Earnings Per Diluted Share of $0.07
Consolidated Gross Margin Expands By 500
Basis Points
Aggregates Product Line Volume Up 17% and
Pricing Up 11%
Company Raises Annual Aggregates Pricing
Guidance
Magnesia Specialties Generates Record
First-Quarter Net Sales and Gross Profit
Martin Marietta Materials, Inc. (NYSE:MLM) today reported its
results for the first quarter ended March 31, 2015.
Ward Nye, Chairman, President and CEO of Martin Marietta,
stated: “We are pleased to report improved margins and increased
profitability, both considerably ahead of our internal plans, and a
first-quarter profit for the first time since 2008. These quarterly
results serve as a further validation of our success in executing
on our strategic objectives, as well as our relentless commitment
to operational excellence and cost discipline. Notably, we achieved
volume growth and reported a double-digit pricing increase in our
heritage aggregates product line despite severe late winter weather
in many markets and significant rainfall in Texas. We view this
volume and pricing momentum as an indication of a more
construction-centric phase of economic recovery. Our first-quarter
results and outlook for the full year have led us to increase our
annual aggregates product line pricing guidance from an increase of
4% to 6% to an increase of 7% to 9% over 2014.
“Texas ranks second in the nation in job growth, supported by
increased construction activity and a diverse industrial base. Our
leading position in Texas’ major northern, central and southern
markets will allow us to capitalize on this trend as our customers’
backlogs across the construction end-use spectrum continue to
improve. Construction activity is led by the state Department of
Transportation’s nearly $9 billion fiscal year 2015 letting budget,
which includes multi-year projects and adds to an existing
infrastructure backlog. Texas also ranks first in nonresidential
starts, with $39 billion in the trailing-12 months, and second in
housing starts, which represented more than 15% of the nation’s
housing starts for the trailing-12 months through March.
“We continue to see indicators of further recovery in the
eastern half of the United States, where Martin Marietta has
leading market positions. North Carolina, Georgia and Florida all
rank in the top five in job growth and, similar to Texas,
construction activity is improving. Further, both North Carolina
and Georgia are among several states considering legislation to
expand infrastructure funding, supporting the importance of
transportation investment in spurring economic growth.
Additionally, Iowa enacted a $0.10 per gallon increase in the state
gas tax on March 1, 2015, to increase annual funding for
infrastructure projects by an estimated $215 million.
“The Cement and Magnesia Specialties businesses made significant
contributions to our quarterly earnings and cash generation. The
Cement business continues to benefit from a sold-out Texas market,
which is operating near current peak utilization from a domestic
capacity perspective. For the quarter, the business generated
earnings before interest, income taxes, depreciation, depletion and
amortization, or EBITDA, of $27.5 million. The Magnesia Specialties
business is operating at physical capacity and leveraged record net
sales to expand its gross margin (excluding freight and delivery
revenues) 160 basis points over the prior-year quarter.”
Mr. Nye continued, “In addition to operational excellence and
cost discipline, our performance reflects the execution of our
other core foundational pillars: world-class safety, ethical
conduct, sustainability, and customer satisfaction. Our employees
remain focused on these principles and delivered exceptional
first-quarter performance. We look forward to building on our
progress to further increase shareholder value.”
NOTABLE ITEMS FOR THE QUARTER (ALL COMPARISONS ARE VERSUS THE
PRIOR-YEAR FIRST QUARTER)
- Earnings per diluted share of $0.07
compared with a loss of $0.47 (which includes a $0.12 per diluted
share charge for business development expenses related to the TXI
acquisition)
- Consolidated net sales of $631.9
million compared with $379.7 million, an increase of
66%
- Aggregates product line volume increase
of 17.1%; aggregates product line price increase of 11.4%
- Heritage aggregates product line volume
increase of 7.0%, excluding shipments from 2014 divestitures from
prior-year quarter; reported heritage volume increase of 3.7%
- Heritage aggregates product line price
increase of 10.5%
- Cement business net sales of $96.6
million, earnings from operations of $12.2 million and EBITDA of
$27.5 million
- Magnesia Specialties net sales
of $58.8 million and earnings from operations of $17.8
million
- Heritage consolidated gross margin
(excluding freight and delivery revenues) of 12.5%, up 570 basis
points; consolidated gross margin (excluding freight and delivery
revenues) of 11.8%, up 500 basis points
- Consolidated selling, general and
administrative expenses (SG&A) of $49.5 million, or 7.8% of net
sales, a reduction of 120 basis points
- Consolidated earnings from operations
of $25.6 million compared with a loss from operations of $15.9
million (which includes $9.5 million of business development
expenses related to the TXI acquisition)
QUARTERLY OPERATING RESULTS (ALL COMPARISONS ARE VERSUS THE
PRIOR-YEAR FIRST QUARTER UNLESS NOTED OTHERWISE)
Aggregates Business
Heritage aggregates product line shipments reflect growth in all
end-use markets. Shipments to the infrastructure market comprised
40% of quarterly volumes and increased 8%. Growth was driven by
large projects in the Mid-America Group (notably in North Carolina
and Iowa) and the Southeast Group. Shipments in the West Group were
hampered by rainfall. The federal highway bill, Moving Ahead for
Progress in the 21st Century, or MAP-21, will expire on May 31,
2015. However, management anticipates the U.S. Congress will pass
another continuing resolution through the fall, while working
towards passage of a multi-year bill.
