8 May 4, 2000
warm Springs, Oregon
spilyay tymoo
Warm Springs Forest Products
1999 Annual Report
General Manager's statement. . .
1999 was a year of transition.
Commencing the year on a
cautionary note, gaining
confidence by mid-year, to
realization of the anticipated
outcomes by late 1999.
The year started with the
realization that 1998 ended with
the first operation loss since 1991.
Coupled with the lowest
stumpage receipts to the Tribes in
recent history, these two events
caused much frustration and
uncertainty within the Enterprise.
This stumpage reduction also
caused the departure from the
normal Profit & Risk calculation
process, which has the impact of
eliminating capital required for
mill improvements. Soon after the
year began, a catastrophic wind
occurrence created the "Big Wind
Timber Sale." And soon after that,
Rirk Saunders, General Manager
of WSFPI, gave notice of his
departure for other employment.
By mid year, under the
direction of Ralph Minnick, acting
General Manager, the Enterprise
began to demonstrate its strength
and confidence by investing in
training for the operators of the
new Big Log side of the sawmill.
This training facilitated the
opportunity to process a portion
of the ponderosa pine timber
from the Big Wind Sale. Other
small, but strategic, capital
investments were implemented
during mid-year.
By tall of 1999, a new general
manager was hired. The second
shift at the Big Log side became
operational. Production increased
substantially from prior levels.
This increased production led to
the Board of Directors to approve
the purchase of two additional
dry Kilns (the new kilns will be
operational in April, 2000). New
lumber products, Export Clears
and vertical grain Douglas fir
door stock were introduced late in
1999-and WSFPI ended the year
with a respectable profit!
Goals for 2000:
Identify sources of timber off
reservation.
Identify and implement new
efficiency standards.
Increase the of Tribal and
Married Into the Tribe employees.
Define and implement new
marketing strategies.
Human Resources 1999 annual summary
Plan of Operations
Resolution 8413, April 20, 1992
Plan of Operations Resolution
8413-April20,1992
The Enterprlse-The
Confederated Tribes of the Warm
Springs Reservation of Oregon
(the "Tribe") is a body politically
organized under Section 16,
Chapter 576 of the Act of June 18,
1934, passed by the Congress of
the United States. As authorized
under Section 17 of that Act,
Warm Springs Forest Products
Industries (the "Enterprise") was
created in 1967 to operate as an
enterprise fund of the Tribe with
the following purposes, objectives
and priorities, as modified,
effective April 20, 1992: - . ,
The first priority is to earn a
level of profit and economic
return for the Tribe and its
members consistent with that
which an efficient and well-run
forest products operation would
earn under similar economic
conditions so the Enterprise can
fund long-term growth and
increase tribal wealth.
The second priority is to
provide the Tribe and its
members with employment
opportunities arid such social
benefits as may flow therein.
The third priority is to
' provide the Tribe ana its
members with education and
training benefits and such social
benefits as may flow therein.
Lumber Division report-
WSFPI's continued to increase
it's Tribal Member employee level
in 1999; of the 206 employees 119
were Tribal Members, 35 were
Married Into the Tribe, 5 were
Indians Not Affiliated and 47
made up the balance. In 1998 the
level of Tribal Members
employed by WSFPI was 53;
ending 1999 the percentage
increased to 58. This percentage
combined with the percentage of
employees married into the tribe
(17) equals 75; the largest
percentage accomplishedthus far.
Since the beginning of the
training program WSFPI has
provided skill building
opportunities for 33 employees;
ll -current participants, 18
completions, and 4-non-completions.
Current trainees are:
Ted Barney-7th period
Apprentice Manufacturing Plant
Electrician, Peter Brunoe-4th
Sriod Apprentice Millwright,
lico Holliday, Anthony Boise,
Jesse Reese, Hector Torres-Saw
Filer trainees, Ken Florez and Sam
Kentura-3rd period Apprentice
Boiler Operators, George
Baldridge-Quality Assurance
Trainee, Wayne Moe and Stacey
Winishut-Student Graders.
The Accident and Injury rate
for 1999 increased from the
previous year by 28 incidents. In
1999 WSFPI recorded 133 accident
and incidents compared to 105 for
1998. The breakdown for 1999 is:
18 Lost time injuries, 33 medical
only injuries, and 82 incidents.
Across the board the increase in
injuries caused an increase in the
Workers Compensation program
medical costs of $52,900 from 1999
compared to $19,524 in 1998.
It is always interesting to
recapture at years end, highlights
from the previous twelve months
of business history.
A surprise in January 1999,
buying enthusiasm was strong
and the demand was better than
expected, giving Warm Springs
Forest Products Industries an
order file with muscle for that
time of year.
Housing construction was
unexpectedly strong. The
question early on was whether or
not the country could sustain the
projected 1.5 million housing
starts. The answer to that question
developed into a sound yes as the
year progressed.
The overall trend in demand
and higher prices was on the
upside, but not without a few ruts
in the road. By mid-March, mill
sales were on the slow side, but
prices were much stronger
compared to January. For
example, 2x4 2&BTR KD
Douglas Fir was trading for $335
per thousand board feet in
January. By mid-March it had
climbed to a $390 trading level.
