462847 february 2015

February 2015

CED Construction Equipment Distribution Published by AED: Business Fuel for a More ProďŹ table Dealership

Workforce Warrior AED 2015 Chairman Don Shilling is passionate about plugging the next generation into the industry, the association, and his own business.

Q A Clear Day for Credit

Q Intelligent Q Compaction n

More deals are going through

Changing how w roads are builtlt

Q Q&A with NES Rental insights from Operations VP

Faster Forward™

Mobile applications for your dealership and customers.

New solutions for improving customer satisfaction.

Analytics that uncover profit opportunities.

Learn how our solutions can take you Faster Forward.™

cdkglobal.com/heavyequipment

Heavy Equipment © 2015 CDK Global, LLC / CDK Global is a trademark of CDK Global, LLC.

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contents CED Magazine | February 2015

vol. 81, No. 1

www.cedmag.com

>> FEATURES

24

Put Up Your Sails – Credit’s Got a Good Breeze Dealer and finance experts talk about 2015 conditions and why they’re so bullish.

30

Cover Story:

Workforce Warrior

Meet 2015 AED Chairman Don Shilling, the first of his peers before him to have served as Chairman of The AED Foundation before leading the association.

34

Hard Fact: Intelligent Compaction Is Here To Stay Dealers need to prepare to support a huge change in how roads are built.

>> DEPARTMENTS

12 » AED hp 16 » Industry Beat 20 » Data Trends 22 » Ready to Order 55 » Ad Index

40

That ’70s Show – A Q&A With NES The national rental chain attains utilization in the upper 70s-percent range, so CED has questions.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 3

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ZZZ DVNKUW FRP ZZZ NRSRQDLUGR FRP Manned by Karla Dobbeck (karlad@hrtechniques.biz) and her associates at Human Resource Techniques, Inc., the AED 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.

'YWXSQM^IH WTIGM½G ,6 services are also available to member companies at a discounted rate of $125 per hour.

Call Counsel is AEDâ&#x20AC;&#x2122;s new FREE legal hotline for AED members provided by Kopon Airdo, LLC, AEDâ&#x20AC;&#x2122;s general counsel. *IEXYVIW SJ XLMW QIQFIV FIRI½X Â&#x2C6; Staffed by attorneys from the 'LMGEKS SJ½GI SJ /STSR %MVHS LLC, with a network of attorneys nationwide. Â&#x2C6; Callers receive immediate guidance on commercial, employment, and litigation-based legal questions, enabling them to evaluate possible courses of action â&#x20AC;&#x201C; and to understand the VEQM½GEXMSRW SJ WYGL EGXMSRW ÂŻ when a legal situation arises or is looming. Â&#x2C6; 7XVMGX GSR½HIRXMEPMX] MW EHLIVIH to on all calls.

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UKHQGHUVRQ#DHGQHW RUJ This is no ordinary Dealer 20 Group â&#x20AC;&#x201C; led by its own participants and custom-sized to meet individual needs, your group will review operating results, but will also discuss key ½RERGMEP IRKMRIIVMRK XIGLRMUYIW FEROMRK XIVQW ERH ½RERGMRK options, how to downsize the balance sheet based on your current sales levels, M&A opportunities, product line optimization, and more. %)(´W žI\MFPI TVSKVEQ QEXGLIW noncompetitive dealers by company size and provides I\IGYXMZI GSEGLMRK [LIR requested, for better overall performance and value. %)( 1IQFIVW 3RP] Starting at $350/month

Three new reasons your AED membership pays off!

>> EDITORIAL TEAM Executive Editor and Director of Programs KIM PHELAN kphelan@aednet.org Contributing Editor JOANNE COSTIN pr@aednet.org Graphic Production EVA BELMONTE eva@neggie.net

>> COLUMNISTS

contents CED Magazine | February 2015

>> COLUMNS

07 » President’s Message Do this and prosper all year long.

GARRY BARTECKI Financial Consultant Dealer-Rental Succes LLC

09 » Editor’s Note

STEVE CALECHMAN Journalist

21 » Money$$$Man

KARLA DOBBECK Human Resource Techniques RON HODGEMAN WTP Exchange CHRISTIAN KLEIN AED Vice President of Government Affairs ELI LUSTGARTEN ESL Consultants TROY OTTMER Doggett Heavy Industries STEVE PIERSON Seldon Fox

Numbers always scare me – but these might scare you, too.

How long can you hold out if oil stays low?

47 » CFO 41

Rethinking C vs. S Corp – new advantages to examine

49 » Smart HR

How to distinguish between performance and behavior

51 » Problem Solved

Get a grip on stale inventory.

53 » View From the Hill

NAM president says, “It’s time to govern.”

56 » Easy Wins Magic for meetings – and presto, no more boredom.

>> ADVERTISING CONTACTS Vice President–Sales/Publisher DAVID W. GORDON 800-388-0650 ext. 334 dgordon@aednet.org Advertising Sales Manager ALBERT J. RAMIREZ 800-388-0650 ext. 311 aramirez@aednet.org

>> PLUS

42 » Intermat 2015

Production Manager MARTIN CABRAL 800-388-0650 ext. 313 mcabral@aednet.org Since 1920 2IÀFLDO 3XEOLFDWLRQ RI

vol. 81, No. 2

44 » 40-Below featuring:

www.aednet.org 600 22nd Street, Suite 220 Oak Brook, IL 60523 630-574-0650 fax 630-574-0132 4 | www.cedmag.com | Construction Equipment Distribution | February 2015

Eric Poulson Faris Machinery

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>> PRESIDENT’S PAGE BRIAN P. MCGUIRE

This is the Year to Harness AED’s Energy

W

Make plans now to send your key managers to all AED executive events in 2015.

e’re just back from a phenomenal AED Summit, and if you were there, you know that the new life we pumped into the convention was not only invigorating – it’s also just the tip of the iceberg.

Put simply, the AED you experience in 2015 is revitalized and renewed – everything has gone under the microscope and is new and improved. Your company will not want to miss out on the extraordinary value found at each one of our events throughout the year.

Plus, I hope we’re getting your attention with some of the brand new “destination” venues we’ve selected. Why shouldn’t we have an adventure as well as a conference?!

You’re driving your business for success, so why take a backseat when it comes to engaging with your peers and enjoying the top-notch business content AED offers? I would challenge you today, at a minimum, to put each of these must-attend industry events on your calendar and make a decision now as to the key individuals at your company who will benefit most from them. Then get on aednet.org and sign up.

Here’s the big lineup: Financial Symposium, April 22-24 Peabody Hotel | Memphis, Tenn.

AED 20 Groups, May 7-8 Little America Hotels Salt Lake City, Utah Washington Fly-In, June 3-4 Willard Hotel | Washington, D.C. Leadership Academy, Aug. 25-27 The Meritage Resort |Napa, Calif.

Executive Forum, Sept. 23-25 Renaissance Schaumburg Schaumburg, Ill. Ottawa Briefing, Oct. 29 (tentative) Ottawa, Ontario (hotel TBA) And finally, mark the company calendar for the 2016 Summit, Jan. 19-22, in the Washington, D.C. area at the Gaylord.

While we’re on the subject of driving growth in your business, I want to underscore the unique opportunities and benefits that are available to you – and work done on your behalf – through The AED Foundation. All year long The Foundation offers you webinars and seminars that teach management best practices for every department in the dealership.

In addition, The Foundation goes beyond building into your existing team and is dedicated to rebuilding your technical workforce. I don’t know if you realize this, but no other group apart from The Foundation is actually (1.) working to ensure that post-secondary academic curricula meet the real-world

needs of the construction equipment distribution industry; and (2.) promoting heavy equipment careers to kids, faculty and parents at a time when those careers don’t get a lot of positive PR. Right now, The Foundation is on the home stretch of its Annual Campaign, and every AED member has a responsibility to invest in this nonprofit organization so it can continue its powerful work.

If you have not yet pledged your taxdeductible contribution to support their essential programs, now is the time. No donation is too small, but frankly, I would ask you to weigh how much it’s worth to have a team in your camp that is helping to flood the workforce with well-trained heavy equipment technicians. Please give generously, because it’s all for you.

Your Regional Managers are teaming up with The Foundation this year to multiply the outreach to technical colleges around the U.S., forging new partnerships between these schools and the local dealer/manufacturer community to help more heavy diesel programs achieve AED Accreditation – which means higher skills for graduates you’re hiring.

This is the year to engage with AED personally and deep within your organization. Do this, and it will be a great year, indeed.

BRIAN MCGUIRE (bmcguire@aednet.org) is president and CEO of Associated Equipment Distributors..

THE AED FOUNDATION | AN AFFILIATE OF ASSOCIATED EQUIPMENT DISTRIBUTORS

>> OFFICERS

>> DIRECTORS

A. ROY KERN Chairman Equipment Corporation of America

GARY BRIDWELL Ditch Witch of Oklahoma

TIMOTHY KRAMER Kramer Ltd.

DENNIS VANDER MOLEN Vice Chairman Vermeer MidSouth, Inc.

TODD COFFEY Brandeis Machinery and Supply Co.

SONJA METZLER Ohio CAT

JOHN D. CRUM Treasurer Wells Fargo Equipment Finance.

JOHN COSGROVE Central Power Systems & Services, Inc.

DAVID REILLY John Deere Construction & Forestry

BOB HENDERSON President The AED Foundation

DR. DONALD M. CLAYCOMB State Technical College of Missouri

KENNETH SILVERMAN Volvo Construction Equipment

CHRISTOPHER PERA Immediate Past Chairman Tri-State Equipment Services

MIKE HAYES Komatsu America Corp.

MARK TEEL Caterpillar, Inc.

DIANE BENCK AED Board Representative West Side Tractor Sales Co.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 7

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>> EDITOR’S NOTE KIM PHELAN

The Yin and Yang of Administration’s Budget Proposal When you decode the math, the message is: Join the AED offense.

“...a $478 billion, six-year surface transportation reauthorization proposal...sounds terrific; but it would be paid for with... business tax – ouch.”

M

ath has never been my thing – shocking, right, given my profession as an editor. But it is rather an irony considering I’m the daughter of a former college mathematics professor. The only reason I got As and Bs in high school math is because I had a private tutor at the kitchen table every night, walking me through those algebraic y’s and x’s so that I looked like genius girl next morning in class.

Despite my disability, as I listened to a “Bloomberg Government” webinar a few days before we went to press it dawned on me that it really doesn’t take a math genius to see a few pros and several cons embedded in President Obama’s proposed budget released on Feb 2. (It’s the first time in his presidency that it’s been delivered on time, I learned – possibly, the presenters noted, with the intent to “provoke a fight.”)

You’ll no doubt have seen the breakdown analysis from Christian Klein and his team in AEDNews’ Feb. 9 edition. But let me underscore a few key points that got my attention because of their equipment-industry- and general-business relevance.

I observe a certain yin and a yang throughout most of the proposal, but of course the bottom line is that it’s a $4 trillion ask with a $474 billion pay shortfall. (that’s “code” for deficit). Needless to say, while discussing the proposed increased spending caps and tax increases the Bloomberg presenters noted that the “fiscal 2016 discretionary budget request will face challenges in Congress.”

Here’s what I mean about yin yang.

The president’s budget proposal does reflect an 11 percent deficit decrease over last year’s request and anticipates another $11 billion decrease in 2017; but experts noted that deficits would begin to increase in 2018.

The budget proposal comprises a $478 billion, six-year surface transportation reauthorization proposal – wow, that sounds terrific; but it would be paid for with transition revenue from business tax – ouch.

The administration wants $2.1 trillion more in revenue over 10 years, according to Bloomberg Government experts. Revenue sounds good to me, until, oops, I see that’s “code” for more taxes. Specifically: raising the capital gains tax rate to 28 percent; changing taxes on inherited wealth; a one-time 14 percent tax on past overseas profits and 19 percent minimum tax on future overseas business income; and two higher airport security fees. There is also a proposed revenue-neutral corporate tax decrease to 29 percent from 35 percent. (check with Steve Pierson, page 47, but that’s probably not helpful for all you S-Corp-structured businesses.)

Experts indicated that there is “zero agreement between the president and Congress” when it comes to the EPA – Obama’s ask is a 9 percent increase, and clean air and climate change would receive $487 million, likely affecting power and energy companies. And doesn’t it give you a fuzzy feeling to know that the requested 18 percent increase for the federal Treasury comprises an estimated $60 billion in revenue from additional IRS enforcement – and requests more IRS staff. Yay! Friends, my point is there are a lot of scary numbers being bantered about in Washington; it helps that Congress’ business conscience is more tingly than it has been for many years, and your AED PAC support and election votes certainly got that job done. But let’s not rest on those laurels, which could quickly turn to thorns in our collective backside if we don’t stay actively engaged with elected officials.

AED gives you the ideal platform at the Washington Fly-In, a little more than three months away from now, June 3-4. Won’t you join your industry peers this year and make sure the budget and lawmaking that’s done syncs with AED legislative priorities?

We’re also looking forward to seeing your company represented at the next major AED executive event: The AED Foundation Financial Symposium – that’s “code” for CFO conference – April 22-24 in Memphis. Thanks for reading.

KIM PHELAN (kphelan@aednet.org) is the executive editor of Construction Equipment Distribution and director of programs for AED. February 2015 | Construction Equipment Distribution | www.cedmag.com | 9

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Happening

www.cedmag.com

Financial Symposium Heads to Memphis Brand new location for annual CFO event!

Calling all CFOs and related accounting personnel: It’s time to register and make travel plans now for The AED Foundation’s Financial Symposium (formerly the CFO Conference), which will convene April 23-24 at the Peabody Hotel in Memphis, Tenn. Featured topics will include taxes, insurance, technology, HR, and leadership. Network with the industry’s brightest financial minds – your registration includes a traditional Memphis BBQ dinner on Beale Street, and a rooftop party at the Peabody. To register, visit the AED online store at aednet.org.

Current events and news for the equipment distribution industry

12 » AED hp 16 » Industry Beat 20 » Data Trends 21 » MoneyMan 22 » Ready to Order

February 2015 | Construction Equipment Distribution | www.cedmag.com | 11

>> AED hp

AED Chairman Don Shilling and 2015 Officers Installed at AED Summit

A

ED 2015 Chairman Don Shilling and six volunteer AED officers were installed at a ceremony during the Chairman’s Inaugural Breakfast on Feb. 13 at the AED Summit in Orlando. The group will serve as members of AED’s Executive Committee during the coming year. Members of the executive

committee are elected by mail ballot and sworn in at the event.

Don Shilling is president of General Equipment & Supplies, Inc., Fargo, N.D. His dealership represents Komatsu, Link Belt, Trail King, Terex, KPI-JCI Astec and other brands.

