<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ______, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CROWN PACIFIC PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
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DELAWARE 0800 93-1161833
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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121 S.W. MORRISON STREET, SUITE 1500
PORTLAND, OREGON 97204
(503) 274-2300
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
----------------------------
ROGER L. KRAGE
121 S.W. MORRISON STREET, SUITE 1500
PORTLAND, OREGON 97204
(503) 274-2300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------------
COPIES TO:
ANDREWS & KURTH L.L.P. BAKER & BOTTS, L.L.P.
4200 TEXAS COMMERCE TOWER 910 LOUISIANA
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 220-4200 (713) 229-1234
ATTENTION: ROBERT V. JEWELL ATTENTION: JOSHUA DAVIDSON
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
AGGREGATE MAXIMUM
OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS AMOUNT TO BE PER COMMON OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Units representing
limited partner interests 10,925,000 $20.125 $219,865,625 $75,816
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</TABLE>
(1) Includes 1,425,000 Common Units issuable upon exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, based on the
average of the high and low sale prices of the Common Units on the New York
Stock Exchange on May 31, 1996.
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE __, 1996
PROSPECTUS
CROWN PACIFIC PARTNERS, L.P.
9,500,000 COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS
__________
Of the 9,500,000 Common Units representing limited partner interests in
Crown Pacific Partners, L.P., a Delaware limited partnership (the
"Partnership"), offered hereby, 7,000,000 Common Units are being offered by the
Partnership and 2,500,000 Common Units are being offered by the Selling
Unitholders identified herein. The Partnership will not receive any of the
proceeds from the sale of Common Units by the Selling Unitholders. See "Selling
Unitholders and Security Ownership" and "Underwriting."
The Partnership distributes to its partners, on a quarterly basis, all of
its Available Cash. During the Subordination Period, which will not end prior to
January 1, 2000, each holder of Common Units will generally be entitled to
receive distributions of $0.51 per Common Unit per quarter (the "Minimum
Quarterly Distribution"), or $2.04 per Common Unit on an annualized basis,
before any distributions are made on the outstanding Subordinated Units. The
Partnership has paid a quarterly distribution equal to the Minimum Quarterly
Distribution on all outstanding Common Units and Subordinated Units with respect
to each quarter in 1995. For the quarter ended March 31, 1996, the Partnership
distributed $0.524 per Unit, the First Target Distribution. There can be no
assurance, however, that distributions by the Partnership will not be less than
the Minimum Quarterly Distribution.
The Common Units are traded on the New York Stock Exchange under the symbol
"CRO." The last reported sale price of the Common Units on the New York Stock
Exchange on May 31, 1996 was $20 per Common Unit.
PURCHASERS OF COMMON UNITS SHOULD CONSIDER EACH OF THE FACTORS DESCRIBED
UNDER "RISK FACTORS" BEGINNING ON PAGE IN EVALUATING AN INVESTMENT IN
THE COMMON UNITS. SUCH FACTORS INCLUDE THE FOLLOWING:
- THE PARTNERSHIP'S OPERATIONS WILL BE SUBJECT TO CYCLICAL FLUCTUATIONS
IN PRICES AND DEMAND FOR FOREST PRODUCTS.
- THE PARTNERSHIP'S ABILITY TO HARVEST ITS TIMBER MAY BE AFFECTED BY
VARIOUS FACTORS, INCLUDING ENVIRONMENTAL AND ENDANGERED SPECIES CONCERNS, DAMAGE
BY FIRE, INSECT INFESTATION, DISEASE, DROUGHT AND OTHER NATURAL DISASTERS.
- THE ACTUAL AMOUNT OF CASH DISTRIBUTIONS DEPEND ON PARTNERSHIP
OPERATING PERFORMANCE AND IS AFFECTED BY THE FUNDING OF RESERVES, EXPENDITURES
AND OTHER MATTERS WITHIN THE DISCRETION OF THE MANAGING GENERAL PARTNER.
- CONFLICTS OF INTEREST COULD ARISE BETWEEN THE MANAGING GENERAL PARTNER
AND ITS AFFILIATES, ON THE ONE HAND, AND THE PARTNERSHIP OR ANY PARTNER THEREOF,
ON THE OTHER. THE PARTNERSHIP AGREEMENT LIMITS THE LIABILITY AND MODIFIES THE
FIDUCIARY DUTIES OF THE GENERAL PARTNERS. HOLDERS OF COMMON UNITS ARE DEEMED TO
HAVE CONSENTED TO CERTAIN ACTIONS AND CONFLICTS OF INTEREST THAT MIGHT OTHERWISE
BE DEEMED A BREACH OF FIDUCIARY OR OTHER DUTIES UNDER STATE LAW.
- HOLDERS OF COMMON UNITS HAVE LIMITED VOTING RIGHTS, AND THE MANAGING
GENERAL PARTNER MANAGES AND CONTROLS THE PARTNERSHIP.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PROCEEDS TO
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO SELLING
PUBLIC AND COMMISSIONS (1) PARTNERSHIP (2) UNITHOLDERS
<S> <C> <C> <C> <C>
Per Common Unit . . . . $ $ $ $
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Total (3) . . . . . . . $ $ $
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</TABLE>
(1) The Partnership, the Operating Partnership and the General Partners have
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Partnership estimated at
$__________________________.
(3) The Partnership has granted the Underwriters a 30-day option to purchase up
to 1,425,000 additional Common Units on the same terms and conditions as
set forth above, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Partnership will be
$__________________________, $___________________________and
$__________________________, respectively. See "Underwriting."
__________
The Common Units offered by this Prospectus are being offered by the
Underwriters, subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the Common
Units will be made at the offices of Smith Barney Inc., 333 West 34th Street,
New York, New York 10001, on or about ____________________, 1996.
__________
SMITH BARNEY INC. LEHMAN BROTHERS DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC. PAINEWEBBER INCORPORATED
_______, 1996
<PAGE>
The Common Units offered by the Partnership hereby will represent an
aggregate 27.9% (31.7% if the Underwriters' over-allotment option is exercised
in full) limited partner interest in the Partnership. The General Partners own
an aggregate 2% general partner interest in the Partnership. In addition, upon
the closing of this offering, the General Partners and their affiliates will own
an aggregate 18% limited partner interest in the Partnership, of which 11.9% are
represented by Subordinated Units and 6.1% (5.7% if the Underwriters' over-
allotment option is exercised in full) are represented by Common Units. The
Common Units and the Subordinated Units are collectively referred to herein as
the "Units." Holders of the Common Units and the Subordinated Units are
collectively referred to herein as "Unitholders."
During the Subordination Period, holders of Common Units will be entitled
to receive the Minimum Quarterly Distribution, plus arrearages thereon, before
holders of Subordinated Units receive the Minimum Quarterly Distribution and,
after the Minimum Quarterly Distribution has been paid on all Units, will be
entitled to receive, before holders of Subordinated Units receive, the
applicable target distribution level. The Subordination Period will extend
until the first day of any quarter beginning on or after January 1, 2000 in
respect of which (a) distributions of Available Cash on all Units equaled or
exceeded $0.538 per quarter for each of the three consecutive non-overlapping
four-quarter periods immediately preceding such date and (b) there are no
arrearages on the Common Units. Prior to the end of the Subordination Period,
50% of the outstanding Subordinated Units will convert into Common Units on the
first day of any quarter during 1999 in respect of which (a) distributions of
Available Cash on all Units equaled or exceeded the applicable target
distribution level for each of the three consecutive non-overlapping
four-quarter periods immediately preceding such date and (b) there are no
arrearages on the Common Units. For purposes of the foregoing sentences, in
determining the amount of Available Cash distributed in any four-quarter period,
there will be excluded any positive balance in cash from operations at the
beginning of such four-quarter period and any net increase in working capital
borrowings in such four-quarter period and, with respect to the third of three
consecutive such four-quarter periods only, any net decrease in reserves. Upon
the expiration of the Subordination Period, all remaining Subordinated Units
will convert into Common Units, and Available Cash will generally be distributed
98% to all Unitholders, pro rata, and 2% to the General Partners, except that if
distributions of Available Cash exceed certain target distribution levels, the
General Partners will receive a percentage of such excess distributions that
will range from 15% to 50%.
Concurrently with the closing of this offering, the Partnership will
refinance $250 million of its existing indebtedness with borrowings under its
new bank acquisition facility and will redeem the special allocation limited
partner interests (the "SAUs") for an aggregate payment of $4.1 million. See
"Use of Proceeds" and "Prospectus Summary--The Partnership--Partnership
Structure and Management."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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<PAGE>
AVAILABLE INFORMATION
The Partnership has filed with the Securities and Exchange Commission
(the "SEC") in Washington, D.C., a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered by this Prospectus.
Certain of the information contained in the Registration Statement is omitted
from this Prospectus, and reference is hereby made to the Registration Statement
and exhibits and schedules relating thereto for further information with respect
to the Partnership and the securities offered by this Prospectus. The
Partnership is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the SEC. Such reports and
other information are available for inspection at, and copies of such materials
may be obtained upon payment of the fees prescribed therefor by the rules and
regulations of the SEC from, the SEC at its principal offices located at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the Regional Offices of the SEC located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and at 7 World Trade Center,
New York, New York 10048. In addition, the Common Units of the Partnership are
traded on the New York Stock Exchange, and such reports and other information
may be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS
The Partnership's Annual Report on Form 10-K (Commission file No. 0-
24976) for the fiscal year ended December 31, 1995, Quarterly Report on Form 10-
Q for the quarter ended March 31, 1996 and Current Report on Form 8-K dated
May 30, 1996 are hereby incorporated herein by reference.
All documents filed by the Partnership pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, after the date of this Prospectus and
prior to the termination of the offering of the securities offered by this
Prospectus, shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference, herein modifies or
replaces such statement. Any such statement so modified or replaced shall not
be deemed, except as so modified or replaced, to constitute a part of this
Prospectus.
