-----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, Lb+FP8jECIo/r1Ta+YtR1z9ayCJzkDlTae8R/NIGIRLm9DqesnkalWfw+ydua2Px rXmuxGj8IE6XZAen6S4knA== 0000912057-96-025485.txt : 19961113 0000912057-96-025485.hdr.sgml : 19961113 ACCESSION NUMBER: 0000912057-96-025485 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19961112 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIBREBOARD CORP /DE CENTRAL INDEX KEY: 0000833053 STANDARD INDUSTRIAL CLASSIFICATION: SAWMILLS, PLANNING MILLS, GENERAL [2421] IRS NUMBER: 940751580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-10035 FILM NUMBER: 96658247 BUSINESS ADDRESS: STREET 1: 2121 NORTH CALIFORNIA BLVD STE 560 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 5102740700 MAIL ADDRESS: STREET 1: 2121 N CALIFORNIA BLVD STREET 2: SUITE 560 CITY: WALNUT CREEK STATE: CA ZIP: 94596 10-K405/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 (MARK ONE) [XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ______ TO ______ . Commission file number 0-016951 FIBREBOARD CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 94-0751580 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION) IDENTIFICATION NO.) 2200 ROSS AVENUE, SUITE 3600, DALLAS, TX 75201 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (214) 954-9500 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XXX . No . ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K XXX . ----- 1 The aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 18, 1996 was $188,066,032. As of the close of business on March 18, 1996, the Registrant had outstanding 8,448,704 shares of common stock. DOCUMENTS INCORPORATED BY REFERENCE. Portions of Fibreboard Corporation's Proxy Statement relating to its 1996 Annual Meeting of Stockholders are incorporated by reference in Part III. 2 FIBREBOARD CORPORATION AMENDMENT TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995 During 1996, a number of developments have occurred in Fibreboard's asbestos-related litigation, including the affirmation of the Global Settlement and the Insurance Settlement by the U.S. Fifth Circuit Court of Appeals. The Insurance Settlement approval judgment is now final and not subject to further appellate proceedings. Petitions for rehearing on the Global Settlement were filed with the Fifth Circuit by September 9, 1996. As of November 4, 1996, the Court had not issued a decision on these petitions. The Global Settlement and the Insurance Settlement are more fully described in Note 14 to Fibreboard's 1995 consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 1995. Due to the significance of the events described above, the Registrant hereby amends the following items of its Form 10-K for the Year ended December 31, 1995: PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Item 8 is hereby amended to: 1. Add a new Note 16, "Subsequent Event;" and 2. Replace the report of Arthur Andersen LLP, Fibreboard's independent public accountants. The new report eliminates the fourth paragraph reference to the asbestos-related contingent liability. Item 8 as amended is attached hereto. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. The following additional exhibits are filed as part of this report: Exhibit 23 -- Consent of Arthur Andersen LLP. Exhibit 99.1 -- Fibreboard Corporation press release dated November 11, 1996. 3 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements and Supplementary Data PAGE ---- Consolidated Statements of Income for 19 each of the three years in the period ended December 31, 1995 Consolidated Balance Sheets as of December 31, 20 1995 and 1994 Consolidated Statements of Cash Flows for each 22 of the three years in the period ended December 31, 1995 Consolidated Statements of Stockholders' Equity 24 for each of the three years in the period ended December 31, 1995 Notes to Consolidated Financial Statements 25 Report of Independent Public Accountants 44 Report of Management 45 Supplementary Data (unaudited) - Selected Quarterly Financial Data for each of the 46 two years in the period ended December 31, 1995 FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31 -------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE) Net sales $380,806 $183,396 $ 74,716 Cost of sales 280,926 132,861 58,966 --------- --------- --------- Gross margin 99,880 50,535 15,750 Other expenses: Selling and administrative 76,909 35,392 16,342 Asbestos-related items(Note 14) (4,000) -- -- --------- --------- --------- Operating income 26,971 15,143 (592) Interest expense (6,476) (4,931) (3,575) Interest and other income 3,101 3,697 5,551 --------- --------- --------- Income from continuing operations before income taxes 23,596 13,909 1,384 Income taxes relating to continuing operations (9,072) (5,633) (567) --------- --------- --------- Income from continuing operations 14,524 8,276 817 Discontinued operations (Note 13) Income from operations less applicable income taxes of $2,174, $5,132 and $7,572 3,479 7,538 10,896 Gain on surplus asset sales less applicable income taxes of $7,637 -- 11,221 -- Gain on disposal less applicable income taxes of $43,432 77,813 -- -- --------- --------- --------- Net income $ 95,816 $ 27,035 $ 11,713 --------- --------- --------- --------- --------- --------- Earnings per share--primary Income from continuing operations $1.62 $0.92 $0.09 Income from discontinued operations 0.39 0.84 1.24 Gain on surplus asset sales -- 1.25 -- Gain on disposal 8.66 -- -- --------- --------- --------- Net income per share $10.67 $3.01 $1.33 --------- --------- --------- --------- --------- --------- Earnings per share--fully diluted Income from continuing operations $1.62 $0.92 $0.09 Income from discontinued operations 0.39 0.84 1.22 Gain on surplus asset sales -- 1.25 -- Gain on disposal 8.65 -- -- --------- --------- --------- Net income per share $10.66 $3.01 $1.31 --------- --------- --------- --------- --------- --------- Common equivalent shares (thousands) Primary 8,979 8,986 8,792 Fully diluted 8,990 8,992 8,940
FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ---------------------------- 1995 1994 ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents (Note 1) $ 12,382 $ 8,842 Receivables (Notes 2, 4 and 5) 48,199 31,213 Current portion of notes receivable (Note 5) 7,357 1,317 Inventories (Notes 1, 4 and 5) 57,905 40,272 Prepaid expenses 3,941 1,649 Deferred income taxes (Note 1) 13,086 9,270 ------------ ---------- 142,870 92,563 Net assets of discontinued operations -- 109,242 ------------ ----------- Total current assets 142,870 201,805 Property, plant and equipment, at cost: (Notes 1, 4 and 5) Land and improvements 25,676 13,745 Buildings 37,015 28,451 Machinery and equipment 90,534 72,243 Construction in progress 643 620 ------------ ----------- 153,868 115,059 Accumulated depreciation (49,391) (40,973) ------------ ----------- Net property, plant and equipment 104,477 74,086 Notes receivable (Note 5 and 6) 5,271 12,451 Goodwill (Notes 1 and 13) 89,302 64,623 Other assets 17,636 15,212 ------------ ----------- Total operating assets 359,556 368,177 Cash restricted for asbestos costs (Note 14) 2,199 1,893 Asbestos costs to be reimbursed (Note 14) 827,865 810,454 ------------ ----------- Total assets $1,189,620 $1,180,524 ------------ ----------- ------------ -----------
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ------------------------- 1995 1994 ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks (Note 4) $ 1,423 $ -- Current portion of long-term debt (Note 5) 1,346 2,045 Accounts payable and accrued liabilities (Note 3) 63,966 53,239 Reserve for asbestos-related costs (Note 14) 2,700 2,700 ------------ ------------ Total current liabilities 69,435 57,984 Long-term debt (Note 5) 9,365 101,293 Reserve for asbestos-related costs (Note 14) 8,625 14,584 Other long-term liabilities (Note 7 and 8) 12,730 24,109 Deferred income taxes (Note 1) 13,861 19,440 ------------ ------------ Total operating liabilities 114,016 217,410 Asbestos claims settlements (Note 14) 811,952 795,365 Long-term debt associated with asbestos (Note 5) 23,711 22,360 ------------ ------------ Total liabilities 949,679 1,035,135 Minority interest 185 -- Commitments & Contingencies (Notes 11, 14 and 15) Stockholders' equity (Notes 7, 9 and 10): Preferred stock, $.01 par value, 3,000,000 shares authorized; none issued -- -- Common stock, $.01 par value, 15,000,000 shares authorized; 8,631,388 and 4,224,225 shares issued 86 42 Additional paid-in capital 77,293 76,166 Retained earnings 169,568 73,752 Minimum pension liability adjustment (Note 7) (1,400) (4,571) Treasury stock, at cost, 215,700 shares (5,215) -- Foreign currency translation adjustment ( 576) -- ------------ ------------ Total stockholders' equity 239,756 145,389 ------------ ------------ Total liabilities and $1,189,620 $1,180,524 stockholders' equity ------------ ------------ ------------ ------------
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 ----------------------------------- 1995 1994 1993 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) Cash flows from operating activities: Net income $ 95,816 $ 27,035 $ 11,713 Adjustments to reconcile income to net cash provided by continuing operating activities: Income of discontinued operations (81,292) (18,759) (10,896) Depreciation and amortization 13,797 6,983 4,177 Deferred income taxes 4,979 928 300 Deferred long term benefits (2,395) (671) 1,606 Compensation for stock grants 212 129 1,039 Income applicable to minority interest 18 -- -- Gain on sale of assets (342) (2,080) (3,762) Asbestos-related reserve (4,000) -- -- Change in working capital: Receivables (172) 6,447 (1,325) Inventories (3,402) (30) (202) Prepaid expenses (2,022) 159 (463) Accounts payable and accrued liabilities (6,538) (4,293) (1,243) -------- -------- -------- Net cash provided by continuing operations 14,659 15,848 944 Discontinued operations: Income of discontinued operations 81,292 18,759 10,896 Pre-tax gain on sale of assets (121,245) (19,190) -- Proceeds from sale of assets 238,994 23,860 -- Expenses of sale of assets (10,643) -- -- Depreciation, amortization and depletion 3,057 4,151 6,340 Deferred income taxes (16,858) 207 1,927 Net assets change 4,621 28,769 (31,131) --------- -------- --------- Net cash provided (used) by discontinued operations 179,218 56,556 (11,968) Cash flows from investing activities: Non-cash net assets of acquired operations (81,944) (119,894) (13,054) Proceeds from asset sales 348 2,163 5,313 Property, plant and equipment changes (11,784) (7,412) (6,161) Reductions of notes receivable 2,213 1,611 996 Decrease (increase) in other assets (700) (747) (1,542) --------- -------- -------- Net cash used by investing activities (91,867) (124,279) (14,448)
(continued) FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
