Pope Resources (Nasdaq:POPEZ) reported net income of $4.1 million,
or 87 cents per diluted ownership unit, on revenues of $15.3
million for the third quarter ended September 30, 2005. This
compares to net income of $1.4 million, or 30 cents per diluted
ownership unit, on revenues of $8.1 million, for the same period in
2004. Net income for the nine months ended September 30, 2005,
totaled $12.8 million, or $2.70 per diluted ownership unit, on
revenues of $48.1 million. Net income for the corresponding period
in 2004 totaled $9.4 million, or $2.04 per diluted ownership unit,
on revenues of $31.7 million. Earnings before interest, income tax,
depreciation, depletion, and amortization (EBITDDA) for the quarter
ended September 30, 2005, was $7.6 million, compared to $3.2
million for the third quarter of 2004. For the nine months ended
September 30, 2005, EBITDDA was $25.5 million, compared to $15.8
million for year-to-date 2004 results. "On the continued strength
in our core log markets, rural residential real estate land sales,
and a major third-party timberland management contract, we enjoyed
outstanding third quarter results," said David L. Nunes, President
and CEO. "On top of already strong first and second quarter
results, this year is shaping up to be one of the best years in the
partnership's 20-year history." In the current quarter our Fee
Timber segment has benefited from a 12% increase in average log
prices from the corresponding quarter in 2004. On a year-to-date
basis, average log prices are up 10% over last year. In addition, a
timberland acquisition that closed in late 2004 contributed 7
million board feet (MMBF) of additional harvest in the third
quarter relative to the prior year's third quarter and 15 MMBF on a
year-to-date basis as compared to 2004. While this incremental
volume carries a higher depletion expense due to having a separate
depletion pool, the Fee Timber segment nevertheless generated $1.7
million of higher operating income in the current quarter as
compared to the prior year. On a year-to-date basis, the Fee Timber
segment generated $1.2 million more operating income as compared to
2004. Throughout 2005, the Real Estate segment has enjoyed a surge
of buyer interest in rural residential lots. The Real Estate
segment has worked diligently over the past year to first identify
and then bring to market a pipeline of such properties. Sales of
these rural residential lots, which consist of a mix of properties
in the historic Real Estate land portfolio and properties recently
transferred from the Fee Timber portfolio, totaled $1.1 million in
the current quarter and $3.1 million year-to-date. These sales
propelled Real Estate operating income to $0.5 million in the
current quarter and $1.3 million year-to-date. This compares to an
operating loss of $0.3 million in the third quarter of 2004 and
operating income of $0.7 million for the prior year-to-date. The
Timberland Management & Consulting segment, which began serving
a new timberland management customer in January 2005, generated
operating income of $0.4 million in the current quarter compared to
breakeven results for the prior year. On a year-to-date basis, this
segment has generated $2.1 million of operating income compared to
an operating loss of $0.6 million in the prior year. The primary
driver behind the improvement in year-to-date EBITDDA is an
increase in timber harvested as a result of a timberland
acquisition in late 2004. Year-to-date harvest volumes have
increased almost 15 million board feet (MMBF), or 29%, from a year
ago. However, because the volume from this acquisition has its own
separate depletion pool, the increased harvest related to this
acquisition has less of an impact to earnings as compared to the
impact on EBITDDA. Results for 2005's fourth quarter will not
approach those of the first three quarters since we have harvested
83% of the target volume for 2005 in the first nine months. The
financial and statistical schedules attached to this earnings
release provide selected detail on individual segment results and
operating statistics. About Pope Resources Pope Resources, a
publicly traded limited partnership, and its subsidiaries Olympic
Resource Management and Olympic Property Group, own or manage over
640,000 acres of timberland and development property in Washington
and Oregon. In addition, we provide forestry consulting and
timberland investment management services to third-party owners and
managers of timberland in Washington, Oregon, and California. The
company and its predecessor companies have owned and managed
timberlands and development properties for more than 150 years.
Additional information on the company can be found at www.orm.com.
The contents of our website are not incorporated into this release
or into our filings with the Securities and Exchange Commission.
