Pope & Talbot Announces Results for Second Quarter of 2007




    Financial Highlights for Second Quarter of 2007:

    --  Second quarter 2007 net loss widens to $2.62 per share from $1.15 in
first quarter of 2007

    --  Credit agreement in default due to inability to meet required EBITDA
covenant

    --  Strengthening Canadian dollar increased operating loss by an
estimated $9.4 million for the second quarter of 2007 as compared with the
first quarter of this year

    --  Pulp revenues of $137.9 million increased 19 percent from the second
quarter of 2006

    --  Increased product shipments from one year ago; Wood Products shipment
up 10 percent to 248.0 million board feet

    PORTLAND, ORE., August 9 /CNW/ - Pope & Talbot, Inc. (NYSE:  POP) today
reported a net loss of $42.9 million for the second quarter of 2007 compared
with a net loss of $21.8 million for the same quarter of 2006 and $18.6
million for the first quarter of 2007. The net loss for the second quarter of
2007 was $2.62 per share on 16.4 million shares, compared with a net loss of
$1.35 per share on 16.2 million shares for the second quarter of 2006 and a
net loss of $1.15 per share on 16.3 million shares for the first quarter of
2007. Revenues were $236.5 million for the second quarter compared with $213.6
million for the second quarter of 2006 and $200.5 million for the first
quarter of 2007. As a result of the Company's adoption of an accounting
pronouncement for planned major maintenance activities issued in the latter
part of 2006, the second quarter 2006 net loss is $7.3 million more than the
amount previously reported.

    The Company's operating performance significantly declined in the second
quarter of 2007 compared to both the second quarter of 2006 and the first
quarter of 2007. In the second quarter of 2007, the Company's operating loss
was $30.3 million and earnings before interest, taxes, depreciation and
amortization (EBITDA) was negative $17.7 million, as compared with an
operating loss of $10.5 million and negative EBITDA of $0.2 million for the
same quarter of 2006. For the first quarter of 2007, operating loss was $14.7
million and EBITDA was negative $4.4 million. Higher pulp raw material,
manufacturing costs and maintenance costs, combined with the negative impact
of a strengthening Canadian dollar relative to the U.S. dollar offset improved
pulp market prices and increased pulp shipments in the second quarter of 2007
as compared to the prior periods. The strengthening Canadian currency also
impacted wood products costs, which were also higher than the prior periods as
a result of increased shipments. Lumber prices, while improving from the first
quarter of 2007 levels, continued to reflect depressed lumber market
conditions.

    As announced August 6, 2007, the Company is in default of its senior
secured credit agreement as a result of its inability to maintain compliance
with one financial covenant calculated as of June 30, 2007. The Company and
its senior lenders entered into a forbearance agreement pursuant to which its
senior lenders have agreed that until September 17, 2007, or the earlier of
another default they will forbear from exercising any rights or remedies they
may have under the credit agreement arising from the existing default
(including their right to declare all amounts outstanding as immediately due
and payable), and will permit the Company to continue to borrow under the
revolving credit facility, on a reduced basis, subject to all other terms and
conditions of the credit agreement. See discussion below in "Capital and
Liquidity."

    The covenant required that the Company generate EBITDA, as defined, of at
least $30 million for the four-quarter period ended June 30, 2007; however,
the Company generated EBITDA of $4.0 million for this period, including
negative EBITDA of $24.8 million in the second quarter of 2007. Although the
Company may seek further forbearance or other relief from its senior lenders
when the current forbearance expires, it cannot provide any assurance that
such forbearance or other relief will be provided. Even if the Company is
successful in obtaining additional covenant relief, the Company will continue
to be challenged in its ability to maintain adequate levels of liquidity
relative to the size of its operations. Accordingly, the Company is continuing
to explore alternatives to strengthen its balance sheet and generate cash,
including one or more possible asset sales or other capital infusions, and is
analyzing its ability to restructure its debt and other liabilities,
including, if necessary, through bankruptcy proceedings. In addition, the
Forbearance Agreement requires the Company during the six-week forbearance
period to solicit offers to purchase all or substantially all of the Company's
assets or equity interests. The Company has engaged Rothschild Inc. to assist
in all those efforts.

