Pope & Talbot Announces Results for Full Year, Fourth Quarter 2006




    Financial Highlights for 2006:

    --  Net income for 2006 of $45.3 million, an improvement of $95.3 million
compared with 2005 primarily due to receipt of softwood lumber duty refunds

    --  Leverage ratio decreased from 82 percent at September 30, 2006 to 73
percent at December 31, 2006 with prepayment of $63.0 million of term debt and
full repayment of cash borrowings under its revolving credit facility

    --  Pulp shipments of 177,800 metric tons for the fourth quarter, down
24% from the fourth quarter of 2005

    --  Lumber market weakness impacted price, availability and quality of
wood chips for the pulp business

    PORTLAND, ORE., April 2 /CNW/ - Pope & Talbot, Inc. (NYSE:  POP) today
reported net income of $45.3 million for the year ended December 31, 2006
compared with a net loss of $50.0 million reported for the prior year. The
earnings for 2006 were $2.79 per share on 16.3 million shares, compared with a
loss of $3.09 per share for 2005 on 16.2 million shares. Revenues were $841.1
million for 2006 compared with $848.8 million for the prior year.

    For the fourth quarter of 2006, earnings were $82.9 million or $5.09 per
share on revenues of $190.0 million, which compares with a net loss of $33.6
million or a loss of $2.07 per share on revenues of $226.8 million for the
same period a year ago, and a loss of $0.62 per share on revenues of $214.6
million for the third quarter of 2006.

    The results for the full year and the fourth quarter of 2006 reflect
non-recurring duty refunds of approximately $113.3 million, of which $101.2
million related to duty deposits paid in prior years, and accrued interest of
approximately $14.2 million. In total, the Company received $127.5 million
from the settlement of the softwood lumber dispute.

    With the receipt of the duty refunds in November 2006, the Company
prepaid $63 million of term debt and reduced revolver cash borrowings to zero.
This provided both capital structure and liquidity improvement as of the end
of the year. Further liquidity enhancement was achieved with an amendment to
the Company's credit agreement signed in December 2006. The Company remained
in full compliance with its credit agreement at December 31, 2006. The credit
agreement contains financial covenants including one based on defined EBITDA,
which is tested on a quarterly basis. Compliance with this covenant cannot be
assured because the Company's results of operations are highly dependent on
price fluctuations in pulp and lumber markets and in the Canadian to US dollar
exchange rate. The Company's independent auditors cited uncertainty over the
Company's ability to comply in future periods with the EBITDA covenant
contained in the credit agreement. As a result, their report included in the
2006 Annual Report on Form 10-K contained an explanatory paragraph that this
factor raises substantial doubt about the Company's ability to continue as a
going concern. In its evaluation and assessment of internal controls over
financial reporting as of December 31, 2006, the Company concluded that such
control over financial reporting was effective thereby eliminating the
material weakness noted in prior years relative to its accounting for income
taxes.

    The Company's operating income and earnings before interest, taxes,
depreciation and amortization (EBITDA) for 2006 were $83.4 million and $125.6
million, respectively. After excluding the effects of the lumber import duty
refunds, the annual results were an operating loss of $26.2 million and EBITDA
of $16.0 million, which favorably compared with an operating loss of $29.2
million and EBITDA of $8.9 million for the prior year. The decreased operating
loss was due primarily to increased pulp revenues caused by higher price
realizations and lower costs for the combination of lumber import duties and
export taxes expensed. The results for 2006 were negatively impacted by lower
wood products revenues due to lower price realizations and lower shipments,
reduced pulp shipments, increased pulp cost per ton and increased selling
general and administrative (SG&A) costs, primarily due to a $4.5 million
increase in environmental reserves.

    For the fourth quarter of 2006, operating income and EBITDA were $93.0
million and $103.7 million, respectively. Excluding the effects of the lumber
import duty refunds on the quarter, an operating loss of $16.6 million and
negative EBITDA of $5.9 million were realized, which compares with an
operating loss of $16.4 million and negative EBITDA of $6.0 million for the
corresponding quarter one year ago. As compared with the third quarter of
2006, which showed operating profit of $1.0 million and EBITDA of $11.7
million, the adjusted numbers for the fourth quarter of 2006 reflect lower
contribution from pulp, lower revenues from wood products and a significant
increase in SG&A costs.

