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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 name of co-registrant as specified in its charter)
Delaware 93-1217136
Delaware 91-1851612
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
625 Madison Avenue, Suite 10-B, New York, NY 10022
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(Address of principal executive offices) (Zip Code)
Co-Registrant's telephone number, including area code: 212-755-1100
Indicate by check mark whether the co-registrants (1) have 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
co-registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
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<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
-------
U.S. TIMBERLANDS KLAMATH FALLS, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Unit Information)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30,
------------------------------------------
2000 1999
------------------ -------------------
<S> <C> <C>
Revenues $ 23,960 $ 20,296
Cost of timber harvested (2,937) (2,774)
Depletion, depreciation and road amortization (8,142) (5,268)
------------------ -------------------
Gross profit 12,881 12,254
------------------ -------------------
Selling, general and administrative (2,205) (2,489)
------------------ -------------------
Operating income 10,676 9,765
------------------ -------------------
Interest expense (5,402) (5,495)
Interest income 108 99
Financing fees (168) (169)
Other income - net 345 257
------------------ -------------------
Net income $ 5,559 $ 4,457
================== ===================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2 of 17
<PAGE>
U.S. TIMBERLANDS KLAMATH FALLS, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Unit Information)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------
2000 1999
------------------ -------------------
<S> <C> <C>
Revenues $ 35,884 $ 31,425
Cost of timber harvested (6,824) (4,796)
Depletion, depreciation and road amortization (11,945) (9,252)
------------------ -------------------
Gross profit 17,115 17,377
------------------ -------------------
Selling, general and administrative (4,161) (4,839)
Equity in net income of affiliate 607 -
------------------ -------------------
Operating income 13,561 12,538
------------------ -------------------
Interest expense (10,856) (10,965)
Interest income 230 351
Financing fees (337) (338)
Other income - net 1,004 1,139
------------------ -------------------
Net income $ 3,602 $ 2,725
================== ===================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3 of 17
<PAGE>
U.S. TIMBERLANDS KLAMATH FALLS, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------ -------------------
(Unaudited) *
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,762 $ 2,798
Accounts and current portion of notes receivable - net 5,226 3,140
Prepaid expenses and other current assets 81 981
------------------ -------------------
Total current assets 8,069 6,919
Timber and timberlands, net 284,279 293,828
Investment in affiliate 19,675 18,243
Receivable from affiliate 294 294
Property, plant and equipment, net 993 1,038
Notes receivable - long-term - 2,304
Deferred financing fees 4,986 5,323
------------------ -------------------
Total assets $ 318,296 $ 327,949
================== ===================
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,378 $ 4,472
Deferred revenue - 39
------------------ -------------------
Total current liabilities 4,378 4,511
------------------ -------------------
Long-term debt 225,000 225,000
------------------ -------------------
Members' equity:
Managing member's equity 890 984
Non-managing member's equity 88,028 97,454
------------------ -------------------
88,918 98,438
------------------ -------------------
Total liabilities and members' equity $ 318,296 $ 327,949
================== ===================
</TABLE>
* Derived from audited Consolidated Balance Sheet as of December 31, 1999.
See accompanying notes to the condensed consolidated financial statements.
4 of 17
<PAGE>
U.S. TIMBERLANDS KLAMATH FALLS, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
Six Months Ended June 30,
------------------------------------------
2000 1999
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 15,235 $ 9,880
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Timber, timberlands and road additions (2,143) (541)
Purchase of property, plant and equipment - net (52) (36)
Proceeds from sale of assets 46 -
Increase in other assets - (1,000)
------------------- ------------------
Net cash used in investing activities (2,149) (1,577)
------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings - 1,000
Distributions to members (13,122) (13,122)
------------------- ------------------
Net cash used in financing activities (13,122) (12,122)
------------------- ------------------
Decrease in cash and cash equivalents (36) (3,819)
Cash and cash equivalents - beginning of period 2,798 4,824
------------------- ------------------
Cash and cash equivalents - end of period $ 2,762 $ 1,005
=================== ==================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5 of 17
<PAGE>
U.S. TIMBERLANDS KLAMATH FALLS, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Unit Amounts or
as Otherwise Indicated)
(Unaudited)
1. BUSINESS AND BASIS OF PRESENTATION:
BUSINESS
The accompanying consolidated financial statements include the accounts of U.S.