The Partnership undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of any such person, a copy of any or all
of the documents incorporated by reference herein, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information that this Prospectus incorporates. Written or oral requests for
such copies should be directed to: Crown Pacific Partners, L.P., 121 S.W.
Morrison Street, Portland, Oregon 97204, Attention: Mr. Kelly Lang, Assistant
Treasurer and Director of Investor Relations, telephone (503) 274-2300.
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION INCORPORATED BY REFERENCE IN THIS PROSPECTUS. AS USED IN THIS
PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "PARTNERSHIP" OR "CROWN
PACIFIC" REFERS TO CROWN PACIFIC PARTNERS, L.P. AND ITS PREDECESSORS, TOGETHER
WITH ITS SUBSIDIARIES. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS BY
THE PARTNERSHIP IS NOT EXERCISED AND, EXCEPT FOR FINANCIAL STATEMENTS AND
RELATED OPERATING DATA, INCLUDES INFORMATION RELATING TO THE ASSETS ACQUIRED
FROM CAVENHAM FOREST INDUSTRIES.
THE PARTNERSHIP
GENERAL
Crown Pacific Partners, L.P. (the "Partnership") is a publicly held
Delaware limited partnership that owns and operates timberland properties and
wood product manufacturing operations in the northwestern United States. The
Partnership's business consists of the growing and harvesting of timber for sale
as logs in domestic and export markets and the manufacture and sale of lumber,
plywood and other wood products. Lumber and other wood products are used
principally in new residential home construction, home remodeling and repair and
for general industrial uses. The Partnership currently owns and/or controls
approximately 724,000 acres of timberland in the Pacific Northwest (the
"Timberlands"), containing a total merchantable timber inventory of
approximately 4,875 million board feet ("MMBF"). In addition to its Timberlands,
the Partnership has significant manufacturing assets consisting of four lumber
mills in Oregon and Idaho and a remanufacturing facility, a plywood facility and
a chip mill all located in Oregon (collectively, the "Manufacturing
Facilities").
BUSINESS STRATEGY
The Partnership's primary business strategy is to pursue growth through
strategic acquisitions of timber and timberlands. The Managing General Partner
intends to focus on acquisitions that would be expected to increase per Unit
distributable cash flow. Historically, the Partnership has been successful in
acquiring timber and manufacturing operations from third parties and integrating
them into its operations on a financially attractive basis. The elements of the
Partnership's acquisition strategy include (i) identification of undervalued
timber assets and acquisitions on a wholesale basis, (ii) review of
opportunities for simultaneous or subsequent resales of smaller, non-strategic
portions of acquired assets at a profit, (iii) emphasis on improving operating
efficiencies at acquired manufacturing facilities in order to be a low-cost
producer and on enhancing timber management practices employed by the sellers
and (iv) the disposition or liquidation of assets that are not expected to
produce an attractive financial return. Since April 1988, the Partnership has
completed ten significant acquisitions with an aggregate purchase price of
approximately $900 million (after $145 million of simultaneous sales of certain
assets arranged by Crown Pacific to third parties).
In order to enhance its ability to finance future acquisitions, the
Partnership intends to obtain a $125 million bank commitment that is scheduled
to close concurrently with the offering made hereby (the "Acquisition
Facility"), borrowings under which will be used to make acquisitions. In
connection with the Cavenham Acquisition (defined below), the Partnership
converted its prior acquisition facility to a term loan, a portion of which
will be repaid with the proceeds of this offering and the balance of which will
be repaid with borrowings under the Acquisition Facility. See "Use of
Proceeds." In addition to borrowings under the Acquisition Facility, the
Partnership may fund future acquisitions from internal cash flow and additional
sales of Common Units. There can be no assurance, however, that general
economic conditions will be conducive to this acquisition strategy, that the
Partnership will be able to identify attractive acquisition candidates in the
future, that the Partnership will be able to acquire any such assets or
businesses on economically acceptable terms, that any acquisitions will not be
dilutive to earnings and distributions or that any additional debt incurred to
finance an acquisition will not affect the ability of the Partnership to make
distributions to
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<PAGE>
Unitholders. In addition, the terms of the Partnership's debt facilities may
limit the ability of the Partnership to make acquisitions, particularly without
also raising additional equity through the sale of Common Units, which may
require the approval of the holders of outstanding Units.
CAVENHAM ACQUISITION
On May 15, 1996, the Partnership completed the purchase of approximately
207,000 acres of timberland in Oregon and Washington from Cavenham Forest
Industries ("Cavenham") containing approximately 1,485 MMBF of merchantable
timber for $205 million (the "Cavenham Acquisition"). The Cavenham properties
are located in close proximity to the Partnership's existing operations,
requiring only minimal additional overhead. The Partnership believes that the
acquisition will benefit the Partnership in several ways. First, the majority of
the logs from the Cavenham Oregon timberlands (the "Eastside Timberlands") will
be processed by the Partnership's existing Oregon manufacturing facilities and
will be used to offset higher cost external log purchases, which is anticipated
to reduce the Partnership's overall production cost. Second, the acquisition of
the Cavenham Olympic Peninsula timberlands (the "Olympic Timberlands") should
give the Partnership more volume that can be sold in the export market (which
has historically commanded a premium over the domestic market), more flexibility
in harvest planning with the Partnership's existing Washington timberlands (the
"Hamilton Timberlands"), which are approximately 40 miles away by water, and the
ability to negotiate more favorable terms for sales in both the export and
domestic markets from the Washington region. Third, due to the high growth
rates in the Olympic Timberlands, the acquisition has increased the overall
average growth rate of the Partnership's Timberlands. See "--The Timberlands"
and "--Manufacturing Facilities."
The Eastside Timberlands consist of approximately 124,000 acres, containing
approximately 474 MMBF of appearance-grade lodgepole pine (61%), Ponderosa pine
(16%), true firs (13%) and other conifer species (10%). The Eastside
Timberlands have estimated annual growth rates of between 2.5% to 3.25% and
contain significant volumes of mature timber greater than 80 years old. The
Eastside Timberlands are located in two discrete areas, one of which is a 91,000
acre tract in Klamath County in south central Oregon called the Mazama Tract.
The Mazama Tract's northern point is approximately 20 miles south of the
southern boundary of the Partnership's existing Oregon tree farm and in close
proximity to the Partnership's Gilchrist sawmill, which is already a producer of
appearance-grade pine lumber. The remaining approximately 33,000 acres of the
Eastside Timberlands are made up of several small tracts located in Baker, Union
and Umatilla counties in northeastern Oregon that contain a high percentage of
fir species. The Partnership plans to sell approximately 20% of the Eastside
Timberlands harvest to third party mills and to use the balance in its mills
located in central Oregon, principally the Prineville and Gilchrist sawmills.
The Olympic Timberlands consist of approximately 83,000 acres, containing
approximately 1,011 MMBF of hemlock (71%), Douglas fir (10%), hardwood (11%) and
other conifers (8%) in one of the most productive timber growth sites in the
nation. Growth rates on the Olympic Timberlands average an estimated 7% per
year because of the combination of rainfall quantity, soil types and low
elevations. The Olympic Timberland operations will be combined with the
Partnership's existing Hamilton Timberlands for minimal additional
administrative cost. Logs harvested from both Washington tracts will be sold on
the open market to domestic and export log buyers or may be processed in a
manufacturing facility the Partnership intends to purchase or construct in
northwest Washington. The Olympic tract is uneven aged (resulting in stable
annual harvest levels) and well managed. Intensive silvicultural practices
typically applied at the Olympic Timberlands include reforestation, competing
vegetation control, precommercial thinning and commercial thinning. In the past
five years, over 19,000 acres on the Olympic Timberlands have been
precommercially thinned, providing potential for increased production in future
years.
THE TIMBERLANDS
The Partnership's Timberlands include substantial holdings of mature,
premium-quality timber. The Partnership is one of the larger holders of mature
Ponderosa pine in the United States. The Partnership also has significant
holdings of other species, including white fir, lodgepole pine, cedar and sugar
pine.
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<PAGE>
The Partnership's Timberlands, including the Cavenham Acquisition, are
geographically divided into three principal regions: the Oregon region (the
"Oregon Region") encompassing approximately 334,000 acres and approximately
1,200 MMBF of merchantable timber, the northwest Washington region (the
"Washington Region") encompassing approximately 185,000 acres and approximately
1,870 MMBF of merchantable timber and eastern Washington, Idaho and northwestern
Montana (the "Inland Region") encompassing approximately 205,000 acres and
approximately 1,805 MMBF of merchantable timber. Timber harvested from the
Oregon and Inland Regions is used principally as raw material for the operation
of the Manufacturing Facilities, with the remainder sold to third parties. In
contrast, between 35% and 50% of the timber harvest from the Washington Region
has been sold as logs in the export market (principally Japan) at premium
prices, with the remainder sold to unaffiliated local mills. The Partnership's
substantial timber resources reduce reliance on third-party log sources to
supply its Manufacturing Facilities, which results in a key competitive
advantage over mills without a supply of fee timber. See "--Industry
Conditions."
MANUFACTURING FACILITIES
The Partnership manufactures a wide variety of lumber, plywood and
remanufactured wood products in its Manufacturing Facilities. Due to the
quality and quantity of the Partnership's mature pine timber, the Partnership's
two Oregon sawmills are among the largest producers in the Pacific Northwest of
appearance-grade pine lumber, which is sold at premium prices to manufacturers
of doors, windows and other specialty wood products. Lumber produced in the
Inland Region Manufacturing Facilities is sold principally to distributors of
dimension or structural lumber products, which are used primarily for
residential construction. The Partnership's plywood products customers are
primarily wholesalers. The Partnership's remanufactured wood products customers
include window and door manufacturers and retail home centers.
