TJ International, Inc. - Company Profile, Information, Business Description, History, Background Information on TJ International, Inc.

200 E. Mallard
Boise, Idaho 83706

Company Perspectives:

"TJ International is a dedicated team of creative, marketingoriented individuals committed to meeting the needs of the customer, associate, and stockholder. This will be accomplished through strict adherence to the following Basic Business Values: Unsurpassed customer service; respect for our associates; technological leadership and innovation; defect-free quality; a reasonable profit for growth and for the stockholders; integrity in everything we do."

History of TJ International, Inc.

TJ International, Inc., through its Trus Joist MacMillan subsidiary, is the world's leading manufacturer of engineered lumber products. Having pioneered this field in the 1960s, TJ continues to hold a 60 percent share of the North American market and has taken the lead in the small, but growing, European and Asian markets as well. TJ's products are meant to replace traditional solid-sawn lumber for joists, trusses, and other areas of both commercial and residential construction. As the supply of old growth trees needed for solid-sawn lumber dwindles, TJ's products offer alternatives that are not only more readily available and more environmentally friendly, but also stronger, more reliable, and less labor intensive.

TJ markets its products to the commercial, residential, and industrial construction sectors. Products include trusses, I-joists for floors and roofs, rim joists, window and door headers, beams, construction columns, window and door cores, concrete forming and support members, and scaffolding planks. The company's products fall under three primary trademarks and technologies. The company markets its laminated veneer lumber under the Microlam trademark. The company pioneered the laminated veneer lumber (LVL) market, in which logs are cut into thin sheets of veneer, which are then dried, graded, and layered together with the grain parallel. This configuration is then processed using adhesives, heat, and pressure to create wood struts with thicknesses of three-quarters of an inch to 3.5 inches, widths from 24 to 48 inches, and lengths of up to 80 feet. The LVL process eliminates the natural defects of wood, such as knots and warping, reducing wastage. The LVL process is also capable of using up to 75 percent of a log. In addition, the struts are manufactured with knockout holes for wiring and piping, reducing construction site labor costs. Under the Parallam trademark, TJ markets its parallel strand lumber (PSL) products. Similar to LVL, PSL clips the veneer sheets taken from a log into five-eighths-inch-wide strands up to eight feet long. The strands are coated with adhesives, then subjected to pressure and microwave heating to cure the adhesives. The resulting billet, or block of lumber, can reach measurements up to 11 inches by 20 inches by 66 feet. The PSL process, which remains closely protected by patents, is capable of using a higher percentage of a log than traditional lumber techniques or LVL. TJ's youngest product line, marketed under the TimberStrand trademark, uses a proprietary technology called laminated strand lumber (LSL). Unlike LVL and PSL, which typically use logs from larger trees such as pines, LSL uses small, cheaper, and faster-growing aspen, yellow poplars, and other species typically used as pulp logs. In the PSL process, logs are flaked into 12-inch-long strands, which are then coated with adhesives and pressed using steam-injection, which cures the adhesive and adds density to the wood. LSL boards range up to 5.5 inches thick, eight feet wide, and 48 feet long.

TJ's sales are gained primarily through its 51 percent share of Trus Joist MacMillan, a joint venture partnership established in 1991 with Canadian forest products giant MacMillan Bloedel. TJ acts as managing director of Trus Joist MacMillan. In 1996, the company posted sales of $577 million and net earnings of $16 million.

Pioneering Engineered Lumber in 1960

TJ was founded as Trussdeck Corporation by Art Troutner and Harold Thomas in 1960. Thomas provided $8,000 in start-up funds, but it was Troutner who supplied the tools, technology, and the ideas. Troutner, born in 1922, was raised on a farm in Pingree, Idaho, where he displayed a propensity for inventiveness at an early age. Recognizing that Pingree's two-year high school would not provide him with a proper education, Troutner set off for Boise at the age of 13 to live with his grandmother in a boarding house and attend high school in that community of 25,000. After high school, Troutner attended two semesters at Boise Junior College, then joined the Army Air Corps during the Second World War, where he became crew chief for such bombers as the B-17 Flying Fortress and the B-24 Liberator, while also helping to develop the B-29 Super Fortress. After the war, Troutner switched to architecture, receiving a degree in that field from the University of Idaho in 1949. Rather than apply for his architect's license, Troutner sought to combine his engineering skills with his architectural knowledge and his talent for invention. Over the next several decades, Troutner would design some 60 engineering/architectural projects, including the University of Idaho's Kibbie Dome, for which he received the American Society of Civil Engineers' Outstanding Structural Engineering Achievement Award in 1976, placing Troutner in the company of the designers of St. Louis's Gateway Arch, the World Trade Center, JFK International Airport, and the St. Lawrence Seaway.

