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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 9, 1998
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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 Identification No.)
incorporation or organization)
121 SW MORRISON STREET, SUITE 1500, PORTLAND, OREGON 97204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-274-2300
(Former name or former address, if changed since last report): N/A
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<PAGE>
CROWN PACIFIC PARTNERS, L.P.
FORM 8-K
INDEX
<TABLE>
<CAPTION>
Item Description Page
- ---- ----------- ----
<S> <C> <C>
Item 5. Other Events 2
Item 7. Financial Statements and Exhibits 2
Signatures 3
</TABLE>
1
<PAGE>
ITEM 5. OTHER EVENTS
Attached as Exhibit 23.1 is a Consent of Independent Accountants consenting
to the incorporation into the Prospectus constituting part of the
Registration Statement of certain reports.
Attached, as Exhibits 99.1 and 99.2, are audited balance sheets, accompanying
notes thereto and reports of independent public accountants for Crown
Pacific, Ltd. and Crown Pacific Management Limited Partnership. Crown
Pacific, Ltd. is the Special General Partner of the Partnership. Crown
Pacific Management Limited Partnership is the managing general partner of the
Partnership. Crown Pacific Limited Partnership is a 99% owned subsidiary of
the Partnership, through which the Partnership acquires, owns and operates
timberland properties, related manufacturing assets and its wholesale
operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
None.
(b) Pro Forma Financial Information
None.
(c) Exhibits
23.1 Consent of Independent Accountants
99.1 Balance Sheet of Crown Pacific, Ltd. at December 31, 1997, with
Report of Independent Accountants.
99.2 Balance Sheet of Crown Pacific Management Limited Partnership at
December 31, 1997, with Report of Independent Accountants.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 9, 1998 CROWN PACIFIC PARTNERS, L.P.
By: Crown Pacific Management Limited
Partnership, as General Partner
By: /s/ Richard D. Snyder
----------------------------
Richard D. Snyder
Vice President and Chief Financial
Officer of HS Corp. of Oregon, a
general partner of Crown Pacific
Management Limited Partnership
(Duly Authorized Officer and
Principal Financial and Accounting
Officer)
3
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-27269)
of Crown Pacific Partners, L.P. of our report dated January 26, 1998, which
appears on page F-1 of the Crown Pacific Partners, L.P. Annual Report on Form
10-K for the year ended December 31, 1997. We also consent to the
incorporation by reference of our report dated February 20, 1998, which
appears on page 1 of Exhibit 99.1 of the Current Report on Form 8-K dated
June 9, 1998 relating to the balance sheet of Crown Pacific, Ltd. We also
consent to the incorporation by reference of our report dated May 20, 1998,
which appears on page 1 of Exhibit 99.2 of the Current Report on Form 8-K
dated June 9, 1998 relating to the balance sheet of Crown Pacific Management
Limited Partnership.
PRICE WATERHOUSE LLP
Portland, Oregon
June 9, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Crown Pacific, Ltd.
In our opinion, the accompanying consolidated balance sheet presents fairly, in
all material respects, the financial position of Crown Pacific, Ltd. and its
subsidiary at December 31, 1997 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this statement in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Portland, Oregon
February 20, 1998
1
<PAGE>
CROWN PACIFIC, LTD.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
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<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 146 $ 380
Accounts receivable (Note 7) 226 226
Interest receivable (Note 2) 2,718 2,721
Due from affiliate 76 -
-------- --------
Total current assets 3,166 3,327
Restricted cash (Note 2) 220,000 220,000
Timber and timberlands, net 9,154 9,150
Investment in limited partnership (Note 3) 11 12
Other assets (Note 7) 250 250
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$232,581 $232,739
-------- --------
-------- --------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accrued interest (Note 2) $ 2,669 $ 2,669
Due to affiliates - 56
Income taxes payable 570 1,349
-------- --------
Total current liabilities 3,239 4,074
Deferred income taxes (Note 5) 6,827 5,618
Long-term debt (Note 4) 220,000 220,000
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230,066 229,692
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Commitments and contingent liabilities (Note 8)
Shareholders' equity (Note 6):
Common stock, no par value, 5,000 shares
authorized, 1,749.33 shares issued and
outstanding 20,381 20,381
Accumulated deficit (17,866) (17,334)
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2,515 3,047
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$232,581 $232,739
-------- --------
-------- --------
</TABLE>
2
The accompanying notes are an integral part of this statement.
