C-Tech Industries Inc.

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C-Tech Industries Inc.

4275 NW Pacific Rim Boulevard
Camas, Washington 98607
U.S.A.
Telephone: (360) 833-1600
Toll Free: (888) 551-3633
Web site: http://www.c-techindustries.com

Wholly Owned Subsidiary of Alfred Karcher GmbH & Co.
KG
Incorporated: 1999
Employees: 500
Sales: $125 million (2006 est.)
NAIC: 333319 Other Commercial and Service Industry Machinery Manufacturing

Maintaining its headquarters in Camas, Washington, a suburb of Portland, Oregon, C-Tech Industries Inc. is North America's largest manufacturer of high-pressure washers and related equipment. The company's products, sold under the Hotsy, Landa, and Karcher labels, include both hot- and cold-water pressure washers, dry ice blasting systems, automatic aqueous parts washers, and high-pressure pumps. The company also offers wastewater and recycling and treatment systems so that users comply with environmental regulations, as well as detergents used in the washers, and replacement parts and accessories sold under the Spraymart banner. C-Tech maintains manufacturing and distribution facilities in Camas; Springdale, Arkansas (Spraymart's base of operations); Monterrey, Mexico; and Reggio, Italy. Another plant located in Calumet, Michigan, was expected to close in 2007. C-Tech is owned by a German company, Alfred Karcher GmbH & Co. KG, the world's largest maker of pressure washers.

ORIGINS

C-Tech Industries was created in 1999 when a St. Louis investment firm, Harbour Group, combined the country's two largest industrial pressure washer manufacturers: Landa and the Hotsy Corporation. By just a year, Landa was the older of the two companies, founded by a business school graduate, Larry Linton, in Portland, Oregon, in September 1969. His inspiration for starting the company was a chance encounter with a pressure washer in a paint store. The pressure washer was a relatively recent development, growing out of the Steam Jenney, which relied on low-pressure steam. Responsible for inventing the Steam Jenney was Frank W. Ofeldt, whose family had made major contributions to the field of steam boilers and generators. In 1926, in the midst of Prohibition, Ofeldt was employed by a Pennsylvania water heater and boiler company when he took on a project in his garage to make some extra cash: creating a portable whiskey still for a moonshiner. It had a steam outlet that was turned toward his greasy floor, and he noticed that the steam was doing a good job in dislodging the grease. He knew that steam lacked the mass actually to remove the grease, but he was intrigued by his discovery and eventually found a chemical to mix with the wet steam to make an effective cleaning machine, which was then used to remove grease from engines and parts. By the late 1960s a more effective alternative to the Steam Jenney gained prominence, hot water sprayed under pressure, which did an even better job than low-pressure steam.

Since Portland was known for its rainy weather, resulting in muddy vehicles and dingy buildings, the uses for pressure washers in the community were obvious to Linton. After a year of preparation, he launched Landa, the name being a quasi acronym for "Linton and Associates." He leased a 1,000-square-foot store in Portland and with a $600 tax refund check bought three pressure washers, which he initially rented out to painters. He later expanded his customers to include homeowners. While the rental business did well, Linton soon realized there was also money to be made in selling the equipment as well as accessories and the necessary washer chemicals. Annual revenues reached $1 million in 1976 and more than doubled just two years later to $2.25 million.

LANDA MOVES INTO MANUFACTURING

Demand was so strong for pressure cleaners that Landa had difficulty obtaining enough equipment for sales. As a result, Linton decided to become a manufacturer. With Linton's younger brother Paul in charge of the effort, the company began manufacturing both cold- and hot-water pressure washers under the Landa label in 1978. Success came quickly, and by 1985 Landa was the second largest manufacturer of pressure washers, generating sales of about $14 million. A new plant was needed, and in 1985 the company moved into a new 100,000-square-foot facility near the Portland International Airport. When the Exxon Valdez tanker caused one of the world's worst oil spills in Alaska, in March 1989, it was Landa that Exxon Corp. called on to develop a portable, self-contained, pressure washer for use in the cleanup. The $1.5 million sale was the largest in the company's history. It was also at this time that Landa moved beyond pressure cleaners, unveiling a new line of environmental systems, used to treat and recycle wash water, sold under the Water Maze name. The system employed a three-phase, closed-loop concept. The first phase used a solids-liquid separator, an oilcoalescing surface, and a filter to remove oils and collect solids; a second unit used a variety of filters to remove microscopic hydrocarbons, dirt, and other contaminants; and a final unit oxidized bacteria and metals from the water, which was now suitable for discharge into the sewer.

