Pope Resources Reports Fourth Quarter Net Income Of $2.3 Million

Pope Resources (NASDAQ:POPE) reported net income attributable to unitholders of $2.3 million, or $0.52 per diluted ownership unit, on revenue of $17.8 million for the fourth quarter ended December 31, 2011. This compares to net income attributable to unitholders of $1.7 million or $0.35 per diluted ownership unit, on revenue of $8.5 million for the comparable period in 2010.

Net income attributable to unitholders for the year ended December 31, 2011 totaled $8.8 million, or $1.94 per diluted ownership unit, on revenue of $57.3 million. Net income attributable to unitholders for the corresponding period in 2010 totaled $2.0 million, or $0.43 per diluted ownership unit, on revenue of $31.2 million. Results for 2010 included a loss on early debt extinguishment of $1.2 million.

Cash provided by operations for the quarter ended December 31, 2011 was $7.4 million, compared to $3.5 million for the fourth quarter of 2010. For the year ended December 31, 2011, cash provided by operations was $21.7 million, compared to $9.0 million in 2010.

“The big story for 2011 was strong demand from China for logs and lumber,” said David L. Nunes, President and CEO. “We were well positioned to capitalize on this surge in demand since all of our tree farms are tributary to export log ports. Based on both new properties acquired by our second timber fund in 2010 and significant amounts of deferred harvest volume from 2008-2010, we had a record harvest year in 2011 at 90 million board feet (MMBF). In addition, we enjoyed a 17% increase in our average realized log price based on both export demand and greater competition in domestic markets where many of the mills benefited by the exporting of lumber to China. These factors combined for a very strong year in terms of cash flow generation.”

Fee Timber operating income for the fourth quarter of 2011 was $5.5 million compared to $1.7 million for the fourth quarter of 2010. This tripling of operating income was due to the combined impact of a 164% increase in harvest volume, which increased from 11 MMBF in 2010 to 29 MMBF in 2011, and a 17% boost in average realized log price, which increased from $481 per thousand board feet (MBF) in 2010 to $565 per MBF in 2011. In recent years, our fourth quarter log production has been relatively light as a function of the front-loading of annual harvest volumes into the earlier part of the year. The fourth quarter of 2011 broke significantly from this pattern as a result of incorporating harvest volume from timber fund properties acquired in 2010, mild weather, and a decision to dip into deferred harvest volumes from 2008-2010. Over 52% of 2011’s fourth quarter harvest came from timber fund properties versus 39% for the comparable period in 2010. Notwithstanding the significantly higher per-MBF depletion expense for the timber fund properties, this additional harvest from the timber fund properties contributed $1.8 million of operating income to Q4 2011.

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