Good day, ladies and gentlemen, and welcome to the Third Quarter 2008, Louisiana-Pacific Corp. Earnings Conference Call. My name is Lacy, and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Curt Stevens, Chief Financial Officer. Please proceed.

Thank you very much, and good morning to all of you, joining us on Election Day. Hope you all had a chance to go out and vote. I appreciate you joining us for our conference call to discuss our financial ruts for the third quarter ended September 30th, 2008. As the moderator said, I am Curt Stevens, Executive Vice President of Administration and Chief Financial Officer. With me today I have Rick Frost, Chief Executive Officer; and Mike Kinney and Becky Barckley, our regular Investor Relations contacts. As I usually do, I will start the call with a review of the financial results for the third quarter; provide a discussion about the performance of each of our segments; and some comments on the balance sheet. I will then turn it over to Rick, who will discuss the current market environment, our accomplishments and challenges during the third quarter of 2008, and a summary of our thoughts and plans for the rest of this year and in to 2009. As we have done in the past, we have opened this call up to the public, and we are doing a webcast. This could be accessed through www.lpcorp.com. Additionally, as we have done in the past to help the earnings call, we have provided a presentation that has supplemental information that is included in our earnings release. As I go through my comments, I will reference these slides. As a caution, this presentation should be reviewed in conjunction with the publicly available earnings release. The second slide of our presentation, I want to remind the participants about the forward-looking statements, comment that is included in our earnings release and also on this page in the presentation. Also be aware that there will be a discussion and use of non-GAAP financial information, and…

Well good morning, everyone, and I too thank you for being interested in our call. As is customary, the weather here in Nashville, absolutely stellar, it is about 60 degrees without a cloud in the sky. This is a big election day in the history of our country, and last but not least the titans are 8-0 in the NFL. That said, things have obviously not improved in the business since our last call. Housing news is still dismal, and since the middle of September, the banking system and the credit markets have virtually shut down as you know. Today's business conditions are without precedence in my 31 years in this industry. Sales of building products are at a very slow pace since September. The fed, the treasury, the Congress, and the FDIC have been working overtime to concoct and administer a potion to limit from the housing and mortgage collapse, and the turmoil in the financial services area. I hope with this increased liquidity, the banks actually start lending to each other and to businesses again. For housing, I am cautiously optimistic that the actions being proposed by Congress and the FDIC around some type of mortgage relief and the direct actions taken by some institutions to renegotiate mortgage terms will reduce the amount of future and anticipated foreclosures. So with that as an economic backdrop, let me make a comment on Q3 here at LP. I want to begin on the bright side. LP is having another good safety year. I mentioned that, because it is a core value with us. We actually have a chance to have our best year ever. In June, we began our 100 days of summer safety focus, and I am pleased to report a TIR for the year stands at 0.91, and…

Thanks, Rick. Lacy why do not we go to the Q&A queue, if we could.

(Operator Instructions). And our first question will come from the line of Mark Connelly with Credit Suisse. Please proceed.

Thank you. Rick, two related questions. You know, you mentioned the rise in the US dollar helping your Canadian operations. But can you talk more broadly about what the OSB cost serve looks like now? And I can't help but wonder if the rise in the US dollar is actually flattening out the overall curve and making things potentially difficult to resolve. My second question is related on the Engineered Wood side. Could you give us a sense of whether your competitive position there, you think, is better or worse than average right now.

I'll take the second one, since I remember it better. I think we are about the same position. We do feel over the last year and a half, we have gained a couple of points of market share in our efforts. Where we're getting killed in EWP right now is bringing on the Houlton mill under such adverse conditions. And so the majority of our losses in the Engineered Wood Products business have to do with bringing that mill up, and right now, selling it out at about 25%. So that's one of our major issues that we have to think through right now, in terms of what do we do about that? In terms of the overall cost curve, obviously I think exchange rate this morning was about $0.79, that's making us go back to the drawing board in our scenario planning in terms of based upon what production levels we run in to next year, which mills that we will run. Now we do approach that from a very regional basis, with regional customers, and regional pricing. So, it does add a dimensions that we are used to deal with back in to the mix in terms of, if conditions actually get worse, and our takeaways go down further, which will be the mills that go down. Under this scenario, it's not quite as obvious as say looking at that eight weeks ago, and we're going through that planning process right now. I hope that answers your question.