The Partnership employs modern technology in its Manufacturing Facilities
in order to maximize efficiency and utilization of the timber resources, reduce
labor costs and maintain high-quality standards of production. Since
January 1, 1993, the Partnership and its predecessors have invested more than
$20 million to upgrade the Manufacturing Facilities. An additional $8.9 million
is anticipated to be spent by the end of 1996 to upgrade and to reconfigure the
Manufacturing Facilities to process more efficiently the species that can be
supplied from the Timberlands and from other reliable sources in proximity to
the mills. The most tangible benefits of these upgrades are expected to be
increased recovery rates (the ratio of the volume of lumber produced at a
facility to the volume of logs utilized at such facility), reduced operating
costs and increased product quality. The Partnership has agreed to sell to a
third party a sawmill in the Inland Region that has been closed since December
1995 due to a fire and plans to close another, nonstrategic, Inland Region
sawmill by June 30, 1996, leaving the Partnership with a total of seven
Manufacturing Facilities. The closure and sale of those facilities are expected
to increase the Inland Region's raw material self-sufficiency at the remaining
Manufacturing Facilities. The Partnership also intends to purchase or construct
a sawmill in northwest Washington to process non-export quality logs from the
Washington Timberlands into dimension lumber. The Partnership believes that the
efficiency of its Manufacturing Facilities, in combination with a highly
productive work force and the ability to meet a substantial portion of its raw
material needs from its Timberlands, make the Partnership competitive in the
production of its lumber and other wood products.
INDUSTRY CONDITIONS
The Partnership's ability to implement its business strategy over the long
term and its results of operations will depend upon a number of factors, many of
which are beyond its control. These factors include general industry
conditions, prices and supply and demand for logs, lumber and other wood
products, competition from other supplying regions and substitute products and
seasonality. Environmental and other similar concerns and governmental policies
have substantially reduced the volume of timber under contract to be harvested
from federal lands. The resulting supply imbalance has caused prices for logs
and lumber in recent years to be volatile, reaching peak levels during late 1993
and early 1994. Even though prices have declined from these record levels,
current prices still exceed pre-1993 levels. The low supply of timber from
federal lands, which is expected to continue for the foreseeable future, has
benefited forest products companies with private timber holdings such as the
Partnership. Since the beginning of 1988, federal
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<PAGE>
timber sales under contract in the Pacific Northwest decreased 80% from
approximately 10,000 MMBF to 2,000 MMBF at year end 1995, forcing many
conversion facilities to close, including three Crown Pacific sawmills that were
closed promptly after their acquisition and two others in the Inland Region that
are currently being closed or sold. Increased supplies of logs imported from
foreign countries have only partially offset the lost volume from public lands
and have not replaced the mature, high-quality timber found in greater
quantities on federal lands. The Partnership believes that because of its
sizeable holdings of fee timber and efficient Manufacturing Facilities it will
continue to benefit from these price levels and market conditions.
Changes in general economic and demographic factors, including the strength
of the economy and interest rates for home mortgages and construction loans,
have historically caused fluctuations in housing starts and in turn in demand
(and therefore prices) for lumber and other wood products. Domestic demand for
lumber and manufactured wood products is primarily affected by the level of new
residential construction activity. In addition to housing starts, demand for
wood products is also significantly affected by repair and remodeling activities
and industrial uses, demand for which has historically been less cyclical.
Domestic demand for logs, lumber and other wood products is seasonal. In the
winter, demand generally subsides, increasing in the spring as construction
activity resumes. Severe weather conditions, storms and natural disasters can
also affect demand. The Partnership is also affected by international demand
factors. The strength of the economy in Japan and other Asian countries and the
relative strength of the United States dollar directly affect the demand for
exported logs from the Partnership's Washington Region. Revenues from sales of
exported logs are determined in part by variations in inventory in the countries
that import those logs.
In late 1994 and throughout 1995, demand for lumber and plywood was
adversely affected by declines in housing starts, competition from substitute
wood products such as oriented strand board ("OSB") and changes in purchasing by
distributors and retailers to a just-in-time inventory system. In addition,
decreases in sawmill capacity in response to supply reductions resulted in
decreased demand for logs. Other factors acting to reduce lumber prices during
this period were increased inports of Canadian lumber and unusually high prices
for wood chips (a raw material used in pulp and paper manufacturing), resulting
in increased production of lumber from which the high-priced wood chips are a
by-product. The resulting price decreases have reversed in early 1996. In
fact, demand from new housing starts outpaced supply, causing shortages which in
turn stemmed from the inability of wholesalers to replenish their inventories
because of a severe winter and an extended spring break-up.
PARTNERSHIP STRUCTURE AND MANAGEMENT
Crown Pacific Management Limited Partnership, a Delaware limited
partnership, is the managing general partner of the Partnership (the "Managing
General Partner"), and Crown Pacific, Ltd., an Oregon corporation ("CPL"), is
the special general partner of the Partnership (in such capacity, the "Special
General Partner"). The Managing General Partner and the Special General Partner
are together referred to herein as the "General Partners." Both of the General
Partners are owned by Fremont Investors, Inc. (formerly called "Fremont Group,
Inc.") ("Fremont") and its affiliates and by Mr. Peter W. Stott and Mr. Roger L.
Krage (collectively, the "Sponsors"). Mr. Stott and Mr. Krage have had
preliminary discussions with Fremont regarding the purchase of all of Fremont's
interest in the Partnership and the General Partners. These discussions are
only preliminary, however, and price and other significant terms have not been
established.
The operations of the Partnership are carried out through, and the
Timberlands and operating assets are owned by, Crown Pacific Limited
Partnership, a Delaware limited partnership, and other subsidiary operating
partnerships and corporations (collectively, the "Operating Partnership"). The
Partnership owns a 98.9899% limited partner interest in the Operating
Partnership. The Managing General Partner is the general partner of the
Operating Partnership with a 1.0101% general partner interest. The General
Partners own an aggregate 2% general partner interest in the Partnership and the
Operating Partnership. References herein to the General Partners' 2% interest or
to distributions to the General Partners of 2% of "Available Cash" are
references to the amount of the General Partners' combined percentage interest
in the Partnership and the Operating Partnership. Unless the context otherwise
requires, references herein to the
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<PAGE>
Partnership include the Partnership, the Operating Partnership and any other
subsidiary operating partnerships and corporations.
Effective upon the closing of the offering made hereby, all of the
outstanding SAUs will be redeemed from a portion of the net proceeds of this
offering for an aggregate of $4.1 million. Under the terms of the Partnership
Agreement, the SAUs were entitled to receive aggregate distributions, through
the end of 1997, of up to $80 million, subject to annual limitations, only after
the Partnership distributed to all Common Units and Subordinated Units $0.51
per quarter during 1995, $0.524 per Unit (the"First Target Distribution") with
respect to each quarter during 1996 and $0.538 per Unit (the "Second Target
Distribution") with respect to each quarter during 1997. The Partnership
Agreement has been amended, with the approval of the SAU holders, to redeem the
SAUs in exchange for a one-time cash payment equal to $4.1 million in the
aggregate (the "SAU Amendment"), which represents the present value of the
future cash distributions that the Managing General Partner anticipates the SAU
holders could receive from the Partnership with respect to the periods ending on
or before December 31, 1997. Dillon, Read & Co. Inc., as a financial advisor to
the Partnership, has delivered its opinion to the Partnership that the SAU
Amendment will not adversely affect the limited partners of the Partnership
(including the holders of Common Units) in any material respect. Upon
redemption, the SAUs will cease to exist and any Available Cash, remaining after
the Minimum Quarterly Distribution and the applicable Target Distribution, will
be distributed to the Partners as provided in the Partnership Agreement.
The activities of the Managing General Partner are limited by the
Partnership Agreement to the management of the activities and operations of the
Partnership. The Managing General Partner receives no management fee in
connection with its management of the Partnership and receives no remuneration
for its services as managing general partner of the Partnership other than
reimbursement for all direct and indirect expenses incurred in connection with
the Partnership's operations and all other necessary or appropriate expenses
allocable to the Partnership or otherwise reasonably incurred by the Managing
General Partner in connection with the operation of the Partnership's business.
The principal executive offices of the Partnership, the Operating
Partnership and the General Partners are located at 121 S.W. Morrison Street,
Suite 1500, Portland, Oregon 97204. The telephone number at such offices is
(503) 274-2300.
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<PAGE>
SUMMARY HISTORICAL FINANCIAL
AND OPERATING DATA
The following table sets forth for the periods and at the dates indicated,
summary historical financial and operating data for the Partnership and its
predecessors, on a combined historical basis. The summary historical financial
data for the three years ended December 31, 1993, 1994 and 1995 are derived from
the historical combined audited financial statements of the Partnership and
should be read in conjunction with such financial statements incorporated by
reference in this Prospectus. The related historical consolidated financial data
for the three-month periods ended March 31, 1995 and 1996 are derived from the
historical unaudited consolidated financial statements of the Partnership
incorporated by reference in this Prospectus, which in the opinion of management
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair statement of the results for the unaudited interim period.
