Patricia Bedient - Chief Financial Officer and Executive Vice President Kathryn McAuley - Vice President of Investor Relations Daniel Fulton - Chief Executive Officer, President, Director and Member of Executive Committee

Peter Ruschmeier - Barclays Capital Mark Connelly - Credit Agricole Securities (USA) Inc. Joshua Barber - Stifel, Nicolaus & Co., Inc.

Mark Weintraub - Buckingham Research Group Mark Wilde - Deutsche Bank AG Steven Chercover - D.A. Davidson & Co.

Chip Dillon - Crédit Suisse AG Gail Glazerman - UBS Investment Bank

Thank you, Nicole. Good morning.

Thank you for joining us on Weyerhaeuser's Fourth Quarter 2010 Earnings Conference Call. I am Kathy McAuley, Vice President of Investor Relations.

This call is being webcast at www.weyerhaeuser.com. The earnings release and materials 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, as forward-looking statements will be made during this conference call. Joining me this morning are Dan Fulton, President and Chief Executive Officer; and Patty Bedient, Executive Vice President and Chief Financial Officer.

This morning, Weyerhaeuser reported Q4 2010 net earnings of $171 million or $0.32 per diluted share, a net sales of $1.7 billion. Fourth quarter earnings include after-tax gains of $119 million from special items, an after-tax gain of $31 million on the sale of five short line railroads, an after-tax charge of $89 million for restructuring, closures and impairment.

Income tax adjustments of $177 million, which include benefits of $149 million from the Cellulosic Biofuel Producers Credit and $22 million from the reversal of deferred tax liabilities related to the company's REIT conversion. As we commented last quarter, the Cellulosic Biofuels Credit offsets income tax liability.

We will carry the credit forward. Excluding these items, the company reported Q4 2010 net earnings of $52 million or $0.10 per diluted share.

For the full year of 2010, Weyerhaeuser reported net earnings of $1,281,000,000 or $3.99 per diluted share on net sales of $6.6 billion. Full year 2010 earnings, include $1,064,000,000 from income tax adjustments related to Weyerhaeuser's conversion to a Real Estate Investment Trust.

The financial data accompanying our earnings release has been redesigned. We hope you find this new format useful and welcome your comments.

Please turn to the earnings information package available on our website. This package includes a GAAP reconciliation of special item.

In our discussions of the business segments, we will refer to Charts 4 through 10. Turning to Chart 4, changes in contribution to earnings by segment.

This chart illustrates the change in contribution by business segments from the third quarter to the fourth quarter. We began our business segment discussion of the fourth quarter with Timberlands, Charts 5 and 6.

In the fourth quarter, Timberlands contributed $56 million pretax to earnings. The Q3 pretax contribution was $75 million.

Earnings from non-strategic Timberlands disposition declined from $34 million in Q3 to $19 million in Q4. Sales volumes declined 3%.

Costs were higher due to seasonal downtime in the West and slightly higher fuel costs in silvicultured spending in the South. Key depletion declined 3% in fourth quarter as we continue to defer the harvest.

In 2010, the fee harvest was down an additional 10% from the already reduced level of 2009. Western log prices rose 4% while Southern log prices declined 4%.

Japanese log export softened in Q4. However, log exports to China increased 10% in the quarter.

Japan continues to be our largest log export market. Wood Products, Charts 7 and 8.

Seasonally slower demand and continued difficult market conditions affected the fourth quarter. Before special items, Wood Products lost $85 million.

In the previous quarter, the segment lost $100 million. Log cost were slightly lower in the quarter and SG&A cost decreased.

Total sales realizations were flat in Q4 with slight increases in lumber prices offsetting decreases in OSB and plywood prices. Lumber sales realizations increased $6 per thousand board feet or 2%.

And OSB prices decreased $7 per thousand square feet or 4%. Engineered Solid Section and I-joists sales realizations were flat compared to Q3.

Lumber sales volume was down 8% and OSB sales volume decreased 5%. Volumes for Engineered Solid Sections declined 13% and Engineered I-joists volumes decreased 10%.

Asset impairment, closures and restructuring charges of $103 million pretax were recognized in the fourth quarter. These charges were for the rationalization of capacity, which includes the permanent closure of three Wood Products facility.

Turning to Cellulose Fibers, Chart 9. In the fourth quarter, on a pretax basis, Cellulose Fibers earned $138 million.

