Good day ladies and gentlemen, and welcome to the second quarter 2008 Louisiana-Pacific Corp. earnings conference call. (Operator instructions). I would now like to turn the presentation over to your host for today's conference, Mr. Curt Stevens, Executive Vice President of Administration and Chief Financial Officer. Please proceed.

Thank you. Good morning, we appreciate all of you joining us for the Louisiana-Pacific conference call and discuss our financial results for the second quarter ended June 30, 2008. With me today are Rick Frost, LP CEO, and Mike Kinney and Becky Barckley, our regular investor relations contacts. As usual, I will start the call with a review of the financial results for the second quarter, provide a discussion about our performance of our individual segments, and give you some comments on the balance sheet. I will then turn over the call to Rick, who will discuss the current market environment, the challenges and accomplishments during the second quarter of 2008, and a summary of his thoughts and plans for the rest of the year. As we have done in the past, we have opened up this call to the public and are doing a webcast. This can be accessed through www.lpcorp.com. Additionally, to help with our earnings call we have provided a presentation with supplemental information. As I go through the discussion today I will reference these slides. As a caution, this presentation should be reviewed in conjunction with the publicly available earnings release that we sent out this morning. I want to remind all the participants about the forward-looking statement comment that is included in our earnings release and shown on Slide 2 of the presentation. In these uncertain times in the housing market and the turmoil in the credit markets, forward-looking statements are even more difficult in today's environment. Please also be aware of the discussion on the use of non-GAAP financial information, it is included on Slide 3. There is also an Appendix to the presentation that contains the necessary reconciliations. I am not going to re-read these statements, but I am incorporating them with this…

Thanks, Curt, and good morning everyone, and I also thank you for being interested in the LP building products Q2 earnings call. It is a beautiful day here in Nashville. It is going to be about 95 degrees today. I was out part of the month of June getting a total knee replacement, and I will tell you that that is just about as bad as the housing environment right now. But I am on the mend and I wish the market would be the same. I would like to be sharing better economic news with you than I did last quarter on the call, but there has not been much improvement. We are still in a tough housing environment and concerns with the mortgage debt and the other financial markets continue to plague the housing industry, as you well know. One small bright spot, it does look like the president may sign the Housing Bill which I don't think is going to be the solution, but may provide some stability in this market. I want to begin with a few comments on Q2. I will speak first on safety. Last quarter was the best quarter that we have had as a company with a safety experience rate of .62. In Q2 we had a set-back with the Clarke County thermal oil room explosion and fire that Curt mentioned briefly. We had four employees hurt in that incident and thank goodness not more seriously. But as a result, at mid-year we have a TIR now of .99, which is still under 1.0 and something to be proud of. It creates great challenges for our people in staying safe during these times of great distraction by intermittent running, by changing shift schedules, and the financial concerns that people are feeling at…

Thanks, Rick. That was not very upbeat. So now, why do we not open up for questions?

(Operator instructions). Your first question comes from the line of George Staphos of Bank of America Securities. Please proceed.

Thanks, everyone, good morning. Rick, maybe first question, I know it is a little early, but just hypothetically, do you have further opportunities if you need to rebalance within the fleet of mills and do you think have opportunities on the cost curve by which to improve performance if, in fact, you chose to take some downtime as we look out to 2009?

I think the way I will try to answer that is when you take temporary downtime, it is the most expensive downtime you can take because you do not get it fixed cost. Now, we have shut down two mills to get at the fixed cost structure and if we are hopeful at continuing to get at the fixed cost structure. Then what we would have to do is to look at some of our temporary decisions and to declare them as more permanent. And then actually get the rest of the costs out of the system. I am not prepared to say anything more about that at this time.

Okay, I understand and could you remind us or give us a bit more in the way of detail in terms of what is attractive to you about the joint venture in Oregon and the decision on the timing to invest a bit more now in light of some of the obvious other challenges from a cash flow standpoint.

Well, the timing was pretty well predicated on the deal that we made when this mill was built and we have a call option and we think that it makes sense for us to execute that. So, it is a very low cost source of product and what we want to do--at this point in time, what you have to do is you have to make LVL at the lowest possible cost. That is the only way that you can sell it. So, it makes sense for us. It is a good mill. It will reduce our cost structure in that part of the world and we had planned to do it and we have the ability to do it.

