<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(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, 1996 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 no. 0-016951
FIBREBOARD CORPORATION
----------------------------------------
(exact name of registrant as specified in charter)
DELAWARE 94-0751580
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
2200 ROSS AVE., SUITE 3600, DALLAS, TX 75201
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(Address of principal executive offices)
(214) 954-9500
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(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 X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 18, 1997 was $282,587,974.
As of the close of business on March 18, 1997, the Registrant had outstanding
8,490,020 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Fibreboard Corporation's Proxy Statement relating to its 1997 Annual
Meeting of Stockholders, which will be filed pursuant to Regulation 14A not
later than April 30, 1997, are incorporated by reference in Part III.
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FIBREBOARD CORPORATION AND SUBSIDIARIES
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Fibreboard Corporation (Fibreboard) is a Delaware corporation incorporated in
1917. Between June 1978 and June 1988, Fibreboard was a wholly-owned subsidiary
of Louisiana-Pacific Corporation (L-P). In June 1988, L-P distributed
Fibreboard's common stock to its stockholders, and Fibreboard once again became
an independent, publicly held company. Fibreboard's business is the manufacture
and distribution of building products.
Sales in 1996 were as follows:
IN THOUSANDS PERCENT
------------ -------
Building Products:
Residential $ 411,268 88%
Industrial 57,670 12%
--------- ----
$ 468,938 100%
--------- ----
--------- ----
Building Products consists of the Residential Building Products Group and the
Industrial Building Products Group. Residential Building Products primarily
manufactures vinyl siding and related accessories for exterior residential
applications at three manufacturing facilities in North America with a fourth
facility under construction. Vinyl products are sold through two primary
channels: 1) A company-owned distribution network of 124 branches, which
also sell a wide variety of other exterior building products; and 2) a
network of independent distributors. Residential Building Products also
manufactures cast stone products sold through independent masonry
distributors. Industrial Building Products, sold under the trade name of
Pabco, manufactures molded insulation for high temperature and industrial
applications, fireproofing board used in commercial construction and metal
jacketing.
In December 1996, Fibreboard sold its resort operations, which included three
ski resorts located in California: Northstar-at-Tahoe, Sierra-at-Tahoe and
Bear Mountain. The resort operations are now accounted for as discontinued
operations. Resort operations revenues, which have been excluded from the
table above, were $42,773 in 1996.
Fibreboard employs approximately 2,400 people, substantially all of whom are
non-union.
Information concerning the revenues, operating results and identifiable
assets of Fibreboard's building products operations can be found in Note 12
to Fibreboard's Consolidated Financial Statements, "Industry Segment
Information" on page 38.
BUILDING PRODUCTS
RESIDENTIAL BUILDING PRODUCTS GROUP
PRODUCTS
Norandex Vinyl Products Company and Vytec Corporation manufacture vinyl
siding and related accessories. Norandex produces vinyl siding and
accessories at its highly efficient manufacturing facility in Claremont,
North Carolina. More than 95% of Norandex manufactured products are sold
through Norandex Distribution Company, a 124 branch company-owned
distribution network operating in 32 states. Norandex manufactured vinyl
siding and accessories account for approximately one-third of
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FIBREBOARD CORPORATION AND SUBSIDIARIES
distribution sales. Purchased windows and doors make up an additional 30% of
sales. Other resale products include aluminum and steel soffit and siding,
as well as other primarily exterior building products and installation
supplies. Norandex products are used in residential remodeling
(approximately 60% of sales) and new construction (40% of sales).
Fibreboard purchased Vytec Corporation on November 30, 1995. Vytec produces
vinyl siding and accessories at two manufacturing facilities located in
London, Ontario, and Mission, British Columbia, Canada. While a portion of
Vytec's products are sold through Norandex branches, the majority of Vytec's
products are sold through independent distributors, principally in the Great
Lakes, mid-west, mid-Atlantic and southeastern states. Approximately 65% of
Vytec's sales are to customers located in the United States, with the
remainder shipped primarily to customers in Canada, Australia and an
affiliate in Poland.
Fibreboard purchased Stone Products Corporation on July 1, 1996. Stone
Products is the pioneer and leading producer of manufactured stone building
products. The cast stone products offer an authentic, stone-like, natural
look and feel with superior quality and durability and can be fully installed
for a variety of applications at a cost substantially less than natural
stone. Cast stone production facilities are located in Napa, California and
Navarre, Ohio. The majority of its products are sold through independent
distributors with approximately 80% of sales to customers in the U. S. and
the remainder shipped to customers in Japan, Canada and other Pacific Rim
countries.
MARKET POSITION, COMPETITION AND ENTRY BARRIERS
Fibreboard is one of the top five producers of vinyl siding in North America.
The industry consists of more than 25 producers which supply an overall vinyl
siding market of approximately 36 million squares (a square is material
sufficient to cover a 10 foot by 10 foot area). Fibreboard believes it has a
9% market share in vinyl siding. Fibreboard believes it is among the
industry's low cost producers with production yields substantially higher
than the industry average.
Fibreboard is one of four vinyl siding producers that has a captive
distribution network, and Fibreboard believes the Norandex Distribution
Company network to be the most extensive. Norandex Distribution Company
competes regionally with many privately-owned distribution companies which
offer products manufactured by competitors.
Stone Products is the largest manufacturer of cast stone products in the
world. Fibreboard believes that Stone Products has an approximate 50% share
of the U. S. market with no competitor having more than a 10% share.
Competitors are primarily local and regional manufacturers.
Barriers to entry in the manufacture of vinyl siding and cast stone products
are significant, requiring a substantial investment in manufacturing
equipment. By contrast, barriers to entry in the distribution business are
modest.
The principal means of competition are price, service and quality.
SUPPLIERS
The primary raw material used in the manufacture of vinyl siding is polyvinyl
chloride (PVC) resin. Fibreboard has supply agreements at current market
prices with several major manufacturers of PVC resin. The primary raw
materials used in the manufacture of cultured stone are Portland cement and
lightweight natural aggregates. Fibreboard has not experienced any
difficulty in securing sufficient raw material to meet its manufacturing
needs. The price of PVC resin is subject to price swings. Fibreboard
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FIBREBOARD CORPORATION AND SUBSIDIARIES
has historically been able to pass the impact of raw material price increases
on through increased end product prices.
CUSTOMERS
Norandex Distribution Company's network is concentrated in the 30-state area
east of the Rocky Mountains. Customers are typically residential siding
installers and construction and remodeling contractors. Norandex believes
its manufacturing flexibility and ability to meet short order delivery times
provide it a competitive advantage.
Vytec's customers are generally independent distributors, who sell the
products to residential siding installers and construction and remodeling
contractors. Some of Vytec's independent distributors compete directly with
Norandex branches. Vytec's sales force concentrates its efforts on assisting
distributors in developing their markets and attracting new customers.
Stone Products' customers are independent distributors of masonry materials.
These distributors are presently concentrated in California, Great Lakes and
northeast states, although efforts are underway to increase distribution on a
national level.
FACILITIES
PRACTICAL ANNUAL
PLANT LOCATION PRODUCTION CAPACITY PRODUCTION SCHEDULE
-------------------------- ------------------- --------------------
VINYL SIDING MANUFACTURING (IN SQUARES)
Claremont, NC 2,150,000 3 shifts-7 days/week
Joplin, MO* 1,150,000 3 shifts-7 days/week
London, Ontario 1,350,000 3 shifts-7 days/week
Mission, British Columbia 270,000 3 shifts-7 days/week
---------
Total 4,920,000
---------
---------
STONE PRODUCTS MANUFACTURING (IN SQUARE FEET)
Napa, CA 16,900,000 2 shifts-7 days/week
Navarre, OH 5,000,000 2 shifts-7 days/week
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Total 21,900,000
----------
----------
*Expected to be operational in the second quarter of 1997
BRANCH LOCATIONS
Norandex branches are located in the following states: Alabama, Arkansas,
Colorado, Delaware, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, New York, North Carolina, North Dakota, Ohio, Oklahoma,
Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, West
Virginia and Wisconsin. Branches are typically 10,000 to 20,000 square feet
in size. The vast majority of branch locations are leased.
CAPITAL SPENDING
Capital expenditures have increased with the growth of Fibreboard's
Residential Building Products business. Capital expenditures of $16.6
million in 1996 and over $30.0 million projected in 1997 include
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approximately $15.0 million for the construction of a new vinyl siding plant
in Joplin, Missouri, $6.0 million for expansion of production capacity at the
Claremont, North Carolina and London, Ontario, Canada facilities, and
approximately $6.0 million for expansion of Stone Products production
facilities.
SEASONALITY
Sales activity is seasonal and dependent on weather patterns. Historically,
sales are low in the first quarter of the year, before picking up in the
second and third quarters and falling off in the fourth quarter.
Manufacturing activity, while somewhat heavier during the high-activity
summer months, is more evenly spread throughout the year.
OPERATING RESULTS - RESIDENTIAL BUILDING PRODUCTS GROUP*
HISTORICAL PERFORMANCE
(in thousands)
------------------------------
1996 1995 1994
-------- -------- --------
Sales $411,268 $276,180 $ 85,607
Pre-tax operating income 36,728 18,031 8,096
Depreciation & amortization 10,302 6,303 1,815
Capital expenditures ** 16,595 4,048 585
* Operating results include Norandex Inc. from August 31,
1994, Vytec Corporation from November 30, 1995 and Stone Products
from July 1, 1996. Information has been extracted from the
required segment disclosure and should not be considered a
substitute for financial statements prepared in accordance with
generally accepted accounting principles. See Note 13 to
Fibreboard's Consolidated Financial Statements for further
information regarding acquisitions.
** Does not include amounts paid to acquire eight building products
distribution centers during the first three quarters of 1996, Stone
Products on July 1, 1996, Vytec on November 30, 1995 or Norandex on
August 31, 1994.
INDUSTRIAL PRODUCTS GROUP (PABCO)
PRODUCTS
Pabco produces molded industrial insulation, fireproofing board and metal
jacketing. Molded industrial insulation (calcium silicate - "CalSil") is
produced in a variety of standard sizes and configurations for use in
industrial construction and maintenance, primarily for high temperature
piping and boiler applications. The panel industrial fireproofing board
(Super Firetemp-TM-, also a form of calcium silicate insulation) can be used
in industrial and commercial applications such as protecting columns, flues,
cable trays, tanks and bulkheads.
Super Firetemp competes with a number of generic fireproofing products.
Super Firetemp retains its shape, size and strength under continuous service
at temperatures in excess of 2,000DEG F and may be re-used after exposure to
extreme temperatures. Super Firetemp is exceptionally easy to cut and
handle, and can be applied directly to the surface it is protecting, unlike
competing products which require clearance space. Consequently, Super
Firetemp's durability, space efficiency and ease of application may provide
greater cost savings to users than competing products.
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FIBREBOARD CORPORATION AND SUBSIDIARIES
Metal jacketing and metal elbows are used to cover and protect insulation
products after installation.
MARKETS
Nearly all of Pabco's products are sold into industrial markets, with a small
percentage sold into commercial markets. Approximately 90% of sales are
domestic, with the remainder primarily to South America and the Middle East.
MARKET POSITION, COMPETITION AND ENTRY BARRIERS
Fibreboard believes there are three significant producers of calcium silicate
industrial insulation used in North America. Pabco is the largest producer
of this specialized product category which directly competes with fiberglass,
mineral wool, foam glass and ceramic fibers in the industrial insulation
market. Pabco's CalSil production facilities are the largest single product
plants in its segment of the domestic industrial insulation industry.
Pabco's precision-molded, modular technology allows for more efficient
operation at a wider range of volumes than can be achieved by major
competitors. Pabco's key insulation and metal plants include operations in
the Gulf States region where buyers and sales are currently concentrated.