In the third quarter, the business earned $181 million. Costs increased and productivity was lower due to the impact of an annual maintenance outage at the New Bern North Carolina mill.

There were no maintenance outages in the third quarter. Pulp shipment volumes declined 2% due to the timing of shipments.

Pulp prices were flat in the quarter. And finally turning to Chart 10, Real Estate.

Before special items, WRECO contributed $13 million pretax to Q4 earnings. In the third quarter, the business contributed $20 million.

The quarter included a $20 million charge for asset impairment and restructuring. 606 single-family homes were closed in Q4, a 21% increase from Q3.

The fourth quarter is typically the highest quarter for closings. The average closing price rose to $439,000 from $400,000 due to mix.

The margins on single-family homes sold increased to 26.1% for 24.3% in the previous quarter also due to mix. The quarter included $6 million in land sales and related activity.

The backlog of single-family homes sold but not closed decreased to 439 units, a backlog of about 2.5 months. At the end of 2009, the backlog was 3.5 months.

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

Thanks, Kathy, and good morning, everyone. Last year was one of continued market challenges but also a year where we enhanced our ability to return value to our shareholders and saw the benefits of the work we've done to improve our operations.

The most noteworthy event of 2010 involved the completion of our conversion to a Real Estate Investment Trust. In the process, shareholders received a $5.6 billion special dividend.

Going forward, we are targeting a dividend payout ratio of 75% of funds available for distribution over the cycle. Our Board will determine and declare the actual dividend on a quarterly basis, but beginning in March, we anticipate paying a quarterly dividend of $0.15 per share or $0.60 per share on an annualized basis.

Converting to a REIT enhances our ability to operate and grow our core asset. The more than 6 million acres of valuable, sustainably managed timberland that we hold and it provides significant benefits to our shareholders.

Throughout 2010, market conditions required our business segments to adjust their strategies and their focus. Timberlands continue to defer harvest to preserve the long-term value of our core asset.

As Kathy noted, harvest levels dropped 10% compared with 2009. We took advantage of our strategically located Western lands and export facilities to grow Pacific Rim export volumes.

Increased exports helped to offset weak domestic demand, which is primarily linked to U.S. housing markets.

In 2010, our export volumes grew 18% year-over-year and export share of our total volume increased from 14% to 19%. Increases in shipments to China slightly exceeded increases to Japan for the year though Japan still represents over 75% of our total export volume.

Wood Products fades to highly volatile market in 2010 as prices rose sharply in the first four months of the year before experiencing a precipitous decline beginning at the end of the second quarter. As you know, on October 1, I asked Larry Burrows to lead this business.

While performance is still unacceptable, our focus on controlling costs, improving cash flow and rightsizing capacity for our long-term needs has begun to show some progress. Wood Products loss narrowed in the fourth quarter even though that quarter is typically our weakest of the year.

WRECO is one of the most profitable homebuilders in the country in 2010 despite another extremely challenging year for the U.S. housing market.

For the year, we increased margins from 18% to 24% by aggressively cutting costs and leveraging the unique value propositions and local market knowledge of our experienced managers. Our Cellulose Fibers segment set both earnings and production records in 2010.

These achievements are the result of our focus on meeting the needs of our global customers by improving mill system productivity and reducing operating costs, actions that positioned us to take full advantage of strong market conditions for pulp. As we mentioned in December, we expect similar housing market conditions for our businesses in 2011.

This will continue to present challenges for our Timberlands, Wood Products and Homebuilding segments. In December, our outlook for Cellulose Fibers assume some weakening in pulp prices in 2011 but we're pleased that pricing so far in 2011 has remained relatively stable.

Despite continuing market challenges, I expect improved performance from our businesses due to progress that we made in 2010, and our ongoing improvements, operational changes and enhanced cost efficiencies. We expect to continue to defer a portion of our timber harvest although volumes will increase over 2010.

In addition, we will flex our harvest in response to market opportunities, including meeting the growing demand from the Asian export market. I expect our Wood Products segment to be cash flow positive.

I expect that WRECO, our Homebuilding segment, will continue delivering strong delivery performance relative to its peers. And finally, I expect continued strong operating performance from Cellulose Fibers.

I'll now turn the call over to Patty, who will provide our first quarter outlook

Thanks, Dan, and good morning, everybody. The outlook comments for the businesses are summarized on Chart 11, and I'll begin my comments with Timberlands.

In the West, export and domestic log prices are expected to increase somewhat due to continued strong demand from China. Southern log realizations may be down slightly.

