>- r Owens Corning We Make The Difference WV-03712 Business Overview BUSINESS bKmorttflMc Aiomne*rica of glass fibcs insuiatat in North Aplfalwnawfatr,owutgthhnwiw U-S,rtS Quads PRODUCTSMARKETS/SEP USES PEMAfg> DBIV1RS/6BOWTH Ptbecgtas* insulation; oteduntel instdaiSn; frtaBy tonb ireldiPgAlfRAPH a$erireulsttet panels Professionalcwieractore in K&dcadaiaadccenmeroai ecnsntfticn: mobile hcroe manufacturers aurancsi**. apptanseandrefRgeraacm jn&strte Residential and commercial reimulatnu. repair and remodeling activity-oorpacifignew coosmtction in Nor* America in 1995 <tewtfigawortes ofenergy conservation GovernmenttegslaUons, Dcpatbiwm of Energy regulattoos,increased uuvteion levels IncreasinB size ofhomes, popularity of high- performance products Roofing/Asphalt leading manufac turerofresidBntial roofingtengles and industrial asphalt In theUS. with JS roofing! teaspfcsh pnx*swtg plants Specialty and Poom Produots Secondbrgssr pro ducer and marketer, gpl^oybsaTllyyr,coteffeoaemradad product*. Specialty manufacturer ar*d marketerof windows and patio{bars MS/ CUttrSurfion Matedriver oftome haksg product sate ftough waif chains and home etnws, walingHearty 40%of building product sate and 25%oftotal corporate sate Bidding Products* Europe Cornerstone for canalMare, marketing ato sate ofbuMia pate** in the U.K.ind the Earcpeapeontusutt Mireflex'* Produces Cwnmereiaiuatwn teen fee newly ssetiteec MsraflesM fiber. Kfeudptonf operations andnew appbadkm develc^- esent Thee-uK andarchisecturs) high-style residential reefing shmjfles; industrial asphalt forreefing felts and Angles, commercial roofing systems, water prooftQfi.cosungs, adhesives, prates exieisdcrs and various automotive applKanott* Roofing shingles; residen tial amsouedonand reroofarg Asptak* ns$niefl Gal shinglemanufacture, commercial roofing systems, comctKtinv automotive, chemical and rubber industries Rwooftag-75%ofmsjket demand-including remodeling, repeiaand replacement. Hemes hretorteslly need&swroofs, every 17 yean. btevre^ifeirttaJcoosirudiOTi-25%of demand FGAMULAR* pink, extruded polystyrene, ngid loam insulation, foam products; windows, potto <fcx Foam iroulatiois and foam products: rwaJemiaf, commercial and industrial teulauco. including agnet]> turalbtnldmgs.wld swage, highway insoUuon and (inhlnsulasrcn applicsitoas. Windows/TaiioDoom, new residentialmd corwneroal coboucuoo; remodeling, replacement Remcde)ing/rep)a:*nv?nc activity Crenmutial.induMsiafeasd institutional invc^mcni in tool estate New tomeconunKtionactivity increasingenergy awareness; bwildmg cede enhancemenu * Irareasingly sophisticated ardiRettum? sto tecteical spectficaoons Thefamous lire of "Pink ProJLKSj/'mcte&ag PWkMw*bands of eeHdcrtUai insulation. FOAMULAR* pink foam fostdaoon aridPtnk'Wrap'* bousewrap, roofing rtiingtes; B*bw* and patio dccre ResaM cuteisaving cennettn andtteiv yourselfcsstocnere duooghout Nor* Aneica arvdexpanding globally. * Rapid^trwth ingjofcaifaarse improvement nutea-outparingnew eonsowsion iofteth Asicriab 1995 ft Sftre^ posiboo kt NorthAtnericao mail Wittes; global Mpanskeiincorqw>cT>* withretail chains Growingawareness ofenergycotservaikm Worldwidetrertetoopgrade toiling specifications 75% drivenby repairand mrwddaii; 15%RsidcMiai asd 10% commercial construction QxmtnwdemaM foentanoref^ comtet. carveitfuice, sccasnty Buldtng teulcsion: large saubaioawbaleteus. builtte/merctams, discributon and twites. Mechanic^ uBubtion: dtstribom. fabricators andnaattfactem b fte heaing. veadbuicn, power andpress tmhraras, ^pllffiKe andfire protec- rte* indusoies * Grovdnf! awareness ofenergy conservation ft kKreasingboifdsngpeiformanceregtdauonsinchc United KingdomandGermany Ej^anstaointoBcwgeographtcniarkcuondie European continentby hotnc buildmg preducu rail uudets * GFowbgawareneaofawrgyasnaervadon tootaung brand awarenw-ihtoughcxpanffed gktel marteQng righu to ihe hnkPanthes icon hnkfttu* mtsfenual teubiion featuring UsaflexTM fiber, adtbttaal product and applications currently w devefopmeor Rtsidensial msuboon: home fmprwsrmnt contractonanddo^t- youmltot. Addtuon^ ^pricanccis oaneotly in devdoptMM f use in OwenvCarak^'s hon building product* arid glass fiber businesses Woridwtdsdemajrift* products that last Growing awareness of energy cemrsvanon C^nsumwdemand forpoducu wfuch provide comfort. caiveflter,oa*c-of-tBe. sufrior ptafOrmarKe NeedftxsicreasediWtsn recoil sheff spa ftedtesuperwreossandp^wmancecharKWri** tks in new and e*(song n^ca!tons currently supplied by synthetic, peffoteoro-based ar>d ruturaf fibers ...... * CotnjxnitM World'sfca&flg peodocer of fetes tear maunafc used ste&ntpaites Pipe Sesjfcosibiefor Contpany's pipe business around the bofid Aaie/Peeifa: Sj^hgfcuard ft* development of new growth oppoounities mth* Asia/Pacifc regst Lteta America devetopmetofoew po^th opportunities mtfKljttin Amcttesn region Western Fiberglass Group Uni^oe eapaWrtKS In *mfffiewse edinotogyate s*na)f pte* operatic**, aborting a teased manufsetunagtemagy andftxpanstcfttee devnlnjsiQg countries PRODUCTS Markets/end uses pgtfA*ooVEfiS/oftOOTH ReutfoWDnens (ftdudxng rovings, riwpped smb tndc&y-pfocesssMts; wei-dropsawtdstoais and veil*; teitiJe yams Usedto 40pOfjOendase rattcasorsis eswitipfa fattteBte. teiuteg fctwoOTve andouci, oertspaa-manac, dtenv leal, emsewd, eSecotaa andeiecsswwcs.f&eropies, egb^atoustriic fiamew pipes, tfraeou^ wenposhe* art ^f^*rimae fibers Wort(hmde^ivar4fop^i>sAalasiinctuc&Lg Assign flexibility,increased Airab&ry metwwrgy saving; DrveR$nwrtofnwitteconomiesategbtaJ (Nftets M^^i&teseuxmdirve^ffwiiQihiidwcidrt emsttnes Ttertdtowardswntased substitutionofglass fiber te toretiteiuens) materials.suchas weed. iJaffartuflj erne) Como!rev-resmaw, large dsaawter, glau-remforesd plastic (GRP) pipe Industrial atecoaunestel water, citecnical and sewagetransport systems municipal and go-vem(Benta! inteurucoire pTOjwJjr Poptdaaion growth M^ttftasmerturedevelopmentVyga^arnmeou andprivate industry, especially in developing C-tes fibers forcompose applications; commercial ana residential frosldang isolation; mechanics] and other insolation products; lifg?diameter GRP pips Consbobbssv automotive, elecfromca. other matwf> lorinf industries: maps infrastructure pmjccss Worldwidedemand for products thut last including design ffc;sbda>', tncnswddurw'iisn and energy saving, Orow^aw^ncss ofenergy coriservituof) Rapid l/tfia&ractujv development Oms flies farcomposite apg4frima*sv<iiansctf nsuteioruxesktassri ate ceearoffCid bkfctfig insulaijoa; large diameter ORP pips, imported roofing shingle* Automotive, dawawa. projects WoridwRfe demote for pro&as that Us* tnclteiftg Ai^fleiw^.tereaseddwabtlfy Csaviinng^s^w^^e^cms&.siks) R^idintestntc4sttdevdc^Ben( a Ne*amRnKttoiateienovtewfmtfeveJoplsig OMrsrtes Residential ateceraroereial bu&ng ins*team Professfed*! cootracem b res(denial and commercial consouctam:reual outSee Ihcnaseddemrd&rteulahonpraduosln devdopsng countries Cosompeijnveae&sofsA^ieTpiniuop&^icvistn develop^tewtnes Vtfettia, -PirdT ua trfiofrfdirademrtrfFfberflosCprpcfauon. Financial Highlights Income Statement fiamillionsofdollars, exceptper sharedata and wherenoted,) Net Setee Gross Margin Income from ongoing operations Income from operations Net Income As a percent ofsales Per Share Information Fully Diluted Earnings per Share Net Income from ongoing operations Net Income per Shore Shares outstanding (in thousands) Fully diluted Balance Sheet fin millions ofdollars) Total assets Total debt Total other liabilities Total stockholders' equity Cash Flows (in millions ofdollars) Net cash flow from operations Net cash flow from investing Net cash flow from financing Net cash flow from asbestos-related activities Capital spending Net Sale* fin waHlons ofdeilan) *000 Ptvteetagt Income from Ongoing Operations (In willbu ofdollars) 400 QraMh firrumagr Year Ended December 31. 1994 1993 J992 * *351 $ 2,944 $ 2,878 8 819 $ 67b S 644 * 943 s $ 236 s * 189 s 6% 267 s 236 $ m 4% 229 213 73 39 $ 335 s 8 8.35 s 2.56 2.81 S $ 1.8? 1.67 60.025 49,410 48.844 Year Ended December 31. 1994 im 1992 9 3474 $ 34)13 s 3.162 $ 1412 $ uxw $ 1.099 9 2,742 s 2^78 $ 3.071 $ (880) $ (869) $ (1.008) Year Ended December 31, 1994 1993 1992 $ 361 s 9 (355) 9 178 % 9 (1235 $ 312 (178) (74) (59) s $ $ s 184 (134) (59) 8 9 288 s 178 s 144 Fully Diluted Earnings per Share (Ongoing Operations) (h dollars) 4.00 Oawth Pmtmasi 1992 tM 19S4 1 t OWfeNS cdkminc To Our Shareholders OtotHHiMr Q4* litMtiw Officer JVIany promises were made in Iasi year'sshareholderletter and J am happy (o report that, on nearly every one ofthem, Owew-Comiag delivered. The most satisfying was a sales growth of$400 million, die largestsince 1979. j We introduced new technologiesand products, oftanced productivity, earnings and revenues and expanded globally through newjoint ventures and non-dilutive acquisitions. Disappointments along the way secluded a toughef-ihan-anti^patedentry into FarHastmarkets and laggingprofitability in our roofing and window businesses. We never lostfocus, however, onour commit ment to build long-term value for Owens-Coming shareholders. To that end, 1994 marked the third consecutive year and 12th consecutive quarter that we achieved ourgoal of repotting higher earnings than the same period the yearbefore. Reflecting a five percent boost in productivity Owrns-Cdrmng's net income from ongoing operations, before special items, rose 35 percent to $159 million, or $3.35 per fully diluted share, compared to $ 118 million, or S2.56 per share in 1993. Net sale* for the year were $3,351 billion, up 14 percent from 1993's $2,944 billion. Tfreile numbers alone do not capture the full magnitude of the year's achievements. 1994 was a year in which Owens-Coming became increasinglyglobal, diversified andeven betterprepared io compete and succeed in the global marketplace. Today, 20 percent of sales are related totew construction in the United States. A. fail SO percentofsates are dnven primarily by businesses serving the worldwide composites and home improvement markets. We are externally focused on ourcustomers, our markets and on anticipating and responding to world trends. In our toe to be a $5 b&&mcompany by theyear2GCXX we are growing our core businesses,developing new technologies, introducing new products and expanding globally. Bringing Tetmlg* to Marks* By far ourmostdramatic technology breakthrough during 1994 was MirafiexTM fiber, the fira new fottn of glass fiber mnearly 60 years. Launched in September, Miraftexw fiberpromises torevolutionize the insula tion industry and compete wfoh synthetic, petroteuro-based and natural fibers in a wide range ofproducts. More than 30patents are pending ar>d the Company is aggressively stoking additional protection worldwide. 2 p~- Our first application is a home attic insulation product called PinkPfar* with MiraflexTM fiber. We are actively developing additional MiraflcxTM fiber applications and are particularly excited about its potential in ourcomposites business. Owens-Coming's second technology breakthrough of 1994 was a patented system formanufacturing roofing shingtes. The result, a line we call ProminenceTM, can be prexfeiccd fasterand more cost-effectively than the traditional laminates with which it competes. Launched in early 1995, it is expected to expand the Company's position in (he shingle market. With contracts signed in 1994, initial revenues forourrevolutionary AURATM superinsulation panels will be recorded in the current fiscal year. Customers include Whirlpool, from whom we recently received a significant repeat order, aid several refrigerator manufacturers in Europe. Another 1994 accomplishment was last April's re-opening ofour composites plant in Jackson, Tennessee. On-line foronly nine months rn 1994. this world-class, state-of-the-art facility is setting new standards forteamwork and productivity, Constructed with the latest in environmental controls, the plant Owene-Comtng 1994 Sales Profile Hmt tmprwrmt# 4 Otht'Hafha 36% USelfsOmsi^f ifcrU.S. 24% 90% Censmate* 20% recycles its own waste and controls its stack emissions to levels well below government standards. The plant will deliver even more to the bottom line in 1995 and beyond. i Global Expansion Owens-Coming w-as active last year in seeking and completing noivdiiutive first-yearacquisitions and new joint ventures. "Through these, weextended our global reach to 19 new locations. IX^eTvfudRfVfix* Sasr The Company's purchase last Tuneofthe insulation and industrial supply businesses ofUK.*fcased Pilkington pk con- Solosere becoiHlrrt) mcfeminelv diversified end glebe* wttfc 80 percent derived from sources outside tfe U.S. now construction marten. " "J....... * " tributed lo 1994 sales and earnings. Together with our project to increase the output ofourpknc in Vis6. Belgium, by 50 percent, the newly acquired f^Uities will be a springboard for growth in tandem with the pace ofEurope's demand for insulating materials, In the US., we acquired UC Industries, in&, a producerofpink, extruded polystyrene, foam insulation products that add an important new line to ourPink trademark. Wc alsocompleted the formation of Alpha/Owens-Coming, LL.C, ajoint venture chat is now the latest produccrofpolyester resms in North America. We broke pound on air firstrwo plants in China, established an insulation plant in Thailand and extended our drive tocapitals onthe $9 billion market for infrastructure pipe bydedicating ourjoint venture plant in Germany and announcing a newjoint venture in Spain. 3 Portfolio Actions and Challenges We nat csdy added new businesses in 1994. but fixed or sold others aspan ofourstrategic portfolio realign ment. Actions included the sale ofour underground storage tank business, closing ofourResol product line and the exchange ofourcommercial roofing business for the residential roofing business ofSchuller International, These measures enable us tofocus ourfull attention andresources on ourcore businesses and ourglobal growth agenda. In (Mir roofing business, sales volume increased in 1994 whiteearnings wen: disappointing due to price weakness in that market. The Company's window business achieved sales gains and productivity improvements in 1994 but has not yet reached the break-even point. V&are actively ad&essing these issues Owens-Coming Vision 2000 through new product introductions and improvements in price and productivity and expect significant improvement in 1995. 5i _________a Biinonsi In the area ofasbestos, case filings and resolutions in 1994 ir, ss tut,* 2000 were down from 1993. Wc remain confident hi the manageability of this issue as we pursue out growth objectives. '97 9) "94 The CompauT*! Vtafem for 2000 ft dmren by growth In <w* taurine****. 05 w<HI ihougH now tecHnelfrglee, new protfoets and geographic eapawston. Looking Ahead Owens-Coming emerged from the lan fiscal year dynamic, aggres sive and strategically focused, with new technologies and products that are uniquely positioned torespond to the worldwide drive to conserve energy, expand infrastructure and build structures with '95 '96 '97 96 99 '00 greater strength, rcsiltence andcaduriagvalue. Last August aiawell-aaeixied New York press conference, we introduced a new corporate promise: 0is-Cornmg: We Make The DifferenceTM The very essence ofthe Oweitt-Cotming brand is making a difference. Ourproducts and services can be expected to deliver greater value; our materials can beexpected to make products stronger, lighter and more energy-efficient; and our people can be expected to personify a commitment to customer satisfaction, individual dignity and shareholder value. As we continue to makea difference m the marketplace and in people's lives every day, we have set ambitious, but achievable, goals ofgenerating steadily increasing, profitable sates reaching $5 billion by the end ofthe decade. Wc know what we must do to get there, we are delivering and wears genuinely grateful for yoursupport Glen H. Hiner Chairman and ChiefExecutive Officer March, 1995 4 19 Not Location* la Hs aitasion to beThe teOrfd loader in all otMfceta in which It compels*, Owens Coming continues to capitalize on expansion opportunities aroundthe The Company added 19 new locations overtfw test vaar. resulting in increased geographic and market penetration and diversification of rmnoes. f OWENS CORNNG Global Demand Drives Worldwide Expansion ,i>e I !& itsmission tobe the world leaderin alt markets in which it comps^OwcnsOvriini; cc^itirtues to capitalizeonexpansion opporamitifis aroundtheglobe. ThiGanfeny's presence inmore than 30coumriea provides unparalleled teaefr and scale economies, including opportunities ofproduct and market intelligenceand sharedtechnological expertise. In 1994, Oweas^Conong added 19newlocations, expanding its global reach tteough oofi'tiitetiveacquisi tions and formation ofjoint venture alliances."The year was marked by significant expansion in Europe and AriVPadfic, inaddition toaszaregic acquisition and majorplant reopening in North America. During the year, global rights to the widely recognized Pink Panther kon also weresecured. Geographic and market diversification are at the heart ofdie Company s year 2000 goal of$5 billion in global sales. Saksoutside the United Stares areexpected to grow from 24 percent in 1994 to40 percent by the end ofthe decade. Product/Market Diversification In 1994,Owens-Coming entered the pink,extruded polystyrene, rigid foam insulation business wife its KXfMaon ofU.S.