Jiffy Lube founder to go public with youth-service firm

December 04, 1993|By David Conn | David Conn,Staff Writer

W. James Hindman, a former college football coach and the founder of the Jiffy Lube chain, is about to go public with his latest venture: an Owings Mills company that runs facilities for troubled youths, including the Charles H. Hickey Jr. School in Baltimore County.

The company, Youth Services International Inc., will try to sell up to $18 million of stock to the public sometime next year, according to a registration statement filed with the Securities and Exchange Commission.

The 3-year-old company plans to sell nearly 1.5 million shares of stock, at a maximum price of $12 a share, according to the statement. The shares would represent just over one-fourth of all outstanding common stock. Ferris, Baker Watts Inc. is listed as the lead underwriter.

Although the company has generated more than $3 million in losses since its inception in January 1991, it reported its first quarterly profit of $208,000 in the three months that ended Sept. 30.

Mr. Hindman, the company's chairman and chief executive, has stock and options amounting to 1.83 million shares, about 37 percent of the company. Those shares would be worth nearly $22 million at the maximum $12 offering price.

Since its first contract in February 1992, Youth Services has taken charge of seven facilities in Iowa, Tennessee, Utah, South Dakota and Maryland. The company defines its mission as "developing and operating programs that foster the moral, intellectual and physical growth of troubled youths, while maintaining public safety as its highest priority." As of last month, there were 837 students in its charge.

The Hickey school, in the Cub Hill section of Baltimore County, is by far YSI's largest facility. The Maryland Department of Juvenile Services awarded the five-year, $49 million contract to the company in May, several months after the state had canceled its contract because of dissatisfaction with the previous provider, Rebound Corp. of Colorado.

Youth Services International also has run the 125-student Victor Cullen Academy in northern Frederick County since September 1992.

"Victor Cullen, I think, is doing excellent," said Juvenile Services Secretary Mary Ann Saar. "We've had over a year of a track record."

As for Hickey, "it's hard to tell" so soon after the company has started, she said. "Some areas, they're doing well, and it's slow in other areas."

She said the Hickey school has four distinct programs, and therefore poses challenges not faced at other facilities.

The 58-year-old Mr. Hindman has a history of taking on challenges. A successful executive in the hospital and nursing-home industries, Mr. Hindman, an Iowa native, switched gears in the mid-'70s and became head coach of Western Maryland College's football team.

According to Hindman legend, he responded to a student's challenge that it was impossible to become a millionaire anymore, by conceiving and creating Jiffy Lube, the quick-lube-and-oil-change company.

The company was a success almost from its inception in 1979, but rapid expansion led to its near-collapse from too much debt by the late 1980s.

Pennzoil Co. rescued Jiffy Lube in 1990 by buying an 80 percent stake in the company for $35 million. Mr. Hindman received $1.3 million and about $250,000 a year for five years in consulting fees.

According to the SEC registration, by using existing facilities rather than building its own, Youth Services hopes to avoid the level of capital needs that Jiffy Lube required.

It has submitted two bids to operate juvenile boot camps in Utah and Colorado and expects to pursue similar contracts for a program that the U.S. Justice Department is considering.

Ms. Saar, of Maryland's Juvenile Services Department, said the industry is growing rapidly as more states turn toward private companies to operate their most challenging facilities, both for efficiency and to save money.

Youth Services International, in its registration statement, says its programs in Maryland and Iowa, for example, cost less than each state's similar program. The company estimates that the market for publicly and privately provided residential juvenile-rehabilitation services is about $2.8 billion.

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