This article is the first of a series sponsored by PNC. Over the coming months, we’ll be engaging with CEOs from around the U.S. on some of the most important topics facing business leaders today. Click here for part 2 and part 3.
One of the world’s highest corporate-tax rates was a big obstacle for American CEOs who wanted to increase manufacturing in the United States or repatriate profits that their companies had generated in lower-tax jurisdictions abroad.
But tax reform approved by Congress in December cut the standard rate for C corporations to 21 percent from 35 percent, at once making U.S-based companies more competitive globally, and also freeing up huge proceeds that had been sucked away by federal taxes.
Here’s how three CEOs have reacted to U.S. tax reform:
Bill Hall, CEO, Ultravision: His Dallas-based company is a global leader in LED lighting technology, products and projects, ranging from Times Square to an iconic outdoor-advertising space on Cromwell Road in London. Competitors include blue-chippers such as Samsung and low-cost Chinese manufacturers.
“We’re 100-percent U.S.-made, so our quality is better than any competitor’s out there,” Hall said. With “less than one percent” failure rates for their products, far lower than many Asian companies.
“So the lowering of our tax rate helps us to become more competitive globally, because we’re able to keep our costs down, which allows us to keep our pricing to the end customer down. We’ve already worked this factor into our cash-flow projections five years out.”
“we decided to give significant raises to all of our middle and senior managers, which we wouldn’t have been able to do without the tax savings.” – ultravision ceo bill hall
“And we’re able to reinvest in the company. We’re hiring more people – going from about 35 to about 70 people by the end of this year, and hopefully that growth will continue over the next five years. Just within the last two weeks, we decided to give significant raises to all of our middle and senior managers, which we wouldn’t have been able to do without the tax savings.”
“We also already have added a whole new section of warehouse and three new production lines, in addition to the four we had. And we’ll be able to double our manufacturing capacity this year.”
Jay Deady, CEO, Recondo Technology: The company creates and maintains cloud-based software platforms for health-care organizations, and Deady has been CEO for nearly four years as part of a 26-year career in the industry.
Growth has been 40 to 50 percent annually for the past three years for the Denver- based outfit, and there are huge chunks of its main markets – 20 to 30 percent in health-cost estimating, for instance, and up to 80 percent for claims-status updating software – that are “open opportunities for us,” Deady said.
“So the tax cuts are enabling us to reinvest and drive faster growth in the market segments where we have solutions that are seeking customers,” he said.
“We are hiring two or three additional sales people this year,” adding to Recondo’s existing staff of fewer than a dozen direct and indirect sales employees. “Next year I see additions to our head count at least doubling, because we will need additional people to support the revenue growth.”
Right now, Recondo employs about 135 people. “And over the next 24 to 36 months, we’re looking at a total of an additional 15 to 20 jobs being created plus the additional marketing spend that will benefit the company as a result of this.
“Those investments will all come from additional income that otherwise would have gone to federal taxes. As CEO, I’m very happy about that.”
Don Daseke, CEO, Daseke Inc.: Daseke has become one of the fastest-growing freight transporters in America, as the company, which owns more than a dozen open-bed truck companies went public last year in a reverse-merger deal and has grown to about $1 billion in annual revenues through a series of acquisitions.
Daseke loves how the tax-reform bill “has contributed to the positive economic environment we’re in,” encouraging his company’s customers to repatriate profits and invest in expanding their own businesses. “We’re beneficiaries of that,” he said.
As for actions by his Addison, Texas-based company: “This year we’ll make our largest investment in capital expenditures by far compared with the last several years, an amount that we’ve increased significantly as a result of economic growth, the pro-business climate and tax reform. We will buy more trucks and trailers this year by far than in any previous year,” adding to Daseke’s fleet of more than 5,000 tractors and more than 11,000 flatbed trucks and trailers.
More than that, Daseke will be hiring furiously to put people behind the steering wheels of that expanding fleet. The trucking industry already faces one of the tightest labor markets in America, but savings from tax reform will help Daseke compete for new and returning drivers by paying them more.
“That’s the one way we’re going to solve the shortage of truckers,” he said. “If we pay our truck drivers $80,000 to $100,000 a year, we won’t have a shortage of drivers. Our shippers know they’re also going to have to pay more. That’s the reality.”
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