-based UC industries,inc., and reopened itsmodel Jackson, Tennessee, composite* pianl Idmeet growing worldwide demand b June 1994,tireCompanypim*ased the insula tion and industrial supply businesses ofUK,-based Ptikington pic. and is corre&tiy completing a 50percent increase in capacity at iu isolation plant in Visd Belgium. These actions will springboard the Company's growth in buildingproducts throughout Europe. In 1995. tireCompany is explcring oppemnides to extend its successful NorthAmericanretail franchisefor biakhng producttoEurope, and Uevaluating tire posraial for introduction ofits famous Pink brandon diecerement. Recovery ofthe Europeanecon omy isalso anticipated bocst sales of Owcas-Commg composite materials md pipeinfrastructure products. Use Pacific Rim and Beyond Owens-Commg*expansion in 1994 m AsiftiPacifk: wasdramatic,encompassing insulation and large diameterpipe, fit 1994, (heCompanydedicated its firs insulation plant in Thailand; began construction ofits first insulation facility inGuangzhou, China,he completed by mid-1995; Hid began activenegotiations fora third insulation plan to start-up bymkM99<x These additions established an immediatemarket presence for Owens-Oming's insulation products d promise attractive financial returns. Capitalizing on rapid mfraaracauredevelopment inthe region, Qweng'Coming also broke ground on hs firstwhollyowned pipe plan? in China, slated to open m'Changchun in the fust halfof 1995. In Latin America, where Owcm-Cornmgenjoys adominant position in glass fiber forcomposites applica tions, emphasis is on mowing market demand through increased production and process imovation, produc tivity improvements sad geographicextension, Owens-Coming aheady is successfully importing building products, including glass fiber shingles, into theregion, and is actively exploringjostf ventures in Argentina, Brazil,Chile andColombia. In early 1995,theCorrqarty acquired U.S,-based Western FiberglassGrov^ as a wholly-owned subsidiary, adding unique capabilities in small plant operations and small furnace technology to propel its focused manufac turing strategy and expansion ofinsulation activities into developing countries. 6 >* . -v-h.- OwonsGorniny expanded to 19 new locislkuts in 1994 o meet growing demand. Glass fiberproduced from rsw matenafv, here at Ota newly acrfukod St. Helens faclttty in Great Britain (far left), H manufac tured into various product applications and packaged for sfoment (center left!. Moving Qdekly through Owens-Coming's extcnsrve distribution network. such os this dock at tho Kitsons focflUy in Great Britain {left}, the finished glees fax* product reaches its final destination A technician htstaju Owens-Coming's Crown Pipe Insulation (this page), the U.K.'s leading pipe Insulation, which now offers the added benefit of a selt-seeiing overlap. OWENS CORNING Technology: Making the Difference An exciting new productor breakthrough technology is only as profitableas (he process that brings itto market. Owests-Commg's global Science & Technology team U highly proficient a*development ofnewtechnologies andproductsand rapiddevelopment ofmarket-ready applications. With a nearly $0% increase in R4tD spending overthe last five year*,the Company'sinvestment is payingoffwith new product introductions andnew applications tailoredtoexpanding glotef markets. T>*Company's aggressivegrowth and expansion strategy includes creative use ofalliances, engineering partnerships and joins development agreements to bring these newtechnologiesto market in record time. Minified Fiber Owens-Coming'srevolutionary MiraflexTM fiber is the first new formofglass fiber in nearly 69 years. Created wjihapfopnes&y bi-coa*pon?M Jedwcdcigy in which two different glass compositions are combined twoone fiber, MiraflexTM fiber will compete with synthetic, petroleum-based and even natural fibers in unlimited applications. Morethan 30 patents on tbs new fiber,iis applications and technology are pending worWwkfe. Thtfirst commercial application * PiukWw* frsulaksiwith MireJlex'fiber. expected toreveJutkraize the S4 billion glass fiberinsulation industry. Flexible, soft tothe touch and virtually itch-fret, the insulation can be com pressed into rolls 75% tm^kr than standard insulation. Introduced in *111994, the product ismanufactured at a new plant in Mt Nfemon.Ohjo, and will bemore broadly available inNorth America in 1995, AURA* SuperirwoMition Vi 1994,the Company perfected its new AURATM sypcriiMuJark wiaro panels of thermally-craftedglass fiber in a stamieassteel envelope. This breakthrough technology has the potential to revolutionhc the $27 billion global refrigerator industry. A prttotyperefngeratwusingofity AURA"4 soperinsuiation has 25% more internal capacity and uses op to 33% less energy. Injustfive montits,the Company developed asimilar prototypefortheEuropean market In 1994. WhirlpoolCorporationplaced a $5 ra&ktn tier for thisnewbreakthrough insulation, andrecemfy placed a significant repeatorder. Promhvonoe** SNngte* roofingshingle with theaesthetic appeal of8 high-style laminate shingle and thevalue, practicably and costeffectivenessofa threc-lafe. Produced using an exclusive axteioiogy for which patent applications havebeenfiled and broad patent prwetfic is expected, ProrninersceTM shingles were introduced to she retail market in early 1995. Composite Applications 71mCompanycontinues todevelopdiverse composite applications with advanced glass fibertechnology, ranging6om Shakespeare utiwyfries tosnow skis made with Advance*1* glassfibers. Looking Ahead Owens-Coming'S Alpha Laboratory was createdto advance quaritum leapachievements, explorenew commercial applications andreducecycle time forintro ducingnew products to market Engineering partnerships with world-class firms willensurefurther productivity enhancements and standanfite construction and replicahifiryoffacilities aroundthe worfdinrecordtime. 'MV*. 'S '1. Rupirt commercializa tion oi technology create* nfw products' Prominence*"roofmo shtogtes, creeled with tintakthtough tech nology, me inspected in an if{4nr bleml study Hat tfHU, Sewnlists ecemtne the wrap pattern of s-2 Glass fibers on a reinforced cylinder at the Science & Tnehnolpgy Center {cemcr Info. Using AURA'" supezinsula tion panels (left),a prototype refrigerator increases rntwief capacity 25% and saves upto 33% in energy consumption. At the new Mirefie*'fiber plant In \ tti. Vemon. Ohio, PinkPA/*' insolation with Mtrafiei'*' fiber re tested for recovery (this page). f OWENS Corning Building "Pink" Houses Around the World Owens-Coming is widely recognized for Its Panther jam, trademark color Pink andfamous pktk FibeegUs* In hofnebisidingprvdactsm&bcu t#>e COnpasty1*fear*extendstoroofing dongles. pink foam insulation,pink famewrap, windows and otherhome With ?5&ofretail sates byhome improve menttrends,demand fw home building products is on ifcerise,Tbo $247 &!&gtobalhomeimprovement market ts expected to grow 7% a 1995andover 50% in the U.S. overthe nextfive years, surpassing new construction sales for die first time in 1995.The Baby Boot population, the aging housing market in North America, enhstedemphasison quality oflife, comfoti and security andgrowing awareness ofenergy conserva tion around theworld are driving consumer demands to which Owens-Coming isresponding. Strategic Positioning In 1994, Owens-Coming implemented a building * products expansion strategy tocontinue toaggressively respond toconsumer needs and increase market share. Nor* America and tteough 10 of the lop 15 home centers worldwide.The 1994 acquisition ofDebased UCtodtistries-letc^increasedglobalpresence with a tine ofpink,extruded polystyrene,foam msulaon products ticereed for manufacture m ninewrier locations around the world, ittiuding Canada, Enrope, theMiddle East sad Asia. Emphasis atcustomer supportincludes re-store training, databasemarketing and *e Company's J-800-GET-FINK hotline, providing solutions forthe do-it-yourselfer and professional contractor. Now Product Launches OwenvConing isintroducing new product lines and categories through product development, acquisitions and rebranding ofproducts manufactured to the Company's rigid specifications, including: PinkP/tts* insulation featuring Miroflex7* fiber. Extremely resilient, the irsulatkm can be com pressed into roils 75%smaller than standard insulation, making a easier to store, transport and install FOAMULAR* pink, extruded polystyrene, rigid foam insulation. IVoduccd with die proprietary HYDROVAC process, foam products comeina both in varietyofproducts offered and ki global markets served.The Company's strategy to leverage and build onOwens-Coming's strong brand cqufty, taking full advantage ofits extensive retail distribution network to move new products tomarkets arotmd (he world. As do-it-yourselfcustomers increase in number. Owens-Coming ccraktues to expand its pretence with national and independent retail chains and home centers TheCbmpany scliz to 60% oftd! majorretatfoutlets in commercialsvdakhstrial insulation sidfarxm- insuiation pwposes. m ProminenceTM, anewroofing shingle, combining (heaesthetic appeal and performance ofa laminate shingle with fhe value and practicality ofa three-tab. PBfcWrapTM, ahousewrap product designed to preventairinfiltration into tire home. * A new line of Owens-Coming braided vinyl win dows, extending the Company's product offering for residen tialand lightcommer cial applications. n filii'r* 'lot ri<"? lire at ikto beyiii rung of U manufacturing chain lint results in more han 40.000 glass fiberlinJorcod products. >wens-Cmlog's glass ibers flr<; processed ito riiflirmnt forms at bo Amarillo, Teuts, iiant for shipment to irnduct manufacturers senfer right). A glass ibernMnrrod part is ospected for condition and quality at the maiv pfacturer's plain before reaching* product assembly Kne jreght). 7ho final product, a 1995 Ford Mustang, receives a finishingpolish before rolling intothe showroom (thispage). >" 'h/" 1 . :s *-- f OWENS CORNING Expanding the Demand for Products that Last As worldeconomies develop,markets merge andcon* atmere* tastes becomeever-discerning, Owens-Coming, long knowsasaproducerofpremium buikting materials, is ina uniquepetition tocapitalizeon fe positiQQ as aleading producerofglass fibers usedin composites- Foundin everything from computers k> municipal water pipes, composes contribute to better products and higherliving standards the worldover. Composites arc fabricatedmaterialscomprised oftwo ormorecomponents, such as plasticrose; and glassfiber, wvd used to replace traditional materials like wood, aluminum and steel, in myriad application*. industry, propelledby its global manufactutingand materialssourcing network, technical expertise, lowcos production, strong distribution charadeand brand recognition. Oweas-Cwrong's glass fiberbusiness also enjoyseperatstgsynergieswitha theCompany, supplying iu pipe, windowsandroofing operations. PooniftiBrawh Tounderscore innovation and versatility, an ingredient brandingarMegy waslaunchedin 1994, beginning with ajoint effort wi*themakerofK2 skis. K2*srecent introduction ofdie new Missile Ski, tagged to identify Owens<bming's AdvantcxTM fiber, was Responding to worldwide demand forproducts flat ]>U this materialscombination providesnumerous advan tages,fn*ndesign flexibility to improvements at durability, energy savings andcost reduction. 40.000 EtkMJm. Products Glass fibercomposites are fotmd m morethan 4QQQ end-useproducts. The advantages are sodramatic that, typically, cncea product or m&ssy converts touse of composites, the change is permanent Glass fiber composites virtually surround us. from cars, bossand airplanes, to everyday uses including vinyl flooring, vertical Winds, small appliances, utility poles, roofirtg jfcngles and packaging tape. Because oftheir relatively simple manufacturing process, tubs,showers and related building products an:often among the fust successful applications for composites in developing coufitries. In 1994, Owens-Comingexpanded its strong number one position m the $3.7 Wilton glass fiber the most successful launch in K2's history. The Company also is a co-sponsor of the 1994/95 Freestyle World Cup siding competition, helping to generateawareness ofsbsandequipment made with glass fiberami underscoring theperformance and Asa workl leader.Owens-Coming is workingto durability ofOwens-Comingproducts. Tbe Company's developinnovative initiatives torecycle ghcomposites Advmaex* S-2 Glass*, HoikxV*tad EOtGLAS* and reduce solid waste. TieCompany recently acquired brandsofglass fiberare synonymous with topquality siequity position m and management responsibility for comporire materials, Phoenix Fibreglass, aCanadian-based recycling entity, Canodnistinwuoetfdontogncltofnserelyhwipith an industry recycling coalition in EuropecalledRCOM, Useofcomposites widatthe developed markets ofEurope and NorthAmerica continuesto rise and demand in Asia/Pacific and Latin America represents significant growth opportunity. The Company is pedsed to meet this growth through expansion of its capacity for production worldwide, led by the rc-opening of its model plant in Jackson,Tennessee. Owens-Coming is expand ingthe boundaries ofthe composites industry,with confidence that the long-term potential for new applica tions and new materials is virtually limitless. n / OWENS CORNING Working Toward a Common Good The spiritofOwens-Cbming reaches ferinio the global communities withwftkb U worts. TheCompany strives lenhance endconch these communitiethrough a varietyofcivicand eoviroarnemal projects, tteough monetarycontributions, donations ofmaterials, expense and vc&sneertirne. Thelargest shareoftheannual givingbudgetis designate) toheal* aoJ human services, withtheUnicoi Wayreedvtogover$1 nulliMddiarsinCai^aRywd employeecontributions in 1994. Over 30otherhealth and human servicesorganizations receive support aswell. The Companyalso supports cultural programs encompassing public television, museums, musk.ballet and (hearts. Think Globally, Act Locally Though mcreasmgly global in scope, Owens-Coming realizes local facilities oftenknow best die needsof theircommunities.Atthe local level, hometess and low-income bousing projects generate considerable support. Employee volunteer teams worked with Habitat fixHumanity, feuQdtegmd insulating1 toeas ofhomes around theeotsnay, iochidxtgpart ofanIndianReservation andRocddamagedhomes m southeastTexas andthe Midwest. Shingles end insulation wens to themountainsof Katfucky through theChristianAppalachi Project. Alsoin 1994, attortak?) o/overSU million worth of VinkPtuS*feg^rw>, nearly 160,000roils, was delivered toGSfUInKind Americato ksu&e morethan5500 hones. Support ofeducation isalsoamajorpriority. Local facilitiesparticipate in Ariopt-A-School andJunior Achievementprograms,where volunteers develop school programs,read to and tutor students.The focus H on "a?*risk" students--those most likely to drop out before graduation. College-boundchildren ofemployees benefit fromat Owens-Coming scholarship foundation, TbeWorWAround Ur Owem-Conungis firmlyccsnmmed to theenvironment, trough education andaction. In oneH994's most successful programs,an elementary school readertitled A Raindrop'sJourney teaches awarenessofthe environmemandout interdependence with earth. More than 40^00cq?s have beesdonate* m Not* America and Baope and the bookhasbeen translatedintoBench std so) Spanish. Corporatesupport continues forenvironmental programs, includingrecycling, beautification and clean up projttts andenrironmeata! grants. Awetlands regentrificaticmreceived$30500and volunteerlabor, from selectingenvironmentally friendly raw materials to generatingless waste a:each plant. Ovrens-Coming tikes seriously its commitmenttoenvironmental stewardship A Global CommunityToward A Common Good Cbrporate giving andresponsibility docsn't stepat the shores ofNorth America. Owens-Coming facilities around the worldare activeand generous contributors to anenragingglobal society. TheCompanyand Usemployee* provide help whereverand whatever theycan.fromrefrigerator donations in Brazilto RocdreliefinCtaa. In Botswana. Owens-Oarting hascomrrased$75,000to ahospital naar itsnewCabarone pipeplat, for medical equipment, renovation arsd stafftraining,ii) 1994, Gwers-Commg's corporategivingprogram surpassedall goalsin outreach toworld communities. The Company, togetherwith its employees aroundthe world, strives tomakeadifference toward the common good U \' * * */ Ja T Jr i ~t. w^0A. -' >%. a - -';;^3SS '* -TV** ' : ,r;': V- y?