    "The securing of the credit agreement, the receipt of the duty refunds
and subsequent prepayment of a portion of our term debt, and the remediation
of our material weakness all result in a stronger financial position for us to
begin the new year," stated Michael Flannery, Chairman and Chief Executive
Officer. "While I am disappointed in the fourth quarter operating results, I
am encouraged by the strength of the pulp market. Our challenge as we look
forward into 2007 is to fully optimize this market for the benefit of our
shareholders. To do this we must overcome the significant negative impact on
wood chip pricing, availability, and quality caused by the weakness in the
lumber markets."

    Pulp

    Revenues from Pope & Talbot's Pulp business totaled $466.9 million in
2006 compared with $442.6 million in 2005, an increase of five percent. The
increase related to higher prices offset in part by a decrease in volumes sold
in 2006. Pulp generated operating income before corporate expenses, interest
and income taxes of $18.2 million in 2006, compared with an operating loss of
$13.6 million in 2005. EBITDA from the Company's pulp operations totaled $46.6
million in 2006 compared with $12.8 million in 2005.

    Pulp cost of sales was $435.8 million in 2006, compared with $445.1
million in 2005, a decrease of two percent. Per metric ton, the average cost
of pulp sold increased four percent in 2006 compared with 2005. A significant
factor affecting pulp cost of sales is the average exchange rate used to
translate operating costs of the Company's Canadian pulp mills from Canadian
dollars to U.S. dollars. The average value of the Canadian dollar relative to
the U.S. dollar strengthened significantly in 2006, and the Company estimates
that the increase in the average daily Canadian to U.S. dollar exchange rate
from 2005 to 2006 resulted in an approximate $20.2 million increase in pulp
cost of sales, or a five percent increase in the average cost per metric ton
of pulp sold in 2006. Excluding the effect of the stronger Canadian dollar,
the average cost per ton of pulp sold was slightly lower in 2006 compared with
2005 primarily due to lower freight costs. Higher fiber costs in the fourth
quarter of 2006 were offset by lower fiber costs experienced in the first half
of the year.

    Pulp production totaled 800,700 metric tons in 2006 compared with 820,400
metric tons in 2005. This decrease is primarily due to reduced pulp production
at the Company's Nanaimo and Mackenzie mills due to a shortage of wood chips
in the fourth quarter of 2006. The Company's Mackenzie mill also experienced
operational difficulties from the restart of the mill after its planned annual
maintenance shutdown in September 2006.

    Pope & Talbot's fourth quarter pulp revenues decreased 6 percent to
$114.5 million due to sales volume decreasing 24 percent to 177,800 metric
tons, as compared with the fourth quarter of 2005. The reduction in shipments
was due to lower production, higher than normal shipment levels in December
2005 and inventory building stemming from transportation issues over the year
end. The average price realized per metric ton sold during the quarter
increased 25 percent to $644 from $517 in the fourth quarter of 2005. As
compared with the third quarter of 2006, the fourth quarter of 2006 pricing
represented a 2 percent increase from $630 per metric ton, but revenues for
the quarter decreased 9 percent with shipments decreasing 11 percent for the
period.

    In the fourth quarter of 2006, cost of sales for the pulp segment
decreased $18.9 million, or 15 percent as compared with the fourth quarter of
2005, due primarily to the decrease in volume, partially offset by a
significant increase in fiber costs. The Company estimates that the increase
in the average daily Canadian to U.S. dollar exchange rate resulted in an
approximate $2.5 million, or 3 percent increase in pulp cost of sales.
Excluding the impact of foreign exchange, cost of sales on a per ton basis
increased by 10% compared with the fourth quarter of 2005; this was due in
part to the decrease in production of 7% and an increase in fiber costs
primarily due to supply constraints from weakness in the lumber industry. The
Company's finished pulp inventory levels at December 31, 2006 were
approximately 36 days of shipments compared with 27 days of shipments at
December 31, 2005.

    Wood Products

    Revenues from Pope & Talbot's Wood Products business totaled $374.3
million in 2006 compared with $406.2 million in 2005, an eight percent
decrease. The decrease primarily related to lower lumber prices and lower
volumes sold, offset in part from the inclusion of a full year of volume from
the Fort St. James mill acquired on April 25, 2005 and an estimated $7.1
million increase from the effect of the strengthening of the Canadian dollar
on Canadian dollar revenues. For 2006, Wood Products generated an operating
loss before lumber duty refund for prior years, corporate expenses, interest
and income taxes of $10.5 million and EBITDA of $2.4 million. Excluding the
effects of the current year lumber import duty refunds which were recorded as
a reduction to wood products cost of sales, an operating loss of $21.1 million
and negative EBITDA of $8.2 million were realized, which compares with
operating income of $2.9 million and EBITDA of $13.2 million for the prior
year.

