Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q
( X )
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9035

POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware
91-1313292
(State or other jurisdiction of incorporation or organization) 
(IRS Employer Identification Number)
 
19950 7th Avenue NE, Suite 200, Poulsbo, WA 98370
Telephone: (360) 697-6626
(Address of principal executive offices including zip code)
(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x          No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes x         No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
 
Large Accelerated Filer o
Accelerated Filer x
Emerging growth company o
 
Non-accelerated Filer o
Smaller Reporting Company o
 
                                                                                                           
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    
Yes o          No x

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Depositary Receipts (Units)
POPE
NASDAQ Capital Market

Partnership units outstanding at October 31, 2019: 4,354,927





Pope Resources
Index to Form 10-Q Filing
For the Nine Months Ended September 30, 2019

Description
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)
Pope Resources, a Delaware Limited Partnership
September 30, 2019 and December 31, 2018
 
2019
 
2018
ASSETS
 
 
 
Current assets
 
 
 
Partnership cash
$
990

 
$
1,784

ORM Timber Funds cash
2,909

 
3,330

Cash
3,899

 
5,114

Restricted cash
892

 
943

Total cash and restricted cash
4,791

 
6,057

Accounts receivable, net
3,327

 
4,670

Contract assets
2,620

 
2,872

Land held for sale
384

 
5,697

Prepaid expenses and other current assets
947

 
1,070

    Total current assets
12,069

 
20,366

Properties and equipment, at cost
 

 
 

Timber and roads
376,861

 
377,970

Timberland
77,109

 
74,267

Land held for development
20,243

 
20,891

Buildings and equipment, net of accumulated depreciation (2019 - $8,066; 2018 - $8,223)
5,452

 
5,500

    Total properties and equipment, at cost
479,665

 
478,628

Other assets
7,170

 
9,255

Total assets
$
498,904

 
$
508,249

 
 
 
 
LIABILITIES, PARTNERS’ CAPITAL AND NONCONTROLLING INTERESTS
 

 
 

Current liabilities
 

 
 

Accounts payable
$
2,488

 
$
2,379

Accrued liabilities
5,928

 
5,191

Current portion of long-term debt - Partnership
132

 
128

Current portion of long-term debt - Funds
24,987

 

Deferred revenue
244

 
336

Current portion of environmental remediation liability
1,140

 
1,082

Other current liabilities
1,238

 
865

    Total current liabilities
36,157

 
9,981

Long-term debt, net of unamortized debt issuance costs and current portion - Partnership
92,323

 
93,928

Long-term debt, net of unamortized debt issuance costs and current portion - Funds
32,343

 
57,313

Environmental remediation and other long-term liabilities
7,627

 
8,427

Partners’ capital and noncontrolling interests
 

 
 

General partners' capital (units issued and outstanding 2019 - 60; 2018 - 60)
846

 
944

Limited partners' capital (units issued and outstanding 2019 - 4,258; 2018 - 4,253)
48,574

 
56,533

Noncontrolling interests
281,034

 
281,123

    Total partners’ capital and noncontrolling interests
330,454

 
338,600

Total liabilities, partners’ capital and noncontrolling interests
$
498,904

 
$
508,249

See accompanying notes to condensed consolidated financial statements.

3



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Pope Resources, a Delaware Limited Partnership
Nine Months Ended September 30, 2019 and 2018
(in thousands, except per unit data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
27,948

 
$
28,008

 
$
80,965

 
$
80,907

Cost of sales
(21,193
)
 
(16,769
)
 
(58,636
)
 
(43,644
)
Operating expenses
(5,538
)
 
(5,137
)
 
(15,007
)
 
(14,471
)
Environmental remediation expense

 

 

 
(2,900
)
General and administrative expenses
(3,234
)
 
(1,930
)
 
(6,774
)
 
(4,954
)
Income (loss) from operations
(2,017
)
 
4,172

 
548

 
14,938

 
 
 
 
 
 
 
 
Interest expense, net
(1,420
)
 
(1,311
)
 
(4,385
)
 
(3,703
)
 
 
 
 
 
 
 
 
Income (loss) before income taxes
(3,437
)
 
2,861

 
(3,837
)
 
11,235

Income tax expense
(400
)
 
(117
)
 
(435
)
 
(243
)
Net and comprehensive income (loss)
(3,837
)
 
2,744

 
(4,272
)
 
10,992

 
 
 
 
 
 
 
 
Net and comprehensive (income) loss attributable to noncontrolling interests - ORM Timber Funds
3,148

 
(110
)
 
9,058

 
(2,498
)
Net and comprehensive loss attributable to noncontrolling interests - Real Estate
110

 
10

 
151

 
68

Net and comprehensive income (loss) attributable to unitholders    
$
(579
)
 
$
2,644

 
$
4,937

 
$
8,562

 
 
 
 
 
 
 
 
Allocable to general partners
$
(8
)
 
$
37

 
$
69

 
$
119

Allocable to limited partners
(571
)
 
2,607

 
4,868

 
8,443

Net and comprehensive income (loss) attributable to unitholders
$
(579
)
 
$
2,644

 
$
4,937

 
$
8,562

 
 
 
 
 
 
 
 
Basic and diluted earnings per unit attributable to unitholders
$
(0.15
)
 
$
0.60

 
$
1.11

 
$
1.96

 
 
 
 
 
 
 
 
Basic and diluted weighted average units outstanding
4,317

 
4,316

 
4,322

 
4,319

 
 
 
 
 
 
 
 
Distributions per unit
$
1.00

 
$
0.80

 
$
3.00

 
$
2.20

See accompanying notes to condensed consolidated financial statements.