Landa used the Water Maze as a wedge to enter the Mexico market, especially Mexico City, notorious for its polluted air and water. Landa also spread farther south into Central and South America, including Costa Rica, Venezuela, Argentina, and Peru. Doing business in Mexico proved difficult, but new water conservation and waste recovery regulations helped to drive sales. Water Maze also enjoyed success in Canada, and within five years Landa had installed 2,000 of the units. Overall, Landa was somewhat disappointed with its international foray, however. Because domestic sales for pressure washers had softened, the company had looked to foreign markets as an engine of growth, but it required a much greater effort to sell internationally. When domestic sales picked up in the mid-1990s, Landa backed off and began focusing more of its resources on sales in the United States, Canada, and Mexico. A major development in this regard was the 1994 decision by W.W. Grainer, America's largest catalog industrial equipment supplier, to use Landa as its exclusive supplier of hot- and cold-water pressure washers. Nevertheless, the company continued to expand internationally, eventually selling its products in more than 35 countries around the globe.

Landa's steady growth caused the company once again to outgrow its facilities. The search for a site on which to build a new plant led to Camas, Washington, in the outskirts of Vancouver. Here, in 1998, Landa built a new 200,000-square-foot facility that combined manufacturing space with the company's administrative offices. By this time, Linton had turned over day-to-day control of the business to Andrew Gale. After working as an accountant for several years and earning a master of business administration degree from Washington State University in 1988, Gale had joined Landa and began working his way up through the ranks, becoming controller, chief financial officer, chief operating officer, president, and ultimately chief executive officer. When Linton sold the company in 1999, Gale stayed on to run it. Linton, in the meantime, devoted his attention to a company he had founded two years earlier at Landa's previous facility, Water Technologies International, making drinking water filtration equipment.

COMPANY PERSPECTIVES

The mission of C-Tech Industries is to dominate our targeted North American sales channels in the design, manufacture and marketing of powered cleaning equipment and related systems.

Meanwhile, Landa, which by this time was generating annual sales of $40 million, was acquired by St. Louis-based Harbour Group. Launched in 1976 by investor Sam Fox, the private investment firm specialized in buying manufacturing companies that it could nurture through reorganization and mergers in order to profit by taking them public or selling to another company. One of the more than 100 businesses it had acquired was The Hotsy Corporation, a top high-pressure water washer company picked up in 1997.

HARBOUR GROUP FOUNDS C-TECH: 1999

Hotsy was founded in 1970 by Robert L. Cohen, a native of the Denver, Colorado, area. He started out in the trucking industry and served as president of Navajo Freight Lines from 1964 to 1970. Being familiar with the way trucks were cleaned, Cohen recognized that there was an opportunity in the high-pressure hot-water washer business and left trucking to pursue it. He bought an Iowa company called Kenco Tech. and moved its operations to Englewood, Colorado, in 1970. He renamed the company Hotsy, short for "hot systems." While it may have sounded odd to many, the name was memorable and Hotsy soon became the leading brand in the industry.

Cohen was in his late 60s when he sold Hotsy to Harbour Group and retired to Carefree, Arizona, to spend the rest of his life hunting, fishing, skiing, and playing golf. Hotsy became the foundation of Harbour Group's New Cleaning Technologies Group. Later in 1997, Cuda, maker of parts for washers, was acquired. The following year another high-pressure washer company, Rhino Industries, Inc., joined the group, followed by Landa in 1999, as well as Victor Midland, Inc., which made washers as well as accessories and parts. Later in 1999 Harbour Group brought together these assets, which included the top American brands in the industry, to create C-Tech Industries, based in Landa's new Camas facility with Andrew Gale in charge.

