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Stock Soars as Company Takes $800 Million Charge for Asbestos Cases

February 6, 1992

TOLEDO, Ohio (AP) _ Owens-Corning Fiberglas Corp. stock soared Thursday after the company announced it would set aside $800 million to pay for asbestos personal-injury claims through the year 2000.

The fourth-quarter charge against earnings removed a major uncertainty about the company’s future, sending Owens-Corning stock rising 26 percent in heavy trading on the New York Stock Exchange.

Stock in Owens-Corning, the world’s largest manufacturer of fiberglas, rose $7.62 1/2 to close at $36.50 in consolidated nationwide trading. It was the most actively traded issue on the NYSE, with nearly 4 million shares changing hands.

Several Wall Street analysts raised their rating of Owens-Corning, saying the asbestos charge would allow the company to focus on its strong global fiberglas business and a possible rebound in the housing and auto industries.

″The company is basically putting most of its asbestos uncertainty behind it,″ said Jonathan Goldfarb, an analyst with Merrill Lynch & Co. in New York. ″Previously we were facing just an endless series of large costs.″

Goldfarb said the one-time write-off of the costs of asbestos settlement and litigation means analysts and investors, as well as the company itself, would not have to worry as much about regular quarterly expenses that reduced earnings.

The asbestos charge gave the firm a loss of $529 million, or $12.45 per share, in the quarter, compared with a $33 million loss, or 77 cents a share, a year earlier. Without the charge, Owens-Corning made $3 million as business slumped due partly to the recession.

Quarterly sales sank 9.4 percent to $687 million from $758 million a year earlier.

Owens-Corning is among dozens of former makers of asbestos or asbestos- containing products sued by thousands of former workers who have been made sick or died from inhaling asbestos fibers over decades.

The company said the $800 million estimates its uninsured costs related to asbestos settlements and litigation. Glen Hiner, Owens-Corning’s chairman and chief executive, said the company would adjust the reserve if necessary.

The $800 million is in addition to $1.1 billion the company already has in insurance to pay for current claims and another $150 million in reserves, said Terry Priestap, Owens-Corning corporate finance director.

Owens-Corning said it received 20,700 new asbestos personal injury claims last year. It said the average settlement cost of $9,300 per case was down from $9,600 in 1990.

The company said asbestos claims usually take about seven years to resolve.

For the full year, Owens-Corning lost $742 million, or $17.52 a share, compared with profits of $73 million, or $1.73 a share, in 1990. Sales fell 10 percent to $2.8 billion from $3.1 billion.

In addition to the asbestos reserve, Owens-Corning said it took a $227 million charge to pay for post-retirement health benefits.

Before the charges, Owens-Corning said it made $22 million for the year.

The company said its performance was hurt by weak markets that required lower prices in the United States, Canada and Europe. Its Brazilian operations suffered because of economic malaise there, the company said.

Sales of contruction products dropped sharply in the quarter and the year, partly due to a decline in housing construction in the United States and Canada. But that market has shown signs of a possible upturn in recent months.

Industrial product sales were flat in the United States for the quarter, but fell for all of 1991. That sector was hurt by weakness in the automotive and pleasure boat industries, Owens-Corning said.

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