##### 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 October 1, 2005
  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
(State or other jurisdiction of
incorporation or organization)
    
    75-1903917
(I.R.S. Employer Identification Number)
 1300 MoPac Expressway South, Austin, Texas 78746
 (512) 434-5800
 Not Applicable
 þ  ̈
 þ  ̈
  ̈ þ
  Class
    
    Number of common shares outstanding
as of October 1, 2005Common Stock (par value $1.00 per share)
    
    112,232,790
 Page 1 of 49
    
    The Exhibit Index is page 43.




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PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Temple-Inland Inc. and Subsidiaries
    
    
    3Consolidated Balance SheetConsolidated Statements of IncomeConsolidated Statements of Cash FlowsParent Company (Temple-Inland Inc. and its manufacturing subsidiaries)
    
    
    7Summarized Balance SheetsSummarized Statements of IncomeSummarized Statements of Cash FlowsFinancial Services
    
    
    10Summarized Balance SheetsSummarized Statements of IncomeSummarized Statements of Cash FlowsNotes to the Consolidated Financial Statements
    
    
    13Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3. Defaults Upon Senior Securities
    
    
    40Item 4. Submission of Matters to a Vote of Security Holders
    
    
    40Item 5. Other Information
    
    
    41Item 6. Exhibits
    
    
    41SIGNATURES
    
    
    42Certification of Chief Executive Officer Pursuant to Section 302Certification of Chief Financial Officer Pursuant to Section 302Certification of Chief Executive Officer Pursuant to Section 906Certification of Chief Financial Officer Pursuant to Section 906




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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
    
    $
    5
    
    
    $
    475
    
    
    $
    480Trade receivables, less allowance of $16
    
    
    418
    
    
    
    
    
    
    
    418Inventories
    
    
    403
    
    
    
    
    
    
    
    403Timber and timberland
    
    
    496
    
    
    
    
    
    
    
    496Loans held for sale
    
    
    
    
    
    
    189
    
    
    
    189Loans, net of allowance for loan losses of $77
    
    
    
    
    
    
    10,013
    
    
    
    10,013Securities available-for-sale
    
    
    
    
    
    
    982
    
    
    
    982Securities held-to-maturity
    
    
    
    
    
    
    4,452
    
    
    
    4,452Property, premises, and equipment
    
    
    1,657
    
    
    
    186
    
    
    
    1,843Goodwill
    
    
    236
    
    
    
    164
    
    
    
    400Prepaid expenses and other assets
    
    
    436
    
    
    
    593
    
    
    
    980Investment in financial services
    
    
    1,198
    
    
    
    
    
    
    
    TOTAL ASSETS
    
    $
    4,849
    
    
    $
    17,054
    
    
    $
    20,656LIABILITIESAccounts payable, accrued expenses, and other liabilities
    
    $
    686
    
    
    $
    209
    
    
    $
    875Long-term debt and other borrowings
    
    
    1,472
    
    
    
    212
    
    
    
    1,684Deposits
    
    
    
    
    
    
    9,110
    
    
    
    9,110Federal Home Loan Bank borrowings
    
    
    
    
    
    
    6,020
    
    
    
    6,020Securities sold under repurchase agreements
    
    
    
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    153
    
    
    
    
    
    
    
    124Pension liability
    
    
    280
    
    
    
    
    
    
    
    280Postretirement benefits
    
    
    140
    
    
    
    
    
    
    
    140Preferred stock issued by subsidiaries
    
    
    
    
    
    
    305
    
    
    
    305TOTAL LIABILITIES
    
    
    2,731
    
    
    
    15,856
    
    
    
    18,538SHAREHOLDERS 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
    
    
    
    
    
    
    
    
    
    
    433Accumulated other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (193
    )Retained earnings
    
    
    
    
    
    
    
    
    
    
    2,1422,506Cost of shares held in the treasury: 11,372,554 shares
    
    
    
    
    
    
    
    
    
    
    (388
    )TOTAL SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    
    2,118TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    $
    20,656
 3




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##### Table of Contents



Parent
    
    
    FinancialCompany
    
    
    Services
    
    
    Consolidated(In millions)ASSETSCash and cash equivalents
    
    $
    9
    
    
    $
    363
    
    
    $
    372Trade receivables, less allowances of $16
    
    
    404
    
    
    
    
    
    
    
    404Inventories
    
    
    427
    
    
    
    
    
    
    
    427Timber and timberland
    
    
    496
    
    
    
    
    
    
    
    496Loans held for sale
    
    
    
    
    
    
    510
    
    
    
    510Loans, net of allowance for loan losses of $85
    
    
    
    
    
    
    9,618
    
    
    
    9,618Securities available-for-sale
    
    
    
    
    
    
    1,118
    
    
    
    1,118Securities held-to-maturity
    
    
    
    
    
    
    3,864
    
    
    
    3,864Property, premises, and equipment
    
    
    1,738
    
    
    
    167
    
    
    
    1,905Goodwill
    
    
    236
    
    
    
    152
    
    
    
    388Prepaid expenses and other assets
    
    
    469
    
    
    
    658
    
    
    
    1,042Investment in financial services
    
    
    1,121
    
    
    
    
    
    
    
    TOTAL ASSETS
    
    $
    4,900
    
    
    $
    16,450
    
    
    $
    20,144LIABILITIESAccounts payable, accrued expenses, and other liabilities
    
    $
    740
    
    
    $
    350
    
    
    $
    1,052Long-term debt and other borrowings
    
    
    1,485
    
    
    
    206
    
    
    
    1,691Deposits
    
    
    
    
    
    
    8,964
    
    
    
    8,964Federal Home Loan Bank borrowings
    
    
    
    
    
    
    4,717
    
    
    
    4,717Securities sold under repurchase agreements
    
    
    
    
    
    
    787
    
    
    
    787Deferred income taxes
    
    
    136
    
    
    
    
    
    
    
    89Pension liability
    
    
    289
    
    
    
    
    
    
    
    289Postretirement benefits
    
    
    143
    
    
    
    
    
    
    
    143Preferred stock issued by subsidiaries
    
    
    
    
    
    
    305
    
    
    
    305TOTAL LIABILITIES
    
    
    2,793
    
    
    
    15,329
    
    
    
    18,037SHAREHOLDERS 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 122,779,104 shares, including shares held in the treasury
    
    
    
    
    
    
    
    
    
    
    123Additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    350Accumulated other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (192
    )Retained earnings
    
    
    
    
    
    
    
    
    
    
    2,0672,348Cost of shares held in the treasury: 10,592,914 shares
    
    
    
    
    
    
    
    
    
    
    (241
    )TOTAL SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    
    2,107TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    
    
    
    
    
    
    
    $
    20,144
   4




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##### Table of Contents



Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions, except per share amounts)REVENUESManufacturing
    
    $
    947
    
    
    $
    955
    
    
    $
    2,917
    
    
    $
    2,788Financial services
    
    
    271
    
    
    
    239
    
    
    
    759
    
    
    
    7781,218
    
    
    
    1,194
    
    
    
    3,676
    
    
    
    3,566COSTS AND EXPENSESManufacturing
    
    
    (927
    )
    
    
    (876
    )
    
    
    (2,784
    )
    
    
    (2,646
    )Financial services
    
    
    (204
    )
    
    
    (223
    )
    
    
    (594
    )
    
    
    (650
    )(1,131
    )
    
    
    (1,099
    )
    
    
    (3,378
    )
    
    
    (3,296
    )OPERATING INCOME
    
    
    87
    
    
    
    95
    
    
    
    298
    
    
    
    270Parent company interest
    
    
    (27
    )
    
    
    (31
    )
    
    
    (82
    )
    
    
    (97
    )Other non-operating income (expense)
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    (2
    )INCOME BEFORE INCOME TAXES
    
    
    61
    
    
    
    64
    
    
    
    219
    
    
    
    171Income tax expense
    
    
    (24
    )
    
    
    (25
    )
    
    
    (69
    )
    
    
    (66
    )INCOME FROM CONTINUING OPERATIONS
    
    
    37
    
    
    
    39
    
    
    
    150
    
    
    
    105Discontinued operations
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    2NET INCOME
    
    $
    38
    
    
    $
    40
    
    
    $
    152
    
    
    $
    107WEIGHTED AVERAGE COMMON SHARES
OUTSTANDINGBasic
    
    
    112.7
    
    
    
    111.8
    
    
    
    113.0
    
    
    
    111.0Diluted
    
    
    114.1
    
    
    
    113.4
    
    
    
    115.0
    
    
    
