Analytical Surveys, Inc.

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Analytical Surveys, Inc.

941 North Meridian Street
Indianapolis, Indiana 46204
U.S.A.
Telephone: (317) 634-1000
Fax: (317) 532-3440
Web site: http://www.anlt.com

Incorporated: 1981
Employees: 1,225
Sales: $113.5 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: ANLT
NAIC: 54136 Geophysical Surveying & Mapping Services

Analytical Surveys, Inc. (ASI) is a provider of data conversion and computerized mapping services to the Geographic Information Systems (GIS) industry. The company gathers geographically related information, such as utility usage data, infrastructure patterns, aerial photographs, and tax records, and then converts that information into computerized, database format. This digitized information is then used to create a GIS: a high-resolution, computerized map that contains various “layers” of geographical data. The GIS also can incorporate database applications, such as query and statistical analysis.

ASI’s customers are primarily large organizations that use extensive geographically-related information to manage their operations, such as municipalities, utilities, public works departments, and federal and state environmental agencies. The company has offices in Colorado, Wisconsin, North Carolina, Indiana, and Texas.

1980s: Laying a Foundation for Growth

Analytical Surveys, Inc. was founded in 1981 in Colorado Springs, Colorado by John Thorpe. Thorpe’s educational background included a B.S. in geography and mathematics from Rhodes University in South Africa and an M.S in photogram-metric engineering from the International Training Center for Aerial Survey, in Holland. Prior to founding ASI, he had owned an aerial survey company in Johannesburg, South Africa, for 12 years.

ASI spent its first several years growing slowly, realizing steady gains in revenues, but experiencing fluctuations in net results. In 1984, the company went public, and by the end of the 1980s, began gearing up for a more rapid growth rate. The first order of business was to strengthen its infrastructure by investing in new equipment and additional employees. Toward this end, the company hired a new director of marketing and sales and expanded its research and development department. It also hired a new director for its GIS department.

These investments, mostly made in 1987, led the company to post a $183,796 loss for that year. “Even though we showed a loss, we felt good about 1987,” explained ASFs vice-president of administration and finance, George Southard. “We had to build up the facility in order to win the work. We think that 1989 will be the year we begin to really reap the benefits of all the work we did in 1987,” he observed. With the newly laid foundation for growth, the company planned to move forward rapidly; its goal was to increase sales by 50 percent annually for several years. ASI felt confident that the expanding digital mapping industry would easily support such a growth rate. With the use of GIS systems increasing rapidly, the industry was projected to grow from $390 million to $779 million within five years.

By 1988, ASI had returned to profitability, with sales of $5.3 million and earnings of $277,251. The company finished up the year by introducing a new service called digital orthophotography. Digital orthophotography was a method of converting aerial photographs into accurate, measurable digital images. To prepare a digital orthophotograph, ASI scanned an aerial photograph into a computer, using a high-resolution scanner. The company then used its own, proprietary software to remove the distortions that were caused by photography. The resulting ortho-photo, which was delivered either as a computer data file or a printed image, was a true-to-scale depiction of surface features.

1990: Controlled Growth

In 1990 ASI appointed a new president and chief operating officer: Sidney Corder. Corder had served previously as president of Cubic Western Data, a San Diego-based subsidiary of Cubic Corporation, and as general manager of manufacturing control for Rohr Industries, a company providing technology and manufacturing service to the aerospace industry. As ASFs new leader, the industry veteran was charged with managing the company’s day-to-day operations and finances. Thorpe, who continued to hold the office of CEO, remained in charge of policy and strategic technical advancements. Shortly after hiring Corder, ASI initiated a new, controlled growth strategy that included improving and standardizing operating procedures and controls; upgrading its proprietary software; establishing capital sources; and making further investments in its infrastructure. Corder became the company’s CEO in 1993.

