MAXXAM GROUP HOLDINGS INC
10-Q, 1999-05-07
PRIMARY PRODUCTION OF ALUMINUM
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                               UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549


                                 FORM 10-Q

                              ---------------

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

                      Commission File Number 333-18723


                         MAXXAM GROUP HOLDINGS INC.
           (Exact name of Registrant as specified in its charter)



           DELAWARE                          76-0518669
 (State or other jurisdiction             (I.R.S. Employer
      of incorporation or              Identification Number)
         organization)


  5847 SAN FELIPE, SUITE 2600                   77057
        HOUSTON, TEXAS                       (Zip Code)
     (Address of Principal
      Executive Offices)


     Registrant's telephone number, including area code: (713) 975-7600



     Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes /X/   No /  /

     Number of shares of common stock outstanding at May 3, 1999: 1,000


Registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.


                             TABLE OF CONTENTS


PART I.  -  FINANCIAL INFORMATION

     Item 1.   Financial Statements:
          Consolidated Balance Sheet at March 31, 1999 and
               December 31, 1998
          Consolidated Statement of Operations for the three
               months ended March 31, 1999 and 1998
          Consolidated Statement of Cash Flows for the three
               months ended March 31, 1999 and 1998
          Condensed Notes to Consolidated Financial Statements

     Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations

     Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk

PART II.  -  OTHER INFORMATION

     Item 1.   Legal Proceedings
     Item 6.   Exhibits and Reports on Form 8-K
     Signatures

APPENDIX A - GLOSSARY OF DEFINED TERMS

                MAXXAM GROUP HOLDINGS INC. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEET
             (IN MILLIONS OF DOLLARS, EXCEPT SHARE INFORMATION)


<TABLE>
<CAPTION>
                                                    MARCH 31,    DECEMBER 31,
                                                       1999          1998
                                                  ------------  ------------
                                                   (UNAUDITED)
                      ASSETS
<S>                                               <C>           <C>
Current assets:
     Cash and cash equivalents                    $      124.0  $      150.8 
     Marketable securities                                23.8          11.7 
     Receivables:                                                            
          Trade                                            9.2          10.5 
          Other                                            4.4           7.1 
     Inventories                                          29.3          44.0 
     Prepaid expenses and other current assets             8.2           8.0 
                                                  ------------  ------------
          Total current assets                           198.9         232.1 
Timber and timberlands, net of accumulated
     depletion of $176.0 and $178.4, respectively        254.5         302.3 
Property, plant and equipment, net of accumulated
     depreciation of $87.9 and $85.7,
     respectively                                        101.9         103.1 
Note receivable from MAXXAM Inc.                         140.1         132.8 
Investment in Kaiser Aluminum Corporation                 28.0          41.5 
Deferred financing costs, net                             25.6          26.2 
Deferred income taxes                                     18.3          90.4 
Restricted cash                                          294.2          16.6 
Other assets                                               7.8           7.2 
                                                  ------------  ------------
                                                  $    1,069.3  $      952.2 
                                                  ============  ============

      LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
     Accounts payable                             $        2.2  $        3.4 
     Accrued interest                                     15.1          34.9 
     Accrued compensation and related benefits             8.8           8.4 
     Deferred income taxes                                 3.6           9.7 
     Other accrued liabilities                             9.6           2.2 
     Long-term debt, current maturities                   15.9           8.3 
                                                  ------------  ------------
          Total current liabilities                       55.2          66.9 
Long-term debt, less current maturities                  977.2         990.2 
Other noncurrent liabilities                              51.1          29.6 
                                                  ------------  ------------
          Total liabilities                            1,083.5       1,086.7 
                                                  ------------  ------------ 
Contingencies

Stockholder's deficit:
     Common stock, $1.00 par value; 3,000 shares
          authorized; 1,000 shares issued                    -             - 
     Additional capital                                  123.2         123.2 
     Accumulated deficit                                (137.4)       (257.7)
                                                  ------------  ------------ 
          Total stockholder's deficit                    (14.2)       (134.5)
                                                  ------------  ------------ 
                                                  $    1,069.3  $      952.2 
                                                  ============  ============ 


<FN>

The accompanying notes are an integral part of these financial statements.

</TABLE>

                MAXXAM GROUP HOLDINGS INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF OPERATIONS
                          (IN MILLIONS OF DOLLARS)


<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED
                                                            MARCH 31,
                                                   --------------------------
                                                        1999          1998
                                                   ------------  ------------
                                                           (UNAUDITED)

<S>                                                <C>           <C>
Net sales:
     Lumber and logs                               $       41.6  $       48.5 
     Other                                                  5.1           3.4  
                                                   ------------  ------------
                                                           46.7          51.9 
                                                   ------------  ------------

Operating expenses:
     Cost of goods sold                                    39.8          33.1 
     Selling, general and administrative expenses           3.5           3.1 
     Depletion and depreciation                             4.9           5.6 
                                                   ------------  ------------ 
                                                           48.2          41.8 
                                                   ------------  ------------ 

Operating income (loss)                                    (1.5)         10.1 

Other income (expense):
     Gain on sale of Headwaters Timberlands               239.8             - 
     Equity in earnings (loss) of Kaiser Aluminum
          Corporation                                     (13.5)          4.3 
     Investment, interest and other income                  8.2           8.4 
     Interest expense                                     (20.6)        (23.8)
                                                   ------------  ------------ 
Income (loss) before income taxes                         212.4          (1.0)
Credit (provision) in lieu of income taxes                (92.1)          1.9 
                                                   ------------  ------------ 
Net income                                         $      120.3  $        0.9 
                                                   ============  ============ 


<FN>

The accompanying notes are an integral part of these financial statements.

