SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1998, or
Transition report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934 [No Fee Required]
For the transition period from to
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Commission File No. 1-9035
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
DELAWARE 91-1313292
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(State of Organization) (IRS Employer I.D. No.)
P.O. BOX 1780, POULSBO, WA 98370
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(Address of principal executive offices Zip Code)
Registrant's telephone number, including area code: (360) 697-6626
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Depositary Receipts (Units) NASDAQ National Market System
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. [X]
Approximate aggregate market value of the non-voting equity in the form
of units held by nonaffiliates of the registrant as of March 5, 1999 was
$104,386,064.
DOCUMENTS INCORPORATED BY REFERENCE:
SEE ITEM 14
Exhibit Index Item IV.
1
PART I
ITEM 1. BUSINESS
Pope Resources, A Delaware Limited Partnership (the "Partnership") was
organized in October, 1985 as a result of a spin-off by Pope & Talbot, Inc.
(P&T) of certain of its assets, and two of its subsidiaries (Ludlow Water
Company and Gamble Village Water & Sewer Company). The Partnership is a
successor to Pope & Talbot Development, Inc. and other P&T affiliates. P&T
acquired its first timberlands in the Puget Sound area in 1853.
The Partnership formed Ludlow Bay Realty, Inc. in 1993.
In March 1997, the Partnership's unitholders authorized management to
expand its timberland business with the Investor Portfolio Management Business
(IPMB). The IPMB has two complementary business strategies: portfolio
development and timberland management. Portfolio development's goal is to build
and manage diversified portfolios of timberlands for third-party investors,
sometimes acting exclusively as an investment manager, while at other times
co-investing as a partner on behalf of Pope Resources. Timberland management's
mandate is to provide a full range of management services to third-party owners
of timberlands. ORM, Inc. and Olympic Resource Management LLC (ORMLLC) were
formed in 1997 to facilitate the IPMB activities.
The amendment to the Limited Partnership Agreement authorizing
management to pursue the IPMB business limits cumulative net expenditures to
$5,000,000, including debt guarantees. As of December 31, 1998, cumulative net
expenditures, incurred in pursuit of IPMB opportunities, including guarantees,
totaled approximately $1,337,000 net of income generated. The amendment further
specifies that income from the IPMB will be split using a sliding scale
allocation method beginning at 80% to ORM, Inc., a subsidiary of Pope Resources
and 20% to Pope MGP, Inc., the managing general partner of the Partnership. The
sliding scale allocation method will evenly divide IPMB income between ORM, Inc.
and Pope MGP, Inc. once such income reaches $7,000,000 in a given fiscal year.
During 1998, the Partnership formed ORM International, Inc. and ORM
Resources Canada Ltd. to facilitate the acquisition of assets comprising Simons
Reid Collins, a division of H.A. Simons Ltd. of Vancouver, British Columbia.
These assets and employees are expected to expand the Partnership's ability to
market forest management and consulting services globally and expand its array
of consulting services available to owners and managers of timberlands.
Also during 1998, the Partnership formed the following wholly owned
subsidiaries: Olympic Property Group LLC, Olympic Real Estate Development LLC,
and Olympic Resorts LLC, and changed the name of Ludlow Bay Realty, Inc. to
Olympic Real Estate Management, Inc. and Ludlow Water Company to Olympic Water
and Sewer, Inc. In 1991, Pope Resources became a partner in Ludlow Associates, a
Washington partnership, for the purposes of ownership of the Heron Beach Inn on
Ludlow Bay. In 1998, Ludlow Associates was dissolved and Pope Resources acquired
the entire ownership of the Heron Beach Inn on Ludlow Bay.
FINANCIAL INFORMATION ABOUT SEGMENTS
Segment financial information is presented in Note 11 to the
Partnership's Financial Statements included with this report.
2
NARRATIVE DESCRIPTION OF BUSINESS
The Partnership operates in two primary industry segments: (1)
Timberland Resources and (2) Real Estate. The Partnership's largest segment,
Timberland Resources, encompasses the growing and harvesting of timber from the
Partnership's tree farm and management of tree farms owned by others. This
segment also includes revenue earned through providing forestry consulting
services to owners and managers of timberlands. The Partnership's other segment,
Real Estate, consists of residential development and income-producing
properties. The following is a description of each industry segment.
TIMBERLAND RESOURCES
The Timberland Resources segment's key operation is the management of
over 600,000 acres of timberlands for the Partnership and third-party investors.
The Partnership's tree farm represents approximately 76,000 of the 600,000 acres
under management. Operations consist of the growing of timber to its optimal
harvest age, and the subsequent harvesting and marketing of timber and timber
products to both domestic and Pacific Rim markets. The Partnership earns revenue
from management and consulting fees received from third-party investors and the
sale of timber products from the Partnership's tree farm. This segment produced
68%, 65%, and 65% of the Partnership's consolidated gross revenues in 1998, 1997
and 1996, respectively.
All of the activities of the IPMB are currently conducted within this
segment. The vehicle for the IPMB is ORMLLC, which seeks investors interested in
developing risk-diversified portfolios of timberland and timberland management
opportunities in the United States, Canada, and other strategic locations
globally. The IPMB business generates fee income directly and indirectly through
ORMLLC's services to large investors in acquiring, managing, and eventually
disposing of timberland investments. ORMLLC also earns revenue by providing
timberland consulting services to owners and managers of timberland assets. In
December 1997, ORMLLC entered into a contract with the Hancock Timber Resource
Group following a competitive bid process to manage over 500,000 acres of timber
holdings. ORMLLC operates nine field offices managing timberland in Washington,
Oregon, California, and British Columbia.
With the formation of ORM International, Inc. and ORM Resources Canada
Ltd. in 1998, the Partnership will expand its presence outside the U.S. ORM
Resources Canada Ltd. provides consulting services in forest inventory, timber
supply analysis, timber sale cruising and forest resource mapping to a broad
range of clients in western Canada. It also provides timberland management
services on 60,000 acres on Vancouver Island together with general forestry
consulting services for projects in Argentina and Jamaica. The company has
offices throughout western Canada and in Buenos Aires, Argentina. The resources
used to provide consulting and management services for third parties are also
utilized to manage the Partnership's own tree farm near Seattle, Washington.
The dominant timber species on the Partnership's 76,000-acre tree farm
is Douglas-fir. Douglas-fir is noted for its strength, flexibility and other
physical characteristics that make it generally preferable to other softwoods
and hardwoods for the production of construction grade lumber and plywood. As of
December 31, 1998, the tree farm's total softwood inventory volume was estimated
to be 432 million board feet (MMBF). This compares to inventory volumes of 457
and 470 MMBF at December 31, 1997 and 1996, respectively. Due to Washington
State forest practice regulations that provide for limited clear-cut size,
riparian management zones, wildlife leave trees, wetlands requirements and other
harvest restrictions, the Partnership estimates
2
that between 7% and 10% of the aforementioned volume is not available for
harvest. The merchantable timber volume is accounted for by the Partnership's
standing timber inventory system, which utilizes periodic statistical sampling
of the timber (cruising) with annual adjustments made for estimated growth and
the depletion of areas harvested.
The Partnership views its tree farm as a core holding and is managing
it accordingly. As such, the Partnership's annual harvest policy is to schedule
harvesting to coincide with a given stand's economic rotation age, consistent
with rate-of-harvest regulations in the State Forest Practices Act. From year to
year, the policy allows for flexibility in response to the external environment.
For instance, when log markets are weak, annual harvest levels might be reduced
whereas in strong log markets, the annual levels may be above the average. The
Partnership's harvesting schedules are based on both inventory data and
projected growth rates. Inventory data includes species, site index,
classification of soils, volume, size and age of the timber. From this
information, the Partnership develops its annual and long-term harvesting plans
predicated on existing and anticipated economic conditions with the objective of
maximizing the long-term returns.
The Partnership markets timber in one of two ways. Management engages
independent logging contractors to harvest the standing timber and manufacture
it into logs which management then sells on the open market. Logs produced are
sold both domestically and internationally. One of the principal international
markets served is the Pacific Rim. Logs going to this destination are generally
sold to brokers who in turn sell direct to offshore destinations. Japan is by
far the largest consumer of the international market, though Korea and China are
significant from time to time.
The second method in which timber is sold is through stumpage sales,
where standing timber is sold on the stump to purchasers that in turn manage the
harvesting and marketing of the timber. These operations are governed by
provisions of the sales contract, and are closely monitored by management to
facilitate sound forestry and stewardship practices and regulatory compliance.
Stumpage sales are generally used in unique situations where returns can be
improved through the involvement of outside parties.
There are many competitors of the Partnership, most of whom are
comparable in size or larger. The principal areas of competition in the timber
business are quality, pricing and the ability to satisfy volume demands for
various types and grades of logs to respective markets. Management believes that
the location, type and grade of the Partnership's timber will enable it to
effectively compete in these markets. However, the Partnership's products are
subject to increasing competition from a variety of non-wood and engineered wood
products as well as competition from foreign-produced products.
