-----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, Mdm2zi0wr9W0CMGL3Yws+iObJjUndiDiNgHhHaFTOjf7dRhslHuex36qyM5ox5JN fyrTBVg5DyzTAz5WuatqZA== 0000731939-97-000017.txt : 19970812 0000731939-97-000017.hdr.sgml : 19970812 ACCESSION NUMBER: 0000731939-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970811 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: 97655473 BUSINESS ADDRESS: STREET 1: 303 S TEMPLE DR STREET 2: PO DRAWER N CITY: DIBOLL STATE: TX ZIP: 75941 BUSINESS PHONE: 4098297729 MAIL ADDRESS: STREET 1: 303 SOUTH TEMPLE DR CITY: DIBOLL STATE: TX ZIP: 75941 10-Q 1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 28, 1997 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period From ___________________________ to ____________________________ Commission File Number 1-8634 Temple-Inland Inc. (Exact name of registrant as specified in its charter) Delaware 75-1903917 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 303 South Temple Drive, Diboll, Texas 75941 (Address of principal executive offices) (Zip Code) (409) 829-5511 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report.) Indicate whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes X No_____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Number of common shares outstanding Class as of June 28, 1997 Common Stock (par value $1.00 per share) 56,769,513 The Exhibit Index appears on page 21 of this report. 2 PART I. FINANCIAL INFORMATION FINANCIAL STATEMENTS Summarized Statements of Income Parent Company (Temple-Inland Inc.) Unaudited Second Quarter First Six Months 1997 1996 1997 1996 (in millions) Revenues Net sales $ 687.1 $ 677.9 $ 1,336.1 $ 1,348.3 Financial services earnings 32.4 29.7 61.9 54.4 719.5 707.6 1,398.0 1,402.7 Costs and Expenses Cost of sales 602.2 553.3 1,169.3 1,086.4 Selling and administrative 65.0 73.6 127.7 137.7 667.2 626.9 1,297.0 1,224.1 Operating Income 52.3 80.7 101.0 178.6 Interest - net (28.3) (27.5) (56.1) (54.2) Other 1.9 1.3 2.7 1.5 Income Before Taxes 25.9 54.5 47.6 125.9 Taxes on income 10.3 19.1 18.8 44.1 Net Income $ 15.6 $ 35.4 $ 28.8 $ 81.8 See notes to consolidated financial statements. 3 Summarized Balance Sheets Parent Company (Temple-Inland Inc.) Unaudited June 28, December 28, 1997 1996 (in millions) ASSETS Current Assets Cash $ 15 $ 14 Receivables, less allowances of $12 million in 1997 and $9 million in 1996 322 295 Inventories: Work in process and finished goods 110 107 Raw materials 222 220 332 327 Prepaid expenses 17 13 Total current assets 686 649 Investment in Financial Services 660 592 Property and Equipment Buildings 540 516 Machinery and equipment 3,609 3,576 Less allowances for depreciation and amortization (1,995) (1,882) 2,154 2,210 Construction in progress 149 106 2,303 2,316 Timber and timberlands--less depletion 523 503 Land 32 31 Total property and equipment 2,858 2,850 Other Assets 173 161 Total Assets $ 4,377 $ 4,252 See notes to consolidated financial statements. 4 Summarized Balance Sheets - Continued Parent Company (Temple-Inland Inc.) Unaudited June 28, December 28, 1997 1996 (in millions) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 126 $ 143 Accrued expenses 177 140 Employee compensation and benefits 19 28 Current portion of long-term debt 2 8 Total current liabilities 324 319 Long-Term Debt 1,573 1,522 Deferred Income Taxes 235 234 Postretirement Benefits 138 136 Other Liabilities 23 26 Shareholders' Equity 2,084 2,015 Total Liabilities and Shareholders' Equity $ 4,377 $ 4,252 See notes to consolidated financial statements. 