Timberlands Klamath Falls, LLC ("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 the co-obligator for USTK's notes. It has nominal assets and does not conduct
operations. All intercompany transactions have been eliminated in consolidation.
U.S. Timberlands Company, LP (the "MLP") owns a 99% non-managing member interest
in USTK. The MLP 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, LLC, formerly known as U.S.
Timberlands Services Company, LLC. U.S. Timberlands Services Company (the
"Manager") manages the business of the Company and owns a 1% managing member
interest in USTK.
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.
BASIS OF PRESENTATION
These condensed consolidated financial statements have been prepared by the
Company, without audit by independent public accountants, pursuant to the rules
and regulations of the United States Securities and Exchange Commission. In the
opinion of management, the accompanying unaudited 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 these
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements included in the Company's 1999 Annual
Report on Form 10-K. Operating results for the quarter and six month periods
ended June 30, 2000 are not necessarily indicative of the results that may be
expected for the full year or any other period.
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 1999 Annual Report on Form 10-K.
RECLASSIFICATIONS
Certain amounts presented for 1999 have been reclassified for comparability
purposes and have no impact on net income.
6 of 17
<PAGE>
2. TIMBER AND TIMBERLANDS:
Timber and timberlands consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------- --------------------
<S> <C> <C>
Timber and logging roads $ 319,391 $ 317,856
Timberlands 39,691 39,338
Seed orchard and nursery stock 1,551 1,277
------------------- --------------------
360,633 358,471
Less accumulated depletion and road amortization 76,354 64,643
------------------- --------------------
$ 284,279 $ 293,828
=================== ====================
</TABLE>
3. INVESTMENT IN AFFILIATE:
The following is summarized financial information for U.S. Timberlands Yakima,
LLC, the MLP's equity affiliate.
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2000
------------------- -------------------
Net sales $ 4,987 $ 9,772
Gross profit $ 2,196 $ 5,307
Net income $ 369 $ 1,770
There are no corresponding amounts for the quarter and six month period ended
June 30, 1999 as the Company's investment in the affiliate began in October
1999.
In June 2000, the Company purchased timber cutting rights for approximately 4.2
million board feet from U.S. Timberlands Yakima, LLC for $1.3 million. These
timber cutting rights expire in June 2003.
4. SHORT-TERM DEBT:
The Company has a credit facility with an affiliate of the Manager (the
"Affiliate Credit Facility") consisting of a revolving line of credit of up to
$12.0 million. Borrowings under the Affiliate Credit Facility bear interest at
the prime lending rate as published in the Wall Street Journal plus applicable
margin (1.25% at June 30, 2000), which is based on the Company's leverage ratio.
The prime lending rate was 9.50% at June 30, 2000. There were no outstanding
borrowings under the Affiliate Credit Facility at June 30, 2000. The Affiliate
Credit Facility expires June 30, 2001 and any amounts borrowed thereunder shall
then be due and payable.
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<PAGE>
5. SUBSEQUENT EVENT:
On July 19, 2000, the Board of Directors of the Manager authorized the MLP to
make a distribution of $0.50 per Unit. The total distribution will be $6,561
(including $131 to the Manager) and will be paid on August 14, 2000 to
Unitholders of record on July 31, 2000.
6. NEW ACCOUNTING PRONOUNCEMENT:
In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting for derivative
instruments and hedging activities, and would require the Company to record all
derivatives as assets or liabilities at fair value. Implementation of the
statement was delayed by SFAS No. 137 to all fiscal quarters of fiscal years
beginning after June 15, 2000. Consistent with SFAS No. 137, the Company will
adopt SFAS No. 133 as of January 1, 2001. Management believes that adoption of
this statement will not have a material impact on the Company.
