Martin Marietta Materials, Inc. (NYSE:MLM) today announced
results for the first quarter ended March 31, 2011.
Ward Nye, President and CEO of Martin Marietta Materials,
stated, “Our first-quarter financial results confirmed our
expectations, reflecting a 240-basis-point improvement in our
consolidated operating margin (excluding freight and delivery
revenues) over the prior-year quarter. I am especially pleased our
Aggregates business experienced greater levels of stability during
the quarter. In particular, aggregates product line pricing,
supported partly by 2010 volume growth, increased for the first
time in more than a year. We believe this pattern of stability will
continue and serve as a platform as we advance toward the next
phase of the construction cycle – recovery and growth.”
NOTABLE ITEMS FOR THE QUARTER (ALL COMPARISONS ARE VERSUS THE
PRIOR-YEAR QUARTER)
- Net sales increased to $306.2 million
compared with $295.6 million
- Loss per diluted share of $0.39
compared with loss per diluted share of $0.54
- Increased diesel costs negatively
affected earnings by $0.05 per diluted share
- Heritage aggregates product line
pricing up 0.4%
- Heritage aggregates product line volume
down 1.2%
- Specialty Products record first-quarter
earnings from operations of $15.1 million
- Selling, general and administrative
(SG&A) expenses down 190 basis points as a percentage of net
sales
MANAGEMENT COMMENTARY
Nye continued, “Since heavy-construction activity slows during
the winter months, our first-quarter results seldom reflect annual
performance. That said, milder weather in some of our markets early
in the quarter led to monthly aggregates shipment growth over the
prior-year periods. In contrast to 2010, weather patterns
deteriorated in the critical last two weeks of March, slowing
momentum gained early in the quarter. We believe these
weather-related delays in shipments were a primary factor leading
to an overall quarterly decrease of 1% in our heritage aggregates
volume. However, despite a volume decrease for the quarter and the
negative impact of rising diesel prices, we achieved an incremental
operating margin (excluding freight and delivery revenues) for our
Aggregates business, in line with our expectations.
“Infrastructure as our largest end-use market, comprises
approximately half of our quarterly aggregates shipments.
Uncertainty stemming from the absence of a long-term federal
highway bill has negatively affected the infrastructure
construction market. For the quarter, infrastructure shipments
declined 3% compared with the prior-year quarter.
“The residential end-use market volume grew 15% compared with
the prior-year quarter, reflecting increased multi-family
construction activity. Our ChemRock/Rail end-use market experienced
a 2% volume increase compared with the prior-year quarter. The
commercial component of the nonresidential end-use market,
particularly in our San Antonio District, reflected increased
shipments during the quarter. While we continue to expect strong
volumes to the energy sector for the full year, shipments to this
industry declined from the prior-year quarter, which led to an
overall 3% reduction in nonresidential shipments.
“Compared with the prior-year quarter, changes in aggregates
pricing varied by geographic region. In the first quarter of 2011,
more of our markets reported pricing increases than in the past two
years. For example, quarterly heritage aggregates pricing for the
Southeast Group increased 5.8%, with price increases in the Florida
market compensating for a price decrease in the Alabama market.
Pricing in the West Group was negatively affected by product mix,
particularly in the Southwest market. Other markets in the West,
including North Texas and Iowa, had pricing increases.
“Our Specialty Products business benefitted from strong demand,
primarily in the magnesia chemicals product line, where volume
records were achieved for several product lines. The Specialty
Products business reported record quarterly net sales of
$49.1 million, an 18% increase over the prior-year quarter.
Record first-quarter earnings from operations of $15.1 million grew
35% compared with the prior-year quarter, reflecting increased
product demand and our continued cost control efforts. Thus, while
we expect strong performance from this business segment for the
remainder of the year, prospective prior-year comparisons will be
versus record 2010 quarterly performance.
“Our continuous commitment to cost control is evident in our
SG&A expenses, down $4.3 million, or 190 basis points as a
percentage of net sales, primarily due to lower personnel and
pension costs. Consolidated direct production costs increased 7%,
primarily due to a 14% increase in noncontrollable energy costs.
Higher energy prices also increased embedded freight costs for the
quarter, as transportation providers passed on their rising energy
costs.
“For the first quarter 2011, we reported a loss from operations
of $6.1 million, a significant improvement compared with a loss
from operations of $12.9 million for the first quarter 2010.