5 Summarized Statements of Cash Flows Parent Company (Temple-Inland Inc.) Unaudited First Six Months 1997 1996 (in millions) Cash Provided by (Used for) Operations Net income $ 28.8 $ 81.8 Adjustments to reconcile net income to net cash: Depreciation and depletion 126.4 120.4 Deferred taxes .7 (11.4) Unremitted earnings of affiliates (50.4) (33.0) Receivables (26.8) (31.0) Inventories (4.9) 18.1 Prepaid expenses (4.2) 3.5 Accounts payable and accrued expenses 10.0 (41.1) Other (25.8) 13.7 53.8 121.0 Cash Provided by (Used for) Investments Capital expenditures (115.0) (166.1) Investment in joint ventures/acquisitions (7.8) (17.0) Sale of property and equipment 1.7 2.6 Capital contributions to financial services (24.6) - Dividends from financial services 125.0 11.2 Acquisition of California Financial Holding Company, net of cash acquired (22.7) - (43.4) (169.3) Cash Provided by (Used for) Financing Change in debt, net 45.8 94.3 Purchase of stock for treasury (25.5) (12.8) Cash dividends paid to shareholders (35.5) (33.3) Other 5.3 .5 (9.9) 48.7 Net increase in cash and cash equivalents .5 .4 Cash and cash equivalents at beginning of period 14.3 14.7 Cash and cash equivalents at end of period $ 14.8 $ 15.1 See notes to consolidated financial statements. 6 Summarized Statements of Income Temple-Inland Financial Services Unaudited Second Quarter First Six Months 1997 1996 1997 1996 (in millions) Interest Income Mortgage-backed and investment securities $ 37.1 $ 46.7 $ 74.2 $ 96.4 Loans receivable and mortgage loans held for sale 122.4 105.7 240.8 207.5 Other earning assets 5.2 5.2 10.2 10.9 Total interest income 164.7 157.6 325.2 314.8 Interest Expense Deposits 76.3 77.3 151.1 155.7 Borrowed funds 37.8 31.0 73.1 60.5 Total interest expense 114.1 108.3 224.2 216.2 Net Interest Income 50.6 49.3 101.0 98.6 Provision for loan losses 1.4 2.9 .7 9.1 Net Interest Income After Provision For Loan Losses 49.2 46.4 100.3 89.5 Noninterest Income Loan servicing fees 17.6 13.8 32.1 27.5 Loan origination and marketing 9.6 7.6 16.4 14.2 Other 28.9 26.5 49.0 47.3 56.1 47.9 97.5 89.0 Noninterest Expense Compensation and benefits 29.5 25.4 56.8 50.6 Other 42.4 39.2 78.1 73.5 Total noninterest expense 71.9 64.6 134.9 124.1 Income before taxes 33.4 29.7 62.9 54.4 Minority interest in income of consolidated subsidiary (1.0) - (1.0) - Pretax Income After Minority Interest 32.4 29.7 61.9 54.4 Taxes on income (.1) 11.7 11.5 21.4 Net Income $ 32.5 $ 18.0 $ 50.4 $ 33.0 See notes to consolidated financial statements. 7 Summarized Balance Sheets Temple-Inland Financial Services Unaudited June 30, December 31, 1997 1996 (in millions) ASSETS Cash and cash equivalents $ 174 $ 214 Mortgage loans held for sale 429 244 Loans receivable 6,804 5,414 Mortgage-backed and investment securities 2,976 2,783 Other assets 880 680 TOTAL ASSETS $ 11,263 $ 9,335 LIABILITIES Deposits $ 7,278 $ 6,263 Securities sold under repurchase agreements 1,914 1,937 Federal Home Loan Bank advances 604 55 Other borrowings 151 133 Other liabilities 506 355 TOTAL LIABILITIES 10,453 8,743 PREFERRED STOCK ISSUED BY SUBSIDIARY 150 - SHAREHOLDER'S EQUITY 660 592 TOTAL LIABILITIES AND SHAREHOLDER S EQUITY $ 11,263 $ 9,335 See notes to consolidated financial statements. 8 Summarized Statements of Cash Flows Temple-Inland Financial Services Unaudited First Six Months 1997 1996 (in millions) Cash Provided by (Used for) Operations Net income $ 50.4 $ 33.0 Adjustments to reconcile net income to net cash: Amortization, accretion and depreciation 16.5 17.1 Provision for loan losses .7 9.1 Receivable from FDIC - 7.4 Mortgage loans held for sale (4.6) (36.2) Collections and remittances on loans serviced for others, net 68.7 (51.7) Other (12.5) (53.1) 119.2 (74.4) Cash Provided by (Used for) Investments Purchases of securities held-to-maturity (19.2) (.1) Purchases of securities available-for-sale - (2.2) Maturities of securities held-to-maturity 163.0 162.0 Maturities of securities available-for-sale 28.0 47.8 Proceeds from sale of securities available- for-sale 172.4 4.3 Loans originated or acquired - net of principal collected on loans (784.0) (359.1) Other (2.9) (14.0) (442.7) (161.3) Cash Provided by (Used for) Financing Net increase (decrease) in deposits 33.8 (38.9) Securities sold under repurchase agreements and short-term borrowings - net (48.3) 341.9 Change in debt, net 195.3 (85.5) Capital contributions from parent 24.6 - Proceeds from sale of subsidiary preferred stock 150.1 - Dividends paid to parent (125.0) (11.2) Net increase in advances from borrowers for taxes and insurance 52.4 47.8 282.9 254.1 Net increase (decrease) in cash and cash equivalents (40.6) 18.4 Cash and cash equivalents at beginning of period 214.4 343.1 Cash and cash equivalents at end of period $ 173.8 $ 361.5 See notes to consolidated financial statements. 