Read this CEO interview!!!!
VISTAQUEST, Inc.
A Financial Public Relations Company
380 Lexington Avenue, Ste. 1700 New York, NY 10168
Tel. (212) 551-7874
Fax. (212) 551-7837
MARCH 13, 1997
C.E.O. INTERVIEW
Geoffrey C. Lawrence
INTERNATIONAL ABSORBENTS CORPORATION
(NASDAQ: IABSF)
We recently passed along some of the many questions you have asked us
regarding International Absorbents (IAB) to Geoff Lawrence, the relatively new chief executive officer of the Company's operating subsidiary, Absorption Corp. Since a major operating management transition culminated in late 1996, the Company has become focused and dedicated to increasing their share of the industrial absorbent, and animal care markets. With new management firmly in place, and recent manufacturing expansion in the East Coast coming on-line, IAB is enjoying record breaking revenues and anticipates positive earnings in the current fiscal year. IAB has reinvented itself and is in a turnaround.
Q&A by Andrew Schamisso,
Vice President, VistaQuest, Inc.
VistaQuest: Please tell us a little bit about your background.
Geoffrey Lawrence: I have an engineering education with practical
experience in operations, sales and general management. From an operations standpoint, at Kimberly Clark, I managed a facility that had the highest output, produced the best quality, and was most profitable within the organization. My most recent success came from my tenure at Impact Systems, Inc. (NASDAQ:MPAC) as Vice President, Sales and Marketing, where we enjoyed growth from a start-up to $18 million.
VQ: Why did you move to IABSF?
GL: After considerable research on the industry and the company, I
realized that there were many coinciding factors creating a great
opportunity for growth of International Absorbents' business. There is increasing emphasis on waste minimization within the industry, concerns about the health and disposal aspects of the clay-based competition, and newly introduced and anticipated legislation favors recycled products like IAB's. Additionally, there is accelerating market acceptance of the Company's products, new production plans to make manufacturing more cost effective and, increased pressure on paper mills to find disposal solutions for their waste-wood fiber.
VQ: Didn't it seem strange to you that with such as superior product, the company still languished?
GL: If you open up the pages of the Wall Street Journal you can look at any industry and see that there are companies that, for lack of focus of the management, are languishing or simply not making it. It was the same for International Absorbents: the opportunities were there, but management wasn't capitalizing on them.
VQ: Including yourself, there has been a major management transformation at IABSF; tell us about some of the new people.
GL: What we have been able to put together what I believe is a winning
team. Jack VonEwegen, vice president of the Industrial Markets Division, has a 25-year history in the sorbents industry. He came from Slikwik Sorbents where he spearheaded the growth of that company from basically nothing to $8 million in revenues. Jack understands the positioning and marketing of organic sorbents and is a pragmatic manager who knows how to foster growth. As an example, Jack hired a senior sales person as soon as he came on board whom has brought immediate results, initiating distributors and providing entrees to other markets. Overall, he has better placed the sales staff and crystallized the marketing strategy. Ed Murchie, a new member of the board, has taken a very active role as a consultant and advisor to myself. As former COO of Vernitron, and as a former CFO and COO of Fairchild Industries, Ed has a wealth of experience and general financial management knowledge.
VQ: What did previous management not accomplish that you believe you can?
GL: I think that goes back to an earlier question. Here was a company with tremendous potential and favorable market forces which really hadn't gone anywhere. A large part of the problem is that with so many possibilities, there has been the temptation to want to participate in all of them and to be everything to everybody. The result was that a great deal of time and money was spent chasing opportunities in a very cursory manner without really getting into the nitty gritty of any of them. We have now adopted a back-to-basics philosophy where we are identifying the opportunities with
the highest potential and focusing our efforts into exploiting those
opportunities - we can and will be the best at our chosen markets.
VQ: How are you identifying those opportunities?
GL: They are already defined. In general they are the MRO (Maintenance Repair & Operation) segment of the industrial market and all aspects of pet and animal bedding on the animal care side. We have been on a good growth curve with all our products and have increased our emphasis on the offshoots within the markets with which we already have a market share. Basically again, it's a matter of concentrating and building on the things we know and do well.
VQ: Tell us about competition in your industrial market.
