UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	for the Quarterly Period Ended September 27, 2008

OR

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.

(Exact name of registrant as specified in its charter)

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
(Address of Principal Executive Offices, including Zip code)

(512) 434-5800
(Registrant’s telephone number, including area code)

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ  Accelerated filer o  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller reporting company o 

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes  þ No

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

	Number of common shares outstanding
Class	as of September 27, 2008
Common Stock (par value $1.00 per share)	106,509,710

Page 1 of 37 The Exhibit Index is page 31.

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Cash Flows		5
Notes to the Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures About Market Risk		26
Item 4. Controls and Procedures		26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		28
Item 1A. Risk Factors		28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3. Defaults Upon Senior Securities		29
Item 4. Submission of Matters to a Vote of Security Holders		29
Item 5. Other Information		29
Item 6. Exhibits		29
SIGNATURES		30
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TEMPLE-INLAND INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	Third
	Quarter-			Year-End
	End 2008			2007
	(In millions)
ASSETS
Current Assets
Cash and cash equivalents	$	50		$	227
Trade receivables, net of allowance for doubtful accounts of $16 in 2008 and $14 in 2007		469			433
Inventories:
Work in process and finished goods		116			116
Raw materials		220			224
Supplies and other		135			121
Total inventories		471			461
Deferred tax asset		73			99
Prepaid expenses and other		80			57
Total current assets		1,143			1,277
Property and Equipment
Land and buildings		669			641
Machinery and equipment		3,589			3,423
Construction in progress		56			120
Less allowances for depreciation		(2,634	)		(2,552	)
Total property and equipment		1,680			1,632
Financial Assets of Special Purpose Entities		2,383			2,383
Goodwill		393			365
Other Assets		272			285
TOTAL ASSETS	$	5,871		$	5,942
LIABILITIES
Current Liabilities
Accounts payable	$	226		$	244
Accrued employee compensation and benefits		82			108
Accrued interest		28			31
Accrued property taxes		19			11
Accrued income taxes		—			258
Other accrued expenses		147			173
Current portion of long-term debt		1			3
Current portion of pension benefits		6			48
Current portion of postretirement benefits		13			14
Total current liabilities		522			890
Long-Term Debt		1,192			852
Nonrecourse Financial Liabilities of Special Purpose Entities		2,140			2,140
Deferred Tax Liability		749			762
Liability for Pension Benefits		73			71
Liability for Postretirement Benefits		118			123
Other Long-Term Liabilities		312			324
TOTAL LIABILITIES		5,106			5,162
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 in 2008 and 2007, including shares held in the treasury		124			124
Additional paid-in capital		461			475
Accumulated other comprehensive loss		(124	)		(139	)
Retained earnings		953			987
Cost of shares held in the treasury: 17,095,634 shares in 2008 and 17,464,189 shares in 2007		(649	)		(667	)
TOTAL SHAREHOLDERS’ EQUITY		765			780
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,871		$	5,942

Please read the notes to consolidated financial statements.

3

TEMPLE-INLAND INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Third Quarter						First Nine Months
	2008			2007			2008			2007
	(In millions, except per share)
NET REVENUES	$	976		$	963		$	2,911		$	2,989
COSTS AND EXPENSES
Cost of sales		(891	)		(835	)		(2,660	)		(2,571	)
Selling		(29	)		(28	)		(86	)		(86	)
General and administrative		(40	)		(42	)		(112	)		(155	)
Other operating expense		—			(5	)		(13	)		(14	)
		(960	)		(910	)		(2,871	)		(2,826	)
OPERATING INCOME		16			53			40			163
Other non-operating income (expense)		(3	)		—			(1	)		1
Interest income on financial assets of special purpose entities		17			—			59			—
Interest expense on nonrecourse financial liabilities of special purpose entities		(18	)		—			(63	)		—
Interest expense on debt		(21	)		(29	)		(58	)		(86	)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES		(9	)		24			(23	)		78
Income tax (expense) benefit		12			(13	)		21			(34	)
INCOME (LOSS) FROM CONTINUING OPERATIONS		3			11			(2	)		44
Discontinued operations		—			25			—			96
NET INCOME (LOSS)	$	3		$	36		$	(2	)	$	140
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		106.7			106.2			106.7			105.9
Diluted		107.6			107.8			107.6			107.9
EARNINGS PER SHARE
Basic:
Income (loss) from continuing operations	$	0.03		$	0.11		$	(0.02	)	$	0.41
Discontinued operations		—			0.23			—			0.92
Net income (loss)	$	0.03		$	0.34		$	(0.02	)	$	1.33
Diluted:
Income from continuing operations	$	0.03		$	0.11		$	N/A		$	0.41
Discontinued operations		—			0.22			N/A			0.89
Net income	$	0.03		$	0.33		$	N/A		$	1.30
DIVIDENDS PER SHARE	$	0.10		$	0.28		$	0.30		$	0.84

Please read the notes to consolidated financial statements.

4

TEMPLE-INLAND INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	First Nine Months
	2008			2007
	(In millions)
CASH PROVIDED BY (USED FOR) OPERATIONS
Net income (loss)	$	(2	)	$	140
Adjustments:
Depreciation and amortization		151			162
Non-cash share-based compensation		16			36
Non-cash pension and postretirement plans		49			33
Cash contribution to pension and postretirement plans		(73	)		(62	)
Deferred income taxes		4			5
Earnings of joint ventures		(7	)		(4	)
Dividends from joint ventures		11			3
Other		(7	)		22
Changes in:
Receivables		(27	)		6
Inventories		2			18
Accounts payable and accrued expenses		(337	)		(5	)
Prepaid expenses and other		(23	)		(36	)
		(243	)		318
CASH PROVIDED BY (USED FOR) INVESTING
Capital expenditures		(116	)		(141	)
Acquisition, net of cash acquired		(57	)		—
Sale of non-strategic assets and operations		4			15
Investment in joint ventures		(5	)		(2	)
Other		(5	)		(11	)
		(179	)		(139	)
CASH PROVIDED BY (USED FOR) FINANCING
Payments of debt		(63	)		(57	)
Borrowings under accounts receivable securitization facility, net		229			66
Borrowings under revolving credit facility, net		121			(13	)
Changes in book overdrafts		(10	)		(6	)
Cash dividends paid to shareholders		(32	)		(88	)
Repurchase of common stock		—			(24	)
Exercise of stock options		1			19
Tax benefit (expense) on share-based compensation		(1	)		11
		245			(92	)
CASH PROVIDED BY (USED FOR) DISCONTINUED OPERATIONS
Net cash provided by operating activities		—			170
Net cash used for investing activities		—			(5	)
Net cash used for financing activities		—			(247	)
		—			(82	)
Net increase (decrease) in cash and cash equivalents		(177	)		5
Cash and cash equivalents at beginning of period		227			30
Cash and cash equivalents at end of period	$	50		$	35

Please read the notes to consolidated financial statements.