    Wood Products cost of sales was $378.0 million in 2006 compared with
$397.2 million in 2005, a five percent decrease. Total cost of sales
comparisons were affected by the full year inclusion of the Fort St. James
sawmill in the 2006 amounts offset by $12.1 million for the current year
portion of the lumber import duties refunds. Per thousand board feet, the
average cost of lumber sold in 2006 was three percent lower compared with
2005. The combined costs of lumber import duties and export taxes of $6.2
million after refund for 2006 compared with $37.3 million for 2005. The change
in the combined costs decreased the average cost per thousand board feet of
lumber sold in 2006 by eight percent and all other costs increased five
percent. A significant factor affecting Wood Products cost of sales is the
average exchange rate used to translate operating costs of the Company's
Canadian lumber operations from Canadian dollars to U.S. dollars. The value of
the Canadian dollar relative to the U.S. dollar strengthened significantly
between 2005 and 2006 and the Company estimates that the increase in the
average daily Canadian to U.S. dollar exchange rate resulted in an
approximately $18.3 million increase in Wood Products cost of sales, or a five
percent increase in the average cost per thousand board feet of lumber sold in
2006. Lower log costs in 2006 were offset in part by higher production costs
related to training and equipment operational issues at the Company's Grand
Forks sawmill due to integration of the new planer installed at the end of the
first quarter of 2006. These startup issues were largely resolved in the
fourth quarter of 2006. Lumber inventory write-downs were $3.9 million at
December 31, 2006 and there were no lumber inventory write-downs at December
31, 2005. Inventory write-downs reflect the difference between production
costs and anticipated sales prices of year-end inventories.

    Pope & Talbot's fourth quarter wood products revenues decreased 28
percent to $75.5 million, with lumber sales volume decreasing 21 percent to
187.6 million board feet as compared with the fourth quarter of 2005. The
average price realized per thousand board feet sold during the quarter
decreased 16 percent to $328 from $391 in the fourth quarter of 2005. As
compared with the third quarter of 2006, fourth quarter of 2006 pricing
represented a 10 percent decrease from average price realization of $368 per
thousand board feet. Shipments for the fourth quarter decreased 12 percent
from the third quarter totals of 214.4 million board feet. The reduction in
shipments reflects the continued decline in demand as a result of the
significant downturn in residential housing construction combined with normal
seasonal slowing during the period.

    In the fourth quarter of 2006, cost of sales for the wood products
segment decreased $34.4 million or 32 percent compared with the fourth quarter
of 2005. Cost of sales for the period was favorably impacted by the return of
approximately 82% of the lumber import duties paid during the current year,
which was $12.1 million. The decrease in shipments discussed above also
contributed to the decline in the segment's cost of sales for the period as
compared with the fourth quarter of 2005. Pope & Talbot estimates the impact
of changes in the foreign currency exchange rates for the quarter to be
approximately $2.3 million, or a 3 percent increase in the average cost per
thousand board feet as compared with the fourth quarter of 2005. This increase
was fully offset by a decrease of $5.1 million in the combined cost of import
duties and export taxes, or a 4 percent decrease in average cost per thousand
board feet. The cost of sales for the fourth quarter decreased 22 percent as
compared with the third quarter of 2006, due primarily to the receipt of the
lumber import duty refunds and lower shipments, partially offset by inventory
write-downs of $2.4 million taken due to the decline in net sales prices as
compared with inventory write-downs of $0.6 million taken during the third
quarter of 2006.

    Since October 12, 2006, the Company's lumber shipments to the United
States have been subject to a 15% export tax. The benchmark Prevailing Monthly
Price, as established by an average of the Random Lengths Framing Lumber
Composite Index, was below $315 for the effective period of the export tax in
2006.

    Selling, General & Administration

    SG&A expenses of $45.1 million for 2006 increased by $5.9 million
compared with SG&A expenses for 2005. SG&A expenses for 2006 were impacted by
incentive compensation triggered by positive financial results and by
increases to the Company's environmental reserves associated with two former
sawmill locations. SG&A costs increased by $3.2 million and $5.3 million,
respectively, for these items. The Company increased its environmental
reserves $4.5 million for 2006 for these sites, compared with a benefit of
$0.8 million recorded in the fourth quarter of 2005. These increases were
partially offset by a reduction in legal and other professional fees, charges
associated with terminated financing agreements and costs charged to SG&A in
2005 associated with obtaining debt covenant waivers.

