<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
-------- --------
COMMISSION FILE NO. 0-016951
FIBREBOARD CORPORATION
----------------------
(exact name of registrant as specified in charter)
DELAWARE 94-0751580
-------------------------------------------------------
(State or other juris- (I.R.S. Employer Iden-
diction of incorporation) tification No.)
2121 NORTH CALIFORNIA BLVD., SUITE 560, WALNUT CREEK, CA 94596
---------------------------------------------------------------
(Address of principal executive offices)
(510) 274-0700
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
-----------------
(Former name, former address or former fiscal year,
if changed since last report)
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 XXX . No .
------- ------
As of the close of business on May 6, 1995, the registrant had outstanding
4,247,787 shares of common stock.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following unaudited financial statements are filed as part of this
report:
FINANCIAL STATEMENT TITLE PAGE
----
Consolidated statements of income for the three months
ended March 31, 1995 and 1994 3
Consolidated balance sheets as of March 31, 1995
and December 31, 1994 4
Consolidated statements of cash flows for the three
months ended March 31, 1995 and 1994 6
Notes to consolidated financial statements 7
2
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollar Amounts in Thousands Except Per Share))
(Unaudited)
<TABLE>
<CAPTION>
Quarter
Ended March 31
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Net sales $129,044 $ 86,300
Cost of sales 99,257 66,774
-------- --------
Gross margin 29,787 19,526
Selling and administrative expenses 18,909 6,779
-------- --------
Income from operations 10,878 12,747
Interest expense (1,896) (980)
Interest and other income 426 767
-------- --------
Income before income taxes 9,408 12,534
Income taxes (3,763) (5,076)
-------- --------
Net income $ 5,645 $ 7,458
-------- --------
-------- --------
Earnings per share:
Primary 1.25 1.66
Fully diluted 1.25 1.66
Common equivalent shares (thousands)
(Weighted average)
Primary 4,504 4,491
Fully diluted 4,505 4,491
</TABLE>
3
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1995 1994
---------- ----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,575 $ 8,842
Receivables 41,036 40,412
Current portion of notes receivable 6,317 1,317
Inventories 72,806 76,656
Prepaid expenses 2,194 1,836
Deferred income taxes 9,296 9,270
---------- ----------
Total current assets 134,224 138,333
Timber and timberlands, net 30,815 30,305
Property, plant and equipment, at cost:
Land and improvements 22,178 22,051
Buildings 37,070 37,121
Machinery and equipment 131,276 130,503
Construction in progress 4,036 1,142
---------- ----------
194,560 190,817
Accumulated depreciation (80,610) (75,850)
---------- ----------
Net property, plant and equipment 113,950 114,967
Notes receivable 6,323 12,451
Goodwill 64,079 64,623
Other assets 13,245 12,957
---------- ----------
Total operating assets 362,636 373,636
Cash restricted for asbestos costs 3,322 1,893
Asbestos costs to be reimbursed 858,598 810,454
---------- ----------
Total assets $1,224,556 $1,185,983
---------- ----------
---------- ----------
</TABLE>
4
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1995 1994
----------- -----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 2,108 $ 2,045
Accounts payable and accrued liabilities 52,136 58,698
Reserve for asbestos-related costs 2,700 2,700
----------- -----------
Total current liabilities 56,944 63,443
Long-term debt 90,689 101,293
Reserve for asbestos-related costs 13,965 14,584
Other long-term liabilities 24,923 24,109
Deferred income taxes 19,395 19,440
----------- -----------
Total operating liabilities 205,916 222,869
Asbestos claims settlements:
Current 7,031 6,878
Long-term 837,567 788,487
----------- -----------
Total asbestos claims settlements 844,598 795,365
Long-term debt associated with asbestos 22,696 22,360
----------- -----------
Total liabilities 1,073,210 1,040,594
Commitments & contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 3,000,000
shares authorized; none issued -- --
Common stock, $.01 par value, 15,000,000
shares authorized; 4,247,787 and
4,224,225 shares issued 42 42
Additional paid-in capital 76,478 76,166
Retained earnings 79,397 73,752
Minimum pension liability adjustment (4,571) (4,571)
----------- -----------
Total stockholders' equity 151,346 145,389
----------- -----------
Total liabilities and stockholders' equity $ 1,224,556 $ 1,185,983
----------- -----------
----------- -----------
</TABLE>
5
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended March 31
