<PAGE> 1
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 June 30, 1996
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)
DELAWARE 91-1313292
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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____
1
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P A R T I
ITEM 1
Financial Statements
2
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CONSOLIDATED BALANCE SHEETS (Unaudited)
Pope Resources
June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
(Thousands) 1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 4,634 $ 987
Accounts receivable 474 1,047
Work in progress 11,059 11,375
Current portion of contracts receivable 1,083 739
Prepaid expenses and other 489 164
-------- --------
Total current assets 17,739 14,312
-------- --------
Properties and equipment at cost:
Land and land improvements 15,097 15,146
Roads and timber (net of
accumulated depletion) 12,103 11,922
Buildings and equipment (net of
accumulated depreciation) 9,215 9,040
-------- --------
36,415 36,108
-------- --------
Other assets:
Contracts receivable, net of current portion 1,970 2,640
Unallocated amenities and project costs 1,007 996
Loan fees and other 79 91
-------- --------
3,056 3,727
-------- --------
$ 57,210 $ 54,147
======== ========
Liabilities and Partners' Capital
Current liabilities:
Accounts payable $ 767 $ 1,029
Accrued liabilities 334 521
Current portion of long-term debt 312 300
Deposits 131 165
Other liabilities 469 363
-------- --------
Total current liabilities 2,013 2,378
-------- --------
Other long-term liabilities 275 275
Long-term debt, net of current portion 14,577 17,717
Deferred profit on contracts receivable 254 789
Partners' capital 40,091 32,988
-------- --------
$ 57,210 $ 54,147
======== ========
</TABLE>
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Pope Resources
Three Months and Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(Thousands, except per unit data) June 30 June 30
------------------------ ------------------------
1996 1995 1996 1995
--------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Timberland resources $ 6,251 $ 8,500 $ 13,019 $ 14,103
Property development 3,031 2,936 4,956 4,704
-------- -------- -------- --------
9,282 11,436 17,975 18,807
Cost of sales (3,822) (3,917) (6,885) (6,500)
Selling and administration expenses (1,986) (1,801) (3,718) (3,620)
Deferred profit on current year's contract sales (12) (21)
Recognition of prior years' deferred profit 86 1 544 1
-------- -------- -------- --------
Income from operations 3,560 5,719 7,904 8,667
Other income (expenses):
Interest expense (348) (399) (714) (918)
Interest income 84 79 144 175
Joint venture loss (87) (110) (231) (240)
-------- -------- -------- --------
(351) (430) (801) (983)
-------- --------- -------- -------
Net income $ 3,209 $ 5,289 $ 7,103 $ 7,684
======== ======== ======== ========
Allocable to general partners $ 32 $ 53 $ 71 $ 77
Allocable to limited partners 3,177 5,236 7,032 7,607
-------- -------- -------- --------
$ 3,209 $ 5,289 $ 7,103 $ 7,684
======== ======== ======== ========
Net income per partnership unit $ 3.55 $ 5.85 $ 7.86 $ 8.50
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Pope Resources
Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(Thousands) 1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
Net cash flows from operating activities $ 7,874 $ 8,207
Cash flows from investing activities:
Capital expenditures (1,144) (1,318)
Proceeds from the sale of equipment 44
------- -------
Net cash used in investing activities (1,100) (1,318)
------- -------
Cash flows from financing activities:
Partnership units repurchased (136)
Repayment of long-term debt (3,127) (6,612)
------- -------
Net cash used in financing activities (3,127) (6,748)
------- -------
Net increase (decrease) in cash and cash equivalents 3,647 141
Cash and cash equivalents at beginning of year 987 100
------- -------
Cash and cash equivalents at end of quarter $ 4,634 $ 241
======= =======
</TABLE>
See notes to consolidated financial statements
5
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POPE RESOURCES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
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 June 30, 1996 and December 31, 1995
and the consolidated statements of income for the three months and six
months ending June 30, 1996 and 1995 and cash flows for the six months
ending June 30, 1996 and 1995 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 1995 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 903,894 units
for the three months ending June 30, 1996 and 1995, respectively. Net
income per unit is based on the weighted average of 903,894 and 903,932
units for the six months ending June 30, 1996 and 1995, respectively.
4. Supplemental disclosure of cash flow information: Interest paid
amounted to approximately $724,000 and $937,000 for the six months
ended June 30, 1996 and 1995, respectively.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - June 30, 1996
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POPE RESOURCES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
June 30, 1996
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 two quarters of 1996 the Partnership logged and sold
approximately 14.3 million board feet of softwood logs at an average price of
$798 per thousand board feet (MBF). The Partnership had no stumpage sales in the
first two quarters of 1996. Stumpage sales are cutting contracts for the removal
of trees off of a specific tract for a limited period of time (e.g. 12 months).
For the corresponding period in 1995, the Partnership logged and sold
approximately 14 million board feet of softwood timber at an average price of
$833 per MBF. In addition, during the first six months of 1995, the Partnership
sold stumpage totaling .8 MBF feet of softwood logs at an average price of $521
per MBF. The decrease in the average price per MBF is primarily attributable to
the lower percentage of export volume sold in the first two quarters of 1996 as
compared to 1995. The average price of logs sold reflects various mixes of log
grades and different types of stumpage sales and is, therefore, not necessarily
indicative of future prices.
The Partnership sells its logs and trees into two major markets, namely
the export and domestic markets. Direct and indirect softwood log sales to the
export market totaled 56% and 51% of total timber revenues for the six month
periods ending June 30, 1996 and 1995, respectively. The export demand for
logs is directly affected by the demand from Asian countries. Since the
Partnership's export logs are sold into a log market primarily going 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
strengthened in the second quarter. While the market price of logs can change
significantly for a variety of reasons, management anticipates export prices to
remain stable in the third quarter of 1996 with prices then increasing for the
balance of the year.