Pabco believes its products are preferred in construction projects where ease
of installation is paramount since Pabco's product is more easily field
fabricated. Each of Pabco's major competitors operates single-facility,
older plants located in the mid-west and eastern states. Fibreboard believes
these may be higher-cost facilities in areas of inherent labor cost
disadvantages.
Barriers to entry in CalSil production are significant due to capital
requirements. However, in certain applications, other types of insulation
may be substituted.
Fibreboard believes that there are only three major domestic producers of
metal elbows and jacketing material for insulation protection, with each
having a roughly equal share of the domestic market. The three producers
have substantial excess capacity compared to market demand.
Pabco is the only North American producer of calcium silicate-based
industrial fireproofing board which it manufactures under an exclusive
foreign license. However, competing foreign products have been sold in the
United States with some limited success.
The principal means of competition are price, quality and service.
SUPPLIERS
The primary raw materials in calcium silicate insulation are diatomaceous
earth and limestone. There are several sources of supply of diatomaceous
earth of a quality which Pabco considers acceptable for production of calcium
silicate insulation. Pabco has entered into long-term material supply
contracts on favorable terms. The raw materials for the metal operations are
aluminum, stainless steel, vinyl and paper. Pabco has not experienced any
difficulties in obtaining adequate supplies and does not anticipate any such
difficulties, although metal pricing has varied significantly over the last
three years. Depending on inventory positions and purchase commitments, metal
market price volatility can have a significant impact, either positive or
negative, on operating profits.
CUSTOMERS
A majority of Pabco's revenues are derived from the maintenance market.
Primary customers include insulation contractors and distributors
concentrated in the Gulf States region. Products are marketed by
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FIBREBOARD CORPORATION AND SUBSIDIARIES
Pabco's sales force to insulation distributors and contractors. Although
industrial insulation sales are price sensitive, Fibreboard believes Pabco's
low-cost facilities, material and energy costs give Pabco a significant cost
advantage over competitors.
FACILITIES
MOLDED INDUSTRIAL INSULATION
NORMAL ANNUAL
PRODUCTION CAPACITY
PLANT LOCATION (CUBIC FEET) PRODUCTION SCHEDULE
------------------- ------------------- --------------------
Ruston, LA 2,300,000 3 shifts-7 days/week
Grand Junction, CO 2,300,000* 3 shifts-7 days/week
------------------- ------------------- --------------------
TOTAL 4,600,000
*Facility was operated intermittently during 1996 to match production
with demand.
PANEL INDUSTRIAL FIREPROOFING BOARD
NORMAL ANNUAL
PRODUCTION CAPACITY
PLANT LOCATION (POUNDS) PRODUCTION SCHEDULE
------------------- ------------------- --------------------
Grand Junction, CO 7,500,000* 3 shifts-7 days/week
*Facility was operated intermittently during 1996 to match production
with demand.
METAL JACKETING
PLANT LOCATION PRODUCTION CAPACITY PRODUCTION SCHEDULE
------------------- ------------------- --------------------
Palestine, TX * 1 shift-5 days/week
Poca, WV * 1 shift-5 days/week
Huntington Beach, CA * 1 shift-5 days/week
*Capacity cannot be expressed in a standard unit of measure.
CAPITAL SPENDING
The industrial insulation group requires minimal capital expenditures,
primarily for maintenance purposes, averaging approximately $500,000 per
year. Fibreboard's management does not believe any significant capital
expenditures will be required for the foreseeable future.
SEASONALITY
Industrial insulation products are impacted by petrochemical and general
economic cycles affecting industrial capital expenditure programs. In
general, sales activity is not significantly impacted by seasonality.
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FIBREBOARD CORPORATION AND SUBSIDIARIES
OPERATING RESULTS - INDUSTRIAL BUILDING PRODUCTS GROUP*
HISTORICAL PERFORMANCE
(in thousands)
---------------------------
1996 1995 1994
------- ------- -------
Sales $57,670 $59,671 $56,376
Pre-tax operating income 6,619 7,694 6,452
Depreciation & amortization 901 867 788
Capital expenditures 538 484 327
*Information has been extracted from the required segment disclosure and should
not be considered a substitute for financial statements prepared in accordance
with generally accepted accounting principles.
DISCONTINUED OPERATIONS
In December 1996, Fibreboard sold the outstanding stock of its resort
operations subsidiaries to Booth Creek Ski Holdings, Inc., for $126.5 million
after purchase price adjustments and including the assumption of certain
liabilities. The resort operations consisted of three California resorts:
Northstar-at-Tahoe, Sierra-at-Tahoe and Bear Mountain.
In September 1995, Fibreboard sold the assets of its wood products business
to Sierra Pacific Industries for $239.0 million after purchase price
adjustments. The wood products business consisted of approximately 80,000
acres of northern California timberland, two sawmills, a hardwood plywood
plant, a molding and millwork facility and a bark processing plant.
All financial data contained herein has been restated to reflect the wood
products business and the resort operations as discontinued operations. The
following table presents the combined wood products and resort operating
results through each date of sale and related gains on disposition.
HISTORICAL PERFORMANCE
(in thousands)
-----------------------------
1996 1995 1994
------- -------- --------
Sales $42,773 $156,705 $221,722
Pre-tax operating income 4,012 13,915 20,690
Pre-tax gain on asset
disposition 55,850 121,245 18,858
ENVIRONMENTAL MATTERS
All of Fibreboard's production facilities are subject to regulation by
federal and state environmental agencies. Fibreboard believes its facilities
substantially meet applicable environmental requirements in all material
respects. Although compliance with environmental requirements is currently
not materially burdensome, given the uncertainties associated with
environmental matters generally, and with changing laws and regulations in
particular, there can be no assurance that continued compliance will not be
materially burdensome in the future.
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FIBREBOARD CORPORATION AND SUBSIDIARIES
Information concerning Fibreboard's involvement in landfill litigation and
administrative proceedings is incorporated herein by reference to Note 15 to
Fibreboard's Consolidated Financial Statements, "Other Litigation and
Contingencies," on page 44.
ITEM 3. LEGAL PROCEEDINGS
ASBESTOS-RELATED PERSONAL INJURY CLAIMS
At December 31, 1996, Fibreboard was a defendant in numerous personal injury
claims pending in federal and state courts throughout the United States.
Additional claims are anticipated in the future. These claims typically
allege injury or death from asbestos exposure. Fibreboard is generally only
one of several defendants. These claims seek compensatory, and in many
cases, punitive damages in various amounts depending on injury severity.
During 1993 Fibreboard reached settlement agreements (the Global Settlement
and Insurance Settlement) with its insurers, Continental Casualty Company and
Pacific Indemnity Company, and plaintiff representatives which should resolve
Fibreboard's existing and future asbestos-related personal injury liabilities
within insurance resources and existing corporate reserves. The Insurance
Settlement is final and the Global Settlement requires court approval. The
Global Settlement action is titled Gerald Ahearn, James Dennis and Charles W.
Jeep, on Behalf of Themselves and Others Similarly Situated, Plaintiffs, v.
Fibreboard Corporation, Defendant, Continental Casualty Company and Pacific
Indemnity Company, Intervenors, Civil Action No. 6:93cv526, U.S. District
Court for the Eastern District of Texas, Tyler Division. The Insurance
Settlement action is titled Continental Casualty Company, CNA Casualty Company
of California, Columbia Casualty Company and Pacific Indemnity Company,
Plaintiffs, v. Daniel Herman Rudd, Jr., Beverly White and John Hansel, on
Behalf of Themselves and Others Similarly Situated, and Owens-Illinois, Inc.,
on Behalf of Itself and Others Similarly Situated, and Penn Mutual Life
Insurance Company, Defendants, Civil Action No. 6:94cv458, U.S. District Court
for the Eastern District of Texas, Tyler Division. The U.S. District Court
issued its judgments approving both settlements in July 1995.
Both judgments were appealed to the U.S. Fifth Circuit Court of Appeals. On
July 26, 1996, the Court of Appeals affirmed the Global Settlement by a
majority decision and the Insurance Settlement by a unanimous decision. A
petition for rehearing on the Global Settlement was filed with the Fifth
Circuit and subsequently rejected by the Court. The parties opposing the
Global Settlement have filed petitions seeking review with the U.S. Supreme
Court.
On October 26, 1996, the statutory time period to seek further review of the
Insurance Settlement approval judgment lapsed with no petition for review
having been filed with the U.S. Supreme Court. Therefore, the Insurance
Settlement is now final and not subject to further appeal.
Additional information concerning personal injury claims can be found in Note
14 to Fibreboard's Consolidated Financial Statements, "Asbestos-Related
Litigation," which begins on page 40.
INSURANCE COVERAGE FOR PERSONAL INJURY CLAIMS
Fibreboard has been involved in litigation with its insurers, Continental
Casualty Company and Pacific Indemnity Company, to determine the amount of
insurance available to Fibreboard (In Re Asbestos Insurance Cases, Judicial
Council Coordination Proceeding No. 107). As noted above, the Insurance
Settlement is now final. As contemplated by the Insurance Settlement,
Fibreboard and its insurers will seek to dismiss this insurance coverage
litigation.
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FIBREBOARD CORPORATION AND SUBSIDIARIES
ASBESTOS-IN-BUILDINGS CLAIMS
At December 31, 1996, Fibreboard was a defendant in six asbestos-in-buildings
claims pending in U.S. federal and state courts. Fibreboard is typically only
one of several defendants. Based on its experience to date, Fibreboard
believes the ultimate resolution of asbestos-in-building claims will not have
a material adverse effect on its financial condition or results of operations.
Additional information concerning Fibreboard's asbestos-in-buildings claims
can be found in Note 14 to Fibreboard's Consolidated Financial Statements,
"Asbestos-Related Litigation," which begins on page 40.
INSURANCE COVERAGE FOR ASBESTOS-IN-BUILDINGS CLAIMS
Fibreboard believes the total limits of insurance policies in effect from
1932 to 1985 which may provide coverage for the asbestos-in-buildings claims
aggregated approximately $390 million (approximately $295 million of which
has been confirmed through settlements during 1993 and 1994), 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. Fibreboard is pursuing an insurance coverage suit
(Fibreboard vs. Continental Casualty, et al; Superior Court of the State of
California for the City and County of San Francisco). Trial in this action
has been continued. During the continuance, Fibreboard and its insurers are
attempting to settle their disputes.
Additional information concerning this litigation can be found in Note 14 to
Fibreboard's Consolidated Financial Statements, "Asbestos-Related
Litigation," which begins on page 40.
OTHER LITIGATION
Fibreboard has been named as a potentially responsible party in two
California landfill clean-ups, the Operating Industries Inc. site in Monterey
Park and the GBF landfill in Pittsburgh, and has been named as a defendant in
a private lawsuit related to the Acme landfill in Martinez, CA. Additional
information concerning Fibreboard's involvement can be found in Note 15 to
Fibreboard's Consolidated Financial Statements, "Other Litigation and
Contingencies," on page 44.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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FIBREBOARD CORPORATION AND SUBSIDIARIES
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers of Fibreboard follows:
<TABLE>
NAME AGE POSITION
- -----------------------------------------------------------------------------------------
<S> <C> <C>
John D. Roach 53 Chairman, President and Chief Executive Officer
Ronald W. Mathewson 59 Executive Vice President and Chief Operating Officer
Michael R. Douglas 43 Senior Vice President, General Counsel and Secretary
Stephen L. DeMaria 56 Vice President, Corporate Relations
Herbert M. Elliott 58 Vice President, and President of Stone Products and Pabco
Donald F. McAleenan 42 Vice President and Deputy General Counsel
Garold E. Swan 44 Vice President, Finance
</TABLE>
Officers serve at the discretion of the board of directors.
