Andy Heintzelman (editor of The News-Item): Thanks for coming today. With me is Henry Nyce, our publisher, and Doug Betz, our advertising manager. We'll go around the table. Tell us who you are and who you represent, and offer a sense of what your company does.
Roger Strohecker: My name is Roger Strohecker. I am human resources/facilities manager of Ashland Technologies. We're located outside of Hegins. We're a contract manufacturer and welding fabricator. One of the key items that people don't know in our little niche in Schuylkill County is that we make roller coaster tracks for wooden roller coaster frames. We've been there a little over three years and enjoy being there, and look forward to this discussion.
Ken Freed: My name is Ken Freed. I'm the business manager of Arcos Industries. We're up there behind the greenhouses (in Strong). We manufacture welding material, primarily stainless nickel, used by the nuclear and military industries. We've been around since 1919 in Philadelphia and moved into this area in the early '60s. We've been hiring a few folks. We anticipate a pretty big boom coming.
Earl Foura: My name's Earl Foura and I'm president of National Ticket Company. As the name implies, we print all types of admission tickets. Our customer base is throughout the United States; we ship our product into every state. There are also numerous international countries we ship our product into.
Dan Lamothe: My name is Dan Lamothe. I'm facility controller of International Paper here in Mount Carmel. We've got about 150 employees at this facility. We're a major supplier of corrugated containers. We work with a lot of other companies in the area.
Eric Kujilpers: I'm Eric Kujilpers, general manager of Kurt Weiss Greenhouses. We produce wholesale flowers for big chains: Home Depot, Costco. We produce four crops, flowers in the spring, mums in the fall, poinsettias in the wintertime; we do flowers for Easter.
Jack Hallick: My name is Jack Hallick, human resources manager for Michael Foods. Locally, we have a facility in Klingerstown. Michael Foods is actually a multi-national company, spread out from Vegas all the way to the East Coast and as far north as Winnipeg, Canada. Our facility in Klingerstown is focused primarily on liquid and cooked egg products. We also have a potato division and a cheese division. Crystal Farms is the name of the cheese division and Northern Star is the name of the potato company. You'll be more familiar with Simply Potatoes brand. We have our in-house trucking company where we can ship our products around. We have about 3,500 employees nationwide. In Klingerstown, we have, counting our truck drivers, about 315 total.
Enough good workers
Heintzelman: I think you already see the variety we have here. I wanted someone to start out and give us an assessment of the local business climate.
Hallick: I'll start out by saying it's good to be in the food industry during this entire downturn (laughter). Obviously, people need to eat. The company has positioned itself nicely in ingredients and wholesale food. The outlook continues to be bright for the food industry in general. With that said, we're doing our best to make sure we have a good flow of viable employees coming through the doors.
Heintzelman: Have you increased your labor force in the last year or two?
Hallick: We've increased by about 3 percent over last year.
Heintzelman: Your numbers are notable.
Hallick: Yeah, it's good. We're hiring newer folks and working with a few other temp agencies as well to take up some of the slack for increased short-term demands.
Heintzelman: Have you had any difficulty finding enough employees? I suppose the issue now is some are not even bothering looking anymore.
Hallick: Interestingly enough, in the last two months, we've seen an uptake in the number of applicants coming through. It's driven by the fact that, in Schuylkill County and Luzerne County, we've had over 4,000 people come off unemployment rolls. I think that is pushing people out. Right now, the candidate pool is much better. The quality of individuals, on the other hand ... It's still difficult to sort through that bigger number and find folks who want to work.
Foura: I would concur with that.
Heintzelman: I've heard it at this table before, praise for the work ethic of this county. There are times when you hear the opposite, and I'm not sure if that's where you're going.
Foura: I think the work ethic - if you get the good employee - the work ethic is still there. Our issue is how many people you have to sort through before you get the good candidate. We do a basic mechanical skills test for any applicant before they come through our door for hiring. Only 27 to 30 percent can pass the basic mechanical skills test.
Heintzelman: What does that test involve?
Foura: You would be surprised how many people can't read a ruler. Basic, simple math cannot be done without a calculator. Other parts of the mechanical test are pictures of gears. Gear A is spinning this way. What direction is gear C? People get it wrong. It's surprising.
Heintzelman: And you've seen this trend increase?
Foura: This has been the trend since we started to do this testing a few years ago: 27 to 30 percent. And this is after we pre-screen the applicants, picking out who we think are the better candidates.
Kujilpers: I think there are two groups. We have a core group of people who want full time and they're very hard-working people and have a very good attitude and attendance. Our problem is, we're a seasonable business, we grow flowers, with peaks and lows, and (need) to fill that demand with a crew of people that can do the job. That is always our biggest problem. That is where you separate the two.
Strohecker: We have an added thing on the skill basis. We have 26 CNC machines, full fabrication and welding shop, so we incorporate disciplines in our manufacturing facility that require a certain amount of skill and experience. Let's face it ... we struggle at times to get that skill base. We're looking for 15 people this year to fill orders we know are going to come. I'm going to tell you, it's going to be hard, based on our past track record. We are in for a challenge, especially for the CNC machinery and programming; a lot of math, a
lot of experience. They don't walk in off the streets. The work effort is great from the three or four counties we draw from.
Heintzelman: How many people do you have working there?