By the early 1990s, the company’s growth rate was, indeed, accelerating. In 1993 and 1994, the company’s net earnings improved by 50 percent and 66 percent, respectively. Its average contract size had increased by 50 percent, and its backlog topped $10 million. In 1995, however, ASI decided to ratchet up the pace again. The company developed and implemented a much more aggressive growth strategy—one that had acquisition as its cornerstone.

Acquisition and Consolidation: 1995-96

In the mid-1990s, the GIS industry was highly fragmented. Its players included small regional firms, larger independent firms, major companies operating GIS divisions, and international providers of data conversion services. Many of the companies, however, specialized in only certain areas of data collection and conversion and, therefore, were unable to offer the full range of services necessary to complete large-scale projects. This being the case, ASI believed that the industry was ripe for consolidation—and it planned to lead the way. The company’s newly minted growth strategy involved acquiring businesses that would broaden its geographic reach, capacity, customer base, product offerings, proprietary technology, and operational abilities.

ASI’s first acquisition was Intelligraphics Inc., a utility mapping services company located in Waukesha, Wisconsin. The Intelligraphics purchase, which was completed in December of 1995, added 200 employees, 25 new customers, and $12.3 million in backlog to AS’s operation. More significantly, it gave the company entree into the utilities facility data conversion market, as well as establishing a presence in the Midwest.

A second acquisition followed within a few months. In July 1996, ASI purchased Westinghouse Landmark GIS, Inc. for $1.9 million. The North Carolina company, which was renamed ASI Landmark, specialized in land base and cadastral mapping. Cadastra maps, which indicated boundaries and property lines, were used for researching deeds or determining property areas for tax purposes. Until acquiring Landmark, ASI had used outside subcontractors to perform this type of work; the acquisition, then, expanded the range of services the company could perform in-house. It also strengthened ASI’s presence in the eastern and southeastern parts of the United States and provided it with approximately 20 new customers and 105 new employees.

By the end of 1996, less than two years into its new growth plan, ASI had revenues of $22.7 million—an increase of almost 70 percent from 1995. It posted earnings of $1.9 million. The company had grown from 119 employees to 377 during the same time span.

Industry Dominance: 1997-98

In 1997 ASI made its largest acquisition, purchasing MSB Corporation of Indianapolis, Indiana. With more than 200 customers, 335 employees, and annual sales of around $22 million, MSE was ASI’s main competitor. By merging the two companies, ASI became the clear industry leader. The acquisition also gave ASI expertise in civil engineering, which it had previously had to contract out. “MSE fits well with our strategy of aggressively expanding our service base and geographic presence,” ASI President Sidney Corder said in a July, 1997 interview with the Indianapolis Business Journal. “When we were bidding for jobs, we were always one, two or three with MSE, so it made sense. We are now the largest and most flexible company in our industry.”

The acquisition led to some restructuring in the top echelons at ASI. MSE’s previous owner, Sol Miller, joined ASI’s board of directors. He also became the company’s largest shareholder, holding approximately 14 percent of its stock. MSE’s president, Randy Sage, became ASI’s chief operating officer. John Thorpe retired as chairman of the board and was succeeded by Corder. Shortly after the acquisition, ASI moved its executive offices to Indianapolis, and its top managers—including Corder—relocated there.

Already the largest player in the GIS industry, ASI continued to bulk up. In June 1998, the company acquired the San Antonio-based Cartotech, Inc. Cartotech was a provider of GIS data conversion, digital mapping, and database construction services, with annual revenues around $15 million. The Cartotech acquisition gave ASI a stronger presence in both the utility market and in the southwestern part of the United States. It also added 50 new customers and 270 employees.

ASI made two smaller acquisitions in 1998 and 1999: Cartographic Sciences and Measurement Science, Inc. Cartographic Sciences was an India-based provider of data-conversion services. Measurement Science, based in Englewood, Colorado, was a provider of GIS-related engineering and surveying services with particular expertise in the use of Global Positioning System (GPS) technology for data collection. Prior to the acquisition, ASI had used both firms as outside contractors.