The comparability of results of operations among the periods presented is
affected by the acquisitions of DAW Forest Products Company, L.P. and W-I Forest
Products Limited Partnership ("DAW/W-I") in September and October 1993, which
were accounted for under the purchase method of accounting.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE QUARTER ENDED
-------------------------------------- -------------------------
MARCH 31, MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995 1996
1993 (1) 1994 (1) 1995 (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues (2) . . . . . . . . . . . . . . . . . . . . . $ 220,586 $ 397,326 $ 383,383 $ 97,834 $ 84,555
Operating costs:
Cost of products sold (3). . . . . . . . . . . . . . . 151,379 328,882 313,490 80,995 66,882
Selling, general and administrative expenses . . . . . 10,379 21,148 21,653 5,309 5,312
---------- ---------- ---------- --------- ---------
Operating income . . . . . . . . . . . . . . . . . . . 58,828 47,296 48,240 11,530 12,361
Interest expense . . . . . . . . . . . . . . . . . . . 14,201 23,894 31,053 7,522 8,245
Amortization of debt issuance costs. . . . . . . . . . 997 2,184 508 116 126
Other (income) expense, net. . . . . . . . . . . . . . 3,208 (1,034) (599) (224) (174)
---------- ---------- ---------- --------- ---------
Income before provision for income taxes . . . . . . . 40,422 22,252 17,278 4,116 4,164
Provision for income taxes . . . . . . . . . . . . . . 1,501 2,514 -- -- --
---------- ---------- ---------- --------- ---------
Income before extraordinary item . . . . . . . . . . . 38,921 19,738 17,278 4,116 4,164
Extraordinary item - loss on extinguishment of debt. . -- (16,178) -- -- --
---------- ---------- ---------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . 38,921 3,560 17,278 4,116 4,164
Accretion and income relative to mandatorily
redeemable partnership interests. . . . . . . . . . (3,243) (8,624) -- -- --
Net income (loss) allocated to partnership and
shareholders' interests . . . . . . . . . . . . . . $ 35,678 $ (5,064) $ 17,278 $ 4,116 $ 4,164
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
Earnings per Unit: (Proforma for 1994)
Income before extraordinary item. . . . . . . . . . $ 1.07 $ 0.94 $ 0.22 $ 0.23
Extraordinary item. . . . . . . . . . . . . . . . . (0.88) -- -- --
---------- ---------- --------- ---------
Net income. . . . . . . . . . . . . . . . . . . . . $ 0.19 $ 0.94 $ 0.22 $ 0.23
---------- ---------- --------- ---------
---------- ---------- --------- ---------
CASH FLOW AND OTHER DATA:
EBITDDA (4). . . . . . . . . . . . . . . . . . . . . . $ 85,852 $ 87,016 $ 83,290 $ 17,899 $ 21,414
Additions to timber and timberland . . . . . . . . . . 11,230 15,764 31,211 3,988 15,766
Additions to equipment . . . . . . . . . . . . . . . . 1,885 14,799 10,437 3,425 2,456
Maintenance capital expenditures . . . . . . . . . . .
Cash flow from operating activities. . . . . . . . . . 59,671 57,485 22,976 8,598 20,216
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<PAGE>
FOR THE YEAR ENDED FOR THE QUARTER ENDED
-------------------------------------- -------------------------
MARCH 31, MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995 1996
1993 (1) 1994 (1) 1995 (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working capital. . . . . . . . . . . . . . . . . . . . $ 2,489 $ 51,684 $ 66,737 $ 59,500 $ 66,025
Total assets (5) . . . . . . . . . . . . . . . . . . . 738,363 461,547 476,505 457,641 490,315
Long-term debt (5) . . . . . . . . . . . . . . . . . . 480,362 300,000 326,000 303,000 340,000
Partners' and shareholders' equity . . . . . . . . . . 98,632 119,397 107,056 123,259 101,781
OPERATING DATA:
Fee timber harvested (MMBF). . . . . . . . . . . . . . 152 215 202 46 75
External log sourcing (MMBF) . . . . . . . . . . . . . 106 269 251 53 46
Lumber production (MMBF) . . . . . . . . . . . . . . . 199 421 390 111 97
Plywood production (MMSF)(3/8" basis). . . . . . . . . 45 142 113 37 12
</TABLE>
- -----------
(1) Effective December 22, 1994, the Partnership completed an initial public
offering of 9,850,000 Common Units. Since less than 80% of the limited
partnership interests were sold to the public and because the General Partners
(or their affiliates) were also the general partners of the
companies/partnerships that preceded the Partnership, the assets were not
recorded as a purchase and therefore remain at their historical cost. The
financial information for the periods prior to December 22, 1994 represents the
financial results of the Partnership's predecessors. The Partnership's
predecessors consisted of two corporations, CPL and Crescent Creek Company, and
three limited partnerships, Crown Pacific Limited Partnership, Crown Pacific
Inland Limited Partnership and Crown Pacific Leasing Limited Partnership. These
organizations were under common control in that they had significant common
partners and shareholders, common management and completed certain asset
transfers among the entities as part of reorganizations. Additionally, CPL
provided certain management and administrative services for all of the
enterprises within the group. As legal entities, the corporations and
partnerships were not consolidated; however, due to the common ownership and
management, combination for financial statement purposes was presented to
properly reflect the results of operations, cash flows and financial position of
the Partnership's predecessors. Results of operations for the ten-day period
ended December 31, 1994 were not significant compared to the results of the
combined predecessors taken as a whole. The operations of the Partnership have
been combined with the results of the predecessors for the year ended December
31, 1994 and have been presented together in the accompanying Income Statement
Data.
(2) Total revenues from Inland Region sawmills acquired in the fourth quarter
of 1993 that were closed in the first quarter of 1994 were $8.4 million in the
year ended December 31, 1993 and $13.8 million in the year ended December 31,
1994. Total revenues from Inland Region sawmills that are or will be closed in
1996 were $9.3 million in the quarter ended March 31, 1996 and $50.6 million in
the year ended December 31, 1995.
(3) In the first quarter 1995, the Partnership completed a periodic update of
its timber inventory system to reflect the timber it owned. The update resulted
in an increase in timber volumes, which reduced the estimated depletion rates
and decreased the depletion costs for the year ended December 31, 1995 by $7.4
million or $0.41 per Unit. This change in estimate had no impact on prior
periods or on the Partnership's cash flow.
(4) EBITDDA is defined as net income before interest, amortization of debt
issuance costs, income taxes, depreciation, depletion and amortization and
extraordinary items. EBITDDA is provided because management believes EBITDDA
provides useful information for evaluating the Partnership's ability to make the
Minimum Quarterly Distribution. EBITDDA should not be construed as an
alternative to operating income (as an indicator of the Partnership's operating
performance) or as an alternative to cash flows from operating activities (as a
measure of liquidity).
(5) Included in total assets and long-term debt for the year ended December 31,
1993 was $220 million related to the purchase of certain timberlands in 1989.
The Partnership's predecessors issued twenty-two $10 million installment notes
to the seller secured by unconditional letters of credit. The deposited funds
were restricted such that they could be used to repay the notes. As a result,
both the assets and liabilities remained on the predecessors' balance sheets.
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<PAGE>
THE OFFERING
Securities offered . . . . . . . . . . 9,500,000 Common Units, of which
7,000,000 are being offered by the
Partnership (8,425,000 if the
Underwriters' over-allotment option is
exercised in full) and 2,500,000 are
being offered by the Selling
Unitholders. All of the Common Units
being sold by the Selling Unitholders
were purchased by the Sponsors in the
initial public offering in December
1994 for a purchase price of $20.05
per Common Unit, representing the
initial public offering price, less
underwriting discounts and
commissions.
Units to be outstanding after this 19,360,439 Common Units representing
offering . . . . . . . . . . . . . . . an aggregate 77.0% limited partner
interest in the Partnership
(20,785,439 Common Units, representing
an aggregate 78.3% limited partner
interest in the Partnership, if the
Underwriters' over-allotment option is
exercised in full) and 5,773,088
Subordinated Units representing an
aggregate 23.0% limited partner
interest in the Partnership (21.7% if
the Underwriters' over-allotment
option is exercised in full).
Use of Proceeds. . . . . . . . . . . . The net proceeds from the sale of the
Common Units offered by the
Partnership hereby (estimated to be
approximately $131.8 million after
deducting the underwriting discounts
and commissions and expenses of the
offering) will be used by the
Partnership to repay approximately
$127.7 million of indebtedness
incurred to finance the Cavenham
Acquisition, and the remaining $4.1
million will be used to redeem the
SAUs. See "--The Partnership--
Partnership Structure and Management."
The Partnership will not receive any
of the net proceeds from the sale of
Common Units by the Selling
Unitholders. See "Use of Proceeds."
NYSE Symbol. . . . . . . . . . . . . . CRO
CASH DISTRIBUTIONS
GENERAL
The Partnership distributes all of its Available Cash within 45 days after
the end of each calendar quarter to the Unitholders of record on the applicable
record date and to the General Partners. "Available Cash" for any quarter
consists generally of the sum of all cash on hand at the end of such quarter, as
adjusted for reserves. The full definition of Available Cash is set forth in
the Partnership Agreement. The Managing General Partner has broad discretion in
making cash disbursements and establishing reserves, thereby affecting the
amount of the Available Cash.
Distributions by the Partnership of its Available Cash are generally made
98% to the Unitholders and 2% to the General Partners, subject to the payment of
incentive distributions to the Managing General Partner to the extent that
certain target levels of cash distributions to the Unitholders in excess of the
Minimum Quarterly Distribution are achieved.
For each quarter during the Subordination Period, the holders of Common
Units will have the right to receive the Minimum Quarterly Distribution ($0.51
per Unit) with respect to such quarter and any arrearages for prior quarters
-11-
<PAGE>
before any distributions may be made on the Subordinated Units. Then, the
holders of the Subordinated Units will have the right to receive the Minimum
Quarterly Distribution with respect to such quarter, but no arrearages for prior
quarters. Next, first the holders of Common Units and then the holders of
Subordinated Units will have the right to receive additional cash until they
have received specified Target Distribution levels ($0.524 in 1996 and $0.538 in
1997 and 1998). After the holders of Common Units and the holders of
Subordinated Units have each received the First Target Distribution (in 1996)
and the Second Target Distribution (in 1997), cash distributions will be shared
among the holders of Common Units, the holders of Subordinated Units and the
General Partners in proportion to the total amount of Available Cash
constituting Cash from Operations distributed to each such class of partners
during such year (up to and including the quarter with respect to which such
distribution is being made) up to the applicable Target Distribution level. In
1998 and thereafter, cash distributions in excess of the Second Target
Distribution level ($0.538) will be shared between the General Partners and all
Unitholders pro rata, with the General Partners' share increasing as higher
Target Distribution levels on the Units are met. Specifically, the General
Partners will be entitled to 15% of all quarterly distributions after the
Unitholders have received $0.566 per Unit, 25% after the Unitholders have
received $0.679 per Unit and 50% after the Unitholders have received $0.904 per
Unit. The Minimum Quarterly Distribution and Target Distribution levels are
subject to adjustment under certain circumstances such as unfavorable tax
legislation or upon distributions of Cash from Interim Capital Transactions, as
defined in the Glossary. As of the expiration of the Subordination Period,
which will occur no sooner than January 1, 2000 and then only upon the
satisfaction of certain tests, all Subordinated Units will have converted into
an equal number of Common Units and will participate pro rata with all other
Common Units in distributions of Available Cash. Under certain circumstances,
50% of the Subordinated Units will convert into an equal number of Common Units
after January 1, 1999 if certain Target Distribution levels have been met for a
specified time period. Common Units will not accrue any arrearages for any
quarter after the Subordination Period.
