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                                  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, 2001 OR

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


                         Commission file number 0-23259


                       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 incorporation              (I.R.S. Employer
               or organization)                           Identification No.)

    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>


<TABLE>
<CAPTION>

                                    Form 10-Q

                                Table of Contents

                                                                                      Page
<S>                                                                                   <C>
Part I.  Financial Information

         Condensed Consolidated Statements of Operations
                  for the three months ended September 30, 2001 and 2000 ...............3

         Condensed Consolidated Statements of Operations
                  for the nine months ended September 30, 2001 and 2000 ................4

         Condensed Consolidated Balance Sheets
                  at September  30, 2001 and December 31, 2000 .........................5

         Condensed Consolidated Statements of Cash Flows
                  for the nine months ended September 30, 2001 and 2000 ................6

         Notes to Condensed  Consolidated Financial Statements .........................7

         Management's Discussion and Analysis of Financial
                  Condition and Results of Operations .................................10


Part II.  Other Information

         Item 1.  Legal Proceedings ...................................................15

         Item 2.  Changes in Securities and Use of Proceeds ...........................15

         Item 3.  Defaults Upon Senior Securities .....................................15

         Item 4.  Submission of Matters to a Vote of Security Holders .................15

         Item 5.  Other Information ...................................................15

         Item 6.  Exhibits and Reports on Form 8-K ....................................16

</TABLE>

                                    2 of 16

<PAGE>



PART l.  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>

                                                         Three Months Ended September 30,
                                                     -----------------------------------------
                                                            2001                   2000
                                                     ------------------     ------------------

<S>                                                           <C>                    <C>
Revenues                                                      $ 24,299               $ 14,064
Cost of timber harvested                                        (5,935)                (4,785)
Depletion, depreciation and road amortization                  (17,600)                (6,563)
                                                     ------------------     ------------------
      Gross profit                                                 764                  2,716

Selling, general and administrative                             (1,811)                (2,525)
Equity in net (income) of affiliate                             (1,695)
                                                     ------------------     ------------------
      Operating income                                          (2,742)                   191
                                                     ------------------     ------------------

Interest expense                                                (5,585)                (5,569)
Interest income                                                      2                     85
Amortization of deferred financing fees                           (169)                  (169)
Other income                                                        13                    233
                                                     ------------------     ------------------

      Net income (loss)                                         (8,481)                (5,229)

</TABLE>


   See accompanying notes to the condensed consolidated financial statements.

                                    3 of 16

<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,
                                                            ------------------------------------------
                                                                   2001                   2000
                                                            ------------------     -------------------
<S>                                                                  <C>                     <C>
Revenues                                                             $ 41,093                $ 49,948
Cost of timber harvested                                              (12,926)                (11,609)
Depletion, depreciation and road amortization                         (27,787)                (18,508)
                                                            ------------------     -------------------
      Gross profit (loss)                                                 380                  19,831

Selling, general and administrative                                    (6,246)                 (6,686)
Equity in net income of affiliate                                      (1,695)                    607
                                                            ------------------     -------------------
      Operating income (loss)                                          (7,561)                 13,752
                                                            ------------------     -------------------

Interest expense                                                      (16,532)                (16,425)
Interest income                                                            85                     315
Amortization of deferred financing fees                                  (506)                   (506)
Other income                                                              133                   1,237
                                                            ------------------     -------------------

      Net income (loss)                                               (24,381)                 (1,627)

</TABLE>



      See accompanying notes to the condensed consolidated financial statements.

