-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PE+PL44QpPOkeqWAqPpkwi4C85uBQ6MQALcFZ+9bfXU4zYPKmUCc3gFF6yUsNLkM EYbbkANE4ddjafwjvj4VmQ== 0000731939-96-000007.txt : 19961113 0000731939-96-000007.hdr.sgml : 19961113 ACCESSION NUMBER: 0000731939-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961112 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLE INLAND INC CENTRAL INDEX KEY: 0000731939 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631] IRS NUMBER: 751903917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08634 FILM NUMBER: 96658005 BUSINESS ADDRESS: STREET 1: 303 S TEMPLE DR STREET 2: PO DRAWER N CITY: DIBOLL STATE: TX ZIP: 75941 BUSINESS PHONE: 4098292211 MAIL ADDRESS: STREET 1: 303 SOUTH TEMPLE DIRVE CITY: DIBOLL STATE: TX ZIP: 75941 10-Q 1 FORM 10-Q FOR THIRD QUARTER 1996 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 28, 1996 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period From ___________________________ to ____________________________ Commission File Number 1-8634 Temple-Inland Inc. (Exact name of registrant as specified in its charter) Delaware 75-1903917 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 303 South Temple Drive, Diboll, Texas 75941 (Address of principal executive offices) (Zip Code) (409) 829-2211 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report.) Indicate whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes X No_____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Number of common shares outstanding Class as of September 28, 1996 Common Stock (par value $1.00 per share) 55,418,415 The Exhibit Index appears on page 20 of this report. 2 PART I. FINANCIAL INFORMATION FINANCIAL STATEMENTS Summarized Statements of Income Parent Company (Temple-Inland Inc.) Unaudited Third Quarter First Nine Months 1996 1995 1996 1995 (in millions) Revenues Net sales $ 646.7 $ 673.7 $ 1,974.9 $ 2,032.0 Financial services earnings (17.6) 24.9 36.8 63.1 629.1 698.6 2,011.7 2,095.1 Costs and Expenses Cost of sales 550.9 486.2 1,620.3 1,526.5 Selling and administrative 50.6 66.1 185.2 188.3 601.5 552.3 1,805.5 1,714.8 Operating Income 27.6 146.3 206.2 380.3 Interest - net (27.4) (16.7) (81.6) (50.6) Other 1.6 .8 3.1 2.5 Income Before Taxes 1.8 130.4 127.7 332.2 Settlement of FDIC tax- sharing (31.5) - (31.5) - Taxes on income .6 45.6 44.7 116.2 Net Income $ 32.7 $ 84.8 $ 114.5 $ 216.0 See notes to consolidated financial statements. 3 Summarized Balance Sheets Parent Company (Temple-Inland Inc.) Unaudited September 28, December 30, 1996 1995 (in millions) ASSETS Current Assets Cash $ 15 $ 15 Receivables, less allowances of $10 million in 1996 and $8 million in 1995 315 285 Inventories: Work in process and finished goods 108 99 Raw materials 215 239 323 338 Prepaid expenses 17 15 Total current assets 670 653 Investment in Financial Services 563 605 Property and Equipment Buildings 505 469 Machinery and equipment 3,517 3,323 Less allowances for depreciation and amortization (1,828) (1,702) 2,194 2,090 Construction in progress 109 225 2,303 2,315 Timber and timberlands--less depletion 505 445 Land 31 28 Total property and equipment 2,839 2,788 Other Assets 174 167 Total Assets $ 4,246 $ 4,213 See notes to consolidated financial statements. 4 Summarized Balance Sheets - Continued Parent Company (Temple-Inland Inc.) Unaudited September 28, December 30, 1996 1995 (in millions) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 131 $ 138 Accrued expenses 162 157 Employee compensation and benefits 23 37 Current portion of long-term debt 3 5 Total current liabilities 319 337 Long-Term Debt 1,529 1,489 Deferred Income Taxes 218 259 Postretirement Benefits 136 132 Other Liabilities 31 21 Shareholders' Equity 2,013 1,975 Total Liabilities and Shareholders' Equity $ 4,246 $ 4,213 See notes to consolidated financial statements. 