Troutner and Thomas, a Boise native who studied forestry at the University of Idaho, first met in 1958. Thomas, a travelling wholesale lumber salesman, visited Troutner to sell him lumber for a theater Troutner was building. Instead, Troutner showed Thomas a truss he had been developing during the 1950s. The truss (called a joist when used in floors) featured an open web design, with two-by-fours fastened to overlaid steel tubing. As Troutner told Forbes: "It seemed to me there had to be a better way to build roofs and floors. So I invented this truss. It was lighter and it saved me time and money." Troutner had attempted to sell the idea to lumber manufacturers Boise Cascade and Potlatch, but found no takers. Thomas was impressed by the device, but suggested that Troutner was not using the proper glue and pressure to assemble the truss, at which suggestion Troutner threw Thomas out of his office.

Several months later, Thomas returned to Troutner and convinced the inventor to change the glue and pressure. Thomas next attempted to sell the truss to Weyerhaeuser, which turned it down. The two men decided to go into business for themselves, forming the Trussdeck Corporation in 1960 with $8,000 from Thomas matching Troutner's tools and equipment. Trussdeck's first home was in an old barn, which the company rented for $30 a month. Troutner would oversee the manufacturing, while Thomas acted as salesman and manager.

Trussdeck's truss slowly found acceptance from builders and the partners soon needed to expand the company's manufacturing capacity. The company needed capital to fund its growth, but, as a young start-up business with no real assets, was unable to arrange financing from banks. Instead, the partners turned to the growing fast food industry for inspiration and began to franchise the company's technology. Between 1962 and 1964, Trussdeck set up four franchises in different locations. The investors paid for the factory and equipment, which Troutner designed, and the right to use Trussdeck's patent, while Trussdeck took some two-thirds of each newly formed corporation. Investors were also responsible for sales and management of their franchises. Franchising in this way helped the company raise some $425,000. But, over the next several years, the partners found themselves buried in paperwork. Then one of the franchises, in Portland, Oregon, started failing, and Troutner and Thomas had to buy out the franchise and operate it themselves.

Meanwhile, Thomas was finding it difficult to act as the company's CEO and salesman while also running its marketing and finance operations. During the mid-1960s, he made a number of mistakes that slowed the company's growth. "We didn't raise prices fast enough in the boom years 1964-65," Thomas told Forbes, "so the company's sales went through the roof, but our margins shrank. Then in the bad years of 1966 and 1969, when demand dropped, we didn't drop prices and got hurt. We just weren't very good managers." Finally, in 1969, the company moved to merge its franchise operations into one company, renamed Trus Joist Corporation. Thomas and Troutner each took 20 percent of the new company, and 40 percent went to its franchise investors; the remaining 20 percent was purchased by private investors for $200,000. Next, Thomas brought in Peter Johnson, who held an MBA from Dartmouth's Amos Tuck School of Business Administration, to help run the company. Johnson started as the company's plant manager in 1968, was named president in 1971, and would help restructure the company to $102 million in sales by the end of that decade.

Trus Joist's revenues had reached $11 million by 1970. By then, however, the company was already finding it difficult to find the quality lumber it needed for its truss and joist products. Troutner went back to the drawing board and invented Microlam, the product that would fuel Trus Joist's growth through the 1970s. Microlam products cost some 50 percent more than traditional wood products, but could provide as much as 33 percent savings in labor costs. Microlam beams could also be made in lengths up to 80 feet, far longer than traditional beams. To bring these messages to the construction industry, Johnson began building Trus Joist's sales force to some 155 salesmen by the end of the decade. Total employment reached 1,000 by 1978, as sales grew to $56 million by 1977, $80 million by 1978, and $102 million by 1979, with net earnings for that year of $7.3 million.

From Vision 200 to Future 500 in the 1980s and 1990s

Johnson, who had also led Trus Joist through its initial public offering in 1973, left the company in 1979. He was replaced as president and COO by Walter Minnick, whose Harvard MBA had led him to work on President Nixon's White House staff, before quitting in disgust after Watergate and joining Trus Joist in 1974. As the 1980s began, however, Trus Joist faced the national recession and a suddenly stagnant building market. Thomas, a self-described penny-pincher (during the 1960s, he had a pay phone installed at the company's plant to cut down on employees' long distance phone charges), led the company into belt-tightening measures that included closing the company's Dubuque, Iowa plant, putting on hold plans to add a third West Coast plant, and cutting 13 percent of its salaried employees and 25 percent of its corporate staff. Executive pay cuts ranging from 5 to 15 percent were instituted as well. The result was an increase in profit margins and continued profitability. Despite a drop in revenues to $82 million in 1980, the company managed to earn $6.6 million.

Sales continued to falter during the early 1980s, dropping to $66 million by 1982, although the company continued to post profits. By 1983, construction picked up again, and the company's sales again began to grow. Meanwhile, the company's cash was building, and soon Trus Joist became an attractive takeover target. To head off that possibility, the company, which posted $96 million in 1984 revenues, developed a plan, dubbed "Vision 200," to double the company's size. Vision 200 proved to be easily attainable: by 1987, the company had increased its manufacturing facility from 13 plants in 1980 to 25 plants, plus 136 sales offices. The company's employee base also more than doubled, reaching 2,600. Revenues increased to $256.9 million, for net earnings of $13 million.

