##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-Q



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(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2006



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period  from to

Commission
file number 001-10061



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Longview Fibre Company

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Washington                                                     |  | 91-0298760                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|300 Fibre Way, Longview, Washington                            |  | 98632                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(360) 425-1550

(Registrants telephone number, including area code)



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(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer  x                Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ̈No  x

The number of shares outstanding of the Registrants Common Stock, $1.50 ascribed value per share, as of August 7, 2006 was 65,750,230 shares.



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##### Table of Contents

TABLE OF CONTENTS



|         |  |                                                                                                                  |  |     
|-------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                                  |  | PAGE
|PART I.  |  | FINANCIAL INFORMATION                                                                                            |  |     
|         |  |                                                                                                                 
|Item 1.  |  | Consolidated Financial Statements (Unaudited)                                                                    |  | 3   
|         |  |                                                                                                                 
|         |  | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2005                  |  | 3   
|         |  |                                                                                                                 
|         |  | Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2006 and 2005 |  | 4   
|         |  |                                                                                                                 
|         |  | Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005                                            |  | 5   
|         |  |                                                                                                                 
|         |  | Consolidated Statements of Shareholders Equity for the Six Months Ended June 30, 2006                           |  | 6   
|         |  |                                                                                                                 
|         |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005                            |  | 7   
|         |  |                                                                                                                 
|         |  | Notes to Consolidated Financial Statements                                                                       |  | 8   
|         |  |                                                                                                                 
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 14  
|         |  |                                                                                                                 
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 28  
|         |  |                                                                                                                 
|Item 4.  |  | Controls and Procedures                                                                                          |  | 29  
|         |  |                                                                                                                 
|PART II. |  | OTHER INFORMATION                                                                                                |  |     
|         |  |                                                                                                                 
|Item 1.  |  | Legal Proceedings                                                                                                |  | 31  
|         |  |                                                                                                                 
|Item 1A. |  | Risk Factors                                                                                                     |  | 31  
|         |  |                                                                                                                 
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                      |  | 32  
|         |  |                                                                                                                 
|Item 3.  |  | Defaults Upon Senior Securities                                                                                  |  | 32  
|         |  |                                                                                                                 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                              |  | 32  
|         |  |                                                                                                                 
|Item 5.  |  | Other Information                                                                                                |  | 32  
|         |  |                                                                                                                 
|Item 6.  |  | Exhibits                                                                                                         |  | 32  
|         |  |                                                                                                                 
|         |  | Signature                                                                                                        |  | 33  



2



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##### Table of Contents

PART IFINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | -------------------------------- | ------- | - | -------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                  |  | Three Months EndedJune 30,       |         |   | Six Months EndedJune 30,         |  
|                                                  |  | 2006                             |         |   | 2005                             |   |         | 2006 |  |   | 2005    |  
|                                                  |  | (in thousands, except per share) |         |   | (in thousands, except per share) |  
|Net sales                                         |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Timber                                            |  | $                                | 56,509  |   |                                  | $ | 50,562  |      |  | $ | 98,358  |   |  | $ | 104,263 |  
|Paper and paperboard                              |  |                                  | 71,614  |   |                                  |   | 63,662  |      |  |   | 138,241 |   |  |   | 133,211 |  
|Converted products                                |  |                                  | 118,378 |   |                                  |   | 111,385 |      |  |   | 229,959 |   |  |   | 218,901 |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|                                                  |  |                                  | 246,501 |   |                                  |   | 225,609 |      |  |   | 466,558 |   |  |   | 456,375 |  
|Cost of products sold, including outward freight  |  |                                  | 193,736 |   |                                  |   | 179,504 |      |  |   | 383,929 |   |  |   | 369,162 |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                      |  |                                  | 52,765  |   |                                  |   | 46,105  |      |  |   | 82,629  |   |  |   | 87,213  |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Selling, administrative and general expenses      |  |                                  | 24,718  |   |                                  |   | 22,329  |      |  |   | 49,981  |   |  |   | 44,427  |  
|Advisory fees and REIT-related expenses (Note 6)  |  |                                  | 218     |   |                                  |   |        |      |  |   | 11,326  |   |  |   |        |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Operating profit (loss)                           |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Timber                                            |  |                                  | 28,068  |   |                                  |   | 24,315  |      |  |   | 45,637  |   |  |   | 50,554  |  
|Paper and paperboard                              |  |                                  | 641     |   |                                  |   | 82      |      |  |   | (8,770  | ) |  |   | (2,198  | )
|Converted products                                |  |                                  | (880    | ) |                                  |   | (621    | )    |  |   | (15,545 | ) |  |   | (5,570  | )
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|                                                  |  |                                  | 27,829  |   |                                  |   | 23,776  |      |  |   | 21,322  |   |  |   | 42,786  |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Interest income                                   |  |                                  | 331     |   |                                  |   | 68      |      |  |   | 450     |   |  |   | 121     |  
|Interest expense                                  |  |                                  | (8,590  | ) |                                  |   | (9,320  | )    |  |   | (17,157 | ) |  |   | (18,556 | )
|Other income (expense) (Note 9)                   |  |                                  | (10,926 | ) |                                  |   | 212     |      |  |   | (13,297 | ) |  |   | 513     |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) before taxes                        |  |                                  | 8,644   |   |                                  |   | 14,736  |      |  |   | (8,682  | ) |  |   | 24,864  |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Provision (benefit) for taxes on income (Note 11) |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Current                                           |  |                                  | 15      |   |                                  |   | 5,000   |      |  |   | 30      |   |  |   | 5,272   |  
|Deferred                                          |  |                                  | 3,128   |   |                                  |   | 453     |      |  |   | (3,194  | ) |  |   | 3,928   |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|                                                  |  |                                  | 3,143   |   |                                  |   | 5,453   |      |  |   | (3,164  | ) |  |   | 9,200   |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                 |  | $                                | 5,501   |   |                                  | $ | 9,283   |      |  | $ | (5,518  | ) |  | $ | 15,664  |  
|                                                  |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Per share data (Note 3)                           |  |                                  |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                 |  | $                                | 0.08    |   |                                  | $ | 0.14    |      |  | $ | (0.08   | ) |  | $ | 0.24    |  
|Cash dividends paid                               |  | $                                | 0.19    |   |                                  | $ | 0.02    |      |  | $ | 0.19    |   |  | $ | 0.03    |  
|Shares outstanding (Note 3)                       |  |                                  | 65,750  |   |                                  |   | 65,750  |      |  |   | 65,750  |   |  |   | 65,750  |  

The accompanying notes are an integral part of the consolidated financial statements.



3



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##### Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)



|                                         |  |                            |       |                          |      |   |       |  |   |        |   |  |   |       
|---------------------------------------- |  | -------------------------- | ----- | ------------------------ | ---- | - | ----- |  | - | ------ | - |  | - | ------
|                                         |  | Three Months endedJune 30, |       | Six Months endedJune 30,
|                                         |  | 2006                       |       |                          | 2005 |   | 2006  |  |   | 2005  
|                                         |  | (in thousands)             |       | (in thousands)          
|Net income (loss)                        |  | $                          | 5,501 |                          |      | $ | 9,283 |  | $ | (5,518 | ) |  | $ | 15,664
|Other comprehensive loss, net of tax     |  |                            |       |                          |      |   |       |  |   |        |   |  |   |       
|Unrealized loss on derivatives (Note 10) |  |                            | (399  | )                        |      |   |      |  |   | (399   | ) |  |   |      
|                                         |  |                            |       |                          |      |   |       |  |   |        |   |  |   |       
|Comprehensive income (loss), net of tax  |  | $                          | 5,102 |                          |      | $ | 9,283 |  | $ | (5,917 | ) |  | $ | 15,664
|                                         |  |                            |       |                          |      |   |       |  |   |        |   |  |   |       

The accompanying notes are an integral part of the consolidated financial statements.



4



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##### Table of Contents

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                                      |  | June 30, 2006                     |            |   | December 31, 2005 |  
|                                                                                                                                                                      |  | (in thousands, except share data) |           
|ASSETS                                                                                                                                                                |  |                                   |            |   |                   |   |            |  
|Current assets:                                                                                                                                                       |  |                                   |            |   |                   |   |            |  
|Cash                                                                                                                                                                  |  | $                                 | 19,559     |   |                   | $ | 1,608      |  
|Accounts and notes receivable                                                                                                                                         |  |                                   | 118,213    |   |                   |   | 111,514    |  
|Allowance for doubtful accounts                                                                                                                                       |  |                                   | (1,000     | ) |                   |   | (1,000     | )
|Refundable income taxes                                                                                                                                               |  |                                   | 1,229      |   |                   |   | 3,898      |  
|Inventories, at lower cost or market (Note 4)                                                                                                                         |  |                                   | 68,598     |   |                   |   | 65,727     |  
|Other                                                                                                                                                                 |  |                                   | 7,100      |   |                   |   | 9,295      |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Total current assets                                                                                                                                                  |  |                                   | 213,699    |   |                   |   | 191,042    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Capital assets:                                                                                                                                                       |  |                                   |            |   |                   |   |            |  
|Buildings, machinery and equipment, at cost                                                                                                                           |  |                                   | 1,822,525  |   |                   |   | 1,815,044  |  
|Accumulated depreciation                                                                                                                                              |  |                                   | (1,218,850 | ) |                   |   | (1,186,618 | )
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Costs to be depreciated in future years                                                                                                                               |  |                                   | 603,675    |   |                   |   | 628,426    |  
|Plant sites at cost                                                                                                                                                   |  |                                   | 3,549      |   |                   |   | 3,549      |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|                                                                                                                                                                      |  |                                   | 607,224    |   |                   |   | 631,975    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Timber, at cost less depletion                                                                                                                                        |  |                                   | 197,898    |   |                   |   | 198,462    |  
|Roads, at cost less amortization                                                                                                                                      |  |                                   | 8,601      |   |                   |   | 8,967      |  
|Timberlands, at cost                                                                                                                                                  |  |                                   | 24,836     |   |                   |   | 24,807     |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|                                                                                                                                                                      |  |                                   | 231,335    |   |                   |   | 232,236    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Total capital assets                                                                                                                                                  |  |                                   | 838,559    |   |                   |   | 864,211    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Pension and other assets                                                                                                                                              |  |                                   | 158,413    |   |                   |   | 155,010    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Total assets                                                                                                                                                          |  | $                                 | 1,210,671  |   |                   | $ | 1,210,263  |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                  |  |                                   |            |   |                   |   |            |  
|Current liabilities:                                                                                                                                                  |  |                                   |            |   |                   |   |            |  
|Payable to bank resulting from checks in transit                                                                                                                      |  | $                                 |           |   |                   | $ | 5,115      |  
|Trade accounts payable                                                                                                                                                |  |                                   | 49,703     |   |                   |   | 48,415     |  
|Dividends payable (Notes 2 and 5)                                                                                                                                     |  |                                   | 92,323     |   |                   |   |           |  
|Advisory fees and REIT-related expenses payable                                                                                                                       |  |                                   | 9,716      |   |                   |   | 1,063      |  
|Accrued payroll liabilities                                                                                                                                           |  |                                   | 17,462     |   |                   |   | 15,940     |  
|Other taxes payable                                                                                                                                                   |  |                                   | 7,991      |   |                   |   | 6,782      |  
|Other accrued liabilities (Note 7)                                                                                                                                    |  |                                   | 10,471     |   |                   |   | 17,586     |  
|Current portion of long-term debt (Note 8)                                                                                                                            |  |                                   | 16,250     |   |                   |   |           |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Total current liabilities                                                                                                                                             |  |                                   | 203,916    |   |                   |   | 94,901     |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Long-term debt (Note 8)                                                                                                                                               |  |                                   | 437,250    |   |                   |   | 428,918    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Deferred tax liabilitiesnet                                                                                                                                          |  |                                   | 202,275    |   |                   |   | 205,698    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Other liabilities                                                                                                                                                     |  |                                   | 34,170     |   |                   |   | 36,677     |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Shareholders equity:                                                                                                                                                 |  |                                   |            |   |                   |   |            |  
|Preferred stock; authorized 2,000,000 shares                                                                                                                          |  |                                   |           |   |                   |   |           |  
|Common stock, ascribed value $1.50 per share; authorized 150,000,000 shares; issued 65,750,230 shares (including 14,673,663 shares issued on
August 7, 2006) (Note 2) |  |                                   | 98,625     |   |                   |   | 76,615     |  
|Additional paid-in capital                                                                                                                                            |  |                                   | 289,413    |   |                   |   | 3,306      |  
|Retained earnings (deficit)                                                                                                                                           |  |                                   | (54,579    | ) |                   |   | 364,148    |  
|Accumulated comprehensive loss (Note 10)                                                                                                                              |  |                                   | (399       | ) |                   |   |           |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Total shareholders equity                                                                                                                                            |  |                                   | 333,060    |   |                   |   | 444,069    |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  
|Total liabilities and shareholders equity                                                                                                                            |  | $                                 | 1,210,671  |   |                   | $ | 1,210,263  |  
|                                                                                                                                                                      |  |                                   |            |   |                   |   |            |  

The accompanying notes are an integral part of the consolidated financial statements.