\ ^ I #.^- e*. --"V Tbe Pink Parrtticr and chairman (Men Mtner jom mpioyec volunteers as they break ground 4M* a Habitat |of Humanity project (for feW. Administrative Secretary and Junior Achievement volunteer Helen Jodouin talks with third graders about creating and running the*own newspaper (center left), flood victims m Guonyahoy, China (lefts, received fmmkii aid throughemployees at the Company's nearby insulation plant. Manager of Community Relations Emerson Ross and Manager of HA. Cash Management Cbfh Harperread aloud A Raindrop's Journey, helphtg children loam about the environment Itbis panoi. Management's Discussion and Analysis Net Scries to niSuto JOaUeni ifiCC 'W *a Income from Ongoing Operations* to Bottomsof4oOan) 400 92 93 *94 fiickaajtpt&aiarms Net Income (lmJU&u<4doUan) 200 MO 92 '93 *94 16 Results of Operations Netincome forthe year ended December 31,1994 was $159 million, or$335 par share, compared to net 0Komeof$131 millk>a,cf$2i per share, and ik aeon* of^ million* or $1-67, for the years ended Decenber31,1993 and 1992, respectively. The 1994earnings grow* reflects volume, price and produc tivity galas, aswell as (he benefits of 1994 acquisitions. Net income of$!59naHn for the yearcodedDeomberS/, 1994 includes the following ofisefttag special terns fromthefirstquarter; an after-ex gain of $123 million, or$2.45 per share, reflecting a change to the capital method ofaccounting forthe rebuilding ofglass melting facilities; an after-taxcharge of$85 million, or$1.69 per share, for productivity initiatives and otheractions; a non-cash, after-tax charge of S10 million, or $.20pershare,to reflect adoption ofStatement ofFinancial Amounting Standards (SFAS) No. 106. *`Empk>yere' Accounting for Postrctireroem Benefits Other Than Pensions." forplans outside the United States; and a non-cash, after-tax charge of$28 million, or S.56 per share, to reflect adoption of SFAS No. 112, ``Employers' Accounting for Postemployment Benefits." Please see notes 5,6 and 7 to the Consolidated Financial Statements. Excluding special items, net income for the year ended December 31,1993 was $U8 minion, or $2.56 per share. The 1993 specialitems inefckfed: a crtdkof$26 million, or$.53 pershare, fortteottNtJarhv effect ofadopting the accounting standard for income taxes {SPAS No. 109X a one-time gain of$14 million, or $29 pershare, reflecting a tax benefit resulting from a revaluation ofdeferred taxes, offset, in pari, by an increase in the Company's corporate tax liability, necessitated by the increase in the federal statutory tax rate; an after-tax charge of$5 million, or $. !0 perbbare, for the write-down of the Company's hydrocarbon ventures to theirnet realizable value; and a charge of$23 million, or $.47 pershare, for the restructuring of the Company's European operations. Please see notes 5 and 9 to the Consolidated Financial Statements. Excludingspccialitwns.netincwnefbrtheyeiErendedDecembftrSl, 1992 was $83 million, or $1.87 per share. Ibe 1992 special items included an after-tax chargeof$11 million, or $.22 pershare, to reorganize the Coo^any's Building Products segment and to centralize dieCompany's accounting and information aygems, afa net cxaaatifoary gamofSt miiikxi,orSuperstore, restoring1 from the utilization oftax loss carryforwards, partially offsetby a loss cm theearly retirement ofdebt Please sec notes 2.5 and 9 to the Consolidated Financial Statements. Net sales were$3,351 billion for die year ended December 31.1994, reflectinga 14% increase from the 1993 level of$2,944 billion. Net sales in 1992 were $2,878 billion. Approximately 10% ofthe 1994 growth in sales resulted from volume and pricing gains, white the balance came from acquisitions. Please see note 4 to the Consolidated Flnsiciai Statements. Grossmargin for the year ended December 31,1994 increased to 24%, compared to 23% and 22% in 1993 and 1992.respectively, reflecting volume and pricing gains, as well as productivity improvements. Earnings before interest and taxes (EBH) from ongoing operations increased to $343 million in 1994, from $267 million in 1993 and $229 million in 1992. Operatingexpenses increased by $147 millkm in 1994 due to restructure costs of$89 million, final costs of approximately$20 million associated with the administration ofdie Company's former commercial roofing business, marketing and a&ninistrative costs from acquired businesses ofapproximately $20 million, marketingcosts associated with the Company's new global brand awareness program, and additional costs ofexpanding into new global markets. In the Building Products segment, sales increased 17% forthe yearended December 31,1994 compared so 1993. Tills growth reflects increased demand and pricing, as well as increased sales ($134 million} resulting from tile second quarto* 1994 acquisitions of UCIndustries, Inc. and the United Kingdom-based insulation and industrial supply businesses of Pilkington pic ("rhe U.K. acquisition"). Excluding the charge for restruc ture and other initiatives, income from operations for Building Products increased 47 percent in 1994, reflectingearning* growth m the United States, Europe and Canada. I Industry Segment Data (In mtihaw ofdfiUan} Met Sale* $3451 Building Products sales in die United Slates increased iS% over the 1995 level, led by an increase m the Company's hone improvement and new construction insulation businesses. The Company is completing die integration of its June 1994 U.K. acquisition, and is adding a second production line at ns insulation plan in Vu, Belgium, which is scheduled forcompletionduring foe fest halfof 1995. In January 1994, foe Company exchanged its commercial roofing business forSchullerhsemationaTs residential roofing business. This transaction tripled foe Company's capacity toproducelugh-yle laminateshingles, Roofing sales volume increased during 1994 while earnings were disappointing due to price weakness in that market. The window business achieved sales gains and productivity improvementsduring the year, brn has notyet reached break-even During the second quarter of 1994.theCorapsiy established a joint venture to manufacture insulation products in Guangzhou, The People's Republic ofChina. Proven MfiutuK'iai Mownth tsxra Jt,07B Income from Operations* <208 In the Industrial Materials segment sales increased %% during 1994 compared to foe 1993 level, U S, composites sales grew !3%. driven by continued demand in die automotive sector and a broad range offoe Company's industrial markets. While the April 1994 reactivation offoe Company's Jackson, Tennessee plant increased the Company's capacity, the Company continues to import.products into the U.S. from other worldwide operations, in order tomeet North American demand forthe Company's glass fiber reinforcements. During foe third quarterof 1994, the Company entered into ajoint venture with Alpha Corporation ofTennessee, whereby foe (wo companies combined their existing resin businesses to form Alpha/Owens-Coming, L.L.C, foe largest manufacturer ofpolyesterresins m North America. The Company contributed two manufacturing plants (Valparaiso, Indiana and Guelph, Ontario) and owns a fifty percent interest in thejoint venture. Please see note 4 to the Consolidated Financial Statements. In Europe, theCompany's composites operations benefited from economic improvement. Increased demand and foe effects ofproductivity initiatives resulted in positive income from operations for foe fourth quarter of 1994, The Company expects the European economic recovery to continue in 1995. During thesecond quarterof 1994 foe Company dedicated a uewjoint venture manufacturing plant for giass-reinferred plastic pipe in Mochau, Germany. Construction is cuneotiy underway on a new manufac turing plant for glass-rcutforced plastic pipe in Changchun, People's Republic erfChina, The Company also announced foe formation of a newjoint venture manufacturing plant for giass-rdnfbrced plastic pipe in Canaries. Spain. Prvdueu Materials $t8B <109 #lsnirf inrnr;neat oan&silofo Late in foe fourthquarter of 1994, foe Company completed foe saleofits underground storage tank manufacturing business. This sale, combined wjfo foe closing offoe Company's Resoi product line, the exchange ofthe commercial roofing business for Schuller International's residential roofing business, and the establishment ofa resins and coatingsjoint venture, completes the Company's previously announced portfolio realignment and allows foe Company to focus its resources and attention on core businesses and global growth. Please see note 4 to die Consolidated Financial Statements. The Company's cost of borrowed funds for foe yearended December 31.1994 was $5 million higher than 1993 dueto increased borrowing and higher interest rates during 1994. Please see notes 2and 3 to foe Consolidated Financial Statements. During 1994. foe Company's Canadian operations generated operating income sufficient to utilize all Canadian tax net operating loss carryforwards. At December 31.1994. certain offoe Company's foreign subsidiaries have tax net operating loss carryforwards ofapproximately $2? million, At December 31,1994, foe Company has $464 million in net deferred tax assets, all ofwhkh management expects to realize through income from future operations. Please see note 9 to the Consolidated Financial Statements. In September 1994. the Company announced the development of MiraflexTM fiber, a new form of glass fiber developed by combining twodifferent glass compositions into one fiber. Miraflex*' fibers are flexible, soft to the touch, virtually itch-free, resilient and form-filling, characteristics not normally associated with glass 17 TTtSSSSBBSS Geoffr*ph5t Sogmont Data fht mdlttos ofihfem) Net Safe* Bt/fliMtaws $2^47 'B'op# $S37 BCv&iffMiO&v $2? orinorganic fibers- Thefirst plication of Miraflex* fiber is a home attic insulation and is being introduced in select North American markets dining the firaiquarterof 1995. During tire fastquarter of 1994, the Company announced productivity initiatives and other actions aimed at ttdttcatgcastsandeahancwg speed, focusand efficiency These iuiliarives includedeliminating nearly 400 positionsworldwide, consolidating the corporate engineering and research and developmentUnctions at the Company's Science and Technology Center in Granville, Ohio, and consoKdating the Company's field sales and administrative operations. Other actions incto&dexiting approximately 60 leased facilities worldwide, contsiuingthe rcatignmem of the Company's product lines said manufacturing facilities worldwide, outsourcing various corporate activities, andexiting non-strategic businesses. The Company expects to realize the full benefit ofthese initiatives beginning in 1995. Please sec notes 1 and 5 to the Consolidated Financial Statements Liquidity, Capital Resources and Other Related Matters Cash flow from operations, excluding asbestos-related activities, was $361 million for 1994, compared to $312 million for 1993, Total receivables at December 31,1994 were $5 million higher than the December 31,1992 level due to an increase in sales, offset in pan by the sale of$S0 million in receivables which occurred late in December 1994. An additional sale of $50 million in receivables was completed eariy in 1995. Please see note 20 to the Consolidated Financial Statements. Income from Operations* *295 At December 31, 1994, die Company's net working capital was negative $143 million and its ament ratio was .87 compared to negative $49 million and .94 at December 31,1993, and $123 million and 1.2 at D&cember 31,1992, respectively. The decrease in`!994 was primarily due to increased short-term borrow ings to finance the UK. acquisition. Excluding the impact ofthe short-term borrowings to finance the UK. acquisition, the Company's net working capital was negative $33 million and its current ratio was .97 ax December 31,1994. mvttodtoHI M Steep* Ca*fe cutfOlAtr C2B3 $18 $27 VodnOtsiaprsegmx: The Company's total borrowings si December 31,1994 mic $208 million higher than at year-end 1993, primarily due tothe UK. uquMitioo,capital expenditures, and asbestos payments (net ofinsurance pro ceeds and taxes). Inconnection with the secondquarter 1994 U.K. acquisition, die Company established, effective June 1,1994, a $110 million 364-day ewfit facility with a syndicate ofbanks led by die Baltic of New York, in die third quarter of 1994, the Company amended its long-term U.S. loan facility, led by Credit Suisse, to increase the available lines ofcredit by $100 million and also estab&dieda Canadian credit facility with a syndicate ofbanks, led by Credit Suisse Canada, saving as agent, replacing *c previous facility which expired in July 1994. The new facility has acommitment of95 million Canadian dollars (68 mU&on US. dollars) andexpires in October 1997. As ofDecember3j, 1994. the Company had unused lines ofcredit of$293 million available under long-term bank loan facilities and an additional $91 million under short-term facilities, compared to $376 million and $115 million, respectively, at year-end 1993. The decline in unused available lines ofcredit reflects die Company's higherborrowings and an increase in outstanding tetters ofcredit, supporting appcab from asbestos trials, which reduce credit availability under the Company's long-term US. loan facility. During thefourth quarter, theCompany issued $140 million in 25-year bonds at an interest rate of9.814%. Subsequently, in a separate transaction, tire Company sold a put option tothe holderofthe bonds allowing tire option holder to require the Company to purchase a portion of the bonds for $79 million on May 28.1995. During January 1995, the Company received, from an option holder, a notice of intent to exercise approximately 30% of these put options. Please see notes 2,3 and 16 to the ConsolidatedFinancialStatements, Capital spending for property, plant and equipment, excluding acquisitions, was $258 million during 1994. At the end of ! 994, approved capital projects were $98 million. The Company expects that funding for these expenditures will be from the Company's operations and external sources as required Gross payments for asbestos litigation claims during 1994, including $56 million m defense costs, were $215 million. Proceeds from insurance were $87 million, resulting in a net pretax cash outflow of $128 18 Tot* (lam 3.7SO 3jX I2i' ISO no o c (It 2< l I itat As*ets mittetuetf&ilsnl 92 '91 *t4 miBien, or $77 millionafter-ax. During 1994, the Company receivedapproximately 27,500 new asbestos personal injury cases and dosedapproximately IS,300cases. Over die next twelve monthsB die Company's total payments forasbestos litigation claims, including defeasecosts, are exposed tobe approximately $300million. Proceeds from insurance of$325 million are expected to be available to coverthese costs, resulting to a nttpn^cafooutffcw of$17^ million,or $105 mifiica afrer*tax. Please see note 21 lo the Consolidated Financial Statements. The Company expects funds generated from operations, together with funds available under longand short mn bank loan facilities, tobe sufficient tosatisfy its debtservice obligations under its existing indebtedcess. as well as its contingent liabilities for uninsured asbestospersonal injutyclaims. The Company*5 896 Convertible Junior Subordinated Debentures (Debentures). $1725 million of which were outstanding at December 31,1994, are redeemable, at a premium, at die Company's option. The Debentures are also convertible, at the holder's option, into shares ofCompany common stock at a conver sion price of$29.75 per share until maturity or earlier redemption. In total, the Debentures are convertible into approximately 5.8 million shares ofcommon stock, which shares are already reflected in the Com pany's folly diluted earnings per share calculation in February 1995. the Company announced its call for redemption on March 13,1995 ofthe $50 million bearer tranche ofdie Debentures (BearerTranche). Provided foe price ofCompany common stock exceeds $31.90 (Cafo Equivalent Price) ax the time of conversion, Bearer 7ranche holders who convert will receive stock (plus cash for fractional shares) with a market value greater than the cash payable upon redemption. Tb fund any cash redemptions offoe Bearer Tranche, the Company entered into an arrangement with an unaffiiiaed financial institution (Backup Facility) giving the Company the option to sell tosuch institution. &t foe Cadi Equivalent Price, any balance ofdiscommon shares into which the Bearer Tranche is convertible (approximately 1,7 million shares) which are not used for conversion. The Company will consider on anongoing basis whether to call any additional Debentures for redemption. Aspart ofsuch consideration, the Company will evaluate sourcesof funding for foe redemption costs ofany