<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
(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 JANUARY 1, 1994
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
COMMISSION FILE NUMBER 1-8634
TEMPLE-INLAND INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-1903917
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
---------------------------------------- ---------------------------------
<S> <C>
COMMON STOCK, $1.00 PAR VALUE PER SHARE, NEW YORK STOCK EXCHANGE
NON-CUMULATIVE PACIFIC STOCK EXCHANGE
NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS PACIFIC STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
------------------------
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. /X/
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 8, 1994, was $2,147,214,101. For purposes of this
computation, all officers, directors, and 5% 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% beneficial
owners are, in fact, affiliates of the registrant.
As of March 8, 1994, 55,590,588 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 21, 23-29, 30, 35, 42, and 44-53 of the Annual Report to
Shareholders for the fiscal year ended January 1, 1994 -- Parts I and II.
(b) The Company's definitive proxy statement, dated March 21, 1994, in
connection with the Annual Meeting of Shareholders to be held May 6, 1994
-- Part III.
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<PAGE> 2
PART I
ITEM 1. BUSINESS
INTRODUCTION:
Temple-Inland Inc. (the "Company") is a holding company and functions
through subsidiaries. It has interests in container and containerboard, bleached
paperboard, building products, timber and timberlands, and financial services.
The Company's container and containerboard operations are vertically integrated
and consist of four linerboard mills, three corrugating medium mills, and 39 box
plants. In addition, subsidiaries of the Company manufacture bleached paperboard
and a wide range of building products including lumber, plywood, particleboard,
gypsum wallboard, and fiberboard. Forest resources include approximately 1.9
million acres of timberland in Texas, Louisiana, Georgia, and Alabama. The
Company's financial services operations consist of consumer 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 Container Corporation ("Inland"),
Temple-Inland Financial Services Inc. ("Financial Services"), Temple-Inland
Forest Products Corporation ("Temple-Inland FPC"), 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.
1
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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
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues
Container and containerboard.............. $1,248.5 $1,254.4 $1,148.6 $1,144.2 $1,138.4
Bleached paperboard....................... 318.5 352.6 370.6 373.0 368.3
Building products......................... 475.3 391.3 311.1 305.3 320.3
Other activities.......................... 58.4 77.1 67.9 70.0 67.2
-------- -------- -------- -------- --------
Manufacturing net sales................ 2,100.7 2,075.4 1,898.2 1,892.5 1,894.2
Financial services(a)..................... 635.1 637.8 608.9 508.6 49.4
-------- -------- -------- -------- --------
Total revenues.................... $2,735.8 $2,713.2 $2,507.1 $2,401.1 $1,943.6
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Income before taxes and accounting changes
Container and containerboard.............. $ 21.0 $ 112.3 $ 75.4 $ 150.9 $ 208.4
Bleached paperboard....................... (12.1) 23.3 79.9 98.8 114.9
Building products......................... 99.1 39.5 5.2 9.4 23.7
Other activities.......................... (1.9) (2.0) 1.1 (1.7) (.7)
-------- -------- -------- -------- --------
Operating profit....................... 106.1 173.1 161.6 257.4 346.3
Financial services(a)..................... 67.5 64.4 54.2 51.4 (2.1)
-------- -------- -------- -------- --------
173.6 237.5 215.8 308.8 344.2
Corporate expense......................... (11.2) (15.3) (16.0) (20.7) (12.9)
Parent company interest -- net............ (69.0) (47.4) (31.8) (24.0) (24.4)
Other income(b)........................... 2.8 2.2 (1.2) 4.7 5.0
-------- -------- -------- -------- --------
Income before taxes and accounting
changes.............................. $ 96.2 $ 177.0 $ 166.8 $ 268.8 $ 311.9
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ---------------
(a) Operating results for 1993, 1992, 1991, and 1990 reflect the consolidation
of Guaranty beginning January 1, 1990.
(b) The 1991 amount includes losses of $7.4 million from the write-off of an
investment in a gypsum-fiberboard venture.
For more information with respect to identifiable assets, capital
expenditures, and depreciation, depletion, and amortization on a business
segment basis, see pages 29 and 51 of the Company's 1993 Annual Report to
Shareholders, which are incorporated herein by reference.
2
<PAGE> 4
The following table shows the revenues of the Company:
REVENUES
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Container and containerboard................ $1,248.5 $1,254.4 $1,148.6 $1,144.2 $1,138.4
Bleached paperboard
Paperboard................................ 246.8 263.6 301.9 314.7 300.6
Market pulp............................... 31.4 43.8 38.6 47.7 58.8
Nodular pulp.............................. 2.2 3.8 6.3 6.8 7.2
Other(a).................................. 38.1 41.4 23.8 3.8 1.7
Building Products
Pine lumber(b)............................ 153.8 120.9 87.6 72.7 67.4
Fiber products............................ 62.9 55.8 48.2 48.5 48.0
Particleboard............................. 81.3 70.5 60.7 57.1 64.6
Plywood................................... 54.0 45.2 36.9 33.3 33.1
Gypsum wallboard.......................... 53.3 36.6 33.1 40.7 41.1
Rigid foam insulation(c).................. -- -- -- 4.9 17.0
Retail distribution....................... 60.0 53.5 42.2 41.7 42.1
Other..................................... 10.0 8.8 2.4 6.4 7.0
Other activities............................ 58.4 77.1 67.9 70.0 67.2
-------- -------- -------- -------- --------
Manufacturing net sales................... 2,100.7 2,075.4 1,898.2 1,892.5 1,894.2
Financial services(d)....................... 635.1 637.8 608.9 508.6 49.4
-------- -------- -------- -------- --------
Total revenues.................... $2,735.8 $2,713.2 $2,507.1 $2,401.1 $1,943.6
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ---------------
(a) Reflects Temple-Inland Food Service Corporation beginning with its formation
in March 1991.
(b) Excludes the Rome, Georgia, sawmill acquired as a result of the 1987
dissolution of Georgia Kraft. Sales from that facility totaled $20.2
million, $16.9 million, $11.8 million, $13.3 million, and $11.4 million in
1993, 1992, 1991, 1990, and 1989, respectively.
(c) A three-year lease with option to purchase was negotiated for the Company's
rigid foam insulation operation during the second quarter of 1990. This
lease has been extended through 1996.
(d) Operating results for 1993, 1992, 1991, and 1990 reflect the consolidation
of Guaranty beginning January 1, 1990.
3
<PAGE> 5
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
<TABLE>
<CAPTION>
RATED ANNUAL
CAPACITY AT
JANUARY 1,
1994 1993 1992 1991 1990 1989
------------ ----- ----- ----- ----- -----
(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C> <C>
Container and Containerboard............... (a) 2,394 2,294 2,097 2,061 1,913
Bleached Paperboard
Paperboard............................... (b) 426 414 447 462 453
Market Pulp.............................. (b) 100 123 103 107 103
Nodular Pulp............................. (b) 34 32 19 20 21
Building Products (IN MILLIONS OF BOARD FEET)
Pine Lumber(c)........................... 475 484 467 395 342 308
(IN MILLIONS OF SQUARE FEET)
Fiber products........................... 460 440 464 443 452 446
Particleboard............................ 335 319 326 321 302 333
Plywood.................................. 265 265 250 253 233 213
Gypsum wallboard......................... 780 782 621 601 699 685
Rigid foam insulation(d)................. -- -- -- -- 25 77
</TABLE>
- ---------------
(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 585,000 tons per year. The rated annual capacity
of the linerboard mills is 2.0 million tons per year.
(b) The annual capacity of the paperboard and pulp mill is approximately 525,000
tons, which excludes the capacity of a fourth paper machine at the mill that
was shut down late in 1993 due to market conditions for the paper grade it
produces. Such capacity may vary to some degree depending on product mix.
The annual capacity of Temple-Inland Food Service Corporation, formed in
March 1991, 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) Excludes the Rome, Georgia, sawmill in 1993, 1992, 1991, 1990, and 1989.
Sales totaled 68 million board feet, 71 million board feet, 59 million board
feet, 67 million board feet, and 57 million board feet in 1993, 1992, 1991,
1990, and 1989, respectively.
(d) A three-year lease with option to purchase was negotiated for the Company's
rigid foam insulation operation during the second quarter of 1990. This
lease has been extended through 1996.
NARRATIVE DESCRIPTION OF THE BUSINESS:
The business of the Company includes the following: (1) container and
containerboard, (2) bleached paperboard, (3) building products, and (4)
financial services. In the year ended January 1, 1994, container and
containerboard, bleached paperboard, building products, and financial services
provided 46%, 12%, 17%, and 23%, respectively, of the total consolidated net
revenues of the Company.
Container and Containerboard. Inland manufactures containerboard that it
converts into a complete line of corrugated boxes and containers. Approximately
85% of the containerboard produced by Inland in 1993 was converted into
corrugated containers at its box plants. Inland'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
4
<PAGE> 6
food, paper, glass containers, chemical, appliance, and plastics industries,
among others. As of January 1, 1994, about 46% of Inland's box shipments were
sold directly for use in the food industry, including beverage containers.
Inland also manufactures bulk containers that are constructed of multi-wall
corrugated board for extra strength. These are used for bulk shipments of
various materials. In addition, Inland manufactures paper sealing tape and other
tape specialties.
Inland services about 4,500 customers with approximately 11,600 shipping
destinations. The largest single customer accounted for approximately 4% and the
10 largest customers accounted for approximately 28% of Inland's 1993 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. Demand for containers and containerboard
generally correlates with real growth in the United States gross domestic
product.
Bleached Paperboard. The Bleached Paperboard Group's products include
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 segment, with whom the Company has a
long-standing contractual relationship, accounted for approximately 17% of this
segment's 1993 sales. 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 segment, it would not have a material
adverse effect on the Company taken as a whole. The 10 largest customers
accounted for approximately 50% of this segment's 1993 sales. During 1993, sales
were made to domestic customers in 45 states. Contracts specifying annual
tonnage quantities are maintained with several major customers.
During 1992, the Board of Directors of the Company approved a modernization
program at the bleached paperboard mill in Evadale, Texas. The project is
currently on schedule and is estimated to be completed in late 1995 at a cost of
approximately $500 million. One aspect of the program is the addition of a new
softwood pulpline. The softwood line, which is scheduled to start up in the
first half of 1995, will be in addition to a new hardwood fiber line that began
operations during the fourth quarter of 1992. These two pulp operations will be
used to provide higher quality pulp to meet consumer demands. As a result of
this program, pulp production capacity will be increased by 35% and effluent
discharge will be decreased.
In addition to the pulp mill expansion, the Company will add a new paper
machine and make further upgrades to two of the three existing fourdrinier paper
machines at the Evadale mill to increase paperboard production. The focus of the
paperboard expansion program is to enable the mill to efficiently produce low-
density paperboard with high quality characteristics that are increasingly
demanded by consumers. The addition of the new fourdrinier machine, which will
be designed primarily for low-density coated board, and the upgrades to two of
the three existing fourdrinier machines, will also enable the mill to balance
its pulp-making capacity with its board-making capacity. The remaining paper
machine, a cylinder machine, was shut down late in 1993 due to market conditions
for the paper grade it produces.
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 export markets.
Temple-Inland Food Service Corporation ("Food Service") is an integrated
paper converter formed by the Bleached Paperboard Group to manufacture and
market paper containers and products primarily for the food service industry.
Food Service consists of converting plants in Carlisle, Ohio, Sacramento and El
Cajon,
5
<PAGE> 7
California, and Denver, Colorado. 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. 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 managers and
representatives. Most sales are to distributors, retailers, and O.E.M. (original
equipment manufacturer) accounts. Almost 95% of particleboard sales are to
commercial fabricators, such as manufacturers of cabinets and furniture. The 10
largest customers accounted for approximately 13% of the Building Products
Group's 1993 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.
The Company recently announced a new particleboard plant to be located in
Hope, Arkansas. Construction of this plant will begin in the third quarter of
1994, with completion expected in the first quarter of 1996. The plant, which
will cost approximately $62 million to build, will have an annual production
capacity of 170 million square feet of particleboard.
Financial Services. Financial Services operates a consumer savings bank and
engages in mortgage banking, land 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 124 banking centers located primarily in the
eastern third of Texas, including Houston, Dallas, San Antonio, and Austin. The
primary business of Guaranty is to attract savings deposits from the general
public and to invest in loans or mortgage-backed securities secured by mortgages
on residential and other real estate. In addition, through services agreements
and leases, affiliated entities and third party contractors sell annuities and
mutual funds at some of Guaranty's banking centers.
Guaranty derives its income primarily from interest it charges on real
estate mortgages, commercial loans, consumer loans, interest earned on
investment securities, fees received in connection with loans and deposit
services, and its services agreements and leases. Its major expense is the
interest it pays on consumer deposits and other borrowings. The operations of
Guaranty, like those of other savings banks or savings and loan associations,
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 loans with interest rates that adjust periodically
rather than long-term fixed rates.
On November 12, 1993, Guaranty acquired American Federal Bank, F.S.B.
("AFB") for a purchase price of approximately $155.7 million. AFB, which was
merged into Guaranty, was a federal savings bank headquartered in Dallas, Texas,
with 30 banking centers in north and east Texas. Guaranty reopened all 30
banking centers on the first business day following the date of acquisition. Six
of these banking centers were closed as of December 31, 1993, and the deposits
transferred to existing Guaranty banking centers in order to realize operating
economies. As of November 12, 1993, AFB had assets of approximately $1.3
billion, which consisted primarily of guaranteed assets and residential and
commercial mortgage loans.
In 1988, Guaranty entered into an assistance agreement (the "Guaranty
Assistance Agreement") with the Federal Savings and Loan Insurance Corporation
(the "FSLIC"). Pursuant to the Guaranty Assistance Agreement, the FSLIC agreed
to provide continuing financial assistance to Guaranty consisting of notes from
the FSLIC, guaranteed yield on the book value of assets acquired from the FSLIC
("Covered Assets"), and protection against losses on the book value of the
Covered Assets. AFB also entered into an Assistance
6
<PAGE> 8
Agreement (the "AFB Assistance Agreement") during 1988, which has substantially
the same terms and conditions as the Guaranty Assistance Agreement. Guaranty has
assumed all of the rights and obligations of AFB pursuant to the AFB Assistance
Agreement. All of the notes issued pursuant to these Assistance Agreements have
been prepaid and the guarantees are now obligations of the FSLIC Resolution
Fund, a government-sponsored entity created in August 1989 and managed by the
Federal Deposit Insurance Corporation (the "FDIC"). Both Assistance Agreements
expire during 1998. At December 31, 1993, the book value of Covered Assets was
approximately $700 million, including $400 million of Covered Assets obtained in
the acquisition of AFB, which is less than 7.5% of the total assets of Guaranty.
The Company receives various tax benefits from the receipt of assistance
payments under the Covered Asset guarantees held by Guaranty. The tax benefits
to be received by the Company, however, will be subject to (i) the tax laws then
in effect, (ii) the amount of income attributable to certain Covered Assets, and
(iii) Guaranty's continued status as a "domestic building and loan association"
under the Internal Revenue Code of 1986, as amended. As part of the Omnibus
Budget Reconciliation Act of 1993 (the "Act"), Congress changed the treatment of
FSLIC assistance payments "with respect to any loss of principal, capital, or
similar amount upon the disposition of any asset" so that such assistance is
taken into account as compensation for such loss. By enacting this provision,
Congress eliminated the tax benefit that was permitted when a thrift deducted
the loss on disposition of a Covered Asset while it excluded related assistance
payments from income. As a result of the Act, the Company will pay the
government $45 million in 1994 for 1991 and 1992 deductions that this
legislation eliminated. This payment will have no impact on future net income
and the Company will continue to receive other benefits from its ownership of
Guaranty that will reduce its 1994 cash tax payments.
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%
of adjusted total assets. In addition, in earlier acquisitions from the FDIC,
Guaranty entered into an agreement with the OTS that at the time it makes any
future acquisitions, it will maintain a leverage capital ratio of at least 4% of
adjusted total assets. At December 31, 1993, Guaranty had a leverage capital
ratio of 4.0% of adjusted total assets. The Federal Deposit Insurance Act
requires the OTS and other agencies regulating insured depository institutions
to prescribe safety and soundness standards for such institutions and their
holding companies. The safety and soundness standards adopted to date by the OTS
establish five capital categories for thrifts: well capitalized, adequately
capitalized, under capitalized, significantly under capitalized, and critically
under capitalized. In this hierarchy, Guaranty is categorized as adequately
capitalized.
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, 1993, 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 and services FHA, VA, and
conventional mortgage loans primarily on single family residential property. It
sells all of the mortgage loans into the secondary market. In addition, it sells
some portion of its retained servicing to third parties. At December 31, 1993,
Temple-Inland Mortgage was servicing $9.1 billion in mortgage loans.
Temple-Inland Mortgage produced $4.8 billion in mortgage loans during 1993
compared with $3.5 billion during 1992.
(iii) Land Development and Income Properties. Subsidiaries of Financial
Services are involved in residential subdivisions in Texas and several
commercial buildings.
(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.
