Industry Watch

Jon Holt, chairman; Rob Holt, president and CEO

Chaska’s ‘hidden champion’

In a Twin Cities suburb, Super Radiator Coils quietly thrives in a niche few people know about

Germany is known for having lots of "hidden champions." Usually family owned, these highly successful companies tend to be small or midsize, be mostly unknown to the public, and operate in some small niche market in which they are number one, two, or three globally. Chaska might seem an unlikely place in which to find a U.S. hidden champion, but Super Radiator Coils fits the description nicely. Its custom heat exchanger coils end up in commercial and industrial applications all over the world, from nuclear power plants to compressed-natural-gas pumping stations at QuikTrip to a NASA icing research tunnel in Cleveland. By staying in its niche and not veering into mass production, the company has grown from $6 million in revenue in the mid-'80s to about $75 million today. We interviewed the father-and-son team who run the company. Chairman Jon Holt has managed and directed Super Radiator Coils since he bought the company in 1985. His son Rob is now president and CEO.

What exactly is a heat exchanger coil?

Jon: I think the simplest way to explain it would be to use as an analogy the cooling device in the refrigerator that everyone has in their home. The device in the bottom of the refrigerator which makes it cool is the product we make for industrial and commercial applications.

But on a much bigger scale, correct?

Jon: Yes, on a much larger scale. The size of course of the units can vary between that size, which is reasonably small, to sizes of bus proportion or even room proportion. We can get very, very large or very, very small.

What are some examples of small?

Jon: Right now we're building units for the new nuclear submarines that are in production. Those coils, we call them, or heat exchangers, are significantly smaller than the refrigeration ones that you'd find in a typical refrigeration system.

Because space is at a premium in a submarine?

Jon: Space and efficiency, that's correct.

Turning to some of the larger ones, I understand that you were involved with NASA's Icing Research Tunnel in Cleveland.

Rob: We had a huge contract where they had to replace a bunch of coils in a wind tunnel where they test freezing applications, or the behavior of freezing on airplane parts in jet engines. It was a huge, monumental project. We had to figure out how we were going to build these things and the structure that went along with it.

Jon: The coils typically were 50 feet long, 10 feet wide, and probably three feet thick. We made 20 of them or so. One thing, going back to your definition of what we do again, it's actually called a finned-tube heat transfer surface. Anytime you need a change in temperature and/or humidity, you need this kind of device to accomplish that for control purposes.

Do your coils typically address humidity?

Rob: Humidity is just a component of the heat transfer process. Sometimes you're trying to control the humidity of an environment, and our coils help do that.

Jon: An extreme example of this would be the water that had to be removed in a project that we did in South Korea where they wanted to test parts at high velocities at 80 degrees below zero Fahrenheit. You had to get the water completely out of the air in order to accomplish that.

The problem was that the facility was right along the ocean. In order to make that happen, we ended up designing this very complex system that removed gallons and gallons and gallons of water to allow them to do that testing.

What is your involvement with the nuclear energy industry?

Jon: We make safety-related equipment that goes inside the drywell, which is part of the reactor. It's used when there is a loss-of-coolant accident or basically a meltdown. What happens in a meltdown is a lot of steam builds up inside that drywell, inside the containment unit. Our coil condenses that steam so it doesn't blow up.

Your company recently expanded because of work with the nuclear industry. Tell us a bit about that.

Jon: Yes, there are only three players in the whole world that do that safety-related product that we do. One company is a competitor of ours in the United States, and the other one is over in South Korea. We're now the third competitor. We bring a service, heat transfer expertise, to the table, and obviously competition.

Germany is known for "hidden champions," or companies that are in the top three of a global market, have revenue below $4 billion, and are little known.

Jon: That would be us all right.

Rob: I think we're a leader in our industry. People come to us because of our expertise. Not very many people know about us. We're not huge.

Jon: We're probably the second largest in the country in doing pretty much what we do in coils alone. We're known as the doctors of our industry. A lot of the large OEM people that make their own coils will in fact come to us for new designs and/or replacement items that they want us to make for them. We're well known technically throughout the industry.

Rob: We run the gamut, so we go from real small stuff all the way up to really big stuff. We're the only company that does that. We have competitors in the big stuff and we have different competitors in the small stuff. We're the only ones that do the whole spectrum, so to speak.

When were you founded?

Rob: The company was founded in 1928. The current ownership took it over in 1987.

How did you know this was a good company to buy?

Jon: I'd been in the turnaround business for about 15 years, and one of the companies that I fixed was owned by a banker. He came to me with this opportunity and said, "Well, now I've got something for you that you can fix or ... it might be for yourself. I want you to take a look at it." So I did. At the time, and they had a real problem operation out in Richmond, Virginia. The Minneapolis operation was OK, but it was fairly small, and we didn't even have a West Coast presence.

The funny story about that was he came to me on a Tuesday and said, "Well the good news is this is an opportunity of a lifetime for you today, but you're going to have to decide by Friday. Otherwise, it's going to go away." I went out and visited the Richmond operation, which was a mess, and it didn't look like anything I hadn't seen before in my turnaround opportunities. I came back and said, "This looks like a pretty good deal." It was all in or nothing. I put everything in and away we went. That was in 1985, on October 4.

