Martin Marietta Materials, Inc. (NYSE:MLM) today announced results
for the third quarter and nine months ended September 30, 2008.
Notable items were: Earnings per diluted share of $1.58 compared
with $2.13 in the prior-year quarter Cost of petroleum-based
products increased $16 million, reducing earnings by $0.23 per
diluted share Heritage aggregates product line pricing up 8% and
volume down 13% Consolidated net sales of $526 million, down 3%
compared with the prior-year quarter Record Specialty Products� net
sales, up 18% from prior-year quarter Credit Agreement amendment
increased debt-to-trailing-12-month EBITDA covenant to 3.25 times
MANAGEMENT COMMENTARY Stephen P. Zelnak, Jr., Chairman and CEO of
Martin Marietta Materials, stated, �We are very pleased with our
third-quarter results as they highlight our ability to adapt our
business to successfully address the most challenging economic
times in the Corporation�s history. Aggregates volumes declined for
the tenth consecutive quarter, diesel fuel and natural gas costs
escalated 47% during the quarter, and adverse weather conditions in
the wake of Tropical Storm Fay and Hurricanes Gustav, Hannah and
Ike had a negative impact on operations not only in the Gulf Coast
region, but also in the Southeast and Central United States as the
storm systems moved inland. Nevertheless, our management team and
employees again balanced the productive capacity of our operations
to market demand and aggressively addressed controllable costs. �We
continued to achieve sustainable pricing growth within all groups
of the aggregates business with heritage aggregates pricing up 8%
for the quarter. With the exception of Iowa and Arkansas, the
difficult economic environment caused aggregates volumes to fall in
all of our states with the overall volume in the heritage
aggregates business declining 13%. The strong farm economy, coupled
with increased alternative energy construction in Iowa and energy
expansion projects in Arkansas, East Texas and Northwest Louisiana,
supported volume growth in these areas. Infrastructure and
commercial construction demand remains challenging, most notably
from the lack of credit availability, which has stalled overall
construction activity. Our West Group experienced its first
quarterly volume decline of the year, reflecting the impact of the
hurricanes as well as weakness in construction activity. We
estimate that the third-quarter hurricane season caused our West
Group to reduce shipments by 0.8 million tons and, when coupled
with lost sales and increased production costs from storms in the
Mideast and Southeast Groups, adverse weather lowered profitability
of the Aggregates business by approximately $6 million, or $0.08
per diluted share. �Although petroleum-based energy prices are
beginning to decline, increased energy costs continued to have a
negative impact on both costs and sales in the past quarter. Liquid
asphalt, used in the production of hot-mix asphalt products,
increased approximately 128% over the prior year with average
pricing approaching $800 per ton at peak. Our customers, and
oftentimes end users, cannot react quickly enough to these
escalating costs and, when possible, have chosen to defer work in
anticipation of future potential cost reductions. The rise in the
cost of petroleum-based products resulted in additional production
costs of $16 million, or $0.23 per diluted share, for the quarter.
�Selling, general and administrative expenses of $37.7 million
included a settlement charge of $2.6 million for payment of vested
benefits provided by the Corporation�s SERP (Supplemental Excess
Retirement Plan). Selling, general and administrative expense,
excluding this charge, was $35.1 million compared with $36.4
million in the prior-year period, reflecting our continued focus on
cost management. �During the year, we have been evaluating a number
of strategic initiatives in our ongoing efforts to enhance our
business and create shareholder value. Related to these
undertakings, we incurred $3 million in non-recurring expenses
during the third quarter for professional fees paid to advisors.
