================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
----------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file numbers 1-13573-01 and 1-13573
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
U.S. TIMBERLANDS FINANCE CORP.
(Exact names of co-registrants as specified in their charters)
Delaware 93-1217136
Delaware 91-1851612
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1301 Fifth Avenue, Suite 3725, Seattle, Washington 98101-2636
(Address of principal executive offices) (Zip Code)
Co-registrants telephone number, including area code: 206-652-5000
----------
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 |_|
================================================================================
1 of 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
-----------------------
1998 1997
-------- --------
(In Thousands)
Revenues $ 7,757 $ 12,334
Cost and expenses:
Cost of goods sold 2,654 3,525
Cost of timber and property sales -- 1,191
Depletion, depreciation and road amortization 2,760 2,360
Selling, general and administrative 3,626 1,190
-------- --------
Total cost and expenses 9,040 8,266
-------- --------
Operating income (loss) (1,283) 4,068
Interest expense 5,463 5,319
Amortization of financing fees 169 999
Interest income (176) (366)
Other (income) expense - net (25) 63
-------- --------
Net loss $ (6,714) $ (1,947)
======== ========
See accompanying Notes to Consolidated Financial Statements.
2 of 14
<PAGE>
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1998 1997
-------- ------------
(Unaudited) (Audited)
(In Thousands)
Assets
Current assets:
Cash and cash equivalents $ 11,501 $ 10,625
Accounts receivable - net 232 1,356
Other receivables 149 1,247
Prepaid expenses 400 534
Current portion of notes receivable 1,170 1,170
-------- --------
Total current assets 13,452 14,932
Timber, timberlands and roads - net 356,629 359,349
Seed orchard and nursery stock 1,892 1,828
Property, plant and equipment - net 1,254 1,261
Notes receivable - long term 1,171 1,171
Deferred financing fees 6,504 6,673
-------- --------
Total assets $380,902 $385,214
======== ========
Liabilities
Current liabilities:
Accounts payable $ 547 $ 1,404
Accrued liabilities 9,806 5,949
Deferred revenue 5,146 5,744
-------- --------
Total current liabilities 15,499 13,097
Long-term debt 225,000 225,000
Members' equity
Managing member's interest 1,404 1,471
Nonmanaging member's interest 138,999 145,646
-------- --------
Total liabilities and partners' capital $380,902 $385,214
======== ========
See accompanying Notes to Consolidated Financial Statements.
3 of 14
<PAGE>
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
-----------------------
1998 1997
-------- --------
(In Thousands)
Cash Flows From Operating Activities:
Net loss $ (6,714) $ (1,947)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depletion, depreciation, road amortization and
cost of timber and timberland sold 2,760 3,551
Amortization of deferred financing fees 169 224
Working capital changes - net 4,758 1,597
-------- --------
Net cash provided by operating activities 973 3,425
Cash Flows From Investing Activities:
Timber and road additions -- (42)
Repayment of receivable from affiliate -- 10,000
Capitalized seed orchard and nursery costs (64) (64)
Purchase of property, plant and equipment (33) (93)
-------- --------
Net cash provided by (used in) investing activities (97) 9,801
Cash Flows From Financing Activities:
Distribution to member -- (1,191)
-------- --------
Net cash used in financing activities -- (1,191)
-------- --------
Increase in cash and cash equivalents 876 12,035
Cash and cash equivalents - beginning of period 10,625 16,613
-------- --------
Cash and cash equivalents - end of period $ 11,501 $ 28,648
======== ========
Supplemental Cash Flow Information:
Cash paid for interest $ -- $ 3,441
See accompanying Notes to Consolidated Financial Statements.
4 of 14
<PAGE>
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per Unit amounts or as otherwise indicated)
(Unaudited)
1. ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Organization
The accompanying consolidated financial statements include the accounts of
U.S. Timberlands Klamath Falls, L.L.C. (USTK), a Delaware limited liability
company, and its wholly owned subsidiary U.S. Timberlands Finance Corp. (Finance
Corp.), collectively referred to hereafter as the Company. Finance Corp. serves
as co-obligor for the Notes (defined below). It has nominal assets and does not
conduct any operations. All intercompany transactions have been eliminated in
consolidation. U.S. Timberlands Company, L.P. (Master Partnership) owns a 99%
nonmanaging member interest in USTK. The Master Partnership was formed on June
27, 1997 to acquire and own substantially all of the equity interests in USTK
and to acquire and own the business and assets of U.S. Timberlands Management
Company, L.L.C. (Old Services). U.S. Timberlands Services Company, L.L.C. (the
Manager) manages the businesses of the Company and owns a 1% managing member
interest in USTK. The managing member also owns a 1% general partner interest in
the Master Partnership.