Strohecker: We have 48 right now. We experienced growth. 2009 was really bad; it was terrible, our worst year ever since 1996 (when the business started). We had our first layoff in our history in 2009. Since then, we got them all back. We're at a plus-12 since then and we're looking to grow this year.
Heintzelman: So, we have a bit of variety as far as skill level need, but similar problems. Anything you're doing to try and combat this? Communicating with the schools? How do you get a better workforce?
Hallick: There's a couple of things out there. The YES program - Your Employability Skills - is being offered at a number of high schools. A lot of soft skills building at the high school level to prepare students for work life. Basic things, like the importance of showing up for work on time. It's understanding the needs and the ebb and flow of work. Just a better understanding, for our case the food industry, of why it's important to produce a good quality product. Picture yourself as the end user; that's one that we use. The YES program is one that we're promoting use of. We've taken a more active role by sending reps of the company out to the high schools.
Lamothe: At International Paper, we heavily use CareerLink. If that facility closes in Shamokin, that will place a little more of a burden on us. We direct all our applicants there first and they know what we're looking for. For whatever reasons, there might be difficulty at keeping a job or wanting a job. You'd be surprised at people walking away from a good paying job for whatever reason. Even after all our screening process, we are lucky to have one out of 10 that would actually make it.
Heintzelman: Is that right? One out of 10?
Lamothe: Our work force is aging a little bit. We have openings continuously down the road we'd like to fill, but we like people who are more long term and not just, "I'm going to do this for a year and move on." We make a heavy investment in the employee.
Heintzelman: Anything else on the challenges of the labor force as you work day to day?
Strohecker: I just wanted to add that we are having success attending the career fairs at the colleges and trade schools. I had some success hiring a youngster from Sunbury. He attended Penn Tech. I saw him at a career fair two times. He graduated in May. It's a success story. He's working for us now and is travelling from Sunbury to Hegins. There are occasions that can work.
Heintzelman: What other challenges do you face on a daily basis, assuming you find good labor? Anything related to the local economy and the struggles we've had since the coal industry and the garment industry went away?
Hallick: This year, I think it's been weather challenges. There's been a lot of ice and snow and getting people to come out to work. In our case, chickens don't stop laying eggs. They lay one egg every 24 to 26 hours. You have to be there.
Heintzelman: That's a good worker.
Hallick: Absolutely. It's getting folks to understand that. Obviously traveling safely, too. I'm sure you all lament on this over the years, too. The schools are so quick to shut a school down on a dime. And these kids are coming out into the workforce expecting the employer to shut it down on a dime. That's not the reality of it. Hopefully through the YES program we give them a bigger picture.
Location: Not so critical
Heintzelman: We've had the SEEDCO park here in Coal Township that Reinhart moved into, but one of the things I hear from county officials and others, believe it or not, is that it's too far from the interstates. It's not far either way to 80 and 81; you'd think that is fairly ideal, but when you're up against the SEDCO (Highridge) park and the industrial parks in Luzerne County that sit right along 81, it becomes a challenge. For other companies that look at this area, can you see where they say, "It's just not close enough to 80 or 81"?
Hallick: Sure, sure. Absolutely. We're about 17 miles off 81 down in the Mahantongo Valley. We are where we are.
Kujilpers: For us, it's a seasonal issue. It's important for the local workforce to stick close to where people live. It seems irrelevant for us, maybe. It's an issue for people to drive 15 miles to a job. They don't like to spend a half-hour driving to a job.
Heintzelman: Not to mention gas prices.
Kujilpers: Yeah, so I think there's a tradeoff there, maybe. For us, we have five months out of the year which we're heavily shipping. It's not really an issue. The issue is, though, with all the big industries, trucking has been a big problem. Not the last year, but the year before. It's hard to get trucking. Again, as a seasonal business, you're competing with people who deliver every week. It's frustrating when you can't get a truck to deliver it.
Heintzelman: How many people do you employ?
Kujilpers: We have 50 full-time people and we go up about 100 in the peak season.
Hallick: You made a good point. You have to consider where you want to put an operation. You have to consider the availability of the people. It's approaching $3.50 for gas. Are they willing to travel the additional distance? I'd love to see an operation off Route 81 on Highridge; however, we're drawing people from Dauphin, Schuylkill and Northumberland, so any move we make is going to be detrimental. The closer we get to 81 - they're all vying for the same pool of employees.
Kujilpers: We need basic skills. We're planting plants. If you have a higher skill job, you can draw from a wider area. People would be willing to travel more.
Lamothe: We haven't had too many issues. When IP took over the plant in April 1992, they looked at it as a pretty good location. It's not that far from 80 and 81. And we had the rail siding into the building. That's an advantage, I think, if you need rail service. We service 200 miles out, so 10 miles to the interstate is not that much of a big deal at that point and time. A lot of customers are not nice and easy off the interstate, anyhow. You might have easy access to the highway, but your ultimate destination isn't right off the highway.
Freed: I would think the company that doesn't like to be far from the interstate would be more of a distribution company. As a manufacturing company, for us, we don't ship to anybody really close. We ship to Indiana. We ship to China. You say it's an extra 15 miles, but I'm going to China. (laughter)
Foura: We're in a similar position. We ship all over the United States and internationally. The extra 15 miles to the interstate doesn't make a whole lot of difference.
Freed: I was thinking it was very similar. Now you probably have some local customers, maybe Knoebels?
Foura: Yeah, we have some local customers, but very few. In the state of Pennsylvania, less than 10 percent of our customers come from outside of our area.
