Company Achieved First-Quarter Records
for Revenues and EBITDA, and Strong Gains in Other Key Financial
Metrics
Martin Marietta Materials, Inc. (NYSE:MLM) today reported results
for the first quarter ended March 31, 2019.
Highlights include:
|
Quarter ended March 31, |
($ in
thousands, except per share) |
|
2019 |
|
2018 |
Total
revenues 1 |
$ |
938,955 |
$ |
802,004 |
Products and services revenues 2 |
$ |
878,305 |
$ |
753,305 |
Building
Materials business |
$ |
809,131 |
$ |
688,436 |
Magnesia
Specialties business |
$ |
69,174 |
$ |
64,869 |
Gross
profit |
$ |
142,907 |
$ |
110,392 |
Earnings from operations |
$ |
69,221 |
$ |
39,081 |
Net
earnings attributable to Martin Marietta |
$ |
42,853 |
$ |
10,023 |
EBITDA (adjusted EBITDA for 2018) 3 |
$ |
158,885 |
$ |
123,973 |
Earnings per diluted share |
$ |
0.68 |
$ |
0.16 |
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
EBITDA, including adjusted EBITDA for 2018, 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 Company delivered strong
operating and financial performance for the first three months of
2019, including first-quarter records for revenues and EBITDA
(Earnings Before Interest, Taxes, and Depreciation and
Amortization). Driven by improved shipments, pricing and cost
management, we are off to a promising start to what we expect to be
another record year for Martin Marietta. Notably, the Building
Materials business benefitted from robust pent-up demand as well as
modestly improved weather across portions of our geographic
footprint, which allowed for an early beginning to the construction
season. These encouraging trends, combined with favorable pricing
momentum and growing contractor backlogs, reaffirm our confidence
in our full-year outlook.
“Consistent with our expectations, construction
activity in our key regions, supported by strengthening public- and
private-sector spending, is outpacing the nation as a whole.
Infrastructure construction has begun in earnest on several
transportation projects in North Carolina, Georgia and Florida
following the recent acceleration in public lettings and contract
awards in these key states. Additionally, notable employment gains
and population growth continue to support private-sector strength
in our leading markets. These favorable dynamics bode well for a
busy construction season throughout the remainder of the year.”
Mr. Nye concluded, “This year, Martin Marietta
celebrates 25 years as a public company. We have established a
proven record of value creation and will continue to build upon our
success by focusing on price discipline, strategic geographic
positioning and prudent capital allocation. We remain committed to
the diligent execution of our strategic plan and further
enhancement of the world-class attributes of our business –
including safety, cost discipline and operational excellence. We
believe Martin Marietta is firmly positioned for continued growth
and enhanced shareholder value in 2019 and beyond.”
First-Quarter Operating
Results(All comparisons are versus the prior-year quarter
unless noted otherwise)
|
|
Quarter ended March 31, 2019 |
($ in thousands) |
|
Revenues |
|
Gross profit (loss) |
Gross margin |
Building Materials business: |
|
|
|
|
|
Products
and services: |
|
|
|
|
|
Aggregates |
$ |
541,473 |
|
$ |
97,562 |
|
18.0% |
Cement |
|
99,017 |
|
|
13,779 |
|
13.9% |
Ready mixed concrete |
|
211,156 |
|
|
14,492 |
|
6.9% |
Asphalt and paving |
|
15,846 |
|
|
(7,829 |
) |
(49.4%) |
Less: interproduct revenues |
|
(58,361 |
) |
|
--- |
|
--- |
Products
and services |
|
809,131 |
|
|
118,004 |
|
14.6% |
Freight |
|
55,750 |
|
|
(165 |
) |
NM |
Total Building Materials business |
|
864,881 |
|
|
117,839 |
|
13.6% |
Magnesia Specialties business: |
|
|
|
|
|
|
|
Products
and services |
|
69,174 |
|
|
26,607 |
|
38.5% |
Freight |
|
4,900 |
|
|
(1,065 |
) |
NM |
Total Magnesia Specialties business |
|
74,074 |
|
|
25,542 |
|
34.5% |
Corporate |
|
--- |
|
|
(474 |
) |
NM |
Total |
$ |
938,955 |
|
$ |
142,907 |
|
15.2% |
|
|
