( X )
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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( )
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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91-1313292
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification Number)
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Large Accelerated Filer o
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Accelerated Filer x
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Emerging growth company o
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Non-accelerated Filer o
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Smaller Reporting Company o
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Depositary Receipts (Units)
|
POPE
|
NASDAQ Capital Market
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Description
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Page Number
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2020
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|
2019
|
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Partnership cash
|
$
|
2,740
|
|
|
$
|
2,030
|
|
ORM Timber Funds cash
|
9,575
|
|
|
6,197
|
|
||
Cash
|
12,315
|
|
|
8,227
|
|
||
Restricted cash
|
770
|
|
|
810
|
|
||
Total cash and restricted cash
|
13,085
|
|
|
9,037
|
|
||
Accounts receivable, net
|
4,618
|
|
|
3,824
|
|
||
Contract assets
|
2,361
|
|
|
2,765
|
|
||
Prepaid expenses and other current assets
|
1,405
|
|
|
1,385
|
|
||
Total current assets
|
21,469
|
|
|
17,011
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|
||
Properties and equipment, at cost
|
|
|
|
|
|
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Timber and roads
|
359,354
|
|
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367,305
|
|
||
Timberland
|
77,064
|
|
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77,035
|
|
||
Land held for development
|
20,264
|
|
|
20,223
|
|
||
Buildings and equipment, net of accumulated depreciation (2020 - $8,366; 2019 - $8,214)
|
5,208
|
|
|
5,340
|
|
||
Total properties and equipment, at cost
|
461,890
|
|
|
469,903
|
|
||
Other assets
|
6,503
|
|
|
6,635
|
|
||
Total assets
|
$
|
489,862
|
|
|
$
|
493,549
|
|
|
|
|
|
||||
LIABILITIES, PARTNERS’ CAPITAL AND NONCONTROLLING INTERESTS
|
|
|
|
|
|
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Current liabilities
|
|
|
|
|
|
||
Accounts payable
|
$
|
2,939
|
|
|
$
|
1,700
|
|
Accrued liabilities
|
5,675
|
|
|
7,165
|
|
||
Current portion of long-term debt - Partnership
|
134
|
|
|
133
|
|
||
Current portion of long-term debt - Funds
|
24,994
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|
|
24,990
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|
||
Deferred revenue
|
445
|
|
|
223
|
|
||
Current portion of environmental remediation liability
|
993
|
|
|
1,104
|
|
||
Other current liabilities
|
1,125
|
|
|
1,399
|
|
||
Total current liabilities
|
36,305
|
|
|
36,714
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|
||
Long-term debt, net of unamortized debt issuance costs and current portion - Partnership
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104,389
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96,406
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Long-term debt, net of unamortized debt issuance costs and current portion - Funds
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32,347
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|
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32,345
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|
||
Environmental remediation and other long-term liabilities
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9,068
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|
|
9,091
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|
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Partners’ capital and noncontrolling interests
|
|
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|
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General partners' capital (units issued and outstanding 2020 - 60; 2019 - 60)
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645
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|
|
751
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Limited partners' capital (units issued and outstanding 2020 - 4,273; 2019 - 4,258)
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34,565
|
|
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42,010
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|
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Noncontrolling interests
|
272,543
|
|
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276,232
|
|
||
Total partners’ capital and noncontrolling interests
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307,753
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|
|
318,993
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|
||
Total liabilities, partners’ capital and noncontrolling interests
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$
|
489,862
|
|
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$
|
493,549
|
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Three Months Ended March 31,
|
||||||
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2020
|
|
2019
|
||||
Revenue
|
$
|
24,385
|
|
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$
|
25,042
|
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Cost of sales
|
(18,515
|
)
|
|
(16,608
|
)
|
||
Operating expenses
|
(4,826
|
)
|
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(4,294
|
)
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||
General and administrative expenses
|
(7,496
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)
|
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(1,764
|
)
|
