Temple-Inland Inc. CEO Discusses Q3 2010 Results - Earnings Call Transcript

Temple-Inland Inc. CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Temple-Inland Inc. (

TIN

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Q3 2010 Earnings Call Transcript

October 20, 2010 9:30 am ET

Executives

Chris Mathis – VP, IR and Treasury

Doyle Simons – Chairman and CEO

Pat Maley – President and COO

Randy Levy – CFO and Treasurer

Analysts

Chip Dillon – Credit Suisse

Mark Wilde – Deutsche Bank

Rick Skidmore – Goldman Sachs

Mark Weintraub – Buckingham Research

Mark Connelly – CLSA

Peter Ruschmeier – Barclays Capital

Gail Glazerman – UBS

George Staphos – Bank of America/Merrill Lynch

Presentation

Operator

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Previous Statements by TIN
» Temple-Inland Inc. Q2 2010 Earnings Call Transcript
» Temple-Inland Inc. Q1 2010 Earnings Call Transcript
» Temple-Inland Inc. Q4 2009 Earnings Call Transcript
» Temple-Inland Inc Q3 2009 Earnings Call Transcript

Good morning. My name is Terese and I will be your conference operator today. At this time, I would like to welcome everyone to the Temple-Inland third quarter 2010 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

I would now like to turn the call over to Chris Mathis, Vice President of Investor Relations and Treasury.

Chris Mathis

Good morning. My name is Chris Mathis, Vice President of Investor Relations and Treasury for Temple-Inland and I would like to welcome each of you who have joined us by conference call or webcast this morning to discuss the results for third quarter 2010. Joining me this morning are Doyle Simons, Chairman and Chief Executive Officer of Temple-Inland; Pat Maley, President and Chief Operating Officer and Randy Levy, Chief Financial Officer.

Please read the warning statements in our press release and our slides concerning forward-looking statements as we will make forward-looking statements during this presentation. In addition, this presentation includes non-GAAP financial measures. The required reconciliation to GAAP financial measures can be found on our website at www.templeinland.com.

This morning, we will give a presentation on the results for third quarter 2010. After the completion of the presentation, we will be happy to take your questions. Thank you for your interest in Temple-Inland and I would now like to turn the call over to Doyle Simons.

Doyle Simons

Thank you, Chris. Good morning, everyone and welcome. We had a very good quarter as our employees delivered solid operating results, return on investments and cash flow from operations, despite continued tough economic conditions. Excluding special items, net income was $0.41 per share. This compares with net income excluding special items of $0.19 per share in second quarter 2010 and $0.24 per share in third quarter 2009.

Special items for the third quarter 2010 after-tax were $80 million or $0.72 per share, including a tax benefit of $83 million or $0.75 per share, related to the Cellulosic Biofuel Producer credit, which Randy will discuss in more detail in a few minutes and a charge of $3 million or $0.03 per share, primarily related to by Box Plant Transformation II.

In Corrugated Packaging, we had a record quarter. Our mills performed exceptionally well. And we continue to drive down our converting costs through Box Plant Transformation. We generated $109 million of cash from operations and reduced long-term debt by $36 million in the quarter, consistent with our financial priorities.

Now, let me specifically address each of our segments. Corrugated Packaging

In Corrugated Packaging, segment operating income was $121 million, the highest quarterly operating income ever for this business. This compares with $63 million in second quarter 2010 and $94 million in third quarter 2009.

Corrugated Packaging ROI in the quarter was a record 24%. Our mills ran extremely well in the quarter and set a new quarterly production record. On the box plant side, we continue to realize the benefit of Box Plant Transformation through lower converting cost.

We also benefited from higher box prices, lower input cost and less mill maintenance down time in the quarter. Our average box price was up $31 in the third quarter compared with the second quarter. Compared with February, which is when we began implementing the January linerboard price increase in the boxes, our September average box price was up $93 per ton. Our current box price is up approximately $6 compared with the third quarter average.

In terms of absolute input costs, comparing third quarter 2010 with second quarter 2010, input costs were mostly down with OCC down $6 million, virgin fiber down $6 million, freight down $5 million, energy down $1 million and chemicals up $2 million. Compared with third quarter 2009, input costs were up with OCC up $26 million, freight up $8 million, energy up $6 million, virgin fiber up $5 million and chemicals up $3 million.

Our box shipments were up $0.03 or 1% in third quarter 2010 compared with third quarter 2009. Industry box shipments were up 3% in the quarter. Our shipments versus the industry were against a much tougher comp as our shipments were flat in third quarter 2009 while industry shipments were down 8%.

As we reminded everybody on the second quarter call, seasonally our box shipment are normally down in the third quarter compared with second quarter. And our box shipments were down 23,000 tons in the quarter compared with the second quarter. Excluding seasonality, we continue to see slow but steady improvement in box demand.

We took 4000 tons of maintenance downtime in the quarter. This low level of maintenance downtime coupled with the fact that as I previously mentioned, our mills ran well in the quarter, allowed us to begin to replenish our inventories from their unsustainably low levels.

We will continue to rebuild inventory toward our optimal range in the fourth quarter. We have 13,000 tons of maintenance-related downtime scheduled for fourth quarter 2010.

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