-----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, BAlmoCHBAGLSNuZxnytqmptcwTJAqPI4K8zgsNTxvUczvQQGqW8GX9+019SD/ABg MFLtEhWtHr8aX03DMzGClg== 0000731939-98-000008.txt : 19980515 0000731939-98-000008.hdr.sgml : 19980515 ACCESSION NUMBER: 0000731939-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980514 SROS: NYSE SROS: PCX 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: SEC FILE NUMBER: 001-08634 FILM NUMBER: 98619534 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 (Mark One) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended April 4, 1998 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) 829-5511 (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 April 4, 1998 Common Stock (par value $1.00 per share) 56,064,641 The Exhibit Index appears on page 21 of this report. -1- 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Summarized Statements of Income Parent Company (Temple-Inland Inc.) Unaudited First Quarter ----------------- 1998 1997 ------ ------ (in millions) Revenues Net sales $ 682.2 $ 649.0 Financial services earnings 36.7 29.5 ------- ------- 718.9 678.5 Costs and Expenses Cost of sales 584.2 567.1 Selling and administrative 65.1 62.7 ------- ------- 649.3 629.8 Operating Income 69.6 48.7 Interest - net (26.3) (27.8) Other 1.5 .8 ------- ------- Income Before Taxes 44.8 21.7 Taxes on income 18.4 8.5 ------- ------- Net Income $ 26.4 $ 13.2 ======= ======= See notes to consolidated financial statements. -2- 3 Summarized Balance Sheets Parent Company (Temple-Inland Inc.) Unaudited April 4, January 3, 1998 1998 --------- ---------- (in millions) ASSETS Current Assets Cash $ 14 $ 13 Receivables, less allowances of $10 million in 1998 and $9 million in 1997 329 281 Inventories: Work in process and finished goods 101 109 Raw materials 244 230 ------- ------- 345 339 Prepaid expenses 16 15 ------- ------- Total current assets 704 648 Investment in Financial Services 648 576 Property and Equipment Buildings 554 554 Machinery and equipment 3,726 3,689 Less allowances for depreciation and amortization (2,138) (2,086) ------- ------- 2,142 2,157 Construction in progress 99 115 ------- ------- 2,241 2,272 Timber and timberlands--less depletion 510 507 Land 34 34 ------- ------- Total property and equipment 2,785 2,813 Other Assets 175 163 ------- ------- Total Assets $ 4,312 $ 4,200 ======= ======= See notes to consolidated financial statements. -3- 4 Summarized Balance Sheets - Continued Parent Company (Temple-Inland Inc.) Unaudited April 4, January 3, 1998 1998 -------- ---------- (in millions) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 131 $ 135 Accrued expenses 149 150 Employee compensation and benefits 13 23 Current portion of long-term debt 2 3 ------- ------- Total current liabilities 295 311 Long-Term Debt 1,565 1,438 Deferred Income Taxes 257 252 Postretirement Benefits 142 140 Other Liabilities 12 14 Shareholders' Equity 2,041 2,045 ------- ------- Total Liabilities and Shareholders' Equity $ 4,312 $ 4,200 ======= ======= See notes to consolidated financial statements. -4- 5 Summarized Statements of Cash Flows Parent Company (Temple-Inland Inc.) Unaudited First Quarter ------------------- 1998 1997 ------ ------ (in millions) Cash Provided by (Used for) Operations Net income $ 26.4 $ 13.2 Adjustments to reconcile net income to net cash: Depreciation and depletion 65.2 63.1 Deferred taxes 6.9 (2.9) Unremitted earnings of affiliates (27.1) (17.9) Receivables (48.0) (7.8) Inventories (5.6) (19.6) Accounts payable and accrued expenses (15.5) (31.1) Other (14.4) (33.0) ------- ------- (12.1) (36.0) Cash Provided by (Used for) Investments Capital expenditures (36.3) (51.9) Contribution to financial services (40.0) - Other (1.5) (4.2) ------- ------- (77.8) (56.1) Cash Provided by (Used for) Financing Change in debt, net 125.5 118.7 Purchase of stock for treasury (18.6) (11.2) Cash dividends paid to shareholders (17.9) (17.8) Other 1.5 2.6 ------- ------- 90.5 92.3 Net increase in cash and cash equivalents .6 .2 Cash and cash equivalents at beginning of period 13.4 14.3 ------- ------- Cash and cash equivalents at end of period $ 14.0 $ 14.5 ======= ======= See notes to consolidated financial statements. -5- 6 Summarized Statements of Income Temple-Inland Financial Services Unaudited First Quarter ------------------ 1998 1997 ------ ------ (in millions) Interest income Loans receivable and mortgage loans held for sale $ 138.6 $ 118.4 Mortgage-backed and investment securities 41.4 37.1 Other earning assets .8 5.0 ------- ------- Total