##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    Quarterly Report
Pursuant to Section
13 or 15(d) of the
Securities Exchange
Act of 1934
 for the Quarterly Period Ended June 30, 2007
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the Transition Period From  to
 Commission File Number: 001-08634
 Temple-Inland Inc.
  Delaware
    
    75-1903917(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 1300 MoPac Expressway South, Austin, Texas 78746
 (512) 434-5800
 Not Applicable
 þ o
  þ o o
 o þ
  Number of common shares outstandingClass
    
    as of June 30, 2007Common Stock (par value $1.00 per share)
    
    105,974,913
 Page 1 of 178
    
    The Exhibit Index is page 50.




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##### 



PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Temple-Inland Inc. and Subsidiaries
    
    
    3Consolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Parent Company (Temple-Inland Inc. and its manufacturing and real estate subsidiaries)
    
    
    7Summarized Balance Sheets
    
    
    7Summarized Statements of Income
    
    
    8Summarized Statements of Cash Flows
    
    
    9Financial Services
    
    
    10Summarized Balance Sheets
    
    
    10Summarized Statements of Income
    
    
    11Summarized Statements of Cash Flows
    
    
    12Notes to the Consolidated Financial Statements
    
    
    13Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    45PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    46Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 3. Defaults Upon Senior Securities
    
    
    47Item 4. Submission of Matters to a Vote of Security Holders
    
    
    47Item 5. Other Information
    
    
    48Item 6. Exhibits
    
    
    48SIGNATURES
    
    
    49Purchase AgremeentAmended and Restated Certificate of IncorporationAmended and Restated BylawsCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
  
 
 Parent
    
    
    FinancialCompany
    
    
    Services
    
    
    Consolidated(In millions)ASSETSCash and cash equivalents
    
    $
    26
    
    
    $
    288
    
    
    $
    314Trade receivables, net of allowance for doubtful accounts of $15
    
    
    471
    
    
    
    
    
    
    
    471Inventories
    
    
    420
    
    
    
    
    
    
    
    420Assets held-for-sale
    
    
    313
    
    
    
    
    
    
    
    313Timber and timberland
    
    
    59
    
    
    
    
    
    
    
    59Real estate
    
    
    587
    
    
    
    
    
    
    
    587Loans held for sale
    
    
    
    
    
    
    20
    
    
    
    20Loans, net of allowance for losses of $72
    
    
    
    
    
    
    9,470
    
    
    
    9,470Securities available-for-sale
    
    
    
    
    
    
    888
    
    
    
    888Securities held-to-maturity
    
    
    
    
    
    
    4,192
    
    
    
    4,192Investment in Federal Home Loan Bank stock
    
    
    
    
    
    
    211
    
    
    
    211Property and equipment, net
    
    
    1,624
    
    
    
    222
    
    
    
    1,846Goodwill
    
    
    365
    
    
    
    141
    
    
    
    506Other intangible assets
    
    
    
    
    
    
    23
    
    
    
    23Prepaid expenses and other assets
    
    
    382
    
    
    
    240
    
    
    
    575Investment in financial services
    
    
    1,034
    
    
    
    
    
    
    
    TOTAL ASSETS
    
    $
    5,281
    
    
    $
    15,695
    
    
    $
    19,895LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable, accrued expenses, and other liabilities
    
    $
    821
    
    
    $
    132
    
    
    $
    943Long-term debt and other borrowings
    
    
    1,642
    
    
    
    101
    
    
    
    1,743Deposits
    
    
    
    
    
    
    9,532
    
    
    
    9,526Federal Home Loan Bank borrowings
    
    
    
    
    
    
    4,582
    
    
    
    4,582Deferred income taxes
    
    
    194
    
    
    
    
    
    
    
    163Liability for pension benefits
    
    
    209
    
    
    
    
    
    
    
    209Liability for postretirement benefits
    
    
    140
    
    
    
    
    
    
    
    140Subordinated notes payable to trust
    
    
    
    
    
    
    314
    
    
    
    314TOTAL LIABILITIES
    
    
    3,006
    
    
    
    14,661
    
    
    
    17,620SHAREHOLDERS EQUITYPreferred
stock  par value $1 per share: authorized 25,000,000 shares; none issued
    
    
    
    
    
    
    
    
    
    
    Common stock  par value $1 per share: authorized 200,000,000 shares;
issued 123,605,344 shares, including shares held in the treasury
    
    
    
    
    
    
    
    
    
    
    124Additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    462Accumulated other comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    (185
    )Retained earnings
    
    
    
    
    
    
    
    
    
    
    2,5462,947Cost of shares held in the treasury: 17,630,431 shares
    
    
    
    
    
    
    
    
    
    
    (672
    )TOTAL SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    
    2,275TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    $
    19,895
  3




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##### Table of Contents



Parent
    
    
    FinancialCompany
    
    
    Services
    
    
    Consolidated(In millions)ASSETSCash and cash equivalents
    
    $
    38
    
    
    $
    372
    
    
    $
    405Trade receivables, net of allowance for doubtful accounts of $14
    
    
    452
    
    
    
    
    
    
    
    452Inventories
    
    
    435
    
    
    
    
    
    
    
    435Timber and timberland
    
    
    358
    
    
    
    
    
    
    
    358Real estate
    
    
    512
    
    
    
    
    
    
    
    512Loans held for sale
    
    
    
    
    
    
    23
    
    
    
    23Loans, net of allowance for losses of $65
    
    
    
    
    
    
    9,617
    
    
    
    9,617Securities available-for-sale
    
    
    
    
    
    
    529
    
    
    
    529Securities held-to-maturity
    
    
    
    
    
    
    4,853
    
    
    
    4,853Investment in Federal Home Loan Bank stock
    
    
    
    
    
    
    262
    
    
    
    262Property and equipment, net
    
    
    1,639
    
    
    
    214
    
    
    
    1,853Goodwill
    
    
    365
    
    
    
    141
    
    
    
    506Other intangible assets
    
    
    
    
    
    
    26
    
    
    
    26Prepaid expenses and other assets
    
    
    403
    
    
    
    214
    
    
    
    582Investment in financial services
    
    
    1,015
    
    
    
    
    
    
    
    TOTAL ASSETS
    
    $
    5,217
    
    
    $
    16,251
    
    
    $
    20,413LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable, accrued expenses, and other liabilities
    
    $
    836
    
    
    $
    126
    
    
    $
    953Long-term debt and other borrowings
    
    
    1,628
    
    
    
    101
    
    
    
    1,729Deposits
    
    
    
    
    
    
    9,486
    
    
    
    9,479Federal Home Loan Bank borrowings
    
    
    
    
    
    
    5,076
    
    
    
    5,076Deferred income taxes
    
    
    198
    
    
    
    
    
    
    
    174Liability for pension benefits
    
    
    231
    
    
    
    
    
    
    
    231Liability for postretirement benefits
    
    
    135
    
    
    
    
    
    
    
    135Subordinated notes payable to trust
    
    
    
    
    
    
    142
    
    
    
    142Preferred stock issued by subsidiaries
    
    
    
    
    
    
    305
    
    
    
    305TOTAL LIABILITIES
    
    
    3,028
    
    
    
    15,236
    
    
    
    18,224SHAREHOLDERS EQUITYPreferred
stock  par value $1 per share: authorized 25,000,000 shares; none issued
    
    
    
    
    
    
    
    
    
    
    Common stock  par value $1 per share: authorized 200,000,000 shares;
issued 123,605,344 shares, including shares held in the treasury
    
    
    
    
    
    
    
    
    
    
    124Additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    468Accumulated other comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    (191
    )Retained earnings
    
    
    
    
    
    
    
    
    
    
    2,5012,902Cost of shares held in the treasury: 18,754,907 shares
    
    
    
    
    
    
    
    
    
    
    (713
    )TOTAL SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    
    2,189TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    $
    20,413
  4




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##### Table of Contents



Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions, except per share amounts)REVENUESManufacturing and real estate
    
    $
    1,071
    
    
    $
    1,134
    
    
    $
    2,108
    
    
    $
    2,235Financial services
    
    
    287
    
    
    
    299
    
    
    
    571
    
    
    
    5821,358
    
    
    
    1,433
    
    
    
    2,679
    
    
    
    2,817COSTS AND EXPENSESManufacturing and real estate
    
    
    (978
    )
    
    
    (993
    )
    
    
    (1,969
    )
    
    
    (1,981
    )Financial services
    
    
    (245
    )
    
    
    (244
    )
    
    
    (483
    )
    
    
    (481
    )(1,223
    )
    
    
    (1,237
    )
    
    
    (2,452
    )
    
    
    (2,462
    )OPERATING INCOME
    
    
    135
    
    
    
    196
    
    
    
    227
    
    
    
    355Parent company interest
    
    
    (31
    )
    
    
    (34
    )
    
    
    (62
    )
    
    
    (67
    )Other non-operating income (expense)
    
    
    1
    
    
    
    91
    
    
    
    1
    
    
    
    91INCOME BEFORE INCOME TAXES
    
    
    105
    
    
    
    253
    
    
    
    166
    
    
    
    379Income tax expense
    
    
    (39
    )
    
    
    (62
    )
    
    
    (62
    )
    
    
    (109
    )INCOME FROM CONTINUING OPERATIONS
    
    
    66
    
    
    
    191
    
    
    
    104
    
    
    
    270Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME
    
    $
    66
    
    
    $
    191
    
    
    $
    104
    
    
    $
    270WEIGHTED AVERAGE COMMON SHARES
OUTSTANDINGBasic
    
    
    106.0
    
    
    
    109.8
    
    
    
    105.8
    
    
    
    110.5Diluted
    
    
    108.1
    
    
    
    111.8
    
    
    
    107.8
    
    
    
    112.6EARNINGS PER SHAREBasic:Income from continuing operations
    
    $
    0.63
    
    
    $
    1.74
    
    
    $
    0.99
    
    
    $
    2.45Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.63
    
    
    $
    1.74
    
    
    $
    0.99
    
    
    $
    2.45Diluted:Income from continuing operations
    
    $
    0.62
    
    
    $
    1.70
    
    
    $
    0.97
    
    
    $
    2.40Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.62
    
    
    $
    1.70
    
    
    $
    0.97
    
    
    $
    2.40DIVIDENDS PAID PER SHARE OF COMMON STOCK
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.56
    
    
    $
    0.50
  5




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##### Table of Contents



First Six Months2007
    
    
    2006(In millions)CASH PROVIDED BY (USED FOR) OPERATIONSNet income
    
    $
    104
    
    
    $
    270Adjustments:Depreciation and amortization
    
    
    127
    
    
    
    127Amortization and accretion of financial instrument
discounts and premiums and deferred loan fees and
origination costs, net
    
    
    10
    
    
    
    10Provision (credit) for credit losses
    
    
    (2
    )
    
    
    Deferred income taxes
    
    
    (2
    )
    
    
    7Non-cash real estate cost of sales
    
    
    26
    
    
    
    27Real estate development expenditures
    
    
    (89
    )
    
    
    (60
    )Other
    
    
    2
    
    
    
    6Changes in:Receivables
    
    
    (19
    )
    
    
    (81
    )Inventories
    
    
    16
    
    
    
    11Accounts payable and accrued expenses
    
    
    (29
    )
    
