Empire Resources, Inc.
Empire Resources, Inc.
1 Parker Plaza
Fort Lee, New Jersey 07024
Telephone: (201) 944-2200
Fax: (201) 944-2226
Web site: http://www.empireresources.com
Incorporated: 1990 as Integrated Technology USA, Inc.
Sales: $358.5 million (2005)
Stock Exchanges: American
Ticker Symbol: ERS
NAIC: 331315 Aluminum Sheet, Plate, and Foil Manufacturing
Empire Resources, Inc. is a Fort Lee, New Jersey-based company that distributes value-added, semi-finished aluminum products to more than 200 customers in the United States and Canada, and to a lesser degree in Australia, New Zealand, and Europe. The vast majority of sales, almost 84 percent, come from U.S. customers. The company offers aluminum sheet/coil, used in transportation, construction, and foodservice applications; plate, used in the construction of cars, trucks, and ships; the heartier and more aesthetically pleasing tread-plate, its crosshatch design commonly seen on truck running boards; everyday aluminum foil, intended for use in the packaging industry as well as in the home; aluminum circles, used by the lighting industry to make lamps as well as the food industry to fashion pots and pans; and profiles/extrusions, used for a multitude of structural purposes by a variety of industries, including construction, furniture, and electronics. Empire maintains a lean operation, employing around 30 people.
The company purchases its products from sources around the world, although more than half comes from South Africa's Hulett Aluminum Ltd. Rather than spend money to warehouse stock, Empire places orders with its suppliers only after it has itself received an order from a customer. What Empire primarily provides is customer service: helping customers to select the right product; taking care of foreign-exchange transactions; arranging for products to be warehoused until they are needed on a just-in-time basis; arranging for additional finishing or metal processing; and keeping customers abreast of the latest products and market trends. Although a public company listed on the American Stock Exchange, Empire is 54 percent owned by its founder Nathan S. Kahn, who serves as the chief executive, and his wife, Sandra R. Kahn, the company's chief financial officer.
CORPORATE LINEAGE DATING TO 1990
Empire chooses to trace its corporate heritage through a company it acquired in 1999 to gain public company status: Integrated Technology USA, Inc., which was incorporated in Delaware in August 1990. The company's president, chief executive officer, and chairman was Alan P. Haber, who ran a chain of restaurants and started an import/export company for stationery and entertainment products before becoming CEO of an Israeli subsidiary of Intafile International, a computer and research and development company. Integrated was launched to design, develop, and market products for new computer-related markets. Although it maintained a small U.S. headquarters in Teaneck, New Jersey, the bulk of the company, which at its height employed about 20, consisted of engineers working in Israel. They developed a wireless printing device for laptop computers, but the field they were most interested in exploring was Internet telephony. Integrated hoped to combine the functions of the computer keyboard and telephone to tidy up the modern desk while providing some other capabilities. The resulting product, the CompuPhone 2000, integrated a single-line telephone in a keyboard without the need for a modem, internal card, or serial port connection. A headset plugged into the keyboard, which provided standard phone features such as volume control, flash, mute, and redial, and included a built-in ringer. The system also came with software that allowed users to place calls from an electronic address book and maintained a permanent log of all incoming and outgoing calls. This last function was also part of the product's pitch to telemarketing firms, as well as the system's compatibility with PBX or Centrex phone systems.
A more advanced product, somewhat visionary for the time, was the CompuNet 2000 system, which allowed users not only to place conventional phone calls but also to use the Internet to talk at no charge, other than the subscription paid to an Internet service provider. The party on the other end required compatible software, however, and the quality was poor.
