Built to Last — The Metalcraft Legacy Series

Built to Last | Episode 2: The Pivotal Years

• Metalcraft • Season 1 • Episode 2

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Episode 2 of Built to Last explores the pivotal years that helped shape Metalcraft's future during the 1980s, 1990s, and early 2000s.

Former CEOs Wally Smeby and Doug Peterson join Steve Doerfler to discuss leadership transitions, the emergence of barcode technology, the company's first computer systems, ownership changes, strategic planning, and the innovations that helped drive Metalcraft's growth.

The conversation covers leadership changes, Metalcraft's transition from paper systems to computers, the emergence of barcode technology, the 1993 ownership buyout, catalog marketing, strategic planning, digital printing innovation, and the early development of RFID technology.

Along the way, Wally and Doug share firsthand stories about the challenges, opportunities, and decisions that helped shape the future of Metalcraft. From a laser engraving system that literally blew up during testing to the ownership philosophy that kept Metalcraft private and locally led, this episode captures a remarkable period in company history.

Built to Last – The Metalcraft Legacy Series is a four-part podcast celebrating Metalcraft's 75-year history. Through conversations with former and current company leaders, the series captures the stories, leadership lessons, innovations, and defining moments that have shaped Metalcraft since 1948—and the vision that will carry it into the future.

Learn more about Metalcraft: https://www.idplate.com

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SPEAKER_04

Welcome back for uh part number two of our video series, and I've entitled this The Pivotal Years, The Future of Metalcraft, because uh as we rolled into the early 80s, we had some we had some people changes, uh, we had a technology change, uh, barcode was emerging as a technology, we were a little late to the party on that. And then in the early 90s, we needed an ownership change. So many challenges that really could have gone either way, but fortunately, these all turned out to be fruitful events for us, uh, and we were able to grow through this with a lot of product development too in in the 90s and the early 2000s. So I want to welcome back Wally. Wally Smayby, welcome again. And I want to introduce uh Doug Peterson. Uh Doug, uh thanks for being part of this chat. Um I, you know, Doug is another giant in our history. I mean, these two these two are really legends in our history. Uh Doug's career began in 1980 as controller, uh, and then it went all the way through to 2020 when he stepped down as uh chairman of the board. So we're talking about 40 a 40-year career. Uh, Doug led the company as CEO from mid-2006 uh through 2012. So, Doug, we're we're happy to have you here.

SPEAKER_01

Thanks, Steve. I'm I'm glad to be here. Looking forward to our conversation.

SPEAKER_04

Well, I am too. It's just a it's great to have both of you here. Uh so uh let's get started. How about that?

SPEAKER_03

Okay.

SPEAKER_04

All right. Let's roll from 1980. This is all the way from 1980 to mid-2006, and right away in 1980, uh Daryl Waber was our vice president and general manager, and he had sales responsibility, Wally, and he suddenly decides to leave the company. And that was a big change. Uh so I want you to walk through that process with us in terms of how it affected the company and personally, how did it affect you?

SPEAKER_03

Well, first of all, it uh it uh uh affected me a lot by uh uh driving a lot of energy into me. But I was out in uh Colorado at a school trade show there, and uh I was with uh Fred Finchel, and we we drove down to uh Woodland, Colorado in the mountains and visited Howard Ferris, who uh was the one who ran the adhesive system. And uh uh when I heard the news, uh, of course it was a boost of energy, and I uh uh uh someplace in there uh the announcement I guess came uh in September, and uh I the next Wednesday I played golf and had the best round of my my life, so that that would tell you a lot. But then Alan uh Patton he he was uh hosting meetings immediately after that, and we were sort of uh selecting the positions, and uh I asked for what I wanted because I I I I knew what I felt we should have in the way of uh uh leadership. Uh I think initially they wanted me to hang on to the purchasing, but I I let Dave Patton take that in instead of myself. So uh it uh it uh uh Daryl had always been a very good to me. I I so I didn't fault him, but he he was ready to leave. There's no doubt about that.

SPEAKER_04

Well you you said uh I want to explore this a little bit more. You said you got a boost of energy and you had your best golf round ever. So obviously you're excited you were actually excited about it. Um why why why why the boost of energy and why the excitement about him leaving?

SPEAKER_03

I mean it's all comes under opportunity. I I I was I was ready to move on from the accounting finance side of things, and uh uh I I saw the opportunity for me to be more involved in a company and let me get into sales and marketing and that sort of thing. Uh so I I I I I've been off a an awful lot there. I mean uh a couple of years later we uh uh Fred and I took a trip out east. We spent two weeks working with reps and conducting seminars, and I don't know, Doug must have been you were running the place.

SPEAKER_01

It's lucky the place didn't fall apart.

SPEAKER_03

I don't know uh uh exactly how we handled all the pricing at that time, but anyway, it uh it just it just felt good.

SPEAKER_04

You know, one of the first things that when you made this shift here, and I I want to do want to circle back uh to you and talk a little bit more about how you picked up so well on the sales and marketing stuff, because when I first met you and became involved in Metalcraft, I was 84, and you know, I thought you were really attuned to the market. But before we do that, I I want to go back and say, okay, 1980, you take this new position, you're no longer controller, so you got to backfill your position, right? Yes. Uh and I want you you I want you to tell how that how that happened and ultimately the the person you hired.

SPEAKER_03

Well, Doug uh uh Doug had been uh doing all of our closing and and tax work and uh uh I think it was mostly was mostly closing. Doug might be able to answer that better, but he was working for uh a professional uh accounting firm and uh uh so uh I mean he certainly understood the the business and from my perspective he was so because I had worked with a number of uh uh professional accountants over the years and they they weren't all the same. Doug was really easy to work with. He just uh seemed to understand uh uh the professional side of the business and the business side, and uh so it was an easy pick. Uh I just knew we wanted Doug. And uh Doug he put up a little resistance. He uh I think we wanted to pay him uh show you what how things changed. We wanted to pay him 20,000. I think he got me for 22,000.

SPEAKER_01

I don't think it was quite that much, but yeah.

SPEAKER_04

Well well, Doug, I want to hear, you know, from your perspective, Wally, um you're working for you're you're not that far removed from school, right? Um couple years uh I had worked two and a half years ago.

SPEAKER_01

Two and a half years from a glidery, right?

