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Bohemia, Inc.

 


Address:
85647 Highway 995
Eugene, Oregon 97405
U.S.A.

Telephone: (503) 744-4600
Fax: (503) 683-7679


Statistics:
Public Company
Incorporated: 1942 as The Bohemia Lumber Company
Employees: 2,120
Sales: $291.7 million
SICs: 2421 Sawmills & Planning Mills, General; 2436 Softwood Veneer & Plywood; 2493 Reconstituted Wood Products; 5031 Lumber, Plywood & Millwork; 4789 Transportation Services, Not Elsewhere Classified; 4011 Railroads--Line-Haul Operating; 0811 Timber Tracts


Company History:

Until its assets were acquired by Willamette Industries Inc., Bohemia, Inc. was regarded as one of the more progressive forest products companies in the United States, leading the way in the efficient of use of harvested timber. With facilities in Oregon and northern California, Bohemia was involved in manufacturing laminated beams, lumber, plywood, particleboard, and numerous other wood products. The company also maintained a small presence in the marine construction market.

For L. L. "Stub" Stewart and his brother Faye Stewart, 1970 marked a transitional point in their tenure as operators in the U.S. forest products industry. Much had changed since they had assumed control of The Bohemia Lumber Company in 1946 and much would change in the years after 1970. One era would witness the rise of their forest products company, the other its demise; together the two time periods relate a story representative of the roller-coaster ride that many of the country's lumber company owners took during the second half of the 20th century. For the two brothers, the good times came before the bad, beginning with their acquisition of The Bohemia Lumber Company following World War II.

The Stewart brothers purchased Bohemia Lumber at a propitious juncture in the 20th century. The wave of prosperity which followed the war's conclusion rejuvenated many industries, including the construction industry, which was the largest single market for companies like Bohemia Lumber. The demand for new housing, which had remained stagnant during the Depression and World War II, sharply increased during the postwar years, making the harvesting and manufacture of timber a lucrative business. To meet this demand, the number of lumber mills in operation soared; however, as more and more new lumber companies entered the business, competition within the industry became increasingly severe.

Small, under-capitalized lumber companies were forced to shut down, causing a precipitous drop in the number of mills in operation throughout the country. From 1950 to 1970, the number of lumber mills in the United States plunged from more than 50,000 to less than 35,000 as the lumber industry underwent two decades of significant change. In the new business environment that arose during these decades, the logging and manufacture of timber became an industry in which only those companies able to make efficient use of raw materials could effectively compete. Integrated mills which used as much of a log as possible became crucial to the success of a lumber company; as a result, the manufacture of plywood, particleboard, and paper became integral elements of a lumber company's profitability. Well-financed companies which were able to incorporate new logging and manufacturing techniques into their operations flourished, while others dropped by the wayside.

In Oregon, where the Stewarts presided over their business, market conditions were particularly harsh. Although the state ranked as the largest timber producing region in the country from 1950 to 1970, the number of lumber mills plummeted during that same period from 1,455 to a mere 450. Despite operating in the midst of so much economic turmoil, Bohemia Lumber took the necessary steps survive and prosper in the highly competitive wood manufacturing industry.

Taking its name from a nearby mining district where James "Bohemia" Johnson had discovered gold in 1863, Bohemia Lumber was established in 1916 near Cottage Grove, Oregon, to produce Douglas fir lumber. Three years after its formation, LaSells Stewart, the father of L.L. and Faye, purchased a one-quarter interest in the company. The company remained in LaSells's partial control until after World War II, when Stewart's sons acquired the lumber concern. Graduates of Oregon State University's prestigious School of Forestry, L. L. and Faye Stewart were well-equipped for the defining developments set to sweep through their industry. While the company posed few economic challenges during the first 15 years of their tenure, the brothers' managerial talents would ultimately be put to the test as the lumber market became more competitive. Together they would diversify Bohemia Lumber's interests, steering the company toward more profitable fields and reducing its dependence on one aspect of business.

