Martin Marietta Materials, Inc. (NYSE:MLM) today announced
results for the third quarter and nine months ended September 30,
2011.
Ward Nye, President and CEO of Martin Marietta Materials,
stated, “During the third quarter, we continued to build on a
foundation that has enabled us to outperform others in the industry
as we all work through the prolonged economic downturn. Our
disciplined business approach is once again evident in our
operating results, which reflect aggregates product line pricing
growth and continued cost control. Further, our Specialty Products
business generated a new quarterly record for net sales and a
third-quarter record for earnings from operations. We also continue
to distinguish ourselves through the prudent deployment of capital
in the completion of strategic acquisitions that enhance our
aggregates business, capacity expansion projects in our profitable
Specialty Products business and sustained dividends throughout the
economic cycle. Business development initiatives have been
structured to grow or augment our positions in markets with
attractive growth dynamics while maintaining our balance sheet
strength and financial flexibility. The continued successful
execution of these operating and business development strategies
and initiatives will provide long-term shareholder value.”
NOTABLE ITEMS (ALL COMPARISONS, UNLESS NOTED, ARE WITH THE
PRIOR-YEAR QUARTER)
- Earnings per diluted share of $1.07 and
adjusted EPS of $1.11 (that excluded a $0.04 per diluted share to
reflect a non-recurring early retirement benefit) compared with
$1.13
- Consolidated net sales of $464.0
million, up 4.6%
- Heritage aggregates product line
pricing up 2.8%
- Heritage aggregates product line volume
down 2.2%
- Heritage aggregates product line direct
production costs down slightly, despite a 16% increase in energy
costs
- Specialty Products net sales of $50.4
million and earnings from operations of $15.6 million,
resulting in a 240-basis-point improvement in operating margin
(excluding freight and delivery revenues)
- Consolidated selling, general and
administrative expenses up $2.3 million, resulting from a $2.8
million nonrecurring early retirement benefit
- Consolidated earnings from operations
of $79.0 million compared with $83.9 million
MANAGEMENT COMMENTARY (ALL COMPARISONS, UNLESS NOTED, ARE
WITH THE PRIOR-YEAR QUARTER)
Nye continued, “We are pleased to report pricing growth in each
of our aggregates segments. Last year, we predicted aggregates
product line pricing recovery once a certain degree of volume
stability was achieved. Driven by growth in aggregates shipments in
2010, our 2.8% increase in heritage aggregates product line average
selling price represents our third consecutive quarter of pricing
improvement. Further, pricing momentum has been achieved despite a
modest decline in our heritage aggregates product line shipments.
Even more compelling, most geographic markets with declines in
quarterly shipments still reported an increase in average selling
price, demonstrating the continued pricing power of the Aggregates
business.
“It has long been the cornerstone of our culture to put cost
control as a critical component of our business model and
strategies. To that effect, direct production costs in our heritage
aggregates product line were down slightly, despite a 16% increase
in noncontrollable energy costs. Diesel fuel, which continues to be
the single largest component of our energy expenses, averaged $3.00
per gallon compared with $2.05 in the prior-year quarter. This
increase in diesel for the quarter lowered earnings per diluted
share by $0.08. Cost reductions, primarily in personnel, repairs
and depreciation, more than offset the energy increase in our
heritage operations. However, our consolidated cost of sales
increased 6.9% due to higher raw material costs for liquid asphalt
and an increase in embedded freight costs, both directly
attributable to the increase in diesel.
“Our cost focus extends to selling, general and administrative
expenses. On a consolidated basis, these costs increased $2.3
million for the quarter due to a $2.8 million nonrecurring early
retirement benefit. However, after adjusting for this nonrecurring
item, consolidated selling, general and administrative expenses
were 6.6% of net sales, representing an industry-leading
performance. Interest expense declined $3.7 million due to a higher
mix of variable-rate debt, which currently bears a lower interest
rate than our fixed-rate debt.
“Our Specialty Products business continues to exceed
expectations, setting a new quarterly record for net sales and a
new third-quarter record for earnings from operations. Net sales of
$50.4 million increased $8.1 million, or 19%, over the
prior-year quarter, with $3.5 million, or 44%, dropping to the
bottom line. The result: record earnings from operations of $15.6
million. Operating margin excluding freight and delivery revenues
expanded 240 basis points over the prior-year quarter. These
operating results and our outlook for the fourth quarter have led
us to increase our earnings guidance for the full year for this
business.
