COMPANY ACHIEVED RECORD THIRD-QUARTER REVENUES,
GROSS PROFIT AND EARNINGS PER DILUTED SHARE
Martin Marietta Materials, Inc. (NYSE:MLM) today reported results
for the third quarter ended September 30, 2018.
Highlights Include the
Following:
|
|
($
in thousands, except per share) |
Quarter ended September 30, |
|
2018 |
2017 |
Total revenues
1 |
$ |
1,219,640 |
$ |
1,087,732 |
Products and services revenues 2 |
$ |
1,142,218 |
$ |
1,022,487 |
Building
Materials business products and services revenues |
$ |
1,073,853 |
$ |
962,598 |
Magnesia
Specialties business products and services revenues |
$ |
68,365 |
$ |
59,889 |
Gross
profit |
$ |
312,984 |
$ |
291,678 |
Adjusted gross profit 3 |
$ |
321,333 |
$ |
291,678 |
Earnings from operations |
$ |
240,662 |
$ |
226,964 |
Adjusted earnings from operations 4 |
$ |
256,213 |
$ |
228,278 |
Net
earnings attributable to Martin Marietta |
$ |
180,221 |
$ |
151,546 |
Adjusted EBITDA 5 |
$ |
348,984 |
$ |
303,276 |
Earnings per diluted share |
$ |
2.85 |
$ |
2.39 |
|
|
|
|
|
1 Total revenues include the sales of products
and services to customers (net of any discounts or allowances) and
freight revenues. |
2 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. |
3 Adjusted gross profit excludes an increase in
cost of revenues from the impact of selling acquired inventory
after its markup to fair value as part of acquisition
accounting. See appendix to this earnings release for a
reconciliation to reported gross profit under generally accepted
accounting principles (GAAP). |
4 Adjusted earnings from operations exclude
acquisition-related expenses, net; an increase in cost of revenues
from the impact of selling acquired inventory after its markup to
fair value as part of acquisition accounting; and a restructuring
charge. See appendix to this earnings release for a
reconciliation to reported earnings from operations under
GAAP. |
5 Adjusted EBITDA is a non-GAAP financial
measure. 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, “Our record third-quarter results
demonstrate Martin Marietta’s strong execution as we capitalized on
the improving strength of the current construction cycle while
successfully managing through near-term challenges. Aggregates,
cement and ready mixed concrete shipments meaningfully accelerated
in July and August under normal operating conditions. Pricing
also improved, highlighting robust product demand across our
geographic footprint. In September, extraordinary weather
challenges, including record Texas rainfall and devastation from
Hurricane Florence, mostly in the Carolinas, adversely impacted our
third quarter. As a result, Texas, our largest state by revenues,
and North Carolina, our third-largest state by revenues and leading
state by unit profitability, were disproportionately negatively
affected during the industry’s busiest and most profitable period.
Despite these short-term disruptions, we remain on track to
once again deliver record revenues and EBITDA (Earnings Before
Interest, Taxes, and Depreciation and Amortization) for the full
year, and we are well-positioned to continue our growth trajectory
in 2019.
“We believe the ongoing construction cycle will
continue to promote sustainable and steady growth for the
foreseeable future, fueled by strong underlying demand and the
long-awaited arrival of increased public-sector activity. A
compelling need for greater infrastructure investment exists to
address much-needed maintenance and improvements, support economic
growth and rebuild from weather events. We are encouraged by the
recent and ongoing actions state and local governments are taking
to secure additional funding for transportation projects. Indeed,
Martin Marietta is poised to benefit from an acceleration in public
lettings and contract awards in key states such as Texas, Colorado,
North Carolina, Georgia and Florida. We are prepared to meet these
future market demands. Important catalysts to do so will come from
increased contractor capacity and logistics improvements. While
getting better, these bottlenecks have nonetheless contributed to
project delays and constrained construction growth in recent years.
That said, these factors are also extending the construction cycle
and promoting steady growth.”
Mr. Nye concluded, “Assessing these
macroeconomic factors holistically and applying them to Martin
Marietta, we anticipate increased private-sector demand, improving
infrastructure construction activity and favorable pricing trends
throughout 2019. We expect our key states to benefit from
continued, favorable construction growth due to their attractive
economic drivers and population trends. Our strategic geographic
footprint, leading market positions, disciplined execution of our
strategic plan and world-class attributes across our business -
including safety, efficiency and operational excellence - firmly
position Martin Marietta for both further growth and shareholder
value creation.”
Operating Results(All
comparisons are versus the prior-year quarter unless noted
otherwise)
|
|
|
Quarter ended September 30, 2018 |
($ in thousands) |
Revenues |
Gross profit (loss) |
Gross margin |
Building Materials business: |
|
|
|
Products
and services: |
|
|
|
Aggregates |
$ |
687,800 |
|
$ |
209,082 |
|
30.4 |
% |
Cement |
|
98,223 |
|
|
32,543 |
|
33.1 |
% |
Ready mixed concrete |
|
254,686 |
|
|
20,632 |
|
8.1 |
% |
Asphalt and paving |
|
99,983 |
|
|
25,606 |
|
25.6 |
% |
Less: interproduct revenues |
|
(66,839 |
) |
|
--- |
|
--- |
|
Products
and services |
|
1,073,853 |
|
|
287,863 |
|
26.8 |
% |
Freight |
|
72,264 |
|
|
(47 |
) |
NM |
|
Total Building Materials business |
|
1,146,117 |
|
|
287,816 |
|
25.1 |
% |
Magnesia Specialties business: |
|
|
|
Products
and services |
|
68,365 |
|
|
26,823 |
|
39.2 |
% |
Freight |
|
5,158 |
|
|
(1,076 |
) |
NM |
|
Total Magnesia Specialties business |
|
73,523 |
|
|
25,747 |
|
35.0 |
% |
Corporate |
|
--- |
|
|
(579 |
) |
NM |
|
Total |
$ |
1,219,640 |
|
$ |
312,984 |
|
25.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended September 30, 2017 |
($ in thousands) |
Revenues |
Gross profit (loss) |
Gross margin |
Building Materials business: |
|
|
|
Products
and services: |
|
|
|
Aggregates |
$ |
590,312 |
|
$ |
187,065 |
|
31.7 |
% |
Cement |
|
88,470 |
|
|
27,459 |
|
31.0 |
% |
Ready mixed concrete |
|
240,222 |
|
|
23,913 |
|
10.0 |
% |
Asphalt and paving |
|
110,973 |
|
|
28,873 |
|
26.0 |
% |
Less: interproduct revenues |
|
(67,379 |
) |
|
--- |
|
--- |
|
Products
and services |
|
962,598 |
|
|
267,310 |
|
27.8 |
% |
Freight |
|
61,229 |
|
|
1,012 |
|
NM |
|
Total Building Materials business |
|
1,023,827 |
|
|
268,322 |
|
26.2 |
% |
Magnesia Specialties business: |
|
|
|
Products
and services |
|
59,889 |
|
|
21,272 |
|
35.5 |
% |
Freight |
|
4,016 |
|
|
(1,362 |
) |
NM |
|
Total Magnesia Specialties business |
|
63,905 |
|
|
19,910 |
|
31.2 |
% |
Corporate |
|
--- |
|
|
3,446 |
|
NM |
|
Total |
$ |
1,087,732 |
|
$ |
291,678 |
|
26.8 |
% |
|
|
|
|
|
|
|
|
|
Building Materials Business
Aggregates
Volume growth accelerated during the quarter’s
first two months, reflecting strong underlying product demand, most
notably in Texas, North Carolina, Georgia and Iowa. Despite clear
market strength, extreme weather temporarily hindered construction
activity. Record precipitation in Texas, compounded by disruptions
from Hurricane Florence in the Carolinas, adversely impacted
September’s aggregates shipment, production and overall efficiency
levels.
