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) April 30, 2015
Pope Resources, A Delaware Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
91-1313292 (I.R.S. Employer Identification No.) |
19950 Seventh Avenue NE Suite 200, Poulsbo, Washington 98370
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (360) 697-6626
NOT APPLICABLE
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (SEE General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act |
(17 CFR 230.425)
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act |
(17 CFR 240.14a-12)
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange |
Act (17 CFR 240.14d-(b))
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange |
Act (17 CFR 240.13e-4(c))
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2.02: RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On April 30, 2015, the registrant issued a press release relating to its earnings for the quarter ended March 31, 2015. A copy of that press release is furnished herewith as Exhibit 99.1.
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description
99.1 Press release of the registrant dated April 30, 2015
SIGNATURES
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 30, 2015 | By: | /s/ John D. Lamb |
John D. Lamb Vice President and Chief Financial Officer, Pope Resources, A Delaware Limited Partnership, and Pope MGP, Inc., General Partner |
Exhibit 99.1
Press Release of the Registrant dated April 30, 2015
Pope Resources Reports First Quarter Income Of $7.8 Million
POULSBO, Wash., April 30, 2015 /PRNewswire/ -- Pope Resources (NASDAQ:POPE) reported net income attributable to unitholders of $7.8 million, or $1.80 per ownership unit, on revenue of $26.9 million for the quarter ended March 31, 2015. This compares to net income attributable to unitholders of $12.2 million, or $2.75 per ownership unit, on revenue of $37.8 million for the comparable period in 2014.
Cash provided by operations for the quarter ended March 31, 2015 was $9.1 million, compared to $20.2 million for the first quarter of 2014.
"While comparisons with last year's record first quarter make it look otherwise, results for Q1 2015 were solid, thanks especially to some significant Real Estate segment sales," said Tom Ringo, President and CEO. "As for the timber side of our business, mild winter weather conditions in the Pacific Northwest allowed for an expanded flow of log supply in an atypical seasonal pattern. Coupled with weak demand from Asia related to swollen port inventories, these factors exerted downward pressure on our log price realizations."
First quarter 2015 highlights
First quarter operating results
Fee Timber:
Fee Timber operating income for Q1 2015 was $4.9 million, compared to $9.2 million for Q1 2014. This 47% decrease in segment operating income was due to the combination of an 17% decrease in harvest volume and a 13% decrease in log prices. Tightening credit conditions in China have resulted in a reduction in purchases of logs delivered there, causing a build-up of inventory. In addition, a strengthening US dollar and weakening Russian ruble have made Russian logs more attractive to Chinese importers. Supply in the domestic market has increased as relatively mild weather has allowed operations to continue on timberlands that normally are not accessible this time of year. These supply and demand factors have combined to account for the decrease in pricing.
Timberland Management:
Our Timberland Management segment generates its revenue by managing three private equity timber funds, one of which is in the final stages of its wind-down. All three funds are consolidated into the Partnership's financial statements due to the Partnership's control of the Funds. As such, all fees earned by the Timberland Management segment associated with managing the Funds are eliminated from revenue in the Partnership's consolidated financial statements, leaving an operating loss for this segment that consists entirely of operating expenses. Conversely, this fee revenue is an expense to the Fee Timber segment and the expense is also eliminated when the Funds are consolidated into the Partnership's financial statements. As a result of this consolidation for external reporting purposes, we eliminated $834,000 and $875,000 of timber fund management fee revenue for Q1 2015 and Q1 2014, respectively. Operating losses incurred by this segment for Q1 2015 and Q1 2014 totaled $729,000 and $610,000, respectively, after eliminating revenue earned from managing the funds.
Following the sale of the Fund I assets in Q3 and Q4 2014 and the Q4 2014 acquisition by Fund III, our two remaining funds collectively own 80,000 acres representing $312 million in assets under management. As of March 31, 2015 Fund III has $50.8 million of its original $180 million capital commitment remaining to invest with the Partnership's portion of this remaining capital commitment representing $2.5 million.
Real Estate:
Our Real Estate segment posted operating income of $5.1 million in Q1 2015 compared to $7.0 million for Q1 2014. The primary drivers of Q1 2015 results were sales of 42 lots from our Harbor Hill project in Gig Harbor, Washington for $5.6 million together with a $4.9 million conservation easement and land sale on 3,607 acres in Jefferson County, Washington. Results for Q1 2014 included sales of 107 lots from our Harbor Hill project for $10.7 million plus a $4.6 million conservation land sale.
General & Administrative (G&A):
G&A expenses for Q1 2015 and Q1 2014 were $1.2 million and $1.3 million, respectively. The decrease between 2014 and 2015 in G&A expenses was due primarily to vacant positions that have since been filled.