5



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##### Table of Contents

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

(UNAUDITED)



|                                                                |  |              |  |                            |        |                             |   |         |                                |   |          |                            |  |   |      |   |  |   |         |  
|--------------------------------------------------------------- |  | ------------ |  | -------------------------- | ------ | --------------------------- | - | ------- | ------------------------------ | - | -------- | -------------------------- |  | - | ---- | - |  | - | ------- | -
|                                                                |  |              |  | Additional Paid-in Capital |        | Retained Earnings (Deficit) |   |         | Accumulated Comprehensive Loss |   |          | Total Shareholders Equity | 
|                                                                |  | Common Stock |  |                            |        |                            
|(in thousands)                                                  |  | Shares       |  | Amount                     |        |                             |   |        
|Balance at December 31, 2005                                    |  | 51,077       |  | $                          | 76,615 |                             | $ | 3,306   |                                | $ | 364,148  |                            |  |   |     |   |  | $ | 444,069 |  
|Cash dividends of $0.25 per share paid on April 4, 2006         |  |             |  |                            |       |                             |   |        |                                |   | (12,769  | )                          |  |   |     |   |  |   | (12,769 | )
|Net loss                                                        |  |             |  |                            |       |                             |   |        |                                |   | (11,019  | )                          |  |   |     |   |  |   | (11,019 | )
|                                                                |  |              |  |                            |        |                             |   |         |                                |   |          |                            |  |   |      |   |  |   |         |  
|Balance at March 31, 2006                                       |  | 51,077       |  |                            | 76,615 |                             |   | 3,306   |                                |   | 340,360  |                            |  |   |     |   |  |   | 420,281 |  
|Cash dividends of $0.30 per share paid on July 3, 2006 (Note 5) |  |             |  |                            |       |                             |   |        |                                |   | (15,323  | )                          |  |   |     |   |  |   | (15,323 | )
|REIT E&P special dividend distribution (Note 2):                |  |              |  |                            |        |                             |   |         |                                |   |          |                            |  |   |      |   |  |   |         |  
|Stock                                                           |  | 14,673       |  |                            | 22,010 |                             |   | 286,107 |                                |   | (308,117 | )                          |  |   |     |   |  |   |        |  
|Cash                                                            |  |             |  |                            |       |                             |   |        |                                |   | (77,000  | )                          |  |   |     |   |  |   | (77,000 | )
|Net income                                                      |  |             |  |                            |       |                             |   |        |                                |   | 5,501    |                            |  |   |     |   |  |   | 5,501   |  
|Other comprehensive loss (Note 10)                              |  |             |  |                            |       |                             |   |        |                                |   |         |                            |  |   | (399 | ) |  |   | (399    | )
|                                                                |  |              |  |                            |        |                             |   |         |                                |   |          |                            |  |   |      |   |  |   |         |  
|Balance at June 30, 2006                                        |  | 65,750       |  | $                          | 98,625 |                             | $ | 289,413 |                                | $ | (54,579  | )                          |  | $ | (399 | ) |  | $ | 333,060 |  
|                                                                |  |              |  |                            |        |                             |   |         |                                |   |          |                            |  |   |      |   |  |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                     |  |                           |          |   |      |   |         |  
|-------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | - | ------- | -
|                                                                     |  | Six Months Ended June 30, |         
|                                                                     |  | 2006                      |          |   | 2005 |  
|                                                                     |  | (in thousands)            |         
|Cash provided by (used for) operations:                              |  |                           |          |   |      |   |         |  
|Net income (loss)                                                    |  | $                         | (5,518   | ) |      | $ | 15,664  |  
|Adjustments to net income (loss) for items not requiring cash:       |  |                           |          |   |      |   |         |  
|Depreciation                                                         |  |                           | 36,165   |   |      |   | 35,561  |  
|Depletion and amortization                                           |  |                           | 5,090    |   |      |   | 5,613   |  
|Deferred taxes liabilitiesnet                                       |  |                           | (3,194   | ) |      |   | 3,928   |  
|(Gain) loss on disposition of capital assets                         |  |                           | (299     | ) |      |   | 304     |  
|Swap gains and debt costs from early extinguishment of debt (Note 9) |  |                           | (742     | ) |      |   |        |  
|Change in:                                                           |  |                           |          |   |      |   |         |  
|Accounts and notes receivable                                        |  |                           | (6,699   | ) |      |   | (5,603  | )
|Refundable income taxes                                              |  |                           | 2,669    |   |      |   | 4,600   |  
|Inventories                                                          |  |                           | (2,871   | ) |      |   | (4,249  | )
|Other                                                                |  |                           | 2,195    |   |      |   | 1,091   |  
|Pension and other noncurrent assets                                  |  |                           | (1,193   | ) |      |   | (1,467  | )
|Trade accounts payable and accrued liabilities                       |  |                           | (2,767   | ) |      |   | 8,142   |  
|Advisory fees and REIT-related expenses payable                      |  |                           | 8,653    |   |      |   |        |  
|Other liabilities                                                    |  |                           | 435      |   |      |   | (606    | )
|                                                                     |  |                           |          |   |      |   |         |  
|Cash provided by operations                                          |  |                           | 31,924   |   |      |   | 62,978  |  
|                                                                     |  |                           |          |   |      |   |         |  
|Cash provided by (used for) investing:                               |  |                           |          |   |      |   |         |  
|Additions to: Plant and equipment                                    |  |                           | (12,013  | ) |      |   | (17,017 | )
|Timber and
timberlands                                               |  |                           | (4,050   | ) |      |   | (6,896  | )
|Proceeds from sale of capital assets                                 |  |                           | 430      |   |      |   | 1,933   |  
|                                                                     |  |                           |          |   |      |   |         |  
|Cash used for investing                                              |  |                           | (15,633  | ) |      |   | (21,980 | )
|                                                                     |  |                           |          |   |      |   |         |  
|Cash provided by (used for) financing:                               |  |                           |          |   |      |   |         |  
|Additions to long-term debt                                          |  |                           | 239,086  |   |      |   | 96      |  
|Payments of long-term debt (Note 8)                                  |  |                           | (215,000 | ) |      |   |        |  
|Short-term borrowings, net                                           |  |                           |         |   |      |   | (43,000 | )
|Debt issue costs                                                     |  |                           | (4,542   | ) |      |   |        |  
|Payable to bank resulting from checks in transit                     |  |                           | (5,115   | ) |      |   | 3,254   |  
|Cash dividends paid                                                  |  |                           | (12,769  | ) |      |   | (2,043  | )
|                                                                     |  |                           |          |   |      |   |         |  
|Cash provided by (used for) financing                                |  |                           | 1,660    |   |      |   | (41,693 | )
|                                                                     |  |                           |          |   |      |   |         |  
|Change in cash position                                              |  |                           | 17,951   |   |      |   | (695    | )
|Cash position, beginning of period                                   |  |                           | 1,608    |   |      |   | 2,265   |  
|                                                                     |  |                           |          |   |      |   |         |  
|Cash position, end of period                                         |  | $                         | 19,559   |   |      | $ | 1,570   |  
|                                                                     |  |                           |          |   |      |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Basis for presentation:

The consolidated financial statements have been prepared without an audit, in accordance with generally accepted accounting principles, except that
certain information and note disclosures made in the latest annual report have been condensed or omitted from the accompanying consolidated financial statements. Accordingly, these statements should be read in conjunction with our latest annual
report. The consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of our management, necessary to a fair statement of the results for the interim periods presented.

Reclassifications

Prior year amounts
have been reclassified to conform to current year classifications. These reclassifications have no impact upon net income (loss) or shareholders equity.

Recent accounting pronouncements and developments

In December 2004, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 153, Exchanges of Nonmonetary Assets-An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions (SFAS 153). SFAS 153
eliminates the exception from fair value measurement of nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. We adopted SFAS 153 in November 2005, however, SFAS 153 had no material impact on the consolidated financial statements for
the three and six months ended June 30, 2006.

In May 2005, the FASB issued Statement of Financial Accounting Standard No. 154,
Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error
corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle.
SFAS 154 defines retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as an adjustment of previously issued financial statements to reflect a change
in the reporting entity. The reporting of a correction of an error by restating previously issued financial statements is also addressed by SFAS 154. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005; however, SFAS 154 does not change the transition provisions of any existing accounting pronouncements. We adopted SFAS 154 on January 1, 2006, and it did not have an impact on the consolidated financial
statements for the three and six months ended June 30, 2006.

In September 2005, the FASB ratified the consensus reached by the
Emerging Issues Task Force on Issue No. 04-13, Accounting for Purchase and Sales of Inventory with the Same Counterparty (EITF 04-13), addressing the situation in which an entity sells inventory to another entity that
operates in the same line of business pursuant to a single arrangement (such as our buy/sell agreements). EITF 04-13 states that finished goods sold to acquire work-in-process inventories should be recognized at fair value, while work-in-process
inventories sold to acquire work-in-process or finished goods inventories should be recognized at their carrying values. The adoption of this interpretation is effective for new or modified agreements for fiscal periods beginning on or after
March 16, 2006. The adoption of EITF 04-13 did not have a material effect on the consolidated financial statements for the three and six months ended June 30, 2006.

On March 31, 2006, the FASB issued an exposure draft (Exposure Draft) entitled, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R). If issued with its current provisions, the Exposure Draft, which would be effective for years ending after December 15, 2006, would
require us to recognize the difference between the fair value of plan assets and the projected benefit obligation of our pension and postretirement health care plans in our consolidated financial statements. The Exposure Draft is expected to be
effective for years ending after December 15, 2006. We are currently evaluating the Exposure Draft and monitoring the recent changes made by the FASB to determine its effect on our consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 prescribes guidance for the recognition and measurement of a tax position taken or expected to be taken in a tax return. Recognition of an asset or liability is required if it is more likely than not
that a tax position will be sustained upon examination, including resolution of



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any related appeals or litigation processes. FIN 48 is effective for fiscal years beginning after December 15, 2006, with any adjustment in a
companys tax provision being accounted for as a cumulative effect of accounting change in equity. We are currently evaluating FIN 48 to determine its effect on our consolidated financial statements.

Note 2REIT Conversion and Special Distribution:

We intend to qualify as a real estate investment trust (REIT) for federal income tax purposes, effective January 1, 2006. Our election for Longview Fibre Company to be taxed as a REIT effective January 1, 2006 would be
made in connection with the filing of our federal income tax return for 2006.

As a REIT, Longview Fibre Company will generally not be
subject to corporate income taxes on income and gains from investments in real estate, including proceeds from the sale of standing timber, to the extent that we distribute such income and gains to our shareholders.

Our assets and businesses that cannot be held or operated directly by Longview Fibre Company consistent with REIT tax rules were transferred, effective
December 31, 2005, to Longview Fibre Paper and Packaging, Inc. (Longview TRS), a newly formed, wholly-owned, taxable REIT subsidiary (TRS) of Longview Fibre Company (Company) that is subject to
corporate-level income tax on its earnings. The transferred assets consist principally of our various manufacturing and processing facilities, including our Longview mill, our converting plants, our sawmill, and the related businesses and
operations. As required by REIT tax rules, we changed our fiscal year end from October 31 to December 31, effective January 1, 2006.

To qualify as a REIT effective January 1, 2006, we are also required to, among other things, distribute to our shareholders in a taxable distribution, on or before December 31, 2006, our previously undistributed earnings and
profits (E&P) attributable to taxable periods ending prior to January 1, 2006. To complete the required distribution of this E&P and also to distribute amounts representing anticipated current-year REIT capital gains that
would, if retained by us, be subject to federal corporate income tax, our Board of Directors, on June 14, 2006, declared a special cash-and-stock distribution on our common stock in the amount of $7.54 per share (based on 51,076,567 outstanding
shares, prior to the additional shares issued in the REIT E&P special dividend distribution), or $385.1 million in the aggregate, payable on August 7, 2006 to shareholders of record at the close of business on June 26, 2006. The
special distribution was completed on August 7, 2006 and consisted of an aggregate of 14,673,663 shares of our common stock (based on a per-share value for purposes of the special distribution of $20.997, the average closing price per share of
our common stock on the New York Stock Exchange on July 27, 28 and 31, 2006) and an aggregate of $77.0 million in cash.

We have
recognized in the second quarter ended June 30, 2006 the stock portion of the special distribution as a $308.1 million increase to Common stock and Additional paid-in capital. Additionally, we have recognized the
$77.0 million cash portion of the special distribution as a current liability in the consolidated balance sheet under Dividends payable. In addition, the consolidated statements of operations give retroactive effect under Shares
outstanding and Per share data to the shares issued in the special distribution (see Note 3). Recognition of other effects of the special distribution, including the incurrence of additional debt to fund the cash portion of
the special distribution, and effects of the REIT conversion will not be reflected in our consolidated financial statements until the third quarter of 2006 (see Note 11).

Note 3Earnings Per Share:

Basic earnings per share is based on the number of shares of common
stock outstanding. We do not have dilutive securities. Therefore, our basic and diluted earnings per share are essentially the same for all periods presented in the consolidated statements of operations.

On August 7, 2006, we paid the REIT E&P special dividend distribution, consisting of 14,673,663 shares of common stock and $77.0 million cash to
shareholders of record at the close of business on June 26, 2006 (see Note 2).

Net income (loss) per share and cash dividends paid
per share are computed using the number of common shares outstanding during the period after giving retroactive effect to all periods presented for 14,673,663 additional shares issued as part of the REIT E&P special dividend distribution.



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Earnings per share for each period presented is composed of the following:



|                                      |  |                             |        |      |   |                           |  |      |  |   |        |   |  |   |       
|------------------------------------- |  | --------------------------- | ------ | ---- | - | ------------------------- |  | ---- |  | - | ------ | - |  | - | ------
|                                      |  | Three Months ended June 30, |        |      |   | Six Months ended June 30,
|(in thousands, except share data)     |  | 2006                        |        | 2005 |   |                           |  | 2006 |  |   | 2005  
|Numerator:                            |  |                             |        |      |   |                           |  |      |  |   |        |   |  |   |       
|Net income (loss)                     |  | $                           | 5,501  |      | $ | 9,283                     |  |      |  | $ | (5,518 | ) |  | $ | 15,664
|Cash dividends paid                   |  | $                           | 12,769 |      | $ | 1,022                     |  |      |  | $ | 12,769 |   |  | $ | 2,043 
|Denominator:                          |  |                             |        |      |   |                           |  |      |  |   |        |   |  |   |       
|Basic                                 |  |                             | 65,750 |      |   | 65,750                    |  |      |  |   | 65,750 |   |  |   | 65,750
|Diluted                               |  |                             | 65,750 |      |   | 65,750                    |  |      |  |   | 65,750 |   |  |   | 65,750
|Basic and Diluted earnings per share: |  |                             |        |      |   |                           |  |      |  |   |        |   |  |   |       
|Net income (loss) per share           |  | $                           | 0.08   |      | $ | 0.14                      |  |      |  | $ | (0.08  | ) |  | $ | 0.24  
|Cash dividends paid per share         |  | $                           | 0.19   |      | $ | 0.02                      |  |      |  | $ | 0.19   |   |  | $ | 0.03  

Note 4Inventories:

Inventories consist of the following:



|                           |  |                |         |   |                  |   |         |  
|-------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                           |  | June 30, 2006  |         |   | December 31,2005 |  
|                           |  | (in thousands) |        
|Finished goods             |  | $              | 33,285  |   |                  | $ | 30,909  |  
|Goods in process           |  |                | 35,308  |   |                  |   | 32,479  |  
|Raw materials              |  |                | 4,875   |   |                  |   | 6,525   |  
|Supplies (at average cost) |  |                | 42,985  |   |                  |   | 41,180  |  
|                           |  |                |         |   |                  |   |         |  
|                           |  |                | 116,453 |   |                  |   | 111,093 |  
|LIFO reserve               |  |                | (47,855 | ) |                  |   | (45,366 | )
|                           |  |                |         |   |                  |   |         |  
|Total inventories          |  | $              | 68,598  |   |                  | $ | 65,727  |  
|                           |  |                |         |   |                  |   |         |  

Note 5Dividends payable:

For the second quarter ended June 30, 2006, our Board of Directors declared a cash dividend of $0.30 per share (based on 51,076,567 outstanding
shares, prior to the additional shares issued in the REIT E&P special dividend distribution), or $15.3 million, to shareholders of record at the close of business on June 15, 2006, which was paid on July 3, 2006.