In a way Integrated anticipated the VoIP (Voice over IP) industry that would take shape in the 2000s, but the excitement over having a telephone jack in their keyboard never materialized with consumers, despite Haber's 1995 claim that in a matter of a few years conventional phones would be swept aside by devices such as CompuPhone 2000 and CompuNet 2000. Nevertheless, he was able to generate enough of a buzz to take the company public in 1996 and complete a successful initial public offering (IPO) of stock in October of that year, netting $15.4 million. Sales totaled $804,000 in 1995 when CompuPhone 2000 came on the market and grew to $1.22 million in 1996 after the introduction of CompuNet 2000, but reality quickly set in. In a few months after the IPO, demand for the products failed to take shape and in the first six months of 1997 sales dropped 83 percent, from $600,000 to just $100,000. Shareholders quickly realized that the market for the company's products was unlikely to materialize and took steps to make sure that Integrated did not burn through the more than $10 million that remained from the IPO in a vain attempt to build the business.
INTEGRATED TECHNOLOGY CEASING OPERATIONS IN 1997
In November 1997 the company announced that it would liquidate inventory and cease operations by the end of the year. On the way to its demise, Integrated had laid off its employees and Haber became the last to go, resigning to "pursue other interests." A New York private investor and director of the company, William Spier, took over as interim chief executive and led an effort to find an acquisition partner, perhaps a well established private company that wanted to go public.
Another Integrated director, and chief financial officer until the company discontinued operations, was Simon M. Kahn, brother of Nathan Kahn, who could use a shell company to take his business public. Both were familiar with the metals industry, as their father was involved in the steel importing business through New York City-based Empire Steel Trading Company, which also handled aluminum. Nathan Kahn earned a master's of business administration from Harvard Business School and dreamed of running his own business. "I liked the entrepreneurial life," he told the Record of Hackensack, New Jersey, in a rare interview, conducted in 2005. "I wanted to create something." From his father's business he knew about the quality of international aluminum and had the contacts to form his own aluminum importing business, along with his wife Sandra, in lower Manhattan in 1984. It was called Empire Resources. For funding, Kahn turned to a woman banker. According to the Record, "Somewhat to his surprise, the banker gave him a $5 million line of credit. 'She had more confidence in me than I had in myself,' said Kahn." Nevertheless, it proved to be a wise investment.
Empire Resources, Inc. is a distributor of value added semi-finished aluminum products. We currently serve over 200 customers in diverse industries including transportation, automotive, housing, appliances and packaging.
Kahn and his wife steadily grew the business, successfully competing against giant corporations including Alcoa Inc. and Alcan Inc. The difference was Empire's superior customer service. To maintain that edge the Kahns made sure the employees were well treated. "In fact," reported the Record, "keeping workers happy was behind the company's move to Fort Lee from Lower Manhattan more than a decade ago. Most of the workers lived in New Jersey and were sick of the commute. The Kahns live in New York City and do a reverse commute; because the office is close to the George Washington Bridge, it's not a difficult trip." The couple also had to find a way to work together, given that Sandra, a certified public accountant, served as the company's chief financial officer. "We generally defer to each other in our areas of expertise," her husband explained.
Empire expanded beyond the North American market in 1996 when it established subsidiary Empire Resources Pacific Ltd. in Australia to sell aluminum products in that country as well as New Zealand. By the end of the 1990s, Empire was doing about $100 million in annual sales, and despite the availability of instant communications, Nathan Kahn continued to maintain customer relations the way he had since the beginning, by hitting the road a few times a month to meet with customers. It allowed him to get a feel for what the customer needed. He told the Record: "Sometimes when you're walking out of a plant, you see things that they don't even see. And it's respectful. It shows them that you care enough to get out of your chair and visit."
COMPLETING A REVERSE MERGER IN 1999
In February 1999 Empire signed an agreement to merge with Integrated Technology USA, a "reverse acquisition" completed in September of that year. In essence, Empire exchanged its stock for Integrated's $10 million investment and assumed its American Stock Exchange listing. Three days later Integrated changed its name to Empire Resources Inc. The Kahns maintained their roles as CEO and CFO, and William Spier became non-executive chairman of the board and a director.
