Owens Corning

founded: 1938

Contact Information:

headquarters: 1 owens corning pkwy
toledo, oh 43659 phone: (419)248-8000 fax: (419)248-5337 toll free: (800)get-pink email: [email protected] url: http://www.owenscorning.com

OVERVIEW

Probably best known for its fiber glass (trademarked name Fiberglas) and foam insulation product line, Owens Corning produces a broad range of other construction materials, including everything from vinyl siding and windows to patio doors, roofing materials, and rain gutters. The company is divided into two major operating segments: Building Materials Systems and Composite Solutions. The Building Materials Systems division accounts for about 80 percent of the company annual sales, with the rest generated by Composite Solutions, which produces composite materials used in the electronics, telecommunications, and automotive industries.

Headquartered in Toledo, Ohio, Owens Corning was founded in the 1930s as a joint venture of Owens-Illinois and Corning Glass. The company was originally established to research and manufacture glass fiber, for which both Owens-Illinois and Corning Glass saw great potential as an insulation material. Shortly after its incorporation as Owens-Corning Fiberglas Corporation in 1938, the fledgling company was granted the patent for glass fiber. The company's products are marketed worldwide through its network of subsidiaries and joint licensees in more than 30 countries on six continents.

Owens Corning, in the 1950s, became involved in the asbestos business when it entered into an agreement to distribute Owens-Illinois' Kaylo-brand high-temperature calcium silicate insulation containing asbestos. In the late 1950s Owens Corning bought all Kaylo's assets and began manufacturing the insulation product as well as distributing it. As the dangers of asbestos became better known in the 1970s, Owens Corning removed asbestos from Kaylo but continued to market the product. The company's involvement in the asbestos business eventually resulted in a billion-dollar asbestos liability for Owens Corning. Struggling under the growing demands of these lawsuits on its cash flow, Owens Corning on October 5, 2000, filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Court. The filing enables the company "to refocus on operating its business and serving its customers, while it develops a plan of reorganization that will resolve its asbestos and other liabilities and provide a suitable capital structure for long-term growth."

COMPANY FINANCES

Owens Corning eked out a profit of $39 million in 2001, a significant improvement from its results in 2000 when it reported a net loss of $479 million for the year. The company managed to get back into the black in 2001 despite a slight decline in revenue to $4.76 billion from $4.94 billion in 2000. In 1999 Owens Corning posted a profit of $270 million on revenue of slightly more than $5 billion.

For some years Owens Corning has faced a significant legal liability related to the company's involvement in the asbestos business decades earlier. In late 2000, the company, along with 17 of its subsidiaries, filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. It was hoped that such protection would enable the company to continue operating its existing businesses and serving its customers while it formulates a plan of reorganization that will resolve its asbestos liability and provide a suitable capital structure for long-term growth.

To further enhance its liquidity, Owens Corning obtained a debtor-in-possession financing commitment of $500 million from the Bank of America shortly before it filed its petition for reorganization. The company hopes to use these funds to help meet its future needs and fulfill obligations related to the operation of its business, including payments under normal terms to suppliers and vendors for all goods and services. The company has confirmed that its pension plan for retirees and vested employees is fully funded and protected by federal law.

Owens Corning narrowed its net loss in the first quarter of 2002, reporting a shortfall of $6 million, compared with a loss of $10 million in the same quarter the previous year. The company's revenue for the first quarter edged up slightly to $1.11 billion from $1.07 billion the previous year.

FAST FACTS: About Owens Corning

Ownership: Owens Corning is a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: OWC

Officers: Michael H. Thaman, Chmn. and CFO, 36, 2001 base salary $425,000; David T. Brown, Pres. and CEO, 52, 2001 base salary $400,000

Employees: 19,000

Principal Subsidiary Companies: Oracle operates a number of domestic and foreign subsidiaries. These include Advanced Glassfiber Yarns, LLC; Alcopor Owens Corning AG; Amiantit Fiberglass Industries Ltd. in Saudi Arabia; Arabian Fiberglass Insulation Company Ltd.; Fiberteq LLC; Flowtite Argentina; Flowtite (Botswana) Pty. Ltd.; Flowtite Iberica SA in Spain; Owens Corning Energy LLC; Owens Corning (India) Ltd.; Owens Corning (Nanjing) in China; Owens Corning Yapi Merkezi Boru Sanayi Veticaret A.S. in Turkey; Owens-Corning Eternit Rohre GmbH in Germany; Siam Fiberglass Co. Ltd. in Thailand; Stamax B.V. in the Netherlands; Stamax NA LLC ; and Vitro-Fibras SA in Mexico. Advanced Glassfiber Yarns, headquartered in Aiken, South Carolina, is a leading manufacturer of glass yarns, used in electronic products, automotive equipment, and other industrial applications.