5

TEMPLE-INLAND INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 — Basis of Presentation

     Our consolidated financial statements include the accounts of Temple-Inland Inc. and its subsidiaries and special purpose and variable interest entities of which it is the primary beneficiary. We account for our investment in other entities in which we have significant influence over operations and financial policies using the equity method. On December 28, 2007, we spun off our real estate and our financial services segments into separate public companies, Forestar Real Estate Group and Guaranty Financial Group, respectively. The operations and cash flows of these segments are reflected as discontinued operations. Please read Note 11 for additional information.

     We prepare our unaudited interim financial statements in accordance with generally accepted accounting principles and Securities and Exchange Commission requirements for interim financial statements. As a result, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. However, in our opinion, all adjustments considered necessary for a fair presentation have been included. These adjustments are normal recurring accruals, except as noted. These interim operating results are not necessarily indicative of the results that may be expected for the entire year. For further information, please read the financial statements included in our Annual Report on Form 10-K for the year ended December 29, 2007.

Note 2 — New Accounting Pronouncements

     Beginning January 2008, we adopted two new accounting pronouncements:

• Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements — This standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The adoption of this statement did not have a significant effect on our earnings or financial position.

• SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — This standard permits the election of fair value as the initial and subsequent measurement method for many financial assets and liabilities. Subsequent changes in the fair value would be recognized in earnings as they occur. We did not elect the fair value option.

     In addition, there are three new accounting pronouncements that we will be required to adopt in 2009. Based on our current understanding, we do not expect that adoption of any of these pronouncements will have a significant effect on our earnings or financial position.

• SFAS No. 141(R), Business Combinations — This new standard requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at full fair value, and is effective for business combinations occurring after our year-end 2008. The new standard also changes the approach to determining the purchase price; the accounting for acquisition cost; and the accounting practices for acquired contingencies, restructuring costs, long-lived assets, share-based payment awards, indemnification costs, and tax benefits.

• SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — This new standard specifies that noncontrolling interests be reported as a part of equity, not as a liability or other item outside of equity, and is effective for our first quarter 2009.

• SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — This new 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; and is effective for our first quarter 2009.

6

TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Note 3 — Acquisition

     In July 2008, we purchased our partner’s 50 percent interest in Premier Boxboard Limited LLC (PBL) for $62 million. The joint venture had $50 million in debt, of which $25 million was related to the purchased interest. Subsequent to the purchase we incurred a penalty of $4 million from the prepayment of the $50 million joint venture debt. The penalty is included in other non-operating income (expense). We funded this transaction with borrowings under our existing credit agreements. We are now including all of the assets and liabilities, results of operations and cash flows of PBL as part of our corrugated packaging segment in our consolidated financial statements. Previously we had accounted for our interest in PBL using the equity method. We allocated the purchase price to the 50 percent of the assets acquired and liabilities assumed based on our estimates of their fair value at the date of acquisition. We based these estimates of fair values on independent appraisals and other information that reflect our current intentions. The other 50 percent of the assets and liabilities, which we already owned, were included at their carrying value. The final allocation of the purchase price will be completed in fourth quarter 2008. A summary of the estimated net assets at the date of acquisition (50 percent at fair value and 50 percent at carrying value) follows:

	Total
	(In millions)
Current assets	$	26
Property and equipment		81
Goodwill (estimated at acquisition date)		28
Other assets		1
Total assets		136
Current liabilities		(15	)
Current portion of long-term debt		(51	)
Total liabilities		(66	)
Net assets at date of acquisition	$	70

     The unaudited pro forma results of operations, assuming this transaction had been effective at the beginning of the year, would not have been materially different from those reported. Goodwill, all of which we anticipate will be deductible for income tax purposes, is allocated to the corrugated packaging segment.

7

TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Note 4 — Employee Benefit Plans

     Defined benefit and postretirement benefit expense consists of:

	Defined Benefits																Postretirement
	Qualified						Supplemental				Total						Benefits
	2008			2007			2008		2007		2008			2007			2008			2007
	(In millions)
Third Quarter
Service costs — benefits earned during the period	$	6		$	6		$	1	$	1	$	8		$	7		$	—		$	—
Interest cost on projected benefit obligation		20			19			1		1		21			20			2			2
Expected return on plan assets		(21	)		(21	)		—		—		(21	)		(21	)		—			—
Amortization of prior service costs		1			—			—		—		1			—			—			—
Amortization of actuarial net loss		1			2			—		1		1			3			—			—
Defined benefit expense	$	7		$	6		$	2	$	3	$	10		$	9		$	2		$	2
First Nine Months
Service costs — benefits earned during the period	$	20		$	20		$	1	$	1	$	21		$	21		$	1		$	—
Interest cost on projected benefit obligation		60			57			2		2		62			59			6			6
Expected return on plan assets		(63	)		(63	)		—		—		(63	)		(63	)		—			—
Amortization of prior service costs		3			—			2		—		5			—			(1	)		—
Amortization of actuarial net loss		2			8			1		3		3			11			—			—
Defined benefit expense	$	22		$	22		$	6	$	6	$	28		$	28		$	6		$	6

     In first nine months 2008, we recognized $15 million of expense as a result of $44 million lump-sum cash settlements of supplemental benefits made as part of our transformation plan. We made a $15 million voluntary, discretionary contribution to our qualified defined benefit plan in first nine months 2008. We made $45 million of voluntary, discretionary contributions in first nine months 2007.

Note 5 — Share-Based Compensation

     We have shareholder approved share-based compensation plans that permit awards to key employees and non-employee directors in the form of restricted or performance units, restricted stock, or options to purchase shares of our common stock. We generally grant awards annually in February, and we use treasury stock to fulfill awards settled in common stock and stock option exercises.

     Share-based compensation expense consists of:

	Third Quarter				First Nine Months
	2008		2007		2008		2007
	(In millions)
Restricted or performance units	$	8	$	1	$	7	$	27
Restricted stock		—		1		1		—
Stock options		2		—		8		7
Total share-based compensation expense	$	10	$	2	$	16	$	34

     The fair value of share-based compensation awards granted to retirement-eligible employees and expensed at the date of grant was $7 million in first nine months 2008 and $3 million in first nine months 2007.

8

TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

     Share-based compensation expense is included in:

	Third Quarter				First Nine Months
	2008		2007		2008		2007
	(In millions)
Cost of sales	$	1	$	1	$	5	$	6
Selling expense		—		—		1		2
General and administrative		9		1		10		26
Total share-based compensation expense	$	10	$	2	$	16	$	34

Restricted or performance units

     Restricted or performance units generally have a three-year term; vest after three years from the date of grant or the attainment of stated ROI based performance goals, generally measured over a three-year period; and are settled in cash.

