Roy F. Weston, Inc.

views updated

Roy F. Weston, Inc.

1 Weston Way
West Chester, Pennsylvania 19380
U.S.A.
Telephone: (610) 701-3000
Fax: (610) 701-3186
Web site: http://www.rfweston.com

Public Company
Incorporated: 1957
Employees: 1,650
Sales: $147.8 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: WSTNA
NAIC: 54133 Engineering Services; 54171 Research & Development in the Physical, Engineering, & Life Sciences; 54138 Testing Laboratories

Roy F. Weston, Inc. provides a range of environmental consulting, design, engineering, and construction services designed to solve problems associated with air, water, and land pollution; hazardous material and toxic waste treatment and disposal; workplace hazards; product use; and energy conservation. Its main focus is on infrastructure redevelopment, which it defines as bringing facilities, land, buildings, and other resources that have been environmentally compromised back to profitable use. Weston’s clients include private industry, federal agencies, and state, city, and county governments. The company operates through a network of 60 offices located throughout the United States, as well as offices in Europe, Latin America, and Asia.

Founding and Early Growth in the 1950s and 1960s

Roy Weston acquired an interest in the earth and its ecosystems at an early age. As a child growing up in Reedsburg, Wisconsin, the budding environmentalist spent much of his time outdoors, engaged in pursuits such as fishing and hunting. By the time he enrolled in the University of Wisconsin, he was already considering a career that would keep him involved in environmental issues. Choosing a major in civil engineering and a minor in sanitary engineering, Weston graduated from Wisconsin in 1933. He then continued his education, studying public health engineering at the University of Minnesota before completing a master’s degree in civil engineering at New York University in 1939.

Fresh out of college, Weston was hired by the Philadelphia-based Atlantic Refining Co. as an industrial pollution control engineer. Because the concept of environmental responsibility was just then becoming an issue for U.S. industry, such positions were virtually unheard of. Weston was only the second industrial pollution control engineer in the nation.

Weston stayed at Atlantic Refining for 16 years. By 1949, however, he was already laying the foundation for his own business by taking on consulting work in his spare time. In 1951 he merged his sideline consulting business with that of two other environmental consultants: Wes Eckenfelder and John Hood, of Ridge wood, New Jersey.

In 1955 Weston left his position at Atlantic Refining to concentrate completely on his and his partners’ consulting business. Two years later, he bought out Eckenfelder and Hood and established the consulting firm of Roy F. Weston, Inc. At that time, the company consisted of a staff of ten and had its offices in New-town Square, Pennsylvania, just west of Philadelphia. Its main focus was on the biological treatment of industrial wastewater.

In the early 1960s, a recession put the brakes on traditional industrial wastewater business, leading Weston to expand its client base by tapping the public sector. The resulting infusion of new government clients catapulted the company into a period of rapid growth. By the mid-1960s, with 62 employees, Weston had outgrown its space in Newtown Square. It moved to a 53-acre estate in West Chester, Pennsylvania, which had been built in the 19th century by attorney and environmentalist John F. Lewis. In 1967, with revenues climbing near $2 million, Weston opened regional offices in Illinois and Georgia. By 1969, the company had a staff of almost 200 and had opened two more regional offices—in New York and Texas. That same year, Weston made its first public stock offering, generating capital for even greater expansion.

Increasing Awareness and Rapid Growth in the 1970s

The 1970s were a time of tremendous growth in the environmental consulting and engineering industries. In 1970 President Richard Nixon created the Environmental Protection Agency (EPA), charging it with the mission of protecting human health and safeguarding the natural environment—air, water, and land—upon which life depended. The EPA’s role included finding ways to clean up and prevent pollution, ensuring compliance and enforcement of environmental laws, assisting states in environmental protection efforts, and raising the public’s awareness and understanding of environmental issues. The formation of this new agency set the stage for sweeping changes in U.S. environmental regulation.

Throughout the 1970s, the EPA created programs and proposed legislation designed to clean up the air and the water. The decade’s environmental initiatives included setting new standards for auto emissions; phasing out the use of lead in gasoline; limiting industrial water pollution; banning the use of various toxic substances in manufacturing and farming; and establishing standards for the treatment of the public drinking water supply. Under the Resource Conservation and Recovery Act of 1976, the EPA also began establishing controls over the generation, transportation, treatment, storage, and disposal of hazardous waste.

As the environmental movement picked up steam, Weston’s business also grew. Although the company’s original focus had been on wastewater cleanup, the growing concern over other types of pollution led the company to broaden its range of services. It rapidly moved into new fields, including air pollution controls, solid waste management, and the treatment and disposal of hazardous materials.

The decade was also a time of tremendous geographic growth for Weston. In 1970 the company established a European subsidiary, Weston Europe S.p.A., in Milan. The following year saw the opening of an office in Kobe, Japan. The company also established a research and development lab and in-plant pollution control services unit at its Pennsylvania facility.

