Volume 45 Number 10
Pentair’s Waltz Steps Up to the Plate
A Harrisburg, Pa., native with an engineering degree from Penn State, Bill Waltz doesn’t believe in a lot of management improvement lingo. That’s ironic considering he used to be a management consultant with Deloitte & Touche. He prefers straight talk. The furthest he’ll go is MBOs (management-based objectives), which he underscores in largely sports analogies, borrowing from an old boss who used to cite football’s “blocking and tackling” as the basics necessary to succeed. He prefers baseball analogies.
A firm believer in “incrementalism,” Waltz doesn’t anticipate earthshaking changes in water treatment technology. Rather, he suggests, progress will be made by doing things better, customer service improvement and refining what’s already around—whether through complementary technologies or manufacturing efficiencies that make Pentair more competitive.
While not on a buying binge, acquisitions in the past year significantly helped Pentair Water. In September 2002, it bought Plymouth Products—now PENTEK—from a downsizing USFilter. In July 2003, it picked up K&M Plastics, following the sudden death of president Charley Poellet. Pentair also picked up a few pool equipment, pump and tool manufacturing operations in between. The goal is to target strategic buys that tie into existing businesses.
The larger company, Pentair Inc., is split into three divisions—the Tools Division, Enclosures Division and Water Technology Division. In Water Technology, you have three groups, the Pump Group, Pool Group and Water Treatment Group. Waltz was promoted from vice president and general manager of Aurora Pump in the Pump Group to head the Water Treatment Group in July 2002. Pentair sales as a whole were $2.6 billion in 2002, of which the Water Technology Division made up a third. Water Treatment revenues were a third again of that, he said.
Waltz pointed out overall revenues, while being up, remain relatively flat—like the national economy—if you look at it on a “same store” basis. So, where does Waltz look to grow the business, particularly since Pentair is projecting internal growth of 7-15 percent? “If we do what we need to do, serving the customer, getting new products out and shipping quality products on time, it’s a stretch, but it’s doable,” he said.
“We’ve done a great job of recently coming out with a twin tank valve; and we’re coming out in the next couple of months with a higher flow valve for larger homes. PENTEK was a great buy, adding a lot of valuable skill sets. And the K&M asset acquisition will be great for us because there were customers buying, hypothetically, two-thirds of a truckload of mineral tanks. Now, we can just fill that truck out and provide them with all the product they want,” Waltz said.
Pentair Water—through its WellMate brand—is also about to release a new sideport hydropneumatic tank.
Regardless of economic indicators, Waltz sees water remaining as a driving force for its namesake parent: “It’s definitely the Water Division that’s going to be the focus of Pentair going forward, just because of the fundamentals of the industry. It’s a big part of Pentair.”
Before we get to the interview itself, here are a few facts on Pentair Water Treatment
Pentair Water Treatment
Management: Bill Waltz, Vice President & General Manager
Operations: Manufacturer of multiple lines of water treatment equipment for the residential, C/I and municipal small systems markets. Brands include Fleck, Structural, Codeline, WellMate, PENTEK (formerly Plymouth Products), Hydromatic, American Plumber, Myers, Fairbanks Morse, Aurora, DeVilbiss, etc.
And now for the interview:
WC&P: How long have you been in the business and how did you get started?
Waltz: I guess I'll do it in reverse chronological order. Let's just say, I've been with the water treatment part of Pentair just since last July—a year ago. But, I've been with Pentair for about nine years. I was with the Pump Group for the last eight, so it depends on how you define "water." Before that, I used to be with a consulting group that actually did a project for one of our pump companies and that's how I switched over.
WC&P: What was the name of the consulting company?
Waltz: Deloitte & Touche. It used to be one of the big six accounting companies. I used to be with their management consultant group.
WC&P: What inspired you to make the transition?
Waltz: I'll switch and go to chronological order in this case. I enjoyed my career with Deloitte & Touche. But, at the time, my wife was pregnant with our first child; and, as a consultant, you travel all the time. So, I decided to switch over to something where I could work out of one factory. It was in Chicago at that time. My wife and I looked at the area. It was the right sized company with the right people. It just felt right from that standpoint. From there, I'd been working with Pentair and this opportunity came up a year ago where my boss came to me and asked if I'd be interested. I like new challenges and learning new things and Jorge Fernandez, the previous manager of Pentair Water Treatment Group, was getting promoted to run international sales and operations for us. I jumped on the opportunity.
