Martin Marietta Materials, Inc. (NYSE:MLM) today announced
results for the third quarter and nine months ended September 30,
2010.
Ward Nye, President and CEO of Martin Marietta Materials,
stated, “We are pleased to report our second consecutive quarter of
aggregates volume growth. In fact, aggregates shipments improved in
each of our end-use markets during the quarter, resulting in an
overall 6.3% increase, led by a 14% increase in the nonresidential
end-use market, both compared with the prior-year quarter. We are
confident that we are well positioned to capitalize on an economic
recovery.”
NOTABLE ITEMS (ALL COMPARISONS, UNLESS NOTED, ARE WITH THE
PRIOR-YEAR QUARTER)
- Earnings per diluted share of $1.13
compared with $1.23
- Net sales increased to $443.7 million
compared with $428.3 million
- Heritage aggregates product line volume
up 6.3% for the quarter
- Heritage aggregates product line
pricing down 3.1%, or $0.32 per ton; product and project mix
account for 160 basis points of the decline
- Specialty Products record third-quarter
earnings from operations of $12.0 million
- Selling, general and administrative
expenses down $1.7 million and 70 basis points as a percentage of
net sales
- Consolidated operating margin
(excluding freight and delivery revenues) of 18.9% compared with
20.8%
MANAGEMENT COMMENTARY (ALL COMPARISONS, UNLESS NOTED, ARE
WITH THE PRIOR-YEAR QUARTER)
Nye continued, “The infrastructure end-use market, which had
volume growth of 3%, was supported by an increase in state
transportation spending that was somewhat offset by a decline in
shipments to projects funded by the American Recovery and
Reinvestment Act (“ARRA” or “Stimulus”). We continue to believe
that this is a timing issue since Stimulus-related projects
contributed volume growth in some states during the quarter. In
other states, principally Iowa, where they aggressively completed
their Stimulus-related work in 2009, our shipments actually
declined. Overall, however, aggregates shipments to the
infrastructure end-use market, excluding projects funded by ARRA,
increased more than 6%. Activity in portions of the energy sector,
specifically the Haynesville and Barnett Shale Natural Gas Fields
in northwest Louisiana, east Texas and Arkansas, continues to be
the most significant volume driver in our nonresidential end-use
market, as aggregates are essential to build both oilfield roads
and pads for drilling rigs. Our ChemRock/Rail end-use market
experienced a 9% volume increase, fueled by railroad expansion
activity in certain markets. The residential end-use market had a
volume increase of 3%.
“Weather had a disparate impact on our third-quarter results.
Volume growth was led by our Mideast Group, which experienced dry
weather and generated a 10.3% increase in heritage aggregates
shipments. In particular, our Indiana markets experienced
significant highway work performed under the state’s 10-year, $12
billion transportation plan known as “Major Moves.” Contractors
benefitted from the favorable weather and accelerated construction
in efforts to achieve early completion bonuses on some state work.
The West Group reported a 6.0% increase in heritage aggregates
shipments, which principally reflects the positive impact of the
increased shipments to the energy sector and railroad industries.
These achievements were partially offset by wet weather in our
Midwest Division. Flooding at multiple Midwest Division facilities
restricted both operations and sales, and served to increase
production costs at certain locations. These conditions are a
strong contrast to its prior-year record third-quarter operating
results which reflected aggressive spending of ARRA funds by the
state of Iowa.
“Overall heritage aggregates product line pricing decreased
3.1%. Two previously reported pricing trends continued in the third
quarter. First, a higher percentage of shipments of base stone,
which is used in both road construction and energy sector activity
and has a lower average selling price compared with clean stone,
contributed to this negative period-to-period comparison of selling
price. Second, pricing on Stimulus-related projects was 10% lower
than our company average. We estimate that the impact of these
factors negatively affected aggregate pricing by 160 basis points
and expect this pricing pressure to ease as our end-markets
continue to either recover or reach levels of sustained stability.
However, competitive pricing pressure exists and opportunities to
increase pricing will return one product and one region at a
time.
“Our Specialty Products business benefitted from strong demand
in the chemicals product line and, once again, achieved strong
performance that contributed significantly to our quarterly
results, including record third-quarter gross profit and earnings
from operations. Sales of dolomitic lime decreased slightly, but
reflect the strength in the steel industry experienced in the early
part of the quarter. The Specialty Products business’ net sales of
$42.3 million in the quarter increased 6.8%. Earnings from
operations of $12.0 million reflect management’s continued focus on
cost control programs.
