Item 1. Business
Item
1 - BUSINESS
Overview
of the Company
The
Company is a leading manufacturer of flexible metal hose, which is used in a variety of ways to carry gases and liquids within their
particular applications. Some of the more prominent uses include:
● carrying
fuel gases within residential and commercial buildings;
● carrying
gasoline and diesel gasoline products (both above and below the ground) in a double containment
piping to contain any possible leaks, which is used in automotive and marina refueling, and
fueling for back-up generation;
● using
copper-alloy corrugated piping in medical or health care facilities to carry medical gases
(oxygen, nitrogen, vacuum) or pure gases for pharmaceutical applications; and
● industrial
applications where the customer requires the piping to have both a degree of flexibility
and/or an ability to carry corrosive compounds or mixtures, or to carry at both very high
and very low (cryogenic) temperatures.
The
Company’s business is managed as a single operating segment that consists of the manufacture and sale of flexible metal hose (also
described as corrugated tubing), as well as the sale of the Company’s related proprietary fittings and a vast array of accessories.
The
Company manufactures flexible metal hose at its facilities in Exton, Pennsylvania and Houston, Texas in the United States (U.S.), and
in Banbury, Oxfordshire in the United Kingdom (U.K.). The Company primarily sells its products through distributors, wholesalers and
to original equipment manufacturers (“OEMs”) throughout North America and Europe, and to a lesser extent other global markets.
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Industry
Overview
The
flexible metal hose industry is highly fragmented and diverse, with more than eight companies producing flexible metal hose in the U.S.,
and at least that many in Europe and Asia. Because of its simple and ubiquitous nature, flexible metal hose has been applied to a number
of different applications across a broad range of industries.
The
major market categories for flexible metal hose include (1) automotive, (2) aerospace, (3) residential, commercial, and institutional
construction, and (4) general industrial. Omega Flex participates in the latter two markets for flexible metal hose. The residential
and commercial construction market utilizes corrugated stainless steel tubing (CSST) primarily for flexible gas piping, double containment
piping for conveying diesel fuel and gasoline from a storage tank to a dispenser or back-up generator. The Company produces corrugated
copper tubing for medical gases in medical care facilities, including hospitals, clinics, dental and veterinary offices, and long-term
care facilities. The general industrial market includes all the processing industries, the most important of which include primary steel,
petrochemical, pharmaceutical, and specialty applications for the transfer of fluids at both extremely low and high temperatures, (such
as the conveying of cryogenic liquids) and a highly fragmented OEM market, as well as the maintenance and repair market.
None
of our competitors appear to be dominant in more than one market. We believe that we are a leading supplier of flexible metal hose in
each of the U.S. markets in which we participate. Our assessment of our overall competitive position is based on several factors. The
flexible gas piping market in the U.S. is currently concentrated in the residential housing market. Based on the reports issued by the
national trade groups on housing construction, the level of acceptance of flexible gas piping in the construction market, and the average
usage of flexible gas piping in a residential building, we believe that we can estimate with a reasonable level of accuracy the size
of the total gas piping market. In addition, the Company is a member of an industry trade group comprised of the largest manufacturers
of CSST in the U.S., which compiles and distributes sales volume statistics for its members relative to flexible gas piping. Based on
our sales and the statistics described above, the Company believes it can estimate its position within that market. For other applications,
industry trade groups collect, and report data related to these markets, and we can then compare and estimate our status within that
group as a whole. In addition, the customer base for the products that we sell, and the identity of the manufacturers aligned with those
customers is fairly well known, which again allows the Company to extract information and estimate its market position. Lastly, the term
“leading” implies a host of factors other than sales volume and market share position. It includes the range and capability
of the product line, history of product development and new product launches, all of which information is in the public domain. Based
on all this information, the Company is reasonably confident that it is indeed a leader in the major U.S. market segments in which it
participates.
Development
of Business
Incorporated
in 1975 under the name of Tofle America, Inc., the Company was originally established as the subsidiary of a Japanese manufacturer of
flexible metal hose. For a number of years, the Company was a manufacturer of flexible metal hose that was sold primarily to customers
using the hose for incorporation into finished assemblies for industrial applications. The Company later changed its name to Omega Flex,
Inc., and in 1996, the Company was acquired by Mestek, Inc. (Mestek).