    112.2EARNINGS PER SHAREBasic:Income from continuing operations
    
    $
    0.33
    
    
    $
    0.35
    
    
    $
    1.33
    
    
    $
    0.95Discontinued operations
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.02
    
    
    
    0.02Net income
    
    $
    0.34
    
    
    $
    0.36
    
    
    $
    1.35
    
    
    $
    0.97Diluted:Income from continuing operations
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    1.30
    
    
    $
    0.94Discontinued operations
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.02
    
    
    
    0.02Net income
    
    $
    0.33
    
    
    $
    0.36
    
    
    $
    1.32
    
    
    $
    0.96DIVIDENDS PAID PER SHARE OF COMMON STOCK
    
    $
    0.22 1/2
    
    
    $
    0.18
    
    
    $
    0.67 1/2
    
    
    $
    0.54
   5




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##### Table of Contents



First Nine Months2005
    
    
    2004(In millions)CASH PROVIDED BY (USED FOR) OPERATIONSNet income
    
    $
    152
    
    
    $
    107Adjustments:Depreciation and amortization
    
    
    186
    
    
    
    191Amortization and accretion of financial instruments
    
    
    12
    
    
    
    14Amortization and impairment of servicing rights
    
    
    
    
    
    
    34Provision (credit) for credit losses
    
    
    9
    
    
    
    (9
    )Deferred income taxes
    
    
    34
    
    
    
    47Other non-cash charges and (credits), net
    
    
    44
    
    
    
    31Net assets of discontinued operations
    
    
    
    
    
    
    (9
    )Other
    
    
    (2
    )
    
    
    64Changes in:Trade receivables
    
    
    (19
    )
    
    
    (86
    )Inventories
    
    
    20
    
    
    
    (44
    )Prepaid expenses and other assets
    
    
    15
    
    
    
    3Accounts payable and accrued expenses
    
    
    (36
    )
    
    
    8Loans held for sale, originations
    
    
    (1,939
    )
    
    
    (5,464
    )Loans held for sale, sales
    
    
    2,247
    
    
    
    5,479Collections on loans serviced for others, net
    
    
    (122
    )
    
    
    (5
    )601
    
    
    
    361CASH PROVIDED BY (USED FOR) INVESTINGCapital expenditures
    
    
    (186
    )
    
    
    (147
    )Sale of non-strategic assets and operations
    
    
    31
    
    
    
    63Securities available-for-sale, net
    
    
    139
    
    
    
    201Securities held-to-maturity, net
    
    
    (516
    )
    
    
    453Loans originated or acquired, net of principal collected
    
    
    (476
    )
    
    
    (725
    )Sales of loans and collection of mortgage servicing rights sale receivables
    
    
    47
    
    
    
    36Acquisitions, net of cash acquired, and joint ventures
    
    
    (23
    )
    
    
    130Other
    
    
    19
    
    
    
    56(965
    )
    
    
    67CASH PROVIDED BY (USED FOR) FINANCINGAdditions to debt
    
    
    14
    
    
    
    321Payments of debt
    
    
    (595
    )
    
    
    (718
    )Borrowings under accounts receivable securitization program, net
    
    
    50
    
    
    
    1Payments of other long-term liabilities
    
    
    
    
    
    
    (64
    )Deposits, net
    
    
    147
    
    
    
    140Repurchase agreements and short-term borrowings, net
    
    
    1,040
    
    
    
    (85
    )Cash dividends paid to shareholders
    
    
    (78
    )
    
    
    (60
    )Repurchase of common stock
    
    
    (472
    )
    
    
    Exercise of stock options
    
    
    42
    
    
    
    60Settlement of equity purchase contracts
    
    
    345
    
    
    
    Other
    
    
    (21
    )
    
    
    14472
    
    
    
    (391
    )Net increase (decrease) in cash and cash equivalents
    
    
    108
    
    
    
    37Cash and cash equivalents at beginning of period
    
    
    372
    
    
    
    399Cash and cash equivalents at end of period
    
    $
    480
    
    
    $
    436
  6




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##### Table of Contents



ThirdQuarter-End
    
    
    Year-End2005
    
    
    2004(In millions)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    5
    
    
    $
    9Trade receivables, less allowances of $16 in 2005 and $16 in 2004
    
    
    418
    
    
    
    404Inventories:Finished goods and work in process
    
    
    90
    
    
    
    126Raw materials
    
    
    210
    
    
    
    202Supplies and other
    
    
    103
    
    
    
    99Total inventories
    
    
    403
    
    
    
    427Prepaid expenses and other
    
    
    68
    
    
    
    98Total current assets
    
    
    894
    
    
    
    938Investment in Financial Services
    
    
    1,198
    
    
    
    1,121Timber and Timberland
    
    
    496
    
    
    
    496Property and EquipmentLand and buildings
    
    
    629
    
    
    
    637Machinery and equipment
    
    
    3,368
    
    
    
    3,327Construction in progress
    
    
    74
    
    
    
    86Less allowances for depreciation
    
    
    (2,414
    )
    
    
    (2,312
    )Total property and equipment
    
    
    1,657
    
    
    
    1,738Goodwill
    
    
    236
    
    
    
    236Assets Held for Sale
    
    
    35
    
    
    
    34Other Assets
    
    
    333
    
    
    
    337TOTAL ASSETS
    
    $
    4,849
    
    
    $
    4,900LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    164
    
    
    $
    212Accrued employee compensation and benefits
    
    
    84
    
    
    
    93Accrued interest
    
    
    24
    
    
    
    24Accrued property taxes
    
    
    28
    
    
    
    21Other accrued expenses
    
    
    141
    
    
    
    153Liabilities of discontinued operations
    
    
    7
    
    
    
    7Current portion of long-term debt
    
    
    3
    
    
    
    3Total current liabilities
    
    
    451
    
    
    
    513Long-Term Debt
    
    
    1,472
    
    
    
    1,485Deferred Income Taxes
    
    
    153
    
    
    
    136Pension Liability
    
    
    280
    
    
    
    289Postretirement Benefits
    
    
    140
    
    
    
    143Other Long-Term Liabilities
    
    
    235
    
    
    
    227Total liabilities
    
    
    2,731
    
    
    
    2,793Shareholders Equity
    
    
    2,118
    
    
    
    2,107TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    4,849
    
    
    $
    4,900
  7




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##### Table of Contents



Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)NET REVENUES
    
    $
    947
    
    
    $
    955
    
    
    $
    2,917
    
    
    $
    2,788COSTS AND EXPENSESCost of sales
    
    
    (829
    )
    
    
    (814
    )
    
    
    (2,505
    )
    
    
    (2,435
    )Selling
    
    
    (23
    )
    
    
    (25
    )
    
    
    (73
    )
    
    
    (79
    )General and administrative
    
    
    (58
    )
    
    
    (42
    )
    
    
    (155
    )
    
    
    (123
    )Other operating income (expense)
    
    
    (17
    )
    
    
    5
    
    
    
    (51
    )
    
    
    (9
    )(927
    )
    
    
    (876
    )
    
    
    (2,784
    )
    
    
    (2,646
    )20
    
    
    
    79
    
    
    
    133
    
    
    
    142FINANCIAL SERVICES PRE-TAX EARNINGS
    
    
    67
    
    
    
    16
    
    
    
    165
    
    
    
    128OPERATING INCOME
    
    
    87
    
    
    
    95
    
    
    
    298
    
    
    
    270Interest expense
    
    
    (27
    )
    
    
    (31
    )
    
    
    (82
    )
    
    
    (97
    )Other non-operating income (expense)
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    (2
    )INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    61
    
    
    
    64
    
    
    
    219
    
    
    
    171Income tax expense
    
    
    (24
    )
    
    
    (25
    )
    
    
    (69
    )
    
    
    (66
    )INCOME FROM CONTINUING OPERATIONS
    
    
    37
    
    
    
    39
    
    
    
    150
    
    
    
    105Discontinued operations
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    2NET INCOME
    
    $
    38
    
    
    $
    40
    
    
    $
    152
    
    
    $
    107
  8




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##### Table of Contents



First Nine Months2005
    
    
    2004(In millions)CASH PROVIDED BY (USED FOR) OPERATIONSNet income
    
    $
    152
    
    
    $
    107Adjustments:Depreciation and amortization
    
    
    166
    
    
    
    166Non-cash stock-based compensation
    
    
    22
    
    
    
    26Non-cash pension and postretirement expense
    
    
    44
    
    
    
    45Cash contribution to pension and postretirement plans
    
    
    (55
    )
    
    
    (13
    )Deferred income taxes
    
    
    18
    
    
    
    56Net earnings of financial services
    
    
    (104
    )
    
    
    (79
    )Dividends from financial services
    
    
    25
    
    
    
