FEDERAL WAY, Wash., Feb. 9 -- Weyerhaeuser Company today reported net earnings of $395 million for 2006, or $1.61 per diluted share, on net sales of $21.9 billion. This compares with net earnings of $733 million, or $2.98 per diluted share, on net sales of $22 billion for 2005. For the fourth quarter 2006, Weyerhaeuser reported net earnings of $450 million, or $1.88 per diluted share, on net sales of $5.7 billion. Last year, Weyerhaeuser reported a fourth quarter net loss of $211 million, or 86 cents per diluted share, on net sales of $5.7 billion. Fourth quarter 2006 earnings include 14 weeks of results compared to 13 weeks for the same quarter last year and contain the following after-tax items: -- A gain of $227 million, or 95 cents per diluted share, for the refund of countervailing and anti-dumping duties on Canadian softwood lumber sold in the United States. -- A gain of $43 million, or 18 cents per diluted share, from the sale of the company's composite panels assets in Ireland. -- Charges of $36 million, or 15 cents per diluted share, for asset impairments and costs associated with closure of facilities, primarily in Wood Products. -- Charges of $13 million, or 5 cents per diluted share, for impairment of real estate assets. The loss for fourth quarter 2005 included the following after-tax items: -- Charges of $438 million, or $1.78 per diluted share, for facility closures primarily in the Fine Paper, Cellulose Fiber and Containerboard businesses -- Charges of $32 million, or 13 cents per diluted share, for asset impairment charges, including a charge associated with a California land development. -- A charge of $25 million, or 10 cents per diluted share, associated with the settlement of litigation. -- A loss of $10 million, or 4 cents per diluted share, for early extinguishment of debt. -- A gain of $34 million, or 13 cents per diluted share, on the sale of the company's composite panels assets in France. -- Income of $28 million, or 12 cents per diluted share, for the cumulative effect of a change to begin capitalizing Weyerhaeuser interest to assets of Weyerhaeuser Real Estate Company. During fourth quarter 2006, Weyerhaeuser repurchased 5.5 million shares of common stock. As of the end of the fourth quarter, Weyerhaeuser has repurchased 11 million shares of the 18 million-share repurchase previously authorized by the company's board of directors. "This past year was a time of ongoing dynamic change as we took steps to further improve shareholder value," said Steven R. Rogel, chairman, president and chief executive officer. "These efforts included our work to significantly restructure containerboard packaging and wood products, two of our major segments. To focus our portfolio, we entered into an agreement to combine our fine paper business and related assets with Domtar and began the complex process of implementing this landmark transaction. As part of our growth strategy, we expanded our real estate business and increased our timberlands position in South America. We continue to improve our efficiency by implementing significant changes in how we manage our supply chains and continuing to migrate to a single information technology platform. While we haven't finished our work on many of these efforts, and we may not see their full benefit for several quarters, our continued focus on these initiatives will benefit our shareholders despite challenging market conditions." DOMTAR TRANSACTION On Feb. 2, Weyerhaeuser announced an offer to its shareholders for the exchange of some or all of their shares of Weyerhaeuser common stock or exchangeable shares of Weyerhaeuser Company Limited (TSE: WYL - News) for shares of Domtar Corp. common stock. The exchange is expected to be tax-free to participating Weyerhaeuser shareholders for U.S. federal income tax purposes. The offer will expire at 12:00 midnight, New York City time, on March 2, unless extended or terminated. As previously announced on Aug. 23, Weyerhaeuser and Domtar Inc. entered into a definitive agreement to combine Weyerhaeuser's fine paper business and related assets with Domtar Inc. to form Domtar Corp., which will become North America's largest producer of fine paper. The Registration Statement on Form S-4 and S-1 filed by Weyerhaeuser with the Securities and Exchange Commission more fully describes the terms and conditions of the exchange offer. Fourth quarter earnings decreased from the third quarter mainly due to lower domestic log prices, primarily in the West. Higher fee harvest volumes in the South partially offset the decline in log prices. Costs were slightly higher in the fourth quarter due to weather and curtailment of operations in the West to balance harvest with customer demand. Weyerhaeuser expects the first quarter earnings to be slightly lower for the segment compared to the fourth quarter due to lower demand for lumber resulting in lower domestic log prices, and lower fee harvest volumes