REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholder of
The Pacific Lumber Company:

          We have audited the accompanying consolidated balance sheets of
The Pacific Lumber Company (a Delaware corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, cash flows and stockholder's equity (deficit) for each of the
three years in the period ended December 31, 1996.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based
on our audits.

          We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
The Pacific Lumber Company and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.


                                        ARTHUR ANDERSEN LLP


San Francisco, California
January 24, 1997

                THE PACIFIC LUMBER COMPANY AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEET
                         (IN THOUSANDS OF DOLLARS)

<TABLE>

<CAPTION>
                                                                                              DECEMBER 31,
                                                                                      ---------------------------
                                                                                           1996          1995
                                                                                      ------------- -------------
                                        ASSETS
<S>                                                                                   <C>           <C>
Current assets:
     Cash and cash equivalents                                                        $     26,027  $     26,480 
     Receivables:
          Trade                                                                             18,080        19,688 
          Other                                                                              2,514         1,565 
     Inventories                                                                            65,690        75,580 
     Prepaid expenses and other current assets                                               5,329         6,933 
                                                                                      ------------- -------------
               Total current assets                                                        117,640       130,246 
Timber and timberlands, net of accumulated depletion of $221,063 and $204,856,
      respectively                                                                         324,986       337,390 
Property, plant and equipment, net of accumulated depreciation of $73,772 and
     $65,276, respectively                                                                  95,515        93,726 
Deferred financing costs, net                                                               20,003        22,397 
Deferred income taxes                                                                       34,639        41,958 
Restricted cash                                                                             29,967        31,367 
Other assets                                                                                 6,424         5,502 
                                                                                      ------------- -------------
                                                                                      $    629,174  $    662,586 
                                                                                      ============= =============

                        LIABILITIES AND STOCKHOLDER'S DEFICIT

Current liabilities:
     Accounts payable                                                                 $      3,765  $      3,898 
     Accrued compensation and related benefits                                               9,673         9,241 
     Accrued interest                                                                       20,211        20,666 
     Deferred income taxes                                                                  10,173        10,244 
     Other accrued liabilities                                                               2,325         3,077 
     Long-term debt, current maturities                                                     16,258        14,195 
                                                                                      ------------- -------------
               Total current liabilities                                                    62,405        61,321 
Long-term debt, less current maturities                                                    555,596       571,812 
Other noncurrent liabilities                                                                25,887        33,613 
                                                                                      ------------- -------------
               Total liabilities                                                           643,888       666,746 
                                                                                      ------------- -------------

Contingencies

Stockholder's deficit:
     Common stock, $.01 par value, 100 shares authorized and issued                             --            -- 
     Additional capital                                                                    157,520       157,520 
     Accumulated deficit                                                                  (172,234)     (161,680)
                                                                                      ------------- -------------
               Total stockholder's deficit                                                 (14,714)       (4,160)
                                                                                      ------------- -------------
                                                                                      $    629,174  $    662,586 
                                                                                      ============= =============

<FN>
     The accompanying notes are an integral part of these financial statements.

</TABLE>

                THE PACIFIC LUMBER COMPANY AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF OPERATIONS
                         (IN THOUSANDS OF DOLLARS)

<TABLE>

<CAPTION>
                                                                                YEARS ENDED DECEMBER 31,
                                                                       -----------------------------------------
                                                                            1996          1995          1994
                                                                       ------------- ------------- -------------
<S>                                                                    <C>           <C>           <C>
Net sales:
     Lumber and logs                                                   $    225,017  $    197,320  $    205,504 
     Other                                                                   19,832        24,619        21,875 
                                                                       ------------- ------------- -------------
                                                                            244,849       221,939       227,379 
                                                                       ------------- ------------- -------------
Operating expenses:
     Cost of goods sold (exclusive of depletion and depreciation)           136,335       116,445       116,316 
     Selling, general and administrative expenses                            14,570        14,992        15,190 
     Depletion and depreciation                                              27,644        25,927        25,485 
                                                                       ------------- ------------- -------------
                                                                            178,549       157,364       156,991 
                                                                       ------------- ------------- -------------

Operating income                                                             66,300        64,575        70,388 
Other income (expense):
     Investment, interest and other income                                    4,209         3,928        12,022 
     Interest expense                                                       (54,456)      (55,462)      (56,067)
                                                                       ------------- ------------- -------------
Income before income taxes and extraordinary item                            16,053        13,041        26,343 
Provision in lieu of income taxes                                            (6,107)       (6,480)       (1,429)
                                                                       ------------- ------------- -------------
Income before extraordinary item                                              9,946         6,561        24,914 
Extraordinary item:
     Loss on litigation settlement, net of related credit in lieu of
          income taxes of $6,312                                                 --            --       (14,866)
                                                                       ------------- ------------- -------------
Net income                                                             $      9,946  $      6,561  $     10,048 
                                                                       ============= ============= =============

<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
                THE PACIFIC LUMBER COMPANY AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF CASH FLOWS
                         (IN THOUSANDS OF DOLLARS)

