February 2016
CED
Construction Equipment Distribution Published by AED: Business Fuel for a More Profitable Dealership
Chairman of the Board Whit Perryman discusses his visions and goals for The Association in 2016
n A Closer Look
Infor focuses on
the daily details of a service firm
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n Profit Improvement Report Exclusive report for AED members
n All In The Family
Karen Zajick is at the helm of her family’s 60-year-old business
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contents CED Magazine | February 2016
vol. 82 no. 2
www.cedmag.com
>> FEATURES
6
Meet Chairman Whit Perryman Whit Perryman (wearing a white shirt in the photo above) discusses his vision for AED as the organization’s new chairman and how he plans to help other members prosper.
21
Profitability Report Exclusive report will focus on the profit realities of customers for AED members.
28
A Closer Look at Infor
38
Where Karen Zajick Goes, Leadership Happens
Infor focuses on the daily details of the business, everything from equipment management to managing profits.
Get to know one of AED’s newest board members and president of Norris Sales Company.
February 2016 | Construction Equipment Distribution | www.cedmag.com | 3
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>> EDITORIAL TEAM CED Magazine Director SARA SMITH ssmith@aednet.org Design and Layout KRIS JENSEN-VAN HESTE kjvanheste@gmail.com
>> FEATURED COLUMNISTS
contents CED Magazine | February 2016
>>COLUMNS
Dr. Albert D. Bates
12 >> Dealer Development
Sen. Mike Enzi
Andreas Hellstrom
18 >> Regional Report
Founder and President of Profit Planning Group Senior Senator from Wyoming Industry Strategy Director at Infor
Garry Bartecki
Founder of Dealer-Rental Success, LLC
Emily Peiffer
Associate Editor of Industry Dive’s Construction Dive
Brent Abrahm
President and CEO of Accruit
Brian Rehg
Join AED May 17-18 in Las Vegas for our 2016 rental manager seminar.
An emboldened focus on Canadian advocacy and government affairs: The industry’s workforce development initiatives need everyone to get on board.
26 >> View From The Hill
Sen. Mike Enzi, R-Wyo., says the jobs revolution demands Congress reform skills programs.
Don Buttry
30 >> Money$$$Man
Troy Ottmer
CEO of Blue Stingray President of Sales Professional Training Inc. Vice President of Fixed Operations at Doggett Machinery Services, LLC
Eric Stiles
Account Executive at Sentry Insurance
>> ADVERTISING CONTACTS Vice President of Sales JON CRUTHERS 800-388-0650 ext. 334 jcruthers@aednet.org Advertising Sales Manager ALBERT J. RAMIREZ 800-388-0650 ext. 311 aramirez@aednet.org Production Manager MARTIN CABRAL 800-388-0650 ext. 313 mcabral@aednet.org
vol. 82 no. 2
Here’s how Garry Bartecki sees Section 179 and bonus depreciation having a direct impact on equipment manufacturers, dealers and rental fleets.
32 >> Like-Kind Exchange
A like-kind exchange can keep built-in gains tax at bay.
33 >> Technology 101
Master how to protect your company’s data security and prevent cyberattacks.
40 >> Equipment Watch Intelligence
The average age of an I.C. Cushion Tire Lift Truck varied between 10 and 12 years in the past 12 months, while the I.C. Pneumatic Tire Lift Trucks remained closer to 10.
42 >> Economic Analysis
Three economists predict construction industry growth in 2016.
40 >> Problem Solved
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Since 1920 Official Publication of
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Chairman Board of the
Whit Perryman discusses his vision for AED as The Association’s new chairman and how he plans to help other members prosper. By Christine Arceneaux
Over 25 years ago, Whit Perryman attended an Association Equipment Distributors (AED) meeting that changed the course of history — for him, Vermeer Texas-Louisiana and AED. Today, the former banker turned CEO and chairman of Vermeer Texas-Louisiana is AED’s new chairman. Perryman, who also served on The AED Foundation Board about 12 years ago and as an AED Board regional director from 2006-2008, said he began preparing for his new role as The Association’s chairman three years ago. “It’s been a great opportunity to know owners from all over the world and learn about the different brands,” Perryman said about the benefits of an AED membership. The organization has aided him by collaborating with other business owners in the equipment industry. “We (AED members) can share different ideas about how to do things better and how to solve some of the same problems,” Perryman said. “Why reinvent the wheel?” In his new role, Perryman said he plans to concentrate on getting AED members engaged in the organization by encouraging them to take advantage of training programs and other opportunities the organization provides. He said he is also committed to continuing training programs already in place. “We’re in a shrinking industry,” Perryman explained. “Not from a revenue standpoint or an employee standpoint, but from a consolidation of businesses standpoint.” Perryman said he wants to encourage AED members to be become politically engaged, connecting with their local congressional representatives in support of key issues – such as the highway bill - that affect the industry. Perryman said he believes that if members take advantage of the multitude of offerings that The Association provides, not only will the organization grow but so will their businesses. “It’s about dealers coming together for a common cause,” he said. “We also need future leaders. How do we attract young talent?” “He’s constantly thinking progressively,” said Vermeer Texas-Louisiana COO Mark Krueger of Perryman. Krueger, who worked in sales for decades before becoming the company’s COO, has worked hand-in-hand with Perryman since 1992. “It’s kind of a strange dynamic but it works,” Krueger said. Krueger said Perryman brought with him a wealth of financial knowledge to Vermeer Texas-Louisiana and said he believes he
will enhance AED in his new role as “his decision making is sophisticated.” Perryman’s role as Chairman of AED will not only aid the organization but will also shine a spotlight on Vermeer, and several political issues that have a direct impact on the industry. “He is good at fighting for things like the highway bill,” Krueger said. “He’s got the pulpit and he can get the message out.” Longtime friend and Vermeer Texas-Louisiana Board Member Jack Pfeffer agrees. “He’ll come in with his eyes open and try to improve the organization,” Pfeffer said. “He isn’t afraid to change things but he’s smart enough to not change things just to change things.”
Pfeffer said it’s Perryman’s humble nature and mindset that “everybody is in this together” and that it’s the people who create the success of the whole (company) that have made him a success at Vermeer Texas-Louisiana and will ultimately help AED members progress and grow their businesses. While Perryman left his initial AED meeting over two decades ago feeling better informed about his role in helping secure financing for his customers. He continued in the banking industry until 1992, when Vermeer Texas-Louisiana’s former owner Gary Wiley asked him to join his company – a four-store operation based in Dallas, Texas. “I had just survived the banking crash in Dallas,” Perryman said. “When this opportunity presented itself, I jumped at it.”
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Whit Perryman, far left, and employee-owners from Vermeer Texas-Louisiana visit congressional offices in Washington, D.C.
In his CFO position, Perryman said he handled all of the company’s banking affairs, which included securing land for new projects and securing financing for customers who purchased equipment from Vermeer Texas-Louisiana. He also drafted a policies and procedures manual – a task that’s often left unnoticed by some small businesses. In 1995, employees purchased the company from Wiley in what is known as an ESOP, or Employee Stock Ownership Plan – a solution Perryman called optimum. The business continued to grow, propelled by the growth of the fiber market in the late 1990s. Employees rode a wave of success until 2001, when it suddenly halted when the economy crashed, Perryman said. “Being an ESOP company, we share our financial information with our employees. This was relatively easy during the good BRIAN P. MCGUIRE AED President & CEO
>> OFFICERS WHIT PERRYMAN Chairman Vermeer Texas-Louisiana WES STOWERS Vice Chairman Stowers Machinery Corp. DIANE BENCK Senior Vice President West Side Tractor Sales Co. TODD HYSTAD Vice President Vimar Equipment Ltd. MICHAEL D. BRENNAN Vice President Bramco, LLC JOHN C. KIMBALL VP of Finance Kimball Equipment Company DON SHILLING Immediate Past Chairman General Equipment & Supplies, Inc. A. ROY KERN, JR. Foundation President Equipment Corporation of America
times, but became more difficult and even more important during the bad times.” While some jobs had to be eliminated to help the company reduce overhead, Perryman said employees, many of whom had worked for the company for decades, pitched in where they could to ensure the business would survive. The company immediately began selling assets, and after more than two painstaking years, the company was once again in the black. “It was something I wouldn’t wish on my worst enemy,” Perryman said of those challenging years. “But, you learn from those tough times.” Today, the company is solid, and Perryman and Krueger, along with their management team, run a tight ship, brainstorming ideas for how to make the company better and stronger while it continues to prosper. ROBERT K. HENDERSON AED Executive Vice President & COO
>> AT-LARGE DIRECTORS TODD BACHMAN Florida Coast Equipment, Inc. JAMES P. COWIN Cowin Equipment Co., Inc. GAYLE HUMPHRIES JCB of Georgia LARRY R. MILLER Kelbe Bros. Equipment Co. Inc. JOHN SHEARER 4 Rivers Equipment, LLC KENNETH E. TAYLOR Ohio CAT
Over the past several years, the company has focused on upgrading facilities, most recently acquiring land for relocation in Baton Rouge, Louisiana. In discussing his working relationship with Krueger, Perryman said, “He’s fairly conservative, and I’m more of a risk taker; together, the relationship works. As we look at new opportunities, we’re able to point at different strategies, discuss them and come to a compromise.” Perryman, who is passionate about what he does, and very humble about what he has achieved so far, said he is thankful for “the opportunity to be able to give back to our construction equipment industry, one that has done so much for me.” He said he plans to take what he’s learned during his tenure at Vermeer Texas-Louisiana to help other AED members prosper as well. JASON K. BLAKE AED Senior Vice President & CFO
>> REGIONAL DIRECTORS RON BARLET West Reg. Bejac Corp. CRAIG DRURY Eastern Canada Reg. Vermeer Canada Inc. RYAN GREENAWALT Midwest Reg. Alta Equipment Co. TODD HYSTAD Western Canada Reg. Vimar Equipment Ltd. GILES POULSON Rocky Mountain Reg. Faris Machinery Co. JOHN RIGGS IV South Central Reg. J A Riggs Tractor Co. JAY RODES Southeast Reg. Wilson Equipment Co., LLC KAREN ZAJICK northesat Reg. Norris Sales Co.
February 2016 | Construction Equipment Distribution | www.cedmag.com | 7
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Event Spotlight REGISTER NOW!
Join AED for our Rental Manager Seminar. Senior management and departmental managers that have oversight for rental fleets will benefit from this program, as they gain insight into the rapidly developing rental channel and how that can equate with profitability for their dealership. Mark your calendars Rental Manager Seminar May 17-18 Embassy Suites by Hilton Convention Center Las Vegas Register Now: bit.ly/aedevents
Get Social with AED! Connect with AED on our new social media platforms.
Mention us on Twitter @AEDSocial Like us on Facebook @ Facebook.com/ AEDSocial
Current events and news for the equipment distribution industry
9
» AED Insider
14 » Industry News 19 » Product Preview 24 » Data Trends
8 | www.cedmag.com | Construction Equipment Distribution | February 2016
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>> AED INSIDER
AED Chairman Whit Perryman and 2016 Officers Installed at AED Summit AED 2016 Chairman Whit Perryman and two volunteer AED officers, John C. Kimball, CEO of Kimball Equipment Company, and Michael D. Brennan, president and COO of BRAMCO, were installed at this year’s AED Summit & Condex. The group will serve as members of AED’s Executive Committee during the coming year. Members of the Executive Committee are elected by mail Whit Perryman, Chairman ballot and sworn in at the event. Perryman is the CEO of Vermeer Texas-Louisiana based in Irving, Texas (on President George Bush Hwy. - Hwy 161). Perryman’s dealership is a 100% employee owned (ESOP) company which has grown from $30 million in sales in 1995 to over $160 million in sales as of 2015. Two new At-Large Directors have been elected to threeyear terms on the AED Board. Gayle Humphries serves as CFO at JCB of Georgia in Pooler Ga. John Shearer is general manager of construction & forestry at 4 Rivers Equipment, LLC located in Greeley, Colo. Other At-Large Directors include Larry R. Miller, president and CEO, Kelbe Bros. Equipment Co., Inc.; Todd Bachman, president, Florida Coast Equipment, Inc.; Kenneth E. Taylor president of Ohio Cat; James P. Cowin, president of Cowin Equipment Co. AED’s new Regional Director is Karen Zajick, president, Norris Sales Co. Inc., Plymouth Meeting, Pa. Other Regional Directors include: Christopher Palmer, Woods CRW Corp. Williston, Vt. (Northeast Region); Giles Poulson, president, Farris Machinery, Commerce City, Colo. (Rocky Mountain region); Jay Rodes, president, Wilson Equipment Co., LLC, Lexington, Ky. (Southeast Region); Ryan Greenawalt, vice president of business development, Alta Equipment Co., Wixom, Mich. (Midwest Region); Ron Barlet, president, Bejac Corp., Placentia, Calif. (West Region); Todd Hystad, president, Vimar Equipment Ltd., Burnaby, British Columbia (Western Canada Region); John Riggs IV, president, JA Riggs Tractor Co., Little Rock, Ark. (South Central Region); and Craig Drury, vice president of Operations, Vermeer
Wes Stowers, Vice Chairman
Brian P. McGuire, President & CEO
Diane Benck, Sr. Vice President
Michael D. Brennan, Vice President
Don Shilling, Past Chairman
Todd Hystad, Vice President
John C. Kimball, VP Finance
Dennis Vander Molen, Chairman, AED Foundation
Don’t miss the March issue for complete Summit & Condex coverage!
From left, AED President and CEO Brian P. McGuire, outgoing Board Chairman Don Shilling and incoming Chairman Whit Perryman cut the ribbon on a hugely successful 2016 Summit & Condex in Washington, D.C. The March issue of CED will include complete coverage of the 2016 AED Summit & Condex. February 2016 | Construction Equipment Distribution | www.cedmag.com | 9
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>> AED INSIDER
The AED Foundation Chairman Dennis Vander Molen and 2016 Officers Installed at AED Summit North American construction equipment distributor members of Associated Equipment Distributors (AED) have elected Dennis Vander Molen of Vermeer MidSouth, Inc., to the position of 2016 Chairman of The Foundation. Vander Molen is the president of Vermeer MidSouth in Jackson, Miss. He first worked his way through Vermeer’s Dennis Vander Molen, Chairman organization in service, Vermeer MidSouth, Inc., engineering and sales. In 1987, he left Vermeer to co-found Vermeer MidSouth, Inc. He has seven locations that serve Mississippi, North Louisiana, Arkansas, and West Tennessee. He also represents ASV, RediHaul, Towmaster and Fecon. Vander Molen was chairman of AED’s Board of Directors in 2010.. He has also served on AED committees including Finance, Government Affairs and AED 20 Group.
F O U N D AT I O N
John Riggs IV, Vice Chairman
Robert K.Henderson, AED Foundation President
A. Roy Kern, Past Foundation Chairman
John D. Crum, Foundation Treasurer
The Foundation 2016 Board of Directors Newly elected Foundation board members include: Michael D. Brennan serves as president and COO at Bramco, LLC, Louisville, Ky.; Ryan May, president, Century Equipment Co., Salt Lake City, Utah; Anthony Fassino, Eastern region manager, Caterpillar, Inc., Peroria, Ill.; Judy Worrell, vice president of HR and Sec/Treasurer of Berry Companies, Inc., Wichita, Kan.; Dennis Romanson, general manager at DEUTZ Power Center, Norcross, Ga.; and Robert M. Criste, executive vice preseident & CFO at Stephenson Equipment, Inc., Harrisburg, Pa.
Other members of the board include: Mike Hayes, director, distributor/customer support, Komatsu America, Rolling Meadows, Ill.; Todd Coffey, corporate service manager, Brandeis Machinery and Supply Co., Louisville, Ky.; David Reilly, division manager, customer Support for John Deere Construction & Forestry, Moline, Ill.; Kenneth Silverman, vice president of Custom Solutions, Volvo Construction Equipment, Region Americas, Shippensburg, Pa.; and Sonja Metzler, director of Human Resources for Ohio CAT, Broadview Heights, Ohio.
2016 BOARD OFFICERS
The AED Foundation enhances the success of AED member companies by encouraging continuous learning and providing educational opportunities for employees. The AED Foundation officers and board devote many hours to ensure our programs meet the education and workforce development needs of our members.
