<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarterly Period
Ended June 28, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Transition Period
From ___________________________ to ____________________________
Commission File Number 1-8634
Temple-Inland Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-1903917
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
303 South Temple Drive, Diboll, Texas 75941
(Address of principal executive offices) (Zip Code)
(409) 829-5511
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes X No_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of common shares outstanding
Class as of June 28, 1997
Common Stock (par
value $1.00 per share) 56,769,513
The Exhibit Index appears on page 21 of this report.
<PAGE>2
PART I. FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Summarized Statements of Income
Parent Company (Temple-Inland Inc.)
Unaudited
Second Quarter First Six Months
1997 1996 1997 1996
(in millions)
Revenues
Net sales $ 687.1 $ 677.9 $ 1,336.1 $ 1,348.3
Financial services earnings 32.4 29.7 61.9 54.4
719.5 707.6 1,398.0 1,402.7
Costs and Expenses
Cost of sales 602.2 553.3 1,169.3 1,086.4
Selling and administrative 65.0 73.6 127.7 137.7
667.2 626.9 1,297.0 1,224.1
Operating Income 52.3 80.7 101.0 178.6
Interest - net (28.3) (27.5) (56.1) (54.2)
Other 1.9 1.3 2.7 1.5
Income Before Taxes 25.9 54.5 47.6 125.9
Taxes on income 10.3 19.1 18.8 44.1
Net Income $ 15.6 $ 35.4 $ 28.8 $ 81.8
See notes to consolidated financial statements.
<PAGE>3
Summarized Balance Sheets
Parent Company (Temple-Inland Inc.)
Unaudited
June 28, December 28,
1997 1996
(in millions)
ASSETS
Current Assets
Cash $ 15 $ 14
Receivables, less allowances of
$12 million in 1997 and $9
million in 1996 322 295
Inventories:
Work in process and finished goods 110 107
Raw materials 222 220
332 327
Prepaid expenses 17 13
Total current assets 686 649
Investment in Financial Services 660 592
Property and Equipment
Buildings 540 516
Machinery and equipment 3,609 3,576
Less allowances for depreciation and
amortization (1,995) (1,882)
2,154 2,210
Construction in progress 149 106
2,303 2,316
Timber and timberlands--less depletion 523 503
Land 32 31
Total property and equipment 2,858 2,850
Other Assets 173 161
Total Assets $ 4,377 $ 4,252
See notes to consolidated financial statements.
<PAGE>4
Summarized Balance Sheets - Continued
Parent Company (Temple-Inland Inc.)
Unaudited
June 28, December 28,
1997 1996
(in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 126 $ 143
Accrued expenses 177 140
Employee compensation and benefits 19 28
Current portion of long-term debt 2 8
Total current liabilities 324 319
Long-Term Debt 1,573 1,522
Deferred Income Taxes 235 234
Postretirement Benefits 138 136
Other Liabilities 23 26
Shareholders' Equity 2,084 2,015
Total Liabilities and Shareholders' Equity $ 4,377 $ 4,252
See notes to consolidated financial statements.
<PAGE>5
Summarized Statements of Cash Flows
Parent Company (Temple-Inland Inc.)
Unaudited
First Six Months
1997 1996
(in millions)
Cash Provided by (Used for) Operations
Net income $ 28.8 $ 81.8
Adjustments to reconcile net income to net cash:
Depreciation and depletion 126.4 120.4
Deferred taxes .7 (11.4)
Unremitted earnings of affiliates (50.4) (33.0)
Receivables (26.8) (31.0)
Inventories (4.9) 18.1
Prepaid expenses (4.2) 3.5
Accounts payable and accrued expenses 10.0 (41.1)
Other (25.8) 13.7
53.8 121.0
Cash Provided by (Used for) Investments
Capital expenditures (115.0) (166.1)
Investment in joint ventures/acquisitions (7.8) (17.0)
Sale of property and equipment 1.7 2.6
Capital contributions to financial services (24.6) -
Dividends from financial services 125.0 11.2
Acquisition of California Financial Holding
Company, net of cash acquired (22.7) -
(43.4) (169.3)
Cash Provided by (Used for) Financing
Change in debt, net 45.8 94.3
Purchase of stock for treasury (25.5) (12.8)
Cash dividends paid to shareholders (35.5) (33.3)
Other 5.3 .5
(9.9) 48.7
Net increase in cash and cash equivalents .5 .4
Cash and cash equivalents at beginning
of period 14.3 14.7
Cash and cash equivalents at end of period $ 14.8 $ 15.1
See notes to consolidated financial statements.
