================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                     --------------------------------------
                                    FORM 10-Q
                     --------------------------------------

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 For the quarterly period ended September 30, 2000

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934


                  Commission file number 1-13573-01 and 1-13573
                           --------------------------

                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
                         U.S. TIMBERLANDS FINANCE CORP.
             (Exact name of registrant as specified in its charter)

               Delaware                                  93-1217136
               Delaware                                  91-1851612
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation  or organization)

 625 Madison Avenue, Suite 10-B, New York, NY               10022
   (Address of principal executive offices)               (Zip Code)


        Registrant's telephone number, including area code: 212-755-1100

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 Yes [X]  No [ ]

================================================================================


<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS
-------

                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                  QUARTER ENDED SEPTEMBER 30,

                                                           ------------------------------------------
                                                                  2000                    1999
                                                           -------------------     ------------------

<S>                                                        <C>                    <C>
Revenues                                                             $ 14,064               $ 26,175
Cost of timber harvested                                               (4,785)                (6,709)
Depletion, depreciation and road amortization                          (6,563)                (8,077)
                                                           -------------------     ------------------
       Gross profit                                                     2,716                 11,389

Selling, general and administrative                                    (2,525)                (1,801)
                                                           -------------------     ------------------
       Operating income                                                   191                  9,588

Interest expense                                                       (5,569)                (5,495)
Interest income                                                            85                     55
Financing fees                                                           (169)                  (169)
Other income - net                                                        233                      2
                                                           -------------------     ------------------

       Net loss                                                        (5,229)                 3,981
                                                           ===================     ==================
</TABLE>




       See   accompanying   notes  to  the  condensed   consolidated   financial
statements.





                                    2 of 18
<PAGE>



                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                   NINE MONTHS ENDED SEPTEMBER 30,

                                                             --------------------------------------------
                                                                     2000                    1999
                                                             --------------------    --------------------
<S>                                                          <C>                     <C>
Revenues                                                                $ 49,948                $ 57,600
Cost of timber harvested                                                 (11,609)                (11,505)
Depletion, depreciation and road amortization                            (18,508)                (17,329)
                                                             --------------------    --------------------
      Gross profit                                                        19,831                  28,766

Selling, general and administrative                                       (6,686)                 (6,640)
Equity in net income of affiliate                                            607                       -
                                                             --------------------    --------------------
      Operating income                                                    13,752                  22,126

Interest expense                                                         (16,425)                (16,460)
Interest income                                                              315                     406
Financing fees                                                              (506)                   (507)
Other income - net                                                         1,237                   1,141
                                                             --------------------    --------------------

      Net loss                                                            (1,627)                  6,706
                                                             ====================    ====================
</TABLE>


      See accompanying notes to the condensed consolidated financial statements.




                                    3 of 18
<PAGE>




                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                           SEPTEMBER 30,            DECEMBER 31,
                                                                               2000                     1999
                                                                       ---------------------    --------------------
                                                                            (UNAUDITED)                  *
<S>                                                                     <C>                     <C>
ASSETS
Current assets:

    Cash and cash equivalents                                                       $ 1,419                 $ 2,798
    Accounts and current portion of notes receivable - net                            7,252                   3,140
    Prepaid expenses and other current assets                                            16                     981
                                                                       ---------------------    --------------------

       Total current assets                                                           8,687                   6,919

    Timber and timberlands, net                                                     278,022                 293,828
    Investment in affiliate                                                          19,960                  18,243
    Receivable from affiliate                                                           294                     294
    Property, plant and equipment, net                                                  964                   1,038
    Notes receivable - long-term                                                          -                   2,304
    Deferred financing fees                                                           4,817                   5,323
                                                                       ---------------------    --------------------

       Total assets                                                               $ 312,744               $ 327,949
                                                                       =====================    ====================

LIABILITIES AND MEMBERS' EQUITY
Current liabilities:

    Accounts payable and accrued liabilities                                       $ 10,543                 $ 4,472
    Deferred revenue                                                                      -                      39
                                                                       ---------------------    --------------------

       Total current liabilities                                                     10,543                   4,511
                                                                       ---------------------    --------------------

    Long-term debt                                                                  225,000                 225,000
                                                                       ---------------------    --------------------

Members' equity:
    Managing member's equity                                                            772                     984
    Non-managing member's equity                                                     76,429                  97,454
                                                                       ---------------------    --------------------

                                                                                     77,201                  98,438
                                                                       ---------------------    --------------------

       Total liabilities and members' equity                                      $ 312,744               $ 327,949
                                                                       =====================    ====================

</TABLE>


*   Derived from audited Consolidated Balance Sheet as of December 31, 1999

    See accompanying notes to the condensed consolidated financial statements.




