<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
<TABLE>
<S> <C>
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
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
</TABLE>
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
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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, 1996, was $1,900,268,458. 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, 1996, 55,560,184 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 27-36, 48, and 50-59 of the Annual Report to Shareholders
for the fiscal year ended December 30, 1995 -- Parts I and II.
(b) The Company's definitive proxy statement, dated March 22, 1996, in
connection with the Annual Meeting of Shareholders to be held May 3,
1996 -- Part III.
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<PAGE> 2
PART I
ITEM 1. BUSINESS:
INTRODUCTION:
Temple-Inland Inc. (the "Company") is a holding company that conducts all
of its operations through its subsidiaries. The Company holds interests in
corrugated container, bleached paperboard, building products, timber and
timberlands, and financial services. The Company's corrugated container
operations are vertically integrated and consist of four linerboard mills, three
corrugated medium mills, 42 box plants, and six specialty converting plants.
The Company also manufactures bleached paperboard at one mill 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 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 Forest Products Corporation ("Temple-Inland FPC"), Temple-Inland
Financial Services Inc. ("Financial Services"), Guaranty Federal Bank, F.S.B.
("Guaranty"), and Temple-Inland Mortgage Corporation ("Temple-Inland Mortgage").
The Company's principal executive offices are located at 303 South Temple
Drive, Diboll, Texas 75941. Its telephone number is (409) 829-2211.
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
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues
Corrugated container...................... $1,824.8 $1,438.2 $1,248.5 $1,254.4 $1,148.6
Bleached paperboard....................... 369.0 299.4 318.5 352.6 370.6
Building products......................... 502.4 549.3 475.3 391.3 311.1
Other activities.......................... -- 19.2 58.4 77.1 67.9
-------- -------- -------- ------- -------
Manufacturing net sales............... . 2,696.2 2,306.1 2,100.7 2,075.4 1,898.2
Financial services........................ 764.3 631.4 635.1 637.8 608.9
-------- -------- -------- ------- -------
Total revenues.................... $3,460.5 $2,937.5 $2,735.8 $2,713.2 $2,507.1
======== ======== ======== ======== ========
Income before taxes
Corrugated container...................... $ 344.0 $ 102.0 $ 21.0 $ 112.3 $ 75.4
Bleached paperboard....................... 18.6 (22.1) (12.1) 23.3 79.9
Building products......................... 61.0 132.6 99.1 39.5 5.2
Other activities.......................... -- 1.5 (1.9) (2.0) 1.1
-------- -------- -------- -------- --------
Operating profit....................... 423.6 214.0 106.1 173.1 161.6
Financial services........................ 98.1 56.3 67.5 64.4 54.2
-------- -------- -------- -------- --------
521.7 270.3 173.6 237.5 215.8
Corporate expense........................... (21.7) (13.7) (11.2) (15.3) (16.0)
Parent company interest -- net.............. (72.7) (67.1) (69.4) (48.0) (38.3)
Other income................................ 3.7 3.8 3.2 2.8 5.3
-------- -------- -------- -------- --------
Income before taxes............... $ 431.0 $ 193.3 $ 96.2 $ 177.0 $ 166.8
======== ======== ======== ======== ========
</TABLE>
- ---------------
For more information with respect to identifiable assets, capital
expenditures, depreciation, and depletion on a business segment basis, see pages
35 and 58 of the Company's 1995 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
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Corrugated container........................ $1,824.8 $1,438.2 $1,248.5 $1,254.4 $1,148.6
Bleached paperboard
Paperboard................................ 249.0 217.4 228.7 249.4 292.2
Pulp...................................... 36.9 22.1 33.4 47.3 44.8
Food Service and other.................... 83.1 59.9 56.4 55.9 33.6
Building products
Pine lumber(a)............................ 159.6 185.7 153.8 120.9 87.6
Fiber products............................ 59.7 66.3 62.9 55.8 48.2
Particleboard............................. 99.1 103.0 81.3 70.5 60.7
Plywood................................... 49.3 56.8 54.0 45.2 36.9
Gypsum wallboard.......................... 83.1 74.3 53.3 36.6 33.1
Retail distribution(b).................... 51.3 58.4 60.0 53.5 42.2
Other..................................... .3 4.8 10.0 8.8 2.4
Other activities(c)......................... -- 19.2 58.4 77.1 67.9
-------- -------- -------- -------- --------
Manufacturing net sales................... 2,696.2 2,306.1 2,100.7 2,075.4 1,898.2
Financial services.......................... 764.3 631.4 635.1 637.8 608.9
-------- -------- -------- -------- --------
Total revenues.................... $3,460.5 $2,937.5 $2,735.8 $2,713.2 $2,507.1
======== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Excludes the Rome, Georgia, sawmill, sales from which totaled $28.3 million,
$24.7 million, $20.2 million, $16.9 million, and $11.8 million, in 1995,
1994, 1993, 1992, and 1991, respectively, because its activities of fiber
procurement and fiber processing are integrated with the operations of the
Rome, Georgia, linerboard mill.
(b) In October 1995, the Company sold the largest two of its five retail
distribution outlets.
(c) Includes the revenues from subsidiaries engaged in commercial, industrial,
and public works contracting until its operations were terminated in 1993
and the revenues from subsidiaries engaged in the construction and
maintenance of electrical distribution facilities until its operations were
terminated in 1994.
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 UNIT SALES
DECEMBER 30, -----------------------------------------
1995 1995 1994 1993 1992 1991
------------ ----- ----- ----- ----- -----
(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C> <C>
Corrugated container....................... (a) 2,333 2,492 2,394 2,294 2,097
Bleached paperboard
Paperboard............................... (b) 400 430 426 414 447
Market pulp.............................. (b) 68 59 100 123 103
Nodular pulp............................. (b) 31 28 34 32 19
<CAPTION>
Building products (IN MILLIONS OF BOARD FEET)
Pine lumber(c)........................... 545 493 509 484 467 395
<CAPTION>
(IN MILLIONS OF SQUARE FEET)
Fiber products........................... 460 422 441 440 464 443
Particleboard(d)......................... 520 329 347 319 326 321
Plywood.................................. 265 217 260 265 250 253
Gypsum wallboard......................... 820 813 796 782 621 601
</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 602,000 tons per year. The rated annual capacity
of the linerboard mills is approximately 2.1 million tons per year.
(b) The annual capacity of the four paper machines in operation at the
paperboard and pulp mill is approximately 725,000 tons, which excludes the
capacity of a fifth paper machine at the mill that was shut down late in
1993 due to market conditions for the paperboard grade it produced. The
annual capacity shown above includes the rated annual capacity of the new
No. 5 machine, which did not go on-line until late in the fourth quarter of
1995. 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, sales from which totaled 89 million
board feet, 74 million board feet, 68 million board feet, 71 million board
feet, and 59 million board feet in 1995, 1994, 1993, 1992, and 1991,
respectively, because its activities of fiber procurement and fiber
processing are integrated with the operations of the Rome, Georgia,
linerboard mill.
(d) The annual capacity for the particleboard plants includes the rated annual
capacity of the Hope, Arkansas, plant, which did not begin operations until
late in the fourth quarter of 1995.
NARRATIVE DESCRIPTION OF THE BUSINESS:
The business of the Company is divided among four groups: (1) the
Corrugated Container Group operated by Inland and its subsidiaries, (2) the
Bleached Paperboard Group operated by Temple-Inland FPC and its subsidiaries,
(3) the Building Products Group operated by Temple-Inland FPC and its
subsidiaries, and (4) the Financial Services Group operated by Financial
Services and its subsidiaries. In the year ended December 30, 1995, corrugated
container, bleached paperboard, building products, and financial services
provided 53%, 11%, 14%, and 22%, respectively, of the total consolidated net
revenues of the Company.
On February 19, 1996, the Company announced that the management of its
paper operations will be consolidated under the leadership of William B. Howes,
Chairman and CEO of Inland. David L. Ashcraft will
4
<PAGE> 6
continue to function as Group Vice President -- Bleached Paperboard, and will
report to Mr. Howes. The Company will examine the operations and structure of
the two paper groups to assess additional strategic opportunities and
efficiencies that may be realized in this consolidation.
Corrugated Container. Inland manufactures containerboard that it converts
into a complete line of corrugated boxes and containers. Approximately 86
percent of the containerboard produced by Inland in 1995 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 food, paper, glass containers, chemical, appliance,
and plastics industries, among others. As of December 30, 1995, about 46 percent
of Inland's box shipments were sold directly for use in the food industry,
including beverage containers.
Following an acquisition in 1994, Inland also manufactures litho-laminate
corrugated packaging and high graphics folding cartons. Other products
manufactured by Inland include bulk containers constructed of multi-wall
corrugated board for extra strength, which are used for bulk shipments of
various materials, paper sealing tape, and other tape specialties.
Inland services about 6,800 customers with approximately 10,600 shipping
destinations. The largest single customer accounted for approximately 4 percent
and the 10 largest customers accounted for approximately 26 percent of Inland's
1995 revenues. Costs of freight and customer service requirements necessitate
the location of box plants relatively close to customers. Each plant tends to
service a market within a 150-mile radius of the plant.
Sales of corrugated shipping containers closely track changing population
patterns and other demographics. Historically, there has been a correlation
between the demand for containers and containerboard and real growth in the
United States gross domestic product.
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 14 percent
of this segment's 1995 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 percent of this segment's 1995 sales.
During 1995, sales were made to customers in 43 states, Mexico, and Puerto Rico,
as well as to independent distributors through which this segment's products
were exported to Asia, Japan, Central America, and South America. 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 was
completed in late 1995 at a cost of approximately $500 million. The production
benefits from this project should be achieved during 1996 as the mill continues
to integrate components of its operations with the new facilities. The focus of
the paperboard expansion program is to enable the efficient production of
low-density paperboard with high quality characteristics that are increasingly
demanded by end users. The project will also enable the mill to balance more
effectively its pulp-making capacity with its board-making capacity. A cylinder
machine located at the mill was shut down late in 1993 due to weak market
conditions for the paperboard grade it produced.
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
5
<PAGE> 7
a number of other factors, including changes in industry production capacity and
the strength of international markets.
Temple-Inland Food Service Corporation ("Food Service") is an integrated
paper converter formed by the Bleached Paperboard Group to manufacture and
market paper containers and products primarily for the food service industry.
Products manufactured include paper plates and bowls, clamshells, carrying trays
and boxes, nested food trays, fry cartons, and pails. These products are sold to
the fast food industry, retail consumer stores, and restaurants and cafeterias
for use in food service.
Building Products. 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 75 percent of particleboard sales are
to commercial fabricators, such as manufacturers of cabinets and furniture. The
10 largest customers accounted for approximately 22 percent of the Building
Products Group's 1995 sales.
The building products business is heavily dependent upon the level of
residential housing expenditures, including the repair and remodeling market,
which is largely dependent upon the availability and cost of mortgage funds.
During the year, the Company completed construction of a new particleboard
plant located in Hope, Arkansas. The facility, which cost approximately $65
million to build, has an annual production capacity of 170 million square feet
of particleboard. The Company also announced that it intends to upgrade the
production facilities at its other particleboard mills and that it has entered
into a joint venture that will produce medium density fiberboard.
The Building Products Group also operates retail distribution outlets. In
October 1995, the Company sold all of the assets of the largest two of these
outlets, leaving it with three small outlets currently in operation.
Financial Services. Financial Services operates a savings bank and engages
in mortgage banking, real estate development, and insurance activities.
(i) Savings Bank. Guaranty is a federally-chartered stock savings bank
operated by the Company through its financial services subsidiaries. Guaranty
conducts its business through 113 banking centers located primarily in the
eastern third of Texas, including Houston, Dallas, San Antonio, and Austin. The
primary activities of Guaranty include attracting savings deposits from the
general public, investing in loans secured by mortgages on residential real
estate, being a major construction lender to the commercial and residential real
estate industry, and providing a variety of loan products to consumers.
Guaranty derives its income primarily from interest earned on real estate
mortgages, commercial loans, consumer loans, and investment securities, as well
as fees received in connection with loans and deposit services. Its major
expense is the interest it pays on consumer deposits and other borrowings. The
operations of Guaranty, like those of other savings institutions, are
significantly influenced by general economic conditions, by the monetary,
fiscal, and regulatory policies of the federal government, and by the policies
of financial institution regulatory authorities. Deposit flows and costs of
funds are influenced by interest rates on competing investments and general
market rates of interest. Lending activities are affected by the demand for
mortgage financing and for other types of loans as well as market conditions.
Guaranty primarily seeks assets with interest rates that adjust periodically
rather than assets with long-term fixed rates.
In connection with the acquisition of Guaranty in 1988, the Company 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"), protection
against losses on the book value of the Covered Assets and indemnification from
certain claims and litigation. Pursuant to an acquisition in 1993,
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<PAGE> 8
Guaranty assumed all of the rights and obligations of American Federal Bank,
F.S.B. ("AFB") pursuant to its assistance agreement (the "AFB Assistance
Agreement" and, together with the GFB Assistance Agreement, the "Assistance
Agreements") entered into during 1988 by AFB. Pursuant to the Guaranty
Assistance Agreement, the Company also receives various tax benefits from the
receipt of assistance payments under the Covered Asset guarantees held by
Guaranty. The Company is required to share a portion of these tax benefits with
the FSLIC Resolution Fund, a government-sponsored entity created in August 1989
and managed by the Federal Deposit Insurance Corporation (the "FDIC"). All of
the notes issued pursuant to the Assistance Agreements have been prepaid.
On October 31, 1995, the Company and Guaranty entered into a series of
agreements (the "Termination Agreements") with the FDIC, as manager of the FSLIC
Resolution Fund, terminating the Assistance Agreements. Pursuant to the
Termination Agreements, Guaranty received a net payment from the FSLIC
Resolution Fund of approximately $208 million in payment for the difference
between (i) the transfer value of certain of the Covered Assets and (ii) the
amount owed by Guaranty to the FSLIC Resolution Fund for the present value of
its share of the tax benefits the Company received from the Assistance
Agreements. Guaranty will also receive an additional payment totaling $9 million
representing its portion of the gain sharing on asset dispositions as provided
in the Assistance Agreements. The Company had recorded on its balance sheet an
estimate of the tax sharing amounts to be paid to the FDIC in the future when
the related tax benefits would be realized. The actual payment, however, was a
negotiated amount that reduced the expected future payments to their present
value. Although certain amounts are subject to finalization in 1996, the Company
could potentially recognize a credit to its tax provision of approximately $30
million. The remainder of the Covered Assets have been retained by Guaranty, but
will not be the subject of any on-going assistance.
Guaranty used the proceeds received in connection with the Termination
Agreements to pay down outstanding short-term borrowings. In addition, Guaranty
expects to realize benefits from operating efficiencies derived from the
elimination of the assets transferred to the FDIC.
Both the House Banking Committee and the Senate Banking Committee have
approved legislation that would recapitalize the Savings Association Insurance
Fund ("SAIF") and merge the SAIF with the Bank Insurance Fund ("BIF"). This
proposed legislation would have imposed a one-time assessment estimated to be
$58 million on the deposits of Guaranty and would have ultimately reduced future
deposit insurance premiums by approximately $15 million per year. Due to the
recent budget impasse in Congress, the Company is unable to predict when or if
such legislation will be adopted or, if adopted, the content of any such
legislation.
The House and Senate are also discussing additional legislative proposals,
including changes to tax laws, related to the thrift industry. At this time, the
Company is not able to predict if any of these proposals will be adopted or, if
adopted, the ultimate impact they might have on the Company.
In addition to other minimum capital standards, regulations of the Office
of Thrift Supervision of the Department of the Treasury (the "OTS") currently
require savings institutions to maintain a leverage capital ratio of at least 3
percent of adjusted total assets. Guaranty, however, has agreed with the OTS
that at the time it makes any future acquisitions, it will maintain a leverage
capital ratio of at least 4 percent of adjusted total assets, and in order to
maintain its FDIC insurance premiums at the lowest level, Guaranty intends to
maintain a leverage capital ratio of at least 5 percent of adjusted total
assets. At December 31, 1995, Guaranty had a leverage capital ratio of 5.44
percent of adjusted total assets.
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, 1995, Guaranty met or exceeded these tests and intends to continue
meeting or exceeding these tests.
(ii) Mortgage Banking. Temple-Inland Mortgage, a wholly-owned subsidiary of
Guaranty, headquartered in Austin, Texas, originates, warehouses, and services
FHA, VA, and conventional mortgage loans primarily on single family residential
property. Temple-Inland Mortgage originates mortgage loans for sale into the
secondary market. It typically retains the servicing rights on these loans, but
periodically sells some portion of its servicing to third parties. During 1995,
Temple-Inland Mortgage entered into an agreement to provide
7
<PAGE> 9
servicing on a select portfolio of mortgage loans that do not meet normal
secondary market standards. These loans have been securitized pursuant to a
pooling and security agreement, and at December 31, 1995, constitute $537
million of the total servicing portfolio. At December 31, 1995, Temple-Inland
Mortgage was servicing $13.5 billion in mortgage loans. Temple-Inland Mortgage
produced $1.2 billion in mortgage loans during 1995 compared with $2.1 billion
during 1994.
