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Transnational Corporations

Profile of Crown Pacific Ltd.

May 13, 1999
compiled by George Draffan
Public Information Network
PO Box 965316, Seattle WA 98145-2316
pin@igc.org
www.endgame.org

Footnoted version available by e-mail request

 

Crown Pacific corporate headquarters
121 SW Morrison St, Ste 1500
Portland OR 97204
(503) 274-2300
(888) 697-3276

http://www.crownpacificpartners.com

New York Stock Exchange symbol: CRO

Mr. Bob Hess, Public & Investor Relations Manager

History

In the early 1980s, Crown Zellerbach owned 1.7 million acres in the United States; Crown Zellerbach and Diamond International, which owned mills in Idaho, were acquired by takeover artist Sir James Goldsmith (Cavenham Industries), and subsequently dismantled.

Crown Pacific Ltd. was founded in April 1988 by Portland, Oregon businessman Peter Stott, the founder of the Market Transport Ltd. trucking firm. Stott and partner Tim Blixseth bought 257,252 acres of central Oregon and northern Idaho timberland from Goldsmith for $67 million. "In 1990, Stott and Blixseth parted ways. The next year, The Fremont Group (formerly Bechtel Investments Inc. of San Francisco) bought a majority interest in Crown for $50 million."

Scott Paper timberland acquisition

In 1989, Crown Pacific bought 194,000 acres for $230 million from Scott Paper, including 60,000 acres in Snohomish County. Most of the price was in long-term notes backed by the Sumitomo Bank. U.S. and Finnish banks also helped finance the purchase. The land from Scott Paper supplies Crown's export operations, but parts of the 194,000 acres were to be sold to other companies, including Mutual Life Insurance Co. of New York.

Noisy Creek and Barnaby Slough buyouts

In 1990, The Nature Conservancy bought more than a thousand acres in Whatcom County, Washington, from Crown Pacific for $10.5 million; federal tax money was to eventually pay for the land, which included 642 acres of ancient forest on Noisy Creek. In 1991, Washington State Parks purchased 160 acres on the Skagit River from Crown Pacific for $1.9 million; at that time, CP was negotiating yet another sale, of 139 acres on nearby Barnaby Slough, to The Nature Conservancy.

Gilchrist Timber Co. purchase

Crown Pacific owns 218,000 acres in Oregon and 106,000 in Washington; CP purchased Gilchrist Timber Co. in 1991. The acquisition of Gilchrist led to heavy debt, which drives Crown's rapid cutting; in 1993, CP completed a $160 million debt consolidation.

DAW Forest Products and W-I Forest Products purchases

In the fall of 1993, Crown Pacific acquired DAW Forest Products and W-I Forest Products; the Washington State Board of Investment's shares in DAW have been sold to Crown Pacific. The DAW and W-I deals included seven sawmills in Spokane, Idaho, and Montana, as well as 257,000 acres of land.

Trillium purchase

In 1997, Crown Pacific bought 65,000 acres of timberlands in Washington state from Trillium Corp for about $153 million. The timberlands which are located near Crown Pacific's holdings in the Skagit Valley, include blocks in Whatcom, Skagit, and Snohomish counties. About 590 million board feet of total merchantable hemlock, Douglas fir, cedar and hardwoods are included in the sale, said the company.

Canyon Lake Creek buyout

In January 1999, Crown Pacific sold 2,300 acres of the land purchased from Trillium, including 600 acres of old-growth forest, to the Trust for Public Land for about $3.5 million. The Paul Allen Foundation involved. The Canyon Lake Creek property near Bellingham, Washington included old-growth stands of Alaska yellow cedar, mountain hemlock and silver fir.

Arlecho Creek buyout

"The Lummi Nation, Northwest Indian College, Crown Pacific, Ltd., and The Nature Conservancy of Washington State have formed a unique Partnership to preserve the ancient forests of Arlecho Creek. The Partnership was initiated in 1995 after six years of conflict between the Lummi Nation and a prior owner. In 1995 Crown Pacific took ownership of the basin and signed a Letter of Agreement with the Lummi Nation making a commitment to work together to secure the funds necessary to transfer title of the watershed to the Lummi Nation. The Agreement also sets forth cooperative management strategies on the adjoining 8,500 acres of forestlands in the South Fork of the Nooksack basin owned by Crown Pacific. The Partnership was assisted by The Nature Conservancy of Washington which played a key role in fundraising and in facilitating negotiations between the Lummi Nation and Crown Pacific. The Nature Conservancy will continue as a partner in this effort, supporting the completion of the project and participating in management of the basin under terms and conditions set forth in the conservation easement for the Arlecho Creek forest."

