Exhibit 99.1
Pope Resources Reports Third Quarter Earnings of $1.4 Million
POULSBO, Wash.--(BUSINESS WIRE)--Oct. 20, 2004--Pope Resources
(Nasdaq:POPEZ) reported net income of $1.4 million, or 30 cents per diluted
ownership unit, on revenues of $8.1 million for the third quarter ended
September 30, 2004. This compares to net income of $941,000, or 21 cents per
diluted ownership unit, on revenues of $6.6 million, for the same period in
2003.
Net income for the nine months ended September 30, 2004 totaled $9.4
million, or $2.04 per diluted ownership unit, on revenues of $31.7 million. Net
income for the corresponding period in 2003 totaled $3.5 million, or 78 cents
per diluted ownership unit, on revenues of $21.4 million.
"We continue to enjoy stronger timber markets in 2004 relative to 2003,
which, when combined with the additional harvest volume from a timberland
acquisition that closed in January 2004, resulted in another strong quarter,"
said David L. Nunes, President and CEO. "Our third quarter average log prices
jumped 13% from the corresponding quarter in 2003 and are also up 10% on a
year-to-date basis as compared to 2003. Combined with year-to-date harvest
volumes that were up 13 million board feet (MMBF), or 35%, from a year ago, we
have more than doubled our first nine months' bottom line compared to last year.
The increase in year-to-date harvest volume from 2003 to 2004 accounts for more
than half of the year-over-year $5.9 million improvement in net income. Most of
this volume lift is attributable to our increase in planned annual harvest from
45 MMBF in 2003 to 58 MMBF in 2004 as a result of the January 2004 timberland
acquisition. The other contributing factor in our stronger year-to-date results
was the $1.9 million Heritage Park real estate sale that closed in the second
quarter of 2004. Since we have harvested 88% of planned annual volume through
the third quarter of 2004, fourth quarter results are expected to be only
modestly profitable."
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 over 117,000 acres
of timberland and development property in Washington. 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; 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 "Management's Discussion & Analysis of Financial
Condition and Results of Operation - Risks and Uncertainties." Other issues that
may have an adverse and material impact on our business, operating results, and
financial condition include those risks and uncertainties discussed in our other
filings with the Securities and Exchange Commission. 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 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. In that context, "depletion" refers to a measure of
the reduction in value of timberland upon the harvest of growing timber from
that land.
Pope Resources, A Delaware Limited Partnership
Unaudited
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in $000's except income
per unit)
Three months ended Nine months ended
Sept.30, Sept. 30,
2004 2003 2004 2003
Revenues $ 8,051 $ 6,565 $ 31,671 $21,357
Costs and expenses:
Cost of sales (3,269) (2,758) (11,885) (8,757)
Operating expenses (2,723) (2,179) (8,206) (6,974)
------- ------- -------- -------
Opertaing income 2,059 1,628 11,580 5,626
Interest, net (698) (687) (2,224) (2,095)
------- ------- -------- -------
Income before income taxes 1,361 941 9,356 3,531
Income tax benefit/(provision) - - - (3)
------- ------- -------- -------
Net income 1,361 941 9,356 3,528
======= ======= ======== =======
Average units outstanding - Basic
(000's) 4,522 4,518 4,520 4,518
Average units outstanding -
Diluted (000's) 4,608 4,524 4,588 4,520
Basic net income per unit $ 0.30 $ 0.21 $ 2.07 $ 0.78
Diluted net income per unit $ 0.30 $ 0.21 $ 2.04 $ 0.78
CONSOLIDATED BALANCE SHEETS
(all amounts in $000's)
Sept. 30,
2004 2003
Assets:
Cash and short-term investments $ 10,089 $ 9,487
Other current assets 2,713 3,238
Roads and timber 53,306 48,405
Properties and equipment 25,768 23,689
Other assets 1,358 1,494
---------- ---------
Total 93,234 86,313
========== =========
Liabilities and partners' capital:
Current liabilities 4,772 3,414
Long-term debt, excluding current
portion 34,164 36,104
Other long-term liabilities 168 429
---------- ---------
Total liabilities 39,104 39,947
Partners' capital 54,130 46,366
---------- ---------
