Martin Marietta Materials, Inc. (NYSE:MLM) today announced
results for the third quarter and nine months ended September 30,
2012.
Ward Nye, President and CEO of Martin Marietta Materials,
stated, “Our strong third-quarter results reflect both revenue and
profit growth that demonstrate the underlying strength of our
legacy operations as well as the contribution from our recent
acquisitions in the Denver, Colorado, market. In terms of our
overall performance, the heritage Aggregates business benefitted
from both continued strong pricing trends and increased
productivity, and the Specialty Products business generated record
earnings from operations. Our bottom line continued to reflect the
diligent manner in which we control costs. As a result, our
earnings per diluted share of $1.36, a 27% increase over the
prior-year quarter, is especially noteworthy given that our team
achieved this in an uncertain economic climate that has been marked
by a reluctance by governmental bodies and private industry to
commit to long-range capital projects.
“We also see several positive trends in construction activity.
First, we continue to benefit from recovery and growth in the
residential sector end-use market, which is reporting a 14%
increase in heritage aggregates product line shipments over the
prior-year quarter. Second, with the passage of the Moving Ahead
for Progress in the 21st Century Act, or MAP-21, a
twenty-seven-month Federal surface transportation bill intended to
expedite project approvals and limit spending for programs
unrelated to core transportation needs, federal highway funds can
be obligated with more certainty. Consequently, many of our key
states are taking steps to utilize various funding alternatives to
support important infrastructure projects. Finally, it seems a
backlog of construction work is awaiting, what we believe to be, a
general restoration of confidence in the current economic and
political environment. We anticipate these positive trends will
continue and provide the prospect for increasing volume momentum as
we move forward into 2013.”
SIGNIFICANT ITEMS (UNLESS NOTED, ALL COMPARISONS ARE WITH THE
PRIOR-YEAR THIRD QUARTER)
- Earnings per diluted share of $1.36
compared with $1.07
- Consolidated net sales of $539.1
million compared with $445.0 million
- Heritage aggregates product line
pricing increased 4.1%; volume decreased 3.8%
- Specialty Products net sales of $49.4
million and record third-quarter earnings from operations of $17.0
million
- Consolidated selling, general and
administrative expenses (SG&A) decreased 140 basis points as a
percentage of net sales
- Consolidated earnings from operations
of $91.1 million compared with $80.0 million
MANAGEMENT COMMENTARY (UNLESS NOTED, ALL COMPARISONS ARE WITH
THE PRIOR-YEAR THIRD QUARTER)
Nye continued, “Consolidated net sales increased over 20%, with
the recently acquired Denver, Colorado, area businesses
contributing $92 million in the quarter. These operations once
again exceeded our expectations, reflecting positive construction
trends in that market where the rate of growth in highway contract
awards ranks among the highest in the country, and, importantly,
construction-related employment is well above the national average.
Nonresidential construction activity also continues to improve in
the market with commercial real estate realizing increased lease
rates and decreasing vacancies. Year-to-date housing permits in
Colorado increased more than 60%, outpacing the national average,
while single-family home sales have increased significantly over
the prior-year period.
“Heritage aggregates product line pricing increased 4.1% in the
quarter over the prior-year period. Pricing growth was led by our
Southeast Group, with an overall increase of 5.1% over the
prior-year quarter, driven by improvement in all of its markets
along with favorable product mix. The West Group reported a
heritage aggregates product line price increase of 4.8%, with
shipments to the energy sector being a significant driver of this
improvement. The Mideast Group had a 3.5% increase in its heritage
aggregates product line average selling price, led by growth in our
North Carolina, Virginia and West Virginia markets.
“Volume trends noted in June continued throughout the third
quarter, resulting in a 3.8% decline in heritage aggregates product
line shipments versus the comparable prior-year period. Shipments
to the infrastructure end-use market, which comprised more than
half of our heritage aggregates product line volumes, declined 6%
compared with the prior-year quarter. Much of the volume decline is
attributable to the fact that for nearly three years federal
highway spending operated under a series of short-term, continuing
resolutions. This extended circumstance made it difficult, and at
times impossible, for state departments of transportation to
obligate traditional long-term expenditures. This created a
chilling effect on various states’ ability to advertise and award
significant new highway construction activity.