YEAR ENDED DECEMBER 31 ----------------------------------- 1995 1994 1993 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) Cash flows from financing activities: New borrowings $ 28,434 $ 93,000 $15,000 Repayment of debt (120,243) (35,622) (10,799) Purchase of treasury stock (5,215) -- -- Employee stock plan transactions 509 201 534 --------- --------- -------- Net cash provided (used) by financing activities (96,515) 57,579 4,735 --------- --------- -------- Net cash provided (used) by business activities 5,495 5,704 (20,737) Cash flows from asbestos-related activities: Receipts from insurers 4,754 7,657 19,848 Structured settlement program activity 33 476 (1,638) Other asbestos-related cash transactions (6,422) (9,251) (13,832) Change in cash restricted for asbestos costs (306) (1,066) 5,670 --------- --------- -------- Net cash provided (used) by asbestos-related activities (1,941) (2,184) 10,048 --------- --------- -------- Effect of exchange rate changes on cash and cash equivalents (14) -- -- --------- --------- -------- Net increase (decrease) in cash 3,540 3,520 (10,689) Cash at beginning of year 8,842 5,322 16,011 --------- --------- -------- Cash at end of year $ 12,382 $ 8,842 $ 5,322 --------- --------- -------- --------- --------- -------- Cash paid during the year for: Interest $ 6,673 $ 2,986 $ 3,011 Income taxes 66,645 12,718 5,538 Non-cash items: Decrease in accrued asbestos - related legal costs (203) (198) (574) Increase in asbestos claims settlements 105,908 151,498 244,072 Payments made to claimants on Fibreboard's behalf 89,354 309,537 88,230 Increase in receivables from sale of surplus real estate 697 2,949 250 Acquisition of businesses -- Fair value of assets acquired 95,180 155,440 13,954 Cash paid 81,944 119,894 13,054 --------- --------- -------- Liabilities assumed 13,236 35,546 900
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31 ----------------------------------- 1995 1994 1993 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) Common stock: Beginning balance, 15,000,000 shares authorized; 4,224,225, 4,201,420 and 4,142,300 issued $ 42 $ 42 $ 41 Shares issued under employee stock plans, 159,376, 22,805 and 59,120 shares 2 -- 1 Two-for-one stock split 4,247,787 shares 42 -- -- ---------- ---------- ---------- Ending balance, 15,000,000 shares authorized; 8,631,388, 4,224,225 and 4,201,420 issued $ 86 $ 42 $ 42 ---------- ---------- ---------- ---------- ---------- ---------- Additional paid-in capital: Beginning balance $ 76,166 $ 75,836 $ 74,264 Employee stock plans 1,229 330 1,572 Two-for-one stock split (102) -- -- ---------- ---------- ---------- Ending balance $ 77,293 $ 76,166 $ 75,836 ---------- ---------- ---------- ---------- ---------- ---------- Retained earnings: Beginning balance $ 73,752 $ 46,717 $ 35,004 Net income 95,816 27,035 11,713 ---------- ---------- ---------- Ending balance $ 169,568 $ 73,752 $ 46,717 ---------- ---------- ---------- ---------- ---------- ---------- Minimum pension liability adjustment: Beginning balance $ (4,571) $ (2,427) $ (1,439) Changes during the year 3,171 (2,144) (988) ---------- ---------- ---------- Ending balance $ (1,400) $ (4,571) $ (2,427) ---------- ---------- ---------- ---------- ---------- ---------- Treasury stock, at cost: Beginning balance $ -- $ -- $ -- 215,700 shares acquired (5,215) -- -- ---------- ---------- ---------- Ending balance $ (5,215) $ -- $ -- ---------- ---------- ---------- ---------- ---------- ---------- Foreign currency translation adjustment: Beginning balance $ -- $ -- $ -- Changes during the year ( 576) -- -- ---------- ---------- ---------- Ending balance $ ( 576) $ -- $ -- ---------- ---------- ---------- ---------- ---------- ----------
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF PRESENTATION The consolidated financial statements include the accounts of Fibreboard Corporation, a Delaware Corporation, and all its wholly-owned subsidiaries (collectively Fibreboard) after elimination of intercompany balances and transactions. Foreign subsidiaries in Australia and New Zealand have fiscal year-ends of October 31 to facilitate consolidation of the subsidiaries' financial statements. Certain reclassifications of prior year amounts have been made to conform with the current presentation. In addition, all prior year per share data has been restated to reflect the impact of a two-for-one stock split in May 1995. NATURE OF OPERATIONS Fibreboard operates in two primary industry segments: Building Products and Resort Operations. Building products are further broken down into residential products and industrial products. In 1995, residential building products accounted for 72% of sales, industrial building products 16% of sales and resort operations 12% of sales. Residential products manufactures vinyl siding and related accessories, which are sold to residential siding installers and construction and remodeling contractors. Manufactured products are sold 1) through a company-owned distribution network, which also sells other exterior building products and 2) independent distributors. Principal market areas are east of the Mississippi River with some concentrations in mid-west and Great Lakes states. Industrial building products manufactures molded insulation for high temperature applications, fireproofing board and protective metal jacketing. Markets are concentrated in the Gulf Coast states. Resort operations includes a year-round destination resort and two day ski areas, all located in California. No single customer accounts for a significant portion of Fibreboard's sales. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated. WARRANTY COSTS Fibreboard provides, by a current charge to income, an amount it estimates will be needed to cover future warranty obligations for products sold during the current year. The accrued liability for warranty costs is included in accounts payable and accrued liabilities. EARNINGS PER SHARE Earnings per common and common equivalent share are calculated using the weighted average number of common shares outstanding during the year plus the net additional number of shares which would be issuable upon the exercise of stock options, assuming Fibreboard used the proceeds received to purchase additional shares at market value. CASH AND CASH EQUIVALENTS Fibreboard utilizes a centralized cash management system to minimize the amount of cash on deposit with banks and maximize interest income from amounts not required for immediate disbursement. Cash includes cash on hand or in banks available for immediate disbursal. Cash equivalents are short-term investments that have an original maturity date of less than 90 days. INVENTORY VALUATION FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS) Inventories are valued at the lower of cost (first-in, first-out) or market. Inventory costs include material, labor and operating overhead. Operating supplies are priced at average cost. Inventories are valued as follows:
DECEMBER 31 ----------------------- 1995 1994 ---- ---- Finished goods $49,223 $32,914 Raw materials 6,898 6,770 Supplies 1,784 588 ------- ------- Total inventories $57,905 $40,272 ------- ------- ------- -------
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is provided on the straight-line method based upon the estimated service lives (3- 30 years) of the various units of property. Depreciation expense for continuing operations in 1995, 1994 and 1993 was $8,715, $5,578 and $3,797. Fibreboard capitalizes interest on borrowed funds incurred during construction periods. Capitalized interest is amortized over the lives of the related assets. Interest capitalized in 1995, 1994 and 1993 was $0, $0 and $183. GOODWILL Fibreboard records the excess of purchase price over the fair value of net assets of businesses acquired as goodwill and amortizes such amounts on a straight-line basis over 30 years. Accumulated goodwill amortization was $3,079 and $709 on December 31, 1995 and 1994. The carrying value of goodwill is reviewed periodically to determine its recoverability through future operations. During 1995, the goodwill associated with the acquisition of Norandex was reduced by $2,496 to reflect purchase price adjustments. INCOME TAX POLICIES The income tax provision includes the following:
YEAR ENDED DECEMBER 31 ------------------------------ 1995 1994 1993 ---- ---- ---- Continuing Operations --------------------- Current income taxes $ 5,662 $ 4,972 $ 2,323 Benefit of operating loss carry forward -- -- (118) Deferred income taxes 3,410 661 (1,638) ------- ------- ------- $ 9,072 $ 5,633 $ 567 ------- ------- ------- ------- ------- ------- Discontinued Operations ----------------------- Current income taxes $62,464 $12,562 $ 6,256 Benefit of operating loss carry forward -- -- (611) Deferred income taxes (16,858) 207 1,927 ------- ------- ------- $45,606 $12,769 $ 7,572 ------- ------- ------- ------- ------- -------
The following table summarizes the differences between the statutory federal and effective tax rate: FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS)
YEAR ENDED DECEMBER 31 -------------------------- 1995 1994 1993 ---- ---- ---- Continuing Operations --------------------- Federal tax rate 35% 35% 35% State income taxes, net of Federal benefit 3 6 6 Non-deductible goodwill 3 -- -- Other (3) -- -- --- --- --- 38% 41% 41% --- --- --- --- --- --- YEAR ENDED DECEMBER 31 -------------------------- 1995 1994 1993 ---- ---- ---- Discontinued Operations ----------------------- Federal tax rate 35% 35% 35% State income taxes, net of Federal benefit 3 6 6 Basis difference of subsidiary sold ( 2) -- -- ---- ---- ---- 36% 41% 41% --- --- --- --- --- ---
Effective January 1, 1993, the Company implemented the provisions of Statement of Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 utilizes the liability method and deferred taxes are determined based on the estimated future tax effects of differences between the financial statements and tax bases of assets and liabilities given the provisions of the enacted tax laws. The adoption of SFAS 109 had no effect on reported net income in the Consolidated Statements of Income. The tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows:
YEAR ENDED DECEMBER 31 -------------------------- 1995 1994 ----- ---- Deferred tax assets: Accrued liabilities $ 5,327 $ 4,560 Current portion asbestos reserve 1,142 1,134 AMT credit -- 1,258 Environmental reserve 2,674 784 State taxes 2,373 -- Other 1,570 1,534 ------- ------- Total deferred tax assets $13,086 $ 9,270 ------- ------- ------- ------- Deferred tax liabilities: Property, plant and equipment $ 8,802 $15,751 Timber 593 8,230 Post retirement benefits (4,772) (7,187) Long-term asbestos assets and reserve 3,243 (144) State taxes 270 (1,142) Contingent liabilities 7,243 7,323 Other (1,518) (3,391) ------- ------- Total deferred tax liabilities $13,861 $19,440 ------- ------- ------- -------
FOREIGN CURRENCY TRANSLATION The functional currency of the majority of Fibreboard's foreign operations is the applicable local currency. Translation from the applicable foreign currency to U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for sales and expense accounts using a weighted average exchange rate during the period. The resulting translation adjustment is reflected as a component of stockholders' equity. 2. RECEIVABLES FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS)
DECEMBER 31 -------------------- 1995 1994 ---- ---- Trade receivables $47,752 $31,476 Less reserves for bad debts (2,560) (2,010) Other receivables 3,007 1,747 ------- ------- $48,199 $31,213 ------- ------- ------- -------
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