ABILITY TO MAKE THE MINIMUM QUARTERLY DISTRIBUTION
The Partnership has paid a quarterly distribution equal to or in excess of
the Minimum Quarterly Distribution on all outstanding Common Units and
Subordinated Units with respect to each full quarter since the Partnership's
inception in December 1994. For the quarter ended March 31, 1996, the
Partnership distributed the First Target Distribution of $0.524 per Unit.
Based on the assumptions set forth below, the Managing General Partner
anticipates that the Partnership will generate Available Cash constituting Cash
from Operations sufficient to allow the Partnership to distribute at least the
First Target Distribution of $0.524 per Unit with respect to each full calendar
quarter ending on or prior to December 31, 1996 and at least the Second Target
Distribution of $0.538 per Unit with respect to each full calendar quarter
during 1997, although no assurance can be given in respect of such
distributions. This belief is based on the Managing General Partner's opinions
regarding the future business prospects of the Partnership and other assumptions
that the Managing General Partner believes are reasonable. Some of these
assumptions are beyond the control of the Managing General Partner and cannot be
predicted with certainty, including assumptions concerning market and economic
conditions and other factors, such as log and lumber prices, attainment of
projected timber harvest schedules, availability of non-fee timber, export and
other environmental restrictions and other factors that affect the availability
of timber and the level of lumber production.
The Managing General Partner's estimates of Available Cash constituting
Cash from Operations are based in part on the following specific assumptions
with respect to Partnership operations during the period commencing July 1996:
(i) the rate of inflation will be 3.0% for each year; (ii) prices for logs and
lumber will increase by the assumed rate of inflation, and plywood prices will
remain flat, in 1996 and 1997; (iii) the Partnership will harvest timber in
accordance with its harvest plans, which are based on projections of demand,
price, availability of timber and other factors beyond the control of the
Partnership and which contemplate the harvest of 270 MMBF in 1996 and 256 MMBF
in 1997; (iv) purchases of logs from private sellers will decrease beginning in
1996 in Oregon and in the Inland Region; (v) purchases of logs from federal
sources will be substantially reduced in the Inland Region and will be minimal
in Oregon in 1996 and 1997; (vi) purchases of logs from state sources will
remain relatively constant through 1997;
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<PAGE>
(vii) manufacturing productivity will improve in 1996 and 1997 at the
Manufacturing Facilities due to, among other factors, certain capital
expenditures at such facilities; and (viii) capital expenditures for maintenance
will average $3 million per year in 1996 and 1997. The Partnership's
performance for future years is difficult to predict, and the realization of the
assumptions underlying the projected performance is uncertain.
If the Managing General Partner's assumptions, particularly with respect to
prices, prove to be incorrect, Available Cash constituting Cash from Operations
generated by the Partnership could be insufficient to permit the Partnership to
make the distributions estimated as described above. Accordingly, no assurances
can be given that distributions at those levels will be made.
When used in this Prospectus the words "expect," "estimate," "project" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
expected, estimated or projected.
SUMMARY OF TAX CONSIDERATIONS
THE TAX CONSEQUENCES OF AN INVESTMENT IN COMMON UNITS TO A PARTICULAR
INVESTOR WILL DEPEND IN PART ON THE INVESTOR'S OWN TAX CIRCUMSTANCES. EACH
PROSPECTIVE INVESTOR SHOULD CONSULT HIS OWN TAX ADVISOR ABOUT THE FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES OF AN INVESTMENT IN COMMON UNITS.
RATIO OF TAXABLE INCOME TO DISTRIBUTIONS
The General Partners estimate that a purchaser of Common Units in this
offering who holds such Common Units through the record date for the last
quarter of ____ will be allocated, on a cumulative basis, an amount of federal
taxable income for such period that will be approximately [___]% of cash
distributed with respect to that period. A majority of such taxable income may
be treated as capital gains as a result of an election to be made pursuant to
Section 631(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
as a result of transactions qualifying for treatment under Section 631(b) of the
Code. The General Partners further estimate that after ____ the taxable income
allocable to the Unitholders will constitute a significantly higher percentage
of cash distributed to Unitholders. These estimates are based upon the
assumption that Available Cash will approximate an amount required to make the
applicable Target Distributions with respect to the Common and the Subordinated
Units and other assumptions with respect to capital expenditures, cash flow and
anticipated cash distributions. These estimates and assumptions are subject to,
among other things, numerous business, economic, regulatory, competitive and
political uncertainties beyond the control of the General Partners, especially
the assumed prices for logs and lumber. Further, the estimates are based on
current tax law and certain tax reporting positions that the General Partners
intend to adopt and with which the IRS could disagree. Accordingly, no assurance
can be given that the estimates will prove to be correct. The actual percentages
could be higher or lower than as described above and such differences could be
material.
OWNERSHIP OF COMMON UNITS BY TAX-EXEMPT ORGANIZATIONS AND CERTAIN OTHER
INVESTORS
An investment in Units by tax-exempt organizations (including individual
retirement accounts and other retirement plans), regulated investment companies
and foreign persons raises issues unique to such persons. See "Tax
Considerations--Uniformity of Units--Tax-Exempt Organizations and Certain Other
Investors."
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<PAGE>
RISK FACTORS
A PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AS
WELL AS THE OTHER INFORMATION SET FORTH OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, BEFORE MAKING A DECISION TO INVEST IN THE COMMON UNITS.
RISKS INHERENT IN THE PARTNERSHIP'S BUSINESS
CYCLICALITY OF FOREST PRODUCTS INDUSTRY WILL AFFECT THE PARTNERSHIP'S
RESULTS OF OPERATIONS. The Partnership's results of operations are, and will
continue to be, affected by the cyclical nature of the forest products industry.
Prices and demand for logs and manufactured wood products have been, and in the
future can be expected to be, subject to cyclical fluctuations. The demand for
logs and wood products is primarily affected by the level of new residential
construction activity, which is subject to fluctuations due to changes in
economic conditions, interest rates, population growth, weather conditions and
other factors. In addition to housing starts, demand for wood products is also
significantly affected by repair and remodeling activities and industrial uses,
demand for which has historically been less cyclical. Decreases in the level of
residential construction activity will be reflected in reduced demand for logs
and wood products, resulting in lower prices for the Partnership's log and wood
products and lower revenues, profits and cash flows. Furthermore, changes in
supply of timber affect prices for logs and lumber.
AVAILABILITY OF FEDERAL TIMBER SUPPLY HAS DECLINED. Various factors,
including environmental and endangered species concerns, have limited, and are
likely to continue to limit, the amount of timber offered for sale by certain
United States government agencies, which historically have been major suppliers
of timber to the United States forest products industry. The Partnership must
therefore rely more heavily on the acquisition of timber from other sources
(including domestic private timber owners and foreign sellers) to supply its
Manufacturing Facilities.
The importation of foreign logs is subject to risks not generally incident
to the acquisition of domestic logs, including fluctuations in exchange rates,
import limitations that may be imposed by the United States government and
potential opposition within the source country to the export of natural
resources. The Partnership does not currently have any contractually committed
supply of foreign logs.
THE PARTNERSHIP'S ABILITY TO HARVEST TIMBER WILL BE SUBJECT TO LIMITATIONS.
Revenues, net income and cash flow from the Partnership's future operations will
be dependent to a significant extent on its ability to harvest timber pursuant
to its harvest plans from its approximately 724,000 acres of timberlands.
Harvesting of the Timberlands may be affected by various factors, including
damage by fire, insect infestation, disease, prolonged drought and natural
disasters, access limitations and regulatory requirements. As is typical in the
forest products industry, the Partnership does not maintain insurance coverage
with respect to damage to the Timberlands. Even if such insurance were
available, the cost would be prohibitive.
Weather conditions, access limitations and regulatory requirements
associated with proximity to streams and other water courses may also restrict
harvesting of the Timberlands.
THE PARTNERSHIP'S ABILITY TO SELL LOGS FOR EXPORT MAY BE LIMITED. The
Partnership engages in the sale of logs for export, which business is
substantially dependent on market conditions in the major Asian economies,
particularly Japan and South Korea, and is affected by fluctuations in exchange
rates.
From time to time, legislation has been unsuccessfully introduced in the
United States House of Representatives to prohibit the export of logs
originating from private lands. There can be no assurance that similar
legislation will not be introduced in subsequent sessions of Congress or that
such legislation will not become law. United States, Oregon and Washington laws
already prohibit the export of logs originating from government lands.
THE PARTNERSHIP EXPERIENCES SIGNIFICANT COMPETITION. The forest products
industry is highly competitive in terms of price and quality. Many of the
Partnership's competitors have substantially greater financial and operating
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<PAGE>
resources than the Partnership. Wood products are subject to increasing
competition from a variety of non-wood and "laminated" or engineered wood
products, particularly, in the case of plywood, OSB. In addition, the
Partnership is subject to competition from lumber products and logs imported
from foreign sources to the United States as well as to the export markets
served by the Partnership. To the extent there is a significant increase in
competitive pressures from substitute products or other domestic or foreign
suppliers, it could have a material adverse effect on the Partnership.