“Our strong results continue to reflect our ability to control
operating costs, including selling, general and administrative
expenses, while remaining focused on safety, productivity and
customer service. Direct production costs in our Aggregates
business increased $20.7 million, or 8.7%. Energy costs were a
significant driver as higher prices of energy increased costs by
$4.5 million, thereby reducing earnings by $0.06 per diluted share.
We were able to offset these increased energy costs by higher
productive efficiency, as measured by tons per working man hour,
which increased 3%. Selling, general and administrative expenses
declined $1.7 million, despite absorbing $0.9 million of expense
related to required payments under certain retirement plans. We
expect SG&A expenses to be no more than 8.8% of net sales for
the year, a 50-basis-point reduction from 2009.
“The overall effective tax rate for the quarter was 20.8%
compared with 21.2% in the prior-year period. The quarterly rate
was positively affected by the effective settlement of the IRS
examination of our 2007 federal income tax return and certain
issues related to the 2005 and 2004 tax years. Additionally, the
limitations period for federal examination of the 2006 tax year
expired. For full year 2010, we expect the overall effective tax
rate to be approximately 26%.
LIQUIDITY AND CAPITAL RESOURCES
“We have remained highly attentive to our balance sheet,
liquidity and cash flow generation. We ended the quarter with $60
million in cash and cash equivalents, available borrowings of $323
million on our revolving credit agreement and available borrowings
of $100 million on our secured accounts receivable credit
facility.
“Capital investment in organic growth prior to the current
recession has positioned our operations for strong performance in
an economic recovery. Capital expenditures were $110.0 million for
the nine months ended September 30, 2010, compared with $100.5
million for the comparable prior-year period. Capital expenditures
are forecast at $135 million for full year 2010. We can continue to
safely and appropriately reduce maintenance capital investment and
provide opportunities to allocate capital in a manner that
maximizes long-term shareholder value. In October, we acquired a
sand and gravel business in South Carolina. The acquired operation
supplements our ability to serve the Charlotte, North Carolina,
market as well as certain South Carolina markets by providing a
broader array of products.
“Cash provided by operating activities for the nine months ended
September 30, 2010, was $202.6 million compared with $234.6 million
for the same period in 2009. Increased sales have led to an $86.8
million build in accounts receivable during the current year. This
was partially offset by $8.9 million generated by our inventory
management initiatives and $4.4 million lower cash taxes paid
through the first nine months of 2010.
“At September 30, 2010, we had total outstanding debt of $1.031
billion, of which $245.4 million was classified as current,
including $242 million of Notes that mature in April 2011.
“At September 30, 2010, our ratio of consolidated debt to
consolidated earnings before interest expense, tax expense, and
depreciation, depletion and amortization expense (EBITDA), as
defined, for the trailing twelve-months was 2.88 times.
2010 OUTLOOK
“Our outlook for the balance of the year is based on continued
stability in overall aggregates demand. Evidence of that stability
is reflected in our year-to-date aggregates shipments. For the full
year, we expect: (i) infrastructure construction volume to be up 4%
to 6%; (ii) nonresidential construction volume to increase 6% to
7%; (iii) residential construction volume to be up 3% to 4%; and
(iv) growth of 2% to 3% for our ChemRock/Rail products.
“Considering all these factors, for full year 2010, we expect
aggregates volume growth of 4% to 6%, aggregates pricing to range
from down 3% to down 4%, and aggregates production cost per ton to
increase slightly compared with the prior year. Energy costs –
primarily diesel fuel consumed by off-road mobile quarry equipment
– are expected to increase compared with 2009. We expect the
Specialty Products segment to contribute $46 million to $48 million
in pretax earnings for 2010. Interest expense should be
approximately $70 million in 2010. Consistent with results for the
first nine months of 2010, we expect a continued increased use of
cash for working capital, most notably accounts receivable, in the
fourth quarter as revenues grow.
