Rock Products

NOV 2017

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24 • ROCK products • November 2017 The Q&A Forum outdated infrastructure and serve as an engine for economic growth and job cre- ation. One particular point of emphasis is the need to address the underlying issue that there is not enough money coming into to the Highway Trust Fund through existing user fees to pay for existing levels of expenditures. In order to do so, policymakers should explore collection mechanisms that are not administratively burdensome or costly, while tackling inefficiency in federal transportation programs to ensure that every dollar gets the most 'bang for the buck.' MCLAUGHLIN: Visiting with produc- ers, state association meetings and the general overall feel on how the general public views the current administration leads us to believe that many produc- ers still remain skeptical about the administration's ability to complete an infrastructure plan. But we must remain positive the Trump administration will finalize an aggressive program not only for 2018 but also for years to follow. CLARKE: Based on what we hear from our customers and our industry associ- ations, there is a general optimism that funding will eventually be put in place for longer terms than in the past 10 years. The concern is that tax and health- care reform need to be addressed first. POMPO: Washington needs to get off their butts and start working together, if not, the infrastructure is going to get worse than what it is now and we are going to see things fall apart. The longer we wait the more it's going to cost to fix. Can we do it all at once? The answer is "no" but we need to start and use the monies that are supposed to be used for repairs, instead of diverting it to items that has nothing to do with infrastruc- ture. We send money overseas and they have better roads and transportation than we do. Washington needs to put our needs first. You can drive down any highway and see and feel what needs to be done. We have the technology we need to start putting it to work. This would help our economy tremendously. Yes, we do feel that we will see a plan in the coming year. ROSS: We hear optimism from our con- struction and aggregate customers that there will be an increased level of invest- ment in infrastructure but that its likely to come from a patchwork of sources. That will make contracts and bids more complex but we're confident that there will be an increasing number of projects started next year. The need for solid planning and progress data will make drone based aerial intelligence more important, especially if multiple agen- cies or government bodies are involved. KRAUSE: After being in Washington, D.C., for the recent NSSGA Legislative & Policy Forum, it appears as if the priority for infrastructure within Con- gress is low. There was some faint hope that infrastructure might be tied to tax reform and that repatriated funds could help pay for infrastructure. After the administration stated that any repatri- ated funds would be used elsewhere, any momentum toward an infrastruc- ture bill faded. Everyone we saw on Capitol Hill said that the priorities were taxes, healthcare and immigra- tion. Infrastructure would be 12 to 18 months away, unless the Trump admin- istration pushed it up in the priority listing. With the current focus on taxes, this will indicate whether we can expect any major legislation from this Con- gress. Next year is a midterm election. This would normally be a good time to promote infrastructure and all of the good spending brings to our economy. My fear is that we are in a cycle where we will not have enough money to pay for all of the priorities we want to tackle and nationwide Infrastructure will not be funded. Luckily local and state funding is there to bring a base level of sustainability to the aggregate Industry. Mergers continue to be a way of life on both the producer side of the business and also the manu- facturer side of the business. Are mergers affecting your company directly? Is the continuing merger and acquisition activity good for the industry, in your view? MCLAUGHLIN: Generally, mergers and acquisitions do not affect our short- term business for small to mid-size equipment purchases. However, major system purchases as well as large upgrades can have a negative affect (slow down) as a result of mergers and acquisitions. For 2017, it seems the aggregate industry has experienced increased mergers and acquisitions compared to the previous several years. As director of major accounts for KPI- JCI and Astec Mobile Screens, I believe mergers and acquisitions by producers has had an overall positive affect on the industry. Producers have become much more technical in evaluating all aspects of their operation. The net result forces manufactures to supply better prod- ucts, which in turn helps producers lower their total operational costs and the ability to produce higher quality aggregates. LEPP: While we're not directly affected by mergers, we do view them as a pos- itive action that will promote growth. SEUSS: Komatsu hasn't been active on the construction side of the business, but our recent purchase of Joy Global has been a nice shot in the arm for the mining side and the company is already seeing benefits around economies of scale, selling advantages, etc. KRAUSE: There certainly are M&A cycles in our industries. In the frac world, during the recent slowdown, we saw some consolidation of com- panies and operations. The result is a smaller group of companies with larger operations. As cycles go, with the new uptick in frac, we have seen some new players enter the market. Very typical type of business cycles. We are seeing something similar in aggregates with some high-profile announcements like Bluegrass and Ash Grove. Mergers do affect our business in that it changes some of the buying habits and styles of Mark Krause, McLanahan Corp.

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