5 Summarized Statements of Cash Flows Parent Company (Temple-Inland Inc.) Unaudited First Nine Months 1996 1995 (in millions) Cash Provided by Operations Net income $ 114.5 $ 216.0 Adjustments to reconcile net income to net cash: Depreciation and depletion 183.0 152.9 Deferred taxes (40.4) 28.3 Unremitted earnings of affiliates (20.1) (39.9) Receivables (30.8) (74.4) Inventories 22.2 (79.6) Accounts payable and accrued expenses (19.1) (31.5) Other 17.7 (21.4) 227.0 150.4 Cash (Used for) Investments Capital expenditures (218.5) (286.3) Investment in joint ventures (21.1) - Sale of property and equipment 4.0 7.5 Capital contribution to financial services - (35.0) Dividends from financial services 50.0 - Other (3.0) (1.6) (188.6) (315.4) Cash Provided by (Used for) Financing Change in debt, net 27.4 213.4 Purchase of stock for treasury (16.3) (4.4) Cash dividends paid to shareholders (51.0) (47.1) Other 1.8 3.4 (38.1) 165.3 Effect of exchange rate changes on cash and cash equivalents - (.3) Net increase in cash and cash equivalents .3 - Cash and cash equivalents at beginning of period 14.7 13.0 Cash and cash equivalents at end of period $ 15.0 $ 13.0 See notes to consolidated financial statements. 6 Summarized Statements of Income Temple-Inland Financial Services Unaudited Third Quarter First Nine Months 1996 1995 1996 1995 (in millions) Interest income Mortgage-backed and investment securities $ 44.4 $ 52.9 $ 140.8 $ 156.0 Loans receivable and mortgage loans held for sale 108.3 98.1 315.8 269.6 Assisted assets - 4.2 - 16.4 Other earning assets 5.2 6.2 16.1 17.8 Total interest income 157.9 161.4 472.7 459.8 Interest expense Deposits 76.5 80.3 232.2 232.9 Borrowed funds 32.8 31.3 93.3 91.6 Total interest expense 109.3 111.6 325.5 324.5 Net interest income 48.6 49.8 147.2 135.3 Provision for loan losses 3.4 1.9 12.5 10.9 Net interest income after provision for loan losses 45.2 47.9 134.7 124.4 Noninterest income Loan servicing fees 14.3 11.3 41.8 31.7 Loan origination and marketing 7.8 .6 22.0 3.4 Other 24.4 22.7 71.7 66.5 46.5 34.6 135.5 101.6 Noninterest expense Compensation and benefits 26.3 23.3 76.9 68.7 Other 83.0 34.3 156.5 94.2 Total noninterest expense 109.3 57.6 233.4 162.9 Income before taxes (17.6) 24.9 36.8 63.1 Taxes on income (4.7) 9.6 16.7 23.2 Net income $ (12.9) $ 15.3 $ 20.1 $ 39.9 See notes to consolidated financial statements. 7 Summarized Balance Sheets Temple-Inland Financial Services Unaudited September 30, December 31, 1996 1995 (in millions) ASSETS Cash and cash equivalents $ 421 $ 343 Mortgage loans held for sale 153 106 Loans receivable 5,237 4,764 Mortgage-backed and investment securities 3,087 3,424 Other assets 664 574 TOTAL ASSETS $ 9,562 $ 9,211 LIABILITIES Deposits $ 6,218 $ 6,377 Securities sold under repurchase agreements 2,119 1,604 Federal Home Loan Bank advances 55 155 Other borrowings 136 113 Other liabilities 471 357 TOTAL LIABILITIES 8,999 8,606 SHAREHOLDER'S EQUITY 563 605 TOTAL LIABILITIES AND SHAREHOLDER S EQUITY $ 9,562 $ 9,211 See notes to consolidated financial statements. 8 Summarized Statements of Cash Flows Temple-Inland Financial Services Unaudited First Nine Months 1996 1995 (in millions) Cash Provided by Operations Net income $ 20.1 $ 39.9 Adjustments to reconcile net income to net cash: Amortization, accretion and depreciation 24.3 22.2 Provision for loan losses 12.5 10.9 Receivable from FDIC 7.4 (20.3) Mortgage loans held for sale 3.8 24.6 Collections and remittances on loans serviced for others, net (5.7) 55.8 Other (35.0) (28.8) 27.4 104.3 Cash (Used for) Investments Purchases of mortgage-backed and investment securities held-to-maturity (.1) - Purchases of mortgage-backed and investment securities available-for-sale (2.7) (53.7) Maturities of mortgage-backed and investment securities held-to-maturity 245.3 299.9 Maturities of mortgage-backed and investment securities available-for-sale 69.9 11.0 Proceeds from sales of loans and mortgage- backed and investment securities available- for-sale 4.3 192.6 Loans originated net of principal collected (492.3) (898.6) Reduction in covered assets - 117.9 Other (23.2) (42.4) (198.8) (373.3) Cash Provided by Financing Net (decrease) in deposits (157.2) (117.2) Net increase in securities sold under repurchase agreements and short-term borrowings 466.9 361.6 Change in debt, net (80.9) 24.2 Capital contribution from parent - 35.0 Dividends paid to parent (50.0) - Net increase in advances from borrowers for taxes and insurance 71.0 77.4 249.8 381.0 Net increase in cash and cash equivalents 78.4 112.0 Cash and cash equivalents at beginning of period 343.1 301.8 Cash and cash equivalents at end of period $ 421.5 $ 413.8 See notes to consolidated financial statements. 