Document rKJRRG5pbEVOv1d7RvMm5Yzr

1995 Annual Report Owens Corning WV-04343 Financial Highlights Income Statement (inmillions ofdollars, exceptper skew dagand wherenoted) Net Sties Greet Margin Tincome from ongoing operations 1 income from operations in Net Income ca Asa percent ofsales g i Per Share Information Putty Diluted Earnings psr Share Net Income from ongoing operations Net Income Year Ended December 31 1995 1994 1993 $ 3,912 $ 3,351 $ 2544 942 815 678 412 412 231 6% 343 226 159 5% 267 236 131 43 $ 4-25 $ t 4A0 5 3.35 3.35 $ s 2.56 2.81 * Shares outstanding (in thousands) Fully diluted 94,109 50,025 49410 vu id Balance Sheet ets (!n millions ofdollars! i. Total assets Total debt T- Totalotherliabilities Total minority interest (MIPS) Total stockholders' equity Year Ended December 31 > 1936 1994 1993 $ 3,261 1 893 4 2386 S 194 $ 12> $ % % $ $ 3.274 1,2)2 2,742 (680) $ $ i $ $ 3013 10W 2?% -- (869) iti , Cash Flows (InjjjWww ofdollars) Year Ended December 31. 1996 1994 1993 Net cash flow from operations Net cash flow from investing t 342 $ 091) $ 361 $ itee\ 312 (178) Ntt.cash flew ftwajansacwg 98 5 m s <W) Net cash flow from asbestos-related activities $ 7> S > $ C59> Is tx >0 Capital spending t 276 S 258 s 178 Ibble of Contents o The Chairman*s Penpec?ive 2 Globalization Markets 6 $ Innovation * (0 Productivity 12 rp- Leadership 14 t ManagementV Discu^on and Analysis 16 Ten-Year Summary 20 Financial Sjatenwnts Dwsctcas awi Semoi Officers 21 44 dossaiy 46 Genera) Information inside Back Cover Net Seles (tn mUttcr# dollars) SOOP Growth ftreemogt JOO____ S* sooo 2000 OOP '93 * ' income from Onpoine Operation* (Inmillions ofiotUn) PtfCtK tfSaks 9% 10* 11* Futty Diluted firmbipi per Share (Ongoing Operations} llndehars) Owens Coming, a global Company, serves consumers and industrial customers with high performance glass composites and building materials systems. Produet/Marfcat Ovf j\ BuUding Materials Insulating Systems World's leading iretovatofof * insulating systemsoffering combined performance benefits; world's leading producerofglass fiberinsula* tn products;secondlargest produceroffoam emulation. Roofing Systems Leadingproducer ofintegrated roofing systemsas well as leading U.S.producerof rsskknGaf roofing shingles. Leading VS. manufacturer of industrial asphalt and oneof dieleadingproducers inthe worid. Product* Markets Demand Drivers/ Growth Strategy PINK Fibergias*insula tion; KnkMs*featuring Miraflex1* fiber, expanded andPINK extruded poly styrene rigid foaminsulation; rockwool (U.K.); AUR/F Superi&sulsioiu mechsiica] and specially insuklion. Inflating systems can also ks&sic exteriorsystems con^wnems. Residential andcomme/ml remodeling andnew construc tion throughmailers.contractors and tomanufactured housing. Fabricated systems fororiginal equipment manufacturing including automotive,appli ance,office furniture, KVAC. Foan alsoincludes agricultural buildings, cold storage, highway insulation. Residential and commer cial remodeling outpacing new construction in North America. Majorpresence is NorthAmerica andEurope, expandingin Latin America and Asia Pacific. Insulating systems increasing market shae and take-per-unit. Pronanencc*and odw branded roofing sissies constructed ofglass fiber mat and weathering-grade asphalt; underttryment and ridge vents. Industrial asphalt forcommercial roofing systems, waterproofing, saturams,coatings and adhesives. Residential and commercial reroofing, remodeling and con* structicn worldwide. Asphalt used internally in manufacture ofresidential roofing products and sold to avariety ofindus tries including roofing,automo tive, chemical andrubber. Reroofing skives 80% of demand, including remodel ing and replacement-- homes historically need sew roofs every 1? years. Brand leverage expendingdistribu tion; diversifying tomeet ' demand in emerging market; ofAsiaPacific, Has(era Europe and Latin America. Exterior Systems Redefining the home building market through an integrated, performance-driven, muftipnxlua offering combining exteriorcoto-omh systems, roofing systems, instating systemsandsound coned systems. Extmorcolor-match products includeLuraiDess** vinyl windows andpatio dons.TVanririoreTM vstyl sitting and high-style roofing shingles; PmkWrap** polypropytene housewrap; QuittZofte1* Acoustic Batts. Residential and commercial remodeling and new construc tion tfeough retailers,contrac tors and to manufactured housing. Retail includes home centers that sell todo-it-yourself retd professional customers, ReskJentiaf and commer cial remodeling outpacing newcore(ruction inNoth America. Brand leverage expanding markets. Material systems muftt-psoduct strategy increasing market share retd take-per-unit. Corapcwlta Material* Glass Flbar/Rasln System - World's tending producerofglass fibers usedin composites--a material system made oftwoor more components,t-g. resin retd glass f&er. Leading North American producerofpoly esterresins and one ofthe leafingproducers in the world. Pipe Systems Manufacturer and marketer of glass reinforced plastic (GRP) composite pipe systems for waterand waste transport. Provides lowcost entry into newanddevelop ing i&aricets. Glass fibersinmyriad ferns includingchopped strands, wovenmats,yams; polyesterresins throughjot vesture operation. Glass fibcrAesin systems replace traditional materials like wood andmetals, providing lowercost,lighter weight and greater strength. Morethan40,000end-use applicationsinmultiple indus tries including transportation, electrical/electrortics, comtroction.recreation and others. End- automobiles todreuitboards; from utility poles retdroofing shinglesskisand hockey sticks. Global trend ofmaterials substitutiondriving growth. Expanding applications and markets including infra structure applications. Owcra Coming increasing composites capacity by 30% overnext twoyearsto meet demand Cofrorim-resastaat, laxge- diameter(one to 12 ktt), glassreinforced plastic pif* systems.iretfuding FRwtia* couplingprints, GRP pipe systems, manufactured with proprietarytechnology, glass fibers and resins, areeasier totransport and install. Sold directlyto governments and privateindustry formajor infostructureprojectssuch as water,chemical and sewage transport Uses range from new systems to replacement of outdated systemsoftraditional materials like steel andconcrete. Drivers include popula tion growth and m^jor infra* structure development and replacement, especially in developing countries. New operations, including China. Spain. Argentina and Colombia, bring global man ufacturing facilities toitine. THE CHAIRMAN'S PERSPECTIVE or me, one ofthe stand-out evens ofa stand-oat EOwens Coming year was a diversity training session a few months ago in Toledo that dote ofmy top repeats helped present. 1 could notbe there, which turned outto be a good thing; fora# attendees told me later, this was the meeting where they finally and totally understood that the vision ofachieving a representative workforce is not mine alone. Thefact that it never was mine alone is quite beside the point If was perceived that way -- as have been a lot ofother OwensCominggoalsttes ionly played a rtde m snKuia&ig--and like it or not "perception" is what counts. A related and equally welcome development is my corpora^colleagues' dwindling\e ofThe phrase, "This is what Glen warns;" which among investors was translated to, "I wars to hearGlen say it.*' While flattering on the surface, die implication ofthese two messages gas to the heart ofthe ^eafcttchallengeour Company hashad toface--and therefore to Ok positive turningpoint that was reached in 1993. 1 am speaking to the linked issues of internalownership a^dextemai credibiliTy--ofThe nealfcs each and every Owens Coming employee id personally bay-in to die Company's new goals andcorporate culture, and forinvestorand business audiences todiscoverthat theycan believe the OwnsConingstay evenwhenGlen Hiner doesnot personally tefi ir. As much as any otherachievement, I take pleasure in die progress made on these twocritical, albeit intangible fronts. The result is a new, far-higher level ofOwens Comingcredibility that already haspaid offinmatyways, not the least of which was IPQS's neariy $! billion gain in market capitalization. From a purely objective financial perspective, ourperformance was equally strong. For the fourth consecutive year and 16th consecutive quarter, wc met ourgoal ofreporting higherearnings than the same period the yearbefore, Owens Coming's net income, excluding a one timetax benefit of$8 million, rose 40percent to$223 million or $4.25 per fully diluted share in 1995. compared to $159 million, or$3.35 per share in 1994. Record 1995 sales of$3,612 billion, were up 8 percent or $26! million from 1994's $3,351 billion. ! am now four years into my tenure at Owens Corning, and there are four to go before the year 20CC rolls around with its target of$5 billion in aggregate sales. Hanking back tohow people'seyebrows shot up when we first put that numberdown on pap^ makes it all the more satistyingroreponth^airp^fonns^epsces ahead ofschedule, That is a good-news story with components I will highlight a paragraph or two down the page, bat not before somenecessary comments on our single most stubborn negative. My reference, ofcourse, is to new asbestos claims, which totaledabout 56,000 in 1995,up fromapproximately 29,000 the yearbefore. The vast majority ofnew claimants areivxsicL My personal opinion isthat many ofthe cases were filed by lawyers eagerto maximisetheir feesbeforeionreformlegislation goes intoeffect in Texas and Illinois. -Be that as it may, polls suggest tits theAmerican public has caught on to the way ourcivil laws are being abused by cynical elements within thepersonal injuryprofession aid aredemanding overdue change. Fornow. what corats is that ourCompany's liability risks were, aream) will continueto be entirely manageable. V& continue to paylegitimale claims and to fight those that are unjust Cash expenditures are runningtree toprojections. Mom important, the favorable nonprodocts insurance settlement reached by die Company during the past fiscal year prompted SMUMHIIJUBI O I virtually afl ofour investment analysts to agree with our long-held beliefs there is a light at the aid ofOwens Coming's courtroom tunnel. "Headers will do well to study the whole ofthis report, because the amount ofspace 1 use in this publication does not allowme todojustice to the year's many accomplishments. That said, here are a few thatcome immediately to mind: * The drive for global expansion accelerated in 1995 with the net addition of 1,300newjobs, V* opened our eighth large-diameter glass reinforcedpipe plant in Spm,establishedapartnershiptobo&iagreenfieldcompositespiam inTafoya, India; and announced plans to add 280,000 metric tons ofworldwide compositescapacity over 1994 levels, t 100.000tons ofit available in 1996. Meanwhile, in China, we opened twoplants, one for pipe, flic other for insolation, and signedyet another insulationJam venture to serve therapidly growing Chinamarket. A personal highlight ofdie year was seeing that first Owens Coming logo goon display at ourdistributor in Ousigzhou. Productivity initiatives were headlined by the well-publicized launch ofOwens Coming Advantage 2000. a 100-week, global,enterprise-wide reengineeringeffortdesigned to give GvtCompany world-classoperatingcapabilitiesthrernghfeepairing of simple,common global processes with stac-of-tbe-an technology, hi keeping with our style, die timeline forcompletion is as ambitious as the savings goal forthe project, both ofwhich we folly intend tomeet, Acquisitions during the yearincluded Western Fiberglass Group, Soltech, Inc., Fiber-Ute, Falcon Manufacturing and Delsan Industries, Inc.--companies that together contributed to our capacity in small furnace technology, insulation products, polystyreneproduct$ and vinyl windows and doors. mm i u_j * In the area ofnew products and market development, our building materials busutess now features systems and solutions for the entire house, including glass fiber and foam msulation, siding, roofing, windows, patio doors, housewrap and acoustic bans, It adds up to a farther strengthening ofOwens Coming's relationship with the retail and builderchannels. There is much more, Forexample, Compwemvrtdnamed the Company among the year's J00 Best Places to Work; R&DMagazine selected AURA Superinsulation as one ofthe most technologically significant products of 1995; and Popular Science put ourPinkFfas Insulation featuring MiiaflexTM fiberhigh on its roster ofthe "Best ofWhat's New," Twelve months ago. 1 wrote that 1995 was going to be a "pivotal year" which frankly, in chit stageofdevelopment is about as safe a prediction as one can make. Wei], 1996 is going to be the same, wily more so, for in addition to the dependable array ofsales gains, new product launches and global expansion initiatives, we will be moving our headquarters to a new and very business-friendly building across and down the street. There are some things that we will ware co leave behind--internally-focused orhierarchical thinking, for example, and the type ofnarrow product loyalty that comes at the expense ofthe increasingly importantOwensComing umbrella brand. Far longer, however, is the list ofhard-won gams that we'll be taking along--like the fast-spresling willingness to take risks; a sharpened focus on the customer, and feej>lan toognmi the type of ingredient branding feat worked so well forthe K2ski wife Advance*5* fiber. I look forward to keeping you informed. Glen H. Miner W6 MAKE THE DIFFERENCE; 010 3ALIZA7ION n a swiftly growing global market, geographic expansion is a competitive edge critical to I maintaining Owens Coming's world leadership position, increasing balance, and a broader reach of business across markets and economies, provide greater sales opportunities and lessen susceptibility to adverse local market and economic factors. Emerging markets around the world offer tremendous j potential for Owens Coming to expand the balance and breadth ofhs businesses. The Companyis aggressively targeting these developing countries and regions, as well as expanding existingmarkets with new products and applications. Sale; outside the United Stales in 1995 were 2? percent oftotal sales, up from 24 percent in 1994. Aggressive global markwing demands global manufacturing capabilities. In 1995, Owens Coming opened its first insulation plant in China with a second opening in Shanghai m 1996. The Company opened a new pipe plant in China, its first in Asia Pacific, and twopipe operations in Spain and Argentina. A ninth pipeplant will open in Colombia in 1996. Owens Coming**pipe businessprovides low-cost entry into developing markets. IBWanWWtKB Matneaisy ftn oeJc' don re Aus Ito Yaanawng. W4arwpUidfl iOsnQnw$S flru in&livrestar tti OUna. (aAs jHf* JMuUlrinttt Iherapidly-growing trend toward materials substitution has created an explosion ofraw applications for composite materials, in numerous intones. As the world leader, Owens Coming is meeting this trend with an mcrease in composites capacity of30percent over the next twoyears. This increase accounts for about halfthe total industry increase, far outdistancing the two largest rivals. A new composites facility is scheduled fra India in 1998. increased brand awareness, through useofthe corporate logo, trademarked colorPINK and Pink Panther icon, helps Owens Coming leverage hs market leadership around theworld. Showers is the North Uemajlcu*tS&Q faind enin tiofeslhigh *h KMC rcuMiAi?i 1993,n^n- teftuni UKinuttSmioR rt 5 honhfj. be MUruioJ Kwgdwiv fcma wsAMsaas ** plcMacd tcrttfricniJEuNpean aufUAev. The K9S trade shew, a "plasties world fair" held in Dusseldorf, Germany, exemplifies the rapid growth of the composites industry end Owens Coming's leadership position worldwide. The Company showcased a myriad of the newest, most Innovative applications from around the globe, Including Courtaulds armored vehicles. Velocity aircraft, automotive body parts and flexible pole vaulting equipment. 