##### 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 1934for the Quarterly Period Ended April 4, 2009
  o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for 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, 3 rd Floor, Austin, Texas 78746
 (512) 434-5800
 Not Applicable
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Number of common shares outstanding
as of April 4, 2009Common Stock (par value $1.00 per share)
    
    106,503,626




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##### 



PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to the Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 TEMPLE-INLAND INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)FirstQuarter-
    
    
    Year-EndEnd 2009
    
    
    2008(In millions)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    24
    
    
    $
    41Trade receivables, net of allowance for doubtful accounts of $14 in 2009 and $14 in 2008
    
    
    434
    
    
    
    407Inventories:Work in process and finished goods
    
    
    104
    
    
    
    104Raw materials
    
    
    196
    
    
    
    217Supplies and other
    
    
    139
    
    
    
    137Total inventories
    
    
    439
    
    
    
    458Deferred tax asset
    
    
    69
    
    
    
    66Income taxes receivable
    
    
    58
    
    
    
    57Prepaid expenses and other
    
    
    39
    
    
    
    44Total current assets
    
    
    1,063
    
    
    
    1,073Property and EquipmentLand and buildings
    
    
    671
    
    
    
    671Machinery and equipment
    
    
    3,572
    
    
    
    3,577Construction in progress
    
    
    36
    
    
    
    36Less allowances for depreciation
    
    
    (2,651
    )
    
    
    (2,620
    )Total property and equipment
    
    
    1,628
    
    
    
    1,664Financial Assets of Special Purpose Entities
    
    
    2,475
    
    
    
    2,474Goodwill
    
    
    394
    
    
    
    394Other Assets
    
    
    275
    
    
    
    264TOTAL ASSETS
    
    $
    5,835
    
    
    $
    5,869LIABILITIESCurrent LiabilitiesAccounts payable
    
    $
    155
    
    
    $
    162Accrued employee compensation and benefits
    
    
    62
    
    
    
    84Accrued interest
    
    
    21
    
    
    
    30Accrued property taxes
    
    
    9
    
    
    
    12Other accrued expenses
    
    
    133
    
    
    
    140Current portion of long-term debt
    
    
    1
    
    
    
    1Current portion of pension and postretirement benefits
    
    
    16
    
    
    
    17Total current liabilities
    
    
    397
    
    
    
    446Long-Term Debt
    
    
    1,142
    
    
    
    1,191Nonrecourse Financial Liabilities of Special Purpose Entities
    
    
    2,140
    
    
    
    2,140Deferred Tax Liability
    
    
    778
    
    
    
    750Liability for Pension Benefits
    
    
    174
    
    
    
    172Liability for Postretirement Benefits
    
    
    101
    
    
    
    101Other Long-Term Liabilities
    
    
    294
    
    
    
    292TOTAL LIABILITIES
    
    
    5,026
    
    
    
    5,092SHAREHOLDERS EQUITYTemple-Inland Inc. Shareholders 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 in 2009 and 2008, including shares held in the treasury
    
    
    124
    
    
    
    124Additional paid-in capital
    
    
    462
    
    
    
    461Accumulated other comprehensive loss
    
    
    (184
    )
    
    
    (189
    )Retained earnings
    
    
    961
    
    
    
    936Cost of shares held in the treasury: 17,101,718 shares in 2009 and 17,098,808 shares in 2008
    
    
    (646
    )
    
    
    (646
    )Total Temple-Inland Inc. shareholders equity
    
    
    717
    
    
    
    686Noncontrolling Interest of Special Purpose Entities
    
    
    92
    
    
    
    91TOTAL SHAREHOLDERS EQUITY
    
    
    809
    
    
    
    777TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    5,835
    
    
    $
    5,869
  3




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TEMPLE-INLAND INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 First Quarter2009
    
    
    2008(Dollars in millions, except per share)NET REVENUES
    
    $
    941
    
    
    $
    944COSTS AND EXPENSESCost of sales
    
    
    (797
    )
    
    
    (876
    )Selling
    
    
    (29
    )
    
    
    (29
    )General and administrative
    
    
    (39
    )
    
    
    (33
    )Other operating income (expense)
    
    
    (3
    )
    
    
    (12
    )(868
    )
    
    
    (950
    )OPERATING INCOME (LOSS)
    
    
    73
    
    
    
    (6
    )Other non-operating income
    
    
    10
    
    
    