Fee harvest volumes are anticipated to increase seasonally in both the South and the West. We don't expect to incur any downtime in the West as was the case in the fourth quarter.

Cost will likely increase in the West due to higher road costs. But in the South, they should decrease due to seasonally lower silviculture cost.

Earlier today, we announced the closing of the sale of approximately 82,000 acres of non-strategic plans in the West. This sale represents results in a pretax gain of approximately $150 million in the first quarter.

The transaction represents the sale of the remainder of the storm-damaged whitewoods that we had on the market during 2010. We're pleased with the sales price of approximately $200 million or $2,400 per acre, which is good value given the mix of species and age classes.

Before the effect of this sale, we expect that earnings in the first quarter will be higher than the fourth quarter. In Wood Products, we expect that prices and volumes for lumber and OSB will increase over the fourth quarter.

Engineered Wood realizations are likely to be flat. Manufacturing costs should be lower for all product lines due to less downtime and obtaining the benefits of recent capacity rationalization and cost reductions.

While the first quarter is traditionally a seasonally slow quarter, we do anticipate the loss to decrease significantly compared to the fourth quarter. Market conditions for our sale of Cellulose Fibers segment continued to be favorable.

Global inventories for pulp were at low levels as we entered the quarter. The weak U.S.

dollar, strong Chinese demand and a steadily improving global economy should result in continued strong pricing in the first quarter. Our pulp shipment volumes are expected to increase modestly compared to the fourth quarter.

Manufacturing costs will likely increase in the first quarter due to higher fiber and chemical costs. Increased scheduled annual maintenance outages will result in higher maintenance costs and decreased productivity compared to the fourth quarter.

We expect earnings in our Cellulose Fibers segment to be lower in the first quarter compared to the fourth quarter. In our Homebuilding segment, we expect margins and prices to decline due to mix.

As Kathy has already discussed, we entered the year with a low backlog and market conditions remain challenging. The first quarter is seasonally a slow quarter for closings and we expect to close approximately 200 fewer homes than in the fourth quarter.

We anticipate a slight loss in our single-family homebuilding operations for the first quarter. Now I'll turn to some overall financial comments.

As we previously announced in December, we anticipate that the Board will declare quarterly dividend of $0.15 per share to be paid in March. This payout will be approximately $80 million.

Following our December announcement, we were pleased that S&P issued a report raising the outlook for our credit rating from negative to stable. We ended the year with strong liquidity, including cash balances of over $1.4 billion and an unused line of credit of $1 billion.

We will be focused on renewing this credit line, which expires at the end of this year. Our scheduled debt maturities for 2011 are approximately $30 million, although debt maturities at the beginning of 2012 are over $700 million.

Capital expenditures for the company totaled $234 million in 2010 before consideration of cash receipts for government credits of approximately $25 million. For 2011, we expect to spend approximately $250 million.

In addition, we expect to receive approximately $15 million of additional government credits for energy-related products -- projects at our Grande Prairie, Alberta pulp mill. Net of these credits, our cash spend is estimated to be $235 million.

We anticipate that we will have a seasonal working capital build in the first quarter, primarily related to our Wood Products segment. The amount will depend on market conditions and we will continue our focus of matching supply with demand.

During the first quarter, we will also make our semi-annual interest payments of approximately $130 million. We received the proceeds from the 82,000-acre timber sale yesterday and those will help offset these cash outflows.

So economic conditions may be challenging in 2011, we are focused on increasing our financial and operating performance and creating value for shareholders. Now I'll turn the call back to Dan and I look forward your questions

Thanks, Patty. In summary, as I reflect on 2010 performance, I see improvement in all businesses shown overall by our swing to profitability.

Our 2010 results were positively impacted by actions that we took and improvements that we made. Clearly, I'm not satisfied with where we are but we're headed in the right direction and are well positioned to produce improved operating results.

In 2011, our continued focus on improving what we control, while being ready to take advantage of any uptick in market conditions, is the right strategy for achieving improved 2011 financial results. And now, Kathy, we'll move to Q&A.

Nicole, could we please open the floor for questions?

Can you talk a little bit more about the restructuring activity in Wood Products and help us understand the opportunity there, perhaps discussing the benefits from the closures that you received and any potential targets that we can kind of get our heads around as we model 2011?

Yes. So within our Wood Products business, our primary product lines, as you know, our lumber, Oriented Strand Board, Engineered Wood Products.

