First-Quarter Results and Business Trends
Consistent with Management’s Expectations
Martin Marietta Materials, Inc. (NYSE:MLM) today reported results
for the first quarter ended March 31, 2018.
Highlights Include the Following
Results:
|
Quarter ended March 31, |
($ in millions, except per share) |
2018 |
|
2017 |
Total
revenues 1 |
$ |
802.0 |
|
$ |
843.9 |
|
Products and services revenues 2 |
$ |
753.3 |
|
$ |
792.3 |
|
Building Materials business products and services revenues |
$ |
688.4 |
|
$ |
728.0 |
|
Magnesia Specialties business products and services revenues
|
$ |
64.9 |
|
$ |
64.3 |
|
Gross
profit |
$ |
110.4 |
|
$ |
147.1 |
|
Earnings from operations |
$ |
39.1 |
|
$ |
77.2 |
|
Net
earnings attributable to Martin Marietta |
$ |
10.0 |
|
$ |
42.3 |
|
EBITDA 3 |
$ |
123.3 |
|
$ |
147.7 |
|
Earnings per diluted share |
$ |
0.16 |
|
$ |
0.67 |
|
- Total revenues include the sales of products and services to
customers (net of any discounts or allowances) and freight
revenues.
- Products and services revenues include the sales of aggregates,
cement, ready mixed concrete, asphalt and Magnesia Specialties
products and paving services to customers and exclude related
freight revenues.
- See appendix to this earnings release for a reconciliation to
net earnings attributable to Martin Marietta.
Ward Nye, Chairman, President and CEO
of Martin Marietta, stated, “As we start the year, we are
encouraged by ongoing customer optimism and our first-quarter
results, both of which are consistent with our expectations.
Additionally, while we remain on track to achieve our original 2018
guidance, we are updating and increasing that outlook to reflect
the contribution we expect from our acquisition of Bluegrass
Materials Company.
“We remain confident that underlying market
fundamentals, including positive employment and population trends
across our geographic footprint, will stimulate continued growth in
private construction activity and provide an impetus for additional
infrastructure demand as the current broad-based recovery
continues. Underlying demand trends, coupled with continued
pricing growth for all products and segments, reinforce our
full-year 2018 outlook as construction activity accelerates during
the balance of the year. Importantly, throughout the quarter,
we saw strong shipment volumes on days not impacted by typical
winter weather.
“Our confidence is bolstered by the recent
completion of our acquisition of Bluegrass and the addition of a
talented group of new employees to the Martin Marietta team.
The acquisition, the second largest in our history, strengthens our
aggregates-led position in high-growth southeastern and
Mid-Atlantic regions, particularly in Georgia and Maryland, and is
consistent with our long-term strategic growth plan. We
worked collaboratively with the U.S. Department of Justice (DOJ) as
it completed its review of the transaction and, as expected, the
two quarries required to be divested do not impact the overall
value or strategic rationale for the transaction. I want to
thank our collective employees for their contributions to
successfully completing this acquisition. Working together,
we will expeditiously deliver significant value from our enhanced
business profile. As we integrate the Bluegrass operations
and realize synergies, we remain committed to world-class safety
standards, diligent cost discipline, operational excellence,
customer service and prudent capital allocation. ”
Mr. Nye concluded, “We believe the United States
is in the midst of a steady, multi-year construction
recovery. Our leading positions in attractive, high-growth
markets allow us to benefit from anticipated increased demand for
both public and private construction activity in 2018 and
beyond. Long term, we remain focused on elevating Martin
Marietta from an aggregates industry leader to a globally
recognized world-class organization, allowing us to further enhance
shareholder value.”
Operating Results(All comparisons are versus the
prior-year quarter unless noted otherwise)
|
Quarter ended March 31, 2018 |
($ in millions) |
Revenues |
|
Gross profit (loss) |
|
Gross margin |
Building
Materials business: |
|
|
|
Products and services: |
|
|
|
Aggregates |
$ |
425.0 |
|
$ |
53.0 |
|
12.5% |
|
Cement |
|
89.2 |
|
|
23.7 |
|
26.6% |
|
Ready
mixed concrete |
|
218.5 |
|
|
15.6 |
|
7.2% |
|
Asphalt
and paving |
|
16.4 |
|
|
(7.6) |
|
(46.7%) |
|
Less: interproduct revenues |
|
(60.7) |
|
|
--- |
|
--- |
|
Products
and services |
|
688.4 |
|
|
84.7 |
|
12.3% |
|
Freight |
|
44.3 |
|
|
(0.1) |
|
NM |
|
Total Building Materials business |
|
732.7 |
|
|
84.6 |
|
11.5% |
|
Magnesia
Specialties business: |
|
|
|
Products
and services |
|
64.9 |
|
|
25.1 |
|
38.6% |
|
Freight |
|
4.4 |
|
|
(1.2) |
|
NM |
|
Total
Magnesia Specialties business
|
|
69.3 |
|
|
23.9 |
|
34.5% |
|
Corporate |
|
--- |
|
|
1.9 |
|
NM |
|
Total |
$ |
802.0 |
|
$ |
110.4 |
|
13.8% |
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2017 |
($ in millions) |
Revenues |
|
Gross profit (loss) |
|
Gross margin |
Building Materials business: |
|
|
|
Products
and services: |
|
|
|
Aggregates |
$ |
451.1 |
|
$ |
78.9 |
|
17.5% |
|
Cement |
|
93.6 |
|
|
30.8 |
|
32.9% |
|
Ready mixed concrete |
|
222.3 |
|
|
19.8 |
|
8.9% |
|
Asphalt and paving |
|
21.7 |
|
|
(4.7) |
|
(21.8%) |
|
Less: interproduct revenues |
|
(60.7) |
|
|
--- |
|
--- |
|
Products
and services |
|
728.0 |
|
|
124.8 |
|
17.1% |
|
Freight |
|
47.3 |
|
|
0.4 |
|
NM |
|
Total Building Materials business
|
|
775.3 |
|
|
125.2 |
|
16.1% |
|
Magnesia Specialties business: |
|
|
|
Products
and services |
|
64.3 |
|
|
23.3 |
|
36.3% |
|
Freight |
|
4.3 |
|
|
(1.0) |
|
NM |
|
Total Magnesia Specialties business |
|
68.6 |
|
|
22.3 |
|
32.5% |
|
Corporate |
|
--- |
|
|
(0.4) |
|
NM |
|
Total |
$ |
843.9 |
|
$ |
147.1 |
|
17.4% |
|
|
|
|
|
|
|
|
|
|
Building Materials Business
Aggregates
As contemplated in the Company’s guidance
entering the year, first-quarter aggregates shipments returned to
levels more in-line with historical trends and patterns.