<PAGE>6
Summarized Statements of Income
Temple-Inland Financial Services
Unaudited
Second Quarter First Six Months
1997 1996 1997 1996
(in millions)
Interest Income
Mortgage-backed and investment
securities $ 37.1 $ 46.7 $ 74.2 $ 96.4
Loans receivable and mortgage loans
held for sale 122.4 105.7 240.8 207.5
Other earning assets 5.2 5.2 10.2 10.9
Total interest income 164.7 157.6 325.2 314.8
Interest Expense
Deposits 76.3 77.3 151.1 155.7
Borrowed funds 37.8 31.0 73.1 60.5
Total interest expense 114.1 108.3 224.2 216.2
Net Interest Income 50.6 49.3 101.0 98.6
Provision for loan losses 1.4 2.9 .7 9.1
Net Interest Income After Provision For
Loan Losses 49.2 46.4 100.3 89.5
Noninterest Income
Loan servicing fees 17.6 13.8 32.1 27.5
Loan origination and marketing 9.6 7.6 16.4 14.2
Other 28.9 26.5 49.0 47.3
56.1 47.9 97.5 89.0
Noninterest Expense
Compensation and benefits 29.5 25.4 56.8 50.6
Other 42.4 39.2 78.1 73.5
Total noninterest expense 71.9 64.6 134.9 124.1
Income before taxes 33.4 29.7 62.9 54.4
Minority interest in income of
consolidated subsidiary (1.0) - (1.0) -
Pretax Income After Minority
Interest 32.4 29.7 61.9 54.4
Taxes on income (.1) 11.7 11.5 21.4
Net Income $ 32.5 $ 18.0 $ 50.4 $ 33.0
See notes to consolidated financial statements.
<PAGE>7
Summarized Balance Sheets
Temple-Inland Financial Services
Unaudited
June 30, December 31,
1997 1996
(in millions)
ASSETS
Cash and cash equivalents $ 174 $ 214
Mortgage loans held for sale 429 244
Loans receivable 6,804 5,414
Mortgage-backed and investment
securities 2,976 2,783
Other assets 880 680
TOTAL ASSETS $ 11,263 $ 9,335
LIABILITIES
Deposits $ 7,278 $ 6,263
Securities sold under repurchase
agreements 1,914 1,937
Federal Home Loan Bank advances 604 55
Other borrowings 151 133
Other liabilities 506 355
TOTAL LIABILITIES 10,453 8,743
PREFERRED STOCK ISSUED BY SUBSIDIARY 150 -
SHAREHOLDER'S EQUITY 660 592
TOTAL LIABILITIES AND SHAREHOLDER S
EQUITY $ 11,263 $ 9,335
See notes to consolidated financial statements.