Quarter ended March 31, 2018 |
($ in thousands) |
|
Revenues |
|
Gross profit (loss) |
Gross margin |
Building Materials business: |
|
|
|
|
|
Products
and services: |
|
|
|
|
|
Aggregates |
$ |
425,016 |
|
$ |
53,002 |
|
12.5% |
Cement |
|
89,183 |
|
|
23,734 |
|
26.6% |
Ready mixed concrete |
|
218,537 |
|
|
15,641 |
|
7.2% |
Asphalt and paving |
|
16,365 |
|
|
(7,639 |
) |
(46.7%) |
Less: interproduct revenues |
|
(60,665 |
) |
|
--- |
|
--- |
Products
and services |
|
688,436 |
|
|
84,738 |
|
12.3% |
Freight |
|
44,306 |
|
|
(119 |
) |
NM |
Total Building Materials business |
|
732,742 |
|
|
84,619 |
|
11.5% |
Magnesia Specialties business: |
|
|
|
|
|
Products
and services |
|
64,869 |
|
|
25,063 |
|
38.6% |
Freight |
|
4,393 |
|
|
(1,174 |
) |
NM |
Total Magnesia Specialties business |
|
69,262 |
|
|
23,889 |
|
34.5% |
Corporate |
|
--- |
|
|
1,884 |
|
NM |
Total |
$ |
802,004 |
|
$ |
110,392 |
|
13.8% |
Building Materials Business
First-quarter operating results demonstrate the
robust underlying demand that was masked in 2018 by weather,
contractor capacity and logistics disruptions. While winter weather
traditionally limits the ability of outdoor contractors to perform
work, the Company experienced relatively better weather during the
first three months of 2019. This allowed contractors to begin
addressing backlogs with an earlier-than-normal start to the
construction season. The notable exception was in the Company’s
second-largest state by revenues, Colorado, which experienced one
of its harshest winters on record, delaying the onset of meaningful
construction activity.
Aggregates
First-quarter heritage aggregates volume and
pricing improved 12.5 percent and 4.0 percent,
respectively.
- Shipments for the Mid-America Group heritage operations
increased 18.4 percent, primarily driven by infrastructure,
commercial and residential projects in the Carolinas. Heritage
pricing improved 3.1 percent despite unfavorable product mix from
increased shipments of lower-priced base stone in 2019.
- Shipments for the Southeast Group heritage operations increased
16.7 percent, reflecting the overall strength of the North Georgia
and Florida markets. Heritage pricing improved 6.2
percent.
- West Group shipments increased 6.3 percent as strong
nonresidential construction activity in Texas more than offset
weather-impacted Colorado shipments. Product and geographic mix
limited West Group pricing growth to 2.7 percent.
Inclusive of acquired operations, aggregates volume
and pricing improved 24.2 percent and 2.3 percent, respectively.
Acquired operations shipped 3.5 million tons at selling prices that
are approximately 15 percent below the Company’s average.
Martin Marietta’s first-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 increased 2
percent as modestly improved weather, particularly in the
Southeast, allowed contractors to advance transportation-related
projects earlier in the construction season. Following more than a
decade of underinvestment, management remains confident that
infrastructure demand is poised for meaningful growth. Funding
provided by the Fixing America’s Surface Transportation Act (FAST
Act), combined with numerous state and local transportation
initiatives, has resulted in an acceleration in lettings and
contract awards in key states, including Texas, Colorado, North
Carolina, Georgia and Florida. For the quarter, the infrastructure
market represented 33 percent of aggregates shipments, which is
below the Company’s most recent ten-year average of 46 percent but
consistent with first-quarter historical trends.
Nonresidential Market
- Aggregates shipments to the nonresidential market increased 33
percent, driven by both commercial and heavy industrial
construction activity. The Company continued to benefit from robust
distribution center, warehouse, data center and wind turbine
projects in key geographies, including Texas, the Carolinas,
Georgia and Iowa. The nonresidential market represented 37 percent
of first-quarter aggregates shipments.