- - Mr. Roach was elected Chairman, President and Chief Executive Officer of
Fibreboard on July 2, 1991. Prior to his election, Mr. Roach was Executive
Vice President of Manville Corporation, where he served as President of its
Mining and Minerals Group and President of Celite Corporation, a wholly-
owned Manville subsidiary. In addition, Mr. Roach served as President of
Manville Sales Corporation, now known as Schuller International, from 1988
to 1990, and as Chief Financial Officer of Manville Corporation from 1987
to 1988. Prior to Manville, Mr. Roach was a strategy consultant and Vice
Chairman of Braxton Associates; Vice President and Managing Director of the
Strategic Management Practice for Booz, Allen, Hamilton; and Vice President
and Director of The Boston Consulting Group. Previous experience at
Northrop Corporation included Director of strategic planning, economic
analysis, accounting, management information systems and co-manager of a
venture capital subsidiary. Mr. Roach serves as a director of Morrison
Knudsen and Thompson PBE, Inc.
- - Mr. Mathewson was elected Executive Vice President and Chief Operating
Officer of Fibreboard in October 1996. Prior to joining Fibreboard, Mr.
Mathewson served from 1994 to 1995 as Executive Vice President of Magnetek,
Inc. and President of the Lighting Group. From 1988 to 1994, he served at
Manville Corporation (now Schuller International) where he was corporate
Senior Vice President, President of the Building Products Group and Vice
President/General Manager of the Building Insulation Division. Mr.
Mathewson also spent 27 years with General Electric Company where he served
as General Manager of several business units within the Lighting Business
Group.
- - Mr. Douglas became General Counsel to Fibreboard in September 1987 and was
elected Secretary in November 1990. He was elected Vice President in
August 1991 and Senior Vice President in October 1993. From March 1986 to
September 1987 he was employed by the Asbestos Claims Facility, of which
Fibreboard was a member, as Senior Legal Counsel and then as Director of
Law-West Coast Region. From 1982 to 1986 he was an attorney in the
asbestos litigation group of Jim Walter Corporation.
- - Mr. DeMaria joined Fibreboard in May 1989 as Director-Corporate
Communications and Investor Relations and was elected Vice President,
Corporate Relations in August 1991. Prior to joining Fibreboard, he was
Executive Vice President of the California Forest Protective Association,
an industry trade association representing the interests of industrial
timberland owners before the California legislature and regulatory
agencies.
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FIBREBOARD CORPORATION AND SUBSIDIARIES
- - Mr. Elliott was appointed General Manager of Pabco in October 1991 and was
elected Vice President of Fibreboard in February 1992, and President of
Stone Products and Pabco in July 1996. Prior to joining Fibreboard, Mr.
Elliott was a partner in Management Resource Partners, a professional
management firm advising corporations on financial and operating matters
and functioned as CEO, CFO or a director of several companies. Mr. Elliott
has been CFO of Consolidated Fibers and Itel Corporation, Vice President
Corporate Development of Alexander and Baldwin and a consultant for A.T.
Kearney.
- - Mr. McAleenan joined Fibreboard as Deputy General Counsel in February
1992 and was elected Vice President in August 1996. Prior to joining
Fibreboard, Mr. McAleenan served from September 1989 to January 1992
as Assistant General Counsel at AT&E Corporation, a company engaged in
wireless communications. From 1980 to 1989, he was engaged in private
law practice in New York City.
- - Mr. Swan joined Fibreboard as Controller in September 1988. He was elected
Vice President in October 1991 and Vice President, Finance in October 1996.
He previously was an Audit and Financial Consulting Manager in the
Portland, Oregon office of Arthur Andersen LLP.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 18, 1997, there were 10,206 holders of record of Fibreboard
common stock. Fibreboard's common stock is traded on the American Stock
Exchange under the symbol FBD. Information with respect to the quarterly
high and low market sales prices for Fibreboard's common stock for 1996 and
1995, based upon sales transactions reported by the American Stock Exchange,
is provided below. All per share prices have been adjusted to reflect a
two-for-one stock split on May 19, 1995.
Market Prices of Fibreboard Common Stock
1996 1995
----------------- ------------------
QUARTERS ENDED HIGH LOW HIGH LOW
- -------------- ------ ------ ------ -------
March 31 25 1/8 20 1/4 17 13 3/4
June 30 28 23 27 15 5/16
September 30 35 1/2 25 26 3/8 21 7/8
December 31 36 28 3/4 26 3/4 19 5/8
The closing price of Fibreboard's common stock on March 18, 1997 was $34.00.
Since its spin-off from Louisiana-Pacific Corporation on June 6, 1988,
Fibreboard has not paid cash dividends.
ITEM 6. SELECTED FINANCIAL DATA
Fibreboard sold its wood products business on September 25, 1995 and its
resort operations on December 3, 1996. All data presented below has been
restated to reflect wood products and resort operations as discontinued
operations for all periods. In addition, the results of the following
acquisitions are included only for the periods since the transaction date:
12
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
Norandex - August 1994
Vytec - November 1995
Stone Products - July 1996
<TABLE>
YEAR ENDED DECEMBER 31
(dollar amounts in thousands except per share)
------------------------------------------------------------
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $468,938 $ 335,851 $ 141,983 $ 49,215 $ 49,701
Income (loss) from
continuing operations (1) 15,784 9,439 3,504 (555) (1,282)
Income (loss) from continuing
operations per share (1) 1.77 1.05 0.39 (0.06) (0.16)
Operating assets 451,976 353,816 362,444 250,836 214,586
Asbestos-related assets 236,869 830,064 812,347 969,136 826,582
Total assets 688,845 1,183,880 1,174,791 1,219,972 1,041,168
Long-term debt (2) 27,847 9,365 101,293 23,539 13,306
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Includes pre-tax charge of $3,150 for corporate office relocation in 1996,
pre-tax asbestos-related reserve reversal of $4,000 in 1995, pre-tax
$3,762 gain on surplus real estate sales in 1993, and pre-tax $2,353
pension gain and $2,998 gain on surplus real estate sales in 1992.
(2) Does not include amounts for asbestos claims settlements. See Note 14
to the financial statements, "Asbestos-Related Litigation," on page 40
for additional information. Also does not include asbestos-related
long-term debt of $24,944 in 1996, $23,711 in 1995, $22,360 in 1994,
$21,361 in 1993, and $20,572 in 1992. Does include $2,590, $3,765,
$4,870, $5,905, and $6,875 of long-term debt for which Fibreboard
receives offsetting interest and principal payments from notes
receivable -- see Note 5, "Long-Term Debt."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fibreboard sold its resort operations during 1996 and its wood products
business during 1995. Prior to the acquisition of Norandex in August 1994,
these operations accounted for the majority of Fibreboard's sales and a
significant portion of operating profits. As required, all financial data
contained herein has been restated to reflect resort operations and wood
products as discontinued operations. The discussion which follows reflects
that presentation as well. Such restatement dramatically impacts comparisons
of consolidated operating results between years.
1996 VS. 1995
OVERALL
- - Net sales increased 40% primarily due to the acquisitions of Vytec in
November 1995, Stone Products in July 1996, as well as additional Norandex
branches and a 10% increase in Norandex branch same store sales.
- - Gross margin increased 61%, and increased as a percent of sales from 26% in
1995 to 30% in 1996 due to lower raw material costs and greater operating
efficiencies in the residential building products group. Gross margins for
industrial products declined due to higher raw material costs relative to
sales prices.
13
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
- - Selling, general and administrative costs increased 51% due to the increase
in the number of branches since the prior year, the acquisition of Vytec in
November 1995, and the acquisition of Stone Products in July 1996. SG&A
costs as a percent of sales were consistent between years.
- - Goodwill amortization increased 62% between years as a result of the
acquisitions of Vytec and Stone Products.
- - Unusual items included pre-tax expense of $3.2 million in 1996 for the cost
of relocating the corporate headquarters to Dallas, Texas, while 1995
included pre-tax income of $4.0 million resulting from the reduction of an
asbestos-related reserve.
- - As a result of the factors noted above, pre-tax operating income increased
49% between years. However, excluding unusual items, the increase from
year to year was 111%.
- - Interest expense declined 52%. Borrowings were substantially reduced
compared to 1995 as proceeds from the 1995 sale of the wood products
business were used to retire debt.
- - Interest and other income declined 51%. Interest income decreased 32% as
lower amounts were available for investment, and foreign currency
translation expense totaled $0.6 million.
- - The income tax rate increased from 38% in 1995 to 40% in 1996, primarily as
a result of an increase in the amount of non-deductible goodwill.
- - Income from continuing operations increased 67% as a result of the above
factors.
- - Net income in 1996 includes the results of operations and gain on the sale
of the resort operations which were sold during the fourth quarter of 1996.
Net income in 1995 includes the results of operations and gain on the sale
of the wood products related assets which were sold during the third
quarter of 1995.
BUILDING PRODUCTS
- - Residential products sales increased 49% due to the acquisitions of Vytec
and Stone Products as well as a 10% increase in Norandex branch same store
sales and new Norandex branches added during the past year. Vytec
contributed $60.1 and $7.2 million of sales and operating income during
1996, and Stone Products contributed $23.6 and $3.0 million of sales and
operating income. Had Stone Products been acquired at the beginning of the
periods, it would have contributed $44.1 million of pro forma sales in
1996, compared to pro forma sales of $34.2 million in 1995. Because of
the limited nature of pro forma adjustments, Fibreboard does not believe
pro forma comparisons of operating results between years are indicative of
the results that would have occurred if the combination had been in effect
throughout 1996 and 1995 or which may be obtained in the future. Shipments
of vinyl siding increased over 30% from 2.63 million squares in 1995 to
3.43 million squares in 1996 as a result of the acquisition of Vytec and a
35% increase in shipments by Norandex. Operating profits increased 104%
from $18.0 million in 1995 to $36.7 million. The improvement in operating
profits was due primarily to the increase in sales volumes resulting from
the 10% increase in Norandex branch same store sales as well as the
additions of Vytec and Stone Products.
- - Industrial products sales declined 3% on lower unit sales of fireproofing
and metals products. Operating profits declined 14% due primarily to lower
margins on metal sales.
14
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
UNALLOCATED EXPENSE
- - Unallocated expense increased 12% between years as a result of expenses
associated with Fibreboard's phantom stock plan of $4.2 million in 1996 and
$3.1 million in 1995. The expense related to the phantom stock plan
reflects the increase in the market price of Fibreboard's common stock
during the periods. Excluding the impact of such expense, unallocated
expenses increased only 2% between years.
UNUSUAL ITEMS
- - During 1996, Fibreboard recorded an expense of $3.2 million related to the
relocation of its corporate office to Dallas, Texas. During 1995,
Fibreboard recorded a $4.0 million reversal of an asbestos-related reserve
as discussed in the following section.
ASBESTOS-RELATED COSTS
- - During 1995, Fibreboard recorded a $4.0 million reversal of a previously
established reserve for anticipated unreimbursable costs related to the
asbestos litigation as a result of a reduction in its current estimate of
the amounts which will be needed for such purpose. Fibreboard will
periodically evaluate its estimates and make adjustments as circumstances
and future developments dictate. During 1996 and 1995, $1.6 and $2.0
million of unreimbursed costs related to the asbestos litigation were
incurred and charged against the reserve established in prior years.
DISCONTINUED OPERATIONS
- - Discontinued operations included $2.4 million of income from resort
operations in 1996. Income from resort operations decreased 53% as a
result of fewer skier days at Northstar and Sierra, combined with lower
sales under Northstar's residential lot sales program and eleven months of
operations in 1996 vs. a full year in 1995. In December 1996, Fibreboard
sold its resort operations to Booth Creek Ski Holdings, Inc. for $126.5
million after purchase price adjustments and including the assumption of
certain liabilities, resulting in a pre-tax gain of $55.8 million ($33.5
million after tax).
