Temple-Inland Inc.

Temple-Inland Inc.

303 South Temple Drive
Diboll, Texas 75941
U.S.A.
(409) 829-2211
Fax: (409) 829-1266

Public Company
Incorporated: 1983
Employees: 13,000
Sales: $2.40 billion
Stock Exchanges: New York Pacific

Temple-Inland Inc. is a lumber and lumber-products holding company specializing in paper, packaging, building products, and financial services. The company’s colorful history can be traced back to the late 1800s and includes acquisitions, mergers, lawsuits, name changes, and a notable spin-off that helped the company become a well-rounded producer with more than $1 billion of sales a year at that time.

Temple-Inland was formed in Delaware in 1983 to acquire Time Inc.’s subsidiaries, Temple-Eastex Incorporated, now Temple-Inland Forest Products Corporation, based in Diboll, Texas, and Inland Container Corporation based in Indianapolis, Indiana. Through these and other subsidiaries, Temple-Inland has manufacturing, retail, and service operations in 29 states and Puerto Rico, and owns more than 1.8 million acres of timberland in Texas, Georgia, Louisiana, and Alabama.

What is now Temple-Inland Forest Products Corporation began in 1893, when Thomas Louis Latane Temple Sr. founded Southern Pine Lumber Company on 7,000 acres of east Texas, Angelina County, timberland. Temple built the town of Diboll around his company, and by 1894 the first sawmill was operating, cutting 50,000 board feet of old growth timber each day. During the next few years, Southern Pine Lumber Company continued to expand its operations in Diboll. In 1903 the company built its second sawmill, and in 1907 created a hardwood mill. In 1910, Temple Lumber Company was formed, and established operations in Hemphill and Pineland, both in Sabine County, Texas.

In 1934 Thomas Temple died, leaving his son Arthur with 200,000 acres of land and a company that was $2 billion dollars in debt. Three years later the Hemphill sawmill was destroyed by fire, and Temple Lumber Company operations moved to a smaller mill in Pineland.

During these early years and through the housing boom following World War II, Southern Pine Lumber primarily produced basic lumber products, both hardwood and pine, for the construction and furniture industries. By the 1950s technology offered new directions and opportunity for growth. Southern Pine Lumber Company began converting chips, sawdust, and shavings into panel products. In subsequent years, the company pioneered the production of southern pine plywood, particleboard, gypsum wallboard, and other building materials.

Credit for substantial growth in the 1950s was due to the aggressive leadership of the grandson of Thomas Temple, Arthur Temple, who took over in 1951. Under his direction, the company used technological advances in the forest industry to expand the company’s production and reduce its debt. In 1954 Southern Pine Lumber built a new plant in Diboll for fiber-board production, using wood waste and whole pine chips to make asphalt-coated insulation sheathing. Southern Pine Lumber of Diboll and Temple Lumber of Pineland merged in 1956, taking Southern Pine Lumber’s name.

In 1962 Southern Pine Lumber purchased the controlling interest in Lumbermen’s Investment Corporation of Austin, Texas, a mortgage-banking and real estate development company that became a wholly owned subsidiary in the early 1970s. In 1963 gypsum wallboard production began with the purchase of Texas Gypsum, of Dallas, Texas, that also became a wholly owned subsidiary of the company. That same year, Southern Pine Lumber set up a joint venture with United States Plywood Corporation to build a $3 million plywood-sheathing plant at Diboll. The plant, supplied with raw material from 400,000 acres of Southern Pine Lumber’s timberland, was designed for producing plywood for sheathing, rock decking, sub-flooring, and industrial uses. After several successful years of operating the plant as a joint venture, the company bought out United States Plywood.

In 1963 Southern Pine Lumber Company changed its name to Temple Industries, Inc., and built a pilot plant in Pineland to make particleboard from sawdust and shavings. After 70 years of business, the company’s land holdings had grown to more than 450,000 acres. In 1964 Temple Industries expanded into financial services, including mortgage banking and insurance.

In 1966 the company built a stud mill at Pineland. In 1969 it rebuilt the Diboll sawmill a year after it was destroyed by fire and, also that year, acquired two beverage-case plants in Chattanooga, Tennessee, and Dallas. Two new wholly owned subsidiaries joined Temple Industries in 1969. Sabine Investment Company of Texas, Inc. was formed, and Temple Associates, Inc. was acquired.

The 1970s were even more significant for the company, beginning with the production of medium-density siding and the expansion of the fiberboard operation. Temple Industries formed Creative Homes, Inc., in Diboll, to build mobile and modular homes for approximately four years. In 1971 the company built a new particleboard plant in Diboll, and in 1972 acquired AFCO Industries, Inc., manufacturer of do-it-yourself consumer products. That same year Temple’s West Memphis, Tennessee, gypsum operation began production.

