MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This
report contains a number of projections and statements about our expected
financial condition, operating results, and business plans and objectives.
These
statements reflect our management's estimates based on our current goals,
in
light of currently known circumstances and management's expectations about
future developments. Statements about expectations and future performance
are
“forward looking statements” within the meaning of federal and state securities
laws. 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, you should not interpret these statements
as
promises that we will perform at a given level or that we will take any or
all
of the actions we currently expect to take. Our future actions, as well as
our
actual performance, will vary from our current expectations, and under various
circumstances these variations may be material and adverse. Some of the factors
that may cause our actual operating results and financial condition to fall
short of our expectations are set forth in the part of this report entitled
“Item 1A: Risk Factors ” below and other factors discussed elsewhere in this
report or in our annual report on Form 10-K for the fiscal year ended December
31, 2006. The forward-looking statements in this report reflect our estimates
as
of the date of the report, and we cannot undertake to update these statements
as
our business operations and environment change. References in this
report to first-person pronouns such as “we,” “our,” and “us” refer to the
Partnership or, when used to express intentions or expectations, to the
Partnership’s management and managing general partner.
This
discussion should be read in conjunction with the financial statements and
related notes included with this report.
EXECUTIVE
OVERVIEW
Pope
Resources, A Delaware Limited Partnership (“we” or the “Partnership”), was
organized in late 1985 as a result of a spin-off by Pope & Talbot, Inc.
(“P&T”). We are engaged in three primary businesses. The first,
and by far most significant, segment in terms of owned assets and operations
is
the Fee Timber segment. Operations in this segment consist of growing
timber to be harvested as logs for sale to domestic and to a lesser extent
export manufacturers. The second most significant business in terms
of total assets owned is the development and sale of real estate. Real Estate
activities primarily take the form of securing permits, entitlements and,
in
some cases, installing infrastructure for raw land development, and then
realizing that land’s value through the sale of larger parcels to buyers who may
take the land further up the value chain to home buyers, residential developers,
or to developers, operators and lessors of commercial property. Since these
land
projects ordinarily span multiple years, the Real Estate segment may incur
losses for multiple years while a project is developed until that project
is
sold, which results in operating income to the extent the sale proceeds exceed
our basis in the project. Our third business is providing
timberland-related services to third parties and raising investment capital
from
third parties for private equity timber funds , including a fund we established
and manage, ORM Timber Fund I, LP (the “Fund”).
In
late
2006, the Fund purchased 24,000 acres of timberland in two transactions using
95% of the Fund’s committed capital, or $58.5 million, of the $61.8 million
committed overall. As a result of these acquisitions, the Timberland
Management & Consulting segment generates fees associated with management of
the Fund. The Fund is consolidated into our financial statements with
the 80% third-party Fund interest reported as minority interest. The
fees associated with management of the Fund are eliminated in
consolidation.
Management’s
major opportunity and challenge is to profitably grow our revenue base. For
our
Fee Timber and Timberland Management & Consulting segments, the revenue base
is typically thought of in terms of acres owned or under management. Our
Real
Estate opportunities and challenges center on identifying properties in our
portfolio of owned assets with potential development value. Once
identified, we attempt to maximize that value through securing entitlements
and,
in some cases installing infrastructure, prior to selling the
property.
RESULTS
OF OPERATIONS
The
following table reconciles and compares key revenue and cost elements that
impact our net income for each of the quarter and nine-month periods ended
September 30, 2007 and , 2006. In addition to the table’s detailed
numeric analysis, the explanatory text that follows the table describes many
of
these changes by business segment:
|
QUARTER
TO QUARTER COMPARISONS
|
|
|
(Amounts
in $000's except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2007 vs. Q3 2006
|
|
|
Q3
2007 vs. Q2 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Net
income:
|
|
|
|
|
|
|
|
3rd
Quarter 2007
|
|
$
|
3,551
|
|
|
$
|
3,551
|
|
|
2nd
Quarter 2007
|
|
|
|
4,815
|
|
|
3rd
Quarter 2006
|
|
|
8,279
|
|
|
|
|
|
|
Variance
|
|
$
|
(4,728
|
)
|
|
$
|
(1,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Detail
of earnings variance:
|
|
|
|
|
|
|
Fee
Timber
|
|
|
|
|
|
|
|
|
|
Log
price realizations (A)
|
|
$
|
(183
|
)
|
|
$
|
(228
|
)
|
|
Log
volumes (B)
|
|
|
1,920
|
|
|
|
(4,618
|
)
|
|
Depletion
|
|
|
(152
|
)
|
|
|
608
|
|
|
Production
costs
|
|
|
(1,059
|
)
|
|
|
1,040
|
|
|
Other
Fee Timber
|
|
|
(201
|
)
|
|
|
(220
|
)
|
|
Timberland
Management & Consulting
|
|
|
|
|
|
|
Management
fee changes
|
|
|
69
|
|
|
|
147
|
|
|
Disposition
fee changes
|
|
|
-
|
|
|
|
-
|
|
|
Other
Timberland Mgmnt & Consulting
|
|
|
(346
|
)
|
|
|
(222
|
)
|
|
Real
Estate
|
|
|
|
|
|
|
|
|
|
Environmental
remediation liability
|
|
|
114
|
|
|
|
-
|
|
|
Land
sales
|
|
|
(5,050
|
)
|
|
|
1,218
|
|
|
Other
Real Estate
|
|
|
(192
|
)
|
|
|
(216
|
)
|
|
General
& administrative costs
|
|
|
(96
|
)
|
|
|
749
|
|
|
Interest
net
|
|
|
225
|
|
|
|
110
|
|
|
Minority
interest
|
|
|
211
|
|
|
|
363
|
|
|
Income
taxes
|
|
|
12
|
|
|
|
5
|
|
|
Total
change in earnings
|
|
$
|
(4,728
|
)
|
|
$
|
(1,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
Price variance calculated by extending the change in average
realized
price by current period volume.
|
|
|
(B)
Volume variance calculated by extending change in sales volume
by the
average log sales price for the comparison period.
|
|
Fee
Timber
Fee
Timber
revenue is earned primarily from the harvest and sale of logs from the
Partnership’s nearly 114,000 acres of fee timberland located in western
Washington. We also recognize Fee Timber revenue from sales of timber
harvested from the 24,000 acres of timberland owned by the
Fund. Other revenue includes lease revenue generated from cell tower
sites and sand and gravel pits located on our tree farms. Revenue from
the sales
of timberland tracts will also appear periodically in results for this
segment.
Our Fee Timber revenue is driven primarily by the volume of timber harvested,
which we ordinarily express in terms of millions of board feet, or “MMBF”, and
by the average prices realized on log sales, which we express in dollars
per
thousand board feet, or “MBF”.
The
Fund
harvested 2.3 MMBF and 4.9 MMBF during the three and nine month periods ended
September 30, 2007, respectively, with an average price realized of $510/MBF
and
$558/MBF. We plan to harvest a total of 5.5 MMBF from the Fund’s
timberlands in 2007. The Fund is consolidated into our financial
statements and as a result the Fund’s harvest is included in the Fee Timber
discussion.
When
discussing our Fee Timber operations, we compare current results to both
the
previous quarter and the corresponding quarter of the prior
year. Both of these comparisons are made to help the reader gain an
understanding of the trends in market price and harvest volumes that affect
Fee
Timber results of operations. Revenue and operating income for the
Fee Timber segment for the quarters ended September 30, 2007, June 30, 2007,
and
September 30, 2006 are as follows:
|
|
|
|
($
Million)
Quarter
Ended:
|
|
Log
Sale Revenue
|
|
|
Mineral,
Cell Tower
&
Other Revenue
|
|
|
Total
Fee Timber
Revenue
|
|
|
Operating
Income
|
|
|
Harvest
volume (MMBF)
|
|
|
September
30, 2007
|
|
$
|
9.3
|
|
|
$
|
0.5
|
|
|
$
|
9.8
|
|
|
$
|
3.9
|
|
|
|
15.2
|
|
|
June
30, 2007
|
|
|
14.1
|
|
|
|
0.5
|
|
|
|
14.6
|
|
|
|
7.3
|
|
|
|
22.6
|
|
|
September
30, 2006
|
|
|
7.6
|
|
|
|
0.5
|
|
|
|
8.1
|
|
|
|
3.6
|
|
|
|
12.1
|
|
The
decrease in revenue and operating income for the current quarter relative
to the
preceding quarter of 2007 is attributable to a 7.4 MMBF decrease in harvest
volume combined with a $15/MBF decrease in average price
realized. This decline in harvest volume is principally due to the
acceleration of logging from the Columbia tree farm into the first two quarters
of this year. Fee Timber revenue in the current quarter is $1.7 million higher
than the comparable period in 2006 due to a 3.1 MMBF increase in harvest
volume
netted against a $12/MBF decrease in average price realized. Harvest
volume has increased in the current quarter compared to 2006’s third quarter due
to inclusion of a higher proportion of the Hood Canal tree farm’s annual harvest
in 2007 results and 2.3 MMBF of Fund volume not available for harvest in
2006.
