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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C.  20549**

 

**FORM 10-Q**

 

**(Mark One)**
| **ý** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

**For thequarterly period ended June 30, 2001OR**
| **o** | **EXCHANGE ACT OF  1934 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES** |
|-------|-----------------------------------------------------------------------------------------------|

**For the transition period from              to        **

**Commissionfile number 0-24976**

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**CROWNPACIFIC PARTNERS, L.P.**(Exact name of registrant as specified in its charter)

| **Delaware**                                                    | **93-1161833**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) | (I.R.S. Employer  Identification No.) |

 

| **121 SW Morrison Street, Suite 1500, Portland, Oregon** | **97204**  |
|----------------------------------------------------------|------------|
| (Address of principal  executive offices)                | (Zip Code) |

 

Registrant's telephonenumber, including area code:  **503–274-2300**

 

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Indicate by check mark whether theregistrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days.

Yes      ý                       No        o

Indicatethe number of shares outstanding of each of the issuer's classes of commonequity, as of the latest practicable date.

 

| **Common Units** | **30,527,030**                    |
|------------------|-----------------------------------|
| (Class)          | (Outstanding at August  14, 2001) |

 

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**CROWN PACIFIC PARTNERS, L.P.FORM 10-QINDEX**

 

| PART I - FINANCIAL  INFORMATION    |                                                                                                   |   |
|------------------------------------|--------------------------------------------------------------------------------------------------------|--------|
|                               |                                                                                                   |   |
| Item 1.                            | Financial Statements                                                                                   |   |
|                               |                                                                                                   |   |
|                               | Consolidated  Statement of Operations – Three and Six Month Periods Ended June 30, 2001 and  2000 |   |
|                               |                                                                                                   |   |
|                               | Consolidated Balance Sheet –  June 30, 2001 and December 31, 2000                                 |   |
|                               |                                                                                                   |   |
|                               | Consolidated  Statement of Cash Flows – Six Months Ended June 30, 2001 and 2000                   |   |
|                               |                                                                                                   |   |
|                               | Notes to  Consolidated Financial Statements                                                            |   |
|                               |                                                                                                   |   |
| Item  2.                           | Management's  Discussion and Analysis of Financial Condition and Results of Operations                 |   |
|                               |                                                                                                   |   |
| Item  3.                           | Quantitative  and Qualitative Disclosures About Market Risk                                            |   |
|                               |                                                                                                   |   |
| PART II – OTHER  INFORMATION |                                                                                                   |   |
|                               |                                                                                                   |   |
| Item 6.                            | Exhibits  and Reports on Form 8-K                                                                      |   |
|                               |                                                                                                   |   |
| Signatures                         |                                                                                                   |   |
|                                    |                                                                                                        |        |  |  |  |

 

 

**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**Crown Pacific Partners, L.P.**

**Consolidated Statement of Operations****(In thousands, exceptunit and per unit data)****(Unaudited)**

|                                          | **For the Three Months Ended June 30,**      |    |
|-----------------------------------------------|----------------------------------------------|---------|
|                                          | ****                                         |    |
|                                          | **2001**                                     |    | **2000** |   |
|                                          | ****                                         |    | **** | ** ** |
| Revenues                                      | $                                            | 166,158 |   | $ | 214,265 |   |
|                                          |                                         |    |   |   |
| Operating costs:                              |                                         |    |   |   |
|                                          | Cost of products sold                        | 147,502 |   | 182,924 |   |
|                                          | Selling, general and administrative expenses | 9,293   |   | 9,810 |   |
|                                          |                                         |         |   |  |   |
|                                          |                                         |    |   |   |
| Operating income                              | 9,363                                        |    | 21,531 |   |
|                                          |                                         |    |   |   |
| Interest expense                              | 15,613                                       |    | 14,677 |   |
| Amortization of debt  issuance costs          | 741                                          |    | 236 |   |
| Other income, net                             | (168                                         | )       | (367 | ) |
|                                          |                                              |    |  |   |
| Net (loss) income                             | $                                            | (6,823  | ) | $ | 6,985 |   |
|                                          |                                         |         |   |   |  |   |
|                                          |                                         |    |   |   |
| Basic and diluted net  (loss) income per unit | $                                            | (0.22   | ) | $ | 0.23 |   |
|                                          |                                         |         |   |  |  |   |
|                                          |                                         |    |   |   |
| Weighted average units  outstanding           | 30,527,030                                   |    | 30,410,906 |   |
|                                          |                                              |    |  |   |

Seeaccompanying Notes to Consolidated Financial Statements.

**Crown Pacific Partners, L.P.**

**ConsolidatedStatement of Operations****(Inthousands, except unit and per unit data)(Unaudited)**

|                                          | **For the Six Months Ended June 30,**        |    |
|-----------------------------------------------|----------------------------------------------|---------|
|                                          | ****                                         |    |
|                                          | **2001**                                     |    | **2000** |   |
|                                          | ****                                         |    | **** | ** ** |
| Revenues                                      | $                                            | 304,977 |   | $ | 445,988 |   |
|                                          |                                         |    |   |   |
| Operating costs:                              |                                         |    |   |   |
|                                          | Cost of products sold                        | 273,889 |   | 380,995 |   |
|                                          | Selling, general and administrative expenses | 18,681  |   | 21,255 |   |
|                                          |                                              |    |  |   |
|                                          |                                         |    |   |   |
| Operating income                              | 12,407                                       |    | 43,738 |   |
|                                          |                                         |    |   |   |
| Interest expense                              | 31,527                                       |    | 28,803 |   |
| Amortization of debt  issuance costs          | 973                                          |    | 491 |   |
| Other income, net                             | (291                                         | )       | (804 | ) |
|                                          |                                              |    |  |   |
| Net (loss) income                             | $                                            | (19,802 | ) | $ | 15,248 |   |
|                                          |                                              |    |  |   |
|                                          |                                         |    |   |   |
| Basic and diluted net  (loss) income per unit | $                                            | (0.64   | ) | $ | 0.50 |   |
|                                          |                                              |    |  |   |
|                                          |                                         |    |   |   |
| Weighted average units  outstanding           | 30,516,123                                   |    | 30,397,292 |   |
|                                          |                                              |    |  |   |

Seeaccompanying Notes to Consolidated Financial Statements.