7** ity fceuetf MiEpMite unmnJ ^UiH tnc'mnfiUB9faicuwsg] US. earitfEBJta Betode * Mteftw tod, Aie****fend*jwe4g< glut flba mntaadin0iaS leu. * ea^rrifr Jeon a>4s> KRuae 0* Alfe tannSp*4a taa At ** umt ihaw.US wonttlmBesousing U/S0WM^I MOiA Sw ,<fcw(,fw"utngpavUi nuts r fc* side ritfteAJAaic, Owens Coming's integrated horns butUUng materiel* systems proves maximum snergv efficiency, low maintenance and convenience, They combine total performance benefits of several integrated systems already sold by Owens Coming -- an Insulating system including glass f&er and foam insulation, windows end housewtap; a roofing system of vents, undeHayment and shingles; an exterior color-match system of vinyl siding, windows, patio doors and roofing shingles; and an acoustical system, including acoustic belts, to bo expanded hi 1996. WE MAKE THE DIFFERENCE: MARKETS wens Coming U perpetually expanding end redefining all markets In which rt competes. OI Growth in existing markets throve expanded product offerings and increased take-per-unlt, "eombinod with new market development, increase share gain, market penetration and business balance. Leveraging the Company's Icaderehjp position aid unique industry insights, Owens Coming is redefining a mature buildingmaterials market through its multi-product systems approach, in 1996, the Company introduced its first truly integrated, multi-product home building materials system, the strategy allows Owens Comingto increase sales where it already has high product share, and grow that share profitably. From less than 51,000 per 1,800 square-foot house in 1993, Owens Corning increased its take-pemmit opportunities to $5,000ormore in 1996, while capitalizing on the growing home improvement market. Creating a new market for glass fiber within the building materials indusxry, in 1996 theCompany introduced Ouggose1* Acoustic Batts for advanced sound control. In response toa growing trend, additional components ofsi instated acoustical system will be introduced in 1996. c*wj. pmtdrt e**Wtfcd tSKrCMtQAgITlAftftl'*9 IS Boogetanntlexprm* /*t drttnCcatfn Mv.liv- t gw* Glass fiber for composite materials now constitutes nearly one-third oftotal sales, with approximately one-halffrom outside the United States. As the world leader in glass composite maiei^OwensOwning is taking advantage ofits low-cost ' position, technical leadership, global distribution network and strong cussonerrelationships to aggressively grow the composites business worldwide and expand applications. Forexani|^ialrer|}er-vhickkiaoeasing in the growth in electronics includes cellular technology and fiberoptics; and the construction market U substituting composites in a wide *4 range ofinfrasmiaure-reiated products, including I-beams, bridge decksaid concrete reinforcements. > *atw*gmeaW>TOTtfcafiettor . capable*ceftt 1 ^ totfax ag; fMOtrtMSeeafw^dffifawto Ui Mut-.--..nninlimiti. .ignflrtAte* JncHAng pete **>* teagfe .i4U0Ci** A^iftimniniiuuu .iiaofcv .n*i9ftoxrv> atm In ifyiHiriEftTCd fuiswfeutaav- fLtWpwtUiU * tfomjwittta .iJlIUtf. WE MAKE THE DIFFERENCE: INNOVATION uttbg^^s Innovation, in all fooota of operations, is a living force at Owens Coming and a leading competitive advantage. Customer vf"' focused and bottom^u oriented, the Company's impressive heritage of innovation, incorporated into the corporate strategy, results in product process and service excellence mentis! to globe! growth. Market-focused innovations not only create new products and applications, but speed commercialization, tower costs aid create efficiencies in manufacturing and business Ovuurmn fcaj* j-o* gerlCTBsof* litiu'M oJUiUiaf mao. ecmpu'n kiesi, jngculowi Outatfs S^5p2a processes. At the forefront ofresearch and development around the world, Owens (Coming's Science SlTechnology a*TM cenw.m 0<>ei,Cmn| (yckitA Centerdelves into new areas beyond existing business and enhances theCompany's world leadership position. Innovation is characterized by Mirafiex** fiber, the industry's firstnew form ofglass fiber in nearly 69 years. Possessing properties never before associated with glass, the flexible,resilient fibers offer numerous applicationopportunities. PinkWw Insulation featuring MiraflexTM fiber, ks first product application, was agreat commercial success in the 1993 United States rollout. *mi'0'UfeipfUK J9$3 a tfr* S&Ktakt! TfcS OtoSuw Wiwertiy. t*v*nopKnUrmtfct*t* mi 0**CesUn* CtaaJDegp. Anotherfirst forthemdustiy is Owens Coming's Prominence* shingle, also introduced in 1995, created with a > proprietary blender technology that produces a uniquely styled, high-performance shingle at lowercosts, farcomposites, the Composites Innovation Center devek^s process technologies, allowing reinforcements to penetrate maritets where other -TTugmafehgvrga^rita^aily-begimed. MU wort* ** Wcub^M on Innovations in marketing technology make fa easier forcustomers to dobusiness with Owens Coming and position the Company as a marketing partnerthey can't afford to do business without Owens Coming'snew Marketing Solutions Center, interactive in-store kiosks and Internet home page provide information and education for customers and dealers. VrafteuMof OwsCWEeBt'**#***- httfid Gfct*) MowOJi Aftfeafrstt tt-i Dmfn *uflnon tonj^fiw FW*Bwjnu* dsvtWe reviuieodt vn) MfXrrtWfcm OweCoMf.^e. wmpwnetwfce# pwdMl--nknfcwWfcy wnScfesUtuMnWcfc. DcnTK>t*s)vto)ft andKept MrFWtf^.CwBCweioj preHa xrytf,d pirfefatuceixcMng fiwwtinki. aumt&y Hi TeaMnwt;M Oil^ooua, w the Ui. snA*uH. w 0 Bob Lonergan, Vic President of the Science & Technology organization, leads the group with an eye on the bottom-line to excel In cutting-edge innovations like resUlerrt Miraflex** fiber, the Industry's first new glass fiber hi nearly 60 years, end Prominence* shingles, created with proprietary new technology. htorttfap h*, It-m-i-r 3MvuiMU. C*"tfCriirst6*e*n7 'ape-nan-WS mibm ttferw pw AttAtaas uuHcdBofegy T*e|kW eriwuwxm.aieog nb {Percent 0/(fta^front I9V2J 300% 2fm> Aided by advanced computer Sekar Venkataraman, Manufacturing aystems, closed circuit monitoring Engineer; end Jenny Harber, end robotics, four 15-roember seif- Technician, can move to assist at directed work teams alternate shifts any point in die process while still to ensure the Jackson, Tennessee, monitoring his/her assigned station. composites plant runs at optimum This Automated Guided Vehicle capacity around the clock. With automatically moves cartons only one overall job description between the warehouse and pack* and cross-training In all aspects of operation, team members out area. Whan not on a run, it will take itself to a docking station to Chris Bishop, Technician; recharge its batteries. 1 MAKS 'c3Sg| 6RENCE: PRODUCTIVITY ncreased produetlvhy, a Ifmttiaas objective for Owens Corning contributes I directly to the bottom Hne through lower costs, reduced cycle times, faster reepMtee and improved customer satisfaction and employee morale. The Company strives for end achieves innovative productivity improvements in el) n*!995RACHA' areas of business, from manufacturing to business processes to administration. Owens Coming made significant strides toward increasedproductivity m 1995 through die creative initiativeand solutions of employeesaround the world. Completing its first full yearofoperation in 1995, the redesigned composites plant in Oktj Cttto'rg 6x f" d*ceiWncr 4$(iMra remjrwwif Stum O-eiw<0f*i| fituii. icoftii fataedby ftancW ksrfns. emb <" piwgtvni twBMiWimf Jejgpifte Jackson, Tennessee, now runs at fti11 capacity with ws 15-tncmberteam per sltift managing the entire process. With 0*1 WOsalwn bm< mn^i. anempoweredwork force,coa-effieisncy andaipenat<?oaltty,fee Jadsovplant hasredefined standards ofmanafacniringnot only for Owens Coming, but theentire industry. 1995 mated thelaunch ofOwens Gaming Advantage 2000, a global, 100-weefc, enterprise-wide business process reengineering initiative. Whh total investment one-thifd less than maintaining the status quo> and expected contribution estimated at $50million in annual cost savings, this initiative represents improvement in qualityofpretax earnings by a full percentagepoint ofsties. Owens Coming's extensivereengineering offinancial processes was recognized in 1995 with the REACH Award from CFO Magazine and MasterCard, foroverall excellence. Winners illustrate the ability to"think outside the box, break tufes,shawer assumptions,and findradically new andbetter ways of doingtiangC ad one judge. Strcamhned finsariti processes focus on shareholderissues and represent an additional $20million in annual cost savings. Tte iwbiiojt w*uj=Lfi**ae< tvaIH jlWrtM W MOowly. iMftfavMttRTVW *rUMWMUt K>etarMf- h**teVjtab*#? rewpiud ifwni BewfentttW *gmo"brs-a<te*' prancs. M* mutosiKnuMn. *HruBKW*r*a6B moa na**n w4 pn*ak tAeukfcptaJterra MteBteraSReanre) tovsnwfi. Schfis#^ ionrn4ewe/>]7. Jra* flan ihe<w e^gnwtg("gvmm / 0*9* W6 MAKE THE DIFFERENCE: LEAPCREH1P chieving ambitious goals demands strong leadership to leverage the ACompany1* strengths end implement aggressive growth strategies. Owens Coming Isadora, both veteran end newcomer, trace success to ewjw? **wg*8Kj< **hes Cwftwt We A* R>sCac BftolHe181*tko*ehere-it? fe, fpcuwDffUtfnari aito* ifc *Tnpr empowering their people to take ownership o* die Owens Coming growth straoftpe^Lgn#yi.Mwapi hui** of im#K OtfrHswWC&i** Dm* fc*eeaiP V of Owens Gtfnmg's superior leadership team, a core ofseasoned Company leaders combined with strategic new 0*w?R>cni;?lttAng/S3uici. (mw Vrr> viUiOweas Cun^i** !9V veinnswoie< Yu/e*.U. additions, affonh a breadth oftafera and depth ofexpertise not often duplicated. Successful giobal expansion requires experience and a detailed knowledge ofthe business. Spearheading this effortarc Quick Bland, President Lain Aroerica7Africa; Cad Hedhmd, Preside:, AsiaPacific; Warren Knowlton, President, Building Materials--Europe; Scon Koepke,President, Pipe; and Efihimios Vldaiis, Resident. Composites---with acabined tenure of 107 years. < Newleaders bring frc& insight and innovative thinking. SeniorVice President and ChiefFinancial Officer David Devonshire, whojoined the Company in 1993, directs a team dealing with sophisticated financial management in moreto 30countries. Acquisirionsalsoadd strong leadership to help the Company grow in new directions. Jerry Weinstein.President ofSpecialty and Foam Products, came to OvensComing with the 1994 acquisition ofUC Industries, Inc., r>isi*w*-- , *** u "d directing expansion ofthe foam products and window businesses. Leadershipsetsaato? wan emphasis on a safe and tHfimev--a! supportive work environment, makingOwens Coming a preferred place ofemploymentTheCompany's strong leadershipheritage also benefits diverse workf communities. Regina/do Murari ofRioCfaro, Brazil, was namedOv>ens Coming's 2995 Volunteerofthe Year forhis many hours ofservice with the homeless and AIDS prevention. Corporate partnering with Habitat for Humanity included the 1995 Jimmy CarterWork Project and the Build a Dream*Super Blitz V6, co-sponsomd w/h the NationalFborfal! League. D*M*bw.aikf flwc*SOffk*r. trfU iM tew*;warnffm hisbnn * m/jar MouibuieBre *e*aja**v&gOen> Cofw|*f tatavetlwu. k sell**li fWfllfcuiWi jn*wet1uSWi* *4^ag^45t-- #e Ovnp4Tl>'!fWl?>^SlK fc^pmwtwj..^eMng tfiiuint TiisMfcd wpnioaiM^Su)r bi fyaourffttasriMagn n---h uahJsWrarvap^ioJ fcsuksfcntopYi AabcJ <W)|"*rr^ wSsreptfO* 1995 REACH A**ntp*wW ^(-^OHnsnrvied MatoCud o Jerry Wnlnsteln, President of Speeiehy end Foam Products, typifies Owens Coming's entrepreneurial approach to expanding new markets and introducing new products, teadino the Company's entry mto the foam products industry with expended and HNK extruded foam insulation predicts, end the expansion of the vinyl windows, patio doors and vmyf e&ng businesses. Net Sates llximtUoru afdollanl Am tncdmefrsm Ongoing Operations* (inmUiimsgdothnf sfiaitingspecial iwsu Het Income Ub rmOwut gdattan) 9S '94 Management's Discussion and Analysis (Ailpershare information discussedbelowis n afullydiluted basis! Results of Operations Net income forthe year ended December 31,1995 was $231 million, or $4.40per share, compared to net income of$159 million, or $3.35 per share, and net income of$131 million, or $2.81 per share, for the years ended December 31.1994 and 1993, respectively. Hie 1995 earnings growth reflects pricing gains and the benefits ofacquisitions, as well as a one time gain of $8 million or $. 15 per share which was the result ofa tax lesscarryback, Excluding the impact ofthe tax benefit, net income for the yearended December 31, 1995, was $223 million, or$4-25 per share. Please see Note 8 to the Consolidated Financial Statements. Net income of $159 million for the year ended December 31,1994, included the following offsetting special items: an aftertax gain of $i23 million, or$Z45 pershare, reflecting a change so the capital method of accounting for the rebuilding ofglass melting facilities; an after-tax charge of$85 million, or $1.69 pa share, for productivity initiatives and other actions; a nort-cash, after-tax charge of$10 million, or $20 per share, to reflect adoption ofStatement ofFinancial Accounting Standards (SFA.S) No. 106, "Employers' Accountingfor Postretiremen? Benefits Other Than Pensions," for plans outside the United States and a non-cash, after-tax charge of$28 million, or $.56 per share, to reflect adoption ofSFAS No. 112, "Employers' Accounting for Postemploymcnt Benefits "Please sec Notes 6,16 and l? tothe Consolidated Financial Statements. Excluding special items, net income forthe yearended December 31,1993 was $118 million, or $2.56 per share. The 1993 special items included a credit of $26 million, or $-53 per share, for the cumulative effect of adopting the accountfog standard for income taxes (SFAS No. 109); a one time gain of$14 million, or $,29 per share, reflecting a tax benefit resulting from a revaluation ofdeferred taxes,offset in pan by an increase in the Company'scorporate tax liability, necessitated by the Increase in foe federal statutory tax rate; an after-tax charge of $5 million, or $.10pa share, forthe write-down offoe Company's hydrocarbon ventures to their net realizable value; and a charge of $23 million, or $.47 per share, for foe restructuring of foe Company's European operations. Please see Noes 8 and 16 to foe Consolidated Financial Statements. Net sales woe $3,612 billion forthe year aided December 31,1995, reflecting an 8% increase from the 1994 level of$3,351 btfJion. Net sales in 1993 were $2,944 billion. Most ofthe 1995 growth is attributable to pricing gains achieved worldwide, with incremental growth resulting from acquisitions, which occurred mid year 1994 and throughout 1995. Please see Note 5 tothe Consolidated Financial Statements. Sales outride foe Unrepresented 27% ofthe total sales forfoe year axled December31,1995 compared to24% for foe year? 1994 and 1993. Gross margin forfoe yeaf ended December 31,1995 increased to 26%, compared co 24% and 23% In 1994 and 1993. respectively, reflecting primarily pricing gains worldwide. Earnings before Interes and taxes (EBtD from ongoingoperations increased to $412 million In 1995, from $343 million in 1994 and $267 million in 1993. in the Building Materials segment, sales increased 6% for foe yearended December 31.1995 compared to 1994. This growth reflects pricing gaira. andincremental sales from foe 1995 acquisitions partiallyoffset by a decline in volume, particularly in the Canadian markets. Income from operations for Building Materials decreased 9% from 1994 levels, afterexcluding the 1994 charge for restructure and other initiatives, primarily fore to the weak economic conditions in Canada and start upcosts associated with foe Company's new insulation plan? in Guangzhou, China. Building Materials sales in Europe increased45% overfoe 1994 level, primarily resulting from a full year of sales from the June 1994 acquisition offoe United Kingdom based insulation and industrial supply businessesofPi&xngton pfc (foe *'UJ Acquisition"?, foeadditionofa second productionleat foe kirftistry Segment Data lltt ouilirw o{dctia/si Net Setes $3,612 9BktW*fi Momials C&rposiie Mattfiait *2/>4 $1,208 Company's insulation plant in VjU, Belgium. Ijoc in the thirdquarterof 1995, the Company began shipping product from Us insulation manufacturing facility in Guangzhou. China and announced plans for the construction ofits second insulation plant in China, to be built in Shanghai. Roofing margim improved in 1995, driven primarily by improved pricing, and volume growth, including the successful introduction of Prominentroofing shingles. The window business achieved significant sales grow* and productivity improvements during the year, but has not yet reached break-even. In the foam insulation and related product markets, theCompany has expanded itsposition