    SG&A costs for the fourth quarter of 2006 totaled $16.8 million compared
with $11.9 million in the same period of 2005 and $9.3 million in the third
quarter of 2006, with the increase over the corresponding periods caused by
the impact of the incentive compensation and the increase in the environmental
reserves. Excluding the effect of these items, SG&A costs decreased $3.6
million from the fourth quarter of 2005 and $0.3 million from the prior
quarter. The decrease in SG&A costs as compared with the fourth quarter of
2005 was due primarily to a reduction in legal and other professional fees and
in charges associated with financing agreements terminated earlier in the
year.

    Interest Expense

    Interest expense was $37.0 million for 2006, increasing from $21.9
million for 2005. The increase in interest expense for 2006 as compared with
the corresponding period a year ago was primarily due to increased interest
rates under the Company's new credit agreement and the amortization of the
issue costs associated with that agreement. The Company's weighted average
interest rate on its outstanding debt was 11.6% at December 31, 2006, compared
with 11.7% at September 30, 2006 and 7.3% at December 31, 2005.

    Income Tax Expense

    The Company's effective tax rate was 20 percent for 2006 compared with an
effective tax benefit rate of two percent for 2005. The 2006 tax rate resulted
from the taxable effect of current year earnings and the recording of
additional deferred tax liabilities for undistributed Canadian earnings of
$5.1 million. These items were offset by a net reversal of prior year's
valuation allowance in the fourth quarter of $6.7 million caused by the
generation of earnings for the current year, a benefit due to Canadian income
tax rate reduction of $3.5 million, and the reversal of prior year's tax
liabilities of $1.6 million.

    Selected Statistics

    
                                                            Year ended
                               Fourth Quarter    Third     December 31,
                              ----------------- Quarter  -----------------
                               2006     2005      2006    2006     2005
                              -------- -------- -------- -------- --------
    Sales Volumes:
    Pulp (metric tons)        177,800  235,200  199,400  784,300  836,400
    Lumber (thousand board
     feet)                    187,600  238,500  214,400  871,800  885,800

    Production Volumes:
    Pulp (metric tons)        202,600  217,900  198,500  800,700  820,400
    Lumber (thousand board
     feet)                    208,600  226,300  209,500  883,400  883,800

    Average Price
     Realizations: (A)
    Pulp (metric tons)           $644     $517     $630     $595     $529
    Lumber (thousand board
     feet)                       $328     $391     $368     $377     $405

    Notes:
    (A) Gross invoice price less trade discounts.
    

    Capital

    In the fourth quarter of 2006, Pope & Talbot's capital expenditures were
$5.8 million and depreciation and amortization was $10.7 million. For the full
year, capital expenditures were $27.2 million and depreciation and
amortization was $42.2 million. Under the terms of its credit agreement, the
Company's capital spending limit for 2007 is $32.8 million.

    At the end of 2006, total debt was $321.0 million, a decrease of $68.2
million and $11.1 million from September 30, 2006 and December 31, 2005,
respectively. The decrease in total debt from September 30, 2006 primarily
reflects the mandatory prepayment resulting from the receipt of the lumber
duty refunds and the full repayment of cash borrowings under its revolving
credit facility. At December 31, 2006, stockholders' equity was $120.4
million, an increase of $36.2 million from September 30, 2006 and $8.4 million
from year-end 2005. The Company's adoption of a new pension and postretirement
benefit accounting standard, Statement of Financial Accounting Standards No.
158, on December 31, 2006, resulted in a $37.2 million charge, net of taxes,
to stockholders' equity, partially offsetting the increase from current year
earnings. At December 31, 2006, the ratio of long-term debt to total
capitalization was 73 percent, down from 82 percent at September 30, 2006 and
75 percent at year-end 2005.

    At December 31, 2006, the borrowing base under the Company's revolving
facility was $69.0 million and the Company was utilizing $18.2 million for
outstanding letters of credit, leaving $50.8 million of total availability for
cash borrowings. There were no cash borrowings outstanding under the revolving
facility at December 31, 2006. The Company held cash and cash equivalents of
$19.1 million at December 31, 2006, an increase of $11.6 million from
September 30, 2006 and $13.6 million from year-end 2005. The Company was in
compliance with all debt covenants for its credit agreement at December 31,
2006.

    Pope & Talbot, Inc. will be holding a conference call on Tuesday, April
3, 2007, at 10:00 a.m. PDT (1:00 p.m. ET.) The call-in number is 706-645-9773
Conference ID: 1768580. The conference call will also be webcast
simultaneously on the Company's website: www.poptal.com.