These expenses are included in other operating income and expenses,
net. The combination of the SERP and strategic initiatives expenses
reduced earnings by $0.08 per diluted share. �On a positive note,
the State of Florida has recently launched the �Accelerate Florida�
initiative aimed at advancing start dates on $1.4 billion in road
construction funding to create jobs and stimulate the state�s
weakening construction economy. The Florida Department of
Transportation announced that these projects will employ 39,000
people and generate $7.84 billion in economic benefits, a $5.60
return on each state dollar invested. Martin Marietta is uniquely
positioned to provide high-quality granite construction aggregates
into the Florida infrastructure market from our offshore quarry in
Nova Scotia and interior fall line quarries in Georgia and South
Carolina. Our new plant in Augusta, Georgia, will begin operations
in the fourth quarter of 2008 versus the prior forecast of second
quarter 2009. The earlier completion of this project, which
increases aggregates capacity from 2 million tons to 6 million tons
annually, is enabling us to engage in marketing discussions with
major Florida customers in advance of the infrastructure
acceleration. �Our Specialty Products business continues to perform
exceptionally well. The United States� steel market has remained
positive, leading to increased dolomitic lime demand. Similarly,
we�ve experienced increased demand for magnesia-based chemicals
products used in a number of environmental applications as well as
for our heat-resistant products. The business delivered record
third-quarter net sales of $46.4 million, an increase of 18%
compared with the prior-year quarter, with earnings from operations
of $8.6 million, or approximately 19% of net sales. LIQUIDITY AND
CAPITAL RESOURCES �Our business continues to generate solid cash
flows even in a weak economy. For the nine months ended September
30, 2008, net cash provided by operating activities was $271
million, down $2 million versus the comparable prior-year period,
in spite of a $55 million decline in net earnings during the same
period. Control of working capital and lower cash taxes, resulting
from lower pretax earnings and higher benefits from bonus
depreciation deductions, have contributed to maintaining our cash
flows. We ended the quarter with $14 million in cash, no
outstanding commercial paper balance, $323 million available under
our revolving credit agreement and debt-to-trailing-12-month EBITDA
of 2.49 times, within our targeted range of 2.0 to 2.5 times. �On
October 24, 2008, we amended our credit agreement to provide for an
increase in our leverage covenant to 3.25 times
debt-to-trailing-12-month EBITDA. In exchange for the covenant
modification, the Corporation agreed to an increase in the drawn
facility fee under a pricing grid tied to long-term debt rating,
currently LIBOR plus 225 basis points. �Moody�s and Standard &
Poor�s have continued to view our industry with concern for the
near term, so it was not unexpected that the agencies placed the
Corporation on a negative credit watch. Further, on October�24,
2008, Moody�s downgraded the Corporation�s long-term rating from
Baa3 to Baa1, and downgraded our commercial paper rating to P-3
from P-2 with a stable outlook. While we understand that the
agencies are taking a suitably cautious approach in gauging the
effect of the current economic downturn on the Corporation�s
ability to generate sufficient cash flow, we are comfortable with
our leverage covenant and we have liquidity available to refinance
the $200 million, 5.875% Senior Notes due December 1, 2008. In
addition, based on discussions with our bank group, we expect to
have continued access to the public credit markets, although at a
higher cost of debt when compared with our 5.9% weighted average
interest rate at September 30, 2008. However, given the dynamic,
unpredictable state of the credit markets, accessing the
availability under our credit facility remains an option. We
continue to believe that we have sufficient liquidity from the cash
flows generated in the operation of the business, from our ability
to reduce levels of capital expenditures � expected to be no more
than $185 million in 2009, and from our ability to execute against
an aggressive cost-reduction plan. 2008 OUTLOOK �Over the past 45
to 60 days, the lack of available business credit has stalled
construction activity and further affected demand for our products.
Construction projects underway have had credit effectively pulled,
and new projects are subject to increasingly tighter lending
standards. The unpredictable state of the economy, energy
inflation, credit market uncertainty and lagging construction
demand make forecasting increasingly difficult. That said, pricing
continues to remain positive, even in this challenging climate.
Accordingly, we reaffirm our 6% to 8% range for the rate of
heritage aggregates price increases in 2009. However, with the
pressure on volumes, we now expect our aggregates shipments to be
down 11% to 12% for the year. We continue to expect record sales
and pretax earnings of $36 million to $38 million from our
Specialty Products segment. Based on these factors, we expect net
earnings for 2008 to be in the range of $4.25 to $4.65 per diluted
share. �We are beginning to develop our preliminary views on 2009
as we complete our regional operating plans and would characterize
the upcoming year as a period of stabilization with the first half
subject to continued aggregates volume pressure. We currently
expect modest price increases, stabilizing aggregates demand and a
deflationary cost environment, as it relates to energy costs. While
we are taking a very conservative view in our 2009 planning, it is
becoming more likely that the federal government will create a new
economic stimulus package, and it appears that both federal and
state governments will look toward making increased investment in
road construction and other infrastructure as a jobs-creation tool.