     A summary of activity for first nine months 2008 follows:

				Weighted
				Average Grant		Aggregate
				Date Fair Value		Current
	Shares			Per Share		Value
	(In thousands)					(In millions)
Not vested beginning of the year		1,416		$	48
Granted		794			20
Vested and settled		(295	)		40
Forfeited		(6	)		41
Not vested end of third quarter 2008		1,909			37	$	30

     Unrecognized share-based compensation expense related to non-vested restricted or performance units was $13 million based on $16 per share at third quarter-end 2008. It is likely that this cost will be recognized over the next 2 years. The fair value of awards settled in cash in first nine months 2008 was $7 million.

Restricted stock

     Restricted stock awards generally vest after three to six years and provide for accelerated vesting upon retirement, death, disability, or a change in control. There were no restricted stock awards granted in first nine months 2008 or first nine months 2007. There were 60,000 restricted stock awards outstanding at third quarter-end 2008 with a weighted average grant date fair value of $22 per share and an aggregate value of $1 million or $16 per share at third quarter-end 2008. There were 375,500 restricted stock awards that vested in first nine months 2008.

Stock options

     Stock options have a ten-year term, generally become exercisable ratably over four years and provide for accelerated or continued vesting upon retirement, death, disability, or if there is a change in control. Options are granted with an exercise price equal to the market value of our common stock on the date of grant.

9

TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

     A summary of activity for first nine months 2008 follows:

						Weighted		Aggregate
				Weighted		Average		Intrinsic Value
				Average		Remaining		(Current value
				Exercise Price		Contractual		less exercise
	Shares			Per Share		Term		price)
	(In thousands)					(In years)		(In millions)
Outstanding beginning of the year		4,711		$	15
Granted		2,355			20
Exercised		(65	)		11
Forfeited		(104	)		15
Outstanding end of third quarter 2008		6,897			17		7	$	14
Exercisable end of third quarter 2008		3,681			13		5	$	14

     Unrecognized share-based compensation expense related to non-vested stock options awards was $8 million at third quarter-end 2008. It is likely that this cost will be recognized over the next 2 years.

     We estimated the fair value of our options using the Black-Scholes-Merton option-pricing model and the following assumptions:

	First Nine Months
	2008			2007
Expected life of options (in years)		8			6
Expected stock price volatility		28.2	%		22.8	%
Expected dividend yield		2.1	%		2.3	%
Risk-free interest rate		3.3	%		4.9	%
Weighted average estimated fair value of options granted: (a)
Temple-Inland options	$	2.02		$	7.39
Forestar options		N/A			3.09
Guaranty options		N/A			1.99
Weighted average estimated fair value of options at original grant date	$	2.02		$	12.47

^(a) The weighted average estimated fair value of options granted prior to 2008 has been adjusted to reflect the spin-off of Forestar and Guaranty. The share-based compensation expense on options held by employees of Temple-Inland will be based on the original grant date Black-Scholes-Merton value.

Note 6 — Other Operating Income (Expense)

	Third Quarter						First Nine Months
	2008			2007			2008			2007
	(In millions)
Equity in earnings of joint ventures	$	2		$	2		$	7		$	4
Loss on sale of property and equipment		(1	)		(4	)		(4	)		(5	)
Litigation and other		(1	)		—			4			(10	)
Transformation and other costs		—			(3	)		(20	)		(11	)
Gain on sale of non-strategic timber leases		—			—			—			8
	$	—		$	(5	)	$	(13	)	$	(14	)

     In third quarter 2008, we purchased our partner’s 50 percent interest in PBL. Please read Note 3 for further information.

Note 7 — Contingencies

     We are involved in various legal proceedings that arise from time to time in the ordinary course of doing business and believe that adequate reserves have been established for any probable losses. Expenses related to

10

TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

litigation are included in operating income. We do not believe that the outcome of any of these proceedings should have a material adverse effect on our financial position, long-term results of operations, or cash flows. It is possible, however, that charges related to these matters could be significant to our results or cash flows in any one accounting period.

     In first nine months 2008, we settled and paid our one remaining state court claim related to alleged civil violations of Section 1 of the Sherman Act for $5 million, which had been fully reserved. As a result, all matters related to these alleged violations have been resolved.

     We continue to defend one remaining case in California state court alleging violations of that state’s on duty meal break laws. We believe we have established adequate reserves for this case. Settlements we have reached in other meal break cases have been within established reserves.

Note 8 — Earnings Per Share

     Diluted earnings per share for first nine months 2008 is not applicable due to our loss from continuing operations.

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

	Third Quarter				First Nine Months
	2008		2007		2008		2007
	(In millions)
Weighted average common shares outstanding - basic		106.7		106.2		106.7		105.9
Dilutive effect of stock options held by our employees		0.8		1.6		0.8		2.0
Dilutive effect of stock options held by Forestar and Guaranty employees		0.1		—		0.1		—
Weighted average shares outstanding — diluted		107.6		107.8		107.6		107.9

     At third quarter-end 2008, there were 1,175,058 stock options outstanding held by employees of Forestar and Guaranty. These options were granted prior to the spin-offs of Forestar and Guaranty on December 28, 2007. These options will be considered in our dilution calculation until they are exercised, cancelled or expire.

     At third quarter-end 2008, 4,539,455 stock options outstanding held by our employees and 742,552 stock options outstanding held by employees of Forestar and Guaranty were not included in the computation of diluted earnings per share because they were antidilutive.

Note 9 — Comprehensive Income

     Comprehensive income consists of:

	Third Quarter						First Nine Months
	2008			2007			2008			2007
	(In millions)
Net income (loss)	$	3		$	36		$	(2	)	$	140
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment		(4	)		(1	)		2			—
Defined benefit plans		1			3			13			9
Other comprehensive income (loss)		(3	)		2			15			9
Comprehensive income	$	—		$	38		$	13		$	149

Note 10 — Segment Information

     We have two business segments: corrugated packaging and building products. Corrugated packaging manufactures containerboard that we convert into corrugated packaging. Building products manufactures a variety

11

TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

of building products. We no longer have a timber and timberland segment as a result of the fourth quarter 2007 sale of our timberland.

     We evaluate performance based on operating income before items not included in segments and income taxes. Items not included in segments represent income and expenses managed on a company-wide basis and include corporate general and administrative expense, share-based compensation, other operating and non-operating income (expense), and interest income and expense. Other operating income (expense) includes gain or loss on sale of assets, asset impairments, and unusual income and expense items. The accounting policies of the segments are the same as those described in the accounting policy notes to the financial statements. Intersegment sales are recorded at market prices. Intersegment sales and purchases and shared service expense allocations are included in costs and expenses.

