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VOL. 33, NO. 41
Enrollments drop at community colleges Reversal in years-long growth shifts focus on retention By TIMOTHY MAGAW email@example.com
The economic meltdown led to recordbreaking enrollment surges at Northeast Ohio’s community colleges, but the slowly improving jobs climate is resulting in fewer people flowing through their doors. The economic recovery coupled with an expected decline in high school graduates due to Northeast Ohio’s stagnant and aging population has the region’s community colleges and university branch campuses adopting new ways to recruit students and, perhaps more importantly, keep the ones they already have. “Sometimes we lose sight of how we can impact retention,” said Karen Miller, vice president of enrollment management and
student affairs at Cuyahoga Community College, the region’s largest community college, which stomached a 3.83% decline in enrollment this fall. “If we really impacted retention and focused on that, we wouldn’t have an enrollment problem,” Ms. Miller said. “We wouldn’t have to worry as much about that front-end number.” Early numbers compiled by the Ohio Board of Regents suggest that enrollment at all the region’s community colleges and university branch campuses is headed south for the second straight year, with the exception of Stark State College of Technology in North Canton, which saw a slight uptick. On the flip side, enrollment at the region’s public four-year institutions is mixed, with Cleveland State and See DROP Page 18
HEADCOUNTS LARGELY FALL IN 2012 ACADEMIC YEAR
The lunchtime crowd at the Student Services building on Tri-C’s metro campus last Thursday.
Firms heap on debt to pay out big dividends By CHUCK SODER firstname.lastname@example.org
Three local companies are planning to borrow a total of $1.7 billion and give much of it directly to their shareholders. And they aren’t alone. Those three companies — content management software firm Hyland Software Inc. of Westlake, medical supplies distributor AssuraMed Holdings Inc. of Twinsburg and aircraft parts maker
TransDigm Group Inc. of Cleveland — are part of a wave of U.S. businesses that are borrowing money to pay big dividends, according to an investment banker and two lawyers who specialize in corporate deals. Aluminum products producer Aleris International Inc. of Beachwood also is raising $400 million in debt and might use some of it to pay dividends. “I will tell you, it is hot right now,” said Jay Alicandri, a partner in the See RECAPS Page 17
It’s all in the family for these businesses We ask 10 Northeast Ohio family businesses — including the crew at Allstate Hairstyling & Barber College, pictured above — what’s kept them running all these years. PAGE 11 PLUS: ■ More manufacturers investing in new equipment. PAGE 3
FitzGerald: New Inner Belt part of gov’s turnpike ploy ODOT: Kasich not out to play ‘political football’ By JAY MILLER email@example.com
Cuyahoga County Executive Ed FitzGerald maintains that Gov. John Kasich is plotting to hold a fasttracked second Inner Belt bridge hostage to a plan to privatize, or otherwise monetize, the Ohio Turnpike. Asked about the governor’s plan
to move up construction of the second Cuyahoga River span and several other projects in other parts of the state, Mr. FitzGerald said he fears Mr. Kasich is holding the early completion of those projects and the potential of other road work in northern Ohio out as a carrot. “And then, surprise, he’s going to say, ‘None of those are going to get See TURNPIKE Page 10
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STICK AROUND Private-sector workers are staying in their jobs longer, but they have quite a bit of ground to make up to catch their public-sector counterparts. The federal government reports the median number of years that workers in the private sector had been with their current employer was 4.6 as of January 2012, up from 4.4 years in January 2010. Workers in the public sector had almost doubled the median tenure of private-sector employees, 7.8 years versus 4.2 years. The longer tenure among workers in the public sector is explained, to a large extent, by demographics: About 75% of government workers are age 35 and older, compared with 60% of private-sector workers. Here’s how tenure breaks down by select industry:
REGULAR FEATURES Best of the Blogs ..........19 Classified .....................18 Editorial .........................8 From the Publisher .........8 Going Places ................15
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Median tenure Industry
Private sector total
Public sector total
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VC infusion will quicken fast growth at HeartLab
THE WEEK IN QUOTES “Everybody’s concerned with who’s going to be the next president and how much the tax rates are going to be.” — Jay Alicandri, a partner in the corporate securities group at law firm Dechert LLP of New York. Page One
“We’re talking about two completely different issues. Ed FitzGerald is making it a political football, and at ODOT we don’t have time for that.” — Steve Faulkner, press secretary for the Ohio Department of Transportation. Page One
“I think (new Browns owner Jimmy Haslam) should restore credibility by taking a personal interest in the team, as he seems to be doing, and build this team slowly with good-quality, ethical players.” — From a Big Issue response. Page 9
“Transitions don’t work if the older generation doesn’t let the younger generation take over. I said to (son) Bruce, ‘Tomorrow, you’re the driver and I’m the passenger.’” — Henry Goodman, White Dove Mattress Ltd. Page 15
Cleveland firm that helps ID heart attack risks raises $15M By CHUCK SODER firstname.lastname@example.org MCKINLEY WILEY
Bud Industries vice president of sales Josiah Haas (left) and president Blair Haas at Bud’s Willoughby headquarters
AUTOMATED RESPONSE With dearth of skilled workers, manufacturers turn to new technologies, equipment for operational effiencies By GINGER CHRIST email@example.com
utomation, long a way for manufacturers to cut costs and improve efficiency, now is becoming a solution to the problem created by an ever-growing shortage of skilled workers. Bud Industries Inc., a Willoughby-based maker of electronics enclosures, is doing more work faster and with fewer people thanks to new automated equipment it’s purchased. “One of the challenges manufacturing has in America is how difficult it is to find skilled labor,” said Blair Haas, Bud president and thirdgeneration owner. “Our work force has aged. Getting people to operate our still good equipment has been almost impossible.” Because the company has struggled in finding skilled workers, it instead invested in a $1 million steel bending machine. The machine allows Bud to cut setup time from 30 minutes to two minutes, giving it greater capacity for new orders without hiring new workers. “We use less skilled employees as time goes by to continue to operate and produce the products,” Mr. Haas said. “It’s much more automated. It’s much more high tech.” Bud Industries isn’t the only company automating its manufacturing process as a means of See AUTOMATION Page 17
If you want to make a fast-growing company grow even faster, giving it nearly $15 million might help. Cleveland HeartLab Inc. has raised $14.7 million in venture capital in a deal led by Mutual Capital Partners LLC of Cleveland. The company, which tests blood samples and other specimens to help doctors determine whether a patient is at risk of a heart attack or other medical problems, will use the money to expand its sales and marketing efforts and to commercialize new tests, said CEO Jake Orville. Cleveland HeartLab already has done a lot of expanding. Founded just three years ago, the company today employs 112 people. All but 18 work at its headquarters on Carnegie Avenue in Cleveland’s Midtown district. The company has hired 39 people in 2012 alone. This year’s sales are projected to beat last year’s numbers by 30% to 40%, said Mr. Orville, though he would not provide specific dollar figures or say how many people Cleveland HeartLab might hire with the new money. The company has several proprietary tests licensed from academic medical centers. Its flagship test, licensed from the Cleveland Clinic, checks a patient’s blood for an enzyme called myeloperoxidase. Multiple studies have shown that patients are at greater risk of suffering a heart attack if they have a high level of the enzyme in their bloodstream. Demand for the company’s tests “continues to be strong,” Mr. Orville said. He described how trucks constantly are dropping off foam boxes packed with samples to be tested and shipped back to the doctors that sent them. See HEARTLAB Page 18
FILE PHOTO/MARC GOLUB
Cleveland HeartLab president and CEO Jake Orville
Smaller companies start moving their servers into the ‘cloud’ Seeking reliability, savings, businesses use hardware owned by specialists By CHUCK SODER firstname.lastname@example.org
Local companies aren’t just talking about moving to “the cloud” — they’re doing it. In large numbers, small businesses in Northeast Ohio have started moving many computing functions off the servers that they keep in the back room. Now they’re
starting to use the Internet to tap into computer equipment owned and managed by other companies. Bigger companies are moving slower, but they’re making the move, too. The trend has picked up major momentum over the past year and a half, according to several information technology service providers who spoke with Crain’s.
Nearly one-quarter of the small businesses that work with the Technology Partners division at Skoda Minotti in Mayfield Village have thrown out almost all of their servers, or they’re in the process of doing it, said Brian Rosenfelt, a principal with the division. Many more Skoda Minotti clients are creating hybrid networks, using some of their own servers and some owned
by other companies, he said. The concept of moving to the cloud has become so popular that now it’s near the top of the agenda at almost every client meeting Mr. Rosenfelt has. “People are really asking for it more now,” he said. “We recognize that, in some cases, if we don’t lead with it, we’re not going to get the business. We’re walking into sales meetings now where people are saying, ‘We need to move to the cloud. What have you got?’”
Skoda Minotti is one of many local IT service providers that have added new services over the past year or two aimed at helping companies make the transition. The accounting and business services firm has built its own server bank, which is being called “The Cleveland Cloud,” in the downtown Cleveland data center owned by BlueBridge Networks LLC. The two companies plan to jointly market the service to small businesses See CLOUD Page 7
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OCTOBER 22 - 28, 2012
Riverside projecting record year Expected exits, returns well above norm for private equity outfit By MICHELLE PARK email@example.com
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Cleveland’s most prolific private equity firm is on track for its most prolific year yet in terms of companies sold and returns generated for investors. The Riverside Co., which marks its 25th year in business in 2013, expects to exit, or sell, close to 15 companies by year-end, said co-CEO Stewart Kohl. Fifteen would be four more than Riverside’s previous record of 11 companies sold, which was set in 2010. The firm already has tied its previous record. In addition, the firm, which raises capital from investors and uses the money to buy, operate and sell companies to generate returns, expects to return to its investors about $700 million this year. That amount would be well above the $200 million to $500 million it returns in a typical year, Mr. Kohl said — and would be a return of more than double the investors’ money in those companies. “As a firm, we have grown over the years, and as you get bigger … it would make sense you would exit more (investments) each year,” Mr. Kohl said. “We do think it’s a pretty good time to sell. Fortunately, we have a lot of companies that are ripe and ready to sell.” Mr. Kohl also attributes the record year to processes Riverside implemented in the last few years that drive faster growth at its portfolio companies and lay a more intentional route to an exit.
“Things at Riverside don’t happen by accident so much anymore,” he said. Even before an acquisition is closed, Riverside’s people have developed an investment thesis and strategy. By the time the firm has owned a business for six months, its professionals have completed a strategic plan for the entire hold period, which on average is five to seven years, Mr. Kohl said. But Riverside isn’t just setting record exits in 2012. The firm, founded in 1988, invests in companies with enterprise values of up to $200 million. This year, it’s done a record number of add-on acquisitions — 18 and growing — and will close its 300th acquisition. Its portfolio as of last week comprised 73 companies globally. Mr. Kohl attributed the increased acquisitions to looming tax increases that encourage owners to sell now, the economic roller coaster many business owners are tired of riding, and Riverside’s marketing efforts. “We come to (business owners) and say, ‘Hey, here’s a fair amount for your company,’” he said. “They’re going to think about that.”
The hunt for winners Many industry insiders say it makes sense that private equity firms would be selling companies at a good clip. For one, firms likely deferred some exits following the recession, said Mark Mansour, senior managing partner of MCM Capital Partners, a Beachwood private equity firm. “You needed to re-establish your earnings history, put some distance between bad numbers and better numbers,” Mr. Mansour said. Plus, he said, “The preference would be to do (an exit) this year versus next year,” in part because capital gains tax hikes are expected next year, he said. Also, if a private equity firm is going to raise funds in the next year or two, “putting some wins on the board” is a priority, Mr.
Mansour said. MCM Capital’s exit activity may end the year slightly up, Mr. Mansour said. The firm, which he described as a “low-volume shop” investing in companies with transaction values of less than $50 million, has completed two sales and could complete a third before yearend, up from two in most years. Altogether, it owns six companies. Industrywide, the total number of exits globally totaled 863 during the first three quarters of 2012, down 4% from 902 in the year-ago period. However, that number is up 43% from 605 exits in the first three quarters of 2010 and is more than double the 365 in the like period in 2009, according to data from Preqin, a provider of information for the alternative assets business. While the first quarter of this year was “relatively subdued” for exits, the volume and value of exits in the quarters that followed “have probably exceeded expectations that people may have had at the start of the year,” said Manuel Carvalho, private equity deals manager with Preqin.
