Westar capitalizes on innovation

Tumwater company takes high-tech spin on auto leasing

CHRIS CLOUGH, THE OLYMPIAN

Originally published July 1, 2001

TUMWATER - Westar Financial Services is on a path often traveled but rarely conquered these days: the road of e-commerce.

In a community where state government rules the economic roost, the publicly traded company is making a name for itself in the automobile-lease financing industry.

Westar, formed in 1996, completed the first entirely electronic auto purchase on the Internet and for the fiscal year 2001 racked up more than $300 million in revenue.

Westar's company roots go back to Republic Leasing, which Westar CEO Bob Christensen Jr. started in Olympia in 1978.

"They are a homegrown company that's been around a long time," said Dennis Matson, executive director of the Economic Development Council of Thurston County.

"As Westar, they've found an application for new technology that gives them a unique market niche, and it has accelerated their growth."

Christensen said that as consumers enjoy increased access to car-related information through the Internet, and relatively lower prices on vehicles and financing in general, it has opened the door for nontraditional business.

Westar has capitalized on that.

"Five or six years ago, we saw the deconstruction of the established automobile distribution channels," Christensen said of the company's strategy to invest millions in its computer system that streamlines lease transactions.

"Rather than be a victim, we have become a change agent."

In its sixth year, Westar is anything but a victim.

Nestled among several government office buildings in Tumwater, the company employs about 100 people in family-wage jobs. Westar has the clout of a company on track for more than $500 million in revenue for fiscal year 2002.

In a report to be issued Monday, the company announces that revenue for the first fiscal quarter of 2002, which ended Saturday, hit $140 million.

That is almost triple the $37 million in revenue for the same quarter last year and doubles earnings per share from 18 cents for the quarter ending March 31 to 36 cents per share this quarter.

It marks the fourth consecutive quarter with growth of more than 100 percent from the same period the previous year.

For fiscal year 2001, which ended March 31, Westar had a net loss of $2.8 million on revenue of $307 million. Westar was profitable in the second half of the fiscal year.

Innovation

Westar's growth is grounded in a computer system that gives Westar the flexibility and know-how to compete in an industry that is seeing traditional power players fighting to hold market share.

"We decided electronics would be a big part of the industry change and chose to invest heavily in technology," Christensen said.

He and his Westar team have constructed a cutting-edge system that allows Westar to originate, approve or decline, commit to and fulfill leases.

Westar also has partnered with three of the nation's top 25 largest financial institutions.

In dot.com lingo, Westar's business model is typical of an applications service provider, allowing other companies to tap its information management system.

It's that system, named LASIRpro, that sets Westar apart.

LASIRpro can handle all aspects of lease transactions quickly and in such a way that keeps the information accessible to all departments throughout the company.

Partnerships

Westar makes lease decisions for itself through direct relations with auto dealers in 16 Western states.

Westar has agreements with USAA Federal Savings, Mellon and AmSouth that gives those companies access to Westar's lease-approval technology.

"(The system) worked well for ourselves, so we convinced others to join in," Christensen said.

The kicker for Westar and its clients: The application and approval process is all done in real time.

Speed and service played a large part in Leasebank's recent decision to add its name to the list of Westar's private-label partners.

"Basically they are the new leader of this industry," Leasebank's Jerry Thompson said Friday from Austin, Texas.

"(The industry) has been stagnant for a lot of years, but Westar has tapped into an innovative approach and is incredibly well-positioned."

Starting in about 45 days, Leasebank will use Westar's services for credit decisions and financing leases.

Westar's rapid growth has drawn the attention of financial analysts.

Bryn Harman, with The Red Chip Review in Portland, said he is "impressed by Westar's ability to grow its revenue."

Harman said one shortcoming of the stock is that it is relatively illiquid, meaning it trades in smaller volumes that could be a concern to investors.

Christensen - Westar's largest shareholder with about 750,000 shares outright and partial ownership of about another 685,000 shares - said 200,000 shares of Westar's stock trade a month. On Friday, 5,000 shares traded.

Red Chip is not offering an investment opinion on Westar at this point but plans to do so in the future, Harman said.

Westar's growth is sure to be buoyed further after July 6 when its partnership with USAA becomes fully active. Until then, Westar will continue to process a reduced number of leases to ensure a smooth transition.

The partnership will add access to more than 5 million households that USAA services.

Christensen said Westar's computer system was built to handle rapid growth, and he expects no residual problems from higher volumes.

"It's like a swimming pool being filled with water," he said. "We can handle three or four more hoses at a time."

Expansion

With growth comes the need for more personnel and office space.

Westar's work force has grown from 30 employees a few years ago to about 100.

The company receives about 2,800 applications a year and interviews about 500 of the job seekers, according to Rachel Aest, director of human resources.

"We're an interesting fish in a small pond," Christensen said. "In what is a government town, we are an innovative, fast-growing company."

And as Christensen points out, every employee who has been with Westar more than a year has stock options.

To accommodate an expanding work force, Westar moved to its Tumwater site a year ago after outgrowing the Republic Building in downtown Olympia.

Room to grow

Westar leases its headquarters from the Vine Street Group, an investment building company and general contractor that owns six office buildings in Tumwater.

Vine Street's Brent McKinley said all of the group's other Tumwater spaces are leased to the government.

With 50,000 square feet in a four-story building, space is no longer an immediate issue for Westar.

The first two floors are starting to fill up but there are two more with plenty of room to grow into.

Christensen's business philosophy takes a long-range view of matters, including growth.

"There was a time when we didn't have enough space," he said. "And there'll be a time again when we won't."

Westar couples its high-tech programs with what Christensen calls a high- touch service approach.

"We use technology to support our people, not supplant them," he said.

Christensen also is a firm believer in a team-oriented approach and works hard to cultivate his philosophy within the corporate culture.

"It takes teams of people and teams of departments for us to be successful," he said.

As part of the team approach, workers are trained across departments and there's an emphasis on promoting from within.

"It's my job to see that team members graduate to better jobs," Christensen said. "And last year, two-thirds of our people were promoted."

Chris Clough is The Olympian's business editor. He can be reached at 360-754- 5403 or by e-mail at news@theolympian.com.

The Olympian Copyright 2001

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