(iii) Real Estate Development and Income Properties. Subsidiaries of
Financial Services are involved in the development of 19 residential
subdivisions in Texas, Colorado, and Florida. The real estate group of the
Company also owns 10 commercial properties.
(iv) Insurance. Subsidiaries of Financial Services are engaged in the
brokerage of property, casualty, life, and group health insurance products. One
of these subsidiaries is an insurance agency that administers the marketing and
distribution of several mortgage-related personal life, accident, and health
insurance programs. This agency also acts as the risk management department of
the Company. An affiliate of the agency sells annuities through banks and
savings banks, including Guaranty.
(v) Statistical Disclosures. The following tables present various
statistical and financial information for Financial Services.
8
<PAGE> 10
The following schedule presents the average balances, interest
income/expense, and rates earned or paid by major balance sheet category for the
years 1993 through 1995:
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST SPREAD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------- --------------------------- ---------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- ------ ----- -------- ------ ----- -------- ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Interest-earning deposits in other
banks.............................. $ 41.4 $ 2.4 5.90% $ 26.0 $ 1.3 4.96% $ 22.6 $ .6 2.78%
Mortgage-backed and investment
securities......................... 3,650.4 208.6 5.72% 4,154.7 189.8 4.57% 4,981.8 241.9 4.86%
Securities purchased under agreements
to resell, agency discount notes,
federal funds sold, and commercial
paper.............................. 324.2 19.1 5.88% 653.5 27.2 4.16% 1,181.4 43.0 3.64%
Loans receivable and mortgage loans
held for sale(1)................... 4,490.2 368.6 8.21% 3,241.5 244.7 7.55% 2,248.9 172.9 7.69%
Covered assets....................... 298.5 18.3 6.14% 536.2 30.3 5.66% 405.7 25.4 6.26%
Other................................ 25.6 1.9 7.42% 25.4 2.2 8.52% 62.2 5.9 9.51%
-------- ------ -------- ------ -------- ------
Total interest-earning
assets....................... 8,830.3 $618.9 7.01% 8,637.3 $495.5 5.74% 8,902.6 $489.7 5.50%
====== ====== ======
Cash................................... 90.2 107.2 90.0
Other FSLIC receivables................ (10.7) 17.4 5.2
Other assets........................... 537.3 469.0 440.7
-------- -------- --------
Total assets................... $9,447.1 $9,230.9 $9,438.5
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Interest-bearing liabilities:
Deposits:
Interest-bearing demand.......... $1,212.7 $ 29.9 2.47% $1,549.4 $ 34.5 2.23% $1,443.4 $ 34.1 2.36%
Savings deposits................. 216.2 4.9 2.25% 248.3 5.6 2.26% 201.5 5.2 2.57%
Time deposits.................... 5,037.6 278.1 5.52% 4,615.6 213.7 4.63% 3,919.7 197.5 5.04%
-------- ------ -------- ------ -------- ------
Total interest-bearing
deposits..................... 6,466.5 312.9 4.84% 6,413.3 253.8 3.96% 5,564.6 236.8 4.26%
Advances from the Federal Home Loan
Bank............................. 154.7 11.2 7.26% 154.3 9.5 6.13% 64.2 5.3 8.25%
Securities sold under repurchase
agreements....................... 1,719.2 102.6 5.97% 1,598.0 66.6 4.17% 2,734.2 88.4 3.23%
Other borrowings................... 95.9 7.2 7.49% 64.4 4.5 6.90% 82.6 5.6 6.74%
-------- ------ -------- ------ -------- ------
Total interest-bearing
liabilities.................. 8,436.3 $433.9 5.14% 8,230.0 $334.4 4.06% 8,445.6 $336.1 3.98%
====== ====== ======
Noninterest-bearing demand............. 79.3 85.8 92.4
Other liabilities...................... 331.3 363.0 388.4
Shareholder's equity................... 600.2 552.1 512.1
-------- -------- --------
Total liabilities and
shareholder's equity......... $9,447.1 $9,230.9 $9,438.5
======= ======= =======
Net interest income............ $185.0 $161.1 $153.6
====== ====== ======
Net yield on interest-earning
assets....................... 2.10% 1.87% 1.73%
===== ===== =====
</TABLE>
- ---------------
(1) Nonaccruing loans are included in the average of loans receivable.
9
<PAGE> 11
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>
1995 COMPARED WITH 1994 1994 COMPARED WITH 1993
INCREASE (DECREASE) DUE TO(1) INCREASE (DECREASE) DUE TO(1)
------------------------------- --------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ----- ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-earning deposits in other banks....... $ .9 $ .2 $ 1.1 $ .1 $ .6 $ .7
Mortgage-backed and investment securities...... (24.9 ) 43.7 18.8 (38.4 ) (13.7) (52.1)
Securities purchased under agreements to
resell, agency discount notes, federal funds
sold, and commercial paper................... (16.0 ) 7.9 (8.1) (21.3 ) 5.5 (15.8)
Loans receivable and mortgage loans held for
sale......................................... 101.0 22.9 123.9 74.9 (3.1) 71.8
Covered assets................................. (14.4 ) 2.4 (12.0) 7.6 (2.7) 4.9
Other.......................................... -- (.3) (.3) (3.2 ) (.5) (3.7)
------ ------ ------ ------ ------ ------
TOTAL INTEREST INCOME................... $46.6 $76.8 $123.4 $19.7 $(13.9) $ 5.8
====== ====== ====== ====== ====== ======
Interest expense:
Deposits:
Interest-bearing demand...................... $(8.1 ) $ 3.5 $ (4.6) $ 2.4 $ (2.0) $ .4
Savings deposits............................. (.7 ) -- (.7) 1.1 (.7) .4
Time deposits................................ 20.7 43.7 64.4 33.1 (16.9) 16.2
------ ------ ------ ------ ------ ------
TOTAL INTEREST ON DEPOSITS.............. 11.9 47.2 59.1 36.6 (19.6) 17.0
Advances from the Federal Home Loan Bank....... -- 1.7 1.7 5.8 (1.6) 4.2
Securities sold under repurchase agreements.... 5.4 30.6 36.0 (43.0 ) 21.2 (21.8)
Other borrowings............................... 2.3 .4 2.7 (1.2 ) .1 (1.1)
------ ------ ------ ------ ------ ------
TOTAL INTEREST EXPENSE.................. $19.6 $79.9 $ 99.5 $(1.8 ) $ .1 $ (1.7)
====== ====== ====== ====== ====== ======
Net interest income (expense).................. $27.0 $(3.1) $ 23.9 $21.5 $(14.0) $ 7.5
====== ====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) The change in interest income and expense due to both rate and volume has
been allocated to volume and rate changes in proportion to the relationship
of the absolute dollar amounts of the change in each.
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,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Held-to-Maturity:
Mortgage-backed securities............................................ $2,412.8 $3,760.4 $4,336.2
Debt securities
U.S. Government securities (including agencies)..................... .3 .3 .8
Corporate bonds..................................................... -- 1.5 1.2
Other............................................................... .1 .1 .1
-------- -------- --------
.4 1.9 2.1
-------- -------- --------
Equity securities
Federal Home Loan Bank Stock........................................ -- -- 68.9
Other............................................................... -- -- .1
-------- -------- --------
-- -- 69.0
-------- -------- --------
Available-for-Sale:
Mortgage-backed securities............................................ 949.6 137.7 --
Debt securities
Corporate bonds..................................................... 1.4 -- --
Equity securities
Federal Home Loan Bank Stock........................................ 57.7 63.2 --
Other............................................................... 1.7 1.0 --
-------- -------- --------
59.4 64.2 --
-------- -------- --------
$3,423.6 $3,964.2 $4,407.3
======= ======= =======
</TABLE>
10
<PAGE> 12
The table below sets forth the maturities of mortgage-backed and investment
securities as of December 31, 1995:
MATURITY DISTRIBUTION OF MORTGAGE-BACKED AND INVESTMENT SECURITIES
<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 MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity:
Mortgage-backed securities..... $ -- -- $ -- -- $ -- -- $ -- -- $2,412.8 5.89 % $2,412.8
Debt securities:
U.S. Government securities
(including agencies)....... .3 5.60 % -- -- -- -- -- -- -- -- .3
Certificate of deposits...... .1 6.83 % -- -- -- -- -- -- -- -- .1
Available-for-Sale:
Mortgage-backed securities..... -- -- -- -- -- -- -- -- 949.6 6.21 % 949.6
Debt securities
Corporate bonds.............. -- -- .6 9.00 % -- -- .8 6.83 % -- -- 1.4
Equity securities
Federal Home Loan Bank
stock...................... -- -- -- -- -- -- -- -- 57.7 6.46 % 57.7
Other........................ -- -- -- -- -- -- -- -- 1.7 N/A 1.7
------ ------ ------ ------ -------- --------
-- -- -- -- -- -- -- 59.4 59.4
------ ------ ------ ------ -------- --------
$ .4 $ .6 $ -- $ .8 $3,421.8 $3,423.6
======= ======= ======= ======= ======= ========
</TABLE>
The following table shows the loan distribution for Financial Services:
TYPES OF LOANS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Real estate mortgage................................ $3,341.6 $3,137.5 $2,302.9 $1,153.3 $ 863.2
Construction and development........................ 1,879.0 1,022.6 643.7 274.6 216.6
Commercial.......................................... 406.3 229.0 80.7 25.4 58.2
Consumer and other.................................. 416.0 366.0 404.1 271.1 294.9
-------- -------- -------- -------- --------
6,042.9 4,755.1 3,431.4 1,724.4 1,432.9
Less:
Unfunded portion of loans......................... 1,211.8 1,027.7 614.0 320.6 146.1
Unearned discounts................................ -- .6 3.0 9.3 24.5
Unamortized purchase discounts.................... (1.8) (5.1) 8.9 28.1 39.5
Net deferred fees................................. 3.0 3.2 2.2 2.3 .7
Allowance for loan losses......................... 65.5 53.9 47.9 20.8 19.5
-------- -------- -------- -------- --------
1,278.5 1,080.3 676.0 381.1 230.3
-------- -------- -------- -------- --------
$4,764.4 $3,674.8 $2,755.4 $1,343.3 $1,202.6
======= ======= ======= ======= =======
</TABLE>
11
<PAGE> 13
The table below presents the maturity distribution of loans (excluding real
estate mortgage and consumer loans) outstanding at December 31, 1995, 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
--------------------------------------------
WITHIN 1 TO 5 AFTER
1 YEAR YEARS 5 YEARS TOTAL
-------- ------ ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Construction and development......................... $1,228.2 $648.9 $ 1.9 $1,879.0
Commercial........................................... 188.2 206.8 11.3 406.3
-------- ------ ------- --------
$1,416.4 $855.7 $13.2 $2,285.3
======= ====== ====== =======
Loans maturing after 1 year with:
Fixed interest rates............................... $721.6 $10.1
Variable interest rates............................ 134.1 3.1
------ -------
$855.7 $13.2
====== ======
</TABLE>
Loans accounted for on a nonaccrual basis, accruing loans that are
contractually past due 90 days or more, and restructured or other potential
problem loans were less than two percent of total loans during 1995, 1994, 1993,
1992, and 1991. 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,
------------------------------------------------------
1995 1994 1993 1992 1991
------ ----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year............... $ 53.9 $47.9 $20.8 $19.5 $ 2.0
Charge-offs:
Real estate mortgages.................... (3.9) (4.4)(a) (.7) (1.8) (.4)
Commercial............................... (.7) (1.1) -- -- --
Consumer and other....................... (5.0) (4.7)(a) (1.8) (1.9) (1.6)
------ ----- ----- ----- -----
(9.6) (10.2) (2.5) (3.7) (2.0)
Recoveries:
Real estate mortgages.................... 1.1 .6 .2 .2 --
Commercial............................... .5 .1 -- -- --
Consumer and other....................... .8 1.4 .6 .8 .2
------ ----- ----- ----- -----
2.4 2.1 .8 1.0 .2
------ ----- ----- ----- -----
Net charge-offs.................. (7.2) (8.1)(a) (1.7) (2.7) (1.8)
Additions charged to operations............ 14.6 6.5 4.8 2.6 2.3
Additions related to bulk purchases of
loans, net of adjustment................. 4.2 7.6 24.0(a) 1.4 17.0
------ ----- ----- ----- -----
Balance at end of year..................... $ 65.5 $53.9 $47.9 $20.8 $19.5
====== ===== ===== ===== =====
Ratio of net charge-offs during the year to
average loans outstanding during the
year..................................... .16% .27% .10% .22% .15%
====== ===== ===== ===== =====
</TABLE>
- ---------------
(a) Principally related to the loan portfolio from the acquisition of AFB.
12
<PAGE> 14
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
--------------------- --------------------- --------------------- --------------------- ---------------------
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
mortgage..... $37.3 55% $37.5 66% $24.5 67% $13.5 67% $13.2 60%
Construction
and
development... 3.9 31% 1.3 21% 1.0 19% .5 16% .3 15%
Commercial..... 19.4 7% 10.2 5% 14.7 2% 2.8 1% .7 4%
Consumer and
other........ 4.9 7% 4.9 8% 7.7 12% 4.0 16% 5.3 21%
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
$65.5 100% $53.9 100% $47.9 100% $20.8 100% $19.5 100%
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
</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 9
hereof.
The amount of time deposits of $100,000 or more and related maturities at
December 31, 1995, are disclosed in Note F to Financial Services Group
Summarized Financial Statements on page 48 of the Company's 1995 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,
----------------------------
1995 1994 1993(1)
------ ------ ------
<S> <C> <C> <C>
Return on average assets........................................ .75% .44% 1.07%
Return on average equity........................................ 11.79% 7.41% 19.73%
Dividend payout ratio........................................... 70.66% 73.22% 41.56%
Equity to assets ratio.......................................... 6.35% 5.99% 5.43%
</TABLE>
- ---------------
(1) The 1993 ratios reflect the effect of an accounting change due to the
adoption of Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, of approximately $52 million.
13
<PAGE> 15
Short-term borrowings. The following table shows short-term borrowings
outstanding at the end of the reported period:
SHORT TERM BORROWINGS
(IN MILLIONS)
<TABLE>
<CAPTION>
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING RATE
END OF INTEREST DURING THE DURING THE DURING THE
PERIOD RATE PERIOD PERIOD PERIOD
---------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Securities sold under agreements to
repurchase
1995.............................. $1,603.7 5.8% $1,914.1 $1,719.2 5.9%
1994.............................. $1,365.2 6.1% $2,300.2 $1,598.0 4.1%
1993.............................. $1,570.7 3.3% $2,437.2 $2,734.2 3.2%
</TABLE>
Note: Securities sold under agreements to repurchase generally mature within one
to four days of the transaction date. Average borrowings during the year
was calculated based on daily average.
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 1995, wood
fiber required for the Company's paper and wood products operations was produced
from these lands and as a by-product of its solid wood operations to the extent
shown on the following chart:
WOOD FIBER REQUIREMENTS
<TABLE>
<CAPTION>
PERCENTAGE
SUPPLIED
RAW MATERIALS INTERNALLY
-------------------------------------------------- ----------
<S> <C>
Sawtimber......................................... 45.2%
Pine Pulpwood..................................... 56.3%
Hardwood Pulpwood................................. 27.4%
</TABLE>
The balance of the wood fiber required for these operations was purchased
from numerous landowners and other lumber companies. In an effort to meet its
projected need for hardwood fiber, the Company has entered into a joint venture
to operate a eucalyptus plantation in Mexico. The Company expects to begin
receiving fiber from this venture in five to seven years. During 1995, the
bleached paperboard mill in Evadale, Texas, purchased small amounts of recycled
pulp. Now that the expansion program is completed, this mill may purchase
increasing amounts of recycled fiber.
Linerboard and corrugated 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 corrugated
medium. The Newport, Indiana, Newark, California, and New Johnsonville,
Tennessee, mills are solely corrugated medium mills. The principal raw material
used by the Rome, Georgia, and Orange, Texas, mills is virgin fiber. The
Ontario, California; Newark, California; Newport, Indiana; and Maysville,
Kentucky, mills use only old corrugated containers ("OCC"). The mill at New
Johnsonville, Tennessee, uses a combination of virgin fiber and OCC. The price
of OCC may exhibit volatility due to normal supply and demand fluctuations for
the raw material and for the finished product. In 1995, the average delivered
price of OCC was $156 per ton compared with $101 per ton during 1994. OCC is
purchased by the Company and its competitors on the open market from numerous
suppliers. Price fluctuations reflect the competitiveness of these markets. The
Company's historical grade patterns produce more linerboard and less corrugated
medium than is converted at
14
<PAGE> 16
the Company's box plants. The deficit of corrugated medium is obtained through
open market purchases and/or trades and the excess linerboard is sold in the
open market.
Temple-Inland FPC obtains the gypsum for its wallboard operations from its
own quarry near Fletcher, Oklahoma, and from one outside source through a
long-term purchase contract.