Chief Competitors: The two main operating segments of Owens Corning are Building Materials Systems, which accounts for roughly 80 percent of the company's annual revenue, and Composite Solutions, which generates the remainder of the company's sales. The company's leading competitors include Andersen Corporation, G-I Holdings, and Guardian Industries.

ANALYSTS' OPINIONS

Much of what security analysts were saying about Owens Corning in late 2001 and the first half of 2002 centered on the substantial asbestos-related claims against the company, which triggered its bankruptcy filing in October 2001. Other companies that previously had been involved in the asbestos business-including Johns Manville-were forced to seek similar relief. At the time Owens Corning filed its petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code, the company said the number of asbestos-related claims against it had risen to 7,800 in the third quarter of 2001, up sharply from 4,200 the previous quarter.

Looking at the rapidly mounting number of asbestos-related lawsuits against U.S. construction and manufacturing companies, analyst Scott Davis of Morgan Stanley said: "I view asbestos as a big black hole. It's a problem for many sectors now, not just the traditional spaces." As of early 2002, U.S. companies had paid about $20 billion in asbestos claims and related costs, according to the Asbestos Alliance, a group of corporate asbestos defendants and their trade associations. Security analysts estimated that the cost of the remaining asbestos liability in January 2002 ranged from $20 billion to as high as $200 billion. And, according to A.M. Best analyst Gerald Altonji, the insurance industry has only about half the money it needs in reserves to cover these long-running asbestos and pollution claims.

The outlook was gloomy for relief through acquisition or merger for companies facing asbestos-related liability, according to Morgan Stanley analyst Davis. "Companies with asbestos liability have effectively been put in the penalty box on M&A," he said.

HISTORY

Owens Corning had its origins in the pioneering work of Owens-Illinois Glass Company and Corning Glass Company into glass fiber technology. Much of the research behind the fiberglass technology for which Owens Corning later became famous was conducted in the early 1930s by Games Slayter, Dale Kleist, and Jack Thomas. Kleist, a young researcher who worked for Thomas, Slayter's research assistant, one day in 1932 was welding architectural glass blocks together to form a vacuum-tight seal when a jet of compressed air accidentally hit a stream of molten glass. The result was the creation of fine glass fibers. Later that same year, the process was refined by using steam rather than compressed air to attenuate glass fibers. The result was a glass fiber material that was thin enough to be used as a commercial fiber glass insulation.

In the mid-1930s Owens-Illinois and Corning Glass struck an agreement for a joint venture operation to share the costs of continuing glass fiber research and development. In 1938 the companies decided it might be better to operate the joint venture as a separate company. That same year the patent for glass fiber was granted to Dale Kleist and Jack Thomas. On November 1, 1938, the formation of Owens-Corning Fiberglas Corporation was announced.

During the first half of the 1940s, Owens Corning partnered with the U.S. military to develop and manufacture products for use in the construction of aircraft and ships, as well as for insulation. In 1949 the company built it first plant designed specifically for the manufacture of insulation. In the 1950s, Owens Corning, in partnership with General Motors, announced the first production automobile with a body made entirely of Fiberglas-reinforced plastic, the Chevrolet Corvette. By the end of the 1950s, the company's annual revenues had topped $211 million.

In late 1960 Owens Corning opened its Granville Technical Center in Granville, Ohio, and transferred its research and development operations to the new facility from their previous home in Newark, Ohio. Armstrong Rubber Company in 1966 introduced its Fiberglas-reinforced automobile tire, developed jointly with Owens Corning. The 1970s saw a rapid expansion in Owens Corning's overseas operations as well as a multitude of glass-reinforced plastic innovations. The Pontiac Silverdome, covered by a 10-acre Fiberglas-fiber roof, opened in 1975, and in 1976 Owens Corning topped the $1-billion mark in annual sales. By the end of the decade, annual revenue had climbed to more than $2 billion.