We will provide our full guidance for 2009 when we release annual
earnings for 2008 early next year and have more information about
government spending on infrastructure projects.� RISKS TO EARNINGS
EXPECTATIONS The 2008 estimated earnings range includes
management�s assessment of the likelihood of certain risk factors
that will affect performance within the range. The most significant
risk to 2008 earnings, whether within or outside current earnings
expectations, continues to be the performance of the United States
economy, the uncertainty and availability of credit markets and the
effect on construction activity. Risks to the earnings range are
primarily volume related and include a greater-than-expected drop
in demand as a result of the continued decline in residential
construction, continued decline in commercial construction, delays
in infrastructure projects, or some combination thereof. Further,
increased highway construction funding pressures as a result of
either federal or state issues can affect profitability. Currently,
North Carolina, Georgia, Texas, and South Carolina are experiencing
state-level funding pressures, and these states may
disproportionately affect profitability. The price of liquid
asphalt is a significant cost component in the production of
hot-mix asphalt products and can cause road builders and commercial
contractors to delay or defer work in anticipation of liquid
asphalt cost changes. The level of aggregates demand in the
Corporation�s end-use markets, production levels and the management
of production costs will affect the operating leverage of the
Aggregates business and, therefore, profitability. Production costs
in the aggregates business are also sensitive to energy prices, the
costs of repair and supply parts, and the start-up expenses for
large-scale plant projects. The continued rising cost of diesel and
other fuels increases production costs, either directly through
consumption or indirectly through the higher cost of energy-related
consumables, namely steel, explosives, tires and conveyor belts.
Sustained periods of diesel fuel cost at the current level will
continue to have a negative impact on profitability. The Aggregates
business is also subject to weather-related risks that can
significantly affect production schedules and profitability.
Hurricane activity in the Atlantic Ocean and Gulf Coast generally
is most active during the third and fourth quarters. Opportunities
to reach the upper end of the earnings range depend on the
aggregates product line demand exceeding expectations triggered by
a significant reduction in liquid asphalt prices and/or increased
credit availability, and continued decline in energy-related costs.
Risks to earnings outside of the range include a change in volume
beyond current expectations as a result of economic events outside
of the Corporation�s control. In addition to the impact of
residential and commercial construction, the Corporation is exposed
to risk in its earnings expectations from tightening credit markets
and the availability of and interest cost related to its short- and
intermediate-term financing. The Corporation�s commercial paper
program is rated A-2 by Standards & Poor�s and P-3 by Moody�s.
CONSOLIDATED FINANCIAL HIGHLIGHTS Net sales for the quarter were
$526.2 million, a 3% decrease versus the $544.4 million recorded in
the third quarter of 2007. Earnings from operations for the third
quarter of 2008 were $115.0 million compared with $136.9 million in
2007. Net earnings were $66.3 million, or $1.58 per diluted share,
versus 2007 third-quarter net earnings of $90.3 million, or $2.13
per diluted share. Net sales for the first nine months of 2008 were
$1.449 billion compared with $1.484 billion for the year-earlier
period. Year-to-date earnings from operations were $262.7 million
in 2008 versus $331.0�million in 2007. The Corporation posted an
after-tax gain on discontinued operations of $5.1�million in 2008
compared with $1.3 million in 2007. For the nine-month period ended
September 30, net earnings were $151.0 million, or $3.60 per
diluted share, in 2008 compared with net earnings of $206.2
million, or $4.73 per diluted share, in 2007. BUSINESS FINANCIAL
HIGHLIGHTS Net sales for the Aggregates business for the third
quarter were $479.8 million compared with 2007 third-quarter sales
of $505.2 million. Aggregates pricing at heritage locations was up
7.5%, while volume decreased 13.3%. Including acquisitions and
divestitures, aggregates pricing increased 7.8% and aggregates
volume declined 12.4%. Earnings from operations for the quarter
were $112.4 million in 2008 versus $134.1 million in the
year-earlier period. Year-to-date net sales for the Aggregates
business were $1.314 billion versus $1.366 billion in 2007.