9 Consolidated Statements of Income Temple-Inland Inc. and Subsidiaries Unaudited Third Quarter First Nine Months 1996 1995 1996 1995 (In millions, except for per share data) Revenues Manufacturing net sales $ 646.7 $ 673.7 $ 1,974.9 $ 2,032.0 Financial services revenues 204.4 196.0 608.2 561.4 851.1 869.7 2,583.1 2,593.4 Costs and Expenses Manufacturing costs and expenses 601.5 552.3 1,805.5 1,714.8 Financial services expenses 222.0 171.1 571.4 498.3 823.5 723.4 2,376.9 2,213.1 Operating Income 27.6 146.3 206.2 380.3 Parent Company Interest - net (27.4) (16.7) (81.6) (50.6) Other 1.6 .8 3.1 2.5 Income Before Taxes 1.8 130.4 127.7 332.2 Settlement of FDIC tax-sharing (31.5) - (31.5) - Taxes on Income .6 45.6 44.7 116.2 Net Income $ 32.7 $ 84.8 $ 114.5 $ 216.0 Earnings per share $ .59 $1.51 $2.06 $3.85 Dividends Paid Per Share of Common Stock $ .32 $ .30 $ .92 $ .84 Weighted Average Shares Outstanding 55.5 56.3 55.6 56.2 See notes to consolidated financial statements. 10 Consolidated Balance Sheets Temple-Inland Inc. and Subsidiaries September 28, 1996 Unaudited Parent Financial Company Services Consolidated (in millions) ASSETS Cash and cash equivalents $ 15 $ 421 $ 436 Mortgage loans held for sale - 153 153 Loans receivable - 5,237 5,237 Mortgage-backed and investment securities - 3,087 3,087 Trade and other receivables 315 - 312 Inventories 323 - 323 Property & equipment 2,839 78 2,917 Other assets 191 586 730 Investment in affiliates 563 - - TOTAL ASSETS $ 4,246 $ 9,562 $13,195 LIABILITIES Deposits $ - $ 6,218 $ 6,218 Securities sold under repurchase agreements and Federal Home Loan Bank advances - 2,174 2,174 Other liabilities 350 471 808 Long-term debt 1,529 136 1,665 Deferred income taxes 218 - 181 Postretirement benefits 136 - 136 TOTAL LIABILITIES $ 2,233 $ 8,999 11,182 SHAREHOLDERS' EQUITY Preferred stock - par value $1 per share: authorized 25,000,000 shares; none issued - Common stock - par value $1 per share: authorized 200,000,000 shares; issued 61,389,552 shares including shares held in the treasury 61 Additional paid-in capital 304 Translation and other adjustments (26) Retained earnings 1,837 2,176 Cost of shares held in the treasury: 5,971,137 shares (163) TOTAL SHAREHOLDERS' EQUITY 2,013 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,195 See the notes to the consolidated financial statements. 11 Consolidated Balance Sheets Temple-Inland Inc. and Subsidiaries December 30, 1995 Unaudited Parent Financial Company Services Consolidated (in millions) ASSETS Cash and cash equivalents $ 15 $ 343 $ 358 Mortgage loans held for sale - 106 106 Loans receivable - 4,764 4,764 Mortgage-backed and investment securities - 3,424 3,424 Trade and other receivables 285 - 283 Inventories 338 - 338 Property & equipment 2,788 76 2,864 Other assets 182 498 627 Investment in affiliates 605 - - TOTAL ASSETS $ 4,213 $ 9,211 $12,764 LIABILITIES Deposits $ - $ 6,377 $ 6,377 Securities sold under repurchase agreements and Federal Home Loan Bank advances - 1,759 1,759 Other liabilities 358 357 702 Long-term debt 1,489 113 1,602 Deferred income taxes 259 - 217 Postretirement benefits 132 - 132 TOTAL LIABILITIES $ 2,238 $ 8,606 10,789 SHAREHOLDERS' EQUITY Preferred stock - par value $1 per share: authorized 25,000,000 shares; none issued - Common stock - par value $1 per share: authorized 200,000,000 shares; issued 61,389,552 shares including shares held in the treasury 61 Additional paid-in capital 306 Translation and other adjustments (14) Retained earnings 1,773 2,126 Cost of shares held in the treasury: 5,731,411 shares (151) TOTAL SHAREHOLDERS' EQUITY 1,975 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,764 See the notes to the consolidated financial statements. 