Kathryn McAuley – VP, IR Dan Fulton – President and CEO Tom Gideon – EVP, Forest Products Larry Burrows – President and CEO, Weyerhaeuser Real Estate Company Patty Bedient – EVP and CFO

George Staphos – Bank of America-Merrill Lynch Mark Connelly – Sterne Agee Gail Glazerman – UBS Mark Wilde – Deutsche Bank Chip Dillon – Credit Suisse Mark Weintraub – Buckingham Research Peter Ruschmeier – Barclays Capital

Thank you, Sharnay. Good morning.

Welcome to Weyerhaeuser's second quarter 2009 earnings conference call. I’m Kathy McAuley, Vice President of Investor Relations.

Joining me this morning are Dan Fulton, President and Chief Executive Officer; Patty Bedient, Executive Vice President and Chief Financial Officer; Tom Gideon, Executive Vice President, Forest Products; and Larry Burrows, President, Weyerhaeuser Real Estate Company. This call is being webcast at www.weyerhaeuser.com.

The earnings release material for this call can be found at our website or by contacting April Meier at 253-924-2937. Please review the warning statements in our press release and on the presentation slides concerning the risks associated with forward-looking statements.

Forward-looking statements will be made during this conference call. This morning Weyerhaeuser reported a net loss for the second quarter of $106 million or $0.50 per share, on net sales of $1.4 billion.

The loss includes the following after-tax gains and charges. A gain of $72 million or $0.34 per share for alternative fuel mixture credit, we began mixing at our five US mills in early April; a charge of $36 million or $0.17 per share for real estate impairment and pre-acquisition write-off; a charge of $30 million or $0.14 per share for corporate restructuring and asset impairment; a charge of $14 million or $0.07 per share for closures, restructuring and asset impairment primarily in Wood Products; a gain of $14 million or $0.07 per share on litigation and insurance settlements; a gain of $13 million or $0.06 per share on the sale of a closed box plant we retained from International Paper containerboard sale.

Excluding these items, the company had a net loss of $125 million or $0.59 per share. A GAAP reconciliation of special items is available on our website in the earnings information package.

Please turn to chart four in the earnings information package, as I will next discuss this waterfall chart. Chart four is the bar chart detailing the changes in contribution to earnings by segment from the first quarter to the second quarter of 2009.

This is presented on the basis of contribution to earnings before special interests and taxes. Changes in Weyerhaeuser’s segment earnings from the first quarter to the second quarter were as follows.

Beginning with the first bar on the left hand side of the page, Weyerhaeuser lost $142 million in first quarter 2009. Proceeding from left to right across the waterfall chart, we begin the discussion with Timberland.

Timberland earnings were $31 million higher in Q2. This improvement was driven by more non-strategic land sale, lower harvesting cost and higher volume.

Lower log prices partially offset this improvement. The Wood Products loss improved $29 million in the second quarter.

This improvement was driven by lower SG&A, lower manufacturing and lower raw material costs, as well as some model improvement in volume. Cellulose Fibers earnings were $39 million lower in Q2, resulting in a loss for the segment.

This was attributable to extended maintenance at two facility and lower prices. Average pulp prices declined $45 from the first quarter.

The Real Estate loss improved by $26 million in Q2. A favorable mix of business, land and lot sales, lower SG&A, and higher volume drove the improvement.

Corporate and other expenses were $34 million lower than in the first quarter. This improvement was primarily attributable to foreign exchange gains and pension and post retirement credit.

The final bar to the right of the page is second quarter loss of $61 million before special items. Please note chart one in the information package contains actual Q1 and Q2 contributions to earnings by segment and the total special items, interests, expenses and taxes.

I will now turn the call over to Dan Fulton. Dan?

Thanks, Kathy. In our earnings release this morning, I noted that we’ve seen signs of improvement in the housing market, but I also cautioned that it’s too early to declare victory.

Despite the encourage headlines about June new home sales and the turnaround in the Case-Shiller Home Price Index, there are indications that the housing market will undergo some minor downturns on its way to recovery. This means that our Timberlands, Wood Products and Real State businesses continued to operate in very uncertain market conditions, as we noted when we announced our dividend action earlier this month.

