Kathryn F. McAuley - Vice President of Investor Relations Daniel S.

Fulton - President and Chief Executive Officer Thomas F. Gideon - Executive Vice President, Forest Products Lawrence B.

Burrows - President and Chief Executive Officer, Weyerhaeuser Real Estate Company Patricia M. Bedient - Executive Vice President and Chief Financial Officer

Gail Glazerman - UBS Securities Richard Skidmore - Goldman Sachs Peter Ruschmeier - Barclays Capital Mark Wilde - Deutsche Bank Mark Weintraub - Buckingham Research George Staphos - Banc of America-Merrill Lynch Steven Chercover - D.A. Davidson & Co.

Anna Torma - Soleil Securities Claudia Hueston - J.P. Morgan

Thank you, Brandy. Good morning.

Welcome to Weyerhaeuser's fourth quarter 2008 earnings conference call. I'm Kathryn 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. The call is being webcast at www.weyerhaeuser.com.

The earnings release and material for this call can be found at the 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 in the fourth quarter of $1.212 billion or $5.73 per share on net sales from continuing operations of $1.8 billion.

This includes an $827 million or $3.91 per diluted share goodwill impairment in our iLevel and Cellulose Fibers businesses writing off all of the goodwill in these businesses, real estate impairment related after-tax charges of $313 million or $1.48 per diluted share, an after tax gain of $149 million or $0.70 per diluted share on the ownership restructuring of asset in Uruguay, an after-tax charge of $33 million or $0.15 per diluted share for closure and restructuring activities in wood products and corporate activity, an after tax gain of $21 million or $0.10 per diluted share for early extinguishment of debt. Excluding these items, the company had a net loss after tax of $209 million or a loss $0.99 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 discuss the waterfall chart.

Chart four is the bar chart detailing the changes in the contribution to earnings by segment from the third quarter of 2008 to the fourth quarter of 2008. This is presented on the basis of contribution to earnings before special items, interest and taxes.

As noted in the first bar on chart four in the third quarter 2008, the company earned $17 million before special items, interest and taxes. Changes in Weyerhaeuser's segment earnings from the third quarter to the fourth quarter were as follows.

Proceeding from left to the right across the waterfall chart, we begin the discussion with Timberland. No land sales and reduced timber volumes resulted in lower Timberland's earnings of $45 million.

Significant declines in number and OSP prices, and weak volumes throughout our product lines were the main contributors to the $90 million reduction in wood products earnings. Falling coal prices and market related downtime reduced cellulose fiber earnings by $13 million.

There was no Containerboard, Packaging and Recycling activity in the fourth quarter. Whereas the third quarter contained one month of CBPR earnings.

This had a negative $8 million impact. The loss on land sales at Weyerhaeuser Real Estate companies of $130 million was the most significant factor in the $62 million decline in retail earnings.

Corporate and other contributed $12 million less. Foreign exchange was the largest factor in reduced earnings.

The final bar at the right of the page is the fourth quarter 2008 pre-tax loss before special items of $213 million. Please note chart one in information package contains the actual Q3 and Q4 contributions to earnings by segment excluding special items, interest, expenses and taxes.

Lastly I want to point out that our tax rate for the continuing op -- for continuing operations for the year is now approximately 41%. This excludes Uruguay restructuring gains and the goodwill impairment.

I'll now turn the call over to Dan Fulton.

Thank you, Kathy. And good morning to everyone on the call.

When I spoke to you in December, I mentioned the conditions in all of our markets had significantly deteriorated since the end of the third quarter. I'd also said these were some of the worse conditions in my career, and we foresaw a continued weakening of the economy.

As this morning's sobering results indicate that prediction came true. Single family new home construction has nearly come to a standstill.

During the fourth quarter alone, annual construction plummeted to a rate we haven't seen since 1959. Not only have we seen a 77% drop in housing starts since 2005's peak level of 1.7 million but the pace of this decline has accelerated.

By 2007, starts had fallen to a level of 1 million. In 2008, they plunged to 620,000 and by December, starts had dropped to an annualized rate of 398,000.

Story in the repair and remodel market is the same. Tighter credit and fears of possible unemployment have caused people to delay projects they might have undertaken only a few months ago.

As a result, with products are barely moving and what is selling is going for prices substantially below third quarter levels. These figures demonstrate the complete capitulation of the consumer in the last half of the fourth quarter.

It's not surprising. Consumer confidence has now soaked to its lowest levels ever as buyers face an environment of uncertainty.

They wonder what congress will do and if its action will help stem this free fall. Everybody they read thousands of job cuts and wonder if they're next.

In this environment, even qualified buyers have decided to sit on the sidelines rather than take advantage of lower home prices. Such conditions obviously affect our Real Estate, Wood Products and Timberland businesses.

But the bad news doesn't stop there. Over the past couple of years, Cellulose Fibers has provided a bright spot due to our competitiveness and a weaker dollar.

