Chemi-Trol Chemical Co.

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Chemi-Trol Chemical Co.

2776 County Road 69
Gibsonburg, Ohio 43431
U.S.A.
(419) 665-2367
Fax: (419) 334-5285

Public Company
Incorporated: 1952
Employees: 284 full-time, 117 seasonal
Sales: $71.05 million (1995)
Stock Exchanges: NASDAQ
SICs: 3443 Fabricated Plate Work (Boiler Shops); 3423 Hand & Edge Tools, Not Elsewhere Classified; 7389 Business Services, Not Elsewhere Classified; 5191 Farm Supplies; 5083 Farm & Garden Machinery; 3546 Power-Driven Handtools; 1721 Painting & Paper Hanging

Headquartered in a small, northwest Ohio community of 2,500 people, Chemi-Trol Chemical Co. is one of America’s biggest providers of pavement marking services, with operations in Ohio, Indiana, Michigan, and Kentucky. This diversified manufacturer, distributor, and service company is organized into four divisions. The Chemical Group is the historic core of the business, contributing about 20 percent of annual sales. It makes and operates herbicide spraying equipment used to control weeds along roadsides. By the mid-1990s, the business had diversified and grown to the point that the Tank Division, which produces liquid propane gas storage tanks, was Chemi-Trors primary revenue generator. Chemi-Trol’s Cal-Van Tools Division manufactures and distributes specialty automotive tools, and it contributed 22 percent of yearly turnover. The firm’s fourth and smallest division, Cory Orchard and Turf, supplies pesticides and herbicides to golf courses and orchards. It generated less than 10 percent of Chemi-Trol’s annual sales in the mid-1990s. Chemi-Trol has enjoyed a consistent succession of management, having had only three chief executives over the course of its four-decade history.

Postwar Genesis

Chemi-Trol was founded by Fred W. Karlovetz, a busy northwest Ohio farmer. When he was not working his fields or managing the farm, Karlovetz supplemented his cash flow with a night job at a local sugar beet processing plant. He also operated a home-based agricultural chemical sales business called Commercial Chemical Company. In the summers the ingenious entrepreneur mixed whitewash with insecticide, then traveled the area selling the combined service to his fellow farmers.

Karlovetz’s home-based chemical business dealt primarily in products from Dow Chemical Company, and Dow’s 2-4D herbicide was the catalyst that brought Chemi-Trol to life. Merging his spraying business with his chemical sales operation, the inventive farmer started using Dow’s new product to eradicate the poison ivy that had overtaken many local roadsides. Karlovetz soon began offering his services to local government officials, who found that the herbicides were cheaper and more efficient than mowing. It was not long before Karlovetz’s brother-in-law, Clyde Claypool, bought his own equipment and undertook spraying as a supplementary occupation.

In 1952, Karlovetz invited a business associate, Arthur Doust, to join him and his brother-in-law in the incorporation of Chemi-Trol. Doust, who had a degree in agricultural chemistry and horticulture from Ohio State University, left his job as a sales representative with Dow Chemical Company to take a chance on the new venture. Karlovetz, Claypool, and Doust, along with local banker William J. Dudley, formed the core of Chemi-Trol’s first three decades of management.

With the mechanical expertise of a resourceful neighbor, Dale Zimmerman, Chemi-Trol began building the specialized tanks and sprayers used to apply herbicide along local roadways. Operating from Karlovetz’s barn (which continued to be part of Chemi-Trol’s headquarters complex through the early 1990s), they sold equipment, chemicals, and services to county commissioners throughout northwest Ohio. Before the end of the 1950s, these fledgling executives convinced, the state of Ohio’s chief landscape architect, as well as other government road and highway officials, that spraying roadsides with weed killer was more economical than mowing.

Chemi-Trol also diversified into edgeline pavement marking during the 1950s. Before 1956, only New Jersey had a policy of painting edgelines on its paved roads. When Ohio’s governor contracted for 5,000 miles of highway edgelines that year, Chemi-Trol seized the opportunity to adapt its herbicide sprayers to apply paint. The company’s unique expertise won it several lucrative contracts and helped fuel a dramatic expansion of Chemi-Trol’s work force. It proved a well-timed diversification: the company’s growth mirrored that of the new highways that began to crisscross the state with the support of the 1956 federal interstate highway construction act. The little northwest Ohio business’s sales grew quickly in these early years, surpassing $1 million in 1958 and $2 million by 1961.

Growth Through Acquisition and Diversification in the 1960s and 1970s

As Chemi-Trol matured from a sideline into a full-fledged business, several of its core functions were reorganized into individual divisions. The Chemical Group merged pavement marking and vegetation management (the Contracting Division) with sales of herbicides and chemical delivery systems (the CADCO division, established 1987). As pavement marking technology evolved in the 1970s, Chemi-Trol expanded into thermoplastic markers and traffic engineering. By the end of that decade, Chemi-Trol trucks could be spotted treating weeds and marking roads throughout the Midwest. Although this aspect of the business grew vigorously, it was seasonal, with activity focused almost exclusively from April to November. Chemi-Trol needed other business interests to even out its cyclical cash flow.

