SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarterly Period
Ended April 2, 1994
OR
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Transition Period
From ___________________________ to ____________________________
Commission File Number 1-8634
Temple-Inland Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-1903917
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
303 South Temple Drive, Diboll, Texas 75941
(Address of principal executive offices) (Zip Code)
(409) 829-2211
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate 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 the filing
requirements for the past 90 days.
Yes X No_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of common shares outstanding
Class as of April 2, 1994
Common Stock (par
value $1.00 per share) 55,634,396
The Exhibit Index appears on page 19 of this report.
<PAGE>2
PART I. FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Summarized Statements of Income
Parent Company (Temple-Inland Inc.)
Unaudited
First Quarter
1994 1993
(in millions)
Revenues
Net sales $ 541.8 $ 536.7
Financial services earnings 17.0 17.0
558.8 553.7
Costs and Expenses
Cost of sales 462.0 449.1
Selling and administrative 47.4 47.6
509.4 496.7
Operating Income 49.4 57.0
Interest - net ( 15.9) ( 17.5)
Other .2 .5
Income Before Taxes and Accounting Changes 33.7 40.0
Taxes on income 10.8 12.0
Income Before Accounting Changes 22.9 28.0
Cumulative effect of accounting changes - 50.0
Net Income $ 22.9 $ 78.0
See notes to consolidated financial statements.
<PAGE>3
Summarized Balance Sheets
Parent Company (Temple-Inland Inc.)
Unaudited
April 2, January 1,
1994 1994
(in millions)
ASSETS
Current Assets
Cash $ 9.1 $ 8.6
Receivables, less allowances of
$7.9 million in 1994 and $7.4
million in 1993 223.7 198.5
Inventories:
Work in process and finished goods 81.1 77.7
Raw materials 182.3 180.4
263.4 258.1
Prepaid expenses 12.1 12.5
Total current assets 508.3 477.7
Investment in Financial Services 556.8 487.6
Property and Equipment
Buildings 380.0 376.3
Machinery and equipment 2,740.3 2,723.3
Less allowances for depreciation and
amortization (1,472.9) (1,437.0)
1,647.4 1,662.6
Construction in progress 340.2 238.7
1,987.6 1,901.3
Timber and timberlands--less depletion 421.9 411.0
Land 33.8 33.8
Total property and equipment 2,443.3 2,346.1
Other Assets 92.6 92.4
Total Assets $ 3,601.0 $ 3,403.8
See notes to consolidated financial statements.
<PAGE>4
Summarized Balance Sheets - Continued
Parent Company (Temple-Inland Inc.)
Unaudited
April 2, January 1,
1994 1994
(in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 263.1 $ 244.8
Federal income taxes payable ( .9) 43.9
Employee compensation and benefits 15.4 19.5
Short-term borrowings 3.4 3.3
Current portion of long-term debt 22.2 24.1
Total current liabilities 303.2 335.6
Long-Term Debt 1,242.6 1,044.8
Deferred Income Taxes 199.2 175.9
Postretirement Benefits 123.5 122.0
Other Liabilities 19.4 25.3
Shareholders' Equity 1,713.1 1,700.2
Total Liabilities and Shareholders' Equity $ 3,601.0 $ 3,403.8
See notes to consolidated financial statements.
<PAGE>5
Summarized Statements of Cash Flows
Parent Company (Temple-Inland Inc.)
Unaudited
First Quarter
1994 1993
(in millions)
Cash Provided by (Used for) Operations
Net income $ 22.9 $ 78.0
Adjustments to reconcile net income to net cash:
Cumulative effect of accounting changes - ( 50.0)
Depreciation and depletion 48.9 47.8
Deferred taxes 2.3 3.1
Unremitted earnings of affiliates ( 12.2) ( 12.6)
Receivables ( 25.1) ( 21.5)
Inventories ( 5.3) ( 7.4)
Prepaid expenses .3 ( 1.9)
Accounts payable and accrued expenses ( 69.8) ( 20.2)
Other ( 10.4) 4.3
( 48.4) 19.6
Cash Provided by (Used for) Investments
Capital expenditures ( 135.5) ( 119.8)
Sale of property and equipment, net 1.6 4.4
Acquisitions, net ( 3.3) -
( 137.2) ( 115.4)
Cash Provided by (Used for) Financing
Change in debt 196.0 103.2
Construction funds held by trustee - 5.1
Issuance of common stock for stock plans 5.5 1.7
Purchase of stock for treasury ( 1.5) ( 1.3)
Cash dividends paid to shareholders ( 13.9) ( 13.8)
186.1 94.9
Net (decrease) in cash and
cash equivalents .5 ( .9)
Cash and cash equivalents at beginning
of period 8.6 7.1
Cash and cash equivalents at end of period $ 9.1 $ 6.2
See notes to consolidated financial statements.