In the mid-1970s, Weston sold its newly formed European subsidiary and focused more intently on building up its domestic business. From 1973 to 1976, the company opened facilities in seven new states: Virginia, Maryland, New Mexico, Alabama, Tennessee, California, and Louisiana. It also expanded via the acquisition of four environmental engineering and consulting firms: Phillip Steel & Associates, Battaille Associates, Trygve Hoff & Associates, and Environmental Engineers, Inc., of Concord, New Hampshire. Weston’s expansion rapidly swelled its gross earnings; between 1974 and 1976, the company’s revenues grew from $10 million to $15 million.

Roy Weston, who was by then in his late 60s, had already turned the company’s day-to-day operations over to a younger management team. By the end of the 1970s, however, the company was suffering from growing pains—and Weston grew dissatisfied with his managers’ performance. After firing two different presidents in two years’ time, the spirited founder recaptured control of his company, taking its daily operations back into his own hands. In 1979 Weston and his family bought out the company’s shareholders, returning it to private ownership status.

Superfund Business in the 1980s

With the advent of the 1980s, Roy Weston began preparing again to transfer control of the company to a successor. In 1980 he appointed his two sons-in-law, A. Frederick Thompson and Thomas Swoyer, to top-level positions. Swoyer, who held a degree in air pollution control, became the company’s president and chief operating officer. Thompson, with a Ph.D. in civil engineering, became executive vice-president of quality assurance and finance.

The year 1980 was also significant to the company, because it marked the passage of the federal Superfund legislation. The Superfund Act—more properly known as the Comprehensive Environmental Response, Compensation, and Liability Act—addressed the identification and remediation of hazardous waste sites. The law authorized the EPA to compel responsible parties to clean up the abandoned sites. It also provided a $1.6 billion federal fund for site remediation in the event that the responsible parties could not be identified or located or failed to act.

The establishment of this federal remediation fund meant that millions of dollars were suddenly earmarked for spending on hazardous waste disposal—providing tremendous opportunities for environmental consulting and engineering firms. Weston wasted no time taking advantage of the new legislation. In 1981 the company became one of the nation’s first Superfund contractors. It would go on to win more than $500 million in EPA contracts for Superfund site cleanups by the end of the decade.

The Superfund legislation also created more nongovernment work for the company. As the EPA pressured private industry to clean up its act, more and more companies turned to firms like Weston to help them solve their waste disposal problems. By 1987, the company’s client list included a full half of the Fortune 500 companies. Private sector contracts accounted for approximately 45 percent of total revenues that same year.

Company Perspectives:

The mission of Roy F. Weston, Inc. is to assist clients and customers in defining, anticipating, and avoiding or solving health and safety, environmental quality, and resource sus-tainability problems and achieving greater economic efficiency through application of the principles of natural economics and sustainable development. Be known as a leader in providing professional services and business means, that enhances value for its principal stakeholders: clients, shareholders, employees, and business providers, affiliates, and partners.

Part of Weston’s success during this time was due to its being one of only a few companies offering such a comprehensive range of services. Whereas many pollution-control firms specialized in only certain types of pollutants or solutions, Weston’s capabilities were broad and multifocal. “We were in on this from the very beginning, and we aren’t tied to any particular solution,” Weston explained in a September 1987 interview with the Philadelphia Inquirer, adding “We have in-depth knowledge in many fields.”

Another reason for Weston’s ascension was its focus on and use of new technologies. More than two-thirds of the company’s employees had a background in either science or engineering, and such a technically proficient work force created a fertile environment for research and development. By the late 1980s, Weston had developed two new thermal-based systems for treating contaminated waste. The first was the Transportable Incineration System, a portable incinerator used to burn material contaminated with PCBs and other pollutants. The second was the Low-Temperature Thermal Treatment System, a patented device that used heat to drive volatile materials out of soil.

Not surprisingly, Weston’s sudden influx of public and private business fueled a major growth spurt in the mid-1980s. In the years between 1982 and 1987, the company’s revenues more than quadrupled, growing from $22.2 million to $98.7 million. Earnings increased from $315,000 to $2.7 million during the same time span. To accommodate the growing business, Weston expanded into new facilities in new locations, adding a dozen new offices and hundreds of employees. It also made four new acquisitions: Peer Systems, Inc., Charles R. Velzy Associates, Inc., Gulf Coast Laboratories, Illinois, and ATC Incorporated.

In the middle of its frenzied expansion, Weston went public again, making in 1986 a public offering of one million shares priced at $12.50 per share. Despite bringing new shareholders into the mix, Weston and his family retained tight control of the company. The stock offered to the public carried only one-tenth of the voting power of the regular common stock—which was owned by the company’s officers and directors.

