The Industry Leaders vs. The Laggards: A Look at the Substantial Differences Presented to the Systech Customer Conference by Pierre G. Villere Allen-Villere.

The Industry Leaders vs. The The Industry Leaders vs. The Laggards:Laggards:

AA Look at the Substantial Look at the Substantial DifferencesDifferencesPresented to the Presented to the

Systech Customer ConferenceSystech Customer Conferencebyby

Pierre G. VillerePierre G. VillereAllen-Villere PartnersAllen-Villere Partners

March 14, 2007March 14, 2007

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

As in the past, the Industry Data Survey measured the As in the past, the Industry Data Survey measured the Upper Quartile as compared to the Typical Member. This Upper Quartile as compared to the Typical Member. This year, the IDS accountants captured the data on the Lowest year, the IDS accountants captured the data on the Lowest Quartile as well, giving us a opportunity to examine the Quartile as well, giving us a opportunity to examine the range of financial performance in the industry for the first range of financial performance in the industry for the first time.time.

The Industry Leaders (the “Upper Quartile”) have further The Industry Leaders (the “Upper Quartile”) have further expanded the margin of lead over the Typical Member expanded the margin of lead over the Typical Member compared to the previous year, and they dramatically compared to the previous year, and they dramatically outperform the Laggards (the “Lowest Quartile”), as outperform the Laggards (the “Lowest Quartile”), as measured in Profit Per Yard.measured in Profit Per Yard.

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

As in prior years, the Upper Quartile rose to the top due As in prior years, the Upper Quartile rose to the top due almost exclusively to dramatic improvements in Net Sales almost exclusively to dramatic improvements in Net Sales Price.Price.

Their performance in Net Sales Price exceeds the Typical Their performance in Net Sales Price exceeds the Typical Member by $4.20, and outpaces the Lowest Quartile by Member by $4.20, and outpaces the Lowest Quartile by $12.87$12.87,, accounting for nearly all of their profit advantage.accounting for nearly all of their profit advantage.

This key finding speaks to the importance of the Selling Price This key finding speaks to the importance of the Selling Price in determining the ultimate profitability of a producer. in determining the ultimate profitability of a producer. Those who enjoy the higher per-yard prices outpace the rest Those who enjoy the higher per-yard prices outpace the rest of the industry in the all-important measure of Profit Per of the industry in the all-important measure of Profit Per Yard. Yard.

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

We believe that the Lowest Quartile may have We believe that the Lowest Quartile may have issues with pricing strength in their market, as issues with pricing strength in their market, as dramatically lower materials costs may be down-dramatically lower materials costs may be down-drafting the selling price in their markets.drafting the selling price in their markets.

Conversely, the Upper Quartile may be selling Conversely, the Upper Quartile may be selling higher-spec jobs, combined with vertical higher-spec jobs, combined with vertical integration that drives top-dollar transfer costs in integration that drives top-dollar transfer costs in many cases. many cases.

Differences in Performance:Differences in Performance:This Year vs LastThis Year vs Last

Typical NRMCA Member

Lowest QuartileUpper

Quartile

Total Net Sales $80.98 $72.31 $85.18Total Material Costs (including freight) $44.24 $40.65 $46.22Total Variable Plant Costs $4.37 $4.08 $4.72Total Variable Delivery Costs $14.26 $15.20 $14.00Marginal Contribution $18.11 $12.38 $20.24

Differences in Performance:Differences in Performance:This Year vs. LastThis Year vs. Last

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Total Direct Fixed Costs - Plant $3.23 $3.58 $2.61Total Direct Fixed Costs - Delivery $3.78 $3.93 $3.43Operating Profit $11.10 $4.87 $14.20Total Selling Expenses $1.34 $1.28 $1.28Total General & Administrative Expenses $3.62 $2.99 $3.34Profit Before Taxes $6.14 $0.89 $9.62

The Upper Quartile in 2005:The Upper Quartile in 2005:How Did They Distinguish How Did They Distinguish

Themselves?Themselves?Where the Upper Quartile Has ExcelledWhere the Upper Quartile Has Excelled

Value-Added Revenue ProductsValue-Added Revenue Products Direct Fixed Costs - PlantDirect Fixed Costs - Plant