In 1956, Bohemia Lumber began making moves to compete in increasingly aggressive lumber markets. The Stewart brothers built a new sawmill in Culp Creek, Oregon, to replace the company's original mill; further, they also began acquiring other timber-related interests to complement their sawmill operations. In the mid-1960s, Bohemia Lumber assumed control of Cascade Fiber--an ailing particleboard manufacturer based in Eugene, Oregon--through a management contract. Eventually, Cascade Fiber became a wholly owned division of Bohemia Lumber, when the company purchased the remaining 50 percent interest. This acquisition quickly became one of Bohemia Lumber's more profitable divisions and it added diversity to the company's range of products where none had existed previously. Bohemia Lumber continued to expand in 1969 when it began constructing a laminated beam plant in Saginaw, Oregon. Completed in 1971, the plant could produce 50,000 board feet a day using wood stock the company had previously supplied to other laminated beam manufacturers. Ultimately, laminated beams became Bohemia Lumber's mainstay product.

The same year that Bohemia Lumber began construction of its laminated beam plant, L. L. and Faye Stewart broadened the scope their operations considerably with the acquisition of The Umpqua River Navigation Company. The Umpqua River Navigation Company was involved in the sand and gravel business, in dredging, and in the construction of marine jetties--which were necessities on the Pacific Coast, where few natural harbors existed along the region's numerous navigable rivers. A passenger and freight hauler earlier in the century, Umpqua River Navigation Co. was primarily engaged in marine construction projects awarded through government agency contracts. The addition of Umpqua River Navigation Co., which was formed into Bohemia Lumber's Umpqua Division, provided an immediate boost to profits and gave the Stewart brothers a well-rounded, vertically integrated company to surmount the obstacles that lay ahead in the 1970s and 1980s.

While these moves toward diversification were being executed during the 1960s, significant ownership changes were being effected as well. In 1960, U.S. Plywood-Champion Papers acquired a 50 percent interest in Bohemia Lumber, which it bought back in 1967 in anticipation of Bohemia becoming a publicly owned company. When Bohemia Lumber finally went public in late 1968, the event also signalled a name change from The Bohemia Lumber Company to Bohemia, Inc.

With its new name and the solid backing of its initial stock offering, Bohemia exited the 1960s propelled by unprecedented financial growth and buoyed by its recent diversification into laminated beams and marine construction. Sales increased 50 percent in 1969, jumping from $20.1 million to $30.3 million, but more impressive was Bohemia's profit growth, which soared 900 percent from $507,000 to $4.5 million. Much of Bohemia's financial growth was attributable to its strategic operating philosophy during the 1960s, which elevated the company's stature in the lumber industry from a basic sawmill operator to that of a more sophisticated forest products company with diversified interests in profitable lines of business. By incorporating innovative technologies, such as hauling logs by helium balloons and adopting advanced manufacturing techniques, L. L. and Faye Stewart had created a company able to compete in the lumber industry's new arena.

By the beginning of the 1970s, Bohemia was regarded as one of the more progressive manufacturers of lumber, plywood, and particleboard in the country. The company did much of its own logging, primarily from publicly owned stands of old growth Douglas fir, and operated four plants within Oregon that produced products sold domestically to wholesalers, distributors, retail yards, industrial users, and government agencies. Bohemia also enjoyed a sizeable international demand for its harvested lumber, shipping its softwood lumber to such countries as England, Italy, Switzerland, Germany, Canada, Holland, Belgium, and Australia.

Annual sales, which had hovered around $10 million before the company's diversification and expansion program during the 1960s, approached $60 million annually during the early 1970s and amounted to $130 million annually by the end of the decade. Fueling this growth was a continued commitment to expansion and to using as much of each log as possible. When L.L. and Faye Stewart had acquired the company, using 40 percent of a log was considered efficient. As competition intensified and new technologies emerged, such a percentage could no longer sustain a lumber company's profitability. As one lumber industry official observed, the drive for efficient and total use of harvested timber was analogous to using every part of a hog except its squeal, a goal that Bohemia had demonstrated considerable success in achieving. During the late 1970s, Bohemia stunned the logging industry when it achieved 100 percent log usage by developing a patented extraction process to obtain commercially marketable products from material formerly regarded as waste--Douglas fir bark. From bark, the company was able to produce a wide range of products, including vegetable wax, cork, and extenders for plywood adhesives.

With pioneering manufacturing techniques such as its bark by-product extraction process, Bohemia was able to secure an enviable position in the lumber industry, a position that was bolstered by its steady expansion. By 1974 Bohemia's expansion included the purchase of a 50 percent interest in the Oregon Pacific and Eastern Railway, the construction of a planning mill, and the acquisition of a sawmill in Dexter, Oregon. Concurrent with the completion of its bark conversion plant in 1976, Bohemia constructed a mill designed to process small logs harvested from second growth timber and acquired Yuba River Lumber Company and Brunswick Timber Products, which gave the company three additional sawmills and more than 26,000 acres of timberland.

