Crain's Cleveland Business

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NOT YOUR EVERYDAY CUSTOMER VOL. 37, NO. 22

5/27/2016

2:35 PM

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SERVICE

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MAY 30 - JUNE 5, 2016

Source Lunch

Business of Life

Jeremy Paris, Group Plan Commission Executive director has steered Public Square’s $50 million rebuild. Page 22

CLEVELAND BUSINESS

The List

Largest public companies Pages 25, 27

SPORTS BUSINESS

Force were way ahead of the times

Artist Susie Frazier works to build a brand Page 21

Nearly ready for prime time

kkleps@crain.com @KevinKleps

SEE FORCE, PAGE 8 Entire contents © 2016 by Crain Communications Inc.

Crowdfund law off to slow start Cleveland Whiskey, StartMart among first to raise cash from the masses

By KEVIN KLEPS

Scott Wolstein takes in the theatrics — the fire-breathing scoreboard, T-shirts being tossed or catapulted into the seats, the show-stopping player introductions — when he attends Quicken Loans Arena.

He always makes sure to point out when and where it all started.

“I share that with my friends every time we go to a Cavs game: None of this stuff existed before the MISL,” Wolstein said.

The Major Indoor Soccer League only lasted 14 seasons before it folded in 1992. The Cleveland Force — owned by Wolstein’s parents, Bart and Iris, for all but one of their 10 seasons — didn’t even make it out of the 1980s before the family pulled the plug.

But its impact, especially in the fan experience aspect of sports, lived on.

“We used to say anything short of human sacrifice we would try,” said Cleveland Cavaliers CEO Len Komoroski, who got his start in the industry as the community relations director of the MISL’s Pittsburgh Spirit in 1983. “It was just remarkable.”

TECHNOLOGY

By CHUCK SODER csoder@crain.com @ChuckSoder

Photographs by McKinley Wiley

After a $50 million facelift, the newly revitalized and reimagined Public Square officially reopens in June. But one big question remains: Who will be responsible for keeping the project a safe, vibrant, year-round Cleveland jewel? A smart operational structure and long-term funding will be the keys.

EDITORIAL, Page 10

The highly publicized crowdfunding revolution did not begin with a bang.

On May 16, it became legal for private companies to raise capital online from just about anyone — not just wealthy people who qualify as accredited investors.

Thirty-six companies had signed up to take advantage of the new equity crowdfunding law through May 25, according to the U.S. Securities and Exchange Commission’s website. Among them are two local companies: the Cleveland Whiskey distillery and StartMart Cleveland, which rents out desks and offices to entrepreneurs and freelancers.

Demand for equity crowdfunding has been “somewhat underwhelming,” according to Bob Cohen, CEO of the Braintree Business Development Center in Mansfield. He has been a member of the Crowdfunding Professional Association since it was formed in 2012. That year, Congress passed the Jumpstart Our Business Startups Act, which ordered SEE CROWDFUNDING, PAGE 23

INVESTING GUIDE

What the new federal fiduciary rule means to you Crain’s Superstar 10 list Who’s investing, and in what?

FOCUS, Pages 15-20

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Attracting talent with employee benefits “Here in Cleveland and nationwide, demand for skilled workers is surpassing even the need for traditional capital.

Investing in employees is fast becoming an essential growth strategy for companies both locally and globally.”

John Masters, Managing Director Bank of America Merrill Lynch

“Offering robust benefits tailored to your employees’ needs and preferences can help you build a stronger workforce — and gain a lasting competitive edge.”

Sam Prentis, Market Executive Bank of America Merrill Lynch

Now hiring

Rethinking tradition

Best of both worlds

Adding a multi-generational perspective has become a priority for most companies.

Hiring millennials — people born after 1980 — can help you adapt to changing customers, technologies and other disruptive innovation. At the same time, adding experienced workers can inject valuable experience, knowledge and decision-making skills into your business.

Workers of all ages now expect basic benefits, such as health insurance and retirement.

But several newer, non-traditional benefits are also gaining momentum. Understanding which benefits your workers value — and tailoring your package accordingly — can help increase your appeal to employees.

Health Savings Accounts (HSAs) are quickly becoming popular. Companies can consolidate HSAs with other plans to gain efficiencies, and employees can save for both short- and long-term medical costs. Education is essential to helping your workforce use this powerful tool to prepare for retirement and healthcare at the same time.

Popular non-traditional benefits Percent of workers who value the following:

HSAs do double duty

Recruitment plans Percent of companies planning to hire:

For more local insights, email us at sam.prentis@baml.com or john.masters@baml.com.

Sources: CFO Outlook, Bank of America Merrill Lynch; 2016 Workplace Benefits Report, Bank of America Merrill Lynch General disclaimer for Bank of America Merrill Lynch, visit baml.com/disclaimer. ©2016 Bank of America Corporation. AR8WDNW3

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CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 3

CBIZ at 20: Stronger, capable of more

BY JEREMY NOBILE jnobile@crain.com @JeremyNobile

Jerry Grisko has a billion dollars on his mind.

The president and CEO of Independence-based CBIZ Inc. has told investors the company expects annual top line growth of 6% to 8% as it continues along a multiyear growth path in the wake of the last financial downturn.

At that rate, it’ll be but a few more years until the company crosses the $1 billion threshold for annual revenues. At the end of 2015, CBIZ cleared $750 million in that line, growing about 4% over 2014 and nearly 30% over 2011.

So how will one of the nation’s largest professional service firms, which gained size early on through an aggressive acquisition strategy that continues today, maintain such auspicious goals in an increasingly competitive market where most of the lowest-hanging fruit already has been plucked?

“We’re going to out-local the nationals and out-national the locals,” Grisko said.

It’s a reference, of course, to the competition that CBIZ wants to dominate. While the firm certainly won’t overtake the prevailing control of its global Big 4 counterparts anytime soon — KPMG, comparatively, which ranks at the bottom of the Big 4, logged more than $24 billion in revenues in the 2015 fiscal year — it has a strategy to beat competitors both large and small, national and local.

“I think opportunities for growth today are greater than they’ve ever been in a long time,” Grisko said.

“We’ve had great success. And I think we are positioned for even greater success in the future.”

The implosion The 20-year-old company didn’t always have such a promising outlook.

Grisko assumed the role as president and CEO this spring as CBIZ chairman Steve Gerard handed the reins to him in a transition plan announced years prior. He most recently served as president and chief operating officer, a position he took on in 2000 after first joining CBIZ in 1998 as vice president of mergers and acquisitions.

Prior to that, Grisko was an M&A lawyer with BakerHostetler. That’s when he prodded CBIZ in its very early days to hire his firm for their acquisition work — and there was plenty of it.

Between 1997 and 1999, CBIZ closed at least 140 acquisitions to build out its two main business channels in financial and employee services. Many of those deals Grisko sourced himself. And it was during that period Grisko transitioned to CBIZ directly.

By late summer of 1998, CBIZ stock peaked above $20 a share.

But by the beginning of 2000, the markets changed. Consolidators fell out of favor, Grisko said. CBIZ was using its stock as currency in its various deals, and the markets generally started trending down.

That’s when CBIZ pumped the brakes on acquisitions.

“If you make that many acquisitions in that period of time, it will inevitably implode,” Gerard said.

“This company imploded at the end of 1999 and 2000.”

By the late fall of 2000, the CBIZ

share price plunged to $1.06.

The management team was refreshed around that time. Grisko moved to COO. Gerard came in as CEO with a genGrisko eral goal of gluing together the disparate parts that were CBIZ’s many and varied acquisitions.

As Gerard came in, the company was facing negative cash flow, lawsuits and $150 million in debt.

“Those acquisitions were smallto medium-size entrepreneurially run private businesses with great expectations by the sellers at the time that the combination of all these businesses would create this hugely successful behemoth,” Gerard said.

“Not only did you have economic failures … but also the psychological impact of these people saying, ‘I spent my whole life growing this business. What do I have now?’ ” “They really bought a boatload of companies, claiming they were integrated, and they weren’t,” said analyst Jim Macdonald, managing director at Chicago’s First Analysis, who follows CBIZ. “There were some big problems, and that’s when Steven and other guys came in as a sort of workout management team.”

A recapitalization followed. Debt and lawsuits were cleaned up.

CBIZ was officially on the path that put them where they are today.

“They’ve really turned it around,” Macdonald said.

A happy anniversary CBIZ now marks more than 4,400 employees in over 100 offices in 34 states and 18 major markets.

Its stock price, now hovering around $10.50 a share, is the highest it’s been since the company effectively collapsed under the weight of its own skyrocketing growth 16 years ago.

With its 20-year anniversary, CBIZ has completed what Grisko said is the firm’s first truly comprehensive strategic plan. That’s where the goal to “out-national the local and outlocal the nationals” came from.

The firm is still eyeing at least three or four acquisitions a year, but likely of slightly larger sizes compared with years’ past, Grisko said.

New markets and services won’t be quite as significant as improving certain segments of the business and specific markets.

“Prior to that strategic plan, we were less discerning among opportunities as long as they fit our core business and within our model,” Grisko said. “Today, we have a really strong platform in place, so let’s look for acquisitions that make that platform stronger.”

CBIZ’s size and structure does, indeed, give it an advantage in some niche areas over competitors outside of the more common outsourced business services for things like payroll and human resource management. And it’s going to capitalize on that.

A focus on midsize companies will persist, as that’s the space the company knows best and the field where they want to outperform competitors large and small.

On the accounting side, CBIZ wants to do more work with private equity companies to service M&A needs.

On the employee services side, massive changes in that sector, including impacts of the Affordable

Car Act, are creating a more complex landscape that bodes well for companies like CBIZ. Employee benefits consulting, payroll services and the technology that brings it all together are all highly targeted growth areas.

Similarly, the Medicaid consulting practice is a focus as well. And while CBIZ is already a heavy provider of Medicare services at the state level, it wants to be a bigger player at the federal level.

Grisko admits the firm isn’t in every market it wants to be in, though.

They have nothing in the Pacific Northwest. Markets around Portland, Seattle and San Francisco are on their radar, as well as a beefed-up presence in Silicon Valley. The Carolinas, Texas and Atlanta are attractive regions as well where the firm has either no presence or a smaller, less developed one.

The Cleveland market also falls into that category, Grisko said.

There’s definitely room to grow here. According to Crain’s 2016 Book of List, CBIZ is the 14th-largest accounting firm in Northeast Ohio. Its last deal here came with the acquisition of the actuarial and retirement plan services of Akron’s Tegrit Group in 2014.

Overall, the growth plan hasn’t change that drastically over the years. But one thing is certainly different.

The foundation under CBIZ today is stronger and more capable to handle growth plans than it’s ever been.

“I do have a $1 billion threshold in my mind, as quickly and as responsibly as we can get there,” Grisko said. “But we’d like to get there sooner than later.”

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Business consulting company Spooner Inc. found itself facing the same challenge its clients and many other employers across the country are grappling with: rapidly rising health plan costs.

Many of the Westlake-based company’s clients were on what chief marketing officer Andy Lembach calls the “hamster wheel� “Every year, everyone dreads shopping for the next plan (during) open enrollment,� Lembach said. “And you get a bunch of quotes from people, you go with the cheapest one, and then the next year they jack up the rates, and then you’re in this viscous and you’re doing it all over again.

There’s seemingly no control.�

Last year, Spooner, which employs about 130 people, switched to self-funded health insurance, a model in which an employer provides health benefits to employees with its own funds. It’s typically a cheaper option, but the employer then assumes the risk for paying claims, versus the traditional fully insured model in which insurance carriers bear that risk.

The self-funded option emerged for large, multistate employers after the Employee Retirement Income Security Act of 1974 exempted selffunded plans from state regulation, said Mike Ferguson, president of the Self-Insurance Institute of America.

The option has migrated down market ever since, with midsize and smaller companies making the switch from fully insured benefits.

That has accelerated through health care reform. “Companies are certainly seeing a lot of disruption in the marketplace over the last several years,� Ferguson said. “They want to be able to insulate themselves somewhat from that and by setting up your own health plan, you have more control over your future in terms of costs and how benefits are provided to your employees.�

Worth the risk?

But of course, there is that tradeoff. Although companies aren’t paying traditional premiums to insurance carriers, they are on the hook for claims as they come in.

Dan Polk, Medical Mutual of Ohio’s vice president of small group sales, said it is “extremely important� for groups to understand that self-funded plans pose these greater financial risks.

He has seen considerably more interest from groups in the under100-employees market to offer some form of a self-funded health insurance option, particularly since the Affordable Care Act was signed into law in 2010, he wrote in an email.

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“Groups in a self-funded arrangement are not required to adhere to many of the provisions required by ACA, including community rating and covering what are known as essential health benefits, and also are not required to pay some of the federally mandated fees that fully insured plans do,� Polk wrote. “As a result, a self-funded arrangement can provide some cost savings.�

Self-funded plans usually are administered by a third-party administrator or a traditional payer. Medical Mutual provides certain self-funded

“Companies are certainly seeing a lot of disruption in the marketplace over the last several years. ...

By setting up your own health plan, you have more control over your future in terms of costs and how benefits are provided to your employees.� — Mike Ferguson, president of the Self-Insurance Institute of America arrangements in its options for small group customers, Polk said.

The acceleration of employers shifting to self-funded plans is an unintended consequence of the Affordable Care Act, said Tom Campanella, director of the health care MBA program at Baldwin Wallace University, And that trend further exacerbates the problem.

The insurance health pool of all covered individuals now includes sicker, costlier individuals, since the Affordable Care Act prohibits insurers from denying people coverage.

But with not enough young healthy people enrolling, premium costs are rising.

As those costs soar, smaller employers with generally healthy, lowcost employees — and therefore less financial risk — are more likely to switch to a self-funded plan and exit the fully insured pool, Campanella said. “We’re back to another unintended consequence of it,� he said. “The s Cleveland Bus sines ss Volume 37, Number 22 Crain’s (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright Š 2016 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s s Cleveland Bus sines ss, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

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ACA is incenting healthier groups to get out of the pool, but the whole idea was — through things like individual mandates — to incent healthier people to stay in the pool or come into the pool.�

‘A better way’ The general rule of thumb has been the bigger a company is, the more likely it is to be a good candidate for self-insurance, Ferguson.

