Ew0214combined by Tony Brock

equipmentworld.com | February 2014

速

FUTURE

SPECIAL REPORT

THE

OF YOUR

COMPANY

THE DISCUSSIONS YOU NEED TO HAVE BEFORE YOU RETIRE

P.19

YOU’RE NOT DELIVERING CUPCAKES

The Mack® Granite® is ready to work. Hard work. Real work. Long work. And it doesn’t care what you put on its back— dump, roll-off, mixer, whatever. It’s ready for anything. Visit Mack Trucks at CONEXPO / CON-AGG, South Hall, Booth 60416 Text INFO to 205-289-3715 or visit www.eqwinfo.com

MackTrucks.com

IT’S ALL ABOUT EQUIPMENT

UPTIME Your mechanic truck keeps your customers’ business running and making money. Stellar Industries knows it better than anyone. That’s why we are introducing our enhanced crane control system, The Stellar ® CDTplus™ and E-link equipmentoperator interface, with industry-leading operator feedback and operation reports that improve operator productivity and increase your customers’ ﬂeet uptime. Our next-generation TMAX crane body features compartment compression latches and super-strong stainless-steel billet door hinges to stand up to your toughest jobs, ensuring that more of your customers’ time is uptime.

E M I T P U TS HERE STAR ALL aAs, TNevada

Las Veg ooth 1406 Gold Lot - B 2014 March 4 – 8,

Text INFO to 205-289-3715 or visit www.eqwinfo.com

Vol. 26 Number 2 |

Cover Story

SPECIAL REPORT:

WHAT DOES THE

FUTURE

table of contents | February 2014

HOLD FOR YOUR CONSTRUCTION COMPANY?

Find out in this special four-part series.

Equipment 14

Marketplace

New products include the PC170LC-10 excavator from Komatsu America, Hyundai Constructionâ&#x20AC;&#x2122;s R220LC-9A crawler excavator, the C100R forestry mulcher from Rayco and more.

Maintenance

Fluid analysis master class Learn the relationship between lube oil, coolants and biodiesel.

ProPickup

Surveyor Part V We wrap up the finishing touches on our sweepstakes project truck with custom graphics, GPS navigation, rearview camera and helper springs.

EquipmentWorld.com | February 2014

table of contents | continued

DEPARTMENTS 9 On Record It’s time. 11 Reporter ACG outlook predicts industry growth for 2014. 55 Regulations We run down the top four new federal regulations – healthcare, immigration, OSHA and CSA.

67 Contractor of the Year finalist Tommy, Dany and Greg Giangiulio Glendale Excavating • Voorhees, New Jersey

equipmentworld.com facebook.com/EquipmentWorld twitter.com/Equipment_World Editorial Director: Marcia Gruver Doyle Executive Editor: Tom Jackson Managing Editor: Amy Materson Online Managing Editor: Wayne Grayson Executive Trucks Editor: Jack Roberts Spec Guide Editor: Richard Ries Editorial Intern: Brittany Johnson editorial@equipmentworld.com Art Director: Tony Brock Advertising Production Manager: Sheana Sexton production@equipmentworld.com Senior VP, Market Development, Construction Media: Dan Tidwell VP of Sales, Construction Media: Joe Donald sales@randallreillyconstruction.com

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Trucks Natural gas retrofit

systems and glider kits provide interesting possibilities for costminded contractors.

Robert F. Boger Award for Special Reports, 2006, 2007, 2008 Construction Writers Association Jesse H. Neal Award, Best Subject-Related Series of Articles, 2006 American Business Media Editorial Excellence Special Section Gold Award, 2006 Midwest-South Region, American Society of Business Publication Editors

77 Quick Data Excavators 98 Final Word How to succeed in this business. cover illustration by Tony Brock For subscription information/inquiries, please email equipmentworld@halldata.com. Equipment World (ISSN 1057-7262) is published monthly by Randall-Reilly Publishing Company, LLC, 3200 Rice Mine Road N.E., Tuscaloosa, AL 35406. Periodicals Postage-Paid at Tuscaloosa, Alabama, and at additional mailing offices. POSTMASTER: Send address corrections to Equipment World, P.O. Box 2187, Skokie, IL 60076-9921 or email at equipmentworld@halldata.com. Rates for non-qualified subscriptions (pre-paid US currency only): US & possessions, $48 1–year, $84 2–year; Canada/Mexico, $78 1–year, $147 2–year; Foreign, $86 1–year, $154 2–year. Single copies are available for $6 US, $9 Canada/Mexico and $12 foreign. The advertiser and/or advertising agency will defend, indemnify and hold Randall-Reilly Publishing Company, LLC harmless from and against any loss, expenses or other liability resulting from any claims or suits for libel violations of right of privacy or publicity, plagiarisms, copyright or trademark infringement and any other claims or suits that July arise out of publication of such advertisement. Copyright ©2013 Randall-Reilly Publishing Company, LLC All rights reserved. Reproduction in whole or in part without written permission is prohibited. Equipment World is a trademark of Randall-Reilly Publishing Company, LLC Randall-Reilly Publishing Company, LLC neither endorses nor makes any representation or guarantee regarding the quality of goods and services advertised herein.

February 2014 | EquipmentWorld.com

Editorial Excellence News Analysis Gold Award, 2006 Midwest-South Region, American Society of Business Publication Editors Editorial Excellence News Section Silver Award, 2005 Midwest-South Region, American Society of Business Publication Editors Robert F. Boger Award for Feature Articles, 2005 Construction Writers Association Robert F. Boger Award, 2002 Sept. 11th Feature Articles

TRAIL

KING’S

HDG

WE BUILD IT

SO YOU CAN HAUL IT THE ALL-TIME BEST SELLING DETACHABLE ON THE MARKET

HYDRAULIC DETACHABLE G O O S E N E C K

ENGINEERED WITH HIGH PERFORMANCE STANDARDS • Arched Gooseneck Design for ample clearance even at lowest king pin setting • 5-Position Gooseneck Door Adjustment allows for a full 8” range of king pin height settings • One-piece Main Beam Web and Flange Construction eliminates the potential for weak points in high stress areas • 10” I-beam Crossmembers on 12” centers in outer bays • Covered Knuckle/Boom Trough allows for low-profile transport • Sealed Electrical System and rubber-mounted LED lights reduce maintenance costs • A 3rd Lift Axle offers on-the-road versatility • Adjustable Ride Height Control conveniently located near rear tail channel • Heavy-Duty Pullout Front Outriggers at concentrated weight pivot point provides extra strength

SEE THE HDG FIRST-HAND AT CONEXPO-CON/AGG! Visit us at booth #1374 MARCH 4 - 8 Las Vegas Convention Center

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Have a heavy haul? Contact your nearest TRAIL KING dealer or call 800.762.5557 to learn more about the HDG.

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on record | by Marcia Gruver Doyle

MGruver@randallreilly.com

It’s time Y

ou’ve fought the good fight. Now that the pressure of construction’s most sustained recession is over (and if you were around in the early 80s, did you ever think there would be a time that rivaled that downturn?), it’s time, especially if you’re age 50 and older. The recession littered the landscape with those who didn’t make it. In this issue, we have tales of two contractors who chose to liquidate instead of continue to fight. But even if you escaped with your people and fleet intact, you won’t escape time’s march. We know you’re not ready to let go. If you’re in your 50s, you’ve got a number of prime years ahead of you. “I’m not going anywhere,” one contractor told us. But that didn’t stop him from setting up his succession. Now 61, he’s got three excellent employees gradually becoming shareholders, lined up to take over (his story starts on page 32.) There is a natural reluctance to face all the hard decisions transition planning entails. When we surveyed our readership late last year, only 46 percent of respondents said they had a formal plan in place to transfer management of their company in the event of their retirement or disability. This tracks similarly with a survey industry consultant FMI did last year, where 44 percent gave a like answer. Since the FMI respondents tended to skew to larger construction firms, this tells me the head-in-the-sand syndrome is universal. The majority of respondents to both surveys were first generation contractors. When we interview contractors, we find the American dream alive and well. Many in our industry have crafted multimillion dollar companies with a high school diploma. But perhaps that same do-it-yourself ethic can get in the way when you know the time is ripe to think about passing it on, either to your children, other relatives, employees or a new owner. If this issue get’s you thinking “what next?”, and puts you on the planning journey, we’ll be delighted. Because Next will be here whether you have the blueprint for it or not. EW

“

But even if you escaped with your people and fleet intact, you won’t escape time’s march.

”

EquipmentWorld.com | February 2014 9

reporter | by Equipment World staff

AGC outlook predicts improved construction growth for 2014

Hire a Hero to create path to construction jobs for veterans

he Associated General Contractors of America released their 2014 construction industry forecast in January, reporting the results of an in-depth survey that included 800 AGC members across the United States. The group’s analysis, Optimism Returns: The 2014 Construction Hiring and Business Outlook, found contractors are more optimistic about 2014 than they were about previous years. Noting the mild recovery in 2013, the report said 41 percent of firms that did not change staff levels last year plan to modestly expand payrolls in 2014 while only 2 percent plan to make layoffs. Contractors are most optimistic about demand for new water and sewer construction, predicting a net positive of 17 percent, with highway construction following at a net positive of Contractors 10 percent, said AGC Chief Economist Ken are most Simonson. Credit conditions have improved, optimistic with only 9 percent of firms saying they are about demand having a harder time getting bank loans. for new The number of respondents saying customwater and ers’ projects had been delayed because of sewer contight credit conditions dropped from 40 struction, percent a year ago to 32 percent. As a result, predicting a 73 percent of companies plan to purchase net positive construction equipment this year, while 86 percent plan to lease. of 17 percent. A majority of contractors reported they expect to have difficulty filling key professional and craft worker positions. Most firms said they are improving pay and benefits to retain qualified staff. “In the western U.S., the pay has been flat since 2008,” says Rob Moore, president and CEO of Salt Lake City-based Big D Corporation. “The modest increases of around 1 percent are just the industry trying to catch up. We want to pay a wage that’s more responsible, and we want to keep our workers.” Fifty-one percent of contractors expect demand for their services to be negatively impacted by federal funding cuts, new federal regulations and Washington’s inability to set an annual budget. “Seventy-seven percent of firms listed having Washington find ways to make it easier to prepare the next generation of skilled workers as a top priority,” says Stephen E. Sandherr, chief executive officer. A majority also listed repealing all or part of the Affordable Care Act and renewing tax deductions and bonus depreciations for equipment. For more information on the report or to view results from – Amy Materson specific states, visit www.agc.org.

“

”

ire a Hero, a program designed to transition former U.S. soldiers to the civilian workforce, has not been enough to get veterans into jobs such as those in construction, says the Armed Forces Support Foundation, which runs the program. “The current transition assistance from military to civilian life is inadequate and our veterans are not being hired,” says AFSF. The reasons are many. AFSF cites a 69-company study conducted by the Center for a New American Security, which found: • Companies don’t understand military terminology and positions. This becomes a sticking point when companies use software to search for key words on resumes. • If hiring personnel have never been in the military, they may feel applicants with military backgrounds will be too rigid or formal. Post-traumatic stress syndrome is also a worry. • Former soldiers may not be trained in the exact skills companies want. • If the applicant is still a Guardsman or Reservist, there may be concerns about future deployments. To address this, AFSF says it will introduce Staff a Hero later this year to serve as a staffing company, creating temp-to-hire positions and providing additional training for veterans. Assignments can range from a few hours to a few years, giving veterans the opportunity to view corporate cultures from the inside, and find the work they enjoy. Staff a Hero says it will provide free training, including tools and classes, to veterans. Those who are interested in the initiative can contact Rob Barr, executive director of Hire a Hero, rob@hireahero.org. EquipmentWorld.com | February 2014 11

reporter | continued

Diggerland USA opens in June

he United Kingdom’s popular Diggerland Adventure Park—centered around a construction equipment theme—will see a U.S. version this summer. Sahara Sam’s Oasis, a water park located in West Berlin, New Jersey, will open an adjacent 14-acre, 23-attraction Diggerland USA, where the company says visitors can “drive, ride and operate heavy machinery in a safe family-friendly environment.” Operating from four locations in the UK, Diggerland Adventure Park was started by the construction rental firm H.E. Services in 2000 and is now owned by Allsafety Ltd. As in the UK, the U.S. version will use modified JCB equipment, including skid steers, backhoes, tractors and small excavators. A centerpiece of both the UK and U.S. parks is the Spin Dizzy, where the boom of a JCB JS220L excavator goes up and down while spinning in circles with eight passengers harnessed into the seats of a modified bucket attachment. In the park’s Backhoe Adventure, four riders and a ride marshal climb on board a modified JCB 3CX backhoe for a mystery tour while taking turns behind the wheel of the machine. Anticipating a nine-month season, Sahara Sam’s Oasis says admission to the park will be in the “mid-$20 to $30” range for a full day ticket.

