Pope Resources Reports Third Quarter Earnings of $8.3 Million

  
    
  
  
    
      Pope Resources (Nasdaq:POPEZ) reported net income of $8.3 million, or 
      $1.74 per diluted ownership unit, on revenues of $18.0 million for the 
      third quarter ended September 30, 2006. This compares to net income of 
      $4.1 million, or 87 cents per diluted ownership unit, on revenues of 
      $15.3 million, for the same period in 2005.
    
    
      Net income for the nine months ended September 30, 2006 totaled $17.1 
      million, or $3.60 per diluted ownership unit, on revenues of $49.7 
      million. Net income for the corresponding period in 2005 totaled $12.8 
      million, or $2.70 per diluted ownership unit, on revenues of $48.1 
      million.
    
    
      Earnings before interest, income tax, depreciation, depletion, and 
      amortization (EBITDDA) for the quarter ended September 30, 2006 was $9.9 
      million, compared to $7.6 million for the third quarter of 2005. For the 
      nine months ended September 30, 2006, EBITDDA was $24.7 million, 
      compared to $25.5 million for year-to-date 2005 results.
    
    
      “Operating results for the third quarter, 
      which represent the strongest quarter in the partnership’s 
      history, were dominated by our Real Estate segment’s 
      sale of a 17-acre commercial tract located in our Harbor Hill project in 
      Gig Harbor, Washington to Costco Wholesale Corporation,” 
      said David L. Nunes, President and CEO. “This 
      income reflects the culmination of years of work and investment to 
      realize value from former timberlands now located in the path of 
      development. While we expect continued value realization from these 
      types of sales from time to time in the future, both the timing and the 
      amount of revenue and corresponding operating income from our Real 
      Estate segment depend on a variety of factors beyond our control and 
      these amounts are, as such, far more variable than those of the 
      Partnership’s Fee Timber operations.”
    
    
      Harvest volumes for each of the last two years (2004 and 2005) were 
      higher than our long-term harvest plan as a result of harvest activities 
      stemming from two timberland acquisitions in 2004. Residual volume from 
      these 2004 acquisitions also influenced the harvest levels for 2006, but 
      at a reduced level compared to 2004 and 2005. Our Fee Timber segment 
      generated $3.6 million of operating income in the third quarter, a 
      decrease of 25% from the $4.8 million in the third quarter of last year. 
      This decline in operating income reflects both the aforementioned 
      reduction from 2005 to 2006 in annual harvest volume and the fact that 
      we produced a lower proportional harvest of 12 MMBF, or 21% of the 
      planned annual harvest volume, in the third quarter of 2006 as compared 
      to 21 MMBF, or 28% of the planned annual harvest in the corresponding 
      quarter in 2005. The reduced harvest volume was partially offset by both 
      higher log price realizations and lower per-unit depletion expense. 
      During the quarter, log prices were up $43 per thousand board feet 
      (MBF), or 7%, compared to last year.
    
    
      On a year-to-date basis, Fee Timber operating income fell to $13.8 
      million in 2006 from $14.7 million in 2005, representing a decrease of 
      6%. This decline was a result of harvest volumes that decreased 23% from 
      66 MMBF in 2005 to 51 MMBF in 2006, offset partially by log prices that 
      increased 5%, or $31 per MBF, and lower per-unit depletion expense. 
      Fourth quarter 2006 results for the Fee Timber segment will be modest as 
      we have harvested over 90% of our planned annual harvest volume through 
      the first three quarters.
    
    
      Largely as a result of the aforementioned Costco sale, the Real Estate 
      segment generated $5.7 million of operating income in the third quarter 
      of 2006 versus $496,000 in the prior year’s 
      third quarter. Remaining property in the Harbor Hill project includes an 
      additional 64 acres of property zoned for commercial and business park 
      use that we are currently marketing for sale, and nearly 220 additional 
      acres that are zoned for residential use. Again, based largely on the 
      strength of the Harbor Hill project in Gig Harbor, year-to-date 
      operating income for the Real Estate segment increased to $5.9 million 
      from $1.3 million in 2005.
    
    
      Our Timberland Management & Consulting segment posted year-to-date 
      operating income of $1.4 million in 2006 compared to $2.1 million for 
      the first nine months of 2005. Operating results for the quarter 
      declined to $33,000 from $393,000 in the prior year. The decline in 
      operating income from this segment is the result of fewer assets under 
      management in 2006 offset only in part by earned property disposition 
      fees.
    
    
      The financial and statistical schedules attached to this earnings 
      release provide selected 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 over 400,000 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.
    
    
      A Note About Forward Looking Information
    
    
      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 assurances of 
      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; 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 Item 1A 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.
    
    
      About Our Financial Measures
    
    
      Management 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 and cash 
      from operations. With different companies 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. EBITDDA is 
      not a Generally Accepted Accounting Principles measure and does not 
      include depreciation and depletion expense. This may be deemed a 
      limitation to using EBITDDA for evaluating operating performance.
    