4



CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL AND NONCONTROLLING INTERESTS (Unaudited)
Pope Resources, a Delaware Limited Partnership
Nine Months Ended September 30, 2019 and 2018
(in thousands)

 
 
 
Attributable to Pope Resources
 
 
 
 
 
Units
 
General Partners
 
Limited Partners
 
Noncontrolling Interests
 
Total
December 31, 2018
4,313

 
$
944

 
$
56,533

 
$
281,123

 
$
338,600

Net income (loss)

 
46

 
3,265

 
(2,544
)
 
767

Cash distributions

 
(60
)
 
(4,306
)
 
(3,076
)
 
(7,442
)
Capital call

 

 

 
17,259

 
17,259

Preferred stock issuance

 

 

 
125

 
125

Equity-based compensation
17

 
8

 
585

 

 
593

Units issued under distribution reinvestment plan

 

 
24

 

 
24

Unit repurchases
(3
)
 

 
(166
)
 

 
(166
)
Payroll taxes paid on unit net settlements
(1
)
 
(1
)
 
(78
)
 

 
(79
)
March 31, 2019
4,326

 
$
937

 
$
55,857

 
$
292,887

 
$
349,681

Net income (loss)

 
31

 
2,174

 
(3,407
)
 
(1,202
)
Cash distributions

 
(60
)
 
(4,299
)
 
(3,475
)
 
(7,834
)
Equity-based compensation
1

 
3

 
194

 

 
197

Units issued under distribution reinvestment plan

 

 
9

 

 
9

Unit repurchases
(7
)
 

 
(500
)
 

 
(500
)
June 30, 2019
4,320

 
$
911

 
$
53,435

 
$
286,005

 
$
340,351

Net income (loss)

 
(8
)
 
(571
)
 
(3,258
)
 
(3,837
)
Cash distributions

 
(60
)
 
(4,295
)
 
(1,713
)
 
(6,068
)
Equity-based compensation
1

 
3

 
193

 

 
196

Units issued under distribution reinvestment plan

 

 
9

 

 
9

Unit repurchases
(3
)
 

 
(197
)
 

 
(197
)
September 30, 2019
4,318

 
846

 
48,574

 
281,034

 
330,454


5




 
 
 
Attributable to Pope Resources
 
 
 
 
 
Units
 
General Partners
 
Limited Partners
 
Noncontrolling Interests
 
Total
December 31, 2017
4,311

 
$
1,028

 
$
63,519

 
$
176,079

 
$
240,626

Net income (loss)

 
79

 
5,639

 
(3
)
 
5,715

Cash distributions

 
(42
)
 
(3,010
)
 
(3,481
)
 
(6,533
)
Capital call

 

 

 
92,280

 
92,280

Equity-based compensation
15

 
7

 
516

 

 
523

Units issued under distribution reinvestment plan
1

 

 
59

 

 
59

Unit repurchases
(4
)
 

 
(292
)
 

 
(292
)
Payroll taxes paid on unit net settlements
(1
)
 
(1
)
 
(101
)
 

 
(102
)
March 31, 2018
4,322

 
$
1,071

 
$
66,330

 
$
264,875

 
$
332,276

Net income

 
3

 
197

 
2,333

 
2,533

Cash distributions

 
(43
)
 
(3,008
)
 
(2,842
)
 
(5,893
)
Equity-based compensation

 
3

 
196

 

 
199

Units issued under distribution reinvestment plan
1

 

 
61

 

 
61

Unit repurchases
(5
)
 

 
(361
)
 

 
(361
)
June 30, 2018
4,318

 
$
1,034

 
$
63,415

 
$
264,366

 
$
328,815

Net income

 
37

 
2,607

 
100

 
2,744

Cash distributions

 
(48
)
 
(3,440
)
 
(4,894
)
 
(8,382
)
Equity-based compensation

 
3

 
199

 

 
202

Units issued under distribution reinvestment plan

 

 
8

 

 
8

Unit repurchases
(4
)
 

 
(286
)
 

 
(286
)
September 30, 2018
4,314

 
1,026

 
62,503

 
259,572

 
323,101



See accompanying notes to condensed consolidated financial statements.


6



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Pope Resources, a Delaware Limited Partnership
Nine Months Ended September 30, 2019 and 2018
 
2019
 
2018
Net income (loss)
$
(4,272
)
 
$
10,992

Adjustments to reconcile net income (loss) to net cash provided by operating activities
 

 
 

Depletion
20,924

 
21,104

Equity-based compensation
987

 
924

Depreciation and amortization
581

 
439

Cost of land sold
8,585

 
1,407

Other
251

 
48

Cash flows from changes in operating accounts
 

 
 

Accounts receivable, net
1,344

 
772

Prepaid expenses, contract assets, and other assets
1,028

 
(5,656
)
Real estate project expenditures
(2,622
)
 
(2,182
)
Accounts payable and accrued liabilities
996

 
(489
)
Environmental remediation accruals

 
2,900

Environmental remediation payments
(482
)
 
(1,145
)
Other current and long-term liabilities
22

 
820

Net cash provided by operating activities
27,342

 
29,934

 
 
 
 
Cash flows from investing activities
 

 
 

Reforestation and roads
(2,164
)
 
(2,534
)
Capital expenditures
(419
)
 
(571
)
Proceeds from sale of property and equipment
142

 
10

Proceeds from insurance recovery
365

 

Deposit for acquisition of timberland - Partnership
(4
)
 

Acquisitions of timberland - Partnership
(739
)
 
(6,355
)
Acquisitions of timberland - Funds
(19,344
)
 
(108,364
)
Net cash used in investing activities
(22,163
)
 
(117,814
)
 
 
 
 
Cash flows from financing activities
 

 
 

Line of credit borrowings
14,786

 
27,300

Line of credit repayments
(19,286
)
 
(7,800
)
Proceeds from issuance of long-term debt
3,000

 

Repayment of long-term debt
(95
)
 
(92
)
Payment of debt issuance costs and prepayment penalty
(125
)
 

Proceeds from unit issuances - distribution reinvestment plan
42

 
128

Unit repurchases
(863
)
 
(939
)
Proceeds from preferred stock issuance - ORM Timber Funds
125

 

Payroll taxes paid on unit net settlements
(79
)
 
(102
)
Cash distributions to unitholders
(13,080
)
 
(9,591
)
Cash distributions from Real Estate joint venture
136

 

Cash distributions - ORM Timber Funds, net of distributions to Partnership
(8,265
)
 
(11,217
)
Capital call - ORM Timber Funds, net of Partnership contribution
17,259

 
92,280

Net cash provided by (used in) financing activities
(6,445
)
 
89,967

 
 
 
 
Net increase (decrease) in cash and restricted cash
(1,266
)
 
2,087

Cash and restricted cash at beginning of period
6,057

 
5,284

Cash and restricted cash at end of period
$
4,791

 
$
7,371

See accompanying notes to condensed consolidated financial statements.