Mark, the only thing I would add to that is, that the competition today is very regionally based. So if you think about the change in Canadian currency, for instance, on the West coast, most of the mills that supply the West coast out of Canada will have the same impact of the currency.

It's obviously very good for us with a mill like Peace Valley or a mill like Swan or Dawson, these things work heavily in our favor there.

Okay, that helps. Thank you. Operator And our next question will come from the line of Gail Glazerman with UBS. Please proceed.

Hi, good morning. Curt, I apologize if I missed the number. But I think you said you were expecting about $20 million to $25 million tax refunds in the fourth quarter. Did you give a number or did you receive any refunds in the third quarter?

Yes, I did. We got $75 million, which was the federal refund in the third quarter. The tax refund that we are expecting in the fourth quarter is $20 million to $25 million, and that's several Canadian provinces and US states. Most of it is in the Canadian provinces.

Okay. And again (inaudible) if I missed it, but on the auction-rate securities, in the past you've talked about the fact that they have all been continuing to pay despite the write downs, is that still the case?

That is the case. We've spoken to the collateral agent. We do have two issues of CDOs and there has been some decline in the collateral there, but the bank trust preferred and the credit-linked notes, there has been no reduction in the ratings and they are all performing.

Okay. And just a final question. Operationally, as you think of taking the [investment] downtime that you've announced for the fourth quarter. Clearly overall downtime is going to be up, but are there efficiency of the gains in terms of the cost basis that we should be thinking of, I guess, as conditions start to normalize, or not really?

Yeah, the reason that you go to an indefinite shutdown versus just going up and down is to try to get your fixed costs out. And that's where we went with those two mills, as we are trying to eliminate the fixed cost associated with those two facilities. So there should be an advantage to that.

Okay. And is that something that you would expect to see in the fourth quarter, or there is still running down, something we'd see in the first quarter.

Right now Athens just ran out of wood and I think Chambord has got about 10,000 (inaudible) left. So the impact will be more noticeable in Q1.

Okay, thank you. Operator And our next question will come from the line of Peter Ruschmeier with Barclays Capital. Please proceed.

Thanks. Good morning. On the question of raw materials, I think you mentioned $40 million higher cost year-over-year. How much of that was fiber? I presume a lot was energy with the resin, wax and energy you mentioned.

Well year-to-date fiber was about one-third of it, and the rest was in energy and resin.

Okay. And any reason with oil where it is today, why we shouldn't see the full reversal of resin, wax and energy? And can you help us understand contracts that may prevent that from being realized, you know, over the near term, how does the timing work out?

Yeah, on the energy we do some forward purchasing of natural gas, so we do a portion of our purchasing going forward, so we should see most of the natural gas decline. On the resins, it's a look back. So you look at what the CMAI or the other index is of worth, end of a quarter, and that would affect the next quarter's pricing. So there's a little bit of a lag. So you probably won't see the big reduction in Q4, you should see it in Q1 from a pricing standpoint.

Okay, that's helpful. Looking at the balance sheet, the current and long-term contingency reserves, I believe, when you add them together, down about $52 million sequentially. Can you help us understand what that was?

Well, the big piece of that was the OSB anti-trust settlement, it was 44 of that.

Okay. Got it. All right. And then as we think about, the LVL investment situation, is that contractual? Are you on the hook for making that investment? Or is that discretionary. And what kind of timing, and we mentioned that in the fourth quarter, but what's your expectation for if and when you may complete that?

Well, what I have told our partner or potential partner and there is certainly a partner in the sales piece is that, until we can complete our refinancing activities that we're just not up for it. So that's about as specific as I can get with you.

Okay. And then just lastly, if I could, Curt, can you help us understand, I think it's $78 million on the sale of investments line in the quarter. What exactly does that line represent?