The nonresidential market represented 34% of quarterly heritage
aggregates product line shipments and increased slightly.
Diversified state economies have generated other nonresidential and
infrastructure projects to replace energy-related shipments
currently displaced by volatility in oil prices. Further, the
Company expects energy-related activity to remain strong, supported
by more than $100 billion of planned projects along the Gulf Coast,
including a significant portion in Texas. Nonresidential activity
varies significantly by state, with growth strongest in Texas and
California. The Dodge Momentum Index for March was 122.3. For the
first three months of 2015, the index was 12% higher than the
comparable period in 2014, signaling continued growth in
nonresidential activity.
The residential end-use market accounted for 15% of quarterly
heritage aggregates product line shipments, and volumes to this
market increased 4%. The overall rate of residential growth has
slowed compared with the last few years, in part due to a temporary
reduction in available building lot inventory in the Company’s
markets. Importantly though, subdivision development, which
consumes the majority of stone used in residential construction
activity, has increased in a number of states. Notably, Colorado,
Georgia, Florida and South Carolina all reported double-digit
growth in housing starts for the trailing-12 months through March.
The ChemRock/Rail market accounted for the remaining 11% of
heritage aggregates product line volumes and increased slightly,
led by higher ballast shipments. This growth reflects the
increasing investment in capacity expansion and maintenance by
major railroads.
Overall, heritage aggregates product line shipments increased
7.0%, excluding shipments from the third-quarter 2014 divestiture
of three operations from the prior-year quarter. The divestiture
included an Oklahoma quarry and two Dallas, Texas rail yards and
was required by the Department of Justice in the TXI acquisition.
Shipments from these divestitures continue to be reported in
heritage volumes in the prior-year quarter. Aggregates product line
shipments in the Mid-America Group increased 18.1%, and the
Southeast Group achieved an increase of 2.2%. The West Group
shipments were up slightly, excluding shipments from the divested
operations from the prior-year quarter. The reported variance for
the West Group is a 6.1% decline.
Heritage aggregates product line pricing represents growth in
all reportable groups, led by the 17.6% increase in the West Group.
The most significant improvement was achieved in South Texas. The
Southeast Group and Mid-America Group reported increases of 6.0%
and 3.2%, respectively.
The legacy TXI aggregates product line operations continue to
benefit from integration, which has resulted in expanded margins.
Inclusive of two small acquisitions completed during the first
quarter, these operations had net sales of $31.9 million and a
gross margin (excluding freight and delivery revenues) of
21.7%.
The heritage ready mixed concrete product line reported an 11%
increase in average selling price, which led to an 8% increase in
net sales and a 490-basis-point improvement in gross margin
(excluding freight and delivery revenues). Winter production
reflects increased costs for additives, which is passed along to
customers. The legacy TXI ready mixed concrete shipments and
profitability reflect the impact of rain in Texas. For the quarter,
these operations contributed $86 million of net sales. The hot
mixed asphalt product line reported a 3% increase in average
selling price and $10 million of net sales.
Weather adversely affected the aggregates product line total
production cost per ton shipped, which remained relatively flat.
Lower energy costs continue to benefit the cost structure.
The heritage Aggregates business gross margin (excluding freight
and delivery revenues) was 9.7%, an increase of 730 basis points.
The Southeast Group, which benefitted from recovery in Georgia and
improved performance by offshore operations, led with an increase
of 1,040 basis points. Incremental margin for the heritage
aggregates business was 76% and was led by the Mideast and
Southeast Divisions.
Magnesia Specialties Business
Magnesia Specialties continued to deliver strong performance and
generated first-quarter record net sales of $58.8 million.
First-quarter earnings from operations were $17.8 million compared
with $16.3 million.
Cement Business
The Cement business is benefitting from continued strength in
Texas markets, where demand exceeds local supply. The Portland
Cement Association, or PCA, forecasts continued supply/demand
imbalance in Texas over the next several years. For the quarter,
the business generated $96.6 million of net sales and $19.0 of
gross margin. The business incurred $5.4 million in planned cement
kiln maintenance costs, which are expected to be heaviest in the
third and fourth quarters. First-quarter operating results were
negatively affected by wet weather in Texas, which delayed some
shipments to the balance of the year. During the first quarter, the
Company announced price increases of $10 per ton in the Texas and
California markets effective April 1.
CONSOLIDATED OPERATING RESULTS
Consolidated SG&A was 7.8% of net sales compared with 9.0%
in the prior-year quarter. The reduction of 120 basis points
reflects the growth of net sales outpacing the increase in
SG&A, partially offset by higher pension expense. The Company
incurred acquisition-related expenses of $1.6 million, which is the
expected run rate for the next few quarters. Earnings from
operations for the quarter were $25.6 million compared with a loss
from operations of $15.9 million in the prior-year period.
The Company recorded an income tax benefit of $0.8 million for
the quarter, driven by discrete events, which include the exercise
of converted stock awards issued to former TXI personnel. Excluding
discrete items, the estimated effective income tax rate would have
been 31%, in line with annual guidance. For the year, the Company
expects to fully utilize allowable net operating loss carryforwards
of $363 million acquired with TXI.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the first quarter was
$35.1 million in 2015 compared with $6.6 million in 2014. The
increase is principally attributable to higher earnings before
depreciation, depletion and amortization expense, partially offset
by cash payments in 2015 for 2014 taxes.
At March 31, 2015, the ratio of consolidated debt to
consolidated EBITDA, as defined, for the trailing-12 months was 2.4
times, in compliance with the Company’s leverage covenant.