THE PARTNERSHIP IS DEPENDENT ON KEY PERSONNEL. The Managing General
Partner believes the Partnership's success depends in part upon the efforts and
abilities of its senior management team, in particular Mr. Peter Stott and
Mr. Roger Krage. The failure of the Managing General Partner to retain such
personnel could adversely affect the Partnership's operations. Mr. Stott and
Mr. Krage have entered into employment agreements with the Managing General
Partner. In addition, an event of default will occur under the Partnership's
bank credit agreements if, without lender consent, Mr. Stott at any time is not
either the Chief Executive Officer (as he now serves) or the Chairman of the
Board of the Managing General Partner.
THE PARTNERSHIP IS SUBJECT TO FEDERAL AND STATE ENVIRONMENTAL REGULATION.
The Manufacturing Facilities emit air contaminants, discharge industrial
wastewater and stormwater and generate and dispose of both hazardous and
nonhazardous wastes. The Partnership is subject to regulation under federal and
state statutes, including the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act ("RCRA"), and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA" or "Superfund"), as
well as similar state laws and regulations. There can be no assurance that
additional future legislation or administrative or judicial action with respect
to protection of the environment will not adversely affect the Partnership or
the operation of the Manufacturing Facilities.
THE PARTNERSHIP'S OPERATIONS ARE SUBJECT TO ENDANGERED SPECIES REGULATION.
The federal Endangered Species Act and counterpart state legislation protect
species threatened with possible extinction. Protection of endangered species
may include restrictions on timber harvesting activities on private, federal and
state land containing the affected species. A number of species indigenous to
the Pacific Northwest have been protected under the Endangered Species Act,
including the northern spotted owl, marbled murrelet, mountain caribou, grizzly
bear, bald eagle and various salmon species.
The Managing General Partner does not believe that there are any species
protected under the Endangered Species Act that would have a material adverse
effect on the Partnership's ability to harvest the Timberlands in accordance
with current harvest plans. There can be no assurance, however, that species on
or around the Timberlands may not subsequently receive protected status under
the Endangered Species Act or that currently protected species may not be
discovered in significant numbers on or around the Timberlands.
RISKS INHERENT IN AN INVESTMENT IN THE PARTNERSHIP
CASH DISTRIBUTIONS ARE NOT GUARANTEED AND MAY FLUCTUATE WITH PARTNERSHIP
PERFORMANCE. Although the Partnership will distribute 100% of Available Cash,
there can be no assurance regarding the amounts of Available Cash to be
generated by the Partnership. The actual amounts of Available Cash will depend
upon numerous factors, including the Partnership's profitability, required
principal and interest payments on the Partnership's debt, restrictions
contained in the Partnership's debt agreements, the cost of acquisitions
(including related debt service payments), the issuance of debt and equity
securities by the Partnership, fluctuations in working capital, capital
expenditures, reserves, prevailing economic conditions and financial, business
and other factors, some of which may be beyond the control of the Partnership
and the Managing General Partner. The Partnership Agreement gives the Managing
General Partner broad discretion in establishing reserves that affect the amount
of Available Cash. As a result of these and other factors, there can be no
assurance regarding the actual levels of cash distributions by the Partnership,
and the Partnership's ability to distribute cash may also be limited during the
existence of any events of default under any of the Partnership's debt
agreements.
-15-
<PAGE>
THE PARTNERSHIP HAS INCURRED SUBSTANTIAL INDEBTEDNESS. Upon the closing of
the offering made hereby, assuming no exercise of the Underwriters' over-
allotment, the Partnership will have approximately $422 million in indebtedness
(excluding amounts borrowed under the Working Capital Facility). In addition,
the Partnership will have up to $________ million available to be borrowed under
the Acquisition Facility. As a result, the Partnership will have indebtedness
that is substantial in relation to partners' equity. The ability of the
Partnership to make principal and interest payments will depend on future
performance, which is subject to many factors, some of which will be outside the
Partnership's control. In addition, the agreements governing the Partnership's
indebtedness contain restrictive covenants that limit the ability of the
Partnership to incur additional indebtedness. Payment of principal and interest
on the Partnership's indebtedness, as well as compliance with the requirements
and covenants of the agreements governing such indebtedness, may limit the
Partnership's ability to make distributions to Unitholders.
PARTNERSHIP ASSUMPTIONS CONCERNING FUTURE OPERATIONS MAY NOT BE REALIZED.
In assessing the ability of the Partnership to distribute Available Cash, the
Partnership has relied on certain assumptions concerning its operations through
the quarter ending December 31, 1997, including assumptions regarding stumpage
prices, harvest volumes, regulatory changes and general economic conditions.
Although the Partnership believes its assumptions are within a range of
reasonableness, many of the assumptions made are beyond the Partnership's
control and cannot be predicted with any degree of certainty. If the
Partnership's assumptions, particularly with respect to prices or harvest
volumes, prove to be incorrect, Available Cash constituting Cash from Operations
generated by the Partnership could be insufficient to permit the Partnership to
make the distributions at the levels anticipated.
HOLDERS OF COMMON UNITS HAVE LIMITED VOTING RIGHTS; THE MANAGING GENERAL
PARTNER WILL MANAGE AND CONTROL THE PARTNERSHIP. Unlike the holders of common
stock in a corporation, holders of Common Units will have only limited voting
rights on matters affecting the Partnership's business.
The Managing General Partner will manage and control the activities of the
Partnership. Holders of Common Units will have no right to elect the General
Partners on an annual or other continuing basis.
THE PARTNERSHIP MAY ISSUE ADDITIONAL UNITS. The Managing General Partner
has the authority to cause the Partnership to issue additional Units or other
equity securities of the Partnership for such consideration and on such terms
and conditions as are established by the Managing General Partner, in its sole
discretion without the approval of any limited partners, with certain exceptions
set forth in the Partnership Agreement.
PROVISIONS OF THE PARTNERSHIP AGREEMENT MAY DISCOURAGE REMOVAL OF THE
MANAGING GENERAL PARTNER OR MANAGEMENT. The Partnership Agreement contains
certain provisions that are intended to discourage a person or group from
attempting to remove the current Managing General Partner or otherwise change
the management of the Partnership. If any person or group (other than the
General Partners or their affiliates or successors or persons who acquire 20% or
more of the Common Units from Fremont, Fremont's affiliates or subsequent
transferees of the Units owned by Fremont or its affiliates on the closing date
of this offering) acquires beneficial ownership of 20% or more of the Common
Units, such person or group will lose its voting rights with respect to all of
its Common Units.
THE MANAGING GENERAL PARTNER WILL HAVE A LIMITED CALL RIGHT WITH RESPECT TO
THE COMMON UNITS. If at any time less than 10% of the then issued and
outstanding Common Units are held by persons other than the General Partners and
their affiliates, the Managing General Partner will have the right, which it may
assign to any of its affiliates or the Partnership, to acquire all, but not less
than all, of the remaining Common Units held by such unaffiliated persons at
specified prices. As a consequence of the Managing General Partner's right to
purchase outstanding Common Units, a Unitholder may have his Common Units
purchased from him even though he may not desire to sell them, or the price paid
may be less than the amount the Unitholder would desire to receive upon a sale
of his Common Units.
UNITHOLDERS MAY NOT HAVE LIMITED LIABILITY IN CERTAIN CIRCUMSTANCES. The
limitations on the liability of holders of Common Units for the obligations of a
limited partnership have not been clearly established in some states. If it were
determined that the Partnership had been conducting business in any state
without compliance with the
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<PAGE>
applicable limited partnership statute, or that the right or the exercise of the
right by the holders of Common Units as a group to remove or replace either of
the General Partners, to make certain amendments to the Partnership Agreement or
to take other action pursuant to the Partnership Agreement constituted
participation in the "control" of the Partnership's business, then the holders
of Common Units could be held liable for the Partnership's obligations to the
same extent as a general partner.
CHANGE OF GENERAL PARTNER OWNERSHIP. Mr. Stott and Mr. Krage have had
preliminary discussions with Fremont regarding the purchase of all of Fremont's
interest in the Partnership and the General Partners. These discussions are
only preliminary, however, and price and other significant terms have not been
established.
CONFLICTS OF INTEREST AND FIDUCIARY DUTIES
THE GENERAL PARTNERS AND THEIR AFFILIATES MAY HAVE CONFLICTS OF INTEREST
WITH THE PARTNERSHIP AND THE HOLDERS OF COMMON UNITS. Potential conflicts of
interest could arise as a result of the relationships between the Partnership on
the one hand and the General Partners and their affiliates on the other hand.
The partners, directors and officers of each of the General Partners have
fiduciary duties to manage such General Partners in a manner beneficial to the
partners or stockholders of such General Partners. At the same time, the General
Partners have fiduciary duties to manage the Partnership in a manner beneficial
to the Partnership and the limited partners of the Partnership. The Partnership
Agreement permits the General Partners to consider, in resolving conflicts of
interest, the interests of other parties in addition to the interests of holders
of Common Units, thereby limiting the General Partners' fiduciary duties to such
holders. The duties of the General Partners, as general partners, to the
Partnership and the limited partners of the Partnership, therefore, may come
into conflict with the duties of the directors and officers of the General
Partners to their partners or stockholders.
THE PARTNERSHIP AGREEMENT MODIFIES THE FIDUCIARY DUTIES OF THE GENERAL
PARTNERS. Certain provisions of the Partnership Agreement contain exculpatory
language purporting to limit the liability of the General Partners to the
Partnership and the holders of Common Units. The General Partners will not be in
breach of their obligations under the Partnership Agreement or their duties to
the Partnership or the Unitholders if the resolution of such conflict is fair
and reasonable to the Partnership. In resolving such conflict, the Managing
General Partner may consider the relative interests of the parties involved in
such conflict or affected by such action, any customary or accepted industry
practices or historical dealings with a particular person or entity and, if
applicable, generally accepted accounting practices or principles and such other
factors as it deems relevant. Thus, unlike the strict duty of a fiduciary who
must act solely in the best interests of his beneficiary, the Partnership
Agreement permits the Managing General Partner to consider the interests of all
parties to a conflict of interest, including the interests of the General
Partners.