</TABLE>

                MAXXAM GROUP HOLDINGS INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF CASH FLOWS
                          (IN MILLIONS OF DOLLARS)



<TABLE>

                                                        THREE MONTHS ENDED
                                                            MARCH 31,
                                                   --------------------------
                                                        1999          1998
                                                   ------------  ------------
                                                           (UNAUDITED)

<S>                                                <C>           <C>
Cash flows from operating activities:
     Net income                                    $      120.3  $        0.9 
     Adjustments to reconcile net income to net
          cash provided by operating activities:
          Depletion and depreciation                        4.9           5.6 
          Gain on sale of Headwaters Timberlands         (239.8)            - 
          Equity in undistributed loss (earnings)
               of Kaiser Aluminum Corporation              13.5          (4.3)
          Amortization of deferred financing
               costs and discounts on long-term
               debt                                         0.6           4.4 
          Net gain on other asset dispositions                -          (1.8)
          Net sales of marketable securities               (9.8)          4.3 
          Net (gain) loss on marketable
               securities                                  (2.3)         (2.3)
     Increase (decrease) in cash resulting from
          changes in:
          Receivables                                      (2.4)         12.9 
          Inventories, net of depletion                    13.1           3.4 
          Prepaid expenses and other assets                (0.8)         (0.1)
          Accounts payable                                 (1.1)         (1.3)
          Accrued interest                                (19.8)        (19.4)
          Other liabilities                                 0.5          (2.8)
          Accrued and deferred income taxes                92.1          (1.8)
     Other                                                    -          (0.9)
                                                   ------------  ------------ 
               Net cash used for operating
                    activities                            (31.0)         (3.2)
                                                   ------------  ------------ 
Cash flows from investing activities:
     Net proceeds from sale of Headwaters
          Timberlands                                     299.9             - 
     Capital expenditures                                 (12.4)         (2.8)
     Restricted cash withdrawals used to acquire
          timberlands                                      10.3             - 
     Net proceeds from sale of assets                         -           6.5 
                                                   ------------  ------------ 
               Net cash provided by investing
                    activities                            297.8           3.7 
                                                   ------------  ------------ 

Cash flows from financing activities:
     Redemptions, repurchases of and principal
          payments on long-term debt                       (5.4)        (10.8)
     Restricted cash (deposits) withdrawals, net         (287.9)          0.3 
     Other                                                 (0.3)            - 
                                                   ------------  ------------ 
               Net cash used for financing
                    activities                           (293.6)        (10.5)
                                                   ------------  ------------ 
Net decrease in cash and cash equivalents                 (26.8)        (10.0)
Cash and cash equivalents at beginning of period          150.8          91.8 
                                                   ------------  ------------ 
Cash and cash equivalents at end of period         $      124.0  $       81.8 
                                                   ============  ============ 

Supplemental disclosure of cash flow information:
     Interest paid, net of capitalized interest    $       39.4  $       38.8 
     Income taxes paid                                        -           0.1 


<FN>

The accompany notes are an integral part of these financial statements.

</TABLE>

                MAXXAM GROUP HOLDINGS INC. AND SUBSIDIARIES

            CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      

1.        GENERAL

          The information contained in the following notes to the
consolidated financial statements is condensed from that which would appear
in the annual consolidated financial statements; accordingly, the
consolidated financial statements included herein should be reviewed in
conjunction with the consolidated financial statements and related notes
thereto contained in the Form 10-K.  Any capitalized terms used but not
defined in these Condensed Notes to Consolidated Financial Statements are
defined in the "Glossary of Defined Terms" contained in Appendix A.  All
references to the "Company" include MAXXAM Group Holdings Inc. and its
subsidiary companies unless otherwise noted or the context indicates
otherwise.  Accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end.  The results of operations
for the interim periods presented are not necessarily indicative of the
results to be expected for the entire year.

          The consolidated financial statements included herein are
unaudited; however, they include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly
the consolidated financial position of the Company at March 31, 1999, the
consolidated results of operations for the three months ended March 31,
1999 and 1998 and the consolidated cash flows for the three months ended
March 31, 1999 and 1998.  The Company is a wholly owned subsidiary of
MAXXAM.

          There were no reconciling items between net income and
comprehensive income in either of the three month periods ended March 31,
1999 and 1998.

          SFAS No. 133 requires companies to recognize all derivative
intruments as assets or liabilities in the balance sheet and to measure
those instruments at fair value.  SFAS No. 133 must be adopted by companies
no later than January 1, 2000.  Kaiser, the Company's equity investee, has
hedging programs which use various derivative products to "lock-in" a price
(or range of prices) for products sold or used so that earnings and cash
flows are subject to reduced risk of volatility.  Under SFAS No. 133,
Kaiser will be required to "mark-to-market" its hedging positions at the
end of each period in advance of the period of recognition for the
transaction to which the hedge relates.  Pursuant to SFAS No. 130, Kaiser
will reflect changes in the fair value of its open hedging positions as an
increase or reduction in stockholders' equity through comprehensive income. 
Under SFAS No. 130, the impact of the changes in the fair value of Kaiser's
hedging positions will be reversed from comprehensive income (net of any
fluctuations in other "open" positions) and will be reflected in
traditional net income upon occurrence of the transaction to which the
hedge relates.  Under the equity method of accounting which the Company
follows in accounting for its investment in Kaiser, the Company will
reflect its equity share of Kaiser's adjustments to stockholder's equity
through comprehensive income.
     
2.        HEADWATERS TRANSACTIONS

          As described in Note 7 below, on September 28, 1996, the Pacific
Lumber Parties entered into the Headwaters Agreement with the United States
and California which provided the framework for the acquisition by the
United States and California of the Headwaters Timberlands.  A substantial
portion of the Headwaters Timberlands contains virgin old growth timber. 
Approximately 4,900 of these acres were owned by Salmon Creek, with the
remaining acreage being owned by the Scotia LLC (Pacific Lumber owning the
timber and related timber harvesting rights on this acreage).  On March 1,
1999, the Pacific Lumber Parties, the United States and California
consummated the Headwaters Agreement.  Salmon Creek received $299.9 million
for its 4,900 acres, and  for its 700 acres, Pacific Lumber received the
7,700 acre Elk River Timberlands which are to be contributed to Scotia LLC
on or before August 1999.  Of these proceeds, $285.0 million has been
deposited into an escrow account held by an escrow agent and are to be made
available as necessary to support the Timber Notes, and may be released
only under certain circumstances.  As of March 31, 1999, the Escrowed Funds
were $286.0 million which includes interest earned.

          As a result of the disposition of the Headwaters Timberlands, the
Company recognized a pre-tax gain of $239.8 million ($142.1 million net of
deferred taxes) in the first quarter of 1999.  This amount represents the
gain attributable to the portion of the Headwaters Timberlands for which
the Company received $299.9 million in cash.  With respect to the remaining
portion of the Headwaters Timberlands for which the Company received the
Elk River Timberlands, no gain has been recognized as this represented an
exchange of substantially similar productive assets.  These timberlands
have been reflected in the Company's financial statements at an amount
which represents the Company's historical cost for the timberlands which
were transferred to the United States.