									Items Not
									Included in
	Corrugated			Building			Timber and		Segments and
	Packaging			Products			Timberland		Eliminations			Total
	(In millions)
Third Quarter 2008:
Revenues from external customers	$	797		$	179			N/A	$	—		$	976
Depreciation and amortization		37			11			N/A		3			51
Equity income from joint ventures		2	(a)		—			N/A		—			2
Income (loss) from continuing operations before taxes		50			(6	)		N/A		(53	)(b)		(9	)
Capital expenditures		35			5			N/A		—			40
First Nine Months 2008 or at Third Quarter-End 2008:
Revenues from external customers	$	2,371		$	540			N/A	$	—		$	2,911
Depreciation and amortization		108			35			N/A		8			151
Equity income from joint ventures		6	(a)		1			N/A		—			7
Income (loss) from continuing operations before taxes		157			(26	)		N/A		(154	)(b)		(23	)
Total assets		2,430			609			N/A		2,832			5,871
Investment in equity method investees and joint ventures		3	(a)		24			N/A		—			27
Goodwill		264			129			N/A		—			393
Capital expenditures		98			15			N/A		3			116
Third Quarter 2007:
Revenues from external customers	$	748		$	195		$	20	$	—		$	963
Depreciation and amortization		35			12			1		5			53
Equity income from joint ventures		2			—			—		—			2
Income (loss) from continuing operations before taxes		70			(4	)		18		(60	)(b)		24
Capital expenditures and reforestation		40			10			4		3			57
First Nine Months 2007 or at Third Quarter-End 2007:
Revenues from external customers	$	2,288		$	642		$	59	$	—		$	2,989
Depreciation and amortization		107			35			8		12			162
Equity income from joint ventures		3			1			—		—			4
Income (loss) from continuing operations before taxes		212			23			53		(210	)(b)		78
Total assets		2,233			613			328		406			3,580	(c)
Investment in equity method investees and joint ventures		13			22			—		—			35
Goodwill		236			129			—		—			365
Capital expenditures and reforestation		99			30			10		11			150

^(a) In July 2008, we purchased our partner’s 50 percent interest in PBL. Please read Note 3 for further information.

12

TEMPLE-INLAND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

^(b) Items not included in segments consist of:

	Third Quarter						First Nine Months
	2008			2007			2008			2007
	(In millions)
General and administrative expense	$	(17	)	$	(23	)	$	(59	)	$	(75	)
Share-based compensation		(10	)		(2	)		(16	)		(34	)
Other operating income (expense)		(1	)		(6	)		(16	)		(16	)
Other non-operating income (expense)		(3	)		—			(1	)		1
Net interest income (expense) on financial assets and nonrecourse financial liabilities of special purpose entities		(1	)		—			(4	)		—
Interest expense on debt		(21	)		(29	)		(58	)		(86	)
	$	(53	)	$	(60	)	$	(154	)	$	(210	)
Other operating income (expense) applies to:
Corrugated packaging	$	—		$	(4	)	$	6		$	(14	)
Building products		—			—			(1	)		8
Unallocated		(1	)		(2	)		(21	)		(10	)
	$	(1	)	$	(6	)	$	(16	)	$	(16	)
Other non-operating income (expense) consists of:
Charges related to early repayment of debt	$	(4	)	$	—		$	(4	)	$	—
Interest and other income		1			—			3			1
	$	(3	)	$	—		$	(1	)	$	1

^(c) Excludes assets of discontinued operations of $17,112 million.

Note 11 — Discontinued Operations

     On December 28, 2007, we spun off to our shareholders in tax-free distributions, our real estate segment, Forestar, which included certain real estate and minerals activities in our timber and timberland segment, and our financial services segment, Guaranty. In addition, on August 31, 2007 we sold our chemical operations. A summary of earnings from our discontinued operations follows:

	Third			First Nine
	Quarter			Months
	2007			2007
	(In millions)
Real estate income before taxes	$	15		$	39
Financial services income before taxes		36			124
Chemical operations and other		(12	)		(12	)
Income from discontinued operations before taxes		39			151
Income tax expense		(14	)		(55	)
Discontinued operations	$	25		$	96

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

     Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are identified by their use of terms and phrases such as “believe,” “anticipate,” “could,” “estimate,” “likely,” “intend,” “may,” “plan,” “expect,” and similar expressions, including references to assumptions. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties. A variety of factors and uncertainties could cause our actual results to differ significantly from the results discussed in the forward-looking statements. Factors and uncertainties that might cause such differences include, but are not limited to:

• 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, and contingency reserves;

• 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.

     Our actual results, performance, or achievement probably will differ from those expressed in, or implied by, these forward-looking statements, and accordingly, we can give no assurances that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on our results of operations or financial condition. In view of these uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we expressly disclaim any obligation to publicly revise any forward-looking statements contained in this report to reflect the occurrence of events after the date of this report.

Non-GAAP Financial Measures

     Return on investment (ROI) is an important internal measure for us because it is a key component of our evaluation of overall performance and the performance of our business segments. Studies have shown that there is a direct correlation between shareholder value and ROI and that shareholder value is created when ROI exceeds the cost of capital. ROI allows us to evaluate our performance on a consistent basis as the amount we earn relative to the amount invested in our business segments. A significant portion of senior management’s compensation is based on achieving ROI targets.

     In evaluating overall performance, we define ROI as total segment operating income, less general and administrative expenses and share-based compensation not included in segments, divided by total assets, less certain assets and certain current liabilities. We do not believe there is a comparable GAAP financial measure to our definition of ROI. The reconciliation of our ROI calculation to amounts reported under GAAP is included in a later section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Despite its importance to us, ROI is a non-GAAP financial measure that has no standardized definition and as a result may not be comparable with other companies’ measures using the same or similar terms. Also there may be limits in the usefulness of ROI to investors. As a result, we encourage you to read our consolidated financial statements in their entirety and not to rely on any single financial measure.

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Accounting Policies

Critical Accounting Estimates

     In first nine months 2008, there were no changes in our critical accounting estimates from those we disclosed in our Annual Report on Form 10-K for the year 2007.

New and Pending Accounting Pronouncements

     Beginning January 2008, we adopted two new accounting pronouncements neither of which had a significant effect on our earnings or financial position. In addition, there are three new accounting pronouncements that we will be required to adopt in 2009 none of which are expected to have a significant effect on our earnings or financial position.

     Please read Note 2 to the Consolidated Financial Statements for further information.

15

Results of Operations for Third Quarter and First Nine Months 2008 and 2007

Summary

     We manage our operations through two business segments: corrugated packaging and building products. Timber and timberland is no longer an active segment as a result of the sale of our timberland in fourth quarter 2007.

