Martin Marietta Materials, Inc. (NYSE:MLM) today announced its
results for the first quarter ended March 31, 2012.
Ward Nye, President and CEO of Martin Marietta Materials,
stated: “We are pleased with the first-quarter trends in our
heritage Aggregates business where we leveraged volume improvement
and pricing momentum to achieve a 250-basis-point improvement in
gross margin (excluding freight and delivery revenues). Our
heritage aggregates product line shipments increased 9.6% and, more
significantly, each of our end-use markets experienced volume
growth led by the nonresidential and residential markets with
increases of 17% and 8%, respectively. Pricing grew 2.8% in our
heritage aggregates product line. Our newly acquired platform
position in the Denver, Colorado area experienced an expected
seasonal loss; however, the magnitude of the seasonal loss was
offset somewhat by increased construction activity in the market.
We expect these newly acquired assets will continue to benefit from
the heightened construction activity in Denver for the rest of the
year. We will also focus on bringing this business’ cost structure
in line with our other operations. Our Specialty Products business
continues to perform exceptionally well, establishing a new
quarterly record for net sales and a new first-quarter record for
earnings from operations. On a consolidated basis, excluding
business development expenses and the results from the Denver-based
Rocky Mountain Division, our first-quarter operating results were
significantly stronger compared with the first quarter of 2011.
Based on these business trends, we are increasingly optimistic
about our outlook for the remainder of 2012.”
NOTABLE ITEMS (ALL COMPARISONS, UNLESS NOTED, ARE WITH THE
PRIOR-YEAR QUARTER)
- Loss per diluted share of $0.81
inclusive of:
- $0.34 per diluted share charge for
business development expenses
- $0.17 per diluted share loss from
acquired operations, reflective of seasonality
Excluding these charges, adjusted loss per diluted share was
$0.30 compared with a loss per diluted share of $0.39
-- Consolidated net sales up 20.6% to $350.5 million
- Heritage aggregates product line volume
up 9.6%; West Group achieved double-digit heritage volume growth in
each end-use market
- Heritage aggregates product line
pricing up 2.8%
- Heritage aggregates production up 8.5%;
heritage production cost per ton down slightly, despite an 18%
increase in noncontrollable energy costs
- Specialty Products net sales of $51.7
million and earnings from operations of $18.2 million,
representing a 440-basis-point improvement in operating margin
(excluding freight and delivery revenues)
- Consolidated selling, general and
administrative (“SG&A”) expenses down 50 basis points as a
percentage of net sales
- Consolidated loss from operations of
$35.3 million (loss of $9.4 million exclusive of business
development expenses) compared with loss of $4.4 million
- Maintained quarterly dividend rate of
$0.40 per common share
MANAGEMENT COMMENTARY (ALL COMPARISONS, UNLESS NOTED, ARE
WITH THE PRIOR-YEAR QUARTER)
Nye continued, “We experienced volume growth in each reportable
segment, in addition to each end-use market. Moderate winter
weather in most of our heritage operating regions was a factor in
our increase in heritage aggregates product line shipments. As an
example, our Midwest Division, primarily serving Iowa and Nebraska,
experienced a 34% increase in heritage aggregates volumes. While a
portion of the increase is attributable to strong agricultural lime
shipments, this division also benefitted from an improved business
environment with growth in its nonresidential market. On a
company-wide basis, growth in the nonresidential end-use market was
driven by increased shipments for both repair and maintenance
projects, as well as energy sector activity. The residential
end-use market growth reflects increased single-family housing
activity, particularly in the San Antonio, Texas area, which is
partly attributable to military base realignment and closure (BRAC)
activity. In addition to these previously identified end-use
markets, our shipments to the ChemRock/Rail market rose 4%.
“The infrastructure end-use market represented approximately
half of our aggregates product line shipments and increased 7% for
the quarter. This market continues to be constrained by the
uncertainties surrounding a long-term federal highway bill. In
March, Congress approved a continuing resolution providing federal
highway funding through June 30, 2012, the ninth short-term funding
extension since the expiration of the previous multi-year federal
highway bill in 2009. During this extended time period of multiple
continuing resolutions, states have experienced increased pressure
to find means to supplement the financing of infrastructure
projects. To that end, we were pleased to see the Texas Department
of Transportation announce plans to leverage an additional $2
billion to fund high-priority projects over the next two years.