    "The unfavorable movement of the Canadian dollar and a scarcity of
affordable fiber resources have combined to tighten our liquidity and severely
impact earnings," said Harold Stanton, President and Chief Executive Officer.
"While these factors are largely out of our control, we cannot maintain the
status quo and expect to withstand this current market environment. We are
actively taking steps to improve our liquidity. As previously announced, we
are curtailing one of three production lines at our Nanaimo pulp mill to
reduce operating costs and conserve fiber in light of current market
conditions. We are managing working capital by reducing inventories to minimal
levels and optimizing cash conversion between our collections and payables. We
have initiated actions to reduce non-employee administrative expenses
throughout the Company and have implemented a salary and new hire freeze for
all staff and salaried positions. Additionally, we have closed our Corporate
flight department and have sold the Company airplane. As we investigate
longer-term capital and financing alternatives, I am hopeful that our current
lenders will be supportive of our efforts and will grant us a prudent
timeframe to execute an appropriate strategy."

    
    Selected Statistics
    ----------------------------------------------------------------------

                                                    First    Six months
                                   Second Quarter  Quarter ended June 30,
                                   ---------------         ---------------
                                    2007    2006    2007    2007    2006
                                   ------- ------- ------- ------- -------

    Sales Volumes:
    Pulp (metric tons)             202,000 200,000 174,500 376,500 407,100
    Lumber (thousand board feet)   248,000 225,800 209,100 457,100 469,800

    Production Volumes:
    Pulp (metric tons)             177,100 189,900 182,800 359,900 399,600
    Lumber (thousand board feet)   201,200 212,200 239,200 440,400 465,300

    Average Price Realizations:(A)
    Pulp (metric tons)                $683    $579    $657    $671    $557
    Lumber (thousand board feet)      $331    $392    $320    $326    $400

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

    Pulp

    Pope & Talbot's second quarter revenues for Pulp increased 19 percent to
$137.9 million, compared with the same period a year ago primarily due to an
increase in average price realized and increased 20 percent compared with the
first quarter of 2007 primarily due to an increase in shipments as well as an
increase in average price realized. Shipments for the second and first
quarters of 2007 were 202,000 metric tons and 174,500 metric tons,
respectively. Shipments in the second quarter of 2007 returned to more normal
levels from abnormally low levels in the first quarter, which were primarily a
result of production constraints imposed by fiber availability and
transportation delays caused by a Canadian National Railway strike.

    Pulp generated an operating loss of $16.4 million for the second quarter
of 2007, as compared with losses of $2.3 million and $1.7 million for the
second quarter of 2006 and the first quarter of 2007, respectively. EBITDA for
the second quarter of 2007 decreased to negative EBITDA of $9.5 million from
positive EBITDA of $4.6 million and $5.0 million for the second quarter of
2006 and the first quarter of 2007, respectively. The reduction in the
contribution from the second quarter of 2006 to the same quarter of 2007 was
primarily due to a significant increase in fiber costs due to fiber
availability and quality issues, reduced production caused by scheduled and
unscheduled maintenance shutdowns and the effect on the operating costs
incurred at the Company's Canadian pulp mills due to the strengthening of the
Canadian dollar relative to the U.S. dollar, partially offset by an increase
in pulp revenues. The contribution as compared with the previous quarter was
reduced primarily due to the increase in maintenance costs and the effect of
the Canadian dollar relative to U.S. dollar, partially offset by the increase
in pulp revenues. During the second quarter, the Nanaimo pulp mill performed
its annual maintenance shutdown and incurred costs of approximately $12
million, an increase of approximately $9 million over the cost incurred in the
first quarter of 2007 for the planned maintenance shutdown of the Halsey pulp
mill in that quarter. Compared with the first quarter of 2007, the Company
estimates that the increase in the average daily Canadian to U.S. dollar
exchange rate increased second quarter 2007 pulp cost of sales approximately
$7.0 million. Excluding the effect of the stronger Canadian dollar and the
increase in maintenance shutdown costs, the average cost per ton of pulp sold
was 4 percent higher in the second quarter of 2007 compared with the first
quarter of 2007.