<PAGE>
CROWN PACIFIC, LTD.
NOTES TO CONSOLIDATED BALANCE SHEET
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1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Crown Pacific, Ltd. ("CPL" or "the Company") was incorporated in the
state of Oregon on January 28, 1988. The Company's primary operations
consist of a limited and general partnership interest in Crown Pacific
Partners, L.P. ("the MLP") aggregating approximately 10.01% at
December 31, 1997 and approximately 9.9% at March 31, 1998 (see Note
3).
The MLP is publicly held and owns and operates timberlands and related
manufacturing facilities in Oregon, Idaho, Washington, Arizona and
Montana. During 1996, the MLP completed an equity offering of an
additional 9.0 million units, which effectively reduced the Company's
interest from 14.81% to 10.01%. The MLP issued additional units in
January 1998 which further diluted the Company's interest to
approximately 9.9%.
The March 31, 1998 financial statements are unaudited and reflect the
consolidated financial position of the Company. In the opinion of
management, all material adjustments necessary to present fairly the
March 31, 1998 balance sheet have been included. All such adjustments
are of a normal and recurring nature and all significant intercompany
transactions have been eliminated.
PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet includes the accounts of the Company
and its wholly owned subsidiary, SVE II, Inc. All significant
intercompany accounts and transactions have been eliminated.
INCOME TAXES
Income taxes are calculated in accordance with Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES. This
statement requires that the balance sheet amounts for deferred income
taxes be computed based upon the tax effect of aggregate temporary
differences arising prior to year end and reversing subsequent to year
end. Such effects have been calculated based upon the tax rates
currently enacted. The Company's significant temporary differences
include the difference in basis of its investment in the MLP and its
timberlands (see Notes 3 and 5).
FINANCIAL INSTRUMENTS
All of the Company's material financial instruments were recognized in
its balance sheet at December 31, 1997 and March 31, 1998. The
carrying value reflected in the balance sheet approximates fair market
value for the Company's financial assets and liabilities except for
the Company's investment in the MLP. Descriptions of the methods and
assumptions used to reach this conclusion are as follows:
- Restricted cash and $220 million of instalment notes - the
interest rate related to the restricted cash and each of the
instalment notes represents a rate tied to current credit markets
(see Notes 2 and 4).
- Investment in the MLP - the carrying value of the Company's
investment in the MLP is significantly below its fair value (see
Note 3).
3
<PAGE>
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of balance sheet. Actual results could differ from these
estimates.
2. RESTRICTED CASH
Effective July 7, 1989, CPL acquired approximately 194,000 acres of timber
and timberlands in the state of Washington for an aggregate purchase price
of $227.8 million. To accomplish the Washington property acquisition, CPL
issued twenty-two $10 million instalment notes to the seller. The terms of
the acquisition require that the instalment notes be backed by irrevocable
standby letters of credit. The deposited funds are restricted such that
they can only be used to repay the instalment notes. The instalment notes
mature on October 20, 2005 but can be extended every three years thereafter
(until July 13, 2019) as long as the bank agrees to extend the letters of
credit and the seller agrees to extend the notes. The timberlands have
since been contributed to an affiliated entity which was combined with
other affiliated entities to form the MLP.
As a result of the form of this transaction, the Company has included
noncurrent restricted cash and long-term debt of $220 million on its
December 31, 1997 and March 31, 1998 consolidated balance sheet. The
corresponding accrued interest receivable and accrued interest payable of
$2.7 million is included in current assets and current liabilities at both
December 31, 1997 and March 31, 1998.
3. INVESTMENT IN LIMITED PARTNERSHIP
The Company has accounted for its investment in the MLP using the equity
method because the shareholders of the Company have influence on the
operations of the MLP and because the Company is one of the general
partners of the MLP. In contrast to the Company's general partner
interest, distributions received on the limited partnership interest, in
excess of the investment balance are recorded as income as there is no
financial obligation of a limited partner to the MLP. The Company's
investment in the MLP of $.01 million at December 31, 1997 and March 31,
1998, respectively, is significantly less than the fair value of the MLP
units owned by the Company. This difference is estimated to be
approximately $64.6 and $67.9 million at December 31, 1997 and March 31,
1998, respectively.