SPEAKER_04

Yep uh so you were basically auditing and and going in and providing financial support. Uh and Metalcraft was was your account. I want to hear from your perspective, while he offers you the job, uh why why'd you why'd you accept?

unknown

Yeah.

SPEAKER_01

Well, maybe let me just go back a little bit to let you know why I was even interested in the job in the first place. Um I had worked for McGladrice for two and a half years, um, which means I had gone through two tax seasons. Um and I had just finished my second year of reviewing Metalcraft's books, which was October-November time frame, and became aware of Wally's transition and thought to myself, wow, this would be a nice position to have, mainly because I was familiar with Metalcraft. I knew they were a solid company. I'd worked with Wally a couple years and really felt like I could get along well with him and work well with him. And the timing was was right, right before tax season, my third tax season. I had a one-year-old and another on the way, and I didn't want to go through tax season again. And I just saw it as a great opportunity and the timing being right, so I applied for the job. Um, and as Wally said, Wally tried to lowball me with the offer. But fortunately, don't feel so bad.

SPEAKER_04

He did that with me as well.

SPEAKER_01

Fortunately, uh, we were able to come to agreement on terms, and Wally hired me. I talked him into hiring me.

SPEAKER_04

So that's interesting. I didn't I didn't real thanks for taking it because I didn't realize you actually applied for the job.

SPEAKER_02

Oh, yeah.

SPEAKER_04

And you you would you obviously knew the books pretty I mean you saw so you you felt like well this is a pretty financially solid company. Right. Uh this company's going somewhere. Yeah I want to get out of that auditing and yeah.

SPEAKER_01

Yeah, and doing the review, you not only saw the numbers, but you got involved with some of the systems and of course uh working with Wally during that process. So you got to know the company a little bit. So I felt really good about Metalcraft that it would be someplace I could have a career at.

SPEAKER_04

So yeah, great, great, great story of how people transitions uh take place. Uh and one of the first things that uh and Wally's probably happy for for you to be the new controller because one of the first things you had to do is take a paper-based system uh to computer. And I've been involved in a couple of ERP systems. I can't even imagine going from paper to, and at that time, we ultimately went to a s IBM System 32. Uh but that was one of the first things you had to do was coming in. And I I'd like you to shed more light on that whole approach of you know the the the RFP process and then implementing it, how long it took all that, because it's a big step for us.

SPEAKER_01

Yeah, it was a big step. Um I guess I felt really good that Wally had the confidence in me to kind of head up that project after only being, it was probably around a year or so I had been with Metalcraft long enough to kind of understand a little bit systems and and how things work. So um we started out, I think Wally and I visited uh, I think it was three different manufacturers of at that time um they were called mid-range computers. They had just come out with those. Um digital equipment had one, Burroughs had one, IBM had one, and Wally and I visited with those manufacturers. And in that doing that, uh we became aware of an engineer at uh IBM, I believe that he was with, who had just hurt his back and he was laid up. He was a systems analyst or a systems engineer, and he couldn't work, he was at home and um found out that he was bored stiff and wanted something to work on, and he actually approached me and said, I'd be happy to help you spec out your system.

SPEAKER_04

Really?

SPEAKER_01

At no charge, just to have something to do. So there was a period of probably three months where a couple days a week I would go to his place because he was with a bad back.

SPEAKER_04

What where was he located?

SPEAKER_01

Here in town. Oh, what do you hear in town in town? So I would leave Metalcraft, go out there for an afternoon, and we'd work on specing out the system. Specking it out from a paper system to a computer system. So we did that, and I'm not sure how this all fit together, but the next step was we uh we found a programmer in Minneapolis, uh Michael Snyder, who programmed RPG2, is what the IBM System 32 ran on. So he had done some custom programming and we became aware of him, I think probably through IBM. And we contracted with him to finalize the specs and uh write the software, and then we sent that out to digital equipment, Burroughs and IBM uh as an RFP to see which one would be able to handle that software for us. And one of them, I think it was Digital Equipment, came back and said we we declined to respond. We can't do it. And so we picked between Burroughs at that time and IBM and went with the IBM 32. So it the process, I think, was probably a year and a half from the time we started till the time we got the computer system up and running. Which was all custom written. Uh it was order entry, uh, the work order system going through the plant, it was all the accounting software, um and it was all custom written for us. Parts of the accounting system, I'm sure, were just standard that were modified slightly to fit our needs. Um but yeah, so year and a half later we have it up and running. Um and it was an interesting process because the IBM System 32 was about half of this table.

SPEAKER_04

Yeah, isn't that amazing?

SPEAKER_01

Yeah, and uh I I don't think we could get it in the computer room. I think we built the computer room after we installed it, but um so you have the system 32 sitting there and you had to run cables to all these dumb terminals in the office, um which you know all the terminals did was you it entered the data and then it all went to the 32 for processing. Um so yeah, that was it was a great experience for me. Um and we did all the cabling. I mean, you've got to take the cable to the ceiling, yeah. I mean we actually did a remodel project at the same time that allowed us to set up office stations and then run the cable down.

SPEAKER_04

Right through there. Yeah, okay. All right, wow. Um, and those produced a lot of heat, so you had to you had to cool them, right?

SPEAKER_02

Yeah, yeah.

SPEAKER_04

Um interesting thing. Uh we were were we kind of ahead of the curve of many companies that were going to computers at that time, or were we just about on par?

SPEAKER_01

Yeah, I think we were pretty much on par. I was looking back and uh just to check and see when the system 32 came out, it was in 75. So it had been out a while.

SPEAKER_03

Um and we had a lot more customers than most uh other people would have.

SPEAKER_04

Yeah, right. Uh we had hundreds of thousands of customers at that time. Uh but what what luck to find somebody that was laid up. I know and and the ironic thing is he's works for IBM, right? Yeah. And he doesn't even know if IBM is going to get the business. Right.

SPEAKER_01

No. He just he just did it because he was bored. Yeah. He enjoyed doing that kind of stuff.