Heritage aggregates volume and pricing improved
3.8 percent and 2.9 percent, respectively, excluding the
third-quarter 2017 shipments from the Company’s Forsyth, Georgia,
quarry that was divested in April 2018.
- Shipments for the Mid-America Group
heritage operations increased 5.4 percent, driven by several large
public and private construction projects in North Carolina and
windfarm activity in Iowa. This growth was partially offset by
disruptions from Hurricane Florence. Weather and product mix
limited heritage pricing gains to 2.8 percent.
- Shipments for the Southeast Group
heritage operations increased 11.9 percent, excluding third-quarter
2017 shipments from the Forsyth, Georgia, quarry that was divested
in April 2018. This improvement was driven by strong construction
activity in North Georgia and improving long-haul shipments from
Florida distribution yards. Product mix of the Group’s offshore
shipments muted heritage pricing growth to 1.7 percent.
- West Group shipments declined
slightly, driven by record precipitation in September in
Dallas/Fort Worth and San Antonio, as well as project delays in
Colorado. Notably, the Southwest Division achieved double-digit
volume growth heading into September, underscoring the region’s
healthy construction market. West Group pricing improved 3.1
percent, reflecting robust pricing in Colorado that was partially
offset by product mix and a lower percentage of higher-priced
rail-shipped volumes in Texas.
Martin Marietta’s third-quarter heritage
aggregates shipments by end use are as follows (all comparisons are
versus the prior-year quarter):
Infrastructure Market
- Aggregates shipments to the
infrastructure market were flat as large public projects in North
Carolina and Texas were weather delayed. The Company remains
encouraged by the recent acceleration of state lettings and
contract awards. As state Departments of Transportation (DOTs) and
contractors continue to address labor constraints, and the broader
industry benefits from further regulatory reform, management
remains confident that infrastructure demand will continue to
improve driven by funding provided by the Fixing America’s Surface
Transportation Act (FAST Act) and numerous state and local
transportation initiatives. While some contractors are reporting
longer lag times between contract awards and project commencement,
public construction projects, once awarded, are seen through to
completion. Thus, delays from weather or other factors typically
serve to extend the duration of the construction cycle for the
Company’s single largest end-use market. Aggregates shipments to
the infrastructure market comprised 41 percent of third-quarter
aggregates volumes. On a year-to-date basis, the infrastructure
market represented 39 percent of aggregates shipments, remaining
below the Company’s most recent five-year average of 43
percent.
Nonresidential Market
- Aggregates shipments to the
nonresidential market increased 5 percent, driven by both
commercial and heavy industrial construction activity. Looking
ahead, ongoing energy-sector project approvals, supported by higher
oil prices, underpin management’s expectation that the next wave of
these large projects, particularly along the Gulf Coast, will
contribute to increased aggregates demand for the next several
years. The nonresidential market represented 33 percent of
third-quarter aggregates shipments.
Residential Market
- Aggregates shipments to the
residential market increased 7 percent. Florida, Texas, Colorado,
North Carolina, South Carolina and Georgia, six of the Company’s
key states, ranked in the top ten nationally for growth in
single-family housing unit starts for the trailing twelve months
ended August 31, 2018. The residential construction outlook across
the Company’s geographic footprint remains positive for both
single- and multi-family housing, driven by favorable demographics,
job growth, land availability and efficient permitting. The
residential market accounted for 20 percent of third-quarter
aggregates shipments.
ChemRock/Rail Market
- The ChemRock/Rail market accounted for the remaining 6 percent
of third-quarter aggregates shipments. Shipments to this sector
increased 6 percent, reflecting improved ballast shipments for the
Midwest and Rocky Mountain Divisions.
Aggregates product gross margin was 30.4
percent, inclusive of an $8.3 million negative impact on cost of
revenues related to selling acquired inventory after its markup to
fair value as part of acquisition accounting. Excluding this
impact, adjusted aggregates product gross margin was 31.6
percent.
Acquired operations shipped 5.1 million tons
despite Maryland’s wettest third quarter in history. Selling
prices for acquired operations are 10 percent to 15 percent below
the corporate average. Synergy realization is progressing
ahead of plan.
Cement
Third-quarter cement shipments and pricing
improved 7.6 percent and 3.3 percent, respectively. Both of the
Company’s cement operations reported double-digit volume growth
prior to September’s record rainfall, underscoring strong Texas
demand. These factors, combined with increased production
efficiencies, led to a 210-basis-point expansion in product gross
margin to 33.1 percent.
Downstream businesses
Ready mixed concrete shipments increased 3.3
percent, with solid gains throughout the Rocky Mountain and
Southwest Divisions, despite September’s record rainfall in Texas.
Ready mixed concrete selling prices increased 2.7 percent. Project
delays and permitting issues contributed to the 9.1 percent
decrease in hot mixed asphalt shipments. Asphalt pricing was
essentially flat.
Magnesia Specialties
Business
Magnesia Specialties product revenues increased
14.2 percent to a record $68.4 million with growth in both the
chemicals and lime businesses. Operating efficiencies, together
with lower unit energy costs, contributed to a 370-basis-point
expansion in third-quarter product gross margin to 39.2
percent.
Consolidated
Other operating expenses, net, included a $7.1
million restructuring charge related to the Company’s Southwest
ready mixed concrete business. This primarily consists of asset
impairment and related severance charges, as various ready mixed
concrete locations are consolidated. These actions are anticipated
to improve the long-term profitability of the Southwest ready mixed
concrete business.
Liquidity and Capital
Resources
Cash provided by operating activities for the
nine months ended September 30, 2018 was $441.5 million compared
with $418.1 million in the first nine months of 2017.
Cash paid for property, plant and equipment
additions for the nine months ended September 30, 2018 was $262.2
million. The Company expects capital expenditures of $375 million
for full-year 2018 as it continues to prudently deploy capital into
the business.
