UNITED STATES WOOD-BASED INDUSTRY: A REVIEW OF STRUCTURE AND ORGANIZATION by Paul V. Ellefson and Michael A. Kilgore January 2010 STAFF PAPER SERIES NUMBER 206 Department of Forest Resources College of Food, Agricultural and Natural Resources Sciences University of Minnesota St. Paul, MN 55108 For more information about the Department of Forest Resources and its teaching, research, and outreach programs, contact the Department at: Department of Forest Resources University of Minnesota 115 Green Hall 1530 N. Cleveland Avenue North St. Paul, MN 55108-6112 Ph: 612-624-3400 Fax: 612-625-5212 Email: [email protected] http://forestry.umn.edu/publications/staffpapers/index.html The University of Minnesota is committed to the policy that all persons shall have equal access to its programs, facilities, and employment without regard to race, color, creed, religion, national origin, sex, age, martial status, disability, public assistance status, veteran status, or sexual orientation UNITED STATES WOOD-BASED INDUSTRY: A REVIEW OF STRUCTURE AND ORGANIZATION by Paul V. Ellefson and Michael A. Kilgorea January 2010 a Professors, Department of Forest Resources, University of Minnesota, St. Paul, MN. Research supported by Minnesota Agricultural Experim ent Station; Research and Developm ent-RPA Assessment Program, Forest Service, U.S. Departm ent of Agriculture, Washington, DC; and the Southern Research Station, Forest Service, U.S. Department of Agricultural, New Orleans, LA. Contents Page INTRODUCTION 1 TIMBER GROWING INDUSTRY 1 General Character of Industry 1 Major Segments of Industry 2 Nonindustrial Private Landowners 2 Industrial Fee-Owning Landowners 3 Real Estate Investment Trusts 4 Timber Investment Management Organizations 10 TIMBER HARVESTING AND TRANSPORTING INDUSTRY 17 General Character of Industry 17 Major Companies in Industry 18 TIMBER MANAGEMENT SUPPORTING INDUSTRY 21 General Character of Industry 21 Major Companies in Industry 23 WOOD PRODUCT MANUFACTURING INDUSTRY 30 Industry-wide Conditions 30 Major Industry Segments 33 Wood Product Manufacturing Group 33 Paper Manufacturing Group 40 Wood Furniture Manufacturing Group 47 Geographic Arrangement 54 Shipments, Establishments and Employees 54 Geographic Presence of Industry 65 Organizational Location of Companies 69 Economic and Business Concentration 72 Shipment Values 72 Employees and Establishments 77 Business Assets and Income 81 Capital Expenditures 84 i Contents (continued) Page Diversification and Subsidiaries 87 Industry-wide Diversification 87 Primary Product Specialization 90 Subsidiaries and Joint Ventures 93 Enterprise Ownership 99 Legal Form of Ownership 99 Demographic Character of Owners 101 Corporate Stock Ownership 103 Foreign Ownership 106 Market Entry and Merger Activity 113 Entry and Mobility 113 Mergers and Acquisitions 117 Raw Material Control and Strategies 129 Open-Market Timber Purchases 129 Landowner Cooperative Programs 130 Independent Timber Producing Entities 132 Contractual Purchasing Agreements 133 Fee-simple Timberland Ownership 134 Performance 146 Profits and Growth 146 Productivity 151 Capacity Utilization 156 Employment Conditions 158 Research and Development 163 Industry-wide Patterns 163 Company Programs 172 Environmental and Resource Stewardship 177 Environmental Commitment 177 Forest and Forest Practice Certification 181 Pollution and Waste Abatement 183 Energy Consumption and Conservation 191 Hazardous and Toxic Wastes 195 SUMMARY AND OBSERVATIONS 198 LITERATURE CITED 202 APPENDIX TABLES 210 LIST OF TABLES AND FIGURES 235 ii UNITED STATES WOOD-BASED INDUSTRY: A REVIEW OF STRUCTURE AND ORGANIZATION INTRODUCTION The U.S. wood-based industry is an important and dynamic part of the nation’s economic and social fabric. The industry’s enterprises are mindful of the need to continuously seek innovative and forward-looking responses to rapidly changing domestic and global conditions (Ince and others 2007, Turner and others 2005). In 2007, the industry was responsible for contributing nearly $323 billion in shipment values to the nation’s economy and was the workplace for more than 1.4 million persons. Although the industry in general may rely on forests as a common source of raw material, the industry’s many segments are extremely diverse in the products they produce and in their often unique need f or tim ber, labor and m anufacturing f acilities. At the risk of overgeneralizing, suggested here is that the wood-based industry is com posed of four m ajor segments or groups, namely the timber growing segment, timber management support segment, timber harvesting and transport segment, and the wood product manufacturing segment. Although important segments of the industry, the wholesale and retail trade sectorsof the industry are