Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 28, 1994 TAG: 9408260027
SECTION: BUSINESS PAGE: F1 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
The companies, which develop products and provide services for pollution control, appear to be in the right business at the right time. After a pause due to the economic downturn, government regulators apparently are ready to tighten enforcement of pollution regulations.
The centerpiece of that potential, ETS's patented limestone emission control system, was installed 10 days ago at a power plant in Taiwan and is scheduled to go into service early next month. Potential customers will be able to view for the first time the performance of the equipment, which removes sulphur dioxide from energy plant smokestacks, thus attacking the major source of acid rain.
John Mycock, executive vice president of ETS, acknowledged that potential buyers are waiting to see how the equipment performs. "Their decision [to buy] will be influenced by the operation." Mycock said.
If the system proves itself, an important worldwide market for the invention awaits.
The company also just completed a merger with the Lyttle Cos., a much larger Richmond firm, that gives it the revenue base and critical mass of business it needs for more rapid growth.
ETS Chairman John McKenna said the company is following "a dual path." First, he said, it is expanding the service end of its business. This is the base from which it moved from a small office in south Roanoke County to a 45,000-square-foot building on Municipal Road near the Roanoke Regional Airport. The new headquarters was purchased in 1992.
On the other hand, McKenna said, the company has completed 10 years of significant funding of research and development of four products on which the company holds patents. The next step is commercial production of those products.
The products have more potential for adding to the bottom line, McKenna said, but the steady business of the service arm reduces the risk for investors.
\ The June 1 merger with Lyttle was a case of the canary swallowing the cat. Lyttle has 150 employees, compared to the 80 in Roanoke, and revenues of $12 million, vs. $4.5 million for the Roanoke operation.
Lyttle still operates under that name in Richmond, but it became the subsidiary ETS Water & Waste Management. It specializes in storm drain and sewer construction, water systems, gas line installations, septic and irrigation systems and the like.
Navin Sheth, executive vice president of Lyttle and ETS, said the merger was discussed for four years. Lyttle, he said, wanted to expand and grow, so it was seeking a partner in a related business. Lyttle also wanted independence to carry on its traditional business in Richmond and Central Virginia.
To grow, Sheth said, Lyttle had to sell out to another company or go public on its own, which would take a long time. ETS, which went public in 1988 and began trading on Canada's Vancouver stock exchange, in 1992 began trading on the American Stock Exchange's Emerging Companies Marketplace.
The businesses of the two companies matched up well, he said, and Lyttle was impressed by the "technical know-how and reputation" of ETS management. ETS became the surviving company because its shares were already publicly traded.
ETS paid Lyttle with 2.73 million shares of ETS International Inc. common stock. No cash exchanged hands.
Lyttle was the second merger for ETS, which in November 1989 acquired Centec Analytical Services of Salem. That company now operates as ETS Analytical Services Inc., whose lab performs tests for the federal Superfund program, along with private-sector customers.
David Tompkins, president of the subsidiary, said the merger of Centec brought the promised growth. ETS Analytical, he said, expanded from 12 to 35 employees in the past five years while revenues tripled to $2.1 million.
All of the key people at Centec are still with ETS, Tompkins said, and the company lived up to all of its commitments.
\ ETS also creates and conducts seminars in environmental subjects. About 15,000 square feet of the Municipal Road building is devoted to a classroom where ETS has sponsored many technical seminars in the last few years for people in government agencies, utilities and commercial concerns.
One very popular seminar is on issuance of environmental permits. It's designed for plant engineers, scientists and environmental personnel responsible for obtaining air pollution permits and compliance with air pollution regulations.
Although ETS targets Virginia and North Carolina for its courses, in 1991 it conducted a class on air pollution control technologies for a group of engineers from developing countries. Sponsored by the U.S. Agency for International Development, it included representatives from Jamaica, Nigeria, the Philippines and Tanzania.
The senior staff at ETS also has published more than a hundred technical papers that have been presented throughout North America and Europe.
The company dates to 1973, when ETS was known as Environmental Testing Services. McKenna, Mycock and President Gary Greiner sold out in 1976 to a division of Foster Wheeler Corp., a Clinton, N.J., designer of processing plants for the oil, chemical and pharmaceutical industries.
The founders bought back the company in 1979, when Foster Wheeler wanted to move the operation north.
"We thought it was too cold and the traffic was too heavy," McKenna said.
That's when they changed the company's name to ETS.
Now McKenna, Greiner and Mycock intend to see their company grow even further.
In the near term, McKenna said, ETS would like to leave the Emerging Company Marketplace list of the American Stock Exchange for the regular listing on the Amex. The merger with Lyttle took ETS a long way toward qualifying for that move, which would give the company more national exposure.
The stock has come a long way as well. It was introduced on the Vancouver Stock Exchange, which specializes in new companies, in the late 1980s at 85 cents a share in Canadian dollars. That was about equal to 50 U.S. cents.
ETS stock, now trading on the American Stock Exchange, recently has traded in the range of $1.75 to $2 a share, U.S. dollars. McKenna said the company has no plans to pay dividends in the near term because profits are plowed back into research and development.
ETS has seen its assets grow 30 percent a year and its revenues increase an average of 44 percent a year since it went public. If ETS can maintain that pace, McKenna said, it will have revenues of $100 million annually by the year 2000, up from a combined $16.5 million last fiscal year, ended May 31.
That goal is ambitious, McKenna said, but it will be possible with commercialization of the limestone emission control system and other products. The company also may continue to be an incubator for new products.
And more mergers may lie ahead.
McKenna said ETS is already looking for still other companies willing to join in partnership. ETS is seeking firms that work in complementary lines of business, offering what McKenna described as "synergy," as the merger with Lyttle did.
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by CNB