During the third quarter of 2018, the Company
contributed $150.0 million to its qualified defined benefit
retirement plan and repurchased 305 thousand shares of its common
stock for $60.4 million. Additionally, the Company extended the
maturity date of its $400 million trade receivable facility to
September 25, 2019.
At September 30, 2018, the Company’s ratio of
consolidated net debt-to-consolidated EBITDA, as defined in the
applicable credit agreement, for the trailing twelve months was
2.72 times. The Company expects to be modestly above its target
leverage ratio of 2.0X to 2.5X by the end of 2018.
Commitment to Enhance Long-Term
Shareholder Value
Martin Marietta is dedicated to disciplined
capital allocation that preserves the Company’s financial
flexibility and further enhances shareholder value. The Company’s
capital allocation priorities remain unchanged and include
value-enhancing 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.
In August 2018, the Company increased its
quarterly cash dividend by 9 percent. Additionally, the Company
repurchased 305 thousand shares of common stock pursuant to its
share repurchase authorization. The Company has now returned $1.3
billion to shareholders, in the form of dividend payments and share
repurchases, since announcing a 20 million share repurchase
authorization in February 2015. At September 30, 2018, 14.4 million
shares remained under the current repurchase authorization and 62.7
million shares of Martin Marietta common stock were
outstanding.
Outlook for 2018
Management has updated its full-year 2018
guidance to reflect current trends and expectations, including the
impact of extraordinary weather-related events encountered during
the third quarter.
Specifically:
- Heritage aggregates average selling
price is expected to increase in a range of 3 percent to 4
percent.
- Heritage aggregates volume is expected to be flat to up 1
percent and expected shipments by end-use market, both compared
with 2017 levels and excluding shipments of the Company’s Forsyth,
Georgia, quarry that was divested in April 2018, are as follows:
- Infrastructure shipments to be
relatively flat.
- Nonresidential shipments to
increase in the low- to mid-single digits.
- Residential shipments to increase
in the high-single digits.
- ChemRock/Rail shipments to
decrease.
|
2018 GUIDANCE |
($ and
tons in thousands, except per ton) |
Low * |
|
High * |
Consolidated |
|
|
|
Total revenues
1 |
$ |
4,135,000 |
|
$ |
4,255,000 |
Products
and services revenues |
$ |
3,855,000 |
|
$ |
3,985,000 |
Freight
revenues |
$ |
250,000 |
|
$ |
270,000 |
Gross profit |
$ |
960,000 |
|
$ |
1,000,000 |
Adjusted gross profit 2 |
$ |
980,000 |
|
$ |
1,020,000 |
|
|
|
|
Selling, general and administrative expenses (SG&A) |
$ |
280,000 |
|
$ |
285,000 |
Interest expense |
$ |
135,000 |
|
$ |
140,000 |
Estimated tax rate (excluding discrete events) |
|
20% |
|
|
20% |
Net earnings attributable to Martin Marietta |
$ |
460,000 |
|
$ |
505,000 |
Adjusted EBITDA 3 |
$ |
1,100,000 |
|
$ |
1,145,000 |
Capital expenditures |
$ |
375,000 |
|
$ |
375,000 |
|
|
|
|
Building Materials Business |
|
|
|
Aggregates |
|
|
|
Volume
(total tons) 4 |
|
167,000 |
|
|
170,000 |
% growth
4 |
|
6.0% |
|
|
8.0% |
Average
selling price per ton (ASP) |
$ |
13.75 |
|
$ |
13.85 |
%
growth 5 |
|
2.0% |
|
|
3.0% |
Total
revenues |
$ |
2,530,000 |
|
$ |
2,600,000 |
Products
and services revenues |
$ |
2,320,000 |
|
$ |
2,370,000 |
Freight
revenues |
$ |
210,000 |
|
$ |
230,000 |
Gross
profit |
$ |
620,000 |
|
$ |
640,000 |
Adjusted
gross profit 2 |
$ |
640,000 |
|
$ |
660,000 |
|
|
|
|
Cement |
|
|
|
Total
revenues |
$ |
390,000 |
|
$ |
405,000 |
Products
and services revenues |
$ |
375,000 |
|
$ |
390,000 |
Freight
revenues |
$ |
15,000 |
|
$ |
15,000 |
Gross
profit |
$ |
120,000 |
|
$ |
130,000 |
|
|
|
|
Ready Mixed Concrete and Asphalt and Paving |
|
|
|
Products
and services revenues |
$ |
1,205,000 |
|
$ |
1,235,000 |
Gross profit |
$ |
125,000 |
|
$ |
130,000 |
|
|
|
|
Magnesia Specialties Business |
|
|
|
Total
revenues |
$ |
280,000 |
|
$ |
285,000 |
Products
and services revenues |
$ |
255,000 |
|
$ |
260,000 |
Freight
revenues |
$ |
25,000 |
|
$ |
25,000 |
Gross profit |
$ |
95,000 |
|
$ |
100,000 |
|
|
|
|
|
|
|
*
Guidance range represents the low end and high end of the
respective line items provided above. |
1 2018
consolidated total revenues exclude $270 million related to
estimated interproduct sales. |
2 Adjusted gross profit is a non-GAAP financial measure and in
each case excludes a $20 million increase in costs of revenues from
the impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting. |
3 Adjusted EBITDA is a non-GAAP financial measure. See
appendix to this earnings release for a reconciliation to net
earnings attributable to Martin Marietta. |
4 Represents 2018 total aggregates volumes, which includes
approximately 10.7 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 and
0.9 million tons from the Company’s Forsyth, Georgia, quarry that
was divested in April 2018. |
5 ASP
growth range is in comparison with ASP of $13.46 per ton reported
for the full year 2017. The 2% to 3% ASP growth shown above
reflects the inclusion of legacy Bluegrass Materials pricing which
is below the heritage corporate average. |
|
Preliminary View of 2019
Management’s preliminary view of 2019
anticipates mid-single-digit growth in both aggregates pricing and
shipments. Supported by third-party forecasts, Martin Marietta
believes the current construction cycle will continue to expand at
a steady pace in 2019 for each of its three primary construction
end-use markets. Notably:
- Infrastructure construction
activity should benefit from the funding provided by the FAST Act
as state DOTs and contractors continue to address labor constraints
and the benefits of further regulatory reform emerge. Additionally,
state and local initiatives that support infrastructure funding,
including gas tax increases, bond programs and other ballot
initiatives, continue to garner voter approval at historically
attractive levels and will play an expanded role in public-sector
activity. Third-party forecasts support increased infrastructure
investment in 2019 and beyond, particularly for
aggregates-intensive highways and streets.
- Nonresidential construction
activity should increase in both the commercial and heavy
industrial sectors for the next several years across many of the
Company’s key markets as supported by third-party forecasts.
Continued federal regulatory approvals, supported by higher oil
prices, should notably contribute to increased aggregates
consumption from the next wave of energy-sector projects,
particularly along the Gulf Coast. Construction activity for these
projects is expected to begin in earnest in 2019 and beyond.
