State of the Industry Address

John A. Viniello, President

Thank you Tom [Groos] and good morning to all of you. They say when you purchase real estate you should always keep three things high on your list of priorities – Location, Location, Location. The same holds true when you select a seminar site … Like this island paradise!

What a wonderful turnout and before this conference concludes I hope to have the opportunity of welcoming each and every one of you. Before I begin this morning’s remarks, I, too, would like to add my personal congratulations to Dick Groos, this year’s recipient of the Golden Sprinkler Award. I’ve known Dick since coming into the sprinkler industry and although I never had the pleasure of working with him on the Board of Directors, I know how committed he and his family are to this industry and how supportive he has been of all the things that the Association has been able to accomplish. I think the committee has made an excellent choice to have once again selected a living legend in the industry to receive this most prestigious award, and I know you all agree with me.

And now ladies and gentlemen because we have such a marvelous turnout we need to ask a couple of questions of this audience which, by the way, is composed of a large number of sprinkler contracting firms in addition to sprinkler suppliers and manufacturers. The first question I would like to ask (and I also am going to take part in this little survey) is how many in the audience when they travel on business or for pleasure make sure that they stay in a sprinklered property, whether it be a condominium, a hotel or a motel? I would like those of you who have that belief and perhaps even have a company policy with regard to that philosophy to please stand. And now the dreaded question. Those of you who live in a sprinklered home as your primary residence, I would like you to remain standing and I would like everyone else to sit down. Is there anything wrong with this picture? I would like everybody to look around. I think we owe a round of applause to those who have remained standing.

At this point I would like to introduce a lady who is the Chairperson for Mothers are Fighting Fires (MAFF) who, if she had her way, when this question is asked five years from now everyone in the room would remain standing. She’s a real dynamo and I would like to introduce her to this audience because I can assure you she will be introducing herself to you before this conference is over and that’s Liz Schenck the wife of Bob Schenck from the McDaniel Company. Liz, stand up and take a bow. Thank you.

And now we have a number of special guests in the audience and I would like to extend our personal greetings to them. One gentleman has traveled all the way from Hamburg, Germany to be with us. He is the newest member of the Board of Directors of the International Fire Sprinkler Association (IFSA) from the Mini-Max Company – Torsten Habeck – Torsten. Also from the IFSA Board, Mr. Robert Chapman of the J.W. Singer Company. Robert and two gentlemen who have traveled from Canada, the current President of the Canadian Automatic Sprinkler Association, John Galt and we are also delighted to have with us a real living legend of our Industry the former President of CASA who retired in 1990, Mr. Bill Clark - this is his first conference in a number of years. Let’s make them both feel very welcome. John and Bill please stand.

As I indicated this is the largest turnout of contracting companies that we have had in some time during a non-exhibition year annual seminar. I would like to take this opportunity to introduce a gentleman who is the President of Western States Fire Protection. We have encouraged him to attend this conference, his first as an NFSA contractor member, a former graduate of the United States Military Academy at West Point and a very dynamic individual, Nage Damas. Nage take a bow. (Note: 15 contractors not currently members of NFSA were also introduced as first time attendees to an NFSA Annual Seminar.)

And now to the business at hand. Let’s take a very hard look at what I am characterizing as the Sprinkler Economy. It’s not surprising to everyone that we’ve had a terrific run in terms of business in this industry. Most of you have significant backlogs and the lack people power seems to be the primary problem facing most of our contractors, manufacturers and suppliers. Before we look into our economic crystal ball let’s take a look at what we’ve had business-wise in this industry. First there was an economy on steroids, explosive growth and zooming backlogs. However, in the last 12-18 months we’ve had what has been characterized by some economists as the Goldilocks Economy. It hasn’t been too hot and it hasn’t been too cold. In speaking with contractors, manufacturers and suppliers there seems to be significant backlog… and while that is healthy we need to know where we are going for the balance of this year and into the next year.