    1Interest income on financial assets of special purpose entities
    
    
    12
    
    
    
    24Interest expense on nonrecourse financial liabilities of special purpose entities
    
    
    (10
    )
    
    
    (27
    )Interest expense on debt
    
    
    (19
    )
    
    
    (17
    )INCOME (LOSS) BEFORE TAXES
    
    
    66
    
    
    
    (25
    )Income tax (expense) benefit
    
    
    (30
    )
    
    
    12NET INCOME (LOSS)
    
    
    36
    
    
    
    (13
    )Net income attributable to noncontrolling interest of special purpose entities
    
    
    (1
    )
    
    
    NET INCOME (LOSS) ATTRIBUTABLE TO TEMPLE-INLAND INC.
    
    $
    35
    
    
    $
    (13
    )WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBasic
    
    
    106.7
    
    
    
    106.7Diluted
    
    
    106.7
    
    
    
    107.6EARNINGS PER SHAREBasic
    
    $
    0.33
    
    
    $
    (0.12
    )Diluted
    
    $
    0.33
    
    
    $
    (0.12
    )DIVIDENDS PER SHARE OF COMMON STOCK
    
    $
    0.10
    
    
    $
    0.10
  4




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TEMPLE-INLAND INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 First Quarter2009
    
    
    2008(In millions)CASH PROVIDED BY (USED FOR) OPERATIONSNet income (loss)
    
    $
    35
    
    
    $
    (13
    )Adjustments:Depreciation and amortization
    
    
    51
    
    
    
    50Gains related to purchase and retirement of long-term debt
    
    
    (10
    )
    
    
    Non-cash share-based and long-term incentive compensation
    
    
    9
    
    
    
    4Non-cash pension and postretirement plans
    
    
    12
    
    
    
    27Cash contribution to pension and postretirement plans
    
    
    (7
    )
    
    
    (39
    )Deferred income taxes
    
    
    24
    
    
    
    (11
    )Other
    
    
    
    
    
    
    1Changes in:Receivables
    
    
    (28
    )
    
    
    (24
    )Inventories
    
    
    18
    
    
    
    2Accounts payable and accrued expenses
    
    
    (31
    )
    
    
    (327
    )Prepaid expenses and other
    
    
    7
    
    
    
    (9
    )80
    
    
    
    (339
    )CASH PROVIDED BY (USED FOR) INVESTINGCapital expenditures
    
    
    (19
    )
    
    
    (34
    )Sale of non-strategic assets and operations
    
    
    
    
    
    
    3Other
    
    
    (1
    )
    
    
    (4
    )(20
    )
    
    
    (35
    )CASH PROVIDED BY (USED FOR) FINANCINGPayments of debt
    
    
    (57
    )
    
    
    (9
    )Borrowings under accounts receivable securitization facility, net
    
    
    48
    
    
    
    207Borrowings under revolving credit facility, net
    
    
    (31
    )
    
    
    6Fees related to special purpose entities
    
    
    (15
    )
    
    
    Changes in book overdrafts
    
    
    (11
    )
    
    
    (11
    )Cash dividends paid to shareholders
    
    
    (10
    )
    
    
    (11
    )Tax benefit on share-based compensation
    
    
    
    
    
    
    1(76
    )
    
    
    183Effect of exchange rate changes on cash and cash equivalents
    
    
    (1
    )
    
    
    2Net decrease in cash and cash equivalents
    
    
    (17
    )
    
    
    (189
    )Cash and cash equivalents at beginning of period
    
    
    41
    
    
    
    227Cash and cash equivalents at end of period
    
    $
    24
    
    
    $
    38
  5




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TEMPLE-INLAND INC. AND SUBSIDIARIES
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 Note 1  Basis of Presentation
   Note 2  Accounting Pronouncements
 New Accounting Pronouncements Adopted January 2009
  
    
    Statement of Financial Accounting Standard (SFAS) No. 141(R), Business Combinations
This standard requires most identifiable assets, liabilities, noncontrolling
interests, and goodwill acquired in a business combination to be recorded at full fair
value. The new standard also changes the approach to determining the purchase price;
the accounting for acquisition cost; and several acquisition related accounting
practices. We had no business combinations in our first quarter 2009.
    
    SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements This
standard specifies that noncontrolling interests be reported as part of equity, not as
a liability or other item outside of equity. Upon adoption we reclassified $91 million
of noncontrolling interest of special purpose entities to shareholders equity.
    
    SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities This
standard requires enhanced disclosures about how and why an entity uses derivative
instruments; how derivative instruments and related hedged items are accounted for; how
derivative instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. Adoption did not have a significant effect on
our earnings or financial position because we do not currently have any derivative
instruments or hedging activities.
    
    FASB Staff Position (FSP) EITF 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities  This staff position
specifies that unvested share-based payment awards that contain nonforfeitable rights
to dividends or dividend equivalents are participating securities and should be
included in the computation of earnings per share pursuant to the two-class method.
Adoption did not have an impact on our earnings per share.
    
    FSP 157-2, Effective Date of FASB Statement No. 157 This FSP delayed the effective
date of SFAS No. 157, Fair Value Measurements,for certain nonfinancial assets and
nonfinancial liabilities. Adoption did not have a significant effect on our earnings
or financial position.
 Pending Accounting Pronouncements
 Employers Disclosures about Postretirement Benefit Plan Assets.
 6




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TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  (Continued)
  Note 3  Employee Benefit Plans
  Defined Benefits
    
    
    PostretirementQualified
    
    
    Supplemental
    
    
    Total
    
    
    Benefits2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Service costs  benefits earned
during the period
    
    $
    6
    
    
    $
    7
    
    
    $
    
    
    
    $
    
    
    
    $
    6
    
    
    $
    7
    
    
    $
    
    
    
    $
    Interest cost on projected benefit
obligation
    
    
    20
    
    
    
    20
    
    
    
    
    
    
    
    1
    
    
    
    20
    
    
    
    21
    
    
    
    2
    
    
    
    2Expected return on plan assets
    
    
    (20
    )
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    (21
    )
    
    
    
    
    
    
    Amortization of prior service costs
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Amortization of actuarial net loss
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    Defined benefit expense
    
    $
    9
    
    
    $
    8
    
    
    $
    1
    
    
    $
    2
    
    
    $
    10
    
    
    $
    10
    
    
    $
    2
    
    
    $
    2
  Note 4  Share-Based and Long-Term Incentive Compensation
   First Quarter2009
    
    
    2008(In millions)Restricted or performance units
    
    $
    4
    
    
    $
    Restricted stock
    
    
    
    
    
    
    1Stock options
    
    
    3
    
    
    
    3Total share-based compensation expense
    
    
    7
    
    
    
    4Long-term incentive compensation expense
    
    
    2
    
    
    
    Total share-based and long-term incentive compensation expense
    
    $
    9
    
    
    $
    4
    7




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TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  (Continued)
  First Quarter2009
    
    
    2008(In millions)Cost of sales
    
    $
    2
    
    
    $
    6Selling expense
    
    
    
    
    
    
    General and administrative
    
    
    7
    
    
    
    (2
    )Total share-based and long-term incentive compensation expense
    
    $
    9
    
    
    $
    4
 Restricted or performance units
   WeightedAverage Grant
    
    
    AggregateDate Fair Value
    
    
    CurrentShares
    
    
    Per Share
    
    
    Value(In thousands)
    
    
    
    
    
    
    (In millions)Not vested beginning of the year
    
    
    1,871
    
    
    $
    32Granted
    
    
    1,395
    
    
    
    6Vested and settled
    
    
    (406
    )
    
    
    36Forfeited
    
    
    (8
    )
    
    
    25Not vested end of first quarter 2009
    
    
    2,852
    
    
    
    18
    
    
    $
    17
 Restricted stock
  Stock options
  Weighted
    
    
    AggregateWeighted
    
    
    Average
    
    
    Intrinsic ValueAverage
    
    
    Remaining
    
    
    (Current valueExercise Price
    
    
    Contractual
    
    
    less exerciseShares
    
    
    Per Share
    
    
    Term
    
    
    price)(In thousands)
    
    
    
    
    
    
    (In years)
    
    
    (In millions)Outstanding beginning of the year
    
    
    6,903
    
    
    $
    17Granted
    
    
    1,600
    
    
    
    6Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (74
    )
    
    
    14Outstanding end of first quarter 2009
    
    
    8,429
    
    
    
    14
    
    
    
    7
    
    
    $
    Exercisable end of first quarter 2009
    
    
    4,740
    
    
    
    15
    
    
    