Timberlands

"Crown Pacific owns and manages more than 5 billion board feet of timber on 800,000 acres of timberlands in the Pacific Northwest. In addition, the company operates six manufacturing plants, which produce lumber and other wood products (not plywood, however)."

"Crown Pacific timberlands are spread over approximately 800,000 acres in Oregon, Washington, Idaho and Montana."

"Most of our tree farms feature mature stands, with more than 75% of our merchantable trees older than 50 years."

Crown Pacific has six mills. In Oregon, Crown Pacific has mills near Gilchrist and Prineville. In Washington, the mills are located near Marysville and Port Angeles. The company's Idaho mills are located near Coeur d'Alene and Bonners Ferry. The new mill at Bonners Ferry replaced an existing mill at this site. Crown Pacific's annual production capacity is more than 570 million board feet of lumber.

Sales and marketing offices in Oregon, Arizona, California and Utah, as well as contractor service yards in Arizona and Nevada. In 1996, Crown Pacific acquired a Eugene, Oregon, wholesale trading company to build a stronger marketing and sales presence and to help the company control its products further down the distribution channel. To expand this strategy, Crown Pacific acquired a Phoenix professional contractor supply company in January 1998, and acquired another professional contractor supply company early in 1999, which has operations in Las Vegas and Reno, Nevada. The two new Nevada operations complement the company's other wholesale marketing activities.

Crown Pacific is a publicly traded partnership, which trades primarily on the New York Stock Exchange under the symbol "CRO."

"One major characteristic of a partnership is its tax structure. Unlike corporations, partnerships do not pay federal income tax. Instead, each partner pays his or her allocated share of income, avoiding double taxation."

"Cash Distributions - Tax Deferrals Cash distributions are generally considered a return of capital and are taxable only to the extent that they exceed the unitholders' tax basis. A unitholder is required to report his or her share of the partnership's income in his or her state and federal income tax returns. Through 2001, the taxable income reported to a partner is expected to be less than 20% of the distributions that are received. For example, an investor who received $2.204 per unit for 1998 would have taxable income of less than $0.44, substantially all of which will be taxed at long-term capital gains rates. The tax deferral is recognized when the unitholder sells their partnership units."

Crown Pacific Officers & Directors

Officers

Peter W. Stott, President and Chief Executive Officer
Roger L. Krage, Senior Vice President of Corporate Affairs, General Counsel and Corporate Secretary
Richard D. Snyder, Senior Vice President and Chief Financial Officer
W. R. Jones, Executive Vice President of Resources
Sandy Fulton, Executive Vice President of Operations
L. James Weeks, Vice President of Wholesale Operations
P.A. Leineweber, Vice President of Administration
Mark B. Conan, Vice President of Finance

Directors

Robert Jaunich II, Chairman of the Board of Control of the Managing General Partner and Managing Director of direct investments of Fremont Investors, Inc.

Peter W. Stott, President and Chief Executive Officer, Crown Pacific Partners, L.P.

James A. Bondoux, Retired Managing Principal of The Fremont Group.

Charles E. Carlbom, President and Chief Executive Officer of United Grocers, Inc.

Richard B. Keller, President of Keller Enterprises, Inc.

John W. Larson, Retired Chief Operating Officer of Chronicle Publishing.

Christopher G. Mumford, General Partner of Scarff, Sears & Associates and a Managing Director of Questor Partners Fund, L.P.

William Smith, President of William Smith Properties, Inc.

Peter W. Stott, 54, has been a Director of the Board of Control since its formation and a member of the Executive Committee and he has been President and Chief Executive Officer of Crown Pacific since its inception in 1994. In addition, he served as Chief Executive Officer and in various other capacities for predecessors of the partnership from 1988 until 1994. Mr. Stott is also Chairman and founder of Market Transport, Ltd., a temperature controlled regional motor carrier company located in Portland, Oregon, which employs more than 350 people. Mr. Stott has been involved in the ownership and operations of timberlands since 1983. He is a member of the Board of Trustees for the Nature Conservancy and a member of the Board of Directors for Liberty Northwest Insurance Company.

Roger L. Krage, 51, is Senior Vice President of Corporate Affairs, General Counsel and Corporate Secretary. Mr. Krage has been involved in the legal, administrative, financial and risk management aspects of the forest products business for over 16 years. In addition to overseeing the legal affairs of Crown Pacific, he is closely involved with the development and implementation of corporate planning.