SHARE REPURCHASE PROGRAM
The Company is authorized to execute a share repurchase program
under which it may acquire up to 20 million shares of its
outstanding common stock. Future repurchases are expected to be
carried out through a variety of methods, which may include open
market purchases, privately negotiated transactions, block trades,
accelerated share purchase transactions, or any combination of such
methods. The Company expects to complete the repurchase program
over the next several years, though the actual timing of completion
will be based on an ongoing assessment of the capital needs of the
business, the market price of the Company’s common stock and
general market conditions. Share repurchases will be executed based
on then-current business and market factors, so the actual return
of capital in any single quarter may vary. The repurchase program
may be modified, suspended or discontinued by the Board at any time
without prior notice.
FULL-YEAR OUTLOOK
The Company is encouraged by positive trends in its business and
markets, notably:
- Nonresidential construction is expected
to increase in both the heavy industrial and commercial sectors.
The Dodge Momentum Index remains high and signals continued
growth.
- Energy-related economic activity,
including follow-on public and private construction activities in
the Company’s primary markets, is anticipated to remain
strong.
- Residential construction is expected to
continue to grow, driven by historically low levels of construction
activity over the previous several years, employment gains, low
mortgage rates, significant lot absorption, higher multi-family
rental rates and rising housing prices.
- For the public sector, authorized
highway funding from MAP-21 should remain stable compared with
2014. Additionally, state initiatives to finance infrastructure
projects, including support from TIFIA, are expected to grow and
continue to play an expanded role in public-sector activity.
Based on these trends and expectations, the Company anticipates
the following for the full year:
- Aggregates end-use markets compared to
2014 levels are as follows:
- Infrastructure market to increase
mid-single digits.
- Nonresidential market to increase in
the high-single digits.
- Residential market to experience a
double-digit increase.
- ChemRock/Rail market to remain
relatively flat.
- Aggregates product line shipments to
increase by 10% to 12% compared with 2014 levels.
- Heritage aggregates shipments to
increase 4% to 7%.
- Shipments from acquired TXI operations
to more than double, reflecting a full year of ownership.
- Aggregates product line pricing to
increase by 7% to 9% compared with 2014.
- Aggregates product line production cost
per ton shipped to decline slightly.
- Aggregates-related downstream product
lines to generate between $875 million and $925 million of net
sales and $65 million to $70 million of gross profit.
- Net sales for the Cement segment to be
between $475 million and $500 million, generating $120 million to
$130 million of gross profit.
- Net sales for the Magnesia Specialties
segment to be between $240 million and $250 million, generating $85
million to $90 million of gross profit.
- SG&A expenses as a percentage of
net sales to be less than 6.0%, despite an $18 million increase in
heritage pension costs that resulted from a lower discount
rate.
- Interest expense to approximate $75
million to $80 million.
- Estimated effective income tax rate to
approximate 31%, excluding discrete events.
- Consolidated EBITDA to range from $835
million to $875 million.
- Capital expenditures to approximate
$320 million, including $35 million of synergy-related capital and
$80 million for the continued development of the new Medina
limestone quarry outside of San Antonio. The Medina quarry is rail
connected and will be able to ship aggregates products to South
Texas, including Houston.
Mr. Nye concluded, “We are excited about the solid foundation we
have created and the transformational power of Martin Marietta’s
business model, which positions us to deliver substantial value to
shareholders going forward. The integration of TXI continues on
schedule and will, at a minimum, yield synergies in line with our
updated guidance. We will continue to operate the business with
rigorous discipline. The growing demand for building materials
should allow us to strengthen our balance sheet, increase our
financial flexibility and invest in our business, all while
returning significant value to our shareholders through our
repurchase program.”
RISKS TO OUTLOOK
The full-year outlook includes management’s assessment of the
likelihood of certain risks and uncertainties that will affect
performance. The most significant risks to the Company’s
performance will be Congress’ actions and timing surrounding
federal highway funding and uncertainty over the funding mechanism
for the Highway Trust Fund. Management currently expects Congress
to extend federal highway funding through continuing resolution
through the fall of 2015. Further, a decline in consumer confidence
may negatively impact investment in construction projects. While
both MAP-21 and TIFIA credit assistance are excluded from the U.S.
debt ceiling limit, this issue may have a significant impact on the
economy and, consequently, construction activity. Other risks and
uncertainties related to the Company’s future performance include,
but are not limited to: both price and volume, and 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; a
decline in nonresidential construction; a decline in energy-related
drilling activity resulting from a sustained period of low global
oil prices or changes in oil production patterns in response to
this decline and certain regulatory or other economic factors; a
slowdown in the residential construction recovery, or some
combination thereof; a reduction in economic activity in the
Company’s Midwest states resulting from reduced funding levels
provided by the Agricultural Act of 2014 and a reduction in capital
investment by the railroads; an increase in the cost of compliance
with governmental laws and regulations; unexpected equipment
failures, unscheduled maintenance, industrial accident or other
prolonged and/or significant disruption to our cement production
facilities; and the possibility that certain expected synergies and
operating efficiencies in connection with the TXI acquisition are
not realized within the expected time-frames or at all. Further,
increased highway construction funding pressures resulting from
either federal or state issues can affect profitability. If these
negatively affect transportation budgets more than in the past,
construction spending could be reduced. Cement is subject to
cyclical supply and demand and price fluctuations. The Magnesia
Specialties business essentially runs at capacity; therefore any
unplanned changes in costs or realignment of customers introduce
volatility to the earnings of this segment.
