Pope & Talbot, Inc.
NYSE : POP

Pope & Talbot, Inc.

July 28, 2005 08:00 ET

Pope & Talbot Announces Second Quarter 2005 Results

PORTLAND, Ore.--(CCNMatthews - Jul 28, 2005) -

Pope & Talbot, Inc. (NYSE:POP) today reported a net loss of $7.0 million, or $0.43 per share for the three months ended June 30, 2005, compared with net income of $9.2 million, or $0.58 per diluted share, reported for the same period in 2004 and a net loss of $0.6 million, or $0.04 per share, for the first quarter of 2005. Revenues were $202.1 million for the quarter compared with $193.6 million for the second quarter of 2004, and earnings before interest, taxes, depreciation and amortization (EBITDA) was $3.9 million compared with $28.2 million one year ago.

The year-over-year decline was driven primarily by a combination of market price decreases for the Company's pulp and lumber businesses, as well as increases in the Company's cost of goods sold. In particular, the Canadian to U.S. dollar exchange rate continues to cause significant year-over-year increases in the cost of goods sold. For the quarter ended June 30, 2005, the average Canadian to U.S. dollar exchange rate was .80 versus .82 for the quarter ended March 31, 2005, but was significantly higher than the average .74 rate for the second quarter of 2004. The Company estimates that the change in the Canadian to U.S. dollar exchange rate increased second quarter 2005 reported cost of goods sold by approximately $10.7 million as compared with the second quarter of 2004.

Lumber import duty deposits on Canadian softwood lumber continue to negatively affect lumber costs. Import duties totaled $10.1 million in the second quarter of 2005, compared with $10.7 million in the same quarter of 2004 and $8.5 million in the first quarter of 2005. The decrease in duties paid, compared with 2004, reflected the decrease in duty deposit rates from a combined rate of 27.22 percent in 2004 to 20.15 percent in 2005.

"While we are pleased with the increased lumber production, the year-to-year decline in prices for the Company's lumber and pulp products, combined with foreign exchange driven cost increases, continued to erode the earnings of Pope & Talbot, Inc.," stated Mike Flannery, Chairman and Chief Executive Officer.

Pulp

Pope & Talbot's second quarter pulp sales volume decreased two percent to 187,300 metric tons, with pulp sales revenues decreasing eight percent to $100.9 million, as compared with the second quarter 2004. The average price realized per metric ton sold during the quarter decreased six percent to $539 from $576 in the second quarter of 2004. The second quarter 2005 pricing represented a two percent decrease from the first quarter 2005 average price realization of $551 per metric ton.

In the second quarter of 2005, pulp cost of goods sold increased $6.6 million, or seven percent compared with the second quarter of 2004, despite the two percent decrease in sales volume. The increase in cost of goods sold was primarily the result of foreign exchange driven cost increases of approximately $6.4 million and a $2.5 million inventory write-down at June 30, 2005 due to lower prices anticipated in the third quarter.

Wood products

Pope & Talbot's second quarter 2005 lumber sales volume increased 33 percent to 217 million board feet primarily as a result of the Fort St. James acquisition, with wood products sales revenues increasing 21 percent to $101.2 million, as compared with the second quarter of 2004. The average price realized per thousand board feet sold during the quarter decreased eleven percent to $409 from $460 in the second quarter of 2004. Second quarter 2005 pricing also declined seven percent relative to first quarter 2005 average price realization of $438 per thousand board feet.

In the second quarter of 2005, wood products cost of goods sold increased $27.7 million, or 40 percent, compared with the second quarter of 2004. Contributing to the cost increases were the 33 percent increase in sales volume and foreign currency exchange driven cost increases of approximately $4.3 million.

