Taking on giants

Like David, Kerry Getter and Balcones Resources, Austin, Texas, use five stones to combat larger companies, and issues, in the recycling industry.

When David went to confront Goliath, the boy carried five stones with him. According to many interpretations, this is because Goliath had four relatives who might seek revenge for his death.In the case of Balcones Resources, headquartered in Austin, Texas, the company also brings five “stones” to its daily fight against larger companies and the forces at play in the recycling industry, Kerry Getter, CEO of the company, says.

These five stones —employees, customers, environment, share, and wow —form the foundation of Balcones Resources’ philosophy. Kerry says, that when it comes to employees, the company seeks to “hire the best”, having them work with Balcones rather than for it. This, he says, ensures Balcones’ employees “take care of our customers,” with whom the company strives to be transparent and proactive.

Kerry says, together, Balcones’ employees and its customers “can develop best practices to take care of the environment”, building and operating recycling programs that produce “measurable environmental and financial results that withstand the test of time and changing market conditions”, with the company sharing the financial risks and rewards associated with recycling with its customers.

The “wow” stone takes the form of innovation, such as robotic sorting, patents, trademarks, and programs that are unique in the industry, he says. These principles, combined with a willingness to abandon what isn’t working for the company, have helped Balcones weather market downturns throughout the years.

GETTING ESTABLISHED

Kerry and his wife, Becky, established Balcones Resources in 1994. While the company was new, Kerry had previous experience in the recycling industry.

AT A GLANCE: BALCONES RESOURCES

Executive Leadership: Pictured above, from left, CEO and Director Kerry Getter, Chief Financial Officer Adam Vehik, Executive Vice President of Operations Sara Koeninger, Commodity Salesman Richie Getter and President Rusty Getter

Location: Headquartered in Austin, Texas, which also is home to a single-stream residential and commercial material recovery facility (MRF), with additional commercial MRFs in Dallas and in Little Rock, Arkansas

Year Established: 1994

No. of Employees: 200

Services Provided: Hauling, sorting, and selling of recyclables for commercial customers; processing of 60 percent of the recyclables generated by Austin’s residential recycling program and of material that third-party haulers and 16 central Texas communities deliver to the company’s Austin MRF; and product and document destruction at each of its facilities

Tonnage Handled: 17,000 tons per month, the majority of which is paper

Equipment: The company’s Austin MRF features a single-stream processing system supplied by Bulk Handling Systems, Eugene, Oregon. Each of Balcones’ three processing facilities is equipped with a Macpresse 111-A baler and a REB-2 baler from Sierra International Machinery, Bakersfield, California. Balcones Resources also has more than 100 dedicated railcars for shipping prepared recyclables.

His father, Richard, and brother, Rusty, owned All Waste Paper Recycling Inc., Dallas, where Kerry served as vice president of administration from 1986 to 1990. (Prior to that, he was a founding partner and director of Karolyi Gymnastics in Houston. Yes, that Karolyi. See “From Baseball to Recycling”).

While with All Waste, Kerry developed what he says was the first commercial single-stream recycling program in the state of Texas, which had the trademarked name Anything That Tears.

When Waste Management acquired All Waste Paper Recycling in 1990, Kerry worked as a regional recycling manager for that company until 1993 before parting ways and eventually establishing Balcones.

The company set up operations on East 6th Street in Austin and by the mid-1990s had created 31 jobs that were filled by low- and moderate-income residents of East Austin, Kerry says.

Just five years after opening, in 1999, Balcones began searching for a new corporate headquarters. “At that time,” he says, “the city of Austin and the Austin Revitalization Authority had begun an intensive effort to revitalize the East 11th and 12th Street corridors, an area which had experienced over 40 years of deterioration.”

Kerry continues, “Balcones made a financial commitment to become the first company to make a significant investment on East 11th Street”, sparking further reinvestment in the neighborhood.

GROWTH SPURTS

Balcones opened its newest material recovery facility (MRF) in Austin in 2012. The facility processes residential and commercial single-stream recyclables.

“The $25 million, 100,000-square-foot facility is the largest investment in recycling technology by a private company in the Southwest U.S.,” Kerry says.

The Austin MRF features a single-stream processing system supplied by Bulk Handling Systems, Eugene, Oregon, which he says has the ability to capture more than 95 percent of the incoming recyclables.

