Document XdBRkr4zpQz8m0DmLvnJ3gb4

company is m market areas not previously served by Koppers. Demand was strong m virtually all re gional markets served by Keepers as the 'eSuit of improved activity m onvate construc tion. Allhougn government rugnway maintenance ana construction remainea weak in New York anc Pennsylvania, busi ness was good in trie South anc West. The Suriace Transoonaticn Assistance Act. passed m Decemoer, 1973. continues tne Federal Highway Trust Funa <cr four more years. Slate funding, with me excep tion of the Southeast, continued to be inade quate. Further deterioration of highways, however, is raising the priority for mainte nance and upgrading--a situation mat should favor Koopers. Backlog Road Materials backlog at the end of 1978 was S76.8 million, versus S28.6 million a year earner. The normal tendency is for this .backlog to increase during the first six months of the year and to decline thereafter. Orders in the backlog are considered lirm. and more than 95% of the year-end backlog is expected to result in 1979 sales. Road Materials Business Road Materials is made up of 139 facilities that serve roadbuilding and construction ms'kfits in 14 states. More than 80% of s? 3 are from aggregates (crushed stone, si. 1. gravel, and slag), bituminous concrete, reajy-mix concrete and paving services. The balance is from bituminous paving materials (road asphalt and asphalt emulsions). About 60% of Road Materials sales re sult from publicly funded road maintenance anc construction projects. The remainder is fror privately funded work in many seg ments of the construction market. Transportation is a major factor in total product cost. The delivered price of crushed stone doubles when transported 20 to 30 miles. Aggregate markets, therefore, are lo calized, and the Company generally supplies markets near its quarries in California. Colo rado. Georgia. Indiana. Kansas, Kentucky, New York, Ohio, Pennsylvania, Tennessee and Virginia. In late 1978, Koppers com pleted a definitive merger agreement with Ivy Corporation, Atlanta. Georgia. The merger was approved by Ny shareholders in eariy '979 ana added nine aggregate-producing locations in'Georgia aiong with'six facilities m tne Southeast ana Southwest mvotvea with the orcouction anc distribution cl welded wire *aoric ana other concrete remforcing and forming accessories. Raw Materials and Fuel Aggregate raw materials consist of sano ana gravel, granite, limestone, trap rock and sandstone, which come from quarries, mines or Great Lakes dredging operations. Most of Koppers auarries are on land either owned by the Company or held under long-term leases. It is estimated that the present re serves of aggregates will be sufficient for more than 25 years at currem production rates. Other major raw materials include as phalt. slag and cement, wnich are purchased from oil companies, steel producers and ce ment suppliers. Adequate supplies of raw materials and fuel are expected to continue. Fuel oil satisfies nearly half ol Road Mate rials energy requirements, natural gas and diesel fuel each about 20%. Competitive and Seasonal Conditions Road Materials operations are geographi cally diversified, with limited vertical integra tion within individual regional markets. Be cause mineral reserves are limited within regional areas, ihe Company commonly occupies a high share of those regional mar kets in which it competes. Principal factors in competition are price and service. Prices for aggregates are deter mined by local conditions and are not sub ject to wide fluctuations created by nation wide demand, supply and capacity factors. Increasingly, this business has become service-oriented, calling for dependable on-time delivery from a guaranteed source of supply. Road Materials business is highly sea sonal, with more than 80% of sales occur ring during the peak construction period from May 1 to November 30. Product inventories are controlled at volumes that reflect a balance between the most efficient production level and supplying peak demand. Inventories normally grow substantially during spring months in antici pation of high summer demand. It is not customary, however, to carry inventories or provide financing for customers. Road Materials 1978 Salas by End Markat Engineered Construction Architectural Construction Agriculture ^Ttansponatiqni^.,.^ Other (S Millions) % $232.5 58.7 3.3 2.9 6.7 76 19 1 1 3 $304.1 too Modem aggregate lacllltlea provide cruahed atone tor roadbuilding and paving. Paving aervlcea In Weatem markata Include recreational appllcatlona. -a