Pope Resources (Nasdaq:POPEZ) reported net income of $5.3 million,
or $1.11 per diluted ownership unit, on revenues of $16.1 million
for the first quarter ended March 31, 2006. This compares to net
income of $4.6 million, or 97 cents per diluted ownership unit, on
revenues of $16.7 million for the comparable period in 2005.
Earnings before interest, taxes, depreciation, depletion, and
amortization (EBITDDA) were $8.8 million for the current quarter
versus $9.6 million for the comparable period in 2005. "We enjoyed
strong bottom-line results for the first quarter of 2006,
reflecting a tight market for logs and disposition fees generated
from our timberland management client," said David L. Nunes,
President and CEO. Operating income generated by our Fee Timber
segment increased to $6.2 million from $5.0 million in 2005, due to
a 5% increase in average realized log prices and a decrease in
depletion expense. Harvest volume for the first quarter of 2006 was
22 million board feet (MMBF) compared to 23 MMBF for the comparable
quarter in 2005, consistent with our lower planned 2006 annual
harvest of 58 MMBF compared to 2005's total of 74 MMBF. The impact
from these lower harvest volumes was offset by the higher log
prices, which improved from $580 per thousand board feet (MBF) in
2005 to $608/MBF in 2006. As with other years in which snow limited
access to many of our competitors' lands during the winter, we took
advantage of our year-round road system on the Hood Canal tree farm
and chose to front-load our annual harvest volume to capture
favorable log pricing. First quarter harvest volume represents 38%
of our total planned harvest for 2006. The decrease in current
quarter depletion expense figured prominently in the improved
operating income results for the Fee Timber segment, driven by
lower harvest volume coming from a 2004 timberland acquisition,
which had a separate depletion cost pool that results in a high
per-unit depletion expense when this timber is harvested. Operating
results in 2006 contained a lower proportion of harvest volume from
these high-depletion rate lands than was the case in 2005. Out of a
planned 58 MMBF harvest for 2006, we expect approximately 7 MMBF of
this total to come from the separate depletion pool. Our Timberland
Management & Consulting segment posted operating income of $1.3
million in the current quarter compared to $842,000 in first
quarter 2005, resulting largely from nonrecurring disposition fees
that will also translate to reduced management fee revenue for
future quarters. Based on $1 million of lower property sales
revenues in the current quarter, our Real Estate segment generated
an operating loss of $339,000 compared to operating income of
$635,000 in 2005. We are currently expecting several Real Estate
closings in 2006, including the first sales from both our Gig
Harbor and Bremerton projects, which are anticipated to increase
Real Estate's operating income for the year above the prior year's
results. About Pope Resources Pope Resources, a publicly traded
limited partnership, and its subsidiaries Olympic Resource
Management and Olympic Property Group, own or manage nearly 410,000
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.poperesources.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 to accurately 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 OPERATING
DATA (all amounts in $000's, except per unit amounts) Three months
ended March 31, 2006 2005 -------- -------- Revenues $ 16,083 $
16,656 Costs and expenses: Cost of sales (6,425) (7,804) Operating
expenses (3,478) (3,181) Interest, net (309) (717) Cascade
investment income 5 -------- -------- Total expenses (10,207)
(11,702) Income before income taxes and minority interest 5,876
4,954 Income tax expense (445) (247) -------- -------- Income
before minority interest 5,431 4,707 Minority interest (133) (101)
-------- -------- Net income $ 5,298 $ 4,606 ======== ========
Weighted average units outstanding -- Basic (000's) 4,635 4,561
Weighted average units outstanding -- Diluted (000's) 4,754 4,730
Basic net income per unit $ 1.14 $ 1.01 Diluted net income per unit
$ 1.11 $ 0.97 CONSOLIDATED BALANCE SHEET DATA (all amounts in
$000's) March 31, 2006 2005 -------- -------- Assets: Cash and
short-term investments $ 18,682 $ 4,472 Other current assets 7,232