                                    4 of 16

<PAGE>

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

                                                                             September 30,        December 31,
                                                                                2001                  2000
                                                                         ------------------    -------------------
                                                                            (Unaudited)                 *
<S>                                                                              <C>                    <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                   $   2,622              $   3,168
     Accounts and current portion of notes receivable, net                           3,318                  6,875
     Prepaid expenses and other current assets                                          20                     35
                                                                         ------------------    -------------------

          Total current assets                                                       5,960                 10,078

     Timber and timberlands, net                                                   226,600                265,109
     Investment in affiliate                                                        34,889                 20,588
     Property, plant and equipment, net                                                828                    926
     Notes receivable, less current portion                                            257                      -
     Deferred financing fees, net                                                    4,142                  4,648
                                                                         ------------------    -------------------

          Total assets                                                           $ 272,676              $ 301,349
                                                                         ==================    ===================

LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
     Affiliate credit facility outstanding                                       $       -              $       -
     Accounts payable and accrued liabilities                                        9,853                  4,548
     Payable to general partner and affiliate                                          784                  2,065
     Deferred revenue                                                                    -                  1,474
                                                                         ------------------    -------------------

          Total current liabilities                                                 10,637                  8,087
                                                                         ------------------    -------------------

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

Members' Equity:
     Managing member's interest                                                        370                    683
     Nonmanaging member's interest                                                  36,669                 67,579
                                                                         ------------------    -------------------

                                                                                    37,039                 68,262
                                                                         ------------------    -------------------

          Total liabilities and members' equity                                  $ 272,676              $ 301,349
                                                                         ==================    ===================
</TABLE>

* Derived from audited Consolidated Balance Sheet as of December 31, 2000.

                                    5 of 16

     See accompanying notes to the condensed consolidated financial statements.


<PAGE>


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

                                                                                  Nine Months Ended September 30,
                                                                             -----------------------------------------
                                                                                    2001                   2000
                                                                             ------------------     ------------------
<S>                                                                                  <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities                                            $  12,864               $ 20,589
                                                                             ------------------     ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Timber, timberlands and road additions                                            (6,864)                (2,279)
      Purchase of property, plant and equipment - net                                        -                    (52)
      Proceeds from sale of assets                                                          15                     46
                                                                             ------------------     ------------------
Net cash used in investing activities                                                   (6,849)                (2,285)
                                                                             ------------------     ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Distributions to members                                                          (6,561)               (19,683)
                                                                             ------------------     ------------------
Net cash used in financing activities                                                   (6,561)               (19,683)
                                                                             ------------------     ------------------

Decrease in cash and cash equivalents                                                     (546)                (1,379)
Cash and cash equivalents - beginning of period                                          3,168                  2,798
                                                                             ------------------     ------------------

Cash and cash equivalents - end of period                                            $   2,622               $  1,419
                                                                             ==================     ==================

Noncash activities:
      Contribution of timber cutting rights and timberlands
        for investment in affiliate                                                  $  16,289               $     -

</TABLE>



      See accompanying notes to the condensed consolidated financial statements.

                                    6 of 16

<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 in 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 accounting
principles  generally  accepted  with the  United  States of  America  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 2000 Annual Report on Form 10-K. Operating results for
the three and nine month  periods ended  September 30, 2001 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 2000 Annual Report on Form 10-K.



Reclassifications
Certain  amounts  presented for 2000 have been  reclassified  for  comparability
purposes  and have no impact on net income for the three and nine month  periods
ended September 30, 2000.

                                    7 of 16

<PAGE>

2.  Timber and Timberlands:
Timber and timberlands consisted of the following:


<TABLE>
<CAPTION>

                                                                            September 30,         December 31,
                                                                                 2001                 2000
                                                                          -------------------  --------------------
<S>                                                                               <C>                  <C>
        Timber and logging roads                                                  $  310,132           $   317,651
        Timberlands                                                                   35,764                39,111
        Seed orchard and nursery stock                                                 1,780                 1,364
                                                                          -------------------  --------------------

                                                                                     347,676               358,126
        Less accumulated depletion and road amortization                             121,076                93,017
                                                                          -------------------  --------------------

                                                                                  $  226,600           $   265,109
                                                                          ===================  ====================

</TABLE>


3.       Investment In Affiliate:
The following is summarized  financial  information for U.S. Timberlands Yakima,
LLC ("USTY"), the MLP's equity basis affiliate:
<TABLE>
<CAPTION>



