The industry has three principal modes of gas distribution: on-site or pipeline
supply, bulk or merchant supply, and cylinder or packaged supply. The on-site
mode includes the supply of gaseous product to a customer facility via pipeline
from a gas supplier’s plant located on or off the customer's premises.
The bulk mode consists of the supply of gases to customers in liquid form in
up to truckload quantities or in gaseous form in tube trailers. The packaged
gas mode includes: the supply of gases to customers in gaseous form in cylinders;
in liquid form in less-than-truckload quantities of bulk, also known as microbulk;
or in liquid form in portable cryogenic vessels known as dewars. Generally,
packaged gas distributors, including the Company and its competitors in the
packaged gas market, also supply welding-related hardgoods required by customers
to complement their use of gases.
The Company participates in all three modes of supply to varying degrees, with
the packaged supply mode representing the most significant portion of its gas
sales. The Company is one of the nation’s leading suppliers in the U.S.
packaged gas and welding hardgoods market, with an estimated share of more than
25%. The Company’s competitors in this market include local and regional
independent distributors which are estimated to account for nearly half of the
market’s annual revenues, and certain vertically-integrated gas producers,
which account for the remainder of the market.
The Company markets its products and services through multiple sales channels,
including branch-based representatives, retail stores, telesales, strategic
customer account programs, catalogs, e-Business, and other distributors. Packaged
gases and welding-related hardgoods are generally delivered to customers on
Company-owned or leased trucks, although third-party carriers are also used
in the delivery of welding-related hardgoods and safety products. Packaged gas
distribution is a localized business because it is generally not economical
to transport gas cylinders more than 50 to 100 miles from a plant or branch.
The localized nature of the business makes these markets highly competitive
and competition is generally based on reliable product delivery, product availability,
technical support, quality and price.
Customer Base
The Company’s operations are predominantly in the United States. The Company’s
customer base is diverse and sales are not dependent on a single or small group
of customers. The Company’s largest customer accounts for approximately
0.5% of total net sales. The Company estimates the following industry segments
account for the approximate indicated percentages of its net sales:
Manufacturing & Metal Fabrication (29%)
Non-Residential (Energy & Infrastructure) Construction (14%)
Life Sciences & Healthcare (14%)
Food, Beverage & Retail (13%)
Energy & Chemical Production & Distribution (12%)
Basic Materials & Services (12%)
Government & Other (6%).