<PAGE>6
Summarized Statements of Income
Temple-Inland Financial Services
Unaudited
First Quarter
1994 1993
(in millions)
Interest income
Mortgage-backed and investment securities $ 48.7 $ 67.6
Loans receivable and mortgage loans held
for sale 55.4 36.7
Assisted assets 8.6 7.2
Other earning assets 14.8 6.0
Total interest income 127.5 117.5
Interest expense
Deposits 59.3 61.2
Borrowed funds 25.6 18.5
Total interest expense 84.9 79.7
Net interest income 42.6 37.8
Provision for loan losses .9 .5
Net interest income after provision for
loan losses 41.7 37.3
Noninterest income
Loan servicing fees 7.8 6.9
Loan origination and marketing 7.9 7.1
Other 21.3 14.6
37.0 28.6
Noninterest expense
Compensation and benefits 30.5 23.1
Other 31.2 25.8
Total noninterest expense 61.7 48.9
Income before taxes and accounting changes 17.0 17.0
Taxes on income 4.8 4.4
Income before accounting changes 12.2 12.6
Cumulative effect of accounting changes - 52.3
Net Income $ 12.2 $ 64.9
See notes to consolidated financial statements.
<PAGE>7
Summarized Balance Sheets
Temple-Inland Financial Services
Unaudited
March 31, December 31,
1994 1993
(in millions)
ASSETS
Cash and cash equivalents $ 678.8 $ 156.3
Mortgage loans held for sale 462.1 630.1
Mortgage-backed and investment
securities 4,288.5 4,407.3
Loans receivable 2,613.6 2,755.3
Covered assets 566.2 664.3
Other assets 518.1 520.0
TOTAL ASSETS $ 9,127.3 $ 9,133.3
LIABILITIES
Deposits $ 6,301.4 $ 6,362.3
Securities sold under repurchase
agreements 1,662.1 1,570.7
Federal Home Loan Bank advances 154.2 154.1
Other borrowings 66.5 76.2
Other liabilities 398.3 458.3
TOTAL LIABILITIES 8,582.5 8,621.6
SHAREHOLDER'S EQUITY 544.8 511.7
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 9,127.3 $ 9,133.3
See notes to consolidated financial statements.
<PAGE>8
Summarized Statements of Cash Flows
Temple-Inland Financial Services
Unaudited
First Quarter
1994 1993
(in millions)
Cash Provided by (Used for) Operations
Net income $ 12.2 $ 64.9
Adjustments to reconcile net income
to net cash:
Cumulative effect of accounting changes - ( 52.3)
Amortization, accretion and depreciation 4.3 5.6
Provision for loan losses 1.0 .5
Receivable from FSLIC 24.8 4.7
Mortgage loans held for sale 167.9 5.8
Gain on sale of investments ( .4) ( .1)
Other ( 34.8) 82.3
175.0 111.4
Cash Provided by (Used for) Investments
Maturities of mortgage-backed and investment
securities 250.7 278.8
Purchase of mortgage-backed and investment
securities (135.6) (265.7)
Loans originated net of principal collected 139.8 ( 79.0)
Proceeds from sales of loans and mortgage-
backed securities .5 1.0
Reduction in covered assets 29.8 25.5
Other 1.7 ( 6.5)
286.9 ( 45.9)
Cash Provided by (Used for) Financing
Net decrease in deposits ( 58.2) (136.5)
Net increase in short-term borrowings 91.4 573.6
Change in debt ( 9.8) ( 26.5)
Other 37.2 31.3
60.6 441.9
Net increase in cash and cash equivalents 522.5 507.4
Cash and cash equivalents at beginning of period 156.3 117.7
Cash and cash equivalents at end of period $ 678.8 $ 625.1
See notes to consolidated financial statements.
