Martin Marietta Materials, Inc. (NYSE:MLM) today announced
results for the second quarter and six months ended June 30,
2011.
Ward Nye, President and CEO of Martin Marietta Materials,
stated, “Despite a continuing difficult operating environment, I am
pleased by our Company’s performance. That we were able to increase
prices and control costs is a credit to our operating teams and our
disciplined approach to managing our business. Specifically, in the
quarter, aggregates pricing momentum continued with a 2.6% increase
in the average selling price of our heritage aggregates product
line. The quarter was, unfortunately, challenged by erratic weather
as well as reduced spending on infrastructure projects. Therefore,
as has been the case in the recent past, volumes were significantly
lower, and that had an attendant negative effect on our operating
profits. Our Specialty Products business continued its exceptional
performance and established new quarterly records for both net
sales and earnings from operations.”
NOTABLE ITEMS (ALL COMPARISONS, UNLESS NOTED, ARE WITH THE
PRIOR-YEAR QUARTER)
- Earnings per diluted share of $0.78
compared with $1.18
- Consolidated net sales of $426.7
million compared with $442.8 million
- Heritage aggregates product line
pricing up 2.6%
- Heritage aggregates product line volume
down 9.3%
- Heritage aggregates product line direct
production costs down 2.5%, despite a 13% increase in energy
costs
- Specialty Products record quarterly net
sales of $49.6 million and earnings from operations of
$19.3 million with a 380-basis-point improvement in operating
margin (excluding freight and delivery revenues)
- Consolidated selling, general and
administrative expenses down $1.9 million, or 20 basis points as a
percentage of net sales
- Consolidated earnings from operations
of $63.0 million compared with $90.7 million
- Acquired an aggregates, asphalt and
ready mixed concrete business in San Antonio
MANAGEMENT COMMENTARY (ALL COMPARISONS, UNLESS NOTED, ARE
WITH THE PRIOR-YEAR QUARTER)
Nye continued, “Our aggregates shipments were hindered by an
overall slowing of United States construction activity during the
first half of 2011, as well as severe weather patterns, which, of
course, is a noncontrollable and significant variable. For example,
in our second-quarter results, several Midwest states, including
Iowa, Indiana and Ohio, recorded the wettest April in more than a
century. These record levels of rainfall led to the flooding of the
Mississippi River in April and May, restricting production and
shipments in several of our southeastern operations. This extreme
weather contributed to the 9% decline in heritage aggregates
shipments for the quarter.
“Shipments to the infrastructure end-use market, accounting for
more than half of our Aggregates business, were down 11% for the
quarter. In addition to weather disruptions, the lack of a
long-term surface transportation bill and the winding down of the
American Recovery and Reinvestment Act (“ARRA”), or Stimulus,
projects in certain states continue to negatively affect investment
in transportation construction. While the investment for the nation
as a whole has declined, year-to-date contract lettings in certain
states, including Florida, Iowa and Texas, have increased over the
first half of 2010.
“Although 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 9% reduction in
nonresidential shipments. Our ChemRock/Rail end-use market declined
3% and our residential end-use market decreased 6%.
“Supported by the volume stability achieved in 2010, average
selling prices for the aggregates product line grew in each of our
reportable groups, led by a 6.8% increase for the Southeast Group.
More importantly, average selling price increased in nearly all of
our geographic markets despite volume declines. We continue to
believe pricing increases are sustainable for the remainder of the
year.
“Our Specialty Products business enjoyed strong demand in both
the chemicals and dolomitic lime product lines and established new
quarterly records for net sales and earnings from operations. Net
sales of $49.6 million increased 3.6% over the prior-year
quarter. Earnings from operations of $19.3 million reflect
management’s continued focus on cost control and represents a
380-basis-point improvement in the business’ operating margin over
the prior-year quarter.