          Scotia LLC and Pacific Lumber also entered in the Owl Creek
Agreement and the Grizzly Creek Agreement with California regarding the
future sale to California of the Owl Creek and Grizzly Creek groves.    The
Owl Creek Agreement provides for Scotia LLC to sell the Owl Creek grove to
California, on or before June 30, 2002, for the lesser of the appraised
fair market value or $79.7 million.  At California's option, 25% of the
payment may be paid upon closing with three equal annual installments
thereafter and without interest.  With respect to the Grizzly Creek
Agreement, California may purchase from Pacific Lumber, on or before
October 31, 2000, a portion of this grove for a purchase price determined
based on fair market value, but not to exceed $19.9 million.  The net
proceeds from the Grizzly Creek grove will be placed into an escrow account
(on the same basis as the net proceeds from the sale of the Headwaters
Timberlands) unless, at the time of receipt of such proceeds, the Escrowed
Funds are no longer held in an escrow account.  California also has a five
year option under the agreement to purchase additional property adjacent to
the Grizzly Creek grove.  The sale of the Owl Creek grove or Grizzly Creek
grove will not be reflected in the Company's financial statements until
it has been concluded.

3.        INVENTORIES

          Inventories consist of the following (in millions):


<TABLE>
<CAPTION>

                                                    MARCH 31,    DECEMBER 31,
                                                       1999          1998
                                                  ------------  ------------
<S>                                               <C>           <C>
Lumber                                            $       28.3  $       36.0 
Logs                                                       1.0           8.0 
                                                  ------------  ------------
                                                  $       29.3  $       44.0 
                                                  ============  ============ 


</TABLE>

4.        RESTRICTED CASH

          Cash and cash equivalents include restricted cash of $52.1
million and $74.8 million at March 31, 1999 and December 31, 1998,
respectively, which is being held as security for short positions in
marketable securities and for debt service payments on the Timber Notes.  

          Long-term restricted cash at March 31, 1999 primarily consists of
the Escrowed Funds and funds held in the Prefunding Account.  Long-term
restricted cash at December 31, 1998 primarily consists of funds held in
the Prefunding Account. 


5.        INVESTMENT IN KAISER

          Subsequent to its formation, the Company received, as a capital
contribution from MAXXAM, the Kaiser Shares.  Kaiser operates in several
principal aspects of the aluminum industry--the mining of bauxite into
alumina, the production of primary aluminum from alumina, and the
manufacture of fabricated  (including semi-fabricated) aluminum products. 
Kaiser's common stock is publicly traded on the New York Stock Exchange
under the trading symbol "KLU."  The Kaiser Shares represent a 35.3% equity
interest in Kaiser at March 31, 1999.

          The market value for the Kaiser Shares based on the price per
share quoted at the close of business on April 30, 1999 was $218.3 million. 
There can be no assurance that such value would be realized should the
Company dispose of its investment in the Kaiser Shares.  The following
tables contain summarized financial information of Kaiser (in millions).



<TABLE>
<CAPTION>

                                                  MARCH 31,    DECEMBER 31,
                                                     1999          1998
                                                ------------  ------------
                                                (UNAUDITED)
<S>                                             <C>           <C>
Current assets                                  $      931.4  $    1,030.0 
Property, plant and equipment, net                   1,098.6       1,108.7 
Other assets                                           903.6         852.2 
                                                ------------  ------------
               Total assets                     $    2,933.6  $    2,990.9 
                                                ============  ============ 

Current liabilities                             $      551.7  $      558.4 
Long-term debt, less current maturities                962.3         962.6 
Other liabilities                                    1,221.9       1,227.2 
Minority interests                                     116.7         123.5 
Stockholders' equity                                    81.0         119.2 
                                                ------------  ------------
               Total liabilities and
                    stockholders' equity        $    2,933.6  $    2,990.9 
                                                ============  ============


</TABLE>


<TABLE>
<CAPTION>


                                                       THREE MONTHS ENDED
                                                           MARCH 31,
                                                  -------------------------
                                                       1999          1998
                                                  ------------  ------------
                                                  (UNAUDITED)
<S>                                               <C>           <C>
Net sales                                         $      479.4  $      597.0 
Costs and expenses                                      (512.4)       (552.2)
Other expenses                                           (26.4)        (27.2)
                                                  ------------  ------------
Income (loss) before income taxes and minority
     interests                                           (59.4)         17.6 
Credit (provision) for income taxes                       20.2          (6.2)
Minority interests                                         1.0           0.6 
                                                  ------------  ------------ 
Net income (loss)                                        (38.2)         12.0 
Dividends on preferred stock                                 -             - 
                                                  ------------  ------------ 
Net income (loss) available to common
     stockholders                                 $      (38.2) $       12.0 
                                                  ============  ============ 
Equity in earnings (loss) of Kaiser               $      (13.5) $        4.3 
                                                  ============  ============ 


</TABLE>

6.        LONG-TERM DEBT

          Long-term debt consists of the following (in millions):


<TABLE>
<CAPTION>

                                                    MARCH 31,    DECEMBER 31,
                                                       1999          1998
                                                  ------------  ------------
<S>                                               <C>           <C>
7.43% Scotia LLC Timber Collateralized Notes due
     July 20, 2028                                $      861.9  $      867.2 
Pacific Lumber Credit Agreement                              -             - 
12% MGHI Senior Secured Notes due August 1, 2003         130.0         130.0 
Other                                                      1.2           1.3 
                                                  ------------  ------------ 
                                                         993.1         998.5 
Less: current maturities                                 (15.9)         (8.3)
                                                  ------------  ------------ 
                                                  $      977.2  $      990.2 
                                                  ============  ============ 


</TABLE>

7.        CONTINGENCIES

          Regulatory and environmental matters play a significant role in
the Company's business, which is subject to a variety of California and
federal laws and regulations, as well as the Final HCP, Final SYP and 1999
TOL, dealing with timber harvesting practices, threatened and endangered
species and habitat for such species, and air and water quality.  While
regulatory and environmental concerns have resulted in restrictions on the
geographic scope and timing of the Company's timber operations, increased
operational costs and engendered litigation and other challenges to the
Company's operations, prior to 1998 they had not had a significant adverse
effect on the Company's financial position, results of operations or
liquidity.  However, the Company's first quarter 1999 and year ended 1998
results of operations were adversely affected by certain regulatory and
environmental matters, including during the second half of 1998 through the
date of this report, the absence of a sufficient number of available THPs
to enable the Company to conduct its operations at historic levels.

