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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-8634
TEMPLE-INLAND INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1903917
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 SOUTH TEMPLE DRIVE
DIBOLL, TEXAS 75941
(Address of principal executive offices, including Zip code)
Registrant's telephone number, including area code: (409) 829-2211
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $1.00 Par Value per Share, non-cumulative New York Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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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 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. [ ]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant, based on the closing sales price of the Common Stock on the New
York Stock Exchange on March 7, 1997, was $2,645,982,943. For purposes of this
computation, all officers, directors, and 5 percent beneficial owners of the
registrant (as indicated in Item 12) are deemed to be affiliates. Such
determination should not be deemed an admission that such directors, officers,
or 5 percent beneficial owners are, in fact, affiliates of the registrant.
As of March 7, 1997, 55,437,073 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
indicated part or parts of this report:
(a) Pages 25-34, 47, 49, and 50-61 of the Annual Report to
Shareholders for the fiscal year ended December 28, 1996 -- Parts I and II.
(b) The Company's definitive proxy statement, dated March 17, 1997, in
connection with the Annual Meeting of Shareholders to be held May 2,
1997 -- Part III.
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PART I
ITEM 1. BUSINESS
Introduction:
Temple-Inland Inc. (the "Company") is a holding company that conducts all
of its operations through its subsidiaries. The Company holds interests in
corrugated container, bleached paperboard, building products, timber and
timberlands, and financial services. The Company's Paper Group consists of the
corrugated container and bleached paperboard operations. The corrugated
container operation is vertically integrated and consists of four linerboard
mills, three corrugating medium mills, 43 box plants, and six specialty
converting plants. The bleached paperboard operation consists of one large mill
located in Evadale, Texas.
The Company's Building Products Group manufactures a wide range of building
products including lumber, plywood, particleboard, gypsum wallboard, and
fiberboard. Forest resources include approximately 2.2 million acres of
timberland in Texas, Louisiana, Georgia, and Alabama. The Company's Financial
Services Group consists of savings bank activities, mortgage banking, real
estate development, and insurance brokerage.
The Company is a Delaware corporation that was organized in 1983. Its
principal subsidiaries include Inland Paperboard and Packaging, Inc. ("Inland"),
Temple-Inland Forest Products Corporation ("Temple-Inland FPC"), Temple-Inland
Financial Services Inc. ("Financial Services"), Guaranty Federal Bank, F.S.B.
("Guaranty"), and Temple-Inland Mortgage Corporation ("Temple-Inland Mortgage").
The Company's principal executive offices are located at 303 South Temple
Drive, Diboll, Texas 75941. Its telephone number is (409) 829-2211.
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Financial Information:
The results of operations including information regarding the principal
business segments are shown in the following table:
TEMPLE-INLAND INC.
BUSINESS SEGMENTS*
FOR THE YEAR
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS)
Revenues
Paper..................................... $2,082.3 $2,198.4 $1,740.7 $1,571.2 $1,609.9
Building products......................... 562.6 532.9 575.5 497.5 409.7
Other activities.......................... -- -- 19.2 58.4 77.1
-------- -------- -------- -------- --------
Manufacturing net sales................ 2,644.9 2,731.3 2,335.4 2,127.1 2,096.7
Financial services........................ 815.4 764.3 631.4 635.1 637.8
-------- -------- -------- -------- --------
Total revenues.................... $3,460.3 $3,495.6 $2,966.8 $2,762.2 $2,734.5
======== ======== ======== ======== ========
Income before taxes
Paper..................................... $ 113.0 356.6 $ 73.7 $ 5.6 $ 134.7
Building products......................... 102.0 67.0 138.8 102.4 40.4
Other activities.......................... -- -- 1.5 (1.9) (2.0)
-------- -------- -------- -------- --------
Operating profit....................... 215.0 423.6 214.0 106.1 173.1
Financial services........................ 63.1(a) 98.1 56.3 67.5 64.4
-------- -------- -------- -------- --------
278.1 521.7 270.3 173.6 237.5
Corporate expense......................... (17.2) (21.7) (13.7) (11.2) (15.3)
Parent company interest -- net............ (109.6) (72.7) (67.1) (69.4) (48.0)
Other income.............................. 4.6 3.7 3.8 3.2 2.8
-------- -------- -------- -------- --------
Income before taxes............... $ 155.9 $ 431.0 $ 193.3 $ 96.2 $ 177.0
======== ======== ======== ======== ========
- ---------------
* Reclassified to conform to 1996 presentation related to the realignment into
three business segments, which includes (1) the consolidation of the
corrugated container and bleached paperboard operations into a single Paper
Group, and (2) the transfer of the Rome sawmill from the corrugated
container operation to the Building Products Group.
(a) Includes SAIF assessment of $43.9 million.
For more information with respect to identifiable assets, capital
expenditures, depreciation, and depletion on a business segment basis, see pages
33 and 59 of the Company's 1996 Annual Report to Shareholders, which are
incorporated herein by reference.
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The following table shows the revenues of the Company:
REVENUES*
FOR THE YEAR
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS)
Paper
Corrugated container..................... $1,676.5 $1,829.4 $1,441.3 $1,252.7 $1,257.3
Bleached paperboard...................... 300.5 249.0 217.4 228.7 249.4
Pulp..................................... 19.2 36.9 22.1 33.4 47.3
Food Service and other................... 86.1 83.1 59.9 56.4 55.9
-------- -------- -------- -------- --------
2,082.3 2,198.4 1,740.7 1,571.2 1,609.9
-------- -------- -------- -------- --------
Building products
Pine lumber.............................. 217.4 190.1 211.9 176.0 139.3
Fiber products........................... 73.3 59.7 66.3 62.9 55.8
Particleboard............................ 112.2 99.1 103.0 81.3 70.5
Plywood.................................. 52.1 49.3 56.8 54.0 45.2
Gypsum wallboard......................... 90.2 83.1 74.3 53.3 36.6
Retail distribution (a).................. 17.1 51.3 58.4 60.0 53.5
Other.................................... .3 0.3 4.8 10.0 8.8
-------- -------- -------- -------- --------
562.6 532.9 575.5 497.5 409.7
-------- -------- -------- -------- --------
Other activities (b)....................... -- -- 19.2 58.4 77.1
-------- -------- -------- -------- --------
Manufacturing net sales.................. 2,644.9 2,731.3 2,335.4 2,127.1 2,096.7
Financial services......................... 815.4 764.3 631.4 635.1 637.8
-------- -------- -------- -------- --------
Total revenues................... $3,460.3 $3,495.6 $2,966.8 $2,762.2 $2,734.5
======== ======== ======== ======== ========
- ---------------
(a) In October 1995, the Company sold the largest two of its five retail
distribution outlets. Two more of these retail distribution outlets were
sold during December 1996.
(b) Includes the revenues from subsidiaries engaged in commercial, industrial,
and public works contracting until their operations were terminated in 1993
and the revenues from subsidiaries engaged in the construction and
maintenance of electrical distribution facilities until their operations
were terminated in 1994.
* Reclassified to conform to 1996 presentation related to the realignment into
three business segments, which includes (1) the consolidation of the
corrugated container and bleached paperboard operations into a single Paper
Group, and (2) the transfer of the Rome sawmill from the corrugated
container operation to the Building Products Group.
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The following table shows the rated annual capacities of the production
facilities for, and unit sales of, the principal manufactured products.
ANNUAL CAPACITIES/UNIT SALES
RATED
ANNUAL
CAPACITY AT UNIT SALES
DECEMBER 28, -----------------------------------------
1996 1996 1995 1994 1993 1992
------------ ----- ----- ----- ----- -----
(IN THOUSANDS OF TONS)
Paper
Corrugated container................. (a) 2,435 2,333 2,492 2,394 2,294
Bleached paperboard.................. (b) 524 400 430 426 414
Pulp................................. (b) 100 99 87 134 155
Building products (IN MILLIONS OF BOARD FEET)
Pine lumber*......................... 675 605 582 583 552 538
(IN MILLIONS OF SQUARE FEET)
Fiber products....................... 460 457 422 441 440 464
Particleboard (c).................... 535 399 329 347 319 326
Plywood.............................. 265 259 217 260 265 250
Gypsum wallboard..................... 840 838 813 796 782 621
- ---------------
* Reclassified to conform to 1996 presentation related to the transfer of the
Rome sawmill from the corrugated container operation to the Building
Products Group.
(a) The annual capacity of the box plants is not given because such annual
capacity is a function of the product mix, customer requirements, and the
type of converting equipment installed and operating at each plant, each of
which varies from time to time. The rated annual capacity of Inland's
corrugating medium mills is approximately 600,000 tons per year. The rated
annual capacity of the linerboard mills is approximately 2.1 million tons
per year.
(b) The annual capacity of the four paper machines in operation at the
paperboard and pulp mill is approximately 725,000 tons, which excludes the
capacity of a cylinder machine at the mill that the Company decided to shut
down late in 1993 due to market conditions for the grade it produced. Such
capacity may vary to some degree depending on product mix. The annual
capacity of Temple-Inland Food Service Corporation is not given because such
annual capacity is a function of the product mix, customer requirements, and
the type of converting equipment installed and operating at each plant, all
of which vary from time to time.
(c) The annual capacity for the particleboard plants includes the rated annual
capacity of the Hope, Arkansas, plant, which began operations late in 1995
but did not reach full production until the fourth quarter of 1996. The
capacity figures for 1996 reflect the increase at the Monroeville, Alabama,
plant that resulted from a renovation of this facility during the year.
NARRATIVE DESCRIPTION OF THE BUSINESS:
The business of the Company is divided among three groups: (1) the Paper
Group, which consists of the corrugated container and bleached paperboard
operations, (2) the Building Products Group, and (3) the Financial Services
Group. In the year ended December 28, 1996, the Paper Group, Building Products
Group, and Financial Services Group provided 60 percent, 16 percent, and 24
percent, respectively, of the total consolidated net revenues of the Company.
Paper Group. During 1996, the Company consolidated the management of its
paper operations under the leadership of William B. Howes, Executive Vice
President of the Company. This group is now comprised of two operations, the
results from which had previously been reported separately as corrugated
container and bleached paperboard.
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(i) Corrugated Container. The corrugated container operation of the Company
manufactures containerboard that it converts into a complete line of corrugated
boxes and containers. Approximately 83 percent of the containerboard produced by
Inland in 1996 was converted into corrugated containers at its box plants. The
Company's nationwide network of box plants produces a wide range of products
from commodity brown boxes to intricate die cut containers that can be printed
with multi-color graphics. Even though the corrugated box business is
characterized by commodity pricing, each order for each customer is a custom
order. Inland's corrugated boxes are sold to a variety of customers in the food,
paper, glass containers, chemical, appliance, and plastics industries, among
others. As of December 28, 1996, about 46 percent of the Company's box shipments
were sold directly for use in the food industry, including beverage containers.
Following an acquisition in 1994, the Company also manufactures
litho-laminate corrugated packaging and high graphics folding cartons. Other
products manufactured by the Company include bulk containers constructed of
multi-wall corrugated board for extra strength, which are used for bulk
shipments of various materials, paper sealing tape, and other tape specialties.