    70Earnings of joint ventures
    
    
    (29
    )
    
    
    (19
    )Dividends from joint ventures
    
    
    30
    
    
    
    10Other non-cash charges
    
    
    44
    
    
    
    14Net assets of discontinued operations
    
    
    
    
    
    
    (9
    )Other
    
    
    1
    
    
    
    16Changes in:Trade receivables
    
    
    (19
    )
    
    
    (86
    )Inventories
    
    
    20
    
    
    
    (44
    )Prepaid expenses and other assets
    
    
    15
    
    
    
    3Accounts payable and accrued expenses
    
    
    (36
    )
    
    
    8294
    
    
    
    271CASH PROVIDED BY (USED FOR) INVESTINGCapital expenditures
    
    
    (157
    )
    
    
    (117
    )Sales of non-strategic assets and operations
    
    
    31
    
    
    
    63Proceeds from sale of property and equipment
    
    
    7
    
    
    
    Acquisitions, net of cash acquired, and joint ventures
    
    
    (3
    )
    
    
    (3
    )(122
    )
    
    
    (57
    )CASH PROVIDED BY (USED FOR) FINANCINGPayments of debt
    
    
    (63
    )
    
    
    (156
    )Borrowings under accounts receivable securitization program, net
    
    
    50
    
    
    
    1Payments of other long-term liabilities
    
    
    
    
    
    
    (64
    )Cash dividends paid to shareholders
    
    
    (78
    )
    
    
    (60
    )Repurchase of common stock
    
    
    (472
    )
    
    
    Exercise of options
    
    
    42
    
    
    
    60Settlement of equity purchase contracts
    
    
    345
    
    
    
    (176
    )
    
    
    (219
    )Net increase (decrease) in cash and cash equivalents
    
    
    (4
    )
    
    
    (5
    )Cash and cash equivalents at beginning of period
    
    
    9
    
    
    
    20Cash and cash equivalents at end of period
    
    $
    5
    
    
    $
    15
  9




---



##### Table of Contents



ThirdQuarter
    
    
    Year-End-End 2005
    
    
    2004(In millions)ASSETSCash and cash equivalents
    
    $
    475
    
    
    $
    363Loans held for sale
    
    
    189
    
    
    
    510Loans, net of allowance for losses of $77 in 2005 and $85 in 2004
    
    
    10,013
    
    
    
    9,618Securities available-for-sale
    
    
    982
    
    
    
    1,118Securities held-to-maturity
    
    
    4,452
    
    
    
    3,864Real estate
    
    
    253
    
    
    
    253Premises and equipment, net
    
    
    186
    
    
    
    167Accounts, notes, and accrued interest receivable
    
    
    120
    
    
    
    170Goodwill
    
    
    164
    
    
    
    152Other assets
    
    
    220
    
    
    
    235TOTAL ASSETS
    
    $
    17,054
    
    
    $
    16,450LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    9,110
    
    
    $
    8,964Federal Home Loan Bank borrowings
    
    
    6,020
    
    
    
    4,717Securities sold under repurchase agreements
    
    
    
    
    
    
    787Other liabilities
    
    
    209
    
    
    
    350Other borrowings
    
    
    212
    
    
    
    206Preferred stock issued by subsidiaries
    
    
    305
    
    
    
    305TOTAL LIABILITIES
    
    
    15,856
    
    
    
    15,329Shareholders Equity
    
    
    1,198
    
    
    
    1,121TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    17,054
    
    
    $
    16,450
  10




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##### Table of Contents



Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)INTEREST INCOMELoans and loans held for sale
    
    $
    157
    
    
    $
    122
    
    
    $
    428
    
    
    $
    354Securities available-for-sale
    
    
    10
    
    
    
    13
    
    
    
    40
    
    
    
    42Securities held-to-maturity
    
    
    41
    
    
    
    40
    
    
    
    105
    
    
    
    129Other earning assets
    
    
    1
    
    
    
    1
    
    
    
    3
    
    
    
    2Total interest income
    
    
    209
    
    
    
    176
    
    
    
    576
    
    
    
    527INTEREST EXPENSEDeposits
    
    
    (49
    )
    
    
    (37
    )
    
    
    (133
    )
    
    
    (104
    )Borrowed funds
    
    
    (58
    )
    
    
    (43
    )
    
    
    (152
    )
    
    
    (128
    )Total interest expense
    
    
    (107
    )
    
    
    (80
    )
    
    
    (285
    )
    
    
    (232
    )NET INTEREST INCOME
    
    
    102
    
    
    
    96
    
    
    
    291
    
    
    
    295(Provision) credit for credit losses
    
    
    1
    
    
    
    5
    
    
    
    (9
    )
    
    
    9NET INTEREST INCOME AFTER (PROVISION) CREDIT FOR
CREDIT LOSSES
    
    
    103
    
    
    
    101
    
    
    
    282
    
    
    
    304NONINTEREST INCOMEService charges on deposits
    
    
    12
    
    
    
    11
    
    
    
    33
    
    
    
    31Insurance commissions and fees
    
    
    17
    
    
    
    12
    
    
    
    48
    
    
    
    36Real estate operations
    
    
    16
    
    
    
    8
    
    
    
    44
    
    
    
    43Loan origination and sale of loans
    
    
    5
    
    
    
    34
    
    
    
    19
    
    
    
    117Operating lease income
    
    
    1
    
    
    
    2
    
    
    
    4
    
    
    
    8Loan servicing fees
    
    
    
    
    
    
    8
    
    
    
    1
    
    
    
    24Amortization and impairment of servicing rights
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (34
    )Other
    
    
    11
    
    
    
    9
    
    
    
    34
    
    
    
    26Total noninterest income
    
    
    62
    
    
    
    63
    
    
    
    183
    
    
    
    251NONINTEREST EXPENSECompensation and benefits
    
    
    (47
    )
    
    
    (65
    )
    
    
    (139
    )
    
    
    (209
    )Insurance operations, other than compensation
    
    
    (2
    )
    
    
    (1
    )
    
    
    (6
    )
    
    
    (4
    )Real estate operations, other than compensation
    
    
    (6
    )
    
    
    (4
    )
    
    
    (18
    )
    
    
    (24
    )Occupancy
    
    
    (6
    )
    
    
    (9
    )
    
    
    (20
    )
    
    
    (24
    )Data processing
    
    
    (4
    )
    
    
    (5
    )
    
    
    (12
    )
    
    
    (14
    )Other
    
    
    (33
    )
    
    
    (43
    )
    
    
    (105
    )
    
    
    (131
    )Charges related to asset impairments and severance
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )Total noninterest expense
    
    
    (98
    )
    
    
    (148
    )
    
    
    (300
    )
    
    
    (427
    )INCOME BEFORE INCOME TAXES
    
    
    67
    
    
    
    16
    
    
    
    165
    
    
    
    128Income tax expense
    
    
    (24
    )
    
    
    (7
    )
    
    
    (61
    )
    
    
    (49
    )NET INCOME
    
    $
    43
    
    
    $
    9
    
    
    $
    104
    
    
    $
    79
  11




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##### Table of Contents



First Nine Months2005
    
    
    2004(In millions)CASH PROVIDED BY (USED FOR) OPERATIONSNet income
    
    $
    104
    
    
    $
    79Adjustments:Depreciation
    
    
    16
    
    
    
    18Depreciation of leased assets
    
    
    4
    
    
    
    7Provision (credit) for credit losses
    
    
    9
    
    
    
    (9
    )Amortization and accretion of financial instruments
    
    
    12
    
    
    
    14Deferred income taxes
    
    
    16
    
    
    
    (9
    )Amortization and impairment of servicing rights
    
    
    
    
    
    
    34Non-cash charges related to mortgage banking repositioning
    
    
    
    
    
    
    17Changes in:Loans held for sale, originations
    
    
    (1,939
    )
    
    
    (5,464
    )Loans held for sale, sales
    
    
    2,247
    
    
    
    5,479Collections on loans serviced for others, net
    
    
    (122
    )
    
    
    (5
    )Other
    
    
    (15
    )
    
    
    (1
    )332
    
    
    
    160CASH PROVIDED BY (USED FOR) INVESTINGPurchases of securities available-for-sale
    
    
    (6
    )
    
    
    (28
    )Principal payments and maturities of securities available-for-sale
    
    
    145
    
    
    
    229Purchases of securities held-to-maturity
    
    
    (1,523
    )
    
    
    (896
    )Principal payments and maturities of securities held-to-maturity
    
    
    1,007
    
    
    
    1,349Loans originated or acquired, net of collections
    
    
    (476
    )
    