However, the rebound in the US dollar during the quarter, combined with increased weakness of the global economy took its toll on pulp prices. All of our markets are facing extremely difficult conditions.

In response, we have moved to align our production to the rapidly deteriorating markets and to lower cost. At the moment, Tom Gideon and Larry Burrows will outline in detail the actions they've taken and will take in the coming months.

Patty Bedient will provide the first quarter outlook and explain the goodwill charges that we reported this morning. Based on today's results, it may seem hard to believe that the steps we've taken so far have made a difference.

But we're dealing with a market that's weakening faster than anyone envisioned. So far, we have taken steps to reduce overhead by 375 million and have eliminated significant production.

We recognize that these are unprecedented conditions which require an unprecedented response. We are accelerating the necessary and tough decisions to get us through this protracted down cycle and to position ourselves for the market upturn.

At this time, I'd like to turn the call over to Tom and Larry who will go through their specific areas in detail. Tom, I believe you're first.

Thanks Dan. As you've just heard, we're facing some extraordinarily challenging markets and we're committed to taking the necessary steps to improve our performance under these conditions.

In this portion of the call, I'd like to detail some of the actions we are implementing in our Wood Products, Cellulose Fibers, and Timberland businesses. Because our Wood Products business was the most heavily affected by the current financial situation, I will spend most of my time discussing what we're doing in that business.

However, be assured each business in the forest product segment is responding to this need to act with the same discipline and sense of urgency. Prices in sales volumes for building materials fell during the fourth quarter.

As we have throughout this downturn, we continue to make operating adjustments to balance our production with declining demand. Today, virtually all of our facilities are experiencing some degree of reduced operation; both lumber and OSP are now running at a rate approaching 50% of capacity.

For engineered products, we are operating our mills at less than one-third of their capacity. Since the market peak in 2005, North American lumber demand has dropped 30%.

During the same period Weyerhaeuser production has declined 32%. In addition to volume impact, we've also seeing significant price decline.

For example, we have not seen Douglas-fir fir pricing at these low levels in 25 years. In response, we are monitoring demand and supply on a weekly basis and making real time adjustments to our operating schedules to more aggressively mange our response to these unprecedented market conditions.

In addition to modifying operating postures, we are also making tough decisions about permanent capacity. In just the past 11 days, we have announced the closure or indefinite curtailment of lumber and veneer operations at four mills in Aberdeen, Washington; and Pine Hill, Alabama.

These are in addition to the seven operations we either closed or indefinitely curtailed in 2008. In the coming weeks, we will continue to assess the market situation and make additional operating decisions as appropriate.

From January 2008 through today, we have eliminated approximately 2700 positions in our iLevel business due to closures, sales or modified postures or nearly 25%, of our total operational and staff roles. This translates into a total reduction of $175 million in payroll costs.

For 2009, we've reduced our capital spending by 50%. We will continue to fund only those projects critical to maintaining optimal and operating performance, ensure safety and meet environmental regulations.

We have restricted or eliminated discretionary expenses such as travel and training and all in all we are challenging all of our employees to find ways of doing every aspect of their jobs faster, better, cheaper and of course safer. Our immediate goal is straightforward; to get to a core set of operations that can be cash neutral in this severely depressed market.

These assets will then serve as the platform or significant operating returns when the marked rebounds. While we firmly believe that the long-term prospects for residential housing demand are strong, we recognize the current conditions in the home building industry warrants severe cost conservation actions.

That is why we were taking unprecedented steps across all areas of our business to save cost. Turing to Cellulose Fibers, prices and volume declined due to the dramatic changes in global market conditions.

We continue to improve our operating efficiencies into the quarter. This was offset by the sudden severe declines in market pulp prices and demand.

In response we adjusted our production to meet declining demand and reduced production by 16,000 tons. We will continue to match production with demand by appropriately adjusting capacity utilization.

In November, we began actions to dramatically reduce our spending in key areas, including overtime, chemical usage, enterprising, staffing and the use of outside contractors. We expect to start seeing the results of these actions this quarter.

In addition, we've reduced 2009 capital. Combined with these caps -- these cost reduction actions, we believe Cellulose Fibers is well positioned to meet these challenging market conditions, given our efficient operations and strong presence in the fluff, pulp, and specialty fiber markets.

Moving to Timberlands, we are dealing with lower harvest levels in response to deteriorating market demand. Harvest levels in the fourth quarter were down approximately 13% from the third quarter due to market declines and adverse weather conditions.

For the year, harvest levels were essentially flat to 2007. It should be noted however that nearly one third of the harvest in the west was associated with the need to harvest wood damage by the severe storms that struck the northwest in December 2007.

Following the reduction in demand, domestic log prices were also lower while export realizations were up slightly as our export markets remain steady. Volumes to Japan were comparable to 2007 levels.

During 2008, we took advantage of our experience in Asia to expand our sales to the Korean Hemlock market. We had improved lease revenue from minerals during the fourth quarter, primarily for leases originating in the Hainesville shale region.

