The Industry Leaders: The Industry Leaders: Outperforming The Rest In A Outperforming The Rest In A

Down MarketDown Market

Presented at the 45Presented at the 45thth Annual Annual NRMCA Business Administration NRMCA Business Administration

ConferenceConference

October 20, 2003October 20, 2003

Review Of Changes Review Of Changes Since The Last SurveySince The Last Survey

After several years of improved performance, After several years of improved performance, 2002 saw a downturn in financial results 2002 saw a downturn in financial results industry-wide industry-wide

However, the Industry Leaders continue to However, the Industry Leaders continue to outperform their peers because they find new outperform their peers because they find new areas in which to sharpen their marginsareas in which to sharpen their margins

Review Of Changes Review Of Changes Since The Last Survey cont’dSince The Last Survey cont’d

While the Typical Member saw net profit fall While the Typical Member saw net profit fall 51% ($3.23 to $1.58 per yard), the Industry 51% ($3.23 to $1.58 per yard), the Industry Leaders dropped only 25% ($6.20 to $4.63 per Leaders dropped only 25% ($6.20 to $4.63 per yard).yard).

The Industry Leaders have lost their advantages The Industry Leaders have lost their advantages in selling price, sales expenses and a variety of in selling price, sales expenses and a variety of other areas.other areas.

Review Of Changes Review Of Changes Since The Last Survey cont’dSince The Last Survey cont’d

As exceptional operators, they have found new areas As exceptional operators, they have found new areas in which to reduce costs in the face of the industry’s in which to reduce costs in the face of the industry’s first downturn in a decade. first downturn in a decade.

These new areas of improvement include material These new areas of improvement include material cost, overall delivery, and selling, general and cost, overall delivery, and selling, general and administrative expenses to offset a more precipitous administrative expenses to offset a more precipitous drop in selling price as compared to the Typical drop in selling price as compared to the Typical Member.Member.

Areas of PerformanceAreas of PerformanceThis Year vs LastThis Year vs Last

Income Statement,Dollars Per Cubic Yd.

2001 2002 Year over Year Change (%)

Typical Member

Industry Leaders

Typical Member

Industry Leaders

Typical Member

Industry Leaders

Sales PriceSales Price $66.24$66.24 $70.14$70.14 $67.21$67.21 $68.95$68.95 1.46%1.46% -1.70%-1.70%

Material CostsMaterial Costs $36.01$36.01 $36.33$36.33 $36.81$36.81 $36.14$36.14 2.22%2.22% -0.54%-0.54%

Plant CostsPlant Costs $3.70$3.70 $4.07$4.07 $3.85$3.85 $4.15$4.15 4.05%4.05% 1.97%1.97%

Delivery CostsDelivery Costs $12.07$12.07 $12.60$12.60 $12.33$12.33 $11.82$11.82 2.15%2.15% -6.19%-6.19%

Total Variable CostsTotal Variable Costs $51.78$51.78 $53.00$53.00 $52.99$52.99 $52.10$52.10 2.34%2.34% -1.70%-1.70%

Marginal Marginal ContributionContribution $14.46$14.46 $17.14$17.14 $14.22$14.22 $16.84$16.84 -1.66%-1.66% -3.27%-3.27%

Areas of PerformanceAreas of PerformanceThis Year vs Last cont’dThis Year vs Last cont’d

Income Statement,Dollars Per Cubic Yd.

Continued

2001 2002 Year over Year Change (%)

Typical Member

Industry Leaders

Typical Member

Industry Leaders

Typical Member

Industry Leaders

Direct Costs – PlantDirect Costs – Plant $2.56$2.56 $2.26$2.26 $3.02$3.02 $2.71$2.71 17.99%17.99% 19.91%19.91%

Direct Costs – Direct Costs – DeliveryDelivery $3.74$3.74 $3.76$3.76 $3.99$3.99 $3.75$3.75 6.68%6.68% 0.27%0.27%

Operating ProfitOperating Profit $8.16$8.16 $11.13$11.13 $7.21$7.21 $10.39$10.39 -11.64%-11.64% -6.65%-6.65%

Selling ExpensesSelling Expenses $1.27$1.27 $1.21$1.21 $1.36$1.36 $1.34$1.34 7.09%7.09% 10.74%10.74%

G & A Expenses *G & A Expenses * $4.43$4.43 $4.77$4.77 $4.91$4.91 $4.87$4.87 10.84%10.84% 2.10%2.10%

Profit Before TaxesProfit Before Taxes $3.23$3.23 $6.20$6.20 $1.58$1.58 $4.63$4.63 -51.08%-51.08% -25.32%-25.32%

Industry Leaders:Industry Leaders:2003 Competitive Advantages2003 Competitive Advantages