“On July 6, 2012, the President signed into law MAP-21, which
maintains highway expenditures at current levels, $40 billion per
year, with modest increases to reflect projected inflation and
reform provisions. The bill’s passage nine months into the Federal
fiscal year ended September 30, 2012, meant that a
disproportionately large percentage of federal highway funds were
obligated during the last two months of the fiscal year. This
delayed timing affected highway construction activity during the
quarter and will likely result in many of these projects starting
in 2013. However, certain states, namely Texas, Iowa and Florida,
have initiated state-level programs that demonstrate the importance
of infrastructure investment. In fact, the Texas department of
transportation anticipates its spending during fiscal year 2013,
which began September 1, to be more than double the amount spent in
fiscal year 2012. Additionally, Texas and North Carolina were two
of the first states to apply for funding assistance under the
Transportation Infrastructure Finance and Innovation Act (TIFIA).
Texas submitted requests for TIFIA projects with a cumulative
investment of more than $6 billion, while North Carolina’s proposed
projects total more than $1 billion. TIFIA provides $1.75 billion
of federal credit assistance over the next two years for nationally
or regionally significant surface transportation projects. Each
dollar of federal funds can provide up to $10 in TIFIA credit
assistance and leverage up to $30 in transportation infrastructure
investment. TIFIA and other state-sponsored programs coupled with
MAP-21 should provide an impetus for increased infrastructure
spending into 2013 and beyond.
“The nonresidential market is our second largest aggregates end
use. During the third quarter, we continued to benefit, as we have
for the past couple of years, from a significant level of
aggregates product line shipments to the energy sector and other
heavy industrial uses. Nonetheless, we also saw more traditional
non-energy-related projects delayed during the third quarter. In
general, many developers were hesitant to begin new projects due to
an inability to accurately estimate their investment returns,
including the cost of capital and changes in tax policy, in light
of uncertainty surrounding the United States’ fiscal position. As a
result, our overall heritage shipments to this end use market were
relatively flat compared with the prior year. Our residential
end-use market growth reflects an approximate 25% increase in
year-to-date housing starts over the prior-year period and, as
previously mentioned, heritage aggregates shipments increased 14%
in the quarter. Finally, our ChemRock/Rail end-use market
experienced a 14% decline in heritage shipments compared with the
prior-year quarter. The reduction was principally due to the
comparison with an unusually strong third quarter for ballast
shipments in 2011, as well as a decline in coal traffic on the
railroads.
“As previously indicated, economic growth was inconsistent
across our markets. Aggregates shipment levels varied by geographic
area, with notable strength in Texas, West Virginia and Charlotte,
North Carolina. This relative robustness was offset by weakness in
Ohio, where construction activity on major projects declined, and
our West Group, which experienced reduced rail ballast shipments.
This weakness led to declines of 2.6% and 2.3% in heritage
aggregates product line shipments in the Mideast and West Groups,
respectively. The Southeast Group reported a 10.7% decline in
heritage aggregates shipments, as economic growth in this region
continues to lag national trends, principally due to weak job
growth and continued high foreclosure rates.
“Specialty Products continued its strong performance in both the
chemicals and dolomitic lime product lines. For the quarter, net
sales were $49.4 million and record third-quarter earnings from
operations were $17.0 million, or 34.4% of net sales, an
improvement of 350 basis points. The new dolomitic lime kiln we
recently completed at our Woodville, Ohio, facility will begin
generating sales in the fourth quarter. The new kiln is expected to
provide incremental annual net sales ranging from $22 million to
$25 million with margins comparable to existing operations.
“Direct production costs for the heritage aggregates product
line fell 2.7%, as production levels were reduced to better match
shipment activity. Our operations personnel prudently managed costs
and limited the increase in cost per ton to 1.0%, despite this
decline.
“Consolidated gross margin (excluding freight and delivery
revenues) for the quarter was 22.9%, a 220-basis-point decline
compared with the prior-year quarter. The decline was primarily
attributable to the increased impact of our newly acquired Colorado
businesses, which is more vertically integrated (i.e., with ready
mixed concrete, hot mixed asphalt and related paving operations)
than our traditional heritage business. In fact, excluding the
effect of these recently acquired businesses, consolidated gross
margin (excluding freight and delivery revenues) would have been
25.6%, an improvement of 50 basis points over the prior-year
quarter. Notably, our Mideast Group benefitted during the quarter
from pricing growth to increase net sales, and coupled this sales
growth with reduced personnel costs to increase its gross margin
(excluding freight and delivery revenues) by 180 basis points to
33.7%.