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Income (loss) from operations
|
(6,452
|
)
|
|
2,376
|
|
||
|
|
|
|
||||
Interest expense, net
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(1,443
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)
|
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(1,515
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)
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||
|
|
|
|
||||
Income (loss) before income taxes
|
(7,895
|
)
|
|
861
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|
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Income tax benefit (expense)
|
265
|
|
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(94
|
)
|
||
Net and comprehensive income (loss)
|
(7,630
|
)
|
|
767
|
|
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|
|
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||||
Net and comprehensive loss attributable to noncontrolling interests - ORM Timber Funds
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3,460
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2,528
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Net and comprehensive loss attributable to noncontrolling interests - Real Estate
|
229
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|
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16
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|
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Net and comprehensive income (loss) attributable to unitholders
|
$
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(3,941
|
)
|
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$
|
3,311
|
|
|
|
|
|
||||
Allocable to general partners
|
$
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(55
|
)
|
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$
|
46
|
|
Allocable to limited partners
|
(3,886
|
)
|
|
3,265
|
|
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Net and comprehensive income (loss) attributable to unitholders
|
$
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(3,941
|
)
|
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$
|
3,311
|
|
|
|
|
|
||||
Basic and diluted earnings (loss) per unit attributable to unitholders
|
$
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(0.92
|
)
|
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$
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0.75
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|
|
|
|
|
||||
Basic and diluted weighted average units outstanding
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4,330
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|
|
4,325
|
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||
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|
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|
||||
Distributions per unit
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$
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1.00
|
|
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$
|
1.00
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|
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Attributable to Pope Resources
|
|
|
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|||||||||||
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Units
|
|
General Partners
|
|
Limited Partners
|
|
Noncontrolling Interests
|
|
Total
|
|||||||||
December 31, 2019
|
4,318
|
|
|
$
|
751
|
|
|
$
|
42,010
|
|
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$
|
276,232
|
|
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$
|
318,993
|
|
Net loss
|
—
|
|
|
(55
|
)
|
|
(3,886
|
)
|
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(3,689
|
)
|
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(7,630
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)
|
||||
Cash distributions
|
—
|
|
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(61
|
)
|
|
(4,306
|
)
|
|
—
|
|
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(4,367
|
)
|
||||
Equity-based compensation
|
15
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|
|
10
|
|
|
747
|
|
|
—
|
|
|
757
|
|
||||
March 31, 2020
|
4,333
|
|
|
$
|
645
|
|
|
$
|
34,565
|
|
|
$
|
272,543
|
|
|
$
|
307,753
|
|
|
|
|
Attributable to Pope Resources
|
|
|
|
|
|||||||||||
|
Units
|
|
General Partners
|
|
Limited Partners
|
|
Noncontrolling Interests
|
|
Total
|
|||||||||
December 31, 2018
|
4,313
|
|
|
$
|
944
|
|
|
$
|
56,533
|
|
|
$
|
281,123
|
|
|
$
|
338,600
|
|
Net income (loss)
|
—
|
|
|
46
|
|
|
3,265
|
|
|
(2,544
|
)
|
|
767
|
|
||||
Cash distributions
|
—
|
|
|
(61
|
)
|
|
(4,305
|
)
|
|
(3,076
|
)
|
|
(7,442
|
)
|
||||
Capital call
|
—
|
|
|
—
|
|
|
—
|
|
|
17,259
|
|
|
17,259
|
|
||||
Preferred stock issuance
|
—
|
|
|
—
|
|
|
—
|
|
|
125
|
|
|
125
|
|
||||
Equity-based compensation
|
17
|
|
|
8
|
|
|
585
|
|
|
—
|
|
|
593
|
|
||||
Units issued under distribution reinvestment plan
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
||||
Unit repurchases
|
(3
|
)
|
|
—
|
|
|
(166
|
)
|
|
—
|
|
|
(166
|
)
|
||||
Payroll taxes paid on unit net settlements
|
(1
|
)
|
|
(1
|
)
|
|
(78
|
)
|
|
—
|
|
|
(79
|
)
|
||||
March 31, 2019
|
4,326
|
|
|
$
|
936
|
|
|
$
|
55,858
|
|
|
$
|
292,887
|
|
|
$
|
349,681
|
|
|
2020
|
|
2019
|
||||
Net income (loss)
|
$
|
(7,630
|
)
|
|
$
|
767
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities
|
|
|
|
|
|
||
Depletion
|
8,875
|
|
|
6,534
|
|
||
Equity-based compensation
|
757
|
|
|
593
|
|
||
Depreciation and amortization
|
186
|
|
|
166
|
|
||
Deferred taxes
|
(203
|
)
|
|
23
|
|
||
Cost of land sold
|
—
|
|
|
2
|
|
||
Loss from unconsolidated real estate joint venture
|
327
|
|
|
9
|
|
||
Gain on disposal of property and equipment
|
—
|
|
|
(61
|
)
|
||
Cash flows from changes in operating accounts
|
|
|
|
|
|
||
Accounts receivable, net
|
(795
|
)
|
|
(2,026
|
)
|
||
Prepaid expenses, contract assets, and other assets
