Edward Hines Lumber Company

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Edward Hines Lumber Company

1000 Corporate Grove Drive
Buffalo Grove, Illinois 60089

Telephone (847) 353-7700
Fax: (847) 353-7891
Web site: http://www.edwardhineslumber.com

Private Company
Employees: 100
Sales: $73 million (2003 est.)
NAIC: 321113 Sawmills

Edward Hines Lumber Company is a private company owned by the Hines family and based in the Chicago suburb of Buffalo Grove, Illinois. The company has deep ties to the lumber industry in the United States; its founder, a true pioneer in the field, was responsible for a number of innovations taken for granted today. While the company once owned forests in Wisconsin, Oregon, and Mississippi, along with the railroads that served these regions and interests in coal and natural gas, Hines is now focused on its lumberyard operation. The company is one of the largest building materials suppliers in the Chicago area, operating 13 full-service yards. It also maintains six specialty centers for precision components, precision staining, cabinets, millworking, woodworking, and windows. The president and chief executive of the company is Edward Hines, grandson of the founder.

19th-Century Origins

Company founder Edward Hines was born in Buffalo, New York, in 1863, the son of a ship carpenter and eldest of seven children. When he was only two years old, the family moved to Chicago, where he would attend public school. However, like many children during that period, he left school early to begin working. He was a grocer's errand boy for a spell, but soon found a position as tally boy for a Chicago lumber commission firm. Then, at the age of 14, he became an office boy for S.K. Martin & Company, a prominent Chicago wholesale lumber firm. He now learned the lumber business, mostly on the road as a traveling salesman, before returning to the home office to become a bookkeeper and general office man. He was a natural salesman and possessed the potential to become an outstanding executive. He was 21 years old when he was named secretary-treasurer of S.K. Martin, and over the next eight years he assisted Martin in the running of the firm. In 1892, Hines decided to strike on his own and start his own lumber company.

Hines raised $200,000 to launch Edward Hines Lumber Co. and recruited two of his former colleagues at the Martin Company to help him run it: L.L. Barth, vice-president, and C.F. Wiebe, secretary. In the first year of operation, Hines bought the T.R. Lyon operation and turned out 98 million feet of lumber. The second year, however, was to prove more difficult, as the United States was gripped in one of the era's periodic economic meltdowns: the Panic of 1893. Hines held on, due in large part to the help provided by Jesse Spalding, one of Chicago's legendary lumbermen.

Chicago had emerged as a major wholesale lumber market shortly after the Civil War in the 1860s because it possessed a number of natural and manmade advantages. Because it was located on Lake Michigan, it could receive raw material by boat from the region's teeming forests. In Chicago, the lumber would be milled and then delivered by train to the major eastern cities, as well as to Minneapolis and the Dakotas and as far west as Denver. As the railroad expanded into the treeless prairie states, the Chicago lumbermen were able to serve these growing populations with the building materials they needed. Trainloads of Chicago lumber were also delivered to such growing Texas cities as San Antonio and Houston. While Hines served his apprenticeship at Martin Company, there were approximately 125 lumberyards in Chicago, most of which were involved in the wholesale shipping business. As a result of its lake location and excellent railroad facilities, Chicago became the largest lumber receiving and shipping center of the world.

Acquiring Vast Tracts of Timber in the Early 1900s

Hines became the driving force among a new generation of lumbermen. In 1896, he bought out his old firm, Martin Company. A year later, the company began acquiring mills and tracts of northern pine. In that year, it acquired 200 million feet of Wisconsin timber from Weyerhaeuser & Rutledge. The legendary Frederick Weyerhaeuser would become a part owner of Hines after buying out Spalding and another investor. The so-called Lumber King, who by the end of the 1800s owned more timberland than any other American, served on the Hines board of directors until his death in 1914. He and Edward Hines became devoted friends as a result of their business association. In 1898, Hines added another 150 million feet of timber by acquiring Wisconsin's McCord & Company. Another 60 million feet of Minnesota standing timber was purchased in 1900 from Chatfield & Company, which a year later sold Hines an additional 300 million feet of Wisconsin timber. Hines bought more forests, as well as a saw mill and a railroad, in a deal with Washburn, Wisconsin-based Bigelow Brothers. In 1905, Hines spent what was then the considerable sum of $3 million to acquire the White River Lumber Company in Wisconsin, adding vast tracts of timber and the town of Mason, Wisconsin. Over the next 20 years, the company continued to acquire large tracts of northern pine in Wisconsin and Minnesota. Around 1906, Hines purchased a massive tract of southern pine spread across northern Minnesota and into Canada, containing some three billion feet of timber.