In the corrugated container operation, the Company services about 6,800
customers with approximately 11,000 shipping destinations. The largest single
customer accounted for approximately 4 percent and the 10 largest customers
accounted for approximately 28 percent of the 1996 corrugated container
revenues. Costs of freight and customer service requirements necessitate the
location of box plants relatively close to customers. Each plant tends to
service a market within a 150-mile radius of the plant.
Sales of corrugated shipping containers closely track changing population
patterns and other demographics. Historically, there has been a correlation
between the demand for containers and containerboard and real growth in the
United States gross domestic product.
(ii) Bleached Paperboard. The bleached paperboard operation of the Company
produces various grades and weights of coated and uncoated bleached paperboard,
bleached linerboard, and bleached bristols. These materials are used by other
paper companies and by manufacturers that buy paper in roll lots and convert it
into such items as paper cups, plates, file folders, folding cartons, paperback
book covers, and various other packaging and convenience products.
Bleached paperboard products are sold to a large number of customers. Sales
to the largest customer of this operation, with whom the Company has a
long-standing contractual relationship, accounted for approximately 14 percent
of bleached paperboard sales in 1996. This level of sales is consistent with
sales to this customer over the past several years. Although the loss of this
customer could have a material adverse effect on this operation, it would not
have a material adverse effect on the Company taken as a whole. The 10 largest
customers accounted for approximately 50 percent of bleached paperboard sales in
1996. During 1996, sales were made to customers in 43 states, Mexico, and Puerto
Rico, as well as to independent distributors through which this operation's
products were exported to Asia, Japan, Central America, and South America.
Contracts specifying annual tonnage quantities are maintained with several major
customers.
Demand for bleached paperboard products generally correlates with real
growth in the United States gross domestic product, but is also affected by
inventory levels maintained by paperboard converters as well as a number of
other factors, including changes in industry production capacity and the
strength of international markets.
Temple-Inland Food Service Corporation ("Food Service") is an integrated
paper converter formed to manufacture and market paper containers and products
primarily for the food service industry. Products manufactured include paper
plates and bowls, clamshells, carrying trays and boxes, nested food trays, fry
cartons, and pails. These products are sold to the fast food industry, retail
consumer stores, and restaurants and cafeterias for use in food service.
Building Products Group. The Building Products Group produces a wide
variety of building products, such as lumber, plywood, particleboard, gypsum
wallboard, hardboard siding, and fiberboard sheathing.
Sales of building products are concentrated in the southeastern and
southwestern United States. No significant sales are generated under long-term
contracts. Sales of most of these products are made by account
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managers and representatives to distributors, retailers, and O.E.M. (original
equipment manufacturer) accounts. Almost 75 percent of particleboard sales are
to commercial fabricators, such as manufacturers of cabinets and furniture. The
10 largest customers accounted for approximately 21 percent of the Building
Products Group's 1996 sales.
The building products business is heavily dependent upon the level of
residential housing expenditures, including the repair and remodeling market,
which is largely dependent upon the availability and cost of mortgage funds.
During the year, the Company completed an upgrade to its particleboard mill
in Monroeville, Alabama. Similar renovation projects are scheduled at the
Diboll, Texas, and Thomson, Georgia, particleboard plants during 1997. During
the year, this group entered into three joint ventures, in each of which it owns
a 50 percent interest. One of these joint ventures will produce medium density
fiberboard at a facility under construction in Arkansas. Another of these joint
ventures will produce cement fiberboard at a plant under construction in Texas.
The third joint venture was the acquisition of an existing facility for the
production of gypsum wallboard and a related quarry.
Financial Services Group. The Financial Services Group operates a savings
bank and engages in mortgage banking, real estate development, and insurance
activities.
(i) Savings Bank. Guaranty is a federally-chartered stock savings bank
operated by the Company through its financial services subsidiaries. Guaranty
conducts its business through 113 banking centers located primarily in the
eastern third of Texas, including Houston, Dallas, San Antonio, and Austin. The
primary activities of Guaranty include attracting savings deposits from the
general public, investing in loans secured by mortgages on residential real
estate, lending for the construction of real estate projects, and providing a
variety of loan products to consumers and businesses.
Guaranty derives its income primarily from interest earned on real estate
mortgages, commercial and business loans, consumer loans, and investment
securities, as well as fees received in connection with loans and deposit
services. Its major expense is the interest it pays on consumer deposits and
other borrowings. The operations of Guaranty, like those of other savings
institutions, are significantly influenced by general economic conditions, by
the monetary, fiscal, and regulatory policies of the federal government, and by
the policies of financial institution regulatory authorities. Deposit flows and
costs of funds are influenced by interest rates on competing investments and
general market rates of interest. Lending activities are affected by the demand
for mortgage financing and for other types of loans as well as market
conditions. Guaranty primarily seeks assets with interest rates that adjust
periodically rather than assets with long-term fixed rates.
During the fourth quarter of 1996, the Company entered into an Agreement
and Plan of Merger (the "Merger Agreement") with California Financial Holding
Company ("CFHC"), the parent corporation of Stockton Savings Bank, F.S.B.
("Stockton") headquartered in Stockton, California, by which CFHC will be merged
into the Company. The transaction, which is subject to approval by the CFHC
stockholders and by regulatory authorities, is expected to close during the
second quarter of 1997. Terms of the Merger Agreement provide for CFHC
stockholders to receive a combination of common stock of the Company and cash
valued at $30 per share, for a total consideration of approximately $150
million. Subject to certain limitations, each CFHC stockholder will be given the
election to have the consideration for their shares paid in Company common
stock, cash or a combination of the two. The Company, however, will issue no
more than 1,692,000 shares of common stock in the transaction. The Merger
Agreement permits CFHC to terminate the transaction if the price of the common
stock of the Company, as calculated, is below $40 per share, provided that the
number of shares of Company common stock issued in the transaction has not been
increased. When the transaction is completed, the operations of Stockton, which
has approximately $1.3 billion in assets and operates 23 branches in the Central
Valley of California, will be merged into Guaranty. In connection with execution
of the Merger Agreement, CFHC granted the Company an option, exercisable under
certain circumstances, to purchase 940,095 shares of CFHC common stock,
representing approximately 19.9 percent of the shares presently outstanding, at
a price of $27.25 per share.
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During 1996, Congress adopted legislation to recapitalize the Savings
Association Insurance Fund ("SAIF") and merge the SAIF with the Bank Insurance
Fund. This legislation imposed a one-time special assessment on SAIF members
equal to 67.5 basis points of insured deposits, or approximately $44 million in
the case of Guaranty. Under this legislation, Guaranty will not currently be
required to pay any deposit insurance premiums, but will be required to pay
approximately 6.5 basis points on insured deposits to fund certain Financial
Corporation (FICO) bond obligations. Based on the current level of Guaranty's
deposits, this legislation will ultimately reduce future assessments by
approximately $11 million per year.
The House and Senate are also discussing additional legislative proposals,
including changes to tax laws, related to the thrift industry. At this time, the
Company is not able to predict if any of these proposals will be adopted or, if
adopted, the ultimate impact they might have on the Company.
In addition to other minimum capital standards, regulations of the Office
of Thrift Supervision of the Department of the Treasury (the "OTS") currently
require savings institutions to maintain a leverage capital ratio of at least 3
percent of adjusted total assets. Guaranty, however, has agreed with the OTS
that at the time it makes any future acquisitions, it will maintain a leverage
capital ratio of at least 4 percent of adjusted total assets, and in order to
obtain the lowest level of FDIC insurance premiums, Guaranty must meet a
leverage capital ratio of at least 5 percent of adjusted total assets. At
December 31, 1996, Guaranty had a leverage capital ratio of 5.52 percent of
adjusted total assets. For additional information regarding regulatory capital
requirements, see Note L to Financial Services Group Summarized Financial
Statements on page 49 of the Company's 1996 Annual Report to Shareholders, which
is incorporated herein by reference.
Guaranty must meet or exceed certain tests to continue its current
activities and to take certain deductions under the Internal Revenue Code. At
December 31, 1996, Guaranty met or exceeded these tests and intends to continue
meeting or exceeding these tests.
(ii) Mortgage Banking. Temple-Inland Mortgage, a wholly-owned subsidiary of
Guaranty, headquartered in Austin, Texas, originates, warehouses, and services
FHA, VA, and conventional mortgage loans primarily on single family residential
property. Temple-Inland Mortgage originates mortgage loans for sale into the
secondary market. It typically retains the servicing rights on these loans, but
periodically sells some portion of its servicing to third parties. At December
31, 1996, Temple-Inland Mortgage was servicing $17.9 billion in mortgage loans,
including loans serviced for affiliates and approximately $2.4 billion in
mortgages serviced for a third party. Temple-Inland Mortgage produced $1.9
billion in mortgage loans during 1996 compared with $1.2 billion during 1995.
(iii) Real Estate Development and Income Properties. Subsidiaries of
Financial Services are involved in the development of 24 residential
subdivisions in Texas, Arizona, Colorado, Florida, Georgia, Missouri, and
Tennessee. The real estate group of the Company also owns 10 commercial
properties.
(iv) Insurance. Subsidiaries of Financial Services are engaged in the
brokerage of property, casualty, life, and group health insurance products. One
of these subsidiaries is an insurance agency that administers the marketing and
distribution of several mortgage-related personal life, accident, and health
insurance programs. This agency also acts as the risk management department of
the Company. An affiliate of the agency sells annuities through banks and
savings banks, including Guaranty.
(v) Statistical Disclosures. The following tables present various
statistical and financial information for Financial Services.
