Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Weyerhaeuser 2008 Third Quarter Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. [Operator Instructions]. This conference is being recorded today, Friday, October 31, 2008. I would now like to turn the conference to Kathryn McAuley, Vice President of Investor Relations. Please go ahead, ma'am.

Good morning. Thank you, Mitch and welcome to Weyerhaeuser's third quarter 2008 earnings conference call. I'm Kathryn McAuley, Vice President of Investor Relations. Joining me today are Dan Fulton, President and CEO; Patty Bedient, Executive Vice President and Chief Financial Officer; Tom Gideon, Executive Vice President, Forest Products. The call is being webcast at www.weyerhaeuser.com. The earnings release and material for this call can be found at the website, or by contacting April Meier at 253-924-2937. Please review the warning statements in our press release and on the presentation slides concerning the risks associated with forward-looking statements. Forward-looking statements will be made during this conference call. This morning, Weyerhaeuser reported third quarter 2008 net earnings of $280 million or $1.33 per diluted share. This includes an after-tax gains of $303 million or $1.44 per diluted share on the sale of the container board packaging and recycling business, to international paper on August 4th. An after-tax gain of $158 million or $0.75 per diluted share on the sale of the Australian operations; real estate and related after-tax charges of $144 million or $0.69 per diluted share; an after-tax charge of $24 million or $0.11 per diluted share for asset impairments in wood products, and after-tax charge of $10 million or $0.05 per diluted share for restructuring activities. Excluding these items, the company had a net loss of $3 million or $0.01 per diluted share. A GAAP reconciliation of special items is available on our website, in the information... in the earnings information package. Please turn to chart four in this package, as I will next discuss the waterfall chart. Chart four is the bar chart detailing the changes in earnings per share on a segment basis, from the second quarter of 2008, to the third quarter of 2008. As noted, in…

Thanks Kathy. There is little doubt that we're facing extraordinary market conditions. Single family housing starts have dropped more than 65% from peak 2006 levels. Medium prices of new homes are below September 2004 levels. Consumer confidence is the lowest since tracking began in 1967 and tight credit threatens any near term recovery. Against this backdrop, we stated this morning that we expect that the housing market will remain difficult. Such a slowdown effects and challenges the majority of the businesses in our portfolio and we're prepared to take the necessary actions that these unstable market conditions demand. Although the outlook is gloomy, we've worked hard to position ourselves to emerge stronger and more competitive than before. Our strength begins with the very core of our company, more than 6 million acres of timberlands, which we intensively manage in order to extract maximum value on a long-term sustainable basis. In addition to the timber, we're tapping other revenue sources from this land, such as oil, gas and minerals. We complement this valuable asset with a closely aligned set of businesses that leverage our core competencies and boast some of the most efficient manufacturing operations in the industry. Even before the current economic conditions became widespread, we were working closely with our customers to ensure that our production met their demands, without creating unnecessary inventory. The recent $6 billion sale of our containerboard packaging and recycling business to international paper allowed us to strengthen our balance sheet and enhance our liquidity. This provides us with valuable flexibility to weather these turbulent markets. As announced last quarter, we're eliminating 1,500 corporate level positions and taking other steps to achieve $375 million in annual savings, which will further improve our financial and competitive position. As we manage through the downturn, we'll continue to…

Thank you, Dan. During the third quarter, we continued to adjust to change in market conditions while maintaining our excellent safety performance. As Dan mentioned, we do not expect market conditions to improve in the near term. In response, we continue to balance our production with demand. This morning, I'll discuss the three businesses that comprise our forest products group: timberlands, wood products and cellulose fibers. Patty Bedient will include real estate in her report. Beginning with timberlands which is on chart five, earnings for the third quarter were slightly improved over second quarter. This was due primarily to an increase in oil and gas revenues compared with the prior quarter. We also benefited from an increase in the sales of non-strategic timberlands. In the West, log prices continued to soften due to the sustained low levels of lumber demand in the California market. Although, overall harvest levels were seasonably lower, we have continued to make progress and salvaging wood damage during last December storms. This is a complicated and dangerous test, but our cruise are making great progress and we plan to complete the salvage efforts in Washington by the end of the first quarter in 2009 in an Oregon towards the middle of next year. We started on this work before others in the industry, and this head start combined with our long working relationships with customers in Asia has allowed us to find the markets for that wood. Our export sales remained relatively stable and log prices increased, mainly driven by tight log inventories in the West. We are closely monitoring these markets to see how they are reacting to the global economic slowdown. In the South, great realizations were up slightly as less than half of the normal timber volume came to market. We also continued…