Earnings from operations on a year-to-date basis were $262.7
million in 2008 compared with $333.1�million in 2007. For the
nine-month period ended September 30, 2008, heritage aggregates
pricing increased 6.0%, while volume was down 10.5%. Including
acquisitions and divestitures, aggregates average selling price
increased 6.2%, while volume declined 10.0%. Specialty Products�
third-quarter net sales of $46.4 million increased 18.1% over
prior-year net sales of $39.2�million. Earnings from operations for
the third quarter were $8.6 million compared with $9.0�million in
the year-earlier period. For the first nine months of 2008, net
sales were $134.5 million and earnings from operations were $27.5
million compared with net sales of $117.5 million and earnings from
operations of $24.5 million for the first nine months of 2008.
CONFERENCE CALL INFORMATION The Corporation will host an online Web
simulcast of its third-quarter 2008 earnings conference call later
today (October 28, 2008). The live broadcast of Martin Marietta
Materials' conference call will begin at 2:00�p.m. Eastern Time. An
online replay will be available approximately two hours following
the conclusion of the live broadcast. A link to these events will
be available at the Corporation�s Web site: www.martinmarietta.com.
For those investors without online web access, the conference call
may also be accessed by calling 719-325-4748, confirmation number
8860430. Martin Marietta Materials is a leading producer of
construction aggregates and a producer of magnesia-based chemicals
and dolomitic lime. For more information about Martin Marietta
Materials, refer to the Corporation's Web site at
www.martinmarietta.com. If you are interested in Martin Marietta
Materials, Inc. stock, management recommends that, at a minimum,
you read the Corporation's current annual report and Forms 10-K,
10-Q and 8-K reports to the SEC over the past year. The
Corporation's recent proxy statement for the annual meeting of
shareholders also contains important information. These and other
materials that have been filed with the SEC are accessible through
the Corporation's Web site at www.martinmarietta.com and are also
available at the SEC's Web site at www.sec.gov. You may also write
or call the Corporation's Corporate Secretary, who will provide
copies of such reports. Investors are cautioned that all statements
in this press release that relate to the future involve risks and
uncertainties, and are based on assumptions that the Corporation
believes in good faith are reasonable but which may be materially
different from actual results. Forward-looking statements give the
investor our expectations or forecasts of future events. You can
identify these statements by the fact that they do not relate only
historical or current facts. They may use words such as
"anticipate," "expect," "should be," "believe," and other words of
similar meaning in connection with future events or future
operating or financial performance. Any or all of our
forward-looking statements here and in other publications may turn
out to be wrong. Factors that the Corporation currently believes
could cause actual results to differ materially from the
forward-looking statements in this press release include, but are
not limited to the level and timing of federal and state
transportation funding, particularly in North Carolina, Texas and
Georgia, three of the Corporation�s largest and most profitable
states, and in South Carolina, the Corporation�s fifth largest
state as measured by 2007 Aggregates business� net sales; levels of