But smaller companies have begun signing on.

Cleveland-based Admiral Products is into its fourth year using a self-funded insurance model for its 38 employees. CEO Vincent Hvizda kept watching premiums grow every year, sometimes reaching into double-digit increases.

But three years ago, that increase was going to be more than 25%, he said. “I about fell off my chair,� he said. “There’s gotta be a better way to do this.�

For his company, there was. Since then, self-insurance has saved about $150,000 a year, or 12.5% when compared to fully insured options, Hvizda said.

He gets regular reports of claims, giving him a sense of health issues within the company. It’s always summaries and never identifiable, but the information has provided a basis for him to set up a wellness program within the company, to hopefully further control costs.

Spooner, the Westlake consultancy, also is looking into instituting a wellness program. Lembach said they never would have considered taking more ownership of employee health in a fully insured model, because they didn’t know what the issues were.

The aggregated data he now gets let him know that about 60% of his medical costs was coming from prescription drugs. A switch to generics this year has saved the company money “hand over fist� in the first quarter. “We see that people (are) going to the ER instead of establishing a relationship with a primary care doctor.

They don’t have a primary care doctor because they’re not doing their general screening,� Lembach said. “We didn’t know any of that before, so this transparency is very powerful.�

In the first year, Spooner saved between $300,000 and $400,000 on premiums. There were some administrative costs associated with managing a self-insured plan, but that was only a fraction of the savings.

Spooner has started recommending that clients shift to the self-insured model. One client told Lembach it would be the “easiest sell you’ve ever had.�

Already, two have made the shift and Lembach said he expects more of the more than 3,000 employers Spooner works with throughout Ohio.

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MY BENESCH “Benesch’s approach to really understanding our business issues gives me comfort they’re doing what’s right for SIFCO first. They often provide solutions and alternatives we hadn’t thought of. I consider them a true partner in our business.”

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Although he has 20 years of experience in restaurants, Andre McFarland’s new job as a steward at the Hilton Cleveland Downtown is his first turn at a hotel.

“I felt blessed,” McFarland said of landing the job keeping the kitchen stocked and ship-shape, because he had been out of work for a few months after being downsized from his prior job. He’s also played a part in the all-hands-on-deck period for staffers at a hotel opening, even breaking down cardboard boxes to keep the busy loading dock clear.

McFarland is one of 200 hires at the 369-person Hilton workforce who don’t have prior hotel experience. That’s partly a strategy on Hilton’s part, and in part a reflection that unemployed workers are still seeking work. That helped the industry dodge a worker shortage in a period when hiring was underway in the region’s hotel industry due to a plethora of new properties.

David Sangree, president of Hotel & Leisure Advisors, said he does not believe Cleveland has ever added so many rooms in a four-month period before, nearly 1,386 between the 600-room Hilton convention center hotel at Lakeside Avenue and Ontario Street as well as the Drury Plaza Hotel, the Kimpton Schofield and the Holiday Inn Cleveland Clinic.

Moreover, more than 1,000 rooms are under construction in the region’s suburbs as the hotel industry more than makes up for lost time during the Great Recession, when real estate lending, especially for the precarious hotel category, dried up.

“I’ve not heard anyone complaining,” Sangree said, though he knows hoteliers were worried about the hiring frenzy on the front side. Other regions are not so lucky — even without an epic bulge in supply.

Sangree said on a recent business trip to the Catskills, he found hotels importing foreign workers to allay a worker shortage.

Attitude, not aptitude Scott Schmelzer, general manager of the Drury Plaza Hotel, which opened April 29 in the former Cleveland Board of Education Building, 1301 E. Sixth St., said filling a total of 70 full- and part-time jobs by April 5 was “not as difficult as I thought it would be.” An advantage of the hotel industry, he said, is that it can often import people from other industries if the candidates are sociable and service-oriented.

“We’re all competing for the top candidates,” Schmelzer said. But the pool of job-hunters was huge; the Drury could pick from 1,200 applicants. He estimates about 30% of his associates are new to the lodging trade.

At hotels, it’s a given that there are always jobs, albeit often paying poorly at the lower ranks. But hiring for a new hotel is a different situation. Many jobs get filled in a short period.

Even though there’s not been a shortage, Kimpton general manager Adam Gurgiolo said he could tell

Final touches are being applied to the Hilton Cleveland Downtown. To see a gallery of the Hilton construction from start to (nearly) finish, go to crainscleveland.com. (Stan Bullard photos) More online and in print: Read a Business of Life profile of artist Susie Frazier, who is doing art installations in the hotel, on Page 21. See a video of the process on crainscleveland.com.

After being downsized from his prior job, Andre McFarland “felt blessed” to get his new job as a steward at the Hilton. there was competition for talent before his staff of 40 opened the property on March 8 at 2000 E. Ninth St. “To a certain extent, we competed for applicants even though the Drury was not there yet in terms of hiring,” Gurgiolo said. “We found applicants were weighing all the options. We got questions about the culture of the company. It was being part of this opening team at this hotel or that one. It’s an exciting thing to be part of a hotel’s opening team.

It’s a rarity in Cleveland to have this many opening at once.”

For its part, Hilton wanted to ensure it made a positive impact on the region, according to Teri Agosta, the Hilton’s general manager who came here from Phoenix for her first hotelopening experience.

“It’s not typical to hire non-hotel individuals, especially for an opening,” Agosta said.

“We specifically decided to take this strategy. We wanted to make a difference in the community, offer careers to people who have an amazing hospitality spirit and then train them the Hilton way,” she added. “We did not want to take too many people from the local hotels because our philosophy is it’s not about the Hilton Cleveland; it’s about the city of Cleveland. We made an extra effort in hiring people with no experience, people out of work and people reflective of the community. We hired solely based on attitude, not aptitude.”

The hotel even hired a chief engagement champion, Kelly Rose, in October who spoke with local nonprofit groups, community colleges and universities to “create a huge

buzz regarding her love for Hilton and the opportunities we are providing,” Agosta said.

“Individuals who never even thought about working at a hotel became interested in working for the Hilton and pursuing a career in hospitality,” she said. Hilton interviewed more than 1,300 people at its April hiring fairs, she said — and hired 267 team members on the spot.

By the numbers How much total hiring has gone on in the region between the boom in downtown and suburban hotels is notable.

The Ohio Bureau of Labor Services reports the category for accommodation and food services — which lumps hotels and restaurants together — in the Cleveland-Elyria Metropolitan Statistical Area added 2,200 jobs to 87,900 in April from 85,700 in March, a gain of 2.6%. However, over the last year, the MSA gained 6,200 jobs, a 7.6% increase, from 81,700 in the like month in 2015, though monthly numbers fluctuate.

Steve Groppe, general manager of the Renaissance Cleveland Hotel, 24 Public Square, said he believes that increase is reasonable given that job growth in the sector “is even deeper than just the hotels. You have all the new Flats restaurants staffing up as well. It’s great for the city.”

Richey Piiparinen, a senior research associate at Cleveland State University’s Center for Population Dynamics, joked that “the jobs are not an illusion. Go to the Drury and there are people working there a few months ago.” He said the growth on a percentage basis is gaining national attention because it has occurred for several months.

With hotel opening crews staffed, the region’s lodging business can move on to its next challenge of getting groups here to put heads in beds after the Republican National Convention.

However, going forward, McFarland, of the Hilton, has in addition to the prized job a ceremonial coin that the hotel gave the first 100 of its opening team hires. One side has a 76, reflecting he was the 76th hire, while the other has an etched image of the 32-story hotel.

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CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 7

Fab Labs are “critical” to helping young children become educated in the digital economy, OneCommunity CEO Lev Gonick said. (Contributed photos)

Cleveland is key spot for Fab Lab concept

BY RACHEL ABBEY McCAFFERTY

tronic tablets, where students can design products, and more industrirmccafferty@crain.com al machinery like laser cutters or @ramccafferty CNC machines, which turn those designs into something tangible that A Cleveland-based organization is students can use to construct their looking to help children become designs. makers at a young age — a very Lev Gonick, CEO of OneCommuyoung age. nity, which has traditionally encourTIES, the Teaching Institute for aged the use and adoption of ultra Excellence in STEM, is behind a high-speed internet, has long been push to establish earinvolved in TIES. He ly childhood Fab said he thinks the Labs in locations like early childhood Fab schools, childcares Lab idea is “critical” and children’s museto helping young ums across the counchildren become edtry. ucated in the digital The mission of economy. The Fab TIES is to make sure Labs represent play, children everywhere he said, plus discovhave access to a ery and experiential STEM education, learning. helping them make And TIES has plensense of the world, ty of experience in said president and designing Fab Labs CEO Jan Morrison. for schools.

This means TIES’ One of its early work includes a lot of projects in Cleveland behind-the-scenes was helping with the design of Fab Labs, design of Mc2 STEM STEM schools and High School, which STEM networks by has three in-house 38 consultants across Fab Labs and one the globe. mobile lab, Morrison The organization said. The presence of got its start in 2002 in a Fab Lab was a first Baltimore but moved for schools, she said, to Cleveland almost — Jan Morrison, president which has meant nine years ago. and CEO of TIES that the way Fab Around that time, the Labs are used for Bill & Melinda Gates teaching and learnFoundation, which TIES had been ing is often determined by how it’s working with, had been encouraging being done in Cleveland. the group to go to Ohio to set up a “We’ve had the chance to really statewide STEM network, Morrison prototype Fab Labs for the country said. Two of her children had moved and the world in schools,” she said. to the city. And Morrison, a teacher “They’d been around, but not in and school administrator of 35 schools. And we’ve also prototyped years, said she felt the city had a lot processes around it.” of opportunity.

About a year and a half ago, MorThe size of the city was right, and rison said she heard a lot of talk she likes that the city “knows what it around the idea of pushing compuis to prototype.” Instead of immeditational literacy “earlier and earlier.” ately disregarding ideas, people find The idea is similar to language learnways to get them done for students, ing, in that the younger students are she said. when they start, the better they’ll “I have not looked back for a learn. At the same time, there were minute,” she said. “It was the city to lots of conversations around the move to.” idea of helping young students do Now, one of the group’s main inimore “tinkering.” tiatives is creating Fab Labs in early Morrison saw an opportunity to education, which are designed to be bring representatives from both of more than just a tech-filled play those conversations, like the Nationarea. Fab Labs, which are similar to al Science Foundation, the U.S. Demaker spaces, are affiliated with the partment of Education and FableViFab Foundation and the Massachusion, together to address the issues setts Institute of Technology. The at hand. By the end of the group’s designs for the early childhood labs first meeting, participants had deinclude digital equipment like eleccided to design a possible prototype.

The Bay Area Discovery Museum in California, which volunteered to be first, had a soft launch in January and a hard launch in May. Morrison said plans are also underway to establish pilots at a small number of Head Starts.

The White House can’t endorse specific approaches, but Libby Doggett, deputy assistant secretary for policy and early learning at the

“We’ve had the chance to really prototype Fab Labs for the country and the world in schools. They’d been around, but not in schools. And we’ve also prototyped processes around it.”

U.S. Department of Education, said the administration wants to see STEM education included at younger ages. In April, the White House held an event to highlight these efforts, which included TIES’ early childhood Fab Labs initiative.

STEM education is already part of early education, but often under different words. Young students learn about engineering through “block

play,” Doggett said, and they learn about science on nature walks. But it could be expanded upon if teachers had more support and were taking a scientific approach. Doggett said the TIES program brings together digital, creative and building skills, which she found exciting.

“I think in some ways we have underestimated young children,” Doggett said.

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FORCE

CONTINUED FROM PAGE 1 Smoke machines, lasers and blaring music were the norm in the MISL. The Spirit had a “Hot Legs” promotion, the St. Louis Steamers threw roses into the crowd as a thank you to their large female following, and Baltimore Blast home games featured a soccer ball-shaped spaceship that descended from the rafters.

Nothing, however, seemed to beat the Force, whose Darth Vader mascot grew so popular that the Wolsteins once received a cease-and-desist order from Lucasfilm founder George Lucas.

“We had a tunnel with running lights and smoke,” Scott Wolstein said of the setup at the old Richfield Coliseum. “We’d roll that out before the game and the arena would be completely dark. The tunnel would light up and smoke would rise, and the theme from ‘Star Wars’ would come on, and then a guy in a Darth Vader costume would come running out of the tunnel and point a lightsaber to the sky. The place would go absolutely bonkers.”

It was all part of one of the best shows in sports. Beginning in 198283, the Force outdrew the Cavs at the Coliseum for five consecutive seasons. In 1983-84, the MISL club had almost a 3-to-1 edge on their NBA neighbors, with an average attendance of 13,692 that was 8,617 ahead of the Cavs.

The Force weren’t alone, either.

A 1984 Sports Illustrated story mentioned how indoor soccer teams were “clobbering their basketball neighbors” at the gate. At the time, the MISL’s Kansas City Comets were outdrawing every NBA team with a norm of almost 16,000 per game.

“It was really ahead of its time,” Komoroski said of the league.

The Force were the subjects of a 1984 Sports Illustrated story.

(Contributed photo)

The power of ‘free’

The Force outdrew the Cavs for five straight years. (Contributed photo)

Paul Garofolo, who joined the Force in 1981 as the director of public relations and eventually rose to vice president and general manager, said Bart Wolstein was ready to give up on soccer in Cleveland in 1983, during halftime of a firstround playoff game against the Chicago Sting.

“We were getting beat. There was a lousy crowd,” Garofolo said, “Bart said, ‘I think I’m done with this. I think on Monday I’m just going to call it quits. I’ve given this town a playoff team. What else can we do?’ ” It turned out, a lot.

The Force rallied to win the sec-

ond game of a best-of-three series, and Garofolo said fewer than two days before the series finale, the team had sold fewer than 800 tickets. The Game 2 comeback, however, had been broadcast on radio and TV in Cleveland, and the contest aired again overnight.

By the following morning, Garofolo said every phone line was lit up with people trying to purchase seats.

