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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2004

OR

For the transition period from              to             

Commission File No. 1-7852

POPE & TALBOT, INC.

Registrant’s telephone number, including area code: (503) 228-9161

NONE

Former name, former address and former fiscal year, if changed since last report.

Indicate by checkmark 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  x    No  ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the close of the latest practicable date.

Common stock, $1 par value – 16,241,768 shares as of September 30, 2004.

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*Omitted since no answer is called for, answer is in the negative or inapplicable.

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

POPE & TALBOT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

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POPE & TALBOT, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

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

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POPE & TALBOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

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POPE & TALBOT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004

(Unaudited)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Effective income tax rates for interim periods are based on the current best estimate of taxable earnings for the full year. This rate is applied to year-to-date income or loss at the end of each quarter. Results for the first nine months of the year may not necessarily be indicative of the results that may be expected for the full year.

The balance sheet at December 31, 2003 was derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Certain reclassifications have been made to the prior year’s data to conform to the current year’s presentation. These interim financial statements should be read in conjunction with the consolidated financial statements and footnotes in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2003.

Accounting Pronouncements Implemented

In May 2004, the FASB issued Staff Position FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003”. Staff Position 106-2 supersedes Staff Position 106-1 on the same subject and provides guidance on the accounting and disclosure related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act), which was signed into law in December 2003. Staff Position 106-2 is effective in the first interim or annual period beginning after June 15, 2004. The Company has concluded that the enactment of the Act was not a significant event as defined by FAS Statement 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” and has adopted the guidance under Staff Position 106-2 to incorporate the effects of the Act in its next measurement of plan obligations. See Note 6.

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 period. The weighted average shares outstanding for the three months ended September 30, 2004 and 2003 were 16,021,000 and 15,623,000, respectively, and were 15,805,000 and 15,621,000 for the nine months ended September 30, 2004 and 2003, respectively. Diluted earnings per share reflect the assumed issuance of common stock equivalents related to dilutive stock options and restricted stock awards which totaled 242,000 and 221,000 for the three and nine-month periods ended September 30, 2004, respectively. 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.

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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 during the period, or the impact of their inclusion would be antidilutive. Such stock options, with prices ranging from $18.73 to $21.06 per share in 2004 and from $5.25 to $30.38 per share in 2003, averaged 25,000 and 1,534,000 for the three months ended September 30, 2004 and 2003, respectively, and 32,000 and 1,490,000 for the nine months ended September 30, 2004 and 2003, respectively.

Stock-based Compensation

As allowed by SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, the Company has retained the compensation measurement principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related interpretations for stock options. Under APB Opinion No. 25, compensation expense is recognized based upon the difference, if any, at the measurement date between the market value of the stock and the option exercise price. The measurement date is the date at which both the number of options and the exercise price for each option are known. The following table illustrates the effect on net income (loss) and net income (loss) per share as if the Company had applied the fair value recognition provisions of SFAS No. 123 to all stock-based employee compensation.

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.

To calculate stock-based employee compensation expense under SFAS 123, the Company estimated the fair value of each option grant on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2004 and 2003, respectively: risk-free interest rates of 4.6 and 3.5 percent; dividend yields of 3.6 and 4.1 percent; and expected volatility of 46 percent for both periods. Expected option lives of six years were assumed.

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The Company has entered into a Receivable Purchase Agreement with a financial institution to sell at its option qualifying accounts receivable on a revolving basis. At December 31, 2003 the agreement provided for the sale of up to $30 million of qualifying accounts receivable and at September 30, 2004 the amount available for sale was increased to $35 million. At September 30, 2004 and December 31, 2003, accounts receivable totaling $26.9 million and $27.6 million, respectively, were excluded from accounts receivable in the accompanying Consolidated Balance Sheets. The proceeds available under this program are subject to change based on the level of eligible receivables and restrictions on the concentrations of receivables. The Company is obligated to indemnify the financial institution against any losses on collection of sold receivables, and has collateralized this indemnity obligation with $10 million of other accounts receivable. The costs under this program vary based on changes in interest rates (LIBOR) and are included in selling, general and administrative expenses.