Looking across the entire company, I would dearly miss if I didn't recognize our employees for their outstanding safety performance in 2008. We had our safest year ever and turning fewer and less severe injuries than ever before.

Given the market and operational challenges we faced this past year, this was truly a superior achievement on their part. And now I'll turn the call over to Larry.

Thank you Tom, good morning. As Dan mentioned, what started as a dramatic deterioration in the housing and financial markets, is now significantly affecting the overall economy.

Rising unemployment and economic uncertainty have driven consumer confidence to the lowest levels since the index began in 1967. The supply of customers has become very limited as potential home buyers have lost confidence to make major purchase.

Against this backdrop, foreclosure activity is accelerating, driving up inventories of unsold home and placing downward pressure on prices which continue to decline in all markets. Conditions in our markets have eroded considerably in recent months.

For the middle of last year, there were signs that the Washington D.C. market, one of the first to enter the downturn might begin to stabilize.

Any hopes of stabilization was dashed during the fourth quarter with the rise of unemployment and the collapse of consumer confidence. Phoenix, Las Vegas and the Inland Empire in California remain our most challenged markets.

The Houston and Pacific Northwest markets which had remained relatively steady through the third quarter and now deteriorating. This deterioration is evidenced in our key indicators on chart nine.

Comparing the fourth quarter of 2008 to -- through 2007, traffic decreased 33%, sales fell 44% and closings were off 53%. Our backlog of homes sold but not closed dropped to slightly more than two months.

Our average sales price was down 13% from 2007, consistent with a 15% new home price decline nationally. In the past we've discussed the actions we are taking to adjust to this difficult operating environment.

We have cut land acquisition and land development spending, adjusted staffing, reduced work in progress, closed communities and repositioned others with smaller, less expensive product. Efforts in all of these areas are ongoing, but are insufficient.

We reviewed our homebuilding projects, land portfolio for opportunities to generate cash and avoid future development spending. This effort and the increasingly uncertain timing of recovery resulted in the change in our land strategy for certain projects.

We decided to sell the land rather than hold it for development. Consistent with this strategy in the fourth quarter, we sold land, eliminated option and impaired land identified for future sale.

These land related activities account for 469 million of our 630 million fourth quarter pre-tax loss as follows. $130 million from divesting land in Arizona and California, 58 million from eliminating options on land in virtually all of our markets and 280 million from impairing land we are likely to sell in the future.

This land is located in Arizona, California, Nevada and the Pacific Northwest. An additional 135 million in asset impairments relates to communities where we continue to operate.

We also incurred restructuring charges of 10 million. Excluding the loss on land sales and the non-cash charges I just discussed, RECO recorded a loss of 16 million on fourth quarter operations.

Our local managers are experienced and capable and together we will successfully guide RECO through the exceptionally difficult operating conditions we continue to experience. The actions we are taking position us to generate cash and return to profitability as our markets stabilize and recover.

I will now turn the call over to Patty.

Thanks Larry, and good morning. Well, as you've already heard the start of the year has been exceedingly challenging and we expect it will continue throughout the quarter.

I'll begin the outlook with Timberland. Fee harvest volume is expected to decrease in both the west and south.

Traditionally the first quarter is seasonally weaker than the fourth, and the market curtailments and shutdowns in mills across all geographies will only serve to exacerbate this trend. In the West, export prices are expected to decline due to the slowing Japanese housing market.

Domestic realizations should remain weak. Prices realized in the South are anticipated to decrease although we anticipate a higher mix of grade log compared to the fourth quarter.

We expect logging and handling cost to be somewhat less due to lower diesel cost and improved salvage cost in the west. Overall we expect the Timberlands earnings will be comparable to the fourth quarter.

In wood products, prices and volumes across all product lines continued to be anemic. No curtailments in our geographies and product lines as Tom described are expected to be the norm as we adjust production to low demand level.

Further shutdowns are likely if markets do not improve. As a result we expect that first quarter operating losses could be similar to the fourth quarter.

Pulp prices and sales volumes are expected to decrease in the first quarter as the deterioration in consumer products and Asian markets continues. Production volumes are being adjusted to lower levels of demand which is expected to negatively affect operating efficiency.

We will also have additional maintenance expense in the first quarter compared to the fourth as a result of scheduled annual maintenance. We do expect lower freight cost resulting from decreasing fuel surcharges and ocean freight.

In addition fiber costs should be lower. However these cost decreases will not be enough to offset adverse market trends.

We expect that overall operating earnings in the Cellulose Fibers segment for the first quarter will be significantly lower than the fourth quarter. In our real estate segment we expect that first quarter home closing will be seasonally lower than the fourth quarter.

In addition the lack of demand that Larry has just described is not expected to improve as unemployment continues to be high and consumer confidence remains fragile. Low sales orders and high cancellation rates have been prevalent thus far in the quarter.

