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Veco International.

Veco International

Not long after the Exxon Valde disaster, owner Bill Allen and the managers of Veco International Inc. considered leaving alaska for less politically hostile territory in the Lower 48. Instead, Allen took Veco's profits from the oil spill and bought a failing daily newspaper in Anchorage. He decided to stay and fight.

"I hjad all kinds of opportunities," Allen recalls. "But I have faith in the future of Alaska."

Veco also had a bundle of cash -- an estimated $32 million in earnings as Exxon's prime contractor on the cleanup, following the spill of almost 11 million gallons in Prince William Sound. While Allen has never publicly divulged what he paid for The Anchorage Times, which Veco acquired in December, he now says the entire cache was set aside to acquire and upgrade the newspaper.

"I could have sold out and went south and could have made quicker money," Allen explains. "But I think over the long haul, I'll make more money by staying here in Alaska. I don't care what any of the real hard core environmentalists say, the United States is going to have th have Alaska's oil reserves. That may be 10 years from now, but it'll happen. and that's what I based buying the paper on."

Allen is in an uphill battle against his primary competitor and adversary, The Anchorage Daily News, which dominates the Times in both circulation and advertising. But Allen believes Veco is positioned to win what could be the last great newspaper war in the United States.

"We don't have to make our money here at the paper," Allen points out. "We have all the other companies that are profitable."

As 1990's top revenue-producing, Alaska-based company, Veco International and its subsidiaries last year grossed a whopping $960 million, more than a ninefold increase ove 1988 revenues of $110 million. Subtracting the estimated $800 million of Exxon money Veco spent on beach cleanup, the company still posted a healthy 45 percent increase in business, from $110 million in 1988 to $160 million in 1989. Veco expects to gross about $250 million this year.

Also on other fronts, the fiscal year ending March 31, 1990 has been a big year for Veco. The companay added two subsidiaries, the Times and Veco Environmental and Professional Services Inc.

While the newspaper isn't expected to turn a profit for years, Veco Environmental has the potential of becoming the post profitable of Veco's companies in the new decade, says Pete Leathard, Veco's president and chief operating officer.

"The 1990s is the decade of the environment, and that's pretty obvious on a worldwide basis," Leathard says. "We're already in the business and, if we're going to stay in it, we need to get serious about it."

In addition to the new subsidiaries, Veco International also holds a 100 percent interest in Veco Inc., Norcon Inc., Veco Drilling Inc., Veco Offshore Inc., South West Veco Inc. and Arctic Rentals Inc., and a 30 percent interest in Alaska United Drilling.

Veco was launched as an oil-field service firm by Allan and Wayne Veltrie, a structural steel specialist, as V.E. Construction, which was soon shortened to Veco. The company, which had worked in Cook Inlet and the North Sea, won its first small North Slope contract in 1974.

Primarily an oil-field service and construction company, Veco actually entered the oil-spill response and cleanup business a year before the Exxon Valdez spill when the company landed a contract with the Cook Inlet Response Organization. "Most of our work has been done in support of the oil industry, so it seemed to be a natural fit for us," says Leathard.

"The oil companies encouraged us, because we had quite a few people who were working in the oil fields on a continuous basis. We could take our people away from their work and respond to an emergency. It also looked like a way to make som more money, particularly with business being down in Alaska as it was for a few years"

Whe Veco's management learned of the Exxon Valdez grounding in a radio news report, it immediately offered the company's services to Exxon. But Veco executives had no idea how large the spill would become or the immense work force (10,000) and time it would take to clean up the mess that would spread over 1,000 miles of shoreline from Prince William Sound to the Gulf of Alaska. From March through September of 1989, Veco was forced to concentrate most of its efforts on the spill, while desperately trying to hang on to its other businesses.

Recalls Leathard, "We couldn't get away from the damn thing because it was so big. But I remembered when I was a kid and a big coal generating plant came to my town. Businesses in the area rushed to support it and made some good money. But they forgot about the base of small clients they had. After the work was finished on the plant, a number of companies went broke because they couldn't get their clients back. That weas always a concern of mine during the oil spill. I worked very hard to try to maintain our clients even after some pretty hefty costs to us."

The oil spill provided a significant lift to Norcon, Veco's union construction company. "There was a strong move in the state to bring unions back into the construction market," Leathard explains. "The oil spill helped Norcon grow rapidly and get back to being an operating company."