Okay. Thanks. I will turn it over.

And your next question comes from the line of Chip Dillion of Citigroup. Please proceed.

Hi, good morning. My question first is to make sure I got this right. On the CapEx, did you say, I am sorry, 110 million for the second half?

Chip, I think what Rick’s comment was 110 million, not including the acquisition.

And that is for the whole year?

That is for the whole year.

Okay and that includes, obviously, the remaining spending for Houlton and I guess Clark County is pretty much paid for.

Right.

Okay.

What you have to add to that, though, is you have to add the Matusa (ph 00:35:49) and this proposed LVL.

And MAC-ISA, I think already, has been like about 45 million?

Correct.

And so, that will be 70 all in so there is another 25 and then the 35 for the Oregon JV.

Correct.

And could you describe the plant in Oregon, is it similar to Houlton?

No, no, this laminated veneer limber it is not LSL.

Okay.

It would be similar to what we produce in our Golden facility and in our Wilmington, North Carolina plant.

Okay and would 35 million represent a discount to replacement costs or what?

Well, that is our estimate at this time. There is a quite a mechanism to go through to get to the actual number.

Okay and then, Curt, if you could just review the--we see you need the CapEx, I guess, for the second half is going to be another 35 or 4 million. And then you have this 60 million from MAC-ISA in Oregon and then I think you have term loan of what 127 million and when is that due?

The term loan is due at the end of December it is 125 million Canadian and that was the remaining balance in the 235 that we put in place as part of our attack strategy and we can do the repatriation of earnings from Canada.

Got you. And who is the bank there?

It is our standard banking group. It is actually a little bit expanded because they have to have a Canadian presence, so there is a probably a predominance of Canadian banks in that facility.

Oh, okay and then, beyond that, I think you have some maturities next year. Could you just review those?

We have $200 million senior debt piece that is due in August of 2010. Next year, the only thing we have got is the renewal of our revolving credit facility.

And that has nothing outstanding, right?

It is only--it has outstanding layers of credit.

Got you, got you.

There is no outstanding balance on that.

Okay, so as we think about the 511 million of cash and investments, obviously the ARSs are in the 106, but you can pretty much get at the other 400 of that right?

That is correct.

Okay and if Rick or you want to sort of give us your thoughts. If you sort of add up the joint venture in Oregon and the Brazilian investment, that is over 100 million. I just remember back in the early 2000s you all had sort of a plan to keep your net cash at between two and 300 million. And you are still in tough times and you are below that and I am just kind of wondering why you are doing these other investments when you are below that level and you have to renew with the banks. If you could just give us your thoughts on that.

Well, let me make a couple of other comments. One, we are anticipating close to a $100 million tax refund this quarter, which will offset some of that. And I think the comment we said is we wanted to keep 200, 250 to 300 of cash on the balance sheet. I do not think we ever said net cash.

Okay.

That is correct. I always said, I called it my rainy day fund, and I always said between 250 and three.

And if you look at our debt to total cap, we are still one of the best ratings in the industry.

And after you get this refund and let us say when you do turn profitable, what is your sort of--not predicting what you do in the third quarter and beyond, but just up to now, do you have a? I guess you are carrying back to get this 100 million, would you then? Let us just say, hypothetically, you started to make money tomorrow, would you be taxpayer right away or do you have actual carry forths you can use?

I would have to research that before I gave you an answer on that. I think we would become a taxpayer because I think we can carry back the current real offsets.

So, if you lose money in the second half, you might even have more refunds you can go back and grab is that right?

Well, yes. In fact, today we have got as of--and this will be in the queue, so you will see it there, but if you break out our receivables, we show an increase in receivables up to 280. But if you look at the trade receivables, they are only about 75 of that. There is 170 million income tax receivable in there, 100 that I talked about getting in Q3 would come out of that. The remaining balance, we would expect to be able to carry back from the 2008 filing.

And so you would get that, obviously, the first half of ’09.

Correct, or the summer of ’09, depending on--

And given as much money as you made in the up cycle, if you do keep losing, you basically can continue to crawl back I would think.

Well, at some point, it is going to run out and hopefully, the market is going to turn so I do not have to worry about that.