     A summary of the results of operations by business segment follows:

	Third Quarter						First Nine Months
	2008			2007			2008			2007
	(In millions, except per share)
Revenues
Corrugated packaging	$	797		$	748		$	2,371		$	2,288
Building products		179			195			540			642
Timber and timberland		—			20			—			59
Total revenues	$	976		$	963		$	2,911		$	2,989
Segment operating income
Corrugated packaging	$	50		$	70		$	157		$	212
Building products		(6	)		(4	)		(26	)		23
Timber and timberland		—			18			—			53
Total segment operating income		44			84			131			288
Items not included in segments
General and administrative expense		(17	)		(23	)		(59	)		(75	)
Share-based compensation		(10	)		(2	)		(16	)		(34	)
Other operating income (expense)		(1	)		(6	)		(16	)		(16	)
Other non-operating income (expense)		(3	)		—			(1	)		1
Net interest income (expense) on financial assets and nonrecourse financial liabilities of special purpose entities		(1	)		—			(4	)		—
Interest expense on debt		(21	)		(29	)		(58	)		(86	)
Income (loss) before taxes		(9	)		24			(23	)		78
Income tax (expense) benefit		12			(13	)		21			(34	)
Income (loss) from continuing operations		3			11			(2	)		44
Discontinued operations		—			25			—			96
Net income (loss)	$	3		$	36		$	(2	)	$	140
Average basic shares outstanding		106.7			106.2			106.7			105.9
Average diluted shares outstanding		107.6			107.8			107.6			107.9
Income (loss) from continuing operations, per basic share	$	0.03		$	0.11		$	(0.02	)	$	0.41
Income from continuing operations, per diluted share (a)	$	0.03		$	0.11		$	N/A		$	0.41
ROI, annualized								3.0	%		8.3	%

^(a) Income per diluted share is not applicable for first nine months 2008 due to our loss from continuing operations.

In first nine months 2008, significant items affecting income (loss) from continuing operations included:

• We experienced lower volumes and higher pricing for our corrugated packaging products, lower volumes for most of our building products and lower pricing for gypsum wallboard.

• 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, chemicals, and fiber more than offset these benefits.

• Share-based compensation decreased due to the effect of the lower share price on our cash-settled awards.

• We incurred $20 million of costs primarily related to our transformation plan, of which $15 million is related to the 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.

16

• Interest expense decreased primarily due to the December 2007 early retirement of $286 million of 6.75% Notes and $213 million of 7.875% Senior Notes.

• In July 2008, we purchased the remaining 50 percent interest in Premier Boxboard Limited LLC for $62 million. Subsequent to the purchase we incurred a penalty of $4 million from the prepayment of $50 million in joint venture debt.

In first nine months 2007, significant items affecting income from continuing operations included:

• We experienced higher prices for our corrugated packaging products and lower prices and volumes for our building products, principally lumber and gypsum wallboard.

• While we continued to see the benefit in our manufacturing operations from our initiatives to lower costs, improve asset utilization, and increase operating efficiencies, the cost of recycled fiber, energy and freight offset some of the benefits.

• We recognized $4 million in business interruption insurance proceeds from a prior year claim related to one of our paper mills and an $8 million gain on sale of non-strategic timber leases.

• We incurred $10 million of costs associated with our transformation plan, primarily legal and advisory fees.

• We recognized a one-time tax benefit of $3 million related to Texas tax legislation enacted in May 2007.

     Our operations are affected to varying degrees by supply and demand factors and economic conditions including changes in energy costs, interest rates, new housing starts, home repair and remodeling activities, and the strength of the U.S. dollar. Given the commodity nature of our manufactured products, we have little control over market pricing or market demand.

Corrugated Packaging

     We manufacture linerboard and corrugating medium (collectively referred to as containerboard) that we convert into corrugated packaging. In July 2008, we purchased our partner’s 50 percent interest in Premier Boxboard Limited LLC (PBL), a joint venture that manufactures containerboard and light-weight gypsum facing paper at a mill in Newport, Indiana. We have integrated the PBL operations into our corrugated packaging system. Our corrugated packaging segment revenues are principally derived from the sale of corrugated packaging and, to a lesser degree, from the sale of containerboard and light-weight gypsum facing paper (collectively referred to as paperboard).

     A summary of our corrugated packaging results follows:

	Third Quarter						First Nine Months
	2008			2007			2008			2007
	(Dollars in millions)
Revenues	$	797		$	748		$	2,371		$	2,288
Costs and expenses		(747	)		(678	)		(2,214	)		(2,076	)
Segment operating income	$	50		$	70		$	157		$	212
Segment ROI								10.5	%		14.1	%

     Corrugated packaging results would not have been materially different from those reported assuming the purchase of PBL had occurred at beginning of each period presented.

17

     Fluctuations in corrugated packaging and paperboard pricing (which includes freight and is net of discounts) and shipments follow:

	Third Quarter 2008			First Nine Months 2008
	versus			versus
	Third Quarter 2007			First Nine Months 2007
	Increase/(Decrease)
Corrugated packaging
Average prices		5	%		3	%
Shipments, average week		(3)	%		(1)	%
Industry shipments, average week(a)		(3)	%		(3)	%
Paperboard
Average prices		1	%		3	%
Shipments, in thousand tons		83	(b)		61	(b)

(a)	Source: Fibre Box Association
(b)	The increase includes 18,000 tons of light-weight gypsum facing paper and 9,000 tons of containerboard shipped by PBL since its purchase in July 2008.

     Current economic conditions have had a negative effect on our shipments. We anticipate that this weakness will continue until economic conditions improve.

     Compared with second quarter 2008, average corrugated packaging prices were up two percent and shipments were down five percent, principally due to normal seasonal fluctuations and current economic conditions, while average paperboard prices were up two percent and shipments were up 78,000 tons partially as a result of including the results from our purchase of PBL in July 2008.

     Costs and expenses were up 10 percent in third quarter 2008 compared with third quarter 2007 and up seven percent in first nine months 2008 compared with first nine months 2007. These increased costs were primarily the result of higher prices for recycled fiber, energy, chemicals, freight, and the inclusion of PBL since its purchase in July 2008.

     Fluctuations in our significant cost and expense components included:

	Third Quarter 2008			First Nine Months 2008
	versus			versus
	Third Quarter 2007			First Nine Months 2007
	Increase/(Decrease)
	(In millions)
Wood fiber	$	(2	)	$	4
Recycled fiber		3			19
Energy, principally natural gas		23			44
Chemicals		7			15
Freight		10			23

     The costs of our wood and recycled fiber, energy, chemicals, and freight fluctuate based on the market prices we pay for these commodities. It is likely that these costs will continue to fluctuate for the remainder of 2008.