Michael D. Brennan, AED Board Representative
What’s Ahead on the Hill in 2016: Insider Perspectives from AED’s Washington Office 2015 was one of the most successful years in the history of AED’s government affairs program. Members should be extremely proud of the leading role the association played in achieving several key policy victories: enacting a fully-funded, five-year highway bill, tax legislation to permanently increase Sec. 179 expensing and extend bonus depreciation and lifting the ban on crude oil exports. AED members helped achieve those victories by hosting dozens of congressional visits to dealerships, traveling to Washington to bring the industry’s message directly to the Hill and contributing a record amount to AED PAC. The goal for 2016 is to use that positive momentum to tackle a host of threats and opportunities. Here are some of the areas
10 | www.cedmag.com | Construction Equipment Distribution | February 2016
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>> AED INSIDER
Minnesota Local Group Donates $7,700 to The AED Foundation’s Annual Campaign The AED Foundation would like to thank the Minnesota local group for their campaign donation of $7,700. This contribution supports current and future education and training opportunities available through The Foundation. For the past 25 years The AED Foundation has provided quality and continuous improvements for industry-specific professional education and workforce development. When you invest in The AED Foundation, you are supporting the progress The AED Foundation is making for the
construction equipment distribution industry. You can directly invest by visiting bit.ly/investaedf or by downloading the investment form at bit.ly/aedinvest. (Contributions to The AED Foundation are tax deductible to the extent of the law. The AED Foundation is a 501(c)(3) educational
we will focus on in the year ahead: Obama administration regulatory onslaught. According to one recent media report, there are more than 4,000 new regulations on track to be finalized during the final year of the Obama administration. Many deal with workforce, labor, and environmental issues that could impact construction, mining and other development activity and AED member costs of doing business. AED will be stepping up efforts at the agency level and on Capitol Hill to fight the regulatory deluge. The association is also considering pursuing regulatory initiatives related to driver hours of service in the U.S. and Canada. Technician workforce policy. The construction equipment industry is facing a technical workforce crisis that’s undermining efficiency, driving up costs and losing distributors billions of dollars per year in market opportunity. At the 2016 Summit, AED will unveil a major study by researchers at the College of William and Mary that will quantify the problem, explain its causes and propose solutions. AED will be aggressively promoting the new study on Capitol Hill and beyond in the months ahead to build momentum for career technical education legislation, including Perkins Act reauthorization. Electing a pro-growth Congress. 2016 is both a presidential and congressional election year. While Republicans are likely to keep the House, the Senate and White House are up for grabs. The volatile political environment creates challenges and opportunities for AED. The association will be actively supporting pro-business candidates from both parties with an emphasis on getting early money to candidates in tough primary races. Individual dealers around the country will be involved in this effort through AED PAC and, in particular, through in-person ImPACt 2016 PAC
foundation. Pictured from left are: Tom Sweeney, Sweeney Brothers Jane Sanem, Construction Bulletin Bud Hayden, Metroquip Jon Pederson, Ruffridge-Johnson Chuck Puleston, Cummins Dave Hosch, Ruffridge-Johnson Ellen Borchert Bahr, Borchert-Ingersoll Rich Carlson, Carlson Tractor Ron Carlson, Carlson Tractor Gary Carlson, Gary Carlson Equipment The following were not in attendance when the photo was taken: Curt Steffen, MacQueen Equipment, Inc. Gary Lano, Lano Equipment, Inc. Len Kirk, Hayden-Murphy Equipment Michael M. Sill, Road Machinery & Supply, Co. Russell Sheaffer, Cummins NPower LLC Greg Nuss, Nuss Truck & Equipment
check delivery meetings between distributors and candidates. AED will be using the elections both to educate lawmakers and further raise the industry’s visibility. Implementing highway and tax bills. While AED scored important tax and infrastructure victories in 2015, when it comes to the highway bill and investment incentives, the job’s not done. AED will be working with allies and government officials to help ensure that the highway bill (and, in particular, it’s environmental streamlining provisions) are implemented as intended, that states step up to raise the necessary matching funds to take full advantage of their federal money and that Congress keeps working to identify new long-term revenue streams for the federal highway program. On the tax front, we’ll be working to aggressively promote Sec. 179 and bonus depreciation to our members and their customers. Capital investment incentives don’t incentivize activity if no one knows about them and no one understands them. AED’s revamped depreciationbonus.org website is just the start. In the coming months, we will roll out more member tools. Keeping momentum going to pass airport and water bills. It took years of effort by AED, our industry allies and infrastructure advocates on Capitol Hill, but lawmakers finally came together late last year to pass a well-funded, long-term highway bill. Unfortunately, other important infrastructure legislation is still in limbo. Airport construction and water infrastructure legislation, in particular, are languishing. AED lobbyists will be working to revive – and hopefully grow – federal investment in these areas. 2015 may have been a productive year, but we’re not resting on our laurels and will be working to make 2016 just as successful. Do you think we’ve got our priorities and strategy right? Email aeddc@aednet.org and let us know. February 2016 | Construction Equipment Distribution | www.cedmag.com | 11
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>> DEALER >> DEALERDEVELOPMENT DEVELOPMENT
Looking for a Seminar Exclusively for
Rental Managers?
The rental industry continues to be a growing delivery channel for dealers today. Distribution of construction equipment is steadily evolving with more equipment entering the market through dealer rental fleets. Your dealership needs to be focused on maximizing your rental opportunity and improving your profitability!
Senior management and departmental managers who oversee rental fleets will gain insight into the rapidly developing rental channel and how that can equate to profitability.
About the Presenter:
PROGRAM AGENDA DAY ONE Session 1 A maturing rental market – critical to equipment distribution? Session 2 Rental service is a process – profitability through process
Larry Kaye is a former Board of Directors member with the American Rental Association, where he has received a number of service awards, presented at various conferences and organized the Construction University program for educating members. Kaye has written training materials for the Caterpillar Rental College, authored a series of rental operations manuals for Bobcat and written articles for trade publications on various aspects of the rental industry.
DAY TWO Session 3 Characteristics of a profitable rental fleet Session 4 Case study project: applying what you’ve learned
Join AED May 17-18 in Las Vegas for our 2016 rental manager seminar!
• Visit bit.ly/aedevents • Call 630-574-0650 TO RESERVE YOUR HOTEL ROOM:
Embassy Suites by Hilton Convention Center Las Vegas Act by April 19 to reserve your spot within AED’s room block! • Visit bit.ly/16rentalreserve • Call 702-893-8000
12 | www.cedmag.com | Construction Equipment Distribution | February 2016
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>> DEALER DEVELOPMENT
Des Moines Area Community College Attains AED Re-Accreditation College achieves AED Re-Accreditation of Diesel Technology and CAT Technology Programs. Having first attained this equipment industry distinction in October of 2005, Des Moines Area Community College (DMACC) has for the second time achieved AED Accreditation of its Diesel Technology and CAT Technology Programs. Faculty and staff are to be congratulated for their long-term support of excellence in diesel-equipment technology education. Bill Gorman, Department Chair, speaks to the benefits of AED Accreditation. “In education these days, it is important that programs meet a certain standard. Meeting the AED standards adds credibility to the programs for both the Iowa Department of Education and DMACC. With AED Accreditation, our students have received job offers from different parts of the country. Industry support is very important to our programs; the AED Accreditation has resulted in donations and assistance from several area dealers.” These programs educate students both in the classroom and in the lab to prepare them in the key technology areas in AED’s national technical equipment standards: Safety/Administration, Electrical/Electronics, Hydraulics/Hydrostatics, Power Trains, Diesel Engines, and Heating and Air Conditioning. The focus of the diesel programs at DMACC is to give the student a good basic background in all areas. Via the CAT Technology program, DMACC and Ziegler CAT have teamed up to bring students opportunities in the field of diesel technology. The first three semesters of both programs include the same curriculum; the second three semesters have different classes for the Diesel Technology and Caterpillar Technology areas. The success of both programs is a direct result of the input of the Advisory Committee and their assistance. It is both informative and rewarding to get a close look at AED Accredited programs in equipment technology, and see how they are benefiting both local equipment dealers and the industry. Again, we congratulate the DMACC Diesel Technology faculty. The AED Foundation is proud of its affiliation with DMACC and other outstanding equipment programs via AED Accreditation. If you are now wondering where your next generation of qualified equipment technicians will come from, and are interested in working with your local technical college, contact Steve Johnson at The AED Foundation for more information. To learn more about Des Moines Area Community College Diesel Technology Programs, contact Bill Gorman, Program Chair/Instructor at Diesel Technology & CAT Technology, 2006 South Ankeny Blvd., Building 14, Ankeny, IA 50023-3993, call 515-964-6239 or email wggorman@dmacc.edu.
Diesel Technology Program Faculty
Bill Gorman
Pat Bishop
Terry Goode
Dennis Hanson
Dan Jespersen
Lon Moffitt
February 2016 | Construction Equipment Distribution | www.cedmag.com | 13
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>> INDUSTRY NEWS
Rotar International B.V. Announces New Division Rotar International B.V., Amsterdam, Holland, has announced the creation of a new division, Rotar North America, Inc. This company will be based in Cleveland, Ohio, and offer high quality state-of-the-art mobile hydraulic tools for use in the Scrap Metal, Recycling and Demolition markets. Rotor NA will service North America, Canada, Mexico and parts of the Caribbean. In addition, Louis Broekhuizen, director of Rotar International B.V. in Europe, has announced the appointment of Salvatore LaCorte to the position of sales director of Rotar North America, Inc.
LaCorte is a longtime veteran of the scrap recycling and demolition industry with more than 28 years in the industry, which includes his previous position with Allied Construction Products, LLC where he served as sales manager for the company’s non-impact products division. His experience at both the sales and manufacturing level includes engineering systems design and OEM field sales management. LaCorte also attained degrees in hydraulic systems design and a Master’s in Business Administration and currently holds a position as the Chairman of the Industrial Committee with the National Demolition Association.
Salvatore LaCorte
ARA Foundation Donates $10,000 to Red Cross Winter storm Goliath, a massive system that caused tornadoes and historic flooding along major rivers, impacting more than seven states throughout the South and Midwest recently, resulting in many deaths, is unprecedented. To help those in the equipment rental industry, their families and communities that have been severely impacted by these devastating disasters, the American Rental Association (ARA) Foundation took the extraordinary step on Dec. 30 of donating $10,000 to the American Red Cross for first-responder assistance. “The news reports this past week have been horrific,” said Andy Cooke, CERP, manager of Cooke Rentals in Cornelius, N.C., who serves as the chair of the ARA Foundation board of trustees. “That massive storm system caused tornadoes and torrential rain to rip through the South and Midwest, resulting in loss of life and record-breaking flooding. This devastation is impacting thousands and will have major consequences for some time to come. I felt the ARA Foundation had to act to help our industry peers, their families and their communities deal with this crisis.” The ARA Foundation has been monitoring this storm system since it started Dec. 23, said Jenni Swanson, ARA Foundation director of development. “As part of the ARA Foundation’s disaster relief and recovery programs, we monitor weather-related disasters very closely and are in regular contact with our state association presidents in the affected areas to see who in the industry has been impacted and to reiterate that our disaster programs are available to them,” she said. “We have seen the huge toll this massive storm
The Red Cross distributes supplies at a bulk distribution site in Columbia, South Carolina during the floods in the fall of 2015. Jeanette Ortiz-Osorio/American Red Cross
system has had on so many across the U.S.,” she said. “Tornadoes have hit New Mexico, Texas, Oklahoma and Missouri. Record flooding is occurring in Texas, Oklahoma, Missouri, Mississippi, Louisiana and Illinois. This is just the start. This flooding, which is predicted to be the worst on record along the Mississippi River, is affecting river towns and will start to cause massive flooding along all tributary rivers that feed into it. This is occurring during the winter, resulting in not just floodwaters, but frozen floodwaters that will make cleanup nearly impossible. It will only get worse once the tributary rivers start to flood.”
“Extraordinary times require extraordinary measures,” said Christine Wehrman, ARA Foundation executive director and American Rental Association (ARA) CEO. “The severity of this storm system comes at a difficult time of year, weather-wise, when assistance is even more critical to saving lives. The flooding is occurring on already-saturated ground, which means flooding can extend into the spring months. The tornado damage is severe. Recovery in all areas that have been impacted will be a long-term undertaking and require considerable support and assistance. The ARA Foundation is proud to be able to contribute in this way on behalf of the equipment rental industry.”
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>> INDUSTRY NEWS
Manitou Adds Companies To Dealer Network Material handling equipment manufacturer Manitou has added two new companies to its dealer network: Walter Payton Power Equipment, based in Riverdale, Illinois, and Fernbridge Tractor and Equipment, Fortuna, California. Walter Payton Power Equipment also has branches in Taylor, Michigan; Louisville, Kentucky; and Evansville and Lebanon, Indiana. WPPE will represent Manitou’s telescopic handlers, heavy capacity and rotating telehandlers. Fernbridge Tractor & Equipment serves the Northern California counties of Humboldt, Del Norte and Trinity. It handles Manitou rough terrain vertical-mast forklifts; semi-industrial vertical-mast forklifts and agricultural telehandlers. Manitou Group is headquartered in Ancenis, France, with U.S. headquarters in West Bend, Wisconsin.
Ritchie Bros. Hosts Largest Auction Ever in St. Louis
Kirby-Smith Machinery Makes Internal Structural Changes
Ritchie Bros.’s St. Louis, Mo., auction site held its largest-ever auction on Dec. 16. Buyers from as far away as Australia, Alaska and western Canada took part, purchasing more than 1,700 items in total. Among the equipment highlights: a Cedarapids portable asphalt batch plant, which sold for $330,000; a large selection of late model farm equipment; and hundreds of construction equipment items, including excavators, dozers, articulated dump trucks, loaders and graders. Ritchie Bros. sold to the highest bidder, with no minimum bids or reserve prices. More than 3,700 people registered to bid in the auction: about 1,500 in person at the auction site, and just over 2,200 online at rbauction.com. The auction attracted bidders from 49 U.S. states, nine Canadian provinces and more than 40 other countries.
Kirby-Smith Machinery, Inc. has implemented the following internal structure change to provide streamlined customer focus by branch-assigned territory. Paul Bell is now responsible for all facets of the Fort Worth and Abilene branches, including sales and rental oversight. Doug Bagley will assume the role for the Dallas branch. These dual roles of Sales and Operations Manager will align the company focus to be the equipment authority for the industry and clients they serve. By providing structure to the combined departments with one primary manager, each branch will provide seamless products and product support across the 149 counties covered by KSMI in North and West Texas. KSMI provides support to its customers in Texas from six area locations in North and West Texas. Branch operations in West Texas, including Odessa, Lubbock and Amarillo, are directed by West Texas Area Manager, Chuck Thompson. Kirby-Smith’s organization structure change in the Texas Metroplex is driven by high customer volume and strong activity, which has been mostly unaffected by energy markets. “These operational changes will better position KSMI for the expected growth in sales and rental,” reports David Cooper, Vice President and General Manager of the Southern Division. “In addition we will have the right structure for expanding our support with new locations and new products as we continue to provide strong primary contact with a growing marketplace.” Kirby-Smith Machinery, Inc. has been a leader in the industry for over 30 years, and is approaching its seventh year of expanded coverage in the Texas equipment market. KSMI offers Komatsu, National Boom Trucks and the Wirtgen family of products (Wirtgen, Kleemann, Vogele and Hamm) along with rental, sales, service and parts for these lines and other aligned products in most of the territory. February 2016 | Construction Equipment Distribution | www.cedmag.com | 15
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>> INDUSTRY NEWS
RDO Equipment Co. & R.D. Offutt Co. Announce Recipients of Community Builder Program Grants Fargo, N.D.-based companies RDO Equipment Co. and R.D. Offutt Co. announced that five charitable organizations have been named recipients of their Community Builder grant program, including three from the Dakotas. Launched in summer 2015, the companies’ Community Builder program is designed to support the charitable organizations team members work with, while building vibrant and prosperous communities in which we live and work. The grants awarded are meant to be transformative and impactful to the benefiting charities. “The Community Builder program
builds upon our value of community involvement at RDO while mirroring the passion of giving back, which is the legacy of my father and our Founder, Ron Offutt, along with the other members of our family,” commented Christi Offutt, Chair of RDO Equipment Co. and R.D. Offutt Co. A one-of-a-kind program, any team member from RDO Equipment Co. or R.D. Offutt Co. can apply for a Community Builder grant. As part of the application, the employee must explain how the grant will benefit the local community along with information about their personal commitment to that organization.
Based on the applications received from team members, five Community Builder grants totaling $105,000 were awarded to the following charities: Ronald McDonald House Charities of the Red River Valley, Fargo, North Dakota; Ruth Meiers Hospitality House, Bismarck, North Dakota; Boys and Girls Club of Aberdeen, Aberdeen, South Dakota; Krum Independent School DistrictEducation Foundation, Krum, Texas; and Toys for Tots (DFW Metroplex), Dallas/Fort Worth, Texas.