CPL's underlying equity in the net assets of the MLP exceeded its carrying
value of $0.01 million, by approximately $21.0 million and $20.3 million at
December 31, 1997 and March 31, 1998, respectively. These differences are
primarily caused by the Company's contribution in 1992 of net liabilities
to Crown Pacific Limited Partnership ("CPLP") for which it received a
Class E interest in CPLP. CPLP was combined with other affiliated entities
to form the MLP in 1994. Because of common ownership of CPLP and the
Company, any assets contributed to the
4
<PAGE>
3. INVESTMENT IN LIMITED PARTNERSHIP (CONTINUED)
partnership were transferred to CPLP at book value. CPLP issued Class E
interests to CPL because the fair value of the assets contributed exceeded
the book value. The contribution of net liabilities to CPLP in 1992 was
effectively accounted for as a distribution to CPL from CPLP.
As the Company's operations have been reduced to its ownership interest in
the MLP, the Company is considered to be economically dependent on the MLP
at December 31, 1997 and March 31, 1998.
In connection with the MLP's equity offering during 1996 (see Note 1), the
Company contributed $.02 million to maintain its general partner interest.
A summary of all transactions with respect to the Company's investment in
the limited partnership for the periods ended December 31, 1997 and March
31, 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Investment in MLP at beginning of period $ 15 $ 11
Equity in the MLP's income 2,771 677
Distributions received (5,804) (1,458)
Limited partnership distributions received
in excess of investment 3,029 782
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Investment in limited partnership at end of
period $ 11 $ 12
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</TABLE>
5
<PAGE>
3. INVESTMENT IN LIMITED PARTNERSHIP (CONTINUED)
Summary financial information for the MLP is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Balance sheet data:
Current assets $ 130,961 $ 147,918
Timberlands, property, plant and equipment 692,966 686,315
Other assets 15,217 29,957
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$ 839,144 $ 864,190
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Current liabilities $ 55,777 $ 65,577
Long-term debt and other liabilities 575,128 593,665
Partners' equity 208,239 204,948
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$ 839,144 $ 864,190
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--------- ---------
</TABLE>
Summary financial information for the MLP for the twelve months ended December
31, 1997 and the three months ended March 31, 1998 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Income statement data:
Revenues $ 505,588 $ 153,930
Net income 27,683 6,891
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of instalment notes payable of $220 million at
December 31, 1997 and March 31, 1998. Interest is paid quarterly at a
variable rate which approximated 5.475% at December 31, 1997. The
instalment notes payable are backed by irrevocable letters of credit (see
Note 2).
6
<PAGE>
5. INCOME TAXES
Deferred tax liabilities (assets) consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Financial reporting basis of the investment
in limited partnership in excess of tax
basis $ 7,972 $ 6,747
Tax basis of timberlands in excess of
financial reporting basis (1,145) (1,129)
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$ 6,827 $ 5,618
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</TABLE>
6. SHAREHOLDERS' EQUITY
The Company and its shareholders have entered into a buy-sell agreement
whereby the Company shall have the option to purchase any common shares,
for which a common shareholder has received a bona fide offer, at the same
terms and price as the outside offer for the shares. If the Company elects
not to purchase such shares, then the other common shareholders have the
right to purchase the shares for the terms of the outside offer. During
1997 and the three months ended March 31, 1998, no shares were repurchased
by the Company.
During the year ended December 31, 1997 and the three months ended March
31, 1998, the Company declared and paid dividends of $3.6 million and $0.7
million, respectively, to the Company's shareholders.
7. RELATED PARTIES
In 1991, an officer of the Company borrowed $0.3 million in exchange for a
note receivable which bears interest at 8.43%, is payable annually, and is
due in 2001. This note receivable is included in other assets in the
accompanying consolidated balance sheet.
In connection with the Company's Stock Purchase Agreement dated July 1,
1991, advances may be made to the shareholders/owners for increases in
federal or state income tax liabilities (including associated penalties and
interest, if any) resulting from the tax audits of the Company and a
related entity, SSW Limited Partnership, for periods prior to July 1991.
Pursuant to this arrangement, a shareholder/owner received an advance of
$.5 million in July 1994. During the year ended December 31, 1995, $.4
million was repaid, offset by an additional $.1 million incurred in
expenses by CPL, related to these tax audits. Included in accounts
receivable in the accompanying consolidated balance sheet at both
December 31, 1997 and March 31, 1998 is the remaining $.2 million.
