ITEM 3. LEGAL PROCEEDINGS
ASBESTOS-RELATED PERSONAL INJURY CLAIMS
At December 31, 1994, Fibreboard was a defendant in approximately 41,900 personal injury claims. Approximately 15,600 of these claims were filed on or after August 27, 1993 and will be covered by the Global Settlement discussed below, if approved. Additional claims are anticipated in the future. These claims typically allege injury or death from asbestos exposure. Fibreboard is generally only one of several defendants. These claims seek compensatory, and in many cases, punitive damages in varying amounts depending on injury severity. Claims are pending in federal and state courts throughout the United States.
During 1993 Fibreboard reached settlement agreements (the Global Settlement and Insurance Settlement) with its insurers and plaintiff representatives which, if approved by the courts, should resolve Fibreboard's existing and future asbestos-related personal injury liabilities within insurance resources and existing corporate reserves. These settlements require court approval. The Global Settlement action is titled Gerald Ahearn, James Dennis and Charles W. Jeep, on Behalf of Themselves and Others Similarly Situated, Plaintiffs, v.
Fibreboard Corporation, Defendant, Continental Casualty Company and Pacific Indemnity Company, Intervenors, Civil Action No. 6:93cv526, U.S. District Court for the Eastern District of Texas, Tyler Division. The Insurance Settlement action is titled Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company, Plaintiffs, v. Daniel Herman Rudd, Jr., Beverly White and John Hansel, on Behalf of Themselves and Others Similarly Situated, and Owens-Illinois, Inc., on Behalf of Itself and Others Similarly Situated, and Penn Mutual Life Insurance Company, Defendants, Civil Action No. 6:94cv458, U.S. District Court for the Eastern District of Texas, Tyler Division.
Additional information concerning personal injury claims can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37.
ASBESTOS-IN-BUILDINGS CLAIMS
At December 31, 1994, Fibreboard was a defendant in 14 asbestos-in- buildings claims pending in federal and state courts throughout the United States. Fibreboard is typically only one of several defendants. These claims involve many thousands of buildings and seek hundreds of millions of dollars in compensatory damages for expenses incurred for locating, testing and monitoring or removing asbestos-containing materials. Some claims also seek punitive damages.
Additional information concerning Fibreboard's asbestos-in-buildings claims can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37.
INSURANCE COVERAGE FOR PERSONAL INJURY CLAIMS
Fibreboard is litigating with two insurers, Continental Casualty Company and Pacific Indemnity Company, to determine the amount of insurance available to Fibreboard under policies issued by these companies (In Re Asbestos Insurance Coverage Cases, Judicial Council Coordination Proceeding No. 107). The litigation has been completed at the trial court level, with judgments favoring Fibreboard on all issues. These judgments were appealed to the California Court of Appeal by the insurers. In November 1993, the Court of Appeal issued its ruling on the trigger and scope of coverage issues which upheld the favorable trial court judgments in these areas, 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 those periods are the same. The insurers have filed petitions for review with the California Supreme Court, which has granted review but not yet scheduled any further activity.
At the request of Fibreboard, Continental and Pacific Indemnity, the Court of Appeal withheld its ruling on certain issues which were unique between Fibreboard and its insurers 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.
Further information concerning this litigation can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37.
INSURANCE COVERAGE FOR ASBESTOS-IN-BUILDINGS CLAIMS
Fibreboard believes the total limits of insurance policies in effect from 1932 to 1985 which may provide coverage for the asbestos-in-buildings claims aggregated approximately $390 million (approximately $295 million of which has been confirmed through settlements during 1994 and 1993), which is in addition to the personal injury insurance coverage and does not include additional policies which contain no aggregate limit. The remaining insurers dispute coverage. Fibreboard is pursuing an insurance coverage suit (Fibreboard vs. Continental Casualty, et al; Superior Court of the State of California for the City and County of San Francisco). Trial in this action has been continued. During the continuance, Fibreboard and its insurers are attempting to settle their disputes.
Additional information concerning this litigation can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37.
Other Litigation
Fibreboard has been named as a potentially responsible party in two California landfill clean ups, the Operating Industries Inc. site in Monterey Park and the GBF landfill in Pittsburg, and has been named as a defendant in a private lawsuit related to the Acme landfill in Martinez, CA. Additional information concerning Fibreboard's involvement can be found in Note 15 to Fibreboard's consolidated financial statements, "Other Litigation and Contingencies," on page 43.
In March 1994, two purported class action lawsuits were filed in Delaware Chancery Court naming the Company and its directors as defendants (Sonem Partners LTD., et al. v. Roach, et al., Civil Action No. 13411; Vogel v. Roach, et al., Civil Action No. 13421). Both lawsuits alleged substantially similar causes of actions for breach of fiduciary duty relating to the 1994 amendment of Fibreboard's stockholder rights plan and Fibreboard's rejection of a March 1994 unsolicited proposal of a merger with or an acquisition of Fibreboard. These lawsuits were dismissed without prejudice in February 1995 at no cost to Fibreboard.
Fibreboard is involved in a number of additional disputes arising from its operations. Fibreboard believes resolution of these disputes will not have a material adverse impact on its financial condition or results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers of Fibreboard follows:
Officers serve at the discretion of the board of directors.