Given our significant presence throughout Texas, this initiative
should provide multiple opportunities for our Aggregates business.
We also expect to benefit from the planned increase in projects
awarded by the North Carolina Department of Transportation in the
current fiscal year and beyond. For example, the Garden Parkway
toll road is expected to be bid later this year, and we expect to
competitively bid on this project. Additionally, in February, the
North Carolina Department of Transportation was granted permission
from the Federal Highway Administration to collect tolls on
Interstate 95 as a mechanism to fund a $4.4 billion plan to
overhaul all of the state’s 182 miles of I-95, widening the
four-lane expressway to six lanes and eight lanes on the busiest 50
miles. Should this I-95 proposal move forward, our company is
well-positioned to serve these aggregate-intensive projects.
“Our heritage aggregates product line pricing improvement was
led by the 7.7% increase in our West Group, which was partially
augmented by pricing increases implemented subsequent to the first
quarter of 2011. Aggregates pricing was particularly strong in
South Texas where distribution yards, which have a higher average
selling price due to an internal freight component, accounted for a
higher percentage of shipments. The Southeast Group reported
pricing improvement of 2.2% and our Mideast Group reported a 1.8%
pricing decline, driven by product mix. As previously indicated
during our fourth-quarter and full-year 2011 earnings call, average
selling prices at our newly acquired Colorado operations are
significantly lower than our heritage aggregates selling price,
primarily due to product mix. Sales of base stone, which has a
lower average selling price compared with clean stone, comprised a
significantly higher percentage of shipments from the newly
acquired operations. As a result, overall average selling price for
the aggregates product line, inclusive of acquisitions and
divestitures, increased 1.1% compared with a 2.8% increase for the
heritage business.
“In order to meet higher demand, we increased heritage
aggregates product line production by 8.5%. When unplanned
production increases occur early in the year, certain direct
production costs, such as supplies and repairs, are typically
negatively affected. We also continue to absorb the significant
financial impact of higher energy expenses, particularly diesel
fuel, which represents the single largest component of our energy
costs. For the first quarter, we paid an average of $3.24 per
gallon compared with $2.81 in the prior-year quarter. Despite these
cost pressures, our heritage aggregates product line production
cost per ton decreased slightly. On a consolidated basis, cost of
sales increased proportionately to the increase in net sales.
“As a reminder, our operating results reflect increased exposure
to winter weather resulting from the asset exchange with Lafarge
North America Inc. completed in December 2011. In this transaction,
we acquired operations in and around the Denver, Colorado area and
traded facilities along the Mississippi River. While Denver has
likely endured the worst of the recession and maintained its growth
and economic features popular among businesses and new residents,
the asset exchange of more southerly situated River assets for this
Denver business naturally increases our winter weather exposure –
and, accordingly, alters our quarterly earnings and cash flow
patterns. However, despite Denver’s typical winter weather, our
first-quarter results from these acquired operations exceeded our
expectations due to increased construction activity in the market.
Ongoing, we anticipate that these assets will contribute
significantly to long-term shareholder value.
“SG&A expenses were 9.4% of net sales, a 50-basis-point
reduction compared with the prior-year quarter. On an absolute
basis, SG&A expenses increased $4.4 million, as expected,
primarily related to the recently acquired operations in the
Denver, Colorado market. We continue to focus on SG&A costs and
our industry-leading performance in this area. Interest expense
declined $4.7 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 as well
as a new first-quarter record for earnings from operations. Net
sales of $51.7 million increased $2.6 million, or 5%, over the
prior-year quarter, reflecting growth in both our chemicals and
dolomitic lime product lines. Increased sales, coupled with
effective cost control, resulted in earnings from operations of
$18.2 million, a 440-basis-point improvement in operating margin
excluding freight and delivery revenues. To illustrate the
long-term growth in this business, compared with the first quarter
of 2009, earnings from operations have nearly tripled and operating
margin (excluding freight and delivery revenues) has expanded 1,610
basis points.
“Any report on our business would not be complete without an
update on our continuing efforts to effect a business combination
with Vulcan Materials Company (“Vulcan”). As you know, our proposed
business combination with Vulcan would, if successful, create a
United States-based company that is a global leader in construction
aggregates with a footprint reaching from coast to coast. We
believe that this strategic combination of our two companies 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. During
the first four months of this year, we have worked with the
Department of Justice on its regulatory review of the proposed
transaction and are pleased with the progress in this important
area. Additionally, while awaiting the Chancellor’s ruling
following a bench trial in the Delaware Chancery Court related to
certain aspects of the exchange offer, we are proceeding with our
effort to elect four directors to the Vulcan Board at its Annual
Meeting scheduled for June 1, 2012. Given the classified nature of
Vulcan’s Board of Directors, the slate we are proposing, if
elected, would not constitute a majority of Vulcan’s directors.
