AKRON-After 12 struggling years and a close call with bankruptcy, Waste Recovery Inc. is finally generating profits-but the tire-derived fuel supplier isn't breathing any easier. ``We're not out of the woods yet,'' said WRI President Tom Earnshaw. ``Not by any means.''
But Mr. Earnshaw went on to say that ``I like our chances, because of our technology and history of being a consistent supplier.''
He believes the Dallas-based TDF processor has momentum now in an industry that is starting to gain acceptance. Mr. Earnshaw claims that acceptance is due in large part to WRI's efforts.
``When we got in (the TDF business), there was no TDF market. We were instrumental in its development,'' Mr. Earnshaw said.
The company has been researching and developing TDF processing for the past 12 years, and working to get cement kilns, paper mills and other fuel-burning industries to look at scrap tires as an economical fuel supplement. Most of WRI's processing equipment has been designed or extensively modified by the company's technical staff. The company has also developed proprietary metering devices to control the flow of TDF into a customer's fuel burning operations.
It is these years of experience and proprietary development of equipment and processing that sets the company apart from other processors, according to Mr. Earnshaw.
One of the company's founders, Michael Rouse, pursued the concept of tire-derived fuel while director of energy for Georgia Pacific in Toledo, Ore.
He and other investors formed WRI in 1982 to run a tire processing plant in Portland, Ore. Mr. Earnshaw was WRI's first financial officer and became president and CEO in 1990.
Since its formation, the company has opened additional processing plants in Baytown, Texas, in 1986, and in Atlanta in 1988, with two more due to start operations next year in Illinois.
Over the same period, WRI changed its focus as solely a TDF producer to expanding into the more profitable tire collection business. About 95 percent of the tires collected are processed into TDF, which accounted for 13 percent of company revenues in 1993. Tipping fees, hauling and other services made up the balance.
The company obtains most of its tires through its own collection network which hauls tires from tire stores, factories and other scrap tire generators. The company also nets contracts to clear out scrap tire dumps.
``People think this (business) is easy to get into,'' Mr. Earnshaw said. Take it from him and fellow company officers-it's not. The company has had to operate lean and control its tire stockpile-as well as keep its head above water.
Just a few years ago, WRI came close to filing for bankruptcy.
Back in 1986, WRI made its initial public stock offering to generate investments and enable the company to expand into Atlanta. Goodyear bought into the company and on a periodic basis provided it with investments.
But the stock offering ``was probably premature,'' Mr. Earnshaw admitted, because at about the same time, the Texas facility was having troubles keeping up production as the bottom fell out of the Louisiana fuel market, making fossil fuels cheaper than TDF.
Instead of being able to increase its revenues, prices fell and the business took a downward spiral.
By March 1990, when Mr. Earnshaw became the chief executive, the company was at its lowest point and Goodyear said it planned to end its financing in the company. The decision had to be made at that point as to whether WRI should file for bankruptcy, Mr. Earnshaw recalled.
That's when the company scrambled to stay alive. ``We just scrapped our way out of it,'' he said. The Texas plant was mothballed. The company focused on marketing TDF in ``coal country'' and it managed to garner a few financial transactions.
One of those transactions involved selling 35 percent ownership in the Portland plant-WRI's only asset worth anything at the time-to an investment partnership. ``That gave me cash to stay alive,'' Mr. Earnshaw recalled.
In 1992 WRI reopened its Baytown, Texas, facility and reported its first profit, with revenues largely fueled by tire collection and tire pile abatement contracts.
However, 1993 was a setback for WRI, which lost $195,000 as revenues climbed 8.4 percent to $8.7 million, compared with 1992. Company officials claimed the firm incurred additional expenses due to a lack of tire pile abatement projects, low demand for TDF in the Northwest, a shortage of tires in Atlanta and production restrictions at it Baytown facility due to Texas scrap tire regulations.
This year, some of these situations have been alleviated. WRI netted $136,529 in earnings during the third quarter of 1994, compared with $6,625 in the year-ago period, as sales rallied to $3.2 million, compared with $2.2 million in the 1993 quarter.
The company regained full ownership in the Portland plant last January by trading in company shares. Now the company hopes to get its stock traded on the NASDAQ exchange.
And the company is anticipating additional growth once its two plants in Illinois are up and running. Under a partnership with NIPSCO Development Co. Inc., the two processing plants will supply 60,000 tons of TDF annually to Illinois Power Co. under a five-year contract. The two plants will increase the company's total capacity to 35 million tires per year.
``We've got a positive net worth. We've restructured our balance sheet and we're looking for investing in capital improvements (at the plants),'' Mr. Earnshaw said.
But WRI is not getting heady about its turnaround. While it would like to look at opening operations in the Northeast, the company is going ``one step at a time,'' Mr. Earnshaw said. ``In the early days, we tried to move too fast.''
The company has learned to operate lean-Mr. Earnshaw doesn't even have a desk in his office, he uses a table-and strives to maintain a low overhead, including constantly moving its stockpile of scrap tires through the plants, Mr. Earnshaw said.
Another factor in WRI's momentum is what he called the ``WRI culture.'' He and several other employees have been with WRI since its founding. ``We do it because we enjoy it. We're free spirits. We're entrepreneurs,'' he said.