Declining StatisticsDeclining Statistics Sales PriceSales Price Direct Plant CostsDirect Plant Costs Selling ExpensesSelling Expenses

Improving StatisticsImproving Statistics Plant CostsPlant Costs General & Administrative ExpensesGeneral & Administrative Expenses

New Competitive AdvantagesNew Competitive Advantages Material CostsMaterial Costs Delivery CostsDelivery Costs Direct Delivery CostsDirect Delivery Costs

Industry Leaders:Industry Leaders:2003 Declining Statistics2003 Declining Statistics

Sales PriceSales Price

Direct Plant CostsDirect Plant Costs

Selling ExpensesSelling Expenses

Declining StatisticsDeclining Statistics Sales PriceSales Price

Net sales price down 1.7% for the industry leaders, but up Net sales price down 1.7% for the industry leaders, but up 1.46% for the typical member.1.46% for the typical member.

Industry Leaders still have a pricing advantage in almost Industry Leaders still have a pricing advantage in almost every category, albeit smaller than in 2002. every category, albeit smaller than in 2002.

However, significant pricing advantage lost in the average However, significant pricing advantage lost in the average sales price of ready mixed concrete, added value and misc. sales price of ready mixed concrete, added value and misc. yard sales concrete categories.yard sales concrete categories.

Sales MixUnder

100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

Ready Mixed Ready Mixed ConcreteConcrete $75.18$75.18 $65.96$65.96 $65.05$65.05 $62.14$62.14 $62.89$62.89 $64.94$64.94

Fibers, Supers, Fibers, Supers, Colors, etc.Colors, etc. $1.84$1.84 $2.04$2.04 $1.78$1.78 $2.58$2.58 $2.32$2.32 $1.65$1.65

Misc. Yard SalesMisc. Yard Sales $2.75$2.75 $1.38$1.38 $1.75$1.75 $0.97$0.97 $1.04$1.04 $1.73$1.73

Declining Statistics, cont’dDeclining Statistics, cont’d Direct Plant CostsDirect Plant Costs

Industry leaders still hold advantage in total direct plant costs. Industry leaders still hold advantage in total direct plant costs. However, Direct Plant Cost rose 19.91% in 2003 for the Industry However, Direct Plant Cost rose 19.91% in 2003 for the Industry

Leaders compared to only 17.73% for the Typical Member.Leaders compared to only 17.73% for the Typical Member. The Leaders lost an advantage of $0.24 per yard in 2003 from an The Leaders lost an advantage of $0.24 per yard in 2003 from an

increase in plant and equipment leases.increase in plant and equipment leases.

Direct Plant Costs

Under 100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

Plant & Support Plant & Support Equipment Equipment

LeasesLeases$0.20$0.20 $0.37$0.37 $0.32$0.32 $0.24$0.24 $0.26$0.26 $0.41$0.41

Declining Statistics, cont’dDeclining Statistics, cont’d Selling ExpensesSelling Expenses

Industry leaders still hold advantage in total selling expenses. Industry leaders still hold advantage in total selling expenses. However, Selling Expenses rose $0.13 per yard in 2002 for the However, Selling Expenses rose $0.13 per yard in 2002 for the

Industry Leaders compared to only $0.09 per yard for the Typical Industry Leaders compared to only $0.09 per yard for the Typical Member.Member.

Significant pricing advantage lost in Fringes, Marketing and T&E Significant pricing advantage lost in Fringes, Marketing and T&E expenses.expenses.

Selling ExpensesUnder

100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

FringesFringes $0.20$0.20 $0.20$0.20 $0.18$0.18 $0.17$0.17 $0.17$0.17 $0.21$0.21

Auto Expenses, Auto Expenses, Travel & Travel &

EntertainmentEntertainment$0.26$0.26 $0.21$0.21 $0.23$0.23 $0.19$0.19 $0.19$0.19 $0.22$0.22

Advertising & Advertising & Marketing Marketing ExpensesExpenses

$0.31$0.31 $0.18$0.18 $0.19$0.19 $0.09$0.09 $0.11$0.11 $0.13$0.13

Industry Leaders:Industry Leaders:2003 Improving Competitive 2003 Improving Competitive

AdvantagesAdvantages

Variable Plant CostsVariable Plant Costs

General & Administrative ExpensesGeneral & Administrative Expenses

Improving StatisticsImproving Statistics Variable Plant CostsVariable Plant Costs

Total Plant Costs for the Industry Leaders have increased from Total Plant Costs for the Industry Leaders have increased from $4.07 to $4.15 over 2002. Over the same period, total plant costs $4.07 to $4.15 over 2002. Over the same period, total plant costs for the Typical Member has increased from $3.70 to $3.85. for the Typical Member has increased from $3.70 to $3.85.