    The steady decline of lumber prices in 2006 and lack of sufficient price
recovery in 2007 has caused some sawmills located in both the U.S. and Canada
to cease or reduce production. This decline has severely constrained the
availability and quality of wood chip supply. As a result, the Company has
expanded its geographic harvesting and sourcing areas and its supply chain to
include wood chips and sawdust that may have a chemical composition dissimilar
to the Company's historic supply of fiber. This shift in the characteristics
has caused the Company to incur increased production costs to alter its
manufacturing process while maintaining its pulp quality. The Company has
experienced a substantial increase in its fiber and production costs beginning
in the fourth quarter of 2006 and continuing into the second quarter of 2007.
The on-going supply imbalance is expected to impact the remainder of 2007.

    Pulp production totaled 177,100 metric tons in the second quarter of
2007, compared with 189,900 and 182,800 metric tons in the second quarter of
2006 and the first quarter of 2007, respectively. The Company's Nanaimo pulp
mill took 18 days and 17 days of downtime associated with its planned
maintenance outage in its second quarter of 2007 and 2006, respectively.
Quarterly production was reduced by approximately 16,800 metric tons in 2007
and 20,000 metric tons in 2006 related to this downtime. In April 2007, the
Company's Mackenzie pulp mill experienced a mechanical failure in its Kamyr
digester which caused a production shutdown for that mill of 14 days, reducing
second quarter production by approximately 9,400 metric tons.

    Wood Products

    Pope & Talbot's second quarter revenues for Wood Products of $98.6
million increased one percent from the same period a year ago. The increase
from the second quarter of 2006 resulted from increased lumber sales volumes
and increased by-product revenues partially offset by lower sales prices.
Shipments for the second quarter increased 10 percent to 248.0 million board
feet from 225.8 million in the second quarter of 2006. Average lumber prices
decreased 16 percent to $331 per thousand board feet from $392 per thousand
board feet for the second quarter of 2006. Wood Products revenues for the
quarter increased by 15 percent compared with the first quarter of 2007,
primarily due to an increase in shipments of 19 percent up from 209.1 million
board feet, partially offset by decreased by-product revenues. Lumber sales
prices for the second quarter of 2007 increased slightly from the first
quarter, up 3 percent, but generally continue to reflect depressed lumber
market conditions.

    Wood Products generated an operating loss of $7.8 million in both the
second and first quarters of 2007, compared with an operating loss of $3.3
million in the second quarter of 2006. EBITDA from Wood Products was a
negative $4.4 million in the second quarter of 2007, compared with EBITDA of
$44,000 in the second quarter of 2006 and negative EBITDA of $4.5 million in
the first quarter of 2007. The reduction in contribution from a year ago was
primarily due to a decrease in average sales price realized caused by the
slump in demand for lumber products.

    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, has been below $315 for the entire period of the export tax.

    Lumber production totaled 201.2 million board feet in the second quarter
of 2007, compared with 212.2 million board feet in the same quarter of 2006
and 239.2 million board feet in the first quarter of 2007. The decrease in
production as compared with the second quarter of 2006 was primarily due to
reduced production at the Company's Grand Forks and Fort St. James sawmills as
a result of market-related production curtailments taken by both mills in the
second quarter of 2007, offset by production at the Company's Midway mill
which did not operate in the second quarter of 2006. The decrease in
production as compared with the first quarter of 2007 primarily resulted from
market related production curtailments in the second quarter of 2007 at
Midway, Grand Forks and Fort St. James.