The Company’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
Company’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 and raw
material 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 Company’s long-haul distribution
network. The Cement business is also energy intensive and
fluctuations in the price of coal affects costs. The Magnesia
Specialties business is sensitive to changes in domestic steel
capacity utilization and the absolute price and fluctuations in the
cost of natural gas.
Transportation in the Company’s long-haul network, particularly
the supply of railcars and locomotive power and condition of rail
infrastructure to move trains, affects the Company’s ability to
efficiently transport aggregate into certain markets, most notably
Texas, Florida and the Gulf Coast. In addition, availability of
railcars and locomotives affects the Company’s ability to move
dolomitic lime, a key raw material for magnesia chemicals, to both
the Company’s plant in Manistee, Michigan, and customers. The
availability of trucks, drivers and railcars to transport the
Company’s product, particularly in markets experiencing high growth
and increased demand, is also a risk and pressures the associated
costs.
All of the Company’s businesses are 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. Hurricane activity in the
Atlantic Ocean and Gulf Coast generally is most active during the
third and fourth quarters.
Risks to the outlook also include shipment declines as a result
of economic events beyond the Company’s control. In addition to the
impact on nonresidential and residential construction, the Company
is exposed to risk in its estimated outlook from credit markets and
the availability of and interest cost related to its debt.
The Company’s future performance is also exposed to risks from
tax reform at the federal and state levels.
CONFERENCE CALL INFORMATION
The Company will discuss its first quarter earnings results on a
conference call and online web simulcast today (April 30, 2015).
The live broadcast of the Martin Marietta conference call will
begin at 2:00 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
Company’s website. Additionally, the Company has posted
supplemental financial information related to its first-quarter
performance on its website.
For those investors without online web access, the conference
call may also be accessed by calling (970) 315-0423,
confirmation number 25543184.
Martin Marietta, an American-based company and a member of the
S&P 500 Index, is a leading supplier of aggregates and heavy
building materials, with operations spanning 32 states, Canada and
the Caribbean. Dedicated teams at Martin Marietta supply the
resources for the roads, sidewalks and foundations on which we
live. Martin Marietta's Magnesia Specialties business provides a
full range of magnesium oxide, magnesium hydroxide and dolomitic
lime products. For more information, visit www.martinmarietta.com
or www.magnesiaspecialties.com.
If you are interested in Martin Marietta Materials, Inc. stock,
management recommends that, at a minimum, you read the Company’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
Company’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 Company’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 Company’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 Company 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 to 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 Company currently believes could cause actual
results to differ materially from the forward-looking statements in
this press release include, but are not limited to, Congress’
actions and timing surrounding federal highway funding and
uncertainty over the funding mechanism for the Highway Trust Fund;
the performance of the United States economy and the resolution and
impact of the debt ceiling and sequestration issues; widespread
decline in aggregates pricing; the history of both cement and ready
mixed concrete, to be subject to significant changes in supply,
demand and price; the termination, capping and/or reduction of the
federal and/or state gasoline tax(es) or other revenue related to
infrastructure construction; the level and timing of federal and
state transportation funding, most particularly in Texas, North
Carolina, 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 Company serves; a
reduction in defense spending, and the subsequent impact on
construction activity on or near military bases; a decline in the
commercial component of the nonresidential construction market,
notably office and retail space; a slowdown in energy-related
drilling activity, particularly in Texas; a slowdown in residential
construction recovery; a reduction in construction activity and
related shipments due to a decline in funding under the domestic
farm bill; 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 Company; the volatility of fuel costs,
particularly diesel fuel, and the impact on the cost of other
consumables, namely steel, explosives, tires and conveyor belts,
and with respect to the Specialty Products business, natural gas;
continued increases in the cost of other repair and supply parts;
unexpected equipment failures, unscheduled maintenance, industrial
accident or other prolonged and/or significant disruption to cement
production facilities; increasing governmental regulation,
including environmental laws; transportation availability, notably
the availability of railcars and locomotive power to move trains to
supply the Company’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 of trucks and licensed drivers for transport of our
materials, particularly in areas with significant energy-related