Note 6Advisory fees and REIT-related expenses:

Advisory fees and REIT-related expenses for the six months ended June 30, 2006 consist of (1) advisory fees payable to two investment banking firms that we engaged during the first quarter of 2006 to provide us with financial
advisory services relating to, among other things, evaluation of a proposal by an unsolicited third party indication of interest in acquiring all of our outstanding common stock, and (2) legal fees in connection with the REIT conversion.

Note 7Other accrued liabilities:

Other accrued liabilities consist of the following:



|                                  |  |                |        |                  |   |       
|--------------------------------- |  | -------------- | ------ | ---------------- | - | ------
|                                  |  | June 30,2006   |        | December 31,2005
|                                  |  | (in thousands)
|Workers compensation liabilities |  | $              | 9,285  |                  | $ | 7,513 
|Accrued interest on debt          |  |                | 1,186  |                  |   | 10,073
|                                  |  |                |        |                  |   |       
|Other accrued liabilities         |  | $              | 10,471 |                  | $ | 17,586
|                                  |  |                |        |                  |   |       



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Note 8Long-term debt:

Amendment of Credit Agreement with New Term Loan Facility

Our credit agreement, which we entered
into in December 2005, initially provided for a $200 million senior secured term loan facility, which was fully utilized as of June 30, 2006 and a $200 million senior secured revolving credit facility, of which $14 million in borrowings was
outstanding as of June 30, 2006. The $200 million term loan facility and the revolving credit facility have a term of five years.

During the three months ended June 30, 2006, we amended our credit agreement, (i) to modify certain financial covenants set forth therein, (ii) to include an option to increase the commitment in the amount of $50 million (to
be applied pro rata across the revolving credit facility and the $200 million term loan facility and (iii) to include an additional $300 million in senior secured term financing having a term of seven years (New Term Loan Facility).
During the three months ended June 30, 2006, we drew on the New Term Loan Facility to fund the retirement of all $215 million principal amount of our 10% Senior Subordinated Notes due in 2009; to pay accrued and unpaid interest in connection
with the retirement of the Senior Subordinated Notes; to pay fees and expenses relating to the REIT conversion and retirement of the Senior Subordinated Notes; and to pay, consent and redemption premiums and tender fees relating to the retirement of
the Senior Subordinated Notes. As of June 30, 2006, we had borrowed $225 million on the New Term Loan Facility.

The amount of
timberlands required as collateral was increased to maintain a collateral value of two times the total commitments of the amended agreement. The New Term Loan Facility requires quarterly principal payments of 1% per annum with the remaining
outstanding balance due on June 13, 2013.

Our remaining borrowing capacity as of June 30, 2006 was $251 million under all credit
facilities, after reduction for outstanding letters of credit of $10 million.

Retirement of Senior Subordinated Notes

On June 13, 2006, we consummated a tender offer and consent solicitation with respect to our 10% Senior Subordinated Notes due in 2009, purchasing
$213.7 million principal amount of the Senior Subordinated Notes. Concurrently, with the cancellation of those notes, on June 13, 2006, we sent a notice of redemption with respect to the remaining $1.3 million principal amount of the Senior
Subordinated Notes that we did not purchase in the tender offer and irrevocably deposited with the trustee funds sufficient to redeem such notes on the redemption date of July 13, 2006. As a result, effective June 13, 2006, the Senior
Subordinated Note indenture was discharged. Accordingly, the $1.3 million of remaining Senior Subordinated Notes as of June 30, 2006 has been eliminated from the consolidated balance sheet.

Note 9Net Financing Expenses Related to Retirement of Senior Subordinated Notes:

In connection with the early extinguishment of our Senior Subordinated Notes during the second quarter ended June 30, 2006, we incurred cash expenses
of $11.3 million for consent and redemption premiums and $0.5 million for tender fees and wrote off non-cash items consisting of: (1) $3.6 million of net deferred income on previously terminated interest rate swap agreements, (2) $2.4
million of deferred issue costs and (3) $0.5 million of unamortized debt discount. These amounts were included in other income (expense) in the consolidated statements of operations for the three and six months ended June 30, 2006.

Note 10Accounting for Derivative Instruments and Hedging Activities:

We use fixed interest rate swap agreements (swaps) to manage changes in cash flow as a result of changes in interest rate movements on our
variable rate debt. We have designated these swaps as cash flow hedges. To receive hedge accounting treatment, all of our swaps are formally documented at the inception of each hedge and the hedges must be highly effective at swap inception and at
least quarterly in offsetting changes to future cash flows on hedged transactions. If our swaps are highly effective, the change in fair value is recorded in other comprehensive income or loss, except for any ineffectiveness portion of the fair
value change, as discussed in a following paragraph, which is recognized in earnings. If our swaps are not highly effective, then we record the change in fair value in earnings. All of our swaps were highly effective at June 30, 2006.

We entered into four swaps during the second quarter ended June 30, 2006 for notional amounts totaling $275 million, or approximately
65% of $425 million of our two variable rate term loan facilities (see Note 8) that fixed the rates of interest at rates ranging from 5.45% to 5.69%, plus the spread of 1.50% to 1.75% applicable to the variable rate debt.



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We determine the ineffectiveness portion of the fair value change by comparing the change in fair value
of our actual swaps to the change in fair value of hypothetical swaps that identically match the critical terms of our variable rate debt. None of our swaps had any ineffectiveness for the quarter ended June 30, 2006.

The fair value of each of our swaps was estimated using pricing models widely used in financial markets and represents the amounts at June 30, 2006
that we would receive or pay if the swaps were terminated. As of June 30, 2006, we recognized $0.4 million in other comprehensive loss (see Consolidated Statements of Comprehensive Income (Loss)), consisting of the net adjustment to fair value
of the swaps of $0.6 million and of income tax benefits of $0.2 million.

Note 11Income taxes:

We have computed the provision (benefit) for taxes on income at effective income tax rates applicable to us as a C corporation for federal income tax
purposes. The effective tax rate for the three and six months ended June 30, 2006 was approximately 36% compared to an effective tax provision rate of 37% for the same periods in 2005. The decrease in the effective tax rate of 1% over the same
periods in 2005 is due primarily to a new deduction for domestic production activities.

For federal tax purposes our election to qualify
as a REIT will be effective January 1, 2006. As a REIT, we will generally not be subject to corporate income taxes on income and gains from investments in real estate, including proceeds from the sale of standing timber, to the extent that we
distribute such income and gains to our shareholders. We expect to distribute all of our 2006 income and gains from investments in real estate to our shareholders. Longview TRS, however, is subject to corporate-level income tax on its earnings.

For financial reporting purposes, our deferred tax liabilities and deferred tax assets relating to our REIT qualifying activities will be
eliminated in the quarter that the special distribution is paid (see Note 2). This one-time reduction of net deferred tax liabilities incurred prior to January 1, 2006 will reduce tax expense by approximately $8.1 million.

If we had reported as a REIT for financial reporting purposes for the three and six months ended June 30, 2006, the provision (benefit) for taxes on
income would have been $(6.7) million and $(23.3) million, representing differences of $9.8 million and $20.1 million as compared to what we have reported in the consolidated statements of operations. The $9.8 million difference for the three months
ended June 30, 2006 is primarily due to the tax benefit on REIT income that would not be taxed and other net differences. The $20.1 million difference for the six months ended June 30, 2006 is primarily due to the $8.1 million of net
deferred tax liabilities previously discussed, the tax benefit on REIT income for the six months ended June 30, 2006 that would not be taxed and other net differences. We expect to report the benefits from reporting as a REIT in our provision
(benefit) for taxes on income during the third quarter of 2006.

Note 12Retirement and postretirement benefit plans:

We have two defined benefit pension plans that cover a majority of our employees who have completed one year of continuous service. The pension plans
provide benefits of a stated amount for each year of service with an option for some employees to receive benefits based on an average earnings formula. We also have a postretirement health care plan that covers salaried and certain non-salaried
employees who retire and their dependents until they reach age 65.

The following table sets forth the components of net periodic (income)
expense for the pension and postretirement health care plans:



|                                         |  |                             |         |   |                             |   |         |      |  |      |       |  |   |      
|---------------------------------------- |  | --------------------------- | ------- | - | --------------------------- | - | ------- | ---- |  | ---- | ----- |  | - | -----
|                                         |  | Pension                     |         |   | Postretirement             
|                                         |  | Three Months ended June 30, |         |   | Three Months ended June 30,
|                                         |  | 2006                        |         |   | 2005                        |   |         | 2006 |  | 2005
|                                         |  | (in thousands)              |         |   | (in thousands)             
|Components of net periodic income:       |  |                             |         |   |                             |   |         |      |  |      |       |  |   |      
|Service costbenefits earned during year |  | $                           | 2,628   |   |                             | $ | 2,470   |      |  | $    | 379   |  | $ | 362  
|Interest cost on benefit obligation      |  |                             | 6,247   |   |                             |   | 6,097   |      |  |      | 590   |  |   | 579  
|Expected return on plan assets           |  |                             | (10,196 | ) |                             |   | (10,958 | )    |  |      |      |  |   |     
|Amortization of prior service cost       |  |                             | 1,080   |   |                             |   | 1,469   |      |  |      |      |  |   |     
|Amortization of actuarial losses         |  |                             | 397     |   |                             |   |        |      |  |      | 38    |  |   | 27   
|Amortization of transition obligation    |  |                             |        |   |                             |   |        |      |  |      | 125   |  |   | 125  
|                                         |  |                             |         |   |                             |   |         |      |  |      |       |  |   |      
|Net periodic (income) expense            |  | $                           | 156     |   |                             | $ | (922    | )    |  | $    | 1,132 |  | $ | 1,093
|                                         |  |                             |         |   |                             |   |         |      |  |      |       |  |   |      



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|                                         |  |                           |         |   |                           |   |         |      |  |      |       |  |   |      
|---------------------------------------- |  | ------------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | ---- | ----- |  | - | -----
|                                         |  | Pension                   |         |   | Postretirement           
|                                         |  | Six Months ended June 30, |         |   | Six Months ended June 30,
|                                         |  | 2006                      |         |   | 2005                      |   |         | 2006 |  | 2005
|                                         |  | (in thousands)            |         |   | (in thousands)           
|Components of net periodic income:       |  |                           |         |   |                           |   |         |      |  |      |       |  |   |      
|Service costbenefits earned during year |  | $                         | 5,257   |   |                           | $ | 4,940   |      |  | $    | 758   |  | $ | 724  
|Interest cost on benefit obligation      |  |                           | 12,493  |   |                           |   | 12,194  |      |  |      | 1,180 |  |   | 1,158
|Expected return on plan assets           |  |                           | (20,392 | ) |                           |   | (21,916 | )    |  |      |      |  |   |     
|Amortization of prior service cost       |  |                           | 2,160   |   |                           |   | 2,938   |      |  |      |      |  |   |     
|Amortization of actuarial losses         |  |                           | 794     |   |                           |   |        |      |  |      | 76    |  |   | 54   
|Amortization of transition obligation    |  |                           |        |   |                           |   |        |      |  |      | 249   |  |   | 250  
|                                         |  |                           |         |   |                           |   |         |      |  |      |       |  |   |      
|Net periodic (income) expense            |  | $                         | 312     |   |                           | $ | (1,844  | )    |  | $    | 2,263 |  | $ | 2,186
|                                         |  |                           |         |   |                           |   |         |      |  |      |       |  |   |      

Beginning with the six months ended June 30, 2006, we have changed our measurement date for
the pension and postretirement health care plans from October 31 to December 31. Therefore, net periodic (income) expense for three and six months ended June 30, 2006 and 2005 is based on actuarial computations for the year ending
December 31, 2006 and for the year ended October 31, 2005.

In addition, we changed the discount rate used for developing the net
periodic (income) expense for the pension and postretirement health care plans from 6.0% for the year ended October 31, 2005 to 5.75% for the year ending December 31, 2006. The changes in the discount rate and the measurement date resulted
in a $0.3 million increase in net periodic expense for the pension plans for the three months ended June 30, 2006 and a $0.7 million increase for the six months ended June 30, 2006.

Net periodic expense for 2006 for the pension plans and the postretirement health care plan is expected to be $0.6 million and $4.5 million,
respectively.

We did not make any contributions to our pension plans for the three and six months ended June 30, 2006 and 2005. We
paid $0.6 million and $0.5 million in postretirement health care benefits for each of the three months ended June 30, 2006 and 2005, respectively, and $1.3 million and $1.0 million for the six months ended June 30, 2006 and 2005,
respectively.

We also maintain multiple voluntary 401(k) savings (defined contribution) plans for most employees who have completed one
year of continuous service. We make certain matching contributions to these plans based on contributions made by employees. For the three months ended June 30, 2006 and 2005 we contributed $0.7 million and $0.6 million, respectively, to these
plans. For the six months ended June 30, 2006 and 2005 we contributed $1.3 million and $1.2 million, respectively.

Note 13Potential
Impairments and Possible Divestiture of Converting Plants and Leavenworth Sawmill:

We continually review our long-lived assets,
consisting primarily of buildings, machinery and equipment, and timber and timberlands, for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. We are currently exploring the
possibility of divesting eight of our converting plants located in the eastern and central regions of the United States and our sawmill located in Leavenworth, Washington.