7
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
The Company becomes involved in litigation and other proceedings arising in
the normal course of its business. In the opinion of management, the
Company's liability, if any, under any pending litigation would not
materially affect its financial condition or operations.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Control and Partners of
Crown Pacific Management Limited Partnership
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Crown Pacific Management Limited Partnership
at December 31, 1997 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Partnership's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this statement in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Portland, Oregon
May 20, 1998
1
<PAGE>
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP
BALANCE SHEET
(IN THOUSANDS)
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<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 66 $ 272
Due from affiliates (Note 3) 818 1,015
Prepaid and other current assets 5 -
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Total current assets 889 1,287
Investment in limited partnerships (Note 2) 1,912 1,800
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Total assets $2,801 $3,087
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<CAPTION>
LIABILITIES AND PARTNERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 886 $1,329
Partners' equity 1,915 1,758
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Total liabilities and partners' equity $2,801 $3,087
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</TABLE>
2
The accompanying notes are an integral part of this statement.
<PAGE>
1. THE PARTNERSHIP
Crown Pacific Management Limited Partnership (the Partnership) is a
Delaware limited partnership that was formed August 12, 1994 to become the
managing general partner of Crown Pacific Partners, L.P. (MLP). The MLP is
a limited partnership that owns and operates timberlands and related
manufacturing facilities in Oregon, Idaho, Washington, Arizona and Montana.
The Partnership manages the businesses of the MLP and owns a 0.99% general
partner interest in the MLP. The Partnership also owns a 1% general
partnership interest in Crown Pacific Limited Partnership (the Operating
Partnership), a subsidiary of the MLP. The operations of the Operating
Partnership represent the majority of the MLP's operations. The ownership
interests in these limited partnerships represents the extent of the
Partnership's operations and therefore the Partnership is considered to be
economically dependent on the MLP as of December 31, 1997 and March 31,
1998. The general partners of the Partnership are Fremont Timber, Inc. and
HS Corp. of Oregon.
The March 31, 1998 financial statements are unaudited and reflect the
financial position of the Partnership. In the opinion of management, all
material adjustments necessary to present fairly the March 31, 1998 balance
sheet have been included. All such adjustments are of a normal and
recurring nature and all significant intercompany transactions have been
eliminated.
2. INVESTMENT IN LIMITED PARTNERSHIPS
The Partnership accounts for its investment in limited partnerships using
the equity method because the partners of the Partnership (or their
affiliates) have influence on the operations of the MLP and the Operating
Partnership and because the Partnership is one of the general partners of
the MLP and the sole general partner of the Operating Partnership.
Distributions received in excess of the investment balance are recorded as
a liability as there may be a financial obligation as general partner of
the MLP and the Operating Partnership in the event of financial difficulty.
The recorded value of the Partnership's investment in limited partnerships
is significantly less than the fair value of the equivalent MLP units owned
by the Partnership in both the MLP and Operating Partnership. This
difference is estimated to be approximately $10.9 million and $11.8 million
at December 31, 1997 and March 31, 1998, respectively. The Partnership's
underlying equity in the net assets of the limited partnerships
approximated the carrying value of its investments at December 31, 1997 and
March 31, 1998.
3
<PAGE>
2. INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
The transactions with respect to the Partnership's investment in the
limited partnerships for the year ended December 31, 1997 and the period
ended March 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Investment in MLP and Operating Partnership
at beginning of period $ 2,537 $ 1,912
Capital contribution -- 50
Equity in the income of the MLP and
Operating Partnership 552 137
Distributions received (1,177) (299)
------- --------
Investment in MLP and Operating Partnership
at end of period $ 1,912 $ 1,800
------- --------
------- --------
</TABLE>
Summary financial information for the MLP at December 31, 1997 and March 31,
1998 are as follows:
Balance sheet data:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets $ 130,961 $ 147,918
Timberlands, property, plant and equipment 692,966 686,315
Other assets 15,217 29,957
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$ 839,144 $ 864,190
--------- ---------
--------- ---------
Current liabilities $ 55,777 $ 65,577
Long-term debt and other noncurrent
liabilities 575,128 593,665
Partners' equity 208,239 204,948
--------- ---------
$ 839,144 $ 864,190
--------- ---------
--------- ---------
</TABLE>
4
<PAGE>
2. INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
Income statement data:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Revenues $ 505,588 $ 153,930
Net income 27,683 6,891
</TABLE>
3. DUE FROM AFFILIATES
The amount due from affiliates principally represents unreimbursed
management fees charged to the Operating Partnership.
5