“Consolidated SG&A as a percentage of net sales was 6.0%, an
improvement of 140 basis points compared with the prior-year
quarter. On an absolute basis, SG&A decreased $0.7 million
despite absorbing overhead incurred at our Denver operations, as
well as costs related to an information systems upgrade expected to
be completed by the fall of 2013.
LIQUIDITY AND CAPITAL RESOURCES
“Cash provided by operating activities for the nine months ended
September 30, 2012, was $122.0 million. Excluding the impact of
business development expenses, cash provided by operating
activities for the nine months ended September 30, 2012, was $160.0
million compared with $179.9 million for the same period in 2011.
During the nine months ended September 30, 2012, we invested $105.9
million of capital into our business, including $32 million related
to the new kiln. Days sales outstanding was 45 days, comparable
with 2011.
“At September 30, 2012, our ratio of consolidated debt to
consolidated EBITDA, as defined, for the trailing twelve months was
3.58 times. At September 30, 2012, the maximum ratio is 3.75 times
per our covenant, which we recently amended to provide incremental
liquidity cushion. The amendment maintains the maximum ratio at
3.75 times through June 30, 2013, before returning to a maximum of
3.50 times on September 30, 2013.
FULL-YEAR 2012 AND PRELIMINARY 2013 OUTLOOK
“As discussed, we are encouraged by various positive trends in
our markets. For full year 2012, we anticipate high-single-digit
volume growth in our nonresidential end-use market, driven
primarily by increased energy shipments; 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. Our infrastructure end-use market
volume is expected to be down slightly, and ChemRock/Rail shipments
are expected to be down in the high-single digits.
“As such, we anticipate that heritage aggregates product line
shipments for the full year will increase 1% to 2%, and pricing
will increase 2% to 4%. A variety of factors beyond our direct
control may continue to exert pressure on our volumes and our
forecasted pricing increase is not expected to be uniform across
the company. Heritage aggregates product line direct production
costs per ton are expected to be up slightly compared with
2011.
“Earnings for the Specialty Products segment should be
approximately $68 million to $70 million. Steel utilization and
natural gas prices are two key factors for this segment.
“SG&A expenses, excluding the incremental expense related to
the Denver operations and costs related to our information systems
upgrade, are expected to decline slightly. We expect improvement in
SG&A expenses related to the Denver operations as we fully
complete their integration. Interest expense should decrease
approximately $5 million compared with 2011. Our effective tax rate
is expected to approximate 23%, excluding discrete events. Capital
expenditures are forecast at $155 million.
“We have started framing a preliminary 2013 outlook for our
end-use markets. We currently expect shipments to the
infrastructure end-use market to increase in the mid-single digits,
driven by the impact of MAP-21, TIFIA and state-sponsored programs.
We anticipate our nonresidential end-use market to increase in the
high-single digits. We believe the recent positive trend in housing
starts will continue and our residential end-use market will
experience double-digit volume growth. Finally, we expect our
ChemRock/Rail end-use market to be flat compared with 2012. We will
provide further guidance on our 2013 outlook in our year-end
earnings release.”