Accordingly, we conducted a review of these assets and concluded that, as of the time of our review there was no impairment with respect to such assets.

Note 14Shareholder rights plan:

A full discussion of our shareholder rights plan can be found in Item 8 of our Annual Report on Form 10-K for the year ended October 31, 2005, Note 13 to the consolidated financial statements.

In connection with the REIT E&P special dividend distribution (see Note 2), the purchase price for each whole share of our common stock pursuant to
the exercise of a right under the shareholder rights plan was adjusted from $50.00 to $36.79.

Note 15Commitment:

During the second quarter ended June 30, 2006, we entered into a commitment to acquire 1,600 acres of timberlands in the Northwest for $8 million. We
completed this purchase during the third quarter of 2006.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

You should read the following discussion together with the consolidated financial statements, including the related notes, and the other financial
information appearing elsewhere in this Quarterly Report on Form 10-Q. SeeForward Looking Statements at the end of Managements Discussion and Analysis of Financial Condition and Results of Operations.

DEVELOPMENTS IN THE OPERATING PLAN

In April 2006, we
announced changes in our operating plan intended to increase our cash flow and enhance shareholder value. The principal changes to our operating plan involve an acceleration of our timber harvest, an increased focus on monetization of higher and
better use, (or HBU), lands and restructuring of our manufacturing operations:



| |  |  | We expect to increase our average annual timber harvest from 275 million board feet to 325 million board feet over the next five years, which represents approximately $17
million in incremental cash flow per year.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have classified approximately 34,000 acres of our timberlands as priority HBU tracts for potential sale. We expect to realize $4 million to $5 million annually from HBU land
sales for at least the next ten years.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are exploring the potential divestiture of our sawmill located in Leavenworth, Washington and eight of our converting plants located in the central and eastern United States. We
believe the divestiture of these manufacturing assets would enhance our operating performance and provide additional cash to reduce debt.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with the adjustments to our operating plan, we also announced a change in our dividend policy, increasing the quarterly cash dividend we intend to pay on our common stock by 20%, to $1.20 per share on an
annualized basis. The first such dividend, in the amount of $0.30 per share, was paid on July 3, 2006 to shareholders of record at the close of business on June 15, 2006. We made a special dividend distribution on our common stock of $7.54
per share (based on 51,076,567 outstanding shares, prior to the additional shares issued in the REIT E&P special dividend distribution), or $385.1 million, on August 7, 2006 to shareholders of record at the close of business on
June 26, 2006 (REIT E&P special dividend distribution). This distribution included our pre-REIT earnings and profits (E&P) accumulated prior to January 1, 2006 that had not been distributed to our
shareholders, and anticipated current-year REIT capital gains that would, if retained by us, be subject to federal corporate income tax. The per-share dividend amount under our dividend policy was adjusted to $0.92 per share on an annualized basis
and $0.23 per share for the quarterly dividend paid on July 3, 2006 to reflect the additional shares issued to our shareholders in the REIT E&P special dividend distribution.

We believe the changes in our operating plan, complemented by our strategy to qualify as a REIT for federal income tax purposes, described below, will
increase the benefits to our shareholders. Through the second quarter ended June 30, 2006, we are on target to achieve our annual timber harvest plan.

We intend to continue to expand our timber resource base through strategic acquisitions. This should help broaden our timber resources and allow us to better manage our timberlands on a sustained yield basis whereby
harvesting levels of our timber can be sustained into perpetuity. During the second quarter of 2006, we entered into a commitment to acquire 1,600 acres of timberlands in the Pacific Northwest for approximately $8 million. We completed this purchase
during the third quarter of 2006.

We also believe that we will be able to achieve our operating plan for sale of HBU tracts. We have sold
certain small tracts of land during the second quarter ended June 30, 2006, have a number of potential sales of HBU lands either in process or in the investigation stages, and expect to identify additional buyers of our HBU lands to meet our
objective for the year ending December 31, 2006.

We also continue to focus on reducing our operating costs, both fixed and variable.
Substantial capital investments and business improvement initiatives have enabled us to improve manufacturing capabilities and reliability, streamline supply chain management, manage inventory and working capital more efficiently, upgrade
information systems, reduce permanent headcount and better optimize energy generation and consumption. We also intend to continue to pursue opportunities to reduce our per-unit operating costs and increase our efficiency by increasing worker
productivity and managing workforce levels to meet production requirements.



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REIT CONVERSION PROCESS

On July 27, 2005, our Board of Directors, after reviewing various strategic alternatives, authorized us to take the steps necessary to qualify as a real estate investment trust, or REIT, for federal income tax
purposes, effective January 1, 2006. A REIT is a company that derives most of its income from investments in real estate, which may include timberlands. If a corporation qualifies as a REIT, it generally will not be subject to corporate taxes
on income and gains from investments in real estate to the extent that it distributes such income and gains to its shareholders. Our principal REIT-qualifying investment consists of our timberlands. As a REIT, we will continue to be required to pay
federal corporate income tax on earnings from our non-real estate investments, principally our manufacturing operations and on earnings from real estate investments that are not distributed to our shareholders. Our election to be taxed as a REIT,
effective January 1, 2006, will be made in connection with the filing of our federal income tax return for 2006.

In order to comply
with REIT qualification requirements, we transferred, in December 2005, to our wholly-owned subsidiary Longview Fibre Paper and Packaging, Inc. (hereafter Longview TRS), a taxable REIT subsidiary (TRS), those assets and businesses that cannot be
held or operated directly by Longview Fibre Company consistent with REIT tax rules. The transferred assets consist principally of our various manufacturing and processing facilities, including our Longview mill, our converting plants and our
sawmill, and the related businesses and operations. Longview Fibre Company, and not Longview TRS, will continue to own and manage our approximately 587,000 acres of timberlands.

We are required by REIT tax rules to distribute to our shareholders, on or before December 31, 2006, our previously undistributed earnings and
profits, (or E&P) attributable to taxable periods ending prior to January 1, 2006. As discussed in Developments In The Operating Plan above, we made the REIT E&P special dividend distribution on August 7,
2006.

We expect that, as a REIT, Longview Fibre Companys unconsolidated income will for the foreseeable future consist primarily of
net capital gains from the sale of standing timber to Longview TRS at market prices pursuant to one or more timber-cutting rights contracts. This income, and any other income we derive from owning and managing our timberlands, generally will not be
subject to corporate-level income tax, except to the extent we retain those earnings. To the extent that we retain net capital gains as a REIT, we would be required to pay income tax on such gains at regular corporate tax rates. If we retain and pay
taxes on net capital gains, our shareholders, though required to include their proportionate share of the undistributed long-term capital gain in income, would receive a credit or refund for their share of the federal income tax paid by us.

As a REIT, we will be limited in our ability to fund dividend payments using cash generated through Longview TRS. Our ability to receive
dividends from Longview TRS (from which we would make distributions to our shareholders) is limited by the rules with which we must comply to maintain our status as a REIT. In particular, at least 75% of Longview Fibre Companys gross income
for each taxable year as a REIT must be derived from sales of our standing timber and other types of real estate income. No more than 25% of Longview Fibre Companys gross income may consist of dividends from Longview TRS and other non-real
estate-related income. As a result, if our non-REIT activities conducted through Longview TRS were to become highly profitable, and generate income in excess of one-third of the REITs qualified income, we might be limited in our ability to
receive distributions from Longview TRS in an amount required to fund dividends to our shareholders commensurate with that profitability.

Under the Internal Revenue Code of 1986 as amended, no more than 20% of the value of the assets of a REIT may be represented by securities of subsidiaries that are taxable REIT subsidiaries, such as Longview TRS. This limitation may affect
our ability to make investments in non-REIT qualifying operations, from REIT generated income, including our manufacturing operations, which are held by Longview TRS. It would not limit reinvestment of funds generated by Longview TRS for its
manufacturing assets.

CHANGE IN FISCAL YEAR

Effective January 1, 2006, we changed our fiscal year end from October 31 to December 31. Accordingly, we now report financial results for fiscal periods ending March 31, June 30, September 30 and
December 31 of each year.



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EXPLORATION OF STRATEGIC ALTERNATIVES

On July 19, 2006, we announced that our Board of Directors decided to explore a range of strategic alternatives that may include, but are not limited
to, continued execution of our operating plan, a sale or merger of the company or other strategic transaction, and a sale of certain company assets. Because of the decision to explore strategic alternatives, our Board of Directors also announced the
postponement of the special meeting of shareholders that it had scheduled for September 12, 2006 to consider various non-binding, advisory resolutions advocated by a third party that has made an unsolicited indication of interest in acquiring
all of our outstanding common stock. The third party has also delivered a shareholder demand for a special meeting of shareholders relating to its non-binding, advisory resolutions. Unless the demand is withdrawn, we would expect to have a special
meeting of shareholders in the fall of 2006.

CONSOLIDATED RESULTS OF OPERATIONS

The following is a summary of consolidated results for the three and six months ended June 30, 2006 and June 30, 2005 (in millions of dollars):



|                                                 |  |                             |       |   |      |   |            |                     |  |   |       |   |  |       |  
|------------------------------------------------ |  | --------------------------- | ----- | - | ---- | - | ---------- | ------------------- |  | - | ----- | - |  | ----- | -
|                                                 |  | Three months ended June 30, |      
|                                                 |  | 2006                        |       |   | 2005 |   |            | Increase (Decrease) | 
|                                                 |  |                             |       | $ |      |   | Percentage |                    
|Net sales                                        |  | $                           | 246.5 |   |      | $ | 225.6      |                     |  | $ | 20.9  |   |  | 9.3   |  
|Cost of products sold, including outward freight |  |                             | 193.7 |   |      |   | 179.5      |                     |  |   | 14.2  |   |  | 7.9   |  
|                                                 |  |                             |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Gross profit                                     |  |                             | 52.8  |   |      |   | 46.1       |                     |  |   | 6.7   |   |  | 14.4  |  
|Selling, administrative and general expenses     |  |                             | 24.8  |   |      |   | 22.3       |                     |  |   | 2.5   |   |  | 10.7  |  
|Advisory fees and REIT-related expenses          |  |                             | 0.2   |   |      |   |           |                     |  |   | 0.2   |   |  | 100.0 |  
|                                                 |  |                             |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Operating profit                                 |  |                             | 27.8  |   |      |   | 23.8       |                     |  |   | 4.0   |   |  | 17.0  |  
|Interest expense, net of interest income         |  |                             | (8.3  | ) |      |   | (9.2       | )                   |  |   | (0.9  | ) |  | (10.7 | )
|Other income (expense)                           |  |                             | (10.9 | ) |      |   | 0.2        |                     |  |   | (11.1 | ) |  |      |  
|                                                 |  |                             |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Income (loss) before taxes                       |  |                             | 8.6   |   |      |   | 14.8       |                     |  |   | (6.2  | ) |  | (41.3 | )
|Provision for taxes on income                    |  |                             | 3.1   |   |      |   | 5.5        |                     |  |   | (2.4  | ) |  | (42.4 | )
|                                                 |  |                             |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Net income                                       |  | $                           | 5.5   |   |      | $ | 9.3        |                     |  | $ | (3.8  | ) |  | (40.7 | )
|                                                 |  |                             |       |   |      |   |            |                     |  |   |       |   |  |       |  



|                                                 |  |                           |       |   |      |   |            |                     |  |   |       |   |  |       |  
|------------------------------------------------ |  | ------------------------- | ----- | - | ---- | - | ---------- | ------------------- |  | - | ----- | - |  | ----- | -
|                                                 |  | Six months ended June 30, |      
|                                                 |  | 2006                      |       |   | 2005 |   |            | Increase (Decrease) | 
|                                                 |  |                           |       | $ |      |   | Percentage |                    
|Net sales                                        |  | $                         | 466.5 |   |      | $ | 456.4      |                     |  | $ | 10.1  |   |  | 2.2   |  
|Cost of products sold, including outward freight |  |                           | 383.9 |   |      |   | 369.2      |                     |  |   | 14.7  |   |  | 4.0   |  
|                                                 |  |                           |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Gross profit                                     |  |                           | 82.6  |   |      |   | 87.2       |                     |  |   | (4.6  | ) |  | (5.3  | )
|Selling, administrative and general expenses     |  |                           | 50.0  |   |      |   | 44.4       |                     |  |   | 5.6   |   |  | 12.5  |  
|Advisory fees and REIT-related expenses          |  |                           | 11.3  |   |      |   |           |                     |  |   | 11.3  |   |  | 100.0 |  
|                                                 |  |                           |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Operating profit                                 |  |                           | 21.3  |   |      |   | 42.8       |                     |  |   | (21.5 | ) |  | (50.2 | )
|Interest expense, net of interest income         |  |                           | (16.7 | ) |      |   | (18.4      | )                   |  |   | (1.7  | ) |  | (9.4  | )
|Other income (expense)                           |  |                           | (13.3 | ) |      |   | 0.5        |                     |  |   | (13.8 | ) |  |      |  
|                                                 |  |                           |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Income (loss) before taxes                       |  |                           | (8.7  | ) |      |   | 24.9       |                     |  |   | (33.6 | ) |  |      |  
|Provision (benefit) for taxes on income          |  |                           | (3.2  | ) |      |   | 9.2        |                     |  |   | (12.4 | ) |  |      |  
|                                                 |  |                           |       |   |      |   |            |                     |  |   |       |   |  |       |  
|Net income (loss)                                |  | $                         | (5.5  | ) |      | $ | 15.7       |                     |  | $ | (21.2 | ) |  |      |  
|                                                 |  |                           |       |   |      |   |            |                     |  |   |       |   |  |       |  

Net salesNet sales for the three months ended June 30, 2006 were $246.5 million
as compared with $225.6 million for the same period in 2005, an increase of $20.9 million, or 9.3%. This is due to increases in net sales of our timber segment of $5.9 million, or 11.8%, increases in net sales of our paper and paperboard segment of
$8.0 million, or 12.5%, and increases in net sales of our converted products segment of $7.0 million, or 6.3%.

Net sales for the six
months ended June 30, 2006 were $466.5 million as compared with $456.4 million for the same period in 2005, an increase of $10.1 million, or 2.2%. This is due to increases in our converted



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products segment net sales of $11.1 million, or 5.1%, and increases in our paper and paperboard segment net sales of $5.0 million, or 3.8%, offset by a
decrease in our timber segment net sales of $6.0 million, or 5.7%.