<PAGE>9
Consolidated Statements of Income
Temple-Inland Inc. and Subsidiaries
Unaudited
First Quarter
1994 1993
(in millions)
Revenues
Manufacturing net sales $ 541.8 $ 536.7
Financial services revenues 164.5 146.1
706.3 682.8
Costs and Expenses
Manufacturing costs and expenses 509.4 496.7
Financial services expenses 147.5 129.1
656.9 625.8
Operating Income 49.4 57.0
Parent company interest - net ( 15.9) ( 17.5)
Other .2 .5
Income Before Taxes and Accounting Changes 33.7 40.0
Taxes on income 10.8 12.0
Income Before Accounting Changes 22.9 28.0
Cumulative effect of accounting changes - 50.0
Net Income $ 22.9 $ 78.0
Earnings Per Share:
Before accounting changes $ .41 $ .50
Effect of accounting changes - .90
Earnings per share $ .41 $ 1.40
Dividends Paid Per Share of Common Stock $ .25 $ .25
Weighted Average Shares Outstanding 55.8 55.6
See notes to consolidated financial statements.
<PAGE>10
Consolidated Balance Sheets
Temple-Inland Inc. and Subsidiaries
April 2, 1994
Unaudited
Parent Financial
Company Services Consolidated
(in millions)
ASSETS
Cash and cash equivalents $ 9.1 $ 678.8 $ 687.9
Investments - 4,288.5 4,288.5
Loans receivable - 2,613.6 2,613.6
Covered assets - 566.2 566.2
Receivable from FSLIC - 77.1 77.1
Trade and other receivables 223.7 - 223.7
Inventories 263.4 462.1 725.5
Property & equipment 2,443.3 39.6 2,482.9
Other assets 104.7 401.4 430.8
Investment in affiliates 556.8 - -
TOTAL ASSETS $ 3,601.0 $ 9,127.3 $12,096.2
LIABILITIES
Deposits $ - $ 6,301.4 $ 6,301.4
Securities sold under repurchase
agreements and Federal Home
Loan Bank advances - 1,816.3 1,816.3
Advances from borrowers for taxes
and insurance - 96.5 96.5
Other liabilities 322.6 301.8 612.5
Long-term debt 1,242.6 66.5 1,309.1
Deferred income taxes 199.2 - 123.8
Postretirement benefits 123.5 - 123.5
TOTAL LIABILITIES $ 1,887.9 $ 8,582.5 10,383.1
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 61.4
Additional paid-in capital 297.9
Retained earnings 1,491.1
1,850.4
Cost of shares held in the treasury:
5,755,156 shares ( 137.3)
TOTAL SHAREHOLDERS' EQUITY 1,713.1
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,096.2
See the notes to the consolidated financial statements.
<PAGE>11
Consolidated Balance Sheets
Temple-Inland Inc. and Subsidiaries
January 1, 1994
Unaudited
Parent Financial
Company Services Consolidated
(in millions)
ASSETS
Cash $ 8.6 $ 156.3 $ 164.9
Investments - 4,407.3 4,407.3
Loans receivable - 2,755.3 2,755.3
Covered assets - 664.3 664.3
Receivable from FSLIC - 34.2 34.2
Trade and other receivables 198.5 - 198.5
Inventories 258.1 630.1 888.2
Property & equipment 2,346.1 37.4 2,383.5
Other assets 104.9 448.4 463.1
Investment in affiliates 487.6 - -
TOTAL ASSETS $ 3,403.8 $ 9,133.3 $11,959.3
LIABILITIES
Deposits $ - $ 6,362.3 $ 6,362.3
Securities sold under repurchase
agreements and Federal Home
Loan Bank advances - 1,724.8 1,724.8
Advances from borrowers for taxes
and insurance - 59.2 59.2
Other liabilities 360.9 399.1 753.0
Long-term debt 1,044.8 76.2 1,121.0
Deferred income taxes 175.9 - 116.8
Postretirement benefits 122.0 - 122.0
TOTAL LIABILITIES $ 1,703.6 $ 8,621.6 10,259.1
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 61.4
Additional paid-in capital 296.9
Retained earnings 1,482.1
1,840.4
Cost of shares held in the treasury:
5,908,173 shares ( 140.2)
TOTAL SHAREHOLDERS' EQUITY 1,700.2
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $11,959.3
See the notes to the consolidated financial statements.