9 Consolidated Statements of Income Temple-Inland Inc. and Subsidiaries Unaudited Second Quarter First Six Months 1997 1996 1997 1996 (In millions, except for per share data) Revenues Manufacturing net sales $ 687.1 $ 677.9 $ 1,336.1 $ 1,348.3 Financial services revenues 220.8 205.5 422.7 403.8 907.9 883.4 1,758.8 1,752.1 Costs and Expenses Manufacturing costs and expenses 667.2 626.9 1,297.0 1,224.1 Financial services expenses 188.4 175.8 360.8 349.4 855.6 802.7 1,657.8 1,573.5 Operating Income 52.3 80.7 101.0 178.6 Parent Company Interest - net (28.3) (27.5) (56.1) (54.2) Other 1.9 1.3 2.7 1.5 Income Before Taxes 25.9 54.5 47.6 125.9 Taxes on Income 10.3 19.1 18.8 44.1 Net Income $ 15.6 $ 35.4 $ 28.8 $ 81.8 Earnings per share $ .28 $ .63 $ .52 $1.47 Dividends Paid Per Share of Common Stock $ .32 $ .30 $ .64 $ .60 Weighted Average Shares Outstanding 55.6 55.6 55.6 55.6 See notes to consolidated financial statements. 10 Consolidated Balance Sheets Temple-Inland Inc. and Subsidiaries June 28, 1997 Unaudited Parent Financial Company Services Consolidated (in millions) ASSETS Cash and cash equivalents $ 15 $ 174 $ 188 Mortgage loans held for sale - 429 429 Loans receivable - 6,804 6,804 Mortgage-backed and investment securities - 2,976 2,976 Trade and other receivables 322 - 319 Inventories 332 - 332 Property & equipment 2,858 99 2,957 Other assets 190 781 927 Investment in financial services 660 - - TOTAL ASSETS $ 4,377 $ 11,263 $14,932 LIABILITIES Deposits $ - $ 7,278 $ 7,278 Securities sold under repurchase agreements and Federal Home Loan Bank advances - 2,518 2,518 Other liabilities 347 506 832 Long-term debt 1,573 151 1,724 Deferred income taxes 235 - 208 Postretirement benefits 138 - 138 TOTAL LIABILITIES $ 2,293 $ 10,453 12,698 PREFERRED STOCK ISSUED BY SUBSIDIARY 150 150 SHAREHOLDERS' EQUITY Preferred stock - par value $1 per share: authorized 25,000,000 shares; none issued - Common stock - par value $1 per share: authorized 200,000,000 shares; issued 61,389,552 shares including shares held in the treasury 61 Additional paid-in capital 354 Translation and other adjustments (25) Retained earnings 1,831 2,221 Cost of shares held in the treasury: 4,620,039 shares (137) TOTAL SHAREHOLDERS' EQUITY 2,084 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,932 See the notes to the consolidated financial statements. 11 Consolidated Balance Sheets Temple-Inland Inc. and Subsidiaries December 28, 1996 Unaudited Parent Financial Company Services Consolidated (in millions) ASSETS Cash and cash equivalents $ 14 $ 214 $ 228 Mortgage loans held for sale - 244 244 Loans receivable - 5,414 5,414 Mortgage-backed and investment securities - 2,783 2,783 Trade and other receivables 295 - 292 Inventories 327 - 327 Property & equipment 2,850 81 2,931 Other assets 174 599 728 Investment in financial services 592 - - TOTAL ASSETS $ 4,252 $ 9,335 $12,947 LIABILITIES Deposits $ - $ 6,263 $ 6,263 Securities sold under repurchase agreements and Federal Home Loan Bank advances - 1,992 1,992 Other liabilities 345 355 685 Long-term debt 1,522 133 1,655 Deferred income taxes 234 - 201 Postretirement benefits 136 - 136 TOTAL LIABILITIES $ 2,237 $ 8,743 10,932 SHAREHOLDERS' EQUITY Preferred stock - par value $1 per share: authorized 25,000,000 shares; none issued - Common stock - par value $1 per share: authorized 200,000,000 shares; issued 61,389,552 shares including shares held in the treasury 61 Additional paid-in capital 305 Translation and other adjustments (24) Retained earnings 1,837 2,179 Cost of shares held in the treasury: 5,940,802 shares (164) TOTAL SHAREHOLDERS' EQUITY 2,015 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,947 See the notes to the consolidated financial statements. 