POULSBO, Wash.--(BUSINESS WIRE)--Oct. 31, 2007--Pope Resources (NasdaqGSM:POPEZ) reported net income of $3.6 million, or 74 cents per diluted ownership unit, on revenues of $12.2 million for the third quarter ended September 30, 2007. This compares to net income of $8.3 million, or $1.74 per diluted ownership unit, on revenues of $18.0 million for the comparable period in 2006.
Net income for the nine months ended September 30, 2007, totaled $9.2 million, or $1.91 per diluted ownership unit, on revenues of $34.3 million. Net income for the corresponding period in 2006 totaled $17.1 million, or $3.60 per diluted ownership unit, on revenues of $49.7 million.
Earnings before interest, taxes, depreciation, depletion, and amortization (EBITDDA) for the quarter ended September 30, 2007, were $5.1 million, compared to $9.9 million for the third quarter of 2006. For the nine months ended September 30, 2007, EBITDDA was $13.9 million, compared to $24.7 million for year-to-date 2006 results.
"Results for the third quarter and the first nine months of this year were down significantly compared to last year's comparable periods because of the third quarter 2006 sale of a 17-acre commercial parcel in Gig Harbor to Costco Wholesale Corporation that contributed $5.7 million to our Real Estate segment operating income in the prior year's results," said David L. Nunes, President and CEO.
Notwithstanding the much chronicled decline in domestic housing starts, our Fee Timber segment results have held up reasonably well. While our third quarter realized log prices slipped 2%, from $623 per thousand board feet (MBF) in 2006 to $611 per MBF in 2007, we managed to keep log prices flat on a year-to-date basis by locking in prices earlier in the year when markets were not as weak and by shifting our harvest mix toward those markets with the healthiest relative pricing. For the first nine months of 2007, Fee Timber operating income declined 2% to $13.6 million from $13.8 million in 2006. Even though we experienced a 6% drop in harvest volumes, from 51 MMBF in 2006 to 48 MMBF in 2007, the drop in operating income was mitigated by a lower average depletion rate. Last year's harvest included volume from a separate depletion pool that carried a higher depletion rate than volume harvested in the current year.
Our Timberland Management & Consulting segment posted a year-to-date operating loss of $0.5 million compared to operating income of $1.4 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 $5.9 million for the first nine months of 2006 to a $0.5 million loss for the comparable period in 2007. As mentioned above, this anticipated decline is due primarily to the sale of a 17-acre commercial parcel in Gig Harbor to Costco in 2006 for which there was no counterpart in 2007's year-to-date results. We expect to generate revenue from our Gig Harbor and Bremerton projects during the balance of 2007, but this revenue will not approach 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 nearly 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 of variability in capital structures, legal structures, methods of calculating depletion expense, and cost basis resulting from historical costs recorded under GAAP. Since this variability impacts the GAAP results of industry issuers in different ways, disclosure of EBITDDA can make it easier for the reader to make meaningful comparisons between operating results and cash-generating capabilities from one timber company to another.
Pope Resources, A Delaware Limited Partnership
Unaudited
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(all amounts in $000's, except per unit
amounts)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
Revenues $12,171 $18,024 $ 34,284 $ 49,717
Costs and expenses:
Cost of sales (5,171) (6,198) (14,302) (21,037)
Operating expenses (3,772) (3,423) (11,114) (10,357)
------------ -------- --------- ---------
Operating income 3,228 8,403 8,868 18,323
Interest, net 110 (115) 137 (641)
------------ -------- --------- ---------
Income before income taxes
and minority interest 3,338 8,288 9,005 17,682
Income tax provision (5) (16) (22) (453)
------------ -------- --------- ---------
Income before minority
interest 3,333 8,272 8,983 17,229
Minority interest 218 7 237 (112)
------------ -------- --------- ---------
Net income $ 3,551 $ 8,279 $ 9,220 $ 17,117
============ ======== ========= =========
Average units outstanding -
Basic 4,687 4,645 4,679 4,641
============ ======== ========= =========
Average units outstanding -
Diluted 4,831 4,769 4,823 4,760
============ ======== ========= =========
Basic net income per unit $ 0.76 $ 1.78 $ 1.97 $ 3.69
============ ======== ========= =========
Diluted net income per unit $ 0.74 $ 1.74 $ 1.91 $ 3.60
============ ======== ========= =========