Selected Statistics



Second Quarter First Six months ended
Quarter June 30,
---------------- ------- -----------------
2005 2004 2005 2005 2004
------- ------- ------- ------- --------
Sales Volumes (thousands):
Pulp (metric tons) 187,300 190,400 209,100 396,400 402,600
Lumber (thousand board
feet) 217,100 163,200 185,000 402,100 311,100

Production Volumes
(thousands):
Pulp (metric tons) 189,600 192,700 203,000 392,600 395,100
Lumber (thousand board
feet) 227,100 173,700 185,200 412,300 334,900

Average Price Realizations: (A)
Pulp (metric tons) $539 $576 $551 $545 $543
Lumber (thousand board
feet) $409 $460 $438 $422 $433

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



In the second quarter of 2005, Pope & Talbot's capital expenditures (exclusive of the $37.5 million Fort St. James sawmill acquisition) were $12.6 million and depreciation was $9.1 million. At the end of the quarter, total debt was $274.5 million, an increase of $21.2 million from March 31, 2005, and $39.3 million from year-end 2004. Shareholders' equity was $149.7 million, a decrease of $13.9 million from year-end 2004. On June 30, 2005, the ratio of total debt to total capitalization was 65 percent, up from 59 percent at year-end 2004.

In June, the Company amended its three-year U.S. revolving credit agreement to increase the maximum revolving borrowing capacity to $35 million, a $10 million increase. In July, the Company renewed its Canadian revolving bank line credit agreement through July 29, 2006 and increased the maximum revolving borrowing capacity to $180 million Canadian (approximately $146 million U.S.), an increase of $30 million Canadian or approximately $24 million U.S.

Pope & Talbot, Inc. will be holding a conference call on Thursday, July 28, 2005, at 10:00 a.m. PDT (1:00 p.m. EDT.) The call-in number is 416-695-9757. 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 deterioration 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 considers net income or loss before interest, income taxes, depreciation and amortization ("EBITDA") to be a relevant and meaningful indicator of earnings performance commonly used by investors, financial analysts and others, in addition to and not in lieu of generally accepted accounting principles (GAAP) results, to evaluate companies in its industry and, as such, has included this non-GAAP financial measure in its public statements.

Pope & Talbot is dedicated to the pulp and wood products businesses. The Company is based in Portland, Oregon and trades on the New York and Pacific stock exchanges 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

Second Quarter First Six months ended
Quarter June 30,
------------------- --------- -------------------
2005 2004 2005 2005 2004
-------- -------- -------- -------- --------

Revenues:
Pulp $100,901 $109,598 $115,202 $216,103 $218,739
Wood Products
Lumber 88,860 74,996 80,997 169,857 134,739
Chips, logs and
other 12,332 8,963 11,011 23,343 17,401
-------- -------- -------- -------- --------
Total Wood
Products 101,192 83,959 92,008 193,200 152,140
-------- -------- -------- -------- --------
Total
revenues 202,093 193,557 207,210 409,303 370,879
-------- -------- -------- -------- --------
Costs and expenses:
Pulp cost of sales 101,743 95,173 111,251 212,994 201,087
Wood Products cost
of sales 97,006 69,258 83,379 180,385 133,170
Selling, general
and administrative 8,567 9,894 8,622 17,189 17,473
-------- -------- -------- -------- --------
Operating income
(loss) (5,223) 19,232 3,958 (1,265) 19,149
Interest expense,
net 5,227 5,106 5,135 10,362 10,400
-------- -------- -------- -------- --------

Income (loss) before
income taxes (10,450) 14,126 (1,177) (11,627) 8,749
Income tax provision
(benefit) (3,462) 4,915 (532) (3,994) 2,818
-------- -------- -------- -------- --------
Net income (loss) $ (6,988) $ 9,211 $ (645) $ (7,633) $ 5,931
======== ======== ======== ======== ========

Net income (loss)
per common share:
Basic $ (0.43) $ 0.59 $ (0.04) $ (0.47) $ 0.38
======== ======== ======== ======== ========
Diluted $ (0.43) $ 0.58 $ (0.04) $ (0.47) $ 0.37
======== ======== ======== ======== ========

