Traffic Sign Manufacturer in Western US

The Company is an established company (25+ years of ownership by current owner) in the traffic sign manufacturing business. The company’s main customers consist of cities, counties, and state agencies that are responsible for maintaining street and highway signs throughout their respective jurisdictions. Currently, the Company manufactures traffic signs out of its Western US location for sale into three states, California, Nevada, and Arizona.

Traffic signs of the type that the Company manufactures and sells can be categorized as a “traffic control device” intended to communicate specific information to road users through a word, symbol, and/ or arrow legend that is defined by the U.S. Department of Transportation through the Manual on Uniform Traffic Control Devices (MUTCD). Individual states are allowed to have their own version of the MUTCD, if it is in substantial conformance with the national MUTCD. California in particular has adopted its own state manual, which the Company products conform with.

There are four main categories of traffic signs defined by the MUTCD as follows:

• Regulatory Signs – a traffic sign that gives notice to road users of traffic laws or regulations. The most common of these would be STOP signs, Yield signs, Merge signs, etc.
• Warning Signs – a traffic sign that gives notice to road users of a situation ahead that they need to be made aware of. The most obvious of these signs would be Construction Zone Ahead, 55 MPH Zone Ahead, Pedestrian Crossing, School Zone, etc.
• Guide Signs – a traffic sign that shows route designations, destinations, directions, distances, services, points of interest or other geographical, recreational, or cultural information. The most obvious of these would be street signs and signs we see on the highways giving us upcoming exits.
• Construction Signs – a traffic sign that plays a vital role in conveying essential information, guiding workers, and alerting visitors to potential hazards.

The Company manufactures all four types of traffic signs for use in traffic control. Because the traffic sign industry is governed by federal, state, and local government entities, the traffic signs themselves are typically very specific in their required dimensions, materials used, and fabrication processes. The body of knowledge required to manufacture these multitude of traffic signs to the exact government specifications and dimensions and how to do it economically is considered a clear barrier to entry for new entrants into the traffic sign market.

The Company has a unique position in the traffic sign industry in that they are only one of a few commercial entities in the United States that recycles the aluminum substrate of traffic signs. The aluminum substrate of a traffic sign typically represents a material portion (25%- 35%) of the cost to manufacture a traffic sign.

The Company’s revenue stream from the recycled aluminum substrate from traffic signs is realized in several ways:

1) The Company sells the refurbished aluminum it collects from government agencies (municipalities, counties and state agencies) back to these same end users in the form of new traffic signs (using this recycled aluminum).
2) The Company resells the refurbished blank aluminum substrate of the sign back to the same government agencies it collected the discarded signs from (in these situations the government agencies use these recycled blanks to make their own traffic signs).
3) The Company will sell the discarded aluminum as scrap aluminum from the discarded traffic signs that are considered to be too damaged to be refurbished.

Under all three scenarios, the refurbishing of these aluminum signs or the sale of discarded traffic signs as scrap, the Company is compensated for its transportation, labor costs and cost of operating machinery in the refurbishment process.

When signs are refurbished, the costs for transportation, labor, and operating machinery is still materially cheaper than the purchas