Later in this morning’s call Larry Burrows will share the hopeful signs we’ve seen in our real estate markets and some of the items tampering our outlook. As Larry goes through his explanation, it’s important to remember that we have multiple lines of business and the timing of improvement will be differential.

When homebuilding starts to improve, it will first benefit our Real Estate business, then Wood Products, and finally Timberlands. We welcome the positive signs we saw this week and we know that stronger markets lie ahead.

Our future success lies in making lasting changes to our cost structure, work that has our full attention and commitment. Since second quarter last year, we’ve achieved a 34% reduction in SG&A after adjusting for the sale of our Containerboard Packaging business.

This equates to approximately $450 million in annual savings. As both Tom Gideon and Larry will describe in a moment, we’ve achieved additional savings through operational improvements.

These steps address the challenges of the current market and create a more competitive cost structure that will provide significant long-term benefits in more robust market conditions. To provide more detail on the state of our current markets and the operational adjustments that we’re making, I’d like to turn the call over to our business leaders.

We will start this morning with Tom Gideon, who will provide details on our Forest Products segment.

Thanks, Dan. Second quarter market conditions continued to be challenging.

While we saw some indications of market stabilization, the rate of recovery is uncertain. We continue to focus our efforts on reducing costs and improving our performance.

Starting with Timberlands, referenced on chart five, second quarter earnings were favorably affected by non-strategic land sales and seasonally higher harvest levels. While the continued market slump with downward pressure on both domestic and export realizations, these declines were partially offset by lower operating and SG&A costs.

Although harvest levels did increase seasonally, overall harvest levels are down 30% compared with the second quarter of 2008. We expect harvest levels to decline further in the third quarter.

I should point out that the decline in our harvest levels varies by region. In the West, log prices are depressed because of the collapse of the California housing market.

We’ve reduced harvest levels by 35% compared with second quarter last year while we neared completion of the final (inaudible) of stands damaged by the December 2007 storm. We also had higher export log sales during the quarter due to our close ties with Asian customers and our determined marketing efforts.

Our key Japanese customers improved their market share despite lower post and beam housing starts. In addition, we have seen renewed demand for domestic quality Douglas-fir in China.

We have leveraged this opportunity to sell these logs at margins higher than we would have received from domestic customers. This is a prime example of the work we do to maximize the value from our logs.

In the South, harvest volumes were 23% lower when compared to second quarter of 2008. Most of this long reduction is in grade logs and we anticipate additional grade log deferrals in the third quarter.

We are continuing our early thinning [ph] program to improve stand values and servicing fiber log customers. Moving to Wood Products, please refer to charts six and seven.

We continue to adjust the levers that we can influence; balancing our production against demand, controlling our costs, maintaining our pricing discipline, and taking appropriate actions to improve our cash performance. Today, we are running about half of the facilities that we were at peak market conditions and have reduced staffing by a comparable amount over the same timeframe.

I should point out that more than 1,900 of those positions were eliminated this year alone. In the process, we are also making some fundamental changes to how we operate Wood Products that we will carry in the stronger markets.

This includes lowering product inventories by $68 million in the second quarter alone as we have effectively balanced production against demand and applied lean manufacturing principles to lower inventory levels in our replenishment system. While we are still not satisfied with our results, we are making progress even in due of revenues being down 46% and lumber realizations off by $58 a 1,000 compared to second quarter of last year.

We continue to rescale our business and reduced all of our costs. Earlier this month, we announced the permanent closure of our Taylor, Louisiana sawmill, our 16th sawmill closure since 2006.

Given our losses in lumber, we will take significant further curtailments across our lumber system in the third quarter. We also initiated further staffing reductions in mid-June, which will eliminate another 300 positions by the end of the quarter.

Turning now to Cellulose Fibers on chart eight, second quarter earnings were negatively affected by an extensive boiler repair at a Columbus, Mississippi operation and annual maintenance outages at two other facilities. Realizations declined by $45 per ton, but were partially offset through improved freight, fiber, energy, and chemical costs.

The business has continued to improve its competitiveness by aggressively reducing input, manufacturing, maintenance and SG&A costs. This focus on cost reduction and operating excellence positions the business to capture optimum value when the markets rebound.

I would also like to mention that once again we led the industry in safety during the past quarter. This is a real tribute to the caring and commitment of our employees during these challenging times, and we continue to see improved safety translate into improved operating performance.