7
<PAGE> 9
The following schedule presents the average balances, interest
income/expense, and rates earned or paid by major balance sheet category for the
years 1991 through 1993:
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST SPREAD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992 DECEMBER 31, 1991
------------------------------ ------------------------------ ------------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Interest-earning deposits in
other banks............... $ 22,595 $ 628 2.78% $ 35,817 $ 1,355 3.78% $ 52,254 $ 3,351 6.41%
Mortgage-backed and
investment securities..... 4,981,794 241,936 4.86% 4,962,705 306,437 6.17% 2,426,601 196,698 8.11%
Securities purchased under
agreements to resell and
federal funds sold........ 1,181,405 42,970 3.64% 251,726 10,253 4.07% 409,249 24,036 5.87%
Loans receivable and
mortgage loans held for
sale(1)................... 2,248,947 172,865 7.69% 1,609,475 152,388 9.47% 1,271,357 138,347 10.88%
Covered Assets.............. 405,723 25,416 6.26% 479,410 36,078 7.53% 1,103,978 99,892 9.05%
FSLIC Resolution Fund notes
receivable................ -- -- -- -- -- -- 415,858 38,757 9.32%
Other....................... 62,185 5,914 9.51% 88,507 7,340 8.29% 129,945 11,227 8.64%
---------- -------- ---------- -------- ---------- --------
Total interest-earning
assets................ 8,902,649 $489,729 5.50% 7,427,640 $513,851 6.92% 5,809,242 $512,308 8.82%
-------- -------- --------
-------- -------- --------
Cash.......................... 90,038 75,784 56,055
Other FSLIC receivables....... 5,200 71,940 163,752
Other assets.................. 440,647 303,752 273,586
---------- ---------- ----------
Total assets............ $9,438,534 $7,879,116 $6,302,635
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND SHAREHOLDER'S
EQUITY
Interest-bearing liabilities:
Deposits:
Interest-bearing demand... $1,443,378 $ 34,120 2.36% $1,382,780 $ 43,886 3.17% $ 993,739 $ 53,749 5.41%
Savings deposits.......... 201,546 5,180 2.57% 182,962 6,111 3.34% 134,198 6,926 5.16%
Time deposits............. 3,919,646 197,512 5.04% 4,384,120 259,599 5.92% 4,155,493 295,744 7.12%
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
deposits.............. 5,564,570 236,812 4.26% 5,949,862 309,596 5.20% 5,283,430 356,419 6.75%
Advances from the Federal
Home Loan Bank............ 64,242 5,301 8.25% 57,605 5,555 9.64% 152,962 12,802 8.37%
Securities sold under
repurchase agreements..... 2,734,216 88,433 3.23% 972,500 35,599 3.66% 91,848 5,105 5.56%
Other borrowings............ 82,632 5,570 6.74% 110,822 7,646 6.90% 176,908 12,948 7.32%
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
liabilities........... 8,445,660 $336,116 3.98% 7,090,789 $358,396 5.05% 5,705,148 $387,274 6.79%
-------- -------- --------
-------- -------- --------
Noninterest-bearing demand.... 92,367 51,159 132,522
Other liabilities............. 388,387 306,796 183,822
Shareholder's equity.......... 512,120 430,372 281,143
---------- ---------- ----------
Total liabilities and
shareholder's equity.... $9,438,534 $7,879,116 $6,302,635
---------- ---------- ----------
---------- ---------- ----------
Net interest margin....... $153,613 $155,455 $125,034
-------- -------- --------
-------- -------- --------
Net yield on
interest-earning
assets.................. 1.73% 2.09% 2.15%
------ ------ ------
------ ------ ------
</TABLE>
- ---------------
(1) Nonaccruing loans are included in the average of loans receivable.
8
<PAGE> 10
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
<TABLE>
<CAPTION>
1993 COMPARED WITH 1992 1992 COMPARED WITH 1991
INCREASE (DECREASE) DUE TO (1) INCREASE (DECREASE) DUE TO (1)
--------------------------------- --------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
-------- --------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-earning deposits in other banks......... $ (423) $ (304) $ (727) $ (866) $ (1,130) $ (1,996)
Mortgage-backed and investment securities........ 1,175 (65,676) (64,501) 165,690 (55,951) 109,739
Securities purchased under agreements to resell
and federal funds sold......................... 33,928 (1,211) 32,717 (7,673) (6,110) (13,783)
Loans receivable and mortgage loans held for
sale........................................... 52,815 (32,338) 20,477 33,582 (19,541) 14,041
Covered Assets................................... (5,101) (5,561) (10,662) (49,183) (14,631) (63,814)
FSLIC Resolution Fund notes receivable........... -- -- -- (38,757) -- (38,757)
Other............................................ (2,397) 971 (1,426) (3,453) (434) (3,887)
-------- --------- -------- -------- -------- --------
TOTAL INTEREST INCOME...................... $ 79,997 $(104,119) $(24,122) $ 99,340 $(97,797) $ 1,543
-------- --------- -------- -------- -------- --------
-------- --------- -------- -------- -------- --------
Interest expense:
Deposits:
Interest-bearing demand........................ $ 1,851 $ (11,617) $ (9,766) $ 16,812 $(26,675) $ (9,863)
Savings deposits............................... 577 (1,508) (931) 2,066 (2,881) (815)
Time deposits.................................. (25,800) (36,287) (62,087) 15,597 (51,742) (36,145)
-------- --------- -------- -------- -------- --------
TOTAL INTEREST ON DEPOSITS................. (23,372) (49,412) (72,784) 34,475 (81,298) (46,823)
Advances from the Federal Home Loan Bank......... 599 (853) (254) (8,958) 1,711 (7,247)
Securities sold under repurchase agreements...... 57,433 (4,599) 52,834 32,812 (2,318) 30,494
Other borrowings................................. (1,904) (172) (2,076) (4,597) (705) (5,302)
-------- --------- -------- -------- -------- --------
TOTAL INTEREST EXPENSE..................... $ 32,756 $ (55,036) $(22,280) $ 53,732 $(82,610) $(28,878)
-------- --------- -------- -------- -------- --------
-------- --------- -------- -------- -------- --------
</TABLE>
- ---------------
(1) The change in interest 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.
The following table sets forth the carrying amount of mortgage-backed and
investment securities as of the dates indicated:
TYPES OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1993 1992 1991
---------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Mortgage-backed securities........................... $4,336,226 $5,185,335 $4,381,412
Debt securities:
U.S. Government securities (including agencies).... 805 1,928 31,186
Corporate bonds.................................... 1,175 11,079 33,136
Other.............................................. 82 9,795 --
---------- -------------- ----------
2,062 22,802 64,322
---------- -------------- ----------
Equity securities:
Federal Home Loan Bank stock....................... 68,873 56,392 26,110
Other.............................................. 97 383 96
---------- -------------- ----------
68,970 56,775 26,206
---------- -------------- ----------
$4,407,258 $5,264,912 $4,471,940
---------- -------------- ----------
---------- -------------- ----------
</TABLE>
9
<PAGE> 11
The table below sets forth the maturities of mortgage-backed and investment
securities as of December 31, 1993:
MATURITY DISTRIBUTION OF INVESTMENTS
<TABLE>
<CAPTION>
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 THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed
securities................ $ -- -- $ -- -- $ -- -- $ -- -- $4,336,226 4.63% $4,336,226
Debt Securities:
U.S. Government securities
(including agencies).... 805 3.43% -- -- -- -- -- -- -- -- 805
Corporate bonds........... -- -- 8 6.88% 594 9.00% 573 7.50% -- -- 1,175
Other..................... -- -- 82 7.88% -- -- -- -- -- -- 82
----- ----- ----- ----- ----------
805 90 594 573 2,062
Equity securities:
Federal Home Loan Bank
stock................... 68,873 3.60% 68,873
Other..................... -- -- -- -- 97 -- 97
----- ----- ----- ----- ---------- ----------
68,970 68,970
---------- ----------
$ 805 $ 90 $ 594 $ 573 $4,405,196 $4,407,258
----- ----- ----- ----- ---------- ----------
----- ----- ----- ----- ---------- ----------
</TABLE>
The following table shows the loan distribution for Financial Services:
TYPES OF LOANS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Real estate mortgage............................. $2,302,905 $1,153,279 $ 863,227 $ 782,482 $ 682,830
Construction and development..................... 643,653 274,556 216,609 66,737 26,001
Commercial....................................... 80,665 25,451 58,176 41,555 1,785
Consumer and other............................... 404,151 271,091 294,938 184,692 79,763
---------- ---------- ---------- ---------- ---------
3,431,374 1,724,377 1,432,950 1,075,466 790,379
Less:
Unfunded portion of loans...................... 614,010 320,625 146,091 51,911 15,502
Unearned discounts............................. 3,024 9,319 24,525 3,383 2,108
Unamortized purchase discounts................. 8,884 28,123 39,570 49,455 63,517
Net deferred fees.............................. 2,229 2,280 708 1,088 349
Allowance for loan losses...................... 47,875 20,751 19,432 1,954 1,227
---------- ---------- ---------- ---------- ---------
676,022 381,098 230,326 107,791 82,703
---------- ---------- ---------- ---------- ---------
$2,755,352 $1,343,279 $1,202,624 $ 967,675 $ 707,676
---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------
</TABLE>
10
<PAGE> 12
The table below presents the maturity distribution of loans (excluding real
estate mortgage and consumer loans) outstanding at December 31, 1993, 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
<TABLE>
<CAPTION>
MATURING
------------------------------------------
AFTER
WITHIN 1 1 TO 5 5
YEAR YEARS YEARS TOTAL
-------- -------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Construction and development.......................... $421,542 $221,425 $ 686 $643,653
Commercial............................................ 46,887 30,191 3,587 80,665
-------- -------- ------ --------
$468,429 $251,616 $4,273 $724,318
-------- -------- ------ --------
-------- -------- ------ --------
Loans maturing after 1 year with:
Fixed interest rates................................ $182,870 $1,965
Variable interest rates............................. 68,746 2,308
-------- ------
$251,616 $4,273
-------- ------
-------- ------
</TABLE>
Nonaccrual, past due, restructured, and other potential problem loans were
less than two percent of total loans during 1993, 1992, 1991, 1990, and 1989.
The aggregate amounts and the interest income foregone on such loans, therefore,
are immaterial and are not disclosed.
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
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1993 1992 1991 1990 1989
------- ------- ------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year.................... $20,751 $19,432 $ 1,954 $1,227 $ 195
Charge-offs:
Real estate mortgages......................... (711) (1,818) (368) (162) (370)
Commercial.................................... (9) -- -- -- --
Consumer and other............................ (1,819) (1,874) (1,625) (551) (131)
------- ------- ------- ------ ------
(2,539) (3,692) (1,993) (713) (501)
Recoveries:
Real estate mortgages......................... 205 200 39 -- 20
Consumer and other............................ 635 777 210 66 9
------- ------- ------- ------ ------
840 977 249 66 29
------- ------- ------- ------ ------
Net charge-offs....................... (1,699) (2,715) (1,744) (647) (472)
Additions charged to operations................. 4,830 2,615 2,278 1,374 1,504
Additions related to bulk purchases of loans.... 23,993 1,419 16,944 -- --
------- ------- ------- ------ ------
Balance at end of year.......................... $47,875 $20,751 $19,432 $1,954 $1,227
------- ------- ------- ------ ------
------- ------- ------- ------ ------
Ratio of net charge-offs during the year to
average loans outstanding during the year..... 0.10% 0.22% 0.15% 0.08% 0.06%
------- ------- ------- ------ ------
------- ------- ------- ------ ------
</TABLE>
11
<PAGE> 13
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
--------------------- --------------------- --------------------- --------------------- ---------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS
--------- ---------- --------- ---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate.... $24,468 67% $13,447 67% $13,179 60% $ 870 73% $ 467 87%
Construction
and
development... 974 19% 468 16% 331 15% 317 6% 109 3%
Commercial..... 14,728 2% 2,808 1% 670 4% 106 4% -- -- %
Consumer and
other........ 7,705 12% 4,028 16% 5,252 21% 661 17% 651 10%
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
$47,875 100% $20,751 100% $19,432 100% $ 1,954 100% $ 1,227 100%
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
</TABLE>
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, 1993, are disclosed in Note G to Financial Services Financial
Statements on page 42 of the Company's 1993 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
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993(1) 1992 1991
------ ------ ------
<S> <C> <C> <C>
Return on average assets........................................ 1.07% .68% .71%
Return on average equity........................................ 19.73% 12.42% 15.99%
Dividend payout ratio........................................... 41.56% 17.40% --
Equity to assets ratio.......................................... 5.43% 5.46% 4.46%
</TABLE>
- ---------------
(1) The 1993 ratios reflect the effect of an accounting change due to the
adoption of Statement of Financial Accounting Standards No. 109 of
approximately $52 million.
Short-term borrowings. Short-term borrowings outstanding at the end of the
reported period are presented on Schedule IX on page 31 hereof.
Other Activities. A subsidiary of Temple-Inland FPC was engaged in
commercial, industrial, and public works contracting as a prime contractor until
its operations were terminated by the Company during 1993. A subsidiary that
continues to operate constructs and maintains electrical distribution facilities
for local utilities. Contracting operations are subject to wide variations in
profitability, primarily because of the sensitivity of construction activity to
general economic conditions.
12
<PAGE> 14
RAW MATERIALS
The Company's main resource is timber, with approximately 1.9 million acres
of timberland located in Texas, Louisiana, Alabama, and Georgia. In 1993, these
lands supplied wood fiber required for the Company's paper and wood products
operations as shown on the following chart:
WOOD FIBER REQUIREMENTS
<TABLE>
<CAPTION>
PERCENTAGE
SUPPLIED
OPERATIONS RAW MATERIALS INTERNALLY
----------------------------------------------- ----------------------- ----------
<S> <C> <C>
Texas.......................................... Sawtimber 57%
Pine Pulpwood 55%
Hardwood Pulpwood 38%
Wood Residues 45%
Georgia........................................ Sawtimber 33%
Pine Pulpwood 24%
Hardwood Pulpwood 40%
Wood Residues 28%
</TABLE>
The balance of the wood fiber required for these operations was purchased
from numerous landowners and other lumber companies.
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 to the Rome, Georgia, and Orange, Texas, mills is virgin
fiber; the Ontario, California, Newark, California, Newport, Indiana, and
Maysville, Kentucky, mills use only recycled boxes; and the mill at New
Johnsonville, Tennessee, uses a combination of virgin and recycled fiber. 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 container and containerboard mills and plants
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. At the mill in New
Johnsonville, Tennessee, a boiler that generates all of the steam necessary to
operate the mill burns wood refuse as its basic fuel. In 1993, wood refuse also
provided 15% of the steam requirements of the Rome, Georgia, mill and the
Orange, Texas, mills. Additionally, waste pulping liquor burned in chemical
recovery boilers at these two mills provided approximately 51% of the steam
requirements. The Ontario, California, mill includes a cogeneration plant that
generated approximately 36 megawatts of electricity in 1993, 55% of which was
used by the mill with the balance sold to an electric utility. The cogeneration
plant also produces the steam requirements for the mill. In most cases where
natural gas or fuel oil is used as a fuel, the box plants possess a dual
capacity enabling them to use either of the fuels as a source of energy. All of
the steam and electrical power for the Newport, Indiana, and Maysville,
Kentucky, mills are provided by local power cooperatives located near these
mills.
13
<PAGE> 15
About 75% of the steam requirements of the bleached paperboard operation in
Evadale, Texas, during 1993 was generated by chemical recovery boilers and wood
refuse-fired boilers. The remaining steam came from natural gas fueled power
boilers, the natural gas for which is acquired pursuant to multiple gas
contracts extending through 1995.
In 1993, the building products operation generated approximately 46% of its
total energy needs through the use of bark and wood waste materials. Natural gas
is purchased under multiple contracts that provide for the purchase of gas on an
interruptible basis at favorable rates.
EMPLOYEES
At January 1, 1994, the Company and its subsidiaries had approximately
15,000 employees. Approximately 5,000 of these employees are covered by
collective bargaining agreements. These agreements generally run for a term of
two to five years and have varying expiration dates. The following table
summarizes certain information about the collective bargaining agreements that
cover a significant number of employees:
<TABLE>
<CAPTION>
LOCATION BARGAINING UNIT(S) EMPLOYEES COVERED EXPIRATION DATE
- --------------------------------- --------------------------------- --------------------------------- ----------------
<S> <C> <C> <C>
Bleached Paperboard Mill,
Evadale, Texas................... United Paperworkers International 493 Hourly Production Employees, August 1, 1998
Union ("UPIU"), Local 801, UPIU, 227 Hourly Mechanical Mainte-
Local 825, and International nance Employees, and 57
Brotherhood of Electrical Workers Electrical Maintenance Employees
("IBEW"), Local 390
Linerboard Mill, Orange, Texas... UPIU, Local 1398, and UPIU, 224 Hourly Production Employees July 31, 1999
Local 391 and 108 Hourly Maintenance
Employees
Linerboard Mill, Rome, Georgia... UPIU, Local 804, IBEW, Local 613, 348 Hourly Production Employees, August 28, 1994
United Association of Journeymen 43 Electrical Maintenance
& Apprentices of the Plumbing & Employees, 39 Hourly Maintenance
Pipefitting Industry of the U.S. Employees, and 125 Hourly Mainte-
and Canada, Local 766, and Inter- nance Employees
national Association of
Machinists & Aerospace Workers,
Local 414
Evansville, Indiana, Louisville,
Kentucky, Middletown, Ohio, and
Erie, Pennsylvania, Box Plants
("Northern Multiple")............ UPIU, Local 1046, UPIU, Local 97 Hourly Production Employees, April 30, 1996
1737, UPIU, Local 114, and UPIU, 103 Hourly Production
Local 954, respectively Employees, 97 Hourly Production
Employees, and 82 Hourly Produc-
tion Employees, respectively
Rome, Georgia, Macon, Georgia,
and Orlando, Florida, Box Plants
("Southern Multiple")............ UPIU Local 838, UPIU, Local 626, 152, 103, and 104 Hourly Produc- December 1, 1997
and UPIU Local 834, respectively tion Employees, respectively
</TABLE>
In addition, the Company has collective bargaining agreements with the
employees of various of its box plants and building products plants. These
agreements each cover a relatively few 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
14
<PAGE> 16
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 $5.2 million during 1993. 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.
The Company is committed to protecting the health and welfare of its
employees, the public, and our environment and strives to maintain compliance
with all state and federal environmental regulations in a manner that is also
cost effective. In recent modernization programs at some of its mills, most
notably its mill at Evadale, Texas, the Company has used state of the art
technology for its air and water emissions. These forward-looking programs
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 estimates that
capital expenditures for environmental purposes during the period 1994 through
1996 will average $15 million each year. In addition, the Company will spend
approximately $15 million in 1994 to further reduce air emissions from its mill
in Ontario, California. 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. The EPA reportedly estimates that compliance with
the Cluster Rules will require paper manufacturers to spend $4 billion for
capital investments and $600 million in annual expenditures. The American Forest
and Paper Association, an industry trade association (the "AFPA"), estimates the
costs to the pulp and paper industry of complying with the Cluster Rules will
exceed $10 billion, based on an industry-sponsored study by California-based SRI
International. Based upon its interpretation of the Cluster Rules as currently
proposed, the Company estimates that compliance with these rules could 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 expected to range up to $200 million over the next five years.
RCRA establishes a regulatory program for the treatment, storage,
transportation, and disposal of 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 the Diboll, Texas,
facility. These closure plans were approved by the regulatory authorities in
1986. One of these plans was certified as closed in 1991 and the other was
closed during 1991, but is awaiting state certification. During 1991,
subsidiaries of the Company submitted closure plans for two other facilities.
The closure plan for one of these facilities, the linerboard mill at Orange,
Texas, was approved by the Texas Water Commission, which is now part of the
Texas Natural Resources Conservation Commission, in November 1992, and
implementation is nearly complete. The Company is still awaiting state approval
to proceed on the other site. 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.
15
<PAGE> 17
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 over 1,500 box
plants in the United States. Box plants operated by Inland and its subsidiaries
accounted for 8.4% of total industry shipments during 1993. 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.