12 February 2014 | EquipmentWorld.com

Cat customers use virtual reality simulator for motor grader development feedback

f you’ve ever wondered just how much Caterpillar values customer feedback during the development of new equipment, just wait until you hear about the company’s virtual reality rig. At the Caterpillar Technical Center in Mossville, Illinois, the equipment manufacturer invites groups of customers to step inside what it calls the Immersive Visualization Center (IVC). The IVC is basically an equipment simulator that uses virtual reality to give customers a 1-to-1 ratio view of what the cab of a piece of equipment would be like. Recently, customers evaluated motor grader cab concepts in the IVC. “The advantage of working in the virtual reality environment is that you can switch back and forth so customers can see the concepts side by side and instantly compare the key features,” says Dan Gillen, Caterpillar’s product application specialist for Motor Graders. The IVC is composed of three walls, four screens, a floor and 12 high-definition 3D projectors. As one of the largest virtual reality systems on the continent, the Cat IVC creates an immersive 20-foot-wide and 10-foot-high-and-deep environment. Randy Krieg of Wasilla, Alaska, is a former Caterpillar employee and an expert motor grader operator. Krieg was involved in the development of Cat’s M Series motor grader. He recently sat in the IVC and reminisced about early versions of the simulator used when he was with the company. “The simulations we ran started with a chair, two cardboard boxes, some video game joysticks and a lot of wires running up to the screen,” he said. “We certainly have come a long way.” – Wayne Grayson EW

Text INFO to 205-289-3715 or visit www.eqwinfo.com

marketplace | by Amy Materson AMaterson@randallreilly.com

s or’ t i Ed ick p

DPF-FREE ENGINES Bobcat’s four new Tier 4 excavators feature an ultra-low particulate combustion engine instead of a diesel particulate filter. The UPLC engine reduces the amount of particulate matter created during combustion via a specially designed engine combustion chamber, ensuring Tier 4 emissions compliance without the need for a DPF. The four models – the E42, E45, E50 and E55 – are part of the M-Series lineup of medium-sized machines. The 42.7-horsepower E42 is a conventional tail swing model designed for bulk excavation tasks and offers a 10.5-foot dig depth, 17.3-foot reach at ground level and has 9,183 foot-pounds of bucket digging force. The 42.7-horsepower E45 is a zero-tail-swing model that has unobstructed rotation and all around visibility while delivering a 10.8-foot dig depth, 18.6-foot ground level reach and 7,650-foot-pound bucket digging force. The 49.8-horsepower E50 minimal tail swing excavator has a compact frame designed for performance on tight jobsites and has an 14 February 2014 | EquipmentWorld.com

11.6-foot dig depth, 19.5-foot ground level reach and 8,977 foot-pounds of bucket digging force. The 49.8-horsepower E55 is a conventional tail swing model with high lift capacity and slew torque performance and features a 12.9-foot dig depth, 20-foot ground level reach and 8,977-foot-pound bucket digging force. The E42, E45 and E55 all offer a clamp-ready extendable-arm configuration, designed to provide additional length when fully extended. All four machines feature a new forward-mount instrumentation system. Features include multi-lingual functionality, user statistic analyzing capability, integrated attachment controls and the ability to capture fuel usage, real time fuel consumption and idle-time data. An enhanced keyless start option increases security. As part of the M-Series excavator product line, the four machines also feature an independent boom swing for offset operation, as well as auto-shift travel and an auto-idle feature. Thirteen attachments are available for the new excavators.

FUEL SAVER

Boost capacity while conserving fuel with the PC170LC-10 excavator from Komatsu America, which offers 5 percent more lift capacity with the standard counterweight than the previous model PC160LC-8, and up to 15 percent more lift capacity with an optional counter weight. The newest addition to the dash-10 series, the PC170LC-10 features operating weights ranging from 38,100 to 41,600 pounds, delivers 115 net horsepower at 2,100 rpm and is up to 10 percent more fuel efficient than its predecessor. The excavator has an integrated design with a closed center load sensing hydraulic system that improves hydraulic efficiency by using variable speed matching, which allows the engine speed to adjust based on the hydraulic pump output, and low speed matching, which uses a larger pump capable of producing higher pump output at lower engine speeds. The enhanced working modes match the engine speed, pump delivery and system pressure to the application. The Tier 4 Interim machine has the Komatsu Diesel Oxidation Catalyst, designed to allow soot removal with 100 percent true passive regeneration,

ULTIMATE UPGRADES

John Deere has upgraded their G-Series motor grader line to meet Tier 4 Final emissions standards. The 12 models in the G-Series – 670G/GP, 672G/GP, 770G/GP, 772G/GP, 870G/GP, 872G/GP – all weigh the same as their Tier 4 Interim predecessors. Diesel particulate filter cleaning occurs automatically, and the DPF can go up to 15,000 hours before ash removal.

eliminating the need for a diesel particulate filter. The KDOC delivers long life with no scheduled replacement interval. An advanced electronic control system better manages air flow rate, fuel injection and exhaust aftertreatment, which improves performance while reducing both emissions and fuel consumption. Komatsu’s Equipment Management Monitoring System enables the operator to monitor and troubleshoot critical systems. KOMTRAX technology sends machine operating information to a secure website via wireless technology, including hour meter, location, cautions, load ratio, fuel consumption and maintenance alerts. Six working modes are available, and the excavator includes a standard rearview monitoring system.

Upgrading the 220- to 287-net-horsepower G-Series allowed Deere to include improvements requested by customers. The new series includes better all-around lighting, a more modern radio, an improved rear view camera with a dedicated monitor and upgraded cab features. For 2014, a new laminated cab glass option will be available.

EquipmentWorld.com | February 2014 15

marketplace | continued

TOUGH TRACKS

Perform a range of mulching applications with Raycoâ&#x20AC;&#x2122;s C100R forestry mulcher with rubber tracks. The C100R crosses roadways and sensitive turf while retaining the power and performance of a dedicated forestry machine. Powered by a 99-horsepower Kubota diesel engine, the machine has a super flow, closed loop hydrostatic mulcher head drive, two-speed ground travel, a hydraulic winch and 17.7-inch-wide steel embedded tracks. The C100R also features Raycoâ&#x20AC;&#x2122;s elevated cooling design, which places engine radiators in both the rear of the engine compartment and in the limbriser for maximum cooling performance in harsh climates.

HANDLE HEAVY LOADING Case added to the F Series wheel loader lineup with the introduction of the 1221F, the largest model the company offers. With an 11.9-liter Tier 4 Interim engine that delivers up to 355 horsepower, the loader is designed for heavy earthmoving and loading applications, particularly in aggregate and mining operations. The 1221F has a 66,800-pound operating weight and offers a range of buckets from 6.3 to 7.8 cubic yards, and is available in standard Z-bar and extended reach configurations. Features include four programmable power modes that save fuel and increase available power. A dual-mode shutdown feature maximizes fuel economy and monitors engine components. Standard four-speed transmission has manual kick-down for maximum traction and bucket penetration. An available five-speed transmission has a lockup torque converter, open-differential axles and advanced programming for additional fuel savings. A large cab with full glass door offers an unobstructed view to both edges of the bucket and a sloping hood that provides clear vision to the rear. Additional cab features include a 73-decibel rating, dual filtration system for cleaner air, ergonomic controls and rearview wide-angle camera. A new coupler system pulls the bucket closer to the machine for enhanced breakout force, and the SmartFit bucket tooth system provides stronger, more durable teeth and adapters, as well as hammerless reusable locking pins that improve digging performance. Case ProCare is standard on the 1221F. 16 February 2014 | EquipmentWorld.com

Injector Protector. RELIABLE RAMMERS

Allen Engineering’s ATC130H and ATC170H mid-size rammers deliver between 650 and 700 blows per minute and have 2,800 to 3,500 pounds of impact force. With the ability to compact up to 3,800 square feet per hour, the rammers are designed for a range of applications. Easy to transport and suitable for confined space, the rammers have a purpose-built GXR120 Honda engine. Features include a built-in tachometer, hour meter and a three-way throttle lever that shuts down the engine and fuel supply.

STAY ON GRADE

Establish grade quickly and then ensure the operator stays on grade with Topcon’s 2D and 3D excavator control systems. The systems – the X-32 and X-33 – feature Topcon’s GX-30 control box and TS-i3 sensors. The 2D X-32 excavator grade indication system enables the operator to use a wide array of references including existing surface, a hub, a previous cut, single slopes and dual slopes with the use of a compass or rotating laser. The X-32 is also easily upgradeable to a 3D system. The X-33 3D GPS system includes a MC-i3 GNSS receiver with Vanguard technology for maximum flexibility in satellite signal tracking. The MC-i3 is Sitelink 3D ready for integration into Topcon’s real-time 3D management solution. EW

Up To 10x Better Protection. Research shows an increasing level of contamination in today’s fuel. Traveling at pressures of up to 30,000 psi, contaminants in fuel can rapidly erode injector nozzles, ruining the spray pattern, lowering fuel economy and reducing power. Without proper protection, injectors will have to be replaced at a cost of thousands of dollars and days of downtime. Fleetguard® filters with NanoNet™ media provide up to 10x better protection versus standard filter media, trapping and holding contaminants as small as 4 microns. To learn more about NanoNet technology and to see if NanoNet filter upgrades are available for your engine applications, scan the QR Code below or visit whatsnewatCF.com.

Nothing Guards Like Fleetguard. EquipmentWorld.com | February 2014 17

special report | by Equipment World staff

THE FUTURE OF YOUR CONSTRUCTION COMPANY In the wake of the Great Recession, many baby boomer contractors are planning their business’s futures. Sell? Liquidate? Pass it on? This four-part Special Report will help you decide. PART I

by Marcia Gruver Doyle

How two

construction

companies – one large, one small – decided to close their doors.

eith Andrews, president, RaCON Incorporated, looks at his nearly empty equipment yard from the driver’s seat of his pickup truck. “I always thought they’d scatter my ashes here,” the 55-year-old says with wry laugh. Instead, in a few months, RaCON, based in Tuscaloosa, Alabama, will cease to operate. Andrews has sold off the majority of his 600-piece fleet, along with his office complex, which includes an 18,000-square-foot equipment shop. There will be little evidence of a once $125-million-a-year business, started by his mother Ramona Andrews in 1978. Nearly 800 miles north, Triangle Excavators, a $3 million Holland, Michigan, earthmoving firm, began 2013 with a full roster of Michigan Department of Transportation jobs. But over the course of the construction season, partners Dianne Jacobs, 63, and Steve Krohn, 60, decided to stop bidding new jobs. “We just needed to be done,” Jacobs says.

Keith Andrews will continue with his bridge building firm, Ikaros. “There’s much less competition in that segment,” says the former earthmoving contractor.

“The common sense is gone.” While construction’s prolonged downturn serves as the canvas for both RaCON and Triangle, other factors came

EquipmentWorld.com | February 2014 19

special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued Survey: The future of your company Using FMI’s 2013 Ownership Transfer and Management Succession survey as a base, Equipment World conducted a reader survey on several questions about how contractors are forming their exit plans. Here are our results, compared to the FMI survey.*

1 Do you consider your business a family business? No 16% Dianne Jacobs and Steve Krohn will finish up jobs this spring, then look at other opportunities, possibly in real estate and estimating.

in to play in each owner’s decision to call it quits. Jacobs puts the blame squarely on the frustrations of dealing with government work, to which the company transitioned after private work dried up in their area. “There are some great people that work for the Michigan Department of Transportation, but we just haven’t been running into them lately,” she says. Jacobs says she’s seen older experienced inspectors take early retirement, only to be replaced by “junior inspector wannabes. They have very little understanding of what it takes to build a road. Their big concern is fulfilling the checklist of government requirements. I can work with anyone, but the common sense is gone.” Krohn and Jacobs had talked about giving it one more year, trying to make it until 2015, but by this fall, they decided it was time to go.

