UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
Commission File Number 1-9204
THE PACIFIC LUMBER COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3318327
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
P. O. BOX 37 95565
125 MAIN STREET (Zip Code)
SCOTIA, CALIFORNIA
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (707) 764-2222
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 August 1, 1996: 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.
THE PACIFIC LUMBER COMPANY
INDEX
PART I. - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at June 30, 1996 and
December 31, 1995 3
Consolidated Statement of Operations for the three
and six months ended June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows for the six
months ended June 30, 1996 and 1995 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 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures S-1
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31,293 $ 26,480
Receivables:
Trade 13,652 19,688
Other 2,375 1,565
Inventories 67,746 75,580
Prepaid expenses and other current assets 6,229 6,933
------------- -------------
Total current assets 121,295 130,246
Timber and timberlands, net of depletion of
$212,261 and $204,856 at June 30, 1996 and
December 31, 1995, respectively 331,244 337,390
Property, plant and equipment, net of
accumulated depreciation of $69,298 and
$65,276 at June 30, 1996 and December 31,
1995, respectively 93,432 93,726
Deferred financing costs, net 21,192 22,397
Deferred income taxes 39,289 41,958
Restricted cash 31,067 31,367
Other assets 6,106 5,502
------------- -------------
$ 643,625 $ 662,586
============= =============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 4,350 $ 3,898
Accrued compensation and related benefits 8,744 9,241
Accrued interest 20,375 20,666
Deferred income taxes 10,244 10,244
Other accrued liabilities 2,680 3,077
Long-term debt, current maturities 14,415 14,195
------------- -------------
Total current liabilities 60,808 61,321
Long-term debt, less current maturities 563,053 571,812
Other noncurrent liabilities 26,396 33,613
------------- -------------
Total liabilities 650,257 666,746
------------- -------------
Contingencies
Stockholder's deficit:
Common stock, $.01 par value, 100 shares
authorized and issued - -
Additional capital 157,520 157,520
Accumulated deficit (164,152) (161,680)
------------- -------------
Total stockholder's deficit (6,632) (4,160)
------------- -------------
$ 643,625 $ 662,586
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales:
Lumber and logs $ 60,651 $ 52,865 $ 110,760 $ 95,383
Other 4,648 5,543 9,442 10,334
------------- ------------- ------------- -------------
65,299 58,408 120,202 105,717
------------- ------------- ------------- -------------
Operating expenses:
Cost of goods sold
(exclusive of
depletion and
depreciation) 37,258 29,156 67,870 56,796
Selling, general and
administrative 3,402 3,270 6,826 7,092
Depletion and depreciation 7,154 7,197 13,711 13,053
------------- ------------- ------------- -------------
47,814 39,623 88,407 76,941
------------- ------------- ------------- -------------
Operating income 17,485 18,785 31,795 28,776
Other income (expense):
Investment, interest and
other income 1,518 1,290 2,399 1,950
Interest expense (13,652) (13,871) (27,368) (27,878)
------------- ------------- ------------- -------------
Income before income taxes 5,351 6,204 6,826 2,848
Provision in lieu of income taxes (2,207) (2,343) (2,798) (1,000)
------------- ------------- ------------- -------------
Net income $ 3,144 $ 3,861 $ 4,028 $ 1,848
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,028 $ 1,848
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion and depreciation 13,711 13,053
Amortization of deferred financing
costs 1,205 1,116
Decrease in receivables 5,226 13,869
Decrease in inventories, net of
depletion 5,803 2,967
Increase in accounts payable 452 1,834
Increase (decrease) in other
liabilities (8,111) 1,269
Decrease in accrued and deferred
income taxes 2,669 790
Decrease (increase) in prepaid
expenses and other current assets 704 (1,044)
Decrease in accrued interest (291) (240)
Other (609) (527)
------------- -------------
Net cash provided by operating
activities 24,787 34,935
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of assets 94 14
Capital expenditures (5,329) (4,022)
------------- -------------
Net cash used for investing
activities (5,235) (4,008)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Restricted cash withdrawals, net 300 77
Dividends paid (6,500) (11,000)
Principal payments on long-term debt (8,539) (8,281)
------------- -------------
Net cash used for financing
activities (14,739) (19,204)
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,813 11,723
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26,480 24,330