<PAGE>12
Consolidated Statements of Cash Flows
Temple-Inland Inc. and Subsidiaries
Unaudited
First Quarter
1994 1993
(in millions)
Cash Provided by (Used for) Operations
Net income $ 22.9 $ 78.0
Adjustments to reconcile net income to
net cash:
Cumulative effect of accounting changes - ( 50.0)
Depreciation and depletion 50.8 49.0
Amortization and accretion 2.4 4.4
Deferred taxes 7.1 3.1
Receivable from FSLIC 24.8 4.7
Trade and other receivables ( 25.1) ( 21.5)
Inventories 162.6 ( 1.6)
Other (118.9) 65.0
126.6 131.1
Cash Provided by (Used for) Investments
Capital expenditures (139.7) (123.1)
Sale of property and equipment, net 1.6 4.4
Purchase of investments (135.6) (265.7)
Maturities of investments 250.7 278.8
Proceeds from sale of loans and investments .5 1.0
Loans originated net of principal collected 139.8 ( 79.0)
Reduction in covered assets 29.8 25.5
Manufacturing acquisitions, net ( 3.3) -
Other 5.9 ( 3.2)
149.7 (161.3)
Cash Provided by (Used for) Financing
Additions to debt 196.6 104.5
Payments of debt ( 10.4) ( 27.8)
Net increase in repurchase agreements 91.4 573.6
Cash dividends paid to shareholders ( 13.9) ( 13.8)
Net decrease in deposits ( 58.2) (136.5)
Other 41.2 36.8
246.7 536.8
Net increase (decrease) in cash 523.0 506.6
Cash at beginning of period 164.9 124.7
Cash at end of period $ 687.9 $ 631.3
See notes to consolidated financial statements.
<PAGE>13
TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, because certain assets and
liabilities are in separate corporate entities, the consolidated assets are
not available to satisfy all consolidated liabilities. In the opinion of
management, all adjustments (consisting only of normal accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes
included in, or incorporated into, Temple-Inland Inc.'s (the "Company") Annual
Report on Form 10-K for the fiscal year ended January 2, 1994.
The consolidated financial statements include the accounts of Temple-Inland
Inc. 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 for the Company's primary business
groups.
The Parent Company (Temple-Inland Inc.) summarized financial statements
include the accounts of Temple-Inland Inc. and its manufacturing subsidiaries
with the Financial Services subsidiaries and the 20 percent to 50 percent
owned companies being reflected in the financial statements on the equity
basis.
The Temple-Inland Financial Services Group summarized financial statements
include savings bank, mortgage banking and real estate development activities
and insurance operations.
NOTE B - CONTINGENCIES
There are pending against the Company and its subsidiaries lawsuits and claims
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.
<PAGE>14
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Results of operations, including information regarding the Company's principal
business segments, are shown below:
First Quarter
1994 1993
(in millions)
Revenues
Corrugated container $ 326.9 $ 318.5
Bleached paperboard 69.7 88.8
Building products 139.6 118.0
Other activities 5.6 11.4
Manufacturing net sales 541.8 536.7
Financial services 164.5 146.1
Total revenues $ 706.3 $ 682.8
Income
Corrugated container $ 9.1 $ 16.5
Bleached paperboard ( 10.2) .1
Building products 36.2 26.4
Other activities .4 -
Operating profit 35.5 43.0
Financial services 17.0 17.0
52.5 60.0
Corporate expenses ( 3.1) ( 3.0)
Parent company interest - net ( 15.9) ( 17.5)
Other - net .2 .5
Income before taxes and accounting changes 33.7 40.0
Taxes on income 10.8 12.0
Income before accounting changes 22.9 28.0
Cumulative effect of accounting changes - 50.0
Net income $ 22.9 $ 78.0
<PAGE>15
First Quarter 1994 vs. First Quarter 1993
First quarter earnings of $22.9 million, or $.41 per share were 18 percent
below the $28.0 million, or $.50 per share (before the cumulative effect of
accounting changes), earned in the first quarter of 1993. Revenues increased
to $706 million, from $683 million in the comparable 1993 quarter.
The corrugated container group (formerly the container and containerboard
group) earned $9.1 million, down from $16.5 million in last year's first
quarter, but a marked improvement from a loss of $9.1 million in the fourth
quarter. Demand for containerboard and corrugated boxes was very strong in
the quarter, and pricing showed improvement in the quarter. Further price
improvement should be realized as the year progresses, and the demand for our
linerboard remains strong.