    5
    
    
    $
    
 8




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TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  (Continued)
  First Quarter2009
    
    2008Expected dividend yield
    
    
    3.2
    %
    
    
    2.1
    %Expected stock price volatility
    
    
    57.5
    %
    
    
    28.2
    %Risk-free interest rate
    
    
    2.6
    %
    
    
    3.3
    %Expected life of options (in years)
    
    
    8
    
    
    
    8Weighted average estimated fair value of options at grant date
    
    $
    2.49
    
    
    $
    2.02
  Note 5  Other Operating and Non-operating Income (Expense)
 First Quarter2009
    
    
    2008(In millions)Equity in earnings of joint ventures
    
    $
    1
    
    
    $
    3Facility closures and headcount reductions
    
    
    (3
    )
    
    
    Litigation and other
    
    
    (1
    )
    
    
    5Transformation costs
    
    
    
    
    
    
    (20
    )Other operating income (expense)
    
    $
    (3
    )
    
    $
    (12
    )
  Note 6  Comprehensive Income (Loss)
  First Quarter2009
    
    
    2008(In millions)Net income (loss)
    
    $
    36
    
    
    $
    (13
    )Other comprehensive income (loss), net of taxes:Foreign currency translation adjustment
    
    
    2
    
    
    
    1Defined benefit plans
    
    
    3
    
    
    
    11Other comprehensive income (loss)
    
    
    5
    
    
    
    12Comprehensive income (loss)
    
    $
    41
    
    
    $
    (1
    )
 Note 7  Contingencies and Other
  9




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TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  (Continued)
 Note 8  Earnings Per Share
  First Quarter2009
    
    2008(In millions)Weighted average common shares outstanding  basic
    
    
    106.7
    
    
    
    106.7Dilutive effect of stock options held by our employees
    
    
    
    
    
    
    0.8Dilutive effect of stock options held by Forestar and Guaranty employees
    
    
    
    
    
    
    0.1Weighted average shares outstanding  diluted
    
    
    106.7
    
    
    
    107.6
  Note 9  Financial Assets and Nonrecourse Financial Liabilities of Special Purpose Entities
   Note 10  Segment Information
   10




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TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  (Continued)
 Items NotIncluded inCorrugated
    
    Building
    
    Segments andPackaging
    
    Products
    
    Eliminations
    
    TotalFor First Quarter 2009 or at First 
Quarter-End 2009:(In millions)Revenues from external customers
    
    $
    790
    
    
    $
    151
    
    
    $
    
    
    
    $
    941Depreciation and amortization
    
    
    36
    
    
    
    12
    
    
    
    3
    
    
    
    51Equity income from joint ventures
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Income (loss) before taxes
    
    
    105
    
    
    
    (2
    )
    
    
    (37
    )(a)
    
    
    66Total assets
    
    
    2,345
    
    
    
    581
    
    
    
    2,909
    
    
    
    5,835Investment in equity method
investees
and joint ventures
    
    
    3
    
    
    
    26
    
    
    
    
    
    
    
    29Goodwill
    
    
    265
    
    
    
    129
    
    
    
    
    
    
    
    394Capital expenditures
    
    
    16
    
    
    
    3
    
    
    
    
    
    
    
    19For First Quarter 2008 or at First 
Quarter-End 2008:(In millions)Revenues from external customers
    
    $
    776
    
    
    $
    168
    
    
    $
    
    
    
    $
    944Depreciation and amortization
    
    
    35
    
    
    
    12
    
    
    
    3
    
    
    
    50Equity income from joint ventures
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    3Income (loss) before taxes
    
    
    55
    
    
    
    (21
    )
    
    
    (59
    )(a)
    
    
    (25
    )Total assets
    
    
    2,312
    
    
    
    620
    
    
    
    2,808
    
    
    
    5,740Investment in equity method
investees
and joint ventures
    
    
    11
    
    
    
    23
    
    
    
    
    
    
    
    34Goodwill
    
    
    236
    
    
    
    129
    
    
    
    
    
    
    
    365Capital expenditures
    
    
    27
    
    
    
    6
    
    
    
    1
    
    
    
    34
 
 (a)
    
    Items not included in segments consist of: First Quarter2009
    
    
    2008(In millions)General and administrative expense
    
    $
    (17
    )
    
    $
    (21
    )Share-based and long-term incentive compensation
    
    
    (9
    )
    