Previously Chairman of The AED Foundation from 2005 to 2007, and

2015 Board of Directors

AED Officers

Three new At-Large Directors have Whit Perryman been elected to three-year terms CEO of Vermeer, on the AED Board. Corey Vander Texas-Louisiana, will Molen is sales manager at Vermeer serve as AED’s vice MidSouth. Kenneth E. Taylor is chairman. His dealerpresident of Ohio Cat, headquarship has 12 locations tered in Broadview Heights, Ohio. throughout Texas and James P. Cowin serves as presiLouisiana. dent of Cowin Equipment Co. in Birmingham, Ala., which represents CNH, Gomaco, Liebherr and Volvo, Wes Stowers among many brands. is the new AED senior Other At-Large Directors include vice president. He Mitch Nevins, CEO, Bell Trucks serves as president America, Houston, Texas; Larry R. and CEO of Stowers Miller, president and CEO, Kelbe Machinery Corp., Bros. Equipment Co., Inc.; and headquartered in Todd Bachman, president, Florida Knoxville, Tenn.

Coast Equipment, Inc. New Regional Directors include John Riggs IV, president, JA Riggs Diane Benck Tractor Co., Little Rock, Ark. joins the Executive (South Central Region) and Craig Committee as an AED Drury, vice president of Operations, vice president; she is Vermeer Canada Inc., Stony Creek, vice president of West Ont. (Eastern Canada Region).

Side Tractor Sales Other Regional Directors include Co., headquartered in Christopher Palmer, Woods CRW Naperville, Ill. Corp. Williston, Vt. (Northeast Region); Giles Poulson, president, Farris Machinery, Commerce City, Colo. (Rocky Mountain Regional Director); 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); and Todd Hystad, general manager, Vimar Equipment Ltd., Burnaby, British Columbia (Western Canada Region).

12 | www.cedmag.com | Construction Equipment Distribution | February 2015

a past director on both the AED and The Foundation boards, Shilling accepted the gavel from Dale Vaughn, president and CEO of OCT Equipment, who also installed AED’s new officers.

Todd Hystad general manager of Vimar Equipment Ltd., based in Burnaby, British Columbia, will also serve as an AED vice president.

Dennis J. Heller president and CEO of Stephenson Equipment, headquartered in Harrisburg, Pa., will serve as AED’s vice president of Finance.

Timothy Watters remains on the Executive Committee in 2015 as immediate past chairman. Watters is president/owner of Hoffman Equipment, based in Piscataway, N.J.

Brian P. McGuire president and CEO of AED, also serves on the AED Executive Committee.

>> AED hp The AED Foundation Board of Directors As the economy grows, so does the need to attract and train dealership employees. 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.

Newly elected Foundation board members include David Reilly, division manager Customer Support for John Deere Construction & Forestry, Moline, Ill.; Todd Coffey, corporate service manager, Brandeis Machinery and Supply Co., Louisville, Ky.; and Dr. Donald M. Claycomb, president, State Technical College of Missouri, Linn. Mo.

Other members of the board include Gary Bridwell, president of Ditch Witch of Oklahoma, Edmond, Okla.; John Cosgrove, president and COO, Central Power Systems & Services, Inc., Liberty, Mo.; Mike Hayes, director, Distributor/Customer Support, Komatsu America, Rolling Meadows, Ill.; Timothy Kramer, president and CEO, Kramer Ltd., Regina, Saskatchewan; Sonja Metzler, director of Human Resources for Ohio CAT, Broadview Heights, Ohio; Kenneth Silverman, vice president of Custom Solutions, Volvo Construction Equipment, Region Americas, Shippensburg, Pa.; and Mark Teel, region manager, Western U.S. & Canada, Caterpillar, Inc., Peoria, Ill.

Foundation Officers Roy Kern

Dennis Vander Molen

John D. Crum

will continue as Foundation chairman in 2015. Kern is president of Equipment Corporation of America, a 97-yearold firm with facilities in Pittsburgh, Philadelphia, and Washington D.C.

president of Vermeer MidSouth, continues as AEDF’s vice chairman.

Vermeer MidSouth has five branches in four states including Tennessee, Mississippi, Arkansas and Louisiana. He is a past chairman of AED.

continues as AED Foundation treasurer and senior vice president, Wells Fargo Equipment Finance, in Pittsburgh, Pa. Wells Fargo offers equipment financial services to dealers and manufacturers.

Chris Pera

Diane Benck

Bob Henderson

serves as immediate past chairman.

He recently joined Tri-State Equipment Services, LLC.

vice president of West Side Tractor Sales in Naperville, Ill., will serve as the AED board representative to The Foundation.

executive vice president and COO of AED, serves as AED Foundation president.

AED Utah Reconvenes, Selects Leadership and Gears Up for 2015

M

embers of the AED local group in Salt Lake City gathered for the first of their quarterly meetings for 2015 on Jan. 15 at the Association of General Contractors to discuss local priorities and to elect officers. AED West Regional Manager Phil Riggs and Bob Henderson, AED executive vice president and COO were there to support the group and discuss AED resources.

John Kimball, president of Kimball Equipment, will remain treasurer and Ryan May, president of Century Equipment, was selected as president during the meeting, which consisted of dealer principals and representatives from seven equipment dealerships.

Pictured left to right: Phil Riggs, Bob Henderson, Michael Hale, Arnold Machinery; David Kolesky, Honnen Equipment; Paul Campbell, Wheeler Machinery; Paul Ross, Ross Equipment; Jeff Scott, Intermountain Bobcat; David Foulger, Century Equiment; John Kimball, Kimball Equipment; Skip Francone, Intermountain Bobcat.

Correction CED misprinted the phone number last month for Terramac on our “Good Company” profile article – the correct number is 630-365-4800.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 13

>> AED hp

‘Here’s What Industry Needs’

2014 Ed

ition

The AED Foundation publishes latest college technical standards, setting the bar for curriculum that meets real demands of today’s equipment dealership service department.

T

he AED Foundation recently released the 2014 edition of “Standards for Construction Equipment Technology,” the eighth revision since the standards were first published in 1997. This publication is the foundation for AED Accreditation of two-year college degree programs in diesel equipment technology. Six key areas of technology are covered: diesel engines, hydraulics/hydrostatics, electrical/electronics, power trains, A/C and heating, and safety/ administration.

The Standards are only possible through the generous commitment of industry technical professionals who participate in the process. Each Standards revision is

completed by a taskforce of representatives from AED dealerships, manufacturers and technical colleges. The taskforce is convened under the auspices of the Foundation’s Technical Training Committee. This industry effort is what gives the Standards both credibility and academic rigor. It is the industry’s statement to the colleges of what the industry needs. For a PDF copy, please e-mail sjohnson@aednet.org

Proposed New Members Diamond Mowers, Sioux Falls, S.D.

Dekpol S.A.

Beard Equipment Co., Inc. Midland, Texas

Vac-Tron Equipment LLC

VeriTread

Okahumpka, Fla.

Lakeland, Fla.

OSC Equipment Services, Inc.

C.W. Machine Worx, Ltd.

ButcherJoseph & Co.

Buffalo, N.Y.

Carroll, Ohio

St. Louis, Mo.

DIECI U.S. LLC

Hitek Equipment, Inc.

EW Sleeper Company Inc.

Kenosha, Wis.

Concord, N.H.

ATLAS Cranes & Excavators

HawkinsGraves, Inc.

Chicago, Ill.

Lynchburg, Va.

Springfield, Mo.

VERGA Attachments Pvt. Ltd.

Stanley Hydraulic Tools / LaBounty

Scottrade Bank Equipment Finance

Malur, India

Milwaukee, Wis.

Citizens Bank Asset Finance

RJ Hydraulic Hammers and Heavy Excavator Parts

Pinczyn, Poland

Marshall Machinery, Inc. Honesdale, Pa.

Lake Villa, Ill.

Global Cranes & Machinery, LLC Houston, Texas

MultiOne - OLS

Chandler, Ariz.

Woodland Equipment Inc. Kamloops, B.C.

Red Bank, N.J.

OIC Lender Services Columbus, Ohio

14 | www.cedmag.com | Construction Equipment Distribution | February 2015

Largo, Fla.

Have You Made Your Tax-Deductible Contribution to The AED Foundation Annual Campaign?

A

t the end of January, The Foundation was just past 60 percent of its goal. Members have pledged $183,000 toward the campaign goal of $300,000. Every contribution counts – please keep the unique and industryspecific education and workforce development initiatives running strong in 2015.

Make your pledge now by e-mailing Steve Johnson: sjohnson@aednet.org.

>> AED hp

AED’s McGuire: ‘We’ll Knock on As Many Doors As It Takes to Get the Job Done’

M

embers who’ve met him know AED President & CEO Brian McGuire never misses an opportunity to urge distributors Sen. Mark Kirk to get personally involved in the political process.

McGuire practices what he preaches. As AED continues to press Rep. Carlos Curbelo Congress for swift action on highways, tax reform, and energy legislation, he was in the nation’s capital late last month for a series of high profile meetings to move the equipment industry’s agenda forward. He and AED Vice President of Government Affairs

Christian Klein spent Jan. 21 and 22 meeting with Sen. Mark Kirk (R-Ill.), a centrist Republican and key Senate deal-maker; Peter Rogoff, the U.S. Department of Transportation’s undersecretary for policy; Rep. Carlos Curbelo (R-Fla.), a Transportation & Infrastructure Committee member and rising star in the House freshman class; and congressional members of the Republican Main Street Coalition.

They also spent time with senior staff from the National Governors Association discussing opportunities to strengthen state infrastructure programs and improve governors’ coordination with industry on workforce development.

“One of the keys to success in D.C. is persistence,” McGuire said.

“Moving the ball forward for the equipment industry means knocking on a lot of doors and talking to a lot of people. We’re going to knock on as many doors as it takes to get the job done.”

AED’s Gordon Addresses Sany Dealers

O

On Jan. 15-16, AED Vice President of Sales Dave Gordon participated at the Sany America dealer meeting in Peachtree City, Ga., where 26 dealer executives heard the wide ranging values and benefits of AED membership. Three dealers joined immediately following the program.

“I want to thank Mr. Liang, Mr. Yu, Dave Gordon Mr. Xiang, Eric Teague, and the entire management team at Sany America for the opportunity to address the dealers,” said Gordon. “We hope to see more getting on board in 2015 to take advantage of all the programs and services offered by AED.

Don’t Miss It

Mark Your Calendar

For details and to register, visit the AED online store at aednet.org or call 800-388-0650.

March 3-5, 2015 The Four Pillars of the Sales Profession Dayton, Ohio Presented by Don Buttrey March 12, 2015 Webinar: Sales Team Development 10-11:30 a.m. CST Presented by Don Buttrey March 17-19, 2015 World of Asphalt Baltimore, Md. March 26, 2015

Webinar: What’s Uncle Sam Up to Now? |10-11 a.m. CST Presented by Todd Thompson

April 20-25, 2015 Intermat Paris-Nord Villepinte, France

April 2 Don’t Miss the Interactive Webinar: “Converting Inquires to Sales & Rentals” $275/connection 10 a.m. CT Presented by Signature Worldwide

April 23-24 The AED Foundation Financial Symposium Memphis, Tenn.

This is impactful training for your equipment sales and rental team. It’s more important than ever to better focus on the needs of your customers – allowing you to convert more inquiries to sales and rentals.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 15

>> INDUSTRY BEAT

TCC Study Documents the Benefits of Infrastructure Investment A new study commissioned by the Transportation Construction Coalition (TCC) demonstrates how the benefits of federal highway and transit investment stretch far beyond the construction industry. The report, “Transportation Infrastructure Investment: Macroeconomic and Industry Contribution of Federal Highway and Mass Transit Program,” was completed by IHS, Inc. for the TCC, of which AED is a member. The study reveals 70 percent of the value added by federal transportation investment occurs beyond the construction sector.

Current federal highway and public transit investment, which is about $50 billion annually, generates an average $37 billion in combined personal and corporate tax receipts per year due to increased economic activity. In all, federal highway and mass transit investment produces nearly a 200 percent return on investment in terms of gross domestic product and contributes over $400 to every American household.

“The new study echoes what Congress, stakeholders and the American people already Archer Retires know – surface transportation investment drives economic growth and job creation,” said Brian P. McGuire, AED’s president and CEO. “The time is long overdue for policymakers From HOLT CAT to put aside partisan differences and provide the resources to rebuild our crumbling infrastructure. Responsible, long-term surface transportation legislation – the kind AED and its allies have been calling for – will double-down on the broad benefit the nation already enjoys from infrastructure spending.”

The study projects 5 percent annual increases in federal investment would create as many as 122,000 new jobs by 2019, putting more money in the pockets of American families while growing GDP by $9.6 billion, returning almost $5 billion in new government revenue.

The study can be downloaded at www.transportationconstructioncoalition.org.

IronPlanet and Cat Auction Services Merge IronPlanet, an online marketplace for buying and selling used heavy equipment and trucks, and Associated Auction Services LLC, an alliance of Caterpillar and several of its independent Cat dealers that operates under the name of Cat Auction Services, reached an agreement to merge the two companies.

“I am very excited about the combination of IronPlanet and Cat Auction Services, two trusted partners in helping buyers and sellers with their used heavy equipment acquisition and disposition needs,” said Gregory J. Owens, IronPlanet chairman and CEO. The power of IronPlanet’s technology, multiple marketplace formats

and global buyer base coupled with Cat Auction Services’ live, onsite auction format and deep equipment expertise will provide the most powerful and complete suite of auction remarketing tools in the industry.”

Owens will be chairman and CEO of the combined entity and the company will continue to be headquartered in Pleasanton, Calif. Gary Trettel, president and CEO of Cat Auction Services, will continue to oversee Cat Auction Services live auction format as well as serve on the Executive Committee of IronPlanet. Cat Auction Services’ office in Eagan, Minn., will remain open as the Midwest office for IronPlanet.

16 | www.cedmag.com | Construction Equipment Distribution | February 2015

HOLT CAT, the Caterpillar equipment and engine dealer for South, Central, North and North East Texas, announced the retirement of its President and Chief Operating Officer Allyn L. Archer (left) after a distinguished 43-year career with the company. Archer joined the company as a service technician leadman in 1971 in Corpus Christi. He received numerous promotions and worked in multiple sales and service roles across the company, ultimately ascending into senior management.

In 1986, Archer was appointed executive vice president and general manager, responsible for leading all HOLT CAT divisions. Archer became a partner with CEO Peter M. Holt in 1993 and was promoted to president and chief operating officer in 1995.

“Allyn’s career has been distinguished by a relentless commitment to excellence, integrity, values and service,” said Holt. “He has left an indelible mark on this company and on the lives of countless customers and employees who have benefitted from his expertise and example.” Holt CAT Executive Vice President and General Manager David Harris succeeds Archer.