not considered by this review (Appendix Table 1). TIMBER GROWING INDUSTRY General Character of Industry The timber growing s egment of the wood-based industry is engaged in the operation of timber tracts for purposes of growing and selling andingst timber harvest which can be subsequently harvested and m anufactured into wood products. Although the definition m ay not be inclusive, timber growing enterprises have been identified collectively as the timber tract operations industry (U. S. Census Bureau 2008a). Included within th e latter are private owners of small and medium forest properties, timberland owning manufacturing firms, tax-advantaged entities such as real estate investment tr usts ( REITs), a nd in stitutional tim berland in vestors s uch a s tim ber in vestment management organizations (TIMOs). In some manner, forestland owners in all of these categories engage in the sale of timber grown on their property. In 2007, the tim ber tracts industry (narrowly defined) was nationall y composed of 450 establishments that employed more than 2,600 persons with an annual payroll of about $130 million. Each establishment averaged about 6 employees and an annual payroll of $290,000. As depicted by the following, the industry has experienced a net gain of 32 establishments (8 percent) since 1998 1 with an especially sharp increase occurring from 2001 to 2002 (increase of 239 establishments). In contrast, employment within the industry gained a respectable 32 percent from 1998 through 2005, only to experience a loss of 1,892 employees (42 percent) from 2005 through 2007 (Appendix Table 2) (U. S. Census Bureau 2009a). Year Establishments Employees Annual Payroll (million dollars) 2007 450 2,632 130.3 2006 454 2,806 131.5 2005 472 4,524 192.6 2004 521 5,023 210.0 2003 621 5,515 220.6 2002 680 4,203 158.2 2001 441 3,203 123.0 2000 469 3,337 132.0 1999 431 3,258 121.9 1998 418 3,426 132.4 As gauged by the number of employees per establishment, the industry’s establishments are quite modest in size. In 2007, 84 percent of them employed one to nine persons while 19 percent employed 10 to 49 persons. Only four establishments reported 100 or more employees in 2007 (one each located in Alabama, California, Florida, and Louisiana). Since 1998, there has been a modest (about 2 percent) decline in the portion of em ployees in industry establishments with one to nine employees. Forty-two of the industry’s 2007 establishm ents were located (descending order) in Georgia, Oregon, Alabama, Mississippi and Florida. These same states accounted for 45 percent of the employees working in the industry (U. S. Census Bureau 2009a). Major Segments of Industry Nonindustrial Private Landowners Nonindustrial private owners (including family owners) of forest land are very often growers and sellers of tim ber. Included in this ownership category are individual s, t rusts, and certain corporations that do not own or operate timber processing facilities. Most individuals classified as nonindustrial private owners own relatively small parcels of forest land and very often focus their forest management activities on interests other than the production and harvest of timber. In 2006, more than 10 million such landowners owned 260 million acres of forestland (35 of US total forest land) and in 2002 harvested m ore than 10.6 billion cubic fee t of timber (Butler 2008). Many of these landowners are m embers of the Am erican Tree Farm System ( 24 m illion acres of private forestland owned by 90,000 family forest owners) (American Forest Foundation 2008). 2 A considerable number of forestland owners classified as nonindustrial private forest owners actually each own substantial forest property – but no processing facilities. Examples are Starker Forests, Inc. - - family owned, 60,000 acres of forest land in Oregon; Shasta Forests Company -- family owned, managed by W.M. Beaty and Associates, 280,000 acres of forest land in California; and Port Blakel y Tree Farms, LP – fam ily owned, 140,000 acres of forest land in Oregon and Washington; Pingree Associates – family owned, managed by New England Forestry Foundation (762,000acres), 806,500 acres of forest in Maine;H. C. Haynes, Inc – private corporation, 100,000 acres in Maine; St. Joe Company – corporate owned, 199,000 acres of forest in GA and FL; Pope Resources, LP – public corporation, 115,000 acres of forest in OR and WA; J. M. Huber Corporation – private corporation, 500,000 acres of forest in Maine and Southeast United States; Bayroot, LLC – private corporation, 578,000 acres in M aine and New Hampshire (managed by Wagner Forest Management, Ltd.); Baskahegan Company – family owned, 101,000 acres in Maine; W estervelt Company – private corporation, 500,000 acres; Soper-Wheeler Co – family owned,