Excerpt from "Inside Business", 2/12/2002 on KCEO (AM 1000)
Bob Ryan: With us this morning is Steven Adams, CEO of the Six Pack Companies, a group of technology companies headquarted in Escondido. The Six Pack Companies are hoping for an IPO this October...
Steven Adams: November, actually.
BR: OK, November. And Steve is here today to bring us some insight on the potential IPO and the technology climate in the region. Welcome, Steve.
SA: Thanks, Bob. It's a pleasure to be here.
BR: So Steve, while all indicators are pointing to a recovery in the economy, forecasts are still dicey at best for most technology companies. Why are you looking to test the IPO market now and what do you think the Six Pack Companies offer investors who still do not have confidence in the market recovery?
SA: Well, first off, I think a lot of pundits are really overstating this recovery and the indicators that point to it. One of the big reasons our IPO is targetted for November is that our analysts see the downturn lasting much longer than most people do. One of our strengths is that we tend to carry a lot of cash on the balance sheet and we obviously try to invest that cash the best we can. But, it can also make us more vulnerable to ups and downs in the market. I'll put it bluntly, we're still short. We have very little in the market and I feel the indexes, especially the Dow, have a lot to give up before we reach bottom and start recovering.
BR: Now hold on, let's spend a second on that. I think that it's true a lot of individual investors are as skeptical as you are about this upturn, but you really don't see signs of a recovery out there?
SA: Well, there are signs, certainly. But just looking at the markets now, there just doesn't seem to be the confidence to sustain a prolonged rally. I'll caveat this right now by saying I don't directly handle our corporate investments, but certainly with my own personal investments, I'm playing it that we're at least eight to ten months from any sort of real lasting upturn. There just hasn't been the sort of capitulation that would signal the end of this bear market. Sad as it is, I think there's still a lot of pain to go.
BR: OK then. So, even more interesting, you're very down on the markets now. Why now for an IPO? And why the Six Pack Companies?
SA: I think it's because these are tough times for tech companies, that's exactly why we need to get out there and go public. Venture capital has all but dried up for any company that dares use the word Internet in its description and to continue to grow, to execute on the growth plan we have, the public offering market just seems like the right way to go. Again, we're very early in the planning stages. We're still targetting November for a debut and a lot can happen between now and then. In fact, we're counting on it. The logistics behind getting an IPO off the ground are massive and I'm afraid that if we wait to see sure signs of recovery, we'll be mired in a flood of other companies that are putting public offerings off for the same reasons.
BR: What's your outlook on the success of this IPO?
SA: Obviously, I'm going to be bullish. [laugh] But looking at it from a potential investor's viewpoint, the Six Pack Companies have some very unique points that make us attractive both short and long-term. I'm not going to quote balance sheets and earnings reports to you here. But fundamentally, our network of companies are unique in that they have a healthy, almost ideal, mix of high technology growth superstars, and steady established consumer-based divisions that will continue to provide a solid positive cash flow. These are my companies, my life, so you know I'm going to be a bit gung-ho on them, but the opportunity to get in on the ground floor of a company with risks this low and an upside this high. Even if the market stays down, it's got to draw some attention just for the potential and the sparse IPO market.
BR: Gung ho is certainly the term. [laugh] Now to tell our listeners a little more about the Six Pack Companies, there are six... big surprise there... divisions? business areas? What do you call them?
SA: Divisions is probably the closest, but honestly, we refer to them internally as companies.
BR: OK, six companies run more or less under an umbrella of the Six Pack Companies.
SA: I really dislike the term "umbrella". We're not really placing a thin veneer or a cover over six independently run companies here. We run the six as one. Same management teams, same business rules, same infrastructure.
BR: And the six companies range from textiles to internet service to science-fiction type research.
SA: It sounds like an odd mix, but it's one that works. SCA Designs is our bread-winner. Day in and day out stable business. A major player in the North American marketplace for children's sporting apparel and equipment. Branching out into European and Asian markets over the next few years and always expanding. SCA Designs has never, not once, missed a sales projection or a growth target. Quarter after quarter, economy strong or slow, it's been a winner.
BR: And the others?
SA: We've got three growing Internet Service Providers that I hesitate to place under that label. These companies are in strong, growth markets and are targetting up and beyond simple dial-up service that will soon go to the major telecoms. We've got Del Mar BeachNet locally, Loudoun Virginia Internet Services in the Washington DC area, and Interweb Illinois in Chicago. These companies all have the same profile: steady revenue streams now, but a changing marketplace. This is where Adams Internet Content comes in. Our newest company, AIC was created specifically to synergize with the other three and push them beyond merely acting as a gateway to the internet, but instead providing valuable and desirable content that users will pay to access regardless of their port of entry.
BR: So a mix of high-tech futures and fundamental consumer products? Something not tried before?
SA: Even more than that. I hate to sound like the guy on late night TV selling knives. [laugh] There's also BrainWorks which started out as a pipe dream, to be honest. Our target here is not two or three years down the road, but dozens of years. BrainWorks - in a nutshell - is engineering machines that can communicate directly with the human brain. I loved your term "science fiction" because everyone thinks it is, when in reality, it's very real and the technology is much closer than people think. Realistically, we've got somewhat of a long shot here. But most R & D companies of this caliber stay private up until the patent is filed and the product's out the door. Because BrainWorks is a piece of something much larger, investors who want to take that gamble or who want to ride the revenue stream of "side effect products" created along the way... They can buy into it as part of the Six Pack Companies.