    
    (11
    )Prepaid expenses and other
    
    
    7
    
    
    
    22Loans held for sale:Originations
    
    
    (46
    )
    
    
    (131
    )Sales
    
    
    49
    
    
    
    374154
    
    
    
    571CASH PROVIDED BY (USED FOR) INVESTINGCapital expenditures
    
    
    (111
    )
    
    
    (93
    )Reforestation and acquisition of timber and timberland
    
    
    (6
    )
    
    
    (7
    )Sale of non-strategic assets and operations
    
    
    14
    
    
    
    4Securities available-for-sale, net
    
    
    (361
    )
    
    
    65Securities held-to-maturity, net
    
    
    648
    
    
    
    297Redemption of Federal Home Loan Bank stock
    
    
    58
    
    
    
    Loans originated or acquired, net of principal collected
    
    
    147
    
    
    
    (20
    )Acquisitions, net of cash acquired, and investment in joint ventures
    
    
    (1
    )
    
    
    (135
    )Other
    
    
    (6
    )
    
    
    10382
    
    
    
    121CASH PROVIDED BY (USED FOR) FINANCINGAdditions to debt
    
    
    27
    
    
    
    2Payments of debt
    
    
    (447
    )
    
    
    (229
    )Borrowings under accounts receivable securitization facility, net
    
    
    16
    
    
    
    39Borrowings under revolving credit facility, net
    
    
    (13
    )
    
    
    47Changes in book overdrafts
    
    
    (5
    )
    
    
    Deposits, net
    
    
    46
    
    
    
    72Repurchase agreements and short-term borrowings, net
    
    
    (60
    )
    
    
    (617
    )Issuance of subordinated notes payable to trust
    
    
    172
    
    
    
    Redemption of preferred stock issued by subsidiaries
    
    
    (305
    )
    
    
    Cash dividends paid to shareholders
    
    
    (59
    )
    
    
    (55
    )Repurchase of common stock
    
    
    (24
    )
    
    
    (153
    )Exercise of stock options
    
    
    17
    
    
    
    34Tax benefit on stock options exercised
    
    
    8
    
    
    
    7Other
    
    
    
    
    
    
    8(627
    )
    
    
    (845
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (1
    )Discontinued operations, principally operating activities
    
    
    
    
    
    
    (1
    )Net increase (decrease) in cash and cash equivalents
    
    
    (91
    )
    
    
    (155
    )Cash and cash equivalents at beginning of period
    
    
    405
    
    
    
    441Cash and cash equivalents at end of period
    
    $
    314
    
    
    $
    286
  6




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##### Table of Contents



(Unaudited)SecondQuarter-End
    
    
    Year-End2007
    
    
    2006(In millions)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    26
    
    
    $
    38Trade receivables, net of allowance for doubtful accounts of $15 in 2007 and
$14 in 2006
    
    
    471
    
    
    
    452Inventories:Work in process and finished goods
    
    
    106
    
    
    
    109Raw materials
    
    
    195
    
    
    
    211Supplies and other
    
    
    119
    
    
    
    115Total inventories
    
    
    420
    
    
    
    435Prepaid expenses and other
    
    
    94
    
    
    
    72Assets held-for-sale
    
    
    313
    
    
    
    Total current assets
    
    
    1,324
    
    
    
    997Investment in Financial Services
    
    
    1,034
    
    
    
    1,015Timber and Timberland
    
    
    59
    
    
    
    358Real Estate
    
    
    587
    
    
    
    512Property and EquipmentLand and buildings
    
    
    639
    
    
    
    648Machinery and equipment
    
    
    3,407
    
    
    
    3,402Construction in progress
    
    
    96
    
    
    
    82Less allowances for depreciation
    
    
    (2,518
    )
    
    
    (2,493
    )Total property and equipment, net
    
    
    1,624
    
    
    
    1,639Goodwill
    
    
    365
    
    
    
    365Assets held-for-sale
    
    
    
    
    
    
    20Other Assets
    
    
    288
    
    
    
    311TOTAL ASSETS
    
    $
    5,281
    
    
    $
    5,217LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    199
    
    
    $
    230Accrued employee compensation and benefits
    
    
    89
    
    
    
    128Accrued interest
    
    
    32
    
    
    
    32Accrued property taxes
    
    
    25
    
    
    
    23Other accrued expenses
    
    
    145
    
    
    
    134Liabilities of discontinued operations
    
    
    5
    
    
    
    7Current portion of long-term debt
    
    
    23
    
    
    
    19Current portion of pension and postretirement benefits
    
    
    19
    
    
    
    15Total current liabilities
    
    
    537
    
    
    
    588Long-Term Debt
    
    
    1,642
    
    
    
    1,628Deferred Income Taxes
    
    
    194
    
    
    
    198Liability for Pension Benefits
    
    
    207
    
    
    
    229Liability for Postretirement Benefits
    
    
    123
    
    
    
    122Other Long-Term Liabilities
    
    
    303
    
    
    
    263TOTAL LIABILITIES
    
    
    3,006
    
    
    
    3,028Shareholders Equity
    
    
    2,275
    
    
    
    2,189TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    5,281
    
    
    $
    5,217
  7




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##### Table of Contents



Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)NET REVENUES
    
    $
    1,071
    
    
    $
    1,134
    
    
    $
    2,108
    
    
    $
    2,235COSTS AND EXPENSESCost of sales
    
    
    (888
    )
    
    
    (907
    )
    
    
    (1,763
    )
    
    
    (1,817
    )Selling
    
    
    (40
    )
    
    
    (34
    )
    
    
    (80
    )
    
    
    (68
    )General and administrative
    
    
    (56
    )
    
    
    (58
    )
    
    
    (120
    )
    
    
    (114
    )Other operating income (expense)
    
    
    6
    
    
    
    6
    
    
    
    (6
    )
    
    
    18(978
    )
    
    
    (993
    )
    
    
    (1,969
    )
    
    
    (1,981
    )93
    
    
    
    141
    
    
    
    139
    
    
    
    254FINANCIAL SERVICES PRE-TAX EARNINGS
    
    
    42
    
    
    
    55
    
    
    
    88
    
    
    
    101OPERATING INCOME
    
    
    135
    
    
    
    196
    
    
    
    227
    
    
    
    355Interest expense
    
    
    (31
    )
    
    
    (34
    )
    
    
    (62
    )
    
    
    (67
    )Other non-operating income (expense)
    
    
    1
    
    
    
    91
    
    
    
    1
    
    
    
    91INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    105
    
    
    
    253
    
    
    
    166
    
    
    
    379Income tax expense
    
    
    (39
    )
    
    
    (62
    )
    
    
    (62
    )
    
    
    (109
    )INCOME FROM CONTINUING OPERATIONS
    
    
    66
    
    
    
    191
    
    
    
    104
    
    
    
    270Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME
    
    $
    66
    
    
    $
    191
    
    
    $
    104
    
    
    $
    270
  8




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##### Table of Contents



First Six Months2007
    
    
    2006(In millions)CASH PROVIDED BY (USED FOR) OPERATIONSNet income
    
    $
    104
    
    
    $
    270Adjustments:Depreciation and amortization
    
    
    112
    
    
    
    113Non-cash share-based compensation
    
    
    34
    
    
    
    24Non-cash pension and postretirement expense
    
    
    22
    
    
    
    28Cash contribution to pension and postretirement plans
    
    
    (39
    )
    
    
    (37
    )Deferred income taxes
    
    
    4
    
    
    
    Net earnings of financial services
    
    
    (55
    )
    
    
    (63
    )Dividends from financial services
    
    
    35
    
    
    
    60Earnings of joint ventures
    
    
    (5
    )
    
    
    (19
    )Dividends from joint ventures
    
    
    3
    
    
    
    7Non-cash real estate cost of sales
    
    
    26
    
    
    
    27Real estate development expenditures
    
    
    (89
    )
    
    
    (60
    )Changes in:Receivables
    
    
    (19
    )
    
    
    (81
    )Inventories
    
    
    16
    
    
    
    11Accounts payable and accrued expenses
    
    
    (29
    )
    
    
    (11
    )Prepaid expenses and other
    
    
    3
    
    
    
    22123
    
    
    
    291CASH PROVIDED BY (USED FOR) INVESTINGCapital expenditures
    
    
    (88
    )
    
    
    (72
    )Reforestation and acquisition of timber and timberland
    
    
    (6
    )
    
    
    (7
    )Sales of non-strategic assets and operations and proceeds from the
sale of property and equipment
    
    
    14
    
    
    
    13Acquisitions, net of cash acquired, and investment in joint ventures
    
    
    (1
    )
    
    
    (134
    )Other
    
    
    (3
    )
    
    
    (84
    )
    
    
    (200
    )CASH PROVIDED BY (USED FOR) FINANCINGPayments of debt
    
    
    (13
    )
    
    
    (3
    )Borrowings under accounts receivable securitization facility, net
    
    
    16
    
    
    
    39Borrowings under revolving credit facility, net
    
    
    (13
    )
    
    
    47Change in book overdrafts
    
    
    (10
    )
    
    
    Other additions to debt
    
    
    27
    
    
    
    2Cash dividends paid to shareholders
    
    
    (59
    )
    
    
    (55
    )Repurchase of common stock
    
    
    (24
    )
    
    
    (153
    )Exercise of stock options
    
    
    17
    
    
    
    34Tax benefit on stock options exercised
    
    
    8
    
    
    
    7Other
    
    
    
    
    
    
    5(51
    )
    
    
    (77
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (1
    )Discontinued operations, principally operating activities
    
    
    
    
    
    
    (1
    )Net increase (decrease) in cash and cash equivalents
    
    
    (12
    )
    
    
    12Cash and cash equivalents at beginning of period
    
    
    38
    
    
    
    13Cash and cash equivalents at end of period
    
    $
    26
    
    
    $
    25
  9




---



##### Table of Contents



(Unaudited)SecondQuarter-End
    
    
    Year-End2007
    
    
    2006(In millions)ASSETSCash and cash equivalents
    
    $
    288
    
    
    $
    372Loans held for sale
    
    
    20
    
    
    
    23Loans, net of allowance for losses of $72 in 2007 and $65 in 2006
    
    
    9,470
    
    
    
    9,617Securities available-for-sale
    
    
    888
    
    
    
    529Securities held-to-maturity
    
    
    4,192
    
    
    
    4,853Investment in Federal Home Loan Bank stock
    
    
    211
    
    
    
    262Property and equipment, net
    
    
    222
    
    
    
    214Accounts, notes, and accrued interest receivable
    
    
    103
    
    
    
    104Goodwill
    
    
    141
    
    
    
    141Other intangible assets
    
    
    23
    
    
    
    26Other assets
    
    
    137
    
    
    
    110TOTAL ASSETS
    
    $
    15,695
    
    
    $
    16,251LIABILITIES AND SHAREHOLDERS EQUITYDeposits
    
    $
    9,532
    
    
    $
    9,486Federal Home Loan Bank borrowings
    
    
    4,582
    
    
    
    5,076Other liabilities
    
    
    132
    
    
    
    126Other borrowings
    
    
    101
    
    
    
    101Subordinated notes payable to trust
    
    
    314
    
    
    