However, we expect that these nominees, if elected, would bring a
fresh, independent perspective to the Vulcan Boardroom as to
whether Vulcan should engage with Martin Marietta on its business
combination proposal. Of course, our efforts in pursuing this
business combination have financial ramifications and for the
quarter, we incurred $25.9 million of business development
expenses.
LIQUIDITY AND CAPITAL RESOURCES
“Our balance sheet continues to be one of the strongest in the
industry. Cash used for operating activities for the quarter ended
March 31 was $4.3 million in 2012 compared with cash provided by
operating activities of $21.3 million for 2011. The decrease was
primarily due to lower consolidated net earnings in 2012, which
were negatively affected by increased business development
expenses. Additionally, the previously mentioned asset exchange
with Lafarge North America changed the timing of cash flows
throughout the year, with increased cash flows generated by the
Denver operations expected to be realized later in the year. Our
days sales outstanding was 45 days, unchanged from 2011.
“During the quarter ended March 31, 2012, we invested $37.5
million of capital into our business. This amount reflects the
continued construction of a $53 million dolomitic lime kiln in
Woodville, Ohio, in our Specialty Products business. Once
completed, the new kiln is expected to generate annual net sales
ranging from $22 million to $25 million. This project is expected
to be substantially completed by the end of the year.
“At March 31, 2012, our ratio of consolidated debt to
consolidated EBITDA, as defined, for the trailing twelve months was
3.53 times. During the quarter, we amended the covenant to ensure
our available liquidity is not negatively affected by the impact of
business development expenses and the seasonality of our working
capital for the newly acquired Colorado operations. As amended, the
maximum ratio is 3.95 times at March 31, 2012 and June 30, 2012,
stepping down to 3.75 times at September 30, 2012, before returning
to the pre-amendment maximum of 3.50 times at December 31,
2012.
2012 OUTLOOK
“As previously noted, we are increasingly optimistic for the
remainder of the year. We are encouraged by our first-quarter
aggregates product line shipment trends, and as a result, have
revised our heritage volume guidance accordingly. We expect our
infrastructure end-use market volume to range from flat to down
slightly. We anticipate double-digit volume growth in our
nonresidential end-use market, driven primarily by increased energy
shipments, although some energy-sector activity will continue to be
affected by natural gas prices, the timing of lease commitments for
oil and natural gas companies, geographic transitions and weather
conditions. We expect the rate of improvement in our residential
end-use market to accelerate over the rate of improvement in 2011.
Finally, our ChemRock/Rail shipments should be relatively flat.
“On another positive note, we are gratified by the 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 an essential governmental
priority. However, the reality of election-year politics will
likely slow progress in passing this needed legislation. As we have
previously stated, we believe it is likely that transportation
reauthorization will likely be stymied by the political process
resulting in the current federal highway program being extended by
continuing resolutions through the end of the year. Should a bill
be passed this year, its impact will not be notable before
2013.
“Based on these factors, we anticipate heritage aggregates
product line shipments for the full year to increase from 4% to 5%
and heritage aggregates pricing to increase from 2% to 4%. A
variety of factors beyond our direct control may exert pressure on
our volumes, and our pricing increase is not expected to be uniform
across our company.
“Heritage aggregates product line direct production costs per
ton are expected to decline slightly, as increased production
should improve operating efficiency. This forecast assumes
efficiencies created by higher production volumes are able to
offset increases in energy prices.
“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, as evident in our first-quarter results, our
consolidated aggregates average selling price is changing. 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 without 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 EBITDA. We expect
that this acquisition will be accretive in 2013.
“Earnings for the Specialty Products segment should be
approximately $68 million to $70 million. 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 the
integration of these operations. Interest expense should remain
relatively flat compared with 2011. Our effective tax rate is
expected to approximate 22%, excluding discrete events. Capital
expenditures are forecast at $155 million, which includes the
remainder of the $53 million Specialty Products kiln project.