Environmental Remediation Liability
Over a year after entering into a stipulated order and consent decree, we expect the project design for our Port Gamble, Washington environmental remediation project to be substantially complete by mid-2015. A handful of design issues remain to be resolved, however, and we continue to work with the regulatory agencies and other stakeholders on these issues. We anticipate resolving the project design substantially in either the second or third quarter of this year, though final approval may occur later, which could result in a change to our estimated liability.
Outlook
We expect log prices to reach their lowest point for 2015 in the second quarter and then begin to recover late in the third quarter or early in the fourth quarter. Due to this weaker pricing environment, we are delaying a portion of our harvest and now expect total annual log harvest and stumpage sale volume of between 83 and 88 MMBF for 2015 compared to our previous estimate of approximately 100 MMBF. The majority of this reduction is attributable to tree farms owned by the Funds that are located in areas more strongly influenced by the export market. Good access to logging contractors in these regions provides us confidence that we will be able to increase our harvest when markets improve. We expect that log markets will continue to be volatile over the next several quarters and this will influence our harvest decisions as the year unfolds.
We expect additional land sales from our Real Estate segment over the remainder of 2015, although the timing of these transactions could be impacted by permitting or other delays.
The financial schedules attached to this earnings release provide detail on individual segment results and operating statistics.
About Pope Resources
Pope Resources, a publicly traded limited partnership, and its subsidiaries Olympic Resource Management and Olympic Property Group, own or manage 191,000 acres of timberland and development property in Washington, Oregon, and California. We also manage, co-invest in, and consolidate three private equity timber funds, for which we earn management fees. These funds provide an efficient means of investing our own capital in Pacific Northwest timberland while earning fees from managing the funds for third-party investors. The company and its predecessor companies have owned and managed timberlands and development properties for over 160 years. Additional information on the company can be found at www.poperesources.com. The contents of our website are not incorporated into this release or into our filings with the Securities and Exchange Commission.
Forward Looking Statements
This press release contains a number of projections and statements about our expected financial condition, operating results, business plans and objectives. These statements reflect management's estimates based on current goals and its expectations about future developments. Because these statements describe our goals, objectives, and anticipated performance, they are inherently uncertain, and some or all of these statements may not come to pass. Accordingly, they should not be interpreted as promises of future management actions or financial performance. Our future actions and actual performance will vary from current expectations and under various circumstances the results of these variations may be material and adverse. Among those forward-looking statements contained in this report are statements about management's expectations for future log prices, harvest volumes and markets, and statements about our expectations for future sales in our Real Estate segment. However, readers should note that all statements other than expressions of historical fact are forward-looking in nature. Some of the factors that may cause actual operating results and financial condition to fall short of expectations include our ability to accurately estimate the cost of ongoing and changing environmental remediation obligations, and our ability to anticipate and address the political and regulatory climate that affects these obligations; our ability to consummate various real estate transactions on the terms management expects; our ability to manage our timber funds and their assets in a manner that our investors consider acceptable, and to raise additional capital or establish new funds on terms that are advantageous to the Partnership; conditions in the housing construction and wood-products markets, both domestically and globally, that affect demand for our products; the effects of competition, particularly by larger and better-financed competitors; factors that affect our ability to anticipate and respond adequately to fluctuations in the market prices for our products; fluctuations in foreign currency exchange rates that affect both competition for sales of our products and our customers' demand for them; environmental and land use regulations that limit our ability to harvest timber and develop property, including changes in those regulations; conditions affecting credit markets as they affect the availability of capital and costs of borrowing; labor, equipment and transportation costs that affect our net income; our ability to anticipate and mitigate potential impacts of our operations on adjacent properties; the impacts of natural disasters on our timberlands and on surrounding areas; and our ability to discover and to accurately estimate other liabilities associated with our assets. Other factors are set forth in that part of our Annual Report on Form 10-K entitled "Risk Factors."
Other issues that may have an adverse and material impact on our business, operating results, and financial condition include those risks and uncertainties discussed in our other filings with the Securities and Exchange Commission. Forward-looking statements in this release are made only as of the date shown above, and we cannot undertake to update these statements.