    142Preferred stock issued by subsidiaries
    
    
    
    
    
    
    305Total Liabilities
    
    
    14,661
    
    
    
    15,236Shareholders Equity
    
    
    1,034
    
    
    
    1,015TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    15,695
    
    
    $
    16,251
  10




---



##### Table of Contents



Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)INTEREST INCOMELoans and loans held for sale
    
    $
    175
    
    
    $
    176
    
    
    $
    346
    
    
    $
    342Securities available-for-sale
    
    
    10
    
    
    
    8
    
    
    
    18
    
    
    
    16Securities held-to-maturity
    
    
    57
    
    
    
    64
    
    
    
    117
    
    
    
    126Other earning assets
    
    
    5
    
    
    
    5
    
    
    
    9
    
    
    
    10Total interest income
    
    
    247
    
    
    
    253
    
    
    
    490
    
    
    
    494INTEREST EXPENSEDeposits
    
    
    (86
    )
    
    
    (66
    )
    
    
    (169
    )
    
    
    (128
    )Borrowed funds
    
    
    (66
    )
    
    
    (80
    )
    
    
    (131
    )
    
    
    (155
    )Total interest expense
    
    
    (152
    )
    
    
    (146
    )
    
    
    (300
    )
    
    
    (283
    )NET INTEREST INCOME
    
    
    95
    
    
    
    107
    
    
    
    190
    
    
    
    211Credit for credit losses
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    NET INTEREST INCOME AFTER CREDIT FOR CREDIT LOSSES
    
    
    95
    
    
    
    109
    
    
    
    192
    
    
    
    211NONINTEREST INCOMEInsurance commissions and fees
    
    
    16
    
    
    
    19
    
    
    
    32
    
    
    
    36Service charges on deposits
    
    
    13
    
    
    
    13
    
    
    
    25
    
    
    
    24Operating lease income
    
    
    2
    
    
    
    2
    
    
    
    4
    
    
    
    4Loan origination and sale of loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Other
    
    
    9
    
    
    
    12
    
    
    
    20
    
    
    
    22Total noninterest income
    
    
    40
    
    
    
    46
    
    
    
    81
    
    
    
    88NONINTEREST EXPENSECompensation and benefits
    
    
    (43
    )
    
    
    (46
    )
    
    
    (91
    )
    
    
    (94
    )Insurance operations, other than compensation
    
    
    (4
    )
    
    
    (5
    )
    
    
    (8
    )
    
    
    (10
    )Occupancy
    
    
    (6
    )
    
    
    (6
    )
    
    
    (12
    )
    
    
    (12
    )Information systems and technology
    
    
    (4
    )
    
    
    (4
    )
    
    
    (7
    )
    
    
    (7
    )Charges related to asset impairments and severance
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (10
    )Other
    
    
    (36
    )
    
    
    (32
    )
    
    
    (67
    )
    
    
    (65
    )Total noninterest expense
    
    
    (93
    )
    
    
    (100
    )
    
    
    (185
    )
    
    
    (198
    )INCOME BEFORE TAXES
    
    
    42
    
    
    
    55
    
    
    
    88
    
    
    
    101Income tax expense
    
    
    (16
    )
    
    
    (21
    )
    
    
    (33
    )
    
    
    (38
    )NET INCOME
    
    $
    26
    
    
    $
    34
    
    
    $
    55
    
    
    $
    63
  11




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##### Table of Contents



First Six Months2007
    
    
    2006(In millions)CASH PROVIDED BY (USED FOR) OPERATIONSNet income
    
    $
    55
    
    
    $
    63Adjustments:Depreciation and amortization
    
    
    9
    
    
    
    8Depreciation of assets leased to others
    
    
    3
    
    
    
    3Amortization of core deposit and other intangible assets
    
    
    3
    
    
    
    3Amortization and accretion of financial instrument discounts and
premiums and deferred loan fees and origination costs, net
    
    
    10
    
    
    
    10Provision (credit) for credit losses
    
    
    (2
    )
    
    
    Deferred income taxes
    
    
    (6
    )
    
    
    7Changes in:Loans held for sale:Originations
    
    
    (46
    )
    
    
    (131
    )Sales
    
    
    49
    
    
    
    374Other
    
    
    (9
    )
    
    
    (4
    )66
    
    
    
    333CASH PROVIDED BY (USED FOR) INVESTINGSecurities available-for-sale:Purchases
    
    
    (425
    )
    
    
    (2
    )Principal payments and maturities
    
    
    64
    
    
    
    67Securities held-to-maturity:Purchases
    
    
    (142
    )
    
    
    (351
    )Principal payments and maturities
    
    
    790
    
    
    
    648Redemption of Federal Home Loan Bank stock
    
    
    58
    
    
    
    Loans originated or acquired, net of collections
    
    
    147
    
    
    
    (20
    )Capital expenditures
    
    
    (23
    )
    
    
    (21
    )Other
    
    
    (3
    )
    
    
    466
    
    
    
    321CASH PROVIDED BY (USED FOR) FINANCINGDeposits, net
    
    
    46
    
    
    
    76Repurchase agreements and short-term borrowings, net
    
    
    (60
    )
    
    
    (617
    )Payments of long-term Federal Home Loan Bank and other borrowings
    
    
    (434
    )
    
    
    (226
    )Issuance of subordinated notes payable to trust
    
    
    172
    
    
    
    Dividends paid to parent company
    
    
    (35
    )
    
    
    (60
    )Redemption of preferred stock issued by subsidiaries
    
    
    (305
    )
    
    
    Other
    
    
    
    
    
    
    3(616
    )
    
    
    (824
    )Net increase (decrease) in cash and cash equivalents
    
    
    (84
    )
    
    
    (170
    )Cash and cash equivalents at beginning of period
    
    
    372
    
    
    
    431Cash and cash equivalents at end of period
    
    $
    288
    
    
    $
    261
  12




---



##### Table of Contents



Note 1  Basis of Presentation
    Note 2  Transformation
  
    
    retaining our manufacturing operations  corrugated packaging and building products,
    
    spinning off our financial services segment to our shareholders,
    
    spinning off our real estate segment to our shareholders, and
    
    selling our strategic timberland.
    13




---



##### Table of Contents



Note 3  New Accounting Pronouncements
  Accounting for Uncertainty
in Income Taxes
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans  Employers
Accounting for Pensions
 Accounting for Planned Major Maintenance Activities Interim Financial Reporting
 FullFirst
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    YearQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    2006(in millions, except per share data)Income from Continuing Operations:As originally reported
    
    $
    76
    
    
    $
    192
    
    
    $
    96
    
    
    $
    105
    
    
    $
    469Effects of AUG AIR-1
    
    
    3
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    As recast
    
    $
    79
    
    
    $
    191
    
    
    $
    95
    
    
    $
    104
    
    
    $
    469Net Income:As originally reported
    
    $
    76
    
    
    $
    192
    
    
    $
    96
    
    
    $
    104
    
    
    $
    468Effects of AUG AIR-1
    
    
    3
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    As recast
    
    $
    79
    
    
    $
    191
    
    
    $
    95
    
    
    $
    103
    
    
    $
    468Earnings Per Share (Diluted):Income from continuing operations:As originally reported
    
    $
    0.67
    
    
    $
    1.71
    
    
    $
    0.87
    
    
    $
    0.98
    
    
    $
    4.23Effects of AUG AIR-1
    
    
    0.03
    
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    As recast
    
    $
    0.70
    
    
    $
    1.70
    
    
    $
    0.86
    
    
    $
    0.97
    
    
    $
    4.23Net Income:As originally reported
    
    $
    0.67
    
    
    $
    1.71
    
    
    $
    0.87
    
    
    $
    0.97
    
    
    $
    4.22Effects of AUG AIR-1
    
    
    0.03
    
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    As recast
    
    $
    0.70
    
    
    $
    1.70
    
    
    $
    0.86
    
    
    $
    0.96
    
    
    $
    4.22
 14




---



##### Table of Contents



2006 ending shareholders equity
    
    $
    2,189Adoption of accounting for uncertainty in income taxes
    
    
    5Net periodic benefit cost related to transition of
defined benefit and postretirement benefit plan
measurement date from September 30 to our fiscal
year-end, net of tax
    
    
    (5
    )Adoption of expense as incurred method of accounting
for planned major maintenance activities
    
    
    2007 beginning shareholders equity
    
    $
    2,189
 Pending Accounting Pronouncements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Note 4  Employee Benefit Plans
  Defined Benefits
    
    
    PostretirementQualified
    
    
    Supplemental
    
    
    Total
    
    
    Benefits2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)
    
    
    (In millions)For Second Quarter :Service costs  benefits earned
during the period
    
    $
    7
    
    
    $
    7
    
    
    $
    
    
    
    $
    
    
    
    $
    7
    
    
    $
    7
    
    
    $
    
    
    
    $
    1Interest cost on projected benefit
obligation
    
    
    19
    
    
    
    18
    
    
    
    1
    
    
    
    
    
    
    
    20
    
    
    
    18
    
    
    
    2
    
    
    
    2Expected return on plan assets
    
    
    (21
    )
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    (20
    )
    
    
    
    
    
    
    Amortization of prior service costs
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (1
    )Amortization of actuarial net loss
    
    
    3
    
    
    
    5
    
    
    
    1
    
    
    
    1
    
    
    
    4
    
    
    
    6
    
    
    
    
    
    
    
    $
    8
    
    
    $
    11
    
    
    $
    2
    
    
    $
    1
    
    
    $
    10
    
    
    $
    12
    
    
    $
    2
    
    
    $
    2For First Six Months:Service costs  benefits earned
during the period
    
    $
    14
    
    
    $
    14
    
    
    $
    
    
    
    $
    
    
    
    $
    14
    
    
    $
    14
    
    
    $
    
    
    
    $
    2Interest cost on projected benefit
obligation
    
    
    38
    
    
    
    36
    
    
    
    1
    
    
    
    
    
    
    
    39
    
    
    
    36
    
    
    
    4
    
    
    
    4Expected return on plan assets
    
    
    (42
    )
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (40
    )
    
    
    
    
    
    
    Amortization of prior service costs
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (2
    )Amortization of actuarial net loss
    
    
    6
    
    
    
    10
    
    
    
    2
    
    
    
    2
    
    
    
    8
    
    
    
    12
    
    
    
    
    
    
    
    $
    16
    
    
    $
    22
    
    
    $
    3
    
    
    $
    2
    
    
    $
    19
    
    
    $
    24
    
    
    $
    4
    
    
    $
    4
  Note 5  Share-Based Compensation
  15




---



##### Table of Contents



Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)Restricted or performance units
    
    $
    12
    
    
    $
    5
    
    
    $
    29
    
    
    $
    13Restricted stock
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2Stock options
    
    
    3
    
    
    
    2
    
    
    
    9
    
    
    
    9Total pre-tax share-based
compensation expense
    
    $
    15
    
    
    $
    8
    
    
    $
    38
    
    
    $
    24
   Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)Parent CompanyCost of sales
    
    $
    2
    
    
    $
    2
    
    
    $
    5
    
    
    $
    4Selling expense
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    1General and administrative
    
    
    11
    
    
    
    6
    
    
    
    27
    
    
    
    19Total Parent Company
    
    
    14
    
    
    