Although the late 1980s were a time of corporate success, they also marked a personal tragedy for the Weston family and a change in leadership for the company. In late 1989, Thomas Swoyer, Roy Weston’s son-in-law and the company’s chief operating officer, died at the age of 42. He was replaced by William Marrazzo, who had joined Weston in 1988 after serving eight years as Philadelphia’s water commissioner.

The 1990s

By 1990, Weston had more than 2,500 employees, 49 offices in 25 states and the District of Columbia, and revenues of around $224 million. It was ranked as the third largest environmental consulting firm in the nation by the Engineering News Record. With the company seemingly poised for continued success, Roy Weston retired. His son-in-law, A. Frederick Thompson, became the company’s chairman, and Marrazzo became its CEO.

Unfortunately, the change in leadership coincided with a reversal in the environmental industry. In the early 1990s, the government cut back on the enforcement of hazardous waste cleanup regulations—and the annual growth rate in environmental consulting fell from 30 percent to five percent. The overall softening of the industry sent Weston’s earnings into a steady decline. The company’s gross revenues fell from $330 million in 1992 to $176.5 million in 1996. Although it lowered costs by cutting jobs, Weston was unable to compensate for the precipitous drop in revenues and, in 1996, posted a net loss of $16.7 million.

The company’s downturn was serious enough to bring Roy Weston out of retirement. In March 1996, the 85-year-old Weston removed his son-in-law from the chairman’s seat and took over the position himself. He held the seat for only five months before resigning it again, however, saying that he wanted to focus on long-term strategy. Weston’s next move was to hire Patrick McCann as the new vice-president of strategic development. McCann, who previously had worked for the hazardous waste disposal subsidiary of WMX Technologies, Inc., was charged with drafting a plan to turn the faltering company around.

The company’s new plan centered around becoming less dependent upon government contract work and more focused on private industry. Implementation was slow, however, and the company continued to struggle, finishing 1996 with a net loss of $16.7 million. By spring of 1997, the Weston family, who controlled 62 percent of the company’s voting power, was convinced that major changes were required to bring the company back to profitability. In early May, the family told the company’s board of directors that they were unhappy with the strategy to move away from government work. They also put together a slate of opposition board candidates, in preparation for the next shareholder vote.

Key Dates:

1939:: Roy F. Weston takes job as pollution control engineer with Atlantic Refining Co.
1949:: Weston begins doing environmental consulting work on the side.
1955:: Weston leaves Atlantic Refining to focus on consulting full time.
1957:: Roy F. Weston, Inc. is established.
1969:: With offices in five states and a staff of 200, Weston goes public.
1979:: Company’s performance flags; Weston emerges from semi-retirement to take over; Weston family takes company private again.
1981:: Weston becomes one of nation’s first Superfund contractors.
1986:: Company makes one million share public offering.
1991:: Roy Weston retires; Frederick Thompson becomes chairman, and William Marrazzo becomes CEO.
1997:: Marrazzo resigns, is replaced by William Robertson

Before it reached the voting stage, however, Weston’s five outside directors resigned their positions. The departing directors were replaced with the Weston family’s earlier-chosen candidates—all of whom had close ties to Washington and to government agencies that had traditionally been Weston clients. Shortly after the Westons orchestrated the change of directors, the company’s president and CEO, Marrazzo, tendered his resignation. “My decision to resign as president and CEO of the company results from my belief that, since the incoming board intends to redefine the company strategy, it is in the best interest of the company for the board to have maximum flexibility in that effort and to begin with a clean slate,” he said in a May 1997 interview with the Philadelphia Business Journal. Wes-ton’s chief operating officer and chief financial officer also resigned.

Marrazzo was replaced by William Robertson, the chairman of a small Virginia-based software development company. Patrick McCann, the vice-president of strategic development who had been hired in 1996, was appointed chief operating officer. By the end of 1997, the company had revised its strategy and was ready to begin implementing it. The revamped strategy involved moving away from traditional low-growth environmental services and emphasizing new high-margin, high-growth areas. As such, the company’s main focus became infrastructure redevelopment—bringing facilities, land, and other resources that had been environmentally compromised back to profitable use—for both public and private sector clients.

Weston returned to profitability in 1998, and remained profitable throughout 1999. It finished up the year with net revenues of $147.8 million, compared with $140.4 million for 1998. Profits for 1999 were $988,000—up from $858,000 for 1998.

Looking Ahead

Weston believed that its improvements in 1998 and 1999 were proof of the viability of its new direction. “For the first time since 1995, Weston’s annual net revenues increased, and for the second consecutive year, contract bookings showed steady improvement,” Robertson said in a February 3, 2000 press release. “This confirms our business strategy focused on the infrastructure redevelopment market is working.” Assuming continued gains in revenues and profits, it seemed likely that the company would continue to pursue the strategy it implemented in late 1997.

Principal Subsidiaries

Weston International; Roy F. Weston of New York, Inc.

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.