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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ending March 31, 1995
OR
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9035
POPE RESOURCES, A DELAWARE
LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 91-1313292
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
</TABLE>
19245 10th Avenue NE, Poulsbo, WA 98370
Telephone: (360)697-6626
(Address of principal executive offices including zip code)
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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1
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P A R T I
ITEM 1
Financial Statements
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Pope Resources
March 31, 1995 and December 31, 1994
<TABLE>
<CAPTION>
(Thousands) 1995 1994
- - - - - - - ------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 70 $ 100
Accounts receivable 273 1,172
Work in progress 11,966 11,774
Current portion of contracts receivable 1,001 1,558
Prepaid expenses and other 342 136
-------- --------
Total current assets 13,652 14,740
-------- --------
Properties and equipment at cost:
Land and land improvements 14,518 14,483
Roads and timber (net of
accumulated depletion) 10,250 9,960
Buildings and equipment (net of
accumulated depreciation) 9,366 9,484
-------- --------
34,134 33,927
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Other assets:
Contracts receivable, net of current portion 3,272 2,888
Unallocated amenities and project costs 1,070 1,172
Loan fees and other 100 32
-------- --------
4,442 4,092
-------- --------
$ 52,228 $ 52,759
======== ========
Liabilities and Partners' Capital
Current liabilities:
Accounts payable $ 719 $ 893
Accrued liabilities 594 397
Current portion of long-term debt 283 228
Deposits 80 111
-------- --------
Total current liabilities 1,676 1,629
-------- --------
Other long-term liabilities 94 94
Long-term debt, net of current portion 22,595 25,451
Deferred profit on contracts receivable 780 761
Partners' capital 27,083 24,824
-------- --------
$ 52,228 $ 52,759
======== ========
</TABLE>
See notes to consolidated financial statements.
3
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Pope Resources
Three Months Ended March 31, 1995 and 1994
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<CAPTION>
(Thousands, except per unit data) 1995 1994
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<S> <C> <C>
Revenues:
Timberland resources $ 5,603 $ 3,257
Property development 1,768 1,971
Deferred profit on current
year's contract sales (21) (35)
------- -------
7,350 5,193
Cost of sales 2,582 2,256
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Gross profit 4,768 2,937
------- -------
Selling and administration expenses (1,950) (1,407)
------- -------
Income from operations 2,818 1,530
Other (charges) credits:
Interest expense (519) (455)
Interest income 96 115
------- -------
Net income $ 2,395 $ 1,190
======= =======
Net income allocable to
general partners $ 24 $ 12
Net income allocable to
limited partners 2,371 1,178
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$ 2,395 $ 1,190
======= =======
Net income per partnership unit $ 2.65 $ 1.28
======= =======
</TABLE>
See notes to consolidated financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Pope Resources
Three Months Ended March 31, 1995 and 1994
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<CAPTION>
(Thousands) 1995 1994
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<S> <C> <C>
Net cash flows from operating activities $ 3,380 $ 553
Cash flows from investing activities:
Capital expenditures (473) (766)
Proceeds from the sale of equipment 4
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Net cash used in investing activities (473) (762)
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Cash flows from financing activities:
Partnership units repurchased (136)
Repayment of long-term debt (2,801) (135)
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Net cash used in financing activities (2,937) (135)
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Net (decrease) in cash and cash equivalents (30) (344)
Cash and cash equivalents at beginning of year 100 444
------- -----
Cash and cash equivalents at end of quarter $ 70 $ 100
======= =====
</TABLE>
See notes to consolidated financial statements.
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POPE RESOURCES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
1. The consolidated financial statements have been prepared by the
Partnership without an audit and are subject to year-end adjustments.
Certain information and footnote disclosures in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the Partnership, the
accompanying consolidated balance sheets as of March 31, 1995 and
December 31, 1994 and the consolidated statements of income for the
three months ended March 31, 1995 and 1994 and cash flows for the
three months ended March 31, 1995 and 1994 contain all adjustments
necessary to present fairly the financial statements referred to
above. The results of operations for any interim period are not
necessarily indicative of the results to be expected for the full
year.