12 Consolidated Statements of Cash Flows Temple-Inland Inc. and Subsidiaries Unaudited First Six Months 1997 1996 (in millions) Cash Provided by (Used for) Operations Net income $ 28.8 $ 81.8 Adjustments to reconcile net income to net cash: Depreciation and depletion 132.4 124.9 Amortization and accretion 10.5 12.5 Deferred taxes 5.0 6.2 Receivable from FDIC - 7.4 Trade and other receivables (26.8) (31.0) Accounts payable and accrued expenses 10.0 (40.9) Inventories (4.9) 18.1 Mortgage loans held for sale (4.6) (36.2) Increase (decrease) in collections and remittances on loans serviced for others, net 68.7 (51.7) Other (46.1) (44.6) 173.0 46.5 Cash Provided by (Used for) Investments Capital expenditures (122.4) (172.7) Purchases of securities held-to-maturity (19.2) (.1) Purchases of securities available-for-sale - (2.2) Maturities of securities held-to-maturity 163.0 162.0 Maturities of securities available-for-sale 28.0 47.8 Proceeds from sale of securities available- for-sale 172.4 4.3 Loans originated or acquired - net of principal collected on loans (784.0) (359.1) Acquisition of California Financial Holding Company, net of cash acquired (22.7) - Other (1.6) (21.7) (586.5) (341.7) Cash Provided by (Used for) Financing Additions to debt 436.8 230.2 Payments of debt (195.7) (221.4) Securities sold under repurchase agreements and short-term borrowings - net (48.3) 341.9 Cash dividends paid to shareholders (35.5) (33.3) Net increase (decrease) in deposits 33.3 (38.9) Net increase in advances from borrowers for taxes and insurance 52.4 47.8 Purchase of stock for treasury (25.5) (12.8) Proceeds from sale of subsidiary preferred stock 150.1 - Other 5.3 .5 372.9 314.0 Net increase (decrease) in cash and cash equivalents (40.6) 18.8 Cash and cash equivalents at beginning of period 228.7 357.8 Cash and cash equivalents at end of period $ 188.1 $ 376.6 See notes to consolidated financial statements. 13 TEMPLE-INLAND INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes included in, or incorporated into, Temple-Inland Inc.'s (the "Company") Annual Report on Form 10-K for the fiscal year ended December 28, 1996. The consolidated financial statements include the accounts of Temple-Inland Inc. and all subsidiaries in which the Company has more than a 50 percent equity ownership. However, because certain assets and liabilities are in separate corporate entities, the consolidated assets are not available to satisfy all consolidated liabilities. All material intercompany amounts and transactions have been eliminated. Certain amounts have been reclassified to conform with current year s classification. Included as an integral part of the consolidated financial statements are separate summarized financial statements for the Company's primary business groups. The Parent Company (Temple-Inland Inc.) summarized financial statements include the accounts of Temple-Inland Inc. and its manufacturing subsidiaries with the Financial Services subsidiaries and the 20 percent to 50 percent owned companies being reflected in the financial statements on the equity basis. The Temple-Inland Financial Services Group summarized financial statements include savings bank, mortgage banking, real estate development activities and insurance operations. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share , which is effective for financial statements issued for periods ending after December 15, 1997. The impact of Statement 128 on the calculation of earnings per share is not expected to be material. 