with the acquisition ofFalcon Manufacturing of Michigan. Inc, TheCompany alsocompleted four other acquisitions in 1995 which are expected to contribute to the Company'soverall growth strategy. These acquisitions increased the Company's smalI furnace technology base, as well as expanded its position in fabricated systems for the original equipment manufacturing market and Usproduct offering forthe window market. Tlte Company further expanded its Building Materials mold-product offering in 1995 with the introduction oftwo branded products. TransitionsTM vinyl siding andPinkWrapTM housewrap. In 1995 MirafiexTM the revolutionary new form ofglass fiber developed by Owens Coming which * combines two different glass compositions into one fiber, was successfully introduced to North American markets in its first commercial application. Pinkflw* insulation featuring MsraffexTM fiber. The MiraflexTM fibers are flexible, soft to the touch, virtually itch-free, resilient and form-filling, characteristics not normally associated with glass or inorganic fibers, which is driving tire success ofthe new fiber. Income from Openrtioiu* $462 In the Composite Materials segment, sales increased 12% for the yearended December 31,1995, or approximately 20% excluding the Company's previously consolidated polyester resins business, discussed below. The Composite Materials sales increase, driven by strong worldwide market demand, is attributable to volume and pricing gains, coupled with favorablecurrency impact from Europeanmarkets. In the U.S., sales increased slightly, while in Europe, the Company'scomposites operations benefited from European economic improvement which resulted in increased demand, coupled with the positive effects ofproduc tivity initiatives. ms* Mveriels Carpcww Mhwicfs $237 can fireftufrjgtfief^/co'pofOH etpfssecfSSQ In 1995 the Company announced plans to expand global composites capacity by 135,000 metric tons by 1997. with a significant portion ofthe new capacitycoming from the refiling ofthe second furnace at the Company'sJackson, Tennessee facility. The remaining expansion will be at other existing facilities in the U.5.,Europe, Amandhatm America, IfteCoropanym-$99$ begananewfarge*gnettrgiasyrginfared plastic (GRP) pipe facility in China, pipejoint ventures in Spain and Argentina, as well as a composite materials servicecenter in Colombia. Early in 1996the Company announced the formation ofa pipejoint venture in Colombia, increasingthe Company's global presence. During the third quarter of 1994. die Company entered into ajoint venture with Alpha Corporation of Tennessee, whereby the twocompaniescombined theirexisting resin businesses for fiftypercent interests in AIpha/Owens-Coming, L.L.C, the larges! manufacturer ofpolyester resins in North America. Please see Note 3 to the Consolidated Financial Statements. The Company's cost ofborrowed funds for the year ended December 31,1995 was $7 million lower than 1994, reflecting decreased borrowings resulting from the conversion ofthe Company's 8% convertible junior subordinated debentures into shares ofcommon stock. Additionally, the proceeds from the issuance of$200 million ofconvertible preferred securities were partially used to pay offthe Company's short-term credit facility, established during die second quarter of J994to finance the U.K. Acquisition. Please see Notes 2,3 and 4 to the Consolidated Financial Statements. Geographic Segment Date (la a'llhoptrtfdoUa'D Net Sate* $3,612 At December 31,1995, certain of the Company's foreign subsidiaries have tax ret operating loss carryfor wards ofapproximately $27 million, lire Company has $322 million in net deferred tax assets at December 31,1995, all ofwhich management expects will be realized tltrough future income from operations. Please see Note 8 to the Consolidated Financial Statements. Early in the first quarter of 1996. the Company completed the sale of its share in a Japanese affiliate, Asaht Fiber Glass Co. Ltd., to its partner Asahi Glass Company for approximately $50 million and realized a pretax gain in excess of $25 million. Please see Note 12 io the Consolidated Financial Statements. BUmieJ Staler $2,643 G * h Canute q6 other $723 $246 Liquidity, Capital Resources and Other Related Matters Cash flow from operations, excluding asbestos-relatedactivities, was $342 million for 1995, compared ro $361 million for 1994. The decline in cash flow from operations from 1994 to 1995 was due in part to funding ofa Voluntary Employee's Beneficiary Association trust for tax planning purposes. Tbtal receiv ables ai December 31,1995 were $15 million lowerthan the December31,1994 level due to the sale of $50 million in receivables early in 1995, resulting in a total of$100 million ofreceivables sold under the 1994 sales agreement. 1be receivables sold were largely offset by increased sales in 1995. PJease see Notes 6 and 10 to die Consolidated Financial Statements. Income from Opcwatfeae* $462 At December 31,1995, the Company's net workingcapital was negative S9 trillion and Us current ratio was .99, compared to negative $143 million and .87 at December 31,1994, and negative $49 million and .94 at December 31,1993, respectively. The increase in 1995 wasdue in pan to decreased shon-term borrowings as a result of the repayment erfthe financing used for the U.K.. Acquisition. Excluding the impact ofthe short-term borrowings used to finance die U.K. Acquisition, the Company's net working capital was negative $33 million and its current ratio wa* .97 at December 31,1994. 'lVniltdSiain Mtatnyv ttfilaBaaMosfter 9330 933 '933 During 1995, virtually all ofthe Company's $173 million issue of8% convertiblejunior subordinated debentures were convened. Debentures not convened were redeemed for cash. The conversion resulted in die issuance of5.8 million new shares ofcommon stock. Also in 1995, Owens-Coming Capital, LUC., a Delaware limited liability company, of which all ofthe common limited company interests are indirectly owned by the Company, issued $200 million of6,5% cumulative convertible preferred securities. The proceeds from the issuance were loaned to die Company and partially used to repay its short-term credit facility. Please see Notes 2 and 4toihcOmsolidatedTiriandStatenasns. Ettludtt general <wpanttf eqmue'jSfG The Company's total borrowings December 31.1995 were $893 minion, $319 million tower than at year-end 1994, primarily due to the conversion ofits 8% convertiblejunior subordinated debentures, and the repayment ofdebt through the issuance ofthe above mentioned preferred securities. As erfDecember 31,1995, the Company had umsed lines ofcredit of$358 million available under long term bank loan facilities andan additional S239 million undershort-term facilities, compared to $293 million and $91 million, respectively', at year-end 1994. The increase in unused available lines ofcredit reflects increased availability, primarily in foreign credit facilities,a decrease in borrowings end a decrease m outstanding letters ofcredit supporting appeals from asbestos trials. Such letters ofcredit reduce credit availability under the Company's long-term U.S, loan facility. Capital spending forproperty, plant andequipment, excluding acquisitions, was $276 million during 1995. At the end of 1995, approved capital projects wee $134 million. The Company expects that funding for tltese expenditures will be from the Company's operations #id external sources as required. Total A&&ets lh\ iw/Hom cfJtrtfan) `93 '94 * CepHef Spending lhmU/itos efdeJbfil 93 '94 *96 IbttfDebt IM ntffiomtfdoHvsi 1200 1200 900 600 300 0 Gross payments for asbestos litigation claims during 1995,including $48 million in defense costs and $6 million fee* appeal bond and other costs, were $308 million. Proceeds from insurance were $251 million, SI00 million ofwhich was received as a prepayment ofa third quarter 1995 settlement with a major insurer, which confirmed the Company's access to $330 million ofinsurance for payment ofasbestos litigation claims. Excluding the impact ofthe $100 million prepayment by the carrier, cash flow from asbestos related activities was a net pretax cash outflow of$157 million, or $94 million after-tax. During 1995, the Company received approximately 55,900 new asbestos personal injury cases and dosed approximately 21,900 cases. Over the next twelve months, total payments for asbestos litigation claims, including defense costs, are expected to be approximately $250million. Proceeds from insurance of$100 million are expected to be available to coverthese costs, resulting in a net pretax cash outflow of $150 million, or $90 million after-tax. Please see Note 21 to the Consolidated Financial Statements. The Company expects funds generated from operations, together with funds available underlong and short term bank loan facilities, to be sufficient to satisfy its debt service obligations under its existing indebted ness, as well as its contingent liabilities foruninsured asbestos personal injury claims. The Company has been deemed by the Environmental Protection Agency (EPA) to be a potentially respon sible parry (PRP) with respect to certain sites underthe Comprehensive Environmental Response, Compensation and Liability Act (Superfund). The Company has alsobeen deemed a PRP under similar state orlocal laws, including two stare Superftmd sites where the Company is the primary generator. In other instances,otherPRPs have brought suits or claims against the Company as a PRP for contribution under such federal, state orlocal laws. During 1995, the Company was designated as a PRP in suchfederal, state, local or private proceedings fornine additional sites. At December31,1995, a total of42 such PRP designations remained unresolved by the Company, some of whichdesignations die Company believes to be erroneous. The Company is also involved with environmental investigation or remediation at a number of caber sires ai which ft has not been designated a PRP. The Company hasestablished a $20 million reserve forits Superfund (and similar state, local and private action) contingent liabilities. In addition, basedupon informationpresently available tothe Company, and without regard tothe application ofinsurance, the Company believes that, considered in the aggregate, tire additional costs associated with such contingent liabilities, including any related litigation costa, will nothave a materially adverse effect cm the Company's financial position orresults ofoperations. The 1990 Clean Air ActAmendments (Act) provide that the EPA will issue regulations on a numberofair pollutantsovera period ofyeas. Until these regulationsare developed, the Company cannot determine tire extent to which tire Acs will affect itTheCompany anticipates that its sources to be regulated will include glass fiber manufacturing aid asphalt processing activities. TheEPA's announced schedule isto issue regulations covering glass fiber manufacturing by late 1997 and asphalt processing activities by bus 2000, with implementation as to existing sources upto three years thereafter. Based on information now known to the Company, including the nature and limited numberofregulated materials ft emits, the Company does not expect the Actto have a materially adverse effecton tire Company's results ofoperations, financial condition or long-tom liquidity. Ten-tear Summary of Operations (In millions ofdollars, except sharedata andwhere noted} 1989" 1994* 1993*1 1992* 1991* 1990*' 1989** !988<ft 1987yi !986*; Net Safes *3,6f2 $3351 $ 2,m S 2,87$ $ 2,783 $ 3,069 $ 2,964 5 2,798 $2457 $3,609 Cos! ofSales 2,670 2.536 2,266 2.234 2,186 2J04 2.161 1.999 2.129 2,756 Marketing. Administrative and OAerExpeases 484 518 373 366 1,171 414 323 278 258 6)9 Science and TechnologyExpenses 76 71 69 65 54 58 48 44 43 90 Income (Loss) from Operations 412 226 236 213 (628) 293 432 477 427 144 Com ofBorrowed Funds 87 94 89 110 131 165 166 no 221 94 income (Loss) before Provision for Income Dacs 225 132 147 103 OS9} 128 266 301 343 36 Provision (Credit) forIncome Taxes 106 58 47 33 (238) 58 103 127 136 30 N Income (Loss) 291 159 131 73 (742) 73 172 189 200 16 Net Income (Loss) per Share (Fully Diluted) 440 3.35 2.81 1.67 (18.13) 1.73 4,08 4,51 4,81 049 Weighted Average NumberofFully Diluted Shares Outstanding (inThousands) 84,106 50.025 49.410 48,844 40,924 42.019 42,170 41456 41383 31.776 Net Cash Flow from Operations 942 361 312 184 264 361 395 360 290 416 Capital Spending Total Assets 0) Total Debt 276 3,261 899 258 3.274 1,212 178 3.013 1.004 144 3.162 J.099 m 3,511 1,172 146 1.807 3300 143 1,924 1,482 145 1396 1444 106 1390 1,635 177 2,187 2469 Average Number ofEmployees (inThousands) 17 17 17 17 17 18 20 20 21 30 (a) During ]995. theCompany recordedaonerimeSSmillion tax creditosaresultofataxlosscarryback. (b) During 1994, the Company recordeda$317mHltoncftarge(S&S millionafter-Kujjbrproductivity wrtiafivesandother actions. TheCompanyahorecordeda $10million after-taxchargefor the:adoption ofSPAS 106. "Employers' AccountingforPostreOrememBenefitsOtherThan Pensions*for in non-VS.plans, a$28millionafrer-m chargeforiheadoption cfSfAS112, `Employers' AccoutringforPottemploymeniBenefits," anda $123millionofier-tax creditfirr the changein accounting methodforrebuildingfurnaces. (c) Daring 2993. the Company recordeda$23 millionchargefortherestructuringtffits European operations,anSSmillioncharge($Smillionetfer-mlforthe writedown pfitshydrocarbon ventures totheirnetrealisablevalue,a$26 millioncrtditfbrtheolopiloncfSFAS 109, "AccountingforIncome Taxes," anda S14 msIHoncreditforthe revaluationofdeferredtaxes. Id)During 1992,theCompanyrecordedo5J6millioncharge(SI! million after-taxi toreorganisethe Company's Building Materialssegmentand tocentralize the Company'saccounting andInformationsystems. TheCompanyalsorecorded a netextraordinary gainofSi million resultingfromtheutilisationof/oxtoss carryforwards,partially offset bye loss on the earlyretirementifdebt. (el During 199!.Ac Companyrecordeda non-recurring SS24 million charge($$42 million afuetax}for asbestos litigdtiottclaimsanda$227bullion tfitr-tax charge, or S3JSpershare,fortheadoption ofSFAS106, "Employers' AccountingforPostretirementBenefits OtherThan Pe/tdon?forits VS.plans. 0) Darmg 1990,theCompanyretardeda&SmVkmrenruefBrmgrkorgraad* $3+mliii&rrpr*<#i chargefot^iMxuttiiatoikatcJaimz. (g) During 1969.theCompanyrecordedanadditional$S0millionin itsexistingasbestos-relatedclaimsreserves, a SSOmillion credit resultingfromasrnkmem reachedwiththetti$,anda restructuring charge<f$&mtftion. (h) Beginning In thefourthquarter of1989, the Company's consolidatedfinancialsjatetrtentsbKlude the results ofOwens-ComingCanada, Inc, (if Daring 1966, theComponyrecordedon SSmillion exmordmorytossresultingfrom theeorlyretirementofdebt. {}} Doting 1967, theCompany recordedagain ef$Hl million resultingfromthesaleoftheAerospaceandStrategic MaterialsGroupanda $20million extraordinary loss resultingfromtheearlyretirement<fdebt. (k) Dating 1986, theCompany recorded,arestructuring chargeof$200million. (l) During 1993, theCompanyadoptedtheprerdsforuofFSN39which require theCompanytopresentseparately inUsbafanct sheetitsestimated contingent Habilitiesandrelatedinsurance assets. 