Paperboard produced by the Bleached Paperboard 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 operations compete
with many companies that are substantially larger and have greater resources in
the manufacturing of commodity building materials.
The Company's Financial Services operations compete 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:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---------------------------------- --- ---------------------------------------------
<S> <C> <C>
Chairman of the Board and Chief Executive
Clifford J. Grum.................. 59 Officer
Robert F. Adelizzi................ 59 Group Vice President
David L. Ashcraft................. 48 Group Vice President
William B. Howes.................. 56 Group Vice President
Harold C. Maxwell................. 53 Group Vice President
Kenneth M. Jastrow II............. 46 Chief Financial Officer
Vice President, General Counsel, and
Roger D. Ericson.................. 59 Secretary
David H. Dolben................... 58 Vice President and Chief Accounting Officer
David W. Turpin................... 43 Treasurer
</TABLE>
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 and as a
Director of Inland and of Financial Services.
Robert F. Adelizzi became Group Vice President of the Company in November
1991. Effective January 1, 1992, Mr. Adelizzi became the Chairman and Chief
Executive Officer of Guaranty. Since 1990, he had served as the President and
Chief Executive Officer of HomeFed Bank, a California thrift based in San Diego.
From 1981 to 1990, Mr. Adelizzi served as the President and Chief Operating
Officer of Home Federal Savings, the name of which was changed to HomeFed Bank
in 1990. In July 1992, HomeFed Bank was declared insolvent by the Office of
Thrift Supervision and the Resolution Trust Corporation was appointed as sole
receiver. Prior to submitting his resignation in May 1991, Mr. Adelizzi also
served as a director and
16
<PAGE> 18
executive officer of HomeFed Corp., the holding company of HomeFed Bank, which
filed for protection from creditors in federal bankruptcy court in October 1992.
David L. Ashcraft became Group Vice President of the Company in May 1989.
He has also served as Group Vice President -- Bleached Paperboard of
Temple-Inland FPC since November 1982.
William B. Howes 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.
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.
Kenneth M. Jastrow II became the Chief Financial Officer of the Company in
November 1991. He also serves as Chairman of Temple-Inland Mortgage. In 1984,
Mr. Jastrow formed Capitol Mortgage Bankers, which became a subsidiary of the
Company through an acquisition in June 1991 and changed its name to
Temple-Inland Mortgage Corporation during 1992. In March 1990, Security
Financial Corporation, of which Mr. Jastrow was an executive officer, filed a
voluntary petition under Chapter 11 of the Bankruptcy Code.
Roger D. Ericson became General Counsel and Secretary of the Company in
October 1983 and Vice President in May 1989. He also serves as Vice President,
Secretary, and a Director of Inland and as a Director and Assistant Secretary of
Temple-Inland FPC.
David H. Dolben became Vice President of the Company in May 1987. Mr.
Dolben also serves as Vice President and Treasurer of Temple-Inland FPC.
David W. Turpin became Treasurer of the Company in June 1991. Since March
1993, Mr. Turpin has also served as Executive Vice President and Treasurer of
Lumbermen's Investment Corporation, a real estate subsidiary of the Company, for
which he served as Senior Vice President and Treasurer from January 1991 to
March 1993. From June 1987 to December 1991, Mr. Turpin was Vice President and
Senior Manager of Corporate Banking with The Sanwa Bank, Limited in Dallas,
Texas.
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. The locations of the Company's properties are
depicted on the maps included on page 21 of the Company's 1993 Annual Report to
Shareholders, which are incorporated herein by reference. Additional
descriptions as of year-end of selected properties are set forth in the
following charts:
CONTAINERBOARD MILLS
<TABLE>
<CAPTION>
RATED
NO. OF ANNUAL 1993
LOCATION PRODUCT MACHINES CAPACITY PRODUCTION
- ----------------------------------------------- ----------- -------- -------- ----------
(IN TONS)
<S> <C> <C> <C> <C>
Ontario, California............................ Linerboard 1 290,000 285,000
Rome, Georgia.................................. Linerboard 2 825,000 778,000
Orange, Texas.................................. Linerboard/ 2 600,000 584,000
Kraft Paper
Maysville, Kentucky............................ Linerboard 1 260,000 247,000
Newark, California............................. Medium 2 70,000 69,000
Newport, Indiana............................... Medium 1 270,000 268,000
New Johnsonville, Tennessee.................... Medium 1 245,000 242,000
</TABLE>
17
<PAGE> 19
BLEACHED PAPERBOARD MILL
<TABLE>
<CAPTION>
RATED
NO. OF ANNUAL 1993
LOCATION PRODUCT MIX MACHINES CAPACITY PRODUCTION
- -------------------------------- ------------------------ -------- -------- ----------
(IN TONS)
<S> <C> <C> <C> <C>
Evadale, Texas.................. Bleached Pulp 15% 3 525,000* 85,600
Food Service 33% 184,600
Packaging 19% 107,600
Office Supplies 23% 131,600
Specialties 4% 20,800
Nodular Pulp 6% 33,800
---- -------
100% 564,000
=======
</TABLE>
- ---------------
* Such capacity may vary to some degree depending on product mix. A fourth
machine at the mill is no longer operating due to market conditions for the
paper grade it was designed to produce. The 1993 Product Mix and Production
shown above include production from this machine since it was not shut-down
until late in 1993.
FOOD SERVICE CONVERTING PLANTS*
<TABLE>
<CAPTION>
DATE
LOCATION PLANT SIZE ACQUIRED
- ------------------------------------------------------------------- ---------------- --------
(IN SQUARE FEET)
<S> <C> <C>
Sacramento, California............................................. 88,000 1991
Carlisle, Ohio(1).................................................. 83,000 1991
El Cajon, California............................................... 120,000 1991
Denver, Colorado................................................... 50,000 1991
</TABLE>
- ---------------
* 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) This facility is 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.
18
<PAGE> 20
CORRUGATED CONTAINER PLANTS*
<TABLE>
<CAPTION>
DATE
CORRUGATOR ACQUIRED OR
LOCATION SIZE CONSTRUCTED
- ------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
Fort Smith, Arkansas.............................................. 87" 1978
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...................................... 87" 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
Macon, Georgia.................................................... 100" 1947
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
Edison, New Jersey(1)............................................. 97" 1985
Spotswood, New Jersey............................................. 87" 1963
Middletown, Ohio.................................................. 98" 1930
Biglerville, Pennsylvania......................................... 98" 1955
Erie, Pennsylvania................................................ 85" 1952
Hazleton, Pennsylvania............................................ 98" 1976
Vega Alta, Puerto Rico............................................ 87" 1977
Lexington, South Carolina......................................... 80" 1980
Rock Hill, South Carolina......................................... 87" 1972
Elizabethton, Tennessee........................................... 98" 1982
Elizabethton, Tennessee(1)***..................................... None 1990
Dallas, Texas..................................................... 87" 1962
Edinburg, Texas................................................... 87" 1989
Petersburg, Virginia.............................................. 87" 1991
</TABLE>
- ---------------
* 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.
19
<PAGE> 21
The Company is currently constructing a box plant in Mexico. In January
1994, the Company announced that it intends to close the box plant in Edison,
New Jersey. The closing of this plant is expected to be completed by June 30,
1994.
BUILDING PRODUCTS
<TABLE>
<CAPTION>
RATED
ANNUAL
DESCRIPTION LOCATION CAPACITY
- ------------------------------------------------------ ------------------------ ---------------
(IN MILLIONS OF
BOARD FEET)
<S> <C> <C>
Lumber................................................ Diboll, Texas 125
Lumber................................................ Pineland, Texas 80
Lumber................................................ Buna, Texas 145
Lumber................................................ Rome, Georgia 73
Lumber................................................ DeQuincy, Louisiana 125
</TABLE>
<TABLE>
<CAPTION>
RATED
ANNUAL
DESCRIPTION LOCATION CAPACITY
- ------------------------------------------------------ ------------------------ ---------------
(IN MILLIONS OF
SQUARE FEET)
<S> <C> <C>
Fiberboard............................................ Diboll, Texas 460
Particleboard......................................... Monroeville, Alabama 115
Particleboard......................................... Thomson, Georgia 110
Particleboard......................................... Diboll, Texas 110
Plywood............................................... Pineland, Texas 265
Gypsum Wallboard...................................... West Memphis, Arkansas 380
Gypsum Wallboard...................................... Fletcher, Oklahoma 400
</TABLE>
The Company recently announced a new particleboard plant to be located in
Hope, Arkansas. The plant is expected to be completed in the first quarter of
1996 and will produce 170 million square feet of particleboard annually.
TIMBER AND TIMBERLANDS
<TABLE>
<CAPTION>
TEXAS ALABAMA
AND AND
LOUISIANA GEORGIA* TOTAL
--------- ---------- ----------
(IN ACRES)
<S> <C> <C> <C>
Pine Plantations....................................... 888,279 364,191 1,252,470
Natural Pine........................................... 286,980 57,978 344,958
Hardwood............................................... 130,112 83,990 214,102
Special Use............................................ 58,839 3,900 62,739
--------- ---------- ----------
TOTAL........................................ 1,364,210 510,059 1,874,269
-------- ---------- ----------
-------- ---------- ----------
</TABLE>
- ---------------
* Includes approximately 95,000 acres of leased land.
Additionally, Inland owns a graphics resource center that has a 100"
preprint press in Indianapolis, Indiana, and a tape manufacturing facility in
Milwaukee, Wisconsin, and also leases 18 warehouses located throughout much of
the United States.
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.
20
<PAGE> 22
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, and approximately 100,000 square feet in
Indianapolis, Indiana.
The Company also owns 336,000 mineral acres in Texas and Louisiana. Revenue
from lease and production activities on these acres totaled $4.24 million in
1993. Additionally, the Company owns 395,830 mineral acres in Alabama and
Georgia. There was no significant income from these minerals in 1993.
Reference is made to the "Long-Term Debt" Note to the Financial Statements
of the Company on page 35 of the Company's 1993 Annual Report to Shareholders
for information concerning various mortgages and other encumbrances on the
properties, which information is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS:
GENERAL:
The Company's 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 in relation
to the consolidated financial position 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.
A cooperative study of the paper industry and the United States
Environmental Protection Agency ("EPA") conducted in 1988 found trace amounts,
in the parts per trillion level, of the chemical compound dioxin in some samples
of paper mill sludge and bleach pulp. The Company and other participants in this
study are cooperating with the EPA to determine the amounts and ways to reduce
the levels of dioxin. During 1992, the Company completed modifications to its
bleaching process that, based upon initial testing, have successfully reduced
the dioxin in its wastewater emissions. The Company is a defendant in a lawsuit
filed in Orange County, Texas, by approximately 250 plaintiffs in which
unspecified actual and punitive damages are sought for alleged diminished
property values and increased risk of cancer resulting from the discharge of
dioxin into the river near the Company's plant at Evadale, Texas. The Company
had been named as one of several defendants in two additional dioxin lawsuits
filed in Harris County, Texas, and Brazoria County, Texas, involving numerous
plaintiffs seeking unspecified damages. Both of these cases were settled during
the fourth quarter of 1993 at only a nominal cost to the Company. The possible
effects of human exposure to dioxin in such trace amounts is currently the
subject of much debate. The Company believes, and scientific studies indicate,
that human exposure to dioxin in the trace concentration found in the Company's
treated wastewater does not represent a health risk to its employees or
customers or to the public. For these and other reasons, the Company believes
these suits are without merit and expects to prevail upon final resolution. If a
judgment should be rendered against the Company in any of these lawsuits,
depending on the dates of the alleged dioxin discharges and other matters, the
Company's insurance carrier may contest coverage based on pollution exclusions
contained in many of the Company's insurance policies.
A subsidiary of the Company is involved in a regulatory enforcement action
concerning the management of solid wastes at its facility in Orange, Texas. This
proceeding is representative of a trend the Company has observed toward more
stringent application of RCRA regulations to solid wastes generated at kraft
mills. Also, a subsidiary's facility in Rome, Georgia, experienced a significant
upset in its wastewater treatment process in July 1993. This upset caused the
Georgia environmental agency to order a temporary cessation of production.
21
<PAGE> 23
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
Company's financial position.
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.
In addition, while the Company has an FSLIC indemnification covering
pre-existing environmental matters in connection with the Covered Assets
acquired by Guaranty from the FSLIC and in the acquisition of AFB, the normal
activities of a consumer savings bank or a mortgage banker can result in
environmental liability claims.
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 financial position 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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS:
MARKET INFORMATION:
The information concerning market prices of the Company's Common Stock
required by this item is incorporated by reference from page 30 of the Company's
1993 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 8, 1994,
there were approximately 8,545 holders of record of the Common Stock.
DIVIDEND POLICY:
On February 4, 1994, the Board of Directors declared a quarterly dividend
on the Common Stock of $.25 per share payable on March 15, 1994, to shareholders
of record on March 1, 1994. During fiscal 1992, the Company paid a quarterly
dividend of $.24 per share. The quarterly dividend was increased to $.25 per
share during fiscal 1993. 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.
22
<PAGE> 24
ITEM 6. SELECTED FINANCIAL DATA:
The information required by this item is incorporated by reference from
page 30 of the Company's 1993 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 23 through 29 of the Company's 1993 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.
ITEM 11. EXECUTIVE COMPENSATION:
The information required by this item is incorporated by reference from
pages 10 through 17 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 2 through 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
page 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.
23
<PAGE> 25
1. FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER
---------------------------------------------------------------------------- ------
<S> <C>
Temple-Inland and Subsidiaries
Report of Independent Auditors*........................................... 53
Consolidated Statements of Income -- three years ended January 1, 1994*... 44
Consolidated Balance Sheets -- January 1, 1994, and January 2, 1993*...... 46-47
Consolidated Statements of Shareholder's Equity -- three years ended
January 1, 1994*....................................................... 48
Consolidated Statements of Cash Flows -- three years ended January 1,
1994*.................................................................. 45
Notes to Consolidated Financial Statements*............................... 49-52
</TABLE>
- ---------------
* Incorporated herein by reference from the Company's Annual Report to
Shareholders for the fiscal year ended January 1, 1994, and filed for purposes
of those portions so incorporated as Exhibit 13. Page numbers refer to page
numbers in the Company's 1993 Annual Report to Shareholders.
2. FINANCIAL STATEMENT SCHEDULES:
The following Financial Statement Schedules of the Company required by
Regulation S-X and excluded from the Annual Report to Shareholders for the year
ended January 1, 1994, are filed herewith at the page indicated.
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER
- ------------------ ------
<S> <C> <C>
Temple-Inland Inc. and Subsidiaries
Schedule I -- Marketable Securities -- Other Investments............. 29
Schedule VIII -- Valuation and Qualifying Accounts...................... 30
Schedule IX -- Short-Term Borrowings.................................. 31
Schedule X -- Supplementary Income Statement Information............. 32
</TABLE>
With respect to Schedule II, the Company extends housing loans to employees
who are transferred at the Company's request. These loans are not reported, as
the Company considers the loans to be in the ordinary course of business. 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:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ---------------------------------------------------------------------------------------------
<S> <C>
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(19)
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(13), and as
amended by Third Supplemental Indenture dated as of May 9, 1991(14)
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(13)
4.05 -- Form of Floating-rate Medium Term Note, Series B, of the
Company(13)
4.06 -- Form of 9% Note due May 1, 2001, of the Company(16)
4.07 -- Form of Fixed-rate Medium Term Note, Series D, of the Company(15)
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ---------------------------------------------------------------------------------------------
<S> <C>
4.08 -- Form of Floating-rate Medium Term Note, Series D, of the
Company(15)
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(17)
4.12 -- Form of 8.25% Debenture due September 15, 2022, of the Company(17)
10.01* -- 1983 Stock Option Plan for Key Employees of Temple Inland Inc. and
its Subsidiaries(1), as amended(2)
10.02* -- Form of Incentive Option Agreement under the 1983 Stock Option
Plan(8)
10.03* -- Form of Nonqualified Option Agreement under the 1983 Stock Option
Plan(8)
10.04* -- 1988 Stock Option Plan for Key Employees and Directors of
Temple-Inland Inc. and its Subsidiaries(9)
10.05* -- Form of Incentive Option Agreement under the 1988 Stock Option
Plan(9)
10.06* -- Form of Nonqualified Option Agreement under the 1988 Stock Option
Plan(9)
10.07* -- Temple-Inland Inc. Incentive Stock Plan(1), as amended May 6,
1988(10), as amended February 7, 1992(19)
10.08* -- Form of Incentive Shares Agreement(11)
10.09* -- 1988 Performance Unit Plan for Key Employees of Temple-Inland Inc.
and its Subsidiaries(10), as amended February 4, 1994(21)
10.10* -- Form of Performance Unit Rights Agreement under the Performance
Unit Plan(6)
10.11 -- 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.(12)
10.12* -- Temple-Inland Inc. 1993 Stock Option Plan(18)
10.13* -- Temple-Inland Inc. 1993 Restricted Stock Plan(18)
10.14* -- Temple-Inland Inc. 1993 Performance Unit Plan(18), as amended
February 4, 1994(21)
10.15 -- 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(20)
10.16 -- 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(20)
10.17 -- 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(20)
10.18 -- 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(20)
10.19 -- Holdback Escrow Agreement by and among LST, Guaranty, and Bank One,
Texas, N.A. dated as of November 12, 1993(20)
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ---------------------------------------------------------------------------------------------
<S> <C>
11 -- Statement re: Computation of Per Share Earnings for the three years
ended January 1, 1994(21)
13 -- Annual Report to Shareholders for the year ended January 1, 1994.
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.
21 -- Subsidiaries of the Company(21)
23 -- Consent of Ernst & Young(21)
</TABLE>
- ---------------
* 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 the Company's Form 10-K for the year ended
December 31, 1984.
(9) Incorporated by reference to Registration Statement No. 33-23132 on Form
S-8 filed by the Company with the Commission.
(10) Incorporated by reference to the Company's Definitive Proxy Statement filed
with the Commission on March 18, 1988.
(11) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1983.
(12) Incorporated by reference to the Company's Form 8-K filed with the
Commission on October 14, 1988.
(13) Incorporated by reference to the Company's Form 8-K filed with the
Commission on December 27, 1990.
(14) Incorporated by reference to Registration Statement No. 33-40003 on Form
S-3 filed by the Company with the Commission.
(15) Incorporated by reference to Registration Statement No. 33-43978 on Form
S-3 filed by the Company with the Commission.
(16) Incorporated by reference to the Company's Form 8-K filed with the
Commission on May 2, 1991.
(17) Incorporated by reference to Registration Statement No. 33-50880 on Form
S-3 filed by the Company with the Commission.
(18) 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.