In
2005, Mestek distributed its equity ownership in our common stock to Mestek shareholders and the shares of our common stock started trading
on The NASDAQ Stock Market LLC under the stock symbol “OFLX.”
Over
the years, most of the Company’s business has been concentrated in North America, but the Company also has foreign subsidiaries
located in the U.K. and France, which are largely focused on European and other international markets. The Company also has a U.S. subsidiary
which owns the Company’s Exton, Pennsylvania real estate.
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Overview
of Current Business
Strategy
The
Company’s strategy has been, and continues to be, focused on its core strengths in the development, manufacture, and sale of flexible
metal hose for use in a variety of applications. We believe the Company is uniquely situated to exploit its capabilities in this area
due to its long experience in engineering and bringing new products to market, and its proprietary rotary process, which permits the
Company to manufacture flexible metal hose with superior quality and efficiency as compared to its competitors. The Company’s strategy
is to develop flexible metal products in new and developing markets that would recognize and compensate for the value-added propositions
that each product brings to that industry. Typically, this would involve a new flexible metal hose that replaces traditional rigid products,
and thereby improves the quality of the installed product, increases installation efficiency, and provides an overall cost and time savings.
Examples of such products are our flexible gas piping sold under the TracPipe ® CounterStrike ® trademarks,
our MediTrac ® corrugated medical gas tubing, our DoubleTrac ® double-containment piping, and DEF-Trac ®
flexible piping. In each instance, we believe that the products we bring to market offer customers superior quality, expanded applications
due to the products’ flexibility, and reduced total costs. The Company seeks to protect its investments in product development
by obtaining patent protection for new and unique features of its products.
Sales,
Products and Customers
We
sell our products to customers scattered across a wide and diverse set of industries ranging from construction to pharmaceutical with
close to 10,800 customers on record. These sales channels include sales through independent sales representatives, distributors, OEM,
and direct sales. We utilize various distribution companies in the sale of our TracPipe ® and Counterstrike ® flexible
gas piping, and these distribution customers in the aggregate represent a significant portion of our business. In particular, the Company
has one significant distribution customer, whose various branches had sales in the range of 12% to 14% of total sales during the periods
of 2021 to 2023 and was 19% of the Company’s accounts receivable balance over the last two years. All of this business is done
on a purchase order basis for immediate resale commitments or stocking, and there are no long-term purchase commitments. In the event
we were to lose an account, we would not expect any long-term reduction in our sales due to the broad end-user acceptance of our products.
We would anticipate that in the event of a loss of any one or more distributors, that after an initial transition period, the sales of
our products would resume at or near their historical levels. Furthermore, in the case of certain national distribution chains, which
is the case regarding the Company’s largest customer noted above, and other distributors, it is possible that there would continue
to be purchasing activity from one or more regional or branch distribution customers. We sell our products within North America, primarily
in the U.S. and Canada, and we also sell our products internationally, primarily in Europe through our manufacturing facility located
in Banbury, U.K. Our sales outside of North America were in the range of 4% to 7% of our total sales during the last three years, with
most of the sales occurring in the U.K. and elsewhere in Europe. We do not have a material portion of our long-lived assets located outside
of the U.S.
As
mentioned previously, we sell our products primarily through independent outside sales organizations, including independent sales representatives,
distributors, fabricating distributors, wholesalers, and OEMs. We have a limited internal sales function that sells our products to key
accounts, including OEMs and distributors of bulk hose. We believe that within each geographic market in which the independent sales
representative, distributor or wholesaler is located that our outside sales organizations are the first or second most successful outside
sales organization for the particular product line within that geographic area.
TracPipe ®
The
Company has had the most success within the residential construction industry with its flexible gas piping products, TracPipe ® ,
which was introduced in 1997, and its more robust counterpart TracPipe ® CounterStrike ® , which came to market
in 2004. Partnered with the development of our AutoFlare ® and AutoSnap ® fittings and accessories, both
have enjoyed wide acceptance due to their reliability and durability. In late 2023, we discontinued the AutoSnap ® fitting,
due to overwhelming market acceptance of the AutoFlare ® fitting. Within the residential construction industry, the flexible
gas piping products that we offer, and similar products offered by our competitors have sought to overcome the use of black iron pipe
that has traditionally been used by the construction industry in the U.S. and Canada for the piping of fuel gases within a building.