    Selling, General & Administrative

    SG&A expenses for the second quarter of 2007 totaled $10.2 million
compared with $9.3 million in the same period of 2006 and $9.5 million in the
first quarter of 2007. SG&A expenses in the second quarter of 2007 were $0.9
million higher than the same period a year ago, primarily due to an increase
of $0.7 million in costs associated with financial consultants, legal and
other professional services, an increase of $0.3 million in equity
compensation expense and an increase of $0.2 million in sales commissions,
offset by a reduction in costs of $0.3 million associated with a sales tax
audit in 2006. SG&A expenses increased $0.7 million compared with the first
quarter of 2007, due to similar factors as discussed above except offset by a
decrease of $0.5 million in audit fees and a decrease of $0.2 million
associated with uninsured losses that occurred in the first quarter.

    Capital and Liquidity

    At June 30, 2007, total debt was $354.9 million, an increase of $33.9
million from $321.0 million at December 31, 2006. Total stockholders' equity
decreased by $39.6 million in the first six months of 2007 primarily due to a
net loss, partially offset by an increase in accumulated other comprehensive
income. At June 30, 2007, the ratio of long-term debt to total capitalization
was 81 percent, up from 73 percent at December 31, 2006.

    At June 30, 2007, the Company was utilizing $34.1 million of its
revolving facility for cash borrowings and $16.7 million for letters of
credit. At July 31, 2007, cash borrowing under the revolving credit facility
had increased to $44.4 million primarily due to payment of approximately $8
million in annual Canadian property taxes due in July. Under the Forbearance
Agreement with our senior lenders, the revolving facility has been reduced to
$67.0 million, with maximum limits of $50.0 million and $17.0 million for cash
borrowings and letters of credit, respectively. As a result of the unwaived
default, the Company has classified all outstanding cash borrowings under the
revolving facility and the term loans under its credit agreement as current
liabilities at June 30, 2007.

    Cash requirements in the first six months of 2007 included an increase in
net working capital of $6.4 million and $11.4 million for capital
expenditures. In the second quarter of 2007, Pope & Talbot's capital
expenditures were $6.2 million and depreciation and amortization totaled $10.4
million.

    This press announcement and other Company communications may contain
statements relating to future performance of the Company that are
forward-looking statements. These statements relate to the Company's future
plans, objectives, expectations and intentions and may be identified by words
like "believe," "expect," "may," "will," "should," "seek," or "anticipate,"
and similar expressions. The Company cautions readers that any such
forward-looking statements are based on assumptions that the Company believes
are reasonable, but are subject to a wide range of risks including, but not
limited to, risks associated with future financial results and liquidity
including the Company's continued ability to finance its operation in the
normal course, the continuation of the forbearance agreement without the
occurrence of a termination event thereunder or the potential necessity for
additional forbearance agreements, the possibility that the Company may need
to commence bankruptcy proceedings, fluctuation of the borrowing base and
other limitations that may affect the Company's ability to borrow under its
revolving credit facilities or otherwise, the Company's relationship with and
payment terms provided by its trade creditors, additional financing
requirements, the results of renegotiating certain key commercial agreements,
the effect of commodity and raw material prices, foreign currency
fluctuations, the effect of U.S. housing market conditions and other risks
discussed in the Company's most recent Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q. Due to these uncertainties, there is an
inherent risk that actual results will differ materially from any
forward-looking statements. The Company is under no obligation to (and
expressly disclaims any such obligation to) update or alter any
forward-looking statements whether as a result of new information, future
events or otherwise.

    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 market pulp and softwood
lumber at mills in the U.S. and Canada. Markets for the Company's products
include the U.S., Europe, Canada, South America, and the Pacific Rim. For more
information on Pope & Talbot, Inc., please check our website at
www.poptal.com.