RISKS TO OUTLOOK
The full-year 2012 outlook and preliminary 2013 outlook for the
Corporation’s end-use markets include management’s assessment of
the likelihood of certain risk factors that will affect
performance. The most significant risk to the Corporation’s
performance will be the United States economy and its impact on
construction activity. The resolution of the fiscal cliff and
whether tax increases and spending cuts take effect may have a
significant impact on the economy and, consequently, construction
activity. Other risks related to the Corporation’s future
performance include, but are not limited to, both price and volume
and include a recurrence of widespread decline in aggregates volume
negatively affecting aggregates price; the termination, capping
and/or reduction of the federal and/or state gasoline tax(es) or
other revenue related to infrastructure construction; a significant
change in the funding patterns for traditional federal, state
and/or local infrastructure projects; a reduction in defense
spending, and the subsequent impact on construction activity on or
near military bases, particularly if sequestration of budget
programs occurs; a decline in nonresidential construction, a
decline in energy-related drilling activity resulting from certain
regulatory or economic factors, a slowdown in the residential
construction recovery, or some combination thereof; and a continued
reduction in ChemRock/Rail shipments resulting from declining coal
traffic on the railroads. Further, increased highway construction
funding pressures resulting from either federal or state issues can
affect profitability. Currently, nearly all states have general
fund budget issues driven by lower tax revenues. If these
negatively affect transportation budgets more than in the past,
construction spending could be reduced. North Carolina and Texas,
states disproportionately affecting the Corporation’s 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
aggregates-related construction 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 changes in domestic
steel capacity utilization and 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 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 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 third quarter were $539.1 million, a 21.2%
increase versus the $445.0 million recorded in 2011. Earnings from
operations for the third quarter of 2012 were $91.1 million
compared with $80.0 million in 2011. Net earnings attributable to
Martin Marietta Materials were $62.9 million, or $1.36 per diluted
share, versus 2011 third-quarter net earnings attributable to
Martin Marietta Materials of $49.2 million, or $1.07 per
diluted share.
Net sales for the first nine months of 2012 were $1.381 billion
compared with $1.145 billion for the year-earlier period.
Year-to-date earnings from operations were $115.0 million versus
$140.3 million in 2011. For the nine-month period ended
September 30, 2012, net earnings attributable to Martin
Marietta Materials were $62.9 million, or $1.36 per diluted share,
compared with $67.5 million, or $1.46 per diluted share, in the
first nine months of 2011.
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the third quarter
of 2012 were $489.7 million compared with 2011 third-quarter sales
of $394.7 million. Aggregates volume at heritage locations was down
3.8%, while pricing increased 4.1%. Earnings from operations for
the quarter were $76.1 million in 2012 versus $70.4 million in
the year-earlier period. Year-to-date net sales for the Aggregates
business were $1.229 billion versus $996.1 million in 2011.
Earnings from operations on a year-to-date basis were
$108.3 million in 2012 compared with $104.4 million in
2011. For the nine-month period ended September 30, 2012, heritage
aggregates volume increased 2.2%, while pricing increased 3.0%.
Specialty Products third-quarter net sales of $49.4 million
decreased 1.8% from prior-year net sales of $50.3 million.
Earnings from operations for the third quarter were $17.0 million
compared with $15.6 million in the year-earlier period. For
the first nine months of 2012, net sales were $151.6 million and
earnings from operations were $52.7 million compared with net sales
of $149.1 million and earnings from operations of $50.0 million for
the first nine months of 2011.
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its third
quarter 2012 earnings conference call later today (November 6,
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 48690186.
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 Securities and Exchange Commission (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 and the resolution of
the fiscal cliff; 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, Colorado and
Georgia; 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 reduction in defense spending, and the
subsequent impact on construction activity on or near military
bases, particularly if sequestration of budget programs occurs; 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 SEC. Other factors
besides those listed here may also adversely affect the
Corporation, and may be material to the Corporation. The
Corporation assumes no obligation to update any such
forward-looking statements.