activity, such as Texas and Colorado; availability and cost of
construction equipment in the United States; weakening in the steel
industry markets served by the Company’s dolomitic lime products;
proper functioning of information technology and automated
operating systems to manage or support operations; 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 Company’s leverage ratio debt covenant; changes in tax
laws, the interpretation of such laws and/or administrative
practices that would increase the Company’s tax rate; violation of
the Company’s debt covenant if price and/or volumes return to
previous levels of instability; downward pressure on the Company’s
common stock price and its impact on goodwill impairment
evaluations; reduction of the Company’s credit rating to
non-investment grade resulting from strategic acquisitions; and
other risk factors listed from time to time found in the Company’s
filings with the SEC. Other factors besides those listed here may
also adversely affect the Company, and may be material to the
Company. The Company 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 March 31,
2015 2014 Net sales $ 631.9 $ 379.7
Freight and delivery revenues 59.5 49.0
Total revenues 691.4 428.7 Cost
of sales 557.6 353.9 Freight and delivery costs 59.5
49.0 Total cost of revenues 617.1
402.9 Gross profit 74.3 25.8 Selling, general
and administrative expenses 49.5 34.2 Acquisition-related expenses,
net 1.6 9.5 Other operating (income), net (2.4 ) (2.0
) Earnings (Loss) from operations 25.6 (15.9 ) Interest
expense 19.3 12.2 Other nonoperating expenses, net 0.9
3.5 Earnings (Loss) from continuing operations
before taxes on income 5.4 (31.6 ) Income tax benefit (0.8 )
(8.5 ) Earnings (Loss) from continuing operations 6.2 (23.1
) Discontinued operations, net of related income taxes
- - Consolidated net earnings
(loss) 6.2 (23.1 ) Less: Net earnings (loss) attributable to
noncontrolling interests 0.1 (1.5 ) Net
earnings (loss) attributable to Martin Marietta Materials, Inc. $
6.1 $ (21.6 ) Net earnings (loss) per common
share: Basic from continuing operations attributable to common
shareholders $ 0.07 $ (0.47 ) Discontinued operations attributable
to common shareholders - - $ 0.07
$ (0.47 ) Diluted from continuing operations
attributable to common shareholders $ 0.07 $ (0.47 ) Discontinued
operations attributable to common shareholders -
- $ 0.07 $ (0.47 ) Dividends per common
share $ 0.40 $ 0.40 Average number of common
shares outstanding: Basic 67.4 46.3
Diluted 67.7 46.3
MARTIN MARIETTA MATERIALS, INC. Unaudited Financial
Highlights (In millions)
Three
Months Ended March 31, 2015
2014 Net sales: Aggregates Business: Mid-America Group $
129.7 $ 106.5 Southeast Group 59.7 55.4 West Group 287.1
160.4 Total Aggregates Business 476.5 322.3
Cement 96.6 - Magnesia Specialties 58.8 57.4
Total $ 631.9 $ 379.7 Gross profit
(loss): Aggregates Business: Mid-America Group $ 7.1 $ (1.5 )
Southeast Group 3.1 (2.9 ) West Group 28.5
12.0 Total Aggregates Business 38.7 7.6 Cement 19.0 -
Magnesia Specialties 20.2 18.8 Corporate (3.6 ) (0.6
) Total $ 74.3 $ 25.8 Selling, general and
administrative expenses: Aggregates Business: Mid-America Group $
12.9 $ 13.0 Southeast Group 4.3 4.2 West Group 15.7
10.9 Total Aggregates Business 32.9 28.1 Cement 6.7 -
Magnesia Specialties 2.4 2.4 Corporate 7.5 3.7
Total $ 49.5 $ 34.2 Earnings (Loss)
from operations: Aggregates Business: Mid-America Group $ (4.2 ) $
(11.8 ) Southeast Group (1.5 ) (6.1 ) West Group 14.5
2.1 Total Aggregates Business 8.8 (15.8 ) Cement 12.2
- Magnesia Specialties 17.8 16.3 Corporate (13.2 )
(16.4 ) Total $ 25.6 $ (15.9 )
MARTIN
MARIETTA MATERIALS, INC. Unaudited Financial Highlights
(In millions)
Three Months Ended
March 31, 2015 2014 Net
sales by product line: Heritage: Aggregates Business: Aggregates $
300.3 $ 263.9 Asphalt 9.6 10.5 Ready Mixed Concrete 41.2 38.0 Road
Paving 7.1 9.9 Total Aggregates
Business 358.2 322.3 Magnesia Specialties Business 58.8 57.4
Acquisition: Aggregates Business: Aggregates 31.9 - Ready Mixed
Concrete 86.4 - Total Aggregates
Business 118.3 - Cement Business 96.6 -
Total $ 631.9 $ 379.7 Gross profit (loss) by
product line: Heritage: Aggregates Business: Aggregates $ 34.5 $
10.1 Asphalt (1.5 ) (1.4 ) Ready Mixed Concrete 5.2 2.9 Road Paving
(3.3 ) (4.0 ) Total Aggregates Business 34.9 7.6
Magnesia Specialties Business 20.2 18.8 Corporate (2.8 ) (0.6 )
Acquisition: Aggregates Business: Aggregates 6.9 - Ready Mixed
Concrete (3.1 ) - Total Aggregates Business
3.8 - Cement Business 19.0 - Corporate (0.8 ) -
Total $ 74.3 $ 25.8 Depreciation
$ 59.8 $ 40.1 Depletion 3.1 1.1 Amortization 4.4
1.3 $ 67.3 $ 42.5
MARTIN MARIETTA MATERIALS, INC. Unaudited Financial
Highlights (Dollars in millions)
Three Months Ended March 31
HeritageMartinMarietta(1)
AcquiredOperations(2)
NonrecurringTXITransactionItems(3)
Consolidated 2015 2015
2015 2015 Net sales $ 417.0 $ 214.9 $ - $ 631.9
Freight and delivery revenues 48.6 10.9
- 59.5 Total revenues 465.6
225.8 - 691.4 Cost of
sales 364.7 192.9 - 557.6 Freight and delivery costs 48.6
10.9 - 59.5 Total cost of
revenues 413.3 203.8 -
617.1 Gross profit 52.3 22.0 - 74.3
Selling, general and administrative
expenses(4)
36.7
12.8 - 49.5 Acquisition-related expenses, net 0.2 - 1.4 1.6 Other
operating (income) expense, net (2.5 ) 0.1 -
(2.4 ) Earnings (Loss) from operations $ 17.9
$ 9.1 $ (1.4 ) $ 25.6
(1) Heritage Martin Marietta is
consolidated 2015 results excluding the operating results of
acquired TXI locations and two small acquisitions closed in the
first quarter of 2015 and nonrecurring items directly attributable
to the TXI acquisition.