Excluding impairments and losses on land sales which we experienced in the fourth quarter, we expect that the segment's loss from home building operations will increase in the first quarter compared to the fourth. Capital spending for Weyerhaeuser Company for the full year of 2008 was approximately $425 million.

This included approximately 100 million for the containerboard packaging business we sold last August. As announced in December, we anticipate spending in the range of 200 to $250 million in 2009.

Now as Dan mentioned, I'll provide some additional background on our goodwill impairments as well as other significant changes in equity during the quarter. Included in the loss of 1.2 billion for the fourth quarter, our non-cash charges of 827 million for goodwill write-offs associated with our Cellulose Fibers and Wood Products businesses.

The accelerating deterioration in market conditions during the fourth quarter led to a fair value analysis which indicated that the carrying value of the goodwill was impaired. The analysis takes into account the industry's reduced market multiples, recent and expected operating performance and an expectation that weak macro economic trends will likely continue.

After recording these impairments and according with financial accounting standards 142, the goodwill remaining on our balance sheet is approximately $40 million and is associated with our Timberland segment. At year-end, we also updated the funded status of our pension and post retirement benefit plans.

Investment losses primarily in the second half of 2008 and a lowering of the discount rate resulted in an after-tax charge to equity of approximately $1.2 billion. Other changes in equity included the fourth quarter dividend payment of $127 million in addition to the approval of $53 million for the dividend that the board declared in December and which is payable in March.

Changes in foreign currency translation accounted for the reminder of the decrease. In addition, we ended the year with $2.4 billion in cash and short-term investment and $6 billion in debt.

This follows the retirement of $800 million of debt in the quarter. We remain in compliance with our debt covenants and we have available unused lines of credit totaling $2.2 billion.

Now I'll turn the call back to Dan and I look forward to your questions.

Thank you, Patty. I acknowledge the significance of our $1.2 billion loss.

It reflects the speed and the severity of the deterioration of the economy especially in our markets. We're well aware of the challenges our markets present and we're taking action.

Each of us is taking responsibility to accelerate our cost savings measures. We're questioning every expenditure and challenging ourselves to work more efficiently.

There is no silver bullet here but we're confident that our focus will produce measurable results even in these economic conditions. We have a great asset in our Timberlands.

Our businesses operate in markets that are anchored by sound long-term demographics. Consumer confidence will return, credit markets will ease, and we will see a rebound.

In the meantime, we're dealing with current markets and the uncertain timing of recovery. We will improve our performance and put ourselves in the strongest position for the future.

I have no doubt that we'll succeed. Now I'd like to open up the call for your questions.

Hi, good morning.

Good morning Gail.

I guess just starting on the timber segment, if a third of 2008 volumes were salvage and I am assuming you are running through that activity. How should we think about harvest volumes and mix in 2009?

Gail this is Tom. And looking to 2009 in the west you'll see a lower harvest level and it will be more aligned towards Douglas-fir as apposed to Hemlock.

Okay. And can you give any sort of visibility into, I guess, part of the change in the fourth quarter was one off land sales just a magnitude of land sales between the third and fourth quarter and all of 2008?

Well as we indicated, we did not have any land and adjustment program sales in 2008 at 8.4 (ph) during the fourth quarter. We are in the market on an ongoing basis, and so the difference was that as we looked at the opportunities that -- there wasn't a match in timing between the assets that we were looking to the purchase and opportunities that we felt comfortable with exchanging for.

So we had nothing in the fourth quarter.

Okay but you did in third, correct?

Yes.

Okay. And just looking on the Cellulose business, the weakness that you referred to in emerging market was that more a commodity pulp or was that across the board including fluff?

It was primarily in the paper grade segment which obviously over time has an impact and flows over to some degree on the fluff producers as well. As we are predominantly into market pulp -- excuse me, the reserve in pulp and specialty fiber markets but we weren't new into the slowdown in the Asian markets.

Okay and then Patty just a quick question. Can you remind us what the cash tax payments on the IP sale was in the quarter?

Well we pay taxes on our total in all-in taxes Gail. So the total cash taxes that we paid out in the quarter were just over $1 billion.

Okay, thank you.

Next question.

Thank you, good morning, Tom could you just talk about your comment that you made with regards to getting to cash neutral in the Wood Products business and what are some of the steps that you think you could take and what the timing might be in order to get there?

Well as you can Richard our goal is to do this quicker rather than later. The whole issue that we have is, is we really want to be cash positive and earnings positive, but during these extreme market conditions, our first goal is to make sure we're cash neutral in all of our operations that we continue to run.

So we're continuing to look again against what we see as expected demand, against the customer commitments that we have, and against the facilities that most logistically advantage and cost effectively can meet those demands that we want to continue to fulfill. So it's an ongoing process of looking at every element of our business both our operating postures as well as the markets and the channel that we wish to go through as well as all of the dimensions of overhead expenses and spending that we can take a look at.