On the cash flow?

Correct.

You know, the accounting rules require you, when you change investments you got to (inaudible) to the sales on a repurchase. If you go back a couple of years ago, we would have shown $2.8 billion in purchases, and $2.7 billion in sales. So it's just the in and out of the investment portfolio.

And what kinds of exposures are we talking about there?

Hang on a second. I'm getting a cheat sheet from Becky. Becky, why don't you answer it.

The net difference is partially because what you've done. As you get to a point where your original maturity become less than one year, you are moving that to current. So that's a piece of what the 78 is. What's left in our basically marketable securities, include primarily short commercial paper, there's some corporate obligations that of some very high quality that we have seen little to no decline at all on value.

Got it.

Yeah. So it's principally just a reclassification between cash and cash equivalents and investments.

Got it. Super. Thanks, guys. I'll turn it over.

And our next question will come from the line of Chip Dillon with [Dillon Investment Research]. Please proceed.

Hey, good morning.

Good morning, you resurfaced.

Yeah, I didn't stay under water too long, but still fighting to keep my head above. Hey, on the cash flows that we see as we look in at your near-term financial situation. Just want to confirm that of the 441 of cash, you pretty much have access to about 300 of that right now. Is that fair? And what you really owe, I want to make sure I understand is about $27 million in Canada -- I'm sorry about $130 million; is that right in US dollars over the next, say, two quarters?

Yeah, I would say that at the end of September about 110 of that was not readily accessible either ARS or restricted cash. So I can give you 330. And you are correct, as of today with the exchange rate at about 130 of the September 30th balances would be due before the end of the year.

Okay. And so you've got about 200 more than that, plus you have the tax refunds coming in from Canada in the fourth quarter?

Correct.

Okay. You talk about your refinancing. The real issue is having, if I'm not mistaken is having access to a revolver that you have nothing, really, outstanding under, but, which, I believe matures sometime in the second half of next year; is that right?

The current revolver, we need to cash collateralize the (inaudible) that we have outstanding under that. And we have done that. You are right, there is not any liquidity under the current structure, and we would look to replace that with some other structure that we would look to replace that with some other kind of a facility that would provide liquidity. I think it's September of '09 is when that expires, Chip.

Okay. And then when you look at the moving parts back in the third quarter, when we look at the change in the net debt of the company, basically it's operations, plus the $75 million in tax refund, minus about $48 million, I think you said for the OSB payment?

The OSB payment and then the invest and (inaudible).

That's right. And you actually might have even today a dividend, is that right?

No, No. we didn't pay a dividend in the third quarter.

We did in the second quarter.

Gotcha. And let me ask you lastly this. $25 million in CapEx for next year; that is really getting that number down there. How long can you stay at that level? In other words, if we had a really tough period through say, 2010 or 2011, I would imagine you couldn't keep it quite that low, but could you keep it say, under 50 in 2010, and keep the plants in good shape?

Chip, in is Rick. Actually I've got my operations for next year at $20 million, and I've got $5 million for something that breaks that we haven't thought of. So that's what I'm looking at next year. And our belief is that that is replicatable in 2010.

Okay.

Let me just tell you why, Chip. We have relatively new facilities, we’ve made significant capital investments to upgrade those. So we have done, you know, these are not mills that are broken or mills in need of repair. The other thing to remember is, we will have a significant amount of these mills curtailed, so they will be just in the maintenance, we won't be doing the introduction of any new products or additional capabilities.

Okay. And then finally on Houlton. You suggested, I think yes the loss was somewhere around $5 million or so dollars in this last quarter for startup, and, you know, recognizing the next two quarters are the slowest quarters seasonally, do you see that number coming down in those two quarters, or will you really need to get in to an environment where the demand is better?

I've got to more fully load that plant, Chip, and so I'm trying to explore opportunities to do that. And you know, whether it's contract manufacturing or whatever, we just have to figure out. Although we're out there burning the bushes pretty hard in terms of coming up with new orders, which we are, we've got to have additional volume through that plant, or it continues to be problematic.

