Employee Stock Option Programs June 2024

Industrial Resources, Inc. (IRI) – Mount Vernon, WA

June 27, 2024

Industrial Resources, Inc.

Iron-Clad Leaders of Welding and Steel Fabrication

Navigating diversification and ownership as key strategies for company scaling and growth

In a field ripe with competition, Industrial Resources Inc has become an undisputed industry leader. Founded by Jay Follman in 1986, Industrial Resources Inc. (IRI) has been providing services to customers with challenging and complex industrial and marine projects for the past 38 years.

Started in Follman’s hometown of Clearlake, Washington and now headquartered In Mount Vernon, Washington, this company has relied on innovation, skilled labor, and customer satisfaction to serve the Pacific Northwest, Alaska and beyond.

Its 30,000 square foot fabrication facility in Mount Vernon Washington has allowed it to expand its services and focus on things like fostering a motivated, younger workforce and updating its older operational models with newer technology.

However, the most important development for the company has to be the creation of its Employee Stock Ownership Plan (ESOP) at the end of 2020.

A little over 3 years later, the company’s leadership maintains a clear vision for growth that involves identifying new market opportunities while emphasizing open communication with employees by sharing financial information and outlining the ESOP’s benefits.

Industrial Resources has done a fantastic job of retaining skilled tradespeople, and it has now turned its sights on continuous improvement through investments in higher-quality training, support, and operational standards.

When these elements come together, it results in satisfied customers, a reputation for excellence in the industry, and a positive work environment where employees understand the direct impact of their work on the company’s success.

IRI Before the ESOP Transition

Andy West and Jan Kallshian

In its early years, Industrial Resourcesprimarily worked on oil refineries in the Northwest.

With time, the company diversified into commercial fishing vessels, particularly those that process fish at sea, producing pallets of frozen fish by the time they reach the dock.

The shift from refineries to fishing was driven by the competitive, seasonal nature of the refinery business and the growing opportunities in the fishing sector.

This transition proved fruitful, establishing Industrial Resources as a key player in supporting the Alaskan fishing fleet. So, the company’s largest division remains the support of the Alaskan fishing fleet, which involves services including maintenance and repair.

Industrial Resources’ expansion into commercial fishing vessels provided a more stable and growing market but it’s very specialized and dynamic compared to the refinery sector. However, it also prompted IRI’s leaders to explore more proactive ways of expanding, which most likely triggered the company’s most recent acquisition.

“In November, last year, we acquired a local fabrication company called Superior Systems. Superior is about half the size of Industrial Resources but they’re a 25+ years well-established fabrication business. They’re a full service fabrication shop with some specialties,” says current President and CFO Jan Kallshian.

Originally, IRI had a small fabrication shop to support its customers’ needs for custom marine and other components, however, this planted the seed for a firmer pathway into the larger fabrication industry..

This strategicacquisitionquadrupled the company’s fabrication capabilities and provided an opportunity to direct more work internally, supporting the company’s existing operations.

With this move, Industrial Resources positioned itself for future growth in the fishing sector and the broader fabrication market. “Not only do we have a very strong fabrication business that operates independently of the marine sector, but now we can direct a ton of work that used to go to somebody else in the fabrication business to ourselves,” Kallshian explains. “This also gives us more control over quality and schedule.”

The most noticeable difference has been seen in the company’s revenue, which is projected to be around $20 million in 2024, a strong indication of the massive growth potential awaiting Industrial Resources within the fabrication industry.

Leveraging Technology and Modern Practices

Although much of the work at Industrial Resources involves traditional hands-on trade skills, the company has embraced technology where applicable.

This includes using robotic welding machines and modernized welding equipment to increase efficiency. Additionally, design software like SolidWorks is used to create precise drawings that can be fed into computerized machines for fabrication.

While the company is adopting technology in the field, there’s also a move toward more integrated business systems to improve contract management, timekeeping, and billing.

While the acquisition of Superior Systems did allow the company to significantly expand its services, the traditional nature of Superior Systems’ operations has posed a bit of a challenge when it comes to operational integration.

“It’s a much simpler operation with considerably less technology than what we use at Industrial Resources,” Kallshian explains, noting that the company is now seeking to implement a company-wide ERP system to help align both sides of the IRI business under one streamlined procedure.

Northline Seafoods barge “Hannah”

Despite the company’s success, attracting a younger workforce has become another challenge, especially with the added duty of educating all employees about the benefits of the ESOP and employee ownership..

Industrial Resources is mostly a skilled laborer shop, so it has done a great job retaining an incredible roster of top-quality, dedicated tradesmen.

However, that workforce is aging, and the nature of the work, often involving long hours and hard physical labor, makes it difficult to attract younger talent.

To combat that, Industrial Resources is investing more into promoting the benefits of an Employee Stock Ownership Plan, emphasizing the long-term rewards of ownership and the potential for retirement savings.

However, in the short term, IRI’s leadership has also made it a point to provide its employee-owners with above-and-beyond support.

“That means when you need tools, we buy tools. You need safety equipment, we’re securing it; you need a certain schedule? We’ll work with you,” Kallshian says.

With the ESOP being so young, the company’s leaders have made it a point to show employees that the benefits of an ESOP reach beyond just retirement savings and even influence the company culture.

The message they want to convey is clear. Industrial Resources, Inc. is where you want to work and will be rewarded for doing so. Despite being so young some employees are already beginning to see the retirement benefits that can only be experienced with an ESOP.

“After only three years we have employees with over $30,000 in their account… we’re investing a lot into the ESOP. So, the people are getting a nice allocation of shares, and the share price has doubled since inception,” Kallshian explains.

Future Goals and Strategies

Looking ahead, Industrial Resources aims to create a workplace that attracts new talent while maintaining its commitment to quality and customer satisfaction.

To better appeal to younger individuals, the company seeks to bolster the workforce from the ground up and has sought out many collaborative opportunities with local high schools, trade schools and colleges.

Industrial Resources recognizes that traditional extended education is not for everyone and aims to be the alternative for young people looking to establish a strong foundation for themselves with a company that values them.

Additionally, the company recognizes the need to expand the depth of its offerings rather than the size of its territory. Due to the nature of the commercial fishing industry, it serves, there is an inherent lack of new marine sector companies that Industrial Resources can do business with.

This is why it’s seeking to more smoothly integrate the newly acquired Superior Systems into its existing operational model, to improve its standing in the fabrication industry, as the company seems to have reached the peak of the commercial fishing industry where customers are faced with expansion investments so big they become impractical.

“You get very far out of town and we can’t always offer a competitive advantage… so, we don’t benefit from traditional advertising. We’re not going to get more fish processor customers by advertising because they already know about us,” Kallshian explains.

With that being the case, Industrial Resources is sticking to what has become a de-facto hyper-localized marketing strategy, or as Kallshian puts it, “I liken us to the microbrewery model,” where it focuses on dominating the local regions it serves.

With the recent acquisition of Superior Systems and the ongoing focus on building a strong ESOP culture, Industrial Resources is poised for steady growth and continued success.

Despite being a young ESOP, this company has already established a strong culture that encourages employees to see themselves as part owners of the business, with a stake in its success.

By leveraging technology and bolstering an already skilled workforce with top-notch support and tool procurement, this company has effectively staked its claim as the company set to remain a leader in its industry for years to come