CHRONOLOGY: Key Dates for Owens Corning

1938:

Owens-Corning Fiberglas Corporation is founded

1944:

Owens-Corning develops the first Fiberglas-reinforced plastic boat hull

1949:

Owens-Corning opens first plant specially built for production of insulation

1953:

Owens-Corning and GM introduce auto body made entirely of Fiberglas-reinforced plastic

1976:

Owens-Corning annual sales top $1 billion

1992:

Company unveils a new corporate logo

1996:

Company formally changes name to Owens Corning

2000:

Owens Corning files for reorganization under Chapter 11

In 1980 Owens Corning adopted the Pink Panther, the lovable United Artists cartoon character, for use in its advertising campaign for PINK Fiberglas insulation. The 1980s saw an extensive expansion of the company's manufacturing facilities around the world. Owens Corning in 1986 rejected a hostile takeover offer from Wickes Companies Inc. As the decade closed, the company's annual revenue had reached $3 billion.

In January 1992 Glen H. Hiner took over as the new chairman and CEO of Owens Corning and announced that his top three priorities for the company were "customer satisfaction, individual dignity, and shareholder value." In June 1993 the company unveiled PINKPLUS, a new polyethylene encapsulated glass fiber insulation product for the residential market. In early 1996 the company officially changed its name from Owens-Corning Fiberglas Corporation to Owens Corning.

In the late 1990s and the beginning of the twenty-first century, Owens Corning was inundated with liability claims related to the company's involvement in the asbestos business decades earlier. On October 5, 2000, the company filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The move was undertaken to give the company protection from its creditors while it developed and implemented a plan to reorganize.

STRATEGY

Established by then-Chairman and CEO Glen Hiner in 1992, Owens Corning's Core Values make up the framework on which the company's strategy is based. These guiding principles are composed of three key components: customer satisfaction, individual dignity, and shareholder value.

To Owens Corning, customer satisfaction means more than simply selling quality products at an attractive price. The company thinks it is essential to understand-and even anticipate-customers' needs. The company's focus on individual dignity has made the company a preferred place of employment worldwide. It emphasizes the importance of respect for every individual, regardless of race, creed, color, religion, gender, or national origin. The final component in its Core Values is shareholder value, which is a recognition on the company's part that its stockholders expect the company to be managed efficiently and profitably and to produce an acceptable rate of return.

Although it's not a formal part of the company's Core Values, Owens Corning's October 2000 petition to reorganize under the protection of the U.S. Bankruptcy Code was an important strategic move taken to help preserve cash flow in the face of its extensive asbestos-related liability.

INFLUENCES

Undoubtedly the biggest challenge to have faced Owens Corning in recent years has been the flood of asbestos-related claims tracing back to the company's involvement in the asbestos business between the 1950s and the 1970s. Although the first such claims against Owens Corning were filed in the early 1980s, they were few in number and not perceived to be a major threat to the company.

By the early 1990s, Owens Corning had become a target defendant for asbestos litigation. Towards the end of the 1990s, the National Settlement Program (NSP) was announced, incorporating 176,000 cases settled with more than 50 law firms. To meet its payments to NSP, Owens Corning was forced in 1999 to sell off some of its assets to raise cash. Under pressure to meet its payments to NSP, the company's burden was further increased by the filing of asbestos suits by law firms that had not participated in the NSP. Unfortunately this surge in additional claims coincided with a slowdown in the U.S. economy in the first half of 2000, further hampering the company's ability to generate the strong cash flow needed to meet these demands. Left with few other options, Owens Corning in October 2000 filed a petition for reorganization under Chapter 11 bankruptcy protection.

OWENS CORNING FRIENDLY TO THE ENVIRONMENT

Owens Corning took the occasion of Earth Day 2002 to outline what it is doing to help preserve the environment. Some of the company's best-selling products are environmentally friendly—in addition to environmentally friendly manufacturing processes. Some of the "green" products cited by Owens Corning are its insulation products, Strataguard roof boards, and TruPave paving mat. The main raw material in the company's fiber glass insulation products is sand, a renewable resource, and 30 percent of its content comes from recycled materials. Owens Corning's foam insulation products are made of 20 percent recycled content. The company's Strataguard roof boards are composed of 95 percent recycled material, while Owens Corning's metals business manufactures all of its metal trip coil out of 95 percent recycled aluminum.