<PAGE>8
Summarized Statements of Cash Flows
Temple-Inland Financial Services
Unaudited
First Six Months
1997 1996
(in millions)
Cash Provided by (Used for) Operations
Net income $ 50.4 $ 33.0
Adjustments to reconcile net income
to net cash:
Amortization, accretion and depreciation 16.5 17.1
Provision for loan losses .7 9.1
Receivable from FDIC - 7.4
Mortgage loans held for sale (4.6) (36.2)
Collections and remittances on loans
serviced for others, net 68.7 (51.7)
Other (12.5) (53.1)
119.2 (74.4)
Cash Provided by (Used for) Investments
Purchases of securities held-to-maturity (19.2) (.1)
Purchases of securities available-for-sale - (2.2)
Maturities of securities held-to-maturity 163.0 162.0
Maturities of securities available-for-sale 28.0 47.8
Proceeds from sale of securities available-
for-sale 172.4 4.3
Loans originated or acquired - net of
principal collected on loans (784.0) (359.1)
Other (2.9) (14.0)
(442.7) (161.3)
Cash Provided by (Used for) Financing
Net increase (decrease) in deposits 33.8 (38.9)
Securities sold under repurchase agreements
and short-term borrowings - net (48.3) 341.9
Change in debt, net 195.3 (85.5)
Capital contributions from parent 24.6 -
Proceeds from sale of subsidiary preferred stock 150.1 -
Dividends paid to parent (125.0) (11.2)
Net increase in advances from borrowers for
taxes and insurance 52.4 47.8
282.9 254.1
Net increase (decrease) in cash and cash
equivalents (40.6) 18.4
Cash and cash equivalents at beginning of period 214.4 343.1
Cash and cash equivalents at end of period $ 173.8 $ 361.5
See notes to consolidated financial statements.
<PAGE>9
Consolidated Statements of Income
Temple-Inland Inc. and Subsidiaries
Unaudited
Second Quarter First Six Months
1997 1996 1997 1996
(In millions, except for per share data)
Revenues
Manufacturing net sales $ 687.1 $ 677.9 $ 1,336.1 $ 1,348.3
Financial services revenues 220.8 205.5 422.7 403.8
907.9 883.4 1,758.8 1,752.1
Costs and Expenses
Manufacturing costs and expenses 667.2 626.9 1,297.0 1,224.1
Financial services expenses 188.4 175.8 360.8 349.4
855.6 802.7 1,657.8 1,573.5
Operating Income 52.3 80.7 101.0 178.6
Parent Company Interest - net (28.3) (27.5) (56.1) (54.2)
Other 1.9 1.3 2.7 1.5
Income Before Taxes 25.9 54.5 47.6 125.9
Taxes on Income 10.3 19.1 18.8 44.1
Net Income $ 15.6 $ 35.4 $ 28.8 $ 81.8
Earnings per share $ .28 $ .63 $ .52 $1.47
Dividends Paid Per Share of
Common Stock $ .32 $ .30 $ .64 $ .60
Weighted Average Shares
Outstanding 55.6 55.6 55.6 55.6
See notes to consolidated financial statements.
<PAGE>10
Consolidated Balance Sheets
Temple-Inland Inc. and Subsidiaries
June 28, 1997
Unaudited
Parent Financial
Company Services Consolidated
(in millions)
ASSETS
Cash and cash equivalents $ 15 $ 174 $ 188
Mortgage loans held for sale - 429 429
Loans receivable - 6,804 6,804
Mortgage-backed and investment
securities - 2,976 2,976
Trade and other receivables 322 - 319
Inventories 332 - 332
Property & equipment 2,858 99 2,957
Other assets 190 781 927
Investment in financial services 660 - -
TOTAL ASSETS $ 4,377 $ 11,263 $14,932
LIABILITIES
Deposits $ - $ 7,278 $ 7,278
Securities sold under repurchase
agreements and Federal Home
Loan Bank advances - 2,518 2,518
Other liabilities 347 506 832
Long-term debt 1,573 151 1,724
Deferred income taxes 235 - 208
Postretirement benefits 138 - 138
TOTAL LIABILITIES $ 2,293 $ 10,453 12,698
PREFERRED STOCK ISSUED BY
SUBSIDIARY 150 150
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 354
Translation and other adjustments (25)
Retained earnings 1,831
2,221
Cost of shares held in the treasury:
4,620,039 shares (137)
TOTAL SHAREHOLDERS' EQUITY 2,084
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,932
See the notes to the consolidated financial statements.