Debentures that are notconverted, including use ofarrangements like the Backup Facility orotherwise involving issuanceofequity securities. The Company has been deemed by the Environmental Protection Agency (EPA)to be a potentially responsible party (PRP} with respect to certain sites tinderdieCbmpreheashcEnvironmeeSai Response, Compensation and Liability Act (Superfund). The Company has aHo beendeemed a PRP under similar state or local laws, including two state Soperfond sues where the Company is the primary generator, fa otherinstances,otherPRPshave brought suits orclaims against the Company as a PRP forcontribution under suchfederal state or boa] Dws. During 1994, foe Company was designated as a PRP in Mich federal, sate, focal or private proceedings for fivadditionalsites. Ac December31.1994,a totalof38 sock PRP designations remained unresolved by the Company, some ofwhich designations foe Company believes io be erroneous. The Company is also involved with environmental investigation orremediation at a number ofother sites ai which it has not been designated a PRP. The Company has established a $23 million reserve for its Superfund (and similar state, local and private action) contingent liabilities. In addition, based upon information presently available to foe Company, and without regard Co foe application ofinsurance, foe Company believes foal, considered in the aggregate, the additional costs associated with such contingent liabilities, including any related litigation costs, will not have a materially adverse effect cm the Company's financial position or results of operations. The 1990 Ckan Air Act Amendments (Act) provjcfe foot foe EPA will issue regulations on a numberofair pollutants over a period ofyears. Until these regulations are developed, the Company cannot determine foe extent to which the Act will affect h. The Company anticipates thy its sources to be regulated will include glass fibermanufacturing and asphalt processing activities. The Company currently expects glass fiber manufacturing to be regulated by 1997. Based on information now known to foe Company, including the otfure aod limited numberofregulated materials it emhs, foe Company does not expect the Act to have a materially adverse effect on foe Company's results ofoperations, financial condition or long-term liquidity. Nine-Year Summary of Operations (Inmillions ^dollars, except sharedataandwhere noted) 1994" 1993" 1992" 1991'" 1990" 3989** 1988* 1987n> 1986* Nee Safes *3,351 $ 2,944 $ 2,878 $2,783 $ 3.069 $ 2.964 $ 2,798 $ 2,857 $ 3.609 Cost of Safes Marketing. Administrative aad OtherExpenses use 618 2366 373 2^34 366 2,186 1,171 Z3G3 414 2.161 323 1.999 278 2.129 258 2,756 619 Scienceand Technology Expenses 71 69 65 $4 58 48 44 43 90 tecosR (Loss) ftwn Operations as* 236 213 <) 293 432 477 42? 144 Cost ofBorrowed Funds S4 89 no 131 165 166 170 221 94 Income (Less) before Provision for Income Tkxes 132 147 103 <759) 128 266 303 343 36 Provision (Credit) for IncomeTaxes 68 47 33 (238) 58 103 127 136 30 Net Income (loss) 169 131 73 <742) 73 172 189 200 16 Net Income (loss) per Share (Fully Diluted) &35 2.81 1.67 (18.13) 1.73 4.08 4.51 4.81 0.49 Weighted Average NumberofFully Diluted Shares Outstanding (in Thousands) 50.025 49.4JO 48,844 40.924 42,019 42,170 4156 41.583 3J.776 Net Cash Plow from Operations 361 312 184 264 361 395 360 290 4J6 Capital Spending 258 178 144 114 146 143 145 106 177 TccaJ Assets 00 3.274 3.013 3.162 3,511 1.807 1.924 1,596 1*590 2,187 Total Debt Average Number ofBnpfoyees (in Thousands) 1.212 17 1,004 1.099 1,172 ~T~~..... 17 17 17 1.300 18 1.482 20 1,444 20 1.635 21 2,469 30 /a) Duringthepmquarter of1994, the Company recordeda$117million charge IS$5 millionafter-tas)forproductivity initiatives andotheractions. TheCompany alsorecorded* $10millionafter-tax chargeforthe adoption qfSFAS 106, `Employers' AccountiagforPostretirement Benefits Other Than pensions" for its rton-VS.plans,a523Bullionoficr-ta*chargefortheadoption ofSFAS212, "Employers'AccountingforPattemptaysneni Benefits,"anda$!23million after-tax creditforthe changeinaccounting methodfor rebuildingfurnaces. (bf During 2993, theCompanyrecordeda $23 tmllionchargefortherestructuringofitsEuropean operations,an58million charge (SS million afkraax)for the writedown ofiuhydrocarbonventures totheirnetrealizable value,e $26 million creditfistdieadoptioncfSFAS109, "AccountingforIncan*Taxesf enda $14 adiUoncteditfbr themeluetiatcfdeferredtaxes. k}Cricringi992.AeCompa*syrecord^a$l6maion<Aarte<Xllnuibonafie^iaaStoreor%arizndrxOsnptstefs&d'^,ngfxo^cexmpeHa^ toctnsniheAe Comp^fasc9uniingB^ii^bmatmspttms. The alsorecordedq netearaardimry gate of$l mtiUonrekdringftoffi ike utiHiORMoftaxic&s carryforwards,pardaily offsetbyalossonshe earlyretirementofdebt. Id) During 1991, sheCompany recordeda non-recurring $800million chargefor unassertedasbestoslitigation claimsamia$227million afier-ios charge, or $5S5pershare.fbr sheadoptionofSFAS 106, "Employers1 AccountingforPostretiremenBenefits Other ThanPensions"forits US.plans, (e) During 1990, theCompanyrecorded a $65 million restructuring charge. tf) During 2989, theCompanyrecorded anadditional$SOmillion in itscastingasbettos-relateddebts reserves,a 150million creditresultingfromaseulemert reachedwtih theIRS.andarestructuringcharge of$30 million. fglBeginning in thefourthquarterof1989, theCompany'sconsolidatedfinancialstatements include theresultsofTibergbs Canada. Inc. Ik) During 19$8,the Companyrecordedan $8millionearaordiTiary lost resuhingfrom theearlyretirementofdebt. {>) During 1987.the Companyrecordedagain of$141 million resultingfrom IkesaleoftheAerospaceandStrategic Materials Groupanda$20million taraonHnjrylotsresultingfrom theearlyretirementofdebt. (j) 22uriog t9&>. dteCompany recordedarestructuringcharge of$700mdlion. (k) During 2993, the CompanyadoptedtheprovisionsofFIN39 which requireiheCompanytopresentseparately in itsbalance sheetitsestimated contingent liabilitiesandrelatedinsuranceassets. 1992 and 1991 assets have been restatedto conform with the 1994 and1993presentations. Price Range of Common Stock First Quarter Second Quarter Third Quarter Fourth Quarter 1994 High Low 46 36% 36% 33% 33% 30% 30% 27% 1993 High Low 47 45% 4554 49% .. 34% 36% 40% 42% 1992 High Low 39% 37% 36% 36% 22% 29% 29% 27% To the Stockholders ofOwens-Coming Fiberglas Corporation: Report of Independent Public Accountants Wehaveaudited the accompanying corsolidaied balance sheet ofOWENS-CX)RNING FIBERGLAS CORPORATION (a Delawarecorporation)and subsidiaries as ofDecember 31, 1994Bid 1993,aidthe related consolidated stateaefts of moane,aockhoidas' equity and cash flows foreach ofdie ita*jean mtheperiod ended December 31,1994. These financial saememsare the responribifity ofthe Company's manageaeGL Ourresponsibility is to express anopinion on doefinancial statements basedon our audits. \VbcggK3tKtedour^riasm^^gdarKg 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 ofmaterial 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 accountingprinciples used and significant estimates made by management,as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonablebasis forour opinion. Inot?opinion, the financial statements referred to above present f&iy, in all material respects, the financial position of Oweas-Cbmiog Fiberglas Corporation and subsidiaries as of December31,1994and 1993,and die results oftheir operationsandtheircash Bows foreach ofthe three years in theperiodmdedPecetribg 31,1994, io conformity with generally accepted^counting principles. AsdiscussedinNotes 6,7, and 9 to the consolidate] financial statements, effectiveJanuary i, 1994, the Companychanged its meted*ofaccounting forfurnace rebuilds, postretiremen* bearfrts otherthanpensions foritsnon-U.S. platband postemploynicni benefits, and effectiveJanuary 1,1993, the Companychanged its method ofaccounting for income taxes. ^2^Atc-o L'V4L4AAJ*r$ LLfi Management's Report The financial statements ofOwensComing Fiberglas Corporation ami subsidiaries havebeenprepared by managemem inconformity withgenerally accepted accotsiting principles. Msiageotent uses isbestinformedjudgments to ensure thatthese statements fairlyreflectdie Cbmpany's financial position. Fmandal information contained elsewhere in this annual repotiscowisteat wife the financial statements. The Company maintains a system ofintejTuti accounting controls designed toprovide reasonable assurances that assets areprotected from improperuseand thattransactions are properly authorized and recorded The Board ofDirectors pursues its responsibility for overview ofthe Company'sfmndd statements through Us Audit Committee, wlticb is comprised ofdirectors who are not officers or employees ofthe Company. The Audit Committee meets periodically withmanagement, the Company% internal auditors, and die independent public accountants to review and assess the activities ofeach is meeting their respective respon sibilities. The independent public accountants and the director of internal auditing have full and free access to the Audit Committee to discuss the scope and results oftheir audit work, the adequacy ofinternal accountingcontrols, and the quality of management's financial reporting. fa Ss Gten R Hmer Guirrnan and ChiefExecutive Officer David W. Devonshire SeniorVkc President and ChiefFinancial Officer Jarawy21,1995 Tbkdo,Ohk> Domenico Cecere Vice Presidentand Controller 2! ......... J.IJJMIW4UP1 Summary of Significant Accounting Policies PrinclplM of Consolidation The consolidated financesanroents include<be accounts of subsidiaries. Significant intercompany accounts and transac tors areeftsbated. Net limme per Shan Primary netincome pershare iscoreputed usingthe weighted averagenumber ofconan shares outstandingand common equivalent shses during the period. Fullydiluted net income per sharereflects the dilutive effect ofincreased shares that wouldresult from the conversion ofdebtandequity securities which arenot treated as common stock equivalents. Unless otherwise indicated, all pershare information included in the notesto theCompany'sconsolidated financial statements is presented on a fully diluted basis. Inventory Valuation Inventories arc stated at cost, which is less than market value, and include material, labor, and manufacturing overhead. US. inventories are primarily valued using the last-in. first-out (UFO) method and the balanceerfinventories are generally valued using the first-in, first-our (FIFO)method. Intangible Assets Intangible assets consistprimarily ofgoodwill, patents, and covmmKweto<xm2pe and arecamoiaroo^ leu ? Uiedanomz&ioivGoodwiUsanKTrtrzedtHiaar^g^'lurc basis overaperiod of foety years. OthersKangible assets are amomzedovertheirestimated useful &ves oractual contrac tual lives. The Company continually evaluates whetherevents and circumstances have occurred that indicae the remaining estimated useful lives erfintangible assets may warrant revision orthat the remaining balance ofthese intangible assets may notbe recoverable. When factors indicate that Intangibleassetsshouldbe evaluated fapossible impairment, theCompany uses anestimate oftherelated business segment's ondiscouniednet incomeoverthe remaining life of d* intangible asset in measuring whetherthe feuangiUcasses e recoverable. Investments In Affiliates Investmentsin affiliates are accounted for using die equity method, under which the Company's share ofearnings of these affiliates is reflected in income as earned and dividends are credited against the investment in affiliates when received. Depreciation Forassetsplaced io servicepic*toJanuary 1,1992, the Company'splant and equipment isdepreciated primarily using thedouble-declining balawe method forthe first halfof an asset'sestimated uscMliie andthestraight-line method b w^tha&ite&#&s5eaf)^uisertet^T)ecef7&e{ 31,1991,the Company's plantandt^itiprrrem b depreciated using the straight-line method, Rebuilcfing of Glass Melting Furnaces The Company's glassmelting furnaces periodically require substantial rebuilding. Asdiscussed in Note 6 to die consoli dated financial statements, effective January 1,1994, the Company adopted the capital method ofaccounting for the cost ofrebuilding glass melting furnaces. Under this method, costs arecapitalized when incurred are! depreciated over the estimated useful lives ofthe rebuilt furnaces. Derivative Financial Instruments Gains and losses on hedges ofexisting assets or liabilities are included in the carrying amountof thost assets or liabilities and are ultimately recognized in income* as pan ofthose carrying amounts. Gains and losses on hedges ofnet invest ments in foreign subsidiaries are included in stockholders' equity. Gabsand losses related to qualifyinghedges offirm commitments or anticipated transactions also are deferredand srerecogmzedmincoerc amounts whenthe hedged transactiontows. Gains and losses as forwardcurrency exchange essaraets thfi do not qualify as hedgesarc recognized as other income or expense. ftedassrficattans Certain reclassifications have been made to 1993 and 1992 to conform with dieclassifications used in 1994. Consolidated Statement ofIncome FortheyearsendedDecember31.1994,1993 and 1992 (In millions ofdollars,exceptshare data) Net Sales Cost ef Sates <fcoss margin 1994 $3,331 2336 813 1993 $ 2,944 2066 678 1992 $ 2,878 2^34 644 Operating Expenses Marketing and ateinistfaiive paes Sdmce andtechnology expenses (Note II> Restructure costs (Note 5) Other (NoteS) Thai opwacmg expenses Income from Operations Com ofborrowed funds (Notes 1 and 3) Income before Provision for Income Taxes Provision for income taxes (Note 9) income before Equity In Net Income of Affiliates Equityin net incomeof affiliates (Note 13) Income before Extraordinary Items and Cumulative Effect of Accounting Changes Emannary items (Notes 2and 9} Cumulative effectof accounting changes (Notes 6,7, and 9) Netboome , 386 71 89 43 324 334 69 65 23 16 26 16 389 442 431 226 236 213 94 89 no 132 147 103 38 47 33 74 100 5 70 2 74 105 -- 85 26 72 1 .... $ 1S9 $ 131 8 73 Met Income per Common Share Primary: laotsne beforeextraordinary items and cumulative effect ofaccountingchanges Caanfetive effect ofaccounting charges Net Income per Share * 1.70 1.91 $ 3.81 $ 2.40 ,60 i. 3.00 $ 1.68 .02 evsus $ 1.7Q Assuming full D&trtlon; beforeera<xdinay item?and cumulative effect ofaccountingchanges Extraordiimry items Qtfiwtehvee^ctofaccog^t^dianges Net income per Share $ 1.66 -- 1.69 $ 335 $ 2.28 --.13 $ 2.81 $ 1.65 .02 $ 1.67 Ifeighied averagenrnniwrcrfcomincn shares outstanding and common equivalent shares Msg tbeperiod (asBtiions): Primary Assuming full dDution _____ 44*2 43.6 43,0 __________________________________ _________80,0______ 494________*8.8 7VcccHcKM?ia$smury tfsgn$cantaccountingpoliciesandnotesan IntegralparacfAit t ....... Consolidated Balance Sheet Owtw^gr Si, Assets andi993 (In tfdWctts ofdollars! ClBTSflt Cashand ea& equivakiBs Receivables,less allowances of$16 mink in 1994 and 1993 (Note 20) Inventories (Note 12) Dcfened incometana (Note9) Insurance forasbestos litigationclaims -curnsm portion (No 21) Othercurrent assets Tbtal current Other Goodwill, less accumulated amortization of$14 million in 1994 and $12 million in 1993 (Note 4) Investments in affiliates (Note 13) Deferred income taxes {Note9) Insuranceforasbestos litigation claims (Note 21) Othernoneiiman assets Total other Want and Equipment, at Cost Land Buildingsand leasehold improvements Machinery andequipment (Note 6) ConsttuciioD in progress , Less: Accumulated depredation(Note 6) Net plant and eqoqanesl Total Assets TheQcc&npcRy)ngB?rmsjycfsignifiair&accounting pMklesand nousartuttegrB!partsttfthisstaler**ns. lIHUHlIltLI.tiirif.m'l .1 "'UiiLUMl. 1994 1993 % 99 $ 3 329 324 223 221 186 136 US 98 930 125 18 827 151 74 308 556 122 1,211 77 63 428 643 8! 1,292 SI 553 2,172 125 201 (1,768) 1,133 44 559 1,978 88 2.669 (1,775) 894 93,274 $ 3,013 O/t Consolidated Balance Sheet December31,1994and 1993 (In millionsofdollars) UabBtiai and Stockholders* Equity_________________ Cumnt AaoipBy^^accxuedii^>iSties(l^oK 14) Resaw for wbeoos litjgaiksi dans -current potion (Note 21> Short-tea debt(Note 3) Lcng-ccim debt-currentportion (Note 2) Ibtaleuncnt toag-Term Debt Weis 2) Ollier Restive forasbestos litigation claims (Note 21) Otheremployeebenefits liability (Note 7) Reserve forrebuilding furnaces (Note 6) Pension plan liability (Note 8) Other Total other CommftmcRte and Contingencies (Notes 16,19, and 21) Stockholders' Equity Preferred stock, nopar value; authorized 8 million shares, none outstanding (Note 18) Common stock,par value $.10 per sAare; authorized 100 million shares; issued* l994-442mUlkxt&nd 1993-43.2million xh&es(Notes42nd )7) Deficit Bweign currency translation adjustments Other (Note 8). Total stockholders' equity Total Uabfftties and Stockholders' Equity Correofidetod Statement of Stockholders' Equity Partheyears endedDecember3), 1994.1993mi1992(InmlljionstfdtAters) Common Stock Balance beginning ofyear h&uanceofseek, aduding awards understock condensation pUns(Notes4 and 17) Balance end of rear bofieft Balance beginning ofyear Net income Bflformmri ofvmr Foreign CurroecyTranstatJon Adjustment* Balance begiraang ofyes Treeslatioo adjustments Balance end ofrear Other Balance beginrusgofyear Netaaease (dsetease) Balancecod ofyes Stockholders* Equity theacc9mpaKp*&utrtvnaryefsignificant acetmndngpolicies andnotesartintegral pansofthisstatement 1994 1993 $ 598 $ 495 300 275 166 77 j___2 29 1.073 876 1,037 898 1.145 390 -- 77 232 1,344 1.385 346 124 78 175 2,WS 343 (1,012) (1) (15) (680) 315 (1,171) 5 (18) (869) *3^74 $ 3.013 1M4 109?. 