Leadership Redefined - A thousand mile journey

I always say to people to be where we are today compared to where we started is like landing on the moon it is astounding and you can't appreciate where we are today unless you understand the transformation from where we came the thing that put Barry-Wehmiller on the map was in 1901 Mr. Wehmiller built an experimental pasteurization machine for the anheuser-busch brewing association so he developed this it's actually a huge tank the had a conveyor belt go through that people would load beer bottles in a basket in effect the basket would go through these various big dipping tanks of hot water which would cook beer kill the bacteria and therefore breweries could start shipping beer outside their own town because they had cooked the beer. My father work for Aurthur Anderson he was an auditor and the banks for Barry-Wehmiller required the company to have an audit to ensure the financial statements were appropriate that they lent against and my dad was, happened to be the person responsible for the Barry-Wehmiller audit, came out, got involved in the audit. The company was not doing well and uh... so my dad get to know fred wehmiller who was the obviously the son of Mr. Wehmiller the inventor who had died in about 1915 and uh... he was running the company at that time he was a great engineer not a great businessman and uh... my dad kind of was that businessman so they hit it off. My father was enticed by a job offer to actually get into a business instead of being kind of on the sidelines auditing a business. So quite often the intriguing thing is a chance to actually not be an auditor to review companies but to actually get involved and do something. Now my mother would say that this day why on earth did he leave Aurthur Anderson? A secure, good profession, and go with a very weak company the answer is, it's tempting to actually leave public accounting get into a real business. So it was the first job after he'd had of any significance and i think he joined the company as general manager asisstant to the president, treasurer something like that whether he really thought he could improve it or not, I assume he did. I was five years old, so he didn't really review the decision with me but uh... it was a... pretty bad situation canned beer was starting to come out non-returnable glass was starting to come out we had german competition you know, their were just a lot of negatives very concentrated market very concentrated technology and not good financially so there really wasn't much going for it other than it had been around for a hundred years In the mid fifties he was given an opportunity invest in the company. But my dad didn't have any money so he had to borrow $30,000 which he did and then in about nineteen fifty seven Mr. Wehmiller passed away so the family made my dad president my dad still had a small amount of stock in this company which continued to struggle this group in chicago came in and said we will lend the company enough money that you can buy the Wehmillers out and therefore your stock Mr. chapman will be fifty seven percent. 'cause there were only a few shareholders other than the Wehmillers and it was the V.P. of finance, the V.P. of engineering, the V.P. of production my dad went to the other gentleman who were executives and said look, i'm not trying to control this company we've got this opportunity to acquire the company from the Wehmillers, we got the money if you would like to put in more money so you've got a larger stake in the residual stock that's fine with me. And everybody's reaction to person was, well you know i just...my daughter's going to college...I just bought a new house... what they really said was There's no way I'm going to put another nickel in this company. so my dad said fine. They did the transaction our family became the majority owner. And then over the next maybe ten years as each person retired, the company retired their stock so i think our family stock got up into the mid to high nineties. It was a pretty sad state of affairs when my dad walked in so there wasn't a lot of talent direction and so a gentleman, Bob Pehr uh... who was kind of the uh... sales administrator. He worked for the vice president of sales. But the vice president sales had left because it was looking pretty bad so my dad not many choices, gave Bob Pehr the chance to run sales and Bob Pehr got an order from pabst brewery in peoria illinois for a bottle washer and he got a down payment on that bottle washer. That downpayment was beginning. That order and that downpayment was the beginning of this fragile recovery Bob Pehr saved my dad's life because he had a tremendous skill with customers he was a natural sales executive. So the company started rebuilding. But two of the executives of the company the vp of finance and the vp of production had decided that the best thing would be for the company to be sold so they started talking independent of my dad about trying to find a buyer. My dad found this out and it was very difficult for my dad so my dad decided that he would start, with his secretary virginia, opening the mail everyday. Why did he do it? because he wanted to know what letters were coming in So every morning when my got in, he and virginia went down the mailroom and opened every piece and and put it in the boxes I had never considered working for the company. Ever. I was going to be a public account i was gonna be a partner it's amazing I never even thought about working for the company through my business school, graduate school and my job. But my dad's statement to me was A. I was doing well and B. he was growing frustrated with his leadership team he said, i just need somebody i can trust so that is kinda how bad it was when I stepped into the company uh... in nineteen sixty-nine What he did for me was trust me and give me complete freedom to develop my competency in the company. My first job im Barry-Wehimiller, I worked in the engineering department I came out of public accounting and what did i do? Well, I worked as the project