-----------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 5,645 $ 7,458
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation, amortization, and depletion 5,579 3,728
Deferred income taxes (71) 78
Deferred long term benefits 814 437
Compensation for stock grants 54 37
Gain on sale of assets -- (502)
Change in working capital (3,349) 12,377
------- -------
Net cash provided by operations 8,672 23,613
Cash Flows From Investing Activities:
Non-cash net assets of acquired operations (448) --
Proceeds from asset sales -- 2,430
Property, plant and equipment changes (3,710) (809)
Timber & timberland changes, net (510) 3,335
Reduction in notes receivable 1,128 7
Decrease (increase) in other assets (493) 9
------- -------
Net cash provided (used) by investing activities (4,033) 4,972
Cash Flows From Financing Activities:
Repayment of debt (10,541) (23,136)
Employee stock plan transactions 258 --
------- -------
Net cash used by financing activities (10,283) (23,136)
Net cash provided (used) by business activities (5,644) 5,449
Cash Flows From Asbestos Related Activities:
Receipts from insurers 1,918 3,927
Structured settlement program activity (4) 330
Other asbestos-related cash transactions (1,108) (2,051)
Change in cash restricted for asbestos costs (1,429) (2,586)
------- -------
Net cash used by asbestos-related activities (623) (380)
------- -------
Net increase (decrease) in cash (6,267) 5,069
Cash at beginning of period 8,842 5,322
------- -------
Cash at end of period $ 2,575 $ 10,391
------- -------
------- -------
Cash Paid During the Period For:
Interest $ 2,014 $ 913
Income taxes 1,702 5
Non-Cash Items:
Increase in asbestos claims settlements 86,221 90,966
Payments made to asbestos claimants on
Fibreboard's behalf 36,984 56,296
Increase in receivables from sales of surplus
real estate -- 2,247
</TABLE>
6
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar Amounts in Thousands)
(Unaudited)
1. The interim financial statements included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although Fibreboard management believes that
the disclosures are adequate to make the information presented not
misleading. These interim financial statements and notes should be read in
conjunction with the financial statements and the notes thereto included in
Fibreboard's 1994 Annual Report and Form 10-K.
Interim financial statements are by necessity somewhat tentative.
Judgments are used to estimate the amounts recorded each quarter for items
that are normally determinable only on an annual basis. For example,
numerous items relating to employee benefits are determined annually, with
hours worked determining pension plan contributions for the year,
eligibility for vacations, etc. Further, all inventory quantities are
verified by physically counting the units on hand at least once a year.
For those inventories not counted at the end of the quarter, quantities are
determined using measured sales and production data for the period.
The interim period financial information included herein reflects all
adjustments of a normal and recurring nature which are, in the opinion of
Fibreboard management, necessary for a fair presentation of the results of
the respective interim periods. Results of operations for interim periods
are not necessarily indicative of results to be expected for an entire
year.
2. Net earnings per common and common equivalent share are calculated using
the weighted average number of common shares outstanding during the period
plus the net additional number of shares which would be issuable upon the
exercise of stock options, assuming Fibreboard used the proceeds received
to purchase additional shares at market value.
3. Inventories are valued at the lower of cost (first in, first out) or
market. Inventory costs include material, labor and operating overhead.
Operating supplies are priced at average cost. Inventories are as follows:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
------- -------
<S> <C> <C>
Finished Goods $51,856 $45,622
Raw Materials 19,341 29,182
Supplies 1,609 1,852
------- -------
Total Inventories $72,806 $76,656
------- -------
------- -------
</TABLE>
4. Fibreboard's ability to continue to operate in the normal course of
business is dependent upon its ongoing capability to fund asbestos-related
defense and indemnity costs. Prior to 1972, Fibreboard manufactured
insulation products containing asbestos. Fibreboard has since been named
as a defendant in many thousands of personal injury claims for injuries
allegedly caused by asbestos exposure and in asbestos-in-buildings actions
involving many thousands of buildings.
