<PAGE>
----------------------------------------------------------------------
----------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994
Commission File Number 1-8857
MAXXAM GROUP INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-1310680
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057
(Address of Principal (Zip Code)
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 1, 1994: 100
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.
----------------------------------------------------------------------
----------------------------------------------------------------------
<PAGE>
MAXXAM GROUP INC.
INDEX
PAGE
----
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 1994 and
December 31, 1993 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Operations for the three months
ended March 31, 1994 and 1993 . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows for the three months
ended March 31, 1994 and 1993 . . . . . . . . . . . . . . 5
Condensed Notes to Consolidated Financial Statements . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 9
PART II. -- OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 12
Item 5. Other Information . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
<PAGE>
MAXXAM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
------------ ------------
(Unaudited)
(In thousands of dollars)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . $ 26,366 $ 39,001
Marketable securities . . . . . . . . 21,336 17,775
Receivables:
Trade . . . . . . . . . . . . . . . 12,653 15,910
Other . . . . . . . . . . . . . . . 4,444 4,212
Inventories . . . . . . . . . . . . . 66,370 73,413
Prepaid expenses and other current 3,782 3,189
assets . . . . . . . . . . . . . . ------------ ------------
Total current assets . . . . . . . 134,951 153,500
Timber and timberlands, net of depletion
of $174,105 and $171,007 at March 31,
1994 and December 31, 1993,
respectively . . . . . . . . . . . . . 362,967 365,511
Property, plant and equipment, net of
accumulated depreciation of $52,101
and $50,090 at March 31, 1994 and
December 31, 1993, respectively . . . 103,983 102,780
Deferred financing costs, net . . . . . . 32,058 32,725
Deferred income taxes . . . . . . . . . . 57,500 58,371
Restricted cash . . . . . . . . . . . . . 33,532 33,562
Other assets . . . . . . . . . . . . . . 9,374 9,572
------------ ------------
$ 734,365 $ 756,021
============ ============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable . . . . . . . . . . . $ 4,877 $ 2,871
Accrued interest . . . . . . . . . . . 9,602 26,216
Accrued compensation and related
benefits . . . . . . . . . . . . . 10,006 7,782
Deferred income taxes . . . . . . . . 14,132 14,132
Other accrued liabilities . . . . . . 3,309 4,543
Long-term debt, current maturities . . 13,281 16,093
------------ ------------
Total current liabilities . . . . . 55,207 71,637
Long-term debt, less current maturities . 766,305 772,310
Other noncurrent liabilities . . . . . . 27,940 28,125
----------- ------------
Total liabilities . . . . . . . . . 849,452 872,072
------------ ------------
Contingencies
Stockholder's deficit:
Common stock, $.08 1/3 par value; 1,000
shares authorized; 100 shares issued -- --
Additional capital . . . . . . . . . . 81,287 81,287
Accumulated deficit . . . . . . . . . (196,374) (197,338)
------------ ------------
Total stockholder's deficit . . . . (115,087) (116,051)
------------ ------------
$ 734,365 $ 756,021
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
MAXXAM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1994 1993
------------ ------------
(In thousands of dollars)
<S> <C> <C>
Net sales:
Lumber and logs . . . . . . . . . . . $ 53,653 $ 48,724
Other . . . . . . . . . . . . . . . . 3,060 4,013
------------ ------------
56,713 52,737
------------ ------------
Operating expenses:
Costs of goods sold (exclusive of
depletion and depreciation) . . . . 33,132 26,349
Depletion and depreciation . . . . . . 6,065 6,229
Selling, general and administrative . 4,310 3,926
------------ ------------
43,507 36,504
------------ ------------
Operating income . . . . . . . . . . . . 13,206 16,233
Other income (expense):
Investment, interest and other income 7,719 3,037
Interest expense . . . . . . . . . . . (19,090) (21,372)
------------ ------------
Income (loss) from continuing operations
before income taxes, extraordinary item
and cumulative effect of changes in
accounting principles . . . . . . . . 1,835 (2,102)
Provision in lieu of income taxes . . . . (871) (39)
------------ ------------
Income (loss) from continuing operations
before extraordinary item and
cumulative effect of changes in
accounting principles . . . . . . . . 964 (2,141)
Loss from net assets transferred to
MAXXAM, net of minority interest and
related income taxes . . . . . . . . . -- (480,370)
------------ ------------
Income (loss) before extraordinary item
and cumulative effect of changes in
accounting principles . . . . . . . . 964 (482,511)
Extraordinary item:
Loss on early extinguishment of debt,
net of related credit in lieu of
income taxes of $5,566 . . . . . . -- (10,802)
Cumulative effect of changes in accounting
principles:
Postretirement benefits other than
pensions, net of related credit in
lieu of income taxes of $1,566 . . -- (2,348)
Accounting for income taxes . . . . . -- 14,916
------------ ------------
Net income (loss) . . . . . . . . . . . . $964 $(480,745)
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
MAXXAM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1994 1993
------------ ------------
(In thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . $ 964 $(480,745)
Adjustments to reconcile net income
(loss) to net cash provided by (used
for) operating activities:
Depletion and depreciation . . . . 6,065 6,229
Amortization of deferred financing
costs and discounts on long-term
debt . . . . . . . . . . . . . . 2,914 850
Net losses (gains) on marketable
securities . . . . . . . . . . . 241 (3,067)
Loss from net assets transferred to
MAXXAM, net . . . . . . . . . . -- 480,370
Extraordinary loss on early
extinguishment of debt, net . . -- 10,802
Incurrence of financing costs . . . -- (26,860)
Cumulative effect of changes in
accounting principles, net . . . -- (12,568)
Decrease in inventories . . . . . . 6,214 5,390
Decrease in receivables . . . . . . 2,967 11,129
Increase in accounts payable . . . 2,006 690
Increase in other liabilities . . . 1,825 --
Decrease (increase) in accrued and
deferred income taxes . . . . . 871 (201)
Decrease in accrued interest . . . (16,614) (24,932)
Other . . . . . . . . . . . . . . . (478) (937)
------------ ------------
Net cash provided by (used for)
operating activities . . . . 6,975 (33,850)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of marketable securities (4,822) (7,845)
Capital expenditures . . . . . . . . . (4,045) (1,956)
Increase in net assets transferred to
MAXXAM . . . . . . . . . . . . . . -- (3,059)
Other . . . . . . . . . . . . . . . . 304 43
------------ ------------
Net cash used for investing
activities . . . . . . . . . (8,563) (12,817)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions, repurchase of and
principal payments on long-term debt (8,147) (549,690)
Net payments under revolving credit
agreements . . . . . . . . . . . . (2,900) --
Proceeds from issuance of long-term
debt . . . . . . . . . . . . . . . -- 620,000
Restricted cash deposits . . . . . . . -- (35,000)
------------ ------------
Net cash provided by (used for)
financing activities . . . . (11,047) 35,310
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (12,635) (11,357)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD . . . . . . . . . . . . . . . . 39,001 54,254
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 26,366 $ 42,897
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid, net of capitalized
interest . . . . . . . . . . . . . $ 32,790 $ 45,454
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
MAXXAM GROUP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
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 Annual Report on Form 10-K filed by MAXXAM Group Inc.
with the Securities and Exchange Commission for the fiscal year ended
December 31, 1993 (the "Form 10-K"). All references to the "Company"
include MAXXAM Group Inc. and its subsidiary companies unless otherwise
indicated 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, 1994 and the
consolidated results of operations and cash flows for the three months
ended March 31, 1994 and 1993. Certain reclassifications of prior period
information have been made to conform to the current presentation. The
Company is a wholly owned subsidiary of MAXXAM Inc. ("MAXXAM").
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Lumber . . . . . . . . . . . . . . . . . $51,154 $52,354
Logs . . . . . . . . . . . . . . . . . . 15,216 21,059
------------ ------------
$66,370 $73,413
============ ============
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
7.95% Timber Collateralized Notes due July
20, 2015 . . . . . . . . . . . . . . . $368,857 $376,953
11 1/4% Senior Secured Notes due August 1,
2003 . . . . . . . . . . . . . . . . . 100,000 100,000
12 1/4% Senior Secured Discount Notes due
August 1, 2003, net of discount . . . 75,729 73,499
10 1/2% Senior Notes due March 1, 2003 . 235,000 235,000
Other . . . . . . . . . . . . . . . . . . -- 2,951
------------ ------------
779,586 788,403
Less: current maturities . . . . . . . . (13,281) (16,093)
------------ ------------
$766,305 $772,310
============ ============
</TABLE>
4. INVESTMENT, INTEREST AND OTHER INCOME
In February 1994, The Pacific Lumber Company ("Pacific Lumber," a
wholly owned subsidiary of the Company) received a franchise tax refund
of $7,243, the substantial portion of which represents interest, from the
State of California relating to tax years 1972 through 1985. This amount
is included in investment, interest and other income for the three months
ended March 31, 1994.