    
    (4
    )Other operating income (expense)
    
    
    (4
    )
    
    
    (15
    )Other non-operating income
    
    
    10
    
    
    
    1Net interest income (expense) on financial
assets and nonrecourse financial liabilities of
special purpose entities
    
    
    2
    
    
    
    (3
    )Interest expense
    
    
    (19
    )
    
    
    (17
    )$
    (37
    )
    
    $
    (59
    )Other operating income (expense) applies to:Corrugated packaging
    
    $
    (2
    )
    
    $
    6Building products
    
    
    
    
    
    
    (1
    )Unallocated
    
    
    (2
    )
    
    
    (20
    )$
    (4
    )
    
    $
    (15
    )
 Note 11  Subsequent Event
  11




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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;
    
    changes in interest rates;
    
    current conditions in financial markets could adversely affect our ability to
finance our operations;
    
    demand for new housing;
    
    accuracy of accounting assumptions related to impaired assets, pension and
postretirement costs, contingency reserves, and income taxes;
    
    competitive actions by other companies;
    
    changes in laws or regulations;
    
    our ability to execute certain strategic and business improvement initiatives;
    
    the accuracy of certain judgments and estimates concerning the integration of
acquired operations; and
    
    other factors, many of which are beyond our control.
  Non-GAAP Financial Measure
    12




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##### Table of Contents



Accounting Policies
 Critical Accounting Estimates
 Form 10-K
 New Accounting Pronouncements
 Note 2 to the Consolidated
Financial Statements
 Results of Operations for First Quarter 2009 and 2008
 Summary
  First Quarter2009
    
    
    2008(Dollars in millions, except per share)RevenuesCorrugated packaging
    
    $
    790
    
    
    $
    776Building products
    
    
    151
    
    
    
    168Total revenues
    
    $
    941
    
    
    $
    944Segment operating incomeCorrugated packaging
    
    $
    105
    
    
    $
    55Building products
    
    
    (2
    )
    
    
    (21
    )Total segment operating income
    
    
    103
    
    
    
    34Items not included in segmentsGeneral and administrative expense
    
    
    (17
    )
    
    
    (21
    )Share-based and long-term incentive compensation
    
    
    (9
    )
    
    
    (4
    )Other operating income (expense)
    
    
    (4
    )
    
    
    (15
    )Other non-operating income
    
    
    10
    
    
    
    1Net interest income (expense) on financial assets and
nonrecourse financial liabilities of special purpose
entities
    
    
    2
    
    
    
    (3
    )Interest expense on debt
    
    
    (19
    )
    
    
    (17
    )Income (loss) before taxes
    
    
    66
    
    
    
    (25
    )Income tax (expense) benefit
    
    
    (30
    )
    
    
    12Net income (loss)
    
    
    36
    
    
    
    (13
    )Net income attributable to noncontrolling interest of special purpose entities
    
    
    (1
    )
    
    
    Net income (loss) attributable to Temple-Inland Inc.
    
    $
    35
    
    
    $
    (13
    )Average basic shares outstanding
    
    
    106.7
    
    
    
    106.7Average diluted shares outstanding
    
    
    106.7
    
    
    
    107.6Earnings per basic share
    
    $
    0.33
    
    
    $
    (0.12
    )Earnings per diluted share
    
    $
    0.33
    
    
    $
    (0.12
    )ROI, annualized
    
    
    11.2
    %
    
    
    1.4
    %
 13




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##### Table of Contents




    
    We experienced higher prices and lower volumes, on a per week basis, for our
corrugated packaging products compared with first quarter 2008. We also experienced
higher prices for gypsum wallboard and medium density fiberboard but lower prices for
lumber and lower volumes for particleboard, medium density fiberboard and lumber.
Current economic conditions continue to have a negative impact on our shipments.
    
    Our manufacturing operations benefited from a decline in most key input costs and
from our continuing initiatives to lower costs, improve asset utilization, and increase
operating efficiencies.
    
    Share-based and long-term incentive compensation increased $5 million compared with
first quarter 2008, of which $4 million is due to the effect of our higher share price
on our cash settled awards compared with our share price at year-end 2008.
    
    We incurred $4 million of costs, of which $3 million is primarily associated with
2008 facility closures and severance related to headcount reductions.
    
    We recognized a gain of $10 million in connection with the purchase and retirement
of $53 million of our long-term debt.
  
