Chemical ROMANCE

Chemical ROMANCE

A $100 million Gulf Coast family-run business that revolves around chlorine continues to clean up - despite economic uncertainty and other looming challenges.

companies by Mark Gordon | Managing Editor

Anytime Jeffrey Jones' mind wanders into feeling sorry for himself - a natural place to be given the state of the economy and the fact he runs a $100 million company with 260 employees - he just thinks of his grandfather, J.W. Jones.

The elder Jones lost his Madison Avenue advertising job during the Great Depression. But he didn't stay down for long, moving his family to a small town outside Rochester, N.Y., where his entrepreneurial zeal slowly turned his family fortunes around.

J.W. Jones knew a little about the chemical business, having represented the Clorox brand while in advertising. He took the cleaning concept a step further though, by concocting a more powerful chlorine-based bleach through experiments in a garage bathtub. The result was Sunny Sol, a material that J.W. Jones billed as a 'bottled sunshine' for cleaning soiled white material.

That business, which started with door-to-door sales and grocery store coupon giveaways, was the impetus for today's version of JCI Jones Chemicals, Inc., a Sarasota-based water treatment company with nearly $100 million in annual sales, a dozen chemical manufacturing plants nationwide and clients in 16 countries.

The current version of JCI Jones Chemicals is one of the country's largest manufacturers and distributors of chlorine-related chemicals used to treat drinking water, with a client list ranging from tiny municipalities in the Northeast to major cities such as Los Angeles and Cleveland. The company also has clients in a variety of manufacturing sectors, including food production, pharmaceuticals and textiles.

It's a long way from chlorine in the bathtub.

"He had the brains and nerves to bring people together and say I'm going to form a company," Jeffrey Jones says of his grandfather. "He was a consummate entrepreneur who put it all on the line. Not a day goes by where I don't think about how good I have it."

Indeed, Jeffrey Jones knows he has it pretty good. For one, JCI Jones grew revenues about 13% this year, from $81.32 million in 2007 to $93.11 million this year. It is also projecting it will grow about 11% in fiscal 2009, passing the $100 million mark in the process. Jones adds that the company's gross margins are at about 30% a year - a high rate for a logistic heavy company with employees and facilities spread from Tacoma, Wash., to Sarasota.

"We're doing better than we've ever done before," says Jones, who took on sole ownership of the company in 1998 after an internal family dispute about whether to sell or grow the business. "Our financial health is as good as it has been in 30 years."

Safety first

The company also continues to be healthy in what Jones considers to be one of its most important missions: safety. In the chemical treatment industry, the big gauge for safety is known as "reportable quantity releases," which is industry lingo for leaks. And since 1998, JCI Jones hasn't had any hazardous materials leaks, a remarkable number considering that its plants produce as much as 150 gallons a minute of chemically treated products.

Says Jones: "I truly believe we could take a kindergarten class through one of our plants and they would be safe."

That kind of safety, however, comes at a cost. The company has spent about $11 million in safety and security upgrades over the past decade, Jones says. For example, the company recently spent $1 million to add high-tech emergency shut down switches to each facility.

The company's safety playbook starts with what Jones calls employee training and empowerment. On the latter, many of the upgrades over the past decade have come from line employees who deal with the chemicals on a daily basis.

After that, safety becomes a situation of trying to figure out where the holes will be and finding the best way to plug them. "We begin from scratch and look at each pipe, valve, container hook-up and connection to rail cars," Jones says. "Then we determine what we can do to eliminate any possible unforeseen release of product."

The company has also invested a large amount of money into security upgrades, especially since the Sept. 11, 2001 terrorist attacks. The effort includes scaling back on information posted on the company's Web sites and in promotional materials.

Still, a few critics are at the ready, eager to pounce on a safety or security error, either real or perceived. Also, many times, both with older plants and potential new ones, the company is met with a strong force of NIMBY-ism.

After all, this is a hazardous chemical company, which Jones realizes puts him in the crosshairs for lawsuits, accusations and condemnation. "There's not a lot of love for chemical companies," he says. "There are a lot of skeptics out there."

One skeptic is Paul Orum, who runs the Working Group on Community Right-to-Know, a clearinghouse of public interest groups that study chemical accidents. Orum, through the Center for American Progress, a left-leaning Washington D.C.-based think tank, recently published a report that questions security procedures at 101 chemical facilities across the country.

JCI Jones has a few facilities mentioned in the report. Jones, however, considers the study to be "scandalous" due to its use of data at least four years old, sloppy guesswork and biased omission of pertinent facts.

Family dynamics

Other challenges loom for the company, besides safety, security and fending off critics.

One challenge, a cousin of fending off critics, has been to obtain financing for growth. "A lot of banks don't want to talk to a chemical company," Jones says. One bank in particular that has worked with JCI Jones is M & I Bank.

The company remains a family operation, now in its fourth generation with Jones' sons, Ryan and Jeffrey, working for the business. Jones's wife, Susan, also works for the company. That presents another slate of challenges.

"In running a family business, there can be no real 'democracy,'" says Jones. "You cannot be a parent, husband and a boss during working hours."

Jones says the system works by recognizing that rule and working from there, with a key being to make sure opinions and ideas can be expressed freely.

Family dynamics also played a big role in the company's past decade of growth. That's because in 1998, when Jones sought full ownership of the company from other relatives, there was a split among people who thought the company had growth potential and people who thought a sale would be the best move.

Jones, who began working for the company in 1976 at its San Diego plant, took over as president in 1993, soon after his father, R.B. Jones, died. And in that role, the third generation began to see the company's potential. "I was feeling bullish" on the prospects of the company, Jones says.

The bullish feelings came at a cost. Jones borrowed heavily to buy out other relatives and after taking over the company, he immediately set out on a streamline mission. He moved the headquarters from Rochester to Sarasota after considering other sites, such as Austin, Texas and Charlotte.

That move, going from a 40,000-square-foot office and 140 corporate employees in Rochester to an 8,000-square-foot office and 26 employees in Sarasota, made the company a much more nimble player in the industry. Jones also closed six plants and cut out non-performing products.

The results were that after dipping down to the $70 million range in annual revenues, the company is back in $100 million territory, where it was when it was located in upstate New York. Only now it's more profitable.

The company is also pursuing an aggressive growth strategy aboard, looking to build on its international client base that already includes countries such as Canada, Guam, Honduras and Jamaica.

Meanwhile, Jones, 55, is keeping a close eye on a succession plan involving his two sons - not that he expects that day to come anytime soon. "I know I'm going to retire by death," says Jones, "not by choice."

REVIEW SUMMARY

Businesses. JCI Jones Chemicals Inc., Sarasota

Industry. Manufacturing

Key. Company is in growth mode after spending a decade getting smaller to become more profitable.