2011 OUTLOOK
“It is too early to issue 2011 guidance, but we believe
stability in federal infrastructure funding will be a critical
issue. At present, we continue to operate under a Congressional
continuing resolution that extended the Safe, Accountable, Flexible
and Efficient Transportation Equity Act – A Legacy for Users
(SAFETEA-LU) through December 31, 2010. We view working under
another Congressional continuing resolution of SAFETEA-LU for 2011
as likely. However, it is possible for some form of reauthorized
infrastructure legislation to be passed during the year. The
impetus for any new legislation would be primarily twofold: (i) its
effectiveness at creating new jobs, a major focus of the Obama
administration; and (ii) the current state of infrastructure
disrepair from years of underinvestment.
“We were pleased in September 2010 when President Obama proposed
a six-year plan to rebuild infrastructure with an initial $50
billion investment. However, further action related to any new
legislation will depend on the results of the mid-term elections.
We continue to expect modest improvement in state infrastructure
spending and approximately 30% in ARRA infrastructure funds spent
in 2011. This continued Stimulus spend, coupled with funding from
either an extended federal highway bill or continuing resolutions,
will maintain spending at constant funding levels. We also expect
to see improvement in the residential construction market and
anticipate the commercial component of our nonresidential end-use
market to trough in 2010, with modest 2011 volume recovery. The
price of natural gas and timing of lease commitments for oil and
natural gas companies will be significant factors in the
continuation of the energy sector activity into 2011. We will
provide further 2011 guidance in our fourth quarter earnings
release.”
RISKS TO OUTLOOK
The 2010 estimated outlook includes management’s assessment of
the likelihood of certain risk factors that will affect
performance. The most significant risk to 2010 performance will be,
as previously noted, the strength of the United States economy and
its impact on construction activity. Our 2010 outlook is based on
the expectation that the United States economy will broadly trend
toward stabilization in the remainder of the year.
Risks to the Corporation’s future performance are related to
both price and volume and include a more widespread decline in
aggregates pricing, a decline in infrastructure construction as a
result of unexpected delays in federal ARRA and state
infrastructure projects and continued lack of clarity regarding the
timing and amount of the federal highway bill, a decline in
commercial construction, a decline in residential construction, or
some combination thereof. Further, increased highway construction
funding pressures as a result of either federal or state issues can
affect profitability. Currently, nearly all states are experiencing
state-level funding pressures driven by lower tax revenues and an
inability to finance approved projects. North Carolina and Texas
are among the states experiencing these pressures, and these states
disproportionately affect revenue and profitability.
The Corporation’s principal business serves customers in
construction aggregates-related markets. This concentration could
increase the risk of potential losses on customer receivables;
however, payment bonds normally posted by the Corporation’s
customers on public projects together with lien rights on private
projects help to mitigate the risk of uncollectible receivables.
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, both directly and
indirectly. Diesel and other fuels change production costs directly
through consumption or indirectly in the increased cost of
energy-related consumables, among them, steel, explosives, tires
and conveyor belts. Fluctuating diesel pricing also affects
transportation costs, primarily through fuel surcharges in the
Corporation’s long-haul distribution network. The Corporation’s
estimated outlook does not include any further significant
increases in diesel costs during the remainder of 2010.
The availability of transportation in the Corporation’s
long-haul network, particularly the availability of barges on the
Mississippi River system and the availability of rail cars and
locomotive power to move trains, affects the Corporation’s ability
to efficiently transport material into certain markets, most
notably Texas, Florida and the Gulf Coast region. 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. Additionally,
the early onset of winter can shorten the construction season.
Risks to the 2010 outlook include volume decline as a result of
economic events outside of the Corporation’s control. In addition
to the impact on nonresidential and residential construction, the
Corporation is exposed to risk in its estimated outlook from credit
markets and the availability of and interest cost related to its
debt.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Net sales for the quarter were $443.7 million, a 3.6% increase
versus the $428.3 million recorded in the third quarter of 2009.
Earnings from operations for the third quarter of 2010 were $83.8
million compared with $89.2 million in 2009. Net earnings
attributable to Martin Marietta Materials were $52.0 million, or
$1.13 per diluted share, versus 2009 third-quarter net earnings
attributable to Martin Marietta Materials of $55.5 million, or
$1.23 per diluted share.
Net sales for the first nine months of 2010 were $1.182 billion
compared with $1.169 billion for the year-earlier period.
Year-to-date earnings from operations were $161.6 million versus
$173.1 million in 2009. For the nine-month period ended
September 30, 2010, net earnings attributable to Martin
Marietta Materials were $82.2 million, or $1.78 per diluted share,
compared with net earnings attributable to Martin Marietta
Materials of $88.6 million, or $1.99 per diluted share, in the
first nine months of 2009.