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The following schedule presents the average balances, interest
income/expense, and rates earned or paid by major balance sheet category for the
years 1994 through 1996:
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST SPREAD
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 1995 1994
------------------------------ ------------------------------ ------------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
ASSETS
Interest-earning assets:
Interest-earning deposits
in other banks........... $ 32.1 $ 2.1 6.42% $ 41.4 $ 2.4 5.90% $ 26.0 $ 1.3 4.96%
Mortgage-backed and
investment securities.... 3,208.5 183.5 5.72% 3,650.4 208.6 5.72% 4,154.7 189.8 4.57%
Securities purchased under
agreements to resell,
agency discount notes,
federal funds sold, and
commercial paper......... 339.4 18.4 5.41% 324.2 19.1 5.88% 653.5 27.2 4.16%
Loans receivable and
mortgage loans held for
sale (1)................. 5,258.4 426.1 8.10% 4,490.2 368.6 8.21% 3,241.5 244.7 7.55%
Covered assets............. -- -- -- 298.5 18.3 6.14% 536.2 30.3 5.66%
Other...................... 26.0 .7 2.91% 25.6 1.9 7.42% 25.4 2.2 8.52%
-------- ------ -------- ------ -------- ------
Total
interest-earning
assets............. 8,864.4 $630.8 7.12% 8,830.3 $618.9 7.01% 8,637.3 $495.5 5.74%
====== ====== ======
Cash......................... 90.6 90.2 107.2
Other FSLIC receivables...... .8 (10.7) 17.4
Other assets................. 586.0 537.3 469.0
-------- -------- --------
Total assets......... $9,541.8 $9,447.1 $9,230.9
======== ======== ========
LIABILITIES AND SHAREHOLDER'S
EQUITY Interest-bearing
liabilities:
Deposits:
Interest-bearing
demand................. $1,087.2 $ 26.1 2.41% $1,212.7 $ 29.9 2.47% $1,549.4 $ 34.5 2.23%
Savings deposits......... 184.6 4.2 2.28% 216.2 4.9 2.25% 248.3 5.6 2.26%
Time deposits............ 5,013.6 278.0 5.54% 5,037.6 278.1 5.52% 4,615.6 213.7 4.63%
-------- ------ -------- ------ -------- ------
Total
interest-bearing
deposits........... 6,285.4 308.3 4.91% 6,466.5 312.9 4.84% 6,413.3 253.8 3.96%
Advances from the Federal
Home Loan Bank........... 69.2 5.9 8.55% 154.7 11.2 7.26% 154.3 9.5 6.13%
Securities sold under
repurchase agreements.... 2,044.2 111.6 5.46% 1,719.2 102.6 5.97% 1,598.0 66.6 4.17%
Other borrowings........... 131.9 9.5 7.24% 95.9 7.2 7.49% 64.4 4.5 6.90%
-------- ------ -------- ------ -------- ------
Total
interest-bearing
liabilities........ 8,530.7 $435.3 5.10% 8,436.3 $433.9 5.14% 8,230.0 $334.4 4.06%
====== ====== ======
Noninterest-bearing demand... 46.4 79.3 85.8
Other liabilities............ 361.8 331.3 363.0
Shareholder's equity......... 602.9 600.2 552.1
-------- -------- --------
Total liabilities and
shareholder's
equity............. $9,541.8 $9,447.1 $9,230.9
======== ======== ========
Net interest
income............. $195.5 $185.0 $161.1
====== ====== ======
Net yield on
interest-earning
assets............. 2.20% 2.10% 1.87%
======= ======= =======
- ---------------
(1) Nonaccruing loans are included in the average of loans receivable.
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The following table provides an analysis of the changes in net interest
income attributable to changes in volume of interest-earning assets or
interest-bearing liabilities and to changes in rates earned or paid:
VOLUME/RATE VARIANCE ANALYSIS
1996 COMPARED WITH 1995 1995 COMPARED WITH 1994
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO(1) DUE TO(1)
----------------------- -----------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ----- ------ ------ ----- ------
(IN MILLIONS)
Interest income:
Interest-earning deposits in other banks... $ (.5) $ .2 $ (.3) $ .9 $ .2 $ 1.1
Mortgage-backed and investment
securities.............................. (25.3) .2 (25.1) (24.9) 43.7 18.8
Securities purchased under agreements to
resell, agency discount notes, federal
funds sold, and commercial paper........ .9 (1.6) (.7) (16.0) 7.9 (8.1)
Loans receivable and mortgage loans held
for sale................................ 62.3 (4.8) 57.5 101.0 22.9 123.9
Covered assets............................. (18.3) -- (18.3) (14.4) 2.4 (12.0)
Other...................................... -- (1.2) (1.2) -- (.3) (0.3)
------ ----- ------ ------ ----- ------
Total interest income.............. $ 19.1 $(7.2) $ 11.9 $ 46.6 $76.8 $123.4
====== ===== ====== ====== ===== ======
Interest expense:
Deposits:
Interest-bearing demand................. $ (3.1) $ (.7) $ (3.8) $ (8.1) $ 3.5 $ (4.6)
Savings deposits........................ (.8) .1 (.7) (.7) -- (.7)
Time deposits........................... (1.3) 1.2 (.1) 20.7 43.7 64.4
------ ----- ------ ------ ----- ------
Total interest on deposits......... (5.2) .6 (4.6) 11.9 47.2 59.1
Advances from the Federal Home Loan Bank... (7.0) 1.7 (5.3) -- 1.7 1.7
Securities sold under repurchase
agreements.............................. 18.3 (9.3) 9.0 5.4 30.6 36.0
Other borrowings........................... 2.5 (.2) 2.3 2.3 .4 2.7
------ ----- ------ ------ ----- ------
Total interest expense............. $ 8.6 $(7.2) $ 1.4 $ 19.6 $79.9 $ 99.5
====== ===== ====== ====== ===== ======
Net interest income (expense).............. $ 10.5 $ -- $ 10.5 $ 27.0 $(3.1) $ 23.9
====== ===== ====== ====== ===== ======
- ---------------
(1) The change in interest income and expense due to both rate and volume has
been allocated to volume and rate changes in proportion to the relationship
of the absolute dollar amounts of the change in each.
9
11
The following table sets forth the carrying amount of mortgage-backed and
investment securities as of the dates indicated:
TYPES OF INVESTMENTS
DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
(IN MILLIONS)
Held-to-Maturity:
Mortgage-backed securities................................ $2,083.7 $2,412.8 $3,760.4
Debt securities
U.S. Government securities (including agencies)........ -- .3 .3
Corporate securities...................................... -- -- 1.5
Other..................................................... -- .1 .1
-------- -------- --------
-- .4 1.9
-------- -------- --------
Available-for-Sale:
Mortgage-backed securities................................ 643.9 949.6 137.7
Debt securities
Corporate securities................................... 3.0 1.4 --
Equity securities
Federal Home Loan Bank stock........................... 52.6 57.7 63.2
Other.................................................. .3 1.7 1.0
-------- -------- --------
52.9 59.4 64.2
-------- -------- --------
$2,783.5 $3,423.6 $3,964.2
======== ======== ========
The table below sets forth the maturities of mortgage-backed and investment
securities as of December 31, 1996:
MATURITY DISTRIBUTION OF MORTGAGE-BACKED AND INVESTMENT SECURITIES
MATURING
----------------------------------------------------------------- VARIABLE/NO
WITHIN 1 YEAR 1-5 YEARS 5-10 YEARS OVER 10 YEARS MATURITY TOTAL
-------------- -------------- -------------- -------------- ---------------- CARRYING
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD VALUE
------ ----- ------ ----- ------ ----- ------ ----- -------- ----- --------
(DOLLARS IN MILLIONS)
Held-to-Maturity:
Mortgage-backed securities.... $ -- -- $ -- -- $ -- -- $ -- -- $2,083.7 5.51% $2,083.7
Available-for-Sale:
Mortgage-backed securities.... -- -- -- -- -- -- -- -- 643.9 5.88% 643.9
Debt securities
Corporate securities........ -- -- -- -- 2.0 6.34% 1.0 6.79% -- -- 3.0
Equity securities
Federal Home Loan Bank
stock..................... -- -- -- -- -- -- -- -- 52.6 5.85% 52.6
Other....................... -- -- -- -- -- -- -- -- .3 -- .3
---- ---- ---- ---- -------- --------
-- -- -- -- -- -- -- 52.9 52.9
---- ---- ---- ---- -------- --------
$ -- $ -- $2.0 $1.0 $2,780.5 $2,783.5
==== ==== ==== ==== ======== ========
10
12
The following table shows the loan distribution for Financial Services:
TYPES OF LOANS
AS OF DECEMBER 31
--------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
(IN MILLIONS)
Real estate mortgage................... $4,198.5 $3,720.0 $3,137.5 $2,302.9 $1,153.3
Construction and development........... 2,152.4 1,500.6 1,022.6 643.7 274.6
Commercial and business................ 658.8 406.3 229.0 80.7 25.4
Consumer and other..................... 467.2 416.0 366.0 404.1 271.1
-------- -------- -------- -------- --------
7,476.9 6,042.9 4,755.1 3,431.4 1,724.4
Less:
Unfunded portion of loans............ 2,002.8 1,211.8 1,027.7 614.0 320.6
Unearned discounts................... -- -- .6 3.0 9.3
Unamortized purchase discounts....... (11.8) (1.8) (5.1) 8.9 28.1
Net deferred fees.................... 3.6 3.0 3.2 2.2 2.3
Allowance for loan losses............ 68.4 65.5 53.9 47.9 20.8
-------- -------- -------- -------- --------
2,063.0 1,278.5 1,080.3 676.0 381.1
-------- -------- -------- -------- --------
$5,413.9 $4,764.4 $3,674.8 $2,755.4 $1,343.3
======== ======== ======== ======== ========
The table below presents the maturity distribution of loans (excluding real
estate mortgage and consumer loans) outstanding at December 31, 1996, based on
scheduled repayments. The amounts due after one year, classified according to
the sensitivity to changes in interest rates, are also provided.
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
MATURING
----------------------------------------
WITHIN 1 1 TO 5 AFTER 5
YEAR YEARS YEARS TOTAL
-------- -------- ------- --------
(IN MILLIONS)
Construction and development........................... $1,354.5 $ 797.9 $ -- $2,152.4
Commercial and business................................ 318.4 334.3 6.1 658.8
-------- -------- ---- --------
$1,672.9 $1,132.2 $6.1 $2,811.2
======== ======== ==== ========
Loans maturing after 1 year with:
Variable interest rates.............................. $1,132.2 $6.1
======== ====
Loans accounted for on a nonaccrual basis, accruing loans that are
contractually past due 90 days or more, and restructured or other potential
problem loans were less than two percent of total loans during 1996, 1995, 1994,
1993, and 1992. The aggregate amounts and the interest income foregone on such
loans, therefore, are immaterial and are not disclosed.