So everything that is associated with operating and manufacturing businesses has been scrutinized.

And then just on the recent move up in wood products, specifically lumber prices, you think, and it's only happened in this most recent week where lumber prices have moved up pretty sharply. Do you think that that's something that's just a seasonal factor or is that driven by something else?

Do you think that's sustainable? Can you maybe give some comment on that?

Well I wouldn't want to speculate in this market but there was a slight increase in some of our lumber pricing. But again, as we look at the economic situation and the market conditions, we don't see an ongoing uplift in the lumber prices going forward.

Okay. And then if I can just ask one question for Patty, just with regards to pension.

Can you just give us some detail with regards to what the status was at the end of the year in terms of funded status and what the pension income looks like for 2009?

Sure Rick. As you know, at the end of 2007, our qualified plans were over-funded by almost $2 billion and our investment performance for 2008 was a loss of approximately 30%.

Now our largest plans are US qualified plans and some of those plans are over funded and some are under funded by about a similar amount. For those that are under funded, we don't expect to be required to make a cash contribution until the end of 2010 probably around September.

The amount is still an estimate but could be in the range of 50 to $100 million. In terms of income going forward, we're still in the process of our estimating that number subject to the year-end numbers.

But we will have pension income during 2009.

Okay. Thank you.

Thank you and good morning. Just following up on that last question, Patty, I was hoping you could clarify.

So the over-funded status of I think 1.9 billion, the planned assets came down 30%, what was the net effect?

Well the net effect of the plans at the end of the year and you will see all of this detail in a couple of weeks as we filed the 10-K. But we have -- I am speaking primarily about the U.S.

qualified plans because those are by far in a way our largest plan. And some of those, as I mentioned, that our over-funded, still over-funded some are under-funded by about a similar amount.

I think it swings around $300 million.

Okay. Shifting gears to the Real Estate businesses, was hoping you can provide a little more color on the charges in terms of how much of the charges were cash charges versus non-cash charges?

And what I am really trying to get out is how much was the cash burned for Real Estate business in the quarter?

Peter --

On this --

I am sorry, go ahead.

As I said, I believe that most of the charges related to land write-downs that should be a non-cash item; just trying to separate between the cash and non-cash charges.

I would say that the majority, in terms of, obviously the impairments we took which was a large portion of it -- it was non-cash; obviously the sale, was a little bit different. The 130 million came from selling the land, 58 million was money and cash that we walked away from in terms of auction deposits and what not.

The $280 million of land that we are likely to sell in the future obviously was a non-cash charge. The severance of about $10 million will be a cash charge.

Okay. That's very helpful.

And shifting gears to the interest expense, Patty, it was a little bit higher than I expected. Curious if you can provide a little more color on that in terms of maybe interest expense, interest income.

And do you have any guidance for us for either the first quarter or for full year '09 based on where you stand today?

Yeah, the interest expense will come down simply because the debt is coming down. But I think really the change in the interest expense probably wasn't so much the interest expense itself, Pete, but the fact that we capitalize less interest in the fourth quarter compared to the third.

Okay. Last question --

What we refer (ph) as the net.

Okay. Last question, I'll turn it over.

I see the international operations are now reported in the Timber segment. Is it possible to give us the performance of that piece of that business in the fourth quarter and for 2008?

Yes. In the fourth quarter I think we saw about $10 million loss in the International segment that was primarily driven by the product prices reduction that we experienced globally for the plywood that was being produced at our new operation down there.

We also saw some increased depletion as a result of the step-up in basis, as a result of the partition, and some foreign exchange impact.

Okay. Thanks very much.

You'll see the break-out of those as we go forward Pete in the 10-K.

Thanks Patty.

Good morning. I wonder Tom and Patty if you could just help us unwind the timberland situation a little bit more.

Tom I think you said that a third of the OA western harvest volume was salvage logging. Is that right?

That's correct.

And how much of the volume that you harvest in total across the company is western?

I'd have to look at it. It's probably around 40% but I have to give back to you exactly on that amount, Mark.

Okay. Another question, I noticed that your year-over-year kind of depletion in unit volume in timberland was up about 10% and that your third party log sales were up about 20 or 25%.

And I just -- I'm trying to understand why this is away from the salvage logging that this is occurring when the lumber and wood products markets are down so sharply in terms of both volume and price?

What you'd see in some degree is that with less internal sales and more went to third parties as again we had a good export market and we increased some of our sales over into Korea with the salvage Hemlock that we had.

Okay. So of it's -- so most of the increased volume is going into the export market, it's not domestic sales?

I wouldn't say most of it, I'll just say a good portion of it.

I guess I'm just to trying to understand kind of -- it seems like you would almost aside from your desire to generate cash in the near-term, like there's a market where you'd actually want to be pulling your harvest volumes back pretty significantly?