in the South. The downturn in residential housing construction, combined with normal seasonal construction slowing in the fourth quarter, caused a significant reduction in demand and prices for wood products which led to lower earnings. Lumber sales realizations, on average, declined 8 percent from third quarter. Combined with lower sales volume, this decrease accounts for nearly half of the quarter-to-quarter decrease in operating earnings for the segment. On average, sales realizations for oriented strand board declined 17 percent from third quarter and average weekly shipment volumes declined 3 percent. This change in structural panels accounts for 25 percent of the quarter-to-quarter decrease in segment earnings. Shipment volumes for engineered products also declined. To adjust operations to match customer demands, Weyerhaeuser curtailed production at 70 percent of its wood products facilities during the quarter. Weyerhaeuser anticipates some improvement in market conditions in the first quarter 2007, but still expects to experience significant losses in its wood products business. Weyerhaeuser will continue to balance production to demand which may result in further curtailments. Fine paper sales volumes in the fourth quarter remained unchanged on a per-day basis from third quarter while average sales realizations declined $3 per scale weight ton. Pulp sales volume and prices improved during the fourth quarter. Fourth quarter manufacturing costs increased slightly due to rising raw material costs and a seasonal increase in energy costs. Lower freight and chemical costs, combined with a favorable effect from a weakening Canadian dollar partially, partially offset the higher material and energy costs. Weyerhaeuser expects that first quarter market conditions for this segment will remain favorable. The company anticipates that fine paper prices will remain relatively unchanged and demand will strengthen. Market conditions for pulp are expected to improve and lead to stronger prices. Weyerhaeuser expects the scheduled completion of the announced Domtar transaction the first week of March to affect first quarter earnings. Upon closing, this transaction will eliminate the earnings of the fine paper business and certain related cellulose fiber assets from this segment. Excluding the assets transferring to Domtar, this segment contributed earnings of approximately $44 million in the fourth quarter. Additionally, Weyerhaeuser expects manufacturing costs to increase due to scheduled annual maintenance outages at several facilities, which will be accounted for on an actual expense incurred basis. Fourth quarter earnings decreased from the third quarter primarily due to a higher spending at packaging facilities on maintenance and modernizations, and seasonally higher natural gas consumption at the containerboard mills. Packaging prices decreased slightly due to mix and containerboard prices increased due to higher realizations on export shipments. Packaging shipments declined slightly on a workday basis while containerboard shipments increased 17 percent on a per day basis with strong growth occurring in export markets. During fourth quarter, Weyerhaeuser adjusted containerboard operating rates to match customer demand. The company expects first quarter earnings to be slightly lower compared with fourth quarter. Price realizations for containerboard and packaging are expected to increase in the first quarter. Weyerhaeuser expects packaging shipments to decline on a workday basis due to the effect of California's cold weather on produce markets. Prices for OCC and wood chips are increasing rapidly from fourth quarter levels. The company expects its cost reduction initiatives to partially offset lower packaging shipments and higher fiber related costs. Fourth quarter earnings include approximately $138 million from sales of land, lots and an apartment project. In addition, fourth quarter earnings benefited from seasonally increased single-family home closings and higher average sales prices compared to the prior quarter. Fourth quarter includes asset impairment charges of $19 million compared with $14 million in the third quarter. New orders for single-family homes declined compared with the third quarter. The backlog of homes sold, but not closed, at the end of the fourth quarter is approximately three months' sales compared with five months' sales a year ago. Traffic declined 29 percent from the fourth quarter last year. The single-family cancellation rate was 36 percent, up from 22 percent at year-end 2005. Weyerhaeuser expects first quarter real estate earnings to decline significantly from the fourth quarter. During the quarter, Weyerhaeuser anticipates seasonally lower single-family home closings. Discounting and sales concessions in the near term are expected to affect home prices and margins. There are no expected significant land sales transactions in the first quarter.