<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(MARK ONE)
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED
DECEMBER 31, 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 0-016951
FIBREBOARD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 94-0751580
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
2200 ROSS AVENUE, SUITE 3600, DALLAS, TX 75201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(214) 954-9500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
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 .
----- -----
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 XXX .
-----
1
<PAGE>
The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 18, 1996 was $188,066,032.
As of the close of business on March 18, 1996, the Registrant had
outstanding 8,448,704 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of Fibreboard Corporation's Proxy Statement relating to its
1996 Annual Meeting of Stockholders are incorporated by reference in Part III.
2
<PAGE>
FIBREBOARD CORPORATION
AMENDMENT TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995
During 1996, a number of developments have occurred in Fibreboard's
asbestos-related litigation, including the affirmation of the Global
Settlement and the Insurance Settlement by the U.S. Fifth Circuit Court of
Appeals. The Insurance Settlement approval judgment is now final and not
subject to further appellate proceedings. Petitions for rehearing on the
Global Settlement were filed with the Fifth Circuit by September 9, 1996. As
of November 4, 1996, the Court had not issued a decision on these petitions.
The Global Settlement and the Insurance Settlement are more fully described
in Note 14 to Fibreboard's 1995 consolidated financial statements included in
its Annual Report on Form 10-K for the year ended December 31, 1995.
Due to the significance of the events described above, the Registrant hereby
amends the following items of its Form 10-K for the Year ended December 31,
1995:
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Item 8 is hereby amended to:
1. Add a new Note 16, "Subsequent Event;" and
2. Replace the report of Arthur Andersen LLP, Fibreboard's independent public
accountants. The new report eliminates the fourth paragraph reference to the
asbestos-related contingent liability.
Item 8 as amended is attached hereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The following additional exhibits are filed as part of this report:
Exhibit 23 -- Consent of Arthur Andersen LLP.
Exhibit 99.1 -- Fibreboard Corporation press release dated November 11, 1996.
3
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
PAGE
----
Consolidated Statements of Income for 19
each of the three years in the period ended
December 31, 1995
Consolidated Balance Sheets as of December 31, 20
1995 and 1994
Consolidated Statements of Cash Flows for each 22
of the three years in the period ended
December 31, 1995
Consolidated Statements of Stockholders' Equity 24
for each of the three years in the period
ended December 31, 1995
Notes to Consolidated Financial Statements 25
Report of Independent Public Accountants 44
Report of Management 45
Supplementary Data (unaudited) -
Selected Quarterly Financial Data for each of the 46
two years in the period ended December 31, 1995
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
Net sales $380,806 $183,396 $ 74,716
Cost of sales 280,926 132,861 58,966
--------- --------- ---------
Gross margin 99,880 50,535 15,750
Other expenses:
Selling and administrative 76,909 35,392 16,342
Asbestos-related items(Note 14) (4,000) -- --
--------- --------- ---------
Operating income 26,971 15,143 (592)
Interest expense (6,476) (4,931) (3,575)
Interest and other income 3,101 3,697 5,551
--------- --------- ---------
Income from continuing operations
before income taxes 23,596 13,909 1,384
Income taxes relating to continuing
operations (9,072) (5,633) (567)
--------- --------- ---------
Income from continuing operations 14,524 8,276 817
Discontinued operations (Note 13)
Income from operations less
applicable income taxes of
$2,174, $5,132 and $7,572 3,479 7,538 10,896
Gain on surplus asset sales less
applicable income taxes of $7,637 -- 11,221 --
Gain on disposal less applicable
income taxes of $43,432 77,813 -- --
--------- --------- ---------
Net income $ 95,816 $ 27,035 $ 11,713
--------- --------- ---------
--------- --------- ---------
Earnings per share--primary
Income from continuing operations $1.62 $0.92 $0.09
Income from discontinued operations 0.39 0.84 1.24
Gain on surplus asset sales -- 1.25 --
Gain on disposal 8.66 -- --
--------- --------- ---------
Net income per share $10.67 $3.01 $1.33
--------- --------- ---------
--------- --------- ---------
Earnings per share--fully diluted
Income from continuing operations $1.62 $0.92 $0.09
Income from discontinued operations 0.39 0.84 1.22
Gain on surplus asset sales -- 1.25 --
Gain on disposal 8.65 -- --
--------- --------- ---------
Net income per share $10.66 $3.01 $1.31
--------- --------- ---------
--------- --------- ---------
Common equivalent shares (thousands)
Primary 8,979 8,986 8,792
Fully diluted 8,990 8,992 8,940
</TABLE>
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1994
---- ----
<S> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents (Note 1) $ 12,382 $ 8,842
Receivables (Notes 2, 4 and 5) 48,199 31,213
Current portion of
notes receivable (Note 5) 7,357 1,317
Inventories (Notes 1, 4 and 5) 57,905 40,272
Prepaid expenses 3,941 1,649
Deferred income taxes (Note 1) 13,086 9,270
------------ ----------
142,870 92,563
Net assets of discontinued operations -- 109,242
------------ -----------
Total current assets 142,870 201,805
Property, plant and equipment, at cost:
(Notes 1, 4 and 5)
Land and improvements 25,676 13,745
Buildings 37,015 28,451
Machinery and equipment 90,534 72,243
Construction in progress 643 620
------------ -----------
153,868 115,059
Accumulated depreciation (49,391) (40,973)
------------ -----------
Net property, plant and equipment 104,477 74,086
Notes receivable (Note 5 and 6) 5,271 12,451
Goodwill (Notes 1 and 13) 89,302 64,623
Other assets 17,636 15,212
------------ -----------
Total operating assets 359,556 368,177
Cash restricted for asbestos costs
(Note 14) 2,199 1,893
Asbestos costs to be reimbursed
(Note 14) 827,865 810,454
------------ -----------
Total assets $1,189,620 $1,180,524
------------ -----------
------------ -----------
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1995 1994
---- ----
<S> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 4) $ 1,423 $ --
Current portion of long-term debt (Note 5) 1,346 2,045
Accounts payable and accrued liabilities
(Note 3) 63,966 53,239
Reserve for asbestos-related costs (Note 14) 2,700 2,700
------------ ------------
Total current liabilities 69,435 57,984
Long-term debt (Note 5) 9,365 101,293
Reserve for asbestos-related costs (Note 14) 8,625 14,584
Other long-term liabilities (Note 7 and 8) 12,730 24,109
Deferred income taxes (Note 1) 13,861 19,440
------------ ------------
Total operating liabilities 114,016 217,410
Asbestos claims settlements (Note 14) 811,952 795,365
Long-term debt associated with asbestos (Note 5) 23,711 22,360
------------ ------------
Total liabilities 949,679 1,035,135
Minority interest 185 --
Commitments & Contingencies (Notes 11, 14 and 15)
Stockholders' equity (Notes 7, 9 and 10):
Preferred stock, $.01 par value, 3,000,000
shares authorized; none issued -- --
Common stock, $.01 par value, 15,000,000
shares authorized; 8,631,388 and
4,224,225 shares issued 86 42
Additional paid-in capital 77,293 76,166
Retained earnings 169,568 73,752
Minimum pension liability adjustment (Note 7) (1,400) (4,571)
Treasury stock, at cost, 215,700 shares (5,215) --
Foreign currency translation adjustment ( 576) --
------------ ------------
Total stockholders' equity 239,756 145,389
------------ ------------
Total liabilities and $1,189,620 $1,180,524
stockholders' equity ------------ ------------
------------ ------------
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 95,816 $ 27,035 $ 11,713
Adjustments to reconcile income
to net cash provided by
continuing operating activities:
Income of discontinued operations (81,292) (18,759) (10,896)
Depreciation and amortization 13,797 6,983 4,177
Deferred income taxes 4,979 928 300
Deferred long term benefits (2,395) (671) 1,606
Compensation for stock grants 212 129 1,039
Income applicable to minority interest 18 -- --
Gain on sale of assets (342) (2,080) (3,762)
Asbestos-related reserve (4,000) -- --
Change in working capital:
Receivables (172) 6,447 (1,325)
Inventories (3,402) (30) (202)
Prepaid expenses (2,022) 159 (463)
Accounts payable and accrued liabilities (6,538) (4,293) (1,243)
-------- -------- --------
Net cash provided by continuing operations 14,659 15,848 944
Discontinued operations:
Income of discontinued operations 81,292 18,759 10,896
Pre-tax gain on sale of assets (121,245) (19,190) --
Proceeds from sale of assets 238,994 23,860 --
Expenses of sale of assets (10,643) -- --
Depreciation, amortization and depletion 3,057 4,151 6,340
Deferred income taxes (16,858) 207 1,927
Net assets change 4,621 28,769 (31,131)
--------- -------- ---------
Net cash provided (used) by discontinued
operations 179,218 56,556 (11,968)
Cash flows from investing activities:
Non-cash net assets of
acquired operations (81,944) (119,894) (13,054)
Proceeds from asset sales 348 2,163 5,313
Property, plant and equipment changes (11,784) (7,412) (6,161)
Reductions of notes receivable 2,213 1,611 996
Decrease (increase) in other assets (700) (747) (1,542)
--------- -------- --------
Net cash used by investing activities (91,867) (124,279) (14,448)
</TABLE>
(continued)
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
New borrowings $ 28,434 $ 93,000 $15,000
Repayment of debt (120,243) (35,622) (10,799)
Purchase of treasury stock (5,215) -- --
Employee stock plan transactions 509 201 534
--------- --------- --------
Net cash provided (used) by
financing activities (96,515) 57,579 4,735
--------- --------- --------
Net cash provided (used) by
business activities 5,495 5,704 (20,737)
Cash flows from asbestos-related activities:
Receipts from insurers 4,754 7,657 19,848
Structured settlement program
activity 33 476 (1,638)
Other asbestos-related cash
transactions (6,422) (9,251) (13,832)
Change in cash restricted for
asbestos costs (306) (1,066) 5,670
--------- --------- --------
Net cash provided (used) by
asbestos-related activities (1,941) (2,184) 10,048
--------- --------- --------
Effect of exchange rate changes on
cash and cash equivalents (14) -- --
--------- --------- --------
Net increase (decrease) in cash 3,540 3,520 (10,689)
Cash at beginning of year 8,842 5,322 16,011
--------- --------- --------
Cash at end of year $ 12,382 $ 8,842 $ 5,322
--------- --------- --------
--------- --------- --------
Cash paid during the year for:
Interest $ 6,673 $ 2,986 $ 3,011
Income taxes 66,645 12,718 5,538
Non-cash items:
Decrease in accrued asbestos -
related legal costs (203) (198) (574)
Increase in asbestos
claims settlements 105,908 151,498 244,072
Payments made to claimants on
Fibreboard's behalf 89,354 309,537 88,230
Increase in receivables from sale
of surplus real estate 697 2,949 250
Acquisition of businesses --
Fair value of assets acquired 95,180 155,440 13,954
Cash paid 81,944 119,894 13,054
--------- --------- --------
Liabilities assumed 13,236 35,546 900
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Common stock:
Beginning balance, 15,000,000 shares
authorized; 4,224,225, 4,201,420
and 4,142,300 issued $ 42 $ 42 $ 41
Shares issued under employee
stock plans, 159,376,
22,805 and 59,120 shares 2 -- 1
Two-for-one stock split 4,247,787 shares 42 -- --
---------- ---------- ----------
Ending balance, 15,000,000 shares
authorized; 8,631,388, 4,224,225
and 4,201,420 issued $ 86 $ 42 $ 42
---------- ---------- ----------
---------- ---------- ----------
Additional paid-in capital:
Beginning balance $ 76,166 $ 75,836 $ 74,264
Employee stock plans 1,229 330 1,572
Two-for-one stock split (102) -- --
---------- ---------- ----------
Ending balance $ 77,293 $ 76,166 $ 75,836
---------- ---------- ----------
---------- ---------- ----------
Retained earnings:
Beginning balance $ 73,752 $ 46,717 $ 35,004
Net income 95,816 27,035 11,713
---------- ---------- ----------
Ending balance $ 169,568 $ 73,752 $ 46,717
---------- ---------- ----------
---------- ---------- ----------
Minimum pension liability adjustment:
Beginning balance $ (4,571) $ (2,427) $ (1,439)
Changes during the year 3,171 (2,144) (988)
---------- ---------- ----------
Ending balance $ (1,400) $ (4,571) $ (2,427)
---------- ---------- ----------
---------- ---------- ----------
Treasury stock, at cost:
Beginning balance $ -- $ -- $ --
215,700 shares acquired (5,215) -- --
---------- ---------- ----------
Ending balance $ (5,215) $ -- $ --
---------- ---------- ----------
---------- ---------- ----------
Foreign currency translation adjustment:
Beginning balance $ -- $ -- $ --
Changes during the year ( 576) -- --
---------- ---------- ----------
Ending balance $ ( 576) $ -- $ --
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF PRESENTATION
The consolidated financial statements include the accounts of Fibreboard
Corporation, a Delaware Corporation, and all its wholly-owned subsidiaries
(collectively Fibreboard) after elimination of intercompany balances and
transactions. Foreign subsidiaries in Australia and New Zealand have fiscal
year-ends of October 31 to facilitate consolidation of the subsidiaries'
financial statements.
