Pope Resources (Nasdaq:POPEZ) reported earnings of $0.9 million or
18 cents per diluted ownership unit, on revenues of $8.9 million
for the quarter ended December 31, 2005. This compares to earnings
of $0.8 million or 18 cents per diluted ownership unit, on revenues
of $8.0 million for the quarter ended December 31, 2004. Net income
for the twelve months ended December 31, 2005 totaled $13.7
million, or $2.88 per diluted ownership unit, on revenues of $57.0
million. For the corresponding period in 2004, net income totaled
$10.2 million, or $2.22 per diluted ownership unit, on revenues of
$39.6 million. Earnings before interest, income tax, depreciation,
depletion, and amortization (EBITDDA) for the quarter ended
December 31, 2005 were $2.9 million, compared to $3.1 million for
the fourth quarter of 2004. For the twelve months ended December
31, 2005, EBITDDA was $28.4 million, compared to $18.9 million in
2004. "With a solid foundation for growth laid down over the past
few years, we posted our strongest results in over a decade in
2005," said David L. Nunes, President and CEO. "Three primary
drivers contributed to this breakout year: continued favorable
market conditions in our core log markets, a significant new
timberland management client, and robust markets for rural
residential real estate." In the fourth quarter of 2005, our Fee
Timber segment experienced a 2% increase in average log prices from
the corresponding quarter in 2004, while log volumes decreased from
9 million board feet (MMBF) in 2004 to 8 MMBF in 2005. Fee Timber
operating income for both the fourth quarter of 2005 and 2004 was
$1.6 million. On a year-to-date basis, average realized log prices
increased 9%, rising from $529 per thousand board feet (MBF) in
2004 to $576 per MBF in 2005. Total harvest volume increased to 74
MMBF in 2005 from 60 MMBF in 2004. Fee Timber segment operating
income increased 8%, from $15.1 million in 2004 to $16.3 million in
2005. While the increased harvest level in 2005 resulted in
substantially higher log revenues, it did not translate to a
corresponding increase in operating income due to the use of a
separate depletion pool on 17 MMBF of timber harvested in 2005 from
a late-2004 timberland purchase. The separate depletion pool was
used to account for timber harvested from this acquired property
because it was stocked primarily with merchantable timber. While
the harvest of this 17 MMBF did not generate significant
incremental earnings, it did contribute to significantly higher
cash flow, allowing the Partnership to recover much of the purchase
price of the property while leaving an incremental 1,300 acres of
prime timberland. On the strength of a new management contract,
results for our Timberland Management & Consulting segment
improved substantially, with operating income of $3.5 million in
2005 compared to a loss of $0.6 million for 2004. Similarly, this
segment reported operating income of $1.5 million for the fourth
quarter of 2005 compared to breakeven results for the fourth
quarter of 2004. This improvement in both quarterly and annual
performance is due to our taking on a significant new client in
January 2005 for whom we have performed timberland management,
forestry consulting, and property disposition services. Our Real
Estate segment also performed well in 2005, posting its second
consecutive profitable year, with operating income of $1.3 million
on revenues of $4.8 million. This compares to operating income of
$1.6 million on revenues of $4.5 million in 2004. The majority of
Real Estate segment sales in 2005 were generated from a new rural
residential land sale program which generated $3.0 million of
revenue from 18 sales totaling 523 acres. In addition, in 2005 we
recognized $0.9 million of revenue from a bulk land sale of 390
acres. This compares to 2004's revenue of $3.5 million from two
large bulk land sales totaling 636 acres. The financial schedules
attached to this earnings release provide detail on individual
segment results and operating statistics. About Pope Resources Pope
Resources, a publicly traded limited partnership, and its
subsidiaries Olympic Resource Management and Olympic Property
Group, own or manage nearly 560,000 acres of timberland and
development property in Washington and Oregon. In addition, we
provide forestry consulting and timberland investment management
services to third-party owners and managers of timberland in
Washington, Oregon, and California. The company and its predecessor