Prior to the introduction of the first CSST system in 1989, nearly all construction in the U.S. and Canada used traditional black iron
pipe for gas piping. However, the advantages of CSST in areas subject to high incidence and likelihood of seismic events had been first
demonstrated in Japan. In seismic testing, the CSST was shown to withstand the stresses on a piping system created by the shifting and
movement of an earthquake better than rigid pipe. The advantages of CSST over the traditional black iron pipe also include lower overall
installation costs because it can be installed in long uninterrupted lines within the building.
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The
flexibility of the tube allows it to be bent by hand without any tools when a change in direction in the line is required. In contrast,
black iron pipe requires that each bend in the pipe have a separate fitting attached. This requires the installer to thread the ends
of the black iron pipe, apply an adhesive to the threads, and then screw on the fitting, all of which is labor intensive and costly,
including testing and rework if the work is not done properly. As a result of these advantages, the Company estimates that CSST now commands
over one-half of the market for fuel gas piping in new and remodeled residential construction in the U.S., and the use of rigid iron
pipe, and to a lesser degree copper tubing, accounts for the remainder of the market. The Company plans to continue its growth trend
by demonstrating its advantages against other technologies, in both the residential and commercial markets, in both the U.S. and overseas
in geographic areas that have access to natural gas distribution systems.
CounterStrike ®
As
previously mentioned, in 2004, the Company introduced a new brand of flexible gas piping sold under the registered trademark “CounterStrike ®” .
CounterStrike ® is designed to be more resistant to damage from transient electrical arcing. In a lightning strike, the
electrical energy of the lightning can energize all metal systems and components in a building. This electrical energy, in attempting
to reach ground, may arc between metal systems that have different electrical resistance, and arcing can cause damage to the metal systems.
In standard CSST systems, an electrical bond between the CSST and the building’s grounding electrode would address this issue,
but lightning is an extremely powerful and unpredictable force. CounterStrike ® CSST is designed to be electrically conductive
and therefore disperse the energy of any electrical charge over the entire surface of the CounterStrike ® line. In 2007,
the Company introduced a new version of CounterStrike ® CSST that was tested to be even more resistant to damage from electrical
arcing than the original version, and substantially more effective than standard CSST products. As a result of its robust performance,
the new version of CounterStrike ® has been widely accepted in the market, and thus during 2011, the Company made the decision
to sell exclusively CounterStrike ® within the U.S. This move demonstrated the Company’s commitment to innovation
and safety, and further enhanced its leadership in the marketplace.
DoubleTrac ®
In
2008, the Company introduced its first double containment piping product – DoubleTrac ® . DoubleTrac ®
double containment piping has earned stringent industry certifications for its ability to safely contain and convey liquid fuels. DoubleTrac ®
received certification from Underwriters Laboratory, the testing and approval agency, that our product is fully compliant with
UL 971A, which is the product standard in the U.S. for metallic underground fuel piping, ULc S679 which is the product standard in Canada
for metallic underground fuel piping, as well as approvals from other relevant state agencies that have more stringent testing procedures
for the product. Additionally, DoubleTrac® is fully compliant with UL 1369, which is the bi-national U.S. and Canada standard for
aboveground piping for flammable and combustible liquids. DoubleTrac® is one of a select few piping systems having listings and approvals
for both belowground and aboveground piping systems. Similar to our flexible gas piping, DoubleTrac ® provides advantages
over older rigid pipe technologies. DoubleTrac ® is made and can be installed in long continuous runs, eliminating the
need for manually assembling rigid pipe junctions at the end of a pipe or at a turn in direction. In addition, DoubleTrac ®
has superior performance in terms of its ability to safely convey fuel from the storage tank to the dispenser, primarily because DoubleTrac ®
is essentially a zero permeation piping system, far exceeding the most stringent government regulations. Originally designed for
applications involving automotive fueling stations running from the storage tank to the fuel dispenser, the ability of DoubleTrac ®
to handle a variety of installation challenges has broadened its applications to include refueling at marinas, fuel lines for back-up
generators, and corrosive liquids at waste treatment plants. In short, in applications where double containment piping is required to
handle potentially contaminating fluids or corrosive fluids, DoubleTrac ® is engineered to handle those demanding applications.