Chemi-Trol’s manufacture of its own equipment spawned two separate business segments: the Cal-Van Tools Division and the Tanks Division. In 1963, the company acquired Electronic Tool Company (ETCO), a New York firm that made specialty hand tools for the automotive aftermarket. Over the next few years, Chemi-Trol acquired and merged six other toolmakers into this division. In 1964, Cal-Van expanded into the production of bronze grave markers for military veterans. Renamed Cal-Van Tools in 1966, this business segment was later relocated to a small town in northwest Ohio, where it distributed other manufacturers’ equipment as well. By the late 1970s, Cal-Van brand tools were distributed worldwide.

The Tank Division likely evolved from Chemi-Trol’s manufacture of its own specialty vessels for its mobile herbicide sprayers. Corporate lore recounts that it originated in the mid-1950s, when Fred Karlovetz discovered that his own home’s propane tank had traveled all the way from Oklahoma. In 1957, Chemi-Trol acquired an abandoned steel fabrication plant in northwest Ohio and adapted it for production of “steel pressure tanks,” most of which are used for above-ground and underground storage of liquefied petroleum gas. Used primarily for rural residential heating systems, the tanks range in size from 124 gallon capacity to nearly 2,000 gallon capacity. In 1978, the company formalized a previously sporadic tank financing program as its Leasing and Finance Division. Within five years, about 20 percent of Chemi-Trol’s tank customers took advantage of one or the other of these payment plans. By the early 1990s, the Tank Division was Chemi-Trol’s largest, contributing 45 percent to 50 percent of annual sales.

Chemi-Trol rounded out its roster of divisions with the 1966 acquisition of Indiana’s Cory Orchard and Turf, a full-line distributor of tools, equipment, and chemicals used by fruit and nut growers. This division expanded into Kentucky in 1984 and branched out into golf course turf maintenance in 1990.

Karlovetz supervised the day-to-day operations at Chemi-Trol from 1952 until 1969, when he advanced to the honorary position of chairman and chief executive officer. By the time he went into semiretirement, Karlovetz’s little service company had more than $5 million in sales.

Arthur Doust succeeded his friend as president that year. Chemi-Trol enjoyed its most energetic period of growth during the early years of his term in office. Sales quadrupled from about $5 million in 1968 to more than $20 million in 1976, the year that Chemi-Trol acquired the Karlovetz farm. By the time it celebrated its 25th anniversary in 1977, the company claimed to be “the largest contract applicator of pavement marking and vegetation control in the United States,” with 42 roadside sprayers and 10 stripe-painting trucks. Doust also oversaw the publication of Chemi-Trol’s first formal annual report and the creation of an employee stock option plan in the 1980s.

Revenues increased 38 percent from $27.6 million in 1980 to $38.8 million in 1985. Net income declined during the early 1980s recession, then rebounded for a net increase of 15 percent, to $1.2 million, during that same period.

Management Shakeup in the Mid-1980s

The 1985 death of company founder Fred Karlovetz alerted management to the aging of its top leaders and was one impetus behind a fairly comprehensive “changing of the guard” in the latter years of the decade. In 1987, the leaders of the Tank, Cory Orchard Supply, and Cal-Van Tools divisions all retired, either fully or partially, to be replaced by a new generation of managers. Arthur Doust also turned over direction of the business to Robert W. Woolf at the end of that year, advancing to chairman and CEO. Former Vice-President Woolf was a 15-year veteran of Chemi-Trol’s corporate office. Doust continued to work daily into the 1990s and was honored for his dedication with the 1991 Northwest Ohio Entrepreneur of the Year award for manufacturing.

The management shakeup, not to mention a health economy, helped boost Chemi-Trol’s sales and profitability in the late 1980s. Sales increased 65 percent, from $38.8 million in 1985 to $64 million in 1990, and net income nearly doubled to its highest level ever, $2.4 million.

Chemi-Trol’s management took great pride in its employee perks, which included recreational facilities (a swimming pool and tennis court) and an employee stock option plan that totaled $10 million by the early 1990s.

The 1990s and Beyond

Although Chemi-Trol’s productivity rose appreciably in the early 1990s, other issues affected the bottom line. The number of employees (weighted to account for seasonal workers) per $1 million in sales was driven down from 6.1 in 1991 to 5.4 in 1995. During the same period, revenues slid 13 percent from 1990 to 1991, then rose to a historic high of $71 million by 1995. By contrast, profitability was rather anemic, sliding to a low of $897,000 in 1993 before rising to $1.5 million in 1994. Chemi-Trol blamed its uneven performance on heavy price competition, rising raw materials prices, and high capital investments in plant, automation, and marketing. Company executives hoped that the “dues” they paid in the early 1990s would yield bigger returns in the late 1990s and into the 21st century.