Thanks Tom and good morning. As Tom said, in addition to the fourth quarter outlook that I normally cover, I'll briefly discuss the third quarter performance of our real estate operations. Before I began my comments regarding the real estate segment, please refer to chart 10 in the presentation. Our real estate operations recorded pre-tax impairments of $235 million in the third quarter. In addition, an acreage transaction resulted in a pre-tax loss of $87 million. The loss from homebuilding operations was slightly lower than the previous quarter due to the mix of homes closed and lower selling expenses. Despite the lower loss from our homebuilding operation, the housing industry continues to be challenged by a series of adverse market and economic trend. Declining employment levels over the last several months, a lack of consumer confidence and the recent disruption in the financial markets are clearly evidenced in our slow traffic and new order trend. Home prices continued to decline in virtually every market. Vacant inventories are at record levels and foreclosure actions are increasing, particularly in the weakest markets. Land values remain under pressure with prices linked to trends in housing prices. In response builders have reduced housing starts, resulting in a declining absolute volume of unsold new home inventories. In recent months, sales of existing homes have increased year-over-year in Phoenix and certain California markets, driven by a significant foreclosure sale. While the pricing environment is discouraging, affordability is improving and the market will ultimately benefit from the clearing effect as existing home inventories have moved of peak levels. Our markets weakens throughout the third quarter. Homebuyer prospects scares the number to begin with, same to withdraw from active home search. And significant number of homebuyers continue to have difficulty in selling their existing homes. In addition, buyers…

Thanks Patty. Yesterday, I returned from a trip to Arkansas, where I met with the leadership of our Southern timberlands and lumber organizations, spending time in the fields, observing firsthand some of our Southern operations. There were a number of interesting aspects of the visit, but the most energizing was seeing the pride and determination of our employees. In this particular visit, I met with people who everyday lace up their boots, don their safety gear and head into our woods and mills with the singular focus of safely maximizing the return from our resources. For them that's not a term or slogan. It's a way of life. And as I look at our challenges ahead, I gain confidence from the strength of our balance sheet, our liquidly and what we've done to improve our competitive position as the economy recovers. These are important and critical, but most of my confidence comes from the people that I have spent the last two days with, our committed employees. Throughout Weyerhaeuser, we have employees focused on doing everything possible to ensure that our world leading timberland resource and manufacturing assets are managed and used to the benefit of investors and customers. This dedication will get us through these challenging times, and will create the exciting future that we envision for Weyerhaeuser. And now, we'll open the call to your questions.

Mitch, could you please open the line? Question And Answer

Yes ma'am. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. And our first question comes from George Staphos with Banc of America Securities. Go ahead please.

Thanks. Hi everyone, good morning. Couple of questions. First Dan, I guess or Tom, in wood products in light of the economy and the extended downtime, we're likely to see at the mills. Is there anything that you need to do differently from a maintenance standpoint during this time of the year than you would normally do? And if so, are there any financial implications from that? And I had a couple of follow-ons.

Okay, George. With respect to maintenance, I don't know if there is anything differently that we need to be doing. As you know, we conduct our maintenance on an ongoing basis throughout the year as its appropriate to make the adjustments we need to make. So from that respect, I don't see anything unusual occurring.

Okay. Dan, if we look bigger picture, the sales of paper and containerboard look to be pretty well timed in light of the economy. That said, obviously Rico and with products right now are going through very, very difficult periods. Has your long-term view on the prospects for these businesses changed at all over the last year or so? If not, why not, if so, if you could share a couple of detail there?

ThanksGeorge. Long-term view is not changed. Clearly, the housing market that we find ourselves in is tougher than what we had predicted. I've used the term unprecedented a number of times in presentations and comments to employees and I really do believe that the cycle that we're in is unprecedented. And we believe those businesses are both positioned to be leaders in their industries and with recovery they are positioned to gain share. And so, our view is not changed, but clearly we've been dealing with a really tough market situation.

Okay. Two detailed questions and then I'll turn it over. One, what do you think the operating tax rate was in the quarter end? And two, what was the acreage sale loss of $87 million related to? Thanks.