12 Consolidated Statements of Cash Flows Temple-Inland Inc. and Subsidiaries Unaudited First Nine Months 1996 1995 (in millions) Cash Provided by Operations Net income $ 114.5 $ 216.0 Adjustments to reconcile net income to net cash: Depreciation and depletion 189.8 158.8 Amortization and accretion 17.5 16.3 Deferred taxes (29.1) 47.5 Receivable from FDIC 7.4 (20.3) Trade and other receivables (30.8) (74.4) Accounts payable and accrued expenses (22.6) (31.1) Inventories 22.2 (79.6) Mortgage loans held for sale 3.8 24.6 Increase (decrease) in collections and remittances on loans serviced for others, net (5.7) 55.8 Other (12.6) (58.9) 254.4 254.7 Cash (Used for) Investments Capital expenditures (228.5) (310.6) Purchases of mortgage-backed and investment securities held-to-maturity (.1) - Purchases of mortgage-backed and investment securities available-for-sale (2.7) (53.7) Maturities of mortgage-backed and investment securities held-to-maturity 245.3 299.9 Maturities of mortgage-backed and investment securities available-for-sale 69.9 11.0 Proceeds from sales of mortgage-backed and investment securities available-for-sale 4.3 192.6 Loans originated net of principal collected (492.3) (898.6) Reduction in covered assets - 117.9 Other (33.3) (12.2) (437.4) (653.7) Cash Provided by Financing Additions to debt 259.4 376.1 Payments of debt (312.9) (138.5) Net increase in short-term borrowings and repurchase agreements 466.9 361.6 Cash dividends paid to shareholders (51.0) (47.1) Net (decrease) in deposits (157.2) (117.2) Net increase in advances from borrowers for taxes and insurance 71.0 77.4 Other (14.5) (1.0) 261.7 511.3 Effect of exchange rate changes on cash and cash equivalents - (.3) Net increase in cash and cash equivalents 78.7 112.0 Cash and cash equivalents at beginning of period 357.8 314.8 Cash and cash equivalents at end of period $ 436.5 $ 426.8 See notes to consolidated financial statements. 13 TEMPLE-INLAND INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes included in, or incorporated into, Temple-Inland Inc.'s (the "Company") Annual Report on Form 10-K for the fiscal year ended December 30, 1995. The consolidated financial statements include the accounts of Temple-Inland Inc. and all subsidiaries in which the Company has more than a 50 percent equity ownership. However, because certain assets and liabilities are in separate corporate entities, the consolidated assets are not available to satisfy all consolidated liabilities. All material intercompany amounts and transactions have been eliminated. Certain amounts have been reclassified to conform with current year s classification. Included as an integral part of the consolidated financial statements are separate summarized financial statements for the Company's primary business groups. The Parent Company (Temple-Inland Inc.) summarized financial statements include the accounts of Temple-Inland Inc. and its manufacturing subsidiaries. The financial services subsidiaries and the 20 percent to 50 percent owned companies are reflected in the financial statements on the equity basis. The Temple-Inland Financial Services group summarized financial statements include savings bank, mortgage banking, real estate development activities and insurance operations. NOTE B - CONTINGENCIES There are pending against the Company and its subsidiaries lawsuits and claims arising in the regular course of business. In the opinion of management, recoveries, if any, by plaintiffs or claimants that may result from the foregoing litigation and claims will not be material in relation to the consolidated financial statements of the Company and its subsidiaries. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations Results of operations, including information regarding the Company's principal business segments, are shown below: Third Quarter First Nine Months 1996 1995 1996 1995 (in millions) Revenues Corrugated container $ 401.7 $ 464.9 $ 1,278.6 $ 1,374.7 Bleached paperboard 107.6 83.7 305.6 270.7 Building products 137.4 125.1 390.7 386.6 Manufacturing net sales 646.7 673.7 1,974.9 2,032.0 Financial services 204.4 196.0 608.2 561.4 Total revenues $ 851.1 $ 869.7 $ 2,583.1 $ 2,593.4 Income Corrugated container $ 14.1 $ 103.7 $ 129.7 $ 255.6 Bleached paperboard 5.6 9.9 (15.8) 25.5 Building products 28.1 13.1 67.9 52.1 Operating profit 47.8 126.7 181.8 333.2 Financial services (17.6) 24.9 36.8 63.1 30.2 151.6 218.6 396.3 Corporate expenses (2.6) (5.3) (12.4) (16.0) Parent company interest - net (27.4) (16.7) (81.6) (50.6) Other - net 1.6 .8 3.1 2.5 Income before taxes 1.8 130.4 127.7 332.2 Settlement of FDIC tax-sharing (31.5) - (31.5) - Taxes on income .6 45.6 44.7 116.2 Net income $ 32.7 $ 84.8 $ 114.5 $ 216.0 15 Third Quarter 1996 vs. Third Quarter 1995 Third quarter consolidated earnings were $32.7 million, or $.59 per share. These results included a one-time $44 million pre-tax assessment against Guaranty Federal Bank, F.S.B. ( Guaranty ), levied in connection with the recapitalization of the Savings Association Insurance Fund ( SAIF ) and a credit to the Company s tax provision of $31.5 million. Excluding these nonrecurring items, the Company recorded earnings for the quarter of $29.8 million, or $.54 per share, compared with $84.8 million, or $1.51 per share, in the third quarter of 1995. Consolidated revenues for the quarter were $851.1 million, a decrease of four percent from last year s third quarter revenues of $869.7 million. The corrugated container group earned $14.1 million in the quarter, 86 percent below last year s third quarter earnings of $103.7 million. This decrease in earnings was primarily attributable to a significant decline in prices early in the quarter, which stabilized somewhat by the end of the quarter as demand for corrugated containers recovered. The bleached paperboard group earned $5.6 million in the quarter compared with earnings of $9.9 million in the third quarter of 1995. Although a decline from last year s third quarter earnings, the bleached paperboard group did return to profitability in the quarter after a second quarter loss of $11.1 million. Sales volume continued to improve each quarter which allowed production at the modernized mill at Evadale, Texas to continue to improve, reaching a new record level. The building products group earned $28.1 million in the quarter, up from $13.1 million earned in the third quarter last year. Net revenues increased ten percent, or $12.3 million, as a result of improved price levels for lumber, fiber products and gypsum wallboard. Gypsum wallboard and fiberboard both achieved new records of profitability in the period. While demand for particleboard remained good, this group s results were dampened by the costs associated with the major renovation of the Monroeville, Alabama particleboard plant and the continuation of start-up operations at the new particleboard plant in Hope, Arkansas. The financial services group recorded a $17.6 million loss in the quarter as a result of a $44 million assessment in connection with the recapitalization of the SAIF. During the quarter, Congress approved legislation to recapitalize the SAIF by imposing a one-time assessment of 65.7 basis points on the deposits of all SAIF insured institutions. Current SAIF insurance premiums of 23 basis points of deposits will decline to 6.4 basis points on January 1, 1997, resulting in an annual savings to Guaranty of approximately $11 million based on current deposit levels. Excluding this charge, the financial services group recorded operating earnings of $26.4 million for the quarter, up from $24.9 million earned in the third quarter last year. 16 Third Quarter 1996 vs. Third Quarter 1995--Continued Net interest expense increased to $27.4 million in the third quarter of 1996 compared with $16.7 million in the