(19) Incorporated by reference to the Company's Form 10-K for the year ended
January 2, 1993.
26
<PAGE> 28
(20) Incorporated by reference to the Company's Form 8-K filed with the
Commission on November 24, 1993.
(21) Filed herewith.
(b) Reports on Form 8-K.
On November 24, 1993, the Company filed a report on Form 8-K reporting its
acquisition of AFB. On January 28, 1994, the Company filed a Form 8-K/A amending
this Form 8-K to include the required financial statements and pro forma
financial information.
27
<PAGE> 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 18,
1994.
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------------------- ----------------------------- ---------------
<S> <C> <C>
/s/ CLIFFORD J. GRUM Director, Chairman of the March 18, 1994
Clifford J. Grum Board, and Chief Executive
Officer
/s/ KENNETH M. JASTROW II Chief Financial Officer March 18, 1994
Kenneth M. Jastrow II
/s/ DAVID H. DOLBEN Vice President and Chief March 18, 1994
David H. Dolben Accounting Officer
/s/ ROBERT CIZIK Director March 18, 1994
Robert Cizik
/s/ ANTHONY M. FRANK Director March 18, 1994
Anthony M. Frank
/s/ BOBBY R. INMAN Director March 18, 1994
Bobby R. Inman
/s/ HERBERT A. SKLENAR Director March 18, 1994
Herbert A Sklenar
/s/ WALTER P. STERN Director March 18, 1994
Walter P. Stern
/s/ ARTHUR TEMPLE III Director March 18, 1994
Arthur Temple III
/s/ LARRY E. TEMPLE Director March 18, 1994
Larry E. Temple
/s/ PAUL M. ANDERSON Director March 18, 1994
Paul M. Anderson
/s/ CHARLOTTE TEMPLE Director March 18, 1994
Charlotte Temple
</TABLE>
28
<PAGE> 30
SCHEDULE I
TEMPLE-INLAND INC. AND SUBSIDIARIES
MARKETABLE SECURITIES -- OTHER INVESTMENTS
DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMOUNT AT WHICH EACH
NUMBER OF SHARES MARKET PORTFOLIO OF EQUITY
OR UNITS -- VALUE SECURITY ISSUES AND
PRINCIPAL AMOUNTS OF EACH ISSUE EACH OTHER SECURITY
NAME OF ISSUER AND OF BONDS AND COST OF AT BALANCE ISSUE CARRIED IN
TITLE OF EACH ISSUE NOTES EACH ISSUE SHEET DATE THE BALANCE SHEET
- --------------------------------- ----------------- ----------------- ----------------- --------------------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES:
FNMA certificates.............. $2,293,297 $ 2,346,959 $ 2,331,181 $2,346,959
FHLMC certificates............. 388,513 397,814 394,593 397,814
GNMA certificates.............. 6,232 6,076 6,420 6,076
Collateralized mortgage
obligations................. 531,066 539,255 533,643 539,255
Private issuer pass-
through securities.......... 1,035,374 1,046,122 1,038,643 1,046,122
----------------- ----------------- --------------------
Total mortgage-backed
securities.................. 4,336,226 4,304,480 4,336,226
----------------- ----------------- --------------------
DEBT SECURITIES:
Corporate securities........... 1,208 1,175 1,245 1,175
United States government
and government agencies
and authorities............. 825 805 805 805
Other.......................... 100 82 82 82
----------------- ----------------- --------------------
Total debt securities.......... 2,062 2,132 2,062
----------------- ----------------- --------------------
EQUITY SECURITIES:
Federal Home Loan Bank
stock....................... 688,730sh 68,873 68,873 68,873
Other.......................... 20,139sh 140 585 97
----------------- ----------------- --------------------
Total equity securities........ 69,013 69,458 68,970
----------------- ----------------- --------------------
Total investments...... $ 4,407,301 $ 4,376,070 $4,407,258
----------------- ----------------- --------------------
----------------- ----------------- --------------------
</TABLE>
29
<PAGE> 31
SCHEDULE VIII
TEMPLE-INLAND INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- AT END
PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
------------ ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Year ended January 1, 1994:
Deducted from accounts
receivable:
Allowance for doubtful
accounts.................. $ 5,795 $ 2,658 $ -- $ 1,024(A) $ 7,429
Reserve for discounts and
allowances................ 656 2,457 4,695(B) 6,851(C) 957
Allowance for loan losses
and unrealized losses on
mortgage loans held for
sale...................... 22,874 4,990 23,993(D) 2,350 49,507
------------ ---------- ----------- ------------- ---------
Totals................. $ 29,325 $ 10,105 $28,688 $10,225 $ 57,893
------------ ---------- ----------- ------------- ---------
------------ ---------- ----------- ------------- ---------
Year ended January 2, 1993:
Deducted from accounts
receivable:
Allowance for doubtful
accounts.................. $ 5,545 $ 679 $ 788 $ 1,217(A) $ 5,795
Reserve for discounts and
allowances................ 644 -- 6,890(B) 6,878(C) 656
Allowance for loan losses
and unrealized losses on
mortgage loans held for
sale...................... 24,773 3,615 1,419 6,933 22,874
------------ ---------- ----------- ------------- ---------
Totals................. $ 30,962 $ 4,294 $ 9,097 $15,028 $ 29,325
------------ ---------- ----------- ------------- ---------
------------ ---------- ----------- ------------- ---------
Year ended December 28, 1991:
Deduction from accounts
receivable:
Allowance for doubtful
accounts.................. $ 5,354 $ 3,810 $ 275 $ 3,894(A) $ 5,545
Reserve for discounts and
allowances................ 594 -- 7,110(B) 7,060(C) 644
Allowance for loan losses
and unrealized losses on
mortgage loans held for
sale...................... 5,137 6,364 17,909 4,637 24,773
------------ ---------- ----------- ------------- ---------
Totals................. $ 11,085 $ 10,174 $25,294 $15,591 $ 30,962
------------ ---------- ----------- ------------- ---------
------------ ---------- ----------- ------------- ---------
</TABLE>
- ---------------
(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.
30
<PAGE> 32
SCHEDULE IX
TEMPLE-INLAND INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
WEIGHTED
MAXIMUM AMOUNT AVERAGE AMOUNT AVERAGE
CATEGORY OF BALANCE AT WEIGHTED OUTSTANDING OUTSTANDING INTEREST RATE
SHORT-TERM END OF AVERAGE DURING THE DURING THE DURING THE
BORROWINGS PERIOD INTEREST RATE PERIOD PERIOD PERIOD
- ------------------------------ ---------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1993:
Federal Home Loan Bank...... $ -- --% $ 300 $ 1,458 3.6%
Other Banks................. 24,134 --% 31,144 8,343 --%
Securities sold under
agreements to
repurchase............... 1,570,680 3.3% 2,437,191 2,734,216 3.2%
---------- -------------- --------------
Total............... $1,594,814 3.3% $2,468,635 $2,744,017 3.2%
---------- -------------- --------------
---------- -------------- --------------
1992:
Federal Home Loan Bank...... $ 300 4.2% $ 300 $ 300 5.4%
Other Banks................. 25,810 --% 36,566 10,417 6.3%
Securities sold under
agreements to
repurchase............... 1,459,498 3.5% 1,571,406 972,500 3.7%
---------- -------------- --------------
Total............... $1,485,608 3.4% $1,608,272 $ 983,217 3.7%
---------- -------------- --------------
---------- -------------- --------------
1991:
Federal Home Loan Bank...... $ 300 6.6% $ 450,000 $ 85,099 7.1%
Other Banks................. 50,320 6.5% 89,947 36,811 7.3%
Securities sold under
agreements to
repurchase............... 150,312 5.4% 209,544 91,848 5.6%
Other....................... 1,259 7.7% 1,587 36,624 7.3%
---------- -------------- --------------
Total............... $ 202,191 5.7% $ 751,078 $ 250,382 6.6%
---------- -------------- --------------
---------- -------------- --------------
</TABLE>
NOTE: Federal Home Loan Bank advances generally mature within 90 days.
Securities sold under agreements to repurchase generally mature within one
to thirty days of the transaction date. Average borrowings during the year
were calculated based on daily average for Temple-Inland Financial
Services, and on amounts outstanding at month-end for other subsidiaries.
The weighted average interest rate during the year was computed by
dividing actual interest expense in each year by average short-term
borrowings in such year.
31
<PAGE> 33
SCHEDULE X
TEMPLE-INLAND INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED JANUARY 1, 1994, JANUARY 2, 1993, AND DECEMBER 28, 1991
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
----------------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs.................................... $170,746 $168,296 $140,933
Taxes, other than payroll and income taxes................. 42,622 39,348 35,406
</TABLE>
- ---------------
NOTE: Amounts for royalties, advertising, depreciation and amortization of
intangibles are not presented as such amounts are less than 1% of
revenues.
32
<PAGE> 1
EXHIBIT 10.09
FIRST AMENDMENT
TO THE
1988 PERFORMANCE UNIT PLAN
FOR KEY EMPLOYEES OF
TEMPLE-INLAND INC.
AND ITS SUBSIDIARIES
WHEREAS, Temple-Inland Inc. (the "Company") maintains the 1988
Performance Unit Plan for Key Employees of Temple-Inland Inc. and Its
Subsidiaries (the "Plan"); and
WHEREAS, paragraph 12 of the Plan authorizes the Board of Directors
(the "Board") of the Company to amend the Plan at any time in such respects as
it deems advisable; and
WHEREAS, the Board has determined that it is desirable to amend the
Plan in response to certain recent tax law changes;
NOW, THEREFORE, the Plan is hereby amended to add the following
sentence to the end of paragraph 6(b) and to the end of paragraph 6(c)(ii):
In no event shall any such modification or amendment increase
the amount otherwise payable to a Participant.
Adopted February 4, 1994
<PAGE> 1
EXHIBIT 10.14
FIRST AMENDMENT
TO THE
TEMPLE-INLAND INC.
1993 PERFORMANCE UNIT PLAN
WHEREAS, Temple-Inland Inc. (the "Company") maintains the
Temple-Inland Inc. 1993 Performance Unit Plan (the "Plan"); and
WHEREAS, paragraph 11 of the Plan authorizes the Board of Directors
(the "Board") of the Company to amend the Plan at any time in such respects as
it deems advisable; and
WHEREAS, the Board has determined that it is desirable to amend the
Plan in response to certain recent tax law changes;
NOW, THEREFORE, the Plan is hereby amended to add the following
sentence to the end of paragraph 6(b) and after the fifth sentence contained in
paragraph 6(c)(ii):
In no event shall any such modification or amendment increase
the amount otherwise payable to a Participant.
Adopted February 4, 1994
<PAGE> 1
EXHIBIT (11)
TEMPLE-INLAND INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
JANUARY 1, JANUARY 2, DECEMBER 28,
1994 1993 1991
---------- ---------- ------------
<S> <C> <C> <C>
Primary
Average common shares outstanding......................... 55,337 55,136 54,811
Net effect of dilutive stock options based on treasury
stock method using average market price................. 191 399 437
---------- ---------- ------------
Weighted average shares outstanding............. 55,528 55,535 55,248
---------- ---------- ------------
---------- ---------- ------------
Net income:
Income before accounting changes........................ $ 67,350 $ 146,910 $138,418
Cumulative effect of accounting changes................. 50,000 -- --
---------- ---------- ------------
Net income.............................................. $ 117,350 $ 146,910 $138,418
---------- ---------- ------------
---------- ---------- ------------
Earnings per share:
Before accounting changes............................... $ 1.21 $ 2.65 $ 2.51
Effect of accounting changes............................ .90 -- --
---------- ---------- ------------
Earnings per share...................................... $ 2.11 $ 2.65 $ 2.51
---------- ---------- ------------
---------- ---------- ------------
Fully Diluted
Average common shares outstanding......................... 55,337 55,136 54,811
Net effect of dilutive stock options based on treasury
stock method using the closing market price, if higher
than average market price............................... 239 407 546
---------- ---------- ------------
Weighted average shares outstanding............. 55,576 55,543 55,357
---------- ---------- ------------
---------- ---------- ------------
Net income:
Income before accounting changes........................ $ 67,350 $ 146,910 $138,418
Cumulative effect of accounting changes................. 50,000 -- --
---------- ---------- ------------
Net income.............................................. $ 117,350 $ 146,910 $138,418
---------- ---------- ------------
---------- ---------- ------------
Earnings per share:
Before accounting changes............................... $ 1.21 $ 2.64 $ 2.50
Effect of accounting changes............................ .90 -- --
---------- ---------- ------------
Earnings per share...................................... $ 2.11 $ 2.64 $ 2.50
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
<PAGE> 1
EXHIBIT 13
<TABLE>
<S> <C> <C>
CORPORATE SUBSIDIARIES'
{MAP} HEADQUARTERS HEADQUARTERS TEMPLE-INLAND FOREST
Diboll, Texas INLAND CONTAINER PRODUCTS CORPORATION
CORPORATION Diboll, Texas
Indianapolis, Indiana
TEMPLE-INLAND FINANCIAL
SERVICES INC.
Dallas, Texas
BUILDING PRODUCTS
{MAP} FIBERBOARD OPERATION GYPSUM OPERATIONS PLYWOOD OPERATION
Diboll, Texas West Memphis, Arkansas Pineland, Texas
Fletcher, Oklahoma
PARTICLEBOARD OPERATIONS RETAIL DISTRIBUTION
Diboll, Texas LUMBER OPERATIONS OPERATIONS
Monroeville, Alabama Rome, Georgia Diboll, Texas
Thomson, Georgia DeQuincy, Louisiana Pineland, Texas
Diboll, Texas Conroe, Texas
Pineland, Texas Houston, Texas
Buna, Texas Alexandria, Louisiana
BLEACHED CONTAINERBOARD MILLS
PAPERBOARD MILL LINERBOARD CORRUGATING MEDIUM
{MAP} Evadale, Texas Ontario, California Newark, California
Rome, Georgia Newport, Indiana
Maysville, Kentucky New Johnsonville, Tennessee
Orange, Texas
PACKAGING Vega Alta, Puerto Rico
CORRUGATED CONTAINER Evansville, Indiana Lexington, South Carolina
{MAP} PLANTS Indianapolis, Indiana Rock Hill, South Carolina
Fort Smith, Arkansas Garden City, Kansas Elizabethton, Tennessee (2)
Buena Park, California Kansas City, Kansas Dallas, Texas
El Centro, California Louisville, Kentucky Edinburg, Texas
Los Angeles, California Minden, Louisiana Petersburg, Virginia
Newark, California Minneapolis, Minnesota TAPE MANUFACTURING
Ontario, California Hattiesburg, Mississippi OPERATION
Sante Fe Springs, California (3) St. Louis, Missouri Milwaukee, Wisconsin
Tracy, California Edison, New Jersey FOOD SERVICE CONVERTING
Denver, Colorado Spotswood, New Jersey OPERATIONS
Orlando, Florida Middletown, Ohio Yuma, Arizona
Macon, Georgia Biglerville, Pennsylvania El Cajon, California
Rome, Georgia Erie, Pennsylvania Sacramento, California
Chicago, Illinois Hazleton, Pennsylvania Denver, Colorado
Crawfordsville, Indiana Carlisle, Ohio
FINANCIAL SERVICES
{MAP} CONSUMER BANKING REGIONS MORTGAGE BANKING OPERATIONS
Dallas and Adjacent Cities Arizona New York
Austin and Adjacent Cities California North Carolina
Houston and Adjacent Cities Colorado Oklahoma
East Texas Florida Pennsylvania
Georgia South Carolina
Illinois Tennessee
Indiana Texas
Maryland Virginia
Michigan Washington
Minnesota Wisconson
New Jersey
</TABLE>
T E M P L E - I N L A N D 21
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
Business Segments
For the year 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
- ------------ -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Container and
containerboard $1,248.5 $1,254.4 $1,148.6 $1,144.2 $1,138.4 $1,093.1 $ 962.2 $ 721.7 $ 684.2 $ 665.3
Bleached 2
paperboard 318.5 352.6 370.6 373.0 368.3 336.0 292.5 264.9 256.7 284.5
Building products 475.3 391.3 311.1 305.3 320.3 312.2 322.8 281.5 268.0 295.3
Other activities 58.4 77.1 67.9 70.0 67.2 32.2 23.2 27.7 34.2 17.8
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Manufacturing
net sales 2,100.7 2,075.4 1,898.2 1,892.5 1,894.2 1,773.5 1,602.7 1,295.8 1,243.1 1,262.9
Financial services(1) 635.1 637.8 608.9 508.6 49.4 40.9 39.4 47.2 39.2 36.3
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Revenues $2,735.8 $2,713.2 $2,507.1 $2,401.1 $1,943.6 $1,814.4 $1,642.1 $1,343.0 $1,282.3 $1,299.2
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
INCOME BEFORE TAXES
Container and
containerboard $ 21.0 $ 112.3 $ 75.4 $ 150.9 $ 208.4 $ 221.3 $ 150.8 $ 38.8 $ 49.7 $ 74.8
Bleached
paperboard (12.1) 23.3 79.9 98.8 114.9 82.7 53.4 29.4 19.8 46.8
Building products 99.1 39.5 5.2 9.4 23.7 24.6 36.5 35.9 22.5 40.9
Other activities (1.9) (2.0) 1.1 (1.7) (.7) 1.2 - (5.8) 2.5 (3.2)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Operating profit 106.1 173.1 161.6 257.4 346.3 329.8 240.7 98.3 94.5 159.3
Financial services(1) 67.5 64.4 54.2 51.4 (2.1) .4 5.3 12.9 18.3 13.4
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
173.6 237.5 215.8 308.8 344.2 330.2 246.0 111.2 112.8 172.7
Corporate expense (11.2) (15.3) (16.0) (20.7) (12.9) (19.9) (11.7) (13.1) (8.1) (11.9)
Parent company
interest--net (69.0) (47.4) (31.8) (24.0) (24.4) (23.1) (20.3) (13.0) 1.2 (4.6)
Other income(2)(3) 2.8 2.2 (1.2) 4.7 5.0 16.3 5.5 23.4 20.3 8.7
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income before taxes
and accounting
changes $ 96.2 $ 177.0 $ 166.8 $ 268.8 $ 311.9 $ 303.5 $ 219.5 $ 108.5 $ 126.2 $ 164.9
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C>
PERFORMANCE GRAPH Comparison of five-year cumulative total return*
During the five preceding
fiscal yars, the Company's
cummulative total share-
holder return compared
to the Standard & Poor's {GRAPH}
500 Stock Index and to
the Standard & Poor's
Paper Industry Index
was as shown in the
following table.