Certain reclassifications of prior year amounts have been made to
conform with the current presentation. In addition, all prior year per share
data has been restated to reflect the impact of a two-for-one stock split in May
1995.
NATURE OF OPERATIONS
Fibreboard operates in two primary industry segments: Building Products
and Resort Operations. Building products are further broken down into
residential products and industrial products. In 1995, residential building
products accounted for 72% of sales, industrial building products 16% of sales
and resort operations 12% of sales. Residential products manufactures vinyl
siding and related accessories, which are sold to residential siding installers
and construction and remodeling contractors. Manufactured products are sold 1)
through a company-owned distribution network, which also sells other exterior
building products and 2) independent distributors. Principal market areas are
east of the Mississippi River with some concentrations in mid-west and Great
Lakes states. Industrial building products manufactures molded insulation for
high temperature applications, fireproofing board and protective metal
jacketing. Markets are concentrated in the Gulf Coast states. Resort
operations includes a year-round destination resort and two day ski areas, all
located in California.
No single customer accounts for a significant portion of Fibreboard's
sales.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimated.
WARRANTY COSTS
Fibreboard provides, by a current charge to income, an amount it estimates
will be needed to cover future warranty obligations for products sold during the
current year. The accrued liability for warranty costs is included in accounts
payable and accrued liabilities.
EARNINGS PER SHARE
Earnings per common and common equivalent share are calculated using the
weighted average number of common shares outstanding during the year 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.
CASH AND CASH EQUIVALENTS
Fibreboard utilizes a centralized cash management system to minimize the
amount of cash on deposit with banks and maximize interest income from amounts
not required for immediate disbursement. Cash includes cash on hand or in banks
available for immediate disbursal. Cash equivalents are short-term investments
that have an original maturity date of less than 90 days.
INVENTORY VALUATION
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
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 valued as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1994
---- ----
<S> <C> <C>
Finished goods $49,223 $32,914
Raw materials 6,898 6,770
Supplies 1,784 588
------- -------
Total inventories $57,905 $40,272
------- -------
------- -------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is
provided on the straight-line method based upon the estimated service lives (3-
30 years) of the various units of property. Depreciation expense for continuing
operations in 1995, 1994 and 1993 was $8,715, $5,578 and $3,797.
Fibreboard capitalizes interest on borrowed funds incurred during
construction periods. Capitalized interest is amortized over the lives of the
related assets. Interest capitalized in 1995, 1994 and 1993 was $0, $0 and
$183.
GOODWILL
Fibreboard records the excess of purchase price over the fair value of
net assets of businesses acquired as goodwill and amortizes such amounts on a
straight-line basis over 30 years. Accumulated goodwill amortization was $3,079
and $709 on December 31, 1995 and 1994. The carrying value of goodwill is
reviewed periodically to determine its recoverability through future operations.
During 1995, the goodwill associated with the acquisition of Norandex
was reduced by $2,496 to reflect purchase price adjustments.
INCOME TAX POLICIES
The income tax provision includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Continuing Operations
---------------------
Current income taxes $ 5,662 $ 4,972 $ 2,323
Benefit of operating loss carry forward -- -- (118)
Deferred income taxes 3,410 661 (1,638)
------- ------- -------
$ 9,072 $ 5,633 $ 567
------- ------- -------
------- ------- -------
Discontinued Operations
-----------------------
Current income taxes $62,464 $12,562 $ 6,256
Benefit of operating loss carry forward -- -- (611)
Deferred income taxes (16,858) 207 1,927
------- ------- -------
$45,606 $12,769 $ 7,572
------- ------- -------
------- ------- -------
</TABLE>
The following table summarizes the differences between the statutory
federal and effective tax rate:
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
---- ---- ----
Continuing Operations
---------------------
<S> <C> <C> <C>
Federal tax rate 35% 35% 35%
State income taxes, net of Federal benefit 3 6 6
Non-deductible goodwill 3 -- --
Other (3) -- --
--- --- ---
38% 41% 41%
--- --- ---
--- --- ---
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
---- ---- ----
Discontinued Operations
-----------------------
<S> <C> <C> <C>
Federal tax rate 35% 35% 35%
State income taxes, net of Federal benefit 3 6 6
Basis difference of subsidiary sold ( 2) -- --
---- ---- ----
36% 41% 41%
--- --- ---
--- --- ---
</TABLE>
Effective January 1, 1993, the Company implemented the provisions of
Statement of Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). SFAS 109 utilizes the liability method and deferred taxes are determined
based on the estimated future tax effects of differences between the financial
statements and tax bases of assets and liabilities given the provisions of the
enacted tax laws. The adoption of SFAS 109 had no effect on reported net income
in the Consolidated Statements of Income.
The tax effect of significant temporary differences representing
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1995 1994
----- ----
<S> <C> <C>
Deferred tax assets:
Accrued liabilities $ 5,327 $ 4,560
Current portion asbestos reserve 1,142 1,134
AMT credit -- 1,258
Environmental reserve 2,674 784
State taxes 2,373 --
Other 1,570 1,534
------- -------
Total deferred tax assets $13,086 $ 9,270
------- -------
------- -------
Deferred tax liabilities:
Property, plant and equipment $ 8,802 $15,751
Timber 593 8,230
Post retirement benefits (4,772) (7,187)
Long-term asbestos assets and reserve 3,243 (144)
State taxes 270 (1,142)
Contingent liabilities 7,243 7,323
Other (1,518) (3,391)
------- -------
Total deferred tax liabilities $13,861 $19,440
------- -------
------- -------
</TABLE>
FOREIGN CURRENCY TRANSLATION
The functional currency of the majority of Fibreboard's foreign
operations is the applicable local currency. Translation from the applicable
foreign currency to U.S. dollars is performed for balance sheet accounts using
exchange rates in effect at the balance sheet date and for sales and expense
accounts using a weighted average exchange rate during the period. The
resulting translation adjustment is reflected as a component of stockholders'
equity.
2. RECEIVABLES
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1994
---- ----
<S> <C> <C>
Trade receivables $47,752 $31,476
Less reserves for bad debts (2,560) (2,010)
Other receivables 3,007 1,747
------- -------
$48,199 $31,213
------- -------
------- -------
</TABLE>
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1994
---- ----
<S> <C> <C>
Accounts payable $27,948 $20,642
Accrued pension expense 4,417 4,518
Salaries and wages payable 9,089 6,892
Taxes other than income taxes 2,205 2,520
Workers compensation 5,965 6,330
Environmental reserves 6,402 1,822
Other 7,940 10,515
------- -------
$63,966 $53,239
------- -------
------- -------
</TABLE>
The December 31, 1995 environmental reserve balance includes $5,000
which was recorded upon the sale of the Wood Products Group to indemnify the
acquirer for specified adverse environmental conditions which may have occurred
prior to September 25, 1995. The acquirer of the Wood Products Group has made
no significant claim impacting the reserve since the date of the sale.
Fibreboard is self-insured for the majority of its workers compensation
benefits. Workers compensation expense was $1,981, $1,410 and $268 in 1995,
1994 and 1993 based on actual and estimated claims incurred.
4. NOTES PAYABLE
In 1994, Fibreboard had a $5,000 operating line of credit dedicated for
the seasonal cash needs of its resort operations. The facility was replaced in
1995 with a $30,000 credit facility described in Note 5.