1992and 1991 assetshavebeen restatedtocattform with the 1994 and 1993presentations. Price Range of Common Stock Rrac Quarter Second Quarter Third Quarter Fourth Quarter 1996 High Low 36% 40 47% 4% 30% 34% 36% 40% 1994 High Low 46 36% 36% 33% 33% 30% 30% 27% 1993 High Low 47 45% 45% 49% 34% 36% 40% 42% SHHHV To the Stockholders of Owens Coming Report of Independent Public Accountants We have audited the accompanying consolidated balance sheet of OWENS CORNING (a Delaware corporation) and subsidiaries as ofDecember 31,1995 and 1994, and the related consolidated statements of income, stockholders' equity aid cash flows for eachofdie three years in the period ended December 31,1995. These finanoai statemeasure die responsibility of the Company's management. Our responsibility b to express an opinion onthese financial statements based on ouraudit*. Ubconducted ouraudits In accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about wltaher jhe financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amount* anddisclosures mthe financial statement*. Anaudit also includes assessingthe accountingprinciples usedand signif icant estimates made by management, as well as evaluatingthe overall financial statement presentation. Wc believe that our audits provide a reasonable basis for our opinion. Inour opinion, the financial statements referred to above present fairly. In alt material respects, the financial position ofOwens Coming and subsidiaries asofDecember 31,1995 and i994, and theresults oftheir operations and their cash flows foreach ofthe threeyears in the period ended December 31,1995, inconfor mity with generally accepted accounting principles. Asdiscussed in Notes 6,8 and 17 to theconsolidated financial statements,effective January 1,1994, the Company changed its methods of accountingforfirmacerebuilds, postretirement benefits other than pensions for its non*U3. plans, and posternployment benefits, and effectiveJanuary 1,1993, the Company fariacomcaaxes. QaZJuaa-* Oa^oUa*u^0 i^Lfi Jsraary 20,1996 Tbtedo,Ohk> Management's Report The financial statements of Owens Coming and subsidiaries have beenprepared by management hi conformity with generally accepted accounting principles. Management uses itsbest informedjudgments to ensure thatthese statements fairly reflect the Company's financial position. Financial information contained elsewhere in this annual report is consistent whfi the financial statements. The Company maintains a system of internal accounting controls designed to provide reasonable assurances that assets arc protected from improper use and that transaction* are properly authorized and recorded. The Board ofDirectors pursues itsresponsibility for overview ofthe Company's financial stateness through Ik Audit Committee, which is comprised ofdirectors who are not officers oremployees ofthe Company. TheAudit Committee meets periodically with management, the Company's internal auditory and the independent public accountantsto review and assess the activities ofeach inmeeting theirrespective respon sibilities, The independent public accountants and die director of internal auditing havefull and free access to the Audit Committeeto discuss the scope and results of theiraudit work, the adequacy ofinternal accountingcontrols, and die quality of management's financial repeating. Chairman andChiefExecutive Officer r Af, David W. Devonshire Senior Vice President and ChiefFinaiciaJ Officer ^ Domenico Cecere Vice President andController Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of majority owned subsidiaries. Significant intercompany accounts andtransactions arc eliminated. Net Income par Share Primary net income per shareis computed using the weighted average number ofcommon shares outstanding and common equivalent shares (hiring the period, Fully diluted net income per 3barereflects the dilutive effect ofincreased shares (hat would result from the conversion ofdebt and equity securities which are ncs treated as common stock equivalents. Unless otherwise indicated, all per share information included in the notes to (he OwensComing and subsidiaries' (the "Company") consolidated financial statements is presented on a folly diluted bass. Inventory Valuation Inventories** statedat cost, which is less titan market value, and include material, labor, aid manufacturing overhead. The majority ofU.S. inventories are valuedusing the last-in, first-out (UH>) method and the balance ofinventories are generally valued using the first-in, fust-out (FIFO) method. Intangible Assets Intangible assets consist primarily of goodwill, patents, and covenants not to compete and are earned at cost lessaccumu lated amortization. Goodwill is amortized on a straight-line basisovera period offorty years. Other intangible assets are amortized overtheir estimated useful lives or actual contractual fives.The Company continually evaluates whetherevents and circumstances have occurred that indicate the remaining estimated useful lives ofintangible assets may warrant revision or dm the remaining balance ofthese intangible assets may not Jafexecovttabk. WhenfactorsiodicaJe that intangibleassets should be evaluated forpossible impairment, the Company uses anestimate ofthe related business segment's aidtscounted net income overthe remaining life of the intangible asset ki measuring whetherthe intangible asset is recoverable. hveitiiMinti In Affiliate* Investments in affiliates areaccounted for using the equity method, aider which the Company's share ofearnings of these affiliates isreflected in income as earned and dividends ere credited against the investment in affiliates when received. Depreciation For assets placed in service prior toJanuary 1,1992, the Company's plant and equipment is depreciated primarily using the double-declining balancemethod fixthe fust halfofan asset's estimated useful life and the straight-line method is used thereafter. Forassets placed in service after December 31,1991, the Company's piam and equipment is depreciated using the straight-line method Use of Estimates The preparation offinancial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure ofcontingent assets and liabilities at the dateofthe financial statements and thereported amounts ofrevenues and expenses during the reporting period. Actual results could differ from those estimates. RebuilcSng of CMbm Melting Fttmaeac The Company's glass melting furnaces periodically require substantial rebuilding. As discussed in Note 17 to tire consoli dated financial statements,effective January 1,1994, the Company adopted the capital method ofaccounting forthe cost ofrebuilding glass meting furnaces. Under this method, costs are capitalized when incurred and depreciated overthe estimated useful lives ofthe rebuilt furnaces. Dwhatfve Financial Instruments Gains and losses on hedges ofexisting assets or liabilities at included in (he carrying amour* ofthose assets or liabilities and are ultimately recognized in income as panof(hose carrying amounts. Gains and losses on hedges of net investments in foreign subsidiaries areincluded in stockholder*' equity. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions alsoare deferred and are recognized in income or asadjustments ofcanying amounts when the hedged transaction occurs. Gains and losses on forward currency exchangecontracts that donot qualify as hedges are recognized as otherincome orexpense. Reclassifications Certain reclassifications have been made to 1994 and 1993 to conform with tire classifications used in 1995. Consolidated Statement of Income Fortheyears endedDecemberSL /995, 2994and J99S (inmillions ofdollars, exceptshare data) Net Sales Cost of Sales Gross margin Operating Expenses Marketing and admupararive expenses Sconceand technologyexpenses (Note 9) Restructure costs (Note 16) Other (Notes 2,4,10 and 16) Total operating expenses Income from Operations Cost ofborrowed funds (Notes 2 and 3) Income before Provision for income Taxes Provision for income taxes (Note 8) Income before Equity in Net Income of Affiliates Equityin net income ofaffiliates (Notes 5 and 12) fneome before Cumulative Effect of Accounting Changes Cumulative effect ofaccounting changes (Notes 6,8 and 17) Nat Income Net income per Common Share Primary: income before cumulative effect ofaccountingchanges Cumulative effect ofaccounting changes Net Income per Share Assuming Full Dilution: Income before cumulative effect ofaccountingchanges Cumulative effect ofaccounting changes Net Income per Shore Wejj^aedaveragenumberofcommonsharescutstandgrg ami curranonequivalent sharesduring the period (in millions): Primary Assuming full dilution Theaccompanying summaryofsignificantaccmauingpoliciesandnatesartanintegralpartofthisstatement 1999 $3,612 2*70 942 1994 $ 3,351 2336 815 1993 $ 2,944 2266 678 -444 391 327 76 71 69 ** 89 23 10 38 23 530 589 442 412 226 236 87 94 89 325 132 147 106 58 47 219 12 74 100 --5 231 <-- 74 105 85 26 $ 231 $ 159 $ 131 $ 4.64 -- 9 4.64 $ 1.70 1.91 L 3.61 $ 2.40 .60 $ 3.00 $ 4.40 -- $ 4.40 $ 136 1.69 $ 3.35 $ 228 33 S 2.81 49.7 54.1 44.2 50.0 43.6 494 Consolidated Balance Sheet December$t, fpfjSadJW4jinaMitum gftMJors) Assets_______________________ __________________________ _____________ ______ Current Cash and cash equivalents Receivables, less allowances of$19 million in 1995 and $16 million in 1994 (Note 10) Imetaoriefr<Note 11) insurance for asbestos litigationclaims--cum! portion (Now 21) Deferred income taxes <N6$8) VESAtrust (Note 6) Income taxreceivable Investment is affiliate held for sate (Note 12) Othercumas assets Ibta) current Other Insurance forasbestos litigation claims (Note 21) Deferred incometaxes (Note 8) Goodwill, less accumulated amortization of$19 million in 1995 and $14 million in 3994 (Note S) Investments in affiliates (Notes 5 and 12) Other nenemrem assets (Note 6) TbtaJ other Plant and Equipment, at cost Land Buildings and leasehold improvements Machinery andequipment Construction in progress Less: Accumulated depreciation Netplant andequipment Total Asaets Theaccompanyingsummaryofsignificantaccounting policiesadnotes<seon integralpan efthiseatane/U- 1995 1994 18 314 253 100 70 SI 50 30 35 92? $ 59 329 223 125 156 12 -- 26 930 330 252 249 BO 147 1.028 556 308 151 74 122 Uii 82 681 2,266 168 3,067 (1.7611 1,306 51 553 2472 125 2,903 (1,768) 1433 $3,261 $ 3,274 Consolidated Balance Sheet December 31,J99Sond 1994 (Inmillions ofdollars) liabilities and Stockholders' Equity Current AccotmGpayable aod accrued liabilities (Note 13) Reserve forasbestos litigation claims -- current portion (Note 21) Short-term debt (Note 3) Long-term debt--currentportion (Note 2) Total current Utto-Tam Debt (Note 2} Other Reserve for asbestos litigationclaims (Note 21) Otteremployee benefits liability (Note 6) Pension plan liability (Note 7) Otter Tbtal other Commitments and Contingencies (Notes 15,20 end 21} Company Obligated Convertible Security of Subsidiary Holdleg Solely Parent Debentures {MIPS, Note 41 Stockholders' Equity Preferred stock, no par value; authorized 8 million shares none outstanding (Note 19) Common stock, par value $. 10 per share; authorized ICO million shares; issued 1995--51.4 million and 1994---44.2 million shares (Notes 2,5 aid 18) Deficit Foreign currency translation adjustments Otter (Noe 7) Tbtai eockhokJere' equity Total UabiHttes end Stockholders' Equity Consolidated Statement of Stockholders' Equity. fartkewiendedlif-tmber31 199$ 1994 and1993 (Inmillions ofdoSleni Common Stock Balance beginningofyear Issuance ofstock for: Conversion ofdebt (Nc2) Acquisitions (Noe 5) Awards aider stock compensationplans {Now 18) Balance end of year Deficit Balancebeginning ofyear N income Balance aid of veer Foreign Currency Translation AdjoffiMitts Balance beginning ofyear Translation adjustments Balanceend ofvear Other Balance beaming of year Netincrease (decrease) Balance end of year Stockholders' Equity TVeccmqaenybigtwnm&y pafrcameccotooingpolicies andnazesareanintegralpan thisstatement. 1695 1994 $ 587 250 64 35 936 794 $ 598 300 155 20 1,073 1,037 887 36? 7S 220 1,549 1,145 390 77 232 \m 194 -- < 579 (781) 9 (19) (212) 348 (1.012) (0 05) (680) $3,261 $ 3574 IMS im 1993 $ M S 315 S 299 173 -- MW 42 27 WW* 16 6 16 676 348 315 (1*12) 231 1781} (1J71) 159 (1.012) (1.302) 131 (1.171) ID 5 10 <61 8 (!) 4 1 5 (IB) (18) w3 <9> (9> (19) m> (18) 4 (212) $ (680) S (869> Consolidated Statement of Cash Flows Forthe years endedDecemberSI,1995. )994andJ99S (fa millions ofdotters) Net Cash Flew from Operations Net income Reconciliation ofnetcash provided by operating activities: Noncash items: Cumulative effcclj^accounting changes (Notes 6,8 and 17) Provision for depreciation, amortization, and rebuilding furnaces (Note 17) Provision for deferred income taxes (Note 8) Other (increase) decrease in receivables (Note 10) (Increase) decrease in inventories Increase (decrease) in accounts payable and accrued liabilities Funding ofVEBA trust (Note 6) Other Net cash flow from operations Net Cash Flow from Investing Additions to plant and equipment Investment in subsidiaries, net ofcash acquired (Note 5) Other Net cash flow from investing Net Cash Flow from Financing (Notes 2,3 and 4) Net additions (reductions) to fong-tcrm credit facilities Otheradditions to long-teim debt Otherreductions to long-term debt Net increase(decrease) in short-term debt Issuance ofpreferred stock ofsubsidiary, netoffees Other Net cash flow from financing Nat Cash Row from Asbestos-Related Activities (Note 2)) Proceeds from insurance forasbestos litigation claims Payments for asbestos litigation claims Net cash flow from asbestos-related activities Effect ofexchange rate changes on cash Net Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning ofyear Cash and cash equivalents at end ofyear Theaccompanying summaryifsignificantaccountingpoliciesandnotes arean integralpanifthisstatement. 1995 1994 1993 $ 23? $ 159 5 m -- 125 142 6 36 (15) (BO) (641 (68) 342 (85) 118 59 9 2i 17 53 -- 10 361 (26) 121 10 10 (22) 4 114 -- (30) 312 (276) (81) (4) (361) (258) (120) 23 <3SS) 078) -- 078) 85 iO (90> 9 145 -- (128) (51) (21) (94) 69 26 194 -- -- -- 5 11 36 178 (74) 281 1368) (57) 87 (215) (128) 224 <283) (59) _____(1) (41) 69 8 18 $ 56 3 59 S i 2 3 Notes to Consolidated Financial Statements 1. Segment Data Ihe Company operates in two industiy segments, BuiMing Materialsand Composite Materials, and reports its results in two ways: by industry segmentand by geographic segment. See Note 5 for detail of 1995 and 1994 acquisitions and divestihires of businesses. -j, ' The industry segmented defined as follows: BuSdlng Materials Production and sale ofglass wool fibers formed into thermal and acoustical insulation and airduns; extruded and expan ded polystyrene insulation, roofing shingles and asphalt materials; underground storage tanks; windows; and the rebranded sale ofpatiodoors; vinyl siding and housewrap. Composite Materials Production and sale ofglass fiber yams; rovings, matsand vests; strand and reinforcement products; fiberreinforced plastic pipe; and polyester and vinyl ester resins. Thegeographic segment reporting combines the two iftfcistry segments within themajorregions: United States, Etsope, and Canada and other. Intersegment sales are generally recorded at market orequivalent value. Income (loss) from operations by industry and geographic segment consists ofnet sales teas related costs and expenses. In computing income (loss) from operations by segment, cost of borrowed tefe and othergeneral corporate income and expenses have been excluded. Certain corporateoperating expenses directly traceable to industry and geographic segments have been allocated to those segments. During the first quarter of 1994, the Company recorded a S117 million pretax charge forproductivity initiatives and other actions (Note 16). The impact ofthis charge was to reduce income from operations forBuilding Materials and Composite Materials by $70 millionand $22 million, respectively, and to increase general corporate expense by $25 million. Geographically, Income from operations forBuilding Materials in the United States and Canada and other was reduced by $50 million and $20million, respectively. Income from operations for Composite Materials in the United States, Europe, and Canada and otherwas reduced by $6 miUion> $13 million,and $3 million, respectively During the first quarterof 1993, the Company recorded a $23 million charge to reorganize Its European operations, die full intact ofwhich was reflected as a redaction to income from operations for the Composite Materials segment (Note 26). Identifiable assets by industry and geographic segment are those assets that are used in the Company's operations in each industry and geographic segment and donot include general corporate assets. General corporate assets consist primarily ofcash and cash equivalents. VEBA trust,deferred taxes, asbestos insurance, and emporate property and equipment (In mlilimi ofdebars) Net Safes 1995 1994 1993 industry Segments Building Materials United States Europe Canada and other Tbtal Building Materials Composite Materials United States Europe Canada and other Ibtal Composite Materials Intersegment sales Building Materials Composite Materials Eliminations Net sales S2.093 204 107 $ 1,952 182 139 $ 1,699 97 150 2/404 2,273 1946 610 595 528 459 355 346 *139 128 124 1208 1,078 998 -- 96 (96) 63,612 99 (99) $ 3,351 -- 85 (85) $ 2,944 Geographic Segments United Stales Europe Canada and other Intersegment sales United States Europe Canada and other Eliminations Net sales $2,643 723 246 3,612 $ 2447 537 267 3451 $2427 443 274 2,944 54 21 88 (163) $3,612 43 22 91 056) $ 3,351 42 15 66 (123) $ 2.944 9 1. Segment Data (Continued) (In millionsofdollars) 1995 lieome {Loss! from Operations 1994 1993 (In millions(#dollars! 