                                    4 of 18
<PAGE>



                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                           NINE MONTHS ENDED SEPTEMBER 30,
                                                                     --------------------------------------------
                                                                             2000                    1999
                                                                     --------------------    --------------------
<S>                                                                  <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by operating activities                                       $ 20,589                $ 21,408
                                                                     --------------------    --------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

      Timber, timberlands and road additions                                      (2,279)                   (771)
      Purchase of property, plant and equipment - net                                (52)                    (36)
      Proceeds from sale of assets                                                    46                       -
                                                                     --------------------    --------------------
Net cash used in investing activities                                             (2,285)                   (807)
                                                                     --------------------    --------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

      Distributions to members                                                   (19,683)                (19,682)
                                                                     --------------------    --------------------
Net cash used in financing activities                                            (19,683)                (19,682)
                                                                     --------------------    --------------------

Increase (decrease) in cash and cash equivalents                                  (1,379)                    919
Cash and cash equivalents - beginning of period                                    2,798                   4,824
                                                                     --------------------    --------------------

Cash and cash equivalents - end of period                                        $ 1,419                 $ 5,743
                                                                     ====================    ====================

</TABLE>


      See accompanying notes to the condensed consolidated financial statements.



                                    5 of 18
<PAGE>




                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS OR AS OTHERWISE INDICATED)
                                  (UNAUDITED)

1.  BUSINESS AND BASIS OF PRESENTATION:

BUSINESS

The accompanying consolidated financial statements include the  accounts of U.S.
Timberlands  Klamath Falls, LLC ("USTK"),  a Delaware limited liability company,
and its wholly  owned  subsidiary,  U.S.  Timberlands  Finance  Corp.  ("Finance
Corp"),  collectively referred to hereafter as the Company. Finance Corp. serves
as the co-obligator for USTK's notes. It has nominal assets and does not conduct
operations. All intercompany transactions have been eliminated in consolidation.

U.S. Timberlands Company, LP (the "MLP") owns a 99% non-managing member interest
in USTK.  The MLP was formed on June 27, 1997 to acquire  and own  substantially
all of the equity  interests  in USTK and to acquire  and own the  business  and
assets of U.S.  Timberlands  Management  Company,  LLC,  formerly  known as U.S.
Timberlands  Services  Company,  LLC.  U.S.  Timberlands  Services  Company (the
"Manager")  manages the  business  of the Company and owns a 1% managing  member
interest in USTK.

The primary activity of the Company is the growing of trees and the sale of logs
and standing  timber to third party wood  processors.  The  Company's  timber is
located  in  Oregon,  east  of  the  Cascade  Range.  Logs  harvested  from  the
timberlands are sold to unaffiliated domestic conversion facilities.  These logs
are processed for sale as lumber, plywood and other wood products, primarily for
use in new residential home construction, home remodeling and repair and general
industrial applications.

BASIS OF PRESENTATION

These  condensed  consolidated  financial  statements  have been prepared by the
Company, without audit by independent public accountants,  pursuant to the rules
and regulations of the United States Securities and Exchange Commission.  In the
opinion of management,  the accompanying  unaudited financial statements include
all normal  recurring  adjustments  necessary to present fairly the  information
required  to be set forth  therein.  Certain  information  and note  disclosures
normally included in financial  statements prepared in accordance with Generally
Accepted  Accounting  Principles  have been  condensed  or  omitted  from  these
statements  pursuant  to such  rules  and  regulations  and,  accordingly  these
condensed  consolidated  financial statements should be read in conjunction with
the  consolidated  financial  statements  included in the Company's  1999 Annual
Report on Form 10-K.  Operating  results for the quarter and nine month  periods
ended September 30, 2000 are not necessarily  indicative of the results that may
be expected for the full year or any other period.