Inventory issues However, in the view of James M. Hill, the deal volume of 2012 has been underwhelming. The chairman of the private equity practice at Benesch, Friedlander, Coplan & Aronoff LLP, Mr. Hill said the anticipated rush to sell businesses spurred by looming tax increases hasn’t materialized. “There’s very little inventory — not a lot of people selling their companies right now,” he said. Mr. Hill believes private equity firms with companies that are performing well would be wise to sell, given the “dearth of inventory,” he said. Mr. Mansour does not expect the same level of exit activity next year. He said the uptick that has occurred this year is because some sales were delayed into 2012 and others were moved up for fear of a less friendly tax environment. ■
EXECUTIVE SEARCH DIRECTORY Crain’s Cleveland Business will publish the first Directory of Executive Search Firms and Staffing Firms in our end-of-year publication, The Book of Lists, as well as on our website, www.CrainsCleveland.com. There is no charge to be included in the directory, but we require that a
brief survey be submitted. Don’t miss this chance to get your company’s information in front of business readers. The deadline to submit information is this Wednesday, Oct. 24. You can access the survey at www.CrainsCleveland.com/section/ executive_search_firms.
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OCTOBER 22 - 28, 2012
GCP pushes biz backers on school vote By TIMOTHY MAGAW email@example.com
The Greater Cleveland Partnership is mounting its final pitch to the business community to support a four-year, 15-mill operating levy that, if approved, would pump more money into the beleaguered Cleveland Metropolitan School District. With less than a month to go until Election Day and early voting already under way, the local chamber of commerce recently dispatched a “toolkit” to its members to distribute to their employees. The toolkit is loaded with information about the need for the levy’s passage, which would be the district’s first tax increase in 16 years.
CRAIN’S CLEVELAND BUSINESS
GCP also is offering to dispatch members of the levy campaign to area businesses to drum up support for the measure. “We must turn around our schools, and we need the business community’s support to make that happen,” GCP president and CEO Joe Roman said in a recent interview. The information blast also includes a series of video endorsements from some of the organization’s heaviest hitters, including SherwinWilliams Co. chairman and CEO Christopher Connor; Fred Nance, the regional managing partner for Squire Sanders; Forest City Enterprises chairman Charles Ratner, and Mr. Roman. In one video, Mr. Ratner asks
business leaders to make a financial contribution to the levy campaign, educate their employee base about the issue and place signs in support of the levy around their workplaces. “If we raise graduation rates, send more students to college and ensure the best teachers in our classrooms, that will make Cleveland’s future brighter,” Mr. Ratner said in the video. Mr. Roman said the Council for Smaller Enterprises, the small business arm of GCP, is doing something similar with its members. “I think there’s as strong story to tell,” Mr. Roman said. “Most of these issue campaigns that are tax increases, you’ve got to make sure people get out to vote. I feel good about where we’re headed.” ■
Office 28,300 Sq. Ft. 16035 Industrial Parkway
Furnished -- Price far below market Former PNC/National City Comptroller Building Ceilings 9 ft. - Bottom of Deck 18’9” (1) Dock Near to Cleveland Hopkins Airport, between I-480 & I-71
Former Clinic Westlake site has new owner By STAN BULLARD firstname.lastname@example.org
A partnership associated with a principal of Equity Trust Co. in Elyria paid $3.75 million to buy the building that housed the former Westlake Family Health Center from the Cleveland Clinic Foundation. Cuyahoga County land records show an entity known as 30033 Clemens LLC on Oct. 15 bought the five-story, 69,000-square-foot building, which is visible from Interstate 90. The building is at 30033 Clemens Road. Richard Desich, founder and chairman of Equity Trust, is listed as the trustee of 30033 Clemens LLC, according to state records in Florida, where 30033 Clemens is incorporated. The records list Equity Trust’s 225 Burns Road address in Elyria as the principal address and mailing address of 30033 Clemens LLC. Matt Graban, a Baker & Hostetler attorney in Cleveland who said he has done work for the Desich family, said the buyer is a privately held partnership managed by Mr. Desich and is a different entity from Equity Trust. He returned calls from Crain’s made to Mr. Desich and Jeffrey Desich, Equity Trust CEO. Asked how the new ownership plans to fill the empty space in the 30-year-old building or if Equity Trust itself might occupy some of it, Mr. Graban declined comment. Equity Trust is a growing concern. Its website indicates that it has more than 130,000 clients in 50 states, and it administers more than $11 billion in retirement plan assets. A September 2007 Crain’s story on Equity Trust said it held nearly $3 billion in assets and had 167 employees. Robert Parry, Westlake planning and economic development director, said the suburb is negotiating with a company for an incentive to locate in the property. However, he declined to identify the company because it has not filed a written application. CBRE Group Inc.’s Cleveland office listed the property for the Cleveland Clinic with an asking price of $5.5 million, according to online realty data provider CoStar. David Browning, CBRE Cleveland managing director, declined comment on the sale. He said CBRE signed a nondisclosure provision as part of its listing agreement with the Clinic. ■
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EDUCATION BALDWIN WALLACE UNIVERSITY: Aimee Bell to director of annual giving; Debbie Miller to senior advancement officer; Eric Stephens to advancement officer. NEW HORIZONS COMPUTER LEARNING CENTERS: Shawn Krunich to strategic account manager.
FINANCE FIFTH THIRD BANK, NORTHEASTERN OHIO: Jeff Ferry to vice president, commercial middle market relationship manager; Shanda Miller to vice president, business banking relationship manager. KEYBANK: Michael Moss to director and head, Higher Education and Nonprofit segment. OHIO COMMERCE BANK: Sharon
BRUNER-COX LLP: Jeffrey S. Buckshaw and Laura A. King to assurance services senior managers; Matthew L. Douglas to tax senior associate; Michele M. Monter to assurance services director; Nathan R. Remington to assurance services senior associate; Lisa A. Sturgill to assurance services associate.
FIRSTCREDIT INC.: Kelly Thrasher, Jonathan Riley, Heather Phillips and Julie Robinson to patient account managers. FIRSTCREDIT INC./REVCARE/ PAYMED SOLUTIONS: Terri Foore to client support and commercial insurance billing specialist. PEASE & ASSOCIATES INC.: Christine Sanducci to senior accountant; Carly Roberts to staff accountant. SS&G: Kevin White and Gregory Miller to associates. REVCARE/PAYMED SOLUTIONS: John Rogers to manager of self-pay services.
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BAR 25 LLC: Michael Berkowitz to assistant general manager, Bier Markt, Bar Cento, Market Garden Brewery and Nano Brew Cleveland.
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MARKET GARDEN BREWERY: Patrick Daniels to assistant brewer. NANO BREW CLEVELAND: Kevin Joeken to chef; Andy Tveekrem to brewmaster.
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INSURANCE SEIBERTKECK INSURANCE: Karl Henley to vice president.
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Cloud: Larger companies may not benefit as much from a move continued from PAGE 3
through a partnership that is scheduled to launch on Dec. 1, Mr. Rosenfelt said. BlueBridge allows customers to install their own servers in its downtown data center, but in mid-2011 the company began allowing them to run their entire computer systems on hardware owned by BlueBridge. The midsize businesses and larger companies that make up BlueBridgeâ€™s main client base have been using the new service, but mainly for commodity computing functions, such as web hosting, email, data storage and disaster recovery, said Kevin Goodman, managing director and partner at BlueBridge. Mr. Goodman said more companies will move sensitive information into the cloud as evidence of its effectiveness builds. â€œIn time, you will see those things happen,â€? he said.
Stress reliever Bryan Smith is seeing the same trend at Expedient Communications Inc., a Pittsburgh company that owns several data centers, including one in Garfield Heights. Expedient began letting local companies lease space on its computer servers about 2Â˝ years ago. Over the past 12 to 18 months, however, the popularity of that service has shot up â€œlike a hockey stick,â€? said Mr. Smith, regional vice president for Expedient. Now that offering â€” which falls into the â€œinfrastructure as a serviceâ€? category of cloud computing â€” accounts for about one-third of Expedientâ€™s revenue, in Northeast Ohio and across the nation. â€œItâ€™s by far the fastest growing
part of our business,â€? Mr. Smith said. The Moss Corp. of Independence uses Expedientâ€™s Garfield Heights data center to run its new website and many of its software programs, said Tony Catalano, data architect for Moss, which has about 25 employees. Those programs include internal databases, software used by its in-house insurance agency and a program used to buy and sell sales leads to insurance companies, he said. Moss made the move because it wants to focus on its core business, which has nothing to do with installing and managing computer equipment, Mr. Catalano said. â€œLooking back, youâ€™re so happy you donâ€™t have to deal with all the additional overhead,â€? he said. Thatâ€™s a big reason why U.S. Compliance Systems in Tallmadge has moved some of its computing functions into the cloud, said Keith Dague, president of the consulting firm, which helps businesses comply with various regulations. The eight-employee firm about a year ago began using Microsoftâ€™s Office 365 program, which is a suite of online software products that mimic some of Microsoftâ€™s most popular programs, including its Exchange email system, its SharePoint collaboration software and online versions of programs like Word and Excel. A few months ago, U.S. Compliance moved its public website onto servers owned by Rackspace, a large data center company in San Antonio. The move has helped U.S. Compliance improve the reliability of its website and its email, which is now much easier to access via mobile devices, Mr. Dague said. It
also should save the company some money and some headaches, he added. â€œItâ€™s going to cut some serious stress,â€? he said.
Think hybrid Bigger companies have been slower to make the move. For them, the transition is much more complex and they have more at stake, said Dale Phillips, chief information officer at MCPc, a Cleveland-based provider of computer hardware and IT services. They should take their time, because not everyone is better off moving to the cloud, Mr. Phillips said. A company that has a lot of employees and computer equipment in a single building might want to think twice about moving too many functions to someone elseâ€™s data center, since the companyâ€™s internal network likely is a lot faster than its Internet connection, he said. MCPc a year ago began offering a service that would allow customers to avoid that issue: The company now helps customers build server banks located on the customerâ€™s property, using equipment owned and maintained by MCPc. â€œItâ€™s not one-size-fits-all,â€? Mr.