(2) Acquired operations reflect the
operating results of all acquired TXI locations and two small
acquisitions closed in the first quarter.
(3) Nonrecurring TXI transaction items are
attributable to the TXI acquisition and reflect integration
expenses.
(4) Selling, general and administrative
expenses for acquired operations include the allocation of $1.4
million of Corporate overhead.
Three Months Ended
March 31
HeritageMartinMarietta
HeritageMartinMarietta
Variance(5)-Favorable(Unfavorable)
2015 2014 Net sales $ 417.0 $ 379.7 $ 37.3
Freight and delivery revenues 48.6 49.0
(0.4 ) Total revenues 465.6 428.7
36.9 Cost of sales 364.7 353.9 (10.8 )
Freight and delivery costs 48.6 49.0
0.4 Total cost of revenues 413.3
402.9 (10.4 ) Gross profit 52.3 25.8 26.5
Selling, general and administrative
expenses
36.7
34.2 (2.5 ) Acquisition-related expenses, net 0.2 9.5 9.3 Other
operating (income) & expenses, net (2.5 ) (2.0 )
0.5 Earnings (Loss) from operations $ 17.9 $
(15.9 ) $ 33.8
(5) The variance reflects the change
between Heritage Martin Marietta 2015 and Heritage Martin Marietta
2014.
MARTIN MARIETTA MATERIALS, INC. Unaudited
Financial Highlights - West Group (Dollars in millions)
Three Months Ended March 31
Heritage West
AcquiredOperations
West
2015(1)
2015(2)
2015
Net sales $ 168.9 $ 118.2 $ 287.1 Freight and delivery revenues
28.1 5.3 33.4 Total revenues
197.0 123.5 320.5 Cost of
sales 144.4 114.2 258.6 Freight and delivery costs 28.1
5.3 33.4 Total cost of revenues
172.5 119.5 292.0 Gross profit $ 24.5
$ 4.0 $ 28.5
(1) Heritage West 2015 results reflect the
2015 West results less the operating results of acquired TXI
locations.
(2) Acquired operations reflect the
operating results for all acquired TXI aggregates and ready mixed
concrete operations reported in the West Group and one small
acquisition closed in the first quarter of 2015.
Three Months Ended
March 31
Heritage West West
Variance(3)-Favorable(Unfavorable)
2015 2014 Net sales $ 168.9 $ 160.4 $ 8.5
Freight and delivery revenues 28.1 30.3 (2.2 )
Total revenues 197.0 190.7 6.3
Cost of sales 144.4 148.4 4.0 Freight and delivery costs
28.1 30.3 2.2 Total cost of revenues
172.5 178.7 6.2 Gross profit $ 24.5 $ 12.0 $
12.5
(3) The variance reflects the change
between Heritage West 2015 and West 2014.
MARTIN MARIETTA MATERIALS, INC. Balance
Sheet Data (In millions)
March 31, December 31, March 31,
2015 2014 2014
(Unaudited)
(Audited)
(Unaudited)
ASSETS Cash and cash equivalents $ 56.4 $ 108.7 $ 35.8 Accounts
receivable, net 381.4 421.0 242.6 Inventories, net 505.0 484.9
354.7 Other current assets 338.9 274.2 125.1 Property, plant and
equipment, net 3,365.1 3,402.8 1,793.5 Intangible assets, net
2,663.4 2,664.0 664.4 Other noncurrent assets 107.4 108.8 39.2
Total assets $ 7,417.6 $ 7,464.4 $ 3,255.3
LIABILITIES AND EQUITY Current maturities of long-term debt and
short-term facilities $ 14.4 $ 14.3 $ 12.4 Other current
liabilities 329.2 382.3 181.4 Long-term debt (excluding current
maturities) 1,566.6 1,571.1 1,055.5 Other noncurrent liabilities
1,165.2 1,144.0 461.7 Total equity 4,342.2 4,352.7
1,544.3 Total liabilities and equity $ 7,417.6 $ 7,464.4 $
3,255.3
MARTIN MARIETTA MATERIALS, INC.
