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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) September 30, 2003
Pope Resources, A Delaware Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 91-1313292
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19245 Tenth Avenue NE, Poulsbo, Washington 98370
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (360) 697-6626
NOT APPLICABLE
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(Former name or former address, if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
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Item 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On October 23, 2003 the registrant issued a press release relating to its
earnings for the quarter ended September 30, 2003. A copy of that press release
is attached hereto as Exhibit 99.1.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description
- ----------- -----------
99.1 Press release of the registrant dated October 23, 2003
SIGNATURES
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Pursuant to the requirements of Section 13 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
DATE: October 23, 2003 BY: /s/ Thomas M. Ringo
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Thomas M. Ringo
Vice President and Chief Financial Officer,
Pope Resources, A Delaware Limited
Partnership, and Pope MGP, Inc., General
Partner
Exhibit 99.1
Pope Resources Reports Third Quarter Earnings of $941,000
POULSBO, Wash.--(BUSINESS WIRE)--Oct. 23, 2003--Pope Resources
(Nasdaq:POPEZ) reported net income of $941,000, or 21 cents per
diluted ownership unit, on revenues of $6.6 million for the third
quarter ended September 30, 2003. This compares to net income of $1.1
million, or 24 cents per diluted ownership unit, on revenues of $8.7
million, for the same period in 2002.
Net income for the nine months ended September 30, 2003 totaled
$3.5 million, or 78 cents per diluted ownership unit, on revenues of
$21.4 million. Net income for the corresponding period in 2002 totaled
$2.6 million, or 58 cents per diluted ownership unit, on revenues of
$24.4 million.
"We expected a pattern of softening log prices to unfold over the
course of 2003 and this has in fact happened," said David L. Nunes,
President and CEO. "Our average realized log price for each of the
first, second, and third quarters of this year have been $495, $482,
and $456, respectively. Given this price trend expectation, we
weighted our 2003 log production early in the calendar. As of the end
of 2003's third quarter, we have produced 85% of our anticipated
annual volume, compared to 75% at this time last year. This
front-loading of volume is the principal reason our overall
year-to-date results for 2003 compare favorably to 2002. Real Estate
segment results for this year-to-date are much improved over 2002's
comparable period due primarily to $895,000 of expense accruals
recorded in the second quarter of 2002 that did not recur in 2003.
More than offsetting these improvements, however, is the decline in
income from our third-party Timberland Management and Consulting
segment associated with significantly reduced acres under management
in 2003 following the December 31, 2002 termination of our management
contract with Hancock Timber Resource Group. Overhead costs for
year-to-date 2003 are nearly 25% lower than the prior year's
comparable period, reflective of changes implemented in our support
infrastructure following the reduction in acres managed."
Fee Timber
Operating income from Fee Timber operations totaled $2.6 million
in both the third quarter of 2003 and the third quarter of last year.
Harvest volume of 12.0 million board feet (MMBF) in the current
quarter was down only slightly from 12.2 MMBF in the same quarter a
year ago. However, the Partnership's weighted average log price of
$456 per thousand board feet (MBF) for the third quarter of 2003 was
down $21/MBF (or 4%) from the third quarter of 2002, and down $26/MBF
(or 5%) from the second quarter of 2003. Average export log prices
realized were down $44/MBF (or 8%) in the third quarter of 2003
compared with the third quarter of 2002, and also declined $22/MBF (or
4%) in the third quarter of 2003 from the second quarter of 2003. In
our domestic log market, harvest closures due to forest fire
conditions in the Pacific Northwest created some temporary upward
pressure on prices -- but not enough to overcome broader softness in
log pricing due to excess supply. Domestic conifer log prices moved
down $29/MBF (or 6%) per MBF in the current quarter compared to the
third quarter of 2002, and also lower by $40/MBF (or 8%) when compared
to the second quarter of 2003. Stronger pricing for both hardwood and
pulpwood logs partially offset lower prices in export and domestic
conifer markets. Given comparable harvest volumes between the third
quarters of 2003 and 2002, and lower unit prices in 2003 compared to
2002, operating income for the two periods was nearly identical due to
$237,000 of earnings from three small timberland sales combined with
lower operating costs.
For the first nine months of 2003, operating income was $8.4
million compared to $7.6 million for the first nine months of 2002.
Harvest volume of 37.9 MMBF for the first nine months of 2003 was up
nearly 4.0 MMBF, or 12% higher compared with the harvest level in the
same period a year ago, again owing to our front-loading of planned
volume for the year. The Partnership's weighted average log price of
$478/MBF for the first nine months of 2003 was down $10/MBF (or 2%)
from the comparable period in 2002. Average export log prices realized
were up $8/MBF (or 1%) in the first nine months of 2003 compared with
the same period in 2002. In our domestic conifer log market, average
log prices were down $23/MBF (or 4%) in the first nine months of 2003
compared with the same period in 2002. Overall log realizations
benefited from significantly higher hardwood log prices, which
increased $70/MBF (or 15%) for the first nine months of 2003 compared
with the same period in 2002.