|
419
|
|
|
517
|
|
||
Real estate project expenditures
|
(55
|
)
|
|
(1,023
|
)
|
||
Accounts payable and accrued liabilities
|
(252
|
)
|
|
(736
|
)
|
||
Deferred revenue
|
222
|
|
|
86
|
|
||
Environmental remediation payments
|
(112
|
)
|
|
(158
|
)
|
||
Other current and long-term liabilities
|
(295
|
)
|
|
285
|
|
||
Net cash provided by operating activities
|
1,444
|
|
|
4,978
|
|
||
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
|
||
Reforestation and roads
|
(931
|
)
|
|
(644
|
)
|
||
Capital expenditures
|
—
|
|
|
(252
|
)
|
||
Proceeds from sale of property and equipment
|
—
|
|
|
71
|
|
||
Investment in unconsolidated real estate joint venture
|
(46
|
)
|
|
—
|
|
||
Deposit for acquisition of timberland - Partnership
|
—
|
|
|
(5
|
)
|
||
Acquisitions of timberland - Partnership
|
(19
|
)
|
|
(16
|
)
|
||
Acquisitions of timberland - Funds
|
—
|
|
|
(19,344
|
)
|
||
Net cash used in investing activities
|
(996
|
)
|
|
(20,190
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
|
||
Line of credit borrowings
|
9,000
|
|
|
4,500
|
|
||
Line of credit repayments
|
(1,000
|
)
|
|
(2,400
|
)
|
||
Proceeds from issuance of long-term debt
|
—
|
|
|
3,000
|
|
||
Repayment of long-term debt
|
(33
|
)
|
|
(32
|
)
|
||
Proceeds from unit issuances - distribution reinvestment plan
|
—
|
|
|
24
|
|
||
Unit repurchases
|
—
|
|
|
(166
|
)
|
||
Proceeds from preferred stock issuance - ORM Timber Funds
|
—
|
|
|
125
|
|
||
Payroll taxes paid on unit net settlements
|
—
|
|
|
(79
|
)
|
||
Cash distributions to unitholders
|
(4,367
|
)
|
|
(4,366
|
)
|
||
Cash distributions - ORM Timber Funds, net of distributions to Partnership
|
—
|
|
|
(3,076
|
)
|
||
Capital call - ORM Timber Funds, net of Partnership contribution
|
—
|
|
|
17,259
|
|
||
Net cash provided by financing activities
|
3,600
|
|
|
14,789
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and restricted cash
|
4,048
|
|
|
(423
|
)
|
||
Cash and restricted cash at beginning of period
|
9,037
|
|
|
6,057
|
|
||
Cash and restricted cash at end of period
|
$
|
13,085
|
|
|
$
|
5,634
|
|
1.
|
The condensed consolidated balance sheets as of March 31, 2020, and December 31, 2019, and the related condensed consolidated statements of comprehensive income, partners’ capital and noncontrolling interests, and cash flows for the three-month periods ended March 31, 2020, and 2019, have been prepared by Pope Resources, A Delaware Limited Partnership (the “Partnership”), pursuant to the rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments and accruals) necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods. The financial information as of December 31, 2019, is derived from the Partnership’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019, and should be read in conjunction with such financial statements and notes. The results of operations for the interim periods are not indicative of the results of operations that may be achieved for the entire fiscal year ending December 31, 2020.
|
2.
|
The financial statements in the Partnership’s 2019 annual report on Form 10-K include a summary of significant accounting policies of the Partnership and should be read in conjunction with this Quarterly Report on Form 10-Q.
|
3.
|
On January 14, 2020, Pope Resources entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Rayonier, Inc., (“Rayonier”) and certain of its subsidiaries, and the Merger Agreement and merger were approved by Pope Resources unitholders on May 5, 2020. Upon consummation of the transaction, holders of limited partner units of the Partnership (including the depositary receipts therefor, the “Partnership Units”), will be entitled to receive, for each Partnership Unit, merger consideration consisting of (i) 3.929 common shares of Rayonier, (ii) 3.929 units of Rayonier Operating Partnership LP, or (iii) $125 in cash. Elections will be subject to proration to ensure that the aggregate amount of cash, on the one hand, and Rayonier common stock and Rayonier operating partnership units, on the other hand, that are issued in the merger would be equal to the amounts issued as if every Partnership Unit received $37.50 in cash and 2.751 Rayonier common shares or Rayonier operating partnership units. If elections for the Rayonier common shares and Rayonier operating partnership units are oversubscribed, then to reduce the effect of such proration Rayonier can, in its discretion, add additional equity (and decrease the amount of cash) payable to the Partnership unitholders making such election.
|
4.
|
Revenue is measured based on the consideration specified in a contract with a customer. The Partnership recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Included in “Accounts receivable, net” are $4.1 million and $2.2 million of receivables from contracts with customers as of March 31, 2020, and December 31, 2019, respectively.
|
Contract assets, December 31, 2019
|
$
|
2,765
|
|
Revenue recognized from changes in estimates of variable consideration
|
4
|
|
|
Transferred to receivables from contract assets
|
(408
|
)
|
|
Contract assets, March 31, 2020
|
$
|
2,361
|
|
(in thousands)
|
Quarter ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Partnership Timber
|
|
|
|
||||
Log sale revenue
|
$
|
9,861
|
|
|
$
|
14,722
|
|
Timber deed sale revenue
|
1,638
|
|
|
—
|
|
||
Other revenue
|
577
|
|
|
449
|
|
||
Total revenue
|
$
|
12,076
|
|
|
$
|
15,171
|
|
|
|
|
|
||||
Funds Timber
|
|
|
|
||||
Log sale revenue
|
$
|
11,999
|
|
|
$
|
8,860
|
|
Timber deed sale revenue
|
4
|
|
|
—
|
|
||
Other revenue
|
47
|
|
|
580
|
|
||
Total revenue
|
$
|
12,050
|
|
|
$
|
9,440
|
|
(in thousands)
|
Quarter ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
Sale of unimproved land
|
$
|
—
|
|
|
$
|
22
|
|
Rentals and other
|
259
|
|
|
409
|
|
||
Total revenue
|
$
|
259
|
|
|
$
|
431
|
|
5.