The deciding game ended up drawing 19,106 fans — leading to massive traffic jams on the interstate for an area that wasn’t accustomed to capacity crowds. (The Cavs, who were in the final season of the woeful Ted Stepien era, averaged 3,916 at the gate in ’82-83.)

“We won that game and advanced to the next round, and we had a story to tell,” Garofolo said.

“We had captured lighting in a bottle.”

The Wolsteins — “master marketeers,” as Garofolo calls them now — capitalized on all of the attention.

They urged fans to buy tickets in advance. The season-ticket base expanded from 600 to 6,000, and the average attendance doubled from 6,609 in 1982-83 to 13,692 in ’83-84.

Three years later, it reached a peak of 14,111.

Garofolo said Bart Wolstein introduced the buy-one-get-one-free, or BOGO, concept, which “was unheard of in sports.” Second-tier seats, which were priced at $10, were offered for $20 each, but the second one was free.

“Bart used to say free was the most powerful word in the English language,” Garofolo said.

Scott Wolstein, who used his legal connections (a law school friend was an attorney for Lucasfilm at the time) to help bring Darth Vader back after a one-year absence, said, “We took the worst seats in the end zone and basically doubled the price and people gobbled them up.”

CONTINUES ON PAGE 9

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Notable MISL-NBA connections

CONTINUED FROM PAGE 8 The Force once drew 21,000 to a preseason game after giving away free tickets, which fans had to pick up at a local Revco, a drug store chain with which the team had a partnership. Cavs fans might be familiar with such a ploy, since the team for years has used Discount Drug Mart locations as a pickup spot for preseason tickets.

Then there were the players, who in addition to producing postseason runs in each of the Force’s final five seasons, were more present in the community than possibly any other professional athlete in town.

Kai Haaskivi, a two-time firstteam all-MISL selection, estimates that he would appear at nearly 60 Force-branded soccer camps each summer. Force players who had year-round contracts were required to work at the camps, and those who weren’t were paid weekly for their services during the summer.

“We saw 10,000 kids every summer,” said Haaskivi, who now runs a soccer academy in Sarasota, Fla. “They became friends of ours and they came out to see us play.”

Len Komoroski — The CEO of the Cavaliers and Quicken Loans Arena was the director of media and community relations for the MISL’s Pittsburgh Spirit from 1983-86, and later served as assistant GM of the Minnesota Strikers.

Tim Leiweke — A former president and GM of the MISL’s Kansas City Comets and assistant GM of the St. Louis Steamers, Leiweke went on to serve as the president of the Denver Nuggets. He was also the first employee hired by the expansion Minnesota Timberwolves in 1989.

Chris Wright — He’s been the Timberwolves’ president since 2004 and just completed his 25th year with the organization. Prior to the NBA, Wright was the GM of the Pittsburgh Spirit and Minnesota Strikers.

Jerry Buss — The late Los Angeles Lakers owner also owned the MISL’s L.A. Lazers.

Don Carter — The former Dallas Mavericks owner presided over the Dallas Sidekicks for two seasons.

Others of note Former San Francisco 49ers owner Eddie DeBartolo Jr. and late former Miami Dolphins owner Joe Robbie also owned MISL clubs, and current NFL chief operating officer Tod Leiweke spent two years as an MISL exec.

‘Almost like sacrilege’ During his MISL days, Komoroski got to know Tim Leiweke, a former president and GM of the Kansas City Comets who went on to prominent positions with the Toronto Maple Leafs, Los Angeles Kings, Denver Nuggets and AEG. Leiweke was the first employee hired by the expansion Minnesota Timberwolves, who started play in 1989. Leiweke recruited Komoroski, who became the T-Wolves’ VP of sales and the franchise’s third employee.

Komoroski also was the Timberwolves’ game director, and at the time he says NBA halftime entertainment consisted of “rolling the ball out at halfcourt.”

The Force advanced to the MISL title series in 1988. (Contributed photo) The Timberwolves brought in a dance team, had lights-out introductions with laser shows and fog machines, and played music as the action was unfolding on the court, which was a bit of a no-no at the time.

“You used to have none of that during play,” Komoroski said of the music. “There was silence during

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play. Through the MISL, that ultimately became the norm. You had a number of people passing through from other (NBA) teams that were just aghast. It was almost like sacrilege what we were doing (in Minnesota).”

The T-Wolves — who set an NBA record with an average attendance of

26,160 in their first season — weren’t alone. The Chicago Bulls, who had been outdrawn by the MISL’s Sting prior to Michael Jordan’s arrival, had flashy player introductions that generated a lot of attention. The Charlotte Hornets, Miami Heat and Orlando Magic joined the Timberwolves as expansion teams during a two-year span in the late ’80s — a process Komoroski points to as a critical changing-of-theguard moment for the league’s fan experience initiatives.

“There was a wave of franchises coming in that were not encumbered by decades of tradition,” Ko-

moroski said.

Almost three decades later, every sports team seems to be taking the MISL approach of trying to one-up the others. MISL vets such as Komoroski and Garofolo credit indoor soccer for what we watch and hear now at games.

“The MISL was the precursor to what you’re seeing in the NBA today,” Garofolo said. “We did anything we could to entertain the crowd. It was just the right time in history. People were looking for more out of their sporting events, and we were able to deliver it to them.”

The Force weren’t just the league’s signature franchise in terms of their popular, otherwordly mascot.

The franchise’s annual revenues reportedly increased from $550,000 in the Wolsteins’ first season to $3.8 million in their final campaign as owners. Scott Wolstein said the team was profitable in its final two seasons, making a “few hundred grand” in that time.

But the league had little TV revenue, and the Force’s owners could see the eventual league decline coming years before it did.

The Force was reborn as the Crunch, an MISL expansion team under new ownership, in 1989, but that franchise never caught on like its predecessor. Attendance the next 16 years, the final three of which were again played under the Force nickname, never averaged more than 8,265 per game, and most of the campaigns were in the 4,000 to 6,000 range.

The MISL’s legacy, though, has lived on, and, ironically, a lot of that is because of basketball.

“The moral of the story is good news traveled fast,” Komoroski, the Cavs’ CEO, said. “You had a proliferation of great evolution and game presentation, and it was felt in other areas of the business, too.”

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Opinion From the Publisher / Editor

Got an opinion?

You’re invited to express it here

Editorial

All square The renovated Public Square, which will open officially in June, is gorgeous. As big an accomplishment as that is, now comes the even more important part: keeping it busy with diverse events throughout the year, and keeping it clean and safe.

To do that, the square’s planners will need to come up with a permanent operational structure — likely involving Cleveland Metroparks, Downtown Cleveland Alliance, or both — and an operating fund that ensures the space’s programming and upkeep matches the standards of its sharp new look.

First, credit where it’s due for a job (extremely) well done.

The Group Plan Commission, the nonprofit that guided the $50 million redevelopment of the square, efficiently managed a project that will become a signature space of Cleveland to residents and visitors alike. The design by landscape architecture firm James Corner Field Operations is beautiful, and the key elements of what’s now a true park — a privately operated café, an ice skating rink, a picnic hill, a concert space and new landscaping around the Soldiers and Sailors Monument — make Public Square a unified front door to downtown rather than four separated quadrants.

In March, the Group Plan Commission took the smart step of hiring Sanaa Julien, chief marketing officer of Cleveland Metroparks, as a loaned executive to oversee programming and branding for the square. Early results are encouraging.

They include the National Endowment for the Arts awarding a $50,000 matching grant to Cuyahoga Arts and Culture for arts programming in the square, and the Cleveland Orchestra scheduling a July 29 concert there.

Julien’s only going to be in the job for a year, though. The Group Plan Commission is wise, then, to consider establishing a trust that would work with Metroparks and DCA to run the square on a permanent basis. The commission’s chairman, Anthony Coyne, has estimated that the square will need $2 million a year to be maintained properly — more than $4 mil-

lion already has been raised for an operating fund — so the sooner there’s permanent organization in place, the better.

Based on the work they’ve done in their respective fields, DCA, which has brightened up downtown considerably with its Clean and Safe Ambassadors program, and Metroparks, which has made Cleveland’s lakefront and riverfront more lively, are the right choices to make the new Public Square a long-term gem. We hope they can step up to the task.

Cleveland is getting ready for its closeup this July with 50,000 visitors and a national/international television audience for the Republican National Convention. The square will make a good first impression. Let’s make sure it’s a lasting one.

Speak up In the metaphorical public square, the city of Cleveland last week laid out some sensible steps to accommodate people who want to speak and protest during the Republican convention.

Among them: a “speakers’ platform” on Public Square near the statue of city founder Moses Cleaveland, and a one-mile “parade route” for protestors and groups that apply for official permits.

There was some grumbling about the details, in particular the city’s efforts to limit the times of protest marches. This is a sticky issue for every city that hosts a political convention and seeks to protect the free speech rights of protestors while maintaining the safety of citizens. Given the uniquely nasty tone of the 2016 presidential campaign to date, and the actual incidents of violence at the Republican nominee’s rallies, the approach outlined by the city does a good job of achieving that balance.

PUBLISHER AND EDITOR: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

MANAGING EDITOR: Scott Suttell (ssuttell@crain.com) SECTIONS EDITOR: Timothy Magaw (tmagaw@crain.com)

It’s commencement season for college and high school graduates. And as the name commencement suggests, it’s not an end, but a beginning.

Celebrity speakers, noted business leaders, politicians and media stars have been offering their advice from the podium.

Valedictorians are speaking from the heart to their high school classmates, too.

Facebook COO Sheryl Sandberg, author of “Lean In: Women, Work, and the Will to Lead,” said this to students at the University of California at Berkeley: “When the challenges come, I hope you remember that anchored deep within you is the ability to learn and grow. You are not born with a fixed amount of resilience. Like a muscle, you can build it up, draw on it when you need it.”

Cleveland native Steve Harvey told graduates of Alabama State University: “There is Elizabeth a difference between success and greatness.

McIntyre … Great people change other people’s lives.

Great people put other people’s needs in front of theirs. Great people go back to their communities and change lives.”

Reading these inspirational words, it occurred to me how important it is to listen to diverse viewpoints, to consider perspectives that don’t match our own, and to share opinions. That’s something we hope to provide you with every edition of Crain’s Cleveland Business, through our reporting, our editorials, opinion columns like mine, and letters and oped pieces by you, our readers.

We all benefit when more voices are involved in the conversation. And it doesn’t have to be grand oration. It doesn’t have to be a commencement speech. I know from the conversations I have every day with Northeast Ohio business leaders and our readers that people have so much to offer.

And we all stand to benefit when conversations are diverse and robust.

And so I want to take this moment to extend an invitation.

Please, share your perspective with us. Dispense advice.

Comment on the news, on public policy, on corporate culture. You need not don a mortar board and robe, simply send me an email at emcintyre@crain.com.

If what you have to say is short and sweet (or not so sweet), we can include it in our letters section. If you’ve got more to say, write a column of no more than 650 words and send that along. If you’d prefer to dash off a quick comment on one of the stories you see on crainscleveland.com, including this one, we’ve got a spot for that under every story.

Samantha Power, U.S. ambassador to the United Nations, told the Class of 2016 at Yale University: “From the Facebook and Twitter feeds we monitor, to the algorithms that determine the results of our web searches based on our previous browsing history and location, our major sources of information are increasingly engineered to reflect back to us the world as we already see it. They give us the comfort of our opinions without the discomfort of thought. So you have to find a way to break out of your echo chambers.”

That’s great advice. And one way to break out of the echo chamber is to share your unique voice with the community, to provoke thought.

We hope you’ll let Crain’s Cleveland Business be your podium for that.

WRITE US: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

SOUND OFF: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

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Web Talk Re: Rock Hall’s change in food-service provider Nice work. Toss out the local company (Executive Caterers) for a national conglomerate (Aramark). — Vic

Re: Hard Rock Café Cleveland to close Disappointed to read that the Hard Rock is closing. The “strategic decision” must be that they are not making enough money on the location.

We go there often before Cavs and Indians games, and it’s always packed, with a waiting line. It must be empty on non-game days. — Donald Sinko

Re: Direction of Akron Ugh, here we go again with the puffery in Crain’s profile of Kyle Kutuchief, Akron program director for the John S. and James L. Knight Foundation.

Why are we celebrating mediocrity?

Why do we put lipstick on the pig that is Akron? Why are we profiling people with superficial ideas that won’t move any needles? Let’s regain some journalistic integrity, Crain’s, and start asking some tough questions. — Larry Larry, you just said absolutely nothing.

What point are you trying to make?

No one is putting lipstick on anything.

The article is about a man and an organization trying to change things for the better. What is your CONSTRUCTIVE criticism? …

Complain, complain, complain. You offer no alternatives or solutions.

— Tim Fitzwater

Re: Editorial opposing $15-per-hour minimum wage People earning $150,000 should hold their opinion when they give their kids an allowance and savings greater than what the average worker earns in a year.

Shame on you, Crain’s. Shame. The corresponding opinion would be to reduce the tax burden on citizens. Or at least the salaries in city hall.

— 189345

Re: LeBron’s foundation Outstanding partnership between the LeBron James Family Foundation and the Bridgestone Invitational.

Thanks to LeBron, who continues to lead and be a role model.

Congratulations to the Bridgestone Invitational. And congratulations for the specific focus of LJFF! You are all helping to propel a better future for so many. Education first, for sure, but also bringing in new lives to the wonders of golf — even if some of these are constantly wondering why we miss so many putts.

It’s all about so much more, especially the social encounters and the infinite joy of the shot that actually lands where one intends. This “shot” and your partnership is a true “hole in one” (on a par 4). — Richard Obertots

Letter to the Editor

Separate funding makes sense for Summit’s United Way, Red Cross As United Way of Summit County embarks upon a new strategic direction away from a traditional agency-funding model and toward a community change model, it has become clear that there are some challenges in maintaining the United Way/American Red Cross joint fundraising agreement as it has existed for more than 50 years.

As a result, United Way entered into negotiations with the Red Cross toward a mutually agreeable termination of our joint fundraising contract, which was originally set to expire in April 2019.