3,802 Roads and timber 50,721 61,023 Properties and equipment
29,206 26,604 Other assets 600 1,112 -------- -------- Total
$106,441 $ 97,013 ======== ======== Liabilities and partners'
capital: Current liabilities $ 4,675 $ 4,946 Long-term debt,
excluding current portion 30,741 32,504 Other long-term liabilities
193 211 -------- -------- Total liabilities 35,609 37,661 Partners'
capital 70,832 59,352 -------- -------- Total $106,441 $ 97,013
======== ======== RECONCILIATION BETWEEN NET INCOME AND EBITDDA
(all amounts in $000's) Three months ended 31-Mar-06 31-Mar-05
31-Dec-05 --------- --------- --------- Net income $ 5,298 $ 4,606
$ 872 Added back: Interest, net 309 717 539 Depletion 2,573 3,843
922 Depreciation and amortization 184 152 159 Income tax expense
445 247 435 -------- -------- -------- EBITDDA $ 8,809 $ 9,565 $
2,927 ======== ======== ======== RECONCILIATION BETWEEN CASH FROM
OPERATIONS AND EBITDDA (all amounts in $000's) Three months ended
31-Mar-06 31-Mar-05 31-Dec-05 --------- --------- --------- Cash
from operations $ 4,697 $ 6,893 $ 6,656 Added back: Change in
working capital 3,768 1,994 - Interest 309 717 539 Income tax
expense 445 247 435 Less: Change in working capital - - (4,456)
Deferred profit (275) (152) (81) Cost of land sold (13) (134) (90)
Unit compensation (122) - (76) -------- -------- -------- EBITDDA $
8,809 $ 9,565 $ 2,927 ======== ======== ======== SEGMENT
INFORMATION (all amounts in $000's) Three months ended 31-Mar-06
31-Mar-05 31-Dec-05 --------- --------- --------- Revenues: Fee
Timber $ 13,724 $ 13,663 $ 5,194 Timberland Management &
Consulting (TM&C) 2,024 1,614 2,641 Real Estate 335 1,379 1,072
-------- -------- -------- Total 16,083 16,656 8,907 EBITDDA: Fee
Timber 8,876 8,911 2,544 TM&C 1,307 863 1,508 Real Estate (305)
671 (10) General & administrative (1,069) (880) (1,115)
-------- -------- -------- Total 8,809 9,565 2,927 Depreciation,
depletion and amortization: Fee Timber 2,644 3,869 950 TM&C 16
21 23 Real Estate 34 36 43 General & administrative 63 69 65
-------- -------- -------- Total 2,757 3,995 1,081 Operating income
(loss): Fee Timber 6,232 5,042 1,594 TM&C 1,291 842 1,485 Real
Estate (339) 635 (53) General & administrative (1,004) (848)
(1,134) -------- -------- -------- Total $ 6,180 $ 5,671 $ 1,892
======== ======== ======== SELECTED STATISTICS Three months ended
31-Mar-06 31-Mar-05 31-Dec-05 --------- --------- --------- Log
sale volumes (thousand board feet): Export conifer 347 2,756 952
Domestic conifer 18,449 16,103 5,373 Pulp conifer 2,675 2,653 1,338
Hardwoods 562 1,488 677 -------- -------- -------- Total 22,033
23,000 8,340 ======== ======== ======== Three months ended
31-Mar-06 31-Mar-05 31-Dec-05 --------- --------- --------- Average
price realizations (per thousand board feet): Export conifer $ 716
$ 661 $ 641 Domestic conifer 658 590 620 Pulp conifer 251 219 223
Hardwoods 598 627 561 Overall 608 580 554 Owned timber acres
114,513 115,103 117,000 Acres under management 291,925 527,316
439,000 Capital expenditures ($000's) 948 4,132 Depletion ($000's)
2,573 3,843 922 Depreciation and amortization ($000's) 184 152 159
Debt to total capitalization 31% 36% 34% QUARTER TO QUARTER
COMPARISONS (Amounts in $000's) Q1 2006 vs. Q1 2006 vs. Q1 2005 Q4
2005 Total Total --------- --------- Net income: 1st Quarter 2006 $
5,298 $ 5,298 4th Quarter 2005 872 1st Quarter 2005 4,606 --------
-------- Variance $ 692 $ 4,426 ======== ======== Detail of
earnings variance: Fee Timber: Log price realizations (A) $ 617 $
1,190 Log volumes (B) (561) 7,586 Production costs (148) (2,191)
Depletion 1,270 (1,651) Other Fee Timber 11 (296) Timberland
Management & Consulting: Management fee changes (738) (357)
Disposition fees 1,343 (45) Other Timberland Mgmnt & Consulting
(156) 208 Real Estate: Land sales (808) (560) Other (166) 273
General & administrative costs (156) 130 Interest expense 208
196 Other (taxes, minority int., interest inc.) (24) (57) --------
-------- Total change in net income $ 692 $ 4,426 ======== ========
(A) Price variance calculated by applying the change in price to
current period volume. (B) Volume variance calculated by applying
the change in sales volume to the average log sales price for the
prior period. *T
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