Monty L. Boyd is president and chief executive officer of Whayne Supply Co., one of the oldest and largest Caterpillar Inc. dealers in the United States. The company has a strong presence in and around the Bluegrass State, providing Caterpillar services in all 120 Kentucky counties and 17 counties across southern Indiana.
In addition to his responsibilities with Whayne, Boyd also serves as president of the Kentucky Equipment Distributors and serves on the board of directors of the Associated Equipment Distributors, the Kentucky Association of Highway Contractors, the Kentucky Coal Association, Kentuckians for Better Transportation and the Boy Scouts, and is a member of the Louisville Rotary Club.
Boyd holds a bachelor’s degree in mechanical engineering from the University of Nebraska and earned his MBA from the University of Louisville.
‘Whayne Supply has been successful for 100 years’
Ed Lane: Whayne Supply Co. was founded in 1913 and is celebrating its 100th anniversary this year. You have been an employee, executive or owner of the company for more than 25 years. You became president in 2005 and bought the firm in 2008. Why did you initially decide to work for Whayne Supply?
MB: I was an employee of Caterpillar, calling on dealerships as a factory representative, and Whayne approached me about working for their company. I was very familiar with how well Whayne Supply was managed, and just knew I had a good career opportunity with the company.
EL: Caterpillar is Whayne’s major product. In addition to the rental and sale of Cat products, the company also provides a network of maintenance and repair services facilities. What percentage of the business is directly related to Caterpillar products and services?
MB: Over 75 percent of our business is related to Caterpillar sales, rentals, parts and service.
EL: How many employees and locations does Whayne Supply have?
MB: Whayne employs over 1,200 people and operates in 16 different locations throughout Kentucky and Southern Indiana.
EL: Over the years, Whayne Supply has diversified its product lines and services. How has this initiative helped to boost and stabilize sales for the company?
MB: The two major business categories Whayne Supply serves are the mining and construction industries. Both have very cyclical business activity, so we have targeted other industries that would either be counter-cyclical or not have the large swings typically experienced in mining and construction. That strategy has helped Whayne level its revenue swings and maintain a more stable and compounded growth. Diversification makes it much easier to properly size the business and manage it.
EL: What are some examples of other products and services that Whayne Supply now offers?
MB: In addition to Caterpillar services focused on mining and construction, Whayne also operates a power systems division that offers several Cat diesel-engine generator sets. We also supply diesel engines for the marine industry. In addition to the power systems division, Whayne sells and services Thomas Built Buses, which almost every school district in the state operates. Whayne has a full line of agricultural equipment and represents many manufacturers in that segment. Some of the main product lines are Claas Lexion Combines and AGCO Tractors. As an ExxonMobil lubricants dealer, too, we offer a full line of ExxonMobil products.
EL: What types of technology systems does Whayne market?
MB: Whayne has two methods to distribute its technology products. One is through a separate company, Sitech Midsouth, which is the Trimble representative and offers machine control systems in our geographic area. Within Whayne’s technology division, we also distribute agricultural technology equipment for GPS guidance, crop yield and equipment for the mining industry. For underground mining, the latest technology is proximity units, which basically detect how close a continuous mining machine is to an operator, to make sure miners are a safe distance from an operating machine.
EL: You mentioned that Whayne has 16 locations. Recently the company expanded into the Hopkinsville, Somerset and Owensboro trade areas. How does that recent expansion fit into the company’s diversification strategy?
MB: Hopkinsville and Owensboro are top agricultural markets in Kentucky; that’s why we put locations there. Of course, Whayne now also offers construction and rental equipment, works on school buses, and provides Cat parts and service in those markets. But the primary reason for locating in Hopkinsville and Owensboro was the size of their agricultural markets. With Somerset, it’s a mix. There are significant industry, construction and agribusiness opportunities in that area. As we evaluate markets, Whayne wants to be able to serve several significant market segments. Our retail and service center facilities are specifically designed and built to provide parts, service and equipment on all the product lines we offer within each trade area.
EL: When Whayne expands into new markets, does it acquire existing real estate and facilities, or build a new building?