7



POPE RESOURCES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2019

1.
The condensed consolidated balance sheets as of September 30, 2019, and December 31, 2018, and the related condensed consolidated statements of comprehensive income, partners’ capital and noncontrolling interests, and cash flows for the nine-month periods ended September 30, 2019, and 2018, 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 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, 2018, is derived from the Partnership’s audited consolidated financial statements and notes thereto for the year ended December 31, 2018, and should be read in conjunction with such financial statements and notes. 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, 2019.

2.
The financial statements in the Partnership’s 2018 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.

In February 2016, the FASB established Topic 842, Leases, which requires lessees to recognize leases on the balance sheet and disclose certain information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as financing or operating, with classification affecting the pattern and classification of expense recognition in the income statement. For lessors, leases are classified as a sales-type, direct financing, or operating lease.
The Partnership adopted this new standard effective January 1, 2019 and utilized the effective date as the date of initial application. Consequently, financial information was not updated, and the disclosures required under the new standard are not provided for dates and periods prior to January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Partnership elected the ‘package of practical expedients’, which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs. We did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to us.
The Partnership recognized a ROU asset and lease liability of $294,000 as of January 1, 2019 in connection with the adoption of this standard and all of its leases continue to be classified as operating leases. Accordingly, the adoption of this standard did not have a cumulative effect, or material effect, on the Partnership’s consolidated financial statements.
3.
Revenue is measured based on the consideration specified in a contract with a customer. The Partnership recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Included in “Accounts receivable, net” are $2.1 million and $3.0 million of receivables from contracts with customers as of September 30, 2019, and December 31, 2018, respectively.

Significant changes in the contract asset balance during the period were as follows, and there were no contract liabilities as of September 30, 2019, and December 31, 2018 (in thousands):

Contract assets, December 31, 2018
$
3,829

Revenue recognized from changes in estimates of variable consideration
194

Transferred to receivables from contract assets
(1,426
)
Contract assets, September 30, 2019
$
2,620


The contract assets in the table above represent rights to consideration for timber deeds transferred to the customer and are related primarily to the Funds Timber segment. These contracts provide the customer the legal right to harvest timber on a designated portion of the Funds’ or Partnership’s property. The value of a timber deed contract is determined based on the estimated timber volume by tree species multiplied by the contracted price. The contract consideration is considered variable because the timber volume by species is an estimate until the harvest is completed. The contract assets are

8



transferred to receivables when the rights to consideration become due under the contract. Customers may harvest the timber at their discretion, within a time period and operational parameters stated in the contract.

The following is a description of principal activities, separated by reportable segments, from which the Partnership generates its revenue.

Partnership Timber and Funds Timber

Log sale revenue in these two segments is recognized when control is transferred, and title and risk of loss passes to the customer, which typically occurs when logs are delivered to the customer. Revenue in these two segments is earned primarily from the harvest and sale of logs from the Partnership’s and Funds’ timberland. Other revenue in these segments is generated from the sale of rights to harvest timber (timber deed sales), commercial thinning, ground leases for cellular communication towers, royalties from gravel mines and quarries, and land use permits. Timber deed sales are generally structured so that the customer pays a contracted price per volume, measured in thousands of board feet (MBF), and revenue is recognized when control is transferred to the customer, which generally occurs on the effective date of the contract. Commercial thinning consists of the selective cutting of timber stands that have not yet reached optimal harvest age. However, this timber does have some commercial value and revenue is based on the volume harvested. Royalty revenue from gravel mines and quarries is recognized monthly based on the quantity of material extracted.

The following table presents log sale and other revenue for the Partnership Timber and Funds Timber segments:

(in thousands)
Quarter ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Partnership Timber
 
 
 
 
 
 
 
Log sale revenue
$
5,107

 
$
11,638

 
$
33,514

 
$
31,312

Other revenue
601

 
601

 
1,565

 
1,635

Total revenue
$
5,708

 
$
12,239

 
$
35,079

 
$
32,947

 
 
 
 
 
 
 
 
Funds Timber
 
 
 
 
 
 
 
Log sale revenue
$
9,638

 
$
11,353

 
$
29,915

 
$
29,356

Timber deed sale revenue
23

 
1,640

 
217

 
10,504

Other revenue
42

 
260

 
1,761

 
851

Total revenue
$
9,703

 
$
13,253

 
$
31,893

 
$
40,711


Timberland Investment Management (TIM)

Fee revenue generated by the TIM segment for managing the Funds includes fixed components related to invested capital and acres under management, and a variable component related to harvest volume from the Funds’ tree farms. These fees, which represent an expense in the Funds Timber segment, are eliminated in consolidation. The TIM segment occasionally earns revenue from providing timberland management-related consulting services to third-parties and recognizes such revenue as the related services are provided.

Real Estate

The Real Estate segment’s activities consist of investing in and later selling improved properties, holding properties for later development and sale, and managing commercial properties. Revenue is generated primarily from sales of land, sales of development rights, known as conservation easements (CE’s), sales of unimproved land from the Partnership’s timberland portfolio, and residential and commercial rents. Revenue on real estate sales is recorded on the date the sale closes. When a real estate transaction is closed with obligations to complete infrastructure or other construction, the portion of the total contract allocated to the post-closing obligations may be recognized over time as that work is performed, provided the customer either simultaneously receives and consumes the benefits as we perform under the contract, our performance creates or enhances the asset controlled by the customer, or we do not create an asset with an alternative use to the customer and we have an enforceable right to payment for the performance completed. Progress towards the

9



satisfaction of our performance obligations is generally measured based on costs incurred relative to the total cost expected to be incurred for the performance obligations.

