Update: Who to watch Featured

9:47am EDT July 22, 2002

For the past five years, SBN has devoted its January cover to our bets on which Central Ohio companies would enter the new year with the prospect of major changes.

We’ve told you when some companies were on the brink of a major breakthrough and we’ve warned you when others were teetering on the edge of a fall.

This year, we’ve decided to break with tradition and feature on our cover instead a list of the 100 most influential people in the Central Ohio business community. Nevertheless, we didn’t want to leave our loyal “Who to Watch” readers hanging. So here is a quick look at how our 1999 predictions fared.

Alta Analytics Inc.

We figured Alta would launch a new product, double its revenues and win another major insurance company customer in 1999. Apparently we underestimated the potential of this Westerville-based software developer.

Not only did Deloitte & Touche license Alta’s brand new NetMap for Financials product, which officially debuted last year, but two other Big Five accounting firms have shown strong interest in the audit program, designed to help detect corporate fraud.

The Deloitte deal, along with the rollout of an updated version of the company’s NetMap for Claims insurance fraud-detection software — and the addition of at least four more major property and casualty insurers as customers — helped Alta achieve 100 percent revenue growth by mid-November 1999.

As if that weren’t enough to keep Alta CEO Herb Jones busy last year, the company also formed a strategic alliance with Insurance Services Office Inc., negotiated to have Search Software America integrate one of its products aimed at reducing database inconsistencies into Alta’s products and secured $5 million in venture capital.

“The whole dynamics of our company has changed,” Jones says in reflecting upon the year’s events. “It’s a very exciting time for Alta.”

Zura Sports Inc.

Zura Sports turned the profitability corner in 1999, as expected.

Riding the wave of an anticipated surge in aquatic-resistance exercise, the swimming products company added six new items to its line of 11 last year. A deal involving the new product line, founder Paul Reeder says, resulted in client Leslie’s Swimming Pool Supplies giving Zura more sales in 1999 than the company’s total 1998 sales.

Reeder also arranged licensing agreements so international manufacturers could sell his products abroad in exchange for making them without capital expense to Zura.

Reeder expects even more business from Leslie’s Swimming Pool Supplies, and test sales from big names such as The Sports Authority Inc. and Champs Sports, this spring.

All the action has Zura turning heads. Reeder won’t specify names, but another company is negotiating to purchase Zura Sports. He says he’d accept, but only if the price is right and the Zura brand is held intact. He also hopes the buyer sees the value in the vision of Zura’s six employees.

“The future of the company is not in the products we have now,” Reeder says. “The future of the company is still in our heads.”

invata international inc.

President Andrew Marks’ objectives for 1999 were to give his software company a stable revenue stream, greater scope and more “wealth-building opportunities for my employees and my stockholders.”

He accomplished those goals, but he didn’t do it by targeting other companies for acquisition or by taking his products abroad like he’d planned. Instead, he decided to focus on existing markets. For example, invata added a version of its facility maintenance software to appeal to retail corporations owning property.

In less than a year, big names such as Rite Aid and Best Buy jumped on board, and the new product, SAMTRAK for Retail, brings in 15 percent of the company’s annual revenues.

Marks also scaled back on employees and began promoting from within.

“Revenues are more than double, and net income is up 197 percent,” Marks says.

For 2000, he won’t rule out acquisitions or mergers, but he’s learned to focus more on what he wants to accomplish than how he’s going to do it.

“One thing I do know — and this is the CPA [in me] — when you’ve got growing sales, stratospherically rising profits, greatness and a lot of money in the bank, you have lots of choices,” Marks says. “1999 is the year we created lots of opportunities for ourselves. In 2000, we’ll exercise those rights and make some choices.”

RFC Capital Corp.

Last year was an exciting one for RFC, although not for the reasons we — or President Steve Jaffee, for that matter — anticipated.

“There’s no question we took a turn,” says Jaffee, who began last year hoping to raise another $10 million to $20 million in funding for the four-year-old telecommunications-financing company. “We thought we were going to raise equity,” he notes.

Instead, he sold the business.

“We started to look for equity and what we found was we weren’t that thrilled with the valuation and the market in general,” Jaffee explains. When Rhode Island-based Textron Financial Corp. came calling with a “desirable” offer to acquire RFC, Jaffee jumped.

“This was the greatest thing that could’ve happened to us,” he says. “We now have the ability to be a lot more competitive on price and, perhaps more important, to be able to go after very large deals that would’ve been unlikely before the purchase.”

For instance, RFC — which is now a division of Textron — expected to close late last year on a $75 million financing deal that would’ve been unthinkable without Textron’s deep pockets, he says.

RFC did continue to actively solicit customers in Europe last year, as we expected, and funded its first customer in Germany. In addition, the company rolled out a new Internet Value Loan program and introduced a Corporate Development Division, aimed at offering consulting services such as due diligence, risk analysis and customer-base valuations to clients.

“We’re trying to look at every opportunity to exploit the extra capital base we now have,” Jaffee says.

National Realty Services Inc.

As expected, President and CEO Ronald A. Huff took advantage of his new role as a partner in Apollo Realty Finance Holding Co., allowing him to nearly double in 1999 the worth of the contracts he closed with Apollo in 1998.

