Hach Co.

5600 Lindbergh Drive
Loveland, Colorado 80537
U.S.A.
(303) 669-3050
Fax: (303) 669-2932
Web site: http://www.hach.com

Public Company
Incorporated: 1951
Employees: 865
Sales: $114.3 million (1996)
Stock Exchanges: NASDAQ
SICs: 2819 Industrial Inorganic Chemicals, Not Elsewhere Classified; 2869 Industrial Organic Chemicals, Not Elsewhere Classified; 3231 Glass Products, Mainly of Purchased Glass; 3823 Industrial Instruments for Measurement, Display & Control of Process Variables & Related Products; 3826 Laboratory Analytical Instruments

Hach Co. (pronounced “hawk”) manufactures laboratory instruments, process analyzers, and test kits that are used to analyze the chemical content and other properties of water and other aqueous solutions. It also manufactures and sells analytical reagents and chemicals to be used in this connection. In addition, the company manufactures and sells a small amount of chemicals for uses not associated with its analytical systems for water analysis. Hach was Colorado’s biggest woman-owned business in the mid-1990s. In fiscal 1996 the company enjoyed its 12th consecutive year of record sales and profits.

The Early Years, 1947–70

Clifford and Kathryn Hach founded Hach in Ames, Iowa, in 1947 in a $200 building. The company was originally a partnership. In 1968 it was reincorporated in Delaware as Hach Chemical Co., with Clifford Hach president and treasurer and Kathryn Hach as vice-president. Sales came to about $700,000 and net income to about $80,000 in 1964. Net sales rose from $1.7 million in fiscal 1967 (the year ended April 30, 1967) to $2.7 million in fiscal 1969, while net income rose from $183,344 to $315,684 during this period. Company assets amounted to $2.8 million at the end of fiscal 1969, when there were 137 employees. Later in the calendar year Hach went public, raising $1.7 million by the sale of a small minority of the shares. Most of the money was used to build and equip a new chemical-manufacturing plant in Ames.

Hach went public at an auspicious moment, as concern for the environment had become an issue of international concern. When the first “Earth Day” was observed in 1970, rallies were held in major cities, and an estimated 10 million schoolchildren participated in “teach-in” programs. Utilities and manufacturing companies were being pressed to clean up their activities. Hach launched extensive advertising and sales-promotion programs to publicize what it could do to monitor water purity.

Hach, in 1970, was manufacturing and selling a line of instruments, ranging in price from $200 to $2,000, designed to determine specific water impurities. It was also manufacturing a manometric apparatus that measured the biochemical oxygen demand (BOD) of sewage and industrial wastes in lakes, rivers, and streams—BOD being a measure of water pollution and the most basic analytical measurement in the control of wastewater treatment. Customers for Hach’s instruments included municipal water- and sewage-treatment plants, facilities for the treatment of industrial water wastes, and electric-power plants.

Hach was also manufacturing and selling more than 100 different portable water test kits for laboratory and field use. These kits were employed in water and sewage treatment, water conditioning, cooling towers, wildlife conservation, and boiling water. They usually included specially formulated chemical reagents in the form of small powder packets. Test results were achieved by visual comparison of samples against color standards after adding the prescribed reagents, and directions enabled persons without technical backgrounds to conduct tests. The first of Clifford Hach’s 10-item criteria for company products was, “Can be used by anyone who can read.”

Hach’s products were being sold throughout the United States and Canada, primarily by direct mail, with about 45,000 brochures being distributed regularly to attract customers. In addition to its Ames headquarters, the company maintained regional sales offices in California, Connecticut, Illinois, New Jersey, and Texas. New offices were added later in Georgia and Ohio. International marketing had started in 1964, and in 1970 there were 46 independent distributors and sales agents handling Hach’s products abroad. In fiscal 1970 instruments accounted for about 56 percent of sales, with chemical reagents and portable test kits splitting the remainder roughly evenly. Foreign countries accounted for approximately 12 percent of sales in fiscal 1969.

Expansion in the 1970s

In 1972 Hach formed an international subsidiary and issued more stock, raising close to $5 million, two-thirds of it for expansion, including a new warehouse and more space for electronic assembly. A company plant was opened in Namur, Belgium, the following year, for the distribution and manufacture of products for Europe and adjacent markets. Sales and profits continued to increase year by year. At the end of fiscal 1975, when Hach had net income of $1.1 million on sales of $9.4 million, the company had achieved compound annual earnings growth averaging 25 percent over five years even though the national economy had fallen into recession during this period.