8 of 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------- RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
--------------------------
Certain information contained in this report 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 uncertainties include
the highly cyclical nature of the forest products industry, general economic
conditions, competition, price conditions or trends for the Company's products,
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
other reports and registration statements, which are available from the United
States Securities and Exchange Commission.
OVERVIEW
--------
The Company's principal operations consist of growing and harvesting timber and
selling logs, standing timber and related by-products to third party wood
processors. These logs and by-products are processed for sale as lumber; molding
products; doors; mill work; commodity, specialty, and overlaid plywood products;
laminated veneer lumber; engineered wood I-beams; particleboard; hardboard;
paper and other wood products. These products are used in residential,
commercial, and industrial construction; home remodeling and repair; general
industrial applications; and a variety of paper products. The results of the
Company's operations and its ability to pay quarterly distributions to its
Unitholders depend upon a number of factors, many of which are beyond its
control. These factors include general economic and industry conditions,
domestic and export prices, supply and demand for timber and logs, seasonality,
government regulations affecting the manner in which timber may be harvested,
and competition from other supplying regions and substitute products.
SEASONALITY
-----------
The Company's log and standing timber sales volumes are generally at their
lowest levels in the first and second quarter of each year. In the first
quarter, heavy snowfalls in higher elevations prevent access to many areas of
the Company's timberlands. This limited access, along with spring break-up
conditions (when warming weather thaws and softens roadbeds) in March or April,
restricts logging operations to lower elevations and areas with rockier soil
types. As a result of these constraints, the Company's sales volumes are
typically at their lowest in the first quarter, improving in the second quarter
and at their highest during the third and fourth quarters. Most customers in the
region react to this seasonality by carrying sufficiently high log inventories
at the end of the calendar year to carry them to the second quarter of the
following year.
9 of 17
<PAGE>
CURRENT MARKET CONDITIONS
-------------------------
During the second quarter of 2000 prices for finished wood products (e.g.,
lumber, plywood, and engineered wood products) declined from prior year levels.
Average prices in the second quarter for Ponderosa Pine #3 shop, Lodgepole Pine
studs, White Fir sheathing, and Douglas Fir #2 & better green studs were down
5%, 16%, 25%, and 7% respectively from the same period in 1999. Driven by the
decline in finished wood product prices, log and timber prices started dropping
in late April and continued through the beginning of the third quarter of this
year.
RESULTS OF OPERATIONS
---------------------
Selected operating statistics for the Company:
<TABLE>
<CAPTION>
Sales Volume (MBF) Price Realization (MBF)
-------------------------------------- ----------------------------------------
Timber Timber
Period Logs Stumpage Deeds Logs Stumpage Deeds
------ ---- -------- ----- ---- -------- -----
2000
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended June 30 13,908 - 51,037 $ 432 $ - $ 346
Three Months Ended March 31 20,564 503 8,701 $ 425 $ 379 $ 325
1999
Three Months Ended June 30 15,376 - 26,898 $ 455 $ - $ 484
Three Months Ended March 31 11,996 1,921 17,759 $ 395 $ 440 $ 308
</TABLE>
QUARTER ENDED JUNE 30, 2000 COMPARED TO QUARTER ENDED JUNE 30, 1999
REVENUES Revenues for the quarter ended June 30, 2000 were $24.0 million,
an increase of $3.7 million or 18% over revenues of $20.3 million for the same
period in 1999. This increase in revenues was attributable to a $4.6 million
increase in timber deed sales, partially offset by a $1.0 million decrease in
log sales.
Timber deed sales for the second quarter of 2000 were $17.6 million on
volume of 51.0 million board feet ("MMBF"), as compared to the same period in
1999, when timber deed sales were $13.0 million on 26.9 MMBF. The average timber
deed price was $346 per thousand board feet ("MBF") during the second quarter of
2000, as compared to $484 per MBF for the same period in 1999. The decrease in
the average price reflects a lower value grade of timber sold from the Ochoco
Timberlands.
