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Temple-Inland Posts Lower Third Quarter Income

Oct. 24, 2007 - Temple-Inland Inc. today reported third quarter 2007 net income of $36 million, or $0.33 per diluted share, compared with third quarter 2006 net income of $95 million, or $0.86 per diluted share, and second quarter 2007 net income of $66 million, or $0.62 per diluted share.

Results for third quarter 2007 include (i) an after-tax special charge of $7 million, or $0.06 per share, principally related to costs associated with the company's Transformation Plan, and (ii) an $8 million after-tax charge, or $0.08 per share, related to the disposition of our chemical business, a discontinued operation. In total, the effect of these special items on third quarter 2007 was $15 million, or $0.14 per share. Net income per diluted share, excluding special items, for third quarter 2007 is $0.47, compared with $0.92 in third quarter 2006, and $0.59 in second quarter 2007.

Corrugated Packaging reported third quarter 2007 operating income of $70 million. Lower converting costs and volume growth in third quarter 2007 compared with third quarter 2006 offset higher recycled fiber costs. Operating income declined third quarter 2007 compared with second quarter 2007 principally due to lower corrugated container volumes and higher recycled fiber costs.

Excluding the sale of Performance Sheets (a sheet feeder plant sold August 2006), volume on a per workday basis was up 3% in third quarter 2007 compared with third quarter 2006. On a volume per workday basis, shipments of corrugated containers were down 3% third quarter 2007 compared with second quarter 2007. Year-to-date shipments, on a volume per workday basis, are up 1% compared with 2006.

Average prices for corrugated containers third quarter 2007 were down approximately 1% compared with third quarter 2006 and second quarter 2007. The average cost of recycled fiber third quarter 2007 was up 41% compared with third quarter 2006, and up 12% compared with second quarter 2007. Freight costs third quarter 2007 were up $3 million compared with third quarter 2006, but flat compared with second quarter 2007. Energy costs were flat third quarter 2007 compared with third quarter 2006, but down $6 million compared with second quarter 2007.

Forest Products operating income declined third quarter 2007 compared with third quarter 2006 primarily due to lower prices and lower shipments. Operating income declined third quarter 2007 compared with second quarter 2007 principally due to lower gypsum prices.

Average lumber prices third quarter 2007 were down 1% compared with third quarter 2006, and flat compared with second quarter 2007. Gypsum prices third quarter 2007 were down 38% compared with third quarter 2006, and down 13% compared with second quarter 2007. Particleboard prices third quarter 2007 were down 8% compared with third quarter 2006, and down 3% compared with second quarter 2007.

Shipments of lumber third quarter 2007 were up 4% compared with third quarter 2006, but were down 3% compared with second quarter 2007. Shipments of gypsum were down 19% third quarter 2007 compared with third quarter 2006, and down 11% compared with second quarter 2007. Shipments of particleboard were down 27% third quarter 2007 compared with third quarter 2006, and down 11% compared with second quarter 2007.

Real Estate reported third quarter 2007 operating income of $10 million, including a $4 million gain from the sale of commercial land.

Third quarter 2007 high-value land sales totaled 770 acres at an average price of approximately $7,400 per acre.

Residential activity for wholly-owned and joint venture projects in third quarter 2007 included the sale of 299 lots at an average price of approximately $58,900 per lot.

Commercial activity for wholly-owned and joint venture projects in third quarter 2007 included the sale of 69 acres at an average price of approximately $206,600 per acre.

Financial Services operating income declined third quarter 2007 compared with third quarter 2006 and second quarter 2007 principally due to a higher loan loss provision.

Comments
In announcing third quarter results, Kenneth M. Jastrow, II, chairman and chief executive officer of Temple-Inland Inc. said, “Our Corrugated Packaging operation continues to benefit from improving market conditions and strategic initiatives of full integration and increasing asset utilization. During third quarter 2007 we generated $18 million in additional business improvement compared with third quarter 2006, driven by lower converting costs and volume growth. Market conditions remain favorable and we expect to continue realizing additional business improvement going forward.

“Forest Products results reflect challenging market conditions. Production in our converting operations is being reduced to match demand for our building products. “Real Estate operating income during third quarter 2007 benefited from commercial and high-value land sales activity. Consistent with our focus on value creation, nine projects, representing over 3,000 acres of our high-value land around Atlanta have been entitled over the past year.

“Financial Services results were negatively impacted by higher loan loss provision during third quarter 2007 reflecting challenging homebuilding and current credit market conditions. Financial Services continues to focus on asset generation, low cost, and expanding our branch network located in Texas and California, two of the fastest growing deposit markets in the U.S.”

Transformation Plan
“February 26, 2007 we announced a Transformation Plan to maximize shareholder value by separating Temple-Inland into three focused, stand-alone, public companies and selling our strategic timberland,” Mr. Jastrow continued. “During third quarter 2007, substantial progress was made regarding each component of the Transformation Plan and we are on track to complete the transformation plan by year end. We announced a definitive agreement with an investment entity affiliated with The Campbell Group, Inc. to sell 1.55 million acres of timberland for $2.38 billion. We expect to use the majority of these proceeds to pay a special dividend, which is currently estimated to be approximately $1.1 billion, or $10.25 per share, to our common stockholders. The remaining approximately $700 million of the cash proceeds will be used to reduce debt.

“The three companies resulting from the plan - Temple-Inland, Guaranty Financial and Forestar - have exciting futures, and will be well positioned to continue to maximize value for shareholders going forward.”

SOURCE: Temple-Inland




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