Winter weather traditionally limits the ability of outdoor
contractors to perform work during the winter months.
Accordingly, first-quarter operating results compare unfavorably to
the first quarters of 2017 and 2016, when the Company benefitted
from back-to-back unseasonably favorable weather conditions.
For the quarter, aggregates product revenues decreased 5.8 percent,
reflecting a 7.9 percent decline in shipments. Aggregates
pricing improved 2.3 percent.
The Mid-America Group generated aggregates
pricing growth of 4.9 percent, driven by continued price discipline
and favorable product mix. Pricing improved 2.2 percent for
the Southeast Group as winter weather and poor railroad performance
constrained long-haul shipments to distribution yards in Florida
and Georgia. Product mix, reduced commercial rail-shipped
volumes and various competitive dynamics in portions of Texas
offset robust pricing growth in Colorado, resulting in a modest
price increase for the West Group. Traditional cold and
wet conditions, coupled with railroad inefficiencies, also
contributed to the 12.4 percent shipment decline for the Southeast
Group and the 4.7 percent decline for the West Group.
Mid-America Group shipments decreased 9.9 percent.
First-quarter aggregates shipments by end use
are as follows:
Infrastructure Market
- Aggregates shipments to the infrastructure market decreased 11
percent as precipitation and cold temperatures delayed the start to
the construction season compared with the past few years. As state
Departments of Transportation (DOTs) and contractors continue to
address labor constraints and the construction industry benefits
from further regulatory reform, management remains confident that
infrastructure demand will improve from the funding provided by the
Fixing America’s Surface Transportation Act (FAST Act) and numerous
state and local transportation initiatives. Overall, aggregates
shipments to the infrastructure market comprised 36 percent of
first-quarter aggregates volumes, well below the Company’s most
recent five-year average of 43 percent.
Nonresidential Market
- Aggregates shipments to the nonresidential market decreased 10
percent overall, driven by weather-impacted challenges in office
and retail construction activity. Notably, the Mideast
Division, and more specifically, the Ohio District, reported strong
heavy industrial growth, as a large pipeline project commenced
construction after obtaining long-awaited federal clearance.
Continued project approvals, coupled with higher oil prices,
underpin management’s expectation that the next wave of large
energy-sector projects, particularly along the Gulf Coast, should
notably contribute to increased aggregates consumption. The
nonresidential market represented 31 percent of first-quarter
aggregates shipments.
Residential Market
- Aggregates shipments to the residential market, which tends to
be the least weather-constrained end use, were flat for the first
quarter. The outlook for residential construction remains robust
across the Company’s geographic footprint, driven by favorable
demographics, job growth, land availability and efficient
permitting. Texas, Florida, North Carolina, Georgia, Colorado
and South Carolina, key geographies for the Building Materials
business, comprised six of the top ten states for growth in
single-family housing unit starts for the trailing twelve months
ended March 2018. The residential market accounted for 24
percent of first-quarter aggregates shipments.
ChemRock/Rail Market
- Aggregates shipments to the ChemRock/Rail market declined 11
percent. Reduced ballast shipments reflect weather constraints and
the timing of certain purchases by East Coast railroads in the
prior-year quarter. Additionally, in line with expectations,
agricultural lime shipments declined 8 percent, driven by more
typical winter precipitation. The ChemRock/Rail market accounted
for the remaining 9 percent of first-quarter aggregates
shipments.
Aggregates product gross margin was 12.5
percent, consistent with expectations, reflecting reduced operating
leverage and increased diesel costs.
Cement
Cement product revenues for the first quarter
decreased 4.7 percent as pricing growth of 4.2 percent was offset
by an 8.8 percent volume decline. First-quarter shipments reflect
abnormal precipitation in February, particularly in Dallas/Fort
Worth, and extended maintenance outages at the Midlothian plant.
These factors adversely impacted shipment and production levels and
contributed to the 630-basis-point reduction in product gross
margin to 26.6 percent.