“In Austin,” Kerry says, “we handle 60 percent of the city of Austin’s residential recycling program that is delivered to our facility and residential single stream for third-party hauling companies and 16 central Texas communities.”

In addition to its Austin headquarters and MRF, Balcones operates facilities in Dallas and in Little Rock, Arkansas, serving the I-35 corridor from Dallas to San Antonio and Arkansas. Balcones Resources also owns and operates Balcones Shred, which provides on-site and off-site product and document destruction services, with locations in Austin, Dallas, and Little Rock.

MATERIAL MATTERS

Balcones processes 17,000 tons of recyclables per month across all of its facilities, with Kerry noting that paper and OCC (old corrugated containers) account for the majority of that material at 14,000 tons. The company processes and sells approximately 1,000 tons of plastics, 1,300 tons of glass and 300 tons of metals per month.

“The majority of our paper focuses on the high-grade material to supply tissue mills and OCC for board mills,” Kerry says. “We have significant supply contracts—KC (Kimberly Clark) Mexico for their tissue operations and IP (International Paper) for their corrugated operations in Louisiana and Oklahoma.”

Balcones’ recovered glass is shipped to Strategic Materials.

“We sell about 60 percent of our products domestically and export the balance primarily to Mexico, Latin America and the Far East,” Kerry says, adding that Balcones favors the Latin American market, particularly Mexico, over the Chinese market.

“We have a bilingual administrative and accounting staff,” he says. “Our material marketing folks speak fluent Spanish.”

Balcones has long-term supply contracts with mills in Mexico, Kerry continues but sells its recovered paper largely on a spot-market basis to buyers in China.

Other consumers of Balcones’ recovered paper include America Chung Nam, SCA, Pratt Industries, Smurfit-Kappa, and Bio Pappel.

Kerry says about 50 percent of the company’s plastics are brokered, while 50 percent are sold directly to companies that include Envision Plastics, CarbonLite, QRS, and America Chung Nam.

“Regional market conditions have been poor the last 30 months; however, we continue to turn over our inventory an average of 3.5 times per month,” Kerry says.

As of early May, he adds, the company was seeing modest improvements in pricing and in the speed of its inventory turns.

LESSONS LEARNED

Shortly after establishing Balcones (which means balcony or vantage point in Spanish and also is the name of a fault that runs from San Antonio to Fort Worth, Texas), the paper market collapsed.

“I think we learned a lot of lessons in the mid-1990s,” Kerry says. “We made a lot of money very quickly, and we lost a lot of money very quickly when the market crashed.”

As a result of this crash, Balcones worked to diversify its business, adding secure product and document destruction services. Kerry says diversification can act like an insurance policy in bad markets.

In addition to diversification, Balcones established fee-based processing, sharing the risks and rewards with its clients; reinvested in employees and operations; developed a coherent strategic plan; contracted sales for a percentage of materials each month; managed margins in a manner similar to how banks manage their net interest margins; and introduced the company’s pricing calculator. Balcones adheres to these practices to this day, Kerry says.

Balcones’ pricing calculator is a spreadsheet that includes income and expense variables affecting the buying, selling and processing of material. The tool, which the company’s Chief Financial Officer Adam Vehik developed and maintains, ensures the company’s contract pricing reflects its actual expenses, Kerry says.

ANOTHER LEVEL OF AUTOMATION

If you thought material recovery facilities (MRFs) have reached the pinnacle of automation, you may want to reconsider.

Balcones Resources, Austin, Texas, is working with AMP Robotics, http://amp robotics.com, Denver, and its owner, Matanya Horowitz, to introduce robotic sorting at its Austin material recovery facility (MRF), which processes residential and commercial recyclables.

Kerry Getter, Balcones CEO, says he first became aware of AMP Robotics when Horowitz spoke at a South by Southwest event in Austin in 2015.

AMP is developing robotic sorting systems that the company says fit on existing sorting lines without the need for retrofits and can achieve a return on investment in less than one year.

Getter says AMP is in the final stages of development, with Balcones planning to test a unit from the company on the container line at its Austin MRF in less than two months. He says the robots themselves are being used currently in other industries, though the software AMP has developed for the recycling industry makes them unique.

According to AMP’s website,

“The AMP Recycling system relies on the state of art in machine learning, computer vision and control theory.”

