SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2010
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number 1-12744
MARTIN MARIETTA MATERIALS, INC.
(Exact name of registrant as specified in its charter)
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North Carolina
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56-1848578
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification Number)
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2710 Wycliff Road, Raleigh, NC
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27607-3033
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(Address of principal executive offices)
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(Zip Code)
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Registrants telephone number, including area code
919-781-4550
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Former name:
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None
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Former name, former address and former fiscal year, if changes since last report.
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
o
No
þ
Indicate the number of shares outstanding of each of the issuers classes of Common Stock, as of
the latest practicable date.
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Class
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Outstanding as of October 28, 2010
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Common Stock, $0.01 par value
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45,528,566
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
Page 2 of 47
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30,
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December 31,
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September 30,
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2010
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2009
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2009
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(Unaudited)
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(Audited)
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(Unaudited)
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(Dollars in Thousands, Except Per Share Data)
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$
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60,499
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$
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263,591
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$
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193,835
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Accounts receivable, net
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249,613
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162,815
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241,520
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Inventories, net
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323,820
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332,569
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329,781
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Current deferred income tax benefits
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71,593
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60,303
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58,272
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Other current assets
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26,591
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37,582
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21,558
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Total Current Assets
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732,116
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856,860
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844,966
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Property, plant and equipment
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3,541,058
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3,465,978
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3,436,078
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Allowances for depreciation, depletion and
amortization
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(1,847,852
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)
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(1,773,073
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)
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(1,737,939
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)
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Net property, plant and equipment
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1,693,206
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1,692,905
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1,698,139
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Goodwill
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624,224
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624,224
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624,224
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Other intangibles, net
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17,563
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12,469
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12,887
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Other noncurrent assets
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48,674
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52,825
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52,465
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Total Assets
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$
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3,115,783
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$
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3,239,283
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$
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3,232,681
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LIABILITIES AND EQUITY
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Current Liabilities:
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Bank overdraft
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$
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$
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1,737
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$
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162
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Accounts payable
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76,993
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52,107
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61,741
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Accrued salaries, benefits and payroll taxes
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14,403
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15,222
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18,155
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Pension and postretirement benefits
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16,894
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18,823
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5,852
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Accrued insurance and other taxes
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32,409
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24,274
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34,307
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Income taxes
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2,469
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Current maturities of long-term debt and
short-term facilities
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245,423
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226,119
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226,025
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Accrued interest
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27,231
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12,751
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27,680
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Other current liabilities
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13,482
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22,520
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18,394
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Total Current Liabilities
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426,835
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373,553
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394,785
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Long-term debt
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785,706
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1,023,492
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1,038,873
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Pension, postretirement and postemployment benefits
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144,574
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160,354
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193,249
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Noncurrent deferred income taxes
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216,844
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195,946
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175,255
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Other noncurrent liabilities
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84,596
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79,527
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78,543
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|
|
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Total Liabilities
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1,658,555
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1,832,872
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1,880,705
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Equity:
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Common stock, par value $0.01 per share
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454
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453
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446
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Preferred stock, par value $0.01 per share
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Additional paid-in capital
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395,853
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381,173
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319,777
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Accumulated other comprehensive loss
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(67,249
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)
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|
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(75,084
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)
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(89,267
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)
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Retained earnings
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1,085,750
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1,058,698
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1,080,084
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|
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|
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Total Shareholders Equity
|
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1,414,808
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1,365,240
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1,311,040
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Noncontrolling interests
|
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42,420
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|
|
41,171
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|
|
|
40,936
|
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|
|
|
|
|
|
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Total Equity
|
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|
1,457,228
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|
|
|
1,406,411
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1,351,976
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Total Liabilities and Equity
|
|
$
|
3,115,783
|
|
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$
|
3,239,283
|
|
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$
|
3,232,681
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|
|
|
|
|
|
|
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|
See accompanying condensed notes to consolidated financial statements.
Page 3 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
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|
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Three Months Ended
|
|
|
Nine Months Ended
|
|
|
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September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In Thousands, Except Per Share Data)
|
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|
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|
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(Unaudited)
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|
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Net Sales
|
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$
|
443,709
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$
|
428,271
|
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$
|
1,182,054
|
|
|
$
|
1,168,802
|
|
Freight and delivery revenues
|
|
|
65,594
|
|
|
|
59,696
|
|
|
|
172,822
|
|
|
|
159,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
509,303
|
|
|
|
487,967
|
|
|
|
1,354,876
|
|
|
|
1,327,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
329,914
|
|
|
|
310,523
|
|
|
|
930,948
|
|
|
|
890,801
|
|
Freight and delivery costs
|
|
|
65,594
|
|
|
|
59,696
|
|
|
|
172,822
|
|
|
|
159,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
395,508
|
|
|
|
370,219
|
|
|
|
1,103,770
|
|
|
|
1,049,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
113,795
|
|
|
|
117,748
|
|
|
|
251,106
|
|
|
|
278,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative expenses
|
|
|
31,235
|
|
|
|
32,932
|
|
|
|
98,365
|
|
|
|
106,855
|
|
Research and development
|
|
|
114
|
|
|
|
51
|
|
|
|
150
|
|
|
|
350
|
|
Other operating (income) and expenses, net
|
|
|
(1,393
|
)
|
|
|
(4,448
|
)
|
|
|
(9,031
|
)
|
|
|
(2,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Operations
|
|
|
83,839
|
|
|
|
89,213
|
|
|
|
161,622
|
|
|
|
173,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
17,104
|
|
|
|
18,181
|
|
|
|
51,540
|
|
|
|
55,358
|
|
Other nonoperating (income) and expenses, net
|
|
|
(545
|
)
|
|
|
(1,196
|
)
|
|
|
189
|
|
|
|
(1,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before taxes on income
|
|
|
67,280
|
|
|
|
72,228
|
|
|
|
109,893
|
|
|
|
119,262
|
|
Income tax expense
|
|
|
13,990
|
|
|
|
15,308
|
|
|
|
26,539
|
|
|
|
28,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Continuing Operations
|
|
|
53,290
|
|
|
|
56,920
|
|
|
|
83,354
|
|
|
|
90,591
|
|
(Loss) Gain on discontinued operations, net of related tax expense
of $34, $37, $88 and $271, respectively
|
|
|
(34
|
)
|
|
|
(52
|
)
|
|
|
101
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net earnings
|
|
|
53,256
|
|
|
|
56,868
|
|
|
|
83,455
|
|
|
|
91,079
|
|
Less: Net earnings attributable to noncontrolling interests
|
|
|
1,266
|
|
|
|
1,354
|
|
|
|
1,246
|
|
|
|
2,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings Attributable to Martin Marietta Materials, Inc.
|
|
$
|
51,990
|
|
|
$
|
55,514
|
|
|
$
|
82,209
|
|
|
$
|
88,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings Attributable to Martin Marietta Materials, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
52,024
|
|
|
$
|
55,566
|
|
|
$
|
82,108
|
|
|
$
|
88,124
|
|
(Loss) Earnings from discontinued operations
|
|
|
(34
|
)
|
|
|
(52
|
)
|
|
|
101
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,990
|
|
|
$
|
55,514
|
|
|
$
|
82,209
|
|
|
$
|
88,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings Attributable to Martin Marietta Materials, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Common Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
45,526
|
|
|
|
44,622
|
|
|
|
45,463
|
|
|
|
43,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
45,678
|
|
|
|
44,813
|
|
|
|
45,639
|
|
|
|
43,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Per Common Share
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
1.20
|
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying condensed notes to consolidated financial statements.
Page 4 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
|
|
(Unaudited)
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Consolidated net earnings
|
|
$
|
83,455
|
|
|
$
|
91,079
|
|
Adjustments to reconcile consolidated net earnings to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
135,946
|
|
|
|
133,276
|
|
Stock-based compensation expense
|
|
|
11,684
|
|
|
|
17,084
|
|
(Gains) Losses on divestitures and sales of assets
|
|
|
(4,293
|
)
|
|
|
2,045
|
|
Deferred income taxes
|
|
|
17,131
|
|
|
|
(1,851
|
)
|
Excess tax benefits from stock-based compensation transactions
|
|
|
(1,643
|
)
|
|
|
(1,956
|
)
|
Other items, net
|
|
|
704
|
|
|
|
(2,165
|
)
|
Changes in operating assets and liabilities,
net of effects of acquisitions and divestitures:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(86,798
|
)
|
|
|
(30,291
|
)
|
Inventories, net
|
|
|
8,888
|
|
|
|
(9,738
|
)
|
Accounts payable
|
|
|
24,898
|
|
|
|
(982
|
)
|
Other assets and liabilities, net
|
|
|
12,639
|
|
|
|
38,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
202,611
|
|
|
|
234,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(110,024
|
)
|
|
|
(100,493
|
)
|
Acquisitions, net
|
|
|
(28,107
|
)
|
|
|
(49,574
|
)
|
Proceeds from divestitures and sales of assets
|
|
|
4,524
|
|
|
|
7,375
|
|
Railcar construction advances
|
|
|
(8,997
|
)
|
|
|
|
|
Repayments of railcar construction advances
|
|
|
8,997
|
|
|
|
|
|
Loan to affiliate
|
|
|
|
|
|
|
(4,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used for Investing Activities
|
|
|
(133,607
|
)
|
|
|
(146,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Borrowings of long-term debt
|
|
|
150,000
|
|
|
|
280,000
|
|
Repayments of long-term debt
|
|
|
(369,229
|
)
|
|
|
(167,577
|
)
|
Repayments on short-term facilities, net
|
|
|
|
|
|
|
(200,000
|
)
|
Debt issuance costs
|
|
|
(80
|
)
|
|
|
(2,285
|
)
|
Change in bank overdraft
|
|
|
(1,737
|
)
|
|
|
(4,515
|
)
|
Payments on capital lease obligations
|
|
|
(308
|
)
|
|
|
(110
|
)
|
Dividends paid
|
|
|
(55,157
|
)
|
|
|
(52,945
|
)
|
Distributions to owners of noncontrolling interests
|
|
|
|
|
|
|
(2,561
|
)
|
Purchase of subsidiary shares from noncontrolling interest
|
|
|
|
|
|
|
(17,060
|
)
|
Issuances of common stock
|
|
|
2,772
|
|
|
|
233,232
|
|
Excess tax benefits from stock-based compensation transactions
|
|
|
1,643
|
|
|
|
1,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used for) Provided by Financing Activities
|
|
|
(272,096
|
)
|
|
|
68,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash and Cash Equivalents
|
|
|
(203,092
|
)
|
|
|
156,041
|
|
Cash and Cash Equivalents, beginning of period
|
|
|
263,591
|
|
|
|
37,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, end of period
|
|
$
|
60,499
|
|
|
$
|
193,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
Issuance of notes payable for acquisition of land
|
|
$
|
450
|
|
|
$
|
125
|
|
Notes receivable issued in connection with divestiture and sales of assets
|
|
$
|
|
|
|
$
|
1,675
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
36,073
|
|
|
$
|
39,503
|
|
Cash payments for income taxes
|
|
$
|
3,732
|
|
|
$
|
8,101
|
|
See accompanying condensed notes to consolidated financial statements.