Downstream businesses
Ready mixed concrete shipments decreased 2.3
percent, driven primarily by more typical winter weather in
Colorado. Overall, ready mixed concrete prices increased 0.5
percent for the quarter. Average selling prices in Colorado
improved 4.3 percent; however, seasonality, lower energy-sector
shipments and geographic mix limited Texas ready mixed concrete
pricing opportunities. A return to more normal winter weather
in Colorado contributed to the 30.7 percent decrease in asphalt
shipments, while, rising raw material costs allowed for favorable
pricing during the quarter.
Magnesia Specialties
Business
Magnesia Specialties first-quarter products and
services revenues increased slightly to a record $64.9
million. Lower contract services and maintenance costs
contributed to a 230-basis-point expansion of product gross margin
to 38.6 percent for the first quarter.
Consolidated
The estimated effective income tax rate of 19.7
percent for first quarter 2018 reflects the permanent reduction in
the federal corporate tax rate provided for by the Tax Cuts and
Jobs Act of 2017 (2017 Tax Act).
Liquidity and Capital
Resources
Cash provided by operating activities was $105.0
million in 2018 compared with $73.9 million in 2017.
Cash paid for property, plant and equipment
additions during the first quarter was $96.3 million. The
Company expects capital expenditures for full-year 2018 to range
from $450 million to $500 million as it continues to prudently
deploy capital into the business.
At March 31, 2018, the Company’s ratio of
consolidated net debt-to-consolidated EBITDA, as defined in the
applicable credit agreement, for the trailing-12 months was 1.62
times. The ratio excludes the debt obtained to fund, in part,
the Bluegrass Materials acquisition.
In April 2018, the Company repaid $300 million of
maturing bonds and amended its trade receivable facility to
increase the facility limit to $400 million.
Bluegrass Acquisition
As previously announced, the Company completed
its acquisition of Bluegrass, the largest privately-held, pure-play
aggregates business in the United States, on April 27, 2018.
Furthermore, the Company reached an agreement with the DOJ, which
was submitted to the United States District Court for the District
of Columbia as a proposed court order. The agreement,
embodied in the proposed order, resolves all competition issues
with respect to the acquisition. Under the terms of the
agreement with the DOJ, Martin Marietta divested its Forsyth
aggregates quarry north of Atlanta, Georgia, and will divest
Bluegrass’ Beaver Creek aggregates quarry in western Maryland.
Martin Marietta expects to realize annual
synergies of approximately $15 million within twelve months of the
transaction’s close date. Excluding acquisition-related
expenses, the acquisition is also expected to be accretive to
earnings per share and cash flow within the first full year of
ownership.
Commitment to Enhance Long-Term
Shareholder Value
Martin Marietta is dedicated to disciplined
capital allocation that preserves its financial flexibility and
further enhances shareholder value. The Company’s capital
allocation priorities remain unchanged and include the right
acquisitions that promote the successful execution of the Company’s
strategic growth plan, organic capital investment, and the return
of cash to shareholders through a meaningful and sustainable
dividend and share repurchases.
The Company has returned $1.2 billion to
shareholders, in the form of dividend payments and share
repurchases, since announcing a repurchase authorization in
February 2015 to acquire up to 20 million shares of its outstanding
common stock. At March 31, 2018, 14.7 million shares remain
under the current repurchase authorization and 62.9 million shares
of Martin Marietta common stock were outstanding.
Outlook for 2018
Martin Marietta remains optimistic about its
near-term and long-term outlooks given its continued ability to
successfully execute its strategic business plan and the largely
positive trends in the markets it serves. The Company expects
growth in all three primary construction end-use markets as the
current broad-based recovery continues on a steady and extended
basis. Notably:
- Infrastructure construction activity should benefit from the
funding provided by the FAST Act as state DOTs and contractors
address labor constraints and further regulatory reform emerges.
Additionally, state and local initiatives that support
infrastructure funding, including gas tax increases and other
ballot initiatives, continue to gain overwhelming voter support and
will play an expanded role in public-sector activity.
Third-party forecasts support increased infrastructure spending in
2018, particularly for aggregates-intensive highways and
streets.
- Nonresidential construction is expected to increase in both the
heavy industrial and commercial sectors for the next several years
as supported by third-party forecasts. Management expects new
energy-related projects, particularly along the Gulf Coast, will
continue to bid in 2018 with broader construction activity
beginning in earnest in 2019 and beyond as permitting and final
investment decisions are either made and/or approved.
- Residential construction is expected to continue to grow,
particularly in key Martin Marietta markets, driven by employment
gains, historically low levels of construction activity over the
previous years, low mortgage rates and higher lot development.
Residential construction provides an impetus for future
infrastructure and nonresidential activity.
2018 Guidance
Management has updated its full-year 2018
guidance to reflect the completion of the Bluegrass
acquisition. Absent the impact of the acquired Bluegrass
operations, the Company’s full-year 2018 guidance remains unchanged
from the guidance provided in February 2018. Additionally,
Martin Marietta’s 2018 outlook excludes any benefit from a
potential increase in federal infrastructure funding.
Specifically:
- Heritage aggregates average selling price is expected to
increase in a range of 3 percent to 5 percent and shipments by
end-use market compared with 2017 levels are as follows:
- Infrastructure shipments to increase in the mid-single
digits.
- Nonresidential shipments to increase in the low- to mid-single
digits.
- Residential shipments to increase in the high-single
digits.