There  have  been no  significant  changes  in the  accounting  policies  of the
Company.  There were no  significant  changes in the Company's  commitments  and
contingencies as previously described in the 1999 Annual Report on Form 10-K.

RECLASSIFICATIONS

Certain  amounts  presented for 1999 have been  reclassified  for  comparability
purposes and have no impact on net income.




                                    6 of 18
<PAGE>




2.  TIMBER AND TIMBERLANDS:

Timber and timberlands consisted of the following:
<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30,         DECEMBER 31,
                                                                            2000                 1999
                                                                     -------------------  --------------------

<S>                                                                  <C>                   <C>
Timber and logging roads                                                     $  319,458            $  317,856
Timberlands                                                                      39,691                39,338
Seed orchard and nursery stock                                                    1,684                 1,277
                                                                     -------------------  --------------------

                                                                                360,833               358,471
Less accumulated depletion and road amortization                                 82,811                64,643
                                                                     -------------------  --------------------

                                                                             $  278,022            $  293,828
                                                                     ===================  ====================
</TABLE>

3.  INVESTMENT IN AFFILIATE:
The following is summarized  financial  information for U.S. Timberlands Yakima,
LLC, the MLP's equity basis affiliate.

                                     QUARTER ENDED         NINE MONTHS ENDED
                                  SEPTEMBER 30, 2000       SEPTEMBER 30, 2000

                                 ----------------------  -----------------------

Net sales                                      $ 7,404              $    17,177
Gross profit                                   $ 1,980              $     7,295
Net income (loss)                               $ (125)             $     1,642


There are no  corresponding  amounts for the quarter and nine month period ended
September 30, 1999 as the Company's investment in the affiliate began in October
1999.

4.  SHORT-TERM DEBT:

The  Company  has a  credit  facility  with an  affiliate  of the  Manager  (the
"Affiliate Credit  Facility")  consisting of a revolving line of credit of up to
$12.0 million.  Borrowings  under the Affiliate Credit Facility bear interest at
the prime lending rate as published in the Wall Street  Journal plus  applicable
margin (1.25% at September 30, 2000),  which is based on the Company's  leverage
ratio.  The prime  lending rate was 9.50% at September  30, 2000.  There were no
outstanding  borrowings  under the  Affiliate  Credit  Facility at September 30,
2000.  The  Affiliate  Credit  Facility  expires  June 30,  2001 and any amounts
borrowed thereunder shall then be due and payable.




                                    7 of 18
<PAGE>




5.  SUBSEQUENT EVENTS:


On November 2, 2000,  the MLP announced  that a group lead by senior  management
has begun the process to explore  taking the MLP  private.  On November 9, 2000,
the Board of Directors of the Manager  established an  independent  committee to
evaluate management proposals to take the MLP private.

On October 17, 2000, the Board of Directors of the Manager authorized the MLP to
make a  distribution  of $0.50 per Unit. The total  distribution  will be $6,561
(including  $131 to the  Manager)  and  will be paid  on  November  14,  2000 to
Unitholders of record on October 30, 2000.

6.  NEW ACCOUNTING PRONOUNCEMENT:

In June of 1998, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities", which establishes accounting for derivative
instruments and hedging activities,  and would require the Company to record all
derivatives  as assets  or  liabilities  at fair  value.  Implementation  of the
statement  was delayed by SFAS No. 137 to all fiscal  quarters  of fiscal  years
beginning  after June 15, 2000.  Consistent  with SFAS No. 137, the Company will
adopt SFAS No. 133 as of January 1, 2001.  Management  believes that adoption of
this statement will not have a material impact on the Company.




                                    8 of 18
<PAGE>




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------  CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     Certain information contained in this report may constitute forward-looking
statements  within the  meaning of the federal  securities  laws.  Although  the
Company believes that expectations reflected in such forward-looking  statements
are  based  upon  reasonable  assumptions,  it can  give no  assurance  that its
expectations will be achieved. Forward-looking information is subject to certain
risks,  trends and  uncertainties  that  could  cause  actual  results to differ
materially from those projected.  Such risks,  trends and uncertainties  include
the highly  cyclical nature of the forest products  industry,  general  economic
conditions,  competition, price conditions or trends for the Company's products,
the possibility that timber supply could increase if governmental, environmental
or endangered  species policies change, and limitations on the Company's ability
to  harvest  its  timber  due  to  adverse   natural   conditions  or  increased
governmental restrictions.  These and other risks are described in the Company's
other reports and registration  statements,  which are available from the United
States Securities and Exchange Commission.