Page 5 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF TOTAL EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Additional
|
|
|
Accumulated Other
|
|
|
Retained
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
(in thousands)
|
|
Stock
|
|
|
Stock
|
|
|
Paid-in Capital
|
|
|
Comprehensive Loss
|
|
|
Earnings
|
|
|
Equity
|
|
|
Interests
|
|
|
Equity
|
|
Balance at December 31, 2009
|
|
|
45,399
|
|
|
$
|
453
|
|
|
$
|
381,173
|
|
|
$
|
(75,084
|
)
|
|
$
|
1,058,698
|
|
|
$
|
1,365,240
|
|
|
$
|
41,171
|
|
|
$
|
1,406,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,209
|
|
|
|
82,209
|
|
|
|
1,246
|
|
|
|
83,455
|
|
Unrecognized actuarial losses and prior service costs related to
pension and postretirement benefits, net of tax benefit of $714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,146
|
|
|
|
|
|
|
|
7,146
|
|
|
|
3
|
|
|
|
7,149
|
|
Foreign currency translation gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
286
|
|
|
|
|
|
|
|
286
|
|
|
|
|
|
|
|
286
|
|
Amortization of terminated value of forward starting interest rate
swap agreements into interest expense, net of tax benefit of $264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
403
|
|
|
|
|
|
|
|
403
|
|
|
|
|
|
|
|
403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated comprehensive earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,044
|
|
|
|
1,249
|
|
|
|
91,293
|
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,157
|
)
|
|
|
(55,157
|
)
|
|
|
|
|
|
|
(55,157
|
)
|
Issuances of common stock for stock award plans
|
|
|
130
|
|
|
|
1
|
|
|
|
2,996
|
|
|
|
|
|
|
|
|
|
|
|
2,997
|
|
|
|
|
|
|
|
2,997
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
11,684
|
|
|
|
|
|
|
|
|
|
|
|
11,684
|
|
|
|
|
|
|
|
11,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010
|
|
|
45,529
|
|
|
$
|
454
|
|
|
$
|
395,853
|
|
|
$
|
(67,249
|
)
|
|
$
|
1,085,750
|
|
|
$
|
1,414,808
|
|
|
$
|
42,420
|
|
|
$
|
1,457,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying condensed notes to consolidated financial statements.
Page 6 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
|
Significant Accounting Policies
|
|
|
Basis of Presentation
|
|
|
|
The accompanying unaudited consolidated financial statements of Martin Marietta Materials, Inc.
(the Corporation) have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to the Quarterly Report
on Form 10-Q and to Article 10 of Regulation S-X. The Corporation has continued to follow the
accounting policies set forth in the audited consolidated financial statements and related notes
thereto included in the Corporations Annual Report on Form 10-K for the year ended December 31,
2009, filed with the Securities and Exchange Commission on February 26, 2010. In the opinion of
management, the interim financial information provided herein reflects all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of the results of
operations, financial position and cash flows for the interim periods. The results of
operations for the quarter and nine months ended September 30, 2010 are not indicative of the
results expected for other interim periods or the full year. The balance sheet at December 31,
2009 has been derived from the audited financial statements at that date but does not include
all of the information and notes required by generally accepted accounting principles (GAAP) for
complete financial statements. These financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in the Corporations
Annual Report on Form 10-K for the year ended December 31, 2009.
|
|
|
|
Earnings per Common Share
|
|
|
|
The numerator for basic and diluted earnings per common share is net earnings attributable to
Martin Marietta Materials, Inc., reduced by dividends and undistributed earnings attributable to
the Corporations unvested restricted stock awards and incentive stock awards. The denominator
for basic earnings per common share is the weighted-average number of common shares outstanding
during the period. Diluted earnings per common share are computed assuming that the
weighted-average number of common shares is increased by the conversion, using the treasury
stock method, of awards to be issued to employees and nonemployee members of the Corporations
Board of Directors under certain stock-based compensation arrangements if the conversion is
dilutive. The diluted per-share computations reflect a change in the number of common shares
outstanding (the denominator) to include the number of additional shares that would have been
outstanding if the potentially dilutive common shares had been issued.
|
Page 7 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1.
|
|
Significant Accounting Policies (continued)
|
|
|
|
Earnings per Common Share (continued)
|
|
|
|
The following table reconciles the numerator and denominator for basic and diluted earnings per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In Thousands)
|
|
Net earnings from
continuing
operations
attributable to
Martin Marietta
Materials, Inc.
|
|
$
|
52,024
|
|
|
$
|
55,566
|
|
|
$
|
82,108
|
|
|
$
|
88,124
|
|
Less: Distributed
and undistributed
earnings
attributable to
unvested awards
|
|
|
529
|
|
|
|
617
|
|
|
|
865
|
|
|
|
1,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net earnings from
continuing
operations
attributable to
common shareholders
of Martin Marietta
Materials, Inc.
|
|
|
51,495
|
|
|
|
54,949
|
|
|
|
81,243
|
|
|
|
87,002
|
|
Basic and diluted
net (loss) earnings
from discontinued
operations
attributable to
common shareholders
|
|
|
(34
|
)
|
|
|
(52
|
)
|
|
|
101
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net earnings
attributable to
common shareholders
of Martin Marietta
Materials, Inc.
|
|
$
|
51,461
|
|
|
$
|
54,897
|
|
|
$
|
81,344
|
|
|
$
|
87,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted-average
common shares
outstanding
|
|
|
45,526
|
|
|
|
44,622
|
|
|
|
45,463
|
|
|
|
43,690
|
|
Effect of dilutive
employee and
director awards
|
|
|
152
|
|
|
|
191
|
|
|
|
176
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average
common shares
outstanding
|
|
|
45,678
|
|
|
|
44,813
|
|
|
|
45,639
|
|
|
|
43,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Earnings
|
|
|
|
Consolidated comprehensive earnings for the Corporation consist of consolidated net earnings;
amortization of actuarial losses and prior service costs related to pension and postretirement
benefits; foreign currency translation adjustments; and the amortization of the value of
terminated forward starting interest rate swap agreements into interest expense. Consolidated
comprehensive earnings for the three and nine months ended September 30, 2010 were $55,495,000
and $91,293,000, respectively. For the three and nine months ended September 30, 2009,
consolidated comprehensive earnings were $64,097,000 and $103,484,000, respectively.
|
Page 8 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
|
Discontinued Operations
|
|
|
Operations that are disposed of or permanently shut down represent discontinued operations, and,
therefore, the results of their operations through the dates of disposal and any gain or loss on
disposals are included in discontinued operations in the consolidated statements of earnings.
All discontinued operations relate to the Aggregates business.
|
|
|
|
Discontinued operations included the following net sales, pretax gain or loss on operations,
pretax gain on disposals, income tax expense and overall net earnings or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
44
|
|
|
$
|
408
|
|
|
$
|
102
|
|
|
$
|
1,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax (loss) gain on
operations
|
|
$
|
|
|
|
$
|
(15
|
)
|
|
$
|
189
|
|
|
$
|
756
|
|
Pretax gain on disposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax (loss) gain
|
|
|
|
|
|
|
(15
|
)
|
|
|
189
|
|
|
|
759
|
|
Income tax expense
|
|
|
34
|
|
|
|
37
|
|
|
|
88
|
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings
|
|
$
|
(34
|
)
|
|
$
|
(52
|
)
|
|
$
|
101
|
|
|
$
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finished products
|
|
$
|
350,842
|
|
|
$
|
351,393
|
|
|
$
|
345,682
|
|
Products in process and raw
materials
|
|
|
14,310
|
|
|
|
16,296
|
|
|
|
17,432
|
|
Supplies and expendable parts
|
|
|
46,566
|
|
|
|
47,554
|
|
|
|
47,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
411,718
|
|
|
|
415,243
|
|
|
|
410,665
|
|
Less allowances
|
|
|
(87,898
|
)
|
|
|
(82,674
|
)
|
|
|
(80,884
|
)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
323,820
|
|
|
$
|
332,569
|
|
|
$
|
329,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the quarter ended September 30, 2010, the Corporation reclassified certain of its
finished products and inventory allowances and currently presents them on a gross basis. Prior-period amounts,
which were previously presented on a net basis, have been recast for comparability.
The reclassifications had no effect on the Corporations financial condition, results of
operations or cash flows.
|
Page 9 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
|
|
Goodwill and Intangible Assets
|
|
|
During the three and nine months ended September 30, 2010, there were no changes in goodwill.
|
|
|
|
During the nine months ended September 30, 2010, the Corporation acquired use rights of
$6,600,000 related to its Aggregates business. The use rights are deemed to have an indefinite
life and are not being amortized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.875% Notes, due 2011
|
|
$
|
242,118
|
|
|
$
|
242,092
|
|
|
$
|
242,083
|
|
6.6% Senior Notes, due 2018
|
|
|
298,242
|
|
|
|
298,111
|
|
|
|
298,068
|
|
7% Debentures, due 2025
|
|
|
124,388
|
|
|
|
124,371
|
|
|
|
124,366
|
|
6.25% Senior Notes, due 2037
|
|
|
247,874
|
|
|
|
247,851
|
|
|
|
247,844
|
|
Floating Rate Senior Notes, due 2010
|
|
|
|
|
|
|
217,502
|
|
|
|
217,437
|
|
Term Loan, due 2012, interest rate
of 3.3% at September 30, 2010
|
|
|
111,750
|
|
|
|
111,750
|
|
|
|
126,750
|
|
Other notes
|
|
|
6,757
|
|
|
|
7,934
|
|
|
|
8,350
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,031,129
|
|
|
|
1,249,611
|
|
|
|
1,264,898
|
|
Less current maturities
|
|
|
(245,423
|
)
|
|
|
(226,119
|
)
|
|
|
(226,025
|
)
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
785,706
|
|
|
$
|
1,023,492
|
|
|
$
|
1,038,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In April 2010, the Corporation repaid $217,600,000 of Floating Rate Senior Notes through
the use of cash and short-term borrowings.
|
|
|
|
At September 30, 2010, the Corporation had $245,423,000 of current maturities of long-term debt,
of which $242,118,000 of 6.875% Notes become due April 2011.
|
|
|
|
At September 30, 2010, December 31, 2009 and September 30, 2009, the Corporation had no
outstanding borrowings under its $100,000,000 AR Credit Facility. Borrowings under the AR
Credit Facility are limited based on the balance of the Corporations accounts receivable.
|
Page 10 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
|
Long-Term Debt (continued)
|
|
|
The Corporations $325,000,000 five-year revolving credit agreement, $130,000,000 unsecured term
loan (the Term Loan) and $100,000,000 three-year secured accounts receivable credit facility
(the AR Credit Facility) are subject to a leverage ratio covenant. The covenant requires the
Corporations ratio of consolidated debt to consolidated earnings before interest, taxes,
depreciation, depletion and amortization (EBITDA), as defined, for the trailing twelve months
(the Ratio) to not exceed 3.50 to 1.00 as of the end of any fiscal quarter. The covenant
requires the inclusion of debt guaranteed by the Corporation in the Ratio calculation.