MB: Each location is a different scenario. Whayne prefers to find an existing building that meets its operational criteria. We were not able to do that in Hopkinsville, so we selected an industrial park and built a new facility there. In Owensboro, we were able to find an existing building with the necessary acreage required for inventorying our equipment. And in Somerset, we’re actually leasing a facility.
EL: When you’re evaluating a market to determine if there’s enough sales potential to support Whayne’s business operations, are there certain statistical data that you analyze?
MB: Basically we evaluate SIC (Standard Industrial Classification) codes, and based on those data we can predict the level of opportunity from machine sales, repairs and service standpoint. Over our 100 years of operational history, we know the population of equipment that’s actually physically located in a trade area. We take that (market’s activity) information and analyze it to calculate the level of parts and service revenue a machine should create there on an annual basis.
EL: A significant part of Whayne Supply’s Caterpillar sales is related to coal mining. The EPA’s tougher emission standards and delays in issuing licenses for new mines, as well as the lower cost of natural gas, have reduced coal production levels in Eastern Kentucky and West Virginia. How seriously has this impacted Whayne’s revenue from coal mining operations?
MB: It’s had a significant impact on our revenues – again, because of the large dependence Whayne has on the mining and construction industry. Our mining revenues pretty well track the annual production of steam coal (used for power production). The annual production of coal is down significantly, about 20 percent, and our mining-related revenues track that. Whayne has downsized some of its operations that serve the mining industry in the eastern part of the state. Reduced coal production is having a major impact on us.
EL: How did Whayne Supply become involved with Bucyrus Equipment?
MB: Caterpillar Inc. purchased Bucyrus International Inc. for $8.8 billion on July 8, 2011. Caterpillar sold the sales, service and parts distribution business for Bucyrus Products to Cat dealers that support mining operations, which includes Whayne Supply. All mining equipment now has a single brand – Caterpillar.
EL: Timing is everything. If the coal mining business is currently declining, Whayne’s investment in the former Bucyrus business is also on a downward trend.
MB: It is. Caterpillar made that acquisition as the market was turning down, so it has not performed at the level Caterpillar and Whayne Supply expected at the inception of the purchase. This type of deal was made with the view of it being a very long-term acquisition.
EL: With the current U.S. economic recession now in its fifth year and ongoing pressure on Whayne’s business operations because of reduced construction, mining and road building, what is your view of future economic conditions?
MB: Whayne’s business really prospers during times of infrastructure being built, construction dollars being spent, natural resources being extracted and mined. That’s what really drives Whayne Supply’s business, particularly in its Kentucky and southern Indiana territory. And over the last five years all of those areas have been significantly depressed, which places a very heavy load on Whayne from a business standpoint.
EL: Do you anticipate that U.S. coal, hopefully mined in West Virginia and Kentucky, will be exported to countries like China and India to fulfill their energy needs, and what is your forward-looking forecast for that opportunity?
MB: The EPA rulings on coal-fired power plants and its increased restrictions on carbon dioxide emissions will significantly reduce the amount of steam coal utilized in the United States. For the central Appalachian coalfields to sell its full production, some coal will have to be exported. I think we’ll see an increase in the export market. Even though the United States has kind of turned its back on coal as an energy source, the rest of the world has embraced coal as an energy source. We’re going to see tremendous growth overseas for electricity produced by coal. That will open up opportunities in the export market, but certainly other areas in the world that produce steam coal are also going to compete for that business.
EL: You buy a business, macroeconomic conditions start tanking on you, sales are off, and pressure is on the bottom line – how do you deal with these issues?
MB: I try to manage stress. I always exercise and take care of myself. I view my role as trying to solve problems that come up daily, to take them one at a time, to put plans together and then work through them. Whayne’s been in that mode for 24 months in the mining industry. We’re managing through it. We’ve remained profitable – though not at the levels we would like to achieve. I mentioned Whayne has had some downsizing, but not nearly as much as the markets we serve have declined. I hope we’re close to not having to downsize any more.
EL: Has your long-term business experience with Caterpillar helped you navigate Whayne Supply through one of America’s longest recessions?
