Crystal Ball: Ready Mixed Concrete Industry in 2015 and Beyond

1. A Look Into The Crystal Ball: The Ready Mixed Concrete Industry In 2015 And Beyond Presented to The Mack Trucks Field Sales Meeting By Pierre G. Villere Allen-Villere Partners July 24, 2007

2. Overview: The Areas We See In Our Crystal Ball • Cement Shortages Were Short-lived (for now) • Total Concrete Volume Could Easily Reach 600-700M Yards by 2015, and possibly more • Consolidation Will Continue • HR Will Continue to Be A Challenge • More Sophisticated Marketing Will Play A Key Role In Growth

3. Overview: The Areas We See In Our Crystal Ball Overview • Mixers Will Continue to Become More Sophisticated • Permitting And Compliance Will Become More Daunting Than Ever • Technology Will Continue To Be The Key Driver in Efficiency Improvements

4. Cement Shortages Were Short-lived (for now) • The length and severity of the shortage has been buffered by the housing slowdown • PCA believes that the correction in the residential market will continue through 2007 resulting in a possible 6.5% decline from 2006. • PCA also foresees this correction going into 2008, resulting in them lowering their 2008 cement consumption expectations by 3 million metric tons.

5. Cement Shortages Were Short-lived (for now) • Three big unknowns that can have an impact on the direction of cement demand: • The sub-prime and ARM mortgage mess • Housing inventory • Gasoline prices/consumer spending

6. Long-Term Cement Concerns • Portland Cement consumption in 2005 was 127 million metric tons in the United States. Of that figure, only 87.7 million metric tons were produced domestically • Over the next 5 to 7 years, domestic producers expect to expand production capacity by 18.7 million metric tons • Greenfield Operations: 6 million metric tons • Modernization: 12 million metric tons

7. Long-term Cement Concerns • These numbers indicate that total domestic production in 2015 will be approximately 125.8 million metric tons of Portland Cement • With the ready-mixed concrete industry consuming approximately 75% of the cement production in the US, our industry cannot sustain our current production levels, much less any growth, without historically high levels of imported cement

8. Long-term Cement Concerns • If the ready-mixed concrete industry achieves a 600M cubic yard production level in 2015, this translates into a requirement of 30.4 million tons of cement in excess of domestic production capacity at that time • This means that imported cement will represent 30% of total domestic consumption, which is hovering near the record high percentages.

9. Long-Term Cement Concerns • Additionally, the economics of imported cement relies heavily on favorable ocean freight rates, and that is a commodity as well • Current economic growth in China and India, and their corresponding demand for cement, creates some concern about the stability of future supplies of imported cement

10. Portland Cement 2000-2010

11. Imported Cement As a Percentage of Total Supply • Since the early 1980s, imported cement has increased significantly as a percentage of total supply, regardless of US economic conditions • Early 1980’s (recession): 3% of Total Supply • Latter 1980s: 15-16% of Total Supply • Early 1990’s (recession): 6-8% of Total Supply • 1998: 24% of Total Supply • 1999-2000: 29% of Total Supply • 2005: 27% of Total Supply • 2015: 30+% of Total Supply

12. Total Concrete Volume Could Range Between 600-700M Yards by 2015 • We have studied projections from several industry sources and examined historical rates of consumption growth to project ready-mixed concrete production in 2015 • Our internal estimates indicate total US concrete production will range between a low of 500 million cubic yards (in a mild recession) to a high of 800million cubic yards if the current economic expansion continues.