WC&P: It's sometimes confusing about the hierarchy there, so tell us how Pentair Water fits in the Pentair structure, please.
Waltz: OK. Pentair is around a $2.6-3.0 billion company with three divisions, a Tools Division, a Water Technology Division—which I'll explain—and an Enclosure Division. The Water Division, which is approximately a third of those sales or roughly $1 billion this year, is broken into three parts. All three segments are about the same size, give or take: a Pump Group, which I came from; a Pool Group, which makes components for swimming pools—it's actually the largest manufacturer in the world of swimming pool components—and the group that I now run, Water Treatment. The Water Treatment Group has numerous brands, and three main factories—one in Chardon, Ohio, where I work out of, Brookfield, Wisconsin, outside of Milwaukee, and Sheboygan, Wisconsin, which is where Plymouth Products is located. Coincidentally, Plymouth Products has just introduced their new brand name of filtration products. PENTEK is the name they will now use. The Water Treatment Group products include Structural tanks, Wellmate pressure vessels, Fleck control valves, which are water softening valves, and many various types of filter housings, drinking water systems and cartridges that PENTEK (Plymouth Products) sells. That's it in a nutshell.
WC&P: And the two new companies Pentair has acquired will fit into that as well, correct?
Waltz: Yes. Obviously, PENTEK, which I mentioned, does. We also bought the assets of K&M Plastics. In the past, we only had two brine tanks to offer to our customers, now we we'll be able to offer our customers a full suite of brine tanks to compliment our other products.
WC&P: Now, what did you get K&M for?
Waltz: Why did we purchase it?
WC&P: Why and I assume there was a dollar figure you report to shareholders on it?
Waltz: Actually, no, in that case, we didn’t disclose the dollar level. I can't tell you that.
[NOTE: According to Pentair Inc.'s 10Q Financial Report filed with the SEC on Aug. 12, 2003, the assets of both K&M Plastics Inc. and TwinPumps Inc. were acquired in July for $4.3 million.]
WC&P: What all comes with it?
Waltz: Basically, all the assets. So, the equipment that winds tanks for mineral tanks, which we're going to move to China just to serve the Asian market. It's harder here in the states to make a tank, ship it—as costly as freight is for something as big as a tank or brine tank—to China and compete against Chinese manufacturers serving the local market there.
WC&P: You mean all the production for that is being transferred to China?
Waltz: Exactly, only K&M’s mineral tank production goes there. Then all the molds and blow molding equipment used for brine tanks are going to move to Chardon, Ohio. And we bought it just for those reasons, so that we could serve the Asian market with mineral tanks that we were probably not being competitive with products out of the states and so we could add additional products for our customers with brine tanks in the United States and any other markets we serve out of Chardon.
WC&P: How many people did K&M employ?
Waltz: Honestly, I'm not certain.. This is a sensitive question. Probably the less said the better.
WC&P: It was kind of both good timing and bad timing considering the passing away of Charley Poellet. But K&M has been very well known in the industry, so you get a very good name, definitely, in the acquisition. Who headed up the team that went and looked at them?
Waltz: Mark Lamps, our vice president of operations from Chardon, headed the acquisition team.
WC&P: Some of the employees I guess you kept on and moved, correct?
Waltz:. Yes, there are some customer service people that are going to stay on for a while.
WC&P: Now, tell us about TwinPumps, which is the other company that was acquired at the same time, correct?
Waltz: Exactly. TwinPumps. I can't give you as much detail on (it), simply because—going back to the three segments of Pentair being the Pump Group, the Pool Group and Water Treatment—(it's in the pump group). TwinPumps is a small company in New Jersey, I believe. (It) is going to be a part of Fairbanks Morse.
WC&P: It'll go into the pump division, in other words.
Waltz: Exactly. It's a municipal pump line that will go well with our Fairbanks Morse product line.
WC&P: What's happening as far as revenues and growth in the Water Treatment Group, which we're most familiar with? How does it compare within the Water Technologies Division and the company as a whole?