          On September 28, 1996, the Pacific Lumber Parties entered  into
the Headwaters Agreement with the United States and California which
provided the framework for the acquisition of the Headwaters Timberlands by
the United States and California. Consummation of the Headwaters Agreement
was also conditioned upon, among other things,  approval of an SYP,
approval of a Multi-Species HCP and issuance of the Permits.  As further
described in Note 2 "Headwaters Transactions," on March 1, 1999, the
Pacific Lumber Parties, the United States and California consummated the
Headwaters Agreement.  In addition to the transfer of the Headwaters
Timberlands by the Pacific Lumber Parties described in Note 2, the Final
SYP and the Final HCP were approved and the Permits were issued.  The
Pacific Lumber Parties and California also executed the California
Agreement. 

           The Final SYP complies with certain California Board of Forestry
regulations requiring timber companies to project timber growth and harvest
on their timberlands over a 100-year planning period and establish an LTSY
harvest level.  An SYP must demonstrate that the average annual harvest
over any rolling ten-year period will not exceed the LTSY harvest level and
that a timber company's projected timber inventory is capable of sustaining
the LTSY harvest level in the last decade of the 100-year planning period.
The Final SYP is effective for 10 years and may be amended by Pacific
Lumber subject to approval by the CDF.  The Final SYP is subject to review
after five years.  Revised SYPs would be prepared every decade that address
the LTSY harvest level based upon reassessment of changes in the resource
base and other factors.

          Several species, including the northern spotted owl, the marbled
murrelet, the coho salmon and the steelhead trout, have been listed as
endangered or threatened under the ESA and/or the CESA. The Final HCP and
the Permits allow incidental "take" of these and certain other listed
species so long as there is no "jeopardy" to the continued existence of
such species.  The Final HCP identifies the measures to be instituted in
order to minimize and mitigate the anticipated level of take to the
greatest extent practicable.  The Final HCP  not only provides for the
Company's compliance with habitat requirements for the northern spotted
owl, the marbled murrelet, the coho salmon and the steelhead trout, it also
provides for issuance of Permits for thirteen additional species that are
or may be listed in the future.  The Final HCP and related Permits have a
term of 50 years, and, among other things, include the following protective
measures: (i) setting aside timberlands as marbled murrelet conservation
areas; (ii) establishing streamside "no-cut" and limited cut buffers as
well as mass wasting areas based on an assessment of each of the Company's
watersheds to be completed within five years; (iii) limiting harvesting
activities during certain times of the year and during wet weather
conditions, and (iv) making certain specified improvements to the Company's
roads.   The Final SYP is also subject to the foregoing provisions. The
Company believes that the Final SYP and the Final HCP should in the long-
term expedite the preparation and facilitate approval of its THPs, although
there can be no assurance that the Company will not face difficulties in
the THP submission and approval process as it implements these agreements.

          Under the Federal Clean Water Act, the EPA is required to
establish TMDLs in water courses that have been declared to be "water
quality impaired."  The EPA and the North Coast Regional Water Quality
Control Board are in the process of establishing TMDLs for seventeen
northern California rivers and certain of their tributaries, including
certain water courses that flow within the Company's timberlands.  The
final TMDL requirements applicable to the Company's timberlands may require
aquatic measures that are different from or in addition to the
prescriptions to be developed pursuant to the watershed analysis process
contained in the Final HCP.

          Lawsuits are pending and threatened which seek to prevent the
Company from implementing the Final HCP and/or the Final SYP, implementing
certain of the Company's approved THPs or carrying out certain other
operations.  On August 12, 1998, the EPIC lawsuit was filed by two
environmental groups against Pacific Lumber, Scotia Pacific and Salmon
Creek under which the environmental groups allege that certain procedural
violations of the ESA have resulted from logging activities on the Company's
timberlands and seek to prevent the defendants from carrying out any
harvesting activities under certain THPs until certain wildlife consultation
requirements under the ESA are satisfied.  On March 15, 1999, the court
affirmed a preliminary injunction preventing harvesting on three THPs;
however, it subsequently heard Pacific Lumber's motion to dismiss the case
and issued an order for the plaintiffs to show cause why the lawsuit should
not be dismissed as moot since the consultation requirement appears to have
been concluded upon approval of the Final HCP.  On May 5, 1999, the court
dissolved the preliminary injunction, granted the defendants' motion for
summary judgment and dismissed the case as moot.  On or about January 29,
1999, the Company received the EPIC Notice Letter which alleges various
violations of the ESA and challenges, among other things, the validity and
legality of the Permits.  On March 31, 1999, the EPIC-SYP/Permits lawsuit
was filed which alleges various violations of the CESA and CEQA, and
challenges, among other things, the validity and legality of the Permits
issued by California and the Final SYP.  On March 31, 1999, the USWA lawsuit
was filed which also challenges the validity and legality of the Final SYP.
The Company believes that appropriate procedures were followed throughout
the public review and approval process concerning the Final Plans, and the
Company is working with the relevant state and federal agencies to defend
these challenges.  Although uncertainties are inherent in the final outcome
of the EPIC Notice Letter, the EPIC-SYP/Permits lawsuit and the USWA lawsuit,
the Company believes that the resolution of these matters should not
result in a material adverse effect on its financial condition or results
of operations or the ability to harvest timber.  While the Company expects
environmentally focused objections and lawsuits to continue, it believes
that the Final HCP, Final SYP and the Permits should enhance its position
in connection with these continuing challenges and, over time, reduce or
minimize such challenges. 

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS

          The following should be read in conjunction with the response to
Part I, Item 1 of this Report and Items 7 and 8 of the Form 10-K.  Any
capitalized terms used but not defined in this Item are defined in the
"Glossary of Defined Terms" contained in Appendix A.

          This Quarterly Report on Form 10-Q contains statements which
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  These statements appear in a
number of places in this section, in Item 3. "Quantitative and Qualitative
Disclosures About Market Risk," and in Part II.  Item 1. "Legal
Proceedings."  Such statements can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "estimates,"
"will," "should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of
strategy.  Readers are cautioned that any such forward-looking statements
are not guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in
the forward-looking statements as a result of various factors.  These
factors include the effectiveness of management's strategies and decisions,
general economic and business conditions, developments in technology, new
or modified statutory or regulatory requirements and changing prices and
market conditions.  This Form 10-Q and the Form 10-K identify other factors
that could cause such differences.  No assurance can be given that these
are all of the factors that could cause actual results to vary materially
from the forward-looking statements.