“We continue to see the benefit of cost-savings initiatives and
prudent capital investment. Direct production costs in our heritage
aggregates product line were down 2.5%, despite a 13% increase in
noncontrollable energy costs. Diesel fuel remains the single
largest component of our energy costs. For the quarter, our diesel
costs averaged $3.08 per gallon compared with $2.12 in the
prior-year quarter. The increase in diesel expense for the quarter
lowered earnings per diluted share by $0.06. Cost decreases in
repairs, contract services and depreciation more than offset the
increase in energy in our heritage operations. However, our
consolidated cost of sales increased 1.6% due to higher raw
material costs for liquid asphalt and an increase in embedded
freight costs.
“We reduced our consolidated selling, general and administrative
expenses $1.9 million, or 20 basis points as a percentage of net
sales, due to lower pension costs and stock-based compensation
expense. Consolidated other operating income and expenses, net, was
an expense of $1.8 million in 2011 compared with income of $6.6
million in 2010. The 2010 amount includes a $5 million gain from
the reversal of an excess reserve related to the settlement of
legal proceedings in our West Group. Interest expense declined $3.1
million due to a higher mix of variable-rate debt, which currently
bears a lower interest rate than our fixed-rate debt.
LIQUIDITY AND CAPITAL RESOURCES
“Among our stated strategic aims is to identify geographic areas
with long-term, attractive demographics and to deploy our capital
when we can establish or maintain leading market positions in a
business that we understand and operate exceptionally well. In
complete alignment with that strategy, during the second quarter,
we acquired a business consisting of six aggregate facilities, as
well as several asphalt and ready mixed concrete operations in
western San Antonio. This transaction provides over 200 million
tons of high-quality limestone reserves and complements our
existing integrated presence in this high-growth market. Over the
past five years, San Antonio’s population and economic growth have
consistently outperformed comparable national results with
population growth of 13%.
“In addition, during the six months ended June 30, 2011, we
invested $58.7 million of capital in organic growth projects. In
particular, we initiated construction of a $53 million dolomitic
lime kiln in Woodville, Ohio in our Specialty Products business.
This project is expected to be substantially completed by the end
of 2012. We also opened an aggregates sales yard near Tampa,
Florida, adding to our rail-distribution network and serving the
Tampa and Lakeland, Florida, markets.
“Cash from operating activities for the six months ended June
30, 2011, was $56.7 million compared with $86.3 million for 2010.
The decrease was primarily due to lower net earnings and a slight
build in inventories in 2011 compared with a $12.9 million
inventory reduction in 2010. Our days sales outstanding was 44
days, essentially flat with 2010.
“On April 1, 2011, we repaid the maturity of $242 million of
Notes using borrowings under our term loan facility and our
accounts receivable credit facility. At June 30, 2011, our ratio of
consolidated debt to consolidated EBITDA, as defined, for the
trailing twelve-months was 3.09 times, in compliance with the limit
of 3.5 times. During the second quarter, Standard & Poor’s
reaffirmed our credit rating and upgraded the outlook on our
long-term rating from negative to stable.
2011 OUTLOOK
“A variety of factors outside of our direct control will
continue to affect our performance. One consideration will be the
rate at which states spend available Stimulus funds for
infrastructure projects, which is often dependent on federal
funding. In addition, Congress has previously approved a continuing
resolution that extends the Safe, Accountable, Flexible and
Efficient Transportation Equity Act – A Legacy for Users
(SAFETEA-LU) through September 30, 2011, and recent discussions in
Washington have led to a re-prioritization of Federal funds. Thus,
while 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.
“Another factor complicating our outlook is the pace of
residential construction activity. Although national forecasts
earlier in the year predicted stabilization and improvements in the
overall housing market, the United States Census reported the
seasonally adjusted value of residential construction put in place
declined 6.9% during the first five months of 2011. Economists are
now divided over the timing of recovery in residential
construction; however, we continue to believe that when recovery in
this sector begins, we can expect a notable volume impact.