    
      
        
          Pope Resources, A Delaware Limited Partnership
        
      
      
        
          Unaudited
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          CONSOLIDATED STATEMENTS OF OPERATIONS
        
      
      
        
        
        
        
        
        
        
        
        
          (all amounts in $000's, except per unit amounts)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
          Three months ended September 30,
        
        
        
        
          Nine months ended September 30,
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revenues
        
        
        
        
        
        
          $
        
        
          18,024 
        
        
        
        
          $
        
        
          15,312 
        
        
        
        
          $
        
        
          49,717 
        
        
        
        
          $
        
        
          48,099 
        
      
      
        
          Costs and expenses:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Cost of sales
        
        
        
        
        
        
        
        
          (6,198)
        
        
        
        
        
        
          (6,631)
        
        
        
        
        
        
          (21,037)
        
        
        
        
        
        
          (21,845)
        
      
      
        
        
        
          Operating expenses
        
        
        
        
        
        
           
        
        
          
            (3,423)
          
        
        
        
        
           
        
        
          (3,860)
        
        
        
        
           
        
        
          (10,357)
        
        
        
        
           
        
        
          (10,667)
        
      
      
        
          Operating income
        
        
        
        
        
        
        
        
          
            8,403 
          
        
        
        
        
        
        
          4,821 
        
        
        
        
        
        
          18,323 
        
        
        
        
        
        
          15,587 
        
      
      
        
        
        
          Interest, net
        
        
        
        
        
        
           
        
        
          (115)
        
        
        
        
           
        
        
          (586)
        
        
        
        
           
        
        
          (641)
        
        
        
        
           
        
        
          (1,938)
        
      
      
        
          Income before income taxes and minority interest
        
        
        
        
        
        
          
            8,288 
          
        
        
        
        
        
        
          4,235 
        
        
        
        
        
        
          17,682 
        
        
        
        
        
        
          13,649 
        
      
      
        
          Income tax provision
        
        
        
        
        
        
           
        
        
          (16)
        
        
        
        
           
        
        
          (52)
        
        
        
        
           
        
        
          (453)
        
        
        
        
           
        
        
          (562)
        
      
      
        
          Income before minority interest
        
        
        
        
        
        
          
            8,272 
          
        
        
        
        
        
        
          4,183 
        
        
        
        
        
        
          17,229 
        
        
        
        
        
        
          13,087 
        
      
      
        
        
        
          Minority interest
        
        
        
        
        
        
           
        
        
          7 
        
        
        
        
           
        
        
          (46)
        
        
        
        
           
        
        
          (112)
        
        
        
        
           
        
        
          (275)
        
      
      
        
          Net income
        
        
        
        
        
        
          $
        
        
          
            8,279 
          
        
        
        
        
          $
        
        
          4,137 
        
        
        
        
          $
        
        
          17,117 
        
        
        
        
          $
        
        
          12,812 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Average units outstanding - Basic
        
        
        
        
           
        
        
          4,645 
        
        
        
        
           
        
        
          4,621 
        
        
        
        
           
        
        
          4,641 
        
        
        
        
           
        
        
          4,593 
        
      
      
        
          Average units outstanding - Diluted
        
        
        
        
           
        
        
          4,769 
        
        
        
        
           
        
        
          4,773 
        
        
        
        
           
        
        
          4,760 
        
        
        
        
           
        
        
          4,742 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Basic net income per unit
        
        
        
        
        
        
          $
        
        
          1.78 
        
        
        
        
          $
        
        
          0.90 
        
        
        
        
          $
        
        
          3.69 
        
        
        
        
          $
        
        
          2.79 
        
      
      
        
          Diluted net income per unit
        
        
        
        
        
        
          $
        
        
          1.74 
        
        
        
        
          $
        
        
          0.87 
        
        
        
        
          $
        
        
          3.60 
        
        
        
        
          $
        
        
          2.70 
        
      
    
    
    
    
      
        
        
        
        
        
        
        
          CONSOLIDATED BALANCE SHEETS
        
      
      
        
        
        
        
        
        
        
          (all amounts in $000's)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          September 30,
        
      
      
        
        
        
        
        
        
        
        
        
           
        
        
          2006 
        
        
        
        
           
        
        
          2005 
        
      
      
        
          Assets:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Cash
        
        
        
        
        
        
          $
        
        
          3,663 
        
        
        
        
          $
        
        
          3,009 
        
      
      
        
        
        
          Short term investments
        
        
        
        
        
        
        
        
          29,000 
        
        
        
        
        
        
          14,000 
        
      
      
        
        
        
          Other current assets
        
        
        
        
        
        
        
        
          4,758 
        
        
        
        
        
        
          6,772 
        
      
      
        
        
        
          Roads and timber
        
        
        
        
        
        
        
        
          47,467 
        
        
        
        
        
        
          53,779 
        
      
      
        
        
        
          Properties and equipment
        
        
        
        
        
        
          31,386 
        
        
        
        
        
        
          25,735 
        
      
      
        
        
        
          Other assets
        
        
        
        
        
        
           
        
        
          1,308 
        
        
        
        
           
        
        
          877 
        
      
      
        
        
        
          Total
        
        
        
        
        
        
          $
        
        
          117,582 
        
        
        
        
          $
        
        
          104,172 
        
      
      
        
          Liabilities and partners' capital:
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Current liabilities
        
        
        
        
        
        
          $
        
        
          5,885 
        
        
        
        
          $
        
        
          5,045 
        
      
      
        
        
        
          Long-term debt, excluding current portion
        
        
        
        
        
        
          30,866 
        
        
        
        
        
        
          32,308 
        
      
      
        
        