    
    We experienced higher prices and higher volumes for our corrugated packaging
products, while we continued to experience lower prices and volumes for most of our
building products compared with first quarter 2007.
    
    While we continued to see the benefits in our manufacturing operations from our
initiative to lower costs, improve asset utilization, and increase operating
efficiencies, the increased cost of energy, freight, and fiber more than offset these
benefits.
    
    Share-based compensation decreased compared with first quarter 2007 due to the
effect of our lower share price on our cash settled awards and no share-based
compensation expense being recognized on the stock options awarded in first quarter
2008, as they were subject to shareholder approval, which was not obtained until second
quarter 2008.
    
    We incurred $20 million of costs associated with our transformation plan, of which
$15 million was related to a one-time settlement of supplemental retirement benefits.
We also decreased litigation reserves by $5 million due to the settlement of the
remaining claim related to our antitrust litigation.
    
    Interest expense decreased compared with first quarter 2007 primarily due to the
December 2007 early pay-off of $286 million of 6.75% Notes and $213 million of 7.875%
Senior Notes.
  Corrugated Packaging
  14




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##### Table of Contents



First Quarter2009
    
    
    2008(Dollars in millions)Revenues
    
    $
    790
    
    
    $
    776Costs and expenses
    
    
    (685
    )
    
    
    (721
    )Segment operating income
    
    $
    105
    
    
    $
    55Segment ROI
    
    
    19.9
    %
    
    
    11.1
    %
   First Quarter 2009versusFirst Quarter 2008Increase/(Decrease)Corrugated packagingAverage prices
    
    
    3
    %Shipments, average week
    
    
    (4)
    %Industry shipments, average week (a)
    
    
    (10)
    %PaperboardAverage prices
    
    
    (10)
    %Shipments, in thousand tons
    
    
    7
 
 (a)
    
    Source: Fibre Box Association    15




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##### Table of Contents



First Quarter 2009versusFirst Quarter 2008Increase/(Decrease)(In millions)Wood fiber
    
    $
    (9
    )Recycled fiber
    
    
    (20
    )Energy, principally natural gas
    
    
    (1
    )Freight
    
    
    (3
    )Chemicals
    
    
    3Depreciation
    
    
    1
   First Quarter2009
    
    2008Number of converting facilities (at quarter-end)
    
    
    63
    
    
    
    64Corrugated packaging shipments, in thousand tons
    
    
    829
    
    
    
    827Paperboard production, in thousand tons
    
    
    955
    
    
    
    914Percent containerboard production used internally
    
    
    93
    %
    
    
    91
    %Percent of total fiber requirements sourced from recycled fiber
    
    
    44
    %
    
    
    36
    %
  Building Products
   First Quarter2009
    
    
    2008(Dollars in millions)Revenues
    
    $
    151
    
    
    $
    168Costs and expenses
    
    
    (153
    )
    
    
    (189
    )Segment operating income (loss)
    
    $
    (2
    )
    
    $
    (21
    )Segment ROI
    
    
    (1.5)
    %
    
    
    (15.0)
    %
 16




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##### Table of Contents



First Quarter 2009versusFirst Quarter 2008Increase/(Decrease)Lumber:Average prices
    
    
    (8
    )%Shipments
    
    
    (6
    )%Gypsum wallboard:Average prices
    
    
    13
    %Shipments
    
    
    1
    %Particleboard:Average prices
    
    
    
    %Shipments
    
    
    (11
    )%MDF:Average prices
    
    
    6
    %Shipments
    
    
    (11
    )%
    First Quarter 2009versusFirst Quarter 2008Increase/(Decrease)(In millions)Wood fiber
    
    $
    (6
    )Energy, principally natural gas
    
    
    (4
    )Freight
    
    
    (3
    )Chemicals
    
    
    (5
    )
    First Quarter2009
    
    
    2008Number of converting and manufacturing facilities (at quarter-end)
    
    
    16
    
    
    
    16Operating rates for:Lumber
    
    
    71
    %
    
    
    80
    %Gypsum wallboard
    
    
    55
    %
    
    
    51
    %Particleboard
    
    
    62
    %
    
    
    66
    %MDF
    
    
    97
    %
    
    
    86
    %
 17




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##### Table of Contents



Items Not Included In Segments
  Note
4 to the Consolidated Financial Statements
      Goodwill
    18