18

     Information about our converting facilities and mills follows:

	Third Quarter						First Nine Months
	2008			2007			2008			2007
Number of converting facilities (at quarter-end)		64			64			64			64
Corrugated packaging shipments, in thousand tons		810			839			2,504			2,535
Paperboard production, in thousand tons		947			909			2775			2,712
Percent containerboard production used internally		86	%		93	%		90	%		91	%
Percent of total fiber requirements sourced from recycled fiber		41	%		36	%		37	%		37	%

     In third quarter 2008, we lost production of 38,000 tons of containerboard due to hurricanes Gustav and Ike.

     As part of our continuing efforts to lower cost and improve operating efficiency and asset utilization, in October 2008 we announced the closure of our Rome, Georgia converting facility.

Building Products

     We manufacture lumber, gypsum wallboard, particleboard, medium density fiberboard (MDF), and fiberboard. Our building products segment revenues are principally derived from sales of these products. We also own a 50 percent interest in Del-Tin Fiber LLC, a joint venture that produces MDF at a facility in El Dorado, Arkansas.

     A summary of our building products results follows:

	Third Quarter						First Nine Months
	2008			2007			2008			2007
	(Dollars in millions)
Revenues	$	179		$	195		$	540		$	642
Costs and expenses		(185	)		(199	)		(566	)		(619	)
Segment operating income (loss)	$	(6	)	$	(4	)	$	(26	)	$	23
Segment ROI								(6.2)	%		5.5	%

     Fluctuations in product pricing (which includes freight and is net of discounts) and shipments follow:

	Third Quarter 2008			First Nine Months 2008
	versus			versus
	Third Quarter 2007			First Nine Months 2007
	Increase/(Decrease
Lumber:
Average prices		6	%		1	%
Shipments		(12	)%		(7	)%
Gypsum wallboard:
Average prices		(6	)%		(23	)%
Shipments		(31	)%		(30	)%
Particleboard:
Average prices		9	%		2	%
Shipments		(2	)%		(6	)%
MDF:
Average prices		17	%		10	%
Shipments		6	%		4	%

     While pricing was up for lumber, particleboard and MDF compared with first nine months 2007, demand is down due to current conditions in the housing industry. We anticipate that these difficult conditions will continue for the remainder of 2008 and 2009.

     Compared with second quarter 2008, average prices were up three percent for lumber, seven percent for gypsum, and five percent for particleboard and MDF. Shipments were down for all products.

19

     Costs and expenses were down seven percent in third quarter 2008 compared with third quarter 2007 and down nine percent in first nine months 2008 compared with first nine months 2007. The decrease in costs is primarily attributable to curtailment of production to match demand for our products and headcount reductions. We incurred severance charges of $1 million in third quarter 2008 and $3 million in first nine months 2008 related to headcount reductions.

     Fluctuations in our significant cost and expense components included:

	Third Quarter 2008			First Nine Months 2008
	versus			versus
	Third Quarter 2007			First Nine Months 2007
	Increase/(Decrease)
	(In millions)
Wood fiber	$	(9	)	$	(27	)
Energy, principally natural gas		2			2
Chemicals		7			13
Freight		(1	)		(4	)

     The costs of our fiber, energy, chemicals, and freight fluctuate based on the market prices we pay for these commodities. It is likely that these costs will continue to fluctuate for the remainder of 2008.

     Information about our converting and manufacturing facilities follows:

	Third Quarter						First Nine Months
	2008			2007			2008			2007
Number of converting and manufacturing facilities (at quarter-end)		16			17			16			17
Average operating rates for all product lines excluding sold or closed facilities:
High		98	%		104	%		98	%		102	%
Low		51	%		47	%		47	%		59	%
Average		70	%		76	%		69	%		80	%
Gypsum facing paper purchases from corrugated packaging (previously the PBL joint venture):
In thousand tons		10			10			24			34
Percent supplied								65	%		68	%

     The lower average operating rates in first nine months 2008 resulted from the curtailment of production to match demand for our products and, to a lesser extent, lost production due to hurricanes Gustav and Ike. In December 2007, we permanently ceased production at our Mt. Jewett particleboard plant.

Items Not Included in Segments

     Items not included in segments are income and expenses that are managed on a company-wide basis and include corporate general and administrative expense, share-based compensation, other operating and non-operating income (expense), and interest income and expense.

     The change in share-based compensation was principally due to the effect of share price on our cash-based awards. A significant portion of our share-based awards are cash-settled awards. As a result, changes in our share price have a direct impact on our share-based compensation expense. Please read Note 5 to the Consolidated Financial Statements for further information.

20

     Other operating expense not included in business segments totaled $16 million in first nine months 2008, principally related to the lump-sum settlements of supplemental pension benefits made as part of our 2007 transformation plan.

     Other non-operating expense totaled $1 million in first nine months 2008, of which $4 million is a penalty associated with the prepayment of the $50 million PBL joint venture debt, offset with $3 million in interest and other income.

     We are continuing our efforts to enhance return on investment by lowering costs, improving operating efficiencies and increasing asset utilization. As a result, we will continue to review operations that are unable to meet return objectives and determine appropriate courses of action, including consolidating and closing converting facilities.

     Net interest income (expense) on financial assets and nonrecourse liabilities of special purpose entities relates to interest income on the $2.38 billion of notes received from the sale of our timberland in 2007 and interest expense on the $2.14 billion of borrowings secured by a pledge of the notes received. The notes receivable were contributed to and the borrowings were made by two wholly-owned, bankruptcy-remote special purpose entities, which we consolidate. The borrowings are nonrecourse beyond these two entities. At third quarter-end 2008, the interest rate on our financial assets was 2.84 percent and the interest rate on our nonrecourse financial liabilities was 3.36 percent. These interest rates reset quarterly based on different base rates and may not always reflect the same net interest spread.

     The decrease in interest expense in first nine months 2008 was primarily due to the December 2007 early retirement of our $286 million of 6.75% Notes payable in 2009 and $213 million of 7.875% Senior Notes payable in 2012, offset by an increase in interest expense related to the increase in debt primarily associated with our purchase of the remaining 50 percent interest in the PBL joint venture.

Income Taxes

     In third quarter 2008, we increased our estimated annual effective tax rate for 2008 to 89 percent from 64 percent based on our current estimate of 2008 income. As a result, we recognized an additional $4 million tax benefit in third quarter 2008. Our estimated annual effective tax rate was 44 percent in first nine months 2007.

     Differences between the effective tax rate and the statutory rate are primarily due to state taxes, nondeductible items, and deferred taxes on unremitted foreign income. At the current level of earnings or losses, these differences have a significant effect on our estimated annual effective tax rate.

Average Shares Outstanding

     The increase in average basic shares outstanding was principally due to the issuance of shares related to stock-based compensation plans. The decrease in average diluted shares outstanding was due to the decrease in the dilutive effect of stock options as a result of our lower share price.

