<PAGE>
CONFORMED COPY
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-24976
CROWN PACIFIC PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 93-1161833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 S.W. Morrison Street, Suite 1500
Portland, Oregon 97204
(Address of principal executive office, Zip Code)
(503) 274-2300
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
------ -------
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
1997 1996
---------- ----------
<S> <C> <C>
Revenues ........................................... $125,427 $96,082
Operating costs:
Cost of products sold ............................ 101,753 76,266
Selling, general and administrative expenses ..... 6,983 4,609
---------- ----------
Operating income ................................... 16,691 15,207
Interest expense ................................... 9,305 10,309
Amortization of debt issuance costs ................ 183 155
Other (income) expense, net ........................ (167) 300
---------- ----------
Net income ......................................... $7,370 $4,443
---------- ----------
---------- ----------
Net income per Unit* ............................... $0.27 $0.24
---------- ----------
---------- ----------
Weighted average Units outstanding ................. 27,104,277 18,133,527
---------- ----------
---------- ----------
Cash flow** ......................................... $25,419 $24,308
---------- ----------
---------- ----------
</TABLE>
*Net income per Unit is calculated based on weighted average units outstanding
after deducting the General Partners' allocation of net income.
**Cash flow is defined as EBITDDA or earnings before interest, income taxes,
depreciation, depletion, and amortization. EBITDDA is provided because
management believes EBITDDA provides useful information for evaluating
the Company's ability to service debt and support its cash distributions
to Unitholders.
See accompanying Notes to Consolidated Financial Statements
2
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT AND UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
1997 1996
---------- ----------
<S> <C> <C>
Revenues ........................................... $242,818 $180,637
Operating costs:
Cost of products sold ............................. 195,924 143,148
Selling, general and administrative expenses....... 13,703 9,921
---------- ----------
Operating income .................................... 33,191 27,568
Interest expense .................................... 18,784 18,554
Amortization of debt issuance costs ................. 365 281
Other (income) expense, net ......................... (25) 126
---------- ----------
Net income .......................................... $14,067 $8,607
---------- ----------
---------- ----------
Net income per Unit* ................................ $0.51 $0.47
---------- ----------
---------- ----------
Weighted average Units outstanding .................. 27,104,277 18,133,527
---------- ----------
---------- ----------
Cash flow** ......................................... $50,942 $45,722
---------- ----------
---------- ----------
</TABLE>
*Net income per Unit is calculated based on weighted average units outstanding
after deducting the General Partners' allocation of net income.
**Cash flow is defined as EBITDDA or earnings before interest, income taxes,
depreciation, depletion, and amortization. EBITDDA is provided because
management believes EBITDDA provides useful information for evaluating the
Company's ability to service debt and support its cash distributions
to Unitholders.
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT FOR UNIT DATA)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................... $ 14,984 $ 16,818
Accounts receivable ............................... 42,319 42,810
Notes receivable .................................. 5,139 5,605
Inventories ....................................... 26,415 35,746
Deposits on timber cutting contracts .............. 5,276 4,771
Prepaid and other current assets .................. 2,209 2,674
-------- --------
Total current assets ........................... 96,342 108,424
Property, plant and equipment, net................. 44,817 43,679
Timber, timberlands and roads, net................. 504,136 511,869
Other assets....................................... 11,005 11,789
-------- --------
Total assets..................................... $656,300 $675,761
-------- --------
-------- --------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Notes payable...................................... $ 3,000 $ 15,000
Accounts payable................................... 18,095 11,363
Accrued expenses................................... 11,947 10,470
Accrued interest ................................. 5,582 5,369
Current portion of long-term debt.................. 1,000 1,000
-------- --------
Total current liabilities ....................... 39,624 43,202
Long-term debt .................................... 391,000 392,000
Other non-current liabilities ..................... 1,054 561
-------- --------
431,678 435,763
-------- --------
-------- --------
Commitments and contingent liabilities
Partners' capital:
General partners ................................ 2,553 2,708
Limited partners (27,104,277 Units outstanding at
June 30, 1997 and December 31, 1996) ........... 222,069 237,290
-------- --------
Total partners' capital ....................... 224,622 239,998
-------- --------
Total liabilities and partners' capital.......... $656,300 $675,761
-------- --------
-------- --------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
1997 1996