<TABLE>

<CAPTION>
                                                                                YEARS ENDED DECEMBER 31,
                                                                       -----------------------------------------
                                                                            1996          1995          1994
                                                                       ------------- ------------- -------------
<S>                                                                    <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                        $      9,946  $      6,561  $     10,048 
     Adjustments to reconcile net income to net cash provided by
          operating activities:
          Depletion and depreciation                                         27,644        25,927        25,485 
          Net sales of marketable securities                                     52           478         6,619 
          Amortization of deferred financing costs                            2,394         2,269         2,197 
          Net gains on marketable securities                                    (52)         (478)         (984)
          Net loss (gain) on asset dispositions                                   6           419          (830)
          Increase (decrease) in cash resulting from changes in:
               Accrued and deferred income taxes                              7,135         7,572         1,627 
               Accounts payable                                                (164)          589           949 
               Receivables                                                      803         5,913        (8,742)
               Other liabilities                                             (8,046)        7,406        (2,027)
               Inventories, net of depletion                                  7,304        (7,301)       (1,608)
               Prepaid expenses and other current assets                        682        (3,273)         (721)
               Accrued interest                                                (455)         (443)         (518)
          Other                                                                 (12)          423           706 
                                                                       ------------- ------------- -------------
               Net cash provided by operating activities                     47,237        46,062        32,201 
                                                                       ------------- ------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Net proceeds from sale of assets                                           115            13         1,119 
     Capital expenditures                                                   (14,552)       (9,140)      (10,962)
                                                                       ------------- ------------- -------------
               Net cash used for investing activities                       (14,437)       (9,127)       (9,843)
                                                                       ------------- ------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Dividends paid                                                         (20,500)      (22,000)      (24,500)
     Redemptions, repurchase of and principal payments on long-term
          debt                                                              (14,153)      (13,670)      (13,235)
     Incurrence of financing costs                                               --          (150)         (213)
     Restricted cash deposits, net                                            1,400         1,035         1,160 
                                                                       ------------- ------------- -------------
               Net cash used for financing activities                       (33,253)      (34,785)      (36,788)
                                                                       ------------- ------------- -------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           (453)        2,150       (14,430)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                               26,480        24,330        38,760 
                                                                       ------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                               $     26,027  $     26,480  $     24,330 
                                                                       ============= ============= =============


<FN>
     The accompanying notes are an integral part of these financial statements.

</TABLE>

                THE PACIFIC LUMBER COMPANY AND SUBSIDIARIES

          CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
                         (IN THOUSANDS OF DOLLARS)

<TABLE>

<CAPTION>
                                                       COMMON
                                                       STOCK       ADDITIONAL   ACCUMULATED
                                                     ($.01 PAR)     CAPITAL       DEFICIT        TOTAL
                                                   ------------- ------------- ------------- -------------
<S>                                                <C>           <C>           <C>           <C>
Balance, January 1, 1994                           $             $    157,520  $   (131,789) $     25,731 
     Net income                                              --            --        10,048        10,048 
     Dividends                                               --            --       (24,500)      (24,500)
                                                   ------------- ------------- ------------- -------------

Balance, December 31, 1994                                   --       157,520      (146,241)       11,279 
     Net income                                              --            --         6,561         6,561 
     Dividends                                               --            --       (22,000)      (22,000)
                                                   ------------- ------------- ------------- -------------

Balance, December 31, 1995                                   --       157,520      (161,680)       (4,160)
     Net income                                              --            --         9,946         9,946 
     Dividends                                               --            --       (20,500)      (20,500)
                                                   ------------- ------------- ------------- -------------
Balance, December 31, 1996                         $         --  $    157,520  $   (172,234) $    (14,714)
                                                   ============= ============= ============= =============

<FN>
     The accompanying notes are an integral part of these financial statements.

</TABLE>
                THE PACIFIC LUMBER COMPANY AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (IN THOUSANDS OF DOLLARS)


1.        BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
          ACCOUNTING POLICIES

     BASIS OF PRESENTATION

          The consolidated financial statements include the accounts of The
Pacific Lumber Company and its wholly owned subsidiaries, collectively
referred to herein as the "Company."  The Company is an indirect wholly
owned subsidiary of MAXXAM Group Inc. ("MGI").  MGI is a wholly owned
subsidiary of MAXXAM Group Holdings Inc.  ("MGHI") which is a wholly owned
subsidiary of MAXXAM Inc. ("MAXXAM").  Intercompany balances and
transactions have been eliminated.  Certain reclassifications have been
made to prior years' financial statements to be consistent with the current
year's presentation.

          The Company operates in several principal aspects of the lumber
industry, including the growing and harvesting of redwood and Douglas-fir
timber, the milling of logs into lumber and the manufacture of lumber into
a variety of finished products.  Housing, construction and remodeling are
the principal markets for the Company's lumber products.  Export sales
generally constitute approximately 6% of the Company's sales.  A
significant portion of the Company's sales are made to third parties
located west of the Mississippi River.

     USE OF ESTIMATES AND ASSUMPTIONS

          The preparation of financial statements in accordance with
generally accepted accounting principles requires the use of estimates and
assumptions that affect (i) the reported amounts of assets and liabilities,
(ii) disclosure of contingent assets and liabilities known to exist as of
the date the financial statements are published and (iii) the reported
amount of revenues and expenses recognized during each period presented.
The Company reviews all significant estimates affecting its consolidated
financial statements on a recurring basis and records the effect of any
necessary adjustments prior to their publication.  Adjustments made with
respect to the use of estimates often relate to improved information not
previously available.  Uncertainties with respect to such estimates and
assumptions are inherent in the preparation of the Company's consolidated
financial statements; accordingly, it is possible that the subsequent
resolution of any one of the contingent matters described in Note 8 could
differ materially from current estimates.  The results of an adverse
resolution of such uncertainties could have a material effect on the
Company's consolidated financial position, results of operations or
liquidity.

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Cash Equivalents
          Cash equivalents consist of highly liquid money market
instruments with original maturities of three months or less.

          Marketable Securities
          Marketable securities are carried at fair value.  The cost of the
securities sold is determined using the first-in, first-out method. 
Included in investment, interest and other income for each of the two years
ended December 31, 1995 were:  1995 - net realized gains of $478; and 1994
- a decrease in net unrealized gains of $264 and net realized gains of
$1,248.  Net realized and unrealized gains (losses) for the year ended
December 31, 1996 were not significant.

          Inventories
          Inventories are stated at the lower of cost or market value. 
Cost is determined using the last-in, first-out ("LIFO") method.

          Timber and Timberlands
          Timber and timberlands are stated at cost, net of accumulated
depletion.  Depletion is computed utilizing the unit-of-production method
based upon estimates of timber values and quantities.

          Property, Plant and Equipment
          Property, plant and equipment, including capitalized interest, is
stated at cost, net of accumulated depreciation.  Depreciation is computed
utilizing the straight-line method at rates based upon the estimated useful
lives of the various classes of assets.

          Deferred Financing Costs
          Costs incurred to obtain financing are deferred and amortized
over the estimated term of the related borrowing.