“Our 2012 estimated outlook assumes Martin Marietta on a
stand-alone basis and does not consider any effects that would flow
from the proposed combination of Martin Marietta and Vulcan.”
RISKS TO OUTLOOK
The full-year 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 full-year
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 the Risk Factors
section of the Corporation’s current annual report on Form 10-K and
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 termination, capping and/or
reduction of the federal and/or state gasoline tax(es) 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
disproportionately affecting 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 availability of
trucks to transport our product, particularly in markets
experiencing increased demand due to energy sector activity, is
also a risk. 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 full-year 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 first quarter of 2012 were $350.5 million, a
20.6% increase versus the $290.6 million recorded in the first
quarter of 2011. The loss from operations for the first quarter of
2012 was $35.3 million compared with $4.4 million in 2011. Net loss
attributable to Martin Marietta Materials was $36.7 million, or
$0.81 per diluted share, versus 2011 first-quarter net loss
attributable to Martin Marietta Materials of $17.4 million, or
$0.39 per diluted share.
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the first quarter
of 2012 were $298.8 million compared with 2011 first-quarter net
sales of $241.5 million. Aggregates product line volume at heritage
locations was up 9.6%, while pricing increased 2.8%. The loss from
operations for the quarter was $23.5 million in 2012 versus
$14.8 million in the prior-year quarter.
Specialty Products’ first-quarter net sales of $51.7 million
increased 5.2% over prior-year net sales of $49.1 million.
Earnings from operations for the first quarter were $18.2 million
compared with $15.1 million in the prior-year quarter.
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its first
quarter 2012 earnings conference call later today (May 1, 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 73737234.
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 definitive proxy statement on April 25, 2012 (the
“Vulcan Meeting Definitive Proxy Statement”) with the SEC. 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
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 203.658.9400).
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
2012 annual meeting of shareholders, filed with the SEC on April
18, 2012, and the Vulcan Meeting Definitive Proxy Statement, or
will be available in the Martin Marietta Meeting Proxy Statement,
as applicable.
MARTIN MARIETTA MATERIALS, INC. Unaudited Statements of
Earnings (In millions, except per share amounts)
Three Months Ended March 31, 2012
2011 Net sales $ 350.5 $ 290.6 Freight and delivery revenues
43.5 37.3 Total revenues 394.0
327.9 Cost of sales 326.7 267.9 Freight
and delivery costs 43.5 37.3 Total cost
of revenues 370.2 305.2 Gross profit
23.8 22.7 Selling, general and administrative expenses 33.0
28.6 Business development costs 25.9 1.0 Other operating expenses
and (income), net 0.2 (2.5 ) Loss from
operations (35.3 ) (4.4 ) Interest expense 13.5 18.2 Other
nonoperating (income) and expenses, net (1.8 ) (0.2 )
Loss from continuing operations before taxes on income (47.0 )
(22.4 ) Income tax benefit (9.9 ) (6.2 ) Loss from
continuing operations (37.1 ) (16.2 )
Loss on discontinued operations, net of
related tax benefit of $0.1 and $0.3, respectively
(0.6 ) (1.5 ) Consolidated net loss (37.7 )
(17.7 ) Less: Net loss attributable to noncontrolling interests
(1.0 ) (0.3 ) Net loss attributable to Martin
Marietta Materials, Inc. $ (36.7 ) $ (17.4 ) Net loss per
common share (basic and diluted): Continuing operations
attributable to common shareholders $ (0.80 ) $ (0.36 )
Discontinued operations attributable to common shareholders
(0.01 ) (0.03 ) $ (0.81 ) $ (0.39 ) Dividends
per common share $ 0.40 $ 0.40