As part of the proposed agreement, the Red Cross will receive a lump-sum payout, which is very close to the annual allocations originally negotiated by the contract.

Our common goal is to create a strong community. We feel that the proposed agreement is mutually beneficial to both organizations and positions them to better serve by focusing on their respective missions while acknowledging the changing realities in which both organizations deliver their services for the good of the community.

Both organizations remain committed to providing services in Akron and the surrounding communities and will continue to work together, as the opportunity allows, in an effort to improve the lives of all community members. For example, representatives from each organization will continue to serve on United Way’s campaign cabinet in an effort to gain the support of the community and corporations.

The Red Cross will continue to provide community-based services to support its mission to prevent and alleviate suffering in the face of emergencies throughout Summit, Portage and Medina counties. These services include (but are not limited to): Citizen CPR classes, which offer community members the opportunity to learn “hands only” CPR, which can help save lives; Operation Save-A-Life, which educates community members on responding during a home fire and installs smoke alarms in homes throughout the three counties; blood drives, which provide local medical systems access to life-saving blood products; and disaster relief to those who have experienced a home fire or flooding.

The Red Cross will be expanding its fundraising efforts in the community for the upcoming fiscal year beginning on July 1, 2016.

United Way of Summit County is committed to working within our community to align and drive collaborative resources for long lasting change for all. Over the next 18 months, United Way will convene stakeholders to help shape the overall impact agenda for its work in education, income and health for years to come. Measures of success in this work will be centered on impact and community change indicators that will result in a strong return on investment for Summit County.

Final approval of the dissolution of the partnership will be voted on at the United Way board meeting on June 15.

Rachel D’Attoma Executive Director, American Red Cross of Summit, Portage, and Medina Counties Akron Jim Mullen President & CEO, United Way of Summit County Akron

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THE DISH: Lee Chilcote

Tapstack is a hidden gem for Buckeye Brewing Co.

BY LEE CHILCOTE Chilcote is a freelance writer and editor who has written for Vanity Fair, Next City, Belt and other publications. He is cofounder of Literary Cleveland.

Whenever Tapstack owner Garin Wright fields phone calls from customers who are having trouble finding the place, he recites the slogan: “Follow the stack, we’re right out back!”

Buckeye Brewing Co.’s West Side taproom, which is located in the Walford Industrial Park in Cleveland’s West Boulevard neighborhood, gets its name from the brick smokestack that soars above the complex.

Visible from far away, the towering smokestack helps guide lost hop heads to a seat at the bar.

Tapstack may not be the easiest place to find, but it’s well worth the visit. The brewery, which has been around since 1997, makes its superb beers on site and currently offers up to 16 of them on tap.

Tapstack opened last year, adding to the growing list of taprooms making waves in Northeast Ohio’s

booming beer scene, including the Bottlehouse Brewing Co.’s new Lakewood location, Brick and Barrel in the Flats, and Platform Beer Co. in Ohio City.

“You’ve got to have it, even if it’s off site,” said Wright of opening a taproom. “We’re able to have a deep tap selection here, enough to appeal to the craft beer drinker. That’s what’s great about taprooms — you get to try new things you wouldn’t get to try otherwise.”

Buckeye Brewing Co. distributes its beer in bottles to Northeast Ohio stores and also owns and operates the Beer Engine in Lakewood. However, most of its beers cannot be found in stores. Tapstack offers beer fans the ability to enjoy a fresh pint in the building where it was handcrafted. Additionally, the venue’s industrial-chic décor is unlike anything else in Cleveland.

Tapstack’s interior looks like an industrial hunting lodge. It has painted concrete floors and partially exposed brick walls that boast a mural of pine trees and blue skies.

Its chandeliers are made out of beer bottles and there’s a rough-hewn

bar carved from a giant log. There’s even a window on one side of the bar that allows customers to catch a glimpse of the smokestack.

During a recent visit, beers on tap included the Martian Marzen (a lager), the Sunstream (a Belgian Witte) and Snow Belted (a rye saison). The taproom also features beers from assistant brewer Pedro Sarsama, who owns Early Bird Brewing Company.

Although the off-the-beaten-path location can be “hit or miss,” Wright has a reciprocal relationship with Ray’s MTB, a popular indoor bike park that has been at Walford for over a decade. Tapstack, which is open Thursday from 4-10 p.m., Friday from 3-10 p.m., and Saturday from 12-10 p.m., is the unofficial watering hole for bikers who frequent Ray’s.

Wright is hoping to work even more closely with Ray’s in the future. The bike park is currently closed for the summer as it completes a major expansion that will add more ramps, and Wright is considering punching a door in the brick wall to foster more traffic between the two spaces.

When Wright started Buckeye Brewing Co. after graduating from the University of Akron, he was pretty green. “I’d been doing some home brewing, and my dad wanted to open a brewery,” he said. “I thought, ‘I’m not going to be using my communications degree, so why not make beer?’ ” In those days, there were a lot fewer breweries and significantly less competition. Wright taught himself to make beer using a thick textbook and eventually developed and perfected his own recipes. “After two years of complete stress, I started brewing really good beer,” he said.

Fast forward two decades and the beer scene has evolved quite a bit.

The Cleveland market is much more crowded, with both regional and national breweries vying for shelf space at stores. One of the reasons Wright opened Tapstack was to reach customers through another avenue.

“I think the market is getting saturated. I really do,” Wright said, refuting the commonly held notion that the craft beer market has room for growth. “I have to be convinced

there’s more and more people switching over to craft beer.”

Yet while Wright may be skeptical of continued growth in the local beer scene, he believes that taprooms are critical to nurturing the market. “The one thing I’ve been saying for years is that the growth should be in small breweries serving their product across the bar,” he said. “It’s fresh, and you get people to go out and get it from the source, or to get it in growlers to go.”

Tapstack does not serve food, but Wright may add a small bar menu in the future. He’s also considering staying open later on Saturday nights to accommodate Ray’s bikers.

On a recent Thursday at 4 p.m., the bar was filling up with beer fans slaking their thirst after work. Wright said business isn’t always easy, but the word is starting to get out. “To have your core, you’ve got to have your locals,” he said. “We’re starting to see more and more of that.”

Email Chilcote at clbfreelancer@crain.com or follow him on Twitter @leechilcote.

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CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 13

April job numbers spring forward

By JAY MILLER jmiller@crain.com @millerjh

Northeast Ohio gained 1,874 private-sector jobs in April, part of an uptick in the regional labor market that has seen employment grow by an estimated 3,431 jobs over the last 12 months, as tracked by the Ahola Crain’s Employment Report.

Jack Kleinhenz, the Cleveland Heights economist who created the ACE Report model, said the seasonally adjusted employment numbers suggest some optimism about a rebound in manufacturing employment, which has suffered in recent months.

The 0.12% increase in private-sector employment seen in the ACE analysis is comparable to an increase in the April ADP National Employment Report, which saw a modest increase nationally of 156,000 jobs from March to April. However, manufacturing employment declined nationally, according to the ADP report, while Northeast Ohio manufacturing employment in the seven county Cleveland-Akron area grew by 0.36%.

Longer term, according to the ACE analysis, manufacturing employment gained 1,580 jobs since April 2015, a 0.66% gain. Kleinhenz is optimistic that trend will continue.

“Manufacturing has been in a significant swoon that dates back to late 2014,” he said. “However, based on this month’s estimates, manufacturing employment is headed for at least a temporary improvement in the months ahead.”

Both the ACE and ADP data are derived from payroll data of client companies served, nationally by ADP LLC and regionally by The Ahola Corp., a Brecksville payroll and human services firm.

The economists at PNC Financial Services Group Inc., report in their second-quarter Northeast Ohio Market Outlook that manufacturing employment in its Northeast Ohio service area, which includes the Canton and Youngstown metropolitan areas in addition to Cleveland and Akron, would have been stronger had it not been for layoffs in metals production and the energy industry.

Those layoffs were due to competition from steel imports and the sharp decline in energy prices, which has reduced investment in oil and gas drilling in the region.

Looking back to before the recession, however, is a reminder that the region has shed thousands of jobs.

According to data compiled by the Ohio Department of Jobs and Family Services, the Cleveland and Akron metros have lost 62,400 jobs since employment peaked in 2006, before the recession.

The state agency’s data shows that regional employment averaged 1,398,600 during 2006 but has dropped, as of April, to 1,336,200.

Broken down, the Cleveland area has lost 47,000 workers since 2006, while Akron has lost 18,400 jobs.

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20160530-NEWS--14-NAT-CCI-CL_--

PAGE 14

5/26/2016

4:38 PM

Page 1

z MAY 30 - JUNE 5, 2016 z CRAIN’S CLEVELAND BUSINESS

Strongsville is latest spot for Scannell buildings

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Strongsville.

With Cornerstone, the business Scannell-hired contractors are park in Twinsburg on the former beginning to construct the first of site of the Chrysler stamping plant, two speculative industrial buildScannell is in the southeast subings at 14720 Foltz Industrial Parkurbs, the strongest in the region. way. Construction follows the comWith Strongsville, it will have proppany’s May 24 purchase of a erties in the south market. Elam 17-acre parcel for $1.2 said it is also looking million from Mills for sites to cover the Movers Inc., which is area on the northwest located nearby. The and northeast side of city of Strongsville apthe region. proved development Elam declined to of the site last month. discuss the firm’s inThe first building terest in North will consist of 185,000 Ridgeville, where it has square feet that sought a rezoning and should be available by city approvals for a Dec. 1. The second, — Terry Coyne, vice 350,000-square-foot with 192,000 square chairman of Newmark build-to-suit industrifeet, will be built after Grubb Knight Frank al structure for a tenthe first one reaches ant Scannell and city 75% occupancy, according to Tim officials have declined to identify.

Elam, managing director of ScanTerry Coyne, a Newmark Grubb nell. The first building is an estiKnight Frank vice chairman who mated $10 million project. represents Scannell in Strongsville, With 32-foot ceilings, the strucsaid the structure is the first rental ture is designed to serve manufacindustrial building to be built in the turing, distribution and research southwest suburbs since 2007. and development-oriented users, “It’s time,” Coyne said. “We have Elam said. The first build is dequite a bit of leasing interest in just signed with four separate enthe last week since the property trances and parking for 175 cars, purchase closed.” He noted this with 42 truck doors on its back side. generation of industrial buildings Scannell hopes to have the first differs from prior rental buildings building half leased by the time it’s because they are adapting to econstructed. It already is on its way commerce, which means handling toward that goal as XL Screw Corp., large volumes of packages and larga Lincolnshire, Ill.-based fastener er workforces. manufacturer and distributor, “The days of a warehouse with plans to move to 46,400 square feet eight employees is gone. Now you in the building from its current lomay have hundreds,” Coyne said. cation in Brooklyn Heights.

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Focus INVESTING GUIDE

CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 15

FLAT RETURNS - P. 16

z

SUPERSTARS - P. 18

z

Q&A - P. 19

Are new rules for retirement advice a blessing or a curse?

Depends on your point of view.

ISTOCK

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

I

nvestors should benefit from a heightened standard in retirement advice and service because of the U.S. Department of Labor’s Fiduciary Standard Rule, which embodies a slew of regulations released in April that put into motion some of the most significant changes to the advice industry in decades.

What spells additional protection for clients, though, may be more blessing or curse for financial advisers depending on their business models.

“This is the hottest topic in the financial services industry because it’s a sea change in how your run-of-the-mill adviser does their job,” said Scott Matasar, a Cleveland attorney specializing in the retail securities industry.

“I think the vast majority of financial advisers are honest and are already doing the best thing for clients,” he said. “But raising the bar will make it easier for in-

vestors to sue somebody. And it adds a whole host of regulatory and advisory costs at an institutional level, making the cost of doing business that much greater.”

Those higher costs could put some strain on smaller shops, possibly pricing some clients with less money to invest out of service. The smallest operations advising on only a couple accounts might even close.

Large broker-dealers will have some of the most challenges to face. But the largest, like Morgan Stanley and Bank of America Corp., will have more resources at their disposal to meet those.

Across the industry, this creates a variety of pros and cons. And while plenty of uncertainty remains — including how compliance will be achieved and what the fallout in the industry will look like — one thing is very clear: There will be disruption.

SEE RETIREMENT RULES, PAGE 19

20160530-NEWS--16-NAT-CCI-CL_--

PAGE 16

5/26/2016

1:58 PM

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z MAY 30 - JUNE 5, 2016 z CRAIN’S CLEVELAND BUSINESS

INVESTING GUIDE

Stocks lose luster amid flat return cycle

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

For the stock market, the future ain’t what it used to be.

Stocks have lost much of their luster in the thick of a flat return cycle.

And while most economic forecasters don’t see another recession on the near horizon, the outlook isn’t terribly bright, either.

While stocks are hard to get excited about right now, it could definitely be worse.

Experts generally chalk up the state of the market today to a slew of factors from prolonged low interest rates and a strong dollar to general international market volatility and slow corporate revenue growth putting pressure on margins. Some major investment banks, like Goldman Sachs, have downgraded stocks for the next year as a result.

Local investors are expecting much of the same lukewarm performances.

“Right now, we’ve had four consecutive quarters of negative earnings,” said Anna Rathbun, director

of research for CBIZ Financial Solutions. “That is creating uncertainty on the fundamental level for the markets, and it’s making everyone very jittery.”

Much of investor jitteriness is attributable to a global divergence in interest rates, she said. While the Fed hasn’t ruled out a rate hike in the summer, other central banks outside the U.S. are cutting rates. That would make the dollar stronger and contribute to market uncertainty.

“The central banks are making investors nervous,” Rathbun said, “and that nervousness ultimately

contributes to the flatness in the market.”

The markets are merely “treading water,” said Bruce McCain, chief investment strategist for Key Private Bank.

“It’s a tough game, and one not very reassuring for investors who haven’t decided whether to give up and go to the sidelines or bid more aggressively in hopes they might move up in the future,” he said. “It’s a waiting game.”

Hope certainly isn’t a sound investing strategy, though. And while some frazzled investors might get

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the inkling to pull out of equities entirely, advisers are cautioning against that.

