Back In The Saddle

The grass is greener at Parker Ranch

August, 2004

Early this year, the rains came back to Parker Ranch, ending a more than five-year-long drought.

“We’ve got an awful lot of grass growing around here,” says David Houle, Parker Ranch Inc.’s president and chief executive officer, who stepped down from his position last June. “With cattle prices strong for the first six months of this year, things look very positive for 2004.”

Grass isn’t the only thing that’s been growing on the historic ranch’s 175,000 acres. In 2003, Parker Ranch collected $18.8 million in gross sales, an increase of 29.6 percent over 2002 sales figures. The jump returned Parker Ranch to Hawaii Business’s Top 250 for the first time since 1997, placing it at No. 245 on the list.

At the beginning of 2003, the economic landscape looked pretty inhospitable for the ranch: weak live cattle prices, an illiquid balance sheet, significant capital projects to complete and a Middle East war over the horizon. Indeed, the year didn’t get off to a good start for the ranch or the cattle industry as a whole. In May, Canadian agricultural officials discovered “mad cow” disease in a heifer slaughtered in Alberta in January. In late December, the disease was found in a cow in the United States. As a result, prices for live cattle fluctuated wildly, from a high of $1.10 per pound to $0.74 per pound.

Despite these challenges, Parker’s Livestock Division, which accounts for nearly 80 percent of its gross sales, improved revenues from cattle sales by 16 percent from $9.32 million in 2002 to $11.04 million in 2003. The improvement in earnings was largely achieved through more efficient cattle production, which drove down on-ranch production costs from $228 per calf in 2002 to $215 in 2003.

“We’re raising the same number of cattle on fewer acres with fewer workers,” says Houle. “It’s hard to describe what we’ve done into a sound bite. Everyone has been working very hard to improve our product.”

While the cattle business had its peaks and valleys in 2003, Hawaii’s tourist industry and real estate market were much kinder (and more predictable) to the ranch. Last year, Parker’s visitor attractions, which include the Parker Ranch Store, horseback riding, ATV rides, historic home tours and weddings, accounted for $1.91 million in gross sales, a 60 percent increase over 2002. The ranch’s real estate division, which sells residential lots in Waimea, did nearly as well, accounting for $1.75 million in commissions off of a volume of $27.21 million, an increase of 56 percent over 2002 commissions.

Parker Ranch Center, the company’s shopping center in Waimea, performed better than any of the ranch’s divisions, collecting $1.8 million in gross sales, a 148 percent increase over 2002 sales.

In addition, in accordance with its strategic plan, which calls for a steady revenue stream, Parker sold off 877 acres of land for $12.8 million. To date, the ranch has sold approximately $25 million worth of land, which was used to pay off short-term debt. According to the plan, Parker will sell $75 million to $100 million worth of land from 2002 to 2007.

“Parker Ranch has had much of the same elements in place for several years now,” says Houle. “But in 2003, we saw significant progress in our efforts to diversify our income sources.”

Houle predicts that the performance of all of Parker’s divisions will be similarly strong in 2004. Cattle prices have stabilized, tourism and real estate are looking stronger than they did in 2003. And then, of course, it’s been raining.

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David K. Choo