JEDO Funding, End of Year Poduction

HME is gearing up for significant growth! The episode discusses the company's recent economic incentive, production challenges, and ongoing projects that highlight our commitment to community impact and operational excellence. 

• Review of HME's economic incentives and the potential impact 
• Strategies for navigating production slowdowns and workforce engagement 
• Updates on current projects and future workload expectations 
• Discussion of investments in new equipment and technology 
• Recognition of team efforts and upcoming company events

Transcript

HME Growth and Production Update

Jeff Cowan 0:01

You are listening to the Kick-Ass Podcast . Hello and welcome to the ninth edition of the Kick-Ass Podcast . I'm your host , jeff Cowan , general Manager of Haas Crane and Equipment Rental , joined today by President John Haas , chief Operating Officer Rob Mohan and Chief Financial Officer Kevin Rake Fellas . Thanks for taking the time to get together and discuss all things HME as we're winding down another calendar year . Yeah , thank you , jeff , appreciate it .

Jon Haas 0:34

Thank you very much .

Jeff Cowan 0:35

So today's lineup , quick rundown of the agenda . We're going to talk production status as we're winding down the year , peek into 2025 . A quick kind of broad-based year in review , some of the current projects , upcoming projects , shop status and an update on the paint shop and HME , recently in the news for all the right reasons , keeping the foot on the gas on some future growth and the ever-popular holiday party . So with that , kevin

JEDO Topeka Funding

Jeff Cowan 1:04

, we're going to throw it over to you to get everybody kind of up to speed on some of the blashing news that HME made with some stuff within the community .

Kevin Rake 1:13

Thanks , jeff . Yeah , we happen to attend a meeting of the Joint Economic Development Organization . It's called JADO . It's a group between Shawnee County and the city of Topeka that meet and try to put together incentives for either new businesses or existing businesses , and so HME was in attendance the other night and we were the recipient of an award .

Kevin Rake 1:34

Basically it's a $2.1 million incentive that we have the opportunity to earn through growth , both in employees as well as in some capital investments , and so the news article talks a little bit about kind of how that works , but I wanted to go into a few more details , because one of those was the addition of 300 new employees , and so that's kind of what grabs the headlines , right . So what that means is we have a five-year period that can start anytime between 2024 and 2028 to add those additional 300 positions , and so what that means is it really gives us an opportunity of growth throughout the year of 2032 to add those additional employees and receive some of those benefits . We get to start with a baseline of employees that we have right now . Benefits we get to start with a baseline of employees that we have right now , and so that baseline was 452 . And then any employee growth .

Kevin Rake 2:30

Above and beyond that , they give us an incentive towards and we earn a little bit each year over that five-year period , and those positions can be anything from inside the office to inside the shop , and so that's kind of what's nice about it . It gives us the opportunities to add estimators and add detailers , fabrication personnel and everybody across the board . The other aspect of that is there are some incentives that are associated with capital investments , so both in real estate as well as equipment , and some of those we've already started and are in process right now . So we think of the paint shop , think of some of the new equipment and the plate laser , the AGT layout master all of those items count towards those incentives , and so when we started this process back in March or April of last year , we kind of put together our plan along with our business plan and looked for different ways that we could help fund that , and this is just one of those mechanisms .

Jeff Cowan 3:27

Now , this is not your first time going through one of these .

Kevin Rake 3:31

Correct . This is actually . We're in one of those incentives right now . Actually , we started one back in 2020 . And at that time , the growth goal was to add 167 new projects at that time and some capital investments as well , and that is currently ongoing .

Kevin Rake 3:48

Yeah , it runs , and through the end of 2024 is kind of that five-year period , and what's really cool about that is we've actually been able to earn and achieve kind of those goals that we had set out in that incentive at that time .

Kevin Rake 4:01

And so with the timeframe that we have and some of the expansions that we're undergoing , that we have an opportunity to make that 300 employee goal . And there was about $57 million in investments that we were planning to do as a company . And what's really neat for me , being a guy from Topeka , as well as all of us here , is the economic impact that they calculate . They look at it over a 10-year period and they say , hey , if HME achieves these goals and can add these employees , it's going to be an impact of $1.1 billion to the Shawnee County . That's with a B , that's with a B Yep , and so it's pretty important both to the community and then it's also . These type of incentives are crucial for our continued growth , right ? You know we look at these as ways to be able to help make those decisions , fund some of those opportunities , and so it's really a pretty big win for both the community and as well as the HME group .