MARTIN MARIETTA MATERIALS, INC. Unaudited
Statements of Earnings (In millions, except per share amounts)
Three Months Ended
Nine Months Ended September 30, September 30,
2012 2011 2012 2011 Net
sales $ 539.1 $ 445.0 $ 1,380.9 $ 1,145.2 Freight and delivery
revenues 54.8 57.4 152.7
147.5 Total revenues 593.9 502.4
1,533.6 1,292.7 Cost of
sales 415.5 333.1 1,131.4 913.1 Freight and delivery costs
54.8 57.4 152.7 147.5
Total cost of revenues 470.3 390.5
1,284.1 1,060.6 Gross profit
123.6 111.9 249.5 232.1 Selling, general and administrative
expenses 32.1 32.8 100.4 92.4 Business development costs - 0.7 35.1
3.4 Other operating expenses and (income), net 0.4
(1.6 ) (1.0 ) (4.0 ) Earnings from operations
91.1 80.0 115.0 140.3 Interest expense 13.2 13.4 40.0 45.3
Other nonoperating expenses and (income), net 0.6
2.1 (1.3 ) 2.2 Earnings from
continuing operations before taxes on income 77.3 64.5 76.3 92.8
Income tax expense 13.5 14.2
12.1 21.9 Earnings from continuing operations
63.8 50.3 64.2 70.9
Loss on discontinued operations, net of
related tax benefit of $0.1, $0.6, $0.2 and $1.7, respectively
(0.1 ) - (0.4 ) (2.4 ) Consolidated net earnings 63.7 50.3
63.8 68.5 Less: Net earnings attributable to noncontrolling
interests 0.8 1.1 0.9
1.0 Net earnings attributable to Martin
Marietta Materials, Inc. $ 62.9 $ 49.2 $ 62.9
$ 67.5 Net earnings (loss) per common share: Basic
from continuing operations attributable to common shareholders $
1.36 $ 1.07 $ 1.38 $ 1.52 Discontinued operations attributable to
common shareholders - - (0.01 )
(0.05 ) $ 1.36 $ 1.07 $ 1.37 $ 1.47
Diluted from continuing operations attributable to
common shareholders $ 1.36 $ 1.07 $ 1.37 $ 1.51 Discontinued
operations attributable to common shareholders -
- (0.01 ) (0.05 ) $ 1.36 $ 1.07
$ 1.36 $ 1.46 Cash dividends per common
share $ 0.40 $ 0.40 $ 1.20 $ 1.20
Average number of common shares outstanding: Basic
45.9 45.7 45.8 45.6
Diluted 46.0 45.8 45.9
45.8
MARTIN MARIETTA
MATERIALS, INC. Unaudited Financial Highlights (In
millions)
Three Months Ended
Nine Months Ended September 30,
September 30, 2012 2011 2012
2011 Net sales: Aggregates Business: Mideast Group $
118.1 $ 116.6 $ 305.0 $ 295.3 Southeast Group 71.9 76.7 213.1 217.4
West Group 299.7 201.4 711.2
483.4 Total Aggregates Business 489.7 394.7
1,229.3 996.1 Specialty Products 49.4 50.3
151.6 149.1 Total $ 539.1
$ 445.0 $ 1,380.9 $ 1,145.2 Gross
profit (loss): Aggregates Business: Mideast Group $ 39.8 $ 37.2 $
80.1 $ 77.5 Southeast Group 6.1 8.0 13.2 17.1 West Group
57.3 49.4 98.4 82.7
Total Aggregates Business 103.2 94.6 191.7 177.3 Specialty
Products 19.7 17.8 59.1 56.8 Corporate 0.7
(0.5 ) (1.3 ) (2.0 ) Total $ 123.6 $ 111.9
$ 249.5 $ 232.1 Selling, general and
administrative expenses: Aggregates Business: Mideast Group $ 8.9 $
9.3 $ 28.0 $ 27.8 Southeast Group 5.4 6.8 17.1 20.4 West Group
14.1 10.7 42.0
32.0 Total Aggregates Business 28.4 26.8 87.1 80.2 Specialty
Products 2.2 2.2 6.9 6.9 Corporate 1.5 3.8
6.4 5.3 Total $ 32.1 $
32.8 $ 100.4 $ 92.4 Earnings (Loss)
from operations: Aggregates Business: Mideast Group $ 31.3 $ 28.1 $
54.3 $ 53.2 Southeast Group 0.5 2.8 (5.5 ) (2.0 ) West Group
44.3 39.5 59.5 53.2
Total Aggregates Business 76.1 70.4 108.3 104.4 Specialty
Products 17.0 15.6 52.7 50.0 Corporate (2.0 ) (6.0 )
(46.0 ) (14.1 ) Total $ 91.1 $ 80.0 $
115.0 $ 140.3 Net sales by product line:
Aggregates Business: Aggregates $ 371.1 $ 362.6 $ 985.4 $ 916.9
Asphalt 29.2 12.3 61.9 37.5 Ready Mixed Concrete 33.1 9.8 82.6 22.3
Road Paving 56.3 10.0 99.4
19.4 Total Aggregates Business 489.7
394.7 1,229.3 996.1
Specialty Products Business: Magnesia-Based Chemicals 32.5
32.8 96.7 94.8 Dolomitic Lime 16.5 17.1 53.6 53.3 Other 0.4
0.4 1.3 1.0 Total
Specialty Products Business 49.4 50.3
151.6 149.1 Total $ 539.1 $
445.0 $ 1,380.9 $ 1,145.2 Depreciation
$ 41.5 $ 41.1 $ 125.5 $ 124.7 Depletion 1.5 1.3 3.5 2.6
Amortization 1.2 0.8 4.0
2.4 $ 44.2 $ 43.2 $ 133.0 $
129.7
MARTIN MARIETTA MATERIALS, INC.