“We also remain focused on business development, evidenced by
our recently announced definitive agreement for an asset exchange
with Lafarge North America Inc. to acquire its Front Range business
in and around metropolitan Denver, Colorado. This transaction will
provide us with significant aggregates sites, as well as vertically
integrated asphalt and ready mixed concrete plants and a road
paving business. Denver, based on strong demographic trends, a per
capita income well above the national average and its ability to
attract both national and multinational businesses, is an
attractive market to expand our geographic footprint. Subject to
regulatory approval, we expect to close the transaction this year.
This asset exchange, as well as the second-quarter acquisition in
San Antonio, Texas, represent two strategic transactions that
should enhance long-term shareholder value.
“As previously noted, there was a 2.2% decline in our heritage
aggregates product line shipments. The infrastructure market
continues to represent more than half of our Aggregates business.
Although Congress recently extended federal highway funding through
March 31, 2012, states remain hesitant to initiate long-term
projects. Additionally, the impact of the American Recovery and
Reinvestment Act (“ARRA”), or Stimulus, continues to wane as the
December 31, 2012, deadline to complete all such projects
approaches. These factors directly resulted in a 3% decline in our
infrastructure shipments for the quarter. We nonetheless remain
optimistic that the underlying demand and need for state
infrastructure projects are compelling and anticipate consistent
growth will follow once long-term federal funding is resolved.
“Aggregates shipments to the commercial component of our
nonresidential end-use market increased over the prior-year
quarter. Growth in this sector is encouraging, although the
commercial recovery is limited and often now found in geographies
with distinct characteristics, such as areas with a strong military
presence. This commercial growth, however, was offset by a
reduction in shipments to the heavy industrial component, namely
the energy sector. This decline in energy-related sales reflects
reduced shipments to the nuclear power and wind energy components
of this sector. Cumulatively, we experienced a slight decline in
nonresidential shipments. Shipments to the residential market grew
9%, while our ChemRock/Rail end-use market was flat. Overall, our
heritage aggregates product line shipments were down 2.2% from the
third quarter of 2010.
LIQUIDITY AND CAPITAL RESOURCES
“Cash from operating activities for the nine months ended
September 30, 2011, was $179.9 million compared with $202.6 million
for 2010. The decrease was primarily due to lower net earnings in
2011. Additionally, there was a slight increase in working capital
for the year. Our days sales outstanding was 45 days, essentially
unchanged from 2010.
“During the nine months ended September 30, 2011, we invested
$93.5 million of capital, primarily in maintenance capital
initiatives. We also invested in targeted organic growth projects.
In particular, we continued 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 late
2012.
“At September 30, 2011, our ratio of consolidated debt to
consolidated EBITDA, as defined, for the trailing twelve months was
3.07 times, in compliance with the limit of 3.5 times.
2011 OUTLOOK
“A variety of factors beyond our direct control continue to make
forecasting future performance unclear. Of particular note is the
status of long-term federal infrastructure funding and
uncertainties about the timing and amount of such funding. However,
we are pleased to see increased dialogue in Washington, D.C.,
regarding the need for a multi-year surface transportation bill and
its role in jobs creation. While there is bipartisan Congressional
agreement that infrastructure is a key and essential governmental
priority, the national deficit has created a heightened sensitivity
with respect to all government spending.
“National forecasts earlier this year predicted stabilization
and improvements in the overall housing market, and we increased
aggregates shipments to that sector in discrete geographic areas.
However, the United States Census Bureau reported that the
nationally seasonally adjusted value of residential construction
put in place declined slightly during the first eight months of
2011. Economists continue to be divided over both the timing of
recovery in residential construction and the pace of recovery,
complicating our outlook. We believe that when this sector
recovers, there will be a notable volume impact, and we are well
positioned to benefit from that upturn.
