Pittsburg Tank & Tower Group (PTTG) employees are truly invested in their company. As an employee stock ownership plan (ESOP) company, a trust purchased and owns 30 percent of the shares in PTTG’s stock, while the Johnston family holds the remaining shares. Over a period, the trust will allocate the shares to eligible employees, meaning PTTG employees will reap the benefits of holding a financial stake in the company without having to buy stock. PTTG’s leadership team still makes the company decisions while the employees serve the clients.
Pittsburg Tank and Tower was founded in 1919 and originally was based in Pittsburg, Kansas. Headquarters moved to Henderson, Kentucky in 1983 after the late Don Johnston bought it. It’s expanded and grown over the years to become a full tank and tower service company. Around 2012, the ownership began transitioning from Don to his sons Ben and Johnny Johnston, and their wives, Denise and Kathy.
Family-owned businesses often have successors or heirs in place to take over operations. If that’s not the case, the owners can either find someone outside the company to manage it, to sell the company, or to close its doors. Another option – the ones the Johnstons chose – is to sell stock to a trust who holds and allocates shares to their employees through an ESOP.
“I think the ESOP is the best approach because it keeps the culture intact, it keeps Pittsburg Tank & Tower Group standig as it is,” said Chief Operating Officer Jeremy Dixon. “Ownership shifts from Ben and Johnny to, ultimately, the employees over a period of time.”
ESOP has become an increasingly popular company benefit. There were approximately 6,416 ESOP companies in the United States as of September 2020, according to the National Center for Employee Ownership. Jeremy first heard about ESOPs while reading a brief section of his college textbook in the early 2000s. During a conversation with Ben in 2016 and as typical of our president, Ben had already started his due diligence of the benefits of an ESOP. Ben stated that it was time to quietly start researching ESOPs to make an informed decision about what is right for PTTG and its employees.
They sought out information and advice from CPA firms, legal counsels, and multiple companies with different levels of ESOPS. PTTG has a close relationship with Independence Bank and Houchens Industries, which both are ESOPs. That helped them better understand the different ways ESOPs can be structured and what would work best.
Once a PTTG employee meets the eligibility criteria, an account is automatically set up in their name, and shares are allocated. The employee names a beneficiary – much like they do for 401k plans. PTTG still has a company-match 401k investment for its employees. PTTG has both pre-tax and ROTH options. The Johnstons were adamant that ESOP would be a new benefit, in addition to the 401k and not a replacement for it.
ESOPs are intended to provide retirement benefits to employees. An ESOP trustee oversees the Trust and is considered the legal shareholder. Each eligible PTTG employee has beneficial ownership. With the help of an independent valuation firm, the ESOP trustee determines the stock value each year. Employees receive a yearly statement showing their accounts’ value. The company funds the ESOP 100 percent – none of the funds come out of the employee’s paychecks. The stock is privately held, so employees can’t buy and sell stock to anyone else. If the employee leaves, their vested stock is sold back to the company to be reallocated. The proceeds from the sale of the vested stock will be distributed to the employee over a period of time, up to 10 years depending on each situation.
The ESOP shares were bought at a fair market price. As the company grows, so will the share’s values and employees’ retirement benefits. Employees now have an ownership opportunity, so there’s even more incentive to make the company successful.
Operations have remained mostly the same. The Johnston family continues to be involved, and Ben Johnston is still the president. The management team and board of directors also continue to oversee the company’s day-to-day operations.
Researching ESOP and executing the transaction took about two years. Ben announced the decision to make the company an ESOP at the 2019 Christmas party.
“We felt like it was the right timing,” Jeremy said. “We wanted to see that culminate at the end of the 100th anniversary as the Johnston family’s gift to the employees.”
Unbeknownst to anyone at the party, the announcement came just mere months before the COVID-19 pandemic led to shutdowns and a huge disruption to the world’s economy.
“I think we all had to evolve to what COVID-19 presented and the world that we are living in,” Jeremy said. “I think we did a tremendous job, and our employees did a tremendous job managing and adapting to whatever was needed so we could be successful.”
People outside of PTTG have already taken notice.
During the first quarter of 2020, a man stopped a PTTG worker at a trade show because he had noticed an ESOP logo on their shirt. The man happily struck up a conversation about the many benefits of ESOP. “His enthusiasm and overwhelming positivity of his ESOP was encouraging to hear, and I walked away with a heightened sense of pride and appreciation to be a member of the PTTG team,” the employee said. “His final comments were that the implementation of the ESOP ‘speaks volumes of our company’s ownership and their commitment to all of its employees.’”