The following table breaks down revenue for the Real Estate segment:
(in thousands)
Quarter ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Development rights (CE)
$

 
$

 
$

 
$
3,730

Residential land sales
12,150

 
1,975

 
12,795

 
2,126

Unimproved land

 

 
22

 
125

Total land sales
12,150

 
1,975

 
12,817

 
5,981

Rentals and other
387

 
541

 
1,176

 
1,268

Total revenue
$
12,537

 
$
2,516

 
$
13,993

 
$
7,249


4.
The Partnership is both a lessee and a lessor. A contract is determined to contain a lease if there is an identified asset to which the lessee has the right to substantially all of the economic benefits and has control over how the asset is used throughout the contract period. Upon adoption of ASC 842, Leases, the Partnership elected the practical expedients to not separate lease and non-lease components for all of its leases.

Lessee lease information

As a lessee, the Partnership’s leases consist of office equipment and office space and are classified as operating leases. Leases for some printers have a variable payment for printing in excess of a page allowance set in the lease contract. The discount rate for leases was determined based on Northwest Farm Credit Services’ (NWFCS), the Partnership’s lender, cost of funds for the lease period plus a margin of 1.60%, as provided for in the Partnership’s credit agreement with NWFCS.

The following table presents the balances of our right-of-use assets and lease liabilities and the balance sheet captions in which they are reported (in thousands):

 
September 30, 2019
 
Balance Sheet caption
 
 
 
 
Right of use assets
$
179

 
Other assets
Lease liability - current
$
115

 
Other current liabilities
Lease liability - long-term
$
64

 
Environmental remediation and other long-term liabilities

The following table presents the components of lease costs and other lease information for the quarter ended September 30, 2019:


10



In thousands, except weighted-average information
Quarter ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
Lease cost
 
 
 
 
 
 
 
Operating lease cost
$
47

 
$

 
$
141

 
$

Variable lease cost
3

 

 
7

 

Total lease cost
$
50

 
$

 
$
148

 
$

 
 
 
 
 
 
 
 
Other lease information
 
 
 
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities
$
50

 
$

 
$
148

 
$

Right-of-use asset obtained in exchange for new leases
$

 
$

 
$
17

 
$

Weighted-average remaining lease term in years
1.6

 
 
 
 
 
 
Weighted average discount rate
4.2
%
 
 
 
 
 
 

Payments due under lease contracts for the next five years and thereafter are as follows (in thousands):

2019
$
120

2020
55

2021
10

2022
1

Unamortized discount
(7
)
Total lease liability at September 30, 2019
$
179


Lessor lease information
As a lessor, the Partnership’s leases consist of leases of commercial and residential real estate, reported in the Real Estate segment under “rentals and other”, and land leases on the Partnership’s and Funds’ timberland for cellular communication towers (Tower Leases), reported in the Partnership Timber and Funds Timber segments under “other revenue”. All these leases are classified as operating leases. Tower Leases have a variable payment component for revenue sharing from subleases of space on the tower. Tower Leases typically have a five-year term and two to five automatic five-year extensions.
Commercial real estate leases have non-lease components of taxes, insurance and common area maintenance. Tower Leases have non-lease components for real property taxes related to tenant improvements.
The following table presents the components of lease income for the three and nine months ended September 30, 2019 (in thousands):

(in thousands)
Quarter ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Lease Income
 
 
 
 
 
 
 
Operating lease income
$
452

 
$

 
$
1,261

 
$

Variable lease income
12

 

 
43

 

Total lease income
$
464

 
$

 
$
1,304

 
$


Buildings subject to operating leases had a cost of $2.1 million and accumulated depreciation of $1.2 million at September 30, 2019.


11



Lease income at September 30, 2019, based on payments due by period under the lease contracts, are presented in the following table (in thousands):
2019
$
699

2020
718

2021
662

2022
595

2023
563

Thereafter
3,785

Total
$
7,022


5.
The Partnership has two general partners: Pope MGP, Inc. and Pope EGP, Inc. In total, these two entities own 60,000 limited partner units. The allocation of distributions, profits, and losses among the general and limited partners is pro rata across all units outstanding.

6.
ORM Timber Fund II, Inc. (Fund II), ORM Timber Fund III (REIT) Inc. (Fund III), and ORM Timber Fund IV LLC (Fund IV), collectively “the Funds”, were formed by Olympic Resource Management LLC (ORMLLC), a wholly owned subsidiary of the Partnership, for the purpose of raising capital to purchase timberlands. The objective of these Funds is to generate a return on investments through the acquisition, management, value enhancement, and sale of timberland properties. Each fund is organized to operate for a specific term from the end of its respective investment period; 10 years for each of Fund II and Fund III, and 15 years for Fund IV. Fund II and Fund III are scheduled to terminate in March 2021 and December 2025, respectively. Fund IV will terminate on the fifteenth anniversary of the end of its investment period, which will occur on the earlier of placement of all committed capital or December 31, 2019, subject to certain extension provisions.

Pope Resources and ORMLLC together own equity interests totaling 20% of Fund II, 5% of Fund III, and 15% of Fund IV. The Funds are considered variable interest entities because their organizational and governance structures are the functional equivalent of a limited partnership. As the managing member of the Funds, the Partnership is the primary beneficiary of each of the Funds as it has the authority to direct the activities that most significantly impact their economic performance, as well as the right to receive benefits and the obligation to absorb losses that could potentially be significant to the Funds. Accordingly, the Funds are consolidated into the Partnership’s financial statements. The obligations of each of the Funds are non-recourse to the Partnership.

In January 2019, Fund IV closed on the acquisition of 7,100 acres of timberland in south central Washington for $20.3 million, of which the Partnership’s share was $3.0 million. At December 31, 2018, Fund IV had paid a deposit of $1.0 million in connection with the transaction, which was included in other assets. The purchase price was allocated $17.5 million to timber and roads, and $2.8 million to the underlying land.