20 February 2014 | EquipmentWorld.com

Yes 84%

“You have to fight to get the work, you have to fight to get the work done and then you had to fight like cats and dogs to get paid,” she says. “It sounds like a crybaby story, but when you think, ‘I don’t want to go into work and fight that fight again today,’ you’re in the wrong place.”

“The calls from buyers stopped” For Andrews, the decision was much more prolonged. “I can point to the exact time in June 2008 that I realized something was wrong,” he says. RaCON, an earthmoving contractor active in a number of markets, sold used equipment from its fleet almost on a weekly basis. “All of a sudden, the calls from buyers stopped.” But Andrews wasn’t alarmed. RaCON had almost $220 million in backlog, and made a profit in both 2008 and 2009, with $54 million in equipment and

No 38% Yes 62%

FMI

2 How many generations has the business been in your family? EW

FMI

Still in 1st generation

50%

43%

37%

27%

11%

18%

4 or more

12%

*Equipment World survey, Dec. 2013, 171 respondents from company owners (284 total); FMI survey, 301 respondents.

Let’s get 10,000 miles between oil changes.

© 20013 Chevr Chevron on U.S.A A. Inc. Inc. All All right rightss rre eserv rrved. All trademar ma ks are pprope mar rope opperty owned d by Che Chevron vro Inttelle ellectua ctuall Proper Property LLC.

Want to get the most out of your diesel pickup? Go with the motor oil big-rig drivers depend on, Delo® 400 with ISOSYN® Technology, which combines premium base oils, high performance additives and Chevron formulating expertise to provide superb diesel parts protection. Delo products with ISOSYN Technology help provide extended service protection, maximize engine durability and minimize operating costs. Learn how Delo’s family of products can help you go further, visit ChevronDelo.com Fan us on Facebook

*10,000-mile oil drain intervals are the maximum recommended intervals for Ford Power Stroke 6.4L and GM Duramax 6.6L (LB7, LLY, LBZ, LMM) diesel engines for normal on-road operating conditions. Delo 400 engine oils have been used in various OEM diesel pickup trucks with superb performance and are formulated to meet the maximum OEM drain intervals recommended for diesel engine pickup vehicles in North America. Always follow OEM maintenance recommendations and utilize used oil analysis testing for any extended drain programs.

Text INFO to 205-289-3715 or visit www.eqwinfo.com

special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued Survey: continued

3 Do you have family members active in the business?

No 23% Yes 77%

No 27%

On an unusually cold day last March, RaCON sold most of its 600-piece fleet at auction.

600 employees. It was the site developer for a steel mill in south Alabama, did highway work in three states, and worked on a number of commercial jobs. “Our good fortune was almost a curse because we didn’t react as fast as we could have to the economy,” he says. In November 2009, a bout of swine flu put Andrews in home quarantine for a week, and he immersed himself in business news. He came away with a clearer picture and new resolve. Gathering his managers in the office on a Saturday morning, he passed out racing-themed hard hat stickers that said “RaCON Inc. Endurance 500, Nov. ’09-Mar. ’11.” “I told them we were going to have 500 days of tough times, but that we’d consider it an endurance race, not a sprint. I thought if we could get to March 2011, the economy will start to upturn and we’ll be OK. And if not, we’d have to make some serious decisions.”

22 February 2014 | EquipmentWorld.com

It was a good plan, says Andrews now, and “my guys performed well, but we just couldn’t make a profit in that time frame, and I didn’t see the economy getting better.”

“Keeping us with the company was not an option” Andrews initially tried downsizing, selling $12 million in equipment. He then looked for a buyer. Despite a few overtures, no deal was made. It’s the people that tear at you, Andrews says. “Equipment is just an asset.” Some of Andrews’ employees had worked with the company for 25 years. Jacobs and Krohn also considered selling, but quickly realized it wouldn’t work. “What’s Triangle without Dianne and Steve?” Potential buyers wanted the two to stay with the business. “But that was not an option,” she says. “It was so easy and fun when we started, and it’s so not now,” Jacobs says, citing frustrations

Yes 73%

FMI

4 Are family members recipients of stock in the event of your death? (EW base: 136 respondents)

No 20% Yes 80%

No 34% Yes 66%

FMI

Text INFO to 205-289-3715 or visit www.eqwinfo.com

special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued Survey: continued ranging from an inspector who refused to grant a weather extension even though he shut the project down due to weather, to MDOT’s refusal at first to prioritize competing road projects. “We started the business in 1998,” she says, “and we have guys who have been with us since 2000.” Since Triangle will not finish all of their jobs until spring, “we wanted to give them enough time to find a new employer. And they can be picky, because they’re all good guys.”

“Like a ton of bricks lifted off me” When the sale possibility became a dead end, Andrews decided to liquidate. “Once I made that decision it was like a ton of bricks lifted off me. I could stop worrying about trying to find something for my people and equipment to do.” Andrews knew he would take a hit when his equipment went on the auction block. He hoped his fleet, with a fair market value of $38 million, would sell at $28 to $30 million; instead it brought in $26 million. But the auction route had one thing going for it: 90 percent of his equipment would be sold in two days, rather than in a deal here and there that would extend the hassle. On a cold March day last year, Andrews helped pass out hot chocolate to the bidders milling in his equipment yard. “People asked me if I was going to be able to go through it, and I said, ‘absolutely,’” he says. “It never hit me to feel bad about it because equipment is just an asset. It’s like trading in your car.” And Andrews admits the fire to fight had left. “After 35 years, I

24 February 2014 | EquipmentWorld.com

was tired of the business. I had accomplished what I set out to do.” When he was 17 years old, Andrews made a list of goals, ranging from owning 300 pieces of heavy equipment to making $10 million net profit in a year. “When I turned 50, I had accomplished all of them,” he says. “Maybe I felt like I had done everything I needed to do.”

“It was a great run.” So what now? “I have a couple of careers left in me,” Jacobs says. Under consideration: real estate, home building and design. Steve is looking at doing some estimating down the road. “Both of us right now just want to wrap this up and look back on 15 years and say it was a great run,” she says. Both Triangle and RaCON are finishing out the remaining jobs they have on the books. In RaCON’s case, Andrews’ mother Ramona, 73, and father Benton, 78, are in charge of completing a six-mile extension of the Baldwin Beach Expressway in south Alabama. “It’s a tribute to their 60-plus years of building highways that they’ll probably finish it ahead of time,” Andrews says. In 2004, Andrews started Ikaros, a bridge building company, which he’s retained. “I want to continue to bid bridge projects, simply because there are not as many people in that market.” He’d also like to consult; he’s open about sharing his experiences. “We’ve always ridden the cycles,” Andrews reflects, “but when you have three consecutive losing years, it becomes too much.”

5 If you intend for family members to run the business, how will they become shareholders? EW

FMI

Through my estate

35%

Gifting

They’ll buy shares

24%

Combination of above

52%

68%

6 Do you have a formal plan to ensure continuity of your company in the event of you or your partner’s death?

No 50% Yes 50%

No 36% Yes 64%

FMI

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued Survey: continued PART II

by Marcia Gruver Doyle

How five construction companies are passing the baton to the next generation 1. James*: “In talking stages.” James* is 65 years old, and has three sons in his excavating business. “We’re just in the talking stages now,” he says of transitioning his firm to his sons, “and I’m not quite sure how we’re going to go about it. I’m not quite ready to go; I’m still out in the field every day.” He also acknowledges it will be tricky to get his sons – aged 35, 33 and 30 – to work within an evenly split company. “They’re all under the assumption that they’ll just get the company, but it has to be sold,” he says. “Building this company didn’t happen overnight; there’s no getting off at 5 p.m. every day in this business.” One consideration is selling out completely. Native American-owned firms are making big plays in construction where he’s located, and they’ve

In the event of your death, your stock will (choose one): EW

shown an interest in his firm. “That wouldn’t be my choice, though,” he says. “I’d rather see my sons end up with it.”

2. Pam and Ken*: “Every decision has tax consequences.” Now that an agreement with her children is signed, one Colorado contractor, 66, warns the process can be painful. Pam and her husband Ken, 70, had a simple plan: just split things down the middle. But they got pushback. “Some of our children were putting in much more effort than others,” she says. “We had to step back and look at it and realize what really goes on.” So they created a 60/40 split to compensate the higher performers for their effort, plus the greater risk they were assuming. She chalks it up to a lesson

“The kids were not in favor of that, which makes sense because they are going to be the ones assuming the financial risk.”

*Names were changed due to the personal nature of this information.

26 February 2014 | EquipmentWorld.com

FMI

Pass to 81% my heirs through my estate

44%

Be redeemed by the company

31%

Be purchased directly by your partners

20%

Other

8 Do you have a formal plan to transfer management of your company in the event of your retirement or disability?

No 54% Yes 46%

No 56%

Yes 44%

FMI

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued Survey: continued learned. “Looking back, I would have sat down with each of the kids individually and asked them what they wanted and what they felt they brought to the table. It’s eye opening to make a decision, and then realize all the implications. It also became apparent she and her husband would have to stay on as guarantors until the financials were completely transferred. “It’s something you have to think about because you can’t pull the financial stability of your company,” she says. “You have to think about the financial underpinnings of a company and how they affect banking and bonding.” The transition started about a year ago, with the couple working through the company’s lawyer and accountant. Initially, Pam and Ken were going to own 30 percent of the $7 million company. However, that meant they would receive 30 percent of any dividends paid, plus be responsible for 30 percent of the taxes. “The partners were not in favor of that, which makes sense because they are going to be the ones assuming the financial risk.” Pam says. “Every decision has tax consequences.” While the official selling agreement occurred last year, Pam and Ken will be guarantors through the end of 2015. Letting go also means biting your tongue when you see something you would handle

differently, cautions Pam. “For a while, there was some resistance on their part in asking for advice, but now they ask for our opinion,” she says. “My husband really knows dirt, for example, and they’re taking advantage of it. It’s a good feeling because we want this company to succeed.” But Pam realizes there will be a loss of a certain skill set when she and Ken are no longer involved. “My husband could take a scraper apart in the evening and fix it, and our children will never have that skill. I wish we could do a brain dump of all that knowledge.” While some things are different, “we feel good that the kids are taking over,” Pam says. “The only thing that would make it better is if our grandkids eventually got in.”

“Family is family and the business is the business.”

3. Don*: “You’re not one of the guys anymore.” Don told his son he had two choices: buy company shares for less money when the market was down, or pay more when the market went back up. Son Jim opted to buy 20 percent in a down market. This is the second time Don, now 55, has been through a generation transition. When he was 38, he bought his initial shares of the family firm from his father and uncle. “We’re repeating the process we used then, because it worked quite well,” he

*Names were changed due to the personal nature of this information.