7
<PAGE>
The following tables illustrate asbestos-related claims activity for the
periods indicated:
<TABLE>
<CAPTION>
Three Months ended March 31
---------------------------
1995 1994
------ ------
<S> <C> <C>
Personal Injury
---------------
New claims received 1,800 3,400
Claims disposed
Settled 7,914 5,864
Dismissed 3,019 202
"Green Card" settlements (1) 45 57
Judgments (2) -- --
Adjustments (3) -- --
Average settlement amount per claim settled-(4)
pre-1959 claims $ 21 $ 10
post-1959 claims 6 7
Claims pending at end of period (5) 32,600 55,100
Three Months ended March 31
---------------------------
1995 1994
------ ------
Asbestos-in-Buildings
---------------------
New actions received -- 1
Actions disposed
Dismissed -- 4
Settled 1 --
Joined National Schools class action -- --
Actions pending at end of period 13 18
<FN>
1. Under Green Card Settlements, there is no determination of liability by
Fibreboard to a claimant. Instead, Fibreboard waives the statute of
limitations should a claimant develop an asbestos-related impairment in the
future.
2. Judgments represent defense verdicts in favor of Fibreboard, plaintiff
verdicts where the net amount payable by Fibreboard is zero after applying
prior settlement amounts or plaintiff verdicts where the judgment has been
paid. Additional judgments favoring plaintiffs have been entered.
Fibreboard is appealing these judgments. The amount of such judgments is
included in Fibreboard's overall liability estimate.
3. Often, multiple claims are filed for the same injury. It is often not
possible to fully identify duplicate claims until the claims are prepared
for trial. Fibreboard has an ongoing program to identify duplicate claims
and remove them from the claims database, and anticipates additional future
adjustments.
4. For claims where the initial year of exposure is known.
5. Of the claims pending at March 31, 1995 17,100 were filed on or after
August 27, 1993, and will be covered by the Global Settlement if approved.
</TABLE>
- -------------------------------------------------------------------------------
During 1993, Fibreboard entered into a settlement agreement with
Continental Casualty Company (Continental) and Pacific Indemnity Company
(Pacific) (the Insurance Settlement). In addition, Fibreboard,
Continental, Pacific and plaintiffs' representatives entered into a
settlement agreement (the Global Settlement). These agreements are
interrelated. Final court approval of the agreements is required. The
trial court proceeding is taking place in the United States District Court
for the Eastern District of Texas. Fibreboard believes trial court
approval of the settlements could occur in
8
<PAGE>
the first half of 1995, but if appealed, it may be 1996 or later before
final court approval could be obtained.
If both the Global Settlement and Insurance Settlement are approved,
Fibreboard believes its existing and future personal injury asbestos
liabilities will be resolved through insurance resources and existing
corporate reserves. Fibreboard will contribute $10,000 toward a $1,535,000
settlement trust, which it will obtain from other remaining insurance
sources and existing reserves. The Home Insurance Company paid $9,892
into an escrow account on behalf of Fibreboard during the first quarter
of 1995, in satisfaction of an earlier settlement agreement. Fibreboard
is obligated to pay $245, which includes interest from the settlement date
to December 31, 1994, into the escrow account if the Global Settlement is
approved. The remainder of the trust will be funded by Continental and
Pacific. The insurers have placed $1,525,000 in an escrow account pending
court approval of the settlements. The balance of the escrow account was
$1,560,533 at December 31, 1994 after payment of interim expenses
associated with the Global Settlement. The trust will be used to
compensate "future" plaintiffs, defined as those plaintiffs who had not
filed a claim against Fibreboard before August 27, 1993. Such future
plaintiffs only source of compensation will be the trust, as an injunction
will be entered prohibiting future claims against Fibreboard or the
insurers.
If the Global Settlement is not approved, but the Insurance Settlement is
approved, the insurers will instead provide Fibreboard with up to
$2,000,000 to resolve pending and future claims and will pay the deferred
payment portion of existing settled claims.
While Fibreboard is optimistic, there is no assurance final court approval
of either the Global Settlement or the Insurance Settlement can be
obtained. If neither the Global Settlement nor the Insurance Settlement is
approved, the parties will be bound by the outcome of the insurance
coverage litigation, unless other settlements are reached.
In the event the settlements discussed above are not approved, Fibreboard
believes it has substantial insurance coverage for asbestos-related defense
and indemnity costs. Fibreboard's disputes with Continental and Pacific
have been the subject of litigation which began in 1979. Trial court
judgments rendered in 1990 give Fibreboard virtually unlimited insurance
coverage for asbestos-related personal injury claims where the initial
exposure to asbestos occurred prior to March 1959. Under the judgments,
these insurers can be required to pay up to $500 for each occurrence
(defined as each individual claim) with no limitation on the aggregate
number of occurrences.