third quarter of last year. The increase in net interest expense is due primarily to a decrease in capitalized interest from $11.6 million in the third quarter of 1995 to $.5 million in the third quarter of 1996 as a result of the completion of the modernization and expansion project at the Evadale, Texas mill. The other nonrecurring item recorded by the Company during the quarter was a one-time credit to its tax provision of $31.5 million. In connection with the acquisition of Guaranty in 1988, the Company entered into an assistance agreement (the Assistance Agreement ) with the Federal Savings and Loan Insurance Corporation. Pursuant to the Assistance Agreement, the Company received various tax benefits to be shared with the Federal Deposit Insurance Corporation ( FDIC ) when the cash benefits were realized by the Company. During the term of the Assistance Agreement, the Company recorded these tax- sharing liabilities on an undiscounted basis. The Company and the FDIC terminated the Assistance Agreement. As a part of this termination, the Company and the FDIC agreed to a one-time payment that was based on the present value of future liabilities. The Company recognized a credit to its tax provision of $31.5 million as a result of the completion of this transaction. First Nine Months of 1996 vs. First Nine Months of 1995 For the nine-month period, net income was $114.5 million, or $2.06 per share. Excluding net nonrecurring items, net income was $111.6 million, or $2.01 per share, versus net income of $216.0 million, or $3.85 per share, for last year s first three quarters. The corrugated container group earned $129.7 million, down 49 percent from the $255.6 million earned in the first nine months of 1995. This decline in earnings was attributable primarily to deteriorating prices for containerboard and corrugated containers. Those prices began to fall late last year and continued to decline throughout 1996 with prices stabilizing somewhat by the end of the third quarter. The bleached paperboard group lost $15.8 million for the first nine months of 1996. During the first half of 1996, the Company continued its activities to consolidate management of its paper operations in order to better serve its customers in both the bleached and unbleached segments of the business. Results for the bleached paperboard group include a $5 million charge associated with these consolidation and restructuring efforts. Excluding this charge, the group has lost $10.8 million year-to-date compared with earnings of $25.5 million in the first nine months of 1995. Although sales for the first nine months of 1996 were 13 percent above 1995 levels, product prices declined and the Company limited production in the first half of 1996 due to high inventory levels. The group returned to profitability in the third quarter. 17 First Nine Months of 1996 vs. First Nine Months of 1995--Continued The building products group earned $67.9 million, up from $52.1 million for the first nine months of 1995. The improved results reflect the improved price levels for lumber, fiber products and gypsum wallboard, along with substantial reductions in net wood costs for the solid wood group. Demand for fiber products and gypsum wallboard strengthened throughout the first nine months of 1996 and had a positive impact on earnings. Although demand for particleboard remained good, the group s results were dampened due to the renovation of the Monroeville, Alabama particleboard plant and the start-up operations at the new particleboard plant in Hope, Arkansas. The financial services group earned $36.8 million for the first nine months of 1996. Excluding the one-time SAIF assessment charge, the group recorded operating earnings of $80.8 million versus $63.1 million for last year's comparable period. Earnings improved for mortgage banking, real estate and insurance; however, the savings bank provided the largest portion of the earnings increase. Increase in loan portfolio activity and continuous improvement in