13. Total Concrete Volume Could Range Between 600-700M Yards by 2015 • Bureau of Census growth projections span such a wide range, and coupled with the uncertainty about economic cycles between now and 2015, it is near impossible to estimate concrete volume with any accuracy • We believe a 600M cubic yard domestic market by 2015 is a real possibility, particularly in a stable commodities and interest-rate environment, and if the current economic expansion continues

14. Total Concrete Volume Could Range Between 600-700M Yards by 2015

15. Total Concrete Volume Could Range Between 600-700M Yards by 2015 • The Brookings Institute has reported extensively on the demand for new building space of all types (commercial/residential/industrial/public) to accommodate our population growth: • By 2030, which is well beyond the relevant projection we are presenting here, but indicative of the velocity in growth, they believe:

16. Total Concrete Volume Could Range Between 600-700M Yards by 2015 • In 2030, about half of the buildings in which Americans live, work, and shop will have been built after 2000 • Most of the space built between 2000 and 2030 will be residential space • Overall, most new growth will occur in the South and the West

17. Total Concrete Volume Could Range Between 600-700M Yards by 2015 • Though a small component of overall growth, the projected demand for industrial space in the Midwest outpaces that of the other regions, unlike the other major land uses • While these projections may seem overwhelming, they also demonstrate that nearly half of what will be the built environment in 2030 doesn't even exist yet, giving the current generation a vital opportunity to reshape future development

18. 2015 Total Concrete Volume Projections • I know you are saying to yourself, “That is some crystal ball!” • Based on this data, it is reasonable to assume that production by the end of 2015 could range between 600-700M cubic yard mark for the US • Obviously, the higher the production potential, the greater impact on the future growth of the ready mixed concrete industry

19. Consolidation Will Continue • We estimate that more than 500 companies have been consolidated since the late 90’s • Succession, estate planning, and a concentration of net worth in the family business will continue to motivate the sale of smaller producers to the larger ones • The Top 25 producers in the US represent 50-55% of total production in 2006

20. Consolidation Will Continue • We think the Top 25 producers in the US will represent 80% of total production in 2015 • Of those, the Top 10 could command more than 50% of the market • The smaller independents in local markets will find it more difficult to compete with larger, more sophisticated operations

21. Consolidation Will Continue • The exception will be the smallest producers in the smallest markets, who will be with us forever

22. Consolidation Will Continue • [insert bullet points on impact to Mack Trucks]

23. HR Will Continue to Be A Challenge • There has been so much written on the challenges of hiring truck drivers, and there is really no relief in sight. • In markets with large pools of new immigrants, or with an ingrained blue collar culture, the problem will not be so acute

24. HR Will Continue to Be A Challenge • In markets where such pools don’t exist, the available labor pools will become even more challenging • New initiatives, such as captive Driver Training Schools, outreach programs to local high schools, etc. will become a must for producers in the tougher labor pool markets

25. More Sophisticated Marketing Will Play A Key Role In Growth • The role of our state and national associations will continue to grow in educating the specifying community and consumers at large • A continued effort to educate the industry to sell concrete, rather than price concrete, will be adopted and/or grown by the leaders in individual markets

26. More Sophisticated Marketing Will Play A Key Role In Growth • Continuing to educate the customer base at large of the benefits of concrete over asphalt will be critical in continuing to grow volumes at the national level

27. Mixers Will Continue to Become More Sophisticated • By 2015, new mixers being delivered without GPS/camera/tracking systems will be the exception, not the rule • Truck tracking will be more accurate, with intelligent, real-time routing to compensate for traffic patterns, weight restrictions, etc., translating into more efficient fleet utilization • Electronic detection devices that already measure slumps and quantities of water added at the job site will be supplemented by sensors that report mileage, fuel usage, hydraulic temperature and pressure, water temperature, and the top speed a driver reached

28. Mixers Will Continue to Become More Sophisticated • In-cab cameras will make use of video, increasing safety awareness and efficiency • Multiple cameras at various angles around the truck will also monitor job site activity

29. Permitting And Compliance Will Become More Daunting Than Ever • Federal EPA and state environmental compliance will continue to become more stringent in most states, and compliance costs will continue to escalate • Environmental compliance costs may accelerate at the same percentage rates as recent increases in insurance, fuel, and cement

30. Permitting And Compliance Will Become More Daunting Than Ever • With new plants as unpopular as prisons and landfills, permitting for “greenfield” locations will become harder, and will probably be eliminated altogether in many large, urban markets • In the face of permitting challenges, sited and permitted plants will continue to rise in value

