-----BEGIN PRIVACY-ENHANCED MESSAGE----Proc-Type: 2001,MIC-CLEAR Originator-Name:
[email protected] Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ICI1D/fTFLzhfbo49CGZlHLLnab8YIeWsYpYUZgcQtI0Tgd+C7KEsGR3+EGEo/x4 y2SzJCgRKwzUJmRuQXZfng== <SEC-DOCUMENT>0000927356-98-000343.txt : 19980323 <SEC-HEADER>0000927356-98-000343.hdr.sgml : 19980323 ACCESSION NUMBER: 0000927356-98-000343 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980319 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: / CENTRAL INDEX KEY: STANDARD INDUSTRIAL CLASSIFICATION: NONMETALLIC MINERAL PRODUCTS [3290] IRS NUMBER: STATE OF INCORPORATION: FISCAL YEAR END: FILING VALUES: FORM TYPE: SEC ACT: SEC FILE NUMBER: FILM NUMBER: BUSINESS ADDRESS: STREET 1: CITY: STATE: ZIP: BUSINESS PHONE: MAIL ADDRESS: STREET 1: CITY: STATE: ZIP: 10-K405 001-08247 98568595 717 17TH ST DENVER CO 80202 3039782000 PO BOX 5108 DENVER CO 80217-5108 0000355473 ABRASIVE ASBESTOS & MISC 840856796 DE 1231 JOHNS MANVILLE CORP /NEW FORMER COMPANY: FORMER CONFORMED NAME: SCHULLER CORP DATE OF NAME CHANGE: 19960409 FORMER COMPANY: FORMER CONFORMED NAME: MANVILLE CORP DATE OF NAME CHANGE: 19920703 </SEC-HEADER> <DOCUMENT> <TYPE>10-K405 <SEQUENCE>1 <DESCRIPTION>FORM 10-K405 <TEXT> <PAGE> - ------------------------------------------------------------------------------ -----------------------------------------------------------------------------SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NO. 1-8247 JOHNS MANVILLE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 84-0856796 (IRS Employer Identification Number) 717 17TH STREET, DENVER, COLORADO (Address of principal executive offices) 80202 (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 978-2000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: <TABLE> <CAPTION> TITLE OF EACH CLASS ------------------NAME OF EACH EXCHANGE ON WHICH REGISTERED --------------------- <S> <C> Common Stock ($.01 par value) New York Stock Exchange, Inc. </TABLE> - -----------------------------------------------------------------------------Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [X] No [_] Based solely on the New York Stock Exchange, Inc. closing price as of March 2, 1998, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $406,794,559. As of March 2, 1998, there were 161,681,345 shares of the registrant's sole class of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The following documents or portions thereof filed with the Securities and Exchange Commission are incorporated herein by reference: The Selected Five-Year Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations, Financial Statements and Selected Quarterly Financial Data contained in the Company's 1997 Annual Report to security holders are incorporated by reference into Parts I, II and IV of this report. The Annual Report to security holders, except for portions thereof that have been specifically incorporated by reference, shall not be deemed filed as part of this Annual Report on Form 10-K. - ------------------------------------------------------------------------------ -----------------------------------------------------------------------------<PAGE> TABLE OF CONTENTS PART I <TABLE> <CAPTION> <C> <S> ITEM 1. BUSINESS...................................................... Introduction and Description of the Business.................. Insulation.................................................... Roofing Systems............................................... Engineered Products........................................... Materials..................................................... Research and Development...................................... Patents....................................................... PAGE ---<C> 1 1 1 3 3 5 5 5 Labor Relations............................................... Seasonality................................................... Environmental Regulations..................................... Occupational Health and Safety Aspects of the Company's Products..................................................... ITEM 2. PROPERTIES.................................................... Headquarters.................................................. Manufacturing and Development Facilities...................... ITEM 3. LEGAL PROCEEDINGS............................................. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... Executive Officers of the Company............................. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...................................................... ITEM 6. SELECTED FINANCIAL DATA....................................... ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................... ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..................................... PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ ITEM 11. EXECUTIVE COMPENSATION........................................ ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................... ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..................................................... </TABLE> 5 5 5 6 9 9 9 10 10 10 11 11 11 12 12 12 12 12 12 12 The "Company" or "Johns Manville" when used in this Form 10-K refers to Johns Manville Corporation, incorporated in the State of Delaware in 1981, including, where applicable, its consolidated subsidiaries. i <PAGE> PART I ITEM 1. BUSINESS INTRODUCTION AND DESCRIPTION OF THE BUSINESS Johns Manville is a leading manufacturer of insulation and building products, with 1997 net sales of approximately $1.65 billion. Johns Manville manufactures and markets products for building and equipment insulation, commercial and industrial roofing systems, high-efficiency filtration media, and fibers and nonwoven mats used as reinforcements in building and industrial applications. Johns Manville operates manufacturing facilities in North America, Europe and China and is comprised of three principal business segments, as set forth below. Johns Manville Corporation was incorporated in Delaware in 1981 to continue INSULATION Johns Manville's Insulation segment. insulation.8 million. attics and floors in commercial and residential buildings. ultra-fine fibers for clean room air filters and battery separators. automobiles. <TABLE> <CAPTION> PRODUCT GROUPS BY BUSINESS SEGMENT(1) ------------------------------------<C> INSULATION Building PRODUCTS AND APPLICATIONS ------------------------<S> Fiber glass wool insulation for walls. see Note 26 to the Company's Consolidated Financial Statements contained in the Company's Annual Report to security holders which is incorporated by reference into this report. including membranes.businesses begun by its predecessors in 1858. with 1997 net sales of $697. liquid filtration cartridge and media. woven fiber glass fabrics. accessories and related guarantees Continuous filament fiber glass and nonwoven fiber glass mats for roofing. Johns Manville's building insulation business manufactures a complete line of fiber glass wool insulation products for walls. wall covering and plastic products Air filtration media for buildings. or 42 percent of Johns Manville's total net sales (before elimination of intersegment sales). is comprised of the building. ventilating and air conditioning ("HVAC"). Johns Manville's building . attics and floors in commercial and residential buildings. marine vessels.-------(1) For additional business segment information and geographical data. residential foam sheathing Pipe and duct insulation and fireproof board for use in various commercial and industrial applications Thermal and acoustic insulation for aircraft. heating. <PAGE> Building Products. flooring and specialty substrates and reinforcement of plastics and gypsum products. and other equipment Commercial and industrial roofing systems. commercial and industrial and OEM product groups. and industrial oil sorbent products Commercial and Industrial OEM ROOFING SYSTEMS ENGINEERED PRODUCTS Mats and Fibers Filtration </TABLE> . Johns Manville's commercial and industrial insulation business manufactures pipe and duct insulation for use in commercial buildings. CSG and Knauf Fiberglass USA. the Company acquired a plant located in Mesa County. In addition. Johns Manville competes in the commercial and industrial insulation business primarily on the basis of price. Other important influences are demand in the repair/remodel market and rates of commercial construction of warehouses and light manufacturing facilities. As part of this acquisition. Such products include duct insulation with enhanced thermal and acoustical properties with an antimicrobial agent for improved air filtration. subsidiary of Compagnie de Saint-Gobain ("CSG"). Johns Manville offers EnviroSystem(TM).insulation products include fiber glass batts. the U. a group of products sold together aimed at indoor environmental quality improvement. Johns Manville manufactures building insulation products at nine manufacturing facilities in North America to serve regional population and construction centers. In January 1998. rolls. Commercial and industrial insulation products reach the market through Johns Manville's network of distributors. Johns Manville competes in the building insulation business primarily on the basis of price. Markets and Distribution. Building insulation products typically reach end users through contractors. breadth of product line and strength of fabricator and distributor networks. Commercial and Industrial Products. Markets and Distribution. retailers and distributors. Competition. Demand for Johns Manville's commercial and industrial insulation products is driven primarily by commercial construction activity and by demand in the remodel/retrofit market. The Mesa plant manufactures calcium silicate pipe and block insulation and Super Firetemp(TM) fireproof board. In response to industry attention to indoor environmental quality. . a subsidiary of OC. which keeps most shipping distances within a 500-mile radius. Demand for Johns Manville's building insulation products is driven primarily by North American housing starts. blowing wool and related products. Johns Manville's marketing efforts are normally directed toward insulation contractors and national retailers. contractors and fabricators. factories. Johns Manville's commercial and industrial insulation business primarily competes with OC. Johns Manville also produces polyisocyanurate foam sheathing for use in residential structures. Johns Manville's building insulation business competes primarily with Owens Corning ("OC") and CertainTeed Corporation. Johns Manville manufactures commercial and industrial insulation products at 13 facilities in North America. Competition. Johns Manville acquired the Pabco(R) trademarks and tradenames associated with the business. refineries and other industrial applications. Colorado from the Pabco Division of Fibreboard Corporation. packaging/merchandising and service. This regional structure. implementation of various federal and state energy conservation codes serves to increase the amount of insulation per unit built.S. improves Johns Manville's customer service and reduces its total transportation costs. or 30 percent of the Company's total net sales (before elimination of intersegment sales). Markets and Distribution. ROOFING SYSTEMS In 1997. Mexico and Verona. Inc. marine vessels. While sales of roofing systems are affected by levels of new construction and general economic conditions. Approximately 95 percent of Johns Manville's roofing systems sales during 1997 were sold through wholesale . OEM insulation products generally require extremely fine and uniform fibers to provide the required insulating properties. architects and roofing consultants who generally recommend premium roofing systems. sell to original equipment manufacturers. marine vessels and automobiles and by commercial construction (for HVAC and other insulations). automobiles. In September 1997. Markets and Distribution. HVAC and other equipment. the Company added to this business with the acquisition of the assets of Seal-Dry/USA. Demand for Johns Manville's roofing systems products is driven primarily by commercial and industrial reroofing needs. with the balance attributable to new construction. Competition.5 million. Demand for Johns Manville's OEM insulation products is driven primarily by the production of aircraft. thus mitigating the adverse effect of recessionary periods.OEM Products. Italy. As an alternative to fiber glass insulation. Johns Manville's OEM insulation business produces thermal and acoustic insulation for aircraft. Products. accessories and roofing system guarantees. Johns Manville is a full-line supplier of roofing systems and components for low-slope commercial and industrial roofs. Johns Manville estimates that approximately 75 percent of its roofing material sales during 1997 were attributable to reroofing. Arkansas. Johns Manville typically sells OEM insulation products to distributors and fabricators who. and therefore command higher prices than other fiber glass products. the Company entered the thermoplastic roofing membrane business with its acquisition of the roofing business of HPG International.. Johns Manville's marketing focus is directed to roofing contractors and distributors. Inc. 2 <PAGE> Johns Manville manufactures OEM insulation products at seven facilities in the United States. the Company manufactures and sells polyimide foam insulation products for applications in aircraft and on naval vessels. sales attributable to reroofing are less sensitive to these factors. insulations. Johns Manville's commercial roofing systems business operates 17 manufacturing facilities in the United States and has two additional plants located in Altamira. including a wide range of membranes. In January 1998. Johns Manville's OEM insulation business competes with a variety of large and small companies in its various niche markets. including its plant located in Little Rock. Johns Manville competes in the OEM insulation business primarily on the basis of quality and product customization. building owners. in turn. Johns Manville's Roofing Systems segment had net sales of $510. Johns Manville manufactures fiber glass mat at a plant located in the City of Changzhou. Johns Manville has a 60 percent interest in the joint venture. Johns Manville's primary competitors in the worldwide mats and fibers business are OC. the remainder was sold through roofing contractors. Tamko Asphalt Products Inc. operates three plants in Germany and one plant in Poland. or 28 percent of Johns Manville's total net sales (before elimination of intersegment sales). Competition. the Company entered the woven fiber glass fabrics business as a manufacturer of fiber glass wall coverings which are used primarily in commercial and industrial buildings. Johns Manville competes in the commercial and industrial roofing business primarily on the basis of breadth of product line. guarantees. and various smaller regional companies. which created the market for fiber glass wall coverings in Europe. Johns Manville's mats and fibers business manufactures continuous filament fiber glass-based products that are used in a variety of applications. CSG.S. Johns Manville's Mitex subsidiaries operate two manufacturing facilities in Sweden and one in the United Kingdom. Sarnafil Inc.distributors. Competition. as well as by U. flooring and specialty applications. Johns Manville's U.. Competitors include several large national participants. Johns Manville's German subsidiary. Jiangsu Province. China. . specifications. Schuller GmbH was the pioneer in wet fiber glass mat technology and also developed the unique sliver fiber glass process. Carlisle Companies Incorporated... Johns Manville also sells fiber glass products (chopped fiber and rovings) for reinforcing plastics and gypsum products and for use in fiber glass wall coverings. residential construction and reroofing markets. Through a joint venture with China National New Building Materials Corporation and Tianma Corporation. Schuller GmbH. Markets and Distribution. Johns Manville is a worldwide supplier of nonwoven fiber glass mat products.S. which are used as substrates in roofing. The Engineered Products segment is comprised of the mats and fibers and filtration product groups. Inc. systems reliability and price. Johns Manville competes in the mats and fibers business primarily on the basis of quality and service. ENGINEERED PRODUCTS Johns Manville's Engineered Products segment had 1997 net sales of $476 million. Duro-Last. GAF Corporation. The commercial and industrial roofing business is a highly fragmented market. mats and fibers business provides fiber glass mat to Johns Manville's commercial roofing systems business for its fiber glass-based roofing products. Mats and Fibers Products. PPG Industries and Elk Corporation. Through its May 1997 acquisition of the Mitex group of companies. such as Firestone Building Products. 3 <PAGE> The mats and fibers business operates three manufacturing plants and one support facility in the United States. Demand for Johns Manville's mats and fibers products is driven primarily by the worldwide commercial construction and retrofit markets. Mats and fibers products are sold directly to roofing and flooring manufacturers and to Johns Manville's Mitex subsidiaries as well as to other European textile weavers. lime. Markets and Distribution. and therefore command higher prices than other fiber glass products. Johns Manville competes in the filtration business primarily on the basis of quality and product customization. Competition. ureaformaldehyde. the construction of clean rooms requiring dust-free environments which are primarily used by the pharmaceutical and semiconductor industries (ultra-fine fibers). Johns Manville expanded its synthetic manufacturing capabilities and its product lines by acquiring the assets of Ergon Nonwovens. Phenol-formaldehyde. For example. Johns Manville's products contain materials other than fiber glass to satisfy the broader needs of its customers. The principal raw materials used to manufacture fiber glass products include sand. urea extended phenol-formaldehyde. borate minerals and aluminous materials. Johns Manville also sells finished cartridges for use in high-efficiency liquid filtration applications and ultra-fine fibers to specialty filtration paper manufacturers. The Company also manufactures liquid filtration cartridges and media for use in commercial and industrial applications. All of these raw materials are readily available in sufficient quantities from various sources for Johns Manville to maintain and expand its current production levels. As with OEM insulation. soda ash. melamine-formaldehyde and other resins are also used to bind glass fibers.Filtration Products. Increasing public attention to environmental issues also stimulates demand for filtration media and industrial oil sorbent products. paints. Johns Manville produces a full line of synthetic meltblown nonwoven products used in air and liquid filtration applications. Inc. In January 1997. Johns Manville typically sells air filtration media products to producers of air filtration systems for use in commercial buildings. facilities. calcium silicate pipe . Demand for Johns Manville's filtration products is driven primarily by commercial construction and commercial building occupancy (air filtration media). Johns Manville sells its synthetic nonwoven products primarily to distributors and fabricators. inks. resins and oils in industrial manufacturing operations (liquid filtration media). and the need for high-efficiency filtration of water. Johns Manville's filtration businesses produce air filtration media for commercial and industrial buildings for HVAC and other equipment and ultra-fine fibers for clean room air filters. 4 <PAGE> MATERIALS Fiber glass is the basic material in a significant number of Johns Manville's products.S. Johns Manville's filtration business competes with a variety of large and small companies in its various niche markets. chemicals. The Company sells liquid filtration media products to producers of liquid filtration systems and products for use in commercial and industrial manufacturing operations. The Company manufactures filtration products at seven of Johns Manville's U. filtration products generally require extremely fine and uniform fibers to provide the required filtration properties. personal care and in industrial oil sorbent products. Germany. Wertheim.7 million and $30 million. apparel and industrial oil sorbents. The most significant of the federal laws are the Clean Air Act. Sweden. The raw materials used in these various products are readily available in sufficient quantities from various sources for Johns Manville to maintain and expand its current production levels. ENVIRONMENTAL REGULATIONS All of the Company's domestic operations are subject to a variety of federal. Colorado.800 were covered by collective bargaining agreements. land and water and govern the use and disposal of hazardous substances. 1997. and equipment insulation. LABOR RELATIONS At March 2. development and engineering expenses for the years ended December 31. Richmond. Johns Manville manufactures polyimide foam for marine insulation which is used by the United States Navy in shipbuilding. The Company has experienced a long history of good working relationships with its employees and labor unions. 1996 and 1995 were $31. 1998. While the Company regards its patents and licenses as valuable. it does not consider any of its businesses to be materially dependent upon any single patent or license. PATENTS The Company presently owns or controls approximately 650 U. Research. Indiana. respectively. Mesa County. rubber and thermoplastic membranes and polyester substrates. thereby increasing sales and gross profits in those periods. In addition. Commercial roofing systems use perlite insulation board. and foreign patents and patent applications.insulation products and plastic accessories complement Johns Manville's product offerings to commercial/industrial insulation distributors. the Company employed approximately 8. These laws and regulations regulate the discharge of materials into the air. the Toxic Substances Control Act. Waterville. of whom approximately 3. SEASONALITY The Company's quarterly results of operations are moderately seasonal due to increases in construction activity that typically occur in the second and third quarters of the calendar year.2 million. The Company also holds negotiated licenses under various patents owned by others. the Company uses several advanced polymers in roll goods for roofing substrates. state and local environmental laws and regulations. and Helsingborg.300 persons worldwide. the Resource Conservation and Recovery Act ("RCRA") and the Comprehensive Environmental Response. The Company manufactures polyisocyanurate foam roof insulation and residential sheathing using liquid chemicals comprised primarily of polyol and polyisocyanate. Ohio. RESEARCH AND DEVELOPMENT The Company carries out research and development activities at its facilities in Littleton. $32. substrates.S. the Clean Water Act. These environmental regulatory programs are administered by the federal Environmental 5 <PAGE> . Colorado. Johns Manville has broadened its product lines into certain polymer fiber applications for filtration. Compensation and Liability Act of 1980 ("CERCLA"). In 1987. refractory ceramic fiber ("RCF") and mineral wools classified by the International Agency for Research on Cancer ("IARC") as possible human carcinogens. the IARC evaluated the carcinogenicity of MMVF. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and Note 9 to the Company's Consolidated Financial Statements. RCF and mineral wool were classified as "possibly carcinogenic to humans. states and local jurisdictions have adopted equivalent or more stringent environmental laws and regulations. The Company recently acquired certain assets of the Pabco(R) business and its associated products. The industrial sands used at the Company's facilities contain only a small percentage of crystalline silica which is small enough to be inhaled. that contain certain chemicals or substances. . each incorporated by reference herein. and has in the past manufactured. In addition. a continuing process of workplace and product evaluation and an extensive communications program. In 1996.Protection Agency ("EPA"). Although crystalline silica is a contaminant in one of the raw materials used in Johns Manville's calcium silicate insulation products. the Company reviews work practices and requires mandatory use of respiratory protection. the silica content constitutes less than one percent of the finished product. processes and sells products. National and international scientific authorities are involved on an ongoing basis in the assessment of potential human health hazards. Pabco(R) has several other brands of calcium silicate products that have not been subjected to such testing and are sold under a special cancer hazard warning label in accordance with applicable law. Air concentrations resulting from the expected uses of these products can be properly characterized as "trace or minute" amounts of exposure. The results of these evaluations are reported regularly to employees and customers as part of the Company's communications program. marble forming and roofing plants. The Company manufactures. customers and the general public. Industrial hygiene monitoring of Johns Manville employees' exposure to silica has been performed since the early 1970s and have shown a minimal risk of overexposure. Respirable crystalline silica exposures have been under both "normal" and "foreseeable emergency conditions" for the Company's pipe insulation products (Thermal12(R) and Pabco(R) Super Caltemp Gold). Fiber glass wool. and to protect the health and safety of the Company's employees. The Company has developed and uses hazard communication materials reflecting the potential cancer hazard of crystalline silica that address the proper handling of these products by employees and customers." The IARC concluded that continuous glass filament (chopped strand) was "not classifiable as to human carcinogenicity. which are enforced through various state and local administrative agencies. OCCUPATIONAL HEALTH AND SAFETY ASPECTS OF THE COMPANY'S PRODUCTS The Company has an ongoing product stewardship program to facilitate compliance with existing laws. In cases where overexposures are likely to occur." The IARC classification of crystalline silica was based upon animal and human studies. or have enacted their own parallel environmental programs. Asphalt used by the Company's roofing operations presently is being evaluated by the National Institute of Occupational Safety and Health to determine its carcinogenic potential. processed and sold products. This program is implemented through extensive research. the IARC classified crystalline silica as "known carcinogenic to humans." Crystalline silica exists in trace amounts in the Company's calcium silicate insulation products and is a major constituent of the diatomaceous earth products produced by a former subsidiary and in industrial sands used in the Company's direct melt operations. including man-made vitreous fibers ("MMVF") such as fiber glass. The U. In 1990. excess in respiratory cancer deaths of fiber glass manufacturing workers compared with local mortality rates. RCF products have been labeled as a possible cause of cancer since 1985.S. epidemiological study reviewed by the IARC in 1987 noted a small. the U. Department of Health and Human Services ("HHS") announced its decision to act on the recommendation of the National Toxicology Program ("NTP") and list fiber glass wool and RCF in the Seventh Annual Report on Carcinogens ("ARC") as substances which "may be reasonably anticipated" to be a carcinogen. Data contained in the latest report of an update of the large European epidemiological study show mortality findings for fiber glass wool similar to those from the large U. the IARC reviewed epidemiological studies involving occupational exposure to fiber glass wool. The IARC concluded that evidence of cancer in humans from such epidemiological studies was "inadequate" to permit a conclusion regarding the presence or absence of a causal relationship with fiber glass exposure. Subsequently. the authors. who believe that animal inhalation studies are more appropriate than animal implantation studies to assess the potential risk to humans. The IARC also concluded. as in the IARC assessment. investigation is continuing to determine if the small excess in lung cancer was associated with lifestyle factors such as smoking or other workplace exposures. However. In 1987. concluded that the evidence of an association between exposure to fiber glass wool and respiratory cancer was actually "somewhat weaker" than that at the time of the IARC assessment. which can be formed after use of RCF products at high temperatures.S. The NTP listing criteria provide that a substance must be listed if there are two or more animal studies showing carcinogenic effect.S. regardless of route of exposure and notwithstanding any other evidence. 