CONSOLIDATED BALANCE SHEET DATA
(all amounts in $000's)
September 30,
2007 2006
-------- --------
Assets:
Cash $3,940 $7,194
Short term investments 27,000 25,000
Other current assets 11,814 8,933
Roads and timber 94,483 98,110
Properties and equipment 42,662 39,026
Other assets 1,519 2,019
-------- --------
Total $181,418 $180,282
======== ========
Liabilities and partners' capital:
Current liabilities $12,264 $14,775
Long-term debt, excluding current
portion 29,490 30,866
Other long-term liabilities 282 351
-------- --------
Total liabilities 42,036 45,992
Minority interest 45,969 46,685
Partners' capital 93,413 87,605
-------- --------
Total $181,418 $180,282
======== ========
RECONCILIATION BETWEEN NET INCOME AND EBITDDA
(all amounts in $000's)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
Net income $3,551 $8,279 $ 9,220 $17,117
Added back:
Interest, net (110) 115 (137) 641
Depletion 1,430 1,278 4,179 5,970
Depreciation and
amortization 205 175 604 534
Income tax provision 5 16 22 453
-------------------- ------ --------- -------
EBITDDA $5,081 $9,863 $13,888 $24,715
==================== ====== ========= =======
RECONCILIATION BETWEEN CASH FROM
OPERATIONS AND EBITDDA
(all amounts in $000's)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
Cash from operations $5,087 $15,868 $11,993 $28,423
Adjustments:
Change in working capital (579) (4,005) 1,751 1,435
Interest (110) 115 (137) 641
Deferred revenue 1,168 (90) 1,091 (1,031)
Minority interest 219 7 237 (112)
Deferred taxes (92) (7) (45) 11
Income tax provision 5 16 22 453
Cost of land sold (486) (1,968) (532) (4,837)
Equity based compensation (131) (73) (492) (267)
Other - - - (1)
--------- -------- -------- --------
EBITDDA $5,081 $ 9,863 $13,888 $24,715
========= ======== ======== ========
SEGMENT INFORMATION
(all amounts in $000's)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
Revenues:
Fee Timber $ 9,836 $ 8,114 $30,642 $32,287
Timberland Management &
Consulting (TM&C) 366 578 1,074 3,146
Real Estate 1,969 9,332 2,568 14,284
--------- -------- -------- --------
Total 12,171 18,024 34,284 49,717
EBITDDA:
Fee Timber 5,624 4,686 18,253 19,757
TM&C (223) 58 (482) 1,308
Real Estate 589 5,913 (347) 6,237
General & administrative (909) (794) (3,536) (2,587)
--------- -------- -------- --------
Total 5,081 9,863 13,888 24,715
Depreciation, depletion and
amortization:
Fee Timber 1,517 1,123 4,433 5,948
TM&C 21 18 62 54
Real Estate 49 245 136 322
General & administrative 48 67 152 180
--------- -------- -------- --------
Total 1,635 1,453 4,783 6,504
Operating income/(loss):
Fee Timber 3,889 3,563 13,583 13,809
TM&C (244) 33 (544) 1,366
Real Estate 540 5,668 (483) 5,915
General & administrative (957) (861) (3,688) (2,767)
--------- -------- -------- --------
Total $ 3,228 $ 8,403 $ 8,868 $18,323
========= ======== ======== ========
SELECTED STATISTICS
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
Log sale volumes (thousand
board feet):
Sawlogs
Douglas-fir 7,602 8,626 30,708 36,908
Whitewood 2,272 483 5,985 3,628
Cedar 931 188 1,566 774
Hardwood 1,297 1,464 2,304 3,170
Pulp
All species 3,127 1,386 7,312 6,350
--------- --------- --------- ---------
Total 15,229 12,147 47,875 50,830
========= ========= ========= =========
Average price realizations
(per thousand board feet):
Sawlogs
Douglas-fir 622 662 628 672
Whitewood 446 462 467 446
Cedar 1,347 1,260 1,335 1,058
Hardwood 960 683 938 663
Pulp
All species 353 281 397 261
Overall 611 623 611 610
Owned timber acres (A) 140,294 114,196 140,294 114,196
Acres under management 292,647 291,925 292,647 291,925
Capital expenditures ($000's) $ 3,003 $ 4,851 $ 7,413 $ 8,999
Depletion ($000's) 1,430 1,278 4,179 5,970
Depreciation ($000's) 205 175 604 534
Debt to total capitalization 25% 29% 25% 29%
(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)
Q3 2007 vs. Q3 2006 Q3 2007 vs. Q2 2007
Total Total
Net income:
3rd Quarter 2007 $ 3,551 $ 3,551
2nd Quarter 2007 4,815
3rd Quarter 2006 8,279
-------- --------
Variance $(4,728) $(1,264)
Detail of earnings variance:
Fee Timber
Log price realizations (B) $ (183) $ (228)
Log volumes (C) 1,920 (4,618)
Depletion (152) 608
Production costs (1,059) 1,040
Other Fee Timber (201) (220)
Timberland Management &
Consulting
Management fee changes 69 147
Disposition fee changes - -
Other Timberland Mgmnt &
Consulting (346) (222)
Real Estate
Environmental remediation
liability 114 -
Land sales (5,050) 1,218
Other Real Estate (192) (216)
General & administrative
costs (96) 749
Interest net 225 110
Minority interest 211 363
Income taxes 12 5
-------- --------
Total change in earnings $(4,728) $(1,264)
======== ========
(B) Price variance calculated by extending the change in average
realized price by current period volume.
(C) 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