OVERVIEW

The Company's principal  operations consist of growing and harvesting timber and
selling  logs,  standing  timber and  related  by-products  to third  party wood
processors. These logs and by-products are processed for sale as lumber; molding
products; doors; mill work; commodity, specialty, and overlaid plywood products;
laminated  veneer lumber;  engineered  wood I-beams;  particleboard;  hardboard;
paper  and  other  wood  products.  These  products  are  used  in  residential,
commercial,  and industrial  construction;  home remodeling and repair;  general
industrial  applications;  and a variety of paper  products.  The results of the
Company's  operations  and its  ability to pay  quarterly  distributions  to its
Unitholders  depend  upon a number  of  factors,  many of which are  beyond  its
control.  These  factors  include  general  economic  and  industry  conditions,
domestic and export prices, supply and demand for timber and logs,  seasonality,
government  regulations  affecting  the manner in which timber may be harvested,
and competition from other supplying regions and substitute products.

SEASONALITY

     The Company's log and standing  timber sales volumes are generally at their
lowest  levels  in the first  and  second  quarter  of each  year.  In the first
quarter,  heavy snowfalls in higher  elevations  prevent access to many areas of
the  Company's  timberlands.  This limited  access,  along with spring  break-up
conditions (when warming weather thaws and softens  roadbeds) in March or April,
restricts  logging  operations to lower  elevations  and areas with rockier soil
types.  As a result  of these  constraints,  the  Company's  sales  volumes  are
typically at their lowest in the first quarter,  improving in the second quarter
and at their highest during the third and fourth quarters. Most customers in the
region react to this seasonality by carrying  sufficiently  high log inventories
at the end of the  calendar  year to carry  them to the  second  quarter  of the
following year.




                                    9 of 18
<PAGE>




CURRENT MARKET CONDITIONS

     Third  quarter  2000  prices for  finished  wood  products  (e.g.,  lumber,
plywood, and engineered wood products) declined from prior year levels.  Average
prices  during the third  quarter for Ponderosa  Pine # 3 shop,  Lodgepole  pine
studs, White fir sheathing, and Douglas fir # 2 were down 34%, 30%, 33%, and 33%
respectively  from the same period in 1999. Log and timber prices were down from
1999 levels for the same period due to this decline in finished product prices.

RESULTS OF OPERATIONS

         Selected operating statistics for the Company:

<TABLE>
<CAPTION>
                                              Sales Volume (MBF)                           Price Realization (MBF)
                                        ------------------------------------------   --------------------------------------
                                                                          Timber                                     Timber
                Period                       Logs         Stumpage         Deeds          Logs        Stumpage       Deeds
                ------                       ----         --------         -----          ----        --------       -----
                 2000

<S>                                         <C>            <C>            <C>             <C>          <C>          <C>
Nine Months Ended September 30               57,190         503            89,239          $ 405        $ 379        $ 292
3rd Quarter                                  22,718           -            29,501          $ 372          $ -        $ 189
2nd Quarter                                  13,908           -            51,037          $ 432          $ -        $ 346
1st Quarter                                  20,564         503             8,701          $ 425        $ 379        $ 325

                 1999
Nine Months Ended September 30               66,380       2,665            70,254          $ 437        $ 430        $ 385
3rd Quarter                                  39,008         744            25,597          $ 444        $ 404        $ 334
2nd Quarter                                  15,376           -            26,898          $ 455          $ -        $ 484
1st Quarter                                  11,996       1,921            17,759          $ 395        $ 440        $ 308
</TABLE>

QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1999

     REVENUES  Revenues  for the  quarter  ended  September  30, 2000 were $14.1
million,  a decrease of $12.1  million or 46% from revenues of $26.2 million for
the same period in 1999.  Revenues  during the third  quarter of 2000 were below
the Company's  expectations due to the continued industry declines.  Pricing for
some of the Company's species is at or near 15-year lows.

