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The 1988 Inc. 500

Brief profiles of 15 Inc. 500 companies.
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Company Profiles

#2: Orbital Sciences Corp. Fairfax, Va.

In early 1958, as Sputnik II circled the earth, David Thompson watched in wonder, dreaming of the rocket ship he'd build one day. Graduating first in his class from both MIT and Cal Tech, Thompson went straight to work at NASA. But the future he imagined -- outer-space manufacturing that would take advantage of zero gravity -- could not be done with vehicle-launching costs as high as NASA's. Two years at the space agency convinced him that only private industry could do the job.

Soon we'll begin to see if it has. Today, Thompson's company, Orbital Sciences Corp., has parlayed $75 million in private financing into rockets designed to launch military and commercial satellites. The first will debut next year.

#48: Russell Construction Co. Bettendorf, Iowa

Nine percent of this year's Inc. 500 companies are in the construction business, and James Russell's is among the smallest, with sales of $5.8 million. But its size belies its scope: unlike the majority of general contractors, Russell Construction is not a regional operation. The Iowa company travels nationally, following a few big clients from state to state to build retail outlets.

"We never pursued this niche," says the 27-year-old founder. "We never even advertised beyond a one-liner in the Yellow Pages. We just did one good job, then another, and got repeat business.'

With such clients as The Sock Market -- mall shops that sell socks -- and General Nutrition stores, a good job means keeping to schedule. Price is secondary, and Russell is confident he won't lose a customer to a lower bidder.

He's not so confident, though, about maintaining quality in the face of rapid expansion. "Quality control hasn't kept up with growth," Russell says frankly, "and I've got people in the field with less training than I'd like. But I have no choice.'

#78: Landmark Hotel Corp.Topeka, Kans.

Very few of the 1988 Inc. 500 companies grew through acquisition -- 84% made no acquisitions in the past five years, and only a handful made more than one or two. The major exception is Landmark Hotel Corp., which made 30 purchases, more than any other Inc. 500 company.

Simply put, president Gary Keller has "always wanted to build an empire," and he thinks acquisition is the easiest and cheapest way to do it. His strategy? Buy hotels that in their midsize markets -- Peoria, Sioux Falls -- are relatively up-scale, and renovate them to appeal to the convention trade. All the Landmark properties are franchises, and 22 of the 25 it still owns are Holiday Inns -- not surprising, given that 12 top Landmark managers are refugees from Brock Hotel Corp., once one of the country's biggest Holiday Inn franchisees. Keller headed up real-estate financing there, and has used his experience to work with banks, pension funds, and life-insurance companies to buy and renovate Landmark's hotels.

Acquisition has had a nasty side effect: red ink, despite gross operating profits of 38%. Keller says he's now "totally focused on consolidation" and confident that this year he'll show positive cash flow.

#108: American Nursing Resources Inc.

Overland Park, Kans.

Elizabeth Dayani grew up in Brazil, the daughter of missionary parents, and planned to learn nursing and establish a health clinic in the South American jungles. Instead, she ended up a nurse-practitioner in the plains of Kansas. Dayani also wrote a book called The Nurse Entrepreneur and with her husband, John, founded one of the country's fastest-growing temporary-help agencies for health-care workers.

The underlying motivation for Dayani's work is a conviction that nurses must take charge of their profession. "It's enormously frustrating to be trained to function at a high level and then have no control over your job," she says.

American Nursing Resources is the Dayanis' attempt to address such frustration. The company's 22 offices, from California to Connecticut, provide supplemental staffing to hospitals and nursing homes and coordinate short-term contracts for private care in homes. The offices are all managed by registered nurses who have profit sharing and stock options. The frontline providers set their own hours and choose their assignments. And they're working under other nurses -- the real key, Elizabeth Dayani believes, to empowering the profession. "My dream," she says, "is the day when all hospital nursing services are contracted from nurse-run agencies.'

Preferably hers.

#136: Peter Norton Computing Inc. Santa Monica, Calif.

Computer ate your file? No problem -- once upon a time it ate Peter Norton's file, too. Unlike the rest of us, however, Norton did something about it. He quickly recognized that the experience was probably as common as it was frustrating. Maybe even so common and frustrating that lots of people would happily pay money to keep it from happening again.

He was right. The introduction of his Norton Utilities software, which allows users to retrieve deleted files, created a new niche in the PC market: software that exists to make computing easier.

Like many good ideas, Norton's was an eminently copyable one, and products that were touted as cheaper, easier, or broader in scope soon appeared. Still, Norton, who has the distinction of being the first Dewar's Profilee on the Inc. 500, has retained his edge. Readers of the trade press consistently vote the updated Norton products their favorites, and the company has diversified into guides and text-editing software for programmers.

#176: KVH Industries Inc. Middletown, R.I.

