EX-99.2 3 d51191exv99w2.htm UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET exv99w2
 

Exhibit 99.2
TEMPLE-INLAND INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
     As part of our previously announced transformation plan, we completed the sale of our timberlands on October 31, 2007. The following Unaudited Pro Forma Consolidated Balance Sheet as of second quarter-end 2007 and the Unaudited Pro Forma Consolidated Statements of Income for the first six months 2007 and for the year 2006 have been adjusted to give effect to this sale. The Unaudited Pro Forma Consolidated Balance Sheet assumes the sale occurred at second quarter-end 2007 and the Unaudited Pro Forma Consolidated Statements of Income assume that the sale occurred on the first day of our year 2006. The Unaudited Pro Forma Consolidated Statements of Income do not reflect the after-tax gain on the sale of the timberlands of approximately $1.3 billion.
     Management believes that the assumptions used to derive the Unaudited Pro Forma Financial Information are reasonable. The Unaudited Pro Forma Financial Information has been provided for information purposes only and is not necessarily indicative of future financial condition or results of operations or the financial condition or results of operations that would have occurred had we completed the transaction on the dates indicated. This Unaudited Pro Forma Financial Information should be read in conjunction with our historical consolidated financial statements, which can be found in our quarterly report on Form 10-Q for the period ended June 30, 2007, filed with the Securities and Exchange Commission on August 7, 2007, and our annual report on Form 10-K for the fiscal year ended December 30, 2006, filed with the Securities and Exchange Commission on February 23, 2007.
     This Unaudited Pro Forma Financial Information does not reflect other aspects of our previously announced transformation plan including: (i) the anticipated pledge of the notes received in the sale as collateral for a non-recourse loan payable in 2027 with estimated proceeds of $1.8 billion after payment of transaction costs on the timberland sale and related current taxes; (ii) the anticipated payment of a special dividend to our shareholders of approximately $1.1 billion and the anticipated reduction of debt of approximately $700 million; and (iii) the spin-offs of our financial services and real estate segments, which are expected to occur by year-end 2007.

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TEMPLE-INLAND INC.
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
Second Quarter-End 2007
(In millions)
                         
            Pro Forma        
    Historical     Adjustments     Pro Forma  
            (In millions)          
ASSETS
                            
Cash and cash equivalents
   $ 314     $ (24 ) (a)   $ 290  
Trade receivables, net of allowance for doubtful accounts of $15
     471         ––       471  
Inventories
     420         ––       420  
Assets held-for-sale
     313       (309 ) (b)     4  
Timber and timberland
     59         ––       59  
Real estate
     587       ––       587  
Loans held for sale
     20         ––       20  
Loans, net of allowance for losses of $72
     9,470         ––       9,470  
Securities available-for-sale
     888         ––       888  
Securities held-to-maturity
     4,192         ––       4,192  
Investment in Federal Home Loan Bank stock
     211       ––       211  
Property and equipment, net
     1,846         ––       1,846  
Notes receivable held by special purpose entities
     ––         2,383   (c)     2,383  
Goodwill
     506       ––       506  
Other intangible assets
     23         ––       23  
Prepaid expenses and other assets
     575         ––       575  
 
                  
TOTAL ASSETS
   $ 19,895     $ 2,050     $ 21,945  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                          
Accounts payable, accrued expenses, and other liabilities
   $ 943     $ 295   (d)   $ 1,238  
Long-term debt and other borrowings
     1,743       ––       1,743  
Deposits
     9,526       ––       9,526  
Federal Home Loan Bank borrowings
     4,582       ––       4,582  
Deferred income taxes
     163       491   (e)     654  
Liability for pension benefits
     209       ––       209  
Liability for postretirement benefits
     140       ––       140  
Subordinated notes payable to trust
     314       ––       314  
 
                  
TOTAL LIABILITIES
     17,620       786       18,406  
 
                  
 
                        
SHAREHOLDERS’ EQUITY
                            
Preferred 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
     124       ––       124  
Additional paid-in capital
     462         ––       462  
Accumulated other comprehensive loss, net
     (185 )       ––       (185 )
Retained earnings
     2,546       1,264  (f)     3,810  
 
                  
 
     2,947         1,264       4,211  
Cost of shares held in the treasury: 17,630,431 shares
     (672 )       ––       (672 )
 
                  
TOTAL SHAREHOLDERS’ EQUITY
     2,275       1,264       3,539  
 
                  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 19,895     $ 2,050     $ 21,945  
 
                  
Please read the notes to the Unaudited Pro Forma
Consolidated Balance Sheet

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TEMPLE-INLAND INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
(In millions)
(a)   Represents timberland transaction cost.
 
(b)   Represents carrying value of timberland and related assets sold.
 
(c)   Notes received in exchange for timberland sold. Notes bear interest at LIBOR plus a margin with interest payable quarterly and principal due in 2027.
 
(d)   Current alternative minimum income taxes payable related to sale of timberland at a rate of approximately 14 percent.
 