In the opinion of management, the sources outlined above will be sufficient
to supply the Company's raw material needs for the foreseeable future.
ENERGY:
Energy requirements at the Company's manufacturing facilities are supplied
by electricity, steam, and a variety of fuels, including natural gas, fuel oil,
coal, and in some instances, waste products resulting from the manufacturing
process at the facility concerned. By utilizing these waste products, Inland was
able to generate approximately 16 percent of its energy requirements at its
mills in Rome, Georgia, and Orange, Texas, and Temple-Inland FPC generated
approximately 47 percent of its energy requirements during 1995. The Ontario,
California, mill includes a cogeneration plant that sells excess electricity
generated to an electric utility. In most cases where natural gas or fuel oil is
used as a fuel, the box plants possess a dual capacity enabling them to use
either of the fuels as a source of energy.
The natural gas needed to run the Company's natural gas fueled power
boilers is acquired pursuant to multiple gas contracts that provide for the
purchase of gas on an interruptible basis at favorable rates.
EMPLOYEES:
At December 30, 1995, the Company and its subsidiaries had approximately
15,400 employees. Approximately 5,300 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 513 Hourly Production Employees, August 1, 1998
Union ("UPIU"), Local 801, UPIU, 206 Hourly Mechanical Mainte-
Local 825, and International nance Employees, and 70
Brotherhood of Electrical Workers Electrical Maintenance Employees
("IBEW"), Local 390
Linerboard Mill, Orange, Texas... UPIU, Local 1398, and UPIU, Local 226 Hourly Production Employees July 31, 1999
391 and 109 Hourly Maintenance
Employees
Linerboard Mill, Rome, Georgia... UPIU, Local 804, IBEW, Local 613, 312 Hourly Production Employees, August 28, 2000
United Association of Journeymen 43 Electrical Maintenance Employ-
& Apprentices of the Plumbing & ees and 178 Hourly Maintenance
Pipefitting Industry of the U.S. Employees
and Canada, Local 766, and Inter-
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 107 Hourly Production Employees, April 30, 1996
1737, UPIU, Local 114, and UPIU, 97 Hourly Production Employees,
Local 954, respectively 108 Hourly Production Employees,
and 83 Hourly Production Employ-
ees, respectively
Rome, Georgia, and Orlando,
Florida, Box Plants ("Southern
Multiple")....................... UPIU Local 838 and UPIU Local 150 and 109 Hourly Production December 1, 1997
834, respectively Employees, respectively
</TABLE>
15
<PAGE> 17
The Company has additional collective bargaining agreements with the
employees of various of its other box plants, mills, and building products
plants. These agreements each cover a relatively small number of employees and
are negotiated on an individual basis at each such facility.
The Company considers its relations with its employees to be good.
ENVIRONMENTAL PROTECTION:
The operations conducted by the subsidiaries of the Company are subject to
federal, state, and local provisions regulating the discharge of materials into
the environment and otherwise related to the protection of the environment.
Compliance with these provisions, primarily the Federal Clean Air Act, Clean
Water Act, Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), and Resource Conservation and Recovery Act ("RCRA"), has required
the Company to invest substantial funds to modify facilities to assure
compliance with applicable environmental regulations. Capital expenditures
directly related to environmental compliance totaled approximately $9 million
during 1995. 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 the environment and strives to maintain compliance
with all state and federal environmental regulations in a manner that is also
cost effective. In the construction of new facilities and the modernization of
existing facilities, such as the modernization at the mill in Evadale, Texas,
the Company has used state of the art technology for its air and water
emissions. These forward-looking programs are intended to minimize the impact
that changing regulations have on capital expenditures for environmental
compliance.
Future expenditures for environmental control facilities will depend on new
laws and regulations and other changes in legal requirements and agency
interpretations thereof, as well as technological advances. The Company expects
the trend toward more stringent environmental regulation to continue for the
foreseeable future. The trend in interpretation and application of existing
regulations by regulatory authorities also appears to be toward increasing
stringency particularly under RCRA with respect to certain solid wastes
generated at kraft mills. Given these uncertainties, the Company currently
estimates that capital expenditures for environmental purposes during the period
1996 through 1998 will average approximately $15 million each year. The
estimated expenditures could be significantly higher if more stringent laws and
regulations are implemented.
On December 17, 1993, the U.S. Environmental Protection Agency (the "EPA")
published extensive proposed regulations governing air and water emissions from
the pulp and paper industry (the "Cluster Rules"). The Company anticipates that
these proposed regulations will change before becoming effective. Due to the
uncertainty of the final form of the Cluster Rules, it is impossible to predict
the exact capital expenditures necessary for compliance. Therefore, the
estimated expenditures disclosed above do not include expenditures that may be
mandated by the Cluster Rules. 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 may require
modifications at several facilities. Some of these modifications can be included
in modernization projects that will provide economic benefits to the Company.
The extent of such benefits can increase these investments, but currently these
expenditures are not expected to exceed $200 million over the next five years,
and could be less if the Company's recovery boilers meet the new standards.
RCRA establishes a regulatory program for the treatment, storage,
transportation, and disposal of solid and hazardous wastes. Under RCRA,
subsidiaries of the Company have prepared hazardous waste closure plans to
address land disposal units containing hazardous wastes formerly managed at
various facilities. These closure plans are in various states of implementation,
with most sites simply awaiting state certification. The
16
<PAGE> 18
Company believes that the costs associated with these plans will not have a
material impact on the earnings or competitive position of the Company.
In addition to these capital expenditures, the Company incurs significant
ongoing maintenance costs to maintain compliance with environmental regulation.
The Company, however, does not believe that these capital expenditures or
maintenance costs will have a material adverse effect on the earnings of the
Company. In addition, expenditures for environmental compliance should not have
a material impact on the competitive position of the Company, because other
companies are also subject to these regulations.
COMPETITION:
All of the industries in which the Company operates are highly competitive.
The level of competition in a given product or market may be affected by the
strength of the dollar and other market factors including geographic location,
general economic conditions, and the operating efficiencies of competitors.
Factors influencing the Company's competitive position vary depending on the
characteristics of the products involved. The primary factors are product
quality and performance, price, service, and product innovation.
The corrugated packaging industry is highly competitive with almost 1,500
box plants in the United States. Box plants operated by Inland and its
subsidiaries accounted for 8.3 percent of total industry shipments during 1995.
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.
Financial Services competes with commercial banks, savings and loan
associations, mortgage bankers, and other lenders in its mortgage banking and
consumer savings bank activities, and with real estate investment and management
companies in its development activities. Mortgage banking, real estate
development, and consumer savings banks are highly competitive businesses, and a
number of entities with which the Company competes have greater resources.
EXECUTIVE OFFICERS:
Set forth below are the names, ages, and titles of the persons who serve as
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---------------------------------- --- ---------------------------------------------
<S> <C> <C>
Clifford J. Grum.................. 61 Chairman of the Board and Chief Executive
Officer
David L. Ashcraft................. 50 Group Vice President
William B. Howes.................. 58 Group Vice President
Harold C. Maxwell................. 55 Group Vice President
Kenneth M. Jastrow, II............ 48 Group Vice President and Chief Financial
Officer
M. Richard Warner................. 44 Vice President, General Counsel, and
Secretary
David H. Dolben................... 60 Vice President and Chief Accounting Officer
David W. Turpin................... 45 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, a
Director of Inland, Chairman of the Board of Guaranty, and a Director of
Financial Services.
David L. Ashcraft became a 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.
17
<PAGE> 19
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 a Group Vice President of the Company in 1995
and the Chief Financial Officer of the Company in November 1991. He also serves
as Chairman of the Board and Chief Executive Officer of Financial Services,
President and Chief Executive Officer of Guaranty, and Chairman of the Board and
Chief Executive Officer of Temple-Inland Mortgage. 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.
M. Richard Warner became Vice President, General Counsel and Secretary of
the Company in June 1994. From 1991 to 1994, Mr. Warner was an attorney in
private practice in Lufkin, Texas. Mr. Warner served as Treasurer of the Company
from January 1986 to 1990 and as Vice Chairman of Guaranty from 1990 to 1991.
David H. Dolben became Vice President of the Company in May 1987. Mr.
Dolben also serves as Vice President, Treasurer, and a Director of Temple-Inland
FPC and a Director of Inland.
David W. Turpin became Treasurer of the Company in June 1991. Mr. Turpin
also serves as the Executive Vice President and Chief Financial Officer of
Lumbermen's Investment Corporation, a real estate subsidiary of the Company. Mr.
Turpin was first employed by the Company in December 1990 as the Senior Vice
President and Treasurer of Lumbermen's Investment Corporation.
Officers are elected at the Company's Annual Meeting of Directors to serve
until their successors have been elected and have qualified or as otherwise
provided in the Company's Bylaws.
ITEM 2. PROPERTIES:
The Company owns and operates plants, mills, and manufacturing facilities
throughout the United States and has three box plants in Mexico and 50 percent
joint venture interests in box plants in Argentina and Chile. Additional
descriptions as of year-end of selected properties are set forth in the
following charts:
CONTAINERBOARD MILLS
<TABLE>
<CAPTION>
RATED
NO. OF ANNUAL 1995*
LOCATION PRODUCT MACHINES CAPACITY PRODUCTION
- ------------------------------------------------- ------------ -------- -------- ----------
(IN TONS)
<S> <C> <C> <C> <C>
Ontario, California.............................. Linerboard 1 295,000 269,000
Rome, Georgia.................................... Linerboard 2 805,000 778,000
Orange, Texas.................................... Linerboard/ 2 675,000 609,000
Kraft Paper
Maysville, Kentucky.............................. Linerboard 1 345,000 306,000
Newark, California............................... Medium 2 70,000 62,000
Newport, Indiana................................. Medium 1 275,000 253,000
New Johnsonville, Tennessee...................... Medium 1 257,000 237,000
</TABLE>
- ---------------
* Production during the second half of 1995 was curtailed due to economic
conditions in the industry.
18
<PAGE> 20
BLEACHED PAPERBOARD MILL
<TABLE>
<CAPTION>
RATED
NO. OF ANNUAL 1995
LOCATION PRODUCT MIX MACHINES CAPACITY PRODUCTION
- ------------------------- --------------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
(IN TONS)
Evadale, Texas........... Bleached Pulp 2% 4 725,000 9,336
Food Service 40% 233,368
Packaging 29% 168,748
Office Supplies 18% 104,140
Specialties 6% 33,411
Nodular Pulp 5% 31,137
---- -------- ----------
100% 4 725,000* 580,140
===== ======= ========
</TABLE>
- ---------------
* Such capacity may vary to some degree depending on product mix. A fifth
machine at the mill is no longer operating due to market conditions for the
paperboard grade it was designed to produce. The annual capacity shown above
includes the rated annual capacity of the new No. 5 machine, which did not go
on-line until late in the fourth quarter of 1995.
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
Farmersville, Louisiana(1)........................................... 29,000 1994
</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) These facilities are owned by the Company. The other converting plants are
leased.
Additionally, Food Service rents, from time to time, warehouse space near
its converting plants primarily to store finished products awaiting shipment.
19
<PAGE> 21
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" 1973
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
Rome, Georgia**................................................... 87" & 98" 1955
Chicago, Illinois................................................. 87" 1957
Crawfordsville, Indiana........................................... 98" 1971
Evansville, Indiana............................................... 98" 1958
Indianapolis, Indiana............................................. 87" 1990
Garden City, Kansas............................................... 96" 1981
Kansas City, Kansas............................................... 87" 1981
Louisville, Kentucky.............................................. 87" 1958
Minden, Louisiana................................................. 98" 1986
Minneapolis, Minnesota............................................ 87" 1986
Hattiesburg, Mississippi.......................................... 87" 1965
St. Louis, Missouri............................................... 87" 1963
Spotswood, New Jersey............................................. 87" 1963
Middletown, Ohio.................................................. 98" 1930
Biglerville, Pennsylvania......................................... 98" 1955
Erie, Pennsylvania................................................ 85" 1952
Hazleton, Pennsylvania............................................ 98" 1976
Vega Alta, Puerto Rico............................................ 87" 1977
Lexington, South Carolina......................................... 98" 1980
Rock Hill, South Carolina......................................... 87" 1972
Elizabethton, Tennessee........................................... 98" 1982
Elizabethton, Tennessee(1)***..................................... None 1990
Dallas, Texas..................................................... 98" 1962
Edinburg, Texas................................................... 87" 1989
Petersburg, Virginia.............................................. 87" 1991
San Jose Iturbide, Mexico......................................... 87" 1994
Monterrey, Mexico................................................. 63" 1994
Los Mochis, Sinaloa, Mexico***.................................... None 1995
Buenos Aires, Argentina(2)........................................ 98" 1994
Santiago, Chile(2)................................................ 87" 1995
</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.
(2) This facility is owned by a joint venture in which the Company has a 50%
interest.
(3) During 1995, the Company also operated a box plant in Macon, Georgia, which
was closed at the end of the year.
20
<PAGE> 22
Additionally, Inland owns a graphics resource center in Indianapolis,
Indiana, that has a 100" preprint press and a tape manufacturing facility in
Milwaukee, Wisconsin, and also leases 30 warehouses located throughout much of
the United States. Inland owns a specialty converting plant in Harrington,
Delaware, and leases specialty converting plants in Ontario, California;
Leominster, Massachusetts; and Rural Hall, North Carolina.
BUILDING PRODUCTS
<TABLE>
<CAPTION>
RATED
ANNUAL
DESCRIPTION LOCATION CAPACITY
- ------------------------------------------------------ ------------------------ ---------------
<S> <C> <C>
(IN MILLIONS OF
BOARD FEET)
Lumber................................................ Diboll, Texas 150*
Lumber................................................ Pineland, Texas 85
Lumber................................................ Buna, Texas 170
Lumber................................................ Rome, Georgia 90
Lumber................................................ DeQuincy, Louisiana 140
</TABLE>
- ---------------
* Includes separate finger jointing capacity of 10 million board feet.
<TABLE>
<CAPTION>
RATED
ANNUAL
DESCRIPTION LOCATION CAPACITY
- ------------------------------------------------------ ------------------------ ---------------
<S> <C> <C>
(IN MILLIONS OF
SQUARE FEET)
Fiberboard............................................ Diboll, Texas 460
Particleboard......................................... Monroeville, Alabama 120
Particleboard......................................... Thomson, Georgia 115
Particleboard......................................... Diboll, Texas 115
Particleboard......................................... Hope, Arkansas 170
Plywood............................................... Pineland, Texas 265
Gypsum Wallboard...................................... West Memphis, Arkansas 390
Gypsum Wallboard...................................... Fletcher, Oklahoma 430
</TABLE>
TIMBER AND TIMBERLANDS*
(IN ACRES)
<TABLE>
<S> <C>
Pine Plantations.......................................................... 1,303,716
Natural Pine.............................................................. 355,146
Hardwood.................................................................. 213,080
Special Use............................................................... 42,975
---------
TOTAL................................................................... 1,914,917
=========
</TABLE>
- ---------------
* Includes approximately 95,000 acres of leased land.
In the opinion of management, the Company's plants, mills, and
manufacturing facilities are suitable for their purpose and adequate for the
Company's business.
The Company owns certain of the office buildings in which various of its
corporate offices are headquartered. This includes approximately 76,000 square
feet of space in Diboll, Texas, and approximately 100,000 square feet in
Indianapolis, Indiana. During 1995, the Company completed construction of a
270,000 square foot office building in Austin, Texas, which houses nearly 1,000
employees of Financial Services.
The Company also owns 341,000 mineral acres in Texas and Louisiana. Revenue
from lease and production activities on these acres totaled $4.8 million in
1995. Additionally, the Company owns 395,830 mineral acres in Alabama and
Georgia. There was no significant income from these mineral acres in 1995.
21
<PAGE> 23
At year end 1995, property and equipment having a net book value of
approximately $42.9 million were subject to liens in connection with $62.4
million of debt.
ITEM 3. LEGAL PROCEEDINGS:
GENERAL:
The Company and its subsidiaries are involved in various legal proceedings
that have arisen from time to time in the ordinary course of business. In the
opinion of the Company's management, such proceedings will not be material to
the business or financial condition of the Company and its subsidiaries.
ENVIRONMENTAL:
The facilities of the Company are periodically inspected by environmental
authorities and must file periodic reports on the discharge of pollutants with
these authorities. Occasionally, one or more of these facilities have operated
in violation of applicable pollution control standards, which could subject the
facilities to fines or penalties in the future. Management believes that any
fines or penalties that may be imposed as a result of these violations will not
have a material adverse effect on the Company's earnings or competitive
position. The Company, however, has noticed an increase in the number and dollar
amount of fines and penalties imposed by environmental authorities. No assurance
can be given, therefore, that any fines levied against the Company in the future
for any such violations will not be material.
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
(2,3,7,8 -- TCDD) in some samples of paper mill sludge and bleach pulp. During
1992, the Company completed modifications to its bleaching process that
successfully reduced the dioxin in its wastewater emissions to a point that
dioxin was not detected in tests conducted during 1994 and 1995. The possible
effects of human exposure to dioxin in trace amounts is currently the subject of
much debate. Based on scientific studies conducted to date, the Company believes
that human exposure to dioxin in whatever trace concentration might remain, if
any, in the Company's treated wastewater does not represent a health risk to its
employees or to the public.