Interim LIFO calculations require the estimation of the Company’s year-end inventory quantities and costs. These estimates are revised quarterly and the estimated incremental change in the LIFO inventory reserve is expensed over the remainder of the year. The portion of inventories determined using the last-in, first-out (LIFO) method are reflected in the above table at an aggregate of $21.0 million and $20.6 million using the average cost method at September 30, 2004 and December 31, 2003, respectively.

In June 2004, the Company’s $150.0 million Canadian (approximately $118.0 million U.S.) revolving bank line of credit agreement, consisting of two extendable revolving credit facilities, was renewed through July 31, 2005. The maximum borrowings under one line totals $80.0 million Canadian (approximately $62.9 million U.S.) and converts into a two-year term loan upon expiration of the revolving credit provisions. The other line provides $70.0 million Canadian (approximately $55.1 million U.S.) of revolving borrowings and converts into a one-year term loan upon expiration of the revolving credit provisions. The lines are secured by certain inventory, accounts receivable and the Company’s Canadian pulp mill land and equipment. The interest rates associated with the Canadian agreements are based, at the option of the Company, on specified market rates plus a margin predetermined within the credit agreement. The revolving credit agreement contains certain restrictive covenants, including a maximum leverage ratio, net worth test and minimum interest coverage ratio.

In March 2004, the Company’s $15.0 million U.S. revolving line of credit agreement expired and was replaced by a three-year revolving credit agreement with another U.S. bank. The agreement provides for maximum borrowings of $25.0 million and is secured by certain accounts receivable and inventories. The agreement expires in March 2007 and contains

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financial covenants, including maximum leverage ratios, net worth tests and maximum capital expenditures. 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, as defined.

The Company’s postretirement plans consist principally of noncontributory defined-benefit pension plans and postretirement medical and life insurance plans. The Company also provides defined contribution plans in the U.S. and Canada. The pension plans include plans administered by the Company and multi-employer plans administered by various unions.

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act) was enacted. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) beginning in 2006, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position 106-1, the Company elected to defer recognition of the effects of the Act until final authoritative guidance was issued by the FASB. The FASB issued Staff Position 106-2 on May 19, 2004. This position statement supersedes Staff Position 106-1 and requires measurement of the accumulated postretirement benefit obligation and net periodic postretirement benefit cost reflecting the effects of the Act in the first interim or annual period beginning after June 15, 2004. The Company has concluded that the enactment of the Act was not a significant event and, following the guidance in FAS Staff Position 106-2, will incorporate the effects of the Act in its next measurement of plan obligations. Accordingly, the consolidated financial statements do not reflect the effect the Act may have on the Company’s postretirement plans for its U.S. employees. The Company does not expect the effect of the Act to be material.

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The components of net periodic benefit cost related to Company administered plans for the three and nine-month periods ended September 30 were as follows:

In the third quarter of 2004, the Company made a discretionary $1.5 million cash contribution to its U.S. pension plan and does not anticipate any additional contributions to its U.S. plan in 2004. The Company expects to contribute approximately $3.8 million to its Canadian pension plans in 2004.

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The Company classifies its business into two operating segments: pulp and wood products. A reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial statements follows:

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 in May 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 August 2001, the DOC issued its preliminary determination on the CVD and imposed a preliminary duty rate of 19.31 percent to be posted by cash deposits or bonds on sales of softwood lumber to the U.S. on or after August 17, 2001. The DOC also made a preliminary determination that certain circumstances existed which would have resulted in duties on sales of softwood lumber applying retroactively to May 19, 2001 (Critical Circumstances). The preliminary duty rate of 19.31 percent was suspended on December 15, 2001, 120 days after the preliminary determination, in accordance with U.S. law.

In October 2001, the DOC issued its preliminary determination on the ADD and imposed a company-specific preliminary duty rate on six companies reviewed ranging from 5.94 percent to 19.24 percent. All other companies, including Pope & Talbot’s Canadian subsidiary, received the weighted average rate of the six companies of 12.58 percent. The preliminary ADD rate applied to all shipments of softwood lumber made to the U.S. on or after November 6, 2001. The DOC did not find Critical Circumstances in its preliminary ADD ruling and, therefore, did not assess those duties retroactively.