**Crown Pacific Partners, L.P.**

**Consolidated Balance Sheet****(In thousands, exceptunit data)**

**Assets**

|                                                                                    | **June 30,  2001**                                                                                                   |       | **December 31,  2000** |       |
|-----------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
|                                                                                    | ****                                                                                                                 |       | ****                   |       |
|                                                                                    | **(Unaudited)**                                                                                                      |       |                   |       |
|                                                                                    |                                                                                                                 | ** ** |                   | ** ** |
| Current assets:                                                                         |                                                                                                                 | ** ** |                   | ** ** |
|                                                                                    | Cash and cash equivalents                                                                                            | $          | 5,664                  |       | $ | 14,537 |   |
|                                                                                    | Accounts receivable, net of allowances of $1,417 and  $1,554                                                         | 116,422    |                   | 113,560    |   |
|                                                                                    | Notes receivable                                                                                                     | 5,809      |                   | 4,502      |   |
|                                                                                    | Inventories                                                                                                          | 53,596     |                   | 58,560     |   |
|                                                                                    | Deposits on timber  cutting contracts                                                                                | 2,128      |                   | 2,811      |   |
|                                                                                    | Prepaid and other current assets                                                                                     | 3,700      |                   | 1,491      |   |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    |                                                                                                                 |       |                   |       |
|                                                                                    | Total current assets                                                                                                 | 187,319    |                   | 195,461    |   |
| Property, plant and  equipment, net of accumulated depreciation of $42,981 and $38,805. | 78,293                                                                                                               |       | 79,162                 |       |
| Timber, timberlands  and roads, net                                                     | 621,088                                                                                                              |       | 633,926                |       |
| Intangible assets, net                                                                  | 34,737                                                                                                               |       | 34,182                 |       |
| Other assets                                                                            | 11,739                                                                                                               |       | 12,448                 |       |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    |                                                                                                                 |       |                   |       |
| Total assets                                                                            | $                                                                                                                    | 933,176    |                   | $          | 955,179 |   |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    |                                                                                                                 |       |                   |       |
| **Liabilities and  Partners' Capital**                                                  |                                                                                                                 |       |                   |       |
|                                                                                    |                                                                                                                 |       |                   |       |
| Current liabilities:                                                                    |                                                                                                                 |       |                   |       |
|                                                                                    | Notes payable                                                                                                        | $          | 36,000                 |       | $ | 32,000 |   |
|                                                                                    | Accounts payable                                                                                                     | 49,331     |                   | 50,683     |   |
|                                                                                    | Accrued expenses                                                                                                     | 15,708     |                   | 20,315     |   |
|                                                                                    | Accrued interest                                                                                                     | 10,540     |                   | 10,711     |   |
|                                                                                    | Current portion of  long-term debt                                                                                   | 171        |                   | 166        |   |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    |                                                                                                                 |       |                   |       |
|                                                                                    | Total current liabilities                                                                                            | 111,750    |                   | 113,875    |   |
| Long-term debt                                                                          | 687,865                                                                                                              |       | 688,965                |       |
| Other non-current  liabilities                                                          | 708                                                                                                                  |       | 729                    |       |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    | 800,323                                                                                                              |       | 803,569                |       |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    |                                                                                                                 |       |                   |       |
| Commitments and  contingent liabilities                                                 |                                                                                                                 |       |                   |       |
|                                                                                    |                                                                                                                 |       |                   |       |
| Partners' capital:                                                                      |                                                                                                                 |       |                   |       |
|                                                                                    | General partners                                                                                                     | 41         |                   | 194        |   |
|                                                                                    | Limited partners (30,527,030 and 30,410,906 units  outstanding at June 30, 2001 and December 31, 2000, respectively) | 132,812    |                   | 151,416    |   |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    | Total partners' capital                                                                                              | 132,853    |                   | 151,610    |   |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                    |                                                                                                                 |       |                   |       |
| Total liabilities and  partners' capital                                                | $                                                                                                                    | 933,176    |                   | $          | 955,179 |   |
|                                                                                    |                                                                                                                      |       |                        |       |
|                                                                                         |                                                                                                                      |            |                        |            |  |  |  |  |

Seeaccompanying Notes to Consolidated Financial Statements.

**Crown Pacific Partners, L.P.**

**ConsolidatedStatement of Cash Flows****(In thousands)****(Unaudited)**

|                                                  | **For the Six Months Ended June 30,**                                                               |   |
|-------------------------------------------------------|-----------------------------------------------------------------------------------------------------|--------|
|                                                  | ****                                                                                                |   |
|                                                  | **2001**                                                                                            |   | **2000** |   |
|                                                  | ****                                                                                                |   | **** |   |
| Cash flows from  operating activities:                |                                                                                                |   |   |   |
|                                                  | Net (loss) income                                                                                   | $      | (19,802 | ) | $ | 15,248 |   |
|                                                  | Adjustments to reconcile net (loss) income to net cash  (used in) provided by operating activities: |   |   |   |   |
|                                                  | Depletion, depreciation and amortization                                                            | 21,823 |   | 27,202 |   |
|                                                  | Gain on sale of property                                                                            | (9,206 | ) | (6,342 | ) |
|                                                  | Other                                                                                               | (1     | ) | 2 |   |
|                                                  | Net change in current assets and current liabilities:                                               |   |   |   |   |
|                                                  | Accounts and notes receivable                                                                       | (2,729 | ) | (10,969 | ) |
|                                                  | Inventories                                                                                         | 4,964  |   | (12,640 | ) |
|                                                  | Deposits on timber  cutting contracts                                                               | 683    |   | (675 | ) |
|                                                  | Prepaid and other  current assets                                                                   | (2,454 | ) | 1,384 |   |
|                                                  | Accounts payable and accrued expenses                                                               | (6,130 | ) | 420 |   |
|                                                  |                                                                                                |        |   |  |   |
| Net cash (used in)  provided by operating activities  | (12,852                                                                                             | )      | 13,630 |   |
|                                                  |                                                                                                     |   |  |   |
|                                                  |                                                                                                |   |   |   |
| Cash flows from  investing activities:                |                                                                                                |   |   |   |
|                                                  | Additions to timberlands                                                                            | (6,065 | ) | (82,640 | ) |
|                                                  | Additions to timber  cutting rights                                                                 | (201   | ) | (10,480 | ) |
|                                                  | Additions to equipment                                                                              | (4,321 | ) | (19,565 | ) |
|                                                  | Proceeds from sales of  property                                                                    | 11,116 |   | 8,957 |   |
|                                                  | Deposit on future asset sale                                                                        | -      |   | 4,200 |   |
|                                                  | Principal payments  received on notes                                                               | 521    |   | 1,052 |   |
|                                                  | Purchase of businesses                                                                              | -      |   | (3,511 | ) |
|                                                  | Other investing activities                                                                          | -      |   | (988 | ) |
|                                                  |                                                                                                |        |   |  |   |
| Net cash provided by  (used in) investing activities  | 1,050                                                                                               |   | (102,975 | ) |
|                                                  |                                                                                                     |   |  |   |
|                                                  |                                                                                                |   |   |   |
| Cash flows from  financing activities:                |                                                                                                |   |   |   |
|                                                  | Net increase in  short-term borrowings                                                              | 4,000  |   | 28,000 |   |
|                                                  | Proceeds from issuance  of long-term debt                                                           | 29     |   | 99,444 |   |
|                                                  | Repayments of  long-term debt                                                                       | (1,124 | ) | (762 | ) |
|                                                  | Contributions of capital                                                                            | 45     |   | 990 |   |
|                                                  | Distributions to  partners                                                                          | -      |   | (34,990 | ) |
|                                                  | Other financing activities                                                                          | (21    | ) | 115 |   |
|                                                  |                                                                                                |        |   |  |   |
| Net cash provided by  financing activities            | 2,929                                                                                               |   | 92,797 |   |
|                                                  |                                                                                                     |   |  |   |
|                                                  |                                                                                                |   |   |   |
| Net (decrease)  increase in cash and cash equivalents | (8,873                                                                                              | )      | 3,452 |   |
| Cash and cash  equivalents at beginning of period     | 14,537                                                                                              |   | 21,616 |   |
|                                                  |                                                                                                     |   |  |   |
|                                                  |                                                                                                |   |   |   |
| Cash and cash  equivalents at end of period           | $                                                                                                   | 5,664  |   | $ | 25,068 |   |
|                                                  |                                                                                                     |   |  |   |
|                                                       |                                                                                                     |        |  |  |  |  |  |  |

Seeaccompanying Notes to Consolidated Financial Statemens.