Furthermore, the covenant allows the Corporation to exclude debt incurred in connection with
acquisitions from the Ratio for a period of 180 days so long as the Corporation maintains
specified ratings on its long-term unsecured debt and the Ratio calculated without such
exclusion does not exceed the maximum Ratio plus 0.25. Certain other nonrecurring items and
noncash items, if they occur, can also be excluded from the Ratio. The Corporation was in
compliance with the Ratio at September 30, 2010.
|
|
|
|
The Corporation unwound two forward starting interest rate swap agreements with a total notional
amount of $150,000,000 (the Swap Agreements) in April 2008. The Corporation made a cash
payment of $11,139,000, which represented the fair value of the Swap Agreements on the date of
termination. The accumulated other comprehensive loss, net of tax, at the date of termination
is being recognized in earnings over the life of the 6.6% Senior Notes. For the three and nine
months ended September 30, 2010, the Corporation recognized $226,000 and $667,000, respectively,
as additional interest expense. For the three and nine months ended September 30, 2009, the
Corporation recognized $211,000 and $622,000, respectively, as additional interest expense. The
ongoing amortization of the terminated value of the Swap Agreements will increase annual
interest expense by approximately $1,000,000 until the maturity of the 6.6% Senior Notes in
2018. The accumulated other comprehensive loss related to the Swap Agreements was $5,484,000,
net of cumulative noncurrent deferred tax assets of $3,588,000, at September 30, 2010;
$5,887,000, net of cumulative noncurrent deferred tax assets of $3,852,000, at December 31,
2009; and $6,017,000, net of cumulative noncurrent deferred tax assets of $3,937,000, at
September 30, 2009.
|
|
|
The Corporations financial instruments include temporary cash investments, accounts receivable,
notes receivable, bank overdraft, publicly registered long-term notes, debentures and other
long-term debt.
|
|
|
|
Temporary cash investments are placed primarily in money market funds and Eurodollar time
deposits with the following financial institutions: Bank of America, N.A., Branch Banking and
Trust Company, JP Morgan Chase Bank, N.A. and Wells Fargo Bank, N.A.. The Corporations cash
equivalents have maturities of less than three months. Due to the
short maturity of these investments, they are carried on the consolidated balance sheets at
cost, which approximates fair value.
|
Page 11 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6.
|
|
Financial Instruments (continued)
|
|
|
Customer receivables are due from a large number of customers, primarily in the construction
industry, and are dispersed across wide geographic and economic regions. However, customer
receivables are more heavily concentrated in certain states (namely, Texas, North Carolina,
Georgia, Iowa and Louisiana which accounted for approximately 56% of the Aggregate business
2009 net sales). The estimated fair values of customer receivables approximate their carrying
amounts.
|
|
|
|
Notes receivable are primarily related to divestitures and are not publicly traded. However,
using current market interest rates, but excluding adjustments for credit worthiness, if any,
management estimates that the fair value of notes receivable approximates the carrying amount.
|
|
|
|
The bank overdraft represents the float of outstanding checks. The estimated fair value of the
bank overdraft approximates its carrying value.
|
|
|
|
The estimated fair value of the Corporations publicly registered long-term notes and debentures
at September 30, 2010 was $980,791,000, compared with a carrying amount of $912,622,000 on the
consolidated balance sheet. The fair value of this long-term debt was estimated based on quoted
market prices. The estimated fair value of other borrowings, including the Corporations Term
Loan, was $118,507,000 at September 30, 2010 and approximates its carrying amount.
|
|
|
|
The carrying values and fair values of the Corporations financial instruments are as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
December 31, 2009
|
|
September 30, 2009
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
|
Value
|
|
Fair Value
|
|
Value
|
|
Fair Value
|
|
Value
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
60,499
|
|
|
$
|
60,499
|
|
|
$
|
263,591
|
|
|
$
|
263,591
|
|
|
$
|
193,835
|
|
|
$
|
193,835
|
|
Accounts receivable, net
|
|
$
|
249,613
|
|
|
$
|
249,613
|
|
|
$
|
162,815
|
|
|
$
|
162,815
|
|
|
$
|
241,520
|
|
|
$
|
241,520
|
|
Notes receivable, net
|
|
$
|
10,889
|
|
|
$
|
10,889
|
|
|
$
|
13,415
|
|
|
$
|
13,415
|
|
|
$
|
13,458
|
|
|
$
|
13,458
|
|
Bank overdraft
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,737
|
|
|
$
|
1,737
|
|
|
$
|
162
|
|
|
$
|
162
|
|
Long-term debt
|
|
$
|
1,031,129
|
|
|
$
|
1,099,298
|
|
|
$
|
1,249,611
|
|
|
$
|
1,245,068
|
|
|
$
|
1,264,898
|
|
|
$
|
1,249,621
|
|
Page 12 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Income tax expense reported in the Corporations consolidated statements of earnings includes
income tax expense on earnings attributable to both the Corporation and its noncontrolling
interests.
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
2010
|
|
2009
|
Estimated effective income tax rate:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
24.1
|
%
|
|
|
24.0
|
%
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
46.6
|
%
|
|
|
35.7
|
%
|
|
|
|
|
|
|
|
|
|
Consolidated Overall
|
|
|
24.2
|
%
|
|
|
24.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
The Corporations effective income tax rate reflects the effect of federal and state income
taxes and the impact of differences in book and tax accounting arising from the net permanent
benefits associated with the depletion allowances for mineral reserves and the domestic
production deduction. The effective income tax rates for discontinued operations reflect the
tax effects of individual operations transactions and are not indicative of the Corporations
overall effective income tax rate.
|
|
|
|
On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law.
Among other things, the PPACA reduces the tax benefits available to an employer that receives
the Medicare Part D subsidy. Employers that receive the Medicare Part D subsidy recognize the
deferred tax effects of the reduced deductibility of the postretirement prescription drug
coverage in continuing operations in the period of enactment. The effects of changes in tax law
are recognized as discrete events in the period of enactment. Accordingly, the overall
estimated effective income tax rate for the nine months ended September 30, 2010 includes the
effect to the Corporation of the PPACA.
|
|
|
|
The change in the year-to-date consolidated overall estimated effective income tax rate during
the third quarter of 2010, when compared with the year-to-date consolidated overall estimated
effective tax rate as of June 30, 2010, increased consolidated net earnings for the nine months
ended September 30, 2010 by $5,724,000, or $0.13 per diluted share. The overall estimated
effective income tax rate for the nine months ended September 30, 2010 included the effective
settlement of issues related to the 2004 and 2005 tax years, the effective settlement of the
Internal Revenue Service audit for the 2007 tax year, the expiration of the statute of
limitations for federal examination of the 2006 tax year, the provision of a valuation allowance
for unused tax credits, and the true-up of the 2009 provision estimates to actual taxes paid as
a result of filing the related tax returns during the period.
|
Page 13 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7.
|
|
Income Taxes (continued)
|
|
|
The change in the year-to-date consolidated overall estimated effective income tax rate during
the third quarter of 2009, when compared with the year-to-date consolidated overall effective
tax rate as of June 30, 2009, increased consolidated net earnings for the nine months ended
September 30, 2009 by $5,161,000, or $0.12 per diluted share. The overall estimated effective
income tax rate for the nine months ended September 30, 2009 included the true-up of the 2008
provision estimates to actual taxes paid as a result of filing the related tax returns during
the period.
|
|
|
|
The following table summarizes changes in the Corporations unrecognized tax benefits, excluding
interest and correlative effects, for the nine months ended September 30, 2010 (dollars in
thousands):
|
|
|
|
|
|
Unrecognized tax benefits at beginning of period
|
|
$
|
16,722
|
|
Gross increases tax positions in prior years
|
|
|
18,545
|
|
Gross decreases tax positions in prior years
|
|
|
(3,107
|
)
|
Gross increases tax positions in current year
|
|
|
1,172
|
|
Settlements with taxing authorities
|
|
|
(684
|
)
|
Lapse of statute of limitations
|
|
|
(10,401
|
)
|
|
|
|
|
Unrecognized tax benefits at end of period
|
|
$
|
22,247
|
|
|
|
|
|
|
|
At September 30, 2010, unrecognized tax benefits of $4,372,000, net of federal tax benefits and
related to interest accruals and permanent income tax differences, would have favorably affected
the Corporations effective tax rate if recognized.
|
|
|
|
The Corporation anticipates that it is reasonably possible that $10,213,000 of unrecognized tax
benefits may change during the twelve months ending September 30, 2011 as a result of filing a
change in accounting method for the 2010 tax year.
|
Page 14 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8.
|
|
Pension and Postretirement Benefits
|
|
|
The following presents the estimated components of the recorded net periodic benefit cost for
pension and postretirement benefits (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Pension
|
|
|
Postretirement Benefits
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Service cost
|
|
$
|
2,761
|
|
|
$
|
2,788
|
|
|
$
|
137
|
|
|
$
|
139
|
|
Interest cost
|
|
|
5,753
|
|
|
|
5,566
|
|
|
|
688
|
|
|
|
730
|
|
Expected return on assets
|
|
|
(5,255
|
)
|
|
|
(4,060
|
)
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (credit)
|
|
|
146
|
|
|
|
164
|
|
|
|
(372
|
)
|
|
|
(372
|
)
|
Actuarial loss
|
|
|
2,554
|
|
|
|
3,596
|
|
|
|
|
|
|
|
|
|
Settlement charge
|
|
|
923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit cost
|
|
$
|
6,882
|
|
|
$
|
8,054
|
|
|
$
|
453
|
|
|
$
|
497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
Pension
|
|
|
Postretirement Benefits
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Service cost
|
|
$
|
8,282
|
|
|
$
|
8,364
|
|
|
$
|
411
|
|
|
$
|
418
|
|
Interest cost
|
|
|
17,259
|
|
|
|
16,699
|
|
|
|
2,063
|
|
|
|
2,189
|
|
Expected return on assets
|
|
|
(15,766
|
)
|
|
|
(12,181
|
)
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (credit)
|
|
|
437
|
|
|
|
491
|
|
|
|
(1,117
|
)
|
|
|
(1,116
|
)
|
Actuarial loss
|
|
|
7,661
|
|
|
|
10,787
|
|
|
|
|
|
|
|
|
|
Settlement charge
|
|
|
1,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit cost
|
|
$
|
18,879
|
|
|
$
|
24,160
|
|
|
$
|
1,357
|
|
|
$
|
1,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Corporation is engaged in certain legal and administrative proceedings incidental to
its normal business activities. In the opinion of management and counsel, it is unlikely that
the outcome of any litigation and other proceedings, including those pertaining to environmental
matters, relating to the Corporation and its subsidiaries, will have a material adverse effect
on the results of the Corporations operations, its cash flows or its financial position.