Nature of Operations
The primary activity of the Company is the growing of trees and the sale
of logs and standing timber to third party wood processors. The Company's timber
is located in Oregon, east of the Cascade Range. Logs harvested from the
Timberlands are sold to unaffiliated domestic conversion facilities. These logs
are processed for sale as lumber, plywood and other wood products, primarily for
use in new residential home construction, home remodeling and repair and general
industrial applications.
Initial Public Offering and Related Transactions
On November 19, 1997, the Master Partnership completed an initial public
offering (the Common Units Offering) of 8,577,487 common units (including the
1,118,803 common units issued upon exercise of the underwriters' overallotment
option in December 1997) representing limited partner interests (Common Units).
In addition, the Company issued $225,000 of senior unsecured notes in a public
offering (the Notes). Concurrent with the Common Units Offering, Old Services
contributed all of its assets to the Manager in exchange for interests therein.
Immediately thereafter, USTK assumed certain indebtedness of U.S. Timberlands
Holdings, L.L.C. (Holdings), an affiliate of USTK, and the Manager contributed
its timber operations to USTK in exchange for a member's interest in USTK. The
Manager then contributed all but a 1% member interest in USTK to the Master
Partnership in exchange for a general partner interest, 1,387,963 subordinated
units representing limited partner interests (Subordinated Units) and the right
to receive certain incentive distributions. The Manager distributed the
1,387,963 Subordinated Units to Old Services and Old Services used a portion of
such Subordinated Units to redeem interests in Old Services. Holdings also
contributed all of its member interest in USTK to the Master Partnership in
exchange for 2,894,157 Subordinated Units. This series of transactions is
hereafter referred to as the Transactions. Since the controlling owner of Old
Services and USTK prior to the Transactions now controls the Manager, the
Transactions were recorded as a reorganization under common control and
therefore remain at their historical cost.
5 of 14
<PAGE>
Basis of Presentation
These consolidated financial statements have been prepared by the Company,
without audit by independent public accountants, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the consolidated financial statements include all normal recurring
adjustments necessary to present fairly the information required to be set forth
therein. Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from these statements pursuant to such rules and
regulations and, accordingly, should be read in conjunction with the
consolidated financial statements included in the Company's Annual Report on
Form 10-K. Operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the full year.
There have been no significant changes in the accounting policies of the
Company. There were no significant changes in the Company's commitments and
contingencies as previously described in the Annual Report on Form 10-K.
Basis of Presentation - Prior to the Transaction
During 1996, USTK and Old Services were formed and subsequently entered
into an agreement with Weyerhaeuser Company on August 30, 1996 to purchase
approximately 601,000 acres of timber and timberlands and certain other assets.
As legal entities, USTK and Old Services were not consolidated. However, due to
common ownership and management, the financial statements of USTK and Old
Services prior to the Transactions have been presented on a combined basis. All
intercompany transactions between the above entities have been eliminated in the
accompanying financial statements.
2. SUBSEQUENT EVENT
On April 22, 1998, the Board of Directors of the Manager authorized the
Master Partnership to make a distribution of $0.73 per Unit, representing the
sum of the $0.50 Minimum Quarterly Distribution for the first quarter of 1998,
plus $0.23 for the pro rata portion of the Minimum Quarterly Distribution for
the period from the date of the Common Units Offering through December 31, 1997.
The total distribution will be $9,600 (including $200 to the Manager) and will
be paid on May 15, 1998 to Unitholders of record on May 5, 1998.
3. NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130). This statement establishes
standards for reporting and displaying comprehensive income and its components
in a full set of general purpose financial statements. The objective of SFAS 130
is to report a measure of all changes in equity of an enterprise that result
from transactions and other economic events of the period other than
transactions with owners. The Company adopted SFAS 130 during the first quarter
of 1998. Comprehensive loss did not differ from currently reported net loss in
the periods presented.
6 of 14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company's principal operations consist of the growing and harvesting
of timber and the sale of logs and related by-products. The Company's ability to
implement its business strategy over the long term and its results of operations
depend upon a number of factors, many of which are beyond its control. These
factors include general industry conditions, domestic prices and supply and
demand for logs, seasonality, competition from other supplying regions and
substitute products and government regulation.