**CROWNPACIFIC PARTNERS, L.P.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS(In thousands, except per unit amounts or as otherwise indicated)(Unaudited)**

 

**Note 1: Organization and Basis of Presentation**Crown PacificPartners, L.P. (“Crown Pacific” or the "Partnership"), a Delawarelimited partnership, through its 99% owned subsidiary, Crown Pacific LimitedPartnership (the "Operating Partnership"), was formed in 1994 toacquire, own and operate timberlands and wood product manufacturing facilitieslocated in the northwest United States. The Partnership's business consistsprimarily of growing and harvesting timber for sale as logs in domestic andexport markets and the manufacturing and selling of lumber and other woodproducts.

Thefinancial statements included in this Form 10-Q are unaudited and reflect theconsolidated financial position, results of operations and cash flows of the Partnership.  These financial statements include all theaccounts of the Partnership but do not contain all of the information requiredby generally accepted accounting principles to be included in a full set of financialstatements.  This Form 10-Q should beread in conjunction with the financial statements in the Partnership's 2000annual report on Form 10-K, which include a summary of significant accountingpolicies of the Partnership.  In theopinion of management, all material adjustments necessary to present fairly theresults of operations for the three and six-month periods ended June 30, 2001and 2000 have been included.  All suchadjustments are of a normal and recurring nature and all significant intercompanytransactions have been eliminated.  Theresults of operations for any interim period are not necessarily indicative ofthe results of operations for the entire year.

Netincome (loss) per unit was calculated using the weighted average number ofcommon units outstanding divided into net income (loss), after adjusting forthe General Partner interest**. **TheGeneral Partner (loss) income allocation was $(68) and $70 for the three monthsended June 30, 2001 and 2000, respectively, and $(198) and $152 for the sixmonths ended June 30, 2001 and 2000, respectively.  There is no difference between basic and diluted earnings perunit.

**Note 2:Inventories**Inventories, consisting of lumber andlogs, are stated at the lower of LIFO cost or market.  Supplies and inventories maintained at non-manufacturing locationsare valued at the lower of average cost or market.  Inventories consisted of the following:

 

|                     | **June  30, 2001** |   | **December  31, 2000** |   |
|--------------------------|--------------------|--------|------------------------|--------|
|                     | ****               |   | ****                   |   |
| Lumber                   | $                  | 11,312 |                   | $      | 12,363 |   |
| Logs                     | 13,857             |   | 16,232                 |   |
| Supplies                 | 4,550              |   | 4,355                  |   |
| LIFO adjustment          | 2,042              |   | 1,792                  |   |
|                     |                    |   |                        |   |
| Manufacturing  inventory | 31,761             |   | 34,742                 |   |
| Wholesale products       | 21,835             |   | 23,818                 |   |
|                     |                    |   |                        |   |
|                     | Total              | $      | 53,596                 |   | $ | 58,560 |   |
|                     |                    |   |                        |   |
|                          |                    |        |                        |        |  |  |  |

 

**Note 3:Timber, Timberlands and Roads**In the first quarter ofeach year, the Partnership performs an update of its timber inventory system.  The update in each year resulted in a netincrease in depletion costs for the first six months of 2001 of approximately$0.5 million, or $0.02 per unit, and a net increase in depletion costs for thefirst six months of 2000 of approximately $0.5 million, or $0.02 per unit, withno impact on cash flow.

**Note 4:Supplemental Cash Flow Information**Supplemental disclosureof cash flow information is as follows:

|                                           | **Six  months ended June 30,** |   |
|------------------------------------------------|--------------------------------|--------|
|                                           | ****                           |   |
|                                           | **2001**                       |   | **2000** |   |
|                                           | ****                           |   | **** |   |
| Cash paid during the  period for interest      | $                              | 33,553 |   | $ | 27,930 |   |
| Business assets  acquired with debt and equity | 1,000                          |   | 2,000 |   |
| Note received for sale  of property            | 1,500                          |   | - |   |
|                                                |                                |        |  |  |  |  |

**Note 5:Segment Reporting**The Partnership classifies its operationsinto three fundamental businesses: (1) Timberlands, consisting of the sale oflogs to the Partnership’s manufacturing facilities and to third parties, andthe sale of timber and timberlands to third parties;  (2) Manufacturing, consisting of the manufacture of logs into lumberand the sale of residual chips to pulp and paper mills; and (3) WholesaleMarketing, consisting of the trading of various forest products anddistribution of lumber and panel products through the Partnership’sprofessional contractor service yards.  Corporate and Other includes general corporateoverhead and expenses (such as LIFO) not allocated to the segments andmiscellaneous operations not significant enough to be classified as a separatesegment. The Partnership does not show assets by segment, as historic costs arenot used by management to allocate resources or assess performance.  Transfersbetween segments are generally at prices which management believes reflectcurrent market prices.

The following summarizes thePartnership’s segment information:

|                    | **Three Months Ended June 30,****** |    | **Six Months Ended June 30,****** |    |
|-------------------------|-------------------------------------|---------|-----------------------------------|---------|
| Revenues (in thousands) | **2001******                        |    | **2000******                      |    | **2001****** |   | **2000****** |   |
| Timberlands:            |                                |    |                              |    |   |   |   |   |
|                    | Trade                               | $       | 18,149                            |    | $ | 33,982 |   | $ | 40,747 |   | $ | 68,978 |   |
|                    | Intersegment                        | 23,874  |                              | 44,979  |   | 48,761 |   | 108,413 |   |
|                    |                                     |    |                                   |    |  |   |  |   |
|                    | 42,023                              |    | 78,961                            |    | 89,508 |   | 177,391 |   |
| Manufacturing:          |                                |    |                              |    |   |   |   |   |
|                    | Trade                               | 40,717  |                              | 55,977  |   | 72,581 |   | 123,912 |   |
|                    | Intersegment                        | 3,081   |                              | 3,833   |   | 7,339 |   | 7,515 |   |
|                    |                                     |    |                                   |    |  |   |  |   |
|                    | 43,798                              |    | 59,810                            |    | 79,920 |   | 131,427 |   |
| Wholesale Marketing:    |                                |    |                              |    |   |   |   |   |
|                    | Trade                               | 106,983 |                              | 120,515 |   | 191,139 |   | 246,212 |   |
|                    | Intersegment                        | 8,000   |                              | 12,276  |   | 13,974 |   | 24,256 |   |
|                    |                                     |    |                                   |    |  |   |  |   |
|                    | 114,983                             |    | 132,791                           |    | 205,113 |   | 270,468 |   |
| Corporate and Other:    |                                |    |                              |    |   |   |   |   |
|                    | Trade                               | 309     |                              | 3,791   |   | 510 |   | 6,886 |   |
|                    | Intersegment                        | 229     |                              | 888     |   | 551 |   | 1,703 |   |
|                    |                                     |    |                                   |    |  |   |  |   |
|                    | 538                                 |    | 4,679                             |    | 1,061 |   | 8,589 |   |
| Total:                  |                                |    |                              |    |   |   |   |   |
|                    | Total Revenues                      | 201,342 |                              | 276,241 |   | 375,602 |   | 587,875 |   |
|                    | Less Intersegment                   | (35,184 | )                                 | (61,976 | ) | (70,625 | ) | (141,887 | ) |
|                    |                                     |    |                                   |    |  |   |  |   |
|                    | Revenues                            | $       | 166,158                           |    | $ | 214,265 |   | $ | 304,977 |   | $ | 445,988 |   |
|                    |                                     |    |                                   |    |  |   |  |   |