Realizing that the supply of northern pine was being depleted at a fast rate, in the early 1900s Edward Hines began turning his attention to other regions of the country. He established the Edward Hines Yellow Pine Company, based in Mississippi, which became one of the largest southern pine operations in the country. He also bought large tracts of timberland in Oregon and built one of the largest mills in the Pacific northwest, located in the company-owned town of Hines, Oregon. These assets formed the basis of the Edward Hines Western Pine Company. By the end of his career, Edward Hines owned tracts of timber that stretched from Canada to the Gulf of Mexico and as far west as the Pacific. He also owned sawmills, railroads, and entire towns.

In addition to building a business empire, Edward Hines was also responsible for some important innovations in the lumber industry. He began the practice of contracting for lumber a season ahead, which allowed him to provide a reliable delivery schedule to customers. He created the car card certificate system, whereby lumber was graded at the mill by inspectors and a record was placed in a sealed envelope in the railcar. Furthermore, he started the practice of trademarking each piece of lumber along with an indication of its grade, so that consumers could be certain of what they were receiving. He also developed the branch-yard system to better distribute lumber locally, leading to multiple retail outlets where both contractors and small consumers could inspect the lumber before buying it. By 1930, Hines operated 27 of these outlets in the Chicago area. In addition to bringing much needed changes to the lumber industry, Edward Hines served on the boards of a number of other lumber companies and banks. He served two terms as the president of the National Lumber Manufacturers' Association and remained a member of the executive committee for several years. He also served as the president of the Lumbermen's Council of the National Union, the president of the Lumbermen's Association of Chicago, and was a board member of the Northern Hemlock & Harwood Manufacturers' Association. Moreover, he was engaged in many philanthropic activities.

A New Generation Takes the Helm in the Early 1930s

In June 1930, Edward Hines suffered a severe heart attack. Although he recovered, his participation in running his business and in other activities was now limited. He contracted a case of pneumonia in November 1931, and after lapsing into a coma he died on December 1, 1931. His sons, Charles and Ralph Hines, took over the Edward Hines Lumber Co. An elder son, Edward Hines, Jr., had died in combat during World War I. Charles, the second son, dropped out of Yale University because of illness and in 1923 went to work for some of his father's companies. Ralph, the youngest, earned a degree at Yale and also studied at Oxford before going to work for the Edward Hines Lumber Co.

Upon the death of their father, Charles joined Ralph at Hines and helped to guide the company through the difficult Depression years. Hines benefited from the need for construction supplies in the building of the 1933 Chicago's World Fair and the rebuilding of the Chicago Stockyards, destroyed by a fire in 1934. When the United States entered World War II, Ralph joined the U.S. Navy and Charles became president of Hines. During the war, the company did a great deal of business resulting from the construction of the Great Lakes Naval Depot and other military bases and camps. After the war, Hines thrived as returning servicemen began raising families, resulting in the Baby Boom generation and spurring the rapid growth of housing developments in the Chicago suburbs. During the 1950s, Hines continued to display an innovative spirit. It claimed to be the first Chicago-area lumber dealer to open a millwork facility and by the middle of the decade was offering builders such items as pre-hung doors and glazed windows to help them speed up the construction process.

A Public Company in the 1980s

Charles Hines retired in 1979, and a year later the company went public. Although the company had a float of just 1.8 million shares, traded on an over-the-counter basis, Hines began to attract the attention of major investors by 1984, due in large part to the value of its underlying assets. From the sale of timber properties and sawmills, the company had nearly $12 million cash in the bank. It was also overly conservative in the reserves it held as well as owning a Louisiana gas exploration and drilling company and a 34.5 percent interest in Southern Mineral Corp., a firm that leased oil-and-gas drilling right. Finally, Hines operated ten Chicago wholesale lumber yards, another 15 do-it-yourself stores, and 11 warehouses spread throughout the Midwest and Southwest.