“Given this uncertainty, our 2011 outlook assumes there will be
additional continuing resolutions to maintain current federal
funding levels, but the magnitude of the levels is uncertain. We
also expect states spending on infrastructure should remain
relatively constant and at least 25% of ARRA infrastructure funds
will be spent this year. However, the uncertainty created by the
lack of a long-term highway bill is affecting the nature and timing
of projects with a shift towards maintenance projects that tend to
be shorter in duration. This shift in project mix, coupled with the
uncertainty in long-term funding, creates the possibility that we
may not recover first-half shipments delayed due to weather during
the remainder of the year. We expect our infrastructure end-use
market to be down in the mid-single digit range. 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 and the impact weather has
had on these projects through the first half of 2011, we expect the
rate of growth in the heavy industrial component of our
nonresidential end-use market to moderate in 2011. Natural gas
prices, the timing of lease commitments for oil and natural gas
companies and stable weather are significant factors for
energy-sector activity in the second half of 2011. Overall, we
expect nonresidential end-use shipments in 2011 to be flat to
slightly up. We expect the rate of improvement in the residential
end-use market to increase over 2010. Finally, our ChemRock/Rail
shipments should be stable compared with 2010 shipments.
Cumulatively, we expect aggregates volume for the full year to
range from flat to a decrease of 3%.
“Rising energy costs have provided an impetus for certain
mid-year price increases. For the full year, we expect an increase
in aggregates pricing ranging from 2% to 4%. However, such
increases may not be uniform throughout our enterprise.
“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 $54
million to $56 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.
“Offsetting those factors over which we have little control are
those items where we can and do control our own destiny: selling,
general and administrative expenses should be lower in 2011,
primarily due to reduced 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 now forecast at $155 million for 2011, including
the first $25 million of the $53 million Specialty Products project
and nearly $50 million for selective high-quality growth
projects.
“Taken as a whole, we continue to feel good about our business
and how we are managing it. We remain focused on creating
shareholder value and on operating as a best-in-class company in
terms of our assets, performance and people.”
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; the
discontinuance of the federal gasoline tax or other revenue related
to infrastructure construction; 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
have general fund budget pressures driven by lower tax revenues. If
these pressures negatively affect transportation budgets more than
in the past, construction spending could be reduced. North Carolina
and Texas are among the states experiencing these fiscal 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. Hurricane activity in the Atlantic Ocean and Gulf
Coast generally is most active during the third and fourth
quarters. 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 $426.7 million, a 3.6% decrease
versus the $442.8 million recorded in the second quarter of 2010.
Earnings from operations for the second quarter of 2011 were $63.0
million compared with $90.7 million in 2010. Net earnings
attributable to Martin Marietta Materials were $35.8 million, or
$0.78 per diluted share, versus 2010 second-quarter net earnings
attributable to Martin Marietta Materials of $54.4 million, or
$1.18 per diluted share.
Net sales for the first six months of 2011 were $733.0 million
compared with $738.3 million for the year-earlier period.
Year-to-date earnings from operations were $56.9 million versus
$77.8 million in 2010. For the six-month period ended
June 30, 2011, net earnings attributable to Martin Marietta
Materials were $18.4 million, or $0.39 per diluted share, compared
with net earnings attributable to Martin Marietta Materials of
$30.2 million, or $0.65 per diluted share, in the first six months
of 2010.
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the second quarter
of 2011 were $377.1 million compared with 2010 second-quarter sales
of $394.9 million. Aggregates pricing at heritage locations was up
2.6%, while volume decreased 9.3%. Earnings from operations for the
quarter were $47.1 million in 2011 versus $80.0 million in the
year-earlier period. Year-to-date 2011 net sales for the Aggregates
business were $634.2 million versus $648.7 million in 2010.
Earnings from operations on a year-to-date basis were
$30.6 million in 2011 compared with $60.7 million in
2010. For the six-month period ended June 30, 2011, heritage
aggregates pricing increased 1.8%, while volume decreased 6.2%.