Pope Resources, A Delaware Limited Partnership | ||||||||||||
Unaudited | ||||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) | ||||||||||||
(all amounts in $000's, except per unit amounts) | ||||||||||||
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| Three months ended March 31, | ||||||||
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| 2015 |
| 2014 | ||||||
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Revenue |
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| $26,908 |
| $37,779 | |||||||
Cost of sales |
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| (14,497) |
| (18,924) | |||||||
Operating expenses |
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| (4,338) |
| (4,607) | |||||||
| Operating income |
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| 8,073 |
| 14,248 | ||||||
| Interest expense, net |
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| (745) |
| (574) | ||||||
Income before income taxes |
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| 7,328 |
| 13,674 | |||||||
Income tax expense |
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| (340) |
| (157) | |||||||
Net income |
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| 6,988 |
| 13,517 | |||||||
| Net (income) loss attributable to noncontrolling interests |
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| 821 |
| (1,276) | ||||||
Net income attributable to Pope Resources' unitholders |
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| $7,809 |
| $12,241 | |||||||
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Basic and diluted weighted average units outstanding |
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| 4,295 |
| 4,386 | |||||||
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Basic and diluted net income per unit |
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| $1.80 |
| $2.75 |
CONDENSED CONSOLIDATING BALANCE SHEETS | ||||||||||||
(all amounts in $000's) | ||||||||||||
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| March 31, 2015 |
| December 31, 2014 | ||||||
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Assets: |
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| Pope |
| ORM
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| Consolidating Entries |
| Consolidated |
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| |
| Cash and cash equivalents |
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| $16,476 |
| $9,629 |
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| $26,105 |
| $24,028 |
| Land held for sale |
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| 4,493 |
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| 4,493 |
| 7,160 |
| Other current assets |
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| 7,522 |
| 953 |
| ($901) |
| 7,574 |
| 6,292 |
| Total current assets |
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| 28,491 |
| 10,582 |
| (901) |
| 38,172 |
| 37,480 |
| Timber and roads, net |
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| 32,311 |
| 194,410 |
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| 226,721 |
| 227,144 |
| Timberlands |
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| 14,904 |
| 33,368 |
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| 48,272 |
| 47,933 |
| Buildings and equipment, net |
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| 6,017 |
| 17 |
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| 6,034 |
| 6,039 |
| Land held for development |
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| 27,389 |
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| 27,389 |
| 26,040 |
| Investment in ORM Timber Funds |
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| 18,952 |
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| (18,952) |
| - |
| - |
| Other assets |
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| 375 |
| 151 |
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| 526 |
| 441 |
| Total |
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| $128,439 |
| $238,528 |
| ($19,853) |
| $347,114 |
| $345,077 |
Liabilities and equity: |
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| Current liabilities |
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| $3,625 |
| $2,225 |
| ($901) |
| $4,949 |
| $5,405 |
| Current portion of long-term debt |
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| 5,110 |
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| 5,110 |
| 5,109 |
| Current portion of environmental remediation |
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| 4,600 |
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| 4,600 |
| 3,700 |
| Total current liabilities |
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| 13,335 |
| 2,225 |
| (901) |
| 14,659 |
| 14,214 |
| Long-term debt |
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| 27,464 |
| 57,380 |
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| 84,844 |
| 84,872 |
| Environmental remediation |
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| 16,766 |
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| 16,766 |
| 17,951 |
| Other long-term liabilities |
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| 141 |
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| 141 |
| 411 |
| Total liabilities |
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| 57,706 |
| 59,605 |
| (901) |
| 116,410 |
| 117,448 |
| Partners' capital |
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| 70,733 |
| 178,923 |
| (179,886) |
| 69,770 |
| 64,216 |
| Noncontrolling interests |
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| 160,934 |
| 160,934 |
| 163,413 |
| Total |
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| $128,439 |
| $238,528 |
| ($19,853) |
| $347,114 |
| $345,077 |
RECONCILIATION BETWEEN NET INCOME (LOSS) AND CASH FLOWS FROM OPERATIONS | ||||||
(all amounts in $000's) | ||||||
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| Three months ended March 31, | ||
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| 2015 |
| 2014 |
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Net income |
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| $6,988 |
| $13,517 | |
Added back: |
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| Depletion |
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| 3,211 |
| 3,437 |
| Depreciation and amortization |
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| 155 |
| 178 |
| Equity-based compensation |
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| 338 |
| 450 |
| Excess tax benefit from equity-based compensation |
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| (5) |
| - |
| Real estate project expenditures |
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| (2,586) |
| (1,530) |
| Deferred taxes |
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| 179 |
| - |
| Cost of land and timber sold |
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| 4,078 |
| 6,921 |
| Change in environmental remediation liability |
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| (286) |
| (11) |
| Change in other operating accounts |
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| (2,950) |
| (2,746) |
| Cash provided by operations |
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| $9,122 |
| $20,216 |
SEGMENT INFORMATION | ||||||||||||
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| (all amounts in $000's) |
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| Three months ended March 31, | ||||||||
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| 2015 |
| 2014 | ||||||
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Revenue: |
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| Partnership Fee Timber |
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| $8,790 |
| $11,144 | ||||||
| Funds Fee Timber |
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| 7,156 |