Freed: It's a nice market.
Strohecker: I try to use that as a selling point, to be in a rural area that we are. We're not far from 81 (2½ miles). This is a quiet neck of the woods; it isn't all hustle and bustle, and I try to use that as a recruiting tool. You have to do what you can. It works.
Lamothe: Last year, we probably did over 10,000 total shipments, so we use a lot of trucking and we use our own truck drivers. Fuel costs and anything we can do to reduce freight is one of our issues. One of the corporate positions our company is favoring is higher truck limits: having more weight on trucks. We figured we could save 15 to 20 percent on fuel alone. We feel as though there wouldn't be any added costs. On the safety side, we'd be asking the trucks to have an extra axle to support that. Ultimately, it will reduce emissions. There is a green benefit to that; if you can reduce fuel, you can reduce emissions.
Help small business
Heintzelman: It's encouraging to hear all this, because we tend to hear "location, location." I would suspect you're right in that it's more important for a distribution business than manufacturing. I wanted to move onto another issue. We have the Coal Township-SEEDCO Industrial Park, which will have sewer hookup, it has the water now, it has a new access road going in. There are spots in the Reed Industrial Park. We have some of that infrastructure set up, so what would you do to try to lure industry? What do we need to say? What do we need to do? How do we need to promote it? Or are we doing all we can?
Kujilpers: It's good to support the businesses that are here. I think if businesses come in, hopefully it's a long-term commitment and not just a tax break for a fixed amount of years.
Hallick: One of the things, Michael Foods is corporately owned, our corporate office is in Minneapolis, Minn., so I can't help but think if I'm in a position that they're in out there, they're looking at all these facilities and they're looking at the states they're operating in and the legislative battles in all these states and the infrastructure and such. We in Pennsylvania are doing everything we can to make sure we are looked upon in a good light with our corporate office, which means low turnover, making the jobs interesting to have people think this is a great place to stay, be more sensitive to those things. And we've done well over the last several years. We've keyed in on employer relations and we're low on turnovers. Turnovers are one thing. I mentioned legislation that may or may not be good for business in Pennsylvania.
Heintzelman: I wanted to go there. You guys represent such a diverse segment of industry. Anything from the state, even the county or local level, especially the federal level, in terms of legislation that could help your business? Any examples where you read the headlines and think, "How am I supposed to make a profit, how am I supposed to build my business when I've got X happening?"
Hallick: Health care already added 12 percent in premium costs just from last year to this year. And that was probably just in two moves: one was increasing the age up to 26 (where children can be covered on a parent's plan), the other was lifting the cap on the major meds. That's 12 percent of our total package.
Kujilpers: Our insurance cost doubled and our benefits are less, quite a bit less. We try to keep the cost constant. You pay more and more and you get less and less coverage. It's out of control, really.
Heintzelman: And there are more parts of the legislation that will come into effect in the coming years here that won't make it any better, I take it, right?
Kujilpers: I think especially for us. In the big picture, we're all small (gesturing around the room). I think it's affecting us more. We don't have much pull or say. It's really costing a lot of money and you're getting less.
Freed: And it takes more work to do what they want you do. There are forms to fill out, there are these audits they're talking about. Obviously, any time they pass legislation, they're looking at a certain size company that has a department (to do such work). I've had government people come in and say, "You have to have a department for this." Who should I hire?
Foura: How can I afford to hire someone just to do that? How productive is a person pushing paper? They're not making anything for you.
Freed: The size of the company they're making legislation for is a 2,000-person company. If there was anything the legislators could do it's to think small business.
Foura: On the federal level, I have a problem with the current administration talking about job creation, job creation, job creation - except that it seems like they want to create those jobs on the public-sector side in the government. What bothers me about that is realizing the government can't pay a dime in wages unless they take that dime off somebody else in taxes.
Freed: First they take a dollar, and when it's done, they take a dime. (laughter)
Foura: Really, I think the substance of a good, strong economy is private-sector employment. I mean, it's been proven over and over again. That's us sitting here at this table. It's not government-created jobs that make for a strong economy.
Heintzelman: Have you any confidence the actions of the federal level will do any good reversing the health care legislation?
Foura: I think there will be some changes in the health care legislation simply by the public's input and the direction in the last election. Is it going to be enough to change the big picture? I think the jury's still out on that in my mind. Certainly I don't think at 1600 Pennsylvania Ave. there's any idea that repeal or change in the health care law is going to happen without a veto. So it's going to be a tough, tough change.
Kujilpers: Not knowing the change is also adding a burden. People are trying to figure out what they should do.
Foura: I agree. You read there are a lot of large companies with a lot of cash sitting on the sidelines.
Heintzelman: The president is suggesting they open up their wallets.
Foura: I've been hearing that for well over a year.
Heintzelman: It's easy for him to say.
Foura: It is, but at the same point in time, there's no solid direction on where health insurance is going to end up. They did extend the Bush tax cuts for another two years, but now there's a sunset out there in two years. What's going to happen at the end of those two years? I think we need to know where we're going to be three years from now, five years from now, on the tax front, on the welfare program front, on the entitlement picture, so that companies know, "Hey, I should release some of this money, make some investments, expand." Right now there's so much uncertainty for the long term, it's like, why should I spend my money?
Heintzelman: There's a good reason why business people are hanging onto their money. Unfortunate as it is for the economy, you've got to be smart, you've got to be practical about it, especially when you have such an uncertain future.