You’ve heard me say on a number of occasions that, particularly in an election year, nothing too much seems to go wrong with the general economic conditions. The incumbent party does whatever they can to sustain economic growth. This appears to be the case this year in spite of the Federal Reserve moving up interest rates several times to keep the lid on inflation. Remember …our industry… the fire sprinkler industry as part of the general construction industry is normally the last one to go into a recession and the last one to benefit from any general economic recovery. We need to keep this fact in mind because there could be precursors or warnings of a slowing of business conditions in the general economy which could ultimately affect your business. This is a RED FLAG that you should watch for.

Now let’s take a look at the future and I’m not going to stand here and tell you things that you already know. Many of you are in the process of assembling budgets for next year. I am in the process of doing the same. If we look at the absolutely best case, it is my belief that the volume of business in the sprinkler industry will be flat in the year 2001. Depending on activities of the Federal Reserve, inflation and consumer spending, non-residential construction, the worst case scenario would be a five-percent drop in business. For our budgets we are forecasting a three-percent drop from what I might add has been a very high level of business activity. We are beginning to see signs in the general economy of a slow-down, consumer spending is down, housing starts are up and down and to get a better handle on where we are I think it’s important that we begin to ask questions of some key institutions.

The architects and specification writers that you deal with can provide you with some very useful information. How is their activity going forward? Are there jobs on the books? Talk to your bankers and determine the level of construction loan activity, is there any slow down to a comparable period two or three years ago? One of the dangers that will alert us to problems in the future is having jobs BID but not LET because financing begins to dry up, or is no longer available, or is too costly. All of this can be very useful information in determining NEW business opportunities for the future. Excellent information.

So, in summary, let me say this. While I see some deterioration in business activity next year, it will be down from a very high level. The two words that I leave you with concerning our business are that I am cautiously optimistic. But I ask you to look for signs and any slow-downs in the general economy because I can tell you without question that this will affect your business. [John announces November 28^th On-Line Seminar on Dimensioning the Fire Sprinkler Industry].

And now before I get into some of the projects and programs that your Association is involved in, I think it important at this juncture to introduce some key people within the NFSA leadership, people who have taken time away from their business to work on initiatives within our industry that increase business for all of you. Many of the names are familiar but I think it important on the occasion of such an excellent turnout that you get to meet them up close and personal. First, you met him this morning, the Present Chairman of the Board of the NFSA, Mr. Tom Groos, who is with us and I would like you to hold your applause until we have these gentlemen stand and I ask you to remain standing until everyone is introduced. Our Vice-Chairman of the Board and Director at Large, Mr. Aus Marburger; the Treasurer of the Association who has served in that capacity for a number of years, Mr. Harry Nothhaft; our new Chairman of the Contractors Council who has been very active in the Chicago and Mid-West, Mr. Gregg Huennekens; the Chairman of our Sprinkler Manufacturers Council, and you met him this morning in the presentation of the Golden Sprinkler Award, Mr. James Smyrl. We also have a member of the Board of Directors that represents the Suppliers and Manufacturers in Mr. Gary Johnson who is also with us. Some of the other members of our Board are with us. First our Contractor Directors who have traveled to be with us at this seminar, Mr. Don DeLuca. We also have with us our former Chairman of the Board the immediate Past Chairman, Mr. Bill Oliver from the Mid-Atlantic States as well as our former Chairman of the Board from the Southeast, also a member of our Finance Committee Mr. Claude Chafin. We also have from the Southwest, Mr. Todd Little and from the Pacific Northwest, Mr. Jeff Bennett. In addition, our Manufacturer Directors former two-term Chairman of the Board, another member of the Manufacturers Council who serves on the Board of Directors, Mr. Kevin Fee and the immediate past chairman of the Manufacturers Council Mr. Bob Worthington, Jr. Ladies and Gentlemen I give to you the leaders of your industry.