 

|                             | **Three Months Ended June 30,** |   | **Six Months Ended June 30,** |   |
|----------------------------------|---------------------------------|--------|-------------------------------|--------|
|                             | ****                            |   | ****                          |   |
| Operating  income (in thousands) | **2001**                        |   | **2000**                      |   | **2001** |   | **2000** |   |
|                                  | ****                            |   | ****                          |   | **** |   | **** |   |
| Timberlands                      | $                               | 7,639  |                          | $      | 19,942 |   | $ | 13,324 |   | $ | 38,317 |   |
| Manufacturing                    | 1,541                           |   | 463                           |   | (583 | ) | 5,482 |   |
| Wholesale                        | 3,166                           |   | 3,635                         |   | 6,205 |   | 8,265 |   |
| Corporate and Other              | (2,983                          | )      | (2,509                        | )      | (6,539 | ) | (8,326 | ) |
|                             |                                 |   |                               |   |  |   |  |   |
| Operating Income                 | 9,363                           |   | 21,531                        |   | 12,407 |   | 43,738 |   |
| Interest Expense                 | (15,613                         | )      | (14,677                       | )      | (31,527 | ) | (28,803 | ) |
| Other                            | (573                            | )      | 131                           |   | (682 | ) | 313 |   |
|                             |                                 |   |                               |   |  |   |  |   |
| Net (Loss) Income                | $                               | (6,823 | )                             | $      | 6,985 |   | $ | (19,802 | ) | $ | 15,248 |   |
|                             |                                 |   |                               |   |  |   |  |   |

**Note 6:  Bank Agreement Amendments**On April 20, 2001,the Company’s acquisition and working capital bank facilities were amended tomodify the cash flow to interest expense coverage covenant.  Given the Partnership’s decision to preserveits timber assets until log and land prices improve, and the fact that weaklumber prices continued to adversely affect its manufacturing segment results,relief from this covenant requirement was required.

The Partnership’sbank group agreed, under conditions contained in the amendments, to temporarilymodify the existing credit agreements. With these modifications, thePartnership received the covenant relief necessary in order to follow its nearterm operating plan of waiting out the current product price environment duringthe first and second quarters of 2001. As a result of these amendments, the Partnership’s revolving creditfacility became secured by its accounts receivable and inventories and theacquisition facility line was reduced to the outstanding balance of $199.3million.  The margin paid by thePartnership on both LIBOR and prime rate loans under these facilities increasedby 1.125 percentage points under the amended agreements.

The Partnershipincurred an amendment fee of approximately $1.1 million, which is beingrecognized ratably over the second and third quarters of 2001 as amortizationof debt issuance costs in the accompanying consolidated statement ofoperations.

Atthe September 30, 2001 compliance date and continuing through the existing termof the amended credit facilities, the cash flow to interest expense covenantwill return to its original level, which existed prior to the April 20, 2001amendments.  Given its plan to continueoperating the Partnership at current, reduced production levels, managementbelieves that the Partnership will not be able to comply with this covenant.Based upon discussions with its banking agent and financial advisors,management has sought and anticipates receiving a modification of this covenantto allow the Partnership time to implement a longer term solution forsatisfying this covenant.

Ifthe Partnership does not receive a modification from the bank group, andanother solution is not available, $199.3 million of bank debt currentlyclassified as long-term at June 30, 2001 could be reclassified as a currentliability at September 30, 2001.  Ifthis situation is not cured within thirty days past the non-compliance date ofthe bank debt, then the senior note debt ($486.0 million at June 30, 2001)could also be reclassified as a current liability at September 30, 2001.

**Item 2.   Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

**General**Crown Pacific's principal operations consist of the growing and harvesting oftimber, the sale of logs and the processing and sale of lumber and other woodproducts.  The Partnership’s ability toimplement its business strategy over the long term and its results ofoperations depend upon a number of factors, many of which are beyond itscontrol.  These factors include generalindustry conditions, domestic and international prices and supply and demandfor logs, lumber and other wood products, seasonality and competition fromother supplying regions and substitute products.

**Forward-LookingStatements**Information contained in Item 2 and other sections of this report includeforward-looking statements including statements regarding the Partnership’sexpectations, hopes, beliefs, intentions or strategies regarding the futurethat are not purely historical, but are based on assumptions that in the futuremay prove not to be accurate.  Theseassumptions include harvest volumes, species mix, prices for logs and lumber,demand for housing and levels, timing and amounts received for stumpage,property and asset sales. The Partnership’s business and prospects are subjectto a number of risks, including the volatility of global timber and lumberprices and supplies, factors limiting harvesting of timber includingcontractual obligations, governmental restrictions, weather and accesslimitations, as well as the substantial capital expenditures required to supplyits operations.

Additional factors that could affectfuture performance include environmental risks, operating risks normallyassociated with the timber industry, competition, government regulation andeconomic changes in the regions where the Partnership’s products are sold,including Southeast Asia and Japan.  Otherrisk factors include the ability of the Partnership to implement its businessstrategy and the value of the U.S. dollar against foreign currencies.  These and other risks are described in thePartnership’s registration statements and reports filed from time to time onforms 10-K, 8-K and 10-Q and reports to unitholders, which are available fromthe Partnership or the United States Securities and Exchange Commission.

**FinancialCondition**The Partnership’s primary sources of liquidity have been cash provided byoperating activities, including stumpage and property sales, as well as debtand equity financings.

Cash used by operating activities was$12.9 million in the first six months of 2001 and resulted primarily from a netloss of $7.2 million (net of non-cash expenses of $12.6 million), an increasein accounts and notes receivable of $2.7 million, an increase in prepaids andother current assets of $2.5 million and a decrease in accounts payable andaccrued expenses of $6.1 million, offset by a decrease in inventories of $5.0million. Working capital decreased to $75.6 million at June 30, 2001 comparedto $81.6 million at December 31, 2000.

Net cash provided by investing activitiesof $1.1 million resulted primarily from $11.1 million proceeds from the sale ofproperty, offset by the use of $6.3 million for additions to timberlands andtimber cutting rights and $4.3 million used for additions to equipment.

Net cash provided by financing activitiesof $2.9 million resulted primarily from a $4.0 million net increase inshort-term borrowings, offset by net repayments on long-term debt of $1.1million.

Cash necessary to enable the Partnershipto pay quarterly cash distributions, if any, (in accordance with thePartnership Agreement), to pay for capital expenditures and to satisfy interestand principal payments on indebtedness, is significant.  Additions to plant and equipment totaled$4.3 million in the first six months of 2001, primarily for a new planer millat the Partnership’s Gilchrist, Oregon facility, and are expected to total lessthan $5.0 million during all of 2001. Additions to timber and timberlandpurchases are evaluated as opportunities arise and totaled $6.3 million in thefirst six months of 2001. The Managing General Partner expects that capitalexpenditures will be funded by a combination of any or all of the following:property sales, cash generated from operations, current funds or bankborrowings.  The Partnership does notexpect to make cash distributions from its current funds or from cash generatedby operating activities until significantly improved market conditions willsupport a sustained quarterly distribution.

