Our Success as an ESOP Company

January 5, 2015 Travel and Transport

As we welcome in 2015, Travel and Transport is excited to start our next great chapter as Kevin O’Malley takes on his new role as President and CEO. With the announcement that Bill Tech, current Chairman and former President and CEO would be retiring at the end of 2014, we thought it was important to share how the Travel and Transport succession plan was put in place for the role of President and CEO as well as discuss the status of the company’s Employee Stock Ownership Plan (ESOP) during this period of transition. Chantel Windeshausen, Director of Marketing, sat down with Kevin as well as Tim Fleming, Travel and Transport’s Chief Operating Officer, and Jim Winterscheid, Travel and Transport’s Vice President, Human Resources to get the facts and take a look inside Travel and Transport.

How did being an employee-owned company aid in a successful succession plan?

Jim Winterscheid: Three years prior to Bill Tech’s announcement to his fellow employee-owners of his impending retirement, a succession plan had already been carefully thought out and strategized by members of the Travel and Transport Board of Directors. They had to not only decide who would become President, but also determined how other roles in the company would shift as well. During this transition period we knew one thing for sure; the company would remain Travel and Transport on the other side of Bill’s retirement.

Tim Fleming: Our ESOP structure allowed the Executive members to stay focused on the company’s future. Tim Fleming added that a risk of being bought or merged with a competitor did not exist, and a CEO exit strategy did not need to be put into place. Because of this, it was never a question to the team or the Board if they should look outside of Travel and Transport for the next President. Everyone felt it was very important that the succession occur within Travel and Transport, if possible.

What happens to Bill’s ESOP shares?

Jim Winterscheid: Bill’s ESOP shares will be redistributed the same way that all employee-owner ESOP redistributions are handled. The year after Bill retires, we will repurchase Bill’s shares at the current valuation price, which is determined by our outside valuation firm. Those shares will be distributed back to the eligible employee-owners over the next ten years.

When people are ready to retire from Travel and Transport, what do they need to do to prepare and how is this different than other companies?

Jim Winterscheid: There are two key ages to keep in mind when preparing for retirement. At age 59 ½, employee-owners can retire and withdraw money from their ESOP. If an employee-owner leaves the company before age 59 ½, they can roll their money from their ESOP, which is a qualified plan, into another retirement investment vehicle like an IRA, which does not create a taxable event.

Travel and Transport also has a diversification policy that applies once an employee-owner turns age 55 and has 10 years of service with Travel and Transport. This policy allows qualified individuals, at their option, to diversify some of their ESOP balance into a cash position, which can then be invested into their 401k plan.

A key benefit to our employee-owners is the fact that in addition to the ESOP benefits, Travel and Transport also provides a 401k match. The combination of these greatly helps employee-owners in their retirement years. There are very few companies that have both an ESOP and a matching 401k plan.

When asked about the difference between retiring from an ESOP company as opposed to a non-ESOP company, Jim replied, “Really the only difference for an ESOP employee versus a non-ESOP employee is hopefully they have a larger chunk of money towards retirement.”

"They are more driven to assist that customer, support that customer and help that customer be successful." - Kevin O'Malley, Travel and Transport's President and CEO on the value of working with an ESOP company.What’s different for an employee of Travel and Transport compared to someone who works for another company?

Tim Fleming: In an ESOP company, there is a higher level of information sharing. And at the end of the day, there is obviously a greater reward to employee-owners if the company performs well. They wouldn’t get these things at a non-ESOP company. The key is to ensure all employee-owners understand and remember that if they help cut expense or drive revenue, they will reap the rewards. They have a vested interest in having very happy long-term customers.

Travel and Transport also provides a quarterly release of financial information to the employee-owners so they can keep track of how the company is doing and how they as employee-owners are benefiting.

Why is an ESOP right for Travel and Transport?

Tim Fleming: A large part of our culture is as a result of our ESOP. All the way back to the 1940’s and through Lawrence Youngman’s founding and Mal Hansen’s leadership of the company, it has always been about taking really good care of your customers and your employees. I think that the entrepreneurial spirit that our employees all feel is so engrained in our company, and so an ESOP really made sense.

To further prove how successful Travel and Transport has been, the company stock has averaged a 12% return since inception in 1991. This has outperformed the S&P by almost three times, equating to a tremendous return for the employee-owners. And at 12% annual growth, Travel and Transport’s stock price has doubled about every 6 years.

What is the value for our customers, prospects and vendors to working with an ESOP company?

Kevin O’Malley: The value of working with an ESOP company is knowing that the person the customer is working with is an engaged employee-owner. They are more driven to assist that customer, support that customer and help that customer be successful because in turn they understand that relates back to the overall success of the company. In some companies, no matter how hard you work or no matter what you do, there’s nothing in it for you other than a paycheck. You grow the value for the owners of the business or the shareholders, but there’s no personal gain or motivation as the individual employee. At Travel and Transport, the harder you work and the happier your customers are, the more value you drive for the company and ultimately yourself.

Independent studies show that ESOP companies are 3-5% more efficient, which results in value to our customers. Additionally, when they choose Travel and Transport as their partner, they can be assured that we’re here for the long-term, and they don’t need to worry about the company being sold.

How did being an ESOP company benefit us during recent acquisitions?

Jim Winterscheid: I truly believe that out of the three recent acquisitions that Travel and Transport has done, being an ESOP company made us more appealing in each case to the previous owners simply for the fact that they knew that eventually their employees would become employee-owners of Travel and Transport.

Peter Klebanow, former owner, and President and CEO of Ultramar Travel prior to his retirement in 2014, understood the importance of partnering with an employee-owned company. “It’s not easy selling a company that you helped build and mentor for over 30 years nor is it easy running a highly successful travel management company. Travel and Transport’s employee-owned company, however, provided a perfect platform for the future of Ultramar’s employees and clients that is both unique and powerful and this was a perfect win-win-win.”

How will our ESOP evolve?

Kevin O’Malley: Since our ESOP’s inception 24 years ago, it has been a critical part of our success, and we believe it will be a huge part of our success going forward. The sense of employee-ownership is instilled in each one of our employees. It’s inspiring. This is a great place to be!



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