But I can’t tell you how proud I and our staff are of the work that they do in supporting our initiatives, providing us with the resources to get the job done for you. The first order of business of our New Chairman Tom Groos was to convene a meeting of the NFSA Long Range Planning Committee. Several meetings have been held and a lot was done. In addition to providing the mechanism for some Crisis Management in the event something should happen to the Chief Staff Officer of the Association, we revised NFSA’s Mission Statement and I am proud at this tremendous gathering of the sprinkler industry to announce that our former Mission Statement, while it served its purpose, did not really embrace the true meaning of what NFSA is all about. So here is the new one, “TO PROTECT LIVES AND PROPERTY FROM FIRE THROUGH THE WIDE-SPREAD ACCEPTANCE OF THE FIRE SPRINKLER CONCEPT”. Everything that we do, everything that we hope to accomplish is embraced in that Mission Statement.

In addition, we emphasized our continued commitment to serving our membership at the grassroots level. It is our intent by the first of the year 2001 to have a full compliment of Regional Managers – 11 in number, covering the entire United States. Our Regional Managers Program is a microcosm of what NFSA does at the National Level and one of their jobs is to work with our elected Area Directors in developing programs and projects and addressing local issues for the sprinkler industry.

The next item that was tackled by your Long-Range Planning Committee was the development of what we are characterizing as SBU’s – Strategic Business Units. Focusing on issues that surface locally but need the attention of NFSA Staff nationally, whether it be the passage of an ordinance, whether it be a threat to existing codes or ordinances, whether it be exorbitant requirements or sprinkler disincentives such as stand-by charges or requirements for the P.E. seal, all of which could pose significant threats to fire Sprinklers as the primary tool to protect life and property form the ravages of unfriendly fire will be primary targets for SBU’s. Remember this concept, Yes I’m coming back to it in a moment . . .but now Ladies and Gentleman I would like to introduce a gentlemen who really has served in two capacities for the past 12 months. As you know when Bob McLeod retired and decided to become a consultant for NFSA we gave the responsibilities for Regional Operations to our present Director of Public Fire Protection, Jim Dalton. Jim has done an absolutely outstanding job in molding our Regional Manager Team into an efficient operating unit. But the demands of his responsibilities in Public Fire Protection and moving to a full compliment of Regional Managers and the Strategic Business Unit concept required that these duties once again be split. So beginning in January of 2001 we will be focusing on appointing a Director of Regional Operations so that Jim can reassume his full time duties as the NFSA Specialist in the areas of residential and retro-fit initiatives. But I think Jim deserves a nice round of applause for everything that he has done for us. Jim, take a bow.

As a result we have been conducting a search for a new Director of Regional Operations and as with most of you when a position becomes available in your firm you announce it internally before you seek to bring someone in from the outside. I am delighted to report that we have selected a new Director of Regional Operations who will assume his duties beginning January of next year. He has done an outstanding job for our Contractor, Manufacturer and Supplier members in the state of Florida and we have met with the leadership in Florida (some of whom are here this morning-Alan & Don Wiginton, Don Robertson, Lenny Hollis) and they are in full support of having appointed as Director of Regional Operations for the National Fire Sprinkler Association Mr. Buddy Dewar. Buddy take a bow. I am also delighted to announce at this year’s seminar that Buddy’s replacement will be the 1998 former Fire Marshal of the Year for the state of Florida who has accepted the position of Florida Regional Manager and will begin his duties beginning in December of this year and that’s Mr. Steve Randall. And although Steve is not with us, I know he is here in spirit.

In addition, we are presently conducting a candidate search for a Director of Membership. This person will be responsible for the retention of our existing membership base and recruiting new members in all categories to help strengthen our constituency throughout the country. This person will be working very closely with other Department Heads and will be working closely to strengthen existing Chapters as well as developing viable Chapters in those parts of the country where Chapter activity is very much needed. Stay tuned as we will be announcing this appointment hopefully before the end of the year.