(Laughter). Got you. Alright, thank you.

Yep.

Your next question comes from the line of Peter Ruschmeier of Lehman Brothers.

Thanks, good morning.

Morning.

Hey, Curt, I was hoping you could help us with, remind us what the capitalized interest was in ’07 and what you think it is for ’08 and I guess it really drops off in ’09.

Well, it should drop down dramatically in ’09. I have Becky scurrying to get you that number ’07, Pete.

Okay.

If you have another question, I will answer that, she will get it for you.

Alright, maybe shifting gears to the LVL in Oregon, can you remind us who the partner is there? And the 35 million call option estimate, what does that do for you in terms of your increase in your equity of the LVL capacity? What kind of capacity does that buy you?

Well, the partner in that would prefer we not disclose them and will when we do the transaction, but right now, it is a little bit sensitive. That facility currently is about 4 and a half million cubes and we would a 50% interest in that. We also believe we have the ability to increase that when the market demand comes up.

Okay, so the 35 million would take you to 50%?

Correct, correct.

Okay

Just the capitalized interest for the second quarter 2007, it was $4 million and it was under a million for the second quarter of this year. And for the six month it was seven versus three and a half.

One more comment to refresh your memory on engineered wood products. Last year, we shut down our Hines-Oregon mill, which had a capacity of about 5 million cubes and we did that with an eye for this volume being available to us at a lower cost structure. And so this is the continuation and substitution in our engineered wood products business for the shutdown of the Hines-Oregon mill.

Okay, that is helpful. Rick, could you maybe comment on what you learned so far about the Brazilian OSB opportunity. You know both in terms of how you see the domestic and export opportunity developing over time?

Yes, actually, I am headed down there in September when we actually take over operational control. The mill is in pretty good shape. We are going to have to put a little bit of money into it. Our primary responsibility down there right now is to improve the quality of that product. That is one of the advantages of them partnering with us. We are having their recipe sent up here to our lab and hopefully we will get that product stamped. And currently it is not being used for structural product. So the first thing that we have to do is improve the quality of that product so it can get a structural product stamp. What seems to be very exciting about Brazil is that as you look at the demographics of Brazil and all the forecasts around Brazil, Brazilian families will be expanding at an average annual rate of two percent per year for the next 20 years. Current unmet housing needs in Brazil are at over 2.1 million involving both new homes and repair and remodel. And Brazil is viewed as a very excellent real estate opportunity around the world. Housing investment is projected to grow from a current state in ’07 of about 165 billion Real, up to over 400 billion Real in the next 20 plus years. So, if you look at the improvement in the financing ability, the financing system of the Brazilian housing market. By the deregulation that has occurred there, there is going to be a surge of funds available to meet the housing needs. So we are looking at the number of new families, in Brazil, will move from today around 60 million to 95 million over the next 25 years. So there is going to be a need for 37 million new homes in Brazil. And I believe that an awful lot of that is going to fit into the way that we develop the market in Chile. A lot of that will be low income housing where we can go in and actually give prototypes to the government models, which is the way we got into Chile to get the new housing construction themes accepted. So if you look today in the population in Brazil it is about 189 million people. Over the next 20 years there is going to be 230 million people. And homes today in Brazil there are 56 million and projected to be 93 million in 2030. So we think we are in at the right time in having structural components in Brazil. And it may actually give us an opportunity to export some of our other products down there as well. I really am hopeful that very little of the Brazilian product is exported. I think it can all be consumed within the country.

Okay that is very helpful. And Rick, good luck with the recovery on the knee.

Hey, man, I am coming along.

Pete, I am glad you asked that question. He has been prepping for a week on that one.

Thanks guys. I appreciate it.

Your next question comes on the line of Richard Skidmore of Goldman Sachs. Please proceed.

Good morning guys. Curt, could you talk about what you would expect inflation to be up in the third quarter versus the second quarter given what you have seen thus far in the month of July.

I think your question has to do with raw materials. I am not going to say what the economy is going to do. Well, you know, we have seen natural gas slide back down. So we do expect to have some improvement in natural gas pricing in the third quarter. We have seen oil down below $130 a barrel. The derivatives that go into our P-UP and our NDI resins have not come off much. But I do not anticipate a big increase in the third quarter over the second quarter. I am guessing if I sit here in October for the third quarter call I would probably tell you that raw materials and energy are going to be up slightly from Q2 but not significantly.

