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Pope Resources Reports First Quarter Income of $451,000

May 3, 2010

POULSBO, Wash., May 3, 2010 /PRNewswire via COMTEX/ --Pope Resources (Nasdaq: POPE) reported net income attributable to unitholders of $451,000, or $0.10 per diluted ownership unit, on revenue of $6.0 million for the quarter ended March 31, 2010. This compares to a net loss attributable to unitholders of $123,000, or $0.03 per diluted ownership unit, on revenue of $5.0 million for the comparable period in 2009.

Cash provided by operations for the quarter ended March 31, 2010 was $846,000, compared to $435,000 for the first quarter of 2009.

"Despite continued weak domestic housing starts, we were encouraged by improving market dynamics in both domestic and export log markets," said David L. Nunes, President and CEO. "Domestic sawlog prices improved by 3% to $459 per thousand board feet (MBF), or $13 per MBF, relative to the first quarter of 2009 and by 14%, or $58 per MBF, relative to the fourth quarter of 2009. This improvement is a function of inventory restocking throughout the lumber distribution channel as well as increasing demand from Chinese and Korean log buyers. We responded to these improved market conditions by moving more of our planned harvest volume into the first quarter. Given the improvement in log markets, we intend to continue harvesting more than planned, as we did in the first quarter to take advantage of higher prices, and will do so the rest of the year if market conditions stay constant or improve."

Fee Timber operating income in the first quarter increased 67%, from $1.4 million in 2009 to $2.3 million in 2010, driven by an increase in harvest volume from 9 million board feet (MMBF) in 2009 to 12 MMBF in 2010, offset in part by an 8% decline in average realized log price, which fell from $477 per MBF in 2009 to $441 per MBF in 2010. The decline in average log price realization from the first quarter of 2009 reflects a shift in the export mix, with more volume flowing to the lower valued Chinese and Korean markets, as well as an increase in harvest of lower valued whitewood logs.

Our Timberland Management & Consulting segment posted an operating loss of $241,000 for the first quarter of 2010, a decline from the operating loss of $104,000 for the corresponding quarter in 2009 primarily due to the termination of the Cascade Timberlands contract in mid-2009. This segment includes revenue from the management of timberland owned by the two private equity timber funds managed by Olympic Resource Management. However, fees earned from these management activities during the first quarter of 2010 and 2009 of $253,000 and $204,000, respectively, were eliminated with a corresponding reduction to Fee Timber operating expenses as a result of the consolidation of these funds into the Partnerships' financial statements.

The operating loss of $526,000 posted by our Real Estate segment for the first quarter of 2010 reflects a slight decline from the operating loss of $459,000 for 2009's first quarter due primarily to a decline in commercial lease revenue for the millsite at Port Gamble. The millsite had been leased to the Washington State Department of Transportation in support of a long-term project to replace a portion of the Hood Canal Bridge. The final payment on this lease was received in the third quarter of 2009.

First quarter 2010 General & Administrative expenses increased 11% to $941,000, compared to $844,000 in the prior year, driven by higher professional service fees in the first quarter of 2010 versus 2009.

The financial schedules attached to this earnings release provide 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 152,000 acres of timberland and development property in Washington and Oregon. We also manage, co-invest in, and consolidate two timberland investment funds that we manage for a fee. In addition, we offer our 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 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 conditions in the housing construction and wood-products markets that affect demand for our products; 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, including changes in those regulations; conditions affecting credit markets as they affect the availability of capital and costs of borrowing; labor, equipment and transportation costs that affect our net income; the impacts of natural disasters on our timberlands and on surrounding areas; and our ability to discover and to accurately estimate liabilities associated with our properties. Other factors are set forth in that part of our Annual Report on Form 10-K entitled "Risk Factors." 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.

                     Pope Resources, A Delaware Limited Partnership

      (all amounts in $000's, except per unit amounts)

                                                              Three months
                                                            ended March 31,
                                                             2010        2009

    Revenues                                               $5,966      $4,979
    Costs and expenses:
      Cost of sales                                        (2,606)    (2,198)
      Operating expenses                                   (2,788)    (2,822)
                                                           ------      ------
    Operating income (loss)                                   572         (41)
      Interest income                                          34          69
      Interest expense                                       (541)       (617)
      Capitalized interest                                    240         305
      SLARS gain and (impairment) on dispositions              11         (60)
                                                              ---         ---
    Income (loss) before income taxes                         316        (344)
    Income tax expense                                        (12)          -
                                                              ---         ---
    Net income (loss)                                         304        (344)
      Net loss attributable to noncontrolling
       interests                                              147         221
                                                              ---         ---
    Net income (loss) attributable to Pope
     Resources' unitholders                                  $451       ($123)
                                                             ====       =====

    Average units outstanding - Basic                       4,530       4,591
                                                            =====       =====
    Average units outstanding - Diluted                     4,586       4,591
                                                            =====       =====

    Basic net income (loss) per unit                        $0.10     ($0.03)
                                                            =====      ======
    Diluted net income (loss) per unit                      $0.10     ($0.03)
                                                            =====      ======