Capital Resources and Liquidity for First Nine Months 2008

Sources and Uses of Cash

     We operate in cyclical industries and our operating cash flows vary accordingly. Our principal operating cash requirements are for compensation, wood and recycled fiber, energy, freight, interest, and taxes. Pricing improved for our corrugated packaging and most of our building products in first nine months 2008, but shipments continued to decline. Working capital is subject to cyclical operating needs, the timing of collection of receivables and the payment of payables and expenses and, to a lesser extent, to seasonal fluctuations in our operations.

21

	First Nine Months
	2008			2007
	(In millions)
Cash received from:
Operations (including payments in 2008 related to our 2007 transformation plan of $50 million)	$	142	(a)	$	335	(a)
Working capital (including payments in 2008 related to our 2007 transformation plan of $297 million)		(385	)		(17	)
Cash received from (used for) operations		(243	)		318
Exercise of options and related tax benefits		—			30
Sale of non-strategic assets and other		(6	)		9
Borrowing, net		287			(4	)
Total sources		38			353
Cash used to:
Return to shareholders through:
Dividends		(32	)		(88	)
Repurchase of common stock		—			(24	)
Reinvest in the business through:
Capital expenditures		(116	)		(141	)
Acquisition of PBL, net of cash acquired		(57	)		—
Joint ventures and other		(10	)		(13	)
Total uses		(215	)		(266	)
Discontinued operations, net		—			(82	)
Change in cash and cash equivalents	$	(177	)	$	5

^(a) Includes voluntary, discretionary contributions to our qualified defined benefit plan of $15 million in 2008 and $45 million in 2007.

     In first nine months 2008, our cash from operations included payments of about $347 million related to the completion of our 2007 transformation plan. At third quarter-end 2008, all transformation related payments have been made.

     We issued 368,555 shares of common stock in first nine months 2008 and 940,574 shares of common stock in first nine months 2007 to employees exercising options. We paid cash dividends to shareholders of $0.30 per share in first nine months 2008 and $0.84 per share in first nine months 2007.

     We initiated no purchases under our share repurchase authorizations in first nine months 2008. The maximum number of shares available to be purchased under our repurchase plans is 6.6 million shares at third quarter-end 2008.

     Capital expenditures are expected to approximate $170 to $175 million in 2008 or about 85 percent of expected 2008 depreciation and amortization. Most of the expected 2008 expenditures relate to initiatives to increase efficiency in our corrugated packaging operations.

     In July 2008, we purchased our partner’s 50 percent interest in the PBL joint venture for $62 million. The joint venture had $50 million in debt, of which $25 million was related to the purchased interest. We had previously guaranteed the $50 million in joint venture debt. Subsequent to the purchase we incurred a penalty of $4 million related to the prepayment of the $50 million in joint venture debt. We funded this transaction with borrowings under our existing credit agreements.

22

Liquidity

     Our sources of short-term funding are our operating cash flows and borrowings under our credit agreements and accounts receivable securitization facility. At third quarter-end 2008, we had $716 million of unused borrowing capacity under our committed credit agreements and accounts receivable securitization facility.

				Accounts
	Committed			Receivable
	Credit			Securitization
	Agreements			Facility			Total
	(In millions)
Committed	$	835		$	250		$	1,085
Less: borrowings and commitments		(139	)		(230	)		(369	)
Unused borrowing capacity at third quarter-end 2008	$	696		$	20		$	716

     Our committed credit agreements include a $750 million revolving credit facility that expires in 2011. The remaining $85 million, $10 million of which expires in 2008 and $75 million of which expires in 2009 and 2010, contain provisions that allow for any outstanding borrowings to be repaid in 2010 or 2011. Our accounts receivable securitization facility expires in 2010.

     Our debt agreements, accounts receivable securitization facility, and credit agreements contain terms, conditions, and financial covenants customary for such agreements, including minimum levels of interest coverage and limitations on leverage. At third quarter-end 2008, we were in compliance with the terms, conditions, and covenants in these agreements. We believe the amount available under these credit facilities along with our existing cash and cash equivalents and expected cash flows from operations will provide us sufficient funds to meet our operating needs for the foreseeable future.

     In light of the current conditions in financial markets, we closely monitor the banks in our credit facilities. To date, we have experienced no difficulty in borrowing under these facilities and have no reason to believe any of the participating banks would not be able to honor their commitments under these facilities.

Off-Balance Sheet Arrangements

     At third quarter-end 2008, there were no significant changes in off-balance sheet arrangements from that disclosed in our Annual Report on Form 10-K for the year 2007.

Pension and Postretirement Matters

     We made a $15 million voluntary, discretionary contribution to our qualified defined benefit pension plan in first nine months 2008. In October 2008, we made an additional $15 million voluntary, discretionary contribution to our qualified defined benefit pension plan. Our total contribution for 2008 of $30 million approximates 2008 service cost.

Energy

     Energy costs were $275 million in first nine months 2008 compared with $229 million in first nine months 2007. Our energy costs fluctuate based on the market prices we pay for these commodities and on the amount and mix of fuels we may use. We continue to reduce our dependency on natural gas by utilizing biomass fuels. We hedge very little of our energy needs. It is likely that these costs will continue to fluctuate for the remainder of 2008.

Litigation and Related Matters

     We are involved in various legal proceedings that arise from time to time in the ordinary course of doing business, and we believe that adequate reserves have been established for any probable losses. We do not believe that the outcome of any of these proceedings should have a material adverse effect on our financial position or long-term results of operations or cash flows. It is possible, however, that charges related to these matters could be significant to results of operations or cash flows in any single accounting period.

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     During third quarter 2008, there were no material developments in pending legal proceedings other than as disclosed in Part II, Item 1 of this report.

Calculation of Non-GAAP Financial Measure

				Corrugated			Building			Timber and
	Consolidated			Packaging			Products			Timberland
	(Dollars in millions)
RETURN ON INVESTMENT (ROI)
First Nine Months 2008
Return:
Segment operating income determined in accordance with GAAP	$	131		$	157		$	(26	)	$	N/A
Items not included in segments:
General and administrative		(59	)		N/A			N/A			N/A
Share-based compensation		(16	)		N/A			N/A			N/A
	$	56		$	157		$	(26	)	$	N/A
Investment:
Beginning of year total assets or segment assets determined in accordance with GAAP	$	5,942		$	2,301		$	623		$	N/A
Adjustments:
Current liabilities (excluding current portion of long-term debt)		(887	)		(311	)		(63	)		N/A
Financial assets of special purpose entities		(2,383	)		N/A			N/A			N/A
Municipal bonds related to capital leases included in other assets		(188	)		N/A			N/A			N/A
	$	2,484		$	1,990		$	560		$	N/A
ROI, annualized		3.0	%		10.5	%		(6.2	)%		N/A
First Nine Months 2007
Return:
Segment operating income determined in accordance with GAAP	$	288		$	212		$	23		$	53
Items not included in segments:
General and administrative		(75	)		N/A			N/A			N/A
Share-based compensation		(34	)		N/A			N/A			N/A
	$	179		$	212		$	23		$	53
Investment:
Beginning of year total assets or segment assets determined in accordance with GAAP	$	20,474		$	2,275		$	638		$	330
Adjustments:
Current liabilities (excluding current portion of long-term debt)		(550	)		(271	)		(76	)		(11	)
Assets of discontinued operations		(16,847	)		N/A			N/A			N/A
Municipal bonds related to capital leases included in other assets		(188	)		N/A			N/A			N/A
	$	2,889		$	2,004		$	562		$	319
ROI, annualized		8.3	%		14.1	%		5.5	%		22.2	%

ROI annualized is not necessarily indicative of the ROI that may be expected for the entire year.