- ChemRock/Rail shipments to remain stable.
|
2018 GUIDANCE |
($ and
tons in millions, except per ton) |
Low * |
|
High * |
Consolidated |
|
|
|
Total revenues 1 |
$ |
4,300 |
|
|
$ |
4,500 |
|
Products and services revenues |
$ |
4,050 |
|
|
$ |
4,200 |
|
Freight revenues |
$ |
250 |
|
|
$ |
300 |
|
Gross profit |
$ |
1,100 |
|
|
$ |
1,210 |
|
|
|
|
|
Selling, general and administrative expenses (SG&A)
|
$ |
275 |
|
|
$ |
285 |
|
Interest expense |
$ |
135 |
|
|
$ |
140 |
|
Estimated tax rate (excluding discrete events) |
|
20% |
|
|
|
22% |
|
Net earnings attributable to Martin Marietta |
$ |
525 |
|
|
$ |
640 |
|
Adjusted EBITDA 2 |
$ |
1,150 |
|
|
$ |
1,270 |
|
Capital expenditures |
$ |
450 |
|
|
$ |
500 |
|
|
|
|
|
Building Materials Business |
|
|
|
Aggregates |
|
|
|
Volume
(total tons) 3 |
|
175 |
|
|
|
180 |
|
%
growth 3 |
|
11.0% |
|
|
|
14.0% |
|
Average
selling price per ton (ASP) |
$ |
13.75 |
|
|
$ |
14.00 |
|
%
growth 4 |
|
2.0% |
|
|
|
4.0% |
|
Total
revenues |
$ |
2,630 |
|
|
$ |
2,740 |
|
Products and services revenues |
$ |
2,415 |
|
|
$ |
2,475 |
|
Freight revenues |
$ |
215 |
|
|
$ |
265 |
|
Gross
profit |
$ |
715 |
|
|
$ |
785 |
|
|
|
|
|
Cement |
|
|
|
Total
revenues |
$ |
415 |
|
|
$ |
445 |
|
Products and services revenues |
$ |
400 |
|
|
$ |
430 |
|
Freight revenues |
$ |
15 |
|
|
$ |
15 |
|
Gross
profit |
$ |
140 |
|
|
$ |
160 |
|
|
|
|
|
Ready Mixed Concrete and Asphalt and Paving |
|
|
|
Products
and services revenues |
$ |
1,370 |
|
|
$ |
1,445 |
|
Gross profit |
$ |
160 |
|
|
$ |
175 |
|
|
|
|
|
Magnesia Specialties Business |
|
|
|
Total
revenues |
$ |
265 |
|
|
$ |
270 |
|
Products and services revenues |
$ |
245 |
|
|
$ |
250 |
|
Freight revenues |
$ |
20 |
|
|
$ |
20 |
|
Gross profit |
$ |
85 |
|
|
$ |
90 |
|
* Guidance range represents the low end
and high end of the respective line items provided above.
- 2018 consolidated total revenues exclude $380 million to $400
million related to estimated interproduct sales.
- The 2018 guidance range for Adjusted EBITDA excludes Bluegrass
acquisition-related costs. See appendix to this earnings
release for a reconciliation of Adjusted EBITDA to net earnings
attributable to Martin Marietta.
- Represents 2018 total aggregates volumes, which includes
approximately 11.2 million internal tons. Volume growth ranges are
in comparison with total volumes of 157.7 million tons reported for
the full year 2017, which included 10.9 million internal tons.
- ASP growth range is in comparison with ASP of $13.46 per ton
reported for the full year 2017. The 2% to 4% ASP growth shown
above reflects the inclusion of legacy Bluegrass Materials pricing
which is below our heritage corporate average.
Non-GAAP Financial
Information
This earnings release contains financial
measures that have not been prepared in accordance with GAAP.
Reconciliations of non-GAAP financial measures to the closest GAAP
measure are included in the appendix to this earnings
release.
Conference Call Information
The Company will discuss its first-quarter 2018
earnings results on a conference call and an online web simulcast
today May 8, 2018. The live broadcast of the Martin Marietta
conference call will begin at 10:00 a.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 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
5287057.
About Martin Marietta
Martin Marietta, a member of the S&P 500
Index, is an American-based company and a leading supplier of
building materials, including aggregates, cement, ready mixed
concrete, and asphalt. Through a network of operations spanning 27
states, Canada and The Bahamas, dedicated Martin Marietta teams
supply the resources necessary for building the solid foundations
on which our communities thrive. 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.
Investor Contact:
Suzanne Osberg Vice President, Investor Relations(919)
783-4691Suzanne.Osberg@martinmarietta.com
MLM-E.
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. These statements, which are
forward-looking statements under the Private Securities Litigation
Reform Act of 1995, give the investor the Company’s 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”, “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.