operating efficiencies are the major factors for this positive contribution. Net interest expenses increased to $81.6 million for the first nine months of 1996 compared with $50.6 million in the first nine months of 1995. The increase in net interest expense is due primarily to a decrease in capitalized interest from $31.7 in the first three quarters of 1995 to $2.9 million for the first three quarters of 1996. The decrease in capitalized interest is primarily attributable to the completion of the modernization and expansion project at the Evadale, Texas mill. The tax provision for the first nine months of 1996 includes a one-time credit of $31.5 million that was recorded as a result of the termination of the Assistance Agreement between the Company and the FDIC. As a part of this termination, the Company and the FDIC agreed to a one-time payment that was based on the present value of future liabilities. The recognition of this credit to its tax provision is a result of the completion of this transaction. Liquidity and Capital Resources The Company s financial condition continues to be strong. Internally generated funds, existing credit facilities and the capacity to issue long- term debt are sufficient to fund projected capital expenditures, to service existing debt, to pay dividends and to meet normal working capital requirements. As part of the Company s share repurchase plan, approximately 358,623 shares were repurchased in 1996 at a cost of $16.3 million. Guaranty continues to meet all three regulatory requirement formulae set out under the Financial Institution Reform, Recovery and Enforcement Act of 1989 ( FIRREA ). 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings The information set forth in Note B to Notes to Consolidated Financial Statements in Part I of this report is incorporated by reference thereto. Item 2. Changes in Securities Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Regulation S-K Exhibit Number (11) Statement re computation of per share earnings. (27) Financial Data Schedule (b) Reports on Form 8-K. During the nine months ended September 28, 1996, the Company did not file any reports on Form 8-K. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEMPLE-INLAND INC. (Registrant) Date: November 11, 1996 By /s/ David H. Dolben David H. Dolben Vice President and Chief Accounting Officer 20 EXHIBIT INDEX The following is an index of the exhibits filed herewith. The page reference set forth opposite the description of exhibits included in such index refer to the pages under the sequential numbering system prescribed by Rule 0-3(b) under the Securities Exchange Act of 1934. Regulation S-K Exhibit Sequential Number Page Number (11) Statement re computation of per share earnings 21 (27) Financial Data Schedule 22 EX-27 2 FDS FOR THIRD QUARTER
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENTS FOR TEMPLE-INLAND INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-28-1996 SEP-28-1996 436 0 312 0 323 0 2,917 0 13,195 0 1,665 0 0 61 1,952 13,195 1,975 2,583 1,806 2,377 0 0 82 128 13 115 0 0 0 115 2.06 2.06
EX-11 3 EXHIBIT (11) TEMPLE-INLAND INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (in thousands, except for per share data) Third Quarter First Nine Months 1996 1995 1996 1995 Primary Average common shares outstanding 55,448 56,123 55,506 56,095 Net effect of dilutive stock options based on treasury stock method using average market price 85 136 49 74 Weighted average shares outstanding 55,533 56,259 55,555 56,169 Net income $ 32,648 $ 84,748 $114,480 $215,974 Earnings per share $ .59 $ 1.51 $ 2.06 $ 3.85 Fully Diluted Average common shares outstanding 55,448 56,123 55,506 56,095 Net effect of dilutive stock options based on treasury stock method using the closing market price, if higher than average market price 410 374 157 153 Weighted average shares outstanding 55,858 56,497 55,663 56,248 Net income $ 32,648 $ 84,748 $114,480 $215,974 Earnings per share $ .58 $ 1.50 $ 2.06 $ 3.84 -----END PRIVACY-ENHANCED MESSAGE-----