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, 1997
Commission File Number 33-55538
SCOTIA PACIFIC HOLDING COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 74-2652575
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
P. O. BOX 712 95565
125 MAIN STREET, 2ND FLOOR (Zip Code)
SCOTIA, CALIFORNIA
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (707) 764-2330
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, 1997: 3,000
Registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the
reduced disclosure format.
SCOTIA PACIFIC HOLDING COMPANY
INDEX
PART I. - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheet at June 30, 1997 and December 31, 1996 3
Statement of Income for the three and six months ended
June 30, 1997 and 1996 4
Statement of Cash Flows for the six months ended
June 30, 1997 and 1996 5
Condensed Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature S-1
SCOTIA PACIFIC HOLDING COMPANY
BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
June 30, December 31,
1997 1996
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,858 $ 20,345
Receivables:
Due from Pacific Lumber 12,542 5,007
Accrued interest 94 150
Prepaid timber harvesting costs 1,509 1,509
Other prepaid expenses and current assets 29 98
------------- -------------
Total current assets 28,032 27,109
Timber and timberlands, net of accumulated
depletion of $150,956 and $144,679,
respectively 160,275 165,970
Property and equipment, net of accumulated
depreciation of $5,938 and $5,458,
respectively 6,771 6,597
Deferred financing costs, net 14,091 14,707
Deferred income taxes 30,351 31,377
Restricted cash 29,765 29,967
Other assets 1,548 1,139
------------- -------------
$ 270,833 $ 276,866
============= =============
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Due to Pacific Lumber $ 115 $ 174
Accrued interest 11,569 11,877
Other accrued liabilities 1,123 892
Long-term debt, current maturities 18,226 16,165
------------- -------------
Total current liabilities 31,033 29,108
Long-term debt, less current maturities 309,192 319,965
------------- -------------
Total liabilities 340,225 349,073
------------- -------------
Contingencies
Deficiency in net assets:
Common stock, $1.00 par value, 3,000 shares
authorized and issued 3 3
Excess of liabilities assumed and common
stock issued over assets contributed (59,376) (59,376)
Cumulative activity since inception (10,019) (12,834)
------------- -------------
Total deficiency in net assets (69,392) (72,207)
------------- -------------
$ 270,833 $ 276,866
============= =============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
SCOTIA PACIFIC HOLDING COMPANY
STATEMENT OF INCOME
(IN THOUSANDS OF DOLLARS)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Log sales to Pacific Lumber $ 30,658 $ 37,206 $ 48,166 $ 57,266
------------- ------------- ------------- -------------
Operating expenses:
General and administrative 1,972 1,994 3,677 3,577
Depletion and depreciation 4,199 4,461 6,756 6,911
------------- ------------- ------------- -------------
6,171 6,455 10,433 10,488
------------- ------------- ------------- -------------
Operating income 24,487 30,751 37,733 46,778
Other income (expense):
Interest and other income 702 728 1,377 1,451
Interest expense (6,815) (7,104) (13,669) (14,245)
------------- ------------- ------------- -------------
Income before income taxes 18,374 24,375 25,441 33,984
Provision in lieu of income taxes (7,486) (10,005) (10,366) (13,949)
------------- ------------- ------------- -------------
Net income $ 10,888 $ 14,370 $ 15,075 $ 20,035
============= ============= ============= =============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
SCOTIA PACIFIC HOLDING COMPANY
STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
Six Months Ended
June 30,
---------------------------
1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,075 $ 20,035
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision in lieu of income taxes 10,366 13,949
Depletion and depreciation 6,756 6,911
Amortization of deferred financing
costs 616 624
Increase (decrease) in cash resulting
from changes in:
Receivables (7,906) (10,689)
Amounts due to Pacific Lumber (59) (500)
Accrued interest (308) (300)
Other accrued liabilities 231 136
Other (334) (182)
------------- -------------
Net cash provided by
operating activities 24,437 29,984
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (814) (924)
Net proceeds from sale of assets -- 32
------------- -------------
Net cash used for investing
activities (814) (892)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on Timber Notes (8,712) (8,493)
Dividends paid (21,600) (30,200)
Restricted cash withdrawals, net 202 300
------------- -------------
Net cash used for financing
activities (30,110) (38,393)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,487) (9,301)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,345 21,542
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,858 $ 12,241
============= =============
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Assumption of net tax liabilities by Pacific
Lumber $ 9,340 $ 12,780
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 13,362 $ 13,921
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
SCOTIA PACIFIC HOLDING COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
1. GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
financial statements; accordingly, the financial statements included herein
should be reviewed in conjunction with the financial statements and
related notes thereto contained in the Annual Report on Form 10-K filed by
Scotia Pacific Holding Company (the "Company") with the Securities and
Exchange Commission for the fiscal year ended December 31, 1996 (the "Form
10-K"). Any capitalized terms used but not defined in these Condensed
Notes to Financial Statements have the same meaning given to them in the
Form 10-K. 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 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 financial
position of the Company at June 30, 1997, the results of operations for the
three and six months ended June 30, 1997 and 1996 and cash flows for the
six months ended June 30, 1997 and 1996. Certain reclassifications of
prior period information have been made to conform to the current
presentation. The Company is a wholly owned subsidiary of Pacific Lumber
which is a wholly owned indirect subsidiary of MGI. MGI is a wholly owned
subsidiary of MGHI, which is a wholly owned subsidiary of MAXXAM.