See Selected Segment Statistics and Results of
Operations below.

Cost of products soldCost of products sold for the three months ended June 30, 2006 was $193.7
million, or 78.6% of total net sales, compared with $179.5 million, or 79.6% of total net sales for the same period in 2005. The favorable decrease in the cost of products sold as a percentage of net sales was primarily due to (1) price
increases in our paper and paperboard and converted products segments, (2) a higher average unit log price for our timber segment, (3) decreases in logging and hauling costs in our timber segment, and (4) the mix of products sold. The
decrease was partially offset by (1) higher fiber costs in our paper and paperboard and converted products segments due to chip shortages, (2) increased freight and energy costs in our paper and paperboard segment (3) a decline in mill
capacity utilization in the paper and paperboard segment due primarily to machine down-time from chip shortages and acceleration of annual maintenance, and (4) higher labor and benefits costs.

Cost of products sold for the six months ended June 30, 2006 was $383.9 million, or 82.3% of total net sales, compared with $369.2 million, or
80.9%, of total net sales for the same period in 2005. This increase as a percentage of net sales was primarily due to (1) lower first quarter timber harvest compared to the same period in 2005, and (2) cost increases for (a) logging
and hauling costs in our timber segment in the first quarter, (b) fiber costs in our paper and paperboard and converted products segments due to chip shortages, (c) energy costs in our paper and paperboard segment and (d) higher labor
and benefits costs.

See Selected Segment Statistics and Results of Operations below.

Selling, administrative and general expensesSelling, administrative and general expenses for the three months ended June 30, 2006 were
$24.8 million, or 10.0% of total net sales, compared with $22.3 million, or 9.9% of total net sales for the same period in 2005. Selling, administrative and general expenses increased by $2.5 million in 2006, or 10.7%, as compared to the same period
in 2005 primarily due to increased costs associated with (1) legal and consulting fees associated with Sarbanes-Oxley Act compliance and other projects, (2) audit costs and (3) salaries, wages and benefits.

Selling, administrative and general expenses for the six months ended June 30, 2006 were $50.0 million, or 10.7% of total net sales, compared with
$44.4 million, or 9.7% of net sales for the same period in 2005. Selling, administrative and general expenses increased by $5.6 million in 2006, or 12.5%, as compared to the same period in 2005 primarily due to increased costs associated with
(1) the implementation of our Enterprise Resource Planning Systems (ERP systems), (2) legal and consulting fees associated with Sarbanes-Oxley Act compliance and other projects, (3) audit costs and (4) salaries, wages
and benefits.

Advisory fees and REIT-related expensesAdvisory fees and REIT-related expenses for the six months ended
June 30, 2006 were $11.3 million, or 2.4% of net sales, due to expenses associated with the REIT conversion and financial advisory fees including, among other things, evaluation of an unsolicited third party indication of interest in acquiring
all of our outstanding common stock.

Operating profit Operating profit for the three and six months ended June 30, 2006
was $27.8 million and $21.3 million, respectively, compared with operating profit of $23.8 million and $42.8 million for the same periods in 2005. See Selected Segment Statistics and Results of Operations below.

Interest expense, netInterest expense, net of interest income of $0.3 million and $0.5 million for the three and six months ended
June 30, 2006 was $8.3 million and $16.7 million, respectively, or 3.4% and 3.6% of total net sales, compared with interest expense, net of interest income of $0.1 million for each period, of $9.2 million and $18.4 million, respectively,
or 4.1% and 4.0% of total net sales for the three and six months ended June 30, 2005. The decrease of $0.9 million for the three months ended June 30, 2006 and $1.7 million for the six months ended June 30, 2006 over the same periods
in 2005 was primarily due to lower average interest rates resulting from the prepayment in December 2005 of $124.5 million of higher interest rate senior notes with the proceeds of lower interest rate bank debt.

Other income (expense)Other income (expense) for the three and six months ended June 30, 2006 was an expense of $10.9 million and $13.3
million, respectively, or 4.4% and 2.9% of total net sales, compared with other income of $0.2 million and $0.5 million for the three and six months ended June 30, 2005. This increase in other income (expense) over the same periods in 2005 was
primarily due to $11.1 million in net expenses related to the early redemption of our Senior Subordinated Notes during the second quarter of 2006, consisting of consent and redemption premiums and tender expenses paid in cash of $11.8 million and a
net gain of $0.7 million for non-cash write-offs from deferred terminated swap gains, and deferred debt issue and discount costs.



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Provision (Benefit) for Taxes on IncomeThe provision (benefit) for taxes on income for the
three and six months ended June 30, 2006 was $3.1 million and $(3.2) million, respectively, an effective tax rate of approximately 36%, as compared to a tax provision of $5.5 million and $9.2 million for the three and six months ended
June 30, 2005, an effective tax rate of 37%. The effective tax rate decrease over the same periods in 2005 is primarily due to a new deduction for domestic production activities.

For federal tax purposes our election to qualify as a REIT is effective January 1, 2006. As a REIT, we will generally not be subject to corporate
income taxes on income and gains from investments in real estate, including proceeds from the sale of standing timber, to the extent that we distribute such income and gains to our shareholders. We expect to distribute all of our 2006 income and
gains from investments in real estate to our shareholders. Longview TRS, however, is subject to corporate-level income tax on its earnings.

For financial reporting purposes, our deferred tax liabilities and deferred tax assets relating to our REIT qualifying activities will be eliminated in the quarter that the special distribution is paid. This one-time reduction of net
deferred tax liabilities incurred prior to January 1, 2006 will reduce tax expense by approximately $8.1 million.

If we had reported
as a REIT for financial reporting purposes for the three and six months ended June 30, 2006, the provision (benefit) for taxes on income would have been $(6.7) million and $(23.3) million, representing differences of $9.8 million and $20.1
million as compared to what we have reported in the consolidated statements of operations. The $9.8 million difference for the three months ended June 30, 2006 is primarily due to the tax benefit on REIT income that would not be taxed and other
net differences. The $20.1 million difference for the six months ended June 30, 2006 is primarily due to the $8.1 million of net deferred tax liabilities previously discussed, the tax benefit on REIT income for the six months ended
June 30, 2006 that would not be taxed and other net differences. We expect to report the benefits from reporting as a REIT in our provision (benefit) for taxes on income during the third quarter of 2006.

Net income (loss)As a result of the above changes in net sales, cost of products sold, selling, administrative and general expenses,
advisory fees and REIT-related expenses, other income and expense, and provision (benefit) for taxes on income, we reported net income of $5.5 million for the three months ended June 30, 2006, and a net loss of $5.5 million for the six months
ended June 30, 2006, as compared with net income of $9.3 million and $15.7 million for the three and six months ended June 30, 2005.



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SELECTED SEGMENT STATISTICS AND RESULTS OF OPERATIONS

Timber Segment Statistics (Three and Six Months Ended June 30, 2006 and 2005)



|                                         |  |                             |         |          |   |                     |            |   |         |   |  |       |  
|---------------------------------------- |  | --------------------------- | ------- | -------- | - | ------------------- | ---------- | - | ------- | - |  | ----- | -
|                                         |  | Three months ended June 30, |        
|                                         |  | 2006                        |         | 2005     |   | Increase (Decrease) |           
|Dollar amounts in millions               |  |                             |         | Millions |   |                     | Percentage |  
|Timber net sales                         |  | $                           | 56.5    |          | $ | 50.6                |            | $ | 5.9     |   |  | 11.8  |  
|Timber operating profit                  |  |                             | 28.1    |          |   | 24.4                |            |   | 3.7     |   |  | 15.4  |  
|                                         | 
|                                         |  | Three months ended June 30, |        
|                                         |  | 2006                        |         | 2005     |   | Increase (Decrease) |           
|Volumes in thousands of board feet (MBF) |  |                             |         | MBF      |   |                     | Percentage |  
|Log sales                                |  |                             | 77,553  |          |   | 72,511              |            |   | 5,042   |   |  | 7.0   |  
|Lumber sales                             |  |                             | 18,288  |          |   | 17,585              |            |   | 703     |   |  | 4.0   |  
|                                         | 
|                                         |  | Three months ended June 30, |        
|                                         |  | 2006                        |         | 2005     |   | Increase (Decrease) |           
|Price per thousand board feet (MBF)      |  |                             |         | $/MBF    |   |                     | Percentage |  
|Log average unit price                   |  | $                           | 644     |          | $ | 606                 |            | $ | 38      |   |  | 6.3   |  
|Lumber average unit price                |  |                             | 361     |          |   | 375                 |            |   | (14     | ) |  | (3.7  | )
|                                         | 
|                                         |  | Six months ended June 30,   |        
|                                         |  | 2006                        |         | 2005     |   | Increase (Decrease) |           
|Dollar amounts in millions               |  |                             |         | Millions |   |                     | Percentage |  
|Timber net sales                         |  | $                           | 98.3    |          | $ | 104.3               |            | $ | (6.0    | ) |  | (5.7  | )
|Timber operating profit                  |  |                             | 45.6    |          |   | 50.6                |            |   | (5.0    | ) |  | (9.7  | )
|                                         | 
|                                         |  | Six months ended June 30,   |        
|                                         |  | 2006                        |         | 2005     |   | Increase (Decrease) |           
|Volumes in thousands of board feet (MBF) |  |                             |         | MBF      |   |                     | Percentage |  
|Log sales                                |  |                             | 133,436 |          |   | 150,705             |            |   | (17,269 | ) |  | (11.5 | )
|Lumber sales                             |  |                             | 34,018  |          |   | 36,022              |            |   | (2,004  | ) |  | (5.6  | )
|                                         | 
|                                         |  | Six months ended June 30,   |        
|                                         |  | 2006                        |         | 2005     |   | Increase (Decrease) |           
|Price per thousand board feet (MBF)      |  |                             |         | $/MBF    |   |                     | Percentage |  
|Log average unit price                   |  | $                           | 641     |          | $ | 601                 |            | $ | 40      |   |  | 6.7   |  
|Lumber average unit price                |  |                             | 376     |          |   | 379                 |            |   | (3      | ) |  | (0.8  | )

Timber Segment Results:

Approximately 93% of our 587,000 acres of timberlands in Oregon and Washington consist of softwood such as Douglas fir and hemlock with the balance made
up of pine and other white woods. We manage our timberlands on a sustained yield basis; that is, we harvest levels of timber that can be sustained into perpetuity due to natural growth, our reforestation efforts, and strategic purchases
of timberlands. The primary products generated from the timber that we harvest are mostly softwood logs for construction lumber, plywood and chips. Our Leavenworth sawmill is included in our timber segment.

Timber segment net sales for the three months ended June 30, 2006 were $56.5 million compared with $50.6 million for the same period in 2005. This
increase of $5.9 million, or 11.8%, was due to an increase in log and lumber volumes resulting from our decision to expand our targeted annual timber harvest from 275 million board feet to an average of 325 million board feet over the next
five years and an increase in the log average unit price of 6.3%. This increase was offset by a 3.7% decrease in the lumber average unit price.

Of the $56.5 million timber segment net sales for the three months ended June 30, 2006, log sales were $49.9 million, or 88.3%, of which $43.8 million were domestic sales and $6.1 million were export sales, and lumber sales were $6.6
million, or 11.7%, substantially all of which were domestic sales. Of the $50.6 million in timber segment net sales for the three months ended June 30, 2005, log sales were $44.0 million, or 86.9%, of which $37.0 million were domestic sales and
$7.0 million were export sales, and lumber sales were $6.6 million,



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or 13.1%, substantially all of which were domestic sales. Export log sales were lower for the three months ended June 30, 2006 than in the same period
in 2005 because, under current market conditions, we are selling more volume in the domestic market where profit margins are higher.

Domestic log sales increased by $6.8 million, or 18.5%, for the three months ended June 30, 2006 compared to the same period in 2005 due to a 10.6% increase in volume and a 7.2% increase in the average unit price. Domestic log sales
increased primarily because of the previously discussed increase in our targeted annual harvest levels. Export log sales declined by $0.9 million, or 12.8%, for the three months ended June 30, 2006 compared to the same period in 2005 due
primarily to a 16.8% decrease in volume offset by a 4.9% increase in average unit price. Domestic lumber sales were approximately the same for the three months ended June 30, 2006 as compared to the same period in 2005. Domestic lumber volume
increased by 3.9% for the three months ended June 30, 2006 compared to the same period in 2005 which was offset by a 3.7% decrease in the average unit price.

Timber segment net sales for the six months ended June 30, 2006 were $ 98.3 million compared with $104.3 million for the same period in 2005. The decrease of $6.0 million in net sales, or 5.7%, was due
primarily to a decrease in log volume of 11.5% and lumber volume of 5.6%, substantially all of which occurred during the first quarter of 2006, offset by an increase in the log average unit price of 6.7%. Timber segment net sales decreased from the
same period in 2005 primarily because of inclement weather during the first quarter of 2006 that reduced the timber harvest and due to the lower first quarter 2006 harvest plan.

Of the $98.3 million timber net sales for the six months ended June 30, 2006, log sales were $85.6 million, or 87.0%, of which $74.0 million were
domestic sales and $11.6 million were export sales, and lumber sales were $12.7 million, or 13.0%, substantially all of which were domestic sales. Of the $104.3 million in timber segment net sales for the six months ended June 30, 2005, log
sales were $90.6 million, or 86.9%, of which $73.4 million were domestic sales and $17.2 million were export sales, and lumber sales were $13.7 million, or 13.1%, substantially all of which were domestic sales. Export log sales were lower by 32.5%
for the six months ended June 30, 2006 than in the same period in 2005 because we are selling more volume in the domestic market where profit margins are higher under current market conditions.

Domestic log sales were approximately the same for the six months ended June 30, 2006 compared to the same period in 2005. Although domestic log
sales did not change, volume decreased by 6.9%, which was offset by an increase in the average unit price of 8.3%. Export log sales declined $5.6 million, or 32.5%, for the six months ended June 30, 2006 compared to the same period in 2005 due
to a 35.8% decrease in volume, partially offset by an increase in the average unit price of 5.2%. Domestic lumber sales decreased by $0.9 million, or 6.8%, for the six months ended June 30, 2006 as compared to the same period in 2005 due to a
5.8% decline in volume and a 1.1% decrease in the average unit price.