The Company’s outlook is subject to various
risks and uncertainties, and is based on assumptions that the
Company believes in good faith are reasonable but which may be
materially different from actual results. Factors that the Company
currently believes could cause actual results to differ materially
from the forward-looking statements in this press release
(including the outlook) include, but are not limited to: the
performance of the United States economy, including shipment
declines resulting from economic events beyond the Company’s
control; a widespread decline in aggregates pricing, including a
decline in aggregates volume negatively affecting aggregates price;
the history of both cement and ready mixed concrete being subject
to significant changes in supply, demand and price fluctuations;
the termination, capping and/or reduction or suspension of the
federal and/or state gasoline tax(es) or other revenue related to
infrastructure construction; the level and timing of federal, state
or local transportation funding, most particularly in Texas, North
Carolina, Iowa, Colorado, Georgia and Maryland, including a
significant change in the funding patterns for federal, state
and/or local infrastructure projects or the United States Congress’
inability to reach agreement among themselves or with the current
Administration on policy issues that impact the federal budget; 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, volatility in the commencement of infrastructure
projects and other funding pressures that impact profitability; 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 decline in energy-related
construction activity resulting from a sustained period of
low global oil prices or changes in oil production patterns in
response to this decline, particularly in Texas; a slowdown in
residential construction recovery; unfavorable weather conditions,
particularly Atlantic Ocean and Gulf Coast 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, any of which can significantly affect production
schedules, volumes and profitability; the volatility of fuel costs,
particularly diesel fuel, and the impact on the cost, or the
availability generally, of other consumables, namely steel,
explosives, tires and conveyor belts, and with respect to the
Company’s Magnesia Specialties business, natural gas; continued
increases in the cost of other repair and supply parts;
construction labor shortages and/or supply‐chain challenges;
unexpected equipment failures, unscheduled maintenance, industrial
accident or other prolonged and/or significant disruption to
production facilities; increasing governmental regulation,
including environmental laws; transportation availability or a
sustained reduction in capital investment by the railroads, notably
the availability of railcars, locomotive power and the condition of
rail infrastructure to move trains to supply the Company’s Texas,
Colorado, Florida, North Carolina and the Gulf Coast markets,
including the movement of essential dolomitic lime for magnesia
chemicals to the Company’s plant in Manistee, Michigan and its
customers; increased transportation costs, including increases from
higher or fluctuating passed-through energy costs or fuel
surcharges, 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 the Company’s
materials; availability and cost of construction equipment in the
United States; weakening in the steel industry markets served by
the Company’s dolomitic lime products; a trade dispute with
one or more nations impacting the U.S. economy, including the
impact of tariffs on the steel industry; unplanned changes in costs
or realignment of customers that introduce volatility to earnings,
including that of the Magnesia Specialties business that is running
at capacity; proper functioning of information technology and
automated operating systems to manage or support operations;
inflation and its effect on both production and interest costs; the
concentration of customers in construction markets and the
increased risk of potential losses on customer receivables; the
impact of the level of demand in the Company’s end-use markets,
production levels and management of production costs on the
operating leverage and therefore profitability of the
Company; the possibility that the expected synergies from
acquisitions (including the acquisition of Bluegrass) will not be
realized or will not be realized within the expected time period,
including achieving 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.
You should consider these forward-looking
statements in light of risk factors discussed in our Annual Report