Waltz: Overall, the Water Treatment Group is about a third of the Water Technologies Division. It depends on how you want to look at the group. If you ask on the sales end, then obviously their sales are much larger than they were. But if you look at the buzzword of “same store,” it's basically flat. We're holding our own with the market, but no substantial upswings or downswings right now.
WC&P: Now, the difference from when 2-1/2 years ago when we interviewed Jorge Fernandez for one of the first of these columns was, at that time, it seemed the Water Group was really picking up the slack on a lot of things. In particular, there were some problems with the Tools Division, for which Pentair's taken some remedial measures in the last couple years.
Waltz: Yes, if you look at the water organization, we had some organic growth and the acquisitions we've made help foster good overall growth. And it's still the focus of Pentair. It's definitely the Water Division that's going to be the focus of Pentair going forward, just because of the fundamentals of the industry. So, it's a big part of Pentair. I guess it all depends on what time frame you look at when you answer the question of how the group's doing vs. market share…
WC&P: Well, what's the outlook and the projections that you are looking at? What are your goals?
Waltz: Some of the goals we've stated. I think organic growth in the range of—depending on the specific group—7-15 percent. Given the overall market is growing you assume by maybe 3 percent, that leaves some lofty goals out there. I think if we do what we need to do, serving the customer and getting new products out and shipping quality products on time, it's a stretch but it's doable.
WC&P: There's been some similar consolidation and some tighter competition going on in the market right now. Just recently we saw Osmonics bought up by GE, which seems to be making a major play. And some other companies have been positioning as well. What do you see as the competitive environment for Pentair currently?
Waltz: That's a difficult question from a couple different perspectives. And it's just because there are so many market niches. In other words, if you look at Osmonics, it's a customer of ours when it comes to Codeline. We don't compete with most of Osmonics. On the same hand, obviously, they have an Autotrol valve that is a competitor with Fleck. So, as of yet, we haven't really seen any big moves either way with GE buying Osmonics. It's hard to say what the industry will do going forward, but honestly it is more about blocking and tackling. Whether it's a big corporation like GE or a smaller company out there, it's still serving the customer. I think quite frankly some of the smaller people that have been in the industry the longest do as good a job if not better than the big corporations.
WC&P: That was another one of the topics we discussed with Jorge a few years ago. At that time, there seemed to be a lot of consolidation going on in the middleman group, i.e., the distributor/supplier/assembler types, and some shakeups involved there. For instance, it was around the time that Alamo Water got purchased by Marmon Group. Do you see any difference in the competitive nature of the industry today say below a company of your size?
Waltz: Quite a bit has changed in the last year with numerous consolidations and acquisitions. The GE/Osmonics was a large one. I don’t envision many more big shifts in the industry. From a distribution angle, the Marmon Group’s Alamo acquisition was a good one. Alamo is a great customer of ours, and doing quite well. I think there was more concern a few years ago with the shift to retail and things like that. I think that's basically stabilized out. The non-retail customers are really the market we focus on most, the smaller OEM that buys and assembles our products.
WC&P: How have things changed, today, in terms of channels to market?
Waltz: Again, you've been in this part of the industry longer than me, but I don't see really the channels changing too drastically. There are still the three main channels, water treatment professionals, retail and plumbing wholesale. Retail has its place for certain products. The small OEM is still there and successful. It almost gets back again to blocking and tackling. What's the product you need? How are you delivering it at a reasonable price and on time…?
WC&P: Since you've been there, what's been introduced that's new at Pentair? Are there any products or services that you'd like to mention?
Waltz: Again—and I’m fond of analogies to sports—but it's a basic kind of thing. There’s not anything that I’m aware of that we’re doing that’s going to change the industry overnight. I think we’ve done a great t job of recently coming out with a twin tank valve; and we’re coming out in the next couple of months with a higher flow valve for larger homes. The K&M asset acquisition will be great for us just because, there are customers buying from us that were buying, hypothetically, two-thirds of a truckload of mineral tanks. Now, we can just fill that truck out and provide them with all the product that they want…
WC&P: It gives you better economies of scale with shipping costs, etc.?
