With growth, Krapf keeps focus on people

The seven decades since George Krapf Jr. & Sons began running buses has seen countless changes, for the company and for school transportation in general.

Major regulatory changes have come into play, such as the Federal Motor Vehicle Safety Standards that govern school bus safety features. Technology — from video surveillance to GPS to onboard diagnostics — has taken on a much bigger role in the yellow bus.

Krapf itself has grown to become the sixth largest school bus contractor in the nation, now with a fleet of 2,475 school buses.

For example, two years ago, Krapf acquired Septran, which was another of the Top 50 Contractors, nearly doubling the size of Krapf’s school bus fleet.

But CEO Blake Krapf says that the company is “not interested in growing for the sake of growth” and that potential acquisitions are carefully considered to make sure they’re the right fit.

SBF Executive Editor Thomas McMahon spoke to Krapf about developments at the company, business conditions for contractors and other timely topics, such as sleep apnea and compressed natural gas.

SBF: Krapf recently celebrated its 70th anniversary. Since the beginning of the company, what have been some of the most significant changes, and what are some things that haven’t changed?
BLAKE KRAPF: I think what hasn’t changed is this business is all about the people. It’s a relationship business. The first two customers that we started with 70 years ago are still customers of ours today. I think that’s a testament to how hard we work at maintaining great relationships with our school districts.

It’s truly a team effort. It’s all about having the best bus drivers and the best mechanics and the best dispatchers. Without having really quality people at all of those positions, we wouldn’t have been able to survive for 70 years. High-quality service, safety, reliability — all those things that were important 70 years ago are still what drives the business today.

Probably the biggest change would be that our customers, the school districts, are under a lot more pressure financially these days. Their landscape has changed. They face a lot more pressures than they once did.

And certainly technology has evolved tremendously. The EPA regulations for the buses’ diesel engines, the onboard technology — electrical systems, GPS, cameras, LED lights — all those things have changed the industry tremendously.

What have been some key developments for the company over the past few years?
We’ve been fortunate to attract some really high-quality, non-family managers to the business. In the last year and a half, we’ve added a new CFO. We have a new vice president of HR. Going back a couple of years, we brought in a really good director of risk management, a really good VP of operations, and a director of procurement and IT. They’re all high-level positions. We’ve been fortunate enough to attract people from inside and outside the industry that really help us grow and maintain the high-quality service that we’ve worked so hard to achieve.

So that ties in with what you said about it being a business about people.
Absolutely. Again, without really quality people in every position, we wouldn’t be able to achieve what we’ve achieved. And it starts with the bus driver. That bus driver sets the tone with the children, the parents, the school and the community. That’s where it all starts and ends. The rest of us are just here to support the drivers.

How has the integration of Septran gone, and what have been the challenges and advantages in becoming such a bigger operation?
Certainly that was a very large acquisition for us, but we had made a number of smaller, less-publicized acquisitions prior to that. So we didn’t just jump into acquisition mode with the biggest thing we could find. Obviously, size gives you greater opportunities in purchasing. It gives you access to resources you otherwise might not have. It put us in two new markets: the Illinois and Minnesota markets. So it certainly has opened up new opportunities as well, as far as future growth.

With opportunities come more challenges. It was two new states and two new markets. We had to learn what drives the market in those regions. Probably the biggest significant change is that Septran is 70% to 80% special-needs focused. Most of our business prior was more regular-ed than special needs. And special needs is much more dynamic. It changes often — the routes and the needs of the customer. So learning the particulars of the special-needs market in those areas was certainly a challenge.

Is the company looking at opportunities to expand into other states?
We’re always looking for new opportunities. But we’re not interested in growing for the sake of growth. It has to be the right fit. It has to fit our culture. It has to fit within our long-term strategic plan. And, obviously, it has to make good business sense to make that kind of investment. You need to make a return, which people don’t like to talk about — but if you’re investing that kind of money, you need to make a return. Primarily, we look for a fit with our culture and with our long-term strategic plan.

[PAGEBREAK]
On a national level, what issues are you monitoring as far as their potential impact on the school bus business?
One is potential regulatory activity regarding sleep apnea, and how that might affect our drivers. As part of NSTA [the National School Transportation Association], we’re monitoring that as closely as we can and working with our legislators to make sure that there are well-thought-out regulations put in place that are specific to the school bus industry.
We just want to make sure that drivers aren’t disqualified unnecessarily. Obviously we want to make sure that they’re the safest, healthiest drivers we can find, but still, we don’t want drivers to get disqualified unnecessarily because of a regulation that was intended for over-the-road truck drivers and not school bus drivers.

The other issue is what is popularly referred to as Obamacare. Obviously, the mandated health coverage is a potential threat to not just our business, but all small businesses.

On the sleep apnea issue, is the goal to get FMCSA [the Federal Motor Carrier Safety Administration] to do a formal rulemaking process?
You understand that absolutely correctly. Right now they are considering implementing regulations without doing the formal rulemaking process. The issue is that there is no data that suggests that there is a problem with sleep apnea among school bus drivers. There’s no record of accidents that they’ve been able to produce that suggests that sleep apnea is the cause of the accident.

Would you say that business conditions for school bus contractors have gotten better or more difficult over the past few years?
Similar to what I said before, I think it’s gotten more difficult because of the financial conditions of our customers. Frankly, I don’t see any significant improvement in the landscape for them anytime in the near future. I think they’re going to continue to have financial struggles.

In your state, Pennsylvania, are there any pressing issues that you’re working on with the Pennsylvania School Bus Association?
A couple of issues: There’s a Senate bill being proposed right now that would significantly raise fees for the registration of school buses and also for the driver licenses. So we want to monitor that and make sure we have an understanding of how that impacts our industry. Also, there’s a lot of legislation as a result of the scandal involving Penn State University and Jerry Sandusky — how to make sure that with all background checks, there’s nobody slipping through any loopholes.

Krapf was recognized with the first “Go Yellow, Go Green” award from NSTA a few years ago. Where do you see the alternative-fuel market going?
Pennsylvania’s a big Marcellus Shale state, so compressed natural gas [CNG] is a big topic of discussion here. In my opinion, there is not yet an adequate infrastructure to support a fleet of CNG vehicles, but there is a lot of money being invested currently in the infrastructure. So I think you will see more fleets trying CNG-powered vehicles. That’s a result of the close access to natural gas through the Marcellus Shale.