731939--2/23/2010--TEMPLE_INLAND

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{tax, income, asset}

{condition, economic, financial}

{cost, regulation, environmental}

{debt, indebtedness, cash}

The profitability of our business is affected by changes in raw material and other costs. The corrugated packaging and building products industries are cyclical in nature and experience periods of overcapacity. We are subject to environmental regulations and liabilities that could have a negative effect on our operating results. Further downward changes in demand for housing in the market regions where we operate could decrease profitability in our building products segment. Current conditions in financial markets could have adverse consequences on our ability to finance our operations. If certain internal restructuring transactions and the distributions of Forestar and Guaranty are determined to be taxable for U.S. federal income tax purposes, we and our stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities. If the sale of our strategic timberland did not qualify for installment method reporting for U.S. federal income tax purposes, we could be required to fund significant U.S. federal income tax liabilities the payment of which we believe to be deferred. If the credit ratings of a bank issuing letters of credit in our timberland financing transaction are lowered below designated levels and we failed to secure substitute letter of credit issuers, we could be required to fund significant U.S. federal income tax liabilities the payment of which we believe to be deferred. We have interest rate risk in connection with our financial assets and nonrecourse financial liabilities of special purpose entities.

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731939--2/23/2010--TEMPLE_INLAND_INC