construction spending in the markets the Corporation serves; the
severity and duration of a continued decline in the residential
construction market; the impact of limited credit availability on
commercial construction; unfavorable weather conditions, including
hurricane activity; the ability to recognize quantifiable savings
from internal expansion projects; the ability to successfully
integrate acquisitions quickly and in a cost-effective manner; the
volatility of fuel costs, most notably diesel fuel, liquid asphalt
and natural gas; continued increases in the cost of repair and
supply parts; logistical issues and costs, notably barge
availability on the Mississippi River system and the availability
of railcars and locomotive power to move trains to supply the
Corporation�s Texas and Gulf Coast markets; continued strength in
the steel industry markets served by the Corporation�s dolomitic
lime products; availability of funds for financing and increases in
interest costs; the impact of the Corporation�s credit ratings on
capital structure and financing costs; and other risk factors
listed from time to time found in the Corporation�s filings with
the Securities and Exchange Commission. Other factors besides those
listed here may also adversely affect the Corporation, and may be
material to the Corporation. The Corporation assumes no obligation
to update any such forward-looking statements. � MARTIN MARIETTA
MATERIALS, INC. Unaudited Statements of Earnings (In millions,
except per share amounts) � � Three Months Ended � Nine Months
Ended September 30, September 30, 2008 � 2007 2008 � 2007 Net sales
$ 526.2 $ 544.4 $ 1,448.9 $ 1,484.0 Freight and delivery revenues �
73.1 � � 71.0 � � 199.7 � � 178.4 � Total revenues � 599.3 � �
615.4 � � 1,648.6 � � 1,662.4 � � Cost of sales 374.6 377.1 1,082.7
1,044.9 Freight and delivery costs � 73.1 � � 71.0 � � 199.7 � �
178.4 � Cost of revenues � 447.7 � � 448.1 � � 1,282.4 � � 1,223.3
� Gross profit 151.6 167.3 366.2 439.1 � Selling, general and
administrative expenses 37.7 36.4 117.5 119.0 Research and
development 0.1 0.2 0.5 0.6 Other operating (income) and expenses,
net � (1.2 ) � (6.2 ) � (14.5 ) � (11.5 ) Earnings from operations
115.0 136.9 262.7 331.0 � Interest expense 19.5 17.2 54.6 45.1
Other nonoperating (income) and expenses, net � 2.9 � � (1.2 ) �
3.0 � � (5.1 ) Earnings before taxes on income 92.6 120.9 205.1
291.0 Income tax expense � 26.1 � � 31.1 � � 59.2 � � 86.1 �
Earnings from continuing operations 66.5 89.8 145.9 204.9 �
Discontinued operations: (Loss) Gain on discontinued operations,
net of related tax expense of $1.8, $0.5, $5.4 and $1.1,
respectively � (0.2 ) � 0.5 � � 5.1 � � 1.3 � � Net Earnings $ 66.3
� $ 90.3 � $ 151.0 � $ 206.2 � � Net earnings per share: Basic from
continuing operations $ 1.60 $ 2.15 $ 3.53 $ 4.77 Discontinued
operations � - � � 0.01 � � 0.12 � � 0.03 � $ 1.60 � $ 2.16 � $
3.65 � $ 4.80 � � Diluted from continuing operations $ 1.58 $ 2.12
$ 3.48 $ 4.70 Discontinued operations � - � � 0.01 � � 0.12 � �
0.03 � $ 1.58 � $ 2.13 � $ 3.60 � $ 4.73 � � Dividends per share $
0.40 � $ 0.345 � $ 1.09 � $ 0.895 � � Average number of shares
outstanding: Basic � 41.4 � � 41.8 � � 41.3 � � 42.9 � Diluted �
41.9 � � 42.5 � � 41.9 � � 43.6 � � MARTIN MARIETTA MATERIALS, INC.
Unaudited Financial Highlights (In millions) � � Three Months Ended
� Nine Months Ended September 30, September 30, 2008 � 2007 2008 �
2007 Net sales: Aggregates Business: Mideast Group $ 167.7 $ 193.3
$ 455.3 $ 524.7 Southeast Group 119.1 117.4 343.9 346.8 West Group
� 193.0 � � 194.5 � � 515.2 � � 495.0 � Total Aggregates Business