Revenue
and operating income for the
Fee Timber segment for the nine-month periods ended September 30, 2007 and
2006
were as follows:
|
|
|
|
($
Million)
Nine
months Ended:
|
|
Log
Sale Revenue
|
|
|
Mineral,
Cell Tower
&
Other Revenue
|
|
|
Total
Fee Timber
Revenue
|
|
|
Operating
Income
|
|
|
Harvest
volume (MMBF)
|
|
|
September
30, 2007
|
|
$
|
29.2
|
|
|
$
|
1.4
|
|
|
$
|
30.6
|
|
|
$
|
13.6
|
|
|
|
47.9
|
|
|
September
30, 2006
|
|
|
31.0
|
|
|
|
1.3
|
|
|
|
32.3
|
|
|
|
13.8
|
|
|
|
50.8
|
|
The
decrease in revenue and operating income in 2007 relative to 2006 is due
primarily to a 2.9 MMBF decrease in volume harvested. Through the first nine
months of 2007, we have harvested approximately 87% of our expected annual
volume. Harvest volume during the first nine months of 2007 also includes
4.9
MMBF of Fund volume. Through September 30, 2006, we had harvested over 90%
of
our full-year harvest.
Log
Volume
The
Partnership harvested the following log volumes by species from its timberlands
for the quarters ended September 30, 2007, June 30, 2007, and September 30,
2006
and the nine-month periods ended September 30, 2007 and 2006:
|
Log
volumes (MBF):
|
|
Quarter
Ended
|
|
|
Sawlogs
|
|
30-Sep-07
|
|
|
%
Total
|
|
|
30-Jun-07
|
|
|
%
Total
|
|
|
30-Sep-06
|
|
|
%
Total
|
|
|
|
Douglas-fir
|
|
|
7,602
|
|
|
|
50
|
%
|
|
|
15,991
|
|
|
|
71
|
%
|
|
|
8,626
|
|
|
|
71
|
%
|
|
|
Whitewood
|
|
|
2,272
|
|
|
|
15
|
%
|
|
|
2,922
|
|
|
|
13
|
%
|
|
|
483
|
|
|
|
4
|
%
|
|
|
Cedar
|
|
|
931
|
|
|
|
6
|
%
|
|
|
575
|
|
|
|
2
|
%
|
|
|
188
|
|
|
|
2
|
%
|
|
|
Hardwood
|
|
|
1,297
|
|
|
|
8
|
%
|
|
|
878
|
|
|
|
4
|
%
|
|
|
1,464
|
|
|
|
12
|
%
|
|
Pulp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Species
|
|
|
3,127
|
|
|
|
21
|
%
|
|
|
2,241
|
|
|
|
10
|
%
|
|
|
1,386
|
|
|
|
11
|
%
|
|
Total
|
|
|
|
15,229
|
|
|
|
100
|
%
|
|
|
22,607
|
|
|
|
100
|
%
|
|
|
12,147
|
|
|
|
100
|
%
|
|
Log
volumes (MBF):
|
|
Nine
Months Ended
|
|
|
Sawlogs
|
|
30-Sep-07
|
|
|
%
Total
|
|
|
30-Sep-06
|
|
|
%
Total
|
|
|
|
Douglas-fir
|
|
|
30,708
|
|
|
|
64
|
%
|
|
|
36,908
|
|
|
|
73
|
%
|
|
|
Whitewood
|
|
|
5,985
|
|
|
|
13
|
%
|
|
|
3,628
|
|
|
|
7
|
%
|
|
|
Cedar
|
|
|
1,566
|
|
|
|
3
|
%
|
|
|
774
|
|
|
|
2
|
%
|
|
|
Hardwood
|
|
|
2,304
|
|
|
|
5
|
%
|
|
|
3,170
|
|
|
|
6
|
%
|
|
Pulp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Species
|
|
|
7,312
|
|
|
|
15
|
%
|
|
|
6,350
|
|
|
|
12
|
%
|
|
Total
|
|
|
|
47,875
|
|
|
|
100
|
%
|
|
|
50,830
|
|
|
|
100
|
%
|
Through
September 30, 2007, we have harvested 48 MMBF of our targeted 55 MMBF annual
harvest for this year. In 2007, we have moderated the front loading
of our annual harvest resulting in a greater proportion of our annual harvest
volume falling in the third quarter. Through September, 30, 2007 our
production of whitewood sawlogs as a percentage of total harvest nearly doubled
from the comparable period in 2006, in part because the Fund’s timberlands
contain a higher proportion of whitewood inventory than our other tree
farms.
Log
Prices
While
harvest volume is largely within management’s control, one additional factor
that impacts our Fee Timber income is the price we realize upon selling our
logs
into the market. We try to maximize Fee Timber revenue by adjusting
the timing and mix of our harvest to take advantage of current market conditions
where possible. However, log prices are a result of a broader range of economic
and political factors and are largely beyond our ability to control, except
at
the margins. We realized the following log prices for the quarters ended
September 30, 2007, June 30, 2007 and September 30, 2006 and the nine-month
periods ended September 30, 2007 and 2006:
|
|
|
|
Average
price realizations (per MBF):
|
|
|
|
|
|
Quarter
Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
|
30-Sep-07
|
|
|
30-Jun-07
|
|
|
30-Sep-06
|
|
|
30-Sep-07
|
|
|
30-Sep-06
|
|
|
Sawlogs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas-fir
|
|
$
|
622
|
|
|
$
|
638
|
|
|
$
|
662
|
|
|
$
|
628
|
|
|
$
|
672
|
|
|
|
Whitewood
|
|
|
446
|
|
|
|
477
|
|
|
|
462
|
|
|
|
467
|
|
|
|
446
|
|
|
|
Cedar
|
|
|
1,347
|
|
|
|
1,333
|
|
|
|
1,260
|
|
|
|
1,335
|
|
|
|
1,058
|
|
|
|
Hardwood
|
|
|
960
|
|
|
|
945
|
|
|
|
683
|
|
|
|
938
|
|
|
|
663
|
|
|
Pulp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Species
|
|
|
353
|
|
|
|
398
|
|
|
|
281
|
|
|
|
397
|
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall
|
|
$
|
611
|
|
|
$
|
626
|
|
|
$
|
623
|
|
|
$
|
611
|
|
|
$
|
610
|
|
Douglas-fir
:
Douglas-fir represents the primary tree species growing on our
timberlands. This species is noted for its structural characteristics
that make it generally preferable to other softwoods and hardwoods for the
production of construction grade lumber and plywood. The price
realized on Douglas-fir logs decreased 3% for the current quarter versus
the
preceding quarter of 2007, and decreased 6% from the comparable quarter in
2006. The market for Douglas-fir logs has progressively weakened
during 2007 due to the decline in domestic housing starts. On a
year-to-date basis Douglas-fir prices fell 7% when compared to the prior
year.
Whitewood
:
“Whitewood” is a term used to describe several softwood species, but for us
primarily refers to western hemlock. Though generally considered to
be of a lower quality than Douglas-fir, these logs are also used for
manufacturing construction grade lumber and plywood. The average
price realized on whitewood decreased 6% for the current quarter in 2007
versus
the preceding quarter of 2007, and 3% from the comparable quarter in
2006. The strong market for export quality whitewood sawlogs we were
able to capitalize on in the first quarter of 2007 weakened as 2007
progressed.
Cedar
:
Cedar prices remained virtually the same in the current quarter versus the
preceding quarter of 2007 and increased 7% from the comparable quarter in
prior
year. Cedar prices typically weaken in the winter months as demand
declines, largely because cedar lumber is used primarily as fencing and siding
material. Peak demand for this product is in the summer months, with
corresponding lower demand and log prices at the beginning and end of the
calendar year. On a year-to-date basis, our realized cedar price has
increased 26% from the prior year. The strong price realized in both the
current
quarter and for the first nine months of 2007 reflects a general decline
in
cedar volume available in the Puget Sound area. Notwithstanding these
favorable price trends for cedar, the small amount of cedar in our sales
mix
produces only a slight impact on overall revenue and earnings.
Hardwood:
“Hardwood” can refer to many different species, but on our tree farms
primarily represents red alder and, to a lesser extent, big leaf
maple. The price realized from the sale of red alder sawlogs has
increased steadily over the last couple years as new red alder mills have
opened
to take advantage of strong lumber pricing attributable to the growing
acceptance of solid sawn red alder lumber products. These mills
manufacture lumber for use in furniture construction. Hardwood log
prices increased 2% in the current quarter relative to the preceding quarter
of
2007 and increased 41% relative to the third quarter of 2006. This
increase from prior year is due to an increase in the quality of hardwood
logs
sold in the current year.