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................. $ 14,067 $ 8,607
Adjustments to reconcile net income to
net cash provided by operating activities:
Depletion, depreciation and amortization ............. 18,092 18,561
Gain on sale of property ............................. (482) (5,206)
Other ................................................ 564 20
Net change in current assets and current
liabilities:
Accounts and notes receivable ........................ 3,766 (11,040)
Inventories .......................................... 4,195 13,701
Deposits on timber cutting contracts ................. (505) 1,362
Prepaid and other current assets ..................... 447 (956)
Accounts payable and accrued expenses ................ 6,739 3,753
---------- --------
Net cash provided by operating activities .............. 46,883 28,802
---------- --------
Cash flows from investing activities:
Additions to timberlands .............................. (6,331) (209,902)
Additions to timber cutting rights ..................... (1,275) (12,842)
Additions to equipment ................................. (5,068) (5,069)
Proceeds from sales of property ........................ 1,178 2,676
Principal payments received on notes ................... 5,260 --
Other investing activities ............................. 18 (598)
---------- --------
Net cash used in investing activities .................... (6,218) (225,735)
---------- --------
Cash flows from financing activities:
Net decrease in short-term borrowing ................... (12,000) (2,100)
Proceeds from issuance of long-term debt .............. -- 264,000
Repayments of long-term debt ........................... (1,000) (40,000)
Distributions to partners .............................. (29,372) (19,133)
Equity issuance costs .................................. (69) --
Other financing activities ............................. (58) (5,371)
---------- --------
Net cash (used in) provided by financing activities ...... (42,499) 197,396
---------- --------
Net (decrease) increase in cash and cash equivalents ..... (1,834) 463
Cash and cash equivalents at beginning of period ......... 16,818 10,292
---------- --------
Cash and cash equivalents at end of period ............... $14,984 $10,755
---------- --------
---------- --------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Crown Pacific Partners, L.P. (the "Partnership"), a Delaware limited
partnership, through its 99% owned subsidiary, Crown Pacific Limited
Partnership, was formed in 1994 to acquire, own and operate timberlands and wood
product manufacturing assets. The Partnership's business consists primarily of
growing and harvesting timber for sale as logs in domestic and export markets
and the manufacturing and selling of lumber and other wood products.
The financial statements included in this Form 10-Q are unaudited and
reflect the consolidated financial position, results of operations and cash
flows of the Partnership. These financial statements include all the accounts
of the Partnership but do not contain all of the information required by
generally accepted accounting principles to be included in a full set of
financial statements. The financial statements in the Partnership's 1996
annual report on Form 10-K, which includes a summary of significant accounting
policies of the Partnership, should be read in conjunction with this Form 10-Q.
In the opinion of management, all material adjustments necessary to present
fairly the results of operations for the three and six months ended June 30,
1997 and 1996 have been included. All such adjustments are of a normal and
recurring nature and all significant intercompany transactions have been
eliminated. The results of operations for any interim period are not
necessarily indicative of the results of operations for the entire year.
Net income per unit was calculated using the weighted average number of
Common and Subordinated units outstanding divided into net income, after
adjusting for the General Partner interest. The General Partner income
allocation was $74 and $44 for the three months ended June 30, 1997 and 1996,
respectively, and $141 and $86 for the six months ended June 30, 1997 and 1996,
respectively.
The Partnership will adopt Statement of Financial Accounting Standards No.
128 "Earnings Per Share" in 1997. The effect of adoption of such pronouncement
is expected to be immaterial to the financial statements taken as a whole.
6
<PAGE>
2. INVENTORIES
Inventories consisted of the following (in thousands):
JUNE 30, DECEMBER 31,
1997 1996
------- ------------
Finished goods .......... $10,866 $ 9,068
Work-in-process ......... -- 6,417
Logs .................... 12,609 16,123
Supplies ................ 1,036 1,534
LIFO effect ............. 1,904 2,604
------- -------
Total ............... $26,415 $35,746
------- -------
------- -------
3. SHELF REGISTRATION STATEMENT
On May 17, 1997, Crown Pacific filed a shelf registration statement on Form
S-3 with the United States Securities and Exchange Commission (SEC) for the
registration of 7.5 million limited partnership units. The Partnership intends
to use the proceeds from any potential future sale of these units to finance
future acquisitions.
4. SUBSEQUENT EVENTS
On July 22, 1997, the Board of Control of the Managing General Partner of
the Partnership ratified the Partnership's previously announced plans to
build a new high-technology studmill in Port Angeles, Washington. The Port
Angeles mill will allow the Partnership to add value to the logs harvested
from its Olympic Tree Farm. Construction of the mill is expected to be
completed in the third quarter of 1998. Total costs are expected to be
approximately $18 million.