DECEMBER 31 ------------------- 1995 1994 ---- ---- Accounts payable $27,948 $20,642 Accrued pension expense 4,417 4,518 Salaries and wages payable 9,089 6,892 Taxes other than income taxes 2,205 2,520 Workers compensation 5,965 6,330 Environmental reserves 6,402 1,822 Other 7,940 10,515 ------- ------- $63,966 $53,239 ------- ------- ------- -------
The December 31, 1995 environmental reserve balance includes $5,000 which was recorded upon the sale of the Wood Products Group to indemnify the acquirer for specified adverse environmental conditions which may have occurred prior to September 25, 1995. The acquirer of the Wood Products Group has made no significant claim impacting the reserve since the date of the sale. Fibreboard is self-insured for the majority of its workers compensation benefits. Workers compensation expense was $1,981, $1,410 and $268 in 1995, 1994 and 1993 based on actual and estimated claims incurred. 4. NOTES PAYABLE In 1994, Fibreboard had a $5,000 operating line of credit dedicated for the seasonal cash needs of its resort operations. The facility was replaced in 1995 with a $30,000 credit facility described in Note 5. Fibreboard's Canadian subsidiary has a $6,000 operating line of credit at prime plus 1/4% (7.65% at December 31, 1995) guaranteed by a letter of credit drawn against Fibreboard's $125,000 credit facility which is described in Note 5. Fibreboard has a commitment from a bank to provide a $15,000 operating line of credit, which will replace this facility. Borrowings will have interest at LIBOR plus 0.45% to 0.90%. This facility will be secured by substantially all the assets of the Canadian subsidiary. Fibreboard expects to finalize this facility during the first quarter of 1996. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS) 5. LONG-TERM DEBT Fibreboard's long-term debt not associated with asbestos consists of the following:
DECEMBER 31 ------------------------------ 1995 1994 ------ ----- Revolving credit facility interest at LIBOR + 0.45% to 0.925% (6.39% at December 31, 1995), secured by machinery and equipment, receivables and inventories of Fibreboard and certain subsidiaries $ 5,000 $ 86,000 Reducing revolving credit facility, interest at LIBOR + 1.0% to 1.375% secured by the assets of Fibreboard's resort subsidiaries -- 6,700 Term loan, interest at prime plus 1/2%, secured by the assets of a resort subsidiary -- 4,500 Pollution control project revenue bonds, 6.6%, payable annually through 1999, unsecured 4,870 5,905 Other debt--6.8% to 10.7% payable in varying amounts 841 233 -------- -------- 10,711 103,338 Less: Current portion (1,346) (2,045) -------- -------- $ 9,365 $101,293 -------- -------- -------- --------
Required repayment of long-term debt is as follows:
YEAR ENDING DECEMBER 31 ----------- 1996 $ 1,346 1997 1,306 1998 1,621 1999 1,438 2000 5,000 ------- $10,711 ------- -------
Fibreboard has entered into an agreement under which it will receive an interest payment on $50,000 to the extent LIBOR exceeds 7.5% for the period November 1995 through October 1996. The cost of this transaction will be recognized during 1996. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) Fibreboard has notes receivable with terms and payment dates which are substantially identical to $4,870 of revenue bonds included in the above table. Payments under these notes are as follows: YEAR ENDING DECEMBER 31 ----------- 1996 $ 1,105 1997 1,175 1998 1,255 1999 1,335 ------- $ 4,870 ------- ------- Fibreboard obtained a $175,000 revolving credit facility in 1994. Initial borrowings were used to replace a prior credit facility, repay certain term loans and fund a portion of the purchase of Norandex Inc. (see Note 13). In conjunction with the sale of the wood products business, the facility was reduced to $125,000. The facility expires September 30, 2000 unless the maturity date is extended by Fibreboard and its lenders. Proceeds may be used for general corporate purposes and acquisitions. Amounts available aggregated $108,761 at December 31, 1995. This facility was amended subsequent to December 31, 1995 to increase the maximum commitment to $150,000 in the form of a five year, $25,000 term loan. The term loan bears interest at the same rate as the existing facility. Fibreboard's resort operations reducing revolving credit facility provides for maximum availability of $30,000. Subsequent to December 31, 1995, this facility was increased to $40,000. Maximum availability reduces to $37,471 on April 30, 1996, $34,943 on April 30, 1997, $32,872 on October 30, 1997, $28,272 on April 30, 1998 and $23,672 on April 30, 1999 with any remaining outstanding amounts due May 31, 2000. Fibreboard's loan agreements contain various financial covenants, the most restrictive of which impose limitations on dividends and other distributions and require the maintenance of minimum levels of net worth and certain coverage ratios. At December 31, 1995, these covenants were met. Fibreboard's asbestos related long-term debt consists of the following and is due upon conclusion of the asbestos bodily injury insurance coverage litigation. In the event Fibreboard prevails in the insurance coverage litigation, the amounts will be repaid from insurance proceeds. DECEMBER 31 --------------------- 1995 1994 ----- ----- Amounts advanced under reimbursement agreement, interest at prime minus 2% (6.75% at December 31, 1995) $23,711 $22,360 6. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND SHORT-TERM INVESTMENTS Carrying amount approximates fair value because of the short maturity of these investments. NOTES RECEIVABLE Fair value of notes receivable is estimated by discounting future cash flows using current rates at which similar loans would be made. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) NOTES PAYABLE TO BANKS Carrying amount approximates fair value based on current rates offered to the corporation for similar debt. LONG-TERM DEBT Fair market value is estimated by discounting the future cash flows using the current rates at which similar debt could be placed. The estimated fair values of financial instruments are as follows:
1995 1994 --------------------- -------------------- Carrying Fair Carrying Fair Amount Value Amount Value ------ ----- ------ ----- Financial assets: Cash and short-term investments $ 14,581 $14,581 $ 10,735 $ 10,735 Notes receivable 12,628 12,784 13,768 14,087 Interest rate instruments 292 -- 350 841 Financial liabilities: Notes payable to banks $ 1,423 $ 1,423 $ -- $ -- Long-term debt 10,711 10,770 103,338 101,907
Fibreboard's consolidated balance sheets include financial instruments resulting from the asbestos-related litigation, asbestos costs to be reimbursed, asbestos claims settlement obligations and asbestos-related long-term debt. These are unique financial instruments. Consequently, these instruments are not traded nor is it likely a willing buyer could be found for them. Therefore, it is not practicable to estimate a market value. The balance sheets as of December 31, 1995 and 1994 reflects asbestos costs to be reimbursed of $827,865 and $810,454, asbestos claims settlements of $811,952 and $795,365 and asbestos-related long-term debt of $23,711 and $22,360. 7. PENSION PLANS Fibreboard has pension plans covering substantially all employees. Contributions to defined benefit plans are based on actuarial calculations of amounts necessary to cover current cost and amortization of prior service costs. All defined benefit plan participants' benefits have vested and been frozen. Contributions to defined contribution plans are nondiscretionary and based on varying percentages of eligible compensation for the year. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) The status of Fibreboard's defined benefit pension plans at December 31, 1995 and 1994 is as follows:
Assets Accumulated Accumulated exceed benefits benefits accumulated exceed exceed benefits assets assets DECEMBER 31, 1995 DECEMBER 31, 1994 ------------------------- ----------------- Vested benefit obligation $ 8,602 $ 70,986 $ 73,674 -------- --------- --------- -------- --------- --------- Accumulated benefit obligation $ 8,602 $ 73,714 $ 76,503 -------- --------- --------- -------- --------- --------- Projected benefit obligations $ 8,602 $ 73,714 $ 80,977 Plan assets 9,117 59,101 55,336 -------- --------- --------- Projected benefit obligations in excess of (less than) plan assets 515 (14,613) (25,641) Unrecognized obligation at transition -- 1,086 1,206 Unrecognized net loss in past service (338) 2,334 7,318 Adjustment required to recognize minimum liability -- (3,420) (8,889) -------- --------- --------- Prepaid pension cost (pension liability) $ 177 $(14,613) $(26,006) -------- --------- --------- -------- --------- ---------
Of the accrued expense, $4,417 and $4,518 is included in accounts payable and accrued liabilities in 1995 and 1994 (Note 3). The actuarial assumptions used to determine accrued pension expense and the funded status of the plans for 1995 were: 8.25% discount rate (net pension expense) 7.5% discount rate on funded status and 8% expected long-term rate of return on plan assets. The assets of the plan at December 31, 1995 and 1994 consist of bonds, both corporate and government, stocks, cash and cash equivalents. As required by Statement of Accounting Standards No. 87, Employers' Accounting for Pensions, Fibreboard has recognized a minimum pension liability associated with its frozen defined benefit plan. As a result, Fibreboard recorded an after tax reduction in equity of $1,400 at December 31, 1995 and $4,571 at December 31, 1994. Pension expense for 1995, 1994 and 1993 included the following components:
YEAR ENDED DECEMBER 31 ----------------------- 1995 1994 1993 ---- ---- ---- Benefits earned by employees $ 904 $ 296 $ -- Interest cost on projected benefit obligation 6,380 5,774 5,489 Return on plan assets (15,336) 433 (5,832) Net amortization and deferral 11,208 (4,659) 1,729 Curtailment gain (1,384) -- -- -------- ------- ------- Net pension cost of defined benefit plans 1,772 1,844 1,386 Contributions to defined contribution pension plans for continuing operations 1,330 971 731 -------- ------- ------- Net pension expense $ 3,102 $ 2,815 $ 2,117 -------- ------- ------- -------- ------- -------
FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) On December 31, 1995, Fibreboard's Norandex subsidiary with a defined benefit pension plan with assets in excess of obligations was frozen, resulting in a curtailment gain of $4,762. The assets of the plan were merged with Fibreboard's other defined benefit pension plan. Of the curtailment gain, $3,378 was utilized to reduce goodwill and $1,384 to reduce 1995 pension expense. 8. NON-PENSION POST-RETIREMENT BENEFITS The status of Fibreboard's non-pension post retirement benefits which are primarily available to certain collective bargaining units of facilities which have been sold at December 31, 1995 and 1994 are as follows: Year Ended December --------------------- Net Periodic Post-Retirement Benefit Cost 1995 1994 - ----------------------------------------- ---- ----
Interest cost $ 94 $ 176 Net other (182) (1,456) ------- -------- Total $ (88) $(1,280) ------- -------- ------- -------- Accrued Benefit Cost Accumulated post-retirement benefit obligation Retirees $ 976 $ 1,331 Eligible actives 219 267 Other active plan participants 28 163 ------- -------- 1,223 1,761 Unrecognized net gain (595) (360) ------- -------- Total $1,818 $ 2,121 ------- -------- ------- --------