Assumes $100 invested on December 31, 1988. *Total return reinvestment of dividends.
</TABLE>
(1) Includes operating results from the consolidation of Guaranty Federal
Bank, F.S.B., beginning January 1, 1990.
(2) Income net of federal income taxes from life insurance operations
discontinued in 1990, included in other income, was $15.3 million in 1986
and amounts were immaterial in other years.
(3) The 1991 amount includes losses of $7.4 million from the write-off of an
investment interest in a gypsum-fiberboard venture. The 1988 amount
includes gains of $12.4 million on the disposition of lands and $5.0
million on the sale of the AFCO Industries subsidiary. The 1985 amount
includes an $11.3 million gain on the sale of the Eastex Packaging
subsidiary.
23
<PAGE> 3
CONTAINER AND CONTAINERBOARD
The Container and Containerboard group manufactures linerboard and corrugating
medium at seven paper mills and converts these grades of containerboard into
corrugated shipping containers at 39 box plants.
The group earned $21.0 million in 1993, down 81 percent from the
$112.3 million in 1992. This decline resulted from depressed box and board
prices and increased box plant costs. Earnings had improved $36.9 million in
1992 because of moderate box price improvement, increased volume and lower
costs at several of the group's recently modernized mills.
Mill production totaled 2.5 million tons in 1993, an increase of 8
percent from the previous year. This production increase came primarily from
the Maysville, Kentucky mill which had a fourth quarter 1992 startup. During
the last half of 1993, the Company took unscheduled downtime at all of its
mills in order to bring inventories to targeted levels. A total of 57,000 tons
was taken out of production. Production of containerboard exceeded internal box
plant usage by 376,000 tons in 1993, 243,000 tons in 1992 and 218,000 tons in
1991. Most of the excess production was sold in the domestic and export
markets.
Construction of the $176 million recycle linerboard mill in Maysville
was completed during the fourth quarter of 1992. This new mill has the capacity
to annually produce 260,000 tons of linerboard and corrugating medium using old
corrugated containers as a raw material. Similar to the Newport, Indiana mill,
it is located adjacent to a utility power plant. A long-term contract with the
utility assures the mill a source of reasonably priced steam.
The $40 million expansion of the Ontario, California recycle
linerboard mill was completed in the second quarter of 1992. This expansion
increased production by about one-third -- to 290,000 tons annually.
Also in 1992, the $38 million project to produce mottled white and
white top linerboard at the Orange, Texas mill was completed. As a result of
this project, the Orange mill has the capability of replacing 200,000 tons per
year of ordinary brown linerboard production with higher value white top
linerboard, and in the process utilizing 70,000 tons of the Evadale, Texas
mill's excess bleached pulp.
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
TONS MILL PRODUCTION 2,473,000 2,287,000 2,103,000
</TABLE>
The Company's 39 box plants are located throughout the United States
and in Puerto Rico. They manufacture a wide range of boxes from the simplest
brown box to intricate die cut containers which can be printed with many colors
and attractive graphics. Average prices of boxes can be significantly impacted
by variations in production mix at the box plants.
Tons of boxes sold increased by 2 percent in 1993 after having
increased by 8 percent in 1992.
The table below shows the container and containerboard sales in tons
and dollars. The totals presented include not only boxes sold but also open
market, domestic and export sales of linerboard and related products. Changes
in product mix from period to period may make historical comparisons difficult.
<TABLE>
<CAPTION>
CONTAINER &
CONTAINERBOARD 1993 1992 1991
- -------------- ---- ---- ----
(in thousands of tons)
<S> <C> <C> <C>
UNIT SALES
1st Qtr 598 539 523
2nd Qtr 606 573 536
3rd Qtr 593 579 532
4th Qtr 597 603 506
-------- -------- --------
For the year 2,394 2,294 2,097
======== ======== ========
NET SALES (in millions)
1st Qtr $ 318.5 $ 296.1 $ 289.7
2nd Qtr 319.6 319.0 290.1
3rd Qtr 307.8 315.6 285.3
4th Qtr 302.6 323.7 283.5
-------- -------- --------
For the year $1,248.5 $1,254.4 $1,148.6
======== ======== ========
</TABLE>
BLEACHED PAPERBOARD
The Bleached Paperboard group produces bleached paperboard at its mill located
in Evadale, Texas. This production is sold to manufacturers who convert the
product into paper cups, plates, file folders, folding cartons, paperback book
covers and a variety of other paperboard products.
This group recorded a loss of $12.1 million in 1993, down 152 percent
compared to 1992. This is the first loss since operations began in 1954 and is
attributed to weak global markets for bleached paperboard and an oversupplied
domestic market caused by increased industry capacity. Price decreases for
market pulp led to the decision during the fourth quarter to eliminate market
pulp from the product mix. An extended outage taken in October 1993 on a coated
fourdrinier machine to rebuild the table stock furnish system and install a new
size press further decreased earnings. Earnings had decreased 71 percent in
1992, resulting primarily from price decreases for market pulp and other board
grades, an unfavorable product mix and an extended maintenance outage in June
1992.
During 1993, hardwood fiber production improved with the new pulping
and bleaching line placed in production in late 1992. By the third quarter, the
new fiberline was producing a brighter, stronger, more consistent hardwood
fiber with lower chemical, energy and wood consumption.
Temple-Inland Food Service Corporation ("Food Service") is an
integrated paper converter that manufactures and markets paper containers and
products for the food service industry. This operation has converting plants in
Carlisle, Ohio, Sacramento and El Cajon, California, and Denver, Colorado.
During the fourth quarter, the Yuma, Arizona plant was closed and some of the
manufacturing equipment was relocated to the El Cajon and Denver plants.
Products manufactured include paper plates and bowls, clamshells, carrying
trays and boxes, nested food trays, fry cartons, dispensers and pails, and are
sold to the fast food industry, retail consumer stores and to restaurants and
cafeterias. Food Service enhances the Bleached Paperboard group's ability to
manufacture and market paper products for the food service industry.
24
<PAGE> 4
Mill production in 1993 was 564,000 tons compared to 569,000 tons in
1992 and 586,000 tons in 1991. The decline in production was due primarily to
the exit from the pulp market and the planned maintenance outage.
The table below lists the quarterly sales by product in tonnage and
dollars. Changes in product mix from period to period may make historical
comparisons difficult.
<TABLE>
<CAPTION>
BLEACHED PAPERBOARD 1993 1992 1991
- ------------------- ---- ---- ----
(in thousands of tons)
<S> <C> <C> <C>
UNIT SALES
Paperboard
1st Qtr 116 109 120
2nd Qtr 109 97 116
3rd Qtr 103 101 107
4th Qtr 98 107 104
------ ------ ------
For the year 426 414 447
====== ====== ======
Pulp
1st Qtr 38 40 33
2nd Qtr 41 35 33
3rd Qtr 33 40 23
4th Qtr 22 40 33
------ ------ ------
For the year 134 155 122
====== ====== ======
NET SALES (in millions)
Paperboard
1st Qtr $ 68.9 $ 66.5 $ 81.3
2nd Qtr 64.9 65.2 78.5
3rd Qtr 58.5 65.0 73.3
4th Qtr 54.5 66.9 68.8
------ ------ ------
For the year $246.8 $263.6 $301.9
====== ====== ======
Pulp
1st Qtr $ 10.3 $ 12.9 $ 13.4
2nd Qtr 10.3 10.2 12.0
3rd Qtr 7.9 12.7 8.5
4th Qtr 5.1 11.8 11.0
------ ------ ------
For the year $ 33.6 $ 47.6 $ 44.9
====== ====== ======
Other (including Food Service beginning in 1991)
1st Qtr $ 9.6 $ 12.1 $ 1.5
2nd Qtr 11.7 10.4 4.8
3rd Qtr 9.2 8.9 9.7
4th Qtr 7.6 10.0 7.8
------ ------ ------
For the year $ 38.1 $ 41.4 $ 23.8
====== ====== ======
</TABLE>
BUILDING PRODUCTS
The Building Products group manufactures a diversified line of construction and
commercial grade building materials including lumber, plywood, fiber products,
particleboard and gypsum wallboard. These products are produced at ten
locations in Texas, Louisiana, Oklahoma, Arkansas, Alabama and Georgia. Four
retail locations, which account for 13 percent of group net sales in 1993,
market building materials to contractors and retail customers with
approximately 16 percent of their revenues derived from sales of Company
manufactured products.
Record earnings of $99.1 million were achieved by the group in 1993,
an increase of $59.6 million, or two and one-half times the $39.5 million
reported in 1992. Much of the gain was experienced within the group's
wood-based operations as markets responded to increasing demand exacerbated by
the continued decline in West Coast timber supplies. As the year progressed,
job markets improved and relatively low mortgage interest rates prompted an
increasing number of buyers to make loan commitments. Housing starts for the
year of approximately 1.28 million units were up almost 6 percent over 1992 and
25 percent over 1991, and by mid-fourth quarter stood at a pace of 17 percent
above the year- earlier fourth period.
The following table provides information on sales volume and unit
sales for each business unit.
<TABLE>
<CAPTION>
BUILDING PRODUCTS 1993 1992 1991
- ----------------- ---- ---- ----
(in millions of board feet)
<S> <C> <C> <C>
UNIT SALES
Pine lumber 484 467 395
(in millions of square feet)
Fiber products 400 464 443
Particleboard 319 326 321
Plywood 265 250 253
Gypsum wallboard 782 621 601
NET SALES (in millions)
Pine lumber $153.8 $120.9 $ 87.6
Fiber products 62.9 55.8 48.2
Particleboard 81.3 70.5 60.7
Plywood 54.0 45.2 36.9
Gypsum wallboard 53.3 36.6 33.1
Retail distribution 60.0 53.5 42.2
Other 10.0 8.8 2.4
------ ------ ------
For the year $475.3 $391.3 $311.1
====== ====== ======
</TABLE>
The group's sawmills continued to benefit from earlier investments in
new technology and equipment with unit sales gaining 4 percent and 18 percent
in 1993 and 1992, respectively. With increasing domestic demand, prices moved
to much higher levels for the year-over-year comparisons, and by year-end
several products had surpassed peak first-quarter levels. With the declining
western resource, market share continues to shift to southern producers. Early
in 1993 a new "finger-jointing" operation began production, providing the
recovery of premium- grade lumber from trim waste and lower-grade products.
Also during the third quarter, new equipment was added at one operation which
improves lumber yields from small, crooked logs.
Plywood unit sales increased 6 percent over 1992, and demand for
specialty products, a significant portion of production, remained firm. As with
lumber, demand for commodity structural grade panels also advanced
year-over-year but not at the same pace due to the growing market share of
competitive oriented-strand board produced in the southeast. Exports of plywood
have steadily increased and represented 37 percent of all shipments in 1993. An
additional press and a state-of-the-art lay-up line were completed in early
1992. The mill had 265 million square feet of production in 1993, which was the
design capacity.
By-product wood chips produced by the lumber and plywood operations
are shipped to the Company's two east Texas paper mills, representing about 25
percent of their pine fiber requirements. Chips supplied to the fiber products
operation from lumber manufacturing represent over half of its fiber needs.
The strong demand for hardboard siding products continued well into
the fourth quarter of 1993 when the market began to correct for the growing
availability of competitive products. Insulation products, representing about
42 percent of fiber
25
<PAGE> 5
products shipments, were also active as housing starts increased and commercial
roofing markets gained strength. These positive market forces resulted in
record earnings for this business unit. A $3.5 million capital project was
completed which will significantly increase the capacity of TrimCraft, a line
of engineered lumber substitute products, which has gained market acceptance as
prices of traditional solid wood continue to rise.
Particleboard is produced primarily from dry by-products of lumber
manufacturing and is shipped principally to fabricators of kitchen cabinets and
ready-to-assemble furniture. During 1993, prices continued a quarter-to-quarter
gain as demand levels outpaced supply, resulting in record earnings for the
particleboard operations. Shipments in 1993 reflect a slight downturn in
comparison to 1992 as one operation increased its 1993 product mix to include
higher-margin items which have a slower production rate. Because of the
continued growth projected for southern particleboard, the Board of Directors
approved the construction of a $62 million particleboard facility to be located
in Hope, Arkansas. Scheduled for completion in early 1996, the plant will be
the Company's largest unit, adding 170 million square feet to capacity.
Gypsum wallboard markets strengthened through 1993, and both plants
operated at capacity after the first quarter. Shipments increased 26 percent
over 1992, and earnings were at the highest levels since 1987. Margins were
further enhanced by an increasing complement of specialty items in the product
mix.
TEMPLE-INLAND FINANCIAL SERVICES
The Company's Financial Services operations include a savings bank, mortgage
banking, real estate development and insurance. The following selected
financial information is provided to offer a detailed description of these
operations.
<TABLE>
<CAPTION>
TEMPLE-INLAND FINANCIAL SERVICES
SELECTED SEGMENT INFORMATION
Years ended December 31 1993 1992 1991
- ----------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
INCOME
Savings bank $ 45,158 $ 44,857 $ 41,283
Mortgage banking 19,962 20,915 11,880
Real estate (1,537) (7,630) (2,362)
Insurance 3,967 6,244 3,375
---------- ---------- ----------
Income before taxes
and accounting
change 67,550 64,386 54,176
Taxes on income 18,838 10,946 9,210
---------- ---------- ----------
Income before accounting
change 48,712 53,440 44,966
Cumulative effect of
accounting change 52,344 -- --
---------- ---------- ----------
Net income $ 101,056 $ 53,440 $ 44,966
========== ========== ==========
ASSETS
Savings bank $8,799,557 $7,629,699 $7,253,562
Mortgage banking 131,827 113,670 212,094
Real estate 224,689 245,799 232,115
Insurance 30,994 19,182 16,620
Other activities 13,941 13,944 476
Eliminations (67,755) (44,289) (190,331)
---------- ---------- ----------
Total assets $9,133,253 $7,978,005 $7,524,536
========== ========== ==========
LIABILITIES
Savings bank $8,415,256 $7,315,850 $6,948,191
Mortgage banking 97,232 82,480 194,121
Real estate 125,771 149,400 140,736
Insurance 27,070 17,499 14,057
Other activities 24,003 4,445 9,282
Eliminations (67,755) (44,289) (190,331)
---------- ---------- ----------
Total liabilities $8,621,577 $7,525,385 $7,116,056
========== ========== ==========
EQUITY
Savings bank $ 384,301 $ 313,849 $ 305,371
Mortgage banking 34,595 31,190 17,973
Real estate 98,918 96,399 91,379
Insurance 3,924 1,683 2,563
Other activities (10,062) 9,499 (8,806)
---------- ---------- ----------
Total equity $ 511,676 $ 452,620 $ 408,480
========== ========== ==========
</TABLE>
SAVINGS BANK
The Company's Savings Bank, Guaranty Federal Bank, F.S.B., conducts its
business through 124 banking centers located primarily in the eastern third of
Texas, including Houston, Dallas, San Antonio and Austin. The primary business
of the Savings Bank is to attract savings deposits from the public to invest in
loans secured by mortgages on residential and other real estate or
mortgage-backed securities.
26
<PAGE> 6
Presented below is selected financial information for the Savings Bank:
<TABLE>
<CAPTION>
SAVINGS BANK SUMMARIZED
FINANCIAL STATEMENT INFORMATION
Years ended December 31 1993 1992 1991
- ----------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
INCOME AND EXPENSES
Net interest income $ 135,393 $ 136,548 $ 120,392
Noninterest income 19,461 22,339 17,243
Noninterest expense 104,866 111,415 94,332
Income before taxes and
accounting change 45,158 44,857 41,283
AVERAGE BALANCE SHEET
Total earning assets 8,720,719 7,238,708 5,662,526
Mortgage-backed and
investment
securities 4,978,017 4,958,737 2,422,641
Loans receivable and
mortgage loans
held for sale 2,116,420 1,467,545 1,205,118
Securities purchased under
resell agreements 1,175,959 251,726 409,249
Covered assets 405,723 479,410 1,103,978
Receivables from FSLIC 5,200 71,940 579,610
Deposits 5,838,342 6,128,005 5,419,496
FHLB advances and other
borrowings 2,726,943 997,881 248,496
KEY RATIOS
Yield on earning assets 5.32% 6.72% 8.75%
Cost of funds 3.83% 4.91% 6.62%
Net spread 1.49% 1.81% 2.13%
</TABLE>
Net interest income for 1993 decreased $1.2 million from 1992.
Although average earning assets increased $1.5 billion during 1993, the Savings
Bank's net interest spread decreased 32 basis points, attributable to two
factors: (1) a shortening of the maturities of the investment portfolio in
anticipation of the acquisition of American Federal Bank, F.S.B. ("AFB") and
(2) spread compression of mortgage-backed securities indexed to the Federal
Home Loan Bank 11th District cost of funds ("COFI"). During 1993, COFI
decreased 72 basis points while the Savings Bank's cost of funds decreased only
51 basis points.
Net interest income for 1992 increased $16.2 million from 1991 which
was attributable to a rise in the average balance of interest earning assets.
In general, however, the declining interest rate environment during 1992
reduced asset yields and liability costs. Because the Savings Bank's net asset
yields declined faster than its cost of funds, the Savings Bank's interest rate
spread decreased 32 basis points in 1992. Lower yields in 1992 resulted from
the effect of declining market rates on repricing of adjustable rate assets and
from paydown of higher-yielding assets.
The Savings Bank's noninterest income is composed primarily of service
charges on deposits. Noninterest income in 1992 includes a $5.1 million gain
recognized from the sale of substantially all its fixed-rate mortgage-backed
securities. This sale was undertaken to allow the Savings Bank to reduce its
interest rate risk exposure and more effectively match the maturities of its
assets and liabilities.
With the decline in interest rates, the Savings Bank has experienced
decreases in deposits as customers transfer funds to other investment vehicles
in search of higher returns. The Savings Bank has maintained funding sources by
assuming deposits through acquisitions and by utilizing other borrowings,
principally securities sold under agreements to repurchase.
When the Company acquired Guaranty in 1988, $2.8 billion (almost 70
percent) of Guaranty's assets were composed of assets subject to yield
assistance and loss coverage and certain notes and other receivables. Including
assisted assets acquired from AFB, Covered Assets at December 31, 1993 total
$664 million, or 7.5 percent of the Savings Bank's total assets. Note F on page
41 contains additional information regarding assistance activity.
ACQUISITIONS
In November 1993, the Savings Bank purchased all of the outstanding stock of
AFB for $155.7 million. AFB was a federal savings bank headquartered in Dallas,
Texas with 30 banking centers in north and east Texas. To achieve operating
economies, six of these banking centers were closed December 31, 1993, and the
deposits were transferred to existing banking centers. Assets of AFB at
acquisition totaled approximately $1.3 billion, principally $750 million in
loans and $400 million in covered assets. In connection with the acquisition, a
$20 million escrow was established as recourse available to the Savings Bank
for certain post-closing claims it may have against the seller. See Note B on
page 39 for additional information.