SPEAKER_04

That would never happen today, Doc. No. That would never, I mean, it's just a great story. So thanks, thanks for sharing. So let's shift uh let's shift over. I already kind of framed this uh in in the intro, framed the challenge, the technology challenge, uh Wally, with barcode emerging, and we weren't there yet, and we were beginning to lose, bleed some customers. Uh and that had to make you nervous uh from that standpoint. We weren't used to losing customers. Uh good product, good service, good support. Tell us the impact of that, and and it's a huge story, by the way, of you know how you reacted to when we made that first barcode sale with Union Pacific in 1984.

SPEAKER_03

Well, we were uh and right now I'm not remembering the timing on that, but we were working on uh laser engraving the barcode on a metal tag. But then I was uh and it it shows the value of being out in the field. I was at a small trade show down in Williamsburg. I I had uh my son Doug was with me, so sometimes I'd let him uh at least uh hold on the fort of the the uh the booth and uh I uh I hope he was of age. No, probably not. Anyway, uh I as I was uh out uh just kind of purveying what was going on, I I found this uh uh photo anodized barcode. And uh so I I checked into it fast where it came from, who was making it, and uh materials, and and then uh after I got back, we ended up buying equipment and the material and started making barcodes.

SPEAKER_04

Yeah. Um but my under my understanding in that process is that we've wanted to first laser engrave them, right? Yeah. Um and I wanna yeah, I didn't we go down that path before the photo anodized and and but we had something happened to the laser, didn't it? We after we spec'd it out, didn't we make a visit down to the laser company?

SPEAKER_03

Yeah, well that was where we uh uh we chartered this private airplane and uh flew up uh east, I think, probably New York or something, uh and and got to fit spend time with a company that was already using one of their lasers, and then we stopped in Georgia and uh where we were using one of the lasers and and then some point in there we had to uh we had to make an emergency landing. He he had a light that was wasn't right, so we made that emergency landing. I think he probably gassed up there and got that light thing fixed. And so then we were on into Orlando and we were uh going through all the countdown of uh testing uh that laser to make sure it worked properly. Now, uh uh sort of a sidebar to that was fortunately when we signed that order, yeah, for some reason or another, uh they didn't uh uh they must have fallen between the cracks because they didn't require that we pay for it in advance. So we had nothing in it. And and then when it blew up, I I did some analysis on it, and we then just decided uh just let them have it and we'll walk. And and that's that's when we just started uh do the uh photo anodies.

SPEAKER_04

Yeah. Um so it literally you were you were this was kind of a prove-out that you were going downstairs. Absolutely, yeah. And you it literally blew up.

SPEAKER_03

Yeah, it blew up right in our face, yeah.

SPEAKER_04

Well, yeah, that's it. That's an easy no for the the we're gonna take that equipment, right? I mean, it doesn't give you much confidence when it blows up on the test.

SPEAKER_03

We would have probably been, ooh, whoa, at least another nine months to get another one. So that wasn't not not a hurry-up business.

SPEAKER_04

So this is 1984, and and Doug, you're you now have the new uh uh system 32. Uh this is not a product that we're used to to pricing out. Uh how do we go how do we uh go about that? And did you did you handle all that pricing? Uh, how did how'd that work?

SPEAKER_01

Yeah, I know I was heavily involved with it. I don't know if I handled all of it. I'm sure I had some input from Wally or or uh yeah, but at that time I was probably just getting really familiar with our job costing and pricing uh models and how we did things, and it became difficult to we had some competitive pricing information, so we kind of knew where we had to be. But um the system we were using was a system where we would accumulate all our costs and then we'd apply a markup to the total cost to cover overhead and profit and what have you. And because the barcode was more material intensive, um, that was a huge percentage of the cost.

SPEAKER_04

Much more than our other products.

SPEAKER_01

Right. Um, I did some research and whatever and came up with this uh pricing system. It was called the OOOPS system. System, which is an Aaron Trevor Burrus I remember that.

SPEAKER_04

So I want to know about the OOPS acronym.

SPEAKER_01

Oops system. It's basically out-of-pocket system, I think, is what it stood for.

SPEAKER_04

I love the acronyms.

SPEAKER_01

But what it allowed us to do was to take the material cost and use a markup on that, lower markup, because there's not a whole lot of overhead and that type of thing associated with the material. Right. And then take all the labor costs and apply a higher markup to that based on the overhead and depreciation, other expenses related to actually the labor producing part. And by doing that, I think we were able to kind of match competitors pricing and uh use that system to price it out.

SPEAKER_04

So we we could churn the inventory relatively quickly that would allow us to do this as well, right? Right. Yeah. I I want to explore this a little bit more because uh you know, as I recall, that you know, that whole photo anodized process, uh, we had to produce a negative first, uh, and then apply that negative to the metal that had the that had the emulsion on it. And I I I think we we had the old auto logic um typesetters at that time, right? That were really, I mean, they were at that time they were state of the art, but still very, very slow.

SPEAKER_03

Oh, yeah.

SPEAKER_04

Can can you maybe tell us a little bit more, either either one of you, uh Wally or Doug, tell us a little bit more about those auto-logics and and the importance of them for producing metal barcodes?

SPEAKER_03

Well, it was uh it was uh a piece of equipment that we could get into at probably a lower end of the cost spectrum. And uh it was something we could learn to operate uh pretty fast. Uh and uh so it it was just a quick way to get into it. Uh it may very well be even that the equipment we uh really needed wasn't even available at that time. But I I remember uh a little sidebar to that. Uh we needed an operator that could really operate that uh auto logic. And uh I was interviewing and I found out that uh Liddell uh she was uh a math major.

SPEAKER_04

Yeah, Liddell Overbeck, right?

SPEAKER_03

And uh uh uh so I I decided to stick my neck out and hire her, and and she ended up just learning that fantastically and was a great operator. And I I'm not I think maybe she's left by now.

SPEAKER_04

She retired just a couple of years ago.

SPEAKER_03

She uh worked there for a lot of years.

SPEAKER_04

Yeah, she she worked with us 40 years, uh I think about 45 years. And the interesting thing is with Liddell, not only did she do that, but then and and we'll we possibly may come back to this, uh, but advancing ahead in 1994, when we needed we needed somebody to really kick off that John Deere work, uh Liddell, we shifted Liddell in there because she understood the files and and downloading all that. So yeah, that was extremely valuable from from that perspective. Do you guys um I'd like for either either one of you or both of you to to address this? So 1984, we produced our first barcode, and for the balance of the 80s, what what was our sales growth like in barcode? And then how did that overall impact uh our overall sales? Was it you know was it more linear or was it exponential that we had this growth?