coordinator between Owens Illinois and Barry-Wehmiller. I managed the relationship between Barry-Wehmiller and Owens Illinois on these projects just from a common sense so I learned engineering and then I got involved in manufacturing the I got involved in international relations so one of the greatest things my dad did for me, he gave me the freedom for intellectual curiosity to learn about the business. A business sometimes looks very simple you build a machine, you sell it and you make money but behind that there's a lot of things that have to come together to create something. But what i got a chance to do, was to take a watch apart. I get a chance to take the business apart to understand how the watch works. I'd had dinner with my dad at steak n' shake over on manchester road with my mom and dad 'cause they were leaving the next day for Australia. My dad was great. We had a nice conversation. The best years I ever had in my life with my dad was when we worked together So, we'd had six good years together. And when i got the call the next morning that he had passed out and died of heart attack uh... I was shocked the night before my father died and he said Now bob i'm gonna make you executive vice president because you're really kind of running the company and i want your title to reflect that Bob, being a young man as we both were had a load dumped on his shoulders. When you're handed such a large operation trying to find your way is a tedious process. And he tried different approaches. Some were successful. Some were not. The mission was clear we had to improve our financial performance reduce our debt if we were going to have a future. When the bankers pulled our loans within days of my father's death i grabbed a hold of that business and we had, in the next nine months therefore the full financial year the strongest financial performance in the hundred year history of the company It was the story of St. Louis uh... we went from eighteen to seventy-two million dollars in four years began a series of initiatives we hired a nasa engineer from mcdonald douglas who took us into the field of solar energy as a method of heating up pasteurizors which gave us the idea for the future of our pasteurization process technology uh... that evolved into a solar energy project that anhueser busch evaluated and felt it was the finest in the country at that time it was the fuel and energy crisis and anhueser busch advertised solar brewed beer it was uh... quite an exciting time. moved here from kansas city. It was the primary reason for taking the job. Sounded like a good offer. it was right up my alley and uh... the company was booming We did pasteurizer development, washer development label removal.We had a electronic bottle inspector we had developed called the questron which in fact was ahead of its time we were doing gang busters. we were building fifty two major machines a year large and that's not even the spare parts. we didn't have a lot of competition We had backlogs that went out eighteen months it was, they were coming to us, the customers wanting our machines and we would tell them when it was that they would get their machine and they would have to wait in line that was norm. that was was acceptable to the customer. So it was a dramatic turnaround. But it was a combination of the shock of my dad's death and...and I was ready for the position, and this shock of the bank pulling that said we're gonna turn this place around. and i was not encumbered by anything And it was a ramping-up phase and everybody was so swamped. It was a good feeling to be busy at the time but ramping up isn't so easy when you have to hire lots of contractors then you're talking about...you're digging into margins etc. etc. Six hundred thousand dolars in one-year just recruiting. New vice president of production, New vice president of engineering, new vice president of personnel, people under them. We were spending half our time recruiting people, sharing this journey sharing the passion, where we're going the customer, be it anheuser-busch or miller would come in to inspect their machines before shipment they wouldn't even be looking at their own macine. They would be spending their time looking at, if it was a anheuser busch, Miller's machine. To see what it was they was they were buying And it was just glorious for Barry-Wehmiller we just kinda we just kinda sat back and thought this is a never-eding type of situation. It's a curve that's gonna go right off the graph. Our experience was, well, you know, we have a a straight line extrapolation of this growth. it's going to continue along this line forever we didn't really see that there was a cliff that we were marching towards All of the sudden,we started hearing from Simonazzi, we started hearing from different breweries or equipment makers that weren't a threat in the past and they were coming in and they were trying to sell the bush and sell to Miller. And sell to anybody that wanted to buy their product. anheuser-busch went with Pomma and all of the sudden,we lost all their business. Each one of those bubbles began to burst simultaneously the accumulative affect of that was a period of traumatic decline. Right about that time uh... america starting phasing out bottle washing. Period. And it cost us dearly because the brewing industry was all returnable bottles as was the softdrink industry. The softdrink companies and the breweries were removing these machines at a really fast rate. all things come to an end I guess in this business because um... the brewing industry was cyclical and and we were tied very close to the brewing industry so as they went, so did we. And all of the sudden instead of building new breweries, breweries started buying other breweries which took our demand from here to here. At the time we were borrowing seventeen million dollars at twenty two percent interest rates and they froze our line of credit which means we couldn't borrow another nickel and it put us into a state of crisis I will never forget that meeting or that day because my whole life was before me in terms of my ability to support my family the people that joined us on this journey uh... the directors that had confidence in me the world looked fairly dark to me that day. Once that happened, yes it was very grim circumstance we had to start cutting people pretty dramatically, cutback on all the expenditures where we could we did those things that were necessary for survival. Didn't go to trade shows vendors are knocking at our door for payments. I had the utility companies at the door at the receptionist with their wrenches to turn off the utilities people get their paychecks first thing they do is go to the banks. 