5. LOSS FROM NET ASSETS TRANSFERRED TO MAXXAM
The loss from net assets transferred to MAXXAM was as follows for
the three months ended March 31, 1993:
<TABLE>
<S> <C>
Net sales:
Aluminum operations . . . . . . . . . . . . . . . . $ 442,613
Real estate and other . . . . . . . . . . . . . . . 7,759
------------
450,372
Costs and expenses:
Aluminum operations . . . . . . . . . . . . . . . . 469,843
Real estate and other . . . . . . . . . . . . . . . 9,462
------------
479,305
------------
Loss before income taxes, minority interests,
extraordinary item and cumulative effect of changes
in accounting principles . . . . . . . . . . . . . . (28,933)
Income taxes . . . . . . . . . . . . . . . . . . . . . 11,765
Minority interests . . . . . . . . . . . . . . . . . . 1,594
------------
Loss before extraordinary item and cumulative effect of
changes in accounting principles . . . . . . . . . . (15,574)
Extraordinary item:
Loss on redemption of debt, net of related benefits
for income taxes and minority interests of $11,249
and $2,791, respectively . . . . . . . . . . . . (19,045)
Cumulative effect of changes in accounting principles:
Postretirement and postemployment benefits, net of
related benefits for income taxes and minority
interests of $237,682 and $64,554, respectively . (440,519)
Accounting for income taxes . . . . . . . . . . . . (5,232)
------------
Loss from net assets transferred to MAXXAM . . . . . . $(480,370)
============
</TABLE>
6. CONTINGENCIES
The Company's operations are subject to a variety of California and,
in some cases, federal laws and regulations dealing with timber
harvesting, endangered species, water quality and air and water
pollution. The Company does not expect that compliance with such
existing laws and regulations will have a material adverse effect on the
Company's future operating results. There can be no assurance, however,
that future legislation, governmental regulations or judicial or
administrative decisions would not adversely affect the Company or its
ability to sell lumber, logs or timber.
Various groups and individuals have filed objections with the
California Department of Forestry ("CDF") regarding the CDF's actions and
rulings with respect to certain of the Company's timber harvesting plans
("THPs"), and the Company expects that such groups and individuals will
continue to file objections to the Company's THPs. In addition, lawsuits
are pending which seek to prevent the Company from implementing certain
of its approved THPs. These challenges have severely restricted Pacific
Lumber's ability to harvest virgin old growth redwood timber on its
property during the past few years, as well as substantial amounts of
virgin Douglas-fir timber which are located in virgin old growth redwood
stands. No assurance can be given as to the extent of such litigation in
the future. The Company believes that environmentally focused challenges
to its THPs are likely to occur in the future. Although such challenges
have delayed or prevented the Company from conducting a portion of its
operations, to date such challenges have not had a material adverse
effect on the Company's consolidated financial position or results of
operations. It is, however, impossible to predict the future nature or
degree of such challenges or their ultimate impact on the operating
results or consolidated financial position of the Company.
The Company, Pacific Lumber, MAXXAM and certain of their former and
current officers and directors are defendants in various actions related
to the Company's acquisition of Pacific Lumber. Management is of the
opinion that the outcome of such litigation is unlikely to have a
material adverse effect on the Company's consolidated financial position.
Management is unable to express an opinion as to whether the outcome of
such litigation is unlikely to have a material adverse effect on the
Company's results of operations in respect of any fiscal year.
The Company is also involved in various claims, lawsuits and
proceedings relating to a wide variety of other matters. While there are
uncertainties inherent in the ultimate outcome of such matters and it is
impossible to presently determine the ultimate costs that may be
incurred, management believes the resolution of such uncertainties and
the incurrence of such costs should not have a material adverse effect
upon the Company's consolidated financial position or results of
operations.
<PAGE>
MAXXAM GROUP INC.
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 have the same meaning
given to them in the Form 10-K.