On July 22, 1997, Crown Pacific announced plans to build a $17 million
state-of-the-art sawmill at its existing mill site in Bonners Ferry, Idaho.
The Partnership expects to gain sizable efficiency and fiber realization
improvements from this new facility. Construction of the mill is expected to
be completed in the third quarter of 1998.
On July 22, 1997, the Board of Control authorized the Partnership to make a
distribution of $0.538 per unit, the Second Target Distribution, as defined
by the Partnership Agreement. The total distribution will be $14.88 million
(including $.15 million to the General Partners) and will be paid on August
14, 1997 to unitholders of record on August 5, 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Crown Pacific's principal operations consist of the growing and harvesting
of timber, the sale of logs and the processing and sale of lumber and other
wood products. The Partnership's ability to implement its business strategy
over the long term and its results of operations depend upon a number of
factors, many of which are beyond its control. These factors include general
industry conditions, domestic and international prices and supply and demand
for logs, lumber and other wood products, seasonality and competition from
other supplying regions and substitute products.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES. The Partnership's primary source of
liquidity has been cash provided by operations. The increase in cash
provided by operations resulted from enhanced profitability, decreases in
inventories related to the sale of the remanufacturing facility on March 31,
1997, seasonal declines in the Partnership's log supply and increases in
accounts payable due to seasonal increases in log harvesting activities
during the second quarter.
Net cash used in investing activities resulted from additions to
timberlands, equipment and timber cutting rights, which was partially offset
by proceeds from notes receivable and sales of properties.
On July 22, 1997, the Board of Control of the Managing General Partner
ratified the Partnership's previously announced plans to build a new
high-technology studmill in Port Angeles, Washington. The Port Angeles mill
will allow the Partnership to add value to the logs harvested from its
Olympic Tree Farm. Total costs are expected to be approximately $18 million.
Also on July 22, 1997, Crown Pacific announced plans to construct a new $17
million state-of-the-art sawmill at its existing mill site at Bonners Ferry,
Idaho. The Partnership believes it can realize sizable efficiency and fiber
recovery improvements from this new facility. Both mills are expected to be
completed in the third quarter of 1998. Timber, timberlands and roads
decreased during the six months ended June 30, 1997 primarily due to
depletion and amortization.
Net cash used in financing activities resulted primarily from distributions
to partners and payments on the Partnership's working capital line.
On July 22, 1997, the Board of Control authorized the Partnership to make a
distribution of $0.538 per unit, the Second Target Distribution as defined by
the Partnership Agreement. The total distribution will be $14.88 million
(including $.15 million to the General Partners) and will be paid on August
14, 1997 to unitholders of record on August 5, 1997.
Cash required to meet the Partnership's quarterly cash distributions (as
required by the Partnership Agreement), to pay for capital expenditures and
to satisfy interest and principal payments on indebtedness will be
significant. Capital expenditures, excluding purchases of timber and
timberlands, acquisitions of businesses and any costs incurred in connection
with new
8
<PAGE>
mills, are expected to be approximately $15.0 million in 1997. The Managing
General Partner expects that capital expenditures will be funded by current
funds, cash generated from operations, property sales, and/or bank
borrowings. The new mills are expected to be financed using operating
leases, proceeds from property sales, bank borrowings and/or cash generated
from operations. Debt service is expected to be funded from current
operations. The Partnership expects to make cash distributions from its
current funds and cash generated from operations. Capital expenditures
during the six-month period were funded by proceeds from note collections,
property sales and cash provided by operations.
FORWARD-LOOKING STATEMENTS. The information contained in this report
includes certain forward-looking statements that are based on assumptions
that in the future may prove not to be accurate. Those statements, and Crown
Pacific Partners, L.P.'s business and prospects, are subject to a number of
risks, including the volatility of timber and lumber prices, factors limiting
harvesting of timber including contractual obligations, weather and access
limitations, the substantial capital expenditures required to supply its
operations, environmental risks, operating risks normally associated with the
timber industry, competition, government regulation, the value of the U.S.
dollar against foreign currencies such as the Japanese yen, and the ability
of the Partnership to implement its business strategy. These and other risks
are described in the Partnership's reports and registration statements that
are available from the United States Securities and Exchange Commission.
