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Planning for the Future – CRE’s X-Ray Vision

Larry DeWitt can certainly be excused for not being the biggest fan of digital technology. After all, Commodity Resource and Environmental (CRE), the business he founded 32 years ago and which has grown into one of the world’s leading silver recovery companies, has watched as digital technology has replaced silver-based films in a variety of applications.

In graphic arts and publishing, for example, the volume of silver-based film handled by DeWitt’s company has fallen from as much as 30 percent to about 5 percent today as the industry has jettisoned film and transitioned to computer-to-plate technology.

Even more dramatic has been the move away from camera film — witness the situation with Eastman Kodak Company which has filed for bankruptcy protection — to digital cameras.

“Not many people are shooting film in their cameras any more,” DeWitt notes. “I was the longest holdout on that just because of my business . . . but I’ve had a digital camera now for about eight or nine years.”

DeWitt sees much the same thing ultimately happening to X-ray film, even though the volume of that material processed by CRE has steadily increased over the last five years. The company currently processes some 2.5 million pounds of X-ray films monthly. Of that amount, about 45 percent is film jackets and associated paperwork with the balance being film for silver recovery. The company also accepts shredded film.

The biggest increase in volume, which he describes as a “major spike,” came in 2011, with the financial collapse of Gemark Corp., a major precious-metal refining company in New York. Gemark and seven affiliated companies has since filed for Chapter 7 bankruptcy.

“Even though we had steadily grown over the last four or five years at a nice rate, this was a big spike,” DeWitt says of the Gemark material. “We weren’t prepared for it.

“We always have contingency plans, a lot of which are based on a crisis in wrong direction,” he adds. “This was a crisis in the right direction.”

To handle the increased volume, CRE added three new buildings and increased capacity and ramped up staffing at its plant in Mojave, about 90 minutes from the company’s headquarters in Burbank, Calif.

“For awhile we had a horrendous backlog, but once we got the buildings up and the staff trained, we were able to increase production enough to handle not only what was coming in on a regular basis, but to reduce the inventory backlog we accumulated because of the spike in the business,” DeWitt says.

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By the fall of 2011, the workload stabilized.

While hospitals, medical facilities and document management companies still have decades of stored X-ray films that eventually will need to be destroyed, DeWitt sees a diminishing market as digital continues to make inroads.

“Five years ago, if you were interviewing me, I would have said it’s a maturing business,” says DeWitt, who uses the same description to describe the situation today.

Twenty years ago, he gave the market another 10 years before predicting its demise. Today, he makes the same prediction.

As the market changes, with X-ray film eventually going the way of graphic arts and photo films, he expects CRE will change with it.

“Hopefully we’re smart enough to plan beyond that,” he says. “We will still be in business but it won’t be in the business we are in now. We’re not in the business as it existed 20 years ago or even 10 years ago. But 10 years from now, we won’t be in the business as it exists today.”

“You can’t sit still,” he adds. “You have to keep moving forward. You have to have plans . . .”

DeWitt has already made some moves to remain viable in the future. Chief among them was to begin offering document destruction services at CRE for film jackets and radiology reports.

“Our primary goal was to get the film with the silver on it, but the marketing part was having the in-house capability to destroy the records that accompany the film,” DeWitt explains. “It gave people more reason to use us as their silver refiner. It has been a very big plus for us.”

Along with the effort, CRE became the first silver refiner in the U.S. to be NAID certified. NAID (National Association for Information Destruction) is the international trade association for companies providing information destruction services. CRE also became heavily involved with PRISM (Professional Records & Information Services Management), the trade association for the commercial information management industry.

“The X-ray films themselves are not NAID certifiable, but most of the X-ray films we get, whether from a hospital or a records storage company, come in jackets with the X-rays inside the jacket along with all the radiology reports,” he says. “So we started emphasizing our HIPAA (Health Insurance Portability and Accountability Act) compliance, then moved forward with getting certified by NAID.”

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The company also constructed another building and purchased a shredder and an auto-tie baler.

“We started promoting the fact that not only were we NAID certified but we were the only refiner destroying records in-house, not sending them out or overseas,” DeWitt says.

After shredding the documents, the paper is sold to mills in the U.S.

DeWitt adds that nothing that is sent to CRE ends up in a landfill. After the silver is removed from X-ray films, the remaining PET plastic is sent to recyclers.

And after silver is removed from photo processing chemicals, the resulting industrial waste is sent to evaporation ponds at a waste facility.

CRE in the last year also purchased chopping equipment to handle micromedia, such as microfilm and microfiche. It reduces the material to NAIDmandated chop size of one-eighth of an inch. It also installed a grinder for hard drive destruction.

Those purchases were all part of phase one of a multi-phase plan for document destruction. The other phases had to be put on hold when business spiked in 2011 due to the Gemark situation.

DeWitt notes other reasons why the business has continued to grow, including the fact that smaller, less environmentally friendly refiners have disappeared from the scene. Rising silver prices have also encouraged companies to purge films they are no longer are legally required to maintain. Eliminating those files also frees up much needed valuable space in hospitals, medical facilities and document storage facilities.

CRE is able to source those documents based on referrals and its reputation in the industry. Newcomers may find it somewhat more challenging, DeWitt says.

That’s because some people got into the market when silver prices were rising, collected the films, and then disappeared without ever paying their clients.

“They appear when the market is up and disappear when the market is down,” he says. His advice to medical facilities, hospitals and document storage facilities is “to do your due diligence. Make sure the company you’re dealing with is legitimate.”

DeWitt admits it’s difficult to predict where silver prices will go in the future.

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The swings in silver prices are the result of “so much turmoil right now in Europe and even our own country as far as value of dollar,” he says, adding that many of the increases and decreases in silver prices are due to speculation, just as with the price of oil and other commodities.

“These are all commodities . . . a lot of them are highly speculative,” he says.

As far as a forecast for 2012, DeWitt puts silver at $35 an ounce. Within three years, he predicts the price will hit $40 an ounce.

One prognosticator, he notes, pegged the price of silver at more than $200 an ounce by 2013. “Nobody knows for sure. If I knew all those answers (concerning the price of silver), you’d be calling me long distance to my beach house in the Caribbean,” he says with a laugh.

CRE pays clients either “spot pay” or on a “refining basis” for their X-ray film. Spot pay is based on the net weight per ounce of silver in each pound of film multiplied by the CRE Tradable Silver Market on the date of receipt. An average film lot of .04 ounces per pound and a silver market rate of $32.79 would equal a spot payment of $1.31 per net pound; a shipment of 10,000 pounds of film would result in a payment of $13,100.

Clients who elect to be paid on a refining basis have their payment based on the net silver yield in the process, minus a per pound refining charge. This can result in higher payments for clients whose films have higher silver content due to age, exposure or brand. CRE guarantees the payment on the refining basis will not be lower than the spot pay.

With CRE seemingly well positioned for the future, DeWitt, who is 71 years of age, may take a step back and “slow down.” He has had offers to sell the business in the past and has also looked into the possibility of selling it to the employees, many of whom have been with him for years.

With the inroads of digital, there is still one thing that he hasn’t been able to solve.

“I haven’t figured out a way to recycle pixels yet,” he says with a laugh.

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