Timber segment operating profit for the three and six months ended
June 30, 2006 was $28.1 million and $45.6 million compared with $24.4 million and $50.6 million for the same periods in 2005. The $3.7 million, or 15.4%, increase in operating profit for the three months ended June 30, 2006 as compared to
the same period in 2005 was due primarily to: (1) the 11.8% increase in timber net sales discussed above, and (2) a 6.0% decrease in logging and hauling costs, partially offset by increases in selling, administrative and general expenses.
The reduction in logging and hauling costs was due to better logging conditions and operational efficiencies.

The $5.0 million reduction
in operating profit for the six months ended June 30, 2006 as compared to the same period in 2005 was due primarily to: (1) the 5.7% decline in sales that occurred during the first quarter of 2006 as discussed above, (2) an allocation
to the timber segment of $1.4 million of advisory fees and REIT-related expenses in the first quarter, and (3) increases in selling, administrative and general expenses, partially offset by a 2.1% decrease in logging and hauling costs.



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Paper and Paperboard Segment Statistics (Three and Six Months Ended June 30, 2006 and 2005)



|                                      |  |                             |         |          |      |   |            |                     |  |   |         |   |  |       |  
|------------------------------------- |  | --------------------------- | ------- | -------- | ---- | - | ---------- | ------------------- |  | - | ------- | - |  | ----- | -
|                                      |  | Three months ended June 30, |        
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease) | 
|Dollar amounts in millions            |  |                             |         | Millions |      |   | Percentage |                    
|Paper and Paperboard net sales        |  | $                           | 71.6    |          |      | $ | 63.6       |                     |  | $ | 8.0     |   |  | 12.5  |  
|Paper and Paperboard operating profit |  |                             | 0.6     |          |      |   | 0.1        |                     |  |   | 0.5     |   |  |      |  
|                                      | 
|                                      |  | Three months ended June 30, |        
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease) | 
|Volumes in tons                       |  |                             |         | Tons     |      |   | Percentage |                    
|Paper sales                           |  |                             | 84,086  |          |      |   | 76,078     |                     |  |   | 8,008   |   |  | 10.5  |  
|Paperboard sales                      |  |                             | 38,354  |          |      |   | 40,962     |                     |  |   | (2,608  | ) |  | (6.4  | )
|                                      | 
|                                      |  | Three months ended June 30, |        
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease) | 
|Price per ton FOB mill equivalent     |  |                             |         | $/ton    |      |   | Percentage |                    
|Paper average unit price              |  | $                           | 608     |          |      | $ | 595        |                     |  | $ | 13      |   |  | 2.2   |  
|Paperboard average unit price         |  |                             | 396     |          |      |   | 346        |                     |  |   | 50      |   |  | 14.5  |  
|                                      | 
|                                      |  | Six months ended June 30,   |        
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease) | 
|Dollar amounts in millions            |  |                             |         | Millions |      |   | Percentage |                    
|Paper and Paperboard net sales        |  | $                           | 138.2   |          |      | $ | 133.2      |                     |  | $ | 5.0     |   |  | 3.8   |  
|Paper and Paperboard operating loss   |  |                             | (8.8    | )        |      |   | (2.2       | )                   |  |   | (6.6    | ) |  |      |  
|                                      | 
|                                      |  | Six months ended June 30,   |        
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease) | 
|Volumes in tons                       |  |                             |         | Tons     |      |   | Percentage |                    
|Paper sales                           |  |                             | 167,023 |          |      |   | 159,156    |                     |  |   | 7,867   |   |  | 4.9   |  
|Paperboard sales                      |  |                             | 74,596  |          |      |   | 94,776     |                     |  |   | (20,180 | ) |  | (21.3 | )
|                                      | 
|                                      |  | Six months ended June 30,   |        
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease) | 
|Price per ton FOB mill equivalent     |  |                             |         | $/ton    |      |   | Percentage |                    
|Paper average unit price              |  | $                           | 600     |          |      | $ | 580        |                     |  | $ | 20      |   |  | 3.4   |  
|Paperboard average unit price         |  |                             | 376     |          |      |   | 344        |                     |  |   | 32      |   |  | 9.3   |  



Paper and Paperboard Segment
Results:

We produce our high-quality kraft paper and paperboard, including corrugating medium and linerboard and heavier grades of
multi-wall shipping sacks at our Longview mill. We believe our Longview mill is one of the worlds largest pulp and paper making complexes, with an aggregate annual paper and paperboard capacity in excess of one million tons. Our Longview mill
consists of one pulp mill and ten paper and paperboard machines with more than 3,100 tons average daily paper and paperboard production capacity.

Paper and paperboard net sales for the three months ended June 30, 2006 were $71.6 million as compared with $63.6 million for same period in 2005, an increase of $8.0 million, or 12.5%. This increase was due primarily to: (1) an
increase in paper net sales of $6.6 million, or 13.5%, primarily due to higher domestic sales, (2) an increase in paperboard sales of $1.3 million, or 9.0%, primarily due to increases in domestic paperboard sales, and (3) a 14.5% increase
in average paperboard price, (4) partially offset by a reduction in export sales.

Paper volume sold for the three months ended
June 30, 2006 increased by 10.5% and paperboard volume sold declined by 6.4% compared to the same period in 2005. The average unit prices for paper and paperboard increased by 2.2% and 14.5%, respectively, compared to the same period in 2005.
The increase in the average unit price was due primarily to the fact that we implemented phased-in price increases during the second quarter of 2006 for all product grades.



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Of the total paper and paperboard net sales for the three months ended June 30, 2006 of $71.6
million, domestic sales were $55.3 million, or 77.3%, while export sales were $16.3 million, or 22.7%. Of the total paper and paperboard net sales of $63.6 million for the three months ended June 30, 2005, domestic sales were $45.4 million, or
71.3%, while export sales were $18.2 million, or 28.7%. Due to low wood chip supply, we attempted to optimize product mix by focusing on higher margin products and reducing exposure to products with high virgin fiber content. The decline in paper
and paperboard export sales as a percentage of our total segment sales was primarily from decreased sales of pulp and export liner due to the shortage of chips and reduced emphasis on sales to export markets because of declining profit margins.

Paper and paperboard net sales for the six months ended June 30, 2006 were $138.2 million as compared with $133.2 million for the
same period in 2005, an increase of $5.0 million, or 3.8%. This was due to higher paper net sales of $9.3 million, or 9.3%, primarily from greater domestic sales, offset by a decline in paperboard net sales of $4.2 million, or 12.6%, primarily due
to reduced emphasis on export sales where profit margins are lower.

Paper volume sold for the six months ended June 30, 2006
increased by 4.9%, due to increased domestic demand and rationalized industry supply, and paperboard volume sold declined 21.3%, primarily because of the decline in export sales. The average unit prices for paper and paperboard increased for the six
months ended June 30, 2006 by 3.4% and 9.3%, respectively, compared to the same periods in 2005. Of the total paper and paperboard net sales for the six months ended June 30, 2006 of $138.2 million, domestic sales were $103.9 million, or
75.1%, while export sales were $34.3 million, or 24.9%. Of the total paper and paperboard net sales of $133.2 million for the six months ended June 30, 2005, domestic sales were $92.5 million, or 69.4%, while export sales were $40.7 million, or
30.6%. The percentage increase in the composition of our domestic sales compared to export sales reflects our emphasis on increasing our profit margins.

Paper and paperboard segment operating profit (loss) for the three and six months ended June 30, 2006 was $0.6 million and $(8.8) million, respectively, compared with an operating profit (loss) of $0.1 million
and $(2.2) million for the same periods in 2005. The $0.5 million increase in operating profit for the three months ended June 30, 2006 as compared to the same period in 2005 is primarily due to the volume and price increases discussed above,
offset in part by increased costs for raw materials, labor and energy. Our total fiber costs increased by 7.9% due to a 10.4% increase in the cost of wood chips and a 10.0% increase in the cost of bleached pulp. Increased wood chip demand in the
region coupled with low pulpwood and residual chip supply were the drivers for the increased fiber costs. Purchased energy costs increased 5.5% because we used proportionately more natural gas to produce steam due to increased prices for recycled
oil. Labor costs increased 17.6% due primarily to increased benefit costs. Freight costs increased 20.6% due to higher fuel costs. Operating results were adversely affected by increased selling, administrative and general expenses.

The $6.6 million increase in the operating loss for the six months ended June 30, 2006 as compared to the same period in 2005 is primarily due to
the first quarter operating loss of $9.4 million which was caused by: (1) a 4.3% first quarter decline in sales, (2) higher energy costs due to an increase in hog fuel price and the use of proportionately more natural gas, (3) higher
labor costs due to wage increases and higher benefits, (4) higher fiber costs primarily due to higher chip costs caused by supply shortages related to inclement weather, (5) an allocation to the paper and paperboard segment of $3.5 million
of advisory fees and REIT-related expenses, and (6) higher selling, administrative and general expenses. The change in the operating loss for the six months ended June 30, 2006 as compared to the same period in 2005 was reduced in the second
quarter because of higher net sales and other factors discussed in the preceding paragraphs.

Longview paper mill capacity utilization for
the three and six months ended June 30, 2006 was 88.5% and 89.6%, respectively, as compared to 94.8% and 93.3% for the same periods in 2005. Capacity utilization declined primarily because of: (1) upgrades of certain paper machines that
were performed during the second quarter of 2006, (2) machine down time due to chip shortages and (3) an acceleration of certain annual maintenance procedures historically done in the third quarter that were scheduled and performed in the
second quarter of 2006.



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##### Table of Contents

Converted Products Segment Statistics (Three and Six Months Ended June 30, 2006 and 2005)



|                                      |  |                             |         |          |      |   |            |                     |  |   |       |   |  |    
|------------------------------------- |  | --------------------------- | ------- | -------- | ---- | - | ---------- | ------------------- |  | - | ----- | - |  | ---
|                                      |  | Three months ended June 30,
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease)
|Dollar amounts in millions            |  |                             |         | Millions |      |   | Percentage
|Converted products net sales          |  | $                           | 118.4   |          |      | $ | 111.4      |                     |  | $ | 7.0   |   |  | 6.3
|Converted products operating loss     |  |                             | (0.9    | )        |      |   | (0.7       | )                   |  |   | (0.2  | ) |  |   
|                                      | 
|                                      |  | Three months ended June 30,
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease)
|Volumes in tons                       |  |                             |         | Tons     |      |   | Percentage
|Converted products sales              |  |                             | 135,203 |          |      |   | 134,496    |                     |  |   | 707   |   |  | 0.5
|                                      | 
|                                      |  | Three months ended June 30,
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease)
|Price per ton                         |  |                             |         | $/ton    |      |   | Percentage
|Converted products average unit price |  | $                           | 876     |          |      | $ | 828        |                     |  | $ | 48    |   |  | 5.8
|                                      | 
|                                      |  | Six months ended June 30,  
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease)
|Dollar amounts in millions            |  |                             |         | Millions |      |   | Percentage
|Converted products net sales          |  | $                           | 230.0   |          |      | $ | 218.9      |                     |  | $ | 11.1  |   |  | 5.1
|Converted products operating loss     |  |                             | (15.5   | )        |      |   | (5.6       | )                   |  |   | (9.9  | ) |  |   
|                                      | 
|                                      |  | Six months ended June 30,  
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease)
|Volumes in tons                       |  |                             |         | Tons     |      |   | Percentage
|Converted products sales              |  |                             | 268,143 |          |      |   | 264,469    |                     |  |   | 3,674 |   |  | 1.4
|                                      | 
|                                      |  | Six months ended June 30,  
|                                      |  | 2006                        |         |          | 2005 |   |            | Increase (Decrease)
|Price per ton                         |  |                             |         | $/ton    |      |   | Percentage
|Converted products average unit price |  | $                           | 858     |          |      | $ | 828        |                     |  | $ | 30    |   |  | 3.6

Converted Products Segment Results:

We currently own and operate 15 converting plants located in 12 states that produce value-added corrugated containers, specialty packaging and creative
point-of-purchase displays. We are capable of producing containers in virtually any size, type, color and design, and we believe that we have established a reputation for high-quality products and services.

Converted products net sales for the three months ended June 30, 2006 were $118.4 million compared with $111.4 million for the same period in 2005.
This 6.3% increase was due primarily to a 0.5% increase in volume and a 5.8% increase in average unit price. All converted products sales are primarily domestic. The increase in the average unit price was due primarily to the fact that we
implemented phased-in price increases during the second quarter of 2006.

Converted products net sales for the six months ended
June 30, 2006 were $230.0 million compared with $218.9 million for the same period in 2005. This 5.1% increase was due primarily to a 1.4% increase in volume and a 3.6% increase in average unit prices.

The converting products segment operating loss was $0.9 million and $15.5 million for the three and six months ended June 30, 2006 as compared with
an operating loss of $0.7 million and $5.6 million for the same periods in 2005. The $0.2 million increase in operating loss for the three months ended June 30, 2006 compared to the same period in 2005 was due primarily to: (1) a 2.8%
increase in labor costs due primarily to wage increases and higher benefits, (2) a 6.5% increase in the cost of paperboard from the paper mill driven largely by higher energy, freight, labor and benefits and fiber costs, and (3) higher
selling, administrative and general expenses.

The $9.9 million increase in operating loss for the six months ended June 30, 2006
compared to the same period in 2005 was due primarily to the net increase of $9.8 million in operating loss in the first quarter of 2006



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compared to the same period in 2005. The first quarter operating loss increase was due primarily to: (1) an allocation to the converted products segment
of $6.2 million of advisory fees and REIT-related expenses, (2) a 2.4% increase in labor costs due to wage increases, (3) a 6.1% increase in costs of paperboard from the paper mill driven largely by energy, freight, repair, labor and fiber
costs, and (4) higher selling, administrative and general expenses. The change in the operating loss for the six months ended June 30, 2006 compared to the same period in 2005 was further increased by the second quarter operating loss as
discussed in the preceding paragraph.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2006, our total borrowed debt was $453.5 million, consisting of borrowings under the credit agreement discussed below of $439 million and certain revenue bonds payable totaling $14.5 million. All of
our debt is long-term, except for $16.2 million which is classified as current.