interest income 180.8 160.5 Interest expense Deposits 89.4 74.8 Borrowed funds 32.0 35.3 ------- ------- Total interest expense 121.4 110.1 Net interest income 59.4 50.4 Provision for loan losses 1.9 (.7) ------- ------- Net interest income after provision for loan losses 57.5 51.1 Noninterest income Loan servicing fees 22.5 14.5 Loan origination and marketing 22.0 6.8 Other 37.1 20.1 ------- ------- 81.6 41.4 Noninterest expense Compensation and benefits 41.3 27.3 Other 58.4 35.7 ------- ------- Total noninterest expense 99.7 63.0 Income before taxes and minority interest 39.4 29.5 Minority interest in income of consolidated subsidiary (2.7) - ------- ------- Income before taxes 36.7 29.5 Taxes on income 9.6 11.6 ------- ------- Net Income $ 27.1 $ 17.9 ======= ======= See notes to consolidated financial statements. -6- 7 Summarized Balance Sheets Temple-Inland Financial Services Unaudited April 4, January 3, 1998 1998 -------- ---------- (in millions) ASSETS Cash and cash equivalents $ 182 $ 175 Mortgage loans held for sale 654 439 Loans receivable 6,820 6,451 Mortgage-backed and investment securities 2,749 2,806 Other assets 898 914 ------- ------- TOTAL ASSETS $11,303 $10,785 ======= ======= LIABILITIES Deposits $ 7,347 $ 7,375 Securities sold under repurchase agreements 846 270 Federal Home Loan Bank advances 1,461 1,685 Other borrowings 178 167 Other liabilities 673 562 Preferred stock issued by subsidiary 150 150 ------- ------- TOTAL LIABILITIES 10,655 10,209 SHAREHOLDER'S EQUITY 648 576 ------- ------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $11,303 $10,785 ======= ======= See notes to consolidated financial statements. -7- 8 Summarized Statements of Cash Flows Temple-Inland Financial Services Unaudited First Quarter ----------------- 1998 1997 ------ ------ (in millions) Cash Provided by (Used for) Operations Net income $ 27.1 $ 17.9 Adjustments to reconcile net income to net cash: Amortization, accretion and depreciation 17.5 7.3 Provision for loan losses 1.9 (.7) Mortgage loans held for sale (215.4) (3.1) Collections and remittances on loans serviced for others, net 69.9 (22.0) Other (8.8) 16.2 ------- ------- (107.8) 15.6 Cash Provided by (Used for) Investments Purchases of securities available-for-sale (.2) - Maturities of securities available-for-sale 55.3 14.8 Purchases of securities held-to-maturity - (14.3) Maturities of securities held-to-maturity 62.9 93.6 Proceeds from sale of securities available- for-sale 18.0 171.2 Loans originated or acquired - net of principal collected on loans (446.8) (536.0) Other 32.5 11.3 ------- ------- (278.3) (259.4) Cash Provided by (Used for) Financing Net decrease in deposits (27.7) (53.6) Securities sold under repurchase agreements and short-term borrowings - net 352.3 (46.8) Change in debt, net 10.8 228.5 Capital contributions from Parent 40.0 - Net increase in advances from borrowers for taxes and insurance 17.4 22.6 ------- ------- 392.8 150.7 Net increase (decrease) in cash and cash equivalents 6.7 (93.1) Cash and cash equivalents at beginning of period 175.1 214.4 ------- ------- Cash and cash equivalents at end of period $ 181.8 $ 121.3 ======= ======= See notes to consolidated financial statements. -8- 9 Consolidated Statements of Income Temple-Inland Inc. and Subsidiaries Unaudited First Quarter ----------------- 1998 1997 ------ ------ (in millions) Revenues Manufacturing net sales $ 682.2 $ 649.0 Financial services revenues 262.4 201.9 ------- ------- 944.6 850.9 Costs and Expenses Manufacturing costs and expenses 649.3 629.8 Financial services expenses 225.7 172.4 ------- ------- 875.0 802.2 Operating Income 69.6 48.7 Parent company interest - net (26.3) (27.8) Other 1.5 .8 ------- ------- Income Before Taxes 44.8 21.7 Taxes on income 18.4 8.5 ------- ------- Net Income $ 26.4 $ 13.2 ======= ======= Weighted Average Shares Outstanding: Basic 56.0 55.4 ======= ======= Diluted 56.2 55.6 ======= ======= Earnings per share: Basic $ .47 $ .24 ======= ======= Diluted $ .47 $ .24 ======= ======= Dividends Paid Per Share of Common Stock $ .32 $ .32 ======= ======= See notes to consolidated financial statements. -9- 10 Consolidating Balance Sheet Temple-Inland Inc. and Subsidiaries April 4, 1998 Unaudited Parent Financial Company Services Consolidated -------- -------- ------------ (in millions) ASSETS Cash and cash equivalents $ 14 $ 182 $ 196 Mortgage loans held for sale - 654 654 Loans receivable - 6,820 6,820 Mortgage-backed and investment securities - 2,749 2,749 Trade and other receivables 329 - 323 Inventories 345 - 345 Property & equipment 2,785 106 2,891 Other assets 191 792 936 Investment in Financial services 648 - - ------- ------- ------- TOTAL ASSETS $ 4,312 $11,303 $14,914 ======= ======= ======= LIABILITIES Deposits $ - $ 7,347 $ 7,347 Securities sold under repurchase agreements and Federal Home Loan Bank advances - 2,307 2,307 Other liabilities 307 673 952 Long-term debt 1,565 178 1,743 Deferred income taxes 257 - 232 Postretirement benefits 142 - 142 Preferred stock issued by subsidiary - 150 150 ------- ------- ------- TOTAL LIABILITIES $ 2,271 $10,655 12,873 ======= ======= 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 355 Accumulated other comprehensive income (loss) (16) Retained earnings 1,826 ------- 2,226 Cost of shares held in the treasury: 5,324,911 shares (185) ------- TOTAL SHAREHOLDERS' EQUITY 2,041 ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,914 ======= See the notes to the consolidated financial statements. -10- 11 Consolidating Balance Sheet Temple-Inland Inc. and Subsidiaries January 3, 1998 Unaudited Parent Financial Company Services Consolidated ------- --------- ------------ (in millions) ASSETS Cash and cash equivalents $ 13 $ 175 $ 188 Mortgage loans held for sale - 439 439 Loans receivable - 6,451 6,451 Mortgage-backed and investment securities - 2,806 2,806 Trade and other receivables 281 - 277 Inventories 339 - 339 Property & equipment 2,813 103 2,916 Other assets 178 811 948 Investment in Financial services 576 - - ------- ------- ------- TOTAL ASSETS $ 4,200 $10,785 $14,364 ======= ======= ======= LIABILITIES Deposits $ - $ 7,375 $ 7,375 Securities sold under repurchase agreements and Federal Home Loan Bank advances - 1,955 1,955 Other liabilities 325 562 871 Long-term debt 1,438 167 1,605 Deferred income taxes 252 - 223 Postretirement benefits 140 - 140 Preferred stock issued by subsidiary - 150 150 ------- ------- ------- TOTAL LIABILITIES $ 2,155 $10,209 12,319 ======= ======= 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 356 Accumulated other comprehensive income (loss) (20) Retained earnings 1,817 ------- 2,214 Cost of shares held in the treasury: 5,069,011 shares (169) ------- TOTAL SHAREHOLDERS' EQUITY 2,045 ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,364 ======= See the notes to the consolidated financial statements. -11- 12 Consolidated Statements of Cash Flows Temple-Inland Inc. and Subsidiaries Unaudited First Quarter -------------------- 1998 1997 ------ ------ (in millions) Cash Provided by (Used for) Operations Net income $ 26.4 $ 13.2 Adjustments to reconcile net income to net cash: Depreciation and depletion 68.8 66.0 Amortization and accretion 13.9 4.4 Deferred taxes 6.7 2.5 Trade and other receivables (48.0) (7.8) Accounts payable and accrued expenses (15.5) (31.1) Inventories (5.6) (19.6) Mortgage loans held for sale (215.4) (3.1) Collections and remittances on loans serviced for others - net 69.9 (22.0) Other (21.1) (22.9) ------- ------- (119.9) (20.4) Cash Provided by (Used for) Investments Capital expenditures (43.2) (56.2) Purchases of securities available- for-sale (.2) - Maturities of securities available- for-sale 55.3 14.8 Purchases of securities held-to-maturity - (14.3) Maturities of securities held-to-maturity 62.9 93.6 Proceeds from sale of securities available- for-sale 18.0 171.2 Loans originated or acquired - net of principal collected on loans (446.8) (536.0) Other 37.9 11.4 ------- ------- (316.1) (315.5) Cash Provided by (Used for) Financing Additions to debt 265.4 370.5 Payments of debt (129.1) (23.3) Securities sold under repurchase agreements and short-term borrowings - net 352.3 (46.8) Cash dividends paid to shareholders (17.9) (17.8) Net decrease in deposits (27.7) (53.6) Net increase in advances from borrowers for taxes and insurance 17.4 22.6 Purchase of treasury stock (18.6) (11.2) Other 1.5 2.6 ------- ------- 443.3 243.0 Net increase (decrease) in cash and cash equivalents 7.3 (92.9) Cash and cash equivalents at beginning of period 188.5 228.7 ------- ------- Cash and cash equivalents at end of period $ 195.8 $ 135.8 ======= ======= See notes to consolidated financial statements. -12- 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 January 3, 1998. 