Amounts recorded in 1994 as net other includes a gain of $1,164 from the resolution of a post retirement benefit obligation of facilities sold in 1988. An 8.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1996. The cost trend rate was assumed to decrease slightly until 2001 at which time the rate was assumed to stabilize at 6%. Increasing the assumed health care cost trend rates by 1% in each year would increase the accumulated post retirement benefit obligation as of December 31, 1995 by $33 and increase the aggregate of the service and interest cost components of net periodic post retirement cost for the year then ended by $5. The weighted average discount rate used in determining the accumulated post retirement benefits was 7.5% while 8.25% was used to determine the 1995 post-retirement benefit cost. 9. STOCK OPTION AND STOCK PURCHASE PLANS Fibreboard has a stock option and rights plan for certain officers, directors and key employees. The plan provides for the granting of stock options, stock appreciation rights, limited stock appreciation rights and restricted stock awards. Awards under the plan are determined by the compensation committee of the Board of Directors. The maximum number of shares available for award under the plan is 1,600,000. Option prices are set by the committee. Option prices for grants must be at least 85% of the fair market value on the date of grant. The time limit within which options may be exercised and other exercise terms are fixed by the committee. At December 31, 1995, 31,060 shares were available for awards under this plan. In 1995, Fibreboard adopted a new stock incentive plan, under which a maximum of 500,000 shares are available for grants of stock options, stock appreciation rights, stock unit and restricted stock awards. In addition, any shares which remain available for award under the existing plan, or which become available in the future through forfeiture or cancellation, will be added to shares available under the new plan. Options to purchase 123,500 shares at $21.38 have been awarded under this plan. The plan is subject to shareholder approval at the 1996 annual meeting. Awards are determined by the committee; however, no option may be granted at an exercise price less than 100% of market value on the grant date nor may any individual receive stock option or stock appreciation right grants in any year covering more than 200,000 shares. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) When stock options are exercised, the proceeds (including any tax benefits to Fibreboard resulting from the exercise) are credited to the appropriate common stock and additional paid-in capital accounts. Compensation related to restricted stock awards and certain option grants (measured at the grant date) is recognized as expense over the term of the related award. Information about Fibreboard's stock incentive plans is summarized below: Restricted Options Stock Units ------- -----------
Outstanding at December 31, 1992 1,110,100 60,000 Granted at $5.97-$12.07 per share 24,000 30,000 Exercised at $2.03-$6.59 per share (122,700) -- Cancelled (12,600) -- ---------- --------- Outstanding at December 31, 1993 998,800 90,000 Granted at $12.69-$14.94 per share 24,000 26,000 Exercised at $0.94-$6.59 per share (9,500) (46,000) Cancelled (6,000) -- ---------- --------- Outstanding at December 31, 1994 1,007,300 70,000 Granted at $21.38-$24.00 per share 147,500 -- Exercised at $1.63-$3.53 per share (222,800) (14,000) Cancelled -- (4,800) ---------- --------- Outstanding at December 31, 1995 932,000 51,200 ---------- --------- ---------- --------- Shares exercisable at December 31, 1995 784,500 -- 1996 65,167 30,000 1997 41,167 21,200 1998 41,166 --
Option awards for 132,000 shares include limited stock appreciation rights for a like number of shares. Each limited stock appreciation right entitles the holder, in certain limited circumstances, to surrender the underlying option in exchange for cash equal to the difference between fair market value at the date of surrender and the option price for such shares. In addition, Fibreboard has an employee stock purchase plan. The plan allows employees to purchase Fibreboard stock with an aggregate purchase price of up to 15% of the employee's base salary at the beginning of each purchase period. The purchase price is set by the committee, but cannot be less than the lesser of 85% of fair market value at the beginning of each purchase period or 85% of fair market value at the actual purchase date. The maximum number of shares issuable under the plan is 500,000. During 1995, 1994 and 1993, no shares of Fibreboard stock were sold to employees under this plan. At December 31, 1995, 246,532 shares remain available for issuance under this plan. Fibreboard has a long-term equity incentive plan, which provides for awards of phantom stock units. Each phantom stock unit entitles the grantee to a cash payment equal to the fair market value of one share of Fibreboard common stock at the maturity date less the fair market value on the grant date. At December 31, 1995, 376,000 phantom stock units had been awarded with grant prices of $13.75 to $15.00 per share, which mature 158,000 units in 1996 and 218,000 units in 1997. During 1995, cash payments of $808 were made in satisfaction of 94,800 phantom stock units. Compensation expense recognized for these plans was $3,298, $129 and $1,039 in 1995, 1994 and 1993. 10. PREFERRED STOCK PURCHASE RIGHTS In 1988, Fibreboard implemented a stockholder rights plan and distributed to stockholders one preferred share purchase right for each share of Fibreboard common stock then outstanding. Under FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) the rights plan, as amended in 1994, each right entitles the registered holder to purchase from Fibreboard 1/200th of a share of Series A Junior Participating Preferred Stock at an exercise price of $53 per 1/200th share, subject to adjustment. The rights will not be exercisable until a party acquires beneficial ownership of 15% or more of Fibreboard's then outstanding common shares. The rights, which do not have voting rights, expire in February 2004 and may be redeemed in whole by Fibreboard, at its option, at a price of $.01 per right prior to the expiration or exercise of the rights. In the event Fibreboard is acquired in an unsolicited merger or other business combination transaction, each right will entitle the holder to receive, upon exercise of the right, common stock of the acquiring company having a market value of two times the then current exercise price of the right. In the event a party acquires 15% or more of Fibreboard's outstanding common shares, each right will entitle the holder to receive upon exercise Fibreboard common shares having a market value of two times the exercise price of the right. 11. COMMITMENTS Fibreboard leases certain office and warehouse space and machinery and equipment under operating leases. Minimum lease payments for the next five years are as follows:
Year Ending December 31 ----------- 1996 $ 8,500 1997 7,220 1998 5,808 1999 4,175 2000 3,344 ------- $29,047 ------- -------
In addition, Fiberboard leases property from the U.S. Forest Service for two of its resort operations. Lease payment terms are based on a percentage of revenues. Total rent expense of continuing operations for all operating leases amounted to $11,184, $4,646 and $1,581 in 1995, 1994 and 1993. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) 12. INDUSTRY SEGMENT INFORMATION Information about Fibreboard's industry segments is set forth below.
YEAR ENDED DECEMBER 31 --------------------------------------------- 1995 1994 1993 ---- ---- ---- Outside sales Building products: Residential $ 276,180 $ 85,607 $ -- Industrial 59,671 56,376 49,215 ---------- ---------- ---------- Total building products 335,851 141,983 49,215 Resort operations 44,955 41,413 25,501 ---------- ---------- ---------- Consolidated $ 380,806 $ 183,396 $ 74,716 ---------- ---------- ---------- ---------- ---------- ---------- Operating profit Building products: Residential $ 18,031 $ 8,096 $ -- Industrial 7,694 6,452 5,382 ---------- ---------- ---------- Total building products 25,725 14,548 5,382 Resort operations 8,262 8,020 2,325 ---------- ---------- ---------- Total operations 33,987 22,568 7,707 Unallocated expense, net (7,016) (7,425) (8,299) Interest expense (6,476) (4,931) (3,575) Interest and other income 3,101 3,697 5,551 ---------- ---------- ---------- Income from continuing operations before income taxes $ 23,596 $ 13,909 $ 1,384 ---------- ---------- ---------- ---------- ---------- ---------- Identifiable assets Building products: Residential $ 216,542 $ 147,066 $ -- Industrial 27,715 27,268 25,831 ---------- ---------- ---------- Total building products 244,257 174,334 25,831 Resort operations 68,726 39,536 36,100 Discontinued operations, net -- 109,242 149,310 Unallocated assets 46,573 45,065 43,877 Asbestos-related assets 830,064 812,347 969,136 ---------- ---------- ---------- Total assets $1,189,620 $1,180,524 $1,224,254 ---------- ---------- ---------- ---------- ---------- ---------- Identifiable assets U.S. $1,143,045 $1,180,524 $1,224,254 Canada 43,481 -- -- Other 3,094 -- -- ---------- ---------- ---------- $1,189,620 $1,180,524 $1,224,254 ---------- ---------- ---------- ---------- ---------- ----------
FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS)
YEAR ENDED DECEMBER 31 ------------------------------------------------- 1995 1994 1993 ---- ---- ---- Depreciation and amortization Building products: Residential $ 6,303 $ 1,815 $ -- Industrial 867 788 1,041 -------- -------- --------- Total building products 7,170 2,603 1,041 Resort operations 5,707 3,447 2,514 Capital expenditures Building products: Residential (1) 15,913 28,628 -- Industrial 484 327 324 -------- -------- -------- Total building products 16,397 28,955 324 Resort operations (2) 27,301 6,229 17,794
(1) Includes acquisition assets of $11,865 and $28,043 in 1995 and 1994. (2) Includes acquisition assets of $20,283 and $12,981 in 1995 and 1993. 13. ACQUISITIONS AND DISPOSITIONS In August 1994, Fibreboard acquired the stock of Norandex Inc., a manufacturer and distributor of residential exterior building products, for $119,894 in cash including acquisition costs. The acquisition, which was accounted for as a purchase, resulted in $62,836 of goodwill which will be amortized over 30 years. Norandex operating earnings have been included in Fibreboard's consolidated statement of income since the date of acquisition. On November 30, 1995, Fibreboard acquired the stock of Vytec Corporation, a Canadian manufacturer of exterior vinyl siding products, for $38,576 in cash including acquisition costs. The acquisition, which was accounted for as a purchase, resulted in $19,918 of goodwill which will be amortized over 30 years. Vytec operating earnings have been included in Fibreboard's consolidated statement of income since the date of acquisition. The following unaudited table presents the pro forma combined results of Fibreboard, Norandex and Vytec assuming Norandex was acquired on January 1, 1993 and assuming Vytec was acquired on January 1, 1994.