on Form 10-K for the year ended December 31, 2017, our Current
Report on Form 8-K filed on March 16, 2018 and other periodic
filings made with the SEC. All of our forward-looking
statements should be considered in light of these factors. In
addition, other risks and uncertainties not presently known to us
or that we consider immaterial could affect the accuracy of our
forward-looking statements.
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Statements of Earnings |
(In millions, except per share amounts) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2018 |
|
|
|
2017 |
|
Products and services
revenues |
|
$ |
753.3 |
|
|
$ |
792.3 |
|
Freight revenues |
|
|
48.7 |
|
|
|
51.6 |
|
Total
revenues |
|
|
802.0 |
|
|
|
843.9 |
|
|
|
|
|
|
Cost of revenues -
products and services |
|
|
641.6 |
|
|
|
644.6 |
|
Cost of revenues -
freight |
|
|
50.0 |
|
|
|
52.2 |
|
Total
cost of revenues |
|
|
691.6 |
|
|
|
696.8 |
|
Gross Profit |
|
|
110.4 |
|
|
|
147.1 |
|
|
|
|
|
|
Selling general &
administrative expenses |
|
|
70.1 |
|
|
|
69.5 |
|
Acquisition-related
expenses |
|
|
0.7 |
|
|
|
- |
|
Other operating
expense, net |
|
|
0.5 |
|
|
|
0.4 |
|
Earnings
from operations |
|
|
39.1 |
|
|
|
77.2 |
|
|
|
|
|
|
Interest expense |
|
|
35.1 |
|
|
|
20.9 |
|
Other nonoperating
income, net |
|
|
(8.5 |
) |
|
|
(0.5 |
) |
Earnings
before income tax expense |
|
|
12.5 |
|
|
|
56.8 |
|
Income tax expense |
|
|
2.5 |
|
|
|
14.5 |
|
Consolidated net
earnings |
|
|
10.0 |
|
|
|
42.3 |
|
Less: Net earnings
attributable to noncontrolling interests |
|
|
- |
|
|
|
- |
|
Net Earnings
Attributable to Martin Marietta Materials, Inc. |
|
$ |
10.0 |
|
|
$ |
42.3 |
|
|
|
|
|
|
Net earnings per common
share attributable to common shareholders: |
|
|
|
|
Basic |
|
$ |
0.16 |
|
|
$ |
0.67 |
|
Diluted |
|
$ |
0.16 |
|
|
$ |
0.67 |
|
|
|
|
|
|
Dividends per common
share |
|
$ |
0.44 |
|
|
$ |
0.42 |
|
|
|
|
|
|
Average number of
common shares outstanding: |
|
|
|
|
Basic |
|
|
63.0 |
|
|
|
63.0 |
|
Diluted |
|
|
63.2 |
|
|
|
63.3 |
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Financial Highlights |
(In millions) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2018 |
|
|
|
2017 |
|
Total revenues: |
|
|
|
|
Building
Materials Business: |
|
|
|
|
Mid-America Group |
|
$ |
178.8 |
|
|
$ |
189.0 |
|
Southeast
Group |
|
|
80.2 |
|
|
|
90.3 |
|
West
Group |
|
|
473.7 |
|
|
|
496.0 |
|
Total
Building Materials Business |
|
|
732.7 |
|
|
|
775.3 |
|
Magnesia
Specialties |
|
|
69.3 |
|
|
|
68.6 |
|
Total |
|
$ |
802.0 |
|
|
$ |
843.9 |
|
|
|
|
|
|
Gross profit
(loss): |
|
|
|
|
Building
Materials Business: |
|
|
|
|
Mid-America Group |
|
$ |
18.2 |
|
|
$ |
26.3 |
|
Southeast
Group |
|
|
6.2 |
|
|
|
14.4 |
|
West
Group |
|
|
60.2 |
|
|
|
84.5 |
|
Total
Building Materials Business |
|
|
84.6 |
|
|
|
125.2 |
|
Magnesia
Specialties |
|
|
23.9 |
|
|
|
22.3 |
|
Corporate |
|
|
1.9 |
|
|
|
(0.4 |
) |
Total |
|
$ |
110.4 |
|
|
$ |
147.1 |
|
|
|
|
|
|
Selling, general and
administrative expenses: |
|
|
|
|
Building
Materials Business: |
|
|
|
|
Mid-America Group |
|
$ |
13.1 |
|
|
$ |
13.5 |
|
Southeast
Group |
|
|
4.4 |
|
|
|
4.4 |
|
West
Group |
|
|
26.2 |
|
|
|
25.1 |
|
Total
Building Materials Business |
|
|
43.7 |
|
|
|
43.0 |
|
Magnesia
Specialties |
|
|
2.6 |
|
|
|
2.4 |
|
Corporate |
|
|
23.8 |
|
|
|
24.1 |
|
Total |
|
$ |
70.1 |
|
|
$ |
69.5 |
|
|
|
|
|
|
Earnings
(Loss) from operations: |
|
|
|
|
Building
Materials Business: |
|
|
|
|
Mid-America Group |
|
$ |
6.2 |
|
|
$ |
13.4 |
|
Southeast
Group |
|
|
2.0 |
|
|
|
10.1 |
|
West
Group |
|
|
35.0 |
|
|
|
61.2 |
|
Total
Building Materials Business |
|
|
43.2 |
|
|
|
84.7 |
|
Magnesia
Specialties |
|
|
21.2 |
|
|
|
19.9 |
|
Corporate |
|
|
(25.3 |
) |
|
|
(27.4 |
) |
Total |
|
$ |
39.1 |
|
|
$ |
77.2 |
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Financial Highlights
(Continued) |
(In millions) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
Total revenues: |
|
|
|
|
Building
Materials business products and services: |
|
|
|
|
Aggregates |
|
$ |
425.0 |
|
|
$ |
451.1 |
|
Cement |
|
|
89.2 |
|
|
|
93.6 |
|
Ready Mixed Concrete |
|
|
218.5 |
|
|
|
222.3 |
|
Asphalt and paving |
|
|
16.4 |
|
|
|
21.7 |
|
Less: Interproduct sales |
|
|
(60.7 |
) |
|
|
(60.7 |
) |
Subtotal |
|
|
688.4 |
|
|
|
728.0 |
|
Freight |
|
|
44.3 |
|
|
|
47.3 |
|
Total
Building Materials Business |
|
|
732.7 |
|
|
|
775.3 |
|
Magnesia
Specialties business: |
|
|
|
|
Products and services |
|
|
64.9 |
|
|
|
64.3 |
|
Freight |
|
|
4.4 |
|
|
|
4.3 |
|
Total
Magnesia Specialties Business |
|
|
69.3 |
|
|
|
68.6 |
|
Consolidated total revenues |
|
$ |
