CEO's Corner

Spencer Shaw, CEO

 
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Greetings everyone!

This year seems to be flying by; I find it hard to believe that we’re already at the mid-point of this year.  That must mean that we’re all very busy, and we are!  Our VP of Sales at Bartos, Randy Barnes, was telling me the other day that in all his time in the industry, he’s never seen the level of activity that we’re currently experiencing, and have been for the past couple of years.  The scene at Standard Supply is very similar.  The early start to the summer heat propelled Standard’s business into high gear quickly!  The first quarter of 2018 for both companies was very successful, and while the second quarter numbers are not in just yet, they are looking extremely strong as well!  Bill and I could not be prouder of everyone’s continued efforts to outshine our competition at every turn.  Although our markets are strong, you are achieving great results in the face of very aggressive competition.  I want to encourage you to finish the year strong, don’t let up, and don’t be satisfied; I can guarantee you the competition will, won’t, and isn’t. 

In our last newsletter, I related to you that much 2017 was spent, at both companies, cleaning up some outdated policies and procedures and integrating some new members of our team at several different locations and departments at Bartos and Standard Supply.  I also told you that before we could once again focus on geographic expansion and acquisitions, these changes had to take effect.  I’m pleased to say that, after a short break, we are now in expansion mode once again!  Probably the biggest project at either company is the land purchase and construction of our brand-new Bryan/College Station building!  As usual, these projects take a little longer than you’d like, but we’re now in the design and bidding phase and hope to be breaking ground in the third quarter, (fingers crossed!).  We are very pleased with Mike Arredondo’s leadership and his team in the B/CS!  This new facility is in a prime location that will enable our continued growth and service of the Brazos Valley. 

Staying on the Standard Supply side, we will be opening a new branch in Rockwall.  Rockwall has been an intriguing area for us for some time now.  However, when Todd Anderson returned to Standard Supply, it moved to the top of the list of expansion projects.  We’ve been looking for a location in the Rockwall area for some time now, and have finally landed on a spot we feel will work very well.  We are receiving bids on the build out now and we hope to be open for business by September or October, stayed tuned!  Now to something that on the surface may look like a move of contraction, the closing of our Control Sales branch will allow us to turn our attention to other regions where we’d love to have a physical location.   We are still looking for possible locations in southern Dallas county, Ellis county, and perhaps south/southwestern Tarrant county.  I’m sad to leave the immediate downtown Dallas area and I’d like to highlight and thank Pat Feagin and his team there for their dedication and hard work!  Who knows, maybe one day we’ll have another location downtown, or in the Deep Ellum area where it ALL started for Standard Supply, that would be great!

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"...no one has ever regretted giving their best effort."

I’d like to welcome Scott Cleaveland back to Standard Supply.  Scott worked at our Arlington branch several years ago until he and his family moved to Houston.  Scott has been out of the industry for a while, but we are very glad to have him back as Branch Manager of our Westpark Houston branch!  I’d also like to report on a couple of new faces with our Cool Care business.  Stephen Rodriguez was added to the team earlier this year in an outside sales role, and just this past month Shad Muth joined the team as Customer Service Manager.  We are very pleased to have both on board.  Alex Helland has done a great job leading that group and we are very excited about our fast-growing Cool Care business!  Another highlight of the first half of 2018 has been the performance of the relatively new Lubbock location under the leadership of Jodi Hamlin.  Within her first full year in Lubbock, Jodi signed up one of the largest contractors in the South Plains region in Bruce Thornton Air Conditioning (BTAC) as an Amana dealer.  BTAC has been in business since 1972 and is very well known in that part of the state for being a top notch, highly dependable contractor, that does excellent work.  We’re proud that they are representing the Amana brand!  Jodi has done a great job getting Lubbock off on the right foot, and I’d like to also highlight Will Dunn’s above and beyond efforts in helping her get started.  Congrats Lubbock team!   One more item of note concerning Standard Supply: we will be changing the format for our annual Field Marketing Summit (FMS) starting in 2019.  Todd will be getting into more detail on this soon, but for now I’d like to comment that the current FMS format had grown a little stale, and with thoughtful feedback from everyone involved, we thought a change was in order.  Broadly speaking, the new “FMS-type event” will feature more product training time with key vendors, more time spent with our customers, and a regional (i.e. one in the south and one in the north) venue approach.  More details to come late summer/fall of 2018!  