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. In July 1993, a subsidiary's facility in Rome, Georgia, experienced a
significant upset in its wastewater treatment process. This upset caused the
Georgia environmental agency to order a temporary cessation of production. The
Company's subsidiary has resolved its potential liability to the State of
Georgia by paying a $100,000 monetary penalty and agreeing to perform certain
work, but remains exposed to other potential claims. During the fourth quarter
of 1995, the Company paid a fine in the amount of $318,650 to the Texas Natural
Resource Conservation Commission pursuant to an agreed order in settlement of
alleged violations dating back to 1993 involving odor violations, TRS and
particulate emission violations, and record keeping and reporting violations at
the Company's bleached paperboard mill in Evadale, Texas. Management believes,
however, that these matters will not result in liability to an extent that would
have a material adverse effect on the business or financial condition of the
Company.
Under CERCLA, liability for the cleanup of a Superfund site may be imposed
on waste generators, site owners and operators, and others regardless of fault
or the legality of the original waste disposal activity. While joint and several
liability is authorized under CERCLA, as a practical matter, the cost of cleanup
is generally allocated among the many waste generators. Subsidiaries of the
Company are parties to numerous proceedings relating to the cleanup of hazardous
waste sites under CERCLA and similar state laws. The subsidiaries have conducted
investigations of the sites and in certain instances believe that there is no
basis for liability and have so informed the governmental entities. The internal
investigations of the remaining sites reveal that the portion of the remediation
costs for these sites to be allocated to the Company should be relatively small
and will have no material impact on the Company. There can be no assurance that
subsidiaries of the Company will not be
22
<PAGE> 24
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 indemnification agreement 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 business or financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
The Company did not submit any matter to a vote of its shareholders during
the fourth quarter of its last fiscal year.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:
MARKET INFORMATION:
The information concerning market prices of the Company's Common Stock
required by this item is incorporated by reference from page 36 of the Company's
1995 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, 1996,
there were approximately 7,650 holders of record of the Common Stock.
DIVIDEND POLICY:
On February 2, 1996, the Board of Directors declared a quarterly dividend
on the Common Stock of $.30 per share payable on March 15, 1996, to shareholders
of record on March 1, 1996. During the first three quarters of 1994, the Company
paid a quarterly dividend of $.25 per share. The quarterly dividend was
increased to $.27 per share beginning with the dividend payable December 15,
1994. The dividend was again increased to $.30 per share beginning with the
dividend payable September 15, 1995. The Board will review its dividend policy
periodically, and the declaration of dividends will necessarily depend upon
earnings and financial requirements of the Company and other factors within the
discretion of its Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA:
The information required by this item is incorporated by reference from
page 36 of the Company's 1995 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 27 through 35 of the Company's 1995 Annual Report to Shareholders
furnished to the Securities and Exchange Commission pursuant to Rule 14a-3(b).
23
<PAGE> 25
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 11 through 18 of the Company's Definitive Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
The information required by this item is incorporated by reference from
pages 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.
1. FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER
-------------------------------------------------------------------------- ------
<S> <C>
Temple-Inland Inc. and Subsidiaries
Report of Independent Auditors*......................................... 59
Consolidated Statements of Income -- three years ended December 30,
1995*................................................................ 50
Consolidating Balance Sheets at December 30, 1995 and December 31,
1994*................................................................ 52-53
Consolidated Statements of Shareholders' Equity -- three years ended
December 30, 1995*................................................... 54
Consolidated Statements of Cash Flows -- three years ended December 30,
1995*................................................................ 51
Notes to Consolidated Financial Statements*............................. 55-58
</TABLE>
- ---------------
* Incorporated herein by reference from the Company's Annual Report to
Shareholders for the fiscal year ended December 30, 1995, and filed for
purposes of those portions so incorporated as Exhibit 13. Page numbers refer
to page numbers in the Company's 1995 Annual Report to Shareholders.
24
<PAGE> 26
2. FINANCIAL STATEMENT SCHEDULE:
The following Financial Statement Schedule of the Company required by
Regulation S-X and excluded from the Annual Report to Shareholders for the year
ended December 30, 1995, is filed herewith at the page indicated.
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER
-------------------------------------------------------------------------- ------
<S> <C>
Temple-Inland Inc. and Subsidiaries
Schedule II -- Valuation and Qualifying Accounts........................ 29
</TABLE>
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
- -------------------- ------------------------------------------------------------------------
<C> <S>
3.01 -- Certificate of Incorporation of the Company(1), as amended effective
May 4, 1987(2), as amended effective May 4, 1990(3)
3.02 -- By-laws of the Company as amended and restated May 3, 1991(18)
4.01 -- Form of Specimen Common Stock Certificate of the Company(4)
4.02 -- Indenture dated as of September 1, 1986, between the Registrant and
Chemical Bank, as Trustee(5), as amended by First Supplemental
Indenture dated as of April 15, 1988, as amended by Second
Supplemental Indenture dated as of December 27, 1990(12), and as
amended by Third Supplemental Indenture dated as of May 9, 1991(13)
4.03 -- Form of Specimen Medium-Term Note of the Company(5)
4.04 -- Form of Fixed-rate Medium-Term Note, Series B, of the Company(12)
4.05 -- Form of Floating-rate Medium-Term Note, Series B, of the Company(12)
4.06 -- Form of 9% Note due May 1, 2001, of the Company(15)
4.07 -- Form of Fixed-rate Medium-Term Note, Series D, of the Company(14)
4.08 -- Form of Floating-rate Medium-Term Note, Series D, of the Company(14)
4.09 -- Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock, dated February 16, 1989(6)
4.10 -- Rights Agreement, dated February 3, 1989, between the Company and
NCNB Texas National Bank, Dallas, Texas, as Rights Agent(7)
4.11 -- Form of 7.25% Note due September 15, 2004, of the Company(16)
4.12 -- Form of 8.25% Debenture due September 15, 2022, of the Company(16)
10.01* -- 1988 Stock Option Plan for Key Employees and Directors of
Temple-Inland Inc. and its Subsidiaries(8)
10.02* -- Form of Incentive Option Agreement under the 1988 Stock Option
Plan(8)
10.03* -- Form of Nonqualified Option Agreement under the 1988 Stock Option
Plan(8)
10.04* -- Temple-Inland Inc. Incentive Stock Plan(1), as amended May 6,
1988(9), as amended February 7, 1992(18)
10.05* -- Form of Incentive Shares Agreement(10)
10.06* -- 1988 Performance Unit Plan for Key Employees of Temple-Inland Inc.
and its Subsidiaries(9), as amended February 4, 1994(20)
10.07* -- Form of Performance Unit Rights Agreement under the Performance Unit
Plan(6)
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.08 -- Assistance Agreement dated September 30, 1988, among the Federal
Savings and Loan Insurance Corporation; Guaranty Federal Savings
Bank, Dallas, Texas; Guaranty Holdings Inc. I; Guaranty Holdings Inc.
II; Temple-Inland Inc.; Mason Best Company; and Trammell Crow
Ventures 3, Ltd.(11)
10.09* -- Temple-Inland Inc. 1993 Stock Option Plan(17)
10.10* -- Temple-Inland Inc. 1993 Restricted Stock Plan(17)
10.11* -- Temple-Inland Inc. 1993 Performance Unit Plan(17), as amended
February 4, 1994(20)
10.12 -- Stock Purchase Agreement and Agreement and Plan of Reorganization by
and among Guaranty, Guaranty Holdings Inc. I ("GHI"), Lone Star
Technologies, Inc. ("LST"), and LSST Financial Services Corporation
("LSST Financial"), dated as of February 16, 1993(19)
10.13 -- First Amendment to Stock Purchase agreement and Agreement and Plan of
Reorganization by and among Guaranty, GHI, LST and LSST Financial,
dated as of April 2, 1993(19)
10.14 -- Second Amendment to Stock Purchase Agreement and Agreement and Plan
of Reorganization by and among Guaranty, GHI, LST and LSST Financial,
dated as of August 31, 1993(19)
10.15 -- Third Amendment to Stock Purchase Agreement and Agreement and Plan of
Reorganization by and among Guaranty, GHI, LST and LSST Financial,
dated as of September 30, 1993(19)
10.16 -- Holdback Escrow Agreement by and among LST, Guaranty, and Bank One,
Texas, N.A. dated as of November 12, 1993(19)
10.17 -- Termination Agreement by and among Federal Deposit Insurance
Corporation, as Manager of the FSLIC Resolution Fund, Guaranty
Federal Bank, F.S.B., Guaranty Holdings Inc. I, and Temple-Inland
Inc., dated as of October 31, 1995(21)
10.18 -- GFB Tax Agreement by and among Federal Deposit Insurance Corporation,
as Manager of the FSLIC Resolution Fund, Guaranty Federal Bank,
F.S.B., Guaranty Holdings Inc. I, and Temple-Inland Inc., dated as of
October 31, 1995(21)
10.19 -- Termination Agreement by and among Federal Deposit Insurance
Corporation, as Manager of the FSLIC Resolution Fund, Guaranty
Federal Bank, F.S.B., the surviving institution resulting from the
merger of American Federal Bank, F.S.B. with and into Guaranty, which
subsequently became the successor-in-interest to LSST Financial
Services Corporation, Guaranty Holdings Inc. I, and Temple-Inland
Inc., dated as of October 31, 1995(21)
10.20 -- AFB Tax Agreement by and among Federal Deposit Insurance Corporation,
as Manager of the FSLIC Resolution Fund, Guaranty Federal Bank,
F.S.B., the surviving institution resulting from the merger of
American Federal Bank, F.S.B. with and into Guaranty, which
subsequently became the successor-in-interest to LSST Financial
Services Corporation, Guaranty Holdings Inc. I, and Temple-Inland
Inc., dated as of October 31, 1995(21)
11 -- Statement re: Computation of Per Share Earnings for the three years
ended December 30, 1995(22)
13 -- Annual Report to Shareholders for the year ended December 30, 1995.
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(22)
23 -- Consent of Ernst & Young LLP(22)
27 -- Financial Data Schedule(22)
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement.
26
<PAGE> 28
(1) Incorporated by reference to Registration Statement No. 2-87570 on Form S-1
filed by the Company with the Commission.
(2) Incorporated by reference to Post-effective Amendment No. 2 to Registration
Statement No. 2-88202 on Form S-1 filed by the Company with the Commission.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement No. 33-25650 on Form S-8 filed by the Company with the
Commission.
(4) Incorporated by reference to Registration Statement No. 33-27286 on Form
S-8 filed by the Company with the Commission.
(5) Incorporated by reference to Registration Statement No. 33-8362 on Form S-1
filed by the Company with the Commission.
(6) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1988.
(7) Incorporated by reference to the Company's Form 8-K filed with the
Commission on February 16, 1989.
(8) Incorporated by reference to Registration Statement No. 33-23132 on Form
S-8 filed by the Company with the Commission.
(9) Incorporated by reference to the Company's Definitive Proxy Statement filed
with the Commission on March 18, 1988.
(10) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1983.
(11) Incorporated by reference to the Company's Form 8-K filed with the
Commission on October 14, 1988.
(12) Incorporated by reference to the Company's Form 8-K filed with the
Commission on December 27, 1990.
(13) Incorporated by reference to Registration Statement No. 33-40003 on Form
S-3 filed by the Company with the Commission.
(14) Incorporated by reference to Registration Statement No. 33-43978 on Form
S-3 filed by the Company with the Commission.
(15) Incorporated by reference to the Company's Form 8-K filed with the
Commission on May 2, 1991.
(16) Incorporated by reference to Registration Statement No. 33-50880 on Form
S-3 filed by the Company with the Commission.
(17) Incorporated by reference to the Company's Definitive Proxy Statement in
connection with the Annual Meeting of Shareholders to be held May 6, 1994,
and filed with the Commission on March 21, 1994.
(18) Incorporated by reference to the Company's Form 10-K for the year ended
January 2, 1993.
(19) Incorporated by reference to the Company's Form 8-K filed with the
Commission on November 24, 1993.
(20) Incorporated by reference to the Company's Form 10-K for the year ended
January 1, 1994.
(21) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
(22) Filed herewith.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1995.
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 22,
1996.
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
- ----------------------------------------------- ----------------------------- ---------------
<C> <S> <C>
/s/ CLIFFORD J. GRUM Director, Chairman of the March 22, 1996
------------------------------ Board, and Chief Executive
Clifford J. Grum Officer
/s/ KENNETH M. JASTROW, II Group Vice President and March 22, 1996
------------------------------ Chief Financial Officer
Kenneth M. Jastrow, II
/s/ DAVID H. DOLBEN Vice President and Chief March 22, 1996
------------------------------ Accounting Officer
David H. Dolben
/s/ PAUL M. ANDERSON Director March 22, 1996
------------------------------
Paul M. Anderson
/s/ ROBERT CIZIK Director March 22, 1996
------------------------------
Robert Cizik
/s/ ANTHONY M. FRANK Director March 22, 1996
------------------------------
Anthony M. Frank
/s/ BOBBY R. INMAN Director March 22, 1996
------------------------------
Bobby R. Inman
/s/ HERBERT A. SKLENAR Director March 22, 1996
------------------------------
Herbert A. Sklenar
/s/ WALTER P. STERN Director March 22, 1996
------------------------------
Walter P. Stern
/s/ ARTHUR TEMPLE III Director March 22, 1996
-------------------------------
Arthur Temple III
/s/ CHARLOTTE TEMPLE Director March 22, 1996
--------------------------------
Charlotte Temple
/s/ LARRY E. TEMPLE Director March 22, 1996
--------------------------------
Larry E. Temple
</TABLE>
28
<PAGE> 30
SCHEDULE II
TEMPLE-INLAND INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<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 December 30, 1995:
Deducted from accounts
receivable:
Allowance for doubtful
accounts................... $ 8.4 $ 1.9 $ -- $ 2.0(A) $ 8.3
Reserve for discounts and
allowances................. .7 -- 7.9(B) 7.1(C) 1.5
Allowance for loan losses.... 53.9 14.6 4.2(D) 7.2(A) 65.5
Allowance for unrealized
losses on
available-for-sale
securities................. .7 (.7) (1.7)(E) -- (1.7)
Allowance for unrealized
losses on mortgage loans
held for sale.............. .8 -- -- .5(A) .3
------ ---------- ----------- ------ ---------
Totals.................. $ 64.5 $ 15.8 $10.4 $16.8 $73.9
========= ======== ========= ========== =======
Year ended December 31, 1994:
Deducted from accounts
receivable:
Allowance for doubtful
accounts................... $ 7.4 $ 1.9 $ -- $ .9(A) $ 8.4
Reserve for discounts and
allowances................. 1.0 2.7 5.1(B) 8.1(C) .7
Allowance for loan losses.... 47.9 6.5 7.6(D) 8.1(A) 53.9
Allowance for unrealized
losses on
available-for-sale
securities................. -- .7 -- -- .7
Allowance for unrealized
losses on mortgage loans
held for sale.............. 1.6 (.3) -- .5(A) .8
------ ---------- ----------- ------ ---------
Totals.................. $ 57.9 $ 11.5 $12.7 $17.6 $64.5
========= ======== ========= ========== =======
Year ended January 1, 1994:
Deducted from accounts
receivable:
Allowance for doubtful
accounts................... $ 5.8 $ 2.6 $ -- $ 1.0(A) $ 7.4
Reserve for discounts and
allowances................. .6 2.5 4.7(B) 6.8(C) 1.0
Allowance for loan losses.... 20.8 4.8 24.0(D) 1.7(A) 47.9
Allowance for unrealized
losses on mortgage loans
held for sale.............. 2.1 .2 -- .7(A) 1.6
------ ---------- ----------- ------ ---------
Totals.................. $ 29.3 $ 10.1 $28.7 $10.2 $57.9
========= ======== ========= ========== =======
</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.
(E) Unrealized gains.
29
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
11 -- Statement re: Computation of Per Share Earnings for the three years
ended December 30, 1995
13 -- Annual Report to Shareholders for the year ended December 30, 1995.