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DEF-Trac ®
DEF-Trac ® ,
a complementary product which is very similar to DoubleTrac ® , was brought to the marketplace in 2011. DEF-Trac ®
piping is specifically engineered to handle the demanding requirements for diesel emissions fluid (DEF). Federal regulations require
all diesel engines to use DEF to reduce the particulate contaminants from the diesel combustion process. However, DEF is highly corrosive
and cannot be pre-mixed with diesel fuel. This requires that new diesel trucks and automobiles must have separate tanks built into the
vehicle so that the diesel emissions fluid can be injected into the catalytic converter after the point of combustion. Similarly, a large
portion of fueling stations carrying diesel fuel are now also selling DEF through a separate dispenser. In addition to being highly corrosive,
DEF also has a high freezing temperature, requiring a heat trace in the piping in applications in northern areas of the U.S. DEF-Trac ®
flexible piping is uniquely suited to handle all of these challenges, as the stainless steel inner core is corrosion resistant,
and DEF-Trac ® also comes with options for heat trace that is extruded directly into the wall of the product. In summary,
DEF-Trac ® provides a complete solution to the demanding requirements of this unique application, as such, DEF-Trac ®
has been met with wide acceptance from the industry that was searching for a solution to the new environmental requirement. The
advantageous market position of DEF-Trac ® has leveraged the penetration of DoubleTrac ® into the broader
market for automotive fueling applications.
MediTrac ®
Corrugated Medical Tubing
In
2019, the Company commercialized MediTrac ® corrugated medical tubing (“CMT”), following its 2018 launch with
several beta sites. Developed for the healthcare industry, the product can be used in hospitals, ambulatory care centers, dental, physician
and veterinary clinics, laboratories, and any facility that uses medical gases (oxygen, nitrogen, carbon dioxide, etc.). Made from a
copper alloy with an exterior fire-retardant jacket, MediTrac ® is made and sold in long continuous-length rolls. MediTrac ®
CMT’s flexible nature and storage in rolls allows it to be transported to and installed in health care facilities much more
easily and quickly than traditional medical grade rigid copper pipe, which generally comes in 20 foot long sections. MediTrac ®
CMT is unrolled from a spool and installed in a medical facility in one long continuous length and is bent by hand when a change
in direction is needed. The long lengths and ability to change direction with ease eliminates labor that would otherwise be needed to
braze connections to straight sections of copper pipe or elbows or tees for changes in direction, while increasing installation efficiency
and operational safety and minimizing downtime for healthcare facilities. Easy to assemble axial swaged brass fittings connect with all
K, L and DWV medical tubing that is sized from ½” to 2” in diameter and provides a leak-tight seal using ordinary
hand tools. The patented fitting also prevents tampering or disassembly using a tamper-proof sleeve that is required by the Health Care
Facilities Code (NFPA 99 – 2018 edition). Rated at 185 psig, MediTrac ® CMT can deliver the necessary volume of gas
wherever it is needed across a facility. A recent case study comparing the installation of rigid copper pipe and MediTrac ®
CMT showed that MediTrac ® CMT increases installation efficiency by a factor of five (i.e., a 500% increase in efficiency).
By reducing the number of joints and brazed connections, MediTrac ® CMT also reduces possible contamination into the medical
gas system along with the fire risk associated with brazing. MediTrac ® CMT is currently listed at UL 1365 and has an ASTM
E84 rating of 25/50 and meets all 2018 requirements of the Health Care Facilities Code (NFPA 99 – 2018). MediTrac ®
CMT also meets Canadian standard Z7396.1, Medical Gas Pipeline Systems.