While the Typical Member retains the overall advantage in this While the Typical Member retains the overall advantage in this category, Industry Leaders have reduced the gap $0.07 per yard category, Industry Leaders have reduced the gap $0.07 per yard in 2002. in 2002.

Plant CostsUnder

100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

Power Power $0.53$0.53 $0.54$0.54 $0.46$0.46 $0.43$0.43 $0.44$0.44 $0.37$0.37

Repairs & Repairs & MaintenanceMaintenance $1.08$1.08 $1.10$1.10 $1.05$1.05 $0.96$0.96 $0.98$0.98 $0.85$0.85

Improving Statistics, cont’dImproving Statistics, cont’d General & Administration ExpensesGeneral & Administration Expenses

Total G&A Expenses for the Industry Leaders has increased Total G&A Expenses for the Industry Leaders has increased $0.30 per yard over 2002. For the same period, G&A Expenses $0.30 per yard over 2002. For the same period, G&A Expenses for the Typical Member has increased $0.37 per yard. for the Typical Member has increased $0.37 per yard.

While the Typical Member retains the overall advantage in this While the Typical Member retains the overall advantage in this category, Industry Leaders have reduced the gap $0.07 per yard category, Industry Leaders have reduced the gap $0.07 per yard in 2002. in 2002.

Direct Plant Costs

Under 100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

Office Salaries & Office Salaries & WagesWages $1.76$1.76 $0.84$0.84 $1.22$1.22 $0.80$0.80 $0.86$0.86 $0.75$0.75

Legal & Prof. Legal & Prof. ExpensesExpenses $0.51$0.51 $0.25$0.25 $0.35$0.35 $0.16$0.16 $0.19$0.19 $0.16$0.16

Bad DebtsBad Debts $0.31$0.31 $0.20$0.20 $0.19$0.19 $0.13$0.13 $0.15$0.15 $0.13$0.13

Industry Leaders:Industry Leaders:2003 New Competitive Advantages2003 New Competitive Advantages

Material CostsMaterial Costs

Delivery CostsDelivery Costs

Direct Delivery CostsDirect Delivery Costs

New AdvantagesNew Advantages Material CostsMaterial Costs

Total material costs are down 0.52% ($0.19 per yard) for the Total material costs are down 0.52% ($0.19 per yard) for the industry leaders, but up 2.22% ($0.80 per yard) for the typical industry leaders, but up 2.22% ($0.80 per yard) for the typical member.member.

Industry Leaders have developed a $0.67 per yard cost Industry Leaders have developed a $0.67 per yard cost advantage in material costs over Typical Members. advantage in material costs over Typical Members.

Material CostsUnder

100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

CementCement $20.86$20.86 $18.69$18.69 $18.03$18.03 $17.24$17.24 $17.47$17.47 $16.83$16.83

SlagSlag $0.52$0.52 $0.76$0.76 $0.59$0.59 $0.86$0.86 $0.81$0.81 $0.67$0.67

Miscellaneous Miscellaneous Material CostsMaterial Costs $1.10$1.10 $0.59$0.59 $0.50$0.50 $0.94$0.94 $0.87$0.87 $0.56$0.56

New Advantages cont’dNew Advantages cont’d Variable Delivery CostsVariable Delivery Costs

In 2002, Variable delivery costs are down 6.7% ($0.78 per yard) In 2002, Variable delivery costs are down 6.7% ($0.78 per yard) for the industry leaders, but are up 2.15% ($0.26 per yard) for for the industry leaders, but are up 2.15% ($0.26 per yard) for the typical member.the typical member.

Industry Leaders have developed a $0.51 per yard cost Industry Leaders have developed a $0.51 per yard cost advantage within the delivery cost category. advantage within the delivery cost category.

Variable Delivery Costs

Under 100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

Driver WagesDriver Wages $7.18$7.18 $6.38$6.38 $6.34$6.34 $6.04$6.04 $6.13$6.13 $5.78$5.78

Repairs & Repairs & MaintenanceMaintenance $2.69$2.69 $2.33$2.33 $2.24$2.24 $2.10$2.10 $2.15$2.15 $2.01$2.01

Other Delivery Other Delivery Costs Costs $0.27$0.27 $1.18$1.18 $0.23$0.23 $0.26$0.26 $0.33$0.33 $0.20$0.20

New Advantages cont’dNew Advantages cont’d Direct Delivery CostsDirect Delivery Costs

During 2002, Direct delivery costs are down 0.27% ($0.01 per During 2002, Direct delivery costs are down 0.27% ($0.01 per yard) for the industry leaders, but are up 6.68% ($0.25 per yard) yard) for the industry leaders, but are up 6.68% ($0.25 per yard) for the typical member.for the typical member.