- Residential construction should
continue to grow. Management believes a shortage of single-family
housing units exists, particularly for entry-level homes; a need
the homebuilding industry is now beginning to address. Martin
Marietta’s leading positions in southeastern and southwestern
states offer superior opportunities for gains in single-family
housing driven by a multitude of factors, such as affordable land,
lower taxes and fewer regulatory barriers. Residential housing
starts of 1.2 million units for the trailing twelve months ended
September 2018 remain below the 50-year average of 1.5 million
annual starts. Continued strength in residential construction
supports future infrastructure and nonresidential activity.
Martin Marietta remains confident in its near-
and long-term outlooks given the disciplined execution of its
strategic plan and its attractive geographic footprint. Throughout
the Company’s portfolio, underlying market fundamentals, including
employment, population growth and state fiscal health, are robust
and the Company’s markets show no signs of either a slowdown or
being overbuilt.
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 accompanying appendix to this earnings
release.
Conference Call Information
The Company will discuss its third-quarter 2018
earnings results on a conference call and an online web simulcast
today (November 6, 2018). 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 information related to its third-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 1547199.
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; 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 or infrastructure projects funding, most
particularly in Texas, North Carolina, Iowa, Colorado, Georgia and
Maryland; 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; 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; continued 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.
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, or adversely affect or 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 thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Products and services
revenues |
|
$ |
1,142,218 |
|
|
$ |
1,022,487 |
|
|
$ |
3,024,300 |
|
|
$ |
2,811,646 |
|
Freight revenues |
|
|
77,422 |
|
|
|
65,245 |
|
|
|
199,747 |
|
|
|
183,470 |
|
Total
revenues |
|
|
1,219,640 |
|
|
|
1,087,732 |
|
|
|
3,224,047 |
|
|
|
2,995,116 |
|
|
|
|
|
|
|
|
|
|
Cost of revenues -
products and services |
|
|
828,110 |
|
|
|
730,459 |
|
|
|
2,282,159 |
|
|
|
2,097,272 |
|
Cost of revenues -
freight |
|
|
78,546 |
|
|
|
65,595 |
|
|
|
202,595 |
|
|
|
185,006 |
|
Total
cost of revenues |
|
|
906,656 |
|
|
|
796,054 |
|
|
|
2,484,754 |
|
|
|
2,282,278 |
|
Gross Profit |
|
|
312,984 |
|
|
|
291,678 |
|
|
|
739,293 |
|
|
|
712,838 |
|
|
|
|
|
|
|
|
|
|
Selling general &
administrative expenses |
|
|
68,441 |
|
|
|
57,219 |
|
|
|
209,632 |
|
|
|
195,127 |
|
Acquisition-related
expenses, net |
|
|
89 |
|
|
|
1,314 |
|
|
|
12,925 |
|
|
|
3,319 |
|
Other operating
expenses and (income), net |
|
|
3,792 |
|
|
|
6,181 |
|
|
|
(26,960 |
) |
|
|
(2,575 |
) |
Earnings
from operations |
|
|
240,662 |
|
|
|
226,964 |
|
|
|
543,696 |
|
|
|
516,967 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
35,468 |
|
|
|
23,141 |
|
|
|
103,526 |
|
|
|
68,037 |
|
Other nonoperating
income, net |
|
|
(4,248 |
) |
|
|
(479 |
) |
|
|
(19,873 |
) |
|
|
(6,434 |
) |
Earnings
before income tax expense |
|
|
209,442 |
|
|
|
204,302 |
|
|
|
460,043 |
|
|
|
455,364 |
|
Income tax expense |
|
|
29,089 |
|
|
|
52,763 |
|
|
|
84,147 |
|
|
|
119,277 |
|
Consolidated net
earnings |
|
|
180,353 |
|
|
|
151,539 |
|
|
|
375,896 |
|
|
|
336,087 |
|
Less: Net earnings
(loss) attributable to noncontrolling interests |
|
|
132 |
|
|
|
(7 |
) |
|
|
275 |
|
|
|
(72 |
) |
Net Earnings
Attributable to Martin Marietta Materials, Inc. |
|
$ |
180,221 |
|
|
$ |
151,546 |
|
|
$ |
375,621 |
|
|
$ |
336,159 |
|
|
|
|
|
|
|
|
|
|
Net earnings per common
share attributable to common shareholders: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.86 |
|
|
$ |
2.40 |
|
|
$ |
5.95 |
|
|
$ |
5.33 |
|
Diluted |
|
$ |
2.85 |
|
|
$ |
2.39 |
|
|
$ |
5.93 |
|
|
$ |
5.30 |
|
|
|
|
|
|
|
|
|
|
Dividends per common
share |
|
$ |
0.48 |
|
|
$ |
0.44 |
|
|
$ |
1.36 |
|
|
$ |
1.28 |
|
|
|
|
|
|
|
|
|
|
Average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
62,932 |
|
|
|
62,896 |
|
|
|
62,970 |
|
|
|
62,940 |
|
Diluted |
|
|
63,167 |
|
|
|
63,158 |
|
|
|
63,224 |
|
|
|
63,218 |
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Financial Highlights |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Total revenues: |
|
|
|
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
|
|
|
Mid-America Group |
|
$ |
377,005 |
|
|
$ |
308,472 |
|
|
$ |
906,377 |
|
|
$ |
788,390 |
|
Southeast
Group |
|
|
125,547 |
|
|
|
94,843 |
|
|
|
318,749 |
|
|
|
277,474 |
|
West
Group |
|
|
643,565 |
|
|
|
620,512 |
|
|
|
1,783,174 |
|
|
|
1,726,742 |
|
Total
Building Materials Business |
|
|
1,146,117 |
|
|
|
1,023,827 |
|
|
|
3,008,300 |
|
|
|
2,792,606 |
|
Magnesia
Specialties |
|
|
73,523 |
|
|
|
63,905 |
|
|
|
215,747 |
|
|
|
202,510 |
|
Total |
|
$ |
1,219,640 |
|
|
$ |
1,087,732 |
|
|
$ |
3,224,047 |
|
|
$ |
2,995,116 |
|
|
|
|
|
|
|
|
|
|
Gross profit
(loss): |
|
|
|
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
|
|
|
Mid-America Group |
|
$ |
131,331 |
|
|
$ |
117,957 |
|
|
$ |
270,461 |
|
|
$ |
242,778 |
|
Southeast
Group |
|
|
30,783 |
|
|
|
18,371 |
|
|
|
56,933 |
|
|
|
51,623 |
|
West
Group |