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. As of January 1, 1998, the Company adopted Financial Accounting Standards Board Statement 130, "Reporting Comprehensive Income". Statement 130 establishes new rules for reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or shareholders' equity. Statement 130 requires unrealized gains or losses on the Company's available-for-sale securities, minimium pension liability adjustments and foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. During the first quarter of 1998 and 1997, total comprehensive income amounted to $30.9 million and $11.4 million, respectively. The primary components of total comprehensive income were net income and unrealized gains or losses on the Company's available-for-sale securities which amounted to $5.4 million income in the first quarter of 1998 and $1.9 million loss in the first quarter of 1997. -13- 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. -14- 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Results of operations, including information regarding the Company's principal business segments, are shown below: First Quarter ------------------- 1998 1997 ------ ------ (in millions) Revenues Paper $ 527.7 $ 502.4 Building products 154.5 146.6 ------- ------- Manufacturing net sales 682.2 649.0 Financial services 262.4 201.9 ------- ------- Total revenues $ 944.6 $ 850.9 ======= ======= Income Paper $ 9.9 $ (7.1) Building products 29.9 32.1 ------- ------- Operating profit 39.8 25.0 Financial services 36.7 29.5 ------- ------- 76.5 54.5 Corporate expenses (6.9) (5.8) Parent company interest - net (26.3) (27.8) Other - net 1.5 .8 ------- ------- Income before taxes 44.8 21.7 Taxes on income 18.4 8.5 ------- ------- Net income $ 26.4 $ 13.2 ======= ======= -15- 16 First Quarter 1998 vs. First Quarter 1997 First quarter earnings of $26.4 million, or $.47 per diluted share, represent a 100 percent increase from first quarter 1997 net income of $13.2 million, or $.24 per diluted share. Revenues for the quarter were $944.6 million. The paper group reported operating income of $9.9 million for the first quarter. This compares with an operating loss of $7.1 million in the first quarter of 1997. Revenues for the first quarter were $527.7 million, up $25.3 million from last year's first quarter revenues of $502.4 million. The markets for the paper group's corrugated packaging operations continued the rebound that began in the latter half of 1997. Average box prices for the quarter were up significantly from last year's fourth quarter and exceeded first quarter 1997 levels. The paper group's bleached paperboard operation experienced somewhat weaker demand and lower pricing in the quarter. Average prices for the quarter were approximately four percent lower than fourth quarter prices and fell below year ago levels. A recovery boiler outage early in the quarter hampered production and increased costs at the bleached paperboard mill. The building products group reported first quarter earnings of $29.9 million, compared with operating income of $32.1 million in last year's first quarter. Revenues for the first quarter were $154.5 million, up $7.9 million from last year's first quarter revenues of $146.6 million. This group experienced weaker demand early in the quarter due to the impact of the wet weather on the construction markets. In addition, the cost of sawtimber rose in the quarter due to the shortage caused by the wet weather. Demand for lumber improved late in the first quarter and average prices were slightly above fourth quarter levels, but below year ago levels. Gypsum markets remained strong and prices rose in the quarter. Although sales averages for particleboard declined four percent from last year's first quarter, demand strengthened late in the quarter. The average sales price for fiber products declined 13 percent from last year; however, this decline was offset by increased sales volumes and lower manufacturing costs that were attained through process improvements. The financial services group reported first quarter operating earnings of $36.7 million compared with $29.5 million in the first quarter of 1997. The strong refinancing market resulted in an increase in the bank's loan portfolio, especially mortgage warehousing loans, and the mortgage banking company experienced record levels of new loan production as well as increased prepayments on the existing portfolio. This increase in loans and record levels of production resulted in an improvement in earnings. Net interest expense decreased to $26.3 million in the first quarter of 1998 compared with $27.8 million in the first quarter of last year. -16- 17 Capital Resources and Liquidity 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 first quarter of 1998, the Parent Company's debt increased $125.5 million mainly through issuance of commercial paper