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
23 -- Consent of Ernst & Young LLP
27 -- Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT 11
TEMPLE-INLAND INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN MILLIONS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
DECEMBER 30, DECEMBER 31, JANUARY 1,
1995 1994 1994
------------ ------------ ----------
<S> <C> <C> <C>
PRIMARY
Average common shares outstanding........................... 56.0 55.8 55.3
Net effect of dilutive stock options based on treasury stock
method using average market price......................... .1 .1 .2
------------ ------------ ----------
Weighted average shares outstanding.................... 56.1 55.9 55.5
========== ========== =======
Net income:
Income before accounting changes.......................... $281.0 $131.4 $ 67.3
Cumulative effect of accounting changes................... -- -- 50.0
------------ ------------ ----------
Net income................................................ $281.0 $131.4 $117.3
========== ========== =======
Earnings per share:
Before accounting changes................................. $ 5.01 $ 2.35 $ 1.21
Effect of accounting changes.............................. -- -- .90
------------ ------------ ----------
Earnings per share........................................ $ 5.01 $ 2.35 $ 2.11
========== ========== =======
FULLY DILUTED
Average common shares outstanding........................... 56.0 55.8 55.3
Net effect of dilutive stock options based on treasury stock
method using the closing market price, if higher than
average market price...................................... .1 .1 .3
------------ ------------ ----------
Weighted average shares outstanding.................... 56.1 55.9 55.6
========== ========== =======
Net income:
Income before accounting changes.......................... $281.0 $131.4 $ 67.3
Cumulative effect of accounting changes................... -- -- 50.0
------------ ------------ ----------
Net income................................................ $281.0 $131.4 $117.3
========== ========== =======
Earnings per share:
Before accounting changes................................. $ 5.01 $ 2.35 $ 1.21
Effect of accounting changes.............................. -- -- .90
------------ ------------ ----------
Earnings per share........................................ $ 5.01 $ 2.35 $ 2.11
========== ========== =======
</TABLE>
<PAGE> 1
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations and Financial Condition
Results of operations including information regarding the principal business
segments are shown below.
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
For the year 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in millions)
REVENUES
Corrugated container $1,825 $1,438 $1,249 $1,254 $1,148 $1,144 $1,138 $1,093 $964 $722 $684
Bleached paperboard 369 299 319 353 371 373 368 336 293 265 257
Building products 502 549 475 391 311 305 320 312 323 281 268
Other activities - 20 58 77 68 70 68 33 23 28 34
-----------------------------------------------------------------------------------------
Manufacturing
net sales 2,696 2,306 2,101 2,075 1,898 1,892 1,894 1,774 1,603 1,296 1,243
Financial services 764 632 635 638 609 509(a) 49 40 39 47 39
-----------------------------------------------------------------------------------------
Total Revenues $3,460 $2,938 $2,736 $2,713 $2,507 $2,401 $1,943 $1,814 $1,642 $1,343 $1,282
=========================================================================================
INCOME BEFORE TAXES
Corrugated container 344 102 21 112 76 151 208 221 151 39 50
Bleached paperboard 19 (22) (12) 23 80 99 115 83 53 29 20
Building products 61 133 99 40 5 9 24 25 37 36 23
Other activities - 1 (2) (2) 1 (2) (1) 1 - (6) 2
-----------------------------------------------------------------------------------------
Operating profit 424 214 106 173 162 257 346 330 241 98 95
Financial services 98 56 68 64 54 52(a) (2) - 5 13 18
-----------------------------------------------------------------------------------------
522 270 174 237 216 309 344 330 246 111 113
Corporate expense (22) (14) (11) (15) (16) (21) (13) (20) (12) (13) (8)
Parent company
interest-net (73) (67) (69) (48) (38) (26) (26) (23) (23) (19) (10)
Other income 4 4 2 3 5 7 7 17 9 30(b) 31(c)
-----------------------------------------------------------------------------------------
Income before taxes $ 431 $ 193 $ 96 $ 177 $ 167 $ 269 $ 312 $ 304 $220 $109 $126
=========================================================================================
</TABLE>
During the five preceding fiscal years, the Company's cumulative total
shareholder return compared with the Standard & Poor's 500 Stock Index and to
the Standard & Poor's Paper Industry Index was as shown in the following table.
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TEMPLE-INLAND
(FISCAL YEAR COVERED) INC. S&P 500 S&P PAPER
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 165.55 130.47 126.84
1992 168.72 140.41 145.03
1993 168.57 154.56 159.84
1994 154.10 156.60 166.55
1995 153.49 214.86 183.38
</TABLE>
(a) Includes operating results from the consolidation of Guaranty Federal Bank,
F.S.B., beginning January 1, 1990.
(b) Includes $15.3 million income net of federal income taxes from life
insurance operations which were discontinued in 1990.
(c) Includes $11.3 million gain on the sale of Eastex Packaging subsidiary.
1995 Annual Report | 27
<PAGE> 2
CORRUGATED CONTAINER
The Corrugated Container Group manufactures linerboard and corrugating medium
at seven paper mills and converts it into corrugated shipping containers at 42
box plants located throughout the United States and in Puerto Rico, Mexico and
South America. In addition, the Group operates six specialty converting plants.
The Group earned $344 million in 1995, more than triple the $102 million
earned in 1994. Revenue growth was 27 percent in 1995 compared with 15 percent
in 1994.
The strong global demand for boxes in 1994 carried over to the first half
of 1995, providing the conditions for price improvement. Even though demand
weakened in the second half of 1995, improved box prices held through most of
1995. In addition, the Company's strategy to become a diversified packaging
company rather than simply a producer of shipping containers paid dividends in
both 1995 and 1994 with revenues from the specialty packaging business growing
toward a goal of 33 percent of the Group's total revenues. Tons of boxes sold
were relatively unchanged in 1995 and were up 6 percent in 1994. For the second
consecutive year, the combination of these factors allowed revenues and
earnings as a percent of revenues to improve substantially.
The earnings improvement occurred despite a much higher average cost in
1995 and 1994 of old corrugated containers (OCC), the primary raw material in
over 42 percent of the Group's containerboard production. The cost of OCC was
up $55 per ton in 1995 and $49 per ton in 1994.
As indicated in the table below, mill production, curtailed by 132,000
tons to control inventory levels, totaled 2,514,000 tons in 1995, an 89,000 ton
reduction from the previous year. Production of containerboard exceeded
internal box plant usage by 317,000 tons in 1995, and 376,000 tons in both 1994
and 1993. Excess production was sold in the domestic and export markets.
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------------
<S> <C> <C> <C>
(in tons)
MILL PRODUCTION 2,514,000 2,603,000 2,473,000
================================
</TABLE>
Box production at the Mexican, Puerto Rican and South American converting
facilities grew to 90,000 tons in 1995 from 40,000 tons in 1994.
In May 1994, the Company purchased the stock of Rand-Whitney Packaging
Corporation for $57.5 million. Included in the purchase were three
manufacturing plants specializing in litho-laminate corrugated packaging and
high graphics folding cartons. In 1995, the Company expanded this operation
with an additional plant in Ontario, California, and acquired C.B. Displays of
Rural Hall, North Carolina, a producer of point-of-sale packaging. This year,
the Group also acquired a controlling interest in Wesland Container LLC in
Little Rock, Arkansas, a producer of medical waste boxes. As a result of these
acquisitions and expansions, the Company has the ability to service the
national litho-laminate market.
The table below shows the Corrugated Container Group 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. After rising in
1994 in response to the initial surge in demand as the paper cycle turned
upward, 1995's decrease in unit sales was primarily due to weaker market
conditions.
CORRUGATED CONTAINER
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------
<S> <C> <C> <C>
UNIT SALES
(in thousands of tons)
1st Qtr 602 628 598
2nd Qtr 614 648 606
3rd Qtr 564 622 593
4th Qtr 553 594 597
------------------------------
For the year 2,333 2,492 2,394
==============================
NET SALES
(in millions)
1st Qtr $ 433.4 $ 326.9 $ 318.5
2nd Qtr 476.4 353.8 319.6
3rd Qtr 464.9 371.2 307.8
4th Qtr 450.1 386.3 302.6
------------------------------
For the year 1,824.8 1,438.2 1,248.5
==============================
</TABLE>
28 | Temple-Inland Inc.
<PAGE> 3
BLEACHED PAPERBOARD
The Bleached Paperboard Group manufactures bleached paperboard at one mill in
Evadale, Texas. This Group's products are sold to commercial printers and
paperboard converters, including converters serving packaging, food service and
office product markets.
The Group reported income of $18.6 million in 1995 compared with a loss of
$22.1 million in 1994. As a result of strengthening demand and improved product
mix, average prices for bleached paperboard were up 30 percent over 1994
averages, which were 6 percent below 1993 levels. However, increased
manufacturing costs offset some of the gain in pricing. Manufacturing costs
were up 10 percent in 1995 compared with 1994 because of operational
disruptions related to the various construction projects, the start-up of a new
paper machine and an increase in fiber costs of 10 percent. Manufacturing
costs were up 5 percent in 1994 compared with 1993, primarily because of
increased fiber cost.
The year opened with strong demand across all product lines and increasing
prices. However, by mid-year demand began to decelerate and by year end was
very weak, particularly in the packaging markets. This weakness coupled with
start-up tonnage on the new paper machine caused finished goods inventories to
grow significantly during the last half of 1995. Once demand recovers,
inventory should decrease, but the improved product mix will require
inventories to be maintained at higher than historic levels.
The Group completed a $500 million modernization and expansion program
during 1995. The cornerstone of this project is a new 550 ton per day
paperboard machine capable of producing low density, lightweight bleached
paperboard and bleached bristols. Other key elements of the expansion project
included major technological upgrades on three existing paperboard machines, a
pine fiberline, a coating plant, a power boiler, an extruder plant, a lime kiln
and a concentrator. Additionally, one of the mill's recovery boilers was
rebuilt during the third and fourth quarters of 1995. While these projects
caused manufacturing costs to be higher during 1995, a return to normal
production levels should significantly reduce costs as a result of this
advanced technology.
Before the modernization and expansion, the Evadale mill could efficiently
manufacture about one-half of all bleached paperboard grades. However, with the
addition of the new paperboard machine and the upgrades to the three existing
machines, the mill will have the capability to produce most of these grades
efficiently. The higher-end grades, primarily printing and low density folding
carton, should have better margins than the commodity oriented grades.
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, Denver, Colorado, and Farmersville,
Louisiana. Products manufactured 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 develop and market paper products for
the food service industry. Food Service converted 65,583 and 51,919 tons of
bleached paperboard and recorded revenues of $80.9 million and $57.9 million
during 1995 and 1994, respectively.
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.
BLEACHED PAPERBOARD
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------
<S> <C> <C> <C>
UNIT SALES
(in thousands of tons)
Paperboard
1st Qtr 120 106 116
2nd Qtr 97 109 109
3rd Qtr 83 112 103
4th Qtr 100 103 98
------------------------------
For the year 400 430 426
==============================
Pulp
1st Qtr 16 20 38
2nd Qtr 28 25 41
3rd Qtr 20 24 33
4th Qtr 35 18 22
------------------------------
For the year 99 87 134
==============================
NET SALES
(in millions)
Paperboard
1st Qtr $ 70.7 $ 51.1 $ 63.9
2nd Qtr 56.8 54.4 60.1
3rd Qtr 54.4 56.3 53.7
4th Qtr 67.1 55.6 51.0
------------------------------
For the year $ 249.0 $217.4 $ 228.7
==============================
Pulp
1st Qtr $ 5.3 $ 4.4 $ 10.3
2nd Qtr 12.8 5.3 10.3
3rd Qtr 7.1 6.6 7.9
4th Qtr 11.7 5.8 4.9
------------------------------
For the year $ 36.9 $ 22.1 $ 33.4
==============================
Food Service and Other
1st Qtr $ 18.7 $ 14.2 $ 14.6
2nd Qtr 22.7 16.3 16.5
3rd Qtr 22.2 16.2 14.0
4th Qtr 19.5 13.2 11.3
------------------------------
For the year $ 83.1 $ 59.9 $ 56.4
==============================
</TABLE>
1995 Annual Report | 29
<PAGE> 4
BUILDING PRODUCTS
The Building Products Group manufactures a diversified line of construction and
commercial grade building materials at ten locations in Texas, Louisiana,
Oklahoma, Arkansas, Alabama and Georgia. Three-fourths of its revenues are
typically realized from wood-based materials made from Southern pine logs or
log residues. These products include lumber, plywood, fiber products and
particleboard sold to both residential and commercial market segments. The
non-wood based business unit manufactures a variety of gypsum wallboard
products which are sold to the same market segments.
The Group's retail locations, which sell a broad range of building
materials to the contractor and retail markets, accounted for 10 percent of
Group net revenues in 1995. Approximately 15 percent of 1995's retail revenues
were derived from Group manufactured products. Early in the fourth quarter, the
Group sold its two Houston area retail operations, which historically accounted
for about 80 percent of annual retail revenues.
The Group earned $61.0 million in 1995, the third highest level in its
history following record earnings of $132.6 million in 1994 and $99.1 million
in 1993. Revenues were down 9 percent in 1995 compared with a 16 percent
increase in 1994. The decrease in revenues from 1994 was attributable to lower
lumber prices and decreased volume. The reverse was largely true in comparing
1994 with 1993. In addition to the effect of sales prices, earnings as a
percent of revenues decreased compared with 1994 due to increases in the cost
of pine sawtimber. Except for the gypsum wallboard unit, shipments across all
product lines declined in 1995 as demand softened for building materials in
conjunction with an approximate 8 percent reduction in housing starts.
The following table provides information on unit sales volumes and net
sales for each business unit.
BUILDING PRODUCTS
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------
<S> <C> <C> <C>
UNIT SALES
(in millions of board feet)
Pine lumber 493 509 484
(in millions of square feet)
Fiber products 422 441 440
Particleboard 329 347 319
Plywood 217 260 265
Gypsum wallboard 813 796 782
==============================
NET SALES
(in millions)
Pine lumber $ 159.6 $ 185.7 $ 153.8
Fiber products 59.7 66.3 62.9
Particleboard 99.1 103.0 81.3
Plywood 49.3 56.8 54.0
Gypsum wallboard 83.1 74.3 53.3
Retail distribution 51.3 58.4 60.0
Other .3 4.8 10.0
------------------------------
For the year $ 502.4 $ 549.3 $ 475.3
==============================
</TABLE>
Pine lumber shipments of 493 million board feet dropped 3 percent from the
record 509 million board feet of 1994, but remained slightly above volumes
shipped in 1993. Lumber prices declined during the year and by the fourth
quarter were 16 percent below the same period in 1994, the low for that year.
Reduced building activity resulted in oversupplied markets with the market
imbalance particularly aggravated by increasing Canadian lumber shipments into
the U.S. The Canadian share of the U.S. market had grown to 35 percent in the
second half of the year. Domestic producers were caught in an untenable
situation resulting from deteriorating product prices and escalating raw
material costs. The intense bidding for Southern pine stumpage that accompanied
strong demand for lumber products in 1994 resulted in high stumpage prices well
into 1995. This market imbalance resulted in some curtailment of production by
southern producers by year-end.
Plywood revenues in 1995 declined 13 percent from 1994 due to reduced
sales volume. During the year, the Group's plywood plant was involved in a $3.8
million modernization project to upgrade its veneer process capability and
associated construction activities periodically impacted production schedules.
A construction related fire during the renovation accounted for over one-third
of the total volume reduction. While plywood pricing normally tracks lumber
pricing, the Group's sales prices advanced almost 5 percent over 1994 levels as
the plant increased its higher grade items from 48 percent of production in
1994 to 58 percent in 1995.
30 | Temple-Inland Inc.
<PAGE> 5
By-product wood chips from the manufacture of lumber and plywood are
shipped to the Company's two Texas paper mills and in 1995 represented about 24
percent of these two mill's pine fiber requirements. Chips supplied to the
fiber products operation in 1995, as in prior years, represented over half its
total fiber requirements.
A combination of lower sales prices and reduced shipment volumes of siding
products in 1995 resulted in a 10 percent reduction in revenues for fiber
products. Downward pressure on siding prices resulted from the lower rate of
housing starts combined with the growth in alternative siding products such as
vinyl and cement fiberboard. However, TrimCraft(TM), the alternative lumber
trim product, continued to gain acceptance at the builder level. Roof and wall
insulation products represented about 40 percent of fiber products shipments in
1995 as they did in prior years.
The Group manufactures particleboard from by-products of lumber processing
at three mills in Texas, Alabama and Georgia. A fourth mill in Arkansas, at a
cost of $65 million, was completed late in the fourth quarter, and will
eventually increase existing capacity by about 50 percent, or 170 million
square feet.
Particleboard shipments in 1995 were 5 percent below levels of the prior
year although prices finished the year up about 2 percent. During the second
quarter demand abated due to excessive customer inventory levels, and the Group
elected one week of unscheduled downtime at each of its three mills.
Gypsum wallboard shipments increased 2 percent over 1994 and revenues were
up 12 percent. Price levels, in response to demand, were particularly strong
during the first half of the year. Even with some additional production into
the markets by mid-year, demand for wallboard remained relatively firm
throughout the last half, with fourth quarter prices equal to year ago levels.
Value-added specialty products accounted for 34 percent of 1995 shipments, an
increase of 21 percent over 1994.
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 provides a detailed description of these operations.