Pulp:
Pulp
refers to a lower quality log of any species that is manufactured into wood
chips. These chips are used to manufacture many products including
kraft linerboard for bag and cardboard box production and to a lesser extent
bleached pulp for paper production. The price realized from the sale
of pulp logs is primarily driven by local wood chip inventories. Pulp
log prices in the current quarter decreased 11% from the preceding quarter
of
2007, but increased by 26% from the comparable period in prior
year. On a year-to-date basis pulp prices are up 52% over the level
realized during the first nine months of 2006. The increases in pulp log
prices
result from a decline in sawmill production. Strong log prices
combined with a weakening market for lumber has resulted in an increase in
sawmill downtime which has in turn reduced the supply of wood chips available
to
the Puget Sound market.
Customers
The
table
below categorizes logs sold by customer type for the quarters ended September
30, 2007, June 30, 2007 and September 30, 2006 and for the nine-month periods
ended September 30, 2007 and 2006:
|
|
|
Q3
2007
|
|
|
Q2
2007
|
|
|
Q3
2006
|
|
|
Destination
|
|
Volume*
|
|
|
Price^
|
|
|
Volume*
|
|
|
Price^
|
|
|
Volume*
|
|
|
Price^
|
|
|
Domestic
mills
|
|
|
11.9
|
|
|
$
|
678
|
|
|
|
18.6
|
|
|
$
|
656
|
|
|
|
9.9
|
|
|
$
|
663
|
|
|
Export
brokers
|
|
|
0.2
|
|
|
|
523
|
|
|
|
1.8
|
|
|
|
612
|
|
|
|
0.8
|
|
|
|
708
|
|
|
Pulp
|
|
|
3.1
|
|
|
|
353
|
|
|
|
2.2
|
|
|
|
398
|
|
|
|
1.4
|
|
|
|
281
|
|
|
Total
|
|
|
15.2
|
|
|
$
|
611
|
|
|
|
22.6
|
|
|
$
|
626
|
|
|
|
12.1
|
|
|
$
|
623
|
|
|
*
Volume in MMBF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
^
Price per MBF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended
|
|
|
|
|
30-Sep-07
|
|
|
|
|
|
30-Sep-06
|
|
|
|
|
|
Destination
|
|
Volume*
|
|
|
Price^
|
|
|
Volume*
|
|
|
Price^
|
|
|
Domestic
mills
|
|
|
38.2
|
|
|
$
|
652
|
|
|
|
41.5
|
|
|
$
|
657
|
|
|
Export
brokers
|
|
|
2.4
|
|
|
|
616
|
|
|
|
2.9
|
|
|
|
702
|
|
|
Pulp
|
|
|
7.3
|
|
|
|
397
|
|
|
|
6.4
|
|
|
|
261
|
|
|
Total
|
|
|
47.9
|
|
|
$
|
611
|
|
|
|
50.8
|
|
|
$
|
610
|
|
|
*
Volume in MMBF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
^
Price per MBF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over
the last several years, a strong
domestic market for high-quality “peeler” logs used for producing a range of
products requiring veneer components has emerged that has shifted log volume
away from an already diminished export market. Volume sold to
domestic lumber mills represents 78% of volume sold in the third quarter
of
2007, versus 82% for both the second quarter of 2007 and the third quarter
of
2006. The decrease in the proportion of log volume sold to domestic mills
in the
third quarter of 2007 is due to an increase in proportion of volume sold
to pulp
mills. We adjusted our harvest schedule during the third quarter of 2007
to take
advantage of the relatively strong market for pulp logs
Cost
of Sales
Cost
of sales for the Fee Timber
segment consists of harvest and haul costs and depletion
expense. Harvest and haul costs represent the direct cost incurred to
convert standing timber into logs and deliver those logs to their point of
sale. Depletion expense represents the estimated cost of acquiring
and growing the harvested timber. The applicable depletion rate is derived
by
dividing the aggregate cost of timber and capitalized road expenditures by
the
estimated volume of merchantable timber available for harvest at the beginning
of that year. The depletion rate is then applied to the volume
harvested in a given period to calculate depletion expense for that
period. Fee Timber cost of sales for the quarters ended September 30,
2007,
June
30, 2007, and September 30, 2006 and the nine-month periods ended September
30,
2007 and 2006 are as follows:
|
|
|
|
|
|
($
Million)
Quarter
Ended:
|
|
Harvest,
Haul
and Other
|
|
|
Depletion
|
|
|
Total
Cost of Sales
|
|
|
Harvest
volume (MMBF)
|
|
|
|
September
30, 2007
|
|
|
3.2
|
|
|
|
1.4
|
|
|
|
4.6
|
|
|
|
15.2
|
|
|
|
June
30, 2007
|
|
|
4.3
|
|
|
|
2.0
|
|
|
|
6.3
|
|
|
|
22.6
|
|
|
|
September
30, 2006
|
|
|
2.3
|
|
|
|
1.1
|
|
|
|
3.4
|
|
|
|
12.1
|
|
|
|
|
|
|
|
($Million)
Nine
months Ended:
|
|
Harvest,
Haul
and Other
|
|
|
Depletion
|
|
|
Total
Cost of Sales
|
|
|
Harvest
volume (MMBF)
|
|
|
|
September
30, 2007
|
|
|
9.5
|
|
|
|
4.2
|
|
|
|
13.7
|
|
|
|
47.9
|
|
|
|
September
30, 2006
|
|
|
9.4
|
|
|
|
5.8
|
|
|
|
15.2
|
|
|
|
50.8
|
|
|
|
|
|
|
|
Per
MBF
Quarter
Ended:
|
|
Harvest,
Haul
and
Other
|
|
|
Depletion
|
|
|
Total
Cost of Sales
|
|
|
|
September
30, 2007
|
|
$
|
210
|
|
|
$
|
94
|
|
|
$
|
304
|
|
|
|
June
30, 2007
|
|
|
188
|
|
|
|
90
|
|
|
|
278
|
|
|
|
September
30, 2006
|
|
|
194
|
|
|
|
87
|
|
|
|
281
|
|
|
|
|
|
|
|
Per
MBF
Nine
Months Ended:
|
|
Harvest,
Haul
and
Other
|
|
|
Depletion
|
|
|
Total
Cost of Sales
|
|
|
|
September
30, 2007
|
|
$
|
199
|
|
|
$
|
87
|
|
|
$
|
286
|
|
|
|
September
30, 2006
|
|
|
186
|
|
|
|
113
|
|
|
|
299
|
|
Cost
of
sales decreased in the third quarter of 2007 versus the second quarter of
2007 due primarily to a reduction in harvest volume, and increased versus
the comparable period in the prior year due to higher harvest
volume. Unit costs increased between the third and second quarters of
2007, due to higher harvest and haul cash costs together with a higher depletion
rate due to the impact of harvest volume from the Fund’s timberlands where a
separate depletion cost pool applies. On a year-to-date basis, unit
costs of $286 per MBF were lower than 2006 due to a lower depletion rate
partially offset by higher harvest and haul costs. The depletion rate
in 2006 was impacted by harvest volume from timberland acquired during the
fourth quarter of 2004 that had a separate depletion cost pool with a
significantly higher depletion rate.
Depletion
expense for the quarters
ended September 30, 2007, June 30, 2007, and September 30, 2006 was calculated
as follows:
|
|
|
|
Quarter
ended September 30, 2007
|
|
|
|
|
|
Pooled
|
|
|
Separate
|
|
|
Combined
|
|
|
|
Volume
harvested (MBF)
|
|
|
12,917
|
|
|
|
2,310
|
|
|
|
15,227
|
|
|
|
Rate/MBF
|
|
$
|
70
|
|
|
$
|
226
|
|
|
$
|
94
|
|
|
|
Depletion
expense ($ 000)
|
|
$
|
908
|
|
|
$
|
522
|
|
|
$
|
1,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended June 30, 2007
|
|
|
|
|
|
Pooled
|
|
|
Separate
|
|
|
Combined
|
|
|
|
Volume
harvested (MBF)
|
|
|
20,072
|
|
|
|
2,535
|
|
|
|
22,607
|
|
|
|
Rate/MBF
|
|
$
|
70
|
|
|
$
|
247
|
|
|
$
|
90
|
|
|
|
Depletion
expense ($ 000)
|
|
$
|
1,411
|
|
|
$
|
627
|
|
|
$
|
2,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended September 30, 2006
|
|
|
|
|
|
Pooled
|
|
|
Separate
|
|
|
Combined
|
|
|
|
Volume
harvested (MBF)
|
|
|
11,474
|
|
|
|
673
|
|
|
|
12,147
|
|
|
|
Rate/MBF
|
|
$
|
69
|
|
|
$
|
397
|
|
|
$
|
87
|
|
|
|
Depletion
expense ($ 000)
|
|
$
|
791
|
|
|
$
|
267
|
|
|
$
|
1,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2007
|
|
|
|
|
|
Pooled
|
|
|
Separate
|
|
|
Combined
|
|
|
|
Volume
harvested (MBF)
|
|
|
43,000
|
|
|
|
4,875
|
|
|
|
47,875
|
|
|
|
Rate/MBF
|
|
$
|
70
|
|
|
$
|
237
|
|
|
$
|
87
|
|
|
|
Depletion
expense ($ 000)
|
|
$
|
3,023
|
|
|
$
|
1,156
|
|
|
$
|
4,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2006
|
|
|
|
|
|
Pooled
|
|
|
Separate
|
|
|
Combined
|
|
|
|
Volume
harvested (MBF)
|
|
|
43,979
|
|
|
|
6,851
|
|
|
|
50,830
|
|
|
|
Rate/MBF
|
|
$
|
69
|
|
|
$
|
397
|
|
|
$
|
113
|
|
|
|
Depletion
expense ($ 000)
|
|
$
|
3,033
|
|
|
$
|
2,717
|
|
|
$
|
5,750
|
|
The
separate depletion pool for 2007 harvest volume represents harvest from
timberlands owned by the Fund. The separate depletion pool used for
2006 was attributable to a separate depletion pool created for a fourth quarter
of 2004 timberland acquisition. These separate depletion pools carry
higher depletion rates than our combined pool as they include timber volume
and
associated cost of more recently acquired timber.