315 $ 299 $ 285 33 16 14 346 315 299 (1.171) 159 (1.012) (1302) 131 0.171) (1375) 73 0302) 5 4 24 (6) 1 (20) 11) 5 4 (18) 3 m 00) (9) I (15) at) (9) 6 (6802 $ (869) 5 0.008) 25 Consolidated Statement of Cash Flows For ths ytentndtJDecembt'31,1994,1993 and 1992 fin mllliotuofdollars) Ngt Ch Row from Operations Netereirae RecorcfliatioQ ofnet ca&proddedby operatic activities: Noocashfeeas: Oanalaaive effect ofaccounting changes (Notes 6,7. and 9) ftoviacB fordepredation, azratizatioo, and rebuUdiagfurnaces (Notes 6 and 10) Provision (credit)for deferred income taxes (Note9) Other (Increase)decrease m receivables (Note 20) (Increase) decrease in inventories Increase (decrease) in accounts payable and accrued liabilities Increase (decrease) in accrued income taxes Other Netcash flow from operations Net Cash now from Investing Additions to plant and equipment (Note 6) investment in subsidiaries, netofcash acquired (Note 4) Other Netcash flow from investing * Not Cosh Flow from Financing (Notes 2 and 3) Net additions (reductions) to tong-term creditfacilities Othgaddittoastolong-tenndcbt Otherreductions to!ong*tcim debt Net increase in short-term debt Other Netcash flow from financing Nat Cash Flow from Asbestos-Related Activities (Note 21) Proceedsfrom insurancefor asbestos litigation claims Payments forasbestos litigation claims Netcashflow from asbestos-related activities Net increase(decrease) m cash and cash equivalents Cash atd cash equivalents at beguiling ofyear Cash and cashequivalents at end ofyear (Note 15) The acct^5ffl^6^senaf> ofsi$rttf&aa:accMnrtt% pe&aes and eats am vutgralparts ofthis trnmeni. 1994 1993 1992 159 $ 131 $ 73 (85) 110 89 9 21 17 S3 (8) 18 361 (26) 121 10 10 (22) 4 114 (21) (9) 312 -- 150 <21> 5 (9) (17) (9) (2) 14 184 (268) (120) 23 (355) (178) -- -- (178) (144) -- 10 (134) 10 14S (81) 69 5 178 (90) (21) 26 n (74) 023) 337 (330) 50 7 (59) B7 (215) (128) 224 <283} (59) 413 (405) 8 66 3 6 59 $ 1 2 3$ 0) 3 2 26 Notes to Consolidated Financial Statements 1. Segment Data TbeCompany operates intwoindustry segments, Building Products atxl Industrial Materials, and reports its results in two ways by iadaary segment and by geographic segment See Note* fiordetafl of 1994 acqtuajtioos azad divestitures of businesses. -. Ttefedasoy segments are defined as follows; Buffing Products Production and sateofglass wool fibers fanned into thermal and acoustical insulationand air ducts; extruded polystyrene insulation; roofing shingles and asphalt materials; underground storage tanks; windows; and patio doors. Industrial Materials Production and sale of glass fiber yams; rovings, mats and veils; strand and reinforcement products; fiberreinforced plastic pipe; andpolyester and vinylester reins. Hie geographic segment reporting combines the two industry segments within the major regions: United States, Europe, and Canada and other. fiuessegrngnt safes aregeneratfy recordedarmarkerorequiva* tovalue. Income (loss)fromoperationsby industry and geographic segment consists ofnetsales less related costs and cxpaises. In computing income (loss) from operations by segment,costofborrowedfunds and other general corporate fecothesad expenses lave beenexcludedGaiafe corporate qxaatii^eipeasesdircctiy&ace^dctoaduaiyaBd^ognqjac segments have been allocatedtothosesegments. DuringAe firs quarterof 1994, the Company recorded a $U7 millionpretax charge far productivity initiatives and other actions. The impact ofthis charge waste reduce income from operations for Building Products and Industrial Materials by $70 million and$22 minion, respectively, and to increasegeneral corporateexpense by $25 million. Geographically, income from operations in the United States, Canadaand other,and Europe was reduced by $56 million, $23m3ticaxaod $13 million, respectively. During the first quarterof 1993, the Company recorded a $23 millioncharge 19reorganize asBaopeanoperations, the full impacfofwfaxh was reflected as a reductionto income from operations forthe Industrial Materials segment. In addition, the 1993 change in estimate of fixed asset lives reduced 1993 depreciation expense for Building Products, Industrial Materials, and gefera)corporateexpense try $9million. $4 million, and II million, rc&peetively. During the fourthquarter of 1992, tte Company recorded a $16 million charge to reorganize its Building Products segment and to centralize its accounting and information systems. The impactofthis charge was to reduce incomefrom operations forBuilding Products by $9 million and to increase general corporate expense by $7 million. Geograph' icaily, sicome from operations intheUnited States and Canada and otowasreducedby $8 suUiOB sad $1 miSion,respectively (Notes 5 and 10). identifiable assetsbyadustryandgeographic segment are those assets fast are usedinthe Company's c^enuiais in each industry andgeographic segment and do not mciacte generalcorporate assets. Generalcorporateassetsconsistprimarilyofcash and cash equivalents, deferred taxes, asbestos insurance, andcorporate property andequipment (In millia/ifefdoilars) Nat Sales 1994 1993 1992 Industry Segments BuddingProducts United Slides Europe Canada and otter Total Building Products Industrial Materials United States Europe Canada andcxber Tbtal Industrial Materials Intersegment safes Building Products Industrial Materials Eliminations Net sates $1,352 182 189 $ 1,699 97 150 $ 1,636 91 172 2473 1,946 1.899 595 355 *28 528 346 124 ' 479 373 127 1478 998 979 99 (99) $3451 -- 85 (85) $ 2.944 -- 88 <88) $ 2.878 Geographic Segments United States Europe Canada and other Intersegment sates United States Europe Canadaand other EftminaBCft? Net sates $2447 637 257 3451 $ 2^27 443 274 2.944 $ 2.115 464 299 2,878 43 22 91 (155) $3451 42 15 66 (22.1) $ 2,944 42 7 42 (91) $ 2,878 27 t. Segment Pat* (Contiwwrf? (la millionsOfdollars) 1994 Income liou) from OpaittloM 1993 - 1992 Industry Segments Building Product* United States Europe Canada andofeer 149 $ 153 3 26 16 IB 6 94 10 5 Tb5al BniMing Products 189 175 109 Industrial Materials Uiueerf States Europe Canada and other fos IB) 9 m (15) 12 99 26 13 Total Industrial Materials 109 98 138 General corporate expense (72) 07) (34) Incomefrom opersriofis Cost ofborrowed funds 226 (94) 256 (89) 2)3 (110) Income before provision for income taxes $ 132 $ 147 $ 103 QwgwpWc Soanwntt United States 193 S 254 S Europe IS 1 Canada andottar 27 18 Generai corporate expense (72) (37) 193 36 18 (34) Income from operations Cost ofborrowed funds 226 (94) 236 (89) 213 010) Income before provision for income taxes * 132 % 147 $ 103 (hi millions ofdollars) 1994 Identfttabfe As*ett at December 31 1993 1992 Industry Sagmants Building Products United States Europe Canada andother * 718 162 136 Tbt&l Building fto&cte Industrial Materials United Sates Europe Canada and other 1,016 326 336 160 Total Industrial Materials 821 Generalcorporate 1.363 Investments in affiliates accounted for underfee equity method Total assets 3,200 74 33,274 $ 596 46 155 797 302 256 157 715 3.43S 2,950 63 $ 3.013 S 580 35 151 766 295 259 157 711 1,636 3.113 49 $ 3.162 Goograpftfe Segment* United States Europe Canada and other General corporate *1.044 497 296 1363 Investments in affiliates accounted for under fee equity method 3,209 74 Ibtal assets 63,274 $ 898 302 312 1,438 2.950 63 $ 3,013 $ 875 294 308 1,636 3,113 49 $ 3.162 (In mUHans egjoilari) 1994 1993 Provision for Depreciation, Amortisation, and Sdw&Sns Furnaces 1992 Industry Segments Building Products United Slates Etsope CanadaaiKiaher ' Tbtal Building Products fc&strial Materials United Slates Europe Canada and other Total Industrial Materials General corporate Total provision for depreciation, amorttratioft, and rebuilding furnaces * 48 $ 6 8 47 $ 2 U 68 3 30 62 60 SI 22 24 32 17 16 21 8 10 10 47 50 63 9n 6 1 118 $ 121 $_ IS) Geographic Segments United Stales Europe Canadaand other General corporate Total Revision, for depredation, amortization, and rebuilding furnaces S 70 $ 23 16 9 7! IS 21 11 $ 118 $ 121 S 100 24 20 6 $ 150 (fa mttUofts<fdoiiars) 1994 Additions to Pleat and Equipment 1993 1992 Industry Segments Building Products United Slates Europe Canada and other Triad Building Products Industrial Materials United States Europe Canada and other Tbtal Industrial Materials General corporate Total additions $ 85 - ----41 7 $ 82 $ 2 S 76 4 6 133 89 86 41 31 30 35 32 18 26 7 5 102 70 53 23 19 5 $ 258 $ 178 S 144 Geographic Segments United States Europe Canada and other General ccaponue Tbtal additions 8 126 $ 113 $ 106 76 34 22 33 12 11 23 19 5 $ 298 178 144 29 2. Long-Term Debt (In ffig&vu afdoUan) 1994 Unsecuredcreditfacility duem 1997.v*mbfe ... . unsecuredcreditffcalky due to 1997,variable,payable to Canadian dollars Conwa^btejarflorsabc^tiaiftl debentures due st 2005,8%, convertibleat$29.75 pershare Guaranteeddebenturesdue in2001,10% Debentures due m 2002,8.875% Debentures due in 2012,9375% Guaranteed bends due in 2019.9.814% (Note 19) Guaranteed debentures due in 1998,9,8% Bonds due in 2000,735%, payable mDeisscfcemste/Mste 19) Notes duethrough 1997,6.375% to 850%,payable m foreigncurrencies Odierlong-termdebtdue titrough 20J2, at rates from 5375% to 12,47% 4 173 ISO ISO 149 140 100 50 38 6S Less: Gmcwporttai 1,057 120) ?btai k*ig-temdeb* <1,037 1993 30 _ 173 150 ISO 149 -- 100 50 7? 48 927 (29) $m The Cbn^any has twounsecured, variablerale, tong-asia tank credit facilities. The fitsfacility was amended in July 1994 and hasa maximumcomnatnw^ of$475 milliooatDecember31, 1994, ofwfach$211 miffion was used farstandbyfetters of creditand$229 million was unused. The rale ofinterest is either ihe back's base tale, or 13/16% overthecertifvate ofdeport me, or 11/16% overthe London Interbank OfferedRase (LIBOR). IheraKttfhsaeambarowiRgstMidertlusfedlity was 6.8125%a December 3!, 1994. A commitmentfee of 1/4 of I% tschargedat the wanedportionsofthis bcitiry. The second Joag-term facility ispayable in Canadian dollars and has a maximum commitment of95 rcdIHon Cana&an dollars (68 million UJS. doflare) atDecember 31,1994,of Much 89 million CsadiaBdollars (64 million US. dollars) was unused This facility replaced theprevious CanaaSan facility which expired in July 1994. The rale of interest iseither 11/16% over the Canadiancost offunds rate, or 11/16% over the LIBOR rateon US. deposits, or .7875% over the Csiadian bankers' acceptance me. The rate ofinterest on borrowings undertitis facility was 8.0% December31, 1994. A commitment fee of 1/4 of 1% is chargedon the unused potionsofthis facility* As is typical for bank creditfacilities, the agreements relating to the facilities described abovecontain restrictive covenants, including requirements forthemaintenance ofworking capital, interest coverage, and rntnirogrp coverage offixedcharges: and tum&tions m theearfy labtarwaofsubordinateddebt, additional borrowings, certain investments, payment of dividends,and purchaseofCompany stock. The agreements include e provision which would result in aB oftheunpaid principal end accrued interest ofthe facilities becoming due immediately uponachange ofcontrol in ownership ofthe Company. Amaterial adverse change in the Company's business, assets, liabilities, financial condition orresults of operations constitutes a default undertire agreements. The convertiblejunior subordinated debentures arc subordinated eo a# present araf fofirre indebtedness ofthe Companyandrosy be redeemed at any time, at a premium, at tire option of tire Company, The debentures are convertibleat any time Into shares ofcommon aock ofthe Company a a conversion price of $29.75 per share, The Company has reserved approximately six million additional shares ofcommon stock necessary for In November 1994, Owens*Coming Finance (U K.) FIX. a newly formed wholly-owned subsidiary ofdie Company, issued $140million ofHorobonds. These bonds bearacoupon rate of interestof9.814%, payable semiannually, and mature in 2019. Thesebonds arcconvertible into fixed rare preference shares of Owens-Coming Finance(UJt) PLCin November 2004 and may be redeemed at any time, at a premium, atthe option ofthe Company, Thebonds are guaranteed bythe Company as to payments ofprincipal and interestandrank smuferty with all other seniorunsecured debt oftire Company (Note 19). Subsequently, in a separatetransaction, the Company sold a put option to the holderoftirebontfe allowing the option hokteno require theCompany to purchase a portion ofdie bonds for $79 miiiioB on May 28,1995. During January 1995, die received, ^ommopoonhokkr, ariotk^of to exercise approximately 30% ofthese putoptions. Daring 1992, the Company called, prior to maturity, its 12% sinking fund debentures having a face value of$46 million at a price in excess ofbook value, which resulted man extraordinary loss of$i million, or $.02 pershare, net ofrelated income taxes of$i million. fa June 1992, the Company called, prior to maturity, its senior subordinateddebentures havinga face value of$240million, which resulted m an extraordinary loss ofapproximately $2 million, or $.05 pershare, net ofrelated income taxes of 51 rmlfow. 30 The aggregatematurities and sinking fund requirements forall long-term debt issuesforeach ofthefive years follows^ Deccmba31.1994 are: Year ms {7tf&Uan) Credit Facilities i-- Other Long-Term Debt $ 20 1996 -- 35 1997 . 39 12 1998 -- 104 1999 ______________________________________ _______________ 3 3. Short-Term Debt tiAMUhMsqfdolton) Balance outstanding at December 31 Weighted average interest rates on short-term debt outstanding at December 31 6.6% 1994 $ 155 1993 $ 7? 6.6% During 1994,the Company established an unsecured, variable rale, shest-term bankcredit facility in order to finance die 1994 acquisition of PiBtington (Note 4). This facility has amaximum cwnnitmertofSffOmiihor.atDecember3i, l994,&Rof*iuch wasused'Hus facility expires on May 31.1995 and cames an interest ateof 1/2of 1% overthe LIBOR rate. The rare of intereston borrowings notethis facility was 6.6875% at December 31,1994. TbeOmipaJiyl^imiserfskTit-armlss(>fOTditeotaak^S91 million and $115 stilHooatDecember 31,1994 and 1993, respectively. .4 Acquisitions and Divestitures of Businesses On May 31,1994, the Company acquired UC Industries, Inc. ("UCT).a privtidy held foam board insulation manufacturer basedinHew Jersey. UQ has two manufacturing facilities whs* arelocated m Ohioand minors. The purchase price ofUC! was $45 million. This business corabuaatks was ceososinuseri by theexchange of855,556 aharesofthe Company's common stock forail ofthe capital stock ofUO, as wellas an $18 million cash payment. $6 million ofwhich was paid so acquire diecash ofUO. The remaining $12miUian cash psynwmrepresents a stock value settlement and was paid duringdie fourth quarter of 1994. On Jane 2,1994,the Company acquired Pi&ingtonInsulation Limbed and Kitsons Insulation Predicts limited (collectively '`Pilkingtoo").the United Kingdom-based insulation manufac turing and distribution businesses oftire Pilkington Group. With two fiberglass insulation manufacturing facilities and one rock wool manufacturing facility.Pilkington Insulation Limited Is the United Kingdom'slargest manufacturer offiberglass and nock wool insulation. Kitsons InsnlarenProducts Limited is a major supplier ofthermal and acoustical inaBtiarics protects to fire IhsitedKingdomcoosmctiai sidustry and is comprisedof 14 distributioncenters. The purchase priceofPfikmgton was $110 Bullion and was financed wi&borrowings fromthe Company's short-term bankcredit facility (Note 3). Theseacquisitionswere accounted forusing tipurchase method of accounting. Accordingly, the assets acquired and liabilities assumed have been recorded at their fair values and the results ofoperations ofUCI aid Pilkington have been included in the Company`s consolidated financial statements subsequent to May 31.1994 andJune 2,1994, respectively. The purchase priceallocations were based on preliminary estimates offairmarket value and are subject to revision. The estimated fair valueof assets acquired from UQ, including goodwill and a non-competition agreement, was $72 million, and liabilities assumed, including $14 Bullion in debt, totalled $27 million. Ihe estimated fair value ofassets acquired from Pilkington, including goodwill, was $165 million, and liabili ties assumed, including $7 million in debt, retailed $55 million. Goodwill erf $78 million and the non-competition agreement of$6 rmliion arebang amortized over 40 years nd7yeare,resp5ctiv^y,<aaSraight-hne basis. UQ and PUkingtoQ added $134 millkxjinpost-acquisitkm sidesfortheCompany during 1994, The pro formaeffectof tiresacqitititiofis wasnetmaterial reoet inconrefbrtheyear ended December 3i, 1994or 1993. On September30,1994, theCompany entered into ajoint venture with AlphaCorporation ofTfermessee, 'whereby the two companies cantoned theirexistiiig resm businesses re form AJph^wcns-Gwiirtg.ULC,, the largest manufacturerof polyester resins in North America. The Company contributed rwomarmik5u^plaj^(>^^raiso, Indiana and Guelph, Ontario) and owns a 50 percent interestte thejomtventure. Thisjointventure isbeingaccounted for undo: tireequity method. Forthe rune monthsended September30,5994 aid the yearseodsd December31,1993 and 1992, resin sates retailed $58 million, $63 million, and 56 million, respectively, and were included in the Industrial Materials segment. Late in the fourth quarter of 1994, the Company completed thesahofitewidergrwndsuxagstsnknismfzcliirmg business. Sales for tius business totalled $41 million, $43 million, and $48 million in 1994,1993, d 1992, respec tively, aid were included in Ac Building Products segment. 