    Statements in this press release or in other Company communications may
relate to future events or the Company's future performance. Such statements
are forward-looking statements and are based on present information the
Company has related to its existing business circumstances. Investors are
cautioned that such forward-looking statements are subject to an inherent risk
that actual results may differ materially from such forward-looking
statements. Further, investors are cautioned that the Company does not assume
any obligation to update forward-looking statements based on unanticipated
events or changed expectations.

    The Company's financial performance depends on operating efficiencies and
the prices it receives for its products, as well as other factors such as
foreign exchange fluctuations. Prices for the Company's products are highly
cyclical and have fluctuated significantly in the past and may fluctuate
significantly in the future. A decrease in pricing may result in the Company
taking downtime or other unanticipated actions at its manufacturing
facilities. The Company's sensitivity to these and other factors that may
affect future results are discussed in the Company's Annual Report on Form
10-K and Quarterly Reports on Form 10-Q.

    Pope & Talbot is a pulp and wood products company. The Company is based
in Portland, Oregon and trades on the New York stock exchange under the symbol
POP. Pope & Talbot was founded in 1849 and produces pulp and softwood lumber
in the U.S. and Canada. Markets for the Company's products include: the U.S.;
Europe; Canada; South America; Japan; and other Pacific Rim countries. For
more information on Pope & Talbot, Inc., please check the website:
www.poptal.com.

    
                     POPE & TALBOT, INC. AND SUBSIDIARIES
                   (Thousands except per share, unaudited)

                      CONSOLIDATED STATEMENTS OF INCOME


                                                           Year ended
                           Fourth Quarter     Third       December 31,
                         -------------------  Quarter  -------------------
                           2006      2005       2006     2006      2005
                         --------- --------- --------- --------- ---------
    Revenues:
     Pulp                $114,494  $121,699  $125,698  $466,851  $442,635
     Wood Products
      Lumber               61,607    93,286    78,982   328,436   359,089
      Chips, logs and
       other               13,884    11,821     9,903    45,853    47,121
                         --------- --------- --------- --------- ---------
          Total Wood
           Products        75,491   105,107    88,885   374,289   406,210
                         --------- --------- --------- --------- ---------
              Total
               revenues   189,985   226,806   214,583   841,140   848,845
                         --------- --------- --------- --------- ---------
    Costs and expenses:
     Pulp cost of sales   107,028   125,975   109,167   435,799   445,113
     Wood Products cost
      of sales             74,351   108,790    95,135   377,997   397,193
     Lumber duty refund
      for prior years    (101,209)        -         -  (101,209)        -
     Gain on timber
      take-back                 -    (3,451)        -         -    (3,451)
     Selling, general
      and
      administrative       16,831    11,860     9,255    45,112    39,172
                         --------- --------- --------- --------- ---------
    Operating income
     (loss)                92,984   (16,368)    1,026    83,441   (29,182)
    Interest expense      (11,459)   (5,808)  (12,206)  (36,980)  (21,865)
    Interest income        14,716        28       193    15,066       265
    Loss on
     extinguishment of
     debt                       -         -         -    (4,910)        -
                         --------- --------- --------- --------- ---------
    Income (loss)
     before income
     taxes                 96,241   (22,148)  (10,987)   56,617   (50,782)
    Income tax expense
     (benefit)             13,350    11,406      (826)   11,298      (773)
                         --------- --------- --------- --------- ---------
    Net income (loss)     $82,891  $(33,554) $(10,161)  $45,319  $(50,009)
                         --------- --------- --------- --------- ---------

    Net income (loss) per
     common share - basic
     and diluted            $5.09    $(2.07)   $(0.62)    $2.79    $(3.09)
                         --------- --------- --------- --------- ---------

    Average shares
     outstanding - basic
     and diluted           16,270    16,227    16,269    16,250    16,208
                         --------- --------- --------- --------- ---------
    

    
                         CONSOLIDATED BALANCE SHEETS

                                            December 31,
                                         ------------------- September 30,
                                           2006      2005         2006
                                         --------- --------- -------------
    Assets:
      Current assets                     $258,336  $218,049    $  243,911
      Properties, net                     371,806   386,401       390,425
      Deferred charge                       6,847     7,562         7,028
      Other assets                         25,030    18,641        36,494
                                         --------- --------- -------------
        Total assets                     $662,019  $630,653    $  677,858
                                         --------- --------- -------------
    Liabilities and stockholders'
     equity:
      Current portion of long-term debt  $    474  $ 63,800    $      423
      Other current liabilities           102,030   105,363       118,643
      Long-term debt, excluding current
       portion                            320,476   268,200       388,758
      Deferred income tax liability, net   15,689     9,042        10,140
      Other long-term liabilities         102,925    72,216        75,698
                                         --------- --------- -------------
        Total liabilities                 541,594   518,621       593,662
      Stockholders' equity                120,425   112,032        84,196
                                         --------- --------- -------------
        Total liabilities and
         stockholder's equity            $662,019  $630,653    $  677,858
                                         --------- --------- -------------