The market continued to stair
step up to a peak in late June to
mia-July. Random Lengths
publication had reported the price
of that same 2x4 at $505. During
this peak period of strong
demand, WSFPI's finished
product inventory was 4.3 million
board feet. Of that, 3.9 million was
sold ready to be shipped via rail
or truck, leaving less than 500,000
BF available for sale. This had not
been seen for many years.
In late September, WSFPI's
Lumber Sales Manager, as a
member of Western Wood
Products Association Export
Committee, attended the Japan
Home Show in Tokyo. The nine
day tour was enhanced by several
key Japanese industry visits
including an imported building
materials warehouse, model
home park, lumber yards, and a
pre-cut housing plant.
This Japan opportunity was
sponsored by the Western Wood
Products Association, the
Softwood Exports Council and
funded under the U.S.
Department of Agriculture,
Foreign Market Development
Programs. Although Japan's
housing industry has yet to fully
recover from its four year slump,
WSFPI exported to Japan
approximately 2 million board
feet of lumber. Most of the
product shipped was domestic
sized lam-stock. However, we did
manufacture and ship over
500,000 board feet of special
metric size 27mm x 127mm.
Production by Specie was
almost an even split between
Doug Fir and Hem Fir, with a
small volume of Ponderosa Pine,
totaling 78 million board feet
through the Sawmill.
A total of 71 million board feet
shipped out the door, 30 million
board feet on 290 rail cars and 41
million on an estimated 1350
trucks. The average price for all
products, all grades, all species,
was $400m.
Warm Springs Forest Products
Industries experienced many
changes throughout the last year
of the millennium. As usual, our
employees have risen to the
challenge of change and look
forward to the century before us.
Timber Division report-
Unfortunately, a natural
disaster was the highlight for
1999. The Big Wind Salvage Sale
(24.8 MM BF) was harvested in a
little over two months. Excellent
value was received for this wood
and through quick response, blue
stain was held to a minimum. The
teamwork from everyone
involved was exceptional.
Particular thanks go to Mark
Jackson and Tom Kathrein, who
really put extra effort into this
E reject This sale destroyed our
arvest plan, but did improve
stumpage value because of the
Ponderosa Pine.
Log Markets
Export
Doug Fir demand continues to
fall and is under significant price
pressure. The market did improve
some late in the 4th quarter due to
lack of supply. High grade sorts
are rapidly becoming a thing of
the past. Whitcwood continues to
be sold domestic with no real
export market.
Domestic
Large Ponderosa Pine prices
held up well most of the year.
However, there are some
downward pressure in the 4th
quarter. Doug Fir niche markets
held up well with whitewood
prices generally stable. The 4th
quarter prices did improve some.
Small logs continue to attract
good prices on Doug Fir and
Whitewood due to the increased
milling capacity.
PulpUtility
Prices were stable most of the
year. Several chip plants were off
the market early in the year due to
quotas. Improved pulp and paper
markets have not improved chip
log prices due to the large
volumes of residual chips
available from lumber and
plywood producers.
Goals and Objectives
In addition to our standard
objective to maximize the value of
the Tribal timber, WSFPI will
focus on the following:
- Continue to develop niche
lumber markets for unique log
types.
- Aggressively pursue outside
purchase logs for the large and
small log mills which have
increased production
significantly.
- Continue to evaluate projects
and mandates to assure positive
contribution to the Tribes.
- Work closely with BIA
Forestry and Natural Resources to
lower costs and improve
efficiency.
From December 31, 1999
statement
Total $ Stumpage: $ 1 3.5MM
Price Paid: $M $239
Total Harvest: 56.5MM
Warm Springs Forest Products Industries
Annual Manning Comparison
1803 1903 1904 1999 1996 1997 1998 1999
Tribal Members 105 116 108 87 99 95 100 119
Mamed Into the Tribe 28 33 38 42 39 39 38 35
Indian Not Affiated 10 966697 9
Balance 57 60 58 48 48 44 44 47
Total 200 218 208 193 190 183 189 206
120
100
80
60
40
20
0
IF
rM-w,1
M, ft',,,,.!!
A.
Tribal Members
Married Into the Tribe
Indan Not AftVated
Balance
CM
co
co
n
co
o
m cp r- co o
8co co co co
o co co Co
1092 1993 1994 1999 1096 1997 1996 1999
Tribal Members 53 53 52 50 52 52 53 58
Married Into the Tribe 5 15 18 22 21 21 20 17
Indan Not AffiEatad 14 4 3 3 3 3 4 2
Balance 29 28 27 25 24 24 23 23
Total 100 100 100 100 100 100 100 100
70
60
50
40
30
20
10
0
JJjliMWSWV!W''W'wiTWlWVjllHllly'
n
J ' - ' J' H- J
lii tM III m ifl riiilmufi hi mmt tlmn
Tribal Members
Married Into the Tribe
Indian Not Affiliated
Balance
1992 1993 1994 1995 1996 1997 1998 1999
WSFPI's 1999
AccidentInjury and Worker Comp Cost Comparison
Lost Time Injury
Medical Only
Incident
Total
1997
11
24
58
93
1998
10
25
70
105
1999
18
33
82
133
100
80
60
40
20
0
IX if
1 -
-HI
a
Lost Time Injury
Medical Only
Incident
1997
1998
1999
1997
1998
1999
Workers Comp Costs $
18.237 $
19,524 $
52,900
A