Specialty Products’ second-quarter net sales of $49.6 million
increased 3.6% from prior-year net sales of $47.9 million.
Earnings from operations for the second quarter were $19.3 million
compared with $16.8 million in the year-earlier period. For
the first six months of 2011, net sales were $98.8 million and
earnings from operations were $34.4 million compared with net sales
of $89.6 million and earnings from operations of $28.0 million for
the first six months of 2010.
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its second
quarter 2011 earnings conference call later today (August 2, 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 84273355.
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 discontinuance of the federal gasoline tax
or other revenue related to infrastructure construction; 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 or excessive
rainfall 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 Six Months
Ended June 30, June 30, 2011 2010
2011 2010 Net sales $ 426.7 $ 442.8 $ 733.0 $ 738.3
Freight and delivery revenues 66.3 61.8
116.5 107.2 Total revenues 493.0
504.6 849.5 845.5 Cost of
sales 330.2 325.1 615.4 601.0 Freight and delivery costs
66.3 61.8 116.5 107.2
Total cost of revenues 396.5 386.9
731.9 708.2 Gross profit 96.5 117.7 117.6
137.3 Selling, general and administrative expenses 31.7 33.6
60.9 67.1 Other operating (income) and expenses, net 1.8
(6.6 ) (0.2 ) (7.6 ) Earnings from operations
63.0 90.7 56.9 77.8 Interest expense 13.7 16.8 31.9 34.4
Other nonoperating expenses, net 0.3 1.4
0.1 0.8 Earnings from continuing
operations before taxes on income 49.0 72.5 24.9 42.6 Income tax
expense 13.1 17.5 6.7
12.5 Earnings from continuing operations 35.9 55.0 18.2 30.1
Gain on discontinued operations, net of
related tax expense of $0.0, $0.0, $0.0 and $0.1, respectively
- - - 0.1
Consolidated net earnings 35.9 55.0 18.2 30.2 Less: Net earnings
(loss) attributable to noncontrolling interests 0.1
0.6 (0.2 ) - Net earnings
attributable to Martin Marietta Materials, Inc. $ 35.8 $ 54.4
$ 18.4 $ 30.2 Net earnings per common
share: Basic from continuing operations attributable to common
shareholders $ 0.78 $ 1.18 $ 0.40 $ 0.66 Discontinued operations
attributable to common shareholders - -
- - $ 0.78 $ 1.18 $ 0.40 $ 0.66
Diluted from continuing operations attributable to
common shareholders $ 0.78 $ 1.18 $ 0.39 $ 0.65 Discontinued
operations attributable to common shareholders - -
- - $ 0.78 $ 1.18 $ 0.39
$ 0.65 Dividends per common share $ 0.40 $
0.40 $ 0.80 $ 0.80 Average number of
common shares outstanding: Basic 45.6 45.5
45.6 45.4 Diluted 45.8
45.7 45.8 45.6
MARTIN MARIETTA MATERIALS,
INC. Unaudited Financial Highlights (In millions)
Three Months Ended
Six Months Ended June 30, June 30, 2011
2010 2011 2010 Net sales: Aggregates Business:
Mideast Group $ 124.3 $ 131.6 $ 209.7 $ 214.9 Southeast Group 82.0
92.1 148.0 160.2 West Group 170.8 171.2
276.5 273.6 Total Aggregates Business
377.1 394.9 634.2 648.7 Specialty Products 49.6
47.9 98.8 89.6 Total $
426.7 $ 442.8 $ 733.0 $ 738.3
Gross profit (loss): Aggregates Business: Mideast Group $ 37.9 $
47.6 $ 51.1 $ 59.5 Southeast Group 0.2 14.2 (4.8 ) 11.3 West Group
36.1 37.5 33.7
34.5 Total Aggregates Business 74.2 99.3 80.0 105.3