Phillips said. â€œItâ€™s often a hybrid.â€? Still, he said, â€œeverybodyâ€™s talking about it.â€? Including larger companies. Although Forest City Enterprises Inc. still relies heavily on the servers at its headquarters in downtown Cleveland, almost all of them likely will be gone in a few years, said Bruce Garlitz, the companyâ€™s director of IT. â€œI donâ€™t think itâ€™s going to be 10 years,â€? he said. â€œI think itâ€™s going to be more the three- to five-year range.â€? The real estate giant moved its website into BlueBridgeâ€™s data center about three years ago, and in July it started using hardware that Expedient owns at a data center in Columbus to back up the systems at Forest Cityâ€™s headquarters. Mr. Garlitz said the company next year might implement Microsoftâ€™s Office 365 software suite, which falls into the â€œsoftware as a serviceâ€? category of cloud services. If Forest City moves to Office 365, employees still would keep copies of Word, Excel and other key programs on their personal computers, he said. The company likely will get rid of many of its servers once SAP comes out with a solid online version of the enterprise resource planning system
Wednesday, October 31, 2012
Employers increasingly offer to buy out pensions By MARY BETH FRANKLIN Investment News
Employers continue to move away from traditional pension plans, replacing them with 401(k) plans that shift the burden of saving for retirement and managing investment risks to employees. And theyâ€™re increasingly offering to buy out pensions with a lump-sum payment â€” a move that may not be in the best interest of retirees. While the availability of pension benefits to new, and sometimes existing, employees has been declining for decades, the latest change in employee retirement security focuses on the distribution end. Some employers, led by auto giants General Motors and Ford, have offered to buy out the monthly pension benefits of existing employees. As a result, workers are becoming more responsible for saving, investing and now distributing their retirement nest eggs. Few are equipped to do it on their own, which should create more opportunities for financial advisers ranging from those who work with employers to set up, monitor and advise plans, to those who work with individual clients to coordinate their investment strategies and design income distribution plans. New reports from global profes-
sional services firm Towers Watson and the Pension Rights Center list the latest players in the pension de-risking arena. The Towers Watson analysis found that only 30 Fortune 100 companies now offer a defined benefit pension plan to newly hired salaried workers. Thatâ€™s down from 33 companies last year and is less than half the number of firms that offered pensions in 2005. Back in 1985, 90% of Fortune 100 companies offered traditional pensions to their new employees. Now the tables are turned. Today, 70 of the countryâ€™s biggest 100 employers offer only a defined contribution plan, such as a 401(k), to new hires, compared with 67 companies at the end of last year and 32 companies in 2005. Back in 1985, a mere 10 companies offered only 401(k)-type plans to new employees. Meanwhile, a growing number of employers are asking some retirees who already are receiving pensions to choose between keeping their monthly benefit check and swapping it for a lump sum. The Pension Rights Center warns the only situations in which a lump sum should be seriously considered are those in poor health, who may not live long and who do not need to provide income for a surviving spouse, or those who have other adequate sources of secure income. â–
UP IN THE CLOUDS Information technology service providers in Northeast Ohio are seeing more desire among their clients to move to the cloud â€” another way of saying theyâ€™re storing data and using software housed on servers owned by someone else. Skoda Minottiâ€™s Technology Partners division said nearly a quarter of its clients, who tend to be small businesses, are discarding their servers, while some are creating hybrid networks. Bluebridge Networks LLC, meanwhile, is hosting a server bank built by Skoda, and more clients are using Bluebridgeâ€™s new service, which allows companies to operate their entire computing systems on Bluebridge hardware. Expedient Communications Inc., in Garfield Heights, is seeing more clients take advantage of its service allowing companies to lease space on its servers. Forest City uses for accounting and other internal purposes, Mr. Garlitz said. â€œBefore we buy anything, we see if thereâ€™s a cloud option for it,â€? he said. â–
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First and 10
he children of Israel wandered 40 years in the desert before they finally entered the Promised Land. Fans of the Cleveland Browns have waited about half that long to see competitive football return to the shores of Lake Erie — and for an owner who seems passionate about winning. In Jimmy Haslam, they definitely have the latter. Precisely when the new owner’s passion translates into a consistent playoff contender remains to be seen. However, we doubt Browns fans will be waiting to see their team play football in January anywhere near as long as the Israelites waited to cross the river Jordan. Last week, Mr. Haslam officially became the designated savior of a team that has been stuck in expansion franchise mode, even though it has been 13 years since the Browns returned to the NFL as a replacement for the team that flew the coop to Baltimore after the 1995 season. The unanimous approval by NFL owners of Mr. Haslam’s $1 billion purchase of the Browns from Randy Lerner has injected hope in a fan base that has had little reason for optimism for nearly two decades. We believe it is hope that is not placed falsely. Yes, Mr. Haslam is an astute businessman who has enjoyed success in building the Pilot Flying J chain of highway truck stops. And yes, he knows it takes giving customers a quality product to keep them coming back for more. Then again, so do people who aren’t billionaires. There is a critical piece of business acumen Mr. Haslam brings with him to this new endeavor, though, that seemingly was lost on Mr. Lerner and even on his late father, Al, the original owner of the new Browns. It is the benefits of consciously creating a personal connection with your customers. Mr. Haslam has been a physical presence for weeks around Cleveland and the Browns. He has been interacting with players, coaches, politicians, the media, and, most importantly, the fans. He talked to them at training camp. He has sat with them in the Dawg Pound. Heck, he even was there to celebrate the team’s first victory in nearly a year when the Browns beat the Bengals two Sundays ago. In only three months, the Tennessee native has put a face on the team’s ownership. And that counts for something among people who shell out thousands of dollars for personal seat licenses and pay hundreds and even thousands more for tickets. Fans want to know that the person who signs the paychecks feels as impassioned as they do about the team they support. Mr. Haslam gets that. Last Wednesday, the day after NFL owners OK’d the deal, Mr. Haslam took out full-page ads in The Plain Dealer and Akron Beacon Journal to deliver a message to Browns fans. That message: He values the commitment of the fans, and he can’t wait to get started, “not just with this football team, but also with being active participants in the communities of Cleveland and Northeast Ohio.” It is winning that ultimately will end the fans’ frustrations. In the meantime, it’s great to have an owner who’s letting fans know the love affair with their team is not a one-way street.
FROM THE PUBLISHER
The City Club alone shines in debate
questions from the reporters’ panel, as ast week brought out the best and did his opponent. the, well, not-so-best in the first The highly partisan crowd didn’t help debate between U.S. Sen. Sherrod the mood much, either, drowning out Brown and his Republican chalthe moderator and the other candidate lenger, Ohio Treasurer Josh Mandel. with cheers for their own man. Some In the “best” category was the work sneered and laughed sarcastically at done by the host — The City Club of comments made by the candidates. Cleveland — which staged an event that One of the few specific ideas attracted a sellout crowd of I gathered was from Mr. Mandel, 1,300 and many news media BRIAN who advocated closing U.S. representatives to the Renais- TUCKER military bases in Europe as a sance Hotel ballroom. Debates way to cut the defense budget. are part of the rich 100 years of The rest was more of the same The City Club, and that its that we’ve heard from each small staff did this in the same man’s campaign ads. week it hosted another big There are two more debates crowd to celebrate the club’s left before the election. Let’s 100th anniversary was nothing hope that the next two help Ohio short of remarkable. voters make a choice that’s not While I hesitate to pick out based on personality, or party, but on the worst moment, I would say that neithe pressing issues we face in Ohio and ther of the two candidates offered much America. to differentiate themselves from what **** had been part of their messaging all AND SPEAKING OF POLITICS, it appears along in this hotly contested race. Sen. the members of our congressional deleBrown, a longtime Democratic Party gation are too busy this campaign season officeholder, avoided specifics in some
to answer their mail. An enterprising group of journalism students at Kent State University sent a certified letter to each of the 20 members of Congress from Ohio. The letter asked one question: The students wanted to know what other health care systems in the world each lawmaker had studied in order to help frame the future of ours. You know — that little piece of legislation known as the Patient Protection and Affordable Care Act? You might have heard it mentioned a few times in this presidential campaign. Apparently, the students received just one thoughtful response — from Rep. Steve LaTourette, the Geauga County Republican who’s retiring. He actually included several documents he used in deciding how to vote on the law now known as Obamacare. A video produced by the students ended with a polite but impactful bit of advice: “The approval rating for Congress is at an all-time low. Maybe that rating would go up if you would respond to your mail.” Hard to argue with their logic. ■
Take redistricting away from politicians ■ Here are some good reasons to vote for Issue 2, the redistricting constitutional amendment on the ballot this fall: The League of Women Voters has studied for decades the problem of how best to form congressional and General Assembly districts. Over time, politicians have proven their inability to create fair districts. Special interests, unaccountable to voters, have more influence than voters in how districts are created. Districts formed by legislators after the 2010 Census offer voters the most egregiously gerrymandered districts ever. Consider two Cuyahoga County districts: District 9 now stretches from Toledo to Cleveland and District 11 reaches from Lake Erie deep into Akron. Passage of Issue 2 would set up a system that ends contorted, gerrymandered districts.
The League of Women Voters calls for a fair, nonpartisan plan that reflects how Ohioans vote, minimizes splits of counties and cities, creates compact districts, and maximizes the number of politically balanced districts. “Balance” means politicians have to compete for your vote. The nonpartisan independent commission mandated in Issue 2 will achieve the league’s longstanding recommendations. Politicians have had many chances to get it right; it’s high time to give the power back to voters. Vote “yes” on Issue 2. Carol Gibson Cleveland Heights
No fan of Obama ■ The election for president in November will be a very important one. Our president’s 2008 campaign championed his
ability to bring our country together, unify us, and reach across the aisle to create a better, stronger country. Just the contrary. Think about it — the Affordable Care Act (Obamacare, which will be his landmark legislation) did not reach across the aisle; not one Republican (in the House or Senate) voted for it. How can one who was so dedicated to bringing everyone together not garner one Republican vote? Let us also consider what is being promoted to unify us currently: “Wealthy not paying their fair share.” Based on 2009 data, only 1% of our taxpayers paid 38% of all taxes, and 0.1% of all taxpayers paid 18% of all taxes. These data tell me they are paying their fair share. This does not mean they cannot pay a little more, or that we should not revise our tax laws See LETTERS Page 9
OCTOBER 22 - 28, 2012
CRAIN’S CLEVELAND BUSINESS
THE BIG ISSUE What’s the first thing new Cleveland Browns owner Jimmy Haslam, whose purchase of the team became official last week, should do to improve the team?
CPA’s and Business Advisors
He has many things to do, so there’s no one thing. … As long as he has a good, comprehensive plan and he’s starting from the top all the way down to the bottom, it will work.
I think the first thing he should do is send Mike Holmgren back to Seattle. … Bringing Joe Banner in was the absolute best thing he could do.
I think he should restore credibility by taking a personal interest in the team, as he seems to be doing, and build this team slowly with good-quality, ethical players.
Restore faith. This town has put a lot of commitment and shown an unusual amount of tolerance for what has resulted in a mediocre product.
➤➤ Watch more of these responses by visiting the Multimedia section at www.CrainsCleveland.com.
LETTERS continued from PAGE 8
to deal with other inequalities, but it does tell me they are paying their fair share. All the campaign rhetoric is creating a very dangerous situation of class warfare and divisiveness, not togetherness. In the end, this will lead to social unrest (think about Greece), which would erode our country’s fabric and weaken our ability to lead the world. A president who was so determined to unify us is now determined to divide us. This is not healthy. Cast your November vote carefully. Giving someone another four years can change our entire country, and not necessarily for the better. President Obama is a nice guy, very personable, but hollow on intent. It is more than just words — it is truly all about actions. Michael Pappas Kirtland
Don’t sell ourselves short ■ I appreciated Brian Tucker’s Oct. 8 commentary, “On our list of detractors, we’re No. 1.” The only people that don’t appreciate Cleveland are the people who have never lived here and the people who have always lived here.
The only people that don’t appreciate Cleveland are the people who have never lived here and the people who have always lived here. We have many treasures in this town beyond what is commonly known, but that is not our greatest attraction. Economically, Northeast Ohio may become the natural gas capital of the world, while our abundant water, cheap energy and strategic location can make us a real boom town. And here’s some other promising information — a Chicago real estate expert familiar with Cleveland said that we are unique, maybe in the world, with so much vacant, developable land so close to the lake and business center. I got to thinking. We once had 1 million people living here, mostly in homes. Many of those homes are now vacant lots, and many have abandoned houses. I imagine that much of this property can be gobbled up just by paying the back taxes or promising to tear down the houses and keep the grass mowed.
When people start realizing what we have within the city, the attitude of even the natives might change. Ron Cohen Partner emeritus Cohen & Co.
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OCTOBER 22 - 28, 2012
Nature Stone’s name gets Turnpike: Kasich deals with backlog boost from dealer program continued from PAGE 1
By GINGER CHRIST firstname.lastname@example.org
Bedford-based Nature Stone is using a dealer network to enhance its position in the market. The stone and epoxy flooring company about 18 months ago launched an authorized dealer program, allowing approved dealers nationwide to sell the Nature Stone product. Nature Stone now has more than 80 dealers in the United States, Canada and Barbados, and it’s on pace to add 50 to 80 more each year, said Russ Masetta, owner of Nature Stone. Mr. Masetta, who founded the company in 1989, said he sees the dealership program as a cost-effective way to grow Nature Stone’s brand and business. Already, the dealership program has boosted Nature Stone’s sales, which typically are $10 million annually, by $1 million to $2 million, Mr. Masetta said. He expects another 10% in sales growth this year. “The name Nature Stone is becoming very prominent,” Mr. Masetta said. “The name is synony-
mous with the product.” Mr. Masetta turned to the dealership concept after testing franchising, a program that proved expensive to maintain. “What I saw was the franchises, while they were able to sell the product and make a living, I noticed the growth was not happening like we grew in Cleveland,” he said. With the dealership program, approved contractors participate in a $500 training course and then are able to offer the Nature Stone line in their stores without any contractual obligations or costs. In return, Nature Stone provides marketing materials to the dealerships and pays for national marketing campaigns. In addition to its dealership program, Nature Stone in April launched a do-it-yourself online store from which it sells maintenance and service products to consumers. Mr. Masetta said he would like to develop a larger network of dealers across the country before he decides to sell the online Nature Stone products via retail channels. “It’s something we will certainly consider,” he said. ■
done unless you go along with leasing out the turnpike or using its bonding capacity,’” Mr. FitzGerald told Crain’s Oct. 9, expanding on comments he’d made a few minutes earlier to County Council. Steve Faulkner, press secretary for the Ohio Department of Transportation, discounted any link between the second Inner Belt bridge and other stalled highway projects and the future of the turnpike. “We’re talking about two completely different issues,” Mr. Faulkner said in an Oct. 11 telephone interview. “Ed FitzGerald is making it a political football, and at ODOT we don’t have time for that.” However, Mr. Faulkner did acknowledge that the state has a $1.6 billion backlog of highway and bridge projects stuck in limbo as federal and state gasoline tax revenues — the key sources of money for road projects — have declined, and because tax increases are not in the cards.
