POULSBO, Wash.--(BUSINESS WIRE)--July 30, 2007--Pope Resources (Nasdaq:POPEZ) reported net income of $4.8 million, or $1.01 per diluted ownership unit, on revenues of $15.3 million for the second quarter ended June 30, 2007. This compares to net income of $3.5 million, or 74 cents per diluted ownership unit, on revenues of $15.6 million for the comparable period in 2006.
Net income for the six months ended June 30, 2007 totaled $5.7 million, or $1.19 per diluted ownership unit, on revenues of $22.1 million. Net income for the corresponding period in 2006 totaled $8.8 million, or $1.86 per diluted ownership unit, on revenues of $31.7 million.
Earnings before interest, taxes, depreciation, depletion, and amortization (EBITDDA) for the quarter ended June 30, 2007 were $7.0 million, compared to $6.0 million for the second quarter of 2006. For the six months ended June 30, 2007, EBITDDA was $8.8 million, compared to $14.9 million for year-to-date 2006 results.
"Our operating results for second quarter 2007 were higher than last year's comparable quarter primarily because our harvest volume increased by 36%, from 17 million board feet (MMBF) in 2006 to 23 MMBF in 2007," said David L. Nunes, President and CEO. "Log prices generally softened during the second quarter given the decline in domestic housing starts, but we were able to mitigate much of the impact of this trend by virtue of locking in second quarter prices earlier in the year when market sentiment was less bearish, and by shifting our harvest mix toward select markets where pricing remained healthier. As a result, our average realized log price increased by 4% during the quarter, from $603 per thousand board feet (MBF) in 2006 to $626 per MBF in 2007."
For the first six months of 2007, Fee Timber operating income declined 5% to $9.7 million from $10.2 million in 2006. This decline was driven by a 16% drop in harvest volumes, from 39 MMBF in 2006 to 33 MMBF in 2007. This was offset somewhat by a 1% increase in the average realized log price, which rose from $606 per MBF in 2006 to $611 per MBF in 2007. Through the first half of 2007, we harvested 60% of our planned annual harvest volume, compared to the first half of 2006, when we harvested 71% of the total annual harvest volume.
Our Timberland Management & Consulting segment posted a year-to-date operating loss of $0.3 million compared to income of $1.3 million in 2006. The decline in operating income from this segment is the result of fewer assets under management in 2007 and a timberland disposition fee earned in 2006 that was not repeated in 2007.
Operating income for our Real Estate segment declined from $0.2 million for the first six months of 2006 to a $1.0 million loss for the comparable period in 2007. This anticipated decline is due to a significant reduction in the number of land sale closings in the first half of 2007 compared to the first half of last year. We expect to generate revenue from our Gig Harbor and Bremerton projects during the balance of 2007, but do not expect to reach the record level attained in 2006.
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 430,000 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.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 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; our ability to discover and to accurately estimate liabilities associated with our properties; 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 "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.
Management considers earnings (net income or loss) before interest expense, income taxes, depreciation, depletion and amortization (EBITDDA) to be an important measure of operating profitability, particularly when comparing results between different timber-owning companies because there are varying methods of calculating depletion expense under GAAP. With different issuers employing various calculation methodologies, disclosure of EBITDDA can make it easier for the reader to make meaningful comparisons between the operating results and cash-generating capabilities of different timber companies.
Pope Resources, A Delaware Limited Partnership
Unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in $000's, except per
unit amounts)
Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
Revenues $ 15,326 $15,610 $22,113 $ 31,693
Costs and expenses:
Cost of sales (6,294) (8,414) (9,131) (14,839)
Operating expenses (4,080) (3,461) (7,342) (6,934)
--------- -------- -------- ---------
Operating income 4,952 3,735 5,640 9,920
Interest, net 18 (217) 27 (526)
--------- -------- -------- ---------
Income before income taxes and
minority interest 4,970 3,518 5,667 9,394
Income tax provision (10) 8 (17) (437)
--------- -------- -------- ---------
Income before minority interest 4,960 3,526 5,650 8,957
Minority interest (145) 14 19 (119)
--------- -------- -------- ---------
Net income $ 4,815 $ 3,540 $ 5,669 $ 8,838
========= ======== ======== =========
Average units outstanding -
Basic 4,685 4,641 4,675 4,638
========= ======== ======== =========
Average units outstanding -
Diluted 4,786 4,753 4,776 4,750
========= ======== ======== =========