31 S. Restructuring of Opentiom end Other Initiatives J>iringthe first quarto-of 1994, (he Company recorded a $1 i7miflkmp^mch^^forpothKaMfyimtklivesandother actiots tamedalredncingcosts and enhancingfoeCompany's jpee4 foots. d efflctacy, This 5117 mtlHoapretax djarge is comprisedofan$89 mlliice chaise essodated withfoe restruc turing oflie Company's business segments,as well as a $28 ot^Skioc^^|raBanlyoJQipoQdc^fia^ooSis&&d3ci^d wi^a^admiigsMtimttftfaeCoi^^^fcBtnercotmiwd^ roofingbusiness. The coB^xmenls ofthe $89 miltioorestnoture chargeiachidK $48 nuliionforperaormri redactions, $22 rmlHon fordivestiture ofram-strategic businesses and facilities. $16 million for business realignments. and $3 millionfor other actions, ITte $48 million cost for personnel reductions primarily represents severance costs associated with foeelimination of nearly 400 positions worldwide, the primary employee groups affected include science and technology personnel, field sates perconnd, corporateadmmitfra^personnel, endcommercial roofingand resin businesspersonnel. As ofDecember 31,1994, the Company has recorded approxi mately $50 million In costs against Us 1994 restructure reserve, ofwhich $35 million represents actual cash expenditures and $15 millionrepresents foe ram-cash effects of asset write-offs and business realignments. The $35 million cashexpenditure mefudes personnelreduction costs of$22 million, primarily composed ofpartial payments ofseverance costs for over300 cc]plc^tes.Tberemaimrg$l3!aiflkioca^expefKhture represents costs associated with foe divestirure orrealignmentof businesses and facilities. Dising foe firstquarterof 1993, theCompaty recorded a $23 milikffl charge to reorganize its European operations. This charge included $17 million for personnel reductions and $Gmillion for foe writedown offixed assets. Duringfoe fourth quarter of 1992, foe Company recorded a $16 million charge toreorganize Us Building Products segment and to centralize ks accounting andinformation systems. Tins chargeaduded $14million forperscamcl reductions and $2 million forfoewritedown ofassets. 6. Glass Melting Furnace Rebuilds Effective January 1,1994, foe Company adopted foe capital mefoodofaccouidagforthecost ofrebuilding glass melting furnaces. Underfois method, costs arecapitalized whenincurred and depredated overfee estimated umAiLlivesoffoerebuilt furnaces. Previously, foe Company established a reserve forfoe futurerebuildingcosts ofits glass melting furnaces through a chargetoesnetgshetwsesdatesofrebuilds. The change jofoe capital mefoodprovides amoreappropriate measureoffoe Company's capital investment and is consistent with industry practice.The cumulativeeffect of this change In accounting mefood was an increase to earnings of$123 million, or $2.45 per share, net ofrelated income taxes of $54 million. Theeffect of fois change in accounting mefood was to increasedepreciation expense and eliminate iumace rebuild provision. The pro forma effect offois change was not material to net income forthe year ended December 31,1993 and was $? million, or S.15 per sltare, Urihsyc&r&idedSZeixmb&S}, )992. 7. Postemployment end Postretiremen! Benefits Other Than Pensions ThcCotnpany and its subsidiaries maintain healthcare and life insurance benefit plans for certain retired employees and their dependents. Thehealthcare plans in the US. areunfunded and pay either 1) stated percentages ofcovered medically necessary expenses, after subtractingpayments by Medicare orother providers andafter stateddeductibles have been met, or2) fixed i^(^mBJksle3qxxueremfoureenKifoE&^oyQesfaecxs&e - eligibteroparticipate In the health care plans upon retirement taster oneoftheCompany's pension plans ifthey have accumu lated 10yean ofserviceafterage 45. Some oftheplans are contributory, wife some retiree contributions adjusted annually. The Company has reserved foe right to changeor eliminate these benefa plans subject to foe terms ofcollective bargaining agreements during their term. During 1993, foe Company approved changes in Us postretiremen* health care plans for retirees and activeemployees. These changes, which reduced the accumulatedbenefit obligation by $120 million and 1993 expense by $18 million, resulted in an unrecognized net reduc tion in prior service cost which will be amortized through 1999. Effective January 1,1994, foe Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting toPostretiremen* Benefits OtherThan Pensions" for its non-U,S. plans. Accordingly, foe expected cost ofpostre tiremen! benefits is charged toexpense during foe years in which eligible employeesrenderservice. The cumulative effect offoe adoption of tltis standard was acharge of$10 million, or &.2Qpershare. (The Company adopted Statement No. 306forits U3. plans effective January 1,199L> 32 TtofoHcwjngtabkrax^estbegausc^ibfiaccnfedpcstietirem^beoe^cofflliabUityai0^3^31,1994 and 1993,as reflectedtothebalancesheetas ofDecmto31,1994and 1993:. flu ml&oni tftteB&t) Arrmwilflterf PtwiirtiiBnent Benefits Obligation; Retirees Fullyeiig&Je active plan participants Other active plsi participants 1984 * ' 1993 ' > <1731. 3 (182) 04) 02) (46) (39) Funded status Unrecognized net gain Unrecognized net reduction in prior service cost 0431 {39) (&&> (253) (12) (106) Accrued postretirccnou benefits cost liability (includes current liabilities of$19 mUtionin 1994 and $2S million in 1993) * 1370) $ (371) The net postretiremen! benefits cost for 1994.1993 and 1992 included the following components; flu millions efdollars! 1994 1993 1992 Service cost Interest cost on accumulated postretiremen! benefits obligation 9 8$ 7$ 7 19 23 30 Netamortization and deferral (20) (13) -- Net postretiremens benefits cost t 7 $ 17 S 37 Formeasurementpurposes, an 11% annual rate ofincrease indie per capita cost ofcovered health care claims was assumed for 1995.Ite rate was assumed to decrease to 10.5% for 1996, then decrease gradually to 6% by 2005. Tbe health carecost trend rate assunprion has a significant effecton the amounts reported. Tb illustrate, increasing the assumed healthcare cost trend rate by one percentage point ineach year would increase the accumulated postretiremen*benefits obligation as ofOctober 31,1994, by $13 million and tbeaggregate ofthe service and interest cost components ofnet postretiremen! benefits cost fortheyear then ended by $2 milKort Hie discount rate used indetetmining the accumulated postretirement benefits obligation was 8,5% in 1994, 75% 1993, and 8.25% in 1992. Effective January 1,1994,the Company adopted Statement of Financial Accoutring StandardsHa 112,'`Employers' .According forPosengrloymeat Benefits." Ibis standard nquhes 6eCon^anytomcogi^ oblipticn to prov^ benefits to formeror inactiveemployees afteremploymentbut before retirementundercertainconditions. Thesebenefits include, but arcnot limited to. salary continuation, supplemental TEKmpkFynKrtt benefits, severance benefits (iodudiag voters' corapoisation),job training and counseling, and continuation ofbenefits such as health care and life insurance coverage. The cumulative effectofthe adoptionof this standard was an undheounfed charge of$28 million, or $.56 per share, netofrelated income taxes of$18 million. At December31,1994, the Company's liability forpostemployroem benefits totalled $44 million, including current liabilities of$5 million, and is included in otheremployee benefits liability m the Company's consolidated balance sheet. Postemployment benefits expense was $3 million for the yearended December 31,1994, 8. Pension Plans The Company has several defined beaefit pension plans covering most employees. Under the plans, pension benefits are generally based on an employee's number ofyears ofservice. Company contributions to these pension plans are based on die calculations ofindependent actuaries using the projected unit credit method. Plan assets consistprimarily ofequity securities with the balance in fixed income investments a asotmxc contracts. Theunrecog nizedcost ofretroactiveameidreesas aod actuarial gains and losses areamortized overdieaveragefiiture service period ofplan participants expected torecetvebenefits. Pension expense fordieCompany's defined benefit pension plans includes tbe following: (In millions of&Qars) 1894 Service cost % Interestcoston projected benefit obligation Actual return on plan assets Net amortization anddeferral 22 88 (13) <*4) Net pension expense 83 1993 $ 23 62 024) 50 SU 1992 $ 21 59 (51) (20) $9 33 8. Pension nans (Omtfnoedi Ha funded status at October 31,1994 and 1993 is as follows: (inmS&uefttetlari) - 1994 <\s,, .1993 Over Under Over Under funded Nwded Rmded Fanded Vested benefit obligation t 310 6 273 $ 286 $ 305 Accumulated berefit obligation $ 341 $ 343 $ 323 $ 370 Flan assets at fair value ftopceaibenefff obligation $ 466 6 306 $ 444 5 335 430 352 398 382 Han assets in excess of (less than) projected benefit obligation Uraroograzed loss (gain) Unrecognized prior service cost Unrecognized transition amount Adjustment to minimum liability 36 8 (121 (39) -- (46) 55 (24) (13) (12} 46 02) (13) (45) -- (47) 56 (25) (14) <> Net person Habflity (includes current labilities of SS millton in 1994 and $7 million m 1993 and Doreurreffi assets of $38 m2tioo ki 1994 %M $20 million in 1993) $ {7} $ (40} $ (24) $ (41) ----------,-------------------- ------------------------ ------------- ---------------------The 1994,1993 and 1992 primary actuarial assumptions used for pension plans were: 1994 1993 1991 Discount rate Expected tong-terra rateof team on plan assets Rate ofcompensation increase 6.50% 7.50% 8.25% 9.50% 10.00% 10.00% 6.10% 4.10% 4.50% 9. tneeme Taxes EffectiveJaraiary 1,1993.theOjmparvy adopted Statementof RBaadalAccording StandardsNo. 109. "Accounting for IncomeTb.**StsaarentNo. 109 changes thecriteria for iDcasuriag*ejswisonforincome toes and recognizing deferred tax assets and liabilities. Deferred tax assets and liabili ties are determined based cm the difference between the financial statement asd tax bases ofccgregpopchng liabilities and assets using enacted tax nss heffect forthe year in which thedifferences ate expected toreverse.The cumulativeeffect ofthe adoption ofthis standard was fit increase to earnings of$26 million, or$33per share. ________ (In ituffio/tsofdoikvs) 1964 1993 1992 Income (toss) before provision (credit) for income taxes: VS. Foreign $ 119 $ 163 $ 107 13 (16) <4> Total 132 $ 147 103 Provision (credit) for income taxes: Current U.S. Slate and local Jtseign $ Ibol cornet Deferred VS. Stateand local Foreign Tbtal deferred Adjustment to deferred tax assets and liabilities for an mocassin the U.S. federal sanitary rate from 34% to 35% (21 $ (7) 6 (4) 81 13 <2} 62 -- 24 $ 7 6 37 27 1 <4) 24 (14) 41 5 8 54 (5) (4) (12) (21) -- rj V* s 41 Total provision for htcome taxes TheCompany also sponsors defined contribution plans available to substantially all VS, employees. Companycontributions for the plans are based on matching a percentage ofemployee savings up to a maximum savings level. The Company's contributions were $10 million in 1994. $9 million m 1993, and $7 million in 1992. i i 34 The reconciliation between the US. federal statutory rate and the Company's effective incometaxrateis: 1994 1993 1992 U.S. federalstsaaory rate *',w4 Operating losses of foreigi subsidiaries Utilization oflosses offoreign subsidiaries Enacted federal tax ratechange Difference between foreign tax rates and VS. statutory rate Provision (credit)fortaxes on undistributedearnings of foreign subsidiaries State and local income taxes Other ^**95% - --=34% 7 10 m (2> -- 00) 6 _ -- i ......... (2) * (2) (6) 33 1 S (2) (1) Effectivetax rate 44% 32% 32% As ofDecanter 3\, 1994, the Company has not provided for withholding orU4>, federal income taxes on approximately $124 million ofaccumulated undistributed earnings ofits foreign subsidiaries as they are considered by management to be perma nently reinvested. If(hear undistributed earnings were not consid ered tobe permanently reinvested, approximately $11 million of deferred income taxes would have beenprovided Daring 1994, the Company isilized tax setoperating losscanyforwards forcertain ofits foreign subsktiariesofapproximately $9 million. M December31,1994, file Company had tax net r^erahngk)sscanyfOTwar^forcettamofisfbreigssubskhara5S ofapproximately $27auDwa, csiahofwhichexpire through 1999. Fortheyearended December 31,1992, the Company utilized book net operating loss carryforwards which resulted in an earaoniir^credk ofappnrcimatdy $4 orS.G8 pershare. Thecumulative temporary differences giving rise to thedeferred axasssaiKSBabUiticsatDeceraber31,l994and 1993 areas follows: ffantfflinin tfdottars) >./ . :*994 1993 Deferred Deferred Ita Tax Assets liabilities Deferred 7k Assets Defered Tax Liabilities Asbestos litigation claims Other employee benefits Deprecision Furnace rebuild reserves Warranty and product liability reserves Operating loss carryforwards State and local taxes Other, 3 306 3 -- S 171 -- aa>n 133 -- -- 29 27 122 -- -- 20 6 363 $ 148 --. 45 25 35 -- 90 -- -- 75 -- -- -- 23 4 Subtotal CSS 164 706 10 Valuation allowances (27) -- (40) -- Total deferredtaxes 628 * 164 $ 666 S 10 Management fully expects torealize its netdeferred tax assets dirough meomeffom future operations. Daring 1992,defend income taxes wereprovided for riming differences in therecognitionofcertain items fa*income tax and financial statement purposes, in accordance with Accounting Principles Board Opinion No. 11.These tatsconsisted ofrite following:_________________ __________________________________ (Inm&ions dc&an) _________ 1992 Asbestos litigation claims Depreciation Furnace rebuildreserves Interest expease Undisaibuledearrungsoffixiti^subudiarits Stateand local taxes Warranty andproductliability reserves Other postretiremen! benefits Other $2 (9) (3) {1} (8) 2 1 (6) 1 Deferred tax credit $ (21) 35 10. Depredation of Plant and Equipment During 1993, tire Gsr^any cooqjfetcd areview of6sfixed asset fives. The Ccanpany determinedthat as aresufa ofactions takento increase Uspreventative maintenanceand programs initialed with feseqiapmsu nqiplKa*toiuattsefee quality oMregrproduce, actual fivestocertain asset categories were generally longer than fee ase^lh^^<k^maliOTpurpe^ Therefore, effective April 1,1993, tire Coerpanyextended theestimated usefullives ofcertaincategoriesofplant and equipment Theeffectofthis (Jiang sjestimate reduced depreciation expense forthe year mded December 31,1993 by $14 million and increased income before cumulative effect ofaccounting change by $8 million,or $.16 per share. 11. Science and Technology Expenses Science and technology expenses include research and develop ment costs of$64 mBJtofi in 1994, $61 million in 1993. and $55 million in 1992, lit addition to research arid development costs, science aid technology expenses include continuing commercial activities such as engineering and product modifica tions for special applications and testing. 12. inventories Inventories are summarized as follows: (In nallions oftbllonl finished goods MflimA&andsupphes Less: ReductiontoUFObarfs 1994 1993 * 192 118 $ 195 217 310 187) 312 (91) $ 223 $ 221 Approximately $88 million and $37 million ofnetinventories were valued using the UFO method at December31.1994 and 1993, respectively. During 1994.1993. arid 1992, certain inventories were reduced, resulting in die liquidation ofUFO inventory layers carriedat lowercosts in prior years as compared with thecurrent cost of Eventory. Theeffect ofthese inventory reductions wasto reduce 1994,1993, and 1992 cost ofsales by $3 million, $1 million,and $4 million, respectively. 