Current Market Conditions
First quarter 1998 prices for domestic logs in the eastern and southern
Oregon region were relatively flat compared to the prior year first quarter. Log
inventories at customer conversion facilities were moderately high for the first
quarter due to strong purchases in the fourth quarter of 1997. As a result,
demand for logs in the first quarter of 1998 was slow as inventories were worked
down.
Key lumber price indicators for Ponderosa Pine and Douglas Fir were
down 21% and 25%, respectively, from a year ago. Lodgepole Pine and White
Fir product indicators were down 8% from a year ago.
The Company's log prices fared better regionally as the scheduling,
quality and sales coordination for log deliveries was improved from the same
period a year earlier and only White Fir logs experienced a lower price.
Overall, the Company's average log sales price was up 1% from the prior year
first quarter.
Forward-Looking Statements
The information contained in this report includes information that may
constitute forward-looking statements within the meaning of the federal
securities laws. Although the Company believes that expectations reflected in
such forward-looking statements are based upon reasonable assumptions, it can
give no assurance that its expectations will be achieved. Forward-looking
information is subject to certain risks, trends and uncertainties that could
cause actual results to differ materially from those projected. Such risks,
trends and uncertainies include the highly cyclical nature of the forest
products industry, the possibility that timber supply could increase if
governmental, environmental or endangered species policies change, and
limitations on the Company's ability to harvest its timber due to adverse
natural conditions or increased governmental restrictions. These and other risks
are described in the Company's reports and registration statements that are
available from the United States Securities and Exchange Commission.
7 of 14
<PAGE>
Results of Operations
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997.
Revenues. Revenues for the three months ended March 31, 1998 were $7.8
million, a decrease of 37% over revenues of $12.3 million for the three months
ended March 31, 1997. This was primarily attributable to a $2.0 million decrease
in revenues from log sales and a $3.5 million decrease in timber and timberland
sales, partially offset by an increase of $0.9 million in stumpage sales.
Log and stumpage sales volumes for the three months ended March 31, 1998
were 18,400 MBF, a decrease of 14% over log and stumpage sales volumes of 21,400
MBF for the three months ended March 31, 1997. The decrease in the volume
harvested was primarily due to seasonality factors. Average log and stumpage
prices increased by 2%, from $413 per MBF for three months ended March 31, 1997
to $421 per MBF for the three months ended March 31, 1998, primarily due to an
increased mix of higher value timber and the results of enhanced marketing
efforts.
Revenues from timber and timberland sales were $3.5 million during the
three months ended March 31, 1997. There were no such timber and timberland
sales during the three months ended March 31, 1998.
Operating Costs. Operating costs were $9.0 million for the three months
ended March 31, 1998, an increase of 9% over operating costs of $8.3 million for
the three months ended March 31, 1997. This increase was primarily the result of
a $2.4 million increase in selling, general and administrative expenses and a
$0.4 million increase in depreciation, depletion and road amortization (DD&A)
expense, partially offset by a $1.2 million decrease in the cost of timber and
timberland sales and a $0.9 million decrease in cost of goods sold.
Selling, general and administrative expenses were $3.6 million for the
three months ended March 31, 1998, an increase of 305% over comparable expenses
of $1.2 million for the three months ended March 31, 1997. This increase is
primarily due to the increased cost of operating as a publicly owned company
combined with the one-time expense of $1.1 million related to severance costs
and the repurchase of member interests in the general partner.
DD&A expense was $2.8 million for the three months ended March 31, 1998, a
$0.4 million increase over DD&A expense of $2.4 million for the three months
ended March 31, 1997. This increase was primarily due to the increase in the
Company's depletion rate, which resulted from the Ochoco Timberlands acquisition
in July 1997. The increase in the Company's depletion rate was partially offset
by a 14% decrease in log and stumpage sales volumes during the three months
ended March 31, 1998 from the three months ended March 31, 1997.
During the three months ended March 31, 1997, the Company had a timber
deed sale with a cost basis of $1.2 million, whereas no sales of tracts of
timber or timberlands were made during the three months ended March 31, 1998.
Cost of goods sold was $2.6 million for the three months ended March 31,
1998, a decrease of 25% from cost of goods sold of $3.5 million for the three
months ended March 31, 1997. This decrease is primarily due to decreased logging
costs resulting from the 23% decrease in logs harvested by the Company during
the three months ended March 31, 1998 from the three months ended March 31,
1997.