11
13
The following tables summarize activity in the allowance for loan losses
and show the allocation of the allowance for loan losses by loan type:
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
------ ----- ------ ----- -----
(DOLLARS IN MILLIONS)
Balance at beginning of year................... $ 65.5 $53.9 $ 47.9 $20.8 $19.5
Charge-offs:
Real estate mortgages........................ (5.8) (3.9) (4.4)(a) (.7) (1.8)
Construction and development................. (.1) -- -- -- --
Commercial and business...................... (2.9) (.7) (1.1) -- --
Consumer and other........................... (4.4) (5.0) (4.7)(a) (1.8) (1.9)
------ ----- ------ ----- -----
(13.2) (9.6) (10.2) (2.5) (3.7)
Recoveries:
Real estate mortgages........................ 2.1 1.1 .6 .2 .2
Commercial and business...................... -- .5 .1 -- --
Consumer and other........................... .9 .8 1.4 .6 .8
------ ----- ------ ----- -----
3.0 2.4 2.1 .8 1.0
------ ----- ------ ----- -----
Net charge-offs........................... (10.2) (7.2) (8.1)(a) (1.7) (2.7)
Additions charged to operations................ 13.8 14.6 6.5 4.8 2.6
Additions related to bulk purchases of loans,
net of adjustments........................... (.7) 4.2 7.6 24.0(a) 1.4
------ ----- ------ ----- -----
Balance at end of year......................... $ 68.4 $65.5 $ 53.9 $47.9 $20.8
====== ===== ====== ===== =====
Ratio of net charge-offs during the year to
average loans outstanding during the year.... .20% .16% .27% .10% .22%
====== ===== ====== ===== =====
- ---------------
(a) Principally related to the loan portfolio from the acquisition of American
Federal Bank, F.S.B.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES*
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ---------
PERCENT OF PERCENT OF PERCENT OF
AMOUNT LOANS TO AMOUNT LOANS TO AMOUNT LOANS TO AMOUNT
OF TOTAL OF TOTAL OF TOTAL OF
ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE
--------- ---------- --------- ---------- --------- ---------- ---------
Real estate mortgage...... $59.6 56% $57.9 61% $46.1 66% $39.4
Construction and
development............. 1.9 29% 1.7 25% 1.4 21% 1.0
Commercial and business... 2.5 9% 1.0 7% 1.5 5% 1.1
Consumer and other........ 4.4 6% 4.9 7% 4.9 8% 6.4
----- ---- ----- ---- ----- ---- -----
$68.4 100% $65.5 100% $53.9 100% $47.9
===== ==== ===== ==== ===== ==== =====
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1992
---------- ----------------------
PERCENT OF PERCENT OF
LOANS TO AMOUNT LOANS TO
TOTAL OF TOTAL
LOANS ALLOWANCE LOANS
---------- --------- ----------
Real estate mortgage...... 67% $16.3 67%
Construction and
development............. 19% .5..... 16%
Commercial and business... 2% -- 1%
Consumer and other........ 12% 4.0.... 16%
---- ----- ----
100% 20$.8... 100%
==== ===== ====
- ---------------
* Reclassified to conform to 1996 presentation.
12
14
The amount charged to operations and the related balance in the allowance
for loan losses are based on periodic evaluations of the loan portfolio by
management. These evaluations consider several factors, including without
limitation, past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral, and current economic conditions.
Deposits. The average amount of deposits and the average rates paid on
noninterest-bearing demand deposits, interest-bearing demand deposits, savings
deposits, and time deposits are presented on the schedule of average balance
sheets and analysis of net interest spread of Financial Services on page 8
hereof.
The amount of time deposits of $100,000 or more and related maturities at
December 31, 1996, are disclosed in Note F to Financial Services Group
Summarized Financial Statements on page 47 of the Company's 1996 Annual Report.
Return on Equity and Assets. The following table shows operating and
capital ratios of Financial Services for each of the last three years:
OPERATING AND CAPITAL RATIOS
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------ ------
Return on average assets............................... .41%* .75% .44%
Return on average equity............................... 6.43%* 11.79% 7.41%
Dividend payout ratio.................................. 128.96%* 70.66% 73.22%
Equity to assets ratio................................. 6.32% 6.35% 5.99%
- ---------------
* Includes SAIF assessment of $43.9 million. If the SAIF assessment is excluded
from 1996, the operating and capital ratios for 1996 would have been .74%,
11.63%, and 70.48% for return on average assets, return on average equity, and
dividend payout ratio, respectively.
Short-term borrowings. The following table shows short-term borrowings
outstanding for Financial Services at the end of the reported period:
SHORT TERM BORROWINGS
(IN MILLIONS)
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING RATE
SECURITIES SOLD UNDER END OF INTEREST DURING THE DURING THE DURING THE
AGREEMENTS TO REPURCHASE PERIOD RATE PERIOD PERIOD PERIOD
------------------------ ---------- -------- ----------- ----------- ----------
1996......................... $1,936.9 5.5% $2,359.8 $2,044.2 5.5%
1995......................... $1,603.7 5.8% $1,914.1 $1,719.2 5.9%
1994......................... $1,365.2 6.1% $2,300.2 $1,598.0 4.1%
Note: Securities sold under agreements to repurchase generally mature within
thirty days of the transaction date. Average borrowings during the year
were calculated based on daily average.
13
15
RAW MATERIALS
The Company's main resource is timber, with approximately 2.2 million acres
of timberland located in Texas, Louisiana, Alabama, and Georgia. In 1996, wood
fiber required for the Company's paper and wood products operations was produced
from these lands and as a by-product of its solid wood operations to the extent
shown on the following chart:
WOOD FIBER REQUIREMENTS
PERCENTAGE
SUPPLIED
RAW MATERIALS INTERNALLY
------------- ----------
Sawtimber................................................... 58.6%
Pine Pulpwood............................................... 56.0%
Hardwood Pulpwood........................................... 26.2%
The balance of the wood fiber required for these operations was purchased
from numerous landowners and other lumber companies. In an effort to meet its
projected need for hardwood fiber, the Company operates a eucalyptus plantation
in Mexico. The Company expects to begin receiving fiber from this project in
four to six years. During 1996, the bleached paperboard mill in Evadale, Texas,
purchased small amounts of recycled pulp. Now that the expansion program is
completed, this mill may purchase increasing amounts of recycled fiber.
Linerboard and corrugating medium are the principal materials used by
Inland to make corrugated boxes. The mills at Rome, Georgia, and Orange, Texas,
are solely linerboard mills. The Ontario, California, and Maysville, Kentucky,
mills are traditionally linerboard mills, but can be used to manufacture
corrugating medium. The Newport, Indiana, Newark, California, and New
Johnsonville, Tennessee, mills are solely corrugating medium mills. The
principal raw material used by the Rome, Georgia, and Orange, Texas, mills is
virgin fiber. The Ontario, California; Newark, California; Newport, Indiana; and
Maysville, Kentucky, mills use only old corrugated containers ("OCC"). The mill
at New Johnsonville, Tennessee, uses a combination of virgin fiber and OCC. In
1996, OCC represented approximately 43% of the total fiber needs of the
Company's containerboard operations. The price of OCC may exhibit volatility due
to normal supply and demand fluctuations for the raw material and for the
finished product. OCC is purchased by the Company and its competitors on the
open market from numerous suppliers. Price fluctuations reflect the
competitiveness of these markets. The Company's historical grade patterns
produce more linerboard and less corrugating medium than is converted at the
Company's box plants. The deficit of corrugating medium is obtained through open
market purchases and/or trades and the excess linerboard is sold in the open
market.
Temple-Inland FPC obtains the gypsum for its wallboard operations from its
own quarry near Fletcher, Oklahoma, and from one outside source through a
long-term purchase contract.
In the opinion of management, the sources outlined above will be sufficient
to supply the Company's raw material needs for the foreseeable future.
ENERGY
Energy requirements at the Company's manufacturing facilities are supplied
by electricity, steam, and a variety of fuels, including natural gas, fuel oil,
coal, and in some instances, waste products resulting from the manufacturing
process at the facility concerned. By utilizing these waste products, Inland was
able to generate approximately 13 percent of its energy requirements at its
mills in Rome, Georgia, and Orange, Texas, and Temple-Inland FPC generated
approximately 48 percent of its energy requirements during 1996. The Ontario,
California, mill includes a cogeneration plant that sells excess electricity
generated to an electric utility. In most cases where natural gas or fuel oil is
used as a fuel, the Company's facilities possess a dual capacity enabling them
to use either of the fuels as a source of energy.
The natural gas needed to run the Company's natural gas fueled power
boilers is acquired pursuant to multiple gas contracts that provide for the
purchase of gas on an interruptible basis at favorable rates.
14
16
EMPLOYEES
At December 28, 1996, the Company and its subsidiaries had approximately
15,600 employees. Approximately 5,200 of these employees are covered by
collective bargaining agreements. These agreements generally run for a term of
three to six years and have varying expiration dates. The following table
summarizes certain information about the collective bargaining agreements that
cover a significant number of employees:
LOCATION BARGAINING UNIT(S) EMPLOYEES COVERED EXPIRATION DATES
-------- ------------------ ----------------- ----------------
Bleached Paperboard Mill, United Paperworkers 520 Hourly Production August 1, 1998
Evadale, Texas International Union Employees, 209 Hourly
("UPIU"), Local 801, UPIU, Mechanical Maintenance
Local 825, and International Employees and 77 Electrical
Brothers of Electrical Maintenance Employees
Workers ("IBEW"), Local 390
Linerboard Mill, UPIU, Local 1398, and UPIU, 236 Hourly Production July 31, 1999
Orange, Texas Local 391 Employees and 104 Hourly
Maintenance Employees
Linerboard Mill, UPIU, Local 804, IBEW, Local 340 Hourly Production August 28, 2000
Rome, Georgia 613, United Association of Employees, 39 Electrical
Journeymen & Apprentices of Maintenance Employees and 141
the Plumbing & Pipefitting Hourly Maintenance Employees
Industry of the U.S. and
Canada, Local 766, and
International Association of
Machinists & Aerospace
Workers, Local 414
Evansville, Indiana, Louisville, UPIU, Local 1046, UPIU, 114 Hourly Production August 30, 2002
Kentucky, Middletown, Ohio, and Local 1737, UPIU, Local 114, Employees, 99 Hourly
Erie, Pennsylvania, Box Plants and UPIU, Local 954, Production Employees, 106
("Northern Multiple") respectively Hourly Production Employees,
and 82 Hourly Production
Employees, respectively
Rome, Georgia and Orlando, Florida, UPIU, Local 838 and UPIU, 162 and 112 Hourly Production December 1, 2003
Box Plants ("Southern Multiple") Local 834, respectively Employees, respectively
The Company has additional collective bargaining agreements with the
employees of various of its other box plants, mills, and building products
plants. These agreements each cover a relatively small number of employees and
are negotiated on an individual basis at each such facility.
The Company considers its relations with its employees to be good.
ENVIRONMENTAL PROTECTION
The operations conducted by the subsidiaries of the Company are subject to
federal, state, and local provisions regulating the discharge of materials into
the environment and otherwise related to the protection of the environment.
Compliance with these provisions, primarily the Federal Clean Air Act, Clean
Water Act, Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), and Resource Conservation and Recovery Act ("RCRA"), has required
the Company to invest substantial funds to modify facilities to assure
compliance with applicable environmental regulations. Capital expenditures
directly related to environmental compliance totaled approximately $12 million
during 1996. This amount does not include capital expenditures for environmental
control facilities made as part of major mill modernizations and expansions or
capital expenditures made for another purpose that have an indirect benefit on
environmental compliance.
15
17
The Company is committed to protecting the health and welfare of its
employees, the public, and the environment and strives to maintain compliance
with all state and federal environmental regulations in a manner that is also
cost effective. In the construction of new facilities and the modernization of
existing facilities, such as the modernization at the mill in Evadale, Texas,
the Company has used state of the art technology for its air and water
emissions. These forward-looking programs are intended to minimize the impact
that changing regulations have on capital expenditures for environmental
compliance.
Future expenditures for environmental control facilities will depend on new
laws and regulations and other changes in legal requirements and agency
interpretations thereof, as well as technological advances. The Company expects
the trend toward more stringent environmental regulation to continue for the
foreseeable future. The trend in interpretation and application of existing
regulations by regulatory authorities also appears to be toward increasing
stringency particularly under RCRA with respect to certain solid wastes
generated at kraft mills. Given these uncertainties, the Company currently
estimates that capital expenditures for environmental purposes during the period
1997 through 1999 will average approximately $15 million each year. The
estimated expenditures could be significantly higher if more stringent laws and
regulations are implemented.