Operating
Expenses
Fee
Timber operating expenses were $1.3
million, $1.0 million, and $1.1 million for the quarters ended September
30,
2007, June 30, 2007, and September 30, 2006, respectively. Operating expenses
for the nine-month periods ended September 30, 2007 and September 30, 2006
were
$3.4 and $3.3 million, respectively. Operating expenses include
management, silviculture and the cost of both maintaining existing roads
and
building temporary roads required for harvest activities.
Timberland
Management & Consulting
Revenue
and operating income for the Timberland Management & Consulting segment for
the quarters and nine-month periods ended September 30, 2007 and 2006 were
as
follows:
|
|
|
|
|
|
($
Million)
Quarter
Ended:
|
|
Revenue
|
|
|
Operating
Income/(Loss)
|
|
|
|
September
30, 2007
|
|
$
|
0.4
|
|
|
$
|
(0.2)
|
|
|
|
September
30, 2006
|
|
|
0.6
|
|
|
|
-
|
|
|
|
|
|
|
|
($
Million)
Nine
Months Ended:
|
|
Revenue
|
|
|
Operating
Income/(Loss)
|
|
|
|
September
30, 2007
|
|
$
|
1.1
|
|
|
$
|
(0.5)
|
|
|
|
September
30, 2006
|
|
|
3.1
|
|
|
$
|
1.4
|
|
The
segment posted revenue of $366,000 and an operating loss of $244,000 for
the
quarter ended September 30, 2007, which represents respective $212,000 and
$277,000 declines from the comparable period in 2006. The decreases
in both revenue and operating income are due to a reduction in rate for acres
under management, coupled with lower third-party consulting
revenues. On a year-to-date basis, revenue and operating income
declined $2.0 million and $1.9 million, respectively, between 2006 and
2007. This decline is also due to a reduction in rate for acres under
management for our primary timberland management client, and a disposition
fee
earned in the first quarter of 2006 that did not recur in 2007.
The
capital commitment for ORM Timber
Fund I, LP expired on August 1, 2007. We placed $58.5 million of the
$61.8 million commitment. Pope Resources’ capital co-investment in
this fund totaled $11.7 million, or 20% of the Fund. We are now
organizing our second timber fund that we expect will total $100 million
of
equity capital, with our co-investment commitment at the same 20% level as
in
the first fund. As with the first fund, we will not be required to contribute
the majority of this capital until suitable timber properties are identified
and
acquired.
Operating
Expenses
Timberland
Management & Consulting
operating expenses for the quarters ended September 30, 2007 and 2006 were
$610,000 and $545,000, respectively. The increase in operating
expenses for the quarter ended September 30, 2007 relative to the comparable
period in the prior year is due to costs incurred to organize ORM Timber
Fund
II. Operating expenses for the nine-month periods ended September 30,
2007 and 2006 were $1.6 million and $1.8 million, respectively. The
decrease in operating expenses is attributable to the reduction in expenses
associated with our third-party consulting operation and a reduction in
operating expenses associated with the Fund.
Real
Estate
The
Partnership’s Real Estate segment
consists primarily of revenue from the sale of land together with residential
and commercial property rents. The Partnership’s real estate holdings are
located primarily in Pierce, Kitsap, and Jefferson Counties in Washington
State.
Revenue
and operating income for the Real Estate segment for the quarter and nine-month
periods ended September 30, 2007 and 2006 were as follows:
|
|
|
|
|
|
($
Million)
Quarter
Ended:
|
|
Revenue
|
|
|
Operating
Income
|
|
|
|
September
30, 2007
|
|
$
|
2.0
|
|
|
$
|
0.5
|
|
|
|
September
30, 2006
|
|
|
9.3
|
|
|
|
5.7
|
|
|
|
|
|
|
|
($
Million)
Nine
Months Ended:
|
|
Revenue
|
|
|
Operating
Income/(Loss)
|
|
|
|
September
30, 2007
|
|
$
|
2.6
|
|
|
$
|
(0.5)
|
|
|
|
September
30, 2006
|
|
|
14.3
|
|
|
|
5.9
|
|
Real
Estate revenue is generated through the sale of land and rural residential
lots,
and to a lesser extent from real property rents, most of which are earned
at the
Port Gamble townsite. Leases of cellular tower sites and gravel and
other mineral rights on our timberlands are accounted for in the Fee Timber
segment. Raw land sales are generally made for something other than
residential or commercial use and are normally completed with very little
capital investment prior to sale. Rural residential and commercial
use properties normally involve capital improvements for zoning, road building,
or utility access improvements prior to completing the sale.
Real
Estate revenue for the quarter and nine-month periods ended September 30,
2007
and 2006 consist of the following:
|
For
the three months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Revenue
|
|
|
Gross
Margin
|
|
|
Acres
Sold
|
|
|
Revenue/Acre
|
|
|
Gross
Margin/ Acre
|
|
|
September
30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural
Residential
|
|
$
|
350,000
|
|
|
$
|
287,000
|
|
|
|
33
|
|
|
$
|
10,606
|
|
|
$
|
8,697
|
|
|
Commercial/business
park
|
|
$
|
230,000
|
|
|
$
|
166,000
|
|
|
|
1
|
|
|
$
|
230,000
|
|
|
$
|
166,000
|
|
|
Revenue
recognized on % complete for 2006 closings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
complete
for 2006 closings
|
|
$
|
1,084,000
|
|
|
$
|
668,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
Rentals
|
|
|
293,000
|
|
|
|
293,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
Other
|
|
|
12,000
|
|
|
|
12,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
September
30, 2007 Total
|
|
$
|
1,969,000
|
|
|
$
|
1,426,000
|
|
|
|
34
|
|
|
$
|
17,059
|
|
|
$
|
13,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural
Residential
|
|
$
|
428,000
|
|
|
$
|
216,000
|
|
|
|
33
|
|
|
$
|
12,970
|
|
|
$
|
6,545
|
|
|
Commercial/business
park
|
|
|
7,222,000
|
|
|
|
5,049,000
|
|
|
|
18
|
|
|
|
401,222
|
|
|
|
280,500
|
|
|
Raw
land sale
|
|
|
1,400,000
|
|
|
|
1,003,000
|
|
|
|
401
|
|
|
|
3,491
|
|
|
|
2,501
|
|
|
Rentals
|
|
|
282,000
|
|
|
|
282,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
September
30, 2006 Total
|
|
$
|
9,332,000
|
|
|
$
|
6,550,000
|
|
|
|
452
|
|
|
$
|
20,022
|
|
|
$
|
13,867
|
|
|
For
the nine months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Revenue
|
|
|
Gross
Margin
|
|
|
Acres
Sold
|
|
|
Revenue/Acre
|
|
|
Gross
Margin/ Acre
|
|
|
September
30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural
Residential
|
|
$
|
473,162
|
|
|
$
|
389,000
|
|
|
|
45
|
|
|
$
|
10,515
|
|
|
$
|
8,644
|
|
|
Commercial/business
park
|
|
$
|
230,000
|
|
|
$
|
166,000
|
|
|
|
1
|
|
|
$
|
230,000
|
|
|
$
|
166,000
|
|
|
Revenue
recognized on % complete for 2006 closings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
complete
for 2006 closings
|
|
$
|
1,097,000
|
|
|
$
|
649,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
Rentals
|
|
$
|
754,000
|
|
|
$
|
754,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
Other
|
|
|
14,000
|
|
|
|
14,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
September
30, 2007 Total
|
|
$
|
2,568,162
|
|
|
$
|
1,972,000
|
|
|
|
46
|
|
|
$
|
15,286
|
|
|
$
|
12,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural
Residential
|
|
$
|
1,463,000
|
|
|
$
|
1,044,000
|
|
|
|
282
|
|
|
$
|
5,188
|
|
|
$
|
3,702
|
|
|
Commercial/business
park
|
|
|
10,649,000
|
|
|
|
5,623,000
|
|
|
|
37
|
|
|
|
287,811
|
|
|
|
151,973
|
|
|
Raw
land sale
|
|
|
1,400,000
|
|
|
|
1,003,000
|
|
|
|
401
|
|
|
|
3,491
|
|
|
|
2,501
|
|
|
Rentals
|
|
|
760,000
|
|
|
|
760,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
Other
|
|
|
12,000
|
|
|
|
11,000
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
September
30, 2006 Total
|
|
$
|
14,284,000
|
|
|
$
|
8,441,000
|
|
|
|
720
|
|
|
$
|
18,767
|
|
|
$
|
10,653
|
|
Revenue
and operating income for the Real Estate segment were lower in the third
quarter
of 2007 compared to third quarter 2006 due to a reduction in land
sales. We are projecting a significant decrease in revenue from land
sales in 2007 relative to 2006. We do, however, expect to recognize
over $8.5 million of revenue in 2007 due to the recognition of deferred revenue
on two 2006 transactions. Our Real Estate segment had several large
transactions in 2006 that are not expected to recur in 2007. This is consistent
with our expected future performance in the Real Estate segment: we will
experience periods where we recognize limited or no revenues, even during
periods when we incur expenses, and will from time to time record relatively
large amounts of revenue upon sales of property or, where appropriate, when
all
contingencies and closing conditions have been satisfied or waived.