|
|
|
|
During the nine months ended September 30, 2010, the Corporation settled legal proceedings
relating to its Greenwood, Missouri, operation for approximately $7,000,000. In connection with
the settlement, the Corporation reversed the excess of the established legal reserve, thereby
increasing net earnings by $2,751,000, or $0.06 per diluted share.
|
Page 15 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
The Corporation conducts its aggregates operations through three reportable business segments:
Mideast Group, Southeast Group and West Group. The Corporation also has a Specialty Products
segment that includes magnesia-based chemicals products and dolomitic lime.
|
|
|
|
The following tables display selected financial data for continuing operations for the
Corporations reportable business segments. Corporate loss from operations primarily includes
depreciation on capitalized interest, expenses for corporate administrative functions,
unallocated corporate expenses and other nonrecurring and/or non-operational adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
Total revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
144,688
|
|
|
$
|
139,741
|
|
|
$
|
375,726
|
|
|
$
|
358,474
|
|
Southeast Group
|
|
|
115,672
|
|
|
|
108,162
|
|
|
|
313,209
|
|
|
|
333,519
|
|
West Group
|
|
|
202,841
|
|
|
|
196,044
|
|
|
|
521,277
|
|
|
|
518,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates
Business
|
|
|
463,201
|
|
|
|
443,947
|
|
|
|
1,210,212
|
|
|
|
1,209,994
|
|
Specialty Products
|
|
|
46,102
|
|
|
|
44,020
|
|
|
|
144,664
|
|
|
|
117,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
509,303
|
|
|
$
|
487,967
|
|
|
$
|
1,354,876
|
|
|
$
|
1,327,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
133,607
|
|
|
$
|
131,176
|
|
|
$
|
348,524
|
|
|
$
|
337,554
|
|
Southeast Group
|
|
|
91,216
|
|
|
|
87,938
|
|
|
|
251,440
|
|
|
|
275,392
|
|
West Group
|
|
|
176,623
|
|
|
|
169,571
|
|
|
|
450,212
|
|
|
|
449,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates
Business
|
|
|
401,446
|
|
|
|
388,685
|
|
|
|
1,050,176
|
|
|
|
1,062,818
|
|
Specialty Products
|
|
|
42,263
|
|
|
|
39,586
|
|
|
|
131,878
|
|
|
|
105,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
443,709
|
|
|
$
|
428,271
|
|
|
$
|
1,182,054
|
|
|
$
|
1,168,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) from
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
38,741
|
|
|
$
|
40,067
|
|
|
$
|
80,296
|
|
|
$
|
79,247
|
|
Southeast Group
|
|
|
1,414
|
|
|
|
4,812
|
|
|
|
(144
|
)
|
|
|
22,977
|
|
West Group
|
|
|
33,941
|
|
|
|
36,207
|
|
|
|
54,654
|
|
|
|
65,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates
Business
|
|
|
74,096
|
|
|
|
81,086
|
|
|
|
134,806
|
|
|
|
168,054
|
|
Specialty Products
|
|
|
12,043
|
|
|
|
11,947
|
|
|
|
40,067
|
|
|
|
26,108
|
|
Corporate
|
|
|
(2,300
|
)
|
|
|
(3,820
|
)
|
|
|
(13,251
|
)
|
|
|
(21,056
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
83,839
|
|
|
$
|
89,213
|
|
|
$
|
161,622
|
|
|
$
|
173,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 16 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10.
|
|
Business Segments (continued)
|
|
|
The asphalt, ready mixed concrete, road paving and other product lines are considered internal
customers of the core aggregates business. Product lines for the Specialty Products segment
consist of magnesia-based chemicals, dolomitic lime and other. Net sales by product line are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregates
|
|
$
|
376,554
|
|
|
$
|
364,774
|
|
|
$
|
986,038
|
|
|
$
|
992,088
|
|
Asphalt
|
|
|
9,833
|
|
|
|
12,041
|
|
|
|
29,014
|
|
|
|
34,988
|
|
Ready Mixed Concrete
|
|
|
7,056
|
|
|
|
6,194
|
|
|
|
19,558
|
|
|
|
21,301
|
|
Road Paving
|
|
|
6,575
|
|
|
|
4,349
|
|
|
|
12,602
|
|
|
|
10,550
|
|
Other
|
|
|
1,428
|
|
|
|
1,327
|
|
|
|
2,964
|
|
|
|
3,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
401,446
|
|
|
|
388,685
|
|
|
|
1,050,176
|
|
|
|
1,062,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Magnesia-Based Chemicals
|
|
|
29,290
|
|
|
|
26,238
|
|
|
|
89,287
|
|
|
|
73,757
|
|
Dolomitic Lime
|
|
|
12,457
|
|
|
|
12,761
|
|
|
|
41,386
|
|
|
|
30,918
|
|
Other
|
|
|
516
|
|
|
|
587
|
|
|
|
1,205
|
|
|
|
1,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty Products
|
|
|
42,263
|
|
|
|
39,586
|
|
|
|
131,878
|
|
|
|
105,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
443,709
|
|
|
$
|
428,271
|
|
|
$
|
1,182,054
|
|
|
$
|
1,168,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
|
Supplemental Cash Flow Information
|
|
|
The following table presents the components of the change in other assets and liabilities, net:
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
Other current and noncurrent assets
|
|
$
|
3,108
|
|
|
$
|
(5,479
|
)
|
Accrued salaries, benefits and payroll taxes
|
|
|
(2,237
|
)
|
|
|
(4,594
|
)
|
Accrued insurance and other taxes
|
|
|
8,134
|
|
|
|
10,888
|
|
Accrued income taxes
|
|
|
11,177
|
|
|
|
22,560
|
|
Accrued pension, postretirement and
postemployment benefits
|
|
|
(10,849
|
)
|
|
|
3,729
|
|
Other current and noncurrent liabilities
|
|
|
3,306
|
|
|
|
10,993
|
|
|
|
|
|
|
|
|
|
|
$
|
12,639
|
|
|
$
|
38,097
|
|
|
|
|
|
|
|
|
Page 17 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
|
|
Transactions with Affiliates
|
|
|
On July 14, 2010, the Corporation entered into a reimbursement and indemnification
agreement with Fifth Third Bank (Fifth Third), pursuant to which Fifth Third issued a
letter of credit for the repayment of amounts borrowed by an affiliate under a $20,000,000
two-year revolving line of credit provided by Fifth Third and the Corporation agreed to
reimburse Fifth Third for any amounts funded under the letter of credit. Additionally,
on July 13, 2010, the Corporation provided Bank of America, N.A. with a guarantee of
$12,400,000 of payment obligations of the Corporations affiliate under certain equipment
lease agreements. The affiliate has agreed to reimburse and indemnify the Corporation for
any payments and expenses the Corporation may incur from either the reimbursement and
indemnification agreement or the guarantee agreement. The Corporation holds a
subordinate lien of the affiliates assets as collateral for potential payments
under the reimbursement and indemnification agreement.
|
Page 18 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW Martin Marietta Materials, Inc. (the Corporation), conducts its operations through four
reportable business segments: Mideast Group, Southeast Group, West Group (collectively, the
Aggregates business) and Specialty Products. The Corporations annual net sales and earnings are
predominately derived from its Aggregates business, which processes and sells granite, limestone,
and other aggregates products from a network of 286 quarries, distribution facilities and plants to
customers in 31 states, Canada, the Bahamas and the Caribbean Islands. The Aggregates business
products are used primarily by commercial customers principally in domestic construction of
highways and other infrastructure projects and for commercial and residential building development.
The Specialty Products segment produces magnesia-based chemicals products used in industrial,
agricultural and environmental applications and dolomitic lime sold primarily to customers in the
steel industry.
CRITICAL ACCOUNTING POLICIES The Corporation outlined its critical accounting policies in its
Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and
Exchange Commission on February 26, 2010. There were no changes to the Corporations critical
accounting policies during the nine months ended September 30, 2010.
RESULTS OF OPERATIONS
Except as indicated, the following comparative analysis in the Results of Operations section of
this Managements Discussion and Analysis of Financial Condition and Results of Operations reflects
results from continuing operations and is based on net sales and cost of sales. The Corporations
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.
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 Corporations operating results.
Further, management believes it is consistent with the basis by which investors analyze the
Corporations 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, 2010 and 2009 in accordance with GAAP and reconciliations of the ratios as percentages of total
revenues to percentages of net sales (dollars in thousands):
Page 19 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
Gross Margin in Accordance with GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
113,795
|
|
|
$
|
117,748
|
|
|
$
|
251,106
|
|
|
$
|
278,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
509,303
|
|
|
$
|
487,967
|
|
|
$
|
1,354,876
|
|
|
$
|
1,327,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
22.3
|
%
|
|
|
24.1
|
%
|
|
|
18.5
|
%
|
|
|
20.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin Excluding Freight and Delivery Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
113,795
|
|
|
$
|
117,748
|
|
|
$
|
251,106
|
|
|
$
|
278,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
509,303
|
|
|
$
|
487,967
|
|
|
$
|
1,354,876
|
|
|
$
|
1,327,912
|
|
Less: Freight and delivery
revenues
|
|
|
(65,594
|
)
|
|
|
(59,696
|
)
|
|
|
(172,822
|
)
|
|
|
(159,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
443,709
|
|
|
$
|
428,271
|
|
|
$
|
1,182,054
|
|
|
$
|
1,168,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin excluding
freight
and delivery revenues
|
|
|
25.6
|
%
|
|
|
27.5
|
%
|
|
|
21.2
|
%
|
|
|
23.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin in Accordance with GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
$
|
83,839
|
|
|
$
|
89,213
|
|
|
$
|
161,622
|
|
|
$
|
173,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
509,303
|
|
|
$
|
487,967
|
|
|
$
|
1,354,876
|
|
|
$
|
1,327,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
|
|
16.5
|
%
|
|
|
18.3
|
%
|
|
|
11.9
|
%
|
|
|
13.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 20 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
Operating Margin Excluding Freight and Delivery Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
$
|
83,839
|
|
|
$
|
89,213
|
|
|
$
|
161,622
|
|
|
$
|
173,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
509,303
|
|
|
$
|
487,967
|
|
|
$
|
1,354,876
|
|
|
$
|
1,327,912
|
|
Less: Freight and delivery
revenues
|
|
|
(65,594
|
)
|
|
|
(59,696
|
)
|
|
|
(172,822
|
)
|
|
|
(159,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
443,709
|
|
|
$
|
428,271
|
|
|
$
|
1,182,054
|
|
|
$
|
1,168,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin excluding
freight and delivery
revenues
|
|
|
18.9
|
%
|
|
|
20.8
|
%
|
|
|
13.7
|
%
|
|
|
14.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30
Notable items for the quarter ended September 30, 2010 included:
|
|
Earnings per diluted share of $1.13 compared with $1.23 for the prior-year quarter
|
|
|
Net sales increased to $443.7 million compared with $428.3 million for the 2009 third quarter
|
|
|
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 compared with prior-year quarter
|
|
|
Consolidated operating margin (excluding freight and delivery revenues) of 18.9% compared
with 20.8% for the prior-year quarter
|
The following table presents net sales, gross profit, selling, general and administrative expenses
and earnings (loss) from operations data for the Corporation and its reportable segments for the
three months ended September 30, 2010 and 2009. In each case, the data is stated as a percentage
of net sales of the Corporation or the relevant segment, as the case may be.
