<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Third Quarter Ending September 30, 1998
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
----- -----
<PAGE>
P A R T I
ITEM 1
FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED BALANCE SHEETS (Unaudited)
Pope Resources
September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
(Thousands) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 7,494 $ 3,950
Accounts receivable 1,390 680
Work in progress 10,334 10,072
Current portion of contracts receivable 793 1,433
Prepaid expenses and other 426 364
--------- ---------
Total current assets 20,437 16,499
--------- ---------
Properties and equipment at cost:
Land and land improvements 16,098 15,028
Roads and timber (net of
accumulated depletion) 11,181 11,067
Buildings and equipment (net of
accumulated depreciation) 11,356 10,944
--------- ---------
38,635 37,039
--------- ---------
Other assets:
Deposit for property acquisition 1,788 -
Contracts receivable, net of current portion 2,182 1,877
Unallocated amenities and project costs 1,012 847
Loan fees and other 54 57
--------- ---------
5,036 2,781
--------- ---------
$ 64,108 $ 56,319
--------- ---------
--------- ---------
Liabilities and Partners' Capital
Current liabilities:
Accounts payable $ 919 $ 852
Accrued liabilities 927 947
Distribution payable - 452
Current portion of long-term debt 372 351
Deposits 141 82
IPMB income allocation 243 -
--------- ---------
Total current liabilities 2,602 2,684
--------- ---------
Deficit in investment in joint venture 28 160
Long-term debt, net of current portion 13,751 14,048
Other long-term liabilities 157 275
Deferred profit on contracts receivable 190 242
Partners' capital 47,380 38,910
--------- ---------
$ 64,108 $ 56,319
--------- ---------
--------- ---------
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Pope Resources
Three Months and Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
(Thousands, except per unit data) Three Months ended September 30, Nine Months Ended September 30,
1998 1997 1998 1997
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Revenues $ 12,574 $ 8,591 36,835 $ 23,198
Cost of sales (3,882) (3,206) (10,609) (7,824)
Operating expenses (3,135) (2,051) (8,933) (5,713)
Selling and administration expenses (2,162) (1,303) (6,096) (4,498)
----------- ------------ ------------- ------------
Income from operations 3,395 2,031 11,197 5,163
----------- ------------ ------------- ------------
Other income (expense):
Interest expense (350) (376) (1,074) (1,077)
Interest income 175 109 463 321
Equity in earnings / (losses) of joint venture 1 (3) (170) (223)
IPMB income allocation (63) - (243) -
----------- ------------ ------------- ------------
(237) (270) (1,024) (979)
----------- ------------ ------------- ------------
Income before income taxes 3,158 1,761 10,173 4,184
Income tax provision (217) - (348) -
----------- ------------ ------------- ------------
Net income $ 2,941 $ 1,761 9,825 $ 4,184
----------- ------------ ------------- ------------
----------- ------------ ------------- ------------
Allocable to general partners $ 29 $ 18 98 $ 42
Allocable to limited partners 2,912 1,743 9,727 4,142
----------- ------------ ------------- ------------
$ 2,941 $ 1,761 9,825 $ 4,184
----------- ------------ ------------- ------------
----------- ------------ ------------- ------------
Net income per partnership unit $ 0.65 $ 0.39 2.17 $ 0.93
----------- ------------ ------------- ------------
----------- ------------ ------------- ------------
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Pope Resources
Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
(Thousands) 1998 1997
----------- -----------
<S> <C> <C>
Net cash flows from operating activities $ 8,107 $ 4,822
Cash flows from investing activities:
Capital expenditures (2,178) (2,733)
Joint venture investment (300) (318)
----------- -----------
Net cash used in investing activities (2,478) (3,051)
----------- -----------
Cash flows from financing activities:
Cash distributions to unitholders (1,808) (1,763)
Repayment of long-term debt (277) (256)
----------- -----------
Net cash used in financing activities (2,085) (2,019)
----------- -----------
Net increase (decrease) in cash and cash equivalents 3,544 (248)
Cash and cash equivalents at beginning of year 3,950 3,741
----------- -----------
Cash and cash equivalents at end of the nine month period $ 7,494 $ 3,493
----------- -----------
----------- -----------
Supplemental disclosure of non-cash transaction:
Land acquired through a tax-deferred exchange $ 1,791 $ -
----------- -----------
----------- -----------
</TABLE>
<PAGE>
POPE RESOURCES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1998
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
September 30, 1998 and December 31, 1997 and the consolidated statements of
income for the three months and nine months ending September 30, 1998 and
1997 and cash flows for the nine months ending September 30, 1998 and 1997
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 1997 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 4,519,470 units for 1998 and 1997,
respectively.
