H&C Tool Supply Corp. – Rochester, New York

May 30, 2024

H&C Tool Supply Corp.

A Legacy Built from the Ground Up

Innovative ESOP strategies transform a leading tool supplier into a thriving employee-owned enterprise

Based in Rochester, New York, H&C Tool Supply Corp. has steadily supplied manufacturers with cutting-edge, CNC tooling, mechanical fasteners, and engineering expertise for the past 68 years.

Through integrating technology within operations, keen inventory management, state-of-the-art products, and the benefits of the Employee Stock Ownership Plan (ESOP) model, H&C has grown exponentially in recent years while keeping the personalized service and VIP customer experience that have been its calling cards since it was founded.

This ESOP company combines strong visionary leadership with empowered employees working to delight their customers in a collaborative and inclusive environment. This dynamic guides the company to exceed its goals and sets the stage for long-term partnerships that allow it to expand its reach.

The backbone of the company is its passionate workforce working together in a culture where employees understand their role in the company’s success.

Through clear communication about the ESOP structure and consistent employee training and development, employee-owners are equipped with the skills and knowledge they need to excel.

Ultimately, H&C Tool Supply Corp. has developed into a thriving business with a strong sense of community; a place where growth is not just a corporate goal but a shared achievement.

A Modest Start to an ESOP Enterprise

H&C’s story began in 1955 with a man named Bill Cowgill, a journeyman toolmaker working for Kodak who wanted to be his own boss.

When his previous employer, Kodak, became his first customer, the stage was set for employee ownership. His new venture quickly gained traction as a manufacturer of metalworking tools such as drills, reamers, and carbide tooling for CNC machines.

Over the years, the company transitioned to a distributor of specialty tooling, and in 1980 Bill’s son, Peter Cowgill, bought the company from him, becoming its sole shareholder.

Following that, in 1990, H&C acquired the assets of a company called Hewes Industrial Supply, a general supply distributor specializing in mechanical fasteners, (nuts and bolts, screws, washers), and related supplies.

This acquisition helped H&C greatly expand its offerings, resulting in a solid foundation for the company. In the second half of the 2000’s Cowgill had begun planning for retirement, and with a desire to see the family legacy continue, the company was sold to an ESOP at the start of 2011, a transition that marked a pivotal point in the company’s journey.

H&C’s ESOP success is clearly due to the quality of the team that guided their transition. Attorney Rob Brown, valuation firm Empire Valuation Consultants, and third party administrators Principal all played key roles in launching H&C’s ESOP. Professional societies such as the National Center for Employee Ownership (NCEO) and The ESOP Association provided essential information and support.

With this essential support, fueled by the enthusiasm of its employees, the company flourished with its new culture, experiencing 3X growth in 12 years.

H&C has grown in multiple dimensions, in product offerings, services, and in geography. The company headquarters remain in Rochester, but its operations have expanded nationwide.

This growth is partly due to customers’ requests, which have pulled the company into new regions, including Pennsylvania, Florida, Alabama, North Carolina, Michigan, and Arizona.

Embracing New Technology, Sectors, and Strategies

H&C Tool Supply Corp. prides itself on being a niche distributor with two primary categories: metalworking tools and fasteners. However, these categories are evolving as the company responds to customer needs for shop supplies, corrugated products, safety supplies, and more.

A key part of H&C’s success is its ability to adapt and fulfill customer requests. The company has embraced industrial vending, with more than 75 industrial vending machines across 40 or more customer locations, allowing customers easy access to essential tools.

Tony Mannillo, President

Moreover, H&C offers Vendor Managed Inventory (VMI), which CEO Don Waltzer says is crucial to simplifying the customer experience, adding value, and strengthening relationships. “ According to company President Tony Mannillo: “All of our customers know they’re working with employee-owners who care about great outcomes.”

“As a supplier, we take pains to be easy to do business with” Waltzer says, emphasizing the many steps required to manage the complex nature of the VMI strategy.