802.0 |
|
|
$ |
843.9 |
|
|
|
|
|
|
Gross profit
(loss): |
|
|
|
|
Building
Materials business products and services: |
|
|
|
|
Aggregates |
|
$ |
53.0 |
|
|
$ |
78.9 |
|
Cement |
|
|
23.7 |
|
|
|
30.8 |
|
Ready Mixed Concrete |
|
|
15.6 |
|
|
|
19.8 |
|
Asphalt and paving |
|
|
(7.6 |
) |
|
|
(4.7 |
) |
Subtotal |
|
|
84.7 |
|
|
|
124.8 |
|
Freight |
|
|
(0.1 |
) |
|
|
0.4 |
|
Total
Building Materials Business |
|
|
84.6 |
|
|
|
125.2 |
|
Magnesia
Specialties business: |
|
|
|
|
Products and services |
|
|
25.1 |
|
|
|
23.3 |
|
Freight |
|
|
(1.2 |
) |
|
|
(1.0 |
) |
Total
Magnesia Specialties Business |
|
|
23.9 |
|
|
|
22.3 |
|
Corporate |
|
|
1.9 |
|
|
|
(0.4 |
) |
Consolidated gross profit |
|
$ |
110.4 |
|
|
$ |
147.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
|
Balance Sheet Data |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
|
2018 |
|
2017 |
|
2017 |
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
1,422.4 |
|
$ |
1,446.4 |
|
$ |
55.4 |
|
Accounts
receivable, net |
|
|
466.5 |
|
|
487.2 |
|
|
479.2 |
|
Inventories, net |
|
|
606.8 |
|
|
600.6 |
|
|
537.0 |
|
Other
current assets |
|
|
106.2 |
|
|
97.0 |
|
|
51.6 |
|
Property,
plant and equipment, net |
|
|
3,582.5 |
|
|
3,592.8 |
|
|
3,467.6 |
|
Intangible assets, net |
|
|
2,659.1 |
|
|
2,666.6 |
|
|
2,667.1 |
|
Other
noncurrent assets |
|
|
104.6 |
|
|
101.9 |
|
|
135.9 |
|
Total
assets |
|
$ |
8,948.1 |
|
$ |
8,992.5 |
|
$ |
7,393.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
Current
maturities of long-term debt and short-term facilities |
|
$ |
300.0 |
|
$ |
299.9 |
|
$ |
290.0 |
|
Other
current liabilities |
|
|
351.0 |
|
|
394.3 |
|
|
341.6 |
|
Long-term
debt (excluding current maturities) |
|
|
2,728.1 |
|
|
2,727.3 |
|
|
1,556.2 |
|
Other
noncurrent liabilities |
|
|
889.2 |
|
|
888.5 |
|
|
1,130.0 |
|
Total
equity |
|
|
4,679.8 |
|
|
4,682.5 |
|
|
4,076.0 |
|
Total
liabilities and equity |
|
$ |
8,948.1 |
|
$ |
8,992.5 |
|
$ |
7,393.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Statements of Cash
Flows |
(In millions) |
|
Three Months Ended |
|
March 31, |
|
|
2018 |
|
|
|
2017 |
|
Operating
activities: |
|
|
|
Consolidated net earnings |
$ |
10.0 |
|
|
$ |
42.3 |
|
Adjustments to reconcile consolidated net earnings to net cash
provided by operating activities: |
|
|
|
Depreciation, depletion and amortization |
|
76.8 |
|
|
|
70.4 |
|
Stock-based compensation expense |
|
9.8 |
|
|
|
10.3 |
|
(Gain)
Loss on divestitures and sales of assets |
|
(0.9 |
) |
|
|
0.1 |
|
Deferred
income taxes |
|
2.0 |
|
|
|
2.8 |
|
Other
items, net |
|
(2.3 |
) |
|
|
(0.1 |
) |
Changes
in operating assets and liabilities, net of effects of acquisitions
and divestitures: |
|
|
|
Accounts receivable, net |
|
21.0 |
|
|
|
(21.3 |
) |
Inventories, net |
|
(8.9 |
) |
|
|
(15.4 |
) |
Accounts payable |
|
7.9 |
|
|
|
8.5 |
|
Other assets and liabilities, net |
|
(10.4 |
) |
|
|
(23.7 |
) |
Net cash provided by
operating activities |
|
105.0 |
|
|
|
73.9 |
|
|
|
|
|
Investing
activities: |
|
|
|
Additions
to property, plant and equipment |
|
(96.3 |
) |
|
|
(102.1 |
) |
Proceeds
from divestitures and sales of assets |
|
2.6 |
|
|
|
0.5 |
|
Investments in life insurance contracts, net |
|
0.1 |
|
|
|
0.2 |
|
Payment
of railcar construction advances |
|
(8.4 |
) |
|
|
(37.0 |
) |
Reimbursement of railcar construction advances |
|
8.4 |
|
|
|
37.0 |
|
Net cash used for
investing activities |
|
(93.6 |
) |
|
|
(101.4 |
) |
|
|
|
|
Financing
activities: |
|
|
|
Borrowings of long-term debt |
|
- |
|
|
|
205.0 |
|
Repayments of long-term debt |
|
- |
|
|
|
(45.0 |
) |
Payments
on capital leases |
|
(0.8 |
) |
|
|
(0.8 |
) |
Debt
issue costs |
|
(3.2 |
) |
|
|
- |
|
Contributions by noncontrolling interest to joint venture |
|
0.1 |
|
|
|
- |
|
Repurchases of common stock |
|
- |
|
|
|
(100.0 |
) |
Dividends
paid |
|
(27.9 |
) |
|
|
(26.6 |
) |
Proceeds
from exercise of stock options |
|
2.8 |
|
|
|
4.0 |
|
Shares
withheld for employees' income tax obligations |
|
(6.4 |
) |
|
|
(3.7 |
) |
Net cash (used for)
provided by financing activities |
|
(35.4 |
) |
|
|
32.9 |
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
|
(24.0 |
) |
|
|
5.4 |
|
Cash and cash
equivalents, beginning of period |
|
1,446.4 |
|
|
|
50.0 |
|
Cash and cash
equivalents, end of period |
$ |
1,422.4 |
|
|
$ |
55.4 |
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Operational Highlights |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, 2018 |
|
|
Volume |
|
Pricing |
Volume/Pricing
Variance (1) |
|
|
|
|
Mid-America Group |
|
|
(9.9%) |
|
|
|
4.9% |
|
Southeast Group |
|
|
(12.4%) |
|
|
|
2.2% |
|
West