4. Supplemental disclosure of cash flow information: Interest paid amounted to
approximately $1,080,000 and $1,065,000 for the nine months ended September
30, 1998 and 1997, respectively.
5. Statement of Financial Accounting Standard (SFAS) No. 131, "Disclosure
about Segments of an Enterprise and Related Information" was recently
issued and is effective for the Partnership's fiscal year ending December
31, 1998. The Partnership is currently evaluating the reporting impact of
this SFAS on the Partnership's financial statements.
6. IPMB income allocation represents Pope MGP, Inc.'s distributive share of
net income from the Investor Portfolio Management Business (IPMB) of
Olympic Resource Management LLC (ORMLLC), a Washington limited liability
company in which the Partnership and Pope MGP, Inc. are the only members.
The Partnership's consolidated financial statements include ORMLLC but not
Pope MGP, Inc. Accordingly, Pope MGP, Inc.'s distributive share of net
income of ORMLLC is reflected as an expense and liability of the
Partnership. A description of the IPMB income allocation method is
included in the Partnership's Proxy Statement filed with the Securities and
Exchange Commission on February 14, 1997.
7. Certain reclassifications have been made to 1997 amounts to conform to 1998
presentation.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
September 30, 1998
This discussion should be read in conjunction with the Partnership's
consolidated financial statements included with this report.
RESULTS OF OPERATIONS
TIMBERLAND RESOURCES AND MANAGEMENT
The Partnership's Timberland Resource and Management revenues consist of
revenues from the sale of timber harvested from timberlands owned by the
Partnership and revenues earned through the Investor Portfolio Management
Business (IPMB). The IPMB, approved by the Partnership's unitholders in a
special proxy vote in March 1997, has two complementary business strategies:
portfolio development and property management. Portfolio development's goal is
to build and manage diversified portfolios of timberlands for third-party
investors, sometimes acting exclusively as a portfolio manager, while at other
times co-investing as a partner on behalf of Pope Resources. Property
management's mandate is to provide a full range of management services to
third-party owners of timberlands.
Timberland Resources and Management revenues for the three months ended
September 30, 1998 and 1997 were $8,758,000 and $5,559,000, respectively. On a
year to date basis, Timberland Resources and Management revenues for the periods
ended September 30, 1998 and 1997 were $25,000,000 and $15,571,000,
respectively. The Partnership's increase in revenues resulted primarily from
management fees associated with the Investor Portfolio Management Business
(IPMB). In connection with the IPMB, Olympic Resource Management LLC (ORMLLC), a
limited liability company in which the Partnership and Pope MGP, Inc. are the
only members, has since January 1, 1998 been the U.S. western region timberland
manager for the Hancock Timber Resource Group (HTRG). This contract currently
covers timber management services for 535,000 acres in Washington, Oregon, and
northern California.
Total acres under management for HTRG in the U.S. western region is subject to
change from time to time as HTRG's client portfolios are adjusted. As such
changes occur, Timberland Resources and Management revenues will fluctuate with
an increase in acres bringing a positive impact and a decrease in acres
producing an adverse effect. An example of such a change occurred recently when
HTRG was notified by the State Retirement System of Ohio's (STRSO) plan to
change portfolio managers effective January 19, 1999. This will effect the
Partnership is as much as ORM has been managing 97,000 acres of STRSO's
portfolio on behalf of HTRG, which will be transitioned to a new manager. The
decrease in acres under management will have an adverse effect on revenues in
1999.
While timberland management fees were the primary factor driving an increase in
this segment's revenues, increased Timberland Resources and Management revenues
also resulted from higher timber harvest volumes on timberlands owned by the
Partnership. The Partnership accelerated the timing of scheduled 1998 timber
harvesting to the first half of the year to take advantage of stronger than
expected demand. Conversely, the Partnership expects lower harvest volume and
lower revenues from timber harvest activities in the fourth quarter to offset
harvest activities earlier in the year. Additionally, a land sale to the State
of Washington Department of Fish & Wildlife for $887,000 was completed during
September 1998. The Partnership is currently evaluating replacement properties
and may reinvest the proceeds of the land sale in a tax-deferred exchange.
