Earnings per Share

9 Months Ended

Oct. 01, 2011

Note 8 - Earnings per Share

We computed earnings per share by dividing net income by weighted average shares outstanding using the following:

		Third Quarter						First Nine Months
		2011			2010			2011		2010
		(In millions)
Earnings for basic and diluted earnings per share:
Net income	$	7		$	126		$	41	$	141
Less: Distributed and undistributed amounts allocated to participating securities		0			(1	)		0		(1	)
Distributed and undistributed income available to Temple-Inland common shareholders		7			125			41		140
Less: Net (income) loss attributable to noncontrolling interest of special purpose entities		(1	)		(1-	)		0		0
Net income available to common shareholders	$	6		$	124		$	41	$	140
Weighted average shares outstanding:
Weighted average shares outstanding - basic		109.3			107.9			108.7		107.8
Dilutive effect of stock options and unvested stock-settled restricted stock units		2.4			1.5			2.2		1.7
Weighted average shares outstanding - diluted		111.7			109.4			110.9		109.5

Participating securities include unvested cash-settled restricted stock units issued to employees that contain non-forfeitable rights to dividends. These units vested in first quarter 2011. There are no participating securities outstanding at third quarter-end 2011.

Certain employees of entities spun off in 2007 participated in our employee stock option program. Following the spin-offs, these employees retained stock option rights associated with our stock. These stock options will remain a consideration in our dilutive effect of stock options until they are exercised, cancelled or expire. Information regarding options held by employees of spun-off entities follows:

	Third Quarter-End
		2011		2010
		(Shares in thousands)
Options held		174		451
Options exercisable		174		436
Weighted average exercise price	$	20	$	19
Weighted average remaining contractual term (in years)		4		5

Stock options outstanding that were not included in the computation of diluted common shares outstanding because their exercise price exceeded the average market price of our common stock were as follows:

	Third Quarter		First Nine Months
	2011	2010	2011	2010
	(Shares in thousands)

Options outstanding held by employees	0	3,628	0	1,352
Options outstanding held by employees of spun-off entities	0	279	0	279