1994. As a result. however. the NTP concluded that the results of the experimental animal . but statistically significant. including claims by transferred employees arising out of pre-closing occupational exposures incurred in the course of their employment with the Company or its predecessors. RCF product labels were revised to warn of the additional potential hazard associated with exposure to crystalline silica. after looking at the cumulative evidence from the relevant factors that might support a causal relationship. The relevance of such implantation studies to the evaluation of risk to humans has been questioned by many scientists. that the evidence from animal studies was "sufficient" to establish a causal relationship. That finding was based entirely on positive laboratory results achieved through implantation or other artificial techniques of exposing animals to fibrous materials. the authors of the large U. The next update is expected in late 1998 or in 1999. 6 <PAGE> For purposes of occupational exposure. The Company believes that it is in substantial compliance with all applicable workplace exposure regulations and product "right-to-know" labeling requirements with respect to MMVF.S. The language on these labels not only advises of the possible health hazards. and a large European study of fiber glass manufacturing workers that had reported modest but statistically significant increases of lung cancer deaths compared to national mortality rates. but includes proper handling and protective measures to be followed. the Occupational Safety and Health Administration regulates all MMVF as nuisance dusts. On June 24. including a large U. study.The Company sold most of its RCF operations in 1990 and agreed to indemnify the purchaser for pre-closing liabilities.S. consistent with the previous inhalation study of this fiber. Labels and other hazard communication materials reflecting the potential cancer risk have been developed and are used by the Company to address the proper handling of fiber glass wool products by employees and customers. Since 1988. of histologic type(s). HHS explained that the NTP "reasonably anticipated" category for fiber glass essentially corresponds to the IARC 1987 "possibly carcinogenic" classification. the Institute of Occupation Medicine ("IOM") in Edinburgh. in conjunction with other companies in the industry. the Company has funded. produced any adverse respiratory results. This case-control morbidity study evaluated chest xrays of workers at two RCF manufacturing plants owned by Carborundum Corporation. Johns Manville produced small quantities until 1994 at one manufacturing location. Some of the animals that inhaled this fiber developed lung fibrosis and tumors. Available epidemiologic studies do not confirm an increased risk of cancer in exposed humans. under certain circumstances. E glass microfiber is different than the large diameter E glass continuous filaments that Johns Manville manufactures in its mats and fibers business." ACGIH defines an A3--Animal Carcinogen as follows: "The agent is carcinogenic in experimental animals at a relatively high dose. for personal injury claims arising out of exposure to the Company's fiber glass wool products. The building insulation wool fibers have not. Available evidence suggests that the agent is not likely to cause cancer in humans except under uncommon or unlikely routes or levels of exposure. E glass continuous filaments are too thick to be inhaled into the deep lung and are not considered to be respirable. several epidemiological and chronic animal inhalation studies to assess the cancer-causing potential of MMVF. at site(s). Scotland released preliminary results from a chronic inhalation study of E glass microfiber using rats. In the animals exposed to the special application glass fiber. As with previous research involving exposure of rats to glass fibers." By contrast. an exposure-related increase in pleural plaques was observed. the ACGIH did . and a single mesothelioma was found in one animal. In August 1995. The findings of the IOM study have also been reported to the EPA and the Company has notified its employees and former customers. Although no significant increase in lung fibrosis was seen. E glass microfiber is no longer manufactured in the United States. These findings have been reported to the EPA under the Toxic Substances Control Act. this study also was a two year chronic inhalation study which was completed in 1997. and the Company has notified its employees and customers. 7 <PAGE> In 1997. In 1997 the American Conference of Governmental Industrial Hygienists ("ACGIH") classified all forms of glass fibers as an "A3--Animal Carcinogen. which did not progress. there was continued evidence of fibrosis. by route(s) of administration. however. In addition. the industry expanded the animal research it had begun in 1988 to include exposure of hamsters to a building insulation/wool fiber and a special application glass fiber used in some filtration and a few thermal high performance applications. The results of an industry supported epidemiological study of RCF workers was published in 1996. or by mechanism(s) that are not considered relevant to worker exposure.implantation studies provided sufficient evidence to support the listing. The results of the study found no lung disease (no fibrosis nor cancer) in the animals exposed to the building insulation/wool fiber. the Company has agreed to indemnify certain purchasers. .. Arizona... The Company's analysis of available data and it expectations concerning human health hazards associated with its products are subject to risks and uncertainties... The foregoing statement constitutes a "forward-looking statement" under federal securities laws.. Rockdale. Washington and Altamira............. Canada...................... Lakewood. Jacksonville................. Because domestic and international regulatory and scientific authorities are involved on an ongoing basis in the assessment of potential human health hazards..............000 square feet of office space at Johns Manville Plaza in downtown Denver..... PROPERTIES HEADQUARTERS The Company's headquarters are located in Denver. Mexico facilities are leased..not apply its definition of an "A1--Confirmed Human Carcinogen" to glass fibers...... Tucson. or convincing clinical evidence in....... Winder......... Florida......... <TABLE> <CAPTION> LOCATION -------<S> UNITED STATES AND CANADA Innisfail............ MANUFACTURING AND DEVELOPMENT FACILITIES The following table sets forth certain information with respect to the Company's major manufacturing and development plants and buildings........................... Colorado. South Gate.... or any action taken by federal and state regulatory agencies will have a material adverse effect on the Company................. The Company leases approximately 150.... Macon..... California...... Waukegan.... Little Rock..... the Company does not believe that the IARC classification. have been well maintained and are in sound operating condition and regular use. Lakewood....... Mesa County............ California.......... Colorado..... Illinois..." While there is some disagreement within the scientific and medical community regarding the interpretation of the studies........... Corona. Colorado........... Pittsburg.... California.... The ACGIH definition of an "A1--Confirmed Human Carcinogen" is: "The agent is carcinogenic to humans based on the weight of evidence from epidemiologic studies of.... New Jersey........ Illinois... Kansas City.. All of the buildings are adequate and suitable for the business of the Company...... Kent...... exposed humans. California. The South Gate...... Colorado..... Arkansas...... California........ Georgia.. BUSINESS SEGMENT ---------------<C> Insulation Insulation and Engineered Products Roofing Systems Insulation Roofing Systems Roofing Systems Insulation Insulation Insulation and Engineered Products Insulation Roofing Systems and Insulation Roofing Systems Insulation Roofing Systems Insulation and Roofing Systems .... Colorado... Willows. and there can be no assurance that future actions taken by such authorities or other developments relating to the Company's liability for its products will not have an adverse effect on the Company.... based upon its analysis to date. Kansas.......... 8 <PAGE> ITEM 2.... Alberta................ Georgia........ the listing in the ARC.. Edison... Littleton...... ......... see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Contingent Product Liability and--Environmental Contingencies.. Edison. Richmond................... Lewiston. Kansas............. Oklahoma. West Virginia..... Italy..........." ITEM 4.............................. China. New Jersey............Bremen...... Germany......................... Indiana........................... Parkersburg. Cleburne.. Richmond...... Defiance.............................. St........... Kent....... Kansas City....... Steinach................................. Mississippi.............................. Edinburg............. accordingly.......................... Sweden............ Altamira......................................... England... Poland.. Richland.... Texas.... Virginia........ Indiana....... Helens. Mississippi...... Germany.................... Ohio............... Saco........... New York............. Stromsund....... Maine..... </TABLE> ITEM 3..... adequate provision has been made for losses which may result from these actions and......... </TABLE> 9 <PAGE> Roofing Systems and Insulation Insulation Roofing Systems Insulation Roofing Systems Roofing Systems and Insulation Roofing Systems Engineered Products Insulation Insulation Roofing Systems Insulation and Engineered Products Engineered Products Roofing Systems Roofing Systems and Insulation Engineered Products Roofing Systems Insulation and Engineered Products Roofing Systems Insulation Roofing Systems and Insulation Insulation and Engineered Products <TABLE> <CAPTION> LOCATION -------<S> INTERNATIONAL Changzhou.. Kansas.................. Ohio...... Washington............ McPherson.. Jiangsu....... Pennsylvania......... Germany.......... Oklahoma City..................... Plattsburg.. Thuringen.......... Tennessee..... LEGAL PROCEEDINGS BUSINESS SEGMENT ---------------<C> Engineered Products Engineered Products Engineered Products Engineered Products Engineered Products Roofing Systems Roofing Systems Engineered Products Engineered Products Engineered Products The Company is involved in various legal actions occurring in the normal course of its business................. Bavaria................. Baden-Wuerttemberg..................... Baytown.. Karlstein... Verona............... Natchez... Helsingborg........... Lubliniec................. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of 1997........... In the opinion of the Company's management............................................................................. Maine.. For additional information concerning certain of these proceedings.............. Texas........ there were no matters submitted to a vote ........... Wertheim. New Jersey..... Waterville.. Mexico...... the outcome of these proceedings is not expected to have a material adverse effect on the financial condition of Johns Manville................. Sweden......... Hazelton................. Virginia....... Etowah.................. Penbryn................ . Caltrider. prior to his joining the Company. Inc.----------------------<S> <C> <C> Charles L. 1996... ages and offices of the Chief Executive Officer and other executive officers of the Company are listed below.. 47 June 1997 Senior Vice President.. Von Wald... Henry.... The Company has scheduled its 1998 Annual Meeting of Stockholders for April 24.... du Pont de Nemours and Company........ Perry. President and Chief Executive Officer Richard B......of security holders. The Common Stock is listed and traded on the New York Stock Exchange.. Colorado. For at least the past five years.... A two-year history of high and low sale prices for the Common Stock based on the sales transactions reported by the New York Stock Exchange. Messrs.. 51 December 1997 Senior Vice President and Chief Financial Officer Harvey L.......... Engineered Products Group Thomas L......... Inc.. On March 28. the Company's Board of Directors declared a special cash dividend of $6. EXECUTIVE OFFICERS OF THE COMPANY The names.......... Jr. 43 1996 Senior Vice President. Each of the executive officers holds office until the Board of Directors meeting following the Annual Meeting of Stockholders unless previously removed by the Board of Directors. Von Wald and Perry have been or were officers or executive officers of the Company or its subsidiaries during the past five years....... 1996...... Between 1993 and the time he joined the Company....I...... the Company's Board of Directors approved the payment of a NAME AND TITLE -------------- . Inc... Murphy............ <TABLE> <CAPTION> AGE EXECUTIVE OFFICER SINCE --... Caltrider served as President and Chief Executive Officer of Gundle Environmental Systems... 1996. Mr...... Between 1993 and the time he joined the Company.... Insulation Group </TABLE> 10 <PAGE> PART II ITEM 5.... Murphy served as Chief Financial Officer of Gould Pumps.. 1998 in Denver... 1998... 55 1989 Executive Vice President. (symbol JM).. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company had 9...... Mr....00 per share on the Common Stock to be paid on April 12...923 common stockholders of record at March 2. 56 1996 Chairman of the Board.. 1996 to stockholders of record at the close of business on April 8... .. General Counsel and Secretary John P.... On July 31.. Henry.... Mr. Henry served in various executive positions with E...... is provided below... Inc.. Caltrider and Murphy have been executive officers of the Company from the respective dates indicated below.. Messrs.. 1997..... FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information with respect to this item is incorporated by reference to the Financial Statements and Selected Quarterly Financial Data in the Company's 1997 Annual Report to security holders included in Exhibit 13 to this report.... ITEM 9. 1997 and December 5.... 1997 for the third and fourth quarters of 1997......... SELECTED FINANCIAL DATA Information with respect to this item is incorporated by reference to Selected Five-Year Financial Data in the Company's 1997 Annual Report to security holders included in Exhibit 13 to this report..... the Board of Directors increased the quarterly dividend to $.. Simultaneously with the approval of the dividend policy....... 1997......03 per share to holders of Common Stock to begin in the third quarter of 1996... and accordingly declared dividends of $............. September 30.. 1996. 1997 and January 9......-------<C> <C> 12 5/8 10 1/2 12 3/8 9 3/8 13 7/16 10 15/16 12 9/16 9 1/4 1996 COMMON STOCK ------------HIGH LOW -----.03 per share on the Common Stock for the fourth quarter of 1996 which was paid on January 10... 1997.............. subject to periodic review by the Board of Directors... 11 <PAGE> ITEM 8......-----<C> <C> 14 1/2 12 1/8 15 1/4 7 3/4 10 5/8 8 1/8 10 3/4 8 5/8 FOR THE QUARTERS ENDED ---------------------<S> March 31. which were paid on October 10.. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . 1996..... MARKET PRICES PER SHARE <TABLE> <CAPTION> 1997 COMMON STOCK ---------------HIGH LOW ------......... 1997.. of $.03 per share on the Common Stock for the second quarter of 1997 which was paid on July 11. the Company's Board of Directors declared a dividend of $.. 1997..regular quarterly cash dividend.......... </TABLE> ITEM 6... respectively.... December 31... MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information with respect to this item is incorporated by reference to Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 1997 Annual Report to security holders included in Exhibit 13 to this report.. In August 1997. the Company's Board of Directors declared a dividend of $... On June 6............... On December 6... 1998.. ITEM 7.03 per share on the Common Stock for the first quarter of 1997 which was paid on April 11..04 per share on August 8..04 per share on the Common Stock.... the Company's Board of Directors declared a dividend of $. the Company's Board of Directors declared a dividend of $. June 30....03 per share on the Common Stock to be paid on October 10. On March 7....... any's <C> Second Amended and Restated Plan of REFERENCE --------<C> Refiled as an exhibit to the Comp Reorganization confirmed by the United 1992 Annual Report on Form 10-K f . financial statement schedules and exhibits filed in this report: 1. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to this item is incorporated by reference to the Company's 1998 Proxy Statement. ITEM 12. ITEM 11. The Company is filing herewith Schedule II--Valuation and Qualifying Accounts. 1997: <TABLE> <CAPTION> EXHIBIT ------<S> 2. the information required by this item is incorporated by reference to the Company's 1998 Proxy Statement. ITEM 13.There were no changes in the Company's accountants during the two most recent fiscal years. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item is incorporated by reference to the Company's 1998 Proxy Statement. 12 <PAGE> c. There were also no disagreements with accountants on accounting or financial disclosures during such period. No reports on Form 8-K were filed during the last quarter of 1997. 2. EXECUTIVE COMPENSATION Information with respect to this item is incorporated by reference to the Company's 1998 Proxy Statement. PART IV ITEM 14. b. Financial statements. EXHIBITS. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT In addition to the information set forth under the caption "Executive Officers of the Company" in Part I of this Form 10-K. PART III ITEM 10. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a. Exhibit Index to Johns Manville Corporation Annual Report on Form 10-K for Fiscal Year Ended December 31. Information with respect to financial statements is incorporated by reference to the Financial Statements and Selected Quarterly Financial Data in the Company's 1997 Annual Report to security holders. iled States Bankruptcy Court for the Southern District of New York on December 22. and incorporated Refiled as an exhibit to the Comp 1992 Annual Report on Form 10-K f Filed as an exhibit to the Compan Form 10-Q for the quarter ended M Filed as an exhibit to the Compan 1995 Annual Report on Form 10-K f Filed as an exhibit to the Compan . (d) Amended and Restated Bylaws. (c) Certificate of Amendment to Restated y's Certificate of Incorporation. 1995. and incorporated herein by reference.* iled Refiled as an exhibit to the Comp 1992 Annual Report on Form 10-K f March 30. and incorporated herein by reference. and incorporated herein by reference.(a) Restated Certificate of Incorporation. (b) Supplemental Pension Plan. (c) Annual Executive Incentive any's Compensation Plan. 1993. 1997.(a) Johns Manville International Employees Filed as an exhibit to the Compan y's Retirement Plan. 1997. and incorporated herein by reference. 1993. 1993. 10. (d) Executive Long-Term Disability Plan. and incorporated herein by reference.* any's iled March 30. and incorporated herein by reference. March 30. 1986.* 1994 Annual Report on Form 10-K f iled March 31. and incorporated herein by reference. (b) Certificate of Amendment to Restated y's Certificate of Incorporation. arch 31.* Refiled as an exhibit to the Comp any's 1992 Annual Report on Form 10-K f iled March 30. Filed as an exhibit to the Compan y's 1995 Annual Report on Form 10-K f iled April 11. and incorporated herein by reference. y's 1996 Annual Report on Form 10-K f iled March 31. 1996. 3. 1996. iled April 11. 1993. * Form S-8 filed June 19. 1996. 1996. and incorporated herein by reference. Filed as an exhibit to the Company's 1996 Annual Report on Form 10-K file (m) Employment Agreement between Richard B. 1995. and incorporated herein by reference. (k) Johns Manville Corporation 1996 Executive Incentive Compensation Plan. (f) Amendment to Long-Term Incentive Stock Refiled as an exhibit to the Comp any's Plan. Henry and the Company. 2 to Long-Term Incentive Filed as an exhibit to the Compan y's Stock Plan. and incorporated herein by reference. and incorporated herein by reference. (e) Long-Term Incentive Stock Plan. 1993. 1993.* Filed as an exhibit to the Company's Form S-8 filed June 20. and incorporated herein by reference. and incorporated herein by reference. Filed as an exhibit to the Compan Form 10-Q for the quarter ended J Refiled as an exhibit to the Comp 1992 Annual Report on Form 10-K f (j) Johns Manville Corporation 1996 Stock Filed as an exhibit to the Company's Award Plan.* any's iled March 30.* </TABLE> 13 <PAGE> <TABLE> <CAPTION> EXHIBIT ------<S> <C> (i) Johns Manville Corporation NonEmployee Directors' Deferred d Compensation Plan.* (l) Employment Agreement between Charles L.* REFERENCE --------<C> Filed as an exhibit to the Company's 1996 Annual Report on Form 10-K file March 31. (g) Amendment No. 1996. and incorporated herein by reference.herein by reference.* une 30. (h) Johns Manville Corporation Deferred y's Compensation Plan. and incorporated herein by reference. 1997. Filed as an exhibit to the Company's Form 10-Q for the quarter ended September 30. 1996.* .* 1992 Annual Report on Form 10-K f iled March 30. Von Wald and the Company. Form S-8 filed June 19. herein by reference. herein by reference. 1994. and incorporated September 22. between the Company and the Trust. and incorporated herein by reference. and incorporated herein by reference.d March 31. 1996. and incorporated here in by reference. and incorporated September 22. dated as of September 30. 1994. 1994. and incorporated January 1. Inc. Inc. and incorporated herein by reference. (o) Employment Agreement between Thomas L. 1994.* Form 10-Q for the quarter ended June 30. dated as of September 30. and incorporated herein by reference. dated as of September 30. 1996. dated as of April 5. Filed as an exhibit to the Company's Perry and the Company. Inc. 1995. (s) Corporate Agreement between the Filed as an exhibit to the Company's Company and Johns Manville Form 10-Q for the quarter ended International Group. 1994. . 1997. (r) Tax Sharing Agreement between the Filed as an exhibit to the Company's Company and Johns Manville Form 10-Q for the quarter ended International Group.* 1996 Annual Report on Form 10-K file d March 31. (p) Intercompany Agreement between the Filed as an exhibit to the Company's Company and Johns Manville Form 10-Q for the quarter ended International Group. Filed as an exhibit to the Company's Form 10-Q for the quarter ended September 30. herein by reference. and incorporated herein by reference. dated as of September 22. d dated as of September 22.. 1994. (n) Employment Agreement between Harvey L. (q) Treasury Management Agreement between the Company and Johns Manville International Group. Filed as an exhibit to the Company' Filed as an exhibit to the Company's 1994 Annual Report on Form 10-K file March 31. 1994. (t) Selling Securityholders' Agreement. (v) Supplemental Retirement Agreement REFERENCE --------<C> Filed as an exhibit to the Company' 1995 Annual Report on Form 10-K fil April 11.. Filed as an exhibit to the Company's Caltrider and the Company. </TABLE> 14 <PAGE> <TABLE> <CAPTION> EXHIBIT ------<S> <C> (u) Second Amended and Restated s Supplemental Agreement between the ed Company and the Trust. 1997. 1994.. 1997.. Inc. 1994. . dated December 15. 1994. Pages 18 through 61 of the Company' 1997 Annual Report to security hold 30. Von Wald and the ed Company. Inc. 21. 1994. (y) Amended and Restated Receivables s Purchase Agreement dated as of August 1995 Annual Report on Form 10-K fil ed 15. as Trustee. ed Inc. and incorporated herein by reference. Filed herewith on Page 19. 30. (x) Amended and Restated Indenture between Filed as an exhibit to the Company' s Johns Manville International Group. s ers are filed herewith and are incorporated herein by reference. 1997 among Johns y Manville Funding Corporation. 1996. with related agreements. and incorporated herein by reference. and incorporated herein by reference. and incorporated herein b Form 10-Q for the quarter ended Jun April 11. and incorporated herein by reference. between Johns Manville International Group. 1995. Manville International.* ed on March 31. and the banks and others named therein. Johns reference. 1997. the financial institutions listed therein as Buyers. Filed as an exhibit to the Company' on March 31. 1995. 1995. 1997. Filed as an exhibit to the Company' 1994 Annual Report on Form 10-K fil . and Morgan Guaranty Trust Company of New York.