|
|
125,702 |
|
|
|
131,994 |
|
|
|
333,949 |
|
|
|
349,267 |
|
Total
Building Materials Business |
|
|
287,816 |
|
|
|
268,322 |
|
|
|
661,343 |
|
|
|
643,668 |
|
Magnesia
Specialties |
|
|
25,747 |
|
|
|
19,910 |
|
|
|
73,476 |
|
|
|
65,849 |
|
Corporate |
|
|
(579 |
) |
|
|
3,446 |
|
|
|
4,474 |
|
|
|
3,321 |
|
Total |
|
$ |
312,984 |
|
|
$ |
291,678 |
|
|
$ |
739,293 |
|
|
$ |
712,838 |
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses: |
|
|
|
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
|
|
|
Mid-America Group |
|
$ |
14,113 |
|
|
$ |
12,671 |
|
|
$ |
41,260 |
|
|
$ |
39,934 |
|
Southeast
Group |
|
|
4,440 |
|
|
|
4,097 |
|
|
|
13,689 |
|
|
|
12,896 |
|
West
Group |
|
|
26,600 |
|
|
|
24,716 |
|
|
|
79,892 |
|
|
|
75,665 |
|
Total
Building Materials Business |
|
|
45,153 |
|
|
|
41,484 |
|
|
|
134,841 |
|
|
|
128,495 |
|
Magnesia
Specialties |
|
|
2,404 |
|
|
|
2,329 |
|
|
|
7,512 |
|
|
|
7,146 |
|
Corporate |
|
|
20,884 |
|
|
|
13,406 |
|
|
|
67,279 |
|
|
|
59,486 |
|
Total |
|
$ |
68,441 |
|
|
$ |
57,219 |
|
|
$ |
209,632 |
|
|
$ |
195,127 |
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) from operations: |
|
|
|
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
|
|
|
Mid-America Group |
|
$ |
120,344 |
|
|
$ |
106,235 |
|
|
$ |
235,221 |
|
|
$ |
204,939 |
|
Southeast
Group |
|
|
26,372 |
|
|
|
17,882 |
|
|
|
60,464 |
|
|
|
42,331 |
|
West
Group |
|
|
92,090 |
|
|
|
96,522 |
|
|
|
249,885 |
|
|
|
270,246 |
|
Total
Building Materials Business |
|
|
238,806 |
|
|
|
220,639 |
|
|
|
545,570 |
|
|
|
517,516 |
|
Magnesia
Specialties |
|
|
23,301 |
|
|
|
17,590 |
|
|
|
65,867 |
|
|
|
58,589 |
|
Corporate |
|
|
(21,445 |
) |
|
|
(11,265 |
) |
|
|
(67,741 |
) |
|
|
(59,138 |
) |
Total |
|
$ |
240,662 |
|
|
$ |
226,964 |
|
|
$ |
543,696 |
|
|
$ |
516,967 |
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Financial Highlights
(Continued) |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Total revenues: |
|
|
|
|
|
|
|
|
Building
Materials business products and services: |
|
|
|
|
|
|
|
|
Aggregates |
|
$ |
687,800 |
|
|
$ |
590,312 |
|
|
$ |
1,778,124 |
|
|
$ |
1,619,282 |
|
Cement |
|
|
98,223 |
|
|
|
88,470 |
|
|
|
300,554 |
|
|
|
280,961 |
|
Ready
Mixed Concrete |
|
|
254,686 |
|
|
|
240,222 |
|
|
|
750,424 |
|
|
|
704,471 |
|
Asphalt
and paving |
|
|
99,983 |
|
|
|
110,973 |
|
|
|
199,489 |
|
|
|
215,652 |
|
Less: Interproduct sales |
|
|
(66,839 |
) |
|
|
(67,379 |
) |
|
|
(205,681 |
) |
|
|
(198,638 |
) |
Subtotal |
|
|
1,073,853 |
|
|
|
962,598 |
|
|
|
2,822,910 |
|
|
|
2,621,728 |
|
Freight |
|
|
72,264 |
|
|
|
61,229 |
|
|
|
185,390 |
|
|
|
170,878 |
|
Total
Building Materials Business |
|
|
1,146,117 |
|
|
|
1,023,827 |
|
|
|
3,008,300 |
|
|
|
2,792,606 |
|
Magnesia
Specialties business: |
|
|
|
|
|
|
|
|
Products
and services |
|
|
68,365 |
|
|
|
59,889 |
|
|
|
201,390 |
|
|
|
189,918 |
|
Freight |
|
|
5,158 |
|
|
|
4,016 |
|
|
|
14,357 |
|
|
|
12,592 |
|
Total
Magnesia Specialties Business |
|
|
73,523 |
|
|
|
63,905 |
|
|
|
215,747 |
|
|
|
202,510 |
|
Consolidated total revenues |
|
$ |
1,219,640 |
|
|
$ |
1,087,732 |
|
|
$ |
3,224,047 |
|
|
$ |
2,995,116 |
|
|
|
|
|
|
|
|
|
|
Gross profit
(loss): |
|
|
|
|
|
|
|
|
Building
Materials business products and services: |
|
|
|
|
|
|
|
|
Aggregates |
|
$ |
209,082 |
|
|
$ |
187,065 |
|
|
$ |
460,624 |
|
|
$ |
439,032 |
|
Cement |
|
|
32,543 |
|
|
|
27,459 |
|
|
|
97,582 |
|
|
|
87,608 |
|
Ready
Mixed Concrete |
|
|
20,632 |
|
|
|
23,913 |
|
|
|
66,226 |
|
|
|
70,542 |
|
Asphalt
and paving |
|
|
25,606 |
|
|
|
28,873 |
|
|
|
36,479 |
|
|
|
44,446 |
|
Subtotal |
|
|
287,863 |
|
|
|
267,310 |
|
|
|
660,911 |
|
|
|
641,628 |
|
Freight |
|
|
(47 |
) |
|
|
1,012 |
|
|
|
432 |
|
|
|
2,040 |
|
Total
Building Materials Business |
|
|
287,816 |
|
|
|
268,322 |
|
|
|
661,343 |
|
|
|
643,668 |
|
Magnesia
Specialties business: |
|
|
|
|
|
|
|
|
Products
and services |
|
|
26,823 |
|
|
|
21,272 |
|
|
|
76,756 |
|
|
|
69,425 |
|
Freight |
|
|
(1,076 |
) |
|
|
(1,362 |
) |
|
|
(3,280 |
) |
|
|
(3,576 |
) |
Total
Magnesia Specialties Business |
|
|
25,747 |
|
|
|
19,910 |
|
|
|
73,476 |
|
|
|
65,849 |
|
Corporate |
|
|
(579 |
) |
|
|
3,446 |
|
|
|
4,474 |
|
|
|
3,321 |
|
Consolidated gross profit |
|
$ |
312,984 |
|
|
$ |
291,678 |
|
|
$ |
739,293 |
|
|
$ |
712,838 |
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
|
Balance Sheet Data |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
September 30, |
|
|
|
|
2018 |
|
|
2017 |
|
|
2017 |
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
53,961 |
|
$ |
1,446,364 |
|
$ |
35,219 |
|
Accounts
receivable, net |
|
|
644,835 |
|
|
487,240 |
|
|
582,532 |
|
Inventories, net |
|
|
651,295 |
|
|
600,591 |
|
|
576,429 |
|
Other
current assets |
|
|
104,717 |
|
|
96,965 |
|
|
83,809 |
|
Property,
plant and equipment, net |
|
|
5,103,395 |
|
|
3,592,813 |
|
|
3,521,577 |
|
Intangible assets, net |
|
|
2,908,410 |
|
|
2,666,639 |
|
|
2,664,646 |
|
Other
noncurrent assets |
|
|
121,558 |
|
|
101,899 |
|
|
102,573 |
|
Total
assets |
|
$ |
9,588,171 |
|
$ |
8,992,511 |
|
$ |
7,566,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
Current
maturities of long-term debt and short-term facilities |
|
$ |
380,041 |
|
$ |
299,909 |
|
$ |
80,038 |
|
Other
current liabilities |
|
|
392,645 |
|
|
394,307 |
|
|
388,465 |
|
Long-term
debt (excluding current maturities) |
|
|
2,829,657 |
|
|
2,727,294 |
|
|
1,642,502 |
|
Other
noncurrent liabilities |
|
|
1,043,500 |
|
|
888,524 |
|
|
1,121,798 |
|
Total
equity |
|
|
4,942,328 |
|
|
4,682,477 |
|