    Long-term debt to total
     capitalization                            73%       75%           82%
                                         --------- --------- -------------
    

    
                             SEGMENT INFORMATION

                                                            Year ended
                             Fourth Quarter     Third      December 31,
                           -------------------  Quarter ------------------
                             2006      2005      2006    2006      2005
                           --------- --------- -------- -------- ---------
    EBITDA: (A)
        Pulp                $11,031     $(496) $20,226  $46,567   $12,825
        Wood Products         2,115    (2,065)  (4,309)   2,444    13,206
        Lumber duty
         refund for prior
         years              101,209         -        -  101,209         -
        Gain on timber
         take-back                -     3,451        -        -     3,451
        General Corporate   (10,688)   (6,850)  (4,246) (24,619)  (20,534)
                           --------- --------- -------- -------- ---------
                            103,667    (5,960)  11,671  125,601     8,948
                           --------- --------- -------- -------- ---------
    Depreciation and
     amortization:
        Pulp                 $7,152    $6,925   $7,121  $28,382   $26,429
        Wood Products         3,334     3,117    3,311   12,927    10,269
        General Corporate       197       366      213      851     1,432
                           --------- --------- -------- -------- ---------
                             10,683    10,408   10,645   42,160    38,130
                           --------- --------- -------- -------- ---------
    Operating income
     (loss):
        Pulp                 $3,879   $(7,421) $13,105  $18,185  $(13,604)
        Wood Products        (1,219)   (5,182)  (7,620) (10,483)    2,937
        Lumber duty
         refund for prior
         years              101,209         -        -  101,209         -
        Gain on timber
         take-back                -     3,451        -        -     3,451
        General Corporate   (10,885)   (7,216)  (4,459) (25,470)  (21,966)
                           --------- --------- -------- -------- ---------

        Operating income
         (loss)             $92,984  $(16,368)  $1,026  $83,441  $(29,182)
                           --------- --------- -------- -------- ---------

    Additional
     Information:
        Lumber import
         duties paid
         (refund
         received)         $(12,100)   $8,300   $4,400   $3,000   $37,300
        Lumber export
         taxes                3,200         -        -    3,200         -
        Capital
         expenditures         5,794    11,811    6,450   27,202    43,716
        Capital
         expenditures -
         acquisition of
         sawmill                  -         -        -        -    37,596

    Notes:
    (A) EBITDA equals net income (loss) before net interest expense, loss
         on extinguishment of debt, income tax provision (benefit) and
         depreciation and amortization. Segment EBITDA equals operating
         income (loss) before segment depreciation and amortization.
         EBITDA is a measure used by the Company's chief operating
         decision makers to evaluate operating performance on both a
         consolidated and segment-by-segment basis. The Company believes
         EBITDA is useful to investors because it provides a means to
         evaluate the operating performance of the Company and its
         segments on an ongoing basis using criteria that are used by the
         Company's internal decision makers and because it is frequently
         used by investors and other interested parties in the evaluation
         of companies with substantial financial leverage. The Company
         believes EBITDA is a meaningful measure because it presents a
         transparent view of the Company's recurring operating performance
         and allows management to readily view operating trends, perform
         analytical comparisons, and identify strategies to improve
         operating performance. For example, the Company believes that
         excluding items such as taxes and net interest expense enhances
         management's ability to assess and view the core operating trends
         in its segments. EBITDA is not a measure of the Company's
         liquidity or financial performance under generally accepted
         accounting principles (GAAP) and should not be considered as an
         alternative to net income (loss), income (loss) from operations,
         or any other performance measure derived in accordance with GAAP
         or as an alternative to cash flow from operating activities as a
         measure of the Company's liquidity. The use of EBITDA instead of
         net income (loss) or segment income (loss) has limitations as an
         analytical tool, including the inability to determine
         profitability; the exclusion of net interest expense, loss on
         extinguishment of debt and associated significant cash
         requirements, given the level of the Company's indebtedness; and
         the exclusion of depreciation and amortization which represent
         significant and unavoidable operating costs, given the capital
         expenditures needed to maintain the Company's businesses.
         Management compensates for these limitations by relying on GAAP
         results. The Company's measures of EBITDA are not necessarily
         comparable to other similarly titled captions of other companies
         due to potential inconsistencies in the methods of calculation.
    

