Earle M. Jorgensen Company

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Earle M. Jorgensen Company

10650 Alameda Street
Lynwood, California 90262
U.S.A.
Telephone: (323) 567-1122
Toll Free: (800) 336-5365
Fax: (323) 563-5500
Web site: http://www.emjmetals.com/

Wholly Owned Subsidiary of Reliance Steel and Aluminum Co.
Founded: 1921
Employees: 1,712
Sales: $1.6 billion (2005)
NAIC: 423510 Metals Service Centers and Other Metal Merchant Wholesalers

One of the largest steel distributors, Earle M. Jorgensen Company (EMJ) sells more than 25,000 metal bar, tubular, sheet, and plate products made from carbon, alloy, stainless steel, iron, nickel, copper and brass, and aluminum through 39 distributorships and service facilities in the United States and Canada. EMJ also offers such value-added processing services as saw cutting, Blanchard grinding (rotary surface grinding), plate burning, honing, end finishing, skiving and roller burnishing, and facing and centering. Based in Lynwood, California, EMJ maintains approximately three dozen service and processing centers spread across North America. The company has a long-standing reputation for timely and reliable deliveries, instituted well before just-in-time delivery practices. For decades, exceptional customer service has been a key element in the company's ability to enjoy steady growth despite the cyclical nature of the metal services industry, allowing EMJ to command higher prices than the competition. The company's slate of 35,000 customers come from the machine tools, industrial equipment, transportation, fluid power, energy, fabricated metal, construction, and agricultural equipment industries. Run for most of its history by its founder, Earle M. Jorgensen—who, until a few days before his death in 1999 at the age of 101, continued to come into the office nearly every day—EMJ is a subsidiary of Reliance Steel and Aluminum Co.

FOUNDER SURVIVED THE 1906 SAN FRANCISCO EARTHQUAKE

Earle M. Jorgensen was born in San Francisco in 1898, the only son of a Danish immigrant sea captain, who plied the South Pacific routes out of the city. It was a profession that came in handy during the 1906 earthquake that leveled and set San Francisco ablaze. The family took to the sea, where, from the safety of his father's ship, the young Jorgensen witnessed the calamity onshore. His father died when he was just 13, forcing him to quit school and go to work. Although he never attended college, Jorgensen completed his high school education at night. He was a hard-working, ambitious young man, inspired by the era's inspirational self-help literature that promoted the virtues of pluck and industry in getting ahead. At the age of 16 he came across a magazine article titled, "Hustle—That's All!" It became a lifelong creed for Jorgensen and a motto for the company he founded. Years later he came across a book, The Go-Getter: A Story That Tells You How to Be One, which in many ways mirrored his own story, about a young man who turned himself into a successful businessman. Jorgensen bought the rights to the book and made a practice of giving away signed copies to visitors.

When the United States became involved in World War I in 1916, Jorgensen served in the Army Tank Corps. After his discharge he tried his hand in New York City, taking a job with a novelty toy company, but he never got paid because the company soon went bankrupt, forcing him to borrow $200 to make his way back to California, where he settled in Los Angeles. Unable to land a job, Jorgensen was undeterred: The young go-getter simply went into business for himself with barely a shirt on his back in 1921. In fact, he pawned a suit to raise $2.50 to rent a desk from a public stenographer named Anna Moore in the Douglas Building in Los Angeles. He lacked the full $15 a month rent, but fortunately she trusted him. After learning that the U.S. Navy had scrapped steel shafts from submarines no longer needed, he took advantage of an oil boom in Southern California, where wells were being drilled on the beaches and eventually moved offshore, and convinced oilmen that the shafts could be retooled for drilling. With sales in hand he was able to buy the shafts and begin scouring the shipyards for other scrap metal to sell to the petroleum companies at less than the cost of newly milled steel.

TAKEN PUBLIC: 1957

In 1923 Jorgensen raised $20,000 in venture capital and spent half of that to acquire one acre of land in nearby Lynwood, California. He also bought equipment and built his first warehouse. In 1924 he incorporated Earle M. Jorgensen company and became involved in the steel warehousing business, graduating from scrap to handling steel taken on consignment. He steadily grew the business, moving beyond oil companies to service the emerging aerospace industry in Southern California as well as other industries. He also expanded outside of California and across the country. He added aluminum to the product mix in 1950, and took the company public in 1957 as Earle M. Jorgensen Steel Company. The offering managed by Blyth & Co Inc. was well received by investors and, according to the Los Angeles Times, heavily oversubscribed.