Well, I'll take the first one, George. And I guess I'll turn the other over to Dan. The tax rate for the year... the effective tax rate is just over 42% and so that is the rate that we used through the year-to-date operations, through September. And we would anticipate that that 42 will be the year end rate. Now, let me remind you that 42%, when we're in a loss position which is where we are from the loss from continuing operation, the bigger the tax rate the better in terms of computing that benefit. And included in that benefit is the benefit that we will receive as the part of the capital gains rate differential that comes with harvesting timber as a result of the of the TREE Act.

Right.And the $87 million acreage loss?

George, that was a property that Pardee had been developing in Sacramento. It was one that we initiated a couple of years ago. Before the downturn, they had improved and partially improved lots. It actually opened up sales, and initial models. And as the market continued to deteriorate, we shut the project down, mothball the project, and the intent was to hold it off the market for several years, until the market recovered. We received an unsolicited offer for the property, and determined that given the certainty of the cycle, it was an opportunity for us to monetize the asset. And so we elected to sell it.

Okay. Thanks Dan.

Next question?

Comes from Gail Glazerman with UBS. Go ahead please.

Hi. Dan, maybe going back to the answer on George's question, if you haven't change your long-term view as the market downturn worsen, are you seeing any opportunities arise that that would interest you in terms of growing the business thoughtfully?

Well, we are looking all the time Gail. And I think that there will be opportunities that will emerge. Our focus at this point is to maintain a strong and operating position as we can with our existing assets. We still view the market as highly uncertain. And so, we're being cautious, although we are watching but I wouldn't expect any sudden moves from us.

Okay. And just to clarify obviously, given what's been happening over the last month, you are increasingly cautious. Back in September, you had talked about a hope for maybe, a little bit a price recovering, and with products 2009, and maybe ending the year with hope for volume improvement at the variant. Has that been pushed out, is it fair to assume?

Well, I can't give you target quarter. I think we were more optimistic when we spoke even six or eight weeks ago, because the credit markets have deteriorated more. We've seen a direct impact on not only our housing sales, but sales across the country. And so that puts us in a more cautious position, as we look to a recovery. And I think we have to... in some part, look to Congress, and the Treasury, and the Fed, and see what actions they take in order to stabilize the economy and perhaps, provide some impetus or some recovery in housing. But at this point, housing starts are significantly off, and I think the market has really moved to the sidelines, pending some greater clarity.

Okay. And just last question on fluff pulp, can you give a little bit of insight into exactly what you are seeing in terms of both supply and demand on the fluff pulp side that's driving prices lower.? I mean, obviously paper pulp is weaker. But how is that flowing in the threshold?

Gail, as you know we have a very strong position in the fluff pulp market. You've seen global economic conditions kind of impact demand worldwide. You've seen the China demand diminished significantly. And so you've seen reaction to that. And you've seen a significant announcement across the industry, in terms of market related downtime. We are well-positioned with our key customers. We have a good standing history with them. We're providing quality product long-term. It's a growing market. We're positioned to grow with them. And we're working closely with them, as we go forward. And we're really pleased that how well our demand held up with our key customer group.

Okay. But I mean is your sense of threshold demand has followed, or seen the same type of contraction, say magnetic contraction that's happened in paper pulp then?

I think the issue that you're seen in the marketplace isn't demand driven, it's where you might have some incremental supply that maybe coming into the market, from people who haven't previously participated in that segment of the pulp segment.

Okay, okay. Great, it's on the slide. Thank you.

Next question?

Comes from Mark Connelly, with Credit Suisse. Go ahead please.

Thank you. Just two things first, when you look at the new revenue streams, oil and gas, and mineral rates which were already there and then some of the newer stuff that you are hoping to develop, how much less volatile do those streams look to you, relative to the existing streams? I mean, are we seeing a process of derisking in your business, as we are seeing in ours? And the second question is about you lumber customers, both on the industrial and retail side. Certainly, across consumer retail we're seeing big changes in terms between customers and suppliers. Are you changing your terms, are you running into credit issues or seeing terms change around you?

You want to address both of those?

Okay. In terms of the, your second question first, on lumber customers, obviously it's a tough economic environment. But we have not changed our trends. We're working well with our customers and monitoring it, and we're comfortable where we are with respect to our positions with them. In terms of new revenue streams, those are still in the potential to come out as you think about where might be in area of biofuels, where we might in area of biochemicals as well as in the carbon credit arena. So, over time that potential for that area will play out. We, as to what the risk factor that may be, we'll have to understand that going forward but we are exited about the potential in those areas to augment and to complement with what we are already doing in our main segments.