TEMPLE-INLAND FINANCIAL SERVICES
SELECTED SEGMENT INFORMATION
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(in millions)
INCOME
Savings bank $ 78.1 $ 37.2 $ 45.1
Mortgage banking 20.3 15.9 19.9
Real estate (3.8) (.6) (1.5)
Insurance 3.5 3.8 4.0
---------------------------------
Income before
taxes and
accounting change 98.1 56.3 67.5
Taxes on income 27.3 15.3 18.8
---------------------------------
Income before
accounting change 70.8 41.0 48.7
Cumulative effect of
accounting change - - 52.3
---------------------------------
Net income $ 70.8 $ 41.0 $ 101.0
=================================
ASSETS
Savings bank $ 8,881.7 $ 8,707.8 $ 8,799.6
Mortgage banking 157.0 122.2 131.8
Real estate 238.4 214.7 224.7
Insurance 19.1 21.4 31.0
Other activities 1.6 1.6 13.9
Eliminations (86.7) (60.0) (67.7)
---------------------------------
Total assets $ 9,211.1 $ 9,007.7 $ 9,133.3
=================================
LIABILITIES
Savings bank $ 8,405.2 $ 8,281.7 $ 8,415.2
Mortgage banking 113.5 91.8 97.2
Real estate 156.2 130.8 125.8
Insurance 13.2 15.9 27.1
Other activities 4.6 4.6 24.0
Eliminations (86.7) (60.0) (67.7)
---------------------------------
Total liabilities $ 8,606.0 $ 8,464.8 $8,621.6
=================================
EQUITY
Savings bank $ 476.5 $ 426.1 $ 384.3
Mortgage banking 43.5 30.4 34.6
Real estate 82.2 83.9 98.9
Insurance 5.9 5.4 3.9
Other activities (3.0) (2.9) (10.0)
---------------------------------
Total equity $ 605.1 $ 542.9 $ 511.7
=================================
</TABLE>
1995 Annual Report | 31
<PAGE> 6
SAVINGS BANK
The Company's Savings Bank, Guaranty Federal Bank, F.S.B. ("Guaranty"),
conducts its business through 113 banking centers located throughout Texas,
including Houston, Dallas, San Antonio, Austin and the east Texas area. The
primary business of Guaranty is to attract savings deposits from the public, be
a major construction lender to the commercial and residential real estate
industry, invest in loans secured by real estate mortgages, and provide a
variety of loan products to consumers.
Presented below is selected financial information for Guaranty:
GUARANTY FEDERAL BANK, F.S.B.
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(dollars in millions)
INCOME AND
EXPENSE
Net interest income $ 179.5 $ 149.2 $ 135.4
Noninterest income 37.7 25.0 19.5
Noninterest expense 124.6 130.5 104.9
Income before taxes and
accounting change 78.1 37.2 45.1
AVERAGE BALANCE
SHEET
Total earning assets 8,819.5 8,544.7 8,720.7
Loans receivable and
mortgage loans held
for sale 4,453.6 3,147.6 2,116.4
Mortgage-backed and
investment securities 3,647.1 4,151.3 4,978.0
Securities purchased under
resell agreements - 551.3 1,176.0
Covered assets 298.6 536.2 405.7
Deposits 6,721.3 6,681.6 5,838.3
Securities sold under
repurchase agree-
ments and FHLB
advances 1,873.0 1,714.2 2,726.9
KEY RATIOS
Yield on earning assets 6.87% 5.59% 5.32%
Cost of funds 4.96% 3.91% 3.83%
---------------------------------
Net spread 1.91% 1.68% 1.49%
=================================
</TABLE>
When Guaranty was acquired in September 1988, its primary assets were
mortgage loans, properties and notes receivable, all of which were guaranteed
by agencies of the federal government. Corresponding liabilities were largely
consumer deposits. Further acquisitions in the next two years were primarily
cash assets offset by consumer deposit liabilities. The cash assets were
converted to mortgage-backed securities, the interest rate on which was indexed
to the cost of deposits in the FHLB Eleventh District Cost of Funds Index
("EDCOF"), which is primarily California institutions.
The long-term target was to convert these securities to adjustable rate
mortgage loans and by December 31, 1995, loans receivable comprised 57 percent
of earning assets, up from 45 percent in the prior year. Over the next few
years, this percentage should approach 80 percent of earning assets.
Guaranty can fund its asset base with consumer deposits or short-term
borrowings, including repurchase agreements. Since the earnings of a large
portion of its assets are indexed to the EDCOF, the comparative cost of deposit
liabilities of Guaranty with this index is important to profitability. In 1995,
the seven basis point improvement in comparative cost increased income by
approximately $3 million.
Although the average balance of total earning assets remained virtually
constant with 1994, the improved mix of loans receivable rather than
investments and guaranteed assets improved net interest income by $30.3 million
in 1995. This improved asset mix accounted for a portion of the 23 basis
points increase in the net interest spread.
In 1994, on similar asset balance, the better mix improved earnings by
$13.8 million and the interest spread by 19 basis points.
When new loans are originated, an estimated allowance for losses is
provided. Thereafter, this provision is adjusted for actual experience. The
increase in loans outstanding in both 1994 and 1995 is the primary reason for
the increase in the loan loss provision.
Noninterest income increased by $3.7 million in 1995 and $5.5 million in
1994. Noninterest income is comprised primarily of fees collected, including
service charges on deposits. In addition, in 1995, Guaranty recognized a $9
million gain, representing its portion of gains on certain asset dispositions
(see Note C on page 46 for additional information).
BIF/SAIF LEGISLATION
Both the House Banking Committee and the Senate Banking Committee approved
legislation that would recapitalize the Savings Association Insurance Fund
("SAIF") and merge the SAIF with the Bank Insurance Fund ("BIF"). This proposed
legislation would have imposed a one-time assessment estimated to be $58
million on the deposits of Guaranty and would have ultimately reduced future
deposit insurance premiums by approximately $15 million per year. Due to the
recent budget impasse in Congress, the Company is unable to predict when or if
such legislation will be adopted or if the assessment would be less because of
the favorable current experience of the insurance fund.
32 | Temple-Inland Inc.
<PAGE> 7
ACQUISITIONS:
In June 1994, Guaranty purchased substantially all of the net assets of First
Federal Savings Bank of San Antonio ("FFSB") for approximately $43 million.
FFSB was a savings bank with ten banking centers in San Antonio, Texas, with
assets at acquisition totaling approximately $363 million, consisting primarily
of mortgage loans and cash.
In November 1993, Guaranty purchased all of the outstanding stock of
American Federal Bank, F.S.B. ("AFB") for approximately $156 million. Assets of
AFB at acquisition totaled approximately $1.3 billion, principally $750 million
in loans and $400 million in covered assets. See Note B on page 46 for
additional information.
LIQUIDITY, INTEREST RATE RISK MANAGEMENT AND CAPITAL:
Guaranty 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. At December 31, 1995, Guaranty exceeded the required
liquidity ratios.
The operations of Guaranty are subject to a risk of interest rate
fluctuation to the extent that interest-earning assets and interest-bearing
liabilities mature or reprice at different times or in differing amounts. Since
approximately 80 percent of Guaranty's assets have adjustable rates, this risk
is significantly mitigated. A significant portion of Guaranty's investments in
adjustable rate mortgage-backed securities have annual or lifetime caps that
subject Guaranty to interest rate risk should rates rise above certain levels.
To optimize net interest income while maintaining acceptable levels of interest
rate and liquidity risk, Guaranty from time to time will enter into various
interest rate contracts for purposes other than trading. See Note K on page 49
for additional information.
OTS regulations require savings institutions to maintain certain minimum
levels of capital. Guaranty's regulatory capital exceeded all applicable
capital requirements at December 31, 1995. Note L on page 49 contains
additional information concerning Guaranty's capital requirements.
MORTGAGE BANKING
Mortgage banking activity is conducted through Temple-Inland Mortgage
Corporation ("TIMC"), a full service mortgage banker. TIMC arranges financing
of single-family mortgage loans, then sells the loans into the secondary market
(primarily FNMA, FHLMC and GNMA securities). The Group generally retains the
servicing of these loans.
A summary of selected financial information is provided below.
MORTGAGE BANKING
OPERATIONS SUMMARY
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(dollars in millions)
Revenues $ 71 $ 73 $ 104
Income before taxes 20 16 20
---------------------------------
Portfolio roll-forward:
Beginning servicing $ 10,068 $ 9,067 $ 7,746
Purchased servicing 3,782 1,650 -
New loans added,
net of servicing
released 948 540 3,302
Run-off (1,338) (1,189) (1,981)
---------------------------------
Ending servicing $ 13,460 $ 10,068 $ 9,067
Portfolio growth rate 33.7% 11.0% 17.0%
Run-off factor 13.3% 13.1% 25.6%
Ending number of
loans serviced 184,800 149,500 144,700
=================================
</TABLE>
The servicing portfolio grew from both internal production and acquisition
to a record $13.5 billion during 1995. Servicing totaling $3.8 billion was
acquired during the year. Another $4.4 billion in servicing was under contract
at year end and will be added to the portfolio in 1996. The portfolio growth
has allowed significant cost efficiencies. The cost to service a loan in 1995
was approximately 10 percent lower than the cost to service a loan in 1994.
Increases in mortgage interest rates throughout most of 1995 and lower
levels of new construction led to a decline in mortgage loan originations.
Originations were $1.2 billion in 1995 compared with $2.1 billion in 1994.
Accordingly, the size of the origination network continued to be reduced
proportionately. Production operations expanded in early 1996 with the purchase
of a 16-branch West Coast retail mortgage origination company. See Note B on
page 46 for additional information.
1995 Annual Report | 33
<PAGE> 8
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 19 residential
subdivisions in Austin, Houston, San Antonio and Dallas, Texas, as well as
Denver, Colorado and Tampa, Florida. At the end of 1995, land development
inventory included 1,056 residential lots (695 under contract) and 5,096 acres
of land. Lot sales for 1995 were 467 compared with 461 in 1994 and 526 in 1993.
The Company owns ten commercial properties consisting of two hotels, two
office buildings, two retail centers and four parcels of commercial land.
Selected financial information related to these activities is shown below.
REAL ESTATE GROUP
OPERATIONS SUMMARY
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(in millions)
REVENUES:
Residential $ 12.7 $ 8.4 $ 8.0
Commercial 19.4 21.1 18.3
Interest and other 4.9 4.6 7.9
---------------------------------
Total $ 37.0 $ 34.1 $ 34.2
=================================
INCOME (LOSS)
BEFORE TAXES:
Residential $ (1.9) $ (2.6) $ (3.5)
Commercial 2.0 2.1 1.1
Interest and other (3.9) (.1) .9
---------------------------------
Total $ (3.8) $ (.6) $ (1.5)
=================================
</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.
REAL ESTATE GROUP
INVESTMENT IN JOINT VENTURES
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(in millions)
Assets $ 20.1 $ 19.7 $ 18.6
Liabilities(a) 19.0 18.6 17.5
Equity 1.1 1.1 1.1
=================================
</TABLE>
(a) Although the Company's pro rata share of joint venture notes payable total
$18.1 million, the joint venture partners are in most instances jointly
and severally liable for notes payable. The gross balance of these notes
was $39.7 million at December 31, 1995. 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.
INSURANCE
Timberline Insurance Managers, Inc. ("Timberline"), one of the largest
insurance agencies in Texas, operates as a general agency selling a full range
of insurance products including automobile, homeowners, business insurance,
annuities, and life and health products. The agency also acts as the risk
management department of the Company. Timberline currently has offices in
Austin, Houston, Dallas/Fort Worth, El Paso and San Antonio, Texas.
A summary of revenues and income before taxes is shown below.
INSURANCE
OPERATIONS SUMMARY
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(in millions)
Revenues $ 16.5 $ 18.4 $ 21.1
Income before taxes 3.5 3.8 4.0
=================================
</TABLE>
ENVIRONMENTAL MATTERS
The Company is committed to protecting the health and welfare of its employees,
the public, and the environment and strives to maintain compliance with all
state and federal environmental regulations in a cost effective manner. In
recent modernization programs at some of its mills, including the mill at
Evadale, Texas, the Company has used state-of-the-art technology for 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 anticipated
environmental purposes during the period 1996 through 1998 will average $15
million each year.
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
34 | Temple-Inland Inc.
<PAGE> 9
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 not expected to exceed $200 million over the
next five years, and could be less if the Company's recovery boilers meet the
new standards.
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>
1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(in millions)
CAPITAL
EXPENDITURES
Corrugated container $ 153.3 $ 114.9 $ 87.5
Bleached paperboard 145.8 275.1 200.5
Building products 67.6 43.4 26.1
Timber and timberlands 19.1 28.5 22.5
Other activities .3 1.2 3.7
---------------------------------
Total manufacturing
group $ 386.1 $ 463.1 $ 340.3
=================================
</TABLE>
Capital expenditures of approximately $275 million are projected for 1996.
Commitments on construction projects totaled $39 million at the end of 1995.
Net interest expense incurred by the Parent Company is shown below.
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------
<S> <C> <C> <C>
(in millions)
PARENT COMPANY
INTEREST-NET
Interest expense $ 111.3 $ 94.8 $ 81.9
Capitalized interest (38.6) (27.7) (12.5)
---------------------------------
Interest expense--net $ 72.7 $ 67.1 $ 69.4
=================================
</TABLE>
Interest expense increased in 1995 and 1994 due to the higher levels of
debt outstanding. In 1995, the Company issued $188 million of private placement
debt ranging in maturities from 2002 to 2007. Also, during the year, a
financial services entity borrowed $95 million against a revolving credit
agreement. The increase in capitalized interest in 1995 and 1994 was due to
higher levels of construction in progress associated primarily with the
Bleached Paperboard Group's modernization and expansion project. Since this
project was completed in 1995, capitalized interest in 1996 should be
comparable to 1993 levels with interest expense not changing appreciably for
1996; net interest expense should increase. Parent Company interest paid during
1995, 1994 and 1993 was $95.4 million, $89.2 million and $80.9 million,
respectively.
In August 1995, the Board approved a stock repurchase program allowing the
Company to repurchase up to 2.5 million shares. By year end, approximately 25
percent of this program had been achieved.
ACCOUNTING MATTERS--PRONOUNCEMENTS
In 1993, the Company implemented FASB Statements No. 109, "Accounting for
Income Taxes", and No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions". The effect of the implementation of Statement No. 109 was
to increase net income $125 million ($2.25 per share). The effect of the
implementation of Statement No. 106, net of taxes, was to decrease income $75
million ($1.35 per share).
1995 Annual Report | 35
<PAGE> 10
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For The Year 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in millions, except per share data)
Total revenues $ 3,460 $ 2,938 $ 2,736 $ 2,713 $ 2,507 $2,401(a) $1,943 $1,814 $1,642 $1,343 $1,282
Manufacturing net sales 2,696 2,306 2,101 2,075 1,898 1,892 1,894 1,774 1,603 1,296 1,243
Net income 281 131 117(b) 147 138 232(a) 207 199 141 81 85
Capital expenditures:
Manufacturing 386 463 340 359 378 324 260 219 139 103 184
Financial services 34 20 14 11 9 4 9 4 1 1 -
Depreciation and depletion:
Manufacturing 208 200 191 167 158 140 126 112 94 79 66
Financial services 8 8 6 5 4 5 2 2 1 1 1
Earnings per share 5.01 2.35 2.11b 2.65 2.51 4.20(a) 3.75 3.58 2.34 1.32 1.40
Dividends per common
share 1.14 1.02 1.00 .96 .88 .80 .58 .42 .35 .29 .26
Average shares
outstanding 56.1 55.9 55.5 55.5 55.2 55.4 55.3 55.7 60.3 61.1 60.8
Common shares
outstanding
at year end 55.7 56.0 55.5 55.2 54.9 54.6 54.9 55.2 55.3 60.7 60.5
---------------------------------------------------------------------------------------------
AT YEAR END
Total assets $12,764 $12,251 $11,959 $10,766 $10,068 $7,834(c) $2,380 $2,247 $2,020 $1,894 $1,594
Long-term debt:
Parent company 1,489 1,316 1,045 964 864 501 399 417 416 366 248
Financial services 113 82 76 99 76 94 30 25 30 25 14
Ratio of total debt to total
capitalization--parent
company 43% 43% 38% 38% 36% 26% 24% 29% 31% 28% 23%
Shareholders' equity 1,975 1,783 1,700 1,633 1,532 1,439 1,259 1,096 927 929 864
=============================================================================================
</TABLE>
COMMON STOCK PRICES AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------------------
Price Range Price Range
-----------------------------------------------------------------
High Low Dividends High Low Dividends
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 51 $ 44-5/8 $ .27 $ 54-3/4 $ 45-3/4 $ .25
Second Quarter 47-3/4 41-1/2 .27 50-3/4 43-3/4 .25
Third Quarter 55-3/4 48 .30 56-3/4 46-7/8 .25
Fourth Quarter 52-3/8 42-1/2 .30 56-3/4 43 .27
----------- -----------
Year 55-3/4 41-1/2 1.14 56-3/4 43 1.02
=================================================================
</TABLE>
(a) Includes operating results from consolidation of Guaranty Federal Bank,
F.S.B., beginning January 1, 1990.
(b) Includes a $50 million or $.90 per share from cumulative effect of
accounting changes.
(c) Includes Savings Bank assets from consolidation of Guaranty Federal Bank,
F.S.B., beginning January 1, 1990.
36 | Temple-Inland Inc.
