Martin Marietta Materials, Inc. (NYSE:MLM) today announced
results for the fourth quarter and year ended December 31,
2011.
Ward Nye, President and CEO of Martin Marietta Materials,
stated: “2011 was an exciting year for our company in terms of both
strong operational and financial performance and execution against
stated strategic objectives. Considering the challenges that
confronted the construction materials industry throughout the year,
I am pleased that we concluded 2011 with fourth-quarter earnings
that exceeded market expectations, before charges related to
business development expenses. Underlying these results is a 6%
increase in average selling price in our heritage aggregates
product line that continued the momentum generated throughout the
entire year. Further, our Specialty Products segment established
new records for fourth-quarter and annual earnings.
“In addition to delivering strong operating results for the
quarter, we completed three aggregates-related acquisitions during
2011, which enhanced our platform for future growth in previously
identified target markets. Coupled with tactical execution, our
continued disciplined business approach and commitment to
fundamentals and strategic vision have once again yielded
impressive results, especially in a challenging environment. We are
well positioned to continue building long-term shareholder
value.”
NOTABLE ITEMS FOR THE FOURTH QUARTER (ALL COMPARISONS, UNLESS
NOTED, ARE WITH THE PRIOR-YEAR QUARTER)
- Net earnings per diluted share of $0.32
and Adjusted EPS of $0.52 (excluding a $0.20 per diluted share
charge for business development expenses) compared with EPS of
$0.32 and Adjusted EPS of $0.33
- Consolidated net sales of $374.8
million, up 8.0%
- Heritage aggregates product line
pricing up 6.0%
- Heritage aggregates product line volume
down 1.2%
- Heritage aggregates product line direct
production costs up slightly, primarily due to an 11% increase in
energy costs
- Specialty Products net sales of $51.5
million and earnings from operations of $16.3 million,
resulting in an 810-basis-point improvement in operating margin
(excluding freight and delivery revenues)
- Consolidated selling, general and
administrative (“SG&A”) expenses down $2.4 million, or 130
basis points as a percentage of net sales
- Closed asset exchange with Lafarge
North America Inc. and acquisition of ready mixed concrete company
in Colorado
- Consolidated earnings from operations
of $20.8 million, $35.9 million exclusive of business development
expenses, compared with $33.2 million
NOTABLE ITEMS FOR THE YEAR (ALL COMPARISONS ARE VERSUS
2010)
- Adjusted earnings per diluted share of
$2.03 (which excludes a $0.25 per diluted share charge for business
development expenses) compared with $2.12
- Earnings per diluted share of $1.78
compared with $2.10
- Net sales increased to $1.520 billion
compared with $1.476 billion
- Heritage aggregates product line
pricing up 2.7%
- Heritage aggregates product line volume
down 3.5%
- Specialty Products record earnings from
operations of $66.3 million compared with $50.6 million
- SG&A expenses down $6.3 million, or
60 basis points as a percentage of net sales
MANAGEMENT COMMENTARY (ALL COMPARISONS, UNLESS NOTED, ARE
WITH THE PRIOR-YEAR QUARTER)
Nye continued, “The average selling price in our heritage
aggregates product line was, as we expected, a positive trend that
started in the first quarter and continued throughout the year.
Pricing improved in each of our reporting segments, led by the 7.8%
increase in our West Group, which supports our previously stated
view that pricing growth is sustainable – despite depression-like
shipment declines over the past five years.
“Another key to our strong performance in both the quarter and
the full year has been our Specialty Products segment. This
business continues to exceed expectations by completing a stellar
year and setting new quarterly and annual records for net sales and
earnings from operations. Net sales of $51.5 million increased
$7.0 million, or 16%, over the prior-year quarter, reflecting
growth in both the chemicals and lime product lines. Increased
sales and effective cost management resulted in a 600-basis-point
improvement in the business’ gross margin for the quarter. Earnings
from operations were $16.3 million, a 55% increase over the
prior-year quarter.
“Cost management is an enduring area of focus throughout our
company. In line with that objective, direct production costs for
our heritage aggregates product line increased only 1% despite an
11% increase in noncontrollable energy costs (principally diesel
fuel), which reduced overall earnings by $0.05 per diluted share
and was offset by reductions in personnel and depreciation costs.
For the quarter, diesel fuel costs averaged $2.95 per gallon
compared with $2.32 per gallon in the prior-year quarter. On a
consolidated basis, our cost of sales increased 9.5% over the
prior-year quarter, reflecting higher raw materials costs,
including liquid asphalt, and the impact from rising energy
costs.
“Our SG&A expense continues to differentiate us from others
in the industry. On a consolidated basis, SG&A costs for the
quarter declined $2.4 million, or 130 basis points as a percentage
of net sales, primarily driven by lower pension and incentive
compensation expenses. During the quarter, we also completed
various restructuring activities. These actions led to $1.6 million
of nonrecurring termination costs in the fourth quarter, but should
reduce ongoing general and administrative expenses. Interest
expense declined $3.6 million due to a higher mix of variable-rate
debt, which currently bears a lower interest rate than our
fixed-rate debt.