In 1978, Baron Marcel Bich, chairman of Bic Corp. and owner of the French entry in the America's Cup, wanted an on-board computer to measure his boat's performance. Martin Kits van Heyningen -- who worked in the Newport, R.I., shipyards between semesters at Yale -- claimed his father, Arent, and brother Robert could build it. Luckily for the sailing-mad Kits van Heyningen family, Martin was right.

In the process of designing the computer they discovered a need for a digital electronic compass, "so it wouldn't be a case of garbage in, garbage out," says Martin. With that need in mind, he wrote a business plan while still an undergraduate, raising about $60,000 to start KVH Industries.

Intent on marketing the digital compasses to the U.S. military as well as to the yachting community, KVH pursued and won enough government research money to develop an unusually large engineering department. With 25 people, compared with 3 or 4 for most businesses its size, the company has been able to maintain an R&D edge over the handful of larger foreign competitors now in the market.

Baron Bich, by the way, lost in the trials. But don't blame KVH. Last year, using a KVH compass, Dennis Conner won.

#213: La Quemazon Wholesale El Paso, Tex.

When José Javier Calderon and his family first began selling closeout merchandise from El Paso stores at local flea markets, almost all the business came from Mexicans crossing the border. Today, La Quemazon Wholesale still sells mostly to Mexicans, but the company does more of the crossing itself.

"Half our business is wholesale export to small Mexican customers, with many of their orders in the $300 to $1,000 range," says Calderon, a first-generation American whose parents are Mexican. "Our biggest competitors are Koreans, who don't know our people or our language.'

The company's three retail shops' clientele also continues to be predominantly Mexican. Carrying briefcases full of cash, they cross the river and travel the one U.S. block to buy housewares and action toys at the El Paso store.

"Operating a border business is completely different from other businesses in the United States," says Calderon. He has to think biculturally -- ``when we buy china, for instance, we have to get light, elegant colors for Americans, and bright colors with big patterns for Mexicans' -- and 90% of his customers speak only Spanish.

#256: Libertyville Lincoln/Mercury Libertyville, Ill.

People who live in Libertyville, Ill., call it a sleepy little town, a quiet suburb of Chicago. But there's nothing sleepy about Libertyville Lincoln/Mercury, a dealership that last year sent 12,220 cars off into the sunset and grew an astonishing $100 million, to $212 million in revenues.

Budget Rent-A-Car had a lot to do with it. Company president Julius Marks is a former Budget franchisee who convinced the corporation to buy Lincolns and Mercurys from him; in 1987 Marks went from being a regional supplier to Budget's sole national source for its corporate-owned locations. The account exploded by some 5,000 cars to make up 83% of Libertyville's sales.

Still, moving five new cars a day in retail is in itself no mean feat, especially considering there are two dozen other L/M dealers in the area. Leasing has been the key: retail sales have jumped 33% since Libertyville started the program last year. "Leasing makes luxury affordable," says Marks. "Ford encourages it because people switch leased cars sooner than they buy new ones; the merchandise turns over faster. And for us, it means more customers.'

#300: Prestage Farms Clinton, N.C.

It's an old adage, confides Bill Prestage, that the only thing dumber than turkeys is the guy who works with them. But turkeys aren't that dumb (contrary to popular belief, they will not look up at the sky during a rain shower and drown), and neither are the people at Prestage Farms, a poultry- and pig-production company that this year will sell 6 million turkeys and 190,000 hogs.

The company contracts with farmers in North Carolina, giving them piglets and poults -- along with feed, veterinary services, and technical advice -- to raise in their own facilities. Such an arrangement has become common in the turkey business over the past 10 years but is a relatively recent development for swine, though Prestage thinks that will change. "This is a commodity business. When we buy vitamins to make our feed, for instance, we're buying in bulk. We'll save half a cent here, half there, and it adds up.'

Prestage's timing couldn't have been better. Many of his contract farmers originally grew corn, soybeans, and tobacco, and have been anxious to diversify production. Per capita consumption of turkey meat, meanwhile, has increased from 11 pounds per year to 17 since 1983.

#324: Oneida Asbestos Removal Inc. Marcy, N.Y.

The year was 1981, and it seemed Johns-Manville Corp. was being sued by everyone who'd ever handled its asbestos. Frank DuRoss had a profitable janitorial-services business in upstate New York, and read an article about schools being ordered to remove the stuff. "A guy at the EPA was saying there weren't enough people to do it," remembers DuRoss, "and I figured we could." Within six months DuRoss and his brother James had started a new company specifically for asbestos abatement, and contracts from school districts began pouring in.

Today, work from schools and military facilities accounts for just half of Oneida's business, the rest coming from corporations and mortgage lenders requiring a building's clean bill of health. Disposal of the removed material has become a major problem: three years ago Oneida paid $2 per bag and used municipal dumps and landfills; now, it must pay up to $9 per bag to private haulers. Still, the company's net margins topped 16% last year.