Unaudited Statements of Cash Flows (In millions)
Three Months Ended March 31,
2015 2014 Operating activities:
Consolidated net earnings (loss) $ 6.2 $ (23.1 ) Adjustments to
reconcile consolidated net earnings (loss) to net cash provided by
operating activities: Depreciation, depletion and amortization 67.3
42.5 Stock-based compensation expense 2.9 1.4 Gains on divestitures
and sales of assets (1.6 ) (1.1 ) Deferred income taxes 27.8 (5.1 )
Excess tax benefits from stock-based compensation (0.1 ) (0.6 )
Other items, net 1.1 1.2 Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net 40.0 2.8 Inventories, net (19.1 ) (7.4 )
Accounts payable (20.3 ) (4.8 ) Other assets and liabilities, net
(69.1 ) 0.8 Net cash provided by
operating activities 35.1 6.6
Investing activities: Additions to property, plant and equipment
(56.1 ) (36.9 ) Acquisitions, net (10.6 ) - Proceeds from
divestitures and sales of assets 1.5 1.4 Repayments from affiliate
1.8 - Net cash used for
investing activities (63.4 ) (35.5 )
Borrowings of long-term debt - 60.0 Repayments of long-term debt
(4.7 ) (23.1 ) Payments on capital leases (0.8 ) (0.5 ) Change in
bank overdraft (0.2 ) (2.6 ) Dividends paid (28.4 ) (18.6 ) Excess
tax benefits from stock-based compensation 0.1 0.6 Issuances of
common stock 10.0 6.5 Net cash
(used for) provided by financing activities (24.0 )
22.3 Net decrease in cash and cash equivalents (52.3
) (6.6 ) Cash and cash equivalents, beginning of period
108.7 42.4 Cash and cash equivalents,
end of period $ 56.4 $ 35.8
MARTIN
MARIETTA MATERIALS, INC. Unaudited Operational
Highlights Three Months
Ended March 31, 2015 Volume
Pricing Volume/Pricing Variance (1)
Heritage Aggregates Product Line: (2) Mid-America
Group 18.1 % 3.2 % Southeast Group 2.2 % 6.0 % West Group (6.1 %)
17.6 % Heritage Aggregates Operations 3.7 % 10.5 % Aggregates
Product Line (3) 17.1 % 11.4 %
Three Months Ended
March 31, Shipments (tons in thousands)
2015
2014 Heritage Aggregates Product Line: (2)
Mid-America Group 10,101 8,550 Southeast Group 4,090 4,001 West
Group 11,332 12,068 Heritage Aggregates Operations
25,523 24,619 Acquisitions 3,313 - Aggregates Product
Line (3) 28,836 24,619 (1) Volume/pricing
variances reflect the percentage increase (decrease) from the
comparable period in the prior year.
(2) Heritage Aggregates Product Line and
Heritage Aggregates Operations exclude volume and pricing data for
acquisitions that have not been included in prior-year operations
for the comparable period.
(3) Aggregates Product Line includes acquisitions from the
date of acquisition and divestitures through the date of disposal.
Three Months Ended March
31, 2015 2014 Heritage:
Aggregates tons - external customers 24,632 23,719 Internal
aggregates tons used in other product lines 891 900
Total aggregates tons 25,523 24,619 Asphalt
tons - external customers 213 248 Internal asphalt tons used in
road paving business 57 78 Total asphalt tons
270 326 Ready Mixed Concrete - cubic yards 399
407
Acquisitions: Aggregates tons - external
customers 2,500 - Internal aggregates tons used in other product
lines 813 - Total aggregates tons 3,313
- Ready Mixed Concrete - cubic yards(4) 964 -
Cement tons-external customers 1,025 - Internal cement tons
used in other product lines 192 - Total Cement
tons(5) 1,217 -
Average unit sales
price by product line (including internal sales):
Heritage: Aggregates (per ton) $ 11.96 $ 10.82 Asphalt (per
ton) $ 43.65 $ 42.26 Ready Mixed Concrete (per cubic yard) $ 98.88
$ 89.27 Acquisitions: Aggregates (per ton) $ 12.83 $ - Ready
Mixed Concrete (per cubic yard)(4) $ 88.75 $ - Cement (per ton)(5)
$ 93.41 $ -
(4) Ready mix operations acquired by
Martin Marietta on July 1, 2014. For comparative purposes, for the
three months ended February 28, 2014, TXI shipped 1,085 cubic yards
of ready mixed concrete from these operations. Assuming consistent
classification of products included in ready mixed concrete sales,
average selling price for the quarter ended March 31, 2015 was 3.2%
higher compared with the three months ended February 28, 2014.
(5) Cement operations acquired by Martin
Marietta on July 1, 2014. For comparative purposes, for the quarter
ended March 31, 2015, cement tons shipped or used in other product
lines increased 6.7% compared with the three months ended February
28, 2014.
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 Company presents these ratios calculated
based on net sales, as it is consistent with the basis by which
management reviews the Company's operating results. Further,
management believes it is consistent with the basis by which
investors analyze the Company'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 ended March 31, 2015 and 2014, 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 Accounting Principles
Three Months EndedMarch
31,
2015 2014 Gross profit $ 74.3 $
25.8 Total revenues $ 691.4 $ 428.7 Gross
margin 10.7 % 6.0 %
Three Months Ended
Gross Margin Excluding Freight and Delivery Revenues
March 31,
2015 2014 Gross profit $ 74.3 $ 25.8
Total revenues $ 691.4 $ 428.7 Less: Freight and delivery revenues
(59.5 ) (49.0 ) Net sales $ 631.9 $ 379.7
Gross margin excluding freight and delivery revenues
11.8 % 6.8 %
Operating Margin in Accordance with
Generally Accepted Accounting Principles
Three Months EndedMarch
31,
2015 2014 Earnings (Loss) from operations $ 25.6
$ (15.9 ) Total revenues $ 691.4 $ 428.7
Operating margin 3.7 % (3.7 %)
Three Months
Ended Operating Margin Excluding Freight and Delivery
Revenues
March 31,
2015 2014 Earnings (Loss) from operations $ 25.6
$ (15.9 ) Total revenues $ 691.4 $ 428.7 Less: Freight and
delivery revenues (59.5 ) (49.0 ) Net sales $ 631.9
$ 379.7 Operating margin excluding freight and
delivery revenues 4.0 % (4.2 %)
The Company presents the earnings per
diluted share impact of acquisition-related expenses, net, related
to the TXI acquisition, which represents a non-GAAP measure.
It is presented for investors and analysts
to evaluate and forecast the Company's ongoing financial results,
as acquisition-related expenses related to TXI are
nonrecurring.