    8
    
    
    
    34
    
    
    
    24Financial Services
    
    
    1
    
    
    
    
    
    
    
    4
    
    
    
    Total pre-tax
share-based compensation
expense
    
    $
    15
    
    
    $
    8
    
    
    $
    38
    
    
    $
    24
 Note 6  Earnings Per Share
  Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)Weighted average common shares outstanding  basic
    
    
    106.0
    
    
    
    109.8
    
    
    
    105.8
    
    
    
    110.5Dilutive effect of stock options
    
    
    2.1
    
    
    
    2.0
    
    
    
    2.0
    
    
    
    2.1Weighted average shares outstanding  diluted
    
    
    108.1
    
    
    
    111.8
    
    
    
    107.8
    
    
    
    112.6
 16




---



##### Table of Contents



Note 7  Comprehensive Income
  Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)Net income
    
    $
    66
    
    
    $
    191
    
    
    $
    104
    
    
    $
    270Other comprehensive income (loss), net
of taxes:Unrealized gains (losses) on:Available-for-sale securities
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustments
    
    
    2
    
    
    
    (5
    )
    
    
    1
    
    
    
    (7
    )Defined benefit plans
    
    
    2
    
    
    
    (1
    )
    
    
    6
    
    
    
    (1
    )Other comprehensive income (loss)
    
    
    3
    
    
    
    (6
    )
    
    
    6
    
    
    
    (8
    )Comprehensive income
    
    $
    69
    
    
    $
    185
    
    
    $
    110
    
    
    $
    262
  Note 8  Contingencies
    Note 9  Segment Information
  17




---



##### Table of Contents



Expenses NotAllocated toCorrugated
    
    Forest
    
    Real
    
    Financial
    
    Segments andPackaging
    
    Products
    
    Estate
    
    Services
    
    Eliminations
    
    Total(In millions)For Second Quarter 2007Revenues from external customers
    
    $
    779
    
    
    $
    249
    
    
    $
    43
    
    
    $
    287
    
    
    $
    
    
    
    $
    1,358Depreciation and amortization
    
    
    35
    
    
    
    16
    
    
    
    1
    
    
    
    8
    
    
    
    4
    
    
    
    64Segment operating income or income
(loss) before taxes
    
    
    78
    
    
    
    33
    
    
    
    19
    
    
    
    48
    
    
    
    (73
    )(a)
    
    
    105Financial services, net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    95Capital expenditures and reforestation
    
    
    34
    
    
    
    14
    
    
    
    1
    
    
    
    10
    
    
    
    3
    
    
    
    62For First Six Months 2007 or at Second
Quarter-End 2007Revenues from external customers
    
    $
    1,540
    
    
    $
    495
    
    
    $
    73
    
    
    $
    571
    
    
    $
    
    
    
    $
    2,679Depreciation and amortization
    
    
    72
    
    
    
    32
    
    
    
    1
    
    
    
    15
    
    
    
    7
    
    
    
    127Segment operating income or income
(loss) before taxes
    
    
    142
    
    
    
    71
    
    
    
    22
    
    
    
    97
    
    
    
    (166
    )(a)
    
    
    166Financial services, net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    190Total assets
    
    
    2,274
    
    
    
    1,003
    
    
    
    603
    
    
    
    15,695
    
    
    
    320
    
    
    
    19,895Investment in equity method investees
and joint ventures
    
    
    13
    
    
    
    22
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    126Capital expenditures and reforestation
    
    
    59
    
    
    
    26
    
    
    
    1
    
    
    
    23
    
    
    
    8
    
    
    
    117Goodwill
    
    
    236
    
    
    
    129
    
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    506For Second Quarter 2006Revenues from external customers
    
    $
    758
    
    
    $
    341
    
    
    $
    35
    
    
    $
    299
    
    
    $
    
    
    
    $
    1,433Depreciation and amortization
    
    
    39
    
    
    
    14
    
    
    
    
    
    
    
    7
    
    
    
    4
    
    
    
    64Segment operating income or income
(loss) before taxes
    
    
    66
    
    
    
    101
    
    
    
    9
    
    
    
    62
    
    
    
    15
    (a)
    
    
    253Financial services, net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    107Capital expenditures and reforestation
    
    
    28
    
    
    
    16
    
    
    
    
    
    
    
    7
    
    
    
    3
    
    
    
    54For First Six Months 2006 or at Second
Quarter-End 2006Revenues from external customers
    
    $
    1,479
    
    
    $
    674
    
    
    $
    82
    
    
    $
    582
    
    
    $
    
    
    
    $
    2,817Depreciation and amortization
    
    
    77
    
    
    
    28
    
    
    
    1
    
    
    
    14
    
    
    
    7
    
    
    
    127Segment operating income or income
(loss) before taxes
    
    
    110
    
    
    
    183
    
    
    
    35
    
    
    
    111
    
    
    
    (60
    )      (a)
    
    
    379Financial services, net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211
    
    
    
    
    
    
    
    211Total assets
    
    
    2,336
    
    
    
    1,066
    
    
    
    485
    
    
    
    16,910
    
    
    
    336
    
    
    
    21,133Investment in equity method investees
and joint ventures
    
    
    11
    
    
    
    21
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    108Capital expenditures and reforestation
    
    
    47
    
    
    
    26
    
    
    
    
    
    
    
    21
    
    
    
    6
    
    
    
    100Goodwill
    
    
    236
    
    
    
    129
    
    
    
    
    
    
    
    152
    
    
    
    
    
    
    
    517
 18




---



##### Table of Contents



(a)
    
    Expenses not allocated to segments consist of: Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)General and administrative
    
    $
    (27
    )
    
    $
    (26
    )
    
    $
    (52
    )
    
    $
    (49
    )Share-based compensation
    
    
    (15
    )
    
    
    (8
    )
    
    
    (38
    )
    
    
    (24
    )Other operating income (expense)
    
    
    (1
    )
    
    
    (8
    )
    
    
    (15
    )
    
    
    (11
    )Other non-operating income(expense)
    
    
    1
    
    
    
    91
    
    
    
    1
    
    
    
    91Parent company interest
    
    
    (31
    )
    
    
    (34
    )
    
    
    (62
    )
    
    
    (67
    )$
    (73
    )
    
    $
    15
    
    
    $
    (166
    )
    
    $
    (60
    )Other operating income (expense) applies to:Corrugated packaging
    
    $
    
    
    
    $
    (2
    )
    
    $
    (10
    )
    
    $
    (4
    )Forest products
    
    
    8
    
    
    
    1
    
    
    
    8
    
    
    
    1Real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financial services
    
    
    (5
    )
    
    
    (7
    )
    
    
    (5
    )
    
    
    (10
    )Unallocated
    
    
    (4
    )
    
    
    
    
    
    
    (8
    )
    
    
    2$
    (1
    )
    
    $
    (8
    )
    
    $
    (15
    )
    
    $
    (11
    )
 Note 10  Real Estate
  SecondQuarter-End
    
    
    Year-2007
    
    
    End 2006(In millions)Entitled, developed, and under development land
    
    $
    323
    
    
    $
    255Land held for investment or future development
    
    
    149
    
    
    
    142Investment in real estate ventures
    
    
    91
    
    
    
    90Income producing properties, net of accumulated depreciation
    
    
    24
    
    
    
    25$
    587
    
    
    $
    512
   19




---



##### Table of Contents



SecondQuarter-End
    
    
    Year-End2007
    
    
    2006(In millions)Real estate
    
    $
    224
    
    
    $
    186Total assets
    
    
    287
    
    
    
    281Borrowings, principally non-recourse
    
    
    67
    
    
    
    66Total liabilities
    
    
    87
    
    
    
    84Equity
    
    
    200
    
    
    
    197Our investment in real estate ventures:Our share of their equity
    
    $
    98
    
    
    $
    97Unrecognized deferred gain(a)
    
    
    (7
    )
    
    
    (7
    )Investment in real estate ventures
    
    $
    91
    
    
    $
    90
 
 (a)
    
    We recognize the deferred gain from our sale of real estate to the venture as
the venture sells the real estate to third parties. Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006(In millions)Revenues
    
    $
    12
    
    
    $
    20
    
    
    $
    19
    
    
    $
    73Earnings
    
    
    3
    
    
    
    5
    
    
    
    5
    
    
    
    25Our equity in their earnings
    
    
    2
    
    
    
    3
    
    
    
    3
    
    
    
    13
   Note 11  Assets Held For Sale
    20




---



##### Table of Contents



Note 12  Other Operating Income (Expense)
 Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)Equity in earnings of manufacturing joint ventures
    
    $
    1
    
    
    $
    4
    
    
    $
    2
    
    
    $
    6Equity in earnings of real estate ventures
    
    
    2
    
    
    
    3
    
    
    
    3
    
    
    
    13Litigation
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    Transformation plan legal and other advisory fees
    
    
    (4
    )
    
    
    
    
    
    
    (8
    )
    
    
    Gain on sale of non-strategic timber leases
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    Other
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )$
    6
    
    
    $
    6
    
    
    $
    (6
    )
    
    $
    18
  Beginning
    
    
    
    
    
    
    Cash
    
    
    End ofof Period
    
    
    Additions
    
    
    Payments
    
    
    Period(In millions)Involuntary employee terminations
    
    $
    1
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    Demolition and environmental
remediation
    
    
    8
    
    
    
    1
    
    
    
    (4
    )
    
    
    5$
    9
    
    
    $
    1
    
    
    $
    (5
    )
    
    $
    5
 Note 13  Preferred Stock Issued by Subsidiaries and Subordinated Notes payable to Trust
  Note 14  Subsequent Event
  21




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
  
    
    general economic, market or business conditions;
    
    the opportunities (or lack thereof) that may be presented to us and that we may pursue;
    
    fluctuations in costs and expenses including the costs of raw materials, purchased
energy, and freight;
    
    demand for new housing;
    
    accuracy of accounting assumptions related to pension and postretirement costs,
impaired assets, and allowance for credit losses;
    
    competitive actions by other companies;
    
    changes in laws or regulations and actions or restrictions of regulatory agencies;
    
    our ability to execute certain strategic and business improvement initiatives,
including our transformation plan; and
    
    other factors, many of which are beyond our control.
  Non-GAAP Financial Measure
    22




---



##### Table of Contents



Accounting Policies
 Critical Accounting Estimates
  New and Pending Accounting Pronouncements
 Accounting for Planned Major Maintenance Activities; Accounting for Uncertainty in Income Taxes Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans. Note 3 to the Consolidated
Financial Statements
 Transformation Plan
  
    
    retaining our manufacturing operations  corrugated packaging and building products,
    
    spinning off our financial services segment to our shareholders,
    
    spinning off our real estate segment to our shareholders, and
    
    selling our strategic timberland.
       23




---



##### Table of Contents



Results of Operations for Second Quarter 2007 and 2006
 Summary
  Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions, except per share)RevenuesCorrugated packaging
    
    $
    779
    
    
    $
    758
    
    
    $
    1,540
    
    
    $
    1,479Forest products
    
    
    249
    
    
    
    341
    
    
    
    495
    
    
    
    674Real estate
    
    
    43
    
    
    
    35
    
    
    
    73
    
    
    
    82Financial services
    
    
    287
    
    
    