On August 20, 1993, the Savings Bank signed a definitive agreement to
acquire certain assets and assume certain liabilities of First Federal Savings
Bank of San Antonio ("First Federal") for approximately $42 million, subject to
final adjustment. First Federal is a federal savings bank with ten banking
centers in central Texas. Assets to be acquired are estimated to total $400
million and will consist primarily of loans and short-term investments. The
transaction, subject to the approval of regulatory authorities, is expected to
close in the second quarter of 1994.
LIQUIDITY AND CAPITAL
The Savings Bank is required by the Office of Thrift Supervision ("OTS") to
maintain average daily balances of liquid assets and short-term liquid assets
in amounts equal to 5 percent and 1 percent, respectively, of net withdrawable
deposits and short-term borrowings. The Savings Bank's average daily liquidity
ratio for December 1993 was 7.5 percent.
The primary sources of funds for the Savings Bank are customer
deposits, Federal Home Loan Bank advances, securities sold under repurchase
agreements and principal repayments of mortgage-backed securities and loans.
The Savings Bank uses its funding sources to support current loan demand, to
fund deposit withdrawals, to repay borrowings and to maintain its liquidity.
OTS regulations require savings institutions to maintain certain
minimum levels of capital. The Savings Bank's regulatory capital exceeded all
applicable capital requirements at December 31,1993. Note M on page 43 contains
additional information concerning capital requirements, including capital
ratios of the Savings Bank.
27
<PAGE> 7
MORTGAGE BANKING
Mortgage banking activity is conducted through Temple-Inland Mortgage
Corporation, a full-service mortgage banker. The Company arranges financing of
single-family mortgage loans, sells the loans into the secondary market
(primarily FNMA, FHLMC and GNMA securities) and services the loans after the
sale.
Mortgage loan originations for 1993 were $4.8 billion compared with
$3.5 billion and $1.4 billion in 1992 and 1991, respectively. Mortgage loan
originations are generated through a national network of 61 offices in 21
states. In 1993, production operations were expanded to new markets in the
midwest and southeast and the mortgage loan servicing portfolio grew by 17
percent to a record high of $9.1 billion.
A summary of selected financial information for the years 1993, 1992
and 1991 is provided below.
<TABLE>
<CAPTION>
MORTGAGE BANKING
OPERATIONS SUMMARY
Years ended December 31 1993 1992 1991
- ----------------------- ---- ---- ----
(dollars in millions)
<S> <C> <C> <C>
Revenues $ 104 $ 82 $ 51
Income before taxes 20 21 12
Portfolio roll-forward:
Beginning servicing $ 7,746 $ 6,477 $ 3,270
Acquisition of CMB, Inc. -- -- 2,047
New loans added, net of
servicing released 3,302 2,516 1,677
Runoff (1,981) (1,247) (517)
------- -------- --------
Ending servicing $ 9,067 $ 7,746 $ 6,477
Portfolio growth rate 17.0% 19.6% 35.5%
Runoff factor 25.6% 19.3% 10.6%
Ending number of loans serviced 144,700 138,400 130,000
</TABLE>
REAL ESTATE GROUP
Real estate operations conducted by Lumbermen's Investment Corporation include
development of residential subdivisions as well as management and sale of
income properties. Land development projects include nine residential
subdivisions in Austin, San Antonio and Dallas, Texas. At year end, land
development inventory included 765 residential lots (680 under contract) and
4,561 acres of land. Lot sales for 1993 were 526 as compared to 487 in 1992 and
356 in 1991. Real estate activity has increased in the Company's primary
markets.
The Company owns 20 commercial properties including two hotels, eight
office buildings, three retail centers and seven parcels of commercial land.
Selected financial information related to these activities is shown
below.
<TABLE>
<CAPTION>
REAL ESTATE GROUP
OPERATIONS SUMMARY
Years ended December 31 1993 1992 1991
- ----------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
REVENUES:
Residential $ 8,056 $ 5,555 $ 4,197
Commercial 18,279 15,890 15,220
Interest and other 7,868 10,274 10,376
------- ------- -------
Subtotal 34,203 31,719 29,793
Sale of office building -- -- 4,741
------- ------- -------
$34,203 $31,719 $34,534
======= ======= =======
INCOME (LOSS) BEFORE TAXES:
Residential $(3,553) $(8,927) $(8,885)
Commercial 1,120 (722) 128
Interest and other 896 2,019 1,654
------- ------- -------
Subtotal (1,537) (7,630) (7,103)
Sale of office building -- -- 4,741
------- ------- -------
$(1,537) $(7,630) $(2,362)
======= ======= =======
</TABLE>
Shown below is the real estate group's pro rata share of
the assets, liabilities and equity of joint ventures in which it is a partner.
<TABLE>
<CAPTION>
REAL ESTATE GROUP
INVESTMENT IN JOINT VENTURES
Years ended December 31 1993 1992 1991
- ----------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
Assets $18,565 $31,737 $56,327
Liabilities (a) 17,512 32,808 53,127
Equity 1,053 (1,071) 3,200
</TABLE>
(a) Although the Company's pro rata share of joint venture notes payable
totals $15.0 million, the joint venture partners are in most instances
jointly and severally liable for notes payable. The gross balance of
these notes was $33.6 million at December 31, 1993. Where a venture
partner is jointly and severally liable for notes payable, the partner
also has rights against the other partners' interest in joint venture
assets if payments above the normal partnership percentage are
required.
28
<PAGE> 8
INSURANCE
Timberline Insurance Agency, one of the largest insurance agencies in Texas,
operates as a general agency providing a full range of insurance products
including automobile, homeowners, business insurance, annuities, and life and
health products. Timberline currently has offices in Austin, Baytown, Beaumont,
El Paso and San Antonio, Texas.
A summary of revenues and income before taxes for the years 1993, 1992
and 1991 is shown below.
<TABLE>
<CAPTION>
INSURANCE
OPERATIONS SUMMARY
ears ended December 31 1993 1992 1991
- ---------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
Revenues $21,052 $21,826 $14,499
Income before taxes $ 3,967 $ 6,244 $ 3,375
</TABLE>
ENVIRONMENTAL MATTERS
The Company is committed to protecting the health and welfare of its employees,
the public, and our environment and strives to maintain compliance with all
state and federal environmental regulations in a cost effective manner. In
recent modernization programs at some of its mills, most notably its mill at
Evadale, Texas, the Company has used state-of-the-art technology for its air
and water emissions. These forward-looking programs minimize the impact that
changing regulations have on capital expenditures for environmental compliance.
Future expenditures for environmental control facilities will depend
on changing laws and regulations and technological advances. Given these
uncertainties, the Company estimates that capital expenditures for
environmental purposes during the period 1994 through 1996 will average $15
million each year. In addition, the Company will spend approximately $15
million in 1994 to further reduce air emissions from its mill in Ontario,
California.
On December 17, 1993, the U.S. Environmental Protection Agency ("EPA")
published extensive proposed regulations governing air and water emissions from
the pulp and paper industry ("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 could
require modifications at several facilities. Some of these modifications can be
included in modernization projects that will have economic benefits to the
Company. The extent of such benefits can increase these investments, but
currently these expenditures are expected to range up to $200 million over the
next five years.
CAPITAL RESOURCES AND LIQUIDITY
The Company's financial condition continues to be strong. Internally generated
funds, existing credit facilities and the capacity to issue long-term debt are
sufficient to fund projected capital expenditures, to service existing debt, to
pay dividends and to meet normal working capital requirements.
A summary of capital expenditures is shown below.
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(in millions)
<S> <C> <C> <C>
CAPITAL EXPENDITURES
Container and containerboard $ 87.5 $214.9 $238.2
Bleached paperboard 200.5 87.9 103.4
Building products 26.1 16.1 15.3
Timber and timberlands 22.5 36.5 19.0
Other activities 3.7 3.3 2.4
------ ------ ------
Total manufacturing group $340.3 $358.7 $378.3
====== ====== ======
</TABLE>
Capital expenditures of approximately $490 million are projected for
1994. Commitments on construction projects totaled $244 million at the end of
1993.
Net interest expense incurred by the Parent Company is shown below.
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(in thousands)
<S> <C> <C> <C>
PARENT COMPANY INTEREST--NET
Interest expense $ 81,912 $ 72,255 $ 55,532
Interest income (446) (575) (6,482)
Capitalized interest (12,510) (24,320) (17,223)
-------- -------- --------
Interest expense--net $ 68,956 $ 47,360 $ 31,827
======== ======== ========
</TABLE>
Interest expense increased in 1993 and 1992 due to the higher levels
of debt outstanding, a decrease in the amount of capitalized interest and the
conversion of certain debt to longer-term maturities. Parent Company interest
paid during 1993, 1992 and 1991 was $80.9 million, $66.3 million and $51.5
million, respectively.
29
<PAGE> 9
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For The Year 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
- ------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues (1) $ 2,736 $ 2,713 $ 2,507 $2,401 $1,943 $1,814 $1,642 $1,343 $1,282 $1,299
Manufacturing net sales 2,101 2,075 1,898 1,892 1,894 1,774 1,603 1,296 1,243 1,263
Net income (1) (2) 117 147 138 232 207 199 141 81 85 103
Capital expenditures:
Manufacturing 340 359 378 324 260 219 139 103 184 130
Financial services 14 11 9 4 9 4 1 1 - -
Depreciation and depletion:
Manufacturing 191 167 158 140 126 112 94 79 66 63
Financial services 6 5 4 5 2 2 1 1 1 1
Earnings per share (1) (2) 2.11 2.65 2.51 4.20 3.75 3.58 2.34 1.32 1.40 1.69
Dividends per common share 1.00 .96 .88 .80 .58 .42 .35 .29 .26 .20
Average shares outstanding 55.5 55.5 55.2 55.4 55.3 55.7 60.3 61.1 60.8 60.6
Common shares outstanding
at year end 55.5 55.2 54.9 54.6 54.9 55.2 55.3 60.7 60.5 60.3
AT YEAR END
Total assets (3) $11,959 $10,766 $10,068 $7,834 $6,390 $2,247 $2,020 $1,894 $1,594 $1,510
Long-term debt:
Parent company 1,045 964 864 501 399 417 416 366 248 251
Financial services 76 99 76 94 30 25 30 25 14 13
Ratio of total debt to total
capitalization--parent
company 39% 38% 37% 28% 24% 29% 31% 28% 23% 24%
Shareholders' equity 1,700 1,633 1,532 1,439 1,259 1,096 927 929 864 793
------- ------- ------- ------- ------- ------- ------ ------ ------ ------
</TABLE>
COMMON STOCK PRICES AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
Price Range Price Range
--------------- ---------------
High Low Dividends High Low Dividends
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $52 1/2 $45 3/4 $ .25 $57 1/2 $49 1/8 $.24
Second Quarter 47 1/8 41 3/8 .25 55 1/2 45 .24
Third Quarter 45 3/4 40 1/2 .25 50 7/8 45 .24
Fourth Quarter 51 1/4 37 1/4 .25 54 1/4 43 7/8 .24
Year 52 1/2 37 1/4 1.00 57 1/2 43 7/8 .96
</TABLE>
(1) Includes operating results from consolidation of Guaranty Federal Bank,
F.S.B., beginning January 1, 1990.
(2) 1993 includes $50 million or $.90 per share from cumulative effect of
accounting changes.
(3) Includes Savings Bank assets from consolidation of Guaranty Federal Bank,
F.S.B., beginning January 1, 1990.
30
<PAGE> 10
NOTES TO THE PARENT COMPANY (TEMPLE-INLAND INC.)
SUMMARIZED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Parent Company's (Temple-Inland Inc.) summarized financial statements
include the accounts of Temple -Inland Inc. (the "Company") and its
manufacturing subsidiaries. The Financial Services group, including a savings
bank, mortgage banking and real estate development operations, are reflected in
the financial statements on the equity basis. Refer to pages 36 through 43 for
the Temple-Inland Financial Services summarized financial statements. All
material intercompany amounts and transactions have been eliminated. These
financial statements should be read in conjunction with the Temple-Inland Inc.
consolidated financial statements.
INVENTORIES
Inventories are stated at the lower of cost or market.
Cost of inventories amounting to $86.2 million in 1993 and $91.2
million in 1992 was determined by the last-in, first-out method (LIFO). The
cost of the remaining inventories of $171.9 million in 1993 and $157.0 million
in 1992 was determined principally by the first-in, first-out method (FIFO).
If the FIFO method of accounting had been applied to those inventories
which were costed on the LIFO method, inventories would have been $9.0 and
$10.7 million higher than reported at year end 1993 and 1992, respec tively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less allowances for accumulated
depreciation and depletion. Depreciation is generally provided on the
straight-line method based on estimated useful lives as follows:
Classification Estimated Useful Lives
- -------------- ----------------------
Buildings 15 to 40 years
Machinery and equipment:
Manufacturing and production equipment 3 to 20 years
Automobiles and aircraft 3 to 10 years
Office and other equipment 3 to 10 years
Certain properties are being depreciated based on operating hours
because they depreciate primarily through use rather than merely through
elapsed time.
Timberlands, including long-term timber harvesting rights, are stated
at cost, less accumulated cost of timber harvested. The portion of the cost of
timberlands attributed to standing timber is charged against income as timber
is cut at rates determined annually, based on the relationship of unamortized
timber costs to the estimated volume of recoverable timber. The costs of
seedlings and reforestation of timberlands are capitalized.
NOTE B - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
(in thousands)
<S> <C> <C>
Bank Loans--Weighted average
interest rate was 3.24% in 1993 $ 19,000 $ --
Commercial Paper--Weighted average
interest rate was 3.16% and 3.24%
during 1993 and 1992, respectively 52,500 6,500
8.375% Notes Payable due 1996 70,000 70,000
8.73% to 9.0% Notes Payable due
1996 to 1998 200,000 200,000
9.0% Notes Payable due 2001 200,000 200,000
8.125% to 8.38% Notes Payable due 2006 100,000 100,000
7.25% Notes Payable due 2004 100,000 100,000
8.25% Debentures due 2022 150,000 150,000
Revenue Bonds due 2014--Average
interest rate was 2.19% and 2.73%
during 1993 and 1992, respectively 34,500 34,500
8% Revenue Bonds due through 2009 11,665 11,665
Other Revenue Bonds due through 2028,
weighted average interest rate of
2.61% and 3.10% as of year end 1993
and 1992, respectively 95,289 76,440
Other indebtedness due through 2000,
weighted average interest rate of
10.24% and 9.87% as of year end 1993
and 1992, respectively 11,821 15,216
---------- --------
$1,044,775 $964,321
</TABLE>
At January 1, 1994, $52.5 million in commercial paper and $19.0
million in bank loans were outstanding. These borrowings are supported by
multi-year revolving credit agreements with banks and, accordingly, are
classified as long-term debt. The credit agreements are for a total of $500
million with final maturities as of January 1996, and are available for general
corporate use.
At year end 1993, property and equipment of approximately $44.9
million were subject to liens in connection with $61.2 million of debt.
Based on the Company's incremental borrowing rate for loans, notes and
debentures with similar terms and maturities, the fair value of long-term debt
is $1.2 billion on January 1, 1994.
Aggregate maturities of the Parent Company's long-term debt during the
next five years are as follows (in millions): 1994-$3.3; 1995-$11.4;
1996-$237.2; 1997-$5.7; and 1998-$90.8. For an analysis of net interest
expense, see page 29.
35
<PAGE> 11
Covered Assets managed under both the Guaranty and AFB assistance
agreements are summarized as follows:
<TABLE>
<CAPTION>
At year end 1993 1992
- ----------- ---- ----
(in thousands)
<S> <C> <C>
Loans $421,660 $267,475
Investments in real estate 221,292 72,761
Advances to and investments in
subsidiaries 15,120 48,342
Other assets 6,185 5,299
-------- --------
$664,257 $393,877
======== ========
</TABLE>
NOTE G - DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
At year end 1993 1992
- ----------- ---- ----
Rate Amount Rate Amount
---- ------ ---- -------
(dollars in thousands)
<S> <C> <C> <C> <C>
Noninterest bearing demand --% $ 224,965 --% $ 169,896
Interest bearing demand 2.42% 1,518,860 2.77% 1,276,336
Savings deposits 2.50% 224,764 3.00% 194,269
Time deposits 4.91% 4,377,691 5.33% 3,999,835
---- ---------- ---- ----------
6,346,280 5,640,336
Deposit premium 16,023 4,074
---------- ----------
$6,362,303 $5,644,410
========== ==========
</TABLE>
Scheduled maturities of time deposits outstanding at December 31, 1993,
are as follows:
<TABLE>
<CAPTION>
Time deposits $100,000 Less than
in amounts of: or more $100,000 Total
- -------------- ------- -------- -----
(in thousands)
<S> <C> <C> <C>
3 months or less $ 91,444 $ 757,821 $ 849,265
Over 3 through 6 months 79,723 642,964 722,687
Over 6 through 12 months 96,864 805,136 902,000
Over 12 months 275,393 1,628,346 1,903,739
-------- ---------- ----------
$543,424 $3,834,267 $4,377,691
======== ========== ==========
</TABLE>
The fair value of time deposits of approximately $4.5 billion and $4.1
billion at December 31, 1993 and 1992, respectively, is estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates of similar maturities. The fair values for other
deposits, which have no defined maturities, are equal to the amounts payable on
demand (i.e., their carrying amounts).
A summary of interest paid by the Group is shown below:
<TABLE>
<CAPTION>
For the year 1993 1992 1991
- ------------ ---- ---- -----
(in thousands)
<S> <C> <C> <C>
Interest on deposits $241,133 $312,699 $360,016
Interest on borrowed funds 99,182 44,358 36,646
-------- -------- --------
Total Interest Paid $340,315 $357,057 $396,662
======== ======== ========
</TABLE>
NOTE H - SECURITIES SOLD UNDER
REPURCHASE AGREEMENTS
Securities sold under repurchase agreements were delivered to brokers/dealers,
who retained such securities as collateral for the borrowings and have agreed
to resell the same securities back to the Group at the maturities of the
agreements. The agreements generally mature within one to thirty days.