The domestic demand for logs is directly affected by the level of new home
construction and repair and remodel business 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 1996, management anticipates continued
uncertainty regarding the demand for domestic logs due to fluctuating interest
rates and a slower economy. There continues to be a declining number of domestic
sawmills in the company's operating region. As the number of sawmills has
declined, management has thus far been successful in finding replacement outlets
for its domestic logs. Management does not believe the decline in domestic
sawmills will materially impact its 1996 operations but nonetheless is
continuing to explore additional outlets for its domestic logs.
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Property Development
Property development consists of residential development and income properties.
Residential development consists of the sale of single-family homes, finished
lots and undeveloped acreage. 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; commercial and
residential property rentals in Port Gamble; certain Port Gamble parcels leased
to Pope & Talbot, Inc.; a restaurant/lounge and related facilities leased to and
operated by Village Resorts, Inc.
Revenue from residential development totaled $2,929,000 and $2,796,000 for 1996
and 1995, respectively. The Partnership's largest development is in Port Ludlow,
Washington. During the first two quarters of 1996 the Partnership's development
at Port Ludlow generated revenues of $2,199,000 on 4 finished lot sales and 6
home sales. This compares to the prior year's comparable period sales of
$2,174,000 on 13 finished lot sales, 4 home sales and one bulk sale of 27 lots
with preliminary lot approval. The decrease in lot sales is attributable to a
lack of single-family view lots available for sale. The lack of this inventory
was caused by permit delays resulting from new Washington State growth
management regulations and an unseasonably wet winter. The Partnership is
aggressively pursuing entitlements to increase this inventory and hopes to have
a much larger inventory ready for sale by the fourth quarter of 1996. At June
30, 1996 the Partnership had 180 developed lots and 27 homes under various
stages of completion. This inventory consists of a wide variety of subdivisions
encompassing a broad spectrum of prices in several locales.
As for properties in Bremerton, Kingston, and Gig Harbor that are progressing
through the entitlement process - each is moving more slowly than anticipated.
Both Bremerton and Gig Harbor are expected to gain key municipal approvals in
late 1996. Detailed project applications will follow in early 1997. Entitlements
for Kingston are complicated and delayed by issues related to the State's Growth
Management Act.
Income properties revenues totaled $2,028,000 and $1,802,000 for the periods
ending June 30, 1996 and 1995, respectively. Operations were fairly consistent
for the periods ending June 30, 1996 and 1995 and management expects future
revenues to continue to increase. As of January 1, 1996 the Partnership assumed
responsibility for management of the Port Gamble townsite from Pope & Talbot,
Inc. A year-long planning process is underway to determine how best to optimize
the values inherent in both Port Gamble's historic core and its attendant
acreage.
Other
The Partnership is a joint venture partner in a 36-room inn at Port Ludlow. The
expected occupancy level has not been achieved and the inn has thus performed
below expectations. For the first two quarters of 1996 the inn showed an
occupancy percentage of 31% compared to 22% for the first two quarters of 1995.
Management of the joint venture is working hard to create innovative ways to
increase revenues. The Partnership's share of joint venture losses were $231,000
and $240,000 for the 1996 and 1995 first two quarters, respectively.
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Liquidity and Capital Resources
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-term and
on a long-term basis. At June 30, 1996, the Partnership had available an unused
$20 million loan commitment from a bank.
Management has considerable discretion to increase or decrease the level of logs
cut and thus drive net income and cash flow up or down assuming, of course, log
prices and demand remain stable. Management's current plan is to harvest
approximately 21 million board feet of softwood logs and trees in 1996 which
compares to 27 million board feet in 1995. 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 $7,874,000 in the first two
quarters of 1996, and overall cash and cash equivalents increased by $3,647,000.
The cash generated was primarily used for repayments of long-term debt totaling
$3,127,000 and capital expenditures of $1,144,000.
The Partnership has declared a cash distribution of $2.35 per unit payable on
July 29, 1996 to unitholders of record as of July 8, 1996. The cash distribution
is expected to be followed by a second distribution in late 1996. Together the
two distributions relate to income expected to be realized in 1996 and are
intended to assist the unitholders in meeting their federal and state income tax
liabilities attributable to such income. All cash distributions are at the
discretion of the Partnership's managing general partner, Pope MGP, Inc.
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: July 29, 1996 By: POPE MGP, Inc.
--------------------------------
Managing General Partner
Date: July 29, 1996 By: ________________________________
Gary F. Tucker
President and Chief Executive
Officer
Date: July 29, 1996 By: ________________________________
Thomas M. Ringo
Vice President-Finance
(Principal Financial Officer)
Date: July 29, 1996 By: ________________________________
Thomas A. Griffin
Treasurer/Controller
(Principal Accounting Officer)
12
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,634
<SECURITIES> 0
<RECEIVABLES> 3,527
<ALLOWANCES> 0
<INVENTORY> 11,059
<CURRENT-ASSETS> 17,739
<PP&E> 36,415
<DEPRECIATION> 776
<TOTAL-ASSETS> 57,210
<CURRENT-LIABILITIES> 2,013
<BONDS> 14,889
0
0
<COMMON> 0
<OTHER-SE> 40,091
<TOTAL-LIABILITY-AND-EQUITY> 57,210
<SALES> 17,975
<TOTAL-REVENUES> 17,975
<CGS> 6,885
<TOTAL-COSTS> 10,071
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 714
<INCOME-PRETAX> 7,103
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,103
<EPS-PRIMARY> 7.86
<EPS-DILUTED> 7.86
</TABLE>