Waltz: With shipping, logistics, one purchase order, one customer service person to work with, it just makes sense. But, again, it’s not where we’re coming out with things such as: “Here, we’re going to revolutionize the world!” Nor do I perceive anyone else really doing that in the near future. So, with that, I think we do a good job with customer service. But it’s about continuing to focus on customer service. Recently, we had multiple factories and salesmen. So we asked customers whether they would prefer to have one centralized person that handles both their tanks and their valves or continue on the individual basis. And that’s up to them. If they want to work with each individual factory that’s fine.
WC&P: That was going to be one of the questions I was going to go into next. I recall back when USFilter was just buying up everything in sight, I would talk to a company such as Pentair for their perspective. And their response would be: “Great! Because a big corporation just bought them up, there’s going to be a certain level of employee or customer dissatisfaction that will build up as they try and do the switchover to reconcile two different management systems.” So, I would imagine you’ve had to put a lot of emphasis on making sure that doesn’t happen—or that it’s minimized at the very least.
Waltz: Absolutely. I do think—and, again, a lot I think changed with the USFilter and all eyes on the stock price and the whole end of the 1990s with everyone making acquisitions—our customers may judge. But, before my time, a great job was done with individual customer service, having people out there that are proactive and try to respond to customer needs and requests. Like everybody, you can improve on that area and try to continue to do it. But that’s the focus. And that goes back to something you mentioned earlier about the GEs. It’s not that there are as many left, but the small companies are still there. I had a chance to meet Andy Fleckenstein here a couple months ago, the founder of Fleck. It’s that type of person. The guy who knew everybody’s name, that you dealt with, had trust in and had earned your confidence. That’s what I think I keep trying to remind everybody—it’s providing that individual service that matters most. Whether you’re a private company, a public company or a 10 million dollar company or—as in GE’s case with Betz, Glegg and Osmonics—a billion dollar company…
WC&P: Part of customer service is being able to get that inside joke about something that happened five or 10 years before and being able to respond in kind—even more so these days, history that’s been passed along to you verbally in terms of an understanding of the industry, the players, how they’ve evolved, etc.
Waltz: Yes. And my background comes from the pump industry, but obviously that wasn’t necessarily included in part of the roll-up into whatever you want to call it—the water softener industry.
WC&P: One of the questions we like to ask in these interviews offers an opportunity to add a little levity to the conversation. Can you tell us an interesting story or anecdote about your experience in water treatment?
Waltz: It depends on where you want me to go. Again, with only joining the water treatment part of the industry in the last year, it’s a little tougher. If you want to go back to the water treatment industry on the pump side where I was running international sales, I can do a lot of great stories on that side of the equation.
WC&P: Be my guest…
Waltz: I guess I’ll give you a story that definitely adds some levity there. Back around four or five years ago, I was flying from the United States to India to meet with a company there called Kirloskar Pump. Again, it was a huge Indian company—about $1 billion dollars. And I was fortunate enough that the president and owner of the company, Sanjay Kirloskar agreed to meet with me on a courtesy call. So, I took off on Sunday night on the classic trip where you fly to Europe overnight. And, then, Monday afternoon I’m to fly to, Bombay—to sleep on Monday night—and in the morning fly to another small town called Pune to meet with Sanjay Kirloskar (on Tuesday morning). Well, my flight overnight on Sunday got delayed, so I missed my flight…
WC&P: To make your connection…
Waltz: Exactly, to Bombay. Instead, I ask when’s the next flight—expecting, as in the United States, to hear two or three hours. In this case, from Germany, the next flight to Bombay was the next day, which would have meant I would have missed my meeting with Sanjay Kirloskar and I didn’t want to do that. So, I asked the Lufthansa agent if there was any other way to get there by Tuesday morning. He explained that if I ran to the other end of the airport, you can get on a flight that goes to New Delhi and at 7 a.m. there’s a flight that goes from Delhi to Bombay in enough time that you can get your flight from Bombay to Pune. So, I jump on the flight and try to use the phone to let me wife, my secretary or even the people in India to know that, you know, I’m not going to be make the flight as originally scheduled…
WC&P: So don’t check for me at that airline; I’ll be over here at this one…
Waltz: Exactly. None of the phones on the plane work. I land at around 3 a.m.—trying to get my days straight now—Monday going into Tuesday. Wait for my luggage. Because of the quick switch in connections, my luggage doesn’t show up.