Now, our vision of how these new pieces to the NFSA puzzle will work and how they will benefit you at the Local Level is through a Strategic well-organized approach to problem solving, the Strategic Business Unit approach. Whether it’s the threat to the sprinkler ordinance in Mesa, Arizona or a plumbing code in Wisconsin which is misrepresenting fire sprinklers or whether it’s a threat from the BIA (The Building Industry Association) to existing ordinances, or the misuse of the PE seal as we saw in Florida, whatever the problem an NFSA SWAT - Sprinkler Watch Attack Team will spring into action. We need an organized approach of bringing resources whether it be marketing, engineering and technical support, building code expertise or an orchestrated political and legislative agenda to address issues at the local level. Our membership and strong Chapter support will be a very necessary ingredient to the success of this kind of initiative. We will continue to discuss this concept in depth at our Staff meeting in December and have it ready as a viable program to launch by the 1^st of the year.

Now let’s turn our attention to some of the other things that NFSA is involved in. On Wednesday, you will be hearing for the first time from our Director of Membership and Communications, David Vandeyar, who will be talking about the NFSA Toolbox. But I call this to your attention because of my belief that our website which has been receiving very high marks from the fire sprinkler community is going to be one of the most important things in your toolbox in the coming years. Our objective is to get e-mail addresses of everyone of our members and we are going to begin communication with you through the website and I encourage you to log on to nfsa.org to find out what we are all about.

Next year’s activities in the area of sprinkler promotion will include continued work with the Home Fire Sprinkler Coalition which is presently working on initiatives in North America to promote the use of fire sprinklers. Our view of the markets of the future will be the adoption of the new International Building Code, our continued work with the National Fire Protection Association on the development of their Building Code and of course our continued work in liaison with the architectural community. You will hear on Wednesday from Aus Marburger, NFSA’s Vice Chairman of the Board, on the need for our Association and industry to increase its relationships with the architectural community as we move forward into the new decade.

Very high on our radar screen is improving the requirements within NFPA 25 – Inspection, Testing & Maintenance. We need to pay more attention to what happens to the fire sprinkler product after it is installed. After it leaves the laboratories, after it leaves the manufacturing facilities, what conditions is it subjected to in the field to insure its quality performance that we have enjoyed for more than a century. Stay tuned for very important activity in this arena.

Some of the things that we have resurrected is a new initiative called our Manpower Recruitment Committee which is really a reinvention of the wheel which was started under the watch of Kevin Fee when he was Chairman of the Board. This committee will be meeting here in Aruba to develop a strategy to provide information to the High School, Community College and Vocational School arenas of opportunities within our industry. And let me say that this initiative is going to involve each and every one of you helping to increase this awareness.

In addition, our Chairman of the Board has commissioned a subcommittee of NFSA to work on a development of how well sprinklers perform and develop a data-base through identifying a third party which we can point to with a high level of confidence that demonstrates how well the product you install, manufacture and supply has performed when called on to do so.

And naturally we will be moving forward with initiatives in the area of sprinklers for homes and high-rise retrofit. Many of these initiatives require work at the local level and in order for us to be successful we need every legitimate sprinkler contractor, manufacturer and supplier doing business in this industry to be part of the NFSA Team. Naturally there is a cost involved, but each of you need to assess whether or not there is a return on your investment for what NFSA is accomplishing. I can tell you this. What you pay to NFSA in dues will be paid back tenfold in the preservation of existing sprinkler markets and the creation of new ones. Remember this, in order to be successful in business as in life you need preparation. I think that is evidenced by what NFSA is trying to do as we move into the first decade of the new millenium. I would like to remind you of what John Wooden, the famed Basketball Coach at UCLA has said on a number of occasions and I would like to paraphrase, “Failure to prepare is preparing to fail”.

So, in closing let’s just pause for a moment and think back and imagine what this industry would be like if the National Fire Sprinkler Association wasn’t prepared to create markets, to defend markets and to have a constituency of members. Think about that for a moment. It’s a pretty scary thought isn’t it? Ladies and Gentlemen it’s always a pleasure. Thank you.