Our credit agreement, which we entered into in December
2005, initially provided for a $200 million senior secured term loan facility and a $200 million senior secured revolving credit facility. The $200 million term loan facility and the revolving credit facility have a term of five years.

During the three months ended June 30, 2006, we amended our credit agreement, (i) to modify certain financial covenants set forth therein,
(ii) to include an option to increase the commitment in the amount of $50 million (to be applied pro rata across the revolving credit facility and the $200 million term loan facility and (iii) to include an additional $300 million in
senior secured term financing having a term of seven years (New Term Loan Facility). During the three months ended June 30, 2006, we drew on the New Term Loan Facility to fund the retirement of all $215 million principal amount of
our 10% Senior Subordinated Notes due in 2009; to pay accrued and unpaid interest in connection with the retirement of the Senior Subordinated Notes; to pay fees and expenses relating to the REIT conversion and retirement of the Senior Subordinated
Notes; and to pay, consent and redemption premiums and tender fees relating to the retirement of the Senior Subordinated Notes.

The amount
of timberlands required as collateral under the amended agreement was increased to maintain a collateral value of two times the total commitments of the amended agreement. The New Term Loan Facility requires quarterly principal payments of
1% per annum with the remaining outstanding balance due on June 13, 2013. Borrowings under our credit agreement are secured by most of our Oregon and Washington timberlands.

As of June 30, 2006, we had borrowed $14 million under the revolving facility, $200 million under the term loan facility and $225 million under the
New Term Loan Facility. The revolving facility and term loan facility mature on December 23, 2010 and the New Term Loan Facility matures on June 13, 2013. No debt principal payments are required on the facilities before those maturity
dates, except for the New Term Loan Facility that requires quarterly principal payments of 1% per annum of the outstanding balance through the term of the facility.

Our total borrowing capacity under our credit agreement is now $700 million, of which our unused and available borrowing capacity as of June 30, 2006 under all credit facilities was $251 million, after reduction
for outstanding letters of credit of $10 million.

On June 13, 2006, we consummated a tender offer and consent solicitation with
respect to our 10% Senior Subordinated Notes due in 2009, purchasing $213.7 million principal amount of the Senior Subordinated Notes. Concurrently, with the cancellation of those notes, on June 13, 2006, we sent a notice of redemption with
respect to the remaining $1.3 million principal amount of the Senior Subordinated Notes that we did not purchase in the tender offer and irrevocably deposited with the trustee funds sufficient to redeem such notes on the redemption date of
July 13, 2006. As a result, effective June 13, 2006, the Senior Subordinated Note indenture was discharged. We paid $11.8 million in consent and redemption premiums and tender fees for the early redemption, which was recorded to
Other expense in the consolidated statements of operations for the three and six months ended June 30, 2006 (see Note 9 to the consolidated financial statements).

On August 7, 2006, we drew an additional $75 million on the New Term Loan Facility to fund most of the $77.0 million cash portion of the REIT
E&P special dividend distribution. As a result, the New Term Loan Facility was fully utilized as of August 7, 2006.



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Derivative Instruments and Hedging Activities 

We currently use fixed interest rate swap agreements (swaps) to manage changes in cash flow as a result of changes in interest rate movements
on our variable rate debt. As of June 30, 2006, we had entered into swaps with notional amounts totaling $275 million, or approximately 65% of the total of $425 million of our two variable rate term loan facilities. These swaps have fixed
interest rates ranging from 5.45% to 5.69%, plus the spread of 1.50% to 1.75% applicable to the variable rate debt, and expire in 2007 through 2013.

To reduce our interest rate risk exposure, the benchmark interest rate and interest-reset dates for the counterparties on our swaps are the same as for our variable rate debt. The benchmark interest rate for the swap
counterparties remains fixed throughout the life of each swap. We are allowed under the credit agreement to change our benchmark interest rate on our variable rate debt at the interest-reset dates. If we change the benchmark interest rate and that
rate is higher than the benchmark interest for our swap counterparties, we could incur a higher interest expense and our swaps may not meet the high-effectiveness requirement for hedge accounting.

We are exposed to credit loss on our swaps in the event of counterparty nonperformance. We have minimized our credit risk by dealing only with leading,
credit worthy financial institutions and, therefore, we do not anticipate counterparty nonperformance.

The fair values of our swaps are
subject to significant fluctuations due to interest rate changes. If we should terminate these swaps in the future, the fair value cash settlement of these swaps could significantly impact our cash flows.

REIT E&P Special Dividend Distribution 

To qualify as a REIT effective January 1, 2006, we are required to, among other things, distribute to our shareholders in a taxable distribution on or before December 31, 2006, our previously-undistributed earnings and profits, or
E&P, attributable to taxable periods prior to January 1, 2006. To complete the required distribution and also to distribute amounts representing anticipated current-year REIT capital gains that would, if retained by us, be subject to
federal corporate income tax, our Board of Directors, on June 14, 2006, declared a special cash-and-stock distribution to holders of our common stock of $7.54 per share (based on 51,076,567 outstanding shares, prior to the additional shares
issued in the REIT E&P special dividend distribution), or $385.1 million in the aggregate, payable on August 7, 2006 to shareholders of record at the close of business on June 26, 2006. The special distribution was completed on
August 7, 2006 and consisted of an aggregate 14,673,663 shares of our common stock (based on a per-share value for purposes of the special distribution of $20.997, the average closing price per share of our common stock on the New York Stock
Exchange on July 27, 28 and 31 2006) and an aggregate of $77.0 million in cash.

Deficit Retained Earnings 

As of June 30, 2006 we had a deficit of $54.6 million in retained earnings after accrual for the REIT E&P special dividend distribution and the
declaring of the first and second quarter of 2006 dividends. This deficit was due, in part, to the fact that we accrued and paid dividends during the six months ended June 30, 2006 in anticipation of expected 2006 REIT earnings. We expect to
report the income tax benefits from reporting as a REIT during the third quarter of 2006. If we retain our current-year REIT earnings, those earnings would be subject to corporate income tax.

Cash Provided by (Used for) Operations 

Net
cash provided by operations was $31.9 million for the six months ended June 30, 2006 as compared to $63.0 million for the six months ended June 2005. The decrease in cash provided by operations of $31.1 million for the six months ended
June 30, 2006 as compared to the same period in 2005 was due primarily to the decrease in net income of $21.2 million and the following changes:



| | (1) | A net decrease of $8.4 million in adjustments to net income loss not requiring cash resulting from a net reduction in deferred tax liabilities of $7.2 million, primarily due to the
realization of temporary differences for income tax purposes, and the net changes in depreciation, depletion, write-off of deferred swap gains and debt costs from early extinguishment of our Senior Subordinated Notes, and net gain from the
disposition of capital assets;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | A net increase of $8.6 million in advisory fees and REIT-related expenses payable;
| | --- | ----------------------------------------------------------------------------------



| | (3) | A net increase of $3.8 million due to net changes in inventories, other current assets and pension and other noncurrent assets and a net increase in other liabilities; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (4) | A net decrease of $13.9 million which was due to a net decrease in trade accounts payable and accrued liabilities of $10.9 million, primarily due to the change in accrued interest
payable for the early redemption of the Senior Subordinated Notes, and net decreases in accounts and notes receivable and refundable income taxes.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash Provided by (Used for) Investing 

Net cash used for investing was $15.6 million for the six months ended
June 30, 2006 compared to $22.0 million for the six months ended June 30, 2005, a decrease of $6.4 million. Capital expenditures, including timberland acquisitions, for the six months ended June 30, 2006 were $16.1 million, as
compared to $23.9 million for the same period in 2005. Capital expenditures are expected to be approximately $40 million to $50 million for calendar year 2006 including expenditures for timberland purchases, plant and equipment, and environmental
compliance. We entered into a commitment to acquire 1,600 acres of timberlands in the Northwest for $8 million and we completed this purchase during the third quarter of 2006.

Cash Provided by (Used for) Financing 

Net cash provided by (used for) financing was $1.7
million for the six months ended June 30, 2006 as compared to $(41.7) million for the same period in 2005, an increase of $43.4 million. For the six months ended June 30, 2006, total borrowed debt increased $24.6 million. We borrowed $225.0
million from our New Term Loan Facility to extinguish the Senior Subordinated Notes totaling $215.0 million and pay a portion of the $11.8 million in consent and redemption premiums and tender fees (see Note 9 to the consolidated financial
statements). We also borrowed an additional $14.0 million under our revolving facility. For the six months ended June 30, 2005, we reduced borrowed debt by $43.0 million and also paid cash dividends of $2.0 million.

During the second quarter ended June 30, 2006, we paid cash dividends of $0.25 per share, or $12.8 million. For the six months ended June 30,
2005, we paid cash dividends of $0.04 per share, or $2.0 million. Subsequent to the end of the quarter, on July 3, 2006, we paid dividends of $0.30 per share, or $15.3 million. The per share amounts are based on pre-distribution shares
outstanding of 51,076,567.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Our significant accounting policies are discussed in Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operation, in our Annual Report on Form 10-K for the year ended October 31, 2005. The discussion of each of the policies outlines the specific accounting treatment related to each of these accounting areas. While all of these are important to
understand when reading our financial statements, there are several policies that we have adopted and implemented from among acceptable alternatives that could lead to different financial results had another policy been chosen. Throughout the
preparation of the consolidated financial statements, we employ significant judgments in the application of accounting principles and methods.

Impairment of Long-Lived Assets

We review the long-lived assets held and used by us (primarily capital assets consisting
mostly of buildings, machinery and equipment, timber and timberlands) for impairment annually and when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable through future operations and when the
carrying value of an asset exceeds its market value. Identifying these events and changes in circumstances, and assessing their impact on the appropriate valuation of the affected assets requires us to make judgments, assumptions and estimates. In
general, on assets held and used, impairments are recognized when the book values exceed our estimates of the undiscounted future net cash flows associated with the affected assets. The key assumptions in estimating these cash flows include future
production volumes and pricing of commodity or specialty products and estimates of expenses to be incurred.

When impairment is indicated,
the book values of the assets to be held and used are written down to their estimated fair value, which is generally based upon discounted future cash flows. Assets to be disposed of are written down to their estimated fair value, less estimated
selling costs. Consequently, a determination to dispose of particular assets can require us to estimate the net sales proceeds expected to be realized upon such disposition, which may be less than the estimated undiscounted future net cash flows
associated with such assets prior to such determination, and thus require an impairment charge. In situations where we have experience in selling assets of a similar nature, we may estimate net sales proceeds on the basis of that experience. Due to
the numerous variables associated with our judgments and assumptions relating to the valuation of assets in these circumstances, and the effects of changes in circumstances affecting these valuations, both the precision and



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reliability of the resulting estimates of the related impairment charges are subject to substantial uncertainties and, as additional information becomes
known, we may change our estimates significantly.

Impact of Potential Divestiture of Converting Plants and Leavenworth Sawmill

As discussed in Note 13 to the consolidated financial statements, we are exploring the potential divestiture of eight of our converting plants located in
the central and eastern United States and the Leavenworth sawmill. If we decide to sell the converting plants, it is currently our intention to sell them in one or two groups. In our impairment analysis of these converting plants and the Leavenworth
sawmill, we determined the undiscounted future cash flows based on identifiable cash flows for the asset groups.

Based on current
expectations regarding the structure and outcome of these potential divestitures, we did not recognize any write down for impairment during the second quarter ended June 30, 2006. Accordingly, we conducted a review of these assets and concluded
that the undiscounted cash flows from the manufacturing segments, both with and without the facilities being considered for divestiture, exceeds their carrying values.

Income Taxes

The determination of the provision (benefit) for taxes on income, and the resulting
current and deferred tax assets and liabilities involves significant management judgment, and is based upon information and estimates available to management at the time of such determination. The final income tax liability to any taxing
jurisdiction with respect to any calendar year will ultimately be determined long after our consolidated financial statements have been published for that year. We maintain reserves for known estimated tax exposures; however, actual results may
differ materially from our estimates.

Judgment is also applied in determining whether deferred tax assets will be realized in full or in
part. When we consider it to be more likely than not that all or some portion of a deferred tax asset will not be realized, a valuation allowance is established for the amount of the deferred tax asset that is estimated not to be realizable. As of
June 30, 2006, there were no deferred tax assets for which we believed that valuation allowances needed to be established based upon future taxable income and/or tax strategies planned to mitigate the risk of impairment of these assets.
Accordingly, changes in facts or circumstances affecting the likelihood of realizing a deferred tax asset could result in the need to record valuation allowances.