The money raised was used to expand the company's capabilities as well as to acquire and open new warehouses. As customers demanded more services the steel warehouses became metal service centers, and Jorgensen added such processes as slitting coiled steel, shearing steel into sheet and plate, cutting plate, roller leveling, and cutting into shapes. Because service centers were non-union—or, if they were unionized, had contracts less costly than those negotiated by the steelworkers—they could process steel more profitably than a good number of mills. Between 1958 and the summer of 1961, EMJ expanded from 8 service centers to 13, opening facilities in Denver, Honolulu, Phoenix, Seattle, and Wichita. They carried steel and aluminum produced by 60 domestic mills. EMJ opted not to carry foreign products, due to problems that incurred during a period of short supply when quantity and price proved too unreliable. By this time, EMJ had established itself as a dependable supplier, able to provide next-day shipping, and the company was loathe to compromise its chief competitive advantage. At this stage EMJ's service area included the West Coast and Hawaii, the Southwest, and portions of the Midwest. Customers were small companies that did not need or could not afford to buy the carload-size quantities sold by steel mills and needed fast delivery, as well as larger companies that required special services not offered by the mills. In 1960 annual sales topped the $50 million mark and continued to climb, spurred to a large degree by acquisitions. The most significant of these was the $4.2 million purchase of the Isaacson Forge division from Seattle-based Isaacson Iron Works in 1965. EMJ added the ability to produce such basic forms as steel slabs and ingots, and was no longer dependent on mills for these items.

COMPANY PERSPECTIVES

From top to bottom, everyone in our company is imbued with the spirit of our founder whose motto "Hustle, That's All" motivates us to meet the needs of our customers every single day.

The 1960s also saw Jorgensen's son, John W. Jorgensen, become president and chief operating officer in 1967. The younger Jorgensen was also a veteran, having served in the Navy during World War II. He then graduated from Pomona College in 1948, joined his father's company, and worked his way up through the executive ranks for the next 20 years. Also in the 1960s, Earle Jorgensen became involved in politics. He had been introduced to the Hollywood social scene by his second wife, Marion, who had been previously married to a Hollywood producer. Jorgensen and his wife became friends with actor Ronald Reagan and his wife Nancy. In 1966 Jorgensen and auto dealer Holmes Tuttle urged Reagan to run for governor in California, and they then lined up political consultants for him and raised funds. After Reagan's successful bid, the two men became part of Reagan's "kitchen cabinet" of businessmen advisors. Jorgensen and his cohorts continued to support Reagan's political aspirations, backing him in his 1976 effort to become president of the United States, and his successful run in 1980. Reagan made a tradition of watching his election returns after dinner at Jorgensen's house. Reportedly, the president's staunch support for the free enterprise system was very much influenced by his friend's success story, that of building a major company from $2.50 raised from a hocked suit. While Jorgensen accepted an appointment to the State College Board of Trustees in California, when Reagan became president he had no interest in joining many of his friends who moved to Washington to take government posts. Asked why by one of his stepsons, Jorgensen explained, "That's not my business. I need to stick to what I know best."

EMJ cracked the $100 million level in annual sales for the first time in 1966, posting revenue of $116.8 million. That number increased to $124.4 million by the end of the decade before a down cycle led to a dip in sales to less than $110 million in 1971. Business rebounded and revenues topped $200 million. Then, sales and earnings fell off once again in 1975 and 1976 because of a depression, before surging to $241.9 million in 1977. Nevertheless, by the end of the decade EMJ maintained 19 service centers, two forge operations, a pair of sheet and strip plants, and a blade plant producing parts for construction equipment.

In 1986, Jorgensen, now 87, finally promoted his son, who was himself 60 years old, to the post of chief executive officer. Nevertheless, the elder Jorgensen remained chairman of the board and continued to come into the office on a daily basis. The younger Jorgensen's tenure as CEO was destined to be brief, however. In April 1990 he was forced to retire and within the month died from stomach cancer at the age of 64. Despite his presence at headquarters, Earle Jorgensen, over 90 years old, was no longer able to run the company. Even before his son's passing, a deal was in the work to sell the business to the New York buyout firm Kelso & Co., which agreed to pay about $265 million. EMJ was then merged with Kilsby-Roberts Holding Co., control of which Kelso acquired at the same time. The surviving entity assumed the Earle M. Jorgensen Company name.

Kilsby-Roberts was comprised of steel and aluminum supply companies founded by entrepreneurs in the vein of Earl Jorgensen himself. The oldest, launched in 1921, was the C.A. Roberts Company. In 1981 the Chicago-based company merged with Kilsby Tubesupply, a Los Angeles business established in 1946 by Perry Kilsby, to form Kilsby-Roberts. Employees of the company bought it from Flour Corp. in 1984, backed by Kelso, and two years later Kilsby-Robert acquired A.B. Murray Company, which had been in business since the 1890s.