And then we have the Distribution business, which is primarily focused on distributing and marketing our engineered product. Our focus in Wood Products starts with a review of capacity utilization.

That led us to take the impairments that we announced in December where we took a permanent closure in several facilities that we had shut down previously but determined that at least in the next two to three year period, we would not need that capacity. So our focus is on managing our capacity to deal with today's level of demand and that we anticipate in the next two to three years.

We're focused on improving capacity utilization that will bring down our manufacturing costs. But in the shutdown of those facilities, we'll also be saving some noncash expense in the form of depreciation but also security and maintenance costs that are related to those facilities.

In all of our product lines, we are focused on improving margins, both from improved pricing opportunities, as well as continued cost reductions both through our operating and manufacturing costs but also in our SG&A. We took G&A out in the fourth quarter.

We expect to take out some more this year as well as selling cost. So Gail, our focus in Wood Products is to respond to the market that we have today, to be prepared to respond when the market recovers but in fact, be cash positive with the demand that we have today.

And are there incremental savings I see the impairment positions in December, there would be some savings that you expect to see in the first quarter from those?

Yes, they will start to show up in the first quarter both SG&A, as well as you'll see some reduction and depreciation. And we should expect to see manufacturing costs start to fall a bit as a result of higher utilization in the facilities that we are operating.

And Dan, can you give us a sense of what operating rates were in the fourth quarter?

You're going to have to give me a minute to respond to that, Gail.

While you look that up just another generic question, I know it's a little bit early, but can you talk about what you're hearing and obviously, your WRECO's backlogs are pretty thin right now just what you're hearing about the spring selling season?

Yes, I'll talk about WRECO and then I'll come back to our operating rates in our Wood Products facilities. With respect to the whole market, we and others, entered the year with lower backlogs than we had one year ago.

That's an impact primarily of the housing tax credit that was in place at the beginning of 2010 that as you know, went away at the end of April. So we're entering the new year and other builders entering the year with low backlogs.

Normally, the spring selling season starts to kick in following the Super Bowl weekend. So don't count on it this week.

But believe me, we are going to be looking for traffic signs and sales signs in our own Homebuilding business. But I think what we do is reflective of what other builders do.

So what we and other builders would expect to see is some pick up in activity but traffic has been relatively anemic. Homebuyers are still challenged with qualification for mortgages, if they're a first time buyer.

If they're a move-up buyer, they are challenged by: number one, the ability to sell their house; and secondly, a number of these move-up buyers may have mortgages that are underwater so that makes the market relatively sticky. And so as we look at 2011, we and others, think of 2011 as a bit of a mirror image of 2010.

So 2010 started out more strong, ended up weak. We would expect 2011 to start out weak and then be stronger as we go through the year in order to get to the numbers that are forecast by most economists for 2011 starts.

In terms of operating rates in the fourth quarter, in our Lumber business that we were operating at about 60% of capacity. In our OSB business, we were operating at 49% of capacity.

In our Engineered Wood Products business, it was more in the 30% range. So Engineered Wood Products, as you know, primarily go into new home construction.

Lumber, we've got a number of different markets, including the repair and remodel market. OSB has some alternatives other than just new home construction but the Engineered is focused on new home construction.

I guess for Patty, can you talk a little bit about how we should think about the tax rate for 2011?

Sure, Gail. As you know, the tax rate as we go forward is pretty sensitive to the blend of income in the REIT versus the TRS.

And of course, the income in the REIT is not taxable. So as we sit here today, we would look at the blended tax rate being something just a little over 20% for 2011 as we go forward maybe around the 22%, but it'll change depending upon how that mix changes as we go out in the year, but that's our best estimate at this point.

I was curious on the land you sold in Washington, can you comment on the average age of the inventory?

I would say, Pete, I don't have the average age overall but the whitewood that were predominantly on that land were more of the merge. There were doug fir some but it's pretty merged that's on there.

So the whitewood stance would be a higher age class than the lesser amount of doug fir that was there.

So is it fair to characterize as mostly pre-merge or is it not necessarily the case?

There was some but remember these are the storm-damaged lands that were damaged by the storm in 2007. So we had salvaged.

This particular track I think didn't have I think as much as some of the others but we did salvage a lot of wood off those storm-damaged lands that we sold.

And Dan, I was curious if you could comment on Shipping, remind us what you have in terms of assets in that business. And does it provide a competitive advantage to your Pacific Northwest timber as you look at the Asian opportunity?