        
          Other long-term liabilities
        
        
        
        
        
        
           
        
        
          324 
        
        
        
        
           
        
        
          211 
        
      
      
        
        
        
          Total liabilities
        
        
        
        
        
        
        
        
          37,075 
        
        
        
        
        
        
          37,564 
        
      
      
        
        
        
          Partners' capital
        
        
        
        
        
        
           
        
        
          80,507 
        
        
        
        
           
        
        
          66,608 
        
      
      
        
        
        
          Total
        
        
        
        
        
        
          $
        
        
          117,582 
        
        
        
        
          $
        
        
          104,172 
        
      
    
    
    
    
      
        
        
        
        
        
          RECONCILIATION BETWEEN NET INCOME AND EBITDDA
        
      
      
        
        
        
        
        
          (all amounts in $000's)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          Three months ended September 30,
        
        
        
        
          Nine months ended September 30,
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
        
        
        
        
          $
        
        
          
            8,279 
          
        
        
        
        
          $
        
        
          4,137 
        
        
        
        
          $
        
        
          17,117 
        
        
        
        
          $
        
        
          12,812 
        
      
      
        
          Added back:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Interest, net
        
        
        
        
        
        
        
        
          115 
        
        
        
        
        
        
          586 
        
        
        
        
        
        
          641 
        
        
        
        
        
        
          1,938 
        
      
      
        
        
        
          Depletion
        
        
        
        
        
        
        
        
          1,278 
        
        
        
        
        
        
          2,623 
        
        
        
        
        
        
          5,970 
        
        
        
        
        
        
          9,689 
        
      
      
        
        
        
          Depreciation and amortization
        
        
        
        
        
        
          175 
        
        
        
        
        
        
          163 
        
        
        
        
        
        
          534 
        
        
        
        
        
        
          482 
        
      
      
        
        
        
          Income tax expense
        
        
        
        
        
        
           
        
        
          16 
        
        
        
        
           
        
        
          52 
        
        
        
        
           
        
        
          453 
        
        
        
        
           
        
        
          562 
        
      
      
        
          EBITDDA
        
        
        
        
        
        
          $
        
        
          
            9,863 
          
        
        
        
        
          $
        
        
          7,561 
        
        
        
        
          $
        
        
          24,715 
        
        
        
        
          $
        
        
          25,483 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          RECONCILIATION BETWEEN CASH FROM OPERATIONS AND EBITDDA
        
      
      
        
        
        
        
        
          (all amounts in $000's)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          Three months ended September 30,
        
        
        
        
          Nine months ended September 30,
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash from operations
        
        
        
        
        
        
          $
        
        
          15,868 
        
        
        
        
          $
        
        
          9,454 
        
        
        
        
          $
        
        
          28,423 
        
        
        
        
          $
        
        
          22,268 
        
      
      
        
          Added back:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Change in working capital
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          1,435 
        
        
        
        
        
        
          1,249 
        
      
      
        
        
        
          Interest
        
        
        
        
        
        
        
        
          115 
        
        
        
        
        
        
          586 
        
        
        
        
        
        
          641 
        
        
        
        
        
        
          1,938 
        
      
      
        
        
        
          Deferred revenue
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          10 
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          695 
        
      
      
        
        
        
          Minority interest
        
        
        
        
        
        
        
        
          7 
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          - 
        
      
      
        
        
        
          
            Deferred taxes
          
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          11 
        
        
        
        
        
        
          - 
        
      
      
        
        
        
          Income tax provision
        
        
        
        
        
        
        
        
          16 
        
        
        
        
        
        
          52 
        
        
        
        
        
        
          453 
        
        
        
        
        
        
          562 
        
      
      
        
          Less:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Change in working capital
        
        
        
        
        
        
        
        
          (4,005)
        
        
        
        
        
        
          (2,217)
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          - 
        
      
      
        
        
        
          Deferred revenue
        
        
        
        
        
        
        
        
          (90)
        
        
        
        
        
        
          (84)
        
        
        
        
        
        
          (1,031)
        
        
        
        
        
        
          - 
        
      
      
        
        
        
          Cost of land sold
        
        
        
        
        
        
        
        
          (1,968)
        
        
        
        
        
        
          (178)
        
        
        
        
        
        
          (4,837)
        
        
        
        
        
        
          (344)
        
      
      
        
        
        
          Deferred taxes
        
        
        
        
        
        
        
        
          
            (7)
          
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          (594)
        
      
      
        
        
        
          Equity based compensation
        
        
        
        
        
        
          (73)
        
        
        
        
        
        
          (14)
        
        
        
        
        
        
          (267)
        
        
        
        
        
        
          (14)
        
      
      
        
        
        
          Minority interest
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
        
          (46)
        
        
        
        
        
        
          (112)
        
        
        
        
        
        
          (275)
        
      
      
        
        
        
          Other
        
        
        
        
        
        
           
        
        
          
            - 
          
        
        
        
        
           
        
        
          (2)
        
        
        
        
           
        
        
          (1)
        
        
        
        
           
        
        
          (2)
        
      
      
        
          EBITDDA
        
        
        
        
        
        
          $
        
        
          
            9,863 
          
        
        
        
        
          $
        
        
          7,561 
        
        
        
        
          $
        
        
          24,715 
        
        
        