MB: It certainly has. Relationships between Caterpillar Inc. and its dealers are very long-term. As a team, the manufacturer and the distributors of Cat products take a long-term view of the markets that we serve. This approach has helped Whayne get through this recession. We focus on making the right long-term decisions and eliminating short-term errors. And I think that’s one of the reasons that Whayne Supply has been successful for 100 years.
EL: You announced plans to move some of your corporate operations to 10001 Linn Station Road in Louisville. What is the status of this new $2.4 million office facility? What parts of your company will operate from that facility?
MB: When Whayne Supply and Walker Machinery were consolidated, the plan was to gain synergy for both companies. Each of those companies had back-office structures, and we wanted to combine them at one location to support the entire enterprise. Over time there will be cost savings from the efficiencies we will gain by having one accounting and one human resources area for the company. Our estimates are that we will achieve a fast payback on this office building investment.
EL: The Ohio River Bridges Project now underway involves heavy construction in the Greater Louisville/Southern Indiana area. (See article on Page 29 in this issue.) Is this multibillion-dollar project creating a new business opportunity for Whayne?
MB: Absolutely. Whayne has already experienced growth in its business in the Louisville market directly related to construction of the bridges. We expect that will continue during the bridges’ construction phase. But longer term from a business standpoint, the bridges project will expand regional transportation and stimulate economic conditions within the Greater Louisville/Southern Indiana market. So we’re also very enthusiastic about the long-term potential.
EL: And even if there were firms that were using Caterpillar equipment that they own and bought from another market, you still have the opportunity to provide service and repairs while they are on the construction site in Kentucky.
MB: Whayne technicians are equipped with field service trucks to go out and service equipment right on site, and we are already providing parts and service to some of these machines. That’s exactly what the contractors are doing, and they have also bought and leased some new machines.
EL: Kentucky’s Road Fund revenue has been growing and this indicates that increased state highway construction will be budgeted during upcoming fiscal years. Does Whayne have a number of road contractors who are using its products?
MB: Yes, we do. If we compare roadbuilding in Kentucky to surrounding states within our geographic region in the United States, Kentucky has fared very well compared to other states. Kentucky’s road funding levels have been increasing, and the Kentucky Transportation Cabinet has cost-effectively used its funds during the economic downturn. Highway construction is a major component of our business.
EL: When do you expect the U.S. economy will again be robust? Do you have a forward-looking forecast?
MB: I wish I had a crystal ball. Whayne manages its business very closely on a day-to-day basis. We do a lot of planning. Our management team just completed a business strategy with projections and where we think Whayne Supply will be in the next five years. We prepare very detailed annual plans. Our outlook right now is for a gradual economic recovery coming on into ’14. We’re seeing recovery in 2013 from a construction standpoint. Our ag market has been fairly active; we project it will have continued growth in 2014. Presently, we don’t expect any recovery in the mining industry at least until 2015. Overall we expect ’14 will be very similar to what we’ve experienced in 2013.
EL: How would you rate the effectiveness of Louisville Mayor Greg Fischer?
MB: Mayor Fischer, from the dealings that I have had with him and my observations, has taken a very business-like approach to government. Because he was a very successful businessman, the mayor has applied ‘best practices’ in his management style. He’s being very effective as mayor.
EL: The Affordable Care Act, commonly known as Obamacare, will have a major impact on companies. Have you assessed what the impact may be on your operations? Do you have a plan yet as far as the kind of health insurance coverage Whayne will offer to its employees?
MB: We absolutely have. We’ve been studying healthcare insurance options extensively. Healthcare benefits have already added a significant amount of cost to our organization. Whayne is a company that truly cares about its employees. I read some companies are shifting their employees to health exchanges. That concerns me as a business owner because I’m saying, what is the right thing for our employees? Our insurance costs are going up, but our employees are very highly skilled individuals, and it is important for Whayne to retain them. And our view right now is that Whayne wants to continue to offer a company-sponsored plan to supply our employees with the health coverage that they deserve. Retaining our employees and attracting good, talented people is an advantage for our company. That’s our path, even though health insurance is going to be more costly going that direction.
Ed Lane ([email protected]) is chief executive of Lane Consultants, Inc. and publisher of The Lane Report.