Pope Resources Reports Third Quarter Net Income of $3.6 Million

Business Wire,  Oct 31, 2007  

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POULSBO, Wash. -- Pope Resources (NasdaqGSM:POPEZ) reported net income of $3.6 million, or 74 cents per diluted ownership unit, on revenues of $12.2 million for the third quarter ended September 30, 2007. This compares to net income of $8.3 million, or $1.74 per diluted ownership unit, on revenues of $18.0 million for the comparable period in 2006.

Net income for the nine months ended September 30, 2007, totaled $9.2 million, or $1.91 per diluted ownership unit, on revenues of $34.3 million. Net income for the corresponding period in 2006 totaled $17.1 million, or $3.60 per diluted ownership unit, on revenues of $49.7 million.

Earnings before interest, taxes, depreciation, depletion, and amortization (EBITDDA) for the quarter ended September 30, 2007, were $5.1 million, compared to $9.9 million for the third quarter of 2006. For the nine months ended September 30, 2007, EBITDDA was $13.9 million, compared to $24.7 million for year-to-date 2006 results.

"Results for the third quarter and the first nine months of this year were down significantly compared to last year's comparable periods because of the third quarter 2006 sale of a 17-acre commercial parcel in Gig Harbor to Costco Wholesale Corporation that contributed $5.7 million to our Real Estate segment operating income in the prior year's results," said David L. Nunes, President and CEO.

Notwithstanding the much chronicled decline in domestic housing starts, our Fee Timber segment results have held up reasonably well. While our third quarter realized log prices slipped 2%, from $623 per thousand board feet (MBF) in 2006 to $611 per MBF in 2007, we managed to keep log prices flat on a year-to-date basis by locking in prices earlier in the year when markets were not as weak and by shifting our harvest mix toward those markets with the healthiest relative pricing. For the first nine months of 2007, Fee Timber operating income declined 2% to $13.6 million from $13.8 million in 2006. Even though we experienced a 6% drop in harvest volumes, from 51 MMBF in 2006 to 48 MMBF in 2007, the drop in operating income was mitigated by a lower average depletion rate. Last year's harvest included volume from a separate depletion pool that carried a higher depletion rate than volume harvested in the current year.

Our Timberland Management & Consulting segment posted a year-to-date operating loss of $0.5 million compared to operating income of $1.4 million in 2006. The decline in operating income from this segment is the result of fewer assets under management in 2007 and a timberland disposition fee earned in 2006 that was not repeated in 2007.

Operating income for our Real Estate segment declined from $5.9 million for the first nine months of 2006 to a $0.5 million loss for the comparable period in 2007. As mentioned above, this anticipated decline is due primarily to the sale of a 17-acre commercial parcel in Gig Harbor to Costco in 2006 for which there was no counterpart in 2007's year-to-date results. We expect to generate revenue from our Gig Harbor and Bremerton projects during the balance of 2007, but this revenue will not approach the record level attained in 2006.

The financial schedules attached to this earnings release provide detail on individual segment results and operating statistics.

About Pope Resources

Pope Resources, a publicly traded limited partnership, and its subsidiaries Olympic Resource Management and Olympic Property Group, own or manage nearly 430,000 acres of timberland and development property in Washington and Oregon. In addition, we provide forestry consulting and timberland investment management services to third-party owners and managers of timberland in Washington, Oregon, and California. The company and its predecessor companies have owned and managed timberlands and development properties for more than 150 years. Additional information on the company can be found at www.poperesources.com. The contents of our website are not incorporated into this release or into our filings with the Securities and Exchange Commission.

This press release contains a number of projections and statements about our expected financial condition, operating results, business plans and objectives. These statements reflect management's estimates based on current goals and its expectations about future developments. 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, they should not be interpreted as promises of future management actions or financial performance. Our future actions and actual performance will vary from current expectations and under various circumstances the results of these variations may be material and adverse. Some of the factors that may cause actual operating results and financial condition to fall short of expectations include factors that affect our ability to anticipate and respond adequately to fluctuations in the market prices for our products; environmental and land use regulations that limit our ability to harvest timber and develop property; labor, equipment and transportation costs that affect our net income; our ability to discover and to accurately estimate liabilities associated with our properties; and economic conditions that affect consumer demand for our products and the prices we receive for them. Other factors are set forth in that part of our Annual Report on Form 10-K entitled "Risk Factors." Other issues that may have an adverse and material impact on our business, operating results, and financial condition include those risks and uncertainties discussed in our other filings with the Securities and Exchange Commission. Forward-looking statements in this release are made only as of the date shown above, and we cannot undertake to update these statements.