I will now turn the call over to Larry Burrows.

Thank you, Tom. Good morning.

Housing margin conditions improved across all WRECO geographies during the second quarter. Record affordability, low interest rates, and modestly improved consumer confidence, combined with federal and California tax credits induced home buyers to enter the market.

WRECO’s Arizona and California markets demonstrated the greatest improvement during the second quarter, as they experienced increased traffic at greater number of home sales and lower cancellation rates relative to the first quarter. The Puget Sound and Washington DC markets also strengthened.

Modest market gains occurred in Houston and Las Vegas. These trends are reflected in the key indicators table on chart nine.

Comparing the second quarter of 2009 to 2008, home sales increased 6% and our cancellation rate declined significantly. However, other metrics remained well below 2008 levels.

Traffic decreased 33% compared to the second quarter of 2008 and closings fell by 47%. WRECO’s financial results reflect the slightly enhanced market conditions.

We recorded $50 million pretax loss in the second quarter, including $52 million in one-time charges. These charges include $2 million for restructuring, $11 million from terminating options on land in the states of Maryland and Washington, $5 million of impairing investments, and $34 million from impairments in virtually all of our markets.

We also realized gains of $16 million from the sale of land, lots, and partnership interests located in California, Nevada and Pacific Northwest. Excluding the gains on land and partnership sales and the one-time charges, WRECO lost $14 million on second quarter operations.

I have previously discussed WRECO’s strategy to sell approximately 4,000 lots, principally in Arizona, California and Nevada. We closed approximately 20% of these lots during the second quarter and are in active negotiations on the remaining properties.

Though we are somewhat encouraged by signs of potential recovery, the housing markets still face significant headwinds in the third quarter. Consumer confidence remains fragile.

It improved through much of the second quarter only to decline in June and July. Unemployment continues to rise.

Though the pace of foreclosures had slowed, the availability of foreclosed homes continues to place downward pressure on new home prices. Fannie Mae and Freddie Mac’s May 1st implementation of new appraisal standard creates a potential disconnect between a home’s contracted sales prices and its appraised value.

Earlier this month, the State of California exhausted its available tax credit funding. Though the federal credit is available through December 1st, potential buyers of a to-be-built home must purchase soon to ensure they can settle before the credit expires.

The combination of these factors threatens to delay the housing market recovery. WRECO expects to incur a greater loss from home-building operations in the third quarter compared to the second.

While we anticipate a comparable number of home closings in the third quarter, our mix will temporarily shift away from higher priced California homes in favor of lower priced Arizona properties. In the second quarter, Pardee [ph] Homes successfully sold and closed on much of its available California inventory before building its backlog with sales that we expect to close late this year.

In contrast, (inaudible) homes, which had little standing inventory in Arizona, sold primarily to-be-built homes during the second quarter. These sales will be reflected in third quarter closes.

We continued to adjust staffing, reduce the quantity of model homes and pair down [ph] unsold inventory. We have cut land spending to a bare minimum.

As Dan said, we believe that stronger markets lie ahead. However, numerous obstacles lie between current housing market conditions and a full sustainable recovery.

The actions we continue to execute are enabling WRECO to generate cash today and returning to profitability as our markets stabilize. I will now turn the call over to Patty to discuss the outlook for the third quarter.

Thanks, Larry, and good morning. While we believe that markets are stabilizing, we don’t expect a significant improvement in economic conditions in the third quarter.

Our focus will continue to concentrate on cost control and disciplined matching of supply with demand. I’ll begin the outlook with Timberland.

As Tom has already described, we expect to be deferring additional fee timber harvest as a result of weak prices for logs. This is especially true in the south where realizations for grade logs are expected to soften.

Export price realizations in the west are also likely to weaken somewhat. We anticipate the per-unit costs will be slightly higher due to lower volume.

Excluding the impact of non-strategic land sales, we expect that Timberland earnings in the third quarter will be lower than the second quarter. In Wood Products, we believe that low demand levels will persist.

While we may see some slight price improvements in selected products, we do not believe that it will result in significant earnings improvement. We continued to take additional downtime in order to balance our supply with demand.

Tom has already given you an overview of some of the additional actions we are taking in the third quarter, especially in our lumber system. Our increased focus on working capital and cost control should result in lower losses in the third quarter compared to the second.