Veco renegotiated its contract with Exxon three times, earning about 4 percent, or $32 million, of about $800 million in gross revenues, Leathard says. Still, he believes Exxon got a good deal.

"We didn't gouge Exxon, but there were a lot of people who did," he says. "A lot of people thought we did, but they didn't kmow what was going on. Thirty-two million dollars is peanuts. I tell you, if some of the other big companies had done it, it would have cost them a hell of a lot more than that. We did it for a real low markup."

Leathard estimates it probably will take Veco another six years to close the books on the Exxon Valdez. "We've been inudated with auditors. Exxon and Exxon's insurance company want to have everything tied down as to where all the moeny went," he say. "There also was a tremendous legal action ranging from everything from discrimination on the employment side, injury claims, harassment claims, people who were fired. We have disputes over billings. These things keep cropping up."

Leathard sayss Veco's role as prime contractor on the oil spill opened doors of opportunity and ultimately led to the creation of the company's environmental arm last May.

Following the cleanup project last summer, Veco served as an advisor on the Moroccan spill and later was called on by British Petroleum to help clean up a spill near Huntington Beach, Calif. The firm also has prepared spill response plans for oil companies in California and plans to move into the newly opened Eastern European market.

"Being in the oil spill business, we found Veco Inc. was getting so diversified it was hard to sell our services as a specialty company," Leathard says. "We decided it was necessary to support both Veco and Norcon with engineering services and estimating, bringing together all of our professional services to outside clients within the companies, and also to gain credibility as an environmental services company. We needed to form another subsidiary where we could concentrate on that part of the business."

Even before the Exxon Valdez oil spill, however, Veco was well on the road to recovering from a Chapter 11 bankruptcy filing in the mid-1980s, posting a respectable 11 percent increase in gross revenues in 1988. Explains Allen, "I think by going through that Chapter 11 -- and every manager I've got at Veco went through that -- we're a hell of a lot smarter. We're not going into a Chapter 11 again. We know how to cut the costs, how to not leverage ourselves too far. The only thing I'm expanding on right now is the newspaper."

In 1989, the company Colorado-based subsidiary, Veco Drilling boosted its rig count from 2 to 15. On other fronts, the Red Dog zinc mine near Kotzebue kept Veco Inc. busy. Veco built the port facilities and installed the processing facilities at the mine. Also a resurgence in drilling activity in Cook Inlet and on the North Slope has been good for the firm's bottom line.

But not long ago, Leathard recalls, 1986 and 1987 were particularly hard on oil companies because of low oil prices, that launched Alaska's economy into a major economic recession. "Work just shrank to nearly nothing. There already were too many contractors in the state. Everyone was trying to hang on by their fingernails. It was tough on Veco, but I felt was had enough of a handle on things that we could control our destiny," he says.

These days, Allen spends from 12 to 14 hours a day at the newspaper office, while Leathard keeps other Veco operations running smoothly. When Veco and former Times publisher Bob Atwood announced the sale late last year, Allen figured he'd spend about 20 percent of his working day at the downtown plant.

"It's a tougher fight that I thought when I went into it," Allen says. "I didn't know anything about a newspaper. All I could do was guess."

A major battle, he admits, is luring the big advertising dollars that form the financial base of any newspaper. While the Timess, which expanded to an all-day newspaper in February, has steadily increased its circulation "those guys (advertisers) need to get over here and help me if they believe in what I'm doing," Allen explains.

Says Allen, "The newspaper industry is just as competitive as the construction or drilling industry. You have got to have a better product than the other guy if you're going to beat him."

Veco's owner has learned a thing or two about the publishing business. "There has to be a basis for a news story. You can't go out here and manufacture a news story. I've learned that you've got to have the facts. If the facts aren't there to support the story, you don't write it," he says.

"Probably, newspapermen think I'm crazy for coming in here and doing this. But you've got to take a risk. The reason I bought the paper was not to make money with the paper, but it was to preserve the market here so Veco could have a bright future. Maybe I jumped out here and took it all on myself, but I know I'm right."
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Title Annotation:The New Forty-Niners
Author:Tyson, Ray
Publication:Alaska Business Monthly
Article Type:company profile
Date:Oct 1, 1990
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