Company Perspectives:

Through our aggressive efforts to expand our business, we have gained an in-depth knowledge of our industry and the markets it serves. While this provides us with an outstanding competitive advantage, it also comes with responsibility. Our vision of the future will help shape the direction of the rapidly growing GIS data industry.

In addition to increasing production capability via acquisition, ASI also focused on using new technologies to improve its productivity. One such new technology was METRO—a new process for use in the production of orthophotographs. Whereas correcting distortions in an orthophoto had previously been a time-consuming, labor-intensive task, METRO made the corrections automatically—thereby greatly reducing the production hours and expense involved.

New Directions, New Alliances: 1999

ASI started 1999 with a commitment to and a strategy for expanding its field inventory services. Field inventory collection involved capturing positional and attribute data on fixed objects, such as utility poles and street signs. The data collected was ultimately used in the creation of a GIS. There was a growing demand for such collection services, particularly among utilities customers. To meet the demand, ASI invested more than $600,000 in capital equipment and software used for field inventory services and began increasing its staff of field inventory personnel.

The company also took a step that simultaneously extended its global reach and cut overhead when it formed a strategic alliance with Infotech Enterprises, Ltd., an India-based data conversion company. Under the terms of the partnership, Infotech agreed to provide ASI with data conversion services, using ASFs proprietary mapping software, at a cost that was considerably lower than ASI could obtain domestically. The partnership agreement also included the sale of the ASI-owned, India-based Cartographic Sciences to Infotech.

Corder explained the reasoning behind the Infotech alliance in a June 23, 1999 press release. “Increased worldwide demand for GIS services has prompted our efforts to increase the company’s global capacity,” he said, adding “We have taken several key steps to grow our domestic capacity in recent years, and those efforts will continue. This agreement allows us to expand our international presence in conjunction with our domestic growth programs.” By January 2000, the Infotech partnership was proving so beneficial that ASI decided to move more of its data conversion work overseas.

The year 1999 also brought two small divestitures for ASI. The company sold two subsidiaries, Phillips Design Group and Mid-States Engineering, which had been acquired in 1997 as part of MSE. The company finished up 1999 with sales of $113,548—up 28.8 percent over 1998’s $88.2. Net earnings showed a 117.1 percent improvement in 1999, jumping to $7.2 million from 1998’s $3.3 million.

Mapping the Future: 2000 and Beyond

As the new millennium started, ASI found itself in a period of transition with regard to leadership. In late January 2000, company CEO and Chairman Sid Corder announced his retirement. Sol Miller, the former owner of MSE, was appointed interim CEO. James T. Rothe, a member of ASFs board since 1987, became chairman.

Leadership issues notwithstanding, the company’s future was almost certain to include entry into several new markets where GIS technology was just beginning to be used. Target industries included wireless telecommunications, insurance, transportation, and financial services. The company believed that to effectively tap these new markets, it needed to help potential customers understand how GIS could benefit them. Toward this end, ASI planned to expand its consulting services, offering customers more complete guidance on how to design, use, and manage GIS.

Principal Subsidiaries

ASI Technologies, Inc.; ASI Landmark, Inc.; Intelligraphics International; MSE Corporation; Cartotech, Inc.; ids Digital Map Publishing Service; Phillips Design Group.

Principal Competitors

Bechtel Group, Inc.; Brown and Caldwell; Commodore Applied Technologies, Inc.; EA Engineering, Science, and Technology, Inc.; Ecology and Environment, Inc.; ECOS Group, Inc.; Harding Lawson Associates Group, Inc.; The Keith Companies, Inc.; Montgomery Watson; NSC Corporation; Sevenson Environmental Services, Inc.; Superior Services, Inc.; Tetra Tech, Inc.; TRC Companies, Inc.; United Water Resources; URS Corporation.