C-Tech started out with 450 employees, annual revenues in excess of $100 million, and manufacturing facilities in Camas, Washington; Colorado Springs, Colorado; Calumet, Michigan; Estherville, Iowa; Humboldt, Iowa; Springdale, Arkansas; and Reggio Emilia, Italy. The company also maintained a distribution center in Ghent, Belgium. After taking stock of its accumulated operations, C-Tech began restructuring the business in 2000. The Hotsy plant in Colorado Springs was closed in the fall to reduce excess production capacity. It was chosen because it was one of the older facilities and would require a good deal of capital to bring it up to date. Moreover, the plant was more costly to operate due to the area's tight labor market, which resulted in higher wages.

A downturn in the economy hindered C-Tech's growth in the early 2000s, as many companies held off on making capital investments, resulting in a difficult environment for capital equipment manufacturers in general. By mid-2003, however, business picked up for C-Tech, and Harbour Group elected to pursue an exit strategy. Talks were initiated with Alfred Karcher GmbH & Co. KG, a German company that was a global giant in the high-pressure washers field with $1.2 billion in annual sales. C-Tech's strong position in the North American market held obvious appeal to Karcher, but an acquisition was made even more attractive because the U.S. dollar was falling in value against the euro. As a result, when a deal was struck to acquire C-Tech in March 2004, Karcher received a 20 percent discount.

Alfred Karcher, an engineer who initially produced electric heaters and specialized industrial heating equipment, founded Karcher in Germany in 1935. Following the destruction of World War II, Karcher turned his attention to more mundane products, such as kitchen stoves, and in 1950 put his training to better use when he developed Europe's first hot-water high-pressure cleaning system. After his death from a heart attack in 1959, his wife carried on the business. By the mid-1970s the company focused all of its attention on its pressure washers, and a decade later created a new market that it would dominate worldwide when it introduced the first consumer models of pressure washers based on the professional line. Karcher then became involved in the U.S. market with the 1989 acquisition of American Cleaner.

KEY DATES

1969:: Landa begins renting pressure washers.
1970:: The Hotsy Corporation is founded.
1978:: Landa begins manufacturing pressure washers.
1997:: Harbour Group acquires Hotsy.
1999:: Harbour Group acquires Landa to create C-Tech Industries.
2004:: C-Tech is sold to Alfred Karcher GmbH & Co. KG.

Karcher retained Gale and his management team to run C-Tech, which was granted a great deal of freedom by its new owners, who, unlike Harbour Group, were intimately familiar with the pressure washer industry. "You're never 100 percent independent at the end of the day," Gale admitted to the Columbian newspaper of Vancouver, which reported, "most sales, branding and new product development takes place locally. Local managers develop strategic plans jointly with Karcher, which has encouraged C-Tech to adopt its 'Karcher Production System.' … Posters on the manufacturing floor show each team's goals and quantify productivity under this new system."

Under Karcher, C-Tech underwent a further restructuring of its operation. Plans announced in the fall of 2004 and completed in 2005 resulted in the closing of the seven-person detergent factory in Estherville, the 40-person pressure washer factory in Humboldt, and the parts washer factory in Calumet with 45 employees. In addition, the Springdale, Arkansas, plant was replaced with a larger 103,000-square-foot facility, and a new 120,000-square-foot plant was opened in Monterrey, Mexico, to make high volume pressure washers, high pressure pumps, and parts. These changes were made in order to remain competitive in the global marketplace, which began to see China, a supplier of pressure washer parts, offering fully assembled products at low prices. While the quality was not particularly good, it was bound to improve, and C-Tech took steps to protect its position. The Monterrey plant was devoted to the lowend products requiring a price edge, and the specialized products were made in Camas. The company also looked for new opportunities. One of the most promising was a wastewater reclamation system it was marketing to Home Depot, which rented C-Tech washers to do-it-yourself customers. When the rental units were returned to the store, they had to be cleaned before going out again. Due to environmental regulations, Home Depot had to make sure it removed any chemicals or oil from the equipment. The C-Tech reclamation system to collect and remove these pollutants enjoyed a successful trial at an Oregon Home Depot, leading to the order of 88 systems. The potential market at Home Depot alone was ten times that amount. After overcoming tough times in the beginning of the decade, when sales dipped well below $100 million, C-Tech posted revenues around $125 million in 2006, and there was every reason to expect that number to grow steadily in the near future.

Ed Dinger