Mr. Roach was elected Chairman, President and Chief Executive Officer of Fibreboard on July 2, 1991. Prior to his election, Mr. Roach was Executive Vice President of Manville Corporation, where he served as President of its Mining and Minerals Group and President of Celite Corporation, a wholly-owned Manville subsidiary. In addition, Mr. Roach served as President of Manville Sales Corporation, now known as Schuller International, from 1988 to 1989, and as Chief Financial Officer of Manville Corporation from 1987 to 1988. Prior to Manville, Mr. Roach was a strategy consultant and Vice Chairman of Braxton Associates; Vice President and Managing Director of the Strategic Management Practice for Booz, Allen, Hamilton; and Vice President and Director of The Boston Consulting Group. Previous experience at Northrop Corporation included Director of strategic planning, economic analysis, accounting, management information systems and co-manager of a venture capital subsidiary.
Mr. Donohue was elected Senior Vice President, Finance and Administration and Chief Financial Officer in October 1991. Prior to joining Fibreboard, he was an Executive Vice President of Continental Bank in Chicago where he held a wide variety of senior management positions during his 25 years with the bank.
Mr. Douglas became General Counsel to Fibreboard in September 1987 and was elected Secretary in November 1990. He was elected Vice President in August 1991 and Senior Vice President in October 1993. From March 1986 to September 1987 he was employed by the Asbestos Claims Facility, of which Fibreboard was a member, as Senior Legal Counsel and then as Director of Law-West Coast Region. From 1982 to 1986 he was an attorney in the asbestos litigation group of Jim Walter Corporation.
Mr. Costello has been Vice President, Wood Products Operations since December 1988. He previously was employed by Snider Lumber Products Co., Inc. from December 1983 until December 1988. Prior to December 1983, he was employed by Fibreboard for 14 years. Mr. Costello rejoined Fibreboard with the acquisition of Snider in October 1988, at which time he was president of Snider. Mr. Costello is First Vice Chairman of Western Wood Products Association, an industry group.
Mr. DeMaria joined Fibreboard in May 1989 as Director-Corporate Communications and Investor Relations and was elected Vice President, Corporate Relations in August 1991. Prior to joining Fibreboard, he was Executive Vice President of the California Forest Protective Association, an industry trade association representing the interests of industrial timberland owners before the California legislature and regulatory agencies.
Mr. Elliott was appointed General Manager of Pabco in October 1991 and was elected Vice President, Industrial Insulation Products in February 1992. Prior to joining Fibreboard, Mr. Elliott was a partner in Management Resource Partners, a professional management firm advising corporations on financial and operating matters and functioned as CEO, CFO or a director of companies with sales from $5-$50 million. Mr. Elliott has been CFO of Consolidated Fibers and Itel Corporation, Vice President Corporate Development of Alexander and Baldwin and a consultant for A.T. Kearney.
Mr. Jensen joined Fibreboard in October 1991 as General Manager of Northstar-at-Tahoe and was elected Vice President in June 1993. From 1989 to 1991, Mr. Jensen was Vice President of Marketing and Sales for Sunday River Ski Resort in Bethel, Maine. From 1986 to 1989, Mr. Jensen was Vice President, Tracked Vehicles for Kassbohrer of North America, a manufacturer of ski resort snow grooming vehicles and equipment.
Mr. Johnston joined Fibreboard with the acquisition of Norandex Inc. on August 31, 1994 at which time he was elected Vice President. Mr. Johnston has been employed with Norandex Inc. for 19 years and has held the office of President since 1985. He was formerly Vice President of Sales and Branch Operations for Norandex. Mr. Johnston was previously employed by Kaiser Aluminum Corporation and Reynolds Metals Company.
Mr. Swan has been Controller of Fibreboard since October 1988, and was elected Vice President in October 1991. He previously was an Audit and Financial Consulting Manager in the Portland, Oregon office of Arthur Andersen LLP.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 17, 1994, there were 11,788 holders of record of Fibreboard common stock. Fibreboard's common stock is traded on the American Stock Exchange under the symbol FBD. Information with respect to the quarterly high and low market sales prices for Fibreboard's common stock for 1994 and 1993, based upon sales transactions reported by the American Stock Exchange, is provided below.
Market Prices of Fibreboard Common Stock
The closing price of Fibreboard's common stock on March 17, 1995 was $31 1/2.
Since its spin-off from Louisiana-Pacific Corporation on June 6, 1988, Fibreboard has not paid cash dividends. Fibreboard's Structured Settlement Program contains restrictions on the amount of dividends or distributions to shareholders. At December 31, 1994, $12.9 million was available for the payment of dividends, share repurchases or other distributions.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1994 VS. 1993
Net sales increased 37%. Of the increase, $85.6 million, or 87% of the total, was due to the addition of Norandex Inc. on August 31, 1994. The remaining increase resulted from increases in industrial insulation products and resort operations, reduced by a decline in wood product sales. Income from continuing operations was $27.0 million compared to
$11.7 million in 1993. The 1994 amount includes a pre-tax gain of $18.9 million ($11.2 million after tax) from the sale of surplus timberlands in the third quarter. Norandex contributed pre-tax operating income of $8.1 million for the last four months of the year. Operating income increased for industrial insulation products and resort operations, while wood products experienced a decline.
BUILDING PRODUCTS
Wood products sales declined 5%. The majority of the decrease was due to the early 1994 sale of the agricultural container business, which in 1993 generated sales of approximately $9.7 million. For 1994, lumber sales were higher (increased volume reduced by slightly lower average product sales prices) while decreases were experienced in plywood sales (lower shipment volume) and moulding and millwork (lower volume and sales prices).
