<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 March 31, 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
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P A R T I
ITEM 1
Financial Statements
2
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Pope Resources
March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
(Thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 2,317 $ 987
Accounts receivable 253 1,047
Work in progress 11,232 11,375
Current portion of contracts receivable 765 739
Prepaid expenses and other 181 164
------- -------
Total current assets 14,748 14,312
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Properties and equipment at cost:
Land and land improvements 15,149 15,146
Roads and timber (net of
accumulated depletion) 12,061 11,922
Buildings and equipment (net of
accumulated depreciation) 9,170 9,040
------- -------
36,380 36,108
------- -------
Other assets:
Contracts receivable, net of current portion 2,099 2,640
Unallocated amenities and project costs 985 996
Loan fees and other 81 91
------- -------
3,165 3,727
------- -------
$54,293 $54,147
======= =======
Liabilities and Partners' Capital
Current liabilities:
Accounts payable $ 746 $ 1,029
Accrued liabilities 501 521
Current portion of long-term debt 306 300
Deposits 88 165
Other liabilities 482 363
------- -------
Total current liabilities 2,123 2,378
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Other long-term liabilities 275 275
Long-term debt, net of current portion 14,671 17,717
Deferred profit on contracts receivable 341 789
Partners' capital 36,883 32,988
------- -------
$54,293 $54,147
======= =======
</TABLE>
See notes to consolidated financial statements.
3
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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Pope Resources
Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
(Thousands, except per unit data) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Timberland resources $ 6,768 $ 5,603
Property development 1,925 1,768
Deferred profit on current year's contract sales (12) (21)
Recognition of prior years' deferred profit 458
------- -------
9,139 7,350
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Cost of sales (3,063) (2,582)
Selling and administration expenses (1,732) (1,820)
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Income from operations 4,344 2,948
------- -------
Other income (expenses):
Interest expense (366) (519)
Interest income 60 96
Joint venture loss (144) (130)
------- -------
(450) (553)
------- -------
Net income $ 3,894 $ 2,395
======= =======
Allocable to general partners $ 39 $ 24
Allocable to limited partners 3,855 2,371
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$ 3,894 $ 2,395
======= =======
Net income per partnership unit $ 4.31 $ 2.65
======= =======
</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, 1996 and 1995
<TABLE>
<CAPTION>
(Thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net cash flows from operating activities $ 5,037 $ 3,380
Cash flows from investing activities:
Capital expenditures (667) (473)
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Net cash used in investing activities (667) (473)
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Cash flows from financing activities:
Partnership units repurchased (136)
Repayment of long-term debt (3,040) (2,801)
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Net cash used in financing activities (3,040) (2,937)
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Net increase (decrease) in cash and cash equivalents 1,330 (30)
Cash and cash equivalents at beginning of year 987 100
------- -------
Cash and cash equivalents at end of quarter $ 2,317 $ 70
======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
POPE RESOURCES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 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 March 31, 1996 and December 31, 1995
and the consolidated statements of income for the three months ending
March 31, 1996 and 1995 and cash flows for the three months ending
March 31, 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 the Form 10-Q.
3. Net income per unit is based on the weighted average of 903,894 and
903,970 units for the three months ending March 31, 1996 and 1995,
respectively.
4. Supplemental disclosure of cash flow information: Interest paid
amounted to approximately $357,000 and $472,000 for the three months
ended March 31, 1996 and 1995, respectively.
6
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - March 31, 1996
7
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POPE RESOURCES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
March 31, 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 quarter of 1996 the Partnership logged and sold approximately
7.1 million board feet of softwood logs at an average price of $825 per thousand
board feet (MBF). The Partnership had no stumpage sales in the first quarter 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 6.1
million board feet of softwood logs at an average price of $743 per MBF. In
addition, during the first three months of 1995, the Partnership sold stumpage
totaling .8 MBF feet of softwood logs at an average price of $506 per MBF. The
increase in the average price per MBF is primarily attributable to a higher
percentage of export volume sold in the first quarter of 1996 as compared to
1995. The aforementioned average price of logs sold reflects various mixes of
log grades and different types of stumpage sales and is, therefore, not
necessarily indicative of the price of logs to be sold in the future.
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 50% and 43% of total timber revenues for the three month
period ending March 31, 1996 and 1995, 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 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 remained strong in the first quarter of 1996 and
ended at a higher level than it began. Export prices have begun to soften
lately, but not to the degree that normally occurs at this time of year. While
the market price of logs can change significantly for a variety of reasons,
management anticipates export prices to continue to slowly decline in the second
and possibly third quarters of 1996 with prices then increasing for the balance
of 1996.
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. Management is 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 logs. Management does
not believe the decline in domestic sawmills will materially impact its 1996
operations but is nonetheless exploring 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 $1,108,000 and $1,029,000 for 1996
and 1995, respectively. The Partnership's largest development is in Port Ludlow,
Washington. During the first quarter of 1996 the Partnership's development at
Port Ludlow generated revenues of $776,000 on 1 finished lot sale and 3 home
sales. This compares to 1995 first quarter sales of $936,000 on 8 finished lot
sales, 2 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 March 31, 1996 the Partnership had 201 developed lots and 22 homes under
various stages of completion. This inventory consists of a wide variety of
subdivisions encompassing a broad spectrum of prices in several locales.
Income properties revenues totaled $817,000 and $738,000 for the period ending
March 31, 1996 and 1995, respectively. Operations were fairly consistent for the
periods ending March 31, 1996 and 1995 and management expects future revenues to
be slightly higher. 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.
General
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 quarter of 1996 the inn showed an occupancy
percentage of 19.5% compared to 17.5% for the first quarter of 1995. Management
of the joint venture is working hard to create innovative ways to increase
revenues and are optimistic that such efforts will be successful. The
Partnership's share of joint venture losses were $144,000 and $130,000 for the
1996 and 1995 first quarters, respectively.
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<PAGE> 10
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 March 31, 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, logs
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 $5,037,000 in the first quarter
of 1996, while overall cash and cash equivalents increased by $1,330,000. The
cash generated was primarily used for repayments of long-term debt totaling
$3,040,000 and capital expenditures of $667,000.
The Partnership has not declared a cash distribution in 1996. 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 estimated tax 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 19, 1996 By: POPE MGP, Inc.
------------------------------------
Managing General Partner
Date: April 19, 1996 By: /s/Gary F. Tucker
------------------------------------
Gary F. Tucker
President and Chief Executive Officer
Date: April 19, 1996 By: /s/Thomas M. Ringo
------------------------------------
Thomas M. Ringo
Vice President-Finance
(Principal Financial Officer)
Date: April 19, 1996 By: /s/Thomas A. Griffin
------------------------------------
Thomas A. Griffin
Treasurer/Controller
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,317
<SECURITIES> 0
<RECEIVABLES> 3,117
<ALLOWANCES> 0
<INVENTORY> 11,232
<CURRENT-ASSETS> 14,748
<PP&E> 36,380
<DEPRECIATION> 387
<TOTAL-ASSETS> 54,293
<CURRENT-LIABILITIES> 2,123
<BONDS> 14,977
0
0
<COMMON> 0
<OTHER-SE> 36,883
<TOTAL-LIABILITY-AND-EQUITY> 54,293
<SALES> 9,139
<TOTAL-REVENUES> 9,139
<CGS> 3,063
<TOTAL-COSTS> 4,344
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 366
<INCOME-PRETAX> 3,894
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,894
<EPS-PRIMARY> 4.31
<EPS-DILUTED> 4.31
</TABLE>