“We incurred $15.1 million of business development expenses
during the quarter, including expenses related to completed
transactions and expenses related to our exchange offer to effect a
business combination with Vulcan Materials Company. For the year,
business development expenses were $18.6 million.
“The most significant component of our business development
expenses relates to our exchange offer to effect a business
combination with Vulcan Materials Company, which would create a
United States-based company that is the global leader in
construction aggregates with a footprint reaching from coast to
coast. Under the terms of the offer, launched on December 12, 2011,
each outstanding share of Vulcan would be exchanged for 0.50 of a
Martin Marietta share. We believe that a strategic combination of
Martin Marietta and Vulcan is compelling financially and
operationally, and that such a combination provides significant
benefits for shareholders of both companies, as well as employees,
customers and communities. We are continuing to pursue this
combination in 2012.
“During the quarter, we completed a previously announced asset
exchange with Lafarge North America Inc., providing our company
with a new platform market position in the greater Denver,
Colorado, area. In addition to acquiring strategic and attractive
aggregates facilities, this swap transaction provides us with
complementary downstream asphalt, ready mixed concrete and paving
operations. In a subsequent transaction, we acquired a ready mixed
concrete business in metropolitan Denver. These cumulative actions
are consistent with our view that Denver is an attractive market to
expand our geographic footprint based on its strong demographic
trends, a per capita income well above the national average and its
ability to attract both national and multinational businesses.
“To facilitate the asset exchange, we divested certain
operations along the Mississippi River. These assets operated in a
fragmented market with a high level of competition, relatively low
barriers to entry and did not provide us the best opportunity to
achieve our expected long-term return on assets. This swap
transaction should not be interpreted as an abandonment of our
long-haul distribution strategy, but as the use of our Mississippi
River operations as currency for a premier position in a market
with attractive growth dynamics to best meet our strategic
objectives. We remain fully committed to our leading network of
rail and water-served operations and believe this competitive
differentiation provides us with the flexibility to effectively
serve customers in the high-growth Southeast and Southwest
markets.
“As previously noted, heritage aggregates product line shipments
declined 1.2% for the quarter; however, volume variances differed
significantly by market. Our Mideast Group experienced growth in
most of its markets and, for the quarter, reported a 6.6% increase
in heritage shipments. This growth stemmed from shipments to the
energy sector and the Rebuild Indy program in Indiana. Importantly,
the Mideast Group volume increase drove a 60% incremental margin
after adjusting for the volatile rise in energy costs. Conversely,
our Southeast Group continues to experience weakness in the North
Georgia and Alabama markets and reported a heritage volume decline
of 6.4% for the quarter.
“Consistent with trends noted throughout the year, the
infrastructure market continues to represent more than half of our
Aggregates business. Heritage shipments to this end use declined 2%
compared with the prior-year quarter. While we are encouraged by
the dialogue in Congress regarding the need for a multi-year
federal highway bill, infrastructure spending continues to be
constrained during short-term extensions of federal highway
funding. We continue to anticipate consistent growth in
infrastructure spending once long-term federal funding is
resolved.
“Heritage aggregates shipments to the residential market
increased 2%, reflecting enhanced multi-family construction
activity, and heritage shipments to the nonresidential end-use
market increased slightly, both compared with the prior-year
quarter. Our heritage ChemRock/Rail end-use market decreased 4%
from the prior-year quarter, as expected considering the
significant volume of agricultural lime shipments in the fourth
quarter of 2010.
LIQUIDITY AND CAPITAL RESOURCES
“We concluded 2011 with a characteristically strong cash
position, with cash from operating activities for the year ended
December 31, 2011, of $259.1 million compared with $269.8 million
for 2010. The decrease was primarily due to one-time business
development expenses in 2011, offset by an increase in payables,
including accruals for certain of those costs. Our days sales
outstanding of 47 days was unchanged from 2010 and continues to
represent an impressive accomplishment in view of the challenging
economic environment.
“For the year, we invested $155.4 million of capital, primarily
in maintenance initiatives. We also invested in targeted
organic-growth projects, including initiating 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. We also invested $91.6 million for three
acquisitions completed during the year.
“At December 31, 2011, our ratio of consolidated debt to
consolidated EBITDA, as defined in the accompanying financial
statements, for the trailing twelve months was 3.25 times, in
compliance with the limit in our debt covenants. Our
acquisition-related borrowings increased the limit of the ratio
from 3.5 times to 3.75 times for a period of 180 days.
“Our $100 million secured accounts receivable credit facility is
scheduled to expire in April 2012. We have initiated communications
with our lenders to begin the process of extending the facility for
one year.
2012 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 surrounding the timing and amount of such
funding.