The Partnership has a $58 million revolving creditfacility with a group of banks for working capital purposes and stand-byletters of credit that expire on December 1, 2002.  The credit facility bears a floating rate of interest and issecured by accounts receivable and inventory. At June 30, 2001, the Partnership had $35 million outstanding under thisfacility, with a weighted average interest rate of 7.25%.

The Partnership hasa $199.3 million, three-year credit line with a group of banks to provide forthe acquisition of additional timber, timberlands and related assets andcapital expenditures. The acquisition facility bears a floating rate ofinterest, is unsecured and expires December 1, 2002.  At the end of the revolving period, the Partnership may elect toconvert any outstanding borrowings under this facility to a four-year termloan, requiring quarterly principal payments equal to 6.25% of the outstandingprincipal balance on the conversion date. At June 30, 2001, the Partnership had $199.3 million outstanding underthis facility, with a weighted average interest rate of 7.09%.

The $58 million working capital facility and the $199.3million acquisition facility were amended in April 2001.  See Note 6 to the financial statementsincluded in this Form 10-Q for more information about the amendments and forthe need for additional covenant relief.

The Partnership's 9.78%, 9.60%, 8.17% and 7.8% seniornotes, issued in 1994, 1995, 1996 and 1998, respectively, are unsecured andrequire semi-annual interest payments through 2018.  These senior notes, with an aggregate $486 million principalamount, require the Partnership to make an aggregate principal payment of $37.5million on December 1, 2002, and annual principal payments in various amountsfrom December 1, 2003 through 2018.  Thesenior notes are redeemable prior to maturity, subject to a premium onredemption based on interest rates of U.S. Treasury securities having a similaraverage maturity as the senior notes, plus 50 basis points.

C.P. Air, a subsidiary of the Partnership, borrowed $2.7million in January 2000 to finance a new aircraft.  The debt bears interest at 8.25%, is secured by the aircraft andrequires monthly payments of $26,000 including interest.

All of the Partnership's senior note agreements and banklines of credit contain certain restrictive covenants, including limitations onharvest levels, land sales, cash distributions, the amount of future indebtednessand other financial ratios.  Aftergiving effect to the amendments described in Note 6 above, the Partnership wasin compliance with such covenants at June 30, 2001.  See Note 6 to the financial statements included in this Form 10-Qfor a discussion of the Partnership’s need for additional relief from certainof its covenants with respect to the quarter ending September 30, 2001.

**New Accounting Pronouncements**In June 2000, the Financial Accounting Standards Board (“FASB”) issuedStatement of Financial Accounting Standards No. 138, “Accounting for CertainDerivative Instruments and Certain Hedging Activities-an amendment of FASBStatement No. 133” (“SFAS 138”).  InJune 1999, the FASB issued Statement of Financial Accounting Standards No. 137,“Accounting for Derivative Instruments and Hedging Activities” (“SFAS137”).  SFAS 137 is an amendment toStatement of Financial Accounting Standards No. 133, “Accounting for DerivativeInstruments and Hedging Activities”. SFAS 137 and 138 establish accounting and reporting standards for allderivative instruments.  SFAS 137 and138 are effective for fiscal years beginning after June 15, 2000.  The Partnership does not currently have anyderivative instruments and, accordingly, the adoption of SFAS 137 and 138 inthe first quarter of 2001 did not have an impact on its financial position,results of operations or cash flows.

In June 2001, the FASB issued Statementof Financial Accounting Standards No. 141 (“SFAS 141”), “BusinessCombinations,” and Statement of Financial Accounting Standards No. 142 (“SFAS142”), “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used forall business combinations initiated after June 30, 2001.  Use of the pooling-of-interests method willbe prohibited on a prospective basis only. SFAS No. 142 changes the accounting for goodwill from an amortizationmethod to an impairment-only approach. Thus, amortization of goodwill,including goodwill recorded in past business combinations, will cease uponadoption of that Statement, which for the Partnership will be on January 1,2002.  The Partnership does not expectthat the adoption of SFAS 141 will have a significant impact on the financialcondition or results of operations of the Partnership.  The Partnership is currently evaluating whatthe effects of adopting of SFAS 142 will be on its financial position andresults of operations.

**Results of OperationsThree Months Ended June 30, 2001 compared to Three Months Ended June 30, 2000**

**General**Revenues during the second quarter ended June 30, 2001 decreased $48.1 million,or 22.4%, to $166.2 million, from $214.3 million in the same quarter of2000.  The decrease reflects the impactof lower log and lumber sales volumes and realizations and lower property saleactivity compared to the second quarter of 2000.

Cost of sales as a percentage of salesincreased to 88.8% in the second quarter of 2001, compared to 85.4% in the samequarter of 2000.   The increase isprimarily the result of a decreased revenue base over which to spread fixedcosts and increased depreciation, primarily due to additions made to thePartnership’s Gilchrist, Oregon mill, which were only partially offset byhigher land sales margins, lower log and lumber costs and lower per unitmanufacturing costs.

Selling, general and administrativeexpenses (“SG&A”) decreased 5.3% to $9.3 million (5.6% of revenues) in thesecond quarter of 2001, compared to $9.8 million (4.6% of revenues) in thesecond quarter of 2000 primarily as a result of lower salaries and wages,professional fees and public relations expense.  The increase as a percentage of sales is due to the decrease innet revenues in the second quarter of 2001 compared to the second quarter of2000.

Interest expense increased 6.4% to $15.6million in the second quarter of 2001, from $14.7 million in the second quarterof 2000.  The increase is a result ofhigher debt balances in the second quarter of 2001 due primarily to an increasein short-term borrowings in the first half of 2001 and the fact that the $27.0million of borrowing related to the installation of a new small log line andplaner mill at the Partnership’s Gilchrist sawmill was outstanding for theentire second quarter of 2001, but not the entire second quarter of 2000.

Amortization ofdebt issuance costs of $741,000 for the three months ended June 30, 2001includes $506,000 of fees, which totaled approximately $1.1 million, foramendments made to its working capital bank facilities in April 2001.  The remaining amount will be amortized inthe third quarter of 2001.

Other income, netincludes interest income on notes receivable, rental income and othermiscellaneous income.

The Partnership pays no significantincome taxes and does not include a provision for income taxes in its financialstatements.

**Timberlands**Total external log sales, including property and stumpage sales, decreased46.6% to $18.1 million, or 10.9% of revenue in the second quarter of 2001,compared to $34.0 million, or 15.9% of revenue in the second quarter of2000.  Internal sales of logs tomanufacturing decreased 46.9% to $23.9 million in the second quarter of 2001from $45.0 million in the second quarter of 2000.  The decreases reflect significantly lower average realizations,lower internal consumption of logs and a planned decrease in fee harvest levelsand property and stumpage sales.

Overall operating income fromtimberlands, including property sales, decreased 61.7% to $7.6 million in thesecond quarter of 2001 from $19.9 million in the second quarter of 2000,primarily as a result of a 46.9% decrease in log sales volume, a 20.7% decreasein average sales realizations compared to the second quarter of 2000 andreduced property sales, which were partially offset by lower non-fee andpurchased log volume during the current quarter.