WC&P: It’s now in Uzbekistan…?
Waltz: Exactly. So, now I’m by myself. It’s about 3:30 a.m. in India and I’m the only one in the airport other than the national guard. Oh, the other thing, I found out which no one told me was that, unlike cities such as Chicago with an international airport that handles all flights, a lot of airports in developing countries will have an international airport and a domestic one that are across town from each other.
WC&P: I ran into that situation in Brazil last month…
Waltz: Yes. This is always fun. So, (it's) 3:30 in the morning and I’ve been up, by the way, since Sunday morning since I don’t sleep very well on planes. It’s now Monday going into Tuesday.
WC&P: And you’re supposed to be sharp for a business meeting at the end of this…
Waltz: Exactly. I get out there and a hundred beggars start volunteering to carry my bag for me. I’m all by myself. I stick out like a sore thumb being an American in a business suit…
WC&P: At 3:30 a.m….
Waltz: Yes. I end up finding two guys that agree to drive me to the other airport. I’m thinking: “I’m a smart guy. I’ll negotiate so that they don’t try to surprise me with a $50 cab fee when I get to the other end.” And they mention some currency and what the rupees are. It’s about $3 to $5. That’s cheap. I get in the cab. They ask me if I want to go to the hotel because I have a couple hours before the flight. I don’t have enough time to change but, if nothing else, I figure I can wash my face and call a few people. So I say, “Sure. Take me to the hotel.” They speak fluent English and start asking questions like have I ever been to Delhi before. I think: “Should I tell them the truth? They’ll quickly know if I’m lying.” So I tell them I’ve never been to Delhi. It’s my first time to India. We start driving. Twenty minutes later, I haven’t seen a light or a building for 10 minutes. We’re out in the middle of a field and that eery, sinking feeling in the pit of your stomach begins to flirt with you. I gotta believe, even though I’ve never been to Delhi before, this is not the way to the domestic airport.
WC&P: Or a hotel?
Waltz: Exactly. Finally, they pull up to a small house and ask me to get out. This is when I ask: “Why? You’re supposed to take me to a hotel.” They respond: “No, way to expensive to sleep in a hotel.” I can just sleep in their house for a couple of hours. I argue with them for five minutes that I want to go to the airport. They say: “You said you wanted to go to a hotel.” I say: “Yes, but the hotel at the airport…” So, after I refuse to get out of the car, they’re frustrated with me, take me back, drop me off at the airport…
WC&P: They just thought they were offering you a bit of local hospitality?
Waltz: I’m assuming that or that, hey, they can get an extra 10 bucks out of me by letting me sleep on their couch or bed for two hours. But, honestly, the whole time in the back of my mind is the question: “How much life insurance do I have and will they ever find my body?” Again, I could do stories like that forever on different international experiences—getting lost in China, etc.
WC&P: I assume you did make your flight?
Waltz: Actually, I did. I got back to the airport. The only catch there again—and I don’t know if you experienced this in Brazil, but most of Asia is this way—you walk up to a phone in the United States and with a calling card you get a dial tone to punch in an 800 number. With a lot of phones in other countries, you’ve got to put money in just to get a dial tone. So, having an AT&T card didn’t help. I didn’t have any Indian currency…
WC&P: I’m usually caught without the separate code phone number for that country to access my calling card provider and get the operator I want. But I understand…
Waltz: I’m now at the airport a few hours, frazzled, trying to call anybody to let them know I’m there. I found a little sink and was able to at least wash my face and push my hair to the side. Actually, I found a place that was like a business service that allowed me to use their phone to call our guy in India that worked with Pentair to let him know where I was.
WC&P: So, how did the conversation go once you were finally able to make it to the small town that was your destination?
Waltz: Two things. One, Sanjay Kirloskar is a great guy and, obviously, there was a deep amount of sympathy for my situation, sitting there trying to be nice and have a pleasant conversation when I haven’t slept now for about 50 hours. It wound up being a good time.
WC&P: After your big cup of coffee…
Waltz: Actually, I skipped dinner that night, went to bed at 5 o’clock and slept through until the next morning…
WC&P: And all this occurred while you were a consultant with Pentair, correct?