The Partnership's timberland operations require activities which
include reforestation, competing brush control, thinning of the timber to
achieve optimal spacing after stands are established, and fertilization. During
1998, the Partnership planted 1,048,000 seedlings on 2,600 acres. This compares
to 1997 and 1996 in which the Partnership planted 902,000 and 658,000 seedlings
on 2,073 and 1,440 acres, respectively. Management's policy is to stay current
on its reforestation program, returning all timberlands to productive status as
soon as economically feasible following harvest.
Over the longer term, management anticipates that population and
economic pressures will contribute to the development of increasing portions of
its tree farm. To offset the resulting
4
reductions in the timberland base, management is actively seeking acquisitions
and trades that enhance tree farm ownership.
Timberland Resources is a year-round operation of the Partnership and
presently employs 120 full-time salaried employees and up to 15 part-time and
seasonal personnel.
REAL ESTATE
The Real Estate segment consists of residential development together
with ownership and management of income-producing properties. The Real Estate
segment produced 32%, 35%, and 35% of the Partnership's consolidated gross
revenues in 1998, 1997, and 1996, respectively.
Residential development consists of the sale of single-family homes,
finished lots and undeveloped acreage. The principal activity of residential
development consists of building residential dwellings and developing lots in
Port Ludlow. This division's key assets include approximately 4,000 acres of
land located in western Washington, of which the focus for development is Port
Ludlow. Port Ludlow is an active adult community on approximately 2,000 acres of
which 1,300 acres are still owned by the Partnership. Work is progressing on
five remaining subdivisions in this community. Progress is being made in
activities ranging from permit approval to actual construction for the final 500
lots in this development. Although the Partnership is working closely with the
local government and community, there can be no assurance that all of the
remaining subdivisions will be fully approved for development.
The income-producing properties in this segment consist of a 300-slip
marina, a 27-hole championship golf course, a commercial shopping center, an RV
park, a restaurant/lounge and related facilities, and the water and sewer
utilities serving the Port Ludlow, Washington area. In addition, the Partnership
manages residential and commercial properties in Port Gamble and Kingston,
Washington.
On December 31, 1998, the Partnership dissolved Ludlow Associates, a
Washington partnership, and acquired the entire ownership interest in all Ludlow
Associates' assets, including the Heron Beach Inn on Ludlow Bay. Prior to this
event, the Partnership was a 50% joint venture partner in Ludlow Associates. The
acquisition will facilitate promotion of the Heron Beach Inn on Ludlow Bay as
part of a destination resort at Port Ludlow. The Inn, golf course, marina, and
RV park business is seasonal, with the peak season beginning in May and running
through September of each year.
Other real estate development activities are located in Bremerton, Gig
Harbor, Kingston, and Hansville. The 260-acre Bremerton project is entirely
located within the city limits. About 60 acres will be devoted to an industrial
park, while the remaining 200 acres is slated for residential development.
Preliminary project approval for the development was received in 1997 and
marketing activities for the industrial park will commence in 1999.
Gig Harbor, a suburb of Tacoma, is the site of a 320-acre mixed-use
development consisting of 200 acres for residential development; 120 acres for a
business park; and a site for a neighborhood commercial center. Preliminary
environmental studies were completed in 1997 and the Partnership continues to
work with local officials in Gig Harbor on the development plans.
There are two on-going projects in Kitsap County, a 720-acre
residential development in Kingston and a 200-acre residential development in
Hansville. While significant progress has
5
been made in the governmental entitlement process, final approval is currently
stalled pending the outcome of a court case, in which the Partnership is not a
party, that will establish the appropriate zoning and development regulations
applicable to projects pending throughout the County.
The Partnership's land sales activities are closely associated with the
management of its timberlands. After logging its timberlands, the Partnership
has the option of reforesting the land, developing it for sale as improved
property, or selling it in developed or undeveloped acreage tracts. Management
continually evaluates timberlands in terms of their best economic use, whether
it means continuing to grow timber or reclassifying the property for sale or
development. As the Partnership reclassifies timber properties for sale or
development, the Partnership may replace such timber properties with land
purchases in more remote areas. Although the Partnership believes it has
adequate land inventory for future development, additional properties may be
purchased, as they become available.
The Partnership competes for property sales with other real estate
development companies, which are as large or larger than the Partnership and
have substantial acreage for sale and development. Management believes location,
price and terms of sale enable the Partnership to compete effectively in these
markets.
The residential development division's backlog of sales was
approximately $890,500 as of December 31, 1998, all of which are expected to
close in 1999. This compares to sales backlogs of $926,900 and $1,089,000 as of
December 31, 1997 and 1996, respectively.
Real Estate presently employs 35 full-time salaried employees and has
in the past employed up to an additional 80 part-time and seasonal personnel.
The total number of employees not otherwise classified under a
segment is 40 full-time salaried employees. No employee is a member of a labor
union.
ITEM 2. PROPERTIES
See the discussion of each segment under "Item 1. Business."
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTER TO A
VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Partnership's unitholders
during 1998.
6
PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS
AND RELATED SECURITY HOLDER MATTERS
The units are traded on the Nasdaq National Market System. The
Partnership's units trade under the ticker symbol "POPEZ". The following table
sets forth the 1998-1997 quarterly range of high and low prices for the
Partnership's units, as adjusted for the 5 for 1 unit split completed in
November 1997:
1998 1997
-------------------- ---------------------
High Low High Low
------ ------ ------ ------
First Quarter $29.00 $24.06 $21.60 $17.40
Second Quarter $31.00 $26.63 $23.60 $20.30
Third Quarter $29.50 $27.88 $27.20 $22.75
Fourth Quarter $32.50 $27.63 $31.00 $26.00
As of March 1, 1999, there were approximately 900 beneficial holders
and 417 registered holders of 4,519,470 outstanding units.
During 1998, cash distributions totaled $1,807,000, consisting of
quarterly distributions of 10 cents per unit each quarter. The fourth quarter
distribution of 10 cents per unit was paid on December 15, 1998. During 1997,
cash distributions totaled $2,215,000 consisting of 14 cents, 14 cents, 11
cents, and 10 cents per unit. The fourth quarter distribution of 10 cents per
unit was paid on January 15, 1998. All cash distributions are at the discretion
of the Partnership's managing general partner, Pope MGP, Inc.
7
ITEM 6. SELECTED FINANCIAL DATA
The financial information set forth below for each of the years ending
December 31, 1994 through 1998 is derived from the Partnership's audited
financial statements. This information should be read in conjunction with the
financial statements and related notes included with this report and previously
filed with the Securities and Exchange Commission. Per unit amounts reflected
below have been restated for the 5 for 1 unit split completed in 1997.
(Thousands, except per unit data)
-----------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
TOTAL REVENUES $42,952 $30,109 $33,013 $36,162 $30,085
------- ------- ------- ------- -------
------- ------- ------- ------- -------
INCOME FROM OPERATIONS $10,363 $ 4,854 $ 9,818 $14,799 $10,572
------- ------- ------- ------- -------
------- ------- ------- ------- -------
NET INCOME $ 8,792 $ 3,509 $ 8,334 $13,090 $ 8,893
------- ------- ------- ------- -------
------- ------- ------- ------- -------
EARNINGS PER PARTNERSHIP
UNIT-FULLY DILUTED $ 1.94 $ .78 $ 1.84 $ 2.90 $ 1.93
------- ------- ------- ------- -------
------- ------- ------- ------- -------
DISTRIBUTION PER UNIT $ .40 $ .49 $ .82 $ 1.06 $ .72
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL ASSETS $62,706 $56,319 $54,599 $54,147 $52,879
------- ------- ------- ------- -------
------- ------- ------- ------- -------
LONG-TERM DEBT $13,818 $14,323 $14,678 $17,992 $25,545
------- ------- ------- ------- -------
------- ------- ------- ------- -------
PARTNERS' CAPITAL $45,896 $38,911 $37,616 $32,988 $24,824
------- ------- ------- ------- -------
------- ------- ------- ------- -------
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the Partnership's
consolidated financial statements included with this report.
RESULTS OF OPERATIONS
TIMBERLAND RESOURCES
Timberland Resources revenues were $29.3 million, $19.5 million, and
$21.6 million for the years ended December 31, 1998, 1997, and 1996,
respectively. The 1998 increase in revenues resulted primarily from timberland
management fees. The decrease in revenues for 1997 resulted from weakening
timber prices partially offset by a small increase in timber volume harvested.
Olympic Resource Management LLC (ORMLLC) is the western regional
timberland manager for the Hancock Timber Resource Group (HTRG). The contract
covering these services commenced on January 1, 1998, and currently covers
timberland management services for over 500,000 acres in Washington, Oregon,
California, and British Columbia. Total acres under management for HTRG is
subject to change from time to time as HTRG's client portfolios are adjusted. As
such changes occur, Timberland Resources revenues will fluctuate with an
increase in acres bringing a positive impact and a decrease in acres producing
an adverse effect. An example of such a portfolio change occurred recently when
HTRG, on behalf of one of its pension fund clients chose to sell 25,000 acres of
timberlands in northern California.
Other changes can potentially occur if existing HTRG clients choose to
select an investment manager other than HTRG. An example of such a change
occurred recently when HTRG was notified of the State Teachers Retirement System
of Ohio's (STRSO) plan to change investment managers in the first half of 1999.