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In March 2002, the DOC announced revised import duty rates of 19.34 percent and 9.67 percent, respectively in the CVD and ADD cases. The DOC also determined that there would be no retroactive application of the CVD prior to August 17, 2001. In May 2002, the ITC finalized its determination of a threat of material injury from Canadian softwood lumber imports, but also determined to impose ADD and CVD only on shipments into the United States on or after May 22, 2002. Also in May 2002, the DOC finally determined the CVD deposit rate to be 18.79 percent and the ADD deposit rate applicable to the Company to be 8.43 percent, resulting in a combined duty deposit rate of 27.22 percent on the Company’s lumber imports from May 22, 2002 to the present time.

On May 22, 2002, the Company began expensing and making cash deposits of import duties at the 27.22 percent deposit rate, and incurred duties of $14.1 million in the balance of 2002, $29.4 million in 2003 (including $8.8 million and $22.1 million in 2003 in the third quarter and year-to-date, respectively), and $13.0 million and $32.6 million in 2004 in the third quarter and year-to-date, respectively. Accordingly, the Company has made total cash deposits of $76.1 million with respect to lumber imported into the U.S. from May 22, 2002 through September 30, 2004.

The rulings of the ITC and the DOC have been appealed by Canadian authorities to panels under the North American Free Trade Agreement (NAFTA) and of the World Trade Organization (WTO). In August 2004, a NAFTA panel ruled for the third time that the ITC’s determination of a “threat of material injury” from subsidized and dumped imports of Canadian softwood lumber was not supported by substantial evidence, and this time remanded the case to the ITC with explicit instructions to issue a final determination consistent with the panel’s findings. In September 2004, the ITC complied with the NAFTA panel’s order and issued a final decision “that the U.S. softwood industry is not threatened with material injury by reason of subject imports from Canada”. In so doing, the ITC stated for the record that it believed that the NAFTA panel had exceeded its authority, violated NAFTA, seriously departed from fundamental rules of procedure, and committed legal error. The United States government is expected to file an extraordinary appeal to this final decision. If this decision is upheld on appeal, it will have the effect of invalidating the duties on Canadian softwood lumber and requiring the refund of all duties deposited to date. Two other NAFTA panels have been reviewing the DOC’s determinations regarding the ADD deposit rate and the CVD deposit rate, respectively. In response to decisions of these NAFTA panels, the DOC has preliminarily redetermined the CVD deposit rate, adjusting it down from 18.79 percent to 7.82 percent, and the ADD deposit rate, adjusting it from 8.43 percent to 8.85 percent. However, these adjusted rates are subject to further NAFTA panel reviews and will not be implemented until completion of the respective NAFTA proceedings.

Under U.S. law, the ADD and CVD deposit rates were determined based on historical government subsidies and dumping practices, but the final rates for duties payable on imports during any particular period must be based on government subsidies and dumping during that period. Accordingly, in June 2003, the DOC began conducting administrative reviews to determine the CVD and ADD rates to be applied retroactively to Canadian lumber imports during the initial periods of review, consisting of the period from May 22, 2002 to March 31, 2003 for the CVD and from May 22, 2002 to April 30, 2003 for the ADD. Similar administrative reviews will be conducted for each subsequent 12-month period. Depending on the results of the administrative reviews, the Company may receive refunds of excess CVD and ADD deposits or be required to make additional CVD and ADD payments. DOC’s finally determined CVD and ADD rates in any administrative review then become the new deposit rates for subsequent lumber imports. Decisions by the DOC in these administrative reviews will also be subject to potential appeals to NAFTA and WTO panels. In June 2004, the DOC preliminarily determined the CVD rate to be 9.24% and the ADD rate applicable to the Company to be 3.98% (or a 13.22% combined rate) for the initial

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administrative review periods. This preliminary determination has no immediate effect and the cash deposit rate will not change until a final determination is issued, currently anticipated in December 2004. Although the preliminary rates in the administrative reviews are substantially lower than the current deposit rates, as of this time, the Company cannot determine whether the final rates will be higher or lower than the preliminary rates.