<PAGE>11
Consolidated Balance Sheets
Temple-Inland Inc. and Subsidiaries
December 28, 1996
Unaudited
Parent Financial
Company Services Consolidated
(in millions)
ASSETS
Cash and cash equivalents $ 14 $ 214 $ 228
Mortgage loans held for sale - 244 244
Loans receivable - 5,414 5,414
Mortgage-backed and investment
securities - 2,783 2,783
Trade and other receivables 295 - 292
Inventories 327 - 327
Property & equipment 2,850 81 2,931
Other assets 174 599 728
Investment in financial services 592 - -
TOTAL ASSETS $ 4,252 $ 9,335 $12,947
LIABILITIES
Deposits $ - $ 6,263 $ 6,263
Securities sold under repurchase
agreements and Federal Home
Loan Bank advances - 1,992 1,992
Other liabilities 345 355 685
Long-term debt 1,522 133 1,655
Deferred income taxes 234 - 201
Postretirement benefits 136 - 136
TOTAL LIABILITIES $ 2,237 $ 8,743 10,932
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 (24)
Retained earnings 1,837
2,179
Cost of shares held in the treasury:
5,940,802 shares (164)
TOTAL SHAREHOLDERS' EQUITY 2,015
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,947
See the notes to the consolidated financial statements.
<PAGE>12
Consolidated Statements of Cash Flows
Temple-Inland Inc. and Subsidiaries
Unaudited
First Six Months
1997 1996
(in millions)
Cash Provided by (Used for) Operations
Net income $ 28.8 $ 81.8
Adjustments to reconcile net income to
net cash:
Depreciation and depletion 132.4 124.9
Amortization and accretion 10.5 12.5
Deferred taxes 5.0 6.2
Receivable from FDIC - 7.4
Trade and other receivables (26.8) (31.0)
Accounts payable and accrued expenses 10.0 (40.9)
Inventories (4.9) 18.1
Mortgage loans held for sale (4.6) (36.2)
Increase (decrease) in collections and
remittances on loans serviced for
others, net 68.7 (51.7)
Other (46.1) (44.6)
173.0 46.5
Cash Provided by (Used for) Investments
Capital expenditures (122.4) (172.7)
Purchases of securities held-to-maturity (19.2) (.1)
Purchases of securities available-for-sale - (2.2)
Maturities of securities held-to-maturity 163.0 162.0
Maturities of securities available-for-sale 28.0 47.8
Proceeds from sale of securities available-
for-sale 172.4 4.3
Loans originated or acquired - net of
principal collected on loans (784.0) (359.1)
Acquisition of California Financial Holding
Company, net of cash acquired (22.7) -
Other (1.6) (21.7)
(586.5) (341.7)
Cash Provided by (Used for) Financing
Additions to debt 436.8 230.2
Payments of debt (195.7) (221.4)
Securities sold under repurchase agreements
and short-term borrowings - net (48.3) 341.9
Cash dividends paid to shareholders (35.5) (33.3)
Net increase (decrease) in deposits 33.3 (38.9)
Net increase in advances from borrowers for
taxes and insurance 52.4 47.8
Purchase of stock for treasury (25.5) (12.8)
Proceeds from sale of subsidiary preferred stock 150.1 -
Other 5.3 .5
372.9 314.0
Net increase (decrease) in cash and
cash equivalents (40.6) 18.8
Cash and cash equivalents at beginning of period 228.7 357.8
Cash and cash equivalents at end of period $ 188.1 $ 376.6
See notes to consolidated financial statements.
<PAGE>13
TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal accruals) considered necessary for a
fair presentation have been included. For further information, refer to the
consolidated financial statements and footnotes included in, or incorporated
into, Temple-Inland Inc.'s (the "Company") Annual Report on Form 10-K for the
fiscal year ended December 28, 1996.