        
          $
        
        
          25,483 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          SEGMENT INFORMATION
        
      
      
        
        
        
        
        
        
        
        
        
          (all amounts in $000's)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          Three months ended September 30,
        
        
        
        
          Nine months ended September 30,
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revenues:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Fee Timber
        
        
        
        
        
        
          $
        
        
          8,114 
        
        
        
        
          $
        
        
          12,347 
        
        
        
        
          $
        
        
          32,287 
        
        
        
        
          $
        
        
          39,230 
        
      
      
        
        
        
          Timberland Management & Consulting (TM&C)
        
        
        
        
        
        
          578 
        
        
        
        
        
        
          1,666 
        
        
        
        
        
        
          3,146 
        
        
        
        
        
        
          5,123 
        
      
      
        
        
        
          Real Estate
        
        
        
        
        
        
           
        
        
          9,332 
        
        
        
        
           
        
        
          1,299 
        
        
        
        
           
        
        
          14,284 
        
        
        
        
           
        
        
          3,746 
        
      
      
        
        
        
          Total
        
        
        
        
        
        
        
        
          18,024 
        
        
        
        
        
        
          15,312 
        
        
        
        
        
        
          49,717 
        
        
        
        
        
        
          48,099 
        
      
      
        
          EBITDDA:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Fee Timber
        
        
        
        
        
        
        
        
          4,686 
        
        
        
        
        
        
          7,489 
        
        
        
        
        
        
          19,757 
        
        
        
        
        
        
          24,490 
        
      
      
        
        
        
          TM&C
        
        
        
        
        
        
        
        
          
            58 
          
        
        
        
        
        
        
          373 
        
        
        
        
        
        
          1,308 
        
        
        
        
        
        
          1,854 
        
      
      
        
        
        
          Real Estate
        
        
        
        
        
        
        
        
          5,913 
        
        
        
        
        
        
          457 
        
        
        
        
        
        
          6,237 
        
        
        
        
        
        
          1,458 
        
      
      
        
        
        
          General & administrative
        
        
        
        
        
        
           
        
        
          (794)
        
        
        
        
           
        
        
          (758)
        
        
        
        
           
        
        
          (2,587)
        
        
        
        
           
        
        
          (2,319)
        
      
      
        
        
        
          Total
        
        
        
        
        
        
        
        
          
            9,863 
          
        
        
        
        
        
        
          7,561 
        
        
        
        
        
        
          24,715 
        
        
        
        
        
        
          25,483 
        
      
      
        
          Depreciation, depletion and amortization:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Fee Timber
        
        
        
        
        
        
        
        
          1,123 
        
        
        
        
        
        
          2,735 
        
        
        
        
        
        
          5,948 
        
        
        
        
        
        
          9,764 
        
      
      
        
        
        
          TM&C
        
        
        
        
        
        
        
        
          18 
        
        
        
        
        
        
          26 
        
        
        
        
        
        
          54 
        
        
        
        
        
        
          74 
        
      
      
        
        
        
          Real Estate
        
        
        
        
        
        
        
        
          245 
        
        
        
        
        
        
          (39)
        
        
        
        
        
        
          322 
        
        
        
        
        
        
          135 
        
      
      
        
        
        
          General & administrative
        
        
        
        
        
        
           
        
        
          67 
        
        
        
        
           
        
        
          64 
        
        
        
        
           
        
        
          180 
        
        
        
        
           
        
        
          198 
        
      
      
        
        
        
          Total
        
        
        
        
        
        
        
        
          1,453 
        
        
        
        
        
        
          2,786 
        
        
        
        
        
        
          6,504 
        
        
        
        
        
        
          10,171 
        
      
      
        
          Operating income/(loss):
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Fee Timber
        
        
        
        
        
        
        
        
          3,563 
        
        
        
        
        
        
          4,754 
        
        
        
        
        
        
          13,809 
        
        
        
        
        
        
          14,726 
        
      
      
        
        
        
          TM&C
        
        
        
        
        
        
        
        
          
            33 
          
        
        
        
        
        
        
          393 
        
        
        
        
        
        
          1,366 
        
        
        
        
        
        
          2,055 
        
      
      
        
        
        
          Real Estate
        
        
        
        
        
        
        
        
          5,668 
        
        
        
        
        
        
          496 
        
        
        
        
        
        
          5,915 
        
        
        
        
        
        
          1,323 
        
      
      
        
        
        
          General & administrative
        
        
        
        
        
        
           
        
        
          (861)
        
        
        
        
           
        
        
          (822)
        
        
        
        
           
        
        
          (2,767)
        
        
        
        
           
        
        
          (2,517)
        
      
      
        
        
        
          Total
        
        
        
        
        
        
          $
        
        
          
            8,403 
          
        
        
        
        
          $
        
        
          4,821 
        
        
        
        
          $
        
        
          18,323 
        
        
        
        
          $
        
        
          15,587 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          SELECTED STATISTICS
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          Three months ended
        
        
        
        
          Nine months ended
        
      
      
        
        
        
        
        
        
        
        
        
          30-Sep-06
        
        
        
        
          30-Sep-05
        
        
        
        
          30-Sep-06
        
        
        
        
          30-Sep-05
        
      
      
        
          Log sale volumes (thousand board feet):
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Sawlogs
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Douglas-fir
        
        
        
        
        
        
        