          Restricted Cash and Concentrations of Credit Risk
          Restricted cash represents the amount deposited into an account
(the "Liquidity Account") held by the trustee under the indenture governing
the 7.95% Timber Collateralized Notes due 2015 (the "Timber Notes") of
Scotia Pacific Holding Company ("Scotia Pacific"), a wholly owned
subsidiary of the Company.  See Note 4.  The Liquidity Account is not
available, except under certain limited circumstances, for Scotia Pacific's
working capital purposes; however, it is available to pay the Rated
Amortization (as defined in Note 4) and interest on the Timber Notes if and
to the extent that cash flows are insufficient to make such payments.  The
required Liquidity Account balance will generally decline as principal
payments are made on the Timber Notes.  Investment, interest and other
income for the years ended December 31, 1996, 1995 and 1994 includes
interest of approximately $2,865, $2,560 and $2,638, respectively,
attributable to an investment rate agreement (at 7.95% per annum) with the
financial institution which holds the Liquidity Account.

          At December 31, 1996 and 1995, cash and cash equivalents include
$17,600 and $19,742, respectively, (the "Payment Account") which is
reserved for debt service payments on the Timber Notes (see Note 4).  The
Payment Account and the Liquidity Account are each held by a different
financial institution.  In the event of nonperformance by such financial
institutions, the Company's exposure to credit loss is represented by the
amounts deposited plus any unpaid accrued interest thereon.  The Company
mitigates its concentrations of credit risk with respect to these
restricted cash deposits by maintaining them at high credit quality
financial institutions and monitoring the credit ratings of these
institutions.

          Fair Value of Financial Instruments
          The carrying amounts of cash equivalents and restricted cash
approximate fair value. Marketable securities are carried at fair value
which is determined based on quoted market prices. As of December 31, 1996
and 1995, the estimated fair value of long-term debt, including current
maturities, was $579,102 and $590,594, respectively.  The estimated fair
value of long-term debt is determined based on the quoted market prices for
the Timber Notes and the 10-1/2% Senior Notes due 2003 (the "Senior
Notes"), and on the current rates offered for borrowings similar to the
other debt.  Some of the Company's publicly traded debt issues are thinly
traded financial instruments; accordingly, their market prices at any
balance sheet date may not be representative of the prices which would be
derived from a more active market.

2.        INVENTORIES

          Inventories consist of the following:

<TABLE>

<CAPTION>
                                                 DECEMBER 31,
                                         ---------------------------
                                              1996          1995
                                         ------------- -------------
<S>                                      <C>           <C>
Lumber                                   $      46,882 $      57,905
Logs                                            18,808        17,675
                                         ------------- -------------
                                         $      65,690 $      75,580
                                         ============= =============

</TABLE>

3.        PROPERTY, PLANT AND EQUIPMENT

          The major classes of property, plant and equipment are as
follows:

<TABLE>

<CAPTION>
                                                                         DECEMBER 31,
                                                     ESTIMATED   ---------------------------
                                                    Useful Lives      1996          1995
                                                   ------------- ------------- -------------
<S>                                                <C>           <C>           <C>
Machinery and equipment                            5 - 15 years  $    123,909  $    122,437 
Buildings                                              33 years        34,285        29,079 
Logging roads                                          15 years        11,093         7,486 
                                                                 ------------- -------------
                                                                      169,287       159,002 
Less:  accumulated depreciation                                       (73,772)      (65,276)
                                                                 ------------- -------------
                                                                 $     95,515  $     93,726 
                                                                 ============= =============

</TABLE>

          Depreciation expense for the years ended December 31, 1996, 1995
and 1994 was $8,850, $9,185 and $8,808, respectively.

4.        LONG-TERM DEBT

          Long-term debt consists of the following:

<TABLE>

<CAPTION>
                                                                               DECEMBER 31,
                                                                       ---------------------------
                                                                            1996          1995
                                                                       ------------- -------------
<S>                                                                    <C>           <C>
7.95% Scotia Pacific Timber Collateralized Notes due through
     July 20, 2015                                                     $    336,130  $    350,233 
10-1/2% Pacific Lumber Senior Notes due March 1, 2003                       235,000       235,000 
Other                                                                           724           774 
                                                                       ------------- -------------
                                                                            571,854       586,007 
Less: current maturities                                                    (16,258)      (14,195)
                                                                       ------------- -------------
                                                                       $    555,596  $    571,812 
                                                                       ============= =============

</TABLE>

          The indenture governing the Timber Notes (the "Timber Note
Indenture") prohibits Scotia Pacific from incurring any additional
indebtedness for borrowed money and limits the business activities of
Scotia Pacific to the ownership and operation of its timber and
timberlands.  The Timber Notes are senior secured obligations of Scotia
Pacific and are not obligations of, or guaranteed by, the Company or any
other person.  The Timber Notes are secured by a lien on (i) Scotia
Pacific's timber and timberlands (representing $165,970 of the Company's
consolidated balance at December 31, 1996), (ii) Scotia Pacific's contract
rights and certain other assets, (iii) the funds deposited in the Payment
Account and the Liquidity Account, and (iv) substantially all of Scotia
Pacific's other property and equipment.

          The Timber Notes are structured to link, to the extent of
available cash, the deemed depletion of Scotia Pacific's timber (through
the harvest and sale of logs) to required amortization of the Timber Notes. 
The required amount of amortization due on any Timber Note payment date is
determined by various mathematical formulas set forth in the Timber Note
Indenture.  The minimum amount of principal which Scotia Pacific must pay
(on a cumulative basis) through any Timber Note payment date in order to
avoid an Event of Default (as defined) is referred to as rated amortization
("Rated Amortization").  If all payments of principal are made in
accordance with Rated Amortization, the payment date on which Scotia
Pacific will pay the final installment of principal is July 20, 2015.  The
amount of principal which Scotia Pacific must pay through each Timber Note
payment date in order to avoid prepayment or deficiency premiums is
referred to as scheduled amortization ("Scheduled Amortization").  If all
payments of principal are made in accordance with Scheduled Amortization,
the payment date on which Scotia Pacific will pay the final installment of
principal is July 20, 2009.