This press release contains a number of projections and statements
about our expected financial condition, operating results, business
plans and objectives. These statements reflect management's
estimates based on current goals and its expectations about future
developments. Because these statements describe our goals,
objectives, and anticipated performance, they are inherently
uncertain, and some or all of these statements may not come to
pass. Accordingly, they should not be interpreted as promises of
future management actions or financial performance. Our future
actions and actual performance will vary from current expectations
and under various circumstances the results of these variations may
be material and adverse. Some of the factors that may cause actual
operating results and financial condition to fall short of
expectations include factors that affect our ability to anticipate
and respond adequately to fluctuations in the market prices for our
products; environmental and land use regulations that limit our
ability to harvest timber and develop property; labor, equipment
and transportation costs that affect our net income; and economic
conditions that affect consumer demand for our products and the
prices we receive for them. Other factors are set forth in that
part of our Annual Report on Form 10-K entitled "Management's
Discussion & Analysis of Financial Condition and Results of
Operation -- Risks and Uncertainties." Other issues that may have
an adverse and material impact on our business, operating results,
and financial condition include those risks and uncertainties
discussed in our other filings with the Securities and Exchange
Commission. Forward-looking statements in this release are made
only as of the date shown above, and we cannot undertake to update
these statements. Management considers earnings (net income or
loss) before interest expense, income taxes, depreciation,
depletion and amortization (EBITDDA) to be a relevant and
meaningful indicator of liquidity and earnings performance commonly
used by investors, financial analysts and others in evaluating
companies in its industry and, as such, has provided this
information in addition to the generally accepted accounting
principle-based presentation of net income or loss and cash from
operations. In that context, "depletion" refers to a measure of the
cost of timber harvested. -0- *T Pope Resources, A Delaware Limited
Partnership Unaudited CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (all amounts in $000's except income per unit) Three
months ended Nine months ended Sept. 30, Sept. 30, 2005 2004 2005
2004 Revenues $ 15,312 $ 8,051 $ 48,099 $ 31,671 Costs and
expenses: Cost of sales (6,631) (3,269) (21,845) (11,885) Operating
expenses (3,860) (2,723) (10,667) (8,206) ------- ------- --------
-------- Operating income 4,821 2,059 15,587 11,580 Interest, net
(586) (698) (1,938) (2,224) ------- ------- -------- --------
Income before income taxes and minority interest 4,235 1,361 13,649
9,356 Income tax benefit/(provision) (52) - (562) - ------- -------
-------- -------- Income before minority interest 4,183 1,361
13,087 9,356 Minority interest (46) - (275) - ------- -------
-------- -------- Net income $ 4,137 $ 1,361 $ 12,812 $ 9,356
======= ======= ======== ======== Average units outstanding --
Basic (000's) 4,621 4,522 4,593 4,520 Average units outstanding --
Diluted (000's) 4,773 4,608 4,742 4,588 Basic net income per unit $
0.90 $ 0.30 $ 2.79 $ 2.07 Diluted net income per unit $ 0.87 $ 0.30
$ 2.70 $ 2.04 CONDENSED CONSOLIDATED BALANCE SHEETS (all amounts in
$000's) September 30, December 31, 2005 2004 Assets: Cash $ 3,009 $
757 Short-term investments 14,000 - Other current assets 6,772
2,073 Roads and timber 53,779 62,684 Properties and equipment
25,735 27,999 Other assets 877 1,355 ------------ ------------
Total $ 104,172 $ 94,868 ============ ============ Liabilities and
partners' capital: Current liabilities $ 5,045 $ 5,935 Long-term
debt, excluding current portion 32,308 34,164 Other long-term
liabilities 211 236 ------------ ------------ Total liabilities
37,564 40,335 Partners' capital 66,608 54,533 ------------
------------ Total $ 104,172 $ 94,868 ============ ============
RECONCILIATION BETWEEN NET INCOME AND EBITDDA (all amounts in
$000's) Three months ended Nine months ended 30-Sep-05 30-Sep-04