Although this particular update has been pretty heavily focused on Standard Supply, rest assured that Bartos has been busting at the seams and has been doing a great job keeping up with this never-before-seen pace of the market.  We’re good on space at Fort Worth-Bartos for now, with that building being new, however Dallas is a different story.  We have officially filled up the entire inside office area and have looked at various proposals for remodeling to accommodate future growth.  We’ve even looked at the possibility of purchasing adjacent land to expand the building on Olympic Drive. More to come on that in future updates!  A big congratulations goes out to Julia Bell and her husband Clint as they welcomed their first child, Easton Bell, into the world on May 29th at 11:22pm!  Mother and child are doing great.  Julia is a fabulous Account Executive for Bartos-Dallas and has been sorely missed while she has been out on leave, we look forward to her return! I’d also like to point out that Kelly Hartley, Bartos-Fort Worth, has changed positions within the company.  Kelly had been with the BAS group, but has transitioned into his new role as TSA for the entire company.  We’re very proud of Kelly and what he has accomplished at Bartos and we are already seeing great results from him in his new role with Bartos.  Way to go Kelly!

In closing I’d like to share a little story and communication to us from one of our customers, Hardin Heating & Air in Midlothian.  Gloria Lopez and Clayton Swize, along with Tim Hardin, received an e-mail from Saronda Webster praising the outstanding customer service of Daniel Gonzales from our Arlington branch.  This isn’t the first time Daniel’s meticulous approach to serving our customers has been brought to our attention by our customers, but just one example.  Apparently, Hardin had a very large order delivered by Daniel recently.  Before Daniel got to Hardin, Saronda was concerned about having to sort through all the product and spend all day receiving the product in stock and assigning it to where it needed to go.  Saronda communicated that they are a little cramped when they get a big order delivered.  I’ll share with you her description of what happened next…

“but when he (Daniel) got here I saw where all the orders had been shrink wrapped and he placed colored dots on the pallets that went together.  He made my life so much easier, we don’t have a huge shop and he knows we want everything lined up according to jobs.  I know he had to take some extra time at your place to organize our stuff and separate it……… so just another THANK YOU for Daniel… he is a great driver.”

It is so great to hear this from one of our customers!  THIS is going the extra mile for your customer and it is what sets you apart from everybody else.  Daniel is not only delivering product, but also delivering solutions!  Making their lives easier is why we’re in business.  Outstanding job Daniel, keep it up!

I had an old basketball coach tell us before the season started in summer workouts, that no one has ever regretted giving their best effort.  I want to continue to stress to you the ultra-competitive nature of the business we’re in, especially in the part of the country where we operate.   Texas is one of the top HVAC markets in the entire world.  Bartos has been around for 54 years, Standard 72 years.  While we’re proud of our longevity, we can never settle!  Companies and competitors that have never been to Texas are now moving here for the first time in their history to get a piece of the action, our action.  I continue to encourage you to do the little things much better than the next guy, and we’re going to be successful.  In Daniel’s example above, you see what a wonderful impression it made on the customer during a very busy time of the year.  This not only holds true for drivers, but is true no matter what your responsibilities are with the company, be it accounting, sales, management, payables, etc. 

Thanks everyone for a fantastic first half of 2018.  Your dedication and hard work are very much appreciated!  You are what continues to set Bartos and Standard Supply apart as leaders in our industry.

Have a great rest of Summer!

 

Spencer 

 

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Pay Attention to the Blind Spots

Loran Liu, Executive Vice President

 
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We all know blind spots are dangerous when we are changing lanes while driving.  When we’ve got a blind spot or area of weakness dragging down our company, it can be just as damaging in its own right.  No person or organization is immune to blind spots.  Let’s not kid ourselves.  We easily see them in other people or other organizations, but we have a hard time seeing our own blind spots.  That’s the nature of a blind spot: everyone can see it—except those who need to see it the most.

Earlier this month I celebrated my one-year anniversary with Standard Supply and Bartos Industries.  I can’t believe the year went by so quickly.  However, it makes sense given how extremely busy it has been for both companies.  As I’ve gotten more familiar with both businesses, it is obvious Standard Supply and Bartos are successful companies with a long history of growth and success.  Given all the success, it has been less obvious to see areas needing improvement or spots that needed attention – “Blind Spots”. 