479.8 505.2 1,314.4 1,366.5 Specialty Products � 46.4 � � 39.2 � �
134.5 � � 117.5 � Total $ 526.2 � $ 544.4 � $ 1,448.9 � $ 1,484.0 �
� Gross profit: Aggregates Business: Mideast Group $ 70.9 $ 79.1 $
174.9 $ 220.9 Southeast Group 22.0 25.3 57.4 86.0 West Group � 49.2
� � 51.3 � � 102.1 � � 101.0 � Total Aggregates Business 142.1
155.7 334.4 407.9 Specialty Products 10.9 11.7 35.1 32.8 Corporate
� (1.4 ) � (0.1 ) � (3.3 ) � (1.6 ) Total $ 151.6 � $ 167.3 � $
366.2 � $ 439.1 � � Selling, general, and administrative expenses:
Aggregates Business: Mideast Group $ 11.1 $ 10.9 $ 34.2 $ 34.2
Southeast Group 6.4 6.4 19.6 19.1 West Group � 11.1 � � 11.5 � �
33.5 � � 34.5 � Total Aggregates Business 28.6 28.8 87.3 87.8
Specialty Products 2.5 2.6 7.6 7.9 Corporate � 6.6 � � 5.0 � � 22.6
� � 23.3 � Total $ 37.7 � $ 36.4 � $ 117.5 � $ 119.0 � � Earnings
(Loss) from operations: Aggregates Business: Mideast Group $ 60.9 $
68.6 $ 154.5 $ 188.9 Southeast Group 13.1 19.9 36.0 68.8 West Group
� 38.4 � � 45.6 � � 72.2 � � 75.4 � Total Aggregates Business 112.4
134.1 262.7 333.1 Specialty Products 8.6 9.0 27.5 24.5 Corporate �
(6.0 ) � (6.2 ) � (27.5 ) � (26.6 ) Total $ 115.0 � $ 136.9 � $
262.7 � $ 331.0 � � Depreciation $ 41.7 $ 35.7 $ 120.0 $ 105.5
Depletion 1.5 1.3 3.3 3.4 Amortization � 0.8 � � 0.7 � � 2.4 � �
2.2 � $ 44.0 � $ 37.7 � $ 125.7 � $ 111.1 � � MARTIN MARIETTA
MATERIALS, INC. Balance Sheet Data (In millions) � � September 30,
� December 31, � September 30, 2008 2007 2007 (Unaudited) (Audited)
(Unaudited) ASSETS Cash and cash equivalents $ 13.9 $ 20.0 $ 26.4
Accounts receivable, net 300.4 245.8 312.3 Inventories, net 305.6
286.9 285.3 Other current assets 53.8 73.3 66.9 Property, plant and
equipment, net 1,718.4 1,433.6 1,405.7 Other noncurrent assets 43.5
40.1 40.9 Intangible assets, net � 628.0 � 584.1 � 584.5 Total
assets $ 3,063.6 $ 2,683.8 $ 2,722.0 � � LIABILITIES AND
SHAREHOLDERS' EQUITY Current maturities of long-term debt and
commercial paper $ 203.5 $ 276.1 $ 78.1 Other current liabilities
221.1 230.5 238.5 Long-term debt (excluding current maturities)
1,152.7 848.2 1,050.7 Other noncurrent liabilities 411.1 383.0
367.4 Shareholders' equity � 1,075.2 � 946.0 � 987.3 Total
liabilities and shareholders' equity $ 3,063.6 $ 2,683.8 $ 2,722.0
� MARTIN MARIETTA MATERIALS, INC. Unaudited Statements of Cash
Flows (In millions) � � Nine Months Ended September 30, 2008 � 2007
Net earnings $ 151.0 $ 206.2 Adjustments to reconcile net earnings
to cash provided by operating activities: Depreciation, depletion
and amortization 125.7 111.1 Share-based compensation expense 17.6
16.4 Excess tax benefits from share-based compensation (3.8 ) (20.2
) Gains on divestitures and sales of assets (29.4 ) (9.2 ) Deferred
income taxes 26.0 1.7 Other items, net 1.1 (2.6 ) Changes in
operating assets and liabilities: Accounts receivable, net (53.4 )
(70.3 ) Inventories, net (12.7 ) (29.8 ) Accounts payable 10.5 6.8
Other assets and liabilities, net � 38.4 � � 62.7 � � Net cash
provided by operating activities � 271.0 � � 272.8 � � Investing
activities: Additions to property, plant and equipment (223.8 )
(196.9 ) Acquisitions, net (218.4 ) (12.2 ) Proceeds from
divestitures and sales of assets 19.3 17.0 Railcar construction
advances (7.3 ) - Repayment of railcar construction advances � 7.3
� � - � � Net cash used for investing activities � (422.9 ) �
(192.1 ) � Financing activities: Borrowings of long-term debt 297.8
472.0 Repayments of long-term debt and payments on capital lease
obligations (4.1 ) (125.5 ) Net borrowings (repayments) of
commercial paper and overnight loan (72.0 ) 75.5 Termination of