* (w) 1994 Long-Term Cash Incentive s Compensation Plan. (aa) Amended and Restated Manville Personal Filed as an exhibit to the Company' s Injury Settlement Trust Agreement Form 10-Q for the quarter ended Jun e dated as of April 29. Subsidiaries of the Registrant. as Administrative Agent and Structuring and Collateral Agent. and The Bank of New York. Filed as an exhibit to the Company' 1994 Annual Report on Form 10-K fil 1994 Annual Report on Form 10-K fil on March 31. (z) Amendment to Amended and Restated s Receivables Purchase Agreement dated e as of June 6. 1997. Inc. 1994. 1997 Annual Report. 13. effective as of November 4. and incorporated herein b y reference.s between Richard B. 27.. the financial statement schedule referred to above.. In our opinion. </TABLE> Filed herewith.P... 1997. /s/ Coopers & Lybrand LLP .23.. In connection with our audits of such financial statements.-------* Management contract or compensatory plan or arrangements.. when considered in relation to the basic financial statements taken as a whole. 15 <PAGE> REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Directors of Johns Manville Corporation: Our report on the consolidated financial statements of Johns Manville Corporation has been incorporated by reference in this Form 10-K from the 1997 Annual Report to Stockholders of Johns Manville Corporation. 24. Page 20 (included on signature page this report)..------------------------Denver. . in all material respects.. 18 </TABLE> 17 <PAGE> JOHNS MANVILLE CORPORATION .... 1998 16 <PAGE> JOHNS MANVILLE CORPORATION INDEX TO FINANCIAL STATEMENT SCHEDULE TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31....1 Financial Data Schedule. Powers of Attorney. we have also audited the related financial statement schedule listed in the Index to Financial Statement Schedule of this Form 10-K.. 1997 <TABLE> <CAPTION> SCHEDULE PAGE ----------<C> <S> <C> II Valuation and qualifying accounts. to Consent of Coopers & Lybrand L... Filed herewith.. the information required to be included therein..L. presents fairly. for each of the three years in the period ended December 31.... Colorado March 17... SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31 (IN THOUSANDS OF DOLLARS) <TABLE> <CAPTION> ADDITIONS -----------------------------BALANCE AT CHARGED (CREDITED) CHARGED TO BALANCE AT BEGINNING END OF CLASSIFICATION YEAR ----------------------<S> <C> 1997 Allowances Reducing the Assets in the Balance Sheet: Doubtful accounts receivable........... $ 6,005 Cash discounts........ 2,257 Other allowances...... 28,518 Deferred tax assets... 52,000 OF YEAR TO COSTS AND EXPENSES OTHER ACCOUNTS(a) DEDUCTIONS(b) ---------- ------------------ ----------- ------------<C> <C> <C> <C> $ 7,570 1,278 21,168 70,188 $ (243) --------$ (243) ====== $ 908 26,110 52,904 -- $ 2,230 25,131 45,554 18,188 ------$91,103 ======= --------------Total............... $100,204 $ 88,780 ======== ======== 1996 Allowances Reducing the Assets in the Balance Sheet: Doubtful accounts receivable........... $ 6,497 $ 7,570 Cash discounts........ 1,967 1,278 Other allowances...... 18,646 21,168 Deferred tax assets... 82,512 70,188 --------------Total............... $109,622 $100,204 ======== ======== 1995 Allowances Reducing the Assets in the Balance ------$79,922 ======= $1,122 --------$1,122 ====== $ 2,022 20,962 34,386 -------$57,370 ======= $ 2,071 21,651 31,864 12,324 ------$67,910 ======= Sheet: Doubtful accounts receivable........... $ 6,422 $ 6,497 Cash discounts........ 1,537 1,967 Other allowances...... 15,765 18,646 Deferred tax assets... 96,449 82,512 --------------Total............... $120,173 $109,622 ======== ======== </TABLE> - -------Notes: $ 776 --314 -----$1,090 ====== $ -19,963 30,977 -- $ 701 19,533 28,096 14,251 ------$50,940 ======= ------$62,581 ======= (a) Charged against sales and additions due to acquisitions. (b) Principally charges for which reserves were provided, net of recoveries. 18 <PAGE> EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Direct and indirect subsidiaries of the Company and the jurisdiction in which each company was incorporated are listed below. Certain companies not important to an understanding of the Company's businesses have been omitted and which, if aggregated, would not constitute a significant subsidiary. <TABLE> <CAPTION> SUBSIDIARY ---------<S> CHANGZHOU SCHULLER ZHONGXIN TIANMA FIBER GLASS PROD. CO., LTD. ........................................................ EUROPEAN OVERSEAS CORPORATION................................. JOHNS MANVILLE AB............................................. JOHNS MANVILLE CANADA INC. ................................... JOHNS MANVILLE CHINA LTD. .................................... JOHNS MANVILLE EUROPEAN INVESTMENTS B.V. ..................... JOHNS MANVILLE FUNDING CORPORATION............................ JOHNS MANVILLE INTERNATIONAL B.V. ............................ JOHNS MANVILLE INTERNATIONAL GROUP, INC. ..................... JOHNS MANVILLE INTERNATIONAL, INC. ........................... MANVILLE MINING COMPANY....................................... MESA INSULATION, INC. ........................................ MITEX AB...................................................... MITEX GLASSFIBRE LIMITED...................................... NORD BITUMI SpA............................................... SCHULLER GmbH................................................. SCHULLER POLSKA Sp. zo.o. .................................... </TABLE> JURISDICTION OF INCORPORATION --------------<C> China Delaware Sweden Canada Delaware Netherlands Delaware Netherlands Delaware Delaware Delaware Delaware Sweden England Italy Germany Poland 19 <PAGE> SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of the 18th day of March, 1998. JOHNS MANVILLE CORPORATION (Registrant) /s/ CHARLES L. HENRY By: _________________________________ Charles L. Henry Chairman of the Board, President and Chief Executive Officer POWER OF ATTORNEY Know all men by these presents that each person whose signature appears below does hereby constitute and appoint Charles L. Henry, John P. Murphy and Richard B. Von Wald, and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign all amendments to this report, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents or any of them, or his substitute or substitutes, lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated as of March 18, 1998. SIGNATURE /s/ CHARLES L. HENRY - ------------------------------------(Charles L. Henry) /s/ JOHN P. MURPHY - ------------------------------------(John P. Murphy) /s/ LEO BENATAR - ------------------------------------(Leo Benatar) /s/ ROBERT A. FALISE - ------------------------------------(Robert A. Falise) /s/ TODD GOODWIN TITLE Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) Senior Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) Director Director Director - ------------------------------------(Todd Goodwin) 20 <PAGE> SIGNATURE /s/ MICHAEL N. HAMMES - ------------------------------------(Michael N. Hammes) /s/ KATHRYN R. HARRIGAN - ------------------------------------(Kathryn R. Harrigan) /s/ LOUIS KLEIN, JR. - ------------------------------------(Louis Klein, Jr.) /s/ FRANK J. MACCHIAROLA - ------------------------------------(Frank J. Macchiarola) /s/ CHRISTIAN E. MARKEY, JR. - ------------------------------------(Christian E. Markey, Jr.) /s/ WILLIAM E. MAYER - ------------------------------------(William E. Mayer) 21 <PAGE> ADDITIONAL INFORMATION Individuals interested in receiving additional information may contact the following: FOR COMPANY INFORMATION Call (303) 978-2000 or write to: Johns Manville Corporation Investor Relations P.O. Box 5108 Denver, CO 80217-5108 TRANSFER AGENT AND REGISTRAR First Chicago Trust Company of New York P.O. Box 2500 Jersey City, NJ 07303 Call: (800) 756-8200 Hearing Impaired: TDD: (201) 2224955 Internet Information: FOR PRODUCT INFORMATION Call (303) 978-4900 or (800) 6543103 or write to: Johns Manville Corporation Product Information P.O. Box 5108 Denver, CO 80217-5108 INDEPENDENT ACCOUNTANTS Coopers & Lybrand L.L.P. 370 Seventeenth Street, Suite 3300 Denver, CO 80202-5633 Director TITLE Director Director Director Director Director --------------------------------------------------------------------------------------------------------------Net Sales (Note B) $1.fcnbd.995 65.317.--------------------------------------------------------------------------------------------------------------- .--------------------------------------------------------------------------------------------------------------Year Ended December 31.--------------------------------------------------------------------------------------------------------------Total Assets (Note C) $1. less current portion 456.--------------------------------------------------------------------------------------------------------------<S> <C> <C> <C> <C> <C> Income .451 Income from Continuing Operations.995 36.website: http://www.422 187.498 $2.996 47.059 $2.798 354.781 883. 474.534 $1.525 122.837 Income before Extraordinary Items and Cumulative Effect of Accounting Change (Note B) 150.946.006 55. 391.782 . net of tax (Notes A and B) 130.com e-mail:
[email protected] 115. D.114 .000 406.299 52.529 190.294 428.486 115.277. except per share amounts .645 $1.283 142.fctc.462 1.810 Income from Operations (Notes A and B) 215.522 $1.--------------------------------------------------------------------------------------------------------------Financial Position (As of December 31) .726 $2.307 1. E and F) 150.080.980.083 580.818 $1. 1997 1996 1995 1994 1993 .000 90.427 201.160 447.416 60.552.165.com (send stockholder address changes to the above address) 22 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-13 <SEQUENCE>2 <DESCRIPTION>1997 ANNUAL REPORT <TEXT> <PAGE> EXHIBIT 13 SELECTED FIVE-YEAR FINANCIAL DATA <TABLE> <CAPTION> In thousands of d ollars.079 Long-Term Debt.606 57.163.205 Stockholders' Equity 693.429 $1. 181.772 Net Income (Notes B.007 441. 25 $ .5 million of . E and F) .972 .529 115.29 Income before Extraordinary Items and Cumulative Effect of Accounting Change (Note B) .663 29.833 $ 62.000 $ 111.86 $.--------------------------------------------------------------------------------------------------------------See notes on page 19.92 2.21 Common Dividends Paid .367 $ 201. Plant and Equipment $ 125.74 . the Company recorded nonrecurring charges totaling $49.04 .27 .80 . net of tax (Notes A and B) .03 1.422 $229.174 32.7 million for the shutdown of current operations.78 .74 .Additional Data (Note B) .93 .992 31. D.988 29. E and F) .73 .29 .296 $ 153.13 6.--------------------------------------------------------------------------------------------------------------Income from Operations $215.92 . </TABLE> Johns Manville/18 <PAGE> Notes to Selected Five-Year Financial Data: (A) During 1996.10 .2 million.20 .--------------------------------------------------------------------------------------------------------------Earnings Per Common Share Basic: Income from Continuing Operations.--------------------------------------------------------------------------------------------------------------Additions to Property.21 Diluted: Income from Continuing Operations.37 $.85 .283 $142.81 $ .20 .465 Net Income 130. Development and Engineering 31.71 $.816 Earnings Per Common Share (Diluted): Net Income $.--------------------------------------------------------------------------------------------------------------Pro Forma Data (Note H) .--------------------------------------------------------------------------------------------------------------Per Share Data (Note G) .20 .57 $.329 $ 82.33 .73 .10 .31 Net Income (Notes B.643 Research. demolition of facilities and site restoration and $7.29 Income before Extraordinary Items and Cumulative Effect of Accounting Change (Note B) .738 27.25 .443 60. net of tax (Notes A and B) $. These charges included $41.80 $.299 $84.79 $. D.267 93.31 Net Income (Notes B.93 2.33 . 3 million. the Company adopted Statement of Financial Accounting Standards No.5 million shares of the Company's common stock for the Manville Personal Injury Settlement Trust's profit sharing right to 20 percent of the Company's net earnings (as adjusted). partially offset by a gain on the sale of other manufacturing assets. earnings per share are based on 163. cumulative effect of accounting change. net of taxes of $169. Earnings per share amounts prior to 1997 were calculated after the deduction for preference stock dividends/accretion and the $52.4) million and $0. $(28.9 million.5 million.6 million. restructuring of operations. net of tax.1 million premium on preference stock redemption. extraordinary gains and losses. Accordingly. net assets held for sale totaled $375. Johns Manville/19 <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS .9 million in 1996.5 million.asset write-downs to estimated fair values.2 million. respectively.6 million. During the third quarter of 1997. Income from continuing operations. discontinued operations. 1995. on a consistent basis and adjusted for estimated applicable tax effects. the Company disposed of its 81.6 million and $435. against net income to reflect the accumulated postemployment benefit obligation. net of tax. Series B. preference stock dividends/accretion and premium on preference stock redemption.4 million. certain pension plan settlement gains. (F) Effective January 1. interest expense and profit sharing expense. the Company recorded an extraordinary loss of $314.2 million. (E) The Company recorded extraordinary gains (losses) on early extinguishments of debt. or $0. includes gains on sales of equity investments. 1993. net of tax. the Company redeemed its Cumulative Preference Stock. unusual income tax items. 1994 and 1993. (G) During 1996.2 million related to income taxes. profit sharing expense. $409. Income before extraordinary items and cumulative effect of accounting change and net income include a gain on disposal of discontinued operations of $216. of which $8.11 per common share. 112. (B) In the first quarter of 1996. interest expense on the 9 percent Sinking Fund Debentures. interest income. net of taxes of $8. Riverwood's operations have been reflected as discontinued operations and its operating results have been excluded from the determination of income from continuing operations for all periods presented. net of taxes. 1994 and 1993. gains on sales of equity investments. "Employers' Accounting for Postemployment Benefits. the Company recognized an additional net gain on disposal of discontinued operations of Riverwood of $19. (C) The net assets and liabilities of the discontinued operations of Riverwood have been classified as net assets held for sale for all periods presented." As a result. In addition.3 percent interest in Riverwood International Corporation ("Riverwood"). respectively. in 1995. of $(2) million. (H) Pro forma data has been adjusted to eliminate the effects of nonrecurring charges. in 1996 and a loss on disposal of discontinued operations of $42. the Company recorded a charge in 1993 of $13. (D) In 1996. on the exchange of approximately 32.1 million diluted weighted average shares for all periods presented. At December 31. 9 percent. high-efficiency filtration media.7 million for 1997 from $103. The Roofing Systems segment consists of the Company's commercial/industrial roofing systems business.1 percent in 1996. from $440.2 percentage points to 26. wall covering and plastic products.6 million from $1. to $98.1 percent. development and engineering expenses. The Insulation segment consists of the Company's building insulation business. The Company operates 50 manufacturing facilities in North America.4 million for 1996.5 percent. or 6. or 2. up 14. ventilating and air conditioning ("HVAC") and other equipment.7 million. Income from operations for this segment decreased $4. and the Company's Swedish and U. which manufactures filtration media for commercial and industrial buildings. which included $17. Gross profit of $431. to $1. ultrafine fibers for clean room air filters and battery separators. Roofing Systems and Engineered Products. automobiles and heating.2 million-see "1996 vs 1995 Results of Operations. administrative and research. Income from operations for 1997 was $215. combined. and fibers and nonwoven mats used as reinforcements in building and industrial applications. factories. accessories and related guarantees. and is comprised of three principal business segments: Insulation. During 1997. subsidiaries.Management's Discussion and Analysis of Financial Condition and Results of Operations Johns Manville Corporation (the "Company") manufactures and markets building and equipment insulation.647.2 million. decreased as a percentage of sales in 1997 to 12.1 percent. Income from operations during 1996 included nonrecurring charges totaling $49.7 million.4 million for 1996. the Mitex companies.5 percent. increased $2. The mats and fibers business includes the Company's German subsidiary.4 million. and synthetic meltblown products used in various other applications. attics and floors in residential and commercial buildings and polyisocyanurate foam sheathing for residential structures. insulations. Schuller GmbH. marine vessels. refineries and other industrial applications. commercial/industrial roofing systems.2 percent for 1997 due to lower selling prices. capacity- . which manufactures pipe and duct insulation for use in commercial buildings.5 million for 1997. which manufactures fiber glass wool insulation for walls. or 4.4 million in 1996. Selling.552.6 million in 1996. compared with 13. These expenses. The Engineered Products segment also includes the Company's filtration business. Europe and China.1 million. commercial/industrial insulation business. Johns Manville/20 <PAGE> 1997 vs 1996 Results of Operations The Company's net sales for 1997 increased $95. The gross profit percentage declined 2. The Engineered Products segment consists of the Company's mats and fibers business. flooring. decreased $9. which manufactures continuous filament fiber glass-based products used for reinforcing roofing." Insulation Segment The Insulation segment's net sales remained essentially unchanged at $697. which supplies roofing membranes.8 million for 1997. general. and original equipment manufacturers ("OEM") insulation business. liquid filtration cartridges and media for use in commercial and industrial applications.K. compared with $187. however. which manufactures thermal and acoustic insulation for aircraft.6 million of nonrecurring charges.1 million to $205. reflecting strong margins when compared with $32. The commercial/industrial business. compared with $113. Engineered Products Segment The Engineered Products segment's net sales increased $5. Johns Manville/21 <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS Interest Compared with 1996. During 1997.1 million for 1996. The higher sales were primarily due to increased volumes and broadened product lines from acquisitions. Operating income increased $30. The selling price decreases. Net sales and operating income for the U. Net sales for the filtration business increased for 1997 on higher volumes due to recent acquisitions in the synthetic filtration media markets. reflecting strength in aerospace and other specialty insulations.5 million.1 percent.6 million.S. while lower selling prices led to slightly decreased margins compared with 1996. reflecting a full year of expense related to 1996 acquisitions. which included $5. or 23. During 1997.6 million primarily due to lower average cash and marketable securities balances.3 million for 1996. for 1996 included a $7. Despite lower 1997 net sales in automotive products primarily due to the disposition of the Company's molded parts business.related selling price and other competitive pressures reduced net sales and led to lower margins and a decrease in operating income for the residential insulation business compared with 1996. to $510. higher roof guarantee earnings and improved productivity. net Other expense.6 million of nonrecurring charges. favorable raw material costs. averaging seven-to-eight percent. in addition to expense related to 1997 acquisitions. which included $4 million of income related to nonrecurring items.5 million in 1997 compared with $414 million in 1996.3 million for 1997 compared with $0. Income from operations decreased to $92. These improvements in filtration were offset by competitive pricing pressures and higher acquisition-related costs which led to decreased margins and operating income for 1997. driven primarily by pipe and duct insulations. Roofing Systems Segment The Roofing Systems segment's net sales increased $96. other expense.8 million in 1996. the Company's interest expense increased $2 million due primarily . was $10.2 million to $476 million for 1997 compared with $470.3 percent. were partially offset by unfavorable currency comparisons on reported results. experienced higher 1997 net sales and operating income on volume increases.2 million gain on the settlement of certain pension plans. were partially offset by volume increases due to strength in U. net.1 million in 1996. mats and fibers business decreased in 1997 as reduced costs were more than offset by declining volumes and selling prices due to competitive pressures.S. net. or 18. net. the Company's interest income decreased $8. operating income for OEM insulation increased for 1997 compared with 1996. partially offset by unfavorable product mix. These increases reflected the effective integration of acquisitions. Other expense. including the incremental impacts of the Mitex acquisition.8 million to $62.9 million in 1997. Other Expense. included higher goodwill amortization. construction markets. Strong improvements on higher sales volumes for the segment's European operations. Discontinued Operations During the third quarter of 1997. The Company receives a tax deduction for dividends paid on the shares of the Company's common stock held by the Manville Personal Injury Settlement Trust (the "Trust").S. This rate is higher than the U.12 during 1997 and increased basic . Preference Stock Redemption The Company redeemed its Cumulative Preference Stock. federal statutory tax rate primarily due to the impact of utilizing prior years' general business credits and the tax benefit the Company receives on its quarterly dividend. Income Taxes The Company's 1997 effective income tax rate of 26 percent is lower than the U. federal statutory tax rate principally due to higher foreign effective tax rates and state taxes. Also during 1996. For the year ended December 31. plus accrued interest of $1.2 million related to income taxes.5 million. During 1996.93 and $0. Gain on disposal of discontinued operations increased basic and diluted earnings per common share by $0.1 million. the Company redeemed its 9 percent Sinking Fund Debentures with cash of $27. arose from the termination of certain indemnification obligations to the purchaser of Riverwood and from the determination of certain income tax consequences of the disposition.7 million. 1996. the Company recorded an extraordinary loss of $314. the Company reported a net income tax benefit of $39. net of taxes of $169.6 million. the Company received gross cash proceeds of $1.1 million.5 million shares of its common stock for the Trust's profit sharing right to 20 percent of the Company's net earnings (as adjusted). the Company adjusted the estimated gain recognized in 1996 on the disposition of Riverwood International Corporation ("Riverwood"). Earnings Per Common Share Basic and diluted net earnings per common share for 1997 were $0. The adjustment. respectively.3 million.2 million. the Company's effective tax rate on income from continuing operations was 43 percent for the year ended December 31. net of taxes of $138. resulting in an extraordinary loss on early extinguishment of debt of $2 million. the Company exchanged approximately 32.3 percent interest in Riverwood and recorded a gain of $216.1 million was charged directly to capital in excess of par value and. with cash of $230. net of taxes of $1.8 million during 1996. was deducted from net income to compute earnings and earnings per share applicable to common stockholders during 1996.S.92. Exclusive of the tax benefit on the special cash dividend. As a result. Series B (the "preference stock").to 1997 acquisition-related borrowings. The premium. which were finalized with the completion of the Company's 1996 income tax returns. or excess of the redemption price over the carrying value of the preference stock.7 million. Extraordinary Losses During 1996.20 for 1996.2 million. along with preference stock dividends.5 million tax benefit on the portion of the special cash dividend that was paid to the Trust. which included a $104. 1996. of which $8. resulting in an additional net gain on disposal of discontinued operations of $19.08 billion from the disposition of its 81. as compared with basic and diluted net earnings per common share of $0. of $52. 6 percent.2 million of nonrecurring charges. up $8. which moderately reduced gross margins and operating income of this business.5 million in 1995. or 4.8 million to $103.6 million from $104. The residential insulation business' net sales improved moderately as higher volumes from increased housing starts in the U. Gross profit for 1996 increased $42.6 percent for 1995 as the effects of lower prices were substantially offset by operating efficiencies.9 million. increased $8.9 percent. In addition.1 million.6 percent. Income from operations for 1996. The Company's income from operations.9 percent.552. The combined extraordinary losses on trust settlement and early extinguishment of debt decreased 1996 basic and diluted earnings per common share by $2.4 percent for 1996 and 28.6 million of nonrecurring charges discussed below.9 percent for 1995. which included $17. Johns Manville/22 <PAGE> 1996 vs 1995 Results of Operations Net sales increased $160. 