Jeff Cowan 4:56

Now , I do know a little bit from the evening of the presentation . When you spoke , and if I remember correctly , you referenced yourself as someone who represents manufacturing .

Kevin Rake 5:07

I mean I loosely , but yes , you're correct .

Jeff Cowan 5:09

And I think Rob kind of perked up , thinking he could maybe find some work for you in the shop .

Rob Mohan 5:16

We've tried that in the past .

Rob Mohan 5:19

Didn't work out very well ,

Jeff Cowan 5:20

keep

Jeff Cowan 5:21

him in the office .

Rob Mohan 5:22

Yeah , he hurt himself one of the two times he was in the shop .

Kevin Rake 5:26

There was a time a few years back where we were a little short on labor and so I went out in the yard and I was like , hey , I could load trucks , and yeah , that only happened once . And they asked me to stay inside . You were not asked back .

Rob Mohan 5:38

Correct , Kevin , just to ask a question . So big numbers , 300 employees , $57 million , so the paint building expansion and the 75 plus employees we've hired this year , how does that fit in so ?

Kevin Rake 5:52

yeah , so great question . Those actually count towards those goals too . So the timeframe can start anywhere from 2024 and extend for a five-year period all the way through 2032 . So a little bit longer actually , I guess , than just five years . But yeah , the paint shop and the dollars that we're investing into that , some of the equipment and things that we've already , are counting towards that goal . So we're a long ways towards hitting that goal right now . So obviously we would need to kind of continue looking at employee growth . But I think those are achievable targets and a good jump start already on the way to them .

Jeff Cowan 6:30

Very good ,

Jon Haas - Production Status

Jeff Cowan 6:32

john , production status . We're kind of winding down the calendar year . I know you had some things you wanted to touch on .

Jon Haas 6:40

Oh , absolutely so . I know this comes a little bit of a tough time right now , as we're looking at our immediate production needs . You know the shop's a little bit slow All the shops are a little slow , and we can't always control when the jobs come in at . You know the exact right time when we need to work , but we do have a big backlog and very optimistic that we've got good work in front of us . But at the same time , you know you can't control the weather , you can't control construction . These slow times sometimes happen , and we got to do a better job scheduling on the front end and make sure that we're finding work for all the areas of the shops , and sometimes , you know , things happen out of our control . You know this Boeing project was slated to start delivering last June , July and go through the end of the year , and here we haven't shipped one beam yet . So those things can cause havoc on schedule sometime , but we're working through that .

Jon Haas 7:30

One of the things that you know that I'd like to say , though , is that , as we have a little bit of slow production time , our mindset has always been to make sure that everybody's working and is able to pay their bills , and , you know , pushing to make sure that we've got 40 hours for everybody at a minimum , so maybe some of the overtime is not there . But at the same time , you know , I want to ask you know , guys out in the shops , wherever you're at , if you're asked to go to a different position or to help out on something that you're not used to , to give it your best effort . Look around you , look at it as an opportunity to learn something new . You know , build your skills and I think everybody likes to do something different once in a while . So it's an opportunity . But when you're , when you're out there and you're in and you're looking around and and , uh , trying to help out , or or whatever , look at the guy that's the most productive in the shop . That guy's a leader and and he's figuring out how to get stuff done . He's figuring out how to be efficient .

Jon Haas 8:20

Don't model yourself against , you know , the worst guy in the shop , the guy that's hiding in the corner . Model yourself against the best person in the shop , and I think that's very important . You know the older guy's got to lead the young guys that are just starting out and you young guys , look how you can be the best that you can be . Don't try to figure out how you can stand around with your hands in your pocket . We need people to work hard and I think Rob's got a really good example of , you know , an idle hour in the shop . It cost us , you know , 10 hours of work to pay for that idle hour .

Jon Haas 8:57

So you know we want to make sure that we're keeping everybody busy and you guys you know we as a group got to do the right thing . We're trying to make sure that everybody's got hours and we want everybody to work hard and do the best for the company that they can .

Jeff Cowan 9:07

Well , I know the ebbs and flows of jobs and schedules and try to get everything leveled out is you know what would happen in a perfect world , but that's not where we operate . And you know , and also , the timing of the big news of the expansion comes when you know the shop is a little bit slow , but you know , 2024 has been a great year .