RESULTS OF OPERATIONS
The Company's business is highly seasonal, in that the Company has
historically experienced lower first and fourth 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, 1994 and 1993. The information
presented in the table is in millions of dollars except shipments and
prices.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Shipments:
Lumber(1):
Redwood upper grades . . . . . . . 12.9 15.8
Redwood common grades . . . . . . . 49.4 45.6
Douglas-fir upper grades . . . . . 2.5 3.2
Douglas-fir common grades . . . . . 15.4 14.8
------------ ------------
Total lumber . . . . . . . . . . 80.2 79.4
============ ============
Logs(2) . . . . . . . . . . . . . . . 5.5 --
============ ============
Wood chips(3) . . . . . . . . . . . . 30.3 36.5
============ ============
Average sales price:
Lumber(4):
Redwood upper grades . . . . . . . $1,406 $1,213
Redwood common grades . . . . . . . 448 457
Douglas-fir upper grades . . . . . 1,405 1,114
Douglas-fir common grades . . . . . 460 427
Logs(4) . . . . . . . . . . . . . . . 676 --
Wood chips(5) . . . . . . . . . . . . 71 81
Net sales:
Lumber, net of discount . . . . . . . $ 50.0 $ 48.7
Logs . . . . . . . . . . . . . . . . . 3.7 --
Wood chips . . . . . . . . . . . . . . 2.1 3.0
Cogeneration power . . . . . . . . . . .6 .7
Other . . . . . . . . . . . . . . . . .3 .3
------------ ------------
Total net sales . . . . . . . . $ 56.7 $ 52.7
============ ============
Operating income . . . . . . . . . . . . $ 13.2 $ 16.2
============ ============
Income (loss) from continuing operations
before income taxes, extraordinary item
and cumulative effect of changes in
accounting principles . . . . . . . . $ 1.8 $ (2.1)
============ ============
Loss from net assets transferred to
MAXXAM, net of minority interests and
related income taxes . . . . . . . . . $ -- $ (480.4)
============ ============
Net income (loss) . . . . . . . . . . . . $ 1.0 $ (480.7)
============ ============
Capital expenditures . . . . . . . . . . $ 4.0 $ 2.0
============ ============
<FN>
----------
(1) Lumber shipments are expressed in millions of board feet.
(2) Log shipments are expressed in millions of board feet, net Scribner
scale.
(3) Wood chip shipments are expressed in thousands of bone dry units of
2,400 pounds.
(4) Dollars per thousand board feet.
(5) Dollars per bone dry unit.
</TABLE>
Shipments
Lumber shipments for the three months ended March 31, 1994 were 80.2
million board feet, an increase of 1% from 79.4 million board feet for
the three months ended March 31, 1993. This increase was principally due
to an 8% increase in redwood common lumber shipments, partially offset by
an 18% decrease in shipments of upper grade redwood lumber. Log
shipments for the three months ended March 31, 1994 were 5.5 million feet
(net Scribner scale). Log shipments were insignificant for the three
months ended March 31, 1993.
Old growth trees constitute Pacific Lumber's principal source of
upper grade redwood lumber. Due to the severe restrictions on Pacific
Lumber's ability to harvest virgin old growth timber on its property (see
"Trends" under Item 7 of the Form 10-K), Pacific Lumber's supply of upper
grade lumber has decreased in some premium product categories. Pacific
Lumber has been able to lessen the impact of these decreases by
augmenting its production facilities to increase its recovery of upper
grade lumber from smaller diameter logs and increasing the production of
manufactured upper grade lumber products through its end and edge glue
facility (which is currently being expanded). However, unless Pacific
Lumber is able to sustain the harvest level of old growth trees it has
experienced in recent years, Pacific Lumber expects that its supply of
premium upper grade lumber products will decrease from current levels and
that its manufactured lumber products will constitute a higher percentage
of its shipments of upper grade lumber products.
Net sales
Revenues from net sales of lumber and logs for the three months
ended March 31, 1994 increased by approximately 10% from the three months
ended March 31, 1993. This increase was principally due to increased log
shipments, a 16% increase in the average realized price of upper grade
redwood lumber, increased shipments of redwood common lumber and a 26%
increase in the average realized price of upper grade Douglas-fir lumber,
partially offset by decreased shipments of upper grade redwood lumber, as
previously discussed. The decrease in other sales for the three months
ended March 31, 1994 as compared to the three months ended March 31, 1993
was attributable to decreased sales of wood chips.
Operating income
Operating income for the three months ended March 31, 1994 decreased
by approximately 19% as compared to the three months ended March 31,
1993. This decrease was principally due to lower shipments of high
margin upper grade lumber and the continued higher costs of logs.
Pacific Lumber's cost of producing lumber products has continued to
increase as a result of compliance with evolving environmental
regulations, litigation associated with its timber harvesting plans and
greater costs attributable to processing larger numbers of smaller
diameter logs and producing manufactured products. For the three months
ended March 31, 1993, cost of goods sold was reduced by $1.2 million for
an additional business interruption insurance claim as a result of the
April 1992 earthquake.