|
4,333,982 |
|
Total
liabilities and equity |
|
$ |
9,588,171 |
|
$ |
8,992,511 |
|
$ |
7,566,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
|
Unaudited Statements of Cash
Flows |
|
(In thousands) |
|
|
Nine Months Ended |
|
|
September 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
Operating
activities: |
|
|
|
|
Consolidated net earnings |
$ |
375,896 |
|
|
$ |
336,087 |
|
|
Adjustments to reconcile consolidated net earnings to net cash
provided by operating activities: |
|
|
|
|
Depreciation, depletion and amortization |
|
253,200 |
|
|
|
221,418 |
|
|
Stock-based compensation expense |
|
23,084 |
|
|
|
23,698 |
|
|
Gain on
divestitures and sales of assets |
|
(35,167 |
) |
|
|
(17,970 |
) |
|
Deferred
income taxes |
|
68,833 |
|
|
|
6,543 |
|
|
Other
items, net |
|
(2,107 |
) |
|
|
(9,894 |
) |
|
Changes
in operating assets and liabilities, net of effects of acquisitions
and divestitures: |
|
|
|
|
Accounts
receivable, net |
|
(132,176 |
) |
|
|
(124,622 |
) |
|
Inventories, net |
|
(8,015 |
) |
|
|
(54,804 |
) |
|
Accounts
payable |
|
42,995 |
|
|
|
3,182 |
|
|
Other
assets and liabilities, net |
|
(145,005 |
) |
|
|
34,484 |
|
|
Net cash provided by
operating activities |
|
441,538 |
|
|
|
418,122 |
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Additions
to property, plant and equipment |
|
(262,155 |
) |
|
|
(308,745 |
) |
|
Acquisitions, net of cash acquired |
|
(1,640,698 |
) |
|
|
(7,200 |
) |
|
Proceeds
from divestitures and sales of assets |
|
63,460 |
|
|
|
33,138 |
|
|
Investments in life insurance contracts, net |
|
771 |
|
|
|
276 |
|
|
Payment
of railcar construction advances |
|
(56,033 |
) |
|
|
(42,954 |
) |
|
Reimbursement of railcar construction advances |
|
56,033 |
|
|
|
40,930 |
|
|
Net cash used for
investing activities |
|
(1,838,622 |
) |
|
|
(284,555 |
) |
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
Borrowings of long-term debt |
|
875,000 |
|
|
|
1,011,244 |
|
|
Repayments of long-term debt |
|
(695,039 |
) |
|
|
(975,035 |
) |
|
Payments
of deferred acquisition consideration |
|
(6,707 |
) |
|
|
- |
|
|
Payments
on capital leases |
|
(2,589 |
) |
|
|
(2,708 |
) |
|
Debt
issue costs |
|
(3,194 |
) |
|
|
(1,989 |
) |
|
Change in
bank overdraft |
|
- |
|
|
|
1,047 |
|
|
Contributions by noncontrolling interest to joint venture |
|
- |
|
|
|
211 |
|
|
Repurchases of common stock |
|
(60,377 |
) |
|
|
(99,999 |
) |
|
Dividends
paid |
|
(86,190 |
) |
|
|
(80,961 |
) |
|
Purchase
of remaining interest in existing joint venture |
|
(12,800 |
) |
|
|
- |
|
|
Proceeds
from exercise of stock options |
|
6,993 |
|
|
|
10,017 |
|
|
Shares
withheld for employees' income tax obligations |
|
(10,416 |
) |
|
|
(10,213 |
) |
|
Net cash provided by
(used for) financing activities |
|
4,681 |
|
|
|
(148,386 |
) |
|
|
|
|
|
|
Net decrease in cash
and cash equivalents |
|
(1,392,403 |
) |
|
|
(14,819 |
) |
|
Cash and cash
equivalents, beginning of period |
|
1,446,364 |
|
|
|
50,038 |
|
|
Cash and cash
equivalents, end of period |
$ |
53,961 |
|
|
$ |
35,219 |
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Operational Highlights |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, 2018 |
|
September 30, 2018 |
|
Volume |
|
Pricing |
|
Volume |
|
Pricing |
Volume/Pricing
Variance (1) |
|
|
|
|
|
|
|
Heritage
Operations:(2) |
|
|
|
|
|
|
|
Mid-America Group |
|
5.4 |
% |
|
|
2.8 |
% |
|
|
1.5 |
% |
|
|
4.5 |
% |
Southeast
Group |
|
6.2 |
% |
|
|
1.7 |
% |
|
|
(0.7 |
%) |
|
|
1.7 |
% |
West
Group |
|
(0.6 |
%) |
|
|
3.1 |
% |
|
|
(0.9 |
%) |
|
|
2.4 |
% |
Total
Heritage Aggregates Product Line |
|
3.2 |
% |
|
|
2.9 |
% |
|
|
0.2 |
% |
|
|
3.3 |
% |
Total Aggregates
Product Line (3) |
|
14.9 |
% |
|
|
1.5 |
% |
|
|
7.4 |
% |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, |
|
September 30, |
Shipments (tons in thousands) |
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Heritage
Operations:(2) |
|
|
|
|
|
|
|
Mid-America Group |
|
22,533 |
|
|
|
21,371 |
|
|
|
55,453 |
|
|
|
54,624 |
|
Southeast
Group |
|
5,682 |
|
|
|
5,349 |
|
|
|
15,465 |
|
|
|
15,579 |
|
West
Group |
|
16,979 |
|
|
|
17,085 |
|
|
|
49,186 |
|
|
|
49,637 |
|
Total
Heritage Aggregates Product Line |
|
45,194 |
|
|
|
43,805 |
|
|
|
120,104 |
|
|
|
119,840 |
|
Acquisitions |
|
5,130 |
|
|
|
- |
|
|
|
8,558 |
|
|
|
- |
|
Total Aggregates
Product Line (3) |
|
50,324 |
|
|
|
43,805 |
|
|
|
128,662 |
|
|
|
119,840 |
|
|
|
|
|
|
|
|
|
(1)
Volume/pricing variances reflect the percentage increase (decrease)
from the comparable period in the prior year. |
(2)
Heritage aggregates operations exclude acquisitions that were not
included in prior-year operations for a full year. |
(3)
Aggregates Product Line includes acquisitions from the date of
acquisition and divestitures through the date of disposal. |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Shipments (in thousands) |
|
|
|
|
|
|
|
Aggregates tons - external customers |
|
47,442 |
|
|
|
40,787 |
|
|
|
120,509 |
|
|
|
111,617 |
|
Internal
aggregates tons used in other product lines |
|
2,882 |
|
|
|
3,018 |
|
|
|
8,154 |
|
|
|
8,223 |
|
Total
aggregates tons |
|
50,324 |
|
|
|
43,805 |
|
|
|
128,663 |
|
|
|
119,840 |
|
|
|
|
|
|
|
|
|
Cement
tons - external customers |
|
587 |
|
|
|
523 |
|
|
|
1,767 |
|
|
|
1,749 |
|
Internal
cement tons used in other product lines |
|
292 |
|
|
|
294 |
|
|
|
966 |
|
|
|
895 |
|
Total
cement tons |
|
879 |
|
|
|
817 |
|
|
|
2,733 |
|
|
|
2,644 |
|
|
|
|
|
|
|
|
|
Ready
Mixed Concrete - cubic yards |
|
2,232 |
|
|
|
2,160 |
|
|
|
6,799 |
|
|
|
6,442 |
