The Company is a specialty metals distribution company serving customers on
a global basis. The Company provides a broad range of products and value-added
processing and supply chain services to a wide array of customers. The Companys
customers are principally within the producer durable equipment, aerospace,
heavy industrial equipment, industrial goods, construction equipment, oil and
gas, and retail sectors of the global economy. Particular focus is placed on
the aerospace and defense, power generation, mining, heavy industrial equipment,
and general manufacturing industries, as well as general engineering applications.
Service centers act as supply chain intermediaries between primary producers,
which deal in bulk quantities in order to achieve economies of scale, and end-users
in a variety of industries that require specialized products in significantly
smaller quantities and forms. Service centers also manage the differences in
lead times that exist in the supply chain. While original equipment manufacturers
(“OEM”) and other customers often demand delivery within hours,
the lead time required by primary producers can be as long as several months.
Service centers provide value to customers by aggregating purchasing, providing
warehousing and distribution services to meet specific customer needs, including
demanding delivery times and precise metal specifications, and by providing
value-added metals processing services.
The principal markets served by the Company are highly competitive. Competition
is based on service, quality, processing capabilities, inventory availability,
timely delivery, ability to provide supply chain solutions and price. The Company
competes in a highly fragmented industry. Competition in the various markets
in which the Company participates comes from a large number of value-added metals
processors and service centers on a regional and local basis, some of which
have greater financial resources and some of which have more established brand
names in the local, regional and global markets served by the Company.
The Company also competes to a lesser extent with primary metals producers who
typically sell to larger customers requiring shipments of large volumes of metal.
In order to capture scale efficiencies and remain competitive, many primary
metal producers are consolidating their operations and focusing on their core
production activities. These producers have increasingly outsourced metals distribution,
inventory management and value-added metals processing services to metals service
centers. This process of outsourcing allows them to work with a relatively small
number of intermediaries rather than many end customers. As a result, metals
service centers, including the Company, are now providing a range of services
for their customers, including metal purchasing, processing and supply chain
solutions.
The Company’s marketing strategy focuses on distributing highly engineered
specialty grades and alloys of metals as well as providing specialized processing
services designed to meet very precise specifications. Core products include
alloy, aluminum, nickel, stainless steel, carbon and titanium. Inventories of
these products assume many forms such as plate, sheet, extrusions, round bar,
hexagon bar, square and flat bar, tubing and coil. Depending on the size of
the facility and the nature of the markets it serves, the Companys service
centers are equipped as needed with bar saws, plate saws, oxygen and plasma
arc flame cutting machinery, trepanning machinery, boring machinery, honing
equipment, water-jet cutting equipment, stress relieving and annealing furnaces,
surface grinding equipment, CNC machinery, and sheet shearing and cut-to-length
equipment. Various specialized fabrications are also performed for customers
through pre-qualified subcontractors that thermally process, turn, polish, cut-to-length
and straighten alloy and carbon bar.
The Company purchases metals from many producers. Material is purchased in large
lots and stocked at its service centers until sold, usually in smaller quantities
and typically with some value-added processing services performed. The Company’s
ability to provide quick delivery of a wide variety of specialty metals products,
along with its processing capabilities and supply chain management solutions,
allows customers to lower their own inventory investment by reducing their need
to order the large quantities required by producers and their need to perform
additional material processing services. Some of the Company’s purchases
are covered by long-term contracts and commitments, which generally have corresponding
customer sales agreements.
Thousands of customers from a wide array of industries are serviced primarily
through the Company’s own sales organization. Orders are primarily filled
with materials shipped from Company stock. The materials required to fill the
balance of sales are obtained from other sources, such as purchases from other
distributors or direct mill shipments to customers. Deliveries are made principally
by the Company’s fleet contracted through third party logistics providers.
Common carrier delivery is used in areas not serviced directly by the Company’s
fleet. The Company’s broad network of locations provides same or next-day
delivery to most of their markets, and two-day delivery to substantially all
of the remaining markets.