13.Investments In Affiliates AtDecember31,1994 and 1993, tire Ccropy'* affiliates, which generallyare engagedmdie msmfacwreoffibrous glass and related products feetire insulation, construction, reinforcements. ..*! textilemakes,include: _______ Patent Ownership 1994 Composites: Alpba/Oweas^Samiijg, L.L.C. (USA) Knytex Company, L.L.C (USA) Vjtro-F&ras, S_A_ (Mexico) 90% 50% 40% -- 50% 40% Global Pipe: Amiantit Fiberglass Industries, Ltd, (Saudi Arabia) Owens-ComingEtemit Robre CfcnbH (Germany) Owns-Corning Pipe Botswana (Pty.), Ltd. (Botswana) Owens-Coming Ttibs S.A. (Spain) 30% 80% 49% 60% 30% 50% 49% -- Building Products - Europe: Arabian fiberglass Insulaticn Company, Ltd (Saudi Arabia) 49% 49% Asie/Peclfic: Asahi fiberGlass Company, Ltd. (Japan) Lucky Owens-Coming Corp. (Korea) Siam Fiberglass Ox, Lid (Thaiksd) 28% 30% 20% 28% 30% 20% Building Products - North America: CAEfiberglass.Ltd. (Canada) mmm 25% Tbe foUowfeg tableprovides summarizedfinancial information onacombmed 100% basisforthe Company's affiliates accounted founderthe equity method; (in nuiiicns ofdollars) At December 31: GimsB assets Noncwrcnt assets Qzrectliabilities Noncurrent liabilities For the year Net sales Gross margin Netmcoroc 1984 1993 1992 t 32B 513 331 250 $ 224 387 240 147 $ 19$ 320 233 130 630 486 455 96 81 82 7 16 ?6 TheCompany's equity in undistributednet income ofaffiliates was $32 million at December 31,1994. 36 14. Accounts Payable end Accrued liabilities (in mOikms efdeBon) 1994 1993 Accounts payable $ 298 Payroll and vwatian pay .......81 pRynU, property,md miscellaneoustaxes Other employee benefits liability(Note 7) 24 1994 restructurereserve (Note 5) 34 Other 121 $ 244 .... . 74 *33 25 -- 119 * 698 $ 495 approximately $12 million peryearthrough 2006, $8 million per yearthrough 2015,and, uponrenewal, $2 million per year through 2020. ~17. Stock Compensation Mn* ^TheCompany^Stock PerformanceIncentive Ran <SPIP), ^proved bysharefeddeas in 1992, permits opto twopercent of common shares outstanding atthebeginning ofeach calendar yearto be awarded as stock optionsand restricted stock (with 25% ofdais amountasthemaximum permitted Dumber of restricted stockawards).The Company may carry fonvard f5. Consolidated Statement of Cash Flows Cash payments, netofrefunds, fa income taws and cost of borrowed funds aresummarized as follows: (inmillions cfdoilanf Income taxes Costofborrowed funds 1934 1993 $ (4) S 97 43 95 1992 S 49 125 The Company considers all highly liquiddebt instruments purchased with a maturity ofthree months or less to be cash equivalents. See Note 4 forsupplemental disclosure ofNon-cash Investing and FinancingActivities. 16. Umt The Conqaany feastscertainmanufacturingequipmentand office and warehouse facilities underoperating bases,someof wha^galudecoaescalHamdauses.expgtngoovgkaad^s thrro^20!4TMra3tale3pcnsech^toe?>^icsa\vas $54 mfflkfl in 1994, $42 million in 1993, tad $44 million in 1991 At December 31, 1994, thenrinimusifuturerental commitments unde?ooncancelUble leases payable ovet fbe remaining lives ofthe leases are: unused shares from prior years and may increase the shares available for awards in any calendaryear through an advance of op to 25% ofthe subsequent year's allocation {determined by using 25% ofthe ament year's allocation). These shares are also subject to the25% limit forrestricted stock awards. During i994,the total number ofshares available forstock awards was 953,450 shares, 894.000 ofwhich were awarded as Mock options and 59,450 asrestricted stock, whichincludes an advance of 93,478 sharesfrom the 1995 allocation. 598,678 shares are also available to be awarded undera prior plan; however, the Company does notexpect any awards robe made under that plaa Additionally, the Company has a plan to award sock options anddeferred stock awards to noncmploycedirectors, of which 109,500shares were available fix this purpose as of December31,1994. Doting 1993, thetotalnumber erfsharesavaSableforstock swards was 86S15 shares. 813,900 ofwhich were awarded as flock optionsand S4.315 as restricted stock, which included an advance <rf3,149 shares fromfee 1994 allocation. Stock Options Activity during 1994and 1993 in shares under option: i 1993 Period (km&ioiutfdoUarsi 1995 1996 1997 1998 1999 2000 through 2014 Rental Commitments $ 38 32 20 11 6 27 $ 134 tartar of Sham Price Range per Sure Numte of Shares Price Range pst Share year *660,8*6 *1786-4780 Opfas panted 90*500 26.80-3488 Opticasexercised <137,09$ 18.75-3083 Optionscaneefed (35,813) 26.75*4050 2,171,251 $ 1213-3363 845.40) 39.5O~47.0O (413269) 1113-3063 (41556) 18.75-4050 Bad ofyear *290,454 $17.80 -47.00 1560,826 $1736 47X10 The minimum future rental commitments reflected in the above table include approximately $4 million per year forthe leaseof the Company's corporate headquarters facility in Tbiedo, Ohio through 1996.Tire Company is currently negotiating the lease of a new headquarters facility which would resultin an operating lease beginning inlate 1996. which isnot reflectedabove. This operating lease would result in future rental commitmentsof Exercisable 1,619,119 *1786-47.00 987,089 517.86 40.50 Option prices represent the marketprice at date ofgrant. Shares issued underoptions are recorded in tire common stock accounts aitheoptionprice. Options granted vest ratably through 1997. 37 wm ' * i* 17.Stock CoRipMMtkm nans (Continued) Deferred Stock Awerds Ai December 31, 1994, the Company had 16340 shares of tfefcned stockoutstanding, all ofwhichwere vested Daring iS^2^>90shffiesafde&(Tedodwertraated,aQd 16393 feares wereissued Cbagepsadooeqgns&s measured based<athemaAet^ce of il* stockatdateofgrantand h recognized on asowght-line ha<8<over thevesting period. Restricted Stock Awards At December 31,1994, the Company had 367,2S2 shares of restricted stockoutstanding. Stock restrictions lapse, subject to alternate vesting plans for approved early retirement and involuntary termination, over various periods ending in 2004. 18. Share Purchase Rights Each outstanding sham oftheCompany's common stock includes a preferredshare purchaseright. Eachright entitles the holderto buy from the Company one one-hundredth ofashare ofScries A ParticipatingPreferred Stockofthe Company au priceof$50.The Board ofDirectors has designated 750.000 shares ofthe Company's authorized prefared stock as Scries A Participating Preferred Stock. Tl*er* are currently nopreferred shares outstanding. activities with these financial instruments and does notgenerally reqtarecol/atmlOTherse<^^tosippontfe^CnaiKn^ i:,Ais!ruiaems. Tberwrionai amounts ofderivatives summarized in the foreignexchange rid:andmteiest raterid: management sectionbelow do not represent the amounts exchanged by fee parties and,feus,are not ameasure offoeexposure ofthe Compaty throughto use ofderivatives. The amounts exchanged are calcufeedon the basis ofthenotional amounts and the other wtnsofthe derivatives, which relatetointerestrales, exchange rates, securitiesprices,or financial or other indexes. Foreign Exchange Risk and interest Rate Risk Management TileCompany enters into various types ofcontracts to manage Us foreign exchange risk and interest rate risk, as indicated in the following table. (in millions ofdollars) Notional Amount December 31. 1994 Notional Amount December 3i, 1993 Fcward currency exchange contracts Options purchased Currency swaps Interest rate swaps S 194 22 190 190 $ 200 -- 50 150 Rights become eascisable and detach from the common stock tec daysafter a person orgroupacquires, orannounces atentfer offerfa;20%ormore oftheCompany's outstanding sharesof common g&xk. The rights expire on Decent 30. 1996, unlessredeemed earlier by the Company. The rights are redeemable by theConpany a ate centeachai any time prior toto> daysfollowing public announcementornotice tothe Companythat an acquiringperson or group has p&chased 20% ormore ofthe Company's outstanding common stock. If (he CGroparyisacquired is a merger or other businesscombination atany due afterthe rights become exercisable,each right would entitleitsholdertobuy shares ofthe acquiring orsurviving company having a market value oftwice the exercisepriceof the right. 19. Derivative Financle! instruments end Fair Vatee of Financial Instruments TheCcsrpsnyisaparty to financial instruments withoff-balce~ sheetrisk in the normal course of business to help meet financing needs and to reduce exposureto fluctuating foreign cuneacyexchange rates and interest rates. The Company is expesed credit Joss in theevent ofnonperfcemance by the otterparties to the financial instruments described below. However, the Company does not anticipate nonperformanceby feeoths parties.The Company does not engage in trading The Company enters into forward currency exchange contracts to manage itsexposureapmst foreign asrency fluctuations on certain assets andliabilities denominated kt foreigncurrencies. As ofDecember 31,1994, the Company has 29 forward currency exchange contracts mantling in 1995 which exchange 4.4 billion Belgian francs, 23 million US. dollars, 3$ miiiioR British pounds. 22 million Deutsche marks, 19 billion Italian lira, and various other currencies. As ofDecember31,1993, the Company had 40forward currency exchangecontracts which matured in 1994 andexchanged4.9 billion Belgian francs, 52 million US. dollars, 73 million French francs, 19 million British pounds, 30 million Dutch guilders, and various whercuirencics. Gams ami losses on these foreigncurrency hedges are included in fee carrying amount ofteFste^a&etsaivSliabilkm. AfDecember31,1994and 1993, deferred gains and losses on these foreign currency hedges are not material to theconsolidated financial statements. TheCompany hasentered buo forward currency exchange eaasacsi reduce its exposure tocurreacy fluctuations on die ^cqiatedl995eariungSQfcqtamuropcanspbsidaries.As ofDcceada 31,!994,foeCbmpaayha&9focv^curreocy exchangecontracts which exchange412million Belgianfemes erf $m3&oaBritish pounds against approximately 25 m2Hoo U.S.deflars.Gams mi losses eofoe*forcigp currency hedges areiadtofcd bkwjcneistheyearm whichthe exchange rases dsn^e-Al December31,1994, gains oo these forward currency exchangeattractsare notmaterial tofileconsolidated financial TheCompanyenters into forwardcurrencyexchange contracts to hedge hi equity investments in certain foreign subsidiaries mitorastegc hs exposureagainst fluctuations in foreign currencyrates, AsofDecember 31,1994, the Company has two forwardcurrency exchange contracts maturing in 1995 which exchange 1.0 billion Belgian francs against approximately 32 million US. dollars to hedgeits equity investments in certain of its European subsidiaries. As ofDecember 31,1993, the Company hadthree forward currency exchange contracts which massedm 1994 andexchanged 150 million Sweetish krona and 1.6billion Belgian francs against approximately 64 million US. dollars to hedge fcequity investments m certain ofits l&rapsgn subsidiaries. At December 31,1994, JosserofS3 mHlkwion hedgesofnet investments mforeign subsidiaries are included in stockholder' equity. TheCdatymyasttttito0p6mceBt?act$ tohedgesntiapaied Sransecdocs wifecertainofitsforeign subsidiaries.Asof December31,1994,foeCbogany has six currency option contractsawaaingm 1995 whidt hedgethe 1995 royalty payments offoe Company's European subsidiaries. The ax cartSKy epden contracts exchange496 roSfion Belgian francs and4 milhan Britishpounds against approximately 22 miilim U5.doaara.C5aHisondie Con^any's hedgescrftlwseanxia- transactions are included as deferred revenue in accoimts payaUeaftdaccruedli^nitres.AlDecemb>3}. 1994, deferred gains caroption contracts are not material to the consolidated financial statements. As ofDecember31,1994, the Company has entered into two CJBTeocyswaptransactions to manage sts exposure against foreign currency fluctuations oafoe principal amount ofits guaranteed Eurobonds (Note 2). These currency swapsmature in 2004 and exchange 140million VS. dollars against approxi mately $9 mSHofl Britishpounds. Gains and losses on the currency swaps are includedas deferred revenue in other labili ties. AtDecember 31,1994, gainson die currency swaps are not material to foe consolidated financial statements. The Company has a cross-currency interest rate conversion agreement from Deutsche marks imoU.S. dollars to hedgefoe interest and principal paymentsofits 7.25% Deutschemarie - . -bc^,foia 2000. iWagreemciSeaablishes afixed interest TSteoffM%. * TheCompanyanas intobaerestrateswaps to manage its interest rate risk- The Company has entered intofour interest rate sw^> agreement*toreduce the interestrates on its fixed rate -borrowings. Thesse^reOTCOBefifectiwiyconvertanaggregate principal amount of $150million offixed rate long-term debt buo variable rateborrowingswife interest rates ranging from 5.81% 7.96% in 1994 and 3.5% to5.65% in 1993. The agreements mature in 1998. The differential interest to be paid or received is accrued as interest rates change and is recognized over the life ofthe agreements. Other Financial Instruments with Off-Balance-Sheet Risk As of December 31,1994 and 1993, the Company is contin gently liable for guarantees ofindebtedness owed by certain unconsolidated affiliates ofS27 million. The Company is ofthe opinion that frs unconsolidated affiliates will be able toperform under tiieirrespective payment obligations in connection with such guaranteed indebtedness and that no payments will be required and nolosses will be incurred by the Company under such guarantees. CpneenfntiMW of Credit Risk As ofDecember31,1994 and 1993, foe Company has no significant groi^concentrafwns ofcredit risk. Mr Value of Financial Iniminwirts Thefollowing methods and assumption wot used to estimate foefairvalue ofeachcategoty offinancial instruments. Cash and short-teeni financial instruments Thecarrying amountapproximates fair value due to the short maturity ofthese instruments. Long-term notes receivable Thefairvaluehas been estimated using foeexpected future cash flow? tfecosired at marketinterest rates. Long-term debt The fair valueofthe Company's long-term debt has been estimated based on quoted maricetprices for the same or similar issues,oron thecunem rates offeredto the Company for debt of foe same renaming maturities. 39 > ***! y.,W^ 19. Derivative Rnandti liatnawnti and Pair Value of Bnweisi hmntmonts (Cont^wedj Fantigo currency swaps and interest rate swaps the feirvalues offord&toxrmtcy stopsand interest rate swaps havebeenestimated by tradedmate valuesorby obtaining <pwtesfromtofcera, Forward cmmtey exchange contracts,option contracts, and finsmda! guarantees the Mrvalues offorward nmtncyexchsigccontracts, option contracts, sd financial guarartees arebased cm fees cunently charged forsairilar agreements oronthe estimatedcost10 ttaminaie tee agreements or otherwise settle the obligations with the counter parties at the reporting date. The estimated fair values ofthe Company's financial instru ments as ofDecember 31,1994 and 1993, which have fair values different than their carrying amounts, are as follows; 1994 1993 (fit millionsrfdo/tan) Carrying Amount Fair Canying Value Amount Fair Wue Assess; Long-term note* receivable 6 20 6 18 $ 7 $ 5 UahilHfes Long-termdebt 1,037 1,076 898 1X163 C^'B^naxSm financial Inammmts - Unrealized pins-. Foreign currency swaps Interestrate swaps -- 26 -- 4-- 17 22 Option contracts -- 1-- As ofDecember 31,1994and 1993. the Company iscontin gently liable for guarantees of indeb*e&c*s owed by certain UKonsolidated affiliates. There is no make* for these guarantees and they were issued without explicit costTherefore, itis not practicable to establish theirfairvalue. As ofDecember31,1994 and 1993, theCompany has itiso entered into certain forward currency exchange contracts, the fair valuesofwhich are notmaterial to the consolidated financial statements. 40 20. Accounts Receivable Securitization In l994,tteCompany sold certain accounts receivable of its BuddingProducts North American operations to a 100% ownedsibsfcliary, Owens-CominglandingCorporation (OC Rinding). laDecember 1994, OCRanting entered into a datejesrogreeraeK thereby Ecarsoil coarowlvingtois, an UBfeddedpcFceatageownetsh^) interest ina designated pool of accounts receivable19to a maxknum of$100million. As of December 31,1994, $50raflKajhas beet sold ratethis agreement and the sale has been reflected as a reduction of accounts receivable intheCompany's consolidated balance sheet Thediscountrecordedonthe sale ofreceivables is recorded as an increase in other expenses on the Company's consolidated statementofincome. The Company maintains an allowance fo* doubtful accounts based upon the expected collectibility of consolidated trade accounts receivable, including receivable? sold by OC Funding. 