Gotcha. Thank you.

The other thing to note on Houlton because it has had a significant new capital investment there. There is a big piece of that in DD&A, but when you think about it from a cash standpoint it's not as bad from a cash standpoint. I think the other thing I would say as we are modifying operating schedules not only at Holton but at our other mills to take out fixed costs. As Rick said, we're trying to variabalize our cost as much as we can and Holton is one of those mills where we have changed the shifting patterns.

Gotcha. Thank you.

And our next question will come from the line of Mark Weintraub with Buckingham Research. Please proceed.

Thank you. I think you've laid out how you about $311 million of accessible liquidity, and $105 million of tax refunds that that can come to you, but, obviously you got to be potentially paying off that debt, et cetera. And then the big question I guess is while I understand you are not in a position to share specifics with us, where do you think you can get the cash burn down to in this type of operating environment with the measures that you are contemplating?

You are just a little bit early in asking me that question to put me in a position where I can give you a real good look at it, and I have to apologize for that, but I try very carefully to keep my internal and external communications the same and I can't get ahead of this. I'm right in the middle of this process right now. So, please forgive me.

Fair enough. But presumably, this is a big program, and there's a lot of leeway in terms of where you can get; I guess, maybe to help me get a better grasp is when you talk about variabalizing many of our fixed costs, I understood the various taking out of fixed cost measures that you talked about. Is there something beyond that that you are referring to or is it just, you are taking out a lot of fixed costs?

Well, we are taking them out and when you make a decision to re-enter whatever activity that you abandoned, then you have a much more clear decision in terms of how to go about doing that. If you take an organization, and that's why I'm calling it and describing it and exercising it in this corporation is rightsizing. The notion of having as many variable costs as possible in a cyclical business makes a lot of sense. But if you basically have a structure that has been put together to support a $2 billion plus corporation, there's only so much cutting you can do before you have to sit down and look at it from a different direction. So, what we're going through is looking at ourselves as a $1.2 billion to $1.4 billion corporation, which we currently are now and saying what do you have to do if you are a company of that size? So, an example of that is, instead of having your own research and development laboratory, you keep your key capabilities out of that group, but in the future, you would contract more of that work and use other people's facilities then monetize your fixed investment. So, that would be an example I would give you.

Okay.

Flight would be another one. At a company of our size, we can't afford to have an airplane and a hangar, and it's very difficult to eliminate good people that have performed [available] service for us, they have looked at the world very differently.

That really makes lot of sense. Is there much leeway do you think that you have at the mills in creating greater variabalizing, what's often thought of as fixed costs at the big mill level?

I think we have a couple of levers to pull there. One is continuing to get better on how we schedule both uptime and downtime. The other one is facing the reality that we may not be able to shelter our employees in the mill environment from loss of wages and salaries to the degree that we have up till now. So, in other words it's another element of treating what you learn in school as [oppose to positively] a variable cost, and often times to protect future capability, we have treated it as a fixed cost, and we have to reassess that.

Very helpful. And do you have a sense when you will be in a position to lay this out a little bit more definitively for us?

Yeah, I would think by the next call, I'll be able to give you a run up of what we've done and what we expect to get out of it. I will just say it will be measurable and if you take what we're doing in terms of rightsizing ourselves along with the things that appear to be going our way in raw materials, it should be significant.

Okay. Thank you.

Mark, the one last comment I'd make, and I only addressed it circumspectly is we do have selected assets for sale the one that I mentioned we closed last week. So, we will be seeing cash proceeds come in over the next couple of quarters related to some asset sales principally non-operating facilities.

And our next question will come from the line of Steve Chercover with D.A. Davidson. Please proceed.

Thanks, good morning.

Good morning.

First question in terms of the operating rate which you said will be below 50% in the fourth quarter, can you give us a sense of what it was in Q3 or even just does that correspond to six or 700 million board feet of production?