Wood products operating income declined from $18.5 million to $12.7 million driven by higher log costs in 1994 and slightly lower product sales prices compared to 1993. Higher log costs were caused by a 1993 decision to purchase available open market logs, ensuring a raw material supply for 1994. However, the incremental logs were purchased at high prices which drove up average log cost for 1994. As a higher percentage of logs to be consumed in 1995 will come from company owned lands, Fibreboard expects its average log cost in 1995 will be significantly lower than in 1994.
Fibreboard believes it has adequate raw material on hand, under contract or expected to become available through open market log purchases to operate its primary converting facilities at scheduled production levels through 1995 and into 1996. However, future timber supply remains a strategic concern. Competition for the reduced timber available from the USFS has resulted in higher prices for those contracts where Fibreboard has been the successful bidder. Interim harvest rules announced in early 1993 for USFS timber in California and the possible implementation of the DEIS recommended forest management alternative could further reduce the quantity of timber available for harvest. Fibreboard has responded to these concerns by pursuing non-traditional sources of raw materials, such as imported logs from New Zealand and Chile and the acquisition of timber cutting rights on 4,800 acres in northern New Mexico. Fibreboard expects to continue pursuing alternative timber sources in the future. In addition, Fibreboard has evaluated various operating configurations available to respond most profitably to raw material constraints, and has committed $6.7 million in 1995 to install additional sawmill optimization technology which is expected to improve manufacturing yield and grade recovery.
In the past, timber supply concerns have resulted in increased sales prices for Fibreboard's wood products. While there can be no assurance, Fibreboard believes sales prices for its products may increase should timber supply be further constrained. Continuing supply constraints should also enhance the value of Fibreboard's fee-owned timberlands.
From its acquisition on August 31, 1994 through the end of the year, Norandex generated sales of $85.6 million and operating income of $8.1 million. Norandex sales activity is seasonal, and is driven by the weather and construction activity in its primary market areas. Construction activity is typically at a peak in June-October. Mild early winter weather in Norandex's market areas extended the building season into December and increased Norandex generated profits beyond expectations. Due to the seasonality of the business, the results of the last four months of 1994 should not be considered indicative of the results that would be achieved for a full year of Norandex operations.
Industrial insulation products sales increased 15% due principally to increased shipments and higher sales prices of metal products with some improvement in molded industrial insulation sales.
Operating income increased to $6.5 million from $5.4 million in 1993. Metal products profitability increased as average sales prices increased in advance of corresponding raw material cost increases. However, this improvement was offset somewhat by lower profits from molded insulation due to higher material costs.
RESORT OPERATIONS
Resort revenues increased from $25.5 million to $41.4 million on a 100% increase in skier visits. The increase in skier visits was a result of the addition of Sierra-at-Tahoe (which operated only 23 days subsequent to its acquisition in 1993), a heavy early season snow fall in the fourth quarter of 1994 and the inclusion of two high-volume Christmas to New Years weeks in 1994, one as the first and one as the last week of the year, versus only one such week in 1993's results.
Operating income improved from $2.3 million to $8.0 million driven primarily by the revenue increase as well as aggressive cost controls. Fibreboard believes Northstar's and Sierra's marketing campaigns have increased their market share among Lake Tahoe ski resorts.
Northstar anticipates beginning development of a new subdivision of 158 single family home sites which will be offered for sale on a phased basis over several years starting in 1995. Northstar believes this additional real estate activity will add operating profit of $1.5 to $2.0 million per year.
GENERAL CORPORATE EXPENSES
Unallocated costs declined from $8.3 million to $7.4 million, reflecting the 1994 resolution of a contingent liability related to post-retirement benefits which resulted in a gain of $1.0 million.
ASBESTOS-RELATED COSTS
The 1994 and 1993 results of operations do not include any asbestos-related costs. During 1994, $2.2 million of unreimbursed costs related to the asbestos litigation were incurred and charged against the reserve established in prior years.
As more fully discussed in Note 14 to the consolidated financial statements, at December 31, 1991, Fibreboard estimated its potential liability for asbestos-related personal injury claims to be received through the end of the decade at $1,610 million and that it would ultimately receive insurance proceeds of $1,584 million related to those claims. Although Fibreboard, its insurers and plaintiffs' representatives entered into the Insurance and Global Settlements discussed elsewhere, Fibreboard does not believe these settlements impact its estimate of liability through the end of the decade, and no additional events have transpired which indicate these estimates should be changed. Consequently, no adjustment has been made to the estimated liability for personal injury claims through the end of the decade or anticipated insurance proceeds. Fibreboard will periodically evaluate its estimates and make adjustments as circumstances and future developments dictate.
OTHER ITEMS
Interest expense increased from $3.6 million to $4.9 million, as Fibreboard had higher average borrowings (due to the Norandex purchase on August 31, 1994) offset by lower rates under its new revolving credit facility.
Interest and other income increased to $22.6 million from $5.6 million. Other income included gains from the sales of surplus real estate of $20.5 million in 1994 and $3.8 million in 1993. Interest income increased to $2.1 million from $1.8 million as additional amounts were available for investment than in 1993.
Fibreboard's effective tax rate was 41% in 1994 and 1993.