Waltz: Actually, no. I was only a consultant for about six months. I then switched over to Pentair/Aurora Pump Group and was fortunate enough that the opportunity came up to run international sales for the pump group. So, it was during that time period.
WC&P: Let’s jump back a bit, if we could. Now, where are you a native of?
Waltz: If I do it from that perspective, I’m born and raised in Harrisburg, Pa.
WC&P: Where’d you go to school?
Waltz: Went to college at Penn State. I was an engineer there. Then, I worked for six or seven years at GE actually in Valley Forge in the defense industry. Then, after the defense industry started slowing down—you know, when the Berlin Wall fell—I switched over to management consulting because I didn’t know what I wanted to do with my career at the time.
WC&P: You did that roughly how long?
Waltz: About two years. I figured out that what I enjoyed was working with manufacturing companies, whereas with Deloitte & Touche I had the opportunity to work with healthcare companies and things like that. You quickly learn what you like and don’t like to do as part of the job.
WC&P: Exactly. We generally also ask a question about challenges people have faced and how they’ve overcome them as somewhat of a lesson that can be offered to readers. In your career, what's been a major challenge you've had to overcome and how did you do that?
Waltz: There's nothing as far as the one anecdotal story to bring up that says here's where this major issue arose and how I worked through it. I'm a big believer, though, in incrementalism. One of my first managers at Pentair about eight or nine years ago was a big football fan and would always bring up the analogy to blocking and tackling. I tend to refer to it as you've got to get a base hit before you can score a run. Yeah, you've got the GEs acquiring Osmonics in one grand slam and other potential big players possibly getting in the industry. But at the end of the day it's how you overcome things a step at a time. Whether that's simply responding to the customer service call, that new product may only—making up a number—represent about $500,000 in sales, but it's continuing to listen and respond and take every step that’s required. That, as opposed to one big project, adds up. I'm not a guy that's too focused on corporate stuff actually. I'm not big on PowerPoint presentations. It’s the basics that are important. It's execution, day-in and day-out, on the shop floor and with our sales force.
WC&P: How do you apply that in terms of water treatment? You've had a year to focus on this side of the business. It's pretty diverse field. We've got a column going in this particular issue along with this interview from a consultant that does some analyses and financial work for the industry who's one of the authors on the Drinking Water Dollars column, which is about publicly traded companies primarily. He talks about what we call the water treatment industry is actually a very loosely related collection of a lot of different markets. When you look at your management philosophy, how do you apply it to the diverse channels to market that are involved, the vendor-supplier chain that exists, and just the in-house management that's associated with the personality and characteristics of a company like Pentair?
Waltz: I'll try to give you an answer. We have something that we call a bowling chart. What it is involves the same thing as MBOs. You know, what's your objective for the year? But we sit with each group, whether it's our Hydro-Pneumatic Tank or our pressure vessels like Codeline or the new acquisition of Plymouth. We sit down with each major group and ask what are the seven or eight things we need to focus on. Say I give you a hypothetical such as Wellmate, we're going to come out with this new sideport Hydro-Pneumatic Tank. Again, there's nothing that's not self-evident. Like a bowling score, you've got 10 frames. Put in the months, January through December, and determine when is that going to be done. It started here in February and I'll have 20 percent done. Then 40 percent done. Then 90 percent done. And we're going to introduce it in June.
WC&P: And dropping down, here's my marketing chart that coincides with those frames?
Waltz: Yes. And, again, going back to blocking and tackling. It's that basic kind of stuff that you have to look at to remind you. There's a tendency for people—and there's somewhat of a challenge for larger companies—where the blue-collar worker always jokes about management with their fad of the month. He's also had to handle the One-Minute Manager, who then, next month, (says) "We're going to implement lean manufacturing"; and, the next month, "We're going to Six Sigma"… Instead, here's your MBOs…
WC&P: Refresh me on MBOs?