Weighted-average number of common shares outstanding (basic and
diluted): 45.7 45.6
MARTIN MARIETTA
MATERIALS, INC. Unaudited Financial Highlights (In
millions)
Three Months Ended
March 31, 2012 2011 Net sales: Aggregates
Business: Mideast Group $ 77.2 $ 71.3 Southeast Group 67.5 62.7
West Group 154.1 107.5 Total Aggregates
Business 298.8 241.5 Specialty Products 51.7
49.1 Total $ 350.5 $ 290.6 Gross
profit: Aggregates Business: Mideast Group $ 7.9 $ 8.3 Southeast
Group 3.4 1.7 West Group (4.7 ) (2.6 ) Total
Aggregates Business 6.6 7.4 Specialty Products 19.4 17.6 Corporate
(2.2 ) (2.3 ) Total $ 23.8 $ 22.7
Selling, general and administrative expenses: Aggregates
Business: Mideast Group $ 9.5 $ 9.1 Southeast Group 5.9 6.8 West
Group 13.9 10.6 Total Aggregates
Business 29.3 26.5 Specialty Products 2.5 2.5 Corporate 1.2
(0.4 ) Total $ 33.0 $ 28.6
(Loss) Earnings from operations: Aggregates Business: Mideast Group
$ (0.9 ) $ 2.1 Southeast Group (3.7 ) (4.2 ) West Group
(18.9 ) (12.7 ) Total Aggregates Business (23.5 ) (14.8 )
Specialty Products 18.2 15.1 Corporate (30.0 ) (4.7 )
Total $ (35.3 ) $ (4.4 ) Net sales by product line:
Aggregates Business: Aggregates $ 257.0 $ 223.0 Asphalt 12.5 11.0
Ready Mixed Concrete 20.3 5.3 Road Paving 8.7 2.2 Other 0.3
- Total Aggregates Business 298.8
241.5 Specialty Products Business:
Magnesia-Based Chemicals 36.4 35.2 Dolomitic Lime 15.0 13.8 Other
0.3 0.1 Total Specialty Products
Business 51.7 49.1 Total $ 350.5
$ 290.6 Depreciation $ 42.3 $ 42.0 Depletion 0.6 0.5
Amortization 1.5 0.8 $ 44.4 $
43.3
MARTIN MARIETTA MATERIALS, INC. Balance Sheet
Data (In millions)
March 31,
December 31, March 31, 2012 2011
2011 (Unaudited) (Audited) (Unaudited) ASSETS Cash and cash
equivalents $ 45.0 $ 26.0 $ 176.8 Accounts receivable, net 212.1
203.7 203.2 Inventories, net 333.5 322.6 331.7 Other current assets
111.3 105.5 128.7 Property, plant and equipment, net 1,768.9
1,774.3 1,676.3 Intangible assets, net 670.0 670.8 643.7 Other
noncurrent assets 41.3 44.9 48.2 Total assets $ 3,182.1 $ 3,147.8 $
3,208.6 LIABILITIES AND EQUITY Current maturities of
long-term debt and short-term facilities $ 7.7 $ 7.2 $ 7.1 Other
current liabilities 177.7 166.5 151.7 Long-term debt (excluding
current maturities) 1,127.2 1,052.9 1,161.5 Other noncurrent
liabilities 471.2 472.3 453.6 Total equity 1,398.3
1,448.9 1,434.7 Total liabilities and equity $ 3,182.1 $
3,147.8 $ 3,208.6
MARTIN MARIETTA MATERIALS, INC.
Unaudited Statements of Cash Flows (In millions)
Three Months Ended March 31, 2012
2011 Operating activities: Consolidated net loss $ (37.7 ) $
(17.7 ) Adjustments to reconcile consolidated net loss to net cash
(used for) provided by operating activities: Depreciation,
depletion and amortization 44.4 43.3 Stock-based compensation
expense 1.9 2.8 Excess tax benefits from stock-based compensation
transactions (0.3 ) (0.3 ) Loss (Gain) on divestitures and sales of
assets 0.5 (3.0 ) Deferred income taxes (0.7 ) 3.3 Changes in
operating assets and liabilities:Other items, net 0.7 0.6 Changes
in operating assets and liabilities:Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net (8.3 ) (19.3 ) Inventories, net (10.9 )
0.2 Accounts payable 7.7 14.5 Other assets and liabilities, net
(1.6 ) (3.1 ) Net cash (used for) provided by
operating activities (4.3 ) 21.3
Investing activities: Additions to property, plant and equipment
(37.5 ) (30.7 ) Proceeds from divestitures and sales of assets
2.2 2.2 Net cash used for
investing activities (35.3 ) (28.5 ) Financing
activities: Borrowings of long-term debt 151.0 300.0 Repayments of
long-term debt (76.5 ) (162.2 ) Change in bank overdraft 1.9 (2.1 )
Dividends paid (18.4 ) (18.4 ) Debt issuance costs (0.3 ) (3.2 )
Issuances of common stock 0.6 0.3 Excess tax benefits from
stock-based compensation transactions 0.3 0.3 Distributions to
owners of noncontrolling interests - (1.0 )
Net cash provided by financing activities 58.6
113.7 Net increase in cash and cash
equivalents 19.0 106.5 Cash and cash equivalents, beginning of
period 26.0 70.3 Cash and cash
equivalents, end of period $ 45.0 $ 176.8
