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Fine Paper On March 7, 2007, the company’s Fine Paper operations and related assets were divested in the Domtar Transaction. As a result, the period ended December 30, 2007, includes nine weeks of fine paper operations. Subsequent to the first quarter of 2007, we no longer have results of operations for the Fine Paper segment as the facilities contributing to this business segment were all divested in the Domtar Transaction. HOW WE DID IN 2007 We report sales volume and annual production data for our Fine Paper business segment in “Our Business / What We Do / Fine Paper.” Here is a comparison of net sales and revenues and contribution (charge) to earnings for the last three years: Net Sales and Revenues and Contribution (Charge) to Earnings for Fine Paper  COMPARING 2007 WITH 2006 As discussed above the Fine Paper operations were divested in the Domtar Transaction and as such no comparison between 2007 and 2006 is provided. COMPARING 2006 WITH 2005 In 2006: • Net sales and revenues increased $45 million, or 2 percent. • Contribution to earnings decreased $201 million. Net Sales and Revenues Net sales and revenues improved primarily due to price realizations for fine paper improving $91 per ton, or 11 percent. This was offset by a decline in fine paper sales volumes of approximately 245,000 tons, or 8 percent. This decrease in volume was primarily due to the closures of the Prince Albert and Dryden paper machines in January and April 2006, respectively. Contribution to Earnings Contribution to earnings decreased primarily due to the net effect of the following: • Charges for goodwill impairment were $749 million in 2006 with no impairments in 2005. • Chemical costs increased $34 million related to increased prices and additional costs to provide a higher brightness for fine paper products. • The strengthening of the Canadian dollar resulted in higher operating costs for Canadian operations of $25 million. • Operating supplies expense increased $14 million primarily due to packaging materials. • Raw material costs increased $9 million primarily related to chip price increases. These decreases to contributions to earnings were partially offset by the following: • Incremental charges, net of ongoing operating costs for closed operations, decreased $401 million. • Improved price realizations provided $240 million in additional contribution. This improvement was primarily due to improved market conditions. |