14 TEMPLE-INLAND INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE B - CONTINGENCIES There are pending against the Company and its subsidiaries lawsuits and claims arising in the regular course of business. In the opinion of management, recoveries, if any, by plaintiffs or claimants that may result from the foregoing litigation and claims will not be material in relation to the consolidated financial statements of the Company and its subsidiaries. On August 4, 1995, a former employee of the Company ( Employee ) filed a wrongful termination lawsuit against the Company, which is currently pending in state district court in Angelina County, Texas. Employee alleges that his employment was terminated for refusing to participate in alleged illegal activity consisting of underpayment of the Company s federal income taxes and filing with the Securities and Exchange Commission (the Commission ) financial reports that were misleading because of the understatement of income. Although the Company does not consider this litigation to be material, subsequent to the end of the second fiscal quarter, the Company publicly denied the allegations made by Employee in response to media attention given to the litigation. The Company remains confident that upon the ultimate trial of the issues raised, none of the allegations will be found to have any merit or grounds whatsoever. As a result of the allegations made by Employee, the Commission began a non-public investigation into the allegations. The Company has provided information to the Commission in response to a subpoena issued in this investigation and continues to cooperate with the Commission in resolving this matter. NOTE C - ACQUISITIONS On June 27, the Company acquired California Financial Holding Company, the parent company of Stockton Savings Bank, F.S.B., and merged Stockton Savings Bank into Guaranty Federal Bank. The purchase price of $143.4 million included $47.3 million in cash and approximately 1,615,000 shares of Temple- Inland Inc. common stock valued at $96.1 million. The acquisition has been accounted for under the purchase method of accounting. The net assets acquired consisted of $24.6 million in cash, $955.1 million of loans, $297.5 million of mortgage-backed securities and investments, $126.5 million in other assets, $982.2 million of deposits, $320.1 million of FHLB advances and other borrowings, and $13.0 million of other liabilities. The excess of the aggregate purchase price over the fair market value of net assets acquired of approximately $55 million was recognized as goodwill and is being amortized on a straight-line basis over 25 years. The operating results of Stockton Savings Bank have been included in the Company s consolidated financial statements since the date of acquisition. On June 4, 1997, Temple-Inland Mortgage Corporation acquired Knutson Mortgage Company. The net assets acquired consisted primarily of $94.6 million in mortgage loans held for sale, $72.3 million in mortgage loan servicing rights, $15.8 million in other assets, $161.8 million in debt, and $6.3 million in other liabilities. The acquisition has been accounted for under the purchase method of accounting with the net assets acquired approximating the purchase price paid. The operating results of Knutson Mortgage Company have been included in the Company s consolidated financial statements since the date of acquisition. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations Results of operations, including information regarding the Company's principal business segments, are shown below: Second Quarter First Six Months 1997 1996 1997 1996 (in millions) Revenues Paper $ 527.6 $ 533.2 $ 1,030.0 $ 1,076.3 Building products 159.5 144.7 306.1 272.0 Manufacturing net sales 687.1 677.9 1,336.1 1,348.3 Financial services 220.8 205.5 422.7 403.8 Total revenues $ 907.9 $ 883.4 $ 1,758.8 $ 1,752.1 Income Paper $ (10.1) $ 28.8 $ (17.2) $ 90.0 Building products 36.4 27.0 68.5 44.0 Operating profit 26.3 55.8 51.3 134.0 Financial services 32.4 29.7 61.9 54.4 58.7 85.5 113.2 188.4 Corporate expenses (6.4) (4.8) (12.2) (9.8) Parent company interest - net (28.3) (27.5) (56.1) (54.2) Other - net 1.9 1.3 2.7 1.5 Income before taxes 25.9 54.5 47.6 125.9 Taxes on income 