Average shares
outstanding:
Basic 16,222 15,721 16,157 16,190 15,696
Diluted 16,222 15,943 16,157 16,190 15,891


CONSOLIDATED BALANCE SHEETS

June 30, March 31, December
31,
------------------- --------- ---------
2005 2004 2005 2004
-------- -------- -------- --------
Assets:
Current assets $211,893 $208,222 $217,352 $211,241
Properties, net 366,394 315,096 337,123 340,038
Deferred income
tax assets, net - 9,435 - -
Other assets 20,281 17,744 19,172 19,348
-------- -------- -------- --------
Total assets $598,568 $550,497 $573,647 $570,627
======== ======== ======== ========
Liabilities and
stockholders'
equity:
Current portion of
long-term debt $ 6,673 $ 5,336 $ 6,673 $ 5,605
Other current
liabilities 109,789 102,480 96,520 107,285
Long-term debt,
excluding current
portion 267,847 240,084 246,600 229,634
Deferred income
tax liability,
net - - 974 2,522
Other long-term
liabilities 64,511 57,222 62,801 61,947
-------- -------- -------- --------
Total liabilities 448,820 405,122 413,568 406,993
Stockholders'
equity 149,748 145,375 160,079 163,634
-------- -------- -------- --------
Total liabilities
and
stockholder's
equity $598,568 $550,497 $573,647 $570,627
======== ======== ======== ========

Total debt to total
capitalization 65% 63% 61% 59%
======== ======== ======== ========


SEGMENT INFORMATION

Second Quarter First Six months ended
Quarter June 30,
------------------- --------- -------------------
2005 2004 2005 2005 2004
-------- -------- -------- -------- --------
EBITDA: (A)
Pulp $ 2,851 $ 16,752 $ 7,812 $ 10,663 $ 25,007
Wood Products 4,881 15,001 9,131 14,012 19,963
General Corporate (3,876) (3,559) (4,085) (7,961) (6,984)
-------- -------- -------- -------- --------
3,856 28,194 12,858 16,714 37,986
-------- -------- -------- -------- --------
Depreciation and
amortization:
Pulp $ 6,354 $ 6,841 $ 6,577 $ 12,931 $ 14,493
Wood Products 2,386 1,722 1,946 4,332 3,520
General Corporate 339 399 377 716 824
-------- -------- -------- -------- --------
9,079 8,962 8,900 17,979 18,837
-------- -------- -------- -------- --------
Operating income
(loss):
Pulp $ (3,503) $ 9,911 $ 1,235 $ (2,268) $ 10,514
Wood Products 2,495 13,279 7,185 9,680 16,443
General Corporate (4,215) (3,958) (4,462) (8,677) (7,808)
-------- -------- -------- -------- --------

Operating income
(loss) $ (5,223) $ 19,232 $ 3,958 $ (1,265) $ 19,149
======== ======== ======== ======== ========

Additional
Information:
Lumber import
duties $ 10,100 $ 10,700 $ 8,500 $ 18,600 $ 19,600
Capital
expenditures 12,626 7,277 8,345 20,971 10,334

Notes:
(A) EBITDA equals net income (loss) before income taxes and net
interest expense, plus depreciation and amortization, and is
reconcilable to the Company's net income (loss) using the
depreciation and amortization, net interest expense and income tax
provision (benefit) numbers in the above table. The Company uses
EBITDA to evaluate the operating performance of its business on a
consolidated basis and for each of its operating segments. The
Company considers EBITDA to be a relevant and meaningful indicator
of earnings performance commonly used by investors, financial
analysts and others, in addition to and not in lieu of generally
accepted accounting principles (GAAP) results, to evaluate
companies in its industry. EBITDA is not a measure of liquidity
under GAAP and should not be considered as an alternative to cash
flow from operating activities.



Contact Information

  • Pope & Talbot, Inc.
    Richard K. Atkinson, 503-228-9161