The assets and liabilities of the Funds as of September 30, 2019, and December 31, 2018, were as follows:
 

12



(in thousands)
September 30, 2019

December 31, 2018
Assets:
Cash
$
2,909

 
$
3,330

Contract assets
2,553

 
2,780

Other current assets
1,821

 
2,151

Total current assets
7,283

 
8,261

Properties and equipment, net of accumulated depreciation
364,478

 
360,163

Other long-term assets

 
1,962

Total assets
$
371,761

 
$
370,386

Liabilities and equity:
 

 
 

Current liabilities
$
3,987

 
$
3,237

Current portion of long-term debt
24,987

 

Total current liabilities
28,974

 
3,237

Long-term debt, net of unamortized debt issuance costs and current portion
32,343

 
57,313

Other long-term liabilities

 
300

Funds’ equity
310,444

 
309,536

Total liabilities and equity
$
371,761

 
$
370,386


7.
Other assets consisted of the following at September 30, 2019 and December 31, 2018:

(in thousands)
September 30, 2019
 
December 31, 2018
 
 
 
 
Investment in Real Estate joint venture entity
$
5,577

 
$
5,891

Advances to Real Estate joint venture entity
934

 
804

Deferred tax assets, net
424

 
541

Right-of-use assets
179

 

Contract assets

 
957

Note receivable
52

 
57

Deposits for acquisitions of timberland
4

 
1,005

Total
$
7,170

 
$
9,255


8.
In the presentation of the Partnership’s revenue and operating income (loss) by segment, all intersegment revenue and expense is eliminated to determine operating income (loss) reported externally. The following tables reconcile internally reported income (loss) from operations to externally reported income (loss) from operations by business segment.

In the fourth quarter of 2018, the Partnership changed its method of reporting costs incurred by the Partnership Timber segment on behalf of the TIM segment, and reclassified $123,000 of operating expenses for the third quarter of 2018 and $366,000 for the first nine months of 2018 from the Partnership Timber segment to the TIM segment to conform to the current year presentation.

13



Quarter ended September 30, (in thousands)
Partnership Timber
 
Funds Timber
 
Timberland Investment Management
 
Real Estate
 
Other
 
Consolidated
2019
 
 
 
 
 
 
 
 
 
 
 
Revenue - internal
$
5,915

 
$
9,703

 
$
1,393

 
$
12,660

 
$

 
$
29,671

Eliminations
(207
)
 

 
(1,393
)
 
(123
)
 

 
(1,723
)
Revenue - external
5,708

 
9,703

 

 
12,537

 

 
27,948

 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
(3,032
)
 
(9,352
)
 

 
(8,809
)
 

 
(21,193
)
 
 
 
 
 
 
 
 
 
 
 
 
Operating, general and administrative expenses - internal
(1,521
)
 
(3,030
)
 
(1,265
)
 
(1,420
)
 
(3,259
)
 
(10,495
)
Eliminations
250

 
1,339

 
71

 
38

 
25

 
1,723

Operating, general and administrative expenses - external
(1,271
)
 
(1,691
)
 
(1,194
)
 
(1,382
)
 
(3,234
)
 
(8,772
)
Income (loss) from operations - internal
1,362

 
(2,679
)
 
128

 
2,431

 
(3,259
)
 
(2,017
)
Eliminations
43

 
1,339

 
(1,322
)
 
(85
)
 
25

 

 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from operations - external
$
1,405

 
$
(1,340
)
 
$
(1,194
)
 
$
2,346

 
$
(3,234
)
 
$
(2,017
)
 
 
 
 
 
 
 
 
 
 
 
 
2018
 

 
 

 
 

 
 

 
 

 
 

Revenue - internal
$
12,373

 
$
13,253

 
$
1,212

 
$
2,636

 
$

 
$
29,474

Eliminations
(134
)
 

 
(1,212
)
 
(120
)
 

 
(1,466
)
Revenue - external
12,239

 
13,253

 

 
2,516

 

 
28,008

 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
(4,976
)
 
(9,932
)
 

 
(1,861
)
 

 
(16,769
)
 
 
 
 
 
 
 
 
 
 
 
 
Operating, general and administrative expenses - internal
(1,729
)
 
(2,435
)
 
(1,206
)
 
(1,209
)
 
(1,954
)
 
(8,533
)
Eliminations
43

 
1,212

 
151

 
36

 
24

 
1,466

Operating, general and administrative expenses -external
(1,686
)
 
(1,223
)
 
(1,055
)
 
(1,173
)
 
(1,930
)
 
(7,067
)
Income (loss) from operations - internal
5,668

 
886

 
6

 
(434
)
 
(1,954
)
 
4,172

Eliminations
(91
)
 
1,212

 
(1,061
)
 
(84
)
 
24

 

 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from operations - external
$
5,577

 
$
2,098

 
$
(1,055
)
 
$
(518
)
 
$
(1,930
)
 
$
4,172


14



Nine Months Ended September 30, (in thousands)
Partnership Timber
 
Funds Timber
 
Timberland Investment Management
 
Real Estate
 
Other
 
Consolidated
2019
 
 
 
 
 
 
 
 
 
 
 
Revenue - internal
$
35,676

 
$
31,893

 
$
4,235

 
$
14,359

 
$

 
$
86,163

Eliminations
(597
)
 

 
(4,235
)
 
(366
)
 

 
(5,198
)
Revenue - external
35,079

 
31,893

 

 
13,993

 

 
80,965

 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
(17,031
)
 
(31,728
)
 

 
(9,877
)
 

 
(58,636
)
 
 
 
 
 
 
 
 
 
 
 
 
Operating, general and administrative expenses - internal
(4,607
)
 
(8,268
)
 
(3,798
)
 
(3,455
)
 
(6,851
)
 
(26,979
)
Eliminations
729

 
4,080

 
207

 
105

 
77

 
5,198

Operating, general and administrative expenses - external
(3,878
)
 
(4,188
)
 
(3,591
)
 
(3,350
)
 
(6,774
)
 
(21,781
)
Income (loss) from operations - internal
14,038

 
(8,103
)
 
437

 
1,027

 
(6,851
)
 
548

Eliminations
132

 
4,080

 
(4,028
)
 
(261
)
 
77

 

Income (loss) from operations - external
$
14,170

 
$
(4,023
)
 
$
(3,591
)
 