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the third quarter
of 2010 were $401.4 million compared with 2009 third-quarter sales
of $388.7 million. Aggregates pricing at heritage locations was
down 3.1%, while volume increased 6.3%. Earnings from operations
for the quarter were $74.1 million in 2010 versus $81.1 million in
the year-earlier period. Year-to-date 2010 net sales for the
Aggregates business were $1.050 billion versus $1.063 billion in
2009. Earnings from operations on a year-to-date basis were $134.8
million in 2010 compared with $168.1 million in 2009. For the
nine-month period ended September 30, 2010, heritage aggregates
pricing decreased 3.4%, while volume increased 2.8%.
Specialty Products’ third-quarter net sales of $42.3 million
increased 6.8% from prior-year net sales of $39.6 million.
Earnings from operations for the third quarter were $12.0 million
compared with $11.9 million in the year-earlier period. For
the first nine months of 2010, net sales were $131.9 million and
earnings from operations were $40.1 million compared with net sales
of $106.0 million and earnings from operations of $26.1 million for
the first nine months of 2009.
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its third
quarter 2010 earnings conference call later today (November 2,
2010). The live broadcast of the Martin Marietta Materials, Inc.
conference call will begin at 2 p.m. Eastern Time today. 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 website.
For those investors without online web access, the conference
call may also be accessed by calling (970) 315-0423, confirmation
number 19123787.
Martin Marietta Materials, Inc. is the nation’s second largest
producer of construction aggregates and a producer of
magnesia-based chemicals and dolomitic lime. For more information
about Martin Marietta Materials, Inc., refer to the Corporation’s
website 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
website at www.martinmarietta.com and are also available at the
SEC’s website 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 performance of the United States economy; widespread decline in
aggregates pricing; the level and timing of federal and state
transportation funding, including federal stimulus projects and
most particularly in North Carolina, one of the Corporation’s
largest and most profitable states, and Georgia, Texas, Iowa and
Louisiana, which when coupled with North Carolina, represented 56%
of 2009 net sales of the Aggregates business; the ability of states
and/or other entities to finance approved projects either with tax
revenues or alternative financing structures; levels of
construction spending in the markets the Corporation serves; the
severity of a continued decline in the commercial component of the
nonresidential construction market, notably office and retail
space, and a decline in residential construction; unfavorable
weather conditions, particularly Atlantic Ocean hurricane activity,
the late start to spring or the early onset of winter and the
impact of a drought in the markets served by the Corporation; the
volatility of fuel costs, particularly diesel fuel, and the impact
on the cost of other consumables, namely steel, explosives, tires
and conveyor belts; continued increases in the cost of other repair
and supply parts; transportation availability, 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, Florida and Gulf Coast markets; increased
transportation costs, including increases from higher
passed-through energy costs and higher volumes of rail and water
shipments; weakening in the steel industry markets served by the
Corporation’s dolomitic lime products; inflation and its effect on
both production and interest costs; ability to successfully
