Highway1234 --
The U.S. Economic Census is a great starting point for understanding
the characteristics of the road construction industry. An Economic
Census is conducted in detail every 5 years, with 1997 being the last
year for which all information is available. It takes several years
to validate information and split it down into industries, so you're
not likely to see the results of the 2002 Construction census for
another year.
It's important to know the NAICS code (234-161100 and 234-162200) or
SIC code (1611) for your industry.
In the report, you'll find quite a bit of information about companies
WITH EMPLOYEES, including seasonality, payroll information and
margins. If you see page 12, you'll see that there are more than
12,000 companies with $57.9 billion in construction work. On page 17,
you'll see that the largest companies (with more than 1,000 employees)
account for only about 5% of the total construction value -- and that
there are 29 of these "large" contractors.
U.S. Census Bureau
"Industry Summary: Construction, 1997" (January, 2000)
http://www.census.gov/prod/ec97/97c23-is.pdf
This is the "home" page for heavy construction information, which
shows all of the different ways in which data is split:
"1997 Economic Census: NAICS 234 Heavy construction"
http://www.census.gov/epcd/ec97/industry/E234.HTM
Note too that there a number of owner-operator firms in this sector --
some 6,000 of them. They aren't significant in terms of revenues
(only $338 million), but are important in the structure of the
business because sub-contractors are widely used and very specialized:
"1997 Nonemployer Statistics Construction"
http://www.census.gov/epcd/nonemployer/1997/us/US000_23.HTM
CONSTRUCTION FUNDING
=======================
There are almost 4 million miles of highways in the U.S., more than
half of it under local control. The well-known Interstate highway
system accounts for a small amount, less than 45,000 miles.
Federal control amounts to less than 5% of all roads; states account
for about 16-17% of the roads. The sources of funding are relatively
stable and recession-proof, in part because projects are long and in
part because highway user fees account for a major portion of funding.
According to the Gale Group, a research firm, user fees were $128.7
billion in 2001. This was supplemented by an additional $26.5 billion
from the highway trust fund and $7.6 billion from the Federal
Transportation Administration. Some $54 billion was spent on new
construction -- or about a third of the total highway funding.
Important new funding has from the Transportation Equity Act for the
21st Century (TEA-21), a $217 billion program which ran from 1998-2003
and is being re-authorized. Toll roads also account for $1 billion in
revenues. It was replaced this year by the Safe and Flexible
Transportation Efficiency Act of 2003 (SAFETEA), which provides $320
billion over 6 years.
For more details on road construction funding, the industry trade
association has a wealth of data available, much of it in
presentations and economic summaries that are available online for
free:
American Road & Transportation Builders Association
http://www.artba.org/
"Reports and Studies"
http://www.artba.org/economics_research/reports_studies/reports_studies.htm
THE LARGE FIRMS
================
The largest firms in the industry are often diversified in a number of
construction and construction-related activities. Because there is so
much rock and concrete used in construction, a number of the suppliers
have materials divisions that supply them. Some of the companies,
such as Granite Construction, actually started as materials suppliers
and grew into contracting.
As you might expect, much of the merger activity involves companies
with a more local business being absorbed to provide national
capabilities. According to Gale Group, only one of eight contractors
performs work in more than 1 state. Still, acquisition levels are far
low than high-tech sectors, where some companies acquire smaller firms
at the rate of one per month.
Note that a number of major contractors in this business are private, including:
Camco Construction, Joliet, IL
http://www.camcoconst.com/
McGeorge Contracting, Sweet Home, AR
http://www.mcgeorgecontracting.com/about.html
McCoy & Sons, Westlake Village, CA
http://www.mccoyandsons.com/page2.htm
I've listed the large companies in the business and tried to provide
an acquisition history for them, as it indicates best the developing
business history.
COMPANY: Granite Construction (NYSE: GVA)
http://www.graniteconstruction.com/
REVENUES: $1.845 billion
BUSINESSES: Heavy Construction Division is 33% of company's total.
Division does most of its business in Arizona, California, Florida,
Nevada, Utah, Texas and North Carolina. Materials business has 11
plants providing sand, gravel, asphalt, rock and $228 million in
revenues. The company notes in interviews that this vertical
integration saves sales tax of 6-8% on some projects, a big advantage
when materials may run to 30% of the total cost. David Watts,
chairman, also noted in a 1991 interview that emphasis on quality
control gives larger builders an advantage.
ACQUISITIONS: The company acquired regional operations through the
1970s and made its first moves outside of California. Then Granite
went public in 1990, initially on the NASDAQ.
It purchased Gibbons and Reed in 1995 for $42.3 million to gain access
to the Utah market and more materials plants. In 1997 it bought the
highway and heavy construction divisions of Hardaway Co., of Columbus,
GA, which sold the assets to concentrate on more profitable lines. In
July 2001Granite bought Halmar Builders, a heavy construction company
in New York, with about $200 million in revenues.
The company has an excellent timeline of its investments here:
Granite Construction
"Timeline" (2004)
http://www.graniteconstruction.com/new/about/index.cfm?fuseaction=timeline
COMPANY: Peter Kiewit Sons' (private)
http://www.kiewit.com/
REVENUES: $3.375 billion
BUSINESSES: operates in 40 of the 50 U.S. states; transportation is
the largest share of its business at 50%; telecommunications, mining,
commercial buildings, waste-disposal are other sectors
ACQUISITIONS: With deregulation of the telephone business in the
1980s, Kiewit acquired a number of small companies to build
fiber-optic networks (and later Asynchronous Transfer Mode or ATM
services). This business was incorporated in 1987 as Kiewit
Communications. Business grew rapidly in the early 1990s, consuming
capital and resulting in the spinoff of MFS Communications in 1993 as
a public company.