Well if you look at --

Forget to add a point, a lot of these new potential product streams are related to oil prices and given the volatility that we've seen, there are surely some short-term concerns but long-term. We have a view that oil prices are rising. And I think what they do is they do create a pressure towards shifting from some oil based chemicals to some cellulose based chemicals. And we think that simply as an additional revenue potential that runs through the timberland and we view that is a real positive long-term. So it gives us some greater flexibility and it presents an opportunity for us, particularly in the biomass area to perhaps harvest fiber off of the lands that today is just being less than the woods.

Okay, thanks.

Next question?

Comes from Richard Skidmore with Goldman Sachs. Go ahead please.

Good morning. This question is for Patty, specifically which regards to the pension, as I look in the footnote, it looks like you had a pretty material swing in your pension income and your post-retirement credits in the quarter. And it look like it's actually a bigger swing than what sort of inferred in the 10-Q for the second quarter. Can you talk about what drove that swing?

Sure. There is a number of things that are impacting those numbers, both on the pension and in terms of post retirement. And it depends upon which period you are measuring. But just going back to the second quarter, you'll recall that we did make some changes in our other post-retirement benefits, primarily in our retiree medical which reduced those liabilities. As we come in to the third quarter, we have the containerboard transactions that we executed at the end of July, first of August. The significance of that transaction did require that we rewind the assets at that time and addition in conjunction with that transfer... with that transaction we also transferred some of the assets for one of our union plans which was very over funded, which was the requirement of the plan. And so there is a combination of impacts that are associated with that, both in terms of retirement benefits coming from retiree medical as well as the pension.

And how does that look going into the fourth quarter? Should we expect the same level of sort of pension income and credits in the fourth quarter or does that tail-off in the fourth quarter?

I think that the pension income will be from the ongoing operations will likely be as significant in the fourth quarter as they have been in the third.

Okay. Thank you.

Next question?

Comes from Peter Ruschmeier from Barclays. Go ahead please.

Thanks, good morning. I want to ask a question if I could about the dividend. I believe your old payout ratio used to be 20% to 30% of operating cash flow with the cycle, but clearly the company has changed. And as curious, maybe Dan or Patty if you could help us to think through what metrics should we be thinking about, we try to determine what that level dividend is over the cycle?

Well, as we share Pete, our policy has been to take range of 20% to 30% of cash flow over the cycle. As we've talked before, we are certainly in the downward portion of that cycle right now with respect to our wood products business, our homebuilding business, and even our timberlands. So the Board looks at the longer term, cyclicality of the businesses. We have received significant cash flow from the sale of assets over the past year. And that's been a factor in the Board determination of the ability to maintain the dividend at current level. As you know, it's an ongoing Board decision that is made. And at this point, I can't give you further guidance as to whether or not that range will change in the future.

Okay. Fair enough. I just hope, I could ask a follow-up, in terms of your latest thinking on, how you think about the REIT possibility, if you can update us with your thoughts there. And I guess on a related note, are there any technical reasons why if you chose to payout in the E&P distribution, why that couldn't be done this year, in essence in an effort to limit the tax leakage to just 15%? Or said differently, are there any reasons why you would absolutely not want to consider that?

Pete, this is Patty and I'll take that. In terms of our current thinking as we announced last month, we said at that point in time that given the changes in our portfolio and our assets that it might be possible for us to meet the retest in '09. And we still think that could be the case. And so, in order to preserve our auction to be able to do that, we have continued to move forward to position the company to make the couple of technical changes that would be required for REIT election. And those are the calendar year change, as well as the change in the legal organization setting up a separate subsidiary for the non-requalified assets. In terms of the payout of the E&P, you can payout dividends to shareholders at any point in time. The E&P would be as we referenced in the past, as of the end of '08 we expect that would be about $1.3 billion in cash, if we elected to payout 20% of it in cash. But indeed, the whole $6.5 billion would be taxable to shareholders. As it relates to tax legislation, it is something that we are monitoring very closely. And there are a lot of moving parts, as we all know both with changes in possible administration, both in terms of capital gains rates going forward. There are no announced changes for '09. And it would be highly unusual for Congress to put into place a tax change, and make it retroactive as opposed to prospective. So, I think we'll have some visibility and some time to think about that as we put that into the mix, with all of our other decisions going forward.