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,293 $ 36,053
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of capitalized interest $ 26,454 $ 27,002
Tax allocation payments to MAXXAM Inc. 300 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
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 The Pacific
Lumber Company with the Securities and Exchange Commission for the fiscal
year ended December 31, 1995 (the "Form 10-K"). Any capitalized terms used
but not defined in the following Condensed Notes to Consolidated Financial
Statements have the same meaning given to them in the Form 10-K. All
references to the "Company" include The Pacific Lumber Company 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 June 30, 1996, the
consolidated results of operations for the three and six months ended June
30, 1996 and 1995 and consolidated cash flows for the six months ended June
30, 1996 and 1995. Certain reclassifications of prior period information
have been made to conform to the current presentation. The Company is an
indirect, wholly owned subsidiary of MAXXAM Group Inc. ("MGI") which is a
wholly owned subsidiary of MAXXAM Inc. ("MAXXAM").
2. RESTRICTED CASH
Restricted cash represents the amount deposited into an account
held by the Trustee under the indenture governing the Timber Notes of the
Company's wholly owned subsidiary, Scotia Pacific Holding Company ("Scotia
Pacific").
At June 30, 1996 and December 31, 1995, cash and cash equivalents
also includes $11,327 and $19,742, respectively, which is restricted for
debt service payments on the succeeding note payment date for the Timber
Notes. In January 1996 and July 1996, Scotia Pacific repaid $8,493 and
$5,610, respectively, of the aggregate principal amount outstanding on the
Timber Notes.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
Lumber $ 52,457 $ 57,905
Logs 15,289 17,675
-------------- --------------
$ 67,746 $ 75,580
============== ==============
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
7.95% Scotia Pacific Timber Collateralized
Notes due July 20, 2015 $ 341,740 $ 350,233
10-1/2% Pacific Lumber Senior Notes due
March 1, 2003 235,000 235,000
Other 728 774
------------- -------------
577,468 586,007
Less: current maturities (14,415) (14,195)
------------- -------------
$ 563,053 $ 571,812
============= =============
</TABLE>
5. CONTINGENCIES
The Company's operations are subject to a variety of California
and federal laws and regulations dealing with timber harvesting, endangered
species and critical habitat, and air and water quality. While the Company
does not expect that compliance with such existing laws and regulations
will have a material adverse effect on its consolidated financial position,
results of operations or liquidity, the Company is subject to certain
pending matters, including the resolution of issues relating to the final
designation of critical habitat for the marbled murrelet (described below),
which could have a material adverse effect on the Company's consolidated
financial position, results of operations or liquidity. Moreover, the laws
and regulations relating to the Company's operations are modified from time
to time and are subject to judicial and administrative interpretation.
There can be no assurance that certain pending or future governmental
regulations, legislation or judicial or administrative decisions would not
materially and adversely affect the Company or its ability to sell lumber,
logs or timber.
In May 1996, the U.S. Fish and Wildlife Service (the "USFWS")
published its final designation of critical habitat for the marbled
murrelet ("Final Designation"), designating over four million acres as
critical habitat for the marbled murrelet. Although nearly all of the
designated habitat is public land, approximately 33,000 acres of the
Company's (privately owned) timberlands are included in the Final
Designation, the substantial portion of such 33,000 acres being young
growth timber. The Company's wildlife surveys to date (based upon current
survey protocols) have indicated it has approximately 6,600 acres of
occupied marbled murrelet habitat. A substantial portion of this land
contains virgin and residual old growth timber and the bulk of it falls
within the area covered by the Final Designation. In order to mitigate the
impact of the Final Designation, particularly with respect to timberlands
occupied by the marbled murrelet, the Company has attempted over the last
few years to develop a habitat conservation plan for the marbled murrelet
(the "Murrelet HCP"). The USFWS has given unfavorable responses to the
Company's Murrelet HCP efforts. For this reason and a variety of others,
the Company and its subsidiaries have filed two actions alleging that
certain portions of its timberlands have been "taken" and seeking just
compensation (see Part II, Item 1, "Legal Proceedings--Timber Harvesting
Litigation").
