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ROCKLEDGE, Fla. — Bill Carey has been in the laundry business his entire adult life. Six years ago, he took over the helm at Space Coast Hospital Services, a not-for-profit hospital cooperative laundry.

Florida’s Space Coast region is midway up the peninsula along the Atlantic Ocean. Isolated between the popular tourist destinations of Daytona Beach and Ft. Lauderdale, the area has been heavily dependent on Kennedy Space Center in Titusville for its economic stability.

Close behind tourism and agriculture, the housing and construction industry had helped keep Florida prosperous for decades. The burst of the housing bubble in 2008 sent thousands of residents into unemployment and under-employment positions.

Right in the middle of the housing crisis, the announcement came that the space shuttle program would end and thousands from the Kennedy Space Center and supporting private contractors would be laid off. It was a financial double-whammy for the Space Coast region, to be sure.

So, here we are in 2012, with area foreclosures and unemployment still at record levels in a struggling local economy. What do you do to keep moving forward?

“Our mission is to help our hospitals reduce their cost of linen services,” Carey says. “If we don’t help them, somebody else will. We are operating in an extremely competitive environment right now, and we have to deliver.”

Digging In to Lessen Linen Replacement

For-profit laundry operations are tasked with increasing earnings. Carey views the not-for-profit co-op’s goal as a cost center that needs to be reduced.

“It’s the main difference between the two types of organizations,” he says. “During my time working for the other guys, the motivation was always to increase prices, revenue and profit. Our goal at Space Coast Hospital Services is to reduce costs, which are then directly transferred to our client’s bottom line.

“Six years ago, linen replacement cost was the most significant laundry issue for many of our clients,” Carey continues, “so that’s where we dug in.”

A soil-sort system by Automation Dynamics is the heart of Space Coast Hospital Services’ linen management operation. Although the system is labor-intensive, the accuracy of the process raises efficiencies in other areas.

Bulk soil weight is entered for every cart of soiled linen that comes in. Linen proceeds down the sorting conveyor to operators who feed individual items into vacuum sorting tubes. The vacuum system separates and counts individual items. With item weights previously established by large-sample averages, the bulk soil weight is confirmed by the system to match the combined individual weights of the items sorted.

“We know exactly how many of each item each client returns to the laundry on every pickup,” Carey says.

From an observer’s perspective, the system is fast, efficient and accurate. The vacuum tubes are like the ones you see at a bank drive-in — but larger and faster.

“It can be difficult in co-op applications to get clients motivated to be more responsible with their linen,” says Carey. “Most co-ops, like us, use a common inventory to simplify production and inventory requirements. In a pool of 10 clients, each particular hospital’s improvement typically only returns 10% of their cost saving back to them, as any improvement contributes to the group as a whole.

“In a traditional co-op, it is difficult to validate problem areas, which can lead to finger-pointing within the group.”

Because of tracking accuracy, Space Coast’s clients have all of the advantages of a pooled inventory, but with 100% of their individual linen-management improvement savings added directly to their bottom line, according to Carey.

Proprietary software utilizes the returned-item information to build delivery carts on the shipping side of the plant. Every built cart has a bar-coded tag that is scanned after the cart is built and weighed. The software confirms that the bulk weight of the cart matches the total individual weights of the items listed.

Checks and double-checks within the system accurately identify and confirm the precise quantity of linen items that come in and go out.

“They get back exactly what they send us,” Carey says of his laundry’s clients. “If they want more linen, they requisition additional inventory, which is then added to their delivery and their individual cost.”

Tomorrow: How education and training lead to savings...

RACINE, Wis. — CMJ Partners, a private investment firm based in Vero Beach, Fla., recently acquired Imperial Laundry Systems out of receivership. It is now named Imperial Laundry Services.

“We acquired Imperial Laundry after having completed a significant amount of due diligence,” says Robert C. Moore, president of CMJ Partners. “During that process, we discovered and were excited about the company’s strong and experienced management team, high level of customer satisfaction, reputation for quality and reliability, and the efficiency of the company’s facility and equipment.

“We are pleased to be the company’s new owners and are committed to be our clients’ long-term partner.”

ARDMORE, Pa. — Thanks to the 100% “bonus” depreciation write-offs created by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, many laundry and dry cleaning businesses are discovering that capital investments in equipment, machinery and other business assets are more affordable today than ever before. Remember, however, the 100% bonus depreciation write-off is available only for qualifying purchases made by laundry services and businesses in 2011.

Those that have hesitated or postponed making capital investments because of the recent economic downturn might now want to consider how the combined use of incentives and the 100% bonus depreciation can substantially reduce the cost of capital investments. Even funding those new-equipment purchases is easier—at least for a while.

Opting Out

Although the 2010 Tax Relief Act included the best terms ever for bonus first-year depreciation, namely a 100% write-off of the cost of qualifying property, not all laundry and dry cleaning businesses will find it desirable to use front-load depreciation deductions. While it is possible to elect out of bonus depreciation entirely, it is, at least for now, less certain that a laundry or dry cleaning business can step down from 100% to 50% bonus depreciation.

The prime example of a situation crying out for a laundry business to opt out of 100% bonus depreciation is one where there are about-to-expire net operating losses, the value of which would be lost if current-year income were reduced too much by claiming the maximum depreciation allowance. Similarly, a laundry or dry cleaning business that currently is, and in the recent past, has been in a low tax bracket and expects to be in a higher bracket in future years may want to defer depreciation deductions to offset future higher-taxed income.