On December 17, 1993, the U.S. Environmental Protection Agency (the "EPA")
published extensive proposed regulations governing air and water emissions from
the pulp and paper industry (the "Cluster Rules"). The Company anticipates that
these proposed regulations will change before becoming effective. Due to the
uncertainty of the final form of the Cluster Rules, it is impossible to predict
the exact capital expenditures necessary for compliance. Therefore, the
estimated expenditures disclosed above do not include expenditures that may be
mandated by the Cluster Rules. Based upon its interpretation of the Cluster
Rules as currently proposed, the Company estimates that compliance with these
rules may require modifications at several facilities. Some of these
modifications can be included in modernization projects that will provide
economic benefits to the Company. The extent of such benefits can increase these
investments, but currently these expenditures are not expected to exceed $200
million over the next five years, and could be less if the Company's recovery
boilers meet the new standards.
RCRA establishes a regulatory program for the treatment, storage,
transportation, and disposal of solid and hazardous wastes. Under RCRA,
subsidiaries of the Company have prepared hazardous waste closure plans to
address land disposal units containing hazardous wastes formerly managed at
various facilities. These closure plans are in various states of implementation,
with most sites simply awaiting state certification. The Company believes that
the costs associated with these plans will not have a material impact on the
earnings or competitive position of the Company.
In addition to these capital expenditures, the Company incurs significant
ongoing maintenance costs to maintain compliance with environmental regulation.
The Company, however, does not believe that these capital expenditures or
maintenance costs will have a material adverse effect on the earnings of the
Company. In addition, expenditures for environmental compliance should not have
a material impact on the competitive position of the Company, because other
companies are also subject to these regulations.
COMPETITION
All of the industries in which the Company operates are highly competitive.
The level of competition in a given product or market may be affected by the
strength of the dollar and other market factors including geographic location,
general economic conditions, and the operating efficiencies of competitors.
Factors influencing the Company's competitive position vary depending on the
characteristics of the products involved. The primary factors are product
quality and performance, price, service, and product innovation.
The corrugated packaging industry is highly competitive with almost 1,500
box plants in the United States. Box plants operated by Inland and its
subsidiaries accounted for approximately 8.3 percent of total industry shipments
during 1996. Although corrugated packaging is dominant in the national
distribution process, Inland's products also compete with various other
packaging materials, including products made of paper, plastics, wood, and
metals.
16
18
Bleached paperboard produced by the Paper Group has a variety of ultimate
uses and, therefore, serves diversified markets. The Company competes with
larger paper producers with greater resources.
In the building materials markets, the Building Products Group competes
with many companies that are substantially larger and have greater resources in
the manufacturing of commodity building materials.
Financial Services competes with commercial banks, savings and loan
associations, mortgage bankers, and other lenders in its mortgage banking and
consumer savings bank activities, and with real estate investment and management
companies in its development activities. Mortgage banking, real estate
development, and consumer savings banks are highly competitive businesses, and a
number of entities with which the Company competes have greater resources.
EXECUTIVE OFFICERS
Set forth below are the names, ages, and titles of the persons who serve as
executive officers of the Company:
NAME AGE OFFICE
---- --- ------
Clifford J. Grum................... 62 Chairman of the Board and Chief Executive
Officer
William B. Howes................... 59 Executive Vice President
Kenneth M. Jastrow, II............. 49 Group Vice President and Chief Financial
Officer
Harold C. Maxwell.................. 56 Group Vice President
Ted A. Owens....................... 58 Group Vice President
Jack C. Sweeny..................... 50 Group Vice President
Joseph E. Turk..................... 53 Group Vice President
David H. Dolben.................... 61 Vice President and Chief Accounting Officer
M. Richard Warner.................. 45 Vice President, General Counsel, and Secretary
David W. Turpin.................... 46 Treasurer
Clifford J. Grum became Chairman of the Board, Chief Executive Officer, and
a Director of the Company in February 1991 after serving as President, Chief
Executive Officer, and a Director since October 1983. He also serves as
Chairman, President, and Chief Executive Officer of Temple-Inland FPC, a
Director of Inland, Chairman of the Board of Guaranty, and a Director of
Financial Services.
William B. Howes, who was named Executive Vice President and a Director in
August 1996, became a Group Vice President of the Company and the Chairman of
the Board and Chief Executive Officer of Inland in July 1993 after serving as
the President and Chief Operating Officer of Inland since April 1992. From
August 1990 until April 1992, Mr. Howes was the Executive Vice President of
Inland. Before joining Inland in 1990, Mr. Howes was an employee of Union Camp
Corporation for 28 years, serving most recently as Senior Vice President.
Kenneth M. Jastrow, II became a Group Vice President of the Company in 1995
and the Chief Financial Officer of the Company in November 1991. He also serves
as Chairman of the Board and Chief Executive Officer of Financial Services,
President and Chief Executive Officer of Guaranty, and Chairman of the Board and
Chief Executive Officer of Temple-Inland Mortgage.
Harold C. Maxwell became Group Vice President of the Company in May 1989.
He has also served as Group Vice President -- Building Products of Temple-Inland
FPC since November 1982.
Ted A. Owens became a Group Vice President of the Company in August 1996.
He also serves as Executive Vice President of Inland. Mr. Owens has been
employed by Inland since 1976. During that time he has served in various
positions, including Group Vice President -- Containerboard, and Vice President
Sales, Administration, and Engineering.
17
19
Jack C. Sweeny became a Group Vice President of the Company in May 1996. He
also serves as Group Vice President -- Forests Division of Temple-Inland FPC.
From November 1982 through May 1996, Mr. Sweeny served as Vice
President -- Operations of the Building Products Division of Temple-Inland FPC.
Joseph E. Turk became a Group Vice President of the Company in August 1996.
He also serves as Executive Vice President of Inland. Mr. Turk has been employed
by Inland since 1967 and has served in various capacities including Group Vice
President -- Container Division and Division Vice President Manufacturing
Services.
David H. Dolben became Vice President of the Company in May 1987. Mr.
Dolben also serves as Vice President, Treasurer, and a Director of Temple-Inland
FPC and a Director of Inland.
M. Richard Warner became Vice President, General Counsel and Secretary of
the Company in June 1994. From 1991 to 1994, Mr. Warner was an attorney in
private practice in Lufkin, Texas. Mr. Warner served as Treasurer of the Company
from January 1986 to 1990 and as Vice Chairman of Guaranty from 1990 to 1991.
David W. Turpin became Treasurer of the Company in June 1991. Mr. Turpin
also serves as the Executive Vice President and Chief Financial Officer of
Lumbermen's Investment Corporation, a real estate subsidiary of the Company. Mr.
Turpin was first employed by the Company in December 1990 as the Senior Vice
President and Treasurer of Lumbermen's Investment Corporation.
Officers are elected at the Company's Annual Meeting of Directors to serve
until their successors have been elected and have qualified or as otherwise
provided in the Company's Bylaws.
ITEM 2. PROPERTIES
The Company owns and operates plants, mills, and manufacturing facilities
throughout the United States, three box plants in Mexico, and box plants in
Argentina, Chile, and Puerto Rico. Additional descriptions as of year-end of
selected properties are set forth in the following charts:
CONTAINERBOARD MILLS
RATED
NO. OF ANNUAL 1996*
LOCATION PRODUCT MACHINES CAPACITY PRODUCTION
-------- ---------- -------- -------- ----------
(IN TONS)
Ontario, California................................. Linerboard 1 300,000 273,000
Rome, Georgia....................................... Linerboard 2 820,000 790,000
Orange, Texas....................................... Linerboard 2 645,000 621,000
Maysville, Kentucky................................. Linerboard 1 350,000 324,000
Newark, California.................................. Medium 2 70,000 64,000
Newport, Indiana.................................... Medium 1 280,000 257,000
New Johnsonville, Tennessee......................... Medium 1 255,000 248,000
- ---------------
* Production during the first half of 1996 was curtailed due to economic
conditions in the industry.
18
20
BLEACHED PAPERBOARD MILL
RATED
NO. OF ANNUAL 1996
LOCATION PRODUCT MIX MACHINES CAPACITY PRODUCTION
-------- --------------- -------- -------- ----------
(IN TONS)
Evadale, Texas........................... Bleached Pulp 3% 4 725,000 19,099
Food Service 40% 253,055
Packaging 29% 183,465
Office Supplies 18% 113,875
Specialties 5% 33,514
Nodular Pulp 5% 29,630
---- ------- -------
100% 4 725,000* 632,638
==== ======= =======
- ---------------
* Such capacity may vary to some degree depending on product mix. Due to market
conditions for the grade it was designed to produce, the Company has decided
to no longer operate a cylinder machine at the mill.
FOOD SERVICE CONVERTING PLANTS*
DATE
LOCATION PLANT SIZE ACQUIRED
-------- ---------- --------
(IN SQUARE FEET)
Sacramento, California...................................... 88,000 1991
Carlisle, Ohio(1)........................................... 83,000 1991
El Cajon, California........................................ 120,000 1991
Denver, Colorado............................................ 50,000 1991
Farmersville, Louisiana(1).................................. 29,000 1994
- ---------------
* The annual capacity of the converting plants of Food Service is not given
because such annual capacity is a function of the product mix, customer
requirements, and the type of converting equipment installed and operating
at each plant, all of which vary from time to time.
(1) These facilities are owned by the Company. The other converting plants are
leased.
Additionally, Food Service rents, from time to time, warehouse space near
its converting plants primarily to store finished products awaiting shipment.
19
21
CORRUGATED CONTAINER PLANTS*
DATE
CORRUGATOR ACQUIRED OR
LOCATION SIZE CONSTRUCTED
-------- ---------- -----------
Fort Smith, Arkansas........................................ 87" 1978
Fort Smith, Arkansas(1)***.................................. None 1996
Bell, California............................................ 97" 1972
Buena Park, California(1)................................... 85" 1990
El Centro, California(1).................................... 87" 1990
Newark, California.......................................... 87" 1974
Ontario, California......................................... 87" 1985
Santa Fe Springs, California................................ 98" 1972
Santa Fe Springs, California(1)**........................... 87" 1990
Santa Fe Springs, California***............................. None 1990
Tracy, California**......................................... 87" 1986
Wheat Ridge, Colorado....................................... 87" 1977
Orlando, Florida............................................ 98" 1955
Rome, Georgia**............................................. 87" & 98" 1955
Chicago, Illinois........................................... 87" 1957
Crawfordsville, Indiana..................................... 98" 1971
Evansville, Indiana......................................... 98" 1958
Indianapolis, Indiana....................................... 87" 1990
Garden City, Kansas......................................... 96" 1981
Kansas City, Kansas......................................... 87" 1981
Louisville, Kentucky........................................ 87" 1958
Minden, Louisiana........................................... 98" 1986
Minneapolis, Minnesota...................................... 87" 1986
Hattiesburg, Mississippi.................................... 87" 1965
St. Louis, Missouri......................................... 87" 1963
Spotswood, New Jersey....................................... 87" 1963
Middletown, Ohio............................................ 98" 1930
Biglerville, Pennsylvania................................... 98" 1955
Erie, Pennsylvania(2)....................................... 85" 1952
Hazleton, Pennsylvania...................................... 98" 1976
Vega Alta, Puerto Rico...................................... 87" 1977
Lexington, South Carolina................................... 98" 1980
Rock Hill, South Carolina................................... 87" 1972
Elizabethton, Tennessee..................................... 98" 1982
Elizabethton, Tennessee(1)***............................... None 1990
Dallas, Texas............................................... 98" 1962
Edinburg, Texas............................................. 87" 1989
Petersburg, Virginia........................................ 87" 1991
San Jose Iturbide, Mexico................................... 87" 1994
Monterrey, Mexico........................................... 87" 1994
Los Mochis, Sinaloa, Mexico***.............................. None 1995
Buenos Aires, Argentina..................................... 98" 1994
Santiago, Chile............................................. 87" 1995
- ---------------
* The annual capacity of Inland's box plants is not given because such annual
capacity is a function of the product mix, customer requirements and the
type of converting equipment installed and operating at each plant, each of
which varies from time to time.