Specialty Products 21.4 19.6 39.0 33.6 Corporate 0.9
(1.2 ) (1.4 ) (1.6 ) Total $ 96.5 $
117.7 $ 117.6 $ 137.3 Selling, general
and administrative expenses: Aggregates Business: Mideast Group $
10.6 $ 10.4 $ 21.0 $ 20.8 Southeast Group 6.2 6.3 12.4 12.7 West
Group 10.7 10.5 21.3
21.2 Total Aggregates Business 27.5 27.2 54.7 54.7
Specialty Products 2.2 2.7 4.7 5.6 Corporate 2.0
3.7 1.5 6.8 Total $ 31.7
$ 33.6 $ 60.9 $ 67.1 Earnings
(Loss) from operations: Aggregates Business: Mideast Group $ 27.9 $
39.5 $ 33.6 $ 41.6 Southeast Group (7.3 ) 7.5 (17.1 ) (1.6 ) West
Group 26.5 33.0 14.1
20.7 Total Aggregates Business 47.1 80.0 30.6 60.7
Specialty Products 19.3 16.8 34.4 28.0 Corporate (3.4 )
(6.1 ) (8.1 ) (10.9 ) Total $ 63.0 $
90.7 $ 56.9 $ 77.8 Depreciation $ 41.5
$ 43.4 $ 83.5 $ 86.9 Depletion 0.9 1.4 1.4 2.0 Amortization
0.8 0.7 1.6 1.6 $
43.2 $ 45.5 $ 86.5 $ 90.5
MARTIN MARIETTA MATERIALS,
INC. Balance Sheet Data (In millions)
June 30, December 31,
June 30, 2011 2010 2010 (Unaudited)
(Audited) (Unaudited) ASSETS Cash and cash equivalents $ 26.1 $
70.3 $ 32.1 Accounts receivable, net 269.4 183.4 257.8 Inventories,
net 336.4 331.9 319.8 Other current assets 113.7 110.6 98.8
Property, plant and equipment, net 1,697.8 1,687.8 1,694.4
Intangible assets, net 657.4 644.1 642.5 Other noncurrent assets
48.1 46.6 51.0 Total assets $ 3,148.9 $ 3,074.7 $ 3,096.4
LIABILITIES AND EQUITY Current maturities of long-term debt
and short-term facilities $ 107.0 $ 248.7 $ 244.1 Other current
liabilities 155.9 136.8 170.5 Long-term debt (excluding current
maturities) 979.0 782.0 811.9 Other noncurrent liabilities 456.4
438.9 453.1 Total equity 1,450.6 1,468.3
1,416.8 Total liabilities and equity $ 3,148.9 $ 3,074.7 $ 3,096.4
MARTIN MARIETTA
MATERIALS, INC. Unaudited Statements of Cash Flows (In
millions)
Six Months
Ended June 30, 2011 2010 Operating
activities: Consolidated net earnings $ 18.2 $ 30.2 Adjustments to
reconcile consolidated net earnings to net cash provided by
operating activities: Depreciation, depletion and amortization 86.5
90.5 Stock-based compensation expense 6.4 8.4 Excess tax benefits
from stock-based compensation transactions - (1.5 ) Gains on
divestitures and sales of assets (3.4 ) (4.0 ) Deferred income
taxes 9.2 4.8
Other items, net 1.0 1.0
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures: Accounts receivable, net (87.6 )
(94.9 ) Inventories, net (3.1 ) 12.9 Accounts payable 25.1 25.8
Other assets and liabilities, net 4.4 13.1
Net cash provided by operating activities 56.7
86.3 Investing activities: Additions to
property, plant and equipment (58.7 ) (68.6 ) Acquisitions, net
(49.9 ) (28.1 ) Proceeds from divestitures and sales of assets
5.2 3.9 Net cash used for
investing activities (103.4 ) (92.8 )
Financing activities: Borrowings of long-term debt 460.0 125.0
Repayments of long-term debt and payments on capital lease
obligations (405.0 ) (318.9 ) Change in bank overdraft (2.1 ) 1.7
Dividends paid (36.8 ) (36.8 ) Debt issue costs (3.3 ) (0.1 )
Issuances of common stock 1.1 2.6 Excess tax benefits from
stock-based compensation transactions - 1.5 Purchase of subsidiary
shares from noncontrolling interest (10.4 ) - Distributions to
owners of noncontrolling interests (1.0 ) -