LIQUIDITY AND CAPITAL RESOURCES
Fibreboard generated cash flows from operations (including gains on the sale of assets) of $70.2 million in 1994, compared to a use of $1.4 million in 1993. The investment in working capital was reduced $31.4 million in 1994, compared to an increased investment of $28.5 million in 1993. Fibreboard had an abnormally high level of log inventories on hand at December 31, 1993, which was reduced to a more normal level at year end 1994. Fibreboard believes it will continue to generate substantial cash flows from operations in the future.
Fibreboard has a $175 million revolving credit facility which expires September 30, 1997. At December 31, 1994, borrowings were $86.0 million and $82.9 million remained available. Borrowings may be used for general corporate purposes and acquisitions. Maximum availability decreases to $150 million at September 30, 1995 and to $125 million at September 30, 1996. In addition, Fibreboard's resort operations have two revolving credit facilities, a $5 million operating credit line which expires May 31, 1995 and a $8.1 million reducing revolving line which expires May 31, 1998 and under which maximum availability is reduced by $1.4 million in April of each year. Fibreboard is negotiating with a bank to replace Resort Operations' two revolving credit facilities and a $4.5 million term loan with a new $30 million revolving facility. This new facility is expected to be in place by early in the second quarter of 1995. Fibreboard believes these facilities, combined with cash generated from on-going operations, will be adequate to fund existing operating cash needs and acquisition activities.
In addition to working capital needs, Fibreboard anticipates primarily discretionary capital expenditures of approximately $19 million to $20 million during 1995. Major anticipated projects include $6.7 million to install additional optimization equipment in two sawmills, $1.2 million to expand the Norandex vinyl siding manufacturing plant capacity by 22% and infrastructure development costs of approximately $3 million to support the lot sales program at Northstar, as well as replacements and improvements of machinery and equipment and additional ski area amenities. Capital expenditures will be funded from operating cash flow and borrowings under Fibreboard's credit facilities as needed.
Fibreboard has scheduled principal reductions of long-term debt due in 1995 of $2.0 million. Of this amount, Fibreboard will receive $1.0 million from notes receivable which have interest and payment terms identical to a like amount of Fibreboard's revenue bonds.
In addition to cash needs related to continuing operations, Fibreboard must fund its modest on-going asbestos-related costs. To date, substantially all such costs, other than the cost of litigating insurance coverage issues, have been funded from insurance resources. At December 31, 1994, Fibreboard had $1.9 million in cash on hand restricted for asbestos-related uses.
Fibreboard and Continental have entered into an interim agreement under which Continental agreed to make certain funds available for defense and indemnity costs associated with asbestos-related personal injury claims during the period pending final approval of the Global and/or Insurance Settlements discussed below, or if neither are approved, through the final conclusion of the insurance coverage litigation, however long that may take. Fibreboard believes the amounts to be paid by Continental under this interim agreement and amounts available under settlements with asbestos-in-buildings insurers will be adequate to satisfy its asbestos-related cash requirements as they come due.
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. Fibreboard believes trial court approval will occur in the first half of 1995, but if appealed, it may be 1996 or later before final court approval could be obtained.
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 billion 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.
Fibreboard believes it is probable its insurance coverage for personal injury claims will ultimately be confirmed on appeal or the settlements discussed above will be approved by the court. However, if neither the Global Settlement nor Insurance Settlement is approved and if the trial court decisions in the insurance coverage litigation are subsequently overturned or substantially modified on appeal, Fibreboard would not have adequate resources to fund its asbestos personal injury liabilities.
1993 VS. 1992
Net sales increased 11%, reflecting increased wood products sales and resort operations revenues while sales of industrial insulation products were flat. Income from continuing operations was $11.7 million compared to $9.4 million in 1992. Operating profit increased in wood products and resort operations, but declined slightly in insulation products.
BUILDING PRODUCTS
Wood products sales increased 12%, due principally to increased selling prices in all three major product lines while shipment volumes declined in lumber and plywood. Mill closures and manufacturing operations consolidations accounted for the majority of the lumber volume decline while softer demand impacted plywood shipments. Selling prices for many products reached record highs during the second quarter, before falling during the third quarter.
Wood products operating income increased from $17.3 million to $18.5 million. This improvement was due to price increases and manufacturing improvements offset by increased log costs and volume decreases. Price increases during the year were largely in response to timber and finished product shortage concerns, as timber supply continued to be more restricted and additional industry production capacity reductions were made during the year.
Industrial insulation products sales were nearly unchanged between years. A lack of significant construction and maintenance activity in the petrochemical and power generation industries was offset by a modest increase in export sales activity.
Industrial insulation products operating income decreased to $5.4 million from $6.1 million in 1992. The decrease was caused by reduced average sales prices for molded insulation products, which were partially offset by continuing manufacturing improvements and tighter margins on sales of metal products.
RESORT OPERATIONS
Resort revenues increased from $20.4 million to $25.5 million on a 16% increase in skier visits. The increase in skier visits was a result of improved snowfall in the Sierra during the first quarter of 1993 compared to 1992. Northstar set records during 1993 in a number of areas, including skier days, meals served and lodging room nights.
Operating income improved from $1.6 million to $2.3 million. This increase understates the significant improvements achieved at Northstar-at-Tahoe during the year, as the business unit operating income includes anticipated start-up and operating expenses at Sierra since its July 1993 acquisition in excess of revenues of approximately $1 million. The Northstar improvement was due to the increase in skier visits, lower snowmaking costs due to increased snowfall, aggressive marketing and cost controls.