28 February 2014 | EquipmentWorld.com

9 If I were to leave the company tomorrow: EW

FMI

I have a 42% team of strong managers who could easily manage the business in my absence

47%

I have man- 33% agement that needs further development

47%

I will need to hire someone from outside my organization

25%

10 My ownership transfer plans are: EW Sell/gift to family members

41%

Uncertain at this point

33%

Liquidate

12%

Sell to both family members and employees

Sell to a third party

Sell to employees

special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued Survey: continued says. The ownership buyout was done in stages: first 20 percent, then an additional 10 percent five years later, with the remainder purchased at the end of 10 years. “The biggest thing is not having the buyer faced with too big of a debt load, because that affects how you bid projects and purchase equipment. It can really hinder a company. Plus, the outgoing partners don’t have to exit all at once.” This also allows his son Jim some flexibility down the road. “If he doesn’t want to buy the rest of the company when I retire, we have the option of taking on a partner,” Don says. Separating out family and business is critical, Don stresses. “Family is family and the business is the business.” Since he has three other children, it was important that his exit plan was fair, “and everyone was comfortable with it. My son is paying a fair market value for the company, and when there’s an inheritance, the score will be evened.” Leadership preparation started way before the buyout contract was signed. Jim knew he was 1.) expected to go to college; and 2.) start at the bottom. “He’s to the point now where he’s seeing a project all the way from bidding to superintending to the punch list. I also keep him involved in employee issues and equipment

buying,” Don says. It pays to be aware of the potential downsides. “We have something good going and want to keep it going,” Don says. “But it’s also a risky business, and one really big, really bad project can hurt you.” And as someone who’s seen such a transition from the other side, Don knows that one of the biggest adjustments for Jim is the relationships he has with employees after he moves into the owner’s office. “You have to understand that people are looking at you differently and adjust accordingly,” he says. “You’re not one of guys anymore.”

“You’ve got to get out of the way and let them do it, and let them get paid for it.”

4. Joe*: “When you get to the third generation, get a consultant.” A straightforward transaction between parent and child can appear simple when compared to several cousins who are in different stages of buying and selling, says Joe, who runs the excavating division of his family’s diversified construction firm in the Midwest. “There are about six family members who are owners, so we’ve spent a lot of time with family business planners,” he says. The firm requires any family member who’s interested in the business to go to college and then work outside the company for at least five years. “I did it, and my son is now doing it,” Joe

*Names were changed due to the personal nature of this information.

30 February 2014 | EquipmentWorld.com

11 I believe the following employees should be owners of the business (multiple answers accepted): EW

FMI

Executive personnel

45%

78%

Division managers

19%

48%

Project managers

19%

32%

Superintendents

19%

18%

Estimators

14%

21%

Others

49%

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

says, calling the outside-the-company work a “great experience. It’s good for a young person to get a taste for what working for someone else is like.” The cousins run different divisions of the company, which include aggregates, ready mix and excavating. If you don’t work at the firm or if you’re retired, you can’t be a stockholder. “By the time you’re 65, you’ve sold all your stock,” says Joe. The most important part of a transition? Communication. “We have retreats with family business consultants, where we’re not talking about business, but rather about our relationships and common goals.” He considers business consultants critical. “When you’re going from father to son,” Joe says, “it’s not bad, but when you get to the third generation, you have to have a consultant.” And transfer of ownership needs to be orderly. “One generation getting out and selling all at once is not a good retirement program because it depletes all your cash.”

1 2 3 4 5 6 7 8

There comes a time for the older generation to let go. “I see it in other companies, where the dad is still running things while the kids are in their 40s. You’ve got to get out of the way and let them do it, and let them get paid for it.”

5. John*: “Sometimes you win and sometimes you learn.” When John, now 61, was in his mid-50s, a client went bankrupt, owing him a large sum of money. “It was very stressful, my son was in college, and I started developing chest pains,” he recalls. While the diagnosis was just stress, the incident got his attention: “I finally got the idea I wasn’t going to be here forever,” he says. Knowing that his children were not interested, John eventually decided to transition his $14 million firm to three key employees. But first he had to learn some hard lessons. He initially brought in an outside successor, but ended up firing him. “Sometimes you win and sometimes you learn,” he says of the experience. John then sought professional help, turning to his attorney, who had been with him since he started Transition tips his company in 1985. He also brought in an outside Start early, at least by your mid-50s. Transitions take time, some of accounting firm to deterwhich you’ll need just to determine how you want to move forward. How do mine the company’s worth. you envision the end result? The answer may be more complicated then you “It’s a complex process,” he first thought. advises. “You really need Get input from the next generation. Sit down and have a serious talk help to structure it coror series of talks about how you will structure the deal. rectly to get the best bang Get professional help. Your attorney and accountant should definitely be for your buck, and not pay on call. Also consider a consultant who structures ownership transfers and a more taxes. And the outside third-party accountant to evaluate your net worth. accounting evaluation added Choose a captain if there will be more than one owner. Even splits credibility to what the comare difficult to manage and could set the stage for serious conflict down the pany was worth.” road. Which person among your candidates will be the most capable in makWhen he was younger, ing hard decisions? Who has the respect of your staff and crew? John had his firm buy a “just Expect snags. There’s bound to be things that don’t go smoothly, especially in case” $3 million insurance when assets, money and clients change hands. policy on himself. “Contractors our size live and die on Don’t mentally leave the business before you physically do. Make our bonding,” he explains, sure the business is in the best position before a transition or sale. “and when a principal has Your decisions will have tax ramifications, along with banking and an untimely death, it’s a bonding implications. Know what they are up front. cushion that should alleviate Emotions will be involved. Address them when they arise, and don’t give some of the bonding comthem the power to scotch what otherwise might be an excellent deal. pany concerns.”

*Names were changed due to the personal nature of this information.

32 February 2014 | EquipmentWorld.com

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

While John was lucky enough to have three strong candidates for ownership, it was difficult to pick a lead. “But I had to name a captain,” he says. “There had to be someone with a majority share to steer the ship, otherwise I could see constant battles ahead.” Of all three handpicked executives, John says: “I chose those who worked the hardest and had the fortitude to take it to the next level. I also tried to surround them with quality people.” A gradual transition has its risks, though. “If they make a big mistake, I’m still on the hook, and I could lose my retirement

income,” John says. But he argues all succession decisions are personal decisions; if you don’t want to take those risks, you might be better off selling or liquidating. His is a transition with a purpose, John says, declaring that he’s “not going anywhere” in the near future. He has several long-term employees who are not close to retirement. “For me, to just sell it would not be fair to them,” he reasons. “Plus I’ve built it and I want to make sure it gets to the next generation. And no business runs by just the leadership; you have to have a lot of good foot soldiers.”

“I chose those who worked the hardest and had the fortitude to take it to the next level.”

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

PART III

by Marcia Gruver Doyle

No second generation teed up? Selling could be your best option.

f you’re in the market to sell your business, you may be in luck, especially if you’re in a geographical or market growth area. “We see companies being more aggressive on the buy side to get positioned in markets that are showing signs of recovery,” says Chris Daum, senior managing director of industry consultant FMI. “They’ll acquire a contractor in a target market so they can gain that contractor’s knowledge, client base, project resume and skilled workforce.”

An attractive buy But first your firm has to be attractive to buy-

ers. “Just looking to get out is an unsellable position,” Daum says. “Unless you offer something special, you may be unable to sell. The odds of selling the business and walking away are very low unless you have put capable management in place and have a proven track record.” “A firm has to have value; it has to be profitable,” emphasizes Matt Stevens, president of Stevens Construction Institute. “No one wants to buy a firm in distress.” For those who are looking to sell, Daum advises you operate the business like you are going to keep it forever. “Work on your people and build your team,” he says. “The same issues that will help you grow are the same fac-

Just looking to get out is an unsellable position. Unless you offer something special, you may be unable to sell.

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

tors that will make the company attractive to a firm, Stevens says. “This will give you a credible third party buyer.” assessment of your finances and assets, and it’s One trap of sellers, says Stevens, is that peoeasy to do.” ple start leaving the business Not so easy is hardwirmentally, and while they’re ing the processes you not paying attention, the use – for example, how “People start leaving profits go down and the sale you go about planning the business mentally, a job. Systemizing your doesn’t go through. And owners are better knowledge means when and while they’re not served to start the process you leave your knowpaying attention, the early, so there is a succession how won’t go with you. process in place while you are The transaction has to profits go down and still in a leadership position. work for both the par“You have to start sooner rathties, but the number one the sale doesn’t go er than later,” Daum cautions. thing a buyer will be through.” “If you wait too long you will looking at is a seller’s have limited options.” people, Daum says. “Construction is a people-driven business. A seller has to have the leadership in place that Getting ready for the sale has strong customer relationships and the loyContractors wanting to sell need to start with alty of the workforce.” a financial audit, done by a reputable financial

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

Which is why culture plays such a critical role. “Even if the buyer and seller are two totally different types of businesses, there must be a cultural matchup,” Daum says. “There has to been an appeal in the way each company approaches their work.”

After educating himself on your company, the advisor draws up a small hit list of potential buyers, which the seller vets to eliminate any unsuitable buyers. The advisor then contacts all potential buyers, and follows up on any interest. When it comes time for face-to-face contact, everyone signs a “nondisclosure with teeth,” Stevens says. This auction process helps the seller’s price. “If you have five people looking at the business,” says Stevens, “and one guy gives you a low number, you can just pass. And it gives you a sense of reality about what your firm is worth when several are making offers.”

“A seller has to have the leadership in place that has strong customer relationships and the loyalty of the workforce.”

Create a buyer “hit list” Stevens recommends sellers consider using an auction approach facilitated by a construction business advisor. “But such an advisor has to know construction, because potential buyers will spot it right away if they don’t. The advisor has to know about your equipment, your ratios and be well versed on your company.”

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special report Stevens advises contractors to be market driven and rational. “People get so proud of what they have; if you say you’re not going to sell it for less than $10 million and it’s really worth $6 million, you end up cutting the discussion off after the first meeting. But if both parties want the deal to happen, they’ll figure out a way to make it happen.” The deal needs to happen quickly – within 90 days, Stevens says. “A lot of things can happen in the interim: a key employee leaves, someone gets divorced, or some crazy economic event, all of which could affect the deal.” No one can know about the pending deal unless they are shareholders.

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If you’re the buyer… Buyers have to be careful, and proceed with a well-formed strategy. “If the company being bought is broke or broken,” Daum says, “it could be an opportunistic situation or it could be your worst nightmare, potentially putting your own company at risk. Unless you know the situation very well, or the market or people in that company, you need to be extremely careful.” One trend that may impact the buying-selling process is the increasing pressure on regional contractors, one of six key trends FMI noted in its 2014 U.S. Markets Construction Overview. “The market has gone

THE FUTURE OF YOUR CONSTRUCTION COMPANY continued to both sides of the barbell,” Daum says, with small, nimble contractors on one end who are able to serve local niche markets. At the other end are the huge builders that can bring a large project resume and specialized team into the market. “I know of one contractor who couldn’t stay put doing $40 million wastewater treatment jobs after the bigger firms started chasing those projects,” Daum relates. “He was faced with selling out or shrinking his company.” Stevens, however, feels that highway contractors are well positioned in the seller’s market: they have the equipment expertise, the contracting methodology and the skilled employees. “Heavy highway contractors are more process and en-

gineering oriented,” he says, “so you can take a group of people and get them into a process that works. And the fixed assets will be there regardless if some of the employees leave.” But realize the market is limited: “Loosely speaking, there are probably around 1,000 viable firms that can or want to buy a $5 to $10 million highway contractor. It’s a very small, specific audience.” When you explore all options, Daum says, one pathway becomes evident. “We like to approach things in a holistic way, looking at all the options: selling it to the kids or to management, selling it to outsiders, or even winding the business down and liquidating.”

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EquipmentWorld.com | February 2014 43

special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued PART IV

by Amy Materson

Choosing who you sell to and when.

tever Robbins, executive coach with The most viable options come down to a choice between selling to employees and sellStever Robbins Incorporated, says ing to an outside party. Whatever the path the assuming you’ll pass your business seller takes, the key is longalong to your chilterm early planning, says dren carries risk. “A lot of people Gregory R. Caruso, Esq, CPA, “The biggest problem is that a lot of kids simply don’t want CVA, a partner with Harvest in ’07 and ’08 to go into the family business,” Advisors in Columthought they’d be Business bia, Maryland. Caruso’s firm he says. “When the media performs business valuations, focuses on 28-year-old tech out of the busibusiness brokerage and sucmillionaires, you don’t often ness by ’10 or ’11. cession transaction consulting hear about people doing the for contractors, subcontractors, real work. If you count on your They’re still in.” suppliers and engineers. kids and then they’re not inter“Most of our clients approach us because they ested, you’re left with no options.” want to sell and retire quickly,” Caruso says. Whatever the situation, it puts the contractor “Over the past 18 months, many sellers who in the position of having to form an alternative are ready to go at our first meeting are not so exit strategy.

