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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) June 30, 2003
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Pope Resources, A Delaware Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 91-1313292
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19245 Tenth Avenue NE, Poulsbo, Washington 98370
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (360) 697-6626
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
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Item 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On July 21, 2003 the registrant issued a press release relating to its earnings
for the quarter ended June 30, 2003. A copy of that press release is attached
hereto as Exhibit 99.1.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description
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99.1 Press release of the registrant dated July 21, 2003
SIGNATURES
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Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
POPE RESOURCES, A DELAWARE LIMITED
PARTNERSHIP
DATE: July 21, 2003 BY: /s/ Thomas M. Ringo
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Thomas M. Ringo
Vice President and Chief Financial
Officer, Pope Resources, A Delaware
Limited Partnership, and Pope MGP,
Inc., General Partner
Exhibit 99.1
Pope Resources Reports Second Quarter Earnings of $1.3 Million
POULSBO, Wash.--(BUSINESS WIRE)--July 21, 2003--Pope Resources
(Nasdaq:POPEZ) reported net income of $1.3 million, or 29 cents per
diluted ownership unit, on revenues of $7.5 million for the second
quarter ended June 30, 2003.
This compares to net income of $1.6 million, or 35 cents per
diluted ownership unit, on revenues of $9.9 million, for the same
period in 2002.
Net income for the six months ended June 30, 2003 totaled $2.6
million, or 57 cents per diluted ownership unit, on revenues of $14.8
million. Net income for the corresponding period in 2002 totaled $1.6
million, or 35 cents per diluted ownership unit, on revenues of $15.8
million.
"Our first half results compare favorably with those from the same
period in 2002 primarily due to a decision to front-load our annual
timber production volume in 2003," said David L. Nunes, President and
CEO. "We have produced nearly 60% of our planned log volume for the
year in these first six months, while last year at this time we were
at 50% of our annual production. This front-loading of 2003 log
production has been intentional because we expected going into this
year that prices would soften as the year progressed. We have, in
fact, seen this pattern unfold. Log prices have been soft and we
expect this softness to continue over the balance of the year.
Year-to-date results in 2003 for our Real Estate segment are much
improved over last year's comparable period due primarily to $895,000
of expense accruals recorded in the second quarter of 2002 that did
not recur in 2003. Offsetting a good portion of these improvements,
however, is the decline in income from our third-party Timberland
Management and Consulting segment associated with significantly
reduced acres under management in 2003. Adjusting for this lower
business activity level, overhead costs have been commensurately
trimmed in 2003 by 20% on a comparative year-to-date basis. While
market conditions remain weak, we remain confident that the
organizational changes put in place over the past year will help to
improve our overall competitiveness and profitability."
Fee Timber
Operating income from Fee Timber operations totaled $2.7 million
in the second quarter of 2003 versus $3.4 million in the second
quarter of last year. Harvest volume of 12.7 million board feet (MMBF)
was down 1.9 MMBF, or 13% lower compared with the harvest volume in
the same quarter a year ago. The Partnership's weighted average log
price of $482 per thousand board feet (MBF) for the second quarter of
2003 was down $9/MBF or 2% from the second quarter of 2002, and down
$13/MBF or 3% from the first quarter of 2003. Average export log
prices realized were up $33/MBF or 6% in the second quarter of 2003
compared with the second quarter of 2002, but declined $28/MBF or 5%
in the second quarter of 2003 from the first quarter of 2003. The
continuing weak export market is evidenced by the fact that
approximately 10% of our overall production was sold into this market
in the second quarter of 2003 compared to nearly 24% of total
production two years ago. In our domestic log market, soft lumber
pricing due to excess supply pushed log prices down $12/MBF or 2%
lower per MBF in the current quarter compared to the second quarter of
2002, but still the Partnership managed an increase of $8/MBF or 2%
increase when compared to the first quarter of 2003.
For the first six months of 2003, operating income was $5.8
million compared to $5.0 million for the first six months of 2002.
Harvest volume of 25.8 MMBF for the first six months of 2003 was up
over 4.1 MMBF, or 19% higher compared with the harvest level in the
same period a year ago, again owing to our front-loading of planned
volume for the year. The Partnership's weighted average log price of
$489/MBF for the first six months of 2003 was down $5/MBF or 1% from
the comparable period in 2002. Average export log prices realized were
up $38/MBF or 7% in the first six months of 2003 compared with the
same period in 2002. In our domestic log market, average log prices
were down $19/MBF or 3% in the first six months of 2003 compared with
the same period in 2002. Overall log realizations benefited from
significantly higher hardwood log prices, which increased $76/MBF or
16% for the first six months of 2003 compared with the same period in
2002.
For the balance of 2003 the Partnership expects to harvest
approximately 19 MMBF for a total annual harvest of 45 MMBF, an annual
cut that is anticipated to be sustainable for the foreseeable future.
Timberland Management & Consulting
This segment generated operating losses of $194,000 and $323,000
for the second quarter and first six months of 2003, respectively. For
the second quarter and first six months of 2002, this segment
generated operating income of $422,000 and $514,000, respectively. The
Partnership's acres under management have declined significantly since
late 2002 with the expiration of a major contract at December 31,
2002. This factor has contributed approximately $500,000 to the
negative variance between 2003 and 2002 year-to-date results.