Industry Scores Victory – Hours of Service Restart Provisions Placed on Hold Buried in the 1,603-page, $1.1 trillion legislation keeping most of the government funded well into next year is a special present for groups concerned with the Federal Motor Carrier Safety Administration’s (FMCSAs) new hours of service (HOS) regulations. The so-called “CRomnibus,” avoided another government shutdown and contained relief from the HOS “restart rule.” The legislation reverts back to the restart provisions

in effect from 2003 to 2013.

Specifically, the legislation suspends the requirement that all qualifying restarts contain two consecutive rest periods of time between 1 a.m. and 5 a.m., and that a restart may only be used once every seven or eight days, depending on the how the work week is measured. Drivers may once again restart their weekly hours by taking at least 34 consecutive hours offduty, regardless of whether or not it

includes two periods of time between 1 a.m. and 5 a.m. A driver can also utilize the restart more than one time per week, if necessary. The new provision went into effect Dec. 16, 2014, and will last until Sept. 30, 2015, the end of the fiscal year. AED will continue to work with our allies at the American Trucking Associations and on Capitol Hill to ensure equipment distributors aren’t adversely impacted by the HOS regulations.

in the news Michael D. Brennan has been named president and chief operating of Bramco. Brennan has served Bramco in the capacity of executive vice president since 2001 with increasing responsibilities including his appointment as COO in 2013.

Brennan is a Board member of Bramco, Inc., a retiring board member of Michael D. Brennan AED, and serves on the board of the Trinity High School Foundation.

Bramco has 14 full-service branches throughout Kentucky, Indiana, Tennessee and northern Mississippi.

Wajax Corporation, recently appointed Thomas Alford to its Board of Directors. He is an independent businessman and former senior executive with over 34 years of experience in the western Canadian oil and gas industry. Wajax also announced that Richard Plain, senior vice president, Power Systems, has elected to leave the corporation to pursue other opportunities and that Michael Gross has been appointed to succeed him. Gross is a senior executive with 30 years of experience in industrial sales, manufacturing and service. He began his business career in 1984 with Siemens AG Germany, and then went on to hold increasingly senior positions

within the Siemens group of companies in Germany and Canada.

Kobelco Construction Machinery Co., Ltd. announced it will construct a hydraulic excavator production factory in South Carolina. The new factory will be incorporated into its North American subsidiary, Kobelco Construction Machinery U.S.A. Inc. (KCMU). The construction timeline calls for site preparation to begin in April 2015 and construction to be completed in December. In January 2016, annual production of 1,800 units of the 20t model is expected to begin.

Special machines and mini excavators will continue to be supplied from Japan. Kobelco Construction Machinery re-entered the U.S. market in late 2013, and its distribution network has grown to include 62 companies, 52 in North America and 10 in South America.

Kubota Tractor Corporation will open a 450,000 square foot, state-of-the-art Parts Distribution Center in Edgerton, Kan. The new Parts Distribution Center is expected to streamline our operations and improve parts delivery support. The Edgerton site for the new facility was a strategic decision by Kubota management, given its central location within the U.S. Kubota’s current divisional parts operations located in Suwanee, Ga., Fort Worth, Texas, Columbus, Ohio, and Lodi,

Calif., which will continue to provide regional support to local Kubota dealers.

Kubota plans to have the facility operational during the third quarter of 2015.

DLL, a provider of asset based financial solutions, recently announced its Global Program Agreement with Astec Industries and its family of companies. This arrangement strengthens DLL’s presence in the Energy, Infrastructure and Aggregate/ Mining markets.

On. Dec. 22, Caterpillar Inc. Chairman and CEO Doug Oberhelman rang the opening bell on the New York Stock Exchange (NYSE) to mark the 85th anniversary of the company’s listing on the NYSE. Of the approximately 3,200 companies listed on the NYSE, Caterpillar is among only 2 percent that have been listed for 85 years or more. Caterpillar celebrates its 90th anniversary in 2015.

(continued on next page)

February 2015 201 15 | Construction Equipment Equipme me ent nt Distribution Distribution | www.cedmag.com om m | 17

in the news Volvo Construction Equipment is now offering the first in a series of engine conversion kits that allow Volvo customers to resell their Tier 4I/Stage IIIB machines outside of the U.S. and EU – regardless of when the machine was purchased. Kits are now available for the A25-A40 articulated haulers and the L150-L250 wheel loaders (D13 engine) with kits for additional models to follow in 2015.

Foley Equipment Company now represents the NorAm 65E compact motor grader. Machines will be sold through their 14 locations throughout Kansas and northwest Missouri.

Manitex International, Inc., completed the formation of its Joint Venture with Terex Corporation and has become the majority owner of ASV, effective Dec. 19, 2014. As a result of the transaction, Manitex now owns 51 percent of ASV and Terex owns 49 percent of

ASV. ASV manufactures and sells a line of high-quality compact track and skid-steer loaders.

JLG Industries, Inc., an Oshkosh Corporation company, and manufacturer of aerial work platforms and telescopic material handlers, has reorganized its aerial work platform (AWP) product marketing team. Jeff Ford, currently global category Jeff Ford director for boom lifts, will become director of global strategy and business development. Corey Raymo, currently global category director for scissors, will become global category director for boom lifts. Paul Kreutzwiser has joined JLG as the global category director, scissors/verticals.

Kreutzwiser has more than 12 years of marketing experience in the AWP industry. All three positions report to Alan Loux, JLG’s global vice president of marketing.

HydrauliCircuit Technology Inc., based in McDonough, Ga., has announced the recent addition of Greg Hickman as regional sales manager, with responsibilities in the Central and Western regions of North Greg Hickman America.

Chris Sitter announced the launch of Bat Cave Executive Search.

For more information, e-mail chris@batcavesearch.com and visit www.batcavesearch.com.

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18 | www.cedmag.com www.cedmag.c ag.com | Construction Co Equipment Distribution | February 2015

in the news Steven Bierman, president of CNH Industrial Capital LLC, CNH Industrial’s financial services segment in North America, will retire effective March 1, 2015.

Genesis Attachments has named Mike Ganier as its Southeast regional manager, covering North Carolina, South Carolina, Georgia, Mississippi, Alabama and Florida.

Mike Ganier

FAE, a manufacturer of land clearing equipment and PTO mounted construction attachments, recently celebrated 25 years in business at its world headquarters in Fondo, Italy.

Nearly 400 employees, top-selling dealers and a few loyal customers gathered as President and Co-founder

Diego Scanzoni discussed the history of the company and its rise in the industry. FAE is also known for its track forestry mulchers marketed under the PrimeTech brand. In addition to four manufacturing facilities, the company has six distribution branches in the United States, Canada, Australia, France, Germany and Russia.

Cummins Inc. named Tracy Embree president of the Components Group, effective Jan. 1.

Embree becomes a member of the Cummins Leadership Team, reporting to Chief Operating Officer Rich Freeland.

Embree was presiTracy Embree dent – Cummins Turbo Technologies (CTT). She replaces Anant Talaulicar, who has

been serving in a dual role, president of the Components Group and leading the India Area Business Organization.

Talaulicar will continue be part of the Cummins Leadership Team, serving solely as chairman and managing director of the India Area Business Organization.

Atlas Copco Construction Equipment named Marty Molthen as district sales manager of the company’s Southwest rental channel and DeAnna Wells as its area sales manager for the East Texas and Louisiana territory.

Marty Molthen

DeAnna Wells

February 2015 201 15 | Construction Equipment Equipme me en ntt Distribution Distribution o | www.cedmag.com m | 19

>> DATA TRENDS

Dodge Momentum Index Increases in December Highest reading recorded since February 2009 The Dodge Momentum Index rose in December, increasing 4 percent from a revised 123.8 in November to 128.7 in December according to Dodge Data & Analytics. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The Index is currently at its highest reading since February 2009 and is 17% higher than one year ago. The increases seen in the Index in 2014 are For more information, visit Dodge Data & Analytics at a signal that the construction recovery will continue into 2015. construction.com.

Physical Utilization

The charts below show physical utilization by equipment category. Physical utilization is the percentage of fleet cost which is on-rent during a given period. Physical utilization is cost weighted. “On Rent” and “In Fleet” status are determined on a nightly basis seven 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.” & 2013 Sep 2014 / Aug © ª 2014 © ª2012

Source: Rouse Asset Services. Contact Gary McArdle at gmcardle@rouseservices.com, (310) 363-7520

BACKHOES í

©

0.7%

SKID STEERS í

80%

ª -0.9%

80% 69.7%

70%

70%

60%

62.2%

60%

50% 2011

2012

2013

EXCAVATORS í 80%

©

50% 2011

2014

0.8%

2013

2014

©

WHEEL LOADERS í 80%

0.8% 72.3%

70.6%

70%

70%

60% 50% 2011

2012

60%

2012

2013

50% 2011

2014

2012

2013

2014

The Dirty Dozen - UCC filings on 12 earthmoving units.

Equipment Description

NOV 13

DEC 13

JAN 14

FEB 14

MAR 14

APR 14

MAY 14

JUN 14

JUL 14

AUG 14

SEP 14

OCT 14

Grand Total

69

120

65

77

119

160

143

134

118

118

107

110

1,340

309

435

385

197

328

404

433

495

403

364

364

441

4,558

4

14

13

4

6

19

9

27

40

11

10

13

170

605

966

794

502

671

987

937

1,009

839

818

718

873

9,719

18

297

Articulated Dump Trucks Crawler Dozers Crawler Loaders Excavators - Crawler, Hydraulic Excavators - Wheeled, Hydraulic Mini Excavators

16

37

9

19

20

24

26

32

28

38

30

703

996

1,037

471

731

1,137

1,226

1,246

1,090

975

960

97

112

83

96

134

107

134

125

89

114

70

93

1,254

1

6

3

8

3

16

13

1

8

14

4

8

85

1,319

1,634

1,118

726

879

1,112

1,126

1,084

791

735

953

290

418

432

247

413

399

390

401

461

327

363

Motor Graders Scrapers - Conventional Skid-Steer Loaders Tractor Loader Backhoes

1,036 11,608

1,085 12,562 424

4,565

Wheel Loaders < 80 HP

94

131

135

70

105

108

109

96

103

94

83

115

1,243

Wheel Loaders > 80 HP

566

866

556

374

508

673

661

789

595

556

624

733

7,501

4,073 5,735 4,630 2,791

3,917

5,146

5,207 5,439 4,565

4,164

Grand Total

Supplied by Equipment Data Associates, Charlotte, N.C. 20 | www.cedmag.com | Construction Equipment Distribution | February 2015

4,286 4,949 54,902

>> MONEY$$$MAN GARRY BARTECKI

What Happens to You If Oil Prices Remain Soft – Indefinitely?

Plan for all contingencies, and guard against oil-customer credit risks.

Equipment dealers providing equipment, rentals and services into the oil fields need to take action now to protect their cash positions and solvency.

W

hat happens in our industry now that oil pricing is at $50 a barrel with a distinct possibility of going lower and staying there?

More bad than good.

Historical oil price swings followed the traditional demand-supply commodity cycles – once demand slowed, production slowed to support prices, and eventually demand increased. And when supply was low, prices would again pick up until the next cycle turned the market lower once again.

This time may be different.

Mohamed El-Erian in Bloomberg Insider states that because of the change in the supply model the oil markets may be in for a long-term change.

Whereas in the past Saudi Arabia cut production when demand softened, they are no longer doing that because they figured out it is tougher to get back market share, especially since the increase in U.S. production. It will now be up to the natural markets to correct the problem by shutting down unprofitable sites, cease building new sites and increasing the demand for oil. In short, a long-term process.

To make matters worse, a significant number of oil produces in the U.S. leveraged up to fund the land purchase and well development using junk bonds, made possible because of QE and cheap money. If oil prices remain depressed it is likely many of these junk bond issues will go bust along with the related issuers.

We are now at the crux of the problem.

Equipment dealers providing equipment, rentals and services into the oil fields need to take action now to protect their cash positions and solvency. There is no secret there is a problem and I am sure dealers are hearing it will be a short-term phenomenon – but what if that is not the case?

It would be entirely prudent to update every “oil” customers’ credit availability.

Current financial statements should be part of the package along with an audit report that spells out financing arrangements, so the credit department can inquire about the customer’s ability to meet debt service requirements. In short, it is risk on until the dealer gets a handle on each customer in the patch.

Dealers should also review their purchase commitments and other contracts, personnel levels, transportation equipment and rental units in the field rented to questionable customers. Receivable balances should also be reviewed and liens perfected where collection is in doubt.

Last but not least, a dealer should prepare cash flow projections assuming oil prices remain soft for an extended period. It is easy to spend when customers take up 100 percent of your resources, but similar to a rental unit, a small reduction in utilization can produce extensive cash flow reductions.

In summary, extended soft oil prices will impact new and used equipment markets, prices, lower time and dollar utilization on rental units, and, in general, a recession (at some level) in the construction equipment business probably throughout the entire U.S. market.

On the other hand, soft oil prices increase consumer spending and make the U.S. more attractive to manufacturing, which may increase demand for new or upgraded manufacturing facilities, ports, warehousing and infrastructure – which of course increases construction demand and equipment usage.

What do you need to do?

Prepare to ride out soft oil prices – no matter how long they continue.

Be around for the construction upswing.

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.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 21

>> READY TO ORDER

Four New Link-Belt X4 Excavators Hit the Market New models promise a 12 percent improvement in fuel efficiency without a DPF Four new Link-Belt X4 excavator models are now available for the U.S. and Canada, featuring advanced, electronically controlled Isuzu engines that meet Tier-4 Final requirements, with up to 12 percent improved fuel efficiency over previous models.

Diesel particulate filters (DPFs) are not required on any X4 models.

New features include a 30 percent bigger control valve that creates a larger hydraulic passage area, larger spools and advanced controls to maximize hydraulic system control and responsiveness. Two electrically controlled Kawasaki variable-displacement axial-piston pumps and one Kawasaki gear pump assure that hydraulic flow is delivered precisely when and where it’s needed.

According to the company, the result is more maneuverability and precision across all operating modes, smoother machine operation and up to 12 percent faster cycle times.

New X4 cab features such as large, automotive-grade high-backseat provides unprecedented lumbar support and reclines at a 65 angle. Arm rests move proportionally with the console, RTF230 which means that the distance and angle between joysticks and operator remains the Tire Mulching same, no matter how the seat is adjusted. A large, 7-inch LED color monitor helps operators navigate a full menu of user-friendly controls. Safety features include an ROPS and FOPS-certified cab and a standard rear-view camera that displays a panoramic view of the worksite from the rear of the machine, with sight guidelines added for increased safety.

