( X )
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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( )
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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91-1313292
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(State or other jurisdiction of
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(IRS Employer
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incorporation or organization)
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Identification Number)
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Large Accelerated Filer o
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Accelerated Filer x
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Non-accelerated Filer o
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Smaller Reporting Company o |
Description
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Page Number
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4
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5
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6
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7
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17
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38
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38
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38
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39
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40
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40
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40
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40
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40
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41
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Pope Resources, a Delaware Limited Partnership
|
||||||||
June 30, 2010 and December 31, 2009
|
||||||||
(Thousands)
|
||||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Pope cash and cash equivalents
|
$ | 7,631 | $ | 6,035 | ||||
ORM Timber Funds cash and cash equivalents
|
1,568 | 1,145 | ||||||
Cash and cash equivalents
|
9,199 | 7,180 | ||||||
Student loan auction rate securities, current
|
- | 690 | ||||||
Accounts receivable, net
|
2,334 | 261 | ||||||
Land held for sale
|
401 | 367 | ||||||
Current portion of contracts receivable
|
45 | 320 | ||||||
Prepaid expenses and other
|
225 | 444 | ||||||
Total current assets
|
12,204 | 9,262 | ||||||
Properties and equipment, at cost:
|
||||||||
Land held for development
|
26,320 | 25,872 | ||||||
Land
|
25,048 | 25,072 | ||||||
Roads and timber, net of accumulated depletion
|
||||||||
of $56,997, and $54,743
|
118,380 | 120,457 | ||||||
Buildings and equipment, net of accumulated
|
||||||||
depreciation of $7,521, and $7,321
|
3,956 | 3,967 | ||||||
Total properties and equipment, at cost
|
173,704 | 175,368 | ||||||
Other assets:
|
||||||||
Contracts receivable, net of current portion
|
1,334 | 1,140 | ||||||
Student loan auction rate securities, non-current
|
- | 796 | ||||||
Other
|
566 | 490 | ||||||
Total other assets
|
1,900 | 2,426 | ||||||
Total assets
|
$ | 187,808 | $ | 187,056 | ||||
LIABILITIES AND PARTNERS' CAPITAL
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 925 | $ | 586 | ||||
Accrued liabilities
|
1,280 | 784 | ||||||
Current portion of environmental remediation
|
170 | 200 | ||||||
Current portion of long-term debt
|
82 | 831 | ||||||
Deferred revenue
|
619 | 469 | ||||||
Other current liabilities
|
243 | 196 | ||||||
Total current liabilities
|
3,319 | 3,066 | ||||||
Long-term liabilities:
|
||||||||
Long-term debt, net of current portion
|
29,986 | 28,659 | ||||||
Environmental remediation, net of current portion
|
1,528 | 1,069 | ||||||
Other long-term liabilities
|
180 | 205 | ||||||
Partners' capital and noncontrolling interests:
|
||||||||
Partners' capital:
|
||||||||
General partners' capital (units outstanding 60 and 60)
|
1,083 | 1,103 | ||||||
Limited partners' capital (units outstanding 4,487 and 4,460)
|
81,019 | 82,023 | ||||||
Noncontrolling interests
|
70,693 | 70,931 | ||||||
Total partners' capital and noncontrolling interests
|
152,795 | 154,057 | ||||||
Total liabilities, partners' capital, and noncontrolling interests
|
$ | 187,808 | $ | 187,056 | ||||
See accompanying notes to condensed consolidated financial statements.
