SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 26, 2000.
OWENS CORNING
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(Exact name of registrant as specified in its charter)
Delaware 1-3660 34-4323452
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Owens Corning Parkway 43659
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Toledo, Ohio (Zip Code)
(Address of principal executive offices)
(419) 248-8000
(Registrant's telephone number, including area code)
Item 5. OTHER EVENTS
Owens Corning said today that the softening housing market and related decrease
in demand for building materials, coupled with sharp increases in raw material
and energy costs, are expected to reduce sales and income from operations for
the second quarter ending June 30, 2000, below levels reported for the same
period last year.
On a preliminary basis and subject to final results for the second quarter, the
company expects net sales for the period to be slightly below the $1.3 billion
reported in the same period last year. The company said this reflects weaker
demand in its roofing, siding and insulation businesses, as the housing market
responds to the rise in interest rates. Due to strong sales in the first
quarter, the sales for the first half of the year are expected to show growth in
excess of four percent.
The company reported that $30 million of second quarter cost increases driven by
asphalt and PVC cost pressures have continued to depress margins in the roofing
and vinyl siding businesses. In addition, higher debt levels and interest rates
are expected to increase borrowing costs by more than $10 million versus the
same period last year.
Also on a preliminary basis, net income, excluding the special items discussed
below, is expected to be approximately $1.00 per share on a diluted basis,
compared to $1.31 per share in the same period a year ago. However, it is
expected that the company will report a net loss for the second quarter after
giving effect to the special items discussed below.
The company expects to report its actual second quarter results on July 13,
2000.
For the full year, the company anticipates sales growth of approximately four
percent. However, continued margin pressure, increased borrowing costs and
continued market weakness is likely to reduce earnings per share, excluding the
special items discussed below, by approximately 20% below 1999's levels.
Special Items Impacting Net Income for the Quarter
ASBESTOS INSURANCE DEVELOPMENTS
The company has received a $335 million settlement payment from a group of
excess insurers resolving a dispute concerning coverage for non-products
asbestos related personal injury claims. Of this amount, $125 million was
previously recorded as income and reflected on the company's financial
statements as an asbestos insurance receivable. The balance of $210 million will
be recorded as net pre-tax income in the second quarter. In light of this
settlement, the company is actively pursuing additional non-product insurance
recoveries.
OTHER ASBESTOS DEVELOPMENTS
The company is in the process of reviewing the sufficiency of its provision for
asbestos-related liabilities in light of recent trends and developments in the
administration of the company's National Settlement Program ("NSP") and in
asbestos litigation generally. While the amount of the anticipated adjustment to
the company's asbestos-related liability reserve has not yet been determined due
to the numerous and complex variables affecting its estimates, the amount of the
pre-tax charge to earnings is likely to be in the range of $700 million to $1
billion.
The anticipated adjustment to the reserve is necessitated by several factors.
Since the company announced the NSP in December, 1998, and at that time
increased its asbestos reserve by $1.4 billion, the company has continued to
expand the size of the program. As previously reported, the NSP has increased
from approximately 175,000 claims in 1998 to 237,000 claims today. As more
information is derived from claims submitted and recently approved for payment,
the company believes that resolution of those claims will cost more than
previously estimated.
While the company has not incurred any adverse verdicts year to date, settlement
demands and payments in non-NSP trial-set cases have increased dramatically in
many jurisdictions. Recent large verdicts against other asbestos defendants in
certain jurisdictions, including Madison County, Illinois and Orange County,
Texas, illustrate the unpredictability and high cost of resolving non-NSP cases.
Consequently, the reserve adjustment will also take into account the company's
revised estimate to settle non-NSP claims in its remaining backlog of
approximately 26,000 cases.
Additionally, the company is reviewing other relevant external factors that may
influence its reserve adjustment, such as the bankruptcies of Babcock & Wilcox
and Pittsburgh Corning, which were co-defendants with the company and others in
the ongoing asbestos litigation.
The company continues to emphasize the increasing difficulty of estimating
future asbestos liability, which is compounded by the continuing uncertainties
concerning the number and cost of settling future claims related to asbestos
exposure, especially mesothelioma claims.
The range of adjustments to the company's asbestos reserve liability described
above exclude any adjustment for the company's wholly-owned subsidiary,
Fibreboard Corporation (which is accounted for as a separate item on the
company's financial statements). The asbestos-related reserves of Fibreboard
Corporation are also being reviewed in light of these developments.
In continuing negotiations with the Executive Committee of the NSP, the company
has to date reached agreements in principle to limit payments for all
asbestos-related matters to $950 million in 2000, of which approximately $600
million has been paid to date, $400 million in 2001, and $250 million in 2002.
On the basis of preliminary information, the company now estimates that limiting
payments during 2000-2002 to those amounts may result in deferring approximately
$500 million of otherwise anticipated NSP payments. The company has agreed to
repay this amount in 2003 and 2004. The Company is also seeking modifications of
the Fibreboard Trust NSP payment obligations.
Third Quarter Dividend Announcement
Owens Corning has declared a quarterly dividend of $.075 for each share of
common stock outstanding, payable October 15, 2000, to shareholders of record as
of the close of business on September 29, 2000.
This news release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected in these statements. Further information on
factors that could affect the company's financial and other results are included
in the company's Form 10-Q and 10-K, filed with the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
OWENS CORNING
Registrant
By: /s/ Michael H. Thaman
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Michael H. Thaman
Senior Vice President and
Chief Financial Officer
Dated: June 26, 2000
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