'Cause it was, it was a very, very hard time. fifty two majors machines a year selling at two million dollars approximately and we go down to seven machines a year? That's a big adjustment. it was tough for folks to move on. we actually came to a point layoffs which is something our culture wouldn't do today but we did have those what we'd call black fridays where we had to sit by our phone and uh... wait for the call of would we still be there on on monday. It was a struggle, we lost a lot of good people because it didn't feel safe, didn't feel secure. It was hard. Yeah, I applied at emerson electric down the street from west florissant um... and they actually hired me it was on a friday and uh... i thought about it over the weekend i just loved the folks i was working with and changed my mind over the weekend and showed back up on monday So I walk into the coffee room over at west florissant and on the floor on his hands and knees is some serviceman and he's obviously very frustrated trying to take apart the coffee machine so I'm literally stepping over his legs and I go get a cup of coffee and he looks up at me and he says enjoy your last cup of coffee and I said what are you talking about? He says this company doesn't pay their bills and I'm taking this coffee machine away so they basically were repossessing the coffee machine on my first day. So I walked back into the boardroom and i said to bob, I don't know about my three year plan, but my three minute plan is to make sure this company has coffee. We learned more in that nine months than we had ever learned in our life about how to run a business how to get through difficult times When a bank that has been your primary lender for a long time all of the sudden pulls even though somebody else could look at you and say well you look like a reasonable company to lend to You're tainted by a bank that said this is one of our large clients and we want out, and we want out now So, we had a lot of people interested a lot of people seemed like they were going to lend us money but when they got into it the overwhelming issue in their minds was well, why wouldn't Boatman's continue lending to them? why would we step in and take them out? We ended up getting financed with asset-based-lending out of citicorp in Chicago because citicorp's St. Louis office had a gentleman working in it whose father happened used to work in our store room uh... and therefore because his father used to work here he went to great lengths to try and convince citicorp in chicago to make an asset-based-loan that's a very intense environment where you have to have daily reporting You have to understand what your receivables are, what sales you had that generate those receivables, what you need as far as payables it's very stressful time and one lesson you learn when you go through something like that is once you've been broke you never want to be broke again. We were in a position that was very tentative. Because we had very few orders coming in. international sales actually kept us afloat and uh... the domestic market was flat at best. It was horrific. we all thought we were going to lose our jobs and then and one day uh... through many genius efforts of our sales team Bob Pehr, a lot of others included, made a sale to Cerveseria Modelo that pulls out of the water, stopped us from drowning a friend of mine said have you ever thought bob about having an advisory board? this when i was starting to grow like this and it was exciting and dynamic and i said uh... no, i really haven't thought about it because we just had the board we inherited which was internal and he said, well you know Bob there's some incredible executives that really, in the interest of reaching out, helping you you could get to be on your advisory board and it would be, I think, very helpful to you at this time. (You know I was thirty uh... one years old,) and really helpful to you He and I met at a brewers conference that was dominated by anehuser busch and he knew August had told him he ought to talk to me because i was a manufacturing guy and so forth Eventually i gave august busch a call within some days and said August, i just want you know, you introduced me to Bob Lanigan, i dropped Bob a note about maybe being on our board and August said Bob, he's already called me he said, bob lanigan from my perspective, is one of the finest businessman in america. So we talked and bob subsequently asked me to go on the board and i couldn't do it at that time i really didn't have the time the devote to anything but the problems I had with my own company and told him that, and he said would you be willing to talk on the phone ever so often and that turned out to be a sunday phone call Bob joining our board agreeing to join our board opened my mind to others which led me to recruit Warren Shapleigh because Warren had just retired as president Ralston Purina so Warren brought to me experience in food industry, pet food industry Warren introduced me to *** ford and Warren said, would you consider going on the board? The three of us and Bob were the core group. I mean, with Bob at that point it wasn't walk,run,fly. It was walk, fly. so i had my glass guy, my can guy, my retail guy and my banking guy we began to have began to migrate off our operating executives as they retired bring on board people of substance, of experience that could be my mentors Bob has a natural ability in the field of acquisition he has a natural