Fibreboard's Canadian subsidiary has a $6,000 operating line of credit
at prime plus 1/4% (7.65% at December 31, 1995) guaranteed by a letter of credit
drawn against Fibreboard's $125,000 credit facility which is described in Note
5. Fibreboard has a commitment from a bank to provide a $15,000 operating line
of credit, which will replace this facility. Borrowings will have interest at
LIBOR plus 0.45% to 0.90%. This facility will be secured by substantially all
the assets of the Canadian subsidiary. Fibreboard expects to finalize this
facility during the first quarter of 1996.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
5. LONG-TERM DEBT
Fibreboard's long-term debt not associated with asbestos consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1995 1994
------ -----
<S> <C> <C>
Revolving credit facility interest at LIBOR + 0.45% to 0.925%
(6.39% at December 31, 1995), secured by machinery
and equipment, receivables and inventories of Fibreboard
and certain subsidiaries $ 5,000 $ 86,000
Reducing revolving credit facility, interest at LIBOR
+ 1.0% to 1.375% secured by the assets of
Fibreboard's resort subsidiaries -- 6,700
Term loan, interest at prime plus 1/2%, secured
by the assets of a resort subsidiary -- 4,500
Pollution control project revenue bonds,
6.6%, payable annually through 1999, unsecured 4,870 5,905
Other debt--6.8% to 10.7% payable in
varying amounts 841 233
-------- --------
10,711 103,338
Less: Current portion (1,346) (2,045)
-------- --------
$ 9,365 $101,293
-------- --------
-------- --------
</TABLE>
Required repayment of long-term debt is as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
-----------
<S> <C>
1996 $ 1,346
1997 1,306
1998 1,621
1999 1,438
2000 5,000
-------
$10,711
-------
-------
</TABLE>
Fibreboard has entered into an agreement under which it will receive an
interest payment on $50,000 to the extent LIBOR exceeds 7.5% for the period
November 1995 through October 1996. The cost of this transaction will be
recognized during 1996.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Fibreboard has notes receivable with terms and payment dates which are
substantially identical to $4,870 of revenue bonds included in the above table.
Payments under these notes are as follows:
YEAR ENDING
DECEMBER 31
-----------
1996 $ 1,105
1997 1,175
1998 1,255
1999 1,335
-------
$ 4,870
-------
-------
Fibreboard obtained a $175,000 revolving credit facility in 1994.
Initial borrowings were used to replace a prior credit facility, repay
certain term loans and fund a portion of the purchase of Norandex Inc.
(see Note 13). In conjunction with the sale of the wood products business,
the facility was reduced to $125,000. The facility expires September 30,
2000 unless the maturity date is extended by Fibreboard and its lenders.
Proceeds may be used for general corporate purposes and acquisitions.
Amounts available aggregated $108,761 at December 31, 1995. This facility
was amended subsequent to December 31, 1995 to increase the maximum commitment
to $150,000 in the form of a five year, $25,000 term loan. The term loan bears
interest at the same rate as the existing facility.
Fibreboard's resort operations reducing revolving credit facility
provides for maximum availability of $30,000. Subsequent to December 31,
1995, this facility was increased to $40,000. Maximum availability reduces
to $37,471 on April 30, 1996, $34,943 on April 30, 1997, $32,872 on October
30, 1997, $28,272 on April 30, 1998 and $23,672 on April 30, 1999 with any
remaining outstanding amounts due May 31, 2000.
Fibreboard's loan agreements contain various financial covenants, the
most restrictive of which impose limitations on dividends and other
distributions and require the maintenance of minimum levels of net worth and
certain coverage ratios. At December 31, 1995, these covenants were met.
Fibreboard's asbestos related long-term debt consists of the following
and is due upon conclusion of the asbestos bodily injury insurance coverage
litigation. In the event Fibreboard prevails in the insurance coverage
litigation, the amounts will be repaid from insurance proceeds.
DECEMBER 31
---------------------
1995 1994
----- -----
Amounts advanced under reimbursement
agreement, interest at prime minus 2%
(6.75% at December 31, 1995) $23,711 $22,360
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND SHORT-TERM INVESTMENTS
Carrying amount approximates fair value because of the short maturity of these
investments.
NOTES RECEIVABLE
Fair value of notes receivable is estimated by discounting future cash flows
using current rates at which similar loans would be made.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTES PAYABLE TO BANKS
Carrying amount approximates fair value based on current rates offered to the
corporation for similar debt.
LONG-TERM DEBT
Fair market value is estimated by discounting the future cash flows using the
current rates at which similar debt could be placed.
The estimated fair values of financial instruments are as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 14,581 $14,581 $ 10,735 $ 10,735
Notes receivable 12,628 12,784 13,768 14,087
Interest rate instruments 292 -- 350 841
Financial liabilities:
Notes payable to banks $ 1,423 $ 1,423 $ -- $ --
Long-term debt 10,711 10,770 103,338 101,907
</TABLE>
Fibreboard's consolidated balance sheets include financial instruments
resulting from the asbestos-related litigation, asbestos costs to be
reimbursed, asbestos claims settlement obligations and asbestos-related
long-term debt. These are unique financial instruments. Consequently,
these instruments are not traded nor is it likely a willing buyer could be
found for them. Therefore, it is not practicable to estimate a market value.
The balance sheets as of December 31, 1995 and 1994 reflects asbestos costs to
be reimbursed of $827,865 and $810,454, asbestos claims settlements of $811,952
and $795,365 and asbestos-related long-term debt of $23,711 and $22,360.
7. PENSION PLANS
Fibreboard has pension plans covering substantially all employees.
Contributions to defined benefit plans are based on actuarial calculations
of amounts necessary to cover current cost and amortization of prior service
costs. All defined benefit plan participants' benefits have vested and been
frozen. Contributions to defined contribution plans are nondiscretionary and
based on varying percentages of eligible compensation for the year.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The status of Fibreboard's defined benefit pension plans at December 31,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Assets Accumulated Accumulated
exceed benefits benefits
accumulated exceed exceed
benefits assets assets
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -----------------
<S> <C> <C> <C>
Vested benefit obligation $ 8,602 $ 70,986 $ 73,674
-------- --------- ---------
-------- --------- ---------
Accumulated benefit obligation $ 8,602 $ 73,714 $ 76,503
-------- --------- ---------
-------- --------- ---------
Projected benefit obligations $ 8,602 $ 73,714 $ 80,977
Plan assets 9,117 59,101 55,336
-------- --------- ---------
Projected benefit obligations in
excess of (less than)
plan assets 515 (14,613) (25,641)
Unrecognized obligation at transition -- 1,086 1,206
Unrecognized net loss in past service (338) 2,334 7,318
Adjustment required to recognize
minimum liability -- (3,420) (8,889)
-------- --------- ---------
Prepaid pension cost
(pension liability) $ 177 $(14,613) $(26,006)
-------- --------- ---------
-------- --------- ---------
</TABLE>
Of the accrued expense, $4,417 and $4,518 is included in accounts
payable and accrued liabilities in 1995 and 1994 (Note 3).
The actuarial assumptions used to determine accrued pension expense
and the funded status of the plans for 1995 were: 8.25% discount rate (net
pension expense) 7.5% discount rate on funded status and 8% expected long-term
rate of return on plan assets. The assets of the plan at December 31, 1995
and 1994 consist of bonds, both corporate and government, stocks, cash and
cash equivalents.
As required by Statement of Accounting Standards No. 87, Employers'
Accounting for Pensions, Fibreboard has recognized a minimum pension liability
associated with its frozen defined benefit plan. As a result, Fibreboard
recorded an after tax reduction in equity of $1,400 at December 31, 1995 and
$4,571 at December 31, 1994.
Pension expense for 1995, 1994 and 1993 included the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Benefits earned by employees $ 904 $ 296 $ --
Interest cost on projected
benefit obligation 6,380 5,774 5,489
Return on plan assets (15,336) 433 (5,832)
Net amortization and deferral 11,208 (4,659) 1,729
Curtailment gain (1,384) -- --
-------- ------- -------
Net pension cost of defined
benefit plans 1,772 1,844 1,386
Contributions to defined contribution
pension plans for continuing operations 1,330 971 731
-------- ------- -------
Net pension expense $ 3,102 $ 2,815 $ 2,117
-------- ------- -------
-------- ------- -------
</TABLE>
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
On December 31, 1995, Fibreboard's Norandex subsidiary with a defined
benefit pension plan with assets in excess of obligations was frozen, resulting
in a curtailment gain of $4,762. The assets of the plan were merged with
Fibreboard's other defined benefit pension plan. Of the curtailment gain,
$3,378 was utilized to reduce goodwill and $1,384 to reduce 1995 pension
expense.
8. NON-PENSION POST-RETIREMENT BENEFITS
The status of Fibreboard's non-pension post retirement benefits which
are primarily available to certain collective bargaining units of facilities
which have been sold at December 31, 1995 and 1994 are as follows:
Year Ended December
---------------------
Net Periodic Post-Retirement Benefit Cost 1995 1994
- ----------------------------------------- ---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
Interest cost $ 94 $ 176
Net other (182) (1,456)
------- --------
Total $ (88) $(1,280)
------- --------
------- --------
Accrued Benefit Cost
Accumulated post-retirement benefit obligation
Retirees $ 976 $ 1,331
Eligible actives 219 267
Other active plan participants 28 163
------- --------
1,223 1,761
Unrecognized net gain (595) (360)
------- --------
Total $1,818 $ 2,121
------- --------
------- --------
</TABLE>
Amounts recorded in 1994 as net other includes a gain of $1,164 from
the resolution of a post retirement benefit obligation of facilities sold in
1988.
An 8.5% annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1996. The cost trend rate was assumed to
decrease slightly until 2001 at which time the rate was assumed to stabilize at
6%. Increasing the assumed health care cost trend rates by 1% in each year
would increase the accumulated post retirement benefit obligation as of
December 31, 1995 by $33 and increase the aggregate of the service and interest
cost components of net periodic post retirement cost for the year then ended by
$5. The weighted average discount rate used in determining the accumulated post
retirement benefits was 7.5% while 8.25% was used to determine the 1995
post-retirement benefit cost.
9. STOCK OPTION AND STOCK PURCHASE PLANS
Fibreboard has a stock option and rights plan for certain officers,
directors and key employees. The plan provides for the granting of stock
options, stock appreciation rights, limited stock appreciation rights and
restricted stock awards. Awards under the plan are determined by the
compensation committee of the Board of Directors. The maximum number of
shares available for award under the plan is 1,600,000. Option prices are
set by the committee. Option prices for grants must be at least 85% of the
fair market value on the date of grant. The time limit within which options
may be exercised and other exercise terms are fixed by the committee. At
December 31, 1995, 31,060 shares were available for awards under this plan.