We have a Shipping business, Westwood shipping. The primary business of Westwood is really container trade, Pete.

And our largest log customer in Japan operates its own ships into our West Coast operations. And so our logs are going out on their ships.

As we shipped to China and Korea, some of that log volume goes out in containers, some of it goes out on a bulk [ph]. We are not dependent on our own ships although some of them are used for that purpose.

So it's not a critical strategic need for us as it might have been in the past given that there's a range of alternatives for exporting those logs.

Patty, can you update us on the underfunded pension balance at the end of the year?

Sure. Our funded status has improved year-over-year.

Just going back to last year at this time, we were underfunded about $600 million on a PBO basis. And as we sit here today, we're just under $500 million underfunded.

Now this includes the liability for our nonqualified plans as well as our qualified plans. And as you know, we don't fund the nonqualified plans.

That's about $200 million of that balance. As we look at underfunded status, it improved as a result certainly of the contributions that we made, also the return on the assets that we have invested in those funds.

So our investment return was probably on the order of around $500 million. Benefit payments out of those plans were around $330 million.

And then the other big piece that moved in a negative way in terms of this funded status would be in the actuarial assumption around discount rate. Now the discount rate in the U.S.

for example, we moved from 5.9 down to 5.4.. In Canada, from 6.1 down to 5.3..

The interest rate assumptions increased the underfunded status by about $370 million. So that was a negative factor as we look at the funding.

So those are some of the puts and takes. And as we filed the 10-K later this month, you'll see all of the details of it, but those are the main swings in the underfunded status.

One thing I would point out as you look forward into 2011, the noncash expense associated with these plans will change. In 2010, we had a $47 million pension credit as we amortized the actuarial assumption changes.

As we go into 2011, that will swing to a $60 million noncash expense, as we amortize the actuarial losses that are on our balance sheet today and but they sit in other comprehensive income. So as we amortized those through the P&L and expense, we anticipate about a $60 million pension expense.

First question just to make sure we have this right. You mentioned, Patty, a $60 million expense of noncash for this year.

What was it in 2010?

2010, it was for pension, it was a $47 million credit.

So that will be a swing that we'll see sort of on ongoing earnings of $107 million then?

Yes. So remember, that's as I said, that's a noncash charge that runs through the P&L.

The other piece that you're probably interested in would be the pension contributions that we anticipate in 2011. I had said on the third quarter call that we thought that we would be contributing about $100 million in 2011 to our Canadian plan.

That looks like it'll be probably more on the order of $80 million as we finalize the numbers. We don't have to make a contribution to our U.S.

plans in 2011. Any contribution that we would make would be not have to be made until 2012.

But if we make a contribution at all, it likely will not be of any significant amounts because our U.S. plans are just slightly underfunded.

The other payout will be in our nonqualified plan, the ones that I said that we don't fund and that runs around $20 million pretty much year-to-year.

And Patty, as we look at that $107 million swing, that doesn't occur on the corporate line, right? It actually is in the segments and can you give us, if that's true, what the rough breakdown is?

Sure. What we do for pension expense, we take the pension expense through the Corporate segment and we allocate out to each of the segments their portion of the service costs.

So they don't get the whole expense. They do just get the service cost going forward and the offset comes into the corporate line.

So for example as you look on Page 9, I think it is of the analyst package, we've mentioned that we have about $74 million of credit in the Corporate segment in 2010. That $74 million is higher than the number I gave you before because the offset to it is the expense that's charged in the segment.

And we'll give you a breakdown of that. I think it'll be about the charge that will go into the segment line.

It's about $48 million. So we'll charge expense of $48 million into the segments and then we'll offset that credit in the Corporate segment to get a total net expense of $60 million.

In the Timberlands, you mentioned you sold or had HBU sales or land sales of $131 million in '10 up from $77 million in '09. If we exclude the deal you just closed today, what is a good guess as to both the land sales, these exchanges and the HBU sales in 2011?

Well, those sales since they are non-strategic, they come about as a part of upgrading our portfolio. So they're not all necessarily even HBU sales.

They really are sales of Timberland, where we believe we can trade out of what we have currently for a better value in terms of those exchanges. So I think as we look over the course of the last few years.

If you back out the sale that we announced for the 82,000 acres, it'll probably be something less than what we have had on an ongoing basis. And I think historically, those run in the realm of around $100 million.

Dan, is it possible to get some sort of sense of the benefit that you think you'll get from this pickup in Chinese purchases of logs and lumber? Because it sounds like what they're buying is kind of below what you typically try to sell.