Earnings from operations include research and development expense and other operating income
and expenses, net. Research and development expense for the Corporation was $0.1 million for the
quarters ended September 30, 2010 and 2009. Consolidated other operating income and expenses, net,
was income of $1.4 million and $4.4 million for the quarters ended September 30, 2010 and 2009,
respectively.
Page 21 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
Amount
|
|
|
Net Sales
|
|
|
Amount
|
|
|
Net Sales
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
133,607
|
|
|
|
|
|
|
$
|
131,176
|
|
|
|
|
|
Southeast Group
|
|
|
91,216
|
|
|
|
|
|
|
|
87,938
|
|
|
|
|
|
West Group
|
|
|
176,623
|
|
|
|
|
|
|
|
169,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
401,446
|
|
|
|
100.0
|
|
|
|
388,685
|
|
|
|
100.0
|
|
Specialty Products
|
|
|
42,263
|
|
|
|
100.0
|
|
|
|
39,586
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
443,709
|
|
|
|
100.0
|
|
|
$
|
428,271
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
48,698
|
|
|
|
|
|
|
$
|
50,760
|
|
|
|
|
|
Southeast Group
|
|
|
7,926
|
|
|
|
|
|
|
|
9,608
|
|
|
|
|
|
West Group
|
|
|
43,178
|
|
|
|
|
|
|
|
44,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
99,802
|
|
|
|
24.9
|
|
|
|
105,179
|
|
|
|
27.1
|
|
Specialty Products
|
|
|
14,643
|
|
|
|
34.6
|
|
|
|
14,393
|
|
|
|
36.4
|
|
Corporate
|
|
|
(650
|
)
|
|
|
|
|
|
|
(1,824
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
113,795
|
|
|
|
25.6
|
|
|
$
|
117,748
|
|
|
|
27.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
10,268
|
|
|
|
|
|
|
$
|
10,755
|
|
|
|
|
|
Southeast Group
|
|
|
6,318
|
|
|
|
|
|
|
|
7,107
|
|
|
|
|
|
West Group
|
|
|
10,676
|
|
|
|
|
|
|
|
10,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
27,262
|
|
|
|
6.8
|
|
|
|
28,167
|
|
|
|
7.2
|
|
Specialty Products
|
|
|
2,529
|
|
|
|
6.0
|
|
|
|
2,343
|
|
|
|
5.9
|
|
Corporate
|
|
|
1,444
|
|
|
|
|
|
|
|
2,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
31,235
|
|
|
|
7.0
|
|
|
$
|
32,932
|
|
|
|
7.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
38,741
|
|
|
|
|
|
|
$
|
40,067
|
|
|
|
|
|
Southeast Group
|
|
|
1,414
|
|
|
|
|
|
|
|
4,812
|
|
|
|
|
|
West Group
|
|
|
33,941
|
|
|
|
|
|
|
|
36,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
74,096
|
|
|
|
18.5
|
|
|
|
81,086
|
|
|
|
20.9
|
|
Specialty Products
|
|
|
12,043
|
|
|
|
28.5
|
|
|
|
11,947
|
|
|
|
30.2
|
|
Corporate
|
|
|
(2,300
|
)
|
|
|
|
|
|
|
(3,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
83,839
|
|
|
|
18.9
|
|
|
$
|
89,213
|
|
|
|
20.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 22 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
The Corporation reported its second consecutive quarter of aggregates volume growth. Aggregates
shipments improved in each of the Corporations end-use markets during the quarter, resulting in an
overall 6.3% increase compared with the prior-year third quarter, led by a 14% increase in the
nonresidential end-use market compared with the prior-year quarter. The infrastructure end-use
market, which had volume growth of 3% compared with the prior-year quarter, 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). The
Corporation continues 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, the Aggregates business
shipments actually declined. Overall, however, aggregates shipments to the infrastructure end-use
market, excluding projects funded by ARRA, increased more than 6% over the prior-year quarter.
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 the Corporations nonresidential end-use market, as aggregates are essential to
build both oilfield roads and pads for drilling rigs. The ChemRock/Rail end-use market experienced
a 9% volume increase over the prior-year quarter, fueled by railroad expansion activity in certain
markets. The residential end-use market had a volume increase of 3% over the prior-year quarter.
Weather had a disparate impact on the Corporations third-quarter results. Volume growth was led
by the Mideast Group, which experienced dry weather and generated a 10.3% increase in heritage
aggregates shipments compared with the prior-year quarter. In particular, the Corporations
Indiana markets experienced significant highway work performed under the states 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 significantly wet weather in the 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 the Divisions 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% compared with the prior-year
quarter. 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 the overall average for the Aggregates business. Management estimates
that the impact of these factors negatively affected aggregates pricing by 160 basis points and
expects this pricing pressure to ease as the Corporations 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.
Page 23 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
The following tables present volume and pricing data and shipments data for the aggregates
product line. Heritage aggregates operations exclude volume and pricing data for acquisitions that
were not included in prior-year operations for the comparable period and divestitures.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
September 30, 2010
|
|
|
Volume
|
|
Pricing
|
Volume/Pricing Variance
(1)
|
|
|
|
|
|
|
|
|
Heritage Aggregates Product Line
(2)
:
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
|
10.3
|
%
|
|
|
(7.9
|
%)
|
Southeast Group
|
|
|
1.4
|
%
|
|
|
3.0
|
%
|
West Group
|
|
|
6.0
|
%
|
|
|
(2.4
|
%)
|
Heritage Aggregates Operations
|
|
|
6.3
|
%
|
|
|
(3.1
|
%)
|
Aggregates Product Line
(3)
|
|
|
6.3
|
%
|
|
|
(3.1
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
September 30,
|
|
|
2010
|
|
2009
|
|
|
(tons in thousands)
|
Shipments
|
|
|
|
|
|
|
|
|
Heritage Aggregates Product Line
(2)
:
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
|
12,436
|
|
|
|
11,270
|
|
Southeast Group
|
|
|
8,012
|
|
|
|
7,901
|
|
West Group
|
|
|
17,807
|
|
|
|
16,804
|
|
|
|
|
|
|
|
|
|
|
Heritage Aggregates Operations
|
|
|
38,255
|
|
|
|
35,975
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
Divestitures
(4)
|
|
|
7
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Aggregates Product Line
(3)
|
|
|
38,262
|
|
|
|
35,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
Page 24 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
The Aggregates business is significantly affected by seasonal changes and other
weather-related conditions. Aggregates production and shipment levels coincide with general
construction activity levels, most of which occurs in the spring, summer and fall. Thus,
production and shipment levels vary by quarter. Operations concentrated in the northern United
States generally experience more severe winter weather conditions than operations in the Southeast
and Southwest. Excessive rainfall, and conversely excessive drought, can also jeopardize
shipments, production and profitability. Because of the potentially significant impact of weather
on the Corporations operations, third-quarter results are not indicative of expected performance
for other interim periods or the full year.
The Specialty Products business benefitted from strong demand in the chemicals product line and,
once again, achieved strong performance that contributed significantly to the Corporations
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% over the prior-year quarter. Earnings from operations of
$12.0 million reflected managements continued focus on cost control programs.
The Corporations strong results continue to reflect its ability to control operating costs
and the Corporations operating team remains focused on safety, productivity and customer service.
Direct production costs in the 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. The Aggregates business was able to offset these
increased costs by higher productive efficiency, as measured by tons per working man hour, which
increased 3% over the prior-year quarter.
The Corporations gross margin excluding freight and delivery revenues for the three months
ended September 30 decreased 190 basis points to 25.6% in 2010. The following presents a
rollforward of the Corporations gross profit (dollars in thousands):
|
|
|
|
|
Consolidated gross profit, quarter ended September 30, 2009
|
|
$
|
117,748
|
|
|
|
|
|
Aggregates Business:
|
|
|
|
|
Volume strength
|
|
$
|
23,459
|
|
Pricing weakness
|
|
|
(10,700
|
)
|
Cost increases, net
|
|
|
(18,136
|
)
|
|
|
|
|
Decrease in Aggregates Business gross profit
|
|
|
(5,377
|
)
|
Specialty Products
|
|
|
250
|
|
Corporate
|
|
|
1,174
|
|
|
|
|
|
Decrease in consolidated gross profit
|
|
|
(3,953
|
)
|
|
|
|
|
Consolidated gross profit, quarter ended September 30, 2010
|
|
$
|
113,795
|
|
|
|
|
|
Page 25 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
Selling, general and administrative expenses declined $1.7 million for the quarter compared
with the 2009 third quarter, despite absorbing $0.9 million of expense related to required payments
under certain retirement plans.
Among other items, other operating income and expenses, net, includes gains and losses on the sale
of assets; gains and losses related to accounts receivable; rental, royalty and services income;
and the accretion and depreciation expenses related to asset retirement obligations. For the third
quarter, consolidated other operating income and expenses, net, was income of $1.4 million in 2010
compared with income of $4.4 million in 2009, primarily as a result of lower quarterly gains on
sales of assets in 2010.
Interest expense was $17.1 million for the third quarter 2010 as compared with $18.2 million for
the prior-year quarter. The decrease primarily resulted from lower outstanding borrowings during
the three months ended September 30, 2010 as compared with the prior-year quarter.
In addition to other offsetting amounts, other nonoperating income and expenses, net, are comprised
generally of interest income and net equity earnings from nonconsolidated investments.
Consolidated other nonoperating income and expenses, net, for the quarter ended September 30, was
income of $0.5 million in 2010 compared with income of $1.2 million in 2009, primarily as a result
of lower gains on foreign currency transactions in 2010.
Nine Months Ended September 30
Notable items for the nine months ended September 30, 2010 included:
|
|
Net sales of $1.182 billion, up 1.1% compared with prior-year period
|
|
|
|
Heritage aggregates product line volume up 2.8% and pricing down 3.4% compared with the
prior-year period
|
|
|
|
Selling, general and administrative expenses down $8.5 million compared with the prior-year
period
|
|
|
|
Consolidated operating margin (excluding freight and delivery revenues) of 13.7% compared
with 14.8% for the prior-year period
|
|
|
|
Earnings per diluted share of $1.78, compared with $1.99 for the prior-year period
|
Page 26 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
The following table presents net sales, gross profit, selling, general and administrative expenses
and earnings (loss) from operations data for the Corporation and its reportable segments for the
nine months ended September 30, 2010 and 2009. In each case, the data is stated as a percentage of
net sales of the Corporation or the relevant segment, as the case may be.