1996 gross profits and operating income reflected improved operating efficiencies.4 million in 1996 from $201. decreased $13.and diluted earnings per common share by $1. which also led to improved gross profit and operating income.6 million to $32. reflecting market share gains and strength in construction markets. Income from operations for 1996.5 percent. These increases were partially offset by weakness in sales of automotive products due to competition from alternate materials.2 million. The U. respectively. respectively. combined. These increases were due primarily to the inclusion of the operating results of the businesses acquired during 1996. Net sales in commercial/industrial insulations increased on higher sales volumes.3 percent.1 million. and Canada for most of 1996 more than offset the effects of pricing pressures. general. to $470.42. The increase was principally due to additional expenses as a result of acquisitions and acquisition-related activities. Engineered Products Segment The Engineered Products segment's net sales increased $13. due primarily to the increased sales volumes from acquisitions.6 million and were slightly higher as a percentage of net sales at 13. administrative and research.S. mats and fibers business had significantly higher net sales due to increased sales volumes as the Company expanded its . or 6. development and engineering expenses.5 million. Income from operations for 1996.391. during 1996. increased $23. or 11.09 and $2.7 million for 1995.2 million in 1995.4 million in 1996 from $1.5 million in 1995.4 million in 1996 from $113.6 million of nonrecurring charges discussed below.43 and $1. to $699 million for 1996 compared with $669. Insulation Segment The Insulation segment's net sales increased $29. was $113.3 million in 1995.9 million for 1995. or 2. which included $5. to $1. compared with 1995. which included $4 million of income related to nonrecurring items discussed below.07.1 million.9 million.5 million in 1995. including $49. to $414 million in 1996 from $290. or 42. or 10.5 million in 1995.1 million in 1996 from $23. Roofing Systems Segment The Roofing Systems segment's net sales increased $123.8 million for 1996 compared with $457.1 percent for 1996 compared with 12. decreased $9. to $187. Gross profit margins were 28.S. Selling. and at December 31. Pending federal and state regulatory agency approval. the Insulation segment and the Roofing Systems segment.S. demolition of facilities and site restoration. The filtration business experienced slightly higher net sales due to expanded markets for ultra-fine fibers.2 million gain on the settlement of certain pension plans.1 million and $5.4 million was classified as other current liabilities. industry-wide capacity constraints led to slightly higher 1996 selling prices. $7. the Company recorded the following pretax nonrecurring charges totaling $49.S. the Company believes it is reasonably possible that these estimates may be revised in the near-term. However. These U.S. net. relinquish the properties and obtain regulatory approvals to execute the actions described above.production capacity during 1996.5 million were noncash asset write-downs. of $17 million for 1995. the impacts of such revisions. if any. of which $30 million. $6. the Company recorded nonrecurring charges of $41. Other Expense. Meanwhile. net. The nonrecurring charges are based on estimates and. therefore. liquidity or results of operations. Johns Manville/23 <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS Nonrecurring Charges In 1996.6 million related to corporate and eliminations. net Other expense.7 million related primarily to nonproductive assets. which was disposed of in 1997. the final disposition will begin in 1998 and is expected to be substantially completed by 1999. which improved gross profits and operating income. the Company intends to dispose of the remaining properties and does not expect to incur significant future monitoring and maintenance costs. Included in 1996 was a $7.3 million for 1996 compared with other expense. The Company recorded additional 1996 nonrecurring charges (income) in the Insulation and Engineered Products segments of $11. respectively. dollar-reported results of the Company's German operations due to the strengthening of the U. 1997. the Company spent minimal amounts in preparation for demolition phases of the project. Of these charges. The Company expects to fund the charges requiring cash outlays from existing cash balances and cash generated from operations. $15. In addition. dollar against the German mark. During 1997. Other expense for 1996 also included higher amortization of goodwill resulting from acquisitions completed during the year. are not expected to have a material adverse effect on the Company's financial condition. Consequently. operating results were partially offset by weakness in European construction markets and decreases in the U.9 million charge for legal costs in connection with litigation brought by the Company against the former owner of the phenolic roofing business. consisting primarily of asset write-downs to estimated fair values in the automotive molded parts business. The Company completed an evaluation of a manufacturing facility with both current and former operations and determined that its best course of action was closure of the facility. and a gain on the sale of other manufacturing assets. As a result. respectively. Other expense for 1995 included net asset write-offs/dispositions of $6. are subject to risks and uncertainties related to the Company's ability to secure agreements with third parties. . 1995 included a $2. Upon completion of these actions.5 million and $(4) million. was $0.7 million for the shutdown of current operations. with the majority of liabilities settled during that time frame.2 million. 2 million.7 million and was also paid in 1996. resulting in a pretax gain on sale of equity investment of $74. Exclusive of the tax benefit on the special cash dividend. Discontinued Operations During 1996. the Company received gross cash proceeds of $1. which included a $104. net of taxes of $169. Profit Sharing Expense The Company paid $6. the Company redeemed its 9 percent Sinking Fund Debentures with cash of $27.2 million. the Company recorded an extraordinary loss of $314. Johns Manville/24 <PAGE> These rates are higher than the U. net of taxes of $138.9 million.S. resulting in an extraordinary loss on early extinguishment of debt of $2 million.3 percent interest in Riverwood and recorded a gain of $216.6 million.1 million. Extraordinary Losses During 1996.3 million. the Company reported a net income tax benefit of $39.5 million shares of its common stock for the Trust's profit sharing right to 20 percent of the Company's net earnings (as adjusted). Preference Stock Redemption . net of taxes of $1. due primarily to $5. the Company's effective tax rate on income from continuing operations was 43 percent and 46 percent for the years ended December 31.1 million. the Company sold its remaining equity investment in Stillwater Mining Company for net cash proceeds of $110. In the fourth quarter of 1995.Gain on Sale of Equity Investment In 1995.3 million. interest income in 1996 decreased by $5.5 million.2 million of interest received during 1995 from the Internal Revenue Service related to a 1993 income tax refund.08 billion from the disposition of its 81.6 million of profit sharing expense through April 1996 to the Trust. This loss primarily relates to deferred taxes on the Company's investment in Riverwood that had not been recognized previously. The Company recorded these taxes when it became apparent the taxes would be incurred due to the planned disposition of Riverwood. the Company exchanged approximately 32. As a result.7 million. This was the final profit sharing payment to the Trust. the Company recorded an estimated loss on the disposal of discontinued operations of $42. Profit sharing expense for 1995 totaled $27. federal statutory tax rate principally due to higher foreign effective tax rates and state taxes. Income Taxes For the year ended December 31. plus accrued interest of $1. respectively. 1996. Also during 1996.5 million.7 million. 1996 and 1995.5 million tax benefit on the portion of the special cash dividend that was paid to the Trust in 1996. Interest Income Compared with 1995. Earnings Per Common Share Basic and diluted net earnings per common share for 1996 were $0.The Company redeemed its preference stock with cash of $230.29. investments. of $52. Income from discontinued operations increased basic and diluted earnings per share by $0. The Company's cash and marketable securities balances decreased $80. cash and marketable securities located outside the U. and Canada were $28. The combined extraordinary losses on trust settlement and early extinguishment of debt decreased 1996 basic and diluted earnings per common share by $2. during 1995. The gain on disposal of discontinued operations increased basic and diluted earnings per share by $1. 1997. At December 31. including transfers of cash. fund capital expenditures and meet existing obligations and commitments. and restrictions on intercompany transactions. dividends and other distributions by Johns Manville International Group. In addition. the maximum amount available for dividends to be paid to the Company by Johns Manville International under debt covenants of the Senior Notes was approximately $250 million and $210 million. in 1995.73. Noncompliance Johns Manville/25 <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS with these or other covenants.1 million at December 31. At December 31. respectively.07.43 and $1.74 and $0. As of December 31. 1996. during 1996.1 million was charged directly to capital in excess of par value and was deducted from net income to compute earnings and earnings per share applicable to common stockholders during 1996.8 million during 1996. respectively. from $249. while the loss on disposal of discontinued operations decreased basic and diluted earnings per share by $0. could result in the termination of existing credit agreements and the acceleration of debt owed by the Company and its subsidiaries. for 1995.2 million during 1997 to $169.2 million. Liquidity and Capital Resources The Company broadly defines liquidity as the ability to generate sufficient cash flow to satisfy operating requirements. which owns all of the Company's operating subsidiaries. 1997 and 1996.20 compared with basic and diluted net earnings per common share of $0. liquidity should not be considered separately from capital resources. respectively.42. 1997. These include. earnings and earnings per share applicable to common stockholders for 1996 and 1995 were calculated after deducting preference stock dividends.09 and $2.35 and $0. which consist of currently or potentially available funds for use in achieving longrange business objectives and meeting debt service commitments. respectively. respectively. In addition. liquidity also includes the ability to obtain appropriate financing and convert into cash those assets that are no longer required to meet the Company's strategic objectives. or excess of the redemption price over the carrying value of the preference stock. Inc. or the occurrence of any other event of default. among others.34.30 and $0. The Company's net operating activities provided $168. the Company's wholly owned subsidiary. ("Johns Manville International"). The premium.7 million of cash during . respectively.3 million at December 31. stock issuances and repurchases. 1997. Therefore. The Company's agreements with its lenders contain a number of financial and general covenants.S. the Company was in compliance with these covenants. restrictions on borrowings. 3 million. Cash used in investing activities for 1996 included acquisitions of $153. The 1997 capital expenditures included approximately $50 million related to capacity expansion projects.7 million of 9 Percent Sinking Fund Debentures. During the third quarter of 1997.S.1 million and capital expenditures totaling $103 million. offset by selling price declines in most of the Company's businesses. commercial construction markets.4 million in 1997 and provided $935. and the redemption of $27.1 million. Selling prices are subject to factors influenced by the competitive environment in which the Company operates. The volume increases were. 1997. and U. In addition. businesses acquired in 1997 and 1996. of which $30 million was subsequently repaid. 1997. the Company's replacement roofing. the Company had $100 million available under a receivables sale facility (the "Receivables Facility") for its domestic short-term working capital requirements. of which $51. Investing activities for 1997 also included proceeds from the disposition of the Company's automotive molded parts business. housing starts comparable to 1996 levels. totaling $21 million. proceeds totaling $64.04 per common share. cash flows from continuing operations and proceeds from the settlement of pension plans were offset by cash disbursements relating to final profit sharing obligations and expenses associated with the Riverwood divestment. the Company's international subsidiaries had borrowing and working capital facilities totaling $85 million.03 to $. Cyclicality of Demand/Competitive Environment Demand for the Company's products has historically been cyclical due to macroeconomic factors affecting residential and commercial construction markets. sales volume increased primarily due to the incremental impact of acquisitions. During 1997. the Company borrowed $55 million from international credit facilities to partially finance 1997 acquisitions.08 billion of proceeds from the disposition of Riverwood. At December 31. Due to their specific market niches. respectively. principally to increase mats and fibers production.5 million for acquisitions.S. During 1996.8 million and $10. Also during 1997. increases in operating capacity and . These facilities are principally secured by the Company's equity ownership in certain international subsidiaries and joint ventures. During 1997. of which approximately $45 million related to capacity expansion projects. The Company paid quarterly dividends. filtration and specialty products are less sensitive to business cycles. Investing activities for 1996 provided $1.9 million was available at December 31. The Company's investing activities used $213.8 million from exercises of warrants to purchase common stock.S. construction markets. the Company repaid debt totaling $30 million assumed in connection with 1996 acquisitions. however.4 million for 1996.5 million for capital expenditures. particularly in residential insulation. and $90. Investing activities for 1997 used $136.4 million during 1996. the Company increased its quarterly dividend from $. Amounts available for borrowing under the Receivables Facility are based on the daily balance of certain outstanding trade accounts receivable. net of cash acquired. Financing activities for 1996 included payment of a special common stock dividend of $968. adjusted for various factors as defined under the terms of the Receivables Facility. on its common stock during 1997. sales volumes increased due to continued strength in U. strong U. compared with $165. redemption of the Company's preference stock and related final dividend payment of $230. During 1997. including fluctuations in overall capacity utilization.1997. The Company's cash flows from operating activities are primarily influenced by sales volume and selling prices. 9 million. the Company is responsible for income taxes on the taxable income of the Trust's specific settlement fund at a tax rate of 15 percent. which exceeds the carrying value by nearly $300 million. In addition.S. the Company completed the expansion of existing capacity with the reconstruction of a furnace.0625 per share. if the Trust were to sell the stock at a price lower than the carrying value. Capital Spending and Capacity Expansion In order to increase its U. 1997. liquidity or results of operations. If the Trust were to sell the stock at a price greater than the Company's carrying value. Likewise. the Company believes it will realize its net deferred tax asset. Income Taxes The cash taxes paid by the Company in the U.3 million. To illustrate. The Company plans to fund its capital spending from existing cash .S. this liability could be material in certain situations including the Trust monetizing. is expected to be completed in 1998. net operating loss carryforwards and tax credit carryforwards. the Company does not expect related future liabilities to have a material adverse effect on the Company's financial condition. and retaining the proceeds of. during 1997. Internal Revenue Code. The Company estimates capital spending in 1998 of approximately $128 million excluding acquisitions. outstanding purchase commitments relating to capital spending and capacity expansion projects totaled $21. most of the Company's businesses were adversely affected by capacity-related and other competitive selling price pressures. federal taxable income to realize its net U. the Company will need a cumulative total of approximately $670 million of U. Although the Company cannot predict the amount of any such future tax obligations. the Company will receive a tax deduction when the Trust sells some or all of its shares of common stock and distributes the proceeds to its beneficiaries or transfers the proceeds to a specific settlement fund. However.S. the deferred tax asset related to the Company's stock held by the Trust would total approximately $450 million. The Company's joint venture in China. a significant portion of its investment in the Company's common stock. were substantially lower than statutory rates due to the Company's deductions related to payments made to the Trust. using the December 31. The Company's valuation allowance on all deferred tax assets is subject to change as forecasts of future years' earnings and the estimated timing of the utilization of the Company's tax benefits are revised. As of December 31. and the expected timing of the taxable deductions principally related to amounts paid by the Trust or transferred to a specific settlement fund. of which approximately $55 million will be used in capacity expansion programs. Under Section 468B of the U. which began expansion of an existing fiber glass mat facility in 1996. particularly in residential insulation.S. Based on the Company's historical earnings levels. 1997. production of continuous filament fiber glass to meet the demand for its mats and fibers products.S. the Company may receive a tax benefit in excess of the deferred tax asset reflected for financial reporting purposes. The Company receives a tax deduction for the amount of any dividends paid on shares of the Company's common stock held by the Trust. However. and assuming full realization. As of December 31. projected future earnings. deferred tax asset of $234. the Company would receive a tax benefit less than the deferred tax asset reflected for financial reporting purposes. 1997 closing market price of $10. in August 1997. Any such taxes paid by the Company will generate a tax deduction for the Company.Johns Manville/26 <PAGE> improvements in European construction markets. amounted to approximately $84 million. a U. During the first quarter of 1997. the Company acquired the assets of Seal-Dry/USA.. The Company has accrued for costs relating to future inspections. Also in January 1998. associated with the Insulation segment.S. the Company acquired the assets of Ergon Nonwovens. financed from existing cash balances and borrowings from international credit facilities. The excess of the combined purchase prices over the estimated fair value of net assets acquired. accounted for under the purchase method. The Company's capacity expansion programs are periodically revised to reflect changes in demand. the Company began a voluntary program to inspect such metal decks and remediate where appropriate. which manufactures calcium silicate pipe and block insulation. the Company acquired the Mitex group of companies. the Company acquired the roofing business of HPG International. Subsequently. remediation and anticipated claims. In January 1998. a U. Mitex is a manufacturer of fiber glass wall covering fabrics used primarily in commercial and industrial buildings. net of cash acquired. a U. the Company manufactured phenolic roofing insulation which may.. Inc.S. the Company acquired a plant. Because many of the anticipated regulations have not yet been proposed. Pursuant to reimbursement agreements with the Company's liability carriers and . was $136. manufacturer of thermoplastic membranes. contribute to the corrosion of metal decks on which it is installed.. under certain circumstances. In response to the implementation of the 1990 Amendments to the federal Clean Air Act and requirements of various state air emissions regulations. or goodwill. Contingent Product Liability Between 1988 and 1992. Inc. manufacturer of reinforced thermoplastic roofing systems. The Ergon and Mitex acquisitions are associated with the businesses of the Engineered Products segment. The combined purchase price for these acquisitions. Provisions of Titles III and VII of the 1990 Amendments and the related regulations will likely require capital expenditures in the years 19982001. with most of the expenditures occurring in the latter part of that time frame. Johns Manville/27 <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS Acquisitions During the third quarter of 1997. These allocations were based on estimates and may be revised in the future. and fireproof board. Both acquisitions will be accounted for under the purchase method. industry capacity and the results of productivity improvements and technological innovations.5 million. neither the costs nor timing of compliance can be reasonably anticipated at this time. These accruals are based on the Company's historical experience regarding the incidence of corrosion and the cost of remediation and include a number of assumptions related to the types of roofs on which phenolic insulation has been installed as well as the assumption that the Company's past remediation experience will continue over the remaining lives of roofs insulated with the Company's phenolic roofing insulation.balances and cash flows generated by operations. the Company will be obligated to monitor and reduce air emissions at its manufacturing sites. Inc.S. During the second quarter of 1997. manufacturer of synthetic meltblown nonwoven products. and has manufacturing facilities in Sweden and the United Kingdom. with phenolic insulation installed on their roof decks and seek damages and injunctive relief. Environmental Contingencies At December 31. the Company's balance sheet included undiscounted accruals for environmental remediation costs. Based on the information available to date and subject to the assumptions described above. In addition. Compensation and Liability Act ("CERCLA") or similar state legislation. government and the Company settled certain litigation concerning the Company's disposal activities prior to consummation of its plan of reorganization. Of these 24 sites. accordingly. in the aggregate.000 during any given year. the Company's potential liability for 17 sites will be determined pursuant to the settlement agreement described in the following paragraph. District Court in Boston. the Company and a third party were named as defendants in two class action cases filed in U. the U. Massachusetts. In 1996. out of a total of 19 such sites for which the Company has identified environmental conditions requiring remediation. limits the Company's future liability under both CERCLA and the Resource Conservation and Recovery Act ("RCRA") to 55 percent of its share of site-wide response costs and natural resources damages without regard to joint and several liability for disposals made by the Company prior to consummation of the Company's plan of reorganization.S. . 1997 and 1996. the Company has been reimbursed for a portion of historical costs incurred and is entitled to receive reimbursement for a substantial portion of future costs to be incurred by the Company for inspection and remediation. The Company believes that all such activities and claims. In 1994. At December 31. will be subject to the agreement. 1997. if any. The EPA and others from time to time commence cleanup activities at such sites and in the future the EPA and others may assert claims against the Company with respect to such sites. liquidity or results of operations.S.S. for such sites shall never exceed $850. Johns Manville/28 <PAGE> The remaining seven sites are not subject to the agreement and. which was made an order of the court. The agreement resolved the Company's liability at certain historical sites and also covers CERCLA and RCRA liability for other disposal sites at which the Environmental Protection Agency ("EPA") has incurred or may incur response costs and which were used by the Company prior to consummation of the plan of reorganization. The agreement provides that the amount the Company will be obligated to pay. such costs are not expected to have a material adverse effect on the Company's financial condition. the Company has been identified as a potentially responsible party at 24 non-Company owned or operated sites under the federal Comprehensive Environmental Response. The Company has reviewed its historical inspection and remediation experience and the terms and collectibility of amounts payable under the reimbursement agreements in light of the contingencies described above. The settlement agreement. the Company had remediation activities in progress at nine sites. if additional costs are incurred in excess of the accrued amounts. including an order requiring the removal and replacement of the phenolic insulation and remediation of any deck corrosion. including ongoing compliance. The Company intends to defend these allegations vigorously. The plaintiffs purport to represent all building owners in the U. the Company could be jointly and severally liable for costs of remediating these sites.former owner of the phenolic roofing insulation business. Forward-Looking Statements This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. based on the Company's disaggregation of an entity for internal operating decisions. 130") and "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. However. Year 2000 Compliance The Company is engaged in a comprehensive project to modify its computer software for year 2000 compliance.3 million and $1. actual costs to be incurred for environmental cleanup may vary from previous estimates. Johns Manville/29 <PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS The Company believes that its current cash position. SFAS No. along with related disclosures about products. the Company may need to access capital markets to pay the principal of the Johns Manville International Senior Notes or in connection with possible significant future acquisitions. liquidity or results of operations. 131 establishes standards for reporting information about operating segments. SFAS No. The Company believes that amounts paid in 1997 and 1996 are representative of the Company's future annual environmental cleanup costs and anticipates expenditures relating to costs currently accrued to be made over the next 15 years. and funds available under various credit facilities will enable it to satisfy debt service requirements. the Financial Accounting Standards Board issued the following Statements of Financial Accounting Standards effective for periods beginning after December 15. ongoing capital spending and capacity expansion programs. liquidity or results of operations. 130 establishes standards for reporting and display of comprehensive income and its components. 