Foura: Even if you didn't like where everything is going to end up, if you knew where it was going to end up, you could make a plan around it. But the uncertainty of where we're going to end up, that's worse than having a plan you don't like.
Freed: You can deal with it. There are obstacles and you figure out how to overcome them; you can redirect resources. But when you don't know what those obstacles are â¦
Strohecker: It's a yearly struggle to accommodate the employees. I don't know about you guys, but I don't think they realize how much we fight for them, in terms of getting good benefits for their dollar. They see their benefits are decreasing and they have to pay more out of pocket. And I don't blame them, I understand that; I sympathize. But we really are trying. As a small company, you don't have that pull like maybe the major companies do. It's tough.
Hallick: It's interesting the last few months, we've had folks who gave notice and had a job somewhere else. I've never seen so many people turn around and within weeks go, "I think I made a mistake." For whatever reasons, they found the grass isn't greener; they didn't do their homework. "Now I got hired and I'm laid off already." So they come back.
Heintzelman: It's interesting, again, with the diversity of your products and your services, it sounds like this a similar problem for everyone.
Incentive to work
Lamothe: If you were going to start a new business in Pennsylvania, one of the things you have to be concerned about is where the trends are going right now. Right this moment, I think the cost environment for conducting business in Pennsylvania is pretty advantageous. There are some disturbing trends that could probably be developing. Some of these unfunded pensions are looming in the state where the benefit is so much higher than they would get had they stayed working. Who is going to end of up paying that? The taxpayers. It could be businesses and individuals. Heintzelman: Of all things, we have to borrow from the federal government to help us with the pension situation. ... You said there are some advantageous trends right now. What would you say represents "advantageous?"
Lamothe: If I were to compare, say business in Pennsylvania versus in New Jersey, electrical rates in Pennsylvania are a lot better, utility costs are a lot better; obviously, property taxes are a lot better, wages aren't as pressured. If you have sky-high property taxes and electric in New Jersey, you have to pay those people that much more to conduct your business. They have the advantage of being closer to a lot more economic activity, but there are a lot of good reasons to be doing business in Pennsylvania. But you have to be concerned with some of the trends developing.
Hallick: Another trend that's out there, and I'm not sure if Pennsylvania will see it anytime soon, is some of the states going to a paid employee leave. California has it, I think New Jersey, and others. The concern is, how do you possibly run a business? Where they draw that from, I don't know; that could only come out of more taxes if done on the public side. Or are they going to the employers and raising taxes? Any time or mandatory leave, most employers were handling that just fine. There was no good reason for the feds to get involved in that, but they did. And all of a sudden we have folks who are utilizing that to the fullest degree. Before it was a week or two or three, I need to get this taken care of, fine. But now that's extended out to much longer per the federal government. It's 12 weeks of unpaid. You have to have additional people.
Lamothe: It's very important to really understand that the Family Medical Leave Act, there's a lot of administrative issues that go with it. Leave can be intermittent. They can call and say they're using it. They don't have to provide any detail. It can be challenging. If they pass a law that says we have to pay for that leave, it would only encourage more people to qualify for leave.
Hallick: Some states are making it paid. You want to talk about incentivizing not working. We've done that effectively for employment for the last several years.
Kujilpers: People who go out and work should be helped, just like the people who don't make the effort. If there was a difference, it would be more appealing.
Hallick: It's fine if you're down and out for a short amount of time, but bring back some form of getting these folks having to go out and do something. That's how it was years ago. You had to go out and do job interviews and prove that you were here or there. That's gone. You can now sit and collect unemployment up to your last weekend. And then you go to Careerlink and say you need a job. I think state legislators should take a harder look at that. Set some things in place for folks to keep them earning and working in some capacity.
Kujilpers: The person who has a low-paying job or a seasonable job doesn't qualify for health insurance, but the person who gets laid off gets treatment. There should be incentive for people to work.
Hallick: One of the encouraging things I've heard, talking about legislation, is right now in Pennsylvania, there seems to be a desire to decrease the size of government. That's the latest buzz. We're looking for action.
Nyce: And taxes. I just read an article on business friendly states. And Pennsylvania was in the middle. It has to do with the extraordinary amount of taxes Pennsylvania has created. It was the same thing when Obama was talking to the U.S. Chamber of Commerce. They were asking for less government and less taxes that impede our growth. I haven't heard it here today, but how much do you believe tax rates hurt Pennsylvania businesses?
Freed: From a tax point of view, as the overall revenue has fallen off, every state, every community is looking for ways to add to their coffers. We've noticed an increase in the amount of states (charging new taxes). We pay a tax in Texas based on inventory dollars that are in the state that we never had to pay before. It's just like, "Huh, well I never thought of that."
Heintzelman: Taxes are never a popular subject. Pennsylvania has a lot of bad press, deservedly so, apparently. Can anyone speak to that further?
Hallick: I don't have an aversion to taxes, I just want to know the money is being used wisely, used in such a way that it establishes the future, setting the pace for the future, setting the infrastructure for the country. And it's alarming to know there's so much ineptness when it comes to handling federal and state monies. It just seems like you hear all these stories that things don't have oversight.