For more information visit www.lbxco.com

Fecon’s Rubber Tractor

New Miller Multiprocess Welder Offers Big Capabilities in a Smaller Package Designed to withstand harsh environments, the new Dimension 650 multiprocess welder from Miller Electric Mfg. Co. offers a combination of durability, output, efficiency and capability – all in a smaller, easierto-handle package. The Dimension 650 provides both power-intensive output for heavy welding and carbonarc gouging, as well precision arc characteristics designed for thin-metal welding.

The welder features a tough, corrosion-resistant, all-aluminum case to protect against

the environment. Exclusive protection input inductor protects against “dirty power” commonly found on jobs, preventing power fluctuations from affecting performance or reliability. Adding to its durability, Miller-exclusive Wind Tunnel Technology directs internal airflow to protect sensitive electronic components from dirt, dust and debris, significantly improving reliability.

Fan-on-Demand operates only when needed, reducing noise, power consumption and the amount of airborne contaminants pulled through the machine.

For more information visit www.MillerWelds.com

22 | www.cedmag.com | Construction Equipment Distribution | February 2015

The RTF230 Rubber Tire Mulching Tractor, from Fecon, is a 4-wheel drive, 4-wheel-steer machine noted for its tractive and handling capabilities. A center-mounted engine and hydraulic drive train give the RT230 a very low center of gravity and even balance. Climbing slopes is no chore for the 230 hp engine and 75 gpm/6000 psi hi flow to the Bull Hog mulcher head or other hydraulic or PTO attachments. Unlike other wheeled tractors in the same horsepower class, the RTF230 is capable of 24 mph road speeds.

RTF230 tractors can be configured for many types of work land clearing, municipal maintenance, snow removal and roadside clearing as well as construction, industrial and agricultural applications. The RTF230 is capable of boom and/or crane mounting, mechanical or hydraulic PTO’s (and 3 point hitches) both front and back. With the BH120 variable speed Bull Hog Forestry Mulcher the RTF230 is very agile, productive and easy to drive or haul to the jobsite.

For more info visit www.fecon.com

>> READY TO ORDER Atlas Copco Adds to Soil Roller Line Atlas Copco has introduced its CA1300 and CA1500 single-drum soil rollers for high maneuverability and visibility on parking lot, road, utility pipe and street projects. The new CA1500 roller features Atlas Copco’s exclusive Active Bouncing Control (ABC), a cross-mounted Tier-4 Interim or Tier-4 Final engine and steel blades that improve compaction, safety and visibility.

The engines on the CA1300 and CA1500 are cross-mounted, placed perpendicular to the frames, which is an industry first. The rollers’ hydraulic pumps are also in line with the engine. This allows users to reach all the necessary components on the engines and hydraulic pumps for fast and easy service and maintenance.

Cross-mounted engines also offer optimal weight distribution and contribute to the units’ minimal footprint.

The CA1300 features a Tier-4 Final, 75-horsepower Kubota diesel engine, and the CA1500 uses a Tier-4 Interim, 100-horsepower Cummins diesel engine. Both have top-mounted, cool air intakes with side vents that combine with the ejector exhaust outlet to minimize engine noise and prevent dust from being sucked into the engine compartment, which is a common occurrence on soil compaction sites.

The rollers’ high static linear loads make them ideal for compacting a range of materials, from clay to rock fill. The CA1300 features a static linear load of 73 pounds per linear inch (PLI), and the CA1500 has 112 PLI. The compaction power is transferred through the rollers’ drums to efficiently compact soil with minimal passes.

The CA1300’s 54-inch drum and the CA1500’s 66-inch drum give operators optimal visibility and allow them to maneuver into tight workspaces, such as pipe trenches or road shoulders. Atlas Copco’s ABC system, an optional feature for the CA1500 through CA6500 models, prevents operators from over-compacting the soil, which can damage the rollers. The optional ABC system helps protect the frame and drum by detecting double jumping as soon as it begins to occur and shutting off the roller’ vibration.

For more information visit www.atlascopco.com.us (continued on page 55)

February 2015 | Construction on ttion io on n Equipment Equipm E pment Distribution n | www. www.cedmag.com w cedmag.c ag om | 23

>> FINANCE

WILLIAM ATKINSON

Put Up Your Sails – Credit’s Got a Good Breeze While it may not be all smooth-sailing for non-A customers, more and more deals are going through – dealer and finance experts talk about 2015 conditions.

T

he credit and financing landscape has certainly changed for the better compared to five and six years ago, and, according to the people who keep their eye on this for the equipment distribution industry, this trend is expected to continue, at least into the near future.

When it comes to financing their own businesses, dealers seem to be experiencing few if any problems.

“Conditions have improved greatly since 2010,” said Gayle Humphries, CFO for JCB of Gayle Humphries Georgia (Pooler, Ga.). “Interest rates are competitive, and the banks want our business back.”

George Kapitzky, CFO for Patten Industries (Elmhurst, Ill.) is finding the same thing.

“We have an established line of credit with our bank and just renewed it about a year ago,” he said.

“They know a lot about us, so it was George Kapitzky very easy to renew.

In addition, even though we have a fairly sizeable line of credit, they felt they could go it alone with us.”

“We have no problem getting financing,” said Paul Cunningham, CFO for Highway Equipment Company (Zelienople, Pa.). “In fact, we have

had a number of new banks knocking on our doors.”

Lenders are on board with these observations.

“For dealers, the situation is pretty Paul Cunningham favorable these days,” said Michael Linley, senior vice president, Chase Middle Market Banking, for JPMorgan Chase (Milwaukee, Wis.).

“It’s a cyclical industry, and it Michael Linley reached its trough around 2009. Right now, although it varies from state to state, dealers in general are getting back to the performance levels they had pre-recession – around 2006.”

As a result, according to Linley, there is no shortage of lenders in this space willing to pursue relationships with the industry.

Larry Shute, president, Construction Equipment Finance at 1st Source Bank (South Bend, Ind.), agrees.

“As a group, most dealers have strength in their balance sheets because of the favorable economic environment that Larry Shute has been in place for the last couple of years,” he said.

24 | www.cedmag.com | Construction Equipment Distribution | February 2015

“They are making a good bottom line and retaining it in their business, which is strengthening their balance sheets. As such, most of the credits we’re looking at are very good.” Strength in balance sheets helps borrowers and lenders not only in good times, but also when the downtime comes, which it inevitably will, according to Shute. “That is, when times are good, dealers are able to build equity,” he said. “As such, we expect to see strong balance sheets going forward.”

In 1st Source Bank’s portfolio, and likely in the portfolios of other lenders, according to Shute, delinquencies are nominal and very controlled, or even nonexistent. “I don’t think lenders are taking losses,” he said. “In sum, we are in terrific shape with our customer base.”

Your Customers

What are the credit conditions for the contractors and other customers who purchase that equipment? According to Patten Industries’ Kapitzky, a lot of this dealer’s customers use the finance company set up by the manufacturer.

“Our customers are finding it pretty easy to get credit,” he said. “In fact, there have been very few instances of our customers being rejected.”

Some customers are experiencing challenges, though, according to Humphries in the South. “The equipment finance companies want ‘A’ customers only, and those who have been in business for three years or longer,” she said. “Many customers

have scars on their credit from financial decisions that were made and necessary in order for them to salvage their businesses.”

According to Cunningham at Highway Equipment, things have definitely been loosening up in terms of credit availability for customers.

“We have been able to get a lot more deals through,” he said. There are several reasons for this. “Not only are the banks being more aggressive, but some banks that were out of the market are now back in, and we are also seeing more players in the market.”

Still, he added, everyone wants A-B credit, which can pose a challenge for the dealership. “Not every customer is an A-B customer, especially small local contractors that don’t have the financial

[Dealers] need to take a hard look at their balance sheets to see what the impact of these basically zero interest rates has meant for their bottom line and do some sensitivity analysis.

history or wherewithal,” he said.

Shute is seeing strength among dealers’ customers. “When we look at the finances of dealers, we see some very favorable receivables aging,” he said.

“That is, the dealers aren’t experiencing a lot of bad debt, because their customers are paying. In my experience, the delinquency situation that dealers are experiencing from their customers mirrors our situation.”

In the Shadows

Even when times are good, they aren’t perfect. Dealers should consider a few challenges, even in the midst of “booming” economic times. “Lines of credit have more restraint these days, and we the dealers are more conservative with using our lines,” said Humphries.

“I know that we do our due diligence with our equipment purchases, and our customers are doing the same. We watch our leverage number closely.”

According to JPMorgan Chase’s Linley, one challenge is that, over the last couple of years, more dealers have been increasingly involved in renting equipment rather than selling it outright. As a result, dealers end up with increased inventory carrying levels,

which are leading to increased cash flow and balance sheet leverage. “Where is there a tipping point?” he said. “We have internal guidelines in terms of where we like to see maximum balance sheet and cash flow leverages.”

There are also potential weaknesses in certain industries and regions of the country, according to Linley. “Highway programs tend to be inconsistent from state to state, depending on the financial health of each state,” he said. “They have been really strong in some states, but fairly poor in others.”

Another potential challenge lies ahead for distributors that also deal in agricultural equipment, a market that has experienced some softness lately, with reductions in both revenue and equipment sales.

On the flip side, said Linley, “Energy production has been strong in certain states, especially Texas, Louisiana, Oklahoma, and the Dakotas,” said Linley. “Dealers in these states have been having fantastic results. However, energy prices have been dropping, which could eventually have some impact on dealers in these states.” (see MoneyMan column on page 21) (continued on next page)

February 2015 | Construction Equipment Distribution | www.cedmag.com | 25

>> FINANCE (“Put Up Your Sails – Credit’s Got a Good Breeze” continued from page 25)

RPOs Still Popular

Given that the traditional lines of credit and other lending tools offered by banks and other lending institutions have been able to meet customer needs, there seem to be very few “new” tools being offered these days. Rental Purchase Options remain very popular among dealers, and lenders like them, too. In a typical RPO arrangement, the customer rents the machine for three to 12 months, and a percentage of the rent is applied to the selling price of the machine – the dealer can show this as a down payment on the financial documents.

“The finance companies like to see that the customer has ‘some skin in the game,’ and this facilitates the customer financing,” said Humphries. “By having an RPO, it also gives the contractors stronger bonding capabilities. We have also found that our banker is willing to go the extra mile for a customer who has a good personal credit but is not able to get their business financed through the typical avenues.”

Down the Road

So how do financial experts of the industry feel about the future? In sum, largely optimistic.

“We see good years ahead, especially since we are an oil and gas region, plus the passage of the Pennsylvania highway bill,” said Cunningham. (The bill authorizes over $2 billion in new funding for highway projects.) “So, 2015 through 2017 are supposed to be banner years for contractors, and the banks around here know that.”

There is yet a hint of caution in other parts of the country.

“We are looking positively toward the future,” said Shute.

“Still, even though economic conditions are improving and people’s short-term confidence is improving, what is missing is long-term confidence, just because none of us know what to expect 12 months from now.” That said, for construction equipment dealers in particular, Shute is “very confident” that the forecast for the next two or three years is showing nice, slow, positive growth. “What really says it all for us is that we are expanding our sales force,” he said.

“Overall, I think 2015 will continue to be fairly decent,” said Linley. “Unlike seven or eight years ago, when housing was overheated, resulting in a dramatic downturn in the economy, I don’t think there are any overheated segments of the economy today that could lead to a dramatic downturn.”

However, at some point, he adds, interest rates are going to rise, so dealers need to pay attention to this, especially since they are very credit-intensive and rely on debt quite a bit.

“They need to take a hard look at their balance sheets to see what the impact of these basically zero interest rates has meant for their bottom line and do some sensitivity analysis,” he said. For example, if interest rates go up a couple of percentage points, what will be the impact on their bottom line? Chances are, it will hit their top line, too, according to Linley.

Going forward for dealers, says Humphries, it’s all about good relationships with their bankers. “It’s imperative that

GALLUP: EASY OR HARD TO GET CREDIT? Gallup, in conjunction with Wells Fargo, has been surveying small business owners every quarter on various facets of their business since 2003.

One measure Gallup covers during its surveys is availability of capital, asking the question: “Over the past 12 months, how difficult or easy was it for your company to obtain credit when you needed it? Was it very difficult, somewhat difficult, about average, somewhat easy, or very easy?”

For several years, credit availability was easy. In Q2 2004, for example, 52 percent of respondents reported that it was “very easy or somewhat easy” to obtain credit (with 12 percent reporting that it was “very difficult or somewhat difficult,” and the remaining reporting “about average” or “don’t know”). In Q2 2006, 52 percent of respondents reported “very easy or somewhat easy,” while 10 percent reported “very difficult or somewhat difficult.” In Q2 2008, things tightened a bit, with 44 percent of respondents reporting “very easy or somewhat easy” and 17 percent reporting “very difficult or somewhat difficult.”

Then, during the Great Recession, things got bad. In Q2 2010, only 17 percent of respondents reported “very easy or somewhat easy,” and 36 percent reported (very difficult or somewhat difficult.”

Since that time, credit availability has loosened a bit, according to the survey. In Q2 2012, 22 percent of respondents reported “very easy or somewhat easy,” and 30 percent reported “very difficult or somewhat difficult.”

Most recently? The numbers are still looking up. In Q2 2014, 25 percent reported “very easy or somewhat easy,” and 24 percent reported “very difficult or somewhat difficult.”

As to the future? Another question the Gallup survey asks is: “Over the next 12 months, how difficult or easy to do you think it will be for your company to obtain credit when you need it? Will it be very difficult, somewhat difficult, about average, somewhat easy, or very easy?” In the second quarter of 2014, 32 percent of respondents reported “very easy or somewhat easy,” and 26 percent reported “very difficult or somewhat difficult.” they understand our business and our needs,” she said.

“They are eager to grow. It is our job to make sure that our banker understands our business and our goals. He is very much like a partner. The lines of credit are continuing to increase with competitive rates, and I see this trend continuing through 2018.”

In the final analysis, Linley always reminds dealers that this is a cyclical industry. “Times will eventually slow down again,” he said, “so it is incumbent on the dealers now, when times are good, to build up their balance sheets and liquidity to prepare for when the industry does cycle down again.”

BILL ATKINSON is a freelance writer based in Southern Illinois. He can be reached at w.atkinson@mchsi.com.

26 | www.cedmag.com | Construction Equipment Distribution | February 2015

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>> COVER STORY 2015 AED CHAIRMAN KIM PHELAN

Workforce Warrior 2015 AED Chairman Don Shilling is future-focused and passionate about plugging the next generation into the industry, the association, and his own business.

E

ven though Don Shilling has a long and active history with AED, he’s keenly focused on the future of both the industry and the association. One of his top priorities as 2015 Chairman is to continue building the number of AED-accredited technical school relationships through the U.S. and harnessing the power of The AED Foundation to attract young people to careers in equipment distribution.