8 of 14
<PAGE>
Interest Expense. Interest expense was $5.5 million for the three months
ended March 31, 1998 and related to $225.0 million aggregate principal amount of
Notes issued to the public on November 19, 1997. Interest expense of $5.3
million for the three months ended March 31, 1997 related primarily to $215.0
million of term debt and $90.0 million of revolving debt incurred in connection
with the Weyerhauser Acquisition in August 1996.
Amortization of Deferred Financing Fees and Debt Guarantee Fees. The
Company deferred $6.7 million of fees incurred in connection with the issuance
of the Notes. The amortization of deferred financing fees during the first three
months of 1998 was $0.2 million. The Company recognized $0.8 million of expense
related to debt guarantee fees payable to Weyerhaeuser and $0.2 million of
amortization of deferred financing fees during the three months ended March 31,
1997.
Interest Income. Interest income was $0.2 million during the three months
ended March 31, 1998. For the three months ended March 31, 1997, there was $0.4
million in interest income.
Financial Condition and Liquidity
The Company's primary source of liquidity has been cash from operating
activities as well as debt and equity financings. On July 14, 1997, the Company
refinanced its original revolving credit facility and certain term debt and
incurred an additional $110.0 million of term debt in connection with the Ochoco
Acquisition. Effective November 19, 1997, the Master Partnership completed the
Common Units Offering, an initial public offering of 8,577,487 Common Units
(including the underwriter's overallotment option which was exercised in
December 1997). Net proceeds from the Common Units Offering were $163.2 million.
In addition, the Company and Finance Corp. issued $225.0 million aggregate
principal amount of Notes in a public offering. The proceeds from the Common
Units Offering and the Notes were primarily utilized to retire all outstanding
borrowings under the revolving credit facility and term debt in the aggregate
amount of $330.0 million. For purposes of this discussion, these transactions
are hereafter referred to as the "Transactions". As of March 31, 1998, the
Company had a cash balance of $11.5 million, and $100.0 million of unused
internal borrowing capacity under its new $100.0 million bank credit facility
(the "Bank Credit Facility"). As of December 31, 1997, the Company had a cash
balance of $10.6 million, $1.8 million of working capital and $100.0 million of
unused internal borrowing capacity under the Bank Credit Facility.
Operating Activities. Cash flows provided by operating activities for the
three months ended March 31, 1998 were $1.0 million, as compared to cash flows
provided by operating activities of $3.4 million for the three months ended
March 31, 1997. The $2.4 million decrease in cash flows provided by operating
activities was primarily due to a decrease in log and stumpage sales and
proceeds from timber and timberland sales, partially offset by a $3.4 million
decrease in cash paid for interest.
Investing Activities. Cash flows used by investing activities were $0.1
million for the three months ended March 31, 1998, as compared to cash flows
provided by investing activities of $9.8 million for the three months ended
March 31, 1997. The difference is primarily due to $10.0 million received from
an affiliate in 1997.
Financing Activities. There were no cash flows provided or used by
financing activities for the three months ended March 31, 1998, as compared to
$1.2 million used for the three months ended March 31, 1997. Cash flows used by
financing activities during the three months ended March 31, 1997 represent a
member's distribution.
9 of 14
<PAGE>
Notes
The Notes represent unsecured general obligations of the Company and bear
interest at 9-5/8% payable semiannually in arrears on May 15 and November 15,
and mature on November 15, 2007, unless previously redeemed. The Notes are
redeemable at the option of the Company in whole or in part, on or after
November 15, 2002 at predetermined redemption prices plus accrued interest to
the redemption date. In addition, at any time on or prior to November 15, 2000,
the Company, at its option, may redeem the Notes with the net cash proceeds of
an offering of common units or other equity interests of the Master Partnership,
at 109.625% of the principal amount thereof, plus accrued and unpaid interest
thereon to the redemption date, provided that at least 65% of the principal
amount of the Notes originally issued remain outstanding immediately following
such redemption.
Bank Credit Facility
The Company's Bank Credit Facility consists of a $75.0 million acquisition
facility (the "Acquisition Facility") and a $25.0 million working capital
facility (the "Working Capital Facility"). As of March 31, 1998, there were no
outstanding borrowings under the Bank Credit Facility. The Bank Credit Facility
bears interest at the lower of the Bank of America's prime rate plus a margin of
2.0% or LIBOR plus a margin of 2.5%. The Working Capital Facility expires on
November 19, 2000 and all amounts borrowed thereunder will be due and payable.