Study time Almost from the day he was inaugurated in January 2011, Gov. Kasich has talked about using the turnpike — a largely paid-for toll road operated by an independent commission —
as collateral to raise as much as $1 billion in order to pay for other badly needed infrastructure needs. The governor saw how Indiana came into $3.8 billion in 2006 when it leased the Indiana Toll Road to a private operator for 75 years. Mr. Kasich’s $1 billion figure is based on a 30-year lease or bond sale. After some early pushback from critics, especially from public officials in northern Ohio, the governor in January hired KPMG Corporate Finance to evaluate options for the turnpike. Those options include doing nothing; using excess turnpike revenue to sell bonds that would be invested in roads and bridges; or signing a long-term lease with a private firm that would pay the state to operate the toll road for as long as 30 years. Initially, the consultant’s study was to be finished by July 1. The completion date then was pushed back until the end of the year. But when Gov. Kasich was in Cleveland Oct. 4 for a ribbon cutting of a $34 million link under the West Shoreway between the DetroitShoreway neighborhood and the lakefront, he told a Columbus Dispatch reporter that the study was done and would be released within the next month. He also discussed the potential he saw in unlocking the money in the turnpike. Those comments led The Dispatch to headline its story, “Kasich closer to turnpike lease.” Knowing release of the turnpike study is imminent has raised Mr. FitzGerald’s concerns.
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ODOT’s Mr. Faulkner said the department is working on several fronts to find money for highways and already has found $400 million
it will use to put projects into the pipeline over the next several years. He said the money is coming from a variety of sources, including $40 million in the savings from the mild 2011-12 winter and another from $65 million in federal money that wasn’t spent on projects elsewhere. Mr. Faulkner said another $35 million will go into the pot from cost savings on existing road projects. That money only makes a dent in the $1.6 billion construction backlog, however, and keeps alive the idea that Gov. Kasich will break into the piggy bank that is the turnpike. To start work on the second Inner Belt bridge in 2014 and give ODOT time to gather more reserves, Gov. Kasich has talked about using a form of alternative financing called design-build finance, or DBF. This process asks a contractor to design and build a road or bridge, and to finance it as well. The state would pledge to pay off the bridge contractor’s financing two to four years after the project’s completion. But Mr. FitzGerald and others are suspicious that the only way the state will be able to make good on the pledge to repay the contractor is to extract the money from the turnpike. “It’s almost like it’s a done deal” when it comes to using the turnpike as financial leverage, said Lorain County commissioner Ted Kalo. “I don’t think the process has been as forthright and as fair as it should have been.” Public officials in 13 northern Ohio counties along the turnpike have banded together to oppose any plan to privatize the road. Mr. Kalo said about 75 people came to a town hall meeting in Elyria on the subject in July and the attendees were almost unanimously against selling or leasing the turnpike. ■
Allstate Hairstyling & Barber College cleveland By KATHY AMES CARR email@example.com
arbering has roots in the D’Amico family tree. The vocation stems back generations, with Mike D’Amico’s great-grandfather and grandfather running their own Cleveland barber shops. Mr. D’Amico’s father also settled into that line of business before branching out in 1974 to buy the Allstate Hairstyling & Barber College, which Mr. D’Amico took over in 2008 when his father died. The operation that educates and trains future barbers and provides a variety of discounted services likely will change hands again once Mr. D’Amico, 67, relinquishes ownership to his son, Michael, and daughter, Lisa, both of whom are
involved in the business along with daughter-in-law, Jennifer. “That’s a long way off, longer than I want to think,” said Mr. D’Amico, who graduated in 1967 from the college, which was founded in 1961. The 10-employee operation — one of 12 barber schools in the state — each year graduates 15 to 20 students, with the 1,800-hour program taking about a year to complete. “Some students think they’re just here to learn how to cut hair,” Mr. D’Amico said. “But there’s a whole classroom component to it.” The curriculum consists of customer service training, business management skills and even learning about the body’s nervous system. “You’re learning about the body because you’re working around facial features while doing certain procedures,” Mr. D’Amico said.
Mike D’Amico (center) of Allstate Barbers is flanked by his son, Michael, and daughter, Lisa as longtime customer Michael Gordon of Parma gets a shave. “You need to know if you’re doing a facial for someone who has high blood pressure because there can be a reaction.”
Eric Wobser, executive director of Ohio City Inc., said Allstate Barber College is a neighborhood icon that enhances the community’s
character. “Allstate is a celebration of the neighborhood’s diversity, with lawyers sitting next to brewers and bartenders getting quality service from the next-generation Cleveland barber,” he said. The college touts a 100% job placement rate for its 2011 class. Some of the college’s graduates leave for larger markets, including Chicago, Puerto Rico or California, where one former student operates salons in Torrance and Hollywood. And many stylists remain in Northeast Ohio and start their own ventures. Quintana’s Barber & Dream Spa in Cleveland Heights and Dante Lucci in Rocky River and Avon represent upscale salons founded by Allstate graduates. “A lot of graduates go on to open their own shops,” Mr. D’Amico said. “We get a lot of people who’ve been misplaced in their jobs or come off the street or have no (career) direction. We get them in the school, and they find a lot of opportunities.”
In response to its call for interesting Northeast Ohio family businesses to profile, Crain’s Cleveland Business received nearly 100 suggestions. Coming from a variety of sectors, each had its own compelling history. On the following pages are just a few of those stories, each offering a different look at the dynamics of mixing family and business.
American Commodore Tuxedo
Americon Inc. lakewood By CHRISSY KADLECK firstname.lastname@example.org
By KIMBERLY BONVISSUTO email@example.com
n 1918, Nick Simoni, an Italian immigrant, came to Cleveland and used his master tailor skills to create wedding tuxedos. Word of his talents spread, and in 1928, he ventured into the tuxedo rental business. Three generations later, Mr. Simoni’s family still is in the business, running American Commodore Tuxedo out of its South Euclid headquarters. Frank Simoni, Nick’s grandson, and Ray Caporale, Frank’s cousin, bought the business from Frank’s father, also named Frank, in 1999. Mr. Simoni, president of the company, and Mr. Caporale, vice president, grew up in the business along with Frank’s sister, Toni Wick, treasurer/secretary. Mr. Simoni said he and his sister spent most days after school working at the store, which started out as American Dress Suit Rental. The name changed to American Commodore Tuxedo in the late 1960s when the elder Frank Simoni bought out another Cleveland-based tuxedo business. Today the company employs about 150, increasing to 185 during peak prom season. The company’s headquarters and warehouse are in South Euclid, with additional locations throughout Ohio and Pennsylvania. Mr. Simoni said what makes American Commodore unique is that it has a local 40,000-square-foot warehouse that
Toni Wick and Frank Simoni, the sibling tandem behind American Commodore houses 28,000 tuxedos on site. Dave Morton, general manager/ director of store operations, said the company tries to raise its profile by locating stores in prime regional malls. “We have an obligation to ... the reputation of (the Simoni) grandparent and children and grandchildren who have been serving thousands of weddings for years,” he said, adding that he started out 26 years ago as a part-time sales associate at the Summit Mall location when he was a University of Akron student. The economic downturn of the last few years did lead to the closing of a handful of stores over the past seven years, but the family says the closures actually improved the health of the company. Mr. Caporale added that the business still services roughly the same number of weddings annually, but the size of the wedding party is smaller. Mr. Caporale said trends went casual for a period, and it wasn’t uncommon for a groom to don a regular suit. But, he sees that changing as smaller weddings can turn into
more meaningful celebrations. “My father always said, ‘Did you ever see anyone that didn’t look great in a tuxedo?’” remembered Mr. Simoni, adding that American Commodore offers a color-matching service to coordinate vests and ties with bridesmaids’ dress colors. Last year, the business invested $300,000 into the South Euclid location to increase its inventory and add a prom and special occasion dress section. The boutique shop carries high-end dresses that range in price from $200 to $800. Mr. Caporale said the boutique is a prototype for a combination tuxedo-formalwear concept the company plans to launch in each of its major markets. South Euclid economic development director Michael Love said American Commodore has been an anchor business on the Mayfield Road corridor for decades. “They’ve been a great community partner, a great anchor institution for South Euclid, and they made a decision to make a longterm commitment to this city,” he said.
hen disaster recovery specialists from Americon Inc. were dispatched to the flooded offices of the Cuyahoga Land Bank this summer, they descended on the water-logged workplace like “Navy SEALs of casualty loss,” said Gus Frangos, president and general counsel of the Cuyahoga County Land Reutilization Corp. “An army of people came down here with enormous pieces of equipment — pumps, vacuums, fans — and they started removing water, moving furniture and evaluating computers. We didn’t have to shut down for even an hour,” said Mr. Frangos, noting that his
Lakeside Avenue office handles hundreds of time-sensitive transactions a month. “It’s a story untold,” he said. “I can’t tell you how profound it was that we were able to continue operating because any downtime would have spilled over to create bottlenecks not only here but with other county agencies.” With references like that it’s no wonder the 100-year-old business is thriving in its fourth generation of leadership. Headquartered in Lakewood, Americon provides disaster restoration services to residential, commercial and institutional customers across Northeast Ohio. Family-owned and operated, Americon has grown into a multimillion-dollar corporation during the last four decades with Angelo Coutris at the helm. “We are very unique. If you have a problem, a major, major problem See AMERICON Page 12
The family that makes Americon go, from left: architect Maria Coutris, CEO and president Angelo Coutris; environmental manager Alexis Trakas; vice president of sales and marketing John Coutris; and vice president of operations Anthony Trakas.
CRAIN’S CLEVELAND BUSINESS
Americon continued from PAGE 11
and you want to think out of the box, you want to call Americon,” Mr. Coutris said. The company specializes in both minor and catastrophic losses associated with fires, floods, severe weather and vandalism, as well as construction and remodeling services. “It’s very important for people to get back in their homes and back to business right away after there is an insurance claim on a structure,” he said. “We always answer our phones, 24 hours a day, and we are ready to respond within minutes of getting a call.” The company remains rooted with the same fearless work ethic of its founder, Angelo Kiminas, Mr. Coutris’ grandfather and namesake, an immigrant from Greece who started a small painting company in 1912 to serve Cleveland’s growing commercial and industrial base. Mr. Kiminas’ son-in-law, John Coutris, joined in the business in the 1940s when the company expanded into residential painting. “I used to go to work with my dad when I was a little kid and I loved the business,” said the 63-year-old CEO and president. By the time he graduated high school in 1968, the younger Mr. Coutris was running crews and helping with estimates. His father, who battled cancer, died in 1973. “My father was first generation from Greece, and he had a thick accent but even so he communicated well. Our customers loved my father. He was a great man with a great heart.” By 1980, Mr. Coutris had renamed the company Americon Inc., earned two degrees, including one in law from Ohio Northern University, and branched into a new field of assisting those who suffered structural losses to their home or business. “I started seeing a lot of my
OCTOBER 22 - 28, 2012
“It’s really a family business. We believe in nepotism here.”