2. The financial statements in the Partnership's 1994 annual report on
Form 10-K include a summary of significant accounting policies of the
Partnership and should be read in conjunction with this Form 10-Q.
3. Net income per unit is based on the weighted average of 903,970 and
926,694 units for the three months ending March 31, 1995 and 1994,
respectively.
4. Supplemental disclosure of cash flow information: Interest paid
amounted to approximately $472,000 and $452,000 for the three months
ended March 31, 1995 and 1994, respectively.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - March 31, 1995
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POPE RESOURCES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
March 31, 1995
This discussion should be read in conjunction with the Partnership's
consolidated financial statements included with this report.
Results of Operations
Timberland Resources
During the first quarter ending March 31, 1995 the Partnership logged and sold
approximately 6.1 million board feet of softwood timber at an average price of
$743 per thousand board feet (MBF). In addition, during the first quarter of
1995, the Partnership sold stumpage totaling .8 MBF of softwood timber at an
average price of $506 per MBF. For the corresponding period in 1994, the
Partnership logged and sold approximately 3.0 million board feet at an average
price of $810 per MBF. The decrease in the average price logged per MBF is
primarily attributable to a lower quality of log sold in the first quarter of
1995 as compared to 1994. The aforementioned average price of timber sold
reflects various mixes of timber grades and different types of timber sales and
is, therefore, not necessarily indicative of the price of timber to be sold in
the future.
The Partnership sells its timber into two major markets, namely the export and
domestic markets. Direct and indirect log sales to the export market totaled
43% and 45% of total timber revenues for period ending March 31, 1995 and 1994,
respectively.
The export demand for logs is directly affected by the demand from Asian
countries. As nearly all of the Partnership's export logs are sold to Japan,
the strength of the Japanese economy and the relative strength of the United
States dollar directly affect the demand for export logs. The export market is
currently strong with prices still at high historical levels. Management
anticipates export prices to remain strong into the second quarter of 1995,
then to decline due to increased supply coupled with price resistance from log
buyers. A modest upturn at the end of 1995 is anticipated.
The domestic demand for logs is directly affected by the level of construction
activity. Changes in general economic and demographic factors have
historically caused fluctuations in housing starts. This in turn affects
demand for lumber and commodity wood prices which drives the demand for logs.
For the balance of 1995 management anticipates continued uncertainty regarding
the demand for domestic logs due to fluctuating interest rates and a slower
economy. Management is also concerned about the declining number of domestic
sawmills in its region. As the number of sawmills declines management must
find replacement outlets for its domestic timber. Management does not believe
the decline in domestic sawmills will materially impact its 1995 operations but
is nonetheless exploring additional outlets for its domestic timber.
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Property Development
Property development consists of residential development, land marketing and
income properties. Residential development consists of the sale of
single-family homes and finished lots. Land marketing is comprised of the
development and sale of both cut-over timberland and land purchased for resale.
Income properties consists of providing water and sewer services to properties
in the Port Ludlow area; a marina, golf course, commercial center and RV park
operated by the Partnership; the Port Gamble townsite and log dumps, which are
leased to Pope & Talbot, Inc.; and a restaurant/lounge and related facilities
leased to and operated by Village Resorts, Inc.
During the first quarter of 1995 the Partnership's residential development at
Port Ludlow generated revenues of $936,000 on 8 finished lot sales, 2 home
sales and one bulk sale of 27 lots with preliminary lot approval. This
compares to the prior year's first quarter sales at Port Ludlow of $910,000 on
5 finished lot sales and 4 home sales. For 1995 the Partnership expects to
equal or exceed the 1994 sales in Port Ludlow.
The Partnership's residential development at Grandridge produced revenues of
$32,000 on 1 lot sale. 1995 sales were much slower than anticipated due to
regulatory interference and the loss of one of the two home builders.
At March 31, 1995 the Partnership had 251 developed lots and 23 homes under
various stages of completion. This inventory consists of a wide variety of
subdivisions encompassing a broad spectrum of prices.
Land marketing sold 4 acres in the first quarter of 1995 and generated revenues
of $62,000. This compares to 1994 sales of $ 195,000 consisting of 14 acres.
