Longview Fibre Company - Company Profile, Information, Business Description, History, Background Information on Longview Fibre Company

300 Fibre Way
Longview, Washington 98632

History of Longview Fibre Company

Longview Fibre Company owns and operates a pulp and paper mill as well as 16 container and bag plants in 11 states. The company also manages a sawmill and owns more than 570,000 acres of timberlands in Oregon and Washington, which produce logs for sale. Longview Fibre's plants make a number of paper products, including corrugated shipping containers and merchandise bags, and its paper mill uses wood waste, wood chips, and sawdust to produce pulp to produce kraft paper and containerboard.

Paper Products from Waste Wood: Late 1920s--30s

Longview Fibre Company was first conceived in the mind of Monroe Wertheimer of Thilmany Pulp and Paper Company, based in Wisconsin. Wertheimer had noted the waste wood being produced by a new sawmill overseen by the now defunct Long-Bell Lumber Company. The idea was to utilize that waste wood at a paper mill in Longview, Washington. The first concern was whether or not the wood produced by the Northwestern sawmill--which came from Douglas fir trees--would make suitable paper. After experimenting in Wisconsin with wood shipped from Longview, Wertheimer collected a group of investors and launched the new paper mill. Elected as president was H.L. Wollenberg, formerly an oil company executive. Wertheimer's son, R.S. Wertheimer, became Longview Fibre's vice-president and resident manager. Wertheimers and Wollenbergs remain among the company's directors and corporate officers.

Longview's beginning sparked the company's tradition for utilizing waste wood fiber. Wood from the Douglas fir tree, a dominant species in the Northwest, was formerly wasted; it had been burned before Longview decided to utilize its wood chips in the production of kraft paper. The method was a cornerstone on which Longview Fibre was built, and it continued into the 1990s. Longview was also the first to utilize sawdust in the manufacture of paper.

Once arrangements were made with Long-Bell to provide a plant site, waste wood, steam, and electricity, all the newly formed Longview Fibre Company needed was a pulp mill and a containerboard machine, which were constructed within a year. When Longview Fibre first opened its doors in 1927, there was one containerboard machine and 300 committed employees. The company's goal was to produce high-quality paper products. The total output at that time was 100 tons per day.

A second paper machine was up and running by 1928. The following year, Longview acquired General Fibre Box Company, which had a large container plant in Springfield, Massachusetts. Despite the financial difficulties of the Great Depression, earnings throughout the 1930s were good enough for Longview to expand considerably. In 1933 a third paper machine was installed at the Longview mill. Also during the 1930s, the first electrostatic precipitators were installed in Longview's recovery furnaces to enhance air emission control. Longview's box plants were enlarged in 1934. Then a fourth paper machine was purchased, followed by the fifth machine in 1941. By 1948 a newly constructed container plant in Los Angeles began operations. Another newly built plant was opened in Oakland in 1950.

Expansion and Growth: 1940s--60s

At the same time that the company was expanding its production capacities, it was acquiring timberlands. Its first purchase was in 1941, and through the years a number of acquisitions of small parcels of timberlands in Oregon and Washington grew into the 525,000 acres Longview owned by the early 1990s. The lands were purchased because the company recognized the importance of having its own timber supply. Timberlands provided the company with a wood supply for its own use in making paper if faced with an extreme wood fiber shortage, a condition that began to appear alongside of environmental pressures that surfaced in the late 1980s. The majority of Longview's timberlands were in Oregon. They were managed for timber harvest and the logs sold to independent solid-wood products manufacturers. Since 1951 the company has engaged in a full-scale, sustained-yield forest management program.