The following shows the calculation of
the impact of acquisition-related expenses, net, related to the
combination with TXI on the loss per diluted share for the quarter
ended March 31, 2014:
Acquisition-related expenses, net, related to the business
combination with TXI $ 9.5 Income tax benefit (3.8 )
After-tax impact of acquisition-related expenses, net, related to
the business combination with TXI $ 5.7 Diluted average
number of common shares outstanding 46.3 Per diluted
share impact of acquisition-related expenses, net, related to the
business combination with TXI $ (0.12 )
The Company presents the increase in
heritage aggregates product line shipments for the West Group and
the Aggregates business excluding volumes from the three operations
that were divested in the third quarter of 2014 from the quarter
ended March 31, 2014. These non-GAAP measures are presented for
investors and analysts to have a more comparable analysis of
shipment trends based on the operations owned by the Company for
the quarter ended March 31, 2015. The following shows the
calculation of the heritage aggregates product line shipments for
the West Group and the Aggregates business for the quarter ended
March 31, 2014, excluding shipments from the operations divested in
the third quarter of 2014 (tons in thousands).
West Group Aggregates Business Reported heritage
aggregates product line shipments for quarter ended March 31, 2014
12,068 24,619 Less: aggregates product line shipments for three
operations divested in third quarter of 2014 (759 )
(759 ) Adjusted heritage aggregates product line shipments for
quarter ended March 31, 2014 11,309 23,860
Reported heritage aggregates product line shipments for
quarter ended March 31, 2015 11,332 25,523
Increase in 2015 heritage aggregates product line shipments
over adjusted shipments for quarter ended March 31, 2014 0.2
% 7.0 %
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-12 months
is a covenant under the Company's revolving credit facility, term
loan facility and accounts receivable securitization facility.
Under the terms of these agreements, as amended, the Company's
ratio of Consolidated Debt-to-Consolidated EBITDA as defined, for
the trailing-12 months can not exceed 3.50 times as of March 31,
2015, 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-12 months at March 31, 2015. For supporting calculations,
refer to Company's website at
www.martinmarietta.com.
Twelve-Month Period April 1, 2014
to March 31, 2015 Earnings from continuing operations
attributable to Martin Marietta Materials, Inc. $ 183.4 Add back:
Interest expense 73.2 Income tax expense 102.4 Depreciation,
depletion and amortization expense 244.2 Stock-based compensation
expense 10.5 TXI acquisition-related expenses, net, 34.4 Deduct:
Interest income (0.1 ) TXI EBITDA pre-acquisition (April 1,
2014 - June 30, 2014) 12.9 Consolidated EBITDA, as
defined $ 661.0 Consolidated Debt, including debt for
which the Company is a co-borrower, at March 31, 2015 $ 1,606.7
Consolidated Debt-to-Consolidated EBITDA,
as defined, at March 31, 2015 for the trailing twelve-month
EBITDA
2.43 times
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 Company's website at
www.martinmarietta.com. EBITDA is as follows for the
three months ended March 31, 2015 and 2014.
Three Months Ended March 31,
2015 2014 Consolidated Earnings Before
Interest, Income Taxes, Depreciation, Depletion and Amortization
(EBITDA) $ 91.2 $ 24.2
A Reconciliation of Net Earnings
(Loss) Attributable to Martin Marietta Materials, Inc. to
Consolidated EBITDA is as follows: Three Months Ended
March 31, 2015 2014 Net Earnings (Loss)
Attributable to Martin Marietta Materials, Inc. $ 6.2 $ (21.6) Add
back: Interest Expense 19.3 12.2 Income Tax Benefit for Controlling
Interests (0.8) (8.4) Depreciation, Depletion and Amortization
Expense 66.5 42.0 Consolidated EBITDA $ 91.2 $ 24.2
A
reconciliation of earnings before taxes on income to EBITDA for the
Cement business for the quarter ended March 31, 2015 is as
follows: Cement Business Earnings Before
Taxes On Income $ 12.2 Add back: Interest Expense 0.1 Depreciation,
Depletion and Amortization Expense 15.2 EBITDA $ 27.5
MARTIN MARIETTA MATERIALS, INC. Non-GAAP Financial
Measures (continued) (Dollars in millions)
Incremental gross margin (excluding
freight and delivery revenues) is a non-GAAP measure. The
Corporation presents this metric to enhance analysts' and
investors' understanding of the impact of increased shipments on
profitability. Due to the significant amount of fixed costs, gross
margin (excluding freight and delivery revenues) typically
increases at a disproportionate rate in periods of increased
shipments. The following shows the calculation of incremental gross
margin (excluding freight and delivery revenues) for the heritage
Aggregates business for the quarter ended March 31, 2015:
Heritage Aggregates business net sales for the
quarter ended March 31, 2015 $ 358.2 Heritage Aggregates business
net sales for the quarter ended March 31, 2014 322.3
Incremental net sales $ 35.9 Heritage Aggregates
business gross profit for the quarter ended March 31, 2015 $ 34.9
Heritage Aggregates business gross profit for the quarter ended
March 31, 2014 7.6 Incremental gross profit $ 27.3
Incremental gross margin (excluding freight and
delivery revenues) for the quarter ended March 31, 2015 76 %
MLM-E
Martin Marietta Materials, Inc.Anne H. Lloyd,
919-783-4660Executive Vice President and Chief Financial
Officerwww.martinmarietta.com
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