The decade, however, was defined by the events of 1973: Time Inc. acquired Temple Industries and merged it with its Eastex Pulp and Paper Company subsidiary to form Temple-Eastex Incorporated. Eastex Pulp and Paper had been founded in the early 1950s by Time and Houston Oil Company, as East Texas Pulp and Paper. Houston Oil’s 670,000 acres of southern pine and hardwood provided raw material for the new paper mill, opened at Evadale, Texas, in 1954. Time had purchased Houston Oil’s 50% ownership in 1956, thus acquiring the 670,000 acres of timberland.

When Time created Temple-Eastex, magazines were providing only about one-fourth of the Time’s company’s sales, and Time officials decided to expand the company’s more profitable forest-products business. Both companies were looking to diversify; Time’s underperforming stock made it vulnerable to takeover. Temple met with Eastex president R.M. (Mike) Buckley, and the arrangements were made. Time bought Temple Industries for stock, and the Temples became Time’s largest outside shareholders.

Temple-Eastex produced lumber and other building materials, in addition to paperboard used for household paper products. In 1974 Temple-Eastex opened a new particleboard plant in Thomson, Georgia, and a new plywood plant in Pineland, Texas. In 1975 the stud mill at Pineland was automated, and all operations except plywood and studs were phased out. That same year Temple-Eastex installed an innovative process for bleaching of pulp, required for white paper products, in the Evadale mill, as part of an expansion in kraft pulp capacity. The $55 million Temple-Eastex expansion boosted Evadale production by 17%. The company stayed busy during the late 1970s with openings, closings, purchases, and moves. A wood molasses plant was built in Diboll in 1977 to use the wood sugars found in the waste water from fiber products. The following year a $100 million capital improvement was begun at Evadale to further enhance operations there. In 1978, Arthur Temple became vice chairman of Time and served in that position until 1983. In 1979 Temple-Eastex moved into new corporate offices in Diboll, while the nearby plywood operation was closed permanently.

The 1980s started off smoothly with some improvements at the Diboll mill. In 1980 a plastic-foam operation was put on line to manufacture urethane for rigid-foam insulation, and the company’s newest and largest wood-fired boiler began operation. A new chip mill and log processing operation was constructed in 1982 in Pineland to supply chips to Evadale, plywood and stud logs to Pineland, and fuel for all other operations. In 1982, however, the company was fined $40,000 by the Texas Air Control Board for violating state paniculate rate and opacity standards. In addition to the fine, the Evadale kraft pulp and paper mill was required to install two electrostatic precipitators.

In 1983, ten years after acquiring Temple Industries, Time decided to spin off the company’s forest-products operations into a separate company, again as an antitakeover measure. Time distributed 90% of the common stock in the newly formed company, Temple-Inland Inc., to its shareholders. Time also agreed to sell the balance of its holdings within five years after the spin-off.

Temple-Inland, which was then comprised of Temple-Eastex, Inland Container Corporation, and several other operations, offered a wide range of products, including plywood, fiberboard, lumber, particleboard, gypsum, rigid foam board, and wall paneling. The building-products division operates five retail stores in Texas, and one in Louisiana. Temple-Inland also has successful financial-services operations, offering mortgage banking, real estate development, and insurance. The company’s heaviest volume, however, comes from its container and containerboard segment, which accounted for 59% of the company’s earnings in 1989. This segment ranked fifth in containerboard production in the United States and third among the country’s 800 corrugated box producers in 1990.

Inland Container Corporation, a fully integrated packaging company, makes corrugated boxes and other containers at its six paper mills. The company got its start in 1918 when Herman C. Krannert started Anderson Box Company in Anderson, Indiana, to make ventilated corrugated boxes for the shipment of chickens. By 1925 he moved to Indianapolis, Indiana, and opened the first Inland Box Company plant the following year. The company acquired a second plant in Middletown, Ohio, in 1929, and in 1930 was re-incorporated as Inland Container Corporation. By 1946 Inland Container had grown into a multiplant box maker but was relying entirely on outside sources for its paper supply. Later that year, through a joint venture with The Mead Corporation, Georgia Kraft Company, half of which was owned by Inland Container, was formed, and construction of a new linerboard mill was begun at Macön, Georgia. Georgia Kraft owned approximately one million acres of timberland in Georgia and Alabama, and operated three linerboard mills with five machines, as well as plywood and lumber mills.

In 1958 Inland Container acquired a majority of the outstanding stock of General Box Corporation, which, when combined with shares previously held, gave Inland Container more than 50% control of that company. This acquisition led to an antitrust charge in 1960 by the Federal Trade Commission (FTC) against Inland Container for its purchase of shares of General Box’s Louisville, Kentucky, plant. Charges were dismissed in 1963, and then reinstated in 1964, when the FTC reversed an earlier ruling. Inland Container was ordered to sell the corrugated-shipping-container plant that it had acquired from General Box in June 1958. The FTC said the acquisition more than doubled Inland Container’s share of the corrugated-box market in the city, and caused the company to supplant General Box as the second-largest corrugated box maker in Louisville. In 1964 Inland Container compensated for this loss by building a corrugated shipping plant on a 17-acre site in Hattiesburg, Mississippi.