COMPANY: Skanska, Inc. (Parent is Skanska AB, Stockholm: SKAB)
http://www.usacivil.skanska.com/
REVENUES: $1.519 billion
BUSINESSES: Business units include:
Slattery Skanska and Gottlieb Skanska, New York, rail, tunnel and highway projects.
Koch Skanska of New Jersey, Tidewater Skanska and Fairfield Skanska
both of Virginia construct bridges and other transportation projects.
Atlantic Skanska, Atlanta, GA does wastewater treatment plants and
rail maintenance facilities.
Yeager Skanska, located in Southern California, constructs highway,
dam, bridge, airport and flood control structures.
Tidewater Skanska, and Nielsons Skanska in Cortez, CO, construct
projects such as water filtration plants, bridges, roads, drydocks,
lime plants, tunnels, cement plants and natural gas treatment plants.
Nielsons Skanska: environmental remediation and reclamation.
Bayshore Concrete Products of Cape Charles, Virginia, manufactures all
types of prestressed concrete fabrications and Underpinning &
Foundation, Maspeth, New York, performs underpinning and pile driving.
ACQUISITIONS:
COMPANY: Washington Group International (NASDAQ: WGII)
REVENUES: $2.5 billion
BUSINESSES: Operates 6 businesses: Power, Infrastructure, Mining,
Industrial/Process, Defense and Energy & Environment. The
Infrastructure group does road and transportation work. Unlike some
competitors with internal materials divisions, WGII buys all of its
materials from the outside.
ACQUISITIONS: This former Morrison-Knudsen company bought Raytheon's
engineering and construction unit in 2000, then was forced into
bankruptcy in 2002 -- emerging from Chapter 11 in 2003.
COMPANY: Teichert Construction
http://www.teichert.com/home.html
REVENUES:
BUSINESSES: Primarily a California company, providing materials
(sand, gravel, concrete) and doing road construction.
ACQUISITIONS:
COMPANY: The Hubbard Group
http://www.hubbardgroup.com/
REVENUES: $400 million
BUSINESSES: Owned by the European firm, Vinci (Euronext: DG), the
company operates primarily in the southeastern U.S.
ACQUISITIONS: Owns Blythe Construction, in Charlotte, North Carolina,
which has revenues of $110 million.
COMPANY: Modern Continental Construction (private)
http://www.moderncontinental.com/
REVENUES: $1.098 billion
BUSINESSES: Co-owned by two executives, the company's work is
concentrated in Boston. It is having some cash flow issues after the
completion of the Boston Tunnel project.
ACQUISITIONS:
COMPANY: Hill Brothers Construction & Engineering (private)
http://www.hbconst.com/
REVENUES: N/A
BUSINESSES:
ACQUISITIONS: Started its own materials division, Ackerman Rock, in
1999. Set up a leasing division to provide capital equipment to the
company's various subsidiaries. Merged with building contractor
Worsham Brothers in 1996, putting it into the prefab building
business. Merged Hill-Huffman Construction, LLC, of Poplar Bluff,
MO, to provide general contracting and construction design.
MATERIALS SUPPLIERS
=====================
Because of the amount of materials used in road construction (25%-30%
of project cost), there are a number of specialists in the concrete
and supplies business.
The two large suppliers of concrete and aggregates are Vulcan
Materials (NYSE: VMC) and Martin Marietta Materials (NYSE: MLM). The
two companies have 50% of their revenues tied to public spending,
especially road projects, according to Value Line, the financial
research firm. Vulcan Materials sales were $2.6 billion for 2003;
Martin Marietta sales were $1.5 billion.
Value Line also notes that Texas Industries (NYSE: TXI), Lafarge North
America (NYSE: LAF) and Eagle Materials (NYSE: EXP) all supply
significant amounts of non-cement products for road construction,
including structural steel. Lafarge just recently completed the
acquisition of a Louisiana materials supplier, Thibodaux Timber and
Concrete:
Lafarge North America
"LNA Acquires Ready Mix Assets of Thibodaux Lumber and Concrete," (July 25, 2004)
http://www.lafargenorthamerica.com/lafargena/lafargenamain.nsf
OTHER RESOURCES
==================
The Statistical Abstract of the United States is an excellent source
for a top-level view of many issues, such as how much is being spent
on roads? How many miles of federal/state/local roads are there?
2003 Statistical Abstract of the United States
http://www.census.gov/statab/www/
Hoover's Online, a fee-based service, has extended coverage of
different companies available via the Internet, including some of the
large private companies. There's always at least a thumbnail about
the company for free online, then you can decide whether it's likely
the service will have additional information:
Hoovers Online
http://www.hoovers.com
All financial reports for public companies since about 1995 are
available on the U.S. Securities & Exchange EDGAR website:
SEC EDGAR
http://www.sec.gov/edgar.shtml
Google search strategy:
I used Investext, a fee-based reporting service that my local library
has available, to find out what companies investment analysts follow.
This helped highlight the largest of the firms. Wall Street analysts
can be particularly helpful in tracking economics and trends within
the business but obviously only on the publicly-held companies.
Also helpful is a strategy like this:
"Teichert Construction" + history
A very helpful resource is Gale Group's "Highway and Street
Construction," Encyclopedia of American Industries, 2004. You may
have a library with online access to the Galenet database.
Please let me know if any part of this answer needs a clarification
before rating the answer.
Best regards,
Omnivorous-GA |
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