UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

AMENDMENT NO. 1

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

Commission File Number 1-7852

POPE & TALBOT, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-0777139
(State of incorporation)	(IRS Employer Identification No.)

1500 SW 1st Avenue, Suite 200

Portland, Oregon 97201

(Address of principal executive offices)

503-228-9161

Registrant’s telephone number (including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each Exchange on which registered
Common Stock, par value $1.00	New York Stock Exchange, Pacific Stock Exchange
Rights to purchase Series A Junior Participating Cumulative Preferred Stock	New York Stock Exchange, Pacific Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes  þ  No  ¨

The aggregate market value of voting stock held by nonaffiliates of the registrant was $279,219,086 as of June 30, 2002 ($18.73 per share).

15,637,782

(Number of shares of common stock outstanding as of February 18, 2003)

Part III incorporates specified information by reference from the proxy statement for the annual meeting of shareholders to be held on May 2, 2003.

The sole purpose of this Form 10-K/A Amendment No. 1 is to correct an error in one number included in the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the SEC on March 3, 2003. This error resulted from an unauthorized change made by the registrant’s EDGAR filing agent in the final draft of the 10-K prior to filing. The total stockholders’ equity at December 31, 2001 in the consolidated balance sheets on page 32 of the original Form 10-K is hereby corrected to read $172,113,000 instead of the incorrect figure of $172,413,000.

POPE & TALBOT, INC.

2002 FORM 10-K/A

TABLE OF CONTENTS

		PAGE
PART II
Item 8.	Financial Statements and Supplementary Data	1
PART IV
Item 15.	Exhibits, Financial Statements Schedules and Reports on Form 10-K	27
Signatures		31
Certifications		32

Item 8. Financial Statements and Supplementary Data

Pope & Talbot, Inc.

Consolidated Balance Sheets

	December 31
	2002			2001
	(thousands except per share)
Assets
Current assets:
Cash and cash equivalents	$	4,240		$	18,463
Short-term investments		101			110
Accounts receivable (less allowance of $3,043 in 2002 and 2001)		59,540			64,812
Inventories		93,319			98,256
Prepaid expenses		6,465			4,573
Deferred income taxes		4,053			10,727
Total current assets		167,718			196,941
Properties:
Plant and equipment		597,864			578,809
Accumulated depreciation		(300,927	)		(268,283	)
		296,937			310,526
Land and timber cutting rights		7,410			7,535
Total properties		304,347			318,061
Other assets:
Deferred income tax assets, net		13,081			4,828
Prepaid pension costs		9,351			9,239
Other		9,891			10,408
Total other assets		32,323			24,475
	$	504,388		$	539,477
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	26,824		$	17,786
Accounts payable		41,912			33,021
Accrued payroll and related taxes		17,173			14,021
Accrued lumber import duties		1,324			15,567
Other accrued liabilities		16,730			22,446
Total current liabilities		103,963			102,841
Long-term liabilities:
Long-term debt, net of current portion		205,922			220,029
Other long-term liabilities		50,651			44,494
Total long-term liabilities		256,573			264,523
Stockholders’ equity:
Preferred stock, $10 par value: 1,500,000 shares authorized; none issued		—			—
Common stock, $1 par value: 20,000,000 shares authorized; 17,207,106 and 17,207,095 shares issued		17,207			17,207
Additional paid-in capital		68,014			68,353
Retained earnings		108,901			139,228
Accumulated other comprehensive income (loss)		(25,718	)		(27,533	)
Common stock held in treasury, at cost, 1,569,324 and 1,590,406		(24,552	)		(25,142	)
Total stockholders’ equity		143,852			172,113
	$	504,388		$	539,477

The accompanying notes to consolidated financial statements are an integral part of these statements.

1

Pope & Talbot, Inc.

Consolidated Statements of Operations

	Years Ended December 31
	2002			2001			2000
	(thousands except per share)
Revenues	$	546,333		$	499,227		$	580,052
Costs and expenses:
Cost of sales		535,248			503,263			487,247
Selling, general and administrative		25,590			26,345			28,677
Operating income (loss)		(14,505	)		(30,381	)		64,128
Interest expense, net		17,586			12,563			8,444
Income (loss) before income taxes		(32,091	)		(42,944	)		55,684
Income tax provision (benefit)		(11,141	)		(18,039	)		23,118
Net income (loss)	$	(20,950	)	$	(24,905	)	$	32,566
Basic net income (loss) per share	$	(1.34	)	$	(1.68	)	$	2.28
Diluted net income (loss) per share	$	(1.34	)	$	(1.68	)	$	2.24

The accompanying notes to consolidated financial statements are an integral part of these statements.

2

Pope & Talbot, Inc.

Consolidated Statements of Cash Flows

	Years ended December 31
	2002			2001			2000
	(thousands)
Cash flow from operating activities:
Net income (loss)	$	(20,950	)	$	(24,905	)	$	32,566
Noncash charges (credits) to income:
Depreciation and amortization		35,331			30,840			31,912
Deferred tax provision		(2,950	)		(13,322	)		13,471
Noncash lumber import duties		(15,567	)		15,567			—
Decrease (increase) in working capital:
Accounts receivable		5,272			11,454			12,014
Inventories		4,937			13,832			(14,271	)
Prepaid expenses and other assets		(55	)		4,831			(4,848	)
Accounts payable and accrued liabilities		7,651			(6,506	)		(14,624	)
Current and deferred income taxes		1,137			(1,775	)		1,216
Other liabilities		3,260			(5,758	)		3,089
Net cash provided by operating activities		18,066			24,258			60,525
Cash flow from investing activities:
Purchases of short-term investments		—			(2,745	)		(27,369	)
Proceeds from maturities of short-term investments		9			13,239			27,414
Capital expenditures		(17,333	)		(18,852	)		(50,591	)
Acquisition of subsidiary, net of cash acquired		—			(82,592	)		—
Proceeds from sale of properties and equipment		129			1,591			2,377
Net cash used for investing activities		(17,195	)		(89,359	)		(48,169	)
Cash flow from financing activities:
Short-term borrowings, net		—			—			(11,059	)
Proceeds from long-term debt		58,068			95,300			—
Repayments of long-term debt		(64,036	)		(4,488	)		(4,059	)
Shares repurchased		—			—			(12,999	)
Exercise of stock options		251			205			1,915
Cash dividends		(9,377	)		(8,844	)		(7,482	)
Net cash provided by (used for) financing activities		(15,094	)		82,173			(33,684	)
Increase (decrease) in cash and cash equivalents		(14,223	)		17,072			(21,328	)
Cash and cash equivalents at beginning of year		18,463			1,391			22,719
Cash and cash equivalents at end of year	$	4,240		$	18,463		$	1,391

The accompanying notes to consolidated financial statements are an integral part of these statements.

3

Pope & Talbot, Inc.

Consolidated Statements of Stockholders’ Equity

(thousands)

	Common stock			Treasury Stock					Additional paid-in capital			Retained earnings			Accumulated other comprehensive income (loss)
	Shares	Amount		Shares		Amount												Total
Balance, December 31, 1999	15,451	$	15,451	(920	)	$	(14,690	)	$	48,596		$	147,893		$	(11,149	)	$	186,101
Cash dividends ($.52 per share)	—		—	—			—			—			(7,482	)		—			(7,482	)
Issuance of shares in acquisition	6		6	—			—			(6	)		—			—			—
Issuance of shares under stock plans	—		—	145			2,365			(298	)		—			—			2,067
Repurchased shares	—		—	(825	)		(12,999	)		—			—			—			(12,999	)
Comprehensive income (loss):
Net income	—		—	—			—			—			32,566			—			32,566
Foreign currency translation	—		—	—			—			—			—			(4,647	)		(4,647	)
Total comprehensive income	—		—	—			—			—			—			—			27,919
Balance, December 31, 2000	15,457		15,457	(1,600	)		(25,324	)		48,292			172,977			(15,796	)		195,606
Cash dividends ($.60 per share)	—		—	—			—			—			(8,844	)		—			(8,844	)
Issuance of shares in acquisition	1,750		1,750	—			—			20,038			—			—			21,788
Issuance of shares under stock plans	—		—	10			182			23			—			—			205
Comprehensive loss:
Net loss	—		—	—			—			—			(24,905	)		—			(24,905	)
Foreign currency translation	—		—	—			—			—			—			(9,909	)		(9,909	)
Unrealized loss on cash flow hedging derivatives (net of tax benefit of $973)	—		—	—			—			—			—			(1,549	)		(1,549	)
Minimum pension liability adjustment (net of tax benefit of $159)	—		—	—			—			—			—			(279	)		(279	)
Total comprehensive loss	—		—	—			—			—			—			—			(36,642	)
Balance, December 31, 2001	17,207		17,207	(1,590	)		(25,142	)		68,353			139,228			(27,533	)		172,113
Cash dividends ($.60 per share)	—		—	—			—			—			(9,377	)		—			(9,377	)
Issuance of shares under stock plans	—		—	21			590			(339	)		—			—			251
Comprehensive loss:
Net loss	—		—	—			—			—			(20,950	)		—			(20,950	)
Foreign currency translation	—		—	—			—			—			—			1,216			1,216
Cash flow hedge reclassification of losses (net of $973 tax expense)	—		—	—			—			—			—			1,549			1,549
Minimum pension liability adjustment (net of tax benefit of $518)	—		—	—			—			—			—			(950	)		(950	)
Total comprehensive loss	—		—	—			—			—			—			—			(19,135	)
Balance, December 31, 2002	17,207	$	17,207	(1,569	)	$	(24,552	)	$	68,014		$	108,901		$	(25,718	)	$	143,852

The accompanying notes to consolidated financial statements are an integral part of these statements.