It is impossible for the Company to determine the potential
adverse effect of the Final Designation on the Company's consolidated
financial position, results of operations or liquidity until such time as
the related regulatory and legal issues are fully resolved. However, if
the Company is unable to harvest, or is severely limited in harvesting, on
timberlands designated as marbled murrelet critical habitat, such effect
could be material. If the Company is unable to harvest or is severely
limited in harvesting, it intends to seek just compensation from the
appropriate governmental agencies on the grounds that such restrictions
constitute a governmental taking.
There continue to be other regulatory actions and lawsuits
seeking to have various other species listed as threatened or endangered
under the federal Endangered Species Act and/or the California Endangered
Species Act and to designate critical habitat for such species. It is
uncertain what impact, if any, such listings and/or designations of
critical habitat would have on the Company's consolidated financial
position, results of operations or liquidity.
In 1994, the California Board of Forestry ("BOF") adopted certain
regulations regarding compliance with long-term sustained yield objectives.
These regulations require timber companies to project the average annual
growth they will have on their timberlands during the last decade of a 100-
year planning period ("Projected Annual Growth"). During any rolling ten-
year period, the average annual harvest over such ten-year period may not
exceed Projected Annual Growth. The Company is required to submit, by
October 1996, a plan setting forth, among other things, its Projected
Annual Growth. The Company has not completed its analysis of the projected
productivity of its timberlands (including enhancements to productivity
which could be achieved by a variety of methods) and is therefore unable to
predict the impact that these regulations will have on its future timber
harvesting practices; however, the final results of this analysis could
require the Company to reduce its timber harvest in future years from the
average annual harvest that it has experienced in recent years. The
Company believes that it would be able to mitigate the effect of any
required reduction in harvest level by acquisitions of additional
timberlands, although there can be no assurance that it would be able to do
so. The Company is unable to predict the ultimate impact the sustained
yield regulations will have on its future consolidated financial position,
results of operations or liquidity.
Various groups and individuals have filed objections with the
California Department of Forestry ("CDF") and the BOF regarding the CDF's
and the BOF'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 certain of the
Company's THPs. In addition, lawsuits are pending which seek to prevent
the Company from implementing certain of its approved THPs and other
harvesting operations. These challenges have severely restricted the
Company's ability to harvest old growth timber on its property. To date,
challenges with respect to the Company's THPs relating to young growth
timber have been limited; however, no assurance can be given as to the
extent of such challenges in the future. The Company believes that
environmentally focused challenges to its THPs are likely to occur in the
future, particularly with respect to virgin and residual old growth timber.
Although such challenges have delayed or prevented the Company from
conducting a portion of its operations, they have not had a material
adverse effect on the Company's consolidated financial position, results of
operations or liquidity. It is, however, impossible to predict the future
nature or degree of such challenges or their ultimate impact on the
Company's consolidated financial position, results of operations or
liquidity.