        
          8,626 
        
        
        
        
        
        
          12,921 
        
        
        
        
        
        
          36,908 
        
        
        
        
        
        
          38,797 
        
      
      
        
        
        
          Whitewood
        
        
        
        
        
        
        
        
          483 
        
        
        
        
        
        
          2,309 
        
        
        
        
        
        
          3,628 
        
        
        
        
        
        
          9,837 
        
      
      
        
        
        
          Cedar
        
        
        
        
        
        
        
        
          188 
        
        
        
        
        
        
          1,010 
        
        
        
        
        
        
          774 
        
        
        
        
        
        
          4,218 
        
      
      
        
        
        
          Hardwood
        
        
        
        
        
        
        
        
          1,464 
        
        
        
        
        
        
          1,656 
        
        
        
        
        
        
          3,170 
        
        
        
        
        
        
          4,444 
        
      
      
        
          Pulp
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          All species
        
        
        
        
        
        
           
        
        
          1,386 
        
        
        
        
           
        
        
          2,646 
        
        
        
        
           
        
        
          6,350 
        
        
        
        
           
        
        
          8,609 
        
      
      
        
        
        
          Total
        
        
        
        
        
        
           
        
        
          12,147 
        
        
        
        
           
        
        
          20,542 
        
        
        
        
           
        
        
          50,830 
        
        
        
        
           
        
        
          65,905 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Average price realizations (per thousand board feet):
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Sawlogs
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Douglas-fir
        
        
        
        
        
        
        
        
          662 
        
        
        
        
        
        
          640 
        
        
        
        
        
        
          672 
        
        
        
        
        
        
          643 
        
      
      
        
        
        
          Whitewood
        
        
        
        
        
        
        
        
          
            462 
          
        
        
        
        
        
        
          457 
        
        
        
        
        
        
          446 
        
        
        
        
        
        
          475 
        
      
      
        
        
        
          Cedar
        
        
        
        
        
        
        
        
          1,260 
        
        
        
        
        
        
          948 
        
        
        
        
        
        
          1,058 
        
        
        
        
        
        
          
            944 
          
        
      
      
        
        
        
          Hardwood
        
        
        
        
        
        
        
        
          683 
        
        
        
        
        
        
          643 
        
        
        
        
        
        
          663 
        
        
        
        
        
        
          614 
        
      
      
        
          Pulp
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          All species
        
        
        
        
        
        
        
        
          281 
        
        
        
        
        
        
          210 
        
        
        
        
        
        
          261 
        
        
        
        
        
        
          211 
        
      
      
        
        
        
          Overall
        
        
        
        
        
        
        
        
          623 
        
        
        
        
        
        
          580 
        
        
        
        
        
        
          610 
        
        
        
        
        
        
          579 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Owned timber acres
        
        
        
        
        
        
        
        
          114,196 
        
        
        
        
        
        
          117,585 
        
        
        
        
        
        
          114,196 
        
        
        
        
        
        
          117,585 
        
      
      
        
          Acres under management
        
        
        
        
        
        
        
        
          291,925 
        
        
        
        
        
        
          527,316 
        
        
        
        
        
        
          291,925 
        
        
        
        
        
        
          527,316 
        
      
      
        
          Capital expenditures ($000's)
        
        
        
        
          $
        
        
          4,851 
        
        
        
        
        
        
          932 
        
        
        
        
          $
        
        
          8,999 
        
        
        
        
        
        
          2,624 
        
      
      
        
          Depletion ($000's)
        
        
        
        
        
        
        
        
          1,278 
        
        
        
        
        
        
          2,623 
        
        
        
        
        
        
          5,970 
        
        
        
        
        
        
          9,689 
        
      
      
        
          Depreciation ($000's)
        
        
        
        
        
        
        
        
          175 
        
        
        
        
        
        
          163 
        
        
        
        
        
        
          534 
        
        
        
        
        
        
          482 
        
      
      
        
          Debt to total capitalization
        
        
        
        
        
        
        
        
          29%
        
        
        
        
        
        
          34%
        
        
        
        
        
        
          29%
        
        
        
        
        
        
          34%
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
          QUARTER TO QUARTER COMPARISONS
        
        
        
      
      
        
        
        
        
        
        
        
          (Amounts in $000's except per unit data)
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
          Q3 2006 vs. Q3 2005
        
        
        
        
          Q3 2006 vs. Q2 2006
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          Total
        
        
        
        
        
        
        
        
          Total
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          3rd Quarter 2006
        
        
        
        
        
        
          $
        
        
          
            8,279 
          
        
        
        
        
        
        
        
        
          $
        
        
          8,284 
        
        
        
        
        
      
      
        
        
        
          2nd Quarter 2006
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          3,540 
        
        
        
        
        
      
      
        
        
        
          3rd Quarter 2005
        
        
        
        
        
        
           
        
        
          4,137 
        
        
        
        
        
        
        
        
           
        
        
        
        
        
      
      
        
        
        
          Variance
        
        
        
        
        
        
          $
        
        
          
            4,142 
          
        
        
        
        
        
        
        
        
          $
        
        
          4,744 
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Detail of earnings variance:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Fee Timber
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Log price realizations (A)
        
        
        
        
        
        
          $
        
        
          522 
        
        
        
        
        
        
        
        
          $
        
        
          243 
        
        
        