    299
    
    
    
    571
    
    
    
    582Total revenues
    
    $
    1,358
    
    
    $
    1,433
    
    
    $
    2,679
    
    
    $
    2,817Segment Operating IncomeCorrugated packaging
    
    $
    78
    
    
    $
    66
    
    
    $
    142
    
    
    $
    110Forest products
    
    
    33
    
    
    
    101
    
    
    
    71
    
    
    
    183Real estate
    
    
    19
    
    
    
    9
    
    
    
    22
    
    
    
    35Financial services
    
    
    48
    
    
    
    62
    
    
    
    97
    
    
    
    111Total segment operating income
    
    
    178
    
    
    
    238
    
    
    
    332
    
    
    
    439Expenses not allocated to segmentsGeneral and administrative
    
    
    (27
    )
    
    
    (26
    )
    
    
    (52
    )
    
    
    (49
    )Share-based compensation
    
    
    (15
    )
    
    
    (8
    )
    
    
    (38
    )
    
    
    (24
    )Other operating income (expense)
    
    
    (1
    )
    
    
    (8
    )
    
    
    (15
    )
    
    
    (11
    )Other non-operating income (expense)
    
    
    1
    
    
    
    91
    
    
    
    1
    
    
    
    91Parent company interest
    
    
    (31
    )
    
    
    (34
    )
    
    
    (62
    )
    
    
    (67
    )Income before income taxes
    
    
    105
    
    
    
    253
    
    
    
    166
    
    
    
    379Income taxes
    
    
    (39
    )
    
    
    (62
    )
    
    
    (62
    )
    
    
    (109
    )Income from continuing operations
    
    
    66
    
    
    
    191
    
    
    
    104
    
    
    
    270Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    66
    
    
    $
    191
    
    
    $
    104
    
    
    $
    270Average diluted shares outstanding
    
    
    108.1
    
    
    
    111.8
    
    
    
    107.8
    
    
    
    112.6Income from continuing operations, per diluted share
    
    $
    0.62
    
    
    $
    1.70
    
    
    $
    0.97
    
    
    $
    2.40ROI, annualized
    
    
    
    
    
    
    
    
    
    
    10.2
    %
    
    
    15.8
    %
  
    
    We experienced higher prices for our corrugated packaging products.
    
    While we continue to see the benefit in our manufacturing operations from our
initiatives to lower costs, improve asset utilization, and increase operating
efficiencies, the cost of recycled fiber used at our containerboard mills offset some
of the benefits.
    
    We recognized $4 million in business interruption insurance proceeds from a prior
year claim related to one of our paper mills.
    
    We experienced lower pricing and volumes for our forest products, principally lumber and gypsum.
    
    We recognized an $8 million gain on sale of non-strategic timber leases.
    
    Our real estate operations incurred a decline in lot sales resulting from the
overall slowdown in the housing industry.
 24




---



##### Table of Contents




    
    Real estate operations benefited from a $10 million gain on the sale of land held
for commercial use.
    
    Our financial services operations experienced a $21 million decrease in net interest
income due primarily to a decrease in earning assets, offset in part by a reduction in
noninterest expense.
    
    We increased litigation reserves by $15 million as a result of a recent California
Supreme Court decision and charges related to the mortgage business we exited.
    
    We expensed $10 million of share-based compensation due to the higher share price in
2007 and incurred $8 million of costs associated with our transformation plan,
primarily legal and other advisory fees.
    
    We recognized a one-time tax benefit of $3 million related to Texas tax legislation
enacted in May 2007.
  
    
    We experienced improved markets for our corrugated packaging and forest products,
principally gypsum and particleboard, and we benefited from the acquisition of our
partners 50 percent interest in Standard Gypsum LP.
    
    While we continued to see the benefit in our manufacturing operations from our
initiatives to lower costs, improve asset utilization and increase operating
efficiencies, costs, principally energy and freight, offset much of the benefit.
    
    Real estate operations benefited from an $8 million gain on sale of land held for
commercial use.
    
    Financial services operations benefited from improved net interest income
attributable to an increase in earning assets, principally mortgage-backed securities,
and improved credit conditions.
    
    Actions taken to lower costs in our financial services operation associated with the
elimination of our wholesale mortgage and asset-based lending operations resulted in
charges of $3 million and goodwill impairment of $7 million.
    
    We recognized an $89 million net pre-tax gain resulting from a tax litigation
settlement, most of which was non-taxable.
  Corrugated Packaging
   Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Revenues
    
    $
    779
    
    
    $
    758
    
    
    $
    1,540
    
    
    $
    1,479Costs and expenses
    
    
    (701
    )
    
    
    (692
    )
    
    
    (1,398
    )
    
    
    (1,369
    )Segment operating income
    
    $
    78
    
    
    $
    66
    
    
    $
    142
    
    
    $
    110Segment ROI
    
    
    
    
    
    
    
    
    
    
    14.1
    %
    
    
    10.7
    %
 25




---



##### Table of Contents



Second Quarter
    
    First Six Months2007 versus Second
    
    2007 versus First SixQuarter 2006
    
    Months 2006Increase (Decrease)Corrugated packagingAverage prices
    
    
    3
    %
    
    
    5
    %Shipments, average week
    
    
    (2
    )%
    
    
    (3
    )%Industry shipments, average week (a)
    
    
    (2
    )%
    
    
    (2
    )%LinerboardAverage prices
    
    
    3
    %
    
    
    12
    %Shipments, in thousands of tons
    
    
    29
    
    
    
    69
 
 (a)
    
    Source: Fibre Box Association     Second Quarter
    
    First Six Months2007 versus Second
    
    2007 versus FirstQuarter 2006
    
    Six Months 2006Increase (Decrease)(In millions)Wood fiber
    
    $
    3
    
    
    $
    6Recycled fiber
    
    
    16
    
    
    
    37Freight
    
    
    (2
    )
    
    
    (3
    )Energy, principally natural gas
    
    
    2
    
    
    
    (4
    )Depreciation
    
    
    (4
    )
    
    
    (5
    )Pension and postretirement
    
    
    (3
    )
    
    
    (6
    )
  26




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##### Table of Contents



Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006Number of converting facilities (at quarter-end)
    
    
    64
    
    
    
    65
    
    
    
    64
    
    
    
    65Mill capacity, in thousand tons
    
    
    901
    
    
    
    892
    
    
    
    1,800
    
    
    
    1,784Mill production, in thousand tons
    
    
    906
    
    
    
    883
    
    
    
    1,803
    
    
    
    1,773Percent mill production used internally
    
    
    92
    %
    
    
    95
    %
    
    
    90
    %
    
    
    94
    %Percent of total fiber requirements sourced from recycled fiber
    
    
    36
    %
    
    
    34
    %
    
    
    37
    %
    
    
    34
    %Corrugating medium purchases from our Premier Boxboard Limited
LLC joint venture, in thousand tons
    
    
    15
    
    
    
    23
    
    
    
    35
    
    
    
    37
 Forest Products
    Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Revenues
    
    $
    249
    
    
    $
    341
    
    
    $
    495
    
    
    $
    674Costs and expenses
    
    
    (216
    )
    
    
    (240
    )
    
    
    (424
    )
    
    
    (491
    )Segment operating income
    
    $
    33
    
    
    $
    101
    
    
    $
    71
    
    
    $
    183Segment ROI
    
    
    
    
    
    
    
    
    
    
    15.4
    %
    
    
    37.1
    %
  Second Quarter
    
    First Six Months2007 versus Second
    
    2007 versus FirstQuarter 2006
    
    Six Months 2006Increase (Decrease)Lumber:Average prices
    
    
    (16
    )%
    
    
    (20
    )%Shipments
    
    
    3
    %
    
    
    (2
    )%Gypsum:Average prices
    
    
    (25
    )%
    
    
    (17
    )%Shipments
    
    
    (23
    )%
    
    
    (28
    )%Particleboard:Average prices
    
    
    5
    %
    
    
    12
    %Shipments
    
    
    (18
    )%
    
    
    (16
    )%MDF:Average prices
    
    
    4
    %
    
    
    7
    %Shipments
    
    
    (10
    )%
    
    
    (8
    )%
 27




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##### Table of Contents



Second Quarter
    
    First Six Months2007 versus Second
    
    2007 versus FirstQuarter 2006
    
    Six Months 2006Increase (Decrease)(In millions)Wood fiber
    
    $
    (9
    )
    
    $
    (19
    )Energy, principally natural gas
    
    
    (7
    )
    
    
    (17
    )Freight
    
    
    (3
    )
    
    
    (7
    )Chemical
    
    
    (1
    )
    
    
    (2
    )Depreciation
    
    
    2
    
    
    
    4
    Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006Timber harvest, in million tons:Sawtimber
    
    
    0.6
    
    
    
    0.6
    
    
    
    1.2
    
    
    
    1.2Pulpwood
    
    
    0.8
    
    
    
    0.7
    
    
    
    1.6
    
    
    
    1.51.4
    
    
    
    1.3
    
    
    
    2.8
    
    
    
    2.7Number of converting and manufacturing facilities (at quarter-end)
    
    
    17
    
    
    
    17
    
    
    
    17
    
    
    
    17Average operating rates for all product lines excluding sold or closed
facilities:High
    
    
    110
    %
    
    
    116
    %
    
    
    100
    %
    
    
    113
    %Low
    
    
    62
    %
    
    
    88
    %
    
    
    65
    %
    
    
    93
    %Average
    
    
    85
    %
    
    
    100
    %
    
    
    82
    %
    
    
    100
    %Gypsum facing paper purchases from our Premier Boxboard Limited LLC
joint venture, in thousand tons
    
    
    12
    
    
    
    21
    
    
    
    24
    
    
    
    37Percent of gypsum facing paper supplied by our Premier Boxboard Limited
LLC joint venture
    
    
    
    
    
    
    
    
    
    
    71
    %
    
    
    76
    %
 28




---



##### Table of Contents



Real Estate
   Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Revenues
    
    $
    43
    
    
    $
    35
    
    
    $
    73
    
    
    $
    82Costs and expenses
    
    
    (26
    )
    
    
    (29
    )
    
    
    (54
    )
    
    
    (60
    )Our share of real estate ventures income
    
    
    2
    
    
    
    3
    
    
    
    3
    
    
    
    13Segment operating income
    
    $
    19
    
    
    $
    9
    
    
    $
    22
    
    
    $
    35Segment ROI
    
    
    
    
    
    
    
    
    
    
    8.3
    %
    
    
    17.0
    %
    Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Residential real estate
    
    $
    16
    
    
    $
    19
    
    
    $
    34
    
    
    $
    36Lots sold
    
    
    316
    
    
    
    463
    
    
    
    566
    
    
    
    805Commercial real estate
    
    $
    14
    
    
    $
    2
    
    
    $
    18
    
    
    $
    18Acres sold
    
    
    45
    
    
    
    36
    
    
    
    56
    
    
    
    43Land held for investment
or future development
    
    $
    6
    
    
    $
    6
    
    
    $
    8
    
    
    $
    13Acres sold
    
    
    886
    
    
    
    845
    
    
    
    1,154
    
    
    