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"If we don't expect to see a car on the road, we simply will not see it.  Simply put, we see what we expect to see."

Why is that so? I recently read an article about "Theory of Incongruency" which suggests that our expectations cloud our perception. If we don't expect to see a car on the road, we simply will not see it.  Simply put, we see what we expect to see. The rest falls prey to a virtual blind spot created by our brains when something appears that is not expected.  The same type of blind spot can exist in business.  Many breakthrough ideas are ignored or dismissed because often times people are unable to see the value of a new idea that doesn't fit within their current expectations of what will work within their firm or industry.  Leaders and the employees at Standard Supply and Bartos are not immune to this behavior.  However, what has been refreshing is that when some of these blind spots have been made known, our culture and leaders have been open to new ideas and willing to implement them. 

In my previous newsletter, I mentioned that some blind spots were identified so we launched some key initiatives to address them.  I can confidently say that significant progress has been made in many of these areas.  Some of the key areas that have made a positive impact on our businesses and, in many cases, greatly improved our financial profitability is the implementation of a new Standard Supply pricing strategy and the focus on purchasing activities (e.g. hold our top 25 vendors more accountable and ensuring competitive pricing, decreasing aged inventory, centralizing buying function).  So far this year, Standard Supply gross profit margins are 200 basis points or 2 percentage points higher than this time last year – that is a huge difference and we still have so much room for improvement!  A special thanks to our Standard Supply pricing manager Brian Dunn, the corporate purchasing team, branch managers and regional leaders (Chris Reeves, Jake Gavlick, Todd Anderson and Will Dunn) for supporting these efforts.  

Another area getting special attention and showing positive results is our increased discipline and emphasis on executing towards financial objectives and budgets.  This is something implemented for Standard Supply and we hope to do the same for Bartos next fiscal year.  It has helped us stay focused on where we want to finish at the end of 2018.  So far, we are slightly behind our Sales goal but catching up quickly over the last three months.  Regarding Gross Profit and Net Income, we are right on pace to meet or exceed our year end targets! A special shout out to Jaimison Rousculp for his ongoing accounting and financial modeling assistance.  With respect to Bartos, we continue to look for areas to improve and will most likely share some new opportunities for improvement before next quarter, but in the meantime a big “pain point” that has been addressed is TurboPro.  I believe we finally stopped the bleeding and have it working accurately and more efficiently to support Bartos’ business!  Thank you for being patient over the last year.

While we are making great progress in many areas, there will always be new blind spots that need to be addressed.  A new blind spot we recently uncovered is the large number of Standard Supply customers that show declining sales or no longer buy from Standard Supply (see Table 1) – 2,503 customers which equates to a loss of $23.4M in sales.  This blind spot is masked by new and growing customers – 2,254 customers which equates to an additional $36.7M in sales.  Net, net, the change in sales year over year is $13.3M which is a nice increase but imagine what it could have been if we prevented a portion of the sales erosion!  

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Additional analysis showed that the majority of the customers declining or lost are customers we spend little to no effort nurturing.  Essentially, they are the 80% of customers that drive 20% of our business so they often get ignored because we spend the majority of our time with our biggest customers - the 20% of customers that drive 80% of our business.  Essentially, a large portion of our customers get lost in our rear-view mirror.

Warren Buffet explained the “Blind Spot” phenomenon best:

“What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.”  

Going forward, it is important that we don’t get comfortable with the status quo and become blind to areas that can provide significant opportunities for improvement that create economic value for Standard Supply and Bartos. 

 

 

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TACCA BBQ CookOff

Houston, TX / April 19-21

The Standard Supply Houston team participated in the 19th annual TACCA-GH BBQ Cook Off in Houston, taking home 1st place (ribs) & 2nd place (brisket).



 

TD's Tidbit

Todd Day, President

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I want to touch on a few things this quarter.

How are we doing and where are we headed.

What the industry’s facing about pricing, tariff 232, nylon, copper and the trend on R22 and 410A.

How are we doing? 