1996 -Identifiable Assets at December 31 1994 1993 Industry Segments BuHdmg Materials United States Europe Canada and ether -^*4- $ 195 29 13 $ 7bte) Bujld^g Materials 237 Composite Materials United States Europe Qsjadasid other 136 64 26 Tbial Composite Materials General corporate expense 225 (50} Incomefrom operations Cost ^borrowed funds 412 (87) Income before provision for income taxes S 325 $ 145 $ 26 18 189 108 (8) 9 109 <72} 226 <94> 122 $ 153 16 6 175 101 05) 12 98 07) 236 (89) 147 Gsogryfalc Sstfiiwti United States $ 330 $ 253 S 254 Europe 93 18 1 Canada and other 39 27 18 General corporate expense (SO) (72) (37) Income from operations Cost ofborrowed funds 412 (87) 226 <<M> 236 <89> Income before provision for income taxes $ 325 $ 132 $ 147 induatry.Seements Building Materials United States Europe Canada andother * 893 170 194 Total Building Materials 1,257 Composite Materials United States Europe Canada and other 361 388 145 Total Composite Materials 894 General corporate 1.024 Investments in affiliates accounted for underthe equity method 3,175 86 Total assets *3,261 $ 718 162 136 1.016 326 335 160 821 1,363 3200 74 $ 3,274 $ S96 46 155 797 302 256 157 715 1,438 2,950 63 $ 3,013 Geographic Segments United States E&ope Canals and other General corporate *1,254 558 339 1,024 Investments in affiliates accounted Torunderthe equity method 3,175 86 Ibtal assets *3*61 S 1,044 497 296 1363 3200 74 $ 3,274 $ 898 302 312 1,438 2,950 63 $ 3,013 o i`fafrttX&Uffdft/arsl 1995 1994 Provision for Depreciation, Amortization, and Rebuilding Furnaces jm Industry Segments Building Materials United States ***** $ 49 $ Europe Canada and other 11 8 48 $ 6 8 47 2 11 ?6taf Building Materials 68 62 60 Composite Materials United States Europe Canada and other 22 n 24 18 17 16 7 8 10 Tbtal Composite Materials 47 47 50 General corporate 10 9 11 Total provision for depredation, amortization, and rebuilding furnaces 8 125 $ 118 $ 121 Geographic Segments United States Europe Canada and other Genera! corporate Total provision for depreciation, amortization, and rebuilding furnaces 8 71 29 15 10 8 125 S 70 $ 71 23 18 16 21 9n $ 118 S 121 Ox ##!&#*iftkJtersl 1995 Attentions to Plant amf Equipment J994 1993 industry Segments Building Materials United States Europe X^anada and other Tnal Building Materials Composite Materials United States Europe Canada and other Total Composite Materials General corporate Tsai additions Geographic Segments United Stales Europe Canada and other GeoeraJ corporate Total additions 8 60 % 85 S 36 4! 33 7 82 2 5 129 133 89 37 41 31 39 35 32 18 26 7 94 102 S3 23 8 276 $; 258 4 70 19 $ 178 8 97 5; 126 s 113 75 76 34 61 33 12 53 23 19 8 276 $ 258 $ 178 2. tong-T&rm Debt (in rniSbm c$dcfl&y 1999 Unsecured U.S. credit facility due in 1997, variable $ UnsecuredEuropean creditfacilities due through 2002, variable Unsecured Canadian cretft facility due in 1997, variable Guaranteed debentures due in 2001,10% Debentures due in2002,8.875% Debenturesdue in 2012,9375% Guaranteed debentures due in 1998,9.8% Eurobond (foe through 2001,9314% (Notts 20) Bonds due in 2000,7.25%, payable in Deutsche marks (Note 20) Convertible Juniorsubordinated debe&ure* due in 2005,8%, convertible at $29.75 pershare Notes due through 2002,6.06% to 8.50%, payable in foreign currencies Other long-termdebt due through 2012, at rates from 5375% to 12.47% 65 40 w 150 190 190 too 63 50 -- 26 45 Less: Currentportion Tbtal long-term debt 829 (35) 3 794 1994 $ 35 -- 4 ISO 150 149 100 140 50 173 38 68 1,057 m $ 1,037 TheU.S. credit facility has a maximum commitment of $475 million at December 31,1995.of which $176 ntiflibn was used forstandi letters ofctedh and $244 millionwas umised, TTjeraicofiraen^Liteththeba^'sbaserae,c,13/16%ovcr the certificateofdeposit rote, or 11/16% over the London InterbankOfferedRatc-(UBGR). Theweightedaveragerateof isttratt paidon bowings underthis facility during 1995 was 6.9%. <8.5%at December 31.1995). A commitment fee of 1/4 e 1% is charged on die unused portions ofthis facility. The Canadian credit facility is payable in Canadian dollars and has amaximumcommitment of 135 million Canadian dollars ($99 millionU.S. dollars), all ofwhich was unused as December 31,1995. The raseofinterest is either 11/16% over the Canadian costoffunds rate, or 11/16% overLIBOR on ILS. deposits, or .7875% overthe Canadian banters' acceptance rate. A commitmem fee of 1/4 of 1% is charged on (he isiuscd portions of(has facility The European credit facilities, payable in Belgian francs, have an aggregate commitment of 1,6billion Belgian francs <555 million VS. dollars) ofwhich 400 million Belgian francs ($15 million US, dollars) was unused at December 31,1995. The rate ofinterest on the facilities ranges from 4.28% to 4,51% at December31,1995. The commitment fee on the unused portions ofthe facilities range from 3/20 to 1/4 of 1%. As is typical forbankcredit facilities, the agreements relating to the facilities described abovecontain restrictive covenants, including requirements for die maintenance of working capital, saerestcoverage, and minimum coverage offixed charges; and limitations on the early retirement ofsubordinated debt, additionalborrowings, certain investments, payment of dividends, and purchase ofCompany stock. The agreements includeaprovision which would result in all of the unpaid principal and accrued interest ofdie facilities becoming due immediately upon a change ofcontrol in ownership ofthe Company. A material adversechange in theCompany's business, assets, liabilities, financial condition or results of operations constitutes a default undo'the agreements. During 1995, Ae Company's $173 million issue of8% convcrtiblejunkw subordinated debentures wereconvened. Theconversion resulted in die issuance of5.8 minion new shares ofcommonstock. In conjunction with die conversion ofdie debentures, die Company paid fees ofapproximately S3 million which are reflected as other expenses on die Company's consolidated statement of income forthe year ended December31,1995. In November 1994, Owens-Coming Finance (U.K.) PLC a wholly-owned subsidiaryofthe Company, issued $140 million ofEurobonds. 33Ksebds4im^^ preferenceshamsofOwess-CWoingFinance (UK.) PLC in November2004 and may be redeemedatany rime, at a premium, at the option ofthe Company.Hiebonds are guaran teedby tteCwupany as topaymentsofpruKipalareJ truerest and rank similarly with all otherseniorunsecured debt ofthe Company. Subsequently, in a separate transaction, die Company add aputoptiontodieholder ofthe bonds allowing die option holdertorequire the Company to purchase a portionoftbe bonds. As a result oftheholder's exercise ofthe put option, m May 1995, feeCoe^any rcptschased a portion ofthe $140 million issue ofEurobond* for $77 million. Theaggregate maturities andJinking fund requirements forall long-term debt issues foreach ofthe five years following December 31,1995 are; ___________________________ Year Credit (h mtiimsgfdollars}Facilities Other Long-Term Debt 1996 1997 1998 1999 2000 $-- 63 8 8 6 $ 35 19 112 12 75 3. Short-Trm Debt {In minionsofdollars) 1935 Balance outstanding at December 31 % Weighted average shon-term borrowings $ Weighted average interest rates on short-term debt outstanding at December 31_______________7.6% 64 184 1994 % 155 $ 165 6.6% In May 1995 the Company repaid its unsecured, variable rate, shon-term bank credit facility that was used to finance the 1994 ILK. acquisition {Note 5). Hus facility had a maximum commit ment of $110million at December 31.1994, all ofwhich was used Iherate ofinterest borrowings underfltis facility was 3/2 of X% over LIBOR, or6.6875% at December 31,1994. In December 1995 the Company entered intotwo revolving credit agreements. Each quarter during 1996, die Company may borrow upto a predetermined amount from $13 million to$16 million. The amount borrowed may be repaid in US. doSare at lessthan orequal to the original borrowing, based upon predetermined British pound or Belgian franc currency exchangerates.The agreemerns are in effectthrough 1996 and bear interest at market rates in effect at the time ofeach borrowing. TheCompany had unused short-term lines ofcredit totalling $239millionand $91 million at December 31.1995 and 1994, respectively. 4. Convertible Monthly Income Preferred Securities (MIPS) fa May 1995, Owens-Coming Capital, L.IX. COCCapital"), a Delaware limited liability company, all ofthe common limited lability company interests in which areowned indirectly by the Company, completed aprivate offering of4 million sharesof Convertible Monthly Income Preferred Securities {'"preferred securities"). Ihe aggregate purchase price forthe offering was $200million, fa conjunction with the offering, the Company incurred $6 million in issuance costs. Thepreferred securities arcguaranteed in certain respects by the Company and are convertible, at the option ofthe holders, into Company common stock at the meof 1.1416 shares of Company common stock foreach preferred security (equivalent to a conversion priceof$43.80 per common share). OC Capital cannot initiate any action relating to conversion until after June 1.1995. Distributions on the preferred securities are cumulative and are payable at the annual rate of6-1/2 perceta ofthe liquida tion preference of$50 per preferred security. Distributions of$8 million have been recoded as other expenses on the Company's consolidated statement ofincome forthe year ended December 31.1995. The Company issued $200 million of6-1/2 percent Convertible Subordinated Debentures due 2025 to OCCapital, which repre sents the sole asset ofOC Capital, in exchange forthe proceeds oftheoffering.The Company used the proceeds to repay the $116 million short-term bank credit facility utilized for the 1994 UK. acquisition (Note 5), with thebalance used to reduce borrowings under the Company's revolving credit facilities. 5. Acquisitions and Divestitures of Businesses During 1995 and 1994. the Company made several acquisitions in the Building Materials segment in the United States and Europe, which were consummated through the exchange of various combinations ofcommon stock and cash. The aggregate purchase price including possible subsequent contingentconskioration was $126 million and $155 million for 1995 and 1994, respectively.Hie 3995 acquisitions exchanged 946,922 sharesof she Company's common stock and $82 million In cash which includes$l million be paid in the first quarter of 1996 and the 1994acquisitions exchanged55,556 sharesoftheCompanyV common stock and $120million in cash, net ofcash acquired, fortli-oftheassetsand liabilitiesofAeoompaaes acquired. The incremental sales from the acquisitions, in the year of acquisition, were $41 million and $334 million forthe years ended December 31.1995 and 1994, respectively. The largestoftheseacquisitions was the 1994 second quarter acquisition ofPilkfagton insulation limited and Kiisons Insulation Products Limited (collectively, "the U.K. acquirition"), the United Kingdom based insulation manufacturing and industrial supply businesses ofPiftfagton PLC. Acquiring two glass fiber insulation manufacturing facilities, one rock wool manufacturing facility and 14 distribution centers, the Company now represents the United Kingdom's largest manufacturerof glassfiberand nxtic wool insulation and U a majorsupplierof thermal and acoustical insulation products to the United Kingdom construction industry. The purchase price oftheLUC acquisition was $110 million and was financed with borrowings from fee Company's short-term bank credit facility (Note 3). 5. Acquisitions and Divestitures of Businesses (Continued All acquisitions were accounted forunderthe purchase method of accounting, whereby the assets acquired and liabilities assumed have beenrecorded at tlteir fairvalues and die results ofoperations forfee vqtdstions have been included in the Company's consoli datedfinancial aatemea*SUbsequem to the acquisition dates. The purchase price allocations were based on preliminary estimates of fair market value and are subject to revision. The 1995 acquisitions included goodwill of$9? million and non-competition agreements ofS3 million. The 1994 acquisitions included goodwill of$78 million and non-competition agreements of$6 million. The goodwill and non-competition agreements are being amortized on a strait-line basis over 40 years and 7 years, respectively. The proforma effect ofthe acquisitions was not material tonet income forfee years ended December 31,)995.1994 or 1993, On September 30,1994, the Company entered into ajoint venture wife Alpha Corporation ofTennessee, whereby the two companies combined (heir existing resin businesses to form AlphajOwensCommg, L.L.C., fee largest manufacturer of polyester resins in North America. The Company contributed two manufecturing plants (Valparaiso, Indiana and Guelph, Ontario) and owns a SO percent interest in feejoin! venture. Thisjointventure is being accounted forunder feeequity method. For the nine monthsended September 30,1994 and the year ended December 31.1993, resm sales totalled $58 million and $63 million, respectively, and were included in fee Composite Materials segment Late in the founh quarterof 1994, feeComply completed fee sale ofbs underground storage tank manufacturingbusiness. Sales for feahusiness tcte&d $41 m21xvia/rf$43 million in 1994 and 1993. respectively, and were included in fee Building Materials segment. 8. Postemptaymsnt and Pesiratwwnt Benefits Other Than Pensions The Company and its subsidiaries maintain health care and fife insurancebenefit plans for certain retired employees and feelr dependents. The health careplans in the U,S. are unfunded andpay either 1) statedpercentages ofcovered medically necessary expenses,aftersubtracting payments by Medicare or other providers and after staled deductibles have beat met or, 2) fixed amountsofmedicalexpense reimbursement. Employees become eligibleleparticipate isfeebeaJib careplans igxm retirement unde?one erfthe Company's pension plans ifthey have accumu lated 10 yean ofservice after age 45. Some offee plans are contrib utory, wife someretiree omzri&fskwsadjustedamualfy. The Company has reserved the right to change or eliminate these benefit plans subject tofee terms ofcollective bargaining agreements during their term. Effective January 1,1994. the Company adopted Stateroom of Financial Accounting Standards No. 106, "Employers' Accounting for PostreUrement BenefitsOtherThan Pensions" for its non-US. plans. Accordingly, the projectedcost erfpostretiresnent benefits is charged toexpense during the years in which eligible employees render service. The cumulativeeffect oftire adoption ofthis standard was a charge of$10 million, or $.20pa share. (The Company adopted Statement No. 106 for its US. plans effective January 1,1991.) During 1993, fee Company approvedchanges in its postretiremen* health care plans for retirees and active employees. These changes, which reducedfee accumulated benefit obligation by $120 million and l993expenreby$l8mmion,rewltedirianiinrec<^uzedn reduction in prior servicecost whkh'wili be amortized through 1999. Thefollowingtablereconcfies fee status ofthe accrued postretire men! benefits cost liability at October 31,1995 and 1994, ax reflected on thebalance sheet as ofDecember 31.1995 and 1994: (in motions ofdoHars) 1998 1994 Accumulated Postretiremen! Benefits Obligation: Retirees Fully dfgfttic active plan participants Other active plan participants 9 (194) $ (176) cm (24) <54} (46) Funded status Unrecognized net gain Unrecognized net reduction in prior service cost Benefit payments subsequent to fee valuation date (October 31) <269} C72) 3 (246) m m 3 Accrued postretiremen! benefits cost liability (includes careen! liabilities of $19 million in 1995 and 1994) $J349) $ (370) -... . > i "_qrtauweg"g Formeasurement purposes, a 10.5% annual rate ofincrease in the per capita cost ofcovered health care claims was assumed for 1996. Therate was assumed todecrease to 10% for 1997, then decrease gradually to 6.0% by 2005. Thehealth care cost trend rate assumption has a significant effect on the amounts reported. 