At
our
property in Gig Harbor, Washington, we closed on the sale of nearly 6 acres
of
retail pad sites to Northwest Capital Investors (“NCI”) in late
2006. Our agreement with NCI includes a rescission clause that can be
exercised by NCI if we do not complete the installation of utilities and
grading. As a result of this rescission clause, all of the revenue on
the transaction was deferred in 2006. We will complete most of this
work in 2007 and expect NCI’s rescission clause will be waived. As such, we
anticipate recognizing almost all of the $7.2 million of revenue with gross
profit of approximately $3.8 million in the fourth quarter of 2007. During
the
quarter ended September 30, 2007, we recognized $1.1 million of revenue with
an
estimated gross profit of $668,000 related to the Bremerton residential plat
sale that also closed in late 2006. This revenue is being recognized as
remaining commitments to install a storm water system and other infrastructure
are completed. At September 30, 2007, we have deferred revenue of
approximately $7.5 million with an estimated gross profit of $3.9 million,
which
we expect to recognize during the fourth quarter of 2007.
Our
rural
residential lot program produces lots up to 80 acres in size, based on
underlying zoning densities. This type of program typically entails an
entitlement effort more modest in scale, usually involving simple lot
segregations and boundary line adjustments. Development activities
include minor road building, surveying, and the extension of
utilities. We have a target of selling 150 to 300 acres annually from
this program but we have exceeded that target range for the last few years
as a
result of a strong market for this type of land in our
marketplace. We expect rural residential sales for the full year 2007
to total less than 50 acres due to softening in our local markets for rural
residential land
Cost
of Sales
Real
Estate cost of sales for the quarters ended September 30, 2007 and 2006 was
$543,000 and $2.8 million, respectively. On a year-to-date basis,
cost of sales was $596,000 and $5.8 million for the nine-month periods ended
September 30, 2007 and 2006, respectively. Cost of sales in 2007
represents the cost basis in two rural residential lots sold and cost basis
associated with the 2006 Bremerton residential sale. Cost of sales in
2006 represents the cost basis of the Nisqually Land Trust, Costco Wholesale
Corporation, YMCA and Poulsbo land sales as well as six rural residential
land
sales.
Operating
Expenses
Real
Estate operating expenses for the quarters ended September 30, 2007 and 2006
were $886,000 and $882,000, respectively. For the nine-month periods
ended September 30, 2007 and 2006 operating expenses were consistent at $2.5
million
.
These expenses represent
primarily personnel costs and professional service fees incurred to pursue
entitlements for real estate projects and routine maintenance costs
for the Port Gamble townsite.
Environmental
Remediation
The
Partnership has accrued liabilities for environmental cleanup of $164,000
and
$242,000 as of September 30, 2007 and December 31, 2006, respectively. This
accrual represents our estimated share of the liability for environmental
clean
up activities in and around the Port Gamble townsite following a
negotiated
settlement with Pope & Talbot, Inc. (“P&T”) in
2002.
Current activities at the site include monitoring to
determine if prior clean up activities were effective. Activity in
the environmental remediation liability is detailed as follows:
|
|
|
Balances
at Beginning of Period
|
|
|
Additions
to Accrual
|
|
|
Expenditures
for Monitoring and Remediation
|
|
|
Balances
at End of Period
|
|
|
|
Year
Ended December 31, 2006
|
|
$
|
158,000
|
|
|
$
|
260,000
|
|
|
$
|
176,000
|
|
|
$
|
242,000
|
|
|
Quarter
ended March 31, 2007
|
|
|
242,000
|
|
|
|
-
|
|
|
|
11,000
|
|
|
|
231,000
|
|
|
Quarter
ended June 30, 2007
|
|
|
231,000
|
|
|
|
-
|
|
|
|
36,000
|
|
|
|
195,000
|
|
|
Quarter
ended September 30, 2007
|
|
|
195,000
|
|
|
|
-
|
|
|
|
31,000
|
|
|
|
164,000
|
|
The
environmental remediation liability on the Partnership’s books is based upon an
estimate of the Partnership’s agreed upon portion of the cleanup
costs. While the majority of the Partnership’s portion of the cleanup
efforts is complete, there remains the possibility that the remaining
remediation or monitoring activities may exceed estimates, resulting in an
additional environmental remediation charge.
The
clean up activities at this site
have been shared with Pope & Talbot, Inc. under a contribution
agreement. On August 6, 2007 P&T announced that it had entered
into a forbearance agreement with its senior lenders. Following this
announcement and subsequent to the period covered by this report, on October
28,
2007 P&T filed a petition under Canadian bankruptcy laws seeking protection
from creditors in connection with restructuring the business. P&T has
announced that it intends to continue limited operations during its insolvency
proceedings but has given no assurance when or if it will exit bankruptcy
or
whether it will be able to satisfy its unsecured obligations. Based on these
and
similar announcements management believes there is a possibility that all
or
some portion of Pope & Talbot’s liability under the contribution agreement
will not be fulfilled and could have a material impact on our estimated
liability. Were P&T to fail to satisfy its cleanup obligations, the
Partnership may be liable for some or all of P&T’s share of remediation
costs. Management does not currently have enough information to estimate
the
certainty or the amount of any such liability. However, prior to seeking
protection from its creditors P&T had publicly reported a $1.2 million
liability accrual for environmental cleanup costs related to Port
Gamble.
General
and Administrative (G&A)
G&A
expenses for the quarters ended September 30, 2007 and 2006 were $957,000
and
$861,000, respectively. For the nine months ended September 30, 2007 and
2006
G&A expenses were $3.7 million and $2.8 million,
respectively. The increase in G&A expenses in 2007 is due
primarily to professional service fees incurred to evaluate capital structuring
alternatives with management and the Board of Directors of the General
Partner. This work has been completed. G&A expenses
for the remainder of 2007 are not expected to vary significantly from G&A
expenses incurred during the same period of 2006.
Interest
Income and Expense
Interest
income for the quarter ended September 30, 2007 increased to $453,000 from
$334,000 for the corresponding period of 2006. On a year-to-date
basis, interest income increased to $1.3 million from $805,000 for the
corresponding period in 2006. The increase in interest income is due
to higher cash and short-term investments balances.
Interest
expense prior to the reduction for capitalized interest declined from $667,000
for the three-month period ended September 30, 2006 to $637,000 for the
comparable period in 2007. Capitalized interest for the three-month periods
ended September 30, increased from $218,000 in 2006 to $294,000 in
2007. On a year-to-date basis, interest expense prior to the
reduction for capitalized interest decreased to $1.9 million from $2.0 million
for the corresponding period in 2006.
Capitalized interest
for
the nine months ended September 30 increased from $580,000 in 2006 to $812,000
in 2007. The decrease in interest expense is attributable to
regularly scheduled annual principal payments due on our timberland mortgage
while the increase in capitalized interest expense relates to the increase
in
basis on land projects that are currently under development. The
Partnership’s debt consists primarily of mortgage debt with a fixed interest
rate.
Income
Tax
Pope
Resources is a limited partnership and is, therefore, not subject to federal
income tax. Taxable income/loss is reported to unitholders each year on a
Form
K-1 for inclusion in each unitholder’s tax return. Pope Resources does have
corporate subsidiaries, however, that are subject to income tax.
For
the
quarter ended September 30, 2007 the Partnership recorded tax expense of
$5,000,
as compared to tax expense of $16,000 for the corresponding period in
2006. On a year-to-date basis, income tax expense was $22,000 and
$453,000 for the periods ended September 30, 2007 and 2006,
respectively. The decline in income tax expense on a year-to-date
basis is due to income tax expenses incurred in the first quarter of 2006
in
connection with receipt of an asset disposition fee that did not recur in
2007.