– Angelo Coutris, CEO and president, Americon Inc.
customers were struggling with insurance claims,” he said. “They didn’t know how to handle them, and I started learning the business myself and I started doing it for my relatives, customers and friends.” Now, about 85% of the business is devoted to disaster recovery services and it is 99% referral based. The company has 13 employees, but in his early days of running the company, Mr. Coutris wore all the hats. “I always tried to spend a lot of time with my family,” he said. “I would pile the kids in the car because I wanted to be a good father. I have a beautiful wife, Christine, who I am still married to, 41 years. We would take the kids for rides on estimates. I used to drop them off at a mall and do estimates around the mall and then pick them up and go to dinner.” Now his two oldest children, Alexis Trakas and John Coutris, and their respective spouses, Anthony Trakas and Maria Coutris, all have assumed significant roles at the company. His youngest daughter, Nicole, lives in Minnesota and is not involved with the business. As for succession planning, Mr. Coutris expects his children (and their spouses, who he considers his children, too) to take over the business. And who knows beyond that, but there are four grandchildren, including another Angelo, that could make it a fifth-generation business. “We have great people working for us and we have a lot of families eating out of this business,” he said, adding that other than his immediate family members Americon employs two brothers, cousins and two sisters. “It’s really a family business. We believe in nepotism here.”
By JENNIFER KEIRN firstname.lastname@example.org
he yellowed receipt lists a 6-foot dining table sold for $5, four chairs for $1.68 and a rocking chair for $4. It’s dated Sept. 29, 1894, signed personally by Henry Leopold, a German immigrant and cabinetmaker who founded Leopold’s Furniture in Cleveland in 1859. “People bring these kinds of treasures in to us all the time, like old invoices they found in their parents’ attics,” said Mark Lutz, 60, current president of Leopold’s Furniture. He’s the family’s fifth generation to manage the business, alongside vice president and co-owner Chad Leopold, Mr. Lutz’s second cousin and the company’s sixth generation. Such historic documents, photographs and other relics line the walls of Leopold’s 16,000-squarefoot Brecksville-based showroom, contrasted by contemporary furniture and fabrics from such middleto high-end brands as Drexel Heritage, Bernhardt and Lexington. This store is the fifth the company has owned in its 153-year history. Historically, the furniture business has been one dominated by familyrun companies like Leopold’s, according to Ron Lewis, a retired independent furniture sales rep. But Leopold’s is one of the last
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To succeed, Mr. Lutz and Mr. Leopold have stayed true to the store’s high quality standards and market position while adapting to changing home decor tastes. They place high value on buying from family-owned vendors, and see many customers coming through their doors because of the Leopold family legacy. “They are impressed when they see that my last name is Leopold,” said Mr. Leopold, adding with a laugh: “Then some ask, ‘Hey, can I get a discount?’” Both men are committed to Leopold’s future as a family-owned company. They’re making strategic plans now for long-term succession. “We have a lot of respect for the age of this business,” Mr. Lutz said. “We’re still committed to keeping it in the family.”
brooklyn heights By JUDY STRINGER email@example.com
business name; address; city and ZIP; website; brief description of business; business phone number; business fax number; business email address; and date that business opened.
remaining in Cleveland, Mr. Lewis said, in an industry hit hard by the rise of national chains and online furniture retailers. “It’s the type of business like a family restaurant,” said Mr. Lewis, who sold furniture to Leopold’s for more than 30 years. “It’s tough to go against someone like Applebee’s. It’s long hours and hard work, but people say it gets in your blood.” Raised with fathers and grandfathers in the business, that’s the kind of connection Mr. Lutz and Mr. Leopold have had with furniture from childhood. “I was in kindergarten or first grade, my dad would sit me down in the back of the store with a hand saw and a box of nails,” said Mr. Leopold, 32, who recalled building a step stool that his own kids now use.
OCS Technologies Inc.
SMALL BUSINESS Crain’s, in its monthly Small Business section, highlights new businesses in a feature called Grand Openings. To submit a new business, send the following by email to Amy Ann Stoessel at firstname.lastname@example.org:
Leopold’s Furniture president Mark Lutz (left) and vice president Chad Leopold
he pursuit of quality on the part of manufacturers, even in the face of a global recession, has been the driving force behind OCS Technologies Inc. The third-generation business, based in Brooklyn Heights, has grown from 17 employees in 2002 to 27 today. It has been buoyed in large part by long-term service relationships to test and calibrate industrial equipment and help ensure manufacturers of everything from automobiles to sophisticated biotechnology instruments that their products are up to par. “It is a niche industry, but it is one that is very important to manufacturers,” said OSC Technologies president John Gunn. The firm was founded in 1930 as Ohio Counting Scale by Mr. Gunn’s grandfather, Napoleon Cousineau. At the time, Mr. Cousineau was a technician for a scale company, but he soon stepped up to fill a void when his company manager committed suicide in the wake of the stock market crash. “He lived in Cleveland with four kids and had to feed them. He just kept doing what he was doing, and eventually started his own company to do that,” Mr. Gunn said. Born out of Mr. Cousineau’s perseverance, Ohio Counting Scale filled the need for industrial scales and scale service among Cleveland’s bustling manufacturing base and grew steadily under the family’s
OCS president John Gunn (center) with sons, Joe (left) and Tim management over the next 70 years. Mr. Gunn assumed leadership from his father in 1989 and 10 years later, recognizing the burgeoning demand for product quality, especially among American car makers, he shifted the company’s focus from distributing scales to providing testing and calibrating services. “Over the last 20 years quality has become a much bigger issue for manufacturing companies,” he said. “Companies were saying for the first time, ‘We need to make car parts,’ for example, ‘with no more than one bad part in 1 million.’ In 2000, OCS Technologies became one of the first calibration labs to achieve ISO 17025 certification, an accreditation standard for calibration and testing providers. Soon, customers were asking for the company to expand its calibration services beyond scales to devices that measure pressure, temperature and force, among others. John King, CEO of J.A. King, a North Carolina-based company
that also distributes and services industrial measuring equipment, said OCS Technologies’ diversification was a key to its growth. Once a company can calibrate a wider range of measurement products for existing customers, it offers “a real value to customers,” he said, and could grow the bottom line by 60% to 70% without adding a significant amount of new customers. Family is still an important part of the mix for OCS Technologies. Mr. Gunn’s two sons, Tim and Joe Gunn, head up the new product sales and calibration services departments, respectively. Mr. Gunn’s first cousin, John Corrigan, heads up the OCS weighing technical services department. Mr. Gunn said that being a family business has its advantages. One perk is trust. There is no time clock; employees report their hours. Solidarity is another big bonus. “Everybody wants this to work,” he said. “Everybody wants the company to be successful.”
CRAIN’S CLEVELAND BUSINESS
OCTOBER 22 - 28, 2012
Ozanne Construction Co.
Rose Iron Works
By JENNIFER KEIRN email@example.com
By KATHY AMES CARR firstname.lastname@example.org
he environment, economy and sustainability are conductors of the culture at Ozanne Construction Co., a multidisciplinary concern that has managed the development of prominent structures throughout Ohio and beyond. The company, under Leroy Ozanne, began reshaping Cleveland’s landscape by constructing commercial and industrial buildings in the early 1950s. It subsequently expanded its geographical footprint to include the Midwest and South, and it now has a bevy of heavyweight clients in the aviation, health care, government, education, commercial and residential sectors. Leroy’s son, Dominic Ozanne, joined the firm in 1980 and now, as president and CEO, oversees the 60employee operation that is responsible for $250 million in work under its project management program. His cousin, Ken Auzenne, is the
Dominic Ozanne, the son of Ozanne Construction Co. founder Leroy Ozanne, is president and CEO. He is in front of Ozanne’s recent project, the Cuyahoga Metropolitan Housing Authority’s headquarters building.
n 1903, Martin Rose arrived in the United States with his wife, son, $200 and two chests of blacksmithing tools. He’d left behind a successful metalwork shop in Hungary for the promise of new opportunity in Cleveland, renowned then for steelmaking and metalworking. Martin Rose rebuilt his business by cold-calling Cleveland’s elite, bearing a spray of iron-forged roses that became his calling card. That piece introduced his distinctive European style of metalworking to the region and turned
names like Halle, Sherwin and Severance into devoted patrons. Three generations later, Bob Rose, Martin Rose’s grandson and now president of Rose Iron Works, still has a photograph of that spray on his business card and displays the original at the company’s Cleveland headquarters. “When my grandfather came, blacksmiths didn’t have the skills he brought from Europe,” said Mr. Rose, who joined his father, Melvin, at the company in 1971. “He had to change that culture.” For 108 years, Mr. Rose and his forebears have navigated the challenges of growing the family’s business while also preserving a collection of artwork created by Martin and Melvin Rose in collaboration with masters like Paul Fehér — who See ROSE Page 14
firm’s project executive in the Gulf Coast region. Dominic’s son, Dominic II, is a project engineer at the firm’s New Orleans office and is a student in Tulane University’s sustainable real estate development master’s program. Ozanne Construction, a member of the U.S. Green Building Council, has more than 20 employees certified in Leadership in Energy and Environmental Design. It also focuses on inclusion policies by recording minority, female and local resident participation in the on-site work force, and by actively soliciting those demographics with other project stakeholders. “I admire my dad. From the beginning, he was incorporating diversity and inclusion before they were even mentioned in the industry,” Dominic Ozanne said. Notable projects locally include the construction of both the Nordson Corp. and the Cuyahoga Metropolitan Housing Authority’s headquarters buildings, both of which were completed in 2011. “We are pleased Ozanne Construction was able to align its economic development and innovative green efforts with CMHA’s strategic goals and sustainability practices,” said Jeffrey Patterson, the housing agency’s CEO. “The company truly plays a vital role in augmenting the overall vibrancy of the community.” Projects within both the Cleveland Metropolitan School District and University Hospitals Health System represent some of the significant investments with which Ozanne is involved. As for what’s next, Mr. Ozanne said the operation is looking for new project opportunities and the ability to apply emerging construction technologies such as 3-D building modeling in the Northeast Ohio market and beyond.
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CRAIN’S CLEVELAND BUSINESS
OCTOBER 22 - 28, 2012
Ross Environmental Services Inc. elyria By DAVID PRIZINSKY firstname.lastname@example.org
Bob Rose at Rose Iron Works’ Cleveland headquarters RUGGERO FATICA
Rose continued from PAGE 13
was staff artist in the 1920s and 1930s — Viktor Schreckengost and Elsa Vick Shaw. Rose Iron Works continues collaborations with contemporary artists, architects and sculptors, such as current artist-in-residence Stephen Yusko. More than 2,000 original pieces are on display in the Rose office, while others now are part of permanent collections at the Cleveland Museum of Art and elsewhere. “We’ve had to re-imagine what we do many times in the 100-plus years we’ve been around,” Mr. Rose said.
Rose Iron Works survived the economic blow of the Great Depression, two world wars — during which metal could only be fabricated for the war effort — and a proliferation of overseas metalwork that now dominates mainstream retail. Their success through tough times can be attributed in part to the creation of Rose Metal Industries in the 1970s, which diversified the company’s business model into industrial metal fabrication. “What distinguishes (the company) is that … they preserve both the artistic side and the business manufacturing side,” said Mike Benz, retired United Way president
and CEO, and the first executive director of COSE, where Melvin and Bob Rose were on the founding board in 1973. “That’s what makes it unique and why it has lasted so long.” After the death of his father earlier this year, Mr. Rose, 66, is the only full-time family member involved in this 40-employee business, and he is focused now on creating a succession plan that will sustain the business and artistic legacy. “There’s satisfaction in weathering storms and building staff, who are just amazing people,” Mr. Rose said. “I want to see it continue, but it has to continue as a business. My goal is to find sustainability for the work and the team.”
oss Environmental Services Inc. in Elyria is considered by its owners to be a “family heirloom.” But, the Cromling family owners take nothing for granted in pursuing a strategy that includes growing the company, keeping it in the family and preparing the fourth generation to take over as owners and managers. For example, chairman Maureen Cromling, whose parents started the firm in 1949, said a tour of the firm’s facilities — which will include her six grandchildren — is being planned. “We want them to understand the company and to give them a chance to be involved,” she said. “We want them to know that owning and (the demands of) managing are different.” “We plan as a family, and we keep the next generation in mind,” she said. Maureen (Ross) Cromling and her husband, William E. Cromling II, have two sons, William E. Cromling III and Jon Cromling, who are officials in the firm’s two business units. Bill is the president of Ross Transportation Services, and Jon is vice president of strategic business and land development for Ross Incineration Services. Mr. Cromling II is retired and sits on the board’s
executive committee. For Mrs. Cromling, it is important that family members avoid a sense of entitlement and instead concentrate on effective management. “They have to earn their way.” Mr. Cromling III put it this way: “You have to demonstrate that you are here to work and accomplish the company’s goals. You don’t want anyone to think you are here just because you are a member of the family.” Mrs. Cromling said the emphasis also is on building an effective work force when it comes to those outside the family. Ross has 220 employees. “We have always been impressed by the effort Ross puts into showing they care for their employees and they try to maintain a culture that celebrates and rewards performance,” said Marty Mordarski, director of member services for the Employers Resource Council. Mrs. Cromling said her father, Robert C. Ross, was a farmer and truck driver who started a business hauling industrial waste shortly after World War II. A man with no formal education, but with a knack for engineering, Mr. Ross designed a controlled combustion unit to burn liquid waste. The first unit was installed by the company in 1958 in Eaton Township in Lorain County. The company’s waste disposal and transportation businesses serve customers across the country, although customers in the Northeast and Gulf Coast provide much of the business. Sales are an estimated $45 million annually and are projected to increase 25% in the next five years.