Richard D. Snyder, 51, is Senior Vice President and Chief Financial Officer. Mr. Snyder joined Crown Pacific in 1992 as Treasurer and Chief Financial Officer and has served as Assistant to the President. Mr. Snyder has over 26 years experience in the accounting and finance profession focusing extensively on the forest products industry. From 1981 through 1992, Mr. Snyder was Vice President of Finance for Gregory Forest Products.

W. R. ("Ray") Jones, 46, is Executive Vice President of Resources, joining Crown Pacific in 1992 as Procurement and Acquisition Forester and as Divisional Land and Timber Manager in Central Oregon. Mr. Jones has over 20 years of experience in timberland management, procurement and acquisitions. From 1985 through 1992 Mr. Jones was Timber Manager for Triangle Veneer, Inc., and was a log buyer and woodlands forester for Pope and Talbot from 1979 through 1984. Prior to 1979, Mr. Jones was a service forester and Forest Practices officer for the Oregon Department of Forestry.

Sandy Fulton, 55, joined Crown Pacific in 1998 as Executive Vice President of Operations. He has over 38 years of forest product industry experience. Before joining the Partnership, Mr. Fulton was President and Chief Executive Officer of Pacific Forest Products Limited, a Canadian wood products company since 1993.

L. James Weeks, 57, Vice President of Wholesale Operations. Mr. Weeks joined Crown Pacific in 1996 to oversee all marketing and sales activities of the Partnership. Mr. Weeks has over 27 years experience in the forest products industry, primarily in sales and marketing related functions. Mr. Weeks was formerly President of Maywood-Anderson Forest Products Company, a wholesale sales company, and was with that firm from 1982 through 1996 in several executive capacities. Crown Pacific acquired Maywood-Anderson in September 1996

P.A. ("Tony") Leineweber, 54, Vice President of Administration, joined Crown Pacific in 1990 to oversee its administrative, personnel, and risk management functions. Mr. Leineweber has over 20 years experience in managing these corporate functions.

Mark B. Conan, 38, is Vice President of Finance. Mr. Conan joined Crown Pacific in 1993 as Tax Director and Assistant Treasurer. Mr. Conan has over 15 years experience in the accounting and finance profession, focusing primarily on taxation, mergers and acquisitions. Mr. Conan was formerly a Senior Manager at the accounting firm of Price Waterhouse LLP, and was with that firm from 1983 though 1993.

 

Crown Pacific financial data as of 5/12/1999

Market Capitalization (000) $594,000

Income Statement Fiscal year ended December,1998

Annual Operating Revenue (000) $667,000

Oper. Profit Before Dep. & Amort.(000) $153,200

Pre-tax Income (000) $28,200

Total Net Income (000) $28,200

Return on Equity 12.2%

Return on Invested Capital 3.7%

Pre-tax Profit Margin 4.2%

Post-tax Profit Margin 4.2%

 

Shares Outstanding 4/21/199

Shares Outstanding (000) 26,990

Shares Held by Institutions (000) 633

# of Institutions Holding Shares 27

% of Shares Outstanding Held by Institutions 2.9%

"Fremont Group retains a majority interest in the general partner of Crown Pacific, a Pacific Northwest timber and forest products company, acquired by Fremont in 1991. This was one of several investments made before Fremont Partners was established as the main vehicle for direct investing. For third quarter 1998, Crown Pacific Partners, L.P. reported net revenues of $171.8 million, an increase of 41.6% over 1997 third quarter net revenues of $121.3 million. co-based private investment company that manages $10 billion in assets. Fremont Partners makes substantial equity investments in operating companies with market capitalizations generally up to $1 billion, typically seeking to deploy as much as $100 million in each investment opportunity. Our capital resources of almost $1 billion for equity investments include a $605 million private equity fund as well as additional capital from our sponsor, the Fremont Group. Fremont Partners is an extension of the Fremont Group's well-established Direct Investments program. Since 1991, Fremont has invested over $250 million in 11 buyout transactions. Those investments have since grown to more than $1 billion, with more than 90% of this value realized. Fremont's individual investments have produced an aggregate internal rate of return in excess of 80% - clear evidence that our approach is a good one."

Fremont Group offficers and directors

Stephen D. Bechtel, Jr. Chairman Emeritus, Fremont Group and Chairman Emeritus and Director, Bechtel Group, Inc.

Riley P. Bechtel Chairman and Chief Executive Officer, Bechtel Group, Inc.

Richard E. Cavanagh President and Chief Executive Officer, The Conference Board, Inc.