LIQUIDITY AND CAPITAL RESOURCES
- - Cash on hand at December 31, 1996 aggregated $85.3 million, which will be
utilized to fund continuing operations and acquisitions. In December 1996,
Fibreboard received $117.5 million in cash proceeds from the sale of its
resort operations. Taxes payable on the gain from the sale of resorts
aggregated $22.3 million and will be paid in the first quarter of 1997.
- - At December 31, 1996, Fibreboard's revolving credit facilities aggregated
$140.0 million, of which $134.5 million was available for borrowing.
Subsequent to December 31, 1996, Fibreboard entered into a commitment with
its lenders to increase the U. S. revolving credit facility from $125.0
million to $225.0 million.
- - On July 1, 1996, Fibreboard completed the purchase of the stock of Stone
Products Corporation. The purchase price of $51.0 million including debt
assumed was funded through the use of cash on hand supplemented with
borrowings under Fibreboard's revolving credit facility.
- - Capital expenditures between $30.0 and $35.0 million are anticipated during
1997. Major anticipated projects include the construction of a vinyl
siding manufacturing plant in Joplin, Missouri at an approximate cost of
$15.0 million with an expected completion date in April 1997, $6.0 million
to
15
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
increase production capacity and improve productivity at the vinyl siding
manufacturing plants in London, Ontario and North Carolina, and
approximately $6.0 million for expansion of Stone Products production
facilities. During 1996, Fibreboard expended approximately $18.0 million
on these and other projects relating to continuing operations.
- - In addition to cash needs related to continuing operations, Fibreboard must
fund its ongoing asbestos-related costs. To date, substantially all such
costs, other than the cost of litigating insurance coverage issues and
certain in-house expenses, have been funded from insurance resources. At
December 31, 1996, Fibreboard had $3.5 million in cash on hand restricted
for asbestos-related costs. Fibreboard believes that substantially all of
its cash needs for asbestos-related expenditures will be satisfied through
existing settlements with asbestos-in-buildings insurers or through the
Insurance Settlement which became final on October 24, 1996. Additional
information regarding the asbestos-related litigation can be found in Note
14 to Consolidated Financial Statements.
1995 VS. 1994
OVERALL
- - Net sales increased 137% primarily due to the acquisition of Norandex in
August 1994, as well as a $3.3 million increase in sales of industrial
building products by Pabco.
- - Gross margin increased 137%. Gross margin as a percent of sales remained
stable at 26% for both 1995 and 1994.
- - Selling, general and administrative costs increased 142% due to the
acquisition of Norandex in August 1994. SG&A costs as a percent of sales
were consistent between years at 21%.
- - Goodwill amortization increased 234% between years as a result of the
acquisition of Norandex.
- - Unusual items in 1995 included pre-tax income of $4.0 million resulting
from the reduction of an asbestos-related reserve.
- - As a result of the factors noted above, pre-tax operating income increased
163% between years. However, excluding unusual items, the increase from
year to year was 107%.
- - Interest expense increased 31%. Average borrowings were increased compared
to 1994 due to the funding of the Norandex acquisition.
- - Interest and other income declined 16%. Interest income increased to $3.1
million from $2.1 million as additional amounts were available for
investment during the fourth quarter of 1995 as a result of the sale of the
wood products business. Other income included gains from the sales of
surplus real estate of $1.6 million in 1994 with no sales recorded in 1995.
- - The income tax rate was 38% in 1995 and 41% in 1994. The reduced rate was
attributable to differences in the methods used by the various states to
tax the gain on the disposal of the wood products business.
- - Income from continuing operations increased 169% as a result of the above
factors.
- - Net income in 1995 included the results of operations and gain on the sale
of the wood products-related assets which were sold during the third
quarter of 1995.
16
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
BUILDING PRODUCTS
- - Residential products sales increased 223%, reflecting a full year of
Norandex operations compared to four months in 1994. The November 30, 1995
acquisition of Vytec Corporation added revenues of only $2.5 million for
the one month it was included in Fibreboard's results. On a pro forma
basis, Norandex sales increased 19.2% between years. Same store sales
increased 3.2% with the remainder of the increase attributable to new
branches acquired or opened during 1995. Operating profit for the
residential products group increased 123% from $8.1 million for the last
four months of 1994 to $18.0 million. The last four months of 1994 are not
indicative of the results of a full year's operations due to the
seasonality of the business. Because of the limited nature of pro forma
adjustments, Fibreboard does not believe pro forma comparisons of operating
results between years are indicative of the results that would have
occurred if the combination had been in effect through 1995 and 1994 or
which may be obtained in the future. 1995 operating results were impacted
by significant fluctuations in PVC resin prices, which reached historical
highs during the early part of the year before dropping to 3-year lows near
year end. Additionally, Norandex was adversely impacted by lower than
expected housing starts and remodeling expenditures. Fibreboard believes
Norandex achieved comparatively better operating results than its
competitors due to its manufacturing efficiency and the flexibility
afforded by the combination of manufacturing and company-owned
distribution.
- - Industrial products sales increased 6% due principally to higher sales
prices of metal products reduced by declines in molded industrial
insulation sales. Operating income increased to $7.7 million from $6.5
million in 1994. Metal products profitability increased as average sales
prices increased in advance of corresponding raw material cost increases.
UNALLOCATED EXPENSE
- - Unallocated expense increased 48% between years as a result of expenses
associated with Fibreboard's phantom stock plan of $3.1 million in 1995 and
$0 million in 1994. The expense related to the phantom stock plan reflects
the increase in the market price of Fibreboard's common stock during the
periods. Excluding the impact of such expense, unallocated expenses
increased 7% between years.
UNUSUAL ITEMS
- - During 1995, Fibreboard recorded a $4.0 million reversal of an
asbestos-related reserve as discussed in the following section.
ASBESTOS-RELATED COSTS
- - During 1995, Fibreboard recorded a $4.0 million reversal of a previously
established reserve for anticipated unreimbursable costs related to the
asbestos litigation as a result of a reduction in its current estimate of
the amounts which will be needed for such purpose. During 1995 and 1994,
$2.0 and $2.2 million of unreimbursed costs related to the asbestos
litigation were incurred and charged against the reserve established in
prior years.
17
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
DISCONTINUED OPERATIONS
- - In September 1995, Fibreboard sold its wood products business to Sierra
Pacific Industries for approximately $239 million after purchase price
adjustments, resulting in a gain of $121.2 million ($77.8 million after
tax). In 1994, Fibreboard recorded a $18.9 million gain ($11.2 million
after tax) from the sales of surplus timberlands.
- - Resort revenues increased 8% between years as a result of $5.0 million of
residential lot sales in 1995 offset by a 7% decrease in skier visits from
the record levels of 1994.
IMPACT OF INFLATION
Inflation has not had any significant impact on Fibreboard's operations
during the three years ended December 31, 1996.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Fibreboard has included forward-looking statements concerning its business
and operations in this Form 10-K. These forward-looking statements are
subject to certain risks and uncertainties, including those described below,
that could cause actual results to differ materially from those projected.
Fibreboard expressly disclaims any obligation to release publicly any updates
or revisions to such forward-looking statements to reflect any change in its
expectations with regard thereto or any change in events or circumstances on
which any such statement is based.
- - With respect to Fibreboard's building products operations, such risks and
uncertainties include: the level of housing starts; changes in the
general economy and in economic conditions in the various markets served by
Fibreboard's distribution operations, which could affect demand for
product; increased competitive activity and resulting price pressures;
increased raw material prices, particularly for resin (impacting vinyl
siding product margins) and aluminum (impacting metal jacketing product
margins); the impact of adverse weather on building and remodeling
activities; and Fibreboard's ability to maintain supplier relationships and
adequate manufacturing capacity.
- - With respect to Fibreboard as a whole, such risks and uncertainties
include, in addition to the factors described above: the final resolution
of Fibreboard's asbestos personal injury litigation issues, including the
outcome of the appeal of the Global Settlement Agreement; and the success
of Fibreboard's growth strategy and its ability to make additional
strategic acquisitions which are accretive to earnings.
Fibreboard's revenues and earnings are subject to fluctuation due to the
cyclicality and seasonality of its building products operations. Although
Fibreboard has achieved record operating earnings over the past four years,
its past performance may not be indicative of future performance due to the
factors discussed above. Additionally, Fibreboard common stock could be
subject to significant price volatility should financial results fail to meet
expectations of the investment community.