In 1995, Fibreboard adopted a new stock incentive plan, under which a
maximum of 500,000 shares are available for grants of stock options, stock
appreciation rights, stock unit and restricted stock awards. In addition,
any shares which remain available for award under the existing plan, or which
become available in the future through forfeiture or cancellation, will be
added to shares available under the new plan. Options to purchase 123,500
shares at $21.38 have been awarded under this plan. The plan is subject to
shareholder approval at the 1996 annual meeting. Awards are determined by
the committee; however, no option may be granted at an exercise price less
than 100% of market value on the grant date nor may any individual receive
stock option or stock appreciation right grants in any year covering more
than 200,000 shares.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
When stock options are exercised, the proceeds (including any tax
benefits to Fibreboard resulting from the exercise) are credited to the
appropriate common stock and additional paid-in capital accounts.
Compensation related to restricted stock awards and certain option grants
(measured at the grant date) is recognized as expense over the term of the
related award.
Information about Fibreboard's stock incentive plans is summarized below:
Restricted
Options Stock Units
------- -----------
<TABLE>
<CAPTION>
<S> <C> <C>
Outstanding at December 31, 1992 1,110,100 60,000
Granted at $5.97-$12.07 per share 24,000 30,000
Exercised at $2.03-$6.59 per share (122,700) --
Cancelled (12,600) --
---------- ---------
Outstanding at December 31, 1993 998,800 90,000
Granted at $12.69-$14.94 per share 24,000 26,000
Exercised at $0.94-$6.59 per share (9,500) (46,000)
Cancelled (6,000) --
---------- ---------
Outstanding at December 31, 1994 1,007,300 70,000
Granted at $21.38-$24.00 per share 147,500 --
Exercised at $1.63-$3.53 per share (222,800) (14,000)
Cancelled -- (4,800)
---------- ---------
Outstanding at December 31, 1995 932,000 51,200
---------- ---------
---------- ---------
Shares exercisable at December 31,
1995 784,500 --
1996 65,167 30,000
1997 41,167 21,200
1998 41,166 --
</TABLE>
Option awards for 132,000 shares include limited stock appreciation
rights for a like number of shares. Each limited stock appreciation right
entitles the holder, in certain limited circumstances, to surrender the
underlying option in exchange for cash equal to the difference between fair
market value at the date of surrender and the option price for such shares.
In addition, Fibreboard has an employee stock purchase plan. The plan
allows employees to purchase Fibreboard stock with an aggregate purchase price
of up to 15% of the employee's base salary at the beginning of each purchase
period. The purchase price is set by the committee, but cannot be less than
the lesser of 85% of fair market value at the beginning of each purchase period
or 85% of fair market value at the actual purchase date. The maximum number
of shares issuable under the plan is 500,000. During 1995, 1994 and 1993, no
shares of Fibreboard stock were sold to employees under this plan. At
December 31, 1995, 246,532 shares remain available for issuance under this
plan.
Fibreboard has a long-term equity incentive plan, which provides for
awards of phantom stock units. Each phantom stock unit entitles the grantee
to a cash payment equal to the fair market value of one share of Fibreboard
common stock at the maturity date less the fair market value on the grant date.
At December 31, 1995, 376,000 phantom stock units had been awarded with grant
prices of $13.75 to $15.00 per share, which mature 158,000 units in 1996 and
218,000 units in 1997. During 1995, cash payments of $808 were made in
satisfaction of 94,800 phantom stock units.
Compensation expense recognized for these plans was $3,298, $129 and
$1,039 in 1995, 1994 and 1993.
10. PREFERRED STOCK PURCHASE RIGHTS
In 1988, Fibreboard implemented a stockholder rights plan and
distributed to stockholders one preferred share purchase right for each
share of Fibreboard common stock then outstanding. Under
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
the rights plan, as amended in 1994, each right entitles the registered holder
to purchase from Fibreboard 1/200th of a share of Series A Junior Participating
Preferred Stock at an exercise price of $53 per 1/200th share, subject to
adjustment. The rights will not be exercisable until a party acquires
beneficial ownership of 15% or more of Fibreboard's then outstanding common
shares. The rights, which do not have voting rights, expire in February 2004
and may be redeemed in whole by Fibreboard, at its option, at a price of $.01
per right prior to the expiration or exercise of the rights.
In the event Fibreboard is acquired in an unsolicited merger or other
business combination transaction, each right will entitle the holder to receive,
upon exercise of the right, common stock of the acquiring company having a
market value of two times the then current exercise price of the right. In the
event a party acquires 15% or more of Fibreboard's outstanding common shares,
each right will entitle the holder to receive upon exercise Fibreboard common
shares having a market value of two times the exercise price of the right.
11. COMMITMENTS
Fibreboard leases certain office and warehouse space and machinery and
equipment under operating leases. Minimum lease payments for the next five
years are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31
-----------
<S> <C>
1996 $ 8,500
1997 7,220
1998 5,808
1999 4,175
2000 3,344
-------
$29,047
-------
-------
</TABLE>
In addition, Fiberboard leases property from the U.S. Forest Service for two
of its resort operations. Lease payment terms are based on a percentage of
revenues. Total rent expense of continuing operations for all operating leases
amounted to $11,184, $4,646 and $1,581 in 1995, 1994 and 1993.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
12. INDUSTRY SEGMENT INFORMATION
Information about Fibreboard's industry segments is set forth below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Outside sales
Building products:
Residential $ 276,180 $ 85,607 $ --
Industrial 59,671 56,376 49,215
---------- ---------- ----------
Total building products 335,851 141,983 49,215
Resort operations 44,955 41,413 25,501
---------- ---------- ----------
Consolidated $ 380,806 $ 183,396 $ 74,716
---------- ---------- ----------
---------- ---------- ----------
Operating profit
Building products:
Residential $ 18,031 $ 8,096 $ --
Industrial 7,694 6,452 5,382
---------- ---------- ----------
Total building products 25,725 14,548 5,382
Resort operations 8,262 8,020 2,325
---------- ---------- ----------
Total operations 33,987 22,568 7,707
Unallocated expense, net (7,016) (7,425) (8,299)
Interest expense (6,476) (4,931) (3,575)
Interest and other income 3,101 3,697 5,551
---------- ---------- ----------
Income from continuing operations
before income taxes $ 23,596 $ 13,909 $ 1,384
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets
Building products:
Residential $ 216,542 $ 147,066 $ --
Industrial 27,715 27,268 25,831
---------- ---------- ----------
Total building products 244,257 174,334 25,831
Resort operations 68,726 39,536 36,100
Discontinued operations, net -- 109,242 149,310
Unallocated assets 46,573 45,065 43,877
Asbestos-related assets 830,064 812,347 969,136
---------- ---------- ----------
Total assets $1,189,620 $1,180,524 $1,224,254
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets
U.S. $1,143,045 $1,180,524 $1,224,254
Canada 43,481 -- --
Other 3,094 -- --
---------- ---------- ----------
$1,189,620 $1,180,524 $1,224,254
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Depreciation and amortization
Building products:
Residential $ 6,303 $ 1,815 $ --
Industrial 867 788 1,041
-------- -------- ---------
Total building products 7,170 2,603 1,041
Resort operations 5,707 3,447 2,514
Capital expenditures
Building products:
Residential (1) 15,913 28,628 --
Industrial 484 327 324
-------- -------- --------
Total building products 16,397 28,955 324
Resort operations (2) 27,301 6,229 17,794
</TABLE>
(1) Includes acquisition assets of $11,865 and $28,043 in 1995 and 1994.
(2) Includes acquisition assets of $20,283 and $12,981 in 1995 and 1993.
13. ACQUISITIONS AND DISPOSITIONS
In August 1994, Fibreboard acquired the stock of Norandex Inc., a
manufacturer and distributor of residential exterior building products, for
$119,894 in cash including acquisition costs. The acquisition, which was
accounted for as a purchase, resulted in $62,836 of goodwill which will be
amortized over 30 years. Norandex operating earnings have been included in
Fibreboard's consolidated statement of income since the date of acquisition.
On November 30, 1995, Fibreboard acquired the stock of Vytec
Corporation, a Canadian manufacturer of exterior vinyl siding products, for
$38,576 in cash including acquisition costs. The acquisition, which was
accounted for as a purchase, resulted in $19,918 of goodwill which will be
amortized over 30 years. Vytec operating earnings have been included in
Fibreboard's consolidated statement of income since the date of acquisition.
The following unaudited table presents the pro forma combined results
of Fibreboard, Norandex and Vytec assuming Norandex was acquired on January 1,
1993 and assuming Vytec was acquired on January 1, 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $424,472 $370,717 $267,347
Income from continuing operations 14,190 13,108 7,587
Earnings per share from continuing
operations:
Primary 1.58 1.46 .86
Fully diluted 1.58 1.46 .85
</TABLE>
The pro forma results include only adjustments necessary to 1) reflect
the allocation of the purchase price resulting in changes in depreciation and
amortization; 2) recognize the interest cost associated with the purchase; 3)
adjust sales to reflect intercompany sales between Vytec and Norandex; and 4)
recognize the income tax effects of these adjustments.
Because the pro forma results include only the adjustments indicated
above, they should not be considered indicative of the results that would have
occurred if the combination had been in effect on the dates indicated or which
may be obtained in the future. No attempt has been made to quantify
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
in the pro forma results additional costs which may be incurred as a result of
the combination, even though certain costs are expected to increase.
In July 1993, Fibreboard acquired the net assets of Sierra Ski Ranch, a
ski facility located in the Lake Tahoe region of northern California, for
$13,054 in cash. The acquisition was accounted for as a purchase of assets.
The ski area was subsequently renamed Sierra-at-Tahoe.
On October 23, 1995, Fibreboard acquired the net assets of Bear
Mountain, a ski and golf facility located in southern California, for $20,604 in
cash. The acquisition was accounted for as a purchase of assets.
During 1995, Fibreboard acquired the net assets of 23 building products
distribution branches for $22,764 in cash. These acquisitions resulted in
$9,913 of goodwill which will be amortized over 30 years.