10.3 19.1 18.8 44.1 Net income $ 15.6 $ 35.4 $ 28.8 $ 81.8 16 Second Quarter 1997 vs. Second Quarter 1996 Second quarter earnings for 1997 totaled $15.6 million, or $.28 per share, a decrease of 56 percent from 1996 second quarter earnings of $35.4 million, or $.63 per share. Revenues for the period were $907.9 million, up three percent from the $883.4 million reported for the same quarter of 1996. The paper group recorded an operating loss of $10.1 million for the quarter compared with operating earnings of $28.8 million in the second quarter of 1996. Production and shipment volumes for the paper group s corrugated container operation were at record levels for the quarter; however, average box prices were down $108 per ton from last year s second quarter. The bleached paperboard operation continued to experience improved sales and production levels in the quarter; however, demand for bleached paperboard products, especially folding carton grades, deteriorated somewhat in the quarter, before firming in June. The building products group reported record operating earnings of $36.4 million for the quarter, an increase of 35 percent from the $27.0 million reported in the second quarter 1996. Lumber prices were up from first quarter levels, and the gypsum operation had another outstanding quarter, reflecting strong demand. The financial services group reported record operating earnings of $32.4 million for the quarter. This compares with $29.7 million in the second quarter of 1996. Net interest income and net noninterest income for the quarter were favorable, primarily due to higher levels of loans outstanding. During the quarter, total loans increased by $1.1 billion to $7.2 billion, which is 71 percent of total earnings assets. Net interest expense increased to $28.3 million in the current quarter compared with $27.5 million in the second quarter of last year. Gross interest increased slightly from $28.5 million in 1996 to $28.9 million in 1997. Capitalized interest decreased slightly from $1.0 million in the second quarter of 1996, to $.6 million in the second quarter of 1997. 17 First Half of 1997 vs. First Half of 1996 Earnings for the first six months of 1997 were $28.8 million, or $.52 per share compared with $81.8 million, or $1.47 per share for the first half of last year. Revenues of $1,758.8 million were up slightly from the 1996 first half of $1,752.1 million. The paper group lost $17.2 million compared with earnings of $90.0 million in the first six months of 1996. Although box shipments for the corrugated container operation were up approximately four percent for the first six months of the year compared to the same period last year, the decline in box prices more than offset the benefit of the record volumes. The bleached paperboard operation continued to experience improved sales and production volumes. Total shipments were 335,000 tons for the first half of 1997, an increase of 11 percent over 1996 levels. The building products group earned $68.5 million in the first half of 1997 compared with $44.0 million last year. This improvement in earnings is due to increased earnings for the solid wood and gypsum operations. Lumber demand was very high and sales averages improved to record levels. Sales averages for the gypsum operations were 22 percent higher than year-ago levels. The modernization of the Diboll, Texas, particleboard plant has been completed, and this facility resumed production in late June. Similar renovations were completed last year at the Company s plant in Monroeville, Alabama, and renovations to the Thomson, Georgia, particleboard plant are scheduled to begin in September, completing the upgrade process of all the Company s particleboard facilities. Earnings for the financial services group were $61.9 million for the period, an increase of $7.5 million from last year s comparable period. A decrease in provision for loan losses was a major factor of earnings increase. The credit quality of the