interest rate swaps (11.1 ) - Debt issue costs (1.1 ) (0.8 ) Change
in bank overdraft (0.7 ) (8.3 ) Dividends paid (45.7 ) (39.0 )
Repurchases of common stock (24.0 ) (495.2 ) Issuances of common
stock 2.9 14.5 Excess tax benefits from share-based compensation �
3.8 � � 20.2 � � Net cash provided by (used for) financing
activities � 145.8 � � (86.6 ) � Net decrease in cash and cash
equivalents (6.1 ) (5.9 ) Cash and cash equivalents, beginning of
period � 20.0 � � 32.3 � � Cash and cash equivalents, end of period
$ 13.9 � $ 26.4 � � MARTIN MARIETTA MATERIALS, INC. Unaudited
Operational Highlights � � Three Months Ended � Nine Months Ended
September 30, 2008 September 30, 2008 Volume � Pricing Volume �
Pricing Volume/Pricing Variance (1) Heritage Aggregates Product
Line: (2) Mideast Group (21.1 %) 9.9 % (22.2 %) 11.4 % Southeast
Group (14.6 %) 8.7 % (11.8 %) 6.5 % West Group (5.4 %) 6.7 % 1.6 %
3.8 % Heritage Aggregates Operations (13.3 %) 7.5 % (10.5 %) 6.0 %
Aggregates Product Line (3) (12.4 %) 7.8 % (10.0 %) 6.2 % � Three
Months Ended Nine Months Ended September 30, September 30,
Shipments (tons in thousands) 2008 2007 2008 2007 Heritage
Aggregates Product Line: (2) Mideast Group 15,185 19,254 39,919
51,279 Southeast Group 9,454 11,066 28,568 32,382 West Group 19,773
� 20,902 � 53,394 � 52,543 � Heritage Aggregates Operations 44,412
51,222 121,881 136,204 Acquisitions 911 - 1,841 - Divestitures (4)
123 � 656 � 589 � 1,995 � Aggregates Product Line (3) 45,446 �
51,878 � 124,311 � 138,199 � � (1) Volume/pricing variances reflect
the percentage increase (decrease) from the comparable period in
the prior year. � (2) Heritage Aggregates product line excludes
volume and pricing data for acquisitions that have not been
included in prior-year operations for the comparable period and
divestitures. � (3) Aggregates product line includes all
acquisitions from the date of acquisition and divestitures through
the date of disposal. � (4) Divestitures include the tons related
to divested aggregates product line operations up to the date of
divestiture. � MARTIN MARIETTA MATERIALS, INC. Non-GAAP Financial
Measures (In millions) � Gross margin as a percentage of net sales
and operating margin as a percentage of net sales represent
non-GAAP measures. The Corporation presents these ratios calculated
based on net sales, as it is consistent with the basis by which
management reviews the Corporation's operating results. Further,
management believes it is consistent with the basis by which
investors analyze the Corporation's operating results given that
freight and delivery revenues and costs represent pass-throughs and
have no profit mark-up. Gross margin and operating margin
calculated as percentages of total revenues represent the most
directly comparable financial measures calculated in accordance
with generally accepted accounting principles ("GAAP"). The
following tables present the calculations of gross margin and
operating margin for the three and nine months ended September 30,
2008 and 2007, in accordance with GAAP and reconciliations of the
ratios as percentages of total revenues to percentages of net
sales: � Gross Margin in Accordance with Generally Accepted
Accounting Principles � Three Months Ended September 30, � Nine
Months Ended September 30, 2008 � 2007 2008 � 2007 Gross profit $
151.6 � $ 167.3 � $ 366.2 � $ 439.1 � Total revenues $ 599.3 � $
615.4 � $ 1,648.6 � $ 1,662.4 � Gross margin � 25.3 % � 27.2 % �
22.2 % � 26.4 % � � Gross Margin Excluding Freight and Delivery
Revenues Three Months Ended September 30, Nine Months Ended