***Domestic LogSales***Average external domestic prices received for logs sold from the various treefarms, including stumpage but excluding pulpwood, were as follows (dollars perthousand board feet (“MBF”)): 

|             | **Quarter  Ended June 30,** |   |     |   |
|------------------|-----------------------------|--------|----------|--------|
|             | ****                        |   |     |   |
| **Tree  Farm**   | **2001**                    |   | **2000** |   | **%  Change** |   |
| ****             | ****                        |   | ****     |   | **** |   |
| Oregon           | $157/MBF                    |   | $490/MBF |   | (68.0 | )% |
| Inland           | $397/MBF                    |   | $350/MBF |   | 13.4 | % |
| Hamilton         | $470/MBF                    |   | $401/MBF |   | 17.2 | % |
| Olympic          | $367/MBF                    |   | $460/MBF |   | (20.2 | )% |
| Weighted average | $339/MBF                    |   | $430/MBF |   | (21.2 | )% |

Decreases at the Oregon and Olympic treefarms reflect the impact of weak lumber markets on log pricing, increasedsupply in the marketplace, mix changes and an unwillingness of sawmills tobuild log inventories given the continuing volatility in the lumber markets.

The increases in average external pricesat the Inland and Hamilton tree farms are primarily the result of favorable mixchanges and sales type (i.e. delivered logs versus stumpage sales).

Domestic external log sales volumes decreased47.2% in the second quarter of2001 to 27.0 million board feet (MMBF), compared to 51.1 MMBF in the samequarter of 2000, primarily as a result of a planned decrease in fee harvestlevels.  The voluntary reduction in harvestlevels reflects the Partnership’s ongoing strategy to preserve its timber assetbase until market conditions improve. The domestic external volume, including stumpage, from each of thePartnership’s tree farms was as follows (in MBF):

 

|               | **Quarter  Ended June 30,** |   |     |   |
|--------------------|-----------------------------|--------|----------|--------|
|               | ****                        |   |     |   |
| **Tree  Farm**     | **2001**                    |   | **2000** |   | **%  Change** |   |
| ****               | ****                        |   | ****     |   | **** |   |
| Oregon tree farm   | 8,160                       |   | 16,201   |   | (49.6 | )% |
| Inland tree farm   | 5,918                       |   | 11,785   |   | (49.8 | )% |
| Hamilton tree farm | 7,547                       |   | 12,036   |   | (37.3 | )% |
| Olympic tree farm  | 5,354                       |   | 11,086   |   | (51.7 | )% |
|               |                             |   |          |   |  |   |
|               | Total                       | 26,979 |     | 51,108 |   | (47.2 | )% |
|               |                             |   |          |   |  |   |
|                    |                             |        |          |        |  |  |  |

***Export LogSales***Sales of logs to customers involved in exporting activities (excluded fromtotal log sales volume above) were approximately $0.5 million, or 0.3% ofsales, in the second quarter of 2001, compared to $1.0 million, or 0.5% ofsales, for the same quarter of 2000. The average realization for export logs decreased 18.3% to $509/MBF inthe second quarter of 2001 compared to $623/MBF in the second quarter of 2000.  Sales volumes of export logs decreased 35.6%to 1.0 MMBF in the second quarter of 2001 compared to 1.6 MMBF in the secondquarter of 2000.  The decreases inrealization and volume are primarily a result of the impact of increasedsupplies, soft demand and mix issues. Except for demand for the highest grade logs, export markets were softduring the current period.

***PropertySales***Revenue and operating income from property sales in the second quarter of 2001were $6.2 million and $4.8 million, respectively, compared to $8.4 million and$5.6 million, respectively in the second quarter of 2000.  Significantly lower property sales areplanned for the third quarter of 2001 compared to the second quarter of 2001.

**Manufacturing**External revenues from the Partnership’s sawmills, excluding sales of lumberproducts through the wholesale marketing segment, were $40.7 million, or 24.5%of sales in the second quarter of 2001, compared to $56.0 million, or 26.1% ofsales in the same quarter of 2000.  Thedecreased revenues reflect a 16.9% decrease in external lumber sales volume, a15.7% decrease in average external lumber sales realizations and a 7.4% declinein chip revenue.  The lower sales volumeand chip revenue reflect lower production volume while the lower averagerealization reflects mix changes and market conditions.

Operating income from the manufacturingsegment increased to $1.5 million in the second quarter of 2001 from $0.5million in the second quarter of 2000. The increase is primarily a result of a 20% decline in unit log costs anda 4.7% decline in unit manufacturing costs, offset in part by the decrease inrevenue discussed above and 18.1% higher overhead costs (primarily as a resultof increased depreciation at the Gilchrist, Oregon sawmill).

Average prices received for externallumber sales, excluding sales to the wholesale marketing segment, in thevarious regions were as follows:

|             | **Quarter  Ended June 30,** |   |     |
|------------------|-----------------------------|--------|----------|
|             | ****                        |   |     |
| **Region**       | **2001**                    |   | **2000** |   | **%  Change** |   |
| ****             | ****                        |   | ****     |   | **** |   |
| Oregon           | $342/MBF                    |   | $562/MBF |   | (39.1 | )% |
| Inland           | $327/MBF                    |   | $336/MBF |   | (2.7 | )% |
| Washington       | $306/MBF                    |   | $297/MBF |   | 3.0 | % |
| Weighted average | $327/MBF                    |   | $388/MBF |   | (15.7 | )% |

The lower average lumber realizations forthe Oregon region reflect the combination of product mix and loweryear-over-year lumber pricing.  As aresult of prevailing log supplies, both Oregon sawmills produced a much largerpercentage of lower priced pine dimension grade lumber instead of higher pricedpine shop grade lumber during 2001 compared to 2000.

External lumber sales volumes decreased16.9% in the second quarter of 2001 to 111.9 MMBF compared to 134.6 MMBF in thesame period of 2000.  External salesvolumes from the various regions were as follows (in MBF):

|       | **Quarter  Ended June 30,** |    |     |    |
|------------|-----------------------------|---------|----------|---------|
|       | ****                        |    |     |    |
| **Region** | **2001**                    |    | **2000** |    | **%  Change** |   |
| ****       | ****                        |    | ****     |    | **** |   |
| Oregon     | 45,428                      |    | 36,496   |    | 24.5 | % |
| Inland     | 34,552                      |    | 64,925   |    | (46.8 | )% |
| Washington | 31,907                      |    | 33,193   |    | (3.9 | )% |
|       |                             |    |          |    |  |   |
|       | Total                       | 111,887 |     | 134,614 |   | (16.9 | )% |
|       |                        |         |     |         |   |  |   |

The increased volume from the Oregonregion reflects higher efficiencies at the Gilchrist planer mill as the newfacility ramps-up to its practical production capacity.  The Partnership expects slightly highervolume in the third quarter of 2001 as the production rate at the Gilchristmill continues to increase.

The decreases at the Inland andWashington mills reflect lower production volumes due to modified one-shiftproduction schedules at both Inland sawmills and at the Marysville studmill,which were partially offset by increases at the Port Angeles studmill.

By-product revenues accounted for 2.2% ofrevenue in the second quarter of 2001, compared to 1.7% of revenue in thesecond quarter of 2000.  Residual woodchip prices increased to $71 per bone dry unit (BDU) in the second quarter of2001 compared to $67/BDU in the second quarter of 2000. The 6.0% higher averagerealization reflects the benefit of higher demand and market pricing in boththe Inland and Oregon regions.  Woodchipvolume decreased 13.9% to 50,246 BDUs in the second quarter of 2001 compared to58,332 BDUs in the second quarter of 2000. The lower volume reflects the impact of lower production from thePartnership’s sawmills during the second quarter of 2001.