In
2020, the MediTrac ® product line experienced increased sales in use and acceptance in the marketplace resulting from its
ability to be quickly and safely installed to meet the unprecedented crisis caused by the COVID-19 pandemic. Numerous medical institutions
and emergency medical centers used MediTrac ® CMT to quickly install medical gas lines in tent hospitals or in converted
facilities to handle the surging demand. For example, MediTrac ® medical gas piping was installed in a City of New York
temporary hospital located in Central Park and in the Cleveland Clinic for patients with COVID-19 infections and in need of supplemental
oxygen treatments. On September 25, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a waiver allowing the use of
CMT in new and existing healthcare facilities based on the provisions in NFPA 99 – 2018, allowing MediTrac ® CMT
to be installed in all facilities in the U.S.
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Additional
Market Applications
In
addition to the flexible gas piping and other previously described markets, our flexible metal hose is used in a wide variety of other
applications. Our involvement in these markets is important because just as the flexible gas piping applications have sprung from our
expertise in manufacturing metal hose, other applications may also evolve from our participation in the industry. Flexible metal hose
is used in a wide variety of industrial and processing applications where the characteristics of the flexible hose in terms of its flexibility,
and its ability to absorb vibration and thermal expansion and contraction, have substantial benefits over rigid piping. For example,
in certain pharmaceutical processing applications, the process of developing the specific pharmaceutical may require rapid freezing of
various compounds through the use of liquefied gases, such as liquefied nitrogen, helium or hydrofluorocarbons. The use of flexible metal
tubing is particularly appropriate in these types of applications. Flexible metal hose can accommodate the thermal expansion caused by
the liquefied gases carried through the hose, and the total length of the hose will not significantly vary. In contrast, fixed or rigid
metal pipe would expand and contract along its length as the liquid gases passed through it, causing stresses on the pipe junctions that
would over time cause fatigue and failure. Alternatively, within certain industrial or commercial applications using steam, either as
a heat source or in the industrial process itself, the pumps used to transfer the liquid or steam within the system are subject to varying
degrees of vibration. Additionally, flexible metal hoses can also be used as connections between the pump and the intake of the fluids
being transferred to eliminate the vibration effects of the pumps on the piping transfer system. All of these areas provide opportunities
for the flexible metal hose arena, and thus the Company continues to participate in these markets, as it seeks new innovative solutions
which will generate additional revenue streams for the future.
In
each instance, whether the application is for CSST for fuel gases, flexible metal hose for handling specialty chemicals or gases, flexible
double containment piping, unique industrial applications requiring the ability to withstand wide variations in temperature and vibration,
or copper alloyed CMT for medical facilities, all of our success rests on our metal hose. Most of our flexible metal hoses range in diameter
from 1/4” to 2” while certain applications require diameters of up to 16”. All of our smaller diameter pipe (2”
inner diameter and smaller) are made by a proprietary process that is known as the rotary process. The proprietary process that we use
to manufacture our annular hose is the result of a long-term development effort begun in 1995. Through continuous improvement over the
years, we have developed and fine-tuned the process so that we can manufacture annular flexible metal hose on a high speed, continuous
process. We believe that our own rotary process for manufacturing annular corrugated metal hose is the most cost efficient method in
the industry, and that our rotary process provides us with a significant advantage in many of the industries in which we participate.
As a result, we can generally provide our product on a demand basis. Over the years, the Company has had great success in achieving on-time
delivery performance to the scheduled ship date. The quick inventory turnover reduces our costs for in-process inventory, and further
contributes to our gross profit levels. We have also improved our productivity on a historical basis.
Markets
and Competition
There
are approximately eight manufacturers of flexible metal hose in the U.S., and at least that many in Europe and Asia. The U.S. manufacturers
include Titeflex Corporation, Ward Manufacturing, Microflex Inc., Hose Master, Pennflex, and several smaller privately held companies.