“We continue to be pleased with the positive sentiments and
dialogue in Washington, D.C. regarding the need for a multi-year
surface transportation bill and its role in jobs creation. In his
State of the Union address on January 25th, the President called
for money that was previously being spent for wars in Iraq and
Afghanistan to be used to rebuild America’s infrastructure.
Further, there is seeming bipartisan Congressional agreement that
infrastructure is a key and essential governmental priority.
However, the reality of election-year politics in Washington will
likely slow progress in passing this needed legislation. Our view
is that unless a multi-year surface transportation bill is passed
in the early part of the year, its reauthorization will likely fall
victim to the partisan political process resulting in the current
federal highway program being extended by a ninth continuing
resolution through the end of the year. That said, if a bill is
passed this year, the impact of its passage will be notable
starting in 2013.
“Our expectations for 2012 are generally consistent with the
McGraw Hill Construction forecast. Based on the two-fold impact of
uncertainty created by the absence of a long-term highway bill, as
well as the waning impact of the American Recovery and Reinvestment
Act, we expect our heritage infrastructure end-use market volume to
be down slightly in 2012. We anticipate double-digit volume growth
in our heritage nonresidential end-use market, driven primarily by
increased energy shipments, although natural gas prices, the timing
of lease commitments for oil and natural gas companies, geographic
transitions and weather conditions will continue to affect
energy-sector activity. We expect the rate of improvement in our
heritage residential end-use market to accelerate in 2012. Finally,
our heritage ChemRock/Rail shipments should be relatively flat with
2011. Overall, we expect heritage aggregates product line shipments
for full-year 2012 to increase from 3% to 4%.
“We anticipate heritage aggregates pricing increases from 2% to
4%. This overall increase is not expected to be uniform across our
company.
“Heritage aggregates product line direct production costs per
ton are expected to decline slightly in 2012, as increased
production should improve operating efficiency. This forecast
assumes energy prices are comparable with 2011.
“As previously indicated, the platform acquisition of our new
Denver, Colorado-based business is consistent with one of our
clearly articulated long-term strategies: to be in attractive
growth areas with a leading market position – thereby permitting
greater operational efficiencies, customer service and growth
opportunities. Economic forecasts consistently show Denver's
population growing at a faster-than-average pace, with commensurate
jobs growth. Still, while Denver has likely weathered the worst of
the recession and maintained the features making it a favorite
among businesses and new residents, the sheer timing of our
early-December asset exchange of more southerly situated River
assets for this new Denver business naturally increases our winter
weather exposure – and, accordingly, alters our quarterly earnings
pattern. Further, our average consolidated aggregate selling price
will also change. Our former Mississippi River-based business was
largely a long-haul enterprise with selling prices inclusive of the
embedded costs in transporting aggregates from a producing location
to a distant sales yard from which a customer made its purchase. By
contrast, Denver is a truck-served market with the typical sales
transaction completed at the producing location and absent
transportation costs. Overall, as we integrate these operations
into our disciplined cost structure, we estimate that the exchange
of the River assets for the Denver assets is neutral to our
full-year 2012 EBITDA. We expect that this acquisition will be
accretive in 2013.
“Earnings for the Specialty Products segment should be
approximately $66 million, consistent with 2011. Steel utilization
and natural gas prices are two key drivers for this segment.
“SG&A expenses, excluding the incremental expense related to
the newly acquired operations in Denver are expected to decline
slightly. We expect favorable improvement in SG&A expenses
related to our Denver-based acquisitions as we complete integration
of these operations. Interest expense should remain relatively flat
with 2011. Our effective tax rate is expected to approximate 26%,
excluding discrete events. Capital expenditures are forecast at
$155 million for 2012, which includes the remaining
$35 million of the $53 million Specialty Products kiln
project.
“Our 2012 estimated outlook assumes Martin Marietta on a
stand-alone basis and does not give effect to the potential impact
of the proposed combination of Martin Marietta and Vulcan Materials
Company.”
RISKS TO OUTLOOK
The 2012 estimated outlook includes management’s assessment of
the likelihood of certain risk factors that will affect
performance. The most significant risk to 2012 performance will be
the United States economy and its impact on construction activity.
In addition, our future performance, including the 2012 estimated
outlook, could be affected by our proposal to combine Martin
Marietta with Vulcan Materials Company as announced on December 12,
2011. For a discussion of the potential risks and other
implications of the proposed transaction, please see the
prospectus/offer to exchange included in Martin Marietta’s
Registration Statement on Form S-4 filed on December 12, 2011 (as
may be amended from time to time), as well as Martin Marietta’s
other disclosures relating to the combination proposal.
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, state and/or local infrastructure projects and continued
uncertainty regarding the timing and amount of a successor 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 that disproportionately affect our revenue and
profitability, are among the states experiencing these fiscal
pressures, although recent statistics indicate that transportation
budgets and 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 fuel and other consumables
change production costs directly through consumption or indirectly
by increased energy-related input costs, such as, steel,
explosives, tires and conveyor belts. Fluctuating diesel fuel
pricing also affects transportation costs, primarily through fuel
surcharges in the Corporation’s long-haul distribution network. The
Specialty Products business is sensitive to the absolute price and
fluctuations in the cost of natural gas. However, due to recent
technology developments allowing the harvesting of abundant natural
gas supplies in the U.S., natural gas prices have stabilized.