“Given the uncertainty created by the absence of a long-term
highway bill, we expect our infrastructure end-use market to be
down in the mid-single digit range for 2011. While we anticipate a
modest volume recovery in the commercial component of our
nonresidential end-use market, aggregates shipments to the energy
sector have declined from 2010 levels. Natural gas prices, the
timing of lease commitments for oil and natural gas companies,
geographic transitions and weather conditions continue to affect
energy-sector activity. Overall, nonresidential end-use shipments
for the year are likely to be down slightly. We expect the rate of
improvement in the residential end-use market to be comparable with
2010. Finally, our ChemRock/Rail shipments should be down slightly
compared with 2010. Accordingly, we are revising our volume
guidance for 2011, largely based on the strength of the fourth
quarter of 2010, which reflected dry weather and strong
agricultural lime shipments. We now expect aggregates product line
shipments for full-year 2011 to decrease from 2% to 4%.
“Despite lower volume guidance for the year, we remain confident
that our pricing growth is sustainable and reaffirm our previous
guidance. For the full year, we expect an increase in aggregates
pricing ranging from 2% to 4%. These increases may not be uniform
throughout our enterprise.
“Aggregates product line direct production costs are expected to
decline for the full year. However, lower annual production in
response to the decline in shipments, when coupled with higher
energy costs, is expected to result in a higher cost per ton for
the aggregates product line. The Specialty Products segment should
contribute approximately $60 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 or no
control are those items that we do control: selling, general and
administrative expenses should be lower in 2011, primarily due to
reduced pension expense and after absorbing the nonrecurring early
retirement benefit. 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 $155 million for 2011, including the
first $25 million of the $53 million Specialty Products
project.
“Overall, the year has unfolded broadly in accordance with our
expectations and we are pleased with our performance. We will
continue to focus on our strategic objectives, with the underlying
goal of enhancing long-term shareholder value.”
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 volume negatively
affecting aggregates price; 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 uncertainty 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, states which disproportionately affect our revenue and
profitability, are among the states experiencing these fiscal
pressures, although recent statistics indicate that tax revenues
are increasing.
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 our
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 $464.0 million, a 4.6% increase
versus the $443.7 million recorded in the third quarter of 2010.
Earnings from operations for the third quarter of 2011 were $79.0
million compared with $83.9 million in 2010. Net earnings
attributable to Martin Marietta Materials were $49.2 million, or
$1.07 per diluted share, versus 2010 third-quarter net earnings
attributable to Martin Marietta Materials of $52.0 million, or
$1.13 per diluted share.
Net sales for the first nine months of 2011 were $1.197 billion
compared with $1.182 billion for the comparable prior-year period.
Year-to-date earnings from operations were $135.9 million versus
$161.7 million in 2010. For the nine-month period ended
September 30, 2011, net earnings attributable to Martin
Marietta Materials were $67.5 million, or $1.46 per diluted share,
compared with net earnings attributable to Martin Marietta
Materials of $82.2 million, or $1.78 per diluted share, in the
first nine months of 2010.
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the third quarter
of 2011 were $413.6 million compared with 2010 third-quarter sales
of $401.4 million. Aggregates pricing at heritage locations was up
2.8%, while volume decreased 2.2%. Earnings from operations for the
quarter were $69.3 million in 2011 versus $74.1 million in the
year-earlier period. Year-to-date 2011 net sales for the Aggregates
business were $1.048 billion versus $1.050 billion in 2010.
Earnings from operations on a year-to-date basis were
$100.0 million in 2011 compared with $134.8 million in
2010. For the nine-month period ended September 30, 2011, heritage
aggregates pricing increased 2.1%, while volume decreased 4.7%.
Specialty Products’ third-quarter net sales of $50.4 million
increased 19.1% from prior-year net sales of $42.3 million.
Earnings from operations for the third quarter were $15.6 million
compared with $12.0 million in the year-earlier period. For
the first nine months of 2011, net sales were $149.1 million and
earnings from operations were $50.0 million compared with net sales
of $131.9 million and earnings from operations of $40.1 million for
the first nine months of 2010.
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its third
quarter 2011 earnings conference call later today (November 1,
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 20607264.
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,” “will,” 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; a 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.