Various NAFTA and WTO rulings, including those discussed above, have been issued to date, but none of these rulings have become final. In the event that final rates differ from the current combined 27.22 percent deposit rate, ultimate costs will be higher or lower than those recorded to date. Beginning in the second quarter of 2007, both the CVD and ADD orders will be automatically reviewed in a “sunset” proceeding to determine whether dumping or a countervailing subsidy would be likely to continue or recur. The ultimate outcome or effect of NAFTA and WTO reviews, or whether a settlement between the Canadian and U.S. governments may be reached, cannot be predicted.

The Forestry Revitalization Plan

In March 2003, the Government of British Columbia (Crown) introduced the Forestry Revitalization Plan (Plan) that provides for significant changes to Crown forest policy and to the existing allocation of Crown timber tenures to licensees. The changes prescribed in the Plan include: the elimination of minimum cut control regulations, the elimination of existing timber processing regulations, and the elimination of restrictions limiting the transfer and subdivision of existing licenses. In addition, the Crown has legislated that licensees, including the Company, will be required to return 20 percent of their replaceable tenure to the Crown. The Plan states that approximately half of this volume will be redistributed to open up opportunities for woodlots, community forests and First Nations, and the other half will be available for public auction. The Crown has stated that licensees will be fairly compensated for lost harvesting rights and improvements on Crown land, such as roads and bridges, based on the remaining term of the license and calculated according to a regulation that has not yet been enacted. Because the first 200,000 cubic meters of annual allowable cut (AAC) are not subject to reduction, the timber take-back is expected to result in a reduction of approximately 200,000 cubic meters, or 16 percent, of the Company’s existing annual allowable cut. The Company expects the reductions in its AAC will be made up through market purchases of logs at costs generally consistent with the cost of logs acquired under tenures. The Minister of Forests has three years from March 31, 2003 to determine reductions to a licensee’s AAC.

In addition, as part of the Plan, the Crown has proposed to introduce a market-based timber pricing system for stumpage fees in the British Columbia interior. Although originally targeted for 2004, it now appears that implementation of the market-based system will be delayed with no specified implementation date. Upon implementation, the new system will involve complex formulas that have not been defined and a conceptual framework that is the subject of ongoing discussions between the Crown and industry representatives. Accordingly, while the Company generally believes that a new market-based system will result in some increase in stumpage fees compared to the existing system, the Company cannot estimate the amount of the potential impact.

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

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sites in amounts that it believes are probable and reasonably estimable. When the estimate of a probable loss is a range, the minimum amount in the range is accrued when no estimate within the range is better than another. As additional information becomes available, the Company’s estimates may change. Remediation costs incurred are charged against the reserves, and 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 sediments 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. As of September 30, 2004, the Company’s remediation efforts for four of the five landfills have been completed. The remaining landfill remediation work will be completed in 2004, and the Company expects to receive a “no further action” letter from WDOE soon thereafter. WDOE requested that the Company perform an investigation of sediments in the bay adjacent to the mill site to determine the extent of wood waste accumulation. The Company completed the bay sediment characterization during 2002 and, in the third quarter of 2003, submitted a sediment clean up action plan related to the wood waste accumulation in the mill site bay. Remediation dredging was completed in 2003 as part of the sediment clean up action plan. The Company received approval of the sediment clean up action plan from WDOE in April 2004. The reserve balance for the Port Gamble site was $0.6 million at September 30, 2004. Remediation costs charged to the reserve in the first nine months of 2004 totaled $0.2 million. The Company expects the remaining remediation costs to be incurred in 2004 and expects to incur monitoring costs through 2013.

In June 2002, the Company was requested by Environment Canada, based on detection of environmental contamination in an effluent treatment pond at the Mackenzie pulp mill, to remediate the 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. The Company has worked with British Columbia’s Ministry of Land, Water and Air Protection to develop an appropriate remediation strategy, with site testing and partial dredging completed in the third quarter of 2003 resulting in a reduction in pond water contamination to acceptable levels. The reserve balance was $1.0 million at September 30, 2004, representing the estimated cost of a series of partial dredges of the pond to eliminate remaining sources of water contamination. Remediation costs charged to the reserve in the first nine months of 2004 totaled $0.6 million. The Company expects the remaining remediation costs to be incurred in 2004 through 2007.

