OXARC In Action

Strategic actions build diverse growth markets for Northwestern company.

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OXARC, Inc., headquartered in Spokane, Washington, is a family-owned business that provides welding and industrial supplies or industrial, medical and specialty gases, to customers throughout Washington, Oregon and Idaho. OXARC has developed a way to successfully diversify its products and its markets. The strategy has resulted in a sales growth of eight percent in 2008 and allowed the company to maintain sales in 2009, a year when many companies were fighting just to stay above water.

GAWDA’s newest board member, 1st Vice President Bryan Keen, himself a president of a family-owned business, Keen Compressed Gas Company in Wilmington, Delaware, sat down with OXARC President Greg Walmsley and Vice President/General Manager Mike Sutley to learn how the company got to where it is today.

 

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Greg Walmsley, OXARC President

Bryan Keen: OXARC has grown from 11 employees and two stores to 285 employees and 20 locations. That’s pretty good growth by anyone’s measurement. Is that growth by internal means? Acquisition? How have you done this?

Greg Walmsley: My dad purchased Northwest Oxygen Company in 1968 from Union Carbide, and he changed the name to Norweco. It had two locations. We scratch-started a third store in 1980 and a fourth in Coeur d’Alene, Idaho, shortly thereafter. Then Dad purchased OXARC, based in Pasco, Washington, with five locations.

Mike Sutley: When Norco entered our market, there was confusion between our names. When we acquired OXARC, we kept the name and renamed the rest of our company. We’ve also done a couple of other acquisitions: three welding businesses and one fire company—a million-dollar acquisition that put us into the fire business. We’ve done a dozen or so small fire acquisitions. These are non-traditional to our primary competitors, allowing us the flexibility to grow our business without constantly competing on price.

 

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Mike Sutley, OXARC Vice President & General Manager

Bryan: I’ve heard that some distributors in the fire business wouldn’t get into it again if they had the choice, or they didn’t find that it was that great a fit with their traditional welding supply business. It sounds like your experience is different. It seems to integrate pretty well with your customer base.

Mike: That’s true. You have to put on a different hat when you deal with fire because it is so labor intensive. You have to weigh your costs very carefully. There’s decent money to be made because the government has gotten more involved and compliance is much more detailed for customers. However, the industry itself is not very regulated. Until now, anybody could get into it with very little capital investment, but that is starting to change.

Greg: We have 40 fire techs. That means 40 vans, 40 phones, 40 guys out in the field. Sometimes that can be a challenge.

 

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Bryan Keen, Keen Compressed Gas Company

Bryan: You have to have the right people and you have to pay attention to the details, and if you’re able to do that, I gather you can make a pretty good run at it. If you can’t, it’s like anything else, it won’t survive.

Greg: We’ve even expanded our fire division. Our wholesale fire division sells fire extinguishers, valve stems, o-rings, gauges, anything related to fire extinguishers, and we sell across the U.S.

Bryan: Nice.

Greg: We search out diverse opportunities for additional businesses. For example, four years ago we opened a welding school and eight years ago a welding inspection division. That school now has two locations, Spokane and the Tri-Cities area in the southeastern part of Washington.

Bryan: Is the weld school a profit center? Or is it used to teach future welders who will hopefully end up being loyal OXARC customers?

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OXARC has 20 locations in four states throughout the northwest.

Mike: It’s both. We did $1 million in sales in 2008 and will do well over that in ‘09. The mining industry is down and the timber industry has totally collapsed. The state wanted to retrain unemployed workers. We were asked to put a program together and became licensed through the State of Washington, which is also recognized by Oregon and Idaho, and the school took on a life of its own. We charge $3,000 a quarter for training, and there are three levels: entry-level, intermediate and advanced. $7,500 can pretty much put a guy back to work.

Bryan: That’s tremendous growth in a period of two years.

Greg: Huge. It exploded in the last two years because of the state’s involvement. We’re also doing a youth program and a work-release program for prison inmates transitioning into release.

Bryan: How many employees are devoted to the school and the inspections?

Mike: Seven. Six have their CWI certification, one is working toward it.

Product & Service Offerings
Bryan: I thought my company was pretty diverse in the products and services we offer, but the list of offerings on your Web site goes on and on. How did you get into all that and how do you manage it all? There are a lot of business units falling under one hat.

 

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Outside Salesman Mike Allen does a final check on a dual-head, dual-schedule wire-feed boom setup.