The consolidated financial statements include the accounts of Temple-Inland
Inc. and all subsidiaries in which the Company has more than a 50 percent
equity ownership. However, because certain assets and liabilities are in
separate corporate entities, the consolidated assets are not available to
satisfy all consolidated liabilities. 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 for the Company's primary business
groups.
The Parent Company (Temple-Inland Inc.) summarized financial statements
include the accounts of Temple-Inland Inc. and its manufacturing subsidiaries
with the Financial Services subsidiaries and the 20 percent to 50 percent
owned companies being reflected in the financial statements on the equity
basis.
The Temple-Inland Financial Services Group summarized financial statements
include savings bank, mortgage banking, real estate development activities and
insurance operations.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share , which is effective for financial statements
issued for periods ending after December 15, 1997. The impact of Statement
128 on the calculation of earnings per share is not expected to be material.
<PAGE>14
TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - CONTINGENCIES
There are pending against the Company and its subsidiaries lawsuits and claims
arising in the regular course of business. In the opinion of management,
recoveries, if any, by plaintiffs or claimants that may result from the
foregoing litigation and claims will not be material in relation to the
consolidated financial statements of the Company and its subsidiaries.
On August 4, 1995, a former employee of the Company ( Employee ) filed a
wrongful termination lawsuit against the Company, which is currently pending
in state district court in Angelina County, Texas. Employee alleges that his
employment was terminated for refusing to participate in alleged illegal
activity consisting of underpayment of the Company s federal income taxes and
filing with the Securities and Exchange Commission (the Commission )
financial reports that were misleading because of the understatement of
income. Although the Company does not consider this litigation to be
material, subsequent to the end of the second fiscal quarter, the Company
publicly denied the allegations made by Employee in response to media
attention given to the litigation. The Company remains confident that upon
the ultimate trial of the issues raised, none of the allegations will be found
to have any merit or grounds whatsoever. As a result of the allegations made
by Employee, the Commission began a non-public investigation into the
allegations. The Company has provided information to the Commission in
response to a subpoena issued in this investigation and continues to cooperate
with the Commission in resolving this matter.
NOTE C - ACQUISITIONS
On June 27, the Company acquired California Financial Holding Company, the
parent company of Stockton Savings Bank, F.S.B., and merged Stockton Savings
Bank into Guaranty Federal Bank. The purchase price of $143.4 million
included $47.3 million in cash and approximately 1,615,000 shares of Temple-
Inland Inc. common stock valued at $96.1 million. The acquisition has been
accounted for under the purchase method of accounting. The net assets
acquired consisted of $24.6 million in cash, $955.1 million of loans, $297.5
million of mortgage-backed securities and investments, $126.5 million in other
assets, $982.2 million of deposits, $320.1 million of FHLB advances and other
borrowings, and $13.0 million of other liabilities. The excess of the
aggregate purchase price over the fair market value of net assets acquired of
approximately $55 million was recognized as goodwill and is being amortized on
a straight-line basis over 25 years. The operating results of Stockton
Savings Bank have been included in the Company s consolidated financial
statements since the date of acquisition.
On June 4, 1997, Temple-Inland Mortgage Corporation acquired Knutson Mortgage
Company. The net assets acquired consisted primarily of $94.6 million in
mortgage loans held for sale, $72.3 million in mortgage loan servicing rights,
$15.8 million in other assets, $161.8 million in debt, and $6.3 million in
other liabilities. The acquisition has been accounted for under the purchase
method of accounting with the net assets acquired approximating the purchase
price paid. The operating results of Knutson Mortgage Company have been
included in the Company s consolidated financial statements since the date of
acquisition.