                              Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended
                                 September 30,          September 30,         September 30,         September 30,
                                     2001                   2000                  2001                  2000
                              --------------------   --------------------  --------------------  --------------------

<S>                                  <C>                  <C>                   <C>                  <C>
        Net sales                    $ 993                $ 7,404               $ 6,852              $ 17,177
        Gross profit                    30                  1,980                 3,230                 7,295
        Net income (loss)           (2,081)                  (125)               (2,459)                1,642

</TABLE>


During the nine months ended September 30, 2001, the Company contributed cutting
rights and  timberland  located in Central  Oregon to its  affiliate,  USTY. The
contributions  have an  aggregate  agreed  upon value of $18.5  million and were
added to the  Company's  Preferred  Interest  in USTY.  Terms of the  additional
senior  preferred  interest  acquired are the same terms as the senior preferred
interest  previously issued to the Company.  The Company recorded its additional
preferred  interest  at its basis  for the  cutting  rights  and  timberland  of
approximately  $16.3  million.  All property that has been  contributed  for the
Company's  preferred  interest in USTY has been  pledged as  collateral  by USTY
under  its  credit  facility  with its  lender.  During  the nine  months  ended
September  30, 2001 the Company  exchanged  a previous  contribution  of cutting
rights to its  affiliate  with an agreed upon value of $12.0  million and a cost
basis of $11.9 million for other properties with similar valuations.

On March 30, 2001, the Company purchased timber cutting rights for approximately
17.2 million board feet from USTY for $4.5 million.  These timber cutting rights
expire in March 2004.

On September 17, 2001 the Company sold timber cutting  rights for  approximately
80.6 million board feet to USTY for $12.0  million.  These timber cutting rights
expire in August 2004.

                                    8 of 16

<PAGE>


4.  Short-Term Debt:
The Company has a credit  facility with an affiliate of the General Partner (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 (1.50% at September 30, 2001),  which is based on the Company's  leverage
ratio. The  prime-lending  rate was 6.00% at September 30, 2001. The Company had
$0 in outstanding  borrowings  under the Affiliate  Credit Facility at September
30, 2001. The Affiliate  Credit Facility was scheduled to expire by its terms at
the end of September  2001.  The affiliate of the General  Partner that provides
the Affiliate Credit Facility has extended the Affiliate Credit Facility through
December  31,  2001.  The  Company is seeking to replace  the  Affiliate  Credit
Facility  with a working  capital  facility  from an  unaffiliated  third party.
However,  there can be no  assurance  that the Company  will be able to obtain a
working  capital  credit  facility  in amounts  sufficient  to fund its  working
capital  needs  from a  traditional  commercial  lender.  The  Company  and  the
affiliated  lender have also  initiated  discussions  with  respect to a further
extension  of the credit  facility  on terms  comparable  to those that would be
obtained from an unaffiliated financing source.

5.  Long-Term Debt and Distributions:
As  of  September  30,  2001,   the  Company  was  not  permitted  to  make  any
distributions  as it had not exceeded the  requisite  Consolidated  Fixed Charge
Coverage Ratio within the Restricted Payments provisions of the Senior Notes.

6.  Other Matters:
On November 8, 2001, the Company announced the receipt of a revised offer from a
group led by senior  management to take the Company  private.  The revised offer
contemplates a cash tender offer for approximately 50% of the outstanding common
limited  partnership units not already owned by the entity or its affiliates for
$3.75  per  unit in cash.  Unitholders  will  receive  7.0%,  seven-year  senior
subordinated  notes of the Company in the principal amount of $3.75 per unit for
the remaining  common limited  partnership  units.  This offer is subject to the
execution of the definitive agreements and other customary  conditions,  as well
as the dismissal or satisfactory  settlement of the Company's  outstanding class
action litigation.

On May 10,  2001,  the Board of Directors  of the General  Partner  announced an
indefinite  suspension  of the  quarterly  distribution  to  Unitholders  due to
current conditions in the timber market.


                                    9 of 16

<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  quarters  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.