In Cellulose Fibers, we expect pulp prices to stabilize in the third quarter. Pulp production is expected to increase due to less maintenance downtime.

This increased production and lower maintenance spending and input costs should result in improved earnings. We expect to blend slightly more alternative fuel in the third quarter compared to the second.

Overall, we expect earnings in our Cellulose Fibers segment to increase in the third quarter compared to the second. Larry has already shared the third quarter outlook for our Real Estate business where we anticipate the loss in our single-family homebuilding business to increase compared to the second quarter, primarily as a result of lower average closing prices driven mostly by a change in mix.

Now I’ll close my remarks with some selected financial comments. Our cash flow from operations improved significantly during the quarter, primarily as a result of improved operating results, receipts from alternative fuel tax credits and working capital reductions.

Our capital spending for the quarter, including reforestation, was approximately $40 million for a total of $107 million year-to-date. We anticipate capital expenditures for the year to be approximately $200 million.

At the end of the quarter, we had no borrowings outstanding under our $2.2 billion lines of credit, and we are in compliance with all debt covenants. We have debt maturities of approximately $400 million in the quarter and we will be making our semi-annual interest payments of approximately $150 million.

With that, I’ll turn the call back to Dan and I look forward to your questions.

Thanks, Patty. This quarter was one of continued challenges for three of our businesses and strong operational performance for the fourth.

Our Timberlands, Wood Products and Real Estate businesses are all feeling the effects of the weak housing market. In response, our Timberlands business is deferring harvest, while Wood Products continues to adjust its operations to match supply with demand.

Real Estate saw some improvement across the board, but expects to experience continued pressure on margins. Cellulose Fibers is our bright spot, as this business is generating cash from both operations and from the alternative energy tax credit.

As you’ve heard from several others this morning, we’ve made significant improvements in our cost structure, but we know more can be done and we continue our focus on identifying opportunities to further reductions. And now we’ll open the call up to questions.

Sharnay, we’re ready to take questions.

Thanks. Hi, everyone, good morning to you.

I guess the first question I had within Wood Products is, if you think about the next two to three quarters and eliminate the impact of seasonality and whatever trend we may see in the market per se, what kind of incremental benefit do you think is possible to be seen from your own efforts within the business from an earnings power standpoint, not necessarily next quarter, but say over the next two or three quarters?

Well, George, we have seen sustained progress as we rescaled our business over the course of the last six months. And we did see significantly improved earnings from operation as well as cash usage throughout the second quarter.

And in fact, I would note that for the month of June, we were still slightly negative from an earnings point of view, but with working capital reductions, we were cash positive. Now, we are the first to admit that one month is not a trend mate and that there is a lot of uncertainties still going forward.

But July at this point looks similar to June, and we expect that we’re going to continue to move forward across all the actions that we’ve taken and what we need to do additional as market conditions warrant. We are not waiting as others have mentioned for market conditions to improve or counting on that improvement, so we are going to adjust all of the levers that we have available to us to make this improvement occur.

As we all know, sustainability at this level is going to be a function of what price is, what we do with respect to demand and volume, and of course, what we can do to continue to reduce our costs. So we continue to do the levers that we have, including deferring harvest, including further curtailments on our operations.

We announced the closure of our Taylor, Louisiana sawmill, and of course we’ve taken additional staffing reductions, as I mentioned in the remarks, of about another 300 individuals throughout our organization. So our focus is going to remain on improving our cash usage, and we believe (inaudible) going to be on the basis of continued low levels of demand.

Okay. Appreciate the comments, Tom.

Maybe two quick questions to finish up -- first of all, how much were boiler and repair outages and impact of those things in the second quarter within Cellulose Fibers?

Say, George, could you kind of repeat the question for me?

Yes, sorry about that. How much was the overall effect from boiler repair and outages in the second quarter?

Okay. Are you talking about in terms of expense or --?

Yes, exactly.

Okay. Well, the expense for the Columbus boiler repair was approximately $30 million of maintenance expense spread out over a 45-day outage.

Okay. And I guess the last quick one, just out of curiosity, that box plant that you had not sold to IT that went to somebody else, which facility was that?

George, that was our facility in Honolulu, Hawaii, one that we had taken out early in the process of the transaction with International Paper.

Okay. Seemed like it was a good price you got for it.