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

                      CONSOLIDATED STATEMENTS OF INCOME

                                              First        Six months
                        Second Quarter       Quarter     ended June 30,
                     ---------------------             -------------------
                        2007      2006(A)     2007       2007     2006(A)
                     ----------- --------- ----------- --------- ---------

    Revenues:
       Pulp          $  137,918  $115,819  $  114,604  $252,522  $226,659
       Wood Products
        Lumber           82,185    88,613      66,982   149,167   187,847
        Chips, logs
         and other       16,414     9,129      18,875    35,289    22,066
                     ----------- --------- ----------- --------- ---------
         Total Wood
          Products       98,599    97,742      85,857   184,456   209,913
                     ----------- --------- ----------- --------- ---------
          Total
           revenues     236,517   213,561     200,461   436,978   436,572
                     ----------- --------- ----------- --------- ---------
    Costs and
     expenses:
       Pulp cost of
        sales           151,574   115,197     113,279   264,853   221,345
       Wood Products
        cost of
        sales           105,063    99,578      92,379   197,442   209,463
       Selling,
        general and
        adminis-
       trative           10,163     9,260       9,473    19,636    19,026
                     ----------- --------- ----------- --------- ---------
    Operating loss      (30,283)  (10,474)    (14,670)  (44,953)  (13,262)
    Interest expense    (10,946)   (7,022)    (10,112)  (21,058)  (13,315)
    Interest income         147       104         467       614       157
    Foreign exchange
     gain (loss),
     net                  2,186      (222)        154     2,340       259
    Loss on
     extinguishment
     of debt                  -    (4,910)          -         -    (4,910)
                     ----------- --------- ----------- --------- ---------
    Loss before
     income taxes       (38,896)  (22,524)    (24,161)  (63,057)  (31,071)
    Income tax
     provision
     (benefit)            4,020      (699)     (5,534)   (1,514)   (1,226)
                     ----------- --------- ----------- --------- ---------
    Net loss         $  (42,916) $(21,825) $  (18,627) $(61,543) $(29,845)
                     ----------- --------- ----------- --------- ---------


    Net loss per
     common share -
     basic and
     diluted         $    (2.62) $  (1.35) $    (1.15) $  (3.77) $  (1.84)
                     ----------- --------- ----------- --------- ---------


    Average shares
     outstanding -
     basic and
     diluted             16,364    16,227      16,268    16,317    16,231
                     ----------- --------- ----------- --------- ---------



                         CONSOLIDATED BALANCE SHEETS

                           June 30,         March 31,  December
                                                          31,
                        2007      2006(A)     2007       2006
                     --------------------- ----------- ---------
    Assets:
       Current
        assets       $  259,378  $237,198  $  298,848  $258,336
       Properties,
        net             391,435   394,880     367,396   371,806
       Deferred
        charge            6,092     7,199       6,596     6,847
       Other assets      25,051    30,463      24,145    25,030
                     ----------- --------- ----------- ---------
        Total assets $  681,956  $669,740  $  696,985  $662,019
                     ----------- --------- ----------- ---------
    Liabilities and
     stockholders'
     equity:
       Current
        portion of
        long-term
        debt         $  220,997  $    423  $      476  $    474
       Other current
        liabilities     114,676   108,333     125,894   102,030
       Long-term
        debt,
        excluding
        current
        portion         133,892   383,589     343,570   320,476
       Deferred
        income tax
        liability,
        net              22,789     9,962      20,628    15,689
       Other long-
        term
        liabilities     108,732    75,318     103,782   102,925
                     ----------- --------- ----------- ---------
        Total
         liabilities    601,086   577,625     594,350   541,594
       Stockholders'
        equity           80,870    92,115     102,635   120,425
                     ----------- --------- ----------- ---------
        Total
         liabilities
         and stock-
        holders'
         equity      $  681,956  $669,740  $  696,985  $662,019
                     ----------- --------- ----------- ---------

    Long-term debt
     to total
     capitalization          81%       81%         77%       73%
                     ----------- --------- ----------- ---------