Current Market Conditions

     Third  quarter  2001  prices for  finished  wood  products  (e.g.,  lumber,
plywood,  and  engineered  wood  products)  were higher than second quarter 2001
prices,  but were  down  from  the same  period  in 2000.  This was a result  of
increased log prices for Douglas Fir and Sawlog  Ponderosa Pine,  which accounts
for 70% of the third quarter  harvest mix.  Average  realizations  were down 10%
from  the  previous  year,  but up 33%  from the  previous  quarter.  11% of the
increase was due to better species mix of logs in the third  quarter.  5% of the
increase  was due to lower  logging  costs  and 17% of the  increase  was due to
higher log prices.

                                    10 of 16

<PAGE>

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

               2001
<S>                                     <C>             <C>       <C>        <C>             <C>       <C>
Three Months Ended September 30         27,984            -       83,899     $ 347           $ -       $ 173
Three Months Ended June 30               9,890            -       28,624     $ 313           $ -       $ 138
Three Months Ended March 31             20,939            -       14,744     $ 357           $ -       $ 133


               2000

Three Months Ended September 30         22,718            -       29,501     $ 372           $ -       $ 189
Three Months Ended June 30              13,908            -       51,037     $ 432           $ -       $ 346
Three Months Ended March 31             20,564          503        8,701     $ 425         $ 379       $ 325

</TABLE>


Quarter Ended September 30, 2001 Compared to Quarter Ended September 30, 2000

     Revenues  Revenues  for the  quarter  ended  September  30, 2001 were $24.3
million,  an increase of $10.2 million or 72% from revenues of $14.1 million for
the same period in 2000. The  significant  increase in revenues during the third
quarter of 2001 are a combination  of an increase in sales volume over the third
quarter of 2000 and a partial offset caused by the continuation of weak industry
conditions.

     Timber  deed and  stumpage  sales for the third  quarter of 2001 were $14.5
million on volume of 83.9 million board feet  ("MMBF"),  as compared to the same
period in 2000,  when timber deed and  stumpage  sales were $5.6 million on 29.5
MMBF.  The average  timber deed and stumpage  price was $173 per thousand  board
feet ("MBF")  during the third  quarter of 2001, as compared to $189 per MBF for
the same  period in 2000.  The  decrease  in deed and  stumpage  value  reflects
struggling market conditions.

     Log sales for the quarter  ended  September  30, 2001 were $9.7  million on
volume of 28.0 MMBF,  as compared to the same period in 2000 when log sales were
$8.4  million on 22.7 MMBF.  The  average  sales  price was $347 per MBF for the
third  quarter of 2001,  as  compared to an average of $372 per MBF for the same
period in 2000.  The  decline in log prices  reflects a general  decrease in log
prices and a  continuation  of weak markets that developed in the latter half of
2000.

Gross Profit The Company had a gross profit of $0.8 million in the third quarter
of 2001 as  compared  to a gross  profit of $2.7  million for the same period in
2000, a decrease of $1.9 million.  As a percentage of sales the gross profit was
3.1% as compared to a gross profit  percentage of 19.3 % in the third quarter of
2000.  The  decrease  in gross  profit as a  percentage  of sales is a result of
decreases  in the  amount of  realization  on timber  deed sales  combined  with
deteriorating  market  conditions and increases in depletion rates over the same
period in 2000.

      Selling,   General  and  Administrative  Expenses  Selling,   general  and
administrative expenses decreased by $0.7 million from $2.5 million in the third
quarter of 2000 to $1.8 million in the third  quarter of 2001.  The decrease was
primarily  attributable to decreases in wages and wage related  expenses of $0.3
million and property taxes of $0.2 million.

                                    11 of 16

<PAGE>


     Equity  in Net  Loss of  Affiliate  Equity  in net  loss of  affiliate  was
approximately  $1.7 million for the third quarter of 2001.  This amount reflects
the Company's  common  interest share of the net loss of an affiliate  accounted
for under the equity  method as well as losses in excess of common equity of the
affiliate absorbed by the Company's  preferred  interest in the affiliate.  This
compares  to equity in net  income of  affiliate  of $0.1  million  in the third
quarter of 2000.