A sixth paper machine was installed at the Longview mill in 1951. Business was profitable enough for the Los Angeles and Oakland, California, plants to double their capacity in 1955 in an effort to keep pace with growth on the Pacific coast. Longview took a leading role around that time of converting wooden boxes--used for such things as transporting fruits and vegetables&mdashø fiber or paperboard boxes. This conversion brought so much business to Longview that they built a new container plant in Seattle, Washington, in 1955. The following year a seventh paper machine was helping the Longview mill meet demands. Whenever a paper machine was added to the equipment fold, it required other additions as well, such as pulp machines and recovery equipment. These were all signs of growth.

Longview Fibre acquired Downing Box Company in 1960. Downing produced both corrugated and solid-fiber boxes and added four plants to the Longview fold. The plants were in Milwaukee, Wisconsin; Minneapolis, Minnesota; and Cedar Rapids, Iowa. That same year, the company started running its eighth paper machine. In 1961, the ninth was added. A new container plant near Minneapolis was constructed from scratch in 1963 in order to serve the Twin Cities area. In 1966 Longview Fiber acquired Waltham Bag Company, a producer of grocery bags out of a Massachusetts-based factory and owner of warehouses in other locations in the East. A tenth paper machine was put into operation that year, and another newly constructed container plant was completed in Amsterdam, New York, in 1967.

Challenges and Restructuring: 1970s--80s

The industry was in flux during the 1970s. While sales dipped and energy costs soared, many companies concentrated on investing in updating existing equipment. Longview pursued the development of its profitable converted products business and continued its capital investment programs. During this time, two more container operations were built, one in Yakima, Washington, and another in Twin Falls, Idaho. And another paper machine was added to the Longview mill in 1974. The economic slump of the late 1970s impacted Longview in much the same way that the economic downturn of the late 1980s would: depressed purchases--such as fewer appliance sales--meant fewer boxes sold. In addition, the housing slump hurt lumber sales.

In 1980 Longview suffered its worst earnings drop--a staggering 97 percent plunge after 53 years in business. Not only was the company suffering from the housing slump that was pummeling the entire lumber industry, but Longview was hit doubly hard because it was then buying wood chips from independent lumber mills in order to make paper. The independent mills were down because of the collapsed housing market; the price of wood chips more than doubled in a few months' time, from $60 per ton to $130. Fluctuations in the lumber business had always been balanced for Longview by its paper business, especially since most of its paper business was in grocery bags and containers, a fairly recession-proof market. With the severe crunch in the late 1970s and early 1980s, Longview was in a bind: it had to meet its paper commitments despite the pounding it would take on wood chip prices.

Another contributor to that year's dip in earnings was the Mt. St. Helens eruption; the resultant pollution obliged Longview to purchase a water clarifier it had not previously needed. This was added to $6 million worth of other unanticipated repair bills that year. Financially conservative like his father, Longview president Dick Wollenberg invested approximately $35 million back into the company's paper business. This included $5 million for two new chipping plants so Longview could reduce its dependency on outsiders. This would prevent a repeat of the painful month of April Longview had in 1980, when the company was forced to shut down its paper mill for two weeks because of a shortage of chips. The overall strategy was to focus more on high-margin items such as bleached papers and lighter-weight papers. Despite paper-making being a highly capital-intensive business, it had long been a profitable one for Longview Fibre.

Over the next two years, many modifications were made in Longview Fibre's paper machine, pulping, power, and recovery areas in order to save on energy costs and increase efficiency. This was part of the company's overall upgrading. Energy costs were substantial in an operation the size of Longview's. Still, the continuing recession rocked the industry. The price of 1,000 board-feet of logs dropped nearly 28 percent in 1982 from its high in 1979. By 1984 Longview's margins on logs was only 23 percent.

Longview continued its capital improvements agenda, investing close to $100 million in its pulp and paper mill and converting plants by 1987. This translated into gains in output and quality; reduction in energy costs; and improved product mix and mill utilization. Fourteen converting plants were at work making corrugated and solid-fiber shipping containers and paper bags in Washington, California, Idaho, Minnesota, Wisconsin, Illinois, Iowa, and Massachusetts, while Longview's primary paper grew to maximum capacity. Longview also acquired a site for a box plant in Spanish Fork, Utah, and closed down an unprofitable bag plant in Kansas City.