$
766

 
$
(6,774
)
 
$
548

 
 
 
 
 
 
 
 
 
 
 
 
2018
 

 
 

 
 

 
 

 
 

 
 

Revenue - internal
$
33,313

 
$
40,711

 
$
3,376

 
$
7,621

 
$

 
$
85,021

Eliminations
(366
)
 

 
(3,376
)
 
(372
)
 

 
(4,114
)
Revenue - external
32,947

 
40,711

 

 
7,249

 

 
80,907

 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
(11,996
)
 
(28,754
)
 

 
(2,894
)
 

 
(43,644
)
 
 
 
 
 
 
 
 
 
 
 
 
Operating, general and administrative expenses - internal
(5,076
)
 
(6,766
)
 
(3,337
)
 
(3,327
)
 
(5,033
)
 
(23,539
)
Eliminations
135

 
3,376

 
419

 
105

 
79

 
4,114

Operating, general and administrative expenses - external
(4,941
)
 
(3,390
)
 
(2,918
)
 
(3,222
)
 
(4,954
)
 
(19,425
)
Environmental remediation
 
 

 

 
(2,900
)
 

 
(2,900
)
Income (loss) from operations - internal
16,241

 
5,191

 
39

 
(1,500
)
 
(5,033
)
 
14,938

Eliminations
(231
)
 
3,376

 
(2,957
)
 
(267
)
 
79

 

Income (loss) from operations - external
$
16,010

 
$
8,567

 
$
(2,918
)
 
$
(1,767
)
 
$
(4,954
)
 
$
14,938




15



9.
Basic and diluted earnings per unit are calculated by dividing net income attributable to unitholders, adjusted for non-forfeitable distributions paid out to unvested restricted unitholders and preferred shareholders of the Funds, by the weighted average units outstanding during the period. There were no dilutive securities outstanding during the periods presented. The following table shows the calculation of basic and diluted earnings per unit:

 
Quarter Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands, except per unit amounts)
2019
 
2018
 
2019
 
2018
Net and comprehensive income attributable to Pope Resources’ unitholders
$
(579
)
 
$
2,644

 
$
4,937

 
$
8,562

Less:
 

 
 

 
 

 
 

Non-forfeitable distributions paid to unvested restricted unitholders
(38
)
 
(27
)
 
(114
)
 
(53
)
Preferred share dividends - ORM Timber Funds
(12
)
 
(8
)
 
(35
)
 
(23
)
Net and comprehensive income for calculation of earnings per unit
$
(629
)
 
$
2,609

 
$
4,788

 
$
8,486

 
 
 
 
 
 
 
 
Basic and diluted weighted average units outstanding
4,317

 
4,316

 
4,322

 
4,319

 
 
 
 
 
 
 
 
Basic and diluted net earnings per unit
$
(0.15
)
 
$
0.60

 
$
1.11

 
$
1.96


10.
In the first quarter of 2019, the Partnership issued 11,504 restricted units pursuant to the management incentive compensation program and 3,600 restricted units to members of the Board of Directors. These restricted units vest ratably over four years with the grant date fair value equal to the market price on the date of grant. During the nine months ended September 30, 2019, 1,263 units were granted with no restrictions to certain board members who elected to receive their quarterly board compensation in the form of units rather than cash. Units granted to directors are included in the calculation of total equity compensation expense which is recognized over the vesting period, for restricted units, or immediately for unrestricted units. Grants to retirement-eligible individuals on the date of grant are expensed immediately. The Partnership recognized $196,000 and $202,000 of equity compensation expense in the third quarter of 2019 and 2018, respectively, and $986,000 and $924,000 for the nine months ended September 30, 2019 and 2018, respectively, related to these compensation programs.

11.
Supplemental disclosure of cash flow information: interest paid, net of amounts capitalized, totaled $3.9 million and $3.2 million during the first nine months of 2019 and 2018, respectively. Income taxes paid totaled $82,000 and $660,000 for the first nine months of 2019 and 2018, respectively.

12.
The Partnership’s financial instruments include cash, accounts receivable, and notes receivable, included in prepaid expenses and other current asset and in other assets, for which the carrying amount of each represents fair value based on current market interest rates or their short-term nature.

Collectively, the Partnership’s and the Funds’ fixed-rate debt has a carrying value of $125.4 million as of September 30, 2019 and December 31, 2018. The estimated fair value of this debt, based on current interest rates for similar instruments (Level 2 inputs in the Fair Value Hierarchy), is approximately $134.4 million and $126.3 million as of September 30, 2019 and December 31, 2018, respectively.

13.
The Partnership had an accrual for estimated environmental remediation costs of $8.6 million and $9.1 million as of September 30, 2019 and December 31, 2018, respectively. The environmental remediation liability represents management’s estimate of payments to be made to remedy and monitor certain areas in and around Port Gamble Bay, Washington. The liability at September 30, 2019 is comprised of $1.1 million that management expects to expend in the next 12 months and $7.5 million thereafter.

In December 2013, a consent decree and Clean-up Action Plan (CAP) related to Port Gamble Bay were finalized with the Washington State Department of Ecology (DOE) and filed with Kitsap County Superior Court. Construction activity commenced in late September 2015 and the required in-water portion of the cleanup was completed in January 2017. By the end of the third quarter of 2017, the sediments dredged from the Bay were moved to their permanent storage location on property owned by the Partnership a short distance from the town of Port Gamble. This effectively concluded the component of the project related to the in-water cleanup of Port Gamble Bay.

16




In February 2018, the Partnership and DOE entered into an agreed order with respect to the millsite under which the Partnership had performed a remedial investigation and feasibility study (RI/FS) and drafted a CAP. As with the in-water portion of the project, the CAP defines the scope of the remediation activity for the millsite.

