FEDERAL WAY, Wash., May 4 -- Weyerhaeuser Company today reported net earnings of $755 million for the first quarter of 2007, or $3.22 per diluted share, on sales of $3.9 billion. First quarter 2007 earnings include the following after-tax items: -- A gain of $756 million, or $3.22 per diluted share, on the distribution of the fine paper business and related assets to Weyerhaeuser shareholders. The gain includes a Canadian tax benefit of $74 million. -- A charge of $49 million, or 20 cents per diluted share, for asset impairments and closure costs. Excluding these charges, the company earned $48 million, or 20 cents per diluted share. First quarter 2006 results have been recast to reflect the fine paper business and related assets included in the Domtar transaction as discontinued operations and to apply a new accounting pronouncement to expense planned major maintenance costs as incurred. For first quarter 2006, Weyerhaeuser reported a net loss of $576 million, or $2.34 per diluted share, on net sales of $4.5 billion. First quarter 2006 earnings include the following after-tax items: -- A charge of $746 million, or $3.03 per diluted share, for a write-off of goodwill associated with the fine paper business. -- Income of $12 million in the Real Estate business, or 5 cents per diluted share, associated with insurance recoveries and recognition of deferred income in connection with partnership restructurings. SUMMARY OF FIRST QUARTER BUSINESS PERFORMANCE -- Timberlands -- Log prices improved due to lower supply in the West. -- Wood Products -- Market conditions remained difficult. -- Containerboard, Packaging and Recycling -- Higher fiber and energy costs, combined with lower demand affected performance. -- Cellulose Fibers -- Prices continued to be strong for absorbent fibers, which is the segment's focus following the completion of the Domtar transaction. -- Real Estate and Related Assets -- The segment experienced fewer closings, lower margins, and decreased land and lot activity. -- Corporate and Other -- Results reflect the gain from the Domtar transaction. REVIEW OF STRATEGIC ALTERNATIVES FOR CBPR BUSINESS Earlier this morning, the company announced that its board of directors has authorized a process to consider a broad range of strategic alternatives for its Containerboard, Packaging and Recycling business. Alternatives range from continuing to hold and operate the assets to a possible sale or combination. Weyerhaeuser will not speculate on the outcome of the review or whether it will result in any specific course of action. STEVE ROGEL COMMENTS ON FIRST AND SECOND QUARTER "During the first quarter, we delivered an installment on our commitment to focus Weyerhaeuser on those businesses where we have scale and scope to succeed," said Steven R. Rogel, chairman, president and chief executive officer. "By completing the innovative Domtar transaction, we created significant value for shareholders through a tax-free transaction and by reducing our outstanding shares by more than 25 million. But the quarter also saw us facing significant market challenges. In response, we aggressively managed production, costs and inventory levels. "As we look to the second quarter, we see continued challenges in many of our markets, especially in wood products where we expect to see a weaker than normal increase in seasonal demand," Rogel said. "These conditions only underscore the need for us to continue to improve our operating performance and maintain our sharp focus on the strategic initiatives we're implementing to create more value for our shareholders." 1Q 2007 Performance -- Earnings were stable as log prices were relatively unchanged throughout the quarter. Southern harvest levels declined due, in part, to the effects of damage to timberlands in Louisiana and Mississippi from Hurricane Katrina. 2Q 2007 Outlook -- Weyerhaeuser expects slightly lower earnings from this segment compared with first quarter as log supply increases seasonally and housing starts remain weak. Sales of non-strategic timberlands also will be lower in the second quarter due to timing of transaction closings. WOOD PRODUCTS 1Q 2007 Performance -- Excluding the first quarter 2007 and fourth quarter 2006 items noted below, the segment's net loss decreased from the fourth quarter but still reflects the difficult market conditions. First quarter 2007 included a pre-tax item of $56 million for impairment charges associated with the intended sales of the Canadian distribution business and Miramichi, New Brunswick oriented strand board mill. Fourth quarter 2006 included the following pre-tax items: -- A refund of $344 million countervailing and anti-dumping duties resulting from the settlement of the Canadian Softwood Lumber dispute. -- Income of $95 million for reversal of the alder litigation reserve. -- Charges of $48 million for facility closures and related asset u therimpairments. Weak demand resulted in a five-year low for oriented strand board prices and modestly lower prices for engineered products compared with fourth quarter. Average lumber prices improved slightly from fourth quarter. 2Q 2007 Outlook -- The company expects a weak spring building season. Weyerhaeuser foresees some improvement in earnings compared with first quarter, but still expects the segment to operate at a significant loss. CELLULOSE FIBERS 1Q 2007 Performance -- The first quarter was one of transition for the former Cellulose Fiber and White Papers segment. The company completed the Domtar transaction which included the fine paper business and the Kamloops, British Columbia pulp mill. Fine paper is now reported in a separate segment. Cellulose Fibers segment results included earnings of $9 million in first quarter 2007 from the Kamloops mill compared with $10 million in fourth quarter 2006. During the first quarter, market conditions for absorbent fibers continued to improve. The segment's earnings were affected by costs for scheduled, annual maintenance downtime at the New Bern, N.C., Columbus, Miss., and Longview, Wash. mills. Weyerhaeuser now expenses those costs in the quarter they occur. Previously, the company had amortized planned major maintenance costs over the year. 2Q 2007 Outlook -- Weyerhaeuser expects stronger earnings from this segment compared with first quarter as prices for absorbent fibers continue to improve. The company plans to take routine, annual maintenance downtime at two mills during the quarter. CONTAINERBOARD, PACKAGING AND RECYCLING 1Q 2007 Performance - Higher fiber and energy costs, combined with reduced sales volume resulted in slightly lower earnings compared with fourth quarter. During the quarter, prices for old corrugated containers and wood chips continued to increase. The California freeze reduced produce box demand. An ice storm caused a five-day curtailment at the Cedar River, Iowa containerboard mill. The segment benefited from its intense focus on reducing supply chain costs. 2Q 2007 Outlook -- Earnings for the segment are expected to increase from first quarter levels. The company expects that the benefits from seasonally higher box shipments will be partially offset by continued high fiber prices and costs for scheduled, annual maintenance downtime. REAL ESTATE AND RELATED ASSETS 1Q 2007 Performance -- Earnings decreased from fourth quarter due to lower margins and the seasonal decline in single-family home closings was amplified by a weak housing market. In addition, the fourth quarter included earnings of approximately $138 million from sales of land, lots and an apartment project. The backlog of homes sold, but not closed, is approximately five months. 2Q 2007 Outlook -- Weyerhaeuser expects earnings from this segment to be slightly lower than the first quarter as single-family margins continue to decline. Potential earnings from sale of land, lots or other real estate related assets may result in an improved earnings outlook.