On September 25, 1995, Fibreboard sold substantially all of its wood
products related assets for $238,994 cash, net of purchase price adjustments,
and recorded a pre-tax gain of $121,245 ($77,813 net of income taxes). Retained
balances primarily include notes receivable from prior assets sales, a former
plant site and nominal timberlands adjacent to Fibreboard's Northstar Resort
facility. Fibreboard also retained liabilities for workers compensation claims
that arose prior to September 25, 1995 and established a $5,000 reserve for
future environmental costs related to wood products activities prior to the
sale. As a result of the sale, Fibreboard has restated its financial statements
to reflect the wood products operations as discontinued.
The net assets of discontinued operations at December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 45,770
Timber and timberlands 27,880
Property, plant and equipment 40,881
Other assets 170
Current liabilities (5,459)
--------
$109,242
--------
--------
</TABLE>
Operating results of the discontinued wood products operations
were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Sales $111,750 $180,309 $190,494
Pre-tax operating profit 5,653 12,670 18,468
Net operating income 3,479 7,538 10,896
Net gain on surplus asset sales -- 11,221 --
Net gain on disposal 77,813 -- --
</TABLE>
In July 1994, Fibreboard sold 8,900 acres of non-essential
timberlands for $21,500 and realized an $18,858 pre-tax gain ($11,221 net of
tax).
14. ASBESTOS-RELATED LITIGATION
CONTINGENT LIABILITY FOR ASBESTOS-RELATED CLAIMS
Overview:
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
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.
Fibreboard believes it has unique insurance coverage for personal injury
claims, as the trial court has held (with the issue on appeal) that claims with
initial exposure to asbestos prior to 1959 are covered by two no-aggregate-limit
policies.
During 1993, Fibreboard and its insurers entered into the Insurance
Settlement Agreement, and Fibreboard, its insurers and plaintiffs
representatives entered into the Global Settlement Agreement. These agreements
are interrelated. Final court approval of these agreements is required. Trial
court approval of both settlements was obtained in July, 1995. Both judgments
have been appealed, which will potentially delay final approval of the
settlements until 1997 or later.
If both the Global and Insurance Settlement Agreements are approved,
Fibreboard believes its existing and future personal injury asbestos liabilities
will be resolved through insurance resources and existing corporate reserves.
If the Insurance Settlement is approved but the Global Settlement is not
approved, the insurers will provide Fibreboard with up to $2,000,000 to resolve
claims pending as of August 27, 1993 and all future claims, and will pay claims
settled but not yet paid as of August 27, 1993.
Claims Activity:
Fibreboard has already resolved 158,100 personal injury claims for
approximately $1,779,500, not including legal defense costs. Substantially all
of the settlements have been achieved through 1) payments by Fibreboard's
insurers; 2) assignments of Fibreboard's rights to insurance payments, most of
which have been converted to three-party agreements between Fibreboard, its
insurer and plaintiffs; or 3) deferring payments pending resolution of the
personal injury insurance coverage litigation discussed below. An additional
30,600 claims have been disposed of at no cost to Fibreboard other than legal
defense costs. At December 31, 1995, Fibreboard estimates that approximately
48,000 claims have been filed against it which remain unresolved. Approximately
30,600 of these claims were initially filed against Fibreboard on or after
August 27, 1993 and will be covered by the Global Settlement, if approved.
Fibreboard is unable to determine the exact number of claims that may be filed
in the future, although the number is expected to be substantial.
Fibreboard has achieved excellent results in resolving asbestos-in-
buildings actions. At December 31, 1995, of the 152 actions served against it,
Fibreboard has been dismissed from 135 (31 of which joined the National Schools
class action), settled 8, tried one to a defense verdict and remains a defendant
in 8 actions.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The following tables illustrate asbestos-related personal injury claims
activity for the last three years:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1995 1994 1993
---- ---- ----
Personal Injury Claims
- ----------------------
<S> <C> <C> <C>
New claims received (1) 20,731 3,500 35,100
Claims disposed
Settled 10,672 15,185 27,902
Dismissed 3,775 2,685 2,716
"Green Card" settlements (2) 96 189 429
Judgments (3) -- 1 48
Adjustments (4) -- 1,366 2,300
Average settlement amount
per claim settled (5)--
pre-1959 claims $ 10 $ 8 $ 12
post-1959 claims $ 13 $ 7 $ 4
Claims pending at year end(6) 48,000 41,900 57,800
</TABLE>
1. Fibreboard believes new claims received increased during 1993 in
anticipation of the Global and Insurance Settlements in 1993 and due to
significant year end settlements of outstanding claims in 1992 that
included a significant number of unfiled claims incorporated into large
group settlements. Of the claims received in 1995, 1994 and 1993,
15,900, 2,900 and 14,600 claims were filed on or after August 27, 1993,
and will be covered by the Global Settlement, if approved.
2. 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.
3. Judgments represent defense verdicts in favor of Fibreboard, or
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. Since 1988, only 42 judgments have resulted in
monetary payments, aggregating $8,038. 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 discussed below.
4. Often, multiple claims are filed for the same injury. In addition,
Fibreboard's claims database was constructed by merging several third-
party databases in 1988. During 1993, Fibreboard attempted to identify
duplicate claims and remove them from the database. It is often not
possible to fully identify duplicate claims until the claims are
prepared for trial. Fibreboard anticipates additional future
adjustments.
5. These averages are for claims where the initial year of exposure is
known.
6. Of the 1995 pending claims, 30,600 were filed on or after August 27,
1993, and will be covered by the Global settlement, if approved.
- --------------------------------------------------------------------------------
Insurance Coverage for Personal Injury Claims:
During 1993, Fibreboard entered into a settlement agreement with
Continental Casualty Company (Continental) and Pacific Indemnity Company
(Pacific) (the Insurance Settlement). In addition,
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
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 United States District Court for the Eastern District of Texas
approved both settlements in July 1995. Both judgments have been appealed. The
Fifth Circuit Court of Appeals has scheduled oral argument of the issues in
early March 1996. These appeals, and subsequent appeals, if any, will
potentially delay final approval of the settlements until 1997 or later.
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 has paid $9,892 into the trust on behalf of
Fibreboard, in satisfaction of an earlier settlement agreement. At December 31,
1995, Fibreboard owed the escrow account $221. 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 $1,651,886 at December 31, 1995 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. If the Global Settlement is
approved 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. All insurance proceeds due
from other insurers under previous settlements have been received.
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. 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.
In January 1994 the California Supreme Court granted review of the
decision of the Court of Appeal, but withheld further action until its decision
in another case (MONTROSE CHEMICAL CORP. V. ADMIRAL INS. CO.) then pending
before the Supreme Court was finalized. On July 3, 1995, the Supreme Court
issued a decision in MONTROSE CHEMICAL confirming a trigger of coverage
consistent with the trigger the Court of Appeal applied to the Fibreboard
policies.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
By an order of October 19, 1995 the Supreme Court transferred the
Fibreboard case back to the Court of Appeal which, after receiving supplemental
briefs and perhaps conducting further argument, will review its decision on
trigger and other issues in light of MONTROSE CHEMICAL and any other
considerations the Court of Appeal deems relevant. After the Court of Appeal
reissues a decision, the parties can again petition for review to the California
Supreme Court.
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). 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 trial court judgments are upheld. Fibreboard
received $10,000 upon signing the agreement 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.
Liability Quantification:
At the end of 1991, Fibreboard attempted to quantify its liability for
asbestos-related personal injury claims then pending as well as 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 that 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.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Fibreboard believes it is probable that it will ultimately receive
insurance proceeds of $1,584,000 for the defense and disposition of the claims
quantified above. Fibreboard's opinion is 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. Although there likely will be
claims filed beyond the end of the decade, these have not been estimated.
During 1995, 1994 and 1993, unreimbursed costs of $1,959, $2,211 and $1,802 were
charged against this reserve.
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. However, during 1995, Fibreboard recorded a $4,000 reversal
of previously established reserves for anticipated unreimbursable costs as a
result of a reduction in its estimate of the amounts which will be needed for
such purpose. Fibreboard will continue to reevaluate its estimates and will
make adjustments to the effect dictated by changes in the personal injury
litigation.
Asbestos-in-Buildings Liabilities:
At December 31, 1995 Fibreboard was a defendant in 8 asbestos-in-
buildings claims. Fibreboard does not believe it is presently possible to
reasonably estimate potential liabilities for asbestos-in-buildings claims, if
any. Fibreboard believes that its asbestos-containing products, properly used,
cause no damage to buildings. Further, Fibreboard can frequently identify its
asbestos-containing products and aggressively pursues dismissals of claims where
its products are not identified.
Fibreboard has been named as a defendant in a total of 152 asbestos-in-
buildings claims, all but 8 of which have been resolved. To date, Fibreboard
has successfully defended these claims or settled the claims for modest amounts
compared to the damages sought. Further, although personal injury claims have
similar characteristics, the same cannot be said for asbestos-in-buildings
claims. Each claim can involve from one to several thousand buildings, each of
which may vary as to age, ability to identify various producers products
contained in the building as well as the extent of a producer's product present,
building use, difficulty of abatement (if required) and so on. Thus, while
extrapolation of personal injury claims disposition experience may provide
useful information for estimating future personal injury liability, such an
analysis cannot be applied to asbestos-in-buildings claims. However, based on
its experience to date, Fibreboard believes the ultimate resolution of asbestos-
in-buildings claims will not have a material adverse effect on its financial
condition.
Insurance for Asbestos-in-Buildings Claims:
Fibreboard has reached final settlements with four of its primary
insurers and several of its excess level insurers. The final settlements
confirm more than $295,000 of insurance as needed to defend and dispose of
asbestos-in-buildings claims. Substantially all of the confirmed insurance
remains available.
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
approximately $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, although to date substantially all of
Fibreboard's costs of defending asbestos-in-buildings claims have been paid by
primary carriers.
Fibreboard is seeking a declaration that the underlying asbestos-in-
building claims are covered under various insurance policies. Barring
settlement, final resolution of the insurance available for
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
asbestos-in-buildings claims may not be known for some time as an appeal of the
trial court decision is likely. The trial has been continued. No date has been
set for the trial to recommence. Fibreboard is continuing settlement
discussions with the remaining insurers. While optimistic, Fibreboard cannot
predict whether such discussions will result in settlements.
