Temple-Inland Inc. Reports Third Quarter 2004 Results

Business Wire, Oct 25, 2004

AUSTIN, Texas -- Temple-Inland Inc. (NYSE:TIN) today reported third quarter 2004 net income of $41 million, or $0.73 per diluted share, compared with a third quarter 2003 net loss of $3 million, or ($0.06) per diluted share, and second quarter 2004 net income of $56 million, or $0.99 per diluted share.

Results for third quarter 2004 include (i) a previously announced after-tax charge of $13 million, or $0.23 per share, in asset write-downs, severance, and transaction costs related to the repositioning of mortgage origination activities and the sale of the third party servicing portfolio, (ii) an after-tax charge of $3 million, or $0.05 per share, primarily associated with converting facility closures, and (iii) after-tax income of $1 million, or $0.02 per share, associated with previously discontinued operations. As reflected in the table below, the total effect of these special items for third quarter 2004 is $0.26 per share.

Second
                                          Third Quarter    Quarter
                                        ----------------- ---------
                                          2004     2003      2004
                                        -------- -------- ---------

Net income (loss) per dil. share as
 reported                                 $0.73   ($0.06)    $0.99

Special items                              0.26     0.46      0.06
                                        -------- -------- ---------

Net income per diluted share,
     excluding special items              $0.99    $0.40     $1.05

Corrugated Packaging

The corrugated packaging operation reported income of $42 million in third quarter 2004 compared with $7 million in third quarter 2003 and $26 million in second quarter 2004. Despite higher energy and recycled fiber costs, earnings improved in third quarter 2004 compared with third quarter 2003 due to higher pricing, increased box volumes, and lower converting costs. Earnings increased in third quarter 2004 compared with second quarter 2004 due to higher box prices, partially offset by lower box shipments and slightly higher converting costs associated with the closure of three box plants in the quarter.

Despite the closure of seven box plants since third quarter 2003, on a volume per workday basis, shipments of corrugated containers were up 6.2% in third quarter 2004 compared with third quarter 2003. Shipments were down 3.4% compared with second quarter 2004.

Average prices for corrugated containers in third quarter 2004 were up 3% compared with third quarter 2003 and up 4% compared with second quarter 2004. The average cost of recycled fiber in third quarter 2004 was up 31% compared with third quarter 2003 and flat compared with second quarter 2004.

Forest Products

The forest products operation reported income of $68 million in third quarter 2004, compared with $24 million in third quarter 2003 and $65 million in second quarter 2004. Operating income for third quarter 2004 included $3 million from high-value land sales compared with $2 million in third quarter 2003 and $6 million in second quarter 2004. The average sales price per acre of high-value land in third quarter 2004 was approximately $6,000 per acre.

Average lumber prices in third quarter 2004 were up 18% compared with third quarter 2003, but down 1% compared with second quarter 2004. Particleboard prices were up 41% compared with third quarter 2003 and up 10% compared with second quarter 2004. Medium density fiberboard (MDF) prices were up 24% compared with third quarter 2003 and up 8% compared with second quarter 2004. Gypsum prices were up 30% compared with third quarter 2003 and up 5% compared with second quarter 2004.

Shipments for lumber and gypsum were up in third quarter 2004 compared with third quarter 2003 and second quarter 2004. Shipments for particleboard were down during third quarter 2004 compared with third quarter 2003 and second quarter 2004. Shipments for MDF were up in third quarter 2004 compared with third quarter 2003 but down compared with second quarter 2004.

Financial Services

The financial services operation reported income of $37 million in third quarter 2004 compared with $49 million in third quarter 2003 and $59 million in second quarter 2004. Operating income for third quarter 2004 was negatively impacted $15 million ($0.16 per share) from an increase in the mortgage servicing valuation allowance due primarily to the reduction in long-term interest rates and to the decision to sell the servicing portfolio. Excluding the change in the mortgage servicing valuation allowance, third quarter 2004 income would have compared favorably to third quarter 2003.

Comments

In announcing third quarter results, Kenneth M. Jastrow II, chairman and chief executive officer of Temple-Inland Inc., said, "The operating results achieved during third quarter 2004 reflect continued benefits from our strategic and cost reduction initiatives and favorable market conditions. During the quarter, debt was reduced by $100 million.