Real Estate
For the second quarter of 2003, the Real Estate segment recorded
operating income of $230,000 compared to an operating loss of $960,000
for the comparable period in 2002. The second quarter of 2003 results
reflect a $400,000 gain on the $591,000 sale of a 6-acre parcel in
Everett, Washington while the second quarter of 2002 results were
greatly influenced by two accruals totaling $895,000: one for
environmental cleanup in Port Gamble ($730,000) and the other for home
warranty liabilities in Port Ludlow ($165,000). Prior to those
accruals, the segment generated an operating loss of $65,000 for the
second quarter of 2002. For the first six months of 2003 and 2002, the
Real Estate segment recorded operating losses of $66,000 and $1.1
million, respectively. The disparity in comparative year-to-date
results is due principally to the aforementioned 2002 expense accruals
of $895,000. Prior to these accruals, the segment generated an
operating loss of $233,000 for the first six months of 2002.
General and Administrative
General and administrative costs for the second quarter 2003
declined by 26% from the second quarter of 2002 to $723,000,
reflecting reductions in the Partnership's overhead cost structure in
response to the loss of acres under management at the end of 2002.
Year-to-date costs of $1.5 million are 20% below the comparable level
in 2002 due to the same reduction in acres under management.
Capital expenditures for the first six months of 2003 and 2002
were $716,000 and $1.1 million, respectively. The Partnership's debt
to total capitalization ratio was 45% as of June 30, 2003, down
from 48% at the end of the second quarter of 2002 and 47% from
the end of 2002.
About Pope Resources
Pope Resources, a publicly traded limited partnership, and its
subsidiaries Olympic Resource Management and Olympic Property Group,
own or manage nearly 235,000 acres of timberland and development
property in Washington, Oregon, and California. In addition, we
provide forestry consulting and timberland management services to
third-party owners and managers of timberland. The company and its
predecessor companies have owned and managed timberlands and
development properties for more than 150 years. Additional information
on the company can be found at www.orm.com. The contents of our
website are not incorporated into this release or into our filings
with the Securities and Exchange Commission.
This press release contains a number of projections and statements
about our expected financial condition, operating results, business
plans and objectives. These statements reflect management's estimates
based on current goals and its expectations about future developments.
Because these statements describe our goals, objectives, and
anticipated performance, they are inherently uncertain, and some or
all of these statements may not come to pass. Accordingly, they should
not be interpreted as promises of future management actions or
financial performance. Our future actions and actual performance will
vary from current expectations and under various circumstances these
variations may be material and adverse. Some of the factors that may
cause actual operating results and financial condition to fall short
of expectations are set forth in that part of our Annual Report on
Form 10-K entitled "Management's Discussion & Analysis of Financial
Condition and Results of Operation -- Risks and Uncertainties." Other
issues that may have an adverse and material impact on our business,
operating results, and financial condition include those risks and
uncertainties discussed in our other filings with the Securities and
Exchange Commission, as well as factors that affect our ability to
respond adequately to fluctuations in the market prices for our
products; environmental and land use regulations that limit our
ability to harvest timber and develop property; labor, equipment and
transportation costs that affect our net income; and economic
conditions that affect consumer demand for our products and the prices
we receive for them.
The Company considers earnings (net income or loss) before
interest expense, income taxes, depreciation, depletion and
amortization (EBITDDA) to be a relevant and meaningful indicator of
liquidity and earnings performance commonly used by investors,
financial analysts and others in evaluating companies in its industry
and, as such, has provided this information in addition to the
generally accepted accounting principle-based presentation of net
income or loss.