“Despair isn’t a great strategy either when you know you could be left standing at the platform when the train rolls out,” McCain said.

Zach Abrams, a portfolio manager at Capitol Advisors Ltd., takes a similar perspective. He often finds himself reminding clients today they “can’t squeeze water from a rock.”

In other words, you won’t make anything if you don’t play the game.

But when returns are dismal, convincing clients of that can be more difficult.

Abrams is forecasting low, annualized returns around 5% over the next decade in the U.S. stock market. A more average return would be closer to 9%. So while he’s not forecasting negative returns, the outlook for performance is still below average.

Nonetheless, there’s still money to be made.

Advisers say now is the time to remind investors to be patient and stick to their long-term goals — and defining those are usually more difficult than allocating investments.

Yet, a sideways growth environment underscores the importance of being spread out among investments.

“You want to be diversified among asset classes that move in different directions in any environment,” Rathbun said. “Sticking to your plan is really the discipline of investing so you can weather the storm of whatever volatility is in front of us.”

Credit has become much more appealing — valuations are better there compared to stocks — particularly as cash and bonds present rather lackluster returns as well.

Abrams forecasts emerging markets and other/international markets returning around 10% and 8%, respectively.

“If you are diversified across your asset base,” he said, “you can increase returns in your portfolio without taking a large amount of risk, particularly in this environment.”

Similarly, he cautions against betting too big on one class or investment.

“You really need to look at where you’re most vulnerable,” he said. “If you shoot for the home run without taking into consideration the down side, that could get you into big trouble.”

The general uncertainty with the global markets will contribute to volatility moving forward, as will the coming U.S. presidential election.

So don’t expect market forecasts to change drastically anytime soon.

“That rising dollar, even less growth overseas and the presidential election … will continue to hammer at investors’ psyches,” McCain said. “That will give us thrills and chills over the next few months as people focus on choices that a lot of polls suggest a lot of voters just don’t like.”

“It’s not going to be a fun time for voters as they try to work their way through that election and the implications of what that might mean for the economy,” he added. “The uncertainty will tend to keep prices more range bound, at least more restrictive than they would be otherwise.”

20160530-NEWS--17-NAT-CCI-CL_--

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CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 17

Gap tightens among top public companies

By SCOTT SUTTELL

Top 10 Market Valuations

ssuttell@crain.com @ssuttell

The top 10 publicly traded company in the 15-county coverage area, ranked by market value between April 30, 2015 and April 30, 2016. For a full list of market valuations in the region, see the List on pages 25 and 27.

Every year since 2013, the top two names on Crain’s list of the largest public companies in Northeast Ohio have been the same, and in the same order: Eaton Corp. at No. 1, and Sherwin-Williams Co. at No. 2.

But the gap is shrinking. Fast.

Eaton, a diversified manufacturer that makes electrical, hydraulic, aerospace, truck and automotive products, is in the top spot on the largest public companies list with a market capitalization of $28.977 billion as of April 30. That figure, though, is down 9.7% from Eaton’s market cap of $32.103 billion on April 30, 2015. (Market capitalization is defined as the total dollar market value of all of a company’s shares outstanding.)

Meanwhile, Cleveland-based Sherwin-Williams, the maker of paint, coatings and related products, saw its market cap rise 2.6% to $26.574 billion as of April 30 this year from $25.905 billion the previous year.

The difference between the market capitalizations of the two companies remains substantial, at about $2.4 billion. (That is, after all, a lot of money. Think of it as nearly twoand-a-half of LeBron James’ lifetime Nike contracts, or one-quarter of what Donald Trump claims he’s worth.)

But a year ago, in April 2015, the gap was $6.2 billion. In 2014, it was even larger, at nearly $14.6 billion, when Eaton’s market cap was $34.511 billion and Sherwin-

Company name

Ticker symbol

Market value (4/30/16)

Market value (4/30/15)

Eaton

ETN

28,977,660,000

32,103,785,000

Sherwin-Williams Co.

SHW

26,574,737,000

25,905,705,000

2.583

Progressive Corp.

PGR

19,005,799,000

15,657,413,000

21.385

PH

15,674,649,000

17,003,429,000

-7.815

The J.M. Smucker Co.

SJM

15,197,601,000

11,796,367,000

28.833

FirstEnergy Corp.

FE

13,841,364,000

15,121,809,000

-8.468

TransDigm Group Inc.

TDG

12,210,412,000

11,161,642,000

9.396

KeyCorp

KEY

10,351,742,000

12,295,793,000

-15.811

Goodyear Tire & Rubber Co.

GT

7,704,393,000

7,655,799,000

0.635

RPM International Inc.

RPM

6,712,708,000

6,334,039,000

5.978

Williams’ was $19.914 billion. In April 2013, the year SherwinWilliams rose to the No. 2 spot, the gap was about $10 billion (Eaton: $28.91 billion in market cap; Sherwin-Williams: $18.89 billion.)

Could 2017 be the year the companies cross paths and SherwinWilliams takes the top spot?

It’s possible, since the company is working on an $11.3 billion merger, announced in March, with Valspar Corp. of Minneapolis. The combined company, to be based in Cleveland, would have annual revenues of about $15.6 billion, making it the world’s biggest coatings manufacturer.

Sherwin-Williams and Valspar have said the transaction is expected to close by the end of the first quarter of calendar year 2017 —

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Could 2017 be the year Eaton and Sherwin-Williams swap places for the top spot? It’s possible, since the company is working on an $11.3 billion merger with Valspar Corp. of Minneapolis. about a month before the 2017 market capitalization data would be finalized.

The rest of the members of the top 10 of the public companies list are the same as 2015, though the order is slightly different, as a couple companies saw market gap gains of more than 20% and three longtime stalwarts posted declines.

One of the big gainers in the top 10 was Mayfield Village-based insur-

ance giant Progressive Corp., which rose to No. 3 on the list from No. 4 in 2015 as its market capitalization jumped by 21.4%, to $19.005 billion on April 30 from $15.657 billion a year ago.

Progressive swapped places with Parker Hannifin Corp., the maker of fluid power systems and electromechanical controls, as it dropped to No. 4 on the list as its market cap fell 7.8% to $15.674 billion from

$17.003 billion on April 30, 2015.

Rising to No. 5 on this year’s list, from No. 7 a year ago, was Orrvillebased food products maker The J.M. Smucker Co. Its market cap rose 28.8% — the highest increase in the top 10 of the list — to $15.197 billion from $11.796 billion a year ago. The company in 2015 bought San Francisco-based Big Heart Pet Brands for $5.8 billion, including $2.6 billion in debt, in a deal that marked Smucker’s entry into the pet food business.

Akron-based FirstEnergy Corp. fell to No. 6 on the list from No. 5 in 2015 as its market capitalization dropped 8.5%, to $13.841 billion. KeyCorp dropped to No. 8 from No. 6 as its market cap was off 15.8%, to $10.351 billion.

Just outside the top 10, at No. 12, was one of the biggest market cap gainers in Northeast Ohio: Steris plc.

The company, which makes sterile processing and infection prevention systems, saw its market cap rise 53.2% to nearly $6.1 billion. Steris last year completed a $2 billion deal for a British company, Synergy Health, that originally ran afoul of U.S. regulators.

There are two companies on the full list that posted market cap gains of more than 100%, though, as expected, they’re smaller companies.

The biggest gainer of all was Cleveland biopharmaceutical company Athersys Inc., which posted a 107.4% increase in market cap to $193.4 million from $93.2 million a year ago.

Meanwhile, steel service center Olympic Steel Inc. saw its market cap rise 105.7% to $247.4 million from $120.3 million last year.

20160530-NEWS--18-NAT-CCI-CL_--

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5/26/2016

2:15 PM

Page 1

z MAY 30 - JUNE 5, 2016 z CRAIN’S CLEVELAND BUSINESS

INVESTING GUIDE

Superstar ranking sees major turnover

By SCOTT SUTTELL

Crain’s Superstar 10

ssuttell@crain.com @ssuttell

Crain’s determines its Superstar 10 list by obtaining a composite score for each publicly traded company in the 15-county coverage area. The composite score is the total of the three rankings: 12-month total return to shareholders, 2015 percentage growth in profits and 2015 return on equity.

It makes sense that the spotlight in the Crain’s Superstar 10, our annual look at public company performance in Northeast Ohio, would be on Energy Focus Inc. The Solon-based maker of tubular LED lighting for military and other markets was able to shine brightest among the 56 public companies based in the region, ranking No. 1 on the Superstar 10 list. And it wasn’t particularly close.

The Superstar 10 ranking data cover a one-year period ending April 30, 2016. A composite score for each public company in the 15 counties Crain’s tracks is obtained by adding its rank on three different lists — 12month total return to shareholders; the percentage change in profits in the trailing 12-month period; and return on equity during the latest 12 months reported by the company.

The lower the composite score, the better a company’s overall performance is considered to be, and the higher it ranks on the Superstar 10 list.

Energy Focus, for instance, ranked third in 12-month total return to shareholders (up 52.64%), third in 12month net income change (up 250.21%) and ninth in return on equity (up 19.37%). Adding 3, 3 and 9 gave Energy Focus a composite score of 15.

No other company on the Superstar 10 list compiled a score that was in the teens, or even the 20s.

NACCO Industries Inc., a May-

Rank

Company name

Composite score

1-yr total return (4/29/16)

Total return rank

1-yr net income % change

Net income % change rank

Return on equity

Return on equity rank

1

Energy Focus Inc.

15

52.64

3

250.21

3

19.37

9

2

NACCO Industries Inc.

33

24.10

8

157.67

4

10.93

21

2

RPM International Inc.

33

8.87

17

49.73

12

26.64

4

4

Cedar Fair LP

41

8.86

18

7.68

22

196.85

1

5

Sherwin-Williams Co.

43

4.44

24

21.71

17

121.42

2

6

Progressive Corp.

44

25.68

6

-1.05

25

17.39

13

7

PolyOne Corp.

52

-6.59

36

82.58

9

20.53

7

8

National Interstate Corp.

54

12.04

15

89.07

8

5.81

31

9

CBIZ Inc.

55

12.61

13

14.61

18

7.97

24

9

Myers Industries Inc.

55

-13.56

43

304.61

2

18.18

10

Only one company — Cleveland-based Sherwin-Williams Co. — is a holdover from last year’s Superstar 10. And the 2015 Superstar 10, it should be noted, had 13 companies due to some tie scores. field Heights-based holding company with subsidiaries in the mining, small appliances and specialty retail businesses, and Medinabased specialty coatings and sealants maker RPM International Inc. were tied for second on the Superstar 10 list, with composite scores of 33.

Energy Focus’ win in the Superstar 10 represents more than just

gains for investors.

Crain’s reported in April that Energy Focus is expanding its 30,000square-foot headquarters, research lab, factory and distribution center at 32000 Aurora Road with an additional 70,000 square feet of space that it primarily plans to use for expanding its inventory to keep pace with sales growth.

Peggy Weil Dorfman, Solon eco-

independence integrity best interests

nomic development manager, said last month that the city provided a grant that will provide at least $260,000 to the company over the next six years if it doubles its payroll to $9 million in Solon from the current $4.5 million.

Energy Focus has about 90 employees at the Solon headquarters, but an executive and marketing office in New York and offices in other locations that bring its total staff to 130.

The Superstar 10 is marked by heavy turnover from a year ago.

Only one company — Clevelandbased Sherwin-Williams Co. — is a holdover from last year’s Superstar 10. (And the 2015 Superstar 10, it should be noted, had 13 companies due to some tie scores.)

In both years, Sherwin-Williams was No. 5 on the list, though its composite score was better in 2015 (33) than in 2016 (43). Sherwin-Williams

is in the midst of a $11.3 billion merger with Valspar Corp. of Minneapolis that, if completed, would make the combined company the largest paintmaker in the world.

Valspar would add a significant international component to SherwinWilliams’ strong U.S. base.

One unusual element in this year’s Superstar 10 — and an illustration, perhaps, of the still-challenging global business environment — is the presence of a few negative numbers. Two members of the Superstar 10 posted negative one-year returns to shareholders: Avon Lake-based polymer materials producer PolyOne (-6.59%) and another polymer business, Akronbased Myers Industries Inc. (13.56%). Another company, insurance giant Progressive Corp. of Mayfield Village, made the Superstar 10 despite a 1.05% decline in net income.

Of all the companies in the Superstar 10, only one of them finished first overall in any of the three ranking categories. That honor goes to Sandusky-based Cedar Fair LP, the operator of Cedar Point and other amusement parks, which was first in return on equity, at 196.85%.

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RETIREMENT RULES CONTINUED FROM PAGE 15

The fiduciary standard rule applies to advisers working with investors on retirement accounts. It specifically targets broker-dealers who collect commissions on products they sell, amounting to billions of dollars in the advice business.

Those advisers’ behaviors in terms of advice they give and where they place a client’s money once were held to a “suitability” standard. The DOL ruling changes that to the more scrupulous “fiduciary” standard.

Among various things, that changes the way those advisers can operate by requiring them to disclose if they’re compensated on commissions or referrals and forcing them to prove that anything they do with an investor’s money is done in their best interest (not, in theory, because an adviser wanted to make money off a product or collect the commission).

Ethically, this is the way every adviser should already act. The new ruling just mandates it.

“That’s great news,” said Jeff Malbasa, president and chief investment officer at Spero-Smith Investment Advisers, an independent Cleveland firm offering only fee-based services.

“It’s one more step for clients’ benefit where they are getting more transparency and better service. And that’s a good thing.”

Registered investment advisers are already held to that higher fiduciary standard, which advisers employing strictly fee-only based models naturally meet because they’re disclosing how they’re being paid and not selling commission-based products.

The largest broker-dealers, like Merrill Lynch and Morgan Stanley, will have the most hurdles to deal with.

While representatives for those firms would not comment on how they’re working toward compliance with the new rule, one local representative with a national wirehouse lamented the economics of all that entails.

Much of that is still being figured out, though, by those who need to adapt. The federal government is expecting firms to achieve compliance with the various components of its complex 1,023-page rule beginning next April.