“Dealers have a tendency to focus on sales. In my opinion, with equipment getting more sophisticated, we have to have the service capability or we will never get the second sale, and price will not dictate whether or not you get deals,” said Shilling, who is president of Fargo, N.D.-based General Equipment & Supplies. “We need to have a small army of fresh faces coming

through those [school] programs or our future will not handle growth – and will stagnate.”

It’s more than words – he hired a full-time recruiter at his dealership; and both he and members of his staff serve on advisory boards at three schools near their business, too.

“Not every dealer can afford a recruiter, but every dealer can and should afford the time to connect with the schools that give us those fresh faces,” he added.

Keeping the workforce development pot well stirred has been his passion for a while. He’d been an employeeeducation advocate at his company for many years, but Shilling’s focus on developing new industry talent started heating up in 2002 when he joined The Foundation Board, following service on the AED Board back in the mid-’90s.

He says he had always assumed the primary work of The Foundation was solely centered around training, but after a few meetings he began to see how important workforce is, as well. He ended up leading The Foundation as its Chairman from 2005 to 2007.

As Shilling takes the helm as AED 2015 Chairman, he is the Don and Kay Shilling celebrated their 40th wedding annifirst to have chaired versary on Aug. 3, 2014 and took their first cruise, which The Foundation departed Fort Lauderdale and sailed through the Caribbean prior to chairing the to St. Thomas, St. Martin and Puerto Rico. association.

30 | www.cedmag.com | Construction Equipment Distribution | February 2015

Other Work to Be Done

As Chairman, Shilling recognizes the need to keep public policy advocacy on the front burner, too, and he’s ready to step out of his “comfort zone...working on workforce development,” and do whatever it takes to keep the pressure on Congress to act on AED’s top legislative priorities, including long-term highway funding, water infrastructure, simplifying the tax code, and reducing excessive and unnecessary regulations.

We need to have a small army of fresh faces coming through those [school] programs or our future will not handle growth – and will stagnate.”

“To be effective in workforce and political advocacy, we need a strong AED,” he said. “We are committed to growing our membership – we intend to do that by retaining current members and demonstrating the value of AED.” That includes drawing in the next generation of leaders.

He added, “My company is managed by people under 40. AED needs participation of young people under 40, as well. We need to be that resource young people look to, as well as the experienced managers. Fresh ideas and the energy of the young people.”

He never strays far from his focus on the future – which, off course, belongs to the young.

Shilling reflects on his first AED convention in 1981. “I was in awe. I was 30 years old and meeting dealer principals twice my age, and interesting owners and managers.” He’s been to every annual Summit since, and he says, “I still enjoy the networking and rubbing elbows with some of the most interesting people in the industry.”

A Good Future Takes Planning

Today at 63, he’s all about pumping the energy and enthusiasm of young minds into the industry through workforce programs, into AED through new Future Leaders engagement, and – living proof of his future-focus – he keeps it real right at his own company with a smoothrunning succession plan that has moved a group of under-40 guys into ownership, including Shilling’s son Jonathan.

Whereas some owners procrastinate succession planning, Shilling and his partner Jerry Kern turned their attention to creating a strong plan a few years ago, knowing it would take time to enable their successors to buy them out. The two had acquired the company from its third and senior owner, Orvis Stockstad in 2000, and over the course of several years enjoyed growth that

ultimately doubled the size of General Equipment & Supplies.

“It became obvious to Jerry and me that if we were going to pass the business on, whether to key employees or family members, that we were going to have to start a long ways in advance – otherwise we were going to have to say, ‘Forget it,’ and sell to a third party conglomerate with enough cash to pay for it, “ Shilling explained.

“We didn’t want the company to change a great deal from what we had.

A lot of dealers probably have the same concerns,” he added. “After we’ve grown this thing it’s like your child. We don’t like the idea of selling to somebody who’s going to make wholesale changes, fire a bunch of people, and run it totally differently.”

So for two years they worked with a consultant and set in motion a 12-year buyout process whereby the senior owners have sold stock to the young team, who are making payments back to Shilling and Kern in semi-annual installments. When they do retire in a couple of years, the pair will remain on the board and basically “kind of check on things and then pick up a check and go home,” said Shilling.

“It’s like a weight’s off our shoulders now, because we know what’s going to happen and everything is running pretty close to how we had hoped. It’s a giant relief.”

Living Values

Shilling’s dad was a contractor who had worked in construction at the end of the Depression, then in the Army Corp of Engineers during World War II, and he was part of the post-war boom.

From his model, Don says he learned the value of being conservative with resources and money, a strong work ethic, as well as an attitude that dares your competitor by doing the job faster, safer, cheaper and better.

Construction is a different brand of brutal out in the Rough Riders state – with maybe seven or eight months of good weather, deadlines get intense and contractors work holidays, weekends, and two shifts to meet promised completion dates.

As a kid watching dad under pressure, he saw that “when something broke down, it really threw a monkey wrench into the schedule,” he said.

Which actually prepared Don for the (continued on next page)

February 2015 | Construction Equipment Distribution | www.cedmag.com | 31

>> COVER STORY 2015 AED CHAIRMAN (“Workforce Warrior” continued from page 31)

me,” Shilling gets it. His mentality: “We’ll figure out what we can do to cover this for you.” empathy needed for his dealership’s You might say it was that empathy customers. When they call up and say, for the customer that triggered GES’ ‘“This loader is down again for the launch of a new holding company second time this week, this is killing across the Canadian border. Over time, GES had developed a strong sales business with Canadian contractors who bought in the U.S. and transported their machines back North.

But selling, renting and supporting the customer was getting gnarly – for example sending a technician over the border is an ordeal fraught with technicalities and penalties.

In the end, the solution was to set up a Canadian division, but even Don and Kay Shilling have one child, son Jonathan, who that had its challenges. is GES’ vice president of sales. He and his wife Tara, both Forming a corporation pictured here, have two sons, David and Marcus. Don says, in Canada requires “Grandpa thinks these guys are about the best thing.”

Canadian citizen

A ribbon-cutting ceremony marked the opening of GES’ Bismarck, N.D., location – they’ve got six stores in the U.S., and two in Canada.

32 | www.cedmag.com | Construction Equipment Distribution | February 2015

ownership, with the exceptions of two provinces, Nova Scotia and Alberta.

So in 2008, GES started doing business through its new General Aggregate Equipment Sales, ULC based in Nova Scotia. They’re able to do business in Winnipeg, Manitoba, and Regina, Saskatchewan, their Canadian target markets, by filing necessary government paperwork.

“Our mantra has always been to take care of the customer; that’s the most critical thing that we need to do after he buys something from us,” said Shilling. “So it was important for us, rather than to just broker equipment across the border and be done with it, to be able to support it once it’s over there, selling parts, selling service.”

Meanwhile, back in the U.S., GES takes care of customers from facilities in Fargo, Bismarck, Minot and Williston, N.D; Shakopee, Minn., and Sioux Falls, S.D. The company had a lot to celebrate on the occasion of its 30th anniversary last April – employing 250 people, the Komatsu dealership approaches $200 million in annual sales and has $75 million in inventories.

It doesn’t take a genius to deduce what keeps the dealer chugging at such a successful pace. “Energy is everything,” said Shilling.

North Dakota has long been an agriculture-based economy, which tends to insulate the state from large swings and overly painful cycles. But on top of that, in 2009, while the rest of the U.S. was falling off a seemingly bottomless cliff, North Dakota’s oil boom was just revving up. At the same time, commodity prices on the agriculture side were ramping up, too. That double whammy – coupled with the wisdom and balance instilled by former owner and mentor Orvis Stockstad – caused GES to double in size between 2010 and 2012 and it’s been growing ever since.

But there more to the energy market in Shilling’s territory than oil and gas.

Out on the prairie of North Dakota, the wind blows all the time, he says, so construction of wind farms as well

>> COVER STORY 2015 AED CHAIRMAN as supporting manufacturing has been another boon.

Coal, too, has been an economic staple for the state for 60 years, Shilling adds. Four mines yield cheap, lowgrade lignite coal, which is exported to Great River Energy in Minneapolis and to Montana Dakota Utilities, as well.

Narrow Escape

Shilling’s partner, Jerry Kern, is vice president of GES. The two bought out a third, older partner, Orvis Stockstad, in 2000.

The three men formed General Equipment & Supplies in 1984 after purchasing the liquidated assets of General Diesel, a former AED member distributorship.

Shilling loves the equipment business and wouldn’t trade it for anything, but he almost missed out on all the fun.

As a college student at North Dakota State University, the young Don Shilling was working on a bachelor’s degree in Political Science with the intent on going to law school.

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Luckily, one day his dad asked him to help return some water pump parts over to General Diesel, the company whose liquidated assets Shilling eventually purchased to form GES. “My dad struck up a conversation with one of the owners and asked if they were looking for someone to help out,” Shilling recalled. Next thing you know, he was their next wash bay laborer – and first day on the job he helped hook up a Hotsy Steam Cleaner and was asked to drive a Terex TS24 scraper into the bay and clean it.

“The work was wet and a little dirty, but for some strange reason I loved. I was starting at the ground floor of my life’s career and didn’t even know it!”

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February 2015 | Construction Equipment Distribution | www.cedmag.com | 33

>> INDUSTRY TREND JOANNE COSTIN

Hard Fact: Intelligent Compaction Is Here To Stay With more than 33 states implementing intelligent compaction, dealers need to prepare to support a huge change in how roads are built.

D

iminishing budgets make it difficult for most states to maintain their infrastructure, let alone build new bridges and roads.

As they seek to make roads last longer, state Departments of Transportation and the Federal Highway Administration (FHWA) are targeting improper compaction, either in the base layer or

pavement â&#x20AC;&#x201C; both common causes for pavement failure. A Washington State DOT study showed that every 1 percent of air voids above 7 percent relates to a loss of one year of pavement life.

Solution: The FHWA has encouraged DOTs to use intelligent compaction (IC).

Incentives to implement IC have come through the FHWAâ&#x20AC;&#x2122;s Every Day Counts (EDC) initiative, a state-based model to identify and rapidly deploy proven but underutilized innovations. In 2013-2014, intelligent compaction was included in EDC-2, along with an additional 5 percent in federal funds if DOTs identified with the program. States signing on were required to use IC in a minimum of two projects.

How IC Works

IC units include a GPS digital display, which uses color-coding to identify what areas need compaction. Intelligent compaction was one of four construction innovations selected for a 2014 NOVA Award, presented by CIF, an international, nonprofit organization.

34 | www.cedmag.com | Construction Equipment Distribution | February 2015

Intelligent compactors use rolling resistance/ energy based measurements (Caterpillar MDP system) and/ or an accelerometer mounted in or about the drum to monitor applied compaction effort while measuring the response from the material being compacted. The measured response

represents an indication of the stiffness of the material below the drum.

The information is then collected and processed, allowing for an analysis of the measurements in real time.

Most dealers need to be investing in equipment because it is likely to be a rental market to start. If it is a rental game, the equipment needs to be there.

IC rollers are able to compact greater amounts of pavement with fewer passes than the traditional static rollers, sometimes in a much shorter time, using less fuel. Through Global Positioning System (GPS)-based mapping and an onboard computer reporting system, operators can monitor in real-time and provide corrections to the compaction process.

The system provides documentation of the number of roller passes, compaction measurement values and the location of the roller. The addition of temperature instrumentation on asphalt IC rollers allows the operator to monitor the surface temperature of the asphalt pavement â&#x20AC;&#x201C; critical because vibratory compaction within certain temperature ranges can cause adverse effects.

According to Bryan Downing, sales consultant for Caterpillar Paving Products, one of the key advantages IC offers state agencies and contractors is measurement of 100 percent of the compacted area, versus historical measures such as a plate load test or

nuclear density gage, typically measured at a single location every 100 feet.

Conventional testing will identify a problem area, but only if you happen to land your test on the problem area.

“We probably know the compaction level of less than 1 percent of typical sites today,” said Downing. “The power of intelligent compaction is unleashed when combining measuring systems with machine location with a full documentation map. Now the question is, how do you manage that?”

Because it would not be feasible for the government agencies to purchase proprietary software systems, the development of software – called Veda – to allow project personnel to view and analyze the data from IC machines was made possible through the Federal Highway Administration (FHWA) and the Minnesota DOT (MNDOT) with the assistance of The Transtec Group, a pavement engineering and design firm.

Veda displays the compaction information along with graphs and maps.

Contractors need to provide data that can be uploaded into the Veda system.

Contractor Perception

Despite the benefits of IC, most contractors are not enthusiastic about adopting it.

The machines and aftermarket solutions are expensive. Aftermarket solutions or upgrades from traditional rollers

represent $20,000 to $50,000 in additional cost to the contractor.

“Until the DOTs spec it in their jobs, it is tough to get any traction,” said Tory Williams, an RDO Equipment Co. regional product specialist in Arizona and California.

Dave Dennison, product manager for Bomag, concurs. “At the point IC is mandated, then dealers will have an opportunity.”

‘It comes down to convincing the contractor that with this equipment, they will be better than they were before,” said Downing. “Some may, some not. The system could just document that they are doing their best work.”

Katie Pullen, brand marketing manager, Case Construction Equipment, believes operator resistance is minimal on IC machines. “For operators, it is taking the control out of their hands, which may feel different from their day-to-day operating. However, using intelligent compaction allows contractors to put a newer operator on the machine and it will help them understand how to run the compactor more efficiently.”

Dealers should keep an eye on DOTs across the nation as they begin to spec IC on more projects. Depending on location, the timeframe for implementation will vary. With experience under the industry’ belt and positive results,

most experts believe a major expansion of intelligent compaction is underway.

Watch It Grow

According to George Chang, PhD, PE, of The Transtec Group, who is among those spearheading the spread of intelligent compaction, more than 33 states are committed to using IC on at least two projects. Other states, such as Indiana and Washington, are moving forward with it on their own. More than 18 states have developed intelligent compaction specifications for either asphalt or soil. As those projects are completed, DOTs will be making decisions about how to move forward.

Minnesota was one of the early IC adopters, and MNDOT recently announced full implementation of intelligent compaction by 2018, meaning IC would be required on 100 percent of the projects that meet certain requirements. Implementation will increase gradually over the next few years. In 2015, 10-15 percent of projects meeting the requirements must use IC; in 2016, 40-50 percent and in 2017 50-75 percent.

Positive results are driving MNDOTs decision. The agency has noted a 30-percent increase in compaction uniformity on projects utilizing IC, and up to a 30-percent decrease in thermal segregation through the change in (continued on next page)

February 2015 | Construction Equipment Distribution | www.cedmag.com | 35

>> INDUSTRY TREND

IC RESOURCES Technology Transfer for Intelligent Compaction Consortium (TTICC) www.ceer.iastate.edu/tticc

(“Hard Fact: Intelligent Compaction Is Here To Stay” continued from page 35)

construction practices as a result of using thermal profiling equipment.