21. Contingent Liabilities Asbestos Liabilities The Company is a co-defendant with other former manufac turers, distributors and installers ofproducts containing asbestos and with minere and suppliers ofasbestos fibers (collectively, the Producers) m percent injury and property damage litiga tion. Thepersonal injury claimants generally allege injuries to terhealth caused by infca&iGS ofasbestosfibers from the Company's products. Mostofti elamanu seekpunitive The property damage claims generally allege property damage to school, public and commesciaibuildings resulting from tire presence of protectscontainingasbestos. Virtually all of(he asbestosrelated lawsaks againsttheCompany arise out of its manufac ture, distribution, safe orinstallation ofan asbestos-comaming calcium silicate, high temperature insulation product, die maraifactureofwhich wasdiscontinued in 1972. Status As ofDecember 31,1994, approximately 107,200asbestos personalkijuiy claims wesepeoding against theCompany, 27,500of which wee received m 1994*The Company received approximately 31,700 such claims in 1993, and 26,600 in 1992. Through December31,1994, the Company had resolved (by settlementor otherwise) approximately 139,000 asbestos personal injury claims, 18,300 ofwhich were resolved m 1994. During 1992,1993and 1994, the Cbmpanyresolved approxi mately 66,400 such claims and incurred total indemnity payments of$639 million (an average ofabout $10,000 per case). The Company's indemnity payments have varied consid erably overtime and from case tocase, and are affected by a multitude of factors. These include the type and severity ofdie disease sustained by the claimant (i.c., mesothelioma, lung cseKgr, offertypes ofcafK^.a^ changes); the occupation ofthe cfeamanti theextent oftie clamant's exposure tta^^t(KXBiuinn^iswk^manidacmred,sold<s'^tailcd bytoe Ccoganj`,dextent tftoedaiiaam'SttposareiD ' asbeaos^QQta&iogpEodMaiaHf^^ o&efftotoicers;toemanberedfinance resources ofother Produce? defeodaas; toejuisdictwoofsuit; thepresence or absenceofotoerpossible causesoftoe claimant's illness; the svaii^Uityoraoic^feg^defensessuchftsthest^e^Umha- tions or stateofti art; Aether die claim wasresolved cm an individual basis oras part fa groupsettlement; and whetherthe claimproceeded to an adverse venfet orjudgment Certain ofthe Company's principal codefendants, the 20 members ofthe Center for Claims Resolution, have entered into &proposed "glcbo)"ssttfemem ubkh wouldrequire future claimants to satisfy certain medical criteria indicative of signifi cant asbestos-related impairment as a pre-condition to their eligibility forsettlement payments. The Company is using similarcriteria in the implementation ofits own settlement and litigation strategy and is also seeking to require more careful proofthan in thepast that claimantshad significant exposure to the Ccsi^any's asbestos-containing product or operations, the Company believes that this strategy will reduce the overall cost ofasbestos personal injury claims in the long run by channeling indemnity payments toclaimants whocan establish signifiesa asbeaowefaied impairment andexposure tothe Company's fts6esEos*asuainh^pfodms cs operations and by substantially tc&riog iadetanhypaymenttoadividuals who are onicipaired cr ^sotha^ signifies auc^ exposure 71 Company's strategyhas resolved in an increased level oftrial activity and an increasein thenumber andamountofcornpasaKsy and pisutivedamageverdictsandjudgments against feeCompany. Hus strategymay have the effect ofincreasing average per-case indemnify costs forclaims resolved with payment, while also increasingthe manberofdams dismissed without payment. hmnee As ofDecember31,1994, the Company had approximately $341 imUion in unexhausted products hazardcoverage (twtof deductibles and self-insured retentions and excludingcoverage issued byinsolvent carries) ureterks liability insurance policies applicabletoasbestos personal injuryclaims. Ofthis amount, $144 million will not be available until the years 1996 through 2000 under an agreement witothe carrierconfirming such insurance. An additional $24 miftion (outofthe $341 million coverage) is presently the subjectofcoverage litigation or alternatedispute resoiuti<mprocedures. All ofthe Company's liability insurance policies coverindemnity payments and defense fees and expenses subject to applicable policy limits. In addition, the Company has substantial unexhausted nonprodurtscows^aadersi^lial^^ yet undeterminedamountcrfatch non-productscoverage U .expected tobeavailableftg garment ofasbestos personal injury ferittmsanri associated defeasefees and expenses.HaCompany . vitas coraraeocedsbflratiGnwtthisprimary level insurance carikrtet&ingtobon&mtoeavaiiabSfty ofcertamofksDoaproducts coverage forpaymentofcertain asbestos personal injury '-4tabahfes,-ei\^vingtoe activities erfthe Company's former fei&iiatioacofgrac&gbustuess. TheCompany is seeking prompt rulings oo fee issues presented. Pegpurposesofcalculating die amountoftosaraoce^jp&cahlesoasbestos liabilities,the Compmy has estimated Us recoveries in respectofron-products coverage forclaims received tluough 1999at approximately $310 million, whichrepresents die Company's best estimate ofsuch recoveries for such claims. The Company cautions, however, that this coverage is unconfirmedandthat die actual amounts recovered by the Company could, depending upon the outcome of the arbitration, be much higher or much lower. Reserve TheGwnpany estimated total liabilities in respect ofindemnity and"defense costs associated with pending and unassorted asbestos personal injury claims that may be received through the year 1999(the*1iabSities''), and its estimated insurance recoveries in respect ofsuch claims (the "Insurance''), are reported separately as follows: (Innmausfdollsn) AsbestosLitigation Gaims December 31, Deccmber31, 18M 1993 Reserve for asbestos litigation claims: Carrera Other 3 300 1,146 $ 275 1385 Total Resave 144$ 1,660 Insurance forasbestos litigation claims: Current Other Tbtal Insurance Net Asbestos liability 125 656 681 3 764 125 643 768 $ 892 41 21. Contingent Uabifftfes (Continwd) Case ffiangrates continuedai historically high levels in 1994 -^{TOi3m^iy27300pewdfflmg)fc3ltetti^receiptof3j,700 claimsin 1993 and26^00damn a 1992. Many ofthese eew ....claimsappearto be&eprodacsofmass screemtgprograms aid Management Option Although anyopntioo isnecessarilyjudgmental and mustbe based at krfumiatioo now known to the Company, in the . coss whichmay arise otaofpending peraai injury and zamiberofrecent filings and dieuncertain value oftheseclaims haveadded tothe tmcetakutes revolved inestimatingdie Company's asbestos liabilities. theCoagwiycautionsthat sudt factorsas the number offuture asbestospersonal injury claimsreceived by ft, the rate ofreceipt ofsuchclaims, and the indemnity and defense costs associated with asbestos personal injury claims, as well as the prospects for confirming additional applicable insurantcoverage beyond the $341 miOiofi referenced above, are influenced by numerous variables that are difficult topredict, and thru estimates, such as theCompany which attempt to takeaccount ofsuch variables, are su^ecito considerable uncertainty. Depending upon die outcome ofthe various uncertainties described above, particu larly as they relate to unimpaired claims, it may be necessary at some point m the future forthe Company to make additional provision fortfte uninsured cose ofasbestospersonal injury claims received through theyear 3999 (although no such amounts are reasonably estimable at thistime). The Company remainsccsfident that its estimate ofliabilities and insurance w0i besafffcacat toprovide toediecosts ofall such claims that fcivolve malignancies orsignificant asbestos-related functional knparnneetThe Companyhasreviewed and will continue to reviewdieadequacy ofits estimate ofLiabilities and insurance on aperiodicbasis and make such adjustments as may be appropriate. TheCoogany cannotestimate and is not providing forthecost ofreasserted claims which may be received by the Company after theyear 1999 because management is unableto predict the numberofclaims to be received after 1999, die severty of disease which may be involved aid other factors which would affectthecost ofnshchums. tadiEtqwMUtiirM The Company's anticipatedcashexpenditures foeuninsured asbestDMC&ed costs ofclaims received through 1999 are expectedto approximate $764 million, the Company's Utilities, netof Insurance. Cash payments will vary annually 4speadm$ upon anumiwcf/ksevs, iockfdfflg the paceofthe Company's resolutionofcUims and the timing ofpayment ofits insurance. clamsfiled mthefufcse willdmhave amaterially adverse effect cfire ComfWsy's financial position. While such KSd&onaiaaisxradandtnaesesvedcosts ractared m tad after the year2000may besubstsuial overtime,management believes &aiany such additional costs will not impair the ability ofthe Comp&yto meet its obtigtuiotis, toreinvest m its businesses ortotake advantage ofattractive opportunities for growth, NotvAsbestoa LiabiHtles In October 1991.the Company and certain ofits officers and directors werenamedas dc&iidancs in a lawsoic captioned Gaetana Lavalfe v. Owens-Coming FibergUs Corporation, et al in the United States District Court for the Northern District of Ohio. Lav&flc purports tobe a securitiesclass action on behalfof alJ purchasers ofthe Company's common stockduring the period November 1.1988 through October 18,1991. The complaint alleges that the Company's disclosures during the alleged dass period contained material misstatements and nmkslrtntwwegming its pnntingent tiabititifts forasbestos claims. Thecompyantseeks an unspecified amount ofdamages (including punitive damages) on the theory that such alleged trassfiacaseneendomissbetsa^SdaUyiB^iad thepriceefthe Company'sstock- Variousotherlawsuits andclaims anting in thenormal coarse ofbusinessere pending against the Company, some ofwhich allege substantial damages. Management believes that the outcome ofthese lawsuits andclaims will not have amaterially adverse effect on the Ccm^jany's financial position or results ofoperations. 42 22. Quarterly Financial Information {Unaudited} Onm&um* ofdotlon,t*ce&sharedata) 1994 Net Salas Coat of Sties Chess margin Income (Lena) before Cumulative Effect of Accounting Changes Cumulative effectofaccountingchanges (Notes 6 and 7) Net Income Net Income per Share: Primary Income (loss) before Cumulative Effect of Accounting Changes Cumulative effect ofaccounting changes Nat Income per Share Puffy Diluted income (loss) before CumulativeEffect ofAccoumittg Changes Cumulative effect ofaccounting changes Net income per Share * First Quarter Second third Fourth $ 677 623 $ &S2 644 1S4 208 $ <671 85 45 t 18 $ 45 * 936 706 231 $ 63 -- * 83 $ 886 664 $ 222 S 43 -- $ 43 $(132) 133 $ .41 $ 1.03 _____--^ $ 1.03 $ 1.19 $ 1.19 $ .98 _____-- $ .98 $ {130} 1.70 $ 40 $ .95 -- $ .95 $ 1.09 -- 1.09 $ .91 $ .91 OamUimsofdollars, exceptshore data) 1993 Net Sties Cha ofSafes Gross margin Income (Iocs) before Cumulative Effect ofAccounting Change Cumulativeeffect of accounting change forincome taxes (Note 9) Net Income Net incomeperShare: Primary Income (loss) before Cumulative Effect ofAccounting Change CutntUativeeffect ofaccounting change for income taxes NetIncome perShare FUtiy Diluted Income (loss) before Cumulative Effectof Accounting Change Cumulative effect of accounting change for income taxes NetIncome per Share Pirn Quarter Second Third Fourth $ 651 512 S 754 57$ _ 176 i 2r t:1II 1*1 3 (9) $ 26 $ 17 $ 33 -- 33 $ 785 606 179 S 48 $ 48 $ 754 570 184 5 33 aM $ 33 $ (20) $ .76 30 ..... $ AO" $ .76 $ 1.09 mu. $ 1.09 $ .75 .... . $ .75 5 (.13) .53_ $ .40 $ $ .71 $ l.01 $ _____ ____________-- .71 $ 1.01 $ .70 _____ -- .70 Nei incomepershare and primary and fully diluted weighted average shares arecomputed independently foreach ofthe quarters presented. Therefore, the sum ofthequarterly net income* per share may not equal the per share total for the year. 43 Directors WMJLHWP omecroRS Fw*t Row, Left to Right Wtifetn W. BoeatfMftMn 1.0 Retired Chatman erfthe Board and Ouef Executive Officer Owens-Ccsang Normsn P. Blake, Jr. t-23 Chainnan erfdie Board. President md ChiefExecutive Officer Ug&GCorpot^w Furman C. Mottley, Jr. 1,24 President, Simpson investment Company and Chairman Simpson Paper Company DavidT. MoGovam 3,43 (Xcounsel toand former partner in Shearman & Sieving 44 BackHow,Left aRight Sir Trevor Hotdvworth 2.3 Chairman National Powerpk Glen R Hiw l Chairmanofthe Boarded Chief Buecutive Officer Owens-Coming London HtftlanJ 2,43 Partner Brown Brothers Hamman & Co. W. Welker Lewis 3/43 Sctpot Advisor Dillon Read& Co. Inc. W. Aon Reynold* 33 Chancellor City University ofNew Yeti Jen M. Huntsman, Jr. 1.2 Vice Chairman Huntsman Chemical Coip. Directors serve on committeesofthe Board as indicated by tfemanbets following their names, 1. ExectsiveCcBTsnince (UMUHiRar Chairman 2. Compensation Committee ImdonMIiaid Chairman 3. Audit Committee Mermen P. Bleke, Jr. Chairman 4. Finance Committee Putman C. Koeetey, Jr* Chairman 5. Corporate Governance Committee W. Welker Lews Quitman Senior Officers Gfen H.Hkwr Ommm oftlc Btwnj and Chief E*ecwveOfrKX*r Y' thnfnKOm IsxecudveViccPnaKfcW 'T3ewkipiwnt/f^ , BUSINESSES Charles It ^md Ve ftestdcotand President, Asia/PaciSc Vice PrakJent and Presidea,Insulation-North America David T. Brown Vice Presidedand Pittufcnl Rooficg/AspMt Pauls H. J. Cbotmondelay Vict Preside and President, MiraflexTM Products RobertD. Keddena Vice Preside and Resident, VVcwro FiberglassGroup Cad 8. Hedlund Vice President and President, Rctail/Dtstribusion Warren D. Knowtton * Vice President and President, Building Prreiuas-Europe CORPORATE GhdMlanLCHnpMI Senior Vice Presafe. General Counsel and Corporate Secretary Oomordoe Cooore WeePreside and Cootrollw David IV, Devonshire Senior Vice Presidentand Oiieffiftancia/ ClTiccr Robert c. LonergM Vice PreskSert Science& Te*noiogy Michael l Miller Vic? President and Treasurer Bradford C. Oelman Vice Preside Corporate Relations Gregory M. Thomson Senior Vice President Human Resources SeuttCKoepke Vice Preside and President, Latin America Patrick F. Moore Vice hestdemand President, Pipe BtfainOos O. Vldahs Vice Preside*# and preside. Composites Jerry L. Wainctan Vice Presidentand President, Specialty and Foam Products 45 General Information Corporate Address Ow*s-Coming Worid Headquarters Ftberglas Tower Tbkdo.Oteo 43659 <419)248*8000 s-- - ^' ShticboiderServlMS Owera-Cbmmg main&flis aShareholderServices Office sf world headquarters m Tbledo, Ohio, to assist shareholders. Inquiries are welcomeai the world headquarters address. IVangfer Agent end Registrar Chemical Bank acts as primary Transfer Agent and Registrar for the Company- Questions on change ofownership, coal shares owned, consolidation ofaccounts and other such matters should be sent to Chemical Bank, Securityholder Relations, RO. Box 24935 - Church Sneet Station. New York, New York 10249, or phone 1-800-851-9677. Toll-Free Numbers end Electronic Matt Addresses Investor Relations 1-800403-6843 '' invesux@oweru<tHTurtg.com literature Requests 1-800-723-2727 dcolc^owens-coming.com Product Information 1-BOO-GET-PINK internet As of April 21,1995, you can visit the Owens-Coming Home Page ai our World Wide V&b site using the following address: http://www.owens-coming.coin Auditors ArikurAnderses LLK Tde$o, Ohio, is theindependentpublic accounting firm for the Company. Change of Address A change of address should be reported promptly by sending a letterto Chemical Bank, SecurityholderRelations, P.O. Box 24935 -Church Street Station, New York,New York 10249. Fona tO*K The Company wtU provide without charge to my person who a bmeficial ownerofits shares a copy ofthe Company's 1994 Annual Report on Form KMC, as filed with the Securities and Exchange Commission. Requests should be addressed to Diane Dunmeade, Inquiry Department Owens-Coming Fibetglas Corporation, Document Center 3,801 Washington Street Toledo, Ohio 43624. Annual Heating The annual shareholders meetingof Owem-Orrmng Flberglas Corporation will be held in The J^ristyle, The ToledoMuseum ofAn, 2445 Monroe Street, 7biedo, Ghkx at 2pm. Thursday, April 20,1995. Stock Exchange Owens-Coming stock is listed fortrading on the New1 York Stock Exchange and theToronto Stock Exchange underthe symbol OCR rriytlfdpops'. /w*>'xe Kfxlonte 46 Global Branding: The Power of Pink Owens-Coming in 1994 agtobal ki^ithy campaign, crcaiing a "reegabrand" to omfydeCompany's diverse busiressesunder a single tanbreBa image. A lay elementofthe campaign includes ~*S>. - expanded ose ofthePink Pan&erandCcrapsny logo around the wafri High-visi^ty sportsmateksg aoivifes reh key audiences and underscoredie(brabBityofOwens-Comingproducts. Ce^sxwwrsftip trftbe 1994/95 FreestyleWorldCupgenerates awareness ofskis and equipmentmade with glassffbes. Oathe NascarRacing circuit, the Company is an associate sponsorof well-known Team Lowe's. hi addhkss, aggressive ingredient brandingpromotes products such jisK2skis made with Owens-Coming Advamcx7* fiber. .sag*