Net cash provided by (used for) financing activities
2.5 (225.0 ) Net decrease in cash and cash
equivalents (44.2 ) (231.5 ) Cash and cash equivalents, beginning
of period 70.3 263.6 Cash and
cash equivalents, end of period $ 26.1 $ 32.1
MARTIN MARIETTA
MATERIALS, INC. Unaudited Operational Highlights
Three Months
Ended Six Months Ended June 30, 2011 June 30,
2011 Volume Pricing Volume Pricing
Volume/Pricing Variance (1) Heritage Aggregates
Product Line: (2) Mideast Group (8.1 %) 1.2 % (5.0 %)
1.2 % Southeast Group (16.6 %) 6.8 % (13.7 %) 6.3 % West Group (6.7
%) 2.3 % (3.1 %) 0.5 % Heritage Aggregates Operations (9.3 %) 2.6 %
(6.2 %) 1.8 % Aggregates Product Line (3) (8.9 %) 2.4 % (5.8 %) 1.6
%
Three Months Ended Six Months
Ended June 30, June 30, Shipments (tons in
thousands)
2011 2010 2011 2010
Heritage Aggregates Product Line: (2) Mideast Group
10,699 11,637 17,612 18,542 Southeast Group 6,853 8,219 12,381
14,341 West Group 16,398 17,582 27,149 28,028
Heritage Aggregates Operations 33,950 37,438 57,142 60,911
Acquisitions 155 - 229 - Divestitures (4) 6 7 7
11
Aggregates Product Line (3)
34,111 37,445 57,378 60,922
(1) Volume/pricing variances reflect the
percentage increase (decrease) from the comparable period in the
prior year.
(2) Heritage Aggregates product line
excludes volume and pricing data for acquisitions that have not
been included in prior-year operations for the comparable period
and divestitures.
(3) Aggregates product line includes all
acquisitions from the date of acquisition and divestitures through
the date of disposal.
(4) Divestitures include the tons related
to divested aggregates product line operations up to the date of
divestiture.
MARTIN MARIETTA MATERIALS, INC. Non-GAAP Financial
Measures (Dollars in millions) Gross margin as a
percentage of net sales and operating margin as a percentage of net
sales represent non-GAAP measures. The Corporation presents these
ratios calculated based on net sales, as it is consistent with the
basis by which management reviews the Corporation's operating
results. Further, management believes it is consistent with the
basis by which investors analyze the Corporation's operating
results, given that freight and delivery revenues and costs
represent pass-throughs and have no profit markup. Gross margin and
operating margin calculated as percentages of total revenues
represent the most directly comparable financial measures
calculated in accordance with generally accepted accounting
principles ("GAAP"). The following tables present the calculations
of gross margin and operating margin for the three and six months
ended June 30, 2011, and 2010, in accordance with GAAP and
reconciliations of the ratios as percentages of total revenues to
percentages of net sales:
Gross Margin in
Accordance with Generally Accepted Three Months Ended
Six Months Ended Accounting Principles June
30, June 30, 2011 2010 2011
2010 Gross profit $ 96.5 $ 117.7 $ 117.6
$ 137.3 Total revenues $ 493.0 $ 504.6
$ 849.5 $ 845.5 Gross margin 19.6 %
23.3 % 13.8 % 16.2 %
Three
Months Ended Six Months Ended June 30, June
30, Gross Margin Excluding Freight and Delivery Revenues
2011 2010 2011 2010 Gross profit
$ 96.5 $ 117.7 $ 117.6 $ 137.3 Total