Foura: Any of the public sectors right now are really having a major problem. It was touched on earlier with those pension plans. And the other issue is a lot of the public-sector employees have health insurance for life, even after retirement. That's a burden we're not going to be able to afford. Talk to any actuary out there - you can't have defined benefit pension plans that are going to be sustainable. It's just impossible. They have to do something about it. They have to get away from defined benefit pension plans and go with most of the companies with defined contribution, 401(k) type plans, where you can set aside and say, "Here's what I'm going to put in for retirement for my employees and I know what it's going to be." With defined benefit plans, depending on discounts and depending on assets returned, you don't know what your liability is going to be. It's like a roller coaster; it's up and down; they're so volatile. They have to get control of it, and until they do, states and the federal government will have a tough time having balanced budgets.
Heintzelman: And, of course, it will affect all of us.
Foura: It will affect all of us. They have to get their money to fund these plans from somebody, and it has to be from taxpayers.
Selling to China
Heintzelman: I want to go around to each of you and have you tell us about a high point that happened with your company in the last couple years. I'm going to start with Ken because something really struck me when I called and talked to him briefly about coming here today. You said - well, I'll let you tell us as far as your dealings with China.
Freed: That's one of the areas we are pretty excited about right now. We manufacture welding wire, traditionally in the military; we were the first company approved to sell to the Navy back in the '30s. We are still heavily into nuclear and in the military; we also sell to automotive. One of our biggest increases in the last year has been welding wire that goes into Shanghai, and they use it for exhaust systems in cars that go into China. I sat there and asked how many people are there in China who don't have a car. And the answer is billions. (laughter). I like that. We just secured a fairly big-sized contract to sell stainless-steel welding wire into the Chinese nuclear power industry. Their commercial power industry is beginning to kick off there. They're using a Westinghouse design, which is stateside; we have ties with Westinghouse. The Chinese government has decided they are going to build 20 nuclear power plants in the next five years. I'm going to guess there are no citizens groups that are going to complain. Those are the two areas we're excited about. There's growth stateside as well.
Heintzelman: Back to Roger, you already mentioned roller coasters. That's an interesting little segment. Expand on that.
Strohecker: We make a lot of products. We do have 26 CNC machines, welding and fabrication machines, powder coating and painting facilities; we just added a laser machine that will round us out nicely. I'm very excited with the growth opportunity with that piece of equipment and the people we have in place and the way things are going now with expansion. We are experiencing moderate growth and it is exciting. We make oven and grill equipment for one of the largest fast-food chains in the world. We make the Gyrosphere, an amusement ride; the roller coasters we just completed went to Florida, but we do ship internationally. We have shipped some to China, which is a nice little twist. We make lap bars and those kinds of things.
Heintzelman: Go ahead, Earl.
Foura: We've been around since 1907. We started in Shamokin and now we're down near Elysburg. We're still a family-owned business for over 100 years. Basically, we're in a little bit of a transformation within our company. We're expanding into a couple new product lines that we haven't been in in the past. One of those is the thermal tickets. We're also doing more right now getting into season tickets, and we brought in some new equipment in the last couple years to help us print those tickets. The other thing we've done in the past year, we started a sister company in Las Vegas to handle one product line for the western part of the country. For competitive reasons, when we're shipping across the country to our customers, we were at a competitive disadvantage to people already on the West Coast as far as shipping costs, so we opened a facility in Las Vegas.
Heintzelman: More for distribution?
Foura: We're manufacturing one of our product lines out there, redemption tickets. If you're familiar with skee ball-type games or arcade games, the little tickets they spit out if you win and turn them in for prizes; we're printing those tickets in Las Vegas.
Heintzelman: What I found interesting about your business is you still have the traditional ticket stub, which I think you were describing there, the tear-off paper type, but you've also advanced to the elaborate sensors and plastic bands. You have what you used to have 100 years ago in addition to everything new that's come out.
Foura: One of the things we're doing now is putting computer chips, RFID, radio frequency identification computer chips and antennas on synthetic wrist bands or vinyl wrist bands. It's used a lot in the water parks, where people have bathing suits on. Where do you put your cash if you want to buy something at the concession stand? You tie the ID chip to your account if you're renting a room there or you tie it to a credit card when you register. If you're in the water park and you want to buy a hamburger, buy a hot dog, buy a bag of chips, it just reads the wristband. It keeps track of your purchases so you don't have to carry cash. It's also used in the water parks for lockers. You can tie it to an individual locker so you don't have to carry keys. For those water parks with hotels, you can use it to open up your rooms. We're working on the RFID chips.
Heintzelman: A lot of new equipment with that?
Foura: Not a lot of new equipment. We're buying the chip and the antenna from a manufacturer and just attaching it to some existing product.
Heintzelman: Dan?
Lamothe: Our corporation has been in business for 100 years. We've been in Mount Carmel since 1992, but I think the plant was built in 1962. We've been making ever increasing investments in the plant. The North American market for our business has been kind of stagnant. We've been increasing our footprint globally, making investments in Russia and South America. Our plant here does have the reputation as being a world-class supplier in our industry. Our lead times can be as short as hours to a couple of days. Some of our competitors may have to go out four or five days. We do have some major customers that call on a Friday and expect something that afternoon. Sometimes we may go overboard in trying to meet those obligations because we're not getting any extra money, just hoping to keep their business for next time around. We do have a heavy bias toward the food and beverage industry. We have not shown at the local plant here as much as a downturn as some of our competitors have. We've done really well on our productivity side. At the moment, it's a little slow right now. It's hard to tell in the January and February time frame how much of that is weather-related. Any time you shut down businesses an entire day, it has a ripple effect across all of the industries. Your customers now don't need one day's worth of product from you. We are well positioned and plan to make a few investments this year to increase capacity. It seems odd that we're not full at the moment, but we anticipate a couple of our customers to change their packaging.