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000

     Revenues  Revenues for the nine months ended  September 30, 2001 were $41.1
million,  a decrease of $8.8 million or 18% from  revenues of $49.9  million for
the same  period in 2000.  This  decrease  in  revenues  was  attributable  to a
continuation of market slumping combined with a significant  change in grade mix
of sales as compared to 2000.

     Log sales for the nine months ended  September  30, 2001 were $20.3 million
on volume of 58.8 MMBF,  as  compared  to the same period in 2000 when log sales
were $23.2  million on 57.2 MMBF.  The  average  sales price for logs during the
nine month period ended September 30, 2001 was down  significantly from the same
period in 2000, with Ponderosa Pine,  White Fir and Lodegpole Pine all down over
10% from the average sales price for the first nine months of 2000.  This is due
primarily to overall market conditions combined with the Company's changed sales
mix as compared to the same period in 2000.

     Timber deed and stumpage sales for the nine months ended September 30, 2001
were $20.4  million on volume of 127.3  MMBF,  as compared to the same period in
2000,  when timber deed and stumpage  sales were $26.3 million on volume of 89.7
MMBF. The average timber deed and stumpage sales price for the nine months ended
September  30,  2001 was $160 per MBF,  as compared to $292 per MBF for the same
period in 2000. The decrease in average timber deed and stumpage sales price can
be attributed to lower prices changed sales mix of timber sold in 2001 primarily
due to the fact that the Company  sold the  remainder of its higher value timber
from the Ochoco Timberlands during the second quarter of 2000.

     Gross  Profit  Gross  profit  for the  first  nine  months of 2001 was $0.4
million compared to a gross profit of $19.8 million for the same period in 2000,
a decrease $19.4 million.  As a percentage of sales, gross profit decreased from
39.7% in the first nine months of 2000 to a gross profit  percentage  of 1.0% in
the same period of 2001.  The  decrease in gross profit was  primarily  from two
factors.  First the Company has  continued  to see  significant  declines in its
sales realizations due to depressed market conditions and the changed sales mix.
Second,  contracted  log and haul  costs on a per MBF  basis are up in the first
nine months of 2001 as  compared to the same period in 2000 due to longer  hauls
for delivered logs.

     Selling,   General  and  Administrative   Expenses  Selling,   general  and
administrative expenses decreased by $0.5 million from $6.7 million in the first
nine  months of 2000 to $6.2  million  in the  first  nine  months of 2001.  The
decrease  is  primarily  attributable  to  decreases  in wages and wage  related
expenses  of $0.4  million,  MLP  professional  services  of $0.2  million,  and
property taxes of $0.2 million,  offset by an increase in professional  services
of $0.4 million at the Operating Company.

     Equity in Net Income  (Loss) of  Affiliate  Equity in net loss of affiliate
was $1.7 million for the nine month period ended  September 30, 2001 as compared
to equity in net income of  affiliate  of $0.6  million  for the same  period in
2000.  The amount in the first nine months of 2001 reflects the Company's  share
of net loss (after  intercompany  eliminations)  from its equity  investment  in
affiliate as well as losses in excess of the  affiliate's  common equity,  which
was absorbed by the Company's preferred interest in the affiliate.


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<PAGE>

Financial Condition and Liquidity

     Operating Activities Cash flows provided by operating activities during the
nine months ended  September  30, 2001 were $12.9  million,  as compared to cash
provided by  operating  activities  of $20.6  million  during the same period in
2000.  The $7.7 million  decrease is due  primarily to the Company's net loss of
$24.3  million  compared  to a net loss of $1.6  million  during  the first nine
months of 2000,  a  decrease  in  income of $22.7  million.  This  decrease  was
partially  offset  with an  increase  in cash flows  provided  due to changes in
working  capital  components  and  increased  non-cash  add backs for  increased
depletion  rates in 2001 as compared to 2000 and for the Company's  share of the
net loss equity in net income.

