Pope Resources (NASDAQ:POPEZ)
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Pope Resources (Nasdaq:POPEZ) reported earnings of $0.9
million or 18 cents per diluted ownership unit, on revenues of $8.9
million for the quarter ended December 31, 2005. This compares to
earnings of $0.8 million or 18 cents per diluted ownership unit, on
revenues of $8.0 million for the quarter ended December 31, 2004.
Net income for the twelve months ended December 31, 2005 totaled
$13.7 million, or $2.88 per diluted ownership unit, on revenues of
$57.0 million. For the corresponding period in 2004, net income
totaled $10.2 million, or $2.22 per diluted ownership unit, on
revenues of $39.6 million.
Earnings before interest, income tax, depreciation, depletion, and
amortization (EBITDDA) for the quarter ended December 31, 2005 were
$2.9 million, compared to $3.1 million for the fourth quarter of 2004.
For the twelve months ended December 31, 2005, EBITDDA was $28.4
million, compared to $18.9 million in 2004.
"With a solid foundation for growth laid down over the past few
years, we posted our strongest results in over a decade in 2005," said
David L. Nunes, President and CEO. "Three primary drivers contributed
to this breakout year: continued favorable market conditions in our
core log markets, a significant new timberland management client, and
robust markets for rural residential real estate."
In the fourth quarter of 2005, our Fee Timber segment experienced
a 2% increase in average log prices from the corresponding quarter in
2004, while log volumes decreased from 9 million board feet (MMBF) in
2004 to 8 MMBF in 2005. Fee Timber operating income for both the
fourth quarter of 2005 and 2004 was $1.6 million. On a year-to-date
basis, average realized log prices increased 9%, rising from $529 per
thousand board feet (MBF) in 2004 to $576 per MBF in 2005. Total
harvest volume increased to 74 MMBF in 2005 from 60 MMBF in 2004. Fee
Timber segment operating income increased 8%, from $15.1 million in
2004 to $16.3 million in 2005.
While the increased harvest level in 2005 resulted in
substantially higher log revenues, it did not translate to a
corresponding increase in operating income due to the use of a
separate depletion pool on 17 MMBF of timber harvested in 2005 from a
late-2004 timberland purchase. The separate depletion pool was used to
account for timber harvested from this acquired property because it
was stocked primarily with merchantable timber. While the harvest of
this 17 MMBF did not generate significant incremental earnings, it did
contribute to significantly higher cash flow, allowing the Partnership
to recover much of the purchase price of the property while leaving an
incremental 1,300 acres of prime timberland.
On the strength of a new management contract, results for our
Timberland Management & Consulting segment improved substantially,
with operating income of $3.5 million in 2005 compared to a loss of
$0.6 million for 2004. Similarly, this segment reported operating
income of $1.5 million for the fourth quarter of 2005 compared to
breakeven results for the fourth quarter of 2004. This improvement in
both quarterly and annual performance is due to our taking on a
significant new client in January 2005 for whom we have performed
timberland management, forestry consulting, and property disposition
services.
Our Real Estate segment also performed well in 2005, posting its
second consecutive profitable year, with operating income of $1.3
million on revenues of $4.8 million. This compares to operating income
of $1.6 million on revenues of $4.5 million in 2004. The majority of
Real Estate segment sales in 2005 were generated from a new rural
residential land sale program which generated $3.0 million of revenue
from 18 sales totaling 523 acres. In addition, in 2005 we recognized
$0.9 million of revenue from a bulk land sale of 390 acres. This
compares to 2004's revenue of $3.5 million from two large bulk land
sales totaling 636 acres.
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 nearly 560,000 acres of timberland and development
property in Washington and Oregon. In addition, we provide forestry
consulting and timberland investment management services to
third-party owners and managers of timberland in Washington, Oregon,
and California. The 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 the
results of these variations may be material and adverse. Some of the
factors that may cause actual operating results and financial
condition to fall short of expectations include factors that affect
our ability to anticipate and respond adequately to fluctuations in
the market prices for our products; environmental and land use
regulations that limit our ability to harvest timber and develop
property; labor, equipment and transportation costs that affect our
net income; our ability to discover and accurately to estimate
liabilities associated with our properties; and economic conditions
that affect consumer demand for our products and the prices we receive
for them. Other factors are set forth in that part of our Annual
Report on Form 10-K entitled "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.