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

ready to go when they learn their real market value. Many are waiting and attempting to improve profitability and value over the next year or two.” Thinking you’re going to put your business up for sale today and then being on the golf course in a year or so will only work if your business is profitable today. Equally important, you’ll have difficulty selling a business that’s “all you.” If a great deal of your business is kept in and run from your head, then you need to put systems in place that ensure what you’re selling will stay in place after the deal closes. Some contractors don’t realize until they’re ready to sell that they may not have a great deal of transferable value. The current economy has also pushed exit plans aside as contractors attempt to boost profits and build their

company’s value prior to selling, hoping to get the highest price possible. Caruso says a number of his clients who are ready to retire are now looking at next year and two years after. “A lot of people in ’07 and ’08 thought they’d be out of the business by ’10 or ’11,” he says. “They’re still in.” One problem company owners may have when they’re trying to sell is the tendency to overvalue their own business, Robbins says, and he recommends talking to a business broker who knows and understands how acquirers value businesses. “However, don’t just follow their advice willy-nilly,” he says. “And if you can broker your own deal, that’s great, but if not, you should use an expert.” For contractors who are unable to or don’t wish to transfer ownership to a family member, selling the company to key managers is often a preferred course. In today’s economic climate, though, even longtime employees may not have the net worth needed to buy the company, and they often are unable to get the needed loans and bonds. You only have a management buyout option, though, if you have the right personnel in place. You should have a manager on board five years before your planned exit date who is the right age, with the right attitude and net worth. If your top guy is near your own age, he may not be interested in taking on your business.

“Thinking you’re going to put your business up for sale today and then being on the golf course in a year or so will only work if your business is profitable today. Equally important, you’ll have difficulty selling a business that’s ‘all you’.”

Lifestyle company If you’re a sole proprietor with no investors to consider, Robbins has an unorthodox approach that works for forward-thinking business owners – one he calls “Just Take It.” The strategy is to remain small and run the firm as a “lifestyle company.”

46 February 2014 | EquipmentWorld.com

FOUR OF A KIND: THE WIRTGEN GROUP

Wirtgen Group, the technology leader in road construction and mineral processing with the market leading brands Wirtgen, Vögele, Hamm and Kleemann. Four brands – One technology leader. Experience it at CONEXPO 2014.

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

give you the freedom to draw out the cash you Avoiding investing large profits back into need while allowing you to avoid developing a your business will allow you to pay yourself a complex exit strategy. large salary and bonuses – not only paying for If you have partners, or your your lifestyle now, but also company has a complex strucenabling you to take enough “You should have a ture, then you’ll need to have money out of the company to a strategy in place. The key is finance your future. This apmanager on board planning, and planning early. proach works best for those five years before Robbins says sometimes the who love doing the work and way you form your business do not like the hassle and your planned exit affects the exit strategy. “If overhead of running a big your company is large with a business. date who is the certain type of structure, your Robbins cautions that this right age, with the options may be limited,” he strategy is not for everyone. says. “Looking at your options “It’s important not to put yourright attitude and as early as possible doesn’t self in a situation where you net worth.” mean you have to take actake too much money out of tion immediately – it just may the company, or you reduce inform your decision-making process.” your staff to the point that if you get sick, For example, Robbins says if you’d like to your income totally stops,” he says. However, have your company acquired by a larger firm, if you’re a small contractor, this strategy could

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

give thought to how you’ll be building a credible portfolio. Your company needs to be a suitable fit for the potential new owner. If your business performs the same scope of work as the company you’d like to be acquired by, you’ll be more attractive to them. If your range of work differs, you must be able to make a convincing case for their company to expand. Do the research beforehand and find out what will make them want your company as a division of theirs. Doing the research and looking at your business years before you’re ready to exit the industry will serve as an alignment for your firm – Caruso recommends knowing 10

years out when you’ll be interested in leaving. If you want your managers to buy you out, sit down with them now to gauge their intentions, and come up with a longterm plan, say 10 percent per year over 10 years. Many contractors who do exit the industry sell their company over time. Harvest Business Advisors has seen success with selling small portions of a construction company over many years. In return, the owner retains the right to sell the company if a cash buyer comes along. The employees agree to stay with the new owner for a specified period of time. This plan creates an employee buyout option and locks in the employees. Although

“If you begin to discuss your future plans at your annual meeting, everyone will be aware of your plans, and it won’t be as traumatic as a sudden announcement.”

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Griffin Pump & Equipment, Inc. will have its experts in industryleading customized dewatering & pumping technologies available at CONEXPO-CON/AGG 2014 for questions and discussion in booth #40604 in the Central Hall and in booth #5168 in the Silver Lot. Las Vegas • March 4-8, 2014 Griffin Pump & Equipment, Inc. 5306 Clinton Drive • Houston, TX 77020 Call: (713) 671-7000 or Toll Free: (866) 770-8100 Email: gpe@griffinpump.com Web: www.griffinpump.com Text INFO to 205-289-3715 or visit www.eqwinfo.com

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special report | THE FUTURE OF YOUR CONSTRUCTION COMPANY continued

you give some equity away, you create higher value for your company, which results in a higher profit. This is a solution that could not happen without substantial planning, which is one of the most common mistakes Caruso says he sees. “Owners do nothing and think they are keeping their options open. The number of 70-year-old contractors who think it is a secret that they are going to sell or close shop in the next 10 years is astounding.” If you begin to discuss your future plans at your annual meeting, everyone will be aware of your plans, and it won’t be as traumatic as a sudden announcement. You may even be able to position it as new opportunities for your

employees. “We recently sold an engineering firm where the key manager was a very good salesperson,” Caruso says. “He was excited to get to sell additional products and services that the bigger buyer had. His sales skills were also a huge contributor to the value of the seller, and it was a win-win based on frank, factual conversations.” Another benefit of longterm planning is that it serves as an alignment, helping you understand the steps you must take. You’ll know what creates value. Not only will you know what will put your business in the best financial shape possible for a sale, you’ll avoid the longterm implications of any mistakes you might make without a planning process. EW

“The number of 70-year-old contractors who think it is a secret that they are going to sell or close shop in the next 10 years is astounding.”

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regulations | by Wayne Grayson

| WayneGrayson@randallreilly.com

THE

REGULATORY REGIME Four new federal rules that will affect your company

onstruction has always been a highly regulated industry. In a recent survey of Equipment World readers (see page 60), 72 percent said increased regulations had caused them to quit doing certain jobs. Another 72 percent said it had caused them to increase the number of hours devoted to fulfilling requirements. But in the past few years the number and scope of

regulations has increased dramatically. To run a successful business, you have to stay abreast of these. Here is a rundown of the top four new federal regulations and what you need to know about them. (And be sure to check out our review of the new service truck crane rules in the June 2013 cover story plus a look at the latest from the California Air Resources Board in the November 2013 issue, page 37. Both are available at www.equipmentworld.com)

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regulations | continued 1 Healthcare On March 23, 2010 President Barack Obama signed the Affordable Care Act into law. Small businesses are not required to offer health care coverage to employees under the law. That means construction businesses with less than 50 full-time employees, those who work an average of 30 hours per week, won’t have to worry about beginning to offer coverage or penalties. And, the small companies that do want to offer coverage qualify for tax credits under the law. Those companies with less than 25 full-time employees who pay an average annual wage of $50,000 per employee and cover at least 50 percent of the premium health care costs for an employee, are eligible for up to 50 percent of those premium payments. Because the law’s individual mandate requires all U.S. citizens

to purchase health insurance, large construction companies offering employer-sponsored coverage that is “affordable” under the law could see an increase in participation levels. For a company with even a dozen or so employees who begin an employer-sponsored plan, it may mean a huge and sudden additional cost. That means that companies that

have been paying all or most of the premium costs for their employees’ health insurance will be better off. If the coverage was affordable in the first place, there likely won’t be too much of a spike in employee participation at these companies. Plus, these large companies – those with more than 50 full-time employees – won’t face penalties under the ACA for offering coverage that is too expensive for its employees. Beginning January 1, 2015, large companies with employees who are granted government subsidies to afford employer-sponsored coverage will face penalties. What is considered “affordable” coverage under the law? Employers must pay for at least 60 percent of covered health care expenses. Plus its employees should be able to afford the coverage without paying more than 9.5 percent of their family income before deductions

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and adjustments. Unfortunately, there is not yet a recommended way for companies to calculate “family income” per employee. In terms of the penalties large companies will face, those that choose to offer no coverage to employees must pay $2,000 per year, per full-time employee minus 30. So, if you employ 100 full-time workers, subtract 30 and then multiply that number by $2,000 to calculate the penalty. For those that do offer coverage that is deemed “unaffordable,” the company will be penalized $3,000 for each employee who is granted a subsidy and would be required to pay more than 9.5 percent of their income for coverage.

2 Immigration Most agree that before the end of this year we’ll see some form of

immigration reform. And one of the industries that will see the biggest impact from any such legislation is construction. In June 2013, the Senate passed an immigration bill that would give 11.5 million immigrants living in the United States illegally a chance at

citizenship. The bill was passed with bi-partisan support and includes a new guest worker program called the “W-Visa” that would make a maximum of 200,000 visas available each year. Construction trade groups including the Associated General Contractors of America, Associated Builders and Contractors and the National Association of Home Builders spoke out in a joint statement against the program because it limits the construction industry to no more than 15,000 of those visas per year. There is worry that the low number of visas for the industry could simply encourage ongoing illegal immigration. The joint statement says the legislation is “destined to fail” due to its low cap. “For these reforms to be successful, we believe the cap on visas should be determined by labor

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regulations | continued market demand, the only measure that truly reflects the needs of the economy and our industry.” Democrats have stated their confidence that the Senate-backed bill would pass if Republican House speaker John Boehner would bring it to a vote in the House. That has yet to happen and in January Boehner announced that he and his team were preparing a “standards or principles document” as an outline of what Republicans want out of the legislation, according to a report from The New York Times. In the meantime, the Washington Post reported that officials from Associated General Contractors of America planned to visit with “key GOP members” to stress the importance of upping the visa limit. In terms of how immigration reform could impact construction, Stan Marek, the CEO of Houstonbased Marek Construction, argues

58 February 2014 | EquipmentWorld.com

that it’s necessary step to ending the industry’s struggle with a skilled worker shortage. In a blog post to the company’s website, Marek cites a University of Texas study that says 50 percent of all construction workers in the United States are undocumented – Marek contends that number is low. He explains that because undocumented employees that are discovered by the federal government are not deported, many companies in the construction industry take advantage of them. “The new norm in our industry is to avoid the risk of I-9 audits and limit hourly payrolls that require documentation by hiring a subcontractor or labor broker who supposedly pays the men and follows the laws. This does not happen in the majority of cases, but it’s rarely caught because auditors investigate payrolls instead of payables, which is where the brokers hide their crews.” Pushing responsibility “down the line” in this way “discourages young men and women who could be learning a trade in lieu of college from even considering construction as an option,” Marek writes. “It also discourages construction companies from investing in recruiting, training, and the development of career paths for future workers.”

3 OSHA silica regulations In August 2013, OSHA announced plans to update a 40-year-old rule with the goal of lowering worker exposure to crystalline silica. Exposure to the substance, composed of small particles about 100 times smaller than grains of sand, kills hundreds of workers each year and sickens thousands more. Exposure can cause the condition silicosis which David Michaels, the assistant secretary of labor for occupational safety and health calls “an incurable and progressive disease.” Workers involved in the cutting, sawing, drilling and crushing of concrete, brick, block and other stone products are exposed to the dust. Exposure can cause the condition silicosis, an inflammation and scarring of the lungs, as well as lung cancer, chronic obstructive pulmonary disease and kidney dis-

ease. The agency says the updated rules could save 700 lives each year. According to a document released by Associated General Contractors of America, the proposed rule creates a new uniform permissible exposure limit (PEL) of 50 micrograms of breathable crystalline silica per cubic meter of air in all applicable industries. The proposed rule also creates an action level; should a sample return a reading at or above that action level, employers would be required to conduct addi-

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regulations | continued tional assessments at least every six months until conditions fall below the action level for two consecutive monitoring assessments taken at least seven days apart. OSHA has requested comment from the public on whether an action level is appropriate for inclusion in the final rule. Rather than change the rule, AGC contends that OSHA should seek to achieve better compliance with the current PEL of 100 micrograms per cubic meter of air. The association argues that because silica is so abundant and “is perhaps the most common construction and manufacturing material in the world,” the cost of cutting the current PEL in half would be extremely costly. “A recent analysis of the anticipated OSHA proposal would impose $5.5 billion in annualized compliance costs on affected industries, and result in the loss of 17,000 personyears of employment and $3.1 billion of economic output every year the proposed regulation is in effect,” according to AGC talking points. At requests from the public, both the comment period and deadline to submit notices of intention to appear at the informal public hearings were extended through the middle

of December 2013. The hearings themselves are scheduled to begin on March 18, 2014 and are expected to continue for several weeks.