<PAGE>
TIMBERLAND RESOURCES AND MANAGEMENT (CONTINUED)
The table below reflects the volume of timber harvested and prices received
during the nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Softwood
Year Sawlogs Pulp Logs
-----------------------------------------------------------------
Volume Price Volume Price
-----------------------------------------------------------------
MMBF $/MBF MMBF $/MBF
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Jan - September 1998 25.6 584 8.2 254
-----------------------------------------------------------------
Jan - September 1997 19.5 723 4.6 203
-----------------------------------------------------------------
</TABLE>
MMBF = Million board feet
MBF = Thousand board feet
Log revenues from the Partnership's fee timberland ownership are significantly
affected by export log market conditions. The majority of the Partnership's
export log volume is sold to Japan. The export market remained weak through the
third quarter of 1998. The average price of export logs sold in the first three
quarters of 1998 was $680 per MBF, which represented a 17% decline from the
comparable period in 1997. This decline in price reflects a weak Asian economy,
strong U.S. dollar in 1998 and favorable prices during 1997. Export log volumes
sold through domestic intermediaries for the nine months ending September 30,
1998 and 1997 were 7,537 MBF and 8,739 MBF, respectively. Continued downward
trends in export prices have resulted in an increasingly higher proportion of
export-quality logs being diverted to the domestic markets.
Weak export markets have also negatively affected pricing in the domestic log
market. Average domestic log prices were $544 and $643 per MBF for the first
nine months of 1998 and 1997, respectively, representing a 15% decline. The
decline in domestic log prices is due in large part to increased supply
associated with the diversion of export log volumes to the domestic log market.
Domestic sawlog volumes for the nine months ended September 30, 1998 and 1997
were 18,108 MBF and 10,801 MBF, respectively. The increase in domestic log
volume represents most of the Partnership's overall increase in harvest volume
for the year.
Domestic log demand is directly and indirectly affected by the level of new home
construction, repair and remodel expenditures, and market conditions in foreign
markets, such as Asia, which indirectly influence the demand and supply of
domestic logs. Interest rate fluctuations, population demographics, and changes
in general economic conditions are factors that influence housing starts. The
level of sales of existing homes as well as interest rate movements heavily
influence repair and remodel expenditures. In combination these forces affect
the demand for lumber which in turn drives the demand for logs. Additionally,
as export log prices change, logs may be diverted to or from the export log
market. This may cause a shift in the domestic supply-demand balance, which in
turn impacts log prices. All of these factors affect the price the Partnership
receives from the sale of its log production.
Pulp log volumes for the nine months ended September 30, 1998 and 1997 were
8,214 MBF and 4,580 MBF, respectively. The increase in pulp log volume is due
to both the increase in overall timber harvested year to date, and the
Partnership's harvest of a higher relative percentage of tree stands that have
not been thinned. These stands generally contain a higher pulp content than
thinned stands. Certain tree stands have not been thinned due to topographic or
other local conditions that caused the cost of timber thinning to exceed the
anticipated benefit. By leaving higher quality stands on the stump during this
period of low export prices, the Partnership may benefit from continued growth
in value and volume of high quality tree stands while export market prices are
soft. Revenues benefited from a 25% increase in pulp log prices for the first
nine months of 1998 as compared to the same period in 1997.
In September 1998, ORMLLC reached an agreement in principle to acquire Simons
Reid Collins, a division of privately held H.A. Simons Ltd. of Vancouver,
British Columbia. The two companies are working toward a purchase and sale
agreement with subsequent closing anticipated prior to the end of the year. The
acquisition will further the business synergies achieved in May 1998 when ORMLLC
entered into a joint marketing agreement with Simons Reid Collins to jointly
market timberland management, forestry consulting and acquisition/disposition
services to large-scale owners of timberlands worldwide. Simons Reid Collins,
with offices in western Canada and Buenos Aires, Argentina, has approximately 50
full time employees and had 1997 revenues of $4.7 million Canadian.