4

Pope & Talbot, Inc.

Notes to Consolidated Financial Statements

1. Accounting Policies

Business Description

Pope & Talbot, Inc. (the “Company”) is incorporated in the state of Delaware. The Company classifies its business into two operating segments: pulp and wood products. Pulp manufactures a broad range of pulp utilizing both wood chips and sawdust as fiber sources. Pulp is sold primarily to end users in the U.S., Europe, Canada and Asia. Wood products manufactures standardized and specialty lumber and sells residual wood chips. Lumber products are sold mainly in the U.S. and Canada to wholesalers, and wood chips are sold to manufacturers of pulp.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all its subsidiaries, after eliminating significant intercompany balances and transactions.

Foreign Currency Translation

The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using year-end exchange rates. Revenues and expenses are translated into U.S. dollars at average exchange rates for each period. Resulting translation adjustments are recorded as a component of accumulated other comprehensive income or loss within stockholders’ equity.

Inventories

Inventories are stated at the lower of cost or market. For lumber inventories at the sawmill in the United States and wood chip, sawdust and wood fiber in pulp inventories at the Company’s three pulp mills, cost has been determined using the last-in, first-out (LIFO) method. For remaining inventories, cost has been determined using the average cost method which approximates the first-in, first-out (FIFO) basis.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Expenditures for new facilities and those expenditures that substantially increase the useful lives of existing property, plant and equipment are capitalized as well as interest costs associated with major capital projects until ready for their intended use. Interest capitalized is determined by applying the Company’s effective interest rate to the accumulated capital costs during the construction period of a project and is amortized over the depreciable life of related assets. Capitalized interest was $0.1 million in 2002, $0.1 million in 2001 and $1.2 million in 2000. Upon sale or retirement of capitalized assets, the related cost and accumulated depreciation are removed from the accounts, with the resultant gain or loss included in the Consolidated Statements of Operations. Costs of maintenance and repairs are charged to expense as incurred.

Depreciation of assets other than pulp production assets is computed using the straight-line method over the useful lives of respective assets. Depreciation of the Company’s pulp production assets is computed using the units-of-production method. The estimated useful lives of the principal items of property, plant and equipment range from 3 to 40 years.

5

Impairment of Long-Lived Assets

The Company periodically evaluates long-lived assets for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of an asset to the undiscounted net future cash flows expected to be generated by an asset. If estimated future cash flows indicate the carrying value of an asset may not be recoverable, impairment exists, and the asset’s book value is written down to its estimated realizable value.

Timber Resources

In Canada, the Company primarily obtains its timber from the Provincial Government of British Columbia under timber harvesting licenses. The Canadian timber harvesting licenses allow, but do not require, the Company to remove timber from defined areas annually on a sustained yield basis. Future allowable harvests may be adjusted if the Company does not remove timber over a five-year period in accordance with the licenses. The Company also purchases logs in Canada in the open market. The Company does not incur liabilities for the cost of timber until it has been harvested.

In the U.S., the Company obtains its timber from various public and private sources under timber harvesting contracts. The Company does not incur a direct liability for, or ownership of, this timber until it has been harvested. Additionally, logs are purchased in the open market. The total volume committed under contract at December 31, 2002, and the 2003 planned contract harvest was 137.6 million board feet and 55.7 million board feet, respectively. At December 31, 2002, the Company’s best estimate of its total commitment at current contract rates under these contracts was approximately $18.9 million. The Company evaluates the loss contract reserves for its public and private timber harvesting contracts based on the estimated total cost applied to such harvests compared with replacement cost as measured by the total estimated harvesting costs of recent timber sales in the region.

Amounts capitalized as Canadian timber cutting rights (tree farm licenses and timber licenses) in conjunction with sawmill acquisitions accounted for as a purchase are amortized over 50 years on a straight-line basis due to the long-term, renewable nature of the contracts with the Province of British Columbia.

Reforestation

Under the Canadian timber harvesting licenses mentioned above, the Company is contractually responsible for all reforestation costs until the harvested land is “free to grow.” This is a forestry term meaning that no further reforestation activity is anticipated prior to the next harvest. A substantial portion of the reforestation responsibilities, such as site preparation, planting and fertilization, occurs during the first five years after harvest. The remaining costs, such as thinning and herbicide application, are incurred until the harvested land is free to grow, generally seven to twelve years after initial planting. The Company accrues for the total projected cost of reforestation as the timber is removed. Actual expenditures for reforestation are applied against this accrual when they are made.

Income Taxes

The Company accounts for income taxes using the liability method, and deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws.

Environmental Expenditures

Environmental expenditures related to current operations that substantially increase the economic value or extend the useful life of an asset are capitalized while all other costs are expensed as incurred. Expenditures that relate to an existing condition caused by past operations are expensed as incurred.

6

The Company recognizes a liability for environmental remediation costs when such costs are probable and reasonably estimable. Such liabilities are based on currently available information and reflect the participation of other potentially responsible parties depending on the parties’ financial condition and probable contribution. The accruals are recorded at undiscounted amounts. Recoveries of environmental remediation costs from insurance carriers are recorded when receipt is deemed highly probable and can be reasonably estimated.

Revenue and Related Cost Recognition

The Company recognizes revenue from product sales when the sales price is fixed or determinable, title transfers and risk of loss has passed to the customer and collectibility is reasonably assured. Sales are reported net of discounts and allowances. Amounts charged to customers for shipping and handling are recognized as revenue. Shipping and handling costs incurred by the Company are reported as cost of sales. The Company records lumber import duties as a component of cost of sales.

Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123.” This statement provides alternative methods of transition for a voluntary change from the intrinsic value method of accounting for stock-based employee compensation to the fair value method. In addition, SFAS No. 148 amended the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

The Company continues to use the intrinsic value method under APB Opinion No. 25 and related interpretations to account for stock-based employee compensation. Under this method, no compensation expense related to stock options has been recognized in the Statement of Operations for the periods presented. The table below provides the pro forma disclosures as if the Company had adopted the fair value based method for all stock-based compensation.

	2002			2001			2000
	(thousands except per share)
Net income (loss), as reported	$	(20,950	)	$	(24,905	)	$	32,566
Stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(501	)		(426	)		(368	)
Pro forma net income (loss)	$	(21,451	)	$	(25,331	)	$	32,198
Basic net income (loss) per share:
As reported	$	(1.34	)	$	(1.68	)	$	2.28
Pro forma		(1.37	)		(1.71	)		2.26
Diluted net income (loss) per share:
As reported	$	(1.34	)	$	(1.68	)	$	2.24
Pro forma		(1.37	)		(1.71	)		2.22

The Company has followed the practice of using treasury stock to fulfill its obligations under its stock option plans. When stock is issued pursuant to a stock option plan, the difference between the exercise price and the cost of treasury shares is recorded as an increase or decrease to additional paid-in capital.

7

Earnings Per Share

The computation of basic earnings per share is based on net income or loss and the weighted average number of common shares outstanding during each year. Diluted earnings per share reflect the assumed issuance of common stock equivalents related to dilutive stock options and restricted stock awards. The computation of diluted earnings per share does not assume conversion or exercise of securities that would have an antidilutive effect on earnings per share. For 2002 and 2001, the computation of diluted net loss per share was antidilutive; therefore, the amounts reported for basic and diluted were the same.

The following table summarizes the computation of diluted net income per share:

	2002			2001			2000
	(thousands, except per share)
Weighted average shares outstanding		15,606			14,818			14,278
Effect of stock plans		—			—			233
Diluted average shares outstanding		15,606			14,818			14,511
Net income (loss)	$	(20,950	)	$	(24,905	)	$	32,566
Diluted net income (loss) per share	$	(1.34	)	$	(1.68	)	$	2.24

Certain Company stock options were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares, or the impact of their inclusion would be antidilutive. Such stock options totaled 280,000 shares at December 31, 2000 at prices ranging from $18.13 to $30.38. Due to the net losses incurred in 2002 and 2001, no options outstanding were included in the calculation of diluted loss per share.

Statements of Cash Flows

The Company classifies as cash and cash equivalents unrestricted cash on deposit in banks plus all investments having original maturities of 90 days or less. The effect of exchange rate changes on cash balances held in foreign currencies was not significant. Total cash expenditures for interest were $16.7 million, $14.2 million and $11.0 million for 2002, 2001 and 2000, respectively. Total cash refunds received for income taxes was $7.5 million in 2002. Total cash expenditures for income taxes were $1.8 million for 2001 and $17.3 million for 2000.