January, February and March we got off to a slow start in sales, yet we had record months in April and May.  May was a record for sales and gross profit.  Heat does amazing things for our business.  We have continued growth in sales in unitary equipment causing great things to happen.  The seeds that were planted over the winter with potential Amana dealers are beginning to bloom.  I think the efforts that Rob, Aaron, and Todd are making with the rest of the sales team are paying off.  For the first time we are starting to move the needle in Austin on the Amana side of things.  We recently moved all the purchasing efforts on equipment to the branches.  With our sales growth continuing to grow at a 30 percent clip, it was necessary to move purchasing to the branches.

We are strategically trying to source things at a better price and stretch margins where we can.  The net result of our efforts has allowed us to raise our overall gross profit margin by a couple of points. For the year, Standard Supply is up approximately 10 percent in sales and 15 percent in gross profit. 

Where are we headed?

While we are having a great start to 2018, we have much work to do.  Strategically we are trying to maximize what we do with our vendors.  We are working on trying to reduce the amount of people we buy from.  If we can source from fewer vendors at reduced costs, it’s a win/win for Standard Supply and our primary vendors.  If we source from fewer vendors, it helps purchasing, accounting and our branches. 

We have several expansion opportunities at the moment.  We plan on opening in Rockwall this fall.  Our hopes are that Richard can have us up and running by mid-September.  We are trying to find a location in the DeSoto area as well.  Commercial real estate is super tight right now.  We are working diligently to find the right spot that suits our needs.  We would like to open a location in Katy and South Austin as soon as possible.  When we expand, we need the right people.  Please tell your friends about us.  We have a fantastic crew at Standard Supply.  We are always looking for great people.  In order for us to achieve our goal of $200 million, we will need your help.

What’s trending in our industry?

I’m certain most of you are feeling some pressure related to pricing.  I don’t recall a year when we have had more manufacturers announce price increases. We have some manufacturers that have announced multiple price increases.  There are several reasons why we are seeing this trend.  Tariff Bill 232 was signed by President Trump that imposed a 25% tariff on imported steel and a 10% tariff on aluminum.  This has caused our metal prices to rise by almost 20%.

Transportation costs are a major issue as well.  We are in a situation where truck drivers are being heavily scrutinized.  For years truck drivers used manual logs to track time on the road.  Today trucks have electronic logs.  This has put pressure on the industry and shipping costs are rising.

Nylon 6-6 is in short supply causing duct strap prices to rise.  We are in a great position with Cambridge Resources.  While we had recently negotiated a better price from Cambridge, with the increase we are back to our old cost.

What’s going on with commodities.  Well China is consuming massive amounts of copper tube today and we have a couple of mines that decided to strike.  Copper tube prices are soaring.

We are buying 410a and R22 cheaper today than all last year.  We just received notice that R22 is back on the rise.  This is primarily due to the refrigerant companies needing to move product.  When R22 got above $500-$650 per cylinder, contractors chose not to use it. 

In closing, please keep us informed of what you are hearing in your branches and out in the field.  We are doing our best to provide the best service, the best products and the best people.

Keep Caring,

TD

 

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Birthdays & Anniversaries

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Endings and Beginnings

Christian Young, President

 
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I feel like a broken record when saying this every year but I cannot believe that another year has passed and we are through January already. The years continue to fly by, which is why we all need to try to slow down when we can and enjoy our daily and weekly journeys together. It is easy and natural to come to work on Monday mornings and already be dreaming about Friday afternoons. Who doesn’t love the weekend where we can sleep in and do whatever we want? I sure do. But when we consider that our weekends are a fraction of each week (less than 1/3), then we start to realize that we spend the majority of our waking hours at work. And if we cannot find a way to enjoy that time together and appreciate each day our journey together, then we will be missing 2/3 of our weekly lives. Our careers should not define our lives, but they are a big part of our lives and I encourage you to find joy and fulfillment in working every day with your amazing and diverse coworkers, customers, and business partners. I am working hard at practicing what I am preaching in hopes that in a year I won’t feel like 2018 went by me in a flash. (stepping down from my soapbox)

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"Great products are nothing without a great organization to sell and support them..."

As Spencer has surely spoken about in his article, Bartos had its best sales year in the 50+ year history of our company. There are many reasons that since 2013 we have grown our revenue every year. The first that cannot be ignored is simply the continued growth in population in Texas, and North Texas in particular. Large corporations continue to move their headquarters or major operations to North Texas (State Farm, Liberty Mutual, Amazon, Toyota, Kubota, Facebook, etc.). Not only do the headquarter or operations buildings provide good opportunities to sell Bartos products, but all of the infrastructure associated with the employees moving to North Texas provide continued opportunities. When more families move here they need places to live (multifamily housing along with single family homes). Then when they move in they need more schools, churches, restaurants, gyms, stadiums, theaters, etc. All of these facilities provide continued opportunities for Bartos to sell our manufacturers’ products to our contracting partners.