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##### Table of Contents



Income Taxes
  Average Shares Outstanding
  Capital Resources and Liquidity for First Quarter 2009
 Sources and Uses of Cash
  First Quarter2009
    
    
    2008(In millions)Cash received from:Operations (including payments related to our 2007
transformation plan of $39 million in first
quarter 2008)
    
    $
    114
    
    
    $
    19Working capital (including payments related to our
2007 transformation plan of $276 million in first
quarter 2008)
    
    
    (34
    )
    
    
    (358
    )Cash received from (used for) operations
    
    
    80
    
    
    
    (339
    )Sale of non-strategic assets and other
    
    
    
    
    
    
    4Borrowing, net
    
    
    
    
    
    
    193Total sources
    
    
    80
    
    
    
    (142
    )Cash used to:Reduce borrowings, net
    
    
    (51
    )
    
    
    Pay fees related to special purpose entities
    
    
    (15
    )
    
    
    Return to shareholders through dividends
    
    
    (10
    )
    
    
    (11
    )Reinvest in the business through:Capital expenditures
    
    
    (19
    )
    
    
    (34
    )Joint ventures and other
    
    
    (1
    )
    
    
    (4
    )Total uses
    
    
    (96
    )
    
    
    (49
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1
    )
    
    
    2Change in cash and cash equivalents
    
    $
    (17
    )
    
    $
    (189
    )
   19




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##### Table of Contents



Liquidity
 Credit Agreements
  AccountsCommitted
    
    
    ReceivableCredit
    
    
    SecuritizationAgreements
    
    
    Facility
    
    
    Total(In millions)Committed
    
    $
    835
    
    
    $
    250
    
    
    $
    1,085Less: Borrowings and commitments
    
    
    (150
    )
    
    
    (238
    )
    
    
    (388
    )Temporary
adjustment to borrowing
base
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )Unused borrowing capacity at first
quarter-end 2009
    
    $
    685
    
    
    $
    
    
    
    $
    685
     Financial Assets and Nonrecourse Financial Liabilities of Special Purpose Entities
    20




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Pension and Postretirement Matters
  Energy
   Litigation and Related Matters
   21




---



##### Table of Contents



Calculation of Non-GAAP Financial Measure
 Corrugated
    
    
    BuildingConsolidated
    
    
    Packaging
    
    
    ProductsFirst Quarter 2009Return:Segment operating income determined in
accordance with GAAP
    
    $
    103
    
    
    
    105
    
    
    
    (2
    )Items not included in segments:General and administrative expense
    
    
    (17
    )
    
    
    N/A
    
    
    
    N/AShare-based and long-term incentive
compensation
    
    
    (9
    )
    
    
    N/A
    
    
    
    N/A$
    77
    
    
    
    105
    
    
    
    (2
    )Investment:Beginning of year total assets or segment
assets determined in accordance with GAAP
    
    $
    5,869
    
    
    
    2,366
    
    
    
    580Adjustments:Current liabilities
(excluding current
portion of
long-term debt)
    
    
    (445
    )
    
    
    (257
    )
    
    
    (45
    )Financial assets of
special purpose
entities
    
    
    (2,474
    )
    
    
    N/A
    
    
    
    N/AMunicipal bonds
related to capital
leases included in
other assets
    
    
    (188
    )
    
    
    N/A
    
    
    
    N/A$
    2,762
    
    
    $
    2,109
    
    
    $
    535ROI, annualized
    
    
    11.2
    %
    
    
    19.9
    %
    
    
    (1.5
    )%First Quarter 2008Return:Segment operating income determined in
accordance with GAAP
    
    $
    34
    
    
    $
    55
    
    
    $
    (21
    )Items not included in segments:General and administrative expense
    
    
    (21
    )
    
    
    N/A
    
    
    
    N/AShare-based compensation
    
    
    (4
    )
    
    
    N/A
    
    
    
    N/A$
    9
    
    
    $
    55
    
    
    $
    (21
    )Investment:Beginning of year total assets or segment
assets determined in accordance with GAAP
    
    $
    5,942
    
    
    $
    2,301
    
    
    $
    623Adjustments:Current liabilities
(excluding current
portion of
long-term debt)
    
    
    (887
    )
    
    
    (311
    )
    
    
    (63
    )Financial assets of
special purpose
entities
    
    
    (2,383
    )
    