        
        
      
      
        
        
        
          Log volumes (B)
        
        
        
        
        
        
        
        
          (4,869)
        
        
        
        
        
        
        
        
        
        
          (2,715)
        
        
        
        
        
      
      
        
        
        
          Depletion
        
        
        
        
        
        
        
        
          1,641 
        
        
        
        
        
        
        
        
        
        
          1,061 
        
        
        
        
        
      
      
        
        
        
          Production costs
        
        
        
        
        
        
        
        
          
            1,456 
          
        
        
        
        
        
        
        
        
        
        
          891 
        
        
        
        
        
      
      
        
        
        
          Other Fee Timber
        
        
        
        
        
        
        
        
          54 
        
        
        
        
        
        
        
        
        
        
          69 
        
        
        
        
        
      
      
        
          Timberland Management & Consulting
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Management fee changes
        
        
        
        
        
        
          (672)
        
        
        
        
        
        
        
        
        
        
          1 
        
        
        
        
        
      
      
        
        
        
          Disposition fee changes
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
      
      
        
        
        
          Other Timberland Mgmnt & Consulting
        
        
        
        
        
        
          317 
        
        
        
        
        
        
        
        
        
        
          - 
        
        
        
        
        
      
      
        
          Real Estate
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
          Environmental remediation liability
        
        
        
        
        
        
          (6)
        
        
        
        
        
        
        
        
        
        
          (114)
        
        
        
        
        
      
      
        
        
        
          Land sales
        
        
        
        
        
        
        
        
          5,332 
        
        
        
        
        
        
        
        
        
        
          4,898 
        
        
        
        
        
      
      
        
        
        
          Other Real Estate
        
        
        
        
        
        
        
        
          (154)
        
        
        
        
        
        
        
        
        
        
          298 
        
        
        
        
        
      
      
        
          General & administrative costs
        
        
        
        
        
        
          (39)
        
        
        
        
        
        
        
        
        
        
          41 
        
        
        
        
        
      
      
        
          Interest expense
        
        
        
        
        
        
        
        
          261 
        
        
        
        
        
        
        
        
        
        
          20 
        
        
        
        
        
      
      
        
          Other (taxes, minority int., interest inc.)
        
        
        
        
           
        
        
          299 
        
        
        
        
        
        
        
        
           
        
        
          51 
        
        
        
        
        
      
      
        
          Total change in earnings
        
        
        
        
        
        
          $
        
        
          
            4,142 
          
        
        
        
        
        
        
        
        
          $
        
        
          4,744 
        
        
        
        
        
      
    
    
    
    
      
        
          
            (A)
          
        
        
        
        
          
            Price variance calculated by extending the change in averagerealized 
            price by current period volume.
          
        
      
      
        
          
            (B)
          
        
        
        
        
          
            Volume variance calculated by extending change in sales volume bythe 
            average log sales price for the comparison period.
          
        
      
    
  
Pope Resources (Nasdaq:POPEZ) reported net income of $8.3 million,
or $1.74 per diluted ownership unit, on revenues of $18.0 million for
the third quarter ended September 30, 2006. This compares to net
income of $4.1 million, or 87 cents per diluted ownership unit, on
revenues of $15.3 million, for the same period in 2005.

   Net income for the nine months ended September 30, 2006 totaled
$17.1 million, or $3.60 per diluted ownership unit, on revenues of
$49.7 million. Net income for the corresponding period in 2005 totaled
$12.8 million, or $2.70 per diluted ownership unit, on revenues of
$48.1 million.

   Earnings before interest, income tax, depreciation, depletion, and
amortization (EBITDDA) for the quarter ended September 30, 2006 was
$9.9 million, compared to $7.6 million for the third quarter of 2005.
For the nine months ended September 30, 2006, EBITDDA was $24.7
million, compared to $25.5 million for year-to-date 2005 results.

   "Operating results for the third quarter, which represent the
strongest quarter in the partnership's history, were dominated by our
Real Estate segment's sale of a 17-acre commercial tract located in
our Harbor Hill project in Gig Harbor, Washington to Costco Wholesale
Corporation," said David L. Nunes, President and CEO. "This income
reflects the culmination of years of work and investment to realize
value from former timberlands now located in the path of development.
While we expect continued value realization from these types of sales
from time to time in the future, both the timing and the amount of
revenue and corresponding operating income from our Real Estate
segment depend on a variety of factors beyond our control and these
amounts are, as such, far more variable than those of the
Partnership's Fee Timber operations."

   Harvest volumes for each of the last two years (2004 and 2005)
were higher than our long-term harvest plan as a result of harvest
activities stemming from two timberland acquisitions in 2004. Residual
volume from these 2004 acquisitions also influenced the harvest levels
for 2006, but at a reduced level compared to 2004 and 2005. Our Fee
Timber segment generated $3.6 million of operating income in the third
quarter, a decrease of 25% from the $4.8 million in the third quarter
of last year. This decline in operating income reflects both the
aforementioned reduction from 2005 to 2006 in annual harvest volume
and the fact that we produced a lower proportional harvest of 12 MMBF,
or 21% of the planned annual harvest volume, in the third quarter of
2006 as compared to 21 MMBF, or 28% of the planned annual harvest in
the corresponding quarter in 2005. The reduced harvest volume was
partially offset by both higher log price realizations and lower
per-unit depletion expense. During the quarter, log prices were up $43
per thousand board feet (MBF), or 7%, compared to last year.