MARTIN
MARIETTA MATERIALS, INC. Unaudited Operational
Highlights Three Months Ended
March 31, 2012 Volume Pricing
Volume/Pricing Variance (1) Heritage Aggregates
Product Line: (2) Mideast Group 9.4 % (1.8 %) Southeast Group 5.0 %
2.2 % West Group 11.9 % 7.7 % Heritage Aggregates Operations 9.6 %
2.8 % Aggregates Product Line (3) 7.3 % 1.1 %
Three
Months Ended March 31, Shipments (tons in
thousands)
2012 2011 Heritage Aggregates Product
Line: (2) Mideast Group 6,453 5,899 Southeast Group 5,252 5,000
West Group 12,152 10,861 Heritage Aggregates
Operations 23,857 21,760 Acquisitions 1,087 - Divestitures (4) 21
1,507 Aggregates Product Line (3) 24,965
23,267 (1) Volume/pricing variances reflect
the percentage increase (decrease) from the comparable period in
the prior year. (2) Heritage Aggregates product line
excludes volume and pricing data for acquisitions that have not
been included in prior-year operations for the comparable period
and divestitures. (3) Aggregates product line includes all
acquisitions from the date of acquisition and divestitures through
the date of disposal. (4) Divestitures include the tons
related to divested aggregates product line operations up to the
date of divestiture.
MARTIN MARIETTA MATERIALS, INC.
Non-GAAP Financial Measures (Dollars in millions)
Gross margin as a percentage of net sales
and operating margin as a percentage of net sales represent
non-GAAP measures. The Corporation presents these ratios calculated
based on net sales as it is consistent with the basis by which
management reviews the Corporation's operating results. Further,
management believes it is consistent with the basis by which
investors analyze the Corporation's operating results given that
freight and delivery revenues and costs represent pass-throughs and
have no profit mark-up. Gross margin and operating margin
calculated as percentages of total revenues represent the most
directly comparable financial measures calculated in accordance
with generally accepted accounting principles ("GAAP"). The
following tables present the calculations of gross margin and
operating margin for the three months ended March 31, 2012 and 2011
in accordance with GAAP and reconciliations of the ratios as
percentages of total revenues to percentages of net sales:
Three Months Ended Gross Margin in Accordance with
Generally Accepted March 31, Accounting
Principles 2012 2011 Gross profit $ 23.8
$ 22.7 Total revenues $ 394.0 $ 327.9
Gross margin 6.0 % 6.9 %
Three
Months Ended March 31, Gross Margin Excluding Freight
and Delivery Revenues 2012 2011 Gross
profit $ 23.8 $ 22.7 Total revenues $ 394.0 $ 327.9
Less: Freight and delivery revenues (43.5 ) (37.3 )
Net sales $ 350.5 $ 290.6 Gross margin excluding
freight and delivery revenues 6.8 % 7.8 %
Three Months Ended Operating Margin in Accordance
with Generally Accepted March 31, Accounting
Principles 2012 2011 Loss from operations
$ (35.3 ) $ (4.4 ) Total revenues $ 394.0 $ 327.9
Operating margin (9.0 %) (1.4 %)
Three Months Ended March 31, Operating Margin
Excluding Freight and Delivery Revenues 2012
2011 Loss from operations $ (35.3 ) $ (4.4 ) Total revenues
$ 394.0 $ 327.9 Less: Freight and delivery revenues (43.5 )
(37.3 ) Net sales $ 350.5 $ 290.6 Operating
margin excluding freight and delivery revenues (10.1
%)
(1.5 %)
MARTIN MARIETTA MATERIALS, INC. Non-GAAP
Financial Measures (continued) (Dollars, other than earnings
per share amounts, and number of shares in millions)
The impact of business development
expenses and the impact from newly acquired operations on the loss
per diluted share represent non-GAAP financial measures.
Consolidated loss from operations excluding business development
expenses and adjusted loss per diluted share, which excludes the
impact of business development expenses and the impact of newly
acquired operations, also represent non-GAAP measures. Management
presents these measures to provide more consistent information for
investors and analysts to use when comparing operating results for
the quarter ended March 31, 2012 with the prior-year quarter.
