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Strategy vs. Execution

Strategy vs. Execution. The Hampton Story. Family-owned company in business since 1950s One large Doug fir sawmill in Willamina, Oregon-annual production capacity 180 MMBF One veneer mill, also in Willamina Lumber wholesale business-total sales $100 million. Hampton Lumber Mid-1980s.

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Strategy vs. Execution

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  1. Strategy vs. Execution The Hampton Story

  2. Family-owned company in business since 1950s One large Doug fir sawmill in Willamina, Oregon-annual production capacity 180 MMBF One veneer mill, also in Willamina Lumber wholesale business-total sales $100 million Hampton Lumber Mid-1980s

  3. Hampton Lumber Mid-1980s • Modest Oregon timberland holdings near Willamina – 30,000 acres • Heavily reliant on federal timber sale contracts • Minimal net worth Look what’s lurking…

  4. Which Is More Important? Brilliant Strategy or Flawless Execution Overall 1980s Hampton corporate strategy was opportunistic local growth

  5. 1986 – Sawmill Expansion Opportunity: • National pulp & paper company wants to divest two Oregon sawmills Benefits: • Product diversification into hemlock • Additional volume to sell through wholesale lumber business • Relatively low acquisition price

  6. 1986- Sawmill Expansion Risks: • Timber supply • SBA 500 rule • Rumored poor workforce • Hemlock perceived as inferior product ? ? ?

  7. Decision Point! Spotted Owl litigation underway… Should Hampton’s strategy change? • Should we exit the lumber business? • Should we shift business to other geographical areas? • Should we attempt to purchase our own timber supply?

  8. Late 1980s - Early 1990s Corporate strategy changed to timberland acquisition – veneer mill closed “With trees, you have options…”

  9. Timberland Acquisition Opportunities: • Large fixed-price timber cutting right available from national paper company • 34,000 acres of timberland available for purchase near Astoria, Oregon Benefits: • Timber supply for Willamina & Tillamook sawmills • Protection against shrinking federal timber harvest

  10. Timberland Acquisition Risks: • If log prices drop, company could be wiped out • Obtaining financing would be challenging • Time is of the essence

  11. Decision Point! Manufacturing strategy has been led by family head and focused on “lean & mean” with limited capital investments. Should Hampton bring in new managers with different ideas on manufacturing? Considerations: • Additional mill investments will tie up valuable capital • Personnel changes can be disruptive • Mill operations have not been historically very profitable, unless lumber markets have been strong

  12. 1992 -1994Company’s Financial Position is Stable – Still Looking For Opportunistic Growth Opportunities: One Southern Yellow Pine (SYP) sawmill under construction in Texas is available for acquisition Two SYP sawmills available in Alabama for a reasonable price

  13. SYP Opportunity Benefits: • Timber supply risk diversification away from Pacific Northwest • Product diversification into SYP for wholesale lumber company Risks: • No Hampton experience in the South • Significant geographic distance away from core business • Sawmills needed significant additional investment

  14. 1995 – Federal Timber Harvests Still Declining Opportunities: • Cavenham is selling entire Oregon timberland holdings • International Paper is selling all Oregon & Washington timberland

  15. Benefits: Significant timber holdings not normally on the market Huge timber supply provides many options and puts Hampton in the “Big Leagues” Banks are accommodating risk-taking 1995 – Timberland Acquisition Potential 15

  16. Risks Significant debt required could put company at risk in down cycle Timber holdings are not near our sawmills 1995 – Timberland Acquisition Potential 16

  17. Opportunity: Three sawmills for purchase in SW Washington Mid 1990s - Good Years 1998 - Very Tough Year Benefits: • Two of the sawmills produce studs, which would be a new product for Hampton • Purchase price is historically very cheap 17

  18. Risks: Current owner is in financial difficulty and mills have been for sale for a while. Mills are in a valley near U.S. Forest Service lands, so timber supply could be an issue. Mills have been union for years - other Hampton operations are non-union. Sawmills Acquisition? 18

  19. Opportunity: Very large moulding & millwork manufacturer in Mexico is in financial difficulty and offers Hampton a low-cost venture into remanufacturing Mill Business is growing…Should we expand our wholesale business? Benefits: • Almost no capital entréeto significant remanufacturing capacity • Reman labor costs are very competitive vs. U.S. options 19

  20. Risks: Hampton has no experience in Mexico Hampton has no management experience or systems to manage a reman business Expand Our Wholesale Business? 20

  21. Opportunity: A sawmill with a good quality reputation is for sale in Northern Washington Benefits: Cheap acquisition cost Low-cost private & state timber supply is available Core business, although five hours from Portland. 2002 - Cowlitz Acquisition A Big SuccessLet’s Keep It Going! 21

  22. Risks: Current owner is almost bankrupt and has not maintained mill well Mill needs significant investment to be competitive Workforce capability and depth is questionable Economy is heading down after 9/11 tragedy 2002 Sawmill Acquisition 22

  23. 2003-2005 Very Successful Period For Industry and Hampton New Vision Adopted: • Our Core Values Guide Our Conduct • Ethics • People • Candor • Innovation • Execution 23

  24. Opportunity: Two Canadian sawmills available for purchase in Northern Interior British Columbia Benefits: Product diversification into SPF lumber for wholesale company Cheap timber supply available Good first step for new vision More Sawmill Capacity in 2006? 24

  25. Risks: Pine beetle is destroying timber supply Hampton has no experience in Canada or with foreign exchange risk Lumber market is entering a down cycle that could be challenging More Sawmill Capacity? 25

  26. Should we adjust some of our strategic actions to focus on the green movement? Considerations: Can we change the public debate on logging to emphasize renewable resources? Are there market opportunities for green building products? How much will additional environmental restrictions impact Hampton’s ability to be successful in business? 2007 – Climate Change Issues Are Upon Us And Green-Washing Is Prevalent 26

  27. Hampton Today 27

  28. Still a family-owned company, but with non-family day-to-day management Seven sawmills in Oregon, Washington, and Canada with annual production capacity of 1.9 billion board feet Very large wholesale business with total sales in a normal year of $1.5 billion Timberland holdings of approximately 100,000 acres However, the current housing depression is a potential game changer! Hampton Today 28

  29. Go Beavs! Never Forget!Strategy Is Worthless Without Execution! 29

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