RESULTS OF OPERATIONS

          The Company engages in forest products operations principally
through its subsidiaries Pacific Lumber and Britt.  The Company's business
is seasonal in that the forest products business generally experiences
lower first quarter sales due largely to the general decline in
construction-related activity during the winter months.  Accordingly, the
Company's results for any one quarter are not necessarily indicative of
results to be expected for the full year.  The following table presents
selected operational and financial information for the three months ended
March 31, 1999 and 1998.


<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED
                                                            MARCH 31,
                                                   --------------------------
                                                        1999          1998
                                                   ------------  ------------
                                                     (IN MILLIONS OF DOLLARS,
                                                       EXCEPT SHIPMENTS AND
                                                             PRICES)
<S>                                                <C>           <C>
Shipments:
     Lumber: (1) 
          Redwood upper grades                              7.8          10.2 
          Redwood common grades                            38.7          53.9 
          Douglas-fir upper grades                          2.0           1.9 
          Douglas-fir common grades                        15.3           9.2 
          Other                                             2.5           2.5 
                                                   ------------  ------------ 
               Total lumber                                66.3          77.7 
                                                   ============  ============ 
     Wood chips (2)                                        45.4          32.2 
                                                   ============  ============ 

Average sales price:
     Lumber: (3)
          Redwood upper grades                     $      1,418  $      1,491 
          Redwood common grades                             560           506 
          Douglas-fir upper grades                        1,272         1,269 
          Douglas-fir common grades                         377           352 
     Wood chips (4)                                          80            62 

Net sales:
     Lumber, net of discount                       $       41.6  $       48.5 
     Wood chips                                             3.6           2.0 
     Cogeneration power                                     0.6           0.6 
     Other                                                  0.9           0.8 
                                                   ------------  ------------ 
               Total net sales                     $       46.7  $       51.9 
                                                   ============  ============ 
Operating income (loss)                            $       (1.5) $       10.1 
                                                   ============  ============ 
Operating cash flow (5)                            $        3.4  $       15.7 
                                                   ============  ============ 
Income (loss) before income taxes (6)              $      212.4  $       (1.0)
                                                   ============  ============ 
Net income                                         $      120.3  $        0.9 
                                                   ============  ============ 
Capital expenditures                               $       12.4  $        2.8 
                                                   ============  ============ 


<FN>

- ---------------
(1)  Lumber shipments are expressed in millions of board feet.
(2)  Wood chip shipments are expressed in thousands of bone dry units of
     2,400 pounds.
(3)  Dollars per thousand board feet.
(4)  Dollars per bone dry unit.
(5)  Operating income before depletion and depreciation, also referred to
     as "EBITDA."
(6)  1999 results include a $239.8 million gain on the sale of the
     Headwaters Timberlands.

</TABLE>

          Net Sales
          Net sales for the 1999 first quarter decreased from the 1998
first quarter due primarily to lower shipments of upper and common grade
redwood lumber offset somewhat by higher shipments of Douglas-fir common
grade lumber.  The decrease in shipments of redwood lumber is largely due
to continuing reductions in the volume of logs available for the production
of lumber products.   The diminished supply of approved THPs, combined with
seasonal restrictions on logging operations, continues to affect log
supply.  See "--Trends" for further discussion of the factors affecting the
supply of approved THPs.

          Operating income (loss)
          The Company had an operating loss for the quarter ended March 
31, 1999 as compared to operating income for  the comparable 1998 quarter,
primarily due to decreases in net sales discussed above along with higher
cost of sales.  The increase in cost of sales was due to higher logging
costs and manufacturing  inefficiencies resulting from production
curtailments at the sawmills due to the lack of logs.

          Income (loss) before income taxes
          Income before income taxes for the first quarter of 1999
increased from the comparable prior year period, principally due to the
gain on the sale of the Headwaters Timberlands of $239.8 million ($142.1
million net of deferred taxes), offset by the operating loss discussed
above as well as an equity loss from Kaiser. 

FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES

          This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995.  See above for cautionary information with respect to
such forward-looking statements.

          The Pacific Lumber Credit Agreement and the indentures governing
the Timber Notes contain various covenants which, among other things, limit
the ability of Pacific Lumber and Scotia LLC to incur additional
indebtedness and liens, to engage in transactions with affiliates, to pay
dividends and to make investments.  As of March 31, 1999, under the most
restrictive of these covenants, no dividends could be paid by Pacific
Lumber to its parent.

          As of March 31, 1999, $26.4 million of borrowings was available
under the Pacific Lumber Credit Agreement.  No borrowings were outstanding
and letters of credit outstanding amounted to $14.4 million.

          During the three months ended March 31, 1999, MGI paid $18.7
million in dividends to the Company.

          The indenture governing the MGHI Notes, among other things,
restricts the ability of the Company to incur additional indebtedness and
liens, engage in transactions with affiliates, pay dividends and make
investments.  During the three months ended March 31, 1999, no dividends
were paid by the Company.

           The Escrowed Funds, including accumulated interest, were $286.0
million as of March 31, 1999 and are to be made available as necessary to
support the Timber Notes.  The Escrowed Funds will be released by the
Escrow Agent only in accordance with the terms of the Escrow Agreement.

          As of March 31, 1999, the Company had consolidated long-term debt
of $977.2 million (net of current maturities) as compared to $990.2 million
at December 31, 1998.  The decrease in long-term debt was primarily due to
a $5.4 million principal payment on the Timber Notes.  The Company and
its subsidiaries anticipate that existing cash, cash equivalents,
marketable securities and available sources of financing will be sufficient
to fund their working capital and capital expenditure requirements for the
next year.  With respect to their long-term liquidity, dividends from
Scotia LLC to Pacific Lumber will be limited for at least the next two to
three years, and therefore, absent any release to Pacific Lumber of the
Escrowed Funds, Pacific Lumber will not have adequate funds to support all
of its working capital and capital expenditure requirements, and it will
require contributions from MGI to meet any deficiencies.  Although the
Company believes that existing cash and cash equivalents should provide
sufficient funds to meet the working capital and capital expenditure
requirements for itself and its subsidiaries, until such time as Pacific
Lumber has adequate cash flows from operations, dividends from Scotia LLC
and/or funds released from the Escrowed Funds, there can be no assurance
that this will be the case.  Furthermore, due to its highly leveraged
condition, the Company is more sensitive than less leveraged companies to
factors affecting its operations, including governmental regulation and
litigation affecting its timber harvesting practices (see Note 7 to the
Consolidated Financial Statements), increased competition from other lumber
producers or alternative building products and general economic conditions.

TRENDS

          This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995.  See above for cautionary information with respect to
such forward-looking statements.