Balance Sheet Data (In millions)
September 30, December 31, September
30, 2012 2011 2011 (Unaudited) (Audited)
(Unaudited) ASSETS Cash and cash equivalents $ 35.4 $ 26.0 $
56.8 Accounts receivable, net 296.9 203.7 259.8 Inventories, net
335.1 322.6 337.7 Other current assets 117.7 105.6 113.1 Property,
plant and equipment, net 1,750.9 1,774.3 1,686.6 Intangible assets,
net 667.3 670.8 657.3 Other noncurrent assets 39.9
44.8 47.3 Total assets $ 3,243.2 $ 3,147.8 $ 3,158.6
LIABILITIES AND EQUITY Current maturities of long-term debt
and short-term facilities $ 6.7 $ 7.2 $ 7.2 Other current
liabilities 210.4 166.5 190.5 Long-term debt (excluding current
maturities) 1,092.1 1,052.9 1,038.3 Other noncurrent liabilities
464.0 472.3 437.0 Total equity 1,470.0 1,448.9
1,485.6 Total liabilities and equity $ 3,243.2 $ 3,147.8 $ 3,158.6
MARTIN MARIETTA MATERIALS, INC. Unaudited
Statements of Cash Flows (In millions)
Nine
Months Ended September 30, 2012
2011 Operating activities: Consolidated net earnings $ 63.8
$ 68.5 Adjustments to reconcile consolidated net earnings to net
cash provided by operating activities: Depreciation, depletion and
amortization 133.0 129.7 Stock-based compensation expense 5.9 9.3
Gains on divestitures and sales of assets (0.9 ) (3.9 ) Deferred
income taxes 11.6 6.4
Other items, net
2.3 1.3
Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net (93.2 ) (78.0 ) Inventories, net (12.5 )
(4.4 ) Accounts payable 7.1 26.0 Other assets and liabilities, net
4.9 25.0 Net cash provided by
operating activities 122.0 179.9
Investing activities: Additions to property, plant and equipment
(105.9 ) (93.5 ) Acquisitions, net (0.1 ) (49.9 ) Proceeds from
divestitures and sales of assets 7.8 6.1
Net cash used for investing activities (98.2 )
(137.3 ) Financing activities: Borrowings of
long-term debt 181.0 460.0 Repayments of long-term debt (142.6 )
(445.5 ) Change in bank overdraft 0.1 (2.1 ) Dividends paid (55.3 )
(55.2 ) Debt issue costs (0.3 ) (3.3 ) Issuances of common stock
3.5 1.4 Purchase of remaining interest in existing subsidiaries -
(10.4 ) Distributions to owners of noncontrolling interests
(0.8 ) (1.0 ) Net cash used for financing activities
(14.4 ) (56.1 ) Net increase (decrease) in
cash and cash equivalents 9.4 (13.5 ) Cash and cash equivalents,
beginning of period 26.0 70.3
Cash and cash equivalents, end of period $ 35.4 $ 56.8
MARTIN MARIETTA MATERIALS, INC.
Unaudited Operational Highlights
Three Months Ended Nine Months Ended
September 30, 2012 September 30, 2012 Volume
Pricing Volume Pricing
Volume/Pricing Variance
(1)
Heritage Aggregates Product Line:
(2)
Mideast Group (2.6 %) 3.5 % 2.1 % 0.7 % Southeast Group (10.7 %)
5.1 % (6.0 %) 4.0 % West Group (2.3 %) 4.8 % 5.4 % 5.2 % Heritage
Aggregates Operations (3.8 %) 4.1 % 2.2 % 3.0 % Aggregates Product
Line (3) (2.9 %) 1.8 % 1.7 % 1.2 %
Three Months Ended
Nine Months Ended September 30, September 30,
Shipments (tons in thousands)
2012 2011
2012 2011 Heritage Aggregates Product Line:
(2) Mideast Group 10,694 10,977 26,961 26,416 Southeast
Group 5,495 6,154 16,413 17,454 West Group 18,416 18,840
48,874 46,366 Heritage Aggregates Operations
34,605 35,971 92,248 90,236 Acquisitions 2,068 - 4,497 -
Divestitures (4) 1 1,785 24 4,898
Aggregates Product Line (3) 36,674 37,756 96,769
95,134
(1
)
Volume/pricing variances reflect the
percentage increase (decrease) from the comparable period in the
prior year.