PRODUCTS

The products and services of Owens Corning fall into two separate categories: Building Materials Systems and Composite Solutions. The former accounted for roughly 83 percent of the company's total sales in 2001, with the remainder being generated by Composite Solutions.

Within the company's Building Materials Systems division are two distinct categories of products: glass fiber, foam, and mineral wool insulation and exterior systems for the home, including siding and roofing systems. All of these products are used primarily in the home improvement, new residential construction, manufactured housing, and commercial construction markets. Building Materials Systems products include insulation systems, asphalt products, roofing shingles, windows and patio doors, vinyl siding, and housewrap.

Owens Corning is the world's largest manufacturer of glass fiber materials used in composites, which are made up of two or more component materials and used in a variety of applications to replace traditional materials, such as wood, steel, and aluminum. A typical composite might be made up of a plastic resin and a fiber, usually a glass fiber. The company's Composite Solutions division provides composite materials for use in the manufacture of automotive products, bathtubs and showers, electronics and telecommunications systems.

CORPORATE CITIZENSHIP

Owens Corning makes a concerted effort to enhance and enrich the local communities in which it operates around the world. The company's program of corporate responsibility includes civic and environmental projects, monetary contributions, and the donation of materials, expertise, and volunteer time. Each year the company gives more than $1 million in monetary gifts, as well as product donations, volunteer time, and expertise. The company's program is an extension of its core value of Individual Dignity, which calls for respect for every individual, regardless of race, color, creed, religion, gender, or national origin.

GLOBAL PRESENCE

Owens Corning markets its products around the world. The company operates foreign sales subsidiaries in a number of countries, including Argentina, Botswana, Canada, China, Germany, India, Mexico, Netherlands, Saudi Arabia, Spain, Thailand, and Turkey.

EMPLOYMENT

As of December 31, 2001, Owens Corning had a workforce of 19,000 people worldwide. The company maintains operations in the United States and more than 30 other countries on six continents.

One of the company's three Core Values is Individual Dignity, which stresses the importance of respect for every individual, regardless of race, creed, color, religion, gender, or national origin. Owens Corning's pursuit of this value has made the company a preferred place of employment worldwide. The company is always on the lookout for bright, highly motivated individuals and offers career opportunities in a number of fields, including administrative support, communications, customer service, engineering, finance, health and safety, human resources, information systems, management, marketing and sales, production management, research and development, supply chain management, and transportation/logistics.

SOURCES OF INFORMATION

Bibliography

"business summary: owens corning." multex investor, 2002. available at http://www.marketguide.com.

macintosh, julie. "asbestos worries snare wider range of u.s.firms." reuters business report, 12 december 2001.

"owens corning." gale business resources, 2002. available at http://galenet.galegroup.com/servlet/gbr.

"owens corning." hoover's online, 2002. available at http://www.hoovers.com.

"owens corning 1st-quarter net loss narrows." reuters business report, 23 april 2002.

owens corning 2001 annual report. toledo, oh: owens corning, 2002.

owens corning home page, 2002. available at http://www.owenscorning.com.

seewer, john. "owens corning names new ceo." ap online, 18 december 2001.

For an annual report:

write: owens corning world headquarters, investor relations, 2-e, 1 owens corning parkway, toledo, oh 43659

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. owens corning's primary sics are:

2821 plastics materials and resins

2891 adhesives and sealants

2899 chemical preparations, nec

2951 asphalt paving mixtures and blocks

2952 asphalt felts and coatings

3089 plastics products, nec

3229 pressed and blown glass, nec

3231 products of purchased glass

3272 concrete products, nec

3296 mineral wool

3442 metal doors, sash and trim

also investigate companies by their north american industry classification system codes, also known as naics codes. owens corning's primary naics codes are:

313210 broadwoven fabric mills

325211 plastics material and resin manufacturing

327212 other pressed and blown glass and glassware manufacturing

327993 mineral wool manufacturing