** The Santa Fe Springs, California (Crockett), Tracy, California and Rome,
Georgia plants each contain two corrugators.
*** Sheet plants.
(1) Leased facilities.
(2) In February 1997, the Company announced its intention to close this box
plant by the end of 1997.
20
22
Additionally, Inland owns a graphics resource center in Indianapolis,
Indiana, that has a 100" preprint press and a tape manufacturing facility in
Milwaukee, Wisconsin, and also leases 50 warehouses located throughout much of
the United States. Inland owns a specialty converting plant in Harrington,
Delaware, and leases specialty converting plants in Ontario, California,
Leominster, Massachusetts, and Rural Hall, North Carolina.
BUILDING PRODUCTS
RATED
ANNUAL
DESCRIPTION LOCATION CAPACITY
----------- -------- ----------------
(IN MILLIONS OF
BOARD FEET)
Lumber................................................ Diboll, Texas 150*
Lumber................................................ Pineland, Texas 95
Lumber................................................ Buna, Texas 170
Lumber................................................ Rome, Georgia 115
Lumber................................................ DeQuincy, Louisiana 145
- ---------------
* Includes separate finger jointing capacity of 10 million board feet.
RATED
ANNUAL
DESCRIPTION LOCATION CAPACITY
----------- -------- ----------------
(IN MILLIONS OF
SQUARE FEET)
Fiberboard............................................ Diboll, Texas 460
Particleboard......................................... Monroeville, Alabama 125
Particleboard......................................... Thomson, Georgia 120
Particleboard......................................... Diboll, Texas 120
Particleboard......................................... Hope, Arkansas 170
Plywood............................................... Pineland, Texas 265
Gypsum Wallboard...................................... West Memphis, Arkansas 400
Gypsum Wallboard...................................... Fletcher, Oklahoma 440
TIMBER AND TIMBERLANDS*
(IN ACRES)
Pine Plantations............................................ 1,519,188
Natural Pine................................................ 317,469
Hardwood.................................................... 234,605
Special Use / Non-Forested.................................. 98,755
---------
TOTAL............................................. 2,170,017
=========
- ---------------
* Includes approximately 243,000 acres of leased land.
In the opinion of management, the Company's plants, mills, and
manufacturing facilities are suitable for their purpose and adequate for the
Company's business.
The Company owns certain of the office buildings in which various of its
corporate offices are headquartered. This includes approximately 76,000 square
feet of space in Diboll, Texas, approximately 130,000 square feet in
Indianapolis, Indiana, and 270,000 square feet of office space in Austin, Texas.
The Company also owns 361,000 mineral acres in Texas and Louisiana. Revenue
from lease and production activities on these acres totaled $8.3 million in
1996. Additionally, the Company owns 395,830 mineral acres in Alabama and
Georgia, which produced no lease or production revenue in 1996.
21
23
At year end 1996, property and equipment having a net book value of
approximately $54.3 million were subject to liens in connection with $72.5
million of debt.
ITEM 3. LEGAL PROCEEDINGS
General:
The Company and its subsidiaries are involved in various legal proceedings
that have arisen from time to time in the ordinary course of business. In the
opinion of the Company's management, such proceedings will not be material to
the business or financial condition of the Company and its subsidiaries.
Environmental:
The facilities of the Company are periodically inspected by environmental
authorities and must file periodic reports on the discharge of pollutants with
these authorities. Occasionally, one or more of these facilities have operated
in violation of applicable pollution control standards, which could subject the
facilities to fines or penalties in the future. Management believes that any
fines or penalties that may be imposed as a result of these violations will not
have a material adverse effect on the Company's earnings or competitive
position. The Company, however, has noticed an increase in the number and dollar
amount of fines and penalties imposed by environmental authorities. No assurance
can be given, therefore, that any fines levied against the Company in the future
for any such violations will not be material.
Subsidiaries of the Company are involved in regulatory enforcement actions
concerning the management of solid wastes at various facilities. These
proceedings are representative of a trend the Company has observed toward more
stringent application of RCRA regulations to solid wastes generated at kraft
mills. In July 1993, a subsidiary's facility in Rome, Georgia, experienced a
significant upset in its wastewater treatment process. This upset caused the
Georgia environmental agency to order a temporary cessation of production. The
Company's subsidiary has resolved its potential liability to the State of
Georgia by paying a $100,000 monetary penalty and agreeing to perform certain
work, but remains exposed to potential claims of the U.S. EPA and private
citizens. Management believes, however, that these matters will not result in
liability to an extent that would have a material adverse effect on the business
or financial condition of the Company.
Under CERCLA, liability for the cleanup of a Superfund site may be imposed
on waste generators, site owners and operators, and others regardless of fault
or the legality of the original waste disposal activity. While joint and several
liability is authorized under CERCLA, as a practical matter, the cost of cleanup
is generally allocated among the many waste generators. Subsidiaries of the
Company are parties to numerous proceedings relating to the cleanup of hazardous
waste sites under CERCLA and similar state laws. The subsidiaries have conducted
investigations of the sites and in certain instances believe that there is no
basis for liability and have so informed the governmental entities. The internal
investigations of the remaining sites reveal that the portion of the remediation
costs for these sites to be allocated to the Company should be relatively small
and will have no material impact on the Company. There can be no assurance that
subsidiaries of the Company will not be named as potentially responsible parties
at additional Superfund sites in the future or that the costs associated with
the remediation of those sites would not be material.
All litigation has an element of uncertainty and the final outcome of any
legal proceeding cannot be predicted with any degree of certainty. With these
limitations in mind, the Company presently believes that any ultimate liability
from the legal proceedings discussed herein would not have a material adverse
effect on the business or financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of its shareholders during
the fourth quarter of its last fiscal year.
22
24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information:
The information concerning market prices of the Company's Common Stock
required by this item is incorporated by reference from page 34 of the Company's
1996 Annual Report to Shareholders furnished to the Securities and Exchange
Commission pursuant to Rule 14a-3(b).
Shareholders:
The Company's stock transfer records indicated that as of March 7, 1997,
there were approximately 7,250 holders of record of the Common Stock.
Dividend Policy:
On February 7, 1997, the Board of Directors declared a quarterly dividend
on the Common Stock of $.32 per share payable on March 14, 1997, to shareholders
of record on February 28, 1997. During the first three quarters of 1994, the
Company paid a quarterly dividend of $.25 per share. The quarterly dividend was
increased to $.27 per share beginning with the dividend payable December 15,
1994, was again increased to $.30 per share beginning with the dividend payable
September 15, 1995, and was increased again to $.32 per share beginning with the
dividend payable September 13, 1996. The Board will review its dividend policy
periodically, and the declaration of dividends will necessarily depend upon
earnings and financial requirements of the Company and other factors within the
discretion of its Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference from
page 34 of the Company's 1996 Annual Report to Shareholders furnished to the
Securities and Exchange Commission pursuant to Rule 14a-3(b).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference from
pages 25 through 33 of the Company's 1996 Annual Report to Shareholders
furnished to the Securities and Exchange Commission pursuant to Rule 14a-3(b).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company and its subsidiaries required to be
included in this Item 8 are set forth in Item 14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has had no changes in or disagreements with its independent
auditors to report under this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by reference
from pages 5 through 8 of the Company's definitive proxy statement, involving
the election of directors, to be filed pursuant to Regulation 14A with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K (the "Definitive Proxy Statement").
Information required by this item concerning executive officers is included in
Part I of this report.
23
25
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
pages 10 through 18 of the Company's Definitive Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from
pages 3 and 4 of the Company's Definitive Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from
pages 7 and 8 of the Company's Definitive Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of Report.
1. FINANCIAL STATEMENTS:
PAGE
ITEM NUMBER
---- ------
Temple-Inland Inc. and Subsidiaries
Report of Independent Auditors*........................ 61
Consolidated Statements of Income -- three years ended
December 28, 1996*.................................... 50
Consolidating Balance Sheets at December 28, 1996, and
December 30, 1995*.................................... 52-53
Consolidated Statements of Shareholders' Equity -- three
years ended December 28, 1996*........................ 54
Consolidated Statements of Cash Flows -- three years
ended December 28, 1996*.............................. 51
Notes to Consolidated Financial Statements*............ 55-60
- ---------------
* Incorporated herein by reference from the Company's Annual Report to
Shareholders for the fiscal year ended December 28, 1996, and filed for
purposes of those portions so incorporated as Exhibit 13. Page numbers refer
to page numbers in the Company's 1996 Annual Report to Shareholders.
2. FINANCIAL STATEMENT SCHEDULE:
The following Financial Statement Schedule of the Company required by
Regulation S-X and excluded from the Annual Report to Shareholders for the year
ended December 28, 1996, is filed herewith at the page indicated.
PAGE
ITEM NUMBER
---- ------
Temple-Inland Inc. and Subsidiaries
Schedule II -- Valuation and Qualifying Accounts.......... 29
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
inapplicable and, therefore, have been omitted.