Despite such impressive gains in the 1970s, Bohemia suffered three years of debilitating losses in the early 1980s when the lumber industry experienced an economic downturn. Between 1982 and 1985, the company racked up operating losses of more than $16 million, while long-term debt rose an alarming 150 percent to $47 million. Chiefly to blame were rising interest rates, which crippled the construction market, and cheap timber from Canada and the southern United States; but even more deleterious to Bohemia's long-term stability was its reliance on publicly owned timber stands. At this time, Bohemia obtained about 70 percent of its timber from public land. This practice proved catastrophic during the recession, for the company had to honor long-term contracts with state and federal agencies even though the markets for its timber products had dwindled. Bohemia continued to be plagued financially by this miscalculation long after economic conditions improved.

In an effort to combat its financial slide during the early 1980s, Bohemia contracted out its logging operations--a move that saved the company $3.5 million a year--and renegotiated its labor contract with employees. In addition, Bohemia sold two inefficient sawmills and a plywood plant, helping the company to recover from its financial malaise. However, as time progressed and environmental concerns intensified, Bohemia's future profitability came into question. Those same public lands which had caused Bohemia so much trouble in the early 1980s now presented a new problem, in that they were becoming the subject of a contentious debate between environmentalists and federal legislators.

The environmental debate surrounding the harvesting of government-owned timber created a new business climate in which two types of lumber companies emerged: large forest product companies owning sizeable private timberlands, and small forest product companies that could operate in an entrepreneurial fashion. Although Bohemia was Oregon's eighth largest forest products company and the state's 13th largest public company, it did not own enough private land or capital to compete with the country's largest forest products producers; likewise, Bohemia was too large and owned too much to be run like an entrepreneurial organization. Acknowledging the company's precarious and vulnerable position, Bohemia's management announced in late 1990 that the company's assets would be liquidated. Less than a year later, Willamette Industries Inc., a $2 billion forest products company also based in Oregon, purchased Bohemia's assets for $122 million, ending its 75-year existence as a lumber company.





Further Reading:


Astman, Fred, "Bohemia Inc.," Wall Street Transcript, September 19, 1977.
Beauchamp, Marc, "Almost Out of the Woods," Forbes, October 5, 1987, p. 198.
"Bohemia Enters Discussions," Wall Street Journal, March 13, 1989, p. A4.
"Bohemia Inc.," Wall Street Journal, July 2, 1990, p. C14.
"Bohemia Inc. Completes Purchase," Wall Street Journal, December 9, 1980, p. 44.
"Bohemia Inc. Terminates Talks," Wall Street Journal, April 10, 1989, p. B5C.
"Bohemia Plans to Sell All Assets in 18 Months," Forest Industries, March 1991, p. 8.
"Boise to Sell 11 Plants to Willamette," New York Times, May 16, 1992, p. 40.
Brown, Craig, "Drive to Survive," Oregon Business, August 1991, p. 29.
Fisher, Roger V., "Bohemia, Inc.," Wall Street Transcript, April 30, 1973, p. 32,760.
Mayhew, Harold D., "Bohemia Inc.," Wall Street Transcript, November 21, 1983, p. 71,919.
"1969 Will Be Tough to Beat for Bohemia Lumber Co.," Investment Dealers' Digest, December 2, 1969, p. 34.
Raphael, Marvin S., "The Bohemia Lumber Company," Wall Street Transcript, January 12, 1970, p. 19,176.
Stewart, L.L., "Bohemia Inc.," Wall Street Transcript, October 14, 1974, p. 38,419.
Taylor, John H., "The Ducks Are Flying," Forbes, July 20, 1992, p. 124.
"Two Buyers Found for Bohemia Assets," Forest Industries, September 1991, p. 6.
"Unloading Ships by Balloon May Be More Than Hot Air," Wall Street Journal, March 15, 1973, p. 10.
"Willamette to Buy Bohemia," Wall Street Journal, August 15, 1991, p. C12.
"Willamette Industries Gets 94.5 Percent of Shares in Offer for Bohemia," Wall Street Journal, September 27, 1991, p. B10.

Source: International Directory of Company Histories, Vol. 13. St. James Press, 1996.




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