Okay. And then just shifting to a balance sheet question. The current portion of contingency reserves, 68 million dollars. Is that something that is going to be paid out in 2008? Or can you clarify what that is?

48 million is the OSB settlement.

Okay.

And we paid ten of that already. And then we will pay the balance before October 1st. The other piece of that is, if you recall, the fourth quarter of last year we reserved about $9 million for an environmental settlement in Lockhart and we have not paid that yet. So we are anticipating that that will get finalized here in the next six months.

Okay and the OSB settlement is this year being paid out?

Yes. Ten of it has already been paid. And then the additional, whatever it is, 34 million will be paid before October 1st.

Okay and then on slide 12 or whatever that goes through your net cash position. Is that contingency reserve in that number or not. It does not look like it but I just want to make sure?

It would be in the current liabilities in the working capital?

Okay. Thank you.

Your next question comes from the line of Angie Salom of Deutsche Bank.

Hello. Can you hear me now? I was just wondering if you could tell us what was available under your credit facilities at the quarter end? How much LOCs were against it?

Under the credit facility right now we have an unsecured line that is cullable in Canada. It is 100 million. We have got about 35 outstanding on that. So it is about 65 available there. And then in the U.S. we have 115 million in our credit line. The only thing that is outstanding against that is letters of credit. But as we talked about in last quarter’s 10-Q if we were to access that we would need to cash collateralize it.

Okay so, the cash collateralization is still in place?

Correct.

Okay. And I know it is difficult to discuss any sorts of refinancing. But is there any sorts of details you can give us on options you are looking at? Are you, you know, refinancing the credit facilities or the term loan that is coming up in December?

I think what I said is we are exploring a variety of options and those would be some of the options we are exploring.

Okay and is there a time frame when you would be able to tell us what those options were?

Well if you can tell me when the credit markets are going to be open and when the banks are going to be open with their checkbooks I could probably give you a better timing. But we will be prepared this quarter to take advantage of windows of opportunity.

Okay. So as far as you being comfortable with the amount of cash that you have currently, if for example the credit markets did not open up by December when the term loan is due, you would just pay it off?

That would be our intention, yes.

And then just what exactly is under the debt balance currently? Could you break that down for us, if there is nothing drawn on the credit facility? It looks like the recourse notes were paid down. Is that just an accounting adjustment?

The recourse notes are related to an installment sale on several timber transactions. And that is a slightly higher receivable than there is a payable on that. So the receivable to payable self liquidates. So there is no cash consideration for LP other than the small amount that will get in the receivable above the payable.

Okay thank you very much.

Your next question comes from the line of Christopher Chun of Deutsche Bank.

Yes, thanks. Can you just tell us what CapEx is going to be for ’09?

The guidance that we have given there, Christopher, is that we try to hold that to 25 million. We do not really have any further commitments or large projects that we anticipate would flow into 2009. So it would be basically at those maintenance levels. The only changes that might be what we find when we go into the Brazilian mill as Rick talked about. But it should be a pretty low level.

I think what I actually said on the last call is that it would be under 50 million. And I was arm wrestling the guys that want the money and I am winning.

Okay. In the OSB business I saw that you ran at an EBITDA loss again. I was wondering if you might be able to break out for us in terms of the cost structure at the segment level, how much of that is fixed and how much is variable?

You are asking about the OSB cost?

Right.

The comments I have made talked about the from compared to Q2 of last year. I did talk about the increase in raw materials being about three bucks a thousand. That the effect of the 30% reduced production which would be fixed costs were up about $10.00 a thousand. And there was about $5.00 in the Canadian currency.

Right. I guess we could extrapolate to some extent based on those comments. I was wondering if you cared to make any?

We do not really publicly comment on our cost breakdown for obvious reasons.

Fair enough thanks.

(Operator instructions).

Well, Chanel, if there is no more questions then we thank you all for you participation. As usual, Becky and Mike are available for follow up questions. We appreciate your attendance. Thank you.

Ladies and gentlemen that concludes the presentation. Thank you for your participation. You may now disconnect. Have an excellent week.