Despite having to replace a supplier, Empire completed its first year as a public company by recording $107.1 million in revenues in 1999, a 6 percent increase over 1998's totals. In addition, the company's net income of $2.5 million represented the 15th straight year of profitability for the company. The United States still provided the lion's share of sales, some 75 percent, followed by Canada with 15 percent and Australia and New Zealand contributing the remaining 10 percent.
Empire continued to enjoy steady growth with the start of the new century. It benefited from a supplier launching full-scale production at a new plant, allowing Empire to expand its customer base and increase sales 54 percent to $165 million. The company did not, however, post the level of earnings it had targeted, due to a slowing economy. In order to make sales, Empire in some cases had to accept less than desirable margins. A deteriorating economy would prove to be even more of a factor in 2001, when demand fell, as did prices, and Empire saw revenues slip to $143.2 million. Nevertheless, the company posted its 17th consecutive profitable year, netting $1.3 million. A factor in achieving those earnings was the opening of a new, cost-effective Baltimore distribution facility in 2001.
Business rebounded in 2002 for Empire, as sales increased 10.8 percent to $158.7 million. The company also expanded on a value-added sales program, resulting in higher margins and improved profits. In addition, the company was benefiting from a move to streamline its shipping operations by adopting a "just in time" approach to delivery. For the year, earnings almost doubled to $2.4 million. Because it was able to obtain more products from suppliers, Empire was able to enjoy an even stronger year in 2003, recording sales of $184.4 million and net income of more than $3.5 million. The company's main supplier, Hulett Aluminum Ltd. of South Africa, came under fire during the year, however. Hulett was accused of dumping 6000 series aluminum alloy rolled plates in the U.S. market through Empire, its exclusive distributor in the market, at a price significantly lower than in its home market. An investigation was launched by the U.S. International Trade Commission, during which time Hulett was allowed to continue to ship plates into the United States, but Empire was concerned with the long-term impact should Hulett run afoul of U.S. regulators. Those fears were allayed in November 2004, however, when the U.S. International Trade Commission ruled that the imports did not materially injure the U.S. aluminum industry.
- Empire Resources, Inc., is founded.
- Integrated Technology USA, Inc., is formed.
- Empire Resources Pacific Ltd. is formed.
- Empire and Integrated are merged.
- A used aluminum extrusion press is acquired.
Sales increased 15 percent to $212.5 million in 2004 and net income increased to $4.8 million. Empire benefited from a steady supply of product as well as price increases. It also took steps in the fall of the year to add another revenue stream by acquiring a used aluminum extrusion press. The plan was to modernize the equipment and have it installed in the company's newest warehouse/distribution facility in Baltimore. The extrusion production, once the press became operational, was expected to be marketed to Empire's current customers. In addition, the operation had the potential to build on Empire's value-added strategy, as other capabilities could be added to process and finishing aluminum, and as a result the company could further improve its sales and profitability.
Generally avoiding publicity, Empire achieved results that caught the notice of investors, and in 2004 the price of its stock began to inch upward after years of neglect. That attention would only grow after Empire increased revenues 69 percent to $358.5 million in 2005, and net income topped $9.5 million. In 2006, as a result, Business Week ranked Empire number 32 on its list of Hot Growth companies.
Empire Resources Pacific Ltd.; Empire Resources Extrusions L.L.C.
Alcan Inc.; Alcoa Inc., Ryerson, Inc.
"Integrated Technology USA Joins AMEX," Record (Bergen County, N.J.), October 3, 1996, p. B3.
Lavelle, Louis, "High-Tech Firm Shutting Down in Teaneck," Record (Bergen County, N.J.) November 7, 1997, p. B1.
Lynn, Kathleen, "Heavily into Metal," Record (Hackensack, N.J.), December 25, 2005.
―――――――, "N.J. Microcap Companies' Stocks Soar," Record (Hacksensack, N.J.), January 7, 2005.