Where the Lowest Quartile Has ExcelledWhere the Lowest Quartile Has Excelled Material CostsMaterial Costs General & Administrative ExpensesGeneral & Administrative Expenses

Where the Lowest Quartile Has LaggedWhere the Lowest Quartile Has Lagged Revenue – Total Average Selling PriceRevenue – Total Average Selling Price Variable Delivery CostsVariable Delivery Costs

The Upper Quartile: Where They The Upper Quartile: Where They ExcelExcel

Value-Added ProductsValue-Added Products Direct Fixed Costs - PlantDirect Fixed Costs - Plant

The Upper Quartile: Where They The Upper Quartile: Where They Excel Excel

Value – Added ProductsValue – Added Products

The Upper Quartile was able to increase their The Upper Quartile was able to increase their total average selling price by charging more for total average selling price by charging more for Value-Added product offerings (products other Value-Added product offerings (products other than yards of concrete), or miscellaneous than yards of concrete), or miscellaneous chargescharges

The Upper Quartile: Where They The Upper Quartile: Where They ExcelExcel

Value – Added ProductsValue – Added ProductsThe Upper Quartile charged $3.57 per yard

more for Value-Added products when compared the Lowest Quartile

They also charged $2.11 per yard more for Fuel Surcharges when compared to the Lowest Quartile, for a total advantage of $5.68

The Upper Quartile: Where They The Upper Quartile: Where They ExcelExcel

Sales Mix, Dollars Per Cubic Yard

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Ready mixed concrete $75.41 $67.69 $74.72Fibers, super plasticizers, colors, etc. $3.21 $2.33 $5.90Sand, gravel, cement, misc. yard sales,etc. $0.80 $1.14 $1.66Waiting time, min. load chrgs., etc. $0.78 $1.17 $0.61Fuel surcharge, environmental, etc. $1.24 $0.52 $2.63Discounts, allowances and returns ($0.46) ($0.54) ($0.34)Total Net Sales $80.98 $72.31 $85.18

The Upper Quartile: Where They The Upper Quartile: Where They ExcelExcel

Direct Fixed Costs - PlantDirect Fixed Costs - Plant

The Upper Quartile paid $0.97 less for these costs when compared to the Lowest Quartile

The Upper Quartile: Where They The Upper Quartile: Where They ExcelExcel

Direct Fixed Costs - Plant

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Depreciation $1.06 $1.24 $0.94Plant & support equipment leases $0.26 $0.20 $0.34Insurance on plant, yard and rental equipment $0.16 $0.14 $0.15Real Estate taxes $0.18 $0.25 $0.10Quality Control $0.53 $0.41 $0.45Environmental expense and services $0.10 $0.16 $0.08Info Tech $0.07 $0.08 $0.05Other direct plant expenses $0.87 $1.10 $0.50Total Direct Fixed Costs - Plant $3.23 $3.58 $2.61

Where the Lowest Quartile Where the Lowest Quartile Companies Have ExcelledCompanies Have Excelled

Material CostsMaterial CostsGeneral & Administrative ExpensesGeneral & Administrative Expenses

Where the Lowest Quartile Where the Lowest Quartile Companies Have ExcelledCompanies Have Excelled

Material CostsMaterial CostsThe Lowest Quartile spent $5.57 less when The Lowest Quartile spent $5.57 less when

compared to the Upper Quartile.compared to the Upper Quartile.Key factors contributing to comparison include: Key factors contributing to comparison include:

Cement costs were $1.56 less when compared to the Cement costs were $1.56 less when compared to the Upper Quartile Upper Quartile

Coarse Aggregates were $2.10 less when compared to Coarse Aggregates were $2.10 less when compared to the Upper Quartile, and Fine Aggregates were $1.62 the Upper Quartile, and Fine Aggregates were $1.62 lessless

Where the Lowest Quartile Where the Lowest Quartile Companies Have ExcelledCompanies Have Excelled

Material Costs (including freight)