Information concerning borrowings under repurchase agreements is
summarized as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
At year-end:
Weighted average interest rate 3.25% 3.50%
Mortgage-backed securities pledged
to secure the agreements:
Carrying value $1,641,535 $1,524,505
Estimated market value 1,629,628 1,517,704
During the year:
Average balance 2,734,216 972,500
Maximum month-end balance 2,437,191 1,571,406
</TABLE>
NOTE I - ADVANCES FROM FEDERAL HOME LOAN BANK
Pursuant to collateral agreements with the Federal Home Loan Bank, advances are
secured by a blanket floating lien on the Savings Bank's assets. The weighted
average interest rate of the advances was 5.02 percent and 8.62 percent at
December 31, 1993 and 1992, respectively. At December 31, 1993, the advances
have calendar year maturity dates as follows (in millions): 1996-$100.0;
1997-$2.4; 1998-$2.6; 1999 and thereafter-$51.7. The fair value of the advances
at December 31, 1993 and 1992 is approximately $163.5 million and $65.2
million, respectively, and is estimated using discounted cash flow analyses,
based on current rates for similar types of borrowing arrangements.
NOTE J - OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
At year end 1993 1992 1991
- ----------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
Short-term borrowings $ -- $ -- $ 34,513
Long-term debt at varying
rates which approximate
prime, secured primarily
by real estate 76,250 99,111 76,502
------- ------- --------
$76,250 $99,111 $111,015
======= ======= ========
</TABLE>
Aggregate maturities of the Group's long-term debt during the next five
years are as follows (in millions): 1994-$8.6; 1995-$11.0; 1996-$35.8;
1997-$4.8; 1998-$.9; 1999 and thereafter-$15.2.
42
<PAGE> 12
CONSOLIDATED STATEMENTS OF INCOME
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the year 1993 1992 1991
- ------------ ---- ---- ----
(in thousands)
<S> <C> <C> <C>
REVENUES
Manufacturing net sales . . . . . . . . . . . . . . . . . . . $2,100,705 $2,075,352 $1,898,233
Financial services revenues . . . . . . . . . . . . . . . . . 635,153 637,831 608,936
---------- ---------- ----------
2,735,858 2,713,183 2,507,169
---------- ---------- ----------
COSTS AND EXPENSES
Manufacturing costs and expenses . . . . . . . . . . . . . . 2,005,858 1,917,602 1,752,551
Financial services expenses . . . . . . . . . . . . . . . . . 567,603 573,445 554,760
---------- ---------- ----------
2,573,461 2,491,047 2,307,311
---------- ---------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . 162,397 222,136 199,858
Parent company interest--net . . . . . . . . . . . . . . . . (68,956) (47,360) (31,827)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,773 2,224 (1,262)
---------- ---------- ----------
INCOME BEFORE TAXES AND ACCOUNTING CHANGES . . . . . . . . . . . 96,214 177,000 166,769
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . 28,864 30,090 28,351
---------- ---------- ----------
INCOME BEFORE ACCOUNTING CHANGES . . . . . . . . . . . . . . . . 67,350 146,910 138,418
Cumulative effect of accounting changes . . . . . . . . . . . 50,000 -- --
---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 117,350 $ 146,910 $ 138,418
========== ========== ==========
EARNINGS PER SHARE:
Before Accounting Changes . . . . . . . . . . . . . . . . . . $ 1.21 $ 2.65 $ 2.51
Effect of Accounting Changes . . . . . . . . . . . . . . . . .90 -- --
---------- ---------- ----------
Earnings Per Share . . . . . . . . . . . . . . . . . . . . . $ 2.11 $ 2.65 $ 2.51
========== ========== ==========
</TABLE>
See the notes to the consolidated financial statements.
44
<PAGE> 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the year 1993 1992 1991
- ------------ ---- ---- ----
(in thousands)
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATIONS
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 117,350 $ 146,910 $ 138,418
Adjustments to reconcile net income to net cash:
Cumulative effect of accounting changes . . . . . . . (50,000) -- --
Depreciation and depletion . . . . . . . . . . . . . . 196,853 172,312 161,584
Deferred taxes and tax credits . . . . . . . . . . . . (2,488) 19,907 5,209
Amortization and accretion . . . . . . . . . . . . . . 12,936 22,863 6,207
Receivable from FSLIC Resolution Fund . . . . . . . . (993) 119,317 27,772
Receivables . . . . . . . . . . . . . . . . . . . . . 15,575 (2,122) 9,681
Inventories . . . . . . . . . . . . . . . . . . . . . (183,849) (215,117) (100,753)
Accounts payable and accrued expenses . . . . . . . . 49,175 22,683 36,651
Other . . . . . . . . . . . . . . . . . . . . . . . . 157,345 65,752 (61,573)
----------- ----------- -----------
311,904 352,505 223,196
----------- ----------- -----------
CASH PROVIDED BY (USED FOR) INVESTMENTS
Capital expenditures . . . . . . . . . . . . . . . . . . (354,351) (369,743) (387,356)
Sale of property and equipment, net . . . . . . . . . . . 18,659 11,688 12,051
Purchases of investments . . . . . . . . . . . . . . . . (295,317) (2,239,355) (3,480,172)
Maturities of investments . . . . . . . . . . . . . . . . 1,156,378 1,306,135 421,033
Proceeds from sales of investments and loans . . . . . . 24,148 129,386 161,147
Loans originated net of principal collected . . . . . . . (669,741) (135,413) (223,209)
Reduction in Covered Assets . . . . . . . . . . . . . . . 126,602 472,843 575,233
Repayment of FSLIC Resolution Fund notes . . . . . . . . -- -- 1,063,648
Savings bank acquisitions . . . . . . . . . . . . . . . . (76,225) -- 2,923,716
Manufacturing acquisitions, net . . . . . . . . . . . . . -- (6,706) (27,972)
Mortgage banking acquisition . . . . . . . . . . . . . . -- -- (21,226)
Investment in financial services . . . . . . . . . . . . -- -- (15,100)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 4,628 (138) 7,787
----------- ----------- -----------
(65,219) (831,303) 1,009,580
----------- ----------- -----------
CASH PROVIDED BY (USED FOR) FINANCING
Additions to debt . . . . . . . . . . . . . . . . . . . . 132,035 308,686 777,099
Payments of debt . . . . . . . . . . . . . . . . . . . . (87,215) (207,686) (506,454)
Net increase (decrease) in short-term borrowings . . . . 110,882 1,273,782 (414,744)
Purchase of stock for treasury . . . . . . . . . . . . . (3,319) (2,326) (5,115)
Cash dividends paid to shareholders . . . . . . . . . . . (55,341) (52,940) (48,236)
Net decrease in deposits . . . . . . . . . . . . . . . . (310,120) (890,591) (1,047,313)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 6,571 3,220 3,522
(206,507) 432,145 (1,241,241)
----------- ----------- -----------
Net increase (decrease) in cash . . . . . . . . . . . . . . . 40,178 (46,653) (8,465)
Cash at beginning of year . . . . . . . . . . . . . . . . . . 124,738 171,391 179,856
----------- ----------- -----------
Cash at end of year . . . . . . . . . . . . . . . . . . . . . $ 164,916 $ 124,738 $ 171,391
=========== =========== ===========
</TABLE>
See the notes to the consolidated financial statements.
45
<PAGE> 14
CONSOLIDATING BALANCE SHEETS
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
Parent Financial
At year end 1993 Company Services Consolidated
- ---------------- ------- -------- ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,616 $ 156,300 $ 164,916
Investments . . . . . . . . . . . . . . . . . . . . . . . -- 4,407,258 4,407,258
Covered assets . . . . . . . . . . . . . . . . . . . . . -- 664,257 664,257
Loans receivable . . . . . . . . . . . . . . . . . . . . -- 2,755,352 2,755,352
Trade and other receivables . . . . . . . . . . . . . . . 198,542 -- 198,542
Inventories . . . . . . . . . . . . . . . . . . . . . . . 258,066 630,110 888,176
Property and equipment . . . . . . . . . . . . . . . . . 2,346,135 37,405 2,383,540
Other assets . . . . . . . . . . . . . . . . . . . . . . 104,831 482,571 497,219
Investment in affiliates . . . . . . . . . . . . . . . . 487,578 -- --
---------- ---------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $3,403,768 $9,133,253 $11,959,260
========== ========== ===========
LIABILITIES
Deposits . . . . . . . . . . . . . . . . . . . . . . . . $ -- $6,362,303 $ 6,362,303
Securities sold under repurchase
agreements and Federal Home Loan
Bank advances . . . . . . . . . . . . . . . . . . . . -- 1,724,762 1,724,762
Other liabilities . . . . . . . . . . . . . . . . . . . . 360,966 458,262 812,214
Long-term debt . . . . . . . . . . . . . . . . . . . . . 1,044,775 76,250 1,121,025
Deferred income taxes . . . . . . . . . . . . . . . . . . 175,870 -- 116,799
Postretirement benefits . . . . . . . . . . . . . . . . . 121,977 -- 121,977
---------- ---------- -----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . $1,703,588 $8,621,577 $10,259,080
---------- ---------- -----------
SHAREHOLDERS' EQUITY
Preferred stock--par value $1 per share: authorized
25,000,000 shares; none issued . . . . . . . . . . . . --
Common stock--par value $1 per share: authorized
200,000,000 shares; issued 61,389,552 shares
including shares held in the treasury . . . . . . . . 61,390
Additional paid-in capital . . . . . . . . . . . . . . . 296,893
Retained earnings . . . . . . . . . . . . . . . . . . . . 1,482,093
---------- ---------- -----------
1,840,376
Cost of shares held in the treasury: 5,908,173 shares . . (140,196)
---------- ---------- -----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . 1,700,180
---------- ---------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . $11,959,260
========== ========== ===========
</TABLE>
See the notes to the consolidated financial statements.
46
<PAGE> 15
CONSOLIDATING BALANCE SHEETS
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
Parent Financial
At year end 1992 Company Services Consolidated
- ---------------- ------- --------- ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,115 $ 117,623 $ 124,738
Investments . . . . . . . . . . . . . . . . . . . . . . . -- 5,264,912 5,264,912
Covered assets . . . . . . . . . . . . . . . . . . . . . -- 393,877 393,877
Loans receivable . . . . . . . . . . . . . . . . . . . . -- 1,343,279 1,343,279
Trade and other receivables . . . . . . . . . . . . . . . 214,117 -- 214,117
Inventories . . . . . . . . . . . . . . . . . . . . . . . 248,246 461,211 709,457
Property and equipment . . . . . . . . . . . . . . . . . 2,201,675 26,340 2,228,015
Other assets . . . . . . . . . . . . . . . . . . . . . . 115,627 370,763 487,110
Investment in affiliates . . . . . . . . . . . . . . . . 460,366 -- --
---------- ---------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $3,247,146 $7,978,005 $10,765,505
========== ========== ===========
LIABILITIES
Deposits . . . . . . . . . . . . . . . . . . . . . . . . $ -- $5,644,410 $ 5,644,410
Securities sold under repurchase
agreements and Federal Home Loan
Bank advances . . . . . . . . . . . . . . . . . . . . -- 1,517,284 1,517,284
Other liabilities . . . . . . . . . . . . . . . . . . . . 318,825 256,230 568,029
Long-term debt . . . . . . . . . . . . . . . . . . . . . 964,321 99,111 1,063,432
Deferred income taxes . . . . . . . . . . . . . . . . . . 331,361 8,350 339,711
---------- ---------- -----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . $1,614,507 $7,525,385 $ 9,132,866
---------- ---------- -----------
SHAREHOLDERS' EQUITY
Preferred stock--par value $1 per share: authorized
25,000,000 shares; none issued . . . . . . . . . . . . --
Common stock--par value $1 per share: authorized
200,000,000 shares; issued 61,389,552 shares
including shares held in the treasury . . . . . . . . 61,390
Additional paid-in capital . . . . . . . . . . . . . . . 295,369
Retained earnings . . . . . . . . . . . . . . . . . . . . 1,420,084
---------- ---------- -----------
1,776,843
Cost of shares held in the treasury: 6,138,884 shares . . (144,204)
---------- ---------- -----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . 1,632,639
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . $10,765,505
========== ========== ===========
</TABLE>
See notes to the consolidated financial statements.
Certain amounts have been reclassified to conform with current year's
classification. 47
<PAGE> 16
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
------- -------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 29, 1990 . . . . . . . . . . . . . . . . $61,390 $298,188 $1,235,932 $(156,194)
Net income . . . . . . . . . . . . . . . . . . . . . . . -- -- 138,418 --
Dividends paid on common stock--
$.88 per share . . . . . . . . . . . . . . . . . . . . -- -- (48,236) --
Stock issued for stock plans--
450,944 shares reissued from
treasury at cost . . . . . . . . . . . . . . . . . . . -- (3,283) -- 10,439
Stock reacquired for treasury--
126,318 shares at cost . . . . . . . . . . . . . . . . -- -- -- (5,115)
------- -------- ---------- ---------
BALANCE AT DECEMBER 28, 1991 . . . . . . . . . . . . . . . . $61,390 $294,905 $1,326,114 $(150,870)
------- -------- ---------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . -- -- 146,910 --
Dividends paid on common stock--
$.96 per share . . . . . . . . . . . . . . . . . . . . -- -- (52,940) --
Stock issued for stock plans--
384,192 shares reissued from
treasury at cost . . . . . . . . . . . . . . . . . . . -- 464 -- 8,992
Stock reacquired for treasury--
47,431 shares at cost . . . . . . . . . . . . . . . . -- -- -- (2,326)
------- -------- ---------- ---------
BALANCE AT JANUARY 2, 1993 . . . . . . . . . . . . . . . . . $61,390 $295,369 $1,420,084 $(144,204)
------- -------- ---------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . -- -- 117,350 --
Dividends paid on commonstock--
$1.00 per share . . . . . . . . . . . . . . . . . . . -- -- (55,341) --
Stock issued for stock plans--
310,088 shares reissued from
treasury at cost . . . . . . . . . . . . . . . . . . . -- 1,524 -- 7,327
Stock reacquired for treasury--
79,377 shares at cost . . . . . . . . . . . . . . . . -- -- -- (3,319)
------- -------- ---------- ---------
BALANCE AT JANUARY 1, 1994 . . . . . . . . . . . . . . . . . $61,390 $296,893 $1,482,093 $(140,196)
======= ======== ========== ==========
</TABLE>
See the notes to the consolidated financial statements.
48
<PAGE> 17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements are prepared and presented in accordance
with generally accepted accounting principles and with current financial
reporting requirements. However, because certain assets and liabilities are in
separate corporate entities, the consolidated assets are not available to
satisfy all consolidated liabilities.
The consolidated financial statements include the accounts of
Temple-Inland Inc. (the "Company") and all subsidiaries in which the Company
has more than a 50 percent equity ownership. All material intercompany amounts
and transactions have been eliminated.
Included as an integral part of the consolidated financial statements are
separate summarized financial statements and notes for the Company's primary
business groups as well as the significant accounting policies unique to each
group.
EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of shares
outstanding, including common stock equivalents, during the period. The
weighted average shares outstanding was 55,528,000, 55,535,000 and 55,248,000
in 1993, 1992 and 1991, respectively.
NOTE B - STOCK OPTION AND PURCHASE PLANS
The Company has established stock option plans for key employees and directors.
The plans provide for the granting of incentive stock options and/or
nonqualified stock options, and permit the grant of stock appreciation rights
with all or part of any options so granted.
Options for 741,379, 733,501 and 854,689 shares were exercisable at year
end 1993, 1992 and 1991, respectively. An additional 1,990,000, 1,262,665 and
1,427,931 shares of common stock were available for grants at year end 1993,
1992 and 1991, respectively.
A summary of activity under the option plans is presented below:
Common Stock
------------
Number Price Range
of Shares Per Share
--------- ---------
Outstanding at December 29, 1990 1,802,664 $ 8-$33
Granted 283,146 $16-$46
Exercised (525,345) $ 8-$33
Forfeited (32,466) $22-$36
--------- -------
Outstanding at December 28, 1991 1,527,999 $ 8-$46
Granted 204,519 $36-$54
Exercised (359,972) $ 8-$36
Forfeited (41,287) $22-$54
--------- -------
Outstanding at January 2, 1993 1,331,259 $12-$54
Granted 288,312 $37-$51
Exercised (213,043) $15-$36
Forfeited (12,072) $28-$54
--------- -------
Outstanding at January 1, 1994 1,394,456 $12-$54
========= =======
Additionally, a restricted stock plan provides for a maximum of 300,000
shares of common stock to be reserved for awards at the discretion of the Board
of Directors. At year end 1993, awards of 106,463 shares of common stock were
outstand ing at an average price of $43.64 per share.
The Company has savings and stock purchase plans which permit
participating employees to invest in the Company's common stock and other
funds.
In February 1994, options to purchase 267,696 shares of stock at an
average price of $52.15 were granted, and 33,868 were awarded under the
restricted stock plan.
NOTE C - PENSION PLANS
The Company and its subsidiaries have several pension plans covering
substantially all employees. Plans covering salaried and nonunion hourly
employees provide benefits based on compensation and years of service, while
union hourly plans are based on negotiated benefits and years of service. The
Company's policy is to fund amounts as are necessary on an actuarial basis to
provide assets sufficient to meet the benefits to be paid to plan members in
accordance with the requirements of ERISA.
A summary of the components of net pension cost in 1993, 1992 and 1991
follows:
1993 1992 1991
---- ---- ----
CHARGES (CREDITS) (in millions)
Service cost--benefits earned
during the period $ 9.6 $ 9.5 $ 9.2
Interest cost on projected
benefit obligation .7 24.7 23.3
Actual return on plan assets (59.0) (28.4) (76.1)
Net amortization and deferral .3 (10.1) 45.6
------- ------ ------
Net pension (credit) charge $ (4.4) $ (4.3) $ 2.0
======= ====== ======
49
<PAGE> 18
The following assumptions were used to measure net periodic pension cost
for the defined benefit pension plans:
For the years 1993 1992 1991
- ------------- ---- ---- ----
Discount rate 7.25% 8.50% 9.00%
Expected long-term rate of return 9.00% 9.00% 9.00%
Average increase in compensation
levels 4.25% 5.50% 6.00%
==== ==== ====
The impact of lowering the discount rate will not have a material effect
on future earnings. The status of employee pension benefit plans at year end
1993 and 1992 is summarized below:
1993 1992
---- ----
(in millions)
Actuarial present value of benefit obligations:
Vested benefits $ 327.2 $ 235.3
Nonvested benefits 29.5 23.2
------- -------
Accumulated benefit obligation $ 356.7 $ 258.5
------- -------
Projected benefit obligation for
service rendered to date $(389.6) $(302.0)
Plan assets at fair value, primarily
stocks and bonds 435.0 393.2
Plan assets in excess of projected
benefit obligation 45.4 91.2
Prior service cost not yet recognized in net
periodic pension cost (.2) (.9)
Unrecognized net (gain) loss from past
experience different from that assumed 23.8 (21.9)
Unrecognized net asset at beginning of
period, less amortization to date (31.4) (35.1)
------- -------
Net pension asset included in the
balance sheet $ 37.6 $ 33.3
======= =======
The assets of the plans at January 1994 include 380,998 shares of common
stock of the Company having a market value of $19.2 million at that date.