TAX CONSEQUENCES
TAX TREATMENT IS DEPENDENT ON PARTNERSHIP STATUS. The availability to a
holder of Common Units of the federal income tax benefits of an investment in
the Partnership depends, in large part, on the classification of the Partnership
as a partnership for federal income tax purposes. However, other than with
respect to certain Partnership operations, no ruling from the IRS as to such
status has been or will be requested, and the opinion of Counsel with regard to
the classification of the Partnership is not binding on the IRS. Moreover, in
order for the Partnership to continue to be classified as a partnership for
federal income tax purposes, at least 90% of the Partnership's gross income for
each taxable year must consist of qualifying income.
If the Partnership were classified as an association taxable as a
corporation for federal income tax purposes, the Partnership would pay tax on
its income at corporate rates, distributions would generally be taxed to the
holders of Common Units as corporate distributions, and no income, gains, losses
or deductions would flow through to the holders of Common Units. Because a tax
would be imposed upon the Partnership as an entity, the cash available for
distribution to the holders of Common Units would be substantially reduced.
Treatment of the Partnership as an association taxable
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<PAGE>
as a corporation or otherwise as a taxable entity would result in a material
reduction in the anticipated cash flow and after-tax return to the holders of
Common Units.
There can be no assurance that the law will not be changed so as to cause
the Partnership to be treated as an association taxable as a corporation for
federal income tax purposes or otherwise to be subject to entity-level taxation.
NO IRS RULING WITH RESPECT TO TAX CONSEQUENCES. No ruling, other than a
ruling with respect to certain Partnership operations, has been requested from
the IRS with respect to classification of the Partnership as a partnership for
federal income tax purposes or any other matter affecting the Partnership.
Accordingly, the IRS may adopt positions that differ from Counsel's conclusions
expressed herein. It may be necessary to resort to administrative or court
proceedings in an effort to sustain some or all of Counsel's conclusions, and
some or all of such conclusions ultimately may not be sustained. The costs of
any contest with the IRS will be borne directly or indirectly by the holders of
Common Units and the General Partners.
PASSIVE LOSS RULES/LIMITATIONS ON PASSIVE INCOME GENERATORS. In the case
of taxpayers subject to the passive loss rules (generally, individuals and
closely held corporations), losses generated by the Partnership, if any, will
only be available to offset future income generated by the Partnership and
cannot be used to offset income from other activities, including passive
activities or investments. Unused losses may be deducted when the Unitholder
disposes of all of his remaining Units in a fully taxable transaction with an
unrelated party. Net passive income from the Partnership may be offset by unused
Partnership losses carried over from prior years, but not by losses from other
passive activities, including losses from other publicly traded partnerships.
TAX LIABILITY EXCEEDING CASH DISTRIBUTIONS OR PROCEEDS FROM DISPOSITIONS OF
COMMON UNITS. A holder of Common Units will be required to pay federal income
taxes and, in certain cases, state and local income taxes on his allocable share
of the Partnership's income, whether or not he receives cash distributions from
the Partnership. No assurance can be given that a Unitholder will receive cash
distributions equal to his allocable share of taxable income from the
Partnership or even the tax liability to him resulting from that income.
Further, a holder of Common Units may incur a tax liability, in excess of the
amount of cash received, upon the sale of his Common Units.
OWNERSHIP OF COMMON UNITS BY TAX-EXEMPT ORGANIZATIONS AND CERTAIN OTHER
INVESTORS. Investment in Common Units by certain tax-exempt organizations
(including individual retirement accounts and other retirement plans), regulated
investment companies and foreign persons raises issues unique to such persons.
TAX SHELTER REGISTRATION; POTENTIAL IRS AUDIT. The Partnership has been
registered with the IRS as a "tax shelter." No assurance can be given that the
Partnership will not be audited by the IRS or that tax adjustments will not be
made. The rights of a partner owning less than a 1% profits interest in the
Partnership to participate in the income tax audit process are very limited.
Further, any adjustments in the Partnership's returns will lead to adjustments
in the partners' returns and may lead to audits of partners' returns and
adjustments of items unrelated to the Partnership. Each partner would bear the
cost of any expenses incurred in connection with an examination of his personal
tax return.
CURRENT TAX RATES; CHANGES IN FEDERAL INCOME TAX LAWS. The top marginal
income tax rate for individuals is 36% subject to a 10% surtax on individuals
with taxable income in excess of $256,500 per year. The surtax is computed by
applying a 39.6% rate to taxable income in excess of the threshold. The net
capital gain of an individual remains subject to a maximum 28% tax rate.
The 1995 Proposed Legislation that was passed by Congress on November 19,
1995 as a part of the Revenue Reconciliation Act of 1995 would alter the tax
reporting system and the deficiency collection system applicable to large
partnerships (generally defined as electing partnerships with more than 100
partners) and would make certain additional changes to the treatment of large
partnerships, such as the Partnership. Certain of the proposed changes are
discussed later in this section. The 1995 Proposed Legislation is generally
intended to simplify the administration of the tax rules
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<PAGE>
governing large partnerships such as the Partnership. In addition, the 1995
Legislation contained provisions which would have reduced the maximum tax rate
applicable to net capital gains of an individual to 19.8%.
President Clinton vetoed the 1995 Proposed Legislation on December 6, 1995.
As of the date of this Prospectus, it is not possible to predict whether any of
the changes set forth in the 1995 Proposed Legislation or any other changes in
the federal income tax laws that would impact the Partnership and the Common
Unitholders will ultimately be enacted or, if enacted, what form they will take,
what the effective dates will be, and what, if any, transition rules will be
provided.
UNIFORMITY OF COMMON UNITS AND NONCONFORMING DEPLETION CONVENTIONS.
Because the Partnership cannot match transferors and transferees of Units,
uniformity of the economic and tax characteristics of the Common Units to a
purchaser of Common Units must be maintained. To maintain uniformity, the
Partnership has adopted certain depreciation and amortization conventions that
do not conform with all aspects of certain proposed and final Treasury
Regulations. The IRS may challenge those conventions and, if such a challenge
were sustained, the uniformity of Common Units could be affected.
Non-uniformity could adversely affect the amount of tax depletion available to a
purchaser of Common Units and could have a negative impact on the value of the
Common Units.
PARTNERSHIP TAX INFORMATION AND AUDITS. The Partnership furnishes each
holder of Common Units with a Schedule K-1 that sets forth his allocable share
of income, gains, losses and deductions. In preparing these schedules, the
Partnership uses various accounting and reporting conventions and has adopted
various depletion and amortization methods. There is no assurance that these
schedules will yield a result that conforms to statutory or regulatory
requirements or to administrative pronouncements of the IRS. Further, the
Partnership's tax return may be audited, and any such audit could result in an
audit of a partner's individual tax return as well as increased liabilities for
taxes because of adjustments resulting from the audit.
USE OF PROCEEDS
The net proceeds to the Partnership from the sale of Common Units
offered hereby are estimated to be approximately $131.8 million (assuming an
offering price of $20.125 per Common Unit and offering costs of $2 million),
after deducting estimated underwriting discounts and commissions and
estimated offering expenses ($159.1 million if the Underwriters'
over-allotment option is exercised in full). The Partnership will not
receive any portion of the net proceeds from the sale of Common Units by the
Selling Unitholders. The net proceeds will be used to repay a portion
($127.7 million) of the indebtedness incurred to finance the Acquisition and
to redeem the SAUs ($4.1 million). The General Partners will contribute to
the Partnership an amount equal to two percent of the proceeds to the
Partnership from the offering made hereby.
SELLING UNITHOLDERS AND SECURITY OWNERSHIP
Of the 9,500,000 Common Units being offered by this Prospectus, 7,000,000
are being offered for the account of the Partnership. The remaining 2,500,000
Common Units being offered by this Prospectus are being offered by the Selling
Unitholders identified in the table below in the amounts indicated. The Common
Units offered hereby constitute all of the Common Units purchased by the Selling
Unitholders in connection with the Partnership's initial public offering in
December 1994.
Pursuant to the terms of the Partnership Agreement and subject to certain
limitations described therein, the Partnership agreed to register for resale
under the Act and applicable state securities laws the Common Units proposed to
be sold by the Selling Unitholders if an exemption from such registration
requirements is not otherwise available for such proposed transaction. The
Partnership is obligated to pay all expenses incidental to such registrations,
excluding
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<PAGE>
underwriting discounts and commissions. The Selling Unitholders' Common Units
are included herein pursuant to such obligation.
<TABLE>
<CAPTION>
NUMBER OF COMMON NUMBER OF COMMON NUMBER OF SUBORDINATED
SELLING UNITHOLDER UNITS OFFERED COMMON UNITS RETAINED UNITS RETAINED
------------------ ------------- --------------------- ----------------------
<S> <C> <C> <C>
Fremont Investors, Inc.(1)(2) . . . . . . 1,865,000 34,714 5,029,583
Peter W. Stott(2) . . . . . . . . . . . . 595,439 27,694 3,403,904
Roger L. Krage. . . . . . . . . . . . . . 39,561 382 50,919
John W. Larson. . . . . . . . . . . . . . 0 25,670 --
Christopher G. Mumford. . . . . . . . . . 0 1,576 --
Richard B. Keller . . . . . . . . . . . . 0 606,868 --
Robert Jaunich, II. . . . . . . . . . . . 0 9,000 --
---------
2,500,000
---------
---------
</TABLE>
-------------
(1) Includes affiliated entities.