GENERAL CORPORATE EXPENSES
Unallocated costs declined from $11.9 million to $8.3 million, reflecting improvements resulting from the organizational restructuring completed during 1992 and reversal of certain contingency accruals no longer considered necessary, offset by higher incentive compensation tied to stock performance. In addition, 1992 costs include $1.0 million to increase the reserve for future landfill cleanup costs.
ASBESTOS-RELATED COSTS
The 1993 and 1992 results of operations do not include any asbestos-related costs. During 1993, $1.8 million of unreimbursed costs related to the asbestos litigation were incurred and charged against the reserve established in prior years.
OTHER ITEMS
Interest expense declined from $4.2 million to $3.6 million, due to lower rates on variable rate debt and lower aggregate borrowings.
Interest and other income decreased from $7.7 million to $5.6 million. Other income included $2.4 million in 1992 resulting from the freezing of a defined benefit pension plan
and gains from the sales of surplus real estate of $3.0 million in 1992 and $3.8 million in 1993. Interest income declined as lower amounts were available for investment at lower rates than in prior years.
On July 1, 1993, Fibreboard adjusted the depreciable lives of its assets to more closely approximate their economic useful lives, resulting in a reduction of depreciation expense of $1.4 million during 1993. This expense reduction is included in the segment results discussed above.
Fibreboard's effective tax rate was 41% in 1993 and 44% in 1992. Fibreboard adopted Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES (SFAS 109) on January 1, 1993. SFAS 109 requires an asset and liability approach for financial accounting and reporting for income taxes, and requires the recognition of the tax impact of certain items for which no income tax impact would have been provided in the past. Fibreboard recorded no adjustment of its tax accounts as a result of adopting SFAS 109.
IMPACT OF INFLATION
Inflation has not had any significant impact on Fibreboard's operations during the three years ended December 31, 1994.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
PAGE
Consolidated Statements of Income for 21 each of the three years in the period ended December 31, 1994
Consolidated Balance Sheets as of December 31, 22 1994 and 1993
Consolidated Statements of Cash Flows for each 24 of the three years in the period ended December 31, 1994
Consolidated Statements of Stockholders' Equity 26 for each of the three years in the period ended December 31, 1994
Notes to Consolidated Financial Statements 27
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, 1994
FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
See attached notes to financial statements
FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
See attached notes to financial statements
FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
See attached notes to financial statements
FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
See attached notes to financial statements
FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
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.
Certain reclassifications of prior year amounts have been made to conform with the current presentation.
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. The effect of common stock equivalents was not material in 1992.
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
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:
TIMBER
Fibreboard follows an overall policy on fee timber that amortizes timber costs over the total fiber available during the estimated growth cycle. Timber carrying costs are expensed as incurred.
PROPERTY, PLANT AND EQUIPMENT
Fibreboard uses the units of production method of depreciation for some of its machinery and equipment which depreciates cost over the estimated number of units that the equipment will be able to produce during its useful life.
Provisions for depreciation of buildings and the remaining machinery and equipment have been computed using straight-line rates based upon the estimated service lives (4-30 years).
Fibreboard capitalizes interest on borrowed funds incurred during construction periods. Capitalized interest is amortized over the lives of the related assets. Interest capitalized in 1994, 1993 and 1992 was $0, $183 and $142.
Fibreboard capitalizes logging road construction costs as part of "Land and Improvements." These costs are amortized as the timber volume adjacent to the road system is harvested.
On July 1, 1993, Fibreboard adjusted the depreciable lives of its assets to more closely approximate their useful lives, resulting in a reduction of depreciation expense of $1,437 in 1993.
INCOME TAX POLICIES
The income tax provision includes the following:
The following table summarizes the differences between the statutory federal and effective tax rate:
In 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law increasing the federal tax rate from 34% to 35%.
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 statement 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.
The tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows:
Prior to the implementation of SFAS 109, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11, Accounting for Income Taxes (APB 11). The following table summarizes the major components of the provision for deferred taxes under APB 11 which resulted from timing differences in the recognition of income and expense for financial reporting and tax purposes:
2. RECEIVABLES
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Fibreboard is self-insured for the majority of its workers compensation benefits. Workers compensation expense was $2,356, $1,074 and $1,836 in 1994, 1993 and 1992 based on actual and estimated claims incurred.
4. NOTES PAYABLE
At December 31, 1993, Fibreboard had a $40,000 operating line of credit facility, secured by a substantial majority of Fibreboard's receivables, inventories and machinery and equipment. This facility was replaced during 1994 with the revolving credit facility described in Note 5.
Fibreboard has a $5,000 operating line of credit dedicated for the seasonal cash needs of its resort operations. Borrowings under the facility carry interest at the prime rate plus 1/4% (8-3/4% at December 31, 1994). The facility expires May 31, 1995. At December 31, 1994, no amounts were outstanding; however, $1,428 of availability under the facility was utilized to secure standby letters of credit.
5. LONG-TERM DEBT
Fibreboard's long-term debt not associated with asbestos consists of the following:
Required repayment of long-term debt is as follows:
Fibreboard has notes receivable with terms and payment dates which are substantially identical to $5,905 of revenue bonds included in the above table. Payments under these notes are as follows:
Fibreboard obtained a $175,000 revolving credit facility during 1994. Initial borrowings were used to replace the credit facility described in Note 4, repay the 11.8% term loans and fund a portion of the purchase of Norandex Inc. (see Note 13). The maximum amount available reduces to $150,000 on September 30, 1995 and to $125,000 on September 30, 1996 with the balance due September 30, 1997, unless the maturity date is extended by Fibreboard and its lenders. Proceeds of borrowings may be used for general corporate purposes and acquisitions. Additional amounts available aggregated $82,904 at December 31, 1994.