3. EXHIBITS:
EXHIBIT
NUMBER EXHIBIT
------- -------
3.01 -- Certificate of Incorporation of the Company(1), as
amended effective May 4, 1987(2), as amended effective
May 4, 1990(3)
3.02 -- By-laws of the Company as amended and restated May 3,
1991(18)
24
26
EXHIBIT
NUMBER EXHIBIT
------- -------
4.01 -- Form of Specimen Common Stock Certificate of the
Company(4)
4.02 -- Indenture dated as of September 1, 1986, between the
Registrant and Chemical Bank, as Trustee(5), as amended
by First Supplemental Indenture dated as of April 15,
1988, as amended by Second Supplemental Indenture dated
as of December 27, 1990(12), and as amended by Third
Supplemental Indenture dated as of May 9, 1991(13)
4.03 -- Form of Specimen Medium-Term Note of the Company(5)
4.04 -- Form of Fixed-rate Medium Term Note, Series B, of the
Company(12)
4.05 -- Form of Floating-rate Medium Term Note, Series B, of the
Company(12)
4.06 -- Form of 9% Note due May 1, 2001, of the Company(15)
4.07 -- Form of Fixed-rate Medium Term Note, Series D, of the
Company(14)
4.08 -- Form of Floating-rate Medium Term Note, Series D, of the
Company(14)
4.09 -- Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock, dated
February 16, 1989(6)
4.10 -- Rights Agreement, dated February 3, 1989, between the
Company and NCNB Texas National Bank, Dallas, Texas, as
Rights Agent(7)
4.11 -- Form of 7.25% Note due September 15, 2004, of the
Company(16)
4.12 -- Form of 8.25% Debenture due September 15, 2022, of the
Company(16)
10.01* -- 1988 Stock Option Plan for Key Employees and Directors of
Temple-Inland Inc. and its Subsidiaries(8)
10.02* -- Form of Incentive Option Agreement under the 1988 Stock
Option Plan(8)
10.03* -- Form of Nonqualified Option Agreement under the 1988
Stock Option Plan(8)
10.04* -- Temple-Inland Inc. Incentive Stock Plan(1), as amended
May 6, 1988(9), as amended February 7, 1992(18)
10.05* -- Form of Incentive Shares Agreement(10)
10.06* -- 1988 Performance Unit Plan for Key Employees of
Temple-Inland Inc. and its Subsidiaries(9), as amended
February 4, 1994(20)
10.07* -- Form of Performance Unit Rights Agreement under the
Performance Unit Plan(6)
10.08 -- Assistance Agreement dated September 30, 1988, among the
Federal Savings and Loan Insurance Corporation; Guaranty
Federal Savings Bank, Dallas, Texas; Guaranty Holdings
Inc. I; Guaranty Holdings Inc. II; Temple-Inland Inc.;
Mason Best Company; and Trammell Crow Ventures 3,
Ltd.(11)
10.09* -- Temple-Inland Inc. 1993 Stock Option Plan(17)
10.10* -- Temple-Inland Inc. 1993 Restricted Stock Plan(17)
10.11* -- Temple-Inland Inc. 1993 Performance Unit Plan(17), as
amended February 4, 1994(20)
10.12 -- Stock Purchase Agreement and Agreement and Plan of
Reorganization by and among Guaranty, Guaranty Holdings
Inc. I ("GHI"), Lone Star Technologies, Inc. ("LST"), and
LSST Financial Services Corporation ("LSST Financial"),
dated as of February 16, 1993(19)
10.13 -- First Amendment to Stock Purchase agreement and Agreement
and Plan of Reorganization by and among Guaranty, GHI,
LST and LSST Financial, dated as of April 2, 1993(19)
25
27
EXHIBIT
NUMBER EXHIBIT
------- -------
10.14 -- Second Amendment to Stock Purchase Agreement and
Agreement and Plan of Reorganization by and among
Guaranty, GHI, LST and LSST Financial, dated as of August
31, 1993(19)
10.15 -- Third Amendment to Stock Purchase Agreement and Agreement
and Plan of Reorganization by and among Guaranty, GHI,
LST and LSST Financial, dated as of September 30,
1993(19)
10.16 -- Holdback Escrow Agreement by and among LST, Guaranty, and
Bank One, Texas, N.A. dated as of November 12, 1993(19)
10.17 -- Termination Agreement by and among Federal Deposit
Insurance Corporation, as Manager of the FSLIC Resolution
Fund, Guaranty Federal Bank, F.S.B., Guaranty Holdings
Inc. I, and Temple-Inland Inc., dated as of October 31,
1995(21)
10.18 -- GFB Tax Agreement by and among Federal Deposit Insurance
Corporation, as Manager of the FSLIC Resolution Fund,
Guaranty Federal Bank, F.S.B., Guaranty Holdings Inc. I,
and Temple-Inland Inc., dated as of October 31, 1995(21)
10.19 -- Termination Agreement by and among Federal Deposit
Insurance Corporation, as Manager of the FSLIC Resolution
Fund, Guaranty Federal Bank, F.S.B., the surviving
institution resulting from the merger of American Federal
Bank, F.S.B. with and into Guaranty, which subsequently
became the successor-in-interest to LSST Financial
Services Corporation, Guaranty Holdings Inc. I, and
Temple-Inland Inc., dated as of October 31, 1995(21)
10.20 -- AFB Tax Agreement by and among Federal Deposit Insurance
Corporation, as Manager of the FSLIC Resolution Fund,
Guaranty Federal Bank, F.S.B., the surviving institution
resulting from the merger of American Federal Bank,
F.S.B. with and into Guaranty, which subsequently became
the successor-in-interest to LSST Financial Services
Corporation, Guaranty Holdings Inc. I, and Temple-Inland
Inc., dated as of October 31, 1995(21)
10.21 -- Agreement and Plan of Merger by and among Temple-Inland
Inc., California Financial Holding Company, Guaranty
Federal Bank, F.S.B., and Stockton Savings Bank, F.S.B.,
dated as of December 8, 1996(22)
10.22* -- Temple-Inland Inc. 1997 Stock Option Plan(23)
10.23* -- Temple-Inland Inc. 1997 Restricted Stock Plan(23)
11 -- Statement re: Computation of Per Share Earnings for the
three years ended December 28, 1996(24)
13 -- Annual Report to Shareholders for the year ended December
28, 1996. Such Report is not deemed to be filed with the
Commission as part of this Annual Report on Form 10-K,
except for the portions thereof expressly incorporated by
reference.(24)
21 -- Subsidiaries of the Company(24)
23 -- Consent of Ernst & Young LLP(24)
27 -- Financial Data Schedule(24)
- ---------------
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to Registration Statement No. 2-87570 on Form S-1
filed by the Company with the Commission.
26
28
(2) Incorporated by reference to Post-effective Amendment No. 2 to Registration
Statement No. 2-88202 on Form S-1 filed by the Company with the Commission.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement No. 33-25650 on Form S-8 filed by the Company with the
Commission.
(4) Incorporated by reference to Registration Statement No. 33-27286 on Form
S-8 filed by the Company with the Commission.
(5) Incorporated by reference to Registration Statement No. 33-8362 on Form S-1
filed by the Company with the Commission.
(6) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1988.
(7) Incorporated by reference to the Company's Form 8-K filed with the
Commission on February 16, 1989.
(8) Incorporated by reference to Registration Statement No. 33-23132 on Form
S-8 filed by the Company with the Commission.
(9) Incorporated by reference to the Company's Definitive Proxy Statement filed
with the Commission on March 18, 1988.
(10) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1983.
(11) Incorporated by reference to the Company's Form 8-K filed with the
Commission on October 14, 1988.
(12) Incorporated by reference to the Company's Form 8-K filed with the
Commission on December 27, 1990.
(13) Incorporated by reference to Registration Statement No. 33-40003 on Form
S-3 filed by the Company with the Commission.
(14) Incorporated by reference to Registration Statement No. 33-43978 on Form
S-3 filed by the Company with the Commission.
(15) Incorporated by reference to the Company's Form 8-K filed with the
Commission on May 2, 1991.
(16) Incorporated by reference to Registration Statement No. 33-50880 on Form
S-3 filed by the Company with the Commission.
(17) Incorporated by reference to the Company's Definitive Proxy Statement in
connection with the Annual Meeting of Shareholders to be held May 6, 1994,
and filed with the Commission on March 21, 1994.
(18) Incorporated by reference to the Company's Form 10-K for the year ended
January 2, 1993.
(19) Incorporated by reference to the Company's Form 8-K filed with the
Commission on November 24, 1993.
(20) Incorporated by reference to the Company's Form 10-K for the year ended
January 1, 1994.
(21) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
(22) Incorporated by reference to Registration Statement on Form S-4 (No.
333-21937) filed by the Company with the Commission.
(23) Incorporated by reference to the Company's Definitive Proxy Statement in
connection with the Annual Meeting of Shareholders to be held May 2, 1997,
and filed with the Commission on March 17, 1997.
(24) Filed herewith.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1996.
27
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto authorized, on March 17,
1997.
TEMPLE-INLAND INC.
(Registrant)
By: /s/ CLIFFORD J. GRUM
----------------------------------
Clifford J. Grum,
Chairman of the Board and
Chief Executive Officer
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 and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ CLIFFORD J. GRUM Director, Chairman of the March 17, 1997
- ----------------------------------------------------- Board, and Chief Executive
Clifford J. Grum Officer
/s/ KENNETH M. JASTROW, II Group Vice President and Chief March 17, 1997
- ----------------------------------------------------- Financial Officer
Kenneth M. Jastrow, II
/s/ DAVID H. DOLBEN Vice President and Chief March 17, 1997
- ----------------------------------------------------- Accounting Officer
David H. Dolben
/s/ PAUL M. ANDERSON Director March 17, 1997
- -----------------------------------------------------
Paul M. Anderson
/s/ ROBERT CIZIK Director March 17, 1997
- -----------------------------------------------------
Robert Cizik
/s/ ANTHONY M. FRANK Director March 17, 1997
- -----------------------------------------------------
Anthony M. Frank
/s/ WILLIAM B. HOWES Director March 17, 1997
- -----------------------------------------------------
William B. Howes
/s/ BOBBY R. INMAN Director March 17, 1997
- -----------------------------------------------------
Bobby R. Inman
/s/ HERBERT A. SKLENAR Director March 17, 1997
- -----------------------------------------------------
Herbert A. Sklenar
/s/ WALTER P. STERN Director March 17, 1997
- -----------------------------------------------------
Walter P. Stern
/s/ ARTHUR TEMPLE III Director March 17, 1997
- -----------------------------------------------------
Arthur Temple III
/s/ CHARLOTTE TEMPLE Director March 17, 1997
- -----------------------------------------------------
Charlotte Temple
/s/ LARRY E. TEMPLE Director March 17, 1997
- -----------------------------------------------------
Larry E. Temple
28
30
REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE
We have audited the consolidated financial statements of Temple-Inland Inc.
