We are a leading metals service center that operates in three reportable segments;
carbon flat products, specialty metals flat products and tubular and pipe products.
The carbon flat products segment and the specialty metals flat products segment
are at times consolidated and referred to as the flat products segments. Some
of the flat products segments’ assets and resources are shared by the
carbon and specialty metals segments and both segments’ products are stored
in the shared facilities and, in some locations, processed on shared equipment.
We provide metals processing and distribution services for a wide range of customers.
Our carbon flat products segment’s focus is on the direct sale and distribution
of large volumes of processed carbon and coated flat-rolled sheet, coil and
plate products, and fabricated parts. Our specialty metals flat products segment’s
focus is on the direct sale and distribution of processed aluminum and stainless
flat-rolled sheet and coil products, flat bar products and fabricated parts.
Through our tubular and pipe products segment, which consists of our Chicago
Tube & Iron, or CTI, subsidiary we distribute metal tubing, pipe, bar, valves
and fittings and fabricate pressure parts supplied to various industrial markets.
Products that require more value-added processing generally have a higher gross
profit. Accordingly, our overall gross profit is affected by, among other things,
product mix, the amount of processing performed, the demand for and availability
of metals, and volatility in selling prices and material purchase costs. We
also perform toll processing of customer-owned metals. We sell certain products
internationally, primarily in Canada, Mexico and the Dominican Republic.
The metals industry is comprised of three types of entities: metals producers,
intermediate metals processors and metals service centers. Metals producers
have historically emphasized the sale of metals to volume purchasers and have
generally viewed intermediate metals processors and metals service centers as
part of their customer base. However, all three types of entities can compete
for certain customers who purchase large quantities of metals. Intermediate
metals processors tend to serve as processors in large quantities for metals
producers and major industrial consumers of processed metals, including automobile
and appliance manufacturers.
Services provided by metals service centers can range from storage and distribution
of unprocessed metal products to complex, precision value-added metals processing.
Metals service centers respond directly to customer needs and emphasize value-added
processing of metals pursuant to specific customer demands, such as cutting-to-length,
slitting, shearing, roll forming, shape correction and surface improvement,
blanking, tempering, plate burning and stamping. These processes produce metals
to specified lengths, widths, shapes and surface characteristics through the
use of specialized equipment. Metals service centers typically have lower cost
structures than, and provide services and value-added processing not otherwise
available from, metals producers.
End product manufacturers and other metals users seek to purchase metals on
shorter lead times and with more frequent and reliable deliveries than can normally
be provided by metals producers. Metals service centers generally have lower
labor costs than metals producers and consequently process metals on a more
cost-effective basis. In addition, due to this lower cost structure, metals
service centers are able to handle orders in quantities smaller than would be
economical for metals producers. The benefits to customers purchasing products
from metals service centers include lower inventory levels, lower overall cost
of raw materials, more timely response and decreased manufacturing time and
expense. Customers also benefit from a lower investment in production labor,
buildings and equipment, which allows them to focus on the engineering, assembly
and marketing of their products. We believe that customers’ demands for
just-in-time delivery have made the value-added inventory, processing and delivery
functions performed by metals service centers increasingly important.
We believe that the metals service center and processing industry is driven
by the following primary trends: (i) shift by customers to fewer suppliers that
are larger and financially strong; (ii) increased customer demand for more frequent
deliveries, higher quality products and services; and (iii) globalization of
metals industry participants.
In recognition of these industry trends, our focus has been on achieving profitable
geographic and product growth through the start-up and acquisition of service
centers, processors, fabricators and related businesses, and investments in
people, information systems, higher value-added processing equipment and services,
while continuing our commitment to expanding and improving our operating efficiencies,
sales and servicing efforts.
Our profit improvement program, initiated in 2015 to reduce operating expenses
and enhance margins, is now integrated into our operations. This plan included
eliminating certain leased properties, lowering transportation, labor and personnel
expenses, centralization of certain administrative functions, as well as inventory
and purchasing initiatives. We successfully executed on the initiatives of the
plan, which has led to reduced operating expenses and improved efficiencies.
3.92% 
28.71 %