MLM-E
MARTIN MARIETTA
MATERIALS, INC. Unaudited Statements of Earnings (In
millions, except per share amounts)
Three Months Ended Nine
Months Ended September 30, September 30,
2011 2010 2011 2010 Net sales $ 464.0 $
443.7 $ 1,196.9 $ 1,182.1 Freight and delivery revenues 70.8
65.7 187.3 172.9
Total revenues 534.8 509.4
1,384.2 1,355.0 Cost of sales 352.5
329.9 967.8 931.0 Freight and delivery costs 70.8
65.7 187.3 172.9 Total
cost of revenues 423.3 395.6
1,155.1 1,103.9 Gross profit 111.5 113.8 229.1
251.1 Selling, general and administrative expenses 33.5 31.2
94.4 98.4 Research and development - 0.1 - 0.1 Other operating
(income) and expenses, net (1.0 ) (1.4 ) (1.2
) (9.1 ) Earnings from operations 79.0 83.9 135.9 161.7
Interest expense 13.4 17.1 45.3 51.5 Other nonoperating
(income) and expenses, net 2.1 (0.5 )
2.2 0.3 Earnings from continuing operations
before taxes on income 63.5 67.3 88.4 109.9 Income tax expense
13.4 14.1 20.1
26.6 Earnings from continuing operations 50.1 53.2 68.3 83.3
Gain on discontinued operations, net of
related tax expense of $0.1, $0.0, $0.1 and $0.0, respectively
0.2 0.1 0.2 0.2
Consolidated net earnings 50.3 53.3 68.5 83.5 Less:
Net earnings attributable to noncontrolling interests 1.1
1.3 1.0 1.3
Net earnings attributable to Martin Marietta Materials, Inc. $ 49.2
$ 52.0 $ 67.5 $ 82.2 Net
earnings per common share: Basic from continuing operations
attributable to common shareholders $ 1.07 $ 1.13 $ 1.47 $ 1.79
Discontinued operations attributable to common shareholders
- - - - $ 1.07
$ 1.13 $ 1.47 $ 1.79 Diluted
from continuing operations attributable to common shareholders $
1.07 $ 1.13 $ 1.46 $ 1.78 Discontinued operations attributable to
common shareholders - - -
- $ 1.07 $ 1.13 $ 1.46 $ 1.78
Dividends per common share $ 0.40 $ 0.40
$ 1.20 $ 1.20 Average number of common
shares outstanding: Basic 45.7 45.5
45.6 45.5 Diluted 45.8
45.7 45.8 45.6
MARTIN MARIETTA
MATERIALS, INC. Unaudited Financial Highlights (In
millions)
Three Months Ended Nine Months Ended September
30, September 30, 2011 2010 2011
2010 Net sales: Aggregates Business: Mideast Group $ 131.6 $
133.6 $ 341.3 $ 348.5 Southeast Group 84.4 91.2 232.4 251.5 West
Group 197.6 176.6 474.1
450.2 Total Aggregates Business 413.6 401.4 1,047.8
1,050.2 Specialty Products 50.4 42.3
149.1 131.9 Total $ 464.0 $
443.7 $ 1,196.9 $ 1,182.1 Gross profit
(loss): Aggregates Business: Mideast Group $ 43.0 $ 48.7 $ 94.1 $
108.2 Southeast Group 1.7 7.9 (3.2 ) 19.2 West Group 49.5
43.2 83.3 77.7
Total Aggregates Business 94.2 99.8 174.2 205.1 Specialty Products
17.8 14.6 56.8 48.3 Corporate (0.5 ) (0.6 )
(1.9 ) (2.3 ) Total $ 111.5 $ 113.8 $ 229.1
$ 251.1 Selling, general and administrative
expenses: Aggregates Business: Mideast Group $ 10.4 $ 10.3 $ 31.5 $
31.1 Southeast Group 6.4 6.3 18.7 19.1 West Group 10.7
10.7 32.0 31.8
Total Aggregates Business 27.5 27.3 82.2 82.0 Specialty Products
2.2 2.5 6.9 8.1 Corporate 3.8 1.4
5.3 8.3 Total $ 33.5 $ 31.2
$ 94.4 $ 98.4 Earnings (Loss) from
operations: Aggregates Business: Mideast Group $ 32.7 $ 38.8 $ 66.3
$ 80.3 Southeast Group (3.1 ) 1.4 (20.1 ) (0.1 ) West Group
39.7 33.9 53.8 54.6
Total Aggregates Business 69.3 74.1 100.0 134.8 Specialty
Products 15.6 12.0 50.0 40.1 Corporate (5.9 ) (2.2 )
(14.1 ) (13.2 ) Total $ 79.0 $ 83.9 $
135.9 $ 161.7 Net sales by product line:
Aggregates Business: Aggregates $ 379.3 $ 376.6 $ 964.0 $ 986.0
Asphalt 13.1 9.8 38.1 29.0 Ready Mixed Concrete 9.7 7.0 22.7 19.6
Road Paving 10.0 6.6 19.4 12.6 Other 1.5 1.4
3.6 3.0 Total Aggregates