18
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
PAGE
----
<S> <C>
Consolidated Balance Sheets as of December 31, 1996 and 1995.................... 20
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1996.................................................. 22
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended December 31, 1996........................................... 23
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 1996.................................................. 24
Notes to Consolidated Financial Statements...................................... 26
Report of Independent Public Accountants........................................ 44
Report of Management............................................................ 45
Supplementary Data (unaudited) -
Selected Quarterly Financial Data for each of the two years in the
period ended December 31, 1996.................................................. 46
</TABLE>
19
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
DECEMBER 31
----------------------
1996 1995
-------- ----------
ASSETS
Current assets:
Cash and cash equivalents (Note 1) $ 85,301 $ 12,382
Receivables (Notes 2, 4 and 5) 62,216 47,346
Current portion of notes receivable (Note 5) 3,281 7,357
Inventories (Notes 1, 4 and 5) 66,321 54,638
Prepaid expenses 3,030 3,396
Deferred income taxes (Note 1) 12,656 13,086
-------- ----------
232,805 138,205
Net assets of discontinued operations -- 54,580
-------- ----------
Total current assets 232,805 192,785
Property, plant and equipment, at cost:
(Notes 1, 4 and 5)
Land and improvements 3,918 4,134
Buildings 24,136 22,101
Machinery and equipment 63,835 51,631
Construction in progress 11,228 623
-------- ----------
103,117 78,489
Accumulated depreciation (32,200) (26,130)
-------- ----------
Net property, plant and equipment 70,917 52,359
Notes receivable (Note 5) 4,129 5,271
Goodwill (Notes 1 and 13) 129,171 89,302
Other assets 14,954 14,099
-------- ----------
Total operating assets 451,976 353,816
Cash restricted for asbestos costs (Note 14) 3,467 2,199
Asbestos costs to be reimbursed (Note 14) 233,402 827,865
-------- ----------
Total assets $688,845 $1,183,880
-------- ----------
-------- ----------
SEE ATTACHED NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
DECEMBER 31
---------------------
1996 1995
-------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 4) $ 44 $ 1,423
Current portion of long-term debt (Note 5) 1,184 1,346
Accounts payable and accrued liabilities (Note 3) 88,907 51,979
Current portion of reserves (Notes 13, 14 and 15) 1,641 3,074
-------- ----------
Total current liabilities 91,776 57,822
Long-term debt (Note 5) 27,847 9,365
Long-term reserves (Notes 13, 14 and 15) 13,947 14,498
Other long-term liabilities (Note 7 and 8) 6,837 12,730
Deferred income taxes (Note 1) 13,335 13,861
-------- ----------
Total operating liabilities 153,742 108,276
Asbestos claims settlements (Note 14) 217,072 811,952
Long-term debt associated with asbestos (Note 5) 24,944 23,711
-------- ----------
Total liabilities 395,758 943,939
Minority interest 190 185
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, 30,000,000 shares
authorized; 8,730,399 and 8,631,388 shares issued 87 86
Additional paid-in capital 78,993 77,293
Retained earnings 221,269 169,568
Minimum pension liability adjustment (Note 7) -- (1,400)
Treasury stock, at cost, 274,565 and 215,700 shares (7,161) (5,215)
Foreign currency translation adjustment (291) (576)
-------- ----------
Total stockholders' equity 292,897 239,756
-------- ----------
Total liabilities and stockholders' equity $688,845 $1,183,880
-------- ----------
-------- ----------
SEE ATTACHED NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in thousands, except per share)
<TABLE>
YEAR ENDED DECEMBER 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales $468,938 $335,851 $141,983
Cost of sales 327,167 247,998 104,952
-------- -------- --------
Gross margin 141,771 87,853 37,031
Other expenses:
Selling and administrative 106,884 70,774 29,199
Goodwill amortization 3,840 2,370 709
Unusual items 3,150 (4,000) --
-------- -------- --------
Operating income 27,897 18,709 7,123
Interest expense (3,110) (6,476) (4,931)
Interest and other income 1,520 3,101 3,697
-------- -------- --------
Income from continuing operations before
income taxes 26,307 15,334 5,889
Income taxes relating to continuing operations (10,523) (5,895) (2,385)
-------- -------- --------
Income from continuing operations 15,784 9,439 3,504
Discontinued operations: (Note 13)
Income from operations less applicable
income taxes of $1,605, $5,351 and $8,380 2,407 8,564 12,310
Gain on surplus asset sales less applicable
income taxes of $7,637 -- -- 11,221
Gain on disposal less applicable income
taxes of $22,340 and $43,432 33,510 77,813 --
-------- -------- --------
Net income $ 51,701 $ 95,816 $ 27,035
-------- -------- --------
-------- -------- --------
Earnings per share:
Income from continuing operations $ 1.77 $ 1.05 $ 0.39
Income from discontinued operations 0.27 0.96 1.37
Gain on surplus asset sales -- -- 1.25
Gain on disposal 3.76 8.66 --
-------- -------- --------
Net income per share $ 5.80 $ 10.67 $ 3.01
-------- -------- --------
-------- -------- --------
Common equivalent shares (thousands) 8,921 8,979 8,986
</TABLE>
SEE ATTACHED NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollar amounts in thousands)
<TABLE>
YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Common stock:
Beginning balance, 30,000,000 shares
authorized; 8,631,388, 4,224,225, and
4,201,420 issued $ 86 $ 42 $ 42
Shares issued under employee stock plans,
99,011, 159,376, and 22,805 shares 1 2 --
Two-for-one stock split; 4,247,787 shares -- 42 --
-------- -------- -------
Ending balance, 30,000,000 shares
authorized; 8,730,399, 8,631,388, and
4,224,225 issued $ 87 $ 86 $ 42
-------- -------- -------
-------- -------- -------
Additional paid-in capital:
Beginning balance $ 77,293 $ 76,166 $75,836
Employee stock plans 1,700 1,229 330
Two-for-one stock split -- (102) --
-------- -------- -------
Ending balance $ 78,993 $ 77,293 $76,166
-------- -------- -------
-------- -------- -------
Retained earnings:
Beginning balance $169,568 $ 73,752 $46,717
Net income 51,701 95,816 27,035
-------- -------- -------
Ending balance $221,269 $169,568 $73,752
-------- -------- -------
-------- -------- -------
Minimum pension liability adjustment:
Beginning balance $ (1,400) $ (4,571) $(2,427)
Changes during the year 1,400 3,171 (2,144)
-------- -------- -------
Ending balance $ -- $ (1,400) $(4,571)
-------- -------- -------
Treasury stock, at cost:
Beginning balance; 215,700, 0,
and 0 shares $ (5,215) $ -- $ --
Shares acquired; 69,100, 215,700,
and 0 shares (2,213) (5,215) --
Shares issued under employee
stock plans; 10,235 shares 267 -- --
-------- -------- -------
Ending balance; 274,565, 215,700
and 0 shares $ (7,161) $ (5,215) $ --
-------- -------- -------
-------- -------- -------
Foreign currency translation adjustment:
Beginning balance $ (576) $ -- $ --
Changes during the year 285 (576) --
-------- -------- -------
Ending balance $ (291) $ (576) $ --
-------- -------- -------
-------- -------- -------
</TABLE>
SEE ATTACHED NOTES TO FINANCIAL STATEMENTS. 23
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
<TABLE>
YEAR ENDED DECEMBER 31
--------------------------------
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 51,701 $ 95,816 $ 27,035
Adjustments to reconcile income to
net cash provided by continuing
operating activities:
Income of discontinued operations (35,917) (86,377) (23,531)
Depreciation and amortization 11,876 8,039 3,516
Deferred income taxes (283) 3,824 510
Deferred long-term benefits (3,233) (1,895) (671)
Compensation for stock grants 815 212 129
Income applicable to minority interest 7 18 --
(Gain) loss on sale of assets 181 -- (1,754)
Asbestos-related reserve -- (4,000) --
Change in reserves (374) 4,619 (168)
Change in working capital:
Receivables (4,161) 115 6,553
Inventories (3,014) (2,022) (21)
Prepaid expenses 1,076 (2,031) 51
Accounts payable and accrued liabilities 6,135 (11,454) (5,576)
-------- --------- ---------
Net cash provided by continuing operations 24,809 4,864 6,073
Discontinued operations:
Income of discontinued operations 35,917 86,377 23,531
Pre-tax gain on sale of assets (55,850) (121,587) (19,516)
Proceeds from sale of assets 117,534 238,994 23,860
Expense from sale of assets (1,071) (10,643) --
Depreciation, amortization and depletion 6,033 8,815 7,618
Deferred income taxes (2,038) (15,703) 625
Non-cash net assets of acquired operations -- (20,604) --
Net assets change 10,739 (4,147) 24,155
-------- --------- ---------
Net cash provided by discontinued operations 111,264 161,502 60,273
Cash flows from investing activities:
Non-cash net assets of acquired operations (57,527) (61,340) (119,894)
Proceeds from asset sales 674 348 2,163
Property, plant and equipment additions (17,959) (8,178) (1,447)
Reductions of notes receivable 5,306 2,213 1,611
Decrease (increase) in other assets (2,861) 2,601 (654)
-------- --------- ---------
Net cash used by investing activities (72,367) (64,356) (118,221)
</TABLE>
SEE ATTACHED NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(dollar amounts in thousands)
<TABLE>
YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
----------- --------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
New borrowings $ 45,000 $ 28,434 $ 93,000
Repayment of debt (31,702) (120,243) (35,622)
Purchase of treasury stock (2,213) (5,215) --
Employee stock plan transactions 133 509 201
----------- --------- --------
Net cash provided (used) by financing
activities 11,218 (96,515) 57,579
----------- --------- --------
Net cash provided by business activities 74,924 5,495 5,704
Cash flows from asbestos-related activities:
Receipts from insurers 2,049 4,754 7,657
Structured settlement program activity (160) 33 476
Other asbestos-related cash transactions (2,683) (6,422) (9,251)
Change in cash restricted for asbestos costs (1,268) (306) (1,066)
----------- --------- --------
Net cash used by asbestos-related activities (2,062) (1,941) (2,184)
Effect of exchange rate changes on cash and
cash equivalents 57 (14) --
----------- --------- --------
Net increase in cash 72,919 3,540 3,520
Cash at beginning of year 12,382 8,842 5,322
----------- --------- --------
Cash at end of year $ 85,301 $ 12,382 $ 8,842
----------- --------- --------
----------- --------- --------
Cash paid during the year for:
Interest $ 2,730 $ 6,673 $ 2,986
Income taxes 11,288 66,645 12,718
Non-cash items:
Increase in asbestos claims settlements 544,063 105,908 151,498
Payments made to claimants on
Fibreboard's behalf 1,138,783 89,354 309,537
Increase in receivables from sale of
surplus real estate -- 697 2,949
Acquisition of businesses:
Fair value of assets acquired 70,442 95,180 155,440
Cash paid 57,527 81,944 119,894
----------- --------- --------
Liabilities assumed 12,915 13,236 35,546
</TABLE>
SEE ATTACHED NOTES TO FINANCIAL STATEMENTS.
25
<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 inter-company balances and
transactions.
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's business is the manufacture and distribution of building
products. In 1996, Residential Building Products accounted for 88% of
sales and Industrial Building Products 12% of sales. Residential Building
Products primarily manufactures vinyl siding and related accessories for
exterior residential applications at three manufacturing facilities in
North America with a fourth facility under construction. Vinyl products
are sold through 1) a company-owned distribution network, which also sells
a wide variety of other exterior building products and 2) a network of
independent distributors. Principal market areas are concentrated in the
30-state area east of the Rocky Mountains. Residential Building Products
also manufactures cast stone products sold through independent masonry
distributors which are presently concentrated in California, Great Lakes
and northeast states, although efforts are underway to increase
distribution on a national level. Industrial Building Products
manufactures molded insulation for high temperature and industrial
applications, fireproofing board and protective metal jacketing. Markets
are concentrated in the Gulf Coast states.
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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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
Net 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 that would be issuable upon the
exercise of stock options and restricted stock, assuming Fibreboard used
the proceeds received to purchase additional shares at market value.
26
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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 original maturity dates of less than
90 days.
INVENTORY VALUATION
Inventories are valued primarily 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:
DECEMBER 31
------------------
1996 1995
------- -------
Finished goods $54,447 $47,068
Raw materials 9,115 6,898
Supplies 2,759 672
------- -------
Total inventories $66,321 $54,638
------- -------
------- -------
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. Fibreboard periodically evaluates
its long-lived assets, including property, plant and equipment, to determine
whether events or changes in circumstances have occurred that indicate the
remaining asset balances may not be recoverable and an impairment loss
should be recorded. Depreciation expense for continuing operations in 1996,
1995 and 1994 was $6,853, $4,626 and $2,131.
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
$6,919, $3,079 and $709 on December 31, 1996, 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. During 1996, the
goodwill associated with the acquisition of Vytec was increased by $703
to reflect purchase price adjustments.
INCOME TAX POLICIES
The income tax provision includes the following:
27
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31
--------------------------------
1996 1995 1994
------- -------- -------
CONTINUING OPERATIONS:
Current income taxes $ 9,026 $ 3,640 $ 2,142
Deferred income taxes 1,497 2,255 243
------- -------- -------
$10,523 $ 5,895 $ 2,385
------- -------- -------
------- -------- -------
DISCONTINUED OPERATIONS:
Current income taxes $25,983 $ 64,486 $15,392
Deferred income taxes (2,038) (15,703) 625
------- -------- -------
$23,945 $ 48,783 $16,017
------- -------- -------
------- -------- -------
The following summarizes the differences between the statutory federal
and effective tax rate:
YEAR ENDED DECEMBER 31
----------------------
1996 1995 1994
---- ---- ----
CONTINUING OPERATIONS:
Federal tax rate 35% 35% 35%
State income taxes, net of federal benefit 3 3 6
Non-deductible goodwill 5 3 --
Other (3) (3) --
---- ---- ----
40% 38% 41%
DISCONTINUED OPERATIONS:
Federal tax rate 35% 35% 35%
State income taxes, net of federal benefit 3 3 6
Other 2 -- --
Basis difference of subsidiary sold -- (2) --
---- ---- ----
40% 36% 41%
The tax effect of significant temporary differences representing deferred
tax assets and liabilities are as follows:
DECEMBER 31
-------------------
1996 1995
------- -------
Current deferred tax items:
Accrued liabilities $ 5,590 $ 5,327
Current portion of reserves 3,576 3,816
State taxes 888 2,373
Other 2,602 1,570
------- -------
Net deferred tax assets $12,656 $13,086
------- -------
------- -------
28
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
Non-current deferred tax items:
Property, plant and equipment $ 7,302 $ 8,802
Timber 490 593
Post-retirement benefits (3,297) (4,772)
Long-term reserves 3,885 3,243
State taxes 274 270
Contingent liabilities 5,131 7,243
Other (450) (1,518)
------- -------
Net deferred tax liabilities $13,335 $13,861
------- -------
------- -------
FOREIGN CURRENCY TRANSLATION
The functional currency 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.
