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Timberlands Our Timberlands business segment manages 6.4 million acres of private commercial forestland in the U.S. We own 5.7 million of those acres and lease the other 700,000 acres. In addition, we have renewable, long-term licenses on 15.1 million acres of forestland located in five Canadian provinces. Information in the tables below includes data from all of the segment’s business units as of the end of 2007. What We Do We grow and harvest trees for use as lumber and other wood and building products. We also export logs to other countries where they are made into products. After harvest, we typically plant seedlings to reforest the harvested areas using the most effective regeneration method for the site and species. We monitor and care for the new trees as they grow to maturity. We seek to sustain and maximize the timber supply from our forestlands while keeping the health of our environment a key priority. We are recognized as a leading forest manager. The goal of our Timberlands business is to maximize returns by selling logs and stumpage to internal and external customers. We focus on solid softwood and use intensive silviculture to improve forest productivity and returns while managing the forests on a sustainable basis to meet both customer and public expectations. We capture additional value from our land and timber through the lease or sale of minerals, oil, gas, recreation and communications sites; sales of higher-and-better-use property; and the sale of other nontimber products. Timberlands Products and Revenues  Where We Do It We manage a balanced portfolio of timberlands assets located primarily in North America. In the U.S. we own and manage sustainable forests in nine states for use in wood products manufacturing. We own or lease: • 4.2 million acres in the southern U.S.; and • 2.2 million acres in the Pacific Northwest. In addition, we have renewable, long-term licenses on 15.1 million acres of forestland located in five Canadian provinces. In Canada, forests generally are owned and administered by provincial governments. We also own and manage forestlands in the Southern Hemisphere. The results of these international operations are reported in the Corporate and Other segment. Our worldwide timber inventory is approximately 268 million cunits. One cunit equals 100 cubic feet of solid wood. The amount of timber inventory does not translate into an amount of lumber or panel products because the quantity of end products: • varies according to the species, size and quality of the timber; and • will change through time as the mix of these variables adjusts. As a result, there is no standard for converting cubic feet of solid wood into board feet of lumber or square feet of panel products. Summary of 2007 Timber Inventory and Timberland Locations  Our Timberlands annual fee depletion represents the harvest of the timber assets that we own. Depletion is a method of expensing the fee timber asset based on the harvest or timber sales volume. The decline in fee depletion from 2004 through 2006 reflects the disposition of our B.C. Coastal operations in May 2005, and the decline in fee depletion from 2006 to 2007 reflects the Domtar Transaction in March 2007. The 2007 harvest volume by region was 55 percent in the South and 45 percent in the West. Five-Year Summary of Timberlands Production(1)(2)  How Much We Sell Our net sales to unaffiliated customers declined 10 percent in 2007 to slightly under $1 billion, with 2006 slightly exceeding $1 billion. Five-Year Summary of Net Sales for Timberlands(1)(2)  Five-Year Trend for Total Net Sales in Timberlands(1)(2)  Percentage of 2007 Net Sales in Timberlands 
Log Sales Volumes Logs sold to unaffiliated customers in 2007 declined 355,000 cunits, or 10 percent, from 2006. Sales volumes from Canada dropped 177,000 in 2007. This reduction in volume was due primarily to the Domtar Transaction in March 2007. Other factors that may affect our log sales volume include the following: • Domestic grade log sales depend on lumber usage, which is influenced by and depends on housing starts and repair and remodel activity. In addition, sales to unaffiliated customers can fluctuate based on the needs of our own mills as well as the availability of logs from outside markets and our own timberlands. • Domestic fiber log sales fluctuate as a result of the demand for chips by pulp and containerboard mills. • Export log sales depend on the level of housing starts in Japan, as that is where most of our North American export logs are sold. All of our domestic and export logs are sold to unaffiliated customers or transferred at market prices to our internal mills by sales and marketing staff within our Timberlands business units. Five-Year Summary of Log Sales Volumes to Unaffiliated Customers for Timberlands(1)(2)  Log Prices Average log price realizations in 2007 were down as compared with 2006, primarily due to lower export and domestic log prices. Our log prices are affected by the supply of and demand for grade and fiber logs, which are influenced by all of the factors described above. Five-Year Summary of Selected Published Export Log Prices (#2 Sawlog Bark On – $/MBF)  Where We're Headed Our strategies for achieving continued success include: • managing forests on a sustainable basis to meet customer and public expectations; • reducing the time it takes to realize returns by practicing intensive forest management and focusing on the most advantageous markets; • efficiently delivering fiber to internal supply chains; • building long-term relationships with external customers who rely on a consistent supply of high-quality raw material; • continuously reviewing our portfolio to create the greatest value for the company; and • investing in technology and advances in silviculture to improve yields and timber quality. |