    1,768Income producing
properties, timber and
other
    
    $
    7
    
    
    $
    8
    
    
    $
    13
    
    
    $
    15$
    43
    
    
    $
    35
    
    
    $
    73
    
    
    $
    82
 29




---



##### Table of Contents



Second Quarter-End2007
    
    2006Owned and consolidated ventures:Entitled, developed, and under development landNumber of projects
    
    
    44
    
    
    
    31Residential lots remaining
    
    
    19,957
    
    
    
    11,951Commercial acres remaining
    
    
    922
    
    
    
    722Land held for investment or future developmentNumber of projects
    
    
    24
    
    
    
    20Acres in entitlement process
    
    
    26,960
    
    
    
    21,950Acres undeveloped
    
    
    186,715
    
    
    
    196,379Ventures accounted for using the equity methodVentures lot sales (for first six months)Lots sold
    
    
    416
    
    
    
    1,122
    (a)Revenue per lot sold
    
    $
    54,505
    
    
    $
    52,098Ventures entitled, developed, and under development landNumber of projects
    
    
    22
    
    
    
    23Residential lots remaining
    
    
    9,734
    
    
    
    11,789Commercial acres remaining
    
    
    721
    
    
    
    669Ventures land held for investment or future developmentAcres sold (for first six months)
    
    
    
    
    
    
    75Acres remaining
    
    
    6,258
    
    
    
    6,519
 
 (a)
    
    The elimination of the previously discussed one month reporting lag resulted in a
one-time increase in the number of lots sold of 122 lots. Financial Services
   Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006(Dollars in millions)Net interest income
    
    $
    95
    
    
    $
    107
    
    
    $
    190
    
    
    $
    211Segment operating income (a)
    
    
    48
    
    
    
    62
    
    
    
    97
    
    
    
    111Segment ROI
    
    
    
    
    
    
    
    
    
    
    19.1
    %
    
    
    21.8
    %
 
 (a)
    
    Segment operating income excludes share-based compensation, charges related to
asset impairments and severance, and litigation charges related to the mortgage business we
exited, all of which are reported in financial services summarized financial statements. 30




---



##### Table of Contents



Net Interest Income and Earning Assets and Deposits
  Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006Average
    
    Yield/
    
    Average
    
    Yield/
    
    Average
    
    Yield/
    
    Average
    
    Yield/Balance
    
    Rate
    
    Balance
    
    Rate
    
    Balance
    
    Rate
    
    Balance
    
    Rate(Dollars in millions)Earning assets
    
    $
    14,904
    
    
    
    6.61
    %
    
    $
    16,363
    
    
    
    6.19
    %
    
    $
    14,900
    
    
    
    6.57
    %
    
    $
    16,474
    
    
    
    6.00
    %Interest-bearing liabilities
    
    
    13,850
    
    
    
    (4.37
    )%
    
    
    15,147
    
    
    
    (3.84
    )%
    
    
    13,797
    
    
    
    (4.34
    )%
    
    
    15,278
    
    
    
    (3.70
    )%Impact of noninterest bearing funds
    
    
    
    
    
    
    0.31
    %
    
    
    
    
    
    
    0.29
    %
    
    
    
    
    
    
    0.32
    %
    
    
    
    
    
    
    0.27
    %Net interest margin
    
    
    
    
    
    
    2.55
    %
    
    
    
    
    
    
    2.64
    %
    
    
    
    
    
    
    2.55
    %
    
    
    
    
    
    
    2.57
    %
  Part I,
Item 3, Quantitative and Qualitative Disclosures About Market Risk ,
  Second Quarter-End2007
    
    
    2006(Dollars in millions)Residential housing assets:Loans held for sale
    
    $
    20
    
    
    $
    37Loans
    
    
    5,585
    
    
    
    6,853Securities
    
    
    5,291
    
    
    
    6,14510,896
    
    
    
    13,035Other earning assets
    
    
    4,097
    
    
    
    3,198
    (a)Total earning assets
    
    $
    14,993
    
    
    $
    16,233Residential housing assets as a percentage of earning assets
    
    
    73
    %
    
    
    80
    %Noninterest-bearing deposit accounts
    
    $
    724
    
    
    $
    777Interest-bearing deposit accounts
    
    
    3,901
    
    
    
    3,500Certificates of deposit
    
    
    4,907
    
    
    
    5,000Total deposits
    
    $
    9,532
    
    
    $
    9,277
 
 (a)
    
    Includes $295 million of commercial loans held for sale.  31




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##### Table of Contents



Asset Quality and Allowance for Credit Losses
  Second Quarter-End
    
    
    Year-End2007
    
    
    2006
    
    
    2006(Dollars in millions)Non-performing loans
    
    $
    29
    
    
    $
    35
    
    
    $
    26Foreclosed real estate
    
    
    7
    
    
    
    2
    
    
    
    5Non-performing assets
    
    $
    36
    
    
    $
    37
    
    
    $
    31Non-performing loans as a percentage of total loans
    
    
    0.30
    %
    
    
    0.37
    %
    
    
    0.27
    %Non-performing assets ratio
    
    
    0.38
    %
    
    
    0.39
    %
    
    
    0.32
    %Allowance for loan losses as a percentage of non-performing loans
    
    
    248
    %
    
    
    199
    %
    
    
    253
    %Allowance for loan losses as a percentage of total loans
    
    
    0.75
    %
    
    
    0.73
    %
    
    
    0.68
    %Net charge-offs as a percentage of average loans outstanding
    
    
    (0.03
    )%
    
    
    (0.12
    )%
    
    
    0.10
    %
  Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)Balance at beginning of period
    
    $
    78
    
    
    $
    76
    
    
    $
    72
    
    
    $
    81Provision (credit) for credit losses
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    Net (charge-offs) recoveries
    
    
    1
    
    
    
    4
    
    
    
    9
    
    
    
    (3
    )Balance at end of period
    
    $
    79
    
    
    $
    78
    
    
    $
    79
    
    
    $
    78Allowance for credit losses:Loan
    
    $
    72
    
    
    $
    71
    
    
    $
    72
    
    
    $
    71Commitment-related
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Combined allowance for credit losses
    
    $
    79
    
    
    $
    78
    
    
    $
    79
    
    
    $
    78
  32




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##### Table of Contents



Noninterest Income and Noninterest Expense
  Expenses Not Allocated to Segments
    Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(In millions)Transformation cost
    
    $
    4
    
    
    $
    
    
    
    $
    8
    
    
    $
    Gain on sale of non-strategic timber leases
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )
    
    
    Litigation
    
    
    5
    
    
    
    
    
    
    
    15
    
    
    
    Elimination of wholesale mortgage origination network
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Goodwill impairment
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Other
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Total
    
    $
    1
    
    
    $
    8
    
    
    $
    15
    
    
    $
    11
   33




---



##### Table of Contents



Income Taxes
   Average Shares Outstanding
  Capital Resources and Liquidity for First Six Months 2007
  Sources and Uses of Cash
  34




---



##### Table of Contents



Parent Company Sources and Uses of Cash
 First Six Months2007
    
    
    2006(In millions)We received cash from:Operations
    
    $
    180
    
    
    $
    234Dividends from financial services (a)
    
    
    35
    
    
    
    60Proceeds from tax litigation settlement, net
    
    
    
    
    
    
    89Real estate development expenditures, net of non-cash cost of sales
    
    
    (63
    )
    
    
    (33
    )Working capital changes
    
    
    (29
    )
    
    
    (59
    )From operations
    
    
    123
    
    
    
    291Sale of assets and other
    
    
    14
    
    
    
    13Exercise of options and related tax benefits
    
    
    25
    
    
    
    41Borrowing, net
    
    
    17
    
    
    
    85Total sources
    
    
    179
    
    
    
    430We used cash to:Return to shareholders through:Dividends
    
    
    (59
    )
    
    
    (55
    )Repurchase of common stock
    
    
    (24
    )
    
    
    (153
    )Reinvest in the business through:Capital expenditures
    
    
    (94
    )
    
    
    (79
    )Acquisition, joint ventures, and other
    
    
    (14
    )
    
    
    (131
    )Total uses
    
    
    (191
    )
    
    
    (418
    )Change in cash and cash equivalents
    
    $
    (12
    )
    
    $
    12
 
 (a)
    
    Dividends received from financial services are eliminated in the consolidated
statements of cash flows.      35




---



##### Table of Contents



Financial Services Sources and Uses of Cash
 First Six Months2007
    
    
    2006(In millions)We received cash from:Operations
    
    $
    72
    
    
    $
    94Changes in loans held for sale and other
    
    
    (6
    )
    
    
    239From operations
    
    
    66
    
    
    
    333Net repayments on loans and securities
    
    
    434
    
    
    
    342Redemption of Federal Home Loan Bank stock
    
    
    58
    
    
    
    Total sources
    
    
    558
    
    
    
    675We used cash to:Pay dividends to the parent company (a)
    
    
    (35
    )
    
    
    (60
    )Fund decreases in deposits and borrowings
    
    
    (276
    )
    
    
    (767
    )Redeem preferred stock issued by subsidiaries
    
    
    (305
    )
    
    
    Reinvest in the business through
capital expenditures, acquisitions, and other
    
    
    (26
    )
    
    
    (18
    )Total uses
    
    
    (642
    )
    
    
    (845
    )Change in cash and cash equivalents
    
    $
    (84
    )
    
    $
    (170
    )
 
 (a)
    
    Dividends we pay to the parent company are eliminated in the consolidated
statements of cash flows.     Liquidity
  36




---



##### Table of Contents



Parent Company Liquidity
  AccountsCommitted
    
    
    ReceivableCredit
    
    
    SecuritizationAgreements
    
    
    Facility
    
    
    Total(In millions)Committed
    
    $
    850
    
    
    $
    250
    
    
    $
    1,100Less: borrowings and commitments
    
    
    (4
    )
    
    
    (180
    )
    
    
    (184
    )Unused borrowing capacity at second quarter-end 2007
    
    $
    846
    
    
    $
    70
    
    
    $
    916
    Financial Services Liquidity
   37




---



##### Table of Contents



Contractual Obligations and Off-Balance Sheet Arrangements
 Parent Company
    Financial Services
  SecondQuarter-End
    
    
    Year-End2007
    
    
    2006(In millions)Single-family mortgage loans
    
    $
    92
    
    
    $
    91Unused lines of credit
    
    
    2,073
    
    
    
    2,109Unfunded portion of credit commitments
    
    
    4,482
    
    
    
    4,421Commitments to originate commercial loans
    
    
    439
    
    
    
    655Letters of credit
    
    
    363
    
    
    
    386$
    7,449
    
    
    $
    7,662
 Capital Adequacy and Other Regulatory Matters
   Regulatory
    
    For Categorization asActual
    
    Minimum
    
    Well CapitalizedRegulatory capital ratios:Tangible capital
    
    
    8.07
    %
    
    
    >2.00
    %
    
    
    N/ALeverage capital
    
    
    8.07
    %
    
    
    >4.00
    %
    
    
    >   5.00
    %Risk-based capital
    
    
    10.61
    %
    
    
    >8.00
    %
    
    
    >10.00
    %
 38




---



##### Table of Contents



Pension and Postretirement Matters
  Energy
  Litigation and Related Matters
   39