Transportation in the Corporation’s long-haul network,
particularly 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. The
first and fourth quarters are most adversely affected by winter
weather, and the recent acquisitions of operations in the Denver,
Colorado, market increased the Corporation’s exposure to winter
weather. Hurricane activity in the Atlantic Ocean and Gulf Coast
generally is most active during the third and fourth quarters.
Risks to the 2012 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 fourth quarter were $374.8 million, an 8.0%
increase versus the $346.9 million recorded in the fourth quarter
of 2010. Earnings from operations for the fourth quarter of 2011
were $20.8 million compared with $33.2 million in 2010. Net
earnings attributable to Martin Marietta Materials were $14.8
million, or $0.32 per diluted share, for the fourth quarter of both
2011 and 2010.
Net sales for full-year 2011 were $1.520 billion compared with
$1.476 billion for the prior year. Full-year earnings from
operations were $161.0 million versus $198.4 million in 2010.
For the year, net earnings attributable to Martin Marietta
Materials were $82.4 million, or $1.78 per diluted share, compared
with net earnings attributable to Martin Marietta Materials of
$97.0 million, or $2.10 per diluted share, in 2010.
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the fourth quarter
of 2011 were $323.3 million compared with 2010 fourth-quarter sales
of $302.4 million. Aggregates pricing at heritage locations was up
6.0%, while volume decreased 1.2%. Earnings from operations for the
quarter were $23.1 million in 2011 versus $30.2 million in the
prior year. Full-year 2011 net sales for the Aggregates business
were $1.319 billion versus $1.299 billion in 2010. Earnings
from operations were $127.5 million in 2011 compared with
$168.6 million in 2010. For the year, heritage aggregates
pricing increased 2.7%, while volume decreased 3.5%.
Specialty Products’ fourth-quarter net sales of $51.5 million
increased 16% over prior-year net sales of $44.5 million.
Earnings from operations for the fourth quarter were $16.3 million
compared with $10.5 million in the year-earlier period. For
full-year 2011, net sales were $200.6 million and earnings from
operations were $66.3 million compared with net sales of $176.3
million and earnings from operations of $50.6 million for full-year
2010.
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its fourth
quarter 2011 earnings conference call later today (February 7,
2012). 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 46805814.
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, Iowa, Georgia and South Carolina, which when coupled with
North Carolina, represented 57% of 2011 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 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 Corporation’s 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. The
Corporation also encourages investors to review its disclosures
with respect to its proposed combination with Vulcan Materials
Company, including the risks and other factors described under the
headings “Risk Factors” and “Forward- Looking Statements” in the
prospectus/offer to exchange included in the Corporation’s
Registration Statement on Form S-4 filed on December 12, 2011 (as
may be amended from time to time). 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.
Important Additional Information
This press release relates, in part, to the Exchange Offer by
Martin Marietta to exchange each issued and outstanding share of
common stock of Vulcan for 0.50 shares of Martin Marietta common
stock. This press release is for informational purposes only and
does not constitute an offer to exchange, or a solicitation of an
offer to exchange, shares of Vulcan common stock, nor is it a
substitute for the Tender Offer Statement on Schedule TO or the
preliminary prospectus/offer to exchange included in the
Registration Statement on Form S-4 (the “Registration Statement”)
(including the letter of transmittal and related documents and as
amended and supplemented from time to time, the “Exchange Offer
Documents”) initially filed by Martin Marietta on December 12, 2011
with the SEC. The Registration Statement has not yet become
effective. The Exchange Offer will be made only through the
Exchange Offer Documents. INVESTORS AND SECURITY HOLDERS ARE URGED
TO READ THE EXCHANGE OFFER DOCUMENTS AND ALL OTHER RELEVANT
DOCUMENTS THAT MARTIN MARIETTA HAS FILED OR MAY FILE WITH THE SEC
WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION.
In connection with the solicitation of proxies for Vulcan’s 2012
annual meeting of shareholders (the “Vulcan Meeting”), Martin
Marietta filed a preliminary proxy statement (the “Vulcan Meeting
Preliminary Proxy Statement”) with the SEC on January 24, 2012 and
intends to file a definitive proxy statement in connection
therewith (the “Vulcan Meeting Definitive Proxy Statement”). When
completed, the Vulcan Meeting Definitive Proxy Statement and
accompanying proxy card will be mailed to the shareholders of
Vulcan. Martin Marietta also intends to file a proxy statement on
Schedule 14A and other relevant documents with the SEC in
connection with its solicitation of proxies for a meeting of Martin
Marietta shareholders (the “Martin Marietta Meeting”) to approve,
among other things, the issuance of shares of Martin Marietta
common stock pursuant to the Exchange Offer (the “Martin Marietta
Meeting Proxy Statement”). INVESTORS AND SECURITY HOLDERS ARE URGED
TO READ THE VULCAN MEETING PRELIMINARY PROXY STATEMENT, THE VULCAN
MEETING DEFINITIVE PROXY STATEMENT, THE MARTIN MARIETTA MEETING
PROXY STATEMENT AND OTHER RELEVANT MATERIALS AS THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
All documents referred to above, if filed, will be available
free of charge at the SEC’s website (www.sec.gov) or by directing a
request to Morrow & Co., LLC at (877) 757-5404 (banks and
brokers may call (800) 662-5200).