Business 413.6 401.4 1,047.8 1,050.2 Specialty Products Business:
Magnesia-Based Chemicals 36.1 29.3 105.4 89.3 Dolomitic Lime 13.9
12.5 42.7 41.4 Other 0.4 0.5 1.0
1.2 Total Specialty Products Business
50.4 42.3 149.1 131.9
Total $ 464.0 $ 443.7 $ 1,196.9 $
1,182.1 Depreciation $ 41.1 $ 43.5 $ 124.7 $ 130.4
Depletion 1.3 1.2 2.6 3.2 Amortization 0.8 0.7
2.4 2.3 $ 43.2 $ 45.4
$ 129.7 $ 135.9
MARTIN MARIETTA MATERIALS, INC.
Balance Sheet Data (In millions)
September 30, December 31,
September 30, 2011 2010 2010
(Unaudited) (Audited) (Unaudited) ASSETS Cash and cash equivalents
$ 56.8 $ 70.3 $ 60.5 Accounts receivable, net 259.8 183.4 249.6
Inventories, net 337.7 331.9 323.8 Other current assets 113.1 110.6
98.2 Property, plant and equipment, net 1,686.6 1,687.8 1,693.2
Intangible assets, net 657.3 644.1 641.8 Other noncurrent assets
47.3 46.6 48.7 Total assets $ 3,158.6 $ 3,074.7 $ 3,115.8
LIABILITIES AND EQUITY Current maturities of long-term debt
and short-term facilities $ 7.2 $ 248.7 $ 245.4 Other current
liabilities 190.5 136.8 181.4 Long-term debt (excluding current
maturities) 1,038.3 782.0 785.7 Other noncurrent liabilities 437.0
438.9 446.1 Total equity 1,485.6 1,468.3
1,457.2 Total liabilities and equity $ 3,158.6 $ 3,074.7 $ 3,115.8
MARTIN MARIETTA
MATERIALS, INC. Unaudited Statements of Cash Flows (In
millions)
Nine Months
Ended September 30, 2011 2010
Operating activities: Consolidated net earnings $ 68.5 $ 83.5
Adjustments to reconcile consolidated net earnings to net cash
provided by operating activities: Depreciation, depletion and
amortization 129.7 135.9 Stock-based compensation expense 9.3 11.7
Excess tax benefits from stock-based compensation transactions -
(1.6 ) Gains on divestitures and sales of assets (3.9 ) (4.3 )
Deferred income taxes 6.4 17.1
Other items, net 1.3 0.7
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures: Accounts receivable, net (78.0 )
(86.8 ) Inventories, net (4.4 ) 8.9 Accounts payable 26.0 24.9
Other assets and liabilities, net 25.0 12.6
Net cash provided by operating activities
179.9 202.6 Investing activities:
Additions to property, plant and equipment (93.5 ) (110.0 )
Acquisitions, net (49.9 ) (28.1 ) Proceeds from divestitures and
sales of assets 6.1 4.5 Railcar construction advances - (9.0 )
Repayment of railcar construction advances -
9.0 Net cash used for investing activities
(137.3 ) (133.6 ) Financing activities: Borrowings of
long-term debt 460.0 150.0 Repayments of long-term debt and
payments on capital lease obligations (445.5 ) (369.5 ) Change in
bank overdraft (2.1 ) (1.7 ) Dividends paid (55.2 ) (55.2 ) Debt
issue costs (3.3 ) (0.1 ) Issuances of common stock 1.4 2.8 Excess
tax benefits from stock-based compensation transactions - 1.6
Purchase of subsidiary shares from noncontrolling interest (10.4 )
- Distributions to owners of noncontrolling interests (1.0 )
- Net cash used for financing activities
(56.1 ) (272.1 ) Net decrease in cash and cash
equivalents (13.5 ) (203.1 ) Cash and cash equivalents, beginning
of period 70.3 263.6 Cash and
cash equivalents, end of period $ 56.8 $ 60.5
MARTIN MARIETTA
MATERIALS, INC. Unaudited Operational Highlights
Three Months Ended
Nine Months Ended September 30, 2011 September 30,
2011 Volume Pricing Volume Pricing
Volume/Pricing Variance (1) Heritage Aggregates
Product Line: (2) Mideast Group (3.9 %) 1.6 % (4.6 %)
1.3 % Southeast Group (12.7 %) 5.2 % (13.3 %) 5.9 % West Group 3.7
% 4.2 % (0.5 %) 2.0 % Heritage Aggregates Operations (2.2 %) 2.8 %
(4.7 %) 2.1 % Aggregates Product Line (3) (1.3 %) 2.4 % (4.1 %) 1.9