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Cement $21.00 $19.86 $21.42Fly ash $1.58 $1.04 $1.92Slag $0.69 $0.73 $0.64Chemical admixtures $1.25 $1.42 $1.16Mechanical admixtures (fibers, etc.) $0.20 $0.17 $0.14Coloring $0.12 $0.10 $0.11Fine aggregates $7.39 $6.41 $8.03Coarse aggregates $11.35 $10.17 $12.27Water $0.03 $0.06 $0.01Miscellaneous material costs $0.63 $0.69 $0.52Total Material Costs (including freight) $44.24 $40.65 $46.22

Where the Lowest Quartile Where the Lowest Quartile Companies Have ExcelledCompanies Have Excelled

General & Administrative ExpensesGeneral & Administrative ExpensesThe Lowest Quartile was $0.35 less when The Lowest Quartile was $0.35 less when

compared to the Upper Quartilecompared to the Upper Quartile A key factor contributing to their advantage is that A key factor contributing to their advantage is that

Other General & Administrative Expenses were $1.15 Other General & Administrative Expenses were $1.15

less when compared to the Upper Quartileless when compared to the Upper Quartile

Where the Lowest Quartile Where the Lowest Quartile Companies Have ExcelledCompanies Have Excelled

General & Administrative Expenses

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Executive salaries $0.44 $0.39 $0.31Executive bonuses $0.21 $0.18 $0.07Office salaries and wages $0.58 $0.60 $0.54Fringers $0.32 $0.33 $0.25Communication Expense $0.09 $0.10 $0.05Office supplies & related office expense $0.14 $0.17 $0.10All other insurance expense $0.10 $0.10 $0.10All other depreciation and amortization $0.13 $0.12 $0.06Info Tech $0.10 $0.05 $0.03Legal & professional expenses $0.15 $0.20 $0.12Bad debts $0.13 $0.23 $0.04All other general & administrative expenses $1.23 $0.52 $1.67Total General & Administrative Expenses $3.62 $2.99 $3.34

Where the Lowest Quartile Has Where the Lowest Quartile Has LaggedLagged

Revenue – Total Average Selling PriceRevenue – Total Average Selling PriceVariable Delivery CostsVariable Delivery Costs

Where the Lowest Quartile Has Where the Lowest Quartile Has LaggedLagged

Revenue – Total Average Selling PriceRevenue – Total Average Selling Price

The Lowest Quartile had a Selling Price of The Lowest Quartile had a Selling Price of $12.87 less when compared to the Upper $12.87 less when compared to the Upper Quartile.Quartile.Key factors contributing to comparison include: Key factors contributing to comparison include:

Value-Added products was $3.57 per yard less Value-Added products was $3.57 per yard less when compared to the Upper Quartilewhen compared to the Upper Quartile

Fuel Surcharge revenue was $2.11 per yard less Fuel Surcharge revenue was $2.11 per yard less when compared to the Upper Quartilewhen compared to the Upper Quartile

Where the Lowest Quartile Has Where the Lowest Quartile Has LaggedLagged

Sales Mix, Dollars Per Cubic Yard

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Ready mixed concrete $75.41 $67.69 $74.72Fibers, super plasticizers, colors, etc. $3.21 $2.33 $5.90Sand, gravel, cement, misc. yard sales,etc. $0.80 $1.14 $1.66Waiting time, min. load chrgs., etc. $0.78 $1.17 $0.61Fuel surcharge, environmental, etc. $1.24 $0.52 $2.63Discounts, allowances and returns ($0.46) ($0.54) ($0.34)Total Net Sales $80.98 $72.31 $85.18

Where the Lowest Quartile Has Where the Lowest Quartile Has LaggedLagged

Variable Delivery CostsVariable Delivery Costs

The Lowest Quartile spent $1.20 more when The Lowest Quartile spent $1.20 more when compared to the Upper Quartilecompared to the Upper QuartileKey factors contributing to comparison include: Key factors contributing to comparison include:

Fringes were $0.36 more when compared to the Fringes were $0.36 more when compared to the Upper QuartileUpper Quartile