YEAR ENDED DECEMBER 31 ---------------------------- 1995 1994 1993 ---- ---- ---- Net sales $424,472 $370,717 $267,347 Income from continuing operations 14,190 13,108 7,587 Earnings per share from continuing operations: Primary 1.58 1.46 .86 Fully diluted 1.58 1.46 .85
The pro forma results include only adjustments necessary to 1) reflect the allocation of the purchase price resulting in changes in depreciation and amortization; 2) recognize the interest cost associated with the purchase; 3) adjust sales to reflect intercompany sales between Vytec and Norandex; and 4) recognize the income tax effects of these adjustments. Because the pro forma results include only the adjustments indicated above, they should not be considered indicative of the results that would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. No attempt has been made to quantify FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) in the pro forma results additional costs which may be incurred as a result of the combination, even though certain costs are expected to increase. In July 1993, Fibreboard acquired the net assets of Sierra Ski Ranch, a ski facility located in the Lake Tahoe region of northern California, for $13,054 in cash. The acquisition was accounted for as a purchase of assets. The ski area was subsequently renamed Sierra-at-Tahoe. On October 23, 1995, Fibreboard acquired the net assets of Bear Mountain, a ski and golf facility located in southern California, for $20,604 in cash. The acquisition was accounted for as a purchase of assets. During 1995, Fibreboard acquired the net assets of 23 building products distribution branches for $22,764 in cash. These acquisitions resulted in $9,913 of goodwill which will be amortized over 30 years. On September 25, 1995, Fibreboard sold substantially all of its wood products related assets for $238,994 cash, net of purchase price adjustments, and recorded a pre-tax gain of $121,245 ($77,813 net of income taxes). Retained balances primarily include notes receivable from prior assets sales, a former plant site and nominal timberlands adjacent to Fibreboard's Northstar Resort facility. Fibreboard also retained liabilities for workers compensation claims that arose prior to September 25, 1995 and established a $5,000 reserve for future environmental costs related to wood products activities prior to the sale. As a result of the sale, Fibreboard has restated its financial statements to reflect the wood products operations as discontinued. The net assets of discontinued operations at December 31, 1994 are summarized as follows:
Current assets $ 45,770 Timber and timberlands 27,880 Property, plant and equipment 40,881 Other assets 170 Current liabilities (5,459) -------- $109,242 -------- --------
Operating results of the discontinued wood products operations were as follows:
1995 1994 1993 ---- ---- ---- Sales $111,750 $180,309 $190,494 Pre-tax operating profit 5,653 12,670 18,468 Net operating income 3,479 7,538 10,896 Net gain on surplus asset sales -- 11,221 -- Net gain on disposal 77,813 -- --
In July 1994, Fibreboard sold 8,900 acres of non-essential timberlands for $21,500 and realized an $18,858 pre-tax gain ($11,221 net of tax). 14. ASBESTOS-RELATED LITIGATION CONTINGENT LIABILITY FOR ASBESTOS-RELATED CLAIMS Overview: FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) Fibreboard's ability to continue to operate in the normal course of business is dependent upon its ongoing capability to fund asbestos-related defense and indemnity costs. Prior to 1972, Fibreboard manufactured insulation products containing asbestos. Fibreboard has since been named as a defendant in many thousands of personal injury claims for injuries allegedly caused by asbestos exposure and in asbestos-in-buildings actions involving many thousands of buildings. Fibreboard believes it has unique insurance coverage for personal injury claims, as the trial court has held (with the issue on appeal) that claims with initial exposure to asbestos prior to 1959 are covered by two no-aggregate-limit policies. During 1993, Fibreboard and its insurers entered into the Insurance Settlement Agreement, and Fibreboard, its insurers and plaintiffs representatives entered into the Global Settlement Agreement. These agreements are interrelated. Final court approval of these agreements is required. Trial court approval of both settlements was obtained in July, 1995. Both judgments have been appealed, which will potentially delay final approval of the settlements until 1997 or later. If both the Global and Insurance Settlement Agreements are approved, Fibreboard believes its existing and future personal injury asbestos liabilities will be resolved through insurance resources and existing corporate reserves. If the Insurance Settlement is approved but the Global Settlement is not approved, the insurers will provide Fibreboard with up to $2,000,000 to resolve claims pending as of August 27, 1993 and all future claims, and will pay claims settled but not yet paid as of August 27, 1993. Claims Activity: Fibreboard has already resolved 158,100 personal injury claims for approximately $1,779,500, not including legal defense costs. Substantially all of the settlements have been achieved through 1) payments by Fibreboard's insurers; 2) assignments of Fibreboard's rights to insurance payments, most of which have been converted to three-party agreements between Fibreboard, its insurer and plaintiffs; or 3) deferring payments pending resolution of the personal injury insurance coverage litigation discussed below. An additional 30,600 claims have been disposed of at no cost to Fibreboard other than legal defense costs. At December 31, 1995, Fibreboard estimates that approximately 48,000 claims have been filed against it which remain unresolved. Approximately 30,600 of these claims were initially filed against Fibreboard on or after August 27, 1993 and will be covered by the Global Settlement, if approved. Fibreboard is unable to determine the exact number of claims that may be filed in the future, although the number is expected to be substantial. Fibreboard has achieved excellent results in resolving asbestos-in- buildings actions. At December 31, 1995, of the 152 actions served against it, Fibreboard has been dismissed from 135 (31 of which joined the National Schools class action), settled 8, tried one to a defense verdict and remains a defendant in 8 actions. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) The following tables illustrate asbestos-related personal injury claims activity for the last three years:
Year Ended December 31 ---------------------- 1995 1994 1993 ---- ---- ---- Personal Injury Claims - ---------------------- New claims received (1) 20,731 3,500 35,100 Claims disposed Settled 10,672 15,185 27,902 Dismissed 3,775 2,685 2,716 "Green Card" settlements (2) 96 189 429 Judgments (3) -- 1 48 Adjustments (4) -- 1,366 2,300 Average settlement amount per claim settled (5)-- pre-1959 claims $ 10 $ 8 $ 12 post-1959 claims $ 13 $ 7 $ 4 Claims pending at year end(6) 48,000 41,900 57,800
1. Fibreboard believes new claims received increased during 1993 in anticipation of the Global and Insurance Settlements in 1993 and due to significant year end settlements of outstanding claims in 1992 that included a significant number of unfiled claims incorporated into large group settlements. Of the claims received in 1995, 1994 and 1993, 15,900, 2,900 and 14,600 claims were filed on or after August 27, 1993, and will be covered by the Global Settlement, if approved. 2. Under Green Card Settlements, there is no determination of liability by Fibreboard to a claimant. Instead, Fibreboard waives the statute of limitations should a claimant develop an asbestos-related impairment in the future. 3. Judgments represent defense verdicts in favor of Fibreboard, or plaintiff verdicts where the net amount payable by Fibreboard is zero after applying prior settlement amounts or plaintiff verdicts where the judgment has been paid. Since 1988, only 42 judgments have resulted in monetary payments, aggregating $8,038. Additional judgments favoring plaintiffs have been entered. Fibreboard is appealing these judgments. The amount of such judgments is included in Fibreboard's overall liability estimate discussed below. 4. Often, multiple claims are filed for the same injury. In addition, Fibreboard's claims database was constructed by merging several third- party databases in 1988. During 1993, Fibreboard attempted to identify duplicate claims and remove them from the database. It is often not possible to fully identify duplicate claims until the claims are prepared for trial. Fibreboard anticipates additional future adjustments. 5. These averages are for claims where the initial year of exposure is known. 6. Of the 1995 pending claims, 30,600 were filed on or after August 27, 1993, and will be covered by the Global settlement, if approved. - -------------------------------------------------------------------------------- Insurance Coverage for Personal Injury Claims: During 1993, Fibreboard entered into a settlement agreement with Continental Casualty Company (Continental) and Pacific Indemnity Company (Pacific) (the Insurance Settlement). In addition, FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) Fibreboard, Continental, Pacific and plaintiffs' representatives entered into a settlement agreement (the Global Settlement). These agreements are interrelated. Final court approval of the agreements is required. The United States District Court for the Eastern District of Texas approved both settlements in July 1995. Both judgments have been appealed. The Fifth Circuit Court of Appeals has scheduled oral argument of the issues in early March 1996. These appeals, and subsequent appeals, if any, will potentially delay final approval of the settlements until 1997 or later. If both the Global Settlement and Insurance Settlement are approved, Fibreboard believes its existing and future personal injury asbestos liabilities will be resolved through insurance resources and existing corporate reserves. Fibreboard will contribute $10,000 toward a $1,535,000 settlement trust, which it will obtain from other remaining insurance sources and existing reserves. The Home Insurance company has paid $9,892 into the trust on behalf of Fibreboard, in satisfaction of an earlier settlement agreement. At December 31, 1995, Fibreboard owed the escrow account $221. The remainder of the trust will be funded by Continental and Pacific. The insurers have placed $1,525,000 in an escrow account pending court approval of the settlements. The balance of the escrow account was $1,651,886 at December 31, 1995 after payment of interim expenses associated with the Global Settlement. The trust will be used to compensate "future" plaintiffs, defined as those plaintiffs who had not filed a claim against Fibreboard before August 27, 1993. If the Global Settlement is approved such future plaintiffs only source of compensation will be the trust, as an injunction will be entered prohibiting future claims against Fibreboard or the insurers. If the Global Settlement is not approved, but the Insurance Settlement is approved, the insurers will instead provide Fibreboard with up to $2,000,000 to resolve pending and future claims and will pay the deferred payment portion of existing settled claims. While Fibreboard is optimistic, there is no assurance final court approval of either the Global Settlement or the Insurance Settlement can be obtained. If neither the Global Settlement nor the Insurance Settlement is approved, the parties will be bound by the outcome of the insurance coverage litigation, unless other settlements are reached. All insurance proceeds due from other insurers under previous settlements have been received. In the event the settlements discussed above are not approved, Fibreboard believes it has substantial insurance coverage for asbestos-related defense and indemnity costs. Fibreboard's disputes with Continental and Pacific have been the subject of litigation which began in 1979. Trial court judgments rendered in 1990 give Fibreboard virtually unlimited insurance coverage for asbestos-related personal injury claims where the initial exposure to asbestos occurred prior to March 1959. Under the judgments, these insurers can be required to pay up to $500 for each occurrence (defined as each individual claim) with no limitation on the aggregate number of occurrences. The insurers appealed to the California Court of Appeal. Among other issues, Continental disputed the definition of an occurrence under its policy as well as the trigger and scope of coverage as determined by the trial court, while Pacific argued that its policy contained an aggregate limit as well as disputing the trigger and scope of coverage issues. In November 1993, the Court of Appeal issued its ruling on the trigger and scope of coverage issues, confirming the favorable trial court judgments, except the court held the period for coverage would begin at the time of exposure to Fibreboard's asbestos products rather than at the time of exposure to any company's asbestos product, with the presumption that these periods are the same. At the request of Fibreboard, Continental and Pacific, the Court of Appeal withheld its ruling on the remaining issues while the parties seek approval of the Global and Insurance Settlements. If the Global and/or Insurance Settlements are ultimately approved, Fibreboard and its insurers will seek to dismiss the insurance coverage litigation. In January 1994 the California Supreme Court granted review of the decision of the Court of Appeal, but withheld further action until its decision in another case (MONTROSE CHEMICAL CORP. V. ADMIRAL INS. CO.) then pending before the Supreme Court was finalized. On July 3, 1995, the Supreme Court issued a decision in MONTROSE CHEMICAL confirming a trigger of coverage consistent with the trigger the Court of Appeal applied to the Fibreboard policies. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) By an order of October 19, 1995 the Supreme Court transferred the Fibreboard case back to the Court of Appeal which, after receiving supplemental briefs and perhaps conducting further argument, will review its decision on trigger and other issues in light of MONTROSE CHEMICAL and any other considerations the Court of Appeal deems relevant. After the Court of Appeal reissues a decision, the parties can again petition for review to the California Supreme Court. Fibreboard has entered into an interim agreement with Continental under which Continental agreed to provide a full defense to Fibreboard on pre-1959 claims and make certain funds available as needed to pay currently due Structured Settlement Obligations and other personal injury defense costs for which Fibreboard does not otherwise have insurance available during the period pending final approval of the Global and/or Insurance Settlement, or if neither is approved, through the ultimate conclusion of the insurance coverage appeal, however long that may take. In exchange for the benefits provided under this agreement, Fibreboard agreed not to settle additional pre-1959 personal injury claims without Continental's consent. If neither the Global Settlement nor the Insurance Settlement are approved and Fibreboard prevails in the appeal of the insurance coverage litigation, Continental has agreed to provide Fibreboard with $315,000 to $425,000 to resolve personal injury claims alleging first exposure to asbestos after March 1959, less any amounts Fibreboard recovers from the Pacific settlement described below. Continental would also continue to have responsibility for all pre-1959 personal injury claims against Fibreboard up to $500 per claim. In March 1992, Fibreboard and Pacific entered into a settlement agreement (the Pacific Agreement). If the Global Settlement or Insurance Settlement is approved, the Pacific Agreement will be of no effect. If neither of the settlements is approved, the Pacific Agreement establishes amounts payable to Fibreboard if the trial court judgments are upheld. Fibreboard received $10,000 upon signing the agreement and received an additional $10,000 during 1993. In addition, if the judgments are affirmed on appeal, Fibreboard will receive from $80,000 to $105,000 to be used for claims costs for which it does not otherwise have insurance. In the event the trigger and scope of coverage judgments are reversed on appeal, Pacific will owe Fibreboard nothing and will have a right to repayment of interim funds previously advanced. Fibreboard believes amounts available under the settlements discussed above will be adequate to fund defense and indemnity costs until the insurance coverage appeal is concluded, whether as a result of the final approval of the Global and/or Insurance Settlements or the final resolution of the insurance coverage litigation. Liability Quantification: At the end of 1991, Fibreboard attempted to quantify its liability for asbestos-related personal injury claims then pending as well as anticipated to be received through the end of the decade. There are many opportunities for error in such an exercise. Assumptions concerning the number of claims to be received, the disease mix of pending and future claims and projections of defense and indemnity costs may or may not prove correct. Fibreboard's assumptions are based on its historical experience, modified as appropriate for anticipated demographic changes or changes in the litigation environment. Notwithstanding the inherent risk of significant error in such a calculation, Fibreboard estimated that the amount necessary to defend and dispose of asbestos-related personal injury claims pending at December 31, 1991 and anticipated through the end of the decade plus the costs of prosecuting its insurance coverage litigation would aggregate $1,610,000. Because of the dynamic nature of this litigation, it is more difficult to estimate how many personal injury claims will be received after 1999 as well as the costs of defending and disposing of those future claims. Consequently, Fibreboard's estimated liability contains no amounts for personal injury claims received after the end of the decade, although it is likely additional claims will be received thereafter. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) Fibreboard believes it is probable that it will ultimately receive insurance proceeds of $1,584,000 for the defense and disposition of the claims quantified above. Fibreboard's opinion is based on its understanding of the disputed issues, the financial strength of the insurers and the opinion of outside legal counsel regarding the outcome of the litigation. As a result, Fibreboard recorded a liability, net of anticipated insurance proceeds, of $26,000 at December 31, 1991, representing its best estimate of the unreimbursed cost of resolving personal injury claims then pending and anticipated through the remainder of the decade as well as the costs of prosecuting the insurance coverage litigation. Although there likely will be claims filed beyond the end of the decade, these have not been estimated. During 1995, 1994 and 1993, unreimbursed costs of $1,959, $2,211 and $1,802 were charged against this reserve. Although Fibreboard, its insurers and plaintiffs' representatives entered into the Insurance and Global Settlements discussed above, Fibreboard does not believe these settlements impact its estimate of liability through the end of the decade. However, during 1995, Fibreboard recorded a $4,000 reversal of previously established reserves for anticipated unreimbursable costs as a result of a reduction in its estimate of the amounts which will be needed for such purpose. Fibreboard will continue to reevaluate its estimates and will make adjustments to the effect dictated by changes in the personal injury litigation. Asbestos-in-Buildings Liabilities: At December 31, 1995 Fibreboard was a defendant in 8 asbestos-in- buildings claims. Fibreboard does not believe it is presently possible to reasonably estimate potential liabilities for asbestos-in-buildings claims, if any. Fibreboard believes that its asbestos-containing products, properly used, cause no damage to buildings. Further, Fibreboard can frequently identify its asbestos-containing products and aggressively pursues dismissals of claims where its products are not identified. Fibreboard has been named as a defendant in a total of 152 asbestos-in- buildings claims, all but 8 of which have been resolved. To date, Fibreboard has successfully defended these claims or settled the claims for modest amounts compared to the damages sought. Further, although personal injury claims have similar characteristics, the same cannot be said for asbestos-in-buildings claims. Each claim can involve from one to several thousand buildings, each of which may vary as to age, ability to identify various producers products contained in the building as well as the extent of a producer's product present, building use, difficulty of abatement (if required) and so on. Thus, while extrapolation of personal injury claims disposition experience may provide useful information for estimating future personal injury liability, such an analysis cannot be applied to asbestos-in-buildings claims. However, based on its experience to date, Fibreboard believes the ultimate resolution of asbestos- in-buildings claims will not have a material adverse effect on its financial condition. Insurance for Asbestos-in-Buildings Claims: Fibreboard has reached final settlements with four of its primary insurers and several of its excess level insurers. The final settlements confirm more than $295,000 of insurance as needed to defend and dispose of asbestos-in-buildings claims. Substantially all of the confirmed insurance remains available. Fibreboard is also litigating with its remaining insurance carriers and believes the total limits of insurance policies in effect from 1932 to 1985 which may provide coverage for asbestos-in-buildings claims, aggregate approximately $390,000 (including the $295,000 referred to in the prior paragraph), which is in addition to the personal injury insurance coverage and does not include additional policies which contain no aggregate limit. The remaining insurers dispute coverage, although to date substantially all of Fibreboard's costs of defending asbestos-in-buildings claims have been paid by primary carriers. Fibreboard is seeking a declaration that the underlying asbestos-in- building claims are covered under various insurance policies. Barring settlement, final resolution of the insurance available for FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) asbestos-in-buildings claims may not be known for some time as an appeal of the trial court decision is likely. The trial has been continued. No date has been set for the trial to recommence. Fibreboard is continuing settlement discussions with the remaining insurers. While optimistic, Fibreboard cannot predict whether such discussions will result in settlements. EVENTS IMPACTING ASBESTOS-RELATED LIABILITIES A number of events could impact Fibreboard's ability to continue to manage its asbestos-related liabilities within available resources. The potential impact of the personal injury issues which follow are largely dependent on whether the Global and/or Insurance Settlements are approved. Insurance Assignment Program: During 1991, Fibreboard introduced its Insurance Assignment Program as a settlement vehicle for large groups of claims. Under this program, the plaintiffs accept an assignment of Fibreboard's right to insurance monies from Continental as complete settlement of their claims against Fibreboard. Consequently, these settlements involve no cash payments by Fibreboard. This contrasts with settlements under Fibreboard's Structured Settlement Program, in existence since 1988, wherein partial payments are made by Fibreboard using insurance funds with the remainder of the settlement deferred pending resolution of insurance coverage. The settlement agreements entered into to date under the Insurance Assignment Program do not require Fibreboard to pay cash unless insurance proceeds are ultimately not available. Additional provisions of certain settlement agreements provide that Fibreboard and the plaintiffs return to the "status quo" existing prior to settlement if certain specified court actions are not obtained. The plaintiffs have a right to return to the status quo should Continental declare bankruptcy prior to the final resolution of the personal injury insurance coverage litigation. During 1992, Fibreboard obtained widespread acceptance of this program to resolve large numbers of pending and not yet filed claims. Most of the assignment agreements have subsequently been converted to three-party agreements among Fibreboard, Continental and the plaintiffs. A 1992 judicial determination in California state court supporting the right of Fibreboard to settle claims via the Insurance Assignment Program was reversed by the appellate court in 1994. However, the issue of the validity of the Insurance Assignment Program has been rendered moot by the three-party agreements discussed above. Insurance Assignment Program and three-party settlements are recorded as a liability when the settlement is executed. A corresponding asset for anticipated insurance proceeds is also recorded. This accounting treatment differs from the handling of unresolved claims, where no gross liability is recorded until such time as the claim is settled. Structured Settlement Program: Beginning in 1988, Fibreboard has used its Structured Settlement Program (SSP) to settle personal injury claims. Under the SSP, Fibreboard and the plaintiff agree to a settlement amount. Fibreboard agrees to pay 40% of the settlement amount of pre-1959 claims in cash, and the remainder is deferred until September 1, 1996 or upon approval of the Global and/or Insurance Settlements. Settlements of post-1959 claims result in deferring 100% of the settlement amount. As a consequence of the insurance settlements with Continental and Pacific in 1993, the SSP now has been superseded by three-party agreements among Continental, Fibreboard and the plaintiffs, whereby Continental or Fibreboard agrees to pay certain amounts depending upon the resolution of the insurance coverage case or the final approval or disapproval of the Global and Insurance Settlements. These three-party agreements typically provide a partial cash payment from Continental on pre-1959 claims. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) Other Issues (Punitive Damage Claims): Most of the personal injury claims and many of the asbestos-in-buildings actions also seek punitive damages. Fibreboard has not paid any punitive damages judgments except when funded by insurance. It is uncertain whether punitive damages would be covered by insurance as the law in this area varies from state to state. During 1991, Fibreboard received a ruling by the 9th Circuit Court of Appeal that punitive damages awarded by the Cimino jury in Texas and by a West Virginia jury in a consolidated trial similar to Cimino were covered by insurance. However, this ruling may have limited applicability in view of the varying state rules regarding punitive damage awards. RESOURCES AVAILABLE FOR ASBESTOS-RELATED COSTS Under the terms of the interim agreement, Continental will provide a full defense to Fibreboard on pre-1959 claims and make certain funds available as needed to pay currently due Structured Settlement obligations and other personal injury defense costs for which Fibreboard does not have insurance available during the period pending final approval of the Global and/or Insurance Settlement, or if neither is approved, through the ultimate conclusion of the insurance coverage appeal, however long that may take. At December 31, 1995, Fibreboard had approximately $2,199 in cash on hand restricted for asbestos-related expenditures. Fibreboard believes restricted cash on hand, amounts available under the interim agreement with Continental and amounts available under settlement agreements with Fibreboard's asbestos-in- buildings insurers will be adequate to fund defense and indemnity costs of personal injury and asbestos-in-buildings claims plus any amounts due under current and future Structured Settlement Program settlements. 15. OTHER LITIGATION AND CONTINGENCIES Fibreboard has been named as a potentially responsible party in two separate landfill clean-ups in the state of California, the Operating Industries, Inc. landfill in Monterey Park and the GBF landfill in Pittsburg. In addition, Fibreboard has been named a defendant in a private party lawsuit seeking to recover costs of clean-up and remediation of the Acme landfill in Martinez, California. In all cases, Fibreboard's former container products division was responsible for materials deposited at the landfills. Fibreboard is attempting to determine its allocable share of investigation and remediation costs. The ultimate liability may change upon 1) determination of total costs of remediation and 2) resolution of Fibreboard's allocable share of such costs. Fibreboard has established a reserve against which the costs of study and cleanup, as well as ongoing legal and administrative costs, will be charged. As of December 31, 1995, the reserve had a remaining balance of $1,246. Fibreboard is involved in a number of additional disputes arising from its operations. Fibreboard believes resolution of these disputes will not have a material adverse impact on its financial condition or results of operations. FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS) 16. SUBSEQUENT EVENT During 1996, additional court action was taken with respect to the asbestos- related insurance settlements discussed in Note 14, "Asbestos Related Litigation," above. On July 26, 1996, the U.S. Fifth Circuit Court of Appeals affirmed the Global Settlement by a majority decision and the Insurance Settlement by a unanimous decision. Petitions for rehearing on the Global Settlement were filed with the Fifth Circuit by September 9, 1996. At November 4, 1996, the Court had not issued a decision on these petitions. On October 24, 1996, the statutory time period to request review by the U.S. Supreme Court of the Insurance Settlement approval judgment expired with no request having been filed. The Insurance Settlement approval judgment is now final and not subject to further appellate proceedings. Fibreboard will continue to seek final approval of the Global Settlement. The Insurance Settlement will not be fully implemented or funded until such time as the Global Settlement has been finally resolved, with no further appeals possible. In the event the Global Settlement is finally approved, the Insurance Settlement will not be funded. If, however, the Global Settlement is not approved, then the Insurance Settlement will be activated. In any event, the insurers have begun paying deferred settlement obligations as they come due beginning in the third quarter of 1996. Under the Insurance Settlement, Fibreboard will continue to manage the defense and settlement of asbestos-related personal injury claims. However, Fibreboard is no longer subject to the risk that favorable judgments rendered to date in the California insurance coverage litigation may be reversed or significantly modified on appeal, as Fibreboard and its insurers will seek to dismiss the actions pending in the California courts. Fibreboard believes the amounts available under the Insurance Settlement Agreement will be adequate to fund the ongoing defense and indemnity costs associated with asbestos-related personal injury claims for the foreseeable future. For a more detailed discussion of the terms of the Global Settlement and the Insurance Settlement, please see Note 14, "Asbestos Related Litigation," above. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Fibreboard Corporation: We have audited the accompanying consolidated balance sheets of Fibreboard Corporation (a Delaware corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fibreboard Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP San Francisco, California, February 2, 1996 (except as to Note 16 for which the date is November 7, 1996) REPORT OF MANAGEMENT The objectivity and integrity of the consolidated financial statements are the responsibility of Fibreboard Corporation management. To discharge this responsibility, management maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded and that accounting records are reliable. Management supports an internal audit program to provide assurance that the system of internal controls is operating effectively. The consolidated financial statements and notes thereto and other financial information included in this annual financial report have been prepared by management in accordance with generally accepted accounting principles, and by necessity include some items determined using management's best judgment, tempered by materiality. The Board of Directors discharges its responsibility for reported financial information through its Audit Committee. This Committee, composed of all outside directors, meets periodically with management, the internal audit department and Arthur Andersen LLP to review the activities of each. John D. Roach James P. Donohue Chairman, President and Senior Vice President, Chief Executive Officer Finance and Administration Garold E. Swan Vice President and Controller FIBREBOARD CORPORATION AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA (DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE) (UNAUDITED)
Earnings Income Per Share from from Net Gross Continuing Net Continuing Income Quarter Net Sales Margin Operations Income Operations Per Share ------- --------- ------ ---------- ------ ---------- --------- 1995 ---- 1st $ 87,414 $ 25,781 $ 3,870 $ 5,645 $ .43 $ .63 2nd 87,942 23,413 3,442 4,350 .38 .48 3rd 102,284 27,342 3,747 80,353 (1) .42 8.93 4th 103,166 23,344 3,465 5,468 (2) .39 .62 -------- -------- -------- -------- TOTAL $380,806 $99,880 $14,524 $95,816 1.62 10.67 -------- -------- -------- -------- -------- -------- -------- -------- 1994 ---- 1st $ 38,220 $ 13,341 $ 4,558 $ 7,458 $.51 $ .83 2nd 15,657 3,370 462 2,105 .05 .23 3rd 38,707 9,758 1,418 13,015 (3)(4) .16 1.45 4th 90,812 24,066 1,838 4,457 (3) .21 .50 -------- -------- -------- -------- TOTAL $183,396 $50,535 $ 8,276 $27,035 .92 3.01 -------- -------- -------- -------- -------- -------- -------- --------
(1) Includes a net gain on the sale of the wood products group of $75,897. (2) Includes an adjustment on the sale of the wood products group of $1,916 net of tax. (3) Includes the results of operations of Norandex Inc. acquired on August 31, 1994. (4) Includes an after tax gain of $11,221 on surplus asset sales. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (A) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS FILED IN THIS REPORT. 1. Index to Financial Statements and Supplementary Data. See page 18. 2. Index to Financial Statement Schedules. See page 53. 3. The following exhibits are filed as part of this Form 10-K: EXHIBIT NUMBER EXHIBIT DESCRIPTION 3.1 Fibreboard's Restated Certificate of Incorporation (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 3.2 Fibreboard's Restated Bylaws as amended June 8, 1993 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993). 4.1 Specimen Common Stock Certificate, $.01 par value (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 4.2 Rights Agreement dated as of August 25, 1988 between Fibreboard Corporation and Bank of America, N.T.&S.A. as Rights Agent (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated August 25, 1988). 4.2.1 Amendment No. 1 to Rights Agreement, dated as of February 11, 1994, between Fibreboard Corporation and The First National Bank of Boston (incorporated herein by reference from Fibreboard Corporation's Form 8-A/A dated February 15, 1994). 10.1* Form of Indemnification Agreement between Fibreboard Corporation and each director and officer of Fibreboard Corporation (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 10.2 Asset Purchase Agreement dated February 22, 1988, between Fibreboard Corporation and Gaylord Container Corporation (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 10.3 Fibreboard Corporation Restated 1988 Employee Stock Option and Rights Plan (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992). 10.3.1 Amendment No. 1 to Fibreboard Corporation Restated 1988 Employee Stock Option and Rights Plan (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994). 10.3.2 Amendment No. 2 to the Fibreboard Corporation Restated 1988 Employee Stock Option and Rights Plan, dated as of May 19, 1995 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995). 10.4 Form of Fibreboard Corporation Profit Sharing 401(k) Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 10.5 Fibreboard Corporation 1988 Employee Stock Purchase Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1988). 10.5.1 Prospectus Supplement (Appendix) to Registration Statement on Form S-8 No. 33-26449 for Shares issuable under the Fibreboard Corporation 1988 Employee Stock Purchase Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1989). 10.5.2 Amendment No. 1 to the Fibreboard Corporation 1988 Employee Stock Purchase Plan, dated as of May 19, 1995 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995). 10.6 Agreement of Compromise, Settlement and Release dated May 27, 1987, between Fibreboard Corporation and The Home Insurance Company (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 10.6.1 Agreement dated February 6, 1995 between Fibreboard Corporation and The Home Insurance Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1994). 10.7 Fibreboard Corporation Structured Settlement Program Description dated November 8, 1988 (incorporated herein by reference from Fibreboard's Current Report on Form 8-K dated November 8, 1988). 10.8 Form of Structured Settlement Agreement (incorporated herein by reference from Fibreboard's Current Report on Form 8-K dated November 8, 1988). 10.9 Form of Stipulation Regarding Settlement Negotiations and Right to Alternative Dispute Resolution (incorporated herein by reference from Fibreboard's Current Report on Form 8-K dated November 8, 1988). 10.10 Amended and Restated Trust Agreement dated September 29, 1989 by and among Fibreboard Corporation, the Trustees and the Directors and Officers of Fibreboard (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1989). 10.11 Consulting/Sales Representation Agreement dated February 20, 1989 between Distribution International and Pabco Metals Corporation, a wholly-owned subsidiary of Fibreboard Corporation (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated February 20, 1989). 10.12* Summary description of Fibreboard Corporation incentive compensation arrangements (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1993). 10.13* Amended and Restated Employment Agreement dated January 1, 1995 between Fibreboard Corporation and John D. Roach (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1994). 10.14 Third Amended and Restated Credit Agreement dated February 6, 1996 among Fibreboard Corporation, as Borrower, Certain Commercial Lending Institutions and Bank of America National Trust and Savings Association, as Administrative Co-Agent, and NationsBank N.A. as Documentation Co-Agent. 10.15 Stock Purchase Agreement among Noranda Aluminum, Inc., Norandex Inc. and Fibreboard Corporation dated as of August 31, 1994 (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated August 31, 1994). 10.16* Form of Officer Severance Agreement dated December 11, 1995. 10.17 Agreement and related documents dated March 27, 1992 between Fibreboard Corporation and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1991). 10.18 Rescission of Insurance Policies dated March 27, 1992 between Fibreboard Corporation and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1991). 10.19* Amended and Restated Fibreboard Corporation Supplemental Retirement Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1994). 10.20 Settlement Agreement dated January 1, 1993 between Fibreboard Corporation and Continental Casualty Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 10.21 Settlement Agreement dated January 1, 1993 between Fibreboard Corporation and Fireman's Fund Insurance Company, Insurance Company of North America and Royal Insurance Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 10.22 Settlement Agreement between Fibreboard Corporation and American Home Assurance Company, et al (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 10.23 Agreement of Purchase and Sale between Fibreboard Corporation and Sierra Ski Ranch, Inc. dated as of June 11, 1993 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1993). 10.24 Settlement Agreement among Fibreboard Corporation, Continental Casualty Company and Ness, Motley, Loadholt, Richardson & Poole and certain affiliated law firms dated as of August 5, 1993 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1993). 