Martin Marietta, its directors and executive officers and the
individuals nominated by Martin Marietta for election to Vulcan’s
Board of Directors are participants in any solicitation of proxies
from Vulcan shareholders for the Vulcan Meeting or any adjournment
or postponement thereof. Martin Marietta, its directors and
executive officers are participants in any solicitation of proxies
from Martin Marietta shareholders for the Martin Marietta Meeting
or any adjournment or postponement thereof. Information about the
participants, including a description of their direct and indirect
interests, by security holdings or otherwise, is available in the
Registration Statement, the proxy statement for Martin Marietta’s
2011 annual meeting of shareholders, filed with the SEC on April 8,
2011, and the Vulcan Meeting Preliminary Proxy Statement, or will
be available in the Vulcan Meeting Definitive Proxy Statement or
the Martin Marietta Meeting Proxy Statement, as applicable.
MLM-E
MARTIN MARIETTA
MATERIALS, INC. Unaudited Statements of Earnings (In
millions, except per share amounts)
Three Months Ended Year Ended
December 31, December 31, 2011 2010
2011 2010 Net sales $ 374.8 $ 346.9 $ 1,520.0 $
1,475.7 Freight and delivery revenues 46.3
43.7 193.9 177.2 Total revenues
421.1 390.6 1,713.9 1,652.9
Cost of sales 304.9 278.3 1,218.0 1,154.0 Freight and
delivery costs 46.3 43.7 193.9
177.2 Total cost of revenues 351.2
322.0 1,411.9 1,331.2 Gross
profit 69.9 68.6 302.0 321.7 Selling, general and
administrative expenses 31.7 34.1 124.1 130.4 Business development
expenses 15.1 0.7 18.6 1.2 Other operating (income) and expenses,
net 2.3 0.6 (1.7 ) (8.3 )
Earnings from operations 20.8 33.2 161.0 198.4 Interest
expense 13.3 16.9 58.6 68.4 Other nonoperating (income) and
expenses, net (0.3 ) - 1.8 0.3
Earnings from continuing operations before taxes on income
7.8 16.3 100.6 129.7 Income tax (benefit) expense (0.9 )
2.3 21.0 30.9 Earnings from
continuing operations 8.7 14.0 79.6 98.8
Gain (Loss) on discontinued operations,
net of related tax expense (benefit) of $3.9, $0.5, $2.2 and
$(1.6), respectively
6.4 1.2 4.0 (0.1 )
Consolidated net earnings 15.1 15.2 83.6 98.7 Less: Net earnings
attributable to noncontrolling interests 0.3
0.4 1.2 1.7 Net earnings
attributable to Martin Marietta Materials, Inc. $ 14.8 $
14.8 $ 82.4 $ 97.0 Net earnings per common
share: Basic from continuing operations attributable to common
shareholders $ 0.18 $ 0.29 $ 1.70 $ 2.11 Discontinued operations
attributable to common shareholders 0.14 0.03
0.09 - $ 0.32 $ 0.32 $ 1.79
$ 2.11 Diluted from continuing operations
attributable to common shareholders $ 0.18 $ 0.29 $ 1.69 $ 2.10
Discontinued operations attributable to common shareholders
0.14 0.03 0.09 - $ 0.32
$ 0.32 $ 1.78 $ 2.10 Dividends per
common share $ 0.40 $ 0.40 $ 1.60 $ 1.60
Average number of common shares outstanding: Basic
45.7 45.5 45.7 45.5
Diluted 45.8 45.7 45.8
45.7
MARTIN MARIETTA MATERIALS, INC.