Fibreboard's loan agreements contain various financial covenants, the most restrictive of which impose limitations on dividends and other distributions to stockholders, require the maintenance of minimum levels of net worth, limit the ratio of consolidated funded debt to net worth and require maintenance of certain coverage ratios. At December 31, 1994, these covenants were met.
Fibreboard has entered into an interest rate swap to fix the interest rate on $50,000 of borrowings under the revolving credit facility. Through October 1995, Fibreboard will pay the intermediary interest at 6.41% and will receive interest at LIBOR. In addition, 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's asbestos related long-term debt consists of the following and is due upon conclusion of the asbestos personal injury insurance coverage litigation. In the event Fibreboard prevails in the insurance coverage litigation, the amounts will be repaid from insurance proceeds.
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.
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.
INTEREST RATE INSTRUMENTS
Fair market value is based on market rates at the end of the period for similar instruments.
The estimated fair values of financial instruments are as follows:
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. Therefore, it is not practicable to estimate a market value. The balance sheets as of December 31, 1994 and 1993 reflects asbestos costs to be reimbursed of $810,454 and $968,309, asbestos claims settlements of $795,365 and $952,928 and asbestos-related long- term debt of $22,360 and $21,361.
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. Benefits for employees of the acquired Norandex operation continue to vest while all other 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.
The status of Fibreboard's defined benefit pension plan at December 31, 1994 and 1993 is as follows:
Of the accrued expense, $4,518 and $1,058 is included in accounts payable and accrued liabilities (Note 3).
The actuarial assumptions used to determine accrued pension expense and the funded status of the plans for 1994 were: 7.5% discount rate (net pension expense), 8.25% discount rate (funded status), 8% expected long-term rate of return on plan assets and a 5% salary increase for active participants. The assets of the plan at December 31, 1994 and 1993 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 $4,571 at December 31, 1994 and $2,427 at December 31, 1993.
Pension expense included the following components:
On December 31, 1992, a defined benefit pension plan with assets in excess of obligations was frozen, resulting in a curtailment gain of $2,353. The assets of the plan were merged with Fibreboard's other defined benefit pension plan. The curtailment gain is reflected as a component of interest and other income in the Consolidated Statements of Income.
8. NON-PENSION POST-RETIREMENT BENEFITS
Through 1992, Fibreboard provided post-retirement benefits to employees who met certain requirements until they reached age 65. The benefits provided were mainly health care and dental. This benefit was discontinued for employees who retired after December 31, 1992. However, post-retirement benefits are available to certain collective bargaining units of facilities which have been sold.
The status of Fibreboard's non-pension post retirement benefits at December 31, 1994 and 1993 are as follows:
Amounts recorded as net other includes a gain of $1,164 from the resolution of a post-retirement benefit obligation of facilities sold in 1988.
A 16% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1994. The cost trend rate was assumed to decrease to 9% in 1995 and slightly thereafter 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, 1994 by $45 and the aggregate of the service and interest cost components of net periodic post retirement cost for the year then ended by $4. The weighted average discount rate used in determining the accumulated post retirement benefits was 8.25% while 7.5% was used to determine the 1994 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 granting 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 800,000. 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.
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.
At December 31, 1994, options to purchase 503,650 shares at prices from $2.83 to $25.38 were outstanding. Options exercised in 1994 were 4,750. At December 31, 1994, options to purchase 491,650 shares were immediately exercisable. Options becoming exercisable in 1995 are 12,000. Option awards for 54,000 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.
At December 31, 1994, restricted stock awards of 35,000 shares were outstanding. The shares awarded will be issued, 7,000 shares in 1995, 15,000 in 1996 and 13,000 in 1997 provided the grantee is employed continuously through the issue date.
In addition, Fibreboard had an employee stock purchase plan which was suspended in 1992. The plan allowed 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 was 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 was 250,000. During 1994, 1993 and 1992, 0, 0 and 17,360 shares of Fibreboard stock were sold to employees 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, 1994, 235,400 phantom stock units had been awarded at fair market value on the grant date from $27.50 to $30.00. These phantom stock units mature 47,400 units in 1995, 79,000 units in 1996, and 109,000 units in 1997.
Compensation expense recognized for these plans was $129, $1,039 and $517 in 1994, 1993 and 1992.
10. PREFERRED STOCK PURCHASE RIGHTS
In 1988, Fibreboard implemented a stockholder rights plan and distributed to stockholders one preferred share purchase right for each share of Fibreboard common stock then outstanding. Under the rights plan, as amended in 1994, each right entitles the registered holder to purchase from Fibreboard 1/100th of a share of Series A Junior Participating Preferred Stock at an exercise price of $106 per 1/100th 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 is obligated to purchase timber under cutting contracts with the U.S. Forest Service, which extend to 1996. The table below presents Fibreboard's best estimate of its commitment under timber cutting contracts by year of contract expiration:
Fibreboard leases certain office and warehouse space and machinery and equipment under operating leases which expire within six years. Minimum lease payments and subleases for the next five years are as follows:
In addition, the Company leases property from the U.S. Forest Service for one of its resort operations. Lease payment terms are based on a percentage of revenues. Total rent expense for all operating leases amounted to $4,979, $2,194 and $1,753 in 1994, 1993 and 1992.