BR: Steve, it's easy to spread a lot of words around and I've sat here with way too many people who thought they had the next big thing in tech. You've certainly got a different sort of company, but what's going to make it a hot IPO?
BR: If I'm an investor, I hear good things. But then again, I can go blue chip with my money and buy up Nike for the apparel business, AOL Time Warner for internet, and Monsanto for the big R&D stuff. It's not like I need to one stop shop with the Six Pack Companies.
SA: Bob, we're not looking for your blue-chip investors. Obviously, any good portfolio has the blue chips and if apparel, internet, and genetics are going to be the next big things, you've got to carry those companies. Our target investor is looking longer term, with a chance to hit the big home run. We don't have the fundamentals to compete day in and day out with a Nike, and we're not looking to do that. It's a different marketplace. We do have a solid revenue stream, good profit margin, great growth numbers, and a potential that I think is higher than 99% of the companies out there now.
BR: With such a wide variety of markets, how do you keep on top of changes in each area?
SA: It's not easy. I'm a workaholic, which helps. [laugh] But we've got good management teams in place. We try to keep the same managerial oversight on each company. It's easy for some like BrainWorks. SCA Designs really requires it's own management team, which I head up. But the continuity is there between all companies. All of our operational managers are home grown, I don't believe in hiring outside for upper management positions unless absolutely necessary. There's a lot to be said for learning the business on the inside and working for that promotion.
BR: Do you find yourself going just from briefing to briefing?
SA: I don't.. I could never manage that way. That's not managing, that's being in the know. The senior managment team, three of us, have to stay on top of every development in every area of our business. Our internet guys, grown through technology circles, they have to understand the apparel business too. It's only with that kind of overlapping vision that you can get a sense of how the whole company is growing and shifting. Are we going to sell more uniforms this year? Are we going to see a boom in licensing fees for our internet content? You've got to know all sides of the business. It's tough, but whoever spread the rumor about fat cat CEOs sitting back and collecting $50 million salaries for running companies on auto-pilot... they never came to our headquarters, that's for sure.
BR: You kind of glossed over a good point. Where do you see the revenues of the companies going? Are you going to sell more uniforms or get more licensing fees?
SA: Well, we're gonna do both, Bob! Again, not to bore with numbers but for Fiscal 2000 we showed about 56% of our revenue from SCA Designs, with the other 44% split pretty much evenly between the internet companies. Preliminary numbers for FY 2001... and again, these are very raw, show a growth in the internet numbers, which is what we are hoping for. SCA Designs still had a growth in both gross receipts and profits, but percentage-wise our tech business took off.
BR: What kind of percentages are we looking at for 2001?
SA: I don't really want to reveal numbers until they've been scrubbed by the auditors. FY 2001 actuals will be announced later this month. But estimated, let's say 50% SCA Designs, 50% the internet companies, with Interweb Illinois really taking on the strongest growth there.
BR: What's your target? Your dream for - say, 2005 - in revenue distribution?
SA: We're looking for growth. All around. I think the percentages will level out to around thirds because of the faster growth of the internet business. On our big chart on the wall, we're targetting 33% apparel, 33% internet services, 33% R and D plus internet content.
BR: And the growth target on the overall numbers?
SA: Wow, I should just read out the balance sheet for you. [laugh] Seriously, Bob, I don't want to quote dollar figures for 2001 right now, but I'll say for the next four years, our target is 20 to 25 percent growth per year. The majority of that in the internet space.
BR: Sounds very aggressive, especially given the economy.
SA: It is aggressive. But it's in line with what we've experienced pretty much year in and year out since 1996.
BR: OK, Steve. We're running low on time. But I just had to bring up some personal notes for you. Listeners out there, this man has a one page bio that will just blow your mind. I found myself reading and re-reading it thinking that he must be exaggerating.
SA: It's all 100% true and verified, Bob. I have fact checkers on staff. [laugh]
BR: Well, it's certainly good for an attention getter and door opener. Can you run down for our listeners at home some of the jobs you've held in the past?
SA: Let's see. I pitched minor league baseball for 4 years. I played bass in a local band and did some session work at a few studios. In fact, we have a company band "The Six Pack Band" that gets together once a year at our annual meetings, plays a couple of songs during our awards dinner, and then disperses. That's the kind of culture we have.
BR: I guess "beach bum" doesn't count as an occupation.
SA: [laugh] I prefer to call that: taking time off for self evaluation. But yes, I pretty much lived off the beach and mountains at various points in my life trying to find myself. But I credit that period with inspiring me to start up the Six Pack Companies.
BR: And the Little League World Series thing? True or false.
SA: All true, Bob. I was actually banned from playing in the Little League World Series because of the chicken pox. Nowadays, I'm sure there would have been a million dollar lawsuit involved.
BR: Well, we're almost out of time here. Any plugs or wrap up for us?
SA: I want to invite all the listeners to check us out on the web at www.6pack.net. We'll have updates on the IPO process as things progress. And Bob, I want to thank you for giving me an opportunity to come on here and chat with you for this time.
BR: My pleasure, Steve. Parting comment: San Diego's future in the technology world, bright or dim?
SA: Bright. But it will take a while to really get that way.
BR: OK. Thanks to our special guest this morning, Steven Adams, CEO of the Six Pack Companies based in Escondido. You've been listening to Inside Business on KCEO.