Owens Corning Inc. expects sales to hit US$ 8 billion by 2004, up from US$ 5 billion in 1998, Chairman and Chief Executive Glen Hiner said. He also predicts annual earnings growth of at least 10% in t…
Owens Corning Inc. expects sales to hit US$ 8 billion by 2004, up from US$ 5 billion in 1998, Chairman and Chief Executive Glen Hiner said. He also predicts annual earnings growth of at least 10% in that period. The company“s stock price, however, continues to languish as market watchers fret over how much money the company may be forced to dole out to settle its long-standing asbestos litigation. The explosive asbestos issue has been clouding the company“s financial picture for years. But Hiner insists there is light at the end of the asbestos tunnel. Through the company“s National Settlement Program, “we have made our future predictable,” Hiner said. Under this program, the Toledo, Ohio, building-products company has set up reserves of US$ 2.6 billion to settle claims against Owens Corning made by people suffering from asbestos-related illnesses, said Hiner. Another US$ 1.9 billion in insurance funds, controlled by a trust, exists to resolve similar claims against the company“s Fibreboard unit. About US$ 1.4 billion of the US$ 2.6 billion reserve is expected to settle the company“s backlog of 235,000 cases, according to Hiner. The rest will be used to settle future cases through the company“s National Settlement Program, he added. Having watched the company continually revise its reserves and projections on the asbestos issue during the past number of years, some analysts remain skeptical that the issue has been settled, or that its future is predictable. According to the company, Hiner dismissed this concern. Contractual agreements made with plaintiffs“ attorneys have made the company“s future liability “predictable” on a cash-flow and payment basis, he said. Under the program, he said, the company“s future payments will be limited to US$ 150 million a year beginning in 2001. That cap doesn“t apply to suits filed outside the program. The Florida Supreme Court, for example, recently upheld a US$ 31 million award against the company on behalf of a man who died of a rare form of lung cancer that he contracted because of exposure to an asbestos-contaminated insulation sold by the company. Hiner could not state definitively that the company“s reserves wouldn“t have to be increased again. Still, he noted that about 95% of the backlog has opted into the program, and he believes future claimants will follow. “The claimants get their money immediately” rather than having to wait years for a payment, Hiner said. “The predictability of Owens Corning“s future is very sound. Will it cost more money? Well, it might. But it“s going to be over a very long period of time and it“s going to be a certain percentage of our cash flow.” Once the backlog is paid off by the end of 2000, Hiner predicts the company will reap the benefits of its growth program and pursue acquisitions again. Until then, the company has put its acquisition agenda on hold and is taking jointventure partners in some of its activities. Hiner said he is comfortable with analysts“ financial earnings projections of US$ 1.52 a share for the third quarter, up from US$ 1.37, excluding items, a year earlier, and US$ 4.79 a share in full-year 1999 and US$ 5.31 a share in 2000, up from US$ 3.59 a share, excluding items, in 1998.