SPEAKER_03

I'm gonna let uh Doug answer that. He probably knows the numbers.

SPEAKER_01

Yeah, I don't know the numbers, but if I think back at it, um there was some significant um growth because of barcode. And I don't know if I'd call it exponential, but um certainly it had a huge impact. We could sell one big barcode order, which would have a huge impact on that month's sales because our you know our sales dollars were so much lower than they ended up being later on with our barcode business. So um the barcode business, yeah, I mean it had a huge impact on financials as far as um sales and profit-wise, which it caused a little more uh fluctuation, I think, month to month, depending on whether we would get a big order or not. Um so yeah, I mean, I think the growth was uh it was huge for us compared to what it would have been without barcode over that time frame. Yeah, I don't I think the I don't know what the growth would have been just with autographs, but nowhere near what we experienced with the barcode.

SPEAKER_04

Well, I I think it's fair to say that if we don't get into barcode at that time, that we may not be sitting here today. Oh, yeah. Uh or if we were, uh the company would be about five people uh or or so.

SPEAKER_03

So I think that was you had to change as the uh the technology changed.

SPEAKER_04

Yeah. That's a that's a big credit to to both of you uh for making sure that we had that technology change. Doug, I want to shift over to to you because again, you were you came in as uh controller. Um you were probably what uh 25, 26. Yeah, uh you were very young. Um it I'm interested to know what point, I think were you uh elected to the board of directors like in in 83 or what what when were you elected to the board of directors?

SPEAKER_01

Yeah, that's I'm not real sure because as controller I would participate in board meetings from the start, giving the financial report and what have you. But I think, yeah, it was probably 83. It could have been 82, 83, some a couple years circuit 82, 83. Yeah, a couple years after I started, I was elected to the board. Yeah, yeah.

SPEAKER_04

And when when did you become an owner? Um, and and then once you became an owner, how you know what how did that make you feel?

SPEAKER_01

Yeah, um I looked back and I actually became an owner September of 81. So I started January of 80, bought my first shares September of 81. Wally allowed me to buy 25 shares at that point in time. Was it me or Alan? Yeah, it was you. Because that this would have been, yeah, yeah, 81. Um and then every couple years Wally would offer me 25 more shares, so I kept buying.

SPEAKER_04

Started accumulating at that point.

SPEAKER_01

And then I think when it got to be late 80s, early 90s, Wally increased it to 50 shares a time. So um so that's how I accumulated shares up until 93 when we bought out uh David Patton. Um, and I mean I always felt like I wanted to be an owner. Yeah, uh, I just wanted to have more at stake with the company, and I thought it was a great opportunity to um be successful being an owner, accumulate some wealth and what have you. So that was that it was a no-brainer for me to actually buy shares and become an owner.

SPEAKER_04

Yeah, good. Thanks for sharing that. And um, you know, I first met you, I remember meeting you because I became a manufacturer's rep in 1984, and I remember having lunch at the uh with you. I don't know why this memory hits me, but I remember having lunch with you at the Pheasant Run, the old Pheasant Run, uh, you know, and uh met met Bonnie um uh as well. And one of the things that struck me as I started working with you, Doug, I didn't have a ton of contact with you, but but I had contact with you. Most of my contact would have been with with Wally or Dave Rice. But every time uh what really impressed me, because I'm thinking this guy's a finance guy, this is that guy's a CPA. But one of the things that I did intrigue me with you is you globbed on to understanding sales and marketing and and the products and the processes extremely well. And I I I thought to myself, uh, you know, this guy is he's he's deep into the company. I mean, he he knows this. He's not he's not the typical CPA. And I just want to know how you went about understanding and knowing that and and being able to comfortably talk with a the sales guy like me.

SPEAKER_01

Um funny you should say that, because uh if I look back, I thought of myself as being weak, probably in all those other areas outside of finance. I thought uh I could learn more about processes, sales, and what have you. So I I didn't feel that I was strong in those areas. But I have to give credit to Wally for what I learned was he gave me the opportunity to get involved and the other functions of the business and uh provided training and just opportunities to learn all about Metalcraft's um processes and systems. And I think maybe doing the uh the computer specs when we I first joined Metalcraft, I had to learn a lot of things about how processes work and what have you in order to spec out that computer system and what have you. So I think that helps some too.

SPEAKER_04

Yeah, that makes a lot of sense with the with the computer system. Well, you know, you mentioned Wally giving you the opportunity, and I think there's been several times, like even during the the first uh video series that we had and and this one already, Wally, is that you know you're exhibiting this uh uh uh effective and really excellent leadership by making sure that future leaders have the tools necessary to uh to not only survive but thrive kind of a thing. So you know, hats off to to to you from that perspective. Okay, let's let's go to 1988, Wally. Um you became president in 1988, yet um now Alan Patton had passed away, I think, in eighty three. He had basically turned the company over to David in 1980, and then he passed away in 83, 84 circa. Um and um so Dave is effectively running, you know, he's he's in charge of the company, but you become president. How how did that transpire and then what was the importance of that during that era?

SPEAKER_03

Well, it it it just became very apparent to me that uh uh we needed uh uh a change. There was things going on with uh David where he I I could see he was losing his interest in the business. And uh so I uh I I just uh went to him and and said, I I w I want to be the I want to be the president. And uh I uh uh so I just stepped forward and asked for it, and uh and he he I don't know, I guess I'm not sure if he'd say orchestrated the uh appointment of a presidency or what, but anyway I ended up the president in 1988.

SPEAKER_04

What do you think that did to the to the business? I mean, was that a I had to be a shot of energy into the business uh from from David's leadership uh because you mentioned that he was you know losing his interest. And so that had to be a little bit of an injection into everybody else now that you're president.

SPEAKER_03

Aaron Powell Yeah, well it it uh it's maybe ducking it. There was a lot of interesting things going on at that time. And and I don't remember actually the timing, but I know in 92 uh we had we had quite a recession. I had to meet with all of the managers and and let them know there wasn't going to be any bonus that year, which was probably the first time ever, you know. But as it turned out, uh that recession uh really uh propelled uh the acquisition because uh the market value was down significantly when we went into that negotiation. And then after the buy, uh all of a sudden the economy was really good. Well, the actually the 90s uh uh probably was a pretty steady climb in business during the 90s, so that uh increased the value of the company pretty rapidly, uh maybe made uh certain things look good, but sometimes the economy, you know, it's up at up until 92, we were still doing that old yo-yo effect. Uh and I don't I don't remember what it was like, like say like in 88, 89, but I know by the time we got into the 90s, it was it was pretty soft.