EVENTS IMPACTING ASBESTOS-RELATED LIABILITIES
A number of events could impact Fibreboard's ability to continue to
manage its asbestos-related liabilities within available resources. The
potential impact of the personal injury issues which follow are largely
dependent on whether the Global and/or Insurance Settlements are approved.
Insurance Assignment Program:
During 1991, Fibreboard introduced its Insurance Assignment Program as a
settlement vehicle for large groups of claims. Under this program, the
plaintiffs accept an assignment of Fibreboard's right to insurance monies from
Continental as complete settlement of their claims against Fibreboard.
Consequently, these settlements involve no cash payments by Fibreboard. This
contrasts with settlements under Fibreboard's Structured Settlement Program, in
existence since 1988, wherein partial payments are made by Fibreboard using
insurance funds with the remainder of the settlement deferred pending resolution
of insurance coverage.
The settlement agreements entered into to date under the Insurance
Assignment Program do not require Fibreboard to pay cash unless insurance
proceeds are ultimately not available. Additional provisions of certain
settlement agreements provide that Fibreboard and the plaintiffs return to the
"status quo" existing prior to settlement if certain specified court actions are
not obtained. The plaintiffs have a right to return to the status quo should
Continental declare bankruptcy prior to the final resolution of the personal
injury insurance coverage litigation.
During 1992, Fibreboard obtained widespread acceptance of this program
to resolve large numbers of pending and not yet filed claims. Most of the
assignment agreements have subsequently been converted to three-party agreements
among Fibreboard, Continental and the plaintiffs. A 1992 judicial
determination in California state court supporting the right of Fibreboard to
settle claims via the Insurance Assignment Program was reversed by the appellate
court in 1994. However, the issue of the validity of the Insurance Assignment
Program has been rendered moot by the three-party agreements discussed above.
Insurance Assignment Program and three-party settlements are recorded as
a liability when the settlement is executed. A corresponding asset for
anticipated insurance proceeds is also recorded. This accounting treatment
differs from the handling of unresolved claims, where no gross liability is
recorded until such time as the claim is settled.
Structured Settlement Program:
Beginning in 1988, Fibreboard has used its Structured Settlement Program
(SSP) to settle personal injury claims. Under the SSP, Fibreboard and the
plaintiff agree to a settlement amount. Fibreboard agrees to pay 40% of the
settlement amount of pre-1959 claims in cash, and the remainder is deferred
until September 1, 1996 or upon approval of the Global and/or Insurance
Settlements. Settlements of post-1959 claims result in deferring 100% of the
settlement amount.
As a consequence of the insurance settlements with Continental and
Pacific in 1993, the SSP now has been superseded by three-party agreements among
Continental, Fibreboard and the plaintiffs, whereby Continental or Fibreboard
agrees to pay certain amounts depending upon the resolution of the insurance
coverage case or the final approval or disapproval of the Global and Insurance
Settlements. These three-party agreements typically provide a partial cash
payment from Continental on pre-1959 claims.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Other Issues (Punitive Damage Claims):
Most of the personal injury claims and many of the asbestos-in-buildings
actions also seek punitive damages. Fibreboard has not paid any punitive
damages judgments except when funded by insurance. It is uncertain whether
punitive damages would be covered by insurance as the law in this area varies
from state to state. During 1991, Fibreboard received a ruling by the 9th
Circuit Court of Appeal that punitive damages awarded by the Cimino jury in
Texas and by a West Virginia jury in a consolidated trial similar to Cimino were
covered by insurance. However, this ruling may have limited applicability in
view of the varying state rules regarding punitive damage awards.
RESOURCES AVAILABLE FOR ASBESTOS-RELATED COSTS
Under the terms of the interim agreement, Continental will 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 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. At December 31,
1995, Fibreboard had approximately $2,199 in cash on hand restricted for
asbestos-related expenditures. Fibreboard believes restricted cash on hand,
amounts available under the interim agreement with Continental and amounts
available under settlement agreements with Fibreboard's asbestos-in-
buildings insurers will be adequate to fund defense and indemnity costs of
personal injury and asbestos-in-buildings claims plus any amounts due under
current and future Structured Settlement Program settlements.
15. OTHER LITIGATION AND CONTINGENCIES
Fibreboard has been named as a potentially responsible party in two
separate landfill clean-ups in the state of California, the Operating
Industries, Inc. landfill in Monterey Park and the GBF landfill in Pittsburg.
In addition, Fibreboard has been named a defendant in a private party lawsuit
seeking to recover costs of clean-up and remediation of the Acme landfill in
Martinez, California. In all cases, Fibreboard's former container products
division was responsible for materials deposited at the landfills. Fibreboard
is attempting to determine its allocable share of investigation and remediation
costs. The ultimate liability may change upon 1) determination of total costs
of remediation and 2) resolution of Fibreboard's allocable share of such costs.
Fibreboard has established a reserve against which the costs of study and
cleanup, as well as ongoing legal and administrative costs, will be charged. As
of December 31, 1995, the reserve had a remaining balance of $1,246.
Fibreboard is involved in a number of additional disputes arising from
its operations. Fibreboard believes resolution of these disputes will not have
a material adverse impact on its financial condition or results of operations.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
16. SUBSEQUENT EVENT
During 1996, additional court action was taken with respect to the asbestos-
related insurance settlements discussed in Note 14, "Asbestos Related
Litigation," above.
On July 26, 1996, the U.S. Fifth Circuit Court of Appeals affirmed the Global
Settlement by a majority decision and the Insurance Settlement by a unanimous
decision. Petitions for rehearing on the Global Settlement were filed with the
Fifth Circuit by September 9, 1996. At November 4, 1996, the Court had not
issued a decision on these petitions.
On October 24, 1996, the statutory time period to request review by the U.S.
Supreme Court of the Insurance Settlement approval judgment expired with no
request having been filed. The Insurance Settlement approval judgment is now
final and not subject to further appellate proceedings.
Fibreboard will continue to seek final approval of the Global Settlement. The
Insurance Settlement will not be fully implemented or funded until such time
as the Global Settlement has been finally resolved, with no further appeals
possible. In the event the Global Settlement is finally approved, the Insurance
Settlement will not be funded. If, however, the Global Settlement is not
approved, then the Insurance Settlement will be activated. In any event, the
insurers have begun paying deferred settlement obligations as they come due
beginning in the third quarter of 1996.
Under the Insurance Settlement, Fibreboard will continue to manage the defense
and settlement of asbestos-related personal injury claims. However, Fibreboard
is no longer subject to the risk that favorable judgments rendered to date in
the California insurance coverage litigation may be reversed or significantly
modified on appeal, as Fibreboard and its insurers will seek to dismiss the
actions pending in the California courts.
Fibreboard believes the amounts available under the Insurance Settlement
Agreement will be adequate to fund the ongoing defense and indemnity costs
associated with asbestos-related personal injury claims for the foreseeable
future.
For a more detailed discussion of the terms of the Global Settlement and the
Insurance Settlement, please see Note 14, "Asbestos Related Litigation,"
above.
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Stockholders of Fibreboard Corporation:
We have audited the accompanying consolidated balance sheets of
Fibreboard Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 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 financial position of Fibreboard Corporation and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
San Francisco, California,
February 2, 1996 (except as to
Note 16 for which the date is
November 7, 1996)
<PAGE>
REPORT OF MANAGEMENT
The objectivity and integrity of the consolidated financial statements
are the responsibility of Fibreboard Corporation management. To discharge this
responsibility, management maintains a system of internal controls designed to
provide reasonable assurance that assets are safeguarded and that accounting
records are reliable. Management supports an internal audit program to provide
assurance that the system of internal controls is operating effectively. The
consolidated financial statements and notes thereto and other financial
information included in this annual financial report have been prepared by
management in accordance with generally accepted accounting principles, and by
necessity include some items determined using management's best judgment,
tempered by materiality.
The Board of Directors discharges its responsibility for reported
financial information through its Audit Committee. This Committee, composed of
all outside directors, meets periodically with management, the internal audit
department and Arthur Andersen LLP to review the activities of each.
John D. Roach James P. Donohue
Chairman, President and Senior Vice President,
Chief Executive Officer Finance and Administration
Garold E. Swan
Vice President and Controller
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
Earnings
Income Per Share
from from Net
Gross Continuing Net Continuing Income
Quarter Net Sales Margin Operations Income Operations Per Share
------- --------- ------ ---------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
----
1st $ 87,414 $ 25,781 $ 3,870 $ 5,645 $ .43 $ .63
2nd 87,942 23,413 3,442 4,350 .38 .48
3rd 102,284 27,342 3,747 80,353 (1) .42 8.93
4th 103,166 23,344 3,465 5,468 (2) .39 .62
-------- -------- -------- --------
TOTAL $380,806 $99,880 $14,524 $95,816 1.62 10.67
-------- -------- -------- --------
-------- -------- -------- --------
1994
----
1st $ 38,220 $ 13,341 $ 4,558 $ 7,458 $.51 $ .83
2nd 15,657 3,370 462 2,105 .05 .23
3rd 38,707 9,758 1,418 13,015 (3)(4) .16 1.45
4th 90,812 24,066 1,838 4,457 (3) .21 .50
-------- -------- -------- --------
TOTAL $183,396 $50,535 $ 8,276 $27,035 .92 3.01
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(1) Includes a net gain on the sale of the wood products group of $75,897.
(2) Includes an adjustment on the sale of the wood products group of $1,916 net
of tax.
(3) Includes the results of operations of Norandex Inc. acquired on August 31,
1994.
(4) Includes an after tax gain of $11,221 on surplus asset sales.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
(A) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
FILED IN THIS REPORT.
1. Index to Financial Statements and Supplementary Data. See page
18.
2. Index to Financial Statement Schedules. See page 53.
3. The following exhibits are filed as part of this Form 10-K:
<PAGE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
3.1 Fibreboard's Restated Certificate of Incorporation (incorporated
herein by reference from Fibreboard Corporation's Registration
Statement on Form 10 dated May 23, 1988, as amended on June 28,
1988).
3.2 Fibreboard's Restated Bylaws as amended June 8, 1993
(incorporated herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993).
4.1 Specimen Common Stock Certificate, $.01 par value (incorporated
herein by reference from Fibreboard Corporation's Registration
Statement on Form 10 dated May 23, 1988, as amended on June 28,
1988).
4.2 Rights Agreement dated as of August 25, 1988 between Fibreboard
Corporation and Bank of America, N.T.&S.A. as Rights Agent
(incorporated herein by reference from Fibreboard Corporation's
Current Report on Form 8-K dated August 25, 1988).