Aggregate foreign currency translation losses were $584 and $0 during 1996
and 1995. To mitigate future translation gains or losses on U.S.
denominated debt held by a Canadian subsidiary, Fibreboard entered into
a foreign currency swap during 1996, which terminates August 6, 1998,
under which Fibreboard will receive U.S. $25,000 in exchange for Canadian
$34,290. Gains or losses due to currency exchange fluctuations during
the contract period are deferred.
2. RECEIVABLES
DECEMBER 31
-------------------
1996 1995
------- -------
Trade receivables $59,817 $47,324
Less reserves for bad debts (3,078) (2,548)
Other receivables 5,477 2,570
------- -------
$62,216 $47,346
------- -------
------- -------
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
DECEMBER 31
-------------------
1996 1995
------- -------
Accounts payable $30,067 $24,541
Income taxes 22,804 (575)
Accrued pension expense 3,829 4,417
Salaries and wages payable 17,095 9,089
Taxes other than income taxes 2,236 2,205
Workers' compensation 4,292 5,965
Other 8,584 6,337
------- -------
$88,907 $51,979
------- -------
------- -------
29
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
Fibreboard is self-insured for the majority of its workers' compensation
benefits. Workers compensation expense resulting from continuing
operations was $2,706, $1,160 and $755 in 1996, 1995 and 1994, based on
actual and estimated claims incurred.
4. NOTES PAYABLE
Fibreboard's Canadian subsidiary has a $15,000 operating line of
credit at LIBOR plus 0.45% to 0.925%, the Canadian prime rate (4.75%
at December 31, 1996), or the Alternate Base Rate Canada (8.25% at
December 31, 1996). Amounts available under this line of credit
aggregated $14,956 at December 31, 1996. This facility is secured by
substantially all the assets of the Canadian subsidiary and guaranteed
by Fibreboard.
5. LONG-TERM DEBT
Fibreboard's long-term debt not associated with asbestos consists of
the following:
<TABLE>
DECEMBER 31
------------------
1996 1995
------- -------
<S> <C> <C>
Term loan of Canadian subsidiary, interest at
LIBOR + 0.45% to 0.925% (6.16% at December 31, 1996),
secured by machinery and equipment, receivables and
inventories, payable February 2001 $25,000 $ --
Revolving credit facility, interest at LIBOR + 0.45%
to 0.925%, secured by machinery and equipment,
receivables and inventories -- 5,000
Pollution control project revenue bonds, 6.6%, payable
annually through 1999, unsecured 3,765 4,870
Other debt 266 841
------- -------
29,031 10,711
Less: current portion (1,184) (1,346)
------- -------
$27,847 $ 9,365
------- -------
------- -------
</TABLE>
Required repayment of long-term debt is as follows:
YEAR ENDING DECEMBER 31
-----------------------
1997 $ 1,184
1998 1,512
1999 1,335
2000 --
2001 25,000
-------
$29,031
-------
-------
30
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
Fibreboard has notes receivable with terms and payment dates which are
substantially identical to $3,765 of revenue bonds included in the above
table. Payments under these notes are as follows:
YEAR ENDING DECEMBER 31
-----------------------
1997 $1,175
1998 1,255
1999 1,335
------
$3,765
------
------
Fibreboard amended its $125,000 revolving credit facility during 1996 to
include a five-year, $25,000 term loan. The term loan bears interest at
the same rate as the revolving facility and expires February 7, 2001,
unless the maturity date is extended by Fibreboard and its lenders.
Proceeds may be used for general corporate purposes and acquisitions.
Amounts available under the revolving facility aggregated $119,491 at
December 31, 1996.
Fibreboard's resort operations revolving credit facility provided for
availability of $32,904 at the date of the sale of the resort operations.
The facility was terminated concurrent with the December 3, 1996 sale of
resort operations (see Note 13).
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, 1996, these covenants were
met.
Fibreboard's asbestos-related long-term debt consists of the following.
Upon implementation of either the Global or Insurance Settlement, these
amounts will be forgiven (see Note 14).
DECEMBER 31
-------------------
1996 1995
------- -------
Amounts advanced under reimbursement
agreement, interest at prime minus 2%
(6.25% at December 31, 1996) $24,944 $23,711
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.
31
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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:
1996 1995
------------------ -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------- ------- -------- -------
Financial assets:
Cash and short-term
investments $88,768 $88,768 $14,581 $14,581
Notes receivable 7,410 7,430 12,628 12,784
Interest rate instruments -- -- 292 --
Financial liabilities:
Notes payable to banks $ 44 $ 44 $ 1,423 $ 1,423
Current and long-term debt 29,031 29,042 10,711 10,770
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, 1996 and 1995 reflect
asbestos costs to be reimbursed of $233,402 and $827,865 asbestos claims
settlements of $217,072 and $811,952 and asbestos-related long-term debt
of $24,944 and $23,711.
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 amortization of prior service costs. All
defined benefit plan participants' benefits have vested and have been
frozen. Contributions to defined contribution plans are non-discretionary
and based on varying percentages of eligible compensation for the year.
The status of Fibreboard's defined benefit pension plan at December 31, 1996
and 1995 is as follows:
32
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
<TABLE>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- ---------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Vested benefit obligation $ 9,316 $71,191 $8,602 $ 70,986
------- ------- ------ --------
------- ------- ------ --------
Accumulated benefit obligation $ 9,316 $72,688 $8,602 $ 73,714
------- ------- ------ --------
------- ------- ------ --------
Projected benefit obligations $ 9,316 $72,688 $8,602 $ 73,714
Plan assets 10,731 66,804 9,117 59,101
------- ------- ------ --------
Projected benefit obligations
(in excess of) less than plan assets 1,415 (5,884) 515 (14,613)
Unrecognized obligation at transition -- 966 -- 1,086
Unrecognized net (gain) loss in past
service (1,099) (2,987) (338) 2,334
Adjustment required to recognize
minimum liability -- -- -- (3,420)
------- ------- ------ --------
Prepaid pension cost (pension liability) $ 316 $(7,905) $ 177 $ (14,613)
------- ------- ------ --------
------- ------- ------ --------
</TABLE>
Of the pension liability, $3,829 and $4,417 are included in accounts payable
and accrued liabilities in 1996 and 1995 (see Note 3).
The actuarial assumptions used to determine accrued pension expense and
the funded status of the plans for 1996 were: 7.5% discount rate (net
accrued pension expense), 7.5% discount rate on funded status and 8.75%
expected long-term rate of return on plan assets. The assets of the plans
at December 31, 1996 and 1995 consist of bonds, both corporate and
government, stocks, cash and cash equivalents.
As required by Statement of Financial Accounting Standards No. 87,
Employers' Accounting for Pensions, Fibreboard recognized a minimum
pension liability associated with its frozen defined benefit plan and
recorded an after tax reduction in equity of $1,400 at December 31, 1995.
No amounts were required at December 31, 1996.
Pension expense for 1996, 1995 and 1994 included the following components:
<TABLE>
YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Benefits earned by employees $ -- $ 904 $ 296
Interest cost on projected benefit obligation 5,973 6,380 5,774
(Return) loss on plan assets (12,657) (15,336) 433
Net amortization and deferral 6,938 11,208 (4,659)
Curtailment gain -- (1,384) --
-------- -------- -------
Net pension cost of defined benefit plans 254 1,772 1,844
Contributions to defined contribution
pension plans for continuing operations 1,998 1,058 719
-------- -------- -------
Net pension expense $ 2,252 $ 2,830 $ 2,563
-------- -------- -------
-------- -------- -------
</TABLE>
33
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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. Of the curtailment gain,
$3,378 was utilized to reduce acquired goodwill and $1,384 to reduce
1995 pension expense. The assets of the plans are invested in the same
investment trust, although each plan remains an independent plan.
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 that have been sold at December 31, 1996 and 1995, is as
follows:
YEAR ENDED DECEMBER 31
------------------------
1996 1995
---------- ----------
Net periodic post-retirement benefit cost:
Interest cost $ 78 $ 94
Net other (148) (182)
------ ------
Total $ (70) $ (88)
------ ------
------ ------
Accrued benefit cost:
Accumulated post-retirement benefit obligation-
Retirees $ 980 $ 976
Eligible actives 47 219
Other active plan participants 15 28
------ ------
1,042 1,223
Unrecognized net gain 524 595
------ ------
Total $1,566 $1,818
------ ------
------ ------
An 8% annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1997. 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, 1996 by $24 and increase the aggregate of
the service and interest cost components of net periodic post-retirement
cost for the year then ended by $2. The weighted average discount rate
used in determining the accumulated post-retirement benefits and in
determining the 1996 post-retirement benefit cost was 7.5%.
9. STOCK OPTION AND STOCK PURCHASE PLANS
Fibreboard has two stock option and rights plans for certain officers,
directors and key employees: the 1988 Plan and the 1995 Plan. The
plans provide for the granting of stock options, stock appreciation
rights, limited stock appreciation rights and restricted stock awards.
Awards under the plans are determined by the Compensation Committee of
the Board of Directors. The maximum number of shares available for
award under the 1988 Plan was 1,600,000.
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 units and restricted stock awards. In
addition, any shares which remain available for award under the 1988
Plan, or which become available in the future through forfeiture or
cancellation, will be added to
34
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
shares available under the 1995 Plan. 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. At December 31, 1996, 135,513 shares
were available for awards under the 1995 Plan.
At December 31, 1996, Fibreboard has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123). In accordance with
the provisions of SFAS 123, the Company applies Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its stock incentive plans.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the
date of the grant over the amount a recipient must pay to acquire the
stock.
When stock options are exercised, the proceeds (including any tax
benefits to Fibreboard resulting from the exercise) are credited to
common stock at par or treasury stock at average cost with any excess or
deficit applied to additional paid-in capital. Compensation related to
restricted stock awards and certain option grants is recognized as
expense over the term of the related award.
Had compensation cost for the Company's stock incentive plans been
determined based on the fair value at the grant date consistent with the
provisions of SFAS 123, the Company's net income and earnings per share
would have been reduced to the unaudited pro forma amounts shown below:
YEAR ENDED DECEMBER 31
-------------------------
1996 1995
---------- ----------
Net income - as reported $51,701 $95,816
Net income - pro forma 50,970 95,658
Earnings per share - as reported 5.80 10.67
Earnings per share - pro forma 5.71 10.65
Because the SFAS 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions:
YEAR ENDED DECEMBER 31
----------------------
1996 1995
-------- --------
Expected dividend yield -- --
Expected stock price volatility 35.18% 41.49%
Risk-free interest rate 6.05% 5.71%
Expected life 5 years 5 years
The weighted average fair value at date of grant for option grants
during 1996 and 1995 was $12.67 and $9.75 per share.
Information about Fibreboard's stock incentive plans is summarized below:
35
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
<TABLE>
WEIGHTED WEIGHTED
AVERAGE RESTRICTED AVERAGE
OPTIONS GRANT PRICE STOCK UNITS GRANT PRICE
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993 998,800 $ 2.60 90,000 $ 5.31
Granted at $12.69 to $14.94 per share 24,000 12.69 26,000 14.94
Exercised at $0.94 to $6.59 per share (12,500) 4.36 (46,000) 2.46
Canceled (3,000) 5.39 -- --
--------- -------
Outstanding at December 31, 1994 1,007,300 2.80 70,000 10.75
Granted at $21.38 to $24.00 per share 147,500 21.80 -- --
Exercised at $1.63 to $3.53 per share (222,800) 2.55 (14,000) 1.91
Canceled -- -- (4,800) 14.94
--------- -------
Outstanding at December 31, 1995 932,000 5.86 51,200 12.78
Granted at $22.42 to $35.00 per share 134,000 31.25 153,012 27.22
Exercised at $2.00 to $26.25 per share (87,200) 4.24 (44,000) 16.02
Canceled (10,000) 21.38 -- --
--------- -------
Outstanding at December 31, 1996 968,800 $ 9.36 160,212 $25.62
--------- -------
--------- -------
</TABLE>
At December 31, 1996, 774,133 options were exercisable with a range of
exercise prices from $1.41 to $24.00. The weighted average exercise
price of these options is $4.63 with a weighted average remaining life
of four years. The remaining 194,667 options have exercise prices from
$21.38 to $32.00, with a weighted average exercise price of $28.17 and a
weighted average remaining contract life of five years.