10.25 Asset Purchase and Sale Agreement dated September 6, 1995 among Sierra Pacific Industries, Fibreboard Box & Millwork Corporation and Fibreboard Corporation (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated September 25, 1995). 10.25.1 Amendment No. 1 to the Asset Purchase and Sale Agreement dated September 6, 1995 among Sierra Pacific Industries, Fibreboard Box & Millwork Corporation and Fibreboard Corporation (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated September 25, 1995). 10.26 Agreement between Fibreboard Corporation and Continental Casualty Company dated April 9, 1993 (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated April 9, 1993). 10.27 Agreement to Amend, Consolidate and Lend dated May 31, 1995 between First Interstate Bank of Nevada, N.A., as lender, and Sierra-at-Tahoe and Trimont Land Company, as borrowers (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 10.27.1 Amendment No. 1 to the Agreement to Amend, Consolidate and Lend, dated as of November 22, 1995 among First Interstate Bank of Nevada, N.A., Trimont Land Company, Sierra-at-Tahoe, Inc. and Bear Mountain, Inc. 10.27.2 Amendment No. 2 to the Agreement to Amend, Consolidate and Lend, dated as of January 30, 1996 among First Interstate Bank of Nevada, N.A., Trimont Land Company, Sierra-at-Tahoe, Inc. and Bear Mountain, Inc. 10.28 Settlement Agreement dated October 12, 1993 among Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1993). 10.29 Supplemental Agreement dated October 12, 1993 between Fibreboard Corporation and Continental Casualty Company (pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, confidential treatment has been requested for this exhibit. This agreement has been placed under court seal.) 10.30 Global Settlement Agreement among Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company, Pacific Indemnity Company and The Settlement Class, together with Exhibits A-E (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated December 23, 1993). 10.30.1 Amendment No. 1 to the Global Settlement Agreement, dated December 15, 1994, by and among The Settlement Class, Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company, Pacific Indemnity Company and the Trustees of the Fibreboard Asbestos Compensation Trust (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1994). 10.30.2 Amendment No. 2 to the Global Settlement Agreement, dated February 6, 1995, by and among the Settlement Class, Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1994). 10.30.3 Amendment No. 1 to the Escrow Agreement, dated February 6, 1995, by and among Continental Casualty Company, Pacific Indemnity Company, Fibreboard Corporation and The First National Bank of Chicago (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1994). 10.31 Agreement dated March 1994 among Representative Plaintiffs, Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1994). 10.32 Settlement Agreement dated October 28, 1994 between Fibreboard Corporation, CIGNA Specialty Insurance Company, Central National Insurance Company of Omaha, Century Indemnity Company, CIGNA Property and Casualty Insurance Company and Insurance Company of North America (pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, confidential treatment has been requested for this exhibit). 10.33* Fibreboard Corporation Long-Term Equity Incentive Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1993). 10.33.1* Amendment No. 1 to the Fibreboard Corporation Long-Term Equity Incentive Plan, dated as of May 19, 1995 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995). 10.34 Asset Purchase Agreement dated October 6, 1995 among Bear Mountain, Inc., Fibreboard Corporation, Bear Mountain Ltd. and S- K-I Ltd. (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995). 10.34.1 Amendment No. 1 to Asset Purchase Agreement dated October 6, 1995 among Bear Mountain, Inc., Fibreboard Corporation, Bear Mountain Ltd. and S-K-I Ltd. (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995). 10.35 Agreement dated November 30, 1995 among Andrew M. Spriet, et al, 1155714 Ontario Inc. and Fibreboard Corporation regarding the purchase and sale of Vytec International Corporation (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated November 30, 1995). 10.36 Fibreboard Corporation 1995 Stock Incentive Plan effective as of November 28, 1995.** 21. Fibreboard Corporation Subsidiaries.** 23. Consent of Arthur Andersen LLP. 27 Financial Data Schedule.** 99.1 Fibreboard Corporation press release dated November 11, 1996. * Denotes management contract or compensation plan identified pursuant to Item 14(a)(3) of Form 10-K. ** Previously filed. (b) REPORTS ON FORM 8-K The following Current Report on Form 8-K was filed during the period October 1, 1995 to December 31, 1995: Date Event Reported --------------- --------------------------------------------------------- November 30, 1995 Fibreboard's purchase of the stock of Vytec Corporation. INDEX TO FINANCIAL STATEMENT SCHEDULES TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 Schedule Page - -------- ---- III Valuation and qualifying accounts for each of the three 54 years in the period ended December 31, 1995. Report of independent public accounts on financial 55 statement schedules. FIBREBOARD CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31 (000's Omitted)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - -------- -------- -------- -------- -------- ADDITIONS BALANCE AT CHARGED TO UNCOLLECTIBLE BEGINNING COSTS AND ACCOUNTS BALANCE AT DESCRIPTION OF PERIOD EXPENSES WRITTEN OFF OTHER (a) END OF PERIOD - ----------- --------- -------- ----------- --------- ------------- 1993 - ---- Reserve for: Doubtful accounts 504 362 (451 ) -- 415 Asbestos related costs 21,297 -- -- (1,802 ) 19,495 1994 - ---- Reserve for: Doubtful accounts 415 378 (174 ) 1,391 2,010 Asbestos related costs 19,495 -- -- (2,211 ) 17,284 1995 - ---- Reserve for: Doubtful accounts 2,010 1,050 (931 ) 431 2,560 Asbestos related costs 17,284 (4,000 ) -- (1,959 ) 11,325
- ----------------- (a) Consists of reserve for doubtful accounts of acquired company and asbestos related payments REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULES To the Stockholders of Fibreboard Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Fibreboard Corporation included in this Form 10-K, and have issued our report thereon dated February 2, 1996. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the significant uncertainty surrounding the asbestos claims that have been filed against the Company as discussed in Note 14 to the financial statements. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedule II, Valuation and Qualifying Accounts, is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP San Francisco, California February 2, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. FIBREBOARD CORPORATION Dated: November 11, 1996 By: /s/ GAROLD E. SWAN --------------------------------- Garold E. Swan Vice President Finance EX-23 2 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K/A, into Fibreboard Corporation's previously filed Registration Statements on Form S-8, File No. 33-60412, No. 33-26449 and No. 33-26450. ARTHUR ANDERSEN LLP San Francisco, California, November 7, 1996 EX-99.1 3 EXHIBIT 99.1 EXHIBIT 99.1 FOR IMMEDIATE RELEASE Contact: Stephen DeMaria/Margaret Turbeville Fibreboard Corporation (214) 954-9500 FIBREBOARD MULTI-BILLION DOLLAR ASBESTOS INSURANCE SETTLEMENT FINALIZED NATION'S LARGEST SINGLE-COMPANY ASBESTOS SETTLEMENT RECORDED DALLAS (Nov. XX, 1996) -- Fibreboard Corporation (AMEX:FBD) announces that its multi-billion dollar asbestos Insurance Settlement Agreement, unanimously approved in July by the U.S. Fifth Circuit Court of Appeals, is final as the period for filing a petition for review with the U.S. Supreme Court has expired. The more than $3 billion Insurance Settlement Agreement between Fibreboard and its insurers, Continental Casualty Company and Pacific Indemnity Company, is the nation's largest recorded single-company asbestos settlement. A related Global Settlement Agreement, which if ultimately approved supercedes the Insurance Settlement Agreement, also was approved by the Fifth Circuit in July, but separately awaits that Court's decision on a pending petition for rehearing by certain objectors. In response to the final approval of the Insurance Settlement Agreement, Arthur Andersen LLP, Fibreboard's outside auditor, has removed its qualification regarding asbestos from its report on Fibreboard's 1995 financial statements. Additionally, Fibreboard's insurers are commencing to pay approximately $1 billion in deferred settlement obligations. "The Insurance Settlement Agreement is a major milestone in resolving our asbestos litigation and continuing Fibreboard's turn-around strategy," said John D. Roach, Fibreboard's chairman and chief executive officer. "While we are diligently pursuing final approval of the Global Settlement Agreement, which would completely bar future asbestos personal injury claims from being asserted against Fibreboard, we now know for the first time that we are assured at a minimum of receiving the enormous benefits provided by the Insurance Settlement Agreement. We can now focus all our attention on our next significant growth phase, with the goal of doubling revenues to $1 billion by the year 2000." -- more -- Fibreboard finalizes settlement agreement -- Page two Under the Insurance Settlement Agreement, Fibreboard's insurers will pay in full all settlements reached prior to August 27, 1993. Additionally, the insurers will provide Fibreboard up to $2 billion, plus accrued interest, in additional funds to manage and resolve pending unsettled claims as of August 27, 1993, as well as claims filed after that date. In August 1993, Fibreboard, its insurers and plaintiffs also entered into a Global Settlement Agreement, which was affirmed by the Fifth Circuit in July 1996 when the Court also unanimously approved the Insurance Settlement Agreement. If ultimately approved, the Global Settlement Agreement provides that Fibreboard's insurers, Continental Casualty Company and Pacific Indemnity Company, assume full responsibility for resolving all asbestos personal injury claims settled or filed as of August 27, 1993. Claims filed after August 27, 1993 and all future claims become the responsibility of a court supervised settlement trust, separately funded by the insurers with more than $1.5 billion. If the Global Settlement Agreement is not ultimately approved, the Insurance Settlement Agreement will be implemented. "Attaining final approval of the Insurance Settlement Agreement is a true testament to the expertise and perseverance of our legal team, led by Fibreboard's senior vice president and general counsel Michael Douglas and our outside counsel, Brobeck, Phleger and Harrison, led by firm chairman Stephen Snyder," said Roach. THE FIBREBOARD TURN-AROUND STRATEGY In 1991, facing mounting losses and enormous asbestos liabilities, the company's Board elected a new chairman and chief executive officer, John D. Roach, to lead a corporate revitalization and turn-around strategy. The three-prong strategy consisted of demonstrating profit potential of existing businesses, resolving asbestos litigation, and achieving aggressive growth. Significant results have been achieved in just five years. From 1991 to 1995, the company's revenues, including discontinued operations, increased from $234 million to $493 million, net income increased from a loss of $43.9 million to a profit of $95.8 million, earnings per share increased from a loss of $5.50 per share to a gain of $10.66 per share, with book value per share increasing from $12.37 to $26.67. In addition, with the 1994-1995 acquisitions of Norandex and Vytec respectively, Fibreboard now is the fifth largest manufacturer of vinyl siding in North America, with a new -- more -- Fibreboard finalizes settlement agreement -- Page three manufacturing facility increasing plant capacity by more than 30 percent by mid-1997. The company has set the objective of being in the "top three" by the turn of the century when analysts estimate that the vinyl siding market will reach approximately 4 billion square feet of product. The company divested its Wood Products division in September 1995 and anticipates completing the sale of its Resorts Group by the end of this year. The company's future growth goals continue to focus on expanding market share in the building products industry through internal growth and acquisition, and building corporate value through opportunistic, disciplined acquisitions with more than $200 million available through credit facilities to support expansion plans. Fibreboard Corporation, headquartered in Dallas, is a leader in the building products industry, manufacturing residential vinyl products, cast stone building products and industrial insulation. Building products manufacturing groups include Norandex Vinyl Products Company, Vytec Corporation, Stone Products Corporation and Pabco. Its Norandex Distribution Company operates an extensive multi-state distribution network for exterior building products. The company also currently owns and operates three California resorts: Northstar-at-Tahoe, an all season ski and golf resort and conference center, and Sierra-at-Tahoe and Bear Mountain Ski Resort, both day ski facilities. For more information on Fibreboard Corporation, please call (800) PRO-INFO. -- ### -- EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIBREBOARD'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 7,895 0 74,682 2,005 70,390 169,746 174,409 58,214 1,226,739 96,065 0 0 0 87 256,704 1,226,734 381,453 381,453 265,849 265,849 0 1,366 2,292 25,139 10,056 15,083 0 0 0 15,083 1.69 0
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