<PAGE>
REAL ESTATE DEVELOPMENT
Real Estate Development consists of Residential Development and Income-Producing
Properties. Residential Development consists of the sale of single-family
homes, finished lots and undeveloped acreage. Income-Producing Properties
consist of providing water and sewer services to properties in the Port Ludlow
area; a 300 slip marina, 27 hole championship golf course, commercial center and
RV park operated by the Partnership; certain Port Gamble parcels leased to
businesses and individuals; and a restaurant/lounge and related facilities
leased to a resort operator. Real Estate Development revenues for the three
months ended September 30, 1998 and 1997 were $3,816,000 and $3,032,000,
respectively. On a year-to-date basis, Real Estate Development revenues for the
periods ended September 30, 1998 and 1997, were $11,835,000 and $7,627,000,
respectively.
Revenues from Residential Development for the three months ended September 30,
1998 and 1997 were $1,972,000 and $1,357,000, respectively. Residential
Development revenues on a year-to-date basis totaled $7,767,000 and $3,766,000
for the periods ended September 30, 1998 and 1997, respectively. The increase
in Residential Development revenues on a quarter to date basis was due to an
increase in the number of lots and dwellings sold for the quarter. On a year to
date basis the increase in revenues resulted primarily from undeveloped acreage
sales, which totaled $3,624,000 and $70,000 for the first nine months of 1998
and 1997, respectively. The increase in undeveloped acreage sales is primarily
attributable to the sale of the Crescent Lake property for $2,800,000, which
closed during the second quarter of 1998. The Partnership has used $1,791,000
of the proceeds from this sale to purchase replacement properties pursuant to a
tax-deferred exchange. The Partnership believes these replacement properties are
better aligned with the Partnership's property development plan than the
Crescent Lake property.
The Partnership's largest development is in Port Ludlow, Washington. During
the three months ending September 30, 1998, the Partnership's development at
Port Ludlow generated revenues of $1,684,000 on 9 finished lot sales and 5
home sales. This compares to the prior year's comparable period sales of
$1,038,000 on 4 finished lot sales and 3 home sales. During the first
three-quarters of 1998 the Partnership's development at Port Ludlow generated
revenues of $3,879,000 on 19 finished lot sales and 11 home sales. This
compares to the prior year's comparable period sales of $3,191,000 on 13
finished lot sales, and 9 home sales. Revenue realized per sale depends on
the quality and size of the home, the subdivision, and the location of the
lot.
Revenues from Income-Producing Properties totaled $1,844,000 and $1,675,000 for
the three months ending September 30, 1998 and 1997, respectively. On a
year-to-date basis, revenues were $4,068,000 and $3,861,000 for the periods
ending September 30, 1998 and 1997, respectively. The increase in revenues
resulted from modest increases in most of the properties included in the
Income-Producing Properties business.
The Partnership's residential development inventory includes a number of
residential subdivisions encompassing a broad spectrum of prices in several
locales. The Partnership continues to be in the planning and entitlement phases
for several developments located in the West Puget Sound region. In 1997, the
City of Bremerton approved the Partnership's request for preliminary planned
unit development status on a 260-acre property. The industrial portion of the
Bremerton property is 60 acres. Construction of the off-site sewer at this site
is completed and the Partnership is focusing on its marketing plan. With
respect to other properties, the Partnership continues to work with officials in
Gig Harbor regarding the development of a 320-acre mixed-use project, Peacock
Hill, located within the Gig Harbor city limits. The Partnership has two
additional ongoing projects in Kitsap County, a 720-acre residential development
in Kingston and a 200-acre residential development in Hansville. While
significant progress has been made in the governmental entitlement process,
final approval is currently stalled pending the outcome of an unrelated court
case that will establish the appropriate zoning and development regulations
applicable to projects pending throughout the county.
Land holdings throughout Washington state are affected by the state's Growth
Management Act, which requires counties to submit comprehensive plans that
designate the future direction of growth and stipulate where population
densities are to be concentrated. Kitsap County's compliance with the Growth
Management Act is currently pending before a state hearings board. While
subject to further appeals, a decision of the state hearings board is
anticipated in 1999. Jefferson County has adopted a
<PAGE>
REAL ESTATE DEVELOPMENT (CONTINUED)
Comprehensive Plan intended to meet the requirements of the Growth Management
Act. While subject to appeal, the Comprehensive Plan designates Part Ludlow as
a Master Planned Resort, which will facilitate the ability to further develop
the area. The Partnership is now working with the local residents and Jefferson
County officials to develop related zoning ordinances to permit future growth
and development.
