Pope & Talbot, Inc. (NYSE:POP) today reported a net loss of
$8.8 million, or $0.54 per share for the three months ended
September 30, 2005, compared with net income of $7.8 million, or
$0.48 per diluted share, reported for the same period in 2004 and a
net loss of $7.0 million, or $0.43 per share, for the second
quarter of 2005. Revenues were $212.7 million for the third quarter
compared with $199.1 million for the third quarter of 2004, and
earnings before interest, taxes, depreciation and amortization
(EBITDA) was a negative $1.8 million compared with EBITDA of $26.4
million one year ago. On November 3, 2005, the Company's Board of
Directors suspended the quarterly dividend to conserve the
Company's net worth and cash balances. The year-over-year decline
in earnings 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 September 30, 2005, the average Canadian to U.S.
dollar exchange rate was .83 versus .80 for the quarter ended June
30, 2005, and was significantly higher than the average .76 rate
for the third quarter of 2004. The Company estimates that the
change in the Canadian to U.S. dollar exchange rate increased third
quarter 2005 reported cost of goods sold by approximately $13.5
million as compared with the third quarter of 2004. Lumber import
duty deposits on Canadian softwood lumber continue to negatively
affect lumber costs. Import duties totaled $10.4 million in the
third quarter of 2005, compared with $13.0 million in the same
quarter of 2004 and $10.1 million in the second 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. "We are pleased with the
performance and production improvements of both our pulp and lumber
mills; however, the year-to-year decline in prices for the
Company's lumber and pulp products, foreign exchange driven cost
increases, and continuation of the lumber trade dispute have all
lead to the continued erosion of Pope & Talbot's financial
performance," stated Mike Flannery, Chairman and Chief Executive
Officer. Pulp Pope & Talbot's third quarter 2005 pulp sales
volume increased 11 percent, with pulp sales revenues largely
unchanged, compared with the third quarter 2004. The average price
realized per metric ton sold during the quarter decreased nine
percent from the third quarter of 2004. The third quarter 2005
pricing represented a five percent decrease from the second quarter
of 2005. In the third quarter of 2005, pulp cost of goods sold
increased eight percent compared with the third quarter of 2004.
The increase in cost of goods sold was primarily the result of the
11 percent increase in sales volume and foreign exchange driven
cost increases of approximately $6.7 million, or seven percent,
compared with the third quarter of 2004. Wood products Pope &
Talbot's third quarter 2005 lumber sales volume increased 41
percent, primarily due to the Fort St. James acquisition, with wood
products sales revenues increasing 14 percent, compared with the
third quarter of 2004. The average price realized per thousand
board feet sold during the quarter decreased 19 percent in the
third quarter of 2004. Third quarter 2005 pricing also declined
five percent relative to second quarter 2005 average price
realization. In the third quarter of 2005, wood products cost of
goods sold increased 40 percent compared with the third quarter of
2004. The 41 percent increase in lumber sales volume was the
principle cause of the increase in cost of goods sold, along with
foreign exchange driven cost increases of approximately $6.8
million. Selected Statistics -0- *T Second Nine months ended Third
Quarter Quarter September 30, ---------------------
------------------- --------- ------------------ 2005 2004 2005
2005 2004 --------------------- --------- --------- ---------
--------- -------- Sales Volumes (thousands): Pulp (metric tons)
204,800 185,200 187,300 601,200 587,800 Lumber (thousand board
feet) 246,000 174,400 216,300 647,300 485,500 Production Volumes
(thousands): Pulp (metric tons) 209,900 203,600 189,600 602,500
598,700 Lumber (thousand board feet) 245,200 169,000 227,100
657,500 503,900 Average Price Realizations: (A) Pulp (metric tons)
$ 512 $ 562 $ 539 $ 534 $ 549 Lumber (thousand board feet) $ 390 $
483 $ 411 $ 411 $ 451 Notes: (A) Gross invoice price less trade
discounts. *T In the third quarter of 2005, Pope & Talbot's
capital expenditures were $10.9 million and depreciation was $9.7
million. At the end of the quarter, total debt was $292.5 million,
an increase of $18.0 million from June 30, 2005, and $57.3 million
from year-end 2004. As of September 30, 2005, the Company had
borrowing capacity under its revolving lines of credit and their
restrictive covenant requirements of approximately $84.2 million.
Stockholders' equity was $147.4 million, a decrease of $16.2
million from year-end 2004. On September 30, 2005, the ratio of
total debt to total capitalization was 66 percent, up from 59
percent at year-end 2004. As of September 30, 2005, the Company
required and obtained waivers from the other parties to its Halsey
pulp mill leases to avoid a violation of one of the financial
covenants in those leases. The Company does not expect to be in
compliance with the financial covenants of those leases as of
December 31, 2005, and therefore will require a further waiver or
amendment or other negotiated resolution. Pope & Talbot, Inc.
will be holding a conference call on Friday, November 4, 2005, at
10:00 a.m. PST (1:00 p.m. EST.) The call-in number is 416-695-5259.