revenues $ 493.0 $ 504.6 $ 849.5 $ 845.5 Less: Freight and delivery
revenues (66.3 ) (61.8 ) (116.5 )
(107.2 ) Net sales $ 426.7 $ 442.8 $ 733.0 $
738.3 Gross margin excluding freight and delivery revenues
22.6 % 26.6 % 16.0 % 18.6 %
Operating Margin in Accordance with Generally
Accepted Three Months Ended Six Months Ended
Accounting Principles June 30, June 30,
2011 2010 2011 2010 Earnings from
operations $ 63.0 $ 90.7 $ 56.9 $ 77.8
Total revenues $ 493.0 $ 504.6 $ 849.5 $ 845.5
Operating margin 12.8 % 18.0 % 6.7 %
9.2 %
Three Months Ended Six
Months Ended Operating Margin Excluding Freight and Delivery
Revenues June 30, June 30, 2011
2010 2011 2010 Earnings from operations $ 63.0
$ 90.7 $ 56.9 $ 77.8 Total revenues $
493.0 $ 504.6 $ 849.5 $ 845.5 Less: Freight and delivery revenues
(66.3 ) (61.8 ) (116.5 ) (107.2 ) Net
sales $ 426.7 $ 442.8 $ 733.0 $ 738.3
Operating margin excluding freight and delivery revenues
14.8 % 20.5 % 7.8 % 10.5 %
MARTIN MARIETTA MATERIALS,
INC. Non-GAAP Financial Measures (continued) (Dollars in
millions)
Three Months
Ended Six Months Ended June 30, June 30,
2011 2010 2011 2010
Earnings Before Interest, Income Taxes,
Depreciation, Depletion and Amortization (EBITDA) (1)
$ 105.4 $ 133.8 $ 142.6 $ 166.8
(1) EBITDA is a widely accepted financial
indicator of a company's ability to service and/or incur
indebtedness. EBITDA is not defined by generally accepted
accounting principles and, as such, should not be construed as an
alternative to net earnings or operating cash flow. For further
information on EBITDA, refer to the Corporation's website at
www.martinmarietta.com.
A reconciliation of Net Earnings Attributable to Martin
Marietta Materials, Inc. to EBITDA is as follows:
Three Months Ended Six Months Ended June 30,
June 30,
2011
2010
2011
2010
Net Earnings Attributable to Martin Marietta Materials, Inc. $ 35.8
$ 54.4 $ 18.4 $ 30.2 Add back: Interest Expense 13.7 16.8 31.9 34.4
Income Tax Expense for Controlling Interests 13.1 17.5 6.7 12.6
Depreciation, Depletion and Amortization Expense 42.8
45.1 85.6 89.6 EBITDA $ 105.4 $ 133.8 $
142.6 $ 166.8 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 the end
of any fiscal quarter, with certain exceptions related to
qualifying acquisitions, as defined.
The following presents the calculation
of Consolidated Debt-to-Consolidated EBITDA, as defined, for the
trailing-twelve months at June 30, 2011. For supporting
calculations, refer to Corporation's website at
www.martinmarietta.com.
Twelve-Month Period
July 1, 2010 to
June 30, 2011
Earnings from continuing operations attributable to Martin Marietta
Materials, Inc. $ 85.2 Add back: Interest expense 65.9 Income tax
expense 23.3 Depreciation, depletion and amortization expense 172.9
Stock-based compensation expense 12.6 Deduct: Interest income
(0.9 ) Consolidated EBITDA, as defined $ 359.0
Consolidated Debt, including debt guaranteed by the Corporation, at
June 30, 2011 $ 1,110.0 Less: Unrestricted cash and cash
equivalents in excess of $50 at June 30, 2011 -
Consolidated Net Debt, as defined, at June 30, 2011 $ 1,110.0
Consolidated Debt-to-Consolidated EBITDA,
as defined, at June 30, 2011 for the trailing twelve-month
EBITDA
3.09 x
MLM-E
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