“The overall effective tax rate for the quarter was 27% compared
with 17% for the first quarter 2010. The 2010 effective tax rate
includes the effect of a $2.8 million charge resulting from the
Patient Protection and Affordable Care Act (the “Act”).
LIQUIDITY AND CAPITAL RESOURCES
“We continue the attentive management of our balance sheet,
liquidity and cash flow generation. Cash from operating activities
for the first quarter was $21.3 million compared with $27.1 million
for 2010, primarily due to the timing of federal income tax
refunds. Working capital management remains a priority and to that
end, days sales outstanding was 45 days, essentially flat with 2010
and the change in net working capital improved nearly $9 million in
the first quarter compared with 2010.
“During the first quarter, we invested $30.7 million of capital
in organic growth projects. In May 2011, we will begin the
construction of a $53 million dolomitic lime kiln at our Specialty
Products location in Woodville, Ohio. This project is expected to
be completed by the end of 2012.
“On March 31, 2011, we entered into a new $600 million credit
agreement that provides a $350 million four-year unsecured
revolving facility (“Revolving Facility”) and a $250 million senior
unsecured term loan (“Term Loan Facility”). At closing, we borrowed
$250 million under the Term Loan Facility and on April 1, 2011, we
borrowed $100 million on our accounts receivable credit facility.
These borrowings were used to repay amounts outstanding under our
previous term loan as of March 31, 2011, and also $242 million of
Notes that matured on April 1, 2011. The new credit agreement
retained the leverage ratio covenant that limits our ratio of
consolidated debt to consolidated earnings before interest expense,
tax expense, and depreciation, depletion and amortization expense
(EBITDA), as defined, for the trailing twelve-months to 3.5 times.
However, if no amounts are outstanding under both the new revolving
facility and our accounts receivable securitization facility,
consolidated debt may be reduced by our cash and cash equivalents
in excess of $50 million, such reduction not to exceed $200
million, for purposes of the covenant calculation. At March 31,
2011, our ratio of consolidated debt to consolidated EBITDA, as
defined, for the trailing twelve-months was 2.73 times. We are
pleased that Standard & Poor’s recently reaffirmed our credit
rating and upgraded our outlook from negative to stable.
2011 OUTLOOK
“A variety of factors make it difficult to form a complete
perspective for 2011. A noteworthy consideration will be the rate
at which states spend available Stimulus funds for infrastructure
projects. We are operating under a Congressional continuing
resolution that extends the Safe, Accountable, Flexible and
Efficient Transportation Equity Act – A Legacy for Users
(SAFETEA-LU) through September 30, 2011. Although there is
bipartisan Congressional agreement that infrastructure is a key and
essential governmental priority, there is heightened sensitivity
with respect to all government spending due to the national
deficit. Without interim clarity, a definitive outlook is
uncertain. We believe there are several options for federal
infrastructure funding, including additional continuing resolutions
that maintain current funding through the next presidential
election or a new federal highway bill with flat or reduced funding
and which may be shorter than the typical six-year term. While
operating under a continuing resolution is more likely for 2011, we
believe Congress understands that fully funded, reauthorized
infrastructure legislation at the Federal level serves as an
efficient means of jobs creation and investment in America’s
economic growth.
“Given this uncertainty, our 2011 outlook assumes there will be
additional continuing resolutions that maintain current federal
funding levels. We also expect that state spending on
infrastructure should remain relatively constant and 30% of ARRA
infrastructure funds will be spent this year. We expect the
infrastructure end-use market to be flat to slightly down; we
anticipate a modest volume recovery in the commercial component of
our nonresidential end-use market. Considering the notable
aggregates shipments to the energy sector in 2010, we expect the
rate of growth in the heavy industrial component of our
nonresidential end-use market to moderate in 2011. Natural gas
prices and the timing of lease commitments for oil and natural gas
companies will be significant factors for energy-sector activity.
Additionally, given current oil prices, there is a possibility of
increased wind farm construction activity. Overall, we expect
nonresidential end-use shipments in 2011 to increase in the
mid-single digit range. We have noticed early signs of potential
recovery in the multi-family component of the residential
construction market and we expect the rate of improvement in this
end-use market to increase over 2010. Finally, our ChemRock/Rail
shipments should be stable compared with 2010 shipments.