12. INDUSTRY SEGMENT INFORMATION
Information about Fibreboard's industry segments is set forth below.
13. ACQUISITIONS AND DISPOSITIONS
In July 1993, Fibreboard acquired the net assets of Sierra Ski Ranch, a ski facility located in California, for $13,054. The acquisition was accounted for as a purchase of assets. The ski area was subsequently renamed Sierra-at-Tahoe.
On August 31, 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 $65,332 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. The following unaudited table presents the pro forma combined results of Fibreboard and Norandex assuming the transaction took place at January 1, 1994 or 1993.
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; and 3) 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 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. Furthermore, the pro forma results include the effects of gains on asset sales and restructuring costs which occurred during the periods and which may not reoccur.
In February 1994, Fibreboard sold its agricultural container manufacturing facilities located in Fresno, CA in order to concentrate its resources on the primary wood products and remanufacturing businesses. In July 1994, 8,900 acres of non-essential timberlands were sold for $21,500 and an $18,858 pre-tax gain was recognized in interest and other income.
14. ASBESTOS-RELATED LITIGATION
CONTINGENT LIABILITY FOR ASBESTOS-RELATED CLAIMS
Overview:
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. Fibreboard believes trial court approval could occur during the first half of 1995, but if appealed, it may be 1996 or later before final court approval could be obtained.
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 147,400 personal injury claims for approximately $1,654,400, not including legal defense costs. Substantially all of the settlements have been achieved through 1) payments by Fibreboard's insurers; 2) assignments of Fibreboard's rights to insurance payments, most of which have been converted to three-party agreements among Fibreboard, its insurer and plaintiffs; or 3) deferring payments pending resolution of the personal injury insurance coverage litigation discussed below. An additional 26,800 claims have been disposed of at no cost to Fibreboard other than legal defense costs. At December 31, 1994, Fibreboard estimates that approximately 41,900 claims have been filed against it which remain unresolved. Approximately 15,600 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, 1994, of the 152 actions served against it, Fibreboard has been dismissed from 134 (31 of which joined the National Schools class action), settled or agreed to settle five for $2,020, tried one to a defense verdict and remains a defendant in 14 actions. In one of the remaining actions, Fibreboard won a defense verdict on product identification and cost of abatement issues, although further proceedings are scheduled.
The following tables illustrate asbestos-related claims activity for the last three years:
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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, 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. Fibreboard believes trial court approval could occur during the first half of 1995, but if appealed, it may be 1996 or later before final court approval could be obtained.
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 paid $9,892 into the escrow account after December 31, 1994 on behalf of Fibreboard, in satisfaction of an earlier settlement agreement. Fibreboard is obligated to pay $245, which includes interest from the settlement date to December 31, 1994, into the escrow account if the Global Settlement is approved. 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 $1,560,633 at December 31, 1994 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. 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 and prior settlements with Continental and Pacific, 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. The insurers have filed petitions for review with the California Supreme Court, which has granted review but not yet scheduled any further activity. 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.
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 determined it was probable that it would ultimately receive insurance proceeds of $1,584,000 for the defense and disposition of the claims quantified above. Fibreboard's opinion was 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 insurance coverage 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 1994, 1993 and 1992, unreimbursed costs of $2,211, $1,802 and $4,729 were charged against this reserve.
Fibreboard continues to believe it is probable that it will ultimately receive insurance proceeds of $1,584,000 for the defense and disposition of the asbestos-related personal injury claims quantified above. 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, and no additional events have transpired during 1994 which indicate the potential liability and insurance proceeds estimates should be changed. Consequently, no adjustment has been made to the estimated liability for personal injury claims through the end of the decade or anticipated insurance proceeds. 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:
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. To date, Fibreboard has been very successful in obtaining dismissals, and has won the only trial which went to verdict and won a defense verdict on product identification and cost of abatement issues in another trial in which further proceedings are scheduled.
Fibreboard has settled five asbestos-in-buildings claims, including settlement agreements in the National Schools class action and another class action, for $2,020. The class action settlements are subject to court approval. 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.
Trials in some of the pending asbestos-in-buildings claims are likely to occur over the next few years. To date Fibreboard has successfully defended these claims, or settled the claims for nominal amounts compared to the damages sought. Based on its experience to date, Fibreboard believes the ultimate resolution of asbestos-in-buildings claims will not have a material adverse 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 settlements confirm more than $295,000 of insurance as needed to defend and dispose of asbestos-in-buildings claims, of which $6,400 has been used through December 31, 1994.
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. To date substantially all of Fibreboard's costs of defending asbestos-in-buildings claims have been paid by insurance.
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 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.
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. Fibreboard does not believe this reversal will have an adverse impact on the resolution of its asbestos-related personal injury liabilities.
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.
Oher Issues (Asbestos-in-Buildings Claims):
Many asbestos-in-buildings claims allege a conspiracy and/or concert of action theory which assert, among other things, that the asbestos producers withheld information regarding the potential danger of asbestos. If this theory prevails at trial, it could eliminate the requirement that the plaintiff positively identify Fibreboard's products as present in buildings in trials where the conspiracy theory is alleged. The conspiracy theory has not yet been tested in trial against Fibreboard, although Fibreboard believes it has meritorious defenses.