September 30, 2008 2007 2008 2007 � Gross profit $ 151.6 � $ 167.3
� $ 366.2 � $ 439.1 � Total revenues $ 599.3 $ 615.4 $ 1,648.6 $
1,662.4 Less: Freight and delivery revenues � (73.1 ) � (71.0 ) �
(199.7 ) � (178.4 ) Net sales $ 526.2 � $ 544.4 � $ 1,448.9 � $
1,484.0 � Gross margin excluding freight and delivery revenues �
28.8 % � 30.7 % � 25.3 % � 29.6 % � � Operating Margin in
Accordance with Generally Accepted Accounting Principles Three
Months Ended September 30, Nine Months Ended September 30, 2008
2007 2008 2007 Earnings from operations $ 115.0 � $ 136.9 � $ 262.7
� $ 331.0 � Total revenues $ 599.3 � $ 615.4 � $ 1,648.6 � $
1,662.4 � Operating margin � 19.2 % � 22.2 % � 15.9 % � 19.9 % � �
Operating Margin Excluding Freight and Delivery Revenues Three
Months Ended September 30, Nine Months Ended September 30, 2008
2007 2008 2007 Earnings from operations $ 115.0 � $ 136.9 � $ 262.7
� $ 331.0 � Total revenues $ 599.3 $ 615.4 $ 1,648.6 $ 1,662.4
Less: Freight and delivery revenues � (73.1 ) � (71.0 ) � (199.7 )
� (178.4 ) Net sales $ 526.2 � $ 544.4 � $ 1,448.9 � $ 1,484.0 �
Operating margin excluding freight and delivery revenues � 21.8 % �
25.1 % � 18.1 % � 22.3 % � MARTIN MARIETTA MATERIALS, INC. Non-GAAP
Financial Measures (continued) (Dollars in millions) � � Three
Months Ended � Nine Months Ended September 30, September 30, 2008 �
2007 2008 � 2007 Earnings Before Interest, Income Taxes,
Depreciation, Depletion and Amortization (EBITDA) (1) $ 157.3 � $
176.7 � $ 394.9 � $ 449.6 � � (1) EBITDA is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness. EBITDA is not defined by generally accepted
accounting principles and, as such, should not be construed as an
alternative to net income or operating cash flow. For further
information on EBITDA, refer to the Corporation's Web site at
www.martinmarietta.com. � A reconciliation of Net Cash Provided by
Operating Activities to EBITDA is as follows: � Three Months Ended
Nine Months Ended September 30, September 30, 2008 2007 2008 2007
Net Cash Provided by Operating Activities $ 145.9 $ 132.8 $ 271.0 $
272.8 � Changes in operating assets and liabilities, net of effects
of acquisitions and divestitures (27.0 ) (11.9 ) 17.2 30.6 Other
items, net (9.0 ) 7.1 (12.5 ) 13.9 Income tax expense 27.9 31.5
64.6 87.2 Interest expense � 19.5 � � 17.2 � � 54.6 � � 45.1 �
EBITDA $ 157.3 � $ 176.7 � $ 394.9 � $ 449.6 � � The ratio of
Consolidated Debt-to-Consolidated EBITDA, as defined, for the
trailing twelve months is a covenant under the Corporation's
$325,000,000 five-year revolving credit agreement. Under the
agreement, the Corporation's ratio of Consolidated
Debt-to-Consolidated EBITDA, as defined, for the trailing twelve
months can not exceed 2.75 to 1.00 as of the end of any fiscal
quarter, with certain exceptions related to qualifying
acquisitions, as defined. � The following presents the calculation
of Consolidated Debt-to-Consolidated EBITDA, as defined, for the
trailing twelve months at September 30, 2008. For supporting
calculations, refer to Corporation's Web site at
www.martinmarietta.com. � � Twelve-Month Period October 1, 2007 to
September 30, 2008 Net earnings $ ���201.4 Add back: Interest
expense 70.4 Income tax expense 89.2 Depreciation, depletion and
amortization expense 163.1 Stock-based compensation expense 20.9
Deduct: Interest income (0.9 ) Consolidated EBITDA, as defined $
���544.1 � Consolidated Debt at September 30, 2008 $� 1,356.2 �
Consolidated Debt-to-Consolidated EBITDA, as defined, at September
30, 2008 for the trailing twelve-month EBITDA 2.49 � MLM-E
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