RESULTS OF OPERATIONS (THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE
MONTHS ENDED JUNE 30, 1996)
Net sales during the second quarter ended June 30, 1997 increased 30.5% to
$125.4 million, from $96.1 million in the same quarter in 1996. The $29.3
million increase was principally due to $32.8 million of sales from the
wholesale operation, which was acquired in September 1996, and increased
revenues from lumber and log products due to higher sales prices during the
1997 quarter. Sales increases during the second quarter of 1997 were
partially offset by decreases in sales of plywood and remanufacturing
products subsequent to the sale of these facilities and decreased land sales
in the 1997 quarter.
Lumber sales, excluding sales from the wholesale operation, represented
43.4% of sales in the second quarter of 1997, compared to 48.9% of sales in
the same quarter of 1996. Average external prices received for lumber in the
Oregon and Inland regions increased 12.9% and 18.7%, respectively, to $699
per thousand board feet (MBF) and $483/MBF, respectively, for the second
quarter of 1997 from prices received in the same quarter of 1996. Price
increases were due to strong U.S. housing and residential and commercial
remodeling markets. Prices for lumber products sold from the Partnership's
studmill in Marysville, Washington, acquired in September 1996, were $326/MBF
in the second quarter of 1997. Lumber prices have softened slightly during
the early part of the third quarter of 1997 and are expected to continue
moderately downward during the first part of the third quarter as the U.S.
millwork industry works off existing inventory levels. Lumber prices remain
strong, however, relative to historical prices.
9
<PAGE>
External lumber sales volumes, excluding those sales from the wholesale
operation, decreased 2.3% in the second quarter of 1997 to 93.9 million board
feet (MMBF), compared to 96.1 MMBF in the same period of 1996. Sales volumes
of Oregon lumber increased 21.7% to 41.9 MMBF in the 1997 quarter due to
increases in capacity at the Partnership's Gilchrist and Prineville, Oregon
facilities as a result of capital improvements made in the first quarter of
1997. External lumber sales volumes in the Inland region decreased by 27.9%
to 44.4 MMBF in the second quarter of 1997 due to the closure of the Albeni
Falls, Idaho sawmill in June 1996. External sales volumes of lumber from the
Marysville studmill were 7.6 MMBF during the second quarter of 1997.
Log sales represented 20.8% of sales in the second quarter of 1997,
compared to 24.2% in the same quarter of 1996. Average external domestic
prices for logs sold in the Oregon and Inland Tree Farms decreased 22.7% and
9.1%, respectively, to $412/MBF and $482/MBF, respectively, while prices for
logs sold in the Hamilton and Olympic Tree Farms increased 38.4% and 35.7%,
respectively, to $638/MBF and $494/MBF, respectively, over prices received
in the comparable 1996 quarter. Increases in pricing were primarily due to a
strong domestic lumber market and reductions in lower priced stumpage sales
in the 1997 quarter. Decreases in the Oregon and Inland Tree Farms were due
to changes in harvest patterns toward lower priced logs.
Domestic log sales volumes increased 9.2% in the second quarter of 1997 to
40.0 MMBF, compared to 36.6 MMBF in the same quarter of 1996. Overall
increases resulted primarily from the shifting of logs normally sold in
export markets to the stronger domestic markets. Domestic volumes from the
Oregon, Inland and Olympic Tree Farms increased 46.2%, 15.5% and 44.0%,
respectively, to 4.2 MMBF, 11.4 MMBF and 16.4 MMBF, respectively, over
volumes attained in the 1996 quarter. Domestic volumes sold from the
Hamilton Tree Farm decreased 36.0% to 8.0 MMBF in the second quarter of 1997,
compared to levels attained in the same quarter of 1996.
Sales of logs to customers involved in exporting activities (included in
total log sales above) were approximately $4.6 million, or 3.6% of sales in
the second quarter of 1997, compared to $6.0 million, or 6.2% of sales for
the same quarter in 1996. Prices received for export logs increased 1.6% to
$628/MBF while sales volumes decreased 25.8% to 7.3 MMBF in the second
quarter of 1997 from levels experienced in the same quarter of 1996.
Decreases in sales volumes resulted from a shift in Japanese preferences from
the purchase of logs to the purchase of lumber products and decreased demand
for the most expensive export-grade logs. Over the longer term, the shift to
the purchase of lesser-grade export logs in Japan may increase the total
proportion of export logs sold from the Washington Tree Farms, where these
grades are predominant.
Sales from the Partnership's wholesale operations acquired in September
1996 consisted of lumber and other wood products, most of which were not
manufactured by the Partnership, and represented 26.1% of sales in the second
quarter of 1997.