It is below what we try to sell in lumber. So let me take them in two parts, Mark.

In terms of logs, as I mentioned in my remarks, we've seen a dramatic pickup in exports to China. It is still only about a fifth of the volume that we're sending to Japan but this has all happened over the last several years.

For us, the pickup in exports to China started as we started to harvest the storm-damaged woods on the west side of Oregon and Washington following the December 2007 storm. So at that point, they were taking storm-damage wood as well as some of that was going to Korea.

And over time, what we've seen is a steady upgrade in the value and the quality of the wood that they're taking. It's still not the same grade as the Japan log but there has been really a steady increase in both volume as well as the quality of the logs that they're importing.

As you know, some of that's related to the slowdown in exports from Russia. But it seems like it's a combination of slowdown in Russia and perhaps some other markets that may have been exporting into China plus the general pickup in their economy.

Still going into what we believe are industrial grades and industrial applications, concrete formwork et cetera, but there's been steady improvement. With respect to lumber, they started taking lumber primarily out of British Colombia, build damaged wood, and that continues to be the case.

We are further away from the coast in D.C. and so that's not a primary market.

But the benefit that we see is to the extent that any volume of logs or lumber is being exported to China, on a marginal basis creates more opportunity for us in North America.

Second question I had is just generally any thoughts about kind of the potential for more non-strategic asset sales in 2011 whether that's likely to be a material amount for you guys?

We have some non-strategic assets we've identified in the past, as you know, we had identified the railroads. We had identified some of those non-strategic Timberland.

We evaluate opportunities all the time and our goal was to monetize them when the market's appropriate but I can't give you any guidance for specifics for the balance of this year, Mark.

And then the other thing I was curious about is just your Specialty Cellulose business, because it seems like a lot of your competitors have been making moves here over the last six to 12 months. GP acquired a pretty large producer and is converting to fluff.

Rayonier is looking at investing to kind of go up the value chain and Domtar is getting in the -- how do you think about what you want to do in that business going forward?

We like the Fluff business. We've got strong customer relationships with customers that are growing globally that need the product that we produce.

We have seen some shift to fluff as you identified both with Domtar as well as GP. But at the same time, there is this increased interest in dissolving pulp with some manufacturers talking about converting some of their fluff capacity to dissolving pulp.

So we view that as positive because there may be some existing fluff that may be converted and that will create some opportunity for us. We have customer relationships globally and we'll continue to seek out opportunities to improve the mix that we produce in the overall margin that we're able to gain out of selling to those customers.

But the market is in flux a bit as you know, with this heavy demand for dissolving pulp driven primarily by, what I believe, are about 140 year-high prices for cotton.

Could you see putting a lot more capital into the Cellulose business?

I can't see putting a lot more capital in the near term. We are investing to maintain the effectiveness of our mills.

A lot of the capital that we put into our mills is targeted at projects that will reduce cost, primarily energy. So we've got some green energy projects and those that will improve our cost of production but we're not anticipating any significant increase in capital spend.

Is it possible, Patty, to just help us kind of bridge on the maintenance in that business as we go from fourth quarter to first quarter? It sounds like it's going to be up but I'm not sure how much it's going to be up, and then what kind of a drop-off we might see as we go into the second quarter?

Sure, Mark. Let me start by saying, as you point out, the maintenance outages are lumpy in that business.

So last year, we had two in the first quarter, three in the second and then shorter one in the fourth, which was our New Bern, North Carolina mill. So as we go moving from the fourth to the first quarter now, we will have two outages in the first quarter.

Those outages will be longer and somewhat more extensive than the New Bern shutdown in the fourth quarter. I think the way to think about it is that in terms of increased expense over what we spent in the fourth quarter, for maintenance spend itself, it will probably be on the order of say, $25 million to $30 million additional maintenance expense.

And then we'll also have an impact to productivity of those two mills being down and some additional chemical costs. So I think that's the way to think of going from Q4 to Q1.

And then in Q2, it depends on how many mills will be down in Q2 but if it was similar to last year, for example, where we had three, we actually had more maintenance in the second but I don't have that maintenance schedule in front of me.

When we look at your changes you made in the Homebuilding offerings, you made a lot of changes in price points and value propositions. And it looks like that has paid off nicely when I hear your comments and think about what's happened to margins.