Unaudited Financial Highlights (In millions)
Three Months Ended Year Ended December
31, December 31, 2011 2010 2011
2010 Net sales: Aggregates Business: Mideast Group $ 112.7 $
101.5 $ 454.0 $ 450.1 Southeast Group 53.4 53.9 224.7 243.7 West
Group 157.2 147.0 640.7
605.6 Total Aggregates Business 323.3 302.4 1,319.4
1,299.4 Specialty Products 51.5 44.5
200.6 176.3 Total $ 374.8 $
346.9 $ 1,520.0 $ 1,475.7 Gross profit
(loss): Aggregates Business: Mideast Group $ 30.0 $ 25.0 $ 124.1 $
133.2 Southeast Group 0.6 1.3 1.1 22.7 West Group 22.1
30.9 104.8 108.4
Total Aggregates Business 52.7 57.2 230.0 264.3 Specialty Products
18.6 13.4 75.4 61.7 Corporate (1.4 ) (2.0 )
(3.4 ) (4.3 ) Total $ 69.9 $ 68.6 $ 302.0
$ 321.7 Selling, general and administrative
expenses: Aggregates Business: Mideast Group $ 11.0 $ 10.6 $ 42.5 $
41.7 Southeast Group 5.4 5.9 22.1 22.9 West Group 11.9
11.0 43.9 42.9
Total Aggregates Business 28.3 27.5 108.5 107.5 Specialty Products
2.3 2.9 9.2 11.0 Corporate 1.1 3.7
6.4 11.9 Total $ 31.7 $ 34.1
$ 124.1 $ 130.4 Earnings (Loss) from
operations: Aggregates Business: Mideast Group $ 18.7 $ 13.6 $ 85.1
$ 94.0 Southeast Group (6.1 ) (4.3 ) (21.2 ) (0.8 ) West Group
10.5 20.9 63.6
75.4 Total Aggregates Business 23.1 30.2 127.5 168.6
Specialty Products 16.3 10.5 66.3 50.6 Corporate (18.6 )
(7.5 ) (32.8 ) (20.8 ) Total $ 20.8 $
33.2 $ 161.0 $ 198.4 Net sales by
product line: Aggregates Business: Aggregates $ 296.6 $ 281.3 $
1,213.2 $ 1,218.1 Asphalt 10.2 10.3 47.3 37.9 Ready Mixed Concrete
10.3 5.6 33.0 25.0 Road Paving 5.9 5.2 25.3 17.8 Other 0.3
- 0.6 0.6 Total
Aggregates Business 323.3 302.4
1,319.4 1,299.4 Specialty Products Business:
Magnesia-Based Chemicals 37.3 31.2 142.6 120.5 Dolomitic Lime 13.8
12.8 56.6 54.2 Other 0.4 0.5 1.4
1.6 Total Specialty Products Business
51.5 44.5 200.6 176.3
Total $ 374.8 $ 346.9 $ 1,520.0 $
1,475.7 Depreciation $ 41.5 $ 43.7 $ 166.2 $ 174.1
Depletion 1.2 1.1 3.8 4.3 Amortization 1.0 0.8
3.4 3.1 $ 43.7 $ 45.6
$ 173.4 $ 181.5
MARTIN MARIETTA MATERIALS, INC.
Balance Sheet Data (In millions)
December 31, December 31, 2011
2010 (Unaudited) (Audited) ASSETS Cash and cash equivalents
$ 26.0 $ 70.3 Accounts receivable, net 203.7 183.4 Inventories, net
322.6 331.9 Other current assets 105.5 110.6 Property, plant and
equipment, net 1,774.3 1,687.8 Intangible assets, net 670.8 644.1
Other noncurrent assets 44.9 46.6 Total assets $ 3,147.8 $ 3,074.7
LIABILITIES AND EQUITY Current maturities of
long-term debt and short-term facilities $ 7.2 $ 248.7 Other
current liabilities 166.5 136.8 Long-term debt (excluding current
maturities) 1,052.9 782.0 Other noncurrent liabilities 472.3 438.9
Total equity 1,448.9 1,468.3 Total liabilities and
equity $ 3,147.8 $ 3,074.7
MARTIN MARIETTA MATERIALS, INC. Unaudited
Statements of Cash Flows (In millions)
Year Ended December 31,
2011 2010 Operating activities: Consolidated
net earnings $ 83.6 $ 98.7 Adjustments to reconcile consolidated
net earnings to net cash provided by operating activities:
Depreciation, depletion and amortization 173.4 181.5 Stock-based
compensation expense 11.5 14.7 Excess tax benefits from stock-based
compensation transactions - (1.3 ) Gains on divestitures and sales
of assets (15.5 ) (4.5 ) Deferred income taxes 11.3 1.0
Other items, net 1.6 4.6
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures: Accounts receivable, net (19.4 )
(20.5 ) Inventories, net (5.1 ) 1.2 Accounts payable 30.4 8.2 Other
assets and liabilities, net (12.7 ) (13.8 )
Net cash provided by operating activities 259.1
269.8 Investing activities: Additions to
property, plant and equipment (155.4 ) (135.9 ) Acquisitions, net
(91.6 ) (43.3 ) Proceeds from divestitures and sales of assets 8.1
5.0 Railcar construction advances - (9.0 ) Repayment of railcar
construction advances - 9.0 Net
cash used for investing activities (238.9 ) (174.2 )
Financing activities: Borrowings of long-term debt 495.0
200.0 Repayments of long-term debt and payments on capital lease
obligations (470.5 ) (420.0 ) Change in bank overdraft (2.1 ) 0.4
Dividends paid (73.6 ) (73.6 ) Debt issue costs (3.3 ) (0.1 )
Issuances of common stock 1.4 3.1 Excess tax benefits from
stock-based compensation transactions - 1.3 Purchase of subsidiary
shares from noncontrolling interest (10.4 ) - Distributions to
owners of noncontrolling interests (1.0 ) -
Net cash used for financing activities (64.5 )
(288.9 ) Net decrease in cash and cash equivalents (44.3 )
(193.3 ) Cash and cash equivalents, beginning of period 70.3
263.6 Cash and cash equivalents, end of
period $ 26.0 $ 70.3
MARTIN MARIETTA MATERIALS, INC.