In the late 1960s, Inland Container further integrated its operations with construction of a corrugating-medium mill in Tennessee, which began operations in 1970. Corrugating medium is the rippled, corrugated center of the sandwich, with linerboard on each side, which is the composition of corrugated board. Further expansion took place with the construction of a recycled corrugating-medium mill at Newport, Indiana, which began operations in 1975.

In 1978 Time paid $272 million to buy Inland Container. Other operating divisions of Inland Container market packaging materials for the agricultural, horticultural, and poultry industries, and manufacture and market paper and reinforced box tapes.

Following the 1983 spin-off, Temple-Inland incorporated Inland Container and Temple-Eastex. Temple-Inland adopted the same aggressive stance as its subsidiaries had in previous years. The Temple family was still in control of the company, although it had been expanded, diversified, and modernized since Thomas Temple began operations in 1894. During its first year of business, the subsidiary Temple-Eastex purchased Elmendorf Board of Claremont, New Hampshire, a manufacturer of oriented-strand board. The next year, the company acquired National Fidelity Life Insurance Company of Kansas for $28 million with an eye to expanding its financial-services group. In December 1987, Temple-Inland Financial Services acquired Kilgore Federal Savings and Loan Association in Texas for $10 million.

In 1986 Temple-Inland purchased a linerboard mill, three box-manufacturing plants, a short-line railroad, and approximately 260,000 acres of timberland in east Texas and Louisiana at a cost of about $220 million, from Owens-Illinois, a Toledo, Ohio-based packaging company. The mill, in Orange, Texas, greatly increased the company’s capacity for production of linerboard. The mill and timberland were also valuable because of their proximity to Temple-Inland’s other facilities. That same year, Temple-Eastex announced construction of a $30 million wood-converting facility in Buna, Texas. The facility was intended as a high-tech sawmill and low-cost residue provider to paper mills in the Texas cities of Evadale and Orange.

In 1988 Temple-Eastex Incorporated changed its name to Temple-Inland Forest Products Corporation. That same year Georgia Kraft Company was dissolved and its assets divided between Temple-Inland and Mead. Temple-Inland acquired the Rome, Georgia, linerboard mills, a sawmill in Rome, and more than 400,00 acres of timberland.

The big news of 1988, however, was the purchase of three insolvent Texas savings and loans. Temple-Inland, along with Trammell Crow and Mason Best Company, bought Delta Savings Association of Texas, in Alvin; Guaranty Federal Savings & Loan Association of Dallas; and First Federal Savings & Loan Association of Austin. The three institutions were combined into one, Guaranty Federal Savings Bank, operating in Dallas, of which Temple-Inland had an 80% interest. Temple-Inland’s initial outlay was $75 million, and the company committed to contribute another $50 million by January 1991. Temple-Inland was hoping for future payoffs. Purchase of the institutions was a low-risk investment that complemented the company’s plans for growth in its financial-services group.

In 1989 Temple-Inland was deemed “the most under-valued paper stock on the Big Board” by Business Week, May 22, 1989. The company was described as having superb leadership but stock that failed to reflect Temple-Inland’s rapid growth. The following year, Temple-Inland sold its Great American Reserve Insurance Company, using the $10 million profit from the sale to bolster Guaranty Federal’s capital to expand its home-mortgage lending and consumer-banking services. Also in 1990, the company started a new sawmill in DeQuincy, Louisiana, which produces chips for the Evadale and Orange mills, as well as 100 million board feet of lumber annually. In 1991 the company expanded and upgraded its recycled liner-board mill in Ontario, California.

Demand for paper products was seen to have been consistent during the late 1980s and early 1990s, and the demand for linerboard for corrugated boxes continued to increase. Containers and containerboard sales accounted for more than one-half of the company’s profits. The smaller, but highly profitable bleached-pulp-and-paperboard division had seen a rise in demand. This division was one of the company’s strongest segments, with bleached paperboard being used for many products, including paper cups and paper plates.

President and chief executive officer, Clifford Grum who became chairman in April 1991, has said that Temple-Inland will focus on new technology, including synthetic paper products such as heat-resistant microwave containers. He predicted that synthetic paper will play an increasingly important role in the future of the industry. Temple-Inland will work toward achieving an ecological balance for growing trees for economic use and preserving trees for nature, he said.

Principal Subsidiaries

Inland Container Corporation; Temple-Inland Forest Products Corporation; Temple-Inland Financial Services Inc.

Further Reading

“A Proud Tradition,” Temple-Inland corporate typescript, [1984]; “Chronology of Temple-Inland Operations,” Temple-Inland corporate typescript, 1990.

—Leslie C. Halpern