Earnings from operations include research and development expense and other operating income and
expenses, net. Research and development expense for the Corporation was $0.2 million and $0.4
million for the nine months ended September 30, 2001 and 2009, respectively. Consolidated other
operating income and expenses, net, was income of $9.0 million and $2.3 million for the nine months
ended September 30, 2010 and 2009, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
Amount
|
|
|
Net Sales
|
|
|
Amount
|
|
|
Net Sales
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
348,524
|
|
|
|
|
|
|
$
|
337,554
|
|
|
|
|
|
Southeast Group
|
|
|
251,440
|
|
|
|
|
|
|
|
275,392
|
|
|
|
|
|
West Group
|
|
|
450,212
|
|
|
|
|
|
|
|
449,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
1,050,176
|
|
|
|
100.0
|
|
|
|
1,062,818
|
|
|
|
100.0
|
|
Specialty Products
|
|
|
131,878
|
|
|
|
100.0
|
|
|
|
105,984
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,182,054
|
|
|
|
100.0
|
|
|
$
|
1,168,802
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
108,178
|
|
|
|
|
|
|
$
|
111,762
|
|
|
|
|
|
Southeast Group
|
|
|
19,238
|
|
|
|
|
|
|
|
41,666
|
|
|
|
|
|
West Group
|
|
|
77,686
|
|
|
|
|
|
|
|
93,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
205,102
|
|
|
|
19.5
|
|
|
|
247,298
|
|
|
|
23.3
|
|
Specialty Products
|
|
|
48,271
|
|
|
|
36.6
|
|
|
|
33,353
|
|
|
|
31.5
|
|
Corporate
|
|
|
(2,267
|
)
|
|
|
|
|
|
|
(2,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
251,106
|
|
|
|
21.2
|
|
|
$
|
278,001
|
|
|
|
23.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general &
administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
31,088
|
|
|
|
|
|
|
$
|
33,024
|
|
|
|
|
|
Southeast Group
|
|
|
19,056
|
|
|
|
|
|
|
|
20,293
|
|
|
|
|
|
West Group
|
|
|
31,851
|
|
|
|
|
|
|
|
31,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
81,995
|
|
|
|
7.8
|
|
|
|
84,773
|
|
|
|
8.0
|
|
Specialty Products
|
|
|
8,148
|
|
|
|
6.2
|
|
|
|
7,028
|
|
|
|
6.6
|
|
Corporate
|
|
|
8,222
|
|
|
|
|
|
|
|
15,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
98,365
|
|
|
|
8.3
|
|
|
$
|
106,855
|
|
|
|
9.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 27 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
Amount
|
|
|
Net Sales
|
|
|
Amount
|
|
|
Net Sales
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
Earnings (Loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
$
|
80,296
|
|
|
|
|
|
|
$
|
79,247
|
|
|
|
|
|
Southeast Group
|
|
|
(144
|
)
|
|
|
|
|
|
|
22,977
|
|
|
|
|
|
West Group
|
|
|
54,654
|
|
|
|
|
|
|
|
65,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aggregates Business
|
|
|
134,806
|
|
|
|
12.8
|
|
|
|
168,054
|
|
|
|
15.8
|
|
Specialty Products
|
|
|
40,067
|
|
|
|
30.4
|
|
|
|
26,108
|
|
|
|
24.6
|
|
Corporate
|
|
|
(13,251
|
)
|
|
|
|
|
|
|
(21,056
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
161,622
|
|
|
|
13.7
|
|
|
$
|
173,106
|
|
|
|
14.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for the Aggregates business for the nine months ended September 30 were $1.050
billion in 2010, a 1.2% decline versus 2009 net sales of $1.063 billion. Aggregates volume at
heritage locations increased 2.8% and pricing was down 3.4%. Competitive pressure and geographic
mix continue to negatively affect aggregates product line pricing.
The following tables present volume and pricing data and shipments data for the aggregates product
line. Heritage aggregates operations exclude volume and pricing data for acquisitions that were
not included in prior-year operations for the comparable period and divestitures.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30, 2010
|
|
|
Volume
|
|
Pricing
|
Volume/Pricing Variance
(1)
|
|
|
|
|
|
|
|
|
Heritage Aggregates Product Line
(2)
:
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
|
8.8
|
%
|
|
|
(5.2
|
%)
|
Southeast Group
|
|
|
(6.4
|
%)
|
|
|
(2.0
|
%)
|
West Group
|
|
|
3.9
|
%
|
|
|
(2.7
|
%)
|
Heritage Aggregates Operations
|
|
|
2.8
|
%
|
|
|
(3.4
|
%)
|
Aggregates Product Line
(3)
|
|
|
2.8
|
%
|
|
|
(3.4
|
%)
|
Page 28 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
2010
|
|
2009
|
|
|
(tons in thousands)
|
Shipments
|
|
|
|
|
|
|
|
|
Heritage Aggregates Product Line
(2)
:
|
|
|
|
|
|
|
|
|
Mideast Group
|
|
|
30,977
|
|
|
|
28,463
|
|
Southeast Group
|
|
|
22,352
|
|
|
|
23,869
|
|
West Group
|
|
|
45,836
|
|
|
|
44,130
|
|
|
|
|
|
|
|
|
|
|
Heritage Aggregates Operations
|
|
|
99,165
|
|
|
|
96,462
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
Divestitures
(4)
|
|
|
18
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
Aggregates Product Line
(3)
|
|
|
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.
|
Specialty Products net sales were $131.9 million for the first nine months of 2010 compared
with $106.0 million for the prior-year period. The increase in net sales is due to volume growth
in all major product lines. Earnings from operations for the nine months ended September 30, 2010
were $40.1 million compared with $26.1 million for the prior-year period.
The Corporations gross margin excluding freight and delivery revenues for the nine months ended
September 30 decreased 260 basis points to 21.2% in 2010. The following presents a rollforward of
the Corporations gross profit (dollars in thousands):
|
|
|
|
|
Consolidated gross profit, nine months ended September 30, 2009
|
|
$
|
278,001
|
|
|
|
|
|
Aggregates Business:
|
|
|
|
|
Volume strength
|
|
$
|
24,015
|
|
Pricing weakness
|
|
|
(36,657
|
)
|
Cost increases, net
|
|
|
(29,554
|
)
|
|
|
|
|
Decrease in Aggregates Business gross profit
|
|
|
(42,196
|
)
|
Specialty Products
|
|
|
14,918
|
|
Corporate
|
|
|
383
|
|
|
|
|
|
Decrease in consolidated gross profit
|
|
|
(26,895
|
)
|
|
|
|
|
Consolidated gross profit, nine months ended September 30, 2010
|
|
$
|
251,106
|
|
|
|
|
|
Page 29 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
Selling, general and administrative expenses declined $8.5 million during the nine months ended
September 30, 2010 due to lower personnel costs. Management expects selling, general and
administrative expenses to be no more than 8.8% of net sales for the full year 2010, a
50-basis-point reduction from 2009.
For the nine months ended September 30, consolidated other operating income and expenses, net, was
income of $9.0 million in 2010 compared with income of $2.3 million in 2009. In addition to higher
gains on asset sales, during 2010, the Corporation settled legal proceedings relating to its
Greenwood, Missouri, operation for less than its established legal reserve, thereby increasing
other operating income for the West Group by $5.0 million.
Consolidated interest expense was $51.5 million for the nine months ended September 30, 2010 as
compared with $55.4 million for the prior-year period. The decrease primarily resulted from lower
outstanding borrowings during 2010.
The change in the year-to-date consolidated overall estimated effective income tax rate during the
third quarter of 2010, when compared with the year-to-date consolidated overall estimated effective
tax rate as of June 30, 2010, increased consolidated net earnings for the nine months ended
September 30, 2010 by $5.7 million, or $0.12 per diluted share. The 2010 consolidated overall
effective tax rate includes the reduction of tax benefits for the Medicare Part D subsidy resulting
from the enactment of the Patient Protection and Affordable Care Act (PPACA); the effective
settlement of issues related to the 2004 and 2005 tax years, the effective settlement of the
Internal Revenue Service audit for the 2007 tax year, the expiration of the statute of limitations
for federal examination of the 2006 tax year, the provision of a valuation allowance for unused tax
credits, and the true-up of the 2009 provision estimates to actual taxes paid as a result of filing
the related tax returns during the period. Management expects the overall effective tax rate for
the full year, inclusive of the effects of PPACA, to be approximately 26%.
LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities during the nine months
ended September 30, 2010 was $202.6 million compared with $234.6 million for the same period
in 2009. Operating cash flow is primarily from consolidated net earnings, before deducting
depreciation, depletion and amortization, offset by working capital requirements. Net cash
provided by operating activities for the first nine months of 2010 as compared with the
year-earlier period reflects a $86.8 million build in accounts receivable for the nine months ended
September 30, 2010 resulting from increased sales occurring in the second and third quarters of the
current year. Cash used in the build of accounts receivable was partially offset by $8.9 million
generated by the Corporations inventory management initiatives and $4.4 million lower cash taxes
paid through the first nine months of 2010.
Page 30 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
Depreciation, depletion and amortization were as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in Thousands)
|
|
Depreciation
|
|
$
|
130,433
|
|
|
$
|
127,845
|
|
Depletion
|
|
|
3,171
|
|
|
|
3,026
|
|
Amortization
|
|
|
2,342
|
|
|
|
2,405
|
|
|
|
|
|
|
|
|
|
|
$
|
135,946
|
|
|
$
|
133,276
|
|
|
|
|
|
|
|
|
In the fourth quarter of 2010, the Corporation will make required cash payments under certain
retirement plans of $11.2 million.
On July 14, 2010, the Corporation entered into a reimbursement and indemnification agreement
with Fifth Third Bank (Fifth Third), pursuant to which Fifth Third issued a letter of credit for
the repayment of amounts borrowed by an affiliate under a $20 million two-year revolving line of
credit provided by Fifth Third and the Corporation agreed to reimburse Fifth Third for any amounts
funded under the letter of credit. Additionally, on July 13, 2010, the Corporation provided Bank
of America, N.A. with a guarantee of $12.4 million of payment obligations of the Corporations
affiliate under certain equipment lease agreements. The affiliate has agreed to reimburse and
indemnify the Corporation for any payments and expenses the Corporation may incur from either the
reimbursement and indemnification agreement or the guarantee agreement. The Corporation holds a
subordinate lien of the affiliates assets as collateral for potential payments under the
reimbursement and indemnification agreement.