Log sales for the quarter ended June 30, 2000 were $6.0 million on volume
of 13.9 MMBF, as compared to the same period in 1999 when log sales were $7.0
million on 15.4 MMBF. The average sales price was $432 per MBF for the second
quarter of 2000, as compared to an average of $455 per MBF for the same period
in 1999. The decline in log prices reflects a general decrease in log prices and
a slightly lower value species mix sold during the second quarter of 2000 as
compared to the same period in 1999. The decrease in the average log sales price
was primarily attributable to 16% and 13% decreases in Douglas Fir and Lodgepole
Pine prices, respectively.
10 of 17
<PAGE>
GROSS PROFIT Gross profit increased $0.6 million from $12.3 million in the
second quarter of 1999 to $12.9 million in the second quarter of 2000. As a
percentage of sales, gross profit decreased from 60% in the second quarter of
1999 to 54% in the second quarter of 2000. The dollar increase in gross profit
is attributed to a higher overall sales volume in the second quarter of 2000 as
compared to the same period in 1999. The decrease in gross profit as a
percentage of sales was primarily from two factors. First, contracted log and
haul costs on a per MBF basis were up 37% in the second quarter of 2000 as
compared to the same period in 1999 due to longer hauls for delivered logs and
increased fuel costs. Second, the Company's timber deed sales in the second
quarter of 2000 were generally composed of a lower value grade mix as compared
to the same period in 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses decreased by $0.3 million from $2.5 million in the
second quarter of 1999 to $2.2 million in the second quarter of 2000. As a
percentage of net sales, this expense decreased from 12% for the second quarter
of 1999 to 9% in the second quarter of 2000. The decrease was primarily due to
$0.7 million of severance expenses from the closure of the Seattle office in the
second quarter of 1999 offset by an increase of $0.3 million for professional
services expenses during the second quarter of 2000 as compared to the same
period in 1999.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
REVENUES Revenues for the six months ended June 30, 2000 were $35.9
million, an increase of $4.5 million or 14% over revenues of $31.4 million for
the same period in 1999. This increase in revenues was primarily attributable to
a $3.0 million increase in log sales as well as a $1.4 million increase in
timber deed and stumpage sales.
Log sales for the six months ended June 30, 2000 were $14.7 million on
volume of 34.5 MMBF, as compared to the same period in 1999 when log sales were
$11.7 million on 27.4 MMBF. The average sales price for logs during the six
month period ended June 30, 2000 was comparable to the average sales price for
logs during the same period in 1999. This is due primarily to a higher value
species mix as compared to the six months ended June 30, 1999. Ponderosa Pine
prices have remained relatively stable and the average log sales price for White
fir for the six months ended June 30, 2000 was 8% higher than for the same
period in 1999.
Timber deed and stumpage sales for the six months ended June 30, 2000 were
$20.7 million on volume of 60.2 MMBF, as compared to the same period in 1999,
when timber deed and stumpage sales were $19.3 million on volume of 46.6 MMBF.
The average timber deed and stumpage sales price for the six months ended June
30, 2000 was $343 per MBF, as compared to $415 per MBF for the same period in
1999. The decrease in average timber deed and stumpage sales price can be
attributed to a lower value grade mix of timber sold from the Ochoco
Timberlands.
GROSS PROFIT Gross profit decreased $0.3 million from $17.4 million in the
first six months of 1999 to $17.1 million in the first six months of 2000. As a
percentage of sales, gross profit decreased from 55% in the first six months of
1999 to 48% in the same period of 2000. The decrease in gross profit was
primarily from two factors. First, contracted log and haul costs on a per MBF
basis were up 22% in the first six months of 2000 as compared to the same period
in 1999 due to longer hauls for delivered logs and higher fuel costs. Second,
the Company's timber deed sales were generally composed of a lower value grade
mix as compared to the same period in 1999.
11 of 17
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses decreased by $0.6 million from $4.8 million in the first
six months of 1999 to $4.2 million in the first six months of 2000. As a
percentage of net sales, this expense decreased from 15% for the six months
ended June 30, 1999 to 12% in the first six months of 2000. The decrease was
primarily due to $0.7 million in severance expenses from the closure of the
Seattle office in 1999.