loan portfolio remains strong. Financial Condition The Company s financial condition continues to be strong. Internally generated funds, existing credit facilities and the capacity to issue long- term debt are sufficient to fund projected capital expenditures, to service existing debt, to pay dividends and to meet normal working capital requirements. During the second quarter, a newly formed subsidiary of the Company that qualifies as a real estate investment trust ( REIT ) issued $150 million of noncumulative floating rate preferred stock to third party investors in a private placement. The preferred stock pays quarterly cash dividends at a floating rate of three-month LIBOR plus 140 basis points. The preferred stock is redeemable at the option of the Company in certain circumstances. 18 Financial Condition--Continued On June 27, 1997, the Company acquired California Financial Holding Company, the parent company of Stockton Savings Bank, F.S.B., and merged the operations of Stockton Savings Bank into Guaranty Federal Bank. The purchase price consisted of approximately $47.3 million in cash and approximately 1,615,000 shares of Temple-Inland Inc. common stock valued at $96.1 million. On June 4, 1997, Temple-Inland Mortgage Corporation acquired Knutson Mortgage Company. Temple-Inland Mortgage Corporation s servicing portfolio of mortgage loans now exceeds $25 billion, making it one of the 20 largest mortgage servicing companies in the nation. Guaranty Federal Bank continues to exceed all three regulatory capital requirements. 19 PART II. OTHER INFORMATION Item 1. Legal Proceedings. The information set forth in Note B to Notes to Consolidated Financial Statements in Part I of this report is incorporated by reference thereto. Item 2. Changes in Securities. Not Applicable. Item 3. Defaults Upon Senior Securities. Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable Item 5. Other Information. Not Applicable. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Regulation S-K Exhibit Number (11) Statement re computation of per share earnings (27) Financial Data Schedule (b) Reports on Form 8-K. During the six months ended June 28, 1997, the Company did not file any reports on Form 8-K. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEMPLE-INLAND INC. (Registrant) Date: August 11, 1997 By /s/ David H. Dolben David H. Dolben Vice President and Chief Accounting Officer 21 EXHIBIT INDEX The following is an index of the exhibits filed herewith. The page reference set forth opposite the description of exhibits included in such index refer to the pages under the sequential numbering system prescribed by Rule 0-3(b) under the Securities Exchange Act of 1934. Regulation S-K Exhibit Sequential Number Page Number (11) Statement re computation of 22 per share earnings. (27) Financial Data Schedule 23 EX-11 2 EXHIBIT (11) TEMPLE-INLAND INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (in thousands, except for per share data) Second Quarter First Six Months 1997 1996 1997 1996 Primary Average common shares outstanding 55,454 55,504 55,440 55,534 Net effect of dilutive stock options based on treasury stock method using average market price 171 59 175 31 Weighted average shares outstanding 55,625 55,563 55,615 55,565 Net income $ 15,552 $ 35,406 $ 28,801 $ 81,832 Earnings per share $ .28 $ .63 $ .52 $ 1.47 Fully Diluted Average common shares outstanding 55,454 55,504 55,440 55,534 Net effect of dilutive stock options based on treasury stock method using the closing market price, if higher than average market price 202 105 190 54 Weighted average shares outstanding 55,656 55,609 55,630 55,588 Net income $ 15,552 $ 35,406 $ 28,801 $ 81,832 Earnings per share $ .28 $ .63 $ .52 $ 1.47 EX-27 3
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 6-MOS JAN-03-1998 JUN-28-1997 188 0 319 0 332 0 2,957 0 14,932 0 1,724 0 0 61 2,023 14,932 1,336 1,759 1,297 1,658 0 0 56 48 19 29 0 0 0 29 0.52 0.52
-----END PRIVACY-ENHANCED MESSAGE-----