     Timber  deed and  stumpage  sales for the third  quarter  of 2000 were $5.6
million on volume of 29.5 million board feet  ("MMBF"),  as compared to the same
period in 1999,  when timber deed and  stumpage  sales were $8.9 million on 26.3
MMBF.  The average  timber deed and stumpage  price was $189 per thousand  board
feet ("MBF")  during the third  quarter of 2000, as compared to $338 per MBF for
the same period in 1999.  The decrease in deed and stumpage  value  reflects the
lower  value  grade of  timber  sold  from  the  Ochoco  Timberlands  as well as
deteriorating market prices.

     Log sales for the quarter  ended  September  30, 2000 were $8.4  million on
volume of 22.7 MMBF,  as compared to the same period in 1999 when log sales were
$17.3  million on 39.0 MMBF.  The  average  sales price was $372 per MBF for the
third  quarter of 2000,  as  compared to an average of $444 per MBF for the same
period in 1999.  The  decline in log prices  reflects a general  decrease in log



                                    10 of 18
<PAGE>



prices and a  significant  shift to a lower  value  species  mix sold during the
third  quarter of 2000 as compared to the same period in 1999.  The  decrease in
the average  log sales price was  primarily  attributable  to a 32%  decrease in
Lodgepole Pine prices combined with an average decrease of approximately  15% in
the  prices of Douglas  Fir and White Fir  during  the third  quarter of 2000 as
compared to the same period in 1999.

     GROSS PROFIT Gross profit  decreased $8.7 million from $11.4 million in the
third  quarter  of 1999 to $2.7  million  in the  third  quarter  of 2000.  As a
percentage  of sales,  gross profit  decreased  from 44% in the third quarter of
1999 to 19% in the third quarter of 2000.  The decrease in gross profit  dollars
is  attributed  to a lower  overall sales volume in the third quarter of 2000 as
compared to the same period in 1999, deteriorating market prices and an increase
in  contracted  log and haul costs.  Log and haul costs  increased due to longer
haul distances for delivered logs as well as rising fuel costs.  As a percentage
of sales  gross  profit is down due to the  deteriorating  market  prices and an
increase in log and haul costs.




                                    11 of 18
<PAGE>




     SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES  Selling,   general  and
administrative expenses increased by $0.7 million from $1.8 million in the third
quarter of 1999 to $2.5 million in the third  quarter of 2000.  The increase was
primarily  due to  $0.2  million  of  severance  expenses,  a $0.3  increase  in
professional  service  expenses,  and increased  property taxes due to an Oregon
property tax amendment  during the third quarter of 2000 as compared to the same
period in 1999.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999

     REVENUES  Revenues for the nine months ended  September 30, 2000 were $49.9
million,  a decrease of $7.7 million or 13% from  revenues of $57.6  million for
the same period in 1999. This decrease in revenues was primarily attributable to
low realizations on delivered log values and decreased demand in the industry in
general.

     Log sales for the nine months ended  September  30, 2000 were $23.2 million
on volume of 57.2 MMBF,  as  compared  to the same period in 1999 when log sales
were $29.0  million on 66.4 MMBF.  The  average  sales price for logs during the
nine month period ended September 30, 2000 was $405 per MBF compared to $437 per
MBF in for the same  period in 1999.  This is due to  continued declines  in the
prices and demand in the timber industry.

     Timber deed and stumpage sales for the nine months ended September 30, 2000
were $26.3  million on volume of 89.7 MMBF,  as  compared  to the same period in
1999,  when timber deed and stumpage sales were $28.2 million on volumes of 72.9
MMBF. The average timber deed and stumpage sales price for the nine months ended
September  30,  2000 was $293 per MBF,  as compared to $387 per MBF for the same
period in 1999. The decrease in average timber deed and stumpage sales price can
be  attributed  to a lower  value  grade  mix of  timber  sold  from the  Ochoco
Timberlands.