2. RESTRICTED CASH
Restricted cash represents the amount deposited into an account
held by the Trustee under the indenture governing the Company's Timber
Notes. In addition, cash and cash equivalents includes $10,916 and $17,600
at June 30, 1997 and December 31, 1996, respectively, which is restricted
for debt service payments on the Timber Notes.
3. 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. Moreover, these
laws and regulations are modified from time to time and are subject to
judicial and administrative interpretation. Compliance with such laws,
regulations and judicial and administrative interpretations, together with
the cost of litigation incurred in connection with certain timber
harvesting operations of Pacific Lumber have increased the cost of logging
operations. The Company and Pacific Lumber are subject to certain pending
matters described below which could have a material adverse effect on the
Company's financial position, results of operations or liquidity. There
can be no assurance that certain pending or future governmental
regulations, legislation, judicial or administrative decisions or
California ballot initiatives will not have a material adverse effect on
the Company.
In May 1996, the USFWS published the Final Designation of
critical habitat for the marbled murrelet, a coastal seabird, which
designated over four million acres as critical habitat for the marbled
murrelet. Although nearly all of the designated habitat is public land,
approximately 25,000 acres of the Company's timberlands are included in the
Final Designation, the substantial portion of such acreage being young
growth timberlands. In order to mitigate the impact of the Final
Designation, particularly with respect to timberlands occupied by the
marbled murrelet, Pacific Lumber attempted to develop the Murrelet HCP.
Due to, among other things, the unfavorable response of the USFWS to
Pacific Lumber's initial Murrelet HCP efforts, the Company and Pacific
Lumber filed the Takings Litigation alleging that certain portions of their
timberlands had been "taken" and seeking just compensation. Pursuant to
the Headwaters Agreement entered into by Pacific Lumber, MAXXAM, the United
States and California on September 28, 1996 and described in Note 4 below,
the Takings Litigation has been stayed at the request of the parties.
It is impossible for the Company to determine the potential
adverse effect of the Final Designation on the Company's financial
position, results of operations or liquidity until such time as various
regulatory and legal issues are resolved; however, if the Company is unable
to harvest, or is severely limited in harvesting, on timberlands designated
as critical habitat for the marbled murrelet, such effect could be
materially adverse to the Company. 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 other species listed as
threatened or endangered under the ESA and/or the CESA and to designate
critical habitat for such species. For example, on April 25, 1997 the NMFS
announced the listing of the coho salmon under the ESA in northern
California, including lands owned by the Company. It is uncertain what
impact, if any, such listings and/or designations of critical habitat would
have on the Company's financial position, results of operations or
liquidity.
In 1994, the BOF adopted certain regulations regarding compliance
with long-term sustained yield ("LTSY") objectives. These regulations
require that timber companies project timber growth and harvest on their
timberlands over a 100-year planning period and establish a LTSY harvest
level that takes into account environmental and economic considerations.
Timber companies must submit an SYP demonstrating that the average annual
harvest over any rolling ten-year period will not exceed the LTSY harvest
level and that their projected timber inventory is capable of sustaining
the LTSY harvest level in the last decade of the 100-year planning period.
On December 17, 1996, Pacific Lumber submitted a proposed SYP to the CDF.
The proposed SYP sets forth an LTSY harvest level substantially the same as
Pacific Lumber's average annual timber harvest over the last six years.