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Pope Resources, a Delaware Limited Partnership
|
||||||||||||||||
For the Three Months and Six Months Ended June 30, 2010 and 2009
|
||||||||||||||||
(Thousands, except per unit data)
|
||||||||||||||||
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2010
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2009
|
2010
|
2009
|
|||||||||||||
Revenue
|
$ | 8,089 | $ | 3,666 | $ | 14,055 | $ | 8,645 | ||||||||
Cost of timber and land sold
|
(3,825 | ) | (1,882 | ) | (6,431 | ) | (4,080 | ) | ||||||||
Operating expenses
|
(2,681 | ) | (1,607 | ) | (4,528 | ) | (3,585 | ) | ||||||||
General and administrative expenses
|
(1,452 | ) | (901 | ) | (2,393 | ) | (1,745 | ) | ||||||||
Income (loss) from operations
|
131 | (724 | ) | 703 | (765 | ) | ||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(321 | ) | (593 | ) | (862 | ) | (1,210 | ) | ||||||||
Debt extinguishment costs
|
(1,250 | ) | - | (1,250 | ) | - | ||||||||||
Capitalized interest
|
78 | 313 | 318 | 618 | ||||||||||||
Interest income
|
27 | 63 | 61 | 132 | ||||||||||||
Realized gain on investments
|
- | 3 | 11 | 3 | ||||||||||||
Unrealized loss on investments
|
- | - | - | (60 | ) | |||||||||||
Total other expense
|
(1,466 | ) | (214 | ) | (1,722 | ) | (517 | ) | ||||||||
Loss before income taxes
|
(1,335 | ) | (938 | ) | (1,019 | ) | (1,282 | ) | ||||||||
Income tax expense
|
- | (5 | ) | (12 | ) | (5 | ) | |||||||||
Net loss
|
(1,335 | ) | (943 | ) | (1,031 | ) | (1,287 | ) | ||||||||
Net loss attributable to noncontrolling interests:
|
||||||||||||||||
ORM Timber Funds
|
209 | 250 | 356 | 471 | ||||||||||||
Net loss attributable to unitholders
|
$ | (1,126 | ) | $ | (693 | ) | $ | (675 | ) | $ | (816 | ) | ||||
Allocable to general partners
|
$ | (15 | ) | $ | (9 | ) | $ | (9 | ) | $ | (11 | ) | ||||
Allocable to limited partners
|
(1,111 | ) | (684 | ) | (666 | ) | (805 | ) | ||||||||
Net loss attributable to unitholders
|
$ | (1,126 | ) | $ | (693 | ) | $ | (675 | ) | $ | (816 | ) | ||||
Loss per unit attributable to unitholders:
|
||||||||||||||||
Basic
|
$ | (0.25 | ) | $ | (0.16 | ) | $ | (0.15 | ) | $ | (0.18 | ) | ||||
Diluted
|
$ | (0.25 | ) | $ | (0.16 | ) | $ | (0.15 | ) | $ | (0.18 | ) | ||||
Weighted average units outstanding:
|
||||||||||||||||
Basic
|
4,541 | 4,529 | 4,536 | 4,561 | ||||||||||||
Diluted
|
4,541 | 4,529 | 4,536 | 4,561 | ||||||||||||
Distributions per unit
|
$ | 0.10 | $ | 0.20 | $ | 0.20 | $ | 0.40 | ||||||||
See accompanying notes to condensed consolidated financial statements.
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Pope Resources, a Delaware Limited Partnership
|
||||||||
Six Months Ended June 30, 2010 and 2009
|
||||||||
(Thousands)
|
||||||||
2010
|
2009
|
|||||||
Net loss
|
$ | (1,031 | ) | $ | (1,287 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depletion
|
2,189 | 1,033 | ||||||
Capitalized development activities, net of reimbursements
|
(472 | ) | (860 | ) | ||||
Equity based compensation
|
424 | 303 | ||||||
Depreciation and amortization
|
305 | 405 | ||||||
(Gain) loss on investments
|
(11 | ) | 57 | |||||
Deferred taxes
|
- | (109 | ) | |||||
Cost of land sold
|
67 | 116 | ||||||
Write-off of debt issuance costs
|
32 | - | ||||||
Increase (decrease) in cash from changes in operating accounts:
|
||||||||
Deferred revenue
|
150 | 208 | ||||||
Accounts receivable, net
|
(2,073 | ) | (149 | ) | ||||
Contracts receivable
|
81 | 59 | ||||||
Prepaid expenses and other current assets
|
219 | 118 | ||||||
Accounts payable and accrued liabilities
|
798 | (734 | ) | |||||
Other current liabilities
|
47 | 54 | ||||||
Environmental remediation
|
429 | (206 | ) | |||||
Other long-term liabilities
|
(25 | ) | (74 | ) | ||||
Other, net
|
(6 | ) | (9 | ) | ||||
Net cash provided by (used in) operating activities
|
1,123 | (1,075 | ) | |||||
Cash flows from investing activities:
|
||||||||
Redemption of investments
|
1,497 | 25 | ||||||
Reforestation and roads
|
(230 | ) | (306 | ) | ||||
Other capital expenditures
|
(213 | ) | (539 | ) | ||||
Proceeds from fixed asset sale
|
- | 15 | ||||||
Net cash provided by (used in) investing activities
|
1,054 | (805 | ) | |||||
Cash flows from financing activities:
|
||||||||
Repayment of long-term debt
|
(868 | ) | (1,350 | ) | ||||
Extinguishment of long-term debt
|
(18,554 | ) | - | |||||
Proceeds from issuance of long-term debt
|
20,000 | - | ||||||
Debt issuance costs
|
(81 | ) | ||||||
Unit repurchases
|
- | (1,824 | ) | |||||
Proceeds from option exercises
|
148 | - | ||||||
Cash distributions to unitholders
|
(920 | ) | (1,846 | ) | ||||
Capital call- ORM Timber Fund II, Inc.