Industry Leaders have gained a $0.24 per yard cost advantage Industry Leaders have gained a $0.24 per yard cost advantage over Typical Members in 2002.over Typical Members in 2002.

Sales MixUnder

100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

DepreciationDepreciation $2.46$2.46 $2.19$2.19 $1.81$1.81 $1.34$1.34 $1.46$1.46 $1.22$1.22

Other Direct Other Direct Delivery CostsDelivery Costs $0.21$0.21 $0.34$0.34 $0.38$0.38 $0.29$0.29 $0.30$0.30 $0.18$0.18

Profit Model RatiosProfit Model Ratios Pre-Tax Profit Margin %Pre-Tax Profit Margin % Asset TurnoverAsset Turnover Return on Assets (ROA) %Return on Assets (ROA) % Return on Equity (ROE) %Return on Equity (ROE) %

Profit Model RatiosUnder

100,000 Yards

100,000 to 299,999 yards

300,000 to 500,000 yards

Over 500,000 Yards

Typical NRMCA Member

Industry Leaders

Pre-Tax Profit Pre-Tax Profit Margin %Margin % 3.5%3.5% 1.1%1.1% 3.7%3.7% 2.8%2.8% 2.4%2.4% 6.7%6.7%

Asset TurnoverAsset Turnover 1.3x1.3x 1.6x1.6x 1.5x1.5x 1.7x1.7x 1.7x1.7x 1.9x1.9x

ROA %ROA % 4.6%4.6% 1.8%1.8% 5.4%5.4% 4.8%4.8% 4.0%4.0% 12.7%12.7%

ROE %ROE % 10.4%10.4% 6.2%6.2% 11.0%11.0% 8.9%8.9% 7.8%7.8% 21.5%21.5%

Profit as a Percentage of Sales Profit as a Percentage of Sales by Company Sizeby Company Size

3.50%

1.10%

3.70%

2.80%2.40%

6.70%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 YardsOver 500,000 Yards Typical Member Industry Leader

Profit as a Percentage of Sales Profit as a Percentage of Sales by Regionsby Regions

5.4%

2.2%

6.6%

0.1% -0.7%

10.3% 10.5%

1.8% 2.4%

6.7%

-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%12.0%

Northeastern MidAtlantic Southeastern North CentralSouth Central Great Lakes Rocky MountainPacific Northwest Pacific Southwest Typical MemberIndistry Leaders

Asset Turnover by Company SizeAsset Turnover by Company Size

1.3x

1.6x1.5x

1.7x 1.7x1.9x

0

0.5

1

1.5

2

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 YardsOver 500,000 Yards Typical Member Industry Leader

Asset Turnover by RegionsAsset Turnover by Regions

1.8x 1.7x1.5x

2.1x

1.5x1.3x

1.0x

2.0x

1.7x

1.9x

0.0

0.5

1.0

1.5

2.0

2.5

Northeastern MidAtlantic Southeastern North CentralSouth Central Great Lakes Rocky MountainPacific Northwest Pacific Southwest Typical MemberIndistry Leaders

Return on Assets (ROA) % Return on Assets (ROA) % by Company Sizeby Company Size

4.6%

1.8%

5.4%4.8%

4.0%

12.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 YardsOver 500,000 Yards Typical Member Industry Leader

Return on Assets (ROA) % Return on Assets (ROA) % by Regionsby Regions

9.5%

3.7%

10.3%

0.1% -1.1%

13.2%

11.0%

3.7% 4.0%

12.7%

-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%

Northeastern MidAtlantic Southeastern North CentralSouth Central Great Lakes Rocky MountainPacific Northwest Pacific Southwest Typical MemberIndistry Leaders

Return on Equity (ROE) % Return on Equity (ROE) % by Company Sizeby Company Size

10.4%

6.2%

11.0%8.9%

7.8%

21.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 YardsOver 500,000 Yards Typical Member Industry Leader

Return on Equity (ROE) % Return on Equity (ROE) % by Regionsby Regions

16.6%

6.7%

17.2%

0.5%

-2.6%

26.6%

16.1%

4.9%

7.8%

21.5%

-5.0%0.0%5.0%

10.0%15.0%20.0%25.0%30.0%

Northeastern MidAtlantic Southeastern North CentralSouth Central Great Lakes Rocky MountainPacific Northwest Pacific Southwest Typical MemberIndistry Leaders

Benchmarks to ProductivityBenchmarks to Productivity

Cubic Yards Per HourCubic Yards Per Hour

Average Load SizeAverage Load Size