1b illustrate, increasing the assumed health care cost trend rate by one percentage point chycarwould increase the accumulated postretiremen* beneBtTobligafion as ofOctober 31,1995, by $14 million and the aggregate ofthe service and interest cost components of net postretirement benefits cost fordie yearthen ended by $2 million. The discount rale used in determining the acaunulatcdpostredremea benefits oWigation was 7.5% in 1995, 8.5% in 1994. and 7.5% in 1993. Effective January 1, i994, the Company adopted Statement of Financial Accounting Standards No, 112, "Employers' Accounting forPostemployment Benefits."Tins standard requires die Company to recognize the obligation toprovide benefits to formeror tractive employees afteremployment but before retire* roent under certain conditions. These benefits include, but are not limited to, salary continuation, supplemental unemployment benefits, severance benefits, disability-related benefits (including workers' compensation),job training and counseling, and contin uation ofbenefits such as health care and life ensurance coverage. The cumulativeeffectoftheadoption ofthis standard, recorded in 1994, was an undiscountcd charge of $28 million, or $56 per share, netofrelated income taxes of$18 million, The following table reconciles theslants ofthe accrued postem ployment benefitscost liability at October 31.1995 and !994, as reflected on the balance sheet as ofDecember 31,1995 and 1994: {In naiitctuitfdsfldr*> 1995 1994 Funded stams Uisecognized net gain Benefit payments subsequent to the valuation date (October31) $ (40) $ (45) (2) 11 Accrued postentploynwst benefit cost liability {includes current liabilities of$4 million in 1995 and $S million in 1994) < (41) $ (44) The net posemploymera benefits expense was $2 million and S3 million for 1995 and 1994. the year/adoption, respectively. The net po&treibement benefits cost for 1995,1994 and 1993 included the following components: (in millions ofdoOars) 1995 1994 1993 Service cost Interest cost on accumulated postretirement benefits obligation Net amortization and deferral 9 7$ 8$ 7 19 19 23 (24) (20) 03) NetpoaretirerneiS benefits cost 9 2$ 7 $ 17 In December 1995, the Company established and funded a Voluntary Employees' Beneficiary Association (VESA) trust to covercertain employee welfare and postretirement benefits in the amount of $64 million, ofwhich $13 million has been classified as long-term 7. Pension Plans TheCompany has several defined benefitpension plans covering mostemployees- Underthe plans, pension benefits are generally based on an employee'snumber of years ofservice. Company cowrifewtanstothese personpteeteebased onThe csdeakrions ofindepen(fern actuaries using the projected unit credit method, Ran assets consist primarily ofequity securities with die balance m fixed income investments or insurance contracts. Hie unrecog nized cosofretroactive amendments and actuarial gains and losses are amortized overdie average future service period ofplan participants expected to receive benefits. In August of 1995, die Company amended thepension plan for US. salaried employees to change from a final averagepay ice3noteu.ca&ha]ancc&!3nula. The$ewtpimpMwwf& become effective onJanuary 1,1996. Thechange resulted in a reduction in the projected benefit obligation of$20 million- The change tsexpectedtoreduceperish through the amortization ofthe reduction in the projected benefit obligation, reduced service costand reduced interestcos* on the projected benefit obligation. The reduction in pension expense for 1996is expected to be $11 million. The snpact on pension expense for 1995 was a reduction of$4 million. 7. Pension Plans {Continued) Pension expense for the Company's defined benefit pension plans includes the following: (In m>Hic#oofdolfori) 1995 Service cost $ 20 Interest com on projected-r^: benefit obligation 64 Actual return on plan assets (114) Ms amortization anddeferral 30 Net penskm expense $- 1994 $ 22 58 (13) (64} %3 1993 $ 23 62 <124> 50 $ 11 The funded status at October 31,1995 and 1994 is as follows: (Inmillion* ofdcJhis) Vested benefit obligation 1995 Over Under Funded Funded 1994 Over Under Funded Funded $ 359 312 $ 310 $ 273 Accumulated benefit obligation t 395 $ 355 $ 341 $ 343 Plan assets at fairvalue Projected benefit obligation 9 500 9 316 $ 466 S 306 447 365 430 352 Plan assets in excess of(1ess than) projected benefit obligation 53 (48) 36 (46) Unrecognized loss 15 68 8 55 Unrecognized prior service cost (30) (31) 02) (24) Unrecognized transition amount (35) (11) <39) 03) Adjustment to minimum liability (7) 02) Net pensionliability (includes current liabilities of $2 million in 1995 and $8 million in 1994 and noncurrera assets of $41 million in 1995 and $3S miHion m 1994} $ 3 8 (39) $ <?} S (40) The 1995,1994 and 1993 primary actuarial assumptions used for pension plans were: _________ _______ 1995 1994 1993 Discount nte Expected,long-term rase of return on plan-assets Rate ofcompensation increase 73% 9.0% 5.1% 8.5% 9.5% 5.1% 7.5% 10.0% 4.1% The Con^any also sponsors defined contribution plans available to substantially all US. employees. Cbmpany contributions forthe plans arc based on matching a percentage ofemployee savings up to a maximum savings level. The Company's contributions were $12 million in 1995, $10 million in 1994, and $9 million in 1993. 8. Income Taxes Effective January 1,1993, theCompany adopted Statement of Financial Accounting Standards No. 109, "Accounting forIncome Taxes."Statement No. 109 changed the criteria fa-measuring the provision for income taxes and recognizing deferred tax assets and liabilities. Deferred tax assets and liabilitiesare determined based on thedifference between the financial statement and tax bases of corresponding liabilities and assets using enacted tax rates in effect for the year in which the differences arc expected to reverse. The cumulative effect ofdie afcpQon ofthis standard, recorded m 1993, was an increase toearnings of $26 mllliGn, or$.53 per dare. tin miliioruofdollars) 1995 1994 1993 Income (loss) beforeprovision (credit) for incometaxes: VS. S 225 $ 119 $ 163 Foreign 99 13 (16) Total $ 925 $ 132 $ 147 Provision (credit) forincome taxes: Current VS. 9 (45) State and local (4) Foreign 13 Tbtal current (35) 5 (2) $ (7) 5 (4) 24 7 6 37 Deferred U.S. Stale and local Foreign Ibtal deferred 113 15 14 142 51 27 13 1 (2) (4) 62 24 Adjustment todeferred tax assets and liabilities foran increase in the US, federal statutory me Ibta) provisionfor income taxes 3 106 $ ... 04) 58 % 47 o The reconciliation between the US. federal statutory rate and the Company's effective income tax rats is: 1899 1994 1993 US. federal statutory rate Opcmjngjosses offoreign subsidiaries - > Utilization ofresearch'SHf development credits Utilization ofoperating loss carryforwards Utilization oftax loss carryback Enacted federal tax ratechange Stateand local income taxes Other 35% -- m -- 2 1 35% 7 <7) -- -- 3 6 35% 10 ---- (2) -- (10) 3 (4) Effective tax me 33% 44% 32% As ofDecember 31, 1995, the Company hasnot provided for withholding or U5. federal income taxes onapproximately $196 million ofaccumulated undistributed earnings ofits foreign subsidiaries as they are considered by management to be permanently reinvested. Ifthese undistributed earnings were notconsidered to be permanently reinvested, approximately $25 million ofdeferred incometaxes would have been provided During 1995 and 1994, the Company utilized tax net operating loss carryforwards forcertain ofits foreign subsidiaries ofapproxi mately $2 million and $9 million,respectively. At December 31, 1995 and 1994. the Company had tax net operating loss carryfor wards forcertain ofits foreign subsidiaries ofapproximately $27 million, certain ofwhich expire through 1999. The cumulative temporary differences giving rise to the deferred tax assets and liabilities at December 31,1995 aid 1994 are as follows: Hr rnlHoRS cf&ilsrt} 1995 1994 Deferred Deferred Tax tex Assets UabBtfe* Deferred Tk Assets Deferred Tax Liabilities Asbestos litigation claims $ 244 6 -- $ Other employee benefits 160 mmm Depredation tie Warranty and product liability reserves 27 mrnm Operating loss carryforwards 27 4M# State and local taxes -- 21 Other 60 39 306 $ 171 ---- 29 27 -- 122 -- -- 138 -- -- 20 6 Subtotal Valuation allowances Tbtal deferred 518 176 <201 -- 6 498 8 176 $ 655 (27) 628 $ 164 -- 164 Management fully expects torealizeits net deferred tax assets through income from future operations. 9. Science and 'technology Expanse* Science and technology expenses include research and deveiopntent costs of$69 million in 1995, $64 million in 1994. and $61 million in 1993. In addition toresearchand development costs, science ami technology expenses include continuing commercial activities such asengineering and product modifica tions for special applications and testing. 10. Accounts Receivable Securitization In J994 and 1995, the Ccanpany sold certain accounts receivable of its Building Materials operations to a 100% owned subsidiary. Owcn$-G>ming Funding Corporation C'OC Funding"), In December 1994, OC Funding entered into a three-year agreement whereby it can sell, on a revolving basis, an undivided percentage ownership interest in a designatedpool ofaccounts receivable up to amaximum of $100 million. At December 31,1995 and 1994, $100 million and $50million, respectively, have been sold under this agreement and the sale has been reflected as a reduction of accounts receivable in the Company's consolidated balance sheet. The discount of6 million on the receivables sold has been recorded as other expenses on the Company's consolidated statementofincome forthe year ended December 31,1995. The Company maintains an allowance for doubtful accounts based upot\thetxpected coUectfo&ty ef all sw&dasedtrade accounts receivable, including receivables sold by OCRinding 11. Inventories Inventories are summarized as follows; tin milians ofdeters) Finished goods Materials and supplies FIFO inventory Less: Reduction to LIFO basis 1895 $ 210 127 337 (64) * 253 1994 $ 192 118 310 (87) $ 223 Approximately $175 million ofFIFO inventories were valued using the UFO method at December 31, 1995 and 1994, During 1995,1994, and 1993, certain inventories were reduced, Tsafemg-mihe hquidadon ofUPO mvemorylayers carried st lowercosts in prior years as compared with the currentcos of inventory, The effect ofthese inventory reductions was toreduce 1995,1994, and 1993 cost ofsales by $7 million, $3 million, and SI million, respectively. 12. Investments in Affiliates At December 3\, 1995 and 1994,theCompany's affiliates, which generally are engaged in die manufacture offibrous glass and related products for the Insulation, construction, reinforcements, and textile markets, include; Percent Ownership 1995 1994 Composites: AJphaA)wens-Coming, L.L.C. (USA) Knytcx Company, L.LC. (USA) Vitro-Fibras, SA. (Mexico) Globe! Pipe: Amiantit Fiberglass Industries, Ltd. (Saudi Arabia) Owem-Coming Esemit Rohre GmbH (Germany) OwensComing Pipe Botswana (Pty.), Ud (Botswana) Owens-Coming Ibbs SA. (Spun) Owens-OamkigCaftos, SA_ (Argentina) 60% 60% 40% 30% 60% 46% 50% 60% 50% 50% 40% 30% 50% 49% 50% -- laftfag MatwUif -Europe; Arabian Fiberglass Insulation Company, Dd (Saudi Arabia) Asia Pacific: Asahi Fiber Glass Company, Ltd (Japan) LG Owens-Coming Coip. (Korea) Siam Fibendass Co., Ltd. (Thailand) 49% 28% 31% 20% 49% 28% 30% 20% The followingtableprovides summarized financial information onacombined 100% basis forthe Company's affiliates accounted forundertheequity method: (lamiHioat dollars) 1996 1994 1993 At December31: Current assets Noncmrem assets Current labilities Koncurrent liabilities Portia; yean Net sales Gross margin Net income 3 338 472 403 253 $ 328 513 331 250 $ 214 387 240 147 962 630 486 178 96 81 47 7 16 The Company's equity m undistributed net income ofaffiliates was $36miflioa at December 31,1995. Subsequent to yearend, the Company sold all ofits interest in Asahi RberGlass Comply, Ltd. forapproximately $50 million, and realized a pretax gam in excess of $25 million. 13. Accounts Payable end Accrued Liabilities On mUhonxrfdoilars) 1995 1994 Accounts payable 3 Payroll and vacation pay Payroll, property, and miscellaneous taxes Otheremployee benefits liability (Note 6) 309 87 39 23 129 $ 298 117 30 24 129 8 587 $ 598 14. Consolidated Statement of Cash Flows Cash payments, net ofrefunds, for income taxes and cost of borrowed funds are summarized as follows: (ItmitlMScfdoibn)1995 1994 1993 Income taxes Cost ofborrowed fends $ (34} $ 94 (4) $ 9? 43 95 The Company considers all highly liquid debt instruments purchased with a maturity ofthree monthsor less to be cash equivalents. See Notes 2 and 5 for supplemental disclosure ofNon-cash Investing and Financing Activities. 19. losses The Congjany leases certain manufacturing equipment and office and warehouse facilities underoperating leases, some ofwhich include cost escalation clauses,expiring on various dates through 2015. "total rental expense charged to operations was $63 million in 1995, $54 million in 1994, and $42 millionm 1993. At Dcccmber3i, 1995, the minimum future rental commitments under noncancellable leases payable overthe remaning lives ofthe leases are: Period tfnimVioascfttoiion} .MUmaum.Btiure Reraal Coranitments 1996 199? 1998 1999 2000 2001 through 2015 $ 52 52 40 20 J8 134 $ 316 16. Restructuring of Operations and Other Initiatives During thefirst quarterof 1994, the Company recorded a $117 million pretax charge for productivity initiatives and other actions turned a? reducing costs and enhancing the Company's speed, focus, and efficiency. This $11? million pretax charge is comprise* of an $89 million charge associated with the restructuring of the Company's business segments, as well as a $28 million charge, primarily composed of final costs associated with the administra tion ofthe Company's former commercial roofing business. The components offile $89 milHon restructure include: $44 million for personnel reductions, $20 million fordivestiture ofnon-strategic businesses and facilities, $22 million forbusiness realignments, and $3 millionforother actions. The $44 million cost for persoime reductions primarily represents severance costs associated with die elimination ofnearly 400 positions worldwide. The primary employee groups affected include science and technology personnel, fieldsales personnel, corporate administrative personnel, andcommercial roofing and resin business personnel. As ofDecember 31,1995. the Company has recorded approxi mately $82 million in costs against its 1994 restructure reserve, of which $67 million represents actual cash expenditures and $15 miflicsirepresents the non-casheffects ofasset write-offs and business realignments. The $67 million cash expenditure includes severance costs of$42 million, divestiture or realignment of businesses and facilities costs erf$22 million, and $3 million for other anions. During the firstquarterof 1993, theCompany recorded a $23 million charge to reorganize its European operations. This charge included $17 million for personnel reductions and $6 million for the writedown offixedassets. 17. Glass Melting Furnace RabuSds EffectiveJanuary }, 1994, the Company adopted the capital method ofaccounting forthe cos ofrebutiding glass melting furnaces. Under fids method,costs are capitalized when incurred and depredated ovtftheestimated use&Uives oftherebuilt furnaces. Previously, the Company established a reserve for the futurerebuildingcosts ofits glassmelting furnaces through a charge toearnings between dates ofrebuilds. The change to the capital method provides a mere appropriate measure ofthe Company's capita! investment and is consistent with industry practice. The cumulative effect ofthis change in accounting method was an increasetoearnings of$123 million, or $2.45 per share, net ofrelated income taxes erf$54 million. The effect ofthis change in accounting method was to increase depreciation expense andeliminate furnace rebuild provision. Thepro forma effect of this change was not material to ns income forthe yearended December 31,1993. 