GL: The industrial sorbents market is estimated at $500 million in North America alone. The largest segment of this market is clay, which faces its own set of challenges. Clay is a disposal problem because it is basically rock and cannot be incinerated; also it is heavier and doesn't absorb as much as our products. Industry is concerned with the future liabilities regarding silicosis, a respiratory disease, which can be caused by the inhalation of silica (clay dust). Rapidly increasing market and regulatory forces heavily favor our products over the clay competition.
VQ: What about other companies trying to replace the clay market?
GL: There are other small companies that are marketing organic absorbents. I say, though, that of the cellulose-based absorbents, we are the most cohesive and most focused company in America and we will capture a relatively large share of the overall market; the timing is right for us.
VQ: Are your potential customers aware of the environmental problem?
GL: They are becoming more and more aware. What is key is the fact that we have been able to bring costs to a level where our products price structure is competitive with clay. Being environmentally friendly is great, but the bottom line is the bottom line: cost.
VQ: Do you have the capacity to handle a home run distribution agreement?
GL: Yes.
VQ: If you were to lose a customer would it materially affect the company?
GL: First of all, we have no customer nor distributors who accounts for more than 10 percent of revenues so even if we lose one of our larger customers it would not be a catastrophic loss. We have several strong distributors and are developing more, both domestically and
internationally. In addition, we continue to gain notice and credibility with such customers as GM, Petco, Boeing, and Fed Ex, which opens doors for other opportunities.
VQ: How is business on the international front?
GL: We are moving forward quite well in the Pacific Rim. We have a very strong Master Distributor in Australia with distribution in several other Australia markets. They recently opened a sub-distribution channel in Singapore as we are shipping multiple containers monthly to them. Our distributor in Japan is also growing rapidly and has recently cleared the bureaucratic hurdle of having our products qualified by a governing Japanese ministry, clearing the way for further growth.
VQ: What percentage of your business is international?
GL: Last fiscal year international revenues were just over 10 percent of total revenues, and that figure is growing. That's particularly important because our international business is typically conducted via letters-of-credit and carries a good gross margin.
VQ: What is the significance of the "F" designation on your stock symbol?
GL: The "F" suffix designates that IAB is domesticated outside the United States; in this case Canada. However, more than 90 percent of our shareholders are in the United States, as well as most of our operations and the majority of our sales. I have proposed to the board that the company be redomesticated to the U.S. this year.
VQ: You lost 9 cents per share last year; do you foresee earnings this
fiscal year and what are your conservative estimates?
GL: Our policy is not to make projections, but I will say that
profitability is planned and we will be disappointed if by year-end our earnings are not significant.
VQ: What are some important business gauges investors can look for to get a clear picture of how and/or if business is growing?
GL: Gross margin is one key measure on which we focus in the management of the business. Gross margin percent was in the low 20s when I arrived; it is now in excess of 30 percent and rising. Other key measures are new customers. For example, our product acceptance within General Motors should bring in other auto manufacturers and after-market auto suppliers. We also do an internal measure of product volume, which we will begin to publish on a monthly or quarterly basis for investors.
VQ: What are the most important investment attributes of your company?
GL: We are currently trading at less than 2 times revenues. We have the possibility to support significantly higher multiples and have excellent growth prospects.
VQ: Where do you see your company in the next 12 months (revenue run rate)?
GL: Again, our policy is not to make projections, but in general terms I believe by the end of the year, revenues could be at a run rate in excess of 100 percent of revenues in the recently completed year.
VQ: What is IABSF's burn rate per month?
GL: Our burn rate is minimal, and we anticipate being cash flow positive in the near future. Spending reductions and margin improvement programs continue to show their effect and we expect to be cash flow positive in the near future.
VQ: What money may IABSF require to finance your optimal objectives?
GL: Some of our important plans include establishment of additional
manufacturing closer to our markets. With the BeneTech facility in New York, in addition to cash investments, financing included economic
development monies. As we continue to improve our financial standing and as we contemplate additional facilities, this and other types of funding will be more available and we intend to take advantage of them. In fact, we have already had strong interest from a large Northeast industrial concern that would like to play a major role in setting up an additional facility in New York State.
VQ: What are IABSF's current and long-term obligations?
GL: We have no long-term debt, and our credit facility is primarily a
revolving line of credit.
VQ: So, in general you are optimistic about International Absorbents future?
GL: Yes, very. With the combination of more competitively priced products, improved distribution channels, increased credibility with major customers, and a focused approach to our business, opportunities for International Absorbents have never been better
# # # # # |