31. Permitting And Compliance Will Become More Daunting Than Ever • The trend towards siting plants in aggregates suppliers’ yards will be one way around this issue

32. Technology Will Continue To Be The Key Driver in Efficiency Improvements • Technology will continue to drive improvements in productivity, profitability, and the ability to “work smarter” • Things that now “take a while” will be instantaneous, will all real-time metrics loaded onto your screen • You will know the profitability of each load the moment the truck is batched, and the erosion of that profit based on waiting time/return

33. Technology Innovations • Improvements in GPS • Next generation will take into account traffic patterns, weight restrictions, etc. • Complete integration with back office, truck maintenance, etc. • Voice & Status (like Never Lost or OnStar)

34. Technology Innovations • Complete, seamless, integration of all systems • Dispatch • Payroll • A/P • QC • Truck Maintenance • Real Time Productivity and Profitability • By Load, as the truck is rolling out of the plant • By Customer, in real time • By Plant, in real time

35. Plant Innovations • The advent of truly “smart” plants • Batching performance will be measured in real time • Temperature and humidity levels will be measured in real time, and adjustments made to the mix designs • Wireless Technology will be prevalent in all aspects of operations, from dispatch to batching to trucks and delivery • These systems will move and monitor gates, valves, conveyors, and other mechanical parts

36. Plant Innovations • IP Addressable Valves • Automatic Maintenance • Signals or e-mail identifying failing or failed components • Automatic QC Information • Immediate e-mail notification of mix issues • Inventory • Automatic e-mail or integration of materials based on inventory, outstanding orders, and production models

37. Communication Innovations • Cameras in Plants • Centralized Batching • Cameras on Trucks • Job Site Conditions • Safety Issues • Voice Over IP • Connectivity at Low Costs

38. Communication Innovations • Electronic or Web Business • Orders • Tickets • Invoices • Payment • Delivery Schedules • PDAs

39. Summary – Our Opinion • Ready mixed concrete production will grow to between 600-700 million cubic yards by 2015 • An average yard of concrete will sell in a range of $105 - $115, with certain markets well over $120 - $125, without value-added products • Fleet utilization will continue to climb due to technology • Driver recruiting and training will grow to being the biggest challenge for many producers

40. Summary – Our Opinion • Environmental compliance costs will continue to climb, becoming one of the fastest growing costs by percentage • Many of you will be far more computer-literate than you are today • Many of you will become better marketers • Some of you will have sold and will be living in Florida

41. And Finally, A Word About Us • Allen-Villere Partners is a transaction- oriented private investment banking and consulting services firm that focuses on the ready-mixed concrete, aggregates and concrete products industries

42. Industry Activities • The firm was pivotal in the creation and refinement of the annual Industry Data Survey, and still provides significant time and resources in assisting NRMCA in the planning and execution of the survey each year. It is considered a key benchmarking tool and has become a standard of measure for performance in the ready-mixed concrete industry • Six years ago, the firm led the initiative to create an industry-standard Chart of Accounts, which is in the process of being implemented by the ABA and AICPA, and as a revised SIC code

43. Value Added Services • Mergers & Acquisitions • Valuation & Fairness Opinions • Financial Restructuring and Workout Services • Financing Services • Strategic Planning • Environmental & Permitting Services • Management Consulting & Training • Expert Testimony

44. Our Track Record • We have been involved in almost 50 M&A transactions over the past 20 years, with almost twenty of those in the last five. • We have conducted over 500 valuations of ready mixed concrete companies in 40 states. • We are considered the pre-eminent investment bank working exclusively in the middle markets of the ready mixed concrete, construction aggregates, and concrete products industries.

45. The William B. Allen Award • NRMCA created this award which is to be bestowed annually to an individual in lifetime recognition of outstanding contributions to the business of the ready mixed concrete industry • The Award was named after our Founder and Senior Partner, Bill Allen, acknowledging almost 60 years of leadership in this industry • The 2007 Recipient is Gene Martineau, the CEO of U.S. Concrete, who will receive his award at the NRMCA Annual Convention in March

46. And finally… Thank You!