“The smaller projects won’t be using IC at this time, because the contractors don’t have the systems yet,” said Rebecca Embacher, advanced materials and technology engineer for MNDOT. “Eventually, down the road when it is second nature, and all the contractors have the equipment, we will be able to drop it down to smaller projects.”

The agency plans to use IC on asphalt pavements as well as grading projects. “We’re going to focus more on the aggregate bases, full-depth reclamation, stabilized reclamation and cold-in-place recycling jobs,” added Embacher.

IC Technical Support Service Center +1 (512) 659-1231 FHWA IC Workshops www.intelligentcompaction.com

Increase in IC is reflected in how much of Kowalski’s time is devoted to it. “Five years ago intelligent compaction took up 5 percent of my time. Today it is 95 percent of my time,” West Coast Perspective he said. “There are definitely more calls, more questions, In California, where four IC test projects were conducted in more bids, and more states putting in specifications. It is not 2014, intelligent compaction is also progressing. Josh Steele, going away – it is here to stay.” marketing manager for Sakai America, who attended a “Starting in 2007, we had to beg to get contractors to buy recent CALTRANS meeting, reported that CALTRANS was in to give intelligent compaction a try,” said Chang. “That was definitely in favor of moving forward with IC. so difficult at the time. They were afraid of interrupting their “They plan more projects in 2015 and there was some talk production. They had a lot of doubts and resistance. Initial about full implementation in 2016,” said Steele. investment is always difficult for new technology.”

According to Tim Kowalski, applications support manager for To combat resistance, some DOTs have injected money Wirtgen America (Hamm Compactors) there were more than to pay for the technology for contractors to try it out.

150 IC projects completed in 2014, up from just four in 2007.

Other DOTs such as Texas have not, and as a result they have met with resistance from local contractor associations.

Chang advises DOTs that any new technology put into a contract should contain both incentives and disincentives. “OtherSOLUTIONS AND OPTIONS wise there is going to be a lot of resistance.”

Downing agrees. “Until there is an incentive in the DOT contract to request different measurements of quality, there is WITH AED BUSINESS SERVICES going to be resistance.”

With further testing and advancements in equipment and technology, Downing believes DOTs and contractors are going to continue to see advantages.

“Currently, DOTs see the value in temperature and pass-count mapping.

Call Counsel is AED’s new FREE Manned by Karla Dobbeck They are using it as a process control tool, legal hotline for AED members (karlad@hrtechniques.biz) providing guidance to the operator and provided by Kopon Airdo, LLC, and her associates at Human documenting the complete rolling pattern,” AED’s general counsel.

Resource Techniques, Inc., the he said. “However, when the measure of a AED HR Help Desk allows CMV (Compaction Meter Value) is introAED members to get answers • Callers receive immediate duced while compacting an asphalt layer, to simple questions or many guidance on commercial, the stiffness indicated should be considered employment, and litigation-based employment-related issues free legal questions, enabling them a composite stiffness – a combined stiffness of charge. to evaluate possible courses of of the asphalt layer being compacted, base action – and to understand the layers of asphalt as well as sub-base materiservices are also available als. The composite CMV value becomes when a legal situation arises or to member companies at a is looming. unclear regarding what it is indicating, due discounted rate of $125 • to the depth of measurement influence. per hour. to on all calls.

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36 | www.cedmag.com | Construction Equipment Distribution | February 2015

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ef

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>> INDUSTRY TREND

Compaction Meter Value A unitless value indicating a stiffness of the material the drum is rolling over

can use IC to accurately measure asphalt compaction on mill and fill paving jobs.”

Here A Spec, There a Spec

According to Embacher, MNDOT has been working with the Minnesota Asphalt Paving Association, and presenting at different forums to get contractors up to date on the technology. They share specifications so they can review and provide comments.

Coming to an agreement on the specs isn’t always easy. According to Williams and other sources interviewed, one bone of contention is the use of IC on cold in-place recycling.

Manufacturers believe it will destroy the machines, but DOTs want to include it in their specs.

“There needs to be education on both sides,” Williams advised.

Despite working with the FHWA and The American Association of State Highway Officials (AASHTO) to develop a national standard for IC, Chang says many states create their own specifications.

“Some DOTs without much experience may accidentally put in a spec that is difficult to achieve,” said Chang.

One example is a project where it was specified that 90 percent of the area had to have four roller passes based on IC data. Minnesota requires a much more reasonable target of 70 percent.

It has been a challenge for manufacturers to meet so many different specifications. Until recently, only one roller manufacturer could meet MNDOT’s requirement that data be cloud-compatible. Some states have also required training as part of the specs, which can drain resources of manufacturers and dealers.

Meanwhile, Embacher has found most asphalt contractors to be accepting of the move to IC.

“The grading contractors – they are a little less on board just because the nature of earthwork. It is a little more complex – it is not linear,” she said.

She says data management and getting the Veda system working has delayed implementation. Contractors need to be able to upload proprietary machine data into the DOT’s Veda system. 2015 will be the first year the software will be fully deployed.

What Dealers Need to Know

“We believe it is going to be a rental application in the beginning,” said Ed Conlin, asphalt specialist with Sakai.

Another low-cost option for contractors

is an aftermarket retrofit IC kit for existing machines. Trimble currently has a solution on the market.

The importance of training for contractors, dealers, and DOTs can’t be overstated.

“Most of the dealers around the country have very little or no training in IC,” said Chang. “They need training to provide technical support on projects.”

At their next sales meeting, Williams will provide the RDO Equipment Co. sales team with a presentation on IC, including what Sakai and their partner Topcon provide, as well as an update on what is happening at the DOTs. “It’s coming fast in the Southwest, but there is not a lot of information out there on it,” said Williams. Where he sees contractors struggling with is the data. “What do you do with it? How do you segment, filter and diagnose the data?” (continued on next page)

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(“Hard Fact: Intelligent Compaction Is Here To Stay” continued from page 37)

Chang says a lot of the issues with IC during the last construction season happened because the local dealership lacked the knowledge and experience to provide the support. “There is no way out but the proper training and experience,” added Chang.

IC units include a GPS digital display, which uses color-coding to identify what areas need compaction. Intelligent compaction was one of four construction innovations selected for a 2014 NOVA Award, presented by CIF, an international, nonprofit organization.

He recently met with IC manufacturers to discuss what needs to be done to advance the technology. “They need to continue to improve their systems and make them simpler to the enduser. Otherwise it will be very difficult to implement and for dealerships to support,” continued Chang.

“At the very least, a dealer needs to familiarize themselves with the equipment and technology,” said Steele.

“Beyond that, most dealers need to be investing in equipment because it is likely to be a rental market to start. If it is a rental game, the equipment needs to be there.”

The FHWA has done a good job in developing interest for intelligent compaction. But it will be up to manufacturers, dealers and DOTs to get the education and experience they need to keep it rolling.

Participating in TTIC

# of Projects Completed or Planned

Specifications

HMA

1

Alabama

No

2

Alaska

Yes

2

3

Arizona

No

2

4

Arkansas

No

5

California

Yes

6

Colorado

Yes Yes

7

Connecticut

8

Delaware

No

9

Florida

Yes

10

Georgia

Yes

11

Hawaii

No

12

Idaho

Yes

13

Illinois

Yes

14

Indiana

No

15

Iowa

Yes

16

Kansas

No

17

Kentucky

No

18

Louisiana

Yes

Yes

26

1 Yes

Asphalt, Soils 1 2

Yes Yes

1

19

Maine

Yes

Maryland

No

1

21

Massachusetts

Yes

4

22

Michigan

Yes

23

Minnesota

Yes

24

Mississippi

No

Yes

25

Missouri

Yes

Yes

26

Montana

Yes

27

Nebraska

No

28

Nevada

Yes

29

New Hampshire

Yes

30

New Jersey

Yes

31

New Mexico

Yes

1

39 100% by 2018

Asphalt HMA (Coming Soon) 1

New York

No

1

North Carolina

Yes

1

34

North Dakota

No

1

Ohio

Yes Yes

37

Oregon

No

38

Pennsylvania

Yes

39

Rhode Island

Yes

40

South Carolina

Yes

Asphalt-Soils Combined, Thermal Profiles

1

33

Oklahoma

HMA Soils

32

35

Soils Asphalt, Soils

20

36

HMA, CIR (draft)

Yes

Asphalt, Soils (Draft)

1 Asphalt

Yes

15

Asphalt (Draft)

2

HMA

41

South Dakota

Yes

42

Tennessee

Yes

8

HMA

43

Texas

Yes

5

Soils, Approved IC Rollers

44

Utah

Yes

45

Vermont

Yes

46

Virginia

No

47

Washington

No

48

West Virginia

No

49

Wisconsin

Yes

50

Wyoming

Yes

Yes

Asphalt Asphalt, Subbase

Yes 1 Yes

JOANNE COSTIN (jcostin@costincustom.com) is a freelance writer and marketing consultant focusing on the construction industry. She can be reached at (847) 340-4075..

38 | www.cedmag.com | Construction Equipment Distribution | February 2015

>> RENTAL

LORI TOBIAS

That ’70s Show – A Q&A with NES The national rental chain attains utilization in the upper 70s-percent range, so CED has questions.

R

ecently, NES Rentals, one of the largest aerial equipment rental providers in the country, announced its strategic fleet utilization had reached an all-time high of 76 percent late in 2014, and had also hit a weekly record of 77 percent. What made it all the more impressive was news that the current fleet was 7 percent larger than in 2013. Construction Equipment Distribution magazine sat down with Don Irwin, vice president of Operations in Chicago, to talk about his thoughts on the market for 2015.

CED: What is your take on the boom of rental equipment as a financial and asset management decision among contractors?

Don Irwin: That’s the age-old decision for rental people. The first driver is capital preservation. That is, the contractor using money for his business as opposed to for equipment. Rental is a good decision for contractors who have variable needs, needs that fluctuate up and down or where they might lack logistical support with mechanics.

Rental allows them to match their needs to current business conditions. Financially, if they needed the equipment all the time, they would probably be better off with the ownership model.

CED: What rental trends do

you see evolving and where is construction equipment rental going in the next 2-5 years?

DI: I think first I have to mention that safety and quality control is more of an ingrained cultural requirement as opposed to a task-driven matter.

It would be the first thing you think about, not something you think about down the line. Can I do this job safely? Can I rent this piece of equipment safely? I would say it’s up the decision ladder a few more higher priorities than it ever has been.

I think we’ll probably see more merger and acquisition trends in the coming years. I think the larger rental companies will continue to try to get larger yet. We’ll see that coming back into play.

I think technology will play a bigger part in how equipment is manufactured, especially in the next few years. It’s already there, but it is really coming into its own.

NES is in the aerial work platforms and the forklift business. Our product offerings are getting much larger, taller. We really are access and material handling people. We’re not in some of the lighter categories. All of that is getting bigger and bigger. For instance, we used to be able to put someone 100 feet in the air, and now we can put them 180 feet in the air. There are some specific jobs that require additional heights, like wind power farms. That’s one area where the manufacturers are trying to come out with products that are new and innovative.

We’re also seeing a lot more electric powered engines. That’s because of emissions. The standards are going up.

40 | www.cedmag.com | Construction Equipment Distribution | February 2015

Don Irwin, NES Rentals, Group Vice President, Branch Operations

You can rent online, make service requests online.

There’s real-time cellular notification – what is happening with your request. It’s all about that real-time environment.

There is this whole diesel engine thing.

Tier-4, it’s all about lowering emissions.

That is an expensive process. I think electric products are filling in.

CED: Is electric more expensive than diesel?

DI: Actually, it’s not more expensive.

Diesel driven products have jumped significantly in price and that is to comply with these Tier-4 requirements.

That sort of created a new playing field for electric products. The limitations in the past are quickly being remedied.

It doesn’t require more maintenance.

Electric is environmentally friendly. It’s quiet. The limitations are strictly performance related. How robust, the length of service. Fuel running products will run as long as you put fuel in, whereas electric has to stop and recharge.

CED: What equipment units saw the most rental growth this year and why were they in demand?

And what models have the most rental potential for 2015?

>> RENTAL DI: The high capacity. For example, instead of a forklift being capable of picking up 10,000 pounds, it might be 12,000 or 15,000. Boom lifts, scissor lifts and fork lifts. Something that will either get you higher in the air or pick up more material.

CED: What’s driving the growth?

DI: Some of it is application, such as wind farms. Some of it is fracking; this oil boom has driven capacity up. A lot of it is just trying to wring out the efficiencies. Make one trip instead of two. Use a forklift instead of a crane.

CED: What are your views on best practices in age of the rental fleet and methods for rotating inventory, as well as units that best hold their resale value in the used equipment market?

DI: We use a series of metrics to determine when a unit has reached

its useful life, and they include fiscal age, actual age, high maintenance or extreme maintenance cost, how much revenue or yield we are able to get off the equipment.

It’s also technological, in the same way your cell phone might not have the features you want. The equipment might become technologically obsolete. You marry all those measures into one thought and make a decision. It’s done at the serial number level. Each item is rated that way. If you have 10 forklifts, you would run that scenario over each one. We believe that equipment can be aged anywhere from 48 to 60 months. That’s a big topic of discussion.

When do you sell it? Some people believe you shouldn’t suffer the aging maintenance and sell at 24-36 months.

We believe equipment has a longer useful life than our competitors.

Should I buy a new car or put in a new transmission? We keep equipment longer. Some of the others might make a case for trading it off.

CED: Does your company use

Like Kind Exchange as a strategy for replacingrental fleet units?

DI: No. We don’t use it at all.

CED: What are some key chal-

lenges for the rental industry in the coming year, including anything legislative that might be on your radar?

DI: All of this sort of ties together –

One rental trend on the rise: the need for higher reach (like the JLG 1850SJ) and heavier capacity, says NES executive Don Irwin.

environmental issues, including emissions control, are a big challenge to the industry. A lot is legislative. Safety training and enforcement. Safety enforcement is handled by OSHA and the American National Standards Institute. ANSI pretty much writes the laws and OSHA enforces them.

This is a big one, the availability of training for technicians and drivers is huge. These young folks are not going into the blue-collar area. That is going

to be a huge problem nationwide for the rental industry. It already is.

CED: Any hints about your

company’s growth plans for 2015?

DI: We [had] a great year in 2014.

We’re seeing double digit increases in revenue and profits. We believe 2015 will be the same.

CED: What’s the reason?

DI: The rebounding economy, the rebound of commercial activity. There are a lot of projects on the drawing boards and a lot of things coming out of the ground in 2015. The liquid national gas boom is generating billions of dollars.

CED: Can you talk about the latest in rental technology?

