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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) March 31, 2004
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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
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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: RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On April 21, 2004 the registrant issued a press release relating to its earnings
for the quarter ended March 31, 2004. 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 April 21, 2004
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: April 21, 2004 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 Net Income of $4.0 Million
POULSBO, Wash.--(BUSINESS WIRE)--April 21, 2004--Pope Resources
(Nasdaq:POPEZ) reported net income of $4.0 million, or 87 cents per
diluted ownership unit, on revenues of $11.7 million for the first
quarter ended March 31, 2004. This compares to net income of $1.3
million, or 29 cents per diluted ownership unit, on revenues of $7.3
million for the comparable period in 2003.
Earnings before interest, taxes, depreciation, depletion, and
amortization (EBITDDA) were $6.4 million for the current quarter
versus $3.0 million for the comparable period in 2003.
"We enjoyed our strongest quarterly earnings in six years during
the first quarter of 2004," said David L. Nunes, President and CEO.
"The significant increase in earnings compared to last year's first
quarter is attributable to a sizeable increase in the volume of timber
harvested combined with a meaningful uptick in timber prices. Our
timber harvest increased 55% from the prior year's comparable period
due primarily to the acquisition of 3,300 acres of timberland in
January 2004, which contributed 4 million board feet to our first
quarter harvest volume. This incremental harvest activity will allow
us to recoup a major portion of the purchase price over the next few
years. In addition, we experienced a 9% and 16% increase in the
weighted average log price realized on our timber harvested in the
first quarter of this year compared to last year's first and fourth
quarters, respectively. Strengthening prices for logs in both the
domestic and export markets are a welcome change from declines
experienced over the last few years. To capitalize on this relatively
healthy log market environment, we harvested 35% of our planned annual
volume in the first quarter. Early indications are that these
increased log prices will hold firm and possibly strengthen in the 2nd
quarter of 2004. While we expect this front-loaded harvest and the
corresponding first quarter earnings to contribute significantly
towards strong full-year performance, we do not expect quarterly
results for the balance of the year to be as favorable as those for
the first quarter of 2004."
Fee Timber
Comparative operating results for the Fee Timber segment are shown
below (readers should be mindful that our strategy this year, as well
as last year, has been to front-load our harvest into earlier periods
of the fiscal year, which partially drives the proportionately lower
fourth-quarter results):
Description First Quarter Fourth Quarter First Quarter
2004 2003 2003
- ----------------------------------------------------------------------
Revenue $11.4 million $3.8 million $6.8 million
Operating income $6.1 million $1.2 million $3.2 million
Harvest volume 20.4 MMBF 7.1 MMBF 13.2 MMBF
Average realized price $540 per MBF $467 per MBF $495 per MBF
MMBF-million board feet
MBF-thousand board feet
As mentioned above, increased revenue and operating income for
this segment in the current quarter reflect an increase in both
harvest volume and log prices realized. The increase in harvest volume
results primarily from the acquisition of 3,300 acres of timberland
from Plum Creek Timber Company in January 2004. As a result of this
acquisition, annual harvests in 2004 and 2005 are expected to increase
29% to a total of 58 MMBF (compared to 45 MMBF in 2003).
The current quarter's increase in average realized log prices is
due in part to the weakened U.S. dollar, which has helped strengthen
the export log market. Given the improved market for export logs, log
volume that otherwise would have been sold domestically has been
diverted to the export market, resulting in the added benefit of
upward pressure on domestic log prices. A strike at Canadian lumber
mills limited lumber exports from Canada to the U.S., which has served
as an additional factor pushing up domestic log prices.
Timberland Management & Consulting
Revenue and operating loss for the Timberland Management &
Consulting segment:
Description First Quarter 2004 First Quarter 2003
- --------------------------------------------------------------------
Revenue $126,000 $384,000
Operating loss 404,000 129,000
The decline in revenue and increase in operating loss experienced
by the Timberland Management and Consulting segment in the first
quarter of 2004 is due to the absence of a major timberland management
client for the first time since 1998. We completed a four-year
property disposition assignment for a timberland management client in
the fourth quarter of 2003. Management is currently working on the
launch of a private equity timber fund as well as pursuing other
large-scale timberland management opportunities.
Real Estate
Revenue and operating loss for the Real Estate segment:
Description First Quarter 2004 First Quarter 2003
- --------------------------------------------------------------------
Revenue $195,000 $153,000
Operating loss 241,000 296,000
The modest quarter-over-quarter improvement in revenue and
operating loss is principally due to increased rental revenue earned
from commercial and residential properties in Port Gamble. A major
focus for this segment is planning for installation of infrastructure
at the Partnership's 320-acre project in Gig Harbor, Washington. The
first closing on this project, the sale to Costco Wholesale
Corporation of approximately 17 acres of commercially zoned property,
is not expected until 2005. Real Estate revenue in 2004 is expected to
include proceeds from the sale of undeveloped rural residential land
parcels and small plat land sales that are projected to close later in
the year.