Prices rose on all four of Longview Fibre's product lines in 1987, as domestic and export markets revived. In 1986 about 40 percent of the company's timber production was sold in Japan, China, and Hong Kong. The company-owned 487,000 acres of tree farms looked well poised to profit from a decline in competition from Canada and the South, as well as from government-owned timber in the Northwest.

More expansion projects were announced in 1988, including a 12th paper machine to produce lightweight bag and specialty kraft paper grades and a new recycling plant to process old corrugated containers and new kraft clippings. Between 1983 and 1988, improvements had been made on every paper machine at the Longview mill, greatly increasing production rates. Other changes alongside the mill modernization program was Longview's handling of raw material. Whereas previously close to 90 percent of the company's materials arrived by rail, by 1989 truck dumps had been rebuilt to accommodate larger rigs, and 274 trucks, four barges, and 60 railcars were handled daily. Also in 1989, the company built a new used-box recycling plant. The used-box recycling plant, recognized as state-of-the-art in its field, reflected the growing public demand for recycled fibers, but was also built, according to Longview, because of reduced wood supply brought about by environmental pressures--particularly the issue of the northern spotted owl--in the timberlands.

Ups and Downs in the 1990s

The northern spotted owl, threatened with extinction, had a native habitat in the Pacific Northwest. To protect the bird, restrictions were placed on harvesting and foresting within its habitat circles. That habitat encompassed private as well as public lands, and restrictions impacted the industry. A wood shortage due to reduced harvesting drove up the price of wood chips--they more than doubled between 1990 and 1993--in the Pacific Northwest, and owl protection restricted Longview's managing of its timberlands. Longview was still buying nearly half of its wood chip supply from independent saw mills in 1993, and as the major wood source for independent mills was federal forests, costs soared. The best use for timber was not to grind up entire trees for making paper, but to use the residual from trees cut for lumber.

The Pacific Northwest had been in the center of the spotted owl/ancient tree controversy and also the worldwide dioxin/water quality controversy, which came to a full boil in the early 1990s. While the world was overcutting forests from Scandinavia and Canada to Africa and South America, demand for tree products kept growing, particularly in foreign markets. The forest-rich Pacific Northwest became a prime base for export, which intensified the struggle for its preservation. Longview was considered the most conservative of loggers in the region; in fact, it was said to be the only lumber company in the region that could accelerate its timber harvesting. Profits in all product lines inched upward as the battles raged on. The spotted owl issue became a point of war between the lumber industry and environmentalists, and with the change of administration in 1993, the shift of focus in Washington, D.C., went from industry to environment.

Meanwhile, Longview Fibre's healthy cash flow brought about talk of leveraged takeovers and, by the spring of 1990, the Robert Bass Group owned 8 percent of Longview. Just over a quarter of the company was owned by officers, directors, descendants of the company's founding families, and employees. While log prices improved somewhat, prices for wood chips remained high and earnings low. Takeover rumors peaked, then calmed when the Bass Group lowered its stake in the company to less than five percent. In the summer of 1990, a strike was averted when pulp mill workers approved a new four-year contract that had been in dispute. That same year, the company's 12th paper machine started producing lightweight paper.

Fire weather caused some concern in 1992, when a long west coast drought threatened to limit log production. Nonetheless, Longview Fibre officials said demand and prices were strong in the log market. Prices for paper and paperboard products declined during that same time. While earnings improved by 93 percent in 1992, the mill production was still down due to lagging paper markets and industry over-capacity. In 1992 Longview Fibre started the first ever solid wood products mill; the central Washington mill utilized very small logs and included special equipment from Finland. The mill produced dimension lumber and timbers in both standard and metric sizes for markets at home and abroad. Meanwhile, Longview Fibre Company's main pulp and paper mill maintained a daily production capacity of 3,000 tons, in addition to three container divisions and bag plants.