Cumulatively, we expect flat to a 3% improvement in overall
aggregates volume in 2011.
“Stability in our aggregates shipments will likely lead to
sustainable price increases. However, such increases may not be
uniform throughout our enterprise. Overall, we expect full-year
2011 aggregates pricing will range from flat to a 2% increase.
Additionally, rising energy costs may provide an impetus for
certain mid-year price increases.
“Aggregates production cost per ton in 2011 is expected to range
from flat to a slight decrease compared with 2010, despite rising
energy costs. The Specialty Products segment should contribute $50
million to $52 million in pretax earnings for 2011, as economic
recovery drives industrial demand for magnesia-based chemicals
products and continued demand for environmental applications is
driven by the United States’ focus on green technology and
innovation.
“Selling, general and administrative expenses should be lower in
2011, primarily due to lower pension expense. Interest expense
should be approximately $60 million in 2011, or $8 million less
than 2010, resulting from our refinancing of $242 million of our
6.875% Senior Notes with variable-rate borrowings under our
outstanding credit facilities. Our effective tax rate is expected
to be 26%. Capital expenditures are forecast at $175 million for
2011, including the first $25 million of the $53 million project in
Specialty Products and nearly $50 million for selective
high-quality growth projects.”
RISKS TO OUTLOOK
The 2011 estimated outlook includes management’s assessment of
the likelihood of certain risk factors that will affect
performance. The most significant risk to 2011 performance will be,
as previously noted, the United States economy and its impact on
construction activity.
Other risks related to the Corporation’s future performance
include, but are not limited to: both price and volume and include
a recurrence of widespread decline in aggregates pricing; a
greater-than-expected decline in infrastructure construction as a
result of continued delays in traditional federal, ARRA, state
and/or local infrastructure projects and continued lack of clarity
regarding the timing and amount of the federal highway bill; a
decline in nonresidential construction; a slowdown in the
residential construction recovery; or some combination thereof.
Further, increased highway construction funding pressures resulting
from either federal or state issues can affect profitability.
Currently, nearly all states are experiencing some funding-level
pressures driven by lower tax revenues. If these pressures reduce
transportation budgets more than in the past, construction spending
could be negatively affected. North Carolina and Texas are among
the states experiencing these general pressures, although recent
statistics indicate that tax revenues are increasing; these states
disproportionately affect our revenue and profitability.
The Corporation’s principal business serves customers in
construction aggregates-related markets. This concentration could
increase the risk of potential losses on customer receivables;
however, payment bonds normally posted on public projects, together
with lien rights on private projects, help to mitigate the risk of
uncollectible receivables. The level of aggregates demand in the
Corporation’s end-use markets, production levels and the management
of production costs will affect the operating leverage of the
Aggregates business and, therefore, profitability. Production costs
in the Aggregates business are also sensitive to energy prices,
both directly and indirectly. Diesel and other fuels change
production costs directly through consumption or indirectly in the
increased cost of energy-related consumables, such as, steel,
explosives, tires and conveyor belts. Fluctuating diesel pricing
also affects transportation costs, primarily through fuel
surcharges in the Corporation’s long-haul distribution network.
Transportation in the Corporation’s long-haul network,
particularly barge availability on the Mississippi River system as
well as rail cars and locomotive power to move trains, affects the
Corporation’s ability to efficiently transport material into
certain markets, most notably Texas, Florida and the Gulf Coast.
The Aggregates business is also subject to weather-related risks
that can significantly affect production schedules and
profitability. The first and fourth quarters are most adversely
affected by winter weather.
Risks to the 2011 outlook include shipment declines as a result
of economic events beyond the Corporation’s control. In addition to
the impact on nonresidential and residential construction, the
Corporation is exposed to risk in its estimated outlook from credit
markets and the availability of and interest cost related to its
debt.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Net sales for the quarter were $306.2 million, a 3.6% increase
versus the $295.6 million recorded in the first quarter of 2010.
The loss from operations for the first quarter of 2011 was $6.1
million compared with $12.9 million in 2010. Net loss attributable
to Martin Marietta Materials was $17.4 million, or $0.39 per
diluted share, versus 2010 first-quarter net loss attributable to
Martin Marietta Materials of $24.2 million, or $0.54 per diluted
share.