companies have owned and managed timberlands and development
properties for more than 150 years. Additional information on the
company can be found at www.orm.com. The contents of our website
are not incorporated into this release or into our filings with the
Securities and Exchange Commission. This press release contains a
number of projections and statements about our expected financial
condition, operating results, business plans and objectives. These
statements reflect management's estimates based on current goals
and its expectations about future developments. Because these
statements describe our goals, objectives, and anticipated
performance, they are inherently uncertain, and some or all of
these statements may not come to pass. Accordingly, they should not
be interpreted as promises of future management actions or
financial performance. Our future actions and actual performance
will vary from current expectations and under various circumstances
the results of these variations may be material and adverse. Some
of the factors that may cause actual operating results and
financial condition to fall short of expectations include factors
that affect our ability to anticipate and respond adequately to
fluctuations in the market prices for our products; environmental
and land use regulations that limit our ability to harvest timber
and develop property; labor, equipment and transportation costs
that affect our net income; our ability to discover and accurately
to estimate liabilities associated with our properties; and
economic conditions that affect consumer demand for our products
and the prices we receive for them. Other factors are set forth in
that part of our Annual Report on Form 10-K entitled "Risk
Factors." Other issues that may have an adverse and material impact
on our business, operating results, and financial condition include
those risks and uncertainties discussed in our other filings with
the Securities and Exchange Commission. Forward-looking statements
in this release are made only as of the date shown above, and we
cannot undertake to update these statements. Management considers
earnings (net income or loss) before interest expense, income
taxes, depreciation, depletion and amortization (EBITDDA) to be an
important measure of operating profitability, particularly when
comparing results between different timber-owning companies because
there are varying methods of calculating depletion expense under
GAAP. With different issuers employing various calculation
methodologies, disclosure of EBITDDA can make it easier for the
reader to make meaningful comparisons between the operating results
and cash-generating capabilities of different timber companies. -0-
*T Pope Resources, A Delaware Limited Partnership Unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS (all amounts in $000's,
except per unit amounts) Three months ended Twelve months ended
Dec.31, Dec. 31, 2005 2004 2005 2004 Revenues $ 8,907 $ 7,977 $
57,006 $ 39,648 Costs and expenses: Cost of sales (2,751) (3,299)
(24,596) (15,184) Operating expenses (4,264) (3,130) (14,931)
(11,336) --------- --------- ---------- ---------- Opertaing income
1,892 1,548 17,479 13,128 Interest, net (539) (728) (2,477) (2,952)
Minority interest (46) - (321) - --------- --------- ----------
---------- Income before income taxes 1,307 820 14,681 10,176
Income tax provision (435) - (997) - --------- --------- ----------
---------- Net income 872 820 13,684 10,176 ========= =========
========== ========== Average units outstanding - Basic (000's)
4,646 4,522 4,605 4,522 ========= ========= ========== ==========
Average units outstanding - Diluted (000's) 4,780 4,629 4,753 4,594
========= ========= ========== ========== Basic net income per unit
$ 0.19 $ 0.18 $ 2.97 $ 2.25 ========= ========= ==========
========== Diluted net income per unit $ 0.18 $ 0.18 $ 2.88 $ 2.22
========= ========= ========== ========== CONSOLIDATED BALANCE
SHEETS (all amounts in $000's) Dec. 31, 2005 2004 Assets: Cash and
short-term investments $ 18,361 $ 757 Other current assets 5,770
2,073 Roads and timber 53,019 64,485 Properties and equipment
28,543 26,198 Other assets 665 1,355 ------------ ------------
Total 106,358 94,868 ============ ============ Liabilities and
partners' capital: Current liabilities 7,454 5,935 Long-term debt,
excluding current portion 32,281 34,164 Other long-term liabilities
218 236 ------------ ------------ Total liabilities 39,953 40,335