Residential Market
- Aggregates shipments to the residential market increased 8
percent, driven by weather-deferred homebuilding activity in the
Carolinas, Georgia and Florida. Despite the recent slowdown in
housing unit starts at the national level, 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, steady
interest rates and efficient permitting. On a national level,
housing starts remain below the 50-year annual average of 1.5
million despite notable population gains. The residential market
accounted for 23 percent of first-quarter aggregates
shipments.
ChemRock/Rail Market
- The ChemRock/Rail market accounted for the remaining 7 percent
of first-quarter aggregates shipments. Volumes to this sector
decreased 9 percent, driven by reduced agricultural lime shipments
from a depressed farm economy. Additionally, ballast shipments
declined due to lower maintenance spending by western Class I
railroads.
Aggregates product gross margin increased 550 basis
points to 18.0 percent, reflecting improved operating leverage from
increased shipment and production levels.
Cement
Cement shipments and pricing increased 7.3 percent
and 3.8 percent, respectively, as these operations benefitted from
solid underlying demand in Texas, a new Houston-area sales yard and
enhanced product line. Extended maintenance outages, including the
acceleration of maintenance activities originally planned for later
in the year, and higher transportation costs contributed to
the 1,270-basis-point reduction in product gross margin to 13.9
percent.
Downstream businesses
Ready mixed concrete shipments decreased 3.8
percent, driven by cold and wet winter weather in Colorado.
Overall, ready mixed concrete prices improved 0.5 percent for the
quarter, led by a 3.0 percent increase in Colorado.
Restructuring initiatives implemented in 2018 have improved
profitability for the Southwest ready mixed concrete business
despite relatively flat shipments. Colorado asphalt shipments
declined while pricing improved 3.9 percent.
Magnesia Specialties Business
Magnesia Specialties product revenues increased 6.6
percent to a record $69.2 million as the business continued to
benefit from strong domestic steel production and increased global
demand for magnesia chemical products. Product gross margin
was relatively flat at 38.5 percent as pricing gains and production
efficiencies were offset by higher costs for supplies and contract
services.
Consolidated
Other operating income, net, included the reversal
of a $4.2 million purchase accounting accrual related to the Texas
Industries, Inc. acquisition.
The Company recorded a discrete income tax benefit
of $13.2 million related to a change in tax election for an
acquired entity.
Liquidity and Capital
Resources
Cash provided by operating activities was $117.9
million in 2019 compared with $105.0 million in 2018.
Cash paid for property, plant and equipment
additions during the first quarter was $130.1 million.
Capital expenditures for the full year are expected to range from
$350 million to $400 million as the Company continues to prudently
deploy capital into the business.
At March 31, 2019, the Company’s ratio of
consolidated net debt-to-consolidated EBITDA, as defined in the
applicable credit agreement, for the trailing twelve months was 2.7
times.
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.
The Company has returned $1.4 billion to
shareholders in the form of dividend payments and share repurchases
since announcing a 20 million share repurchase authorization in
February 2015. As of March 31, 2019, 14.1 million shares remained
under the current repurchase authorization and 62.5 million shares
of Martin Marietta common stock were outstanding.
Full-Year Outlook
Martin Marietta remains confident in its previously
announced full-year outlook. The Company’s geographic footprint has
attractive underlying market fundamentals, including notable
employment gains, population growth and superior state fiscal
health – all attributes promoting steady and sustainable
construction growth. Supported by robust underlying demand
and third-party forecasts, Martin Marietta believes the current
construction cycle will continue for the foreseeable future and
expand further this year for each of the Company’s three primary
construction end-use markets. Notably:
- Infrastructure construction, particularly for
aggregates-intensive highways and streets, should benefit from
recent accelerations in state lettings and contract awards in key
Martin Marietta states, continued FAST Act funding, and regulatory
reform that allows for reduced permitting time for large projects.