That's very helpful. If I could just a quick one for Dan, I'll turn it over. I am curious Dan, how you think about the Russian export log duty situations, and how that may feed into what you're actually seeing in the markets, in terms of log export demand, and pricing in Asia in particular? Thanks very much.

I'm going to let Tom address that one, Pete.

Yes, Pete with respect to the Russian log tariff situation, as you know they have announced that as of 1/1/09 they'll go up to 80%. All indications are that that is still something that is going to occur. As we've reported last time and it continues today, we've seen increased opportunities for our products in the international markets, as a result of that. So particularly, if I've just mentioned the export log situation, we'll continue to see improvement in our volumes going to both China as well as Korea. So, it is an opportunity as we see it going forward.

Pete, I think the other potential impact of the Russian taxes is that it should have the effect of driving up fiber prices for the Scandinavian pulp producers. So that may provide some benefit to us.

Thanks very much.

Next question?

Comes from Claudia Hueston with J.P. Morgan. Go ahead please.

Thanks very much. Good morning. I was hoping, if you could just talk a little bit about the wood products business, in terms of how much of your capacity is down? And then if you've any sense of how much of industry lumber capacity is down, that would be helpful as well?

Well Claudia, as a general overview, if you look at the most recent report I've seen, lumber production is going down anywhere between 20 billion and 25 billion square feet, since the year 2006 period. So it's been significant in our case, as we mentioned in our last call, we're at around 30% in terms of where we've been on a lumber and more than that in both our OSP and engineered with products. It's something that we continue to monitor. It's one of those things on an ongoing basis; we need to ensure that our production is meeting our expected demand. And so, we're adjusting as appropriate.

Thank you. And then I know it's little early, but do you have any sense of what capital spending will look like for 2009 or maybe any idea just what maintenance capital is now for the remaining businesses?

Sure, Claudia. As it relates to 2009 it is early. So, the end of the year as we talk about our end of 2008 and going into 2009, but let me say that we are looking very carefully at capital expenditures in terms of... of the levels that would be absolutely necessary to continue to meet the requirements of keeping our operations in good running condition. And we'll be cautious about starting new projects. However, that amount has not been determined at this point.

Okay. And then just a quick on the corporate expense, do you have some sort of estimates for what we should expect there in the fourth quarter? Its jumped around a lot this year.

Well, it does jump around a lot because there are a lot of very unique items that all roll into that corporate expense number. Ongoing just expense is probably somewhere in the neighborhood of $30 million a quarter, but again, having said that, there are number of items that could change that significantly. Couple of that just that comes to mind are variables; stock compensation and stock prices move around, foreign exchange et cetera that also get wrapped into that.

Okay. And then as your sort of corporate overhead program comes into place, will the bulk of that benefit be in that corporate segment or more of that would be in the operating segments?

Can you repeat the question?

As your $350 million in your cost improvement program rolls in, will the benefits of that be more weighed towards the corporate segment or will we see that more in the operating segments?

That's more heavily weighed towards the corporate segment.

Okay, great. Thank you.

Next question?

Comes from Chip Dillon with Dillon Research. Go ahead please.

Hi, good morning. My question, Patty, getting back to the REIT election, if you could do that, is there anything that can... or do you feel constrained let's say if you look at sort of recent run rates of the income streams and the non-REIT eligible businesses? And I would also assume that pretty much all the debt of the company would have to be in that taxable REIT subsidiary as well, except for I think about $1billion. So when you think about the interest expense, the run rate of the combined three entities, pulp, wood products and homebuilding, do you see that as a constraint possibly in 2009 or do you have ways you can ever come back?

Well Chip, you've really touched on a number of moving parts that you think about, looking at specifically 2009. As you referenced, you would obviously want to put as much debt in the taxable REIT subsidiary as possible, because of the fact that it gives you the tax benefit of those interest payments. And also I would remind you that not all of the timber income, that being some of the other value streams besides the actual harvest value of the income, would also go into the taxable REIT. So there are a number of mixes both in terms of what it looks like in '09, what it looks like in terms of its timber income that certainly make it challenging to look forward with clarity about what will happen in 2009. And I think that's why we said that while we don't have clarity about those today, that we want to be in a position to be able to make that, have the option to make that election, if indeed it does look like the best decision going forward. There are number of other things as you think about 2009. If we were to elect REIT status, any loss in the taxable REIT subsidiary would have to be carried forward as opposed to carry back against the gains that we have in 2008. So, that's why as we said we have not made any election about REIT status at this point, but what we are doing is putting the company in the best position with the most options available to create the highest value once we do have more clarity.