          Principal and interest on the Timber Notes are payable semi-
annually on January 20 and July 20.  On January 21, 1997, Scotia Pacific
paid $8,712 of principal on the Timber Notes.  The Timber Notes are
redeemable at the option of Scotia Pacific, in whole but not in part, at
any time.  The redemption price of the Timber Notes is equal to the sum of
the principal amount, accrued interest and a prepayment premium calculated
based upon the yield of like-term Treasury securities plus 50 basis points.

          Interest on the Senior Notes is payable semi-annually on March 1
and September 1.  The Senior Notes are redeemable at the option of the
Company, in whole or in part, on or after March 1, 1998 at a price of 103%
of the principal amount plus accrued interest.  The redemption price is
reduced annually until March 1, 2000, after which time the Senior Notes are
redeemable at par. The Senior Notes are unsecured and are senior
indebtedness of the Company; however, they are effectively subordinated to
the Timber Notes.  The indenture governing the Senior Notes contains
various covenants which, among other things, limit the Company's ability to
incur additional indebtedness and liens, to engage in transactions with
affiliates, to make investments and to pay dividends.

          The Company has a revolving credit agreement with a bank (as
amended and restated, the "Revolving Credit Agreement") which expires on
May 31, 1999.  Borrowings under the Revolving Credit Agreement are secured
by the Company's trade receivables and inventories, with interest currently
computed at the bank's reference rate plus 1-1/4% or the bank's offshore
rate plus 2-1/4%.  The Revolving Credit Agreement provides for borrowings
of up to $60,000, of which $15,000 may be used for standby letters of
credit and $30,000 is restricted to timberland acquisitions.  Borrowings
made pursuant to the portion of the credit facility restricted to
timberland acquisitions would also be secured by the purchased timberlands. 
As of December 31, 1996, $46,992 of borrowings was available under the
Revolving Credit Agreement, of which $4,732 was available for letters of
credit and $30,000 was restricted to timberland acquisitions.  No
borrowings were outstanding as of December 31, 1996, and letters of credit
outstanding amounted to $10,268.  The Revolving Credit Agreement contains
covenants substantially similar to those contained in the indenture
governing the Senior Notes.

          As of December 31, 1996, under the most restrictive covenants
contained in the indentures governing the Senior Notes, the Timber Notes
and the Revolving Credit Agreement, the Company could pay approximately
$17,200 of dividends.

          Scheduled maturities of long-term debt outstanding at December
31, 1996, using the Scheduled Amortization for the Timber Notes, are as
follows:  years ending December 31, 1997 - $16,258; 1998 - $19,430; 1999 -
$21,745; 2000 - $24,065; 2001 - $24,827; thereafter - $465,529.

5.        PROVISION IN LIEU OF INCOME TAXES

          Income taxes are determined using an asset and liability approach
which requires the recognition of deferred income tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns. 
Under this method, deferred income tax assets and liabilities are
determined based on the temporary differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates.

          The Company and its subsidiaries are members of MAXXAM's
consolidated return group for federal income tax purposes.  The Company's
tax allocation agreement with MAXXAM (the "Tax Allocation Agreement"),
provides that The Pacific Lumber Company, excluding its wholly owned
subsidiaries  ("Pacific Lumber"), is liable to MAXXAM for the federal
consolidated income tax liability of Pacific Lumber, Scotia Pacific and
certain other subsidiaries of Pacific Lumber (but excluding Salmon Creek
Corporation) (collectively, the "PL Subgroup") computed as if the PL
Subgroup was a separate affiliated group of corporations which was never
connected with MAXXAM.  The Tax Allocation Agreement further provides that
Salmon Creek Corporation is liable to MAXXAM for its federal income tax
liability computed as if Salmon Creek Corporation was a separate
corporation which was never affiliated with MAXXAM.

          The provision in lieu of income taxes on income before income
taxes and extraordinary item consists of the following:

<TABLE>
<CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                             -----------------------------------------
                                                                  1996          1995          1994
                                                             ------------- ------------- -------------
<S>                                                          <C>           <C>           <C>
Current:
     Federal credit (provision) in lieu of income taxes      $       (189) $       (239) $         -- 
     State and local                                                  (28)          (61)          (50)
                                                             ------------- ------------- -------------
                                                                     (217)         (300)          (50)
                                                             ------------- ------------- -------------
Deferred:
     Federal credit (provision) in lieu of income taxes            (5,613)       (4,755)       (1,748)
     State and local                                                 (277)       (1,425)          369 
                                                             ------------- ------------- -------------
                                                                   (5,890)       (6,180)       (1,379)
                                                             ------------- ------------- -------------
                                                             $     (6,107) $     (6,480) $     (1,429)
                                                             ============= ============= =============

</TABLE>

          A reconciliation between the provision in lieu of income taxes
and the amount computed by applying the federal statutory income tax rate
to income before income taxes and extraordinary item is as follows:

<TABLE>

<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                 -----------------------------------------
                                                                                      1996          1995          1994
                                                                                 ------------- ------------- -------------
<S>                                                                              <C>           <C>           <C>
Income before income taxes and extraordinary item                                $     16,053  $     13,041  $     26,343 
                                                                                 ============= ============= =============

Amount of federal income tax based upon the statutory
     rate                                                                        $     (5,619) $     (4,564) $     (9,220)
Revision of prior years' tax estimates and other changes in
     valuation allowances                                                                 981          (651)        7,148 
State and local taxes, net of federal tax effect                                       (1,080)         (966)          207 
Expenses for which no federal tax benefit is available                                   (489)           --            -- 
Other                                                                                     100          (299)          436 
                                                                                 ------------- ------------- -------------
                                                                                 $     (6,107) $     (6,480) $     (1,429)
                                                                                 ============= ============= =============

</TABLE>

          Revision of prior years' tax estimates and other changes in
valuation allowances as shown in the table above include amounts for the
reversal of reserves which the Company no longer believes are necessary,
other changes in prior year tax estimates and changes in valuation
allowances with respect to deferred income tax assets.  Generally, the
reversal of reserves relates to the expiration of the relevant statute of
limitations with respect to certain income tax returns or the resolution of
specific income tax matters with the relevant tax authorities.  For the
years ended December 31, 1996, 1995 and 1994, the reversal of reserves
which the Company believes are no longer necessary resulted in a credit to
the income tax provision of $883, $127 and $7,048, respectively.