Trent Ryan Joins International Iron International Iron, Florida’s premier customer service-focused heavy equipment sales, rental and service dealer, today announced the addition of Trent Ryan as product support representative and field mechanic to the company’s growing team. In this capacity, Ryan is charged with serving the company’s existing clients in the north Florida region, as well as overseeing future market growth. “We’re honored to welcome Trent to the International Iron team and we’re looking forward to his tremendous depth of expertise in the industry and customer relations,” stated Jon Hall, president of International Iron. “Our expansion in Trent Ryan has joined north Florida is driven by our dedication to best International Iron. serve customers, and having Trent in the market, ready and available to customers, brings our promise of customer support to reality.” Ryan’s extensive experience in construction and heavy equipment and machinery includes more than 30 years in sales, support and technology. With knowledge in field service and product support, as well as customer relations, Ryan brings a unique perspective and expertise. Prior to joining International Iron, Ryan served as a service manager for Heavy Machines, Inc., a Liebherr dealer, overseeing a multi-state territory. For more information please visit: www.intiron.com.
MASABA Appoints New President James R. Peterson was named the president of Masaba. Jim worked in sales and marketing at Masaba for the past seven years. Prior to joining Masaba, he was business owner and president of Canica-Jaques VSI Crushers. Peterson holds an MBA from Mississippi State University and a Bachelor’s Degree in Finance from Marquette University.
Omaha Standard Palfinger Makes Organizational Change Omaha Standard PALFINGER (OSP) has announced that, effective January 1, 2016, Mark Whaley will step down as the company’s president. Mr. Whaley will continue his involvement with PALFINGER under the PALFINGER North America Group moving forward. Mark Woody, Managing Director of the PALFINGER North America Group, reflects, “We are pleased that Mark’s personal goals can now be achieved and that he will remain with PALFINGER.
Under Mark’s leadership, major accomplishments were achieved at OSP that resulted in strong sales growth.” In a related move, Jason Holt will report directly to Mark Woody. Holt, who holds the position of VP – Operations, has made tremendous contributions to the operational objectives at OSP since his installment in 2013. He comments, “I am very excited to be a part of this next phase of OSP’s transformation and supporting our customers with high quality products.”
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Getting Social with Associated Equipment Distributors Want to be featured in our next issue of CED Magazine? It’s easy! Interact and engage with AED on Facebook and Twitter by using the hashtag #AEDGetSocial. We’ll pick our favorites
#AEDGetSocial The NEW Social Experience For AED Members
Compact Equipment @CompactEquip New AED Analysis: FAST Act will generate $13+ billion in equipment market activity. #GreatInfo @AEDSocial http://compactequip.com/?p=17740
Dennis Kruepke Retweeted @AEDSocial Proud @TheHill cited @AEDsocial as one of the top winners in the #highwaybill lobbying fight to #fixthetrustfund http://ow.ly/VYABV
ECA @EquipCorp ECA Retweeted Equipment Today Good times ahead for the #constructionequipment industry thanks to #FASTAct, according to @AEDSocial.
Lori A Welz @msloriw66 Lori A Welz Retweeted AED Be Safe From @CTABSInc and @msloriw66
AED @AEDSocial AED 20 Group members testing equipment #playwithstuff @annpollert @aedcfo
McCann Industries liked your Tweet: Today, the House voted to pass a $680-billion package of tax cuts, the first of two steps. #taxbill #AEDGetSocial
Jon Cruthers @joncruthers Congratulations to Tom Neikirk as new President of @Okada_America @AEDSocial http://ow.ly/Weg5K
Monitordaily @monitordaily Pivotal Elections Approaching: @AEDSocial Washington Office Plans 2016 Policy Push http://ow.ly/Wuvq7 A
Follow AED on Twitter @AEDSocial
Christian A. Klein @caaklein Thanks @MonitorDaily for allowing me to contribute this piece on @AEDsocial equip industry policy agenda http:// ow.ly/VYJDF #Congress
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>> REGIONAL REPORT
MIKE DEXTER
For 2016: An Emboldened Focus on Canadian Advocacy, Government Affairs The industry’s workforce development initiatives need everyone to get on board.
There is nothing more impactful than letting your elected officials know and see firsthand how their decisions impact your business.
There’s a new player in town, and the name is Justin Trudeau and the Liberal Party of Canada. Some of you may be wondering what this means for the equipment distribution industry in Canada and how AED plays a role in that regard. Let me assure you that your Association is at the forefront of federal public policy discussions that impact your dealership’s ability to grow, hire and succeed in an incredibly competitive market where certainty is not a word heard often in regards to the current state of the economy. Many of these issues focus primarily on energy production, increased infrastructure spending and taking a hard look at regulations such as hours of service for drivers. For instance, what would it mean to your dealership if the new government made good on its promise to double current infrastructure spending levels to $125 billion over the course of 10 years? Or how would your dealership benefit from the TransCanada Energy East project or the Kinder Morgan Inc.’s Trans Mountain expansion? While your answer may depend on where you do business, a single fact remains: AED is your voice in Ottawa and across Canada, with a mission to ensure your interests are protected and that the voice of an extremely important industry is heard in Parliament. But we can’t do it alone. While AED does significant work at advocating on your behalf in Ottawa, there is nothing more impactful than letting your elected officials know and see firsthand how their decisions impact your business. When they see how your business is affected and the role it plays in the community, they tend to listen and understand
the issues at hand with a more comprehensive perspective. In the United States, this model has been very effective at educating lawmakers on infrastructure policy, regulatory issues and even local problems that aren’t being addressed. AED members across the United States have teamed up with AED regional managers, brought out elected officials to the dealership and educated them on the business and issues at hand. This has ultimately made a difference and is a model for success that – with a little work – can be achieved in Canada. For years, AED has been a champion at advocating for a long term highway spending bill, tax extenders related to equipment depreciation that will generate significant economic activity and more recently has begun to work on identifying obstacles related to the skilled worker shortage that can be overcome with a little hard work and effort between industry and government. All of which were achieved in 2015. Let’s get to work in 2016 to progress as an industry, and let’s start by making sure our voices are heard by a government that should be working for us. Your Association can only be effective if it has the backing and involvement of its membership. With your help and participation in functions such as the annual Ottawa Briefing, you’ll not only become more intelligent in these issues, but you’ll also go back to the dealership with the ability to make more informed decisions. You’ll be sending a message to Parliament that you’re ready to work with them and let them know that there are things that they can do right now that will dramatically improve the business climate of an industry that has never given up on the development and growth of Canada and its provinces. So let’s get to work in 2016 on making sure that the promises made by the new player in town are kept; and making sure that at the end of the day, we can all walk away saying that we are doing everything we can as an industry to progress.
MIKE DEXTER is the Midwest regional manager and director of member engagement for AED. Prior to his assoction work, Dexter had a long career in manufacturing, including a stint as plant manager for Dayton/Superior Corp., where he was responsible for a staff of 55 and an $8 million budget. He can be reached at 630-468-5124.
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>> PRODUCT PREVIEW
T
CASE Introduces 580N EP Backhoe
Geith’s Ripper Sharpens Your Excavator’s Bite The Geith Ripper is designed to add a powerful ripping ability to your excavator in the most demanding hard ground and demolition applications. The Ripper has been specifically engineered to reduce the amount of stress exerted on the excavator. The Geith Ripper is available for a wide variety of work depths and a wide range of machines to best meet our customers’ needs. Features & Benefits: ● Offer a range for 9 – 90 ton excavators ● Apply all the power of your excavator at one point for maximum ripping efficiency ● Replaceable tooth and wear shroud (450 BHN) ● Added side wear protection to extend life of ripper (for excavators bigger than 10 tons) ● Extra thick steel shank for increased strength ● Ripper reduces excessive stresses on your excavator ● Reinforcing gussets for added durability ● Rip & Load ● The Quick Coupler, Bucket and Ripper combination allows the operator to change from ripping to loading without ever leaving the cab ● Capital investment reduced: only one excavator is required to rip-and-load ● Cost effective and low maintenance alternative to rock breaking or drilling and blasting ● Rock can be extracted in areas where blasting is not an option ● Powerful ripping ability in hard materials such as rock, permafrost and caliche For more information, please visit www. geith.com.
Introducing the newest addition to the industry’s best lineup of backhoes – the 580N EP. This Tier 4 Final model combines the quintessential features of our N Series, new productivity-boosting options and an efficient, maintenance-free Tier 4 Final solution. So whether you need the lifting and digging power of a light-duty excavator, the scooping and hauling capabilities of a wheel loader or the versatility of a skid steer, the 580N EP is where efficiency meets power. The 580N EP combines efficient power with exceptional performance. Designed with our exclusive over-center backhoe design, the 580N helps reduce material spillage during roading. And for even greater comfort, choose the Ride Control or speed selectable Auto-Ride Control (4WD ONLY) options. Operators can also
customize their forward/reverse transitions with the industry-exclusive SmartClutch modulation. Optional high-intensity, “easy flex” side lights provide superior jobsite visibility at night and a new universal backhoe coupler option fits Cat® and John Deere attachments for expanded versatility. Plus, SiteWatch™ comes standard to help track, manage and optimize machine performance. The 580N EP uses a Diesel Oxidation Catalyst with a Particulate Matter Catalyst solution to meet Tier 4 Final emissions standards. What does that mean to you? We’re proud to say – nothing. It’s compliance that requires no extra work. No extra fluid to add. No filters to replace. Just get in and go. For more information, visit www.casece. com.
Meet JCB’s 135 Radial Lift Skid Steer The small platform 1350lb (612kg) rated operating capacity JCB 135 radial lift skid steer is the smallest model in our revolutionary range. Our unique single boom and side entry design makes this skid steer loader comfortable, safe, economical, productive and tough. Designed and built in the USA (home of the skid steer), the 135’s 48hp (36kW) Kohler engine delivers impressive performance and low operating costs. The 135 has on average 60% better visibility and a 46% larger cab than rival manufacturers’ mini skid steer designs, and there are a whole range of other benefits too. Like ergonomic controls, an extremely tough power boom and a low cost of ownership. Keeping your operators fresh, focused and productive is paramount, which is why we’ve designed the 135 skid steer loader with a 46% larger cab than the nearest competitive machine. Our standard seat has mechanical suspension and there’s also a 12V charger, easily readable control panels and an electronic hand throttle. www.greenshieldsjcb.com Electric controls make handling smooth and intuitive; all in all, we like to think the JCB 135 skid steer loader is a comfortable favorite with operators. There’s no more productive skid steer than the JCB 135. The figures speak for themselves: it has a 16% lower cost of ownership than the top competitor, a better SAE service rating, an annual fuel savings of over 2450 liters (based on 50 weeks per year and 35 hours per week) and a heavy-duty crowd ram that’s nearly 3 times the size of the nearest major competition. There’s a standard mechanical quickhitch and auxiliary couplers on the PowerBoom too. For more information, visit www.jcbna.com. February 2016 | Construction Equipment Distribution | www.cedmag.com | 19
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>> PRODUCT PREVIEW
New Cat 325F Excels at Close-Quarters Work The new mid-size Cat 325F is a highly efficient compact radius excavator built for all your close-quarters work. The machine features a powerful and fuel efficient Cat C4.4 ACERT engine paired with a responsive stateof-the-art hydraulic system. Engine emissions meet U.S. EPA Tier 4 Final regulations. Compared with its Cat 321D Tier 3 predecessor, the 325F can run on biodiesel up to B20. Based on engineering validation, it will consume up to 22 percent less diesel fuel than its predecessor, with no loss of swing torque and bucket and stick forces. With a maximum lifting capacity of 27,000 pounds (12,650 kg) at 15 feet over the front at ground level, the 325F exceeds its predecessor model’s capacity by 8 percent. The 325F features proven electronic, fuel, air and aftertreatment components such as a maintenance-free diesel particulate filter, and it has isochronous control that
automatically manages pump and engine speed for improved fuel efficiency. Boom and stick recirculation valves reduce fuel consumption and speed up cycle times, and a choice of three power modes – high power, standard and eco – help you more actively manage fuel consumption. A variable-speed fan for less energy consumption and noise, high-ambient cooling capability to work in extreme heat, and altitude capability up to 9,840 feet (3,000 m) with no engine de-rating round out the machine’s high-performance attributes. The 325F’s compact radius design makes it ideal for working confidently in space-restricted areas like road jobs with lane closures and next to buildings or other structures. With a front swing radius of 7 feet 8 inches (2.34 m) and a tail swing radius of 5 feet 8 inches (1.72 m), the machine can dig, swing and dump within a working space of 13 feet 4
inches (4.06 m). When rotated 90 degrees and working over the side, just 135 mm (5 inches) of counterweight extends beyond the track width, which allows trucks and jersey barriers to be positioned closer to the machine. Bucket linkage is the same as the 321D, which means you can work with the same tools. For more information, visit www.cat.com.
Komatsu America Corp. Presents D61-24 Crawler Dozer The D61-24 crawler dozer features a 6.8 liter, 168-horsepower, SAA4D107E-3, EPA Tier 4 Final emissions-certified engine with class-leading power and fuel efficiency. The Komatsu Variable Geometry Turbocharger (KVGT) creates excellent engine response and helps maintain a high level of passive regeneration to ensure fuel isn’t wasted on cleaning the exhaust filter. More than 99 percent of Komatsu Diesel Particulate Filter regeneration is performed with no action required by the operator. “The D61-24 dozer combines the visibility and productivity strengths of its predecessor with blade durability and equipment-speed upgrades in the new model,” said Jonathan Tolomeo, Komatsu product manager. “Also, we think operators will really like the H-Mode enhancement for high-duty cycle applications requiring extra engine speed.” Other noteworthy features on the D61-24 crawler dozer include: ● A choice between quickshift, three-speed mode and a variable, 20-speed customizable transmission mode to suit personal preferences. ● Proprietary engine and hydrostatic transmission technology that improves machine efficiency and cuts fuel consumption. ● New auto-idle shutdown and economy modes that help reduce idle time and save fuel. ● Pioneering KOMTRAX telematics system and monitor that provides key machine metrics, including KDPF status, DEF consumption, fuel level, operating hours, location, cautions and maintenance alerts. Operator ID also makes it possible to view KOMTRAX data by job, application or operator. KOMTRAX is included with the D61-24 at no charge. Visit the website atwww.komatsuamerica.com for more information.
Link-Belt Upgrades Include Engine Package
For 2016 model year, the 140-ton (120-mt) HTC-3140 and HTC-3140LB hydraulic truck cranes from LinkBelt will receive feature upgrades along with emissions updates. The 581-hp (434-kW) carrier engine graduates to EPA 2013 on-highway requirements and 250-hp (186-kW) upper engine moves up to off-highway Tier 4 Final/Stage IV. It is also worth noting that both models will maintain an ultra-efficient twin engine platform. The highlight of these upgrades is the addition of sideto-side suspension tilt which can go up to 4 degrees. An auto-lubrication system is a new feature on both the upper and carrier frames and “all temperature” hydraulic oil, lubrication and anti-freeze packages are now standard. Transportability remains impressive on 2016 model HTC-3140 and HTC-3140LB. Carrying 6,000 pounds (2,721.5 kg) of counterweight on the back of this truck is nothing new in a 5-axle configuration, but now it is possible with a boom dolly. This means a well-equipped 195-foot (59.5 m) boom “LB” version can carry 32,000 pounds (14,514.9 kg) of counterweight and still achieve transport loading below 20,000 pounds (9,071.8 kg) per axle. For more information, visit www.linkbelt.com.
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>> PROFITABILITY
CONSTRUCTION EQUIPMENT INDUSTRY
DR. ALBERT D. BATES
PROFIT IMPROVEMENT REPORT Exclusive report will focus on the profit realities of customers for AED members.
Dr. Albert D. Bates is founder and president of Profit Planning Group. His recent book, “Breaking Down the Profit Barriers in Distribution,” is the basis for this report.