**Wholesale Marketing**The Partnership’s wholesale operationsinvolve sales of lumber and other wood products, much of which were notmanufactured by the Partnership.  Salesfrom the wholesale operations totaled $107.0 million, or 64.4% of sales in thesecond quarter of 2001, compared to $120.5 million, or 56.2% of sales in thesecond quarter of 2000.

Operating income from wholesaleoperations decreased 12.9% to $3.2 million in the second quarter of 2001 from$3.6 million in the second quarter of 2000. The decreases in revenue andoperating income are a result of significantly lower building material prices,which were only partially offset by increased sales volume at the Partnership’sAlliance, Desert and Cheshire lumber operations.  Housing activity has been strong in these markets and the DesertLumber operation is realizing the benefits of the Reno yard capacity expansionwith a gain in market share for that area. The Partnership increased its salesvolume of internally produced lumber through this segment by 21.5% in thesecond quarter of 2001 compared to the second quarter of 2000, reflecting aplanned defensive strategy to support mill sales during periods of soft marketconditions.

**Results of OperationsSix Months Ended June 30, 2001 compared to Six Months Ended June 30, 2000**

**General**Revenues during the six months ended June 30, 2001 decreased 31.7% to $305.0million, from $446.0 million in the same period of 2000.  The decrease reflects the impact of lowerlog and lumber sales volumes and realizations and lower property sale activitycompared to the first half of 2000.

Cost of sales as a percentage of salesincreased to 89.8% in the first six months of 2001, compared to 85.5% in the sameperiod of 2000.  The increase isprimarily the result of a decreased revenue base over which to spread fixedcosts and increased depreciation, primarily due to additions made to thePartnership’s Gilchrist, Oregon mill, which were only partially offset byhigher land sales margins, lower log and lumber costs and lower per unitmanufacturing costs.

Selling, general and administrativeexpenses decreased 12.1% to $18.7 million (6.2% of revenues) in the first sixmonths of 2001, from $21.3 million (4.8% of revenues) in the same period of2000. The decrease is primarily a result of lower salaries and wages,professional fees and public relations expense.  The increase as a percentage of sales is due to the decrease insales in the first half of 2001.

Interest expense increased 9.5% to $31.5million in the first six months of 2001, from $28.8 million in the first sixmonths of 2000.  The increase is aresult of higher debt balances in the first six months of 2001 due primarily toan increase in short-term borrowings and the fact that $27.0 million ofspending related to the installation of a new small log line and planer millwere outstanding for the entire first six months of 2001, but not the entirefirst six months of 2000.

Amortization ofdebt issuance costs of $973,000 for the six months ended June 30, 2001 includes$506,000 of fees, which totaled approximately $1.1 million, for an amendmentmade to the Partnership’s working capital bank facilities in April 2001.  The remaining amount will be amortized in thethird quarter of 2001.

Other income, netincludes interest income on notes receivable, rental income and othermiscellaneous income.

The Partnership pays no significantincome taxes and does not include a provision for income taxes in its financialstatements.

**Timberlands**Total external log sales, including property and stumpage sales, decreased40.9% to $40.7 million, or 13.4% of revenue in the first six months of 2001,compared to $69.0 million, or 15.5% of revenue in the first six months of 2000.  Internal sales of logs to manufacturingdecreased 55.0% to $48.8 million in the first six months of 2001 from $108.4million in the first six months of 2000. The decreases reflect significantly lower average realizations, lowerconsumption of logs at the Partnership’s sawmills and a planned decrease in feeharvest levels and property and stumpage sales.

Overall operating income fromtimberlands, including property sales, decreased 65.2% to $13.3 million in thefirst six months of 2001 from $38.3 million in the first six months of 2000,primarily as a result of a 44.1% decrease in external log sales volume and a17.7% decrease in average sales realizations compared to the first six monthsof 2000 and reduced property sales, which were partially offset by lowernon-fee and purchased log volume during the current period.

***Domestic LogSales***Average external domestic prices received for logs sold from the various treefarms, including stumpage but excluding pulpwood, were as follows (dollars perthousand board feet “MBF”): 

|             | **Six  Months Ended June 30,** |   |     |   |
|------------------|--------------------------------|--------|----------|--------|
|             | ****                           |   |     |   |
| **Tree  Farm**   | **2001**                       |   | **2000** |   | **%  Change** |   |
| ****             | ****                           |   | ****     |   | **** |   |
| Oregon           | $155/MBF                       |   | $493/MBF |   | (68.6 | )% |
| Inland           | $407/MBF                       |   | $304/MBF |   | 33.9 | % |
| Hamilton         | $457/MBF                       |   | $447/MBF |   | 2.2 | % |
| Olympic          | $378/MBF                       |   | $465/MBF |   | (18.7 | )% |
| Weighted average | $295/MBF                       |   | $397/MBF |   | (25.7 | )% |

Decreases at the Oregon and Olympic treefarms reflect the impact of weak lumber markets on log pricing, increasedsupply in the marketplace and changes in the mix of both species and sales type(i.e. stumpage versus delivered logs).

The increases in average realization atthe Inland and Hamilton tree farms are primarily the result of favorable mixchanges and sales type (i.e. delivered logs versus stumpage sales).

Domestic external log sales volumesdecreased 43.6% in the first sixmonths of 2001 to 71.2 million board feet (MMBF), compared to 126.3 MMBF in thefirst six months of 2000, primarily as a result of decreased demand.

The external volume from each of thePartnership’s tree farms was as follows (in thousands of board feet (MBF)):

|               | **Six  Months Ended June 30,** |   |     |    |
|--------------------|--------------------------------|--------|----------|---------|
|               | ****                           |   |     |    |
| **Tree  Farm**     | **2001**                       |   | **2000** |    | **%  Change** |   |
| ****               | ****                           |   | ****     |    | **** |   |
| Oregon tree farm   | 33,191                         |   | 22,885   |    | 45.0 | % |
| Inland tree farm   | 9,760                          |   | 54,575   |    | (82.1 | )% |
| Hamilton tree farm | 15,535                         |   | 22,383   |    | (30.6 | )% |
| Olympic tree farm  | 12,679                         |   | 26,412   |    | (52.0 | )% |
|               |                                |   |          |    |  |   |
|               | Total                          | 71,165 |     | 126,255 |   | (43.6 | )% |
|               |                           |        |     |         |   |  |   |

The increase at the Oregon tree farm is aresult of increased stumpage activity in the first quarter of 2001.

The decreases at the Inland, Hamilton andOlympic tree farms are a result of planned reductions in the overall feeharvest program and stumpage sale activity during the first half of 2001compared to the same period of 2000.

***Export LogSales***Sales of logs to customers involved in exporting activities (excluded fromtotal log sales volume above) were approximately $1.2 million, or 0.4% of salesin the first six months of 2001, compared to $3.2 million, or 0.7% of sales inthe first six months of 2000.  Theaverage realization for export logs decreased 14.7% to $551/MBF in the firstsix months of 2001 compared to $646/MBF in the first six months of 2000.  Sales volumes of export logs decreased 55.5%to 2.2 MMBF in the first six months of 2001 compared to 5.0 MMBF in the firstsix months of 2000.  The decreases in realizationand volume are primarily a result of the impact of increased supplies in themarketplace and soft demand.  Except fordemand for the highest grade logs, export markets were soft during the currentperiod.