Company Perspectives:

The integrity of Edward Hines Lumber Co. can never be compromised. Honest, fair dealings are essential with our various constituent groups, our customers, our people, our vendors, our communities and our stockholders.

To some observers, the lumber business could produce much better results if new management were brought in to replace the Hines family, which controlled an estimated 40 percent of the company. Edward Hines III now served as president and CEO. New York and Connecticut investors with a 23 percent stake hired the New York banking firm of Roths-child Inc. to advise them on how to force the company to maximize the value of their investment. In response, Hines hired Salomon Brothers Inc. to help it consider what steps to take in the best interests of shareholders, including a possible sale of assets or a merger. In reality, there was little chance of a merger because of the variety of assets the company held. Consequently, in 1985 the company formulated a plan of liquidation under which Edward Hines purchased the wholesale lumber yards and the do-it-yourself centers and the rest of the assets were sold off.

Strategies New and Old in the 1990s and Beyond

The stripped-down version of the Hines company, generating some $100 million in annual revenues, carried on under the leadership of the founder's grandson. In 1992, the 26-unit business celebrated its 100 anniversary, taking the opportunity to launch a year-long promotional campaign. The goal was to build on customer loyalty, the erosion of which, according to Edward Hines III, was a serious trend. He told Building Supply Home Centers, "Some retailers neglect quality in the equation. Price is important, but too many focus only on that and ignore quality. You've got to provide the right product, for the right job, at the right price." To bolster its relations with the all-important contractor market, Hines added a number of improvements, including a second component plant, a new millwork plant, and a scanner-based purchasing system. The company also extended its reach to the southern part of the Chicago-area market by acquiring a contractor-oriented yard in Mokena, Illinois, located some ten miles from the nearest Hines yard. In 1996, Hines added another area yard when it acquired Moser Lumber Inc., a well-established business that had been operating in Naperville, Illinois, for 50 years.

At the same time, Hines also closed some of its operations as it faced increased competition from national big-box do-it-yourself retailers like Lowe's and Home Depot. Hines instituted a restructuring plan in 1997. Four stores were closed while two others were expanded. The commercial division was also expanded and relocated, and the company decided to focus on its core lumber business, targeting contractors with its remaining 16 stores and eliminating plumbing and electrical supplies. By the close of the decade, Hines would be reduced to 13 units.

At the beginning of the 21st century, Hines turned to the Internet to boost business. It launched a Web-enabled procurement program that was able to track job quotes and accept orders. The Internet hardly revolutionized the lumber business, however, but was just another tool to communicate with customers, who were still just ordering material from a lumberyard. The company's online purchasing system was slow to catch on with customers, bringing in only a modest amount of sales, and few of the customers that logged on took advantage of the system's full capabilities.

In some respects, the lumber business had not changed since a teenaged Edward Hines learned the business traveling throughout the Midwest. Nevertheless, there were changes in the business. In order to continue to thrive, the company employed a new formula to better serve the professional market, supplementing conveniently located full-service lumberyards with a number of specialty centers offering millworking, cabinets, windows, doors, decking, and staining capabilities.

Principal Subsidiaries

Hines Precision Components; Hines Precision Staining; Muench Woodworking, Inc.

Principal Competitors

The Home Depot, Inc.; Lowe's Companies, Inc.; Seigles's, Inc.

Key Dates:

Edward Hines starts a lumber company.
White River Lumber Company is acquired.
Edward Hines dies and is succeeded by his sons Charles and Ralph.
The company goes public.
Edward Hines III takes the company private as a retail operation.
The company is restructured to focus on lumber.

Further Reading

"Anniversary Promo Woos Customers for Hines' 2nd Century," Building Supply Home Centers, April 1992, p. 32.

"A Great Lumberman Called by Death," American Lumberman, December 5, 1931, p. 1.

"Hines-Fitzgerald Retire Following Distinguished Careers With Company," Update: A Quarterly Newsletter Published by The Edward Hines Lumber Co., spring 1979, p. 1.

Jaffe, Thomas, "Oh, What a Lovely War," Forbes, July 16, 1984, p. 163.

Ed Dinger

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