Harold J. Haynes Chairman, Board of Counselors, Senior Counselor, and Director, Bechtel Group, Inc., and former Chairman and Chief Executive Officer, Standard Oil Company of California.

Cordell W. Hull* Director, Bechtel Group, Inc., and former Chairman, Bechtel Enterprises, Inc.

Robert Jaunich II* Managing Director, Fremont Group.

David L. Redo Managing Director, Fremont Group.

George P. Shultz Senior Counselor, Director, and former President, Bechtel Group, Inc., and former U.S. Secretary of State.

John W. Weiser Director and former Senior Vice President, Bechtel Group, Inc., and former President, Bechtel Enterprises, Inc.

Crown Pacific insider Shareholders as of January 29, 1999:

PERCENT PERCENT

NUMBER OF UNITS NUMBER OF UNITS

SHAREHOLDER OF UNITSOUTSTANDING OF UNITS OUTSTANDING

- -------------------------------------- ------------- ---------------- --------------- ----------------

Fremont Investors, Inc. (2) (3) 296,4431.2% 3,562,825 61.7%
SVE II, Inc. (1) - - 2,711,318 47.0%
Sequoia Ventures Inc. (2) - - 1,466,758 25.4%
Robert Jaunich II (4) 315,4431.3% 5,029,583 87.1%
Peter W. Stott (5) 660,4452.7% 3,403,904 59.0%
James A. Bondoux (6) - - 2,711,318 47.0%
Richard B. Keller 610,0682.5% - -
Roger L. Krage (7) 215,200 * 50,9190.9%
John W. Larson 45,285 * - -
Richard D. Snyder (8) 18,998 * - -
W. Ray Jones (9) 19,132 *
L. James Weeks (10) 12,700 * - -
Christopher G. Mumford 2,626 * - -
Charles E. Carlbom1,150 * - -

All executive officers and directors as a group (15 persons)(11)1,748,8967.3% 5,773,088

 

How many employees does Crown Pacific have?

"The company has approximately 1,200 employees at its six conversion facilities, four major tree farms, corporate headquarters, and sales and marketing offices."

When did Crown Pacific Partners, L.P. become publicly traded?

"Founded in 1988, Crown Pacific's initial public offering was completed in December 1994. The company completed a second public offering on July 31, 1996, and a third offering in December of 1998."

How much "old growth" forest does Crown Pacific own?

"Of the company's 800,000 acres, less than 10% of Crown Pacific's trees are older than 100 years, with significantly less considered "old growth." The company recognizes that some lands are so sensitive that they need complete preservation. When Crown Pacific identifies such tracts, they are either isolated from commercial activity or the land is transferred to a suitable owner, such as The Nature Conservancy. A willingness to enhance and protect company timberlands is central to Crown Pacific's operating philosophy. It illustrates a belief in the long-term value of the company's renewable resources, and it also reflects Crown Pacific's commitment to acting as a responsible steward of the environment and our timberlands."

 

Debt and delisting: March 2003: Crown Pacific to be delisted Tuesday Crown Pacific Partners LP, the wood-products company Local Stocks that owns timberland in Western Washington and operates Interactive sawmills in Port Angeles and Marysville, said its Charting ownership units will commence trading on the OTC The Portland, Ore.-based partnership said it was informed Friday that the New York Stock Exchange plans to begin proceedings to delist Crown Pacific's units in the immediate future, and to suspend trading of its units before the stock markets open Tuesday. A new trading symbol will be assigned at that time, Crown said. Crown Pacific owns and manages approximately 524,000 acres of timberland and several mills in Washington and Oregon. The company on Monday said it had received a delisting List notification from the exchange, after failing to maintain a minimum market capitalization over a30-trading day period of at least $15 million. On Monday, the units were trading at 28 cents, giving the company a market cap of about $8.5 million. The units closed at 20 cents each on Friday. The company reported a 2002 loss of $59.1 million, or $1.92 per unit, on revenue of $484.2 million. The company expects to lose between 35 cents and 40 cents per unit in the first quarter and between 80 cents and $1 a unit for the full year 2003. Its last profitable year was 2000, when it earned $13 million. The partnership said it is negotiating with its lenders on a recapitalization. Due to its $505 million in outstanding debt and the depressed operating environment, Crown Pacific has not paid dividends since December 2000 and does not expect to do so in the near future. Although it renegotiated the terms of its indebtedness, sold some of its timberland assets and reduced its debt in 2002, it may sell more assets to make future principal payments and/or recapitalize the partnership. Another possibility would be a merger with another wood-products company. (Puget Sound Business Journal, March 10, 2003).