          As shown in the Consolidated Statement of Operations for the year
ended December 31, 1994, the Company recorded an extraordinary loss related
to the settlement of litigation in connection with MGI's acquisition of the
Company (see Note 10).  The Company reported the loss net of related
deferred income taxes of $6,312 which is less than the federal and state
statutory income tax rates due to expenses for which no tax benefit was
recognized.

          The components of the Company's net deferred income tax assets
(liabilities) are as follows:

<TABLE>

<CAPTION>
                                                                     DECEMBER 31,
                                                             ---------------------------
                                                                  1996          1995
                                                             ------------- -------------
<S>                                                          <C>           <C>
Deferred income tax assets:
     Timber and timberlands                                  $     28,992  $     32,528 
     Loss and credit carryforwards                                 22,089        25,408 
     Other liabilities and other                                    8,468        10,344 
     Valuation allowances                                          (1,884)       (2,825)
                                                             ------------- -------------
          Total deferred income tax assets, net                    57,665        65,455 
                                                             ------------- -------------

Deferred income tax liabilities:
     Inventories                                                  (15,102)      (16,056)
     Property, plant and equipment                                (15,917)      (15,023)
     Other                                                         (2,180)       (2,662)
                                                             ------------- -------------
          Total deferred income tax liabilities                   (33,199)      (33,741)
                                                             ------------- -------------

Net deferred income tax assets                               $     24,466  $     31,714 
                                                             ============= =============

</TABLE>

          A principal component of the net deferred income tax assets
listed above relates to the excess of the tax basis over financial
statement basis with respect to timber and timberlands.  The Company
believes that it is more likely than not that this net deferred income tax
asset will be realized, based primarily upon the estimated value of its
timber and timberlands which is well in excess of its tax basis.  The
valuation allowances listed above relate to loss and credit carryforwards. 
The Company evaluated all appropriate factors to determine the proper
valuation allowances for loss and credit carryforwards.  These factors
included any limitations concerning use of the carryforwards, the year the
carryforwards expire and the levels of taxable income necessary for
utilization.  The Company has concluded that it will more likely than not
generate sufficient taxable income to realize the benefit attributable to
the loss and credit carryforwards for which valuation allowances were not
provided.

          Included in the net deferred income tax assets listed above are
$22,586 and $28,199 at December 31, 1996 and 1995, respectively, which are
recorded pursuant to the Tax Allocation Agreement with MAXXAM.

          The following table presents the Company's estimated tax
attributes, for federal income tax purposes, under the terms of the Tax
Allocation Agreement at December 31, 1996.

<TABLE>

<CAPTION>
                                                                 EXPIRING
                                                                 THROUGH
                                                              -------------
<S>                                             <C>           <C>
Regular Tax Attribute Carryforwards:
     Net operating losses                       $      56,386      2011    
     Minimum tax credit                                   364    Indefinite
                                                                           
Alternative Minimum Tax Attribute                                          
Carryforwards:
     Net operating losses                       $       9,608       2011   

</TABLE>

6.        EMPLOYEE BENEFIT PLANS

     RETIREMENT PLAN

          The Company has a defined benefit plan which covers all employees
of the Company.  Under the plan, employees are eligible for benefits at age
65 or earlier, if certain provisions are met.  The benefits are determined
under a career average formula based on each year of service with the
Company and the employee's compensation for that year.  The Company's
funding policy is to contribute annually an amount at least equal to the
minimum cash contribution required by The Employee Retirement Income
Security Act of 1974, as amended.

          A summary of the components of net periodic pension cost is as
follows:

<TABLE>

<CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                             -----------------------------------------
                                                                  1996          1995          1994
                                                             ------------- ------------- -------------
<S>                                                          <C>           <C>           <C>
Service cost - benefits earned during the year               $      1,903  $      1,483  $      1,643 
Interest cost on projected benefit obligation                       1,682         1,693         1,263 
Actual loss (gain) on plan assets                                  (2,762)       (3,900)           10 
Net amortization and deferral                                       1,448         2,460          (859)
                                                             ------------- ------------- -------------
Net periodic pension cost                                    $      2,271  $      1,736  $      2,057 
                                                             ============= ============= =============

</TABLE>

          The following table sets forth the funded status and amounts
recognized in the Consolidated Balance Sheet:

<TABLE>

<CAPTION>
                                                                               DECEMBER 31,
                                                                       ---------------------------
                                                                            1996          1995
                                                                       ------------- -------------
<S>                                                                    <C>           <C>
Actuarial present value of accumulated plan benefits:
     Vested benefit obligation                                         $     18,506  $     16,910 
     Non-vested benefit obligation                                            1,371         1,214 
                                                                       ------------- -------------
          Total accumulated benefit obligation                         $     19,877  $     18,124 
                                                                       ============= =============

Projected benefit obligation                                           $     23,582  $     21,841 
Plan assets at fair value, primarily equity and debt securities             (21,800)      (18,363)
                                                                       ------------- -------------
Projected benefit obligation in excess of plan assets                         1,782         3,478 
Unrecognized net transition asset                                                18            24 
Unrecognized net gain (loss)                                                  2,855           (27)
Unrecognized prior service cost                                                 (39)          (45)
                                                                       ------------- -------------
          Accrued pension liability                                    $      4,616  $      3,430 
                                                                       ============= =============

</TABLE>

          The assumptions used in accounting for the defined benefit plan
were as follows:

<TABLE>

<CAPTION>
                                                                  1996          1995          1994
                                                             ------------- ------------- -------------
<S>                                                          <C>           <C>           <C>
Rate of increase in compensation levels                               5.0%          5.0%          5.0%
Discount rate                                                         7.5%         7.25%          8.5%
Expected long-term rate of return on assets                           8.0%          8.0%          8.0%

</TABLE>

     POSTRETIREMENT MEDICAL BENEFITS

          The Company has an unfunded defined benefit plan for certain
postretirement medical benefits which covers substantially all employees of
the Company.  Participants of the plan are eligible for certain health care
benefits upon termination of employment and retirement and commencement of
pension benefits.  Participants make contributions for a portion of the
cost of their health care benefits.  The expected costs of postretirement
medical benefits are accrued over the period the employees provide services
to the date of their full eligibility for such benefits.