O
One of the most widely discussed topics in distribution today is the fact that a lot of customers and a lot of items lose money for the company. That is, the cost of servicing a large component of the customer set or handling many of the items is larger than the gross margin dollars generated by those customers or items. While the economics of the situation are fairly straightforward, the implications for action are not. One widely-suggested option is to eliminate items and customers that don’t cover their costs. It is a quick and easy solution. Another option is to work on enhancing margins or lowering costs to overcome the profit deficit. This approach is both time consuming
and difficult. Because the observations regarding customer profitability are largely mirrored by item profitability, this report will focus exclusively on the profit realities of customers for AED members. The report will examine customer profitability from two perspectives: ● The Economics of Customers — An analysis of how customers break out into widely varying profitability groupings. ● Changing the Profit Relationship — A discussion of how profitability can be enhanced by working with customers. The Economics of Customers Within every line of trade in distribution,
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>> PROFITABILITY
including AED, there are wide variations in customer purchasing patterns. Some customers buy a lot of merchandise, others buy very little. Some customers are aggressive price negotiators while others are more service oriented. Finally, some customers are the proverbial “squeaky wheel” while others are easier to work with. These factors come together to produce widely varying levels of profitability across the distributor’s customer set. At one extreme, customers who purchase a lot of products are service-oriented (rather than price-oriented) and who don’t “have issues” tend to be highly profitable for the distributor. At the other extreme, some customers who are high maintenance actually result in a loss for the distributor. Unfortunately, there are only a few of the highly-profitable customers and a fairly large number of the unprofitable ones. This relationship between customers and the profitability they produce for the distributor is often referred to as the “whale curve.” Customers are ranked from most profitable to least profitable along the horizontal axis. The percent of total profit generated is presented on the vertical axis. The graph looks something like a whale, albeit a rather anemic one. As can be seen, the most profitable customers cause total firm profit to rise quickly. Somewhere along the way the slope changes as additional customers generate profit at a lower rate. Finally, the curve starts back down as some customers cause the firm to lose money. Eventually the curve ends up at the 100% of total profit level. The typical AED member generates $1,500,000 in profit. For that firm, the customers fall into four categories based upon the profit they generate for the
distributor. The A customers are the most profitable and the D customers are the least profitable—the money losers. The relationship for customers and profit tends to be a little more dramatic when put into tabular form: The fact that the typical firm loses $675,000 on slightly more than one-third of their customers is not an inconsequential issue. Potentially, dollar profit could be increased by 45% through concerted effort. Changing the Profit Relationship The immediate, knee-jerk, reaction is to just fire the D customers. In point of fact, this is an approach that some analysts support. It is an approach that should be avoided. Instead, it is essential to break the customer base into three target groups and work with them systematically. Group One—A Customers: In the rush to focus on the money losers, there is a tendency to overlook the most profitable customers in the mix. It is actually more important to support the A accounts than it is to worry about the D ones. No customer set buys all of their needs from one supplier. Anything that can be done to encourage A customers to purchase more has a direct and immediate impact on profitability. It is also a positive set of actions that everybody supports. Group Two—The Down and Dirty Two Percent:
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>> PROFITABILITY
Anecdotal evidence suggests that somewhere around place the number of orders they want to place. Time two percent of all customers are not just unprofitable for and effort must be spent to educate customers about the the distributor, they are highly unprofitable. Even worse, cost savings on their side of the profitability equation they probably enjoy being unprofitable. These customers if they were to order less frequently. It requires both an analytical effort and a sales effort. The profit impact, really should be fired. though, justifies the effort. Care must be exercised in the firing. Today’s fired customer may become tomorrow’s acquirer of one of the best A customers. The Percent of Percent Dollar Customer simplest approach is to simply let them Category Customers of Profit Profit fire themselves. This involves systematically moving them to a different, higher, category on the pricing schedule. Group Three—The Mass of D Accounts: After the members of Group Two have been eliminated, there remains a massive number of accounts that still produce a gross margin that does not cover the cost to serve them. It is a lot of customers -45 -675,000 and requires a lot of work to correct the situation. There may be some opportunity on the pricing side with these accounts. However, most of the effort must Moving Forward be devoted to the issue of the A lot of firms are aware that some customers are cost to serve. This inevitaunprofitable to them. What is needed is a more bly gets back to the reality precise analysis of the nature of the challenge. of too many small orders, too many emergency orders Once the analysis is conducted that analysis must lead to action. and too many returns. The key is to get customers to plan ahead and ultimately place fewer orders. Alas, customers
©2015 Profit Planning Group. AED has unlimited duplication rights for this manuscript. Further, members may duplicate this report for their internal use in any way desired. Duplication by any other organization in any manner is strictly prohibited.
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>> DATA TRENDS
Dodge Momentum Index Increases in December
ROUSE ANALYTICS
Physical Utilization
The charts below shows physical utilization equipmentUnits category. Physical utilization is the percentage of fleet cost which Physical Utilization of FourbyRental is on-rent during a given period. Physical utilization is cost weighted. “On Rent” and “In Fleet” status are determined on a nightly basis 7 days a week, 365 days a year. A unit is “On Rent” if it is at a job site earning rental revenue. A unit is “In Fleet” if it is a rental asset owned by the client. Units out for repair and refurbishment are considered “In Fleet.”
PHYSICAL UTILIZATION
PHYSICAL UTILIZATION
PHYSIC
85% 77.9% 80% 80% 85% 80% 85% 85% 77.9% 80% 80% 80% 71.4% 71.4% 77.9% 80% 70% 75% 75% 80% 85% 85% 71.4% 71.4% 77.9% 70% 80% 70% 75% 75% 70% 71.4% 80% 80% 71.4% 75% 70% 75% 65.6% 70% 70% 77.9% 71.4% 71.4% 70% 75% 75% 65.6% 70% 70% 63.5% 70% 63.5% 65% 60% 65% 65.6% 70% 70% 71.4% 71.4% 63.5% 75% 63.5% 75% 60% 65% 65% 65.6% 60% 60% 63.5% 70% 63.5% 65% 70% 65% 60% 60% 63.5% 60% 63.5% 65.6% 60% 60% 65% 65% 60% 55% 55% 60% 60% 50% 2015 63.5% 55% 2012 2013 2014 2015 2012 2013 2014 2015 63.5% 55% 2012 65%2011 65%2011 50% 50% 60% 50%2011 2011 2012 2013 2014 2015 2012 2015 2015 2012 2013 2014 2015 2012 2012 2013 2013 2014 2014 2015 2015 50%2011 50%2011 60% 60% 50%2011 55% 55%2011 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 50% 2015 2012 2013 2014 2015 2012 2013 2014 2015 50%2011 50%2011 55% 55% 2011 2012 2013 2014 2015 2011 2012 2015 2015 50%2011 50%2011 2011 2012 2013 2014 2015 2012 2012 2013 2013 2014 2014 2015 2015 50% 55% 55% 2015 2015 2011 2012 2013 2014 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2012 2013 2014 2.2%2015 2015 2011 2012 50%2011 50% SKID STEERS − -0.2% 5.0% 80% 80% 80% 2015 2011 - ARTICULATING 2012 2013 2011 2013 2014 − 2015 AWP BOOMS − 20141.7% 2015-3.2% FORKLIFTS -2012 WAREHOUSE/INDUSTRIAL 1.7% -4.1% 80% 80% 85% 80% The Dodge Momentum Index rose in December, increasing 4.0% from 80% 80% 80% 85% 80% 80% 80% Data 80% 77.9% 77.9% 80% arevised 123.8 in November to 128.7 in December according Dodge 68.7% 68.7% 70% 68.3%to85% 70% 70% 80% 85% 77.9% 77.9% 80% 68.7% 70% 68.7% 80% 68.3% 75% 80% 70% 70% 77.9% 77.9% 68.7% &80% Analytics. The Momentum Index is a monthly measure68.3% of the85% first70% (or 68.7% 70% 70% 77.9% 77.9% 68.7% 70% 68.7% 70% 68.3% 75% 70% 70% 70% 75% 77.9% 77.9% initial) which have 60% report for nonresidential building projects in planning, 70% 75% 60% 68.7% 68.7% 60% 68.3% 70% 70% 63.5% 65% 70% 60% 60% 60% 63.5% 70% 75% 60% 60% been 60% shown to lead construction spending for nonresidential buildings 65% 60% by 63.5% 65% 60% 60% 60% December 2015 60% 50% 50% 50% 63.5% 65% a 60% full year. The Index is currently at its highest reading since February 2009 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2012 50% 50% 50%2011 60% 60% 60% 50% 55% 50%2011 2012 50%2011 50%2011 2015 2015 2012 2013 2014 2015 63.5% 55% 2012 2012 2013 2013 2014 2014 2015 2015 60% 65%2011 50% and is 17% higher than one year ago. The increases seen in the Index in 2014 2015 2011 2012 2013 2014 2015 50% 50% 50% 2011 2011 2012 2015 2012 2013 2014 2015 2012 2012 2013 2013 2014 2014 2015 2015 50%2011 55%2011 2011 2011 2012 2013 2014 2015 2012 2013 2014 2015 2011 2012 2015 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 50% 55% For 50% 50%more 2012 50% are a2011 signal that 2012 the construction recovery will continue into 2015. 2015 2015 2013 2014 2015 2011 2013 2013 2014 2014 2015 2015 2011 2012 2013 2014 2015 2011 2012 2011 2012 50% 55% 80%2011 70% 80% 2015 2012 2013 2014 2015 2011 2012 2013 2014 2015 information, Dodge Data & Analytics at www.construction.com. 80% AWP visit 70% 80% 80% SCISSOR LIFTS − 0.6% GENERATORS − 1.0% -7.8% -3.2% FORKLIFTS - WAREHOUSE/INDUSTRIAL − 1.7%0.0%-4.1% 80% 70% 80% 80% 71.1% 80% 80% 70%ANALYTICS 80% ROUSE 80% 80% December 20 71.1% 70% 60% 70% 80% 80% 71.1% 80% 70% 80% 68.7% 70% 60% 70% 70% 68.3% 68.3% 71.1% 68.7% 80% 70% 52.9% 80% 52.9% 70% 68.3% 70% 70% 60% The charts below show physical utilization by equipment category. Physical utilization is the percentage of fleet cost68.3% which is 70% 68.7% 70% 60% 68.3% 52.9% 70% 52.9% 68.3% 71.1% Physical Utilization 68.7% 70% 52.9% 70% 68.3% 68.3% 60% 50% 52.9% 60% 70% 70% 60% 70% 52.9% 52.9% 60% 50% 60% on-rent during a given period. Physical utilization is cost weighted. “On Rent” and “In Fleet” status are determined on a nightly basis 60% 68.7% 70% 68.3% 70% 60% The charts utilization is the percentage of fleet cost w 50% below shows physical utilization by equipment category. Physical68.3% 60% 60% 60% 52.9% 52.9% 60% 50% 60% status are determined seven job earning rentalPhysical revenue. A unit is weighted. “In Fleet” it isand a rental 60% 60% isaon-rent during a given period. utilization is cost “OnifRent” “In Fleet” 50% days a week, 365 days a year. A unit is “On Rent” if it is at 40%site 50% 60% 60% 2015 2012 2013 2014 2015 2011 2012 2013 2014if it is at a job 2015 2011 A unit is2012 40% 50%revenue. 60%2011 50% 60% 50% 50% nightly basis 7 days a week, 365 days a year. A unit is “On Rent” site earning rental “In Fl asset owned by 2012 the client. Units repair and refurbishment are considered Fleet.” 50%2011 2011 2012 2012 40% 50%2011 2015 2015 2013 out for2014 2015 2011 2012“In 2013 2013 2014 2014 2015 2015 50% 50% 60% 60% 2011 2012 2013 20142015 / 2015 2015 50%2011 if it2011 is40% a rental owned by2015 the client. Units out for2014 repair2014 and refurbishment are considered50% “In2011 Fleet.” 