Hach, in 1975, had a product line of more than 3,500 items, with the instruments now selling for $400 to $4,000. During the fiscal year instruments accounted for 32 percent of sales revenue, test kits for 24 percent, and chemical reagents (in both powder and liquid form) for 44 percent. The drop in instrument sales was attributed to industrial customers saving money by substituting cheaper test kits. Chemical reagents were enjoying the highest profit margins because there were only a few competitors in this field. Industrial and commercial customers accounted for 50 percent of all sales, water and waste-treatment customers for 35 percent, educational customers for 10 percent, and miscellaneous for five percent. The number of customers had grown to 30,000, with the potential customer list exceeding 60,000. Direct-mail marketing in the United States and Canada was being supplemented by advertising in business publications.

In 1977 Hach purchased Carle Instruments, Inc., of Fullerton, California, paying $1.86 million in cash for this manufacturing company, which produced gas chromatography instrumentation used in analyzing a wide range of compounds. D. W. Carle, its president, continued to manage the company, which became a Hach subsidiary. It moved its operations to Anaheim, California, in 1978, and to Loveland, Colorado, in 1984. By 1989, when it was sold to EG&G, Inc., Carle Chromatography was manufacturing and marketing analytical gas chromatographs in a wide range of application-engineered systems designed to meet the needs of natural gas, petroleum, petrochemical, and industrial gas industries. Hach also acquired Fann Instrument Corp. in 1976 for $1.75 million in cash and notes. This Houston-based firm made fluid-analysis products that were used mainly by oil well drillers to analyze and measure the viscosity of drilling muds. It was sold in 1980 to Dresser Industries, Inc. for about $3.2 million.

Clifford Hach took the position of chairman and chief executive officer in 1977, and Kathryn Hach became president and chief operating officer the following year. Water-analysis products accounted for 75 percent of company earnings in fiscal 1978, and steam-generation plants in electric-power installations were its largest industrial customers. In 1978 Hach moved its instrument division and its corporate headquarters to a site next to the airport in Loveland, Colorado. Hach Chemical Co. became Hach Co. in 1980. Net sales reached nearly $20 million in that fiscal year, but net income was only $493,000 after deducting $1 million for depreciation. Long-term debt, nonexistent in the mid-1970s, reached $7.6 million.

Hach in the 1980s

In 1985 the company added a subsidiary called Hach Synthesis that made high-purity chemical compounds in Casper, Wyoming, until 1990. Also in 1985, it leased a Loveland building in an industrial complex to make the plastic components used in its operations. Clifford Hach was chairman in 1985, Kathryn Hach was vice-chairman, and Stelios Papadopoulos president of the company, which had grown to 580 employees. Net sales reached $34.5 million in fiscal 1985, with net income a solid $1.7 million after a $1.7-million charge for depreciation and amortization. The long-term debt had fallen to $4 million.

About this time Hach introduced just-in-time inventory techniques and adopted W. Edward Deming’s principles of quality control. Because the former required smaller production lots to be made and delivered quickly, workers had to be capable of performing a number of different jobs. An assembly worker, for example, also had to become knowledgeable in quality control and parts procurement, and to meet Hach’s standards this meant keeping sophisticated statistical charts and understanding basic algebra and trigonometry. Many workers could not meet these demands, so in 1989 Hach began offering a basic math course, and it later added a basic writing course. The quality-control campaign, despite its demands, had paid off by 1990, according to a company executive who estimated defects had decreased fourfold since 1985 and who attributed a 70 percent increase in output to the program, with only a 30 percent increase in staff and no increase in floor space.

The late 1980s proved even more profitable for Hach than earlier years. By 1990 it was maintaining 20 sales offices, including one in Belgium and one in Canada. That fiscal year the company enjoyed its sixth consecutive year of record sales and profits, with net sales reaching $63.1 million and net income an impressive $5.1 million. The long-term debt had fallen to $1.9 million. With Clifford Hach’s death in 1990, Kathryn Hach became chairman and chief executive officer, while the Hachs’ son Bruce became president.

Continued Success in the 1990s

Hach’s revenues and profits continued to grow each year, with the former increasing from $72.3 million in fiscal 1991 to $114.3 in fiscal 1996, and the latter from $6 million to $11.3 million over this period. Steam-generation plants were the biggest industrial customers in fiscal 1992. Plant operators were using the company’s continuous-reading process analyzers for online monitoring of cooling-tower and boiling-feedwater quality. Hach’s turbidimeters were being used widely to assure that water-filtration processes met acceptable standards. Sales abroad accounted for one-third of the total.