At November 19, 2000, the Company may elect to amortize any outstanding loans
under the Acquisition Facility in sixteen equal quarterly installments beginning
one quarter after the conversion to a term loan, subject to certain provisions
contained in the Bank Credit Facility Agreement.
Each of the Indenture governing the Notes and the agreement governing the
Bank Credit Facility contain restrictive covenants, including limitations on
harvest levels, land sales, cash distributions and the amount of future
indebtedness. In addition, these agreements require that the Company maintain
certain financial ratios. The Company was in compliance with such covenants and
ratios as of March 31, 1998.
Capital Expenditures / Cash Distributions
Capital expenditures for the three months ended March 31, 1998 totaled
$0.1 million. As the Company does not currently own and does not plan to own or
operate manufacturing facilities, and all logging is subcontracted to third
parties, it is anticipated that capital expenditures in the future will not be
material and will consist mainly of land management and silvicultural
expenditures. It is not currently anticipated that the Company will either
maintain log inventories (although small log inventories may be maintained for a
short period of time) or incur material capital expenditures for machinery and
equipment. The Company anticipates that capital expenditures will be $1.8
million for the year ended December 31, 1998. Capital expenditures will consist
of capitalized silvicultural costs and miscellaneous equipment and computer
hardware and software expenditures.
Cash required to meet the Master Partnership's Minimum Quarterly
Distribution (as required by the Partnership Agreement), and interest and
principal payments on indebtedness is significant. The Manager expects that the
quarterly cash distributions and debt service will continue to be funded from
current operations.
10 of 14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There is no pending litigation and, to the knowledge of the Company, there
is no threatened ligitation, the unfavorable resolution of which would have a
material adverse effect on the business or financial condition of the Company.
Items 2, 3 and 4 of Part II are not applicable and have been omitted.
Item 5. Partnership Amendment
On May 6, 1998, the Manager amended the Master Partnership's Amended and
Restated Agreement of Limited Partnership to provide that annual and quarterly
reports may be made available to Unitholders by electronic means. To the extent
permitted by law, the Master Partnership intends to post its quarterly reports
on its web site (http://www.ustimberlands.com) rather than mail such reports to
Unitholders. A copy of such amendment is included as an exhibit to this
Quarterly Report on Form 10-Q.
11 of 14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
+3.1 -- Amended and Restated Agreement of Limited Partnership of U.S.
Timberlands Company, L.P.
+3.2 -- Second Amended and Restated Operating Agreement of U.S.
Timberlands Klamath Falls, L.L.C.
3.3 -- Amendment No. 1 to Amended and Restated Agreement of Limited
Partnership of U.S. Timberlands Company, L.P.
+10.1 -- Credit Agreement among U.S. Timberlands Klamath Falls, L.L.C. and
certain banks
+10.2 -- Indenture among U.S. Timberlands Klamath Falls, L.L.C., U.S.
Timberlands Finance Corp. and State Street Bank and Trust
Company, as trustee
+10.3 -- Contribution, Conveyance and Assumption Agreement among U.S.
Timberlands Company, L.P. and certain other parties
*10.4 -- Form of U.S. Timberlands Company, L.P. 1997 Long-Term Incentive
Plan
*10.5 -- Employment Agreement for Mr. Rudey
++10.6 -- Employment Agreement for Mr. Symington
++10.7 -- Employment Agreement for Mr. Michie
++10.8 -- Employment Agreement for Mr. McDowell
*10.9 -- Supply Agreement between U.S. Timberlands Klamath Falls, L.L.C.
and Collins Products LLC
27.1 -- Financial Data Schedule
* Incorporated by reference to the same numbered Exhibit to the Co-registrants'
Registration Statement on Form S-1 filed November 13, 1997.
+ Incorporated by reference to the same numbered Exhibit to the Master
Partnership's Current Report on Form 8-K filed January 15, 1998.
++ Incorporated by reference to the same numbered Exhibit to the Co-registrants'
Annual Report on Form 10-K filed March 31, 1998.
12 of 14
<PAGE>
(b) Report on Form 8-K
One report on Form 8-K was filed by the Company during the first quarter
of 1998 (quarter ended March 31, 1998).