DI: Technology as an interface with the customer is real big. Every one of our competitors has ramped up capabilities, and so have we. NES owns most of the technology. We also partner with some vendors. We have developed a lot of technological resources. Real-time, near-paperless events, documentation, reporting. You can rent online, make service requests online. There’s real-time cellular notification – what is happening with your request. It’s all about that real-time environment.

This includes the customer’s ability to manage their own account online.

You can look at all sorts of documentation. You can look at history of the equipment. Every one of our drivers manages their delivery routes with an iPhone. Customers sign on with a smart phone. All of our sales people have iPad mini’s. Also, we’re not quite up to speed, but coming down the road is telematics stuff. It’s where you proactively maintain the equipment. If I need the air filter changed, somebody out there makes it happen. The dealership calls us. We don’t call them.

LORI TOBIAS is a journalist of more than 20 years, including time at the Rocky Mountain News as a columnist and feature writer and 10 years at The Oregonian. She currently freelances for numerous publications from her home on the Oregon Coast. She can be reached at ltwriter0815@gmail.com.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 41

>> CONSTRUCTION SHOW

INTERMAT 2015 Is Products, Partnerships and Paris Make plans to attend the spring show that rotates with CONEXPO and Bauma.

I

NTERMAT 2015 is rolling out a new show layout replete with newly organized product segmentation of more than 1,500 indoor and outdoor exhibits spanning more than 1.2 million square feet. The new organization of the show will give visitors a smoother transition between the halls (featuring a new a new 49,000-square-foot area) and the exterior demonstration zones.

On a three-year rotation with CONEXPO/CONAGG and Bauma, INTERMAT takes place this April 20-25 at Paris-Nord Villepinte exhibition centre.

“INTERMAT shines the spotlight on the machines, equipment and solutions of it’s exhibitors...”.

Ninety-six percent of attendees in 2012 were satisfied with their visit, and almost 90 percent said they were happy with the quality of contacts they made – you can be one of them this year. AED will be attending – let us know when you’ll be in town and we’ll make a point of seeing you!

INTERMAT shines the spotlight on the machines, equipment and solutions of its exhibitors and also facilitates the visits of building and construction professionals, as well as equipment distributors seeking to add to their companies’ breadth of product offerings.

This year, the concrete industry takes center stage where the entire range of concrete-related machinery and equipment will be on display.

The exhibition will also highlight exhibitors’ expertise in demolition,

recycling and reuse of materials, particularly emphasizing the importance of protecting natural resources and complying with lower pollution regulations. INTERMAT is a forum for exchange on these issues and more.

INTERMAT is organized by S.E. INTERMAT, an umbrella organization bringing together the trade associations for manufacturers and importers: CISMA (Association of Equipment Manufacturers for Construction, Infrastructure, Steel and Handling Equipment Industries), SEIMAT (Association of International Civil Engineering, Mining, Construction and Hoisting Equipment Industries) and Comexposium, one of Europe’s leading event organizers.

For details visit www.intermatconstruction.com.

CED EDITOR’S TOP 5 REASONS FOR U.S. AND CANADIAN DEALERS TO ATTEND 1. Take this opportunity to talk to dozens of overseas manufacturers that

are seeking North American distribution.

Red Says: Brush up on your French (or not) and come to Intermat!

2. Surprise your best customer with a trip to Paris and walk the aisles of one of the world’s largest construction tradeshows. I can’t think of a better place for a business-writeoff trip.

3. Meet dealers and rental company owners from different parts of the world, and even take a tour at a local facility. Among other things, find out how T-4/Stage III equipment is holding its resale value.

4. Learn about the world’s latest, award-winning equipment innovations and pick up safety strategies to share with your team and customers back home.

5. See products and hear education sessions at World of Concrete Europe.

42 | www.cedmag.com | Construction Equipment Distribution | February 2015

WORLD OF CONCRETE EUROPE BECOMES PART OF INTERMAT Exhibition covers all stages of the concrete construction process.

W

orld of Concrete is recognized as the leading event for the concrete industry in North America. For its first appearance in Europe, World of Concrete aims to become the same catalyst of change for the concrete industry by hosting producers, contractors and suppliers from Europe, Frenchspeaking African countries and the Middle East.

Educational seminars and demonstrations will supplement the show for an engaging and fun learning experience about the different decorative uses for concrete.

Specialists in plant and equipment for the production, transport, placing and finishing of concrete all come together, presenting a comprehensive range dedicated to the concrete sector, from production activities (materials, products and admixtures) to construction (decorative concrete, coverings and mortars, engineering and services).

BOOK AND RESERVE WITH EASE

W

hether youâ&#x20AC;&#x2122;re coming for a few days, the whole week, or more, INTERMATâ&#x20AC;&#x2122;s trusted Maryland-based travel agent, Patricia Daury at Premier Vacations is ready to help book your travel and accommodations in Paris.

New primary number: 301-364-5050 Premier Executive office: 240-686-1794 E-mail: premvac@aol.com

February 2015 | Construction Equipment Distribution | www.cedmag.com | 43

>> 40-BELOW

JOANNE COSTIN

CED CHECKS IN WITH AN UP-AND-COMING DEALER LEADER UNDER AGE 40

Being Someone They Can Rely On Eric Poulson shares lessons from the sales front and explains why he bought in to Faris Machinery.

L

ast week a manufacturer postponed delivery of a customer’s machine. It was Eric Poulson’s customer and he was not at all happy.

“I told the guy who wants to spend $100,000 with me that I could get him something by the end of the month and now the factory is telling me I can’t get it for him until May,” said Poulson, a sales representative for Faris Machinery, working out of the company’s Grand Junction, Colo., branch.

It was clear the situation nagged at Poulson’s gut. “People are looking for someone to rely on,” he said, “and when you become that person, it’s easy: the dealer is the face of the product and the face of customer service.”

Say what you are going to do; do what you say, be consistent and follow through.

Those are the words that Poulson grew up hearing from his grandfather Roger Poulson, a past president of Faris Machinery, and his father Giles Poulson, the current president of Faris Machinery.

As he observed his father and grandfather working with customers, Eric took these words to heart, and made them his own as he continued in his sales career.

The eldest of three siblings, Poulson was the kid who built go-carts in the garage and he enjoyed working alongside his Dad to build the barn or remodel the house. In high school, he worked in the family’s restaurant business where he gained valuable customer service experience. After pursuing a business degree at Mesa College in Grand Junction, Poulson worked in the mortgage industry. It didn’t take him

long to realize that he would prefer selling heavy equipment to selling mortgages. When the opportunity arose to work at Faris Machinery’s branch in Grand Junction, he jumped at it.

“I like that in the equipment business you are selling something tangible,” he said. “For me, the greatest part of my job is working with customers to help them achieve their goals. I am working with customers who are building roads, building dams, building bridges and tunnels. I like selling them equipment that will help them get the job done, especially on things that will be around 100 years from now.”

Being customer-focused is something that Poulson believes will be an advantage as he moves from sales to management. In 2013, he purchased a portion of Faris Machinery, formalizing his position as the next generation leader.

“Customers have become more valueconscious,” said Poulson. “They want to understand the value so they can articulate the value proposition to the people above and below them, that I might not have access to.” This means examining “the whole deal” and fully understanding the competition, the applications of the equipment, and how each performs.

“This helps position my brand correctly to the customer, and against the competition,” explained Poulson.

His technique for handling sales rejection is to recognize that it’s a long road. “If you miss one, there are always other opportunities,” he said. At the same time he thinks it is important to analyze losses to learn more about the competition. When

44 | www.cedmag.com | Construction Equipment Distribution | February 2015

selling premium products, you aren’t going to win every deal.

About Faris Machinery

Founded in 1953 as a construction supply firm by Lloyd Faris and Charlie Moritz, Faris Machinery was originally named Faris-Moritz. The partners were former key employees of the McCoy Company, a Caterpillar dealership at the time. In 1976, Roger Poulson took the helm, managing for 28 years until 2003, when his sons, Todd Poulson and Giles Poulson took over. In 2011, Todd retired, leaving Giles Poulson in charge.

“It was the first cycle that I was part of and it is going to be with me for a while. I am sure it will only increase my conservative nature...”

“I’ve always felt that our founders’ Caterpillar roots were an important advantage,” said Poulson. “From early on, our company had a distinct way of doing business brought about by Charlie and Lloyd’s experience. It allowed us to understand what the expectation was, and what needed to be done to succeed.”

On Leadership

When asked to reflect on the kind of leader he wants to be, Poulson doesn’t hesitate.

“I want to lead by example,” said Poulson. “We do whatever it takes to get the job done, and that starts at the top.”

ERIC POULSON Sales Representative Faris Machinery Age: 38 Years in Equipment Industry: 9

ABOUT FARIS MACHINERY Locations: Denver, Grand Junction, and Colorado Springs, Colo.

Years in Business: 63 Number of Employees: 45 Ownership Structure: Family-Owned Brands Represented: Carlson, Doosan, Elgin, Etnyre, Gehl, Gomaco, Gorman Rupp Pumps, Gradall, Midland Machinery, Minnich, Palfinger, Superior Broom, Vactor, Volvo (Paving), Wacker Neuson Poulson says the culture at Faris Equipment is such that everyone acts like an owner. “In Grand Junction, we are a group of self-directed individuals who thrive on each other’s performance,” he said. “There is never a need for a push from behind.” Poulson feels fortunate to work with a branch manager who has been with the company 30 years, as well as five others. “We’ve proven our performance and profitability,” said Poulson.

Managing Through The Great Recession

As a company, Faris Machinery has an incredible track record, with only one down year in 62 years in business.

Poulson recalled the year The Great Recession hit the dealership – it was 2009.

“That was a huge wake-up call to me as a business person,” said Poulson. “It was the first cycle that I was part of and it is going to be with me for a while. I am sure it will only increase my conservative nature throughout my business life.”

Despite the challenges, Poulson believes successful management of his sales territory through the recession was one of his biggest accomplishments to date. “There was a huge shake out.

It was a year of going out and hearing sob stories,” he said. “It was far more difficult than rejection.”

Mixing It Up

Poulson credits the dealership’s diversification into the municipal markets for keeping them going during the recession.

They also continued to pursue additional opportunities. In 2011 and 2012, Faris acquired Boyle Equipment and Foster Equipment, extending the company’s offerings to the environmental and concrete industries. The Boyle acquisition provided them with an opportunity to sell high-quality sewer cleaners and vacuum excavation equipment. Through the Foster acquisition they became an authorized dealer of Gomaco and other concrete products. Today, the company’s diverse customer base includes the solid waste, asphalt, concrete, oil & gas, and the municipal sectors.

Poulson’s involvement in management decisions continues to grow. At some point, he knows he’ll have to leave the spectacular scenery and blue skies of Western Colorado for the company’s headquarters in Denver. One of the ways he’s preparing himself for the changes ahead is by taking advantage of education opportunities such as the AED Leadership Academy. “I really value what AED brings to the table in terms of that kind of education and networking event,” said Poulson.

“AED membership sets us apart as a dealer.”

While Poulson knew long ago that he would eventually become an owner in the company, he was somewhat surprised at the impact the announcement made on the Faris team.

“People seem relieved because they understand what the future of the company looks like, in terms of a leader,” said Poulson. “I didn’t really understand how that would affect people.”

With a leader who says what he will do, does what he says, and follows through, the future looks bright for Faris Machinery.

JOANNE COSTIN (jcostin@costincustom.com) is a freelance writer and marketing consultant focusing on the construction industry. She can be reached at (847) 340-4075.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 45

>> CFO 411

STEVE PIERSON

C Corporations Reconsidered Thanks to tax increases in 2012’s health care law, S doesn’t always stand for ‘smart’ anymore.

“... it may be time to re-examine the use of C corporations as an advantaged cost savings structure in which to operate your business.”

M

any small businesses operate as either an S corporation or partnership. This has made good sense from a tax planning point of view, as the income is taxed only once to the shareholder or partner.

But consider this: Since 2013, individual income taxes have taken a sharp hike with the American Taxpayer Relief Act of 2012 by: increasing rates for individual taxpayers with adjusted gross incomes above $406,750 and married taxpayers filing jointly with AGI above $457,600 to a 39.6 percent rate; increasing the capital gains and dividend tax rates for taxpayers who exceed the income thresholds listed above increase from 15 percent to 20 percent, and adding a cap on itemized deductions and personal exemptions for those making $250,000 (married couples making $300,000).

Furthermore, there is an additional tax on investments of 3.8 percent for individual taxpayers with adjusted gross income over $200,000 and joint filing taxpayers with adjusted gross income above $250,000 under the Health Care Bill.

Given the new higher individual tax rates described above, it may be time to re-examine the use of C corporations as an advantaged cost savings structure in which to operate your business. Below are some factors in helping an owner or executive in making this decision.

C corporations have a tax rate that is now lower than that for high-income individuals.

The first $50,000 of taxable income is taxed at 15 percent and the next $25,000 is taxed at 25 percent. The rates are structured so that as taxable income increases the corporation pays a flat 34 percent up to $10 million. However, remember that with a C corporation there is a “double taxation” of income both at the corporate and shareholder level.

A business owner/employee can plan for use of the 15 percent and 25 percent lower corporate rate by paying a salary at a level that brings the corporate income down to utilize the

lower rate instead of that same income being taxed at the 39.6 percent rate. In addition, C corporations are not subject to the 3.8 percent investment income tax described above.

In the case of an equipment rental business, the tax law has created a problem for owners that operate as a partnership or S corporation.

The rental business is treated as a passive business despite the time and effort the owner puts into the business. If a business is considered passive, any losses derived from that business cannot be used to offset income not considered passive nor carried back to prior years. Potential exceptions to this rule are when the rentals average 30 days or less or the rental operation is considered de minims to total operations.

The passive loss rules do not apply to C corporations and may be a significant factor in deciding whether to use a C corporation.

C corporations offer a reduced rate of capital gains tax on the sale of qualified small business stock (QSBS). QSBS is generally stock held at least five years in a qualified trade or business but not certain personal service businesses.

Currently, owners of QSBS can exclude 50 percent of the gain on the sale if the shares were acquired after Dec. 31, 2014. The maximum gain that can be excluded is limited to the greater of $10 million or 10 times the taxpayer’s basis in the stock. The tax rate on the reported gain is subject to a 28 percent tax rate, or an effective rate of 14 percent on the entire realized gain. Taxpayers who obtained QSBS between Sept. 28, 2010 and Dec. 31, 2014 can exclude 100 percent of the gain on that stock.

We have only scratched the surface on C corporation considerations. Certain employee benefits and compensation bonus structures are available to C corps that aren’t available to pass through entities. And remember, the key is not only the present status of the business but the ultimate goal in transfer or sale at retirement or death.