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the first quarter
of 2011 were $257.1 million compared with 2010 first quarter net
sales of $253.8 million. Aggregates pricing at heritage locations
was up 0.4%, while volume declined 1.2%. The loss from operations
for the 2011 first quarter was $16.5 million versus
$19.3 million in the year-earlier period.
Specialty Products’ first-quarter net sales of $49.1 million
increased 17.8% from prior-year net sales of $41.8 million.
Earnings from operations for the first quarter were $15.1 million
compared with $11.2 million in the year-earlier period.
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its fourth
quarter 2011 earnings conference call later today (May 3, 2011).
The live broadcast of the Martin Marietta Materials, Inc.
conference call will begin at 2 p.m. Eastern Time today. An
online replay will be available approximately two hours following
the conclusion of the live broadcast. A link to these events will
be available at the Corporation’s website.
For those investors without online web access, the conference
call may also be accessed by calling (970) 315-0423, confirmation
number 61456607.
Martin Marietta Materials, Inc. is the nation’s second largest
producer of construction aggregates and a producer of
magnesia-based chemicals and dolomitic lime. For more information
about Martin Marietta Materials, Inc., refer to the Corporation’s
website at www.martinmarietta.com.
If you are interested in Martin Marietta Materials, Inc. stock,
management recommends that, at a minimum, you read the
Corporation’s current annual report and Forms 10-K, 10-Q and 8-K
reports to the SEC over the past year. The Corporation’s recent
proxy statement for the annual meeting of shareholders also
contains important information. These and other materials that have
been filed with the SEC are accessible through the Corporation’s
website at www.martinmarietta.com and are also available at the
SEC’s website at www.sec.gov. You may also write or call the
Corporation’s Corporate Secretary, who will provide copies of such
reports.
Investors are cautioned that all statements in this press
release that relate to the future involve risks and uncertainties,
and are based on assumptions that the Corporation believes in good
faith are reasonable but which may be materially different from
actual results. Forward-looking statements give the investor our
expectations or forecasts of future events. You can identify these
statements by the fact that they do not relate only historical or
current facts. They may use words such as "anticipate," "expect,"
"should be," "believe," and other words of similar meaning in
connection with future events or future operating or financial
performance. Any or all of our forward-looking statements here and
in other publications may turn out to be wrong.
Factors that the Corporation currently believes could cause
actual results to differ materially from the forward-looking
statements in this press release include, but are not limited to,
the performance of the United States economy; widespread decline in
aggregates pricing; the level and timing of federal and state
transportation funding, including federal stimulus projects and
most particularly in North Carolina, one of the Corporation’s
largest and most profitable states, and Texas, Georgia, Iowa and
Louisiana, which when coupled with North Carolina, represented 55%
of 2010 net sales of the Aggregates business; the ability of states
and/or other entities to finance approved projects either with tax
revenues or alternative financing structures; levels of
construction spending in the markets the Corporation serves; the
severity of a continued decline in the commercial component of the
nonresidential construction market, notably office and retail
space; a slowdown in residential construction recovery; unfavorable
weather conditions, particularly Atlantic Ocean hurricane activity,
the late start to spring or the early onset of winter and the
impact of a drought in the markets served by the Corporation; the
volatility of fuel costs, particularly diesel fuel, and the impact
on the cost of other consumables, namely steel, explosives, tires
and conveyor belts; continued increases in the cost of other repair
and supply parts; transportation availability, notably barge
availability on the Mississippi River system and the availability
of railcars and locomotive power to move trains to supply the
Corporation’s Texas, Florida and Gulf Coast markets; increased
transportation costs, including increases from higher
passed-through energy and other costs to comply with tightening
regulations as well as higher volumes of rail and water shipments;
availability and cost of construction equipment in the United
States; weakening in the steel industry markets served by the
Corporation’s dolomitic lime products; inflation and its effect on
both production and interest costs; ability to successfully
integrate acquisitions quickly and in a cost-effective manner and
achieve anticipated profitability to maintain compliance with the
Corporation’s leverage ratio debt covenant; changes in tax laws,
the interpretation of such laws and/or administrative practices
that would increase the Corporation’s tax rate; violation of the
debt covenant if price and/or volumes return to previous levels of
instability; downward pressure on the Corporation’s common stock
price and its impact on goodwill impairment evaluations; and other
risk factors listed from time to time found in the Corporation’s
filings with the Securities and Exchange Commission. Other factors
besides those listed here may also adversely affect the
Corporation, and may be material to the Corporation. The
Corporation assumes no obligation to update any such
forward-looking statements.