Management considers earnings (net income or loss) before interest
expense, income taxes, depreciation, depletion and amortization
(EBITDDA) to be an important measure of operating profitability,
particularly when comparing results between different timber-owning
companies because there are varying methods of calculating depletion
expense under GAAP. With different issuers employing various
calculation methodologies, disclosure of EBITDDA can make it easier
for the reader to make meaningful comparisons between the operating
results and cash-generating capabilities of different timber
companies.
-0-
*T
Pope Resources, A Delaware Limited Partnership
Unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in $000's, except per unit amounts)
Three months ended Twelve months ended
Dec.31, Dec. 31,
2005 2004 2005 2004
Revenues $ 8,907 $ 7,977 $ 57,006 $ 39,648
Costs and expenses:
Cost of sales (2,751) (3,299) (24,596) (15,184)
Operating expenses (4,264) (3,130) (14,931) (11,336)
--------- --------- ---------- ----------
Opertaing income 1,892 1,548 17,479 13,128
Interest, net (539) (728) (2,477) (2,952)
Minority interest (46) - (321) -
--------- --------- ---------- ----------
Income before income taxes 1,307 820 14,681 10,176
Income tax provision (435) - (997) -
--------- --------- ---------- ----------
Net income 872 820 13,684 10,176
========= ========= ========== ==========
Average units outstanding -
Basic (000's) 4,646 4,522 4,605 4,522
========= ========= ========== ==========
Average units outstanding -
Diluted (000's) 4,780 4,629 4,753 4,594
========= ========= ========== ==========
Basic net income per unit $ 0.19 $ 0.18 $ 2.97 $ 2.25
========= ========= ========== ==========
Diluted net income per unit $ 0.18 $ 0.18 $ 2.88 $ 2.22
========= ========= ========== ==========
CONSOLIDATED BALANCE SHEETS
(all amounts in $000's)
Dec. 31,
2005 2004
Assets:
Cash and short-term investments $ 18,361 $ 757
Other current assets 5,770 2,073
Roads and timber 53,019 64,485
Properties and equipment 28,543 26,198
Other assets 665 1,355
------------ ------------
Total 106,358 94,868
============ ============
Liabilities and partners' capital:
Current liabilities 7,454 5,935
Long-term debt, excluding current portion 32,281 34,164
Other long-term liabilities 218 236
------------ ------------
Total liabilities 39,953 40,335
Partners' capital 66,405 54,533
------------ ------------
Total 106,358 94,868
============ ============
RECONCILIATION BETWEEN NET INCOME AND EBITDDA
(all amounts in $000's)
Three months ended Twelve months ended
31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04
Net income $ 872 $ 820 $ 13,684 $ 10,176
Added back:
Interest, net 539 728 2,477 2,952
Income tax provision 435 - 997 -
Depletion 922 1,353 10,611 5,092
Depreciation and
amortization 159 152 641 660
-------- -------- ---------- ----------
EBITDDA $ 2,927 $ 3,053 $ 28,410 $ 18,880
======== ======== ========== ==========
RECONCILIATION BETWEEN CASH FROM OPERATIONS AND EBITDDA
(all amounts in $000's)
Three months ended Twelve months ended
31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04
Cash from operations $ 6,656 $ 3,595 $ 28,909 $ 17,854
Added back:
Interest, net 539 728 2,477 2,952
Deferred profit - - 614 -
Income tax expense 435 - 997 -
Other - 1 - -
Less:
Change in working capital (4,456) (827) (4,075) (902)
Unit compensation (76) - (76) -
Deferred profit (81) (275) - (815)