    
    (725
    )Collection of mortgage servicing rights sale receivables
    
    
    46
    
    
    
    Sales of loans
    
    
    1
    
    
    
    36Acquisitions, net of cash acquired
    
    
    (20
    )
    
    
    (15
    )Branch acquisitions
    
    
    
    
    
    
    148Capital expenditures
    
    
    (29
    )
    
    
    (30
    )Other
    
    
    12
    
    
    
    56(843
    )
    
    
    124CASH PROVIDED BY (USED FOR) FINANCINGDeposits, net
    
    
    147
    
    
    
    140Repurchase agreements and short-term borrowings, net
    
    
    1,040
    
    
    
    (85
    )Additions to debt and long-term FHLB borrowings
    
    
    14
    
    
    
    321Payments of debt and long-term FHLB borrowings
    
    
    (532
    )
    
    
    (562
    )Dividends paid to parent company
    
    
    (25
    )
    
    
    (70
    )Other
    
    
    (21
    )
    
    
    14623
    
    
    
    (242
    )Net increase (decrease) in cash and cash equivalents
    
    
    112
    
    
    
    42Cash and cash equivalents at beginning of period
    
    
    363
    
    
    
    379Cash and cash equivalents at end of period
    
    $
    475
    
    
    $
    421
  12




---



##### Table of Contents



Note A  Basis of Presentation
     Note B  Earnings Per Share
  Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Denominator for basic earnings per share,
weighted average common shares
outstanding
    
    
    112.7
    
    
    
    111.8
    
    
    
    113.0
    
    
    
    111.0Dilutive effect of:Equity purchase contracts
    
    
    
    
    
    
    0.4
    
    
    
    0.5
    
    
    
    0.2Stock options
    
    
    1.4
    
    
    
    1.2
    
    
    
    1.5
    
    
    
    1.0Denominator for diluted earnings per share
    
    
    114.1
    
    
    
    113.4
    
    
    
    115.0
    
    
    
    112.2
   13




---



##### Table of Contents



Note C  Comprehensive Income
  Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Net income
    
    $
    38
    
    
    $
    40
    
    
    $
    152
    
    
    $
    107Other comprehensive income (loss), net
of taxes:Unrealized gains (losses) on:Available-for-sale securities
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    (3
    )Derivative instruments
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    3Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (1
    )Other comprehensive income (loss)
    
    
    (3
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )Comprehensive income
    
    $
    35
    
    
    $
    39
    
    
    $
    151
    
    
    $
    106
   Note D  Segment Information
   14




---



##### Table of Contents



UnallocatedCorrugated Packaging
    
    Forest Products
    
    Financial Services
    
    Expenses and Eliminations
    
    TotalFor Third Quarter 2005
    
    
    
    
    
    
    
    
    
    (In millions)Revenues from external customers
    
    $
    690
    
    
    $
    257
    
    
    $
    271
    
    
    $
    
    
    
    $
    1,218Depreciation and amortization
    
    
    41
    
    
    
    12
    
    
    
    6
    
    
    
    2
    
    
    
    61Segment operating income and
income (loss) before taxes
    
    
    15
    
    
    
    64
    
    
    
    67
    
    
    
    (85
    )(a)
    
    
    61Financial services, net
interest income
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    102Capital expenditures
    
    
    20
    
    
    
    19
    
    
    
    16
    
    
    
    4
    
    
    
    59For First Nine Months 2005 or at
Third Quarter-End 2005Revenues from external customers
    
    $
    2,146
    
    
    $
    771
    
    
    $
    759
    
    
    $
    
    
    
    $
    3,676Depreciation and amortization
    
    
    120
    
    
    
    38
    
    
    
    20
    
    
    
    8
    
    
    
    186Segment operating income and
income (loss) before taxes
    
    
    123
    
    
    
    176
    
    
    
    165
    
    
    
    (245
    )(b)
    
    
    219Financial services, net
interest income
    
    
    
    
    
    
    
    
    
    
    291
    
    
    
    
    
    
    
    291Total assets
    
    
    2,334
    
    
    
    962
    
    
    
    17,054
    
    
    
    306
    
    
    
    20,656Capital expenditures
    
    
    95
    
    
    
    48
    
    
    
    29
    
    
    
    14
    
    
    
    186Goodwill
    
    
    236
    
    
    
    
    
    
    
    164
    
    
    
    
    
    
    
    400For Third Quarter 2004Revenues from external customers
    
    $
    689
    
    
    $
    266
    
    
    $
    239
    
    
    $
    
    
    
    $
    1,194Depreciation and amortization
    
    
    40
    
    
    
    13
    
    
    
    9
    
    
    
    2
    
    
    
    64Segment operating income and
income (loss) before taxes
    
    
    40
    
    
    
    68
    
    
    
    37
    
    
    
    (81
    )(c)
    
    
    64Financial services, net
interest income
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    96Capital expenditures
    
    
    36
    
    
    
    15
    
    
    
    12
    
    
    
    2
    
    
    
    65For First Nine Months 2004 or at
Third Quarter-End 2004Revenues from external customers
    
    $
    2,049
    
    
    $
    739
    
    
    $
    778
    
    
    $
    
    
    
    $
    3,566Depreciation and amortization
    
    
    119
    
    
    
    41
    
    
    
    25
    
    
    
    6
    
    
    
    191Segment operating income and
income (loss) before taxes
    
    
    72
    
    
    
    165
    
    
    
    149
    
    
    
    (215
    )(d)
    
    
    171Financial services, net
interest income
    
    
    
    
    
    
    
    
    
    
    295
    
    
    
    
    
    
    
    295Total assets
    
    
    2,370
    
    
    
    1,035
    
    
    
    17,037
    
    
    
    277
    
    
    
    20,719Capital expenditures
    
    
    77
    
    
    
    34
    
    
    
    30
    
    
    
    6
    
    
    
    147Goodwill
    
    
    235
    
    
    
    
    
    
    
    152
    
    
    
    
    
    
    
    387
 
 (a)
    
    Includes other operating expenses for third quarter 2005 of $27 million, which
consists of a $5 million charge associated with converting and production facility closures or
sales, a $16 million charge associated with hurricane related costs, a $5 million charge
related to antitrust litigation, and $1 million of other charges. Of these amounts, $19
million applies to corrugated packaging and $8 million applies to forest products.(b)
    
    Includes other operating expenses for first nine months 2005 of $80
million, which consists of a $44 million charge associated with converting and production
facility closures or sales, a $16 million charge associated with hurricane related costs, a
$13 million charge related to antitrust litigation, a $4 million charge associated with a
proxy contest in the first half of the year, and $3 million of other charges. Of these
amounts, $39 million applies to corrugated packaging, $35 million applies to forest products,
and $6 million does not apply to a business segment.(c)
    
    Includes other operating expenses for third quarter 2004 of $25 million,
which consists of a $4 million charge associated with converting and production facility
closures, a $1 million charge related to consolidation and supply chain initiatives, a $21
million charge associated with the repositioning of mortgage origination and servicing
activities, and $1 million of 15




---



##### Table of Contents



income related to the collection of notes previously written-off. Of these amounts, $3 million
applies to corrugated packaging, $21 million applies to financial services, and $1 million does
not apply to a business segment.(d)
    
    Includes other operating expenses for first nine months 2004 of $49
million, which consists of a $21 million charge associated with converting and production
facility closures, a $7 million charge related to consolidation and supply chain initiatives,
a $21 million charge associated with the repositioning of mortgage origination and servicing
activities, $1 million of income related to the collection of notes previously written-off,
and $1 million of other charges. Of these amounts, $9 million applies to corrugated
packaging, $12 million applies to forest products, $21 million applies to financial services,
and $7 million does not apply to a business segment. Note E  Employee Benefit Plans
  Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Service costs
    
    $
    6
    
    
    $
    6
    
    
    $
    19
    
    
    $
    18Interest cost on projected benefit obligation
    
    
    18
    
    
    
    18
    
    
    
    54
    
    
    
    54Expected return on plan assets
    
    
    (18
    )
    
    
    (17
    )
    
    
    (54
    )
    
    
    (51
    )Amortization of prior service costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of net loss
    
    
    6
    
    
    
    6
    
    
    
    19
    
    
    
    18Net periodic benefit cost
    
    $
    12
    
    
    $
    13
    
    
    $
    38
    
    
    $
    39
   Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Service costs
    
    $
    1
    
    
    $
    1
    
    
    $
    3
    
    
    $
    3Interest cost on projected benefit obligation
    
    
    2
    
    
    
    2
    
    
    
    6
    
    
    
    6Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service costs
    
    
    (1
    )
    
    
    (1
    )
    
    
    (3
    )
    