          A summary of the components of net periodic postretirement
medical benefit cost is as follows:

<TABLE>

<CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                             -----------------------------------------
                                                                  1996          1995          1994
                                                             ------------- ------------- -------------
<S>                                                          <C>           <C>           <C>
Service cost - medical benefits earned during the year       $        332  $        228  $        216 
Interest cost on accumulated postretirement medical benefit
     obligation                                                       415           317           294 
Net amortization and deferral                                          --           (53)           (7)
                                                             ------------- ------------- -------------
Net periodic postretirement medical benefit cost             $        747  $        492  $        503 
                                                             ============= ============= =============

</TABLE>

          The postretirement medical benefit liability recognized in the
Company's Consolidated Balance Sheet is as follows:

<TABLE>

<CAPTION>
                                                                     DECEMBER 31,
                                                             ---------------------------
                                                                  1996          1995
                                                             ------------- -------------
<S>                                                          <C>           <C>
Retirees                                                     $      1,182  $         634
Actives eligible for benefits                                         905            726
Actives not eligible for benefits                                   3,818          3,317
                                                             ------------- -------------
     Accumulated postretirement medical benefit obligation          5,905          4,677
Unrecognized net gain (loss)                                          (86)           553
                                                             ------------- -------------
     Postretirement medical benefit liability                $      5,819  $       5,230
                                                             ============= =============

</TABLE>

          The annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is 10.5% for 1997 and
is assumed to decrease gradually to 5.5% in 2008 and remain at that level
thereafter.  Each one percentage point increase in the assumed health care
cost trend rate would increase the accumulated postretirement medical
benefit obligation as of December 31, 1996 by approximately $810 and the
aggregate of the service and interest cost components of net periodic
postretirement medical benefit cost by approximately $130.

          The discount rates used in determining the accumulated
postretirement medical benefit obligation were 7.5% and 7.25% at December
31, 1996 and 1995, respectively.

     EMPLOYEE SAVINGS PLAN

          The Company's employees are eligible to participate in a defined
contribution savings plan sponsored by MAXXAM.  This plan is designed to
enhance the existing retirement programs of participating employees. 
Employees may elect to contribute up to 16% of their compensation to the
plan.  For those participants who have elected to make voluntary
contributions to the plan, the Company's contributions consist of a
matching contribution of up to 4% of the compensation of participants.  The
cost to the Company of this plan was $1,388, $1,281 and $1,215 for the
years ended December 31, 1996, 1995 and 1994, respectively.

     WORKERS' COMPENSATION BENEFITS

          The Company is self-insured for workers' compensation benefits. 
Included in accrued compensation and related benefits and other noncurrent
liabilities are accruals for workers' compensation claims amounting to
$8,000 and $8,900 at December 31, 1996 and 1995, respectively.  Workers'
compensation expenses amounted to $2,925, $3,302 and $3,698 for the years
ended December 31, 1996, 1995 and 1994, respectively.

7.        RELATED PARTY TRANSACTIONS

          MAXXAM provides the Company with personnel, insurance, legal,
accounting, financial, and certain other services.  MAXXAM is compensated
by the Company through the payment of a fee representing the reimbursement
of actual out-of-pocket expenses incurred by MAXXAM, including, but not
limited to, labor costs of personnel of MAXXAM rendering services to the
Company.  Charges by MAXXAM for such services were $1,552, $1,694, and
$1,744 for the years ended December 31, 1996, 1995, and 1994, respectively. 
The Company believes that the services being rendered are on terms not less
favorable to the Company than those which would be obtainable from
unaffiliated third parties.

          An agreement with Britt Lumber Co., Inc., an indirect wholly
owned subsidiary of MGI ("Britt"), governs, among other things, the sale of
logs and lumber by the Company and Britt to each other and the sale of hog
fuel (wood residue) by Britt to the Company.  The logs which the Company
sells to Britt are sold at approximately 75% of the applicable price for
such species and category as established by the California State Board of
Equalization, which reflects the lower quality of these logs.  Logs which
either the Company or Britt purchases from third parties and which are then
sold to each other are transferred at the actual cost of such logs.  Hog
fuel is sold to the Company by Britt at applicable market prices.  Net
sales for the years ended December 31, 1996, 1995 and 1994 include revenues
of $14,710, $13,627 and $10,326, respectively, from Britt.  The Company
recognized operating income of $6,784, $5,527 and $5,571 on these revenues
for the years ended December 31, 1996, 1995 and 1994, respectively.  At
December 31, 1996 and 1995, receivables include $1,281 and $813,
respectively, related to these affiliate sales.

          All of the Company's issued and outstanding common stock is
pledged as collateral for MGI's $100,000 11-1/4% Senior Secured Notes due
2003 and $125,720 12-1/4% Senior Secured Discount Notes due 2003
(collectively, the "MGI Notes").  MGI conducts its operations primarily
through subsidiary companies.  The Company represents the substantial
portion of MGI's assets and operations.  The indenture governing the MGI
Notes requires the Company's board of directors to declare and pay
dividends on the Company's common stock to the maximum extent permitted by
any consensual restriction or encumbrance on the Company's ability to
declare and pay dividends, unless the Board determines in good faith that
such declaration and payment would be detrimental to the capital or other
operating needs of the Company.

          In 1994, in connection with the litigation settlement described
in Note 10, the Company paid approximately $3,185 to a law firm in which a
director of the Company is also a partner.