(2
)
Heritage Aggregates product line excludes
volume and pricing data for acquisitions that have not been
included in prior-year operations for the comparable period and
divestitures.
(3
)
Aggregates product line includes all
acquisitions from the date of acquisition and divestitures through
the date of disposal.
(4
)
Divestitures include the tons related to
divested aggregates product line operations up to the date of
divestiture.
MARTIN MARIETTA MATERIALS, INC. Non-GAAP Financial
Measures (Dollars in millions)
Gross margin as a percentage of net sales
and operating margin as a percentage of net sales represent
non-GAAP measures. The Corporation presents these ratios calculated
based on net sales, as it is consistent with the basis by which
management reviews the Corporation's operating results. Further,
management believes it is consistent with the basis by which
investors analyze the Corporation's operating results, given that
freight and delivery revenues and costs represent pass-throughs and
have no profit markup. Gross margin and operating margin calculated
as percentages of total revenues represent the most directly
comparable financial measures calculated in accordance with
generally accepted accounting principles ("GAAP"). The following
tables present the calculations of gross margin and operating
margin for the three and nine months ended September 30, 2012, and
2011, in accordance with GAAP and reconciliations of the ratios as
percentages of total revenues to percentages of net sales:
Gross Margin in Accordance with Generally Accepted
Three Months Ended Nine Months Ended
Accounting Principles September 30, September
30, 2012 2011
2012 2011 Gross
profit $ 123.6 $ 111.9 $ 249.5 $ 232.1
Total revenues $ 593.9 $ 502.4 $ 1,533.6 $
1,292.7 Gross margin 20.8 % 22.3 % 16.3
% 18.0 %
Three Months Ended Nine Months
Ended September 30, September 30, Gross Margin
Excluding Freight and Delivery Revenues 2012 2011
2012 2011 Gross profit $ 123.6 $ 111.9
$ 249.5 $ 232.1 Total revenues $ 593.9 $ 502.4
$ 1,533.6 $ 1,292.7 Less: Freight and delivery revenues
(54.8 ) (57.4 ) (152.7 ) (147.5 ) Net sales $
539.1 $ 445.0 $ 1,380.9 $ 1,145.2 Gross
margin excluding freight and delivery revenues 22.9 %
25.1 % 18.1 % 20.3 %
Operating Margin in
Accordance with Generally Accepted Three Months Ended
Nine Months Ended Accounting Principles September
30, September 30, 2012 2011 2012
2011 Earnings from operations $ 91.1 $ 80.0 $
115.0 $ 140.3 Total revenues $ 593.9 $ 502.4
$ 1,533.6 $ 1,292.7 Operating margin
15.3 % 15.9 % 7.5 % 10.9 %
Three
Months Ended Nine Months Ended Operating Margin
Excluding Freight and Delivery Revenues September 30,
September 30, 2012 2011 2012
2011 Earnings from operations $ 91.1 $ 80.0 $
115.0 $ 140.3 Total revenues $ 593.9 $ 502.4 $
1,533.6 $ 1,292.7 Less: Freight and delivery revenues (54.8
) (57.4 ) (152.7 ) (147.5 ) Net sales $ 539.1
$ 445.0 $ 1,380.9 $ 1,145.2 Operating
margin excluding freight and delivery revenues 16.9 %
18.0 % 8.3 % 12.2 %
Consolidated gross margin excluding
freight and delivery revenues and excluding the effect of
businesses acquired in the Denver, Colorado, area in December 2011
represents a non-GAAP financial measure. Management presents this
measure to provide more consistent information for investors and
analysts to use when comparing gross margin excluding freight and
delivery revenues for the quarter ended September 30, 2012, with
the respective prior-year quarter.
The following reconciles consolidated
total revenues and consolidated gross profit in accordance with
generally accepted accounting principles to consolidated net sales
and consolidated gross profit, both excluding the impact of
businesses acquired in the Denver, Colorado, area in December 2011.