Anyway, I’ll turn it over.

George, just one thing on the 45 days that Tom was mentioning on Columbus, we had 30 of that in the second quarter and 15 of it will be in the third.

Thanks, Patty.

Yes.

Thank you, George.

Thank you. Two questions.

First, Tom, you talked about activities that go beyond right-sizing, and you mentioned working capital. Can you give us a sense of those activities that are going to make the business look different when the volumes come back?

Most of what you mentioned just sounds like it’s right-sizing. I’m just curious, is there much going on beyond that to try to shift what this thing is going to look like when the recovery is here?

Sure, Mark. One of the activities that we are doing across our entire organization, and in fact, we are applying against all elements of our business system is applying the concept of lean manufacturing to sustainably and predictably improve our performance.

That involves looking across our supply chain, removing inventory buffers on a permanent basis, taking up waste wherever we can across our system and improving our operational reliability. And we apply that both to our operating facilities as well as to our business systems.

So we believe we’ve made some fundamental sustained improvements on our business system going forward.

And that will take your working capital down then on a sustainable basis as well?

Yes, we’ll take it down, but we should recognize that as markets improve and working capital goes up, we will be able to maintain it at a lower level than it would have been had we not under the actions [ph].

Great, perfect. Okay.

And a question for Dan, big picture question, when you think about your portfolio and obviously this is a tough time in a lot of businesses, when you think strategically, do you think that Weyerhaeuser needs to rethink its product diversification? When we look at the old portfolio, maybe some of the businesses weren’t great, but it was far more diversified than what you have now.

And that was -- those were decisions made over decades that have been pretty much reversed in the last two or three years. I’m curious how you are thinking about dealing with diversification as we get past this cycle.

Good question, Mark. I mean, clearly as we exited the Fine Paper business and we exited the Containerboard Packaging business, we are more reliant on US housing market.

And as we look forward, the Cellulose Fibers business gives us diversification away from the housing market and also puts us on a global market situation where we compete all over the world. So that’s a positive for us.

As we look at our Timberlands, we have opportunities in our Timberlands business to diversify earning streams in the future that will come from what we would call the bio-products and biochemical opportunities that emerge from our land. We’ve talked about that in some of our sessions such as in May so that -- I think, as we look at the Timberlands, we’ve got an energy potential in the future and a bio-products potential in the future.

We also have potential to expand beyond our borders in our position in South America. We’ve got a small position in Timberlands in China.

And so our focus would be to continue to build our Timberlands capabilities and opportunities, and I think that’s where we are going to find the diversification opportunities that will lessen reliance on the housing cycles in the US.

Very helpful, thank you.

Hi. Actually, maybe just taking the opposite side of that equation when you look at the portfolio and you start seeing markets recover and you may have some more opportunity to sell, do you think you might consider further restructuring beyond what you’ve done?

Gail, we continue to evaluate the performance of the portfolio on an ongoing basis, as we’ve shared before. Our foundational business is our Timberlands, which includes the land, the timber, the minerals, and oil and gas rights that come with that, as well as what I mentioned in the conversation with Mark, biomass and energy potential.

Our other businesses, the challenge that we have for them is that they operate on top quartile basis. We have significant scale in our Wood Products business, and we believe that that has significant earnings power and cash flow generation potential for us, as the housing market recovers.

Our Real Estate business has been a top quartile performer in the past, and as we come out of this cycle, our focus will be getting back to performance at that prior level. And our Cellulose Fibers business, as you know, is focused on high-value absorbance.

But the goal for each of those is that they would be able to perform at peak levels in top quartile as compared to peers, that they would be able to generate cash for the portfolio as well as for their own internal needs, and we have the ability on an ongoing basis to measure their effectiveness internally in the valued Weyerhaeuser company as compared to alternatives. So I think the message from me would be that we continue to evaluate the portfolio.

We like the businesses that we have today, but our goal is for them to be top performing.

Okay. And a couple of questions for Patty.

Patty, how much cash did you actually receive from the fuel credits in the quarter? And can you also give an update on the status of your loans to the pension plan?

I thought that maybe they were kind of callable at six months or something like that when they can.

Yes. In terms of the alternative fuel tax credits, we received actual cash receipts in the quarter of right around $80 million and the bulk of the remainder in the -- right after the end of the quarter, so in this month.