Jon Cromling (from left), Maureen Cromling, Bill Cromling II and Bill Cromling III
Phil Vedda and Sons Printing lakewood By KIMBERLY BONVISSUTO email@example.com
print shop course at Lakewood High School in the 1950s planted the seed for a family business that now boasts three generations. Phil Vedda and Sons Printing has been family-owned since 1956. The company’s namesake took to heart a high school assignment to print a business card for his grandfather, who owned a stand at the East Side Market. After graduation, Mr. Vedda bought a $4,000 piece of equipment to start his print shop business on Detroit Avenue. While Mr. Vedda is semi-retired, he still brings lunch for everyone every day — Mondays and Fridays are spaghetti and meatballs — and his wife, Grace, still takes care of the books. In 2007, the business moved to Berea Road in Lakewood to expand
its commercial printing and mailing service business. Services include green printing, pre- and post-press, digital printing, offset printing and bindery, along with mailing services. Today, brothers Joe and Jim Vedda — both vice presidents — have picked up where their parents left off. Joe Vedda said his parents weren’t the vacationing type, so the Vedda clan spent summers at the print shop. After school, they walked down the street and around the corner from St. Edward High School to help out around the business. While Jim Vedda dove into the production end of the business, Joe Vedda went to Cleveland State University to earn an associate’s degree in business. “I was never the type to get my hands dirty and run the equipment. I was going to be an accountant to run the business side of things,” said Joe Vedda, adding that it was never really a question what they
CRAINâ€™S CLEVELAND BUSINESS
OCTOBER 22 - 28, 2012
White Dove Mattress Ltd. newburgh heights By SHARON SCHNALL firstname.lastname@example.org
college project guided Bruce Goodmanâ€™s return to his familyâ€™s business. From 1983 to 1993, Mr. Goodman, now 52 and president of White Dove Mattress Ltd., a fourth-generation operation, worked for the family business. Back then, however, Mr. Goodman was managing another of the familyâ€™s enterprises â€” five J.L. Goodman Furniture Co. stores and three Ethan Allen furniture stores â€” not the Newburgh Heights bedding products company that he now leads. â€œI made a decision, after 10 years in the business, that furniture retailing was not for me; I didnâ€™t enjoy this to do this the rest of my working life,â€? Mr. Goodman said. Due to that decision, he said, in 1993 the J.L. Goodman furniture stores were closed; the Ethan Allen stores were sold. Mr. Goodman subsequently attended school, starting in 1994, and earned an executive MBA from Case Western Reserve University in 1996. That time, he said, energized him. Returning to the family business happened as Mr. Goodman researched the familyâ€™s bedding products company for a school project. Founded in 1922, H. Goodman Inc. was a business that included mattress and box spring manufacturing. Meanwhile, Mr. Goodman also was pursuing company ownership elsewhere through networking channels. Ultimately that collegedriven analysis of H. Goodman Inc., now known as White Dove Mattress, helped him identify the â€œperfect opportunity.â€? He approached his father. â€œI told him I only had two preconditions: One is I make all the decisions; and two, I own the majority of the company. He ended up saying, â€˜Yes.â€™ The time was right for him; the time was right for me.â€? Henry Goodman, 80, said he supported both his sonâ€™s 1993 departure and 1996 return.
would do when they grew up. â€œWe were doomed from birth.â€? That family tradition is carrying on with Joe and Jim Veddaâ€™s sons, both named Phil. Joe Vedda explained itâ€™s an old Sicilian tradition to name the first-born son after the childâ€™s grandfather. Joeâ€™s son, Phil, is the executive sales manager and involved in a variety of networking groups to grow the business. Jimâ€™s son, Phil, followed in his fatherâ€™s footsteps and runs the bindery and mailing department. Each son is being groomed to take over his fatherâ€™s role in the company. â€œI see the two Phils taking it a step further than us one day,â€? said Joe Vedda, adding that they agreed to limit family involvement in the business to the two sons. â€œWe thought weâ€™d cut it off there. It seemed like an even thing to each have one son or daughter in the family in the business.â€? Since that first $4,000 press, the Vedda brothers have grown the business into a 20,000-square-foot warehouse with 26 employees. With the opening of the new facility in 2007, also came the purchase of a
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White Dove Mattressâ€™ Henry and Bruce Goodman â€œTransitions donâ€™t work if the older generation doesnâ€™t let the younger generation take over. I said to Bruce, â€˜Tomorrow, youâ€™re the driver and Iâ€™m the passenger.â€™â€? Company net sales have increased eight-fold since 1996, Bruce said. Several factors contributed to the 100-employee companyâ€™s growth including: becoming a national player through their own SleepLogic brand; securing licensing agreements with other vendors such as Comfort Solutions; and serving larger regional and national accounts. This yearâ€™s sales are expected to exceed $20 million; year-to-date net sales reflect a 30% increase from last year, he said. The companyâ€™s longevity â€œis an accomplishment to be applauded,â€? said Karin Mahoney, director of communications for the International Sleep Products Association of Alexandria, Va. Mattress purchases are deferrable, she added. â€œItâ€™s a competitive market,â€? she said. â€œEverybody tries to come out with the latest and greatest to try to please people; to stay afloat takes a lot of work.â€? â€œThe world has changed,â€? Mr. Goodman said, from when his father conducted 80% of sales volume within a 40-mile radius from the companyâ€™s factory headquarters. By comparison, current sales are generated primarily within a 300-mile radius from headquarters;
new $2 million press. Less than two years ago, Vedda and Sons added another press and upgraded its mailing equipment. The new space was projected to carry the business for 10 to 15 years, but there already are plans to expand the building another 20,000 square feet within two years. The Beck Center for the Arts in Lakewood has a long-standing relationship with Vedda and Sons Printing, using the printer for the majority of its printing, including catalogs and postcard mailings. â€œThe quality of their work is outstanding,â€? said Kathleen Caffrey, director of marketing and external affairs. â€œThatâ€™s why weâ€™ve continued the relationship. They are one of our longest-standing vendors.â€? Joe Vedda said running a family business means knowing that everyone has the same goals. â€œWe all came from the same blood. We all think the same,â€? he said. â€œOur thing is we donâ€™t have anything else to do except succeed. Our sons are coming up in the company, so there is no option to fail.â€?
additionally all 48 mainland states are served. Someday, Bruce will address succession. Whether his children enter the business remains an unknown; he prefers they explore their own career paths. â€œThe most important starting point is that individuals wanting to come into the business have to be committed,â€? he said. â€œIt canâ€™t be because they think they should or others want them to. They should be comfortable in that decision.â€?
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CRAINâ€™S CLEVELAND BUSINESS
OCTOBER 22 - 28, 2012
LARGEST ACCOUNTING FIRMS RANKED BY NUMBER OF LOCAL CPAS Number of local CPAs Name Address Rank Phone/Website
Number of local degreed professionals 8/31/2012
Full-time permanent local employees 8/31/2012
Practice personnel engaged in Auditaccounting
Top local executive Title
Ernst & Young LLP 925 Euclid Ave., Suite 1300, Cleveland 44115 (216) 861-5000/www.ey.com
C. Lee Thomas, managing partner, Cleveland; Edward T. Eliopoulos, managing partner, Akron
SS&G Inc. 32125 Solon Road, Cleveland 44139 (440) 248-8787/www.ssandg.com
Gary S. Shamis managing director
PwC LLP 200 Public Square, 18th floor, Cleveland 44114 (216) 875-3000/www.pwc.com
Robert (Bob) Saada, Lake Erie Market and Cleveland office managing partner
Deloitte 127 Public Square, Suite 3300, Cleveland 44114 (216) 589-1300/www.deloitte.com
Craig Donnan managing partner, Deloitte LLP
Cohen & Co. 1350 Euclid Ave., Suite 800, Cleveland 44115 (216) 579-1040/www.cohencpa.com
Randall S. Myeroff president, CEO
KPMG LLP 1375 E. Ninth St., Suite 2600, Cleveland 44114 (216) 696-9100/www.us.kpmg.com
John S. MacIntosh managing partner
Meaden & Moore LLP 1100 Superior Ave., Suite 1100, Cleveland 44114 (216) 241-3272/www.meadenmoore.com
James P. Carulas CEO
Skoda Minotti 6685 Beta Drive, Mayfield Village 44143 (440) 449-6800/www.skodaminotti.com
Gregory J. Skoda chairman
Grant Thornton LLP 1228 Euclid Ave., Suite 800, Cleveland 44115 (216) 771-1400/www.grantthornton.com
Daniel S. Zittnan managing partner
Maloney + Novotny LLC 1111 Superior Ave., seventh floor, Cleveland 44114 (216) 363-0100/www.maloneynovotny.com
Matthew J. Maloney managing shareholder
McGladrey 1001 Lakeside Ave., Suite 1400, Cleveland 44114 (216) 523-1900/www.mcgladrey.com
Donna Sciarappa managing director
Bruner-Cox LLP 388 S. Main St., Suite 403, Akron 44311 (330) 376-0100/www.brunercox.com
Steven O. Pittman managing partner
CBiz Inc. 6050 Oak Tree Blvd. S., Suite 500, Cleveland 44131 (216) 447-9000/www.cbiz.com
Steven L. Gerard chairman, CEO
Barnes Wendling CPAs Inc. 1350 Euclid Ave., Suite 1400, Cleveland 44115 (216) 566-9000/www.barneswendling.com
Hill Barth & King LLC 7680 Market St., Boardman 44512 (330) 758-8613/www.hbkcpa.com
Jeffrey D. Neuman president and director Phillip L. Wilson COO
YOUR BUSINESS IS OUR BUSINESS Â˜Â—Â?ÂŠÂŒÂ?ČąÂŠÄ´Â‘ÂŽÂ ČąÂŠÂ•Â˜Â—ÂŽÂ˘ČąĆ¸ČąÂ–Â–ÂŠÂ•Â˜Â—ÂŽÂ˘Č“Â–ÂŠÂ•Â˜Â—ÂŽÂ˘Â—Â˜Â&#x;Â˜Â?Â—Â˘ÇŻÂŒÂ˜Â–ČąĆ¸ČąĹ˜Ĺ—ĹœÇŻĹ™ĹœĹ™ÇŻĹ–Ĺ—Ĺ–Ĺ–
Bober, Markey, Fedorovich & Co. 3421 Ridgewood Road, Suite 300, Akron 44333 (330) 762-9785/www.bobermarkey.com
Richard C. Fedorovich CEO, managing partner
Howard, Wershbale & Co. 23240 Chagrin Blvd., Cleveland 44122 (216) 831-1200/www.hwco.com
Stephen E. Stanisa president, CEO
Apple Growth Partners 1540 W. Market St., Akron 44313 (330) 867-7350/www.applegrowth.com
David J. Gaino chairman
Ciuni & Panichi Inc. 25201 Chagrin Blvd., Suite 200, Cleveland 44122 (216) 831-7171/www.cp-advisors.com
Brian D. Marita managing partner
BCG & Co. 1735 Merriman Road, Akron 44313 (330) 864-6661/www.bcgcompany.com
David A. Brockman president, managing partner
Walthall Drake & Wallace LLP 6300 Rockside Road, Suite 100, Cleveland 44131 (216) 573-2330/www.walthall.com
Zinner & Co. LLP 29125 Chagrin Blvd., Pepper Pike 44122 (216) 831-0733/www.zinnerco.com
Robin L. Baum managing partner
Pease & Associates Inc. 1422 Euclid Ave., Suite 400, Cleveland 44115 (216) 348-9600/www.peasecpa.com
Joseph V. Pease Jr. president
Hobe & Lucas CPAs Inc. 4807 Rockside Road, Suite 510, Independence 44131 (216) 524-8900/www.hobe.com
Jerome J. Lucas president, COO
Plante Moran PLLC 1111 Superior Ave., Suite 1250, Cleveland 44114 (216) 523-1010/www.plantemoran.com
Daniel P. Hursh office managing partner
Four-Fifteen Group 4100 Holiday St., Canton 44718 (330) 492-0094/www.415group.com
Frank J. Monaco managing partner
Corrigan Krause 2055 Crocker Road, Suite 300, Westlake 44145 (440) 471-0800/www.corrigankrause.com
Rea & Associates Inc. 7325 Production Drive, Suite C, Mentor 44060 (440) 266-0077/www.reacpa.com
Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate.