EQUITY IN NET INCOME OF AFFILIATE Equity in net income of affiliate was
$0.6 million for the six month period ended June 30, 2000. This amount
represents the Company's recapture of losses on its investment in an affiliate
absorbed by the Company during the fourth quarter of 1999.
FINANCIAL CONDITION AND LIQUIDITY
---------------------------------
OPERATING ACTIVITIES Cash flows provided by operating activities during the
six months ended June 30, 2000 were $15.2 million, as compared to $9.9 million
during the same period in 1999. The $5.3 million increase in cash flows provided
by operating activities was primarily due to changes in working capital
components. The change in working capital was primarily driven by the fact that
the Company utilized notes receivable for timber deed sales during the first
quarter of 1999 and the Company received cash for its timber deed sales during
the first six months of 2000. Timber deed sales during the first quarter of 1999
resulted in notes receivable of $4.3 million, which reduced operating cash flow
during the first six months of 1999, while a $2.1 million net reduction of notes
receivable through collections during the first six months of 2000 increased
operating cash flow during the first six months of 2000. The increase related to
changes in notes receivable is partially offset by a $1.3 million non-cash
increase in the Company's investment in its affiliate from the Company's
recapture of losses on its investment in its affiliate and the accrual of a
preferred dividend from the Company's preferred investment in its affiliate.
INVESTING ACTIVITIES Cash flows used in investing activities were $2.1
million during the first six months of 2000, as compared to $1.6 million during
the same period in 1999. The increase is primarily attributable to the Company's
purchase of cutting rights from its affiliate for approximately $1.3 million,
partially offset by a $1.0 million deposit during the first quarter of 1999 that
was subsequently returned to the Company.
FINANCING ACTIVITIES Cash flows used in financing activities were $13.1
million for the first six months of 2000, as compared to $12.1 million during
the same period in 1999. The increase is attributable to the fact that the
Company had cash provided by net borrowings of approximately $1.0 million during
the first six months of 1999 and had no such net borrowings in the first six
months of 2000.
The Company has a credit agreement with an affiliate of the Manager (the
"Affiliate Credit Facility"). The Affiliate Credit Facility allows the Company
to borrow up to $12.0 million under certain terms and covenants. The covenants
include restrictions on the Company's ability to make cash distributions, incur
certain additional indebtedness or incur certain liens. In addition, the Company
is required to maintain certain financial ratios. The Affiliate Credit Facility
will expire on June 30, 2001. At that time, any amounts borrowed will be due and
payable. As of June 30, 2000 there were no outstanding borrowings under the
Affiliate Credit Facility. The Company has the ability to generate cash flow
through the acceleration of planned log and timber deed sales.
12 of 17
<PAGE>
The agreements governing the Company's 9-5/8% senior notes (the "Notes")
and the Affiliate 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 the Company to
maintain certain financial ratios. Under the Notes, the Company's average annual
adjusted harvest volume over any period of four consecutive years cannot exceed
a volume of approximately 147 MMBF as adjusted for timberland sales and
purchases. The Notes also limit one-year harvest levels and average annual
harvest levels for consecutive two-and three-year periods. As of June 30, 2000
the Company was in compliance with the covenants and ratios pertaining to the
Notes and Affiliate Credit Facility.
Through the first six months of 2000, the Company funded its operations and
met its cash requirements for distributions to its Unitholders and debt service
from cash on hand, cash generated from current operations and borrowings under
its Affiliate Credit Facility.
Cash required to make distributions to all Unitholders at current levels
and to pay interest on the Notes is $26.2 million and $21.7 million,
respectively, per year. To make these payments and meet its working capital
requirements, the Company has been selling logs and timber at a rate in excess
of the Manager's estimate of the current annual board footage growth on the
Company's timberlands. The Manager expects that the debt service and quarterly
cash distributions will be funded from operations and borrowings. Given
projected volumes for sales of logs and timber, estimated current board footage
growth on the timberlands and the harvest restrictions in the Notes, unless
prices improve, costs are reduced, new markets are developed or the Company
makes accretive acquisitions, the Company's ability in the future to make
distributions at current levels may be adversely affected. The Company continues
to evaluate means to improve cash flows, including the factors mentioned above.
