The trucking company creates an Employee Stock Ownership Plan (ESOP) to guarantee its employees stay in the Pittsburgh region

WARRENDALE, PA – The phone rang one evening in late July last year and Howard Schillinger, president of Coldstream Logistics, received terrible news. The main warehouse that all of his trucks used in New England, run by A&D Cold Storage, was on fire. By morning a great portion of it would be burned to the ground.

As if the logistical nightmare that COVID-19 set in motion earlier in the year wasn’t enough, the refrigerated trucking company had yet another problem to deal with. “At the time, we had no idea what we were going to do,” Schillinger said. “But it ended up making our company stronger in the end.”

First, Schillinger learned no one was killed, everyone was safe and the fire was under control. Second, a customer reached out to say they had some unused warehouse space in the area that Coldstream could use until they rebounded. Third, the logistics team in Pittsburgh worked out new trucking routes using its sophisticated computer modeling. In fact, Coldstream Logistics and A&D did not lose a single account thanks to the quick action and excellent reputations of the teams from both companies.

And fourth, A&D learned they could triple the capacity of the warehouse when it was rebuilt. A&D could build a new, ultra-modern facility to replace the lost capacity and use it until Coldstream was ready to use it again.

Coldstream Logistics was founded by Schillinger and Dan Palus in 2004 in Warrendale, PA. after a distinguished career as executives for large food and agricultural companies. They saw a need in the market to transport the products made by numerous small family-owned frozen food companies—that made everything from cherry pies to bean burritos—to distribution centers that could consolidate the products and deliver them to large grocery store chains.

The niche was successful and since then, Coldstream has grown the company to more
than 60 employees and became an official consolidation partner for Walmart. Through all of its success Schillinger said Coldstream’s primary constant has been its terrific employees. So when he began to consider his exit from the business in 2019, Schillinger wanted to make sure they were taken care of.

“I saw if I sold the company to private equity or another trucking company, they would
likely want to move the employees around,” he said. “All of our employees are from
Pittsburgh and they wouldn’t like that. I wasn’t going to put their jobs in jeopardy after all
they did to make this company a success.”

Dan Zugell, director at Business Transition Advisors (BTA) in Pittsburgh, suggested he could sell the business to his employees through an Employee Stock Ownership Plan (ESOP) and Schillinger said it was an ideal fit. He was paid full fair market value, and because of this remarkable, yet little known Labor Department program, the company is now tax free. And the employees own all shares in the company.

There are currently more than 300 companies in Pennsylvania that are either partially or fully employee-owned. They include Dansko Shoes, Bradford White Water Heaters and Sheetz. Nationally, 5,000 other companies have Employee Stock Ownership Programs (ESOPs).

Kevin McPhillips, executive director of the Pennsylvania Center of Employee Ownership, agreed that Coldstream’s culture matched well with the ESOP model. “Employee-owned businesses are built on a foundation that honors teamwork, creates a sense of community, and provides limitless opportunities for hard-working people,” he said. “An ESOP rewards the employees with an ownership stake and an extraordinary advantage for their retirement.”

Schillinger started the ESOP transition process with BTA in late 2019 but the pandemic
and then the warehouse first delayed the announcement until this month. “The employees built this company and were the reason we made it through last year. The Coldstream’s reputation and legacy is because of them and they deserve to have ownership of that,” Schillinger said. “I’m proud that Coldstream is now 100% employee owned.”