The insurers appealed to the California Court of Appeal. Among other
issues, Continental disputed the definition of an occurrence under its
policy as well as the trigger and scope of coverage as determined by the
trial court, while Pacific argued that its policy contained an aggregate
limit as well as disputing the trigger and scope of coverage issues. In
November 1993, the Court of Appeal issued its ruling on the trigger and
scope of coverage issues, confirming the favorable trial court judgments,
except the court held the period for coverage would begin at the time of
exposure to Fibreboard's asbestos products rather than at the time of
exposure to any company's asbestos product, with the presumption that these
periods are the same. The insurers have filed petitions for review with
the California Supreme Court, which has granted review but not yet
scheduled any further activity. At the request of Fibreboard, Continental
and Pacific, the Court of Appeal withheld its ruling on the remaining
issues while the parties seek approval of the Global and Insurance
Settlements. If the Global and/or Insurance Settlements are ultimately
approved, Fibreboard and its insurers will seek to dismiss the insurance
coverage litigation.
Fibreboard has entered into an interim agreement with Continental under
which Continental agreed to provide a full defense to Fibreboard on pre-
1959 claims and make certain funds available as needed to pay currently due
Structured Settlement Obligations and other personal injury defense costs
for which Fibreboard does not otherwise have insurance available during the
period pending final approval of the Global and/or Insurance Settlement, or
if neither is approved, through the ultimate conclusion of the insurance
coverage appeal, however long that may take. In exchange for the benefits
provided under this agreement, Fibreboard agreed not to settle additional
pre-1959 personal injury claims without Continental's consent.
If neither the Global Settlement nor the Insurance Settlement are approved
and Fibreboard prevails in the appeal of the insurance coverage litigation,
Continental has agreed to provide Fibreboard with $315,000 to $425,000 to
resolve personal injury claims alleging first exposure to asbestos after
March 1959, less any amounts Fibreboard recovers from the Pacific
settlement described below. Continental would also continue to have
responsibility for all pre-1959 personal injury claims against Fibreboard
up to $500 per claim.
In March 1992, Fibreboard and Pacific entered into a settlement agreement
(the Pacific Agreement).
9
<PAGE>
If the Global Settlement or Insurance Settlement is approved, the Pacific
Agreement will be of no effect. If neither of the settlements is approved,
the Pacific Agreement establishes amounts payable to Fibreboard if the
the insurance coverage judgments are ultimately upheld. Fibreboard received
$10,000 upon signing the agreements and received an additional $10,000
during 1993. In addition, if the judgments are affirmed on appeal,
Fibreboard will receive from $80,000 to $105,000 to be used for claims
costs for which it does not otherwise have insurance.
In the event the trigger and scope of coverage judgments are reversed on
appeal, Pacific will owe Fibreboard nothing and will have a right to
repayment of interim funds previously advanced.
Fibreboard believes amounts available under the settlements discussed above
will be adequate to fund defense and indemnity costs until the insurance
coverage appeal is concluded, whether as a result of the final approval of
the Global and/or Insurance Settlements or the final resolution of the
insurance coverage litigation.
In addition, Fibreboard has reached final settlements with four of its
primary insurers and several of its excess level insureres. The
settlements confirm more than $295,000 of insurance as needed to defend
and dispose of asbestos-in-buildings claims.
Fibreboard is also litigating with its remaining insurance carriers and
believes the total limits of insurance policies in effect from 1932 to 1985
which may provide coverage for asbestos-in-buildings claims aggregate
$390,000 (including the $295,000 referred to in the prior paragraph), which
is in addition to the personal injury insurance coverage and does not
include additional policies which contain no aggregate limit. The remaining
insurers dispute coverage. To date substantially all of Fibreboard's costs
of defending asbestos-in-buildings claims have been paid by its primary
carriers.
The asbestos-in-buildings insurance coverage trial has been continued. No
date has been set for the trial to recommence. Fibreboard is continuing
settlement discussions with the remaining insurers. Fibreboard cannot
predict whether such discussions will result in settlements.
Fibreboard has entered into tentative settlement agreements in two of the
class action asbestos-in-buildings claims in which it is involved. The
total amount of these settlements was $1,750, which will be fully funded
from existing confirmed insurance resources. The settlements are subject
to certain court actions. Once these settlements are finalized, the
settlement statistics in the table above will be adjusted to reflect these
two settlements.