%
Three Months Ended Nine Months Ended
September 30, September 30, Shipments (tons in
thousands)
2011 2010 2011 2010
Heritage Aggregates Product Line: (2) Mideast Group
11,946 12,436 29,558 30,977 Southeast Group 6,997 8,012 19,378
22,352 West Group 18,465 17,807 45,614 45,836
Heritage Aggregates Operations 37,408 38,255 94,550 99,165
Acquisitions 344 - 573 - Divestitures (4) 4 7 11
18 Aggregates Product Line (3) 37,756 38,262
95,134 99,183
(1) Volume/pricing variances reflect the
percentage increase (decrease) from the comparable period in the
prior year.
(2) Heritage Aggregates product line
excludes volume and pricing data for acquisitions that have not
been included in prior-year operations for the comparable period
and divestitures.
(3) Aggregates product line includes all
acquisitions from the date of acquisition and divestitures through
the date of disposal.
(4) Divestitures include the tons related
to divested aggregates product line operations up to the date of
divestiture.
MARTIN MARIETTA
MATERIALS, INC. Non-GAAP Financial Measures (Dollars in
millions) Gross margin as a percentage
of net sales and operating margin as a percentage of net sales
represent non-GAAP measures. The Corporation presents these ratios
calculated based on net sales, as it is consistent with the basis
by which management reviews the Corporation's operating results.
Further, management believes it is consistent with the basis by
which investors analyze the Corporation's operating results, given
that freight and delivery revenues and costs represent
pass-throughs and have no profit markup. Gross margin and operating
margin calculated as percentages of total revenues represent the
most directly comparable financial measures calculated in
accordance with generally accepted accounting principles ("GAAP").
The following tables present the calculations of gross margin and
operating margin for the three and nine months ended September 30,
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 Nine Months Ended
Accounting Principles September 30, September
30, 2011 2010 2011 2010 Gross
profit $ 111.5 $ 113.8 $ 229.1 $ 251.1
Total revenues $ 534.8 $ 509.4 $ 1,384.2 $
1,355.0 Gross margin 20.8 % 22.3 % 16.5
% 18.5 %
Three Months Ended Nine
Months Ended September 30, September 30, Gross
Margin Excluding Freight and Delivery Revenues 2011
2010 2011 2010 Gross profit $ 111.5
$ 113.8 $ 229.1 $ 251.1 Total revenues
$ 534.8 $ 509.4 $ 1,384.2 $ 1,355.0 Less: Freight and delivery
revenues (70.8 ) (65.7 ) (187.3 )
(172.9 ) Net sales $ 464.0 $ 443.7 $ 1,196.9 $
1,182.1 Gross margin excluding freight and delivery revenues
24.0 % 25.6 % 19.1 % 21.2 %
Operating Margin in Accordance with Generally
Accepted Three Months Ended Nine Months Ended
Accounting Principles September 30, September
30, 2011 2010 2011 2010 Earnings
from operations $ 79.0 $ 83.9 $ 135.9 $ 161.7
Total revenues $ 534.8 $ 509.4 $ 1,384.2
$ 1,355.0 Operating margin 14.8 % 16.5
% 9.8 % 11.9 %
Three Months
Ended Nine Months Ended Operating Margin Excluding
Freight and Delivery Revenues September 30, September
30, 2011 2010 2011 2010 Earnings
from operations $ 79.0 $ 83.9 $ 135.9 $ 161.7
Total revenues $ 534.8 $ 509.4 $ 1,384.2 $ 1,355.0 Less:
Freight and delivery revenues (70.8 ) (65.7 )
(187.3 ) (172.9 ) Net sales $ 464.0 $ 443.7 $
1,196.9 $ 1,182.1 Operating margin excluding freight
and delivery revenues 17.0 % 18.9 % 11.4 %
13.7 %
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. EBITDA is as follows for the
three and nine months ended September 30, 2011 and 2010.