Unaudited Operational Highlights
Three Months Ended Year Ended
December 31, 2011 December 31, 2011 Volume
Pricing Volume Pricing Volume/Pricing
Variance (1) Heritage Aggregates Product Line:
(2) Mideast Group 6.6 % 3.3 % (2.0 %) 1.7 % Southeast Group
(6.4 %) 5.4 % (12.4 %) 5.0 % West Group (4.6 %) 7.8 % (1.4 %) 3.4 %
Heritage Aggregates Operations (1.2 %) 6.0 % (3.5 %) 2.7 %
Aggregates Product Line (3) (2.9 %) 5.2 % (3.8 %) 2.7 %
Three Months Ended Year Ended
December 31, December 31, Shipments (tons in
thousands)
2011 2010 2011 2010
Heritage Aggregates Product Line: (2) Mideast Group
9,895 9,279 39,453 40,257 Southeast Group 4,212 4,499 18,159 20,727
West Group 13,991 14,670 60,149 60,996
Heritage Aggregates Operations 28,098 28,448 117,761 121,980
Acquisitions 494 33 1,067 33 Divestitures (4) 1,348 2,343
6,246 7,994 Aggregates Product Line (3) 29,940
30,824 125,074 130,007
(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 months and year ended December 31, 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 Year Ended
Accounting Principles December 31, December
31, 2011 2010 2011 2010 Gross
profit $ 69.9 $ 68.6 $ 302.0 $ 321.7
Total revenues $ 421.1 $ 390.6 $ 1,713.9 $
1,652.9 Gross margin 16.6 % 17.6 % 17.6
% 19.5 %
Three Months Ended Year
Ended December 31, December 31, Gross
Margin Excluding Freight and Delivery Revenues 2011
2010 2011 2010 Gross profit $ 69.9
$ 68.6 $ 302.0 $ 321.7 Total revenues $
421.1 $ 390.6 $ 1,713.9 $ 1,652.9 Less: Freight and delivery
revenues (46.3 ) (43.7 ) (193.9 )
(177.2 ) Net sales $ 374.8 $ 346.9 $ 1,520.0 $
1,475.7 Gross margin excluding freight and delivery revenues
18.7 % 19.8 % 19.9 % 21.8 %
Operating Margin in Accordance with Generally
Accepted Three Months Ended Year Ended
Accounting Principles December 31, December
31, 2011 2010 2011 2010 Earnings
from operations $ 20.8 $ 33.2 $ 161.0 $ 198.4
Total revenues $ 421.1 $ 390.6 $ 1,713.9
$ 1,652.9 Operating margin 4.9 % 8.5 %
9.4 % 12.0 %
Three Months Ended
Year Ended Operating Margin Excluding Freight and
Delivery Revenues December 31, December
31, 2011 2010 2011 2010 Earnings
from operations $ 20.8 $ 33.2 $ 161.0 $ 198.4
Total revenues $ 421.1 $ 390.6 $ 1,713.9 $ 1,652.9 Less:
Freight and delivery revenues (46.3 ) (43.7 )
(193.9 ) (177.2 ) Net sales $ 374.8 $ 346.9 $
1,520.0 $ 1,475.7 Operating margin excluding freight
and delivery revenues 5.5 % 9.6 % 10.6 %
13.4 %
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 months and year ended December 31, 2011 and 2010.
Three Months Ended Year Ended
December 31, December 31, 2011
2010 2011 2010 Earnings Before Interest,
Income Taxes, Depreciation, Depletion and Amortization (EBITDA) $
74.4 $ 79.6 $ 335.9 $ 374.7
A reconciliation of Net Earnings Attributable to Martin
Marietta Materials, Inc. to EBITDA is as follows:
Three Months
Ended Year Ended December 31, December
31, 2011 2010 2011 2010 Net
Earnings Attributable to Martin Marietta Materials, Inc. $ 14.8 $
14.8 $ 82.4 $ 97.0 Add back: Interest Expense 13.3 16.9 58.6 68.5
Income Tax Expense for Controlling Interests 3.0 2.7 23.1 29.3
Depreciation, Depletion and Amortization Expense 43.3
45.2 171.8 179.9 EBITDA $
74.4 $ 79.6 $ 335.9 $ 374.7
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") and the earnings per diluted share impact of business
development expenses represent non-GAAP financial measures.