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 determine the ultimate costs that may be incurred, management
believes that the resolution of such uncertainties and the incurrence of
such costs should not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
THE PACIFIC LUMBER COMPANY
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 seasonal in that the Company generally
experiences lower first quarter sales due largely to the general decline in
construction-related activity during the winter months. Accordingly, the
Company's results for any one quarter are not necessarily indicative of
results to be expected for the full year. The following table presents
selected operational and financial information for the three and six months
ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
(In millions of dollars, except shipments and prices)
<S> <C> <C> <C> <C>
Shipments:
Lumber: (1)
Redwood upper grades 12.9 12.8 23.3 23.5
Redwood common grades 42.9 43.7 81.0 75.8
Douglas-fir upper grades 2.8 1.4 5.0 3.2
Douglas-fir common grades 18.6 11.1 37.9 24.5
Other 6.4 3.9 8.3 7.0
------------- ------------- ------------- -------------
Total lumber 83.6 72.9 155.5 134.0
============= ============= ============= =============
Logs (2) 12.2 9.1 26.4 17.8
============= ============= ============= =============
Wood chips (3) 48.6 42.0 92.1 86.0
============= ============= ============= =============
Average sales price:
Lumber: (4)
Redwood upper grades $ 1,392 $ 1,478 $ 1,389 $ 1,508
Redwood common grades 548 521 528 487
Douglas-fir upper grades 1,158 1,290 1,156 1,333
Douglas-fir common grades 438 378 407 378
Logs (4) 488 386 469 378
Wood chips (5) 69 115 80 102
Net sales:
Lumber, net of discount $ 54.7 $ 49.4 $ 98.4 $ 88.7
Logs 6.0 3.5 12.4 6.7
Wood chips 3.3 4.8 7.3 8.8
Cogeneration power .9 .4 1.3 .8
Other .4 .3 .8 .7
------------- ------------- ------------- -------------
Total net sales $ 65.3 $ 58.4 $ 120.2 $ 105.7
============= ============= ============= =============
Operating income $ 17.5 $ 18.8 $ 31.8 $ 28.8
============= ============= ============= =============
Operating cash flow (6) $ 24.6 $ 26.0 $ 45.5 $ 41.8
============= ============= ============= =============
Income before income taxes $ 5.3 $ 6.2 $ 6.8 $ 2.8
============= ============= ============= =============
Net income $ 3.1 $ 3.9 $ 4.0 $ 1.8
============= ============= ============= =============
<FN>
- ---------------
(1) Lumber shipments are expressed in millions of board feet.
(2) Log shipments are expressed in millions of 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.
(6) Operating income before depletion and depreciation, also referred to as "EBITDA."
</TABLE>
Shipments
Lumber shipments for the second quarter of 1996 increased from
the second quarter of 1995. Increased shipments of common and upper grade
Douglas-fir lumber and other fir lumber were partially offset by decreased
shipments of redwood common grade lumber. Log shipments for the second
quarter of 1996 were 12.2 million feet (net Scribner scale), an increase of
3.1 million feet from the second quarter of 1995.
Lumber shipments for the six months ended June 30, 1996 increased
from the six months ended June 30, 1995. Increased shipments of common and
upper grade Douglas-fir lumber, redwood common grade and other fir lumber
were partially offset by decreased shipments of redwood upper grade lumber.
Log shipments for the six months ended June 30, 1996 were 26.4 million
feet, an increase of 8.6 million feet from the six months ended June 30,
1995.
Net sales
Net sales for the second quarter of 1996 increased from the
second quarter of 1995. This increase was principally due to higher
shipments of common and upper grade Douglas-fir lumber, logs, and higher
average realized prices for logs, redwood common and Douglas-fir common
grade lumber, partially offset by lower average realized prices for wood
chips and redwood upper grade lumber.
Net sales for the six months ended June 30, 1996 increased from
the six months ended June 30, 1995, principally due to higher shipments of
common and upper grade Douglas-fir lumber, logs, and redwood common lumber
and higher average realized prices for Douglas-fir and redwood common
lumber and logs, partially offset by lower average realized prices for
redwood upper grade lumber and wood chips. Shipments of fencing and other
value-added common lumber products from the Company's new remanufacturing
facility were a contributing factor in the improved redwood common lumber
realizations.
Operating income
Operating income for the second quarter of 1996 decreased from
the second quarter of 1995 principally due to increased costs associated
with the higher shipments of common grade lumber and lower wood chip
prices, partially offset by the increase in net sales as discussed above.