|
The Partnership has two general partners: Pope MGP, Inc. and Pope EGP, Inc. In total, these two entities own 60,000 limited partner units. The allocation of distributions, profits, and losses among the general and limited partners is pro rata across all units outstanding.
|
6.
|
ORM Timber Fund II, Inc. (Fund II), ORM Timber Fund III (REIT) Inc. (Fund III), and ORM Timber Fund IV LLC (Fund IV), collectively “the Funds”, were formed by Olympic Resource Management LLC (ORMLLC), a wholly owned subsidiary of the Partnership, for the purpose of raising capital to purchase timberlands. The objective of these Funds is to generate a return on investments through the acquisition, management, value enhancement, and sale of timberland properties. Each fund is organized to operate for a specific term from the end of its respective investment period; 10 years for each of Fund II and Fund III, and 15 years for Fund IV. Fund II, Fund III, and Fund IV are scheduled to terminate in March 2021, December 2025, and December 2034, respectively.
|
(in thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Assets:
|
|||||||
Cash
|
$
|
9,575
|
|
|
$
|
6,197
|
|
Contract assets
|
2,361
|
|
|
2,765
|
|
||
Other current assets
|
2,621
|
|
|
2,427
|
|
||
Total current assets
|
14,557
|
|
|
11,389
|
|
||
Properties and equipment, net of accumulated depreciation
|
348,256
|
|
|
355,162
|
|
||
Total assets
|
$
|
362,813
|
|
|
$
|
366,551
|
|
Liabilities and equity:
|
|
|
|
|
|
||
Current liabilities
|
$
|
3,913
|
|
|
$
|
3,747
|
|
Current portion of long-term debt
|
24,994
|
|
|
24,990
|
|
||
Total current liabilities
|
28,907
|
|
|
28,737
|
|
||
Long-term debt, net of unamortized debt issuance costs and current portion
|
32,347
|
|
|
32,345
|
|
||
Funds’ equity
|
301,559
|
|
|
305,469
|
|
||
Total liabilities and equity
|
$
|
362,813
|
|
|
$
|
366,551
|
|
7.
|
Other assets consisted of the following at March 31, 2020 and December 31, 2019:
|
(in thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
|
|
|
|
||||
Investment in Real Estate joint venture entity
|
$
|
4,653
|
|
|
$
|
4,954
|
|
Advances to Real Estate joint venture entity
|
1,000
|
|
|
1,000
|
|
||
Deferred tax assets, net
|
672
|
|
|
469
|
|
||
Right-of-use assets
|
128
|
|
|
161
|
|
||
Note receivable
|
49
|
|
|
50
|
|
||
Other
|
1
|
|
|
1
|
|
||
Total
|
$
|
6,503
|
|
|
$
|
6,635
|
|
8.
|
In the presentation of the Partnership’s revenue and operating income (loss) by segment, all intersegment revenue and expense is eliminated to determine operating income (loss) reported externally. The following tables reconcile internally reported income (loss) from operations to externally reported income (loss) from operations by business segment.