Let me try it this way. I think in Q3, we ran at 77% of our capacity of our rated capacity OSB, if you exclude both Silsbee and Clarke County from that calculation and include Peace Valley. If you exclude Clarke County from that calculation and exclude Silsbee, which is indefinitely shutdown, we ran at 77% of the capacity last quarter.

Okay, thanks. And with respect to the sale of St. Michel complex, is that going to make OSB for someone else, or is there a prohibition on what products it makes going forward?

Steve, that wouldn't be a very smart thing for us to do, but those agreements are confidential at this point.

Well, hopefully you are smart because I hope…

Thanks. Give me a little credit, Steve, okay?

Okay. Thank you. I'll give you credit, then. Well, that was it because my other questions have been answered.

All right. Lacy, we have time for one more question.

And our final question will come from the line of George Staphos with Bank of America Securities. Please proceed.

Thanks. Hi, everyone. Good morning.

Hi, George.

I wanted to come back to Pete's question regarding the joint venture. Realizing that you've told your potential partner that you'd like to pull if off until a refinancing is completed, is there still a time by which you would still need to fund that investment if in fact refinancing did not go with the timing that you would expect?

I don't think I can provide anymore color on that at this time.

Okay Rick. Second question and I'll try to make them quick, given the time of the call. The operating posture that you are currently at right now within OSB and if we hold pricing constant at these levels which is obviously a fairly large assumption, do you think that the operations as you are currently running are still going to burn cash in 2009 or do you think you would be in a position where you could keep your operations above water from a cash generation standpoint?

Yeah, that's dependent on a couple of moving parts. Obviously, the challenge that we're issuing the organization is as it looks at itself at the size we are today, we have to try to figure out how to be cash neutral until things turn around. There are a couple of moving parts there though, based upon what we run and what we don't, based upon the acceptability of the arrangements with customers in terms of how much they want at what price.

I see.

So, that's the difficulty that we're having and the challenge that we're taking on here in terms of sitting down and if we look at this for another year, at least in this type of condition, we are probably going to be willing to pass up business that we have taken in the past and as a result take the downtime in our operating system.

Okay.

I don't know if that's helpful to you or not.

It helps. Two last ones. I know you can't quantify much on the rightsizing, but could the cash generation be at least as large as restructuring charge and then over the course of 2009, how much cash would you like to have on hand as you run the operations? What would be the minimum that you need? Thanks, guys. Good luck on the quarter.

Well, on the cash burn rate compared to the restructuring charge, we would expect that the benefit would be much greater than the restructuring charge in 2009. Now as you know, when you have severance, what you do is you need to accrue that severance based on the time that you would indicate to the individual that they are not part of the go-forward plan since they are actually terminated. So, the accrual will likely be over a couple of quarters.

A pretty good rule of thumb for you on staffing reductions is it's about two to one, your run rate advantage to what your severance cost is. By the time you loaded up with benefits and all of that…

Okay.

You run that out, it takes you probably about half as long as to start gaining your actual run rate as you have severance out there.

Okay. And the minimum cash?

When you think about the cash, we said this on last call and I just said it on this one as well, what I would really like to do is that I'd like to be in a position to address both the 125 roll over and the August 2010 bonds of $200 million. So, I'd like to be in a position where I can add that much cash to the balance sheet so that the ability to pay off the short-term loan and to de-fees, potentially de-fees the 2010 gives us the running room we need to get this economy back on shape.

Thanks, guys.

Thank you. Well, I appreciate everybody participating on the call. As always, Mike and Becky are available for any follow-up questions. I also will tell you that it's painful time in the credit markets and I wish I could give you better news on that, but we're doing everything we can as aggressively as we can to take advantage of a poor situation. And as Rick said, we are committed to improving the operations going forward with the right sizing the mill downtime that we're taking and the changes in our operating schedules at the mills. We would expect to do significantly better and what we think will be basically a flat market. With that, thank you very much, and Lacy if you could give the replay information I would appreciate it.

Thank you. To access the replay for today's call, you may dial 888-286-8010 toll free, or 617-801-6888 internationally with the replay passcode of 80225988. The replay will be available approximately one to two hours at the end of the conference. Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day everyone.