With this growth, Trus Joist next determined to double its size again, formulating its "Future 500" plan, which called for $500 million in annual sales and a spot on the Fortune 500. The first step toward achieving this goal was to diversify the company's operations. Future 500, however, was to prove more difficult to attain than Vision 200.

The company's first diversification move was into energy management systems, which cost Trus Joist some $2.5 million over 18 months in the mid-1980s. Abandoning that direction, in 1987 Trus Joist looked at a new area, acquiring Norco Windows of Hawkins, Wisconsin and Dashwood Industries, of Canada, both of which manufactured wood windows. The acquisitions helped raise annual sales to $351 million by 1989. But then the company, now reorganized as TJ International to include its Trus Joist and Norco subsidiaries, ran into a new recession. Residential housing starts collapsed, and the company's sales sank, to $327 million in 1990 and to $283 million in 1991. By 1991, the company suffered its first-ever loss, of nearly $11 million.

Meanwhile, the company's Trus Joint operation was coming under competitive pressure as other, larger lumber manufacturers, including Boise Cascade and Weyerhaeuser, sought to enter the engineered lumber market, which, given the shrinking old growth supply, was looking more and more attractive. One of these competitors was MacMillan Bloedel, which had spent some $100 million developing its Parallam technology to rival Trus Joist's Microlam. MacMillan, a $3 billion company, sought to expand its engineered lumber division and was considering buying TJ International. Instead, the two companies placed their engineered lumber subsidiaries into a joint venture partnership, named Trus Joist MacMillan. TJ held onto 51 percent of the joint venture, which continued to represent some three-quarters of its annual sales, as well as maintaining the new company's management and direction. Taking charge of the new subsidiary was Trus Joist alum Tom Demig, as president and chief executive.

As the recession faded, TJ's revenues again began to climb, reaching $400 million in 1983. Its Norco Windows subsidiary was beginning to drag on the company's profits, however, and TJ faced a $8 million loss for the year. In 1994, TJ merged Norco with Oldach Window Corp. of Colorado Springs and SealRite Windows of Lincoln, Nebraska, forming the Outlook Window Partnership, with TJ as majority (64 percent) shareholder. The company's window losses continued, however, and in 1995, TJ discontinued its participation in Outlook.

Meanwhile, Trus Joist was looking at a bright new horizon. Environmental concerns were building pressure on the logging industry, leading to federal restrictions on old growth logging. As lumber resources began to dwindle, Trus Joist's engineered lumber products became more attractive, both in terms of environmental impact and in terms of the narrowing price gap. The addition of MacMillan's Parallam technology and the introduction of the new TimberStrand technology was also helping to enhance the engineered lumber market in general. TJ's sales entered a new growth phase, helped in part by a growing international market, especially in Japan and, more slowly, in Europe. By 1994, the company neared its long-desired $500 million mark (on sales of engineered lumber products). The following year, however, a lumber price drop caused the company's sales to sink back to $485 million. With a $40 million charge for the divestiture of its wood windows division, the company lost $36 million for the year. Minnick left the company that year, following disagreements with the board on the company's future direction. Minnick wanted to continue to diversify TJ, but the board chose to focus on growing the engineered lumber market. Minnick was replaced by Demig.

Under Demig, the company began looking toward expanding its international sales, and it opened sales offices in Japan, Australia, France, England, Belgium, Germany, and the Middle East. Trus Joist also built two new manufacturing plants, an $85 million plant in Buckhanon, West Virginia and a $106 million facility in Hazard, Kentucky. In 1996, the company at last reached its Future 500 goal, jumping to $577 million. With old growth lumber supplies continuing to shrink, TJ could look forward to the next milestone for its engineered lumber products--becoming a $1 billion company.

Principal Subsidiaries: Trus Joint MacMillan (51%).

Additional Details

Further Reference

Bailey, Julie, "Trus Joist Venture Heads Overseas," Idaho Statesman, November 5, 1995, p. 1E.------, "What Does TJI Become?," Idaho Statesman, January 5, 1995, p. 5B.Benoit, Ellen, "The Perils of Penny-Pinching," Financial World, October 20, 1987, p. 44.R.L.F., "Spare That Old Tree!," Forbes, January 3, 1994, p. 156.Galluccio, Nick, "Just a Different Glue," Forbes, November 24, 1980, p. 101."Knock on Wood," Forbes, October 30, 1978, p. 177.Robertson, Lance, "Beneath TJ International's Wood Products Veneer Lies an Earth Friendly Approach," Eugene Register-Guard, May 20, 1993.Tucker, John, "Boise Firm Grows with the Trees," Idaho Statesman, December 19, 1996, p. 5B.Woodward, Tim, "Trus Joist Founder Still at Drawing Board," Idaho Statesman, March 27, 1997, p. 1A.Yang, Dori Jones, "A Lumberman Goes Against the Grain," Business Week, March 29, 1993, p. 52.

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