Whatever Happened To The Class Of '82?

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A major decline in 1982 sales (a drop of more than 15%) was evidentin only 19 of last year's 500, although a total of 77 suffered dips of lesser magnitude. It is not surprising that the most troubled companies were those whose growth depended on oil-and-gas development. Four of the 19 companies reporting severe setbacks are in Oklahoma, where oil-field suppliers and drilling contractors have been flattened indiscriminately. Temporary employment is another industry punished by recession. Of 10 service companies on last year's list, only 2 -- Willis Cos. (#51 in 1982, #217 in 1983) and Ad-Tek Engineering Services (#71 in 1982, #362in 1983) -- qualified for the '83 ranking, while fully half saw sales declines.

"Last year was a tough one for us," concedes Barry Wright, president of Temporaries Inc. (#390 in 1982), a Washington, D.C., company with 27 offices from Boston to Seattle. "Our clients found out where the holes were and where the fat was, and the business went to hell. Still, we didn't sacrifice profits by lowering our rates. We stuck with our markups and, because we did, we're in great shape this year."

Last year was also a tough one for Jer-Way of Texas Inc. (#304 in 1982) in Port of Brownsville, Tex., a sash-and-door wholesaler that had been riding a wave of local high-rise and condominium construction. When the Mexican economy took a dive, so did Jer-Way's sales, down 12%. "We're on the border," explains Roger McKnight, Jer-Way's secretary/treasurer, "where the construction business has been hit by the peso's devaluation. Everyone else in the industry is down about 50%."

Of all the shifts in fortune, however, none was more unexpected -- nor unusual -- than that of David Owens. Owens, founder of Terminals Unlimited Inc. (#2 in 1982), in Falls Church, Va., transferred ownership of his company, in a $21-million stock transaction, to Duke of Energy Corp. (now called TU International Inc.), a publicly traded holding company based in Cushing, Okla. Two months later, the new company s president and chairman resigned for health reasons and Owens was catapulted into the top slot virtually overnight. Among other challenges facing Owens as he grabbed the reins of the $25-million venture: selling off various portions of the original corporation, eliminating duplicate functions overseeing an audit of all the divisions, and complying with Securities and Exchange Commission regulations. Asked recently if he would do it again, he said emphatically "If I knew then what I know now, no."

Owens was only one of a dozen INC. 500 CEOs who were afforded the luxury (or the burden) of hindsight after steering their companies into the public trading place. First in most regards was Altos Computer Systems, the San Jose, Calif., microcomputer maker. Altos was #1 on the 1982 INC. 500 list and $52 million richer after a stock offering in November 1982, that fueled expansion of receivables and research and development. Has life for Altos CEO David Jackson been spent happily ever after?

"I never imagined the impact it would have on my personal life," admits the affable Englishman. "There are no secrets anymore: where I go, what I own, how much I make. It goes on and on."

Balancing off giant Altos were several smaller companies whose public offerings were far more modest and whose reasons for taking that route more varied.

"Of the three original stockholders," explains John E. Whalen, CEO of Northern Air Freight Inc. (#372 in 1982), which raised $2.7 million for the company from an offering last August, "I was the only one who was actively involved in management. The other two stockholders wanted to cash out, so we looked at options. I talked to some private individuals, and the price wasn't nearly as good. What were the advantages? Well, we got some surplus working capital, paid off our $400,000 long-term debt, and gave our employees the chance at stock options. It's been mostly positives."

Bob Jones, director of business operations at General Physics Corp. (#356 in 1982), also feels it was important that his company's $8.4-million offering ($3.4 million to the company) put equity in the hands of the company's employees. "Ninety percent of the people who work here are professional types who are in for the long haul," says Jones, "and it's important to keep them happy." But, he says, there was a finer focus to General Physics's desire for capital gain: acquisition. "We were very cash rich at the time, so rich that we were constantly asked why we were doing this," says Jones. "And the answer was, sure, we can finance internal growth from our own earnings, but we can't fund acquisitions, too, and that's the direction we have to go to diversify."

Bill Fletcher, CEO of Termiflex Corp. (#500 in 1982), a manufacturer of hand-held terminals, concedes that he was in no hurry to go public, but when the right deal with the right underwriter came along, he took it. "Frankly, we thought we were a little small to be doing this," says Fletcher, alluding to the $3.2-million offering handled by Advest Inc. "But we were also in a situation where we had only 25% internal management equity and the rest represented by venture capital. Sooner or later, they'd have to get their money out. The Advest people believed in our potential and were willing to support a price based on that future growth."

Fletcher adds that one other factor played an important role in the process by which Termiflex went public. "No question about it," he avers, "making the INC. 500 list last year was a real attention-getter. If any one thing did it, that was the trigger point." That may be useful ammunition for the Class of '83 to arm itself with.

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