Income (loss) from continuing operations before income taxes,
extraordinary item and cumulative effect of changes in accounting
principles
Income from continuing operations before income taxes, extraordinary
item and cumulative effect of changes in accounting principles increased
for the three months ended March 31, 1994 as compared to the three months
ended March 31, 1993. This increase resulted from higher investment,
interest and other income and decreased interest expense, partially
offset by the decrease in operating income. Investment, interest and
other income for the three months ended March 31, 1994 includes the
receipt of a franchise tax refund of $7.2 million (as described in Note 4
to the Condensed Notes to Consolidated Financial Statements).
Investment, interest and other income for the three months ended March
31, 1993 includes net gains on marketable securities of $3.1 million.
Interest expense decreased due to lower interest rates resulting from the
refinancing of the Company's long-term debt in March and August of 1993.
FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES
As of March 31, 1994, the Company had consolidated long-term debt of
$732.8 million (net of current maturities and restricted cash deposited
in the Liquidity Account) as compared to $738.7 million at December 31,
1993. The decrease in long-term debt was primarily due to principal
payments on the Timber Notes.
The Company conducts its operations through its principal operating
subsidiaries, Pacific Lumber and Britt. The indentures governing the
Pacific Lumber Senior Notes and the Timber Notes and Pacific Lumber's
Revolving Credit Agreement contain various covenants which, among other
things, limit the payment of dividends and restrict transactions between
Pacific Lumber and its affiliates. As of March 31, 1994, under the most
restrictive of these covenants, approximately $3.4 million of dividends
may be paid by Pacific Lumber. On February 24, 1994, Pacific Lumber paid
dividends of $5.7 million which represented the entire amount permitted
at December 31, 1993.
The indenture governing the MGI Notes contains various covenants
which, among other things, limit the payment of dividends and restrict
transactions between the Company and its affiliates. At March 31, 1994,
under the most restrictive of these covenants, no dividends may be paid
by the Company.
The Company anticipates that cash flows from operations, together
with existing cash, marketable securities and available sources of
financing, will be sufficient to fund the working capital and capital
expenditures requirements of the Company and its respective subsidiaries
for the foreseeable future; however, due to its highly leveraged
condition, the Company is more sensitive than less leveraged companies to
factors affecting its operations, including governmental regulation
affecting its timber harvesting practices, increased competition from
other lumber producers or alternative building products and general
economic conditions.
<PAGE>
MAXXAM GROUP INC.
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. Any capitalized or italicized terms used but not defined in
this Item have the same meaning given to them in the Form 10-K.
Pacific Lumber Merger Litigation
With respect to the Russ case, the Court has scheduled a status
conference for June 6, 1994.
With respect to the Boesky Multidistrict Securities Litigation,
trial is set to commence beginning May 17, 1994. Additionally,
plaintiffs were recently allowed to amend their complaint with additional
claims, including that MAXXAM and others assisted the former Board of
Directors of Pacific Lumber in their alleged breaches of fiduciary duty.
With respect to the Kayes case, oral argument before the 9th Circuit
Court of Appeal was held May 10, 1994 and the Court took the matter under
submission.
Pacific Lumber Environmental Litigation
With respect to the Sierra Club, et al. v. State Board of Forestry
(No. 82371) action, the California Supreme Court has scheduled oral
argument for June 7, 1994.
With respect to the Lost Coast League action, on April 19, 1994 the
Court indicated that it would be issuing a preliminary injunction staying
harvesting operations in connection with this THP pending trial which is
scheduled to commence on June 27, 1994.
Effective May 2, 1994, EPIC filed an action entitled EPIC v.
California Department of Forestry, et al. (No. 94CP0317) in the Superior
Court of Humboldt County, California. This lawsuit relates to six THPs
for approximately 1,360 acres of primarily residual old growth redwood
timber (virtually all of such acres containing timber of SPHC). On May
5, 1994, the Court held a hearing on plaintiff's application for a
temporary restraining order ("TRO") and the Court took the matter under
submission. On May 10, 1994, the Court denied plaintiff's application
for a TRO.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
None.
B. REPORTS ON FORM 8-K:
None.
<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, who has signed this report on
behalf of the Registrant and as the chief financial officer of the
Registrant.
MAXXAM GROUP INC.
Date: May 13, 1994 By: JOHN T. LA DUC
----------------------------------
John T. La Duc
Vice President and Chief Financial
Officer