Greg: We have an excellent management team that is very knowledgeable. Our safety sales manager came to us from DrÑger, and is responsible for $10 million in sales. The manager of the fire equipment division has been in the business for 30 years and is responsible for about $8 million in sales.

Mike: They both come to us with their recommendations, and we ask them to justify those recommendations. Then we leave them alone. We also have two fill plants, one in Pasco, the other in Spokane. Six branches pump medical oxygen. We do a significant amount of small medical cylinders for home healthcare companies. We’re really not in the medical business, but we support a lot of home care companies. One customer did 260,000 cylinder fills with us last year.

Bryan: Kind of hard to say you’re not in the medical business with those numbers.

Mike: No kidding.

Greg: Our chemical business is also unique. We sell a lot of sodium hypochlorite and calcium thiosulfate and sulphur dioxide for water treatment and for dechlorinating water.

Bryan: How did you get into that chemical business?

Mike: We were selling chlorine in cylinders to a chemical company. One of their employees suggested that he help us get into that business. We brought him on board and he wasn’t kidding. As a result of his suggestion, we sold 200 gallons of sodium hypochlorite in a microbulk environment to that chemical company. This past fall we began sales of sodium hypochlorite in Spokane. Two other locations will soon add sodium hypochlorite sales. We purchased our first tanker, in order to move 4,000 to 5,000 gallons of bleach at a time, a 12 percent chlorine and water solution, which means it is a 12 percent solution of bleach.

 

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Jarrod Henry takes care of cylinder regulators, gauges, torches and valves in Oxarc's Apparatus Service & Repair deprtment.

Mike: We’re also building a 38,000 sq. ft. centralized warehouse.

Bryan: How about online sales? I see that you’re selling products online.

Mike: Most of our online sales are B2B. We have an e-commerce initiative and we do wholesale online. We look at business to consumer on a case-by-case basis.

Bryan: It seems like people either do a very good job with online sales or they just don’t.

Mike: It’s very, very difficult. It takes a lot of energy to make sure that the customer on the other end is who they say they are and that you’re actually going to get paid.

Bryan: And you have to have some profit margin built in to absorb the losses.

Growth Areas
Bryan: Where do you see OXARC putting its capital investment over the next few years? What are your highest growth priorities?

 

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Welding School Instructor Lane Vanderhoof (left) teaches a student how to set up an air arc process.

Mike: We installed a dry ice block press in November and started pressing 55-pound blocks of dry ice. We have an agreement with a new customer who is going to take about 10,000 pounds a week. We just started doing dry ice nuggets and rice in the past year. We think dry ice is an area where we can grow from a service standpoint because all the dry ice manufacturers are west of the mountains, pretty far outside of the system.

Greg: We also want to add to what we do in testing, inspections and the school. And we’re going to continue to grow our fire service because it’s related to safety. Fire extinguishers are in hotels, motels, apartment complexes and places where our traditional competitors really have no reason to go.

Mike: Our chemical business is another big growth area. For years, we sold ammonia for refrigeration and chlorine for water treatment. Regulations are now forcing people to get away from toxic gas and the answer is to go to that water-bleach solution. This is creating a whole new opportunity for us.

Greg: Still another is microbulk. People don’t like handling drums and totes. Put a 300-gallon tank on site, fill it once a week, and get paid to do the service.

Bryan: These are different, non-traditional businesses for the typical welding supply/industrial gas house.

Generational Excellence
Bryan: My company is a family business. I’m third generation. Greg, you and your sister, Jana Nelson, are second generation, and your children are working in the business.

 

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OXARC headquarters in Spokane, Washington

Greg: Out of 285 employees, 12 are immediate family.

Mike: Jerry Walmsley, OXARC’s founding father, might say he’s retired but he just spent two weeks with us. I think when you have a family environment and you’re treated like family and you treat your employees like family, it’s the best thing that you can have.

Greg: Many OXARC employees have relatives who work here, too. In fact, the last time I checked, almost 100 of our 285 employees are related. It’s amazing.

Mike: My son works here. We have brothers, we have sisters, we have husbands and wives who work for OXARC.

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Bryan: It’s a great place to go for good employees if the bloodlines run close in the family.

Mike: If they’re good ones! When they’re bad ones, it’s a pain to fix the problem.

Bryan: Who has any bad family members?

Gases and Welding Distributors Association