and bank debt. As part of the Company's share repurchase plan, approximately 350,500 shares were repurchased in the first quarter of 1998 at a cost of $18.6 million. Guaranty Federal Bank continues to exceed all three regulatory capital requirements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK: The Company is subject to interest rate risk from the utilization of financial instruments such as term debt and other borrowings, as well as the lending and deposit gathering activities of the Financial Services Group. Historically, the exposure of income to interest rate risk has been maintained at a relatively moderate level due to the high correlation between changes in the rates earned on the group's adjustable-rate assets and changes in the aggregate cost of the group's funding sources. The Company has many options to mitigate the earnings impact of a significant change in interest rates. Potential options include selling assets, executing hedges, and modifying the maturity or repricing characteristics of assets and/or liabilities. The Company routinely utilizes a simulation model to measure the sensitivity of income to movements in interest rates. The model incorporates the maturity and repricing characteristics of interest rate sensitive assets and liabilities, as well as assumptions regarding the impact of changing interest rates on the prepayment rates of certain results. The results of the sensitivity analyses as of April 4, 1998 did not differ materially from the amounts reported as of January 3, 1998. FOREIGN CURRENCY RISK: The Company's exposure to foreign currency fluctuations on its financial instruments is not material because most of these instruments are denominated in U.S. dollars. COMMODITY PRICE RISK: The Company has no financial instruments subject to commodity price risks. -17- 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. On April 30, 1998, the Company confirmed that it had been advised by the staff of the Securities and Exchange Commission that the staff has terminated its non-public investigation arising out of allegations made by a former employee, and that no enforcement action has been recommended to the Commission. The Company again denied the allegations made by the former employee in his wrongful termination lawsuit, which is still pending, and stated it is confident that upon the ultimate trial of the issues raised, none of the allegations will be found to have any merit or grounds whatsoever. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. The Company held its annual meeting of stockholders on May 1, 1998, at which a quorum was present. The table below sets forth the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes for each matter voted upon at that meeting. Abstentions Against or and Broker Matter For Withheld Non-votes 1. Election of four Directors (a) Clifford J. Grum 47,784,136 463,489 - (b) Bobby R. Inman 47,785,669 461,956 - (c) Kenneth M. Jastrow, II 47,815,919 431,706 - (d) Herbert A. Sklenar 47,816,697 430,928 - 2. Ratification of appointment of Ernst & Young LLP 47,945,132 96,981 205,512 Item 5. Other Information. None. -18- 19 PART II. OTHER INFORMATION (Continued) 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 three months ended April 4, 1998, the Company did not file any reports on Form 8-K. -19- 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: May 14, 1998 By /s/ David H. Dolben ---------------------------- David H. Dolben Vice President and Chief Accounting Officer -20- 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 refers 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. 22 (27) Financial Data Schedule 23 -21- EX-11 2 EXHIBIT (11) TEMPLE-INLAND INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (in thousands, except for per share data) 13 Weeks Ended --------------------- April 4, March 29, 1998 1997 --------- --------- Basic Weighted average shares outstanding 56,038 55,426 ====== ====== Net income $ 26,457 $ 13,249 ====== ====== Earnings per share $ .47 $ .24 ====== ====== Diluted Weighted average shares outstanding 56,038 55,426 Effect of dilutive stock options 177 178 ------ ------ Total weighted average shares outstanding 56,215 55,604 ====== ====== Net income $ 26,457 $ 13,249 ====== ====== Earnings per share $ .47 $ .24 ====== ====== -22- 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 3-MOS JAN-02-1999 APR-04-1998 196 0 323 0 345 0 2,891 0 14,914 0 1,743 0 0 61 1,980 14,914 682 945 649 875 0 0 26 44 18 26 0 0 0 26 .47 .47
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