This will affect the Partnership inasmuch as ORMLLC has been managing 97,000
acres of STRSO's portfolio on behalf of the current investment manager HTRG. The
decrease in acres under management is expected to have an adverse effect on
revenues in 1999.
While timberland management fees were the primary factor driving an
increase in this segment's revenues in 1998, increased revenues also resulted
from higher timber harvest volumes on timberlands owned by the Partnership. The
Partnership harvested the following softwood timber:
- --------------------------------------------------------------------------
Year Softwood
Sawlogs Pulp Logs Totals
- --------------------------------------------------------------------------
Volume Price Volume Price Volume Price
MMBF $/MBF MMBF $/MBF MMBF $/MBF
------------------------------------------------------------
1998 28.6 $583 9.5 $251 38.9 $500
1997 24.7 698 7.0 217 33.2 584
1996 23.4 808 5.3 220 31.6 698
- --------------------------------------------------------------------------
9
Log revenues from the Partnership's timberland ownership are
significantly affected by export log market conditions. The majority of the
Partnership's export log volume is sold to Japan. Indirect sales to the export
market totaled 8.6 MMBF, 10.3 MMBF, and 12.3 MMBF of softwood logs for 1998,
1997, and 1996, respectively. The average price per MBF realized for export logs
sold was $681, $794, and $968 for 1998, 1997, and 1996, respectively. The
decline in export log volumes and prices over this period reflects the weakening
Japanese economy and strengthening U.S. dollar.
Sales to the export market totaled 20%, 42%, and 55% of segment
revenues for 1998, 1997, and 1996, respectively. The decrease in 1998 of export
revenues as a percent of total segment revenues is caused by both a decrease in
export log volumes and an increase in total revenue as a result of the increase
in timberland management activities. Management anticipates that the recovery in
the Japanese economy will be modest at best and thus housing starts and the
corresponding demand for imported logs will remain relatively flat in 1999.
Weak export markets have also had an adverse impact on domestic log
prices in 1998, as log volume was diverted from the export to the domestic
market and thus supply increased relative to demand. Domestic sawlog volumes
were 20.0 MMBF, 14.4 MMBF, and 11.1 MMBF in 1998, 1997, and 1996 respectively.
Average domestic log prices per MBF were $541, $630, and $631 for 1998, 1997,
and 1996, respectively. Weak 1998 pricing occurred despite very strong U.S.
housing starts. Continued weakness in the export log market combined with a
possible slowdown in the U.S. economy may have a negative impact on domestic
sawlog prices in 1999.
Pulp log volumes were 9.5 MMBF, 7.0 MMBF, and 5.3 MMBF for 1998, 1997,
and 1996, respectively. The increase in pulp log volume in 1998 and 1997 was due
to both an increase in overall timber harvested and the Partnership's harvest of
a higher relative percentage of timber stands that had not been previously
thinned. These stands generally contain a higher proportion of lower-quality
pulp logs than stands that have been previously thinned. These timber stands
were not thinned because of topographic and local log market conditions that
caused the cost of thinning to exceed the anticipated benefit. By harvesting
these lower-quality timber stands during periods of weak export markets and
leaving higher-quality stands to grow in both volume and value, the overall
value of the Partnership's timberland holdings is enhanced. Pulp log prices were
$251, $217, and $220 per MBF for 1998, 1997, and 1996, respectively.
Additionally, a land sale to the Washington State Department of Fish &
Wildlife for $887,000 was completed during 1998. For tax purposes, profit from
the land sale was not recognized pursuant to a tax-deferred exchange.
In the operation and management of its tree farm, the Partnership is
subject to federal, state and local laws, that govern land use. Management's
objective is to be in compliance with such laws and regulations at all times.
They anticipate that increasingly strict requirements relating to the
environment, threatened and endangered species, natural resources, forestry
operations, and health and safety matters, as well as increasing social concern
over environmental issues, may result in additional restrictions on the timber
operations of the Partnership. This will in turn result in increased costs,
additional capital expenditures and reduced operating flexibility. Although
management does not consider current laws and regulations to be materially
burdensome, there can be no assurance that future legislative, governmental, or
judicial decisions will not adversely affect the Partnership's operations.
10
Risk of loss from fire, while possible on any timberland, is minimized
on Partnership lands for several reasons. First, the Partnership maintains a
well-developed road system that allows access and quick response to any fire
that may occur. Second, management maintains a fire plan and program that
provides for increased monitoring activities and requires all operators to
maintain adequate fire suppression equipment during fire season. All of
management's activities are supplemented by the Washington State Department of
Natural Resources, which is ultimately responsible for all fire suppression
activities in the state.
REAL ESTATE
Real Estate revenues for the years ended December 31, 1998, 1997, and
1996 were $13.6 million, $10.6 million, and $11.4 million, respectively. These
revenues were derived from residential development and income-producing
properties. Residential development consists of the sale of single-family homes,
developed lots, and undeveloped acreage. Income-producing properties consist of
the 36-room Heron Beach Inn on Ludlow Bay, a 300-slip marina, a 27-hole
championship golf course, a commercial center, an RV park, a restaurant/lounge
and related facilities leased to Village Resorts, Inc., and the water and sewer
utilities providing service to properties in the Port Ludlow area. They also
include the Port Gamble townsite and a residential and commercial property in
Kingston, Washington.
Revenue from residential development totaled $8.6 million, $5.8
million, and $6.9 million for the years ended December 31, 1998, 1997, and 1996,
respectively. The primary source of increased residential development revenue in
1998 was an increase in undeveloped acreage sales from $.5 million in 1997 to
$3.6 million in 1998. The majority of this increase is attributable to the sale
of a 980-acre property for $2.8 million. The Partnership utilized $1.8 million
of the proceeds from this sale to purchase replacement properties pursuant to a
tax-deferred exchange. The Partnership believes the replacement properties are
better aligned with other property development plans and relative to developing
the property that was sold, resulting in an income stream that is nearer term in
nature. Revenue in 1996 included the recognition of $.5 million of previously
deferred revenue. The revenue was recognized in 1996 when a contract on a large
parcel was paid.
The Partnership's largest development is in Port Ludlow, Washington.
During 1998, the Partnership's development at Port Ludlow generated revenues of
$4.6 million through the sale of 13 developed lots and 21 homes. These compare
to 1997 sales of $4.7 million for 17 developed lots and 13 homes, and 1996 sales
of $5.0 million for 8 developed lots and 17 homes. Revenue per sale depends on
the quality and size of the home, features of the subdivision, and location of
the lot.
Revenue from income-producing properties totaled $5.0 million, $4.8
million, and $4.5 million for the years ended December 31, 1998, 1997, and 1996,
respectively. The increase in revenues is due to a modest revenue increase in
most of the properties included in the Partnership's income-producing properties
portfolio. During 1998, 1997, and 1996, the Partnership participated in a joint
venture to operate the 36-room Heron Beach Inn on Ludlow Bay. As a joint venture
partner, only the Partnership's share of operations from the joint venture was
included in non-operating income/loss. On December 31, 1998, the joint venture
was dissolved and the Partnership acquired the entire interest in the Inn, and
will include the Inn's results in operating income beginning January 1, 1999.
Accordingly, management expects an increase in this segment's revenues in 1999
as the Partnership begins to include Inn revenues in the Partnership's results
of operations.
11
The Partnership continues to be in the planning and entitlement phases
for several developments located in the West Puget Sound region. In 1997, the
City of Bremerton approved the Partnership's request for preliminary planned
unit development status on a 260-acre property. The industrial portion of the
Bremerton property is 60 acres. Construction of the off-site sewer at this site
is completed and the Partnership is focusing on its marketing plan. With respect
to other properties, the Partnership continues to work with officials in Gig
Harbor regarding the development of a 320-acre mixed-use project located within
the Gig Harbor city limits. The Partnership has two additional ongoing projects
in Kitsap County, a 720-acre residential development in Kingston and a 200-acre
residential development in Hansville. While significant progress has been made
in the governmental entitlement process, final approval is currently stalled
pending the outcome of a court case, in which the Partnership is not a party,
that will establish the appropriate zoning and development regulations
applicable to projects pending throughout the County.
Land holdings throughout Washington state are affected by the state's
Growth Management Act, which requires counties to submit comprehensive plans
that spell out the future direction of growth and stipulate where population
densities are to be concentrated. Both Kitsap County and Jefferson County, in
which Port Ludlow is located, have received approval by a State hearings board
for their Comprehensive Plans. In this plan, Port Ludlow was granted status as a
Master Planned Resort, ensuring future build-out and development. The
Partnership is now working with local residents and Jefferson County to adopt a
zoning ordinance for Port Ludlow.
OTHER
The following table sets forth expenses as a percentage of revenues for the
years indicated:
1998 1997 1996
------ ------ -------
Revenues 100% 100% 100%
Cost of sales 28 36 37
Operating expenses 28 25 19
Selling, general, and administrative expenses 20 23 14
------ ------ -------
Operating income 24% 16% 30%
------ ------ -------
------ ------ -------
Cost of sales includes the cost of purchasing and producing tangible
goods for sale. As timberland management services expand, the percentage of
revenue expended on cost of sales is expected to decrease, as this business does
not sell tangible goods. In 1998, cost of sales reflected this expected trend,
though cost of sales for the Partnership will fluctuate due to the various
methods for selling and harvesting timber and the basis of the land the
Partnership sells.