Richard T. Lash chairman
Thomas L. Harrison managing director Ryan Dumermuth Mentor office manager
RESEARCHED BY Deborah W. Hillyer
OCTOBER 22 - 28, 2012
Automation: Worker shortage could worsen continued from PAGE 3
offsetting the skilled worker shortage. “There’s a need to find a way to increase productivity and overcome the challenge of not having enough people. Resounding out of manufacturing right now is the call that they don’t have people with the right capabilities,” said Deanna Postlethwaite, marketing manager of Lincoln Electric Co.’s automation division. John Stropki, chairman and CEO of Lincoln Electric, said a company can buy a $100,000 machine that can do the work of two to three people. And that’s why Lincoln Electric, which sells automation in the form of welding equipment, is highly automated itself. “If you’ve been to Lincoln and you’ve walked the floor, just the change of the face of the manufacturing floor from 10 to 20 years ago is amazing,” Ms. Postlethwaite said. Lincoln Electric views its automation division as one of its major areas of growth moving forward, thanks to the large demand from companies looking for ways to do more with less. “Automation is a clear opportunity when you don’t have enough people,” Ms. Postlethwaite said.
Astro adjusts Astro Manufacturing and Design is in the process of spending $1.5 million on new fabricating machines for its fabricating division to reduce its reliance on skilled workers. “One of the compelling reasons to buy the new fabricating equipment was to be in a position to use lesser skilled fabricators,” said Rich Peterson, a community and public relations representative and former vice president of business development for Astro, an Eastlake custom machining and fabricating shop. The new machines are more automated and will allow Astro to employ workers with less specialized skill sets, rather than higher-paid
journeymen fabricators, to run each. “We, like everyone else in our industry, have difficulty in finding skilled workers,” Mr. Peterson said. “Finding skilled manufacturing workers is a huge challenge and is expected to get worse ... as the baby boomers leave the work force.” Astro is looking for a plant manager, manufacturing engineers and skilled machinists. Those needs are among the reasons it participates in the Alliance for Working Together, a Lake County manufacturing coalition dedicated to promoting manufacturing careers.
From bad to worse The manufacturing sector could face a severe worker shortage by the end of the decade, according to Boston Consulting Group, a global management consulting firm. Boston Consulting estimates the skilled worker shortage currently is in the rangeof 80,000 to 100,000 workers, which is less than 1% of the country’s manufacturing work force and less than 8% of its skilled manufacturing workers. Yet, based on U.S. Bureau of Labor Statistics data, the global consulting group estimates the skilled worker shortage could worsen to 875,000 workers by 2020. While automation can help companies offset a short supply of workers, it doesn’t eliminate the need for skilled laborers, according to Michael Marlowe, managing director and director of government relations for the Automation Federation, a manufacturing and process automation association based in North Carolina. If anything, many automated processes require workers to have even more training to run the complex machines behind them. “For the automation processes to work from the operational and safety aspects, you need the men and women skilled in the automation profession to make it happen,” Mr. Marlowe said. ■
CRAIN’S CLEVELAND BUSINESS
Recaps: Capital markets favorable continued from PAGE 1
corporate securities group at law firm Dechert LLP of New York. “I’m getting lots of term sheets.” None of the companies provided details saying why they wanted to take on debt to pay big dividends. However, the sources who spoke with Crain’s said most companies engaging in so-called dividend recapitalizations are doing so for the same reasons: Credit is cheap, taxes might go up and the owners believe the companies are strong enough to handle more debt. The idea of a business taking on debt without reinvesting the money is controversial. For instance, some of Mitt Romney’s opponents have bashed him for doing so during his time at private equity firm Bain Capital. The sources who spoke with Crain’s, however, say most companies doing dividend recaps these days are healthy enough to handle them. “You don’t see sick companies doing this,” said Gregory Gale, a partner at law firm Squire Sanders in Cleveland. “You see healthy companies doing this.”
Eye on the election Hyland, AssuraMed, TransDigm and Aleris are profitable and should be able to make payments on the new debt, according to credit ratings agencies Moody’s and Standard & Poor’s. However, S&P did lower AssuraMed’s corporate rating by one level, as did Moody’s with Aleris. According to Moody’s and S&P: ■ Hyland plans to raise $395 million to refinance debt and pay a $94 million dividend to shareholders. ■ AssuraMed — which formerly was known as Edgepark Medical and in 2010 was sold for nearly $900 million to private equity firms Clay-
ton, Dubilier & Rice and Goldman Sachs Capital Partners — plans to raise $660 million in new debt. About $400 million will be used to refinance existing debt, but the company plans to use the rest to issue a dividend. ■ TransDigm announced last week that the company had raised $550 million through the sale of senior subordinated notes and had secured an incremental term loan of $150 million. The publicly traded company plans to use most of the money to pay a special dividend of $12.85 a share. The company as of June 30 had roughly 53.9 million shares outstanding, so by that measure, TransDigm would pay out roughly $692 million with the special dividend. TransDigm conducted a dividend recap three years ago. Hyland did one two years ago, as did Aleris, about eight months after it emerged from Chapter 11 bankruptcy. AssuraMed, the only company that provided comments for this story, said in a statement that it wanted to do the deal because of “the favorability of the capital markets and the relatively high cost of our existing debt.” That’s probably the main reason why companies are pursuing dividend recaps these days, said Mr. Gale, of Squire Sanders. Many companies also are worried that the federal government — which is expected to engage in a big budget debate after the election — could let the Bush-era tax cuts expire, which would cause tax rates on investment income to rise. The chances of that happening are higher if President Barack Obama is re-elected, said Mr. Alicandri, of Dechert. “Everybody’s concerned with
who’s going to be the next president and how much the tax rates are going to be,” he said.
In control Most companies doing dividend recaps have been fairly conservative, Mr. Alicandri said. Few businesses engaging in such transactions end up with debt levels that are seven or eight times greater than their annual earnings, which is a particularly high ratio, he said. After the deals are finalized, the four local companies would have debt-toearnings ratios that are at least slightly lower than that range. “I’m not seeing things that are out of control,” Mr. Alicandri said. Most companies that do dividend recaps are able to make their debt payments because they had to be healthy to get the loans in the first place, Mr. Gale said. However, they might have “a little less flexibility” if sales drop, he added. Companies that pursue dividend recaps are less likely to make acquisitions or other large investments, said Matthew Bristow, managing director at ClearRidge Capital, an investment bank in Tulsa, Okla. However, TransDigm’s 2009 recap didn’t slow it down too much: The company two years ago paid $1.27 billion for McKechnie Aerospace Holdings Inc., and it has made other significant acquisitions since then. Dividend recaps do hurt a company’s balance sheet, but Mr. Bristow said shareholders who push for them often have confidence in the business: They think the company can handle the new debt and will be worth more in a few years. Otherwise, they’d sell it now. “It’s a positive reflection on the investment,” he said. ■
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OCTOBER 22 - 28, 2012
Drop: Dip in high school graduates leads schools to adults continued from PAGE 1
Kent State universities showing gains but the University of Akron and Youngstown State University seeing declines. Community college officials say the downward pressure on enrollment was expected once the recession’s grip started to loosen and fewer people sought to enhance their job skills and employment prospects by heading back to the classroom. Thus, the declines won’t force drastic staff reductions or budget cuts. One reason is that much of the academic muscle at community colleges is in the form of adjunct, or part-time, faculty hired on a class-by-class basis. “This is part of a cycle we’re all going through,” said Tracy Green, vice president for strategic and institutional development at Lorain County Community College. “We have weathered this before, but it gives us an opportunity to examine what types of programs we need to offer students so we can stay relevant.”
Don’t leave — please! Community college officials say
their students — often parents carrying full-time jobs and other responsibilities — are harder to retain than those at traditional four-year institutions, and the data support those claims. The first- to second-year retention rate for the state’s community colleges, for example, hovers at a tepid 52%, according to the most recent data compiled by the Ohio Board of Regents. The retention rate for Ohio’s selective public universities stands at 84%, while the retention rate at those with open admission policies averages 65%. “Community college students have so many priorities,” Tri-C’s Ms. Miller said. “If they don’t have assistance with jobs or children or whatever else they have going on, that in many cases prevents them from coming back to us.” To plug those holes in which they lose students, community colleges are taking a more activist approach at shepherding the most at-risk students toward degree completion. Tri-C, for instance, last year started offering practice tests for the college’s placement exams. The idea,
according to Ms. Miller, is to place more students into college-level courses rather than remedial coursework. “It saves them dollars in the long run and shortens their time to completion,” Ms. Miller said. “All of those things affect whether someone stays in school.” Lakeland Community College, which saw a 3.16% enrollment decline this fall, now requires students testing into remedial English to complete that coursework in their first semester. The hope is that by fine-tuning those language skills early on, students will use that foundation in other coursework. Also, Lakeland is offering new student orientation programs that focus on honing students’ study and time management skills. “We’re really focusing on the incoming students, making sure first semester get off on strong footing,” said William Kraus, Lakeland’s associate provost for enrollment management.
Give us the adults Ms. Green at Lorain County
HeartLab: Company eyes bigger footprint continued from PAGE 3
“We’re receiving hundreds of boxes a day from … physicians across the U.S.,” Mr. Orville said. In addition to Mutual Capital Partners, which invests in companies that already have a steady revenue stream and appear ready to expand, Cleveland HeartLab received capital from most of its existing
Contact: Phone: Fax: E-mail:
investors as part of this latest investment. Included in that mix are Excel Medical Ventures and HealthCare Ventures LLC, two Boston venture capital firms that last year led an $18.4 million investment in Cleveland HeartLab. The Cleveland Clinic also participated. The company has raised about $38 million since it was founded in
Toni Coleman (216) 522-1383 (216) 694-4264 email@example.com
November 2009. Cleveland HeartLab began to expand its sales and marketing efforts in August, when it hired three new executives, including Stephen A. Massaro, vice president of sales. Most of the samples the company tests come from the South and the mid-Atlantic regions of the United
Community College suggested that community colleges don’t exist solely to award degrees but also to grant certifications and other credentials. Consequently, her school is exploring new programs related to the shale boom, which could bring more students to its campus. “If a student has a degree, their education is not necessarily over,” Ms. Green said. “Their return to our campus might be for a specific skill set, so we have to keep our fingers on the pulse of what those might be.” Meanwhile, the number of students at Kent State University’s seven regional campuses, which serve as the institution’s in-house community college network of sorts, has trended downward over the last two years. Systemwide enrollment, however, has been buoyed by the explosive growth of the university’s main campus in Kent. This fall, Kent State’s only regional campus to see an enrollment increase was its Geauga campus in Twinsburg — also the university’s only location falling outside the Marcellus shale area, where oil and gas exploration has boomed using
hydraulic fracturing, or fracking. As such, a portion of the enrollment declines at the six other regional campuses could be chalked up to an increase in available energy-related jobs, said Wanda Thomas, the university’s associate provost for system integration and dean of the regional college. To cope with those declines and an expected dip in high school graduates as the children of baby boomers age beyond their teen years, Dr. Thomas said Kent State is ramping up its efforts at recruiting non-traditional college students — adults. At present, about 60% of the student body at the university’s seven regional campuses is comprised of students enrolling right out of high school, while the rest is made up of what Thomas called “adult learners.” To increase that adult learner headcount, Dr. Thomas said Kent State has made a big push to market its bachelor of technical and applied studies degree — a broad academic offering designed for someone who at one time or another earned some college credit. ■
States, where heart attacks and strokes are more common, Mr. Orville said. Now the company wants to increase sales in other parts of the country. Plus, Cleveland HeartLab plans to do more marketing through events and groups focused on health and wellness, he said. Cleveland HeartLab also plans to use the money to develop and license more proprietary tests, Mr. Orville said. The company made its desire to expand its product lineup clear in August: The other two
executives it hired that month were Deborah H. Sun, vice president of laboratory operations, and Cory Bystrom, director of research and development. Cleveland HeartLab is targeting a big market, and it has a great management team — and a lot of other assets, said Wayne Wallace, general partner at Mutual Capital Partners. “They have a great brand, they have a great platform, they have a great pipeline and lots of happy customers,” Mr. Wallace said. ■
City of Lorain, OH will have a Request for Proposals (RFP) available for industrial/commercial real estate brokerage services for a city-owned commercial/industrial park, which is shovel ready with fully developed infrastructure. The complete RFP package will be available at http://www.cityoflorain.org/openbids/ The deadline for responses is 12 Noon on Wednesday November 14, 2012. Questions may be directed to Dave Gulden or Howard Goldberg at 440-204-2020
124 acres and house at 17576 Philips Road Thompson Township, Geauga County, 1/2 tillable, 1/2 wooded, Parcel No. 30-054500, by Trustee, with or without mineral rights, or mineral rights only. Invitation for offers deadline 11/07/12. For information call 440 285 2247 or email firstname.lastname@example.org.