|
Quarter ended March 31, (in thousands)
|
Partnership Timber
|
|
Funds Timber
|
|
Timberland Investment Management
|
|
Real Estate
|
|
Other
|
|
Consolidated
|
|||||||||||||
2020
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenue - internal
|
$
|
12,275
|
|
|
$
|
12,050
|
|
|
$
|
1,459
|
|
|
$
|
394
|
|
|
$
|
—
|
|
|
$
|
26,178
|
|
|
Eliminations
|
(199
|
)
|
|
—
|
|
|
(1,459
|
)
|
|
(135
|
)
|
|
—
|
|
|
(1,793
|
)
|
|||||||
Revenue - external
|
12,076
|
|
|
12,050
|
|
|
—
|
|
|
259
|
|
|
—
|
|
|
24,385
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cost of sales
|
(5,305
|
)
|
|
(12,893
|
)
|
|
—
|
|
|
(317
|
)
|
|
—
|
|
|
(18,515
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating, general and administrative expenses - internal
|
(1,279
|
)
|
|
(2,569
|
)
|
|
(1,352
|
)
|
|
(1,390
|
)
|
|
(7,525
|
)
|
|
(14,115
|
)
|
|||||||
Eliminations
|
249
|
|
|
1,407
|
|
|
70
|
|
|
38
|
|
|
29
|
|
|
1,793
|
|
|||||||
Operating, general and administrative expenses - external
|
(1,030
|
)
|
|
(1,162
|
)
|
|
(1,282
|
)
|
|
(1,352
|
)
|
|
(7,496
|
)
|
|
(12,322
|
)
|
|||||||
Income (loss) from operations - internal
|
5,691
|
|
|
(3,412
|
)
|
|
107
|
|
|
(1,313
|
)
|
|
(7,525
|
)
|
|
(6,452
|
)
|
|||||||
Eliminations
|
50
|
|
|
1,407
|
|
|
(1,389
|
)
|
|
(97
|
)
|
|
29
|
|
|
—
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from operations - external
|
$
|
5,741
|
|
|
$
|
(2,005
|
)
|
|
$
|
(1,282
|
)
|
|
$
|
(1,410
|
)
|
|
$
|
(7,496
|
)
|
|
$
|
(6,452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Revenue - internal
|
$
|
15,372
|
|
|
$
|
9,440
|
|
|
$
|
1,363
|
|
|
$
|
551
|
|
|
$
|
—
|
|
|
$
|
26,726
|
|
|
Eliminations
|
(201
|
)
|
|
—
|
|
|
(1,363
|
)
|
|
(120
|
)
|
|
—
|
|
|
(1,684
|
)
|
|||||||
Revenue - external
|
15,171
|
|
|
9,440
|
|
|
—
|
|
|
431
|
|
|
—
|
|
|
25,042
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cost of sales
|
(7,188
|
)
|
|
(9,139
|
)
|
|
—
|
|
|
(281
|
)
|
|
—
|
|
|
(16,608
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating, general and administrative expenses - internal
|
(1,317
|
)
|
|
(2,489
|
)
|
|
(1,290
|
)
|
|
(856
|
)
|
|
(1,790
|
)
|
|
(7,742
|
)
|
|||||||
Eliminations
|
245
|
|
|
1,311
|
|
|
69
|
|
|
33
|
|
|
26
|
|
|
1,684
|
|
|||||||
Operating, general and administrative expenses -external
|
(1,072
|
)
|
|
(1,178
|
)
|
|
(1,221
|
)
|
|
(823
|
)
|
|
(1,764
|
)
|
|
(6,058
|
)
|
|||||||
Income (loss) from operations - internal
|
6,867
|
|
|
(2,188
|
)
|
|
73
|
|
|
(586
|
)
|
|
(1,790
|
)
|
|
2,376
|
|
|||||||
Eliminations
|
44
|
|
|
1,311
|
|
|
(1,294
|
)
|
|
(87
|
)
|
|
26
|
|
|
—
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from operations - external
|
$
|
6,911
|
|
|
$
|
(877
|
)
|
|
$
|
(1,221
|
)
|
|
$
|
(673
|
)
|
|
$
|
(1,764
|
)
|
|
$
|
2,376
|
|
9.
|
Basic and diluted earnings per unit are calculated by dividing net income attributable to unitholders, adjusted for non-forfeitable distributions paid out to unvested restricted unitholders and preferred shareholders of the Funds, by the weighted average units outstanding during the period. There were no dilutive securities outstanding during the periods presented. The following table shows the calculation of basic and diluted earnings per unit:
|
|
Quarter Ended
March 31, |
||||||
(in thousands, except per unit amounts)
|
2020
|
|
2019
|
||||
Net and comprehensive income (loss) attributable to Pope Resources’ unitholders
|
$
|
(3,941
|
)
|
|
$
|
3,311
|
|
Less:
|
|
|
|
|
|
||
Non-forfeitable distributions paid to unvested restricted unitholders
|
(35
|
)
|
|
(38
|
)
|
||
Preferred share dividends - ORM Timber Funds
|
(12
|
)
|
|
(12
|
)
|
||
Net and comprehensive income (loss) for calculation of earnings per unit
|
$
|
(3,988
|
)
|
|
$
|
3,261
|
|
|
|
|
|
||||
Basic and diluted weighted average units outstanding
|
4,330
|
|
|
4,325
|
|
||
|
|
|
|
||||
Basic and diluted net earnings (loss) per unit
|
$
|
(0.92
|
)
|
|
$
|
0.75
|
|
10.
|
In the first quarter of 2020, the Partnership issued 11,977 restricted units pursuant to the management incentive compensation program and no restricted units to members of the Board of Directors. These restricted units vest ratably over four years with the grant date fair value equal to the market price on the date of grant. Units granted to directors are included in the calculation of total equity compensation expense which is recognized over the vesting period. Grants to retirement-eligible individuals on the date of grant are expensed immediately. The Partnership recognized $757,000 and $593,000 of equity compensation expense in the first quarter of 2020 and 2019, respectively, related to these compensation programs.
|
11.