4 CSA The Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability (CSA) program began in 2010, and focused on large trucking carriers. Now it’s taking aim at smaller truck-owning entities including construction firms. Any vehicle weighing more than 10,000 pounds – including what you’re towing – that crosses state lines is regulated under the CSA program. And even if your construction company only has “casual truck drivers,” as Jeff Davis of Fleet Safety Services calls them, they too are required to comply with CSA rules. FMSCA calculates scores in seven areas: unsafe driving; hours of service; driver fitness; controlled substances/ alcohol; vehicle maintenance; hazardous materials and crash indicator. These scores are then compared with Regulations

similar carriers or companies and ranked from 1 to 100; the higher the score, the worse the ranking. Individually, drivers also receive severity weight points ranging from one (least severe) to 10 (most severe), points that contribute to a company’s rating and show up on the driver’s personal safety performance. Davis says the best things for contractors to do are to make sure their drivers obey the speed limit (speeding violations lead to CSA inspections) and to reduce the number of observable defects on your trucks. EW

effects

In a recent Equipment World reader survey, 79 percent of contractors and upper management at construction companies say increased government regulations have affected their business. How have increased government regulations affected your business? Increased the number of labor hours devoted to fulfilling requirements.............................71.9% Caused us to quit doing certain jobs.........................71.9% Caused us to change our business practices.............65.2% Caused us to quit operating in certain areas............ 46.7% Caused us to change our truck fleet......................... 39.3% Caused us to change our equipment fleet................26.7% Percentages indicate those who reported an impact 60 February 2014 | EquipmentWorld.com

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maintenance | by Tom Jackson TJackson@randallreilly.com

Understanding the relationship between lube oil, coolants and biodiesel Fluid analysis master class

eeing traces of coolant or fuel dilution in a lube oil analysis doesn’t necessarily mean what it did 10 years ago. There’s no doubt that Tier 4 Interim and Final diesel emissions technology has drastically cut the pollution going out the exhaust stacks of heavy equipment. Same holds true for diesel truck engines manufactured since 2007. But this new engine technology, along with biodiesel, has brought new complexity to the art and science of engine fluid analysis. Today, to understand what’s going on with your engines you have to know how all these new elements work and how they corre-

late to one another says Dave Tingey, field services engineer for Polaris Laboratories. “It’s like a three-legged stool. They all have an effect on the equipment.” Of particular interest, he says, are how coolant leaks via EGR (exhaust gas recirculation) can impact lube oil quality and how biodiesel can throw of tests for fuel dilution. The interrelation of these elements makes fluid analysis more important and more useful than ever. EquipmentWorld.com | February 2014 63

maintenance | continued A good fluid sampling and analysis program can help you head off engine problems. And with a little extra effort you can use the results of your fluid analysis as a diagnostic tool for preventive maintenance.

EGRs to consider Virtually all emissions compliant engines today include an EGR circuit that takes exhaust gas and pumps it back into the cylinders to reduce emissions of NOx. This gas must also be cooled and this is typically done in an EGR cooler that uses the same coolant as the engine. “The biggest issue we’ve seen in the past couple of years, one that’s really come to a head, is the coolant,” Tingey says. In the past, if oil analysis showed traces of sodium or po-

“

tassium salts (from the coolant) in the lube oil it might indicate a leaking head gasket, cavitation on the cylinder liners or a damaged oil cooler. That still can be the case but with EGR you have a potential new source of coolant leaks. “If your coolant isn’t maintained you could have coolant additive fallout,” Tingey says. “Those have a tendency to clog passages in the

The coolant samples Polaris receives are also showing that communication about coolant changes in the shop are not always ideal, Tingey says. Many fleets are switching to extended life coolants, which provide better protection and last much longer. But in some samples they’re seeing it’s obvious that the shop has switched to ELCs but is still using SCA type filters, which add the old style additives back into the coolant. “We recommend that twice a year, or a minimum of once a year, you do an advanced coolant test,” says Tingey. “These can help you determine if problems are a chemistry issue or mechanical issues. By monitoring coolant condition you can see more and identify whether you have a lot of degradation acids happening. That’s an indicator that your coolant is not doing what it is supposed to. A lot of times we will have recommendations in the comments section to do further diagnostics. And a lot of times people will call us.” In one transportation fleet, Polaris identified coolant leaks at a severity level of 3 to 4 in 6 percent of the samples submitted. Catching coolant leaks earlier, at severity levels of 1 or 2 can prevent premature failure, according to Polaris. Fixing the problem at severity levels 1 and 2 may only mean replacing a leaking oil cooler, head gasket or EGR valve. But if the leaks are allowed to progress the coolant can attack soft metals such as copper and lead in the main and rod bearings.

We recommend that twice a year, minimum once a year, you do an advanced coolant test

64 February 2014 | EquipmentWorld.com

”

cooler, which in turn don’t provide the correct amount of heat transfer or heat rejection. You can get hot spots which could lead to thermal stress on the joints of the cooler or cracks in the material that let coolant back into the exhaust gas where it goes through the combustion process.” You’ll also see combustion byproducts in your coolant samples. “Manufacturers have been addressing this by making the EGR coolers longer and bigger, but we still see an increase in coolant contamination in diesel engines,” Tingey says.

Biodiesel and fuel dilution A small amount of unburned fuel normally gets past the rings in a piston and enters the lube oil even on a healthy engine. The fuel will dilute the lube oil resulting in a loss of lubricity and a lowering of viscosity. Fuel contamination of the lube oil can also degrade anti-wear additives. Polaris says more than 14 percent of the engine samples it tested in 2010 showed fuel dilution levels high enough to flag. Biodiesel attracts and holds water more than straight diesel and water can mask some of these problems. As a result, many labs are shifting to a gas chromatography test for fuel dilution, Tingey says, to get an accurate picture of fuel dilution. Biodiesel can also attract oil additives leaving less of these available to protect the engine. Many municipal and government fleets are required to use biodiesel, and in some parts of the country regulations allow refiners to mix up to 5 percent biodiesel without labeling it as such. So you may be burning biodiesel and not know it. When oil analysis shows fuel dilution reaching its limits, you change the oil and the problem is solved – temporarily. “Eightyfive percent of the people will change the oil and think they’ve fixed the problem, but it really doesn’t,” Tingey says. If the fuel dilution problem repeatedly tests out of range you can use this information to diagnose potential problems. In addition to coolant contamination, fuel dilution may also signal that the rings are worn or the fuel injectors may not be functioning properly. Analyze before you buy Fluid analysis is useful in spotting trends in the equipment you own. But it can also be valuable

to take a one-time snapshot analysis of the fluids on any machine you are considering for purchase, says Tingey. A seller can change the oil before selling a machine, which could mask problems, but they’re much less likely to change the

coolant, Tingey says. If the coolant is in any way degraded and shows a possible combustion gas leak or something similar you know you may have an issue. That tells you if the engine is capable of maintaining its correct operating temperature. EW

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CONGRATULATIONS to the 2013 Contractor of the Year winner and finalists IN

Scott Kelly Enterprise Trenchless Technologies, Inc. Lisbon Falls, ME

Richard Gordon Baystate Engineering Holliston, MA

Michael, Ellis and Albert Brown Brown Brothers Construction Loa, UT

Gene Lowder Charles D. Lowder, Inc. Winston-Salem, NC

Chris Fink Dale’s Paving Bossier City, LA

Danny Williams Dan’s Marine Service Grafton, WV

Thomas Jr., Greg and Daniel Giangiulio Glendale Excavating Voorhees, NJ

Ken and Melissa Lester Lester Contracting Port Lavaca, TX

Gale Nitteberg Nitteberg Construction Estelline, SD

Stuart Caudill R.L. Caudill Construction Owingsville, KY

Jesse and Paul Steger Steger Construction Dyersville, IA

Michael Thibault T-Bone Construction Colorado Springs, CO

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contractor of the year finalist | by Marcia Gruver Doyle | MGruver@randallreilly.com

Tommy, Dany and Greg Giangiulio Voorhees, New Jersey

Glendale Excavating Year started: 1984 Number of employees: 15 to 20 Annual revenues: $3 to $5 million Markets served: Commercial and industrial site development, roadways and utilities

lendale Excavating’s three brothers – Tommy, Dany and Greg Giangiulio – take pride in their construction heritage. “We’re third generation operating engineers,” says Dany. “We watched our grandfather operate equipment

Tommy, Greg and Dany Giangiulio.

Run by three brothers with a long construction heritage, Glendale Excavating excels at “getting it done.” when we were kids, and begged to go to work with our father.” Adds Greg with a laugh: “It’s not that we had any choice in the matter.” Glendale Excavating began in 1984, taking its name from the Glendale section of the town of Voorhees, New Jersey, just over the Delaware River from Philadelphia.

The brothers now concentrate on site development, utility and bulk earthmoving in South Jersey. Like most contractors, Dany remembers the company’s first machine, a backhoe with more bells and whistles than most first machines, including an enclosed cab and extendahoe. At the start, it was EquipmentWorld.com | February 2014 67

contractor of the year finalist | continued Glendale began onsite crushing in 1994 on a job in Atlantic City, and has remained a proponent. “You keep the material onsite and it saves from hauling old material out and running new material back in,” Dany Giangiulio says.

just Tommy, and Dany. The two offered their services – and their machine – on a rental basis to other contractors. “That made us enough money to buy a D3, then we added a Cat 941 track loader,” Dany says. By 1986, the brothers had added a D6, excavator, scraper and lowbed.

“Running, running, running” Although their father, Thomas Sr., had one foot in his day job – directing operating engineers on several large projects – and another in helping out his sons, the brothers eventually convinced him to come on board full time. “He took over the office, operations and maintenance,” Dany says. In the mid-80s, the work was plentiful and Dany and Tommy were “running, run68 February 2014 | EquipmentWorld.com

ning, running,” Dany says, doing site development in a number of markets. (Greg, the youngest, joined them later.) The company has gone through some survival scares and readjustments. “Dad took care of the business end, and we really suffered when he retired after falling ill,” Tommy says. “We had to learn about things like billing and insurance.” They eventually brought in Carmen Lavergetta to handle the business side. “He’s dealing with banks, bonding companies and accountants, giving us the ability to stay out in the field and do what we do best,” Tommy says. The firm does a 50/50 mix of low bid/negotiated work. A ride in a pickup around the community

quickly becomes a resume of past jobs. There’s the addition in 1992 that more than doubled the size of the high school, and the area’s first $1 million site package for a shopping center. Currently, the company is doing site development on the Evesham Recreational Center, which at one point involved importing 60,000 cubic yards of material.

“Not afraid to do anything.” While Greg handles the office, Tommy takes the early shift, and Dany takes the late shift. “It kind of fell into a grove,” Tommy says.” By 4 p.m., I’m usually punched out.” Tommy was glad when Greg moved from the field to the office to take over estimating. “With a family member, it’s not only their

job, it’s their livelihood and their family. You have a whole different approach to it,” Tommy says. “We’re not afraid to do anything,” Tommy says of the 29-year-old company that averages 15 to 20 employees. “I honestly look at things from the perspective if you can take it apart, it’s a mechanical thing. It can be built. There’s no reason you can’t do it.” “They simply get it done,” says client Raymond Herman, president, Herman/Stewart Construction. “They take it very seriously, and they know how to execute soup to nuts. If any issue will reflect on the success of a job, Tommy will be dogged about it. There’s a lot of value added with Glendale.”