(e)   Deferred income taxes related to sale of timberland at a rate of approximately 38 percent, net of alternative minimum tax credit carryforwards.
 
(f)   Represents gain on sale of timberland, net of applicable transaction costs and taxes.

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TEMPLE-INLAND INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME
First Six Months 2007
(In millions)
                         
            Pro Forma        
    Historical     Adjustments     Pro Forma  
    (In millions, except per share amounts)  
REVENUES
                        
Manufacturing and real estate
   $ 2,108     $ (35 ) (a)   $ 2,073  
Financial services
     571       ––       571  
 
                  
 
     2,679       (35 )     2,644  
 
                  
 
                        
COSTS AND EXPENSES
                        
Manufacturing and real estate
     (1,969 )     (17 ) (a)     (1,986 )
Financial services
     (483 )     ––       (483 )
 
                  
 
     (2,452 )     (17 )     (2,469 )
 
                  
OPERATING INCOME
     227       (52 )     175  
Parent company interest
     (62 )     ––       (62 )
Interest income on notes receivable held by special purpose entities
     ––       63 (b)     63  
Other non-operating income (expense)
     1       ––       1  
 
                  
INCOME BEFORE INCOME TAXES
     166       11       177  
Income tax expense
     (62 )     (4 ) (c)     (66 )
 
                  
INCOME FROM CONTINUING OPERATIONS
     104       7       111  
Discontinued operations
     ––       ––       ––  
 
                  
NET INCOME
   $ 104     $ 7     $ 111  
 
                  
 
                        
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                        
Basic
     105.8       105.8       105.8  
Diluted
     107.8       107.8       107.8  
 
                        
EARNINGS PER SHARE
                        
Basic:
                        
Income from continuing operations
   $ 0.99     $ 0.07     $ 1.06  
Discontinued operations
     ––       ––       ––  
 
                  
Net income
   $ 0.99     $ 0.07     $ 1.06  
 
                  
 
                        
Diluted:
                        
Income from continuing operations
   $ 0.97     $ 0.06     $ 1.03  
Discontinued operations
     ––       ––       ––  
 
                  
Net income
   $ 0.97     $ 0.06     $ 1.03  
 
                  
 
                        
DIVIDENDS PAID PER SHARE OF COMMON STOCK
   $ 0.56     $ ––     $ 0.56  
 
                  
Please read the notes to the Unaudited Pro Forma
Consolidated Statements of Income

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TEMPLE-INLAND INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME
For the Year 2006
(In millions)
                         
            Pro Forma        
    Historical     Adjustments     Pro Forma  
    (In millions, except per share amounts)  
REVENUES
                        
Manufacturing and real estate
   $ 4,389     $ (80 ) (a)   $ 4,309  
Financial services
     1,169       ––       1,169  
 
                  
 
     5,558       (80 )     5,478  
 
                  
 
                        
COSTS AND EXPENSES
                        
Manufacturing and real estate
     (3,880 )     (13 ) (a)     (3,893 )
Financial services
     (965 )     ––       (965 )
 
                  
 
     (4,845 )     (13 )     (4,858 )
 
                  
OPERATING INCOME
     713       (93 )     620  
Parent company interest
     (128 )     ––       (128 )
Interest income on notes receivable held by special purpose entities
     ––       123 (b)     123  
Other non-operating income (expense)
     92       ––       92  
 
                  
INCOME BEFORE INCOME TAXES
     677       30       707  
Income tax expense
     (208 )     (11 ) (c)     (219 )
 
                  
INCOME FROM CONTINUING OPERATIONS
     469       19       488  
Discontinued operations
     (1 )     ––       (1 )
 
                  
NET INCOME
   $ 468     $ 19     $ 487  
 
                  
 
                        
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                        
Basic
     108.8       108.8       108.8  
Diluted
     110.8       110.8       110.8  
 
                        
EARNINGS PER SHARE
                        
Basic:
                        
Income from continuing operations
   $ 4.31     $ 0.17     $ 4.48  
Discontinued operations
     (0.01 )     ––       (0.01 )
 
                  
Net income
   $ 4.30     $ 0.17     $ 4.47  
 
                  
 
                        
Diluted:
                        
Income from continuing operations
   $ 4.23     $ 0.17     $ 4.40  
Discontinued operations
     (0.01 )     ––       (0.01 )
 
                  
Net income
   $ 4.22     $ 0.17     $ 4.39  
 
                  
 
                        
DIVIDENDS PAID PER SHARE OF COMMON STOCK
   $ 1.00     $ ––     $ 1.00  
 
                  
Please read the notes to the Unaudited Pro Forma
Consolidated Statements of Income

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TEMPLE-INLAND INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF INCOME
(In millions)
(a)   Represents the results of operations of timberland sold on October 31, 2007.
 
(b)   Represents interest income on notes receivable held by special-purpose entities at LIBOR plus a margin.
 
(c)   Represents the tax effect of (a) and (b) above computed using a 39 percent tax rate for first six months of 2007 and a 36 percent tax rate for the year 2006.

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