The proposed SYP also indicates that Pacific Lumber's average annual timber
harvest during the first decade of the SYP would approximate the LTSY
harvest level. During the second decade of the proposed SYP, Pacific
Lumber's average annual timber harvest would be approximately 8% less than
that proposed for the first decade. The SYP, when approved, will be valid
for ten years. Thereafter, revised SYPs will be prepared every decade that
will address the LTSY harvest level based upon reassessment of changes in
the resource base and protection of public resources.
The proposed SYP assumes that the transactions contemplated by
the Headwaters Agreement will be consummated and that the Multi-Species HCP
will permit Pacific Lumber to harvest its timberlands (including over the
next two decades a substantial portion of its old growth timberlands not
transferred pursuant to the Headwaters Agreement) to achieve maximum
sustained yield. The SYP is subject to review and approval by the CDF, and
there can be no assurance that the SYP will be approved in its proposed
form. Until the SYP is reviewed and approved, the Company is unable to
predict the impact that these regulations will have on its future timber
harvesting practices. It is possible that the results of the review and
approval process could require the Company to reduce its timber harvest in
future years from the harvest levels set forth in the proposed SYP. The
Company believes that Pacific Lumber would be able to mitigate the effect
of any required reduction in harvest level by acquisitions of additional
timberlands and making corresponding amendments to the SYP; however, there
can be no assurance that Pacific Lumber would be able to do so and the
amount of such acquisitions would be limited by Pacific Lumber's available
financial resources. The Company is unable to predict the ultimate impact
the sustained yield regulations will have on its future financial position,
results of operations or liquidity.
Various groups and individuals have filed objections with the CDF
and the BOF regarding the CDF's and the BOF's actions and rulings with
respect to certain of the Company's THPs and other timber harvesting
operations, and the Company expects that such groups and individuals will
continue to file such objections. In addition, lawsuits are pending or
threatened which seek to prevent the Company from implementing certain of
its approved THPs or which challenge other operations by the Company.
These challenges have severely restricted Pacific Lumber'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 and to its
other operations 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 timber harvesting and other
operations 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
financial position, results of operations or liquidity. Nevertheless, it
is impossible to predict the future nature or degree of such challenges or
their ultimate impact on the Company's financial position, results of
operations or liquidity.
The Company is also involved in various claims, lawsuits and
proceedings. 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 that the
resolution of such uncertainties and the incurrence of such costs should
not have a material adverse effect on the Company's financial position,
results of operations or liquidity.
4. HEADWATERS AGREEMENT
On September 28, 1996, the Pacific Lumber Parties entered into
the Headwaters Agreement with the United States and California. The
Headwaters Agreement provides the framework for the acquisition by the
United States and California of the approximately 5,600 acres of Pacific
Lumber's timberlands commonly referred to as the Headwaters Forest and the
Elk Head Springs Forest (collectively, the "Headwaters Timberlands"). A
substantial portion of the Headwaters Timberlands consists of virgin old
growth timberlands. Approximately 800 of these acres are owned by the
Company (Pacific Lumber having the exclusive right to harvest on
approximately 300 of these acres). The Headwaters Timberlands would be
transferred in exchange for (a) property and other consideration (possibly
including cash) from the United States and California having an aggregate
fair market value of $300 million and (b) approximately 7,755 acres of
adjacent timberlands (the "Elk River Timberlands") to be acquired by the
United States and California from a third party. The United States and
California would also acquire and retain an additional 1,900 acres of
timberlands from such third party.
The Headwaters Agreement also provides, among other things, for
the expedited processing by the United States of a Permit (an incidental
take permit) to be based upon a Multi-Species HCP covering (a) the
Resulting Pacific Lumber Timber Property (the property Pacific Lumber will
own after consummation of the Headwaters Agreement) and (b) the Headwaters
Timberlands and the 1,900 acres of additional timberlands to be acquired
and retained by the United States and California (both of the latter as
conserved habitat). The agreement also requires expedited processing by
California of an SYP covering the Resulting Pacific Lumber Timber Property.
As part of the Headwaters Agreement, the Pacific Lumber Parties
agreed to not enter the Headwaters Forest or the Elk Head Forest to conduct
logging operations, including salvage logging (the "Moratorium"). The
Moratorium was to terminate if by July 28, 1997 the parties had not
achieved the Specified Items to their respective satisfaction. On March
11, 1997, the Pacific Lumber Parties agreed to amend the Headwaters
Agreement to extend to February 17, 1998 the period of time during which
these closing conditions must be met. The extension is, however, subject
to the achievement of certain milestones toward completion of the
Headwaters Agreement, including satisfaction of the Pacific Lumber Parties
with the progress of the United States and California toward providing for
the consideration to be transferred at the closing.