Operating income for the six months ended June 30, 1996 increased from the
same period in 1995, reflecting the improvement in net sales as discussed
above. Additionally, cost of goods sold for the second quarter of 1995 was
reduced by $1.5 million of business interruption proceeds for the
settlement of claims related to the April 1992 earthquake.
Income before income taxes
Income before income taxes for the second quarter of 1996
decreased from the second quarter of 1995 principally due to the decrease
in operating income discussed above. Income before income taxes for the
six months ended June 30, 1996 increased from the same period in 1995,
primarily as a result of the increase in operating income as discussed
above.
FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES
The indentures governing the Senior Notes and the Timber Notes
and the Company's Revolving Credit Agreement contain various covenants
which, among other things, limit the payment of dividends and restrict
transactions between the Company and its affiliates. As of June 30, 1996,
under the most restrictive of these covenants, approximately $18.2 million
of dividends could be paid by the Company.
As of June 30, 1996, $45.1 million of borrowings was available
under the Company's Revolving Credit Agreement, of which $5.1 million was
available for letters of credit and $30.0 million for timberland
acquisitions. No borrowings were outstanding as of June 30, 1996, and
letters of credit outstanding amounted to $9.9 million.
As of June 30, 1996, the Company had consolidated long-term debt
of $532.0 million (net of current maturities and restricted cash deposited
in the Liquidity Account) as compared to $540.4 million at December 31,
1995. The decrease in long-term debt was due to principal payments on the
Timber Notes. The Company anticipates that cash flow from operations,
together with existing cash, cash equivalents and available sources of
financing, will be sufficient to fund its working capital and capital
expenditure requirements for the next year. With respect to its long-term
liquidity, the Company believes that its existing cash and cash
equivalents, together with its ability to generate sufficient cash flow
from operations and obtain both short and long-term financing, should
provide sufficient funds to meet its working capital and capital
expenditure requirements. However, due to its highly leveraged condition,
the Company is more sensitive than less leveraged companies to factors
affecting its operations, including litigation and governmental regulation
affecting its timber harvesting practices, increased competition from other
lumber producers or alternative building products and general economic
conditions.
TRENDS
The Company's operations are subject to a variety of California
and federal laws and regulations dealing with timber harvesting, endangered
species and critical habitat, and air and water quality. While the Company
does not expect that compliance with such existing laws and regulations
will have a material adverse effect on its consolidated financial position,
results of operations or liquidity, the Company is subject to certain
pending matters, including the resolution of issues relating to the Final
Designation of critical habitat for the marbled murrelet, which could have
a material adverse effect on the Company's consolidated financial position,
results of operations or liquidity. Moreover, the laws and regulations
relating to the Company's operations are modified from time to time and are
subject to judicial and administrative interpretation. There can be no
assurance that certain pending or future governmental regulations,
legislation or judicial or administrative decisions would not materially
and adversely affect the Company or its ability to sell lumber, logs or
timber. See also Note 5 of the Condensed Notes to Consolidated Financial
Statements set forth in Part I, Item 1 of this Report and Part II, Item 1.
"Legal Proceedings--Timber Harvesting Litigation" for further information,
including government takings actions recently filed and additional takings
claims which could be filed by the Company and its subsidiaries.
Judicial or regulatory actions adverse to the Company, increased
regulatory delays and inclement weather in northern California,
independently or collectively, could impair the Company's ability to
maintain adequate log inventories and force the Company to temporarily idle
or curtail operations at certain of its lumber mills from time to time.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 of the Form 10-K and Part II, Item 1
of the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1996 (the "Form 10-Q") for information concerning material
legal proceedings with respect to the Company. The following material
developments have occurred with respect to such legal proceedings.
In connection with U.S., ex rel., Martel v. Hurwitz, et al., on
June 11, 1996, defendants filed their motion to dismiss this case. On
August 6, 1996, the Court transferred this case to the judge handling the
Federal Deposit Insurance Corporation, as manager of the FSLIC Resolution
Fund v. Charles E. Hurwitz (No. H-96-6041) action in the U.S. District
Court for the Southern District of Texas (the "FDIC action"). The Company
is not a defendant in the FDIC action. For further information concerning
the FDIC action, see MAXXAM's Annual Report on Form 10-K for the period
ended December 31, 1995.
