Owens Corning boosts asbestos reserve fund, posts 1Q loss

Building materials manufacturer Owens Corning said 4 May 2005 that it had increased its reserve for asbestos liabilities to the amount a court estimated it will ultimately have to pay claimants for he…

Building materials manufacturer Owens Corning said 4 May 2005 that it had increased its reserve for asbestos liabilities to the amount a court estimated it will ultimately have to pay claimants for health-related asbestos damages. The USD 4.34 billion raise in the non-cash asbestos liability reserve for the quarter ended 31 March 2005 which included around USD 907 million set aside by the company“s Fibreboard unit, produced a USD 4.2 billion loss for the quarter, compared with net income of USD 5 million for the same period 2004. Owens Corning General Counsel Stephen Krull said the increase in the asbestos liability reserve brought the Ohio company“s balance sheet in line with a 31 March 2005 ruling from US District Judge John Fullam, who estimated Owens Corning would be subject to USD 7 billion in asbestos claims. Ultimately, Owens Corning expects to pay off financial creditors and asbestos claimants largely with equity in a reorganized company distributed through a Chapter 11 plan. “We are really pleased to have received an estimation of our asbestos liability in the 1Q,” Krull said Wednesday. “The reserve we have taken simply reflects the liability on our balance sheet and doesn“t impact our liquidity or our ability to run and grow our business.” Owens Corning reported stronger liquidity, ending the quarter with USD 930 million in cash, up from USD 821 million for the first three months of 2004. Net sales for the 1Q of 2005 were USD 1.4 billion, up from sales of USD 1.2 billion for the 1Q of 2004, in a booming market for building materials. Owens Corning controller Roy Dean said the company expects the new building and renovation market to remain strong through the end of 2005. Bankruptcy-related costs were USD 36 million for the 1Q of 2005, including USD 27 million in professional fees. Owens Corning“s asbestos reserve figure had been unchanged since 2002. Until the recent change, the company booked a USD 3.56 billion asbestos reserve, at the low end of the range estimated by its expert. Reserves for Owens Corning“s Fibreboard unit were also boosted in the 1Q, rising to USD 3.2 billion from USD 2.3 billion. While the judge did not estimate Fibreboard claims, Owens Corning said it applied the reasoning in his ruling on the parent company“s claims and decided to increase the Fibreboard number accordingly. The company said on 4 May 2005 that for the 1Q 2005 ended 31 March it swung to a loss of USD 4.24 billion from net income of USD 5.0 million in the year-ago quarter. Sales increased to USD 1.40 billion from USD 1.21 billion. While a precise figure for asbestos liability has now emerged, a decision is still awaited from a federal appeals court in Philadelphia on whether Owens Corning should be treated as one company or as many for the purposes of its Chapter 11 plan.