The bleached paperboard group lost $10.2 million in the quarter compared with
break-even in the first quarter last year. Earnings for our bleached
paperboard group continue to suffer from weak demand, lower selling prices and
increased costs due to poor product mix.
The building products group achieved another record quarter, earning $36.2
million, up from $26.4 million in the first quarter last year. Business
activity for most of the quarter remained brisk, continuing the momentum of
the fourth quarter. Demand for solid wood products (lumber and plywood)
moderated during the quarter and pricing declined, but panel products (gypsum,
particleboard and fiber products) were in strong demand.
The financial services group earned $17 million, equal to the first quarter of
last year but up from $15.5 million in the fourth quarter. Mortgage
originations totaled $865 million during the first quarter compared to $757
million in the first quarter last year and $1.5 billion in the fourth quarter
last year.
Net interest expense decreased to $15.9 million in the first quarter of 1994
compared with $17.5 million in the first quarter of last year. Although
interest expense increased due to higher levels of debt outstanding, that
increase was more than offset by an increase in capitalized interest due to
the Company's continuing spending for the bleached paperboard group's
modernization projects which are expected to be operational in mid-1995.
<PAGE>16
Financial Condition
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. During the first quarter of 1993, the Company's debt increased
$196 million mainly through issuance of commercial paper and bank debt to fund
the planned capital projects for our bleached paperboard group.
Our savings bank continues to meet all three regulatory requirement formulae
set out under the Financial Institution Reform, Recovery and Enforcement Act
of 1989 ("FIRREA").
<PAGE>17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note B to Notes to Consolidated
Financial Statements in Part I of this report is incorporated by
reference thereto.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of stockholders on May 6, 1994,
at which a quorum was present. The table below sets forth the
number of votes cast for, against or withheld, as well as the
number of abstentions and broker non-votes for each matter voted
upon at that meeting.
Abstentions
Against or or Broker
Matter For Withheld Non-votes
(in millions)
1. Election of five Directors
(a) Charlotte Temple 52.0 .6 -
(b) Paul M. Anderson 52.3 .3 -
(c) Robert Cizik 52.3 .3 -
(d) Arthur Temple III 52.3 .3 -
(e) Larry E. Temple 52.3 .3 -
2. Ratification of appointment of
Ernst & Young 51.9 .1 .7
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Regulation S-K
Exhibit Number
(11) Statement re computation of per share earnings.
(b) Reports on Form 8-K. During the three months ended April 2,
1994, the Company did not file any reports on Form 8-K.
<PAGE>18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEMPLE-INLAND INC.
(Registrant)
Date: May 17, 1994 By /s/ David H. Dolben
David H. Dolben,
Vice President and
Chief Accounting Officer
<PAGE>19
EXHIBIT INDEX
The following is an index of the exhibits filed herewith. The page reference
set forth opposite the description of exhibits included in such index refer to
the pages under the sequential numbering system prescribed by Rule 0-3(b)
under the Securities Exchange Act of 1934.
Regulation S-K
Exhibit Sequential
Number Page Number
(11) Statement re computation of 20
per share earnings.
<PAGE>20
EXHIBIT (11)
TEMPLE-INLAND INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(in thousands, except for per share data)
13 Weeks Ended
April 2, April 3,
1994 1993
Primary
Average common shares outstanding 55,586 55,274
Net effect of dilutive stock options
based on treasury stock method using
average market price 206 345
Weighted average shares outstanding 55,792 55,619
Net income:
Income before accounting changes $ 22,914 $ 28,006
Cumulative effect of accounting changes - 50,000
Net income $ 22,914 $ 78,006
Earnings per share:
Before accounting changes $ .41 $ .50
Effect of accounting changes - .90
Earnings per share $ .41 $ 1.40
Fully Diluted
Average common shares outstanding 55,586 55,274
Net effect of dilutive stock options
based on treasury stock method
using the closing market price, if
higher than average market price 206 345
Weighted average shares outstanding 55,792 55,619
Net income:
Income before accounting changes $ 22,914 $ 28,006
Cumulative effect of accounting changes - 50,000
Net income $ 22,914 $ 78,006
Earnings per share:
Before accounting changes $ .41 $ .50
Effect of accounting changes - .90
Earnings per share $ .41 $ 1.40