SPEAKER_04

Yeah, I certainly remember that '92 uh recession there uh uh and there was a political change around that as well. Um so I I want to I want to get to the buyout, because this is the buyout of the Patton family. I want to get to that. But before we really get in more into that detail, you touch base on that, but I want to explore a little do a deeper dive. But before we get to that, Doug, I want your perspective. You're you're involved in the business, you're an owner, uh, you see what's happening, and now Wally becomes president. What did that mean to you as um uh as a leader of the company as well?

SPEAKER_01

Yeah, um, it was obvious that David uh wasn't interested in really running the company, providing leadership for the company. And I would say that from my perspective, I considered Wally the president, the leader of the company years before he actually became president. And I think that was the case for others in leadership, that it was obvious who was had the vision and who was uh leading the company, even though Dave was the president, um, he really didn't fulfill that responsibility. So the official announcement, I don't know if it had that big of an impact on me because we were already um going to Wally or relying on Wally to lead the company, even though he wasn't president.

SPEAKER_04

Yeah, so I mean it was just it was a title change at that time, but Wally was was was the leader of the company at that time. All right, so I want to I there and there were a couple, there were two really key things that happened in in October of '93. Uh one is the buyout, which I want to explore, and then the other is the catalog, which Wally, that was one of your concepts and ideas. But let's let's take this buyout, and I want both of you to walk me through this process so that you know I can better understand it. Because I was part of the organization, but I was fairly new, and I'm looking at this from the outside, you know, outside looking in. But the other thing that was very important to me, Wally, is when you hired me in 1990, one of the key things that like both of you guys, I really wanted ownership. And and you told me that there potentially could be a change of ownership of which would allow me to have ownership as well. So I'm I'm like cheerleading this thing on from the sideline, but I want you guys, because you're both of you are heavily involved in this, tell tell me more about this buyout.

SPEAKER_01

Well, I'll start out because uh certainly it was Wally's um idea. And uh if I recall, Wally came to me and said, um let's buy out Dave. And it was his idea, and I think he felt that the timing was right in '93, as as he indicated, the stock value had gone down some because we had we're going through that little bit of a tough period. And um I guess my involvement mainly was uh doing some calculations on what the stock price should be and how much we should offer David. And and while he took it, um went to David, approached David about it. And I will say that um our attorney at the time, Sock Papa John, was very helpful in that whole process. Uh David really trusted him and relied on him, and and Sock did a great job of helping that whole process to go through and uh for us to be able to acquire David's shares.

SPEAKER_03

So Yeah, well that was that's another one of those respect issues of uh Sock just seemed to have uh uh a respect for Doug and I. And uh he he he essentially just told Dave it's best for you to sell out.

SPEAKER_04

And he listened, obviously. Yeah. I want to I want to go back to the valuation because today the way companies are valued uh with multiples of eidbata um a little different, I'm betting, than 1993. So what what was you know what was what was your calculation of the value? You don't have to tell me the number, but just how you went about that. Yeah.

SPEAKER_01

Um I wish I could remember more clearly how we did the valuation, but we had a formula, and it was uh based on the asset value, how much excess working capital was in the company, and we kind of factored that out. Um and I'm sure earnings came into play, but it was no discounted cash flow, none of that that we use now. Um But I I think the formula was really pretty fair and came up with uh pretty realistic value. We had used that formula whenever we valued the company anyway. Trevor Burrus, Jr. We bought shares. Like for instance, when I bought my 25 shares, that was the formula we used to calculate. So it was a very fair formula for so David knew how that we were using that formula and that it was consistent with what we'd done in the past. Trevor Burrus, Jr.

SPEAKER_03

Yeah, and we we bought out all the minority holders in that process, too. And uh I'm quite sure we used that formula for that. Trevor Burrus, Jr.

SPEAKER_04

Minority owners outside the company. Uh because I actually I was a minority owner prior to that. I mean, when you say I got an opportunity to buy in '92, I think it was out outside the company.

SPEAKER_00

Like David's sister was Fred was no longer with the company.

SPEAKER_04

So when I say outside the company, I'm guessing what I I I guess what I meant to say is people no longer involved in the company.

SPEAKER_03

Yeah, they were they weren't involved in the day to day-to-day, yeah.

SPEAKER_04

Exactly. Um was it was it uh a stock sale or asset sale?

SPEAKER_01

I think it was stock sale. We did a stock sale.

SPEAKER_04

Yeah, I that's what that's what I was thinking, but I wasn't quite sure. Well, one of the things that opened up, uh Wally, and I I you know I give you great credit here because when you when you decided to buy, and and you again you bought those other minority owners out that were no longer involved in the company, you could have owned the company a hundred percent. But you set aside a block of shares for the managers to buy uh in ninety-three and ninety-four and and at this discounted rate as well, uh of which uh certainly um I took advantage of that. And I wish I would have taken more advantage of that, but uh certainly Doug and I took advantage of that, and you know, I'm very grateful for that opportunity. But what I want to do is uh ask you why why didn't you just say, no, I I want 100 percent of this. I'm uh and why did you say I want the managers, I want the team to have some ownership?

SPEAKER_03

Yeah, well, it it goes back to uh uh my uh relationship with My dad and with Alan Patton. They showed me that ownership was really important to me. And uh it uh it and also then uh carrying that further down the road, it gave me uh a market to sell Metalcraft too, which basically with you uh you uh Doug and Steve uh there. And uh I uh you know part of it was just my like for ownership. Uh most guys won't give up, you know, they but they want like 100% if they can have it, and uh that gives them big bucks, you know. And that I mean I saw that in a lot of cases, you know, like from GPI. I if there was anybody operating like us, there wasn't very many, that's for sure. And then uh uh probably in in the long run, it uh which would help me and you guys both. Uh you both had significant ownership by the time it came to buy me out. So that uh that gave me the market, and it also uh gave you guys because you had this ownership, you could go to the banks, and they were much more likely to listen to you.