The increase in operating expense ratio is due to an increase in
payroll and facility expenses associated with expanding the timberland under
management. As the Partnership continues to develop timberland management and
consulting services, the operating expense ratio is expected to increase. The
increase in operating expense ratio in 1997 is due to the decline in revenues
from 1996 and costs incurred for the ramp-up of the IPMB.
The decrease between 1997 and 1998 in the selling, general, and
administrative (SG&A) ratio is due to the increase in revenues from the
timberland management. The SG&A ratio for 1997 increased over 1996 as a result
of costs incurred in the launch of the timberland
12
management business, investments in information technology, and expenses
related to the proxy statement and unitholder vote on the Investor Portfolio
Management Business.
Interest income increased in 1998 due to a higher average cash
balance during the year. The increase in interest income in 1997 relative to
1996 is due to an increase in the balance of real estate contracts receivable.
The Partnership was a 50% joint venture partner in Ludlow Associates
which owned the 36-room Heron Beach Inn on Ludlow Bay. The Partnership's share
of joint venture losses was $217,000, $337,000 and $378,000 for the years 1998,
1997, and 1996, respectively. Profitability of the Inn is expected to improve as
a result of a reduction in outstanding debt. The Partnership plans to market the
Inn along with its golf course and marina as a distinctive resort location in
western Washington.
On October 9, 1997, Pope Resources authorized the first-ever split of
its partnership units. Unitholders of record as of October 31, 1997, received an
additional four units for each unit then held. The split was intended to bring
the units to a price level where they can be more easily traded in the
marketplace, and to meet new Nasdaq listing requirements.
LIQUIDITY AND CAPITAL RESOURCES
Funds generated internally through operations and externally through
financing will provide the required resources for the Partnership's real estate
development and other capital expenditures. Management may also consider
increasing the Partnership's debt ratio to participate in investments in real
property, if the investments meet the Partnership's requirements of return and
provide a good fit with the Partnership's portfolio of properties. Management
considers its capital resources to be adequate for its current plans. At
December 31, 1998, the Partnership had available an unused $20 million bank loan
commitment.
Management has considerable discretion to increase or decrease the
level of logs cut and thereby may increase or decrease net income and cash flow,
assuming log prices and demand remain stable. Management's current plan is to
harvest approximately 38 million board feet of timber in 1999. Since harvest
plans are based on demand and pricing, actual harvesting may vary subject to
management's ongoing review.
Cash provided by operating activities was $9.2 million for the year
ended December 31, 1998. Overall cash and cash equivalents decreased by $1.3
million in 1998. The cash generated was primarily used for cash payments to
unitholders of $2.3 million , $.5 million of which was accrued on December 31,
1997, repayments of long-term debt of $2.6 million and capital expenditures
related to real property, equipment, roads, and reforestation of $5.0 million.
Repayments of long-term debt in 1998 included debt retirement associated with
the Heron Beach Inn on Ludlow Bay.
In 1997, cash provided by operating activities was $5.8 million and
was used primarily for cash payments to unitholders of $1.8 million,
repayments of long-term debt of $0.3 million, and purchases of equipment and
reforestation costs of $3.0 million. In 1996, cash provided by operating
activities was $12.3 million and was used primarily for debt repayments of $3.3
million, unitholder distributions totaling $3.7 million, and capital and land
expenditures of $2.2 million.
13
The Partnership plans to continue making quarterly partnership
distributions during 1999.
YEAR 2000 (Y2K)
The Partnership has hired consultants to help evaluate its exposure
related to year 2000 (Y2K) issues and to develop a plan to fix hardware or
software that is not Y2K compliant. Projected costs of identifying Y2K issues,
fixing software and hardware that is not Y2K compliant, and querying major
vendors and customers to determine their state of readiness are not expected to
be greater than $250,000. Costs incurred as of December 31, 1998 on assessing
Y2K readiness are $120,000. Management is in the process of identifying the
hardware, software, and related equipment that must be modified, upgraded, or
replaced to minimize the possibility of a material disruption of its business.
Management has essentially achieved Y2K compliance for all of its critical
internal systems, and expects to complete this process for its remaining systems
no later than the third quarter of 1999. In addition to computer equipment, the
Y2K consultants are currently assessing the potential impact of addressing
potential Y2K compliance issues for other equipment with embedded date-sensitive
processors.
In addition, Management has initiated communications with suppliers of
major hardware, software, and other related equipment used, operated, or
maintained by the Partnership, to identify and, to the extent possible, resolve
issues involving Y2K compliance. The Partnership has not received notification
by these suppliers of significant unresolved Y2K problems. However, there can be
no assurance that these suppliers will resolve all potential Y2K problems,
whether currently known or not, before the occurrence of a material disruption
to the business of the Partnership.
To date, the majority of suppliers and customers contacted have
responded to such communications or have indicated that the status of their Y2K
compliance has yet to be determined. However, management can give no assurance
that the Y2K issue will not materially affect its suppliers or customers. In
addition, management can give no assurance that failure by its suppliers and
customers to achieve Y2K compliance will not have a significant impact on the
Partnership's business. However, management intends to continue with follow-up
communications until all critical suppliers and customers have indicated their
status and/or compliance. In the event that a significant customer or vendor
were not able to operate after the year 2000, the resulting interruption in the
Partnership's business could lead to costs in excess of management's estimate of
expenses related to Y2K compliance.
A framework for developing contingency plans in the event of
significant interruptions of internal systems or our supplier's or customer's
business is currently being developed. Contingency plans are expected to be
complete late in 1999. Management believes that the most reasonably likely worst
case scenario relating to Y2K compliance could relate to a potential disruption
in cash processing from failures of customers and/or financial institutions.
14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
POPE RESOURCES
A DELAWARE LIMITED PARTNERSHIP
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
15
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
CONTENTS
Page
----
Independent auditors' report 17
Consolidated financial statements:
Balance sheets 18
Statements of income 19
Statements of cash flows 20
Notes to financial statements 21
16
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Unitholders
Pope Resources, A Delaware Limited Partnership
Poulsbo, Washington
We have audited the accompanying consolidated balance sheets of Pope
Resources, A Delaware Limited Partnership and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of income and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Pope Resources, A Delaware
Limited Partnership and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Seattle, Washington
February 5, 1999
17
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1998 AND 1997
(Thousands) 1998 1997
------- -------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,666 $ 3,950
Accounts receivable 639 680
Work in progress 11,199 10,072
Current portion of contracts receivable 611 1,433
Prepaid expenses and other 368 364
------- -------
Total current assets 15,483 16,499
------- -------
PROPERTIES AND EQUIPMENT:
Land and land improvements 16,701 15,028
Roads and timber, net of accumulated depletion
of $8,868 and $8,090 11,272 11,067
Buildings and equipment, net of accumulated
depreciation of $12,910 and $12,029 16,028 10,944
------- -------
44,001 37,039
------- -------
OTHER ASSETS:
Contracts receivable (net of current portion) 1,780 1,877
Unallocated amenities and project costs 1,073 847
Other 369 57
------- -------
3,222 2,781
------- -------
Total assets $62,706 $56,319
------- -------
------- -------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 777 $ 852
Distributions payable - 452
Accrued liabilities 1,383 1,028
Current portion of long-term debt 382 351
Minority interest 256 -
------- -------
Total current liabilities 2,798 2,683
Deficit in investment in joint venture - 160
Long-term debt 13,818 14,323
Deferred profit 194 242
Commitments and contingencies (Notes 2 and 9)
Partners' capital 45,896 38,911
------- -------
Total liabilities and partners' capital $62,706 $56,319
------- -------
------- -------
See notes to consolidated financial statements.
18
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(Thousands, except per unit information) 1998 1997 1996
-------- -------- --------
Revenues $ 42,952 $ 30,109 $ 33,013
Cost of sales (12,120) (10,937) (12,160)
Operating expenses (12,004) (7,445) (6,410)
Selling, general, and administrative (8,465) (6,873) (4,625)
-------- -------- --------
Income from operations 10,363 4,854 9,818
OTHER INCOME (EXPENSE)
Interest expense (1,406) (1,421) (1,388)
Interest income 618 413 282
Equity in losses of joint venture (217) (337) (378)
-------- -------- --------
(1,005) (1,345) (1,484)
Income before income taxes and minority interest 9,358 3,509 8,334
Income tax provision (310) - -
-------- -------- --------
Income before minority interest 9,048 3,509 8,334
Minority interest (256) - -
-------- -------- --------
Net income $ 8,792 $ 3,509 $ 8,334
-------- -------- --------
-------- -------- --------
NET INCOME:
Allocable to general partners $ 117 $ 47 $ 111
Allocable to limited partners 8,675 3,462 8,223
-------- -------- --------
Net income 8,792 3,509 8,334
-------- -------- --------
-------- -------- --------
EARNINGS PER UNIT:
Basic $ 1.95 $ 0.78 $ 1.84
-------- -------- --------
-------- -------- --------
Fully diluted $ 1.94 $ 0.78 $ 1.84
-------- -------- --------
-------- -------- --------
WEIGHTED AVERAGE UNITS OUTSTANDING:
Basic 4,519 4,519 4,519
-------- -------- --------
-------- -------- --------
Fully diluted 4,534 4,526 4,519
-------- -------- --------
-------- -------- --------
See notes to consolidated financial statements.