In connection with the Kayes/Miller action and the DOL civil
action, the settlement agreement in these cases was approved by the Court
at the July 12, 1996 final hearing. The settlement called for payment to
the class plaintiffs and their counsel of $7.0 million in cash by Pacific
Lumber in exchange for full releases by the plaintiffs of defendants and
dismissal of the Kayes/Miller and DOL civil actions.
TIMBER HARVESTING LITIGATION
In connection with the Marbled Murrelet action, on May 7, 1996,
the U. S. Ninth Circuit Court of Appeals reversed the preliminary
injunction order concerning harvesting pursuant to exemptions for forest
health. In addition to appealing the preliminary injunction issued on
April 3, 1996 preventing harvesting on eight THPs to the extent each
relies on the Owl Plan, the Company has obtained reapproval of two of the
THPs without reliance on the Owl Plan and has received confirmation from
the Court that these two THPs are not subject to the preliminary
injunction. The Company continues to review and seek reapproval of the
other THPs covered by the April 3, 1996 preliminary injunction.
In connection with The Pacific Lumber Company, et al. v. The
United States of America, the Court has granted the parties' agreed
motion to stay this action until September 15, 1996 in order to negotiate a
possible settlement involving approximately 4,500 acres of the Company's
timberlands, including a 3,000 acre stand of virgin old growth timber often
referred to as the "Headwaters Forest." Settlement discussions have
commenced. On July 23, 1996, EPIC and the Sierra Club filed a motion to
intervene in this lawsuit.
In connection with Salmon Creek Corporation v. California State
Board of Forestry, et al., in July 1996 the parties submitted an agreed
motion to stay this action until September 15, 1996 in order to negotiate a
possible settlement involving the Headwaters Forest.
In connection with the EPIC action, on May 7, 1996, the U. S.
Ninth Circuit Court of Appeals affirmed the District Court's decision
permanently enjoining the Company from conducting timber harvesting
operations in connection with THP 90-237. The Company intends to appeal
this decision to the U. S. Supreme Court.
In connection with Lost Coast League v. The California Department
of Forestry, et al., on June 19, 1996, the Court dissolved the injunction
concerning the THP and awarded costs to the defendants. On June 28, 1996,
the Court of Appeal reinstated the injunction on the THP, pending review.
On July 22, 1996, the Court of Appeal dissolved the injunction and denied
plaintiff's appeal.
ITEM 5. OTHER INFORMATION
See Part II, Item 1. "Legal Proceedings" for information
regarding settlement discussions involving the Headwaters Forest.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
27 Financial Data Schedule
B. REPORTS ON FORM 8-K:
None.
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 principal accounting officer of the
Registrant.
THE PACIFIC LUMBER COMPANY
Date: August 13, 1996 By: GARY L. CLARK
Gary L. Clark
Vice President - Finance and
Administration
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of
operations and is qualified in its entirety by reference to such
consolidated financial statements together with the related footnotes
thereto.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 31,293
<SECURITIES> 0
<RECEIVABLES> 13,652
<ALLOWANCES> 0
<INVENTORY> 67,746
<CURRENT-ASSETS> 121,295
<PP&E> 162,730
<DEPRECIATION> 69,298
<TOTAL-ASSETS> 643,625
<CURRENT-LIABILITIES> 46,393
<BONDS> 577,468
0
0
<COMMON> 0
<OTHER-SE> (6,632)
<TOTAL-LIABILITY-AND-EQUITY> 643,625
<SALES> 120,202
<TOTAL-REVENUES> 120,202
<CGS> 67,870
<TOTAL-COSTS> 67,870
<OTHER-EXPENSES> 20,537
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,368
<INCOME-PRETAX> 6,826
<INCOME-TAX> 2,798
<INCOME-CONTINUING> 4,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,028
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