<PAGE> 11
NOTE F | Deposits
Deposits consisted of the following:
<TABLE>
<CAPTION>
At year end 1995 1994
--------------------------------------------
(dollars in millions) Rate Amount Rate Amount
--------------------------------------------
<S> <C> <C> <C> <C>
Noninterest bearing demand -% $ 128.3 -% $ 185.3
Interest bearing demand 2.75% 1,028.4 2.75% 1,255.7
Savings deposits 2.25% 198.9 2.25% 247.4
Time deposits 5.74% 5,017.9 5.19% 4,901.8
--------------------------------------------
6,373.5 6,590.2
Deposit premium 3.5 8.1
--------------------------------------------
$ 6,377.0 $ 6,598.3
============================================
</TABLE>
Scheduled maturities of time deposits outstanding at December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
Time deposits $100,000 Less than
in amounts of: or more $100,000 Total
----------------------------
<S> <C> <C> <C>
(in millions)
3 months or less $ 88.9 $ 699.3 $ 788.2
Over 3 through 6 months 105.2 859.1 964.3
Over 6 through 12 months 170.6 1,316.8 1,487.4
Over 12 months 237.5 1,540.5 1,778.0
----------------------------
$ 602.2 $4,415.7 $5,017.9
============================
</TABLE>
A summary of interest paid by the Group is shown below:
<TABLE>
<CAPTION>
For the year 1995 1994 1993
------------------------
<S> <C> <C> <C>
(in millions)
Interest on deposits $317.7 $ 262.9 $ 241.1
Interest on borrowed funds 115.9 79.0 99.2
------------------------
$433.6 $ 341.9 $ 340.3
========================
</TABLE>
At December 31, 1995, time deposits maturity dates were as follows (in
millions): 1996-$3,239.9; 1997-$1,110.5; 1998-$255.2; 1999-$242.3; 2000-$161.0;
2001 and thereafter-$9.0.
NOTE G | 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 Guaranty at the maturities of the
agreements. The agreements generally mature within ninety days.
Information concerning borrowings under repurchase agreements is
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------------------
<S> <C> <C>
(dollars in millions)
At year-end:
Weighted average interest rate 5.81% 6.11%
Mortgage-backed securities pledged
to secure the agreements:
Carrying value 1,699.6 $1,502.8
Estimated market value 1,680.8 1,426.3
During the year:
Average balance 1,719.2 1,598.0
Maximum month-end balance 1,914.1 2,300.2
==================
</TABLE>
NOTE H | Federal Home Loan Bank Advances
Pursuant to collateral agreements with the Federal Home Loan Bank of Dallas
("FHLB"), advances are secured by a blanket floating lien on Guaranty's assets.
The weighted average interest rate of the advances was 6.60 percent and 6.72
percent at December 31, 1995 and 1994, respectively. At December 31, 1995, the
advances had calendar year maturity dates as follow (in millions): 1996-$100.0;
1997-$2.3; 1998-$2.5; 1999-$51.7.
NOTE I | Other Borrowings
Other borrowings, which represent borrowings of non-savings bank entities,
consisted of the following:
<TABLE>
<CAPTION>
At year end 1995 1994
------------------
<S> <C> <C>
(in millions)
Long-term debt with an
average rate of 7.44% during
1995, due through 2000 $ 95.0 $ -
Long-term debt at
various rates which
approximate prime,
secured primarily
by real estate 17.7 81.7
------------------
$ 112.7 $ 81.7
==================
</TABLE>
In August 1995, a non-savings bank subsidiary entered into a secured
variable rate revolving credit agreement with an initial credit line of $175
million that expires in 2000, of which $80 million remained unused at December
31, 1995.
Maturities of other borrowings during the next five years are as follows:
1996-$0.8; 1997-$8.6; 1998-$12.8; 1999- $24.2; and 2000-$53.0.
48 | Temple-Inland Inc.
<PAGE> 12
CONSOLIDATED STATEMENTS OF INCOME
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the year 1995 1994 1993
------------------------------
<S> <C> <C> <C>
(in millions)
REVENUES
Manufacturing net sales $ 2,696 $ 2,306 $ 2,101
Financial services revenues 764 632 635
------------------------------
3,460 2,938 2,736
------------------------------
COSTS AND EXPENSES
Manufacturing costs and expenses 2,294 2,106 2,006
Financial services expenses 666 576 567
------------------------------
2,960 2,682 2,573
------------------------------
OPERATING INCOME 500 256 163
Parent company interest--net (73) (67) (69)
Other 4 4 2
------------------------------
INCOME BEFORE TAXES
AND ACCOUNTING CHANGES 431 193 96
Taxes on income 150 62 29
------------------------------
INCOME BEFORE ACCOUNTING CHANGES 281 131 67
Cumulative effect of accounting changes - - 50
------------------------------
NET INCOME $ 281 $ 131 $ 117
==============================
EARNINGS PER SHARE:
Before Accounting Changes $ 5.01 $ 2.35 $ 1.21
Effect of Accounting Changes - - .90
------------------------------
Earnings Per Share $ 5.01 $ 2.35 $ 2.11
==============================
</TABLE>
See the notes to the consolidated financial statements.
50 | Temple-Inland Inc.
<PAGE> 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the year 1995 1994 1993
-------------------------------
<S> <C> <C> <C>
(in millions)
CASH PROVIDED BY (USED FOR) OPERATIONS
Net income $ 281 $ 131 $ 117
Adjustments to reconcile net income to net cash:
Cumulative effect of accounting changes - - (50)
Depreciation and depletion 216 208 197
Deferred taxes and tax credits 53 47 (2)
Amortization and accretion 18 12 13
Receivable from FDIC (18) 19 (1)
Mortgage loans held for sale 24 500 (174)
Receivables (42) (41) 15
Inventories (71) (1) (10)
Accounts payable and accrued expenses (51) (2) 47
Collections and remittances on loans
serviced for others, net 96 (164) 122
Other (31) (46) 36
-------------------------------
475 663 310
-------------------------------
CASH PROVIDED BY (USED FOR) INVESTMENTS
Capital expenditures (420) (483) (354)
Proceeds from sale of property and equipment 16 19 19
Purchases of securities available-for-sale (54) (146) -
Maturities of securities available-for-sale 12 17 -
Purchases of securities held-to-maturity - (229) (295)
Maturities of securities held-to-maturity 391 790 1,156
Loans originated or acquired, net of principal
collected on loans (1,009) (823) (670)
Proceeds from sale of securities available-to-sale 192 - -
Proceeds from sale of securities
held-to-maturity and loans - - 24
Reduction in Covered Assets 343 244 127
Savings bank acquisitions - 200 (76)
Manufacturing acquisitions (2) (60) -
Other (23) 11 11
-------------------------------
(554) (460) (58)
-------------------------------
CASH PROVIDED BY (USED FOR) FINANCING
Additions to debt 356 334 134
Payments of debt (165) (54) (87)
Securities sold under repurchase agreements
and short-term borrowings, net 239 (205) 111
Purchase of stock for treasury (24) (1) (3)
Cash dividends paid to shareholders (64) (57) (55)
Net decrease in deposits (217) (92) (310)
Other (3) 22 (2)
-------------------------------
122 (53) (212)
-------------------------------
Net increase in cash and cash equivalents 43 150 40
Cash and cash equivalents at beginning of year 315 165 125
-------------------------------
Cash and cash equivalents at end of year $ 358 $ 315 $ 165
===============================
</TABLE>
See the notes to the consolidated financial statements.
1995 Annual Report | 51
<PAGE> 14
CONSOLIDATING BALANCE SHEETS
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
Parent Financial
At year end 1995 Company Services Consolidated
-------------------------------
<S> <C> <C> <C>
(in millions)
ASSETS
Cash and cash equivalents $ 15 $ 343 $ 358
Mortgage loans held for sale - 106 106
Loans receivable - 4,764 4,764
Mortgage-backed and investment securities - 3,424 3,424
Trade and other receivables 285 - 283
Inventories 338 - 338
Property and equipment 2,788 76 2,864
Other assets 182 498 627
Investment in affiliates 605 - -
-------------------------------
TOTAL ASSETS $ 4,213 $ 9,211 $ 12,764
===============================
LIABILITIES
Deposits $ - $ 6,377 $ 6,377
Securities sold under repurchase
agreements and Federal Home Loan
Bank advances - 1,759 1,759
Other liabilities 358 357 702
Long-term debt 1,489 113 1,602
Deferred income taxes 259 - 217
Postretirement benefits 132 - 132
-------------------------------
TOTAL LIABILITIES $ 2,238 $ 8,606 10,789
===============================
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
Additional paid-in capital 306
Translation and other adjustments (14)
Retained earnings 1,773
---------
2,126
Cost of shares held in the treasury: 5,731,411 shares (151)
---------
TOTAL SHAREHOLDERS' EQUITY 1,975
---------
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,764
=========
</TABLE>
See the notes to the consolidated financial statements.
52 | Temple-Inland Inc.
<PAGE> 15
CONSOLIDATING BALANCE SHEETS
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
Parent Financial
At year end 1994 Company Services Consolidated
-------------------------------
<S> <C> <C> <C>
(in millions)
ASSETS
Cash and cash equivalents $ 13 $ 302 $ 315
Mortgage loans held for sale - 130 130
Loans receivable - 3,675 3,675
Mortgage-backed and investment securities - 3,964 3,964
Covered assets - 418 418
Trade and other receivables 244 - 244
Inventories 268 - 268
Property and equipment 2,621 50 2,671
Other assets 175 469 566
Investment in affiliates 543 - -
-------------------------------
TOTAL ASSETS $ 3,864 $ 9,008 $ 12,251
===============================
LIABILITIES
Deposits $ - $ 6,598 $ 6,598
Securities sold under repurchase
agreements and Federal Home Loan
Bank advances - 1,520 1,520
Other liabilities 410 265 663
Long-term debt 1,316 82 1,398
Deferred income taxes 229 - 163
Postretirement benefits 126 - 126
-------------------------------
TOTAL LIABILITIES $ 2,081 $ 8,465 10,468
===============================
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
Additional paid-in capital 305
Translation and other adjustments (10)
Retained earnings 1,556
---------
1,912
Cost of shares held in the treasury: 5,370,976 shares (129)
---------
TOTAL SHAREHOLDERS' EQUITY 1,783
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,251
=========
</TABLE>
See the notes to the consolidated financial statements.
1995 Annual Report | 53
<PAGE> 16
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Temple-Inland Inc. and Subsidiaries
<TABLE>
<CAPTION>
Additional Other
Common Paid-in Equity Retained Treasury
Stock CapitalAdjustments Earnings Stock Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(in millions)
BALANCE AT JANUARY 2, 1993 $ 61 $ 295 $ - $ 1,420 $ (144) $ 1,632
Net income - - - 117 - 117
Dividends paid on common
stock--$1.00 per share - - - (55) - (55)
Stock issued for stock plans--
310,088 shares - 2 - - 7 9
Stock reacquired for treasury--
79,377 shares - - - - (3) (3)
-----------------------------------------------------------------
BALANCE AT JANUARY 1, 1994 $ 61 $ 297 $ - $ 1,482 $ (140) $ 1,700
=================================================================
Net income - - - 131 - 131
Translation and other
adjustments - - (10) - - (10)
Dividends paid on common
stock--$1.02 per share - - - (57) - (57)
Stock issued for stock plans--
608,713 shares - 8 - - 14 22
Stock reacquired for treasury--
71,516 shares - - - - (3) (3)
-----------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 $ 61 $ 305 $ (10) $ 1,556 $ (129) $ 1,783
=================================================================
Net income - - - 281 - 281
Translation and other
adjustments - - (4) - - (4)
Dividends paid on common
stock--$1.14 per share - - - (64) - (64)
Stock issued for stock plans--
154,109 shares - 1 - - 2 3
Stock reacquired for treasury--
514,544 shares - - - - (24) (24)
-----------------------------------------------------------------
BALANCE AT DECEMBER 30, 1995 $ 61 $ 306 $ (14) $ 1,773 $ (151) $ 1,975
=================================================================
</TABLE>
See the notes to the consolidated financial statements.
54 | Temple-Inland Inc.
<PAGE> 17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 | 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 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. Certain amounts have been reclassified to conform with current
year's classification.
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 year. The weighted
average shares outstanding was 56,064,000, 55,890,000 and 55,528,000 in 1995,
1994 and 1993, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, amounts due from banks,
securities purchased under resell agreements, federal funds sold, and other
short-term liquid instruments with original maturities of three months or less.
USE OF ESTIMATES
Management is required to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
TRANSLATION OF INTERNATIONAL CURRENCIES
Balance sheets of the Company's international operations where the functional
currency is other than the U.S. dollar are translated into U.S. dollars at
year-end exchange rates. Adjustments resulting from financial statement
translation are reported as a component of shareholders' equity. For other
international operations where the functional currency is the U.S. dollar,
inventories, property, plant and equipment are translated at the rate of
exchange on the date the assets were acquired, while other assets and
liabilities are translated at year-end exchange rates. Translation adjustments
for these operations are included in net income.
Income and expense items are converted to U.S. dol-lars at average rates
of exchange prevailing during the year. Gains and losses resulting from
foreign currency transactions are included in earnings and are not material.
PENDING ACCOUNTING POLICY CHANGES
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement
121 in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation". Under the provisions of FASB 123, companies can
elect to account for stock-based compensation plans using a fair value based
method or continue measuring compensation expense for those plans using the
intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees". FASB 123 requires that
companies electing to continue using the intrinsic value method must make pro
forma disclosures of net income and earnings per share as if the fair value
based method had been applied. The Company's required adoption date for FASB
123 is January 1, 1996. Presently, the Company anticipates continuing to
account for stock-based compensation using APB 25.
NOTE 2 | Stock-Based Compensation
The Company has established stock option plans for key employees and directors.
The plans provide for the granting of nonqualified stock options and/or
incentive stock options, and prior to 1994, the plans permitted the grant of
stock appreciation rights with all or part of any options so granted.
Options for 717,618, 643,201 and 741,379 shares were exercisable at year
end 1995, 1994 and 1993, respectively. An additional 1,431,172 shares of common
stock were available for grants at December 30, 1995.
1995 Annual Report | 55
<PAGE> 18
A summary of activity under the option plans is presented below:
COMMON STOCK
<TABLE>
<CAPTION>
Number Price Range
of Shares Per Share
----------------------------
<S> <C> <C> <C>
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
Granted 267,696 $ 34 - $ 53
Exercised (319,274) $ 12 - $ 36
Forfeited (68,016) $ 22 - $ 54
----------------------------
Outstanding at December 31, 1994 1,274,862 $ 12 - $ 54
Granted 326,258 $ 31 - $ 47
Exercised (145,564) $ 12 - $ 42
Forfeited (51,053) $ 28 - $ 54
----------------------------
Outstanding at December 30, 1995 1,404,503 $ 12 - $ 54
============================
</TABLE>
Additionally, a restricted stock plan provides for a maximum of 300,000
shares of restricted common stock to be reserved for awards. At year end 1995,
awards of 124,472 shares of common stock were outstanding at an average price
of $49.81 per share.
NOTE 3 | Pension Plans
The Company and its subsidiaries have 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 on an actuarial basis to provide assets sufficient to meet the
benefits to be paid in accordance with the requirements of ERISA.
A summary of the components of net pension cost in 1995, 1994 and 1993
follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------
<S> <C> <C> <C>
(in millions)
CHARGES (CREDITS)
Service cost--benefits
earned during the
period $ 11.6 $ 12.7 $ 9.6
Interest cost on projected
benefit obligation 30.6 28.0 25.7
Actual return on plan
assets (72.0) (3.7) (59.0)
Net amortization and
deferral 31.0 (38.6) 19.3
Net pension
----------------------------
charge (credit) $ 1.2 $ (1.6) $ (4.4)
============================
</TABLE>
The following assumptions were used to measure net periodic pension cost for
the defined benefit pension plans:
<TABLE>
<CAPTION>
For the years 1995 1994 1993
----------------------------
<S> <C> <C> <C>
Discount rate 7.75% 8.25% 7.25%
Expected long-term
rate of return 9.00% 9.00% 9.00%
Average increase in
compensation levels 4.75% 5.25% 4.25%
============================
</TABLE>
The funded status of employee pension benefit plans at year end 1995 and 1994
is summarized below:
<TABLE>
<CAPTION>
1995 1994
-----------------
<S> <C> <C>
(in millions)
Actuarial present value of benefit obligations:
Vested benefits $ 360.6 $ 322.5
Nonvested benefits 28.1 19.0
-----------------
Accumulated benefit obligation $ 388.7 $ 341.5
=================
Projected benefit obligation for
service rendered to date $(426.5) $(380.7)
Plan assets at fair value,
primarily stocks and bonds 472.8 420.3
-----------------
Plan assets in excess of projected
benefit obligation 46.3 39.6
Prior service cost not yet recognized
in net periodic pension cost .4 .3
Unrecognized net loss from past
experience different from
that assumed 15.1 27.0
Unrecognized net asset at beginning
of period, less amortization to date (21.4) (26.0)
-----------------
Net pension asset included in the
balance sheet $ 40.4 $ 40.9
=================
</TABLE>
NOTE 4 | 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 year end 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------
<S> <C> <C>
(in millions)
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION
Retirees $ 63.4 $ 61.8
Active participants, eligible
to retire 16.8 14.6
All other participants 41.5 32.7
-----------------
Accrued postretirement
benefit cost 121.7 109.1
Unrecognized net gains 12.0 18.8
Unrecognized prior service cost (2.1) (2.4)
-----------------
Postretirement benefit liability $ 131.6 $ 125.5
=================
</TABLE>
The components of net postretirement benefit costs for 1995, 1994 and 1993 are
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------
<S> <C> <C> <C>
(in millions)
Service costs for benefits $ 2.6 $ 1.9 $ 1.7
Interest cost 8.7 7.3 9.2
Net amortization and
deferral (.4) (.8) -
----------------------------
Net postretirement
charge $ 10.9 $ 8.4 $ 10.9
============================
</TABLE>
56 | Temple-Inland Inc.