Can you give us a sense, Dan, of whether we're going to see another shift like that this year or should we be thinking of this as more of a slowly evolving shift in trends? Because the last one was sort of a big discrete step change, I'm just wondering if we should be anticipating something like that again.

You should not anticipate a significant step change. This is really an ongoing process that all of our subsidiaries are engaged in, not just because of the market that we're in today but they continue to adjust their value propositions over time.

We do have an evolving market today and there has been a shift to somewhat smaller product. Although ironically, our one operation in the Pacific Northwest Quadrant Homes, which is a first-time buyer of Homebuilder has actually upgraded their product in today's market and that seems to be a more effective value proposition than their old ones.

So what you see in the results is a function of, I think, our local operators are finding to opportunities and competitive niches in their own market places. And it's also a function of the markets in which we operate, our land position, which as you know, is significant as compared to some other homebuilders, and we've been able to capitalize on that in this market.

So overall, are you saying that you're pretty happy with the propositions across all the markets right now?

We are. These are all very competitive markets.

And if you were to think about longer-term shifts in product type, I don't think we would see anything radical in WRECO. There may be some greater shifts in some of the national homebuilders as they have downsized product and everyone is searching for a formula that will make them successful and fundamentally make them profitable.

We watch that from the perspective of our Wood Products business because to the extent that higher density product is being built, that has some implications for Engineered Wood Products. Square footage changes have an implication on the amount of lumber and Engineered Wood Products, which is used in every single house.

On the book tax rate, you gave us that, thank you. Is it fair to say that your cash taxes would be a lot lower because of being able to use Biofuel Credits et cetera?

Can you tell us what cash taxes would likely be?

Sure, Mark. You're exactly right.

We will utilize the biofuel tax credit going forward. So cash taxes for 2011, I would anticipate would be significantly lower than our book tax.

And then second, you talked about over the course of the cycle paying out roughly 75% of funds available to the dividend potentially. Should we be thinking about things like the Washington sale as a part of those funds available?

Or do you think of that as something separate and then how about the other $100 million or so of land sales that you would typically have in the year? Would that be something that would be included in your thought process of funds available or not?

Sure. Let me think about or talk about 2011.

So as we said the dividend, talked with the Board and they determined the final dividend for 2011, we did have knowledge about these asset sales at that point in time. And as we said on our dividend call, they were included in the numbers in the consideration for setting the dividend in 2011.

I think as we go forward past that, it's the large numbers that if we were to have additional non-strategic plans of a really significant amount that we deal with that at that point in time, we don't have any identified at this point. In terms of an ongoing just the normal timber sales that we do on a regular basis, those would be included in our funds available for distribution.

But remember that a lot of those, we do with 1031 exchanges to avoid having to pay the tax on them because even though we are in the REIT for the next 10 years, we will have to pay tax on any timberland that we sell. So I'd anticipate that just as a course of business to the extent we can, we would try to do those with 1031 exchanges.

On the Timberland harvest for 2011, can you give us a sense of what you expected it to be relative to 2010?

We expect it to be up. You would like a percentage, wouldn't you?

I'd love it.

I don't think it's up probably any more than 10%, Mark, but let us take a look at that and get you a more...

Just one last clarification, on the pension. If I understand it rightly, since service and cost would probably stay roughly the same in 2011 to 2010.

So for modeling purposes, effectively that $107 million swing would basically run through the corporate line. Is that the right way to look at it?

And if so, what should we use in order of magnitude for corporate expense for the full year?

That is it pretty close to the right way to look at it. I think, Mark, we're going to be charging about as I said before right around $40 million or $50 million to the segments.

So if you took that -- and last year, I think we had roughly the same number, maybe just a little lower than that but it was in the low to mid-40s. So I think your analysis about all-in, year-over-year in the segment is going to be pretty similar.

So last year, for example, we had a net credit of $47 million. We charged the segments about $42 million, I think.

And so the additional credit that you see on the analyst package on Page 9 for the Corporate segment I think was $74 million. That $74 million also includes an offset of about $16 million that for the post-employment benefit costs.

So you've got two things going on there. You've got pension and other post-employment costs and we don't charge the other post employment out to the various segments.

So that would stay in the corporate. So going forward then into 2011, we'll have about $16 million for pension and another $16 million again for other post employment.

Those will run through the corporate line and then we will also charge out to the segments about $48 million, I think it is, and that credit will come into the segment line at Corporate.

So will Corporate be roughly $20 million, $25 million a quarter in 2011 for everything?