131"). Based on current estimates. cash generated from operations. and the allocation of costs among potentially responsible parties. and existing remediation technology. the Company does not anticipate related material adverse effects on its financial condition. the difficulty in assessing the extent of environmental contamination. The Company paid $1. the Company believes that if additional costs are incurred in excess of the accrued amounts.8 million for environmental cleanup in 1997 and 1996. Comprehensive income generally includes changes in separately reported components of equity along with net income. and based on information presently available.maintenance and monitoring costs. The Company's reportable business segments are currently aligned with its internal business units. New Accounting Pronouncements During 1997. other ongoing operating costs and dividend policy. currently enacted environmental laws and regulations. respectively. geographic areas and major customers. the application and effectiveness of remedial actions. such costs are not expected to have a material adverse effect on the Company's financial condition. Statements of the Company . 1997: "Reporting Comprehensive Income" ("SFAS No. spending to upgrade or replace the Company's software or systems related to year 2000 compliance is not expected to exceed $5 million through 1999. Although it is not possible to quantify the effects year 2000 compliance issues will have on customers or suppliers. Subject to the uncertainties inherent in evaluating environmental exposures. services. As a result of factors such as changes in federal and state regulations. including the Company's historical remediation experience. of $34 million. the contingencies and commitments discussed in the Company's financial statements included in this report for the year ended December 31. Johns Manville/30 <PAGE> <TABLE> <CAPTION> . See "Liquidity and Capital Resources. (vi) the Company's expectations concerning levels of capital spending and funding of current operations. employment rates and overall consumer confidence. including the general rate of inflation." Forward-looking statements of the Company are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in such statements. including. particularly residential insulation. (iv) adverse effects on operating earnings of capacity-related and other competitive pressures in most of the Company's businesses. environmental matters and year 2000 compliance. see "Liquidity and Capital Resources-Contingent Product Liability." For a discussion of factors concerning contingencies related to phenolic roofing insulation. (v) expected benefits from the continuing integration of acquisitions and capacity expansions. without limitation. constitute such forward-looking statements. without limitation. 1997. including. (ii) the Company's ability to realize its net deferred tax asset. debt service. while the remainder are to residential construction markets." Other factors also could affect the Company's expected levels of capital spending and funding of current operations.contained in this report concerning matters that are not historical facts. Environmental Contingencies. In addition. Factors relating to the Company's estimates concerning nonrecurring charges are discussed in "1996 vs 1995 Results of Operations" and factors relating to the Company's net deferred tax asset are discussed in "Liquidity and Capital Resources-Income Taxes. statements concerning (i) the Company's estimates concerning nonrecurring charges taken in 1996. rates of technological development and changes in productivity. Demand for such products is generally cyclical and is influenced by macroeconomic factors that affect demand in residential and commercial construction and replacement markets and demand from original equipment manufacturers. debt service and dividends. overall demand for the Company's products could be affected by the factors described in "BUSINESS-Occupational Health and Safety Aspects of the Company's Products" in the Company's Annual Report on Form 10-K for the year ended December 31. In addition. Approximately 75 percent of the Company's annual sales are made to customers in commercial/industrial markets. and Year 2000 Compliance. (iii) the Company's expectations as to contingencies related to phenolic roofing insulation and environmental liabilities. 1997. Overall capacity levels in the industry directly affect prices for the Company's products. Factors that could affect the forward-looking statements generally are related to demand for the Company's products and to overall capacity levels in the industry. Important factors relating to such risks and uncertainties are set forth below. interest rates. the Company's ability to make future acquisitions depends upon the ability of the Company to identify and reach agreement with viable acquisition candidates and the availability of sources of financing for such acquisitions on terms which are acceptable to the Company. dividends and future acquisitions and (vii) the Company's estimates concerning year 2000 compliance issues. Other factors that may affect prices include the overall competitive environment in which the Company operates. the availability and pricing of raw materials. 649 .726 .228 .470 1.------------------------------------------------------------------------------------------------------------------Property.485 617.946.338 . at cost. Plant and Equipment.------------------------------------------------------------------------------------------------------------------Total Assets $1.923 . at cost Land and improvements 50. net 797.------------------------------------------------------------------------------------------------------------------Property.836 212.943 229.690 Receivables 221.106 1.041 Prepaid expenses 11.------------------------------------------------------------------------------------------------------------------<S> <C> <C> Assets Current Assets Cash and equivalents $ 132.175 237.980.------------------------------------------------------------------------------------------------------------------Deferred Tax Assets 194.CONSOLIDATED BALANCE SHEET In thousands of dollars . 1997 1996 .605 Marketable securities.------------------------------------------------------------------------------------------------------------------December 31.977 Buildings 246.141.------------------------------------------------------------------------------------------------------------------1.437.994 Other Assets 213.061 101.759 770.409 7.758 Less accumulated depreciation and depletion 639.161 Goodwill 202.137 $ 206.534 $1.844 127.189 47.711 630.400. Plant and Equipment.921 Deferred tax assets 42.115.006 30.420 .665 Inventories 127.929 42. which approximates market 36.132 Machinery and equipment 1.610 218.------------------------------------------------------------------------------------------------------------------Total Current Assets 571.001 . ------------------------------------------------------------------------------------------------------------------Stockholders' Equity Cumulative Preference Stock.638 120.================================================================================ ==================================== Liabilities Current Liabilities Short-term debt $ 1.462 . Series B.422 539.822.748 Accounts payable 114. at cost. respectively.951 shares in 1997 and 1.449 333.221 105.106 Cumulative Currency Translation Adjustment 9.------------------------------------------------------------------------------------------------------------------Total Stockholders' Equity 693.423 Unearned Stock Compensation (7. in 1997.629 Income taxes 8.646 shares in 1996 (16.01 par value.------------------------------------------------------------------------------------------------------------------Commitments and Contingencies (Notes 2. less current portion 456.837 Other accrued liabilities 86. respectively.785 68.419 200.087 .851 Compensation and employee benefits 84.767 $ 31.492 38. authorized 300. 16 and 20) .627 Treasury Stock.000 shares in 1997 and 175.160 Deferred Income Taxes 42.175 41.216.888 .242 Postretirement Benefits Other Than Pensions 197.495.224) (9.822 Other Noncurrent Liabilities 295. and issued and outstanding 162.287 26. $.953 Long-Term Debt. 9.000.287.671 .------------------------------------------------------------------------------------------------------------------Total Liabilities 1.522) (16.576 shares and 161.451 1. in 1996 1. 1. issued and outstanding 162.241.703 35.000 shares in 1996.540 shares and 161.580.114 362.589 shares.083 580.264 .366.------------------------------------------------------------------------------------------------------------------Total Liabilities and Stockholders' Equity .294 428. redeemed 1996 Common Stock.000.124) Retained Earnings 165.628 1.------------------------------------------------------------------------------------------------------------------Total Current Liabilities 296.712.241) Capital in Excess of Par Value 540.930 shares. 242 48.889 Interest Income 10.------------------------------------------------------------------------------For the Years Ended December 31.529 190.988 Nonrecurring Charges 49.111.145 $ 91.647.391.174 32.135 1.648 27. net (10. </TABLE> Johns Manville/31 <PAGE> <TABLE> <CAPTION> CONSOLIDATED STATEMENT OF INCOME In thousands of dollars.525 122. net of tax (Note 21) 19.283 Gain on Sale of Equity Investment 74.005) .471 216.091) 102.072 .006 Income from Discontinued Operations.------------------------------------------------------------------------------Income from Continuing Operations 130.951 (39. except per share amounts .------------------------------------------------------------------------------<S> <C> <C> <C> Net Sales $1.205 48.434 224.491 Gain (Loss) on Disposal of Discontinued Operations.177 Interest Expense 50.------------------------------------------------------------------------------Income from Operations 215.135 Research. Development and Engineering 31.429 $1.------------------------------------------------------------------------------Income before Extraordinary Items 150. 1997 1996 1995 .000 90.897 24.423 Income Tax Expense (Benefit) 44.811 993.661 .000 406.341) (24.156 Other Income (Expense).502) .------------------------------------------------------------------------------Net Income 150.285) .645 $1.522 Cost of Sales 1.771 115.$1.573 171.111 Selling.216.995 Preference Stock Redemption Premium/Dividends (60.995 Extraordinary Losses (Notes 19 and 22) (316.265 Profit Sharing Expense (Note 19) 6.726 ================================================================================ ==================================== The accompanying notes are an integral part of these consolidated financial stat ements. General and Administrative 174.000 $ 30.417 .923) .480 151.486 115.946.552.341) (345) (17.263 18. net of tax and Minority Interest (Note 21) 36.427 201.246 (42.------------------------------------------------------------------------------Income from Continuing Operations before Income Taxes 175.663 29.------------------------------------------------------------------------------Net Income Applicable to Common Stock $ 150.980.534 $1.027 150.422 187. 995 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.85 $ .000 $ 90.79 Income from Discontinued Operations.92 $ .------------------------------------------------------------------------------For the Years Ended December 31.93 2.------------------------------------------------------------------------------<S> <C> <C> <C> Cash Flows from Operating Activities Net income $ 150.78 Income from Discontinued Operations.12 1.123 Product guarantee income 4.486 $ 115.20 $ .20 $ .571 (67.29 .34) .09) . net of tax (Note 21) .352 .178) 82.92 2.42 (. depletion and amortization 80.30 Gain (Loss) on Disposal of Discontinued Operations.------------------------------------------------------------------------------Basic: Income from Continuing Operations $. 1997 1996 1995 .73 Extraordinary Losses (Notes 19 and 22) (2.961 8.175 63.651 9.------------------------------------------------------------------------------Income before Extraordinary Items . net of tax and Minority Interest (Note 21) .07) .80 $ .163 71. Johns Manville/32 <PAGE> <TABLE> <CAPTION> CONSOLIDATED STATEMENT OF CASH FLOWS In thousands of dollars .43 (.35) .12 1.------------------------------------------------------------------------------Net Income Applicable to Common Stock $.29 Gain (Loss) on Disposal of Discontinued Operations.833 Deferred taxes 11.81 $ .93 $ .86 $ .================================================================================ Earnings Per Common Share . net of tax and Minority Interest (Note 21) .------------------------------------------------------------------------------Income before Extraordinary Items .74 ================================================================================ Diluted: Income from Continuing Operations $.27 . net of tax (Note 21) .------------------------------------------------------------------------------Net Income Applicable to Common Stock $.74 Extraordinary Losses (Notes 19 and 22) (2.73 ================================================================================ </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 042) (33.491) (Gain) loss on disposal of discontinued operations (19.538 84.186) (22.441 (88.373) (13.Provision for furnace rebuilds 11.607 12.528) (103.648 27.681) (45) Compensation and employee benefits (11.732) 1.721 165.870 Gain on sale of equity investment (74.406) Proceeds from sales of available-for-sale marketable securities 45.966 (Increase) decrease in other assets (2.237 Increase (decrease) in current liabilities: Accounts payable (5.347) (19.081.786) (3.458) (164.450) (7.423) (2.672 Proceeds from disposition of Riverwood 1.502 Extraordinary losses 314.296 Other.985 11.349 Pension and postretirement benefits expense 6.680) (19.339 .000 Proceeds from maturities of held-to-maturity marketable securities 2.247) Income taxes (24.576 .351 15.309) (18.664) (31.412) 6.047 1.------------------------------------------------------------------------------Net cash provided by operating activities 168.742) Decrease in other noncurrent liabilities (54.534 12.165) (1.177 (2.387) 935.------------------------------------------------------------------------------Net cash provided by (used in) investing activities (213.737 Decrease in postretirement benefits other than pensions (16.622 Payments on debt (61.691) Purchases of held-to-maturity marketable securities (14.349) .446 135.041) (111.450 (Increase) decrease in current assets: Receivables 22.411 4.798 Inventories (18.363) (16.889) Interest expense 2.035 10.701) (14.217) (7.259) Net cash provided by discontinued operations 29.113) Proceeds from sales of assets 9.721 20. net 9.808 Profit sharing expense 6.------------------------------------------------------------------------------Cash Flows from Financing Activities Issuance of debt 56.329) Acquisitions (136.327) Prepaid expenses (4.251 22.332) (68.661 Income from discontinued operations (36.022) (12.270 8.233) 20.341 Purchases of available-for-sale marketable securities (27.246) 42.------------------------------------------------------------------------------Cash Flows from Investing Activities Purchases of property.561) .264 8.420) (16.712 55.637 63 6.471) (216.697) Profit sharing paid (34.464) Preference stock redemption/dividends (241.556) Other accrued liabilities 23.645 Nonrecurring charges 49.396 217.264 (40.170) (42.923) .056) (24.318 2.521) (153.386 112. plant and equipment (90. 638 1. 1995 178.592) Other stock transactions 330 2.323) (1.----------------------------------------------------------------Cumulative Preference Stock.242) (1.999) Net income for the year Currency translation Exercise of warrants for common stock 69 Stock compensation plan transactions 5 Common stock dividends Preference stock dividends Redemption of preference stock (178.------------------------------------------------------------------------------Net cash used in financing activities (25.------------------------------------------------------------------------------Effect of Exchange Rate Changes on Cash (4.----------------------------------------------------------------BALANCES AT DECEMBER 31. Common Treasury Series B Stock Stock .------------------------------------------------------------------------------Net Increase (Decrease) in Cash and Equivalents (74.242) .605 $ 310.794 Purchases of treasury stock (281) (14.204) 106.137 $ 206.518 Cash and Equivalents at Beginning of Year 206.638) Purchase of treasury stock (14. Johns Manville/33 <PAGE> <TABLE> <CAPTION> CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY .701) (22.203.------------------------------------------------------------------------------Cash and Equivalents at End of Year $ 132.228 $ (407) Net income for the year Currency translation Exercise of warrants for common stock Stock compensation plan transactions Preference stock dividends Purchase of treasury stock (1.638 $ 1. 1994 $ 178.605 310.----------------------------------------------------------------<S> <C> <C> <C> BALANCES AT DECEMBER 31.514 710 .291 .809 ================================================================================ </TABLE> The accompanying notes are an integral part of these consolidated financial statements.340) (62) .Dividends on common stock (20.228 (1.647) .----------------------------------------------------------------.592) .479) (1.995) (972.809 204.988) Stock warrants exercised 64.468) (104. ----------------------------------------------------------------BALANCES AT DECEMBER 31.013) $(130.586 4.427) (39.995 115.419 $1.322) 32 .241) Net income for the year Currency translation Stock compensation plan transactions 1 Common stock dividends Purchase of treasury stock (281) .923) (24.013.310 $(6.592) . 1997 $ 1.923) Purchase of treasury stock (1.522) ================================================================= </TABLE> The accompanying notes are an integral part of these consolidated financial statements.457 Preference stock dividends (24.627 (16.995 Currency translation 6 .080.871 2.-----------------------------------------------------------------------------------------------BALANCES AT DECEMBER 31. Johns Manville/34 <TABLE> <CAPTION> .781 Net income for the year 115.394) $26 .------------------------------------------------------------------------------------------------<S> <C> <C> <C> <C> <C> BALANCES AT DECEMBER 31. 1995 1.----------------------------------------------------------------BALANCES AT DECEMBER 31.628 $(16.------------------------------------------------------------------------------------------------In th ousands of dollars .------------------------------------------------------------------------------------------------Retained Cumula tive Capital in Unearned Earnings Curr ency Total Excess of Stock (Accumulated Transla tion Stockholders' Par Value Compensation Deficit) Adjust ment Equity .011. 1994 $1.265 6.265 Exercise of warrants for common stock 324 324 Stock compensation plan transactions 1.Issuance of common stock in connection with the profit sharing exchange 325 . 1996 1.505 (3. 013) (6.900 2.989 (5.697) 9.000 150.013) Exercise of warrants for common stock 64.124) 38.307 Net income for the year 90. high-efficiency filtration media.462 Net income for the year 150.764) Purchase of treasury stock (14. 1997 $540.831) Preference stock dividends (8.------------------------------------------------------------------------------------------------BALANCES AT DECEMBER 31.083 ================================================================================ ================== </TABLE> Johns Manville/35 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Summary of Significant Accounting Policies Johns Manville Corporation ("Johns Manville" or the "Company") manufactures and markets building and equipment insulation.181.486 Currency translation (6 .794 Stock compensation plan transactions 14.422 $(7.671 580.287 $ 693.224) $165.900 Common stock dividends (22.000 Currency translation (17 .684 1.384) (17.492 $ 9 . 1996 539. The Company estimates .106 26 .215) Redemption of preference stock (52.384) Stock compensation plan transactions 999 1.------------------------------------------------------------------------------------------------BALANCES AT DECEMBER 31.725 64..486 90.643 .843) (977.126) (230.614) Purchase of treasury stock (281) .423 (9.242) Issuance of common stock in connection with the profit sharing exchange 471.318 471.614) (22.215) (8. and fibers and nonwoven mats used as reinforcements in building and industrial applications. commercial/industrial roofing systems.988) (4.297 Common stock dividends (972. Realized gains and losses are computed on the specific identification method. The first-in. Cost is determined principally on the last-in. Depreciation expense is computed using the straight-line method. while the remainder are to residential construction markets.that approximately 75 percent of its annual sales are to commercial/industrial markets. (B) Use of Estimates The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements. The Company's products are sold to contractors. Plant and Equipment Property. (D) Financial Instruments The Company uses the amortized cost method of accounting for investments in held-to-maturity debt securities for which it has the positive intent and ability to hold to maturity. first-out (LIFO) basis for all domestic subsidiaries. based upon the estimated useful lives of the assets. (G) Goodwill Goodwill associated with acquisitions in excess of fair value of net assets acquired is amortized on a straight-line basis generally over 20 years. Buildings are depreciated principally over 20 to 40 years. first-out (FIFO) basis is used to determine the cost of inventories for all foreign subsidiaries. plant and equipment are stated at cost. The Company does not obtain collateral or other security to support financial instruments subject to credit risk. mass merchants. (A) Principles of Consolidation The consolidated financial statements include the accounts of Johns Manville Corporation and its majority-owned subsidiaries. All significant intercompany transactions have been eliminated. (F) Property. including disclosures of contingent liabilities. and machinery and equipment are depreciated principally over 20 years. Europe and Asia. wholesale distributors and fabricators throughout North America. (C) Cash and Equivalents Cash and equivalents include money market mutual funds. Fair value accounting is used for debt securities that are classified as available-for-sale securities. The Manville Personal Injury Settlement Trust (the "Trust") owns approximately 80 percent of the Company's common stock. but monitors the credit standing of counterparties. (E) Inventories Inventories are stated at the lower of cost or market. The Company evaluates the recoverability of goodwill through its ongoing strategic . Maintenance and repairs are charged to current period earnings. time deposits and marketable securities with original maturities of three months or less. while replacements and betterments are capitalized. included in operating results. if required. based upon an evaluation of historical claims data and expected future claims. customer incentives. Note 2: Financial Instruments The Company has had limited involvement with derivative financial instruments and does not use them for trading purposes. (K) Income Taxes Tax credits granted by various countries are accounted for as reductions of income tax expense in the year in which the related expenditures become eligible for investment benefit under applicable tax regulations. (I) Revenue Recognition The Company recognizes revenue from product sales upon shipment. the refractory components of the glass furnaces are periodically rebuilt. typically every six to seven years. The Company enters into foreign exchange forward contracts to hedge against currency fluctuations on certain Company's glass on a straightUnusual. allowances and original warranties in the period the sale is reported. Revenue on these product guarantees is recognized over the contract period in proportion to costs incurred. The Company also sells extended roofing product guarantees for periods of 10 to 20 years. The timing of the periodic rebuilds is dependent upon a number of variables including production volumes. The estimated cost to rebuild the refractory components of the furnaces is credited to an allowance and charged to operations line basis over the estimated period to the next rebuild date. In addition. are . product mix. the Company records a receivable at present value for the portion of outstanding claims covered by third-party insurers. During that time. based on its experience. These extended guarantees cover the water tightness of roofing systems resulting from defects in materials or deficiencies in workmanship. (L) Reclassifications Certain prior year information has been reclassified to conform with the current year presentation. sales returns. Johns Manville/36 <PAGE> (H) Provision for Rebuilding Furnaces The Company's glass furnaces have an estimated useful life of approximately 30 years. (J) Workers' Compensation The Company accrues a liability for workers' compensation claims at present value. nonrecurring adjustments to previously established allowances. and the extent and timing of interim repair and maintenance work performed. The Company estimates and records provisions for cash discounts.planning process. due to the fixed and determinable nature of the claim payments. 7 million and other assets of $9. Additionally. The Company's investment policies require diversification of investments and include restrictions on maturity and credit quality. but does not anticipate any significant off-balance-sheet credit risk of accounting loss. 1997 and 1996.8 million had contractual maturities within one year. The amortized cost basis of these securities approximated fair value. Additionally. The Company's investments in held-to-maturity debt securities at December 31.2 million.6 million. marketable securities of $7. The Company's investments in held-to-maturity debt securities at December 31.1 million as of December 31.4 million and $15. depending upon the nature and maturity of the investments. At December 31. The Company invests excess cash in a diversified portfolio of high-quality money market instruments consistent with the preservation of capital and the maintenance of liquidity. 1996. the remainder mature in one to five years. for the period in which the exchange rate changes. 1997. The Company is exposed to credit losses in the event of nonperformance by the counterparties to its financial instruments.material foreign currency exposures and records a receivable/payable which is classified consistently with the related outstanding foreign currency exposure. The Company had outstanding letters of credit totaling $15.7 million and other assets of $9. 1997. the remainder mature in one to five years. net.8 million have contractual maturities of one to five years. which approximated fair value. $5. which approximated fair value. $105.9 million. The Company monitors compliance with these restrictions on an ongoing basis.3 million. 1996. at December 31. The Company did not have any forward contracts outstanding at December 31. the Company had investments in available-for-sale debt . Of these securities. 