19
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(Thousands) 1998 1997 1996
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 41,294 $ 29,371 $ 33,523
Cash paid to suppliers and employees (30,693) (22,575) (20,078)
Interest received 609 428 302
Interest paid, net of amounts capitalized (1,663) (1,404) (1,417)
Income taxes paid (395) - -
-------- -------- --------
Net cash provided by operating activities 9,152 5,820 12,330
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,496) (3,023) (2,156)
Business combinations (2,476) - -
Joint venture investment (610) (492) (425)
-------- -------- --------
Net cash used for investing activities (5,582) (3,515) (2,581)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to unitholders (2,260) (1,763) (3,706)
Repayment of long-term debt (2,594) (333) (3,289)
-------- -------- --------
Net cash used for financing activities (4,854) (2,096) (6,995)
Net increase (decrease) in cash and
cash equivalents (1,284) 209 2,754
CASH AND CASH EQUIVALENTS:
Beginning of year 3,950 3,741 987
-------- -------- --------
End of year $ 2,666 $ 3,950 $ 3,741
-------- -------- --------
-------- -------- --------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 8,792 $ 3,509 $ 8,334
Land sold through tax-deferred exchange (2,677) - -
Cost of land and timber sold 946 306 1,192
Minority interest 256 - -
Land resale expenditures (66) (288) (106)
Depreciation and depletion 2,053 1,647 1,458
Loss on equity in joint venture 217 337 378
Deferred profit (48) (34) (511)
INCREASE (DECREASE) IN CASH FROM CHANGES
IN OPERATING ACCOUNTS:
Accounts receivable 41 (163) 530
Work in progress (1,353) 539 912
Contracts receivable 919 (498) 566
Accounts payable and accrued liabilities 280 493 (328)
Other long-term liabilities (118) - -
Other, net (90) (28) (95)
-------- -------- --------
Net cash provided by operating activities $ 9,152 $ 5,820 $ 12,330
-------- -------- --------
-------- -------- --------
See notes to consolidated financial statements.
20
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS:
Pope Resources, A Delaware Limited Partnership (the
"Partnership"), is a publicly traded limited partnership engaged
principally in managing timber resources on its own properties as
well as those owned by others, and real estate development
activities in the northwest region of the United States. The
managing general partner is Pope MGP, Inc. Timberland Resources
activities include the sale of logs and fees from the management
of tree farms owned by others. Real Estate includes the sale of
single-family homes, finished lots and undeveloped acreage, and
various commercial property operations.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries. Significant intercompany
balances and transactions have been eliminated in consolidation.
MINORITY INTEREST:
Minority interest represents Pope MGP, Inc.'s interest in the
Investor Portfolio Management Business (see Note 10).
USE OF ESTIMATES IN FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CONTRACTS RECEIVABLE:
The Partnership sells land parcels under contracts requiring a
minimum cash down payment of 20% and having financing terms of up
to eight years at interest rates of 10%. The Partnership reduces
credit risk on contracts through collateral on the underlying land
and down payment requirements.
21
Principal payments on contracts receivable for the next five years
are due as follows:
(Thousands)
1999 $611
2000 171
2001 453
2002 257
2003 216
UNALLOCATED AMENITIES AND PROJECT COSTS:
Unallocated amenities and project costs represent indirect development
costs for long-term real estate development projects. These costs are
expensed based on anticipated project sales of residential dwellings
and lots over the life of the project.
PROPERTIES AND EQUIPMENT:
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets, which range from 5 to 39 years.
Depletion of logging roads and costs of fee timber harvested are
provided at rates based on unrecovered costs and estimated recoverable
volume of softwood timber.
When facts and circumstances indicate the carrying value of properties
may be impaired, an evaluation of recoverability is performed by
comparing the carrying value of the property to the projected future
cash flows. Upon indication that the carrying value of such assets may
not be recoverable, the Partnership would recognize an impairment loss
by a charge against current operations.
REVENUE RECOGNITION:
Revenue on timber sales is recorded when title and risk of loss passes
to the buyer. Revenue on real estate sales is recorded on the date the
sale closes. The Partnership uses the installment method of accounting
for real estate sales transactions until 20% to 25% of the contract
sales value has been collected, at which time the full accrual method
of accounting is used.
INCOME PER PARTNERSHIP UNIT:
Basic income per partnership unit is computed using the weighted
average number of units outstanding during each year. Diluted income
per unit is calculated using the weighted average units outstanding
during the year, plus the dilutive impact of unit options outstanding.
All unit numbers were adjusted to reflect the 5 for 1 stock split to
owners of record on October 31, 1997.
22
STATEMENT OF CASH FLOWS:
The Partnership considers all highly liquid debt instruments with a
maturity of three months or less when purchased to be cash equivalents.
Noncash investing activities in 1998 include $2,677,000 of proceeds
from land sales received by tax-deferred exchange facilitators and
utilized to purchase other real property on behalf of the Partnership
and the assumption of $2,239,000 in debt for the acquisition of real
property.
RECLASSIFICATIONS:
Certain reclassifications have been made to the prior years' financial
statements to conform with the current year's presentation.
2. BUSINESS COMBINATIONS AND JOINT VENTURE
The Partnership and its subsidiaries completed two acquisitions at the end
of December 1998. One of those acquisitions was the purchase of assets
comprising the forestry consulting and timberland management business of
H.A. Simons Ltd. and will be part of operations for the Timberland
Resources segment in 1999. This acquisition was structured primarily as an
"earnout," where the Partnership is required to make contingent payments
over the next five years provided the acquired operation meets or exceeds
specified profitability levels from business outside of the United States.
The second acquisition involved assets of a joint venture that the
Partnership participated in to operate the 36-room Heron Beach Inn on
Ludlow Bay in western Washington, which will become part of operations for
the Real Estate segment in 1999. Prior to the acquisition, the Partnership
owned 50% of the joint venture. As a result of this acquisition the
Partnership owns 100% of the Inn. Losses from the joint venture were
recorded on the equity method during 1996, 1997, and 1998. The purchase
price and the Partnership's basis in the dissolved joint venture were
allocated to assets and liabilities acquired.
3. INCOME TAXES
The Partnership is not subject to income taxes. Instead, partners are taxed
on their share of the Partnership's taxable income, whether or not cash
distributions are paid. The provision for income taxes relating to taxable
subsidiaries of the Partnership consists of $278,000 in current and $32,000
in deferred taxes in 1998.
The following schedule reconciles net income reported for financial
statement purposes to consolidated taxable income:
23
(Thousands) 1998 1997 1996
- --------------------------------------------------------------------------------------
Net income per financial statements $ 8,792 $3,509 $8,334
Undistributed subsidiary corporation income (1,226) - -
Difference in reporting depreciation (314) (163) (37)
Difference in reporting depletion (12) (116) (27)
Cost basis of land, timber and homes sold 316 29 175
Deferred profit from differences in the use
of the installment method (177) (128) 330
Deferred gain from land exchange (2,771) - -
------- ------ ------
Taxable income $ 4,608 $3,131 $8,775
------- ------ ------
------- ------ ------
24
4. LONG-TERM DEBT
Long-term debt at December 31 consists of:
(Thousands) 1998 1997
--------------------------------------------------------------------------
Mortgage note payable to an insurance company,
with interest at 9.65%, collateralized by
timberlands, with a minimum monthly payment
of $136,000 and maturing May 2022 $13,632 $13,935
Local improvement district assessments, with
interest ranging from 6.5% to 10%, due
through 2009 411 464
Other 157 275
--------------------
14,200 14,674
Less current portion 382 351
--------------------
Total long-term debt $13,818 $14,323
--------------------
--------------------
The Partnership has a $20 million revolving term loan agreement. There
was no balance outstanding on the agreement as of December 31, 1998 and
1997. The maximum available borrowings are reduced by $10 million on
September 30, 2000 and the agreement expires on September 30, 2001.
The Partnership debt agreements contain certain financial statement
ratio covenants and have tangible net worth requirements. The minimum
net worth requirements for the bank and the insurance company notes
were $25,856,000 as of December 31, 1998. The net worth requirements
increase each year by a percentage of the current year's net income.
The mortgage note payable also includes debt repayment provisions in
the event that timber harvests exceed specified levels. The Partnership
was in compliance with these covenants as of December 31, 1998.
Principal payments on long-term debt for the next five years are due as
follows:
(Thousands)
1999 $382
2000 411
2001 448
2002 489
2003 534
25
5. PARTNERS' CAPITAL
The general partners of the Partnership are Pope EGP, Inc., and Pope
MGP, Inc. Allocations of partner distributions are based on units held.