At the end of 1991, Fibreboard attempted to quantify its liability for
asbestos-related personal injury claims then pending and anticipated to be
received through the end of the decade. There are many opportunities for
error in such an exercise. Assumptions concerning the number of claims to
be received, the disease mix of pending and future claims and projections
of defense and indemnity costs may or may not prove correct. Fibreboard's
assumptions are based on its historical experience, modified as appropriate
for anticipated demographic changes or changes in the litigation
environment.
Notwithstanding the inherent risk of significant error in such a
calculation, Fibreboard estimated the amount necessary to defend and
dispose of asbestos-related personal injury claims pending at December 31,
1991 and anticipated through the end of the decade plus the costs of
prosecuting its insurance coverage litigation, would aggregate $1,610,000.
Because of the dynamic nature of this litigation, it is more difficult to
estimate how many personal injury claims will be received after 1999 as
well as the costs of defending and disposing of those future claims.
Consequently, Fibreboard's estimated liability contains no amounts for
personal injury claims received after the end of the decade, although it is
likely additional claims will be received thereafter. In addition, the
projected liability does not include any liability for asbestos-in-
buildings claims, if any, as Fibreboard believes that any liability for
such claims is not subject to reasonable estimation.
Fibreboard determined it was probable that it would ultimately receive
insurance proceeds of $1,584,000 for the defense and disposition of the
claims quantified above. Fibreboard's opinion was based on its
understanding of the disputed issues, the financial strength of the
insurers and the opinion of outside legal counsel regarding the outcome of
the litigation. As a result, Fibreboard recorded a liability, net of
anticipated insurance proceeds, of $26,000 at December 31, 1991,
representing its best estimate of the unreimbursed cost of resolving
personal injury claims then pending and anticipated through the remainder
of the decade as well as the costs of prosecuting the insurance coverage
litigation. The balance of the net liability was $16,665 at March 31,
1995.
Fibreboard continues to believe it is probable that it will ultimately
receive insurance proceeds of
10
<PAGE>
$1,584,000 for the defense and disposition of the asbestos-related personal
injury claims quantified above. Although Fibreboard, its insurers and
plaintiffs' representatives entered into the Insurance and Global
Settlements discussed above, Fibreboard does not believe these settlements
impact its estimate of liability through the end of the decade, and no
additional events have transpired which indicate the potential liability
and insurance proceeds estimates should be changed. Consequently, no
adjustment has been made to the estimated liability for personal injury
claims through the end of the decade or anticipated insurance proceeds.
Fibreboard will continue to reevaluate its estimates and will make
adjustments to the effect dictated by changes in the personal injury
litigation.
5. Information about Fibreboard's industry segments is set forth below:
<TABLE>
<CAPTION>
Quarter
Ended March 31
-----------------------
1995 1994
------ ------
<S> <C> <C>
Outside sales
Building products:
Wood products $41,630 $48,080
Norandex 45,045 --
Industrial insulation products 17,722 14,428
-------- --------
Total building products 104,397 62,508
Resort operations 24,647 23,792
-------- --------
Consolidated $129,044 $86,300
-------- --------
-------- --------
Operating profit (loss)
Building products:
Wood products $ 2,958 $ 4,874
Norandex (134) --
Industrial insulation products 2,812 2,206
-------- --------
Total building products 5,636 7,080
Resort operations 7,863 8,496
-------- --------
Total operations 13,499 15,576
Unallocated expense (2,621) (2,829)
Interest expense (1,896) (980)
Interest and other income 426 767
-------- --------
Income before income taxes $9,408 $12,534
-------- --------
-------- --------
</TABLE>
6. Subsequent to March 31, 1995, Fibreboard acquired eight exterior building
products distribution centers in Texas, Nebraska and Colorado for $13,448
in cash.
On April 17, 1995, Fibreboard announced a two-for-one common stock split,
payable in the form of a 100 percent stock dividend, to be distributed on
May 19, 1995. Per share amounts will be restated after the distribution to
reflect the stock dividend.
Fibreboard is negotiating with a bank to replace Resort Operation's two
revolving credit facilities and term loan with a new $30 million revolving
facility. This new facility is expected to be in place during the second
quarter of 1995.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Overall--
Total sales increased 50% from $86.3 million to $129.0 million in 1995. The
majority of the sales increase is due to the acquisition of Norandex in the
third quarter of 1994, which generated $45.0 million in sales in the first
quarter of 1995.