Got you. And just to understand, that was very good clarification actually. If you didn't elect tax REIT status in '09, then you could I guess this I would assume there is some gain in '08 from the containerboard in Australian transactions that you could use to offset any tax losses in 2009, if you were not to be a REIT, is that correct?

That's correct.

Okay, got you. And then lastly, maybe you could address a little bit about what you are seeing in the housing area, obviously there is... it's a tough call because of the financial turmoil. But I know a few months ago I think you all were seeing maybe a little bit of daylight in the DC suburbs and nowhere else. But would you say that there is been any signs of any change? I noticed that your average house price actually was up in the third versus the second quarter. So, I didn't know if there is any like second derivative changes that you are seeing in the market that might indicate that's the bottom for all?

Well,Jim we were seeing some light in Washington DC market. It seemed to have been stabilizing in part because resale prices had dropped enough that there was creating a little bit of a balance between re-sales and new home prices. We were starting to see some stability in the costal markets in California, particularly San Diego, our longer term higher value markets. And what we've seen recently is buyers generally moving to the sidelines with publicity in the financial markets over the last let's say 45 days. The impact on homeowners with their 401 (k), their sense of where they are with respect to equity challenges in reselling their homes. We've seen as our numbers show an uptick in cancellation rates and we are continuing to sell houses in every single market, but we are looking at this every week and it's very choppy. And our sense is that homebuyers need to regain some confidence that the financial markets are stable before they really start to show up and make purchase. The other thing that we're seeing at the low end is continued challenges in qualifying for mortgages. So higher down payments, higher required FICO scores, which make it more difficult for that first time homebuyer. So, we're still expecting housing sales to be rough for some period of time

Got you. Well, thank you very much.

Next question?

Comes from Mark Wilde with Deutsche Bank. Go ahead please.

Good morning. Dan is it possible to talk a little bit about the write-downs you've taken in real estate over the last couple of quarters, where have they been at and where are at in the process of kind of evaluating further charges? As I mentioned we've seen some greater stability in Washington DC, and on a spot basis we'll still see impairments. But what we do is we react to the pricing of our competitors. And so as prices may fall, we re-evaluate the absorption and the pricing required to build out of project and that may cause the need for impairments. In the last quarter, roughly half of those impairments related to the need to reduce prices, reduce assumptions on absorption and in some cases redesign product. The other determination that we make in looking at impairments is the long-term intent and strategy for the property. And so if we are building it out and selling homes, then we have to in essence mark-to-market based upon an competition, if it's a longer term land position, where we still maybe doing through an retirement process and have a longer time perspective, we evaluate the cost to hold and likely value in the market, when we would come to market. And so, the geography has shifted a bit over the last 12 to 24 months. As you know we took earlier impairments in Arizona, where we had purchased land in 2006. And now as we evaluate the portfolio every quarter, we are seeing impairments needed to be taken in markets as I said California and Nevada and we've taken some in the Puget Sound area.

Okay. That's very good. I wondered if I could also just talk a little bit about whether you'd be willing to participate in some consolidation and maybe further rationalizations over in the wood products area. I mean to the extent of this housing downturn goes on longer; we had a lot of capacity added in many of the wood products businesses over the last three of four years, any thoughts on that?

Well, we evaluate the industry in all of the businesses that we are in. We are cautious at this point because of the uncertainty in the market. We're also mindful of the asset in income test that we would face if we elect REIT status. And so that does impact our view of potential strategy moves in the wood product sector or cellulose fiber sector, or even the real estate sector. Not to rule them out, but that's part of the process that we used to evaluate longer term structural issues, as it may relate to our strategy.

Okay. And finally, could you just tell us, I see that some of the old TJ assets went, I think with the sale of that commercial building products operation. What's really left from TJ? Or said another way, how big were those sales as part of TJ?

Well, Mark, that you are right. It was the commercial component of the TJ product plans; it was a relatively small portion of the total sales that we have. With respect to TJ, we're in the full range of engineered products which includes Parallam timber strand, Microllam well as our TJI Joists components. So, we're fully going forward with those product lines as well. But anyway, we're going to continue to focus on the residential market it has been our strategy.