As disclosed previously, certain environmental laws allow state, federal, and tribal trustees (collectively, the Trustees) to bring suit against property owners to recover damages for injuries to natural resources. Like the liability that attaches to current property owners in the cleanup context, liability for natural resource damages (NRD) can attach to a property owner simply because an injury to natural resources resulted from releases of hazardous substances on that owner’s property, regardless of culpability for the release. In the case of Port Gamble, the Trustees are alleging that the Partnership has NRD liability because of releases that occurred on its property. The Partnership has been in discussions with the Trustees regarding their claims and the alleged conditions in Port Gamble Bay, and has also been discussing restoration alternatives that might address the damages the Trustees allege. These discussions have progressed to the point where management has identified a short list of restoration projects that may resolve the Trustees’ NRD claims.

The RI/FS and CAP for the millsite will be reviewed by DOE prior to being finalized, which will be codified in a consent decree. For the NRD component of the project, discussions with the Trustees are continuing, and management expects those discussions will ultimately result in a settlement agreement. At present, management expects the CAP and consent decree for the millsite and the NRD settlement agreement to be finalized in the first half of 2020. In both cases, it is reasonably possible that cost estimates could change as a result of changes to either the millsite cleanup or the NRD restoration components of the liability, or both. Management currently expects the millsite cleanup and NRD restoration projects to occur over the next two to three years.
Finally, there will be a monitoring period that is expected to be approximately 15 years during which the Partnership will monitor conditions in the Bay, on the millsite, and at the storage location of the dredged and excavated sediments. During this monitoring phase, conditions may arise that require corrective action, and monitoring protocols may change over time. In addition, extreme weather events could cause damage to the sediment caps that would need to be repaired. These factors could result in additional costs.

Activity in the environmental liability is as follows:
 
(in thousands)
Balance at Beginning of the Period
 
Additions to Accrual
 
Expenditures for Remediation
 
Balance at Period-end
Year ended December 31, 2017
$
12,770

 
$

 
$
(7,791
)
 
$
4,979

Year ended December 31, 2018
4,979

 
5,600

 
(1,496
)
 
9,083

Quarter ended March 31, 2019
9,083

 

 
(158
)
 
8,925

Quarter ended June 30, 2019
8,925

 

 
(203
)
 
8,722

Quarter ended September 30, 2019
8,722

 

 
(120
)
 
8,602


14.
In April 2019, the Partnership refinanced a $9.8 million debt tranche with Northwest Farm Credit Services that was originally due in September 2019. As refinanced, this debt has an ultimate maturity of April 2031. The $9.8 million refinancing is divided into three tranches with fixed rates, gross of patronage rebates, for specific periods, as follows:
$3.0 million at 4.35% through April 2027
$3.0 million at 4.51% through April 2029
$3.8 million at 4.60% through April 2031

On the expiration of the fixed-rate periods, the tranches can be repaid or refinanced without penalty, or revert to a floating rate or be fixed at then-current rates for periods not to exceed the ultimate maturity of April 2031. The Partnership paid a make-whole premium of $61,000 in connection with this refinancing.

17



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains a number of projections and statements about our expected financial condition, operating results, and business and strategic plans and objectives. These statements reflect management’s estimates based upon our current expectations, in light of management’s knowledge of existing circumstances and our intentions and expectations about future developments. Statements about expectations and future performance are “forward looking statements” within the meaning of applicable securities laws, which describe our plans, goals, objectives and anticipated performance. These statements can be identified by words such as “anticipate”, “believe”, “expect”, “intend”, and similar expressions. Some of these statements are inherently uncertain, and some or all of these statements may not come to pass. Accordingly, you should not interpret these statements as promises that we will perform at a given level or that we will take any or all of the actions we currently expect to take. Our future actions, as well as our actual performance, will vary from our current expectations, and under various circumstances these variations or their outcomes may be material and adverse. Some of the factors that may cause our actual operating results and financial condition to fall short of our expectations are set forth in the part of this report entitled “Risk Factors” in Part II, Item 1A below. From time to time we identify other risks and uncertainties in our other filings with the Securities and Exchange Commission. The forward-looking statements in this report reflect our estimates and expectations as of the date of the report, and unless required by law, we do not undertake to update these statements as our business operations and environment change.

This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included with this report. 
 
EXECUTIVE OVERVIEW

Pope Resources, A Delaware Limited Partnership (“we” or the “Partnership”), is engaged in four primary businesses: Partnership Timber, Funds Timber, Timberland Investment Management, and Real Estate.

By far the most significant segments, in terms of owned assets and operations, are our two timber segments, which we refer to as Partnership Timber and Funds Timber. These segments include timberlands owned directly by the Partnership and three private equity funds (“Fund II”, “Fund III”, and “Fund IV”, collectively, the “Funds”), respectively. We refer to the timberland owned by the Partnership as the Partnership’s tree farms, and our Partnership Timber segment reflects operations from those properties. We refer to timberland owned by the Funds as the Funds’ tree farms, and operations from those properties are reported in our Funds Timber segment. When referring collectively to the Partnership’s and Funds’ timberland, we refer to them as the Combined tree farms. Operations in each of these segments consist of growing timber and manufacturing logs for sale to domestic wood products manufacturers and log export brokers.

Our Timberland Investment Management segment is engaged in organizing and managing private equity timber funds using capital invested by third parties and the Partnership. The Funds are consolidated into our financial statements, but then income or loss attributable to equity owned by third parties is subtracted from consolidated results in our Condensed Consolidated Statements of Comprehensive Income under the caption “Net and comprehensive (income) loss attributable to non-controlling interests-ORM Timber Funds” to arrive at “Net and comprehensive income attributable to unitholders”.

Our current strategy for adding timberland acreage is centered primarily on our private equity timber fund business model. However, where it does not conflict with exclusivity provisions with the Funds, we acquire smaller timberland parcels from time to time to add on to the Partnership’s existing tree farms. In addition, during periods when the Funds’ committed capital is fully invested, we may look to acquire larger timberland properties for the Partnership. Our three active timber funds have assets under management totaling approximately $545 million as of September 30, 2019 based on the most recent appraisals. Through our 20% co-investment in Fund II, our 5% co-investment in Fund III, and our 15% co-investment in Fund IV, we have deployed $51 million of Partnership capital. Fund IV, launched in December 2016, is still in its investment period and has not yet placed all of its committed capital. Our co-investment affords us a share of the Funds’ operating cash flows while also allowing us to earn asset management and timberland management fees, as well as potential future incentive fees, based upon the overall success of each fund. We also believe that this strategy allows us to maintain more sophisticated expertise in timberland acquisition, valuation, and management on a more cost-effective basis than we could for the Partnership’s timberlands alone. We believe our co-investment strategy also enhances our credibility with existing and prospective Fund investors by demonstrating that we have both an operational and a financial commitment to the Funds’ success.