On May 1, 1998 the Partnership announced an internal realignment of its Real
Estate Development segment into new subsidiary entities. This is expected to
enhance the Partnership's ability to measure the financial performance of this
operation and provide flexibility for future growth plans.
Changes in the local and national economies as well as changes in the regulatory
environment affect revenues from real estate development. There can be no
assurance that the Partnership will be successful in receiving the necessary
regulatory approvals that make its real estate development activities possible.
OTHER
The Partnership is a 50% joint venture partner in Ludlow Associates, which owns
and manages the 36-room Heron Beach Inn at Ludlow Bay. The Partnership's share
of joint venture income and (loss) was $1,000 and ($3,000) for the three months
ending September 30, 1998 and 1997, respectively, and ($170,000) and ($223,000)
for the nine months ended September 30, 1998 and 1997, respectively. The
Partnership is currently negotiating a possible purchase of the remaining 50%
interest in the Inn. The Inn has outstanding debt of $4,900,000 that the
Partnership would either assume, pay off, or otherwise refinance if the
remaining 50% interest is acquired.
Operating expenses for the Partnership were $3,135,000 and $2,051,000 for the
three months ending September 30, 1998 and 1997, respectively. On a
year-to-date basis, operating expenses were $8,933,000 and $5,713,000 for the
periods ending September 30, 1998 and 1997. The increase in operating expenses
was primarily due to an increase in payroll and facility expenses associated
with the IPMB, particularly to meet staffing needs related to the HTRG contract.
Selling and administrative expenses were $2,162,000 and $1,303,000 for the three
months ending September 30, 1998 and 1997, respectively. On a year-to-date
basis selling and administrative expenses were $6,096,000 and $4,498,000 for the
periods ending September 30, 1998 and 1997, respectively. The increase in
selling and administrative expenses was primarily due to payroll, information
technology and other costs associated with continuing enhancement of the
Partnership's internal systems. For the nine months ended September 30, 1998
and 1997 selling and administrative expenses as a percentage of revenues
decreased to 17% from 19% of revenues. The decrease in selling and
administrative expenses as a percentage of revenues is due to better leveraging
of existing selling and administrative expenses given the increase in revenues
resulting from the IPMB.
Consistent with the Amendment to the Partnership Agreement authorizing
management to pursue the IPMB, the Partnership has allocated 20% of income
earned from the IPMB during the first three-quarters of 1998 to Pope MGP, Inc.
under the unitholder-approved formula. The IPMB income allocation to Pope MGP,
Inc. for the three months and nine months ending September 30, 1998 was $63,000
and $243,000, respectively.
Included in the consolidated financial statements of the Partnership are three
wholly owned subsidiary corporations that are taxable. The taxable entities are
ORM, Inc. (ORMI), Olympic Real Estate Management, Inc. (OREMI), and Olympic
Water and Sewer, Inc. (OWSI). OREMI and OWSI have not incurred income tax
expense as of September 30, 1998 and are not expected to incur income tax
expense during 1998. As of September 30, 1998, ORMI, the subsidiary through
which the Partnership holds its interest in ORMLLC has incurred $217,000 and
$348,000 in income tax expense for the three months and nine months ending
September 30, 1998, respectively. ORMI is projected to continue to generate
taxable income through the balance of 1998.
The Partnership's depositary receipts (units) are currently quoted on the
Nasdaq National Market System under the symbol POPEZ. In the second quarter
of 1998, the Partnership requested and received permission from the Pacific
Exchange and the U.S. Securities and Exchange Commission to de-list from the
Pacific Exchange.
<PAGE>
OTHER (CONTINUED)
The Partnership has hired a consulting firm to help evaluate the Partnership's
exposure to year 2000 (Y2K) issues and to develop a plan to fix hardware or
software identified that is not Y2K compliant. In addition to evaluating
internal risks, management is working with customers and vendors to determine
the potential exposure resulting from third parties not adequately addressing
Y2K issues. Projected costs of identifying Y2K issues, fixing software and
hardware that is not Y2K compliant, and querying major vendors and customers to
determine their state of readiness are not expected to be greater than
$250,000. Costs incurred on the Y2K project as of September 30, 1998 are
$87,000. The Partnership has not identified any significant systems, vendors,
or customers that will require a contingency plan to deal with lack of
compliance with Y2K. The Y2K project is proceeding as planned and is expected
to be complete by mid 1999.