Okay, Very good. Thanks.

I think, the other thing that we want just reiterate their markets that we have signed a letter of intent. So, we've not sold those assets yet, so we're still in that process. But as Tom said, it is really a very small part of the TJ business, probably revenue of well under a $100 billion for the year.

Next question?

Our next question comes from Mark Weintraub with Buckingham Management. Go ahead please.

Thank you. First Patty, I just wanted to clarify on the tax, maybe I am calculating this wrong, but, when I was looking at chart one, it looked like the pre-tax income was minus $99 million. So, if I'm going to have a net earnings of minus 3, doesn't that mean I had a tax provision of plus $96 million, so I didn't quite see how the 42% fitted with that?

Well, it does get a little confusing, Mark. So let me try and put it some clarity on that. Because you have not only the change in the tax rate going on and affecting the quarter, but we do need to catch up the tax rate used for prior quarters as well. So if you were to go into our Analyst Package, you'll see that the lost year-to-date through September 30, is about I think $1.2 billion from continuing operations. We have to take and add back to that about a $100 million, which was the gain in the second quarter from the restructuring of our Uruguay and join ventures. The reason you added back as there is no tax on that gain because there is no Uruguayan tax because of the forestry exemption there, and those are definitely invested in South America. So there is no U.S. tax. So take the year-to-date loss, add a $100 million and take that times about 42%. So this is just the year-to-date piece. And then we had I think in the second quarter or earlier in the year about $16 million or so Fin 48 one items, discrete items that need to be added back to that. That should get you pretty close to the 570ish; I think maybe 574 that's in the Analysts Package for income taxes year-to-date through September 30. And then you've got to catch up the difference between what we had for income taxes through this end of the second quarter, with what we have at the end of the third quarter. And that difference all goes through the second quarter. That's why when Kathy was walking you through the chart on page, I think it's chart four, Kathy?

Yes, chart four.

That see a big green bar in the corporate and other segments that is all related to the tax rate.

Okay. I think I got it. But all that difference went through the third quarter, right not the second quarter?

Correct.

Okay. So, basically it's 42 % year-to-date, it was a much higher number in the third quarter. But that was catch-up for the first two quarters.

Correct.

Got it, okay. And then, for the fourth quarter we should use the 42%. Okay. And then second, on the real estate business, first just, I see you've now got long-term debt of $501 million. Is that recourse to Weyerhaeuser or non-recourse?

Yes,the $500 million is non-recourse to Weyerhaeuser. It's a Weyerhaeuser Real Estate Company debt market.

And obviously, you paid down about $600 million during the quarter. Does that mean that you contributed a bunch of money from Weyerhaeuser to the real estate subsidiary? And can you just help us out with the thinking behind that?

The capital structure today is as we paid-off a down third-party debt as it was due. And then there is an advance from Weyerhaeuser Company to Weyerhaeuser Real Estate Company that makes up the difference to get us to a total debt position for RICO.

So, when that $500 million is third-party debt. But even going into the third quarter Mark, we had Inter Companies Act from Weyerhaeuser to Weyerhaeuser Real Estate.

Okay. And that doesn't show up on this balance sheet here?

Right. And, if you want to walk through the details of that we can do that. Give Kathy a call when we're done with the call. We'll be happy to do that.

Okay. Thank you.

Next question?

Comes from Keith Wiley with Goldman Sachs. Go ahead please.

Hi. I'm just wondering when you say that you want to maximize the debt at the tax flow subsidiaries, are you envisioning having that subsidiary issue new debt, or are you actually contemplating transferring the public bonds issued by Weyerhaeuser into that taxable subsidiaries?.

We are not looking at refinancing that debt. So it is something that we are going through the process in terms of how the deductibility of the interest wouldn't work at the taxable REIT subsidiaries. But the debt that we would have going forward, it would be our... those public bonds would still be backed by the full credit of the total assets of Weyerhaeuser Company.

So, you would guarantee that the bonds substantiate?

We're still looking through what the best form of getting to that result would be.

Got you. And if you did guarantee the bonds, would you still then be able to spin-off that subsidiary later?

Which subsidiary?

For the taxable subsidiary?

Well, I think that we wouldn't want to speculate as to what we would do in the future about spinning off subsidiaries and that we don't have plans to do that at this point. So, I think the answer to your question will depend ultimately where we land with the changes that we are working through right now. And that would be predicated on any thing that we might think about or speculate doing in the future. But I'd to hate to comment on that at this point, since we aren't there.