|
- | 305 | ||||||
Preferred stock issuance- ORM Timber Fund II, Inc.
|
125 | - | ||||||
Preferred stock distribution- ORM Timber Fund II, Inc.
|
(8 | ) | - | |||||
Net cash used in financing activities
|
(158 | ) | (4,715 | ) | ||||
Net increase (decrease) in cash and cash equivalents
|
2,019 | (6,595 | ) | |||||
Cash and cash equivalents at beginning of period
|
7,180 | 17,978 | ||||||
Cash and cash equivalents at the end of the six-month period
|
$ | 9,199 | $ | 11,383 | ||||
See accompanying notes to condensed consolidated financial statements.
|
1.
|
The condensed consolidated financial statements as of June 30, 2010 and December 31, 2009 and for the three-month periods (quarters) and six-month periods ended June 30, 2010 and 2009 have been prepared by Pope Resources, A Delaware Limited Partnership (the “Partnership”) pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated financial statements are unaudited, but, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments and accruals) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2009, is derived from the Partnership’s audited consolidated financial statements and notes thereto for the year ended December 31, 2009, and should be read in conjunction with such financial
statements. The results of operations for the interim periods are not indicative of the results of operations that may be achieved for the entire fiscal year ending December 31, 2010.
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2.
|
The financial statements in the Partnership's 2009 annual report on Form 10-K include a summary of significant accounting policies of the Partnership and should be read in conjunction with this Quarterly Report on Form 10-Q.
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3.
|
Basic net earnings (loss) per unit are based on the weighted average number of units outstanding during the period. Diluted net earnings per unit are calculated by dividing net income (loss) attributable to unitholders, adjusted for non-forfeitable distributions paid out to unvested restricted unitholders, by the weighted average units outstanding during the year plus additional units that would have been outstanding assuming the exercise of in-the-money unit equivalents using the treasury stock method.
|
Quarter Ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Average trading price
|
$ | 27.50 | $ | 21.29 | $ | 26.32 | $ | 19.99 | ||||||||
Total options outstanding
|
136,810 | 163,000 | 136,810 | 163,000 | ||||||||||||
Less: options with strike price above average trading price (not in-the-money)
|
(1,869 | ) | (41,323 | ) | (1,869 | ) | (43,525 | ) | ||||||||
Options used in calculation of dilutive unit equivalents
|
134,941 | 121,677 | 134,941 | 119,475 | ||||||||||||
Net loss attributable to Pope Resources’ unitholders
|
$ | (1,126 | ) | $ | (693 | ) | $ | (675 | ) | $ | (816 | ) | ||||
Dilutive unit equivalents
|
57,883 | 42,222 | 55,028 | 38,097 | ||||||||||||
Less: unit equivalents considered anti-dilutive due to net loss in period
|
(57,883 | ) | (42,222 | ) | (55,028 | ) | (38,097 | ) | ||||||||
Dilutive unit equivalents used to calculate dilutive EPS
|
- | - | - | - |
(Thousands) |
Quarter Ended
June 30,
|
Six months ended
June 30,
|
||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net loss attributable to Pope Resources’ unitholders
|
$ | (1,126 | ) | $ | (693 | ) | $ | (675 | ) | $ | (816 | ) | ||||
Nonforfeitable distributions paid to unvested restricted unitholders
|
(7 | ) | (12 | ) | (13 | ) | (24 | ) | ||||||||
Preferred dividends paid to Fund II preferred shareholders
|
(4 | ) | - | (8 | ) | - | ||||||||||
Adjusted net loss attributable to unitholders
|
$ | (1,137 | ) | $ | (705 | ) | $ | (696 | ) | $ | (840 | ) | ||||
Weighted average units outstanding (in thousands):
|
||||||||||||||||
Basic
|
4,541 | 4,529 | 4,536 | 4,561 | ||||||||||||
Dilutive effect of unit equivalents
|
- | - | - | - | ||||||||||||
Diluted
|
4,541 | 4,529 | 4,536 | 4,561 | ||||||||||||
Loss per unit: Basic
|
$ | (0.25 | ) | $ | (0.16 | ) | $ | (0.15 | ) | $ | (0.18 | ) | ||||
Loss per unit: Diluted
|
$ | (0.25 | ) | $ | (0.16 | ) | $ | (0.15 | ) | $ | (0.18 | ) |
|
4.