Interest

Interest expense in the Consolidated Statements of Operations is shown net of interest income and capitalized interest. Interest income was $0.5 million in 2002, $1.3 million in 2001 and $2.4 million in 2000.

Financial Instruments and Derivatives

The carrying amounts reported in the balance sheet for cash and cash equivalents, short-term investments, accounts receivable, short-term borrowings and accounts payable and accrued liabilities approximate fair values due to the short maturity of those instruments.

The Company utilizes well-defined financial contracts in the normal course of its operations as a means to manage its foreign currency exchange and certain commodity price risks. The vast majority of these contracts are fixed-price contracts for future purchases of various commodities, primarily natural gas and electricity, which meet the definition of “normal purchases or normal sales” and therefore, are not considered derivative instruments under SFAS No. 133, as amended. Likewise, several of the Company’s financial and commodity contracts do not provide for net settlement, and therefore, are not considered derivative instruments under SFAS No. 133, as amended. The Company does not hold financial instruments for trading purposes. The Company is exposed to credit-related gains or losses in the event of nonperformance by counterparties to financial instruments but does not expect any counterparties to fail to meet their obligations. The Company’s current accounting treatment for the limited number of contracts considered derivative instruments is described below.

8

For derivatives designated as fair value hedges, changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in the fair value of the derivatives are recorded in other comprehensive income and are recognized in earnings when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. Changes in the fair value of all other derivative instruments not designated as hedges are also recognized in earnings in the period in which the changes occurred.

The Company periodically engages in commodity swap agreements designated as cash flow hedges. These agreements are designed to hedge against the variability of future cash flows arising from changes in natural gas spot rates. Gains or losses recorded in other comprehensive income are reclassified into earnings at the contracts’ respective settlement dates.

The notional amount of the natural gas commodity swap agreements was $5.7 million at December 31, 2001. All outstanding contracts at that date matured during 2002. The notional amount did not represent amounts exchanged by the parties and, thus, was not a measure of exposure to the Company through its use of derivatives. The exposure in a derivative contract is the net difference between what each party is required to pay based on contractual terms. The net earnings impact in 2002, 2001 and 2000 resulting from the Company’s use of commodity swap agreements was not material.

The Company periodically uses foreign exchange contracts to manage its exposure to foreign currency transaction gains and losses in the translation of U.S. dollar cash and accounts receivable of its Canadian subsidiaries. These Canadian dollar forward exchange contracts are not designated as hedges. Twenty-one such contracts were entered into in 2002, with maturities ranging from one to sixty days. The impact of these activities in 2002, 2001 and 2000 was not material to the Company’s financial results.

Accounting Changes

Effective January 1, 2000, the Company changed the method for valuation of fiber in wood chip, log and pulp inventories of the Harmac pulp operations from the FIFO method to the LIFO method. The change was made to conform the method of valuing fiber inventories between the Company’s U.S. and Canadian operations. The impact of this change was an increase in cost of sales and corresponding decrease in pre-tax operating earnings of approximately $2.9 million, or $.12 per diluted share after tax. The cumulative effect of this change to the LIFO method on operating results as of the beginning of 2000 has not been presented, as the effect is not readily determinable.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Reclassifications

Certain reclassifications have been made to prior years’ data to conform to the current year’s presentation.

9

Prospective Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143, “Accounting for Obligations Associated with the Retirement of Long-Lived Assets.” SFAS No. 143, effective January 1, 2003, addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Under the new statement, the Company will record both an initial asset and a liability, at fair value, for estimated costs of legal obligations associated with the retirement of long-lived assets. The initial asset will be depreciated over the expected useful life of the asset. This statement will change the Company’s accounting for landfill closure costs and reforestation liabilities. The Company currently accrues the estimated costs of closure over the expected useful life of the landfill and reforestation liabilities are not currently discounted. The Company is assessing the impact of this statement on its results of operations and financial portion and will adopt this statement as of January 1, 2003.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The statement requires that a liability for all costs be recognized when the liability is incurred with exit or disposal activities as opposed to when the entity commits to an exit plan under EITF No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” The statement will be applied prospectively to activities exited from or disposed of initiated after December 31, 2002.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others” (the Interpretation), which addresses the accounting for and disclosure of obligations under guarantees. The disclosure provisions of the Interpretation were effective at December 31, 2002. See Note 9 Contingencies. The accounting requirements of the Interpretation are effective January 1, 2003, and require the recognition of a liability at its fair value by a guarantor at the inception of certain guarantees. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements.

2. Inventories

	2002			2001
	(thousands)
Lumber	$	15,171		$	14,681
Pulp		26,774			24,711
Saw logs		22,014			28,307
Pulp logs, chips and sawdust		11,784			12,542
Chemicals and supplies		18,880			19,313
LIFO reserve		(1,304	)		(1,298	)
	$	93,319		$	98,256

The portion of inventories accounted for using the last-in, first-out (LIFO) method aggregated $19.9 million using the average cost method, which approximates the FIFO basis, at December 31, 2002 and 2001.

3. Properties

	2002		2001
	(thousands)
Plant and equipment:
Mills, plants and improvements	$	88,341	$	87,404
Equipment		486,113		466,616
Mobile equipment		19,511		19,345
Construction in progress		3,899		5,444
	$	597,864	$	578,809
Land and timber cutting rights:
Land	$	4,253	$	4,107
Canadian timber cutting rights		3,157		3,428
	$	7,410	$	7,535

10

Included in plant and equipment at December 31, 2002, were assets at cost of $182.6 million ($182.7 million at December 31, 2001) and a net book value of $53.1 million ($63.0 million at December 31, 2001) for which the Company does not hold title. See Note 5 and the discussion of the Halsey mill sale/leaseback transactions.

4. Income Taxes

Earnings before income taxes were comprised of the following:

	2002			2001			2000
	(thousands)
Domestic loss	$	(29,193	)	$	(31,999	)	$	(9,900	)
Foreign income (loss)		(2,898	)		(10,945	)		65,584
	$	(32,091	)	$	(42,944	)	$	55,684

The income tax provision (benefit) consisted of the following components:

	Current			Deferred			Total
	(thousands)
2002
Federal	$	2		$	(9,790	)	$	(9,788	)
State		—			(962	)		(962	)
Foreign		(8,193	)		7,802			(391	)
	$	(8,191	)	$	(2,950	)	$	(11,141	)
2001
Federal	$	—		$	(11,912	)	$	(11,912	)
State		—			(892	)		(892	)
Foreign		(4,717	)		(518	)		(5,235	)
	$	(4,717	)	$	(13,322	)	$	(18,039	)
2000
Federal	$	409		$	(2,172	)	$	(1,763	)
State		—			(407	)		(407	)
Foreign		9,238			16,050			25,288
	$	9,647		$	13,471		$	23,118

The income tax provision (benefit) was different from the amount computed by applying the U.S. statutory federal income tax rate as follows:

	2002			2001			2000
	(thousands)
Tax at U.S. statutory rate	$	(11,232	)	$	(15,031	)	$	19,489
State tax net of federal benefit		(625	)		(580	)		(263	)
Foreign tax rate differential and withholding		1,006			299			3,824
Reduction in foreign tax rate		—			(1,734	)		—
State pollution control tax credits		(506	)		(1,149	)		—
Other items, net		216			156			68
	$	(11,141	)	$	(18,039	)	$	23,118

11

Deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. The net deferred tax asset is comprised of the following:

	2002			2001
	(thousands)
Current deferred taxes:
Gross assets	$	4,053		$	10,727
Noncurrent deferred taxes:
Gross assets		66,961			56,526
Gross liabilities		(53,880	)		(51,698	)
Total noncurrent deferred taxes		13,081			4,828
Net deferred tax asset	$	17,134		$	15,555

The most significant deferred tax asset relates to net operating loss carryforwards. At December 31, 2002, the Company had available $78.7 million of U.S. federal tax loss carryforwards expiring as follows: 2010 – $13.8 million; 2011 – $4.3 million; 2012 – $6.8 million; 2020 – $3.2 million; 2021 – $21.3 million and 2022 – $29.3 million. As of December 31, 2002, the Company also had Alternative Minimum Tax carryforwards of $0.5 million that may be carried forward indefinitely.

Management believes that the Company will have sufficient future U.S. taxable income from tax planning strategies to make it more likely than not that the net operating loss deferred tax asset will be realized. In making this assessment, management has considered the cyclical nature of its businesses, the relatively long expiration period of net operating losses and the ability to utilize certain tax planning strategies if a net operating loss were to otherwise expire. The realization of the asset is not assured and could be reduced in the future if estimates of future taxable income during the carryforward period are reduced.

The tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows:

	2002			2001
	(thousands)
Postretirement benefits	$	7,400		$	8,136
Reforestation		2,897			3,107
Depreciation		(28,120	)		(24,760	)
Lumber import duties		—			5,542
AMT and other tax credits		523			2,197
Net operating loss carryforwards		29,611			20,312
Valuation allowance		(979	)		(5,159	)
Other, net		5,802			6,180
Net deferred tax asset	$	17,134		$	15,555

The Company’s valuation allowance against deferred tax assets was $1.0 million and $5.2 million at December 31, 2002 and 2001, respectively. The change in the valuation allowance related primarily to expiration of state tax credits and the reduction of deferred tax assets and the related valuation allowance for those states in which the Company no longer operates. The remaining valuation allowance relates to state net operating loss carryforwards.

Undistributed earnings of the Company’s Canadian subsidiaries totaled $150.2 million at December 31, 2002, which, under existing law, will not be subject to U.S. tax until distributed as dividends. Since the earnings have been, and are intended to be, reinvested in Canadian operations, no provision has been made for any U.S. taxes that may be applicable thereto. Furthermore, any taxes paid to the Canadian government on those earnings may be used, in whole or in part, as credits against the U.S. tax on any dividends distributed from such earnings. It is not practicable to estimate the amount of unrecognized deferred U.S. taxes on these undistributed earnings.

12

5. Debt

	2002		2001
	(thousands)
Long-term debt:
Revolving credit and term loan facilities, variable interest rate	$	—	$	37,732
Term loan due June 2003, variable interest rate 4.80%		21,737		21,568
Lease financing obligations, weighted average interest rate 7.08%		77,059		82,134
Long-term obligation, due 2002-2012, effective rate 7.54%		8,671		9,488
8 3/8% senior notes due 2013, less unamortized discount of $9,721, effective rate 11.03%		50,279		—
8 3/8% debentures, due 2013		75,000		75,000
State of Oregon Small Scale Energy Loan Program note payable, secured by irrevocable letter of credit, 6.55%		—		11,893
		232,746		237,815
Less current portion		26,824		17,786
Long-term debt	$	205,922	$	220,029

Revolving Credit and Term Loan Facilities

Effective June 14, 2002, the Company renewed its 364-day Canadian revolving bank line of credit of $110 million Canadian (approximately $70 million U.S.) with three Canadian banks. The Company also renewed its $25 million U.S. revolving credit agreement with a U.S. bank in July 2002. The U.S. facility is secured by accounts receivable, permits revolving borrowings through June 2003 and is convertible into a one-year term loan upon expiration of the revolving credit provisions. The U.S. revolving credit line was subsequently reduced to $15 million effective January 1, 2003. The Canadian facility is a revolving credit line secured by certain inventory and accounts receivable, permits revolving borrowings through June 2003 and is convertible into a two-year term loan upon expiration of the revolving credit provisions. At December 31, 2002 the Company had no borrowings outstanding under its revolving credit agreements, and, as of January 1, 2003, had available approximately $59.4 million U.S. of borrowing capacity under the agreements and $4.3 million of cash, cash equivalents and short-term investments. The Company’s ability to borrow under its revolving lines of credit at a particular point in time is subject to the availability of adequate collateral and compliance with existing financial covenants. Under the existing financial covenants, the Company was required to have borrowing capacity under its revolving lines of credit or excess cash totaling $25 million and, accordingly, the Company’s net borrowing capacity under its revolving lines of credit was $38.7 million at January 1, 2003.

The interest rate associated with the $110 million Canadian agreement is based, at the option of the Company, on specified market rates plus a margin predetermined by the credit agreement. A commitment fee of .45 percent per year on the unused portion is payable quarterly. A commitment fee on the unused portion of the U.S. credit facility is payable quarterly and is based on specific debt ratios as outlined in the credit agreement ranging from .40 percent to .75 percent per year. The interest rate associated with the U.S. revolving credit agreement is based, at the option of the Company, on specified market rates plus a margin based on the Company’s debt ratio.

In June 2001, the Company obtained a $35 million Canadian (approximately $22 million U.S.) two-year term loan, due June 2003 and secured by real property, to fund a portion of the Mackenzie acquisition costs. At December 31, 2002, the Company had $21.7 million U.S. outstanding under the two-year term agreement included in the current portion of long-term debt. The interest rate associated with the term loan is based, at the option of the Company, on specified market rates plus a margin predetermined by the credit agreement.

The revolving credit agreements and term loan agreement contain certain restrictive covenants, including maximum leverage ratios and EBITDA to interest coverage. As of December 31, 2002, the Company was in compliance with its debt covenants.

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Lease Financing and Long-Term Obligation

In the third quarter of 1999, the Company entered into a sale/leaseback of its Halsey pulp mill. The facility was sold for $64.6 million cash in a transaction accounted for as a financing, wherein the property remained on the books and continues to be depreciated. A lease-financing obligation equal to the proceeds received was recorded. The lease term ends in 2012, with an early purchase option in 2007. In December 2001, the lessor in this transaction agreed to credit the Company $2.2 million as an offset against the early purchase option price, if the Company exercises that option. The adjustment to the lease financing obligation was accounted for as a prospective reduction in the effective interest rate of the debt.

On December 27, 2001, the Company entered into a $36 million sale/leaseback of the Halsey pulp mill’s chlorine dioxide facility (the ClO₂ lease financing). The lessor is the same financial institution with which the Company sold and leased back the Halsey pulp mill in 1999. In this transaction, the lessee is a limited partnership of which the Company is the general partner and another financial institution is the limited partner. The limited partner invested $10.6 million in the lessee partnership, which was utilized to fund an advance rent payment to the lessor of the ClO₂ facility. The Company has recorded the $36 million ClO₂ transaction as a $25.4 million lease financing obligation and a $10.6 million long-term obligation. The ClO₂ lease financing has a term, rent payment schedule and early purchase option that are coterminus with the Halsey mill sale/leaseback.

The Halsey leases require annual rent payments, payable semi-annually, as follows: for the years 2003 and 2004—$9.6 million; 2005—$9.8 million and 2006—$11.6 million. Beginning in January of 2007 (if the leases have not been terminated by exercise of the early purchase options), two semi-annual payments of $16.6 million and other payments totaling $22.5 million through the end of the lease term in 2012 are required. There are two purchase options under each of the Halsey leases. The aggregate price under the early purchase options in 2007 is fixed at $59.1 million, payable in five installments during 2007. The purchase options at the end of the leases will be at fair market value as determined at the time of the exercise. The leases contain certain restrictive covenants, including a maximum leverage ratio, a minimum net worth requirement and a fixed charge coverage ratio or cash requirement. At December 31, 2002, the Company was in compliance with all of these covenants.

The Company is retiring the long-term obligation through the allocation by the lessee partnership of state pollution control tax credits and other partnership tax attributes to the limited partner over the 12 tax years ending in 2012. The Company is obligated to otherwise repay the long-term obligation if the state pollution control tax credits and other tax attributes are not available to the limited partner as contemplated in the agreement. The stated effective interest rate represents the calculated implicit interest rate on the $10.6 million cash investment of the limited partner based upon the after-tax cash flows of the pollution control tax credits and other tax attributes allocated to the limited partner over the 12 year life of the limited partnership. At December 31, 2002, the Company maintained a $9.8 million letter of credit to support the long-term obligation. The fair value of the long-term obligation, based upon rates currently available for debt with similar terms, was estimated to be $7.6 million at December 31, 2002.

In January 2002, the Company elected to repay the remaining balance of the State of Oregon Small Scale Energy Loan. Accordingly, the Company included this debt in the current portion of long-term debt at December 31, 2001. The Company maintained a $12.4 million letter of credit at December 31, 2001 associated with this note payable. The letter of credit was discontinued upon payment of the debt in January 2002.

8 ³/8% Senior Notes

On July 30, 2002, the Company completed the sale of $60 million principal amount of 8 ³/8% senior notes due 2013, with net proceeds to the Company of $50.1 million, after discount of $8.2 million and issue expenses of $1.7 million. The 8 ³/8% senior notes were priced to yield 10.5 percent and the net proceeds were used to pay down the Company’s revolving bank lines of credit. The notes were offered in a Rule 144A offering to qualified institutional buyers in the United States and to non-U.S. persons outside the United States. The subsequent exchange for registered, publicly tradable notes with substantially identical terms was completed in October 2002. The terms and conditions of the notes are substantially identical to the Company’s existing 8 ³/8% debentures due 2013. The Company’s 8 ³/8% senior notes and debentures do not have any financial covenants. The total fair value of the 8 ³/8% senior notes and debentures was $120.2 million based upon the trading price of the instruments at December 31, 2002.

14

The annual maturities of long-term debt, excluding the lease financing obligations and related long-term obligation, for the five years subsequent to December 31, 2002 were: 2003—$21.7 million; and 2004 through 2007- none.

6. Other Long-term Liabilities

Other long-term liabilities consist of the following:

	2002		2001
	(thousands)
Reforestation	$	10,682	$	11,209
Pension liabilities		10,784		6,663
Other postretirement benefits		19,570		17,418
Environmental liabilities		6,667		7,171
Other		2,948		2,033
	$	50,651	$	44,494

At December 31, 2002 and 2001, the Company classified $1.7 million and $4.2 million, respectively, of environmental liabilities as current liabilities in other accrued liabilities.