In terms of the loans to the pension plan, there was no activity on those loans. We did extend the payment terms on some of them for another six months.

I would expect that we would see some of that cash coming back late in the year, but probably the bulk of it after the first of the year.

Okay. And Dan or Patty, I don’t know if either one of you want to comment on the decision to cut the dividend again, especially in light of the improved cash flow in the second quarter.

I’ll comment, Gail. The decision was made by the Board, as we said when we announced it, to enhance liquidity and provide financial flexibility in light of what we continue to believe is an uncertain market.

So the point we are making this morning, we are pleased with the activity in the second quarter. As Larry talked about, we saw a turnaround in housing.

We started to see some improvement in Wood Products, but we are not convinced that it is sustainable at this point. And we think that we will have significant uncertainty during this recovery until we see unemployment peak and start to come down, and consumer confidence be restored and we still have significant issues on dealing with the foreclosed housing inventory that exists.

And as Larry pointed out, interestingly, the boost that we got from the tax credit programs, both federal and state, can provide some disruption in the marketplace. So we benefited from it, but when those tax credits go away as they have in California, then there is an adjustment.

So the decision of the Board was focused on -- we continue to believe there is a significant amount of uncertainty in the direction of recovery and then couple that with the desire to have greater flexibility and liquidity as we move forward.

Okay, thank you.

Good morning. I had some questions around the timberland.

Is it possible to get a sense of how much the gain was in the quarter on that -- the non-strategic land sales and also where those sales occurred at?

Sure, Mark. As you know, we have an ongoing land adjustment program.

So we had a number of parcels that we are looking at to see if there is an opportunity to exchange or sell. We had some non-strategic timberland sales this quarter.

The bulk of that was focused in a comfortable region in Southwest of Washington and it was for about 14,000 acres.

Okay. And the gain on that?

Tom?

Overall what we had, we saw the sales price for that was about $34 million for the 14,000 or approximately $2,500 an acre. This was property that was very heavily oriented towards Hemlock Stands as opposed to Douglas fir.

It was an area that had not only seen some salvage activity as a result of the December 7th storms, which still has some residual impact that they are still resident in the stands themselves. And it’s also one that, as an entity, is significantly young in its age class.

It only averages 24 years, so significantly high percentage of pre-merges on that particular set of property. So when we look at everything and put all of that in to consideration, we thought it was overall good valuations for us, Mark.

Okay. Couple of other questions, Tom, on the timberland.

I noticed just digging back in the details that your outside sales of southern timber were up about 2.5-fold year-on-year, but when I look at the depletion in terms of kind of cubic meters in the south, it was down sharply. Can you help us explain -- help us understand what’s going on there?

Well, in some respect, that’s the fact that we have looked at outside sales as we’ve reduced the usage internally, and it’s just the balancing of that against our usage against what’s available in the marketplace.

Okay. And then in your commentary, you kind of leave open in timberland a question of additional non-strategic sales in the second half.

Can you provide us with any thoughts on what we might see there?

Yes, Mark, this is Patty. As I made the comment about excluding the non-strategic timber sales, as you know, we have an ongoing program of improving our portfolio through timberland sales and its changes.

And just to give you some color on that, I just -- in terms of giving you the guidance for the third quarter, I have excluded those. They are lumpy, so it just depends upon what we find in terms of good value where we look at potential to improve that portfolio.

So we really -- I think Tom has already taken you through the changes in the second quarter and we really aren’t forecasting what level that might be in the quarter.

Well, I guess to come right to the point, I mean, there were reports about six months ago about you guys having a lot of land for sale potentially in the Pacific Northwest. I think many of us have written about that.

Aside from this sale of 14,000 acres, we really haven’t seen much. I’m just trying to get a sense of whether we should assume much in a way of land sales as we look into the second half.

Again, Mark, we just don’t comment or speculate on rumors that are out the marketplace regarding the potential land sales. One thing that I would like to go back and reiterate was when you were talking about the third-party sales, you might have been referring it back far enough that when we sold CBPR, a lot of the internal sales of fiber logs have been transferred into third-party sales as a result of them going to International Paper.

Okay. And finally, just a question on Wood Products.

Volumes are off sharply. We’re all uncertain about when the housing market is going to recover.