    
    (3
    )Amortization of net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    2
    
    
    $
    2
    
    
    $
    6
    
    
    $
    6
 Note F  Stock-Based Compensation
 Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB
Statement No. 123
 16




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##### Table of Contents



Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Net income, as reported
    
    $
    38
    
    
    $
    40
    
    
    $
    152
    
    
    $
    107Add: Stock-based
compensation expense,
net of related tax
effects, included in
the determination of
reported net income
    
    
    4
    
    
    
    3
    
    
    
    14
    
    
    
    16Deduct: Total
stock-based
compensation expense,
net of related tax
effects, determined
under the fair value
based method for all
awards
    
    
    (5
    )
    
    
    (5
    )
    
    
    (17
    )
    
    
    (23
    )Pro forma net income
    
    $
    37
    
    
    $
    38
    
    
    $
    149
    
    
    $
    100Earnings per share:Basic, as reported
    
    $
    0.34
    
    
    $
    0.36
    
    
    $
    1.35
    
    
    $
    0.97Basic, pro forma
    
    $
    0.33
    
    
    $
    0.34
    
    
    $
    1.32
    
    
    $
    0.90Diluted, as reported
    
    $
    0.33
    
    
    $
    0.36
    
    
    $
    1.32
    
    
    $
    0.96Diluted, pro forma
    
    $
    0.32
    
    
    $
    0.34
    
    
    $
    1.30
    
    
    $
    0.89
 Note G  Contingencies
   Note H  Assets Held For Sale
    17




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##### Table of Contents



Note I  Other Operating Income (Expense)
 Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Equity in earnings of joint ventures
    
    $
    10
    
    
    $
    9
    
    
    $
    29
    
    
    $
    19Closure and sale of converting and production facilities
    
    
    (5
    )
    
    
    (4
    )
    
    
    (44
    )
    
    
    (21
    )Hurricane related costs
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )
    
    
    Antitrust litigation
    
    
    (5
    )
    
    
    
    
    
    
    (13
    )
    
    
    Proxy contest
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    Consolidation of administrative functions
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (7
    )Collection of note previously written-off
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Other
    
    
    (1
    )
    
    
    
    
    
    
    (3
    )
    
    
    (1
    )Total
    
    $
    (17
    )
    
    $
    5
    
    
    $
    (51
    )
    
    $
    (9
    )
     Beginning of Period
    
    
    Additions
    
    
    Cash Payments
    
    
    End of Period(In millions)Involuntary employee
terminations
    
    $
    1
    
    
    $
    1
    
    
    $
    (1
    )
    
    $
    1Contract termination penalties
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Environmental compliance
    
    
    6
    
    
    
    
    
    
    
    (2
    )
    
    
    4Demolition
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Total
    
    $
    20
    
    
    $
    1
    
    
    $
    (3
    )
    
    $
    18
 18




---



##### Table of Contents



Note J  Acquisitions and Other Items
  Note K  Change in Method of Accounting and Accounting Pronouncements
 Change in Method of Accounting for Certain Inventories
   Corrugated Packaging
    
    
    Income from ContinuingSegment Operating Income
    
    
    Operations
    
    Per Diluted ShareAs
    
    
    Retrospective
    
    
    As
    
    
    Retrospective
    
    
    As
    
    
    RetrospectiveReported
    
    
    Application
    
    
    Reported
    
    
    Application
    
    
    Reported
    
    
    Application(In millions, except per share)2004First quarter
    
    $
    10
    
    
    $
    8
    
    
    $
    13
    
    
    $
    12
    
    
    $
    0.12
    
    
    $
    0.11Second quarter
    
    
    26
    
    
    
    24
    
    
    
    55
    
    
    
    54
    
    
    
    0.49
    
    
    
    0.48Third quarter
    
    
    42
    
    
    
    40
    
    
    
    40
    
    
    
    39
    
    
    
    0.36
    
    
    
    0.35Fourth quarter
    
    
    27
    
    
    
    24
    
    
    
    54
    
    
    
    52
    
    
    
    0.47
    
    
    
    0.45Year
    
    $
    105
    
    
    $
    96
    
    
    $
    162
    
    
    $
    157
    
    
    $
    1.44
    
    
    $
    1.39
 Pending Accounting Pronouncements
 Share Based Payment
 Accounting for Conditional Asset Retirement Obligations, Accounting for Retirement
Obligations,
 
 19




---



##### 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 and pursued by us and our subsidiaries;
    
    the availability and price of raw materials used by us and our subsidiaries;
    
    fluctuations in the cost of purchased energy;
    
    fluctuations in the cost we incur to transport the raw materials we use and the
products we manufacture;
    
    assumptions related to pension and postretirement costs;
    
    assumptions related to accounting for impaired assets;
    
    the collectibility of loans and accounts receivable and related provision for losses;
    
    competitive actions by other companies;
    
    changes in laws or regulations and actions or restrictions of regulatory agencies;
    
    the accuracy of certain judgments and estimates concerning our integration of acquired operations;
    
    our ability to execute certain strategic and business improvement initiatives; and
    
    other factors, many of which are beyond our and our subsidiaries control.
  Non-GAAP Financial Measure
    20




---



##### Table of Contents



Results of Operations for Third Quarter and First Nine Months 2005 and 2004
 Summary
  Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions, except per share)RevenuesCorrugated packaging
    
    $
    690
    
    
    $
    689
    
    
    $
    2,146
    
    
    $
    2,049Forest products
    
    
    257
    
    
    
    266
    
    
    
    771
    
    
    
    739Financial services
    
    
    271
    
    
    
    239
    
    
    
    759
    
    
    
    778
    (a)Total revenues
    
    $
    1,218
    
    
    $
    1,194
    
    
    $
    3,676
    
    
    $
    3,566Segment Operating IncomeCorrugated packaging
    
    $
    15
    
    
    $
    40
    
    
    $
    123
    
    
    $
    72Forest products
    
    
    64
    
    
    
    68
    
    
    
    176
    
    
    
    165Financial services
    
    
    67
    
    
    
    37
    
    
    
    165
    
    
    
    149Total segment operating income
    
    
    146
    
    
    
    145
    
    
    
    464
    
    
    
    386Expenses not allocated to segmentsGeneral and administrative
    
    
    (32
    )
    
    
    (25
    )
    
    
    (86
    )
    
    
    (67
    )Other operating income (expense)
    
    
    (27
    )
    
    
    (25
    )
    
    
    (80
    )
    
    
    (49
    )Other non-operating income (expense)
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    (2
    )Parent company interest
    
    
    (27
    )
    
    
    (31
    )
    
    
    (82
    )
    
    
    (97
    )Income before income taxes
    
    
    61
    
    
    
    64
    
    
    
    219
    
    
    
    171Income taxes
    
    
    (24
    )
    
    
    (25
    )
    
    
    (69
    )
    
    
    (66
    )Income from continuing operations
    
    
    37
    
    
    
    39
    
    
    
    150
    
    
    
    105Discontinued operations
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    2Net income
    
    $
    38
    
    
    $
    40
    
    
    $
    152
    
    
    $
    107Average diluted shares outstanding
    
    
    114.1
    
    
    
    113.4
    
    
    
    115.0
    
    
    
    112.2Income from continuing operations, per diluted share
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    1.30
    
    
    $
    0.94ROI, annualized
    
    
    
    
    
    
    
    
    
    
    9.5
    %
    
    
    8.7
    %
 
 (a)
    
    Includes the effect of a reclassification of $6 million related to first quarter
2004. The reclassification had no effect on operating income.Significant items affecting income from continuing operations included:·
    
    
    In 2005, we continued to see the benefits in our manufacturing operations of our
initiatives to lower costs and improve asset utilization and increase operating
efficiencies and the benefits in our financial services operations from repositioning
our mortgage origination and servicing activities completed in late 2004. Raw material
costs, however, continued to escalate for our manufacturing operations, offsetting some
of the benefits. Actions taken to lower cost, improve asset utilization, and increase
operating efficiencies resulted in charges and expenses of $44 million, principally
related to the closure or pending closure of four corrugated packaging converting
facilities and the sale of our Pembroke, Canada MDF facility. As a result of the sale
of this facility, we recognized a one-time tax benefit of $16 million. In third
quarter 2005 and continuing into the early part of fourth quarter 2005, Hurricanes
Katrina and Rita forced us to curtail operations at seven of our converting and
production facilities for varying periods, which we estimate adversely affected segment
operating income by about $11 million due to production downtime and start-up expenses.
In addition, in third quarter 2005, we recognized hurricane related losses and unusual
expenses of $16 million principally related to impairment of our Texas and Louisiana
forests, facility damage, and employee and community assistance. 21