integrate acquisitions quickly and in a cost-effective manner and
achieve anticipated profitability to maintain compliance with the
Corporation’s leverage ratio debt covenant; changes in tax laws,
the interpretation of such laws and/or administrative practices
that would increase the Corporation’s tax rate; violation of the
debt covenant if price and/or volumes decline worse than expected;
downward pressure on the Corporation’s common stock price and its
impact on goodwill impairment evaluations; 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,
2010 2009
2010 2009 Net sales $ 443.7 $
428.3 $ 1,182.1 $ 1,168.8 Freight and delivery revenues 65.6
59.7 172.8 159.1
Total revenues 509.3 488.0
1,354.9 1,327.9 Cost of sales 329.9
310.6 931.0 890.8 Freight and delivery costs 65.6
59.7 172.8 159.1 Total
cost of revenues 395.5 370.3
1,103.8 1,049.9 Gross profit 113.8 117.7 251.1
278.0 Selling, general and administrative expenses 31.2 32.9
98.4 106.9 Research and development 0.1 0.1 0.1 0.3 Other operating
(income) and expenses, net (1.3 ) (4.5 ) (9.0
) (2.3 ) Earnings from operations 83.8 89.2 161.6 173.1
Interest expense 17.1 18.2 51.5 55.4 Other nonoperating
(income) and expenses, net (0.6 ) (1.2 ) 0.2
(1.6 ) Earnings from continuing operations before
taxes on income 67.3 72.2 109.9 119.3 Income tax expense
14.0 15.3 26.5 28.7
Earnings from continuing operations 53.3 56.9 83.4 90.6
Gain on discontinued operations, net of related tax expense
of $0.0, $0.0, $0.1 and $0.3, respectively - -
0.1 0.5 Consolidated net
earnings 53.3 56.9 83.5 91.1 Less: Net earnings attributable to
noncontrolling interests 1.3 1.4
1.3 2.5 Net earnings attributable to
Martin Marietta Materials, Inc. $ 52.0 $ 55.5 $ 82.2
$ 88.6 Net earnings per common share: Basic
from continuing operations attributable to common shareholders $
1.13 $ 1.23 $ 1.79 $ 1.99 Discontinued operations attributable to
common shareholders - - -
0.01 $ 1.13 $ 1.23 $ 1.79 $ 2.00
Diluted from continuing operations attributable to
common shareholders $ 1.13 $ 1.23 $ 1.78 $ 1.98 Discontinued
operations attributable to common shareholders -
- - 0.01 $ 1.13 $
1.23 $ 1.78 $ 1.99 Dividends per common
share $ 0.40 $ 0.40 $ 1.20 $ 1.20
Average number of common shares outstanding: Basic
45.5 44.6 45.5 43.7
Diluted 45.7 44.8 45.6
43.9
MARTIN MARIETTA MATERIALS, INC. Unaudited
Financial Highlights (In millions)
Three Months
Ended Nine Months Ended September 30,
September 30, 2010 2009
2010 2009 Net
sales: Aggregates Business: Mideast Group $ 133.6 $ 131.2 $ 348.5 $
337.5 Southeast Group 91.2 87.9 251.5 275.4 West Group 176.6
169.6 450.2 449.9
Total Aggregates Business 401.4 388.7 1,050.2 1,062.8 Specialty
Products 42.3 39.6 131.9
106.0 Total $ 443.7 $ 428.3 $ 1,182.1
$ 1,168.8 Gross profit (loss): Aggregates
Business: Mideast Group $ 48.7 $ 50.8 $ 108.2 $ 111.7 Southeast
Group 7.9 9.6 19.2 41.7 West Group 43.2 44.8
77.7 93.9 Total Aggregates
Business 99.8 105.2 205.1 247.3 Specialty Products 14.6 14.4 48.3
33.4 Corporate (0.6 ) (1.9 ) (2.3 )
(2.7 ) Total $ 113.8 $ 117.7 $ 251.1 $ 278.0
Selling, general and administrative expenses:
Aggregates Business: Mideast Group $ 10.3 $ 10.8 $ 31.1 $ 33.0
Southeast Group 6.3 7.1 19.1 20.3 West Group 10.7
10.3 31.8 31.5 Total
Aggregates Business 27.3 28.2 82.0 84.8 Specialty Products 2.5 2.3
8.1 7.0 Corporate 1.4 2.4 8.3
15.1 Total $ 31.2 $ 32.9 $ 98.4
$ 106.9 Earnings (Loss) from operations:
Aggregates Business: Mideast Group $ 38.7 $ 40.1 $ 80.3 $ 79.3
Southeast Group 1.4 4.8 (0.2 ) 23.0 West Group 34.0
36.2 54.7 65.8 Total
Aggregates Business 74.1 81.1 134.8 168.1 Specialty Products 12.0
11.9 40.1 26.1 Corporate (2.3 ) (3.8 ) (13.3 )
(21.1 ) Total $ 83.8 $ 89.2 $ 161.6 $
173.1 Depreciation $ 43.5 $ 43.8 $ 130.4 $ 127.9
Depletion 1.2 1.3 3.2 3.0 Amortization 0.7 0.8
2.3 2.4 $ 45.4 $ 45.9