The seasonal nature of the construction aggregates business impacts quarterly operating cash flow
when compared with the year. Full year 2009 net cash provided by operating activities was $318.4
million, compared with $234.6 million for the first nine months of 2009.
Capital expenditures, exclusive of acquisitions, for the first nine months were $110.0 million in
2010 and $100.5 million in 2009. Full-year capital spending for 2010 is expected to be
approximately $135 million, including the Hunt Martin Materials joint venture but exclusive of
acquisitions. Comparable full-year capital expenditures were $139.2 million in 2009.
During the nine months ended September 30, 2010, the Corporation spent $28.1 million on
acquisitions, primarily on the acquisition of a deep-water port operation located at Port Canaveral
in Florida. This facility is currently the only developed deep-water aggregates import terminal
located on the central east coast of Florida. From this location, the Corporation can ship product
into the greater Orlando area, the second-largest aggregates consuming area in Florida. This
acquisition complements the Corporations existing long-haul rail network.
Page 31 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
In October 2010, the Corporation acquired a
sand and gravel business in South Carolina. The acquired operation supplements the Corporations ability to serve the Charlotte, North Carolina market as well as certain South Carolina markets by providing a broader array of products.
In April 2010, the Corporation repaid $217.6 million of Floating Rate Senior Notes through the use
of cash and short-term borrowings.
At September 30, 2010, the Corporation had $245.4 million of current maturities of long-term debt,
of which $242.1 million of 6.875% become due April 2011. Management believes it has the ability to
refinance the Notes when they become due.
The Corporation can repurchase its common stock through open-market purchases pursuant to authority
granted by its Board of Directors. The Corporation did not repurchase any shares of common stock
during the nine months ended September 30, 2010 or 2009. Management currently has no intent to
repurchase any shares of its common stock. At September 30, 2010, 5,042,000 shares of common stock
were remaining under the Corporations repurchase authorization.
The Corporations $325 million five-year revolving credit agreement (the Credit Agreement), $130
million unsecured term loan (the Term Loan) and $100 million AR Credit Facility are subject to a
leverage ratio covenant. The covenant requires the Corporations ratio of consolidated debt to
consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as
defined, for the trailing twelve months (the Ratio) to not exceed 3.50 to 1.00 as of the end of
any fiscal quarter. Furthermore, the covenant allows the Corporation to exclude debt incurred in
connection with acquisitions from the Ratio for a period of 180 days so long as the Corporation
maintains specified ratings on its long-term unsecured debt and the Ratio calculated without such
exclusion does not exceed the maximum Ratio plus 0.25. The Ratio is calculated as total long-term
debt, including debt guaranteed by the Corporation, divided by consolidated EBITDA, as defined, for
the trailing twelve months. Consolidated EBITDA is generally defined as earnings before interest
expense, income tax expense, and depreciation, depletion and amortization expense for continuing
operations. Additionally, stock-based compensation expense is added back and interest income is
deducted in the calculation of consolidated EBITDA. Certain other nonrecurring items and noncash
items, if they occur, can affect the calculation of consolidated EBITDA.
Page 32 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
At September 30, 2010, the Corporations ratio of consolidated debt to consolidated EBITDA, as
defined, for the trailing twelve months EBITDA was 2.88 times and was calculated as follows
(dollars in thousands):
|
|
|
|
|
|
|
Twelve Month Period
|
|
|
|
October 1, 2009 to
|
|
|
|
September 30, 2010
|
|
Earnings from continuing operations attributable to Martin Marietta Materials, Inc.
|
|
$
|
79,166
|
|
Add back:
|
|
|
|
|
Interest expense
|
|
|
69,643
|
|
Income tax expense
|
|
|
25,184
|
|
Depreciation, depletion and amortization expense
|
|
|
176,873
|
|
Stock-based compensation expense
|
|
|
15,152
|
|
Deduct:
|
|
|
|
|
Interest income
|
|
|
(1,300
|
)
|
|
|
|
|
Consolidated EBITDA, as defined
|
|
$
|
364,718
|
|
|
|
|
|
Consolidated debt, including debt guaranteed by the Corporation, at September 30, 2010
|
|
$
|
1,049,326
|
|
|
|
|
|
Consolidated debt to consolidated EBITDA, as defined, at September 30, 2010 for the trailing twelve months EBITDA
|
|
|
2.88
|
X
|
|
|
|
|
In the event of a default on the leverage ratio, the lenders can terminate the Credit Agreement,
Term Loan and AR Credit Facility and declare any outstanding balances as immediately due.
Cash on hand, along with the Corporations projected internal cash flows and availability of
financing resources, including its access to debt and equity capital markets, are expected to
continue to be sufficient to provide the capital resources necessary to support anticipated
operating needs, cover debt service requirements, meet capital expenditures and discretionary
investment needs, fund certain acquisition opportunities that may arise, and allow for payment of
dividends for the foreseeable future. At September 30, 2010, the Corporation had $323 million of
unused borrowing capacity under its Credit Agreement and $100 million of available borrowings on
its AR Credit Facility, subject to complying with the related leverage covenant. Of the $423
million of unused borrowing capacity, $212 million, or 50%, has been committed from Wells Fargo
Bank, N.A. and Wachovia Bank, N.A. under commitments entered into prior to Wells Fargo Bank, N.A.s
acquisition of Wachovia Bank, N.A. Management does not expect any material change in this
commitment prior to the expiration of the facilities. The Credit Agreement expires on September
30, 2012 and the AR Credit Facility terminates on April 20, 2012.
Page 33 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
The Corporation may be required to obtain financing in order to fund certain strategic
acquisitions, if any such opportunities arise, or to refinance outstanding debt. Any strategic
acquisition of size would require an appropriate balance of newly-issued equity with debt in order
to maintain an investment-grade credit rating. Borrowings under the AR Credit Facility would be
limited based on the balance of the Corporations accounts receivable. Furthermore, the
Corporation is exposed to the credit markets, through the interest cost related to its AR Credit
Facility and Term Loan and the interest cost related to its commercial paper program, to the extent
that it is available to the Corporation. Currently, the Corporations senior unsecured debt is
rated BBB+ by Standard & Poors and Baa3 by Moodys. The Corporations commercial paper
obligations are rated A-2 by Standard & Poors and P-3 by Moodys. While management believes its
credit ratings will remain at an investment-grade level, no assurance can be given that these
ratings will remain at those levels.
TRENDS AND RISKS The Corporation outlined the risks associated with its business in its Annual
Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange
Commission on February 26, 2010. Management continues to evaluate its exposure to all operating
risks on an ongoing basis.
OUTLOOK
Managements outlook for the Corporation for the balance of the
year is based on continued stability in
overall aggregates demand. Evidence of that stability is reflected
in the Aggregates business year-to-date aggregates shipments. For the full year, management
expects: (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 the Corporations ChemRock/Rail products.
Considering all these factors, for full year 2010,
management expects 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.
Management expects 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, management expects a continued increased
use of cash for working capital, most notably accounts receivable, in the fourth quarter as
revenues grow.
Page 34 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
It is too
early to issue 2011 guidance, but management believes stability in federal
infrastructure funding will be a critical issue. At present, the Corporation continues 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.
While management views working under another Congressional continuing resolution of SAFETEA-LU for 2011
as likely, it also believes 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. Management was 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. Management continues 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. Management also
expects to see improvement in the residential construction market and anticipates the commercial
component of the Corporations 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.
Management will provide further 2011 guidance in the
Corporations fourth quarter earnings release.
The 2010 estimated outlook includes managements 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. The Corporations 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 Corporations 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 continued 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.
Page 35 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
The Corporations 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 Corporations 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 Corporations 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 Corporations long-haul distribution network. The
Corporations estimated outlook does not include any further significant increases in diesel costs
during the remainder of 2010.
The availability of transportation in the Corporations 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 Corporations 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
Corporations 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.
OTHER MATTERS If you are interested in Martin Marietta Materials, Inc. stock, management
recommends that, at a minimum, you read the Corporations current Annual Report and Forms 10-K,
10-Q and 8-K reports to the SEC over the past year. The Corporations 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 Corporations website at
www.martinmarietta.com
and are also available at the SECs website at
www.sec.gov
. You may also
write or call the Corporations Corporate Secretary, who will provide copies of such reports.
Page 36 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
Investors are cautioned that all statements in this Quarterly Report 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 the Corporations expectations or forecasts of future events. You can
identify these statements by the fact that they do not relate only to historical or current facts.
They may use words such as anticipate, estimate, expect, project, intend, plan,
believe, and other words of similar meaning in connection with future events or future operating
or financial performance. Any or all of the Corporations 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 Quarterly Report on Form 10-Q 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 Corporations 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 construction market, notably office and retail space, and the continued
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 Corporations 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 Corporations 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
Corporations leverage ratio debt covenant; changes in tax laws, the interpretation of such laws and/or
administrative practices that would increase the Corporations tax rate; violation of the debt
covenant if price and volume decline worse than expected; downward pressure on the Corporations
common stock price and its impact on goodwill impairment evaluations; and other risk factors listed
from time to time found in the Corporations 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.
Page 37 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 2010
(Continued)
INVESTOR ACCESS TO COMPANY FILINGS Shareholders may obtain, without charge, a copy of Martin
Marietta Materials, Inc.s Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 2009, by writing to:
Martin Marietta Materials, Inc.
Attn: Corporate Secretary
2710 Wycliff Road
Raleigh, North Carolina 27607-3033
Additionally, Martin Marietta Materials, Inc.s Annual Report, press releases and filings with the Securities and Exchange Commission, including Forms 10-K, 10-Q, 8-K and 11-K, can generally be accessed via the Corporations website. Filings with the Securities and Exchange Commission accessed via the website are available through
a link with the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Accordingly, access to such filings is available upon EDGAR placing the related document in its database. Investor relations contact information is as follows:
Telephone: (919) 783-4540
Website address: www.martinmarietta.com
Page 38 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Corporations operations are highly dependent upon the interest rate-sensitive construction and
steelmaking industries. Consequently, these marketplaces could experience lower levels of economic
activity in an environment of rising interest rates or escalating costs.
Management has considered the current economic environment and its potential impact to the
Corporations business. Demand for aggregates products, particularly in the commercial and
residential construction markets, could continue to decline if companies and consumers are unable
to obtain financing for construction projects or if the economic recession causes delays or
cancellations to capital projects. Additionally, declining tax revenues and state budget deficits
have negatively affected states abilities to finance infrastructure construction projects.
Demand in the residential construction market is affected by interest rates. The Federal Reserve
kept the federal funds rate at zero percent during 2009; the rate remains unchanged in 2010. The
residential construction market accounted for approximately 7% of the Corporations aggregates
product line shipments in 2009.
Aside from these inherent risks from within its operations, the Corporations earnings are affected
also by changes in short-term interest rates as a result of any temporary cash investments,
including money market funds and Eurodollar time deposit accounts; any outstanding variable-rate
borrowing facilities; and defined benefit pension plans. Additionally, the Corporations earnings
are affected by energy costs. The Corporation has no counterparty risk.
