Newspaper article THE JOURNAL RECORD

Uspci Growth Surges with Gagner at Helm/ Started in 1968 by Beard Oil Co., Using One or Two Trucks

Newspaper article THE JOURNAL RECORD

Uspci Growth Surges with Gagner at Helm/ Started in 1968 by Beard Oil Co., Using One or Two Trucks

Article excerpt

Journal Record Staff Reporter A small firm called U.S. Pollution Control Inc. had the use of only one or two trucks back in 1968, when it was started as a subsidiary of what was then Beard Oil Co. of Oklahoma City.

It grew slowly at first, then by leaps and bounds as a waste disposal firm meeting demands that stemmed from the growing influence of the U.S. Environmental Control Agency. Waste disposal sites were acquired in northwest Oklahoma and Utah, and a laboratory was established in Tulsa.

In 1983, USPCI was formed as a parent firm, which went public with 12 percent of its stock in 1984. The remaining 88 percent was controlled by Beard. Eventually, the Beard ownership was reduced to 30.4 percent.

However, the buyout officer by Union Pacific Corp. this week followed the largest growth period of USPCI by far during the last three years under Gerald J. Gagner, who became president in 1984.

After losses totaling $1.8 million in 1982 and 1983, USPCI reached a net income of $1.6 million reported in 1984. Last year, the company's consolidated earnings totaled $6.7 million from revenues of $56.9 million. The firm now has six divisions, three subsidiaries and owns three waste disposal facilities.

Even that success doesn't indicate the potential that Union Pacific and others obviously see in this 19-year-old Oklahoma City company, regardless of how the Union Pacific bid comes out.

A projection of $16.5 million in 1987 net income from revenues exceeding $75 million is stated in the 1987 budget of USPCi.

That would be a 146 percent increase in net income and a 32 percent increase in revenues. Beyond that, the net income would be up 904 percent from the $1.6 million in 1984.

"We currently have bids out on $60 million in contracts," said Gagner during a recent interview.

After Union Pacific's offer, the USPCI stock jumped from a 34 1/4 close on Tuesday to 49 on Thursday before slipping to 48 1/2 on Friday. Beard's stock also jumped - fromn 13 to 18 before slipping back tgo 16 1/2.

All this is the result of USPCI's climb from its two-year slump after Gagner joined the company. He changed its strategies for operating an efficient hazardous waste management firm, concentrating on profitable areas of the business.

Since then, the company has received high ratings from the Council of Economic Priorities. It was listed among Standard & Poor's top 100 small businesses in the country and was selected The Journal Record Stock of the Year in Oklahoma for 1984 and 1985.

Not only are USPCI's earnings growing at a rapid pace, its capital expenditures are increasing every year. Gagner said USPCI spent $17 million on capital improvements last year - an amount exceeding total expenditures made when the company was founded.

This year, USPCI intends to spend $26 million for capital improvements and is projecting expenditures for capital improvements will reach $50 million next year.

The most recent stock offering for 686,250 shares of common stock was completed on May 7, enabling the company to raise $12 million.

The net proceeds will be used this year to eliminate a net bank debt of about $3 million and the remainder will go toward the cost of building an incinerator in Utah, Gagner said.

To complete the incinerator project, Gagner said the company also will secure bank financing. USPCI purchased a lime plant in Utah that included two plant kilns which will be converted into incinerators used to treat contaminated soil - a market in the industry that is virtually untapped.

"There are millions of cubic yards of contaminated soil, but no facility to treat this," Gagner said.

Contaminated soil currently is hauled to landfills, a practice that is not well accepted by regulatory agencies, Gagner said.

The five incinerators planned for construction are expected to contribute $30 million a year to USPCI's consolidated sales. The first incinerator should be completed in 1988. Upon completion, a second incinerator will be built in Oklahoma and should be completed by 1989, Gagner said.

The incinerators themselves reflect concern the company has over the negative public perception of the hazardous waste industry, he pointed out.

After the soil is neutralized by a chemical reaction within the incinerator and other processes, the material will be reheated so that no plume would be produced and seen escaping from the smokestack.

Although the material is pure when it reaches the smokestack, the company is spending $100,000 to eliminate the smoke and do away with concerns, said Ginger Bailey, customer service representative.

The bank debt, which is to be paid off from the net proceeds of the stock offering, was accumulated from borrowings made by the company to purchase government securities to post as bonds for government jobs. Gagner explained the government has rigid bond requirements on Superfund Act projects.

Meanwhile, the lateast stock offering reduced the Beard Co. stock ownership from 36 percent to 30 percent in USPCI, which began trading on the New York Stock Exchange in October last year.

The result of that ownership reduction is a broadening of the ownership of the company, giving it more liquid security and making it more marketable, said Gagner.

About 64 percent, or 5.1 million shares, of the company stock is owned by 57 institutions, Gagner said. Beard owns about 2.7 million shares, or 30.4 percent, and the remainder is held by individuals.

The largest division of USPCI is Special Services, a department which combines and integrates the company's full range of waste management services. The division completed 180 projects producing approximately $15 million in gross revenues for the company in 1986.

Just a little over two years ago, the division was comprised of five employees. By the end of May it will employ about 70.

Gagner proudly noted the division's revenues have increased from $500,000 in 1983 to $1.2 million in 1984 to $5 million in 1985 to $15 million in 1986. Through April this year, Special Services had revenues of $9 million, he said. It is expected to generate $20 million in sales for the year and increase to about $55 million next year.

Special Services moved into USPCI's 17,000-square-foot facility at 10220 W. Reno Ave. about one year ago. Gagner said originally the plans called for moving the headquarters into the building, but Special Services ultimately used the entire space.

Another credit to USPCI was the Superfund contract awarded to it for one of the larger jobs, totaling $4 million, at Jibboom Junkyard in California.

The hazardous waste industry is widely criticized by environmental groups, but USPCI has been able to avoid conflicts with the public over operating permits for facilities.

Gagner said the company explains its methods to the public and residents in areas where it operates. Procedures used in treating the waste do not pose a threat to residents living in the area of a treatment plant, Gagner said, and landfills are totally isolated.

"If we are given the opportunity, we can usually explain to the public what we are doing," Gagner said.

A full-time safety director has been added to the staff and outside consultants are retained to monitor waste sites and treatment procedures.

"We spend a lot of money in training," Gagner said. "The main thing is, we are offered opportuntities to do all kinds of things with hazardous waste, but we only take what we can handle with our facility and technical expertise."

While others may cut corners to get a job done at a lower cost, Gagner said USPCI will draw the line and walk away if its plant can't handle the job.

Lone Mountain Controlled Industrial Waste Recovery and Surface Disposal Site, located about 135 miles northwest of Oklahoma City and USPCI's first major waste treatment facility, began operating in 1979 on a 560-acre tract development.

Grassy Mountain Industrial Waste Recovery and Surface Disposal Site near Knolls, Utah, approximately 80 miles west of Salt Lake City, was opened in March 1982 on a 600-acre tract.

Prior to Gagner, the company was headed by Harry A. Hansen, president. At Dec. 31, 1983, Hansen's last full year, 67 percent of the company's assets consisted of land and pollution control facilities and equipment, totaling $7.67 million funded by advances from Beard Oil Co., long-term debt and working capital from operations.

Assets at the end of 1986, 2 1/2 years after Gagner took over, totaled $61.3 million, including $14.7 million in working capital and $10.8 million in long-term debt.

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