|
Supplemental disclosure of cash flow information: interest paid, net of amounts capitalized, totaled $226,000 and $415,000 during the first three months of 2020 and 2019, respectively. Income taxes paid totaled $0 and $20,000 for the first three months of 2020 and 2019, respectively.
|
12.
|
The Partnership’s financial instruments include cash, and accounts receivable, for which the carrying amount represents fair value based on their short-term nature. The carrying amounts of note receivable, included in other assets, also approximates fair value given current market interest rates.
|
13.
|
The Partnership had an accrual for estimated environmental remediation costs of $9.9 million and $10.0 million as of March 31, 2020 and December 31, 2019, respectively. The environmental remediation liability represents management’s estimate of payments to be made to remedy and monitor certain areas in and around Port Gamble Bay, Washington. The liability at March 31, 2020 is comprised of $993,000 that management expects to expend in the next 12 months and $8.9 million thereafter.
|
(in thousands)
|
Balance at Beginning of the Period
|
|
Additions to Accrual
|
|
Expenditures for Remediation
|
|
Balance at Period-end
|
||||
Year ended December 31, 2018
|
4,979
|
|
|
5,600
|
|
|
(1,496
|
)
|
|
9,083
|
|
Year ended December 31, 2019
|
9,083
|
|
|
1,576
|
|
|
(649
|
)
|
|
10,010
|
|
Quarter ended March 31, 2020
|
10,010
|
|
|
—
|
|
|
(112
|
)
|
|
9,898
|
|
14.
|
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and all states and several municipalities have declared public health emergencies. The COVID-19 pandemic has introduced significant economic and business uncertainty, along with volatile financial market conditions.
|
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||
Partnership
|
|
|
|
||||
Overall log price per MBF
|
$
|
597
|
|
|
$
|
629
|
|
Total volume (in MMBF)
|
19.8
|
|
|
23.4
|
|
||
|
|
|
|
||||
(in thousands)
|
|
|
|
||||
Log sale revenue
|
$
|
9,861
|
|
|
$
|
14,722
|
|
Timber deed sale revenue
|
1,638
|
|
|
—
|
|
||
Other revenue
|
577
|
|
|
449
|
|
||
Total revenue
|
12,076
|
|
|
15,171
|
|
||
Cost of sales
|
(5,305
|
)
|
|
(7,188
|
)
|
||
Operating expenses
|
(1,030
|
)
|
|
(1,072
|
)
|
||
Operating income
|
$
|
5,741
|
|
|
$
|
6,911
|
|
Average price realizations (per MBF)
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||
Partnership
|
|
|
|
||||
Douglas-fir domestic
|
$
|
633
|
|
|
$
|
655
|
|
Douglas-fir export
|
723
|
|
|
730
|
|
||
Whitewood domestic
|
473
|
|
|
528
|
|
||
Whitewood export
|
435
|
|
|
544
|
|
||
Cedar
|
985
|
|
|
973
|
|
||
Hardwood
|
470
|
|
|
650
|
|
||
Pulpwood
|
332
|
|
|
385
|
|
||
Overall log price
|
597
|
|
|
629
|
|
Volume (in MMBF)
|
|
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||||
Partnership
|
|
|
|
|
|
||||
Douglas-fir domestic
|
11.0
|
|
67
|
%
|
|
12.4
|
|
53
|
%
|
Douglas-fir export
|
2.1
|
|
13
|
%
|
|
4.8
|
|
21
|
%
|
Whitewood domestic
|
0.4
|
|
2
|
%
|
|
0.5
|
|
2
|
%
|
Whitewood export
|
—
|
|
—
|
%
|
|
0.2
|
|
1
|
%
|
Cedar
|
0.2
|
|
1
|
%
|
|
0.4
|
|
2
|
%
|
Hardwood
|
0.5
|
|
3
|
%
|
|
1.3
|
|
6
|
%
|
Pulpwood
|
2.3
|
|
14
|
%
|
|
3.8
|
|
15
|
%
|
Log sale volume
|
16.5
|
|
100
|
%
|
|
23.4
|
|
100
|
%
|
Timber deed sale volume
|
3.3
|
|
|
|
—
|
|
|
||
Total volume
|
19.8
|
|
|
|
23.4
|
|
|
(in thousands)
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||
Partnership
|
|
|
|
||||
Harvest, haul, and tax
|
$
|
3,896
|
|
|
$
|
5,586
|
|
Depletion
|
1,396
|
|
|
1,599
|
|
||
Other
|
13
|
|
|
3
|
|
||
Total cost of sales
|
$
|
5,305
|
|
|
$
|
7,188
|
|
|
|
|
|
||||
Amounts per MBF *
|
|
|
|
||||
Harvest, haul, and tax
|
$
|
236
|
|
|
$
|
239
|
|
Depletion
|
$
|
71
|
|
|
$
|
68
|
|
*
|
Timber deed sale volumes are excluded in the per MBF computation for harvest, haul and tax costs but included in the per MBF computation for depletion.