Variable-Rate Borrowing Facilities.
The Corporations variable-rate borrowing facilities include a
$325 million Credit Agreement which supports its commercial paper program, a $100 million AR Credit
Facility and a $130 million Term Loan. Borrowings under these facilities and the commercial paper
program bear interest at a variable interest rate. A hypothetical 100-basis-point increase in
interest rates on outstanding borrowings of $111.8 million, which is the outstanding balance at
September 30, 2010, would increase interest expense by $1.1 million on an annual basis. Wells
Fargo Bank, N.A. and Wachovia Bank, N.A. have collective commitments of $200 million under the
Corporations variable-rate borrowing facilities.
Pension Expense.
The Corporations results of operations are affected by its pension expense.
Assumptions that affect this expense include the discount rate and the expected long-term rate of
return on assets. Therefore, the Corporation has interest rate risk associated with these factors.
The impact of hypothetical changes in these assumptions on the Corporations annual pension
expense is discussed in the Corporations Annual Report on Form 10-K for the year ended December
31, 2009, filed with the Securities and Exchange Commission on February 26, 2010.
Page 39 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
Energy Costs
. Energy costs, including diesel fuel, natural gas and liquid asphalt, represent
significant production costs for the Corporation. Increases in the prices of these products
generally are tied to energy sector inflation. In 2009, decreases in the prices of these products
compared with 2008 positively affected earnings per diluted share by $0.50. A hypothetical 10%
change in the Corporations energy costs in 2010 as compared with 2009, assuming constant volumes,
would impact 2010 pretax earnings by approximately $13.1 million.
Aggregate Risk for Interest Rates and Energy Costs.
Pension expense for 2010 was calculated based
on assumptions selected at December 31, 2009. Therefore, interest rate risk in 2010 is limited to
the potential effect related to the Corporations borrowings under variable-rate facilities. The
effect of a hypothetical increase in interest rates of 1% on the $111.8 million of variable-rate
borrowings outstanding at September 30, 2010 would be an increase of $1.1 million in interest
expense in 2010. Additionally, a 10% change in energy costs compared with 2009 would impact annual
pretax earnings by $13.1 million.
Item 4. Controls and Procedures
As of September 30, 2010, an evaluation was performed under the supervision and with the
participation of the Corporations management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and the operation of the Corporations
disclosure controls and procedures. Based on that evaluation, the Corporations management,
including the Chief Executive Officer and Chief Financial Officer, concluded that the Corporations
disclosure controls and procedures were effective as of September 30, 2010. There were no changes
in the Corporations internal control over financial reporting during the most recently completed
fiscal quarter that materially affected, or are reasonably likely to materially affect, the
Corporations internal control over financial reporting.
Page 40 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
.
Reference is made to
Part I
.
Item 3. Legal Proceedings
of the Martin Marietta Materials, Inc.
Annual Report on Form 10-K for the year ended December 31, 2009.
Item 1A. Risk Factors.
Reference is made to
Part I. Item 1A. Risk Factors and Forward-Looking Statements
of the Martin
Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
.
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Maximum Number of
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
Shares that May Yet
|
|
|
|
|
|
|
|
|
|
|
|
Part of Publicly
|
|
|
be Purchased Under
|
|
|
|
Total Number of
|
|
|
Average Price Paid
|
|
|
Announced Plans or
|
|
|
the Plans or
|
|
Period
|
|
Shares Purchased
|
|
|
per Share
|
|
|
Programs
|
|
|
Programs
|
|
July 1, 2010
July 31, 2010
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
5,041,871
|
|
August 1, 2010
August 31, 2010
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
5,041,871
|
|
September 1, 2010
September 30, 2010
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
5,041,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
5,041,871
|
|
The Corporations initial stock repurchase program, which authorized the repurchase of 2.5
million shares of common stock, was announced in a press release dated May 6, 1994, and has been
updated as appropriate. The program does not have an expiration date.
Page 41 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
PART II-OTHER INFORMATION
(Continued)
Item 5. Other Information.
The operation of the Corporations aggregates quarries and mines is subject to regulation by the
federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act
of 1977 (the Mine Act). MSHA inspects the Corporations quarries and mines on a regular basis
and issues various citations and orders when it believes a violation has occurred under the Mine
Act.
Under the recently-enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, the
Corporation is required to present information regarding certain mining safety and health citations
which MSHA has issued with respect to its aggregates mining operations in its periodic reports
filed with the Securities and Exchange Commission. In evaluating this information, consideration
should be given to factors such as: (i) the number of citations and orders will vary depending on
the size of the quarry or mine, (ii) the number of citations issued will vary from inspector to
inspector and location to location, and (iii) citations and orders can be contested and appealed,
and in that process, may be reduced in severity and amount, and are sometimes dismissed.
The Corporation presents the following items regarding certain mining safety and health matters for
the three months ended September 30, 2010:
|
|
Total number of violations of mandatory health or safety standards that could significantly
and substantially contribute to the cause and effect of a mine safety or health hazard under
section 104 of the Mine Act for which the Corporation has received a citation from MSHA
(hereinafter, Mine Act Section 104 Significant and Substantial Citations);
|
|
|
|
Total number of orders issued under section 104(b) of the Mine Act (hereinafter, Mine Act
Section 104(b) Orders);
|
|
|
|
Total number of citations and orders for unwarrantable failure of the mine operator to comply
with mandatory health or safety standards under Section 104(d) of the Mine Act (hereinafter,
Mine Act Section 104(d) Unwarrantable Failure Citations/Orders);
|
|
|
|
Total number of imminent danger orders issued under section 107(a) of the Mine Act
(hereinafter, Mine Act Section 107(a) Imminent Danger Orders); and
|
|
|
|
Total dollar value of proposed assessments from MSHA under the Mine Act.
|
Page 42 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
PART II-OTHER INFORMATION
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine Act
|
|
|
|
|
Mine Act
|
|
|
|
|
|
Mine Act Section
|
|
Section
|
|
Total Dollar
|
|
|
Section 104
|
|
|
|
|
|
104(d)
|
|
107(a)
|
|
Value of
|
|
|
Significant and
|
|
Mine Act
|
|
Unwarrantable
|
|
Imminent
|
|
Proposed
|
|
|
Substantial
|
|
Section 104(b)
|
|
Failure
|
|
Danger
|
|
MSHA
|
Location *
|
|
Citations
|
|
Orders
|
|
Citations/Orders
|
|
Orders
|
|
Assessments
|
Alden
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,747
|
|
American Stone
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ames
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arrowood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,258
|
|
Auburn, AL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
481
|
|
Augusta, GA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
Burning Springs
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Caldwell
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carmel Sand & Gravel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Cayce
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Rock
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Charlotte
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,180
|
|
Clinton County
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
Cook Road
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363
|
|
Davis
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438
|
|
Denver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
|
|
Des Moines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
Fairfield
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fort Dodge
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fountain
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
615
|
|
Franklin Gravel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
Fredonia
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granite Canyon
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,124
|
|
Greenwood
|
|
|
2
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Guernsey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
676
|
|
Hatton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Hickory
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,792
|
|
Hugo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Kings Mountain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Kokomo Stone
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Lemon Springs
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Malcom
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 43 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
PART II-OTHER INFORMATION
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine Act
|
|
|
|
|
Mine Act
|
|
|
|
|
|
Mine Act Section
|
|
Section
|
|
Total Dollar
|
|
|
Section 104
|
|
|
|
|
|
104(d)
|
|
107(a)
|
|
Value of
|
|
|
Significant and
|
|
Mine Act
|
|
Unwarrantable
|
|
Imminent
|
|
Proposed
|
|
|
Substantial
|
|
Section 104(b)
|
|
Failure
|
|
Danger
|
|
MSHA
|
Location *
|
|
Citations
|
|
Orders
|
|
Citations/Orders
|
|
Orders
|
|
Assessments
|
Matthews
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
|
|
Noblesville Stone
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
North Indianapolis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
Parkville
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
262
|
|
Pederson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
Pinesburg
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portable Crushing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254
|
|
Raccoon River
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243
|
|
Raleigh/Durham
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
Randolph
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
Sawyer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350
|
|
Snyder
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,445
|
|
Spanish Springs
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stamper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
|
|
Sully
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunflower
|
|
|
3
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1,101
|
|
Weeping Water
|
|
|
5
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Woodville
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
54
|
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
$
|
23,556
|
|
|
|
|
|
*
|
|
Only locations that have received violations, citations, orders and/or proposed assessments
issued under the Mine Act have been included in this table.
|
For the three months ended September 30, 2010, none of the Corporations aggregates quarries or
mines received written notice from MSHA of (i) a flagrant violation under section 110(b)(2) of the
Mine Act; (ii) a pattern of violations of mandatory health or safety standards that are of such
nature as could have significantly and substantially contributed to the cause and effect of other
mine health or safety hazards under section 104(e) of the Mine Act; or (iii) the potential to have
such a pattern. During the three months ended September 30, 2010, the Corporation experienced no
fatalities at any of its aggregates quarries or mines.
As of September 30, 2010, the Corporation has a total of 18 matters pending before the Federal Mine
Safety and Health Review Commission. This includes legal actions that were initiated prior to the
three months ended September 30, 2010 and which do not necessarily relate to the citations, orders
or proposed assessments issued by MSHA during such three-month period.
Page 44 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
PART II-OTHER INFORMATION
(Continued)
Item 6. Exhibits.
|
|
|
Exhibit
|
|
|
No.
|
|
Document
|
|
|
|
31.01
|
|
Certification dated November 2, 2010 of Chief Executive Officer pursuant to Securities and
Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
|
|
31.02
|
|
Certification dated November 2, 2010 of Chief Financial Officer pursuant to Securities and
Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
|
|
|
|
32.01
|
|
Written Statement dated November 2, 2010 of Chief Executive Officer required by 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.02
|
|
Written Statement dated November 2, 2010 of Chief Financial Officer required by 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
Page 45 of 47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC.
(Registrant)
|
|
Date: November 2, 2010
|
By:
|
/s/ Anne H. Lloyd
|
|
|
|
Anne H. Lloyd
|
|
|
|
Executive Vice President and
Chief Financial Officer
|
|
|
Page 46 of 47
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2010
EXHIBIT INDEX
|
|
|
Exhibit No.
|
|
Document
|
|
|
|
31.01
|
|
Certification dated November 2, 2010 of Chief Executive
Officer pursuant to Securities and Exchange Act of 1934 rule
13a-14 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
31.02
|
|
Certification dated November 2, 2010 of Chief Financial
Officer pursuant to Securities and Exchange Act of 1934 rule
13a-14 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.01
|
|
Written Statement dated November 2, 2010 of Chief Executive
Officer required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.02
|
|
Written Statement dated November 2, 2010 of Chief Financial
Officer required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
Page 47 of 47
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