                                    12 of 18
<PAGE>




     GROSS PROFIT Gross profit  decreased $9.0 million from $28.8 million in the
first nine months of 1999 to $19.8 million in the first nine months of 2000. The
decrease in gross profit was primarily from three factors. First, contracted log
and haul  costs on a per MBF basis  were  approximately  20% higher in the first
nine months of 2000 as  compared to the same period in 1999 due to longer  hauls
for delivered  logs and higher fuel costs.  Second,  the  Company's  timber deed
sales were composed of a lower value grade mix as compared to the same period in
1999.  Finally,  continued declines in the timber markets have resulted in lower
realizations on delivered log values.

     EQUITY IN NET INCOME OF  AFFILIATE  Equity in net income of  affiliate  was
$0.6  million for the nine month period ended  September  30, 2000.  This amount
represents  the Company's  recapture of losses on its investment in an affiliate
absorbed by the Company during the fourth quarter of 1999.

FINANCIAL CONDITION AND LIQUIDITY

     OPERATING ACTIVITIES Cash flows provided by operating activities during the
nine months ended  September 30, 2000 were $20.6  million,  as compared to $21.4
million  during the same period in 1999.  The $0.8 decrease is due to net income
decreasing  $8.1  million  for the first nine  months of 2000 as compared to the
same period in 1999  combined  with an increase  in cash flows  provided  due to
changes in  working  capital  components.  The  change in  working  capital  was
primarily  driven by the fact that the Company  utilized  notes  receivable  for
timber deed sales during the first quarter of 1999 and the Company received cash
for its timber  deed sales  during the first nine  months of 2000.  Timber  deed
sales  during the first  quarter of 1999  resulted in notes  receivable  of $4.3
million, which reduced operating cash flow during the first nine months of 1999,
while a $2.1  million net  reduction  of notes  receivable  through  collections
during the first nine months of 2000  increased  operating cash flow during that
period.

     INVESTING  ACTIVITIES  Cash flows used in  investing  activities  were $2.3
million during the first nine months of 2000, as compared to $0.8 million during
the same period in 1999. The increase is primarily attributable to the Company's
purchase of cutting rights from its affiliate for approximately $1.3 million.

     FINANCING ACTIVITIES Cash flows used in financing activities, consisting of
distributions  to members were $19.7  million for the first nine months of 2000,
approximately the same as the same period in 1999.

The  Company  has a credit  agreement  with an  affiliate  of the  Manager  (the
"Affiliate Credit  Facility").  The Affiliate Credit Facility allows the Company
to borrow up to $12.0 million under certain terms and  covenants.  The covenants
include restrictions on the Company's ability to make cash distributions,  incur
certain additional indebtedness or incur certain liens. In addition, the Company
is required to maintain certain financial ratios.  The Affiliate Credit Facility
will expire on June 30, 2001. At that time, any amounts borrowed will be due and
payable. As of September 30, 2000 there were no outstanding borrowings under the
Affiliate  Credit  Facility.  The Company has the ability to generate  cash flow
through the acceleration of planned log and timber deed sales.




                                    13 of 18
<PAGE>




     The  agreements  governing the Company's  9-5/8% senior notes (the "Notes")
and the Affiliate  Credit  Facility  contain  restrictive  covenants,  including
limitations on harvest levels,  land sales, cash distributions and the amount of
future  indebtedness.  In  addition,  these  agreements  require  the Company to
maintain certain financial ratios. Under the Notes, the Company's average annual
adjusted harvest volume over any period of four consecutive  years cannot exceed
a volume  of  approximately  147  MMBF as  adjusted  for  timberland  sales  and
purchases.  The Notes also limit  one-year  harvest  levels and  average  annual
harvest levels for consecutive  two-and three-year  periods. As of September 30,
2000 the Company was in compliance  with the covenants and ratios  pertaining to
the Notes and Affiliate Credit Facility.

     Through the first nine months of 2000,  the Company  funded its  operations
and met its cash  requirements for distributions to its members and debt service
from cash on hand, cash generated from current  operations and borrowings  under
its Affiliate Credit Facility.