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The CITY OF BEREA is seeking proposals from qualified Developers for the purpose of developing a 2.33 acre site, known as Front Street & Lou Groza Boulevard. The intent of this Request for Proposals is to retain an experienced Developer to redevelop the existing area with potential land use suitable for development at the site. For further information and/or submission of the Statement of Proposals please contact: Matthew Madzy, Director at email@example.com and/or visit http://cityofberea.org/en-US/RFPFRONTGROZA.aspx. Phone calls will not be accepted.
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OCTOBER 22 - 28, 2012
CRAIN’S CLEVELAND BUSINESS
THEWEEK OCTOBER 15 - 21 Jimmy loves the Cleveland Browns: Now Jimmy Haslam can get down to charting the course for the immediate and long-term futures of the Cleveland Browns. The chairman and former CEO of Pilot Flying J — the behemoth Knoxville, Tenn.-based operator of truck stops his dad founded — officially was approved as the new owner of the Browns at a meeting of the Haslam league’s owners in Chicago. He needed only 24 of 32 owners’ votes, and was approved unanimously. See editorial, Page 8.
A full Spectrum: Medical equipment maker Steris Corp. of Mentor acquired two companies — including one based in Northeast Ohio — for a total of $110 million. Both Spectrum Surgical Instruments Corp. of Stow and Total Repair Express LLC of Hillsborough, N.J., provide surgical instrument repair services and instrument care products. The two companies are expected to generate a combined $72 million in revenue during 2012, producing net income of about $7 million, or $11 million excluding one-time costs.
Back at it: Ben Venue Laboratories said it “resumed production on a limited number of manufacturing lines” at its complex in Bedford. The move represents the end of a year-long shutdown. Ben Venue, which has 1,400 employees, voluntarily stopped producing drugs last fall so it could address quality control issues identified by the U.S. Food & Drug Administration and international regulators. The company has spent about $300 million to upgrade its facilities and change its processes since May 2011, when the FDA released its first inspection report.
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
The skinny on Hyland’s hefty debt plans ■ Hyland Software Inc. plans to take on debt to pay a $94 million dividend to its shareholders, but the Westlake company apparently can handle it. Northeast Ohio’s biggest software company had sales of $234 million in the 12 months that ended June 30, according to credit ratings agency Standard & Poor’s, which released a document evaluating the deal (read more about it on Page One). That figure is up 25% from $186 million in the like period a year earlier, the document stated. The S&P document also provides a rough glimpse of the privately held company’s earnings. The content management software provider plans to secure $395 million in debt, with about $300 million going to refinance existing debt. Once the deal is done, the company’s debt will be five times higher than its annual earnings before interest, taxes, depreciation and amortization, or EBITDA. As long as Hyland Software is refinancing all of its debt, that puts its EBITDA at about $79 million. Hyland shouldn’t have a problem making payments, given its steady cash flow, S&P said. But the agency noted that it expects the company to put a higher priority on making acquisitions and other investments in the near future, as opposed to paying down debt. It also said Hyland needs to demonstrate “a more consistent financial policy.” The company, a majority of which is
Sea change: Parker Hannifin Corp. agreed to acquire Sea Recovery, a maker of reverse osmosis systems for sea water desalination, from Danfoss A/S of Denmark. Parker did not say what it will pay for Sea Recovery, which is based in Compton, Calif. Sea Recovery is a 70-employee business that had sales of $26 million in the 12 months that ended Aug. 31. Read all about it: Case Western Reserve University received another significant gift for its Kelvin Smith Library. Marian K. Freedman and her family added a gift of $500,000 to the Samuel B. and Marian K. Freedman Library Endowment fund that is conditional on matching gifts from other university contributors. The university said matching funds have been secured, bringing the total endowment to $1 million. Earlier this month, the university secured a $5 million gift from an anonymous donor.
This and that: The National Association of Seed and Venture Funds, which has close ties to Lorain County Community College, is merging with a nonprofit in the Columbus area, the Westerville-based State Science & Technology Institute. … OurPet’s Co. received a U.S. patent for the Durapet technology related to “non-skid material permanently bonded to the base of metal pet bowls.” The pet supply company based in Fairport Harbor said utility patents also are pending in Canada and other countries.
Think of it as weight control ■ And now for a weighty matter in the weight loss business. Akron-based Physicians Weight Loss Centers of America Inc. has sued a similarly named company in New York for trademark infringement. Filed Oct. 18, the lawsuit asks the court to enjoin Physicians Weight Loss Clinic of Huntington Village, N.Y., from infringing the Akron company’s federally registered trademark (“Physicians Weight Loss Centers”) and to award it profits derived from the defendant’s use of the mark. The suit also asks that www.physicians weightlossclinic.com — the website domain name used by the New York company — be assigned to the plaintiff. Both companies offer weight reduction and control services, according to the lawsuit, and the defendant’s use of the trademark “is likely to cause confusion … and to mislead the public into believing that defendant’s services are approved, sponsored or authorized by plaintiff.” Physicians Weight
If you have to ask how much it costs …
THE COMPANY: The Garland Co., Cleveland THE PRODUCT: Quick-Slope modified acrylic cementitious material Garland, a maker of roofing and building maintenance products for the commercial, industrial and institutional markets, describes Quick-Slope as “an easy-to-apply material that redirects or disperses harmful standing water on low-slope modified bitumen roofing.” The Quick-Slope material “is designed to reduce and redirect water toward existing scuppers or drains,” according to Garland. “It can also be used to provide increased localized slope.” The company says Quick-Slope “is a costeffective alternative to adding drains or crickets, and provides a tenacious bond to new or existing smooth or mineral roof systems.” It also can be added to pond areas “to help water travel in multiple directions, thereby speeding up evaporation.” Once a surface is cleaned and prepared, Garland says, “the product can be troweled out in minutes, without removal of existing roofing material.” Garland product manager Rick Catley says Quick-Slope “is low-odor and non-volatile, so it can be applied without any disruption to the workplace, and with minimal waste.” For information, visit www.GarlandCo.com.
Loss Centers alleges its Akron office already has received complaints due to the other company’s infringement. John D. Gugliotta, a patent attorney in Richfield, sees hurdles for the plaintiff. For one, the names are different, and the argument can be made the New York company’s name is merely descriptive of what it does. “I don’t think it’s a nuisance suit, but I also don’t think it’s a slam dunk,” said Mr. Gugliotta, who is not involved in the case. “It’s going to come down to whether there’s a likelihood of confusion between the two.” Calls placed to one of the Akron company’s attorneys and to the New York company’s office were not returned as of Crain’s deadline last Friday, Oct. 19. — Michelle Park
All hail this tale: Dale’s Pale Ale is for sale here ■ New data from the Washington, D.C.based Beer Institute show Ohio ranked No. 7 in 2011 in beer shipments. However, a growing Colorado brewer is banking on Ohioans’ consumption habits as it ships beer into the state. Coincidentally timing its release with Cleveland Beer Week, which launched last Friday with events across the region, Oskar Blues has partnered with Superior Beverage Group in Glenwillow to distribute its Dale’s Pale Ale in the Buckeye State. Oskar Blues says it was the first brewer to can its craft beer over 10 years ago. It recently expanded its distribution to Chicago and Alabama with the help of a new North Carolina brewery, the capacity of which should reach 40,000 barrels next year. — Joel Hammond
BEST OF THE BLOGS Excerpts from recent blog entries on CrainsCleveland.com.
The French connection:
The Goodrich Electric Power Systems plant in Twinsburg will change hands as part of Goodrich Corp.’s planned sale of its electric power systems business to Paris-based Safran. The French aerospace and defense company has agreed to acquire Goodrich Electric Power Systems, a supplier of on-board aerospace electrical power systems that’s based in the United Kingdom, for $404 million. Goodrich Electric employs about 560 people, 100 of whom work at the Twinsburg plant at 8380 Darrow Road.
owned by private equity firm Thoma Bravo, two years ago took on $225 million in debt and issued a $114 million dividend. The company recently scrapped a proposal that would have involved taking on debt to finance a $268 million dividend; going that route means Hyland would have taken on debt in excess of its annual EBITDA by about seven times, which is considered high. — Chuck Soder
■ We’ve known for a long time that college costs are out of control, but that doesn’t diminish the shock of a new list of the sticker prices of the country’s 100 most expensive schools for the 2012-13 academic year. CampusGrotto.com ranked schools with a “total costs” comprising tuition, room and board, and required fees. (The website did not attempt, though, to find out what percentage of students actually pay that list price. Given the prices, it’s hard to imagine many students pay the full price.) Two Northeast Ohio schools are in the top 100: Oberlin College, at No. 25, with a total cost of $57,025, and Case Western Reserve University, at No. 100, with a total cost of $52,926. The most expensive school in the country is Sarah Lawrence College in Bronxville, N.Y., where, without discounts, a year will set you back $61,236.
Mitt’s next song could be ‘Me and My Shadow Senator’ ■ Sen. Rob Portman isn’t on the Republican ticket — it’s Rep. Paul Ryan who had the honor of enduring 90 minutes of hell with Joe Biden — but the Cincinnati political veteran has emerged as something of a “shadow running mate” for GOP nominee Mitt Romney. BusinessWeek.com noted that Sen. Portman is the most powerful Romney surrogate on the campaign trail and is a frequent
presence in ads. “It’s tempting to suspect that the Romney campaign is intentionally burying Ryan because he’s turned out to be a liability,” wrote political analyst Joshua Green. “Conspiracy theorists might suspect that Romney’s advisers, some of whom didn’t want Ryan on the ticket and preferred Portman or Tim Pawlenty, are passive-aggressively having their revenge,” he wrote. “My own hunch, though, is that Romney’s shadow running mate in these ads is really a reflection of how vitally important it is for Romney to win Ohio.”
Did you get this much out of your history textbooks? ■ Need to convince your kid to read? Maybe this story will provide him or her with some incentive. Mental_floss, a growing national magazine with business operations in Geauga County, shared on its website an email it received from reader Erik Dresner about his experience on the game show “Jeopardy!” The correspondence was a bit long, but at base, it came down to this: A mental_floss story Mr. Dresner read on an airplane about the modern opera “Nixon in China” helped him correctly answer a Final Jeopardy! question in the category of … Modern Opera. (Sometimes you just get lucky.) His winnings? More than $22,000. Mr. Dresner’s email ended with a declaration any publisher would love to hear: “So thanks to you, mental_floss, I can forever call myself a ‘Jeopardy!’ champion, even if it’s just for one day. If I wasn’t already planning on being a lifetime subscriber, that cemented it.”