ability to bargain and he has great disciplin Obviously they had to be acquisitions that our banks allowed us to make They had to be acquisitions that didn't stretch our resources. And Bob had a terrific discipline in not overpaying there's no sense in prolonging negotiation because we will not move at all, and that's the key to not making a bad mistake We bought Inex which was the first acquisition of the company in denver. So now with my new financing in place this intense desire to reshape our business and that's one of the best decisions I made was to say that our history is a rich history of serving the brewing industry with washers and pasteurizers but it did not give us a rich future i made that decision that we needed to reinvent ourselves. reinventing a hundred year old company is always a challenge for anybody. So we need to branch out. We needed to get into other avenues sometimes it's hard for people understand that Following Inex we were approached Vicars in England to consider the acquisition of dawson, a competitor of ours in bottle washers and they also made fillers for the dairy industry The way that we were able to do that acquisition is by way of demonstrating to them that it would be that meaningful to take preferred stock from the company. Instead of having to use cash we were able to use our preferred stock as currency as you know set dividend rate. We treated taking stock in Barry-Wehmiller like paying cash, we just gave our stock but again it was another way that we could take a look at this. the interesting thing on Inex our first acquisition, is this is the acquisition, that when i went to the board, Bob Lanigan said to me because he was in the glass industry, which was largest provider of glass in the world, bob said, it looks like a good acquisition But Bob, you're betting your *** on your future, on this acquisition and we went to Citicorp to get financing for this acquisition because we had to go into an over funding situation to do it which means we had to borrow more than we had collateral to buy this company so we put two companies together. We moved the Boulder operation of Inex to Florida. Renamed the company Inex and embraced the video technology of Inex uh... and long story short, is we built from two sick three million dollar businesses we built a thirty seven million dollar business making seventeen percent operating income What ultimately pulled us out of the circumstance of being near bankruptcy was when there came about this idea, Well why don't you structure some sort of loan with Barry-Wehmiller limited, Dawsons and fords closure since that was a the group that was a profitable set of companies and do an IPO for that set of companies. The acquisitions were doing well but historic business was still really struggling It was pulling everything down. But from the point of our lender The historic business was the core and they saw the core as unhealthy so our team flew in from england, made a pitch to me and said uh... look Bob our business is doing well with the Dawson acquisition Inex is part of it Fords is part of it and if we could take it public in this kind of uh... secondary market you might be able with the proceeds to pay off your debts and have two million dollars in the bank that seemed like heaven to me having lived through the refinancing and then the asset based lending and i said let's pursue it so in may of eighty seven we launched. we were selling seventy percent of thirty-five million so we were selling about twenty eight million The public market in England sent in one point one billion dollars of cash trying to buy this twenty eight million dollars of stock It was thirty times over-subscribed and we ended up, not with two million dollars in the bank we ended up twenty-eight million dollars in the bank we couldn't borrow five million dollars before the public offering and within a month or two, the public offering people sent in, trying to buy at one point one billion dollars in cash harvard ended up doing a case study on this because in the words of our directors, they had never seen such a dramatic transformation. So it had growth, it has stability it had just what the public wanted and they responded dramatically. After that initial offering and the success that we did have which in effect, it paid all of our bank debts. That actually turned out to be our second chance and I have to give Bob all the credit in the world because he had a vision from the...we're about the same age and he was a young man when he took over and was trying to find himself, trying to find where we were headed it was an immense job and his vision and his energy level and his dedication to making that work just carried over to other people. I learned more in that environment about creating value than you could ever have learned at a P.H.D. in the finest universities in the world because we had to make it happen we had to be creative,we had to be incredibly focused. When we stepped into this company it was really a broken company, broken in spirit products with no future, financial instability. you know we were still living off the legacy of our past it was a very thin legacy. I mean, we were near the end of our journey and the transformation we experienced in the seventies and the eighties was a total transformation. I jokingly say that you really can't imagine what it feels like to be where we are today unless you understand where we came from. Its like families that uh... people came over from europe with five dollars in their pocket and ended up creating meaningful life, and a meaningful future for a family here, and they always go back and they tell how they landed on the shore with five dollars in their packet and through hard work and initiative they built a future for them and their family and i'd say to you. We landed in this company with less than five dollars in our pockets not much of a future and we were able to transform this company into a company with a leadership team, a culture, a vision and financial stability and that journey is a journey of a million miles.