MARTIN MARIETTA MATERIALS, INC. Unaudited
Statements of Earnings (In millions, except per share amounts)
Three Months Ended March 31,
2011 2010 Net sales $ 306.2 $ 295.6 Freight and
delivery revenues 50.3 45.3 Total
revenues 356.5 340.9 Cost of
sales 285.1 276.0 Freight and delivery costs 50.3
45.3 Total cost of revenues 335.4
321.3 Gross profit 21.1 19.6 Selling, general
and administrative expenses 29.2 33.6 Other operating (income) and
expenses, net (2.0 ) (1.1 ) Loss from operations (6.1
) (12.9 ) Interest expense 18.2 17.6 Other nonoperating
(income) and expenses, net (0.3 ) (0.6 ) Loss from
continuing operations before taxes on income (24.0 ) (29.9 ) Income
tax benefit (6.3 ) (5.0 ) Loss from continuing
operations (17.7 ) (24.9 )
Gain on discontinued operations, net of
related tax expense of $0.0 and $0.0, respectively
- 0.1 Consolidated net loss
(17.7 ) (24.8 ) Less: Net loss attributable to noncontrolling
interests (0.3 ) (0.6 ) Net loss attributable
to Martin Marietta Materials, Inc. $ (17.4 ) $ (24.2 ) Net
loss per common share: Basic from continuing operations
attributable to common shareholders $ (0.39 ) $ (0.54 )
Discontinued operations attributable to common shareholders
- - $ (0.39 ) $ (0.54 ) Diluted from
continuing operations attributable to common shareholders $ (0.39 )
$ (0.54 ) Discontinued operations attributable to common
shareholders - - $ (0.39 ) $ (0.54 )
Dividends per common share $ 0.40 $ 0.40
Average number of common shares outstanding: Basic
45.6 45.4 Diluted 45.6
45.4
MARTIN MARIETTA MATERIALS,
INC. Unaudited Financial Highlights (In millions)
Three Months Ended March 31, 2011
2010 Net sales: Aggregates Business: Mideast Group $ 85.4 $
83.3 Southeast Group 66.0 68.1 West Group 105.7
102.4 Total Aggregates Business 257.1 253.8 Specialty
Products 49.1 41.8 Total $ 306.2
$ 295.6 Gross profit: Aggregates Business: Mideast
Group $ 13.2 $ 11.9 Southeast Group (5.0 ) (2.9 ) West Group
(2.4 ) (3.0 ) Total Aggregates Business 5.8 6.0 Specialty
Products 17.6 14.1 Corporate (2.3 ) (0.5 ) Total $
21.1 $ 19.6 Selling, general and
administrative expenses: Aggregates Business: Mideast Group $ 10.4
$ 10.4 Southeast Group 6.1 6.4 West Group 10.6
10.7 Total Aggregates Business 27.1 27.5 Specialty Products
2.5 2.9 Corporate (0.4 ) 3.2 Total $ 29.2
$ 33.6 Earnings (Loss) from operations:
Aggregates Business: Mideast Group $ 5.7 $ 2.1 Southeast Group (9.7
) (9.1 ) West Group (12.5 ) (12.3 ) Total Aggregates
Business (16.5 ) (19.3 ) Specialty Products 15.1 11.2 Corporate
(4.7 ) (4.8 ) Total $ (6.1 ) $ (12.9 )
Depreciation $ 42.0 $ 43.5 Depletion 0.5 0.6 Amortization
0.8 0.9 $ 43.3 $ 45.0
MARTIN MARIETTA MATERIALS, INC.