    
     The following table reconciles net income (loss) to EBITDA for the
      periods indicated:

                                                           Year ended
                         Fourth Quarter      Third        December 31,
                      --------------------   Quarter   -------------------
                        2006       2005        2006      2006      2005
                      ---------  --------- ----------- --------- ---------
                                           (thousands)
     Net income
      (loss)           $82,891   $(33,554)   $(10,161)  $45,319  $(50,009)
     Interest
      expense
      (income), net     (3,257)     5,780      12,013    21,914    21,600
     Loss on
      extinguishment
      of debt                -          -           -     4,910         -
     Income tax
      provision
      (benefit)         13,350     11,406        (826)   11,298      (773)
     Depreciation
      and
      amortization      10,683     10,408      10,645    42,160    38,130
                      ---------  --------- ----------- --------- ---------

     EBITDA           $103,667    $(5,960)    $11,671  $125,601    $8,948
                      ---------  --------- ----------- --------- ---------


    The following table reconciles operating income (loss) to EBITDA for
     each of the Company's Pulp and Wood Products operating segments:


                                                           Year ended
                         Fourth Quarter      Third        December 31,
                      --------------------   Quarter   -------------------
                        2006       2005        2006      2006      2005
                      ---------  --------- ----------- --------- ---------
     Pulp                                  (thousands)
       Operating
        income
        (loss)          $3,879    $(7,421)    $13,105   $18,185  $(13,604)
       Depreciation
        and
        amortization     7,152      6,925       7,121    28,382    26,429
                      ---------  --------- ----------- --------- ---------

       EBITDA          $11,031      $(496)    $20,226   $46,567   $12,825
                      ---------  --------- ----------- --------- ---------

     Wood Products
       Operating
        income
        (loss)         $(1,219)   $(5,182)    $(7,620) $(10,483)   $2,937
       Depreciation
        and
        amortization     3,334      3,117       3,311    12,927    10,269
                      ---------  --------- ----------- --------- ---------

       EBITDA           $2,115    $(2,065)    $(4,309)   $2,444   $13,206
                      ---------  --------- ----------- --------- ---------
    

    
    The Company's senior secured credit agreement subjects the Company to
     a financial covenant based on EBITDA. EBITDA is defined differently
     in the credit agreement and requires additional adjustments, among
     other items, to (i) eliminate any refunds of prior years lumber
     import duties, (ii) include income tax benefits recognized in any
     quarter, and (iii) exclude certain other non-cash income and expense
     items. EBITDA as defined in the credit agreement was $39.4 million
     for the year ended December 31, 2006. The following table reconciles
     net income to credit agreement EBITDA for the year ended December 31,
     2006:


                                                            Year ended
                                                         December 31, 2006
                                                         -----------------
                                                            (thousands)
     Net income                                             $      45,319
     Interest expense, net                                         21,914
     Loss on extinguishment of debt                                 4,910
     Income tax provision (benefit)                                11,298
      Add back: quarterly income tax benefits recognized            2,052
     Depreciation and amortization                                 42,160
     Lumber duty refunds for prior years                         (101,209)
     Other non-cash income and expenses:
      Net periodic benefit costs for pension and
       postretirement plans, net of benefits paid and
       cash contributions                                           4,560
      Net unrealized foreign exchange gains recognized
       in earnings                                                   (424)
      Environmental accruals                                        4,536
      Inventory write downs, net                                    2,580
      Stock compensation and other                                  1,696
                                                         -----------------

     Credit agreement EBITDA                                $      39,392
                                                         -----------------
    

    
                          SELECTED FINANCIAL RESULTS

                                                           Year ended
                            Fourth Quarter     Third      December 31,
                          -------------------  Quarter -------------------
                            2006      2005      2006     2006      2005
                          --------- --------- -------- --------- ---------

    Selected consolidated
     results as adjusted:
    ---------------------

    Adjusted operating
     income (loss) (B)    $(16,628) $(16,368)  $1,026  $(26,171) $(29,182)

    Adjusted EBITDA(B)     $(5,945)  $(5,960) $11,671   $15,989    $8,948

    Selected Segment
     results as adjusted:
    ---------------------

    Adjusted operating
     income (loss):(B)
        Pulp                $4,475   $(7,421) $13,105   $18,781  $(13,604)

        Wood Products     $(11,836)  $(5,182) $(7,620) $(21,100)   $2,937

    Adjusted EBITDA:(B)
        Pulp               $11,627     $(496) $20,226   $47,163   $12,825