SPEAKER_04

Well some banks. I don't know about much more, but uh no, I you had a yeah, I I I'm sorry, I'm chuckling on that, but uh yeah, it uh depends upon the bank. But uh while extremely, I mean you had that that vision, uh that that's an incredible vision that you had to say, uh sure I can have this, but what am I gonna do when I want to sell it? And you know what you you all all of us know what happens when that when that occurs is it gets sold to another company or private equity and it gets sliced and diced. And yeah, uh so you really had the speech.

SPEAKER_03

Yeah, if I hadn't to let you guys buy in, uh I probably wouldn't have had a market locally.

SPEAKER_04

No, not locally. You would have had a market, but it wouldn't have been local. The company would not be the what it is, it would not have been local. Who knows if it had been private?

SPEAKER_03

That was uh that was really, really important to me.

SPEAKER_04

Yeah. Well, I uh you know again, uh kudos for for doing that and keeping this business viable and continuing to be private. And Doug, uh we'll we're gonna get into that in the third session uh or for third segment, but uh yes, because we had about 30 percent ownership of the company, that really did allow us to well, there's no way we could have we we couldn't have pulled it off as tight as it was. But so thank you for for doing that. Okay, Wally, the other the other key thing, and how could two huge things like this happen all in the same month in the same year? Okay, we we had the buyout, and then the first major catalog drop is October. This was your concept of of this catalog, printed catalog that we could mail out to thousands of customers and potential customers. In fact, actually, when when you interviewed me, you talked to me about this concept. Uh, what were your overall feelings of of the catalog and then uh being able to mail out 200 to 250,000 catalogs a year and grow that business?

SPEAKER_03

Well, a lot of the driving from my standpoint was we had all these customers, thousands of customers, and even though we had reps all over the country, I mean, uh you can't reach them all. So I will always thought, how do we reach all of these people on a regular basis so that we we can get get these orders? So uh uh and plus it it you know allowed us to put all the products basically in one one book, and uh that helped customers order basically can they get ordered right off of the book, you know. And uh it was also a big help for reps in terms of uh here we have all this and under one one cover, we might say.

SPEAKER_04

Yeah, yeah, it was um it was quite an era for us there. Um okay, so a lot happened from the balance of the 90s, uh tremendous uh from from the ownership or the rest of the 90s that and I'm just gonna run through a few things uh that were really pivotal for uh for our history. Um you you implemented teams and team training. Uh we also uh brought on John Deere, which was um an incredible opportunity at providing them uh what we refer to as on-demand nameplates. So they would send us the file uh in the morning and we would laser engrave these. So we'd never at that point because the laser blew up a decade before, we had never laser engraved and provide them. And then we had we implemented continuous improvement, which is very important in manufacturing. Uh we also um initiated strategic planning uh for the future of our our company. We um website. We we rolled out the our own our own website at that time um as well. And then we had the we had the the PIB. I love the anachronyms that we have, which was uh the pay, incentive, and benefits. Uh and then probably the most bold decision that we made in the late uh 90s was we got into digital printing, um which was we were very much cutting edge. There weren't too many companies that employed, so we went to indigo. Uh so there are a lot of things in Wally, I'd like for you to take maybe one or two of those and and just uh take those and and and give your viewpoints about the importance of those one or two.

SPEAKER_03

Well, uh actually my number one item is I just rolled up uh several of those items up above and just uh said it was it's the people. And uh the uh you I learned uh so much over the years. Uh I mentioned earlier, I think uh you uh we had brainstorming sessions, and I I would always be amazed at how many good ideas would come up that I never thought about them. But also, you know, with with the people you you look them in the eye. Every day you come in there, you look them in the eye, and uh you just know it's about the people. They're you know, like friends practically, you know, like family, because uh uh everybody's close and uh uh and you just want to get along, you know, and you want to make the organization strong by the support you can get from all the people. And the other one is digital printing. Uh you know, it's new cutting edge technology, and it uh it just gave us a whole new technology to build a business on.

SPEAKER_04

Yeah, it was interesting technology for sure. Uh Doug, I mean, I I believe, if I recall right, that was about a half million dollar purchase. And how do we I mean our sales at that time uh you know, I I can't quite remember, probably probably in the five million dollar range, somewhere around there. Um but when you're investing five hundred thousand dollars in a piece of equipment, how did how did we adjustify that?

SPEAKER_01

Yeah. Um I think uh you know, we we always had a kind of a system of before we would buy a piece of equipment, we would run it through uh a model, and the goal was to get a 25% return on any type of asset purchase of that size. So we probably fudged the numbers to just justify it. So you would never do that, would you? So it came out to be the 25%. But I I think based on some projections of how it would impact sales and costs, and we could we could justify that buying that piece of equipment over time would generate that 25 percent return.

SPEAKER_04

Now, if if and I I could be off on this, but uh and so uh you know correct me and maybe you can shed more light on it. But I we were producing negatives off the auto logic at that time. And I I I just seem to recall that we could produce negatives maybe more efficiently, uh more productively. And did that come into play? I mean, you mentioned, yeah, of course, you have to go through the uh the analysis and so that that's a lot of people. Sure, that would have been part of it.

SPEAKER_01

Yeah, some cost savings there. I mean, we didn't I don't think we adjusted the price down as a result of being more efficient. So, yeah, that was a way to justify that capital expenditure, I think.

SPEAKER_04

Okay. Wally, thanks for sharing those. And you know, to to this date, uh our first uh value is member owners focus. And it's interesting because you you mentioned people first. I mean, you were a people first person then and and you supported that. So you uh certainly led that and you were leading that at that time. Very important at that time. Absolutely. Doug, what uh what what couple are you know, you want to take one or two of these that I mentioned and and maybe tell us a little bit more about them?

SPEAKER_01

Maybe talk a little bit about PIB since you like the website. Oh, I love the acronyms of the phone.

SPEAKER_04

I love our acronyms, I do. We have a we had a few good ones too. Oops. It's not maybe not quite as good as OOPS, but not quite, but yeah.