Balance Sheet Data (In millions)
March
31, December 31, March 31, 2011
2010 2010 (Unaudited) (Audited) (Unaudited) ASSETS
Cash and cash equivalents $ 176.8 $ 70.3 $ 221.0 Accounts
receivable, net 203.2 183.4 202.1 Inventories, net 331.7 331.9
322.0 Other current assets 128.7 110.6 109.6 Property, plant and
equipment, net 1,676.3 1,687.8 1,695.0 Intangible assets, net 643.7
644.1 643.1 Other noncurrent assets 48.2 46.6
52.1 Total assets $ 3,208.6 $ 3,074.7 $ 3,244.9
LIABILITIES AND EQUITY Current maturities of long-term debt and
short-term facilities $ 7.1 $ 248.7 $ 219.6 Other current
liabilities 151.7 136.8 175.7 Long-term debt (excluding current
maturities) 1,161.5 782.0 1,029.6 Other noncurrent liabilities
453.6 438.9 447.1 Total equity 1,434.7 1,468.3
1,372.9 Total liabilities and equity $ 3,208.6 $ 3,074.7 $ 3,244.9
MARTIN MARIETTA MATERIALS, INC.
Unaudited Statements of Cash Flows (In millions)
Three Months Ended March 31, 2011
2010 Operating activities: Consolidated net loss $ (17.7 ) $
(24.8 ) Adjustments to reconcile consolidated net loss to net cash
provided by operating activities: Depreciation, depletion and
amortization 43.3 45.0 Stock-based compensation expense 2.8 3.9
Excess tax benefits from stock-based compensation transactions (0.3
) (0.1 ) Gains on divestitures and sales of assets (3.0 ) (1.1 )
Deferred income taxes 3.3 0.9
Other items, net
0.6 0.3
Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net (19.3 ) (39.3 ) Inventories, net 0.2 10.7
Accounts payable 14.5 15.1 Other assets and liabilities, net
(3.1 ) 16.5 Net cash provided by operating
activities 21.3 27.1 Investing
activities: Additions to property, plant and equipment (30.7 )
(25.0 ) Acquisitions, net - (28.0 ) Proceeds from divestitures and
sales of assets 2.2 1.5 Net cash
used for investing activities (28.5 ) (51.5 )
Financing activities: Borrowings of long-term debt 300.0 50.0
Repayments of long-term debt and payments on capital lease
obligations (162.2 ) (50.5 ) Change in bank overdraft (2.1 ) 0.5
Dividends paid (18.4 ) (18.4 ) Debt issue costs (3.2 ) (0.1 )
Issuances of common stock 0.3 0.2 Excess tax benefits from
stock-based compensation transactions 0.3 0.1 Distributions to
owners of noncontrolling interests (1.0 ) -
Net cash provided by (used for) financing activities
113.7 (18.2 ) Net increase (decrease) in cash
and cash equivalents 106.5 (42.6 ) Cash and cash equivalents,
beginning of period 70.3 263.6
Cash and cash equivalents, end of period $ 176.8 $ 221.0
MARTIN MARIETTA MATERIALS, INC.
Unaudited Operational Highlights Three
Months Ended March 31, 2011 Volume Pricing
Volume/Pricing Variance (1) Heritage Aggregates
Product Line: (2) Mideast Group 0.1 % 0.8 % Southeast
Group (9.7 %) 5.8 % West Group 2.9 % (2.4 %) Heritage Aggregates
Operations (1.2 %) 0.4 % Aggregates Product Line (3) (0.9 %) 0.3 %
Three Months Ended March 31, Shipments
(tons in thousands)
2011 2010
Heritage Aggregates Product Line: (2) Mideast Group
6,913 6,905 Southeast Group 5,528 6,122 West Group 10,751
10,446 Heritage Aggregates Operations 23,192 23,473
Acquisitions 74 - Divestitures (4) 1 3 Aggregates
Product Line (3) 23,267 23,476 (1)
Volume/pricing variances reflect the percentage increase (decrease)
from the comparable period in the prior year.
(2) Heritage Aggregates product line
excludes volume and pricing data for acquisitions that have not
been included in prior-year operations for the comparable period
and divestitures.
(3) Aggregates product line includes all acquisitions from
the date of acquisition and divestitures through the date of
disposal. (4) Divestitures include the tons related to
divested aggregates product line operations up to the date of
divestiture.