as of December 28, 1996 and December 30, 1995, and for each of the three years
in the period ended December 28, 1996, and have issued our report thereon dated
January 31, 1997 which is incorporated by reference in this Annual Report (Form
10-K) from the 1996 Annual Report to Shareholders of Temple-Inland Inc. Our
audits also included the financial statement schedule listed in Item 14(a) of
this Form 10-K. This schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Houston, Texas
January 31, 1997
29
31
SCHEDULE II
TEMPLE-INLAND INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
BALANCE CHARGED CHARGED BALANCE
AT TO TO OTHER AT END
BEGINNING COSTS AND ACCOUNTS -- DEDUCTIONS -- OF
OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
---------- ---------- ----------- ------------- ---------
Year ended December 28, 1996:
Deducted from accounts receivable:
Allowance for doubtful accounts....................... $ 8.3 $ 3.1 $ -- $ 2.0(A) $ 9.4
Reserve for discounts and allowances.................. 1.5 -- 7.0(B) 7.1(C) 1.4
Allowance for loan losses............................. 65.5 13.8 -- 10.9(A) 68.4
Allowance for unrealized (gains)/losses on
available-for-sale securities....................... (1.7) -- 13.9(E) -- 12.2
Allowance for unrealized losses on mortgage loans held
for sale............................................ .3 -- -- .3(A) --
----- ----- ----- ----- -----
Totals............................................ $73.9 $16.9 $20.9 $20.3 $91.4
===== ===== ===== ===== =====
Year ended December 30, 1995:
Deducted from accounts receivable:
Allowance for doubtful accounts....................... $ 8.4 $ 1.9 $ -- $ 2.0(A) $ 8.3
Reserve for discounts and allowances.................. .7 -- 7.9(B) 7.1(C) 1.5
Allowance for loan losses............................. 53.9 14.6 4.2(D) 7.2(A) 65.5
Allowance for unrealized (gains)/losses on
available-for-sale securities....................... .7 (.7) (1.7)(E) -- (1.7)
Allowance for unrealized losses on mortgage loans held
for sale............................................ .8 -- -- .5(A) .3
----- ----- ----- ----- -----
Totals............................................ $64.5 $15.8 $10.4 $16.8 $73.9
===== ===== ===== ===== =====
Year ended December 31, 1994:
Deducted from accounts receivable:
Allowance for doubtful accounts....................... $ 7.4 $ 1.9 $ -- $ .9(A) $ 8.4
Reserve for discounts and allowances.................. 1.0 2.7 5.1(B) 8.1(C) .7
Allowance for loan losses............................. 47.9 6.5 7.6(D) 8.1(A) 53.9
Allowance for unrealized losses on available-for-sale
securities.......................................... -- .7 -- -- .7
Allowance for unrealized losses on mortgage loans held
for sale............................................ 1.6 (.3) -- .5(A) .8
----- ----- ----- ----- -----
Totals............................................ $57.9 $11.5 $12.7 $17.6 $64.5
===== ===== ===== ===== =====
- ---------------
(A) Uncollectible accounts written off, net of recoveries.
(B) Reduction of revenues for customer discounts.
(C) Customer discounts taken.
(D) Additions related to bulk purchases of loans.
(E) Unrealized (gains)/losses.
30
32
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.01 -- Certificate of Incorporation of the Company(1), as
amended effective May 4, 1987(2), as amended effective
May 4, 1990(3)
3.02 -- By-laws of the Company as amended and restated May 3,
1991(18)
4.01 -- Form of Specimen Common Stock Certificate of the
Company(4)
4.02 -- Indenture dated as of September 1, 1986, between the
Registrant and Chemical Bank, as Trustee(5), as amended
by First Supplemental Indenture dated as of April 15,
1988, as amended by Second Supplemental Indenture dated
as of December 27, 1990(12), and as amended by Third
Supplemental Indenture dated as of May 9, 1991(13)
4.03 -- Form of Specimen Medium-Term Note of the Company(5)
4.04 -- Form of Fixed-rate Medium Term Note, Series B, of the
Company(12)
4.05 -- Form of Floating-rate Medium Term Note, Series B, of the
Company(12)
4.06 -- Form of 9% Note due May 1, 2001, of the Company(15)
4.07 -- Form of Fixed-rate Medium Term Note, Series D, of the
Company(14)
4.08 -- Form of Floating-rate Medium Term Note, Series D, of the
Company(14)
4.09 -- Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock, dated
February 16, 1989(6)
4.10 -- Rights Agreement, dated February 3, 1989, between the
Company and NCNB Texas National Bank, Dallas, Texas, as
Rights Agent(7)
4.11 -- Form of 7.25% Note due September 15, 2004, of the
Company(16)
4.12 -- Form of 8.25% Debenture due September 15, 2022, of the
Company(16)
10.01* -- 1988 Stock Option Plan for Key Employees and Directors of
Temple-Inland Inc. and its Subsidiaries(8)
10.02* -- Form of Incentive Option Agreement under the 1988 Stock
Option Plan(8)
10.03* -- Form of Nonqualified Option Agreement under the 1988
Stock Option Plan(8)
10.04* -- Temple-Inland Inc. Incentive Stock Plan(1), as amended
May 6, 1988(9), as amended February 7, 1992(18)
10.05* -- Form of Incentive Shares Agreement(10)
10.06* -- 1988 Performance Unit Plan for Key Employees of
Temple-Inland Inc. and its Subsidiaries(9), as amended
February 4, 1994(20)
10.07* -- Form of Performance Unit Rights Agreement under the
Performance Unit Plan(6)
10.08 -- Assistance Agreement dated September 30, 1988, among the
Federal Savings and Loan Insurance Corporation; Guaranty
Federal Savings Bank, Dallas, Texas; Guaranty Holdings
Inc. I; Guaranty Holdings Inc. II; Temple-Inland Inc.;
Mason Best Company; and Trammell Crow Ventures 3,
Ltd.(11)
10.09* -- Temple-Inland Inc. 1993 Stock Option Plan(17)
10.10* -- Temple-Inland Inc. 1993 Restricted Stock Plan(17)
10.11* -- Temple-Inland Inc. 1993 Performance Unit Plan(17), as
amended February 4, 1994(20)
33
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.12 -- Stock Purchase Agreement and Agreement and Plan of
Reorganization by and among Guaranty, Guaranty Holdings
Inc. I ("GHI"), Lone Star Technologies, Inc. ("LST"), and
LSST Financial Services Corporation ("LSST Financial"),
dated as of February 16, 1993(19)
10.13 -- First Amendment to Stock Purchase agreement and Agreement
and Plan of Reorganization by and among Guaranty, GHI,
LST and LSST Financial, dated as of April 2, 1993(19)
10.14 -- Second Amendment to Stock Purchase Agreement and
Agreement and Plan of Reorganization by and among
Guaranty, GHI, LST and LSST Financial, dated as of August
31, 1993(19)
10.15 -- Third Amendment to Stock Purchase Agreement and Agreement
and Plan of Reorganization by and among Guaranty, GHI,
LST and LSST Financial, dated as of September 30,
1993(19)
10.16 -- Holdback Escrow Agreement by and among LST, Guaranty, and
Bank One, Texas, N.A. dated as of November 12, 1993(19)
10.17 -- Termination Agreement by and among Federal Deposit
Insurance Corporation, as Manager of the FSLIC Resolution
Fund, Guaranty Federal Bank, F.S.B., Guaranty Holdings
Inc. I, and Temple-Inland Inc., dated as of October 31,
1995(21)
10.18 -- GFB Tax Agreement by and among Federal Deposit Insurance
Corporation, as Manager of the FSLIC Resolution Fund,
Guaranty Federal Bank, F.S.B., Guaranty Holdings Inc. I,
and Temple-Inland Inc., dated as of October 31, 1995(21)
10.19 -- Termination Agreement by and among Federal Deposit
Insurance Corporation, as Manager of the FSLIC Resolution
Fund, Guaranty Federal Bank, F.S.B., the surviving
institution resulting from the merger of American Federal
Bank, F.S.B. with and into Guaranty, which subsequently
became the successor-in-interest to LSST Financial
Services Corporation, Guaranty Holdings Inc. I, and
Temple-Inland Inc., dated as of October 31, 1995(21)
10.20 -- AFB Tax Agreement by and among Federal Deposit Insurance
Corporation, as Manager of the FSLIC Resolution Fund,
Guaranty Federal Bank, F.S.B., the surviving institution
resulting from the merger of American Federal Bank,
F.S.B. with and into Guaranty, which subsequently became
the successor-in-interest to LSST Financial Services
Corporation, Guaranty Holdings Inc. I, and Temple-Inland
Inc., dated as of October 31, 1995(21)
10.21 -- Agreement and Plan of Merger by and among Temple-Inland
Inc., California Financial Holding Company, Guaranty
Federal Bank, F.S.B., and Stockton Savings Bank, F.S.B.,
dated as of December 8, 1996(22)
10.22* -- Temple-Inland Inc. 1997 Stock Option Plan(23)
10.23* -- Temple-Inland Inc. 1997 Restricted Stock Plan(23)
11 -- Statement re: Computation of Per Share Earnings for the
three years ended December 28, 1996(24)
13 -- Annual Report to Shareholders for the year ended December
28, 1996. Such Report is not deemed to be filed with the
Commission as part of this Annual Report on Form 10-K,
except for the portions thereof expressly incorporated by
reference. (24)
21 -- Subsidiaries of the Company(24)
23 -- Consent of Ernst & Young LLP(24)
27 -- Financial Data Schedule(24)
34
- ---------------
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to Registration Statement No. 2-87570 on Form S-1
filed by the Company with the Commission.
(2) Incorporated by reference to Post-effective Amendment No. 2 to Registration
Statement No. 2-88202 on Form S-1 filed by the Company with the Commission.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement No. 33-25650 on Form S-8 filed by the Company with the
Commission.
(4) Incorporated by reference to Registration Statement No. 33-27286 on Form
S-8 filed by the Company with the Commission.
(5) Incorporated by reference to Registration Statement No. 33-8362 on Form S-1
filed by the Company with the Commission.
(6) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1988.
(7) Incorporated by reference to the Company's Form 8-K filed with the
Commission on February 16, 1989.
(8) Incorporated by reference to Registration Statement No. 33-23132 on Form
S-8 filed by the Company with the Commission.
(9) Incorporated by reference to the Company's Definitive Proxy Statement filed
with the Commission on March 18, 1988.
(10) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1983.
(11) Incorporated by reference to the Company's Form 8-K filed with the
Commission on October 14, 1988.
(12) Incorporated by reference to the Company's Form 8-K filed with the
Commission on December 27, 1990.
(13) Incorporated by reference to Registration Statement No. 33-40003 on Form
S-3 filed by the Company with the Commission.
(14) Incorporated by reference to Registration Statement No. 33-43978 on Form
S-3 filed by the Company with the Commission.
(15) Incorporated by reference to the Company's Form 8-K filed with the
Commission on May 2, 1991.
(16) Incorporated by reference to Registration Statement No. 33-50880 on Form
S-3 filed by the Company with the Commission.
(17) Incorporated by reference to the Company's Definitive Proxy Statement in
connection with the Annual Meeting of Shareholders to be held May 6, 1994,
and filed with the Commission on March 21, 1994.
(18) Incorporated by reference to the Company's Form 10-K for the year ended
January 2, 1993.
(19) Incorporated by reference to the Company's Form 8-K filed with the
Commission on November 24, 1993.
(20) Incorporated by reference to the Company's Form 10-K for the year ended
January 1, 1994.
(21) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
(22) Incorporated by reference to Registration Statement on Form S-4 (No.
333-21937) filed by the Company with the Commission.
(23) Incorporated by reference to the Company's Definitive Proxy Statement in
connection with the Annual Meeting of Shareholders to be held May 2, 1997,
and filed with the Commission on March 17, 1997.
(24) Filed herewith.