However, despite the complexity, H&C keeps things simple by leveraging powerful platforms to supplement its operational strategies.

H&C’s adoption of technology has played a crucial role in its growth and operational efficiency. The company transitioned to a new cloud-based system called NetSuite, an Oracle product, in two stages: in 2018 for the cutting tool division and in 2022 for the fastener division.

This transition, while challenging, has provided the company with greater flexibility and accuracy, particularly in accounting and custom invoicing.

“It’s incredibly flexible while maintaining accuracy, especially in the accounting area… I can do all sorts of custom reporting to meet exactly whatever the customer needs,” Waltzer says, explaining that this flexibility has been instrumental in winning multiple million-dollar contracts, as customers appreciate the tailored service.

Beyond that, H&C is also exploring how to optimize its business efficiencies through optical character recognition and various web services to streamline operations. The company is also beginning to experiment with artificial intelligence to manage inventory, confirming its forward-thinking approach to technology.

A Culture of Quality Partnerships, People, and Products

Internally, employee adoption of tech and strategy are a big portion of what keeps H&C’s operations running, however, there are also key external factors that move the company forward.

Partnerships with key vendors and suppliers are critical to H&C’s success, as it allows for the protection and expansion of operations. A turning point came in the mid-2000s when the company became an approved partner of Kennametal and Widia, a world-leading manufacturer of metal-cutting tools.

Don Waltzer, CEO

“That’s been vital for us because these are highly engineered products,” Waltzer explains, emphasizing that this partnership has allowed H&C to offer highly engineered products with limited distribution, creating unique value for customers.

However, the quality of its products and partnerships isn’t the only thing helping H&C differentiate itself. The company also leans on the quality of its employee-owners as well.

Almost all of H&C’s employees have hands-on experience with the products they sell, so based-on their experience, they are more able to problem-solve for customers, saving them time and money.

According to Waltzer, when there is a problem, “our people go in, and generally speaking, they’ve seen that problem before and they already have some solutions, then they work jointly with the customer to make sure that solution is right for them.”

So relative to other companies in its industry, H&C employees have a much higher level of job-specific, hands-on expertise, that the company consistently hones, refines, and updates.

“All of our people go through technical training every month from all the different product lines and stay up to date with their latest technology, and how to apply it,” Mannillo explains, confirming once again how consistently diligent H&C has been with investing in its employees.

Those investments have surely become the hidden factor driving much of the company’s culture and overall outcomes.

Like many companies under the ESOP model, H&C’s culture is one of shared passion, ownership, and teamwork. This culture starts at the top but is reinforced by co-workers, creating a sense of community and collaboration.

“H&C is the kind of company that gets into your blood… you work there for a while, and the way [we] treat people begins to get into your system. Then you blink and it’s been 20 years,” Waltzer says, commenting on how powerfully the company’s culture influences its employee retention.

Employees are encouraged to be proactive in solving problems, contributing to a positive work environment that they all realize they have a stake in.

The ESOP structure provides employees with a tangible stake in the company’s success, and that tangible vested interest contributes to fostering a sense of value, healthy pride, and commitment to the company’s goals.

Because of this, H&C’s leadership invests a lot of time and energy into helping employees understand how they fit into the ESOP, emphasizing that when the company’s value improves, so too does their personal value.

Considering that H&C’s ESOP share prices have consistently outperformed even the S&P 500, it is easy to see how one could become so committed to a company that pays back so much in so many ways.

Looking ahead, H&C plans to continue investing in technology, vending solutions, and employee development.

It’s also prioritizing ways to enhance the already comprehensive benefits it offers, like gap health insurance and company-paid disability coverage. The company has also maintained a strong commitment to community involvement, supporting various charitable organizations and initiatives.

By maintaining its commitment to employee ownership, employee development, and customer satisfaction, H&C is poised for continued success and growth in the years to come.