|
In 2005, we adopted the 2005 Unit Incentive Plan. Following adoption of this plan the Human Resources Committee of the Board of Directors began issuing restricted units instead of unit options as its primary method of granting equity based compensation. However, the plan also permits the issuance of unit options, unit appreciation rights and other equity compensation at the discretion of the Human Resources Committee.
|
Restricted units
|
June 30, 2010
|
Number outstanding
|
65,395
|
Aggregate value
|
$1,683,000
|
Options Outstanding and Exercisable
|
June 30, 2010
|
Number outstanding
|
136,810
|
Weighted average exercise price
|
$15.08
|
Aggregate intrinsic value
|
$1,471,000
|
Weighted average remaining contractual term (yrs)
|
2.05
|
5.
|
Supplemental disclosure of cash flow information: interest paid, net of amounts capitalized, totaled $540,000 and $587,000 for the six months ended June 30, 2010 and 2009, respectively. Income taxes paid in the first half of 2010 was $5,000 compared to an income tax refund received of $61,000, net of income taxes paid of $1,000 in the first half of 2009.
|
As Originally
|
||||||||||||
(Thousands)
|
Reported
|
Adjustments
|
As Revised
|
|||||||||
Cash flows from operating activities:
|
||||||||||||
Capitalized development activities
|
- | (860 | ) | (860 | ) | |||||||
Net cash used in operating activities
|
(215 | ) | (860 | ) | (1,075 | ) | ||||||
Cash flows from investing activities:
|
||||||||||||
Capitalized development activities
|
(860 | ) | 860 | - | ||||||||
Net cash used in investing activities
|
(1,665 | ) | 860 | (805 | ) | |||||||
6.
|
The fair values of cash and cash equivalents and investments held at June 30, 2010 and December 31, 2009 were as follows (in thousands):
|
June 30, 2010
|
||||||||||||
Gross
|
||||||||||||
Amortized
|
Unrealized
|
Estimated
|
||||||||||
Cost
|
Loss
|
Fair Value
|
||||||||||
Cash and cash equivalents
|
$ | 9,199 | $ | - | $ | 9,199 | ||||||
December 31, 2009
|
||||||||||||
Gross
|
||||||||||||
Amortized
|
Unrealized
|
Estimated
|
||||||||||
Cost
|
Loss
|
Fair Value
|
||||||||||
Cash and cash equivalents
|
$ | 7,180 | $ | - | $ | 7,180 | ||||||
Securities maturing after ten years:
|
||||||||||||
Auction rate securities, current
|
925 | (235 | ) | 690 | ||||||||
Auction rate securities, non-current
|
1,000 | (204 | ) | 796 |
Date
|
Description
|
Proceeds
|
Basis
|
Gain/(Loss)
|
|||||||||
Jan 21st
|
Pennsylvania Higher Education
|
$ | 25,000 | $ | 18,653 | $ | 6,347 | ||||||
Jan 28th
|
Pennsylvania Higher Education
|
702,000 | 671,490 | 30,510 | |||||||||
Mar 5th
|
Brazos
|
770,000 | 796,100 | (26,100 | ) | ||||||||
Total
|
$ | 1,497,000 | $ | 1,486,243 | $ | 10,757 |
7.