   On a year-to-date basis, Fee Timber operating income fell to $13.8
million in 2006 from $14.7 million in 2005, representing a decrease of
6%. This decline was a result of harvest volumes that decreased 23%
from 66 MMBF in 2005 to 51 MMBF in 2006, offset partially by log
prices that increased 5%, or $31 per MBF, and lower per-unit depletion
expense. Fourth quarter 2006 results for the Fee Timber segment will
be modest as we have harvested over 90% of our planned annual harvest
volume through the first three quarters.

   Largely as a result of the aforementioned Costco sale, the Real
Estate segment generated $5.7 million of operating income in the third
quarter of 2006 versus $496,000 in the prior year's third quarter.
Remaining property in the Harbor Hill project includes an additional
64 acres of property zoned for commercial and business park use that
we are currently marketing for sale, and nearly 220 additional acres
that are zoned for residential use. Again, based largely on the
strength of the Harbor Hill project in Gig Harbor, year-to-date
operating income for the Real Estate segment increased to $5.9 million
from $1.3 million in 2005.

   Our Timberland Management & Consulting segment posted year-to-date
operating income of $1.4 million in 2006 compared to $2.1 million for
the first nine months of 2005. Operating results for the quarter
declined to $33,000 from $393,000 in the prior year. The decline in
operating income from this segment is the result of fewer assets under
management in 2006 offset only in part by earned property disposition
fees.

   The financial and statistical schedules attached to this earnings
release provide selected 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 over 400,000 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.

   A Note About Forward Looking Information

   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
assurances of 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; 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
Item 1A 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.

   About Our Financial Measures

   Management 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 and cash
from operations. With different companies 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. EBITDDA is not a Generally Accepted Accounting Principles
measure and does not include depreciation and depletion expense. This
may be deemed a limitation to using EBITDDA for evaluating operating
performance.

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            Pope Resources, A Delaware Limited Partnership
                              Unaudited

                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (all amounts in $000's, except per
                                             unit amounts)

                                Three months ended Nine months ended
                                   September 30,      September 30,
                                   2006     2005     2006      2005

Revenues                         $18,024  $15,312  $ 49,717  $ 48,099
Costs and expenses:
 Cost of sales                    (6,198)  (6,631)  (21,037)  (21,845)
 Operating expenses               (3,423)  (3,860)  (10,357)  (10,667)
                                 -------- -------- --------- ---------
Operating income                   8,403    4,821    18,323    15,587
 Interest, net                      (115)    (586)     (641)   (1,938)
                                 -------- -------- --------- ---------
Income before income taxes and
 minority interest                 8,288    4,235    17,682    13,649
Income tax provision                 (16)     (52)     (453)     (562)
                                 -------- -------- --------- ---------
Income before minority interest    8,272    4,183    17,229    13,087
 Minority interest                     7      (46)     (112)     (275)
                                 -------- -------- --------- ---------
Net income                       $ 8,279  $ 4,137  $ 17,117  $ 12,812
                                 ======== ======== ========= =========

Average units outstanding -
 Basic                             4,645    4,621     4,641     4,593
                                 ======== ======== ========= =========
Average units outstanding -
 Diluted                           4,769    4,773     4,760     4,742
                                 ======== ======== ========= =========

Basic net income per unit        $  1.78  $  0.90  $   3.69  $   2.79
                                 ======== ======== ========= =========
Diluted net income per unit      $  1.74  $  0.87  $   3.60  $   2.70
                                 ======== ======== ========= =========
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                                           CONSOLIDATED BALANCE SHEETS
                                             (all amounts in $000's)

                                                  September 30,
                                                 2006         2005
                                            ------------- ------------
Assets:
 Cash                                         $    3,663   $    3,009
 Short term investments                           29,000       14,000
 Other current assets                              4,758        6,772
 Roads and timber                                 47,467       53,779
 Properties and equipment                         31,386       25,735
 Other assets                                      1,308          877
                                            ------------- ------------
     Total                                    $  117,582   $  104,172
                                            ============= ============
Liabilities and partners' capital:
 Current liabilities                          $    5,885   $    5,045
 Long-term debt, excluding current portion        30,866       32,308
 Other long-term liabilities                         324          211
                                            ------------- ------------
 Total liabilities                                37,075       37,564
 Partners' capital                                80,507       66,608
                                            ------------- ------------
     Total                                    $  117,582   $  104,172
                                            ============= ============
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                              RECONCILIATION BETWEEN NET INCOME AND
                                              EBITDDA
                                      (all amounts in $000's)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2006      2005      2006      2005

Net income                     $  8,279  $  4,137  $ 17,117  $ 12,812
Added back:
 Interest, net                      115       586       641     1,938
 Depletion                        1,278     2,623     5,970     9,689
 Depreciation and amortization      175       163       534       482
 Income tax expense                  16        52       453       562
                               --------- --------- --------- ---------
EBITDDA                        $  9,863  $  7,561  $ 24,715  $ 25,483
                               ========= ========= ========= =========


                                 RECONCILIATION BETWEEN CASH FROM
                                       OPERATIONS AND EBITDDA
                                      (all amounts in $000's)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2006      2005      2006      2005