Jon Haas 9:28

Oh , absolutely , absolutely .

Jeff Cowan 9:29

Record-breaking and I actually looked at app services and the month of December for jobs booked is the third best month for 2024 . Even though the schedule doesn't level out like you want and things a little bit slow , it's just the ebbs and flows of schedules .

Jon Haas 9:47

Right , right , absolutely . And schedule is a tough thing for construction , so we're always trying to prove that and get better . You know we had a meeting this morning talking about continuous improvements and what we can do to get more work and make sure that we've got it flowing through the shops , that not just you know the welders are busy , but the saws are busy or trucking is busy and all the things that go into making it a successful company . It takes a lot of effort so we're working hard to get that overtime available to you guys and get out of this little bit of a slump , but we'll do it .

Jeff Cowan 10:21

A lot of variables and one of them get a little sideways and it can have a big impact .

Jon Haas 10:27

Oh yeah .

Jeff Cowan 10:28

Yeah ,

Projects Current and Future

Jeff Cowan 10:29

Rob , what projects that are currently being worked on , what's coming up and shop status . Give us kind of an update on that .

Rob Mohan 10:39

Yeah , so from a backlog standpoint , as John mentioned , we do have a very good backlog at HME . Topeka Foundry has a lot of good work on the books that will be coming to fruition soon . Just talking short term here . Obviously shops are light . I think all of our employees would know that we're always calling for overtime and this is a very rare situation . So for the new hires , rest assured that these type of things or this situation we're in with workload is very rare . So a few things cooking Bronco's practice facility that will be releasing into the shop here very soon . It came back from approval , had a few things we have to update , but we'll be seeing that in the shop . Clark Hall , colorado State University that will be releasing to the shop soon . Rapid City , south Dakota Correctional Facility that's another job that's going to be hitting the shop and those are all big jobs .

Rob Mohan 11:38

Yeah , the Broncos one's definitely a big one . The Rapid City is probably on the smaller side , or the Correctional Facility , but yeah , substantial and will make a difference . B21 Fuel Hangar in Rapid City , south Dakota , that's also hitting the shop . Uc Health there's another phase of that , getting ready to hit the shop . That's job 23090 . Shop personnel should be very familiar with that job .

Rob Mohan 12:01

Estimating team has been working hard chasing fast track projects . Not uncommon for other fabricators to have the similar problems as we do . Sometimes your workload all hits at once , sometimes it doesn't . So Atomfector and the estimating department has been reaching out , calling every fabricator they can . They've bid over a thousand tons of fast track work , about 25,000 man hours worth . As a matter of fact , we just were notified we are going to insource a 300-ton job , 3,500 man-hours , to start delivering January 10th . So that'll definitely hit the shop fast . Hopefully we'll see that hit in production just before Christmas and we'll be pushing hard to get it done .

Rob Mohan 12:49

To touch on a comment John made , so just to talk about hourly rate and costs , so our average hourly rate sits at around $87 an hour . In that rate we have employees' wage , we have health insurance , electricity , propane , welding supplies , welding equipment , all the machinery everyone sees in the building property insurance , work comp , vacation pay , holiday pay , 401k , and the list goes on . There's just a lot built into that number . So I know it sounds like a big number but when you look at all the costs , including our payment to the bank , that all aggregates into that $87 an hour . And you know , if we shoot to make 10% on that that equates to $8.70 an hour . So in a 10-hour day there's your $87 . So if you think about that , if we look for 10 hours of good , billable labor , we'll generate the company $87 in revenue or in profit .

Rob Mohan 13:52

One hour of lost production due to lack of work . You know it's human nature . When things are slow , humans naturally slow down and we've got to push through that . So you know whether it's standing around talking , just any sort of unproductive time adds up quickly . So if you aggregate in a 10-hour duration one hour of unproductive time , we've undone all of the profit that we could have gained in that 10 hours . So it's kind of crazy thinking of it from that angle , but it's definitely real . So we look for everyone to . You know , like John mentioned , let's put our best foot forward and during these slow times we have to work harder than we normally do , and I'll tell you what everyone's done a wonderful job of jumping in . You know we have Topeka Foundry folks out working on our paint building shop personnel out there . Field personnel's been out battling the cold and the wind at various job sites across the country . So everyone's jumping in and helping out and that's what we're looking for .