NOTE D - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In 1993 the Company adopted FASB Statement No. 106, "Employer Accounting for
Postretirement Benefits Other than Pensions". The Company elected to
immediately recognize the cumulative effect of the change in accounting for
postretirement benefits of $75 million ($115 million liability net of a
deferred tax asset of $40 million), or $1.35 per share, which represents the
accumulated postretirement benefit obligation ("APBO") existing at adoption.
The Company provides these benefits to eligible salaried and hourly employees
who reach retirement age while employed by the Company.
Summary information on the Company's plan as of January 1, 1994 is as
follows (in millions):
Accumulated Postretirement Benefit Obligation
- ---------------------------------------------
Retirees $ 64.1
Active participants, eligible to retire 7.9
All other participants 31.3
------
Accrued postretirement benefit cost 103.3
Plus unrecognized net gains 18.6
------
Postretirement benefit liability $121.9
======
The components of net postretirement benefit costs for 1993 are as follows:
Service costs for benefits $ 1.7
Interest cost 9.2
------
Net postretirement charge $ 10.9
======
The discount rate used in determining the APBO as of January 1, 1994 was
7.25 percent. The assumed health care cost trend rate used in measuring the
APBO was 12 percent in 1993, grading down to 6.75 percent in years 2007 and
later. The assumptions at adoption included an 8 percent discount rate and
health care trend rates beginning at 14 percent and declining to 8 percent in
2004 and thereafter. If the health care cost trend rate assumptions were
increased by one percent, the APBO as of January 1, 1994 would be increased by
10 percent. The effect of the change on the components of service cost and
interest costs of the net periodic postretirement costs for 1993 would be an
increase of 11 percent.
NOTE E - TAXES ON INCOME
Taxes on income from continuing operations consisted of the following:
Current Deferred
------- --------
(in thousands)
1993
Federal $ 67,879 $ (45,086)
Investment tax credit deferred -- (3,005)
State and other 9,076 --
-------- ---------
$ 76,955 $ (48,091)
======== =========
1992
Federal $ 17,517 $ 10,038
Investment tax credit deferred -- (3,482)
State and other 6,017 --
----- --
$ 23,534 $ 6,556
======== =========
1991
Federal $ 23,447 $ 7,257
Investment tax credit deferred -- (4,154)
State and other 2,323 (522)
-------- ---------
$ 25,770 $ 2,581
======== =========
50
<PAGE> 19
Significant components of the Company's consolidated deferred tax assets
and liabilities as of January 1, 1994 are as follows:
(in thousands)
DEFERRED TAX LIABILITIES:
Depreciation $ 234,444
Depletion 38,953
Pensions 12,286
---------
Total deferred tax liabilities 285,683
---------
DEFERRED TAX ASSETS:
Alternative minimum tax credits 128,619
Assets with excess tax basis 115,500
Net operating loss carryforwards 102,059
OPEB obligations 42,665
Other 11,541
---------
Total deferred tax assets 400,384
Valuation allowance for deferred tax assets (231,500)
---------
Net deferred tax assets 168,884
---------
Net deferred tax liabilities $ 116,799
=========
The components of the provision for deferred income taxes were as follows:
1992 1991
---- ----
(in thousands)
Depreciation $15,703 $ 14,882
Investment tax credits (3,482) (4,154)
Pension expense 1,238 1,645
Other employee benefit plans (606) 2,060
Other--net (6,297) (11,852)
------- --------
$ 6,556 $ 2,581
======= ========
The differences between the consolidated effective income tax rate and the
federal statutory income tax rates include the following:
1993 1992 1991
---- ---- ----
(in thousands)
Taxes on income at
statutory rate $ 33,675 $ 60,180 $ 56,701
Book benefit of FSLIC
assistance and other
permanent items (10,882) (32,625) (26,519)
Investment tax credits (3,005) (3,482) (4,154)
State and foreign taxes 9,076 6,017 2,323
-------- -------- --------
$ 28,864 $ 30,090 $ 28,351
======== ======== ========
Effective January 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes", whereby the Company is required to adopt the
liability method for computing deferred income taxes.
The cumulative effect of adopting FASB Statement No. 109 as of January
1993 increased net earnings by $125 million, or $2.25 per share. As permitted
under the new rules, prior years' financial statements have not been restated.
Income tax payments, net of refunds received, were $19 million, $(2)
million and $3 million during 1993, 1992 and 1991, respectively.
Investment tax credits were deferred and are being amortized as a
reduction of income tax expense over the estimated useful lives of the related
assets.
Temple-Inland and Guaranty have net operating loss carryforwards which if
utilized could result in tax savings of $64 million and $38 million,
respectively, at December 1993. If unused, these carryforwards expire through
the year 2006. The realization of Guaranty's loss carryforwards is limited to
the future taxable income of Guaranty. The Company's alternative minimum tax
credits may be carried forward indefinitely.
As a result of the Omnibus Budget Reconciliation Act of 1993, the Company
will pay the government $45 million in 1994 for 1991 and 1992 deductions that
this legislation eliminated. This payment will have no impact on future net
income and the Company will continue to receive other benefits from its
ownership of Guaranty that will reduce its 1994 cash tax payments.
NOTE F - BUSINESS SEGMENT INFORMATION
Refer to "Business Segments" on page 23 for information relating to Revenues
and Income Before Taxes, and page 29 for information relating to Capital
Expenditures for the principal segments of business for the three years 1993,
1992 and 1991.
Additional business segment information is presented below:
For the year 1993 1992 1991
- ------------ ---- ---- ----
(in millions)
IDENTIFIABLE ASSETS
Container and containerboard $ 1,575.7 $ 1,615.2 $ 1,463.7
Bleached paperboard 523.2 450.7 393.8
Building products 300.0 216.8 203.0
Timber and timberlands 453.7 419.8 382.8
Corporate and other activities 63.6 84.3 109.7
--------- --------- ---------
2,916.2 2,786.8 2,553.0
Financial services 9,133.3 7,978.7 7,515.5
Reclassifications and eliminations (90.2) -- --
--------- --------- ---------
TOTAL $11,959.3 $10,765.5 $10,068.5
========= ========= =========
DEPRECIATION AND DEPLETION
Container and containerboard $ 112.5 $ 97.5 $ 87.4
Bleached paperboard 40.1 32.1 29.9
Building products 22.6 22.7 22.4
Timber and timberlands 12.7 12.0 15.1
Other activities 3.2 3.2 2.9
--------- --------- ---------
191.1 167.5 157.7
Financial services 5.8 4.8 3.9
--------- --------- ---------
TOTAL $ 196.9 $ 172.3 $ 161.6
========= ======== ========
51
<PAGE> 20
NOTE G - SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Selected quarterly financial results for the years 1993 and 1992 are summarized
below:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in millions except per share amounts)
<S> <C> <C> <C> <C>
1993
Total revenues $682.8 $702.6 $681.0 $669.4
Manufacturing net sales 536.7 543.7 518.6 501.7
Manufacturing gross profit 87.7 76.6 67.3 62.1
Financial services
operating income
before taxes and
accounting change 17.0 18.5 16.5 15.5
Net income:
Net income before
accounting changes 28.0 20.9 11.4 7.0
Cumulative effect of
accounting changes 50.0 -- -- --
Net income 78.0 20.9 11.4 7.0
Earnings per share:
Before accounting changes .50 .38 .21 .12
------ ------ ------ ------
Effect of accounting
changes .90 -- -- --
------ ------ ------ ------
Earnings per Share 1.40 .38 .21 .12
====== ====== ====== ======
1992
Total revenues $658.0 $684.4 $672.2 $698.6
Manufacturing net sales 485.5 523.5 521.7 544.7
Manufacturing gross profit 82.0 97.9 87.9 78.8
Financial services
operating income
before taxes 19.2 18.0 16.2 11.0
Net income 34.8 47.7 39.2 25.2
Earnings per share .63 .85 .71 .46
====== ====== ====== ======
</TABLE>
NOTE H - SHAREHOLDER RIGHTS PLAN
During 1989, the Board of Directors adopted a Shareholder Rights Plan in which
one preferred stock purchase right ("the Right") was declared as a dividend for
each common share outstanding. Each one-half Right entitles shareholders to
purchase, under certain conditions, one-hundredth of a share of newly issued
Series A Junior Participating Preferred Stock at an exercise price of $200. The
Rights will be exercisable only if a person or group acquires beneficial
ownership of 20 percent or more of the common shares or commences a tender or
exchange offer, upon consummation of which such person or group would
beneficially own 25 percent or more of the common shares. The Company will
generally be entitled to redeem the Rights at $.01 per Right at any time until
the 10th business day following public announcement that a 20 percent position
has been acquired. The Rights will expire on February 20, 1999.
NOTE I - COMMITMENTS AND CONTINGENCIES
There are pending against the Company and its subsidiaries lawsuits, claims and
environmental matters arising in the regular course of business.
In the opinion of management, recoveries, if any, by plaintiffs or
claimants that may result from the foregoing litigation and claims will not be
material in relation to the consolidated financial position of the Company and
its subsidiaries.
See page 29 for a discussion of commitments on construction projects.
52
<PAGE> 21
REPORT OF MANAGEMENT
MANAGEMENT REPORT ON FINANCIAL STATEMENTS
Management has prepared and is responsible for the Company's financial
statements, including the notes thereto. They have been prepared in accor dance
with generally accepted accounting principles and necessarily include amounts
based on judgments and estimates by management. All financial information in
this annual report is consistent with that in the financial statements.
The Company maintains internal accounting control systems and related
policies and procedures designed to provide reasonable assurance that assets
are safeguarded, that trans actions are executed in accordance with manage
ment's authorization and properly recorded, and that accounting records may be
relied upon for the preparation of financial statements and other financial
information. The design, monitoring, and revision of internal account ing
control systems involve, among other things, management's judgment with respect
to the relative cost and expected benefits of specific control measures. The
Company also maintains an internal auditing function which evaluates and
formally reports on the adequacy and effectiveness of internal accounting
controls, policies and procedures.
The Company's financial statements have been examined by Ernst & Young,
independent auditors, who have expressed their opinion with respect to the
fairness of the presentation of the statements.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets with the independent auditors and internal auditors to
evaluate the effectiveness of the work performed by them in discharging their
respective responsibilities and to assure their independent and free access to
the Committee.
Clifford J. Grum
Chairman of the Board and
Chief Executive Officer
David H. Dolben
Vice President and
Chief Accounting Officer
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF TEMPLE-INLAND INC.:
We have audited the accompanying consolidated balance sheets of Temple-Inland
Inc. and subsidiaries as of January 1, 1994 and January 2, 1993, and the
related consol idated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended January 1, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Temple-Inland
Inc. and subsidiaries at January 1, 1994 and January 2, 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 1, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes D and E to the consolidated financial statements, in
1993 the Company changed its method of accounting for postretirement benefits
other than pensions and income taxes.
Houston, Texas
February 10, 1994
53
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF TEMPLE-INLAND INC.
(State of Incorporation) (Percentage of Ownership by Immediate Parent)
Inland Container Corporation I (Delaware)(100%)
Inland Container Corporation (Delaware)(100%)
EL Morro Corrugated Box Corporation (Delaware)(100%)
EL Morro Corrugated Box Corporation (Puerto Rico)(100%)
Georgia Kraft Company (Delaware)(100%)
Sabine River & Northern Railroad Company (Texas)(100%)
Inland Container FSC, Inc. (U.S. Virgin Islands)(100%)
Inland International Holding Company (Delaware)(100%)
Inland de Mexico Holding Company, S.A. de C.V. (Mexico)(100%)
Inland Corrugados de Mexico, S.A. de C.V. (Mexico)(100%)
Inland Paper Company, Inc. (Indiana)(100%)
Inland Real Estate Investments, Inc. (Indiana)(100%)
Crockett Container Corporation (California)(100%)
King Container Company (California)(100%)
Pakway Container Corporation (Indiana)(100%)
Temple-Inland Forest Products Corporation (Delaware)(100%)
The Angelina Free Press, Inc. (Texas)(100%)
Big Tin Barn Inc. (Delaware)(100%)
Eastex Incorporated (Texas)(100%)
Evadale Realty Company (Delaware)(100%)
Bestile Manufacturing Company (California)(100%)
Home Owners Trust Company (Texas)(100%)
Sabine Investment Company of Texas, Inc. (Texas)(100%)
Scotch Investment Company (Texas)(100%)
Scotch Properties Management Inc. (Delaware)(100%)
Security & Guaranty Abstract Co. (Texas)(50%)
Southern Pine Lumber Company (Texas)(100%)
Southern Pine Plywood Co. (Texas)(100%)
Templar Essex Inc. (Delaware)(100%)
Temple Associates, Inc. (Texas)(100%)
Temple Associates of Louisiana, Inc. (Louisiana)(100%)
Universal Electric Construction Company (Texas)(100%)
Temple-Eastex Incorporated (Delaware)(100%)
Temple Industries, Inc. (Texas)(100%)
Temple-Inland Food Service Corporation (Delaware)(100%)
Temple-Inland Forest Products International Inc. (Delaware)(100%)
Temple-Inland Paperboard Specialty Company (Delaware)(100%)
Temple-Inland Recaustisizing Company (Delaware)(100%)
Temple-Inland Recovery Company (Delaware)(100%)
Temple-Inland Stores Company (Delaware)(100%)
Temple Lumber Company (Texas)(100%)
Texas Southeastern Railroad Company (Texas)(100%)
Topaz Oil Company (Texas)(100%)
<PAGE> 2
EXHIBIT 21
PAGE 2
SUBSIDIARIES OF TEMPLE-INLAND INC.
(State of Incorporation) (Percentage of Ownership by Immediate Parent)
Temple-Inland Financial Services Inc. (Delaware) (50%;
50% By Temple-Inland Forest Products Corporation)
Guaranty Holdings Inc. I (Delaware)(100%)
Guaranty Federal Bank, F.S.B. (Federal)(100%)
AFB Group, Inc. (Texas)(100%)
Aleeda Corporation (Texas)(100%)
Americity 5 Percent Corporation (Texas)(100%)
Big D Cold Storage, Inc.(Texas)(100%)
First Service Corporation (Texas)(100%)
IMRE, Inc. (Texas)(100%)
Kemp Hills Utility Corporation (Texas)(100%)
GSC Realty Corporation (Texas)(100%)
GSC Housing Corporation (Texas)(100%)
Guaranty Group Inc. (Texas)(100%)
Guaranty Investment Advisory, Inc. (Texas)(100%)
Guaranty Resources, Inc. (Texas)(100%)
Guaranty Service Land Corporation (Texas)(100%)
MMJ-Stoneybrook Land Corporation (Texas)(100%)
Mercury Flight, Inc. (Texas)(100%)
A.G. Aircraft Corporation (Texas)
J.R. Aircraft Corporation (Texas)
L.J. Aircraft Corporation (Texas)
T.H. & M.A. Corporation (Oregon)
Mercury Investment Corporation (Texas)(100%)
Milam Investment Corporation (Texas)(100%)
Paris Development Corporation (Texas)(100%)
Paris Service Corporation (Texas)(100)
Parker Town Square, Inc. (Texas)(100%)
Participation Purchase Corporation (Nevada)(100%)
Providence Park, Inc. (Texas)(100%)
Skyline Financial, Inc. (Texas)(100%)
Southern Associated Services, Inc. (Texas)(100%)
TCCN Corporation (Texas)(100%)
Temple-Inland Mortgage Corporation (Nevada)(100%)
Temple-Inland Properties Inc. (Delaware)(100%)
Travis County Land Corporation (Texas)(100%)
Wichita Realty Investments, Inc. (Texas)(100%)
Stanford Realty Advisors, Inc. (Delaware)(100%)
LIC Investments Inc. (Delaware)(100%)
Lumbermen's Investment Corporation (Delaware)(100%)
Austin Crest Hotel, Inc. (Texas)(100%)
LIC Financial Corporation (Delaware)(100%)
Sunbelt Insurance Company (Texas)(100%)
TEEC Inc. (Texas)(100%)
Timberline Insurance Managers, Inc. (Texas)(100%)
Timberline Securities, Inc. (Texas)(100%)
Valley Creek Development Corporation (Texas)(100%)
Temple-Inland Life Inc. (Nevada)(100%)
Temple-Inland Insurance Corporation (Delaware)(100%)
Temple-Inland Realty Inc. (Delaware)(100%)
TIFS Financial Corporation (Delaware)(100%)
<PAGE> 1
(LOGO)ERNST & YOUNG
-One Houston Center -Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney Street
Houston, Texas 77010-2007
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Temple-Inland Inc. of our report dated February 10,
1994, included in the 1993 Annual Report to Shareholders of
Temple-Inland Inc.
Our audit also included the financial statement schedules of
Temple-Inland Inc. listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in (i)
Post-Effective Amendment Number 3 to Registration Statement Number
2-88202 on Form S-8, (ii) Registration Statement Number 33-20431 on
Form S-3, (iii) Registration Statement Number 33-23132 on Form S-8,
(iv) Post-Effective Amendment Number 1 to Registration Statement Number
33-25650 on Form S-8, (v) Post-Effective Amendment Number 1 to
Registration Statement Number 33-27286 on Form S-8, (vi)
Post-Effective Amendment Number 3 to Registration Statement Number
33-31004 on Form S-8, (vii) Post-Effective Amendment Number 2 to
Registration Statement Number 33-32124 on Form S-8, (viii)
Registration Statement Number 33-36393 on Form S-8, (ix) Registration
Statement Number 33-37597 on Form S-8, (x) Registration Statement
Number 33-40381 on Form S-8, (xi) Registration Statement Number
33-43801 on Form S-8, (xii) Registration Statement Number 33-43802 on
Form S-8, (xiii) Registration Statement Number 33-43978 on Form S-3,
(xiv) Registration Statement Number 33-50880 on Form S-3, (xv)
Registration Statement Number 33-48034 on Form S-8, (xvi)
Registration Statement Number 33-54388 on Form S-8, and (xvii)
Registration Statement Number 33-63104 on Form S-8 of our report dated
February 10, 1994, with respect to the consolidated financial
statements incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement
schedules included in this Annual Report (Form 10-K) of Temple-Inland
Inc.
ERNST & YOUNG
March 17, 1994