|
|
|
|
|
|
|
|
|
Asphalt
tons - external customers |
|
394 |
|
|
|
385 |
|
|
|
803 |
|
|
|
863 |
|
Internal
asphalt tons used in road paving business |
|
709 |
|
|
|
829 |
|
|
|
1,420 |
|
|
|
1,615 |
|
Total
asphalt tons |
|
1,103 |
|
|
|
1,214 |
|
|
|
2,223 |
|
|
|
2,478 |
|
|
|
|
|
|
|
|
|
Average unit
sales price by product line (including internal
sales): |
|
|
|
|
|
|
|
Aggregates (per ton): |
|
|
|
|
|
|
|
Heritage |
$ |
13.79 |
|
|
$ |
13.40 |
|
|
$ |
13.87 |
|
|
$ |
13.43 |
|
Acquisition |
$ |
11.86 |
|
|
$ |
- |
|
|
$ |
11.95 |
|
|
$ |
- |
|
Total |
$ |
13.60 |
|
|
$ |
13.40 |
|
|
$ |
13.74 |
|
|
$ |
13.43 |
|
Cement
(per ton) |
$ |
110.63 |
|
|
$ |
107.11 |
|
|
$ |
108.92 |
|
|
$ |
105.26 |
|
Ready
Mixed Concrete (per cubic yard) |
$ |
112.14 |
|
|
$ |
109.22 |
|
|
$ |
108.36 |
|
|
$ |
107.34 |
|
Asphalt
(per ton) |
$ |
44.40 |
|
|
$ |
44.73 |
|
|
$ |
44.39 |
|
|
$ |
43.08 |
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Non-GAAP Financial
Measures |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
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 September 30, 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 September 30, 2018, for the
trailing-12 months EBITDA. For supporting calculations, refer to
the Company's website at www.martinmarietta.com. |
|
|
|
|
|
|
|
|
|
|
Twelve Month Period |
|
|
|
|
|
|
|
October 1, 2017
to |
|
|
|
|
|
|
|
September 30, 2018 |
|
|
|
|
Earnings from
continuing operations attributable to Martin Marietta Materials,
Inc. |
|
|
$ |
752,804 |
|
|
|
|
|
Add back: |
|
|
|
|
|
|
|
Interest
expense |
|
|
|
126,976 |
|
|
|
|
|
Depreciation, depletion and amortization expense |
|
|
|
325,410 |
|
|
|
|
|
Stock-based compensation expense |
|
|
|
29,846 |
|
|
|
|
|
Acquisition-related expenses, net |
|
|
|
36,656 |
|
|
|
|
|
Bluegrass
EBITDA - Pre-Acquisition (October 1, 2017 to April 27, 2018) |
|
|
|
43,417 |
|
|
|
|
|
Noncash
portion of restructuring expenses |
|
|
|
5,245 |
|
|
|
|
|
Deduct: |
|
|
|
|
|
|
|
Income
tax benefit |
|
|
|
(129,691 |
) |
|
|
|
|
Interest
income |
|
|
|
(7,149 |
) |
|
|
|
|
Consolidated EBITDA, as
defined by the Company's Credit Agreement |
|
|
$ |
1,183,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Net Debt, as defined and including debt
for which the Company is a co-borrower, at September 30, 2018 |
|
$ |
3,224,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Debt-to-Consolidated EBITDA, as defined by the
Company's Credit Agreement, at September 30, 2018, for the
trailing-12 months EBITDA |
|
2.72 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: |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Consolidated Earnings
Before Interest, Income Taxes, Depreciation, Depletion and
Amortization (EBITDA) |
$ |
333,433 |
|
|
$ |
301,962 |
|
|
$ |
813,361 |
|
|
$ |
741,974 |
|
|
|
|
|
|
|
|
|
A
Reconciliation of Net Earnings Attributable to Martin Marietta to
Consolidated EBITDA is as follows: |
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Net Earnings
Attributable to Martin Marietta |
$ |
180,221 |
|
|
$ |
151,546 |
|
|
$ |
375,621 |
|
|
$ |
336,159 |
|
Add back: |
|
|
|
|
|
|
|
Interest
Expense |
|
35,468 |
|
|
|
23,141 |
|
|
|
103,526 |
|
|
|
68,037 |
|
Income Tax
Expense for Controlling Interests |
|
29,051 |
|
|
|
52,744 |
|
|
|
84,070 |
|
|
|
119,247 |
|
Depreciation,
Depletion and Amortization Expense |
|
88,693 |
|
|
|
74,531 |
|
|
|
250,144 |
|
|
|
218,531 |
|
Consolidated
EBITDA |
$ |
333,433 |
|
|
$ |
301,962 |
|
|
$ |
813,361 |
|
|
$ |
741,974 |
|
|
|
|
|
|
|
|
|
Aggregates shipments in the Southeast Group for January
through April of 2018 and the nine months ended September 30, 2017
include the Forsyth, Georgia operation, which was divested in April
2018. |
|
|
|
|
|
|
|
|
The following table presents aggregates shipment data
and volume variance excluding the Forsyth, Georgia operation from
the periods of Martin Marietta's ownership to provide a more
comparable analysis of aggregates volume variance (tons in
000s). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Southeast
Group: |
|
|
|
|
|
|
|
Reported heritage
aggregates shipments |
|
5,682 |
|
|
|
5,349 |
|
|
|
15,465 |
|
|
|
15,579 |
|
Less: Aggregates
shipments for the Forsyth, Georgia quarry during periods of Martin
Marietta ownership |
|
- |
|
|
|
(272 |
) |
|
|
(229 |
) |
|
|
(680 |
) |
Adjusted heritage
aggregates shipments |
|
5,682 |
|
|
|
5,077 |
|
|
|
15,236 |
|
|
|
14,899 |
|
|
|
|
|
|
|
|
|
Heritage aggregates
volume variance excluding shipments for the Forsyth, Georgia
quarry |
|
11.9 |
% |
|
|
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
Total Heritage
Business: |
|
|
|
|
|
|
|
Reported heritage
aggregates shipments |
|
45,194 |
|
|
|
43,805 |
|
|
|
120,104 |
|
|
|
119,840 |
|
Less: Aggregates
shipments for the Forsyth, Georgia quarry during periods of Martin
Marietta ownership |
|
- |
|
|
|
(272 |
) |
|
|
(229 |
) |
|
|
(680 |
) |
Adjusted heritage
aggregates shipments |
|
45,194 |
|
|
|
43,533 |
|
|
|
119,875 |
|
|
|
119,160 |
|
|
|
|
|
|
|
|
|
Heritage aggregates
volume variance excluding shipments for the Forsyth, Georgia
quarry |
|
3.8 |
% |
|
|
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Non-GAAP Financial Measures
(continued) |
(Dollars and number of shares in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted consolidated gross profit, adjusted
consolidated earnings from operations and adjusted consolidated
EBITDA for the three months ended September 30, 2018 and 2017,
exclude the impact of acquisition-related expenses, net; the impact