Based on work performed to date on the Y2K project the Partnership's risk
resulting from the failure of internally used systems does not appear to be
material. The greater risk results from customers and vendors with which the
Partnership does business and the possibility that those business partners would
not be able to operate as a result of significant failures in their systems or
their vendors' systems. The Partnership is addressing this risk through
contacting significant vendors and customers to ask for some assurance that they
will be able to continue operating after the year 2000. In most instances the
Partnership must rely on assurances from these business partners that the Y2K
issue will not cause a significant interruption in their business as there is
not an effective way to test such assurances. In the event that a significant
customer or vendor were not able to operate after the year 2000, the resulting
interruption in the Partnership's business could lead to costs in excess of the
Partnership's estimate of expenses to fix the Y2K problem.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership depends upon funds generated internally through operations and
external financing to provide the required resources for the Partnership's
timber operations, real estate development, capital expenditures and business
development activities. The Partnership considers its capital resources to be
adequate for its real estate development and other business development plans.
At September 30, 1998, the Partnership had available an unused $20 million bank
loan commitment.
Management has considerable discretion to increase or decrease the level of logs
cut and thereby may increase or decrease net income and cash flow. The
Partnership's current plan is to harvest approximately 38 million board feet of
timber in 1998. 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 was $8,107,000 for the nine months of
1998, and overall cash and cash equivalents increased by $3,544,000 during the
nine-month period. The cash generated in this period was primarily used for
capital expenditures of $2,178,000 and cash distributions to unitholders of
$1,808,000.
The fourth quarter 1997 cash distribution of $.10 per unit, payable to
unitholders of record on December 30, 1997, was paid on January 15, 1998. The
first quarter 1998 cash distribution of $.10 per unit, payable to unitholders of
record on March 31, 1998, was paid on April 15, 1998. The second quarter 1998
cash distribution of $.10 per unit, payable to unitholders of record on June 1,
1998 was paid on June 15, 1998. The third quarter 1998 cash distribution of $.10
per unit, payable to unitholders of record on September 11, 1998 was paid on
September 25, 1998.
A fourth quarter 1998 cash distribution of $.10 per unit has been approved,
payable to unitholders of record on December 1, 1998 and to be paid on December
15, 1998.
<PAGE>
PART II
Items 1 through 5 are not applicable.
6. EXHIBITS AND REPORTS ON FORM 8-K
None.
Exhibit 27. Financial Data Schedule
<PAGE>
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: November 11, 1998 By: POPE MGP, Inc.
Managing General Partner
Date: November 11, 1998 By:
-----------------------------------------
Gary F. Tucker
President and Chief Executive Officer
Date: November 11, 1998 By:
-----------------------------------------
Thomas M. Ringo
Sr. Vice President Finance & Client Relations
(Principal Financial Officer)
Date: November 11, 1998 By:
-----------------------------------------
Meredith R. Green
Vice President Finance and Treasurer
(Principal Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUN-30-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 7,494 7,494
<SECURITIES> 0 0
<RECEIVABLES> 1,390 1,390
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 20,437 20,437
<PP&E> 60,370 60,370
<DEPRECIATION> 21,735 21,735
<TOTAL-ASSETS> 64,108 64,108
<CURRENT-LIABILITIES> 2,602 2,602
<BONDS> 13,751 13,751
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 47,380 47,380
<TOTAL-LIABILITY-AND-EQUITY> 64,108 64,108
<SALES> 12,574 36,835
<TOTAL-REVENUES> 12,574 36,835
<CGS> 3,882 10,609
<TOTAL-COSTS> 9,179 25,638
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 350 1,074
<INCOME-PRETAX> 3,158 10,173
<INCOME-TAX> 217 348
<INCOME-CONTINUING> 2,941 9,825
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,941 9,825
<EPS-PRIMARY> .65 2.17
<EPS-DILUTED> .65 2.17
</TABLE>