The United States has recently focused its efforts on furnishing
the federal portion of the required consideration through a federal budget
appropriation. The Budget Agreement between President Clinton and the
Republican Congressional leadership would allocate $250,000 for the
acquisition pursuant to the Headwaters Agreement. In July 1997, the Senate
Appropriations Committee approved the interior appropriations bill, which
contained provisions allowing the expenditure of $700,000 for priority land
acquisitions, including the $250,000 for the acquisition pursuant to the
Headwaters Agreement. This bill does, however, contain a provision
requiring the passage of authorizing legislation for the Headwaters
acquisition. The corresponding appropriations bill approved by the House
of Representatives did not contain any part of the $700,000 priority land
acquisitions. Whether a federal budget appropriation for the Headwaters
acquisition will be enacted, or the terms of any such appropriation, is
uncertain as the full Senate must still consider the interior
appropriations bill, and a conference would have to resolve any differences
between the final Senate bill and the House version.
Although California has not enacted legislation providing funds
for its portion of the acquisition contemplated by the Headwaters
Agreement, representatives of the State of California continue to indicate
that they are considering various methods of furnishing the required
consideration.
Closing of the Headwaters Agreement is subject to various
conditions, including (a) acquisition by the government of the Elk River
Timberlands, (b) approval of an SYP and a Multi-Species HCP and issuance of
a Permit, each in form and substance satisfactory to Pacific Lumber, (c)
the issuance by the Internal Revenue Service and the California Franchise
Tax Board of closing agreements in form and substance sought by and
satisfactory to the Pacific Lumber Parties, (d) the absence of a judicial
decision in any litigation brought by third parties that any party
reasonably believes will significantly delay or impair the transactions
described in the Headwaters Agreement, and (e) the dismissal with prejudice
at closing of the Takings Litigation. The parties to the Headwaters
Agreement are working to satisfy these conditions; however, there can be no
assurance that the Headwaters Agreement will be consummated.
5. DEFICIENCY IN NET ASSETS
A reconciliation of the cumulative activity component of the
Company's deficiency in net assets is as follows:
<TABLE>
Six
Months
Ended
June 30,
1997
-------------
<S> <C>
Balance at beginning of period $ (12,834)
Net income 15,075
Assumption of net tax liabilities by Pacific Lumber 9,340
Dividends paid (21,600)
-------------
Balance at end of period $ (10,019)
=============
</TABLE>
SCOTIA PACIFIC HOLDING 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.
This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements appear in several places in this Form
10-Q. Such statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "estimates," "will,"
"should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of
strategy. Readers are cautioned that any such forward-looking statements
are not guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in
the forward-looking statements as a result of various factors. These
factors include the effectiveness of management's strategies and decisions,
general economic and business conditions, developments in technology, new
or modified statutory or regulatory requirements and changing prices and
market conditions. This section and the Company's Form 10-K identify other
factors that could cause such differences. No assurance can be given that
these are all of the factors that could cause actual results to vary
materially from the forward-looking statements.
RESULTS OF OPERATIONS
General
The Mbfe concept was developed for use in structuring the Timber
Notes in order to take account of the relative values of the species and
categories of timber included in the Company Timber. Under the Mbfe
concept, one thousand board feet, net Scribner scale, of residual old
growth redwood timber equates to one Mbfe. One thousand board feet, net
Scribner scale, of each other species and category of timber included in
the Company Timber was assigned a value in Mbfe equal to a fraction of an
Mbfe. This fraction was generally determined by dividing the SBE Price (as
defined below) applicable to such species and category for the first half
of 1992 by the SBE Price applicable to residual old growth redwood for the
first half of 1992.
The Master Purchase Agreement generally contemplates that all
sales of logs by the Company to Pacific Lumber will be at a price which
equals or exceeds the applicable stumpage price for such species and
category, as set forth in the most recent Harvest Value Schedule published
by the California State Board of Equalization (the "SBE Price"). The
Harvest Value Schedule is published by the California State Board of
Equalization at six month intervals for purposes of computing yield taxes
imposed on the harvesting of timber. The published SBE Prices are based on
average actual log prices between unrelated parties over a recent twenty-
four month period. Therefore, SBE Prices may not necessarily be
representative of actual prices that would be realized from unrelated
parties at subsequent dates.
