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Pope Resources Reports First Quarter Loss of $123,000

April 29, 2009

POULSBO, Wash.--(BUSINESS WIRE)--Apr. 29, 2009-- Pope Resources (Nasdaq:POPE) reported a net loss attributable to unitholders of $123,000, or 3 cents per diluted ownership unit, on revenue of $5.0 million for the quarter ended March 31, 2009. This compares to net income attributable to unitholders of $941,000, or $0.20 per diluted ownership unit, on revenue of $6.3 million for the comparable period in 2008.

Cash provided by operations for the quarter ended March 31, 2009 was $764,000, compared to $497,000 for the first quarter of 2008, with the year-over-year improvement resulting from a decline in cash used to fund working capital.

“Ongoing weakness in both our log and real estate markets eroded revenue and operating profit for the first quarter of 2009 compared to the same period in 2008,” said David L. Nunes, President and CEO. “As was the case in 2008, rather than push a ‘normal’ log volume onto relatively depressed markets, we are responding to the current market conditions by reducing our planned annual timber harvest to 37 million board feet (MMBF), nearly 30% below our estimated long-term sustainable harvest level of 52 MMBF. With the continued slump in the housing market, and its indirect impact on our markets for raw land and logs, 2009 is shaping up to be a tough year for all our business segments.”

Operating income for our Fee Timber segment was off by 40%, declining from $2.3 million in 2008 to $1.4 million in 2009. Roughly half this reduction was a function of an 8% decline in log harvest volume, which fell from 9.5 MMBF in 2008 to 8.7 MMBF in 2009. The remaining decline in operating income was driven by an 11% drop in log prices, which fell from $538 per thousand board feet (MBF) in the first quarter of 2008 to $477 per MBF in the first quarter of 2009. The impact of these reductions in volume and price was mitigated in part by lower per MBF harvest and haul costs.

Both of our other segments, Timberland Management & Consulting and Real Estate, posted operating losses for the first quarter of 2009 that were slightly improved from last year’s first quarter. Timberland Management & Consulting posted a first quarter operating loss of $104,000 in 2009 compared to an operating loss of $198,000 in 2008. The Real Estate operating loss for the current quarter was $459,000 compared to an operating loss of $500,000 in 2008.

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 over 400,000 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. We also manage, co-invest in, and consolidate two timberland investment funds that we manage for a fee. 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.poperesources.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 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; 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
Unaudited
             
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  (all amounts in $000's, except per unit amounts)
             
        Three months ended March 31,
        2009   2008
             
Revenues       4,979     $ 6,340  
Costs and expenses:          
  Cost of sales       (2,198 )     (2,679 )
  Operating expenses       (2,822 )     (2,956 )
Operating income (loss)       (41 )     705  
  Interest income       69       395  
  Interest expense       (617 )     (634 )
  Capitalized interest       305       308  
  SLARS impairment       (60 )     -  
Income (loss) before income taxes       (344 )     774  
Income tax expense       -       (57 )
Net income (loss)       (344 )     717  
  Net loss attributable to noncontrolling interest Timber Fund I, LP   219       224  
  Net loss attributable to noncontrolling interest Timber Fund II, Inc.   2       -  
Net income (loss) attributable to Pope Resources' unitholders   $ (123 )   $ 941  
             
Average units outstanding - Basic       4,654       4,672  
Average units outstanding - Diluted       4,654       4,749  
             
Basic net income (loss) per unit     $ (0.03 )   $ 0.20  
Diluted net income (loss) per unit     $ (0.03 )   $ 0.20  
             
             
             
        CONDENSED CONSOLIDATED BALANCE SHEETS
        (all amounts in $000's)
             