FORWARD-LOOKING STATEMENTS

Except for historical information, the statements made in this quarterly report on Form 10-Q are
forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on certain assumptions or estimates, discuss future expectations, describe future
plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.
Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements.
Forward-looking statements in some cases can be identified by the use of words such as may, will, should, potential, intend, expect, endeavor, seek,
anticipate, estimate, overestimate, underestimate, believe, could, would, project, predict, continue, plan,
believe, propose or other similar words or expressions. The forward-looking statements in this quarterly report on Form 10-Q include statements concerning our future dividends, the REIT conversion and our operations as a
REIT, expected timber harvest levels, the expected realization from HBU land sales, the effect of potential asset divestitures, the effect of our operating plan, the continued expansion of our timber resource base, our pursuit of opportunities to
reduce operating costs and increase efficiency, our exploration of strategic alternatives and the scheduling of a special meeting of our shareholders. Forward-looking statements are based on the companys estimates and projections on the date
they are made, and are subject to a variety of risks and uncertainties. Actual events, circumstances or results could differ materially from those anticipated by the company or reflected in the forward-looking statements due to a variety of factors,
including, but not limited to: our ability to achieve our strategies and the results of these strategies; actual log harvest levels and customer and product focus; our dependence on timber resources; changes or growth in the general domestic and
foreign economy, the forest products industry or the specific markets into which we sell products; our ability to achieve anticipated improvements in operating results and earnings and expected cost reductions; risks and costs associated with the
restructuring of our manufacturing operations, including the potential divestiture of our sawmill and select converting plants; risks and costs associated with our review of strategic alternatives; our ability to realize anticipated benefits from
the sale of higher and better use lands; our having sufficient resources to fund operations and meet debt payment obligations and capital expenditure requirements; our working capital needs, including inventory levels and raw material requirements;
unanticipated changes



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in pricing and market conditions for our products, energy and certain raw materials, including changes in log, paper, paperboard and converted products
pricing and demand; our ability to achieve anticipated reductions in the amount of natural gas purchased from third parties; our ability to improve reliability and uptime of equipment, creating a more steady operation and better management of raw
material purchases; our ability to achieve anticipated savings and improvements from various business improvement projects and programs within the expected time frames or at all; unexpected capital expenditures and the timing of completion and
results of capital expenditure projects; our ability to reduce debt and prioritize the use of excess cash to reduce debt; expected sales of power; possible effects of changes in currency exchange rates between the U.S. dollar and currencies of
important export markets (particularly Japan); cost of compliance with environmental regulations and effects of environmental contingencies, litigation and regulations on our financial condition and results of operations and our competitive
position; developments in the world, national, or regional economy or involving our customers or competitors affecting supply of or demand for our products, energy or raw materials, including the level of interest rates and new housing starts;
implementation or revision of government policies affecting the environment, import and export control and taxes; changes in harvest conditions or regulations affecting our timber operations; adverse weather conditions; availability of excess cash
to pay dividends and existence of contractual limitations on our ability to pay dividends; the need to obtain board approval of dividends and other distributions to our shareholders, which approval could be granted or withheld based on, among other
things, our results of operations, cash flow and prospects at the time; unforeseen maintenance on capital assets; unforeseen developments in our business; any additional material weaknesses in our internal control over financial reporting that may
arise or be identified; our ability to remediate material weaknesses in our internal control over financial reporting; adverse changes in the capital markets or interest rates affecting the cost or availability of financing; disasters and other
unforeseen events; potential changes in tax laws affecting REITs that could reduce the tax benefits associated with being a REIT; the occurrence of events that require a change in the timing of the REIT election; our previously-undistributed
earnings and profits attributable to taxable periods ending prior to January 1, 2006 varying from estimates; our ability to satisfy complex technical rules in order to qualify for or maintain REIT status and to operate effectively within the
limitations imposed by those rules; unforeseen developments in our business or in financial markets that could adversely affect our ability to satisfy the conditions for borrowing additional amounts under our credit agreement; and the sensitivity of
our stock price to the level of dividends on our common stock.

Readers are cautioned not to place undue reliance on any of the
forward-looking statements in this quarterly report on Form 10-Q, which reflect our managements views as of the date of this report. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by
law, we do not undertake any obligation to update any of the forward-looking statements contained in this quarterly report on Form 10-Q. For additional information about factors that could impact future results, see the risk factors in our most
recent annual report on Form 10-K on file with the SEC and the additional risk factors referenced in Part IIOther Information, Item 1A. Risk Factors in this quarterly report on Form 10-Q.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Our exposure to market risks on our financial instruments is limited to interest rate changes on our variable rate debt and on our fixed-interest rate swap agreements (swaps). The interest rates applied to our variable rate
borrowings are adjusted often and therefore react quickly to any movement in the general trend of market interest rates. Interest expense incurred annually related to our variable rate debt is dependent upon the amount outstanding during the year
and the extent to which interest rates rise and fall. If the weighted-average interest rate on our variable rate debt increased by 1.0% per annum, our annual interest expense would increase by $1.8 million based on our outstanding debt as of
June 30, 2006 after adjusting for the portion of our debt that has been hedged with fixed interest rate swaps.

We utilize swaps to
hedge a portion of our variable rate debt for exposure to changes in cash flows as a result of changes in interest rate movements. With our swaps, we benefit from interest rate increases because interest expense will be lower due to the fact that we
pay a fixed interest rate on hedged portion of our variable rate debt. If interest rates fall below the fixed interest rate on our swaps, then we are at risk of incurring higher interest expense than if we had not hedged a portion of our variable
rate debt.

In establishing our swaps, we have set the same benchmark interest rate and the interest-reset date for the swap counterparties
as for our variable rate debt, thereby reducing our risk of exposure for changes in interest rates. While the benchmark interest rate for the swap counterparties remains fixed throughout the life of each swap, we are allowed under the credit
agreement to change our benchmark interest rate on variable rate debt. If we change the benchmark interest rate on our variable rate debt, we could incur a higher interest expense if the benchmark interest rate for the swap counterparties is less
than the actual interest rate on our variable interest rate debt.



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Our swaps are also subject to changes in fair market value due primarily to changing interest rates,
resulting in the recognition of significant unrealized gains or losses. For our four fixed-interest rate swaps that were entered into in June 2006 with notional amounts of $275 million, we recognized a pre-tax unrealized net loss of $0.6 million in
other comprehensive loss for the second quarter ended June 30, 2006 for the fair value of these swaps. Further changes in interest rates could result in significant unrealized gains and losses in subsequent periods for the change in fair value
of our swaps. Additionally, if we should terminate these swaps in future periods, the fair value cash settlement of these swaps could significantly impact our cash flows.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be
disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that the information is accumulated
and communicated to our management, including our Chief Executive Officer and Senior Vice President-Finance, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Senior Vice President-Finance, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.
Our management, including our Chief Executive Officer and Senior Vice President-Finance, concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this report
because of material weaknesses in our internal control over financial reporting relating to an insufficient complement of personnel with appropriate accounting knowledge and training, and ineffective controls over the existence and valuation of
supplies inventories. A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be
prevented or detected.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud.
Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and
procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls
and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Material
Weaknesses in Internal Control Over Financial Reporting As Reported In Form 10-K, Item 9A

Our material weaknesses relating to an
(1) insufficient complement of personnel with appropriate accounting knowledge and training, (2) ineffective controls over the existence and valuation of supplies inventories, (3) ineffective controls over the valuation of
workers compensation claims liability and (4) ineffective controls over the valuation of postretirement medical benefits liability were described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2005 under
Item 9A Controls and ProceduresManagements Report on Internal Control Over Financial Reporting (Managements Report).

The current status of remediation plans for the material weaknesses is as follows:

Remediation of Material Weaknesses

We disclosed material weaknesses relating to (1) an insufficient complement of personnel with appropriate accounting knowledge and
training, (2) ineffective controls over the existence and valuation of supplies inventories, (3) ineffective controls over the valuation of workers compensation claims liability and (4) ineffective controls over postretirement
medical benefits liability. The material weakness relating to item (4), ineffective controls over postretirement medical benefits liability, was remediated as of December 31, 2005. The material weakness relating to item (3), ineffective
controls over the valuation of workers compensation claims liability, and the ineffective controls over the existence and valuation of fuel supplies inventories in item (2) were remediated as of March 31, 2006. Our remediation plan
to address these material weaknesses was described in the 2005 10-K, for fiscal year ended October 31, 2005, under Item 9A, Controls and ProceduresRemediation Plan for Material Weaknesses.



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The status of our remediation plan, as of June 30, 2006, with respect to each of the remaining
material weaknesses identified in our 2005 Managements Report is as follows:



| | 1. | Insufficient personnel with appropriate accounting knowledge and training.
| | -- | --------------------------------------------------------------------------

During the first quarter of 2006 we hired a Corporate Controller and also a Director of Financial and SEC Reporting. These professionals
have extensive experience in financial accounting and reporting. We expect their operational training with us and integration into our accounting department will be completed by the end of 2006. We also intend to enhance our processes for ensuring
that validation of our conclusions regarding recent accounting pronouncements and their application to our business transactions are carried out by personnel having the relevant accounting expertise and knowledge of our business. The training and
development of our accounting personnel associated with the enhancement of this process is currently in process and will be completed by the end of 2006.



| | 2. | Ineffective controls over supplies inventories.
| | -- | -----------------------------------------------

We have established a new and improved monitoring program or process for determining obsolescence and proper valuation of spare parts inventories that was initiated in January 2006. This new monitoring program is
composed of an improved valuation enhancement process provided under our new supply chain management system. We have not had sufficient time to evaluate the operating effectiveness of our new inventory procedure for determining obsolescence in spare
parts inventory under this new program. We expect this new obsolescence valuation program for spare parts inventory to be fully implemented and evaluated by the end of 2006.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Additionally, projections of any
evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes In Internal Control Over Financial Reporting

During the three months ended June 30, 2006, we established internal controls over the documentation of our derivative instruments that are treated as cash flow hedges for a portion of our variable rate debt and also over the testing
for hedge high effectiveness and for calculating the ineffectiveness portion of the changes in fair value.

There have been no other
changes in our internal control over financial reporting for the three months ended June 30, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

Nothing to report.

ITEM 1A. RISK FACTORS

Other than with respect to the risk factors below, there have been no material changes
from the risk factors disclosed in the Risk Factors section of our 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission on January 17, 2006.

Potential divestiture of eight converting facilities may adversely impact our results of operations in future periods.

We announced during the second quarter ended June 30, 2006 that we are exploring the potential divestiture of up to eight converting facilities located in
the eastern and central regions of the United States and the Leavenworth sawmill. The converting facilities are part of our converted products segment and the Leavenworth sawmill is included in our timber segment. Based on our current expectations
regarding the structure and outcome of these potential divestitures, we did not recognize any write-down for impairment of these assets during the second quarter ended June 30, 2006. Our assessment of the potential proceeds that may be realized from
any such divestitures assumes, among other things, that the converting facilities are sold in one or more groups, rather than on an individual basis. If our assumptions prove to be incorrect and the net proceeds we achieve upon any sale of these
facilities is less than their recorded net carrying amounts reflected in our consolidated financial statements, we may be required to recognize a write-down for impairment. If a write-down does occur, it could negatively impact our results of
operations in subsequent reporting periods, including, but not limited to, the third and fourth quarters of 2006.

We are exploring a
range of strategic alternatives to enhance shareholder value that we may not pursue or that may yield unforeseen results.

On July
19, 2006, we announced that our Board of Directors has decided to explore a range of strategic alternatives. These strategic alternatives may include, but are not limited to, continued execution of our operating plan, a sale or merger of the company
or other strategic transaction, and a sale of certain of our assets. If we choose to continue to execute our operating plan instead of pursuing other potential alternatives, our stock price could decline. In addition, we may be unsuccessful in
implementing an alternative that is chosen by our Board of Directors or we may implement one or more of such alternatives that do not yield expected results, having a material adverse effect on our business, financial condition and results of
operations. The process of continuing to review, and potentially executing, certain of the strategic alternatives is likely to be costly and time-consuming and may distract our management from operating the company, which could have a material
adverse effect on our business, financial condition and results of operations.



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|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Nothing to report.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

Nothing to report.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

The Annual Meeting of Shareholders of Longview Fibre Company was held on April 6, 2006 at which time the following four Class I directors and one Class III director were elected:

CLASS I DIRECTORS

(Terms to Expire in 2009)



|                      |  |            |  |           |  |               |  |                    
|--------------------- |  | ---------- |  | --------- |  | ------------- |  | -------------------
|                      |  | For        |  | Withheld  |  | Abstained (a) |  | Broker Non-Vote (a)
|David L. Bowden       |  | 37,825,544 |  | 4,829,411 |  | 3,222,862     |  | 0                  
|Richard H. Wollenberg |  | 38,749,776 |  | 3,905,179 |  | 3,222,862     |  | 0                  
|Rick L. Bentzinger    |  | 39,395,354 |  | 3,259,601 |  | 3,222,862     |  | 0                  
|Curtis M. Stevens     |  | 39,393,145 |  | 3,261,810 |  | 3,222,862     |  | 0                  

CLASS III DIRECTOR

(Term to Expire in 2008)



|                    |  |            |  |           |  |               |  |                    
|------------------- |  | ---------- |  | --------- |  | ------------- |  | -------------------
|                    |  | For        |  | Withheld  |  | Abstained (a) |  | Broker Non-Vote (a)
|David A. Wollenberg |  | 36,708,133 |  | 5,946,822 |  | 3,222,862     |  | 0                  

(a) included in the Withheld vote tally

The remaining directors of Longview Fibre Company are as follows:

CLASS II DIRECTORS

(Terms to Expire in 2007)

Robert E. Wertheimer

John R. Kretchmer

Robert A. Kirchner

CLASS III DIRECTORS

(Terms to Expire in 2008)

M. Alexis Dow

Michael C. Henderson

Lisa J. McLaughlin



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

Nothing to report.



|ITEM 6. | EXHIBITS
|------- | --------

The exhibits to this quarterly report on
Form 10-Q are listed on the accompanying Exhibit Index.



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                     |  |  |  |                                                                                                            
|-------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------
|                     |  |  |  | LONGVIEW FIBRE COMPANY (Registrant)                                                                        
|Date: August 9, 2006 |  |  |  |                                                                                                            
|                     |  | 
|                     |  |  |  | /s/ L. J. MCLAUGHLIN                                                                                       
|                     |  |  |  | L. J. McLAUGHLIN                                                                                           
|                     |  |  |  | Senior Vice President-Finance, Secretary and Treasurer (Authorized Officer and Principal Financial Officer)



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EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                               
|            | 
|3.1         |  | Articles of Incorporation of Longview Fibre Company (incorporated by reference to Exhibit 3.1 to the registrants Annual Report on Form 10-K for the fiscal year ended October 31, 2005
(File No. 001-10061))             
|            | 
|3.2         |  | Bylaws of Longview Fibre Company (incorporated by reference to Exhibit 3.1 to the registrants Current Report on Form 8-K dated March 25, 2006 and filed March 30, 2005 (File No.
001-10061))                             
|            | 
|10.1        |  | First Amendment to Credit Agreement, dated as of June 13, 2006 (incorporated by reference to Exhibit 99.1 to the registrants Current Report on Form 8-K dated June 13, 2005 and filed
June 14, 2006 (File No. 001-10061))
|            | 
|31.1        |  | Rule 13a-14(a)/15d-14(a) Certification by R. H. Wollenberg, President, Chief Executive Officer and Chairman of the Board                                                                                                  
|            | 
|31.2        |  | Rule 13a-14(a)/15d-14(a) Certification by L. J. McLaughlin, Senior Vice President-Finance, Secretary and Treasurer                                                                                                        
|            | 
|32.1        |  | Section 1350 Certification by R. H. Wollenberg, President. Chief Executive Officer and Chairman of the Board                                                                                                              
|            | 
|32.2        |  | Section 1350 Certification by L. J. McLaughlin, Senior Vice President-Finance, Secretary and Treasurer                                                                                                                    



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