---



##### Table of Contents



Calculation of Non-GAAP Financial Measure
 Parent
    
    
    Corrugated
    
    
    Forest
    
    
    Real
    
    
    FinancialCompany
    
    
    Packaging
    
    
    Products
    
    
    Estate
    
    
    Services(Dollars in millions)First Six Months 2007Return:Operating income or segment operating income
determined in accordance with GAAP
    
    $
    227
    (a)
    
    $
    142
    
    
    $
    71
    
    
    $
    22
    
    
    $
    97Adjustments for significant unusual items
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A$
    227
    
    
    $
    142
    
    
    $
    71
    
    
    $
    22
    
    
    $
    97Investment:Beginning of year total assets, segment assets
or investment in financial services determined
in accordance with GAAP
    
    $
    5,217
    
    
    $
    2,284
    
    
    $
    1,011
    
    
    $
    544
    
    
    $
    1,015Adjustments:Current liabilities
(excluding current
portion of long-term
debt)
    
    
    (554
    )
    
    
    (271
    )
    
    
    (87
    )
    
    
    (11
    )
    
    
    N/AAssets held for sale
    
    
    (20
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMunicipal bonds
related to capital
leases included in
other assets
    
    
    (188
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A$
    4,455
    
    
    $
    2,013
    
    
    $
    924
    
    
    $
    533
    
    
    $
    1,015ROI, annualized
    
    
    10.2
    %
    
    
    14.1
    %
    
    
    15.4
    %
    
    
    8.3
    %
    
    
    19.1
    %First Six Months 2006Return:Operating income or segment operating income
determined in accordance with GAAP
    
    $
    355
    (a)
    
    $
    110
    
    
    $
    183
    
    
    $
    35
    
    
    $
    111Adjustments for significant unusual items
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A$
    355
    
    
    $
    110
    
    
    $
    183
    
    
    $
    35
    
    
    $
    111Investment:Beginning of year total assets, segment assets
or investment in financial services determined
in accordance with GAAP
    
    $
    5,001
    
    
    $
    2,318
    
    
    $
    866
    
    
    $
    422
    
    
    $
    1,017Adjustments:Current liabilities
(excluding current
portion of long-term
debt)
    
    
    (492
    )
    
    
    (269
    )
    
    
    (76
    )
    
    
    (11
    )
    
    
    N/AAssets held for sale
    
    
    (34
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMunicipal bonds
related to capital
leases included in
other assets
    
    
    (188
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAcquisition of
Standard Gypsum, LP
in January 2006
    
    
    196
    
    
    
    N/A
    
    
    
    196
    
    
    
    N/A
    
    
    
    N/A$
    4,483
    
    
    $
    2,049
    
    
    $
    986
    
    
    $
    411
    
    
    $
    1,017ROI, annualized
    
    
    15.8
    %
    
    
    10.7
    %
    
    
    37.1
    %
    
    
    17.0
    %
    
    
    21.8
    %
 
 (a)
    
    Net of expenses not allocated to segments of $105 million in 2007 and $84
million in 2006.  40




---



##### Table of Contents



STATISTICAL AND OTHER DATA
 Parent Company
   Second Quarter
    
    
    First Six Months2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in millions)RevenuesCorrugated PackagingCorrugated packaging
    
    $
    744
    
    
    $
    737
    
    
    $
    1,461
    
    
    $
    1,435Linerboard
    
    
    35
    
    
    
    21
    
    
    
    79
    
    
    
    44Total
    
    $
    779
    
    
    
    758
    
    
    $
    1,540
    
    
    $
    1,479Forest ProductsPine lumber
    
    $
    67
    
    
    $
    76
    
    
    $
    126
    
    
    $
    160Gypsum wallboard
    
    
    67
    
    
    
    116
    
    
    
    137
    
    
    
    228Particleboard
    
    
    49
    
    
    
    58
    
    
    
    101
    
    
    
    107Medium density fiberboard
    
    
    17
    
    
    
    19
    
    
    
    34
    
    
    
    35Fiberboard
    
    
    14
    
    
    
    22
    
    
    
    28
    
    
    
    43Hunting, mineral and recreational leases
    
    
    10
    
    
    
    14
    
    
    
    19
    
    
    
    28Fiber and other
    
    
    25
    
    
    
    36
    
    
    
    50
    
    
    
    73Total
    
    $
    249
    
    
    $
    341
    
    
    $
    495
    
    
    
    674Unit salesCorrugated PackagingCorrugated packaging, thousands of tons
    
    
    866
    
    
    
    884
    
    
    
    1,696
    
    
    
    1,753Linerboard, thousands of tons
    
    
    76
    
    
    
    47
    
    
    
    176
    
    
    
    107Total, thousands of tons
    
    
    942
    
    
    
    931
    
    
    
    1,872
    
    
    
    1,860Forest ProductsPine lumber, million board feet
    
    
    222
    
    
    
    216
    
    
    
    425
    
    
    
    434Gypsum wallboard, million square feet
    
    
    414
    
    
    
    537
    
    
    
    796
    
    
    
    1,100Particleboard, million square feet
    
    
    134
    
    
    
    164
    
    
    
    277
    
    
    
    329Medium density fiberboard, million square feet
    
    
    37
    
    
    
    41
    
    
    
    74
    
    
    
    80Fiberboard, million square feet
    
    
    79
    
    
    
    106
    
    
    
    153
    
    
    
    208
 41




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##### Table of Contents



(a)
 Project
    
    County
    
    Project Acres(b)CaliforniaHidden Creek Estates
    
    Los Angeles
    
    
    700Terrace at Hidden Hills
    
    Los Angeles
    
    
    30GeorgiaBall Ground
    
    Cherokee
    
    
    500Burt Creek
    
    Dawson/Lumpkin
    
    
    990Cedar Creek Preserve
    
    Coweta
    
    
    200Corinth Landing
    
    Coweta
    
    
    800Crossing
    
    Coweta
    
    
    230Euharlee II West
    
    Bartow
    
    
    360Fincher Road
    
    Cherokee
    
    
    950Friendship Road
    
    Cherokee
    
    
    110Garland Mountain
    
    Cherokee/Bartow
    
    
    350Genesee
    
    Coweta
    
    
    750Grove Park
    
    Coweta
    
    
    160Jackson Park
    
    Jackson
    
    
    690Lithia Springs
    
    Haralson
    
    
    260Mill Creek
    
    Coweta
    
    
    780Overlook
    
    Cherokee
    
    
    510Pickens School
    
    Pickens
    
    
    420Serenity
    
    Carroll
    
    
    400Wolf Creek
    
    Carroll
    
    
    12,180Yellow Creek
    
    Cherokee
    
    
    1,100TexasLake Houston
    
    Harris/Liberty
    
    
    3,630Entrada(c)
    
    Travis
    
    
    240Woodlake Village(c)
    
    Montgomery
    
    
    620Total
    
    
    
    
    26,960
 
 (a)
    
    A project is deemed to be in the entitlement process when customary steps
necessary for the preparation and submittal of an application, like conducting
pre-application meetings or similar discussions with governmental officials, have
commenced, or an application has been filed. Projects listed may have significant steps
remaining, and there is no assurance that entitlements ultimately will be received.(b)
    
    Acreage is for the total project and is approximate. The actual number of acres
entitled may vary.(c)
    
    We own a 50 percent interest in these projects. 42




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##### Table of Contents



(a)
 Residential Lots(c)
    
    Commercial Acres(d)Lots Sold
    
    
    
    
    
    Acres SoldInterest
    
    Since
    
    Lots
    
    Since
    
    AcresProject
    
    County
    
    Owned(b)
    
    Inception
    
    Remaining
    
    Inception
    
    RemainingProjects we ownColoradoBuffalo Highlands
    
    Weld
    
    
    100
    %
    
    
    
    
    
    
    645
    
    
    
    
    
    
    
    Johnstown Farms
    
    Weld
    
    
    100
    %
    
    
    115
    
    
    
    699
    
    
    
    
    
    
    
    Pinery West
    
    Douglas
    
    
    100
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Stonebraker
    
    Weld
    
    
    100
    %
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    TexasArrowhead Ranch
    
    Hays
    
    
    100
    %
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    5Caruth Lakes
    
    Rockwall
    
    
    100
    %
    
    
    245
    
    
    
    629
    
    
    
    
    
    
    
    Cibolo Canyons
    
    Bexar
    
    
    100
    %
    
    
    462
    
    
    
    1,287
    
    
    
    64
    
    
    
    81Harbor Lakes
    
    Hood
    
    
    100
    %
    
    
    190
    
    
    
    388
    
    
    
    
    
    
    
    13Harbor Mist
    
    Calhoun
    
    
    100
    %
    
    
    
    
    
    
    1,393
    
    
    
    
    
    
    
    36Hunters Crossing
    
    Bastrop
    
    
    100
    %
    
    
    266
    
    
    
    311
    
    
    
    19
    
    
    
    95Katy Freeway
    
    Harris
    
    
    100
    %
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    La Conterra
    
    Williamson
    
    
    100
    %
    
    
    
    
    
    
    509
    
    
    
    
    
    
    
    60Maxwell Creek
    
    Collin
    
    
    100
    %
    
    
    567
    
    
    
    456
    
    
    
    
    
    
    
    Oakcreek Estates
    
    Comal
    
    
    100
    %
    
    
    
    
    
    
    648
    
    
    
    
    
    
    
    The Colony
    
    Bastrop
    
    
    100
    %
    
    
    347
    
    
    
    1,078
    
    
    
    22
    
    
    
    50The Gables at North Hill
    
    Collin
    
    
    100
    %
    
    
    193
    
    
    
    89
    
    
    
    
    
    
    
    The Preserve at Pecan Creek
    
    Denton
    
    
    100
    %
    
    
    111
    
    
    
    708
    
    
    
    
    
    
    
    9The Ridge at Ribelin Ranch
    
    Travis
    
    
    100
    %
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    77Other projects (6)
    
    Various
    
    
    100
    %
    
    
    2,171
    
    
    
    127
    
    
    
    62
    
    
    
    39GeorgiaTowne West
    
    Bartow
    
    
    100
    %
    
    
    
    
    
    
    2,550
    
    
    
    
    
    
    
    121Other projects (7)
    
    Various
    
    
    100
    %
    
    
    
    
    
    
    1,264
    
    
    
    
    
    
    
    40Missouri and UtahOther projects (3)
    
    Various
    
    
    100
    %
    
    
    760
    
    
    
    257
    
    
    
    
    
    
    
    5,427
    
    
    
    13,870
    
    
    
    331
    
    
    
    741Projects in entities we
consolidateTexasCity Park
    
    Harris
    
    
    75
    %
    
    
    689
    
    
    
    612
    
    
    
    36
    
    
    
    129Lantana
    
    Denton
    
    
    55
    % (e)
    
    
    285
    
    
    
    2,065
    
    
    
    
    
    
    
    Light Ranch
    
    Collin
    
    
    65
    %
    
    
    
    
    
    
    2,461
    
    
    
    
    
    
    
    Timber Creek
    
    Collin
    
    
    88
    %
    
    
    
    
    
    
    654
    
    
    
    
    
    
    
    Other projects (5)
    
    Various
    
    Various
    
    
    286
    
    
    
    295
    
    
    
    13
    
    
    
    521,260
    
    
    