MARTIN MARIETTA MATERIALS,
INC. Non-GAAP Financial Measures (Dollars in
millions)
Gross margin as a percentage of net sales
and operating margin as a percentage of net sales represent
non-GAAP measures. The Corporation presents these ratios calculated
based on net sales as it is consistent with the basis by which
management reviews the Corporation's operating results. Further,
management believes it is consistent with the basis by which
investors analyze the Corporation's operating results given that
freight and delivery revenues and costs represent pass-throughs and
have no profit 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 months ended March 31, 2011 and 2010
in accordance with GAAP and reconciliations of the ratios as
percentages of total revenues to percentages of net sales:
Three Months Ended
March 31,
Gross Margin in Accordance with
Generally Accepted Accounting Principles
2011 2010 Gross profit $ 21.1 $ 19.6
Total revenues $ 356.5 $ 340.9 Gross margin
5.9 % 5.8 %
Three Months Ended March
31, Gross Margin Excluding Freight and Delivery Revenues
2011 2010 Gross profit $ 21.1 $ 19.6
Total revenues $ 356.5 $ 340.9 Less: Freight and delivery revenues
(50.3 ) (45.3 ) Net sales $ 306.2 $ 295.6
Gross margin excluding freight and delivery revenues
6.9 % 6.6 %
Three Months Ended
March 31,
Operating Margin in Accordance with
Generally Accepted Accounting Principles
2011 2010 Loss from operations $ (6.1 ) $ (12.9 )
Total revenues $ 356.5 $ 340.9 Operating margin
(1.7 %) (3.8 %)
Three Months
Ended March 31, Operating Margin Excluding Freight
and Delivery Revenues 2011 2010 Loss from
operations $ (6.1 ) $ (12.9 ) Total revenues $ 356.5 $ 340.9 Less:
Freight and delivery revenues (50.3 ) (45.3 ) Net
sales $ 306.2 $ 295.6 Operating margin excluding
freight and delivery revenues (2.0 %) (4.4 %)
MARTIN MARIETTA MATERIALS, INC. Non-GAAP
Financial Measures (continued) (Dollars in millions)
Three Months Ended March 31, 2011
2010
Earnings Before Interest, Income Taxes,
Depreciation, Depletion and Amortization (EBITDA) (1)
$ 37.3 $ 33.0
(1) EBITDA is a widely accepted financial
indicator of a company's ability to service and/or incur
indebtedness. EBITDA is not defined by generally accepted
accounting principles and, as such, should not be construed as an
alternative to net earnings or operating cash flow. For further
information on EBITDA, refer to the Corporation's website at
www.martinmarietta.com.
A reconciliation of Net Loss Attributable to Martin Marietta
Materials, Inc. to EBITDA is as follows:
Three Months
Ended March 31, 2011 2010 Net Loss
Attributable to Martin Marietta Materials, Inc. $ (17.4 ) $ (24.2 )
Add back: Interest Expense 18.2 17.6 Income Tax Benefit for
Controlling Interests (6.4 ) (4.9 ) Depreciation, Depletion and
Amortization Expense 42.9 44.5 EBITDA $
37.3 $ 33.0
The ratio of Consolidated
Debt-to-Consolidated EBITDA, as defined, for the trailing twelve
months is a covenant under the Corporation's revolving credit
facility, term loan facility and accounts receivable securitization
facility. Under the terms of these agreements, the Corporation's
ratio of consolidated debt-to-consolidated EBITDA, as defined, for
the trailing twelve months can not exceed 3.5 times as of March 31,
2011, with certain exceptions related to qualifying acquisitions,
as defined.
The following presents the calculation
of Consolidated Debt-to-Consolidated EBITDA, as defined, for the
trailing-twelve months at March 31, 2011. For supporting
calculations, refer to Corporation's website at
www.martinmarietta.com.
Twelve-Month Period
April 1, 2010 to
March 31, 2011
Earnings from continuing operations attributable to Martin Marietta
Materials, Inc. $ 103.8 Add back: Interest expense 69.0 Income tax
expense 27.8 Depreciation, depletion and amortization expense 175.1
Stock-based compensation expense 13.5 Deduct: Interest income
(1.0 ) Consolidated EBITDA, as defined $ 388.2
Consolidated Debt, including debt guaranteed by the Corporation, at
March 31, 2011 $ 1,186.0 Less: Unrestricted cash and cash
equivalents in excess of $50 at March 31, 2011 (126.7 )
Consolidated Net Debt, as defined, at March 31, 2011 $ 1,059.3
Consolidated Debt-to-Consolidated EBITDA,
as defined, at March 31, 2011 for the trailing twelve-month
EBITDA
2.73 times
MLM-E
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