2011asset 2012 2012 2013 2012 2015 2015 2012 2013 2014 2013 2015 2015 50% 50% Sep Aug 2015 Sep / Sep 2014 Source: Rouse Asset Services. Contact Gary McArdle at gmcardle@rouseservices.com, (310) 363-7520 2011 2012 2013 2014 2015 2011 2011 2012 2015 2015 50% 50%2011 2012 2013 2014 2015 2012 2012 2013 2013 2014 2014 2015 2015 50%2011 40% 50% 2015 2015 2011 2012 2013 2014 2015 2011 2012 2012 2013 2015 Sep 2015 2015 2014 Sep 2015 / Sep 2014 2012 2013 2014 2015 2011 2013/ Aug2014 2015 2011 2012 50%2011 50% 80% 75%2011 75% 2015 2012 2013 2014 2015 2011 2012 2013 2014 2015 75% 75% 70% 80% 80% BACKHOES − 0.3% -5.8% 75% AWP - TELESCOPIC BOOMS − BOOMS − 0.9% -4.3% BACKHOES − 0.3% 80%AWP - TELESCOPIC 75% -5.8% 70% 0.0% GENERATORS 1.0% 0.9% -7.8% -4.3% 80% EXCAVATORS − − 80% 0.9% -3.3% WHEEL LOADERS − 0.4% 80% -6.1% 80% 75% 75% 70% 80% 80 68.2% 80% 68.0% 70% 68.0% 65% 71.1% 71.1% 70% 65% 80% 80% 80% 80% 80 80% 80% 80% 68.2% 80% 75% 75% 80% 80% 80% 80 68.0% 60% 68.0% 71.1% 71.1% 70% 65% 65% 71.4% 70% 80% 80% 80% 80 68.2% 80% 80% 80% 68.0% 71.4% 71.1% 70% 80% 68.0% 65% 65% 71.1% 70% 70% 70% 70 70% 60% 70% 71.4% 80% 80% 80% 80% 68.2% 65.6%70% 65.6% 80 80% 80% 70% 70% 70% 70 68.0% 60% 68.0% 71.1% 71.1% 65% 65% 71.4% 70% 65.6% 70% 65.6% 70 71.4% 52.9% 70% 70% 80% 80% 80% 65.6% 70% 70% 70% 65.6% 70 60% 55% 55% 71.4% 60% 70% 71.4% 68.2% 52.9% 65.6% 65.6% 60% 60% 60% 60 68.0% 65% 68.0% 65% 70% 70% 70% 71.1% 71.1% 70% 70% 70% 70% 70 60% 55% 55% 60% 60% 60% 71.4% 80% 80% 80% 52.9% 60% 65.6% 60% 65.6% 60 65.6%50% 65.6% 70% 70% 70% 60% 60% 60 60% 70% 55% 60% 55% 52.9% 71.4% 50% 60% 60% 60% 60% 60 70% 65.6% 55% 65.6% 70% 70% 50% 50% 50% 50 60% 55% 60% 50% 2012 2013 2014 2015 2011 2012 2013 2014 2015 2012 2013 2014 2015 50%2011 50% 50%2011 50 60% 60% 60% 60 65.6%50% 70% 70% 70% 65.6% 45% 45% 50%2011 50%2011 71.4% 2012 2013 201452.9% 2015 2012 2013 2014 2015 2012 2013 2014 2015 50%2011 50 50% 60% 65.6% 2012 2013 2014 2015 2011 2012 2013 2014 2015 50%2011 50% 50 2011 2012 2013 45% 2014 2015 2012 2015 65.6%40% 2011 2012 2013 2014 2015 2011 2012 2013 2015 201450%2011 2015 2011 50% 60% 60% 60% 60% 55% 55% 45% 50% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2012 2013 2014 2015 70% 70% 70% 50% 50% 50% 50 2011 2012 2013 2014 2015 2011 2012 50% 45% 60% 60% 60% SKID STEERS − -0.2% 2.2% FORKLIFTS HI-REACH − 0.4% -5.0% 45% 2015 2015 65.6%50% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 40% 50% 60% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 65.6% 2011 2012 2013 2014 2015 50% 60% 2011 2012 2013 201480% 2015 2015 2011 201285 45% 45% 60% 60% 80% 85% 2015 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 40% 50% 80% 80% 85% 85 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 60% 60% 60% 2015 2015 40% 50% 2011 2012 2013 2014 2015 2011 2012 2013 2014 80% 85% 77.9% 80% 2015 85 50% 50% 50% 50% 45% 45% 80% 80% 80% 80% 2015 85% 85 77.9% 2015 2015 2011 2012 2013 2014 2015 2011 77.9% 70% 70% 75% 75 2011 2012 2013 2014 2015 2011 2014 2015 2011 2012 2015 2011 2012 2013 2014 2015 2011 2012 2012 2012 2013 2013 2013 2014 2014 2015 2011 20 50% 50% 50% 60% 60% 60% 40% 50% 85% 80% 80% 80% 80% 85 77.9% 70% 70% 75% 75 50% 2011 2012 2013 2014 2015 2014 2015 2011 20 50%2011 2012 2012 2013 2013 2014 50% 70% 75% 80% 70% 75 2015 2015 2011 2012 2013 2014 2015 2011 2015 80% 77.9% 70% 70% 75% 75 2015 2012 2013 2014 2015 50%2011 50%2011 50%2011 80% 75% 2012 2013 2014 2015 63.5% 65% 63.5%20 80% 60% 60% 65 63.5% 75% 63.5%20 70% 70% 75 60% 60% 65% 65 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 80% 75% 70% 70% 67.9% 63.5% 65% 63.5% 65 60% 60% 50% 50% 50% 80% 80% 63.5% 65% 63.5% 65 SKID STEERS − -0.2% 2.2% FORKLIFTS HI-REACH − 0.4% -5.0% 75% 60% 60% 70% 70% 67.9% 2015 2011 WHEEL2012 2013 2014 2015 2012 2013 2014 2015 2011 20 50% 50% 55% 2011 55 LOADERS − 0.4% -6.1% 80% 75% 63.5% 63.5% 70% 67.9% 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 70%2014 2015 60% 60% 65%2011 65 50%2011 50%2011 55 68.2% 68.2% 80% 85% 85% 2012 2013 201468.0% 2015 2012 2013 2014 2015 2012 2013 70% 2014 2015 50%2011 50%2011 70% 65% 55% 55%2011 55 2012 2013 201467.9% 2015 2011 2012 2013 2014 2015 2012 2013 2014 2015 50%2011 50%2011 68.2% 68.2% 55 80% 85% 85% 80% 75% 55% 2011 2012 2013 201468.0% 2015 2011 2012 2013 2014 2015 2011 2012 2013 60%2014 2015 65% 60% w w w . r o u 70% s85% eanalytics.com 68.2% 77.9% 50% 50% 68.2% 80% 85% 55% 55 70% 70% 67.9% 65% 80% 2011 2012 2013 201468.0% 2015 2011 2012 2013 2014 2015 2011 2012 2013 60%2014 2015 60% 68.2% 68.2% 80% 85% 85% 80% 80% 80 77.9% 68.0% AWP - ARTICULATING BOOMS − 1.7% -3.2% FORKLIFTS - WAREHOUSE/INDUSTRIAL − 1.7% -4.1% 70% 65% 80% 60% 60% 80% 80% 80 77.9% 70% 75% 75% 80% 80% 80% 80 60% 55% 60% 68.2% 68.2% 80% 85% 85% 80% 80% 80% 80 68.0% 77.9% 70% 65% 70% 75% 75% 50% 50% 68.7% 70% 68.7% 70 68.3% 60% 55% 70% 70% 80% 80% 80 68.7% 80% 68.7% 68.3% 75% 70% 70% 70% 70 70% 75% 2011 2012 2013 2014 2015 2011 2012 50% 50% 60% 60% 55% 68.7% 70% 68.7% 70 68.3% 70% 77.9% 70% 70% 75% 75% 68.7% 70% 68.7% 50% 2011 2012 2013 2014 2015 2011 201270 68.3% 50% 70% 70% 55% 63.5%60% 63.5% 60% 60% 60% 60 50% 2011 2012 2013 2014 2015 50% 60% 65% 65% 45% 68.7% 68.7% 2011 2012 68.3% 70% 70% 70% 70 60% 60% 60% 63.5%60% 63.5% 75% 70% 75% 2015 2011 2012 2013 2014 2015 2012 2013 2014 50% 55% 2011 201260 60% 60% 45%2011 60% 65% 65% 60% 2015 60 63.5%50% 60% 60% 60% 2015 60 63.5% 50% 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 65% 45% 50% 50% 50% 50 60% 65% 63.5%50% 63.5% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 50% 50% 50% 50 2011 2012 2013 2014 2015 2011 2012 60% 60% 60% 60 2015 2012 2013 2014 2015 2012 45%2011 60% 65% 65% 50%2011 50% 2012 2013 2014 2015 2011 2012 2013 2014 2015 2013 2014 2015 50%2011 50 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2012 2013 2014 2015 2011 2012 2013 2014 2015 50%2011 50% 50%2011 50 2012 2013 2014 2015 50% 55% 55% 63.5% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2013 2015 2011 2012 2013 20142011 2015 45% 2015 63.5%50% 2011 2012 2013 2014 2015 2011 2012 2014 2015 20 60% 65% 65% 80% 50% 50% 50% 50 50% 55% 55% 2015 2015 2011 2012 2013 2014 2012 2012 2013 2014 2014 2015 2012 2011 2012 2014 2015 2011 2013 2014 2013 2015 2011 20142011 2015 2011 2012 2013 2014 2013 2015 2015 2011 2012 2015 2013 20 80%2011 50% 55% 70% 80% 70% 80 55% 2015 2012 2013 2014 2015 70% 70% 80 2011 2012 2014 2015 − 20 80% 80% 50% AWP - SCISSOR LIFTS − 0.6% 20130.0% GENERATORS 1.0% -7.8% 55%2011 55%2011 70% 80% 70% 80 2015 2011 2012 2013 2014 2015 2012 2013 71.1% 2014 2015 2011 20 80% 80% 2011 70% 70% 80 71.1% 60% 70% 60% 70 50% 70% 55% 55% 67.9% 67.9% 71.1% 70% 80% 70% 80 UCC filings on 12 earthmoving units. 60% 70% 2011 60% 70 2015 2011 2012 2013 2014 2015 2012 2013 2014 2015 2011 20 80% 71.1% 60% 70% 52.9% 70% 52.9% 70 60% 67.9% 67.9% 80% 80% 80% 60% 70% 60% 52.9% 52.9% 70 71.1% 67.9% AWP ARTICULATING BOOMS − 1.7% -3.2% FORKLIFTS WAREHOUSE/INDUSTRIAL − 1.7% -4.1% 70% 67.9% 52.9% 60% 50% Nov 50% Sep 52.9% 60 80% 80% 80% Dec Jan Feb Mar Apr May Jun July Aug Oct Grand 60% 70% 60% 52.9% 60% 52.9% 70 50% 50% 60 70% 67.9% 67.9% Equipment Description 50% 60% 80% 50% 60 80% 80% 52.9% 52.9% 60 50% 60% 14 14 15 15 60% 15 15 15 15 15 - 15 50% - 15 67.9% 15 Total 40% 50% 40% 50 80% 80% 80% 70% 67.9% 60% 60% 2012 2013 2014 68.3% 2015 2012 2013 2014 2015 2012 2013 2014 2015 40%2011 50%2011 40%2011 50 50% 50% 60 68.7% 70% 68.7% 70% 70% 40%2011 50% 2012 2013 2014 2015 2011 2012 2013 2014 2015 2012 2013 2014 2015 40%2011 50 60% 80% 80% 80% 68.7%Articulated 2014 68.3% 2015 2011 169 2012 2013 2014 2015 40%2011 107 2012 1452013 50% 40%2011150 2012 132 68.7% 50 20131,707 2014 2015 Dump Trucks 98 123 142 150 175 154 162 70% 70% 70% 2011 2012 2013 2014 2015 2012 2013 2014 2015 2011 2012 2013 2014 2015 60% 50%2011 68.7% 70% 68.7% 68.3% 40% 40% 50 50% 70% 70% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 68.7%Crawler 68.7% 68.3% 80% 80% 2015 75% 75 70% 70% 70% Dozers 346 460 472 251 348 512 379 433 481 446 425 422 4,975 2015 2011 2012 2013 2014 50% 60% 80% 80% 75% 75 2015 2012 2013 2014 50%2011 60% 60% 80% 75% 80% 2015 75 68.7% 60% 68.7% 68.3% EXCAVATORS − 0.9% -3.3% WHEEL LOADERS − 223 0.4% -6.1% 70% 70% 70% 80% 80% 2015 75% 75 2015 50% 2011 2012 2013 2014 60% 60% 60% Crawler Loaders 4 19 17 15 20 40 25 15 14 33 13 8 68.2% 68.0% 65% 68.0% 65 70% 70% 68.2% 80% 80% 75% 68.0% 68.0% 75 2015 2011 2012 2013 2014 60% 70% 70% 2015 65% 65 60% 60% 68.2% 68.0% 68.0% 65 70% 65% 70% 50% 68.2% 60% 60% 60% 68.0% 68.0% 65% 1,062 65 Excavators - Crawler, Hydraulic70% 707 988 1,052 614 871 919 2014728 70% 810 782 10,412 2015 2011 2012840 1,039 2013 50% 50% 50% 60% 60% 2015 55% 55 68.2% 68.0% 55% 68.0% 55 70% 70% 65% 65 60% 60% 2015 2012 2013 2014 2015 2012 2013 2014 2015 20 50%2011 50%2011 50%2011 60% 60% 60% 60% 55% 60% 55 50%2011 - Wheeled, 60% 60% 55% 55 Excavators 25 49 31 13 25 22 31 27 27 29 14 12 305 2015 2012 Hydraulic 2013 2014 2015 2011 2012 2013 2014 2015 2011 20 50% 50% 50% 50% 45% 45 2015 2012 2013 2014 2013 2015 50%2011 50% 50% 2012 2014 2015 2011 2012 2013 2014 2013 2015 2012 2013 20142011 2015 50%2011 50%2011 60% 60% 55% 55 2011 2012 2014 2015 20 45% 45 50%2011 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 50%2011 45%2011 45 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 20 2014 2015 2012 1,372 2013 2014 2015 50%2011 769 20121,21520131,421 2011 2012 2013 2014 2015 45%2011 45 Mini 794 994 1,327 2012 1,213 50%2011 1,191 2012 1,260 2013 14,505 50%Excavators 50% 50% 2011 2012 2013 2014 2015 2011 2013 1,530 2014 1,419 2015 2014 2015 50% 50% 45% 45 80% 80 2015 2011 2012 2013 2014 2013 2015 2011 2012 2012 20142011 2015 2013 20 2011 2012 2014 2015 2013 2014 2013 2015 2012 20142011 2015 80%2011 80 80% 80% Graders 70% 121 80% Motor 78 128 101 97 98 105 109 122 119 99 145 1,322 80 80% 80 80% AWP - SCISSOR LIFTS − 70% 80% 70% 70 67.9% 0.6% 0.0% GENERATORS − 1.0% -7.8% 80% 80 70% 70 67.9% 80% 70% 80% Scrapers - Conventional 4 12 9 4 6 6 12 7 15 67.9% 12 5 7 99 70% 70 71.1% 80% 70% 80% 70% 70 67.9% 60% 60 71.1% w w w . r o u 70% s60% eanalytics.com 70% 70% 70 67.9% 60% 1,138 60 Skid-Steer Loaders 1,186 1,872 1,414 878 1,005 1,163 1,102 995 905 897 1,239 13,794 71.1% 80% 70% 80% 60% 60 70% 60% 70% 60% 60 71.1% 50% 50 70% Loader Backhoes 52.9%Tractor 52.9% 60% 70% 355 471 411 402 358 345 432 369 338 320 394 4,547 2013 2014 2015 50%2011 352 2012 50 60% 60 60% 50% 52.9% 70% 52.9% 70% 2011 2012 2013 2014 2015 50 71.1% 2011 2012 2013 2014 2015 50% 50 52.9% 60% 50% 60% 52.9% 2011 170 2012 2013 2014 2015 Wheel Loaders < 80 HP 158 173 223 103 130 142 147 118 109 114 136 1,723 70% 60% 70% 50% 50 52.9% 60% 52.9% 60% 50% 2011 2012 2013 2014 2015 60% 50% 60% 52.9%Wheel 52.9% 750 1,004 701 518 63150% 716 596 722 672 571 571 676 8,128 60% Loaders > 80 HP 60% 50% 40% 50% 2015 2012 2013 4,489 2014 20153,812 4,62850% 2011 20125,738 5,305 2013 20144,609 5,213 2015 61,740 20 50%2011 40% 50%2011 60% 60% Grand Total 6,536 5,950 5,635 5,160 4,665 50%2011 2015 2012 2013 2014 2015 2012 2013 2014 2015 20 40%2011 50%2011 2015 2012 2013 2014 2015 50%2011 40%2011 50%2011 2012 2013 2014 2015 20 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 20 Supplied by EDA, Charlotte, N.C. Supplied 50% by EDA, Charlotte, N.C. 40% 50% 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 20 24 | www.cedmag.com | Construction Equipment Distribution | February 2016 80% 75% 75% 80% 75% 75% 75% 80% 75% EXCAVATORS − 0.9% -3.3% WHEEL LOADERS − 0.4% -6.1% 80% 75% 75% 68.2% 68.0% 65% 68.0% 65% 70% 68.2% 80% 68.0% 75% 68.0% 75% 70% 65% 65% 68.2% 68.0% 65% 68.0% 65% 70% 68.2% AED February 2016.indd 26 68.0% 68.0%2/3/16 70% 65% 65%5:45 PM
The Dirty Dozen -
7
7
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>> DATA TRENDS
EquipmentWatch Values: December Update EquipmentWatch Values™ is the industry’s only source of Fair Market Values (FMV) and Forced Liquidation Values (FLV) covering construction, lift truck and agricultural equipment. Each month our ValueTrend Engine consumes an average of 750,000 market transactions which are cleaned, mapped and fed into a proprietary blend of automated equations managed by our analyst staff. The result is the most accurate, market-driven equipment valuations available updated on a monthly basis. Below you’ll find a quick summary of month over month FMV and FLV trending as well as a deeper look into last month’s market activity driving the latest Values™ update.
November Summary
December 2015
Market Activiage of fleet costObserved which us are determined on a ty: $25,700,000,000+ ue. A unit is “In Fleet” t.” Overall Resale (FMV) Change from Previous Month: -1.11% 80%
5.8%
2015 2015 2015 2015
2.2%2015
2015 2015 2015 2015 2015
1.7%
2015 2015 2015 2015 2015
-7.8%
80% 80% 71.4% 80% 71.4% 70% 71.4% 65.6% 80% 70% 71.4% 65.6% 70% 70% 65.6% 71.4% 65.6% 60% 70% 60% 65.6% 60% 60% 50% 2012 2013 2014 2015 50%2011 60% 2012 2013 2014 2015 50%2011 50%2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 50% 2011 2012 2013 2014 2015 85% 85% 77.9% 85% 85% 77.9% 77.9% 75% 85% 77.9% 75% 75% 77.9% 75% 63.5% 65% 63.5% 75% 65% 63.5% 65% 63.5% 65% 63.5% 55% 2012 2013 2014 2015 65%2011 55% 2012 2013 2014 2015 55%2011 2012 2013 2014 2015 55%2011 2011 2012 2013 2014 2015 55% 2011 2012 2013 2014 2015 80% -4.1% 80% 80% 80% 68.7% 70% 68.3% 68.7% 80% 68.3% 70% 68.7% 70% 68.3% 68.7% 70% 68.3% 68.7% 60% 68.3% 70% 60% 60% 60% 50% 2012 2013 2014 2015 50%2011 60% 2012 2013 2014 2015 50%2011 50%2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 50% 2011 2012 2013 2014 2015 80% 80% 80% 71.1% 80% 71.1% 70% 80% 71.1% 70% 71.1% 52.9% 70% 52.9% 70% 71.1% 52.9% 60% December 2014 November 2015, Top Equipment Subtypes 70% 52.9% 60% 60% 52.9% 60% 50% 20% 2012 2013 2014 2015 50%2011 60% 2012 2013 2014 2015 50%2011 50%2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 50% 2011 2012 2013 2014 2015 10% 75% 75% 75% 75% 68.2% 68.0% 65% 68.2% 68.0% 75% 0% 65% 68.2% 68.0% 65% 68.2% 68.0% 65% 55% 68.2% 68.0% 65% 55% 55% -10% 55% 45% 2012 2013 2014 2015 55% 45%2011 2012 2013 2014 2015 45%2011 2012 2013 2014 2015 45%2011 2011 2012 2013 2014 2015 45% 80% -20% 2012 2013 2014 2015 80%2011 80% 80% 70% 67.9% 80% 70% 67.9% 70% 67.9% 70% 67.9% 60% 70% 67.9% Mounted Hydraulic Excavators 60% 4-Wd Articulated Wheel Loaders Crawler 60% 60% Electric Self Propelled Scissor Lifts I.C. Self Propelled Telescopic Boom Aerial 50% 2012 2013 2014 2015 50%2011 60% 2012 2015 50%2011 Standard Crawler2013 Dozers 2014 Telescoping Boom Rough Terrain Lift Trucks 50%2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Wheel Tractors Combines 50% Tractor-Loader-Backhoes 2011 2012 2013 2014 2015
Overall Auction (FLV) Change from Previous Month: -0.19%
Month over Month Change in Retail Price
Retail market (millions of $USD)
5
5
N ov -1
15
O ct -1
5
-1
Se p-
5
Au g
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15
n-
Ju
Ju
15
5
-1
ay -
M
15
ar -
Ap r
15
M
4
15
Fe b-
Ja n-
7
D ec -1
2015 2015 2015 2015 2015
Percent Change in Price
-6.1%
November 2014 - November 2015, in millions of $US 20k
200
15k
150
10k
100
5k
50
0k
Lifts
Auction market (millions of $USD)
2015 2015 2015 2015 2015
Total Value of Observed Market Activity
0 Jan '15
Apr '15
Resale
Jul '15
Oct '15
Auction Highcharts.com
Highcharts.com
February 2016 | Construction Equipment Distribution | www.cedmag.com | 25
AED February 2016.indd 27
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>> VIEW FROM THE HILL
SEN. MIKE ENZI, R-WY
Jobs Revolution Demands Congress Reform Skills Programs
AED periodically invites lawmakers and other policy leaders to provide commentary in CED Magazine. The views expressed are those of the commentator, not necessarily AED.
We need to eliminate the stigma against hands-on skills resulting from the emphasis on college degrees.