Struggles continued in 1994, and the company's earnings fell 17 percent for fiscal 1994, dropping to $33.4 million from $40.3 million in 1993 and marking Longview Fibre's sixth consecutive year of poor results. Longview blamed unsatisfactory earnings on a weak market that forced the company to run at about 87 percent of capacity. Despite the problems, however, the company managed to have some bright spots--paperboard demand was on the rise, the paper market saw improvement, and the prices of corrugated boxes increased. In addition, Longview was in the midst of constructing a cogeneration plant for long-term energy supply and a corrugated sheet plant in Utah.

Longview Fibre refused to let poor market conditions take over operations, and to combat the fluctuations of the pulp and paper market, the company spent the mid-1990s searching for more stable alternatives. One option Longview explored was to offer more niche products, such as high-end, multicolored boxes designed to hold specialty items such as software or wine. Another new item offered by Longview was a new kind of extensible paper, called Tea-Kraft. Extensible paper was used to construct bags for holding products such as cement. Longview also planned to introduce pallets manufactured with corrugated material. The company also continued its effort to modernize its plants and equipment, which it began at the beginning of the decade.

In 1995, in the wake of restored trade relations with Vietnam, Longview exported 2,000 metric tons of kraft paper to Vietnam. The following year the company announced plans to expand its three plants in Utah. Longview's largest Utah plant, Spanish Fork, was expanded considerably, with more than 90,000 square feet added to the plant. This marked the fifth expansion effort of Spanish Fork since its construction in 1988. Longview's Cedar City plant was doubled in size, and its container distribution warehouse in Logan was also expanded, gaining a new design center to better assist customers with box design. In 1997 Longview began building a corrugated sheet plant in Grand Forks, North Dakota, to meet growing box demand in the North Central region. Also that year the company upgraded its printing and labeling equipment.

Despite efforts to improve operations, Longview continued to perform poorly. Though net earnings in fiscal 1995 improved an impressive 128 percent over fiscal 1994 earnings, the following year earnings declined 26 percent and revenues fell 17 percent. Longview's plants ran at about 82 percent of capacity in fiscal 1996, and the company suffered from declines in timber, paper and paperboard, and converting operations. In fiscal 1997 Longview reported a six percent drop in sales and a 77 percent decline in net earnings, falling from $56.4 million to $12.7 million, the lowest in a decade. Oversupply of containerboard was partly to blame, and Longview also felt the effects of the economic crisis in Asia&mdashout 22 percent of the company's sales in 1997 came from Asia.

Longview felt confident that a recovery was forthcoming, and in early 1998 company officials cautiously indicated that a turnaround was imminent. Though the paper and paperboard and converting divisions suffered from declines in fiscal 1997, Longview's timber operations had operating profits of $101 million. Industry analysts agreed that Longview had most likely hit bottom in the winter of 1997--98 and that the company's outlook was more positive.

Unfortunately for Longview, the worst came in 1998, when it reported a net loss of $6.65 million on sales of $763.2 million, a drop of three percent compared to sales in 1997. Plants operated at 75 percent of capacity, and the Asian economic crisis created lower demand for containerboard, causing an oversupply of containerboard and thus lower prices. Longview discontinued manufacturing grocery and carry bags at its Spanish Fork plant because of poor results, and a lack of profitability forced the company to close its Rockford box plant in Illinois. In 1998 Longview Fibre announced plans to exit the grocery bag business to focus more attention on higher priced merchandise, such as color print bags, and handle shopping bags.