<PAGE> 19
The discount rate used in determining the APBO as of December 30, 1995 was
7.75 percent. The assumed health care cost trend rate used in measuring the
APBO was 11 percent in 1995, declining to six percent in years 2010 and later.
The assumptions for 1994 included an 8.25 percent discount rate and health care
trend rates beginning at 11 percent and declining to six percent in 2010 and
thereafter. If the health care cost trend rate assumptions were increased by
one percent, the APBO as of December 30, 1995 would be increased by nine
percent and the net periodic postretirement costs for 1995 would be increased
by 11 percent.
NOTE 5 | Taxes on Income
Taxes on income from operations consisted of the following:
<TABLE>
<CAPTION>
Current Deferred
-----------------
<S> <C> <C>
(in millions)
1995
Federal $ 87.2 $ 48.2
State and other 11.9 2.7
-----------------
$ 99.1 $ 50.9
=================
1994
Federal $ 10.7 $ 43.7
State and other 6.8 .6
-----------------
$ 17.5 $ 44.3
=================
1993
Federal $ 67.9 $ (49.2)
State and other 9.1 1.1
-----------------
$ 77.0 $ (48.1)
=================
</TABLE>
Significant components of the Company's consolidated deferred tax assets
and liabilities as of year end 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------
<S> <C> <C>
(in millions)
DEFERRED TAX LIABILITIES:
Depreciation $ 297.8 $ 267.8
Depletion 37.7 39.6
Pensions and other 48.7 13.8
-----------------
Total deferred tax liabilities 384.2 321.2
=================
DEFERRED TAX ASSETS:
Alternative minimum tax credits 169.7 121.0
Net operating loss carryforwards 80.6 204.0
OPEB obligations 46.2 43.9
Other 4.2 7.9
-----------------
Total deferred tax assets 300.7 376.8
VALUATION ALLOWANCE (133.0) (219.0)
-----------------
Net deferred tax liability $ 216.5 $ 163.4
=================
</TABLE>
The differences between the consolidated effective income tax rate and the
federal statutory income tax rates include the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------
<S> <C> <C> <C>
(in millions)
Taxes on income at
statutory rate $ 150.9 $ 67.7 $ 33.7
Book benefit of FDIC
assistance and other
permanent items (9.8) (10.3) (10.9)
State and other taxes 8.9 4.4 6.1
----------------------------
$ 150.0 $ 61.8 $ 28.9
============================
</TABLE>
In fiscal year 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes", whereby the Company was required to adopt the
liability method of computing deferred income taxes. The cumulative effect of
adopting FASB Statement No. 109 as of January 1993 was to increase net earnings
by $125 million, or $2.25 per share.
Income tax payments, net of refunds received, were $74 million, $58
million and $19 million during 1995, 1994 and 1993, respectively.
Temple-Inland has net operating loss carryforwards which expire through
the year 2009. Alternative minimum tax credits may be carried forward
indefinitely.
The decrease in the valuation allowance results from the Termination
Agreement which included payments to the FSLIC Resolution Fund for its share of
the tax benefits the Company received from the Assistance Agreements. The
remaining valuation allowance represents accruals for deductions that are
uncertain and accordingly have not been recognized for financial reporting
purposes.
NOTE 6 | Fair Value of Financial Instruments
The carrying amounts and fair values of financial instruments were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------------------------
<S> <C> <C> <C> <C>
(in millions)
FINANCIAL ASSETS
Loans receivable $4,764.4 4,798.7 $3,674.8 $3,624.2
Mortgage-backed and
investment securities 3,423.6 3,368.4 3,964.2 3,753.0
Covered assets - - 418.1 418.1
====================================
FINANCIAL
LIABILITIES
Deposits 6,377.0 6,627.4 6,598.3 6,567.3
FHLB advances 155.0 160.3 154.5 156.1
Long-term debt 1,601.6 1,701.3 1,397.5 1,396.5
====================================
OFF-BALANCE-SHEET
INSTRUMENTS
Commitments to extend
credit - (1.3) - (4.3)
Interest rate swaps - - - (.9)
====================================
</TABLE>
1995 Annual Report | 57
<PAGE> 20
Differences between fair value and carrying amounts are primarily due to
instruments which provide fixed interest rates or contain fixed interest rate
elements. Inherently, such instruments are subject to fluctuations in fair
value due to subsequent movements in interest rates. The fair value of cash and
cash equivalents, trade and other receivables, securities sold under agreements
to repurchase and mortgage loans held for sale consistently approximate the
carrying amount due to their short-term nature and are excluded from the above
table. The fair value of mortgage-backed and investment securities and off
balance sheet instruments are based on quoted market prices. Other financial
instruments are valued using discounted cash flows. The discount rates used
represent current rates for similar instruments.
NOTE 7 | Business Segment Information
Refer to "Business Segments" on page 27 for information relating to Revenues
and Income Before Taxes, and page 35 for information relating to Capital
Expenditures for the business segments for the three years 1995, 1994 and 1993.
Identifiable assets by business segment are those assets specifically used
in Company operations in each segment. The results of the timber and
timberlands operations are allocated to the manufacturing groups based upon
fiber usage. Corporate assets are principally cash and office buildings.
Additional business segment information is presented below:
<TABLE>
<CAPTION>
For the year 1995 1994 1993
-------------------------------
<S> <C> <C> <C>
(in millions)
IDENTIFIABLE
ASSETS
Corrugated container $ 1,823.6 $1,709.3 $1,580.3
Bleached paperboard 956.3 838.7 596.1
Building products 280.3 248.1 223.2
Timber and timberlands 490.6 466.1 453.7
Corporate and other
activities 44.7 46.5 62.9
-------------------------------
3,595.5 3,308.7 2,916.2
Financial services 9,211.1 9,007.7 9,133.3
Reclassifications and
eliminations (42.2) (65.7) (90.2)
-------------------------------
Total $12,764.4 12,250.7 11,959.3
===============================
DEPRECIATION
AND DEPLETION
Corrugated container $ 124.4 $ 120.6 $ 112.5
Bleached paperboard 46.6 43.3 40.1
Building products 24.0 23.2 22.6
Timber and timberlands 12.2 11.2 12.7
Corporate and other
activities .4 2.0 3.2
-------------------------------
207.6 200.3 191.1
Financial services 8.1 7.8 5.8
-------------------------------
Total $ 215.7 $ 208.1 $ 196.9
===============================
</TABLE>
NOTE 8 | Summary of Quarterly Results of Operations (Unaudited)
Selected quarterly financial results for the years 1995 and 1994 are summarized
below:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------------------------------
<S> <C> <C> <C> <C>
(in millions except
per share amounts)
1995
Total revenues $ 834.7 $ 889.0 $ 869.7 $ 867.1
Manufacturing net sales 660.8 697.5 673.7 664.2
Manufacturing gross profit 150.7 167.2 187.6 153.5
Financial services operating
income before taxes 14.2 24.0 24.9 35.0
Net income 58.3 72.9 84.8 65.0
Earnings per Share 1.04 1.30 1.51 1.16
======================================
1994
Total revenues $ 706.3 $ 725.1 $ 755.0 $ 751.1
Manufacturing net sales 541.8 573.5 601.2 589.6
Manufacturing gross profit 79.8 89.8 103.8 132.5
Financial services operating
income before taxes 17.0 14.4 12.8 12.1
Net income 22.9 26.6 33.1 48.8
Earnings per Share .41 .48 .59 .87
======================================
</TABLE>
NOTE 9 | 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 10 | 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 statements of the Company
and its subsidiaries.
See page 35 for a discussion of commitments on construction projects.
58 | Temple-Inland Inc.
<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 accordance
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 transactions are executed in accordance with management'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 accounting
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
LLP, 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.
/s/CLIFFORD J. GRUM
CLIFFORD J. GRUM
Chairman of the Board and
Chief Executive Officer
/s/ DAVID H. DOLBEN
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 December 30, 1995 and December 31, 1994, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 30, 1995. 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 December 30, 1995 and December 31, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 30, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes 4 and 5 to the consolidated financial statements, in
1993 the Company changed its method of accounting for postretirement benefits
other than pensions and income taxes.
/s/ ERNST & YOUNG
Houston, Texas
February 2, 1996
1995 Annual Report | 59
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF TEMPLE-INLAND INC.
(State of Incorporation) (Percentage of Ownership by Immediate Parent) (Federal
Tax I.D. Number)
INLAND CONTAINER CORPORATION I (DELAWARE) (100%) (75-2042862)
Inland Container Corporation (Delaware)(100%)(13-2946332)
C.B. Displays, Inc. (Delaware)(100%)(56-1924238)
El Morro Corrugated Box Corporation (Delaware)(100%)(35-1323144)
El Morro Corrugated Box Corporation (Puerto Rico)(100%)(66-0274059)
Georgia Kraft Company (Delaware)(100%)(75-2212491)
Sabine River & Northern Railroad Company (Texas)(100%)(34-0969790)
IC Holding, Inc.(Delaware)(100%)(75-2559834)
Rand-Whitney Packaging Corporation (Massachusetts)(100%)(04-2424252)
Delmar Packaging, Inc. (Delaware)(100%)(59-0981827)
Rand-Whitney Robertson Corporation (Delaware)(100%)(04-2938624)
Inland Argentina, Inc. (Delaware)(100%)(75-2559834)
Inland Massuh S.A. (Argentina)(50%)
Inland Chile I, Inc. (Delaware)(100%)(75-2559831)
Inland Chile II, Inc. (Delaware)(100%)(75-2559773)
Inland Chile Ltda. (Chile)(100%)
Inland Container FSC, Inc. (U.S. Virgin Islands)(100%)(66-0412023)
Inland International Holding Company (Delaware)(100%)(75-2559772)
Inland Corrugados de Mexico, S.A. de C.V. (Mexico)(100%)
Inland Corrugados de Guanajato, S.A. de C.V. (Mexico)(100%)
Inland Corrugados de Monterrey, S.A. de C.V. (Mexico)(100%)
Inland Corrugados de Sinaloa, S.A. de C.V. (Mexico)(100%)
TinCorr S.A. (Uruguay)(100%)
Inland Paper Company, Inc. (Indiana)(100%)(35-1343720)
Inland Real Estate Investments, Inc. (Indiana)(100%)(35-6019135)
Crockett Container Corporation (California)(100%)(95-2692965)
King Container Company (California)(100%)(95-3420258)
Pakway Container Corporation (Indiana)(100%)(35-1142085)
Wesland Container LLC (Arkansas)(50%)
TEMPLE-INLAND FOREST PRODUCTS CORPORATION (DELAWARE) (100%) (75-1462427)
The Angelina Free Press, Inc. (Texas)(100%)(75-1080101)
Big Tin Barn Inc. (Delaware)(100%)(75-2450632)
Eastex Incorporated (Texas)(100%)(74-1180064)
Evadale Realty Company (Delaware)(100%)(74-6047398)
Bestile Manufacturing Company (California)(100%)(95-1608040)
Home Owners Trust Company (Texas)(100%)(74-1482976)
Sabine Investment Company of Texas, Inc. (Texas)(100%)(75-1308206)
Scotch Investment Company (Texas)(100%)(74-1463738)
Scotch Properties Management Inc. (Delaware)(100%)(75-2242094)
Southern Pine Lumber Company (Texas)(100%)(75-1183646)
Southern Pine Plywood Co. (Texas)(100%)(75-1159301)
Templar Essex Inc. (Delaware)(100%)(75-2459426)
Temple Associates, Inc. (Texas)(100%)(75-0777257)
Temple-Eastex Incorporated (Delaware)(100%)(75-2248412)
Temple Industries, Inc. (Texas)(100%)(75-0571180)
Temple-Inland Food Service Corporation (Delaware)(100%)(75-2285370)
<PAGE> 2
EXHIBIT 21 -- (CONTINUED)
Temple-Inland Forest Products International Inc. (Delaware)(100%)(75-1462427)
Planfosur S. de R.L. de C.V. (Mexico)(50%)
Temple Inland Forest Products of Canada Inc. (New Brunswick, Canada)(100%)
Temple-Inland Paperboard Specialty Company (Delaware)(100%)(75-2504953)
Temple-Inland Recaustisizing Company (Delaware)(100%)(75-2468479)
Temple-Inland Recovery Company (Delaware)(100%)(75-2468476)
Temple-Inland Stores Company (Delaware)(100%)(75-2468477)
Temple-Inland Trading Company (Delaware)(100%)(75-2604111)
Temple Lumber Company (Texas)(100%)(75-6018597)
Texas Southeastern Railroad Company (Texas)(100%)(75-6002614)
Topaz Oil Company (Texas)(100%)(75-1053707)
TEMPLE-INLAND FINANCIAL SERVICES INC. (DELAWARE) (50%;
50% BY TEMPLE-INLAND FOREST PRODUCTS CORPORATION)(74-2421034)
Guaranty Holdings Inc. I (Delaware)(100%)(75-2244180)
Guaranty Federal Bank, F.S.B. (Federal)(100%)
Guaranty Group Inc. (Texas)(100%)(75-2515512)
Guaranty Investment Advisory, Inc. (Texas)(100%)(75-2406252)
Participation Purchase Corporation (Nevada)(100%)(74-2676327)
Temple-Inland Mortgage Corporation (Nevada)(100%)(74-1878850)
Temple-Inland Properties Inc. (Delaware)(100%)(74-2431999)
Stanford Realty Advisors, Inc. (Delaware)(100%)(75-2426395)
LIC Investments Inc. (Delaware)(100%)(74-2366105)
Lumbermen's Investment Corporation (Delaware)(100%)(74-1213624)
Austin Crest Hotel, Inc. (Texas)(100%)(74-1547526)
LIC Financial Corporation (Delaware)(100%)(74-2553548)
Sunbelt Insurance Company (Texas)(100%)(74-1950814)
TEEC Inc. (Texas)(100%)(75-1962795)
Timberline Insurance Managers, Inc. (Texas)(100%)(74-1550763)
Capline Marketing Group (Texas)(50%)(74-2577835)
Timberline Securities, Inc. (Texas)(100%)(76-2678579)
Temple-Inland Capital Inc. (Delaware)(100%)(75-2555146)
Temple-Inland Life Inc. (Nevada)(100%)(74-2387096)
Temple-Inland Insurance Corporation (Delaware)(100%)(75-2045626)
Temple-Inland Realty Inc. (Delaware)(100%)(75-2370575)
<PAGE> 1
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 2, 1996, included in the
1995 Annual Report to Shareholders of Temple-Inland Inc.
Our audit also included the financial statement schedule of Temple-Inland Inc.
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
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 33-23132 on Form S-8, (iii) Post-Effective
Amendment Number 1 to Registration Statement Number 33-25650 on Form S-8, (iv)
Post-Effective Amendment Number 1 to Registration Statement Number 33-27286 on
Form S-8, (v) Post-Effective Amendment Number 2 to Registration Statement
Number 33-32124 on Form S-8, (vi) Registration Statement Number 33-43802 on
Form S-8, (vii) Registration Statement Number 33-50880 on Form S-3, (viii)
Registration Statement Number 33-48034 on Form S-8, (ix) Registration Statement
Number 33-54388 on Form S-8, and (x) Registration Statement Number 33-63104 on
Form S-8 of our report dated February 2, 1996 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 schedule
included in this Annual Report (Form 10-K) of Temple-Inland Inc.
/s/ Ernst & Young LLP
March 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
balance sheets and consolidated income statements for Temple-Inland Inc. and
subsidiaries and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 358
<SECURITIES> 0
<RECEIVABLES> 283
<ALLOWANCES> 0
<INVENTORY> 338
<CURRENT-ASSETS> 0
<PP&E> 2,864
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,764
<CURRENT-LIABILITIES> 0
<BONDS> 1,602
<COMMON> 61
0
0
<OTHER-SE> 1,914
<TOTAL-LIABILITY-AND-EQUITY> 12,764
<SALES> 2,696
<TOTAL-REVENUES> 3,460
<CGS> 2,294
<TOTAL-COSTS> 2,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 431
<INCOME-TAX> 150
<INCOME-CONTINUING> 281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281
<EPS-PRIMARY> 5.01
<EPS-DILUTED> 5.01
</TABLE>