An election to take a reduced bonus-depreciation deduction was specifically authorized under prior law, when a taxpayer could elect 30%—instead of 50%—bonus first-year depreciation. Until recently, however, it appeared that the only choice for a laundry or dry cleaning business that does not want 100% bonus depreciation was to elect out of bonus depreciation entirely. Now, the IRS has decided to follow Congress’ “General Explanation” for the 2010 Tax Relief Act and permit a step-down election from 100% to 50% bonus depreciation.

Discretionary Incentives

When it comes to a financial helping hand, the best opportunity for laundry and dry cleaning businesses investing in capital improvements may come in the form of discretionary incentives available at the federal, state and local level. Although many of these incentives require some level of job-creation or, at least, job-retention criteria be met in addition to capital investment, there are some notable exceptions.

The Federal New Markets Tax Credit, for example, provides a significant financial incentive for qualified investments made in certain eligible census tracts. Also, Delaware and Virginia offer cash grants based on future capital investment made by existing businesses without requiring a commitment to job creation.

It is the incentives offered by many local jurisdictions that often provide the most significant level of benefit for capital investment activities. Many municipalities have the ability to offer property tax abatement or tax increment financing as tools to encourage capital investment. The property tax-related incentives are typically long-term in duration and provide significant savings for making qualified capital investment.

Funding Based on Need

Last fall’s Small Business Jobs Act created the State Small Business Credit Initiative and funded it with $1.5 billion to strengthen state programs that support lending to small businesses such as laundries and dry cleaning operations (and small manufacturers). Designed to spur up to $15 billion in lending, January saw the first wave of awards to the states.

Under the State Small Business Credit Initiative (SSBCI), participating states will use the federal funds for programs to leverage private lending to help finance small businesses such as dry cleaning plants and laundries that are creditworthy, but that are not getting the loans they need to expand and create jobs.

Last year’s Jobs Act included other provisions designed to help small businesses obtain funding. Among that bill’s many provisions were several new—but temporary—funding programs, such as the U.S. Small Business Administration’s amped-up extension of its lending guarantee programs and fee reductions. In addition, increases in the maximum loan size for the SBA’s 7(a), 504, and microloan programs will help. The 7(a) and 504 loan program maximums would bump from $2 million to $5 million and the microloans would increase from $35,000 to $50,000. Loans made under the SBA Express program would temporarily increase from $300,000 to $1 million. Also included is a temporary allowance for small-business owners to use 504 loans to finance certain mortgages to avoid foreclosure.

The SBA’s CDC/504 Loan Program provides long-term, fixed-rate financing to acquire fixed assets (such as real estate and equipment) for expansion or modernization. It is ideal for small businesses requiring “brick and mortar” financing. Rather than commercial lending institutions, 504 loans are delivered via CDCs (Certified Development Companies)—private, nonprofit corporations set up to contribute to the economic development of their communities.

Gone but Hopefully Not Forgotten

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 provided many opportunities designed to help businesses reap tax benefits for capital investments and provide funding for doing so. The 2011 tax year may be the optimal time to take advantage of the federal, state and local tax or financing incentives that encourage capital investments.

Under the right capital-investment scenario, a savvy business may be able to claim 100% federal bonus depreciation, New Markets Tax Credit, state investment tax credits and municipal property tax abatement on the same capital investment. Or, the laundry business may benefit from the soon-to-expire funding opportunities available today.

Click here for Part 1.

LOS ANGELES — Private investment firm Carlin Capital Partners (CCP) has acquired Consolidated Laundry Machinery Co. (CLM) from its president and founder, Leonard Bernstein, CCP announced May 17. Terms of the transaction were not disclosed.

CLM is a manufacturer of industrial-grade dryers and related finishing equipment, primarily serving the textile services industry. It was founded in 1962.

Many laundry companies with private fleets don’t have enough people on staff to ensure that the best technological platforms and business processes are being utilized to accomplish their objectives.

Because determining the best computer system and how to maximize data usage are not part of a laundry company’s core business, and do not always yield short-term financial gains, those critical tasks are often neglected. The result is a lack of necessary business intelligence that can undermine a company’s ability to remain competitive.

MIAMI — Inc. magazine has named World Emblem International Inc. to its list of the 5,000 fastest-growing private companies in the United States for the second year in a row.

Editor’s Note: This story was written prior to Hillary Clinton’s decision on Saturday to suspend her campaign and throw her support behind fellow Democrat Barack Obama.

Presidential candidates are talking big on foreign policy and the Middle East; budget deficits, taxation, government spending, healthcare, global warming and free trade, but saying little about pending legislation that would upend labor laws and greatly ease union organizing efforts.

What measures can a laundry manager take to reduce the percentage of stain rewash found in their operation? How can they differentiate stains from soils? What do you consider an acceptable reject/rewash rate to be?

I want to set up a preventive-maintenance program in my laundry. What kind of resources will I need in place to keep my equipment operating well? How much time should I allow for routine maintenance? Can I get any help from manufacturers or distributors?

Some unknown factor has increased the hardness of the water entering my laundry. How can we combat this change so we can produce high-quality linen without jeopardizing production efficiency? What options are available to me to address this hard-water problem?