---



##### Table of Contents




    
    In 2004, actions taken to lower costs and improve asset utilization and operating
efficiencies resulted in charges and expenses of $49 million, principally related to
the closure of five corrugated packaging converting facilities, the sale of certain
assets used in our specialty packaging operations, the sale of our Clarion MDF facility
and the repositioning of our financial services mortgage origination and servicing
activities.   Corrugated Packaging
   Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(Dollars in millions)Revenues
    
    $
    690
    
    
    $
    689
    
    
    $
    2,146
    
    
    $
    2,049Costs and expenses
    
    
    (675
    )
    
    
    (649
    )
    
    
    (2,023
    )
    
    
    (1,977
    )Segment operating income
    
    
    15
    
    
    
    40
    
    
    
    123
    
    
    
    72Segment ROI
    
    
    
    
    
    
    
    
    
    
    7.8
    %
    
    
    4.7
    %
   Third Quarter 2005
    
    First Nine Monthsversus Third
    
    2005 versus FirstQuarter 2004
    
    Nine Months 2004Increase (Decrease)Corrugated packagingAverage prices
    
    
    (1
    %)
    
    
    5
    %Shipments, average week
    
    
    1
    %
    
    
    2
    %Industry shipments, average week (a)
    
    
    (2
    %)
    
    
    (1
    %)LinerboardAverage prices
    
    
    (25
    %)
    
    
    0
    %Shipments, tons
    
    
    36
    %
    
    
    (12
    %)
 
 (a)
    
    Source: Fibre Box Association  22




---



##### Table of Contents



Third Quarter 2005
    
    First Nine Monthsversus Third
    
    2005 versus FirstQuarter 2004
    
    Nine Months 2004Increase (Decrease)(In millions)Wood fiber
    
    $
    2
    
    
    $
    17Recycled fiber
    
    
    (2
    )
    
    
    2Freight
    
    
    7
    
    
    
    25Energy, principally natural gas
    
    
    8
    
    
    
    13Depreciation
    
    
    1
    
    
    
    1Pension and postretirement
    
    
    (1
    )
    
    
    (3
    )
   Third Quarter
    
    First Nine Months2005
    
    2004
    
    2005
    
    2004(In millions)Number of converting facilities (at quarter-end)
    
    
    68
    
    
    
    69
    
    
    
    68
    
    
    
    69Mill capacity, in thousand tons
    
    
    860
    
    
    
    826
    
    
    
    2,578
    
    
    
    2,467Mill production, in thousand tons
    
    
    830
    
    
    
    853
    
    
    
    2,568
    
    
    
    2,533Percent mill production used internally
    
    
    91
    %
    
    
    93
    %
    
    
    92
    %
    
    
    91
    %Percent of total fiber requirements sourced from recycled fiber
    
    
    37
    %
    
    
    36
    %
    
    
    36
    %
    
    
    36
    %Corrugating medium purchases from our Premier Boxboard Limited
LLC joint venture, in thousand tons
    
    
    15
    
    
    
    23
    
    
    
    52
    
    
    
    78
  23




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##### Table of Contents



Forest Products
   Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(Dollars in millions)Revenues
    
    $
    257
    
    
    $
    266
    
    
    $
    771
    
    
    $
    739Costs and expenses
    
    
    (193
    )
    
    
    (198
    )
    
    
    (595
    )
    
    
    (574
    )Segment operating income
    
    
    64
    
    
    
    68
    
    
    
    176
    
    
    
    165Segment ROI
    
    
    
    
    
    
    
    
    
    
    25.1
    %
    
    
    22.5
    %
   Third Quarter 2005
    
    First Nine Monthsversus Third
    
    2005 versus FirstQuarter 2004
    
    Nine Months 2004Increase (Decrease)Lumber:Average prices
    
    
    3
    %
    
    
    5
    %Shipments
    
    
    (3
    %)
    
    
    0
    %Particleboard:Average prices
    
    
    (11
    %)
    
    
    2
    %Shipments
    
    
    8
    %
    
    
    5
    %Gypsum:Average prices
    
    
    17
    %
    
    
    14
    %Shipments
    
    
    11
    %
    
    
    13
    %MDF:Average prices
    
    
    (7
    %)
    
    
    0
    %Shipments
    
    
    (44
    %)
    
    
    (15
    %)
  24




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##### Table of Contents



First NineThird Quarter
    
    
    Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Our share of gypsum and MDF joint venture operating income
    
    $
    7
    
    
    $
    7
    
    
    $
    21
    
    
    $
    16Hunting, mineral and recreational lease income
    
    
    10
    
    
    
    8
    
    
    
    24
    
    
    
    17Gain on sale of about 2,900 acres of timberland to
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    $
    22
    
    
    $
    15
    
    
    $
    50
    
    
    $
    33
  First NineThird Quarter
    
    Months2005
    
    2004
    
    2005
    
    2004High-value land:Acres sold
    
    
    477
    
    
    
    469
    
    
    
    1,436
    
    
    
    1,811Profit included in segment operating income (in millions)
    
    $
    3
    
    
    $
    3
    
    
    $
    10
    
    
    $
    12
   Third Quarter 2005
    
    First Nine Monthsversus Third
    
    2005 versus FirstQuarter 2004
    
    Nine Months 2004Increase (Decrease)(In millions)Wood fiber
    
    $
    1
    
    
    $
    16Energy, principally natural gas
    
    
    2
    
    
    
    8Freight
    
    
    3
    
    
    
    8Chemical
    
    
    2
    
    
    
    12Depreciation
    
    
    (1
    )
    
    
    (3
    )Pension and postretirement
    
    
    1
    
    
    
    3
  25




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##### Table of Contents



Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004Timber harvest, in million tons:Sawtimber
    
    
    0.5
    
    
    
    0.6
    
    
    
    1.7
    
    
    
    1.7Pulpwood
    
    
    0.8
    
    
    
    0.9
    
    
    
    2.4
    
    
    
    2.5Total
    
    
    1.3
    
    
    
    1.5
    
    
    
    4.1
    
    
    
    4.2Number of converting and manufacturing facilities (at quarter-end)
    
    
    17
    
    
    
    18
    
    
    
    17
    
    
    
    18Average operating rates for all product lines excluding sold or closed
facilities:High
    
    
    107
    %
    
    
    106
    %
    
    
    99
    %
    
    
    98
    %Low
    
    
    87
    %
    
    
    88
    %
    
    
    78
    %
    
    
    84
    %Average
    
    
    96
    %
    
    
    95
    %
    
    
    91
    %
    
    
    93
    %
   Financial Services
   Third Quarter
    
    First Nine Months2005
    
    2004
    
    2005
    
    2004(Dollars in millions)Net interest income
    
    $
    102
    
    
    $
    96
    
    
    $
    291
    
    
    $
    295Segment operating income
    
    
    67
    
    
    
    37
    
    
    
    165
    
    
    
    149Segment ROI
    
    
    
    
    
    
    
    
    
    
    19.6
    %
    
    
    17.7
    %
   26




---



##### Table of Contents



Net Interest Income and Earning Assets and Deposits
   Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004Average Balance
    
    
    Yield/ Rate
    
    
    Average Balance
    
    
    YieldRate
    
    
    Average Balance
    
    
    Yield/ Rate
    
    
    Average Balance
    
    
    Yield/ Rate(Dollars in millions)Earning assets
    
    $
    15,451
    
    
    
    5.42
    %
    
    $
    15,799
    
    
    
    4.46
    %
    
    $
    15,121
    
    
    
    5.08
    %
    
    $
    16,073
    
    
    
    4.37
    %Interest-bearing liabilities
    
    
    14,468
    
    
    
    2.98
    %
    
    
    14,956
    
    
    
    2.14
    %
    
    
    14,169
    
    
    
    2.69
    %
    
    
    15,180
    
    
    
    2.04
    %Interest rate spread
    
    
    
    
    
    
    2.44
    %
    
    
    
    
    
    
    2.32
    %
    
    
    
    
    
    
    2.39
    %
    
    
    
    
    
    
    2.33
    %
   Third Quarter-End2005
    
    
    2004(Dollars in millions)Residential housing assetsLoans held for sale
    
    $
    189
    
    
    $
    535Loans
    
    
    7,311
    
    
    
    7,142Securities
    
    
    5,434
    
    
    
    5,402Total residential housing assets
    
    
    12,934
    
    
    
    13,079Other earning assets
    
    
    3,067
    
    
    
    2,899Total earning assets
    
    $
    16,001
    
    
    $
    15,978Residential housing assets as a percentage of total earning assets
    
    
    81
    %
    
    
    82
    %Transaction accounts
    
    $
    4,514
    
    
    $
    5,165Certificates of deposit
    
    
    4,596
    
    
    