|
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||
Funds
|
|
|
|
||||
Overall log price per MBF
|
$
|
585
|
|
|
$
|
631
|
|
Total volume (MMBF)
|
20.5
|
|
|
14.1
|
|
||
|
|
|
|
||||
(in thousands)
|
|
|
|
||||
Log sale revenue
|
$
|
11,999
|
|
|
$
|
8,860
|
|
Timber deed sale revenue
|
4
|
|
|
—
|
|
||
Other revenue
|
47
|
|
|
580
|
|
||
Total revenue
|
12,050
|
|
|
9,440
|
|
||
Cost of sales
|
(12,893
|
)
|
|
(9,139
|
)
|
||
Operating expenses - internal
|
(2,569
|
)
|
|
(2,489
|
)
|
||
Operating loss - internal
|
(3,412
|
)
|
|
(2,188
|
)
|
||
Eliminations *
|
1,407
|
|
|
1,311
|
|
||
Operating loss - external
|
$
|
(2,005
|
)
|
|
$
|
(877
|
)
|
Average price realizations (per MBF)
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||
Funds
|
|
|
|
||||
Douglas-fir domestic
|
$
|
650
|
|
|
$
|
647
|
|
Douglas-fir export
|
676
|
|
|
731
|
|
||
Whitewood domestic
|
515
|
|
|
513
|
|
||
Whitewood export
|
372
|
|
|
547
|
|
||
Pine
|
425
|
|
|
432
|
|
||
Cedar
|
659
|
|
|
961
|
|
||
Hardwood
|
395
|
|
|
530
|
|
||
Pulpwood
|
312
|
|
|
359
|
|
||
Overall log price
|
585
|
|
|
631
|
|
Volume (in MMBF)
|
|
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||||
Funds
|
|
|
|
|
|
||||
Douglas-fir domestic
|
10.8
|
|
54
|
%
|
|
7.4
|
|
52
|
%
|
Douglas-fir export
|
2.7
|
|
13
|
%
|
|
2.9
|
|
21
|
%
|
Whitewood domestic
|
4.4
|
|
21
|
%
|
|
1.3
|
|
9
|
%
|
Whitewood export
|
—
|
|
—
|
%
|
|
0.4
|
|
3
|
%
|
Pine
|
0.2
|
|
1
|
%
|
|
0.1
|
|
1
|
%
|
Cedar
|
0.1
|
|
—
|
%
|
|
0.5
|
|
4
|
%
|
Hardwood
|
0.2
|
|
1
|
%
|
|
0.2
|
|
1
|
%
|
Pulpwood
|
2.1
|
|
10
|
%
|
|
1.3
|
|
9
|
%
|
Log sale volume
|
20.5
|
|
100
|
%
|
|
14.1
|
|
100
|
%
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
||||
|
Q1 2020
|
|
Q1 2019
|
||||
Funds
|
|
|
|
||||
Harvest, haul, and tax
|
$
|
5,415
|
|
|
$
|
3,817
|
|
Depletion
|
7,478
|
|
|
4,935
|
|
||
Other
|
—
|
|
|
387
|
|
||
Total cost of sales
|
$
|
12,893
|
|
|
$
|
9,139
|
|
|
|
|
|
||||
Amounts per MBF *
|
|
|
|
||||
Harvest, haul, and tax
|
$
|
264
|
|
|
$
|
271
|
|
Depletion
|
$
|
365
|
|
|
$
|
350
|
|
|
|
Quarter Ended
|
||||||
(in thousands, except invested capital, volume and acre data)
|
|
Mar-20
|
|
Mar-19
|
||||
Revenue internal
|
|
$
|
1,459
|
|
|
$
|
1,363
|
|
Intersegment eliminations
|
|
(1,459
|
)
|
|
(1,363
|
)
|
||
Revenue external
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
||||
Operating income internal
|
|
$
|
107
|
|
|
$
|
73
|
|
Intersegment eliminations
|
|
(1,389
|
)
|
|
(1,294
|
)
|
||
Operating loss external
|
|
$
|
(1,282
|
)
|
|
$
|
(1,221
|
)
|
|
|
|
|
|
||||
Invested capital (in millions)
|
|
$
|
407
|
|
|
$
|
407
|
|
Acres owned by Funds
|
|
141,000
|
|
|
141,000
|
|
||
Harvest volume - Funds (MMBF), including timber deed sales
|
|
20.5
|
|
|
14.1
|
|
•
|
Residential and commercial plat land sales represent land sold after development rights have been obtained and are generally sold with prescribed infrastructure improvements.
|
•
|
Rural residential lot sales that generally require some capital improvements such as zoning, road building, or utility access improvements prior to completing the sale.
|
•
|
The sale of unimproved land, which generally consists of larger acreage sales rather than single lot sales, is normally completed with very little capital investment prior to sale.