Lean operation “If you can’t make a couple bucks on a job, you’ve got to walk away, because we’re done practicing,” Dany says. So Glendale keeps their operation lean. Their earthmoving fleet is paid for; “we’re not in the position where we have to get work just to pay for the equipment,” Dany explains. “Small repairs out in the field are

Company mechanic Mike Gonnelli (right, shown with Dany Giangiulio) started working on equipment in high school. “He doesn’t play around,” Tommy Giangiulio says. “He sees something out of line, and he stays ahead of it.” what I cut my teeth on,” Tommy says. “My father believed just because a machine broke down doesn’t mean you’re going to take it back to the shop every time to fix it. We have very few breakdowns that take us longer than two hours to fix.” The brothers have an obvious respect for their mechanic, Mike Gonnelli, whom they say has an intuitive ability to fix machines. Mike is also a person who has things

Using a picture from Ransome Cat, Glendale hired an airbrush artist to give their mechanics truck a distinctive touch. Thomas Sr., father of the present owners, specified the truck, which has a 55-gallon waste oil storage tank.

nailed down in the shop, Tommy says. “For instance, if you come in there and start messing with the filters, you learn quickly that you don’t move stuff around. He’s got it set up so he can glance across the room and see if he needs a to order a filter.” This meticulousness is even remarked on outside of the firm. “Mike makes sure the equipment is repainted every two years,” says vendor Michael Forte with MJF Materials. “It looks impeccable.” While the company’s office is in Vorhees, the firm’s equipment shop and yard is located on Tommy’s farm about 20 minutes away. “During our first 10 years, we were literally working outside on our equipment,” Tommy says. The company used telephone poles scavenged from jobs to build a 65-by-70-foot shop lean-to, where they park trucks and equipment. “It was just a way to get stuff out of the weather,” Dany says. “The guys come in and they don’t have to scrape frost off the windshield.” “Our ability to work hard has kept us in the game,” Tommy says. “We were taught you just don’t let up.” His advice to those just starting in construction? “What you lack in experience, you have to make up with desire. That’s the way this business has always been.” EW EquipmentWorld.com | February 2014 69

Text INFO to 205-289-3715 or visit www.eqwinfo.com

trucks | by Jack Roberts JRoberts@randallreilly.com

A new way to play the

natural gas game?

A road test and firsthand experience with natural gas retrofit fuel systems and glider kits reveal interesting possibilities for cost-minded contractors

he first part of my test drive began westbound on Interstate 80 out of Salt Lake City, on the level desert run that leads to the Bonneville Salt Flats. The goal then had been to find flat ground and a little traffic to give me a feel for the truck. But now, weâ&#x20AC;&#x2122;d doubled back and were climbing the Wasatch

The Series 60 Detroit Diesel engine was refurbished and retrofitted with a bi-fuel natural gas kit from APG and Wheel Time before being dropped in a Freightliner Columbia glider. EquipmentWorld.com | February 2014 71

trucks | continued

The 2014 Freightliner Columbia daycab was a glider kit fitted with a refurbished diesel engine that itself was retrofitted with an American Power Group natural gas fuel system.

Mountains east of the city on I-215 leading to I-80 East toward Park City. Here, I’d get a chance to pull some serious mountain grades and see for myself if a dual-fuel diesel-ignited natural gas truck engine was up to hauling 44,000 pounds in demanding terrain. Starting up the first grade, the road suddenly began a series of winding S-turns at the same time that construction took a couple of lane options off the table. The truck was pulling well, but I grabbed another gear just to be on the safe side. It was the most remarkable thing that occurred during my test drive. That’s not a slam against the Freightliner Columbia I was driving, but rather a vindication that this rig – a glider kit fitted with a refurbished diesel engine that itself was retrofitted with an American Power Group natural gas fuel system – had performed exactly as 72 February 2014 | EquipmentWorld.com

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trucks | continued the folks at APG, the Wheel Time Group and Smith Power, the manufacturer of the truck, had assured me it would.

– and enjoy more reliable power and serviceability in the bargain. My test rig was a 2014 Freightliner Columbia daycab truck. On

What lies beneath? Glider kit builders, sales and support provider Wheel Time, natural gas supplier Blu and APG have teamed to introduce natural gas glider kits to the North American trucking industry. Contractors wishing to find an affordable way to get into the natural gas game can spec glider kits with retrofit fuel systems and save as much as $40,000 on the vehicle compared to purchasing a new, dedicated natural gas truck. A further enticement is that you can spec older pre-exhaust gas recirculation emissions engines to power these trucks

the outside, even seasoned industry veterans would be unable to tell that this truck was anything other than a new Columbia. Climbing into the cab, that reac-

tion was further reinforced: The interior still had a factory-fresh smell with modern instrumentation and gauges, mirrors and ergonomics. Because the truck had been spec’d as a regional-haul daycab, its interior appointments were basic. But if a contractor wanted to upgrade the interior with the latest Daimler diagnostic and telematics systems, it wouldn’t be a problem. It was underneath the hood and cab where the real differences this tractor offered could be found. Pulling the hood forward didn’t reveal the new selective catalytic reduction-equipped DD12 one would expect to see. Instead, I was greeted with a concrete-gray 1996-vintage Series 60 Detroit Diesel engine, complete with vibrant

Fleets wishing to find an affordable way to get into the natural gas game can spec glider kits with retrofit fuel systems and save as much as $40,000 on the vehicle

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blood-red lettering scripted across the engine block. Glider kits take advantage of a quirky loophole in truck manufacturing laws that allow fleets to purchase a truck with a new cab and chassis, fitted with a recycled or refurbished drivetrain. The additional twist – thrown into the mix by APG, Wheel Time and their partners – is that their rebuilt powertrains receive the further addition of a natural gas fuel and tank system. The system manages the flow of the two fuels to the engine, using diesel both as the ignition source in the combustion chamber and as a power boost in situations demanding higher torque from the engine. So when the truck is just getting rolling or climbing a steep mountain grade, the system supplies larger amounts of diesel to the engine – up to 50 percent of the fuel supplied, depending on road and terrain conditions – and then dials that ratio back as engine load demands decrease. So on my flat run heading west, the engine was using a minimum of diesel – only a little shot to initiate combustion – while the cheaper natural gas kept the wheels turning. Later in the mountains, the system delivered a significantly higher percentage of diesel to the combustion mix to make sure I had plenty of power to deal with the hilly terrain. On the road, the truck handles and drives exactly as one expects: it is, after all, a new truck. The only indications that something unusual is happening are an electronic fuel system monitor on the dash – which shows the driver the diesel-to-natural gas fuel ratio – and the noise level in the cab. Although the truck is new, it has a 20-year-old engine under the hood that – despite the technological upgrades it has received in its current incarnation – is louder than new ones that come out of factories

today, so some more pronounced drivetrain noise is to be expected. Most importantly is the performance of the fuel system in actual driving conditions, which was why my Salt Lake hosts were so eager for me to drive the truck in the nearby mountains. The dualfuel system delivered in spades;

the glider kit pulled as well as any truck on the highway. The truck was loaded with about 44,000 pounds in the box and had no problem dealing with any grades – up to 6 in percent in some areas. This is clearly a system that works on the driver’s behalf to get the job done. EW

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in EquipmentWorld.com | February 2014 75

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quick data | by Marcia Gruver Doyle MGruver@randallreilly.com

Excavators Auctions $ 525,000 OtHER tOp BIDS

A snapshot of new and used sales trends from Randall-Reillyâ&#x20AC;&#x2122;s Equipment Data Associates and TopBid auction price service.

Top auction price, paid for 2011 Cat 374D L sold on Oct. 23, by Ritchie Bros. Auctioneers International in Chehalis, Washington.

top financed used excavator* Cat 320D L, 285 units

$470,000, 2009 374D L, Ritchie Bros., Oct. 3, in Chicago, Illinois. $312,500, 2012 John Deere 470G LC, Ritchie Bros., Nov. 20 in Houston, Texas.

Final Bids

*Jan. 1-Nov. 30, 2013, Source: EDA, edadata.com (Note: EDA reports are continually updated.)

00 0 , 5 $52

AVERAGE

0 0 5 , $37

HIGH

*Jan.-Dec. 2013; prices for full-size excavators 5 years old and newer, U.S. sales only. Only includes bids $5,000 and above. Source: TopBid, topbid.com

LOW

unit count: 284*

Auction prices, 2009-2013 110,000

90,000

16 2 , 9 $13

Recent: Dec. 2013

86,534

top three buyers of excavators, YtD*

Wisconsin water sewer pipeline contractor, 126 units total, all new, mix of Cat and Deere 36- to 50-metric-ton units.

Another Wisconsin water sewer pipeline contractor, 121 units total, mix of new and used, Cat, Deere and Komatsu 13- to 50-metric-ton units.

Texas utility contractor, 69 units total, mix of new and used, Cat, Komatsu and Volvo 20- to 40-metric-ton units.

Low: Oct. 2009

100,000

73,492

80,000

High: Aug. 2011

70,000 60,000

102,848

top financed excavator brands*

50,000 Trend prices for the top 10 models of full-size excavators sold at auction, not seasonally adjusted.

40,000 30,000

2009

2010

2011

2012

Used high: 2005,

Dec.

Sep.

Jul.

New

Used

Used low: 2009,

20,354 units

14,344 units

Caterpillar, 6,342 units, 34.3% of total market

Komatsu, 3,590 units, 19.4% of total market

Deere, 3,205 units, 17.4% of total market

*Jan.1 - Nov. 30, 2013, includes both new and used financed sales (Note: EDA reports are continually updated.) Source: EDA, edadata.com

New, used excavators year-over-year unit growth*

New low: 2010,

2,455 units

New high 2006,

Caterpillar remained the dominant player in the full-size excavator market for financed new and used units. Looking at just new units, market shares for the top three brands were slightly higher, with Cat at 34.8%, Komatsu at 21.6% and Deere at 19.1%.

2013

Excavators, 10-year buying patterns* 25,000 22,500 20,000 17,500 15,000 12,500 10,000 7,500 5,000 0

May

Mar.

Jan.

Nov.

Sep.

Jul.

May

Mar.

Jan.

Nov.

Sep.

Aug.

May

Mar.

Jan.

Nov.

Sep.

Jul.

May

Mar.

Jan.

Oct.

Sep.

Jul.

May

Mar.

Jan.

*Financed equipment, 2004-2013. Source: EDA, edadata.com

66 February 2014 | EquipmentWorld.com

2013

2012

2011

2010

2009

2008

NEW Up 23% 2007

2006

2005

16,576 units

2004

Number of units

top financed new excavator* Cat 336E L, 652 units

USED Up 7%

New

*Comparison of Jan. 1 - Nov. 30 period, 2012 and 2013, number of units sold. Source: EDA, edadata.com

pro pickup | by Bruce W. Smith

SURVEYOR 1 Sweepstakes Build PART V Editor’s note: This is the fifth in a series of articles on the outfitting of the Surveyor 1 sweepstakes truck. For previous articles in this series, go to hardworkingtrucks. com. Entries are still being accepted for a chance to win this fully outfitted truck. Go to hardworkingtrucks.com to submit your entry.

Wrapping up the

FINISHING

TOUCHES Adding custom graphics, GPS navigation, rearview camera and helper springs ready for our Ram 2500HD for the road

ike most work trucks, Surveyor 1 started off as a base-model Ram Truck 2500 SLT diesel crew cab 4x4. The factory upgrades were few to keep purchase costs minimized while affording the occupants

the comfort and creature features that would maximize their work efficiency. That meant no factory navigation system and reverse camera – two items we wanted Surveyor 1 to have as a matter of increased safety and efficiency in the field.