Among various effects, the cost alone to educate customers on the rule and what it means will be staggering. That’s in addition to communication now required if an adviser wants to move around a retirement client’s money.

So while the changes benefit investors, they also impose a slew of challenges for companies with scores of customers.

It could impact the quality of service. Not only could advisers with small books of business possibly be at risk for being released, Matasar said, some large firms are considering call centers for investor calls for clientele with less to invest. Some services, like Merrill Edge, already take that approach — of course, that might still be the best option for some investors and isn’t an inherently bad thing.

“Many of those clients, especially the less-affluent ones with smaller accounts, will likely end up priced out of being able to work with a live human being,” Matasar said.

Meanwhile, litigation could surge.

With the new fiduciary standard, clients have more teeth to sue their adviser if they feel they didn’t receive beneficial or otherwise proper advice.

If a client can prove violation by an adviser held to this higher standard, a lawsuit will almost certainly follow.

Not only does that create the potential for more litigation, it could spur a rise in rates for professional liability insurance — or what’s more commonly known as error and omissions for advisers which protects against a possible claim of negligence of fiduciary duties — as ad-

That, in turn, will create more competition.

“It forces us to do better at our Underlying opportunity jobs, which I don’t have any issue Firms like Cleveland’s Beacon Fi- with,” Franz said. “The fact is, you nancial Partners established an RIA don’t have to be really good to be to create more independgood at our business, to ence from a broker-dealer get into it. This will force world, said co-chief investpeople to become better ment officer Pete Franz. or get out.”

Younger investors, he said, Number of pages Indeed, smaller broalready expect more trans- in the new federal ker-dealer firms could parency overall in their ad- fiduciary standard find the time and cost visement.

And those rules that go into necessary to meet the clients will have tomor- effect next April. new standard too high to row’s retirement accounts. make smaller accounts Promoting transparency was once worth their while. That could result a differentiator for some firms, in consolidation as some advisers though, and that won’t be as mean- exit the industry. ingful anymore when everyone is Simultaneously, other firms held to the same standard. might not close, but may still push

visers look to cushion themselves against these potential lawsuits.

1,023

away clients at the lower end of their asset spectrums, which in the industry generally hovers around $250,000. This could funnel people to automated “robo-adviser” investment services like those widely promoted by Betterment or Wealthfront.

Or, they could land at firms already charging competitive flat rates.

That’s where firms like SperoSmith and Beacon Financial see potential to grow their own businesses.

“Clients will focus on the actual fee structure or quality of advice,” Malbasa said. “It’s a tremendous opportunity for anybody in the retirement plan business who is ready to serve as a fiduciary.”

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z MAY 30 - JUNE 5, 2016 z CRAIN’S CLEVELAND BUSINESS

INVESTING GUIDE

Q & A: Ken Mayland President, ClearView Economics corrected. Inflation went down and interest rates came down substantially. But the stock market hits its bottom of August 1982. Reagan gets charged with that even though the economy had a wonderful run after that. So these are legacy effects, either positive or negative. It comes down to adjustment.

Ken Mayland, president of ClearView Economics in Pepper Pike, is regarded as one of country’s best and most accurate economic forecasters. In his career spanning nearly four decades, he has held top economist roles for major financial institutions like KeyCorp, advised governors through Ohio’s economic advisory committee and held various leadership roles with the National Association for Business Economics. So, Crain’s decided to sit down with Mayland to get his perspective on how companies and investors might react to possibly the most important — and contentious — market catalyst of the next several years: the 2016 presidential election. — Jeremy Nobile The stock market has been quite volatile. What are you seeing at this point in the cycle?

The market has had to deal with a lot of bad earnings and drags on earnings in the S&P 500 due to low commodity prices. The energy sector of the S&P is down very substantially, and commodity prices are way down because of very sluggish world growth — so not just the price of oil, but the price of copper and primary metals. This has weighed heavily on the market. I think we’ve been down because of sliding commodity prices with S&P earnings having been down for something like six quarters sequentially. A good part of the rest of the market is doing OK, though, if not good. People say in the real estate business ‘lo-

cation, location, location.’ We should say that in the stock market because if you look at the overall market, the S&P is not too far away from all-time highs, depending on which day you look. So everything is relative, and some of it depends on where you’re at. If some stuff is doing bad, obviously some stuff is doing good.

How does a presidential election usually affect the stock market?

Historically, the years of and preceding the election are, statistically, outperformers. Then the next two years after the election tend to be underperformers. But I wouldn’t put a great deal of weight on those statistics. I don’t think it’s an investable theory.

Last time I checked, it’s probably under Democratic presidents that the stock market has done better.

But again, I would be more inclined to look at what sort of circumstances might prevail under the policies of someone like Donald Trump or Hillary Clinton than look at that statistical data.

What’s behind this phenomenon?

The economy has to adapt.

Take Ronald Reagan’s presidency in 1981. He had to fix a lot of problems under Democratic president Jimmy Carter, which included 15% inflation in 1980 and a 21.5% prime rate. The policies that needed to be pursued were painful for the economy and painful for the stock market. In the end, the economy, those problems, were

Do you see any market effects that would be specific to a Trump or Clinton presidency, considering they appear to be the presumptive nominees?

Based on some of their stated policies: The Democrats want to give away a lot of free stuff, whether it’s subsidized college education or something closer to universal health care. Then there’s the $15per-hour minimum wage. All that stuff has to be paid for. And some of the things talked about on the Democratic side include a fee on stock market trading — so part of the bill could include tax to federal government. In general, there could be higher tax rates. I think those measures, like higher tax rates to pay for stuff, if they were enacted, would probably have an adverse effect on stock prices.

On the Republican side, there’s

some talk about flatter taxes, a reduction in corporate tax — a flatter tax by that way means deductions — and in addition to that, net tax reductions. My inclination is to believe that would be positive for the stock market.

That assumes the next president will get some cooperation with Congress, though, right?

I think that is an important point. I suspect, with the next president, things will be increasingly done through executive orders because of the gridlock we’ve seen in Congress.

And one candidate might preserve more of those executive orders than the next.

So what’s the effect of that? A Democratic administration would sustain the existing presidency’s executive orders on everything from greener policies, the EPA, regulation, labor, financial markets etc. If it’s a Republican president, a lot of those executive orders could be reversed. New management in the EPA could make that more business friendly. The public has to decide what kind of climate they want to achieve. But a business friendly market would be very positive to the stock market.

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20160530-NEWS--21-NAT-CCI-CL_--

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CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 21

Business of Life

Eco-designer Susie Frazier refers to the digital pattern file for proper positioning of pieces in the installation of “Swarm,” her design of walnut-stained maple on stainless standoff posts, in the Rockefeller Suite at the Hilton Cleveland Downtown Hotel. (Peggy Turbett photos)

Her earth-minded art opens up new worlds

By DOUGLAS J. GUTH

Susie Frazier has spent almost 20 years narrowing her self-styled “earthminded” aesthetic into a cohesive brand. Pursuing that clarity has allowed the Cleveland designer to expand her arts-based business into the commercial space and beyond.

Frazier repurposes materials found in and out of nature to create art, home living products, furnishings and gifts. In her hands, discarded wood, steel and stone can be transformed into a magnetic puzzle for a Cleveland Clinic event or a finely crafted wood block laser-engraved with inspirational words.

Housed in the 78th Street Studios in Cleveland’s Gordon Square Arts District, Frazier’s company sells high-end art and custom products geared toward corporate clients as well as home accessories and apparel for walk-in customers.

While direct retail was once Frazier’s mainstay, commercial production now comprises nearly three-

Frazier and Anna Birchler, general manager of Susie Frazier Inc., work on the installation at the Hilton. quarters of the business. The Westlake resident recently designed 100 steel-and-wood tabletop puzzles for health care professionals speaking at a Cleveland Clinic medical innovation summit. Frazier’s other corpo-

rate clients include BakerHostetler and Sherwin-Williams, representing an increasingly lucrative enterprise that converges art with function.

“The work is tied to our aesthetic while meeting the client’s goals,”

Frazier said.

The change in focus came over the last year with the hire of CEO/managing partner Julia Toke, who proactively reached out to corporate clients and hired additional managerial help.

Frazier was able to turn budget details over to her team and concentrate instead on her strengths.

“My wheelhouse is marketing and sales,” she said. “I love being out there to define what our brand stands for.

There’s a protocol to follow in how we make choices, and I’m grateful for that. It’s brought my anxiety down and helps create a better product.”

Signing with brand management and licensing firm Prominent Brand + Talent is a greater measure of the company’s potential, Frazier said.

Prominent’s role is to position Frazier’s patterns, designs and personality with major retailers and manufacturers in the creation of new products. The branding firm currently represents Madonna’s Hard Candy premium fitness clubs. Frazier would like nothing more than to have her personal brand reach a similar altitude as that of the pop star.

“We could have a TV show where I feature cool new design ideas,” Frazier said. “We want to be an emerging brand.”

Frazier’s entrepreneurial spirit is rooted in wellness and personal empowerment, gleaned from a love of nature while growing up in Arizona and Colorado. The resulting “earthmindedness” connects to the natur-

al world through sustainable materials procured from either the environment or Cleveland’s industrial landscape.

Local aftermarket scrap vendors have provided Frazier a wealth of valuable steel she’s fashioned into picture frames and serving trays. She also harvests driftwood three times a year from Lake Erie’s shores, giving the cast-off material a second life as a candle holder or lamp.

Frazier began her artistic/business career in 1997 by salvaging slate roofing tiles from old Cleveland buildings and crafting them into mosaic furniture and home decor.

She’s kept that local connection going through relationships with a rotation of 22 area fabrication partners, including metalworker Alex Loos of Hans Noble Design, whose custom steel manufacturing shop helped Frazier piece together speaker gifts for the Clinic summit.

“Susie thinks differently than most artists I know,” Loos said.

“People are blown away by the nature of what she’s producing. It’s the combination of putting herself out there and her expression through art that really makes her unique and sought after.”

Frazier said she’s “past the stage of sitting in studio and noodling around. Artists create stuff that pleases them, while a designer is creating with a target market in mind. Now we have a brand, a collection of pieces that belong together.”

20160530-NEWS--22-NAT-CCI-CL_--

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z MAY 30 - JUNE 5, 2016 z CRAIN’S CLEVELAND BUSINESS

BUSINESS OF LIFE

Source Lunch It’s safe to say Jeremy Paris is busy lately.

As executive director of the Group Plan Commission, the board orchestrating the $50 million revitalization of Public Square, Paris has been overseeing a 16-month build that’s been in the planning stages since early 2010. A fast-talking, civic-minded go-getter, Paris — it seems to new confidantes — is the right man for the job.

A former on-the-hill adviser for U.S. Sen. Patrick Leahy, Paris is actually a native Northeast Ohioan, born and raised in Shaker Heights.

Spending decades in D.C., returning to the city in 2012 “without a job,” Paris quickly stepped up to guide the GPC toward city beautification, to be displayed to the country and world this July.

But don’t call him anxious. “I see it more as challenging,” Paris said.

Jeremy Paris

This said, you’re better off talking to him in August.

— Mark Oprea

The Republicans are coming to town in July. Is this sort of a litmus test for Public Square?

It’s a period of time when we’re concerned with making sure we’re ready: working with the Host Committee, with the Republican National Committee.

It’s a funny thing to have in the middle of this opening period: this huge out-of-town party. But during the convention, I think it’s just a key part of the city.

Looking at city beautification projects in Boston, Chicago or New York, and what they’ve done to those portions of the city, do you see Public Square fitting alongside those?

Yeah. Cleveland, for the first time in its history, downtown is now an actual neighborhood, which was not true even when it was a bigger city. These are big office buildings. Not residences. You have this idea of this transformational green space right in the heart of a city that’s actually a part of a neighborhood — not just a place of work.

It’s a very new thing?

It’s part of the millennial generation wanting to live downtown. … All of a sudden, Public Square is also part of people’s daily lives, which that — even a generation ago — wasn’t a thing. There’s that livability piece.

You need a place to have a coffee. Walk your dog. Experience cultural life. Just like any infrastructure, it’s really not a question of could we afford to

make this investment, it’s could we afford not to?

Growing up in Shaker Heights, did you ever one day think that you were going to be revitalizing the city you were raised in?

It’s funny. I always felt very connected to downtown. I think when I was 12 — I lived right off of the RTA line — and my parents allowed me to go to Indians games on my own with a couple of a bucks for a hot dog. It sounds like it was the 1950s, but I swear to God it was the 1980s.

There was a wave of excitement around Cleveland in the early 1980s and 1990s: the Rock Hall was built, new stadiums came in.

Of course, we lost the Browns, but they came back.

Another city park for example, let’s say in New York or Boston, that really impressed you or influenced this project?

Bryant Park in New York. It’s similar in size to Public Square. It was at one point a real troubled spot in New York. Drugs. Crime.

Underutilized. And they took it over, they did some infrastructure development, and they also started programming it very heavily. And now Bryant Park’s like the heart of the design district in New York. And the yoga that they do there, the things they do there — it’s amazing.

You’ve had a lot of criticism about the public transit running through Public Square.

Can you settle that for us?

One of the things to remember is that we studied this before we even did the final design process.

We studied this certainly well before we put a shovel in the ground. We had one of the best traffic and transportation firms in the world look at 30 intersections in downtown for different scenarios for shutting down roads, how it would impact traffic and transit. Sixty thousand riders come through daily at the square.

Shifts to those could have a significant impact on many residents. We’ve been flexible, we’ve worked closely with RTA, worked closely with stakeholders, with businesses around the square. We need to make this work for everybody.

You’re compensating.

Yeah. Finding the balanced use.

And I think people just have in mind the old sense of what Public Square has been.

It’s going to be this sort of poster child for Cleveland come July during the RNC. Do you see it as this?

Before, what I would see when I was on the square is the traffic. …

Now, you see the buildings. … You see the beautiful architecture, you see Old Stone Church, the Terminal Tower, the May Company Building, the Key Tower, the Society Buildings. … It seems like a different kind of space.

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FREE NIGHT: WHAT DO YOU DO? A restaurant in Tremont. In the summer? Somewhere on the water.