8.        CONTINGENCIES

          The Company's operations are subject to a variety of California
and federal laws and regulations dealing with timber harvesting, endangered
species and critical habitat, and air and water quality.  Moreover, these
laws and regulations are modified from time to time and are subject to
judicial and administrative interpretation.  Compliance with such laws,
regulations and judicial and administrative interpretations, together with
the cost of litigation incurred in connection with certain timber harvesting
operations of the Company, have increased the cost of logging operations.
The Company is subject to certain pending matters described below which
could have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.  There can be no assurance
that certain pending or future governmental regulations, legislation,
judicial or administrative decisions or California ballot initiatives will
not have a material adverse effect on the Company.

          In May 1996, the United States Fish and Wildlife Service
("USFWS") published its final designation of critical habitat for the
marbled murrelet (the "Final Designation"), which designated over four
million acres as critical habitat for the marbled murrelet. Although nearly
all of the designated habitat is public land, approximately 33,000 acres of
the Company's timberlands are included in the Final Designation, the
substantial portion of such acreage being young growth timber. In order to
mitigate the impact of the Final Designation, particularly with respect to
timberlands occupied by the marbled murrelet, the Company over the last few
years has attempted to develop a habitat conservation plan for the marbled
murrelet (the "Murrelet HCP").  Due to, among other things, the unfavorable
response of the USFWS to the Company's initial Murrelet HCP efforts, the
Company and its subsidiaries filed two actions (the "Takings Litigation")
alleging that certain portions of their timberlands have been "taken" and
seeking just compensation.  Pursuant to an agreement entered into by the
Company, MAXXAM, the United States and California on September 28, 1996
(the "Headwaters Agreement") described in Note 9 below, the Takings
Litigation has been stayed at the request of the parties.

          It is impossible for the Company to determine the potential
adverse effect of the Final Designation on the Company's consolidated
financial position, results of operations or liquidity until such time as
various regulatory and  legal issues are resolved; however, if the Company
is unable to harvest, or is severely limited in harvesting, on timberlands
designated as critical habitat for the marbled murrelet, such effect could
be materially adverse to the Company.  If the Company is unable to harvest
or is severely limited in harvesting, it intends to seek just compensation
from the appropriate governmental agencies on the grounds that such
restrictions constitute a governmental taking. There continue to be other
regulatory actions and lawsuits seeking to have other species listed as
threatened or endangered under the federal Endangered Species Act ("ESA")
and/or the California Endangered Species Act ("CESA") and to designate
critical habitat for such species. For example, the National Marine
Fisheries Service has announced that by April 25, 1997 it will make a final
determination concerning whether to list the coho salmon under the ESA in
northern California, including, potentially, lands owned by the Company. It
is uncertain what impact, if any, such listings and/or designations of
critical habitat would have on the Company's consolidated financial
position, results of operations or liquidity.

          In 1994, the California Board of Forestry ("BOF") adopted certain
regulations regarding compliance with long-term sustained yield ("LTSY")
objectives. These regulations require that timber companies project timber
growth and harvest on their timberlands over a 100-year planning period and
establish a LTSY harvest level that takes into account environmental and
economic considerations. The sustained yield plan ("SYP") must demonstrate
that the average annual harvest over any rolling ten-year period will not
exceed the LTSY harvest level and that the Company's projected timber
inventory is capable of sustaining the LTSY harvest level in the last
decade of the 100-year planning period. On December 17, 1996, the Company
submitted a proposed SYP to the California Department of Forestry ("CDF").
The proposed SYP sets forth an LTSY harvest level substantially the same as
the Company's average annual timber harvest over the last six years. The
proposed SYP also indicates that the Company's average annual timber
harvest during the first decade of the SYP would approximate the LTSY
harvest level. During the second decade of the proposed SYP, the Company's
average annual timber harvest would be approximately 8% less than that
proposed for the first decade. The SYP, when approved, will be valid for
ten years. Thereafter, revised SYPs will be prepared every decade that will
address the LTSY harvest level based upon reassessment of changes in the
resource base and protection of public resources.

          The proposed SYP assumes that the transactions contemplated by
the Headwaters Agreement (see Note 9) will be consummated and that the
Multi-Species HCP (as defined in Note 9) will permit the Company to harvest
its timberlands (including over the next two decades a substantial portion
of its old growth timberlands not transferred pursuant to the Headwaters
Agreement) to achieve maximum sustained yield. The SYP is subject to review
and approval by the CDF, and there can be no assurance that the SYP will be
approved in its proposed form. Until the SYP is reviewed and approved, the
Company is unable to predict the impact that these regulations will have on
its future timber harvesting practices. It is possible that the results of
the review and approval process could require the Company to reduce its
timber harvest in future years from the harvest levels set forth in the
proposed SYP. The Company believes it would be able to mitigate the effect
of any required reduction in harvest level by acquisitions of additional
timberlands and making corresponding amendments to the SYP; however, there
can be no assurance that the Company would be able to do so and the amount
of such acquisitions would be limited by the Company's available financial
resources.  The Company is unable to predict the ultimate impact the
sustained yield regulations will have on its future financial position,
results of operations or liquidity.

          Various groups and individuals have filed objections with the CDF
and the BOF regarding the CDF's and the BOF's actions and rulings with
respect to certain of the Company's timber harvesting plans ("THPs") and
other timber harvesting operations, and the Company expects that such
groups and individuals will continue to file such objections. In addition,
lawsuits are pending or threatened which seek to prevent the Company from
implementing certain of its approved THPs or which challenge other
operations by the Company. These challenges have severely restricted the
Company's ability to harvest old growth timber on its property. To date,
challenges with respect to the Company's THPs relating to young growth
timber and to its other operations have been limited; however, no
assurance can be given as to the extent of such challenges in the future. 
The Company believes that environmentally focused challenges to its timber
harvesting and other operations are likely to occur in the future, 
particularly with respect to virgin and residual old growth timber.
Although such challenges have delayed or prevented the Company from
conducting a portion of its operations, they have not had a material
adverse effect on the Company's consolidated financial position, results of
operations or liquidity. Nevertheless, it is impossible to predict the
future nature or degree of such challenges or their ultimate impact on the
Company's consolidated financial position, results of operations or
liquidity.

