U.S. Boiler Company, Inc., Burnham Hydronics --

Chris Drew

Phc News continues its monthly “Executive’s Club” feature with Chris Drew, president, U.S. Boiler Company, Inc., Burnham Hydronics.

Please provide a brief history of the company.

Drew: Burnham is one of the largest manufacturers of cast iron boilers and hydronic heating accessories in the United States. In addition, we fabricate a complete line of condensing boilers, utilizing both stainless steel and aluminum heat exchangers.

What is new and exciting with the company?

Drew: We have a significant number of product and operational efficiency initiatives currently under way. Personally, I am most excited about some of the new products we have in development. Our engineering staff is designing a new generation of boilers that borrows styling and technology liberally from a number of other industries. In particular, we are leveraging the industrial design and technology currently integrated into high- end “white goods,” automobiles and industrial computers. I really don’t want to go much beyond that for competitive reasons. I will say, our goal is to market boiler products that are viewed by consumers as safe, reliable, highly efficient and technically advanced. We also are designing these same products with an eye toward making them simpler to install and service than competing products.

Given the current status of the global economy, what effect, if any, has it had on Burnham’s overall business?

Drew: Burnham has faced similar challenges to those of all manufacturers around the world. We have felt the impact of spiking energy and fuel costs, as well as exchange rate fluctuations between the U.S. dollar and the Chinese yuan and Euro. Most significantly has been the impact of the dramatic inflation in costs for steel for boiler shells and jackets, and steel scrap for the foundry. Interestingly, the run up in steel scrap has been partially caused by the weakness of the dollar. A weak dollar made it very attractive for foundries and mills around the world to purchase scrap in the U.S. and ship it overseas. As a result the U.S. has seen record scrap exports through the first half of 2008. The unfortunate by-product of these exports was domestic prices for scrap that rose to record levels almost overnight.

What factors separate Burnham from its competition?

Drew: Two factors stand out as having helped Burnham thrive over the years.

The first is our high degree of vertical integration. For example, the key component of a cast iron boiler is the cast iron section assembly. We are the only boiler manufacturer in the U.S. that manufacturers all of its own cast iron boiler sections and makes 100% of its own sheet metal for boiler jackets. Our foundry operation is state of the art and we make the most technically advanced boiler castings in the United States. Our two sheet metal operations process an extraordinary amount of rolled steel using an array of cnc machines. Leveraging these operations allows us to ensure the quality of our parts and provides plenty of capacity to meet dramatic fluctuations in demand.

The second factor is our people. We have a significant number of long-term employees throughout our operations. One in particular is our sales staff where we have had particularly low turnover among our direct sales- people, which translates into strong multi-decade relationships with our wholesalers and the contractors that install and service our equipment.

What is the mission statement for Burnham?

Drew: The follow are excerpts from Burnham’s 2007 Annual Report. Our philosophy is to be:

• A company whose products are efficient, safe, reliable and the best value in the industry.
• A company whose customers recommend us to others because we consistently exceed their expectations.
• A company where the best people want to work.
• A company whose success can be measured in the growth of its people, its market share and its earnings.

Our guiding principles are:

• Performance -- We are always striving to improve our service and to be a state-of-the-art supplier; we encourage the entrepreneur in each of us.
• Relationships -- We treat customers and suppliers as partners; we treat each other with respect.
• Growth -- We seek new markets and new opportunities; we innovate to get and keep customers.
• Integrity -- We keep our word because we’re Burnham.

What are/have been your key initiatives for the company?

Drew: The boiler market today is enthralled by efficiency and that market view is feeding a significant number of our initiatives. We have introduced six new Energy Star products, in a multitude of sizes, during the last 24 months, which is more than any other domestic boiler manufacturer. In fact, our overall product line efficiency is over the 85% Energy Star minimum and the products introduced span all segments of the hydronics market. We are the only domestic manufacturer to offer stainless steel and aluminum gas fired condensing boilers and we make the only 3-pass high efficiency oil fired steam boiler in the world.

Looking ahead, our product development pipeline is full with additional high efficiency products. Our goal is to continue to develop innovative, differentiable, category-leading high quality heating equipment that is easy to install, safe, dependable and cost effective.