4.2.1 Amendment No. 1 to Rights Agreement, dated as of February 11,
1994, between Fibreboard Corporation and The First National Bank
of Boston (incorporated herein by reference from Fibreboard
Corporation's Form 8-A/A dated February 15, 1994).
10.1* Form of Indemnification Agreement between Fibreboard Corporation
and each director and officer of Fibreboard Corporation
(incorporated herein by reference from Fibreboard Corporation's
Registration Statement on Form 10 dated May 23, 1988, as amended
on June 28, 1988).
10.2 Asset Purchase Agreement dated February 22, 1988, between
Fibreboard Corporation and Gaylord Container Corporation
(incorporated herein by reference from Fibreboard Corporation's
Registration Statement on Form 10 dated May 23, 1988, as amended
on June 28, 1988).
10.3 Fibreboard Corporation Restated 1988 Employee Stock Option and
Rights Plan (incorporated herein by reference from Fibreboard
Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992).
10.3.1 Amendment No. 1 to Fibreboard Corporation Restated 1988 Employee
Stock Option and Rights Plan (incorporated herein by reference
from Fibreboard Corporation's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994).
10.3.2 Amendment No. 2 to the Fibreboard Corporation Restated 1988
Employee Stock Option and Rights Plan, dated as of May 19, 1995
(incorporated herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1995).
<PAGE>
10.4 Form of Fibreboard Corporation Profit Sharing 401(k) Plan
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1992).
10.5 Fibreboard Corporation 1988 Employee Stock Purchase Plan
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1988).
10.5.1 Prospectus Supplement (Appendix) to Registration Statement on
Form S-8 No. 33-26449 for Shares issuable under the Fibreboard
Corporation 1988 Employee Stock Purchase Plan (incorporated
herein by reference from Fibreboard Corporation's Annual Report
on Form 10-K for the year ended December 31, 1989).
10.5.2 Amendment No. 1 to the Fibreboard Corporation 1988 Employee Stock
Purchase Plan, dated as of May 19, 1995 (incorporated herein by
reference from Fibreboard Corporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995).
10.6 Agreement of Compromise, Settlement and Release dated May 27,
1987, between Fibreboard Corporation and The Home Insurance
Company (incorporated herein by reference from Fibreboard
Corporation's Registration Statement on Form 10 dated May 23,
1988, as amended on June 28, 1988).
10.6.1 Agreement dated February 6, 1995 between Fibreboard Corporation
and The Home Insurance Company (incorporated herein by reference
from Fibreboard Corporation's Annual Report on Form 10-K for the
year ended December 31, 1994).
10.7 Fibreboard Corporation Structured Settlement Program Description
dated November 8, 1988 (incorporated herein by reference from
Fibreboard's Current Report on Form 8-K dated November 8, 1988).
10.8 Form of Structured Settlement Agreement (incorporated herein by
reference from Fibreboard's Current Report on Form 8-K dated
November 8, 1988).
10.9 Form of Stipulation Regarding Settlement Negotiations and Right
to Alternative Dispute Resolution (incorporated herein by
reference from Fibreboard's Current Report on Form 8-K dated
November 8, 1988).
10.10 Amended and Restated Trust Agreement dated September 29, 1989 by
and among Fibreboard Corporation, the Trustees and the Directors
and Officers of Fibreboard (incorporated herein by reference from
Fibreboard Corporation's Annual Report on Form 10-K for the year
ended December 31, 1989).
10.11 Consulting/Sales Representation Agreement dated February 20, 1989
between Distribution International and Pabco Metals Corporation,
a wholly-owned subsidiary of Fibreboard Corporation (incorporated
herein by reference from Fibreboard Corporation's Current Report
on Form 8-K dated February 20, 1989).
<PAGE>
10.12* Summary description of Fibreboard Corporation incentive
compensation arrangements (incorporated herein by reference from
Fibreboard Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993).
10.13* Amended and Restated Employment Agreement dated January 1, 1995
between Fibreboard Corporation and John D. Roach (incorporated
herein by reference from Fibreboard Corporation's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.14 Third Amended and Restated Credit Agreement dated February 6,
1996 among Fibreboard Corporation, as Borrower, Certain
Commercial Lending Institutions and Bank of America National
Trust and Savings Association, as Administrative Co-Agent, and
NationsBank N.A. as Documentation Co-Agent.
10.15 Stock Purchase Agreement among Noranda Aluminum, Inc., Norandex
Inc. and Fibreboard Corporation dated as of August 31, 1994
(incorporated herein by reference from Fibreboard Corporation's
Current Report on Form 8-K dated August 31, 1994).
10.16* Form of Officer Severance Agreement dated December 11, 1995.
10.17 Agreement and related documents dated March 27, 1992 between
Fibreboard Corporation and Pacific Indemnity Company
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1991).
10.18 Rescission of Insurance Policies dated March 27, 1992 between
Fibreboard Corporation and Pacific Indemnity Company
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1991).
10.19* Amended and Restated Fibreboard Corporation Supplemental
Retirement Plan (incorporated herein by reference from Fibreboard
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.20 Settlement Agreement dated January 1, 1993 between Fibreboard
Corporation and Continental Casualty Company (incorporated herein
by reference from Fibreboard Corporation's Annual Report on Form
10-K for the year ended December 31, 1992).
10.21 Settlement Agreement dated January 1, 1993 between Fibreboard
Corporation and Fireman's Fund Insurance Company, Insurance
Company of North America and Royal Insurance Company
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1992).
10.22 Settlement Agreement between Fibreboard Corporation and American
Home Assurance Company, et al (incorporated herein by reference
from Fibreboard Corporation's Annual Report on Form 10-K for the
year ended December 31, 1992).
<PAGE>
10.23 Agreement of Purchase and Sale between Fibreboard Corporation and
Sierra Ski Ranch, Inc. dated as of June 11, 1993 (incorporated
herein by reference from Fibreboard Corporation's Quarterly
Report on Form 10-Q for the period ended June 30, 1993).
10.24 Settlement Agreement among Fibreboard Corporation, Continental
Casualty Company and Ness, Motley, Loadholt, Richardson & Poole
and certain affiliated law firms dated as of August 5, 1993
(incorporated herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the period ended June 30,
1993).
10.25 Asset Purchase and Sale Agreement dated September 6, 1995 among
Sierra Pacific Industries, Fibreboard Box & Millwork Corporation
and Fibreboard Corporation (incorporated herein by reference from
Fibreboard Corporation's Current Report on Form 8-K dated
September 25, 1995).
10.25.1 Amendment No. 1 to the Asset Purchase and Sale Agreement dated
September 6, 1995 among Sierra Pacific Industries, Fibreboard Box
& Millwork Corporation and Fibreboard Corporation (incorporated
herein by reference from Fibreboard Corporation's Current Report
on Form 8-K dated September 25, 1995).
10.26 Agreement between Fibreboard Corporation and Continental Casualty
Company dated April 9, 1993 (incorporated herein by reference
from Fibreboard Corporation's Current Report on Form 8-K dated
April 9, 1993).
10.27 Agreement to Amend, Consolidate and Lend dated May 31, 1995
between First Interstate Bank of Nevada, N.A., as lender, and
Sierra-at-Tahoe and Trimont Land Company, as borrowers
(incorporated herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the period ended June 30,
1995).
10.27.1 Amendment No. 1 to the Agreement to Amend, Consolidate and Lend,
dated as of November 22, 1995 among First Interstate Bank of
Nevada, N.A., Trimont Land Company, Sierra-at-Tahoe, Inc. and
Bear Mountain, Inc.
10.27.2 Amendment No. 2 to the Agreement to Amend, Consolidate and Lend,
dated as of January 30, 1996 among First Interstate Bank of
Nevada, N.A., Trimont Land Company, Sierra-at-Tahoe, Inc. and
Bear Mountain, Inc.
10.28 Settlement Agreement dated October 12, 1993 among Fibreboard
Corporation, Continental Casualty Company, CNA Casualty Company
of California, Columbia Casualty Company and Pacific Indemnity
Company (incorporated herein by reference from Fibreboard
Corporation's Quarterly Report on Form 10-Q for the period ended
September 30, 1993).
10.29 Supplemental Agreement dated October 12, 1993 between Fibreboard
Corporation and Continental Casualty Company (pursuant to Rule
24b-2 promulgated under the Securities Exchange Act of 1934, as
amended, confidential treatment has been requested for this
exhibit. This agreement has been placed under court seal.)
<PAGE>
10.30 Global Settlement Agreement among Fibreboard Corporation,
Continental Casualty Company, CNA Casualty Company of California,
Columbia Casualty Company, Pacific Indemnity Company and The
Settlement Class, together with Exhibits A-E (incorporated herein
by reference from Fibreboard Corporation's Current Report on Form
8-K dated December 23, 1993).
10.30.1 Amendment No. 1 to the Global Settlement Agreement, dated
December 15, 1994, by and among The Settlement Class, Fibreboard
Corporation, Continental Casualty Company, CNA Casualty Company
of California, Columbia Casualty Company, Pacific Indemnity
Company and the Trustees of the Fibreboard Asbestos Compensation
Trust (incorporated herein by reference from Fibreboard
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.30.2 Amendment No. 2 to the Global Settlement Agreement, dated
February 6, 1995, by and among the Settlement Class, Fibreboard
Corporation, Continental Casualty Company, CNA Casualty Company
of California, Columbia Casualty Company and Pacific Indemnity
Company (incorporated herein by reference from Fibreboard
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.30.3 Amendment No. 1 to the Escrow Agreement, dated February 6, 1995,
by and among Continental Casualty Company, Pacific Indemnity
Company, Fibreboard Corporation and The First National Bank of
Chicago (incorporated herein by reference from Fibreboard
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.31 Agreement dated March 1994 among Representative Plaintiffs,
Fibreboard Corporation, Continental Casualty Company, CNA
Casualty Company of California, Columbia Casualty Company and
Pacific Indemnity Company (incorporated herein by reference from
Fibreboard Corporation's Quarterly Report on Form 10-Q for the
period ended June 30, 1994).