Minority
Interest - IPMB
“Minority
interest – IPMB” represents
that share of income earned from the Investor Portfolio Management Business
(IPMB) attributable to Pope MGP, Inc., the managing general partner of the
Partnership. The amendment to the Limited Partnership Agreement
authorizing the Partnership to pursue the IPMB further specifies that income
from the IPMB will be split using a sliding scale allocation method beginning
at
80% to the Partnership’s wholly-owned subsidiary, ORM, Inc., and 20% to Pope
MGP, Inc. The sliding scale allocation method evenly divides IPMB income
between
ORM, Inc. and Pope MGP, Inc. once such income reaches $7,000,000 in a given
fiscal year.
Current
activities of the IPMB are
contained in the Timberland Management & Consulting segment, which includes
timberland consulting, management, and expenses associated with the launch
of
our second private equity timber fund. The minority interest-IPMB
allocation of income in the third quarter of 2007 was zero and was a benefit
of
$7,000 in the comparable quarter in 2006. For the nine-months ended September
30, 2007 the minority interest-IPMB was zero and was an expense of $112,000
in
the comparable prior year period. Minority interest-IPMB allocation
in 2007 reflects the reduction in the per-acre management fee rate for our
primary timberland management client, and expenses associated with launching
our
second timber fund. In 2006 the benefit resulted from losses incurred in
these
businesses as we adjusted to a reduction in acres under management.
Minority
Interest-ORM Timber Fund I, LP
“Minority
Interest-ORM Timber Fund I,
LP” represents that portion of the Fund’s income or loss attributed to the 80%
of the Fund owned by third-party investors. The increase in this
amount in both the third quarter and first nine months of 2007 from the
comparable periods in prior year is due to the increase in operating activities
of the Fund given its acquisition of timberland in late 2006.
Off
Balance Sheet Arrangements
We
do not
have any off balance sheet arrangements.
Liquidity
and Capital Resources
We
ordinarily finance our business activities using funds from operations and,
where appropriate in management’s assessment, bank lines of credit. Funds
generated internally from operations and externally through financing are
expected to provide the required resources for the Partnership's future capital
expenditures. The Partnership’s debt-to-total-capitalization ratio as measured
by the book value of equity was 25% at September 30, 2007 versus 27% as of
December 31, 2006. The Partnership’s debt consists primarily of a
timberland mortgage with a fixed amortization schedule and loan term, which
includes a prepayment penalty. We currently operate without an
operating line of credit due to the cash we hold in excess of our current
operating needs. We will continue to monitor and forecast our
expected cash requirements and may re-establish a line of credit if a need
for
additional liquidity should arise.
Over
the
remaining three months of 2007, management plans to harvest approximately
7 MMBF
of timber, 6 MMBF of which will come from the Hood Canal and Columbia tree
farms
and 1 MMBF from the Fund’s tree farms, for a total fiscal 2007 harvest of 55
MMBF. Since harvest plans are based on demand and pricing, actual harvesting
may
vary subject to management's ongoing review.
For
the
nine months ended September 30, 2007, overall cash and cash equivalents
decreased $3.3 million versus an increase of $302,000 for the corresponding
period in the prior year. Cash generated by operating activities was
$12.0 million for the nine months ended September 30, 2007 versus $28.5 million
of cash generated by operating activities for the corresponding period in
2006. The decrease in cash generated by operating activities
primarily results from a decrease in timber volume harvested and a decrease
in
Real Estate sales.
Cash
used
for investing activities decreased to $9.4 million for the nine months ended
September 30, 2007 from $23.0 million for the corresponding period in
2006. The change in cash used in investing activities is primarily
the result of a decrease in cash from investing in auction rate securities
combined with a decrease in capital expenditures at our project in Gig
Harbor. Capital expenditures of $7.4 million in the first nine months
of 2007 included the following: $1.6 million for a development property
acquisition adjacent to the Port Gamble townsite; development expenditures
of
$961,000 related to the Gig Harbor project; $1.8 million related to our project
in Bremerton; capitalized interest of $812,000; $636,000 of other capitalized
development costs; reforestation and roads costs of $699,000, vehicle
replacement costs of $217,000, capitalized improvement costs at the Port
Gamble
townsite of $247,000, and $441,000 for various other building and equipment
items
Investing
activities in 2006 consisted of the purchase of $14.0 million of auction
rate
securities and $9.0 million of capital expenditures. Year-to-date
capital expenditures in 2006 consisted of the following: $5.6 million of
capitalized development costs at the Gig Harbor site; $580,000 of interest
capitalized to the Gig Harbor project, $1.1 million of capitalized development
costs at the Bremerton project, $513,000 of capitalized development
costs on the Partnership’s other development properties; $667,000 of
reforestation and road building costs on the owned timberlands; $328,000
of
capital improvements at the Port Gamble townsite; and $133,000 of other
miscellaneous capital expenditures.
Seasonality
Fee
Timber.
The
Partnership owns 114,000 acres of timberland in Washington State. Our timber
acreage is concentrated in two non-contiguous tree farms: the 70,000-acre
Hood
Canal tree farm located in Kitsap, Jefferson, and Mason Counties on the eastern
side of Washington’s Olympic Peninsula, and the 44,000-acre Columbia tree farm
located in Cowlitz, Clark, Lewis, Skamania, and Pierce counties on the western
side of Washington’s Cascade mountain range. The Fund owns
24,000 acres of timberland, two-thirds of which is in eastern King County
with
the remainder in Lewis County.
The
Hood
Canal tree farm is concentrated at low elevations, which permits us to harvest
trees year-round. Generally, we concentrate our harvests from this tree farm
in
the winter and spring when supply, and thus competition, is typically lower
and,
accordingly, when we can expect to receive higher prices. However, in late
2006,
log prices softened as lumber prices declined on news of the slowdown in
residential real estate sales. As a result, in 2007, we moderated the
front loading of our 2007 harvest.
With
the
acquisition of the Columbia tree farm in 2001, management expected a decrease
in
the seasonality of Fee Timber operations as the Columbia tree farm is at
higher
elevations where harvest activities are generally possible only in the late
spring and summer months. In practice, over the last several years our harvest
has tended to be more front-loaded, as log prices have been relatively strong
in
the first half of the year coupled with mild winter weather and low snowpack
enabling management to front-load the harvest plan. As noted above this trend
has been broken in 2007. The timberlands owned by the Fund are at
elevations similar to the Columbia tree farm. In future
periods, management expects quarterly harvest volume to be affected by both
local market conditions for logs and weather conditions.
Timberland
Management &
Consulting.
In
broad terms, Timberland
Management & Consulting operations are not
currently seasonal. Our timberland consulting operations at McCloud,
California are, however, concentrated primarily in the summer
months.
Real
Estate.
While
Real Estate results are not expected to be seasonal, the nature of the
activities in this segment will likely result in periodic large transactions
that will have significant positive impacts on both revenue and operating
income
of the Partnership in periods in which these transactions close, and relatively
limited revenue and income in other periods. While the “lumpiness” of these
results is not primarily a function of seasonal weather patterns, we do expect
to see some seasonal fluctuations in this segment because of the general
effects
of weather on Pacific Northwest development activities.
Capital
Expenditures and Commitments
We
are
currently seeking capital commitments from certain institutional investors
for
ORM Timber Fund II (“Fund II”). Our current plans for this second
fund are to raise $100 million of equity capital, with Pope Resources investing
20% of this amount, or $20 million. The majority of this
capital will not be called until Fund II has located suitable timber properties
to acquire. Meanwhile, the outstanding commitment for ORM Timber Fund
I, LP of $642,000 expired unused on August 1, 2007 following a deployment
of
$58.5 million, including the Partnership’s investment of $11.7
million.
Total
capital expenditures in 2007 are expected to approximate $9.4 million, of
which
$7.4 million has been expended through September 30, 2007. The
anticipated capital expenditures for the balance of 2007 include $1.0 million
related to the Real Estate project at Gig Harbor, Washington, of which $350,000
pertains to capitalized interest, and $800,000 for the Bremerton West Hills
property, of which $60,000 pertains to capitalized
interest. Remaining planned capital expenditures are related to
various property development projects, capitalized reforestation costs, and
capital improvements at the Port Gamble townsite. The Partnership
expects that the source of capital for these expenditures will be primarily
funds generated internally through operations supplemented by external financing
as necessary.
ACCOUNTING
MATTERS
Critical
Accounting Policies and Estimates
Management
believes its most critical
accounting policies and estimates relate to management’s calculation of timber
depletion and liabilities for matters such as environmental remediation,
and
potential asset impairments. In relation to liabilities,
potential impairments and other estimated charges, it is management’s policy to
conduct ongoing reviews of significant accounting policies and assumptions
used
in the preparation of the financial results of the Partnership. The assumptions
used are tested against available and relevant information and reviewed with
subject-matter experts for consistency and reliability. During the preparation
of financial results, tests are conducted to ascertain that the net book
carrying values of assets are not in excess of estimated future cash
flows. These tests use current market information, if available, or
other generally accepted valuation methods, such as future cash flows. When
the
use of estimates is necessary, an exact answer is unlikely, and therefore,
the
reporting within a range of likely outcomes is used in the preparation of
the
financial statements. Tests are also applied in order to be reasonably assured
that liabilities are properly reflected on the records of the Partnership
and
that the notes to the financial statements are prepared in a fashion that
informs readers of possible outcomes and risks associated with the conduct
of
business.