Logging operations on the Company's timberlands are highly
seasonal. Logging activity is normally significantly higher in the months
of April through November than in the months of December through March.
Management expects that the Company's revenues and cash flows will continue
to reflect that seasonality.
Log sales to Pacific Lumber
Net sales from logs were $30.7 million and $37.2 million for the
quarter ended June 30, 1997 and 1996, respectively. The volume of log
deliveries for such periods represented approximately 51,600 Mbfe and
54,000 Mbfe, respectively. Net sales from logs were $48.2 million and
$57.3 million for the six months ended June 30, 1997 and 1996,
respectively. This represents a log volume of 81,600 Mbfe and 83,700 Mbfe,
respectively. The decrease in revenues for the quarter and six months
ended June 30, 1997 compared to the same periods in 1996 is primarily due
to decreases in average SBE prices for young growth redwood and Douglas-fir
logs and, to a lesser degree, a lower volume of log deliveries.
Operating income and income before income taxes
Operating income was $24.5 million and $30.8 million for the quarter
ended June 30, 1997 and 1996, respectively. Operating income was $37.7
million and $46.8 million for the six months ended June 30, 1997 and 1996,
respectively. Income before income taxes was $18.4 million and $24.4
million for the second quarter of 1997 and 1996, respectively. Income
before income taxes was $25.4 million and $34.0 million for the six months
ended June 30, 1997 and 1996, respectively. The decreases in operating
income and income before income taxes were primarily due to lower SBE
prices and log volumes as discussed above.
FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES
In January and July 1997, the Company repaid approximately $8.7
million and $7.5 million, respectively, of the aggregate principal amount
outstanding on the Timber Notes in accordance with Scheduled Amortization.
The Company paid $21.6 million of dividends to Pacific Lumber
during the six months ended June 30, 1997. At June 30, 1997, the Indenture
permitted the payment of $4.6 million of dividends which were paid on July
21, 1997.
TRENDS
This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. See above for cautionary information with respect to
such forward-looking statements.
The Company's business is subject to a variety of California and
federal laws, regulations and judicial and administrative interpretations
dealing with timber harvesting, endangered species and critical habitat,
and air and water quality. Moreover, these laws and regulations are
modified from time to time and are subject to judicial and administrative
interpretation. The Company is subject to certain pending matters which
could have a material adverse effect on the Company's consolidated
financial position, results of operations or liquidity. There can be no
assurance that these pending matters or future governmental regulations,
legislation or judicial or administrative decisions would not have a
material adverse effect on the Company. See Part II. Item 1. "Legal
Proceedings" and Note 3 to the Financial Statements for further information
regarding regulatory and environmental factors affecting the Company. See
also Note 4 to the Financial Statements for the agreement to extend the
Headwaters Agreement to February 17, 1998.
Judicial or regulatory actions adverse to the Company, increased
regulatory delays and inclement weather in northern California,
independently or collectively, could impair Pacific Lumber's ability to
conduct normal timber harvesting operations on the Company's timberlands.
SCOTIA PACIFIC HOLDING COMPANY
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.
With respect to the Marbled Murrelet action, on April 18, 1997,
the U.S. Ninth Circuit Court of Appeals reversed the trial court's decision
which had preliminarily enjoined eight already-approved THPs to the extent
they rely on the Federal Owl Plan. On June 18, 1997 the court granted the
defendants' motions for summary judgment disposing of the remaining issues
in this case in favor of the defendants.
With respect to the Takings Litigation, the Pacific Lumber
Parties have offered to continue and extend the stay of proceedings through
September 15, 1997 in response to the request of the United States for an
extension of the stay of proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
27 Financial Data Schedule
B. REPORTS ON FORM 8-K:
None
SIGNATURE
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.
SCOTIA PACIFIC HOLDING COMPANY
Date: August 1, 1997 By: /S/ 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> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 13,858
<SECURITIES> 0
<RECEIVABLES> 12,542
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,032
<PP&E> 12,709
<DEPRECIATION> 5,938
<TOTAL-ASSETS> 270,833
<CURRENT-LIABILITIES> 31,033
<BONDS> 327,418
0
0
<COMMON> 3
<OTHER-SE> (69,395)
<TOTAL-LIABILITY-AND-EQUITY> 270,833
<SALES> 48,166
<TOTAL-REVENUES> 48,166
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,669
<INCOME-PRETAX> 25,441
<INCOME-TAX> 10,366
<INCOME-CONTINUING> 15,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,075
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