7. Pension and Other Postretirement Plans

The Company’s retirement plans consist principally of noncontributory defined-benefit pension plans and postretirement medical and life insurance plans. The pension plans include plans administered by the Company and multi-employer plans administered by various unions.

Certain union employees are covered under multi-employer pension plans. Contributions to these plans are based upon negotiated hourly rates. It is not possible to determine the amount of accumulated benefits or net assets available for benefits that apply solely to Company employees covered by these plans. All other Company participating employees are covered by noncontributory defined-benefit pension plans administered by the Company.

The Company’s funding policy regarding all of its Company-administered pension plans is to make contributions to the plans that are between the minimum amounts required by law and the maximum amounts deductible under current tax regulations. The Company also sponsors unfunded postretirement medical and life insurance plans for certain salaried and non-salaried employees and eligible spouses and dependents of the employees.

The Company sponsors a defined contribution plan to provide substantially all U.S. salaried employees an opportunity to accumulate personal funds for their retirement. Contributions may be made on a before-tax basis. The Company matches a portion of the employee’s contributions in cash to be invested among several investment options at the employee’s discretion. The amounts contributed to the plan for participating employees were $0.8 million for the year 2002 and $0.9 million for the years 2001 and 2000.

15

The following table sets forth selected financial information regarding the pension and postretirement benefit plans:

	Pension Benefits						Other Postretirement Benefits
	2002			2001			2002			2001
	(thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	70,302		$	68,511		$	17,148		$	15,351
Service cost		3,159			2,314			1,391			493
Interest cost		5,286			5,026			1,275			1,171
Amendments		150			—			—			—
Actuarial (gain) loss		5,227			(405	)		6,655			(88	)
Acquisition		1,419			430			—			1,099
Benefits paid		(3,981	)		(3,664	)		(571	)		(505	)
Foreign currency rate changes		220			(1,910	)		49			(373	)
Benefit obligation at end of year	$	81,782		$	70,302		$	25,947		$	17,148
Change in plan assets:
Fair value of plan assets at beginning of year	$	69,612		$	86,719		$	—		$	—
Actual return on plan assets		(2,412	)		(12,522	)		—			—
Acquisition		—			430			—			—
Employer contributions		1,583			584			571			505
Benefits paid		(3,981	)		(3,664	)		(571	)		(505	)
Foreign currency rate changes		209			(1,935	)		—			—
Fair value of plan assets at end of year	$	65,011		$	69,612		$	—		$	—
Funded status	$	(16,771	)	$	(690	)	$	(25,947	)	$	(17,148	)
Employer contribution after measurement date		225			273			—			—
Unrecognized net actuarial loss (gain)		17,050			3,474			6,377			(270	)
Unrecognized prior service cost		1,050			1,230			—			—
Unrecognized net asset at transition		(34	)		(44	)		—			—
Additional minimum pension liability adjustment		(1,907	)		(439	)
Prepaid (accrued) benefit cost	$	(387	)	$	3,804		$	(19,570	)	$	(17,418	)
Plans having assets in excess of accumulated benefits
Benefit obligation	$	—		$	37,027
Fair value of plan assets		—			43,370
Plans having accumulated benefits in excess of assets
Benefit obligation	$	81,829		$	33,274
Fair value of plan assets		65,011			26,242

	Pension Benefits				Other Postretirement Benefits
	2002		2001		2002		2001
Weighted-average assumptions as of December 31
Discount rate	6.9	%	7.4	%	6.7	%	7.4	%
Rate of compensation increase	4.5	%	4.5	%	4.5	%	4.5	%
Expected return on plan assets	8.5	%	8.5	%

For measurement purposes of U.S. postretirement plans, 9.0 percent and 6.5 percent rates of increase were assumed for health care costs in 2002 and 2001, respectively. The rate was assumed to decline in .5 percent decrements every year until it reached 5 percent in 2010 where it remained thereafter. For the Company’s Canadian plans, 6.3 percent and 7.0 percent annual rates of increase were assumed for health

16

care costs in 2002 and 2001, respectively. The rate was assumed to decline over a graded period until it reached 4.2 percent in 2008 where it remained thereafter.

Net periodic pension cost for 2002, 2001 and 2000 was composed of the following:

	Pension Benefits
	2002			2001			2000
	(thousands)
Components of net periodic benefit cost:
Service cost	$	3,159		$	2,314		$	2,365
Interest cost		5,286			5,026			4,987
Expected return on plan assets		(5,924	)		(7,225	)		(6,968	)
Amortization of prior service cost		190			186			76
Amortization of transition amounts		(10	)		(28	)		23
Recognized net actuarial gain		(20	)		(747	)		(663	)
Settlement gain		—			—			(1,129	)
Plan admendment		150			—			—
Net periodic benefit cost for Company administered plans		2,831			(474	)		(1,309	)
Contributions to multi-employer plans		5,514			4,872			4,686
Net periodic benefit cost	$	8,345		$	4,398		$	3,377

The Company has granted certain former employees pension benefits that supplement the normal Company plans. These benefits are unfunded obligations of the Company, and the accrued benefit cost totaled $1.0 million at December 31, 2002.

At December 31, 2002 and 2001, the Company recorded an additional minimum liability of $1,468,000 and $439,000, respectively, for plans with unfunded accumulated benefit obligations in excess of the unfunded accrued pension cost. Accordingly, a loss of $950,000, and $279,000, net of tax, was recorded in other comprehensive income (loss) in 2002 and 2001, respectively.

Net periodic cost for the Company’s postretirement medical and life insurance plans for 2002, 2001 and 2000 was composed of the following:

	Other Postretirement Benefits
	2002		2001			2000
	(thousands)
Components of net periodic benefit cost:
Service cost	$	1,391	$	493		$	478
Interest cost		1,275		1,171			1,080
Recognized net actuarial (gain) loss		—		(6	)		15
Net periodic benefit cost	$	2,666	$	1,658		$	1,573

Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement medical plans. A one percentage point change in assumed health care cost trend rates would have the following effects:

	One Percentage Point
	Increase		Decrease
	(thousands)
Effect on total service and interest cost components	$	458	$	(336	)
Effect on postretirement benefit obligation		4,261		(3,411	)

17

8. Stockholders’ Equity

Shareholder Rights Plan

On February 5, 1998, the Company adopted a shareholder rights plan and declared a dividend distribution of one Right for each outstanding share of Common Stock. Under certain conditions, each Right may be exercised to purchase 1/100 of a share of Series A Junior Participating Preferred Stock at a purchase price of $70, subject to adjustment. The Rights are not presently exercisable and will only become exercisable if a person or group acquires or commences a tender offer to acquire 15% of the Common Stock. If a person or group acquires 15% of the Common Stock, each Right will be adjusted to entitle its holder to receive, upon exercise, Common Stock (or, in certain circumstances, other assets of the Company) having a value equal to two times the exercise price of the Right or each Right will be adjusted to entitle its holder to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the Right, depending on the circumstances. The Rights expire on April 24, 2008 and may be redeemed by the Company for $0.001 per Right. The Rights do not have voting or dividend rights, and until they become exercisable, have no dilutive effect on the earnings of the Company.

Stock Option Plans

The Company maintains three stock option plans and accounts for all options under APB Opinion No. 25 and related interpretations, under which no compensation expense has been recognized in the Consolidated Statements of Operations. The Company has a stock option plan (Option Plan) for officers and key employees. This plan is administered by the Compensation Committee of the Board of Directors. The Committee is composed of outside Directors who are not eligible for awards under this plan. The Company also has a non-employee director stock option plan (Director Plan). At December 31, 2002, shares available for future grants under these plans totaled 418,400. Additionally, the Company has a non-employee director stock retainer fee plan (Retainer Plan). At December 31, 2002, shares available for future grants under this plan totaled 180,800.

The Option Plan provides for granting both incentive stock options and nonqualified stock options to purchase shares of the Company’s common stock at prices not less than 85 percent of fair market value at grant date; however, stock options are generally granted at fair market value at grant date. Options are exercisable as stated in each individual grant and vest over a five-year period; however, no option may extend beyond ten years from the date of grant.

The Director Plan provides for automatic option grants at designated intervals to non-employee directors over their period of continued service on the Board of Directors. Such options are granted at 100 percent of fair market value on the date of grant. Options are immediately exercisable and have a ten-year term.

The Retainer Plan permits non-employee directors to apply all or a portion of their annual retainer fees to the acquisition of options to purchase shares of the Company’s common stock. The number of shares covered by such options is determined by dividing the amount of retainer fees to be applied by the Black-Scholes formula value for the option. Such options are granted at 100 percent of fair market value on the date of grant. Options are immediately exercisable and have a ten-year term.