Consolidation
of ORM Timber Fund I, LP (the Fund):
The Fund is owned
19% by Pope Resources, A Delaware Limited Partnership, 1% by Olympic Resource
Management LLC and 80% by third-party investors. Olympic Resource
Management LLC is the general partner of the Fund and earns management fees
for
managing the Fund and its properties. Transactions between the Fund
and Pope Resources and its subsidiaries are eliminated in consolidation.
The
portion of loss attributed to the 80% of the Fund not owned by us is reported
as
Minority Interest-ORM Timber Fund I, LP.
Purchased
Timberlands Allocation:
When the Partnership acquires
timberlands, a purchase price allocation is performed that allocates the
acquisition cost between the categories of merchantable timber, premerchantable
timber, and land based upon the relative fair values pertaining to each of
the
categories. When timberland is acquired the land is evaluated for
current value. To the extent the land has value under current market
conditions as something other than timberland, generally referred to as HBU
(or
“higher-and-better-use”), we assign a value greater than that typically
associated with timberland.
Depletion-Cost
Pools:
Depletion
represents the
cost of timber harvested and is charged to operations by applying a depletion
rate to volume harvested during the period. The depletion rate is
calculated in January each year by dividing the Partnership’s cost of
merchantable timber by the volume of merchantable
timber. Merchantable timber is defined as timber that is equal to or
greater than 40 years of age.
To
calculate the depletion rate, the
Partnership combines all properties with similar characteristics and uses
one
depletion rate for all volume harvested from that timberland cost
pool. Each timberland acquisition is evaluated for consistency with
the already established timberland portfolio using the following five
characteristics
:
|
|
1.
|
Management-Will
the acquisition be managed as part of the existing cost
pool?
|
|
|
2.
|
Location-Is
the tree farm in the same geography as the existing timberland
cost
pool?
|
|
|
3.
|
Products-Will
the products harvested from the acquisition be substantially similar
to
those harvested from the existing cost
pool?
|
|
|
4.
|
Customers/Markets-Will
the harvest from the acquisition be sold to the same customers/markets
as
logs harvested from the existing cost
pool?
|
|
|
5.
|
Stocking-Are
the acres in the acquisition of a similar age class distribution
to the
existing cost pool? (If the premerchantable timberland acres in
the acquisition are less than 50% of total acres, stocking on the
acquisition will be deemed sufficiently different and strongly
indicate
that a separate pool is
appropriate.)
|
Depletion-Estimated
Volume:
Inventory volumes take into account the
applicable state and federal regulatory limits on timber harvests as applied
to
the Partnership’s properties, including the Forests and Fish law that
supplements Washington State’s forest practice regulations to provide for
expanded riparian management zones, wildlife leave trees, and other harvest
restrictions. Timber inventory volume is tracked by the Partnership's
standing timber inventory system, which utilizes annual statistical sampling
of
the timber (cruising) with annual adjustments made for estimated growth and
the
depletion of areas harvested.
The
standing inventory system is subject to two processes each year to monitor
accuracy. The first is the annual cruise process and the second is a
comparison of (a) volume actually extracted by harvest, to (b) inventory
for the
corresponding stands of harvested timber in the standing inventory system
at the
time of the harvest. A “cruise” represents a physical measurement of
timber on a specific set of acres. The cruise process is completed
when the physical measurement totals are compared to the inventory in the
standing inventory system. The standing inventory system is then
updated for the results of the cruise. Only productive acres with
timber that is at least 20 years old are selected to cruise. We plan
to cruise 20% of such acres in 2007 and each year
thereafter. Specific acres are first selected for cruising with a
bias towards those acres that have gone the longest without a cruise and,
second, with a bias towards those acres that have been growing the
longest. As the cruise is being performed, only those trees with a
breast-height diameter (approximately 4.5 feet from the ground) of at least
6
inches are measured for inclusion in the inventory.
Environmental
Remediation
: The environmental remediation liability
represents estimated payments to be made to monitor (and remedy if necessary)
certain areas in and around the townsite and millsite of Port Gamble,
Washington. Port Gamble is a historic town that was owned and
operated by Pope & Talbot, Inc. (“P&T”) until 1985 when the townsite and
other assets were spun off to the Partnership. P&T continued to
operate the townsite until 1996 and leased the millsite at Port Gamble through
January 2002, at which point P&T signed an agreement with the Partnership
dividing the responsibility for environmental remediation of Port Gamble
between
the two parties.
The
environmental remediation liability on the Partnership’s books is based upon an
estimate of the Partnership’s portion of the clean-up costs under this agreement
with P&T. While the majority of the Partnership’s portion of the
clean up efforts is complete, there remains the possibility that the remaining
remediation or monitoring activities may exceed estimates
,
both because of variations
in
the projected overall costs and because of the possibility that P&T’s
current financial condition may render P&T unable to satisfy all or a
portion of its remaining obligations. As mentioned above, and
subsequent to the period covered by this report, on October 28, 2007 P&T
filed a petition under Canadian bankruptcy laws seeking protection from
creditors in connection with restructuring the business. P&T has announced
that it intends to continue limited operations during its insolvency proceedings
but has given no assurance when or if it will exit bankruptcy or whether
it will
be able to satisfy its unsecured obligations. These factors may result in
the
Partnership recording additional environmental remediation costs or
reserves. Management will continue to monitor the remaining liability
against estimates to complete to determine if an adjustment to the environmental
remediation liability is necessary to accurately represent management’s estimate
of remaining cost to complete the project.
Property
Development Costs:
The Partnership is developing
several master planned communities with the Gig Harbor and Bremerton projects
the most notable currently. Costs of development, including interest,
are capitalized for these projects and allocated to individual lots based
upon
their relative preconstruction value. This allocation of basis
supports, in turn, the computation of those amounts reported as a current
vs.
long-term asset (“Land Held for Sale” and “Land Held for Development”,
respectively). As lot sales occur, the allocation of these costs becomes
part of
cost of sales attributed to individual lot sales. Costs associated
with land including acquisition, project design, architectural costs, road
construction, and utility installation are accounted for as investment
activities (as opposed to an operating activity) on our statement of cash
flows. These investments are often made for a number of years prior
to the realization of revenue from the disposition of these
properties. Cash generated from the sale of these properties is
classified as an operating activity on our cash flow statement as the sale
of
these properties is the main operating activity of our Real Estate
segment.
Percentage
of Completion Revenue
Recognition
:
The
Partnership accounts for revenue recognized from development sales consistent
with Statement of Financial Accounting Standards No. 66 Accounting for Sales
of
Real Estate. When a real estate transaction is closed
with significant outstanding obligations to complete infrastructure or other
construction, revenue is recognized on a percentage of completion method
by
calculating a ratio of costs incurred to total costs
expected. Revenue is deferred by the ratio of remaining costs to
complete. As a result of this accounting, at September 30, 2007, the
Partnership has deferred $231,000 of revenue related to the Bremerton West
Hills
closing. An additional $7.2 million of revenue related to the Gig
Harbor retail pad closing has been deferred due to a rescission clause in
the
purchase and sale agreement that can be exercised by the buyer if we do not
complete certain infrastructure improvements.
Interest
Rate Risk
As
of
September 30, 2007, 2007, the Partnership had $30.8 million of fixed-rate
debt
outstanding with a fair value of approximately $32.3 million based on the
current interest rates for similar financial instruments. A change in the
interest rate on fixed-rate debt will affect the fair value of the debt,
whereas
a change in the interest rate on variable-rate debt will affect interest
expense
and cash flows. A hypothetical 1% change in prevailing interest rates would
change the fair value of the Partnership's fixed-rate long-term debt obligations
by approximately $1.0 million.
The
Partnership’s management maintains
a system of internal controls, which management views as adequate to promote
the
timely identification and reporting of material, relevant
information. Those controls include (1) requiring executive
management and all managers in accounting roles to sign and adhere to a Code
of
Conduct and (2) implementation of a confidential hotline for employees to
contact the Audit Committee directly with financial reporting
concerns. Additionally, the Partnership’s senior management
team meets regularly to discuss significant transactions and events affecting
the Partnership’s operations. The Partnership’s President & Chief
Executive Officer and Vice President & Chief Financial Officer (“Executive
Officers”) lead these meetings and consider whether topics discussed represent
information that should be disclosed under generally accepted accounting
principles and the rules of the SEC. The Board of Directors of
the Partnership’s general partner includes an Audit Committee. The
Audit Committee reviews the earnings release and all reports on Form 10-Q
and
10-K prior to their filing. The Audit Committee is responsible for hiring
the
Partnership’s external auditors and meets with those auditors at least eight
times each year.