Heintzelman: Tell us exactly what you make.
Lamothe: A lot of people will call it cardboard boxes. We cringe when we hear that because it's corrugated. We have a machine called the corrugator; it makes the sheets. At some point, they get cut out and go through two types of machinery: either a dye cutter or one that takes a sheet and stabs it out. We do business with Michael Foods on occasion; we got our safety teams together. We try to network on the safety side. Worker's comp is something you have to manage a little bit. It probably gets a little more challenging as health care goes up because you now have more likelihood of work-related injuries appearing, especially on a Monday. "I just happened to walk in the door five minutes ago and strained my back," meanwhile they might have been out snowmobiling. You have to be careful about that.
Heintzelman: Eric?
Kujilpers: We are Kurt Weiss Greenhouses. We're also a family-owned business, out of Long Island, N.Y. We have nine locations, three locations in the area with greenhouses in Mount Carmel, Marion Heights and Washingtonville. We produce flowers; our plants does mainly Easter product right now. Springtime there's the bedding plants, our biggest business. In June-July, we go poinsettias for the winter months. Then we go into mums for the fall. A year and a half ago, like everybody else, we decreased our staff and didn't grow as much. We anticipate this year to be back in full cycle. Our business is not as vulnerable with the recession because we produce low-cost plants. We're trying to reduce our costs all the time. Of course, you can imagine it costs quite a bit to keep our greenhouses warm right now. We're currently trying to gather a grant to install a boiler to burn wood that is locally available. It would reduce our fuel costs. More so, it would be more predictable. Natural gas prices were good this year. When the price goes up, it's kind of tough.
Lamothe: You mentioned bio-mass. Everyone talks about ethanol and corn base. It's probably an overly subsidized fuel source because it's really not more efficient. It costs more to make than actually what you use it for. It's one of those things that sounds good on paper, being green, but is actually detrimental to us, because one of the major things we buy is corn starch. Our costs are going up. If you drive by our plant, we have a huge silo. It's holds a couple hundred thousand pounds.
Heintzelman: It makes some sort of glue?
Lamothe: Yeah, it's a mixture. It looks like Elmer's Glue when it's all said and done. Now we're all competing for the same use. It (increased use of ethanol) has unintended costs. It goes right through the food chain, so to speak.
Hallick: You have less corn going into animal feed and more into ethanol productions. ... We're owned by a private investment firm and this facility in Klingerstown has actually been around since the '50s. It started out as Spread Eagle Farms and it came under new ownership and run under Quaker State Farms; then in the early '80s, an egg products company in Elizabeth, N.J., purchased the facility and expanded it and added production lines to produce liquid egg products predominantly for expanded shelf life. Our plant in Klingerstown was bought by Michael Foods in the mid '90s. We make both liquid egg products for extended shelf life as well as both liquid egg whites and yolks for bigger bakeries. We sell some product to government through child nutrition programs and public school systems. We have our own retail line of omelets called Chef's Omelet. We're on a seven-day work schedule; we're creating a weekend crew to help offset some of the overtime. Before the economy went in the tank, we were already starting to implement lean processes. We're hopeful for the day to come when we're able to expand our operation there and add more production lines there and a bigger warehouse.
Nyce: Where do you gather the eggs from?
Hallick: We're considered offline breaking, so we buy our eggs from local producers such as Hegins Valley Farms, to bigger producers as far away as the state of Indiana. Klingerstown alone is breaking 3 million eggs a day.
Freed: What do you do with the egg shells?
Hallick: That's an excellent question. There's nothing thrown away from the egg. Before we even do anything with the shell before it leaves our facility, we spin out any remaining liquid that is considered inedible, along with any other inedible egg we generate in our process. We tanker that over to our dryer plant, located four miles from our main plant, and evaporate the liquid egg, create egg powder, and sell that as pet protein. Pet food manufacturers will buy that. The end result of the shell, it's a fine, gritty, almost sandy texture. We give that to local farmers. They spread that in the fields and it replenishes the calcium in the soil, and other nutrients. So no waste.
Cautious optimism
Heintzelman: I wanted to go around the table again and get your insights on what you see for 2011. We've had a couple hints at what you're thinking, but I wanted to get a sense on what you feel on both the national level and locally what we can expect over the next year, 18 months, even two years.
Strohecker: As I said earlier, we are looking to hire almost immediately for needs we have. We're looking for 15 people for our 48-person operation. We're a family-run company and we want to bring more people into the fold. We fully expect to be operational in another facility by the end of 2011. We're involved in building a commercial type of windmill that would go on light poles, and we're expecting them to take off. They're currently being tested in Arkansas; we are very hopeful and excited about that prospect. We would be the North American manufacturer of that windmill. Another style involves a German company that's approached us to make a rooftop model for electricity for people's homes. I'm not jumping over backwards, but we're very encouraged by the way the economy is up-ticking.
Heintzelman: Is it safe to categorize your optimism more about what your company is doing and the link to some green technology and electricity, or to the economy in general?
Strohecker: The economy, as I said, kind of gives you a punch and jab and you think you're going to have a good shot and then you've got to back off. But it's generally better than what it was.