18

A summary of the stock options outstanding at December 31, 2002, 2001 and 2000 and changes during the years then ended in the number of shares (Shares) and the weighted average exercise price (Price) is presented below:

	2002					2001					2000
	Shares			Price		Shares			Price		Shares			Price
	(shares in thousands)
Outstanding at beginning of year		1,370		$	15		1,176		$	15		1,054		$	15
Granted		238			14		296			15		278			16
Exercised		(21	)		7		(1	)		15		(114	)		15
Canceled		(67	)		18		(101	)		17		(42	)		23
Outstanding at end of year		1,520			15		1,370			15		1,176			15
Exercisable at year-end		877			15		742			16		399			16
Weighted average fair value of options granted during year	$	4.45				$	5.07				$	5.21

The fair value of options granted in 2002, 2001 and 2000 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2002, 2001 and 2000, respectively: risk-free interest rates of 4.7, 5.1 and 6.6 percent; dividend yields of 4.3, 5.0 and 5.5 percent; and expected volatility of 46, 55 and 50 percent. Expected option lives of six years were assumed. The following table summarizes information about stock options outstanding at December 31, 2002:

	Range of exercise prices
	$5-$11		$12-$20		$21-$30		Total
	(shares in thousands)
Options outstanding:
Number outstanding		233		1,232		55		1,520
Remaining contractual life in years		6.0		6.1		1.9		5.9
Weighted average exercise price	$	8	$	15	$	29	$	15
Options exercisable:
Number exercisable		143		679		55		877
Weighted average exercise price	$	8	$	16	$	29	$	15

In 2000, restricted shares of 30,280 were awarded to Michael Flannery, the Company’s Chief Executive Officer, at no cost based on stock price targets established under the award. Ten percent of the shares vest on the date of issuance and 10 percent will vest on each anniversary thereof. At December 31, 2002, unvested restricted shares totaled 21,196.

9. Commitments and Contingencies

Minimum Rental Commitments

The Company leases certain equipment, including computers, automobiles and other mobile equipment, that are classified as operating leases. It also leases office space for its corporate administrative and sales functions. Rent expense for operating leases was $4.4 million in 2002, $4.1 million in 2001 and $4.5 million in 2000. For operating leases with remaining terms of more than one year, the minimum lease payment requirements were $3.3 million for 2003, $2.5 million for 2004, $1.7 million for 2005, $1.4 million for 2006, and $1.1 million for 2007, with total payments thereafter of $1.3 million.

19

Guarantees

In connection with the sale/leaseback of the Halsey pulp mill and ClO₂ facility (see Note 5. Debt), the Company agreed to indemnify certain other participants in the financings against the loss, on an after-tax basis, of certain tax items, including Oregon pollution control tax credits. At December 31, 2002, the maximum potential future payments that could be required under these guarantees were $14.0 million, and the amount recorded as liabilities related to these guarantees was $12.1 million. The Company’s indemnity obligations with respect to these tax items continue while the relevant tax years of the indemnified parties remain open to audit; provided, however, that with respect to $10.6 million of the potential payments, the Company’s obligation expires if a claim for indemnity is not asserted on or before March 15, 2016.

In connection with the divestiture of a former business, the Company is secondarily liable for certain payments to a third party in the event the buyer fails to make such payments. The Company’s potential obligation under this arrangement expires December 31, 2003. The potential future liability, if any, cannot be estimated at this time. The Company has no recorded liability for this potential obligation.

Collective Bargaining Agreements

Most of the Company’s hourly workforce in its Canadian pulp and sawmill operations are covered by collective bargaining agreements that are scheduled to expire in the second quarter of 2003. The Company does not anticipate a significant impact to its operations as a result of negotiations and renewal of these contracts.

Litigation

The Company is a party to legal proceedings and environmental matters generally incidental to the business. Although the final outcome of any legal proceeding or environmental matter is subject to a great many variables and cannot be predicted with any degree of certainty, the Company believes that any ultimate outcome resulting from these proceedings and matters would not have a material effect on the current financial position, liquidity or results of operations; however, in any given future reporting period, such proceedings or matters could have a material effect on results of operations.

Import Duties

Approximately 80 percent of the Company’s current lumber capacity is located in British Columbia, Canada. Between April 1996 and April 2001, exporters of softwood lumber from Canada to the U.S. were subject to tariffs on lumber volumes in excess of defined tariff-free volumes under the Canada-U.S. Softwood Lumber Agreement (SLA). Upon expiration of the SLA on April 1, 2001, petitions for the imposition of antidumping duties (ADD) and countervailing duties (CVD) on softwood lumber from Canada were filed with the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC), by certain U.S. industry and trade groups. In response to the petitions, the ITC conducted a preliminary injury investigation and on May 16, 2001, determined that there was a reasonable indication that the lumber industry in the United States was threatened with material injury by reason of softwood lumber imports from Canada. In May 2002, the ITC finalized its ruling on the imposition of ADD and CVD on softwood lumber from Canada, and, based on the DOC’s final determination of ADD and CVD rates, the Company is currently subject to a combined import duty rate of 27.22 percent, effective as of May 22, 2002.

Approximately one year following the publication of the final order, and annually thereafter for a total of five years, the DOC will conduct reviews to determine whether Canada continued to subsidize softwood logs and whether the Canadian companies engaged in dumping and, if so, the appropriate CVD and ADD rates to impose. At the end of the five years, both the CVD and ADD will be automatically reviewed in a “sunset” proceeding to determine whether dumping or a countervailing subsidy would be likely to continue or recur.

The federal and provincial governments in Canada have moved for appellate review by panels under NAFTA and the World Trade Organization (WTO) with respect to the CVD findings. In July 2002, the WTO, in a non-binding set of recommendations to the U.S., ruled that the U.S. government erred on several points in its determination of the existence of a subsidy on softwood lumber from Canada. The WTO also issued an interim ruling recommending the U.S. government repeal the Byrd Amendment, which gives U.S. firms cash from punitive trade sanctions applied on foreign imports.

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The ITC’s final ruling is subject to further reviews by panels of the World Trade Organization and under NAFTA and, accordingly, it is possible that the lumber import duties may change as a result of a negotiated settlement between the Canadian and U.S. governments. Any adjustments to the financial statements resulting from a change in duty rates will be made prospectively if such events occur.

Environmental Matters

The Company is currently participating in the investigation and environmental remediation of several sites where the Company currently conducts or previously conducted business. The ultimate costs to the Company for the investigation, remediation and monitoring of these sites cannot be predicted with certainty, due to the often unknown magnitude of the pollution or the necessary cleanup, the varying costs of alternative cleanup methods, the amount of time necessary to accomplish such cleanups and the evolving nature of cleanup technologies and governmental regulations. The Company has recognized liabilities for environmental remediation costs for these sites in amounts that it believes are probable and reasonably estimable. Remediation costs incurred are charged against the reserves. The Company has assumed it will bear the entire cost of remediation at these sites.

The Company is working with the Washington Department of Ecology (WDOE) to remediate the Company’s former mill site and surrounding area at Port Gamble, Washington. The Company is responsible for environmental remediation costs related to five landfills used by the Company that contain wood debris and industrial wastes. WDOE has also requested that the Company perform an investigation of sediments in the adjacent bay to determine the extent of wood waste accumulation. The Company is working with WDOE and completed the bay sediment characterization in 2002. The Company has submitted closure plans of the landfills to WDOE. As of December 31, 2002, four landfills have been closed and three landfills have received “no further action” letters from WDOE. The final remediation steps at the remaining landfill are expected to be completed in the first half of 2003. The reserve balance for this site was $1.9 million at December 31, 2002, compared with $6.7 million at December 31, 2001, and represented the low end of the range of estimated future remediation and monitoring costs at this site. The decrease reflected a $2.8 million reduction in the reserve to incorporate new information on this site concerning remediation alternatives and updates on prior cost estimates. In addition, $2.0 million of costs incurred in 2002 to remediate the site were charged against the reserve. The Company expects the majority of the remaining remediation costs to be incurred in 2003 and expects to incur monitoring costs through 2013.

In June 2002, the Company was requested by British Columbia environmental authorities, based on detection of environmental contamination in an effluent treatment pond at the Mackenzie pulp mill, to prepare a remediation plan for this pond. The environmental contamination occurred before the Company acquired the mill as a result of a manufacturing process that was discontinued at the mill in 1993. Based on preliminary findings, the Company recorded a $2.0 million reserve (representing the low end of the range of estimated future remediation costs) in the second quarter of 2002 as an adjustment of the acquisition cost for the June 15, 2001 acquisition of the Mackenzie pulp mill. The reserve is for the estimated costs of dredging and relining the pond. The Company charged $0.1 million of costs related to this site against the reserve and currently expects the majority of the remediation costs to be incurred in 2005 through 2007.

In 1992, the Oregon Department of Environmental Quality, based on detection of creosote and hydrocarbon contamination, determined that a vacant industrial site in St. Helens, Oregon formerly owned by the Company requires further action. The Company is currently participating in the investigation phase of this site. The reserve balance for this site was $3.7 million at December 31, 2002, compared with $3.5 million at December 31, 2001, and represented the low end of the range of estimated future remediation and monitoring costs at this site. This increase resulted from the incorporation of new information on this site, primarily related to additional sediment investigation. In addition, the Company charged $0.1 million of costs incurred in 2002 related to this site against the reserve. The Company currently expects the majority of the remediation costs to be incurred in 2006, with post-remediation monitoring costs to begin in 2007 and to continue for 15 to 20 years.