BEST ADVICE? “It’s always important to meet people where they are,” Paris said. “Always understand the situation from the other side.”

BOOKS? Science fiction, “Ulysses.” John Scalzi’s “Old Man’s War.” Roman history, U.S. history. Books on Churchill, FDR. “Triumph of the City” by Edward Glaeser. “The Life and Death of Great American Cities” by Jane Jacobs.

ADVICE TO THE GPC IN 100 YEARS? “I hope you got your flying cars, first of all — or drones,” he said.

“But I think the key is to be true to the city’s needs at the time.

Build from success but not be beholden to it.”

LUNCH SPOT Sans Souci 24 Public Square Cleveland 216-902-4095 sanssoucicleveland.com

The meal One had the Clevelandian: braised pork cheeks, local Swiss, Tony Packo’s pickles, Stadium mustard, on a ciabatta roll with fries and ice water. The other: Mediterranean turkey burger topped with arugula, pesto and mozzarella, plus fries and an Arnold Palmer.

The vibe Sans Souci is classic Cleveland. Right inside the Renaissance Hotel, the restaurant overlooking the square is a fine local twist on Mediterranean cuisine. It’s sharp, vintage, dotted with Victorian-era chandeliers, veneered bar-tops, fountains and statues. Want to have a whiskey on the rocks around men in suits? This is the place.

The bill $34.65, plus tip

20160530-NEWS--23-NAT-CCI-CL_--

5/27/2016

4:38 PM

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CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 23

CROWDFUNDING

CONTINUED FROM PAGE 1

regulators to draft rules that would legalize equity crowdfunding and other techniques designed to help private companies raise capital from large numbers of investors.

However, because of those rules — and the cost of complying with them — the number of companies that decide to raise money from the masses will be significantly lower than many people originally anticipated, according to Cohen and a few others who spoke with Crain’s. “I think a lot of people thought there was a big backlog of companies waiting for it to happen,� Cohen said.

Ending prohibition Granted, a few people said crowdfunding could become more popular over time, as companies and investors (not to mention their lawyers and accountants) become more comfortable with the concept.

For instance, Cleveland Whiskey CEO Tom Lix said he “wouldn’t be surprised� if a lot of entrepreneurs are still thinking about raising capital online through crowdfunding.

As of 4 p.m. on Friday, May 27, Cleveland Whiskey had raised $71,200 from 137 people via Wefunder.com, one of several websites that are approved to run crowdfunding campaigns. The company will be able to keep the cash if it raises at least $100,000, but it aims to raise up to $1 million.

Cleveland Whiskey — which uses a patented process that ages whiskey in a single day, instead of several years — would use the money to expand production and distribution. But Lix says the crowdfunding campaign is less about the

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Amount Cleveland Whiskey must raise in order to keep the cash.

$1 million

Cleveland Whiskey’s long-term goal for the campaign. funding and more about building relationships with his customers.

Through email and social media, he’s trying to convince Cleveland Whiskey drinkers to become Cleveland Whiskey investors.

Granted, it’s not free to raise capital this way. If he raises the full million, he estimates he’ll end up spending $40,000 to $50,000 on lawyers, accountants and document processing costs. That total will be

lower if he raises less. But he would’ve provided a higher estimate if Cleveland Whiskey hadn’t already created detailed financial statements. Fortunately, the company had previously raised capital and didn’t have to start from scratch.

StartMart estimates that its fundraising costs would range from $50,000 (if it hits its minimum goal, $200,000) to $75,000 (if it hits its maximum $1 million goal), according to its profile on SeedInvest.com.

The company — which among other things wants to build more private offices at its headquarters on the second floor of Terminal Tower — had raised $9,000 as of 4 p.m. on May 27.

Like Cleveland Whiskey, StartMart wants the people who use the company’s coworking space to become investors. Those who do will get a bonus: Free access to a desk at StartMart until May 31, 2017. And StartMart will get a committed SEE CROWD, PAGE 24

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Teraphysics sets $47M goal Teraphysics Corp. aims to raise $47 million through a form of crowdfunding often referred to as a “mini IPO.�

After spending more than a decade developing a palm-sized device designed to vastly increase wireless data speeds, the Highland Heights company plans to start turning its technology into an actual product.

To fund that plan, Teraphysics is taking advantage of a regulation that went into effect last summer: The company has filed for a Regulation A+ stock offering. The company expects the U.S. Securities and Exchange Commission to formally approve the offering in a matter of days, said Don Battista, chief business and market strategy director for Teraphysics.

Reg A+ offerings were made possible by the Jumpstart Our Business Startups Act of 2012. The JOBS Act is best known as the bill that made it legal for companies to raise up to $1 million in investment capital via the internet, from everyday people, not just accredited investors (see Page One for a story on that topic).

But Reg A+ offerings give companies a way to raise much larger amounts of capital from the general public. The annual cap for a Reg A+ offering is either $20 million or $50 million, depending on which path a company takes.

The process does involve jumping through a few regulatory hoops, but it’s not as burdensome as a full initial public offering, Battista said. For instance, Teraphysics will have to

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Teraphysics makes a palm-sized device that vastly increases wireless data speeds. (Contributed photo) file financial reports with the SEC twice a year if it conducts the Reg A+ offering, but it would have to file reports every quarter if it did an IPO. Teraphysics must raise at least $10 million by Nov. 23 to receive any capital. If that happens, the company’s shares would be traded through a website run by its underwriter, ASMX Capital of Los Angeles. Soon thereafter, the company will attempt to have its shares listed on a stock exchange run by OTC Markets Group Inc. It eventually aims to list shares on the NASDAQ, Battista said.

Among other things, the company would use money to build a miniature wireless network designed to show potential customers that its device can transmit data at blistering speeds from its headquarters to another point a mile or so away, Battista said. Teraphysics’ first high-frequency amplifier should be able to achieve transfer speeds of 10 to 20 gigabits per second — which would be hundreds of times faster than your standard home internet connection. The company believes that future products should be able to reach 150 gigabits per second. — Chuck Soder

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20160530-NEWS--24-NAT-CCI-CL_--

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5/27/2016

4:44 PM

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z MAY 30 - JUNE 5, 2016 z CRAIN’S CLEVELAND BUSINESS

CROWD

How equity crowdfunding works

CONTINUED FROM PAGE 23

customer who’s more likely to recommend the coworking space to a friend, said CEO Charles Stack.

Stack said that many consumer products companies could benefit by raising investment capital from their own customers. And that includes restaurants and retailers.

“But it will take a while to change 80 years of prohibition,” he said, referring to the Securities Act of 1933, which prevented private companies from publicly announcing plans to raise money.

Hard to find the sweet spot Crowdfunding might not work as well for newer companies that don’t already have customers who can be turned into investors. Same goes for companies that sell products to other businesses and companies that need to raise large amounts of money, according to a few people who spoke with Crain’s. However, those businesses might benefit by taking advantage of other fundraising techniques described in the JOBS Act. For instance, one local company, Teraphysics Corp., aims to raise $47 million through a “mini IPO” made possible by the 2012 law (see Page 23 for more details). And some local companies have taken advantage of the “general solicitation” rule, which allows companies to publicly announce that they’re raising capital, even if they’re not doing a full crowdfunding campaign.

The number of companies using the general solicitation rule also has been relatively modest — which is one reason why Cleveland-based Crowdentials went out of business, said cofounder Rich Rodman.

Equity crowdfunding is legal, so now you can invest in startup companies via the internet, even if you’re not rich. But you’ll have to follow new rules set by the U.S. Securities and Exchange Commission.

If your net worth and your income both exceed $100,000.

In that case, take the lower of the two dollar figures. You can invest up to 10% of that amount over a 12-month period.

If you don’t meet both the net worth and income standard. In that case, the percentage falls to 5%. At a minimum, however, you can invest up to $2,000.

The maximum investment: You can’t buy more than $100,000 worth of shares during a 12-month period through crowdfunding, even if they’re spread across multiple companies.

— Chuck Soder Nationwide, roughly 1,900 companies initiated stock offerings designed to take advantage of the general solicitation rule between Sept.

23, 2013, when it went into effect, and the end of 2014, according to an SEC study published last year. They raised $33 billion — 2% of all capital raised by private companies selling stock under Regulation D. Rodman had projected that more companies would use the general solicitation rule. Thus, there wasn’t enough demand for Crowdentials’ software, which helped those companies meet a regulation requiring them to verify that their investors were indeed wealthy enough to fall into the “accredited” category.

That lack of demand caused Rodman to question his projections for equity crowdfunding as well — a market Crowdentials had been planning to target since 2012. Thus, in December, he decided to close up shop instead of raising additional capital.

He’s still a big fan of crowdfunding, but he thinks it will take time to catch on.

Vestor CEO Matthew Moss made similar comments. In April, he shut down his website, which used the general solicitation rule to recruit investors for real estate projects in the Cleveland area. So what went wrong? Moss said developers often preferred to use more familiar financing tools, given how long it takes to recruit groups of individual investors — and the uncertainty involved in the process. He thought about broadening his focus to include unaccredited investors, but in the end it didn’t make sense.

Crowdfunding will catch on faster as funding portals provide more services to make the process easier, said Cohen, Braintree’s CEO. He’d also like to see the $1 million cap is raised.

“For a high-tech startup, a million dollars is not that much,” he said.

It’s also too low for many real estate deals, said Vadim Kleyner, CEO of a Highland Heights company called Brelion, which uses the general solicitation rule to recruit accredited investors to fund residential and commercial real estate projects.

But that’s more than enough money for, say, a local restaurant opening a new location. If a new restaurant was opening near his home in Gates Mills, Kleyner said he’d think about becoming an investor.

“Would I go into the restaurant more often than I go to others? Of course I would. This is genius for local businesses,” he said.

Cleveland Whiskey CEO Tom Lix (Contributed photo)

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20160530-NEWS--25-NAT-CCI-CL_--

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4:02 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 25

The List COMPANY/TICKER SYMBOL THIS LAST HEADQUARTERS YEAR YEAR PHONE/WEBSITE

LARGEST PUBLIC COMPANIES Ranked by Market Value MARKET VALUE (MILLIONS)

NET INCOME (MILLIONS)

4-30-2016

4-30-2015

PERCENT CHANGE 2015

2014

PERCENT RETURN ON CHANGE EQUITY

LINES OF BUSINESS

TOP LOCAL EXECUTIVE TITLE

1

1

Eaton/ETN 1000 Eaton Blvd., Cleveland 44122 (440) 523-5000/www.eaton.com

$28,977.7

$32,103.8

-9.7%

$1,979.0

$1,793.0

10.4

13.0

Electrical, hydraulic, aerospace, truck and automotive products

Craig Arnold chairman, CEO (1)

2

2

Sherwin-Williams Co./SHW 101 W. Prospect Ave., Cleveland 44115 (216) 566-2000/www.sherwin.com

$26,574.7

$25,905.7

2.6%

$1,053.8

$865.9

21.7

121.4

Coatings and related products

Christopher M. Connor executive chairman

3

4

Progressive Corp./PGR 6300 Wilson Mills Road, Mayfield Village 44143 (440) 461-5000/www.progressive.com

$19,005.8

$15,657.4

21.4%

$1,267.6

$1,281.0

-1.1

17.4

Insurance and financial company

Glenn Renwick chairman, president, CEO (2)

4

3

Parker Hannifin Corp./PH 6035 Parkland Blvd., Cleveland 44124 (216) 896-3000/www.parker.com

$15,674.6

$17,003.4

-7.8%

$842.8

$1,090.8

-22.7

17.6

Fluid power systems, electromechanical controls

Thomas L. Williams chairman, CEO

5

7

The J.M. Smucker Co./SJM One Strawberry Lane, Orrville 44667 (330) 682-3000/jmsmucker.com

$15,197.6

$11,796.4

28.8%

$407.4

$553.7

-26.4

5.6

Manufacturer of branded food products

Mark T. Smucker president, CEO

6

5

FirstEnergy Corp./FE 76 S. Main St., Akron 44308 (800) 736-3402/www.firstenergycorp.com

$13,841.4

$15,121.8

-8.5%

$578.0

$299.0

93.3

4.7

Electric utility holding company

Charles E. Jones president, CEO

7

8

TransDigm Group Inc./TDG 1301 E. Ninth St., Suite 3000, Cleveland 44114 (216) 706-2939/www.transdigm.com

$12,210.4

$11,161.6

9.4%

$466.6

$316.3

47.5

NM

Designer and producer of highly engineered aircraft components

W. Nicholas Howley chairman, CEO

8

6

KeyCorp/KEY 127 Public Square, Cleveland 44114 (216) 689-6300/www.key.com

$10,351.7

$12,295.8

-15.8%

$916.0

$900.0

1.8

8.5

Bank holding company

Beth E. Mooney chairman, CEO

9

9

Goodyear Tire & Rubber Co./GT 200 Innovation Way, Akron 44316 (330) 796-2121/www.goodyear.com

$7,704.4

$7,655.8

0.6%

$307.0

$2,452.0

-87.5

7.8

Tire manufacturer

Richard J. Kramer chairman, CEO, president

10 10

RPM International Inc./RPM 2628 Pearl Road, Medina 44258 (330) 273-5090/www.rpminc.com

$6,712.7

$6,334.0

6.0%

$329.8

$220.3

49.7

26.6

Specialty coatings for industrial and consumer markets

Frank C. Sullivan chairman, CEO

11 11

DDR Corp./DDR 3300 Enterprise Parkway, Beachwood 44122 (216) 755-5500/www.ddr.com

$6,376.1

$6,133.8

3.9%

($72.2)

$117.3

-161.5

NM

Real estate investment trust

David J. Oakes president, CEO

12 16

Steris plc/STE 5960 Heisley Road, Mentor 44060 (440) 354-2600/www.steris.com

$6,069.1

$3,960.8

53.2%

$94.4

$132.5

-28.8

3.2

Maker of sterile processing and infection prevention systems

Walter M. Rosebrough Jr. president, CEO

13 14

Forest City Realty Trust Inc./FCE-A 50 Public Square, Suite 1100, Cleveland 44113 (216) 621-6060/www.forestcity.net