Would you consider in your Wood Products business things like perhaps creating some joint ventures that might help to rationalize things on the supply side, say, in the engineered wood type business?

Mark, again, we are focused first and foremost on improving what we have and what we have -- what we need to do in order to make the sustained improvements that need to happen. But again, as Dan has mentioned, we will consider any opportunity that could potentially add value and would be accretive to the return to our shareholders.

Okay, very good. Thanks very much.

Next question. Operator?

Hi, good morning. First question is on the homebuilding unit, and I was just curious, do you have -- you used to tell us or you do tell us that your rough -- your tax basis for the timberland is around $1 billion.

What would be the similar number at this point for the homebuilder?

I think what we’ve said, Chip, as it relates to Timberlands is that our tax basis is less than $1 billion. So it is well under what our book basis and fair market value basis is.

In WRECO, in our Real Estate business, our tax basis exceed our book basis, primarily as a result of the impairments that we’ve taken because we can’t take those for tax purposes until we actually dispose off the land. So it would be greater than book value.

And could that be by as much as -- looking at all the impairments and I can’t add them up right now, but it would look like there could be as much as $1 billion gap in the other direction there.

Chip, this is Larry. I think when we chatted in New York a couple of months ago, we said that I think we had a book value -- and this is going back to the first quarter of about $1.6 billion and there was about a little less than $1 billion -- in addition, there was about $1 billion of impairments that we have on top of that.

Got you, okay. So 2.5 for tax purposes at this point [ph].

And I guess, Larry, you are mentioning the lot sales, and just to make sure I got that right that there are about 4,000 lots you’re actively marketing in California, Nevada and Arizona, and you got about 20% of them sold. I’m kind of guessing here, but did you -- are you getting, what, roughly -- I mean, it’s like 10,000 a lot sort of where prices are moving right now?

It really varies greatly because of not only the location but kind of the condition of the loss. So something in Arizona would be different maybe than something in Vegas versus Southern California.

And also -- are they -- all of them are entitled, some of them have some land spend that’s already been part of it, but some of them don’t. And so it varies.

And so something that’s entitled, then in the raw, you get -- it would be a little bit lower price if something is entitled, but also has some land development spending that’s been associated with it.

Got you. And last question is, Dan, at the top of the call, you said that when we see housing recovery, you expected the WRECO to benefit first and then Wood Products and then Timberlands.

I’m just kind of curious. I always thought there was a bit of lag in terms of the ability to get pricing up on the houses.

Obviously, the units would improve, but is there a chance that maybe next year we would see Wood Products lead the way only because there could be a better chance that repair and remodeling could lead the way?

My take on the sequential recovery is that we’ve had disappearance of the significant number of participants in the homebuilding business, the private builders. And as the recovery begins, the larger, well-capitalized public builders should have the capacity to take advantage of that first, because they have got a land position and lots to build on.

And they don’t need a construction loan from a bank. And so our experience is we’ll start to see that uptick earlier, and then we’ll translate into home -- into Wood Products.

In Wood Products, there is a bit of a lag and there is more of an overcapacity issue in the Wood Products arena. And then Wood Products producers, as their activity starts to pick up, they need to earn a margin on manufacturing and that ultimately then translate in the log values.

And it’s going to be differential by market and it’s going to be very regional, but it’s a general comment.

Got you. Okay, thank you.

Thank you. Just following up on the timing of things getting better and perhaps also things getting worse.

Do you think that the Timberlands business, which as you noted tends to be lagged, has seen the full brunt of the effect of the downturn, or do you expect that there will still be more downward pressure, particularly on private market values for timberland?

Markets we look at in terms of just the log usage and takeaway as well as pricing, I think Timberlands is reflecting what the markets have to offer in Wood Products and up through housing today. Again, what happens there will mirror what the recovery that we see throughout those components of our portfolio.

Okay. But so -- as long as things don’t get worse in housing, you think that Timberlands essentially have bottomed though?

Is that a fair characterization of what you just said?

I would say -- I was trying to say that this is going to mirror that and we still believe there is some uncertainty going forward, and we are not able to pinpoint with the high degree of accuracy on where we are at in the system, but it does appear that we’ve seen some relative stabilization across demand going all the way from housing and through Wood Products and then eventually down through to Timberlands.