For the balance of 2003 the Partnership expects to harvest 7 MMBF
for a total annual harvest of approximately 45 MMBF, an annual cut
that is anticipated to be sustainable for the foreseeable future.
Timberland Management & Consulting
For the third quarter and first nine months of 2003, this segment
generated operating losses of $122,000 and $445,000, respectively.
These results compare unfavorably with the third quarter and first
nine months of 2002, when this segment generated operating income of
$539,000 and $1.1 million, respectively. The Partnership's acres under
management have declined significantly since late 2002 with the
expiration of a major contract at December 31, 2002. This factor alone
has contributed approximately $800,000 to the negative variance
between 2003 and 2002 year-to-date results.
Real Estate
The Real Estate segment recorded an operating loss of $192,000 in
the current quarter, compared to a loss of $190,000 for the comparable
period in 2002. For the first nine months of 2003 and 2002, the Real
Estate segment recorded operating losses of $258,000 and $1.3 million,
respectively. The disparity in comparative year-to-date results is due
principally to two accruals totaling $895,000: one for environmental
cleanup in Port Gamble ($730,000) and the other for home warranty
liabilities in Port Ludlow ($165,000). Prior to these accruals, the
segment generated an operating loss of $423,000 for the first nine
months of 2002. Improvements in the financial performance of the
historic milltown of Port Gamble account for the balance of the
improved year-to-date results.
General and Administrative
In response to the loss of acres under management at year-end
2002, the Partnership reduced its overhead cost structure. As such,
general and administrative costs for the third quarter 2003 declined
by 32% from the third quarter of 2002 to $649,000. Year-to-date costs
of $2.1 million are 25% below the comparable level in 2002 due to
these same reductions in overhead. The Partnership expects this
pattern of overhead savings to be reflected in results for the full
year 2003.
Capital expenditures for the first nine months of 2003 and 2002
were $1.1 million and $1.5 million, respectively. The Partnership's
debt to total capitalization ratio was 45% as of September 30, 2003,
down from 47% at the end of 2002.
About Pope Resources
Pope Resources, a publicly traded limited partnership, and its
subsidiaries Olympic Resource Management and Olympic Property Group,
own or manage approximately 217,000 acres of timberland and
development property in Washington, Oregon, and California. In
addition, we provide forestry consulting and timberland management
services to third-party owners and managers of timberland. 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.orm.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 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 are set forth in that part of our Annual Report on
Form 10-K entitled "Management's Discussion & Analysis of Financial
Condition and Results of Operation - Risks and Uncertainties." 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, as well as factors that affect our ability to
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; and economic
conditions that affect consumer demand for our products and the prices
we receive for them.
The Company considers earnings (net income or loss) before
interest expense, income taxes, depreciation, depletion and
amortization (EBITDDA) to be a relevant and meaningful indicator of
liquidity and earnings performance commonly used by investors,
financial analysts and others in evaluating companies in its industry
and, as such, has provided this information in addition to the
generally accepted accounting principle-based presentation of net
income or loss.
Pope Resources, A Delaware Limited Partnership
Unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in $000's)
Three months ended Nine months ended
Sept.30, Sept. 30,
2003 2002 2003 2002
Revenues $ 6,565 $ 8,654 $21,357 $ 24,426
Costs and expenses:
Cost of sales (2,758) (2,964) (8,757) (8,479)
Operating expenses (2,179) (3,726) (6,974) (11,393)
Operating income 1,628 1,964 5,626 4,554
Interest, net (687) (737) (2,095) (2,161)
Minority interest - (103) - (135)
Income before income taxes 941 1,124 3,531 2,258
Income tax benefit/(provision) - (61) (3) 380
Net income 941 1,063 3,528 2,638
Average units outstanding -
Basic (000's) 4,518 4,518 4,518 4,518
Average units outstanding -
Diluted (000's) 4,524 4,518 4,521 4,520
Basic net income per unit $ 0.21 $ 0.24 $ 0.78 $ 0.58
Diluted net income per unit $ 0.21 $ 0.24 $ 0.78 $ 0.58