Businesses across the country are struggling to find workers to fill skilled positions. There are going to be millions of new jobs created in America in the next few years, and many of them will require skills and training beyond a high school diploma. If we are going to maintain a leadership role in the global economy, our workers need the proper training and skills. The American workers need career and technical skills and professional capabilities to not only succeed, but to lead the way in tomorrow’s job market. We need to eliminate the stigma against hands-on skills resulting from the emphasis on college degrees. Congress must ensure that education and training are connected to the needs and interests of workers now and in the future. That is why I am working with Republicans, Democrats and Independents to reauthorize the Perkins Career and Technical Education Act. The act was created by Congress to help provide individuals with the career and technical skills needed to succeed. It hasn’t been reviewed in detail for almost eight years. If a business hadn’t reviewed a part of their business for eight years, they would probably be out of business! If Congress is going to support learning opportunities for students to help them find and hold highskill and high-wage jobs, we need to review, revise and re-approve the Career and Technical Education Act. I am currently working with supporters to craft a bill that would make it easier for states and locals to run programs that serve all students who desire to gain access to career and technical education course work. If we want to make sure that we are preparing students for the real world, we also need to strengthen the connection of career and technical education programs to the needs of businesses so jobs are available upon completion of certification or graduation. If we are going to help fill the growing need for skilled workers, we need to ensure these programs coordinate their instruction with current practices in industry and with the needs of the workers. And in order to stay competitive, we need to ensure the act will help support seamless transitions from education to the workforce including real-life skills and work ethic. But the Career and Technical Education Act is just part of the solution to prepare workers for the
changing job market. Last year Congress was able to re-do and approve the Workforce Investment Act to help transform the bureaucratic federal job training system into a streamlined program that can help many more people learn the skills they need to get meaningful jobs. The new changes are helping states better meet regional economic demands and provide training for jobs in which quality workers are in short supply. The Workforce Innovation and Opportunity Act also delivered long-overdue changes by eliminating 15 programs identified as ineffective or duplicative and 21 federal mandates on state and local workforce boards. It also provided stronger accountability for taxpayer dollars by applying common performance measures for all programs with a focus on employment outcomes and employer satisfaction with trained workers. By strengthening the job training programs Congress also gave authority back to state governments to equip them with tools to help small businesses. It provided governors and state workforce directors what they told us they needed – flexibility to use money where it is most needed. Employers are looking for the right people that can be part of a team where everyone succeeds. Some of that depends on what skills and training someone can bring to a job, but a desire to learn, to improve and to contribute to that success is something employers are looking for, too. We need to ensure that students who have a drive to work hard and will to succeed also have the professional and technical knowledge to make success a reality from the day they graduate or are certified. By focusing on the skills and programs that are in demand by America’s economy today, we can have a strong economy tomorrow. We are going to experience dramatic changes in the workforce over the next 10 to 15 years, and we need to start now if we are going to adapt federal education and training policy to meet the coming crisis of too few workers with too few skills. Any business owner knows that success depends on the quality of their workers. No matter how much effort goes into the product or the plan, without the work of dedicated employees a business will struggle. But with skilled workers who have been given the training and preparation for jobs, the sky is the limit.
Currently serving his fourth term, SEN. MIKE ENZI is the senior senator from Wyoming. He is expected to be a key figure in congressional efforts to overhaul the American technical education system. 26 | www.cedmag.com | Construction Equipment Distribution | February 2016
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>> A CLOSER LOOK
ANDREAS HELLSTROM
W
A Closer Look At Infor, a Software Solutions Provider
Infor focuses on the daily details of the business, everything from equipment management to managing profits. When executives of Aggreko, a non-residential generator rental company and global leader in rental power, temperature control and oil-free compressed air systems, searched for a superior way to streamline their business, they immediately enlisted help from Infor. “We rent power, we rent chillers …,” said Rupert Soames, chief executive officer for Aggreko. “In logistics terms, it’s a very, very complex business because we have to run credit checks and we have to dispatch equipment to places we might not know where it is, in addition we have to be very careful that everything we send out comes back.” The desire to help run his complex business more effectively led Aggreko to Infor, a software company that allows business owners to focus on their customers. Infor focuses on the daily details of the business, everything from equipment management to managing profits, Aggreko’s website states. For many industries, including rental equipment industries, Infor is changing the way information is published and consumed, and is helping 70,000 customers in 194 countries improve their operations, drive growth, and quickly adapt to changes in business demands, according to the company’s website, www.infor.com. With 25 years of experience in the equipment-centric industry, Infor aims to help businesses achieve new levels of profitability and growth by providing user-friendly software for equipment businesses. Infor’s Andreas Hellstrom, who is based in Sweden, said he began catering to organizations that manufactured equipment by providing operations support. “It evolved into customers, dealers and distribution business management,” Hellstrom said of the products offered at that time. Back then, the software was designed to assist European manufacturing companies, and support their sales, service, parts and rental business. As equipment rental businesses evolved, so did the need for software to support all aspects of the businesses, from financial and fleet management to customer service management, Hellstrom said. As the industry grew, Hellstrom realized customers couldn’t find an “off the shelf” software to aid equipment businesses, so Infor made it their mission to provide a standardized software system to lower costs for these businesses, he said. “Working in collaboration with customers, we were able to sell the software to additional individuals with similar industries,” Hellstrom said.
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Soon, Infor became an innovative, exciting key player in the enterprise software space. By designing business applications with proven functionality, Infor made a significant impact on numerous industries around the globe. “Infor offers deep industry-specific applications and suites, engineered for speed, and with an innovative user experience design that is simple, transparent, and elegant,” according to www. infor.com. “Infor provides flexible deployment options that give customers a choice to run their businesses in the cloud, on-premises, or both.” The company accomplished their goal by working closely with an advisory council comprised of industry leaders from medium and large equipment companies, he said. “We have developers sit down and see what they do and what they need by shadowing employees,” Hellstrom said. And while two companies may use the same software, Hellstrom said Infor is able to customize the software to meet the needs of each company, even if those needs are slightly different. Infor also offers different levels of support depending on what the customer requires. Hellstrom said the software system also extrapolates data which can then be used to determine a variety of issues about the business. For example, the data can determine when equipment may need to be serviced or repaired. The data, gathered from the software use, can recommend equipment service before the equipment breaks down, Hellstrom said. “We are getting smarter (in) how we help our customers,” he said. “This is a proactive step instead of a reactive one.” Hellstrom said Infor is constantly revamping its systems to become smarter about how to use the data. Derrick Carter, Infor’s manager of Equipment for North America, says the company provides software to equipment dealers, rental businesses and service providers that enables them to effectively manage customer service, assets, financials, performance, resource planning, human capital, equipment and the flow of each company’s goods and services. At the core of the offering is Infor M3, an enterprise resource planning solution. Wagner, a regional dealer of Caterpillar machinery servicing Colorado, New Mexico and West Texas, has opted to deploy the solution using the Infor Implementation Accelerator for Equipment Rental, which delivers scalability and agility that is specifically for rental-centric customers. The implementation
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accelerator provides prebuilt, industry-leading processes that enable a faster return on investment. Wagner will benefit from an integrated technology suite that provides proven solutions to help meet the specific needs of the equipment rental industry, Infor’s website states. “We are excited at Wagner to be able to leverage the Infor M3 solution to better serve our customers through increased visibility and better overall efficiency,” said David Leski, operations and administration support manager of Wagner Equipment Co., which is a member of the Infor - CAT Dealer Advisory Council. “We view this rental solution as the first step in our relationship with Infor and hope to continue fostering a mutually beneficial relationship for years to come.” By investing with Infor, he said he hopes to strengthen visibility into fleet management and provide automated processes for rental coordinators to reduce errors and generate more accurate reporting. Wagner also is equipping its rental coordinators with a solution that uses a more modern look and feel, which will help increase productivity and enhance customer service. Infor provides end-users with an interface that has a clean and unified appearance, according to www.infor.com. The Infor Equipment Dealers and Service advantage drives profitability throughout the equipment life cycle, gains the whole financial picture, down to the level of each piece of
equipment, and uses CRM tools to improve customer service and support parts marketing programs and rebates, said Andreas Hellstrom of Infor. The software also allows equipment companies to manage all aspects of their dealership, enhance and integrate aftermarket service and support parts and marketing programs. Companies who employ Infor can enter into service-level agreements with greater confidence, deploy in the Cloud for the latest in user experience and agility, and use social and mobile applications to transform the way they work, the Infor website states. For equipment dealers, rental and service providers – whatever their role in the equipment life cycle – speed matters, Hellstrom said. “To respond quickly to today’s shifting customer and market demands, you need tools for continuous control and visibility into every piece of equipment you deal with. Infor Equipment provides it all — the broadest, deepest single integrated system created specifically for equipment-centric companies.” “Our customers count on us to provide them with high quality products and services,” said Thor Hess, director of Corporate Development, Southeastern Equipment Co. “With Infor M3, we are investing in our future by enhancing our backend technology to better meet the growing needs of the equipment industry.” Headquartered in New York, Infor is a
privately held company whose primary shareholder is the private equity firm Golden Gate Capital Partners. Infor has approximately $3 billion in revenue, more than 70,000 customers, and more than 12,400 employees. Infor supports customers with 3,500 product specialists in 194 countries, plus 1,400 technology and sales and service partners, offering support and training in 20 languages. The company provides support 24/7 to its clients, which are located in the United States, Europe and Asia, Hellstrom said. In addition to the equipment industry, the company has also tapped into the aerospace and defense, automotive, chemicals, distribution, fashion, food and beverage, industrial manufacturing, healthcare, high tech and electronics and hospitality industries. “We deliver a complete set of software that can be implemented in that industry without any modifications,” according to a video posted www.infor.com. To learn more about the products and services Infor provides and how these services address multiple businesses, including the equipment business, visit www.infor.com. ANDREAS HELLSTROM has over 15 years of experience working in enterprise software and the equipment industry. He spearheads Infor’s strategy for the Equipment Industry & Solutions.
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>> MONEY$$$MAN
GARRY BARTECKI
Bringing Awareness to Industry
Here’s how Section 179 and Bonus Depreciation have a direct impact on equipment manufacturers, dealers and rental fleets.
Make sure you know the benefits of Sec 179 and Bonus Depreciation, two elements that have a direct impact on equipment manufacturers, equipment dealers with rental fleets and equipment end users.
I assume any C-Level executive is aware there is a Tax Extender Bill in the works, especially regarding Sec 179 expensing and Bonus Depreciation that had to be passed before the Congress left D.C. for their Christmas break. Well, all I can say is we all must have been good boys and girls because not only did Santa deliver on the Sec 179 and Bonus Depreciation for 2015 and 2016, but he made the 179 deduction permanent and extended Bonus through 2019 with lower write-off percentages starting in 2018. There were numerous other extensions and changes as well, but these two are the ones that have a direct impact on equipment manufacturers, equipment dealers with rental fleets and equipment end users. While finding out about the extender 179 and Bonus being available for 2015 (in mid-December 2015) is kind of a drag, at least dealers and end users that bought new or used equipment in 2015 (and it is placed in service in 2015) have the flexibility to use these tax breaks for 2015 if they need deductions. On the other hand, knowing you have a five-year window to take advantage of these tax breaks makes planning the capital budget or rental fleet changes a little easier, keeping in mind that the tax tail should not be wagging the dog. Specifically, we have the following extender benefits: Sec 179 increased to $500,000 with a $2 million phase-out threshold. As a side note, 179 also covers qualified real estate. 179 can be used for both new and used equipment purchases. These limits for 179 were made permanent (until someone changes them). Bonus Depreciation is extended for five years through 2019. The rate is 50% of the adjusted basis of the property in the first year it is placed in service. The rate decreases to 40% in 2018 and 30% in 2019. Bonus Depreciation applies ONLY to new equipment placed in service. Another side note and that is these are the Federal Rates for these deductions which may or may not be available for state tax purposes. It is not uncommon to have a zero federal tax bill and a significant state tax bill in the same year. While these appear to be significant tax benefits they are only significant if they fit into a dealer’s tax
plan for that year or because a dealer wants to recoup taxes paid in previous years (if it is worth it to do so). Dealers and rental companies have quite a complex tax environment that requires extensive planning on what to use and when to use it. It is not easy to plan in this environment, and it pays to do it right every year. Another thing to consider about these deductions is that they are mostly deferrals, meaning you are accelerating the depreciation deductions you would have anyway, but over a longer term. So you could find yourself taking advantage of these deductions in years where your tax rates are low and then when you sell the unit find yourself paying it back at max rates. This is especially true for dealers planning to transition out of the business in the next few years, because if they sell assets they will be valued well in excess of their tax value and thus generate a SIGNIFICANT tax bite out of the sales proceeds received. I guess in the end if you take deductions at the max tax rate and then pay it back at the max rate, you may as well take advantage of these breaks if the tax gods show it works. The point here is that proper planning is a must regarding both 179 and Bonus. I have seven summary pages of the Tax Extender Legislation. You can ask your CPA to get you a copy of a summary so that you can see if any other provision is of use to you in the company or personally. There are a large number of energy tax incentives which may be of use if you are initiating a “green” policy. There is no mention of LKE (Like Kind Exchange) in the summary, so we can assume this planning procedure is still available for use in 2015 and going forward, until we hear otherwise. A couple of personal strategies: Find out about Stretch IRAs: If you can use them the offer up tremendous tax savings. Family Partnerships….if you plan to sell out within five years, this strategy can help reduce gift tax or estate tax liability. We will call it quits now and not get into the other complex tax issues dealers face. They have been discussed previously on numerous occasions. Any questions, give me a call. Have a profitable 2016!
GARRY BARTECKI (gbartecki@comcast.net), founder of Dealer-Rental Success, LLC, is a financial consultant to the equipment industry. He can be reached at 708-347-9109. 30 | www.cedmag.com | Construction Equipment Distribution | February 2016
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>> LIKE-KIND EXCHANGE
BRENT ABRAHM
Keep Your BIG (Built-In Gains) From Getting Small Here’s how a like-kind exchange can keep built-in gains tax at bay.
Implementing a 1031 exchange is a little bit like having your cake and eating it too.
Converting a C Corporation to an S Corporation Thinking about changing your corporate structure from a C corporation to a subchapter S corporation? S corporations, partnerships, and certain LLCs are considered pass-through entities, which means they “pass through” various types of taxable income: interest, dividends, deductions, and credits to the shareholders, partners, or members responsible for paying tax. This avoids the double taxation associated with C corporations that pay entity-level taxes and then distribute dividends that become subject to individual taxes. What is Built-in Gains Tax? With all of the tax advantages provided to S corporations, many companies are making the move. However, there are some pitfalls. One of these is the tax recognition of built-in gains (BIG). Generally, BIG tax is triggered when existing assets are sold during the holding period, a period after the conversion to S corporation status. The holding period is currently 10 years, starting from the date of the conversion. During this period, the existing assets are encumbered by the corporate tax rate of 35%. Holding Periods for Built-in Gains Tax When it comes to tax law, Congress has a habit of letting certain provisions expire, only to extend/amend them in later tax years. Built-in gains are no exception: For 2009 and 2010, Congress shortened the holding period to seven years. In 2011 through 2013, the holding period was further shortened to five years. For 2014 and 2015, the holding period is 10 years. The shorter holding periods of prior years proved beneficial for a great number of companies that were concerned about the traditionally long (10 year) holding period, helping
many avoid recognizing gains at a punishing 35%. Disposing of Assets during the Built-in Gains Holding Period with a 1031 Exchange In the ordinary course of business, companies may need to dispose of existing assets, whether those assets are underutilized or aging fleets, idle or obsolete equipment, or rental assets routinely sold and replaced. Holding on to such assets takes up yard space and triggers unnecessary insurance costs and maintenance fees. Exchanging them through a Section 1031 like-kind exchange (LKE) will protect those built-in gains from income recognition (taxation), free up working capital, and significantly increase cash flow to continue growing and expanding operations. Beyond the Holding Period: The Like-Kind Exchange Program Implementing a 1031 exchange will not only keep the BIG tax at bay, it can reduce or eliminate other holding costs and secure tax benefits beyond the holding period. It is a little bit like having your cake and eating it too. Asset owners that maintain an LKE program throughout the holding period can permanently avoid the pain of BIG tax and implement a business process that protects them from triggering taxation after the holding period ends. Absent an ongoing like-kind exchange program, future sales will likely be subject to income taxation (flowing out to S Corp owners). Leveraging a 1031 like-kind exchange program immediately after the conversion provides tremendous cash flow opportunities, as does keeping the program in place thereafter. Summary Asset owners with recent C to S corporation conversions should evaluate their tax positions with their advisors and consider the potential negative impact of their built-in gains. With the help of a qualified intermediary, owners can project the returns that like-kind exchanges can generate by allowing access to a low cost of capital, deferring gain recognition, and ensuring that their BIG will never get small.