Total 93,234 86,313
========== =========
RECONCILIATION BETWEEN NET INCOME AND
EBITDDA
(all amounts in $000's)
Three months ended
30-Sep-04 30-Sep-03 30-Jun-04
Net income $ 1,361 $ 941 $ 3,997
Added back:
Interest, net 698 687 776
Depletion 975 779 1,294
Depreciation and amortization 165 166 174
Income tax expense - -
Less:
Income tax benefit - - -
--------- -------- -------
EBITDDA $ 3,199 $ 2,573 $ 6,241
========= ======== =======
RECONCILIATION BETWEEN CASH FROM OPERATIONS
AND EBITDDA
(all amounts in $000's)
Three months ended
30-Sep-04 30-Sep-03 30-Jun-04
Cash from operations $ 2,763 $ 2,647 $ 7,272
Added back:
Change in working capital 237 -
Interest 698 687 776
Deferred profit 26 33
Income tax expense - - -
Other 2 -
Less:
Change in working capital (587) (1,834)
Deferred profit (465) - -
Income tax benefit - - -
Cost of land sold (36) (200) -
Other - - (6)
--------- -------- --------
EBITDDA $ 3,199 $ 2,573 $ 6,241
========= ======== ========
SEGMENT INFORMATION
(all amounts in $000's)
Three months ended Nine months ended
Sept.30, Sept. 30,
2004 2003 2004 2003
Revenues:
Fee Timber $ 7,215 $5,994 $27,995 $19,107
Timberland Management &
Consulting (TM&C) 477 353 999 1,036
Real Estate 359 218 2,677 1,214
------- ------ ------- -------
Total $ 8,051 $6,565 $31,671 $21,357
------- ------ ------- -------
EBITDDA:
Fee Timber $ 4,055 $3,398 $17,359 $10,959
TM&C (82) (106) (541) (395)
Real Estate (205) (169) 856 (196)
General & administrative and
minority interest (569) (550) (1,847) (1,814)
------- ------ ------- -------
Total $ 3,199 $2,573 $15,827 $ 8,554
------- ------ ------- -------
Depreciation, depletion and
amortization:
Fee Timber $ 997 $ 807 $ 3,798 $ 2,526
TM&C 22 16 66 50
Real Estate 30 23 114 62
General & administrative 91 99 269 290
------- ------ ------- -------
Total $ 1,140 $ 945 $ 4,247 $ 2,928
------- ------ ------- -------
Operating income/(loss):
Fee Timber $ 3,058 $2,591 $13,561 $ 8,433
TM&C (104) (122) (607) (445)
Real Estate (235) (192) 742 (258)
General & administrative (660) (649) (2,116) (2,104)
------- ------ ------- -------
Total $ 2,059 $1,628 $11,580 $ 5,626
------- ------ ------- -------
SELECTED STATISTICS
Three months ended Nine months ended
30-Sep-04 30-Sep-03 30-Sep-04 30-Sep-03
Log sale volumes (thousand
board feet):
Export conifer 550 947 7,732 3,580
Domestic conifer 9,236 8,880 33,455 27,106
Pulp conifer 2,807 1,814 8,226 5,562
Hardwoods 716 408 1,803 1,642
-------- -------- -------- --------
Total 13,309 12,049 51,216 37,890
======== ======== ======== ========
Average price realizations
(per thousand board feet):
Export conifer $ 695 $ 542 $ 655 $ 569
Domestic conifer 591 492 568 516
Pulp conifer 226 208 227 213
Hardwoods 564 559 570 547
Overall 517 456 526 478
Owned acres 112,240 112,200 112,240 112,200
Acres under management 5,316 104,791 5,316 104,791
Capital expenditures ($000's) 395 399 2,311 1,115
Depletion ($000's) 975 779 3,740 2,433
Depreciation ($000's) 165 166 507 495
Debt to total capitalization 40% 45% 40% 45%
QUARTER TO QUARTER COMPARISONS
(Amounts in $000's except per unit data)
Q3 2004 vs. Q3 2003 Q3 2004 vs. Q2 2004
Total Per Unit Total Per Unit
Net income:
3rd Quarter 2004 $1,361 $ 0.30 $ 1,361 $ 0.30
2nd Quarter 2004 3,997 0.88
3rd Quarter 2003 941 0.21
Variance $ 420 $ 0.09 $(2,636) $(0.58)
Detail of earnings
variance:
Fee Timber
Log price realizations (A) $ 735 $ 0.16 $ - $ -
Log volumes (B) 367 0.08 (1,676) (0.37)
Timberland sale income - - - -
Depletion (196) (0.04) 319 0.07
Other Fee Timber (439) (0.10) 43 0.01
Timberland Management &
Consulting - -
Management fee changes 176 0.04 (279) (0.06)
Other Timberland Mgmnt &
Consulting (158) (0.03) 274 0.06
Real Estate - -
Environmental remediation
reserve (171) (0.04) 124 0.03
Other Real Estate 128 0.03 (1,577) (0.35)
General & administrative
costs (11) - 58 0.01
Interest expense 22 - 62 0.01
Other (taxes, minority
int., interest inc.) (33) (0.01) 16 0.01
------ ------ ------- ------
Total change in earnings $ 420 $ 0.09 $(2,636) $(0.58)
====== ====== ======= ======
(A) Price variance allocated based on changes in price using the
higher period volume.
(B) Volume variance allocated based on change in sales volume and
the average log sales price for higher margin less variance in log
production costs.
CONTACT: Pope Resources
Tom Ringo, 360-697-6626
Fax: 360-697-1156