    3,826Total deposits
    
    $
    9,110
    
    
    $
    8,991
   27




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##### Table of Contents



Asset Quality and Allowance for Credit Losses
  Third Quarter-End
    
    
    Year-End2005
    
    
    2004
    
    

2004(Dollars in millions)Non-performing loans
    
    $
    38
    
    
    $
    56
    
    
    $
    50Restructured operating lease assets
    
    
    
    
    
    
    37
    
    
    
    37Foreclosed real estate
    
    
    2
    
    
    
    17
    
    
    
    4Non-performing assets
    
    $
    40
    
    
    $
    110
    
    
    $
    91Non-performing loans as a percentage of total loans
    
    
    0.37
    %
    
    
    0.58
    %
    
    
    0.51
    %Non-performing assets ratio
    
    
    0.40
    %
    
    
    1.12
    %
    
    
    0.93
    %Allowance for loan losses/non-performing loans
    
    
    204
    %
    
    
    170
    %
    
    
    170
    %Allowance for loan losses/total loans
    
    
    0.76
    %
    
    
    0.98
    %
    
    
    0.88
    %
  28




---



##### Table of Contents



Third Quarter
    
    
    First Nine Months2005

    2004
    2005
    2004(Dollars in millions)Loans:Balance at beginning of period
    
    $
    78
    
    
    $
    100
    
    
    $
    85
    
    
    $
    111Provision (credit) for loan losses
    
    
    (1
    )
    
    
    (5
    )
    
    
    7
    
    
    
    (9
    )Net charge-offs
    
    
    
    
    
    
    1
    
    
    
    (15
    )
    
    
    (6
    )Balance at end of period
    
    
    77
    
    
    
    96
    
    
    
    77
    
    
    
    96Unfunded Credit Commitments:Balance at beginning of period
    
    
    6
    
    
    
    
    
    
    
    7
    
    
    
    Provision for commitment-related credit losses
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Net charge-offs
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    Balance at end of period
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    Combined allowances for credit losses at period end
    
    $
    83
    
    
    $
    96
    
    
    $
    83
    
    
    $
    96Provision (credit) for:Loan losses
    
    $
    (1
    )
    
    $
    (5
    )
    
    $
    7
    
    
    $
    (9
    )Commitment-related credit losses
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Combined provision (credit) for credit losses
    
    $
    (1
    )
    
    $
    (5
    )
    
    $
    9
    
    
    
    (9
    )Net charge-offs as a percentage of average loans outstanding
    
    
    (0.02
    %)
    
    
    (0.01
    %)
    
    
    0.24
    %
    
    
    0.09
    %
  Noninterest Income and Noninterest Expense
  Third Quarter 2005
    
    First Nine Monthsversus Third
    
    2005 versus FirstQuarter 2004
    
    Nine Months 2004Increase (Decrease)(In millions)Noninterest income:Loan origination and sale of loans
    
    $
    (29
    )
    
    $
    (98
    )Servicing rights amortization and impairment
    
    
    (21
    )
    
    
    (34
    )
   Third Quarter 2005
    
    First Nine Monthsversus Third
    
    2005 versus FirstQuarter 2004
    
    Nine Months 2004Increase (Decrease)(In millions)Compensation and benefits
    
    $
    (18
    )
    
    $
    (70
    )
 29




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##### Table of Contents



Third Quarter
    
    First Nine Months2005
    
    2004
    
    2005
    
    2004(Dollars in millions)Loans originated and retained
    
    $
    235
    
    
    $
    416
    
    
    $
    743
    
    
    $
    1,365Loans sold to third parties
    
    
    504
    
    
    
    1,162
    
    
    
    1,577
    
    
    
    4,115
  Expenses Not Allocated to Segments
    Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(In millions)Closure and sale of converting and production facilities
    
    $
    (5
    )
    
    $
    (4
    )
    
    $
    (44
    )
    
    $
    (21
    )Repositioning of mortgage origination and servicing
activities
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )Hurricane related costs
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )
    
    
    Antitrust litigation
    
    
    (5
    )
    
    
    
    
    
    
    (13
    )
    
    
    Proxy contest
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    Consolidation of administrative functions and other
    
    
    (1
    )
    
    
    
    
    
    
    (3
    )
    
    
    (7
    )Total
    
    $
    (27
    )
    
    $
    (25
    )
    
    $
    (80
    )
    
    $
    (49
    )
    30




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##### Table of Contents



Income Taxes
  Average Shares Outstanding
  Capital Resources and Liquidity for First Nine Months 2005
  Sources and Uses of Cash
  31




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##### Table of Contents



Parent Company Sources and Uses of Cash
 First Nine Months2005
    
    
    2004(In millions)We received cash fromOperations
    
    $
    289
    
    
    $
    320Dividends from financial services (a)
    
    
    25
    
    
    
    70Working capital changes
    
    
    (20
    )
    
    
    (119
    )From operations
    
    
    294
    
    
    
    271Sale of non-strategic and other assets
    
    
    38
    
    
    
    63Exercise of options and in 2005 the settlement of
equity purchase contracts
    
    
    387
    
    
    
    60Total sources
    
    
    719
    
    
    
    394We used cash toReduce debt and other obligations
    
    
    (13
    )
    
    
    (219
    )Pay dividends to shareholders
    
    
    (78
    )
    
    
    (60
    )Repurchase common stock
    
    
    (472
    )
    
    
    Reinvest in the business throughCapital expenditures
    
    
    (157
    )
    
    
    (117
    )Joint ventures
    
    
    (3
    )
    
    
    (3
    )Total uses
    
    
    (723
    )
    
    
    (399
    )Change in cash and cash equivalents
    
    $
    (4
    )
    
    $
    (5
    )
 
 (a)
    
    Dividends we receive from financial services are eliminated in the consolidated
statements of cash flows.     1 2
   32




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##### Table of Contents



Financial Services Sources and Uses of Cash
 First Nine Months2005
    
    
    2004(In millions)We received cash fromOperations
    
    $
    161
    
    
    $
    151Changes in loans held for sale, and other
    
    
    171
    
    
    
    9From operations
    
    
    332
    
    
    
    160Sale of loans and mortgage servicing rights
    
    
    47
    
    
    
    36Total sources
    
    
    379
    
    
    
    196We used cash toPay dividends to the parent company (a)
    
    
    (25
    )
    
    
    (70
    )Change in deposits and borrowings
    
    
    669
    
    
    
    (186
    )Reinvest in the business throughLoans and securities, net of payments
    
    
    (853
    )
    
    
    (71
    )Capital expenditure, acquisitions and other uses
    
    
    (58
    )
    
    
    173Total uses
    
    
    (267
    )
    
    
    (154
    )Change in cash and cash equivalents
    
    $
    112
    
    
    $
    42
 
 (a)
    
    Dividends we pay to the parent company are eliminated in the consolidated statements
of cash flows.    Liquidity
  Parent Company Liquidity
  33




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##### Table of Contents



AccountsReceivableCredit
    
    
    SecuritizationAgreements
    
    
    Program
    
    
    Total(In millions)Committed
    
    $
    775
    
    
    $
    250
    
    
    $
    1,025Less: borrowings
    
    
    (2
    )
    
    
    (66
    )
    
    
    (68
    )Unused borrowing capacity at third quarter-end
    
    $
    773
    
    
    $
    184
    
    
    $
    957
    Financial Services Liquidity
  Off-Balance Sheet Arrangements
 Parent Company
  Financial Services
  ThirdQuarter-End
    
    
    Year-End2005
    
    
    2004(In millions)Single-family mortgage loans
    
    $
    225
    
    
    $
    290Unused lines of credit
    
    
    1,956
    
    
    
    1,907Unfunded portion of loan commitments
    
    
    3,562
    
    
    
    3,048Commitments to originate commercial loans
    
    
    970
    
    
    
    579Letters of credit
    
    
    415
    
    
    
    370Total
    
    $
    7,128
    
    
    $
    6,194
 34




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##### Table of Contents



Capital Adequacy and Other Regulatory Matters
   Third Quarter-
    
    Year-EndEnd 2005
    
    2004(In millions)Balance sheet data:Total assets
    
    $
    16,665
    
    
    $
    16,065Total deposits
    
    
    9,110
    
    
    
    8,964Shareholders equity
    
    
    1,066
    
    
    