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, 1994, Fibreboard had $1,062 in cash on hand restricted for asbestos-in-buildings- related expenditures. At December 31, 1994, $6,878 was due in 1995 to asbestos claimants who had accepted Structured Settlement Program obligations and will be paid by Continental under the interim agreement. 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 as 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 working with the steering committees of each site to determine Fibreboard's allocable share of investigation and remediation costs. Fibreboard has established a reserve against which the costs of study and cleanup, as well as ongoing legal and steering committee administrative costs, will be charged. The amount of the reserve was increased by $986 in 1992 to account for the addition of the Acme landfill contingency and to reflect more current remediation cost estimates for the GBF landfill. As of December 31, 1994, the reserve had a remaining balance of $1,627. Fibreboard believes its litigation reserves will be adequate to cover its remaining costs associated with these landfill sites.
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.
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, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. 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, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in more detail in Note 14 to the accompanying financial statements, Fibreboard has been subject to significant asbestos-related litigation and claims allegedly caused by products that the Company manufactured prior to 1972. The amounts involved are substantial. During 1993, Fibreboard, its insurance carriers, and counsel for personal injury claimants entered into agreements which, if finally approved by the court, would resolve the Company's asbestos-related personal injury liabilities within available insurance and existing reserves. However, if these agreements are not approved by the court, the ultimate resolution of these claims and litigation could be materially adverse to Fibreboard causing a substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared assuming that Fibreboard will continue as a going concern and do not include any adjustments that might result from the final resolution of these asbestos-related uncertainties.
Arthur Andersen LLP
San Francisco, California, February 1, 1995.
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)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Directors of Fibreboard is incorporated herein by reference from "Election of Directors" and "Directors Not Standing for Election" of Fibreboard Corporation's Proxy Statement to be filed pursuant to Regulation 14A not later than April 30, 1995. See also "Executive Officers of the Registrant" in Part I of this Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation is incorporated herein by reference from "Compensation of Directors" and "Executive Compensation" of Fibreboard's Proxy Statement to be filed pursuant to Regulation 14A not later than April 30, 1995.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Security Ownership of Certain Beneficial Owners and Management is incorporated herein by reference from "Security Ownership of Management and Principal Stockholders" of Fibreboard's Proxy Statement to be filed pursuant to Regulation 14A not later than April 30, 1995.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14.
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 20. 2. Index to Financial Statement Schedules. See page 51. 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).
10.4 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).
10.6 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.
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.
10.14 Amended and Restated Credit Agreement dated September 29, 1994 among Fibreboard Corporation, as Borrower, Certain Commercial Lending Institutions and Bank of America National Trust and Savings Association, as Administrative Co-Agent and Collateral Co-Agent (incorporated herein by
reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994).
10.14.1 First Amendment to Amended and Restated Credit Agreement, dated as of March 10, 1995, among Fibreboard Corporation, Bank of America National Trust and Savings Association, as administrative co-agent for the Lenders and as collateral co-agent for the Lenders, and the several financial institutions party to the Credit Agreement.
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 Severance Agreement dated January 1, 1992 between Fibreboard Corporation and Messrs. Donohue, Costello, Douglas, DeMaria, Elliott and Swan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1991).
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.
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 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).
10.26 Loan Agreement dated May 3, 1993 between First Interstate Bank of Nevada, N.A. and Trimont Land Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1993).
10.27 Loan Agreement dated September 17, 1993 between First Interstate Bank of Nevada, N.A. and Sierra-at-Tahoe and Trimont Land Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1993).
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.
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.
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.
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, 19943).
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).
21. Fibreboard Corporation Subsidiaries.
23. Consent of Arthur Andersen LLP
* Denotes management contract or compensation plan identified pursuant to Item 14(a)(3) of Form 10-K.
(b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed during the period October 1, 1994 to December 31, 1994.
INDEX TO FINANCIAL STATEMENT SCHEDULES TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994
Schedule Page -------- ----
III Valuation and qualifying accounts for each 52 of the three years in the period ended December 31, 1993
Report of independent public accountants on 53 financial statement schedules.
FIBREBOARD CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31 (000'S Omitted)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT 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 1, 1995. 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 1, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FIBREBOARD CORPORATION ---------------------- (Registrant)
Dated: March 24, 1995 By: /s/ John D. Roach -------------------- John D. Roach Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated:
Name Title Date ------------------------- ----------------- -----------
/s/ John D. Roach Chairman, President, March 24, 1995 ------------------------- Chief Executive Officer John D. Roach and Director (Principal Executive Officer)
/s/ James P. Donohue Senior Vice President, March 24, 1995 ------------------------- Finance and Adminis- James P. Donohue tration and Chief Financial Officer (Principal Financial Officer)
/s/ Garold E. Swan Vice President and March 24, 1995 ------------------------- Controller (Principal Garold E. Swan Accounting Officer)
/s/ Philip R. Bogue Director March 24, 1995 ------------------------- Philip R. Bogue
Name Title Date ------------------------- ----------------- -----------
/s/ William D. Eberle Director March 24, 1995 ------------------------- William D. Eberle
/s/ G. Robert Evans Director March 24, 1995 ------------------------- G. Robert Evans
/s/ George B. James Director March 24, 1995 ------------------------- George B. James
/s/ John W. Koeberer Director March 24, 1995 ------------------------- John W. Koeberer
/s/ James F. Miller Director March 24, 1995 ------------------------- James F. Miller