BRENT ABRAHM is Accruit President and CEO. Prior to co-founding Accruit in 2000, Brent pioneered the development of qualified intermediary programs for personal property exchanges at Fortune 10 companies, including Amoco and British Petroleum. His commitment to excellence, service and innovation has thrived at Accruit. In addition to the value of its unique technological platform, the company’s success—as well as the success of its clients—is built on his passion for fostering and growing customer relationships. 32 | www.cedmag.com | Construction Equipment Distribution | February 2016
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>> TECHNOLOGY 101
BRIAN REHG
Is It Time To Rethink Your Data Security Plan?
Master how to secure your company’s information and prevent cyberattacks.
You may think that hackers don’t want access to your company data. The truth is, hackers are not always actual people.
Cybersecurity may seem like an issue for large corporations and governmental agencies, but any business, regardless of size, can be vulnerable to “attacks” or data breaches. As more and more companies make their information available online and software moves from our desktops to the cloud, maintaining data security is more important than ever. You may think that hackers don’t want access to your company data. The truth is, hackers are not always actual people, with any sort of personal vendetta. More often than not, they are automated scripts, simply looking for vulnerabilities in any server. Once a vulnerability is discovered, these scripts will install additional scripts and begin performing illegal activities, like emailing spam from your account. Unfortunately, this will then be tied to the company itself. Luckily, there are several simple tasks to prevent these security breaches. The first step is to review your current computer systems for viruses and other forms of malicious code. Once you are positive your current computer setup is clean of viruses, the next step is to check for vulnerabilities that
will allow unwanted introducers into your network. Finally, you build a plan to perform weekly or monthly security maintenance. Below are a few recommendations to help you get started: 1. Start With the Simple Stuff It’s always the simplest issues that allow hackers into computer systems. Passwords are still the weakest link for businesses. Many people use passwords that are easy to remember, making them easy to guess. Make sure that passwords are at least 8 characters long and include letters, numbers and punctuation marks. 2. Stay Current Make sure your IT team frequently updates all the software your company uses, including security patches and standard updates. Outdated software and websites open you up to attacks. 3. Firewalls There are two types of firewalls that your company should be concerned with. The first one protects your computer desktops and internal servers. These are important to keep introducers out of the internal data and desktop software systems that run your company. The other firewall is the one that protects your website and cloud applications. These are important if sensitive data is available online to your staff or customers. 4. The Third Party If you want an unbiased opinion on the status of your server security, you might consider hiring a third party. There are companies that will run security scans on your current computer systems and then present the results to the executive staff and the IT department, offering suggestions. The most effective safeguard is prevention. Setting up a plan to stay on top of all the tasks listed above will go a long way toward security. Whether you’re performing this maintenance weekly or once a month, regular security evaluations could be what keeps your company and your clients protected.
BRIAN REHG is CEO and founder of Blue Stingray, a web and mobile application development agency. As a former software engineer with over 20 years of development experience, Rehg stays up-to-date on emerging business technologies and is an active member of several local business associations. He can be reached at brian@bluestingray.com. February 2016 | Construction Equipment Distribution | www.cedmag.com | 33
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>> SALES STRATEGIES
DON BUTTREY
Are You The New Salesperson? You can have a “rookie of the year” season in 2016!
The days of winging it in sales are over.
So you are the new salesperson? This is always a big challenge, whether you are a green, young rookie or a veteran WHO just made a big change. And the answer to success in both cases is much the same. The confidence you need comes with the same disciplines that assure it for pro athletes: learn your playbook and practice your offense/defense. Simple, huh? But do it quickly and do it with heart. When I say learn your playbook, I mean get training! As a sales professional it is imperative that you acquire three components of training: product, the added value of your company, and fundamental selling skills. To be a sales professional consultant with confidence, you need to study and learn everything you can get your hands on about your product such as features and benefits, competitive comparisons, industry applications, strengths and weaknesses. You also need to sell the added value that your new company brings to the table. Some call this your value proposition. Why you? Why should your customers buy from you versus the competition? You must know these answers – so ask for that training or find it out! Most companies seem to know intuitively that you need product and application training. They typically indoctrinate you in orientation with the advantages of the organization you now sell for. But do not stop there.
If you just learn this stuff you may be inclined to “show up and throw up.” Product and value training is vital, but without the next piece of training you may be predisposed to a presentation-based selling instead of consultative selling. Present your brains out – and your hyped-up, pseudo-confidence will soon wane. You also need training in fundamental selling skills. Yes, both rookie and experienced veterans in a new position can benefit from training or refreshers in the basics. Truly, solid confidence is a result of training and practice in selling skills. You play like you practice. An obvious part of this would include relationship skills, communication, and listening. But you need one more item in training that seems to be missing in most sales organizations. Often, the key to success right out of the gate, and the thing that will bolster trustworthy confidence is learning and applying the selling process. Learning The SELL Process (as I call it in my book of that title) will equip you with a framework to prepare and execute highly effective selling. If you learn how to pre-call plan for each call (your offense) – and you have a framework to anticipate, prepare, and practice responses to objections (your defense) – this will provide you with a sure confidence that comes from preparation. Many coaches have said, “The will to win is not nearly as important as the will to prepare to win.” Professional quarterbacks run their patterns and plays over and over and over. Then, when on the field in the actual game, they execute with confidence and precision. Why not sales professionals? The days of winging it are over. Confidence with notable success right out of the gate in your new territory is possible. Oh, it might come eventually after years of hard knocks. But we don’t have time for that. Plus, that path is plagued with ruts, bad habits, confusion, frustration and oblivious patterns of going through the motions. Don’t wait for training – get it. Don’t just wing it – practice.
DON BUTTREY is the president of Sales Professional Training Inc., a company that offers in-depth skill development for sales professionals. He can be reached at (937) 427-1717 or email donbuttrey@salesprofessionaltraining.com. Check out his website at salesprofessionaltraining.com for more information or to purchase his book. 34 | www.cedmag.com | Construction Equipment Distribution | February 2016
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business services your aed membership provides solutions and options AED’s membership services and benefits are designed to enhance and develop the profitability and continuity of construction equipment dealers by providing tools and resources.
aed legal call counsel AED’s call counsel is a FREE legal hotline for AED members provided by Kopon Airdo, LLC — AED’s general counsel. Take advantage of this member benefit today, call 312-506-4480 or visit www.koponairdo.com.
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aed hr help desk AED’s HR Help Desk allows AED members to get answers to simple questions or many employment-related issues free of charge. Call about any HR compliance or procedural issue, even sensitive personnel situations. Contact Karla Dobbeck at Kdobbeck@askhrt.com.
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www.aednet.org 630-574-0650
DID YOU KNOW?
Ad
AED DID YOU KNOW?
HOW TO GET INVOLVED WITH AED’S 20 GROUP
Did you know that AED provides a unique dealer networking group exclusively for executives and managers from dealerships? AED’s 20 group elevates the operational performance of equipment dealers of all sizes. See below on why you should be a part of this exciting group: Summary of AED 20 Group: • Established three years ago with the goal of taking the overall business to the next level. • Meetings have evolved into a day-and-a-half event • Members have the ability to collaborate and network • Members work on financial goals and best practices • Share new techniques that they can utilize in their own businesses
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Highlights of AED 20 Group: • Financial review and benchmarking • Professional moderator • Interim statements for review • Member facility visits • Theme focus for each session • Networking • Professional development
Membership Requirements: • Must be a member of AED • Must be approved by group for admittance • Willing to attend a dayand-a-half meeting to be determined 3 to 5 months in advance twice a year • Current position member
attending must have the ability to effect operational changes to drive results • AED 20 Group member must fall under the distribution category of AED • Must sign a nondisclosure document • Submit results in AED 20 format monthly
For more information, contact AED’s senior vice president and CFO, Jason K. Blake. You can reach Mr. Blake at 630-574-0650 or by email jblake@aednet.org
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Wherever Karen Zajick Goes,
HAPPENS
Get to know one of AED’s newest board members and president of Norris Sales Company. By Christine Arceneaux
Karen Zajick is keeping it all in the family – the Norris Sales Company family – as she leads the more than 60-year-old family business to further prosperity. Zajick admits it wasn’t her childhood dream to follow in her parents’ footsteps – her father Don has been with the Norris Sales Company for more than 40 years, and her mother, Rachel, for more than 30 years. But Zajick said she’s “so glad she did it.” The 45-year-old entrepreneur who is the company’s president will now add Associated Equipment Distributors (AED) board member to her already impressive resume. “Karen is a great listener. She takes the time to understand the challenges the customers “It’s a rare face and also understands the challenges her opportunity to employees face,” said co-worker and company sales professional Bill Cummings. “(Her see your parents leadership) works because when you value every day and another individual’s opinion, listen to what build a business they have to say, and consider their opinion (together.) I have before decisions are made, you get a better been very lucky.” buy-in. “Getting people to believe in what you are trying to accomplish, that is the challenge and - Karen Zajick I think that is what Karen has been able to do over the last 10 years,” he said. Zajick said she believes her new role as AED board member will be an excellent opportunity for her to learn from other AED members. “This will give me the opportunity to see what’s really happening in the industry, and learn about the political action (of the industry),” she said. She said she also hopes to encourage the next generation of leaders to get involved and continue the tradition of renting and selling equipment. Character, honesty, work ethic, a passion for the equipment
business and a willingness to learn are attributes Cummings noted without hesitation when asked what would make Zajick a successful AED board member. “All of these attributes will add to the AED board,” Cummings said. “I know Karen will be an active member of the AED Board and will be a difference maker during the time that she serves.” While Zajick’s family purchased the business in 1999, Zajick didn’t start her career at Norris until 2001, and began to learn the business step-by-step, from controlling inventory and finances to heading the company’s sales team. “It was really interesting,” Zajick said of those initial years spent learning about the equipment business she said she remembers hearing so much about as a young child. Before becoming a part of Norris Sales Company, Zajick attended Syracuse University, where she earned a degree in accounting. After graduation, Zajick worked for a top-rated accounting firm and then moved to sales. “I never really considered working at Norris Sales Company,” Zajick recalled about the years following graduation. But as a former accountant, Zajick knew firsthand that construction was a big economic indicator in the area, and as she quickly saw the company expand, it wasn’t long before she jumped aboard. The longtime business was also a staple in Pennsylvania, with a loyal customer following, which made her decision to join the organization much easier. “We have a lot of longevity (in this area),” Zajick said. “Our customers can really count on us. The continuity that happens (here) makes our knowledge of the products and offerings more sustainable.” Today, Zajick continues to lead employees, many of whom have been gainfully employed for decades. She has watched the company expand from its initial 40 employees when she came aboard in 2001 to 89 employees. “Our employees really care about how people are doing and how their families are,” Zajick said of the many employees who have worked in the business. To recognize them, Norris Sales Company distributes an in-house publication that shares births, anniversaries and many of life’s other important milestones. As she continued to lead the business, Zajick also watched it expand from a single location in Plymouth Meeting, Pennsylvania,
38 | www.cedmag.com | Construction Equipment Distribution | February 2016
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to a new location in Conshohocken, Pennsylvania, and one in Sicklerville, New Jersey. Today, she spends her time carrying out the mission of providing construction products and service to customers in Philadelphia and its surrounding suburbs – the same mission company founders created in 1956. As the company’s president, Zajick is responsible for overseeing its operations, assisting the sales team, parts and service department, streamlining safety initiatives and ultimately ensuring that her customers are happy. The company offers a variety of products, everything from aerial lifts and air compressors and tools to excavators, welders and generators. Like most long-standing equipment companies, Zajick has watched the business morph from a strictly rental equipment business – 85 percent of the company’s business was renting equipment when Zajick joined Norris Sales Company – to one where equipment sales is key. “As you take on new lines, you start to see what people need to buy for their jobs,” she said, adding that the company maintains equipment in excellent working condition and caters to customers interested in purchasing workable, well-kept, used equipment. “Some people would rather have a used piece in good, working condition than purchase a new piece of equipment,” she said. “It’s a better way for some customers to go to market and be competitive.” Most recently, the company has become an official Link-Belt dealer, offering rental, sales, service and parts for Link-Belt excavators and other products. “We’re trying to be that one-stop-shop for the customer,” Zajick said, adding that Norris Sales Company deals mostly with contractors skilled in a number of trades. She attributes the success of the company to its employees and diversification. “We’ve been able to stay busy and adapt to changing economic
times,” Zajick said. She said she also believes the company’s success has come from “being aggressive and knowing what the customer needs.” “It’s realizing what products customers really want to have, especially during economic downturns,” she said. “When you have people put their heart and soul into their job every day, it really shows.” “We try to be proactive with our offerings and keep our rates manageable,” she added. To add to its already impressive service, the company was just certified as a member of the Women’s Business Enterprise National Council, Zajick said. And while growing the business and adding her input to aid AED is crucial to her company’s success, Zajick said the greatest benefit to her joining the family business is really quite simple. “It’s a rare opportunity to see your parents every day and build a business (together,)” she said. “I have been very lucky.” February 2016 | Construction Equipment Distribution | www.cedmag.com | 39
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>> EQUIPMENT WATCH INTELLIGENCE
Annual Usage Increasing at High Rates for Internal Combustion Lift Trucks
The average age of an I.C. Cushion Tire Lift Truck varied between 10 and 12 years in the past 12 months, while the I.C. Pneumatic Tire Lift Trucks remained closer to 10. Internal Combustion Counterbalanced Lift Trucks Top Subtype Usage Hours 600 562 550 550
Average Annual Usage
Analyzing over 62,000 data records on Internal Combustion Counterbalanced Lift Trucks used to power EquipmentWatch Values, the annual usage comparison between I.C. Pneumatic Tire Lift Trucks and I.C. Cushion Tire Lift Trucks showed variation in both hours used and average age on the market. The average age of a Cushion Tire Lift Truck fluctuated from 10 years in January up to 12 in June through August before dropping back down to 11 years in September. The Pneumatic Tire Lift Trucks averaged at age 10 years in January, only rising to 11 for 3 months (February, March, May) and ending September back at 10. This impacted the average usage of these lift trucks on the market throughout the year as well as their average annual usage. The average usage on Cushion Tire Lift Trucks went from 4101 in January up to 4556 in September. Despite the average age going from 12 to 11 years between August and September, the average usage did not change. However, it did impact average annual usage. Annual usage in January on these lift trucks were 431 hours and in September rose to 562. Despite the average usage not changing between August and September, the average age change impacted the average annual usage, going from 550 to 562, adding an extra 12 hours. Trends in both average age and average usage were different between the two types of lift trucks. Month over month the decreases and increases in average usage were similar in terms of positive and negative directions, but the percentage changes were quite different. The largest percentage increase in usage for Cushion Tire Lift Trucks was in April, up 15%, and the largest increase for Pneumatic Tire Lift Trucks was in July, up 22% from June. So far this year, Pneumatic Tire Lift Trucks increased the most since January, up 36%, while Cushion Tire Lift Trucks were up 31%. This was primarily due to that large increase in July.
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I.C. Pneumatic Tire Lift Trucks Highcharts.com
KEY TAKEAWAYS
FOR DECISION MAKERS EQUIPMENT MANAGER/ RENTER/SELLER: I.C. Cushion Tire Lift Trucks have maintained a higher average age and average annual usage thus far in 2015, but I.C. Pneumatic Tire Lift Trucks are increasing in usage at a higher rate.