#374: Barter Exchange Inc. Austin, Tex.

We're always flattered when people tell us Inc. has affected how they do business. But Matthew O'Hayer has taken it a step further. He says he'd never even heard of the bartering industry until he read about it here. He was so intrigued that he started Barter Exchange Inc., which joins the Inc. 500 in its first year of eligibility.

BEI coordinates the trading of goods and services for 4,000 companies nationally; a restaurant, for example, might serve BEI members and get paid in trade dollars, which it then uses to get menus printed or buy media time. "Bartering is just another marketing tool," says O'Hayer, who makes the bulk of his money from a 10% charge (in Uncle Sam's dollars) on transactions.

BEI, by the way, is one of its own biggest customers. BEI uses trade dollars (paid monthly by members) for Peat Marwick Main & Co. accounting, as well as for its computers, cellular phones, fax machines, printing, most of its advertising, and even part of its payroll. "We've got three employees about to get married," says O'Hayer, "and they're using trade dollars to pay for bridal dresses, tux rentals, receptions, and photographers.'

#392: Just Fish Inc. Winslow, Wash.

When Julie Just was hired to do sales for a fish-trading start-up, she had no idea that the president would grow disillusioned within the month. Or that he'd quit, and sell his 80% share and liability for the debt to her for $400. Or that she'd operate the company out of her house for the next two years, eventually hire a couple of other people, and end up marrying the other investor in the business. But life, as they say, is what happens when you're making other plans.

Says Just, whose previous jobs have included waiting tables, picking apples, and helping to run a salmon farm: "I always figured my lot in life was to be a bookkeeper. In essence, that's what I do now, but on a broader scale.'

She arranges for fishermen to ship salmon directly from Alaska to her wholesale customers in the States and abroad; sometimes she traipses down to the Puget Sound docks herself to pick out, unload, ice up, and truck off the best fresh-caught fish.

Her finest compliment? She sent a Japanese client, known for his particularly high standards, a sample of the fish that was filling his 15,000-pound order. "He told me later that he didn't even look at it. He said, 'I didn't have to -- I know I can count on you.' That's a sign that we're doing something right.'

#439 and #76: Bulldog Movers Inc./

Alpha Products Inc. Atlanta, Ga.

It's impressive enough to make the Inc. 500 with one company before your 28th birthday. But evidently that wasn't enough for Jim Scott and Richard Williams: they've done it with two.

First came the idea for strapless sun visors -- plastic wedges that clip onto the wearer's head. Scott and Williams, figuring they could make enough to pay for their third year at the University of Georgia, convinced a mold maker to do the work for no money down, and they were off.

They bought a van "in anticipation of all the visors we'd be carrying to UPS," but the mold maker got behind schedule. Necessity being the mother of invention, they ran a few ads claiming "college students will move you for less," and they were off -- again.

Within a year and a half, Bulldog Movers had 15 trucks and was the biggest intrastate moving company in Georgia. And last year, Alpha Products sold about 10 million visors.

Which company are they concentrating on now? Heeding the advice Dustin Hoffman so blithely ignored in The Graduate, Jim Scott earnestly answers: "Plastics. That's where we see our future.'

#468: E-Mu Systems Inc. Scotts Valley, Calif.

How has a small U.S. maker of electronic musical instruments survived in an industry dominated by the Yamahas and Rolands of the world? Credit, in part, Michael Jackson.

When Jackson used E-mu Systems' experimental synthesizer to sculpt his best-selling album Thriller, E-mu became the talk of the town. By the time Japanese imitations started pouring into the States, E-mu already had the credibility of gold records and movie soundtracks -- not to mention a whole new generation of products.

"Our lead time was several years," says chairman and CEO Scott Wedge. "And actually, by the time [the Japanese] got here, the exchange rate had shifted so radically that comparable synthesizers weren't any less expensive."

Despite the company's success, Wedge has been unable to tap any venture capital. "We've got 20 products we want to work on, but we can fund development of only one or 2. It's frustrating -- the biggest threat we face from the Japanese isn't their technology, it's the fear they instill in investors.'

#486: Strategic Management Group Inc.

Philadelphia, Pa.

Not enough money to make payroll? Creditors knocking on your door? No problem. Joe Gekowski will help. Gekowski and co-founders Leslie Spero and Michael Aronson, who head Strategic Management Group, aren't kind-hearted bankers. They're teachers. And the companies they bail out are created by a computer.

Who plays the training firm's game? Senior and middle managers of Fortune 500 companies, mostly. And sure enough, says Gekowski, many groups end up teetering on the brink of bankruptcy.

Last updated: Dec 1, 1988




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