Okay. I’m sorry, I may have missed it, but what did you say the gain on the FIA sale had been?

I didn’t mention what the gain was. I mentioned that the total sale price for that sale was approximately $34 million.

And the gain, Mark, was just under $30 million.

Okay. Thank you very much.

Thanks, and good morning. Couple questions.

Is it possible, Tom, to share with us the amount of gains that you may have had in the first quarter and also in the year-ago quarter? I think they were much lower?

Peter, could you help me out a little bit more about what specific gains you’re referring to?

I’m sorry. The non-strategic land sales gains in the timber business.

Okay. And you are asking what we are year-over-year?

Well, in other words, you shared with us what the gain was in the second quarter. I’m curious to be able to have an apples-to-apples comparison.

I'm curious on how much gain you may have had embedded in your reported numbers in the first quarter and in the year-ago quarter for Timberlands.

I was hoping that -- I just don’t have -- really available to me, but something that I think Patty can get back to you.

I’ll get back to you, Pete, on that.

Okay. And I’d also be curious, Tom, to the extent you can comment on your harvests in terms of what you would characterize a saw timber versus pulpwood and has that shifted much over the last year or so.

Well, certainly over the last six months, we’ve started to see some reduction in our pine grade as compared to our fiber in the south [ph]. And we expect that that’s going to continue, Peter, as we take off our harvest deferrals up a little bit going forward in the third quarter.

Okay. And Tom, also you mentioned your -- some of your commentary on log exposure to Japan, I’m curious if you could comment on the demand and pricing trend you’re seeing for logs and lumber outside of Japan and other Asian markets, whether it be China, Korea or elsewhere.

Peter, as I mentioned, we are starting to see some renewed demand in China for a domestic log that previously wasn’t something that the export market was looking for. So we’re exploring that.

It’s had good margins compared to our domestic alternative, and we think that that can move into a very fruitful market for us as things progress.

Okay. Just lastly if I could, maybe a question for Dan -- I'm curious, Dan, on what you’d be willing to share your thoughts on the timber deed structure announced recently, and I’m sure you’ve looked at every structure under the sun, but can you share any thoughts on whether that might be something applicable for Weyerhaeuser?

I’m not able to comment on that today, Peter.

Okay. Fair enough.

Thanks, guys.

Yes. Just a couple of cleanups.

One, it looked like the tax rate came down quite a bit quarter-to-quarter. Can you comment on that, Patty?

You got it, Mark. As you think about our tax rate, in the first quarter, our tax rate for the year, we were looking at about 38%.

As we look at it now at the end of the second quarter, our effective tax rate is around 36%. So you had about 2% or somewhere around $10 million of cumulative rate cleanup for the quarter -- or for the year-to-date that runs to the second quarter.

And then we had about $13 million, just over $10 million of discrete items in the quarter for some state tax, deferred taxes, as well as some FIN 48 charges. It’s about -- going forward the tax rate for the year, as we sit here today, we’re looking at just under 36%.

Okay. And I also noticed -- it looked like SG&A came down sequentially about $24 million.

Is that level we saw in the second quarter, is that a new sustainable level?

Mark, I think what you’re going to see is continued decline in SG&A. As I mentioned in my remarks, on a year-over-year basis, our SG&A is down $450 million at a run rate level.

And we are continuing to take out costs, and so you should expect to see that number to continue to decline.

Okay. Very good, Dan.

Good luck in the third quarter.

Thank you.

Thanks for joining us on the call this morning. Just a couple of wrap-up comments.

I want to emphasize that we are doing business in a changing environment with varying degrees of uncertainty related to the economic situation, consumer confidence, and in addition, the political environment. Our current focus continues to be to respond to market opportunities while maintaining a focus on driving cost down for long-term sustainable benefit.

And we believe that our portfolio of the building blocks that we have in our portfolio and their relationship to the new energy and climate change policies that are being developed offer us new opportunities for our biomass, and we believe we will see benefits from our longstanding practices of sustainable forestry. And finally, our strategic view is the portfolio of assets that we have are well positioned to take advantage of that changing environment.

I appreciate your attention today. As always, follow-up questions can be directed to Kathy.

Kathy, any final comments?

No, I don’t believe so, but I’ll be back in my office shortly and I’d be happy to take any of your questions.

Thank you very much.

Have a good day.