     Investing  Activities  Cash flows used in  investing  activities  were $6.8
million during the first nine months of 2001, as compared to $2.3 million during
the same period in 2000. The increase is primarily attributable to the Company's
purchase of cutting rights from its affiliate for approximately $4.5 million.

     Financing  Activities Cash flows used in financing activities for the first
nine  months of 2001 were $6.6  million as  compared  to cash used in  financing
activities  of $19.7  million for the same period in 2000.  The change is due to
the fact that the  company did not make any  distributions  during the second or
third quarter of 2001, compared to $13.1 million in the comparable period of the
prior year.

     The Company has a credit agreement with an affiliate of the General Partner
(the  "Affiliate  Credit  Facility").  The Affiliate  Credit Facility allows the
Company to borrow up to $12.0 million. The Affiliate Credit Facility will expire
on December 31,  2001.  The Company  will seek to replace the  Affiliate  Credit
Facility prior to its expiration with a new credit facility.

     The agreement  governing  the  Company's  9-5/8% senior notes (the "Notes")
contains restrictive  covenants,  including  limitations on harvest levels, land
sales,  cash  distributions  and the  amount of future  indebtedness.  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, 2001 the Company was in compliance with
the covenants requirements pertaining to the Notes. As of September 30, 2001 the
Company was not permitted to make any  distributions  as it had not exceeded the
requisite  Consolidated  Fixed  Charge  Coverage  Ratio  within  the  Restricted
Payments provisions of the Notes.

         Through  the  first  nine  months  of  2001,  the  Company  funded  its
operations and met its cash  requirements  for  distributions to its Unitholders
and debt service from cash on hand,  cash generated from current  operations and
borrowings under its Affiliate Credit Facility.


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<PAGE>

     Cash required to meet the Company's debt service and any cash distributions
will be significant.  To meet its working capital requirements,  the Company has
been  selling  logs and making  timber  sales at a rate in excess of the General
Partner's  estimate of the current  annual board footage growth on the Company's
timberlands.  The debt service and quarterly cash distributions have been 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 will be adversely  affected.  On May
10, 2001 the Company announced an indefinite  suspension of  distributions.  The
Company continues to evaluate means to improve cash flows, including the factors
mentioned above.  There can be no assurance that prices will improve or that the
Company will be able to take any of these actions and it is unlikely prices will
improve or any of these actions will take effect within a short-term horizon.


PART ll.  OTHER INFORMATION

Item 1.  Legal Proceedings

         In November  2000,  six  purported  class  action  lawsuits  were filed
against the General  Partner and the Board of Directors  of the General  Partner
(the "Board")  alleging breach of fiduciary duty and self-dealing by the General
Partner and the Board in  connection  with an  announcement  on November 2, 2000
that a group led by senior  management  has begun the process to explore  taking
the Company private (the "Going-Private Transaction").

         All six  lawsuits  were filed in the Court of  Chancery of the State of
Delaware for the County of New Castle. Each lawsuit was filed by a Unitholder of
the Company, on behalf of all other Unitholders of the Company who are similarly
situated,  and seeks to have the class certified and the Unitholder bringing the
lawsuit named as representative of the class. In addition,  the lawsuits seek to
enjoin the Going-Private  Transaction,  to rescind the Going-Private Transaction
if it is consummated, and to recover damages and attorneys' fees. In addition to
naming the Manager and the Board as defendants, all six lawsuits name the MLP as
a defendant.

         In the opinion of management,  after consultation with outside counsel,
the pending  lawsuits are not expected to have a material  adverse effect on the
Company's financial position or results of operations.


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 of U.S. Timberlands Yakima, LLC

  *21.1    --       List of Subsidiaries

</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 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.



(b.) Reports on Form 8-K


         On November 8, 2001 the Company filed a Form 8-K containing the revised
privatization offer and the related news release.

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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 19, 2001            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,
                                          Duly Authorized Officer,
                                            And Principal Accounting Officer)




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