     Cash required to make  distributions  at current levels and to pay interest
on the Notes is $26.2 million and $21.7 million, respectively, per year. To make
these payments and meet its working capital  requirements,  the Company has been
selling  logs and timber at a rate in excess of the  Manager's  estimate  of the
current  annual board footage growth on the Company's  timberlands.  The Manager
expects that the debt service and quarterly  cash  distributions  will be funded
from  operations and borrowings.  Given projected  volumes for sales of logs and
timber,  estimated  current  board  footage  growth on the  timberlands  and the
harvest restrictions in the Notes, unless prices improve, costs are reduced, new
markets are developed or the Company makes accretive acquisitions, the Company's
ability in the future to make  distributions  at current levels may be adversely
affected.  The  Company  continues  to  evaluate  means to improve  cash  flows,
including the factors mentioned above.  However,  there can be no assurance that
prices  will  improve  or that  the  Company  will be able to take  any of these
actions.


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<PAGE>





PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
-------
     There is no pending litigation and, to the knowledge of the Company,  there
is no threatened  litigation,  the unfavorable  resolution of which could have a
material adverse effect on the business or financial condition of the Company.

ITEMS 2, 3, 4 AND 5 OF PART II are not applicable and have been omitted.
------------------------------



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<PAGE>




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

 (a.) EXHIBITS

<TABLE>
<CAPTION>

<S>                  <C>
    +3.1    --       Amended and Restated Agreement of Limited Partnership of U.S. Timberlands Company, LP

    +3.2    --       Second Amended and Restated Operating Agreement of U.S. Timberlands Klamath Falls, LLC

   +10.2    --       Indenture among U.S. Timberlands Klamath Falls, LLC, U.S. Timberlands Finance Corp.
                     and State Street Bank and Trust Company, as trustee

   +10.3    --       Contribution, Conveyance and Assumption Agreement among U.S. Timberlands Company, LP
                     and certain other parties

   *10.4    --       Form of U.S. Timberlands Company, LP 1997 Long-Term Incentive Plan

   *10.5    --       Employment Agreement for Mr. Rudey

   *10.9    --       Supply Agreement between U.S. Timberlands Klamath Falls, LLC and Collins Products LLC

 ++10.10    --       Operating Agreement for U.S. Timberlands Yakima, LLC

 ff10.11    --       Agreement for Greg Byrne

    **16    --       Letter from Arthur Andersen, LLP dated December 8, 1998

   *21.1   --       List of Subsidiaries

    27.1   --       Financial Data Schedule


</TABLE>

*    Incorporated by reference to the same numbered  Exhibit to the Registrant's
     Registration Statement on Form S-1 filed November 13, 1997.

**   Incorporated by reference to Exhibit 1 to the  Registrant's  Form 8-K filed
     on December 8, 1998.

+    Incorporated by reference to the same numbered  Exhibit to the Registrant's
     Current Report on Form 8-K filed January 15, 1998.

++   Incorporated by reference to the same numbered  Exhibit to the Registrant's
     Form, 10-Q filed on May 15, 2000.

ff   Incorporated by reference to the same numbered  Exhibit to the Registrant's
     Form, 10-Q filed on August 14, 2000.

(b.) REPORTS ON FORM 8-K

         The  Company  filed no reports on Form 8-K  during  the  quarter  ended
September 30, 2000.




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<PAGE>




                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

  DATE: NOVEMBER 14, 2000     U.S. TIMBERLANDS KLAMATH FALLS, LLC
                              By: U.S. Timberlands Services Company, LLC
                                  as Manager

                               By: /s/  Thomas C. Ludlow
                                   -------------------------------------------
                                    Thomas C. Ludlow
                                    Chief Financial Officer
                                    (Chief Financial Officer
                                      and Duly Authorized Officer)


                               By:   /s/  Toby A. Luther
                                   -------------------------------------------
                                    Toby A. Luther
                                    Corporate Controller - Western Operations
                                    (Principal Accounting Officer)


                               U.S. TIMBERLANDS FINANCE CORP.
                               By: U.S. Timberlands Services Company, LLC
                                   as Manager

                               By:  /s/  Thomas C. Ludlow
                                   -------------------------------------------
                                    Thomas C. Ludlow
                                    Chief Financial Officer
                                    (Chief Financial Officer
                                      and Duly Authorized Officer)


                               By:  /s/  Toby A. Luther
                                   -------------------------------------------
                                    Toby A. Luther
                                    Corporate Controller - Western Operations
                                    (Principal Accounting Officer)

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