For everything, it'll be about $16 million, for other post-employment benefits. And for pension, it'll be about another $10-ish million.

Going back to the Pulp business a little bit, you're old Cosmopolis mills now coming back as a desolving pulp mill. So when you see assets coming back, does it make you change your view on whether to close or sell them and that could be applicable to building materials as well?

It hasn't changed our view with respect to the Cosmopolis mill. And in particular, let me just talk about that.

That was a business that we decided to exit. It was a mill that took a significant amount of capital to maintain and operate over time.

And we were pleased to sell it. The impact of that mill coming back is actually positive because it creates some additional demand for fiber in the region and puts a number of people back to work in that community that were long-time Weyerhaeuser employees.

As we look at other facilities, we look at the impact of the mill if we were to sell it, becoming a competitor. So the Cosmopolis mill is not a competitor of ours.

If we were to be exiting other manufacturing facilities, including some in the Wood Products business, we would certainly evaluate the impact on our position in the remaining facilities in that sector and make a determination accordingly whether or not we wanted to sell it or shut it down.

Could you just confirm that the 82,000 acres that you're selling was part of your 2011 expectations when you establish your dividend policy in December?

Yes, it was. We had talked last year about the fact that it had been on the market for a period of time.

The last guidance that I provided about that was that we had increased interest and we thought that we would have a transaction that we might be able to execute really in 2011. So it was factored into our expectations when we provided our dividend guidance.

I was wondering if you could talk a little bit about your cash position given what we've seen recently in the credit markets? Cash net of or including the Hancock sale this morning seems to be closer to $1.6 billion and you have some pretty modest capital spending targets for '11 and even taking into account the 2012 debt maturities, at what point I guess, the question is, what level of cash balances do you feel comfortable running at for the next couple of years?

And would you feel comfortable with your refinancing prospects in 2012 that you're sufficiently comfortable using some of that cash today for other shareholder activities?

Well, as we go in into 2011, I think as we talked about on the dividend call, we knew that we would have this cash coming in on the sale. As we look forward, the 2011 environment is pretty uncertain in terms of the housing market.

And as we think about our cash balances, we were very comfortable looking at dividend-ing out pretty close to 100% of our funds available from distribution in 2011. We're in the process of looking at renewing our credit line of $1 billion that expires at the end of this year.

So I think as we go forward, we'll continue to think about what the best use of cash is and how the markets unfold in terms of economic recovery in 2011. So what we said in terms of a debt balance was that we thought that given the cyclicality and the makeup of the portfolio as we sit here today, that's something under $4 billion of total debt would be appropriate.

Now as you point out, on a net debt basis, we are there as we sit here today and that really depends on what we do with our cash going forward. But we're very comfortable that we can deal with those maturities, we're comfortable that we can deal with the economic scenarios as they unfold.

And how much cash we will need will be a function of all of those as well as renewing our bank credit line, which I think will be a very favorable development.

You had referenced before some increasing manufacturing costs and chemical costs on the Fibers business. Can you talk a little bit more about that maybe in percentage terms, what you're seeing there and what the expectations are for the first half of the year?

Expectations, Josh, are that those costs are moving up a bit. In some locations, we've got fiber costs also increasing.

I don't have a specific percentage that I can provide you at this point.

I don't have a specific percentage for you, Josh. Part of the chemical cost increase also in the first quarter over the fourth quarter is a result, I think of additional maintenance because we tend to use additional chemicals when we take the mills down for maintenance.

So I don't know that, that was necessarily a long-term chemical cost but it really will be a function of what happens to oil prices as we go forward and how that impacts the rest of the chemical costs. So we don't have a longer-term forecast on the first quarter for you.

So as we close the call, I'd just like to summarize our key theme for the new year. And that is that as we and other builders enter 2011 with lower sales backlogs in the year ago, we'll need housing sales to gain momentum throughout the year in order to reach forecasted annual levels.

Our focus therefore, in our Timberlands Wood Products and WRECO businesses is to continue to improve profitability in today's level of demand, while being prepared to take advantage of our significant operating leverage if the pace of recovery picks up. In our Cellulose Fibers business, we'll continue to focus on operational excellence, while meeting the needs of our growing customers.

The closing of our approximately $200 million sale of non-strategic lands in the West that we announced earlier today is a solid start for the year and we look forward to building on this base with improving operational performance. We appreciate all of your attention this morning and encourage you to follow up with Kathy McAuley if you have further questions.

Thanks very much.