STEVE PIERSON is vice president and a shareholder of Selden Fox, Ltd. He has more than 30 years of experience as a tax professional in public accounting, specializing in technical accounting, tax, financial, estate and succession planning, employee benefits, international tax planning, merger and acquisition transactions, and compliance for medium-sized businesses. He can be reached at pierson@seldenfox.com.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 47

>> SMART HR

KARLA DOBBECK

Coach for Skills – Discipline for Behaviors Build trust and develop better performance by using the right approach for adverse situations.

Think about it, would you rather work for a tyrant or a mentor?

W

orking with employees who just don’t ‘get it’ can be frustrating! When this happens, the first reaction for many supervisors and managers is to issue a written warning. But in the long-run, a written warning isn’t going to help the employee improve; instead, a written warning will probably intimidate someone who is already struggling in their responsibilities.

Instead of rushing to judgment and ‘reacting,’ try a more proactive approach. Use the opportunity to coach and develop the employee using a step-by-step plan. Think about it, would you rather work for a tyrant or a mentor?

Performance Improvement Plans (PIP) have several key components. They identify the ‘as is’ and the ‘should be.’ They include a measurement to ensure the improvement has been made, a timeframe for the end result, and most importantly, action steps the employee can take to reach the objective. Most people really do want to do a good job and feel a sense of accomplishment when their work is improved.

To help the employee see the problem from your perspective, make sure to have examples of poor performance to share. Once the employee understands, he or she will be more likely to embrace new methods and learn new things.

Don’t make the mistake of sitting back and waiting for the employee to fail. Instead, set up check-in times to meet and see how the improvement is progressing. Any electronic calendar will allow you to set up reminders and appointments.

When meeting, check to see if there are obstacles in the way and if there are, help your employee remove or work around them.

Be flexible – if your original plan isn’t working for the employee, develop a new one.

Also, make sure to praise your employee for small improvements along the way.

Everyone likes to hear they are doing a good job, and positive reinforcement should lead to more improvements.

A Different Approach for Behavior

On the other-hand, if the problem is behavioral, coaching might not be the best approach. Most companies have policies such as attendance, dress code, drug/alcohol use, inappropriate behavior, confidentiality, and so on. When an employee does not meet these expectations, it is his/her choice. Behavioral issues are better addressed through discipline.

When disciplining, there are a few simple things to keep in mind.

Please do it in private. And while a signature on the warning is preferable, there are other ways to prove the conversation took place. If the employee refuses to sign a warning, call in another manager to witness the employee’s refusal. Or, send a recap e-mail to the employee outlining the conversation with the warning attached, or send a certified letter to the employee’s home with the warning included.

Say what it is. If issuing a verbal warning, you might want to make a note of it but don’t put a ‘warning’ in the employee’s file. If you do, it really isn’t a verbal warning – it is a written warning! Also, be sure to state consequences in the event the behavior continues, and then follow through if necessary. In the end, if you terminate and the employee knew his or her behavior would lead to termination, you are in a stronger position in case of a legal challenge.

Only issue a final warning if the next step is termination. If you issue several “final warnings” the unemployment office will ask why this final warning was different than the first final warning and probably allow benefits.

By using coaching techniques and only disciplining at appropriate times, you will find you have the skills needed to develop great employees while weeding out the problems.

Your employees will begin to trust you more as a manager and also respect the fact that you recognize the difference when it comes to performance versus behavioral issues.

KARLA DOBBECK, founder of Human Resource Techniques, Inc. based in suburban Chicago, and manages AED’s HR Help Desk, a free hotline for members that also offers reduced fees for a wide range of services, including employee handbooks. She can be reached at 847- 289-4504, karlad@hrtechniques.biz. Or visit her website at hrtechniques.biz.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 49

BUILDING THE FUTURE

TOGETHER

E X P E R T I S E - I N N O VAT I O N - N E T W O R K I N G

20-25 A vril 20 Paris-No 15 rd Villep inte - Fr ance

GE

VISITOR

Your free badge on Code www.intermatconstruction.com

INTERMAT c/o IMEX Management, Inc. Tel: 704.365.0041 - Fax: 704.365.8426 Email: rebeccaj@imexmanagement.com

PROMOAED

HOTLINE : +33 (0)1 43 84 83 86

BLOG

#intermatparis

Design: madmac - Š Lev Kropotov

YOUR BAD

>> PROBLEM SOLVED TROY OTTMER

Parts Turns and Aged Inventory – Keep on Top of the Nonmoving Parts How to calculate and manage this perennial, pernicious problem.

Any part on the shelf that does not sell costs you money...and this cost, over a period of a few years, can kill your profitability.

Inventory Turnover

=

Cost of Goods Sold Average Inventory

4.0 = $3,500,000 $875,000

I

nventory aging is something that every equipment business will face. If left unchecked, aged inventory will rob your operation of profitability. How do we measure, track or otherwise manage what we have on our shelves?

Do you know what your parts turns are? Do you know what your percentage of nonmoving inventory is? Do you know what your 24-, 36- or 48-month aged inventory value is? How many days since last order date versus last sell date? The list could go on and on. The message here is that you have to track these various metrics.

Please keep in mind that there are different stocking criteria for different industrial business models (equipment, lift trucks, automotive, trucks, etc.), so for the purposes of this conversation I will use a simple inventory example.

Let’s say at year-end we have $1 million in total inventory and we want to determine what our current turns are. For this we will need to know a couple of more basic things.

For example, we already know what our total inventory is; however, for this calculation we need to determine what our average inventory is. You can do this on a month-to-month basis over the 12-month period, or you can use your beginning inventory and ending inventory for that year. In either case, you will simply divide by 12 or by 2. You will also need to find out what your parts Cost of Goods sold were for the same period. In this case, our Cost of Goods sold were $3,500,000 for the period.

Our beginning inventory was $750,000 and our ending was $1 million. Your average inventory for the year was $875,000. Your Cost of Goods sold is $3,500,000. Divide Cost of Goods sold by Average Inventory and your turns are 4.0 for the year. Formula for this is on left: Now that we know our turns, we need to calculate our nonmoving inventory. For this

you will need to know how much of the $1 million in inventory has not had any sales over a specific period of time. In this case, we will use 24 months as our metric. We will also use the ending inventory for this measurement.

In this scenario, we have $195,000 in inventory that has not had any sales activity within the last 24 months. This will equal 19.5 percent of your total inventory. In most circles, this ratio is too high. That said, my suggestion is to keep this at 5 percent or less on an annual basis, or no more than a 10 percent maximum.

I call this the 5/10 method. Now, there are many things to consider when measuring your aged inventory – such as type of parts, seasonality, and acquisition cost.

Take the entire list of nonmoving parts.

Break it down by vendor first, and then sort by extended cost, largest value to smallest. If you are a large multilocation group, then you will need to compare sales history across the group. In this case, you may transfer parts between locations. If you are a smaller group or single location, then you can do a variety of different things to dispose of the parts in a manner that mitigates your exposure to a full write-off. You can have your parts staff target these parts for movement at a predetermined pricing, or you can source to various services that are in the business of processing obsolete inventory via the secondary market.

The idea is not to have parts on your shelf beyond “X” period. Any part on the shelf that does not sell costs you money (in property tax, shelf space, handling, shrinkage potential, obsolescence, etc.) and this cost, over a period of a few years, can kill your profitability. Regardless of the size of your organization, you have to pay careful attention to your parts inventory on a daily, monthly and yearly basis.

TROY OTTMER is vice presidentof Fixed Operations at Doggett Heavy Machinery Services, LLC, in Houston, Texas, a John Deere construction equipment dealership serving the greater Houston metro area including Beaumont and surrounding market. Doggett Machinery Group also serves South Texas and Louisiana. Ottmer has worked in the equipment and automotive industry for 24 years. He can be reached at troy.ottmer@doggettmachinery.com February 2015 | Construction Equipment Distribution | www.cedmag.com | 51

>> VIEW FROM THE HILL

GUEST COLUMNIST JAY TIMMONS

It’s Time To Govern Elected officials have important work cut out for them; the business community should keep them focused on the issues that drive growth.

“U.S. manufacturers are growing the economy, but we can’t do it alone.

We’re asking our elected officials to just solve problems...”

T

he months of campaigning, fundraising and getting-out-the-vote efforts have come to an end. For the National Association of Manufacturers (NAM), we can close the book on unprecedented election outreach in 2014, educating millions of potential manufacturing voters nationwide and helping deliver a stronger delegation for manufacturers in Washington, D.C. Now the hard work begins, and voters have made clear their motivations. In a post-election survey by McLaughlin & Associates, 64.3 percent of voters said the U.S. was on the wrong track. Just one day before Election Day, a Wall Street Journal and NBC survey found Congress with an approval rating of just 12 percent. In that same survey, 77 percent of respondents named either job creation/economic growth or ending gridlock/getting things done as the top issues behind their vote for Congress.

So the election wasn’t just a referendum on the president. It was a call for leadership – for a government that works to spur job creation and ignite widespread and long-term economic growth.

That’s why the NAM’s message to the president and Congress is very basic: It’s time to govern – to come together for real solutions that allow us to take full advantage of our high productivity, world-leading innovation and the boom in reliable and affordable domestic energy.

Manufacturers know that if Washington gets its act together, we can unleash these advantages to improve our economy in a meaningful way. And, beyond the short-term benefits, if Washington acts now on the policies manufacturers need, we can seize global manufacturing leadership for generations, securing pathways to the middle class, to stable and secure retirements, and to a future where America’s possibilities are only limited by our dreams.

Some will misread this election’s mandate and seek to divide Americans, satisfy populist sentiment and serve up a campaign platform for 2016. Others have chosen to emphasize select polls and turnout instead of the results,

trying to dismiss the decisive outcome for a new direction. The window for divisive tactics or out-of-touch rhetoric must end now.

Elected officials need to renew the faith of the American people in our government and in our institutions. And Americans, most notably those in the business community, must continue to counter those who distract from the goal of economic growth.

U.S. manufacturers are growing the economy, but we can’t do it alone. We’re asking our elected officials to just solve problems: extend important tax policies; approve the Keystone XL pipeline; make comprehensive tax reform happen, including for companies that operate as “S”-corporations or as other “flow-through” entities; invest in our aging infrastructure; fix our nation’s broken immigration system; stop the Environmental Protection Agency’s assault on American energy security; move Trade Promotion Authority; and enact regulatory reform to name just some of the issues that need immediate action.

The facts back us up on the need for these vital initiatives. For example, a recent NAMcommissioned study found that a sustained investment in our nation’s aging infrastructure would increase jobs by almost 1.3 million at the onset of initial investment, return three dollars for every dollar invested, and grow real GDP by 2.9 percent by 2030.

Manufacturers are realistic about the chances of moving many of our priorities. It’s not going to be easy. No one can predict with certainty how the new Congress will operate. But as a manufacturing economy, with important partners like Associated Equipment Distributors, we’re ready to work with the president and Congress to achieve real leadership – and results.

It’s time to work with anyone who sincerely wants to get this country moving again. It’s past time to govern to bring about the solutions our people and businesses need. It’s about time to build on our progress, together, and make this nation prosperous and proud.

JAY TIMMONS is president and CEO of the National Association of Manufacturers.

February 2015 | Construction Equipment Distribution | www.cedmag.com | 53

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advertiserâ&#x20AC;&#x2122;s index Arctic Snow & Ice Control, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 48

LiuGong Construction Machinery . . . . . . . . . . . . . . . . . . . . . . . 10

Bell Trucks of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Loftness Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

BidSpotter.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Lowe Manufacturing Company, Inc. . . . . . . . . . . . . . . . . . . . . . 18

CDK Global Heavy Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Ritchie Bros. Auctioneers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

e-Emphasys Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . .28-29

Screen Machine Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 46

EPG Insurance, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Sentry Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

GE Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Strickland MFG, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

IMEX Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Summit Supply LLC . . . . . . . . . . . . . . . . . . . . . Inside Front Cover

Infor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Turtle Plastics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

LayMor Sweepers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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February 2015 | Construction Equipment Distribution | www.cedmag.com | 55

>> EASY WINS

STEVE CALECHMAN

Running a Meeting That People Will Attend Or make that, ‘Will Want to Attend!’

Build into every meeting the chance to share a problem and let the group workshop a solution.

M

eetings don’t have to be boring. It’s just that they usually are. The wrong people talk. They talk for too long and about nonrelevant issues. Cue the texting from under the table. Chris Lytle, president of Sparque, a sales training company, and author of The Accidental Sales Manager, gives his suggestions on making your meeting must-attend stuff: Define the mission. Know going in what the purpose, plan and takeaway will be. If you don’t have the answers, you don’t have the meeting.

If it’s solely about imparting information, use e-mail and save everyone’s time. Your goal is to offer performance-enhancing value, so people would attend if it was optional or if you were charging. “That attitude makes you plan a good enough meeting.”

Get quick involvement. The default mode is for the boss to lecture, but you want more of an honors class environment, less freshman English 101. “Adults learn by doing, not hearing about how you did it.” Get everyone talking within the first five minutes by giving them an open-ended sentence. “This week I’m excited

about …” The answer could be about a potential account or a book. If it’s a new employee’s debut, have everyone offer a lesson that they wish they had learned when they started. Sharing war stories – always a useful move – sends the signal that, “People help each other instead of keeping things to themselves.”

Change the scenery. You only have so much original material for 52 weekly meetings. Prevent it from becoming shtick by rotating venue and voices. Pick a location central to customers – a hotel or bank conference room, for example – and have everyone schedule an appointment for afterward to maximize the trip. Bring in the company president or a department head. The staff gets access to them, hears new and big-picture perspectives, and, ultimately, there’s a more cooperative attitude. Also, invite a customer and allow your people to each ask three questions. The client receives personal attention; your people gain insight to apply to other business accounts or scenarios.

Spread the wealth. When you know of an employee’s accomplishments, ask the person to share details. While you’re always the meeting’s guide, you’re allowing the group to dictate some of the agenda. The staff sees that credit is given out and they hear continually effective peer-topeer advice. “Once people see it can be done, they believe they can do it.”

Encourage feedback. Build into every meeting the chance to share a problem and let the group workshop a solution. At the end, ask what’s missing and what should be missing from future meetings, and give everyone 48 hours to respond. Both moves give buy-in and make the meeting responsive to actual needs.

Ultimately, you want to give your staff every opportunity to achieve better results. If you do that, the office isn’t just a place to work, but a place to stay for the long-term, because, says Lytle, “They see you as a path to a more successful career, not just as a boring manager.”

STEVE CALECHMAN is a freelance journalist in the Boston area. He’s a contributing editor for Men’s Health and his work has appeared in The Boston Globe Magazine, The Old Farmer’s Almanac and Delta’s Sky magazine.

56 | www.cedmag.com | Construction Equipment Distribution | February 2015

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