30-Sep-05 30-Sep-04 Net income $ 4,137 $ 1,361 $ 12,812 $ 9,356
Added back: Interest, net 586 698 1,938 2,224 Income tax provision
52 - 562 - Depletion 2,623 975 9,689 3,740 Depreciation and
amortization 163 165 482 507 ------ ------ ------- ------- EBITDDA
$ 7,561 $ 3,199 $ 25,483 $ 15,827 ====== ====== ======= =======
RECONCILIATION BETWEEN CASH FROM OPERATIONS AND EBITDDA (all
amounts in $000's) Three months ended Nine months ended 30-Sep-05
30-Sep-04 30-Sep-05 30-Sep-04 Cash from operations $ 9,439 $ 2,763
$ 22,253 $ 15,510 Added back: Change in working capital - 237 1,249
- Interest, net 586 698 1,938 2,224 Deferred profit 10 - 695 -
Income tax expense 52 - 562 - Other - 2 - 1 Less: Change in working
capital (2,217) - - (1,328) Deferred profit - (465) - (540)
Deferred taxes (84) - (594) - Minority interest (46) - (275) - Cost
of land sold (178) (36) (344) (40) Other (1) - (1) - ------- ------
------- ------- EBITDDA $ 7,561 $ 3,199 $ 25,483 $ 15,827 =======
====== ======= ======= SEGMENT INFORMATION (all amounts in $000's)
Three months ended Nine months ended Sept. 30, Sept. 30, 2005 2004
2005 2004 Revenues: Fee Timber $ 12,347 $ 7,215 $ 39,230 $ 27,995
Timberland Management & Consulting (TM&C) 1,666 477 5,123
999 Real Estate 1,299 359 3,746 2,677 ------- ------ -------
------- Total $ 15,312 $ 8,051 $ 48,099 $ 31,671 ------- ------
------- ------- EBITDDA: Fee Timber $ 7,489 $ 4,055 $ 24,490 $
17,359 TM&C 419 (41) 2,129 (500) Real Estate 457 (246) 1,458
815 General & administrative and minority interest (804) (569)
(2,594) (1,847) ------- ------ ------- ------- Total $ 7,561 $
3,199 $ 25,483 $ 15,827 ------- ------ ------- -------
Depreciation, depletion and amortization: Fee Timber $ 2,735 $ 997
$ 9,764 $ 3,798 TM&C 26 22 74 66 Real Estate (39) 30 135 114
General & administrative 64 91 198 269 ------- ------ -------
------- Total $ 2,786 $ 1,140 $ 10,171 $ 4,247 ------- ------
------- ------- Operating income/(loss): Fee Timber $ 4,754 $ 3,058
$ 14,726 $ 13,561 TM&C 393 (63) 2,055 (566) Real Estate 496
(276) 1,323 701 General & administrative (822) (660) (2,517)
(2,116) ------- ------ ------- ------- Total $ 4,821 $ 2,059 $
15,587 $ 11,580 ------- ------ ------- ------- SELECTED STATISTICS
Three months ended Nine months ended 30-Sep-05 30-Sep-04 30-Sep-05
30-Sep-04 Log sale volumes (thousand board feet): Export conifer
2,123 550 7,596 7,732 Domestic conifer 14,115 9,236 45,253 33,455
Pulp conifer 2,655 2,807 8,590 8,226 Hardwoods 1,649 716 4,466
1,803 -------- -------- -------- -------- Total 20,542 13,309
65,905 51,216 ======== ======== ======== ======== Average price
realizations (per thousand board feet): Export conifer $ 683 $ 695
$ 675 $ 655 Domestic conifer 626 591 629 568 Pulp conifer 211 226
211 227 Hardwoods 643 564 612 570 Overall 580 517 579 526 Owned
acres 117,585 112,240 117,585 112,240 Acres under management
527,316 5,316 527,316 5,316 Capital expenditures ($000's) 932 395
2,624 2,311 Depletion ($000's) 2,623 975 9,689 3,740 Depreciation
($000's) 163 165 482 507 Debt to total capitalization 34% 40% 34%
40% QUARTER TO QUARTER COMPARISONS (Amounts in $000's except per
unit data) Q3 2005 vs. Q3 2004 Q3 2005 vs. Q2 2005 Total Per Total
Per Diluted Diluted Unit Unit Net income: 3rd Quarter 2005 $ 4,137
$ 0.87 $ 4,137 $ 0.87 2nd Quarter 2005 4,069 0.86 3rd Quarter 2004
1,361 0.30 ------- ------- ------- ------- Variance $ 2,776 $ 0.57
$ 68 $ 0.01 Detail of earnings variance: Fee Timber Log price
realizations (A) $ 838 $ 0.17 $ 67 $ 0.01 Log volumes (B) 4,188
0.83 (1,059) (0.18) Production costs (1,630) (0.32) 123 0.02
Depletion (1,648) (0.33) 600 0.10 Other Fee Timber (52) (0.01) 93
0.02 Timberland Management & Consulting Management fee changes
176 0.04 (279) (0.05) Other Timberland Mgmnt & Consulting 280
0.06 (148) (0.03) Real Estate - - Land sales 829 0.16 273 0.05
Environmental remediation liability 63 0.01 - - Other Real Estate
(120) (0.02) 31 0.01 General & administrative costs (162)
(0.03) 25 - Interest expense 29 0.01 (1) - Other (taxes, minority
int., interest inc.) (15) - 343 0.06 ------- ------- -------
------- Total change in earnings $ 2,776 $ 0.57 $ 68 $ 0.01 =======
======= ======= ======= (A) Price variance calculated by
multiplying change in average price by prior period volume. (B)
Volume variance calculated by multiplying change in volume by
current average price. *T
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