|
ASC 820 Fair Value Measurements and Disclosures (FASB Statement No. 157 Fair Value Measurement (SFAS No. 157)) was followed to determine the fair value of the Partnership’s investments. ASC 820 defines a hierarchy of three levels of evidence used to determine fair value:
|
·
|
Level 1 - quoted prices for identical assets/liabilities in active markets
|
·
|
Level 2 - quoted prices in a less active market, quoted prices for similar but not identical assets/liabilities, inputs other than quoted prices
|
·
|
Level 3 - significant unobservable inputs including the Partnership’s own assumptions in determining the fair value of investments
|
June 30, 2010
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash and cash equivalents
|
$ | 9,199 | $ | - | $ | - | $ | 9,199 | ||||||||
December 31, 2009
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash and cash equivalents
|
$ | 7,180 | $ | - | $ | - | $ | 7,180 | ||||||||
Auction rate securities, current
|
- | 690 | - | 690 | ||||||||||||
Auction rate securities, non-current
|
- | 796 | - | 796 | ||||||||||||
Total financial assets at fair value
|
$ | 7,180 | $ | 1,486 | $ | - | $ | 8,666 |
8.
|
Total comprehensive loss for the three- and six-month periods ended June 30, 2010 is $1.3 million and $1.0 million, respectively, which is solely net loss for the periods presented. Total comprehensive loss for the three-month period ended June 30, 2009 was $821,000 which includes net loss for the quarter offset by an unrealized gain of $122,000 on redemption of auction rate securities. Total comprehensive loss for the six-month period ended June 30, 2009 was $1.1 million which consists of net loss offset by an unrealized gain of $141,000 on redemption of the auction rate securities.
|
9.
|
The Partnership has two general partners: Pope MGP, Inc. and Pope EGP, Inc. In total, these two entities own 60,000 partnership units. The allocation of distributions and loss between the general and limited partners is pro rata among all units outstanding.
|
10.
|
In the presentation of the Partnership’s revenue and operating income (loss) by segment all intersegment revenue and expense is eliminated to determine externally reported operating income by business segment. The tables that follow reconcile internally reported income (loss) from operations to externally reported income (loss) from operations by business segment, for the quarters and six-month periods ended June 30, 2010 and 2009:
|
Fee
Timber
|
Timberland
|
|||||||||||||||||||||||||||
Three Months Ended
|
Pope
Resources
|
Timber
|
Total
|
Management
&
|
Real
|
General &
|
||||||||||||||||||||||
June 30, (Thousands)
|
Timber
|
Funds
|
Fee Timber
|
Consulting
|
Estate
|
Adminstrative
|
Consolidated
|
|||||||||||||||||||||
2010
|
||||||||||||||||||||||||||||
Revenue internal
|
$ | 6,420 | $ | 1,428 | $ | 7,848 | $ | 337 | $ | 288 | $ | - | $ | 8,473 | ||||||||||||||
Eliminations
|
(35 | ) | - | (35 | ) | (337 | ) | (12 | ) | - | (384 | ) | ||||||||||||||||
Revenue external
|
6,385 | 1,428 | 7,813 | - | 276 | - | 8,089 | |||||||||||||||||||||
Cost of timber and land sold
|
(2,570 | ) | (1,253 | ) | (3,823 | ) | - | (2 | ) | - | (3,825 | ) | ||||||||||||||||
Operating, general and administrative expenses internal
|
(837 | ) | (435 | ) | (1,272 | ) | (423 | ) | (1,370 | ) | (1,452 | ) | (4,517 | ) | ||||||||||||||
Eliminations
|
12 | 324 | 336 | 48 | - | - | 384 | |||||||||||||||||||||
Operating, general and administrative expenses external
|
(825 | ) | (111 | ) | (936 | ) | (375 | ) | (1,370 | ) | (1,452 | ) | (4,133 | ) | ||||||||||||||
Income (loss) from operations internal
|
3,013 | (260 | ) | 2,753 | (86 | ) | (1,084 | ) | (1,452 | ) | 131 | |||||||||||||||||
Eliminations
|
(23 | ) | 324 | 301 | (289 | ) | (12 | ) | - | - | ||||||||||||||||||
Income (loss) from operations external
|
$ | 2,990 | $ | 64 | $ | 3,054 | $ | (375 | ) | $ | (1,096 | ) | $ | (1,452 | ) | $ | 131 | |||||||||||