1997 or 1996. respectively. The Company has not experienced any material losses related to these investments.7 million had contractual maturities within one year. At December 31. Johns Manville/37 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company maintains cash and cash equivalents and certain other financial instruments with various financial institutions throughout the world. the Company held investments in debt securities that were classified as held-to-maturity with an amortized cost basis of $120. Of these securities. 1996. 1997 were classified on the balance sheet as cash equivalents of $31 million. net. Of these securities.6 million.1 million had contractual maturities within one year. over the life of the contract.2 million and other assets of $4. the remaining $21. The Company anticipates that counterparties will be able to fully satisfy their obligations under the contracts. Gains and losses on foreign currency transactions and forward exchange contracts are included in other income (expense). the Company held investments in debt securities that were classified as held-to-maturity with an amortized cost basis of $54. were classified on the balance sheet as cash equivalents of $103. depending upon the nature and maturity of the investments. The discount or premium on forward contracts is accounted for separately from the gain or loss on the contracts and is amortized to other income (expense). $45. Letters of credit are primarily collateralized by cash.7 million. marketable securities of $14. at December 31. the Company had investments in available-for-sale debt securities that were classified on the balance sheet as marketable securities of $22. The amortized cost basis of these securities approximated fair value.--------------------------------------------$127.041 ============================================= </TABLE> Inventories in the amounts of $23.082 $ 60.--------------------------------------------200. $19. $1. the remaining $20.383 Supplies 8. 1997 and 1996.5 million at December 31.700 8.4 million and $29.980 17.016 . The balance of the .061 $101.6 million at December 31. were valued using FIFO.665 ============================================= </TABLE> Included in allowances are doubtful accounts of $6 million and $7.743 $242. 1996 and 1995. The provision for doubtful accounts charged (credited) to costs and expenses related to continuing operations was $(0.963 212.--------------------------------------------<S> <C> <C> Trade $237. $55 million and $10 million. During 1997.410 23.8 million for 1995. respectively. The Company generally requires no collateral on receivables.--------------------------------------------1997 1996 .730 .2) million for 1997.8 million had contractual maturities within one year.securities that were classified on the balance sheet as marketable securities of $35 million and other assets of $5 million. the Company sold securities that had been classified as available-for-sale. Of these securities. 1997 and 1996.2 million have contractual maturities of one to five years.530 Less allowances 36. respectively.943 $229. <TABLE> <CAPTION> Note 3: Receivables In thousands of dollars . which approximated carrying value each year.869 8. resulting in proceeds of $45.--------------------------------------------<S> <C> <C> Finished goods $ 82.780 30.472 Raw materials 25.1 million for 1996. John Manville/38 <PAGE> <TABLE> <CAPTION> Note 4: Inventories In thousands of dollars .7 million.151 .--------------------------------------------1997 1996 . respectively.--------------------------------------------$221. and $0.456 Work-in-process 10.514 Other 20. --------------------------------------------------------------------<S> <C> <C> Vacation.inventories was valued using LIFO.634 Current portion of long-term debt 437 9. These facilities are principally secured by the Company's equity ownership in certain international subsidiaries and joint ventures.--------------------------------------------------------------------1997 1996 .330 $22. 1997 and 1996. respectively.114 . compensation and payroll deductions $47.221 $105.9 million was available at December 31.-------------------------------------------------------$1.5 million at December 31. The excess of current values over amounts for financial reporting purposes was $53.709 Self insured medical and group life coverage 32.888 . the Company's international subsidiaries had borrowing and working capital facilities totaling $85 million. <TABLE> <CAPTION> Note 6: Compensation and Employee Benefits In thousands of dollars .-------------------------------------------------------1997 1996 . of which $51.--------------------------------------------------------------------$84.629 ===================================================================== </TABLE> <TABLE> <CAPTION> Note 7: Long-Term Debt In thousands of dollars .937 $ 54.--------------------------------------------------------------------1997 1996 . In addition.767 $31. 1997.405 15.-------------------------------------------------------<S> <C> <C> Short-term borrowings $1.879 35.--------------------------------------------------------------------- . Amounts available for borrowing under the Receivables Facility are based on the daily balance of certain outstanding trade accounts receivable.032 Other 3.8 million and $51. 1997.748 ======================================================== </TABLE> At December 31. adjusted for various factors as defined under the terms of the Receivables Facility. <TABLE> <CAPTION> Note 5: Short-Term Debt and Credit Facilities In thousands of dollars . the Company had $100 million available under a receivables sale facility (the "Receivables Facility") for its domestic short-term working capital requirements. 731 437.502 Collateralized Revolving credit facility with interest at LIBOR plus 1 percent.354 4.--------------------------------------------------------------<S> <C> 1998 $ 437 1999 25. 1997 are as follows: <TABLE> <CAPTION> In thousands of dollars .--------------------------------------------------------------------$456. payable 1999 25.000 Industrial revenue bonds with interest at floating rates.--------------------------------------------------------------------456.000 $400.000 Bonds payable to the Trust 19.557 15. payable through 2009.<S> <C> <C> Unsecured 10.274 2000 239 2001 989 2002 2. due 2004.731 .634 Less interest accruing to principal (106.875 percent Senior Notes.--------------------------------------------------------------Total 563. 1997.160 ===================================================================== </TABLE> 10. These notes may be redeemed on or after December 15.8 million consist of a series of fixed payments totaling $75 million per year in 2013 and 2014.702 Notes payable with interest from 5. real property and equipment 9.98 percent to 8. discounted at 13 percent.875 Percent Johns Manville International Senior Notes In 1994.820 17.625 percent. from 2 percent to 8.294 $428. the bonds payable to the Trust (the "Trust Bonds") of $19. Johns Manville International issued $400 million of 10.903) . 1999 at prices ranging from 100 percent to 105 percent of the principal amount.875 percent Johns Manville International Senior Notes. payable 2004 $400. Long-term debt maturities at December 31.114 .377 .--------------------------------------------------------------$ 456.13 percent. Interest on these notes is payable semiannually.070 . payable through 2007 2. collateralized by a letter of credit. Johns Manville/39 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bonds Payable to the Trust At December 31. plus accrued interest.274 Less current portion 437 9.318 Thereafter 534. 620 $20. respectively.=============================================================== </TABLE> The Company's agreements with its lenders contain a number of financial and general covenants.6 million in 1995. which owns all of the Company's operating subsidiaries.405 Provisions for estimated costs 11.063) (8.264 8. was as follows: <TABLE> <CAPTION> In thousands of dollars . 1997. the maximum amount available for dividends to be paid to the Company by Johns Manville International under debt covenants of the Senior Notes was approximately $250 million and $210 million.881 1.4 million.--------------------------------------------------$18.3 million and had an estimated fair value of $494. $11.--------------------------------------------------1997 1996 .5 million in 1997. At December 31. the fair value of the Company's long-term debt is an estimate based on quoted market prices. ("Johns Manville International").353 =================================================== </TABLE> Note 9: Commitments and Contingencies Total rental expense related to continuing operations was $12. the Company's long-term debt totaled $437.375) . the Company's wholly owned subsidiary.--------------------------------------------------27. At December 31. for the years ended December 31. 1997.300 Less current portion 8. 1997 and 1996. restrictions on borrowings. dividends and other distributions by Johns Manville International Group. included in other noncurrent liabilities.5 million.--------------------------------------------------<S> <C> <C> Balance at beginning of year $22. 1997. Inc. Noncompliance with these or other covenants. Note 8: Allowance for Furnace Rebuilds The activity in the allowance for furnace rebuilds. Generally. minimum rental commitments of the Company under long-term.9 million in 1996 and $14. among others. 1996.7 million and had an estimated fair value of $515.300 $22. At December 31. the Company was in compliance with these covenants. and restrictions on intercompany transactions. when available. noncancelable operating leases are as follows: <TABLE> .270 Rebuild expenditures (6.501 22. These include. At December 31.947 . could result in the termination of existing credit agreements and the acceleration of debt owed by the Company and its subsidiaries. investments. the Company's long-term debt totaled $456. As of December 31. or the occurrence of any other event of default. stock issuances and repurchases. or the discounted cash flow method. including transfers of cash. The Company has accrued for costs relating to future inspections. The Company has various purchase commitments for items used in the ordinary conduct of business.620 .4 million.--------------------------------------------------------$24. if additional costs are incurred in excess of the accrued amounts. including an order requiring the removal and replacement of the phenolic insulation and remediation of any deck corrosion. the Company began a voluntary program to inspect such metal decks and remediate where appropriate. Massachusetts.501 ========================================================= </TABLE> Minimum rental commitments of the Company have not been reduced by anticipated sublease income over the lease terms of approximately $2.190 2002 and thereafter 7. The Company has reviewed its historical inspection and remediation experience and the terms and collectibility of amounts payable under the reimbursement agreements in light of the contingencies described above. District Court in Boston.--------------------------------------------------------<S> <C> 1998 $ 6. These accruals are based on the Company's historical experience regarding the incidence of corrosion and the cost of remediation and include a number of assumptions related to the types of roofs on which phenolic insulation has been installed as well as the assumption that the Company's past remediation experience will continue over the remaining lives of roofs insulated with the Company's phenolic roofing insulation.S. remediation and anticipated claims. The Company intends to defend these allegations vigorously. Johns Manville/40 <PAGE> Contingent Product Liability Between 1988 and 1992.S. .<CAPTION> In thousands of dollars .938 2000 3. such commitments do not exceed current market prices or anticipated usage requirements. Pursuant to reimbursement agreements with the Company's liability carriers and former owner of the phenolic roofing insulation business. Subsequently. such costs are not expected to have a material adverse effect on the Company's financial condition.432 2001 3. the Company manufactured phenolic roofing insulation which may. contribute to the corrosion of metal decks on which it is installed. under certain circumstances. Based on the information available to date and subject to the assumptions described above. with phenolic insulation installed on their roof decks and seek damages and injunctive relief. liquidity or results of operations. The plaintiffs purport to represent all building owners in the U. the Company has been reimbursed for a portion of historical costs incurred and is entitled to receive reimbursement for a substantial portion of future costs to be incurred by the Company for inspection and remediation. In 1996.321 1999 3. the Company and a third party were named as defendants in two class action cases filed in U. In the aggregate. Compensation and Liability Act ("CERCLA") or similar state legislation. will be subject to the agreement. the Company had remediation activities in progress at nine sites. the application and effectiveness of remedial actions. the Company's balance sheet included undiscounted accruals for environmental remediation costs. of $34 million. government and the Company settled certain litigation concerning the Company's disposal activities prior to consummation of its plan of reorganization. The Company believes that amounts paid in 1997 and 1996 are representative of the Company's future annual environmental cleanup costs and anticipates expenditures relating to costs currently accrued to be made over the next 15 years.8 million for Johns Manville/41 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS environmental cleanup in 1997 and 1996. limits the Company's future liability under both CERCLA and the Resource Conservation and Recovery Act ("RCRA") to 55 percent of its share of site-wide response costs and natural resources damages without regard to joint and several liability for disposals made by the Company prior to consummation of the Company's plan of reorganization. if any. respectively.S. for such sites shall never exceed $850. The EPA and others from time to time commence cleanup activities at such sites and in the future the EPA and others may assert claims against the Company with respect to such sites. Of these 24 sites. actual costs to be incurred for environmental cleanup may vary from previous estimates. At December 31. the Company could be jointly and severally liable for costs of remediating these sites. maintenance and monitoring costs. the Company has been identified as a potentially responsible party at 24 non-Company owned or operated sites under the federal Comprehensive Environmental Response. which was made an order of the court. Subject to the uncertainties inherent in evaluating environmental exposures. including the Company's historical remediation experience. the difficulty in assessing the extent of environmental contamination. The remaining seven sites are not subject to the agreement and. in the aggregate. the U. In addition.Environmental Contingencies At December 31. and based on information presently available. currently enacted environmental laws and regulations. . out of a total of 19 such sites for which the Company has identified environmental conditions requiring remediation.3 million and $1. The agreement provides that the amount the Company will be obligated to pay. accordingly.000 during any given year. The Company believes that all such activities and claims. the Company believes that if additional costs are incurred in excess of the accrued amounts. the Company's potential liability for 17 sites will be determined pursuant to the settlement agreement described in the following paragraph. liquidity or results of operations. In 1994. 1997 and 1996. The Company paid $1. 1997. The agreement resolved the Company's liability at certain historical sites and also covers CERCLA and RCRA liability for other disposal sites at which the Environmental Protection Agency ("EPA") has incurred or may incur response costs and which were used by the Company prior to consummation of the plan of reorganization. including ongoing compliance. and existing remediation technology. and the allocation of costs among potentially responsible parties. such costs are not expected to have a material adverse effect on the Company's financial condition. The settlement agreement. As a result of factors such as changes in federal and state regulations. The following is a summary of shares outstanding: <TABLE> <CAPTION> Cumulative Pre ference Stock. In addition. approximately 32.-------------------------------------------------------------------------------------------------------------------Balance at December 31.230.761 Issuance of common stock in connection with compensation plans 89. Although it is not possible to quantify the effects year 2000 compliance issues will have on customers or suppliers.230.Year 2000 Compliance The Company is engaged in a comprehensive project to modify its computer software for year 2000 compliance.583 122. was deducted from net income to compute earnings and earnings per share applicable to common stockholders.9 million shares of common stock during 1996. spending to upgrade or replace the Company's software or systems related to year 2000 compliance is not expected to exceed $5 million through 1999. The Company declared and paid a special cash dividend to all common stockholders during 1996 of $6. the Company does not anticipate related material adverse effects on its financial condition. The Company redeemed its cumulative Preference Stock. 1995 9. Preference stock dividends paid in 1996 and 1995 totaled $10. Based on current estimates. totaling $968.300 Forfeiture of common stock issued in connection with compensation plans (31.358) .1 million was charged directly to capital in excess of par value and.3 million and $24. The premium.583) Issuance of common stock in connection with compensation plans .583 122.827. Series B. warrants were exercised to purchase 6.9 million.00 per share. along with preference stock dividends.550 Treasury stock acquired (134.8 million. or excess of the redemption price over the carrying value of the preference stock.500) Issuance of common stock upon exercise of warrants 34. 1994 9.785. representing a substantial portion of the proceeds from the disposition of Riverwood International Corporation ("Riverwood").-------------------------------------------------------------------------------------------------------------------<S> <C> <C> Balance at December 31. respectively. Common Series B Stock .5 million shares of the Company's common stock were issued under the profit sharing exchange (see Note 19). Note 10: Stockholders' Equity During 1996.1 million. in 1996 with cash of $230.230. liquidity or results of operations. of $52. Series B (9.753 Redemption of Cumulative Preference Stock. 1.19 per share. At December 31. 1997.527. 128. 1997 161.425) Issuance of common stock in connection with the profit sharing exchange 32.504 Issuance of common stock upon exercise of warrants 6.9 million shares of the Company's common stock were registered and reserved for issuance. Deferred and Restricted Stock Deferred stock rights entitle participants to the receipt of shares of common stock upon vesting and dividend equivalents. During 1996.3 million shares of its common stock. the Company granted approximately 1. 1997.48 per share. respectively.0 million were outstanding at December 31. In connection with the noncompensatory plan. the Company introduced a noncompensatory Johns Manville employee stock ownership plan for its worldwide employees.1 million deferred stock rights were issued at a weighted average market value at grant date of $10. During 1996. approximately 6.892. These options vest through July 1.305) .964 Treasury stock acquired (25.-------------------------------------------------------------------------------------------------------------------Balance at December 31. 43. In addition. 2002 and expire on December 31. 5. 2000.000 deferred stock rights were issued at a weighted average market value at grant date of $11.580.495. vest through December 31. and are restricted as to disposition and are subject to forfeiture prior to vesting upon certain circumstances.325.7 million.36 per share. restricted stock and options to purchase shares of the Company's common stock. 1996 161.930 Issuance of common stock in connection with compensation plans 109. the Company has registered and reserved for issuance. $2.589 ================================================================================ ===================================== </TABLE> Johns Manville/42 <PAGE> Note 11: Stock Compensation Plans The Company's stock compensation plans grant eligible employees deferred stock rights.000 shares of restricted common stock were granted at a market .6 million shares were available for issuance under stock compensation and noncompensatory plans. During 1996.-------------------------------------------------------------------------------------------------------------------Balance at December 31. 1996 and 1995.8 million for the years ended December 31. The plan enables employees to purchase stock directly from the market and through Company savings plans. 1997. During 1997.6 million options to employees at $12.8 million and $1. These deferred stock rights. 1997. The amount of compensation expense recognized for stock-based compensation was $2. an additional 7. of which 1. 2002. On July 1.035. but no voting rights prior to vesting.988 Treasury stock acquired (1.110 . 000 $10.800) $ 7. The Company's common stock options were granted at exercise prices equal to. 1996 and 1995 is presented below: <TABLE> <CAPTION> 1997 199 6 1995 .18 . and $2.price of $10.75 per share.62 (252.81 per share for options with exercise prices exceeding market prices on grant dates.900 $ 9.54 Granted 2. The weighted average fair values of options granted during 1996 were $3.29 5.00 Exercised (44.69 325. 2005.400 $ 7. 123. 1997. Johns Manville/43 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the status of the Company's stock option plans as of December 31.242) $ 8. Stock Options The Company applies APB Opinion 25 and related interpretations in accounting for its fixed stock options.235.51 548.800) $ 7.1 million shares of restricted stock previously issued was accelerated during 1996 due to the disposition of Riverwood. and therefore no compensation cost was recognized. other than those granted under the noncompensatory plan.234.225 $11.84 per share for options with exercise prices equal to market prices on grant dates. The weighted average fair values of options granted during 1997 were $3.02 per share for options with exercise prices equal to market prices on grant dates. changes. The vesting of 2.00 318. the methods for recognition of expense on the Company's plans involving stock options. of which 28. or in excess of. and if fully adopted. among other things. market prices on the grant dates. 123") was issued in 1995.----------------------------------------------------------------------------------------------------------------------<S> <C> <C> <C> <C> <C> <C> Outstanding at Beginning of Year 5. 1997. 1997 and expire on December 31. Statement of Financial Accounting Standards No.14 (84.260.295 $12. The substantial majority of the options.----------------------------------------------------------------------------------------------------------------------Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price . "Accounting for Stock-Based Compensation" ("SFAS No.71 per share for options with exercise prices exceeding market prices on grant dates.440 $11. vested by December 31. and $2.000 were outstanding at December 31. 862 7. however.88-$12.000 7.00 ================================================================================ ======================================== Options Exercisable at End of Year 4.866.3 $11.56 (9.----------------------------------------------------------------------------------------------------------------------6.28 . 123 beginning in 1996 are required.880 $13.58 ================================================================================ ======================================== </TABLE> Recognition of compensation expense under SFAS No. 1997: <TABLE> <CAPTION> .70 (321.900 ================================================================================ ======================================== </TABLE> The following table summarizes information about stock options outstanding at December 31. 1997.20 2.44-$15.3 $ 4.717. Had compensation cost been determined based on the fair value at grant dates for stock option awards consistent with SFAS No.51 548.225 $11.38 .0 $13.----------------------------------------------------------------------------------------------------------------------Options Outstanding Options Exercisable ------------------------------------------------------------------------------------------Weighted Average Range of Number Remaining Weighted Average Number Weighted Average Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price .55 2.256 8.108 2.828 $10.40 1. 123 is optional.235. except per share amounts .00 70.315) $ 7.------------------------------------------------------------------------------ .43 4.154.606 7.900 $ 9. 123.Forfeited (443.075. 1996 and 1995 would have been reduced to the following pro forma amounts: <TABLE> <CAPTION> In thousands of dollars.981.76 5.700) $10.400 $ 4.685.981.108 $11.0 $11. pro forma disclosures as if the Company adopted expense recognition requirements under SFAS No.00 110. the Company's net income and earnings per share for the years ended December 31.416) $11.----------------------------------------------------------------------------------------------------------------------<S> <C> <C> <C> <C> <C> $ 4.----------------------------------------------------------------------------------------------------------------------Outstanding at End of Year 6.76 4.862 $11.685.747.515 223.00 $9.63 $12. which revises the computation and disclosure of earnings per share. The basic and diluted earnings per common share amounts are determined using the following common equivalent shares: <TABLE> <CAPTION> 1997 1996 1995 .73 ================================================================================ </TABLE> John Manville/44 <PAGE> The pro forma compensation expense based on the fair value of the options is estimated on the grant date using the Black-Scholes option-pricing model the weighted average assumptions used for options granted in 1997 were: dividend yield of $0.20 $. The adoption of SFAS No.6 percent and expected life of the options of 4 years.------------------------------------------------------------------------------<S> <C> <C> <C> Net income applicable to common stock: As reported $150. "Earnings Per Share" ("SFAS No.89 $. SFAS No. Principally.------------------------------------------------------------------------------ .93 $.16 per share. 128"). and additional awards in future years are possible. expected volatility of 32 percent.12 per share.