Longview began its long-awaited turnaround at the end of the decade. In fiscal 1999 it posted net earnings of $19.9 million on revenues of $774.3 million, and by the close of the fiscal year Longview's plants were running at 97 percent of capacity. The company's three divisions also fared better, with operating profits for timber operations increasing 12 percent, and operating losses in paper and paperboard falling from $13 million in fiscal 1998 to $4.1 million. Operating losses in the converted products division also fell, from $39.9 million in fiscal 1998 to $11.5 million the following year. Longview began construction of a corrugated sheet plant in Seward, Nebraska, to accommodate industrial and agricultural packaging demands in the region. In October of 2000 Longview began building a corrugated container plant in Bowling Green, Kentucky.

For the first nine months of fiscal 2000, Longview continued to show improvements. Sales reached $642,506, up from $547, 342 for the first nine months of fiscal 1999, and net income increased 255 percent, from $7,975 in the first nine months of 1999 to $28,303 for the comparable period in 2000. Still, the company struggled with a poor timber market, which affected profits in the timber division during the third quarter of 2000. Having been in business for more than 70 years, however, Longview had learned to weather the cyclical nature of the timber and paper markets. Longview Fibre remained confident and hopeful that it would survive and succeed well into the next millennium.

Principal Subsidiaries: Longfibre Ltd.; Longtimber Company of Oregon.

Principal Competitors: Boise Cascade Corporation; Smurfit-Stone Container Corporation; Weyerhaeuser Company.


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Further Reference

'Bass Group Cuts Stake in Longview,' New York Times, November 2, 1990, p. D4.'Box Plants Learn Ink is the Key Link,' Paperboard Packaging, November 1986, p. 32.Denne, Lorianne, 'Longview Fibre Gears Up For a Fight,' Puget Sound Business, January 29, 1990, p. 14.Drapeau, Jacques, 'Longview Fibre Lowers Steam Use by Reducing PV Air Temperatures,' Pulp & Paper, September 1983, pp. 167--69.Ducey, Michael, 'Longview Fibre Modernization Plan Shifts to Pulp Mill, Recovery Block,' Pulp & Paper, July 1989, pp. 96--97.Erb, George, 'Longview Fibre Takes Long View of Rebound; Worst Seems Over for Wood-Products Firm,' Puget Sound Business Journal, January 23, 1998, p. 4.------, 'Outlook Is Improving for Longview Fibre,' Puget Sound Business Journal, January 21, 2000, p. 6.Guide, Robert, 'Mill-Wide Process Changes Reduce Energy Use at Longview Fibre,' Pulp & Paper, March 1982, pp. 114--16.Harris, William, 'Catch-22,' Forbes, September 14, 1981, p. 214.'Long Longview,' Barron's, December 10, 1990, p. 44.'The Long View on Longview,' Forbes, March 5, 1990, p. 176.'Longview Expands in Utah,' Paperboard Packaging, July 1996, p. 12.'Longview Fibre Co.,' Business Journal-Portland, July 30, 1990, p. S33.'Longview Fibre Co.,' Insiders' Chronicle, August 20, 1990, p. S37.'Longview Fibre Co.,' Wall Street Journal, August 20, 1992, p. B4.Maturi, Richard, 'Logging Profits,' Barron's, June 22, 1987, p. 56.Shaw, Monica, 'Aggressive Strategy, Flexibility Boost Product Performance at Longview Fibre,' Pulp & Paper, July 1, 1999, p. 42.Shortt, Lee, 'Condensate Treatment Program at Longview Fibre Reduces Corrosion,' Pulp & Paper, September 1986, p. 166.Stepankowsky, Paula L., 'Longview Fibre Chief Sees Possible Signs of Improvement in 1999,' Dow Jones Business News, December 23, 1998.Stepankowsky, Paula L., 'Longview Fibre's Chief Is Uncertain Company Can Meet Analyst Estimates,' Wall Street Journal, December 22, 1995.Wilma, D.D., 'Press Rebuild Improves Mullen, Output of Linerboard Machines,' Pulp & Paper, February 1982, pp. 57--58.'Woodsman's Song,' Forbes, April 6, 1987, p. 194.

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