The following is the Partners' capital account activity for the three
years ended December 31, 1998:
General Limited
(Thousands) Partners Partners Total
-------- -------- -------
January 1, 1996 $460 $32,528 $32,988
Distributions (49) (3,657) (3,706)
Net Income 111 8,223 8,334
---- ------- -------
December 31, 1996 $522 $37,094 $37,616
Distributions (30) (2,184) (2,214)
Net Income 47 3,462 3,509
---- ------- -------
December 31, 1997 $539 $38,372 $38,911
Distributions (24) (1,783) (1,807)
Net Income 117 8,675 8,792
---- ------- -------
DECEMBER 31, 1998 $632 $45,264 $45,896
---- ------- -------
---- ------- -------
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership's financial instruments include cash and cash
equivalents, accounts receivable, contracts receivable, and variable
rate debt, for which the carrying amount of each approximates fair
value. The fair value of contracts receivable was determined based on
current yields for similar contracts. The fair value of fixed rate debt
having a carrying value of $14,043,000 and $14,399,000 has been
estimated based on current interest rates for similar financial
instruments and totals $15,614,000 and $15,796,000 as of December
31, 1998 and 1997, respectively.
7. UNIT OPTION PLAN
The Partnership's 1997 Unit Option Plan authorized the granting of
nonqualified unit options to employees, officers, and directors of the
Partnership. A total of 300,000 units have been reserved for issuance
under the plan. Unit options are granted at prices not less than the
fair value of the limited partnership units on the date of the grant.
The options generally become exercisable annually over a four-year
period and have a maximum term of ten years. During 1998, 50,000
options were granted with a strike price of $26.50. During 1997, 42,500
options were granted at a strike price of $20 per unit. As of December
31, 1998, 10,625 options were exercisable.
26
The Partnership accounts for unit-based compensation in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees.
Accordingly, compensation cost for unit options is measured as the
excess, if any, of the fair value of the Partnership's units at the
date of grant over the amount an employee must pay to acquire the unit.
No compensation expense has been recognized on original grants of unit
options, which have all had an exercise price not less than the fair
value of the Partnership's unit price on the date of the grant. Had
compensation expense for unit option grants been recognized based on
the fair value at the grant date consistent with the method described
in SFAS No. 123, Accounting for Stock-Based Compensation, the
Partnership's net income would have been adjusted to the pro forma
amounts indicated below:
(Thousands) 1998 1997
------ ------
Net income as reported $8,792 $3,509
Pro forma net income under SFAS No. 123 8,653 3,393
The fair value of options was calculated using the Black-Scholes
option-pricing model, with the following assumptions:
1998 1997
------- -------
Expected life 5 years 5 years
Risk-free interest rate 5.0% 5.1%
Dividend yield 1.4% 2.1%
Volatility .14 .18
8. EMPLOYEE BENEFITS
Full-time salaried employees with one year of service are eligible to
receive benefits under a defined contribution plan. The Partnership is
required to contribute 3% of eligible employee compensation into the
plan, which amounted to $230,000, $60,000, and $49,000 for December 31,
1998, 1997, and 1996, respectively.
9. COMMITMENTS AND CONTINGENCIES
Performance bonds and letters of credit: In the ordinary course of
business, and as part of the entitlement and development process, the
Partnership is required to provide performance bonds and letters of
credit to ensure completion of certain public facilities. The
Partnership had outstanding performance bonds and letters of credit
which total $685,000 and $712,000 at December 31, 1998 and 1997,
respectively.
Operating leases: The Partnership has non-cancellable operating leases
for office and computer equipment. The lease terms are from 12 to 36
months. Rent expense under the operating leases totaled $340,000,
$27,000 and $7,000 for the years ending December 31, 1998, 1997 and
1996, respectively.
Future minimum rental payments required under non-cancellable operating
leases are as follows:
1999 $649,000
2000 603,000
2001 193,000
27
Contingencies: The Partnership may from time to time be a defendant in
various lawsuits arising in the ordinary course of business. Management
believes that loss to the Partnership, if any, will not have a material
adverse effect to the Partnership's financial condition or results of
operations.
10. RELATED PARTY AND MINORITY INTEREST
Pope MGP, Inc., is the managing general partner of the Partnership and
receives an annual fee of $150,000.
The minority interest represents Pope MGP, Inc.'s interest in the IPMB.
The amendment to the Limited Partnership Agreement authorizing
management to pursue the IPMB specifies that net income from the IPMB
will be split using a sliding scale allocation method, commencing with
80% to ORM, Inc., a subsidiary of Pope Resources, and 20% to Pope MGP,
Inc. The sliding scale allocation method will allocate income evenly
between ORM, Inc. and Pope MGP, Inc. once net income from the IPMB
reaches $7,000,000 in a fiscal year. The aforementioned amendment
authorizing pursuit of the IPMB limits cumulative net expenditures to
$5,000,000, including debt guarantees. The Partnership has incurred
approximately $1,337,000 of net expenditures and debt guarantees though
December 31, 1998.
A director of Pope MGP, Inc., is also a director of Pope & Talbot, Inc.
(P&T). In 1998, 1997 and 1996, the Partnership received lease payments
of $75,000 from P&T for lease of a log sorting and storage site at Port
Gamble, Washington.
In 1996, the Partnership sold one of its residential homes at Port
Ludlow, Washington, to the Director, President, and CEO of the
Partnership in connection with his relocation and employment. The
Partnership holds the promissory note for a portion of the purchase
price with a balance of $271,000 at December 31, 1998 and 1997. The
note bears interest at 6.48% and requires interest-only payments until
maturity in 2001.
The partnership contracts with a relative of the President and CEO to
direct the Partnership's outreach efforts, which involves the location
of potential timberland properties to be included in investor
portfolios. The partnership paid $121,000 and $102,000 to the
individual during 1998 and 1997, respectively.
As of December 31, 1997, the Partnership had a note receivable from an
individual participating with the Partnership in a joint venture to
develop and manage real estate. The balance of the note receivable was
$224,000 at December 31, 1997, and was repaid in December 1998.
11. SEGMENT AND MAJOR CUSTOMER INFORMATION:
The Partnership's operations are classified into two segments:
Timberland Resources and Real Estate. The Timberland Resources segment
manages over 600,000 acres of timberland properties for third parties
and the Partnership's own tree farm in Washington State. Timberlands
under management are in Washington, Oregon, California and British
Columbia. Revenues are generated through management fees earned and the
sale of timber harvested from the Partnership's tree farm. Major
28
customers include two customers with 21% and 9%; 15% and 9%; and 19%
and 11% of total revenues for 1998, 1997, and 1996, respectively.
The Real Estate segment builds and sells homes and lots and manages
several commercial properties including marina, golf course, sewer and
water facilities and other commercial properties. All of the
Partnership's real estate development activities are in Washington
state, with the majority in Port Ludlow.
Identifiable assets are those used exclusively in the operations of
each industry segment or those allocated when used jointly. The
Partnership does not allocate cash, accounts receivable, certain
prepaid expenses or the Partnership's administrative office for
purposes of evaluating segment performance. Details of the
Partnership's operations by business segment for the years ended
December 31 were as follows:
Timberland
(Thousands) Resources Real Estate Administrative Consolidated
- ----------------------------------------------------------------------------------------------
1998
Revenues $29,310 $13,642 $ - $42,952
Income (loss) from operations 14,940 2,527 (7,104) 10,363
Depreciation and depletion 862 731 460 2,053
Identifiable assets 16,976 36,461 9,269 62,706
Capital and land expenditures 1,314 5,613 697 7,624
1997
Revenues $19,486 $10,623 $30,109
Income (loss) from operations 10,151 (727) $(4,570) 4,854
Depreciation and depletion 573 763 311 1,647
Identifiable assets 16,015 33,515 6,789 56,319
Capital and land expenditures 719 769 1,884 3,372
1996
Revenues $21,569 $11,444 $33,013
Income (loss) from operations 13,650 (77) (3,755) 9,818
Depreciation and depletion 505 800 $ 153 1,458
Identifiable assets 15,947 33,178 5,474 54,599
Capital and land expenditures 490 1,249 526 2,265
Revenues by product line for the years ending December 31, 1998, 1997, and 1996
are as follows:
1998 1997 1996
------- ------- -------
Sales of forest products:
Domestic $14,547 $11,337 $ 9,663
Export, indirect 5,857 8,149 11,906
Sales of homes, lots, and
undeveloped acreage 8,631 5,819 6,832
Fees for service 13,917 4,804 4,612
------- ------- -------
Total revenues $42,952 $30,109 $33,013
------- ------- -------
------- ------- -------
29
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Income/(loss) Net Income/(loss) per
(Thousands, except per from Partnership unit,
unit data) Revenues operations Net Income/(loss) fully diluted
- ----------------------------------------------------------------------------------------------------
1998
First quarter $ 9,948 $2,791 $ 2,337 $ .52
Second quarter 14,313 5,011 4,547 1.01
Third quarter 12,574 3,395 2,941 .65
Fourth quarter 6,117 (834) (1,033) (.24)
1997
First quarter $ 7,080 $2,045 $ 1,683 $ .37
Second quarter 7,526 1,086 739 .16
Third quarter 8,591 2,017 1,761 .39
Fourth quarter 6,912 (294) (674) (.14)
1996
First quarter $ 9,139 $4,344 $ 3,894 $ .86
Second quarter 9,282 3,560 3,209 .71
Third quarter 8,676 2,220 1,916 .42
Fourth quarter 5,916 (306) (685) (.15)
30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Managing General Partner of the Partnership is Pope MGP, Inc. Its
address is the same as the address of the principal offices of the Partnership.