2009
|
||||||||||||||||||||||||||||
Revenue internal
|
$ | 2,784 | - | $ | 2,784 | $ | 501 | $ | 621 | - | $ | 3,906 | ||||||||||||||||
Eliminations
|
(30 | ) | - | (30 | ) | (198 | ) | (12 | ) | - | (240 | ) | ||||||||||||||||
Revenue external
|
2,754 | - | 2,754 | 303 | 609 | - | 3,666 | |||||||||||||||||||||
Cost of timber and land sold external
|
(1,723 | ) | - | (1,723 | ) | - | (159 | ) | - | (1,882 | ) | |||||||||||||||||
Operating, general and administrative expenses internal
|
(616 | ) | (313 | ) | (929 | ) | (274 | ) | (644 | ) | (901 | ) | (2,748 | ) | ||||||||||||||
Eliminations
|
12 | 198 | 210 | 30 | - | - | 240 | |||||||||||||||||||||
Operating, general and administrative expenses external
|
(604 | ) | (115 | ) | (719 | ) | (244 | ) | (644 | ) | (901 | ) | (2,508 | ) | ||||||||||||||
Income (loss) from operations internal
|
445 | (313 | ) | 132 | 227 | (182 | ) | (901 | ) | (724 | ) | |||||||||||||||||
Eliminations
|
(18 | ) | 198 | 180 | (168 | ) | (12 | ) | - | - | ||||||||||||||||||
Income (loss) from operations external
|
$ | 427 | $ | (115 | ) | $ | 312 | $ | 59 | $ | (194 | ) | $ | (901 | ) | $ | (724 | ) | ||||||||||
Fee Timber |
Timberland
|
|||||||||||||||||||||||||||
Six Months Ended
|
Pope
Resources
|
Timber
|
Total
|
Management
&
|
Real
|
General &
|
||||||||||||||||||||||
June 30, (Thousands)
|
Timber
|
Funds
|
Fee Timber
|
Consulting
|
Estate
|
Adminstrative
|
Consolidated
|
|||||||||||||||||||||
2010
|
||||||||||||||||||||||||||||
Revenue internal
|
$ | 11,923 | $ | 1,706 | $ | 13,629 | $ | 590 | $ | 504 | $ | - | $ | 14,723 | ||||||||||||||
Eliminations
|
(54 | ) | - | (54 | ) | (590 | ) | (24 | ) | - | (668 | ) | ||||||||||||||||
Revenue external
|
11,869 | 1,706 | 13,575 | - | 480 | - | 14,055 | |||||||||||||||||||||
Cost of timber and land sold
|
(5,099 | ) | (1,329 | ) | (6,428 | ) | - | (3 | ) | - | (6,431 | ) | ||||||||||||||||
Operating, general and administrative expenses internal
|
(1,598 | ) | (819 | ) | (2,417 | ) | (680 | ) | (2,099 | ) | (2,393 | ) | (7,589 | ) | ||||||||||||||
Eliminations
|
27 | 577 | 604 | 64 | - | - | 668 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Operating, general and administrative expenses external
|
(1,571 | ) | (242 | ) | (1,813 | ) | (616 | ) | (2,099 | ) | (2,393 | ) | (6,921 | ) | ||||||||||||||
|
||||||||||||||||||||||||||||
Income (loss) from operations internal
|
5,226 | (442 | ) | 4,784 | (90 | ) | (1,598 | ) | (2,393 | ) | 703 | |||||||||||||||||
Eliminations
|
(27 | ) | 577 | 550 | (526 | ) | (24 | ) | - | - | ||||||||||||||||||
Income (loss) from operations external
|
$ | 5,199 | $ | 135 | $ | 5,334 | $ | (616 | ) | $ | (1,622 | ) | $ | (2,393 | ) | $ | 703 | |||||||||||
2009
|
||||||||||||||||||||||||||||
Revenue internal
|
$ | 7,349 | $ | 1 | $ | 7,350 | $ | 913 | $ | 883 | $ | - | $ | 9,146 | ||||||||||||||
Eliminations
|
(75 | ) | - | (75 | ) | (402 | ) | (24 | ) | - | (501 | ) | ||||||||||||||||
Revenue external
|
7,274 | 1 | 7,275 | 511 | 859 | - | 8,645 | |||||||||||||||||||||
Cost of timber and land sold external
|
(3,920 | ) | - | (3,920 | ) | - | (160 | ) | - | (4,080 | ) | |||||||||||||||||
Operating, general and administrative expenses internal
|
(1,514 | ) | (589 | ) | (2,103 | ) | (631 | ) | (1,352 | ) | (1,745 | ) | (5,831 | ) | ||||||||||||||
Eliminations
|
24 | 402 | 426 | 75 | - | - | 501 | |||||||||||||||||||||
Operating, general andadministrative expenses external
|
(1,490 | ) | (187 | ) | (1,677 | ) | (556 | ) | (1,352 | ) | (1,745 | ) | (5,330 | ) | ||||||||||||||
Income (loss) from operations internal
|
1,915 | (588 | ) | 1,327 | 282 | (629 | ) | (1,745 | ) | (765 | ) | |||||||||||||||||
Eliminations
|
(51 | ) | 402 | 351 | (327 | ) | (24 | ) | - | - | ||||||||||||||||||
|
||||||||||||||||||||||||||||
Income (loss) from operations external
|
$ | 1,864 | $ | (186 | ) | $ | 1,678 | $ | (45 | ) | $ | (653 | ) | $ | (1,745 | ) | $ | (765 | ) | |||||||||
11.