                                                       BALANCE SHEETS
                                                      (all amounts in

                                                     10       31-Dec-09
                                                 --------     ---------
      Pope Resources cash and cash equivalents     $6,917        $6,035
      ORM Timber Funds cash and cash equivalents    1,317         1,145
                                                    -----         -----
        Cash and cash equivalents                   8,234         7,180
      Auction rate securities, current                  -           690
      Other current assets                          1,621         1,392
                                                    -----         -----
        Total current assets                        9,855         9,262
      Roads and timber, net                       119,778       120,457
      Properties and equipment, net                55,246        54,911
      Auction rate securities, non-current              -           796
      Other assets                                  1,605         1,630
                                                    -----         -----
          Total                                  $186,484      $187,056
                                                 ========      ========
    Liabilities and equity:
      Current liabilities                          $2,242        $2,235
      Current portion of long-term debt            18,636           831
      Long-term debt, excluding current portion    10,098        28,659
      Other long-term liabilities                   1,249         1,274
                                                    -----         -----
        Total liabilities                          32,225        32,999
      Partners' capital                            83,350        83,126
      Noncontrolling interests                     70,909        70,931
          Total                                  $186,484      $187,056
                                                 ========      ========

                               (all amounts in $000's)

                                                             Three months
                                                              ended March
                                                           2010        2009

    Net income (loss)                                      $304       ($344)
    Added back:
      Depletion                                             724         569
      SLARS activity                                        (11)         60
      Depreciation and amortization                         154         203
      Unit compensation                                     161         159
      Development expenditures                            (320)        (329)
      Cost of land sold                                      67           -
      Change in operating accounts                        (233)         117
                                                           ----         ---
      Cash provided by operations                          $846        $435
                                                           ====        ====

                                                             (all amounts in

                                                               Three months
                                                             ended March 31,
                                                            2010        2009

      Pope Resources Fee Timber                           $5,484      $4,520
      ORM Timber Funds                                       278           1
                                                             ---         ---
          Total Fee Timber                                 5,762       4,521
      Timberland Management & Consulting (TM&C)                -         208
      Real Estate                                            204         250
                                                             ---         ---
          Total                                           $5,966      $4,979
                                                          ======      ======
    Operating income (loss):
      Fee Timber                                           2,280       1,366
      TM&C                                                  (241)       (104)
      Real Estate                                           (526)       (459)
      General & administrative                              (941)       (844)
                                                            ----        ----
          Total                                             $572        ($41)
                                                            ====        ====


                                                               Three months
                                                             ended March 31,
                                                            2010         2009
    Log sale volumes (thousand board feet):
      Douglas-fir                                          9,023        7,530
      Whitewood                                              487           65
      Cedar                                                  146           64
      Hardwood                                                89          119
      All species                                          1,847          967
                                                           -----          ---
    Total                                                 11,592        8,745
                                                          ======        =====

    Average price realizations (per thousand board
      Douglas-fir                                            467          508
      Whitewood                                              371          306
      Cedar                                                  794          798
      Hardwood                                               499          475
      All species                                            300          227
    Overall                                                  441          477

    Owned timber acres                                   114,000      114,000
    Acres owned by Funds                                  36,000       24,000
    Third-party managed acres                                  -      267,000
    Capital expenditures ($000's)                            589          780
    Depletion ($000's)                                       724          569
    Depreciation and amortization ($000's)                   154          203
    Debt to total capitalization (excludes
     noncontrolling interest)                                 26%          25%

                                                 QUARTER TO QUARTER
                                              (Amounts in $000's except
                                                   per unit data)

                                           Q1 2010 vs.           Q1 2010 vs.
                                             Q1 2009               Q4 2009
                                             Total                Total
                                             -----                -----

    Net income (loss) attributable to
     Pope Resources' unitholders:
      1st Quarter 2010                         $451                  $451
      4th Quarter 2009                                              ($376)
      1st Quarter 2009                         (123)
         Variance                              $574                  $827

    Detail of earnings variance:
    Fee Timber
      Log price realizations (A)              ($417)                 $301
      Log volumes (B)                         1,358                   578
      Depletion                                (155)                 (172)
      Production costs                         (254)                 (126)
      Other Fee Timber                          382                     5
    Timberland Management & Consulting
      Management fee changes                   (208)                    -
      Other Timberland Mgmnt & Consulting        71                   (69)
    Real Estate
      Environmental remediation liability         -                    30
      Land and conservation easement sales       (1)                 (214)
      Timber depletion on HBU sale                -                     6
      Other Real Estate                         (66)                   50
    General & administrative costs              (97)                  257
    Net interest expense                        (24)                   (5)
    Other (taxes, noncontrolling int.,
     impairment)                                (15)                  186
    Total variance                             $574                  $827
                                               ====                  ====

      (A) Price variance calculated by extending the change in average
      realized price by current period volume.
       (B) Volume variance calculated by extending change in sales volume by
       the average log sales price for the comparison period.

SOURCE Pope Resources


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