BACK-UP SAFETY A back-up, or reverse, camera or audible warning system is essential in this truck’s setup because the surveyor cargo management system and bedcap combo blocks the driver’s view of what’s behind the truck. EquipmentWorld.com | February 2014 79

pro pickup | continued

Richard Trahan applies Camoclad-designed/produced custom vinyl graphics to Surveyor 1. Vinyl is special 3M product that can be easily removed without harming the Ram 2500sâ&#x20AC;&#x2122; factory finish.

&L S GAIESE D

BD SUSPENSION DRIVING STRAIGHT STEADY AND STRONG

Sway Bar End Link // Dodge More Articulation Allows More Stress Long Life Urethane Bushings Easily Serviceable

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Adjustable Track Bars // Dodge & Ford Dodge Control Arms // Dodge 3x Stronger than Stock Powder Coated & Zinc Plated 3 Adjustment Points Adjustable on the Truck

Corrects axle alignment on lifted trucks Less Wandering & More Positive Steering Feel Long Lasting & Easily Serviceable Polyurethane Bushings

Cam Caster Ajduster // Ford Makes Correcting Caster Easier Prevents Potential Steering Problems Reduces tire cupping

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80 February 2014 | EquipmentWorld.com

No shop should be without state-ofthe-art welding/cutting equipment. Our installer’s shop is outfit with a Lincoln Electric Power MIG 216 welder and Tomahawk portable plasma cutter. So we turned to a new product from Escort: The SmartMirror2, which is a rearview mirror with built-in GPS, hands-free cellular, and rearview camera system that replaces the OEM mirror. It takes a couple of hours to install, but when

done the SmartMirror2 provides a lot of electronic bang for the buck. The installation requires removing the stock mirror, running the SmartMirror2 wiring harness above the headliner and down the “A”-pillar where it then runs back along the

frame rails to the rear of the truck to the camera. Camera power is via the reverse lights; when they come on, so does the camera. One twist in our custom installation was installing the dime-sized camera centered in the tailgate

EquipmentWorld.com | February 2014 81

pro pickup | continued

Escortâ&#x20AC;&#x2122;s SmartMirror2 incorporates a back-up camera that we custom mounted into the tailgate with the wiring on the inside.

Drive. Dominate. Repeat. The brand new Site Commander by A.R.E. is made from composite construction to create a lightweight yet durable truck cap that offers many storage and organization results to fleets. All of this comes with cost savings over vans.

Drop down ladder rack (optional)

Interior rope lighting

Bolt One-Key technology (programmed to your truck ignition key)

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This “smart mirror” from Escort has a multitude of built-in functions similar to a smartphone including GPS and direct internet access. below the Ram’s head badge. This location gives a good view of the hitch while keeping the lens protected from road spray. We also installed Escort’s new Guardian Alert radar warning system. The little black cube device

These Hellwig load-leveler helper springs help keep the rear of our Ram 2500 from sagging when loaded down with tools and crew.

slips into the hitch receiver tube and plugs in to the OE trailer connector. It uses a pulse signal to scan the area behind the truck from ground to about five feet high, covering the width of the vehicle to about 9 feet back.

The signal is sent to a small receiver that can be mounted anywhere in the cab. We stuck the little warning device on the dash where it emits both audible and visual signals telling how far an object is from the hitch.

Designed for Ford® F-Series 4x4 Super Duty Capacity range of 90-200 CFM No engine modifications No voiding of engine warranty No need for underhood air compressors

866.244.7221 | vanair.com EquipmentWorld.com | February 2014 83

pro pickup | continued A neat feature is if the distance between the object and the truck stays the same, the signal stops. So there’re no nuisance warnings. The downside is the Guardian Alert has to be removed when using the hitch. (Just slip it out and put in the glovebox until it’s needed again.)

ADDING HELPER SPRINGS Another area we needed to address on Surveyor 1 is keeping the truck level when it’s loaded down with surInstalling Hellwig’s Big Wig rear stabilizer (anti-sway) veying tools and equipment. bar under the Ram 2500’s rear axle keeps the truck level Although our 2500HD SLT has a maximum payload through the turns and during off-pavement travel. capacity of 2,600 pounds, our bigger concern is keeping the departure angle (the angle between the bottom of the rear wheels and bumper) maximized for optimum off-pavement performance. Between the A.R.E. ToolMaster bed cap and TruckVault Surveyor cargo management unit we’ve added more than 800 pounds to the bed. Figure in tools and crew of four, the truck will be carrying close to a ton. That kind of weight will undoubtedly sink the suspension a bit and make it a little softer handling on/ off-pavement than what we want. So we made a fast, inexpensive upgrade to accommodate the expected load and use by adding a set of Hellwig Pro Series load leveler springs and Big Wig sway bar to the rear suspension. The “Silent Ride” helper springs bolt right on top of the OE spring pack and take just a few minutes to install. They provide 2,500 pounds of load-leveling capacity, and they have special bushings at the ends High Output grilles so they don’t pop and bang going LED Grilles by Rigid Industries are the new way to customize your rig with high output Rigid lights. Not only do these new accessories over bumps like more traditional mount Rigid lights in your grille but they give your vehicle a whole overloads tend to do. new Rigid look. Visit RigidIndustries.com for more information. The Big Wig sway bar is also easy to install. It does a remarkably good job keeping the big Ram from leaning in sharper turns, giving it the ride and handling much like it was right off the showroom floor. ®

NEW GRILLES FOR CHEVY, FORD®, GMC®, POLARIS® AND TOYOTA®

84 February 2014 | EquipmentWorld.com

VINYL EYE CANDY One of the other additions we did to Surveyor 1 was laying on some custom graphics. Graphics on a

SURVEYOR 1 Presented by Mobil Delvac and Ram Commercial Trucks

work truck are a great way to advertise one’s business 24/7. Anytime a truck is on the road and it looks different, people take notice. Why not take advantage of that for free advertising? We’ve published several articles over the past couple years on the Coming next issue: benefits of using vinyl graphics on One last look. Surveyor 1 is ready for the April work trucks. Come up with creative giveaway. Don’t miss our ideas and there are suppliers all final wrap-up article in over who can turn those into fun the March issue of Equipment World. graphics for your trucks. Camoclad is the company we used for Surveyor 1, and the design displays what the truck is all about: Surveying. Joe Warner, the owner of Illinoisbased Camoclad, came up with the design concept from graphics used on some WWII Mustang fighters and the tape used on a survey leveling staff. Richard Trahan, from Advanced Signs & Graphics in Louisiana handled the application part.

Supporting Sponsors: Amp Research amp-research.com A.R.E. 4are.com Fab Fours Bumpers fabfours.com Transfer Flow transferflow.com BD Diesel dieselperformance.com Marathon Seat Covers marathonseatcovers.com Rigid Industries rigidindustries.com Escort Inc. escortradar.com BOLT Locks boltlock.com Lincoln Electric lincolnelectric.com

800-309-6823 330-830-7800 866-385-1905 800-442-0056 888-841-8884 800-735-2769 480-655-0100 800-964-3138 877-251-8798 888-935-3877

Special Thanks: Warren Spears, Spears’ Auto Repair, Long Beach, Mississippi; 228-863-1878

BRING ON THE HEAT Some upgrades and modifications on Surveyor 1 weren’t off-the-shelf, or needed some customizing/fabrication to make them fit our needs. When those mods involved working with metal, Warren Spears turned to his two favorite Lincoln Electric products: a Power Mig 216 welder and Tomahawk plasma cutter. With those two tools at his disposal, and Lincoln’s top-of-theline protective gear, no metal fab job was too big or too small. Spears trimmed, cut and welded brackets, fabricated steel parts and handled a number of other tasks with the Lincoln products during the build-up of our 2013 Ram 2500HD. He also put the same equipment to use in the day-to-day operations of his auto body repair shop. Having the right tools and equipment is what makes a business efficient and safe. We think Surveyor 1 is the right tool with the right equipment to make any surveyor’s day-to-day job easier, safer and more efficient from shop to jobsite – and back. EW EquipmentWorld.com | February 2014 85

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February 2014 • EquipmentWorld.com

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THE RIGHT KNOW YOUR PAYLOAD WEIGHT

SOLUTION FOR YOUR APPLICATION

Power Landscape Rakes Ideal for removing debris or sod as it prepares the seedbed surface to: Professional Grade • Create a new lawn Attachments — Built for Hard Work! • Renovate an existing lawn • Pulverize & set grade on new construction sites From Worksaver, Inc.

www.wssitepro.com • E-mail: sales@wssitepro.com Phone: 217-324-5973 • Litchfield, IL 62056-0100

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5/21/12 9:59 AM

VULC N ON-BOARD SCALES

800 237-0022

www.vulcanscales.com

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February 2014 • EquipmentWorld.com Untitled-2 1

STOP BY BOOTH 61558 AT CONEXPO-CON/AGG 2014, BOOTH 5468 AT THE NTEA WORK TRUCK SHOW, AND BOOTH 30116 AT THE MID-AMERICA TRUCKING SHOW TO LEARN WHICH SCALE SOLUTION IS RIGHT FOR YOUR SPECIFIC APPLICATION

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1/21/14 8:45 A

final word | by Tom Jackson TJackson@randallreilly.com

How to succeed in this business

n our cover story this month, “The Future of Your Construction Company”, we have focused so much on contractors retiring or transitioning out of the business that it almost begs a question. What does it take to succeed in the construction business? I’ve been in the fortunate position of interviewing at length dozens of our Contractor of the Year finalists and winners over the last 10 years, and I’ve come up with a pretty good idea of what makes a successful contractor.

Here’s what I’ve learned: 1. They’ve got an eye for talent. Most successful contractors ask their own employees to put the word out when they’re hiring. When a competitor has layoffs, they know who’s good and who to go after. They keep an ear to the ground and as a result rarely have to put an ad in the paper.

2. They take care of their people. Finding qualified people with a good work ethic is difficult in this day and age. But when these contractors find one, they make sure they pay them well, they listen to their ideas and they provide a career path up to supervisory level. They don’t mollycoddle, but they don’t act like drill sergeants either. They make their companies places where people want to work.

3. They go above and beyond the requirements of a bid or a contract to fix problems and to satisfy clients. Turning customers into stark raving fans separates the good from the great. That’s why time and again we find so few of our Contractor of the Year finalists doing hard bid work. Many of their customers don’t even bother to bid out 98 February 2014 | EquipmentWorld.com

the work, knowing that these guys will do the work right the first time at a fair price with no delays or hassles.

5. They embrace technology. Less than 10 percent of earthmoving contractors in general use GPS/GNSS technology. More than half of our Contractor of the Year finalists use it. It’s a tough nut to crack at first, but the ones that do so, dramatically improve their productivity. Likewise with telematics. Being able to know at any point in time where all your trucks and machines are and what they’re doing gives them tremendous competitive advantages. 6. They follow the money. The fun in construction is mostly in the field. But our Contractor of the Year finalists know that they have to pay attention to the books. The boring, spreadsheet-dominated business side has to be attended to. The best get into it with the same intensity they bring to field operations and can tell you to a dime what everything costs. They bid better and more confidently than competitors and rarely leave money on the table. 7. They are leaders. Dwight Eisenhower once said leadership is getting extraordinary results from ordinary people. Some are born leaders. Some learn it through experience or study leadership and apply it to their lives. But time and again what we’ve seen is that most of our Contractor of Year finalists and winners build great businesses by finding, nurturing and motivating the ordinary people who come to work for them. What about you? What do you know that makes contractors successful? Email me at tjackson@randallreilly.com.

Components for your Equipment.

Liebherr components perform a wide range of different drive tasks in various applications in the fields of construction and mining. Examples include travel drives in crawler vehicles, slewing gearboxes in cranes, large diameter bearings in excavators and diesel engines in pipeline machines. Liebherr Common Rail systems are ideal for engines used in heavy Off-road and On-road applications. Visit us at the

2014 Conexpo Con/Agg Show Las Vegas, Nevada, USA March 04-08, 2014 Gold Lot, Booth 2155 www.liebherr.com Liebherr Components North America Co. 1465 Woodland Drive Saline MI 48176 USA Phone: (734) 944 6334 E-Mail: info.lcn@liebherr.com www.liebherr.com Text INFO to 205-289-3715 or visit www.eqwinfo.com