Getter says, “This is pretty exciting stuff. It could be a game changer”. He adds that robotic units can potentially provide “a world of benefits,” such as never calling in sick.

If pleased with their performance in this initial trial, Getter says Balcones would consider adding AMP units to assist with quality control as well as with paper sorting.

“We maintain strict adherence to those guidelines when pricing business,” he says. “It helps us maintain a margin, even in bad markets.”

Despite the challenges presented by the market in 2015 and so far in 2016, Kerry says, “We made money last year, and we are making money this year.”

To be able to understand its costs, Balcones must understand its incoming material, which is why the company has vigorously embraced audits of incoming loads. If incoming material deviates from what has been spelled out in that customer’s contract, Balcones adjusts its payment, he says, adding that it only takes 10 minutes for this information to get from the tipping floor to the hauler or generator.

“We pay aggressively for material and want to get conforming items in our facility,” Kerry says. “If I am paying for material, I need to be able to sell it.”

Running residential single-stream material in Austin has made auditing more necessary, he adds, noting the residue rate tends to be in the 12 to 15 percent range.

However, the residue rate tends to be much lower for the commercial material Balcones processes, averaging 5 percent.

INDUSTRY ISSUES

The depressed commodity markets that Balcones faced in the mid-1990s are again plaguing the industry.

After the boom times of the early 2000s, Kerry says some recycling companies appear to lack clear strategic direction and fail to understand their real costs or to practice restraint when markets are robust. Some companies and facilities also have clung to unrealistic financial models.

FROM BASEBALL TO RECYCLING

Baseball runs in the blood of the Getter family.

Richard Getter, father of Austin, Texas-based Balcones Resources CEO Kerry Getter and President Rusty Getter, played professionally beginning in the late 1940s. At that time it was common to have a job in the off-season, and Richard worked for Rock-Tenn, Kerry says.

When he left pro ball behind in 1960, Richard worked in various professions before starting All Waste Paper Recycling Inc. in Dallas in the mid-1970s with Rusty, having had his interest in the industry piqued when working for Rock-Tenn.

Rusty and Kerry also played baseball professionally. Rusty, who has a degree in radio, film, and television from the University of Texas, played for the Cincinnati Reds organization. Kerry, who graduated from Texas Wesleyan University with a degree in political science, was a pitcher for the Texas Rangers organization from 1974 to 1976.

Kerry joined his father and brother in All Waste Paper Recycling in 1986. Prior to that, in 1983, he helped to found and served as the director of Karolyi Gymnastics, Houston. His business partners included Bela and Marta Karolyi, who remain friends with Kerry and his wife, Becky.

Mary Lou Retton, winner of the All-Around Gold Medal in women’s gymnastics at the 1984 Olympic Games in Los Angeles, becoming the first American woman ever to win a gold medal in gymnastics, trained at the facility.

He says he also believes it’s difficult for companies to take advantage of economies of scale in light of the capital-intensive nature of the industry.

“We believe there needs to be further consolidation in the industry to realize measurable economies of scale,” Kerry says. “As part of our strategic plan, we are in search of companies who want to become part of the Balcones vision and family. We’re focused on Austin, Dallas, and Little Rock.”

A recent example of such a move is Natural State Recycling, Balcones’ joint venture with Goldman Recycling in Little Rock, formed in the spring of 2015. Kerry says many recycling facilities operate in the city, though it’s a small market. By forming Natural State Recycling, the partners create economies of scale they would not be able to achieve individually, he says. Balcones is the managing partner of the venture.

Despite joining forces with Goldman Recycling, Kerry says Balcones’ Little Rock facility, which processes recyclables for commercial customers, still operates at 50 percent of capacity. In fact, Balcones has excess capacity across all three of its plants.

However, Kerry says, it’s difficult to build economies of scale one customer at a time, which is why the company’s board supports acquiring local competitors.

“Over the years, we’ve been fortunate to operate under the guidance of a very sophisticated board of directors who have taken a long-term view of our industry.”

Kerry says Balcones has a list of companies it is interested in and has started talking with a few.

“We believe we are buyers and not sellers right now,” he says, adding that Balcones is on a mission to pursue acquisitions. “Fortunately, we are in good enough shape financially to have a variety of options in that regard.”

The author is the managing editor of Recycling Today and can be contacted via email at dtoto@gie.net.