These adjusted amounts are then used to calculate consolidated
gross margin excluding freight and delivery revenues and excluding
the impact of these acquired businesses:
Three Months Ended September 30, 2012
Consolidated total revenues $ 593.9 Less: Freight and delivery
revenues 54.8 Less: Net sales at businesses acquired in Denver,
Colorado area in December 2011 91.7 Consolidated net sales
excluding net sales at business acquired in Denver, Colorado area
in December 2011 $ 447.4 Consolidated gross profit $
123.6 Gross profit at businesses acquired in Denver, Colorado, area
in December 2011 9.1 Consolidated gross profit excluding
gross profit at business acquired in Denver, Colorado area in
December 2011 $ 114.5
Consolidated gross margin excluding
freight and delivery revenues and excluding impact of businesses
acquired in Denver, Colorado, area in December 2011
25.6 %
MARTIN MARIETTA MATERIALS, INC. Non-GAAP
Financial Measures (continued) (Dollars in millions)
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 3.75 times
as of September 30, 2012, with certain exceptions related to
qualifying acquisitions, as defined.
The following presents the calculation
of Consolidated Debt-to-Consolidated EBITDA, as defined, for the
trailing-twelve months at September 30, 2012. For supporting
calculations, refer to Corporation's website at
www.martinmarietta.com.
Twelve-Month Period October 1, 2011 to
September 30, 2012 Earnings from continuing operations
attributable to Martin Marietta Materials, Inc. $ 72.3 Add back:
Interest expense 53.3 Income tax expense 11.1 Depreciation,
depletion and amortization expense 170.5 Stock-based compensation
expense 8.2 Deduct: Interest income (0.5 ) Consolidated
EBITDA, as defined $ 314.9 Consolidated Debt,
including debt guaranteed by the Corporation, at September 30, 2012
$ 1,126.5 Less: Unrestricted cash and cash equivalents in excess of
$50 at September 30, 2012 - Consolidated Net Debt, as
defined, at September 30, 2012 $ 1,126.5
Consolidated Debt-to-Consolidated EBITDA,
as defined, at September 30, 2012 for the trailing twelve-month
EBITDA
3.58 times
Net cash provided by operating activities
excluding the impact of business development expenses represents a
non-GAAP financial measure. Management presents this measure to
provide more consistent information for investors and analysts to
use when comparing net cash provided by operating activities for
the nine months ended September 30, 2012, with the respective
prior-year period.
The following reconciles net cash
provided by operating activities in accordance with generally
accepted accounting principles to net cash provided by operating
activities excluding the impact of business development
expenses:
Nine Months Ended September 30, 2012 Net cash
provided by operating activities in accordance with generally
accepted accounting principles $ 122.0 Add back: Impact of business
development expenses on operating cash flow 38.0 Net cash provided
by operating activities excluding the impact of business
development expenses $ 160.0
EBITDA is a widely accepted financial
indicator of a company's ability to service and/or incur
indebtedness. EBITDA is not defined by generally accepted
accounting principles and, as such, should not be construed as an
alternative to net earnings or operating cash flow. For further
information on EBITDA, refer to the Corporation's website at
www.martinmarietta.com. EBITDA is as follows for the
three and nine months ended September 30, 2012, and 2011.
Three Months Ended Nine Months Ended
September 30, September 30, 2012 2011
2012 2011 Earnings Before Interest, Income Taxes,
Depreciation, Depletion and Amortization (EBITDA) $ 133.3 $ 118.9 $
246.4 $ 261.5
A reconciliation of Net Earnings
Attributable to Martin Marietta Materials, Inc. to EBITDA is as
follows:
Three Months Ended
Nine Months Ended September 30, September 30,
2012 2011 2012 2011 Net Earnings
Attributable to Martin Marietta Materials, Inc. $ 62.9 $ 49.2 $
62.9 $ 67.5 Add back: Interest Expense 13.2 13.4 40.0 45.3 Income
Tax Expense for Controlling Interests 13.3 13.5 11.9 20.2
Depreciation, Depletion and Amortization Expense 43.9
42.8 131.6 128.5 EBITDA $ 133.3 $ 118.9 $
246.4 $ 261.5
MLM-E
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