Pope MGP, Inc. receives $150,000 per year for acting as managing general partner
of the Partnership.
The following table identifies the officers and directors of Pope MGP,
Inc. as of December 31, 1998. The Partnership has no directors. Officers of
Pope MGP, Inc. hold identical offices with the Partnership.
NAME AGE POSITION AND BACKGROUND
- ----------------------------------- --- ----------------------------------
Adolphus Andrews, Jr. (1), (2), (5) 76 Director; President of Andrews
Associates, Inc., 1981 to
present.
Peter T. Pope (1), (2) 64 Director; President, CEO and
Chairman of the Board of Pope &
Talbot, Inc., 1971 to present.
Gary F. Tucker (3)(4) 63 Director; President and CEO of
Pope MGP, Inc. and the
Partnership since December 1995;
President of Trees Inc., June
1989 to December 1995; Vice
President Resources of Plum Creek
Timber Company, Inc., March 1984
to May 1989.
Marco F. Vitulli (4) 64 Director; President, Vitulli
Ventures Ltd., 1980 to present.
Douglas E. Norberg (2) 58 Director; President, Wright
Runstad & Company, 1975 to
present.
David Cunningham (3) 52 Vice President Public Affairs,
since June 1996, Vice President
Land Use from December 1985 to
June 1996 of Pope MGP, Inc. and
the Partnership; Planning
Director, Pope & Talbot
Development, Inc., July 1978 to
December 1985.
Thomas R. Gilkey (3) 52 Senior Vice President Timberlands
since November 1998, Senior Vice
President Timberland and
Acquisitions from January 1997 to
October 1998 of Pope MGP, Inc.
Private consultant from January
1994 to December 1996. Executive
Vice President, The Campbell
Group 1987 to 1994.
32
Timberland Division Manager of
Crown Zellerbach 1974 to 1987.
Meredith R. Green (3) 39 Vice President Finance and
Treasurer since December 1997,
Controller and Treasurer from
January 1997 to December 1997 of
Pope MGP, Inc. and the
Partnership. Controller of
Trillium Corporation from October
1995 to December 1996; Controller
of Fiberchem/Hanna Resin
Distribution from December 1989
to October 1995; Emerging
Business Consultant with Ernst
and Young from September 1986 to
December 1989.
Thomas A. Griffin (3) 41 Vice President Income Properties
from June 1996, Treasurer and
Controller from November 1991 to
June 1996, and Controller from
March 1989 to October 1991, and
Assistant Controller May 1988 to
February 1989 of Pope MGP, Inc.
and the Partnership; Property
Manager of Wood Associates,
January 1986 to April 1988;
Controller of Vestar, January
1984 to January 1986.
Craig L. Jones (3) 44 Senior Vice President General
Counsel and Secretary since
September 1996 of Pope MGP, Inc.
and the Partnership. Private law
practice from 1981 to 1996.
Gregory M. McCarry (3) 49 Senior Vice President Real Estate
since June 1996, Vice President
Development from November 1987 to
June 1996 of Pope MGP, Inc. and
the Partnership; owner of Pace
Builders, 1986 to November 1987;
Treasurer of Security Resources,
Inc., from 1983 to 1986.
David L. Nunes (3) 37 Senior Vice President
Acquisitions & Portfolio
Development since November 1998;
Vice President Portfolio
Development from December 1997 to
October 1998; Director of
Portfolio Development from April
1997 to December 1997 of Pope
MGP, Inc. and the Partnership;
Strategic Planning Director of
Weyerhaeuser Company from June
1988 to April 1997.
Thomas M. Ringo (3) 45 Senior Vice President Finance and
Client Relations since June 1996,
Vice President Finance from
November 1991 to June 1996, and
Treasurer from March 1989 through
33
October 1991 of Pope MGP, Inc.
and the Partnership; Tax Manager
of Westin Hotel Company, 1985 to
March 1989; Tax Consultant for
Price Waterhouse, 1981 to 1985.
Wes Nicholson, Ph.D. (3) 48 Vice President Operational
Planning and Analysis since
November 1998. Director
Operational Planning and Analysis
from January 1998 to October
1998. President of Taiga Ltd., a
one person forestry consulting
firm, since January 1995.
Director Resource Planning, The
Campbell Group from March 1988 to
December 1994.
(1) Mr. Pope is the first cousin of Emily T. Andrews, Mr. Andrews' wife.
(2) Terms expire December 31, 2000.
(3) Term as an officer expires December 31, 1999.
(4) Term as a director expires December 31, 1999.
(5) Mr. Andrews retires on March 22, 1999 when he attains the age of 77 years.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the cash
compensation paid to each of the five most highly compensated executive officers
of the Partnership.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------
Annual Compensation
- --------------------------------------------------------------------------------------------
Name and Other Annual All Other
Principal Salary Bonus Compensation Compensation
Position Year ($) ($)(1) ($)(2) ($)(3)
- --------------------------------------------------------------------------------------------
Gary F. Tucker 1998 258,300 116,000 4,800
CEO & President 1997 252,000 100,000 4,800
1996 240,000 110,000 -
- --------------------------------------------------------------------------------------------
Greg McCarry 1998 148,196 52,000 4,800
Sr. V.P. Real Estate 1997 144,581 44,400 4,800
1996 136,048 50,000 4,363
- --------------------------------------------------------------------------------------------
Craig Jones 1998 145,294 65,000 4,800
Sr. V.P. General Counsel 1997 141,750 80,500 4,800
1996 45,000 20,000 -
- --------------------------------------------------------------------------------------------
Thomas M Ringo 1998 133,250 47,000 4,800
Sr. V.P. Finance and 1997 130,000 45,600 4,800
Client Relations 1996 107,925 50,000 3,960
- --------------------------------------------------------------------------------------------
34
- --------------------------------------------------------------------------------------------
Annual Compensation
- --------------------------------------------------------------------------------------------
Name and Other Annual All Other
Principal Salary Bonus Compensation Compensation
Position Year ($) ($)(1) ($)(2) ($)(3)
- --------------------------------------------------------------------------------------------
Thomas Gilkey 1998 133,250 60,000 4,800
Sr. V.P. Timber 1997 130,000 73,700 4,800
- --------------------------------------------------------------------------------------------
(1) Amounts represent bonuses or commissions earned in the year shown but paid
in either the current or following years.
(2) Perquisites and other personal benefits paid to each named executive
officer in each instance aggregated less than 10% of the total annual
salary and bonus for each officer and accordingly were omitted from the
table as permitted by the rules of the Securities and Exchange Commission
(SEC).
(3) Amounts represent contributions to the Partnerships 401(k) plan.
(4) Mr. Jones was hired as the Partnership's Sr. V.P. General Counsel in
September, 1996.
COMPENSATION PURSUANT TO UNIT OPTIONS
During 1998 unit options were issued at the unit market value as follows:
35
The following table provides information on option exercises in fiscal 1998
by the named executive officers and the value of exercisable and
unexercisable unit options at December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------
Number of Number of
securities underlying securities underlying
unexercised options unexercised options
at year-end (#) at year-end ($)
Units Acquired Value
Name on exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ -------------- -------- ----------- ------------- ----------- -------------
Gary Tucker - - 3,750 26,250 $46,875 $230,625
President and CEO
Greg McCarry - - 938 6,813 $11,719 $59,156
Sr. V.P. Real Estate
Craig Jones - - 938 6,813 $11,719 $59,156
Sr. V.P. General
Counsel
Thomas M. Ringo - - 938 6,813 $11,719 $59,156
Sr. V.P. Finance and
Client Relations
Thomas Gilkey - - 938 6,813 $11,719 $59,156
Sr. V.P. Timber
COMPENSATION OF DIRECTORS
Compensation of the outside directors of Pope MGP, Inc. consisted of a
monthly fee of $1,500 plus a $1,000 per day fee for each board meeting attended.
Two outside directors were granted 1,250 unit options each at a strike price of
$20.00 and 3,000 unit options each at a strike price of $26.50 in 1997 and 1998,
respectively. The option grants were made pursuant to the Partnership's 1997
Unit Option Plan for their service as directors of Pope MGP, Inc.
EMPLOYEE BENEFIT PLANS.
Full-time salaried employees with one year of service are eligible to
receive benefits under a defined contribution plan. The Partnership is required
to contribute 3% of eligible employee compensation into the plan, which amounted
to $230,000, $60,000, and $49,000 for each of the three years ended December 31,
1998, 1997, and 1998, respectively. Employees become fully vested over a
six-year period in the Partnership's contribution.
The Partnership has a supplemental retirement plan for a retired key
employee. The plan provides for a retirement income of 70% of the employee's
base salary at retirement after taking into account both 401(k) and social
security benefits. The Partnership accrued $181,000 for this benefit in 1995.