Sales of timberlands were insignificant in the second quarter of 1997,
compared to 5.4% of sales in the second quarter of 1996, which resulted in a
$3.6 million gain.
10
<PAGE>
By-product and other revenues, which includes millwork products, accounted
for 8.6% of sales in the second quarter of 1997, compared to 21.5% of sales
in the same quarter of 1996. Decreases relate primarily to the sale of the
remanufacturing facility on March 31, 1997 and a 12.2% decrease in the price
of wood chips in the 1997 period.
Cost of sales as a percentage of sales increased slightly to 81.1% in the
second quarter of 1997, compared to 79.4% in the same quarter of 1996.
Higher margin sales of the Partnership's lumber and log products in the
second quarter of 1997 were offset by lower margin sales from the
Partnership's wholesale operation. Without the effect of sales from the
wholesale operation, cost of sales would have been 75.7% of total sales for
the second quarter of 1997, reflecting higher product prices and the closure
of the less profitable Albeni Falls sawmill and the Partnership's plywood and
remanufacturing facilities.
Selling, general and administrative expenses increased $2.4 million in the
second quarter of 1997, from $4.6 million in the second quarter in 1996.
Selling, general and administrative expenses represented 5.6% of sales in the
second quarter of 1997 and 4.8% of sales in the same quarter of 1996.
Increases were primarily due to increased marketing expenses associated with
the Partnership's wholesale operation and additional salaries, wages and
other benefits needed to support the current level of sales and marketing
activities.
Interest expense decreased $1.0 million in the second quarter of 1997, from
$10.3 million in the same quarter in 1996. Amounts in the 1996 quarter
include interest for bridge debt used to finance the purchase of the Olympic
and Eastside Oregon Tree Farms in May 1996.
The Partnership pays no significant income taxes and does not include a
provision for income taxes in its financial statements.
Weighted average units outstanding in the second quarter of 1997 increased
by 8.97 million due to the Partnership's public offering and sale of common
units in August 1996.
RESULTS OF OPERATIONS (SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX
MONTHS ENDED JUNE 30, 1996)
Net sales during the six months ended June 30, 1997 increased 34.4% to
$242.8 million, from $180.6 million in the same 1996 period. The $62.2
million increase was principally due to $58.6 million of sales from the
wholesale operation, which was acquired in September 1996, and increased
sales of lumber and log products due to higher prices during the 1997 period.
Sales increases during the 1997 six-month period were partially offset by
decreases in plywood and millwork products subsequent to the sale of these
facilities, decreased land sales and decreases in the prices of wood chips
and other residuals.
Lumber sales, excluding those sales from the wholesale operation,
represented 43.5% of sales in the 1997 period, compared to 49.0% of sales in
the 1996 period. Average external prices received for lumber in the Oregon
and Inland regions increased 12.8% and 26.0%, respectively, to $696/MBF and
$484/MBF, respectively, for the 1997 period from prices received in the 1996
six-month period. Price increases were due to strong U.S. housing and
residential and
11
<PAGE>
commercial remodeling markets. Prices for lumber products sold from the
Partnership's studmill in Marysville, Washington, acquired in September 1996,
were $319/MBF in the 1997 six-month period. Lumber prices have softened
slightly during the early part of the third quarter of 1997 and are expected
to continue moderately downward during the first part of the third quarter as
the U.S. millwork industry works off existing inventory levels. Lumber
prices remain strong, however, relative to historical prices.
External lumber sales volumes, excluding sales from the wholesale
operation, decreased 1.7% in the 1997 period to 185.8 MMBF, from 189.0 MMBF
in the same period in 1996. Sales volumes of Oregon lumber increased 15.0%
to 75.7 MMBF in the 1997 period due to increases in capacity at the
Partnership's Gilchrist and Prineville, Oregon facilities subsequent to
capital improvements made in the first quarter of 1997. External lumber
sales volumes in the Inland region decreased by 22.9% to 95.1 MMBF in the
1997 six-month period primarily due to the closure of the Albeni Falls, Idaho
sawmill in June 1996. External sales volumes from the Marysville studmill
were 15.1 MMBF during the 1997 period.
