The Hampton Story

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Family-owned company in business since 1950s One large Doug fir sawmill in Willamina,

Oregon-annual production capacity 180 MMBF One veneer mill, also in Willamina Lumber wholesale business-total sales $100

million

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Modest Oregon timberland holdings near Willamina – 30,000 acres

Heavily reliant on federal timber sale contracts

Minimal net worth

Look what’s lurking…

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Brilliant Strategyor

Flawless Execution

Overall 1980s Hampton corporate strategy was opportunistic local growth

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Opportunity: National pulp & paper company wants to divest two

Oregon sawmillsBenefits: Product diversification into hemlock Additional volume to sell through wholesale lumber

business Relatively low acquisition price

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Risks: Timber supply SBA 500 rule Rumored poor workforce Hemlock perceived as inferior

product

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Spotted Owl litigation underway…Should Hampton’s strategy change?

► Should we exit the lumber business?

► Should we shift business to other geographical areas?

► Should we attempt to purchase our own timber supply?

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Corporate strategy changed to timberland acquisition – veneer mill closed

“With trees, you have

options…”

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Opportunities: Large fixed-price timber cutting right available

from national paper company

34,000 acres of timberland available for purchase

near Astoria, Oregon

Benefits: Timber supply for Willamina & Tillamook sawmills

Protection against shrinking federal timber harvest

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Risks: If log prices drop, company could be wiped out

Obtaining financing would be challenging

Time is of the essence

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Manufacturing strategy has been led by family head and focused on “lean & mean” with limited capital investments. Should Hampton bring in new managers with different ideas on manufacturing?

Considerations: Additional mill investments will tie up valuable capital Personnel changes can be disruptive Mill operations have not been historically very profitable, unless

lumber markets have been strong

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Opportunities:

Two SYP sawmills available in Alabama for a reasonable price

One Southern Yellow Pine (SYP) sawmill under construction in Texas is available for acquisition

1992 -1994 Company’s Financial Position is Stable –

Still Looking For Opportunistic Growth

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Benefits: Timber supply risk diversification away from Pacific Northwest Product diversification into SYP for wholesale lumber company

Risks: No Hampton experience in the South Significant geographic distance away from core business Sawmills needed significant additional investment

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Cavenham is selling entire Oregon timberland holdings

International Paper is selling all Oregon & Washington timberland

Opportunities:

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Benefits: Significant timber holdings not normally on

the market Huge timber supply provides many options

and puts Hampton in the “Big Leagues” Banks are accommodating risk-taking

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Risks Significant debt required could

put company at risk in down cycle Timber holdings are not near our

sawmills

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Opportunity:Three sawmills for purchase in SW Washington

Benefits: Two of the sawmills

produce studs, which would be a new product for Hampton

Purchase price is historically very cheap

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Risks: Current owner is in financial

difficulty and mills have been for sale for a while.

Mills are in a valley near U.S. Forest Service lands, so timber supply could be an issue.

Mills have been union for years - other Hampton operations are non-union.

Sawmills Acquisition?

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Opportunity:Very large moulding & millworkmanufacturer in Mexico is in financial difficulty and offers Hampton a low-cost venture into remanufacturing

Benefits: Almost no capital entrée to

significant remanufacturing capacity Reman labor costs are very

competitive vs. U.S. options

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Risks: Hampton has no experience in Mexico Hampton has no management experience or

systems to manage a reman business

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Opportunity:A sawmill with a good quality reputation is for sale in Northern Washington

Benefits: Cheap acquisition cost Low-cost private & state timber supply is available Core business, although five hours from Portland.

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Risks: Current owner is almost bankrupt and has not

maintained mill well Mill needs significant investment to be

competitive Workforce capability and depth is questionable Economy is heading down after 9/11 tragedy

2002 Sawmill

Acquisition

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Our Core Values Guide Our ConductEthicsPeopleCandorInnovationExecution

New Vision Adopted:

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Opportunity:Two Canadian sawmills available for purchase in Northern Interior British Columbia

Benefits: Product diversification

into SPF lumber for wholesale company

Cheap timber supply available

Good first step for new vision

More Sawmill Capacity in 2006?

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Risks: Pine beetle is destroying timber supply Hampton has no experience in Canada or

with foreign exchange risk Lumber market is entering a down cycle

that could be challenging

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Should we adjust some of our strategic actions to focus on the green movement?

Considerations:Can we change the public debate on logging to emphasize renewable resources?Are there market opportunities for green building products?How much will additional environmental restrictions impact Hampton’s ability to be successful in business?

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Still a family-owned company, but with non-family day-to-day management

Seven sawmills in Oregon, Washington, and Canada with annual production capacity of 1.9 billion board feet

Very large wholesale business with total sales in a normal year of $1.5 billion

Timberland holdings of approximately 100,000 acres

However, the current housing depression is a potential game changer!

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Go Beavs!