36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL UNITHOLDERS
As of December 31, 1998, the following persons were known or believed by
the Partnership to be the beneficial owners of more than five percent (5%) of
the outstanding Partnership units:
Title of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership (1) of Class
- -------- -------------------------------- ------------------------ --------
Units Private Capital Management, Inc. 1,600,357 (2) 35.4
3003 Tamiami Trail North
Naples, FL 33940
Units Emily T. Andrews 557,100 (3) 12.3
600 Montgomery Street
35th Floor
San Francisco, CA 94111
Units Peter T. Pope 314,345 (4) 7.0
1500 S.W. 1st Avenue
Portland, OR 97201
(1) Each beneficial owner has sole voting and investment power unless
otherwise indicated.
(2) Private Capital Management, Inc. is an investment adviser shown
registered under the Investment Advisers Act of 1940. Units are held in
various accounts managed by Private Capital Management, Inc. which shares
dispositive powers as to those units.
(3) Includes 1,090 units owned by her husband, Adolphus Andrews, Jr. as to
which she disclaims beneficial ownership. Also includes a total of 60,000
units held by Pope MGP, Inc. and Pope EGP, Inc., as to which she shares voting
and investment power.
(4) Includes 53,420 units held in trust for his children. Also includes a
total of 60,000 units held by Pope MGP, Inc., and Pope EGP, Inc., as to which
he shares investment and voting power.
37
MANAGEMENT
As of December 31, 1996, the beneficial ownership of the Partnership
units of (I) the general partners, (II) the directors of the Partnership's
general partners, and (III) the Partnership's general partners, directors and
officers of the Partnership as a group was as follows:
Amount and Nature of Percent of
Name Position and Offices Beneficial Ownership (1) Class
- --------------------- --------------------------------- ------------------------ ----------
Adolphus Andrews, Jr. Director, Pope MGP, Inc. and Pope 557,100 (2) 12.3
EGP, Inc. (3)
Peter T. Pope Director, Pope MGP, Inc. and Pope 314,345 (4) 7.0
EGP, Inc. (5)
Pope EGP, Inc. Equity General Partner 54,000 1.2
Pope MGP, Inc. Managing General Partner 6,000 *
Marco Vitulli Director, Pope MGP, Inc. 1,000 *
Douglas Norberg Director, Pope MGP, Inc. 3,250 *
Thomas M. Ringo Senior Vice President Finance, Pope 500 *
MGP, Inc. and the Partnership
All general partners, directors and officers of general 816,195 (6) 18.0
partners, and officers of the Partnership as a group
(11 individuals and 2 partners)
* Less than 1%
(1) Each beneficial owner has sole voting and investment power unless
otherwise indicated.
(2) Includes 499,510 units as to which he shares investment and voting
power. Also includes units owned by Pope MGP, Inc. or Pope EGP, Inc.,
as to all of which he disclaims beneficial ownership. See footnote
(3) under "Principal Unitholders."
(3) Mr. Andrews is also Vice President of Pope EGP, Inc.
(4) See footnote (4) under "Principal Unitholders."
(5) Mr. Pope is also President of Pope EGP, Inc.
(6) For this computation, the 60,000 units held by Pope MGP, Inc. and Pope
EGP, Inc. are excluded from units beneficially owned by Mr. Pope and
Mr. Andrews. All of the outstanding stock of Pope MGP, Inc. and Pope
EGP, Inc. is owned by Mr. Pope and Mr. Andrews' wife, Emily T. Andrews.
38
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership Agreement provides that it is a complete defense
to any challenge to an agreement or transaction between the Partnership and a
general partner, or related person, due to a conflict of interest if, after full
disclosure of the material facts as to the agreement or transaction and the
interest of the general partner or related person, (1) the transaction is
authorized, approved or ratified by a majority of the disinterested directors of
the managing general partner, Pope MGP, Inc., or (2) the transaction is
authorized by partners of record holding more than fifty percent (50%) of the
units held by all partners.
In 1996, the Partnership sold one of its residential homes at Port Ludlow,
Washington to Gary F. Tucker, a Director, President, and CEO of Pope MGP, Inc.
in connection with his relocation and employment by Pope MGP, Inc. The
Partnership holds Mr. Tucker's promissory note for a portion of the purchase
price which has a balance of $271,000, bears interest at 6.48% per annum,
requires interest-only payments and matures in 2001.
The Partnership contracts with a relative of Gary F. Tucker to direct the
Partnership's outreach acquisitions outreach efforts, which involves the
location of potential properties to be included in investor portfolios. During
the last fiscal year, the Partnership paid fees totaling $121,000 for services
provided by the individual.
39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS
Page
Financial Statements:
Independent Auditors' Report................................. 17
Consolidated Balance Sheets.................................. 18
Consolidated Statements of Income............................ 19
Consolidated Statements of Cash Flows........................ 20
Notes to Consolidated Financial Statements................... 21-30
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the
fiscal year ended December 31, 1998.
(c) EXHIBITS.
3.1 Partnership's Certificate of Limited Partnership. (1)
3.2 Partnership's Limited Partnership Agreement, dated as of November
7, 1985. (1)
3.3 Amendment to Partnership's Limited Partnership Agreement dated
December 16, 1986. (2)
3.4 Amendment to Partnership's Limited Partnership Agreement dated
March 14, 1997. (4)
4.1 Specimen Depositary Receipt of Registrant. (1)
4.2 Partnership's Limited Partnership Agreement dated as of
November 7, 1985 and amended December 16, 1986 (see
Exhibits 3.1 and 3.3).
9.1 Shareholders Agreement entered into by and among Pope MGP,
Inc., Pope EGP, Inc., Peter T. Pope, Emily T. Andrews,
P&T, present and future directors of Pope MGP, Inc. and
the Partnership, dated as of November 7, 1985 included as
Appendix C to the P&T Notice and Proxy Statement filed
with the Securities and Exchange Commission on November
12, 1985, a copy of which was filed as Exhibit 28.1 to the
Partnership's registration on Form 10 identified in
footnote (1) below. (1)
10.1 Transfer and Indemnity Agreement between the Partnership and P&T
dated as of December 5, 1985. (1)
40
10.2 Management Agreement between the Partnership and P&T dated as of
December 5, 1985. (1)
10.3 Ground Leases between the Partnership as Lessor and P&T as Lessee
dated December 3, 1985. (1)
22.1 Subsidiaries of the Partnership (3) and (4)
28.1 Certificate of Incorporation of Pope MGP, Inc. (1)
28.2 Amendment to Certificate of Incorporation of Pope MGP, Inc. (3)
28.3 Bylaws of Pope MGP, Inc. (1)
28.4 Certificate of Incorporation of Pope EGP, Inc. (1)
28.5 Amendment to Certificate of Incorporation of Pope EGP, Inc. (3)
28.6 Bylaws of Pope EGP, Inc. (1)
(1) Incorporated by reference from the Partnership's registration on
Form 10 filed under File No. 1-9035 and declared effective on
December 5, 1985.
(2) Incorporated by reference from the Partnership's annual report on
Form 10-K for the fiscal year ended December 31, 1987.
(3) Incorporated by reference from the Partnership's annual report on
Form 10-K for the fiscal year ended December 31, 1988.
(4) Incorporated by reference from the Partnership's Proxy Statement
filed on February 14, 1997.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
POPE RESOURCES, A Delaware
Limited Partnership
By POPE MGP, INC.
-------------------------------
Managing General Partner
Date: March 19, 1999 By
-------------------------------
GARY F. TUCKER,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Date: March 19, 1999 By
------------------- ---------------------------------
GARY F. TUCKER,
President, Chief Executive Officer
(principal executive officer),
Partnership and Pope MGP, Inc.;
Director, Pope MGP, Inc.
Date: March 19, 1999 By
------------------- ---------------------------------
THOMAS M. RINGO
Senior Vice President Finance and
Client Relations (principal
financial officer), Partnership and
Pope MGP, Inc.
Date: March 19, 1999 By
------------------- ---------------------------------
MEREDITH R. GREEN
Vice President Finance & Treasurer
(principal accounting officer),
Partnership and Pope MGP, Inc.
42
Date: March 19, 1999 By
------------------- ---------------------------------
ADOLPHUS ANDREWS, JR.
Director, Pope MGP, Inc.
Date: March 19, 1999 By
------------------- ---------------------------------
PETER T. POPE
Director, Pope MGP, Inc.
Date: March 19, 1999 By
------------------- ---------------------------------
MARCO F. VITULLI
Director, Pope MGP, Inc.
Date: March 19, 1999 By
------------------- ---------------------------------
DOUGLAS E. NORBERG
Director, Pope MGP, Inc.
43
5
12-MOS 12-MOS
DEC-31-1998 DEC-31-1997
JAN-1-1997 JAN-1-1996
DEC-31-1998 DEC-31-1997
2,666 3,950
0 0
639 680
0 0
11,199 10,072
15,483 16,499
65,779 57,158
21,778 20,119
62,706 56,319
2,798 2,683
13,818 14,323
0 0
0 0
0 0
45,896 38,911
62,706 56,319
29,035 25,305
42,952 30,109
12,120 10,937
32,589 25,255
788 1,009
0 0
1,406 1,421
9,358 3,509
310 0
8,792 3,509
0 0
0 0
0 0
8,792 3,509
1.95 .78
1.94 .78