Jeff Cowan 14:51

So

Paint Shop Status - Christmas Party

Jeff Cowan 14:52

everyone sees a lot of activity across the road over at the paint shop . What is the status ?

Rob Mohan 14:57

of that project . So it's coming along very well . So the unfortunate thing about the paint shop is we were hoping to be done with it by now . That was our plan many , many months ago when we started it . John's goal was it's a big , huge building . Let's have our Christmas party in the building . And as we progressed you know things move around rain , weather and schedules started slipping and by the time we realized where we were going to be , we realized , well , we're not going to make a December Christmas party and any venue in Topeka that could handle a party of our size was already booked . So hence why you've seen a little few notes out there about the Christmas party moving into March . But as far as status goes , we should have this building fully enclosed in the next couple weeks . We have some power and lights on as of last Wednesday . Crane installs will happen late January . Our goal is we'll be moving in , probably in about the next 10 weeks , so we're going to have a spring break party . That's what I heard .

Rob Mohan 16:00

That's absolutely correct , you know .

Jon Haas 16:02

I'm thinking , you know mimic something , maybe spring break 1989 or something like that .

Jon Haas 16:08

Padre Island , that's the one I remember . But yeah , actually I think that could be a great thing to change things up a little bit and , you know , if we can do the spring , maybe it gets us a little ways away from the holidays . Things are cooking in the shop , you know strong , so we always feel better about that and I know in the past it seems like we always , always miss a lot of people . That you know people have family things going on around Christmas . Bad weather keeps , you know , some people away . Just a tough time to really plan and get everybody together at one shot . So spring break would be that time frame . Hopefully it'll be not right when colleges are going to spring break , but a little bit before or after and we can get everybody there for a good time .

Jeff Cowan 16:53

It'll be a different theme than past holiday parties .

Rob Mohan 16:56

Absolutely , you know , jeff . And just a few other updates . So , following that paint shop update , 235

Equipment Update

Rob Mohan 17:02

Kansas Avenue building at our downtown campus , we're working on just getting started on remodeling . As far as equipment goes , we have that AGT block welding system that we've talked about in the past . It was initially due late January , february . Agt actually made some innovations , I guess you could say , to the design of the system and they showed us those changes and we really liked it . So we're going to hold off , or they're going to hold off on delivery of our machine to get those changes adapted into our system . So with that , the engineering and design on these new innovations are not complete on the AGT side , so we won't be seeing that machine until August .

Rob Mohan 17:45

Plate laser that's one of our newest additions . Everyone's probably heard a lot about it . It's doing great . We're cutting materials up to five times faster than we were on plasma , with much higher cut quality . And on the hiring front on the production side , we've grown 67 employees this year across all of our shops . So a lot of exciting things happen .

Jon Haas 18:07

Right , right and just thinking out loud

Growth

Jon Haas 18:10

.

Jon Haas 18:10

You know , talking about growth , and some people look at growth like , well , why are you trying to always grow and expand ?

Jon Haas 18:16

And I think it's very important for the success of our company that we're continually growing in order to be competitive in the marketplace . You know , the little bit bigger that we get , the more buying power we have to get materials a little bit more economical . The ability to add , you know , high-tech equipment increases growth because the market's tough out there . I mean , every day that we're bidding , there's somebody bidding against you trying to take that work and we win . Right now we win 10% , 15% of the jobs that we bid and in order for us to keep winning those jobs , we've got to keep growing and we've got to keep investing . And sometimes we get more work than we can do and we've got to grow again and other times we'll have a slow time that we've got to make up for . But across the board , growth is very , very important to the company and the success , our long-term success , and I mean there's kind of an old saying if you're not growing , you're dying . So we got to keep growing .

Jeff Cowan 19:10

Status quo is not an option .

Rob Mohan 19:12

Keeping the foot on the gas Rob one other thing I was going to ask you as we're winding down is holiday hours . Yes , it's been a question kind of roaming around , but we actually did answer that in the last kick-ass . With all the different shifts the schedules kind of get complicated , but I think we got all that worked out . You know to touch on that a little bit , given the light workload now I'm going to throw a caveat in there . With this new 300-ton project we just hit , we might need to adapt , but I would talk to your supervisor . If you are interested in taking any additional time off during the holidays , with or without vacation , there may be options to take that additional time . So feel free to communicate with your supervisor . Once again , this quick-hitting project may change that and we may need all the manpower we can get . We'll just have to see how the cards lay . So , jeff , I hear a lot of buzz about Hass Crane . How's Hass Crane doing this year ?