18. Stock Compensation Plana The Company's Stock Performance Incentive Plan (SPIP) and the OwensComing 5995 Stock Plan, (collectively, the "Plans"), jenrjH up totwopercent and one percent, respectively, of common shares outstanding at the beginning ofeach calendar year to be awarded as stock cpUons andrestricted stock (with 25% ofthisamours asthe maximum permuted number of restrictedstock awards). The Company may carry forward, independently feu each plan, unused shares fromprior years and mayincrease theshares available for awards m any calendar year through an advance ofup to25% ofthe subsequent year's alloca tor? (determined by using 25% ofthe currentyear's allocation). These sharesarc also subject to the 25% limit for restricted stock awards. During 1995, the iol numberofshares available under the Plans for stock awards was 1.565,004 shares. 1.006.950 of which were awanfcrfas stock prionsand 232224ssrestricted stock,which indudes an advanceof54.355 shares from the 1996 allocation for SPIR 599,840 shares are also available tobe awarded unde; apriorplan; however, the Company dees not expect any awards to be made under that plan. Additionally, the Company has a plan to award stock options and deferred stock awards to nonemployee directors, of which 95300 shares were available forthis purpose as of December3f, 1995, In 1995.10,000options and 4,000 stockawards were granted,of which 2,000 were issued in conjunction with the plan for cionemplciyee directors. During 1994, the total numberof shares availableforstock awards for SPIPwas 1.075,752 shares, 894,000 ofwhkh were swarded as stock cptions and 59,450 as restricted stock, which included an advanceof93,47$ sharesfrom the 1995 allocation, AAMorsaHy, & *994.4l5fqprioBs and 4.000 stock awards were granted,of which. 2,000 were issued in conjunction with the plan fornotiMfi$0yte directors. Stock Options Activity during 1995 and 1994 in shares unde? option'. 196S 1994 Number Prko Nisntxr fti* ot ftaagapff of Rargeper &o/h Sham Sitass Start Begbtningofyf 3J90AS4 $ 17.8fr47.00 2560526 $ 174647X10 Options gamed 1,016,830 0 9Q2SD 21&M.SS Optionsexercised (300,663) 17,864*50 <137559) 18.75*3063 OptionseaiKdjed 83*31} 30.684030 (354(3) 26.7UQ50 End ofye 33*3,110 * 17.8647.00 3290454 % 174647X10 Exercisable 3.107427 $ 17,8647.00 1419,119 5 174647.00 Option prices represenrthe market price afdare ofgram. Shares issued under options are recorded in the common stock accounts at the option price. Options grantedvest ra&My through }998 for the SHP plan and, as determined by the compensation committee, for the Owens-Coming 1995 Stock Plan. Deferred Stock Awards At December 31,1995, the Company had 15,711 shares of deferred stockoutstanding, all ofwhich werevested. During 1995,2,000 shares ofdeferred stock were granted, and 2,629 shares were issued. Compensation expenseis measured based cm die market price of the stock at dateof grant and isrecognized on a straight-line basis over dievestingperiod. Restricted Stock Awards At Efccember?), 3995, the Company had 448,973 shares of restricted stock outstanding. Stock restrictions lapse, subject to alternate vestingplane tcrappewed eariyretirement and involun tary termination, overvarious periods ending in 2005. 19. Shan Purchase Rights Each outstanding gjiareofdie Company's commonstock includes a preferred share purchase right Each right entitlesthe holderto buy from the Company oneone-hundredth ofa shareotSeries A Participating Prefared Stockof theCompany al aprice of $50. The Board ofDirectors has tfesignaied 750,00(3 sharesofdie Company's authorized preferred stock as Series A Participating Preferred Stock. There are cuirently nopreferredshares outstanding. Rights become exercisable and detachfrom die common stockten days aftera personal group sequins,tsrawwtmees a tender offer for. 20% ormoreof the Company's outstanding shares of common sock. The rights expire cm December 30.1996, unless redeemed eariierby the Company. The rights areredeemable by theCompany al one cent each al any time priorto ten days fallowingpublic announcement ornotice to theCompany that an acquiringperson or group has purchased 20% ormore ofthe Company's outstanding common stock. Ifthe Company is acquired in amerger orotherbusinesscombination atany time aftertherightsbecomeexe&isakfe, eachright would entitle its bolder to bay sharesofthe sequamgorsurviving company having a markervalue oftwice (teexodiepriceoftheright. 20. Derivative Ftnaodat Instruments an4 Fair Value of Financial totnimuu The Company is a party to financial instruments offbalance-sheetrisk in the normal course ofbusinesstohelp meet financing needs and toreduce exposure to fluctuating foreign currency exchange rales and interest rates. The Company is exposed tocredit loss in the event ofnonperformance by the other patties to the financial instruments described below. However, the Company does not anticipate ^performance by theocherpanics. The Company does not engage in trading activities with these financial instruments and docs not generally require coUateral^gsbersccurity to support tiicsc financial instruments. The notional amounts of derivatives summarized in the foreignexchange risk and interest rate riskmanagement section below do not represent the amounts exchanged by the parties and, thus, are nota measure ofdie exposure of the Company through its use ofderivatives. The amounts exchanged are calculated on the basis of the notional amounts and the other tomsofthe derivatives, which relate to interest rates, exchange rates, securities prices, or financial or other indexes. Foreign Exchange Ask anti Interest ftste Ask Management The Companyenters into various types ofderivative financial instruments to manage its foreign exchange risk and interest rate risk, as indicated in the following table. On mitUoructfdollars) Notional Amount December 3), 1995 Notional Amount December 33, 1994 Forward currency exchange contracts Options purchased Currency swaps Interestrate swaps $ 234 26 190 150 $ 194 22 190 150 The Company enters into forward currency exchange contracts to manage its exposure against foreigncurrency fluctuations on certain assets and liabilities denominated in foreign currencies. As of December 31,1993, the Companyhas 21 forward currency exchange contractsmaturing in 1996which exchange 2.7 billion Belgian francs, 19 million US. dollars, 11 million Britishpounds, 117 million French francs, 17 billion Italian bra, and various othercurrencies. As ofDecember3), 1994, the Company bad 29 forward currency exchange contracts which matured in 1995 and exchanged 4.4 billion Belgian francs, 23 million US. dollars, 38 million British pounds. 22 million Deutsche marks, 19 billion Italianlira, and various othercummdes. Gams and losses onthese foreign currencyhedges are included in the carrying amountofthe related assess and liabili ties. At December 31,1995 and 1994, deferred gains and losses on these foreign currency hedges are not material to the consoli datedfinancial s&emens. The Company enters into forward currency exchange contracts to hedge Us equity investments in certain foreign subsidiaries and to manage its exposure against fluctuations in foreign currency rates. As ofDecember31,1995. the Company has two forward currency exchangecontracts maturing in 1996 which exchange I billion Belgian francs against approximately 34 million.U-S. dollars to hedge its equity investments in certain of its European subsidiaries. As ofDecember 31,1994, the Companyhad two forward currency exchange contracts which matured in 1995 andexchanged 1 billion Belgian francs against approximately 32 millionVS. dollars to hedge Us equity invest ments incertain ofits European subsidiaries. At December 31, 1995 and 1994, losses of$4 million and S3 million on hedges of net investments in foreign subsidiaries arc included in stockholders' equity, respectively. The Company has entered into forward currency exchange contracts to reduce Us exposure to currency fluctuations on the proceedsofthe sale ofits investment m Asahi Fiber Glass Company. Ltd. (Note 12}, As ofDecember 31,1995, these contracts exchange 5 billion Japanese yen for 50million U.S. dollars. At December31,1995, gains ofS3 million are included as deferred revenue. The Company entered suo forward currency exchangecontracts to reduce its exposure to currency fluctuations on the anticipated 1995 earnings ofcertain Etsopean subsidiaries. Thesuite forward currency exchange contracts which matured in 1995, exchanged 412 million Belgian francs and 8 million British pounds against approximately 25 million VS. dollars. Gains and losses on these foreign currencyhedgeswere included in income in die period in which the exchange rates changed. Gains on these forward currency exchange contracts were not material to die consolidatedfinancial statements. The Company enters sho option comets tohedge anticipated transactions with certain ofits foreign subsidiaries. As of December31,1995, die Company has eight currency option contracts maturing in 1996 which hedgedie 1996royalty paymentsofthe Company's European subsidiaries. Asof December31,1995, the currency option contracts exchanged 526 million Belgian francs and 6 millionBritish pounds against approximately 25 million U.S. doDare, As ofDecember 31, 1994, dieCompany had six currency option contracts which exchanged 496 milson Belgian francs and 4 million British pounds against approximately 22 million UJS. dollars. Gains on the Company's hedges ofthese anticipated transactions are mcJoded as deferred revenue. At December 31,1995 sid 1994, deferredgams on option contracts arenot material to the consol idated financial statements. 20. Derivative Financial Instruments end Fair Value of Financial testrumsms (Continued) As ofDecember3?, 1994. the Company entered into two cur rency swap transactions to manage its exposureagainst foreign currency fluctuations on die principal amount ofits guaranteed 9.814% Eurobonds (Note 2^At December3!. 1994, gains on ikesecurrencyswaps Werenotmaterial to the consolidated financialstatements- During May 1995 the Company terminated these swaps. The termination ofthese swaps exchanged 140 mil lion US. dollars forapproximarly 89 million Britishpounds, resulting in a gain of approximately 10 million US. dollar*. At that time, the Company entered intvrocross-currency interest rate swaps from US. dolls* i&ro Britishpounds to hedge the interest and principal payments ofthe remainingEurobonds through 2002. These agreements also convert part ofthe fixed ate merest mio variablerateimeresi. Diegain on the exercised swaps is being amortized overthe life ofthe original hedge. At December 31,1995, $? million ofunamortized gain on the four cross-currency interest rareswapsisincludedin other liabilities. The Company has a cross-currency interest rate conversion agreement from Deutsche mariu into US. dollars tohedge the interestand principal payments ofits 7.25% Deutsche mark bonds, due in 2000. The agreement establishes a fixed interest rateof 22.2%. The Company enters into interestrate swaps to manage its fftferesfrate risfc TheCompanyhas cmered intofourinterest rare swap agreements to reduce the interest rates on its fixed rate borrowings. These agreements effectively convert an aggregate prindpal noc/ntof5150mSlionoffired ratelcg-terrod^t into variable rate borrowings with interest rates ranging from 5^75%jo &j025Sud 1995 and 5.81% to 7.96% in 1994. The agreements mafttre in 1998.interest tobepaidce received isaccrued as interest rateschange and isrecognized overthe life ofthe agreements. Other financial instruments wHh Off-Balance-Sheet Risk As ofDecember 31,1995^ l&M. theCompanyis cornin' gently liable for guarantee* ofindebtedness owed by certain unconsolidated affiliates of$71 million and $2? million, respec tively. TheCbmjwny isoffte optaron that iBiincerrsoJideted affiliates will be able to perform under theirrespective payment obligations in connection with such guaranteed indebtedness and that nopayments will be required and no losses will be incurred by the Company under such guarantees, 'oncentretioiu of Credit fffok As of December31,1995 and 1994, the Company has no signifi cant groupconcentrations ofcredit risk. Fair Value of Financial Instruments The following methods and assumptions wise used to estimate the fair valueofeach categcay of financial instruments. Cash and short-term financial instruments The carrying amount approximates fair value due to rite short maturity ofthese instruments. Long-term notes receivable The fair value has beenestimated using the expected future cash flows discounted ai maiket interest rates. Long-term debt The fair value ofthe Company's long-term debt has been estimated based on quoted market prices for the same or similar issues, or on the current ratesoffered to the Company for debt of the same remaining maturities. Foreign currency swaps and Interestrate swaps The fair values offoreign currency swaps and interest rate swaps have been estimated by tradedmarket values or by obtaining quotes from broker*. Forward currency exchangecontracts, option contracts, and financial guarantees The fairvaluesofforward currency exchange contracts, option contracts, and financial guarantees are based on fees currently charged forsimilar agreementsor on tee estimated cost to terminate these agreements orotherwise settle the obligations with the counter parties at the reporting dare. The estimated fair valuesofthe Company's financial instruments asofDecember 31.1995 and 1994. which have fair values different than theircarrying amounts, are asfoftows:_________ (h mUihns cfddbts) 199S1994 Carrying Fair Carrying Amount Value Amount Fair Vfcfue Assets Long-terni notes receivable $ 24 * 22 $ 20 $ 18 Liabilities Long-termdeb? 794 876 3.037 1.076 Off-Balance-Sheet Financial Instruments --Unrealized gains Foreign currency swaps Interest rate swaps 39 14 26 As ofDecember 31,1995 and 1994. the Company is contingently {table forguarantees ofindebtedness owed by certain unconsoli datedaffiliates. There is no market for these guarantees and they were issued without explicit cost. Therefore, it is not practicable to establish their fair value. As ofDecember 3i*095 and 1994. the Company has alsoentered into certain forward currency exchange and option cottracts, the fair values ofwhich are not material to theconsolidated financial statements. 