          The Company is also involved in various claims, lawsuits and
proceedings.  While there are uncertainties inherent in the ultimate
outcome of such matters and it is impossible to presently determine the
ultimate costs that may be incurred, management believes that the resolution
of such uncertainties and the incurrence of such costs should not have a
material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.

9.        HEADWATERS AGREEMENT

          On September 28, 1996, the Company (on behalf of itself, its
subsidiaries and affiliates) and MAXXAM (collectively, the "Pacific Lumber
Parties") entered into the Headwaters Agreement with the United States and
California.  The Headwaters Agreement provides the framework for the
acquisition by the United States and California of approximately 5,600
acres of the Company's timberlands commonly referred to as the Headwaters
Forest and the Elk Head Springs Forest (the "Headwaters Timberlands").  A
substantial portion of the Headwaters Timberlands consists of virgin old
growth timberlands.  Approximately 4,900 of these acres are owned by Salmon
Creek and are part of the area commonly referred to as the "Headwaters
Forest." The remaining acreage is owned by Scotia Pacific (the Company
having harvesting rights on a portion of the acreage).  The Headwaters
Timberlands would be transferred in exchange for (a) property and other
consideration (possibly including cash) from the United States and
California having an aggregate fair market value of $300 million and (b)
approximately 7,755 acres of adjacent timberlands to be acquired by the
United States and California ( the "Elk River Timberlands") from a third
party.  The United States and California would also acquire and retain an
additional 1,900 acres of timberlands from such third party.

          The Headwaters Agreement also provides, among other things, for
the expedited processing by the United States of an incidental take permit
("Permit") to be based upon a habitat conservation plan for multiple
species ("Multiple-Species HCP") covering (a) the timberlands and timber
harvesting rights which the Company will own after consummation of the
Headwaters Agreement (the "Resulting Pacific Lumber Timber Property") and
(b) the Headwaters Timberlands and the 1,900 acres of Elk River Timberlands
retained by the United States and California (both as conserved habitat). 
The agreement also requires expedited processing by California of an SYP
covering such timberlands and timber harvesting rights.

          On December 5, 1996, the United States and California each
furnished a list of properties consisting of oil and gas interests,
timberlands and a variety of other real estate properties for the Company's
review and approval.  There have been ongoing discussions between the
Pacific Lumber Parties and the United States regarding the properties and
other consideration to be furnished by the United States.

          Closing of the Headwaters Agreement is subject to various
conditions, including (a) acquisition by the government of the Elk River
Timberlands from a third party, (b) approval of an  SYP and a Multi-Species
HCP and issuance of a Permit, each in form and substance satisfactory to
the Company, (c) the issuance by the Internal Revenue Service and the
California Franchise Tax Board of closing agreements in form and substance
sought by and satisfactory to the Pacific Lumber Parties, (d) the absence
of a judicial decision in any litigation brought by third parties that any
party reasonably believes will significantly delay or impair the
transactions described in the Headwaters Agreement, and (e) the dismissal
with prejudice at closing of the Takings Litigation.  The parties to the
Headwaters Agreement are working to satisfy these conditions; however,
there can be no assurance that the Headwaters Agreement will be
consummated.

10.       SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION

          Investment, Interest and Other Income
          In February 1994, the Company received a franchise tax refund of
$7,243, the substantial portion of which represents interest, from the
State of California relating to tax years 1972 through 1985.  This amount
is included in investment, interest and other income for the year ended
December 31, 1994.

          Items Related to 1992 Earthquake
          In 1995, the Company recorded reductions in cost of sales of
$1,527 resulting from business interruption insurance reimbursements for
higher operating costs and the related loss of revenues resulting from the
April 1992 earthquake.

          Extraordinary Item Related to Litigation Settlement
          During 1994, MAXXAM, the Company and others agreed to a
settlement, subsequently approved by the court, of class and related
individual claims brought by former stockholders of the Company against
MAXXAM, MGI, the Company, former directors of the Company and others
concerning MGI's acquisition of the Company.  Of the $52,000 settlement,
$33,000 was paid by insurance carriers of MAXXAM and the Company, $14,800
was paid by the Company, and the balance was paid by other defendants and
through the assignment of certain claims.  In 1994, the Company recorded an
extraordinary loss of $14,866 related to the settlement and associated
costs, including a $2,000 accrual for certain contingent claims and $4,400
of related legal fees, net of benefits for federal and state income taxes
of $6,312.

<TABLE>

<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                 -----------------------------------------
                                                                                      1996          1995          1994
                                                                                 ------------- ------------- -------------
<S>                                                                              <C>           <C>           <C>
Supplemental information on non-cash investing and financing activities:
     Timber and timberlands acquired subject to loans from seller                $         --  $        615  $        910 

Supplemental disclosure of cash flow information:
     Interest paid, net of capitalized interest                                  $     52,517  $     53,636  $     54,388 
     Income taxes paid (refunded)                                                         221        (5,190)        1,170 
     Tax allocation payments to MAXXAM                                                    330            --            -- 

</TABLE>

11.       QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

          Summary quarterly financial information for the years ended
December 31, 1996 and 1995 is as follows:

<TABLE>

<CAPTION>
                                                  THREE MONTHS ENDED
                               -------------------------------------------------------
                                  MARCH 31      JUNE 30     SEPTEMBER 30  DECEMBER 31
                               ------------- ------------- ------------- -------------
<S>                            <C>           <C>           <C>           <C>
1996:
     Net sales                 $      54,903 $      65,299 $      62,965 $      61,682
     Operating income                 14,310        17,485        15,415        19,090
     Net income                          884         3,144         1,473         4,445

1995:
     Net sales                 $     47,309  $     58,408  $      58,807 $      57,415
     Operating income                 9,991        18,785         17,115        18,684
     Net income (loss)               (2,013)        3,861          2,669         2,044

</TABLE>