Consolidated earnings from operations exclusive of business
development expenses also represents a non-GAAP measure. Management
presents these measures as it believes Adjusted EPS represents the
most comparable operating performance measure to analysts'
expectations as they have not factored the impact of business
development expenses into their EPS expectations. Further,
management believes Adjusted EPS and consolidated earnings from
operations exclusive of business development expenses represent
more meaningful comparisons of performance considering the
significant impact of business development expenses incurred in
2011. The following shows the calculation of the EPS impact
of business development expenses and reconciles earnings per
diluted share in accordance with generally accepted accounting
principles to Adjusted EPS:
Three Months Ended
Three Months Ended December 31, 2011 December 31,
2010 Business development expenses $ 15 .1 $ 0 .7 Income tax
effect 5 .8 0 .3 After-tax impact of business
development expenses $ 9 .3 $ 0 .4 Diluted average number of common
shares outstanding 45 .8 45 .7 Earnings per diluted
share impact of business development expenses $ 0 .20 $ 0 .01
Year Ended Year Ended December 31, 2011
December 31, 2010 Business development expenses $ 18 .6 $ 1
.2 Income tax effect 7 .2 0 .5 After-tax impact of
business development expenses $ 11 .4 $ 0 .7 Diluted average number
of common shares outstanding 45 .8 45 .7 Earnings per
diluted share impact of business development expenses $ 0 .25 $ 0
.02
Three Months Ended Three Months
Ended December 31, 2011 December 31, 2010
Earnings per diluted share in accordance with generally accepted
accounting principles $ 0 .32 $ 0 .32 Add back: Earnings per
diluted share impact of business development expenses 0 .20
0 .01 Adjusted EPS $ 0 .52 $ 0 .33
Year Ended
Year Ended December 31, 2011 December 31, 2010
Earnings per diluted share in accordance with generally accepted
accounting principles $ 1 .78 $ 2 .10 Add back: Earnings per
diluted share impact of business development expenses 0 .25
0 .02 Adjusted EPS $ 2 .03 $ 2 .12
The following reconciles consolidated earnings from
operations exclusive of business development expenses to
consolidated earnings from operations in accordance with generally
accepted accounting principles:
Three Months Ended
December 31, 2011 Consolidated earnings from operations in
accordance with generally accepted accounting principles $ 20 .8
Business development expenses 15 .1 Consolidated earnings
from operations exclusive of business development expenses $ 35 .9
MARTIN MARIETTA
MATERIALS, INC. Non-GAAP Financial Measures (continued)
(Dollars in millions) The presentation of
incremental operating margin excluding freight and delivery
revenues for the Mideast Group, assuming energy costs were equal to
the expense in the prior-year quarter, is a non-GAAP financial
measure. Management presents this measure, as it believes it helps
demonstrate the impact of incremental sales on operating margin due
to the significant amount of fixed production costs. The following
presents the calculation of the incremental operating margin
excluding freight and delivery revenues for the Mideast Group for
the quarter ended December 31, 2011, assuming energy costs were
equal to the expense for the quarter ended December 31, 2010:
Mideast Group net sales for the quarter ended December 31,
2011 $ 112.7 Mideast Group net sales for the quarter ended December
31, 2010 101.5 Incremental net sales for the Mideast
Group $ 11.2 Mideast Group earnings from operations
for the quarter ended December 31, 2011 $ 18.7 Increase in energy
costs for Mideast Group for the quarter ended December 31, 2011
1.6 Pro forma earnings from operations for Mideast
Group for quarter ended December 31, 2011 20.3 Mideast Group
earnings from operations for the quarter ended December 31, 2010
13.6
Pro forma incremental earnings from
operations for the Mideast Group for the quarter ended December 31,
2011, assuming energy costs were equal to the expense in prior-year
quarter
$ 6.7
Pro forma incremental operating margin for
the Mideast Group for the quarter ended December 31, 2011, assuming
energy costs were equal to the expense in prior-year quarter
60 % 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. Acquisition-related borrowings
increase the limit of the ratio from 3.5 times to 3.75 times for a
period of 180 days, so long as the ratio does not exceed 3.5 times
when excluding the acquisition-related borrowings.
The following presents the calculation of
Consolidated Debt-to-Consolidated EBITDA, as defined, for the
trailing-twelve months at December 31, 2011. For supporting
calculations, refer to Corporation's website at
www.martinmarietta.com.
Twelve-Month Period
January 1, 2011 to December 31, 2011 Earnings from
continuing operations attributable to Martin Marietta Materials,
Inc. $ 85.1 Add back: Interest expense 58.6 Income
tax expense 21.0 Depreciation, depletion and amortization expense
158.8 Stock-based compensation expense 11.5 Deduct: Interest income
(0.8 ) Consolidated EBITDA, as defined $ 334.2
Consolidated Debt, including debt guaranteed by the Corporation, at
December 31, 2011 $ 1,086.7
Consolidated Debt-to-Consolidated EBITDA,
as defined, at December 31, 2011 for the trailing twelve-month
EBITDA
3.25 times
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