of selling acquired inventory after its markup to fair value as
part of acquisition accounting; and the impact of restructuring
charges. Acquisition-related expenses, net, consist of
acquisition and integration expenses and the nonrecurring gain on
the required divestiture of a legacy Martin Marietta quarry in
Georgia as part of the acquisition of Bluegrass Materials.
Adjusted consolidated gross profit, adjusted consolidated earnings
from operations and adjusted EBITDA represent non-GAAP financial
measures. Management presents these measures for investors and
analysts to evaluate and forecast the Company's financial results,
as acquisition-related expenses, net; the impact of selling
acquired inventory after its markup to fair value as part of
acquisition accounting; and restructuring charges are
nonrecurring. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reconciles consolidated gross profit in
accordance with GAAP to adjusted consolidated gross profit for the
three months ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Consolidated gross profit in accordance with GAAP |
$ |
312,984 |
|
|
$ |
291,678 |
|
Add back: |
|
|
|
Impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting |
|
8,349 |
|
|
|
- |
|
Adjusted gross profit |
$ |
321,333 |
|
|
$ |
291,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reconciles consolidated earnings from
operations in accordance with GAAP to adjusted consolidated
earnings from operations for the three months ended September
30: |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Consolidated earnings from operations in accordance with
GAAP |
$ |
240,662 |
|
|
$ |
226,964 |
|
Add back: |
|
|
|
Acquisition-related expenses, net |
|
89 |
|
|
|
1,314 |
|
Impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting |
|
8,349 |
|
|
|
- |
|
Restructuring charge |
|
7,113 |
|
|
|
- |
|
Adjusted consolidated earnings from operations |
$ |
256,213 |
|
|
$ |
228,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reconciles consolidated EBITDA to
adjusted consolidated EBITDA for the three months ended September
30: |
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Consolidated EBITDA |
$ |
333,433 |
|
|
$ |
301,962 |
|
Add back: |
|
|
|
Acquisition-related expenses, net |
|
89 |
|
|
|
1,314 |
|
Impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting |
|
8,349 |
|
|
|
- |
|
Restructuring charge |
|
7,113 |
|
|
|
- |
|
Adjusted consolidated EBITDA |
$ |
348,984 |
|
|
$ |
303,276 |
|
|
|
|
|
Adjusted gross margin for aggregates products excludes
the impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting and is a non-GAAP
measure. Management presents this measure for investors and
analysts to evaluate and forecast the Company's financial results,
as the impact of selling acquired inventory after its markup to
fair value as part of acquisition accounting is nonrecurring. |
|
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|
The following reconciles gross margin for aggregates
products to adjusted gross margin for aggregates products for the
three months ended September 30, 2018: |
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|
|
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Gross profit for aggregates products |
$ |
209,082 |
|
|
$ |
187,065 |
|
Total
revenues for aggregates products |
$ |
687,800 |
|
|
$ |
590,312 |
|
Gross margin for aggregates products in accordance with
GAAP |
|
30.4 |
% |
|
|
31.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit for aggregates products in accordance with
GAAP |
$ |
209,082 |
|
|
|
Add back: |
|
|
|
Impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting |
$ |
8,349 |
|
|
|
Adjusted gross profit for aggregates products |
$ |
217,431 |
|
|
|
Total revenues for aggregates products |
$ |
687,800 |
|
|
|
Adjusted gross margin for aggregates products |
|
31.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
|
Non-GAAP Financial Measures
(continued) |
|
(Dollars in thousands) |
|
|
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|
|
|
|
|
|
|
|
|
|
The following are reconciliations of the GAAP
measure for the midpoints of the 2018 guidance to the midpoints of
the adjusted metrics included in the 2018 guidance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Guidance - Consolidated gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated gross profit in accordance with GAAP |
$ |
980,000 |
|
Add
back: |
|
|
Impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting |
|
20,000 |
|
Adjusted consolidated gross profit |
|
|
|
$ |
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Guidance - Aggregates product gross
profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregates
product gross profit in accordance with GAAP |
$ |
630,000 |
|
Add
back: |
|
|
Impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting |
|
20,000 |
|
Adjusted aggregates product gross profit |
|
|
|
$ |
650,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Guidance - Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Earnings Attributable to Martin Marietta |
$ |
482,500 |
|
Add
back: |
|
|
Interest Expense |
|
137,500 |
|
Taxes on Income |
|
120,500 |
|
Depreciation, Depletion and Amortization Expense |
|
340,000 |
|
EBITDA |
$ |
1,080,500 |
|
Add back: |
|
|
Bluegrass acquisition-related expenses, net |
|
15,000 |
|
Impact of selling acquired inventory after its markup to fair
value as part of acquisition accounting |
|
20,000 |
|
Restructuring charge |
|
7,000 |
|
Adjusted
EBITDA |
$ |
1,122,500 |
|
|
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