18



Our Real Estate segment’s activities primarily include securing permits and entitlements, and in some cases, installing infrastructure for raw land development and then realizing that land’s value by selling larger parcels to developers who, in turn, seek to take the land further up the value chain by either selling homes to retail buyers or lots to developers of commercial property. More recently, we have acquired and developed other real estate properties (not previously owned by the Partnership), either on our own or by partnering with another developer in a joint venture. Since these projects often span multiple years, the Real Estate segment may incur losses for multiple years while a project is developed, and will not recognize operating income until that project is sold. In addition, within this segment, we sometimes negotiate and sell development rights in the form of conservation easements (CE’s) on Partnership Timber properties which preclude future development, but allow continued timber operations. The strategy for our Real Estate segment centers around how and when to “harvest”, or sell, a parcel of land to realize its optimal value. In doing so, we seek to balance the long-term risks and costs of carrying and developing a property against the potential for income and cash flows upon sale. Land held for development by our Real Estate segment represents property in western Washington that has been deemed suitable for residential and commercial building sites. Land held for sale includes those properties in the development portfolio that we expect to sell in the next 12 months.

Recent Developments

On November 5, 2019, we issued a press release announcing that we are in discussions with certain parties regarding one or more strategic transactions that, if consummated, may result in a merger of Pope Resources or an acquisition of the Partnership. No definitive agreement has been reached and there can be no assurances that any transaction will result from these discussions. However, in exploring, developing and analyzing these transactions and the various alternatives, we have incurred greater than normal general and administrative expense as discussed further herein.

Adjusted EBITDDA

We use Adjusted EBITDDA as a supplemental measure of segment performance. We define Adjusted EBITDDA as earnings before interest, taxes, depletion, depreciation, amortization, gain or loss on timberland sold, and environmental remediation expense. In addition, we reflect Adjusted EBITDDA on an internal reporting basis without eliminating inter-segment activity, which has no net impact on total Adjusted EBITDDA. Accordingly, fees earned from managing the Funds are reflected in the Timberland Investment Management segment and this same amount is reflected as expense in the Funds Timber segment. We believe Adjusted EBITDDA captures the ongoing operations of each of our segments and is a useful supplemental metric to assess the segments’ financial performance. Our definition of Adjusted EBITDDA may be different from similarly titled measures reported by other companies, including those in our industry. Adjusted EBITDDA is not necessarily indicative of the Adjusted EBITDDA that may be generated in future periods. Adjusted EBITDDA is a non-GAAP performance measure which is reconciled to the GAAP measure of operating income in the table below.

Quarter ended September 30, (in thousands)
Partnership Timber
 
Funds Timber
 
Timberland Investment Management
 
Real Estate
 
Other
 
Consolidated
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from operations - external
$
1,405

 
$
(1,340
)
 
$
(1,194
)
 
$
2,346

 
$
(3,234
)
 
$
(2,017
)
Reversal of segment eliminations
(43
)
 
(1,339
)
 
1,322

 
85

 
(25
)
 

Income (loss) from operations - internal
1,362

 
(2,679
)
 
128

 
2,431

 
(3,259
)
 
(2,017
)
Depletion, depreciation, and amortization
728

 
4,679

 
25

 
64

 
24

 
5,520

Adjusted EBITDDA
$
2,090

 
$
2,000

 
$
153

 
$
2,495

 
$
(3,235
)
 
$
3,503

 
 
 
 
 
 
 
 
 
 
 
 
2018
 

 
 

 
 

 
 

 
 

 
 

Income (loss) from operations - external
$
5,577

 
$
2,098

 
$
(1,055
)
 
$
(518
)
 
$
(1,930
)
 
$
4,172

Reversal of segment eliminations
91

 
(1,212
)
 
1,061

 
84

 
(24
)
 

Income (loss) from operations - internal
5,668

 
886

 
6

 
(434
)
 
(1,954
)
 
4,172

Depletion, depreciation, and amortization
1,094

 
5,906

 
21

 
68

 
10

 
7,099

Adjusted EBITDDA
$
6,762

 
$
6,792

 
$
27

 
$
(366
)
 
$
(1,944
)
 
$
11,271



19



Nine Months Ended September 30, (in thousands)
Partnership Timber
 
Funds Timber
 
Timberland Investment Management
 
Real Estate
 
Other
 
Consolidated
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from operations - external
$
14,170

 
$
(4,023
)
 
$
(3,591
)
 
$
766

 
$
(6,774
)
 
$
548

Reversal of segment eliminations
(132
)
 
(4,080
)
 
4,028

 
261

 
(77
)
 

Income (loss) from operations - internal
14,038

 
(8,103
)
 
437

 
1,027

 
(6,851
)
 
548

Depletion, depreciation, and amortization
4,175

 
16,958

 
67

 
196

 
36

 
21,432

Adjusted EBITDDA
$
18,213

 
$
8,855

 
$
504

 
$
1,223

 
$
(6,815
)
 
$
21,980

 
 
 
 
 
 
 
 
 
 
 
 
2018
 

 
 

 
 

 
 

 
 

 
 

Income (loss) from operations - external
$
16,010

 
$
8,567

 
$
(2,918
)
 
$
(1,767
)
 
$
(4,954
)
 
$
14,938

Reversal of segment eliminations
231

 
(3,376
)
 
2,957

 
267

 
(79
)
 

Income (loss) from operations - internal
16,241

 
5,191

 
39

 
(1,500
)
 
(5,033
)
 
14,938

Depletion, depreciation, and amortization
2,930

 
18,275

 
48

 
204

 
35

 
21,492

Environmental remediation

 

 

 
2,900

 

 
2,900