Three Months Ended Nine Months Ended
September 30, September 30, Earnings Before
Interest, Income Taxes, Depreciation, Depletion and Amortization
(EBITDA) $ 118.9 $ 128.2 $ 261.5 $ 295.0
A reconciliation of Net Earnings Attributable
to Martin Marietta Materials, Inc. to EBITDA is as follows:
Three Months Ended Nine Months Ended September
30, September 30, Net Earnings Attributable to Martin
Marietta Materials, Inc. $ 49.2 $ 52.0 $ 67.5 $ 82.2 Add back:
Interest Expense 13.4 17.1 45.3 51.5 Income Tax Expense for
Controlling Interests 13.5 14.0 20.2 26.6 Depreciation, Depletion
and Amortization Expense 42.8 45.1
128.5 134.7 EBITDA $ 118.9 $
128.2 $ 261.5 $ 295.0
MARTIN MARIETTA MATERIALS, INC.
Non-GAAP Financial Measures (continued) (Dollars, other than
earnings per share amounts, and number of shares in millions)
Adjusted earnings per diluted share ("Adjusted EPS"),
the earnings per diluted share impact of a nonrecurring early
retirement benefit, and selling, general and administrative
expenses adjusted for a nonrecurring early retirement benefit
("Adjusted SG&A") as a percentage of net sales represent
non-GAAP financial measures. Management presents these measures as
it believes Adjusted EPS and Adjusted SG&A represent the most
comparable operating performance measures to analysts' expectations
for the three months ended September 30, 2011. Analysts have not
factored the impact of the nonrecurring early retirement benefit
into their EPS or selling, general and administrative expenses
estimates for the quarter. The following shows the
calculation of the EPS impact of the nonrecurring early retirement
benefit and reconciles earnings per diluted share in accordance
with generally accepted accounting principles for the three months
ended September 30, 2011, to Adjusted EPS: After tax impact
of nonrecurring early retirement benefit $ 1.7 Diluted
average number of common shares outstanding for the three months
ended September 30, 2011 45.8 Diluted earnings per
share impact of nonrecurring early retirement benefit $ 0.04
Three Months Ended September 30, 2011
Earnings per diluted share in accordance with generally accepted
accounting principles $ 1.07 Add back: Earnings per diluted share
impact of nonrecurring early retirement benefit 0.04
Adjusted EPS $ 1.11 The following presents the
calculation of Adjusted SG&A as a percentage of net sales:
Three Months Ended September 30, 2011 Selling,
general and administrative expenses in accordance with generally
accepted accounting principles $ 33.5 Deduct: Nonrecurring early
retirement benefit 2.8 Adjusted SG&A $ 30.7
Net sales $ 464.0 Adjusted SG&A as
a percentage of net sales 6.6 % 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 September 30, 2011. For supporting
calculations, refer to Corporation's website at
www.martinmarietta.com.
Twelve-Month Period
October 1, 2010 to
September 30, 2011
Earnings from continuing operations attributable to Martin Marietta
Materials, Inc. $ 82.1 Add back: Interest expense
62.2 Income tax expense 22.7 Depreciation, depletion and
amortization expense 170.8 Stock-based compensation expense 12.3
Deduct: Interest income (0.9 ) Consolidated EBITDA, as
defined $ 349.2 Consolidated Debt, including debt guaranteed
by the Corporation, at September 30, 2011 $ 1,070.9
Consolidated Debt-to-Consolidated EBITDA,
as defined, at September 30, 2011 for the trailing twelve-month
EBITDA
3.07 x
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