Average prices per acre totaled $17,500 and $13,900 for 1995 and 1994,
respectively. The decrease in acres sold is mainly attributable to the lack of
inventory available for sale. This was caused by state and local government
adopting more restrictive development ordinances which have led to increasingly
longer periods of time to obtain necessary permits. The Partnership has
entitlements for 124 lots on 434 acres which should be available for sale by
the second and third quarters of 1995.
Income properties revenues totaled $738,000 and $771,000 for the periods ending
March 31, 1995 and 1994, respectively. Operations were consistent for the
periods ending March 31, 1995 and 1994, and management expects future revenues
to be stable.
General
General and administrative costs increased due to three factors: increased
property taxes on the Partnerships land, road maintenance and silviculture
expenses in timberland resources, and increased costs related to the
Partnership's Ludlow Bay development in Port Ludlow.
Interest expense was higher for the periods ending March 31, 1995 as compared
to 1994 as a result of increased interest rates on the Partnership's line of
credit.
Interest income declined from amounts earned at March 31, 1995 as compared to
1994. This was attributable to the decline in contracts receivable.
9
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Liquidity and Capital Resources
Management anticipates spending $5.8 million on its real estate development in
1995. In addition, management plans to spend another $1.2 million in capital
expenditures in 1995. Funds generated internally through operations and
externally through financing will provide the required resources for the
Partnership's real estate development and capital expenditures. Management
considers its capital resources to be adequate for its real estate development
plans, both in the near future and on a long-term basis. At March 31, 1995,
the Partnership had available an unused $12.4 million loan commitment from a
bank.
Management has considerable discretion to increase or decrease the level of
timber cut and thus drive net income and cash flow up or down assuming, of
course, timber prices are stable. Management's current plan is to harvest 21
million board feet of softwood timber in 1995, which is in balance with its
sustainable yield capacity. Since harvest plans are based on demand, price and
cash needs, actual harvesting may vary subject to management's on-going review.
Cash provided by operating activities generated $3,380,000 in the first quarter
of 1995, while overall cash and cash equivalents decreased by $30,000. The
decrease was primarily due to repayments of long-term debt totaling $2,801,000
and capital expenditures of $473,000.
The Partnership has not declared a cash distribution in 1995. All cash
distributions are at the discretion of the Partnership's managing general
partner, Pope MGP, Inc. The practice of the Partnership has been to make cash
distributions only for the purpose of defraying the tax estimated liability of
unitholders on their flow-through share of Partnership net income and as
approved from time to time by the managing general partner.
10
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PART II
ITEM 6
Exhibits and Reports on Form 8-K
None.
11
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POPE RESOURCES
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POPE RESOURCES,
A Delaware Limited Partnership
------------------------------------
Registrant
Date: April 18, 1995 By: POPE MGP, Inc.
------------------------------------
Managing General Partner
Date: April 18, 1995 By: /s/ G. H. Folquet
------------------------------------
George H. Folquet
President and Chief Executive Officer
Date: April 18, 1995 By: /s/ Thomas M. Ringo
------------------------------------
Thomas M. Ringo
Vice President-Finance
(Principal Financial Officer)
Date: April 18, 1995 By: /s/ Thomas A. Griffin
------------------------------------
Thomas A. Griffin
Treasurer/Controller
(Principal Accounting Officer)
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 70
<SECURITIES> 0
<RECEIVABLES> 4,546
<ALLOWANCES> 0
<INVENTORY> 11,966
<CURRENT-ASSETS> 13,652
<PP&E> 34,134
<DEPRECIATION> 398
<TOTAL-ASSETS> 52,228
<CURRENT-LIABILITIES> 1,676
<BONDS> 22,878
<COMMON> 0
0
0
<OTHER-SE> 27,083
<TOTAL-LIABILITY-AND-EQUITY> 52,228
<SALES> 7,350
<TOTAL-REVENUES> 7,350
<CGS> 2,582
<TOTAL-COSTS> 4,532
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 519
<INCOME-PRETAX> 2,395
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,395
<EPS-PRIMARY> 2.65
<EPS-DILUTED> 2.65
</TABLE>