Heintzelman: Ken, you've got a billion people that aren't driving in China.
Freed: And I hope they all buy a car next week. I would say from the overall economy we are cautiously optimistic. It seems to be that the uptake is there. We've been pleasantly surprised with the stateside automotive, with success in the last six to eight months. We've pulled out of the fourth quarter surprisingly. You see all those companies with sales that are up. They all have markers. Beyond that, there are efforts our company has taken to expand our markets that are probably a bigger piece of the pie. Because we're a relatively small company, even though we've dominated perhaps in the nuclear industry and somewhat in the military, there's a lot of business out there. We have a West Coast salesperson that we haven't had for years and he's doing some great things out there in the shipyards. It's really a combination of the market picking up, but focusing on expanding on our own. We have 65 employees and we just hired five. We're looking to continue to expand as the year goes on. Not quite as many as you (pointing toward Hallick).
Heintzelman: You're hiring, that's the big thing.
Foura: As far as National Ticket is concerned, we have about 135 employees now. We brought on a handful of employees, four or five, in the fall, and we'll be looking at a similar number here in the next couple months. Not a significant increase, but we'll be bringing on and anticipating on bringing on a few employees. ... We spent some money on capital equipment for season tickets and digital presses. We brought two digital presses within the last year and then some finishing auxiliary equipment to go along with that. ... As far as the general economy is concerned, I would say we are guarded. We're not jumping up and down thinking it's going to take off, but it's sort of a guarded approach to where the economy is going. What we've experienced in our business, there have been very few price increases we've been able to get over the past number of years. It is cutting into our margins. We did implement a price increase on Jan. 1 for a lot of our product lines and - knock on wood - so far it seems to be sticking. That's an encouraging sign there. At least it seems like we're able to get a little more of a price increase for our product, which we haven't been able to do over the past couple years.
Heintzelman: You're ultimately impacted by entertainment dollars in some fashion. That tends to ride with the economy.
Foura: That tends to ride with the economy, yes. Luckily for us, a lot of our business is the lower-end entertainment, the amusement parks. People still seem to be going to the amusement parks. They may not be taking the destination vacations, going to the Disneys, going to the Universals, where they have to take the family and get them on a plane and fly them, hotel rooms - but they are visiting local amusement parks, they are going to the Jersey Shore, which is a good part of our business, and spending money on the day trips, the weekend trips, that type of thing. The economy has hurt the destination business entertainment more than it hurt the local parks.
Heintzelman: The ones you're more connected to.
Foura: Right. And movie theaters. People are still going to theaters.
Heintzelman: Dan?
Lamothe: I would echo the same thoughts. We're still cautiously optimistic. We're definitely tied to overall economic activity for the country. It doesn't seem like it, but we're always measuring the output of all of our competitors, looking for economic activity. If the prognosticators are correct, they're saying 3 percent GDP (gross domestic product) growth this year, which should have a benefit on us ultimately. We service such a wide customer base; collectively, all our customers would have to do better in those circumstances, and that's where we would end up doing better.
Heintzelman: If they're shipping more products, they need more of your boxes.
Lamothe: Correct. Everything has to get from point A to point B and 99 times out of 100, it's got to be in a box. And we service to potentially 300 miles out from our facility. The Philly market, New Jersey, Baltimore, Maryland, Harrisburg area. We're continuing to look for new opportunities so anytime a new business potentially starts up, we can be right there. We're not planning any layoffs. We're continuing to make investments to keep our costs down; if something were to happen and our economy takes a hit, you don't know what's going on with China, the oil pricing affecting our fuel. Those are potential things you have to work around.
Heintzelman: I'm sure the fuel issue is a concern. I've heard some discouraging predictions for that in the next couple years.
Lamothe: We do $60,000 worth of diesel fuel a month.
Freed: Do you have your own dryers you use for any of your boxes?
Lamothe: We have natural gas as our primary utility. It's a little more expensive in the wintertime, because we lose ambient heat because of the weather. It's a steam driven process so natural gas is used to generate. We have the ability to switch to oil if needed to because there are occasions - you guys probably experience it too - sometimes you could get a shut-off notice. It all has to come through pipelines and sometimes there's not enough gas. That means we might get a four-hour notice saying we have to switch to oil.
Heintzelman: Eric?
Kujilpers: We're also cautiously optimistic. Our business is really about the timing. In the spring, we have six weeks where we do most of our business for the year. If it's six weeks of rain on weekends, no one wants to go out and plant the flowers. We can have a really good economy, but we're not going to be doing so good. Winter is the same. For Christmas, if every weekend there's a snow storm and people can't get to the stores, the flowers won't last. No one wants to buy poinsettias after Christmas. We're really connected to the weather. We're going to be increasing our staff over the next two to three weeks. We're looking forward, if things stay the way they are, to get back up to production like we were two years ago. We hope to be filling up the greenhouses again. ... We have to be close to where the market is. We pick up flowers today and they'll be in stores tomorrow. We can't really pick up stuff today and ship out two days from now. We pretty much do anywhere from Connecticut, New Hampshire, over to upstate New York, a little bit into Ohio, down to Maryland. Our Florida location does the south. It's a family business. As they grew, they needed more and acquired more facilities and expanded production.
Heintzelman: And Jack?