Pope Resources, A Delaware Limited Partnership
Unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in $000's)
Three months Six months ended
ended June 30, June 30,
2003 2002 2003 2002
Revenues $7,480 $9,935 $14,792 $15,772
Costs and expenses:
Cost of sales (3,192) (3,789) (6,126) (5,515)
Operating expenses (2,289) (4,294) (4,668) (7,667)
Operating income 1,999 1,852 3,998 2,590
Interest, net (694) (682) (1,408) (1,424)
Minority interest - (32) - (32)
Income before income taxes 1,305 1,138 2,590 1,134
Income tax benefit/(provision) (9) 425 (3) 441
Net income 1,296 1,563 2,587 1,575
Average units outstanding - Basic
(000's) 4,518 4,518 4,518 4,518
Average units outstanding - Diluted
(000's) 4,519 4,520 4,519 4,520
Basic net income per unit $ 0.29 $ 0.35 $ 0.57 $ 0.35
Diluted net income per unit $ 0.29 $ 0.35 $ 0.57 $ 0.35
CONSOLIDATED BALANCE SHEETS
(all amounts in $000's)
June 30,
2003 2002
Assets:
Cash and short-term investments $7,602 $3,709
Other current assets 2,092 3,062
Roads and timber 49,033 50,900
Properties and equipment 23,543 23,391
Other assets 3,188 3,761
Total 85,458 84,823
Liabilities and partners' capital:
Current liabilities 3,192 4,994
Long-term debt, excluding current
portion 36,057 37,025
Other long-term liabilities 468 554
Total liabilities 39,717 42,573
Partners' capital 45,741 42,250
Total 85,458 84,823
RECONCILIATION BETWEEN NET INCOME AND EBITDDA
(all amounts in $000's)
Three months ended
30-Jun-03 30-Jun-02 31-Mar-03
Net income $1,296 $1,563 $1,291
Added back:
Interest, net 694 682 714
Depletion 811 1,040 843
Depreciation and amortization 162 200 167
Income tax expense 9 - -
Less:
Income tax benefit - (425) (6)
EBITDDA $2,972 $3,060 $3,009
RECONCILIATION BETWEEN CASH FROM OPERATIONS AND EBITDDA
(all amounts in $000's)
Three months ended
30-Jun-03 30-Jun-02 31-Mar-03
Cash from operations $1,960 $4,069 $1,947
Added back:
Change in working capital 328 - 372
Interest 694 682 714
Deferred profit - 14 -
Other - 11 9
Less:
Change in working capital - (1,046) -
Deferred profit (2) - (27)
Income tax benefit - (425) (6)
Other (8) (245) -
EBITDDA $2,972 $3,060 $3,009
SEGMENT INFORMATION
(all amounts in $000's)
Three months Six months ended
ended June 30, June 30,
2003 2002 2003 2002
Revenues:
Fee Timber $6,338 $7,350 $13,113 $11,324
Timberland Management & Consulting
(TM&C) 299 1,922 683 3,542
Real Estate 843 663 996 906
Total 7,480 9,935 14,792 15,772
EBITDDA:
Fee Timber 3,531 4,433 7,561 6,629
TM&C (180) 473 (289) 623
Real Estate 250 (946) (27) (1,099)
General & administrative (629) (900) (1,264) (1,633)
Total 2,972 3,060 5,981 4,520
Depreciation, depletion and
amortization:
Fee Timber 845 1,068 1,719 1,597
TM&C 14 51 34 109
Real Estate 20 14 39 29
General & administrative 94 107 191 227
Total 973 1,240 1,983 1,962
Operating income/(loss):
Fee Timber 2,686 3,365 5,842 5,032
TM&C (194) 422 (323) 514
Real Estate 230 (960) (66) (1,128)
General & administrative (723) (975) (1,455) (1,828)
Total 1,999 1,852 3,998 2,590
SELECTED STATISTICS
Three months ended Six months ended
30-Jun-03 30-Jun-02 30-Jun-03 30-Jun-02
Log sale volumes (thousand
board feet):
Export conifer 1,203 1,406 2,633 2,672
Domestic conifer 8,939 10,960 18,226 15,442
Pulp conifer 2,069 1,904 3,748 2,845
Hardwoods 464 329 1,234 778
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Total 12,675 14,599 25,841 21,737
========= ========= ========= =========
Average price realizations
(per thousand board feet):
Export conifer $564 $531 $579 $541
Domestic conifer 532 544 528 547
Pulp conifer 200 164 216 167
Hardwoods 563 459 543 467
Overall 482 491 489 494
Owned acres 112,200 112,200 112,200 112,200
Acres under management 123,597 455,553 123,597 455,553
Capital expenditures ($000's) 303 729 716 1,142
Depletion ($000's) 811 1,040 1,654 1,546
Depreciation ($000's) 162 200 329 416
Debt to total capitalization 45% 48% 45% 48%
QUARTER TO QUARTER COMPARISONS
(Amounts in $000's except per unit data)
Q2 2003 vs. Q2 Q2 2003 vs. Q1
2002 2003
Total Per Unit Total Per Unit
Net income:
2nd Quarter 2003 1,296 0.29 1,296 0.29
1st Quarter 2003 1,291 0.29
2nd Quarter 2002 1,563 0.35
Variance (267) (0.06) 5 0.00
Detail of earnings variance:
Fee Timber
Log price realizations (A) (131) (0.03) (171) (0.04)
Log volumes (B) (763) (0.17) (322) (0.07)
Timberland sale income 40 0.01 40 0.01
Depletion 229 0.05 32 0.01
Other Fee Timber (54) (0.01) (49) (0.01)
Timberland Management & Consulting
Management fee changes (953) (0.21) (5) (0.00)
Other Timberland Mgmnt & Consulting 337 0.07 (60) (0.01)
Real Estate
Environmental remediation reserve 730 0.16
Operating results from sold RE op's 112 0.02
Other Real Estate 348 0.08 526 0.11
General & administrative costs 252 0.06 9 0.00
Interest expense 41 0.01 22 0.00
Other (taxes, minority int., interest
inc.) (455) (0.10) (17) (0.00)
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Total change in earnings (267) (0.06) 5 0.00
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(A) Price variance allocated based on changes in price using the
higher period volume.
(B) Volume variance allocated based on change in sales volume and the
average log sales price for higher margin less variance in log
production costs.
CONTACT: Pope Resources
Tom Ringo, 360-697-6626
Fax: 360-697-1156