Total log sales represented 21.3% of sales for the six months ended June
30, 1997, compared to 26.0% in the same period of 1996. Average external
domestic prices received for logs sold in the Inland, Hamilton and Olympic
Tree Farms increased 20.0%, 23.8% and 27.4%, respectively, to $482/MBF,
$574/MBF and $464/MBF, respectively, over prices experienced in the 1996
period. Average external prices received for logs sold in the Oregon Tree
Farm decreased 13.1% to $419/MBF. Overall price increases were due to a
strong domestic lumber market and a lower volume of stumpage sales in the
1997 period. Decreases in the Oregon Tree Farm were due to changes in
harvest patterns toward lower priced logs.
Domestic log sales volumes decreased 5.0% in the 1997 six-month period to
78.7 MMBF, compared to 82.9 MMBF in the same 1996 period primarily due to
reductions in stumpage sales during the first quarter of 1997. Domestic
sales volumes from the Oregon, Inland and Hamilton Tree Farms decreased
29.8%, 33.0% and 31.8%, respectively, to 8.1 MMBF, 25.2 MMBF and 15.2 MMBF,
respectively, over volumes experienced in the 1996 six-month period. Volumes
sold from the Olympic Tree Farm acquired in May 1996 increased 165.5% to 30.2
MMBF in the 1997 six-month period.
Sales of logs to customers involved in exporting activities (included in
total log sales above) were $10.3 million, or 4.2% of sales in the 1997
six-month period, compared to $10.5 million, or 5.8% of sales for the same
period in 1996. Prices received for export logs remained stable at $658/MBF
and sales volumes decreased 2.1% to 15.6 MMBF in the 1997 period from levels
experienced in the 1996 period. Decreases in sales volumes resulted from a
shift in Japanese preferences from the purchase of logs to the purchase of
lumber products and decreased demand for the most expensive export-grade
logs. Over the longer term, the shift to the purchase of lesser-grade export
logs in Japan should increase the total proportion of export logs sold from
the Washington Tree Farms, where these grades are predominant.
Sales from the Partnership's wholesale operations acquired in September
1996 consisted of lumber and other wood products, most of which were not
manufactured by the Partnership, and represented 24.1% of sales in the
six-month period ended June 30, 1997.
12
<PAGE>
Sales of timberlands were insignificant in the 1997 six-month period,
compared to 4.3% of sales in the 1996 period, which resulted in a $5.6
million gain.
By-product and other revenues, which includes millwork products, accounted
for 10.5% of sales in the 1997 period, compared to 20.8% of sales in the 1996
period. Decreases relate primarily to the sale of the remanufacturing
facility on March 31, 1997 and a 31.7% decrease in the price of wood chips in
the 1997 period.
Cost of sales as a percentage of sales increased slightly to 80.7% in the
six months ended June 30, 1997, compared to 79.2% in the 1996 period. Higher
margin sales of the Partnership's lumber and log products in the 1997 period
were offset by lower margin sales from the Partnership's wholesale operation.
Without the effect of sales from the wholesale operation, cost of sales
would have been 75.6% of total sales for the 1997 six-month period,
reflecting higher product prices and the closure of the less profitable
Albeni Falls sawmill and the Partnership's plywood and remanufacturing
facilities.
Selling, general and administrative expenses increased $3.8 million in the
six months ended June 30, 1997, from $9.9 million in the 1996 period.
Selling, general and administrative expenses represented 5.6% of sales in the
1997 period and 5.5% of sales in the same period of 1996. Increases were
primarily due to increased marketing expenses associated with the
Partnership's wholesale operation and additional salaries, wages and other
benefits needed to support the current level of sales and marketing
activities.
Interest expense remained relatively flat during the 1997 and 1996
six-month periods.
The Partnership pays no significant income taxes and does not include a
provision for income taxes in its financial statements.
Weighted average units outstanding in the 1997 six-month period increased
by 8.97 million due to the Partnership's public offering and sale of common
units in August 1996.
PART II. OTHER INFORMATION
Items 1 through 6 of Part II were not applicable and have been omitted.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CROWN PACIFIC PARTNERS, L.P.
----------------------------
(Registrant)
By: Crown Pacific Management
Limited Partnership,
as General Partner
By: /s/ Richard D. Snyder
-------------------------------------------------------
Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
14
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,984
<SECURITIES> 0
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<PP&E> 63,465
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<CURRENT-LIABILITIES> 39,624
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0
0
<COMMON> 222,069
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<TOTAL-LIABILITY-AND-EQUITY> 656,300
<SALES> 242,818
<TOTAL-REVENUES> 242,818
<CGS> 195,924
<TOTAL-COSTS> 209,627
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<INCOME-PRETAX> 14,067
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<EPS-PRIMARY> 0.51
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