Top Companies Report

27. Zep

July 7, 2009

Atlanta, GA
Sales: $574 million

Sales: $574 million. Net income: $16.3 million for the year ended Aug. 31, 2008.

Key Personnel: John K. Morgan, chairman, president and chief executive officer; Mark R. Bachmann, executive vice president and chief financial officer; Robert P. Collins, vice president and chief administrative officer; David A. Korn, vice president and chief compliance officer; Stanley R. Weller Ph.D., vice president and chief technology officer; C. Francis Whitaker III, vice president, general counsel and secretary.

Major Products: Industrial and institutional cleaners. Brands include: Zep, Zep Commercial, Zep Professional and Enforcer Products.

New Products: Pro Visions biodegradable cleaners, Biofilm Drain Purge, Zep Commercial line of auto aftermarket products.

Comments: Sales rose 1.6% last year, primarily due to currency fluctuation, yet overall unit volume declined due to weak demand in North America. However, net income rose nearly 16% last year to $16.3 million. During the year, volume declined in North America, but rose internationally.

With no end to the recession in sight, in December Zep said it was reducing its non-sales headcount by 5%.

“We are operating in a rapidly declining and much broader economic downturn than we initially anticipated and believe it was prudent to reduce our cost structure in response,” noted John K. Morgan, chairman, president and chief executive officer. “In addition to the workforce reduction we have already begun implementing, we will further reduce our costs in other areas as necessary.”

For the first half, Zep reported a net loss of $2.5 million versus $8.2 million net income a year ago. Sales declined 11.9% to $243.8 million.

At the halfway mark in fiscal 2009, the company said it remains focused on simplifying and improving its core Zep sales and service business. Last year, the company fired underperforming sales representatives and most recently began adding sales capacity by seeding its sales force with experienced professionals focused on its most important market verticals. These additional, experienced sales representatives are poised to make an immediate impact on Zep’s top-line, and management expects this new recruitment model will carry a substantially shorter payback period than previous models, according to the Atlanta-based firm.

Also in the second quarter, the company reconfigured its logistics operations by consolidating three branches and signing a lease agreement for a northeastern U.S. distribution center in the Lehigh Valley area of Pennsylvania. Finally, Zep maintains that it made progress on its initiative to grow the Zep Commercial brand with existing partners, and is finding that the retail product expansion effort is enhancing its ability to access new retailers.

Back in October, Zep formed strategic alliances with W.W. Grainger, Inc., Lab Safety Supply Inc., Graybar Electric Company, Inc., R3 Reliable Redistribution Resource, a division of Bunzl North America, and VWR International, LLC. A distribution agreement has also been reached with SP Richards to distribute select Zep Commercial products.

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