Okay. Thank you.

Next question?

Comes from Ross Gilardi with Merrill Lynch. Go ahead please.

Yes. Thank you. Just had a couple of questions. First of all, I noticed that reclassified your international timberlands into your timber segment from corporate. And I'm just wondering is that purely an accounting change or have you changed your strategy, your view on your international timber assets and how they might fit into any future structure decision... future REIT structure decisions that the company might make?

Ross, it is not driven by any consideration of the REIT structure. What it reflects is the change in the management structure that we have in place for our timberlands. In the past, our timberlands assets in the U.S. have been managed by Mike Branson and before him, Tom Gideon. Our international timberlands will probably be about through a separate organization which managed the assets that we had in Australia, New Zealand as well as South America and now China. And what we've done is we reorganized was the focus that we have on timberlands as the company determined that it makes sense for us to have all of the timberlands fall under the responsibility of Mike Branson in one organization, and so that's why we've shifted the recording.

Got it. Thank you. And then can you just update us on your divestiture efforts, when might we hear something on the attempt to divesture real in shipping lines? I think you'd suggested last month that you were seeing a good interest in those businesses. Are you... has anything changed there given the more recent turbulence in the financial markets?

No change at this point. We continued to have strong interest in the assets. We're working through a process that is on schedule, but I can't speculate at this point on timing or value.

Got you.

Ross, we have time one more question. Thank you, Ross.

Okay. Thank you. And our last question comes from Steve Chercover with D.A. Davidson. Go ahead please. Steven Chercover - D.A. Davidson & Co.: Thank you. Given your balance sheet and benefits of the TREE Act, I was wondering if it put you in a position to get back in to the market as timberland acquirer, particularly for lands might be available in key areas like Washington, Oregon?

We look for opportunities all the time to enhance our timberland's ownership. A lot of that we do through 1031 exchanges, but we disclose of higher value properties and we purchase others. We continue to do that as a normal part of our business. Your comment about the TREE Act really would not impact that strategy. And with respect to our cash position, as Patty has said we're maintaining a strong liquidity position at this point because we think it's the conservative thing to do and we're preserving optionality around how best to use that liquidity as we start to see some clarity in the markets. And as Patty mentioned in her comments, we're going to have some options to evaluate, to include how we look at share buyback, how we look at potential debt repayment and also some discipline strategic moves. So, we're being cautious at this time because of the uncertainty in the markets. And, so it really doesn't impact the way we are viewing any ongoing timberland acquisitions position. Steven Chercover - D.A. Davidson & Co.: Okay. And just on the line of capital, to the extent you have some bonds trading at significant discounts, might you take those out?

That is one of the things that I mentioned Steve in the overall mix of thing that we are evaluating and consider, but we don't have any announcements at this point. Steven Chercover - D.A. Davidson & Co.: Great. Thanks very much.

Thank you. Dan?

Okay, I'd just like to thank everybody on the line for your interest and attention this morning. I wanted to close with just a few comments. I started out in the commentary talking about unprecedented market conditions. And we sure are looking at conditions that we haven't seen before, not only on the forest products business but in the overall U.S. economy. We've made strategic decisions over the last couple of years, that it positioned us well. And I believe it benefited our shareholders. And in this particular market that we find ourselves in now, we are value driven, looking at opportunities to put our cash and resources to work towards the best options to unlock value for our shareholders. We're maintaining a strong operating position, controlling the controllables in our manufacturing businesses, working closely with our customers and preserving valuable liquidity. We continued to rely and benefit from the continued commitment of our employees and our long standing relationships with customers. And as we drive through these difficult times, I come back to my opening comments, we're confident in the resource that we have in our timberlands, in our operating assets, driving values from our wood products, our hi-tech cellulose opportunities and emerging carbon credits. And combination of our timberlands, our strong balance sheet and our strong liquidity position we believe positions us well to work through these uncertain times. So with that, I thank everyone for your attention this morning. Obviously, follow-up questions can be directed to Kathy. Thanks very much.

Ladies and gentlemen, this concludes the Weyerhaeuser 2008 third quarter earnings call. If you'd like to listen to a replay of today's conference, please dial 800-405-2236 or 303-590-3000 with the pass code 11120677. ACT would like to thank you for your participation. And you may now disconnect. .