Last year he purchased and renovated the Kimberly Parkway building formerly occupied by the Ohio Bureau of Motor Vehicles, leasing it to a new tenant: the Ohio Bureau of Employment Services. He also continued development at Port Columbus International Airport with a 104,000-square-foot office building to be completed this summer. Those and other developments have brought the Apollo projects to nearly 30 percent of National Realty’s business.

Outside the Apollo arrangement, National Realty made progress on a golf course residential development in Etna, finishing two housing phases and working on a third, as well as selling 78 condominium sites and putting apartment and commercial property under contract.

Late last year, Huff expected National Realty’s 1999 gross real estate transactions to push the $100 million mark. This year, he expects more of the same.

“I think what’s going to happen is we’re going to continue to expand our Apollo relationship and move into some other markets,” he says.

Bigmar Inc.

Investors are still waiting for Bigmar to make money, but the Johnstown-based pharmaceutical company made great strides last year in getting closer to its goal of profitability, says Cynthia May, whose family owns a significant stake in the five-year-old business.

Bigmar’s ability to reach financial stability hinges on gaining approval from the U.S. Food & Drug Administration for the generic drug products it wants to manufacture and distribute domestically. In 1999, seven of those long-awaited approvals came through and two more were pending late in the year.

Quarterly losses are also getting smaller and more financing has been secured — including a private placement of almost $2.9 million, according to May. Another bright spot in 1999 for the company was striking agreements with Sigma-Tau and American Pharmaceutical Partners to distribute Bigmar’s products in the U.S.

These signs of life may encourage investors to stick with Bigmar awhile longer. And, according to May, that’s all Bigmar will need to start making money. She predicts a profitable quarter early this year.

Escape Enterprises Inc.

A wait-and-see reaction from franchisees may have put a damper on the fast growth we expected from Escape Enterprises Inc.

A new financing program offered in late 1998 should’ve opened the way for Steak Escape franchisees to grow more quickly, but 19 new stores rather than the predicted 60 opened in 1999, says Tony Foster, vice president of franchise development.

Franchisees waited to see the success of the company’s first free-standing site, on track in its first year to do 85 percent more business than a traditional mall location. Given that success, the company expects to open 45 new stores this year and sell 75 franchises. Diversification continues into travel plazas, convenience stores, airports and sports and university venues.

We predicted expansion abroad for the company, and a franchise group in Malaysia signed a 10-store deal. The company also is prospecting franchisees in South and Central America.

Systemwide sales for 1999 fell a bit short of our expectations — increasing roughly 12 percent rather than the predicted 35 percent, but Foster anticipates more improvement in the next two years.

“For 2000, it would be a little over 11 percent,” he says, referring to an anticipated $80 million sales figure by year’s end. “I think over time we will have a bigger spurt, because in 2001, we’re looking at a minimum of 65 [new] stores.”

ReSaurus Co. Inc.

When retailers filled their shelves with “Star Wars” products last year, they squeezed out ReSaurus and shot down our predictions for 200 percent sales growth at the Columbus-based toy company. Nevertheless, ReSaurus President and CEO Douglas Sapp still claims a victory.

“It was considered one of the worst years ever in the history of the industry,” he says. “Yet we were able to increase our market share and do everything we wanted to do in creating a new business model.”

The company regrouped mid-year and decided to focus on profits rather than product growth. In fact, Sapp says, the company made a profit in 1999 for the first time since its founding in 1993, while sales increased 30 percent.

Sapp says ReSaurus moved into a leadership position in video game action figures — part of an effort we predicted the company would make to broaden its product base and, thus, reduce its risk. Also as expected, ReSaurus spent last year working on three toy

lines designed to appeal to girls; a debut is planned for next month.

Express-Med Inc.

Last year wasn’t the eye-popping sales year we anticipated for Express-Med, but it certainly was an eye-opening one for company founder Alan Rudy.

First, the new product upon which Rudy had staked a large part of his home-health supply company’s future growth turned out to be a near bust.

“It was terrible; sales were virtually zero,” he says of the home hemoglobin test kits. “We really misread the market about who would pay for it,” which stagnated sales. That was only the beginning. Medicare changed its documentation requirements “17-fold,” Rudy says, for companies like his. Then cash flow and profitability problems surfaced.

“I would never wish on anybody what we had to go through this year, the late nights, the sleepless nights, people worrying about their jobs,” Rudy says. “But it’s probably the best thing that happened to our company. We’re a much stronger company for having gone through this.”

Express-Med is also a slimmer company, with its senior management team cut in half since the start of 1999 and its middle management ranks pared by a quarter. The upshot?

“Our management team is stronger than it’s ever been,” Rudy says. “We also have better financial reporting; we established our core values; we established a focus.”

Now, Rudy says, the company is again ready to move forward. A late fall acquisition of a Texas-based ostomy supply business, which Rudy describes as a “small and extremely efficient,” may give Express-Med a better foothold in the managed care arena. In addition, a new branding campaign for Express-Med is underway.

“It’s been a heck of a year,” Rudy concludes. “I’m very glad we’ve gotten through it.”