Net income decreased from $7.5 million to $5.6 million in 1995. The decline
is due to lower profitability in wood products resulting from lower end product
prices when compared to the prior year, an anticipated seasonal operating loss
at Norandex, lower operating profits from resort operations as the high volume
and profit week following Christmas was the last week of fiscal 1994 rather than
the first week of the year (as was the case in the first quarter of 1994) and
much higher interest costs due to debt incurred to fund the acquisition of
Norandex in 1994.
Building Products--
Building products sales increased 67% from $62.5 million in 1994 to $104.4
million in 1995. The increase is primarily attributable to the acquisition of
Norandex. Operating profit declined from $7.1 million to $5.6 million.
Wood products sales declined 13% compared to 1994. The sales decline was due
to both lower prices (lumber and millwork prices fell by an average of 10%
compared to the first quarter of 1994) and lower shipment volumes in plywood and
millwork. Demand for wood products was adversely impacted by the significant
rainfall experienced in California during the first quarter of 1995, which
limited construction activity.
Wood products operating profit decreased from $4.9 million to $3.0 million,
reflecting the impact of lower demand and sales prices. Prices have continued
at lower levels into the second quarter of 1995. Fibreboard cannot determine
whether sales prices or demand will increase when warmer weather returns and
construction activity increases. In response to poor demand, rising finished
goods inventories and difficulties in conducting logging operations due to
bad weather, Fibreboard has scheduled production curtailments at its wood
products manufacturing facilities during the second quarter of 1995.
During the first quarter of 1995, Norandex contributed sales of $45.0
million, and generated a lower than anticipated seasonal operating loss of
$134,000. Norandex's primary sales regions are the mid-west, Great Lakes, mid-
Atlantic and northeast states, where construction activity is usually at a low
point during the first quarter of the year. Milder than normal winter weather
in these regions contributed to increased construction activity. On a pro forma
basis, Norandex sales in the first quarter of 1994 were $34.8 million with an
operating loss of $1.5 million. These pro forma amounts are not included in
Fibreboard's consolidating operating results for the first quarter of 1994.
Industrial insulation products sales increased 23% due to increased shipments
of metal products at higher average sales prices. Operating profit increased
from $2.2 million during 1994 to $2.8 million. Improved operating profit
resulted primarily from improved margins on metal sales as unit sales prices
increased relative to inventory costs.
12
<PAGE>
Resort Operations--
Resort operations revenues increased 4% to $24.6 million due to increased
skier days at Sierra-at-Tahoe. Operating profit declined from $8.5 million to
$7.9 million. In 1994, the high volume, high profit week between Christmas and
New Years was the first week of the first quarter and the last week of the
fourth quarter. While the first quarter of 1995 consisted of the same number of
operating days as 1994, the high profit week following Christmas was included in
the fourth quarter of 1994. Fibreboard believes the operating results for the
first quarter of 1994 would have been at least $1 million lower had it not
included the week between Christmas and New Years.
General Corporate Expenses--
Unallocated costs decreased from $2.8 million to $2.6 million.
Other Items--
Interest expense increased from $1.0 million to $1.9 million on higher
average borrowings due to the acquisition of Norandex in 1994. Interest and
other income declined from $0.8 million to $0.4 million.
FINANCIAL CONDITION
Cash generated from operations decreased from $23.6 million in 1994 to $8.7
million in 1995, including changes in non-cash working capital which generated
cash of $12.4 million in 1994 compared to a use of $3.3 million in 1995. This
change in working capital trends is due to the addition of Norandex, which
typically builds inventories and lowers its liabilities during the first
quarter, and the operation of the Colorado molded insulation facility in order
to restore inventory levels. Long-term debt was reduced $10.5 million during
the quarter as cash flow from operations was used to retire amounts outstanding
under revolving credit facilities. Amounts available for borrowing aggregated
$97.3 million at March 31, 1995.
Fibreboard is negotiating with a bank to replace its existing resort
operations revolving credit facilities which aggregate $13.1 million and $4.5
million term loan with a new $30 million revolving credit facility. Fibreboard
anticipates finalizing this facility during the second quarter.