                             SEGMENT INFORMATION

                                              First        Six months
                        Second Quarter       Quarter     ended June 30,
                     ---------------------             -------------------
                        2007      2006(A)     2007       2007     2006(A)
                     ----------- --------- ----------- --------- ---------
    EBITDA:(B)
       Pulp          $   (9,527) $  4,611  $    4,956  $ (4,571) $ 13,569
       Wood Products     (4,387)       44      (4,537)   (8,924)    3,686
       General
        Corporate        (3,789)   (4,891)     (4,850)   (8,639)   (9,426)
                     ----------- --------- ----------- --------- ---------
                        (17,703)     (236)     (4,431)  (22,134)    7,829
                     ----------- --------- ----------- --------- ---------
    Depreciation and
     amortization:
       Pulp          $    6,835  $  6,942  $    6,677  $ 13,512  $ 14,109
       Wood Products      3,397     3,297       3,214     6,611     6,282
       General
        Corporate           162       221         194       356       441
                     ----------- --------- ----------- --------- ---------
                         10,394    10,460      10,085    20,479    20,832
                     ----------- --------- ----------- --------- ---------
    Operating loss:
       Pulp          $  (16,362) $ (2,331) $   (1,721) $(18,083) $   (540)
       Wood Products     (7,784)   (3,253)     (7,751)  (15,535)   (2,596)
       General
        Corporate        (6,137)   (4,890)     (5,198)  (11,335)  (10,126)
                     ----------- --------- ----------- --------- ---------
       Operating
        loss         $  (30,283) $(10,474) $  (14,670) $(44,953) $(13,262)
                     ----------- --------- ----------- --------- ---------

    Additional
     Information:
       Lumber import
        duties       $        -  $  4,900  $        -  $      -  $ 10,700
       Lumber export
        taxes             5,100         -       5,000    10,100         -
       Capital
        expenditures      6,239     8,419       5,197    11,436    14,958

    Notes:
    (A)Recast from amounts previously reported due to the Company's
        adoption of an accounting pronouncement issued in September 2006
        for planned major maintenance activities.


    (B)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 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 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 loss to EBITDA for the periods
        indicated:

                                              First        Six months
                        Second Quarter       Quarter     ended June 30,
                     ---------------------             -------------------
                        2007      2006(1)     2007       2007     2006(1)
                     ----------- --------- ----------- --------- ---------
                                          (thousands)
       Net loss      $  (42,916) $(21,825) $  (18,627) $(61,543) $(29,845)
       Interest
        expense, net     10,799     6,918       9,645    20,444    13,158
       Loss on
        extinguish-
       ment of debt           -     4,910           -         -     4,910
       Income tax
        provision
        (benefit)         4,020      (699)     (5,534)   (1,514)   (1,226)
       Depreciation
        and
        amortization     10,394    10,460      10,085    20,479    20,832
                     ----------- --------- ----------- --------- ---------
       EBITDA        $  (17,703) $   (236) $   (4,431) $(22,134) $  7,829
                     ----------- --------- ----------- --------- ---------


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

                                              First        Six months
                        Second Quarter       Quarter     ended June 30,
                     ---------------------             -------------------
                        2007      2006(1)     2007       2007     2006(1)
                     ----------- --------- ----------- --------- ---------
       Pulp                               (thousands)
        Operating
         loss        $  (16,362) $ (2,331) $   (1,721) $(18,083) $   (540)
        Depreciation
         and amorti-
        zation            6,835     6,942       6,677    13,512    14,109
                     ----------- --------- ----------- --------- ---------
        EBITDA       $   (9,527) $  4,611  $    4,956  $ (4,571) $ 13,569
                     ----------- --------- ----------- --------- ---------

       Wood Products
        Operating
         loss        $   (7,784) $ (3,253) $   (7,751) $(15,535) $ (2,596)
        Depre-
        ciation and
         amorti-
        zation            3,397     3,297       3,214     6,611     6,282
                     ----------- --------- ----------- --------- ---------
        EBITDA       $   (4,387) $     44  $   (4,537) $ (8,924) $  3,686
                     ----------- --------- ----------- --------- ---------

       Note 1 - Recast from amounts previously reported due to the
        Company's adoption of an accounting pronouncement issued in
        September 2006 for planned major maintenance activities.