CONSOLIDATED BALANCE SHEETS
(all amounts in $000's)
Sept. 30,
2003 2002
Assets:
Cash and short-term investments $ 9,487 $ 5,003
Other current assets 3,238 2,515
Roads and timber 48,405 50,498
Properties and equipment 23,689 23,117
Other assets 1,494 3,438
Total 86,313 84,571
Liabilities and partners' capital:
Current liabilities 3,414 3,974
Long-term debt, excluding current portion 36,104 36,987
Other long-term liabilities 429 529
Total liabilities 39,947 41,490
Partners' capital 46,366 43,081
Total 86,313 84,571
RECONCILIATION BETWEEN NET INCOME AND EBITDDA
(all amounts in $000's)
Three months ended
30-Sep-03 30-Sep-02 30-Jun-03
Net income $ 941 $ 1,063 $ 1,296
Added back:
Interest, net 687 737 694
Depletion 779 803 811
Depreciation and amortization 166 199 162
Income tax expense - 61 9
Less:
Income tax benefit - - -
EBITDDA $ 2,573 $ 2,863 $ 2,972
RECONCILIATION BETWEEN CASH FROM OPERATIONS AND EBITDDA
(all amounts in $000's)
Three months ended
30-Sep-03 30-Sep-02 30-Jun-03
Cash from operations $ 2,647 $ 1,943 $ 1,960
Added back:
Change in working capital - 111 328
Interest 687 737 694
Deferred profit 26 24 -
Income tax expense 61
Other - - -
Less:
Change in working capital (587) - -
Deferred profit - - (2)
Income tax benefit - - -
Cost of land sold (200) -
Other - (13) (8)
EBITDDA $ 2,573 $ 2,863 $ 2,972
SEGMENT INFORMATION
(all amounts in $000's)
Three months ended Nine months ended
Sept.30, Sept. 30,
2003 2002 2003 2002
Revenues:
Fee Timber $5,994 $ 6,101 $19,107 $17,425
Timberland Management &
Consulting (TM&C) 353 2,081 1,036 5,623
Real Estate 218 472 1,214 1,378
------- -------- -------- --------
Total $6,565 $ 8,654 $21,357 $24,426
======= ======== ======== ========
EBITDDA:
Fee Timber 3,398 3,411 10,959 10,040
TM&C (106) 580 (395) 1,203
Real Estate (169) (174) (196) (1,273)
General & administrative and
minority interest (550) (954) (1,814) (2,587)
------- -------- -------- --------
Total $2,573 $ 2,863 $ 8,554 $ 7,383
======= ======== ======== ========
Depreciation, depletion and
amortization:
Fee Timber 807 838 2,526 2,435
TM&C 16 41 50 150
Real Estate 23 16 62 45
General & administrative 99 107 290 334
------- -------- -------- --------
Total $ 945 $ 1,002 $ 2,928 $ 2,964
======= ======== ======== ========
Operating income/(loss):
Fee Timber 2,591 2,573 8,433 7,605
TM&C (122) 539 (445) 1,053
Real Estate (192) (190) (258) (1,318)
General & administrative (649) (958) (2,104) (2,786)
------- -------- -------- --------
Total $1,628 $ 1,964 $ 5,626 $ 4,554
======= ======== ======== ========
SELECTED STATISTICS
Three months ended Nine months ended
30-Sep-03 30-Sep-02 30-Sep-03 30-Sep-02
Log sale volumes
(thousand board feet):
Export conifer 947 2,058 3,580 4,730
Domestic conifer 8,880 7,333 27,106 22,775
Pulp conifer 1,814 1,935 5,562 4,780
Hardwoods 408 845 1,642 1,623
--------- --------- --------- ---------
Total 12,049 12,171 37,890 33,908
========= ========= ========= =========
Average price realizations
(per thousand board feet):
Export conifer $ 542 $ 586 $ 569 $ 561
Domestic conifer 492 521 516 539
Pulp conifer 208 190 213 176
Hardwoods 559 485 547 477
Overall 456 477 478 488
Owned acres 112,200 112,200 112,200 112,200
Acres under management 104,791 414,938 104,791 414,938
Capital expenditures
($000's) 399 404 1,115 1,545
Depletion ($000's) 779 803 2,433 2,349
Depreciation ($000's) 166 199 495 615
Debt to total
capitalization 45% 47% 45% 47%
QUARTER TO QUARTER COMPARISONS
(Amounts in $000's except per unit data)
Q3 2003 vs. Q3 2002 Q3 2003 vs. Q2 2003
Total Per Unit Total Per Unit
Net income:
3rd Quarter 2003 941 0.21 941 0.21
2nd Quarter 2003 1,296 0.29
3rd Quarter 2002 1,063 0.24
Variance (122) (0.03) (355) (0.08)
Detail of earnings variance:
Fee Timber
Log price realizations (A) (256) (0.06) (330) (0.07)
Log volumes (B) (97) (0.02) (118) (0.03)
Timberland sale income 237 0.05 197 0.04
Depletion 24 0.01 32 0.01
Other Fee Timber 110 0.02 124 0.03
Timberland Management &
Consulting
Management fee changes (937) (0.20) (1) -
Other Timberland Mgmnt &
Consulting 276 0.06 73 0.01
Real Estate
Other Real Estate (2) - (422) (0.09)
General & administrative
costs 309 0.07 74 0.02
Interest expense 62 0.01 8 -
Other (taxes, minority int.,
interest inc.) 152 0.03 8 -
--------- --------- --------- ---------
Total change in earnings (122) (0.03) (355) (0.08)
========= ========= ========= =========
(A) Price variance allocated based on changes in price using the
higher period volume.
(B) Volume variance allocated based on change in sales volume and the
average log sales price for higher margin less variance in log
production costs.
CONTACT: Pope Resources
Tom Ringo, 360-697-6626
Fax 360-697-1156