However, there can be no assurance that prices will improve or that the Company
will be able to take any of these actions.
YEAR 2000 ISSUES
----------------
The Company has completed its Year 2000 readiness work and did not
experience disruption in its business related to the Year 2000 Issue. In
addition to internally assessing its systems and business for Year 2000, the
Company contacted all major external third parties that provide products and
services to the Company to assess their readiness for Year 2000. The Company
made certain investments in systems, applications and products to address the
Year 2000 Issue. The Company did not, however, track internal resources
dedicated to the resolution of the Year 2000 Issue and therefore, is unable to
quantify internal costs incurred to date that are associated with the Year 2000
Issue. The Company believes that direct and indirect expenditures to address the
Year 2000 Issue were immaterial to the Company's operations. To date, the
Company has not experienced any significant, known Year 2000 issues and has been
informed by material third parties that they have also not experienced material
Year 2000 issues. The Company will continue to monitor any on-going Year 2000
issues.
13 of 17
<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 litigation, the unfavorable resolution of which could have a
material adverse effect on the business or financial condition of the Company.
ITEMS 2, 3, 4 AND 5 OF PART II are not applicable and have been omitted.
------------------------------
14 of 17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(A.) EXHIBITS
<S> <C>
+3.1 -- Amended and Restated Agreement of Limited Partnership of U.S. Timberlands Company, LP
+3.2 -- Second Amended and Restated Operating Agreement of U.S. Timberlands Klamath Falls, LLC
+10.2 -- Indenture among U.S. Timberlands Klamath Falls, LLC, 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, LP
and certain other parties
*10.4 -- Form of U.S. Timberlands Company, LP 1997 Long-Term Incentive Plan
*10.5 -- Employment Agreement for Mr. Rudey
*10.9 -- Supply Agreement between U.S. Timberlands Klamath Falls, LLC and Collins Products LLC
++10.10 -- Operating Agreement of U.S. Timberlands, Yakima LLC
10.11 -- Agreement with Greg Byrne
**16 -- Letter from Arthur Andersen, LLP dated December 8, 1998
*21.1 -- List of Subsidiaries
27.1 -- Financial Data Schedule
</TABLE>
* Incorporated by reference to the same numbered Exhibit to the Registrant's
Registration Statement on Form S-1 filed November 13, 1997.
** Incorporated by reference to Exhibit 1 to the Registrant's Form 8-K filed
on December 8, 1998.
+ Incorporated by reference to the same numbered Exhibit to the Registrant's
Current Report on Form 8-K filed January 15, 1998.
++ Incorporated by reference to the same numbered Exhibit to the Registrant's
Form 10-Q filed on May 15, 2000.
(B.) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended June
30, 2000.
15 of 17
<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
undersigned thereunto duly authorized.
DATE: AUGUST 14, 2000 U.S. TIMBERLANDS KLAMATH FALLS, LLC
By: U.S. Timberlands Services Company, LLC
as Manager
By: /s/ Thomas C. Ludlow
-------------------------------------------
Thomas C. Ludlow
Chief Financial Officer
(Chief Financial Officer
and Duly Authorized Officer)
By: /s/ Toby A. Luther
-------------------------------------------
Toby A. Luther
Corporate Controller - Western Operations
(Principal Accounting Officer)
U.S. TIMBERLANDS FINANCE CORP.
By: U.S. Timberlands Services Company, LLC
as Manager
By: /s/ Thomas C. Ludlow
-------------------------------------------
Thomas C. Ludlow
Chief Financial Officer
(Chief Financial Officer
and Duly Authorized Officer)
By: /s/ Toby A. Luther
-------------------------------------------
Toby A. Luther
Corporate Controller - Western Operations
(Principal Accounting Officer)
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