Our
Executive Officers are responsible
for establishing and maintaining disclosure controls and
procedures. They have designed such controls to ensure that others
make all material information known to them within the
organization. Management regularly evaluates ways to improve internal
controls.
As
of the end of the period covered by
this quarterly report on Form 10-Q our Executive Officers completed an
evaluation of the disclosure controls and procedures and have determined
them to
be effective. There have been no changes to internal controls over
financial reporting that materially affected, or that are reasonably likely
to
materially affect, our internal control over financial
reporting.
From
time to time, the Partnership may
be subject to legal proceedings and claims that may have a material adverse
impact on its business. Management is not aware of any current legal proceedings
or claims that are expected to have, individually or in the aggregate, a
material adverse impact on its business, prospects, financial condition or
results of operations.
Our
business is subject to a number of risks and uncertainties, any one or more
of
which could impact our operating results and financial condition materially
and
adversely. Some of these risks are discussed in greater detail below, arranged
according to business segment. In addition, we face a number of risks that
affect our business generally. We compete against much larger companies in
each
of our business segments. These larger competitors may have access to larger
amounts of capital and significantly greater economies of scale. Land ownership
carries with it the risk of incurring liabilities due to accidents that take
place on the land and previously undiscovered environmental contamination.
The
Partnership endeavors to maintain adequate accruals to reflect the cost of
remediating known environmental contamination and other liabilities resulting
from land ownership. However these estimates may prove to be
inadequate as additional information is discovered. A more thorough discussion
of the risks and uncertainties that may affect our business is contained
in the
Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and
in
our various other filings with the Securities and Exchange Commission. Readers
should review these risks in deciding whether to invest in Partnership units,
and should recognize that those factors are not an exhaustive list of risks
that
could cause us to deviate from management’s expectations. Readers also are
cautioned that, in reviewing these risk factors, the factors contained in
this
report and in our other SEC filings are effective as of the date the filing
was
made, and we cannot undertake to update those disclosures.
Fee
Timber
Fee
Timber
revenue is generated primarily through the sale of softwood logs to both
domestic mills and third-party intermediaries that resell to the export market.
The domestic market for logs in the Puget Sound region of Washington State
has
been impacted by imported lumber from Canada and decreased demand for lumber
as
engineered wood products have gained market acceptance in the
U.S. These factors have had the effect of concentrating mill
ownership with larger mill operators and decreasing the number of mills
operating in the Puget Sound region. If this trend continues,
decreases in local demand for logs may decrease our profitability. Recent
strengthening of the Canadian dollar has decreased the volume of lumber and
logs
exported from Canada into the U.S. To the extent this trend was to
reverse, log supplies in the U.S. may increase, resulting in a decrease in
log
prices.
Moreover,
housing construction starts domestically and abroad tend to correlate positively
with the demand for timber and timber products. During periods in which housing
starts decline, timber companies, including the Partnership, often experience
decreases in log prices and, where such declines are protracted or severe,
price
declines can have a material adverse impact upon Fee Timber revenues. Among
the
factors currently affecting U.S. domestic housing demand are increasing interest
rates and a growing economic uncertainty fueled, among other things, by a
perceived increased risk in mortgage markets. These factors are expected
to
continue for the remainder of 2007 or longer and are likely to create further
downward pressure on log prices. As a result, we expect the trend of lower
log
prices to continue or worsen, and if these circumstances become protracted,
we
may experience adverse impacts upon our Fee Timber income which may have
a
material adverse effect upon our results of operations.
Additionally,
over the last few years the Partnership has seen the price of logs erode
in the
Japanese market as competing logs and lumber from regions outside of the
U.S.
and engineered wood products have gradually gained market acceptance. These
export markets for Pacific Northwest logs are significantly affected by
fluctuations in U.S. and Japanese economies, foreign currency exchange rate
between the Japanese yen and the U.S. dollar, and finally shipping costs
between
the U.S. and Japan.
Our
ability to grow and harvest timber can be significantly impacted by legislation,
regulations or court rulings that restrict or stop forest practices.
Restrictions on logging, planting, road building, fertilizing, managing
competing vegetation and other activities can significantly increase the
cost or
reduce available inventory thereby reducing income.
Timberland
Management & Consulting
The
Timberland Management & Consulting (TM&C) segment is currently operating
with one major timberland management client. Management is working to
expand our fee-for-service business in part through the launch of the timber
fund business. The TM&C segment will be paid management fees from the Fee
Timber segment where the Fund’s primary activities are reported. To
date we have closed and fully invested the capital from ORM Timber
Fund I, LP and we are working on obtaining capital commitments for ORM Timber
Fund II, our second timber fund. Unlike other components of our
business, which relate solely or primarily to real estate and timber operations,
this line of business carries risks relating to the offer and sale of
securities, and to the management of investment operations, including potential
liability to investors if we are determined to have made material misstatements
or omissions to those investors, potential accusations that we have breached
fiduciary duties to other limited partners, and similar types of investor
action. Moreover, litigation of shareholder-related matters can be expensive
and
time consuming, and if brought, would likely distract management from their
focus on ordinary operating activities.
Real
Estate
The
value of our real estate
investments is subject to changes in the economic and regulatory environment,
as
well as various land use regulations and development risks, including the
ability to obtain the necessary permits and zoning variances that would allow
us
to maximize our revenue from our real estate investments. Our real estate
investments are long-term in nature, which raises the risk that unforeseen
changes in the economy or laws surrounding development activities may have
an
adverse affect on our investments. Moreover, these investments often are
highly
illiquid and thus may not generate cash flow if and when needed to support
our
other operations.
Environmental
Remediation
We
maintain on our balance sheet a liability reflecting our estimate of the
Partnership’s liabilities for environmental remediation for the Port Gamble
townsite. That liability is shared with Pope & Talbot, Inc. (“P&T”),
under a contribution agreement. The contribution agreement, however, does
not
completely limit the Partnership’s liability for environmental damages at Port
Gamble. Among other things, the Partnership may have liability for remediation
costs in excess of the estimated amounts if and to the extent P&T fails to
satisfy its obligations under the contribution agreement. On October 28,
2007,
following the period covered by this report, P&T announced that it had
commenced a proceeding to obtain protection from its creditors under Canadian
bankruptcy laws while it seeks to restructure its business. P&T had
previously entered into forbearance arrangements with certain of its lenders,
one of the provisions of which required P&T to seek offers from others to
buy P&T’s assets or equity interests. These and other announcements,
including qualifications in P&T’s reported financial statements about its
ability to continue as a going concern, raise substantial doubt about the
firm’s
solvency. These issues necessarily cause management to question
P&T’s ability to contribute financially to the environmental
remediation of Port Gamble. The Partnership’s management does not currently have
enough information to estimate the amount of this liability, but we note
that
P&T’s publicly reported financial statements reflect a $1.2 million
liability accrual for environmental remediation related to Port
Gamble.
Were
P&T to fail to satisfy its obligations under the contribution agreement,
whether because of its solvency issues or otherwise, the Partnership’s liability
for Port Gamble remediation costs may increase, and those increases may be
material to the Partnership. Moreover, to the extent there arises substantial
doubt about P&T’s ability to satisfy its liabilities, the Partnership may be
required to increase its liability for its estimates for environmental
remediation, which would be reflected in a charge to earnings during the
period
in which the estimated liability is increased. We are still assessing the
potential implications of this new information about P&T for the sharing of
remediation costs at Port Gamble.
(a)
–
(e)
None
None
None
(a) None
|
|
(b)
|
There
have been no material changes in the procedures for shareholders
of the
Partnership’s general partner to nominate directors to the
board.
|
Exhibits
.
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule
13a-14(a).
|
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule
13a-14(a).
|
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(b) and 18 U.S.C.
Section 1350 (furnished with this report in accordance with SEC
Rel. No.
33-8238.
|
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C.
Section 1350 (furnished with this report in accordance with SEC
Rel. No.
33-8238.
|
|
|
99.1
|
Press
release announcing quarterly financial results, incorporated by
reference
to the registrant’s Current Report on Form 8-K filed on October 31,
2007.
|
|
|
99.1
|
Press
release announcing unit repurchase plan, incorporated by reference
to the
registrant’s Current Report on Form 8-K filed on October 31,
2007
|
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, on November 7, 2007.
|
|
POPE
RESOURCES,
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|
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A
Delaware Limited Partnership
|
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POPE
MGP, Inc.
|
|
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Managing
General Partner
|
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|
|
|
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|
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|
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By:
/s/ David L. Nunes
|
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David
L. Nunes
|
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|
|
President
and Chief Executive Officer
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(Principal
Executive Officer)
|
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By:
/s/ Thomas M. Ringo
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Thomas
M. Ringo
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Vice
President and CFO
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(Principal
Accounting and Financial Officer)
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33
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