Cash from operations           $ 15,868  $  9,454  $ 28,423  $ 22,268
Added back:
 Change in working capital            -         -     1,435     1,249
 Interest                           115       586       641     1,938
 Deferred revenue                     -        10         -       695
 Minority interest                    7         -         -         -
 Deferred taxes                       -         -        11         -
 Income tax provision                16        52       453       562
Less:
 Change in working capital       (4,005)   (2,217)        -         -
 Deferred revenue                   (90)      (84)   (1,031)        -
 Cost of land sold               (1,968)     (178)   (4,837)     (344)
 Deferred taxes                      (7)        -         -      (594)
 Equity based compensation          (73)      (14)     (267)      (14)
 Minority interest                    -       (46)     (112)     (275)
 Other                                -        (2)       (1)       (2)
                               --------- --------- --------- ---------
EBITDDA                        $  9,863  $  7,561  $ 24,715  $ 25,483
                               ========= ========= ========= =========

                                         SEGMENT INFORMATION
                                       (all amounts in $000's)

                               Three months ended  Nine months ended
                                  September 30,       September 30,
                                 2006      2005      2006      2005

Revenues:
 Fee Timber                    $  8,114  $ 12,347  $ 32,287  $ 39,230
 Timberland Management &
  Consulting (TM&C)                 578     1,666     3,146     5,123
 Real Estate                      9,332     1,299    14,284     3,746
                               --------- --------- --------- ---------
     Total                       18,024    15,312    49,717    48,099
EBITDDA:
 Fee Timber                       4,686     7,489    19,757    24,490
 TM&C                                58       373     1,308     1,854
 Real Estate                      5,913       457     6,237     1,458
 General & administrative          (794)     (758)   (2,587)   (2,319)
                               --------- --------- --------- ---------
     Total                        9,863     7,561    24,715    25,483
Depreciation, depletion and
 amortization:
 Fee Timber                       1,123     2,735     5,948     9,764
 TM&C                                18        26        54        74
 Real Estate                        245       (39)      322       135
 General & administrative            67        64       180       198
                               --------- --------- --------- ---------
     Total                        1,453     2,786     6,504    10,171
Operating income/(loss):
 Fee Timber                       3,563     4,754    13,809    14,726
 TM&C                                33       393     1,366     2,055
 Real Estate                      5,668       496     5,915     1,323
 General & administrative          (861)     (822)   (2,767)   (2,517)
                               --------- --------- --------- ---------
     Total                     $  8,403  $  4,821  $ 18,323  $ 15,587
                               ========= ========= ========= =========


                                         SELECTED STATISTICS

                               Three months ended   Nine months ended
                               30-Sep-06 30-Sep-05 30-Sep-06 30-Sep-05
Log sale volumes (thousand
 board feet):
 Sawlogs
 Douglas-fir                      8,626    12,921    36,908    38,797
 Whitewood                          483     2,309     3,628     9,837
 Cedar                              188     1,010       774     4,218
 Hardwood                         1,464     1,656     3,170     4,444
 Pulp
 All species                      1,386     2,646     6,350     8,609
                               --------- --------- --------- ---------
 Total                           12,147    20,542    50,830    65,905
                               ========= ========= ========= =========

Average price realizations (per
 thousand board feet):
 Sawlogs
 Douglas-fir                        662       640       672       643
 Whitewood                          462       457       446       475
 Cedar                            1,260       948     1,058       944
 Hardwood                           683       643       663       614
 Pulp
 All species                        281       210       261       211
 Overall                            623       580       610       579

Owned timber acres              114,196   117,585   114,196   117,585
Acres under management          291,925   527,316   291,925   527,316
Capital expenditures ($000's)  $  4,851       932  $  8,999     2,624
Depletion ($000's)                1,278     2,623     5,970     9,689
Depreciation ($000's)               175       163       534       482
Debt to total capitalization         29%       34%       29%       34%


                              QUARTER TO QUARTER COMPARISONS
                              (Amounts in $000's except per
                                         unit data)

                              Q3 2006 vs.         Q3 2006 vs.
                                Q3 2005             Q2 2006

                                 Total               Total

Net income:
 3rd Quarter 2006              $  8,279            $  8,284
 2nd Quarter 2006                                     3,540
 3rd Quarter 2005                 4,137
                               ---------           ---------
    Variance                   $  4,142            $  4,744

Detail of earnings variance:
Fee Timber
 Log price realizations (A)    $    522            $    243
 Log volumes (B)                 (4,869)             (2,715)
 Depletion                        1,641               1,061
 Production costs                 1,456                 891
 Other Fee Timber                    54                  69
Timberland Management &
 Consulting
 Management fee changes            (672)                  1
 Disposition fee changes              -                   -
 Other Timberland Mgmnt &
  Consulting                        317                   -
Real Estate
 Environmental remediation
  liability                          (6)               (114)
 Land sales                       5,332               4,898
 Other Real Estate                 (154)                298
General & administrative costs      (39)                 41
Interest expense                    261                  20
Other (taxes, minority int.,
 interest inc.)                     299                  51
                               ---------           ---------
Total change in earnings       $  4,142            $  4,744
                               =========           =========
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(A) Price variance calculated by extending the change in average
    realized price by current period volume.
(B) Volume variance calculated by extending change in sales volume by
    the average log sales price for the comparison period.
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