<PAGE>15
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Results of operations, including information regarding the Company's principal
business segments, are shown below:
Second Quarter First Six Months
1997 1996 1997 1996
(in millions)
Revenues
Paper $ 527.6 $ 533.2 $ 1,030.0 $ 1,076.3
Building products 159.5 144.7 306.1 272.0
Manufacturing net sales 687.1 677.9 1,336.1 1,348.3
Financial services 220.8 205.5 422.7 403.8
Total revenues $ 907.9 $ 883.4 $ 1,758.8 $ 1,752.1
Income
Paper $ (10.1) $ 28.8 $ (17.2) $ 90.0
Building products 36.4 27.0 68.5 44.0
Operating profit 26.3 55.8 51.3 134.0
Financial services 32.4 29.7 61.9 54.4
58.7 85.5 113.2 188.4
Corporate expenses (6.4) (4.8) (12.2) (9.8)
Parent company interest - net (28.3) (27.5) (56.1) (54.2)
Other - net 1.9 1.3 2.7 1.5
Income before taxes 25.9 54.5 47.6 125.9
Taxes on income 10.3 19.1 18.8 44.1
Net income $ 15.6 $ 35.4 $ 28.8 $ 81.8
<PAGE>16
Second Quarter 1997 vs. Second Quarter 1996
Second quarter earnings for 1997 totaled $15.6 million, or $.28 per share, a
decrease of 56 percent from 1996 second quarter earnings of $35.4 million, or
$.63 per share. Revenues for the period were $907.9 million, up three percent
from the $883.4 million reported for the same quarter of 1996.
The paper group recorded an operating loss of $10.1 million for the quarter
compared with operating earnings of $28.8 million in the second quarter of
1996. Production and shipment volumes for the paper group s corrugated
container operation were at record levels for the quarter; however, average
box prices were down $108 per ton from last year s second quarter. The
bleached paperboard operation continued to experience improved sales and
production levels in the quarter; however, demand for bleached paperboard
products, especially folding carton grades, deteriorated somewhat in the
quarter, before firming in June.
The building products group reported record operating earnings of $36.4
million for the quarter, an increase of 35 percent from the $27.0 million
reported in the second quarter 1996. Lumber prices were up from first quarter
levels, and the gypsum operation had another outstanding quarter, reflecting
strong demand.
The financial services group reported record operating earnings of $32.4
million for the quarter. This compares with $29.7 million in the second
quarter of 1996. Net interest income and net noninterest income for the
quarter were favorable, primarily due to higher levels of loans outstanding.
During the quarter, total loans increased by $1.1 billion to $7.2 billion,
which is 71 percent of total earnings assets.
Net interest expense increased to $28.3 million in the current quarter
compared with $27.5 million in the second quarter of last year. Gross
interest increased slightly from $28.5 million in 1996 to $28.9 million in
1997. Capitalized interest decreased slightly from $1.0 million in the second
quarter of 1996, to $.6 million in the second quarter of 1997.
<PAGE>17
First Half of 1997 vs. First Half of 1996
Earnings for the first six months of 1997 were $28.8 million, or $.52 per
share compared with $81.8 million, or $1.47 per share for the first half of
last year. Revenues of $1,758.8 million were up slightly from the 1996 first
half of $1,752.1 million.
The paper group lost $17.2 million compared with earnings of $90.0 million in
the first six months of 1996. Although box shipments for the corrugated
container operation were up approximately four percent for the first six
months of the year compared to the same period last year, the decline in box
prices more than offset the benefit of the record volumes. The bleached
paperboard operation continued to experience improved sales and production
volumes. Total shipments were 335,000 tons for the first half of 1997, an
increase of 11 percent over 1996 levels.
The building products group earned $68.5 million in the first half of 1997
compared with $44.0 million last year. This improvement in earnings is due to
increased earnings for the solid wood and gypsum operations. Lumber demand
was very high and sales averages improved to record levels. Sales averages
for the gypsum operations were 22 percent higher than year-ago levels.