No one manufacturer, as a general rule, participates in more than two of the major market categories, automotive, aerospace, residential
and commercial construction, and general industrial, with most concentrating on just one. We estimate that we are at or near the top
position of the two major categories in which we participate regarding U.S. market share. In the flexible gas piping market, the U.S.
market is currently concentrated in the residential housing market. Based on the reports issued by the national trade groups on housing
construction, the level of acceptance of flexible gas piping in the construction market, and the average usage of flexible gas piping
in a residential building, as well as through our sales position within that market, we can estimate with a high level of accuracy the
size of the total gas piping market. In addition, the Company is a member of an industry trade group, which compiles and distributes
sales statistics for its members relative to flexible gas piping. For other applications, industry trade groups collect and report on
the size of the relevant market, and we can estimate our percentage of the relevant market based on our sales as compared to the market
as a whole. The larger of our two markets, the construction industry, has seen a modest decrease in the number of residential housing
starts in 2023, as compared to the previous year. As discussed elsewhere, black iron pipe or copper tubing was historically used by all
builders of commercial and residential buildings until the advent of flexible gas piping and changes in the relevant building codes.
Since that time, flexible gas piping has taken an increasing share of the total amount of fuel gas piping used in construction.
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Due
to the number of applications in which flexible metal hose may be used, and the number of companies engaged in the manufacture and sale
of flexible metal hose, the general industrial market is very fragmented, and we estimate that no one company has a predominant market
share of the business over other competitors. In the market for double containment piping, we compete primarily against rigid pipe systems
that are more costly to install than DoubleTrac ® double containment piping. For medical tubing applications, the main
competitor is medical grade (Type K or Type L) rigid copper pipe. MediTrac ® CMT is the only corrugated medical tubing
in the U.S. that is approved to the stringent requirements of UL 1365. The general industrial markets within Europe are very mature and
tend to offer opportunities that are interesting to us in niche markets or during periods in which a weak dollar increases the demand
for our products on a competitive basis. Such has been the case for several years and has created new relationships for us. Currently,
we are not heavily engaged in the manufacture of flexible metal hose for the aerospace or automotive markets, but we continue to review
opportunities in all markets for our products to determine appropriate applications that will provide growth potential and high margins.
In some cases, where the product offering is considered a commodity, price is the overriding competing factor. In other cases, a proprietary
product offering, or superior performance will be the major factors with pricing being secondary, and in some cases, an even lesser factor.
Most of our sales are to distributors and wholesalers, and our relationships with these customers are on an arms-length basis in that
neither we nor the customers are so dependent on the other to yield any significant business advantage. See Note 2, Significant Accounting
Policies — Significant Concentrations, to the Consolidated Financial Statements included in this report for additional details.
From our perspective, we can maintain a steady demand for our products due to broad acceptance of our products by end users, regardless
of which distributor or wholesaler sells the product.
Resources
and Raw Materials
We
use various materials in the manufacture of our products, primarily stainless steel for our flexible metal hose and plastics for our
jacketing material on TracPipe ® CounterStrike ® flexible gas piping and DoubleTrac ® double
containment piping, as well as a copper alloy for our MediTrac ® CMT. We also purchase all of our proprietary fittings
for use with the TracPipe ® and CounterStrike ® flexible gas piping, DoubleTrac ® double containment
piping, and MediTrac ® CMT. We have multiple sources qualified for all of our major raw materials and components. Nickel
is a prime material in stainless steel which the Company utilizes to manufacture CSST, and copper is a key component of the Company’s
brass fittings and our MediTrac ® CMT. Fortunately, the Company was able to maintain reasonably stable margins during 2023.
This was mainly accomplished by implementing our own pricing actions to help offset the upward movements in the respective material markets.
We believe that with our purchase commitments for stainless steel, polyethylene and for our proprietary fittings, we have adequate sources
of supply for these raw materials and components. Like most other manufacturers, we had sporadic supply chain issues in 2023, but we
believe our multiple suppliers have sufficient raw materials and capacity minimizing any potential disruption. We believe that the supply
sufficiency of stainless steel will continue until there is a reduction in global capacity, such as mine closures, which would then cause
constriction. Volatility in the commodities marketplace and competitive conditions in the sale of our products could potentially restrict
us from passing along raw materials or component part price increases to our customers.
Business
Seasonality
The
demand for our flexible piping products that are related to construction activity including TracPipe ® and Counterstrike ®
CSST, DoubleTrac ® piping and MediTrac ® CMT, may be affected by the construction industry’s
demand, which generally tightens during the winter months of each year due to cold and inclement weather. Accordingly, sales are usually
higher in the spring, summer, and fall.