----------------------------------------------------------------------------------------------------------------------------------Basic Diluted Basic Diluted Basic Diluted .3 percent and an expected life of the options of 4. a risk free rate of return of 6. expected volatility of 31. 128. 128 replaces primary earnings per share with basic earnings per share which does not consider common stock equivalents.17 $. The weighted average assumptions used for options granted in 1996 were: dividend yield of $0.476 $25. Basic earnings per common share amounts are based on the weighted average number of common shares outstanding during the year. SFAS No.5 years.072 Pro forma $144.73 Pro forma $.92 $. 128 did not have a material impact on the Company's reported results. 123 in this pro forma disclosure are not indicative of future amounts.919 Basic earnings per share: As reported $.4 percent. The diluted earnings per common share computation further includes all dilutive potential common shares outstanding during the year. the Company adopted Statement of Financial Accounting Standards No.926 $90.17 $. Note 12: Earnings per Common Share In 1997.89 $.20 $.-1997 1996 1995 . modifies certain dilutive computations and replaces fully diluted earnings per share with diluted earnings per share.000 $30. a risk free rate of return of 6.74 Diluted earnings per share: As reported $.74 Pro forma $.145 $91. 123 does not apply to awards prior to 1995. The effects of applying SFAS No. including prior periods which were restated. 000 162.------------------------------------------------------------------------------Income before Extraordinary Items 150.----------------------------------------------------------------------------------------------------------------------------------161.000 1.000) .886.000 $ 30.226.------------------------------------------------------------------------------Net Income Applicable to Common Stock $150.083 Income from Discontinued Operations.542.000 122.072 Extraordinary Losses (316.201.285) .S.246 (42.341) (24.662.000 Treasury stock (1.000 346.529 $ 190. rates of increase in future compensation levels and expected long-term rates of return on assets.471 216.000) (871.000 122.781.529 130.000 124. net of tax 19.------------------------------------------------------------------------------1997 1996 1995 .000) (105.594.443.------------------------------------------------------------------------------130.923) .000 152.184 97.006 Preference Stock Redemption Premium/Dividends (60.145 $ 91.430 91.000 1. 330.491 Gain (Loss) on Disposal of Discontinued Operations.228. stock options and deferred stock rights 1.502) .886.558. and German employees. accordingly.-----------------------------------------------------<S> <C> <C> <C> <C> <C> <C> Common stock 162.000) (105.768. net of tax and Minority Interest 36.000 151.000 Dilutive potential common shares: Warrants.226.136. the Company believes it is reasonably possible that .000 163.768.000 152.000) (1. Pension expense (income) and projected benefit obligations under each of these plans are determined using assumptions regarding discount rates.000 ================================================================================ ==================================================== </TABLE> The basic and diluted earnings per common share amounts are determined using the following income amounts: In thousands of dollars .000) ( 871.072 ================================================================================ Johns Manville/45 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 13: Pensions The Company maintains noncontributory defined benefit pension plans for its U. These assumptions are subject to prevailing economic conditions and.525 $122.000 152. 201.000 122.------------------------------------------------------------------------------Income from Continuing Operations $130. 490) (3.257) $ 4.651 Net amortization (6.480 4 6.S. (A) Pension Expense (Income) The Company's pension expense (income) related to the U.S. defined benefit pension plans. U.S.------------------------------------------------------------------------------------1997 1996 1995 .00% Rates of increase in future compensation levels 5. Pension benefits are based primarily on years of service and the employee's compensation or pension rate near retirement.300 ================================================================================ ====== </TABLE> Assumptions used in determining the pension expense (income) for the years ended December 31 are as follows: <TABLE> <CAPTION> 1997 1996 1995 . for the years ended December 31 consists of the following: <TABLE> <CAPTION> In thousands of dollars .------------------------------------------------------------------------------------Total pension expense (income) $ (8.00% ============================================================================= </TABLE> .50% 7.00% 8.297) ( 4. Plan assets are invested primarily in equity and fixed income securities. employees are covered by noncontributory defined benefit pension plans. exclusive of amounts related to discontinued operations.168) 10 1.00% 9.50% 6.480) (46.50% Expected long-term rates of return on assets 8.a change in these assumptions may occur in the near-term.506 $ 6.778) (14 6.866 Interest cost on projected benefit obligation 45. Pension Plans Substantially all of the Company's U.437) -deferred gain (loss) 32.248 Estimated return on assets -actual (gain) loss (87.254 44.25% 8.454) $ (3.----------------------------------------------------------------------------<S> <C> <C> <C> Discount rates 7.685 $ 8.028) . The Company's funding policy is to contribute funds to a trust as necessary to at least meet the minimum funding requirements of the Internal Revenue Code.------------------------------------------------------------------------------------<S> <C> <C> <C> Service cost-benefits earned during the year $ 7.577 (6.50% 5. S.970 $583.184 Unrecognized net loss 30.447 59.619 $610.947 ============================================================================== Projected benefit obligation $641. employees as of December 31.S. Johns Manville/46 <PAGE> German Pension Plan The German plan is noncontributory and is unfunded.115 ============================================================================== Accumulated benefit obligation $624.861 1.5 percent.-----------------------------------------------------------------------------Plan assets in excess of projected benefit obligation 99.007 691.S.156 $119.095) .---------------------------------------------------------------------------1997 1996 1995 . is as follows: <TABLE> <CAPTION> In thousands of dollars . for the years ended December 31 consists of the following: <TABLE> <CAPTION> In thousands of dollars .529 1. The vested U.852 ============================================================================== </TABLE> The projected benefit obligations for the U.204 Unrecognized transition adjustment (12.591 .---------------------------------------------------------------------------<S> <C> <C> <C> Service cost-benefits earned during the year $ 567 $ 881 $ 909 Interest cost on projected benefit obligation 1. benefit obligation is calculated on the benefits the employees are entitled to receive if they were to separate immediately.560 $632. plans were determined in 1997 and 1996 using a discount rate of 7. determined using a discount rate of seven percent and a rate of increase in future compensation of five percent for each year.509 12.-----------------------------------------------------------------------------<S> <C> <C> Actuarial present value of: Vested benefit obligation $595. The Company utilizes a discount rate based on available high-quality corporate bonds.869 .013) (20.5 percent and a rate of increase in future compensation levels for salary-related plans of 5.559 Unrecognized prior service costs 11.-----------------------------------------------------------------------------1997 1996 .213 68.(B) Funded Status The funded status of the Company's defined benefit plans covering U. (A) Pension Expense The pension expense. The pension or termination benefits are based primarily on years of service and the employee's compensation.-----------------------------------------------------------------------------Prepaid pension asset $129.407 Plan assets at fair value 741. Employees may make contributions of up to 16 percent of their compensation.---------------------------------------------------------------------------Total pension expense $2.S.309 $25.691 =========================================================== Accumulated benefit obligation $22. Company contributions to the savings plans were $7.204 Unrecognized net gain 4. and Canadian retirees of the Company and their dependents under defined benefit plans. $7. The rate of increase in future compensation levels for salary-related plans was four percent in 1997 and five percent in 1996.971 $30.861 =========================================================== Projected benefit obligation $23. The Company matches up to six percent of certain contributions at rates ranging from 15 percent to 100 percent.847 $2.5 million in 1996 and $7.-----------------------------------------------------------------------------1997 1996 1995 .335 $24.----------------------------------------------------------<S> <C> <C> Actuarial present value of: Vested benefit obligation $21.972 Unrecognized transition adjustment (633) (863) . The vested benefit obligation is calculated on the benefits the employees are entitled to receive if the employees were to separate immediately.6 million in 1995.S. Voluntary Savings Plans The Company provides voluntary savings plans in which eligible U. depending on the Company's performance.----------------------------------------------------------Pension liability $26.421 $28. employees of the Company may participate. Note 14: Other Postretirement Benefits Medical and life insurance coverage is provided to eligible U. The postretirement benefit expense for the years ended December 31 consists of the following: <TABLE> <CAPTION> In thousands of dollars .062 $2.889 ============================================================================ </TABLE> (B) Funded Status The status of the Company's unfunded German plan as of December 31 is as follows: <TABLE> <CAPTION> In thousands of dollars .----------------------------------------------------------1997 1996 .Net amortization (34) 105 111 .313 =========================================================== </TABLE> Projected benefit obligations were determined using a discount rate of seven percent for both 1997 and 1996.183 2.1 million in 1997. 1997 and 1996.376 .------------------------------------------------------------------------<S> <C> <C> Actuarial present value of the accumulated postretirement benefit obligation: Retirees $151.206 Fully eligible plan participants 10.269 ========================================================================= </TABLE> The current portions of $17.390 $ 1.560 Interest cost on accumulated postretirement benefit obligation 13.------------------------------------------------------------------------188.960 $12. The Company utilizes a discount rate based on available high-quality corporate bonds. the rate was assumed to decrease gradually to 5.5 million of the postretirement benefit obligation are reflected in compensation and employee benefits as of December 31.831 184.640) (1.-----------------------------------------------------------------------------Total postretirement benefit expense $12.434 Net amortization (1.9 percent annual rate of increase in the per capita cost of covered medical benefits was assumed for 1998. For measurement purposes.------------------------------------------------------------------------Postretirement benefit obligation $215.037 8.889 8.8 million and $19.912 Unrecognized prior service costs 24.5 percent.724 $14. increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated benefit obligation . is as follows: <TABLE> <CAPTION> In thousands of dollars . respectively.563 Other active plan participants 27.258 $220. seven percent in 1996 and nine percent in 1995.210 12.212 . Johns Manville/47 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company's unfunded postretirement benefit obligation reconciled with the amounts shown in the Company's consolidated balance sheet as of December 31.478) . The accumulated postretirement benefit obligations were determined in 1997 and 1996 using a discount rate of 7..592 25.-----------------------------------------------------------------------------<S> <C> <C> <C> Service cost-benefits earned during the year $ 1. a 5.373 $ 1.202 $151.981 Unrecognized net gain 1.516 =============================================================================== </TABLE> The postretirement benefit expense was calculated using a discount rate of 7.5 percent in 1997.604) (2.5 percent in 2002 and remain at that level thereafter.955 15. To illustrate.538 26. the Company believes it is reasonably possible that a change in these assumptions may occur in the near term. Accordingly. The Company's assumptions regarding the discount rate and annual rate of increase in the per capita cost of covered medical benefits are subject to prevailing economic conditions.------------------------------------------------------------------------1997 1996 . 798 4.002 Insurance Receivable: Gross $ 7. 1997.2 percent and 8.000 2001 6.765 Present Value 4.------------------------------------------------------------------1997 1996 .5 million.917 $123.572 $ 7. and the aggregate of the service and interest cost components of the periodic cost for the year then ended by $0. 6.200 1999 7. The Company expects to pay the following amounts for its workers' compensation obligations: <TABLE> <CAPTION> In thousands of dollars .S.6 million.------------------------------------------------------------------<S> <C> <C> Workers' Compensation Liability: Gross $117. the Company anticipates claims for insurance coverage will be fully satisfied. by $7.200 Thereafter 83.717 . Treasury securities with maturities similar to the timing of expected claim payments. respectively. respectively.as of December 31.569 Present Value 66.200 2000 7. 1997 and 1996.4 percent.600 2002 6. which reflect rates of return on available U. 1997. Note 15: Workers' Compensation The workers' compensation liability and related receivable at gross and present value at December 31 are: <TABLE> <CAPTION> In thousands of dollars . Although the Company is exposed to credit losses in the event of nonperformance by its insurers.917 =================================== </TABLE> Johns Manville/48 <PAGE> Note 16: Nonrecurring Charges In 1996. Discount rates of 6.2 percent were used to measure expense for the years ended December 31.4 percent at December 31. the Company recorded the following pretax nonrecurring charges totaling .818 =================================================================== </TABLE> The liability and receivable were measured using risk-free discount rates of 6 percent and 6.----------------------------------$117.658 69.----------------------------------<S> <C> 1998 $ 7. 1996 and 1995. demolition of facilities and site restoration.513) (6.682 . the final disposition will begin in 1998 and is expected to be substantially completed by 1999.516) $(4.-----------------------------------------------------------------------------<S> <C> <C> <C> Amortization of intangible assets $(10.5 million and $(4) million. the Company recorded nonrecurring charges of $41.-----------------------------------------------------------------------------1997 1996 1995 .456) Interest accretion on workers' compensation liabilities (3.910) Phenolic legal expenses (600) (2.921) Settlement of pension plans 7. $6. the impacts of such revisions. The Company expects to fund the charges requiring cash outlays from existing cash balances and cash generated from operations. the Company believes it is reasonably possible that these estimates may be revised in the near-term. Upon completion of these actions. Note 17: Other Income (Expense). However.723) Other 5. Pending federal and state regulatory agency approval.6 million related to corporate and eliminations. therefore. the Company spent minimal amounts in preparation for demolition phases of the project. 1997.647 3.-----------------------------------------------------------------------------$(10.4 million was classified as other current liabilities.7 million for the shutdown of current operations. Consequently.005) =============================================================================== </TABLE> . relinquish the properties and obtain regulatory approvals to execute the actions described above.068) (3. of which $30 million. the Insulation segment and the Roofing Systems segment. respectively. and at December 31. The Company completed an evaluation of a manufacturing facility with both current and former operations and determined that its best course of action was closure of the facility. and a gain on the sale of other manufacturing assets. are subject to risks and uncertainties related to the Company's ability to secure agreements with third parties. consisting primarily of asset write-downs to estimated fair values in the automotive molded parts business.5 million were noncash asset write-downs. As a result. The Company recorded additional 1996 nonrecurring charges (income) in the Insulation and the Engineered Products segments of $11. liquidity or results of operations. are not expected to have a material adverse effect on the Company's financial condition.567) (3. The nonrecurring charges are based on estimates and. $15. $7. which was disposed of in 1997.216 Write-off/disposition of nonproductive assets (6. Of these charges.341) $ (345) $(17.528) $ (677) Pension and postretirement benefits (2.$49. the Company intends to dispose of the remaining properties and does not expect to incur significant future monitoring and maintenance costs. respectively.072) (3. if any.1 million and $5. with the majority of liabilities settled during that time frame. During 1997. net <TABLE> <CAPTION> In thousands of dollars .2 million.315 4. 6 million of profit sharing expense through April 1996 to the Trust.837 ============================================================= </TABLE> The approximate tax effect of the temporary differences and carryforwards giving rise to the net deferred tax asset is as follows: <TABLE> <CAPTION> In thousands of dollars .------------------------------------------------------------$8.50 per share.2 million. the Company exchanged approximately 32.------------------------------------------------------------1997 1996 . net of taxes of $169.316 State and local taxes 403 664 . plus related expenses of the transaction and other trust related settlements. Interest accretion on workers' compensation liabilities primarily relates to previous asbestos operations. federal and foreign income taxes $8.------------------------------------------------------------<S> <C> <C> U.3 million. resulting in a pretax gain on sale of equity investment of $74. the Company sold its remaining equity investment in Stillwater Mining Company for net cash proceeds of $110.300 $20. the Company recorded an extraordinary loss of $314. The Company retained a five percent net smelter royalty on metals produced from certain Stillwater mining claims.Pension and postretirement benefits are attributable to retirees of the Company's former business operations. 1996 of $14.7 million and was also paid in 1996. Note 20: Income Taxes Income taxes payable consists of the following: <TABLE> <CAPTION> In thousands of dollars . Johns Manville/49 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 19: Profit Sharing Obligation During 1996.---------------------------------------------------------------------------1997 1996 . The extraordinary loss was based on the New York Stock Exchange closing price of the Company's common stock on April 4.S.703 $35.857 Deferred income taxes 14. Note 18: Gain on Sale of Equity Investment In 1995. This represents the final profit sharing payment to the Trust. Profit sharing expense for 1995 totaled $27. The Company paid $6.5 million.5 million shares of its common stock for the Trust's profit sharing right to 20 percent of the Company's net earnings (as adjusted). As a result.9 million. Deferred Tax Assets: Trust deductions $216.842 $242. before valuation allowances 288. the Company is responsible for income taxes on the taxable income of the Trust's specific settlement fund at a tax rate of 15 percent. or when the Trust Bonds are sold by the Trust.994 . Deferred Tax Liabilities: Property.S. The charge related to the Trust Bonds becomes deductible as principal and interest payments are made to the Trust.994 Employee benefit accruals 102.000) (70.344 . plant and equipment 100.596 Provision for furnace rebuilds 9.162 ============================================================================ </TABLE> The deferred tax asset related to Trust deductions primarily represents stock and Trust Bonds issued to the Trust that are not yet deductible for income tax purposes.547 842 .409 461.---------------------------------------------------------------------------Foreign Deferred Tax Assets 2.216 ..379 108. and retaining the proceeds of. The deferred tax asset related to Trust deductions includes $206.---------------------------------------------------------------------------Net Deferred Tax Asset.575 General business credit carryforward 3.350 Valuation Allowances (52.488 Deferred compensation 5. the Company does not expect related future liabilities to have a material adverse effect on the Company's financial condition. Johns Manville/50 <PAGE> The Company receives a tax deduction for the amount of any dividends paid on shares of the Company's common stock held by the Trust.188 Other 13. Under Section 468B of the U.---------------------------------------------------------------------------Total Deferred Tax Assets 440.842 312.839 4. and funds are distributed to claimants or deposited in a specific settlement fund.871 22.---------------------------------------------------------------------------Total Deferred Tax Liabilities 152.---------------------------------------------------------------------------U.---------------------------------------------------------------------------Net Deferred Tax Asset $236.523 18.7 million (exclusive of any related valuation allowance) generated from the issuance of stock to the Trust.764 Prepaid pension asset 44. However.188) .956 462.412 $215.805 Capitalized research. Although the Company cannot predict the amount of any such future tax obligations. development and engineering 7.114 149.658 45. liquidity or results of operations.625 7.S.613 Reserves 52. In addition. this liability could be material in certain situations including the Trust monetizing.S.---------------------------------------------------------------------------<S> <C> <C> U. Any such taxes paid by the Company will generate a tax deduction for the Company.761 6. a .370 62.552 7. the Company will receive a tax deduction when the Trust sells some or all of its shares of common stock and distributes the proceeds to its beneficiaries or transfers the proceeds to a specific settlement fund.695 97.502 .---------------------------------------------------------------------------438. Internal Revenue Code.027 Credit for prior year minimum tax carryforward 20.599 14.675 .239 Deferred state and local taxes 6.555 Other 6. the Company had a $52 million valuation allowance on its U.1 billion in 1997 and 1996. In accordance with Statement of Financial Accounting Standards No.------------------------------------------------------------------------Total Deferred Tax Liabilities 44.244 .345 . The valuation allowance decreased $12.------------------------------------------------------------------------Foreign Deferred Tax Liabilities: Property.------------------------------------------------------------------------<S> <C> <C> Foreign Deferred Tax Assets $ 1. the Company may receive a tax benefit in excess of the deferred tax asset reflected for financial reporting purposes." the Company's valuation allowance on all deferred tax assets is subject to change as forecasts of future years' earnings and the estimated timing of the utilization of the Company's tax benefits and credit carryforwards are revised (including the timing and amounts received by the Trust for its investment in Company stock).2 million and $1.------------------------------------------------------------------------Net Deferred Tax Liability $ 42. The $18. respectively.175 $ 55.486 Undistributed earnings of foreign subsidiaries 14. Likewise.S. the Company would receive a tax benefit less than the deferred tax asset reflected for financial reporting purposes.2 million decrease in the valuation allowance in 1997 is primarily due to the utilization of general business credit carryforwards that the Company previously believed would expire unused. and foreign components of income from continuing operations before income taxes consist of the following: .117 57. 109. Johns Manville/51 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The approximate tax effect of the temporary differences giving rise to the net deferred tax liability is as follows: <TABLE> <CAPTION> In thousands of dollars . to the specific settlement fund within the Trust or to claimants generating corresponding current tax deductions for the Company.942 $ 2. cash income tax liability in 1996. 1997.3 million in 1996 primarily due to the expiration of foreign tax credit carryforwards and general business credit carryforwards which were fully reserved in prior years. "Accounting for Income Taxes. if the Trust were to sell the stock at a price lower than the carrying value.------------------------------------------------------------------------1997 1996 .S.558 ========================================================================= </TABLE> The U. deferred tax asset primarily related to future deductible amounts that may not be realized.316 Other 2. The Trust transferred approximately $17.772 43. The monies transferred and use of operating loss carryforwards were adequate to eliminate substantially all U.S. If the Trust were to sell the stock at a price greater than the Company's carrying value. plant and equipment 41. At December 31.significant portion of its investment in the Company's common stock.802 . 203 47.----------------------------------------------------------------------------1997 1996 1995 .-------------------------------------------------------------------------11.-------------------------------------------------------------------------Deferred: U.603 .123 .642 Foreign 17.203) 72. federal statutory expense $ 61.----------------------------------------------------------------------------<S> <C> <C> <C> U.002 $ 7 8.420 $ 53.S.526 Foreign (1.091) $102.178) 82.951 $(39.049 U.595 1.-----------------------------------------------------------------------------------<S> <C> <C> <C> U.367 .-------------------------------------------------------------------------33.087 20.492 16.044 (61.571 (67.S.597 .056 Foreign 39. $136.943 42.