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The Company has tendered the defense of certain environmental claims to a number of insurance carriers that issued comprehensive general liability policies to the Company from the 1940’s to 1992. In 1995, the Company filed a declaratory judgment action to obtain a decision that the insurance carriers were obligated to defend the Company and indemnify it for any environmental liabilities incurred as a result of certain operations of the Company during that period. The Company has concluded settlements with several insurance carriers and is engaged in settlement discussions with other insurance carriers. In addition, the Company believes recovery under these policies is highly probable and has recorded receivables in amounts it has deemed highly probable of realization.

10. Acquisition

On June 15, 2001, the Company acquired the Mackenzie pulp mill from Norske Skog Canada, in a transaction accounted for as a purchase, for approximately $80.4 million U.S. in cash, 1,750,000 shares of Company common stock and the assumption of $22.9 million of liabilities. The Company’s common shares were assigned a value of $12.45, based on the average closing price of Company common stock over a reasonable period of time around the announcement date (March 29, 2001) of the transaction. Mackenzie is a single-line pulp mill with an annual capacity of 230,000 metric tons of northern bleached kraft chip and sawdust pulp. The results of Mackenzie are included in the consolidated financial statements from the date of acquisition.

The purchase price of Mackenzie was calculated as follows:

	(thousands)
Company common shares issued		1,750
Multiplied by the average market price	$	12.45
Value of common shares issued	$	21,788
Cash		80,444
Total		102,232
Direct acquisition costs		2,148
Total purchase price	$	104,380

The purchase price, including direct acquisition costs, was allocated to the assets and liabilities of Mackenzie based upon determination of their fair value as indicated below.

	(thousands)
Current assets, other than cash	$	28,217
Property, plant and equipment		99,091
Other assets		8
Current liabilities		(9,246	)
Other liabilities		(13,690	)
Total purchase price	$	104,380

The following unaudited pro forma information for the periods set forth below gives effect to the transaction as if the Mackenzie purchase had occurred as of the beginning of each respective year after giving effect to certain adjustments. The pro forma information is not necessarily indicative of what the actual operating results would have been had the transaction occurred on the dates indicated and does not purport to indicate future results of operations. In addition, the pro forma information does not reflect any cost savings or other synergies resulting from the transaction.

	2001			2000
	(thousands except per share)
	(unaudited)
Revenues	$	549,824		$	707,259
Net income (loss)		(28,254	)		40,566
Basic net income (loss) per share		(1.71	)		2.53
Diluted net income (loss) per share		(1.71	)		2.49

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11. Segment Information

The Company is a manufacturer of pulp and lumber, with operations in the U.S. and in Western Canada. The Company classifies its business into two operating segments: pulp and wood products. The two operating segments were identified as distinct segments based upon the difference in products and the manner in which the operations are managed.

Pulp manufactures a broad range of pulp utilizing both wood chips and sawdust as fiber sources. Pulp is sold primarily to end users in U.S., Europe, Canada and Asia.

Wood products manufactures standardized and specialty lumber and sells residual wood chips. Lumber products are sold mainly in the U.S. and Canada to wholesalers, and wood chips are sold to manufacturers of pulp.

The accounting policies of the operating segments are the same as those described in Note 1. Accounting Policies. The Company evaluates performance based on profit or loss before income taxes. A reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial statements is as follows:

	2002			2001			2000
	(thousands)
Revenues
Pulp	$	322,941		$	291,105		$	348,156
Wood products		223,392			208,122			231,896
Total operating segments	$	546,333		$	499,227		$	580,052
EBITDA
Pulp	$	5,422		$	4,417		$	88,463
Wood products		24,407			6,137			18,104
Total operating segments		29,829			10,554			106,567
Corporate		(9,003	)		(10,095	)		(10,527	)
	$	20,826		$	459		$	96,040
Depreciation and amortization expense
Pulp	$	26,719		$	22,767		$	24,180
Wood products		7,250			7,122			7,014
Total operating segments		33,969			29,889			31,194
Corporate		1,362			951			718
	$	35,331		$	30,840		$	31,912
Income (loss) before taxes
Pulp	$	(21,297	)	$	(18,350	)	$	64,283
Wood products		17,157			(985	)		11,090
Total operating segments		(4,140	)		(19,335	)		75,373
Corporate		(10,365	)		(11,046	)		(11,245	)
Interest expense, net		(17,586	)		(12,563	)		(8,444	)
	$	(32,091	)	$	(42,944	)	$	55,684
	2002			2001			2000
	(thousands)
Total assets at year-end
Pulp	$	366,919		$	378,723		$	296,565
Wood products		93,667			110,010			116,169
Total operating segments		460,586			488,733			412,734
Corporate		43,802			50,744			45,453
	$	504,388		$	539,477		$	458,187
Capital expenditures
Pulp	$	12,732		$	12,194		$	40,843
Wood products		2,837			5,036			8,796
Total operating segments		15,569			17,230			49,639
Corporate		1,764			1,622			952
	$	17,333		$	18,852		$	50,591
Revenues by geographic region(1)
United States	$	259,783		$	257,872		$	274,765
Europe		129,567			105,990			154,683
Other		156,983			135,365			150,604
	$	546,333		$	499,227		$	580,052
Properties by geographic region
United States	$	81,426		$	89,674		$	99,479
Canada		222,921			228,387			148,381
	$	304,347		$	318,061		$	247,860

(1) Revenues are reported by the location of the customer.

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12. Quarterly Information (Unaudited)

The following quarterly information is unaudited, but includes all adjustments which management considers necessary for a fair representation of such information. For interim quarterly statements, income taxes were estimated using the best available information for projected results for the entire year.

	Quarter
	First			Second			Third			Fourth			Year
	(thousands except per share)
2002
Revenues	$	125,503		$	143,919		$	138,555		$	138,356		$	546,333
Gross profit (loss)(1)		1,265			11,043			5,596			(6,819	)		11,085
Net income (loss)		(5,754	)		260			(3,577	)		(11,879	)		(20,950	)
Per Common Share
Basic and diluted net income (loss)	$	(.37	)	$	.02		$	(.23	)	$	(.76	)	$	(1.34	)
Dividends		.15			.15			.15			.15			.60
Stock Price
High		15.82			18.75			19.09			14.37			19.09
Low		13.21			13.37			11.40			9.50			9.50
2001
Revenues	$	116,117		$	108,241		$	137,906	(2)	$	136,963	(2)	$	499,227
Gross profit (loss)(1)		3,591			1,397			(4,604	)		(4,420	)		(4,036	)
Net loss		(2,960	)		(4,858	)		(9,147	)		(7,940	)		(24,905	)
Per Common Share
Basic and diluted net income (loss)	$	(.21	)	$	(.34	)	$	(.59	)	$	(.51	)	$	(1.68	)
Dividends		.15			.15			.15			.15			.60
Stock Price
High		16.44			15.82			14.71			14.25			16.44
Low		11.96			11.78			11.17			12.30			11.17

(1) Gross profit is revenues less cost of sales.

(2) Restated from previously reported amounts to properly reflect intercompany transactions. The effect was to decrease sales and cost of sales by $4.4 million in the third quarter of 2001 and increase sales and cost of sales by the same amount in the fourth quarter of 2001.

In the first quarter of 2002, the Company included $2.9 million of charges for lumber import duties and a credit of $7.2 million for the reversal of duties accrued in 2001. The 2002 second quarter included $1.2 million of charges for duties and a credit of $8.4 million for the reversal of charges accrued in 2001 and a credit of $2.9 million for charges accrued in the first quarter of 2002. The 2002 third quarter included charges of $6.7 million, and the 2002 fourth quarter included charges of $6.2 million for duties. The total impact from duties in 2002 was a net reversal of $1.5 million, including current year charges of $14.1 million, net of $15.6 million of credits related to the reversal of charges accrued in 2001. The third and fourth quarters of 2001 included charges for duties of $10.2 million and $5.4 million, respectively.

In the fourth quarter of 2002, the Company reduced its reserves for environmental remediation liabilities by $2.6 million. The reduction was based on new information and updates on prior cost estimates. In addition, the Company reduced its related receivable from insurance carriers by $0.9 million, for a net reduction to selling, general and administrative costs of $1.7 million. The Company also recognized a $1.0 million charge to settle litigation with the U.S. government.

The tax provision and net income in the fourth quarter of 2001 included $1.1 million of state pollution control credits that became realizable as the result of the sale/leaseback of the Halsey mill chlorine dioxide facility in December 2001. The tax provision and net income in the fourth quarter of 2001 also recognized a $1.7 million benefit due to a reduction in the British Columbia corporate tax rate from 16.5 percent to 13.5 percent.