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STATISTICAL AND OTHER DATA

     Revenues and unit sales, excluding joint venture operations, follows:

	Third Quarter				First Nine Months
	2008		2007		2008		2007
	(Dollars in millions)
Revenues
Corrugated Packaging
Corrugated packaging	$	729	$	717	$	2,231	$	2,178
Paperboard (a) (b)		68		31		140		110
	$	797	$	748	$	2,371		2,288
Building Products
Pine lumber	$	60	$	64	$	177	$	190
Particleboard		46		42		138		143
Gypsum wallboard		33		52		101		189
Medium density fiberboard		18		15		56		49
Fiberboard		11		13		33		41
Other		11		9		35		30
	$	179	$	195	$	540	$	642
Timber and timberland (c)
Fiber and other		N/A	$	20		N/A	$	59
Unit sales
Corrugated Packaging
Corrugated packaging, thousands of tons		810		839		2,504		2,535
Paperboard, thousands of tons (a) (b)		150		67		304		243
		960		906		2,808		2,778
Building Products
Pine lumber, million board feet		189		215		593		640
Particleboard, million square feet		117		119		372		396
Gypsum wallboard, million square feet		255		368		813		1,164
Medium density fiberboard, million square feet		34		32		110		106
Fiberboard, million square feet		52		75		170		228

(a)	Paperboard includes containerboard and light-weight gypsum facing paper.
(b)	Comparisons 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.
(c)	We no longer have a timber and timberlands segment as a result of the fourth quarter 2007 sale of our timberlands.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

     Our interest rate risk is primarily related to our variable-rate, long-term debt and to the financial assets and nonrecourse financial liabilities of special purpose entities. This risk is the result of changes in interest rates and also the use of different base rates and the timing of the quarterly interest rate resets on the financial assets and nonrecourse financial liabilities of special purpose entities. This risk could be volatile in light of current conditions in the financial markets and the erratic movements in LIBOR.

     Our variable-rate debt was $351 million at third quarter-end 2008 and $1 million at year-end 2007. A one percent change in interest rates on $351 million of variable-rate debt would change our annual interest expense by $3 million.

     Our $2.38 billion of financial assets of special purpose entities require quarterly interest payments based on variable rates referenced to LIBOR that reset quarterly. A one percent change in interest rates on these notes will change our annual interest income by $24 million.

     Our $2.14 billion of nonrecourse financial liabilities of special purpose entities require quarterly interest payments based on variable interest rates. The interest rates on these liabilities reflect the lenders’ pooled commercial paper issuance rates plus a margin. A one percent change in interest rates on these borrowings will change our annual interest expense by $22 million.

     The following table illustrates the estimated effect on our pre-tax income of immediate, parallel, and sustained shifts in interest rates for the next 12 months at third quarter-end 2008 on our variable-rate debt and our net financial assets and nonrecourse financial liabilities of special purpose entities, with comparative year-end 2007 information.

	Increase (Decrease)
	Third Quarter-End 2008									Year-End 2007
				Special									Special
	Variable			Purpose						Variable			Purpose
	Rate Debt			Entities - Net			Total			Rate Debt			Entities - Net			Total
	(In millions)
Change in Interest Rates
+2%	$	(7	)	$	5		$	(2	)	$	(1	)	$	5		$	4
+1%		(3	)		2			(1	)		—			2			2
-1%		3			(2	)		1			—			(2	)		(2	)
-2%		7			(5	)		2			1			(5	)		(4	)

Foreign Currency Risk

     In first nine months 2008, there were no significant changes in foreign currency risk from that disclosed in our Annual Report on Form 10-K for the year 2007.

Commodity Price Risk

     In first nine months 2008, there were no significant changes in commodity price risk from that disclosed in our Annual Report on Form 10-K for the year 2007.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

     Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the

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period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting

     There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     During third quarter 2008, there were no material developments in pending legal proceedings.

Item 1A. Risk Factors

     There are no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year 2007 other than the following.

Current conditions in financial markets could have adverse consequences on our ability to finance our operations.

     Current conditions in financial markets, which include the bankruptcy and restructuring of certain financial institutions, could affect financial institutions with which we have relationships and result in adverse effects on our ability to finance our operations. The possible effects of these conditions would include the possibility that a lender under our existing credit facilities may be unwilling or unable to fund a borrowing request, and we may not be able to replace any such lender. In addition, financial market conditions could have a negative effect on the ability of customers, suppliers, and others to conduct business with us on a normal basis.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     Issuer Purchases of Equity Securities

								Maximum
						Total Number		Number of
						of Shares		Shares That
						Purchased as		May Yet be
				Average		Part of Publicly		Purchased
	Total Number			Price		Announced		Under the
	of Shares			Paid per		Plans or		Plans
Period	Purchased			Share		Programs		or Programs
Month 1 (7/1/2008 — 7/31/2008)		—			—		—		6,650,000
Month 2 (8/1/2008 — 8/30/2008)		1,243	(a)	$	15.97		—		6,650,000
Month 3 (9/1/2008 — 9/30/2008)		—			—		—		6,650,000
Total		1,243		$	15.97		—		6,650,000

^(a) Represents shares purchased from employees to pay taxes related to the vesting of restricted shares.

     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, of which 1,650,000 remain to be purchased. 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. The August 4, 2006 and February 2, 2007 plans have no expiration dates. We have no plans or programs that expired in 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.

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Item 3. Defaults Upon Senior Securities

     None.

Item 4. Submission of Matters to a Vote of Security Holders

     None.

Item 5. Other Information

     None.

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.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TEMPLE-INLAND INC.      (Registrant)
Dated: November 4, 2008	By:	/s/ Randall D. Levy
		Randall D. Levy
		Chief Financial Officer
	By:	/s/ Troy L. Hester
		Troy L. Hester
		Corporate Controller and Principal Accounting Officer

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INDEX TO EXHIBITS

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		32
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		34
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		36
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		37

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