SPEAKER_01

So yeah, as you indicated, it stood for pay, incentive, and benefits. And we it came about, I think, as part of strategic planning when we initiated that. There was a consulting firm in Minneapolis that we uh hired to help us with that whole process. And the the goal was to just analyze our pay and our incentives and our benefits to see if they were in line with the market. Um we'd always, I think, had a pretty good system of base pay and bonuses based on how the company did, and uh benefits, I think were always good, but we didn't really have a good comparison with what the market was out there. So we went through the process of uh analyzing everything, made a few tweaks in our pay and incentives and benefits to benefits being paid time off and insurance benefits to make sure we were in line with the market. Um and I think a couple of things that came out of that was we really spent a lot of time communicating that whole uh system to our members so they kind of understood uh what was what we had gone through and what what they were getting. Um and it goes back to the the the member focus value that we have. Um and I think um the system uh we improved it. The pay, base pay system, I think we made a lot of tweaks to, we set up um pay grades, pay ranges, and tied it more into our annual appraisal system of employee performance that affected their pay uh more, which I think was was a great change. And I and as Wally said, I think it it all gets back to the kind of the culture of being member focused and wanting to provide as good a package as we can and and being competitive with the market. So I think that was uh that was a great project. And I we the results of that I think we continue to use for years and years and years.

SPEAKER_04

You're you're absolutely right. I'm glad you chose that one because interestingly enough, we still we we tweaked the slightly tweaked the cash bonus program, which was a result of that. And of course, you know the formula on that. Our members know the formula, we're still using that today. Uh we just made the one tweak between 8% and 10%, uh, adding those half percent increments. But today, we nearly 30 years later, uh, we're still using that with our members. And the other thing about the grades and uh evaluating a grade, we're using that today, again, nearly 30 years later. Uh we so that that was extremely impactful. So thanks for taking that one.

SPEAKER_01

Yeah. Yeah. The other thing I I guess that I thought was pretty impactful was strategic planning. Um ever since I uh started at Metalcraft, we have been doing annual planning, and we spent quite a bit of time and effort in doing that annual planning every year, but we never really looked at strategic planning out three years or three to five years, or and really looked at those types of things. So I think the whole process of implementing strategic planning was very beneficial for Metalcraft. I think one of the benefits for me was um maybe a better functioning leadership team because you went through that as a leadership team, understood a little bit about the other departments' priorities and key result areas and how it all fit together as far as a company and and how we could use that to uh improve our our company. So, yeah, I think strategic planning was key too.

SPEAKER_04

So in in that um that created a little more camaraderie between the the the key folks there, right? Um thank you for uh for bringing that up. Yeah, strategic planning is something that's very important to the company today. Uh it's it's evolved, but it's still very important today. Um I also want to uh address the fact that um again for for our survival and thriving, we needed to add a lot of products in order to more effectively um uh handle our customers, handle our customers, but serve our customers. Uh and so we had a uh we had tremendous growth in label products where we were always this nameplate company before. So I'd like either one of you to address that that intro and the and the growth into to the label products.

SPEAKER_01

You can have that one, Wally.

SPEAKER_04

Well, I don't jump all those guys.

SPEAKER_03

Well, uh I I don't know that I'm uh uh real good at answering that because of uh uh I I have to think back of some of the timing, but I I I do know this. We learned uh really pretty quickly that we couldn't rely on the metal metal, just that metal nameplate for for much of much growth, you know. So we started uh a wide variety of labels even way back in what 60s, 60s, I suppose we did some of that, 70s. But uh uh then uh and of course now you you have all these uh Delta machines that work uh really well with all that label and uh and uh rolling up your uh uh RFID tags uh on one machine, you know, and variety of uh ways of putting it together. Uh I uh I actually didn't get in a lot of that other than to go out and have uh tours and uh learn uh learn s at least some just by going through there. But I mean the way you're growing now, you have to have a pretty good product line. Yeah, for sure. And uh the thing of it is, you know, is that uh it's driven, probably driven to quite a degree. Uh one one of the things I've made a note of is that uh uh it seemed like uh as I was reading the history that a a lot of the development came about by uh one specific customer wanting uh a particular kind of label. And uh so I I thought to myself, how many of those customers do we still have? I mean, it just kind of rolls on and on, and uh because a customer comes in, they buy for a while, and then they might all of a sudden take something cheaper or something. Or I mean if you can build a business on customers coming with I ideas, that's certainly good, but you gotta have some of your own origination too.

SPEAKER_04

Some of the own innovation on that. Okay. So Doug, uh uh we come to the late 90s, and we now have outgrown the system uh 34, and uh we're in need of a different ERP system. Uh tell us uh you know how that all that transpired.

SPEAKER_01

Yeah, I think it was the late 90s, and PCs were becoming more preval prevalent in businesses and Microsoft had come out with a lot of good office tools, and uh we were somewhat limited by the system IBM System 34 on what we could do. Um so we we decided to pursue a PC-based um LAN system with a server. And I'm not sure how we located a local gentleman who was doing programming for PCs, custom programming. So we talked to him and um had him get involved in uh proposing a quote for us on custom software for a PC-based system. He was associated with a company in Des Moines, Horizons, uh, which we used to do the programming for us. And so we had a completely custom written uh PC-based system.

SPEAKER_04

How'd that work for us having a total custom system?

SPEAKER_01

Well, it worked. Um there were always issues, it seemed like, that would come up, and then you you had to get a hold of the uh programmer and have them make changes and rely on them to make the correct changes. And so you were somewhat limited on uh the scope of what you could do. And I think that's actually when we decided, I think it was maybe 2004 five, to pursue uh more of an off-the-shelf uh PC-based system. So we did a lot of checking around and ended up uh finding a, it was actually a software system for printers that was um CRC was the company that had uh uh marketed that system. And so we did some investigation and uh got a quote from them, and um it didn't fit Metalcraft exactly, but the good thing about CRC was that uh they promoted it as being easily customizable. So it was customizable, but I don't know if it was easy. I don't know about that.

SPEAKER_04

Well they got 50 percent of it right, right?