|
On June 10, 2010, the Partnership entered into a new $20.0 million term loan agreement with Northwest Farm Credit Services (NWFCS). Proceeds from this new term loan were used to retire a term loan from John Hancock Life Insurance Company (JHLIC) due in April 2011 and fund a make-whole premium of $1.2 million due on retirement of that timberland mortgage. Following funding of the new term loan and retirement of the final JHLIC term loan, the Partnership had the following long-term debt outstanding as of June 30, 2010 with staggered maturity dates as follows:
|
(Amounts in thousands:)
|
Jun-10
|
Dec-09
|
||||||
Mortgage payable to NWFCS, collateralized by timberlands, comprised of three tranches as follows:
|
||||||||
Five-year tranche, interest at 4.10% with monthly interest-only
|
||||||||
payments. Matures in July 2015.
|
$ | 5,000 | $ | - | ||||
Seven-year tranche, interest at 4.85% with monthly interest-
|
||||||||
only payments. Matures in July 2017.
|
5,000 | - | ||||||
Fifteen-year tranche, interest at 6.05% with monthly interest-
|
||||||||
only payments. Matures in July 2025.
|
10,000 | - | ||||||
20,000 | - | |||||||
Mortgage payable to NWFCS, interest at 6.4%, collateralized by timberlands with monthly interest-only payments. Matures in September 2019.
|
9,800 | 9,800 | ||||||
Mortgage payable to JHLIC, interest at 7.63%, collateralized by timberlands with monthly interest payments and annual principal payments. Matures in April 2011.
|
- | 19,303 | ||||||
Local improvement district assessments, with interest ranging from 5.03% to 6.5%, due through 2013.
|
155 | 260 | ||||||
Fund I note payable to the City of Tacoma, with interest at 4.5%, with monthly principal and interest payments maturing January 2014.
|
113 | 127 | ||||||
$ | 30,068 | $ | 29,490 |
12.
|
The Partnership has an accrual for estimated environmental remediation costs of $1.7 million and $1.3 million as of June 30, 2010 and December 31, 2009, respectively. The environmental remediation liability represents estimated payments to be made to monitor and remedy certain areas in and around the townsite and millsite of Port Gamble, Washington. During the three months ended June 30, 2010, a draft Sawmill Site Feasibility Study Report was completed that suggested changes in remediation alternatives such that we considered an increase in our accrual for estimated remediation costs necessary. As such, we modified the cost assumptions used in the statistical modeling process which suggested an increase in the reserve for environmental remediation of $563,000. The Monte-Carlo simulation model by which we est
imate this liability indicated a range of potential liability from $463,000 to $3.3 million compared to a range of $145,000 to $2.9 million the last time we ran this model at December 31, 2009. This represents a two-standard-deviation range from the mean of possible outcomes generated by the modeling process used to estimate this liability.
|
13.
|
We have entered into two purchase and sale agreements for Fund II to purchase timberlands with a combined value of approximately $58 million. It is anticipated these transactions will close in the third quarter, utilizing $11 million of debt and $47 million of equity, of which the Partnership’s co-investment will be approximately $9.4 million.
|
14.