Repairs & Maintenance was $0.49 more…Repairs & Maintenance was $0.49 more…

Where the Lowest Quartile Has Where the Lowest Quartile Has LaggedLagged

Delivery

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Driver wages (for all on-duty time) $6.51 $6.89 $6.42Fringes (FICA, Worker's Comp., health ins., etc.) $2.53 $2.89 $2.53Repairs & maintenance (parts, etc. for truck mixers) $1.65 $1.68 $2.00Repairs & maintenance (labor and fringes) $0.71 $0.95 $0.46Fuel expenses (gas, diesel & oil for all truck mixers) $2.15 $2.13 $2.03Tires (labor, repairs & replacement costs) $0.22 $0.25 $0.14All other delivery expenses $0.49 $0.41 $0.42Total Delivery Costs $14.26 $15.20 $14.00

……And a Final Look at The IDS By And a Final Look at The IDS By Size and RegionSize and Region

Like every year, there are certain trends we Like every year, there are certain trends we see with regards to size and regionssee with regards to size and regions

This year, the comparison of the Upper to This year, the comparison of the Upper to the Lower Quartiles makes this illustration the Lower Quartiles makes this illustration even more interesting even more interesting

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 Ratios

Under 100,000

Cubic Yds.

100,000 to 299,999 Cubic

Yds.

300,000 to 500,000 Cubic

Yds.

Over 500,000

Cubic Yds.

Typical NRMCA Member

Lowest Quartile

Upper Quartile

Profit Margin (pre-tax)(%) 4.90% 2.72% 6.36% 8.55% 7.54% 1.34% 11.25%Asset Turnover 2.38 1.86 1.72 2.04 1.96 1.74 3.08Return on Assets (pre-tax)(%) 11.68% 4.58% 11.14% 17.66% 14.94% 2.13% 34.76%Return on Net Worth (pre-tax)(%) 21.63% 9.02% 16.42% 25.34% 21.90% 3.37% 47.53%

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

4.9

2.7

6.4

8.57.5

1.3

11.2

0

2

4

6

8

10

12

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 Yards

Over 500,000 Yards Typical Member Lower Quartile

Upper Quartile

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

1.4

10.1

4.6

1.2

6.2

4.3

7.4 7.5

1.3

11.2

0

2

4

6

8

10

12

Northeastern MidAtlantic Southeastern South Central

Great Lakes Rocky Mountain Pacific Northwest

Pacific Southwest Typical Member Lower Quartile

Upper Quartile

Asset Turnover by Company SizeAsset Turnover by Company Size

2.38

1.86 1.722.04 1.96

1.74

3.08

0

0.5

1

1.5

2

2.5

3

3.5

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 Yards

Over 500,000 Yards Typical Member Lower Quartile

Upper Quartile

Asset Turnover by RegionAsset Turnover by Region

1.6

2.4

3.3

1.4

2.1

0.9

3.8

21.7

3.1

0

0.5

1

1.5

2

2.5

3

3.5

4

Northeastern MidAtlantic Southeastern South Central

Great Lakes Rocky Mountain Pacific Northwest

Pacific Southwest Typical Member Lower Quartile

Upper Quartile

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

11.7

4.6

11.1

17.714.9

2.1

34.8

0

5

10

15

20

25

30

35

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 Yards

Over 500,000 Yards Typical Member Lower Quartile

Upper Quartile

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

2.2

25

14.6

1.1

12.4

3.5

28.5

14.9

2.1

34.8

0

5

10

15

20

25

30

35

Northeastern MidAtlantic Southeastern South Central

Great Lakes Rocky Mountain Pacific Northwest

Pacific Southwest Typical Member Lower Quartile

Upper Quartile

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

21.6

9

16.4

25.321.9

3.4

47.5

0

10

20

30

40

50

Under 100,000 Yards 100,000 to 299,000 Yards 300,000 to 500,00 Yards

Over 500,000 Yards Typical Member Lower Quartile

Upper Quartile

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

3

39

25.9

1.6

14.9

4.2

42.4

21.9

3.4

47.5

0

10

20

30

40

50

Northeastern MidAtlantic Southeastern South Central

Great Lakes Rocky Mountain Pacific Northwest

Pacific Southwest Typical Member Lower Quartile

Upper Quartile

SummarySummary

The Industry recovered dramatically in The Industry recovered dramatically in 20052005

Profit margins have skyrocketed, more Profit margins have skyrocketed, more than doubling over 2004than doubling over 2004