Partners' capital 66,405 54,533 ------------ ------------ Total
106,358 94,868 ============ ============ RECONCILIATION BETWEEN NET
INCOME AND EBITDDA (all amounts in $000's) Three months ended
Twelve months ended 31-Dec-05 31-Dec-04 31-Dec-05 31-Dec-04 Net
income $ 872 $ 820 $ 13,684 $ 10,176 Added back: Interest, net 539
728 2,477 2,952 Income tax provision 435 - 997 - Depletion 922
1,353 10,611 5,092 Depreciation and amortization 159 152 641 660
-------- -------- ---------- ---------- EBITDDA $ 2,927 $ 3,053 $
28,410 $ 18,880 ======== ======== ========== ==========
RECONCILIATION BETWEEN CASH FROM OPERATIONS AND EBITDDA (all
amounts in $000's) Three months ended Twelve months ended 31-Dec-05
31-Dec-04 31-Dec-05 31-Dec-04 Cash from operations $ 6,656 $ 3,595
$ 28,909 $ 17,854 Added back: Interest, net 539 728 2,477 2,952
Deferred profit - - 614 - Income tax expense 435 - 997 - Other - 1
- - Less: Change in working capital (4,456) (827) (4,075) (902)
Unit compensation (76) - (76) - Deferred profit (81) (275) - (815)
Cost of land sold (90) (169) (434) (209) Other - - (2) - --------
-------- ---------- ---------- EBITDDA $ 2,927 $ 3,053 $ 28,410 $
18,880 ======== ======== ========== ========== SEGMENT INFORMATION
(dollar amounts in 000's, except average price realizations) Three
months ended Twelve months ended December 31, December 31, 2005
2004 2005 2004 Revenues: Fee Timber $ 5,194 $ 5,576 $ 44,424 $
33,571 Timberland Management & Consulting (TM&C) 2,641 602
7,764 1,601 Real Estate 1,072 1,799 4,818 4,476 -------- --------
-------- -------- Total $ 8,907 $ 7,977 $ 57,006 $ 39,648 --------
-------- -------- -------- EBITDDA: Fee Timber $ 2,544 $ 2,960 $
27,034 $ 20,319 TM&C 1,508 (10) 3,644 (510) Real Estate (10)
904 1,449 1,719 General & administrative and minority interest
(1,115) (801) (3,717) (2,648) -------- -------- -------- --------
Total $ 2,927 $ 3,053 $ 28,410 $ 18,880 -------- -------- --------
-------- Depreciation, depletion and amortization: Fee Timber $ 950
$ 1,395 $ 10,714 $ 5,193 TM&C 23 22 97 88 Real Estate 43 19 178
133 General & administrative 65 69 263 338 -------- --------
-------- -------- Total $ 1,081 $ 1,505 $ 11,252 $ 5,752 --------
-------- -------- -------- Operating income/(loss): Fee Timber $
1,594 $ 1,565 $ 16,320 $ 15,126 TM&C 1,485 (32) 3,540 (598)
Real Estate (53) 885 1,270 1,586 General & administrative
(1,134) (870) (3,651) (2,986) -------- -------- -------- --------
Total $ 1,892 $ 1,548 $ 17,479 $ 13,128 -------- -------- --------
-------- Log sale volumes (thousand board feet): Export conifer 952
1,153 5,732 8,885 Domestic conifer 5,373 5,414 53,442 38,869 Pulp
conifer 1,338 1,422 9,928 9,648 Hardwoods 677 1,111 5,143 2,914
-------- -------- -------- -------- Total 8,340 9,100 74,245 60,316
======== ======== ======== ======== Average price realizations (per
thousand board feet): Export conifer $ 641 $ 676 $ 660 $ 658
Domestic conifer 620 590 631 571 Pulp conifer 223 209 213 224
Hardwoods 561 617 605 588 Overall 554 544 576 529 Owned acres
117,000 118,000 117,000 118,000 Acres under management 439,000
522,000 439,000 522,000 Capital expenditures $ 4,132 $ 948 $ 6,756
$ 3,260 Depletion 922 1,353 10,611 5,092 Depreciation 159 152 641
660 Debt to total capitalization 34% 40% 34% 40% QUARTER TO QUARTER
COMPARISONS (Amounts in $000's) Q4 2005 vs. Q4 2004 Q4 2005 vs. Q3
2005 Total Total Net income: 4th Quarter 2005 872 872 3rd Quarter
2005 4,137 4th Quarter 2004 820 -------------------
------------------- Variance 52 (3,265) Detail of earnings
variance: Fee Timber Log price realizations (A) 83 (217) Log
volumes (B) (413) (7,077) Log production costs (95) 2,177 Depletion
431 1,701 Other Fee Timber 22 255 Timberland Management &
Consulting Management fee changes 918 724 Consulting fees 18 (413)
Disposition fees 1,388 1,380 Other Timberland Mgmnt &
Consulting (807) (599) Real Estate Development property sales (562)
(280) Environmental remediation (90) 18 Other (285) (286) General
& administrative costs (264) (312) Interest expense 14 (14)
Other (taxes, minority int., interest inc.) (306) (322)
------------------- ------------------- Total change in earnings 52
(3,265) =================== =================== (A) Price variance
calculated based on changes in price using the current period
volume. (B) Volume variance calculated based on change in sales
volume using the average log sales price for the prior period. *T
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