Group |
|
|
(4.7%) |
|
|
|
0.8% |
|
Total Aggregates
Product Line (2) |
|
|
(7.9%) |
|
|
|
2.3% |
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
Shipments (tons in thousands) |
|
|
2018 |
|
|
|
2017 |
|
Mid-America Group |
|
|
11,473 |
|
|
|
12,738 |
|
Southeast Group |
|
|
4,405 |
|
|
|
5,028 |
|
West
Group |
|
|
14,142 |
|
|
|
14,845 |
|
Total Aggregates
Product Line (2) |
|
|
30,020 |
|
|
|
32,611 |
|
|
|
|
|
|
(1) Volume/pricing variances reflect the percentage
increase (decrease) from the comparable period in the prior
year. |
(2) Aggregates Product Line includes acquisitions from the date
of acquisition and divestitures through the date of disposal. |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2018 |
|
|
|
2017 |
|
Shipments (in thousands) |
|
|
|
|
Aggregates tons - external customers |
|
|
27,877 |
|
|
|
30,418 |
|
Internal
aggregates tons used in other product lines |
|
|
2,143 |
|
|
|
2,193 |
|
Total
aggregates tons |
|
|
30,020 |
|
|
|
32,611 |
|
|
|
|
|
|
Cement
tons - external customers |
|
|
527 |
|
|
|
606 |
|
Internal
cement tons used in other product lines |
|
|
298 |
|
|
|
299 |
|
Total
Cement tons |
|
|
825 |
|
|
|
905 |
|
|
|
|
|
|
Ready
Mixed Concrete - cubic yards |
|
|
2,009 |
|
|
|
2,056 |
|
|
|
|
|
|
Asphalt
tons - external customers |
|
|
116 |
|
|
|
153 |
|
Internal
asphalt tons used in road paving business |
|
|
76 |
|
|
|
124 |
|
Total
asphalt tons |
|
|
192 |
|
|
|
277 |
|
|
|
|
|
|
Average unit
sales price by product line (including internal
sales): |
|
|
|
|
Aggregates (per ton) |
|
$ |
14.04 |
|
|
$ |
13.73 |
|
Cement
(per ton) |
|
$ |
106.86 |
|
|
$ |
102.54 |
|
Ready
Mixed Concrete (per cubic yard) |
|
$ |
106.34 |
|
|
$ |
105.84 |
|
Asphalt
(per ton) |
|
$ |
42.81 |
|
|
$ |
37.97 |
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Non-GAAP Financial
Measures |
(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 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
cannot exceed 3.50 times as of March 31, 2018, with certain
exceptions related to qualifying acquisitions, as defined. |
|
The following presents the calculation of Consolidated
Debt-to-Consolidated EBITDA, as defined by the Company's Credit
Agreement, at March 31, 2018, for the trailing-12 months
EBITDA. For supporting calculations, refer to Company's website at
www.martinmarietta.com. |
|
|
Twelve Month Period |
|
April 1, 2017
to |
|
March 31, 2018 |
Earnings from
continuing operations attributable to Martin Marietta Materials,
Inc. |
$ |
681.0 |
|
Add back: |
|
Interest
expense |
|
105.7 |
|
Depreciation, depletion and amortization expense |
|
299.8 |
|
Stock-based compensation expense |
|
29.9 |
|
Acquisition-related expenses |
|
9.3 |
|
|
|
Deduct: |
|
Income
tax benefit |
|
(106.5 |
) |
Interest
income |
|
(5.8 |
) |
|
|
Consolidated EBITDA, as
defined by the Company's Credit Agreement |
$ |
1,013.4 |
|
|
|
Consolidated Net Debt,
as defined and including debt for which the Company is a
co-borrower, at March 31, 2018 |
$ |
1,643.4 |
|
|
|
Consolidated
Debt-to-Consolidated EBITDA, as defined by the Company's Credit
Agreement, |
|
at
March 31, 2018, for the trailing-12 months EBITDA |
1.62 times |
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Non-GAAP Financial
Measures
(Continued) |
(Dollars in millions) |
|
|
|
|
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: |
|
|
|
|
|
Three Months
Ended |
|
March 31, |
|
|
2018 |
|
|
2017 |
Earnings Before
Interest, Income Taxes, Depreciation and Amortization (EBITDA) |
$ |
123.3 |
|
$ |
147.7 |
|
|
|
|
A
Reconciliation of Net Earnings Attributable to Martin Marietta to
EBITDA is as follows: |
|
|
|
|
Three Months
Ended |
|
March 31, |
|
|
2018 |
|
|
2017 |
Net Earnings
Attributable to Martin Marietta |
$ |
10.0 |
|
$ |
42.3 |
Add back: |
|
|
|
Interest
Expense |
|
35.1 |
|
|
20.9 |
Income
Tax Expense for Controlling Interests |
|
2.5 |
|
|
14.5 |
Depreciation, Depletion and Amortization Expense |
|
75.7 |
|
|
70.0 |
EBITDA |
$ |
123.3 |
|
$ |
147.7 |
|
|
|
|
|
|
|
|
A
reconciliation of Net Earnings Attributable to Martin Marietta to
the midpoint of the range for Adjusted EBITDA included in
the |
|
|
full-year 2018 outlook is as
follows: |
|
|
|
|
|
|
|
Net Earnings
Attributable to Martin Marietta |
$ |
567.5 |
|
|
Add
back: |
|
|
|
Interest
Expense |
|
137.5 |
|
|
Income
Tax Expense for Controlling Interests |
|
155.0 |
|
|
Depreciation, Depletion and Amortization Expense |
|
335.0 |
|
|
EBITDA |
$ |
1,195.0 |
|
|
Add
back: |
|
|
|
Bluegrass
acquisition-related expenses, net |
|
15.0 |
|
|
Adjusted EBTIDA |
$ |
1,210.0 |
|
|
|
|
|
|
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