The original beginning of the management group was myself at 40 percent, and it was venture capital at 60. It didn't completely flip into a full family business until 1987, on June 19.

Could you give us an idea of the international reach of your clientele?

Rob: I would say a lot of our stuff, probably 85 to 90 percent of it, is domestic. But it ends up overseas through our OEMs that we sell to. Most of the stuff we sell internationally ends up in Australia, the Middle East, China, Russia, and Europe, but it originates here and then goes out into international locations.

We do a lot in compressed natural gas, which is a new market coming online. A lot of these municipalities and buses are run on compressed natural gas. That's getting a lot of legwork in the automobile market and also fleets for trucks, because the per unit price is so much less than regular gas.

We're the leader in the heat exchangers that go into the pumping stations at the QuikTrip or the Holiday gas station. If they want to put in CNG supply, our product goes to those manufacturers who put that supply at the gas station.

Is compressed natural gas becoming an important growth market for you?

Rob: Huge. Very, very big, I think because natural gas has a good distribution network already in place and the cost advantage of it and the availability of the reserves. It's an energy independence issue for our country. There's a lot of it underground here in the United States.

Interesting. What are the advantages of being based in Minnesota as opposed to another state?

Rob: I'd say the cost of manufacturing is not one of them, but we have a great intellectual capital of employees that are experts in their field. We don't want to move because of those people. It would be hard to pick up and move to South Dakota or some other low-cost state. We would lose that. Those people would not move with us. They want to live in Minnesota and work in Minnesota.

Your company keeps its focus on a particular niche. As a member of the younger generation, does Rob get the urge to shake things up? Is there a dynamic like that?

Jon: There is that dynamic, and it's a very healthy dynamic. One of the things that I insisted on early on was that when Rob came into the business, as well as my daughter Kari ... they needed to get an engineering degree. And then they needed to work for somebody else for a minimum amount of time. Then I wanted them to go back and get their MBA.

If they did those three things, then we'd talk about them coming into the business. Now the reason for that was because I wanted them to be able to bring the latest technologies with them out of the university and the science areas, because this is an engineering company. It has, in fact, proved its value.

Rob and Kari both brought in incredible technologies with the computer systems, data systems, social networking, all those kinds of things, which I could not do myself. My generation isn't equipped to handle that, I think.

In terms of changing and being challenged with things to do, I think those situations have presented themselves naturally with the kind of business that we've got. Rob is turning things upside down, but he's doing it in a positive and creative way because of the type of business that we have. The model that I've planned on at least seems to be working at this point.

The other part of that is that the family gets along really well. Myself, my son and daughter, as well as my wife, are a real close-knit group of four people. We understand what the business is about. We know people, we try to build a caring culture - one where fear is not used as a motivator, but results and productivity are. The model seems to be working fairly well, and I think Rob's going to continue to carry it forward as president and CEO.

When do you plan to retire?

Jon: We've talked about that. For estate planning purposes, I'm gradually turning over the estate to Rob and Kari. I want to stay active in the business to protect my own identity as long as I'm healthy. If I feel like I can't contribute and I'm not healthy anymore, I'll step completely aside. At this point, I enjoy the interaction. I enjoy working with Rob and Kari. I see no definite plans for me to step away a hundred percent.

Tell us a bit about Kari.

Jon: She's 35 years old. She's our vice president, second in command in our Richmond, Virginia, operation, which is our largest operation on the East Coast. She has two little daughters, five and two. She's chosen to raise a family as opposed to taking on the total management of that division out there. She wanted to be second in command, and we [also] have a president or a vice president out there who is in command. We were using Kari as best we can to fit her needs as well as ours.

Rob, how did it feel for you to be outside of the family business and then come into it in your position?

Rob: It's pretty rewarding, actually. My dad's given me a lot of leash. He's letting me do the things that I think are best for the business. He's supported me a hundred percent. I think one of the things a family business gives you, you're always on call 24/7. You also have some freedom. You have a lot of responsibility. As long as you're maintaining the results and the growth, and employees want to work for you and they're motivated. It seems like we're doing a pretty good job. I'd say he puts pressure on me, but he also lets me do it my way. He's a good manager and a good mentor in that regard.

Jon: We also own another company, by the way, and Rob's involved in that as we go forward here. It's called Mead Metals, in Shoreview, Minnesota. It's a totally different company than this one. It gives Rob a little bit of variety, too, in terms of management, types of people and businesses and industries to work in.

When was it founded?

Jon: 1961, and I bought it in '93. It's got about 40 employees. We'll do about $20 to $22 million in sales. It's another real niche business though. They supply local stamping houses with unusual types, sizes, and quantities of metals. There's no one else between here and ... well there used to be some in Chicago, but now they're even gone. We pick up a niche that no one has.

This seems to be a theme with you. Do you have German ancestry?

Jon: Yes, we do have some. We do indeed.