Waltz: Management-By-Objectives. It's lingo for saying here's your objectives for the year. But, it's real simple to get the team together about the fifth working day after the month has started so people can gather their data and say—if I'm the Wellmate team—"Did I add the customers I want? Did I get 40 percent of the new product development done? " And it just keeps that focus there so that one month you're not focused on one project and the next month your doing something different. It just keeps the focus on what your goals are. And it helps because you get the discussion from all the employees on what are the key things that are really going to help grow the business. Everybody knows the score. They know how we're doing. It's a reminder. It’s the same thing as putting up on your refrigerator what you want your weight to be and every day keeping a record of how you're doing toward achieving that goal.
WC&P: It's kind of interesting because if you look at the performance of Pentair in recent years, where some other companies have been jettisoning divisions or spinning off product lines—i.e., Vivendi, which is now Veolia, and owns USFilter and Culligan—you've been more on an acquisition run. It seems like a targeted acquisition run, but a run nonetheless. Were you on board when Plymouth Products was acquired?
Waltz: Oh, absolutely, I was aware of it beforehand and switched over in July, so we'd already started some of the work. But, yes, I was the general manager of the division when Plymouth Products came on board. And it's been a great acquisition. They are a great group of people… And, back to your point of "targeted acquisitions," it's a bit more specific. To look at a team such as PENTEK (Plymouth Products), there's as many skill sets there we can learn from, as they can learn from other Pentair teams such as Fleck, Structural, etc.
WC&P: Gary Hatch is a pretty sharp guy. And Neil Desmond is a nice guy as well.
Waltz: Absolutely. I had a flight this morning with Neil and mentioned to him I had this interview and he was complimentary of you.
WC&P: Tell him I appreciate it. What are your reflections on international targets, goals, successes and where things might be going in the future with Pentair?
Waltz: I have several thoughts. First, obviously, the water needs are big enough here in the states, and they're even moreso in the Indias and Chinas with populations and quality of the water. I don't have the statistics in front of me on how many babies die every day due to poor water, but those are huge, growing markets. And I think, as some of the developing countries become a little bit more industrialized, water quality is becoming even more important. That's why the promotion of Jorge Fernandez to help us grow there also is important. We have a small factory in India serving the Indian market, and we have a small factory in China—and the K&M acquisition will help us there. Being there to serve the needs of the local markets is much more of a challenge. And, obviously, if you've got factories in Brookfield or Chardon trying to effectively serve them, that's greater. It is a main emphasis of ours. But, again, how you approach it is step by step. It's not like we're going to go out and buy a $700 million company in China, for example—not that I think there are any, but you understand.
WC&P: I would imagine that's also a situation where you also have to factor in globalization as a key issue in how businesses do operate internationally these days. And particularly countries like China do have certain requirements for, if you're going to do business there, to what level and commitment do you put yourself into that market. Brazil's another similar case. By that, I mean if you're going to do business in Brazil, having a presence internally in the market is very important because otherwise you're going to wind up paying a bunch of tariffs or customs fees. I know that Pentair just opened a warehouse in Brazil, for instance, to ease that competitive burden. That was the week I was there for the Aquatech FITMA trade show.
Waltz: Exactly. Great. That speaks to one of the points you raised earlier also. That's where Pentair with our enclosures group already had a factory in Brazil. And being that we have a facility down there, we can open up a stock store for mineral tanks and various other products to help grow our sales in Brazil. That's some of the stuff where once in a while there is an advantage to being part of a larger company. You've just got to balance it so that you don't get so focused internally that you forget who's important. And that's the customer. To your other point, using China as an example, if you don't have a presence with a factory in China, you have huge tariffs. And then—while I'm not familiar with every rule in China—you can't sell directly into China. You have to sell to a Chinese distributor that then sells your product. So, now, with us opening up a factory in China, we avoid the tariffs. We have a cost base in which we hopefully can be effective there. It grows and we can be there to grow with it.
WC&P: What about Europe? What goes on with Pentair in Europe?
Waltz: I'm not as familiar there. I can explain some of the basics but, again, my role is mostly the North America role. That's where most of the products we make go. That's where most of my focus has been. Yet, we do have sister factories there. We have one in Paris—just outside—that's a sister factory to Fleck that Andy Fleckenstein started a long time ago. And the same thing we have in Belgium that the original founder of Structural, here in Chardon, started.
WC&P: And another in Italy, correct—the SIATA line?