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 1996, 1995 and 1994, no shares of Fibreboard
stock were sold to employees under this plan. At December 31, 1996,
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, 1996, 336,000 phantom stock units
had been awarded with grant prices of $13.75 to $15.00 per share, 51,000
of which mature in December 1997. Subsequent to December 31, 1996,
payments of $5,413 were made in satisfaction of 285,000 phantom stock
units. Of this amount, $3,888 was paid in cash with the remainder paid
in 45,600 shares of Fibreboard common stock. In addition, restricted
stock units for 11,400 shares were issued which vest in December 1999.
Compensation expense recognized for these plans was $5,012, $3,298 and
$129 in 1996, 1995 and 1994.
36
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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 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. Future minimum lease payments are as
follows:
YEAR ENDING DECEMBER 31
-----------------------
1997 $ 9,771
1998 8,865
1999 7,327
2000 6,545
2001 4,154
Thereafter 10,058
-------
$46,720
-------
-------
Total rent expense from continuing operations for all operating leases
amounted to $10,870, $9,774, and $3,430 in 1996, 1995 and 1994.
37
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
12. INDUSTRY SEGMENT INFORMATION
Information about Fibreboard's industry segments is set forth below.
<TABLE>
YEAR ENDED DECEMBER 31
--------------------------------------
1996 1995 1994
-------- ---------- ----------
<S> <C> <C> <C>
Outside sales
Building products:
Residential $411,268 $ 276,180 $ 85,607
Industrial 57,670 59,671 56,376
-------- ---------- ----------
Total operations $468,938 $ 335,851 $ 141,983
-------- ---------- ----------
-------- ---------- ----------
Operating profit
Building products:
Residential $ 36,728 $ 18,031 $ 8,096
Industrial 6,619 7,694 6,452
-------- ---------- ----------
Total operations $ 43,347 $ 25,725 $ 14,548
-------- ---------- ----------
Unallocated expense, net (12,300) (11,016) (7,425)
Unusual items (3,150) 4,000 --
Interest expense (3,110) (6,476) (4,931)
Interest and other income 1,520 3,101 3,697
-------- ---------- ----------
Income from continuing operations
before taxes $ 26,307 $ 15,334 $ 5,889
-------- ---------- ----------
-------- ---------- ----------
Identifiable assets
Building products:
Residential $303,766 $ 216,542 $ 147,066
Industrial 28,224 27,715 27,268
-------- ---------- ----------
Total building products 331,990 244,257 174,334
Discontinued operations -- 54,580 140,208
Unallocated assets 119,986 54,979 47,902
Asbestos-related assets 236,869 830,064 812,347
-------- ---------- ----------
Total assets $688,845 $1,183,880 $1,174,791
Identifiable assets:
U. S. $647,009 $1,137,305 $1,174,791
Canada 40,875 43,481 --
Other 961 3,094 --
-------- ---------- ----------
$688,845 $1,183,880 $1,174,791
Depreciation and amortization
Building products:
Residential $ 10,302 $ 6,303 $ 1,815
Industrial 901 867 788
-------- ---------- ----------
Total building products $ 11,203 $ 7,170 $ 2,603
Capital expenditures
Building products:
Residential(1) $ 23,562 $ 15,913 $ 28,628
Industrial 538 484 327
-------- ---------- ----------
Total building products $ 24,100 $ 16,397 $ 28,955
</TABLE>
(1) Includes acquisition of assets of $6,967, $11,865 and $28,043 in 1996,
1995 and 1994.
38
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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
that is being 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 $20,621 of goodwill that is
being amortized over 30 years. Vytec operating earnings have been
included in Fibreboard's consolidated statement of income since the date
of acquisition.
On July 1, 1996, Fibreboard acquired the stock of Stone Products
Corporation, a manufacturer of cast stone building products, for $51,009
in cash including acquisition costs and the assumption of debt. The
acquisition, which was accounted for as a purchase, resulted in $39,994
of goodwill that is being amortized over 30 years. Stone Products
operating earnings have been included in Fibreboard's consolidated
statement of income since the date of the acquisition.
The following unaudited table presents the pro forma combined results of
Fibreboard, Vytec and Stone Products, assuming Vytec and Stone Products
were acquired on January 1, 1995.
YEAR ENDED DECEMBER 31
-----------------------
1996 1995
-------- --------
Net sales $489,424 $413,671
Income from continuing operations 15,163 7,452
Earnings per share from continuing operations 1.70 0.83
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 inter-company 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 combinations had been in effect on the dates
indicated or which may be obtained in the future. No attempt has been
made to quantify in the pro forma results additional costs that may be
incurred as a result of the combinations, even though certain costs are
expected to increase.
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 and resulted in no goodwill.
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.
During 1996, Fibreboard acquired the net assets of eight building
products distribution branches for $10,216 in cash. These acquisitions
resulted in no goodwill.
39
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
In January 1997, Fibreboard acquired the Florida-based net assets of
Gentek Building Products, including ten building product distribution
sites and two manufacturing plants that fabricate aluminum windows and
doors, for approximately $11,000 in cash. The acquisition resulted in
no goodwill.
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
operations.
On December 3, 1996, Fibreboard sold the outstanding stock of its three
resort subsidiaries: Northstar-at-Tahoe, Sierra-at-Tahoe and Bear
Mountain. Fibreboard received total proceeds of $126,454 including the
assumption of certain liabilities ($117,534 in cash), net of purchase
price adjustments, and recorded a pre-tax gain of $55,850 ($33,510 net
of income taxes). Retained balances primarily include notes receivable
from prior asset sales and certain real estate deposits. Fibreboard also
retained liabilities for workers' compensation claims that arose prior
to December 3, 1996 and established reserves for legal matters relating
to resort operations prior to December 3, 1996. As a result of the
sale, Fibreboard has restated its financial statements to reflect the
resort operations as discontinued.
The net assets of discontinued operations at December 31, 1995 are
summarized as follows:
Current assets $ 4,665
Property, plant and equipment 52,118
Other assets 3,537
Current liabilities (5,740)
-------
$54,580
-------
-------
Operating results of the discontinued operations were as follows:
1996 1995 1994
------- -------- --------
Sales $42,773 $156,705 $221,722
Pre-tax operating profit 4,012 13,915 20,690
Net operating income 2,407 8,564 12,310
Net gain on surplus asset sales -- -- 11,221
Net gain on disposal 33,510 77,813 --
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
OVERVIEW
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
40
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
allegedly caused by asbestos exposure and in asbestos-in-buildings
actions involving many thousands of buildings.
Fibreboard has unique insurance coverage for personal injury claims.
During 1993, Fibreboard and its insurers, Continental Casualty Company
(Continental) and Pacific Indemnity Company (Pacific), entered into the
Insurance Settlement Agreement, and Fibreboard, its insurers and
plaintiffs representatives entered into the Global Settlement Agreement.
These agreements are interrelated and require final court approval. 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
an unanimous decision.
A petition for rehearing on the Global Settlement was filed with the
Fifth Circuit in September 1996 and subsequently rejected by the Court.
The parties opposing the Global Settlement have filed petitions seeking
review with the U.S. Supreme Court. The Supreme Court will likely rule
whether to grant these petitions later this year. If granted, final
resolution of the Global Settlement may not be known until 1998 or later.
On October 24, 1996, the statutory time period to seek further review of
the Insurance Settlement approval judgment lapsed with no petition for
review having been filed with the U.S. Supreme Court. Therefore, the
Insurance Settlement approval judgment is now final and not subject to
further appeal.
Fibreboard will continue to seek approval of the Global Settlement.
Under the Global Settlement, all asbestos-related personal injury
liabilities of Fibreboard will be resolved through insurance funds and
existing corporate reserves. Upon final approval, Fibreboard's insurers
are required to pay existing settlements and assume full responsibility
for any claims filed before August 27, 1993, the date the settling
parties reached agreement on the terms of the Global Settlement. A
court-supervised claims processing trust has already been established to
administer the $1,535,000 dedicated to resolving claims filed against
Fibreboard since August 27, 1993, and any further claims that might
otherwise be asserted in the future.
Fibreboard will contribute $10,000 plus accrued interest toward the
settlement trust, which it will obtain from other remaining insurance
sources and existing reserves. The Home Insurance Company has already
paid $9,892 into the escrow account on behalf of Fibreboard, in
satisfaction of an earlier settlement agreement. At December 31, 1996,
Fibreboard owed the escrow account $224.
The remainder of the trust will be funded by Continental and Pacific.
These insurers have placed $1,525,000 in an interest-bearing escrow
account pending court approval of the settlements. The balance of the
escrow account was $1,697,815 at December 31, 1996, after payment of
interim expenses associated with the Global Settlement. A permanent
injunction barring the filing of any further claims against Fibreboard
or its insurers is included as part of the Global Settlement.
The Insurance Settlement, which is now final, is structured as an
alternative solution in the event the Global Settlement fails to receive
final approval. Under the Insurance Settlement, Continental and Pacific
will pay in full settlements reached as of August 27, 1993 and provide
Fibreboard with up to $2,000,000, plus accrued interest, in additional
funds as needed to resolve unsettled claims as of August 27, 1993 and
claims which have been or may be filed against Fibreboard after that
date. Under the Insurance Settlement, Fibreboard will continue to
manage the defense and resolution of asbestos-related personal injury
claims.
41
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
The Insurance Settlement will not be fully implemented or funded until
such time as the Global Settlement has been finally resolved. In the
event the Global Settlement is finally approved, the Insurance Settlement
will not be implemented. If, however, the Global Settlement is not
approved, then the Insurance Settlement will be implemented. However,
the insurers began paying deferred settlement obligations in the fourth
quarter of 1996.
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.
CLAIMS ACTIVITY
Through December 31, 1996, Fibreboard has resolved 159,800 personal injury
claims for approximately $1,836,400, 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. An additional 31,700 claims have been disposed of at no cost
to Fibreboard other than legal defense costs. 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.
The following table illustrates asbestos-related personal injury claims
activity for the last three years:
<TABLE>
YEAR ENDED DECEMBER 31
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
PERSONAL INJURY CLAIMS
New claims received 32,938 20,731 3,500
Claims disposed
Settled 1,668 10,672 15,185
Dismissed 983 3,775 2,685
"Green Card" settlements(1) 12 96 189
Judgments -- -- 1
Adjustments(2) 91 -- 1,366
Average settlement amount per claim settled
Year(3) $ 34 $ 12 $ 9
Cumulative $ 11 $ 11 $ 11
Claims pending at year end 78,246 48,062 41,874
------------------------------------------------------------------------------
</TABLE>
1. Under Green Card Settlements, there is no determination of liability
by Fibreboard to a claimant. Instead, Fibreboard waives the statute
of limitations should a claimant develop an asbestos-related
impairment in the future.
2. 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. Fibreboard has 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.
42
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
3. The higher settlement average in 1996 is due to the absence
of group settlements, where large numbers of low value cases are
traditionally settled along with more valuable cases, and due to
the fact that in 1996 a relatively small number of individual cases
involving more seriously injured plaintiffs were settled during the
pendency of the Global Settlement injunction.