In January 2003, the Company’s Board of Directors decreased the quarterly dividend from 15 cents per share to 8 cents per share due to continued losses through 2002 resulting from the extended economic downturn and the burden of lumber import duties.

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholders of Pope & Talbot, Inc.:

We have audited the accompanying consolidated balance sheet of Pope & Talbot, Inc. and subsidiaries as of December 31, 2002 and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The financial statements of Pope & Talbot, Inc. as of December 31, 2001, and for the two-year period then ended were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated January 22, 2002.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pope & Talbot, Inc. and subsidiaries as of December 31, 2002, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP

Portland, Oregon

January 23, 2003

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Pope & Talbot, Inc.

We have audited the accompanying consolidated balance sheets of Pope & Talbot, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Pope & Talbot, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

As explained in Note 1 to the consolidated financial statements, effective January 1, 2000, the Company changes its method for valuation of fiber in wood chip, log and pulp inventories of the Harmac pulp operations from the first-in, first-out method to the last-in, first-out method.

Arthur Andersen LLP

Portland, Oregon

January 22, 2002

THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN AND IS INCLUDED HEREIN PURSUANT TO RULE 2-02(e) OF REGULATION S-X OF THE SECURITIES AND EXCHANGE COMMISSION.

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) Financial Statements

The following financial statements of the Company are included in this report:

Consolidated balance sheets at December 31, 2002 and 2001

Consolidated statements of operations for years ended December 31, 2002, 2001 and 2000.

Consolidated statements of stockholders’ equity for years ended December 31, 2002, 2001 and 2000.

Consolidated statements of cash flows for years ended December 31, 2002, 2001 and 2000.

Notes to Consolidated Financial Statements

Independent Auditors’ Report—KPMG LLP

Report of Independent Public Accountants—Arthur Andersen LLP

(a)(2) Schedules

All schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the related schedule, or because the information required is included in the financial statements and notes thereto.

(a)(3) Exhibits

The following exhibits are filed as part of this annual report.

Exhibit No.
2.1.	Purchase and Sale Agreement dated March 29, 2001 among Norske Skog Canada Limited, Norske Skog Canada Pulp Operations Limited, Pope & Talbot Ltd., Pope & Talbot, Inc., and Norske Skog Canada Mackenzie Pulp Limited (Incorporated herein by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, filed with the SEC on May 8, 2001 (SEC File No. 1-7852)).
3.1.	Restated Certificate of Incorporation. (Filed with original 2002 Annual Report on Form 10-K on March 3, 2003).
3.2.	Bylaws. (Incorporated herein by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 24, 2000 (SEC File No. 1-7852)).
4.1.	Indenture, dated June 2, 1993, between the Company and Chemical Trust Company of California as Trustee with respect to the Company’s 8-3/8% Debentures due 2013. (Incorporated herein by reference to Exhibit 4.1 to the Company’s registration statement on Form S-3 filed with the SEC on April 6, 1993 (SEC File No. 33-60640)).
4.2.	Rights Agreement, dated as of April 3, 1998, between the Company and Chase Mellon Shareholder Services, L. L. C., as rights agent. (Incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 1998 (SEC File No. 1-7852)).
4.3.	Amended and Restated Participation Agreement dated as of December 27, 2001 among the Company, SELCO Service Corporation, the Note Purchasers named therein, Wilmington Trust Company and First Security Bank, National Association. (Incorporated herein by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 13, 2002 (SEC file No. 1-7852)).

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4.4.	Amended and Restated Facility Lease between the Company and Wilmington Trust Company dated December 27, 2001. (Incorporated herein by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 13, 2002 (SEC file No. 1-7852))
4.5.	Amendment dated December 13, 2002 to Amended and Restated Facility Lease between the Company and Wilmington Trust Company. (Filed with original 2002 Annual Report on Form 10-K on March 3, 2003).
4.6.	Indenture dated July 30, 2002, between the Company and J.P. Morgan Trust Company, National Association, as Trustee, with respect to the Company’s 8 3/8% Senior Notes due 2013. (Incorporated herein by reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002 (SEC File No. 1-7852)).

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company agrees to furnish to the Securities and Exchange Commission, upon request, copies of agreements relating to other long-term debt.

10.1.	Executive Compensation Plans and Arrangements
10.1.1.	Employee Stock Option Plan, as amended April 26, 2001. (Incorporated herein by reference to Exhibit 10.1.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 13, 2002 (SEC file No. 1-7852)).
10.1.2.	Executive Incentive Plan, as amended. (Incorporated herein by reference to Exhibit 10(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1992, filed with the SEC on March 31, 1993 (SEC File No. 1-7852)).
10.1.3.	Deferral Election Plan. (Incorporated herein by reference to Exhibit 10(d) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1992 filed with the SEC on March 31, 1993 (SEC File No. 1-7852)).
10.1.4.	Supplemental Executive Retirement Income Plan. (Incorporated herein by reference to Exhibit 10(e) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1990 filed with the SEC on March 25, 1991 (SEC File No. 1-7852)).
10.1.5.	Form of Severance Pay Agreement among the Company and certain of its executive officers. (Incorporated herein by reference to Exhibit 10.1.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, filed with the SEC on May 14, 1998 (SEC File No. 1-7852)).
10.1.6.	1996 Non-Employee Director Stock Option Plan, as amended April 26, 2001. (Incorporated herein by reference to Exhibit 10.1.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 13, 2002 (SEC File No. 1-7852)).

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10.1.7.	Special Non-Employee Director Stock Retainer Fee Plan. (Incorporated herein by reference to Exhibit 99.5 to the Company’s Form S-8 filed with the SEC on February 22, 1999 (SEC File No. 333-72737)).
10.1.8.	Split Dollar Life Insurance Agreement between the Company and Maria M. Pope, as trustee of the Pope Grandchildren’s Trust, dated December 21, 1999. (Incorporated herein by reference to Exhibit 10.1.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC on March 24, 2000 (SEC File No. 1-7852)).
10.1.9.	Restricted Stock Award Agreement entered into on April 26, 2001 effective as of September 9, 1999 between the Company and Michael Flannery. (Incorporated herein by reference to Exhibit 10.1.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 13, 2002 (SEC File No. 1-7852)).
10.2.	Lease agreement between the Company and Shenandoah Development Group, Ltd., dated March 14, 1998, for Atlanta diaper mill site as amended September 1, 1988 and August 30, 1989. (Incorporated herein by reference to Exhibit 10(h) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1990, filed with the SEC on March 25, 1991 (SEC File No. 0-928)).
10.3.	Lease agreement between the Company and Shenandoah Development Group, Ltd., dated July 31, 1989, for additional facilities at Atlanta diaper mill as amended August 30, 1989 and February 1990. (Incorporated herein by reference to Exhibit 10(1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1990, filed with the SEC on March 25, 1991 (SEC File No. 0-928)).
10.4.	Province of British Columbia Tree Farm License No. 8, dated March 1, 1995. (Incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, filed with the SEC on November 13, 1996 (SEC File No. 1-7852)).
10.5.	Province of British Columbia Tree Farm License No. 23, dated March 1, 1995. (Incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, filed with the SEC on November 13, 1996 (SEC File No. 1-7852)).
10.6.	Province of British Columbia Forest License A18969, dated December 1, 1993. (Incorporated herein by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, filed with the SEC on November 13, 1996 (SEC File No. 1-7852)).
10.7.	Credit agreement dated June 15, 2001, between the Company and Toronto Dominion Bank, Bank of Montreal and The Bank of Nova Scotia. (Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed with the SEC on August 8, 2001 (SEC File No. 1-7852)).
10.8.	First Amending Agreement to Credit Agreement dated June 15, 2001, between the Company and Toronto-Dominion Bank, Bank of Montreal and The Bank of Nova Scotia, dated May 22, 2002. (Incorporated herein by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 14, 2002 (SEC File No. 1-7852)).

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21.1.	List of subsidiaries. (Filed with original 2002 Annual Report on Form 10-K on March 3, 2003).
23.1.	Consent of KPMG LLP. (Filed with original 2002 Annual Report on Form 10-K on March 3, 2003).
99.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

        No reports on Form 8-K were filed during the three months ended December 31, 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Portland, State of Oregon, on this 5th day of March, 2003.

POPE & TALBOT, INC.
By:	/s/ Maria M. Pope
	Maria M. Pope Vice President and Chief Financial Officer

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CERTIFICATION

I, Michael Flannery, Chairman, President and Chief Executive Officer of Pope & Talbot, Inc., certify that:

1. I have reviewed this annual report on Form 10-K/A Amendment No. 1 of Pope & Talbot, Inc. (the “Registrant”);

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 5, 2003

/s/ Michael Flannery

Chairman, President and

Chief Executive Officer

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CERTIFICATION

I, Maria M. Pope, Vice President and Chief Financial Officer of Pope & Talbot, Inc., certify that:

1. I have reviewed this annual report on Form 10-K/A Amendment No. 1 of Pope & Talbot, Inc. (the “Registrant”);

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 5, 2003

/s/ Maria M. Pope

Vice President and

Chief Financial Officer

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