Our continued growth is also a result of Bartos building one of the best teams of employees in the manufacturing rep business in the country. This results in some of the best manufacturers in our industry wanting to partner with Bartos as their sales force. Great products are nothing without a great organization to sell and support them, and a great organization isn’t nearly as strong without great products and manufacturing partners.  Furthermore, one year ago we promoted Randy Barnes to be our first ever dedicated VP of Sales. It cannot be overlooked that his time spent with our sales team has allowed us to continue our annual growth. Without direct sales responsibilities, Randy has been able to be a much needed back up to our sales team when required, work with the sales people on strategic accounts and projects, and help get through those rare problem projects to minimize lost time and money. Thank you for all you are doing, Randy!

During the early part of last year, Loran Liu took over the reins for the continued development of TurboPro. Anyone that has worked with TurboPro since we launched it 2.5 years ago is more than familiar with the growing pains we have endured through the development of the software. Loran brought to the table his incredible business acumen and experience in helping startup a software company. With his focused direction, vision, and leadership, he and Eric have stabilized our software and brought improvements and functionalities to TurboPro that we all have been dreaming of for a couple of years. Loran, we cannot thank you enough for all you have done and continue to do!

Lastly, with the end of 2017 came the end of the career of one of Bartos’ most beloved and long tenured employees. Clarence “Dudley” Griffith has officially retired after more than 41 years of service at Bartos. Dudley has been a fixture at Bartos Fort Worth and a friend and mentor to so many people in our company and our industry for many years. We cannot thank Dudley enough for all of his hard work and more importantly all that he has taught so many of us through the years. He will be missed and we can only hope that he will visit us regularly. Specifically around the holidays where we need him to lead us in singing carols.   

 

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Tech Tips

Patty Guden, Vice President of Technology & Adam Beck, IT Specialist

Microsoft Training

View current Microsoft training here.

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Bartos

Plan to Reinstall CAPS using the MSI instructions that were emailed on 6/15/18.   Greenheck is moving away from the partner install we’ve used in the past

 

Anti-Virus

As more and more BYOD (bring your own device) becomes prevalent, Anti-virus software and protection of yourself and the company starts to fall on your shoulders. Here is a link to some antivirus software suites

https://www.pcmag.com/article2/0,2817,2372364,00.asp

I recommend: McAfee, Norton, Kaspersky, Webroot, ESET, or Sophos. If you connect from home through the Meraki VPN, having Anti-Virus software is required, and will soon be enforced. Please take the time to evaluate your personal systems posture in regards to having and ACTIVE, PAID, version of one of these.

 

 

Phishing

Lots of folks look for confirmation on scam emails, or “Phishing” emails as they call them. Try asking yourself some basic questions first and you’ll probably find out for yourself, what is real and what is not.

  1. Does the message ask for personal information? Always remember that reputable businesses do not ask for personal information – such as social security and credit card numbers – via email.
  2. Does the offer seem too good to be real? If it seems too good to be true, it's a fake. Beware of emails offering big rewards – vacations, cash prizes, etc. – for little effort.
  3. Does the salutation look odd? Reputable companies will use your name in the salutation – as opposed to "valued customer" or "to whom it may concern."
  4. Does the email have mismatched URLs? If you receive an email from an organization that includes an HTML link in it, hover your mouse over the link without clicking and you should see the full URL appear. If the URL does not include the organization's exact name, or if it looks suspicious in any other way, delete it because it's probably a phishing email. Also, you should only visit websites that begin with 'https' because the 's' at the end indicates advanced security measures. Websites that begin with "http" are not as secure.
  5. Does it give you a suspicious feeling? Trust your instincts when it comes to email. If you catch yourself wondering whether it’s legitimate, and your instinct is to ignore and delete it—then pay attention to that gut check.

Other things to remember: have you ever done business with this person? Do you ever get asked to look at invoices? And feel free to actually pick up the phone to question the alleged sender if they truly sent it,

 

 

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