21. Contingent Uabflfries Asbestos Us&Mities The Company is a co-defendant with other formermanufacturers, distributors and installers ofproducts containing asbestos and with mines and suppliers ofasbestos fibers (collectively, the Producers) in personal injury and propertydamage litigation. The personal injury claimants generally allege injuries to theirhealth caused by inhalation of asbestos fibers from the Company's products. Most of the claimants seek punitivedamages as well ascompensatory damages. The property damage claims generally allege property damage to school, public aid commercial buildings resulting from die presence ofproducts containing asbestos. Virtually ail ofthe asbestos-related lawsuits against the Company arise outofks manufacture, distribution, sale or installation ofsi asbestoscontaining calcium silicate, high temperature insulation product, the manufacture of which was discontinued in 1972. Status As ofDecember 31,1995, approximately 144,200 asbestos personal injury claims werepending against theCompany, 55.900 of which were received in 1995. the Company received approxi mately 29,100 such claims m 1994, and 32,400in 1993. Through December 31,1995, the Company had resolved (by settlement or otherwise) approximately 160.600asbestos personal injury claims. During 1993,1994, and 1995, the Company resolved approximately 60,000 such claims and incurred total indemnity payments ofS641 million (an average ofabout $10,700 per case). The Company's indemnity payments have varied consid erably over time and from case to case, and are affected by a multitude offactors. These include the type and severity erfthe disease sustained by the claimant (i.c-, mesothelioma, lung cancer, othertypes ofcancer, asbestosis or pleural changes); the occupa tion ofdie claimant theextent ofthe claimant's exposure to asbestos-containing products manufactured, sold or installed by the Company; the extent erftheclaimant's exposure to asbestoscontaining products manufactured, sold orinstalledby other Producers; the number and finsictal resourcesof other Producer defendants; thejurisdiction ofsuit; the presence or absenceerf enter possiblecauses ofthe claimant's Hiness; the availability or not of legal defenses such as the statute of limitations or state ofthe art; whether the claim was resolved on an individual basis or as part of a group settlement; and whether theclaim proceeded to an adverse verdict orjudgment insurance As ofDecember 31,1995, the Company had approximately $430 million in unexhausted insurance coverage (net ofdeductibles and self-insured retentions andexcluding coverage issued by insolvent earners) under hs liability insurance policies applicable to asbestos personal injury claims. This insurance, which is substantially confirmed, includes both products hazard coverage and primary level non-products coverage. Portions ofthis coverage are not available until 1997 and beyond under agreements with the carriers confirming such coverage. All ofthe Company's liability insurance policies cover mdemnity payments and defense fees and expenses subject to applicable policy limits. in addition to its confirmed non-products insurance, theCompany hasa significant amount ofpotential non-products coveragewith excess lewd carriers. The Company cautions, however, that this coverage is unconfirmed and that the amount and timing of additional recovery from these policies, if any. will depend on subsequent negotiations orproceedings. Reserve TheCompany's estimated total liabilities in respect ofindemnity and defensecosts associated with pending and unassorted asbestos personal mjiny ebumsthar may be received through the year 1999 (the"liabilities"), and itsestimated insurance recoveries in respect of such claims (the `Insurance'*), are reported separately as follows: (In mUions ofdollars) Asbestos litigation Claims December 31, December 31, 1995 1994 Reserve for asbestos litigation claims Current Other Total Reserve $ 250 887 1,137 $ 300 1.145 1,445 Insurance for asbestos litigation claims Current Other Ibtai Insurance Net Asbestos Liability 100 330 430 $ 707 125 556 681 $ 764 21. Contingent Liabilities (continued} Case filing rales have continued at historically high levels with the receipt ofapproximately 55,900 new claims during 1995, following the receipt ofapproximately 29,100claims in 1994 and approximately 32400 claims in 1993. Many ofthese new claims*appear to be the product ofmass screening programs and not to involve sienific^abcstos-re}ated Impairment. The large numberofrecent filings and the uncertain value of these claims have added tothe uncertainties involved in estimating die Company's asbestos liabilities. Certain ofthe Company`sprincipal co-defendants, the 20 members of the Center for Claims Resolution, have entered into a proposed "global" settlement which would require future claimants to satisfy certain medical criteria indicative ofsignify cant asbestos-related impairment as apre-condition to theneligibility for settlement payments. The Company is using similar criteria in the implementation of its own settlement and litigation strategy and is also seeking to require more careful proofthan in the past that claimants had significant exposure to the Company's asbestos-containing product oroperations. Hie Company believes that this strategy will reduce die overall cost ofasbestos personal injury claims m the long run by channeling indemnity payments to claimants who can establish significant asbestos-related impairment and exposure to the Company's asbestos-containing product oroperations and by substantially reducing indemnity payments to individuals whoare unimpaired or who did not have significant suchexposure. The Company'! strategy hasroadted in an increased level oftrial activity and an increase in the number andamount ofcompensatory and punitive damage verdicts and judgments against the Company. This strategymay have the effect ofincreasing averageper-case indemnity costs forclaims resolved with payment, while also inneasatgiheiuunb^of dates4simssed wthsutpaynaeat TheCcsj^any cautions that such factors as the numberof future asbestos personal injury claims received by it, die rate ofreceipt ofssch claims, and the indemnity and defense costs associated with asbestos personal injury claims, as well as the prospects for confirming additional, applicable insurance coverage beyond the $430 million referenced above, are influenced by numerous variables that are difficult to predict, and that estimates, such as die Company's, which attempt totake account ofsuch variables, aresubject toconsiderable uncertainty. Depending upon the outcomeofthe various uncertainties described above, particu larly as they relate to unimpaired claims, h may be necessary at some point in the future for the Company tomake additional provision for the uninsured costs ofasbestospersonal ijyuiy chirm received through theyear 1999 (although no such amounts are reasonably estimable at this time). The Company remains confident shat its estimate ofLiabilities and Insurance will be sufficient to provide for the costs of all such claims that involve malignancies or significant asbestos-relaxed functional impairment The Company has reviewed and will continue to review the adequacyofits estimate ofLiabilities and Insuranceon aperiodic basis and make such adjustments as may be appropriate. The Company cannot estimate and is not providing for the cost of unassorted claims which may be received by the Company after tiie year 1999 because management is unable to predict the number ofclaims to be received after 1999, the severity ofdisease which may be involved and other factors which would affect thecost erf such claims. Cash Expenditures The Company's anticipated cash expenditures for uninsured asbestos-related costs ofclaims received through 1999 are expected (o approximate $707 million, the Company's Liabilities, net of Insurance, before tax benefits. Cash payments will vary annually depending upon anumbererffactors, including the pace ofthe Company'sresolution ofclaims and tire riming ofpayment ofits Insurance. Mmagement Opinion Although any opinion is necessarilyjudgmental and must bebased on information now known tothe Company, In the opinion of management, the additional uninsured and unreserved costs which may arise out ofpending personal mjtay and property damage asbestos claims and additional similar asbestos claims filed in the fixture will not have a materially advene effect on the Company's financial position. While such additional uninsured and unreserved costs incurred in and after the year2000 maybe substantial over time, management believes that any such additional costs will not impairihcability ofthe Company to meet its obligations, to reinvest in its businesses or to take advantage ofattractive opportu nities forgrowth. Non-Asbestos Uab&tle* Variousother lawsuits andclaims arising in the normal course of busine are pending against titaCompany, some ofwhich allege substantial damages. Management believes that the outcome of these lawsuits and claims will nothave a materially adverse effect cm theCompany's financial position or results ofoperations. mrim WWW 22. Quarterly Financial Information (Unaudited) {!* mitiioxsgfdollars,tveptihar*daai 1^5 Net'Sefee Cost of Seles Gross Margin * -Nat Income NettaeomeparSHaw Primary Not Income per Share Fully Diluted Net Income per Share FaW Quarter Second___ Third Fourth 9 844 630 214 9 33 8 877 S 927 639 684 238 JS_ 243 $ 63 $ 70 8 964 717 247 8 68 $ .71 9 9.29 9 9.36 9 1.27 6 .68 S 120 $ 128 $ 1.21 1994 Net Sales Cost of Sales Gross Margin Income (Loss) Before CumulativeEffect ofAccounting Changes Cumulative Effect of Accounting Changes (Notes 6 and 17) Net Income Net Incomeper Stare: Primary Income (Loss) before CttimdativeEffect ofAccountingChanges Cumulative Effect ofAccountingChanges Xa Income per Share Fully Diluted Income (Loss) before Ctimt&tiF* Effect ofAccounting Changes Cumulative Effect ofAccountingChanges Net IncomeperShare $ 677 S 852 $ 936 % 886 523 644 70S 664 S 154 S 208 $ 231 S 222 s (67) s 45 $ 53 s. 43 85 $ 18 $ 45 S 53 $ 43 $ (1-52) 1.93 $ .41 * L03 ___ --_ S 1.03 $ U9 -- S 1.19 $ .98 ___ ^ S .98 $ (1.30) S .95 $ 1.09 $ .91 1.70 *-- --* -- $ AO i 3? $ 1.09 $ .91 Net income per share and primary and fully diluted v^jghad average shares are computed independently for each offoe quarters presented. Therefore, the smn ofthe<yuarwrlym income per sharemayjk* eQuaitheper sharetotal for theyear. Directors A> DIRECTORS Front Ron1, Seated. Left toRight Sir Trevor Holdaworth 2.3 Farrow Chairman Nadonai Powerp!c NonwP.S^.Jr.i;3 GasmanoftheBoard, Chief Executive Officer and Presklent USF^ Corporation David T. McGovern 3.4.$ Ofcounselto andformerpsuwerin Sheannan & SterKng LandoB HSRard 243 Partner BrownBrothers Harrtman & Co. Furman X Moaeley, Jr. Preside Simpson Investment Company Bock Rohv Standing.Left toRight W. Walker Lewta 5,45 Sanku Advisor to Dillon, Read & Co. Inc. and Marakoo Associates WtmamVU'CoMttaU Legal Consultant toandformerly Senior Vice President, GeneralCounsel and SecretaryofOwens Coming The Pink Panthar GJan H. Mwl Chairman ofihe Boardaid ChiefExecutive Officer Owens Coming W. Ann Reynolds X&S Chancellor City Univerefcy ofNew York 1 n M. * unuman, Jr. IAS Vice Chairman The HuntsmanCorporation Directors saveon committees ofthe Board as indicate*d* owners following theirnames. l.BsecutlveCttramtaec GMm H. Mtnr Chairman X Comfenaticft Committee London HilBard Durnnat 3, AuditCommittee Normal P. Bftk dr. Chairman 4, Fnjance Committee FurmanC. Mo**}y, Jr. Chairman S. CorporateGoverrance Committee W. Walter Uwte Chairmen Senior Officers Gian H, Hliwr Chairman ofthe Board and Chief Executive Officer (AstWHDana Executive Vice President Devetopmem/^annrng/SouTCmg BUSINESSES Charles R. Bknd Vke President and President, Latin America/Africa Alan D. Booth WeePresides and President. Insulation-North America CORPORATE Cferatian L CempbeU Senhf 'ifcePreside, Gettc&S Counsel and Corporate Secretary David W. DavonaNra Senior Vk* Prcsedent and ChiefFinancial Officer DavklT.BiMffl Vice President and President,Building. Material Sales andDistribution-North America Oemanteo Caeere Vice President and President, Roofing/Asphalt (Efftah-tJanuary), J996) Peats H. J. Cbohnenthtoy Vice Resident and President, Mirafiexm Products Robert D. Haddens Vice Resident and President, Western FiberglassGroup -Robert C. Lboergan Vice Presided Science &Technology WehaeflMBIer VicePresident and treasurer Bradford C. Oahnan V> President Cwpcraie Relations Gregory tt. ThomKm Senior Vice President Human Resources Cart B. Hodhmd Vkre President and President. Asia Pacific Warren O. Knowttftn Vice Residentand President, Building Maarials-Europe SconfCKeepks Vfee ftsadeffl and President, Pipe JSttbimJoaO.VMeH* Vtcc President and President. Composites 4onY L Welnvtibt Vice President and President, Specialty and Ram Products o s KMIR Glossary General -Advantage 2000; A global, 100-week, eme^>rise-widc Iwsinessprocess reragincering initiative to redesign core processes and replace 200inefficient information systems with a fiifly integrated global network, -AURA* Suparinadtelon: A vacuum panel of thermally tailored glass fibers encapsulated in statutes seed foil, hermeti cally and evacuated, used in appliance applications. Brand: An identity, includingname, icons and image, disc conveys specific messages to consumers, including what a comprepresents. The Owens Coming brand is a strategic competitive ^vantage, CompoaHt: A material system comprised oftwo or more components, e.g. plastic resins and glass fiber F&erglac*: Owens Coming's standard glass fiber insulation, available in a variety ofR-vabes and thicknesses. Fifadrization: The process by which molten glass is turned into glass fiberfor a variety ofuses, including insulation. Foam insulation: Extruded orexpandedpolystyrene foam board used in a variety ofinsulation applications. Gloss Reinforced Plastic (GRP): A composite in which fibrousreinforcements, such as chopped fibers, rovings, yams or mats, are imbedded to add strength to ftcplastic. Home Building Materiala System: Owens Coming's integrated, multi-product offering including numerous insula* tjco, roofing, exterior color-match and soundcomnrt products, prov&ing anoverall performance system for homeowners and remodeling contractors. Hftuiowrsp; A durable polypropylene material used as an air filtration barrierfor exterior walls in remodeling &id new residential construction. Infwitrww: The system ofpublic works ofa country, state orregion, providing transportation, comnsmicationand utilities for the population. Includes highways, roads and bridges: trsismtfrion towers, cables, yti&ypolesandpower iysems; water and waste transport systems. Material* System: A productcomhrnawn including Moor more materials in specific proportions and anangemente, and processed todefined properties, forcombined performance impact, MiraffaxTM fiber; The Timsew fom ofglass fiberin nearly 60 yeas, developed by Owens Coming using bi-component technology to fuse two different glass compositions into one filament, making ihe fibers flexible, soft-to-the-touch and virtually itch-free- R-value: An insulation'sresistance to heat flow, including heat gain in wanner months and heal loss in colder months. The highertheft-value, the greater the insulatingpower, Polyester realm A synthetic resin. When mixed with glass fiberand put through variousjrroccsses it creates a composite material. -Financial Coat of Borrowed Fund*: Interest payments for long'term and short-term debt obligations, including bonds, notes and debentures. Capital Expenditure*: Fixed funds used for planned rebuilds, equipment upgrades,environmental and safety'hems, as well as discretionary hindsused for additions and improve ments toproperty, plant and equipment forproductivity and growth. Primary Earning* par Share: Net income divided by weighted-averagenumberofcommon shares and common stock equivalents outstandingduring the period Fully Diluted Earnings per Share: Net income plus interest and dividends on convertible dels and Monthly Income Preferred Sccuri&s divided by the wrighted-flverage common shares and common stock equivalents outstanding, assuming conversion. Grots Msrgln: Net sales mums cou ofsales. Venture: A business formed Htagreemesrbctiveentwo ormore entities, with some form ofsharedownership. Ongoing Operations Ftnasriai recitedumasting the impact ofnon-recurring events and transacttorn. Productivity: Change in sales withoutprice, compered to change incosts without inflation. General Information Corporate Address Owens ComingWorld Headquarters Rbcaglas Tower T*fcd>,OhioUS.A.43659 419.248.8000 Shareholder Sgryfeei Owens Coming maintains a ShareholderServices Office at world headquarters inIbiedo, Ohio, to assist sfcareftofetere. inquiries are welcome ai the world headquarters address. Transfer Agent and Rostra Chemical Melton ShareholderServices,Ll.C. acts as primary DansferAgcot and Registrar for the Company^Quescions on change ofownership,total shares owned, consolidation of accounts and other such matters'sbouk! be sent to Chemical Melton SiarefwklerServices, LX.C, Overpeck Center; 85 ChallengerRoad, RidgefieldParis, New Jersey 07660, or phone 1,800.851.9677. Auditor* Arthur Andersen LLP, Toledo, Ohio, is die independent public accounting firm forfoe Company. - IMITree Number* and Electronic Me# Addresses Investor Relations 1.$00,403.6843 mvestof^oweRS-cormngccen . literature Requests . 1,800.723.2727 doccenter^owens'Coming.ccm Produa Information 1.800.GET.HNK Copies of Owens Coming's recent news releases are available via fax by calling Company News On-Call at l .800.758.5804, extension 677350- This electronic, menu-driven service of PR Newswire is available 24 hours a day, seven days a week, at no charge to callers. Internet Toocan wsk foeOwes* Ccerung Home at our World WideWeb she Using foe following address: htTp-7/wwwxwens-comingxom dunsaefAdtteis A change of address should be reported promptly by sending a IcBer toChemical Mellon Shareholder Services,L.L.C, OverpecfcGcaar, 85 GtalteftgerRoad, Ridgefield Park, New Jersey 07660. FormlfrK The Company will provide without charge to any person who isa beneficial ownerof hs shares acopy offoe Company's 1995 Annual Report on Form 10-K, asfiled with foeSecurities and Exchange Commission. Request* should be addressed to GstomerService, Owen? Coming. DocumentCenter 3. $01 Washington Street,Toledo, Ohio43624. Annual Meeting The annual shareholders meetingofOwens Coming will be held In SeaGate Centre,401 Jefferson Avenue.Toledo, Ohio at 2p.tn. Thursday, April 18,1996. Stock Exchange Owens Cortosi$ stock is listedfortrading cmthe New Yk Stock Exchangeand the Toronto Stock Exchange under foe sjwjbol OCT. tVftwiettiertKKi JAistepon uprtnrsrfen rreyd*t>paper,8&{*i)p6$es art wrjcteWr.