SPEAKER_01

Yeah, right. So it it ended up being a pretty good package, actually. And they did a good job of supporting us. Um we did a lot of customization to it to fit metal craft, and uh they actually did a quotation system for us that was a that was a big project, and um it it did it functioned. So I don't know if it was exactly what we wanted, but it it functioned well. So we um we moved from our um system that Horizons had done for us. We probably had used that six years. Maybe seven years and moved over to CRC. And I felt a lot better having CRC supporting us than depending on one guy in Des Moines who who knew what he would what would happen to him. And if he went out of business, who was going to support us? So with CRC, they had 50 plus installations, I think, and a good support team with several programmers there. They were located in Scottsdale, Arizona. So I felt better being with them and the support they would provide for us. And and actually it it worked out well. I think we stayed on that system through what 2018.

SPEAKER_04

Actually, it was December of 2019 when we converted to the new ERP system. So yeah, for several years. Several years on that. Thanks for that perspective. Appreciate that. So Wally, we had another major technology innovation coming in in the early 2000s. And this one is um radio frequency identification or RFID. Much like uh barcode, it was uh it was potentially going to change the dynamics of the marketplace and what customers wanted. I remember taking this trip with you and Clyde, and we, you know, we went to Denver, we went to the Silicon Valley, we went to LA and went to Minneapolis, and we were just gathering a lot of information. This is circa 2000 about RFID market, and and we proceeded ahead. You know, we we proceeded ahead to saying, you know, we we want to do this. Uh but I I just want to get from your perspective of, you know, you're the majority owner now, and you're the you're the you're the CEO. Um what were your thoughts going through your mind as uh in in terms of supporting us and moving us uh in that direction of of uh pursuing RFID?

SPEAKER_03

Well, I knew it was um you have to roll with each new uh technology. Uh technology will happen whether you do it or not. And uh so uh uh there's uh parts of that I remember and parts that I don't remember. So I can't I can't answer it exactly other than that I know it was something we had needed and had to do. And uh unfortunately over this uh l at least probably quite a few years, it's it's really really paid off.

SPEAKER_04

Yeah, it's paid off marvelously. And there were two two other components to that around you know the early 2000s. And you know, I don't know if you you guys can remember this, but we were famous to uh going to 3M auctions. Uh and and you know, John Henry would go to these 3M auctions and we would buy a pallet load of things. We had to buy the pallet because we wanted one or two items, and but you'd always get these uh disparate uh items in there. Like, you know, I went down one time and there was a there was a Ford truck door on this pallet, and I'm thinking, but you had to buy the pallet. We bought a, I mean, John, John bid like just less than $10,000. It was a big investment for us, but it was brand new, it'd never been used before. And in fact, uh the you know the uh 3M called us and said, We made a serious mistake. We shouldn't have sold this to you. Are you willing to sell it back? We said, no, thank you. And we used that, that became the Raptor. Uh we we modified that to the Raptor, and that produced our very first, which we're using today, um, but that produced our very first RFID order. Um, and then as we work towards 2005, business is starting to pick up. Wally, one of the things that that and one of the last areas we're gonna explore here is uh you know, we're getting ready, you're you're thinking about selling the company. Um, and this is you know, circa 2005, you're thinking about selling the company, but before we get to that, um we're gonna buy this million-dollar machine from from Delta, who we had some experience. They we they spec'd out, we spec'd out the machine uh with our FID. Again, our sales are seven million dollars, and we're gonna buy a million-dollar machine. And you're thinking that you're, I mean, right, you may be you may be selling the company. What I'm interested to know is why did you commit? Why did you get behind that and say, yeah, um, even though I may sell the company, I'm willing to go ahead and approve this and move this thing along.

SPEAKER_03

Well, I when I first read it, I thought, well, did I did I lose a million dollars? Well, you may have, I don't know. Well, I uh as I look back, I mean it kind of like just fits into that same scope of uh uh I mean I I wasn't gonna uh impede the company from moving forward. Uh uh and I I had people comment to me that by me selling out it was gonna be hurting working capital, you know. But uh but uh I have that that strong feeling about uh company, seeing the company succeed and uh and the and the people when I sold out, I I certainly didn't have any feelings that I uh wasn't wishing Metalcraft the best. I certainly did. It was a very extraordinarily important part of my life, and I still look at it that that way. Uh uh I I it was it was just it was time for me to move on and uh and to uh work on my uh my foundation. Uh and most people probably had uh no idea how much I put into that foundation. I I would estimate I probably spent at least 5,000 hours uh putting um I mean we'd I I I would give money away in small amounts at one time, and eventually I said to myself, I have to see this perform during my lifetime, uh, see the value of it in my lifetime. So I I directed my focus different uh that way, but that's where uh probably something I shouldn't talk about, but with uh with my involvement uh with the Board of Metalcraft, I uh I never felt like I could be uh signing on to do a lot of extra projects or get uh really that involved because I was spending all of this time on that foundation. And uh it uh it still goes on somewhat because I will never give up on the importance of having that early intervention thing. So I uh uh I mean I've uh uh I I've been uh very, very busy over a lot of years. Uh uh you know, and I I I of course I gave uh the majority of it to Mercy Hospital. I gave some to Mayo and uh and then I I put a challenge out there that got so it was over a million bucks in in total eventually. Not not counting the Mayo thing.

SPEAKER_04

Wally, what you what you did with the foundation and the donation that you made here locally uh for Mercy One North Iowa uh several years ago is nothing short of phenomenal. Um and uh you know I'm certainly glad you put that energy into that. You you you know you know the thing is you didn't have to do any of that, but you chose to do it and you chose to take a situation that was uh that you wanted to to help others. And and believe me, I I totally relate to that um with with with our foundation, yeah. And I so I respect the heck out of you for for for that. Um and so that really what you're saying, and I you know that puts them into good perspective. So that really gave the impetus to say I'm spending all my time, it it's time for me to to sell and move on. Yeah, okay. Well uh Jets, you know what? Uh thank you so much. Uh this has been I've loved it. It's been fun, it's been uh conversational. Uh Wally, I really appreciate you joining us for these first couple of sessions. Thank you so much.

SPEAKER_03

You're welcome, Steve. I enjoy it. Thanks a lot for joining us this session.

SPEAKER_04

And we're gonna see you for the third session, which is the buyout and uh keeping metal craft uh private and local. And we'll we'll be uh doing that. So looking forward to seeing you for that.

SPEAKER_01

Looking forward to it.

SPEAKER_04

Thanks a lot, guys. Appreciate it. Thank you, Steve.

SPEAKER_01

Thank you, Steve.