Government
Regulations, Including Environmental Regulations
The
Company believes that its businesses and operations, including its manufacturing plants and equipment, are in substantial compliance
with all applicable government laws and regulations, including those related to environmental, consumer protection, international trade,
labor and employment, human rights, tax, anti-bribery, and competition matters. Any additional measures to maintain compliance are not
expected to materially affect the Company’s capital expenditures (including expenditures for environmental control facilities),
competitive position, financial position, or results of operations.
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Various
legislative and administrative regulations applicable to the Company in the matters noted above have become effective or are under consideration
in many parts of the world. To date, such developments have not had a substantial adverse impact on the Company. However, if new or amended
laws or regulations impose significant operational restrictions and compliance requirements upon the Company or its products, the Company’s
business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted. Refer
to Item 1A. Risk Factors for further information.
Human
Capital
We
believe that our employees are the foundation of the innovative ideas necessary for the advancement of our products, and success of our
Company. Our employees are the conduits to successful relationships with our customers, vendors, and various business partners, as well
as the custodians of the safe and efficient operation of our assets ending with a highly satisfied customer. The Company fosters a collaborative,
inclusive, and safety-minded work environment, with a focus on ingenuity. We seek to identify the most highly qualified talent for our
organization, enabling us to execute our strategic objectives of providing the most innovative and technologically advanced flexible
metal hose products on the market. To attract and retain employees, the Company offers competitive wages across all levels, and maintains
a superior package of employee benefits, including medical insurance, life insurance, and retirement and savings programs, for all employees,
as well as executive compensation plans as described in our proxy statement.
As
of December 31, 2023, the Company had 168 employees. Most of our employees are located in our manufacturing facilities in Exton, Pennsylvania,
which contain our factory personnel, engineering, finance, human resources and most of our sales staff. Our factory workforce in Exton,
Pennsylvania, is not party to a collective bargaining agreement. A small number of employees work at our facility in Houston, Texas.
A number of individual sales personnel are also scattered across the U.S. We also maintain a manufacturing facility in Banbury, U.K.,
which contains employees of similar functions to those in the U.S., but on a much smaller scale, as well as a small presence in France.
The sales personnel in England and France handle all sales and service for our products in Europe, most notably the U.K., and most of
our transactions with other international territories.
We
are committed to fostering a work environment in which all employees treat each other with dignity and respect. This commitment extends
to providing equal employment and advancement opportunities based on merit and experience. We continually strive to attract a diverse
workforce by partnering with local organizations to identify potential candidates to advance and strengthen our human capital management
program.
Intellectual
Property
We
have a comprehensive portfolio of intellectual property including over 120 patents issued in various countries around the world and trademarks
registered around the world such as OmegaFlex®, AutoFlare®, TracPipe®, CounterStrike®, DoubleTrac®, and MediTrac®.
We also have several patent applications pending in the U.S. and internationally covering improvements to our CounterStrike ®
and MediTrac® products. Finally, and as mentioned above, our unique rotary process for manufacturing flexible metal hose has
been developed over a number of years and constitutes a valuable trade secret.
Available
Information
You
may learn more about our Company by visiting our website at www.omegaflex.com. Among other things, you can access our filings with the
SEC on our website free of charge. These filings include proxy statements, annual reports (Form 10-K), quarterly reports (Form 10-Q),
and current reports (Form 8-K), as well as Section 16 reports filed by our officers and directors (Forms 3, 4 and 5). All of these reports
will be available on our website as soon as reasonably practicable after we file the reports with the SEC. In addition, we have made
available on our website under the heading “Compliance” the charters for the Audit, Compensation and Nominating/Governance
Committees of our Board of Directors and our Code of Business Conduct and Ethics. We intend to make available on our website any future
amendments or waivers to our Code of Business Conduct and Ethics. The SEC maintains a website at www.sec.gov that also contains
the Company’s various reports, proxy, and information statements and other filings. The information contained on or accessible
through the websites referred to above is not incorporated by reference in, or otherwise a part of, this annual report, and any references
to these websites are intended to be inactive textual references only.
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