Harding Lawson Associates Group, Inc.

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Harding Lawson Associates Group, Inc.

7655 Redwood Boulevard
P.O. Box 578
Novato, California 94948
U.S.A.
(415) 892-0821
Fax: (415) 892-0685

Public Company
Incorporated: 1959 as Harding Associates, Inc.
Employees: 1,045
Sales: $130.5 million (1995)
Stock Exchanges: NASDAQ
SICs: 8742 Management Consulting Services

A rising force in the engineering consulting industry, Harding Lawson Associates Group, Inc. provides engineering, environmental, and construction services related to the management of hazardous and solid wastes, as well as civil and geotechnical engineering services. During the mid-1990s, Harding Lawson Group served as the parent company for three subsidiaries, Harding Lawson Associates, Inc., Harding International, Inc., and Harding Lawson Associates Infrastructure, Inc., which together operated 35 offices located in 17 states, Australia, Indonesia, and Mexico. Although Harding Lawson Group celebrated its 36th year of business in 1995, the operations that constituted the company during the 1990s were largely developed during the 1980s and 1990s, when annual sales for the company increased from roughly $10 million to the $130 million generated in 1995.

Origins

Founded in 1959, the Harding Lawson Group began business as Harding Associates, Inc., drawing its name from the then 35-year-old founder of the company, Richard S. Harding. When Harding took the helm of his small, start-up consulting and engineering firm during its inaugural year of business, he began what would become his life’s work. Harding guided the company for more than three decades, stewarding its growth during its formative years as a modestly sized, privately held firm based in California, then, during the later years of his career, superintended its transformation into a much larger, more diversified company. The two periods in the corporate life of Harding Associates were distinct; one comprised nearly 30 years of subdued existence and moderate growth, while the other saw the advent of a more conspicuous player in the engineering consulting industry. Although Harding Associates’ era of prominence came roughly three decades after its formation, reaching stride as Harding himself was nearing the end of his career at the company, the move toward diversification and greater growth was resolute, fueling sales increases that far outpaced the rate of growth recorded during the company’s first era of business.

The company Harding helped to establish and the company of which he was later named chairman emeritus operated as a privately held company for 28 years before entering the public spotlight in 1987. The conversion to public ownership represented a turning point in the company’s history, to be sure, but the signal year in Harding Associates’ transformation into a more diversified and robust competitor in the engineering consulting industry occurred three years earlier, in 1984, when the company shifted its business focus and entered a substantially more fruitful field of operations.

Defining Change in 1984

Until 1984, Harding Associates generated the bulk of its business from conducting soil and foundation analyses for commercial and industrial construction projects, competing as a firm whose specialty was geotechnical consulting. In 1984, however, the company’s management, led by Harding who served as chairman, president, and chief executive officer, took notice of a burgeoning market that offered greater growth and greater rewards. In the years preceding 1984, federal, state, and local environmental regulations put into effect stringent stipulations concerning hazardous waste disposal, which, not surprisingly, created a pressing demand for hazardous waste disposal services during the early and mid-1980s. Noting the rise in demand for such engineering consulting services, the management of Harding Associates decided a change in business emphasis was in order. From 1984 forward, waste management engineering would fuel the company’s growth, precipitating a steady rise in its sales and touching off a new era in its corporate history.

After recasting itself as a provider of engineering and consulting services for hazardous waste disposal, Harding Associates entered the fast-growing market that would support the company in the years to come. Once hired for a project, the company sent its scientists and engineers to determine the nature and extent of contamination at a particular site. Using the information gathered from this initial inspection, company personnel designed a system to control or eliminate the problem, then managed the construction of the remedial system or waste disposal facility and, after that, managed its operation following the completion of construction. The foray into waste disposal engineering and consulting proved to be a boon to the company’s financial condition, yielding ameliorative results and arresting a harmful slide in earnings. In 1983, one year before the entry into hazardous waste disposal services was effected, Harding Associates recorded a year-end loss of $147,000 on $16.2 million in annual sales. By the end of 1984, earnings had shot up to nearly $300,000, while revenues approached $25 million, giving management palpable evidence that the decision to revamp the company’s business focus after 25 years was a prudent one.

Business steadily grew as the 1980s progressed, driving annual sales upward. Although the company’s earnings fluctuated during the mid-1980s, jumping back and forth between $250,000 and $300,000, its revenues marched resolutely upward, surpassing $30 million by the end of 1986. By the following year, the company was ready to go public, making its initial public offering in August when it presented 1.3 million common shares at $12.50 a share. At the time, Harding Associates employed 450 people, most of whom were scientists and engineers. The company had expanded geographically and, during 1987, was operating 12 offices in seven states, the majority of which were located in the western half of the United States. In total, the company completed more than 2,000 projects during the year, collecting nearly $40 million from roughly 1,000 industrial and governmental clients, the majority of whom—70 percent—were involved in the private sector of the nation’s economy. Perhaps more encouraging than the energetic leap in total sales for the year (an increase of nearly $10 million from 1986’s total), was the prolific surge in earnings recorded by the company. In 1986, year-end profits amounted to $270,000, while 1987’s total eclipsed the $1 million plateau, reaching $1.03 million.

Following the stock offering, Richard Harding, by now in his mid-60s, began to relinquish some of his control over the company so he could concentrate more fully on the strategic planning, development, and expansion of Harding Associates. In 1988, Harding vacated two of his posts, making room for Richard P. Prezio, who in addition to his role as the company’s chief financial officer was named chief executive officer and president. With Harding at the top and Prezio holding the titles of chief executive officer, president, and chief financial officer, Harding Associates continued to grow throughout the remainder of the 1980s, entering the new decade as one of the strongest of roughly 15 publicly traded companies in the industry nationwide.