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 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. -0- *T POPE
& TALBOT, INC. AND SUBSIDIARIES (Thousands except per share,
unaudited) CONSOLIDATED STATEMENTS OF OPERATIONS Third Quarter
Second September 30, Quarter ------------------- ---------
------------------- 2005 2004 2005 2005 2004 -------- --------
--------- -------- -------- Revenues: Pulp $104,833 $104,583
$100,901 $320,936 $323,322 Wood Products Lumber 95,946 84,192
88,860 265,803 218,931 Chips, logs and other 11,957 10,369 12,332
35,300 27,770 -------- -------- -------- -------- -------- Total
Wood Products 107,903 94,561 101,192 301,103 246,701 --------
-------- -------- -------- -------- Total revenues 212,736 199,144
202,093 622,039 570,023 -------- -------- -------- --------
-------- Costs and expenses: Pulp cost of sales 106,144 97,877
101,743 319,138 298,964 Wood Products cost of sales 108,018 76,889
97,006 288,403 210,059 Selling, general and administrative 10,123
7,803 8,567 27,312 25,276 -------- -------- -------- --------
-------- Operating income (loss) (11,549) 16,575 (5,223) (12,814)
35,724 Interest expense, net 5,458 4,985 5,227 15,820 15,385
-------- -------- -------- -------- -------- Income (loss) before
income taxes (17,007) 11,590 (10,450) (28,634) 20,339 Income tax
provision (benefit) (8,185) 3,815 (3,462) (12,179) 6,633 --------
-------- -------- -------- -------- Net income (loss) $ (8,822) $
7,775 $ (6,988) $(16,455) $ 13,706 ======== ======== ========
======== ======== Net income (loss) per common share: Basic $
(0.54) $ 0.49 $ (0.43) $ (1.02) $ 0.87 ======== ======== ========
======== ======== Diluted $ (0.54) $ 0.48 $ (0.43) $ (1.02) $ 0.86
======== ======== ======== ======== ======== Average shares
outstanding: Basic 16,226 16,021 16,222 16,202 15,805 Diluted
16,226 16,263 16,222 16,202 16,026 CONSOLIDATED BALANCE SHEETS
September 30, June 30, December 31, ------------------- --------
------------ 2005 2004 2005 2004 -------- -------- --------
-------- Assets: Current assets $227,401 $214,290 $211,893 $211,241
Properties, net 384,027 327,315 366,394 340,038 Deferred income
taxes, net 3,217 8,789 1,084 - Other assets 20,361 19,521 19,197
19,348 -------- -------- -------- -------- Total assets $635,006
$569,915 $598,568 $570,627 ======== ======== ======== ========
Liabilities and stockholders' equity: Current portion of long-term
debt $ 63,974 $ 5,601 $ 6,673 $ 5,605 Other current liabilities
127,096 115,897 109,789 107,285 Long-term debt, excluding current
portion 228,539 220,402 267,847 229,634 Deferred income tax
liability, net - - - 2,522 Other long-term liabilities 68,028
60,106 64,511 61,947 -------- -------- -------- -------- Total
liabilities 487,637 402,006 448,820 406,993 Stockholders' equity
147,369 167,909 149,748 163,634 -------- -------- -------- --------
Total liabilities and stockholder's equity $635,006 $569,915
$598,568 $570,627 ======== ======== ======== ======== Total debt to
total capitalization 66% 57% 65% 59% ======== ======== ========
======== SEGMENT INFORMATION Nine months ended Third Quarter Second
September 30, Quarter ------------------- ---------
------------------ 2005 2004 2005 2005 2004 -------- --------
-------- -------- -------- EBITDA: (A) Pulp $ 2,658 $ 11,902 $
2,851 $ 13,321 $ 36,909 Wood Products 1,259 18,160 4,881 15,271
38,123 General Corporate (5,723) (3,701) (3,876) (13,684) (10,685)
-------- -------- -------- -------- -------- (1,806) 26,361 3,856
14,908 64,347 -------- -------- -------- -------- --------
Depreciation and amortization: Pulp $ 6,573 $ 7,621 $ 6,354 $
19,504 $ 22,114 Wood Products 2,820 1,762 2,386 7,152 5,282 General
Corporate 350 403 339 1,066 1,227 -------- -------- --------
-------- -------- 9,743 9,786 9,079 27,722 28,623 -------- --------
-------- -------- -------- Operating income (loss): Pulp $ (3,915)
$ 4,281 $ (3,503) $ (6,183) $ 14,795 Wood Products (1,561) 16,398
2,495 8,119 32,841 General Corporate (6,073) (4,104) (4,215)
(14,750) (11,912) -------- -------- -------- -------- --------
Operating income (loss) $(11,549) $ 16,575 $ (5,223) $(12,814) $
35,724 ======== ======== ======== ======== ======== Additional
Information: Lumber import duties $ 10,400 $ 13,000 $ 10,100 $
29,000 $ 32,600 Capital expenditures 10,934 7,788 12,626 31,905
18,122 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. *T
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