Jessica Carr Industry Analyst EquipmentWatch.com
Knowing Fuel Cost Trending Can Save You Big
Both diesel and gasoline costs are at their highest in the summer: Diesel rises 11%, gasoline 19% from lowest average. Understanding what your fuel costs will be for a given month is incredibly important in order to run a successful and profitable business. The cost of fuel heavily impacts the operating cost for a piece of equipment, and being prepared for fluctuations can help in any decision making. For example, usage on a piece of equipment that burns higher amounts of fuel per hour might need to be monitored more closely or used less during months of higher fuel costs. Understanding monthly trends can also be beneficial for creating a bid for a job that is months or even years away. If the majority of the work for the job is going to be during the summer months, your operating costs will most likely increase. Likewise, jobs during winter months will generally cost you less in fuel. Being able to predict these changes
in your fuel costs could help you edge out your competition and win the bid. Hereâ&#x20AC;&#x2122;s what we found looking at averages in data from 2004 to 2014: Diesel costs generally spike from March to September. On average, the cost of diesel fuel per gallon in March is $3.15, which is more than a 4% increase from February. The average cost rises another 3% from March to April before it levels out at around $3.30 per gallon from April to September. You will begin to see a slight decline in average prices in October, but nothing significant. The decline will continue through December, when the average diesel cost returns to $3.15 per gallon. You can expect to see the biggest drop in diesel costs from December to January. Overall, diesel fuel is the least expensive in January and February,
when the average cost hovers around $3, and the most expensive in September right before prices start to decline. When compared to diesel, average gasoline costs have a similar spike from March to September, but a much faster drop in prices from October through December. There is over a 6% increase in gasoline costs from February to March, when the average cost per gallon is $2.91. There is another 5% increase in costs from March to April, and a 3.5% increase from April to June, when prices top out at $3.16 per gallon. From July to September, the average cost of gasoline hovers around the $3.12 per gallon mark. In October you see a 4% decrease in the cost of gasoline, and that decline continues throughout the rest of the year. There is a 6% decline from October to
40 | www.cedmag.com | Construction Equipment Distribution | February 2016
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>> EQUIPMENT WATCH INTELLIGENCE
Impact of Meter Reads on Combine Prices Varies by Class In a quick analysis of used combine sales records, we found that larger combines have shorter lifespans before reaching market and exhibit weaker correlation to utilization than smaller models. With the recent unveiling of our new agricultural equipment capabilities, it seemed like the perfect time to dig around in the data surrounding the 4,000 new models we have added to EquipmentWatch Values. We spend a lot of time in the EquipmentWatch offices debating the impact of meter reads on different types of equipment. This week, we pulled together a dataset of all used combines that we have observed on the resale markets, condensed down to over 178,900 unique and cleaned records in 2014 and 2015. Generally, combines are categorized by a class system based on horsepower and several other attributes, but this system can be tricky. AEM, the Association of Equipment Manufacturers, sets the official classes for the industry, but many manufacturers have their own internal processes for determining class. Additionally, to our knowledge there is a gap in the class system, as the largest AEM classification maxes out at 410 horsepower, excluding a substantial number of models we observe on the market. To simplify our analysis, we used the AEM classifications, and then combined several of them to break the data into three buckets. We define Classes 4-6 as any model with up to 322 horsepower, Classes 7-8 as combines with 323 to 410 horsepower, and Classes 9-10 as any combine with over
KEY TAKEAWAYS
FOR DECISION MAKERS
410 horsepower. To get a better understanding of the way meter reads influence average asking price, we charted all of these observations on a Cartesian plane. We found that, as expected, smaller combines exhibited smaller price variance and a greater reactivity to meter reads, while the larger Class 9 and Class 10 models were much less reactive. Interestingly, the largest combine classifications on the market were for the most part below 3,000 hours, while the smaller and medium-sized classes ranged as far as 6,500 hours in the extremes. We expect this occurs because larger machines have a greater capacity per hour, so growers that make an investment in these higher-power machines can harvest more crops in an hour than other growers using smaller classes of equipment. Additionally, we believe large machines react differently due to their relative newness on the market, since the first major models produced past the 375 horsepower limit were introduced after 2010. When we investigated the distribution of model age by these sizes, we found this hypothesis was indeed correctâ&#x20AC;&#x201D;over 99% of the Class 9 and Class 10 models were under eight years old, compared to only 40% of the models in Classes 4-6. This skewness lines up with expectations across the agricultural and
KEY TAKEAWAYS
construction equipment industries, in which new equipment grows heavier and/or more powerful each year. The actual impact of utilization on average asking price varies substantially by the equipment type and industry, but these combines show a very high correlation between the two (coefficient of -0.842, for the mathematically inclined). However, as larger combines make a greater impact on the used equipment market, we may see that correlation fall in the short-run as the market moves towards larger and more expensive equipment.
Sam Giffin Industry Analyst EquipmentWatch.com
Fuel Prices
FOR DECISION MAKERS
3.4
3.2
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CONTRACTORS: Recognizing fuel cost trends is key in being able to predict the operating cost for a job months and even years out. Using these pricing trends can generate more accurate bids and help in managing costs.
RENTER/SELLER: The average price of used combines above 410 horsepower shows less reactivity to meter reads than smaller models, but combines overall show a remarkably stable correlation between usage and price.
3
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November, and a 4% decline from November to December, when the price per gallon drops to $2.70. Overall, gasoline is the least expensive in December and January, when the average cost is around $2.68, and the most expensive in May and Elise Gregory June, where the price Senior Industry Analyst reaches a yearly high of EquipmentWatch.com $3.16 per gallon.
Gasoline Price Highcharts.com
February 2016 | Construction Equipment Distribution | www.cedmag.com | 41
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>> ECONOMIC ANALYSIS
Three Economist Predictions For Construction Industry Growth in 2016 Explore important insight and updates on the construction equipment industry. By Emily Peiffer It’s the season of construction economic predictions, and a week after Dodge Data & Analytics released its 2016 Dodge Construction Outlook, the Associated Builders and Contractors hosted a webinar with top economists from major construction associations offering their own forecasts for the coming year. Similar to Dodge economists, ABC Chief Economist Anirban Basu, American Institute of Architects Chief Economist Kermit Baker and National Association of Home Builders Chief Economist David Crowe predicted continued industry growth in 2016.
Anirban Basu ABC Chief Economist
Basu predicted 7.4% growth in nonresidential construction spending next year. He said the industry is seeing strong momentum that will carry into 2016. The main problem now for construction companies is driven not by a lack of demand, but by difficulty meeting that demand. With a lack of available workers, supply constraints are the most significant obstacle still hindering stronger growth, according to Basu. “The construction industry has benefited from increased stability stemming from low materials prices and greater certainty regarding federal budgeting and monetary policy, although a lack of appropriately skilled labor will remain a challenge for contractors,” he said. Basu added that the Federal Reserve’s interest rate decisions will have a major impact on the construction industry and economy as a whole. “The four segments that are driving the economy forward — consumer spending, auto, residential and nonresidential construction — are largely oriented around low interest rates, and the Federal Reserve knows it. Takeaway these ultra-low interest rates and the U.S. economy has a problem.” Basu added: “Next year overall should be a solid year for nonresidential construction spending. One of the leading indicators is the Architectural Billings Index. Architects are getting busier, which means contractors generally get busier downstream.”
David Crowe NAHB Chief Economist
Crowe expressed optimism for the residential construction industry in 2016, largely due to an improving job market. He pointed to the strong correlation between single-family permits and employment gains. But despite the recent improvements in the U.S.
economy, Crowe said, “We aren’t quite up to where we need to be. We still have a little further to go to have full employment.” Crowe said the supply side of the industry is still dealing with major obstacles, especially access to qualified labor and availability of buildable lots. He added that the labor shortage is continuing largely due to the fact that construction wages are less competitive than before the recession. “In 1990, the typical residential worker made 14% more than general wage rate. What’s disturbing now is that ratio is down to 4% more. The competitive level is not as good as it was. Unfortunately, that means one of the solutions to the labor shortage is to raise wages,” he said.
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>> ECONOMIC ANALYSIS
Kermit Baker AIA Chief Economist
Baker said he expects significant growth in the single-family sector due to pentup demand after years of slower activity. The multifamily and home-improvement segments have already recovered almost fully after the major downturn during the recession and are now “entering an expansionary stage.” Nonresidential building has seen steady growth and is getting closer to reaching its pre-recession peak. “Led by tremendous demand for energy-efficient spaces, spending on home improvements is on track to reach an all-time high by year’s end,” Baker said. “The office and retail sectors are expected to lead the commercial real estate market in
2016 with near double-digit increases in construction spending expected.” Baker pointed to recent growth in existing-home sales and home improvement sector gains as signs the residential industry is starting to get out of “this little lull we’ve been in for a few quarters.” However, Baker cautioned that labor concerns continue to plague the industry. Construction has typically relied on immigrants and students from vocational and technical training programs. But with the decline in immigrant workersand a lack of young people choosing technical training, Baker encouraged the industry to “focus on the key demographics that have traditionally not served this market,” especially women in the workforce.
EMILY PEIFFER is the associate editor of Industry Dive’s Construction Dive publication. Hailing from Lancaster, PA, she received her BA from Susquehanna University. Before joining Industry Dive, Emily worked for Lancaster Newspapers and Science & Diplomacy, under the American Association for the Advancement of Science. February 2016 | Construction Equipment Distribution | www.cedmag.com | 43
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INTRODUCING A NEW LOCATION & PROGRAM
2016 FINANCIAL / HR SYMPOSIUM YOU’RE INVITED!
APRIL 27-29, 2016 LOEWS NEW ORLEANS DON’T MISS OUT ON ONE OF THE TOP INDUSTRY CONFERENCES FOR FINANCIAL & HUMAN RESOURCE PROFESSIONALS TO DISCOVER STRATEGIES FOR SUCCESS!
REGISTER ONLINE: bit.ly/2016aedsymposium REGISTER NOW
Key highlights you’ll want to take back to your dealership! REGISTRATION INFORMATION Finance
HOW TO RESERVE YOUR HOTEL ROOM Human Resources
Register• Online: Register youtax and your team An analysis on essential information online by visiting: bit.ly/2016aedsymposium (link • Identifying when it is time to sell versus when to is case-sensitive).
Two Ways• to Reserve Yourexplanations Room: Listen to important on crucial employment law changes • Reserve by phone: 1-866-211-6411 • Reserve Online: bit.ly/16symposiumhotel (link is • Reinvent your performance review process case-sensitve)
hang on to your equipment
Register• By Phone: more economic information and Engage in an For important outlook assistance, forcontact 2016 your regional manager today 630-574-0650.
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• Information to revamp your employee handbook
Event Details: • Room Rate: Starting at $219.00 for single/double for deluxe accommodations
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YOU ASKED,WE LISTENED Join AED April 27-29 for our annual symposium in the exciting city of New Orleans, Louisiana! This year’s symposium will take place at the Loews New Orleans Hotel, and we are happy to announce that human resources will be included in the program as a separate track. Over the course of this day-and-a-half conference, attendees will have access to a variety of educational learning sessions with topics that include next generation recruiting for technicians, legal must-knows for financial executives, what to do if you get audited and more! Each year, attendees walk away with an abundance of information to take back to their dealerships. Register today at bit.ly/2016aedsymposium and see what the buzz is about!
STRATEGIES FOR SUCCESS Top 3 Reasons You’ll Want To Attend This Year’s Financial/HR Symposium
LEARN This annual symposium is designed to update financial and human resource professionals on important issues that impact their areas of responsibility.
INTERACT Don’t miss the opportunity to interact, talk, ask questions and have group discussions on industry related issues and topics with your peers.
DEVELOP Financial and human resource professionals will gain insight and industry-specific tools through our special educational sessions like; revamping your employee handbook, an important economic update, discovering the top rental key performance indicators and more!
New LOCATION, New PROGRAM Two Ways to Register & Reserve your Room for AED’s Financial / HR Symposium
REGISTRATION INFORMATION Register Online: Register you and your team online by visiting: bit.ly/2016aedsymposium (link is case-sensitive). Register By Phone: For more information and assistance, contact your regional manager today 630-574-0650.
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HOW TO RESERVE YOUR HOTEL ROOM Two Ways to Reserve Your Room: • Reserve by phone: 1-866-211-6411 • Reserve Online: bit.ly/16symposiumhotel (link is case-sensitve) Event Details: • Room Rate: Starting at $219.00 for single/double for deluxe accommodations
2/3/16 5:46 PM
>> PROBLEM SOLVED
TROY OTTMER
Prepaid Maintenance
Grow your business with maintenance contracts.
If all prepaid maintenance plans are NOT created equal, how do you differentiate yourself from the competition?
How do you control your customers’ owning and operating cost, and at the same time grow or sustain a steady stream of parts and service revenue? You do this by selling “Prepaid Maintenance” packages to your customers. You can do this after you sell the units, or you can bundle or front load the prepaid maintenance with the machine deal. What makes one prepaid maintenance plan more appealing than another? This would depend on many variables, including what one customer wants as compared with another customer, and the same would apply from one dealer to another. Well, you can certainly count on one thing: All prepaid maintenance plans are NOT created equal. If these plans are not created equal, then how do you differentiate yourself from your competition? What are the “KEY” differentiators? Again,
these will vary from market to market, so for the sake of simplicity, we will take a look at how this process has traditionally been done. 1. Total Price of the service or better yet, Cost Per Hour of machine usage 2. Hourly Rate charged for the service 3. Items Serviced 4. Service Offerings 5. Scheduling Consistency or Flexibility Please keep in mind there are many other items to consider, and the five listed above are still a good basis for developing your program. Price To some customers, price is the most important factor. Often, we lose deals based purely on price: We were not low bid! In this case, do we truly understand why we lost the deal? Was it because we were too high? Or was it because our quote was more inclusive (i.e. had more items quoted in the job) than the competition? Do we know who the competition is? Hourly Rate Hourly Rate is another item that some customers focus on. You may have the lowest overall price; however, the customer wants to know your hourly rate or the number of hours it will take for the service. Once they have this, sometimes they get hung up on the rate, and sometimes you may lose the deal. It would be best to NOT be drawn into a discussion regarding what your labor rate is or what the total hours will be. Trust me – it’s downhill from there. The best option here is sell the package based on cost per hour. Items Serviced Items Serviced are extremely important from a selling standpoint. This is where you differentiate yourself from the competition. Your overall price maybe higher, but you can then explain to your customer that your plan has more to offer, and you are doing more to make sure their asset is being taken care of. In this case, you lay out what your service includes (filters, sampling, etc.). You
TROY OTTMER is Vice President of Fixed Operations at Doggett Heavy Machinery Services in Houston, Texas, a John Deere Construction Equipment Dealership with 17 locations in Texas and Louisiana. He can be reached at troy.ottmer@doggett.com. 46 | www.cedmag.com | Construction Equipment Distribution | February 2016
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can also break this down as referenced above into what the cost per hour would be. Service Offerings Like Items Serviced, your Service Offerings can set you apart from the competition. Keep in mind, your Service Offerings are the method by which you can customize or cater your maintenance packages to your customer’s unique or specific needs. Trust me, customers will not all want the same program, so you have to be willing to provide a customizable program based on your core offering. Scheduling Scheduling consistency and/or flexibility is another key feature that can make or break your bid for a new contract. Being flexible
certainly will add value to your offering, and likewise, being consistent will gain you a long standing customer. If you are not willing to build the package around your customer’s business needs or you are not consistent with your service scheduling, then you will not earn or retain your customer’s business. So to sum this up, if you do your homework and prepare your quote for the exact needs of the end user, and you price it properly for the market, then you can and will grow your maintenance business by selling a prepaid package or bundling the maintenance into the machine deal. If you cannot sell it as prepaid or bundled, then you can sell the agreement as a “Pay As You Go” plan. Either way, it’s a win-win.
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As the official magazine of Associated Equipment Distributors, this publication carries authoritative notices and articles in regard to the activities of the association. In all other respects, the association cannot be responsible for the contents thereof or the opinions of contributors. Copyright © 2016 by Associated Equipment Distributors. Construction Equipment Distribution (ISSN0010-7655) is published monthly as the official journal of Associated Equipment Distributors. Subscription rate – $39 per year for members; $79 per year for nonmembers. Office of publication: 600 W. 22nd St., Suite 220, Oak Brook, Ill. Phone: 630-574-0650. Periodicals postage at Hinsdale, Ill. 60521 and other post offices. Additional entry, Pontiac, Ill. POSTMASTER: Send address changes to Construction Equipment Distribution, 600 W. 22nd St., Suite 220, Oak Brook, Ill. 60523
February 2016 | Construction Equipment Distribution | www.cedmag.com | 47
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>> RISK MANAGEMENT
ERIC STILES
Sentry Insurance Provides Guidance on General Safety Questions For Construction Equipment Industry
Account Executive Eric Stiles discusses important safety questions that are industry-specific for construction equipment dealerships.
Q: I’ve heard the term “negligent entrustment.” Does it mean anything to my dealership? A: When negligent entrustment is a factor in a liability loss suffered by your dealership, that loss may be significantly larger. What is negligent entrustment? Perhaps the best way to understand the concept is to look at a hypothetical situation: Let’s say your dealership employs a parts driver who you know has had several speeding tickets. The parts driver speeds while making a delivery, runs a stop sign, and broadsides another vehicle in the intersection. The other vehicle is totaled and its driver is seriously injured. Vehicle damage, medical costs, and lost wages for the injured driver total over $250,000. The injured driver files suit against the driver and your dealership. The court rules in favor of the injured driver and awards $250,000 for the loss. The court awards an additional $250,000 in punitive damages, noting you had negligently entrusted a
vehicle to a driver you knew had past driving problems. What can dealers do to prevent negligent entrustment? Follow these control practices to help protect your dealership from the potential risk of negligent entrustment: • Review each driver’s MVR as a condition of employment and repeat the review every three years. Develop a set of criteria that constitutes an acceptable record based on the number of accidents and/or violations. • Provide annual refresher training for drivers which covers safe driving practices and the dealership’s expectations for safe conduct and performance. • Distribute a copy of the dealership’s fleet safety policy to all drivers every year. • Require each driver to sign a commitment statement that affirms their dedication to safe driving practices.
As the endorsed P&C carrier for AED, Sentry Insurance offers great coverage options and services to meet your dealership needs. ERIC STILES is Sentry’s lead Account Executive responsible for maintaining the AED/Sentry relationship.
48 | www.cedmag.com | Construction Equipment Distribution | February 2016
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