Basic net income per unit $ 1.03 $ 0.76 $ 1.21 $ 1.91
========= ======== ======== =========
Diluted net income per unit $ 1.01 $ 0.74 $ 1.19 $ 1.86
========= ======== ======== =========
CONSOLIDATED BALANCE SHEETS
(all amounts in $000's)
June 30, December 31,
2007 2006
----------- ------------
Assets:
Cash $ 6,146 $ 7,194
Short term investments 25,000 25,000
Other current assets 10,705 8,933
Roads and timber 95,814 98,110
Properties and equipment 42,207 39,026
Other assets 1,490 2,019
----------- ------------
Total $ 181,362 $ 180,282
=========== ============
Liabilities and partners' capital:
Current liabilities $ 13,341 $ 14,775
Long-term debt, excluding current portion 29,543 30,866
Other long-term liabilities 46,867 47,036
----------- ------------
Total liabilities 89,751 92,677
Partners' capital 91,611 87,605
----------- ------------
Total $ 181,362 $ 180,282
=========== ============
RECONCILIATION BETWEEN NET INCOME AND EBITDDA
(all amounts in $000's)
Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
Net income $ 4,815 $ 3,540 $ 5,669 $ 8,838
Added back:
Interest, net (18) 217 (27) 526
Depletion 2,038 2,119 2,749 4,692
Depreciation and amortization 197 175 399 359
Income tax expense 10 (8) 17 437
-------- --------- -------- -------
EBITDDA $ 7,042 $ 6,043 $ 8,807 $14,852
======== ========= ======== =======
RECONCILIATION BETWEEN CASH FROM OPERATIONS AND EBITDDA
(all amounts in $000's)
Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
Cash from operations $ 7,718 $ 7,858 $ 6,907 $12,313
Added back:
Change in working capital - 1,522 2,368 5,682
Interest - 217 - 526
Deferred revenue 260 - - -
Minority interest - 13 19 -
Deferred taxes - 36 - 19
Income tax provision 10 - 17 437
Less:
Change in working capital (673) - - -
Interest (17) (26) -
Deferred revenue - (666) (77) (941)
Cost of land sold (14) (2,856) (46) (2,869)
Equity based compensation (103) (72) (361) (195)
Minority interest (145) - - (120)
Income tax provision - (8) - -
Other 6 (1) 6 -
-------- --------- -------- --------
EBITDDA $ 7,042 $ 6,043 $ 8,807 $14,852
======== ========= ======== ========
SEGMENT INFORMATION
(all amounts in $000's)
Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
Revenues:
Fee Timber $ 14,614 $10,449 $20,806 $24,173
Timberland Management &
Consulting (TM&C) 356 544 708 2,568
Real Estate 356 4,617 599 4,952
--------- -------- -------- --------
Total 15,326 15,610 22,113 31,693
EBITDDA:
Fee Timber 9,266 6,195 12,629 15,071
TM&C (149) 71 (259) 1,250
Real Estate (419) 629 (936) 324
General & Administrative (1,656) (852) (2,627) (1,793)
--------- -------- -------- --------
Total 7,042 6,043 8,807 14,852
Depreciation, depletion and
amortization:
Fee Timber 2,122 2,181 2,916 4,825
TM&C 20 20 41 36
Real Estate 43 43 87 77
General & Administrative 50 50 104 113
--------- -------- -------- --------
Total 2,235 2,294 3,148 5,051
Operating income/(loss):
Fee Timber 7,289 4,014 9,694 10,246
TM&C (169) 37 (300) 1,333
Real Estate (462) 586 (1,023) 247
General & Administrative (1,706) (902) (2,731) (1,906)
--------- -------- -------- --------
Total $ 4,952 $ 3,735 $ 5,640 $ 9,920
========= ======== ======== ========
SELECTED STATISTICS
Three months ended Six months ended
30-Jun-07 30-Jun-06 30-Jun-07 30-Jun-06
Log sale volumes (thousand
board feet):
Sawlogs
Douglas-fir 15,991 11,842 23,106 28,282
Whitewood 2,922 1,149 3,713 3,145
Cedar 575 227 635 586
Hardwood 878 1,144 1,007 1,706
Pulp
All species 2,241 2,288 4,185 4,964
--------- --------- --------- ---------
Total 22,607 16,650 32,646 38,683
========= ========= ========= =========
Average price realizations
(per thousand board feet):
Sawlogs
Douglas-fir 638 665 630 675
Whitewood 477 452 480 443
Cedar 1,333 1,182 1,320 993
Hardwood 945 670 910 646
Pulp
All species 398 260 430 255
Overall 626 603 611 606
Owned acres (A) 140,294 117,435 140,294 117,435
Acres under management 292,647 291,925 292,647 291,925
Capital expenditures ($000's) $ 3,101 $ 2,713 $ 4,410 $ 4,148
Depletion ($000's) $ 2,038 $ 2,119 $ 2,749 $ 4,692
Depreciation ($000's) $ 197 $ 175 $ 399 $ 359
Debt to total capitalization 25% 31% 25% 31%
(A) 2007 acres include 23,858 acres owned by ORM Timberfund I, LP.
QUARTER TO QUARTER
COMPARISONS
(Amounts in $000's
except per unit data)
Q2 2007 vs. Q2 2007 vs.
Q2 2006 Q1 2007
Total Total
Net income:
2nd Quarter 2007 $ 4,815 $ 4,815
1st Quarter 2007 854
2nd Quarter 2006 3,540
---------- ----------
Variance $ 1,275 $ 3,961
Detail of earnings variance:
Fee Timber
Log price realizations (A) $ 520 $ 1,085
Log volumes (B) 3,592 7,264
Depletion 81 (1,327)
Production costs (989) (2,145)
Other Fee Timber 68 4
Timberland Management & Consulting
Management fee changes (77) (1)
Other Timberland Mgmnt & Consulting (129) (37)
Real Estate
Land sales (1,370) -
Other Real Estate 326 103
General & administrative costs (804) (681)
Interest expense 96 38
Other (taxes, minority int., interest inc.) (39) (342)
---------- ----------
Total change in earnings $ 1,275 $ 3,961
========== ==========
(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.
CONTACT: Pope Resources
Tom Ringo, VP & CFO, 360-697-6626
Fax: 360-697-1156
SOURCE: Pope Resources