Jeff Cowan 20:11

Well , I guess we'll jump over into the shout outs .

Haas Crane and Equipment Update

Jeff Cowan 20:16

House Crane has had a good year , finishing fourth quarter strong . Fourth quarter typically starts to slow down and rolling into the first quarter of the new year , but we're having a strong fourth quarter . We're just wrapping up about $1.5 million of new equipment purchases , so things are going well and that's a tribute to all the folks involved with Haas Crane . The one thing that's pretty fun to be a part of is that everybody involved from logistics to moving equipment , to servicing equipment , to field service , to administrative everybody cares . It's important to field service , to administrative . You know everybody , everybody cares . It's important to everyone that they do well . They want to see the company do well . So we've been fortunate to have another good year and you know , as 6-0 is a big owner of equipment , you know there's a net benefit that filters down . So yeah , we're going to finish the year out strong .

Rob Mohan 21:08

So that $1.5 million in equipment did 6.0 participate in any of those ?

Jeff Cowan 21:14

They purchased the majority of it . Yeah , there were a couple big purchases that Hass Crane took care of , but the majority of it was 6.0 . Gotcha .

Jon Haas 21:22

Nice job , Jeff . I know that it's a win-win situation when we get 6.0 involved there , that it helps Hass Crane be able to put some more equipment in the fleet and get that stuff rented and keep new customers coming in and 6-0 , I think we're getting a pretty good return on that equipment . So it's nice to see that we can have an employee investment and the company working together as a team .

Jeff Cowan 21:46

So nice job there . It's a collective effort , effort and it's nice for the benefits to kind of filter down . All right ,

Shout-outs

Jeff Cowan 21:53

any other shout outs we want to recognize .

Kevin Rake 21:55

Yeah , I'd like to throw a couple out there . One related to the news and this incentive I'd like to shout out to Angela Ayala . She's kind of taken the lead on most of those incentives and has done a great job of kind of helping put those together and get in front of the right people either at the Greater Topeka Partnership or at the city level . So great job there . Also pretty good shout out to the Topeka Foundry Commercial Door Group . They've been continuing to increase their backlog and new jobs and profitability and overall as a group have really been hitting it out of the park .

Jon Haas 22:27

So great job on those guys too overall as a group have really been hitting it out of the park . So great job on those guys too . Yep , absolutely nice job guys . I'd like to throw a couple shout outs Kyle , cochran , one with a new contractor our largest wastewater , I'd say Kyle , his entire group put that one together Wastewater plant up in Minnesota I think it was 6.5 million . That's the biggest wastewater treatment plant we've done to date . So great job there , kyle .

Jon Haas 22:51

And then , on a different note , talking about sometimes the shops are slow and we've got guys filling in helping out with stuff that maybe needs a little bit of maintenance whatever . A couple weekends ago I had a young man Kai Arnold , was just washing some equipment for me on kind of a cold , rainy day and he sat out there and busted his ass washing equipment all day long , and I know it's probably pretty miserable work , but to see that type of enthusiasm in doing something that's not your regular job , that's kind of a pain in the butt was nice to see . So I just wanted to say thanks , kai .

Rob Mohan 23:25

I'd like to throw a shout out to all the folks that have been stepping outside of what they normally do Topeka Foundry folks coming up helping on the paint , building in the elements , the shop personnel jumping outside and helping as well , and , of course , all our field folks working hard and fighting the weather and the wind . So shout out to everyone out there and we appreciate everyone's efforts .

Jeff Cowan 23:47

Team effort All right .

Year-End Planning and Future Goals

Jeff Cowan 23:49

So as we're winding down , anybody have anything else they want to share ?

Kevin Rake 23:53

Yeah . So , jeff , I would say , you know , in a future podcast to come , maybe towards the end of January , we'll be able to talk a little bit about year-end results , looking at commissions , incentives , the ever-important bonus plans that we have , and then also kind of looking at goals and budgets for 2025 and what that might look like for the future .

Jeff Cowan 24:12

Very good , Well , that's going to start wrapping things up . We'll be signing off with a happy holidays . Be greater than yesterday , stay safe and keep kicking ass .