Prominence in the 1990s

The company’s pace of growth accelerated in the wake of its public offering, gaining momentum as Harding Associates moved past its 30th anniversary and entered the 1990s. The company’s growth, which was occurring at a 30 percent annual rate, led some observers to question whether sufficient numbers of qualified personnel could be brought on board to sustain growth of such magnitude. The services provided by the company—consulting engineering, environmental, and construction services related to hazardous and solid waste management—constituted a narrow academic field, one that would have to be skillfully tapped to attract sufficient numbers of scientists and engineers to continue expanding as fast as Harding Associates was growing in the 1990s. Further, this potential impediment to growth would pose a greater threat as Harding Associates embraced a more aggressive expansion strategy in the new decade. From 1990 forward, the company’s management intensified their expansion efforts, intent on using the company’s business base in California as a springboard for expansion across the country.

By the end of 1991, Harding Associates annual sales volume had more than doubled in the four years since it had become a publicly traded company, rising to $98 million. Greater gains were recorded in annual net income, which had quadrupled since the 1987 public offering, soaring to $4.5 million. As sales began to stagnate in the early 1990s, the company moved forward with plans to become a more nationally oriented engineering consulting firm. In February 1993, Harding Associates acquired Pennsylvania-based EEC Environmental, Inc., a provider of environmental engineering and consulting services to private industry clients in the northeastern United States, then seven months later, in September, purchased Florida-based Cross/Tessitore & Associates, which was involved in providing services for air quality management and air pollution control. The following year, in May 1994, Harding Associates completed a pivotal acquisition when it purchased Alpha Engineering Group, Inc., a 150-person firm based in Washington with offices in Arizona, California, Colorado, and Nevada.

The acquisition of Alpha Engineering, which specialized in civil transportation and municipal engineering, represented a move toward diversification by Harding Associates, one important step in the company’s plan to respond to changes within its industry. Uncertainty concerning the direction environmental statutes would take in the future had stifled Harding Associates environmental services market, hobbling sales growth as a result. In 1992, the company generated $112 million in sales, $115 million the following year, and $115 million in 1993. Diversification and a re-emphasis on traditional engineering services, Harding Associates’ management hoped, would invigorate sales, enabling the company to resume the animated growth it had recorded during the late 1980s. The acquisition of Alpha Engineering, with its expertise in designing streets, highways, bridges, water and sewage systems, and storm water drainage and treatment systems, represented one such diversifying move, part of what would prove to be a busy 1994 for Harding Associates.

One month after the acquisition of Alpha Engineering, in June 1994, Richard Prezio resigned as chief executive officer and chairman (Richard Harding had since been named chairman emeritus). In Prezio’s place, Richard D. Puntillo, a Harding Associates board member since 1989 and a finance professor at the University of San Francisco School of Business, was selected to lead the company, concurrent with the announcement that Harding Associates, through its Harding Lawson Associates subsidiary, would open an office in Pittsburgh. Although the company had already been conducting work in Pittsburgh through its offices in Chicago and Philadelphia, the establishment of a permanent office in Pittsburgh reflected Harding Associates plan to provide a full-range of services in the Ohio Valley, including air quality, emissions testing, engineering and hazardous waste services.

Following the change in leadership and the decision to open an office in Pittsburgh, Harding Associates next moved on the international front, acquiring a 76 percent interest in Envirosciences Pty. Ltd., an environmental consulting firm with five offices located in the major metropolitan areas of New South Wales and Queensland, Australia. Harding Associates’ international presence was strengthened further when marketing activities were intensified in Taiwan, the Philippines, and in Indonesia during the year and by the establishment of a Mexican engineering company, Grupo de Ingeniería Ecológica (GRIEGO), in which the company owned a majority interest.

Entering 1995, Harding Associates was coming off a year of significant changes, particularly its foray into international markets. On the heels of these sweeping changes, the company changed its name in 1995 from Harding Associates, Inc. to Harding Lawson Associates Group, Inc. to benefit from the name recognition earned by its similarly named subsidiary. Once the name change was effected, Harding Lawson Group represented the new corporate title for the parent company of three primary subsidiaries: Harding Lawson Associates, Inc.; Harding International, Inc.; and Harding Lawson Associates Infrastructure, Inc. (HLAInfrastructure).

Through Harding Lawson Associates, Inc., the long-time subsidiary of the company, Harding Lawson Group provided its environmental and waste management services, which included selecting sites for waste disposal facilities, designing facilities, obtaining permits for them, and providing air quality management services, site audits and assessments, and regulatory compliance and environmental permitting and monitoring. HLA-Infrastructure, formerly known as Alpha Engineering, constituted the civil transportation and municipal engineering arm of Harding Lawson Group’s interests, operating as a consulting engineering firm involved in designing streets, highways, bridges, interchanges, high-occupancy-vehicle lanes, as well as several other services, including Harding Lawson Group’s original mainstay business, geotechnical engineering. Complementing these two U.S.-based companies was Harding International, Inc., comprising HLA-Envirosciences in Australia and GRIECO in Mexico, which provided environmental, waste management, and water resources engineering services to international clients.

With these subsidiary firms supporting the company’s position, Harding Lawson Group entered the mid-1990s pursuing a strategy of geographic growth and diversification. As the company prepared to fulfill this goal, encouragement came from the 13 percent increase in sales posted in 1995, following three successive years of lackluster performance. Although uncertainty continued to cloud the environmental regulatory picture in the mid-1990s, Harding Lawson Group was braced for changes affecting its industry, intent on putting the engineering consulting expertise its had developed during 37 years of business to work in the future.