    
    N/A
    
    
    
    N/AMunicipal bonds
related to capital
leases included in
other assets
    
    
    (188
    )
    
    
    N/A
    
    
    
    N/A$
    2,484
    
    
    $
    1,990
    
    
    $
    560ROI, annualized
    
    
    1.4
    %
    
    
    11.1
    %
    
    
    (15.0
    )%
  22




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##### Table of Contents



STATISTICAL AND OTHER DATA
  First Quarter2009
    
    
    2008(Dollars in millions)RevenuesCorrugated PackagingCorrugated packaging
    
    $
    751
    
    
    $
    737Paperboard (a) (b)
    
    
    39
    
    
    
    39$
    790
    
    
    $
    776Building ProductsLumber
    
    $
    46
    
    
    $
    53Particleboard
    
    
    38
    
    
    
    43Gypsum wallboard
    
    
    38
    
    
    
    34Medium density fiberboard
    
    
    18
    
    
    
    19Fiberboard
    
    
    3
    
    
    
    9Other
    
    
    8
    
    
    
    10$
    151
    
    
    $
    168Unit salesCorrugated PackagingCorrugated packaging, thousands of tons
    
    
    829
    
    
    
    827Paperboard, thousands of tons (a) (b)
    
    
    89
    
    
    
    82918
    
    
    
    909Building ProductsLumber, million board feet
    
    
    188
    
    
    
    200Particleboard, million square feet
    
    
    107
    
    
    
    120Gypsum wallboard, million square feet
    
    
    283
    
    
    
    280Medium density fiberboard, million square feet
    
    
    34
    
    
    
    38Fiberboard, million square feet
    
    
    17
    
    
    
    50
 
 (a)
    
    Paperboard includes containerboard and light-weight gypsum facing paper.(b)
    
    Comparison of revenue and unit sales of paperboard are affected by the July 25,
2008 purchase of our partners interest in Premier Boxboard Limited LLC. The effects on revenues
and unit sales for the periods presented are not material. 23




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
      Increase (Decrease)First Quarter-End 2009
    
    Year-End 2008Special
    
    
    
    
    
    
    
    
    
    SpecialChange in
    
    Variable
    
    Purpose
    
    
    
    
    
    Variable
    
    PurposeInterest Rates
    
    Rate Debt
    
    Entities  Net
    
    Total
    
    Rate Debt
    
    Entities  Net
    
    Total+2%
    
    $
    (7
    )
    
    $
    5
    
    
    $
    (2
    )
    
    $
    (7
    )
    
    $
    5
    
    
    $
    (2
    )+1%
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    (3
    )
    
    
    2
    
    
    
    (1
    )-1%
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    3
    
    
    
    (2
    )
    
    
    1-2%
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    7
    
    
    
    (5
    )
    
    
    2
  Foreign Currency Risk
  Commodity Price Risk
  
 Item 4. Controls and Procedures
   24




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1 . Legal Proceedings
  
 Item 1A. Risk Factors
  
 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 (1/1/2009  1/31/2009)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    6,650,000Month 2 (2/1/2009  2/29/2009)
    
    
    2,910
    (2)
    
    $
    5.64
    
    
    
    
    
    
    
    6,650,000Month 3 (3/1/2009  3/31/2009)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    6,650,000Total
    
    
    2,910
    
    
    $
    5.64
    
    
    
    
    
    
    
    6,650,000
 
 (1)
    
    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. We have purchased 4,350,000 shares under
this authorization, which has no expiration date. 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. 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.(2)
    
    Represents shares purchased from employees to pay taxes related to the vesting of
restricted shares. 25




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##### Table of Contents



Item 3 . Defaults Upon Senior Securities
  
 Item 4 . Submission of Matters to a Vote of Security Holders
  
 Item 5 . Other Information
  
 Item 6 . Exhibits
 Exhibits
 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.
 26




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##### Table of Contents



SIGNATURES
  TEMPLE-INLAND INC.(Registrant)Dated: May 1, 2009
    
    By
    
    /s/ Randall D. Levy

          Randall D. LevyChief Financial OfficerBy
    
    /s/ Troy L. Hester

          Troy L. HesterCorporate Controller andPrincipal Accounting Officer
 27




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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
    
    
    2931.2
    
    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
    
    
    3032.1
    
    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
    
    
    3132.2
    
    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
    
    
    32
 28