- -------------------------------------------------------------------------------
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 were 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.
Fibreboard believed it probable that it would ultimately receive insurance
proceeds of $1,584,000 for the defense and disposition of the claims
quantified above. 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 1996, 1995, and 1994,
unreimbursed costs of $1,610, $1,959, and $2,211 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 in the event neither the Global nor Insurance
Settlements are finally approved. Fibreboard anticipates reevaluating and
updating its estimates of liability once it is determined which of the
Global Settlement or the Insurance Settlement is ultimately implemented.
ASBESTOS-IN-BUILDINGS LIABILITIES
At December 31, 1996, Fibreboard was a defendant in six
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.
43
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
Fibreboard has been named as a defendant in a total of 152
asbestos-in-buildings claims, all but six 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. Based on its
experience to date, Fibreboard believes the ultimate resolution of
asbestos-in-buildings claims will not have a material adverse impact on
its financial condition or results of operations.
INSURANCE FOR ASBESTOS-IN-BUILDINGS CLAIMS
Fibreboard has reached final settlements with four of its primary insurers
and several of its excess level insurers. These 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. If no settlement results,
Fibreboard expects to continue to litigate with the remaining carriers.
RESOURCES AVAILABLE FOR ASBESTOS-RELATED COSTS
At December 31, 1996, Fibreboard had $3,467 in cash on hand restricted for
asbestos-related expenditures. Fibreboard believes restricted cash on
hand, amounts available under the Insurance Settlement 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 for
the foreseeable future.
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
Pittsburgh. In addition, Fibreboard was 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
reserves against which the costs of study and clean-up, as well as ongoing
legal and administrative costs, are charged.
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.
16. SUBSEQUENT EVENT
On March 4, 1997, Fibreboard announced it had entered into a letter of
intent to purchase the stock of Fabwel, Inc. for approximately $120 million
in cash. Fabwel is a privately held major
44
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
producer and supplier of customized exterior components for the
manufactured housing, recreational vehicle, building and construction,
and transportation/cargo industries. The transaction is subject to due
diligence and regulatory approval and is expected to close in the second
quarter of 1997. The acquisition will be accounted for as a purchase and
is expected to be financed through Fibreboard's existing revolving credit
facility and available cash.
45
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Dallas, Texas
February 5, 1997 (except for Note 16,
as to which the date is March 4, 1997)
46
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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.
/s/ John D. Roach
- ------------------------------------
John D. Roach
Chairman, President and
Chief Executive Officer
/s/ Garold E. Swan
- ------------------------------------
Garold E. Swan
Vice President, Finance
47
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(dollar amounts in thousands except per share)
(unaudited)
<TABLE>
EARNINGS PER
INCOME FROM SHARE FROM NET
NET GROSS CONTINUING NET CONTINUING INCOME PER
QUARTER SALES MARGIN OPERATIONS INCOME OPERATIONS SHARE
- ------- -------- -------- ----------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
1996
1st $ 79,813 $ 22,218 $ (374) $ 5,177 $(0.04) $0.58
2nd 115,486 34,744 3,359 2,511 0.38 0.28
3rd 145,978 45,587 7,391 7,395 0.83 0.83
4th 127,661 39,222 5,408 36,618(1) 0.60 4.08
-------- -------- ------- ------- ------ ------
Total $468,938 $141,771 $15,784 $51,701 $ 1.77 $5.80
-------- -------- ------- ------- ------ ------
-------- -------- ------- ------- ------ ------
1995
1st $ 62,767 $ 16,384 $ (848) $ 5,645 $(0.09) $0.63
2nd 83,706 23,276 3,574 4,350 0.40 0.48
3rd 94,790 24,866 2,369 80,353(2) 0.26 8.94
4th 94,588 23,327 4,344 5,468(3) 0.49 0.62
-------- -------- ------- ------- ------ ------
Total $335,851 $ 87,853 $ 9,439 $95,816 $ 1.05 $10.67
-------- -------- ------- ------- ------ ------
-------- -------- ------- ------- ------ ------
(1) Includes a net gain on the sale of resort operations of $33,510.
(2) Includes a net gain on the sale of the wood products group of
$75,897.
(3) Includes an adjustment on the sale of the wood products group of
$1,916 net of tax.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Directors of Fibreboard is incorporated
herein by reference from "Election of Directors" and "Directors Not Standing
for Election" of Fibreboard Corporation's Proxy Statement to be filed
pursuant to Regulation 14A not later than April 30, 1997. See also
"Executive Officers of the Registrant" in Part I of this Form 10-K.
48
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation is incorporated herein by
reference from "Compensation of Directors" and "Executive Compensation" of
Fibreboard's Proxy Statement to be filed pursuant to Regulation 14A not later
than April 30, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference from "Security Ownership
of Management and Principal Stockholders" of Fibreboard's Proxy Statement to
be filed pursuant to Regulation 14A not later than April 30, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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 19.
2. Index to Financial Statement Schedules. See page 56.
3. The following exhibits are filed as part of this Form 10-K
49
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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).
3.2.1 Amendment to Fibreboard's Restated Bylaws dated
December 10, 1996.
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).
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).
50
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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).
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. (incorporated
herein by reference from Fibreboard Corporation's Annual
Report on Form 10-K for the year ended December 31, 1995).
51
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31,
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).
10.23 Stock Purchase Agreement among Stone Products, Donald G.
Castle, et al, and Fibreboard Corporation, dated June 5,
1996 (incorporated herein by reference from Fibreboard
Corporation's Current Report on Form 8-K, dated July 12,
1996).
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).
52
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
10.27 Revolving Credit Agreement between the Bank of Nova Scotia
and Vytec Corporation dated March 27, 1996 (incorporated
herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the period ended March
31, 1996).
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.)
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).
53
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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 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 (incorporated herein by reference
from Fibreboard Corporation's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.37 Stock Purchase and Indemnification Agreement among Booth
Creek Ski Holdings, Inc., Fibreboard Corporation, Trimont
Land Company, Sierra-at-Tahoe, Inc. and Bear Mountain,
Inc., dated November 26, 1996 (incorporated by reference
from Fibreboard Corporation's Current Report on Form 8-K
dated December 18, 1996).
21. Fibreboard Corporation Subsidiaries.
23. Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
*DENOTES MANAGEMENT CONTRACT OR COMPENSATION PLAN IDENTIFIED PURSUANT TO
ITEM 14(a)(3) OF FORM 10-K.
(b) Reports on Form 8-K
The following Current Report on Form 8-K was filed during the period October
1, 1996 to December 31, 1996:
Date Event Reported
- ---- --------------
12/18/96 Fibreboard's sale of its resort operations
54
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
FIBREBOARD CORPORATION
- ----------------------
(Registrant)
Dated: March 27, 1997 By: /s/ JOHN D. ROACH
------------------------------
John D. Roach
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
<TABLE>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ JOHN D. ROACH Chairman, President, March 27, 1997
- ------------------------- Chief Executive Officer and Director
John D. Roach (Principal Executive Officer)
/s/ GAROLD E. SWAN Vice President, Finance March 27, 1997
- ------------------------- (Principal Financial and Accounting Officer)
Garold E. Swan
/s/ PHILIP R. BOGUE
- ------------------------- Director March 27, 1997
Philip R. Bogue
/s/ WILLIAM D. EBERLE
- ------------------------- Director March 27, 1997
William D. Eberle
/s/ G. ROBERT EVANS
- ------------------------- Director March 27, 1997
G. Robert Evans
/s/ GEORGE B. JAMES
- ------------------------- Director March 27, 1997
George B. James
/s/ JOHN W. KOEBERER
- ------------------------- Director March 27, 1997
John W. Koeberer
/s/ BILL M. LINDIG
- ------------------------- Director March 27, 1997
Bill M. Lindig
/s/ DONALD K. MILLER
- ------------------------- Director March 27, 1997
Donald K. Miller
</TABLE>
55
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES TO FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
SCHEDULE PAGE
- -------- ----
II Valuation and qualifying accounts for each of the three years in
the period ended December 31, 1996.
Report of independent public accountants on financial statement
schedules.
56
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31
(in thousands)
<TABLE>
Additions
Balance at Charged to Uncollectible Balance at
Beginning Costs and Accounts End of
Description of Period Expenses Written Off Other(a) Period
- ----------- --------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
1994
Reserve for:
Doubtful accounts 405 367 (165) 1,391 1,998
Environmental and
asbestos-related costs 21,290 -- -- (2,379) 18,911
1995
Reserve for:
Doubtful accounts 1,998 1,037 (918) 431 2,548
Environmental and
asbestos-related costs 18,911 1,000 -- (2,339) 17,572
1996
Reserve for:
Doubtful accounts 2,548 2,131 (1,666) 65 3,078
Environmental and
asbestos-related costs 17,572 -- -- (1,984) 15,588
</TABLE>
(a) Consists of reserve for doubtful accounts of acquired companies and
payments of environmental and asbestos-related costs.
57
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
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 5, 1997 (except
for Note 16 - Subsequent Event, as to which the date is March 4, 1997). 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 states 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
Dallas, Texas
February 5, 1997 (except Note 16,
as to which the date is March 4, 1997)
58
<PAGE>
EXHIBIT 3.2.1
FIBREBOARD CORPORATION AND SUBSIDIARIES
AMENDMENT TO BYLAWS
December 10, 1996
WHEREAS, Article FIFTH and Article EIGHTH of the Corporation's Restated
Certificate of Incorporation expressly authorize the Board of Directors to
amend the Bylaws of the Corporation to change the number of Directors of the
Corporation,
NOW THEREFORE, be it Resolved that the first sentence of Article 15(a)
of the Bylaws of the Corporation shall be amended effective immediately, to
read as follows:
"Except as otherwise fixed by, or pursuant to the provisions of, Article
FOURTH of the Certificate of Incorporation relating to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect additional Directors under
specified circumstances, the number of Directors of the Corporation shall be
eight, subject to amendment in accordance with Article FIFTH of the
Certificate of Incorporation."
RESOLVED FURTHER, that the number of Directors in Class I shall be
changed to three (3) effective immediately.
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
EXHIBIT 21
AS OF DECEMBER 31, 1996
Subsidiary State of Incorporation
- ---------- ----------------------
Fibreboard Box & Millwork Corporation Delaware
Norandex Inc. Delaware
Pabco Metals Corporation Delaware
Stone Products Corporation California
Vytec Corporation Ontario, Canada
Vytec Sales Corporation Delaware
<PAGE>
EXHIBIT 23
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into Fibreboard Corporation's
previously filed Registration Statements on Form S-8, File No. 33-60412,
No. 33-26449, No. 33-26450 and No. 333-16551.
Arthur Andersen LLP
Dallas, Texas
March 27, 1997
<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, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 85,301
<SECURITIES> 0
<RECEIVABLES> 65,294
<ALLOWANCES> 3,078
<INVENTORY> 66,321
<CURRENT-ASSETS> 232,805
<PP&E> 103,117
<DEPRECIATION> 32,200
<TOTAL-ASSETS> 688,845
<CURRENT-LIABILITIES> 91,776
<BONDS> 0
0
0
<COMMON> 87
<OTHER-SE> 292,810
<TOTAL-LIABILITY-AND-EQUITY> 688,845
<SALES> 468,938
<TOTAL-REVENUES> 468,938
<CGS> 327,167
<TOTAL-COSTS> 327,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,131
<INTEREST-EXPENSE> 3,110
<INCOME-PRETAX> 26,307
<INCOME-TAX> 10,523
<INCOME-CONTINUING> 15,784
<DISCONTINUED> 35,917
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,701
<EPS-PRIMARY> 5.8
<EPS-DILUTED> 0
</TABLE>
