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Business Observer Thursday, Jun. 25, 2009 12 years ago

The Hole Story

McNichols has filled a niche by making steel products with holes in them, such as stairs.

McNichols has filled a niche by making steel products with holes in them, such as stairs.

McNichols Co., a family-founded enterprise in Tampa, says it is in the perforated metal business — it cuts, drills, welds and makes metal products with holes in them, such as stairs, wire mesh, grating, railing guards and industrial flooring.

Do this enough and you get known for it. Do it well and sales grow. That's what has happened the past 57 years at McNichols, which now has 17 40,000-square-foot fabrication or storage plants around the country, including one in an industrial park north of Waters Avenue in Tampa. The company headquarters is on Rocky Point in Tampa.

McNichols now fills about 45,000 orders a year in the United States, Mexico, Canada, South America and the Middle East. But to do just-in-time deliveries, McNichols usually sticks to North America, because of the size and weight of the products.

Many stadiums, including Lambeau Field in Green Bay, Wis., have McNichols products, such as grating between stair railings and the stairs. So does Space Mountain and other attractions at Walt Disney World. The metal platforms for the monorail in Las Vegas and the grated floors for power plants also use McNichols products.

McNichols is supplying NASA with all of the floor grating for a new launch pad at Cape Kennedy. Shaker screens in mines, which filter out rock particles to protect miners, use McNichols products. The material on the outside of the new Tampa Museum of Art uses McNichols' fabricated metal for its exposed, annodized metal skin. And a stove fixtures store in International Plaza in Tampa wanted a unique metal sign that McNichols developed.

“Some customers want a unique look,” says Herb Gotschius, 59, president and chief operating officer who has been at McNichols for 31 years.

Besides carving a niche, what has been a key to McNichols' growth? Speed and efficiency, Gotschius says.

About 99.8% of all company stock orders — orders for products McNichols has in stock and ready to go — go out within 24 hours of being ordered.

About 98% of fabrication orders — orders where McNichols has to drill, weld and make a product from scratch — go out within 48 hours.

Sales have climbed the past three years, hitting $205 million in 2008, and the company is profitable. But the declining price of steel, and the sluggish construction economy has hurt McNichols.

“In response to the collapse in demand, steel prices are down 50%,” Gotschius says. “That's good for the customer, but our margins will take a hit. I've not seen an economy like this in a while.”

As a result, McNichols trimmed its staff 15% in January, something it has rarely done in the past 57 years.

Public projects, such as the museum of art, schools and NASA have been stronger for McNichols in the past year.

Starting out
U.S. Army Lt. Bob McNichols, a prisoner-of-war survivor in World War II, started McNichols in Cleveland in 1952. After nearly losing his life and being shot at while parachuting, McNichols came home in 1945 and rededicated his life to Christ. It would be a commitment that would guide the business.

The company started making one perforated metal product and delivered products with station wagons, then a van. It made about $95,000 in sales in year one.

McNichols would work with architects, the designers of buildings, by sending them samples of perforated metals and talking with them, developing relationships.

“They liked us so much and it paid off,” Gotschius says.

In 1978, seeing the shift in development moving South, Bob McNichols moved the company to Tampa. He died of cancer in 1981 and was succeeded by his son Gene McNichols, the company chairman and chief executive officer. Gene's sons Steven and Scott, MBA graduates from the University of Tampa, have been working in the business and are beginning to take leadership positions.

McNichols grew coast to coast. In 1989, McNichols bought the grating division of Pacific Northwest, giving it a presence out West with an office in Los Angeles.

The company managers run McNichols according to Christian principals and the company Web site has quotes from Scripture and references to serving God first.

“We don't impose that on people, but we are built on ethics and fair business practices,” Gotschius says. “For us, this translates to trust and ethical behavior. It's a good place to work.”

Diversifying products
Over the years, one of the most significant transformations at McNichols has been the diversification of its product line.

Many of its products are used as the building blocks of construction and are hidden from view. But in recent years, developers have used them to enhance the look of a building, with different colored metals and finishes. These “architectural metals” are the custom orders that McNichols has been getting more of and the company sees this as a growth area in the future.

“I think the architectural metals will continue to grow and we're in a great position to be able to fill that demand,” Gotschius says.

There are a host of competitors in this business. Some try to outmaneuver McNichols on specific products, such as one-inch grating.

“We get pinched on some commodity items,” he says.

But overall, Gotschius says they are smaller and less efficient than McNichols. One is about a third of the size of McNichols. Some do part of what McNichols does, but mainly focus on other kinds of steel work, so they only cut into part of its market share.

“When you need different colors, shapes, configurations, openings for air flow, gas or chemical flow, you need manufacturing relationships and special production and systems, and we have all of those,” Gotschius says.

The future of McNichols hinges on the construction industry, technology, the global economy, construction trends and the growth of architectural metals. The company had a service office in Mexico, but closed it this year when it proved uneconomical. It is looking to open one in Canada to service customers there.

The McNichols company will improve if it continues to focus on good and fast service for customers aided by its automated order-tracking system, says Gotschius.

“That's been our claim to fame,” Gotschius says.

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