$ 135.9 $ 133.3
MARTIN MARIETTA MATERIALS, INC. Balance
Sheet Data (In millions)
September 30,
December 31, September 30, 2010
2009 2009 (Unaudited) (Audited) (Unaudited)
ASSETS Cash and cash equivalents $ 60.5 $ 263.6 $ 193.8 Accounts
receivable, net 249.6 162.8 241.5 Inventories, net 323.8 332.6
329.8 Other current assets 98.2 97.9 79.9 Property, plant and
equipment, net 1,693.2 1,692.9 1,698.1 Intangible assets, net 641.8
636.7 637.1 Other noncurrent assets 48.7 52.8 52.5
Total assets
$ 3,115.8 $ 3,239.3 $ 3,232.7 LIABILITIES AND EQUITY
Current maturities of long-term debt and short-term facilities $
245.4 $ 226.1 $ 226.0 Other current liabilities 181.4 147.5 168.8
Long-term debt (excluding current maturities) 785.7 1,023.5 1,038.9
Other noncurrent liabilities 446.1 435.8 447.0 Total equity
1,457.2 1,406.4 1,352.0 Total liabilities and equity
$ 3,115.8 $ 3,239.3 $ 3,232.7
MARTIN MARIETTA
MATERIALS, INC. Unaudited Statements of Cash Flows (In
millions)
Nine Months Ended September
30, 2010 2009
Operating activities: Consolidated net earnings $ 83.5 $ 91.1
Adjustments to reconcile consolidated net earnings to net cash
provided by operating activities: Depreciation, depletion and
amortization 135.9 133.3 Stock-based compensation expense 11.7 17.1
Excess tax benefits from stock-based compensation transactions (1.6
) (2.0 ) (Gains) Losses on divestitures and sales of assets (4.3 )
2.0 Deferred income taxes 17.1 (1.9 )
Other items, net
0.7 (2.1 )
Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net (86.8 ) (30.3 ) Inventories, net 8.9 (9.7
) Accounts payable 24.9 (1.0 ) Other assets and liabilities, net
12.6 38.1 Net cash provided by
operating activities 202.6 234.6
Investing activities: Additions to property, plant and equipment
(110.0 ) (100.5 ) Acquisitions, net (28.1 ) (49.6 ) Proceeds from
divestitures and sales of assets 4.5 7.4 Railcar construction
advances (9.0 ) - Repayment of railcar construction advances 9.0 -
Loan to affiliate - (4.0 ) Net cash
used for investing activities (133.6 ) (146.7 )
Financing activities: Borrowings of long-term debt 150.0
280.0 Repayments of long-term debt and payments on capital lease
obligations (369.5 ) (167.7 ) Net repayments on short-term
facilities - (200.0 ) Change in bank overdraft (1.7 ) (4.5 )
Dividends paid (55.2 ) (52.9 ) Debt issue costs (0.1 ) (2.3 )
Issuances of common stock 2.8 233.2 Excess tax benefits from
stock-based compensation transactions 1.6 2.0 Purchase of
subsidiary shares from noncontrolling interest - (17.1 )
Distributions to owners of noncontrolling interests -
(2.6 ) Net cash (used for) provided by financing
activities (272.1 ) 68.1 Net (decrease)
increase in cash and cash equivalents (203.1 ) 156.0 Cash and cash
equivalents, beginning of period 263.6 37.8
Cash and cash equivalents, end of period $ 60.5
$ 193.8
MARTIN
MARIETTA MATERIALS, INC. Unaudited Operational
Highlights Three Months Ended Nine Months
Ended September 30, 2010 September 30, 2010
Volume Pricing Volume Pricing
Volume/Pricing Variance (1) Heritage Aggregates
Product Line: (2) Mideast Group 10.3 % (7.9 %) 8.8 %
(5.2 %) Southeast Group 1.4 % 3.0 % (6.4 %) (2.0 %) West Group 6.0
% (2.4 %) 3.9 % (2.7 %) Heritage Aggregates Operations 6.3 % (3.1
%) 2.8 % (3.4 %) Aggregates Product Line (3) 6.3 % (3.1 %) 2.8 %
(3.4 %)
Three Months Ended Nine Months Ended
September 30, September 30, Shipments (tons in
thousands)
2010 2009 2010
2009 Heritage Aggregates Product Line:
(2) Mideast Group 12,436 11,270 30,977 28,463 Southeast
Group 8,012 7,901 22,352 23,869 West Group 17,807 16,804
45,836 44,130 Heritage Aggregates Operations
38,255 35,975 99,165 96,462 Acquisitions - - - - Divestitures (4) 7
10 18 35 Aggregates Product Line (3)
38,262 35,985 99,183 96,497