       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 $4.0 million for the four-quarter period ended June
        30, 2007. The following table reconciles net income to credit
        agreement EBITDA for the four quarters ended June 30, 2007:

                                              Four
                                            quarters
                                              ended
                                            June 30,
                                               2007
                                           -----------
                                           (thousands)

       Net income                          $   13,621
       Interest expense, net                   29,200
       Income tax provision (benefit)          11,010
        Add back: quarterly income tax
         benefits recognized                    6,360
       Depreciation and amortization           41,807
       Lumber duty refunds for prior years   (101,209)
       Refund of lumber import duties paid
        in first six months of 2006            (8,824)
       Other non-cash income and expenses:
        Net periodic benefit costs for
         pension and postretirement plans,
         net of benefits paid and cash
         contributions                          4,680
        Environmental accruals                  4,536
        LIFO accruals, net                      2,128
        Inventory write downs, net              1,429
        Net unrealized foreign exchange
         gains recognized in earnings          (1,736)
        Stock compensation and other              983
                                           -----------
       Credit agreement EBITDA             $    3,985
                                           -----------
    

    
          EFFECT OF NEW ACCOUNTING PRONOUNCEMENT & RECLASSIFICATIONS

    In January 2007, the Company changed its method of accounting for
     planned major maintenance from the previously accepted method of
     allocating the cost over interim periods in the year in which they
     were incurred to the expense as incurred method. As required by GAAP,
     the Company has retrospectively applied the expense as incurred
     method to its 2006 income statement and segment operating results for
     interim periods. Additionally beginning in January, the Company began
     presenting foreign currency transaction and remeasurement gains
     (losses) in non-operating income and expense. In prior periods, the
     Company had presented these items in cost of sales. The Company has
     reclassified the prior periods to be consistent with this
     presentation. The effect of these changes is summarized as follows:


                       Operating Income (Loss)      Net Income (Loss)
                      ------------------------- --------------------------
                          As         After          As         After
                      Previously  Retrospective Previously  Retrospective
                       Reported   Application    Reported   Application
                      ---------- -------------- ---------- ---------------
                                  (thousands except per share)
    2006
    -----------------
     First Quarter    $  (7,190) $      (2,788) $ (12,903) $      (8,020)
     Second Quarter      (3,379)       (10,474)   (14,508)       (21,825)
     Third Quarter        1,026         (1,742)   (10,161)       (12,929)
     Fourth Quarter      92,984         98,518     82,891         88,093




                                                   Earnings (Loss) Per
                                                   Basic & Diluted Share
                                                 -------------------------
                                                     As         After
                                                 Previously  Retrospective
                                                  Reported   Application
                                                 ---------- --------------
                                                 (thousands except per
                                                          share)
    2006
    -------------------------------------------
     First Quarter                               $   (0.79) $       (0.49)
     Second Quarter                                  (0.89)         (1.35)
     Third Quarter                                   (0.62)         (0.79)
     Fourth Quarter                                   5.09           5.41



                      Pulp - Operating           Wood Products -
                        Income (Loss)         Operating Income (Loss)
                  -------------------------- -------------------------
                      As          After          As         After
                  Previously   Retrospective Previously  Retrospective
                   Reported    Application    Reported   Application
                  ----------- -------------- ---------- --------------
                                      (thousands)
    2006
    -------------
     First
      Quarter     $   (2,766) $       1,791  $     812  $         657
     Second
      Quarter          3,967         (2,331)    (2,456)        (3,253)
     Third
      Quarter         13,105          9,515     (7,620)        (6,798)
     Fourth
      Quarter          3,879          9,247     (1,219)        (1,053)
    




For further information:

For further information: Hubbell Communications for Pope & Talbot, Inc.
Mark Rossolo, 503-274-4054

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POPE & TALBOT, INC.

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