Weyerhaeuser Company Seizing 2006 Annual Report and Form 10-K the Future Weyerhaeuser Company 2006 Annual Report and Form 10-K

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Weyerhaeuser Company Seizing 2006 Annual Report and Form 10-K the Future Weyerhaeuser Company 2006 Annual Report and Form 10-K WEYERHAEUSER COMPANY SEIZING 2006 ANNUAL REPORT AND FORM 10-K THE FUTURE WEYERHAEUSER COMPANY 2006 ANNUAL REPORT AND FORM 10-K For more information, please visit: http://investor.weyerhaeuser.com Corporate mailing address Stock exchanges and symbols and telephone Weyerhaeuser Company Common Weyerhaeuser Company Stock is listed on the New York Stock PO Box 9777 Exchange and the Chicago Stock Federal Way, Washington Exchange. The Company’s NYSE symbol TAKING 98063-9777 is WY. Weyerhaeuser Company Limited 253.924.2345 has Exchangeable Shares listed on the Toronto Stock Exchange under the Weyerhaeuser World Wide symbol WYL. Web address www.weyerhaeuser.com Ordering company reports To order a free copy of our 2006 Annual Annual meeting Report/Form 10-K, 2006 Company Over- ACTION April 19, 2007 view, and other company publications, George Hunt Walker visit www.weyerhaeuser.com/aboutus Weyerhaeuser Building /contactus Federal Way, Washington Investor relations contact Proxy material will be mailed on Kathryn F. McAuley or about March 12, 2007, to each Vice President, Investor Relations holder of record of voting shares. 253.924.2058 NOW [email protected] Transfer agent and registrar Mellon Investor Services LLC Production notes PO Box 3315 This report is printed on Weyerhaeuser South Hackensack, New Jersey 100 lb. Cougar® Cover, Smooth Finish; 07606 80 lb. Cougar® Text, Smooth Finish; and or 35 lb. Weyerhaeuser Bobcat® Opaque, 480 Washington Boulevard Smooth Finish. Soy-based inks, which Jersey City, New Jersey are more easily separated from the 07310-1900 paper fi ber in the re-pulping process, 800.561.4405 were used in printing the narrative 800.231.5469 TDD for portion of the report. The entire report hearing-impaired can be recycled in most high-grade offi ce paper recycling programs. Thank Foreign shareholders you for recycling. 201.680.6578 201.680.6610 TDD for hearing-impaired Web site address www.melloninvestor.com/isd Mellon Investor Services’ Web site provides access to an Internet self-service product, “Investor Services Direct.” Through ISD, shareholders can view their account profi les, stock certifi cate histories, direct stock pur- chase plan, book-entry transactions (including any new funds pending investment), dividend payment histories, Form 1099 tax information, current stock price quotes and historical stock prices. Shareholders may also request replacement dividend checks, the issu- ance of stock certifi cates or the sale of shares from book-entry positions or duplicate Form 1099 or dividend rein- vestment statements, safekeeping of stock certifi cates, address changes or stock transfers involving book- entry shares. FITCH, DESIGN CENVEO, PRINTING WEYERHAEUSER COMPANY 2006 ANNUAL REPORT AND FORM 10-K WELCOME TO THE WEYERHAEUSER 2006 ANNUAL REPORT AND FORM 10-K. WE’VE MADE CHANGES TO THIS YEAR’S BOOK THAT MIRROR WHERE WE’RE HEADED AS A COMPANY — TOWARD AN EVEN MORE OPEN AND INNOVATIVE FUTURE. OF COURSE, REAL CHANGE DOESN’T BEGIN IN AN ANNUAL REPORT. IT BEGINS DEEP INSIDE A BUSINESS, WHERE STRATEGIES ARE BROUGHT TO LIFE BY TALENTED PEOPLE. IN THE FOLLOWING PAGES, YOU’LL READ ABOUT THE ACTION WE’RE TAKING TO STRENGTHEN OUR POSITION AND HOW WE INTEND TO BE SUCCESSFUL IN 2007 AND BEYOND. DEAR FELLOW SHARE- HOLDER WEYERHAEUSER COMPANY 2006 ANNUAL REPORT AND FORM 10-K WEYERHAEUSER IS A DYNAMIC COMPANY. WE CONTINUE TO TAKE FOCUSED AND DETERMINED STEPS TO DELIVER THE RESULTS YOU EXPECT. EACH OF OUR BUSINESSES FACES CHALLENGES, AND EACH HAS A STRATEGY IN MOTION. WE HAVE A CLEAR PLAN FOR OUR FUTURE, AND WE’RE EXECUTING IT WITH CONFIDENCE. For decades, Weyerhaeuser has been a forming our containerboard packaging and leader in the forest products industry, and recycling business from a plant-centric we are confi dent in our ability to maintain model into a customer-focused, supply- and build on this position. We recognize that chain design. The sales and marketing continuing to change the way we operate is organization, or demand side, works as a critical to our long-term prosperity. single team with customers in six market To ensure our success, we make disci- segments. The manufacturing organization, plined decisions and then take prompt action. or supply side, allocates customer orders You’ve seen evidence of this approach to the most advantageous mix of facilities for years, and 2006 was no different. As to make and deliver on-spec, on-time a result, we are an even more effi cient, products at the lowest total delivered cost. customer-focused company that rapidly The new organization — which in 2006 responds to market cycles and demands. closed or sold 11 packaging plants, closed We are no longer in the fi ne paper business. one bag facility, and shut down one liner- On Aug. 23, 2006, we