***PropertySales***Revenue and operating income from property sales in the first six months of2001 were $12.5 million and $9.2 million, respectively, compared to $9.5million and $6.3 million, respectively in the first six months of 2000.  Significantly lower property sales areexpected for the third quarter of 2001 compared to levels reported in the prioryear period and during the first two quarters of 2001.

**Manufacturing**External revenues from the Partnership’s sawmills, excluding sales of lumberproducts through the wholesale marketing segment, were $72.6 million, or 23.8%of sales in the first six months of 2001, compared to $123.9 million, or 27.8%of sales in the first six months of 2000. The decreased revenues reflect a 23.7% decrease in external lumber salesvolume, a 27.5% decrease in average external lumber sales realizations and a7.4% decline in chip revenue.  The lowersales volume and chip revenue reflect lower production volume, while the lowerrealization reflects both mix changes and weak markets.

Operating income from the manufacturingsegment decreased to a loss of $0.6 million in the first six months of 2001from income of $5.5 million in the first six months of 2000.  The decrease is primarily a result of thedecrease in revenue discussed above and 15.4% higher overhead costs (primarilyas a result of increased depreciation at the Gilchrist, Oregon sawmill),partially offset by a 6.1% decline in unit manufacturing costs and 27.6% lowerlog costs compared to the first six months of 2000.

Average prices received for externallumber sales, excluding sales to the wholesale marketing segment, in thevarious regions were as follows:

|             | **Six  Months Ended June 30,** |   |     |   |
|------------------|--------------------------------|--------|----------|--------|
|             | ****                           |   |     |   |
| **Region**       | **2001**                       |   | **2000** |   | **%  Change** |   |
| ****             | ****                           |   | ****     |   | **** |   |
| Oregon           | $318/MBF                       |   | $595/MBF |   | (46.6 | )% |
| Inland           | $303/MBF                       |   | $359/MBF |   | (15.6 | )% |
| Washington       | $283/MBF                       |   | $312/MBF |   | (9.3 | )% |
| Weighted average | $303/MBF                       |   | $418/MBF |   | (27.5 | )% |

The lower realizations reflect thecombination of weak lumber markets and mix changes.

The lower average lumber realizations forthe Oregon region reflect the combination of product mix and loweryear-over-year lumber pricing.  As aresult of prevailing log supplies, both Oregon sawmills are now producing amuch larger percentage of lower priced pine dimension grade lumber instead ofhigher priced pine shop grade lumber compared to the same period in 2000.

External lumber sales volumes decreased23.7% in the first six months of 2001 to 213.0 MMBF compared to 279.1 MMBF inthe same period of 2000.  External salesvolumes from the various regions were as follows (in MBF):

 

|       | **Six  Months Ended June 30,** |    |     |    |
|------------|--------------------------------|---------|----------|---------|
|       | ****                           |    |     |    |
| **Region** | **2001**                       |    | **2000** |    | **%  Change** |   |
| ****       | ****                           |    | ****     |    | **** |   |
| Oregon     | 81,774                         |    | 82,649   |    | (1.1 | )% |
| Inland     | 69,575                         |    | 127,790  |    | (45.6 | )% |
| Washington | 61,639                         |    | 68,695   |    | (10.3 | )% |
|       |                                |    |          |    |  |   |
|       | Total                          | 212,988 |     | 279,134 |   | (23.7 | )% |
|       |                           |         |     |         |   |  |   |

The volume from the Oregon regionreflects higher efficiencies at the Gilchrist sawmill as the new small log lineand planer mill ramp-up to a practical production capacity.  The Partnership expects slightly higher volumein the third quarter of 2001 compared to the second quarter of 2001 as theproduction rate at the Gilchrist mill continues to increase.

The decreases at the Inland andWashington mills reflect lower production volumes due to modified one-shiftproduction schedules at both Inland sawmills and at the Marysville studmill,which were partially offset by increases at the Port Angeles studmill.

By-product revenues accounted for 2.7% ofrevenue in the first six months of 2001, compared to 1.9% of revenue in thefirst six months of 2000.  Residual woodchip prices increased to $73 per bone dry unit (BDU) in the first six months of2001 compared to $67/BDU in the first six months of 2000. The higher averagerealization reflects higher demand and market pricing in both the Inland andOregon lumber regions.  Woodchip volumedecreased 14.6% to 98,900 BDUs in the first six months of 2001 compared to115,861 BDUs in the first six months of 2000. The lower volume reflects the impact of lower lumber production from thePartnership’s sawmills during the first six months of 2001.

**Wholesale Marketing**The Partnership’s wholesale operations involve sales of lumber and other woodproducts, much of which were not manufactured by the Partnership.  Sales from the wholesale operations totaled$191.1 million, or 62.7% of sales in the first six months of 2001, compared to$246.2 million, or 55.2% of sales in the first six months of 2000.  Operating income from wholesale operationsdecreased 24.9% to $6.2 million in the first six months of 2001 from $8.3million in the first six months of 2000. The decreases in revenue and operating income are primarily the resultof significantly lower building material prices.  Operating income was further affected by increased operatingexpenses at two operations.  Thesefactors were partially offset by favorable raw material purchase prices. Inaddition, the Partnership increased its sales volume of internally producedlumber through this segment by 31.7% in the first six months of 2001 comparedto the first six months of 2000.  TheDesert Lumber operation is realizing the benefits of the Reno yard capacityexpansion, which was completed in the first quarter of 2001, with a gain inmarket share for that area in the second quarter of 2001.

**Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk**

The Partnership’s only financialinstruments with market risk exposure are its variable rate lines ofcredit.  At June 30, 2001, thePartnership had $234.3 million outstanding under its lines of credit with aweighted average interest rate of 7.11%. A hypothetical 10 percent increase in interest rates to 7.81% would nothave a material impact on the Partnership’s cash flows.

**PART II – OTHERINFORMATION**

**Item 6.  Exhibits andReports on Form 8 - K**

| **(a)** | **The  exhibits filed as part of this report are listed below and this list is  intended to serve as the exhibit index:** |
|---------|---------------------------------------------------------------------------------------------------------------------------|

             Exhibit No. and Description

|   | 10.1   | First Amendment, dated  April 20, 2001, to Amended and Restated Credit Agreement dated December 1,  1999.  Incorporated by reference from  the Partnership’s Form 10-Q for the quarter ended March 31, 2001.      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                        |
|   | 10.2   | First Amendment, dated  April 20, 2001, to Amended and Restated Facility B Credit Agreement dated  December 1, 1999. Incorporated by reference from the Partnership’s Form 10-Q  for the quarter ended March 31, 2001. |

**(b) Reports on Form 8-K:**             Therewere no reports on Form 8-K filed during the quarter ended June 30, 2001.

**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

| Date:   August 14, 2001 |   | CROWN  PACIFIC PARTNERS, L.P.                                      |
|-----------------------------------|--------|--------------------------------------------------------------------|
|                              |   |                                                               |
|                              | By:    | Crown Pacific  Management Limited  Partnership, as General Partner |

 

|   | By:                                                                        | /s/  Richard D. Snyder |
|--------|----------------------------------------------------------------------------|------------------------|
|   |                                                                       |                        |
|   | Richard  D. Snyder                                                         |
|   | Senior  Vice President and Chief Financial Officer                         |
|   | (Duly Authorized  Officer and Principal Financial  and Accounting Officer) |