KEY DATES

1921:: Earle Jorgensen begins selling scrap metal.
1924:: Jorgensen incorporates his warehousing business.
1948:: Son John W. Jorgensen joins the company.
1957:: The company is taken public.
1965:: Isaacson Forge is acquired.
1986:: John Jorgensen succeeds his father as CEO.
1990:: John Jorgensen dies and the company is merged with Kilsby-Roberts and taken private.
1999:: Earle Jorgensen dies.
2004:: The company is taken public again.
2006:: Reliance Steel acquires the business.

The new Earle M. Jorgensen company boasted an asset base of $550 million and annual sales in excess of $900 million, making it America's largest independently-owned metals distributor. The EMJ and Kilsby-Robert combination appeared to be an excellent fit, featuring a minimum of overlap in business. The former did less than 3 percent of its sales in tubing and pipe, while the latter did about the same amount of business in rod. Since 1987, in fact, the two companies had maintained an informal alliance to help one another serve customers who needed a full range of products. Although the company consolidated branches and eliminated redundancies as much as possible, integrating the two companies proved extremely difficult. According to Forbes, "The new management handled the merger clumsily. Expenses hit 90 cents of every $1 grossed." There were also cultural differences to contend with, much of which were traceable to Earle Jorgensen, according to American Metal Market, which opined: "A hands-on executive who for years insisted that all his male employees wear white shirts and ties and answer the telephone within three rings, Jorgensen engendered a fierce personal loyalty that still exists today among his former employees…. In fact, many of his former employees, as well as outsiders, believe that this strong corporate culture built by Jorgensen was one of the factors that initially made it difficult to mesh the company with the former Kilsby Roberts specialty tubing chain."

Earle Jorgensen stepped down as chairman in 1994, although he stayed on as a director and chairman of the board's executive committee. The company continued to struggle, its plight highlighted by the botched installation of a new computerized information system intended to replace the two incompatible systems inherited from the 1990 merger. Business was disrupted, leading to a loss of $29.3 million in fiscal 1996. A year later the company lost another $25.4 million. By this time Kelso was looking to unload the company but found no one interested in the asking price, or in taking on EMJ's heavy debt load.

FOUNDER DIES AT 101 IN 1999

With EMJ on the verge of bankruptcy, Kelso convinced David Roderick, the former chairman of U.S. Steel to take over as chairman. Roderick said he only agreed to take the position if Earle Jorgensen remained as chairman emeritus, once again demonstrating how much beloved Jorgensen was in the industry. Roderick then recruited a new chief executive, hiring 58-year-old Maurice "Sandy" Nelson, who had recently quit the top post at Inland Steel Co. and was about to begin an extended trip to France with his wife, both of them fluent in French and avid art collectors. Forbes reported, "Nelson says it was Jorgensen's example that convinced him he was too young to retire. 'I said to myself, 'Look at Earle,' says Nelson." While Nelson set about the task of restructuring EMJ, Jorgensen continued to come into the office. At one point he asked Nelson if it was okay to take a week off. Nelson told Forbes that he replied, "I don't know, Earle, that's pretty excessive." Following his week-long Caribbean cruise, the company founder showed up for work, according to Nelson, "in a crisp three-piece suit" early Monday morning. He continued to come into the office regularly, even after he reached 101 years of age, ceasing his regimen only weeks before his death in August 1999.

Nelson took over a company that was saddled with excessive overhead expenses. Not only was EMJ too paper-intensive, it had too many high-salaried people in its headquarters. He soon reduced the number of vice presidents from 22 to just 5, and also closed down some underperforming operations while beefing up the moneymakers. He also invested in technology to improve efficiencies. Nelson was able to complete the turnaround of EMJ well before Earle Jorgensen's passing. In recognition of his efforts, Nelson was named Metal Center News' as its Service Center Executive of the Year in 2001.

Under Nelson, EMJ increased revenues to $1.88 billion in 2004, and then in April 2005 took the company public. Investors were far from enthusiastic about the offering, unlike the IPO of the original EMJ in the 1950s. Rather than being oversubscribed, this sale fell far short of its $300 million target, netting just $176 million. Many of its shareholders were also less than happy with the company's initial performance. EMJ's public status lasted just two years, however. In April 2006 the company was sold to Reliance Steel and Aluminum Co. for $984 million, a price that included the assumption of close to $300 million in debt. Based in Los Angeles, publicly-traded Reliance was one of the United States' largest metals service center companies. By acquiring EMJ, Reliance broadened its product offering, bolstered its presence in the Midwest, and expanded its geographic reach into New England and Canada. Upon completion of the transaction, Nelson was finally able to retire, staying on briefly to help in the transition to new ownership.