(2) Includes 2,711,318 Subordinated Units owned by SVE II, Inc. Fremont
Investors, Inc. controls SVE II, Inc. Mr. Stott is a director and
stockholder of SVE II, Inc., but disclaims beneficial ownership with
respect to all such Units.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Partnership and the Selling Unitholders agreed to sell to each of
the Underwriters named below, and each of the Underwriters, for whom Smith
Barney Inc., Lehman Brothers Inc., Dean Witter Reynolds Inc., A.G. Edwards &
Sons, Inc. and PaineWebber Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Partnership, the
respective number of Common Units set forth opposite its name below:
<TABLE>
<CAPTION>
Number of
Underwriter Common Units
----------- ------------
<S> <C>
Smith Barney Inc. . . . . . . . . . . . . . . . .
Lehman Brothers Inc. . . . . . . . . . . . . . .
Dean Witter Reynolds Inc. . . . . . . . . . . . .
A.G. Edwards & Sons, Inc. . . . . . . . . . . . .
PaineWebber Incorporated . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 9,500,000
---------
---------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to the approval of certain legal matters by
counsel and various other conditions. The nature of the Underwriters'
obligations are such that they are committed to take and pay for all of the
Common Units offered hereby if any are purchased.
The Underwriters propose to offer the Common Units in part directly to the
public at the public offering price set forth on the cover of this Prospectus,
and in part to certain securities dealers at such price, less a concession of
$___ per Common Unit. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $___ per Common Unit to certain other brokers and
dealers. After the completion of the initial offering of Common Units, the
offering price and other selling terms may be changed by the Representatives.
The Partnership has granted to the Underwriters an option exercisable for
30 days after the date of this Prospectus to purchase up to 1,425,000 additional
Common Units to cover over-allotments, if any. If the Underwriters exercise
their over-allotment option, the Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of Common Units to be purchased by each of them, as shown in the
foregoing table, bears to the number of Common Units offered.
The Partnership, the Selling Unitholders and certain other holders of
Common Units have agreed that they will not, directly or indirectly, offer, sell
or otherwise dispose of any Common Units or Subordinated Units, or any
securities convertible into or exchangeable for, or any rights to purchase or
acquire, Common Units or Subordinated Units (other
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<PAGE>
than the grant of options to purchase Common Units pursuant to option plans
existing on the effective date hereof), for a period of 150 days after the date
of this Prospectus without the prior written consent of Smith Barney Inc.,
Lehman Brothers Inc. and Dean Witter Reynolds Inc.
Because the National Association of Securities Dealers, Inc. ("NASD") views
the Common Units offered hereby as interests in a direct participation program,
the offering is being made in compliance with Article III, Section 34 of the
NASD's Rules of Fair Practice. Investor suitability of the Common Units should
be judged similarly to the suitability of other securities which are listed for
trading on a national securities exchange.
The Partnership, the Operating Partnership and the General Partners, have
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act or to contribute to payments that
the Underwriters may be required to make in respect thereof.
Certain of the Representatives have performed investment banking and other
financial advisory services for the Partnership in the past, for which they have
received customary compensation.
VALIDITY OF THE COMMON UNITS
The validity of the Common Units will be passed upon for the Partnership by
Andrews & Kurth L.L.P., Houston, Texas. Certain legal matters in connection with
the Common Units will be passed upon for the Underwriters by Baker & Botts,
L.L.P., Houston, Texas.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1995 of Crown
Pacific Partners, L.P. have been so incorporated and included in this Prospectus
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
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<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE PARTNERSHIP
SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO
DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
-------------------
TABLE OF CONTENTS
PAGE
----
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents . . . . . . . . . . . . . . . . . . .
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Historical Financial and
Operating Data . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary of Tax Considerations. . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling Unitholders and Security
Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Validity of the Common Units . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CROWN PACIFIC PARTNERS, LP
9,500,000 COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS
--------------------
PROSPECTUS
________, 1996
--------------------
SMITH BARNEY INC.
LEHMAN BROTHERS
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are the expenses expected to be incurred in connection with
the issuance and distribution of the securities registered hereby. With the
exception of the Securities and Exchange Commission registration fee, the
amounts set forth below are estimates:
Securities and Exchange Commission registration fee . . . . . . . . $
New York Stock Exchange, Inc. Listing Fee . . . . . . . . . . . . .
Printing and engraving expenses . . . . . . . . . . . . . . . . . .
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . .
Accounting fees and expenses. . . . . . . . . . . . . . . . . . . .
Blue Sky fees and expenses. . . . . . . . . . . . . . . . . . . . .
Transfer agent fees and expenses. . . . . . . . . . . . . . . . . .
Miscellaneous expenses. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Partnership Agreement provides that the Partnership will indemnify
and hold harmless each General Partner, any departing General Partner, any
general partner of a General Partner or a departing General Partner, any person
who is or was an officer, director, employee, agent or trustee of a General
Partner, a departing General Partner, or a general partner of a General Partner
or a departing General Partner, any person who is or was an affiliate of a
General Partner, a departing General Partner, or a general partner of a General
Partner or a departing General Partner, and any person who is or was serving at
the request of a General Partner or a departing General Partner as an officer,
director, employee, agent, trustee or partner of another person (collectively,
"Indemnitees" and individually each an "Indemnitee"), to the fullest extent
permitted by law, from and against any and all losses, claims, damages,
liabilities (joint or several), expenses (including, without limitation, legal
fees and expenses), judgments, fines, penalties, interest, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which any
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as any of the foregoing, provided that in
each case the Indemnitee acted in good faith and in a manner which such
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Partnership and, with respect to any criminal proceeding, had no reasonable
cause to believe its conduct was unlawful. Any indemnification under these
provisions will be only out of the assets of the Partnership, and the General
Partners will not be personally liable for, or have any obligation to contribute
or loan funds or assets to the Partnership to enable it to effectuate, such
indemnification. The Partnership is authorized to purchase and maintain (or to
reimburse the General Partners or their affiliates for the cost of) insurance
against liabilities asserted against and expenses incurred by such persons in
connection with the Partnership's activities, whether or not the Partnership
would have the power to indemnify such person against such liabilities under the
provisions described above.
Subject to the terms, conditions or restrictions set forth in the
Partnership Agreement, the Delaware Revised Uniform Limited Partnership Act
empowers Delaware limited partnerships to indemnify and hold harmless any
partner or other person from and against claims and demands incurred in its
capacity as a partner or other representative of the Partnership.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<PAGE>
Exhibit No. Description
----------- -----------
*1.1 Form of Underwriting Agreement
*3.1 Form of Amended and Restated Agreement of Limited Partnership
of Crown Pacific Partners, L.P.
*5.1 Opinion of Andrews & Kurth LLP
23.1 Consent of Price Waterhouse LLP
*23.2 Consent of Andrews & Kurth LLP
25.1 Powers of Attorney, pursuant to which amendments to this
Registration Statement may be filed, included on the signature
page contained in Part II of this Registration Statement
_____________________
*To be filed by Amendment.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of the registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The Registrant undertakes (a) to file any prospectuses required by Section
10(a)(3) as post-effective amendments to the registration statement, (b) that
for the purpose of determining any liability under the Act each such post-
effective amendment may be deemed to be a new registration statement relating to
the securities offered therein and the offering of such securities at that time
may be deemed to be the initial bona fide offering thereof, (c) that all post-
effective amendments will comply with the applicable forms, rules and
regulations of the Commission in effect at the time such post-effective
amendments are filed, and (d) to remove from registration by means of a post-
effective amendment any of the securities being registered which remain at the
termination of the offering.
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The Registrant undertakes to send to each limited partner at least on an
annual basis a detailed statement of any transactions with either of the General
Partners or their affiliates, and of fees, commissions, compensation and other
benefits paid, or accrued to the General Partners or their affiliates for the
fiscal year completed, showing the amount paid or accrued to each recipient and
the services performed.
The Registrant undertakes to provide to the limited partners the financial
statements required by Form 10-K for the first full fiscal year of operations of
the Partnership.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Portland, Oregon, on the 3rd day of June, 1996.
CROWN PACIFIC PARTNERS, L.P.
By: Crown Pacific Management Limited Partnership, as Managing
General Partner
By: /s/Peter W. Stott
------------------------------------------------------------
Peter W. Stott
President of HS Corp. of Oregon, a general partner of Crown
Pacific Management Limited Partnership
By: /s/Robert Jaunich II
------------------------------------------------------------
Robert Jaunich II
President of Fremont Timber, Inc., a general partner of
Crown Pacific Management Limited Partnership
Each person whose signature appears below appoints Peter W. Stott and Roger
L. Krage and each of them, any of whom may act without the joinder of the other,
as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granted unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or would do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their or his substitute and
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES ON JUNE 3, 1996.
SIGNATURE TITLE
/s/Peter W. Stott President, Chief Executive Officer and Board of
- ------------------------- Control Member, Crown Pacific Management Limited
Peter W. Stott Partnership (Principal Executive Officer)
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/s/Richard D. Snyder Vice President and Interim Chief Financial Officer
- ------------------------- and Treasurer, Crown Pacific Management Limited
Richard D. Snyder Partnership (Principal Financial and Accounting
Officer)
/s/Robert Jaunich II Member, Board of Control
- -------------------------
Robert Jaunich II
/s/James A. Bondoux Member, Board of Control
- -------------------------
James A. Bondoux
/s/Richard B. Keller Member, Board of Control
- -------------------------
Richard B. Keller
/s/John W. Larson Member, Board of Control
- -------------------------
John W. Larson
/s/Christopher G. Mumford Member, Board of Control
- -------------------------
Christopher G. Mumford
/s/William L. Smith Member, Board of Control
- -------------------------
William L. Smith
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated January 23, 1996 appearing on page 41 of the Crown Pacific Partners,
L.P. Annual Report on Form 10-K for the year ended December 31, 1995. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Portland, Oregon
May 31, 1996