The following shows the calculation of the impact of
business development expenses and the newly acquired operations on
the loss per diluted share:
Three Months Ended
March 31, 2012 Business development expenses $ 25.9 Income
tax benefit 10.2 After-tax impact of business
development expenses $ 15.7 Diluted average number of common
shares outstanding 45.7 Earnings per diluted share
impact of business development expenses $ (0.34 )
Three Months Ended March 31, 2012 Pretax loss on
newly acquired locations $ 12.5 Income tax benefit 4.9
After-tax loss on newly acquired locations $ 7.6
Diluted average number of common shares outstanding 45.7
Earnings per diluted share impact of newly acquired
operations $ (0.17 ) The following reconciles
consolidated loss from operations in accordance with generally
accepted accounting principles to consolidated loss from operations
exclusive of business development expenses:
Three Months
Ended March 31, 2012 Consolidated loss from operations
in accordance with generally accepted accounting principles $ (35.3
) Business development expenses 25.9 Consolidated
loss from operations exclusive of business development expenses $
(9.4 ) The following reconciles the loss per diluted
share in accordance with generally accepted accounting principles
to adjusted loss per diluted share, which excludes the impact of
business development expenses and the newly acquired operations:
Three Months Ended March 31, 2012 Loss per diluted
share in accordance with generally accepted accounting principles $
(0.81 ) Add back: Impact of business development expenses 0.34
Impact of newly acquired operations 0.17
Adjusted loss per diluted share, which
excludes the impact of business development expenses and the newly
acquired operations
$ (0.30 )
MARTIN MARIETTA MATERIALS, INC. Non-GAAP
Financial Measures (continued) (Dollars in millions)
Three Months Ended March 31,
2012 2011 Earnings Before
Interest, Income Taxes, Depreciation, Depletion and Amortization
(EBITDA) (1) $ 10.6 $ 37.3
(1) EBITDA is a widely accepted financial
indicator of a company's ability to service and/or incur
indebtedness. EBITDA is not defined by generally accepted
accounting principles and, as such, should not be construed as an
alternative to net earnings or operating cash flow.
For further information on EBITDA, refer
to the Corporation's website at
www.martinmarietta.com.
A reconciliation of Net Loss Attributable to Martin Marietta
Materials, Inc. to EBITDA is as follows:
Three Months
Ended March 31, 2012
2011 Net Loss Attributable to Martin Marietta
Materials, Inc. $ (36.7 ) $ (17.4 ) Add back: Interest Expense 13.5
18.2 Income Tax Benefit for Controlling Interests (10.0 ) (6.4 )
Depreciation, Depletion and Amortization Expense 43.8
42.9 EBITDA $ 10.6 $ 37.3
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, as amended, the
Corporation's ratio of Consolidated Debt-to-Consolidated EBITDA as
defined, for the trailing twelve months can not exceed 3.95 times
as of March 31, 2012 and June 30, 2012, with certain exceptions
related to qualifying acquisitions, as defined. The ratio limit
steps down to 3.75 times at September 30, 2012 before returning to
the pre-amended limit of 3.50 times at December 31, 2012. The
amended agreements also allow the Corporation to exclude from the
ratio at March 31, 2012 and June 30, 2012 debt associated with the
Colorado operations that were acquired in the fourth quarter of
2011.
The following presents the calculation of Consolidated
Debt-to-Consolidated EBITDA, as defined, for the trailing-twelve
months at March 31, 2012.
For supporting calculations, refer to
Corporation's website at www.martinmarietta.com.
Twelve-Month Period
April 1, 2011 to March 31, 2012 Earnings from
continuing operations attributable to Martin Marietta Materials,
Inc. $ 72.0 Add back: Interest expense 53.9 Income tax expense 17.2
Depreciation, depletion and amortization expense 162.7 Stock-based
compensation expense 10.6 Deduct: Interest income (0.6 )
Consolidated EBITDA, as defined $ 315.8 Consolidated
Debt, including debt guaranteed by the Corporation and excluding
specified acquisition debt, at March 31, 2012 $ 1,114.3 Less:
Unrestricted cash and cash equivalents in excess of $50 at March
31, 2012 - Consolidated Net Debt, as defined, at
March 31, 2012 $ 1,114.3 Consolidated
Debt-to-Consolidated EBITDA, as defined, at March 31, 2012 for the
trailing twelve-month EBITDA 3.53 times
MLM-E
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