In 1992, the Oregon Department of Environmental Quality (ODEQ), based on detection of creosote and hydrocarbon contamination, determined that a vacant industrial site formerly owned by the Company in St. Helens, Oregon, required further action. The Company is currently participating in the investigation phase of this site. The remediation reserve balance for this site was $3.6 million at September 30, 2004, representing the low end of the range of estimated future remediation and monitoring costs at this site. The reserve is for the estimated costs of soil and groundwater remediation and post remediation monitoring costs, and is based on the Company’s preliminary assessment of the nature and extent of site contamination and remediation methodology. The Company expects to complete additional bioassay and sediment testing and site analysis in 2004. If site testing results are unfavorable or if ODEQ requires more extensive remediation or monitoring for any other reason, it is reasonably possible that up to $5.0 million of additional remediation and monitoring costs could be incurred based on currently available information and analysis. Remediation costs charged to the reserve in the first nine months of 2004 totaled $0.1 million. The Company currently expects the majority of the remediation costs to be incurred in 2007, with post remediation monitoring costs to begin in 2008 and to continue for 15 years.

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Labor Relations

Approximately 80 percent of the Company’s employees are paid on an hourly basis and most of these employees are covered under collective bargaining agreements. In the second quarter of 2004, the Company concluded negotiations with the Canadian unions in Midway, Grand Forks and Boundary covering approximately 381 employees. The renewed contract provides for wage increases totaling 11 percent over a six-year term expiring in June 2009. The Company’s collective bargaining agreement covering approximately 140 employees at the Halsey pulp mill will expire in January 2005.

Other Litigation

In addition to the matters discussed above, the Company is a party to other legal proceedings and environmental matters generally incidental to the business. Although the final resolution of any legal proceeding or environmental matter is subject to a great many variables, the Company currently believes that adequate reserves have been established for probable losses when the amount could be reasonably determined. The Company regularly monitors its exposure to legal and environmental loss contingencies and, as additional information becomes available, the Company’s estimates may change.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The Company continued to experience improvement in market prices for lumber while pulp market prices declined slightly during the third quarter of 2004. The Company earned $7.8 million in the third quarter of 2004 on revenues of $199.1 million, compared with a net loss of $4.7 million in the third quarter of 2003 on revenues of $169.0 million and net income of $9.2 million in the second quarter of 2004 on revenues of $193.6 million. The Company earned $13.7 million for the nine months ended September 30, 2004 compared with a net loss of $19.1 million for the same period in the prior year. Net income per diluted share was $0.48 for the third quarter of 2004 and $0.86 for the nine months ended September 30, 2004. This compares with net loss per diluted share of $.30 and $1.22 for the three and nine month periods ending September 30, 2003.

Average prices for pulp and lumber were up significantly in the first nine months of 2004 compared with the same period in 2003. The low interest rate environment and strong home building activity has led to higher demand for wood products. Average lumber price realizations in the third quarter of 2004 were 32 percent higher than the third quarter of 2003 and were 35 percent higher for the nine months ended September 30, 2004 as compared to the same period in 2003. Average pulp price realizations in the third quarter of 2004 were 21 percent higher than in the third quarter of 2003 and were 19 percent higher for the nine months ended September 30, 2004 as compared to the same period a year ago.

The Company continued to be adversely affected by import duties on Canadian softwood lumber as well as a weaker U.S. dollar as compared to the first nine months of 2003. A weakening U.S. dollar relative to the Canadian dollar increases the Company’s reported pulp and wood products manufacturing costs that are incurred primarily in Canadian dollars. The Canadian dollar strengthened by six percent in the third quarter of 2004 compared to the third quarter of 2003 and strengthened four percent compared to the second quarter of 2004. The Company estimates that the change in the Canadian to U.S. dollar exchange rate between 2003 and 2004 increased third quarter and year-to-date 2004 reported cost of goods sold by approximately $5.5 million and $23.8 million, respectively.

Lumber import duties totaled $13.0 million and $32.6 million in the third quarter and year-to-date 2004, respectively, compared with $8.8 million and $22.1 million in the same periods of 2003. The increase in duties paid primarily reflected higher lumber sales prices in 2004.

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Selected Segment Data