Yeah, again, when you look at that, our primary goals, particularly in the west was to get the value from the wood that was blown down and to get that into cash as quickly as we could otherwise it would have been sitting out there and degrading on an ongoing basis. So you did see that significant volume come in and it was good for us and the shareholders that we were able early in the year to get that into the market place before the degradation occurred out in the woods.

Okay. And then switching over to Real Estate, with the land sales that you've identified out of the -- out of RECO, can you give us some sense of what your land book is likely to look at, look like after those sales are complete?

Mark this is Larry. Help me understand when you --

Well unlike -- you're getting rid of some of your existing land position. Once you complete the sales that you are looking at right now, what will you be sitting on in the way of land inventory?

We have consistently said that we had a little bit longer land inventory than others maybe in the 7-year range; I think that were probably a little bit longer than that right now just given what's happening and so we're essentially looking to kind of work back roughly to about that kind of range level.

Is there any chance going forward just so that we can help both of us as the analyst and investors understand the company? Is there any chance we can get more color on where exactly the land book sits in and how much is there?

So, I think one of the big questions people have right now is really trying to figure out how to value real estate. And if we don't really have any more information on what the portfolio looks like, it's kind of hard to do that?

Mark this is Dan. We can do that.

And as you know we've also committed that we are going to provide an increase level of disclosure in our Timberland segment. You can look for that in the 10-K and our annual investor guidance.

And then you can provide some feedback to us as to whether or not it's helpful. But we will attempt to address your questions on the RECO land because we consider to be a significant asset and obviously better understanding is helpful.

Yeah, okay. And then my last question.

Dan, is it possible to get an update on asset sales? I think you've -- you'd pulled the sale of the shipping business but as I understood it the sale of the short-line railroads was still in progress and I don't know whether you've added anything else to that asset sale.

So could we go little update on that?

We had three assets that we had announced processes on. One was as you mentioned the Westwood Shipping which we pulled off the markets for two reasons; one was just a general deterioration and ocean shipping business across the world, and secondly the financial market just made it impossible for any respective buyer to be able to pay what we thought was a reasonable price as business that's make money for us.

And so we are going to hold it for time being. I can't comment on the railroad process; we are continuing to be in discussion and negotiation with potential buyer but can't provide a specific update.

And then the third business that we announced that we had a letter of intent was our commercial I-Beam business. And once again I can't provide any update other than we are still in discussion with the potential buyer.

Would you consider on any other assets Dan? Would you consider like creating some joint ventures because it just seems like if the real estate market is not going to come back quickly, the deal with some of the oversupply that we've got in a lot of the building products markets that maybe some joint ventures would be wasted to start to get at more of that?

We would not rule it out. One of the issues that we have generally in the wood products business is fundamental over capacity and so the industry has continued to take downtime and curtailment and both temporary and permanent closures.

So, we're open to discussion but we have no ongoing discussions at this point of time.

All right, thanks Dan and I do appreciate the commitment to more information, more transparency.

Next question.

Thank you.

Mark, did you change your employment?

Yeah, I was kind of interested by that too. On the land, you mentioned that you roped down or mark-to-market land where you expect to build on, I'm sorry, what you expect to sell.

Does that mean that you didn't on land which you at some date might develop? I wasn't quite sure with that distinction you were making there was?

Mark, the distinction was is that we went back and we kind of looked at our portfolio. There was some land in our -- land portfolio that we said you know what, I think that we may be better off selling this rather than holding it to develop in the future and again this is a function of kind of looking at maybe a protracted difficult operating environment.

And so what we did is we wrote that land down and anticipate being able to take that to market in sometime of this year. Likely it would be in the series of transactions and probably this is not something that will happen probably quickly.

It would probably play itself out over the several quarters.

So, can -- where you have on the balance sheet, you have land being processed for development and which is at $1.12 billion at the end of the fourth quarter. That would -- would that have been first of all where the write-downs would have shown up did the land you are talking about here?

Yes I believe so. I think we also took some impairments approximately $135 million relating to communities and land where we are continuing to operate in belts.

There's a little bit of both.

Understood. And how much -- can you help us at all understand how much of the land did not get a look through.

So -- or -- and the one way we would get to that number is you told us what the write-down was, where did this land that you wrote down; where did it end up on the book side.

I am trying to understand your question. You're talking about -- well first of all, every quarter, we go through a process where we look at our land held for impairments and we go through that.

So everything gets looked at on a quarterly basis, the degree to which either we've had a change in strategy is the one that we've just outlined where we decided to go ahead and sell land or because of market conditions, things continued to deteriorate. That's when we would elect to take impairment.

And you know the land that we are going to sell in the future -- projected to sell in the future, would go underneath, the real-estate in process of development and for sale. That's what shows up.

Okay. The -- and I guess --

Let me also -- I'll mention one other thing, the majority of what we ended up impairing is land that we acquired typically that has been in run up which is really kind of 2002 and beyond.