General and Administrative
General and Administrative expenses (G&A) in the first quarter of
2004 were consistent with expenses from the comparable period in 2003
($738,000 vs. $732,000). While total G&A has remained constant, as a
percentage of revenue, G&A costs decreased to 6% in the first quarter
of 2004 from 10% for the comparable period in 2003. Looking toward the
end of the year, G&A costs are not expected to vary significantly from
2003's annualized run rate of $2.8 million.
Capital expenditures were $9.3 million for the first quarter of
2004. Inasmuch as $8.5 million of this total was for the 3,300-acre
timberland acquisition, normalized operating capital expenditures were
just over $800,000. For the comparable period in 2003, capital
expenditures were $413,000. The increase in normalized operating
capital expenditures, apart from the timberland purchase, is due to
work on the Gig Harbor development property. Excluding the timberland
acquisition costs, capital expenditures for the year ending December
31, 2004 are expected to total nearly $4.4 million (vs. $2.0 million
for fiscal 2003). Approximately $1.8 million of the anticipated $4.4
million relates to Gig Harbor.
The Partnership's debt to total capitalization ratio was 42% as of
March 31, 2004, down from 46% at the end of the first quarter of 2003.
About Pope Resources
Pope Resources, a publicly traded limited partnership, and its
subsidiaries Olympic Resource Management and Olympic Property Group,
own 118,000 acres of timberland and development property in
Washington. In addition, we provide forestry consulting and timberland
investment management services to third-party owners and managers of
timberland in Washington, Oregon, and California. The partnership and
its predecessor companies have owned and managed timberlands and
development properties for more than 150 years. Additional information
on the partnership 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 include factors that affect our ability to anticipate
and respond adequately to fluctuations in the market prices for our
products; environmental and land use regulations that limit our
ability to harvest timber and develop property; labor, equipment and
transportation costs that affect our net income; and economic
conditions that affect consumer demand for our products and the prices
we receive for them. Other factors are set forth in that part of our
Annual Report on Form 10-K entitled "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. Forward looking
statements in this release are made only as of the date shown above,
and we cannot undertake to update these statements.
Management considers earnings (net income or loss) before interest
expense, income taxes, depreciation, depletion and amortization
(EBITDDA) to be 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. In that
context, "depletion" refers to a measure of the reduction in value of
timberland upon the harvest of growing timber from that land.
Pope Resources, A Delaware Limited Partnership
Unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in $000's, except per unit amounts)
Three months ended
March 31,
2004 2003
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Revenues $ 11,732 $ 7,312
Costs and expenses:
Cost of sales (4,488) (2,871)
Operating expenses (2,496) (2,442)
Interest, net (750) (714)
Total (7,734) (6,027)
Income before income -------- --------
taxes 3,998 1,285
Income tax benefit - 6
-------- --------
Net income $ 3,998 $ 1,291
======== ========
Weighted average units
outstanding - Basic (000's) 4,518 4,518
Weighted average units
outstanding - Diluted (000's) 4,575 4,518
Basic net income per
unit $ 0.88 $ 0.29
Diluted net income per
unit $ 0.87 $ 0.29
CONSOLIDATED BALANCE SHEETS
(all amounts in $000's)
March 31,
2004 2003
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Assets:
Cash and short-term
investments $ 3,358 $ 6,202
Other current assets 3,575 1,707
Roads and timber 54,903 49,751
Properties and
equipment 24,918 23,491
Other assets 1,375 3,673
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Total $ 88,129 $ 84,824
======== ========
Liabilities and partners'
capital:
Current liabilities $ 3,486 $ 3,712
Long-term debt, excluding
current portion 34,574 36,093
Other long-term
liabilities 333 374