$5,356.1

$4,727.6

13.3%

$496.0

($7.6)

6,631.2

14.1

Owner and developer of real estate

David J. LaRue president, CEO

14 15

TFS Financial Corp./TFSL 7007 Broadway Ave., Cleveland 44105 (216) 441-6000/www.thirdfederal.com

$5,145.3

$4,332.9

18.7%

$73.8

$66.5

11.0

4.3

Bank holding company

Marc A. Stefanski chairman, CEO

15 13

Nordson Corp./NDSN 28601 Clemens Road, Westlake 44145 (440) 892-1580/www.nordson.com

$4,372.8

$4,905.2

-10.9%

$209.4

$254.8

-17.8

32.2

Adhesives, coating and sealant applicators

Michael F. Hilton president, CEO

16 12

Lincoln Electric Holdings Inc./LECO 22801 St. Clair Ave., Cleveland 44117 (216) 481-8100/www.lincolnelectric.com

$4,312.2

$5,053.7

-14.7%

$127.5

$254.7

-50.0

13.7

Designs and manufactures welding products

Christopher L. Mapes chairman, president, CEO

17 19

FirstMerit Corp./FMER III Cascade Plaza, Akron 44308 (330) 996-6300/www.firstmerit.com

$3,672.4

$3,204.8

14.6%

$229.5

$238.0

-3.6

7.8

Bank holding company

Paul G. Greig chairman, president, CEO

18 20

Cedar Fair LP/FUN One Cedar Point Drive, Sandusky 44870-5259 (419) 627-2233/www.cedarfair.com

$3,253.0

$3,150.4

3.3%

$112.2

$104.2

7.7

196.8

Amusement and water parks in the United States and Canada

Matthew A. Ouimet president, CEO

19 17

PolyOne Corp./POL 33587 Walker Road, Avon Lake 44012 (440) 930-1000/www.polyone.com

$3,023.9

$3,487.2

-13.3%

$144.6

$79.2

82.6

20.5

Provider of specialized polymer materials, services and solutions

Robert M. Patterson chairman, president, CEO

20 18

The Timken Co./TKR 4500 Mount Pleasant St. N.W., North Canton 44720 (234) 262-3000/www.timken.com

$2,822.7

$3,480.8

-18.9%

$70.8

$170.8

-141.5

NM

Specialty steels and highly engineered bearings and related products

Richard G. Kyle president, CEO

21 22

Applied Industrial Technologies Inc./AIT 1 Applied Plaza , Cleveland 44115 (216) 426-4000/www.applied.com

$1,798.8

$1,719.5

4.6%

$104.9

$118.9

-11.8

14.8

Distributor and provider of industrial parts and service

Neil A. Schrimsher president, CEO

22 21

Diebold Inc./DBD 5995 Mayfair Road, North Canton 44720 (330) 490-4000/www.diebold.com

$1,707.6

$2,247.3

-24.0%

$73.7

$114.4

-35.6

17.9

Integrated self-service delivery systems and services

Andreas W. Mattes president, CEO

23 28

Ferro Corp./FOE 6060 Parkland Blvd., Mayfield Heights 44124 (216) 875-5600/www.ferro.com

$1,070.2

$1,173.5

-8.8%

$64.1

$86.1

-25.5

20.3

Manufacturer of specialty performance materials

Peter T. Thomas chairman, president, CEO

24 27

Hyster-Yale Materials Handling Inc./HY 5875 Landerbrook Drive, Suite 300, Cleveland 44124 (440) 449-9600/www.hyster-yale.com

$1,003.1

$1,196.3

-16.2%

$74.7

$109.8

-32.0

16.2

Manufacturer of lift trucks, provider of aftermarket parts

Alfred M. Rankin Jr. chairman, president, CEO

25 29

Cliffs Natural Resources Inc./CLF 200 Public Square, Suite 3300, Cleveland 44114 (216) 694-5700/www.cliffsnaturalresources.com

$958.7

$910.3

5.3%

($749.3)

($7,224.2)

89.6

NM

Full-service iron ore company

Lourenco Goncalves chairman, president, CEO

26 25

A. Schulman Inc./SHLM 3637 Ridgewood Road, Fairlawn 44333 (330) 666-3751/www.aschulman.com

$820.8

$1,243.3

-34.0%

$23.0

$46.5

-50.5

4.1

High-performance plastic compounds and resins

Bernard Rzepka president, CEO

Chart Industries Inc./GTLS One Infinity Corporate Centre Dr., Suite 300, Garfield Heights 44125 (440) 753-1490/www.chartindustries.com

$787.3

$1,238.4

-36.4%

($203.0)

$81.9

-347.9

NM

27 26

Maker of cryogenic processes and equipment

Samuel F. Thomas chairman, president, CEO

SEE LIST, PAGE 27

20160530-NEWS--26-NAT-CCI-CL_--

5/27/2016

12:29 PM

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20160530-NEWS--27-NAT-CCI-CL_--

5/27/2016

4:02 PM

Page 1

CRAIN’S CLEVELAND BUSINESS z MAY 30 - JUNE 5, 2016 z PAGE 27

The List COMPANY/TICKER SYMBOL THIS LAST HEADQUARTERS YEAR YEAR PHONE/WEBSITE

LARGEST PUBLIC COMPANIES Ranked by Market Value MARKET VALUE (MILLIONS)

NET INCOME (MILLIONS)

4-30-2016

4-30-2015

PERCENT CHANGE 2015

2014

PERCENT RETURN ON CHANGE EQUITY

LINES OF BUSINESS

TOP LOCAL EXECUTIVE TITLE

28 23

Fairmount Santrol Holdings Inc./FMSA 8834 Mayfield Road, Chesterland 44026 (440) 214-3200/http://fairmountsantrol.com

$645.7

$1,414.4

-54.3%

($92.1)

$170.5

-154.1

NM

Provider of highperformance sand and sandbased products

Jenniffer D. Deckard president, CEO

29 34

National Interstate Insurance Co./NATL 3250 Interstate Drive, Richfield 44286 (330) 659-8900/www.natl.com

$613.0

$555.9

10.3%

$20.8

$11.0

89.1

5.8

Specialty property and casualty insurance

Anthony J. Mercurio president, CEO

30 30

Materion Corp./MTRN 6070 Parkland Blvd., Mayfield Heights 44124 (216) 486-4200/www.materion.com

$580.7

$814.6

-28.7%

$32.2

$41.1

-23.7

6.7

High-performance engineered materials

Richard J. Hipple chairman, president, CEO

TimkenSteel Corp./TMST 1835 Dueber Ave. SW, Canton 44706-0932 (330) 471-7000/http://timkensteel.com

$563.1

$1,334.0

-57.8%

($72.4)

$104.4

-169.4

NM

31 24

Manufactures customized alloy-steel products, provides heat-treat and machining solutions

Ward J. "Tim" Timken Jr. chairman, CEO, president

32 36

CBIZ Inc./CBZ 6050 Oak Tree Blvd. S., Suite 500, Cleveland 44131 (216) 447-9000/www.cbiz.com

$535.0

$446.0

20.0%

$34.1

$29.8

14.6

7.9

Provides outsourced business services

Jerome P. Grisko president, CEO

33 38

Nacco Industries Inc./NC 5875 Landerbrook Drive, Suite 220, Cleveland 44124 (440) 229-5151/www.nacco.com

$406.9

$354.4

14.8%

$22.0

($38.1)

157.7

10.9

Coal mining, small electric appliances, specialty retail

Alfred M. Rankin Jr. chairman, president, CEO

34 35

Myers Industries Inc./MYE 1293 S. Main St., Akron 44301 (330) 253-5592/www.myersindustries.com

$398.0

$503.9

-21.0%

$17.8

($8.7)

304.6

18.2

Polymer and metal products; equipment for tire service

R. David Banyard president, CEO

35 32

Invacare Corp./IVC One Invacare Way, Elyria 44035 (440) 329-6000/www.invacare.com

$366.0

$644.6

-43.2%

($26.2)

($56.1)

53.3

NM

Home health care equipment

Matthew E. Monaghan chairman, president, CEO

36 37

Omnova Solutions Inc./OMN 25435 Harvard Road, Beachwood 44122 (216) 682-7000/www.omnova.com

$321.9

$373.9

-13.9%

($15.7)

$7.1

-321.1

NM

A producer of specialty chemicals and functional surfaces

Kevin M. McMullen chairman, CEO, president

37 33

Park-Ohio Holdings Corp./PKOH 6065 Parkland Blvd., Cleveland 44124 (440) 947-2000/www.pkoh.com

$312.3

$579.1

-46.1%

$48.1

$45.6

5.5

23.4

Diversified manufacturer

Edward F. Crawford chairman, CEO

38 40

United Community Financial Corp./UCFC 275 Federal Plaza West, Youngstown 44503 (330) 742-0500/www.ucfconline.com

$282.2

$265.8

6.2%

$16.3

$50.2

-67.6

6.7

Bank holding company

Gary M. Small president, CEO

39 31

TravelCenters of America LLC/TA 24601 Center Ridge Road, Suite 200, Westlake 44145 (440) 808-9100/www.ta-petro.com

$281.7

$658.6

-57.2%

$27.7

$61.0

-54.5

5.1

Interstate travel plazas; fuel, food, convenience stores and truck repairs

Thomas M. O'Brien managing director, president, CEO

40 43

Farmers National Banc Corp./FMNB 20 S. Broad St., Canfield 44406 (330) 533-3341/www.farmersbankgroup.com

$250.4

$152.2

64.5%

$8.1

$9.0

-10.2

4.1

Bank holding company

Kevin Helmick president, CEO

41 44

Olympic Steel Inc./ZEUS 5096 Richmond Road, Bedford Heights 44146 (216) 292-3800/www.olysteel.com

$247.4

$120.3

105.7%

($26.8)

($19.1)

-40.5

NM

Steel service center

Michael D. Siegal chairman, CEO

42 41

Preformed Line Products Co./PLPC 660 Beta Drive, Mayfield Village 44143 (440) 461-5200/www.preformed.com

$219.1

$226.4

-3.2%

$6.7

$12.9

-48.1

3.1

Wire and cable products

Robert G. Ruhlman chairman, president, CEO

43 46

Athersys Inc./ATHX 3201 Carnegie Ave., Cleveland 44115 (216) 431-9900/www.athersys.com

$193.4

$93.2

107.4%

($16.4)

($22.1)

25.6

NM

Biopharmaceutical company

Gil Van Bokkelen chairman, CEO

44

ViewRay Inc. (3)/VRAY 2 Thermo Fisher Way, Oakwood Village 44146 (440) 703-3210 /www.viewray.com

$178.8

NA

NA

($45.0)

($33.8)

-33.1

NM

Designs, manufactures, and markets the MRIdian radiation therapy system

Chris A. Raanes president, CEO

45 42

Shiloh Industries Inc./SHLO 880 Steel Drive, Valley City 44280 (330) 558-2600/www.shiloh.com

$111.9

$200.2

-44.1%

$0.8

$19.9

-96.2

0.6

Steel processing

Ramzi Y. Hermiz president, CEO

46 47

Civista Bancshares Inc./CIVB 100 E. Water St., Sandusky 44870 (419) 625-4121/www.civb.com

$90.9

$87.6

3.7%

$12.7

$9.5

33.8

10.2

Bank holding company

James O. Miller president, CEO

47 52

Energy Focus Inc./EFOI 32000 Aurora Road, Solon 44139 (440) 715-1300 /www.energyfocusinc.com

$90.9

$48.2

88.7%

$8.8

($5.8)

250.2

19.4

LED lighting products and solutions

James Tu executive chairman, CEO

48 45

Gas Natural Inc./EGAS 1375 E. Ninth St., Suite 3100, Cleveland 44114 (440) 701-5100/ www.egas.net

$76.7

$105.6

-27.4%

$4.7

$3.8

24.6

4.9

Distributes and sells natural gas

Gregory J. Osborne president, CEO

49 49

Cortland Bancorp/CLDB 194 W. Main St., Cortland 44410 (330) 637-8040/www.cortland-banks.com

$70.0

$67.9

3.1%

$4.4

$3.9

13.2

7.7

Bank holding company

James M. Gasior president, CEO

50 50

Middlefield Banc Corp./MBCN 15985 E. High St., Middlefield 44062 (440) 632-1666/www.middlefieldbank.com

$60.1

$65.5

-8.2%

$6.9

$7.2

-4.4

11.0

Bank holding company

Thomas G. Caldwell president, CEO

51 48

Sifco Industries Inc./SIF 970 E. 64th St., Cleveland 44103 (216) 881-8600/www.sifco.com

$58.3

$79.5

-26.7%

($4.1)

$2.7

-252.3

NM

Production, repair, plating, machining and marketing of jet engines

Michael S. Lipscomb chairman, CEO

52 51

Consumers Bancorp Inc./CBKM 614 E. Lincoln Way, Minerva 44657 (330) 868-7701/www.consumersbancorp.com

$44.3

$49.2

-9.9%

$2.8

$3.0

-8.8

6.5

Bank holding company

Ralph J. Lober II president, CEO

53 53

Wayne Savings Bancshares Inc./WAYN 151 N. Market St., Wooster 44691 (330) 264-5767/www.waynesavings.com

$35.9

$37.6

-4.4%

$1.6

$2.6

-37.4

4.1

Bank holding company

H. Stewart Fitz Gibbon III president, CEO

-

RESEARCHED BY DEBORAH W. HILLYER Numerical information provided by S&P Global Market Intelligence, www.spcapitaliq.com. The Market Cap and Total Return data used the April 29, 2016 close price for each company, net income figures represent trailing 12-month data through the quarter ending December, January or February depending on the fiscal year end of each company. NA=Not available. NM=Not meaningful. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. (1) Arnold is currently president and chief operating officer, he will become chairman and CEO on June 1, 2016. (2) Tricia Griffith, currently personal lines chief operating officer, will succeed Renwick as president and CEO on July 1. Renwick will continue as executive chairman of the board. (3) The stock began trading on Nasdaq on March 31, 2016.

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