By 1993 continuous training was a mandate at Hach, with 150 company-sponsored classes not only in “hard” skills like soldering, blueprint reading, and forklift certification, but also in team building and customer-satisfaction measurement. Steven Farnham, a company executive, explained, for a special report published in the Denver Business Journal, that “Something like customer service may seem obvious and generic, but our people in this role have to understand the company’s unique commitment to customers, have in-depth familiarity with more than 300 products, possess effective telephone skills and know how to handle ‘people problems’ so they meet customer needs.” With respect to the team-building workshop, typically a class of 20, he said, “For three days you discover how to accomplish ‘team’ objectives with people very different from yourself…. If you can’t work well with a team, there’s probably no place for you here at Hach.” Internal book clubs, a key element of the training program, required members to read a chapter a week and then meet to discuss how the text could help them do their jobs better.

Despite these demands, employees evidently thrived on the regimen, since the worker turnover rate was less than eight percent a year.

Classes on “World Class Manufacturing” were based on Deming’s book by the same title. Many of Hach’s officers and directors personally met with Deming, and Hach managers created a three-hour course, required for each employee, that included the book’s 28 main precepts. Hach also was operating a five-person technical-training center in downtown Loveland that was teaching company employees, customers, and vendors how to use products in a hands-on laboratory setting. The company was refunding employees’ tuition for relevant outside courses. Kathryn Hach and Hach Co. were jointly sponsoring seven new college scholarships per year for students majoring in chemistry. She was named 1993’s Outstanding Business Woman of the Year by the Colorado Women’s Chamber of Commerce.

During the early and mid-1990s Lawter International Inc., an ink and specialty-chemicals manufacturer, made persistent and unwelcome attempts to acquire Hach. Lawter, based in Northbrook, Illinois, first sought to buy Hach in 1983 but was discouraged by the founding family’s large holding (about 45 percent) in the company. Nevertheless, in 1985 it bought about 25 percent of the outstanding shares in a privately negotiated transaction. In August 1993 Lawter, which now owned 28 percent of the shares, announced an agreement to acquire the rest for $146 million worth of its own stock. The proposed transaction collapsed three months later, with Kathryn Hach telling reporters it was just too difficult to “blend companies together as different as we are.”

Undeterred, Daniel J. Terra, Lawter’s chairman and chief executive, made an unsolicited offer in 1995 of $21 a share, or $172 million, for the Hach stock it did not already own. The offer was quickly rejected by Hach’s chief executive officer (now Kathryn Hach-Darrow). Outsiders said a deal never made sense since both Terra and Hach-Darrow were strong-willed executives, and Hach’s chief financial officer declared, “From a technological standpoint, there are no synergies between the two companies.”

Of Hach’s sales in fiscal 1996, analytical reagents and chemicals accounted for 31 percent; laboratory and portable instruments, 30 percent; continuous-reading process analyzers, 17 percent; portable test kits and replacements, 13 percent; and other, nine percent. The instruments continued to be manufactured in Loveland, where Hach also had its corporate headquarters, research, development, and engineering operations, employee training center, and plastic-component manufacturing operation. The chemical manufacturing operations, a chemical research laboratory, and the company warehouse and shipping department were still in Ames. The manufacturing and distribution plant for products sold overseas was still in Namur, Belgium. The company’s electromechanical division was discontinued in 1995.

Hach’s laboratory and portable instruments were being sold to municipal water and wastewater utilities, chemical manufacturers, industrial water-conditioning firms and organizations, power utilities, commercial analytical laboratories, and government agencies for the testing and monitoring of controlled impurities in water systems. Continuous-reading process analyzers were being sold to municipalities for monitoring and controlling drinking water quality and to ensure that wastewater-treatment procedures complied with government regulations.

Steam-generating plants, petrochemical processors, heavy-industry installations, and pulp-and-paper factories were using process analyzers for online monitoring of cooling-tower and boiling-feedwater quality. The microelectronics industry was using the company’s trace-silica analyzers to monitor ultrapure water systems used in processing electronic components.

Hach was offering more than 200 different test kits for 12 different application areas, ranging from agriculture to water quality. They were being sold to municipalities for use in monitoring drinking water distribution systems, to conservation groups for environmental impact studies, to educators for use in testing environmental awareness, to corporate customers for monitoring industrial processes, to the water-conditioning industry for use in testing water quality, and to environmental regulatory authorities for use in checking compliance requirements. Hach was about 42 percent owned by its founding family in 1995. It had no long-term liabilities at the end of the year.