    6,087
    
    
    
    49
    
    
    
    181Total owned and consolidated
    
    
    
    
    
    
    
    
    6,687
    
    
    
    19,957
    
    
    
    380
    
    
    
    922Projects in ventures that
we account for using the
equity methodGeorgiaSeven Hills
    
    Paulding
    
    
    50
    %
    
    
    601
    
    
    
    479
    
    
    
    26
    
    
    
    The Georgian
    
    Paulding
    
    
    38
    %
    
    
    284
    
    
    
    1,101
    
    
    
    
    
    
    
    Other projects (5)
    
    Various
    
    Various
    
    
    1,843
    
    
    
    249
    
    
    
    3
    
    
    
    TexasBar C Ranch
    
    Tarrant
    
    
    50
    %
    
    
    170
    
    
    
    1,011
    
    
    
    
    
    
    
    Fannin Farms West
    
    Tarrant
    
    
    50
    %
    
    
    224
    
    
    
    219
    
    
    
    
    
    
    
    Lantana
    
    Denton
    
    Various (e)
    
    
    1,726
    
    
    
    122
    
    
    
    1
    
    
    
    79Long Meadow Farms
    
    Fort Bend
    
    
    19
    %
    
    
    583
    
    
    
    1,601
    
    
    
    24
    
    
    
    186Southern Trails
    
    Brazoria
    
    
    40
    %
    
    
    201
    
    
    
    858
    
    
    
    
    
    
    
    Stonewall Estates
    
    Bexar
    
    
    25
    %
    
    
    85
    
    
    
    166
    
    
    
    
    
    
    
    Summer Creek Ranch
    
    Tarrant
    
    
    50
    %
    
    
    793
    
    
    
    1,695
    
    
    
    
    
    
    
    374Summer Lakes
    
    Fort Bend
    
    
    50
    %
    
    
    294
    
    
    
    850
    
    
    
    48
    
    
    
    3Village Park
    
    Collin
    
    
    50
    %
    
    
    313
    
    
    
    256
    
    
    
    
    
    
    
    5Waterford Park
    
    Fort Bend
    
    
    50
    %
    
    
    
    
    
    
    493
    
    
    
    
    
    
    
    37Other projects (3)
    
    Various
    
    Various
    
    
    268
    
    
    
    262
    
    
    
    
    
    
    
    37FloridaOther projects (3)
    
    Various
    
    Various
    
    
    473
    
    
    
    372
    
    
    
    
    
    
    
    Total in ventures
    
    
    
    
    
    
    
    
    7,858
    
    
    
    9,734
    
    
    
    102
    
    
    
    721Combined Total
    
    
    
    
    
    
    
    
    14,545
    
    
    
    29,691
    
    
    
    482
    
    
    
    1,643
 
 (a)
    
    A project is deemed entitled when all major discretionary land-use approvals
have been received. Some projects may require additional permits for development.(b)
    
    Interest owned reflects our net equity interest in the project, whether owned
directly or indirectly. There are some projects that have multiple ownership structures
within them. Accordingly, portions of these projects may appear as owned, consolidated,
and/or accounted for on the equity method.(c)
    
    Lots are for the total project.(d)
    
    Commercial acres are for the total project and are net developable acres, which may
be fewer than the gross acres available in the project.(e)
    
    The Lantana project consists of a series of 19 partnerships in which our interests
range from 25 percent to 55 percent. We account for eight of these partnerships using the
equity method and we consolidate the remaining partnerships. 43




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##### Table of Contents



Financial Services
  Second Quarter-End
    
    
    Year-End2007
    
    
    2006
    
    
    2006(In millions)Single-family mortgage
    
    $
    1,915
    
    
    $
    2,748
    
    
    $
    2,323Single-family mortgage warehouse
    
    
    583
    
    
    
    699
    
    
    
    795Single-family construction
    
    
    1,817
    
    
    
    2,039
    
    
    
    1,782Multifamily and senior housing
    
    
    1,270
    
    
    
    1,367
    
    
    
    1,270Total residential housing
    
    
    5,585
    
    
    
    6,853
    
    
    
    6,170Commercial real estate
    
    
    1,519
    
    
    
    901
    
    
    
    1,227Commercial and business
    
    
    1,086
    
    
    
    881
    
    
    
    1,012Energy lending
    
    
    1,218
    
    
    
    758
    
    
    
    1,117Asset-based lending and leasing
    
    
    
    
    
    
    93
    
    
    
    Consumer and other
    
    
    134
    
    
    
    155
    
    
    
    156Total loans
    
    
    9,542
    
    
    
    9,641
    
    
    
    9,682Less allowance for loan losses
    
    
    (72
    )
    
    
    (71
    )
    
    
    (65
    )Loans, net
    
    $
    9,470
    
    
    $
    9,570
    
    
    $
    9,617
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Increase (Decrease) in Income Before TaxesSecond Quarter-End 2007
    
    Year-End 2006Parent
    
    Financial
    
    Parent
    
    FinancialCompany
    
    Services
    
    Company
    
    Services(In millions)Change in 
Interest Rates+2%
    
    $
    (3
    )
    
    $
    (34
    )
    
    $
    (2
    )
    
    $
    (45
    )+1%
    
    
    (2
    )
    
    
    (13
    )
    
    
    (1
    )
    
    
    (17
    )-1%
    
    
    2
    
    
    
    (21
    )
    
    
    1
    
    
    
    (18
    )-2%
    
    
    3
    
    
    
    (53
    )
    
    
    2
    
    
    
    (38
    )
  44




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##### Table of Contents



Foreign Currency Risk
  Commodity Price Risk
   
 Item 4. Controls and Procedures
     
 PART II. OTHER INFORMATION
 
 Item 1 . Legal Proceedings
    45




---



##### Table of Contents



Item 1A. Risk Factors
  Risks Relating to the Transformation Plan
 The cost to complete the transactions contemplated by the transformation plan could be significant.
  We may be unable to complete the transactions.
  
    
    changes in business, political, and economic conditions;
    
    changes in governmental regulations and policies and actions of regulatory bodies;
    
    changes in our operating performance;
    
    required changes to existing financings, factors that could influence establishing
the appropriate capital structure for each company, and changes in credit ratings,
including those that may result from the transformation plan;
    
    the ability to attract a buyer for our strategic timberlands; and
    
    our ability to satisfy certain conditions precedent, including final approval by our
Board of Directors, receipt of certain tax rulings, necessary opinions of counsel, and
the filing and effectiveness of registration statements with the SEC.
 Increased demands on our management team as a result of the transformation plan could distract
managements attention from operating our business.
  Each of the independent companies resulting from the completion of the transformation plan may be
unable to achieve some or all of the benefits that we expect will be achieved from the separation
transactions.
  46




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##### Table of Contents



If certain internal restructuring transactions and the distribution relating to the transformation
plan are determined to be taxable for U.S. federal income tax purposes, we and our stockholders
that are subject to U.S. federal income tax could incur significant U.S. federal income tax
liabilities.
  
 Item 2 . Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
 MaximumTotal Number
    
    Number ofof Shares
    
    Shares ThatPurchased as
    
    May Yet beAverage
    
    Part of Publicly
    
    PurchasedTotal Number
    
    Price
    
    Announced
    
    Under theof Shares
    
    Paid per
    
    Plans or
    
    PlansPeriod
    
    Purchased
    
    Share
    
    Programs
    
    or ProgramsMonth 1 (4/1/2007  4/30/2007)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    6,650,000Month 2 (5/1/2007  5/31/2007)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    6,650,000Month 3 (6/1/2007  6/30/2007)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    6,650,000Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    6,650,000
 
 (a)
    
    On August 4, 2006, we announced that our Board of Directors
authorized the repurchase of up to 6,000,000 shares of our
common stock, of which 1,650,000 remain to be purchased. On
February 2, 2007, we announced that our Board of Directors
authorized the purchase of up to an additional 5,000,000
shares of our common stock, increasing the maximum number
of shares yet to be purchased under our repurchase plans to
6,650,000 shares. The August 4, 2006 and February 2, 2007
plans have no expiration dates. We have no plans or
programs that expired during the period covered by the
table above and no plans or programs that we intend to
terminate prior to expiration or under which we no longer
intend to make further purchases. 
 Item 3 . Defaults Upon Senior Securities
  
 Item 4 . Submission of Matters to a Vote of Security Holders
  47




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##### Table of Contents



AbstentionsAgainst or
    
    and BrokerMatter
    
    For
    
    Withheld
    
    Non-votes1. Election of four directors(a) Donald M. Carlton
    
    
    90,705,399
    
    
    
    988,161
    
    
    
    (b) E. Lynn Draper, Jr.
    
    
    90,442,347
    
    
    
    1,251,213
    
    
    
    (c) Kenneth M. Jastrow, II
    
    
    89,835,153
    
    
    
    1,858,407
    
    
    
    (d) James A. Johnson
    
    
    88,489,468
    
    
    
    3,204,092
    
    
    
    2. Amend Article III, Section 2
of our Bylaws to provide that
directors will be elected by the
majority vote of our
stockholders.
    
    
    85,702,232
    
    
    
    5,317,609
    
    
    
    673,7193. Amend Article V of our
Certificate of Incorporation to
eliminate certain super-majority
vote requirements.
    
    
    89,880,810
    
    
    
    1,007,640
    
    
    
    805,1104. Amend Article VI,
Section 3 of our Certificate of
Incorporation to provide that
directors appointed to fill
vacancies or newly created
directorships will be subject to
election at the next annual
meeting.
    
    
    90,762,360
    
    
    
    225,558
    
    
    
    705,6425. Ratification of appointment
of Ernst & Young LLP
    
    
    90,332,862
    
    
    
    682,128
    
    
    
    678,570
 
 Item 5 . Other Information
  
 Item 6 . Exhibits
 Exhibits.2.1
    
    
    
    Purchase Agreement, dated as of August 3, 2007, among TIN Inc.,
Campbell/Southern Parent, LLC, and the other entities named as buyers in the agreement3.1
    
    
    
    Amended and Restated Certificate of Incorporation of the Company.3.2
    
    
    
    Amended and Restated Bylaws of the Company.31.1
    
    
    
    Certification of Chief Executive Officer pursuant to Exchange Act Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    
    Certification of Chief Financial Officer pursuant to Exchange Act Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 48




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##### Table of Contents



SIGNATURES
  TEMPLE-INLAND INC.
(Registrant)Dated:  August 7, 2007
    By       /s/ Randall D. LevyRandall D. LevyChief Financial OfficerBy       /s/ Troy L. HesterTroy L. HesterCorporate Controller and
     Principal Accounting Officer 49




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##### Table of Contents



Exhibit No.
    
    Description
    
    Page No.2.1
    
    Purchase Agreement, dated as of
August 3, 2007, among TIN Inc., Campbell/Southern Parent, LLC, and the other entities
named as buyers in the agreement
    
    
    513.1
    
    Amended and Restated Certificate of Incorporation of the Company
    
    
    1333.2
    
    Amended and Restated Bylaws of the Company
    
    
    15131.1
    
    Certification of Chief Executive Officer pursuant to Exchange
Act Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    17331.2
    
    Certification of Chief Financial Officer pursuant to Exchange
Act Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    17532.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    
    17732.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    
    178
 50