Right. And I can guess what I'm really trying to get to is get a sense as to how mark-to-market, how good the book value on the real estate business is which kind of I guess goes back to Mark Wilde's point, more information for us to be able to better assess would be very helpful cause -- and obviously you've still got a pretty big book value there, but in this type of market, people I think are unclear whether or not it's really got that type of value.

So any help you can do would be great. And just a quick follow-up on the pension expense, I do assume that pension income would be meaningfully lower than the 177 in 2008.

Would that be true or not necessarily?

Yeah, I think that's a fair statement, Mark, and again we'll get you that number. It will be out in the 10-K here in a couple of weeks.

Okay. And then lastly how much of your timber sales go through your building products manufacturing businesses?

I would say approximately 55, 60% in general go through.

Okay, great. And then the puppet's obviously show up in your timber business though you don't book that at cost of building products, I assume.

No, all of our logs are transferred at market pricing.

Okay. Thank you

Next question please.

Thanks, Hi everyone and good morning. Few questions here.

First of all adding maybe -- on the impairment in the fibers business, obviously, there are some cyclical challenges here, but what changed, and given my words not yours, so radically that there had to been an impairment within the business. Could you give us a bit more color there?

Sure, was your question on Cellulose Fibers George?

Yes it was Patty.

Okay.

But can you hear me okay?

Yeah. Basically it has to do with the way that the impairment test is done under FAS 142.

It is a point in time test. And you're looking at now 12/31 where all of your market caps and market multiples have decreased pretty radically.

Sure.

And, we could have a philosophical debate about whether or not those are indicative of the long-term value of the business. But the accounting rules dictate that those are the values that we use so that's one of the big drivers of why those -- that impairment occurred in Cellulose Fibers even though we would look at that business very favorably in terms of it's focus on especially the absorbent markets and the ability of that product line to continue to be attractive.

So, really as the function of the downturn that happened at the end of year especially in the markets of that business operate in. And then just globally if you just look at what has happened to market caps generally not only in our industry but others, you are seeing an incredible amount of goodwill impairments in a lot of industries coming out in the fourth quarter and that's primarily for that reason.

Thanks for the color on that. I realize this is not the reason why you would do it and it's driven by the accounting rules, but I was curious do the write-downs and impairments of goodwill help you at all ultimately in the process at some point in time to convert to or did it really not get into the various calculations and tests?

Yeah, it really doesn't help one way or the other because as you know, those tests are market value tests.

Got you.

Has nothing to do with what's on our books.

Okay. Patty can you remind us to -- given the sale and now the tax is paid on containerboard, where do you stand in terms of maturities and again if you -- you mentioned at the beginning of the call but what's the cash on hand at the end of quarter?

Yeah, the cash on hand at the end of the quarter and cash and short-term investments was about $2.4 billion. Our maturities for 2009 are approximately 450, 460, and then as you look forward into 2010, I believe, our maturities are around 40 million so they drop off pretty dramatically and then in '11 another 30 or $40 million.

Okay.

And as I'd mentioned also on the call, we do have available our $2.2 billion of credit lines. Those expire -- we have nothing outstanding under them but those expire, 1.2 billion of them expire in March of 2010 and the remainder 1 billion is at the end of 2011.

Okay, great. Last quick one; I didn't hear necessarily the answer to Rick's -- Rick Skidmore's earlier question in terms of when, Tom, you expect that you'll be cash neutral within wood products?

Is that holding current fundamentals going forward? Is that something that is achievable within 2009?

Thanks guys.

Well that is certainly our goal. I can't give you an exact timeframe.

It's a market that's continually been slipping away.

I understand.

We are constantly trying to get in front of that and we're going to accelerate the decisions we need to get us to cash neutral absolutely as quickly as we can. I can't give you a specific timeframe and hope soon we can attain that goal.

Just looking at whether it's 2009 or sometime beyond. Thanks very much.

Thank you, good morning. First of all, can you give us an update on the status of your two new saw mills in Oregon and Washington?

Sure. We have one in Santiam and the other one in Longview; they have started up, they are well along in their start up curve.

The -- our goal there is to make sure that the most efficient and cost effective mills are in the west we're well along on where we're expected to be. So good progress.

So they are both running in presumably the shuts you've taken in this region have been -- it's just cannibalization.

I'm making sure that we're moving our volume to our most effective and efficient operations that we can.

Great thanks. And secondly, can you tell us philosophically where you stand on timberland values.

It seems like eventually you might be a timber REIT, certainly going through the motions, and some of your existing counterparts are for lack of better words arbitraging the market where they look at private timberland values and realize that they can buyback stock or do things with their own balance sheet by crystallizing some extremely good values right now. How do you feel about that?

Steve, this is Dan. I don't want to comment about arbitraging.

If your question is what do we think about timberland values, I'll have Tom address that because obviously we're in the market looking all the time, and Tom can you just address what you see in the market for timberland?

Well sure Dan. We have seen as we've been in the market on an ongoing basis and what we've seen with some of our recent third parties with Potlatch sale that we basically seen holding up at timberland prices.