          The Company's forest products operations are conducted by Pacific
Lumber and Britt.  Regulatory and environmental matters play a significant
role in Pacific Lumber's operations which are subject to a variety of
California and federal laws and regulations as well as the Final HCP, Final
SYP and 1999 TOL dealing with timber harvesting practices, threatened and
endangered species and habitat for such species, and air and water quality. 
Moreover, these laws and regulations are modified from time to time and are
subject to judicial and administrative interpretation.  Compliance with
such laws, regulations and judicial and administrative interpretations, and
related litigation have increased the cost of logging operations.  The
Company's forest products segment has also been adversely affected by a
lack of available logs as a result of a severely diminished supply of THPs. 
Prior to the consummation of the Headwaters Agreement on March 1, 1999, the
reduced number of approved THPs was attributable to several factors,
including a significantly reduced level of THPs submitted by Pacific Lumber
to the CDF during 1998 and during the first two months of 1999 due to (a)
the extensive amount of time devoted by Pacific Lumber's foresters,
wildlife and fisheries biologists and other personnel to (i) amending a
significant number of previously submitted THPs to incorporate various new
requirements which Pacific Lumber agreed to as part of the Pre-Permit
Agreement, (ii) preparing the Combined Plan and all the related data,
responding to comments on the Combined Plan, assessing and responding to
federal and state proposals and changes concerning the Combined Plan and
evaluating the Final Plans, (iii) responding to comments received by
Pacific Lumber from various federal and state governmental agencies with
respect to its filed THPs in light of the new and more stringent
requirements that Pacific Lumber agreed to observe pursuant to the Pre-
Permit Agreement, and (iv) responding to newly filed litigation involving
certain of Pacific Lumber's approved THPs and (b) implementation of a
provision contained in the Pre-Permit Agreement which requires, for the
first time, a licensed geologist to review virtually all of Pacific
Lumber's THPs prior to submission to the CDF.  Pacific Lumber also
experienced an unexpected significantly slower rate of review and approval
with respect to its filed THPs due, in large part, to the issues that
emerged in applying the requirements embodied in the Pre-Permit Agreement
to Pacific Lumber's THPs, certain of which requirements imposed new
forestry practices that applied solely to Pacific Lumber's operations.

          With the consummation of the Headwaters Agreement, Pacific Lumber
has completed its work in connection with preparation of the Final Plans;
however, significant additional work will be required in connection with
its implementation.  The remainder of 1999 will be a transition year for
Pacific Lumber with respect to the filing and approval of its THPs. 
Certain of the THPs which were approved by the CDF prior to March 1, 1999
were grandfathered under the Implementation Agreement, and are harvestable
subject to the harvesting restrictions prescribed under the THPs and
satisfaction of certain agreed conditions.  The remaining THPs which were
in the process of being reviewed but were not yet approved by the CDF at
the time of the consummation of the Final Plans each require varying
degrees of revisions.  Pacific Lumber believes that the rate of submissions
of THPs and the review and approval of THPs during at least the second
quarter may be slower than Pacific Lumber has historically experienced as
Pacific Lumber, the CDF and other agencies develop procedures for
implementing the Final Plans.  Nevertheless, Pacific Lumber anticipates
that after a transition period, the implementation of the Final Plans will
streamline the process of preparing THPs and potentially shorten the time
to obtain approval of THPs.

          There can be no assurance that Pacific Lumber will not continue
to experience difficulties in submitting and receiving approvals of its
THPs similar to those it has been experiencing.  Furthermore, there can be
no assurance that certain pending regulatory and environmental matters or
future governmental regulations, legislation or judicial or administrative
decisions, or adverse weather conditions, would not have a material adverse
effect on the Company's financial position, results of operations or
liquidity.  See Note 7 to the Consolidated Financial Statements for further
information regarding regulatory and legal proceedings affecting the
Company's operations. 

YEAR 2000

          The Company has established a team to address the potential
impacts of the year 2000 on each of its critical business functions.  The
team has completed its assessment of the Company's critical information
technology and embedded technology, including its geographic information
system and equipment and systems used in operating its sawmills and
cogeneration plant, and is now in the process of making the required
modifications for these systems to be year 2000 compliant.  The
modification costs are expected to be immaterial, costing less than $0.1
million and, except for the Company's cogeneration plant, are expected to
be completed by mid-year 1999.   In most cases testing of the modifications
will also be completed by such time.  Modifications and testing of the
cogeneration plant are expected to be completed by the end of the third
quarter of 1999.  Systems modification costs are being expensed as
incurred.  Costs associated with new systems are being capitalized and will
be amortized over the life of the product. 

          In addition to addressing the Company's internal systems, the
team has identified key vendors that could be impacted by year 2000 issues,
and surveys have been conducted regarding their compliance efforts. 
Management is evaluating the responses to the surveys and making direct
contact with parties which are deemed to be critical.  These inquiries are
being made by the Company's own staff, and the costs associated with this
program are expected to be minimal.

          Kaiser, the Company's equity investee, has implemented a company-
wide program to coordinate the year 2000 efforts of its individual business
units and to track their progress.  The intent of the program is to make
sure that critical items are identified on a sufficiently timely basis to
assure that the necessary resources can be committed to address any
material risk areas that could prevent its systems and assets from being
able to meet Kaiser's business needs and objectives.   Spending related to
this program, which began in 1997 and is expected to continue through 1999,
is estimated to be in the $10-15 million range.  As of April 30, 1999,
Kaiser estimates that approximately $4-6 million of year 2000 expenditures
are yet to be incurred.  Such remaining amounts will be incurred over the
balance of 1999, primarily in the second and third quarters of the year. 
Kaiser has established an internal goal of having all necessary system
changes in place and tested by mid-year 1999.  Substantially all
facilities and systems are expected to meet this goal.  However, a limited
number of systems and pieces of equipment will not be completely remedied
and tested until sometime in the third quarter of the year.  Kaiser plans
to commit the necessary resources for all remediation efforts.  In addition
to addressing Kaiser's internal systems, the company-wide program involves
identification of key vendor and customer relationships that could be
impacted by year 2000 issues. 