On January 6, 1998, the Company filed a report on Form 8-K (Commission
File Nos. 1-13573-01 and 1-13573, respectively) which reported certain
management changes in the Manager. The following exhibits were attached:
(i) press release dated December 18, 1997, announcing the election of
Messrs. Spencer R. Stuart and Allen E. Symington to the Board of
Directors of the Manager;
(ii) press release dated January 5, 1998, announcing the election of Mr.
Thomas C. Theobald to the Board of Directors of the Manager and
naming him Chairman of the Finance Committee; and
(iii) press release dated January 6, 1998, announcing certain changes to
the Board of Directors and senior management of the Manager.
13 of 14
<PAGE>
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
undersigneds thereunto duly authorized.
Date: May 15, 1998 U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. Timberlands Services Company, L.L.C.
as Manager
By: /s/ ALLEN E. SYMINGTON
---------------------------------------
Allen E. Symington
President and Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
By: /s/ JOHN C. MCDOWELL
---------------------------------------
John C. McDowell
Vice President-Finance and Controller
(Principal Accounting Officer
and Duly Authorized Officer)
U.S. TIMBERLANDS FINANCE CORP.
By: /s/ ALLEN E. SYMINGTON
---------------------------------------
Allen E. Symington
President and Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
By: /s/ JOHN C. MCDOWELL
---------------------------------------
John C. McDowell
Vice President-Finance and Controller
(Principal Accounting Officer
and Duly Authorized Officer)
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
U.S. TIMBERLANDS COMPANY, L.P.
This Amendment No. 1 is made as of the 6th day of May, 1998 by U.S.
Timberlands Services Company, L.L.C., a Delaware limited liability company (the
"General Partner").
W I T N E S S E T H
WHEREAS, the General Partner proposes to amend Sections 8.3(a) and 8.3(b)
of the Partnership Agreement to permit the General Partner to make annual and
quarterly reports available to Unitholders by electronic means for the following
reasons:
(i) making reports available electronically will eliminate the
cost involved in printing and mailing annual and quarterly reports to the
Unitholders; and
(ii) the substance of the information contained in annual and
quarterly reports is already dated by the time it is otherwise required to
be mailed and is available on a more timely basis through EDGAR and other
Internet sites; and
(iii) such change, particularly with respect to quarterly
reports, will conform to the distribution requirements of the Nasdaq Stock
Market; and
WHEREAS, Section 13.1 of the amended and restated agreement of limited
partnership of U.S. Timberlands Company, L.P. (the "Partnership") (the
"Partnership Agreement"; terms used herein and not otherwise defined having the
meanings given to them in the Partnership Agreement), provides the procedure for
amending the Partnership Agreement when such amendment is to be adopted solely
by the General Partner; and
WHEREAS, in addition to the benefits provided by such proposed amendment,
the General Partner has determined in its discretion, in accordance with Section
13.1(d)(i) of the Partnership Agreement, that the proposed amendment "does not
adversely affect the Limited Partners in any material respect";
NOW THEREFORE, it is agreed as follows:
1. The Partnership Agreement is hereby amended by deleting the words
"mailed or furnished" in Sections 8.3(a) and 8.3(b) and substituting the
following in lieu thereof:
"furnished or made available (including pursuant to electronic
means)".
2. Except as amended hereby, all provisions of the Partnership Agreement
remain in full force and effect.
1
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Amendment No. 1 to
the Amended and Restated Partnership Agreement as of the date first written
above.
GENERAL PARTNER: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.
By: /s/ JOHN M. RUDEY
------------------------
Name: John M. Rudey
Title:Chairman
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF U.S. TIMBERLANDS KLAMATH FALLS, L.L.C. FOR THE THREE
MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
<CASH> 11,501
<SECURITIES> 0
<RECEIVABLES> 1,651
<ALLOWANCES> 100
<INVENTORY> 0
<CURRENT-ASSETS> 13,452
<PP&E> 1,464
<DEPRECIATION> 210
<TOTAL-ASSETS> 380,902
<CURRENT-LIABILITIES> 15,499
<BONDS> 225,000
0
0
<COMMON> 0
<OTHER-SE> 138,999
<TOTAL-LIABILITY-AND-EQUITY> 380,902
<SALES> 7,757
<TOTAL-REVENUES> 7,757
<CGS> 2,654
<TOTAL-COSTS> 9,040
<OTHER-EXPENSES> 144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,463
<INCOME-PRETAX> (6,714)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,714)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,714)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
