OLD FOUNDER Roy F. Weston (left) and sons-in-law ran firm in 1980s. (Photo by William Reinhardt for ENR)
Thomas M. Swoyer Jr. once had it made as a young executive in the consulting company run by his grandfather, environmental engineering pioneer Roy F. Weston. He had worked for "the company" since age 16 and by his 20s already controlled a 3% share of its voting stock. Today, Swoyer's family members no longer are owners or shareholders and the firm no longer bears its founder's full name. But Roy F.'s grandson, now 31, couldn't be happier.
Swoyer, a "profit center" manager in San Antonio, is among a growing group of company managers and outside investors who are launching the staid 45-year-old company into a more energeticand profitableera. Last year, they bought out Roy F. and other family owners, took the firm private and set up an employee stock ownership program. On June 5, management announced a new name: Weston Solutions Inc. "Even being a primary family shareholder with a significant controlling vote, I feel like I have a bigger financial stake now," says Swoyer. "It's empowering."
The name change is the latest step to distance the remediation and environmental services firm from its identification with the legendary but difficult Roy F. Still active at age 92, he also still lives near its West Chester, Pa., headquarters, about 30 miles northwest of Philadelphia. But current interests no longer include the company he founded in 1957, something that relieves its new managers who have their work cut out revving up the Weston culture and its bottom line.
For decades, Weston relied on its technical prowess and loyal clients. But the then-public firm's financials were troubled and its stock was regularly beat up by Wall Street or ignored. Weston "shrank" by 15% a year during the 1990s, and its earnings suffered as well. At one point, it laid off 30% of its vice presidents. The 1989 cancer death of Roy F.'s son-in-law and heir apparent, Thomas M. Swoyer, led to a downhill spiral of management changes and family squabbles. That continued until the family's March 2001 decision to sell out to a management and investor team for $51 million. Roy F., who envisioned a family dynasty, reluctantly agreed.
The new owners had to move quickly. "We found a very centralized company not focused on current markets and a demoralized work force," says President and Chief Operating Officer Patrick G. McCann, who joined in 1996. The family owned just 20% of Weston's equity, but 70% of its voting stock. "Any time management doesn't have a significant stake, you have a business that's not optimally structured," says David Steinglass, the Bethesda, Md.-based principal of American Capital Strategies Ltd., the firm's investment group owner. While ACS and top managers still own most of the stock, employees are expected to own 40% in four years, says McCann. "The company now has a better alignment with the interests of its shareholders and employees than at any other time in its history," adds Steinglass.
MARKET Redevelopment of tainted military bases is growing Weston niche. (Photo courtesy of Weston Solutions)
The distribution of ownership and decision-making away from West Chester is a key goal of current Chief Executive Officer William L. Robertson. Weston Solutions now has a network of "profit centers" across the country that has boosted responsiveness to clients and employee financial incentives. The firm is focusing on its relationships with its 80 "strategic" clients, says Robertson, who became CEO in 1997. About 55% of its business is for federal agencies, 30% for private-sector clients such as Kerr-McGee, Phillips Petroleum and DaimlerChrysler, and 20% municipal. Weston has been involved in environmental work at high-profile projects such as the World Trade Center cleanup and the new U.S. Patent Office project in Virginia. It also is beefing up its Washington, D.C., presence to compete for more Dept. of Defense and Dept. of Energy work, even as its managers privately worry about perception issues among private clients. "The challenge now is not to be complacent," says Robertson. "Our world is changing fast, but we haven't suffered in the recession."
Robertson, 57, and McCann, 47, appear to complement each other, with the former serving as chief strategist and cheerleader, and the latter running the firm's day-to-day operations and scrutinizing its finances. "Bill has really focused on the transition from working for Roy to employee ownership. He's very articulate and forward thinking," says McCann. "It's been a very consuming process. Many days I was glad he was doing it, and not me. "
Going forward, management aims to make the most of Weston's reputation and assets to boost the firm's financial health. The firm recently settled for $8 million a long-running legal claim against the Army Corps of Engineers over mischaracterization of hazardous waste at the former DOD thermal treatment site in Weldon Spring, Mo. Even so, the firm hopes to connect with public and private clients by offering more than just remediation services. Weston is aligned with a developer in a $90-million project to clean up and redevelop 500,000 sq ft of 1930s-era facilities at the Army's Fort Sam Houston in San Antonio. A similar brownfield-type redevelopment program is under way at the former Mare Island Naval Shipyard in Vallejo, Calif. More than 3,000 acres will be transferred to the city and 350 acres of former dredge ponds will be turned into a storage site for San Francisco Bay dredge spoils. "We found we had things to offer clients to get redevelopment projects done,"says McCann. "There's more profitability in a total solution." He claims that brownfield and redevelopment work now make up 15% of revenue, but at least 30% of profit.
While newly motivated employees are a key resource, the company's 53-acre corporate campus in West Chester is another important asset. Purchased by Roy F. Weston in 1966 "for a song," executives say, the bucolic site is the former summer estate of a 19th century Philadelphia lawyer. It includes a large stone house affectionately referred to as "the mansion" that houses the Weston executive suite. Weston officials are somewhat self-conscious about the opulent building and its surroundings. Robertson says the firm considered selling the site to eager developers in the fast-growing suburb, but he says the firm's 600 headquarters employees are "grounded" at the campus and it offers an air of stability to clients. "The campus is an icon for the company," he says. "We're not just another company in a rental box." He says a move could cost at least $1 million more a year. Plans are to turn the mansion into a new employee training center by year's end.
Weston sees growth in its future, but not explosive. The firm aims to recoup size lost to strategic disarray over the past two decades, and then to grow organically. "We're not trying to become a billion-dollar company," says McCann. Weston expects revenue to exceed $300 million this year, but improved systems and other changes "can sustain us to $500-600 million," says Robertson. He adds that employees like the current size. "One guy actually left a bigger firm's regional office because he can actually better manage one here," says McCann.
But sustained profitability is the most critical goal (see chart). Weston earned $15 million last year and is pushing for more to pay off existing debt. Officials say that as of June 30, debt was reduced 30% since the buyout and its 2001 year-end appraised value increased 35% in its first seven months as a private firm. "Now, we're beginning to see payoffs" from the new strategy, says McCann.
Despite Roy F.'s arms-length relationship with his former firm, some hint that he may not agree with all the changes. But Weston lately has busied himself with sponsorship of a sustainable development institute at the University of Wisconsin-Madison, from which he graduated in 1933, and with writing on industry issues. Swoyer remembers that while his grandfather always "craved having an engineer in the family," his business training and that of a cousin working for the firm in Atlanta are skills the firm needs now. Says Swoyer: "We have to meet the market in the best way possible."