(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 (Dollars 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
markup. 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, 2010 and 2009, in accordance with
GAAP and reconciliations of the ratios as percentages of total
revenues to percentages of net sales:
Three Months Ended Nine Months Ended
September 30, September 30,
Gross Margin in Accordance with
Generally Accepted Accounting Principles
2010 2009
2010 2009 Gross profit $ 113.8
$ 117.7 $ 251.1 $ 278.0 Total revenues
$ 509.3 $ 488.0 $ 1,354.9 $ 1,327.9
Gross margin 22.3 % 24.1 % 18.5 % 20.9
%
Three Months Ended Nine Months Ended
September 30, September 30, Gross Margin Excluding
Freight and Delivery Revenues 2010
2009 2010 2009
Gross profit $ 113.8 $ 117.7 $ 251.1
$ 278.0 Total revenues $ 509.3 $ 488.0 $ 1,354.9 $
1,327.9 Less: Freight and delivery revenues (65.6 )
(59.7 ) (172.8 ) (159.1 ) Net sales $ 443.7 $
428.3 $ 1,182.1 $ 1,168.8 Gross margin
excluding freight and delivery revenues 25.6 % 27.5 %
21.2 % 23.8 %
Three Months Ended Nine Months Ended
September 30, September 30,
Operating Margin in Accordance with
Generally Accepted Accounting Principles
2010 2009
2010 2009 Earnings from
operations $ 83.8 $ 89.2 $ 161.6 $ 173.1
Total revenues $ 509.3 $ 488.0 $ 1,354.9
$ 1,327.9 Operating margin 16.5 % 18.3
% 11.9 % 13.0 %
Three Months Ended
Nine Months Ended
September 30, September 30,
Operating Margin Excluding Freight and
Delivery Revenues
2010 2009
2010 2009 Earnings from
operations $ 83.8 $ 89.2 $ 161.6 $ 173.1
Total revenues $ 509.3 $ 488.0 $ 1,354.9 $ 1,327.9 Less:
Freight and delivery revenues (65.6 ) (59.7 )
(172.8 ) (159.1 ) Net sales $ 443.7 $ 428.3 $
1,182.1 $ 1,168.8 Operating margin excluding freight
and delivery revenues 18.9 % 20.8 % 13.7 %
14.8 %
MARTIN MARIETTA MATERIALS, INC.
Non-GAAP Financial Measures (continued) (Dollars in
millions)
Three Months
Ended Nine Months Ended September 30,
September 30, 2010 2009
2010 2009
Earnings Before Interest, Income Taxes,
Depreciation, Depletion and Amortization (EBITDA) (1)
$ 128.2 $ 134.5 $ 295.0 $ 305.0
(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 earnings or operating cash flow. For further
information on EBITDA, refer to the Corporation's website at
www.martinmarietta.com.
A reconciliation of Net Earnings Attributable to Martin
Marietta Materials, Inc. to EBITDA is as follows:
Three
Months Ended Nine Months Ended September 30,
September 30, 2010 2009
2010 2009 Net Earnings Attributable to
Martin Marietta Materials, Inc. $ 52.0 $ 55.5 $ 82.2 $ 88.6 Add
back: Interest Expense 17.1 18.2 51.5 55.4 Income Tax Expense for
Controlling Interests 14.0 15.3 26.6 28.8 Depreciation, Depletion
and Amortization Expense 45.1 45.5
134.7 132.2 EBITDA $ 128.2 $ 134.5 $ 295.0 $ 305.0
The ratio of Consolidated
Debt-to-Consolidated EBITDA, as defined, for the trailing twelve
months is a covenant under the Corporation's $325 million 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 3.50 to 1.00 as of
September 30, 2010, 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, 2010. For supporting
calculations, refer to Corporation's website at
www.martinmarietta.com.
Twelve-Month Period
October 1, 2009 to
September 30, 2010
Earnings from continuing operations attributable to Martin Marietta
Materials, Inc. $ 79.2 Add back: Interest expense 69.6 Income tax
expense 25.2 Depreciation, depletion and amortization expense 176.9
Stock-based compensation expense 15.1 Deduct: Interest income
(1.3 ) Consolidated EBITDA, as defined $ 364.7
Consolidated Debt, including debt guaranteed by the Corporation, at
September 30, 2010 $ 1,049.3
Consolidated Debt-to-Consolidated EBITDA,
as defined, at September 30, 2010 for the trailing twelve-month
EBITDA
2.88 times
MLM-E
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