    997
 Actual
    
    Regulatory Minimum
    

For
Categorization as Well CapitalizedRegulatory capital ratios:Tangible capital
    
    
    7.08
    %
    
    
    2.00
    %
    
    
    N/ALeverage capital
    
    
    7.08
    %
    
    
    4.00
    %
    
    
    5.00
    %Risk-based capital
    
    
    10.69
    %
    
    
    8.00
    %
    
    
    10.00
    %
  Accounting Policies
 Critical Accounting Estimates
   Pension and Postretirement Matters
   Energy and the Effects of Inflation
  35




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##### Table of Contents



Litigation and Related Matters
   Calculation of Non-GAAP Financial Measure
 Parent Company
    
    
    Corrugated Packaging
    
    
    Forest Products
    
    
    Financial Services(Dollars in millions)First Nine Months 2005ReturnOperating income or segment operating income determined in
accordance with GAAP
    
    $
    298

(a)
    
    $
    123
    
    
    $
    176
    
    
    $
    165Adjustments for significant unusual items
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAs defined
    
    $
    298
    
    
    $
    123
    
    
    $
    176
    
    
    $
    165InvestmentBeginning of year total assets, segment assets or
investment in financial services determined in accordance
with GAAP
    
    $
    4,900
    
    
    $
    2,431
    
    
    $
    1,006
    
    
    $
    1,121Adjustments:Current liabilities
(excluding current
portion of
long-term debt)
    
    
    (510
    )
    
    
    (326
    )
    
    
    (71
    )
    
    
    N/AAssets held for sale
    
    
    (34
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMunicipal
bonds related to capital
leases included in
other assets
    
    
    (188
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAs defined
    
    $
    4,168
    
    
    $
    2,105
    
    
    $
    935
    
    
    $
    1,121ROI, annualized
    
    
    9.5
    %
    
    
    7.8
    %
    
    
    25.1
    %
    
    
    19.6
    %First Nine Months 2004ReturnOperating income or segment operating income determined in
accordance with GAAP
    
    $
    270
    (a)
    
    $
    72
    
    
    $
    165
    
    
    $
    149Adjustments for significant unusual items
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAs defined
    
    $
    270
    
    
    $
    72
    
    
    $
    165
    
    
    $
    149InvestmentBeginning of year total assets, segment assets or
investment in financial services determined in accordance
with GAAP
    
    $
    4,861
    
    
    $
    2,374
    
    
    $
    1,035
    
    
    $
    1,123Adjustments:Current liabilities
(excluding current
portion of
long-term debt)
    
    
    (503
    )
    
    
    (323
    )
    
    
    (57
    )
    
    
    N/AAssets held for sale
    
    
    (50
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMunicipal
bonds related to capital
leases included in
other assets
    
    
    (188
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAs defined
    
    $
    4,120
    
    
    $
    2,051
    
    
    $
    978
    
    
    $
    1,123ROI, annualized
    
    
    8.7
    %
    
    
    4.7
    %
    
    
    22.5
    %
    
    
    17.7
    %
 
 (a)
    
    Net of expenses not allocated to segments of $166 million in 2005 and
$116 million in 2004.  36




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##### Table of Contents



STATISTICAL AND OTHER DATA
 Parent Company
  Third Quarter
    
    
    First Nine Months2005
    
    
    2004
    
    
    2005
    
    
    2004(Dollars in millions)RevenuesCorrugated PackagingCorrugated packaging
    
    $
    666
    
    
    $
    667
    
    
    $
    2,072
    
    
    $
    1,965Linerboard
    
    
    24
    
    
    
    22
    
    
    
    74
    
    
    
    84Total
    
    $
    690
    
    
    $
    689
    
    
    $
    2,146
    
    
    $
    2,049Forest ProductsPine lumber(a)
    
    $
    78
    
    
    $
    79
    
    
    $
    238
    
    
    $
    227Particleboard
    
    
    46
    
    
    
    47
    
    
    
    150
    
    
    
    139Medium density fiberboard
    
    
    15
    
    
    
    28
    
    
    
    72
    
    
    
    84Gypsum wallboard
    
    
    39
    
    
    
    30
    
    
    
    104
    
    
    
    81Fiberboard
    
    
    22
    
    
    
    24
    
    
    
    62
    
    
    
    62Other(a)
    
    
    57
    
    
    
    58
    
    
    
    145
    
    
    
    146Total
    
    $
    257
    
    
    $
    266
    
    
    $
    771
    
    
    $
    739Unit salesCorrugated PackagingCorrugated packaging, thousands of tons
    
    
    852
    
    
    
    841
    
    
    
    2,595
    
    
    
    2,556Linerboard, thousands of tons
    
    
    79
    
    
    
    58
    
    
    
    211
    
    
    
    240Total, thousands of tons
    
    
    931
    
    
    
    899
    
    
    
    2,806
    
    
    
    2,796Forest ProductsPine lumber, million board feet(a)
    
    
    199
    
    
    
    205
    
    
    
    611
    
    
    
    613Particleboard, million square feet
    
    
    153
    
    
    
    141
    
    
    
    488
    
    
    
    463Medium density fiberboard, million square feet
    
    
    32
    
    
    
    57
    
    
    
    155
    
    
    
    182Gypsum wallboard, million square feet
    
    
    225
    
    
    
    203
    
    
    
    643
    
    
    
    570Fiberboard, million square feet
    
    
    113
    
    
    
    121
    
    
    
    330
    
    
    
    331
 
 (a)
    We have reclassified some prior year revenue and unit sales to conform to this
periods classification. 37




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##### Table of Contents



Financial Services
  Third Quarter-End
    
    
    Year-End2005
    
    
    2004
    
    
    2004(In millions)Single-family mortgage
    
    $
    3,275
    
    
    $
    3,627
    
    
    $
    3,560Single-family mortgage warehouse
    
    
    857
    
    
    
    544
    
    
    
    580Single-family construction
    
    
    1,719
    
    
    
    1,280
    
    
    
    1,303Multifamily and senior housing
    
    
    1,460
    
    
    
    1,691
    
    
    
    1,454Total residential housing
    
    
    7,311
    
    
    
    7,142
    
    
    
    6,897Commercial real estate
    
    
    680
    
    
    
    623
    
    
    
    709Commercial and business
    
    
    822
    
    
    
    694
    
    
    
    746Energy lending
    
    
    699
    
    
    
    690
    
    
    
    717Asset-based lending and leasing
    
    
    396
    
    
    
    441
    
    
    
    428Consumer and other
    
    
    182
    
    
    
    196
    
    
    
    206Total loans
    
    
    10,090
    
    
    
    9,786
    
    
    
    9,703Less allowance for loan losses
    
    
    (77
    )
    
    
    (96
    )
    
    
    (85
    )Loans receivable, net
    
    $
    10,013
    
    
    $
    9,690
    
    
    $
    9,618
 
 Item 3. Quantitative And Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Increase (Decrease) in Income Before Income TaxesThird Quarter-End 2005
    
    Year-End 2004Parent
    
    Financial
    
    Parent
    
    FinancialCompany
    
    Services
    
    Company
    
    Services(In millions)Change in
Interest Rates+2%
    
    $
    
    
    
    $
    (17
    )
    
    $
    1
    
    
    $
    (21
    )+1%
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (1
    )-1%
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    (34
    )-2%
    
    
    
    
    
    
    (74
    )
    
    
    N/A
    
    
    
    N/A
    38




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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 .
  Antitrust Litigation
   Tax-Exempt Bonds
  39




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##### Table of Contents



Bogalusa
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 (1)
 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
(7/1/2005  7/31/2005)
    
    None
    
    $
    N/A
    
    
    None
    
    
    6,000,000Month 2
(8/1/2005  8/30/2005)
    
    
    300,000
    
    
    $
    38.34
    
    
    
    300,000
    
    
    
    5,700,000Month 3
(9/1/2005 9/30/2005)
    
    
    700,000
    
    
    $
    39.19
    
    
    
    700,000
    
    
    
    5,000,000Total
    
    
    1,000,000
    
    
    $
    38.94
    
    
    
    1,000,000
 
 (1)
    
    On August 5, 2005, we announced that our Board of Directors authorized the
repurchase of up to 6,000,000 shares of our common stock. The plan has no expiration date. We
have no other repurchase plans or programs. 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.
  40




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##### Table of Contents



Item 5. Other Information.
  
 Item 6. Exhibits.
 Exhibits
     41




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##### Table of Contents



SIGNATURES
  TEMPLE-INLAND INC.
(Registrant)Dated:  November 7, 2005
    By      /s/ Louis R. BrillLouis R. BrillVice President and Chief Accounting Officer 42




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##### Table of Contents



Exhibit No.
    
    Description
    
    Page No.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
    
    
    4431.2
    
    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
    
    
    4632.1
    
    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
    
    
    4832.2
    
    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
    
    
    49
 43