announced that we board machine — now has a more direct would maximize the value of our fi ne paper connection with our customer base. This assets by combining them with Domtar, allows us to use our assets more effi ciently, Inc., creating the largest fi ne paper producer make better decisions about what we offer, in North America. For Weyerhaeuser, this provide superior customer service, and means $1.35 billion in tax-free cash, which position ourselves to take advantage of the we will use to pay down debt. We will also growth expected in containerboard pack- retire a signifi cant portion of our outstanding aging markets in 2007. shares through the exchange offering We launched iLevel™. In early 2006, of Weyerhaeuser shares for shares in the we introduced iLevel, a new brand for our new Domtar. residential wood products business, which We restructured our containerboard delivers innovative solutions to the struc- business. In early 2006, we began trans- tural frame market. By simplifying home 2006 FINANCIAL HIGHLIGHTS DOLLAR AMOUNTS IN MILLIONS EXCEPT PER-SHARE FIGURES 2006 2005 2004 Net sales and revenues $ 21,896 $ 22,046 $ 21,411 Net earnings 453 733 1,283 Basic net earnings per share 1.85 3.00 5.45 Capital expenditures (WEYERHAEUSER ONLY, EXCLUDING ACQUISITIONS) 849 875 504 Number of common and exchangeable shares outstanding (IN THOUSANDS) 238,008 245,184 242,472 Book value per share 38.17 39.97 38.17 Return on shareholders’ interest 4.8% 7.7% 15.7% Common stock price range $ 75.09 – 55.35 $ 71.52 – 61.12 $ 67.86 – 56.04 construction for builders with value-adding products and services, Still, for the full year, we generated fi nancial returns among we’re positioning ourselves for increased profitability and the highest in the industry on modestly higher home-closing activity customer loyalty over the long term. Our iLevel business repre- compared with 2005, and we continued to grow in size and sents more than one-third of our companywide revenue, so this breadth. For example, we acquired Maracay Homes in Phoenix, new initiative is signifi cant. Although we currently face a cyclical Ariz., expanded Quadrant Homes and Pardee Homes into downturn in the U.S. housing market, we expect to realize long-term adjacent markets, and introduced niche product lines, such as benefi ts when demand for housing in the United States rebounds. Camberley Homes in the Washington, D.C., area. To position us for success in the current business climate Although some markets in which we operate remain relatively and beyond, we strategically strengthened our residential wood healthy, the outlook for the coming year looks challenging for the products portfolio during 2006 with the announcements to industry overall. During this period, our real estate companies will permanently close fi ve facilities and build, or rebuild, three new maintain fl exibility by taking action, when appropriate, to minimize state-of-the-art softwood lumber mills. As we work through the inventory, slow the pace of land acquisition, and manage pricing diffi cult wood products market in 2007, we’ll continue to strategically pressure. We expect that over this cycle, WRECO will remain align our portfolio with chosen market segments. an industry leader with a strong and growing presence in our We narrowed the focus of our cellulose fi bers business. Our target markets. cellulose fi bers facilities are concentrating on serving the grow- We continue to create value in our timberlands business. Our ing, global market for specialty pulp. We intend to increase the timberlands business continues to thrive despite the pressures earnings of this business by bringing to market new products that on the housing market, which, as expected, signifi cantly slowed have the potential for high growth and margin, developing new demand for wood products. In 2006, we continued to fi nd new markets, strengthening our position in existing markets, and taking ways to reduce cost, increase cash fl ow and extract the most value advantage of our leading technical expertise and global direct from each acre of forest we manage. sales structure. To support this growth effort, the business made For example, in the Southern United States, we’re dispatching signifi cant operational improvements in 2006 by reducing cost log trucks from a central location to maximize loads and save fuel and adopting streamlined, market-driven business processes. costs, and we’ve extended our harvesting hours to make better We strategically invested in our real estate businesses. Our use of logging equipment. In the West, we’re getting more out of Weyerhaeuser Real Estate Company subsidiary had a challenging our small logs by sending them to mills that are best able to year with the decline in housing demand across the United States. extract maximum product value from them, and we’re increasing WEYERHAEUSER COMPANY 2006 ANNUAL REPORT AND FORM 10-K the productivity of log processors. Across the business, we’re We stayed true to our core values.
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