We haven't seen a significant diminishment or acceleration of prices and so they've been holding fairly steady in the marketplace.

Well I would agree that we haven't seen a decline, so if someone was to offer you what you thought was good value given the current environment, might you crystallize a little bit?

Well we are always interested in looking at the best way to create value and add return back to the shareholders and we've got to take that on a case-by-case basis.

Okay. Thank you.

Next question.

Thank you. Just revisiting Mark Weintraub's question on real estate impairments.

Can you give us the sense of what percentage of communities may have been impaired to-date? And what percentage of communities you've impaired more than once at this point?

Sure. Anna this is Tom.

I think if that -- if you were to look at the land that we'd purchased let's say kind of -- as I said in the run up, post let's say 2002 for our -- kind of in our home building operations we have impaired approximately close to two-thirds of it. And I'd say a good portion of that we have impaired of more than one time.

If you look at our kind of entire portfolio when we do have some significant holdings that are prior to 2002, we are probably looking at something on the order of maybe about a third.

Great, that helps a lot. And could you talk about some -- the kind of percentage reduction you might be seeing in the number of communities you had in '08.

And what reduction you might expect in '09. And do you expect your footprint to change?

Are you going to completely exit some markets or enter new markets? Thanks.

Sure. We do not anticipate our footprint changing at all.

Notwithstanding all of the challenges and the difficulties we like the markets that we're in. We saw about a 25% decline in our number of communities in '08 or excuse me, from '07 to '08.

We would anticipate that being probably a little bit less today. And really its going to be a function as we are out there in the communities and we are seeing kind of how the market shapes up if we can be generating cash and being cash positive -- have a good position and able to get some sales and velocity, we will continue to operate those communities if we find conditions change where we're no longer able to do that then we'll revisit that and make a determination to close the community.

Great. Thanks very much.

Next question.

Hi, thanks very much. I was hoping you could just give an update on your SG&A initiatives, where you are from the timing perspective.

And how we should think about those comings through in 2009 and then should we expect a lower corporate expense rate going forward.

Claudia, it's Dan. When we announced the initiative in the mid part of last year we had targeted savings at the corporate level of $375 million.

And we believe that we could achieve a run-rate of 50% of that by year-end 2008, 90% by the end of 2009. We are ahead of that rate at this point in time.

And so I believe that certainly you'll see in the 2009 numbers a good part of that 375 come through our P&L. To give you a little flavor, from year-end 2007 to year-end 2008, our total headcount dropped 47%.

Now that includes the elimination of our containerboard business both direct employees but also the indirect that supported them. And, at the staff level, which supports all of our businesses over that 12-month period we've seen a decline in headcount of 31%.

We've made a lot of change. I would suggest that the 375 was a number that we started with in midyear.

We are continuing to look for opportunities to find additional savings. So I am confident we'll have hit the 375 but I think you will see more.

Okay. Thanks.

And then maybe could you just comment on the importance, how you feel about sort of your credit rating and the importance of investment grade to you right now at this point?

Claudia, this is Patty. I think as we look at our investment grade rating, it has been important to us.

And we believe it's important going forward as it relates to our liquidity. So I don't think we have any change in the way that we think about it.

Okay. Thank you.

Operator: Thank you. And at this time there are no further questions.

Okay. I'll take a minute to just sum up the call.

I'll make a few concluding comments. Going back to December and certainly today you heard us acknowledge that we face some unprecedented challenges as we look at the economy today.

The uncertainty of the timing of recovery is what drove actions that we took in December and continue to frame actions that we take in all of our businesses. We are moving daily with urgency and decisiveness to adjust to these markets.

Adjusting capacity is necessary and even strategy is necessary. We've got disciplined cost control in effect in all of our businesses and support operations.

At this point we are focused on action by congress to help stabilize the economy. We believe that they are addressing the need of fixing housing first which would create some stabilization of home prices.

And following that we need a stabilization of employment and more than anything else is stabilization of consumer sentiment. One of the things that we saw significantly changed in the fourth quarter of the year as it relates to housing which of course affects most of our business activity is the -- what we called is capitulation of the homebuyer.

So they went from being concerned about dropping prices to whether or not they had a job. And as every success of announcement comes out regarding employment, you see unemployment increasing; that's a concern, we got to get that fixed.

Nevertheless we continue to affirm our long-term strategy. Timberlands are our core and we are going to continue to develop the Timberlands asset in all of its aspects.

The land, timber, our minerals and energy, our biomass potential, and then the potential that comes from carbon. The markets for all of our products and all of our businesses continue to be supported by some demographics long-term, and so we like the businesses that we are in.

And when the recovery begins we will be ready. My takeaway from this morning's call is that you'd like to see some greater disclosure on our Timberlands assets and our Real Estate assets, and we will respond to you and I think you can look for the increased Timberlands exposure -- disclosure in the 10-K and the investor guidance.

And thank you very much for your attention this morning.