Cost of land sold (90) (169) (434) (209)
Other - - (2) -
-------- -------- ---------- ----------
EBITDDA $ 2,927 $ 3,053 $ 28,410 $ 18,880
======== ======== ========== ==========
SEGMENT INFORMATION
(dollar amounts in 000's, except
average price realizations)
Three months ended Twelve months ended
December 31, December 31,
2005 2004 2005 2004
Revenues:
Fee Timber $ 5,194 $ 5,576 $ 44,424 $ 33,571
Timberland Management &
Consulting (TM&C) 2,641 602 7,764 1,601
Real Estate 1,072 1,799 4,818 4,476
-------- -------- -------- --------
Total $ 8,907 $ 7,977 $ 57,006 $ 39,648
-------- -------- -------- --------
EBITDDA:
Fee Timber $ 2,544 $ 2,960 $ 27,034 $ 20,319
TM&C 1,508 (10) 3,644 (510)
Real Estate (10) 904 1,449 1,719
General & administrative and
minority interest (1,115) (801) (3,717) (2,648)
-------- -------- -------- --------
Total $ 2,927 $ 3,053 $ 28,410 $ 18,880
-------- -------- -------- --------
Depreciation, depletion and
amortization:
Fee Timber $ 950 $ 1,395 $ 10,714 $ 5,193
TM&C 23 22 97 88
Real Estate 43 19 178 133
General & administrative 65 69 263 338
-------- -------- -------- --------
Total $ 1,081 $ 1,505 $ 11,252 $ 5,752
-------- -------- -------- --------
Operating income/(loss):
Fee Timber $ 1,594 $ 1,565 $ 16,320 $ 15,126
TM&C 1,485 (32) 3,540 (598)
Real Estate (53) 885 1,270 1,586
General & administrative (1,134) (870) (3,651) (2,986)
-------- -------- -------- --------
Total $ 1,892 $ 1,548 $ 17,479 $ 13,128
-------- -------- -------- --------
Log sale volumes (thousand
board feet):
Export conifer 952 1,153 5,732 8,885
Domestic conifer 5,373 5,414 53,442 38,869
Pulp conifer 1,338 1,422 9,928 9,648
Hardwoods 677 1,111 5,143 2,914
-------- -------- -------- --------
Total 8,340 9,100 74,245 60,316
======== ======== ======== ========
Average price realizations
(per thousand board feet):
Export conifer $ 641 $ 676 $ 660 $ 658
Domestic conifer 620 590 631 571
Pulp conifer 223 209 213 224
Hardwoods 561 617 605 588
Overall 554 544 576 529
Owned acres 117,000 118,000 117,000 118,000
Acres under management 439,000 522,000 439,000 522,000
Capital expenditures $ 4,132 $ 948 $ 6,756 $ 3,260
Depletion 922 1,353 10,611 5,092
Depreciation 159 152 641 660
Debt to total capitalization 34% 40% 34% 40%
QUARTER TO QUARTER COMPARISONS
(Amounts in $000's)
Q4 2005 vs. Q4 2004 Q4 2005 vs. Q3 2005
Total Total
Net income:
4th Quarter 2005 872 872
3rd Quarter 2005 4,137
4th Quarter 2004 820
------------------- -------------------
Variance 52 (3,265)
Detail of earnings variance:
Fee Timber
Log price realizations (A) 83 (217)
Log volumes (B) (413) (7,077)
Log production costs (95) 2,177
Depletion 431 1,701
Other Fee Timber 22 255
Timberland Management &
Consulting
Management fee changes 918 724
Consulting fees 18 (413)
Disposition fees 1,388 1,380
Other Timberland Mgmnt &
Consulting (807) (599)
Real Estate
Development property sales (562) (280)
Environmental remediation (90) 18
Other (285) (286)
General & administrative costs (264) (312)
Interest expense 14 (14)
Other (taxes, minority int.,
interest inc.) (306) (322)
------------------- -------------------
Total change in earnings 52 (3,265)
=================== ===================
(A) Price variance calculated based on changes in price using the
current period volume.
(B) Volume variance calculated based on change in sales volume
using the average log sales price for the prior period.
*T