             
        31-Mar-09   31-Dec-08
Assets:          
  Cash and cash equivalents     $ 15,213     $ 17,978  
  Other current assets       2,049       1,868  
  Total current assets       17,262       19,846  
  Roads and timber, net       92,254       92,753  
  Properties and equipment, net       48,392       47,946  
  Auction rate securities       3,578       3,619  
  Other assets       1,232       1,247  
  Total     $ 162,718     $ 165,411  
Liabilities and equity:          
  Current liabilities     $ 3,784     $ 3,581  
  Long-term debt, excluding current portion       26,872       28,169  
  Other long-term liabilities       1,465       1,490  
  Total liabilities       32,121       33,240  
  Partners' capital       86,140       87,817  
  Accumulated other comprehensive income     19       -  
  Noncontrolling interests       44,438       44,354  
  Total     $ 162,718     $ 165,411  

 

RECONCILIATION BETWEEN NET INCOME AND CASH FLOWS FROM OPERATIONS
(all amounts in $000's)
           
      Three months ended March 31,
      2009   2008
           
Net income (loss)     $ (344 )   $ 717  
Added back:          
Depletion       569       655  
Timber depletion on HBU sale       -       126  
SLARS impairment       60       -  
Depreciation and amortization       204       188  
Other non-cash charges to income (loss)       415       376  
Cost of land sold       -       173  
Change in operating accounts       (140 )     (1,738 )
Cash provided by operations     $ 764     $ 497  
           
           
      SEGMENT INFORMATION
      (all amounts in $000's)
           
      Three months ended March 31,
      2009   2008
           
Revenues:          
Pope Resources     $ 4,520     $ 5,452  
ORM Timber Funds       1       108  
Total Fee Timber       4,521       5,560  
Timberland Management & Consulting (TM&C)     208       224  
Real Estate       250       556  
Total       4,979       6,340  
Operating income (loss):          
Fee Timber       1,366       2,281  
TM&C       (104 )     (198 )
Real Estate       (459 )     (500 )
General & administrative       (844 )     (878 )
Total     $ (41 )   $ 705  
           
           
      SELECTED STATISTICS
           
      Three months ended March 31,
      2009   2008
Log sale volumes (thousand board feet):          
Sawlogs          
Douglas-fir       7,530       7,202  
Whitewood       65       512  
Cedar       64       68  
Hardwood       119       201  
Pulp          
All species       967       1,526  
Total       8,745       9,509  
           
Average price realizations (per thousand board feet):        
Sawlogs          
Douglas-fir       508       572  
Whitewood       306       471  
Cedar       798       1,257  
Hardwood       475       639  
Pulp          
All species       227       357  
Overall       477       538  
           
Owned timber acres       114,000       114,000  
Acres under management       291,000       290,000  
Capital expenditures ($000's)    

 

780    

 

1,985  
Depletion ($000's)       569       781  
Depreciation and amortization ($000's)       204       188  
Debt to total capitalization (excludes noncontrolling interest)     25 %     24 %

 

             
    QUARTER TO QUARTER COMPARISONS
    (Amounts in $000's except per unit data)
             
    Q1 2009 vs. Q1 2008

 

Q1 2009 vs. Q4 2008

      Total     Total
             
Net income (loss) attributable to Pope Resources' unitholders:          
1st Quarter 2009     $ (123 )     $ (123 )
4th Quarter 2008             (1,439 )
1st Quarter 2008       941        
Variance     $ (1,064 )     $ 1,316  
             
Detail of earnings variance:            
Fee Timber            
Log price realizations (A)     $ (535 )     $ (144 )
Log volumes (B)       (411 )       3,292  
Depletion       86         (541 )
Production costs       81         (1,150 )
Other Fee Timber       (136 )       (226 )
Timberland Management & Consulting            
Management fee changes       (17 )       -  
Other Timberland Mgmnt & Consulting       111         (5 )
Real Estate            
Land sales       (137 )       (932 )
Timber depletion on HBU sale       126         352  
Other Real Estate       52         465  
General & administrative costs       34         191  
Net interest expense       (312 )       (81 )
Other (taxes, noncontrolling int., impairment)       (6 )       95  
Total change in earnings     $ (1,064 )     $ 1,316  
             
(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

Pope Resources
Tom Ringo, VP & CFO, 360-697-6626
Fax: 360-697-1156

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