The modernization of the Diboll, Texas, particleboard plant has been
completed, and this facility resumed production in late June. Similar
renovations were completed last year at the Company s plant in Monroeville,
Alabama, and renovations to the Thomson, Georgia, particleboard plant are
scheduled to begin in September, completing the upgrade process of all the
Company s particleboard facilities.
Earnings for the financial services group were $61.9 million for the period,
an increase of $7.5 million from last year s comparable period. A decrease in
provision for loan losses was a major factor of earnings increase. The credit
quality of the loan portfolio remains strong.
Financial Condition
The Company s financial condition continues to be strong. Internally
generated funds, existing credit facilities and the capacity to issue long-
term debt are sufficient to fund projected capital expenditures, to service
existing debt, to pay dividends and to meet normal working capital
requirements.
During the second quarter, a newly formed subsidiary of the Company that
qualifies as a real estate investment trust ( REIT ) issued $150 million of
noncumulative floating rate preferred stock to third party investors in a
private placement. The preferred stock pays quarterly cash dividends at a
floating rate of three-month LIBOR plus 140 basis points. The preferred stock
is redeemable at the option of the Company in certain circumstances.
<PAGE>18
Financial Condition--Continued
On June 27, 1997, the Company acquired California Financial Holding Company,
the parent company of Stockton Savings Bank, F.S.B., and merged the operations
of Stockton Savings Bank into Guaranty Federal Bank. The purchase price
consisted of approximately $47.3 million in cash and approximately 1,615,000
shares of Temple-Inland Inc. common stock valued at $96.1 million.
On June 4, 1997, Temple-Inland Mortgage Corporation acquired Knutson Mortgage
Company. Temple-Inland Mortgage Corporation s servicing portfolio of mortgage
loans now exceeds $25 billion, making it one of the 20 largest mortgage
servicing companies in the nation.
Guaranty Federal Bank continues to exceed all three regulatory capital
requirements.
<PAGE>19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note B to Notes to Consolidated
Financial Statements in Part I of this report is incorporated
by reference thereto.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Regulation S-K
Exhibit Number
(11) Statement re computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K. During the six months ended June
28, 1997, the Company did not file any reports on Form
8-K.
<PAGE>20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEMPLE-INLAND INC.
(Registrant)
Date: August 11, 1997 By /s/ David H. Dolben
David H. Dolben
Vice President and
Chief Accounting Officer
<PAGE>21
EXHIBIT INDEX
The following is an index of the exhibits filed herewith. The page reference
set forth opposite the description of exhibits included in such index refer to
the pages under the sequential numbering system prescribed by Rule 0-3(b)
under the Securities Exchange Act of 1934.
Regulation S-K
Exhibit Sequential
Number Page Number
(11) Statement re computation of 22
per share earnings.
(27) Financial Data Schedule 23
EXHIBIT (11)
TEMPLE-INLAND INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(in thousands, except for per share data)
Second Quarter First Six Months
1997 1996 1997 1996
Primary
Average common shares outstanding 55,454 55,504 55,440 55,534
Net effect of dilutive stock options
based on treasury stock method using
average market price 171 59 175 31
Weighted average shares outstanding 55,625 55,563 55,615 55,565
Net income $ 15,552 $ 35,406 $ 28,801 $ 81,832
Earnings per share $ .28 $ .63 $ .52 $ 1.47
Fully Diluted
Average common shares outstanding 55,454 55,504 55,440 55,534
Net effect of dilutive stock options
based on treasury stock method
using the closing market price, if
higher than average market price 202 105 190 54
Weighted average shares outstanding 55,656 55,609 55,630 55,588
Net income $ 15,552 $ 35,406 $ 28,801 $ 81,832
Earnings per share $ .28 $ .63 $ .52 $ 1.47
<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> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 188
<SECURITIES> 0
<RECEIVABLES> 319
<ALLOWANCES> 0
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<PP&E> 2,957
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0
0
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<SALES> 1,336
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