          While the Company believes that its program is sufficient to
identify the critical issues and associated costs necessary to address
possible year 2000 problems in a timely manner, there can be no assurance
that the program, or underlying steps implemented, will be successful in
resolving all such issues prior to the year 2000.  If the steps taken by
the Company (or critical third parties) are not made in a timely manner, or
are not successful in identifying and remedying all significant year 2000
issues, business interruptions or delays could occur.   However, based on
the information the Company has gathered to date and its expectations of
its ability to remedy problems encountered, the Company believes that it
will not experience significant business interruptions that would have a
material impact on its results or financial condition.  The most reasonably
likely worst case scenario which the Company could experience would be
problems with certain of the Company's personal computers, field equipment,
financial software or GIS software.  The Company believes that any such
problems could be remedied at minimal cost within a few days and that
contingency plans used in the past for dealing with problems with its
equipment and software are adequate to address the types of problems which
could be encountered in such a scenario.  These plans include purchases of
replacement equipment, use of third parties for processing GIS information
and working with vendors to make any needed software modifications.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995.  See Item 2.  "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for cautionary information
with respect to such forward-looking statements.

          This item is not applicable for the Company and its subsidiaries;
however, Kaiser, the Company's equity investee, utilizes hedging
transactions to lock-in a specified price or range of prices for certain
products which it sells or consumes and to mitigate its exposure to changes
in foreign currency exchange rates.  See Exhibit 99.3 in the Company's Form
10-K for information relative to Kaiser's hedging activities.


                        PART II.  OTHER INFORMATION


ITEM 1.        LEGAL PROCEEDINGS

          Reference is made to Item 3 of the Form 10-K for information
concerning material legal proceedings with respect to the Company.  The
following material developments have occurred with respect to such legal
proceedings subsequent to the filing of the Form 10-K.

          TIMBER HARVESTING LITIGATION 

          On March 31, 1999, the EPIC-SYP/Permits lawsuit was filed against
Pacific Lumber, Scotia LLC, Salmon Creek and others in the Superior Court
of Sacramento County.  This action alleges, among other things, that the
CDF and CDFG violated the CEQA and the CESA with respect to the Final SYP
and the Permits issued by California.  The plaintiffs seek, among other
things, injunctive relief to set aside the CDF's and CDFG's decisions
approving the Final SYP and the Permits issued by California.  The Company
believes that appropriate procedures were followed throughout the public
review and approval process concerning the Final Plans, and the Company
is working with the relevant state and federal agencies to defend this
lawsuit.  Although uncertainties are inherent in the final outcome of the
EPIC-SYP/Permits lawsuit, the Company believes that the resolution of
this matter should not result in a material adverse effect on its financial
condition or results of operations or the ability to harvest timber.

          On March 31, 1999, the USWA lawsuit was also filed against
Pacific Lumber, Scotia LLC and Salmon Creek in the California Superior
Court of Sacramento County.  This action alleges, among other things,
violations of the Forest Practice Act in connection with the CDF's approval
of the Final SYP.  The plaintiffs seek to prohibit the CDF from approving
any THPs relying on the Final SYP.  The Company believes that appropriate
procedures were followed throughout the public review and approval process
concerning the Final Plans, and the Company is working with the relevant
state and federal agencies to defend this lawsuit.  Although uncertainties
are inherent in the final outcome of the USWA lawsuit, the Company believes
that the resolution of this matter should not result in a material adverse
effect on its financial condition or results of operations or the ability
to harvest timber.

          With respect to the EPIC lawsuit described in the Form 10-K, on May 5,
1999, the Court dissolved the preliminary injunction, granted the defendants'
motion for summary judgment and dismissed the case as moot.

          HUNSAKER MATTER

          With respect to the Hunsaker action described in the Form 10-K,
on March 30, 1999, the Court dismissed the lawsuit with prejudice and
ordered the plaintiffs to pay the defendants' costs with respect to the
lawsuit.  On April 30, 1999, the plaintiffs filed a notice of
appeal.


ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

          A.   EXHIBITS:

               *27  Financial Data Schedule

     *    Included with this filing.

          B.   REPORTS ON FORM 8-K:

          On March 24, 1999, the Company filed a current report on Form 8-K
(under Item 5) concerning the filing of a Prospectus Supplement to the
Prospectus dated December 30, 1998 of Scotia LLC. 

                                 SIGNATURES


          Pursuant to the requirements 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, who have signed this report
on behalf of the Registrant and as the principal financial and accounting
officers of the Registrant, respectively. 



                                  MAXXAM GROUP HOLDINGS INC.




Date:  May 7, 1999            By:     /S/PAUL N. SCHWARTZ
                                       Paul N. Schwartz
                                Vice President, Chief Financial
                                     Officer and Director
                                 (Principal Financial Officer)



Date:  May 7, 1999            By:   /S/ ELIZABETH D. BRUMLEY
                                      Elizabeth D. Brumley
                                           Controller
                                 (Principal Accounting Officer)

                                                                 APPENDIX A


                         GLOSSARY OF DEFINED TERMS


California Agreement:  An agreement between the Pacific Lumber Parties and
     California regarding the enforcement of the California bill which
     authorized state funds for the purchase of the Headwaters Timberlands
     while imposing certain restrictions on the remaining timberlands held
     by the Pacific Lumber Parties

CDF:  California Department of Forestry and Fire Protection

CDFG: California Department of Fish and Game

CEQA: California Environmental Quality Act

CESA:  California Endangered Species Act

Combined Plan: The combined SYP and Multi-Species HCP released by Pacific
     Lumber and Scotia LLC for public review and comment in July 1998

Company:  MAXXAM Group Holdings Inc., a wholly owned subsidiary of MAXXAM

EPA:  Environmental Protection Agency

EPIC:  Environmental Protection Information Center, Inc.

EPIC lawsuit:  An action entitled Environmental Protection Information
     Center, Inc., Sierra Club v. The Pacific Lumber Company, Scotia Pacific
     Holding Company and Salmon Creek Corporation (No. C-98-3129) filed
     August 12, 1998 in the United States District Court for the Northern
     District of California

EPIC Notice Letter:  A notice received by the Company on or about January
     29, 1999 from EPIC and the Sierra Club of their intent to sue Pacific
     Lumber and several federal agencies under the ESA

EPIC-SYP/Permits lawsuit: An action entitled Environmental Protection
     Information Association, Sierra Club v. California Department of
     Forestry and Fire Protection, California Department of Fish and Game,
     The Pacific Lumber Company, Scotia Pacific Company LLC, Salmon Creek
     Corporation, et al. (No. 99CS00639) filed March 31, 1999 in the
     Superior Court of Sacramento County

ESA:  The federal Endangered Species Act

Escrow Agent: The agent holding the Escrowed Funds under the Escrow
     Agreement