10.32 Settlement Agreement dated October 28, 1994 between Fibreboard
Corporation, CIGNA Specialty Insurance Company, Central National
Insurance Company of Omaha, Century Indemnity Company, CIGNA
Property and Casualty Insurance Company and Insurance Company of
North America (pursuant to Rule 24b-2 promulgated under the
Securities Exchange Act of 1934, as amended, confidential
treatment has been requested for this exhibit).
10.33* Fibreboard Corporation Long-Term Equity Incentive Plan
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993).
10.33.1* Amendment No. 1 to the Fibreboard Corporation Long-Term Equity
Incentive Plan, dated as of May 19, 1995 (incorporated herein by
reference from Fibreboard Corporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995).
10.34 Asset Purchase Agreement dated October 6, 1995 among Bear
Mountain, Inc., Fibreboard Corporation, Bear Mountain Ltd. and S-
K-I Ltd. (incorporated herein
<PAGE>
by reference from Fibreboard Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
10.34.1 Amendment No. 1 to Asset Purchase Agreement dated October 6, 1995
among Bear Mountain, Inc., Fibreboard Corporation, Bear Mountain
Ltd. and S-K-I Ltd. (incorporated herein by reference from
Fibreboard Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
10.35 Agreement dated November 30, 1995 among Andrew M. Spriet, et al,
1155714 Ontario Inc. and Fibreboard Corporation regarding the
purchase and sale of Vytec International Corporation
(incorporated herein by reference from Fibreboard Corporation's
Current Report on Form 8-K dated November 30, 1995).
10.36 Fibreboard Corporation 1995 Stock Incentive Plan effective as of
November 28, 1995.**
21. Fibreboard Corporation Subsidiaries.**
23. Consent of Arthur Andersen LLP.
27 Financial Data Schedule.**
99.1 Fibreboard Corporation press release dated November 11, 1996.
* Denotes management contract or compensation plan identified
pursuant to Item 14(a)(3) of Form 10-K.
** Previously filed.
(b) REPORTS ON FORM 8-K
The following Current Report on Form 8-K was filed during the period October
1, 1995 to December 31, 1995:
Date Event Reported
--------------- ---------------------------------------------------------
November 30, 1995 Fibreboard's purchase of the stock of Vytec Corporation.
INDEX TO FINANCIAL STATEMENT SCHEDULES
TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995
Schedule Page
- -------- ----
III Valuation and qualifying accounts for each of the three 54
years in the period ended December 31, 1995.
Report of independent public accounts on financial 55
statement schedules.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31
(000's Omitted)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO UNCOLLECTIBLE
BEGINNING COSTS AND ACCOUNTS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES WRITTEN OFF OTHER (a) END OF PERIOD
- ----------- --------- -------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
1993
- ----
Reserve for:
Doubtful accounts 504 362 (451 ) -- 415
Asbestos related costs 21,297 -- -- (1,802 ) 19,495
1994
- ----
Reserve for:
Doubtful accounts 415 378 (174 ) 1,391 2,010
Asbestos related costs 19,495 -- -- (2,211 ) 17,284
1995
- ----
Reserve for:
Doubtful accounts 2,010 1,050 (931 ) 431 2,560
Asbestos related costs 17,284 (4,000 ) -- (1,959 ) 11,325
</TABLE>
- -----------------
(a) Consists of reserve for doubtful accounts of acquired company and asbestos
related payments
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENTS SCHEDULES
To the Stockholders of
Fibreboard Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Fibreboard Corporation included in this
Form 10-K, and have issued our report thereon dated February 2, 1996. Our
report on the consolidated financial statements includes an explanatory
paragraph with respect to the significant uncertainty surrounding the asbestos
claims that have been filed against the Company as discussed in Note 14 to the
financial statements. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. Schedule II, Valuation and
Qualifying Accounts, is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
February 2, 1996
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
FIBREBOARD CORPORATION
Dated: November 11, 1996 By: /s/ GAROLD E. SWAN
---------------------------------
Garold E. Swan
Vice President Finance
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K/A, into Fibreboard Corporation's
previously filed Registration Statements on Form S-8, File No. 33-60412, No.
33-26449 and No. 33-26450.
ARTHUR ANDERSEN LLP
San Francisco, California,
November 7, 1996
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Stephen DeMaria/Margaret Turbeville
Fibreboard Corporation
(214) 954-9500
FIBREBOARD MULTI-BILLION DOLLAR
ASBESTOS INSURANCE SETTLEMENT FINALIZED
NATION'S LARGEST SINGLE-COMPANY ASBESTOS SETTLEMENT RECORDED
DALLAS (Nov. XX, 1996) -- Fibreboard Corporation (AMEX:FBD) announces that
its multi-billion dollar asbestos Insurance Settlement Agreement, unanimously
approved in July by the U.S. Fifth Circuit Court of Appeals, is final as the
period for filing a petition for review with the U.S. Supreme Court has expired.
The more than $3 billion Insurance Settlement Agreement between
Fibreboard and its insurers, Continental Casualty Company and Pacific Indemnity
Company, is the nation's largest recorded single-company asbestos settlement. A
related Global Settlement Agreement, which if ultimately approved supercedes
the Insurance Settlement Agreement, also was approved by the Fifth Circuit in
July, but separately awaits that Court's decision on a pending petition for
rehearing by certain objectors.
In response to the final approval of the Insurance Settlement Agreement,
Arthur Andersen LLP, Fibreboard's outside auditor, has removed its
qualification regarding asbestos from its report on Fibreboard's 1995
financial statements. Additionally, Fibreboard's insurers are commencing to
pay approximately $1 billion in deferred settlement obligations.
"The Insurance Settlement Agreement is a major milestone in resolving
our asbestos litigation and continuing Fibreboard's turn-around strategy,"
said John D. Roach, Fibreboard's chairman and chief executive officer. "While
we are diligently pursuing final approval of the Global Settlement Agreement,
which would completely bar future asbestos personal injury claims from being
asserted against Fibreboard, we now know for the first time that we are
assured at a minimum of receiving the enormous benefits provided by the
Insurance Settlement Agreement. We can now focus all our attention on our
next significant growth phase, with the goal of doubling revenues to $1
billion by the year 2000."
-- more --
<PAGE>
Fibreboard finalizes settlement agreement -- Page two
Under the Insurance Settlement Agreement, Fibreboard's insurers will pay
in full all settlements reached prior to August 27, 1993. Additionally, the
insurers will provide Fibreboard up to $2 billion, plus accrued interest, in
additional funds to manage and resolve pending unsettled claims as of
August 27, 1993, as well as claims filed after that date.
In August 1993, Fibreboard, its insurers and plaintiffs also entered
into a Global Settlement Agreement, which was affirmed by the Fifth Circuit
in July 1996 when the Court also unanimously approved the Insurance
Settlement Agreement. If ultimately approved, the Global Settlement Agreement
provides that Fibreboard's insurers, Continental Casualty Company and
Pacific Indemnity Company, assume full responsibility for resolving all
asbestos personal injury claims settled or filed as of August 27, 1993.
Claims filed after August 27, 1993 and all future claims become the
responsibility of a court supervised settlement trust, separately funded by
the insurers with more than $1.5 billion. If the Global Settlement Agreement
is not ultimately approved, the Insurance Settlement Agreement will be
implemented.
"Attaining final approval of the Insurance Settlement Agreement is a
true testament to the expertise and perseverance of our legal team, led by
Fibreboard's senior vice president and general counsel Michael Douglas and
our outside counsel, Brobeck, Phleger and Harrison, led by firm chairman
Stephen Snyder," said Roach.
THE FIBREBOARD TURN-AROUND STRATEGY
In 1991, facing mounting losses and enormous asbestos liabilities, the
company's Board elected a new chairman and chief executive officer, John D.
Roach, to lead a corporate revitalization and turn-around strategy. The
three-prong strategy consisted of demonstrating profit potential of existing
businesses, resolving asbestos litigation, and achieving aggressive growth.
Significant results have been achieved in just five years. From 1991 to
1995, the company's revenues, including discontinued operations, increased
from $234 million to $493 million, net income increased from a loss of $43.9
million to a profit of $95.8 million, earnings per share increased from a
loss of $5.50 per share to a gain of $10.66 per share, with book value per
share increasing from $12.37 to $26.67.
In addition, with the 1994-1995 acquisitions of Norandex and Vytec
respectively, Fibreboard now is the fifth largest manufacturer of vinyl
siding in North America, with a new
-- more --
<PAGE>
Fibreboard finalizes settlement agreement -- Page three
manufacturing facility increasing plant capacity by more than 30 percent by
mid-1997. The company has set the objective of being in the "top three" by
the turn of the century when analysts estimate that the vinyl siding market
will reach approximately 4 billion square feet of product.
The company divested its Wood Products division in September 1995 and
anticipates completing the sale of its Resorts Group by the end of this year.
The company's future growth goals continue to focus on expanding market share
in the building products industry through internal growth and acquisition,
and building corporate value through opportunistic, disciplined acquisitions
with more than $200 million available through credit facilities to support
expansion plans.
Fibreboard Corporation, headquartered in Dallas, is a leader in the
building products industry, manufacturing residential vinyl products, cast
stone building products and industrial insulation. Building products
manufacturing groups include Norandex Vinyl Products Company, Vytec
Corporation, Stone Products Corporation and Pabco. Its Norandex Distribution
Company operates an extensive multi-state distribution network for exterior
building products. The company also currently owns and operates three
California resorts: Northstar-at-Tahoe, an all season ski and golf resort and
conference center, and Sierra-at-Tahoe and Bear Mountain Ski Resort, both day
ski facilities.
For more information on Fibreboard Corporation, please call (800) PRO-INFO.
-- ### --
<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, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,895
<SECURITIES> 0
<RECEIVABLES> 74,682
<ALLOWANCES> 2,005
<INVENTORY> 70,390
<CURRENT-ASSETS> 169,746
<PP&E> 174,409
<DEPRECIATION> 58,214
<TOTAL-ASSETS> 1,226,739
<CURRENT-LIABILITIES> 96,065
<BONDS> 0
0
0
<COMMON> 87
<OTHER-SE> 256,704
<TOTAL-LIABILITY-AND-EQUITY> 1,226,734
<SALES> 381,453
<TOTAL-REVENUES> 381,453
<CGS> 265,849
<TOTAL-COSTS> 265,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,366
<INTEREST-EXPENSE> 2,292
<INCOME-PRETAX> 25,139
<INCOME-TAX> 10,056
<INCOME-CONTINUING> 15,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,083
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 0
</TABLE>