| 10,965 | ||||||
| Total Fee Timber |
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| 15,946 |
| 22,109 | ||||||
| Timberland Management |
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| - |
| - | ||||||
| Real Estate |
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| 10,962 |
| 15,670 | ||||||
| Total |
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| 26,908 |
| 37,779 | ||||||
Operating income (loss): |
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| Fee Timber |
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| 4,860 |
| 9,221 | ||||||
| Timberland Management |
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| (729) |
| (610) | ||||||
| Real Estate |
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| 5,132 |
| 6,959 | ||||||
| General & administrative |
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| (1,190) |
| (1,322) | ||||||
| Total |
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| $8,073 |
| $14,248 |
SELECTED STATISTICS | ||||||||||||
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| Three months ended March 31, | ||||||||
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| 2015 |
| 2014 | ||||||
Log sale volumes by species (million board feet): |
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Sawlogs |
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| Douglas-fir |
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| 11.3 |
| 18.0 | ||||||
| Whitewood |
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| 5.9 |
| 6.7 | ||||||
| Cedar |
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| 1.3 |
| 0.7 | ||||||
| Hardwood |
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| 1.5 |
| 1.0 | ||||||
Pulpwood |
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| All species |
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| 4.5 |
| 3.5 | ||||||
Total |
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| 24.5 |
| 29.9 | |||||||
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Log sale volumes by destination (million board feet): |
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| Export |
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| 4.7 |
| 12.5 | ||||||
| Domestic |
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| 13.8 |
| 12.9 | ||||||
| Hardwood |
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| 1.5 |
| 1.0 | ||||||
| Pulpwood |
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| 4.5 |
| 3.5 | ||||||
Subtotal log sale volumes |
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| 24.5 |
| 29.9 | |||||||
| Timber deed sale |
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| 0.6 |
| - | ||||||
Total |
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| 25.1 |
| 29.9 | |||||||
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Average price realizations by species (per thousand board feet): |
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| Three months ended March 31, | |||||||||
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| 2015 |
| 2014 | ||||||
Sawlogs |
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| Douglas-fir |
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| 644 |
| 765 | ||||||
| Whitewood |
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| 555 |
| 695 | ||||||
| Pine |
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| n/a |
| n/a | ||||||
| Cedar |
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| 1,509 |
| 1,406 | ||||||
| Hardwood |
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| 646 |
| 599 | ||||||
Pulpwood |
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| All species |
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| 328 |
| 269 | ||||||
Overall |
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| 609 |
| 701 | |||||||
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Average price realizations by destination (per thousand board feet): |
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| Export |
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| 665 |
| 793 | ||||||
| Domestic |
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| 676 |
| 737 | ||||||
| Hardwood |
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| 646 |
| 599 | ||||||
| Pulpwood |
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| 328 |
| 269 | ||||||
Overall log sales |
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| 609 |
| 701 | |||||||
Timber deed sale |
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| 357 |
| - | |||||||
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Owned timber acres |
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| 111,000 |
| 110,000 | |||||||
Acres owned by Funds |
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| 80,000 |
| 91,000 | |||||||
Depletion per MBF -Partnership Tree Farms |
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| 47 |
| 48 | |||||||
Depletion per MBF -Fund Tree Farms |
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| 209 |
| 174 | |||||||
Capital and development expenditures ($000's) |
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| 3,148 |
| 1,911 |
PERIOD TO PERIOD COMPARISONS | ||||||||||||
(Amounts in $000's except per unit data) | ||||||||||||
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| Q1 2015 vs. | ||||||||
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| Q1 2014 | ||||||||
Net income (loss) attributable to Pope Resources' unitholders: |
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| 1st Quarter 2015 |
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| $7,809 | ||||||||
| 1st Quarter 2014 |
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| 12,241 | ||||||||
| Variance |
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| ($4,432) | ||||||||
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Detail of earnings variance: |
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Fee Timber |
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| Log volumes (A) |
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| ($3,730) | ||||||||
| Log price realizations (B) |
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| (2,258) | ||||||||
| Timber deed sale |
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| 211 | ||||||||
| Production costs |
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| 1,245 | ||||||||
| Depletion |
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| 257 | ||||||||
| Other Fee Timber |
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| (86) | ||||||||
Timberland Management |
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| (119) | |||||||||
Real Estate |
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| Land sales |
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| (6,021) | ||||||||
| Conservation easement sales |
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| 4,311 | ||||||||
| Timber depletion on land sale |
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| (39) | ||||||||
| Other Real Estate |
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| (78) | ||||||||
General & administrative costs |
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| 132 | |||||||||
Net interest expense |
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| (171) | |||||||||
Taxes |
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| (183) | |||||||||
Noncontrolling interest |
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| 2,097 | |||||||||
Total variance |
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| ($4,432) |
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(A) Volume variance calculated by extending change in sales volume by the average log sales price for the comparison period. | ||||||||
(B) Price variance calculated by extending the change in average realized price by current period volume. |
CONTACT: John D. Lamb, Vice President and CFO, 360.697.6626, Fax 360.697.1156