Waltz: Exactly. So, back to your anecdotal links. I was fortunate enough to visit the factories in Europe for the first time about three months ago. After all my travels to places like Bogota, Colombia, or Beirut, trying to sell our products, it's kind of nice to go to a place like Paris, France, or Belgium…
WC&P: From your perspective in the market, where do you see the industry going? What are the challenges and opportunities?
Waltz: I'll tell you both the opportunities and the threats, so to speak. From the high level, here's some statistics that maybe you or your readers already know. If you look at one side, the water industry as a whole, where 97.5 percent of all the water in the world is salt water. Of that remaining 2.5 percent, two-thirds of it is in the ice caps. So, less than 1 percent of all the water in the world is freshwater. And I forget what percentage of that is available, whether in the Great Lakes or elsewhere, for example. The needs for water are great. Just the same as we were talking earlier about poor water in China or India, the same problems exist here. They've installed reverse osmosis in Tampa to make fresh water.
WC&P: They're also talking about doing the same thing on the West Coast on the coast of California.
Waltz: Absolutely. With all that occurring, this is truly a great industry to be in. That's why Pentair's investment is targeted on providing safe, clean water. We won't be on a rapid trajectory as USFilter was a few years ago. But most of it will probably be in the water industry. There are lots of opportunity and lots of growth both here in the United States and worldwide. The challenges—probably the concerns such as in California over the banning of water softeners. If that was to continue forward or go farther, what would that mean short-term or long-term for Pentair and everybody else associated with that part of the industry.
WC&P: Also, WC&P's primary reader is the residential dealer. At least, that's where we've always targeted our editorial, the independent dealer. What is the one hot button issue facing water treatment dealers or the industry that you think will have the most impact over the next few years?
Waltz: I would think in that case it would be water softening bans and things like that. Again, with a limited view over the last few years, it would seem to indicate that.
WC&P: Brine discharge restrictions, etc.?
Waltz: Exactly. That's going to be the scare. One side may say, "Geez, if they ban water softeners and have huge RO plants…" Pentair has different products to go into there; but, for the industry and that independent dealer, regulation could be scary quite frankly.
WC&P: One of the things that's been mentioned in trying to anticipate what might happen in that regard is different engineering that might be done on water softeners, different ways of regeneration and even whole house membrane separation via nanofiltration. Does Pentair take sort of an R&D look into those possibilities? How have you anticipated those California and other restrictions that may grow from there. At least, the California market being as big as it is tends to influence just by its virtual size.
Waltz: We're probably not doing enough there and who's to say we're too late. That's probably the one largest risk that anybody in this industry faces if anybody comes out with the new product that gives you the soft, fluffy towel and simultaneously doesn't have any discharge. I would tell you don't expect anything revolutionary from us in the very short term that's for sure. On the same hand, we're out looking at some things. We're also out talking to other people with different products. I haven't seen—and again, I'm not the engineering expert—anything yet. You look at nanofiltration and reverse osmosis and there's still a discharge. Or, with the classic family of four using 350 gallons of water a day, and with 20 grain hardness—I want to say it's half a pound or a pound of hardness—that's actually being trapped by an RO membrane. If you didn't have any discharge, well, what are you doing with that. Maybe there's a solution with one of the other companies in the industry or somebody outside is testing and ready to implement it any day. But I don't see it.
WC&P: Conversely, another point would be I guess that regulatory issues tend to drive innovation in our particular market. On the other side, the main thing people tend to see when they go to a water treatment convention are anything to do with arsenic. With Plymouth Products, you did acquire some arsenic technology, correct?
Waltz: Exactly, some of PENTEKs’ filters are applicable.
WC&P: Did the GFH media agreement go with Plymouth Products?
Waltz: No, it didn’t, but we do have technology that deals with arsenic removal.
WC&P: Well, that's about it for me. Is there something you'd like to say for a closing statement?
Waltz: Yes. There's nothing more profound than getting out in the industry and meeting people that have been in it for years and have been customers for the long haul. I'm doing that. I spend a lot of time on planes meeting our customers. It's just getting out, meeting customers, answering questions and trying to provide the right product at the right price at the time and the way they want it delivered to them.
Join us next month for an interview with QMP Inc. president Freddy Vidal.