|
On January 4, 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 requires additional disclosure within the roll forward activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, ASU 2010-06 requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Level 2 and Level 3. ASU 2010-06 was adopted for the Partnership’s first quarter ending March 31, 2010, excep
t for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements, for which disclosures are not required until the Partnership’s first quarter of fiscal 2011. During the second quarter of fiscal 2010, the Partnership did not have any transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy. The adoption of the additional disclosures for Level 1 and Level 2 fair value measurements did not have an impact on the Partnership’s financial position, results of operations or cash flows. The Partnership is currently evaluating the potential impact of the disclosures regarding Level 3 fair value measurements.
|
Quarter Ended
|
Six Months Ended
|
|||||||
June 30,
|
June 30,
|
|||||||
Total
|
Total
|
|||||||
Net loss attributable to unitholders:
|
||||||||
2010 period
|
($1,126 | ) | ($675 | ) | ||||
2009 period
|
(693 | ) | (816 | ) | ||||
Variance
|
($433 | ) | $141 | |||||
Detail of earnings variance:
|
||||||||
Fee Timber
|
||||||||
Log price realizations (A)
|
$2,587 | $1,771 | ||||||
Log volumes (B)
|
2,480 | 4,226 | ||||||
Depletion
|
(1,001 | ) | (1,156 | ) | ||||
Production costs
|
(1,099 | ) | (1,353 | ) | ||||
Other Fee Timber
|
(225 | ) | 168 | |||||
Timberland Management & Consulting
|
||||||||
Management fee changes
|
(303 | ) | (511 | ) | ||||
Other Timberland Management & Consulting
|
(131 | ) | (60 | ) | ||||
Real Estate
|
||||||||
Environmental remediation liability
|
(563 | ) | (563 | ) | ||||
Land sales
|
(141 | ) | (142 | ) | ||||
Other Real Estate
|
(198 | ) | (264 | ) | ||||
General & administrative costs
|
(551 | ) | (648 | ) | ||||
Net interest expense
|
1 | (23 | ) | |||||
Debt extinguishment costs
|
(1,250 | ) | (1,250 | ) | ||||
Other (taxes, noncontrolling interest, unrealized loss)
|
(39 | ) | (54 | ) | ||||
Total variance
|
($433 | ) | $141 | |||||
(A) Price variance calculated by extending the change in average realized price by current period volume.
|
||||||||
(B) Volume variance calculated by extending change in sales volume by the average log sales price for
|
||||||||
the comparison period.
|
|
|
|
|
|
||||||
($ Million)
Quarter Ended
|
Log Sale
Revenue
|
Mineral, Cell
Tower &
Other
Revenue
|
Total Fee
Timber
Revenue
|
Operating
Income/(loss)
|
Harvest
Volume
(MBF)
|
|||||
Pope Resources Timber
|
$6.1
|
$0.3
|
$6.4
|
$3.0
|
11,654
|
|||||
Timber Funds
|
1.4
|
-
|
1.4
|
0.1
|
2,803
|
|||||
Total Fee Timber June 30, 2010
|
$7.5
|
$0.3
|
$7.8
|
$3.1
|
14,457
|
|||||
Pope Resources Timber
|
$5.1
|
$0.4
|
$5.5
|
$2.2
|
11,592
|
|||||
Timber Funds
|
-
|
0.3
|
0.3
|
0.1
|
-
|
|||||
Total Fee Timber March 31, 2010
|
$5.1
|
$0.7
|
$5.8
|
$2.3
|
11,592
|
|||||
Pope Resources Timber
|
$2.4
|
$0.4
|
$2.8
|
$0.4
|
7,120
|
|||||
Timber Funds
|
-
|
-
|
-
|
(0.1)
|
-
|
|||||
Total Fee Timber June 30, 2009
|
$2.4
|
$0.4
|
$2.8
|
$0.3
|
7,120
|
|||||
|
|
|
|
|
|
|||||
($ Million)
Six Months Ended
|
Log Sale
Revenue
|
Mineral, Cell
Tower &
Other
Revenue
|
Total Fee
Timber
Revenue
|
Operating
Income/(loss)
|
Harvest
Volume
(MBF)
|
|||||
Pope Resources Timber
|
$11.2
|
$0.7
|
$11.9
|
$5.2
|
23,246
|
|||||
Timber Funds
|
1.4
|
0.3
|
1.7
|
0.1
|
2,803
|
|||||
Total Fee Timber June 30, 2010
|
$12.6
|
$1.0
|
$13.6
|
$5.3
|
26,049
|
|||||
Pope Resources Timber
|
$6.6
|
$0.7
|