On May 1, 1995, Fibreboard completed the purchase of the assets of Almar
Corporation (dba Aluminum Supply), Cornhusker Siding Supply, Inc. and Texas
Siding Supply, Inc. These companies operate eight exterior building product
distribution locations in Colorado, Texas and Nebraska, which concentrate on
vinyl siding and associated products. Purchased assets consist of accounts
receivable, inventories, fixed assets and intangibles. No liabilities were
assumed in the transaction. The total purchase price was $13.4 million.
Fibreboard anticipates primarily discretionary capital expenditures of
approximately $19.0 to $20 million during 1995. Major anticipated projects
include $6.7 million to install additional optimization equipment in two
sawmills, $1.2 million to expand the Norandex vinyl siding manufacturing plant
capacity by 22% and infrastructure development costs of approximately $3 million
to support the lot sales program at Northstar, with the remainder for
replacements and improvements of machinery and equipment and additional ski area
amenities. Through the first quarter, Fibreboard has expended approximately
$3.7 million on these projects.
In addition to cash needs related to continuing operations, Fibreboard must
fund its modest on-going asbestos-related costs. To date, substantially all
such costs, other than the cost of
13
<PAGE>
litigating insurance coverage issues, have been funded from insurance resources.
At March 31, 1995, Fibreboard had $3.3 million in cash on hand restricted for
asbestos-related costs.
Fibreboard and Continental Casualty have entered into an interim agreement
under which Continental agreed to make certain funds available for defense and
indemnity costs associated with asbestos-related personal injury claims during
the period pending final approval of the Global and/or Insurance Settlements
(which are more fully discussed in Fibreboard's Annual Report on Form 10-K for
the year ended December 31, 1994), or if neither are approved, through the final
conclusion of the insurance coverage litigation, however long that may take.
Fibreboard believes the amounts to be paid by Continental under this interim
agreement and amounts available under prior settlements with asbestos-in-
buildings insurers will be adequate to satisfy its asbestos-related cash
requirements as they come due.
Additional information regarding the asbestos-related litigation can be found
in Note 4 to the consolidated financial statements beginning on page 7.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Material developments, if any, in the asbestos-related litigation are
described in Note 4 to the consolidated financial statements beginning on page
7.
ITEM 2. CHANGES IN SECURITIES.
On April 17, 1995, Fibreboard announced a two-for-one stock split of its
common stock, payable in the form of a 100% stock dividend. The dividend is
payable on May 19, 1995 to Fibreboard shareholders of record at the close of
business on April 27, 1995.
Under the terms of Fibreboard's Rights Agreement, each share of common
stock outstanding after payment of the dividend will include one preferred
share purchaes right which attaches to and trades with each share. As
adjusted for the split, each right entitles the holder to purchase from
Fibreboard 1/200th of a share of Series A Junior Participating Preferred
Stock at an exercise price of $53.00 per 1/200th share, subject to
adjustment. The rights become exercisable under the terms and conditions set
forth in the Rights Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits are filed as part of this Form 10-Q:
(b) No Current Reports on Form 8-K were filed during the period January 1,
1995 to March 31, 1995.
14
<PAGE>
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.
FIBREBOARD CORPORATION
----------------------
(Registrant)
Dated: May 12, 1995 By: /s/ James P. Donohue
-----------------------
James P. Donohue
Senior Vice President,
Finance and Administration and
Chief Financial Officer
Dated: May 12, 1995 By: /s/ Garold E. Swan
-----------------------
Garold E. Swan
Vice President and Controller
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIBREBOARD'S
AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2575
<SECURITIES> 0
<RECEIVABLES> 49,775
<ALLOWANCES> 2,422
<INVENTORY> 72,806
<CURRENT-ASSETS> 134,224
<PP&E> 194,560
<DEPRECIATION> 80,610
<TOTAL-ASSETS> 1,224,556
<CURRENT-LIABILITIES> 56,944
<BONDS> 90,689
<COMMON> 42
0
0
<OTHER-SE> 151,304
<TOTAL-LIABILITY-AND-EQUITY> 1,224,556
<SALES> 129,044
<TOTAL-REVENUES> 129,044
<CGS> 99,257
<TOTAL-COSTS> 99,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 316
<INTEREST-EXPENSE> 1,896
<INCOME-PRETAX> 9,408
<INCOME-TAX> 3,763
<INCOME-CONTINUING> 5,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,645
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