|
|
Quarter ended March 31,
|
||||||
(in thousands)
|
2020
|
|
2019
|
||||
Interest expense - Partnership
|
(882
|
)
|
|
(1,025
|
)
|
||
Interest expense - Funds
|
(561
|
)
|
|
(556
|
)
|
||
Capitalized interest - Partnership
|
—
|
|
|
66
|
|
||
Interest expense, net
|
$
|
(1,443
|
)
|
|
$
|
(1,515
|
)
|
•
|
a maximum debt-to-total-capitalization ratio of 30%, with total capitalization calculated using fair market (vs. carrying) value of timberland, roads and timber; and
|
•
|
a maximum loan-to-appraised value of timberland collateral of 50%.
|
|
Three Months Ended March 31,
|
||||||||||
(in thousands)
|
2020
|
|
Change
|
|
2019
|
||||||
Cash provided by operating activities
|
$
|
1,444
|
|
|
$
|
(3,534
|
)
|
|
$
|
4,978
|
|
|
|
|
|
|
|
||||||
Investing activities
|
|
|
|
|
|
||||||
Reforestation and roads
|
(931
|
)
|
|
(287
|
)
|
|
(644
|
)
|
|||
Capital expenditures
|
—
|
|
|
252
|
|
|
(252
|
)
|
|||
Proceeds from sale of property and equipment
|
—
|
|
|
(71
|
)
|
|
71
|
|
|||
Investment in unconsolidated real estate joint venture
|
(46
|
)
|
|
(46
|
)
|
|
—
|
|
|||
Deposit for acquisition of timberland - Partnership
|
—
|
|
|
5
|
|
|
(5
|
)
|
|||
Acquisition of timberland - Partnership
|
(19
|
)
|
|
(3
|
)
|
|
(16
|
)
|
|||
Acquisition of timberland - Funds
|
—
|
|
|
19,344
|
|
|
(19,344
|
)
|
|||
Cash used in investing activities
|
(996
|
)
|
|
19,194
|
|
|
(20,190
|
)
|
|||
Financing activities
|
|
|
|
|
|
|
|
|
|||
Line of credit borrowings
|
9,000
|
|
|
4,500
|
|
|
4,500
|
|
|||
Line of credit repayments
|
(1,000
|
)
|
|
1,400
|
|
|
(2,400
|
)
|
|||
Repayment of long-term debt
|
(33
|
)
|
|
(1
|
)
|
|
(32
|
)
|
|||
Proceeds from issuance of long-term debt
|
—
|
|
|
(3,000
|
)
|
|
3,000
|
|
|||
Units issued under distribution reinvestment plan
|
—
|
|
|
(24
|
)
|
|
24
|
|
|||
Unit repurchases
|
—
|
|
|
166
|
|
|
(166
|
)
|
|||
Proceeds from preferred stock issuance - ORM Timber Funds
|
—
|
|
|
(125
|
)
|
|
125
|
|
|||
Payroll taxes paid upon unit net settlements
|
—
|
|
|
79
|
|
|
(79
|
)
|
|||
Cash distributions to unitholders
|
(4,367
|
)
|
|
(1
|
)
|
|
(4,366
|
)
|
|||
Cash distributions to fund investors, net of distributions to Partnership
|
—
|
|
|
3,076
|
|
|
(3,076
|
)
|
|||
Capital call - ORM Timber Funds, net of Partnership contribution
|
—
|
|
|
(17,259
|
)
|
|
17,259
|
|
|||
Cash provided by (used in) financing activities
|
3,600
|
|
|
(11,189
|
)
|
|
14,789
|
|
|||
Net increase (decrease) in cash and restricted cash
|
$
|
4,048
|
|
|
$
|
4,471
|
|
|
$
|
(423
|
)
|
in millions
|
|
||
Reforestation and roads - Partnership
|
$
|
0.4
|
|
Reforestation and roads - Funds
|
0.5
|
|
|
Other Real Estate development projects
|
0.1
|
|
|
|
$
|
1.0
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
POPE RESOURCES,
|
|
|
A Delaware Limited Partnership
|
|
|
|
|
|
By:
|
POPE MGP, Inc.
|
|
|
Managing General Partner
|
|
|
|
|
|
|
|
|
By: /s/ Thomas M. Ringo
|
|
|
Thomas M. Ringo
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
By: /s/ Daemon P. Repp
|
|
|
Daemon P. Repp
|
|
|
Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
By: /s/ Sean M. Tallarico
|
|
|
Sean M. Tallarico
|
|
|
Controller
|
|
|
(Principal Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Pope Resources;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
May 6, 2020
|
/s/Thomas M. Ringo
|
|
|
Thomas M. Ringo
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Pope Resources;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
May 6, 2020
|
/s/ Daemon P. Repp
|
|
|
Daemon P. Repp
Vice President and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of, and for, the periods presented in the Report.
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of, and for, the periods presented in the Report.
|