Escrow Agreement: The agreement covering the Escrowed Funds

Escrowed Funds:  Proceeds of $285.0 million received by Salmon Creek in
     connection with the sale of the Headwaters Timberlands plus accrued
     interest which have been deposited into an escrow account pursuant
     to the Escrow Agreement as necessary to support the Timber Notes

Final HCP:  The Multi-Species HCP approved on March 1, 1999 in connection
     with the consummation of the Headwaters Agreement

Final Plans: The Final HCP and the Final SYP

Final SYP:  The SYP approved on March 1, 1999 in connection with the
     consummation of the Headwaters Agreement

Forest Practice Act: The California Forest Practice Act

Form 10-K:  The Company's Annual Report on Form 10-K filed with the
     Securities and Exchange Commission for the fiscal year ended December
     31, 1998

Grizzly Creek Agreement:  The agreement entered into by Pacific Lumber with
     California for the future sale of a portion of the Grizzly Creek grove

Headwaters Agreement:  The September 28, 1996 agreement between the Pacific
     Lumber Parties, the United States and California which provided the
     framework for the acquisition by the United States and California of
     the Headwaters Timberlands

Headwaters Timberlands:  Approximately 5,600 acres of Pacific Lumber
     timberlands consisting of two forest groves commonly referred to as
     the Headwaters Forest and the Elk Head Springs Forest which were sold
     to the United States and California on March 1, 1999

Hunsaker action: An action entitled William Hunsaker, et al. v. Charles E.
     Hurwitz, The Pacific Lumber Company, MAXXAM Group Inc., MXM Corp.,
     Federated Development Company and Does (1-50) (No. C98-4515) filed
     November 24, 1998 in the United States District Court for the Northern
     District of California

Implementation Agreement:  The Implementation Agreement with Regard to
     Habitat Conservation Plan agreed to in connection with the
     consummation of the Headwaters Agreement

Kaiser:  Kaiser Aluminum Corporation, an equity investee of the Company
     engaged in aluminum operations

Kaiser Shares: 27,938,250 shares of the common stock of Kaiser, all of
     which are pledged as collateral for the MGHI Notes

LTSY:  Long-term sustained yield

MAXXAM:  MAXXAM Inc.

MGHI Notes: 12% MGHI Senior Secured Notes due August 1, 2003

MGI:  MAXXAM Group Inc., a wholly owned subsidiary of the Company

Multi-Species HCP:  A habitat conservation plan covering multiple species

Owl Creek Agreement:  The agreement entered into by Scotia LLC with
     California regarding the future sale of the Owl Creek grove

Owl Creek Grove:  A grove of approximately 900 acres of primarily old
     growth timber owned by the Company

Pacific Lumber:  The Pacific Lumber Company, an indirect, wholly-owned
     subsidiary of MGI

Pacific Lumber Credit Agreement:  The revolving credit agreement between
     Pacific Lumber and a bank which provides for borrowings of up to $60.0
     million, all of which may be used for revolving borrowings, $20.0
     million of which may be used for standby letters of credit and $30.0
     million of which may be used for timberland acquisitions

Pacific Lumber Parties:  Pacific Lumber, including its subsidiaries and
     affiliates, and MAXXAM

Permits:  The incidental take permits issued by the United States and
     California pursuant to the Final HCP

Prefunding Account:  Restricted cash held in an account by the trustee
     under the indenture governing the Timber Notes to enable Scotia LLC to
     acquire timberlands

Pre-Permit Agreement: The February 27, 1998 Pre-Permit Application
     Agreement in Principle entered into by Pacific Lumber, MAXXAM and
     various government agencies regarding certain understandings that they
     had reached regarding the Multi-Species HCP, the Permits and the SYP

Salmon Creek:  Salmon Creek Corporation, a wholly owned subsidiary of
     Pacific Lumber

Scotia LLC:  Scotia Pacific Company LLC, a limited liability company wholly
     owned by Pacific Lumber

Scotia Pacific:  Scotia Pacific Holding Company, a wholly owned subsidiary
     of Pacific Lumber, which was merged into Scotia LLC on July 20, 1998

SFAS No. 130:  Statement of Financial Accounting Standards No. 130,
     "Reporting Comprehensive Income"

SFAS No. 133:  Statement of Financial Standard No. 133, "Accounting for
     Derivative Instruments and Hedging Activities"

SYP:  Sustained yield plan establishing long-term sustained yield harvest
     levels for a company's timberlands

THP:  Timber harvesting plan required to be filed with and approved by the
     CDF prior to the harvesting of timber

Timber Notes: Scotia LLC's $867.2 million original aggregate principal
     amount of 6.55% Series B Class A-1 Timber Collateralized Notes, 7.11%
     Series B Class A-2 Timber Collateralized Notes and 7.71% Series B
     Class A-3 Timber Collateralized Notes due July 20, 2028

TMDLs: Total maximum daily load limits

TOL: Timber operator's license allowing the holder to conduct timber
     harvesting operations

USWA lawsuit: An action entitled United Steelworkers of America, AFL-CIO,
     CLC, and Donald Kegley v. California Department of Forestry and Fire
     Protection, The Pacific Lumber Company, Scotia Pacific Company LLC and
     Salmon Creek Corporation (No. 99CS00626) filed on March 31, 1999 in
     the Superior Court of Sacramento County


<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
and is qualified in its entirety by reference to such consolidated financial
statements together with the related footnotes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                              JAN-1-1999
<PERIOD-END>                               MAR-31-1999
<EXCHANGE-RATE>                                      1
<CASH>                                         124,000
<SECURITIES>                                    23,800
<RECEIVABLES>                                   13,600
<ALLOWANCES>                                         0
<INVENTORY>                                     29,300
<CURRENT-ASSETS>                               198,900
<PP&E>                                         189,800
<DEPRECIATION>                                  87,900
<TOTAL-ASSETS>                               1,069,300
<CURRENT-LIABILITIES>                           55,200
<BONDS>                                        993,100
                                0
                                          0
<COMMON>                                             0
<OTHER-SE>                                    (14,200)
<TOTAL-LIABILITY-AND-EQUITY>                 1,069,300
<SALES>                                         46,700
<TOTAL-REVENUES>                                46,700
<CGS>                                           39,800
<TOTAL-COSTS>                                   39,800
<OTHER-EXPENSES>                                 8,400
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              20,600
<INCOME-PRETAX>                                212,400
<INCOME-TAX>                                    92,100
<INCOME-CONTINUING>                            120,300
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   120,300
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                        0
        

</TABLE>


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