        Wood Products      $(8,502)  $(2,065) $(4,309)  $(8,173)  $13,206

    Notes:
    (B) Adjusted operating income for the fourth quarter and full year of
         2006 equals operating income excluding the non-recurring lumber
         duty refunds received in the fourth quarter and costs that
         resulted from the receipt of these refunds (principally incentive
         compensation resulting from achieving the Company's return on
         equity goal for the year). Adjusted EBITDA equals EBITDA (as
         described above) excluding the same refunds and costs. The
         Company believes that Adjusted operating income and Adjusted
         EBITDA are meaningful measures for investors because the lumber
         import duty refunds had a very significant one-time impact that
         obscures the Company's recurring operating performance. For all
         other periods presented, Operating income (loss) and EBITDA are
         presented as there were no significant one-time adjustments for
         these periods.
    

    
    The following table reconciles operating income to adjusted operating
     income for the periods indicated:

                                                     Fourth    Year ended
                                                    Quarter   December 31,
                                                      2006         2006
                                                   ---------- ------------
                                                         (thousands)
      Operating income                             $  92,984    $  83,441
      Current year lumber duty refund in cost of
       sales                                         (12,123)     (12,123)
      Lumber duty refund for prior years            (101,209)    (101,209)
      Incentive compensation earned due to lumber
       duty refund                                     3,298        3,298
      Other cost of sales related to lumber duty
       refund                                            422          422
                                                   ---------- ------------

      Adjusted operating loss                      $ (16,628)   $ (26,171)
                                                   ---------- ------------

    The following table reconciles net income (loss) to adjusted EBITDA
     for the periods indicated:

                                                     Fourth    Year ended
                                                    Quarter   December 31,
                                                      2006         2006
                                                   ---------- ------------
                                                         (thousands)
      Net income                                   $  82,891    $  45,319
      Interest expense (income), net                  (3,257)      21,914
      Loss on extinguishment of debt                       -        4,910
      Income tax provision                            13,350       11,298
      Depreciation and amortization                   10,683       42,160
      Current year lumber duty refund in cost of
       sales                                         (12,123)     (12,123)
      Lumber duty refund for prior years            (101,209)    (101,209)
      Incentive compensation earned due to lumber
       duty refund                                     3,298        3,298
      Other cost of sales related to lumber duty
       refund                                            422          422
                                                   ---------- ------------

      Adjusted EBITDA                              $  (5,945)   $  15,989
                                                   ---------- ------------

    The following table reconciles operating income (loss) to adjusted
     operating income (loss) for each of the Company's Pulp and Wood
     Products operating segments for the periods indicated:

                                                     Fourth    Year ended
                                                    Quarter   December 31,
                                                      2006         2006
                                                   ---------- ------------
      Pulp                                               (thousands)
        Operating income                           $   3,879    $  18,185
        Incentive compensation earned due to
         lumber duty refund                              596          596
                                                   ---------- ------------

        Adjusted operating income                  $   4,475    $  18,781
                                                   ---------- ------------

      Wood Products
        Operating loss                             $  (1,219)   $ (10,483)
        Current year lumber duty refund in cost of
         sales                                       (12,123)     (12,123)
        Incentive compensation earned due to
         lumber duty refund                            1,084        1,084
        Other cost of sales related to lumber duty
         refund                                          422          422
                                                   ---------- ------------

        Adjusted operating loss                    $ (11,836)   $ (21,100)
                                                   ---------- ------------

    The following table reconciles operating income (loss) to adjusted
     EBITDA for each of the Company's Pulp and Wood Products operating
     segments for the periods indicated:

                                                     Fourth    Year ended
                                                    Quarter   December 31,
                                                      2006         2006
                                                   ---------- ------------
      Pulp                                               (thousands)
        Operating income                           $   3,879    $  18,185
        Depreciation and amortization                  7,152       28,382
        Incentive compensation earned due to
         lumber duty refund                              596          596
                                                   ---------- ------------

        Adjusted EBITDA                            $  11,627    $  47,163
                                                   ---------- ------------

      Wood Products
        Operating loss                             $  (1,219)   $ (10,483)
        Depreciation and amortization                  3,334       12,927
        Current year lumber duty refund in cost of
         sales                                       (12,123)     (12,123)
        Incentive compensation earned due to
         lumber duty refund                            1,084        1,084
        Other cost of sales related to lumber duty
         refund                                          422          422
                                                   ---------- ------------

        Adjusted EBITDA                            $  (8,502)   $  (8,173)
                                                   ---------- ------------
    




For further information:

For further information: Pope & Talbot, Inc. Neil Stuart, 503-220-3777

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POPE & TALBOT, INC.

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