Hallick: We are, as I've heard several say, cautiously optimistic for the year, watching closely the grain prices, which we are impacted by so much. We in Klingerstown five years ago implemented team building and we started out with developing several improvement teams. We got our folks engaged. That's one of the key points that we gauge ourselves with. Klingerstown has taken the lead out of all the Michael Food plants. We helped by initiating the Gung Ho! program. It's another way of making sure folks know there's more to work than just work. Come to work and bring your brain inside; don't leave it outside. Think about things; have ideas. Have fun, too, through meals, birthday celebrations. Recently, I went out and and bought a regular movie theater popcorn maker. We've got that in the plant now and every so often I fire it up for everyone. It has nothing to do with eggs. (laughter). ... The other thing that was mentioned is we partner with IP (International Paper) to work toward VPP, the OSHA Voluntary Protection Program, and went through the first stages of that last year and we'll finish that up probably the second quarter of this year. We anticipate being successful and having OSHA recognize us as a VPP plant, which is a whole different level of safety awareness in your operation. ... Also, we were the first out of all the Michael Foods plants to become SQF-certified. In the food industry, that's Safe Quality Food. That's recognized by a lot of our customers to be premier, you've got your act together, and you're able to show in audits that you're doing what you say you do. Large customers, Wal-Mart and some others, are pushing that in food industry among their supplies now.
Praise for the area
Heintzelman: Now's the time if you wanted to throw something out that you thought maybe we'd be discussing and didn't. The concept was to tell people what we do have in terms of industry and get some suggestions and even the thought process on maybe what we can do to get more. Anything come to mind?
Kujilpers: I'd like to thank you for the opportunity. I think it's a good idea. In general, I think it's important that the community and the local authorities really support the businesses that are already here and support the local economy and try to help them. Heintzelman: I think that's really important and I think it is overlooked. As part of our job in the media in terms of what we cover and what makes news, you guys don't necessarily make news day to day and you don't even necessarily want to talk about what you're doing. I think over time it's forgotten. I don't know anyone here that wasn't a little bit surprised to hear some of the cool things going on.
Foura: It is interesting because a lot of us are bringing in dollars from outside of the area. New dollars are coming in from a lot of our customers that aren't local. I've said, as far as our company is concerned, I think we're well known or more well known outside Pennsylvania than maybe we are inside Pennsylvania, because of our national exposure. I think that's true with a few of us here.
Heintzelman: I think part of what generated this idea for me, in addition to what we've already talked about, is when we had the double blow of Paper Magic and Fleetwood closing in a matter of months two years ago, I remember some discussion from the county level where they went out last minute and said, "Please don't leave." It was too late. To Eric's point, there was no real recognition of making sure we're offering what we can to ensure those companies that are here are happy. Maybe there's a way to get the labor force trained or get them a little more educated. Maybe those things will make a difference in the long run. You're fighting some big obstacles with the national economy, especially with an operation like Fleetwood, but ...
Foura: They had just made all that investment.
Heintzelman: Just a few years ago. The paint shop; that building is humongous and beautiful.
Foura: That's what oil prices did. That was probably one of the biggest reasons: oil pricing and the economy going down the toilet.
Heintzelman: Ultimately, they made a business decision - which you guys have to do every day, too - to merge some plants, and we were left out. I really think we need to talk about these issues more often, as much as we can.
Strohecker: I'd like to get across we've all got our buildings, we all have our products, but the people are the No. 1 resource that we have, the most important thing to have. This area is a good place to work. The people we have, the people we employ, have a good work ethic. The area was built on their backs and we do enjoy their good work ethic. We want to attract the young people. I think we need to do more by getting out to the schools and getting out to the vocational schools in our industry. The vo-tech schools, we support them, and Blue Mountain is coming next week to tour. We have to let everybody know this is a great place to work. Not just the local people, but bringing people in from Reading, Harrisburg, Scranton. We can do that. It's a good place.
Lamothe: One of the things we didn't talk about but is an asset around here and could be promoted a little more is the fact that this is a good place to live. To me, any place that's a good place to live is a good place to do business. I'm not from around here, so it's probably an interesting perspective on my part, but I can easily see why there are stereotypes of the coal region, decaying towns, but there's a lot more to it than that. I have no ambitions to move out of this area. I've had my opportunities to move up, but I like this area. Where else can you go? I'm not saying it's totally crime-free and some are worried about the drug problem around here, but it's a safe area. Where else can you commute a few miles and get to work in a few minutes versus being in traffic for a half-hour? There's a lot of natural resources, fishing, hunting. It's a little bit more easy-going lifestyle. We should focus on what a good place this is to live. We sometimes have to fight when we want to recruit people to relocate here. You don't understand; you're hours away from New York City, hours away from Philly; you can go to Pittsburgh. You're in the middle of a good area.
Heintzelman: It's not around the corner, but you can do a lot within a few hours' drive.
Lamothe: It's more reason to be optimistic about the quality of life improving around here. That will do more to retain talent and bring more businesses in.
Freed: To the original question of attracting more business, I would think the cost of living here would be significantly lower than some areas. The quality of life is higher. Many recreational opportunities exist here that you just don't have in a larger city. We look at it as a stable workforce. You don't see people moving in and out.
Lamothe: We love going to Mount Carmel because we love eating there. (laughter)
Heintzelman: There are a couple good options, for sure. With that, I think it's a good point to end on. Again, thanks very much for taking the time to come out today. If there is something that we should be talking about in the paper that you guys are doing that you'd like to share with the world, by all means, get in touch with us.