The Typical Member enjoyed profits of The Typical Member enjoyed profits of $6.14 per yard, setting a new record for $6.14 per yard, setting a new record for the industry, and substantially exceeding the industry, and substantially exceeding the prior record of $5.27 set in 1999the prior record of $5.27 set in 1999

SummarySummary

The Upper Quartile saw even greater The Upper Quartile saw even greater prosperity, with profits of $9.62 per prosperity, with profits of $9.62 per yard, nearly double the 1999 recordyard, nearly double the 1999 record

The Upper Quartile also expanded their The Upper Quartile also expanded their profit advantage over the Typical profit advantage over the Typical Member as a percentage over last yearMember as a percentage over last year

The Lowest Quartile suffered, with a The Lowest Quartile suffered, with a profit of $0.89 per yard, illustrating the profit of $0.89 per yard, illustrating the struggle of competing in markets with struggle of competing in markets with weak pricingweak pricing

Our Peek Into 2006Our Peek Into 2006

The slowdown in housing could lead us to a flat The slowdown in housing could lead us to a flat year in terms of financial performanceyear in terms of financial performance

Pricing strength and growth has ebbed in parts of Pricing strength and growth has ebbed in parts of the countrythe country

Despite the housing slowdown, commercial and Despite the housing slowdown, commercial and public work is still strong, and is picking up the public work is still strong, and is picking up the slack in many marketsslack in many markets

We see the 2006 numbers coming in similar to We see the 2006 numbers coming in similar to 2005, with growth cooling off from the blistering 2005, with growth cooling off from the blistering pace of profitability and performance of last year pace of profitability and performance of last year

And Finally, A Word About UsAnd Finally, A Word About Us

Allen-Villere Partners is a transaction- Allen-Villere Partners is a transaction- oriented private investment banking and oriented private investment banking and consulting services firm that focuses on consulting services firm that focuses on the ready-mixed concrete, aggregates the ready-mixed concrete, aggregates and concrete products industriesand concrete products industries

Industry ActivitiesIndustry Activities The firm was pivotal in the creation and refinement of The firm was pivotal in the creation and refinement of

the annual Industry Data Survey, and still provides the annual Industry Data Survey, and still provides significant time and resources in assisting NRMCA in significant time and resources in assisting NRMCA in the planning and execution of the survey each year. It the planning and execution of the survey each year. It is considered a key benchmarking tool and has become is considered a key benchmarking tool and has become a standard of measure for performance in the ready-a standard of measure for performance in the ready-mixed concrete industrymixed concrete industry

Six years ago, the firm led the initiative to create an Six years ago, the firm led the initiative to create an industry-standard Chart of Accounts, which is in the industry-standard Chart of Accounts, which is in the process of being implemented by the ABA and AICPA, process of being implemented by the ABA and AICPA, and as a revised SIC code and as a revised SIC code

Value Added ServicesValue Added Services

Mergers & AcquisitionsMergers & AcquisitionsValuation & Fairness OpinionsValuation & Fairness OpinionsFinancial Restructuring and Workout Financial Restructuring and Workout

ServicesServicesFinancing ServicesFinancing ServicesStrategic PlanningStrategic PlanningEnvironmental & Permitting ServicesEnvironmental & Permitting ServicesManagement Consulting & TrainingManagement Consulting & TrainingExpert TestimonyExpert Testimony

The William B. Allen AwardThe William B. Allen Award

NRMCA created this award which is to NRMCA created this award which is to be bestowed annually to an individual in lifetime be bestowed annually to an individual in lifetime recognition of outstanding contributions to the recognition of outstanding contributions to the business of the ready mixed concrete industrybusiness of the ready mixed concrete industry

The Award was named after our Founder and The Award was named after our Founder and Senior Partner, Bill Allen, acknowledging almost Senior Partner, Bill Allen, acknowledging almost 60 years of leadership in this industry60 years of leadership in this industry

The 2007 Recipient is Gene Martineau, the CEO The 2007 Recipient is Gene Martineau, the CEO of U.S. Concrete, who will receive his award at the of U.S. Concrete, who will receive his award at the NRMCA Annual Convention in MarchNRMCA Annual Convention in March

And finally…And finally…

Thank You!Thank You!