-------------------------------------------------------------------------<S> <C> <C> <C> Current: U.294 .975) 9.380 28.-----------------------------------------------------------------------------------1997 1996 1 995 .<TABLE> <CAPTION> In thousands of dollars .473) (5.491 $182.277 $103.480 $151.S.-------------------------------------------------------------------------1997 1996 1995 . federal $ 12.----------------------------------------------------------------------------$175.S.423 ============================================================================= </TABLE> The provision for income tax expense (benefit) on continuing operations consists of the following: <TABLE> <CAPTION> In thousands of dollars .417 ========================================================================== </TABLE> The reported amount of income tax expense on consolidated pretax income from continuing operations differs from the amount of income tax expense that would result from applying the domestic federal statutory tax rate to consolidated pretax income from continuing operations for the following reasons: <TABLE> <CAPTION> In thousands of dollars . state and local 2.543 Increase (decrease) resulting from: .875 $ 2.434 $224.S.618 24. 13.887 $ 3.-------------------------------------------------------------------------$ 44. 304 =========================================================== Income Before Income Taxes $ 25.3 million at December 31.2 million. the Company adjusted the estimated gain recognized in 1996 on the disposition of Riverwood.924 11.08 billion from the disposition of its 81. which were finalized with the completion of the Company's 1996 income tax returns.S. The determination of the deferred tax liability related to these undistributed earnings is not practicable. The adjustment. Accordingly. net of taxes of $138.180 2.9 million of U. During 1996.978 U.S.417 ================================================================================ ===== </TABLE> Johns Manville/52 <PAGE> As of December 31.Utilization of general business credits (18.3 percent interest in Riverwood and recorded a gain of $216. 1997.485 .246 1 7. federal credit for prior year minimum tax carryforwards.-----------------------------------------------------------------------------------$ 44. deferred income tax has been recorded.2 million related to income taxes.5 million of general business credit carryforwards and $20.213) Foreign income taxed at higher rates 3.293 1. There is no expiration date on the prior year minimum tax credit.298) (107. net 2. resulting in an additional net gain on disposal of discontinued operations of $19.----------------------------------------------------------<S> <C> Net Sales $1.430 . state and local taxes.S.091) $10 2. of which $8.7 million. 1997. it can only be applied against regular tax.951 $ (39. arose from the resolution of indemnification issues with the purchaser of Riverwood and from the determination of certain income tax consequences of the disposition.466 Other.----------------------------------------------------------1995 .342. no U. The general business credits expire at various dates beginning in 2002. the Company had $3. Undistributed earnings intended to be reinvested indefinitely by the foreign subsidiaries totaled $187.188) Deduction for dividends to the Trust (6.913 1.5 million. the Company received gross cash proceeds of $1. net of federal benefit 1. Note 21: Discontinued Operations During the third quarter of 1997. Summarized information on the discontinued operations of Riverwood is as follows: <TABLE> <CAPTION> In thousands of dollars .581 4. Riverwood's results of operations have been shown as discontinued operations through the disposition in the first quarter of 1996. however. the Company recorded an estimated loss on the disposal of discontinued operations of $42. 1996 and 1995 was $53.8 million. Note 23: Supplemental Cash Flow Information In connection with the consolidated statement of cash flows. a U. The combined purchase price for these acquisitions. Inc. net of cash acquired. cash paid for interest related to continuing operations during 1997. accounted for under the purchase method. the Company acquired the Mitex group of companies. $46. resulting in an extraordinary loss on early extinguishment of debt of $2 million. During the first quarter of 1997. $29.5 million.491 =========================================================== </TABLE> In the fourth quarter of 1995. and has manufacturing facilities in Sweden and the United Kingdom. net of taxes of $1. During the second quarter of 1997.7 million.9 million and $18.5 million. Johns Manville/53 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 22: Early Extinguishment of Debt During 1996. This loss primarily relates to deferred taxes on the Company's investment in Riverwood that had not been recognized previously. Note 24: Acquisitions During the third quarter of 1997. 1996 and 1995 was $48.S.9 million. The Company recorded these taxes when it became apparent the taxes would be incurred due to the planned disposition of Riverwood. financed from existing cash balances and borrowings of $55 million from international credit facilities.4 million and $47. a U.389) .271 Equity in Earnings of Affiliate. manufacturer of thermoplastic membranes.Income Tax Expense 11. the Company acquired the roofing business of HPG International. or goodwill.. was $136.214 . The excess of the combined purchase prices over the estimated fair value of net assets acquired.6 million.8 million. The Ergon and Mitex acquisitions are associated with the businesses of the Engineered Products segment.1 million.S. the Company redeemed its 9 percent Sinking Fund Debentures. net of taxes 30. amounted to approximately $84 million. respectively. net of tax and Minority Interest $ 36. These allocations were based on estimates and may be revised in the . Inc.609 Minority Interest in Riverwood (8. with cash of $27. manufacturer of synthetic meltblown nonwoven products.7 million.----------------------------------------------------------Income from Discontinued Operations. plus accrued interest of $1. Mitex is a manufacturer of fiber glass wall covering fabrics used primarily in commercial and industrial buildings. Cash paid for income taxes related to continuing operations during 1997.----------------------------------------------------------Income Before Equity in Earnings of Affiliate and Minority Interest 14. the Company acquired the assets of Ergon Nonwovens. respectively.. . The Company's reportable business segments are currently aligned with its internal business units. 1997: "Reporting Comprehensive Income" ("SFAS No. based on the Company's disaggregation of an entity for internal operating decisions. Both acquisitions will be accounted for under the purchase method. liquid filtration cartridges and media for use in commercial and industrial applications. flooring.future. The mats and fibers business includes the Company's German subsidiary. geographic areas and major customers. 131"). which manufactures calcium silicate pipe and block insulation.K. the Company acquired a plant. SFAS No. insulations. which manufactures filtration media for commercial and industrial buildings. The 1996 and 1995 results were reclassified to conform with the current presentation format. the Mitex companies. SFAS No. The Engineered Products segment consists of the Company's mats and fibers business. a U. along with related disclosures about products. commercial/industrial insulation business. subsidiaries. 131 establishes standards for reporting information about operating segments. Note 25: New Accounting Pronouncements During 1997. automobiles and heating. factories. which supplies roofing membranes. ultrafine fibers for clean room air filters and battery separators. Comprehensive income generally includes changes in separately reported components of equity along with net income. 130 establishes standards for reporting and display of comprehensive income and its components. which manufactures pipe and duct insulation for use in commercial buildings. the Company acquired the assets of Seal-Dry/USA. Inc.S. The Insulation segment consists of the Company's building insulation business. associated with the Insulation segment. which manufactures continuous filament fiber glass-based products used for reinforcing roofing.. In January 1998. refineries and other industrial applications. and synthetic meltblown products used in various other applications. the Company reorganized its business segments and will report separately its operating results in the following three principal business segments: Insulation. and fireproof board. The Roofing Systems segment consists of the Company's commercial/industrial roofing systems business. manufacturer of reinforced thermoplastic roofing systems. 130") and "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. which manufactures fiber glass wool insulation for walls. marine vessels. Johns Manville/54 <PAGE> Note 26: Business Segments and Geographic Area Information Beginning in 1997. Also in January 1998. the Financial Accounting Standards Board issued the following Statements of Financial Accounting Standards effective for periods beginning after December 15. The Engineered Products segment also includes the Company's filtration business. ventilating and air conditioning ("HVAC") and other equipment. attics and floors in residential and commercial buildings and polyisocyanurate foam sheathing for residential structures. Roofing Systems and Engineered Products. accessories and related guarantees. which manufactures thermal and acoustic insulation for aircraft. Schuller GmbH. wall covering and plastic products. and the Company's Swedish and U. services. and original equipment manufacturers ("OEM") insulation business. --------------------------------------------------------------------------------Total $1.946.2 35 Roofing Systems 15.514 $ 527.6 46 Corporate 1.845 148. 1997 1996 1995 .0 59 ================================================================================ == Years Ended December 31.945 51.--------------------------------------------------------------------------------Total $ 80.980.3 69 Engineered Products 582.930 605.319) (52.461 1.690 3.855 11.9 03) .2 62 Corporate 949 357 2.550 $ 28.193 478.175 $ 63.2 25 Roofing Systems 398.729 $ 537.687 $ 32.225 454.734 378. Plant and Equipment Insulation $ 34.650 5.341 26.531 $ 73.5 61 .534 $1.1 15 .726 $2.<TABLE> <CAPTION> In thousands of dollars .3 91 Engineered Products 29.569 $ 30.3 17 Corporate (Note E) 530.--------------------------------------------------------------------------------Total $ 125.163 $ 71.--------------------------------------------------------------------------------Depreciation.638 26.--------------------------------------------------------------------------------<S> <C> <C> <C> Assets Insulation $ 520.3 38 Engineered Products 81.3 29 ================================================================================ .000 $ 111.296 $ 153.101 2. Depletion and Amortization Insulation $ 33.6 14 Roofing Systems 7.--------------------------------------------------------------------------------December 31.474.462 30.594 5.8 33 ================================================================================ == Additions to Property. .0 51 Eliminations and Adjustments (Note B) (52.397.715 68.052) (53. net (Note D) (4.018) Other Income (Expense).013 $ 290.9 38 Costs and Expenses 598.749 372.5 18 Costs and Expenses 444.843) (3. 1997 1996 19 95 .----------------------------------------------------------------------------------Income from Operations $ 62. Johns Manville/55 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <TABLE> <CAPTION> In thousands of dollars .118) 1.5 26 .954 $ 669.739 $ 103.5 26 .993 265.6 85 Costs and Expenses 379.149 1.----------------------------------------------------------------------------------Income from Operations $ 92. net (Note D) (247) 977 (8.082 $ 104.845 $ 698.550 Other Income (Expense).859 579.274 362.7 18) .460 $ 414.129 $ 23.4 19 . net (Note D) (2.1 92 .954 $ 470.2 74 Nonrecurring Charges 5.846 354.----------------------------------------------------------------------------------<S> <C> <C> <C> Insulation Net Sales $ 697.247) (1.----------------------------------------------------------------------------------Engineered Products Net Sales $ 475.353 $ 113.----------------------------------------------------------------------------------Income from Operations $ 98.562 $ 113.== </TABLE> See notes on page 58.6 09 Nonrecurring Charges 17.868 $ 32.644 Other Income (Expense).761 $ 457.----------------------------------------------------------------------------------Roofing Systems Net Sales $ 510.1 37) .5 78 Nonrecurring Charges (Income) (4.028 548.----------------------------------------------------------------------------------Years Ended December 31. 421.9 61) .133) 776 (8.----------------------------------------------------------------------------------Corporate and Eliminations Net Sales (Note A) $ (36.980 Other Income (Expense).----------------------------------------------------------------------------------Consolidated Total Company Net Sales $1. net (10.5 69) .5 22 Costs and Expenses 1.341) (345) (17.000) 634 4.299) $ (26.609 $1.------------------------------------------------------------------------------ .614) $ (31.341.560 1.--------------------------------------------------------------------------------<S> <C> <C> <C> United States Net Sales $1.109.552.391.0 50 .176 Other Income (Expense).6 19) Costs and Expenses (1.--------------------------------------------------------------------------------Income from Operations $ 215.206.1 92 Nonrecurring Charges 19.647.. 1997 1996 19 95 .645 $1.----------------------------------------------------------------------------------Income from Operations $ (38.426.747) $ (61.3 71 Costs and Expenses 1. </TABLE> Johns Manville/56 <PAGE> <TABLE> <CAPTION> In thousands of dollars .200.137) $ (39.2 83 ================================================================================ ==== See notes on page 58.882 1.427 $ 201.1 29) .422 $ 187. net (4.647 993.501 1.120) 9.929 $ 222.--------------------------------------------------------------------------------Years Ended December 31.7 73 Nonrecurring Charges 29.863 (6.315.256 $ 201.173.----------------------------------------------------------------------------------Income from Operations $ 215.2 34 Nonrecurring Charges 49.429 $1.0 05) .156 Other Income (Expense). net (Note D) (3.216 $1. 303 $ 936.461 1.980 Other Income (Expense).081) (11.--------------------------------------------------------------------------------Corporate and Eliminations Net Sales (Note A) $ (10.882 1.028) $ (40.156 Other Income (Expense).5 49 .207.722) $ (13.232.737 (3 63) .---Foreign Net Sales $ 231.341) (345) (17.422 $ 187.0 51 Eliminations and Adjustments (Note B) (52.052) (53.945) (10.647.930 605.5 13) . net (Note C) (5.758 $ 224.421.173.140) 1.107 $ 37.946.4 58 Corporate (Note E) 530.980. .391.--------------------------------------------------------------------------------Income from Operations $ 215.--------------------------------------------------------------------------------Income from Operations $ (38.315.552.0 05) .397.5 22 Costs and Expenses 1.726 $2.199 $ 40. net (1.2 34 Nonrecurring Charges 49.534 $1.0 59 ================================================================================ == .--------------------------------------------------------------------------------Total $1.3 16) . net (10.776 187.2 05) Costs and Expenses 22.511 188.2 83 ================================================================================ == December 31.232 $ 199.--------------------------------------------------------------------------------Income from Operations $ 38.4 44 Other Income (Expense).811 17.019) $ (8.645 $1.429 $1.4 53 Foreign 268.--------------------------------------------------------------------------------Assets United States $1.281 193.5 98 Nonrecurring Charges 29.319) (52.474.501 1.770 158.084 21.--------------------------------------------------------------------------------Consolidated Total Company Net Sales $1.9 03) .427 $ 201.3 56 Costs and Expenses 192.880 $1.614) $ (72. Intersegment sales principally relate to sales from the Engineered Products segment to the Roofing Systems segment. deferred tax assets. the Company maintains a substantial program of internal audits. segments. employee training. which is accomplished through communication of established written codes of conduct. plant and equipment. prepaid income taxes. (C) Includes the elimination of intergeographic dividends between the Company's foreign and U. (E) Corporate assets are principally cash and equivalents and marketable securities. to the historical inventory bases used in consolidation. policies and procedures. Other income (expense). Oversight of management's financial reporting and internal accounting control responsibilities is exercised by the Board of Directors. The Company maintains internal accounting control systems to provide reliable financial information for the preparation of financial statements. All of the other financial information in the Annual Report and Form 10-K is consistent with that in the financial statements. . net. as reported in each of the business segments. certain long-term receivables. net. represents specific operating income and expense items recognized by the individual business units. Management is responsible for maintenance of these systems.See notes on page 58. and appropriate delegation of authority and segregation of responsibilities. included in corporate and eliminations consists of amounts primarily attributable to previous business operations. to safeguard assets against loss or unauthorized use and to ensure proper authorization and accounting for all transactions. which are carried at standard costs. The representations in the financial statements and the fairness and integrity of such statements are the responsibility of management. a portion of prepaid pension assets and a portion of property. through an Audit Committee that consists solely of outside directors. the net assets held for sale related to Riverwood. systems.S. </TABLE> Johns Manville/57 <PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notes to Business Segments and Geographic Area Information: (A) Net sales included in corporate and eliminations relate principally to the elimination of intersegment and intergeographic sales (at prices approximating market). (B) Includes the elimination of intersegment and intergeographic inventory profits and the adjustment of business segment and geographic inventories. certain investments. (D) Other income (expense). Johns Manville/58 <PAGE> MANAGEMENT'S REPORT The accompanying consolidated financial statements have been prepared by management in conformity with generally accepted accounting principles appropriate under the circumstances. To further ensure compliance with established standards and procedures. P. (Jerry) Henry . Colorado January 30. 1998 Johns Manville/60 <PAGE> SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) <TABLE> <CAPTION> In thousands of dollars. These financial statements are the responsibility of the Company's management. We believe that our audits provide a reasonable basis for our opinion. and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31.-------------------------------------------------------------------------------------------------------First Second Thir d Fourth . cash flows and stockholders' equity for each of the three years in the period ended December 31. as well as evaluating the overall financial statement presentation. An audit includes examining. We conducted our audits in accordance with generally accepted auditing standards. on a test basis.L. 1997 in conformity with generally accepted accounting principles. Denver. the consolidated financial position of Johns Manville Corporation as of December 31. (Jerry) Henry Chairman of the Board.L. /s/ Coopers & Lybrand L. except per share amounts ./s/ C. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 1997 and 1996.P. Our responsibility is to express an opinion on these financial statements based on our audits. in all material respects. Murphy Senior Vice President and Chief Financial Officer To the Stockholders and Directors of Johns Manville Corporation: We have audited the accompanying consolidated balance sheets of Johns Manville Corporation as of December 31. Murphy ------------------------J. An audit also includes assessing the accounting principles used and significant estimates made by management. In our opinion.------------------------------------C. 1997 and 1996 and the related consolidated statements of income.L.P. President and Chief Executive Officer Johns Manville/59 <PAGE> REPORT OF INDEPENDENT ACCOUNTANTS /s/ J. the financial statements referred to above present fairly. evidence supporting the amounts and disclosures in the financial statements. 1997. 166 406.92 .004 150.939 $1.422 Income before Extraordinary Items (Note A) 27.17 $. 918 39.427 Income before Extraordinary Items (Note A) 305.20 .-------------------------------------------------------------------------------------------------------Basic Earnings (Loss) Per Common Share (Note E) Income (Loss) before Extraordinary Items (Note A) $2.118 440.000 .24 $2.502 121.150 33.010 $428.000 Net Income (Note A) 27.161 33.21 $.032 57.175 58.36 $.222 187.17 $. 329 27.29 Net Income (Loss) (Notes A. 1996 <S> <C> <C> <C> <C> <C> Net Sales $326.510 Income from Operations 49. 439 117.Quarter Quarter Quart er Quarter Total .23 .429 Gross Profit 93.166 90.698 63. 615 8.23 $ .656 117.16) $ .23 $ .299 67.24 .175 58.23 .-------------------------------------------------------------------------------------------------------<S> <C> <C> <C> <C> <C> Year Ended December 31.759) 26.537 28.486 .20 Diluted Earnings (Loss) Per Common Share (Note E) Income (Loss) before Extraordinary Items (Note A) $2.27 Net Income (Loss) (Notes A.21 .492 37. 329 27.17 $. C and D) (. 1997 Net Sales $379.109 $381.18) . 871 100.403 $422. 918 39.16) $ . 122 $402. C and D) (8.24 $2.18) .618 Income from Operations (Note B) 55.771 Net Income (Loss) (Notes A.36 $.92 Net Income (Note A) .17 $.17 . 906 44.492 37.-------------------------------------------------------------------------------------------------------</TABLE> <TABLE> <CAPTION> Year Ended December 31.24 .12) (.12) (.645 Gross Profit 100.44 $(.36 .17 .17 .036 $438.17 .-------------------------------------------------------------------------------------------------------Basic Earnings Per Common Share Income before Extraordinary Items (Note A) $.39 $(.647.552.21 $.559 108.93 Diluted Earnings Per Common Share Income before Extraordinary Items (Note A) $.291 56. 978 $421. C and D) (.939 112.786 215.004 150.477 $1.21 .93 Net Income (Note A) .36 .044 431. 2 million. During the third quarter of 1997.5 million shares of the Company's common stock for the Trust's profit sharing right to 20 percent of the Company's net earnings (as adjusted). 333-06313) S-8 (File No. (E) Earnings (loss) per share amounts for 1996 were calculated after the deduction for preference stock dividends and the premium on preference stock redemption. an additional gain of $39.1 million. with cash of $230. net of taxes of $169. (D) In the second quarter of 1996.7 million.7 million for the shutdown of current operations.. demolition of facilities and site restoration and $7. an additional net gain of $19. 333-06321) . These charges include $41. net of taxes of $1. adjusting the estimated taxes from $177.3 million. 33-29389) S-8 (File No. which were finalized with the completion of the Company's 1996 income tax returns.-------------------------------------------------------------------------------------------------------</TABLE> (A) The Company disposed of its 81. net of estimated taxes of $177. the Company recorded nonrecurring charges totaling $49.1 million premium on preference stock redemption.2 million.2 million related to income taxes.5 million of asset write-downs to estimated fair values. 33-43912) S-8 (File No. The Company also redeemed its Cumulative Preference Stock.5 million was recognized. In the fourth quarter of 1996.2 million.8 million to $138. Johns Manville/61 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-23 <SEQUENCE>3 <DESCRIPTION>CONSENT OF COOPERS & LYBRAND LLP <TEXT> <PAGE> Exhibit 23 Consent of Independent Accountants Re: Johns Manville On Form and Form and Form and Form Corporation Registrations: S-8 (File No. (B) During the fourth quarter of 1996. the Company recorded an extraordinary loss of $314. of which $8. resulting in a $52.8 million. partially offset by a gain on the sale of other manufacturing assets.1 million was recognized. on the exchange of approximately 32. (C) In the first quarter of 1996. Series B.3 percent interest in Riverwood in the first quarter of 1996 and recorded a gain on the sale of $177. the Company redeemed its 9 percent Sinking Fund Debentures due through 2003 that resulted in an extraordinary loss on early extinguishment of debt of $2 million. arising from the termination of certain indemnification obligations to the purchaser of Riverwood and from the determination of certain income tax consequences of the disposition.8 million. 980. Colorado March 17.061 571.470 639. </LEGEND> <MULTIPLIER> 1. 1997.114 456. on our audits of the consolidated financial statements and financial statement schedule of Johns Manville Corporation as of December 31.and Form S-8 (File No.L. 1996 and 1995.P. Denver. 333-24253) and Form S-8 (File No. /s/ Coopers & Lybrand L. 1997 FORM 10-K OF JOHNS MANVILLE CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. which report is incorporated by reference in this Annual Report on Form 10-K.000 <S> <PERIOD-TYPE> <FISCAL-YEAR-END> <PERIOD-START> <PERIOD-END> <CASH> <SECURITIES> <RECEIVABLES> <ALLOWANCES> <INVENTORY> <CURRENT-ASSETS> <PP&E> <DEPRECIATION> <TOTAL-ASSETS> <CURRENT-LIABILITIES> <BONDS> <PREFERRED-MANDATORY> <PREFERRED> <COMMON> <OTHER-SE> <C> YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 132.743 6.294 0 0 1. 1997 and 1996 and for the years ended December 31.534 296. 1998.137 36.628 691.929 237. 333-06375) and Form S-8 (File No.005 127. 333-31007) Gentlemen: We consent to the incorporation by reference in the above referenced registration statements of our report dated January 30. 1998 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-27 <SEQUENCE>4 <DESCRIPTION>FINANCIAL DATA SCHEDULE <TEXT> <TABLE> <S> <C> <PAGE> <ARTICLE> 5 <LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31.711 1.437.485 1.455 . 92 .216.471 0 0 150.529 19.480 44.647.135 0 (243) 50.645 1.980.000 .216.645 1.951 130.205 175.647.534 1.135 1.<TOTAL-LIABILITY-AND-EQUITY> <SALES> <TOTAL-REVENUES> <CGS> <TOTAL-COSTS> <OTHER-EXPENSES> <LOSS-PROVISION> <INTEREST-EXPENSE> <INCOME-PRETAX> <INCOME-TAX> <INCOME-CONTINUING> <DISCONTINUED> <EXTRAORDINARY> <CHANGES> <NET-INCOME> <EPS-PRIMARY> <EPS-DILUTED> </TABLE> </TEXT> </DOCUMENT> </SEC-DOCUMENT> -----END PRIVACY-ENHANCED MESSAGE----- 1.93 .