To what do you attribute Burnham’s continued success, innovation and growth?

Drew: Like many companies Burnham’s long-term and future success is a result of a distinct focus on its markets and operations. Beyond our investment in developing new products, we have reinvested heavily in our manufacturing operations. Our new facility in Lancaster, Pa. is the result of five years of planning and execution by our operations team to design and commission what I believe is the finest boiler assembly and machining operation in the country.

Our Zanesville, Ohio foundry also sees continual re-investment to ensure that our molding operations are competitive with any boiler foundry in the world. Through all of these initiatives, we are focused on marketing industry leading boiler products, which are manufactured as efficiently as possible. Successful execution along these lines drives our success, which allows us to grow and reinvest in additional product innovation.

Explain Burnham’s commitment to customer support and service.

Drew: Burnham has a strong direct field sales staff and we work with many of the best manufacturer’s rep agencies in the hvac industry. We have a reputation for providing excellent service and support for our products through both of these channels. Our internal customer service organization handles technical support for contractors, product information for homeowners and a myriad of services for our wholesale customers.

What is Burnham’s commitment to its employees?

Drew: Burnham employs over 1,000 people who combine an intense dedication to their responsibilities with a level of experience and commitment to winning that is unmatched by the competition. As we state in the company’s annual report, we encourage the entrepreneurial spirit in each of our employees and constantly strive to create an environment where the best people want to work. In fact, part of our continued success can be directly measured in the growth of our people. We have a strong, experienced organization that is well positioned to implement the plans and visions of the company and take full advantage of the opportunities presented to us in the marketplace. We do have the best people in the industry in every area of our company and will continue to help them grow and prosper in the future.

What is Burnham’s commitment to contractors?

Drew: We pride ourselves on developing equipment that is contractor friendly from an installation and service perspective. The attention to detail that we go to regarding these feature sets is impossible to communicate in a piece of literature so we view training as one of the key touch points we use to drive home our message with our customers. Our trainers conduct well over 500 training sessions for contractors and wholesalers every year. They are real road warriors, logging tens of thousands of miles traveling across the country providing training on our products, their installation and use. They have some great stories to tell about getting to remote parts of Alaska and the urban jungles of New York.

What is Burnham’s commitment to wholesalers?

Drew: As I mentioned previously, we have invested significant resources in our facility in Lancaster. During the planning process, we attempted to factor in the needs of a changing wholesale distribution environment. Wholesalers are utilizing computerized inventory systems more effectively than ever before, focusing on financial measurements such as gmroi (gross margin return on investment) as they make purchasing decisions.

Additionally, there has been significant consolidation among wholesalers. In today’s tough economic times it is increasingly difficult for smaller wholesalers to fund their receivables and inventory unless they are well capitalized or have access to bank lines of credit. Therefore, many of our customers are ordering small loads more frequently in order to use their capital more effectively. Based on that understanding we designed our operation to allow us to quickly ramp our production up and down to meet the dramatic demand fluctuations inherent to the industry. The combination of production responsiveness and an increase in warehouse space allows us to deliver, on average, in less than 10 working days during heating season. Typically we can deliver certain “A” items in less than five days. Remember, logistically, we are talking about boilers generally weighing 500+ pounds and worth thousands of dollars; this isn’t equipment that we call for a Fed-Ex pick-up.

What would you like your legacy at Burnham to be and where do you see Burnham in 5-10 years?

Drew: Interesting question -- now you are asking me to break out my crystal ball. Burnham has been in business for a long time. And since its early inception as the pre-eminent greenhouse manufacturer in the U.S., during the second half of the 19th century, there have been any number of visionary leaders. My tenure is just beginning and history will determine my legacy for better or worse.

Personally, I am attempting to leverage our engineering excellence, trying to drive the company into an era of advanced boiler products. You will see Burnham introduce more new, interesting differentiated products in the next twenty-four months as we have in any twenty-four month period in our history. As I have discussed we are exploring any number of new technologies spanning all aspects of boiler design, installation and operation. This is balanced with our ongoing commitment to training, technical support, marketing support and world-class operations.

We are committed to leading in all of these categories… that’s our heritage, that’s our legacy, that’s our future.