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Total liabilities 38,393 40,179
Partners' capital 49,736 44,645
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Total $ 88,129 $ 84,824
======== ========
RECONCILIATION BETWEEN NET INCOME AND EBITDDA
(all amounts in $000's)
Three months ended
31-Mar-04 31-Mar-03 31-Dec-03
--------- --------- ---------
Net income $ 3,998 $ 1,291 $ -
Added back:
Interest, net 750 714 711
Depletion 1,471 843 454
Depreciation and amortization 168 167 163
Income tax expense - - 239
Less:
Income tax benefit - (6) -
-------- -------- --------
EBITDDA $ 6,387 $ 3,009 $ 1,567
======== ======== ========
RECONCILIATION BETWEEN CASH FROM OPERATIONS
AND EBITDDA
(all amounts in $000's)
Three months ended
31-Mar-04 31-Mar-03 31-Dec-03
--------- --------- ---------
Cash from operations $ 4,225 $ 1,947 $ 2,088
Added back:
Change in working
capital 1,519 372 -
Interest 750 714 711
Deferred profit - 34
Income tax expense 239
Other 1 9 11
Less:
Change in working
capital - (1,341)
Deferred profit (108) (27) -
Income tax benefit - (6) -
Other (175)
-------- -------- --------
EBITDDA $ 6,387 $ 3,009 $ 1,567
======== ======== ========
SEGMENT INFORMATION
(all amounts in $000's)
Three months ended
31-Mar-04 31-Mar-03 31-Dec-03
--------- --------- ---------
Revenues:
Fee Timber $ 11,411 $ 6,775 $ 3,809
Timberland Management &
Consulting (TM&C) 126 384 1,350
Real Estate 195 153 520
-------- -------- --------
Total 11,732 7,312 5,679
EBITDDA:
Fee Timber 7,633 4,030 1,717
TM&C (382) (109) 736
Real Estate (218) (277) (195)
General &
administrative (646) (635) (691)
-------- -------- --------
Total 6,387 3,009 1,567
Depreciation, depletion and
amortization:
Fee Timber 1,502 874 481
TM&C 22 20 19
Real Estate 23 19 23
General &
administrative 92 97 94
-------- -------- --------
Total 1,639 1,010 617
Operating income (loss):
Fee Timber 6,131 3,156 1,236
TM&C (404) (129) 717
Real Estate (241) (296) (218)
General &
administrative (738) (732) (738)
-------- -------- --------
Total $ 4,748 $ 1,999 $ 997
======== ======== ========
SELECTED STATISTICS
Three months ended
31-Mar-04 31-Mar-03 31-Dec-03
--------- --------- ---------
Log sale volumes (thousand board
feet):
Export conifer 5,624 1,430 654
Domestic conifer 11,690 9,287 4,893
Pulp conifer 2,633 1,679 1,267
Hardwoods 405 770 303
-------- -------- --------
Total 20,352 13,166 7,117
======== ======== ========
Three months ended
31-Mar-04 31-Mar-03 31-Dec-03
--------- --------- ---------
Average price realizations
(per thousand board feet):
Export conifer $ 659 $ 592 $ 595
Domestic conifer 554 524 502
Pulp conifer 221 235 223
Hardwoods 558 531 630
Overall 540 495 467
Owned timber acres 115,125 112,200 112,200
Acres under management 5,316 123,605 -
Capital expenditures
($000's) 9,331(a) 413 902
Depletion ($000's) 1,471 843 454
Depreciation and amortization
($000's) 168 167 163
Debt to total
capitalization 42% 46% 45%
(a) Includes $8.5 million timberland acquisition closed in January
2004.
QUARTER TO QUARTER COMPARISONS
(Amounts in $000's except per unit data)
Q1 2004 vs. Q1 2003 Q1 2004 vs. Q4 2003
Total Per Unit Total Per Unit
--------- --------- --------- ---------
Net income:
1st Quarter 2004 $ 3,998 $ 0.87 $ 3,998 $ 0.87
4th Quarter 2003 - -
1st Quarter 2003 1,291 0.29
-------- -------- --------- ---------
Variance $ 2,707 $ 0.58 $ 3,998 $ 0.87
Detail of earnings
variance:
Fee Timber:
Log price realizations (A) $ 916 $ 0.20 $ 1,486 $ 0.32
Log volumes (B) 2,566 0.56 4,344 0.95
Timberland sale income (43) (0.01) - -
Depletion (628) (0.14) (1,017) (0.22)
Other Fee Timber 164 0.03 82 0.02
Timberland Management &
Consulting:
Management fee changes (53) (0.01) (19) -
Other Timberland Mgmnt &
Consulting (222) (0.05) (1,102) (0.24)
Real Estate 55 0.01 (23) (0.01)
General & administrative costs (6) - - -
Interest expense 17 - (6) -
Other (taxes, minority int.,
interest inc.) (59) (0.01) 253 0.05
-------- -------- -------- --------
Total change in earnings $ 2,707 $ 0.58 $ 3,998 $ 0.87
======== ======== ======== ========
(A) Price variance allocated based on changes in price using the
lower period volume.
(B) Volume variance allocated based on change in sales volume and the
average log sales price for the prior period less variance in log
production costs.
CONTACT: Pope Resources
Tom Ringo, 360-697-6626
Fax: 360-697-1156