Importantly, states will continue to play an expanded role in
infrastructure investment. Incremental funding at the state
and local levels, through bond issuances, toll roads and tax
initiatives, should grow at faster near-term rates than federal
funding. Martin Marietta’s top ten states – Texas, Colorado, North
Carolina, Georgia, Iowa, Florida, South Carolina, Indiana, Maryland
and Nebraska – accounted for 85 percent of total Building
Materials’ revenues in 2018 and have all introduced incremental
transportation funding measures within the last five years.
Third-party forecasts also predict increased infrastructure
investment this year and beyond.
- Nonresidential construction should increase in both the
commercial and heavy industrial sectors for the next several years
across many of the Company’s key markets. Both the Architectural
Billings Index and Dodge Momentum Index indicate healthy commercial
construction activity throughout the year. Continued federal
regulatory approvals should notably contribute to increased heavy
building materials consumption from the next wave of large
energy-sector projects, particularly along the Gulf Coast.
Construction activity for these projects is expected to begin in
earnest this year and continue for several years thereafter.
- Residential construction should continue to grow within Martin
Marietta’s geographic footprint, particularly as mortgage
rates have stabilized and homebuilders are beginning to address the
need for more affordable homes. The Company’s leading
positions in southeastern and southwestern states offer superior
opportunities for gains in both multi- and single-family housing,
driven by a multitude of factors, such as available land, an
overall business-friendly environment and fewer regulatory
barriers. The Company believes that permits represent the
best indicator of future housing construction. Martin Marietta’s
top ten states outpaced the nation in housing unit permit growth
for the trailing twelve months ended March 2019 for all three
residential categories: total, multi-family and single-family.
Continued strength in residential construction supports
future infrastructure and nonresidential activity.
Based on current trends and expectations,
management has reaffirmed its full-year guidance as
follows:
- Aggregates shipments by end-use market compared with 2018
levels are as follows:
- Infrastructure shipments to increase
in the high-single digits.
- Nonresidential shipments to increase
in the mid- to high-single digits.
- Residential shipments to increase in
the mid-single digits.
- ChemRock/Rail shipments to be up
slightly.
|
|
2019 GUIDANCE |
($ and
tons in thousands, except per ton) |
Low * |
|
High * |
Consolidated |
|
|
|
Total revenues
1 |
$ |
4,480,000 |
|
|
$ |
4,680,000 |
|
Products
and services revenues |
$ |
4,230,000 |
|
|
$ |
4,380,000 |
|
Freight
revenues |
$ |
250,000 |
|
|
$ |
300,000 |
|
Gross profit |
$ |
1,110,000 |
|
|
$ |
1,210,000 |
|
|
|
|
|
Selling, general and administrative expenses (SG&A) |
$ |
300,000 |
|
|
$ |
310,000 |
|
Interest expense |
$ |
130,000 |
|
|
$ |
140,000 |
|
Estimated tax rate (excluding discrete events) |
|
20 |
% |
|
|
22 |
% |
Net earnings attributable to Martin Marietta |
$ |
520,000 |
|
|
$ |
620,000 |
|
EBITDA 2 |
$ |
1,170,000 |
|
|
$ |
1,280,000 |
|
Capital expenditures |
$ |
350,000 |
|
|
$ |
400,000 |
|
|
|
|
|
|
|
|
|
Building Materials Business |
|
|
|
|
|
|
|
Aggregates |
|
|
|
|
|
|
|
Volume
(total tons) 3 |
|
180,000 |
|
|
|
185,000 |
|
% growth
3 |
|
6.0 |
% |
|
|
8.0 |
% |
Average
selling price per ton (ASP) |
$ |
14.15 |
|
|
$ |
14.40 |
|
% growth
4 |
|
3.0 |
% |
|
|
5.0 |
% |
Total
revenues |
$ |
2,800,000 |
|
|
$ |
2,910,000 |
|
Products
and services revenues |
$ |
2,590,000 |
|
|
$ |
2,650,000 |
|
Freight
revenues |
$ |
210,000 |
|
|
$ |
260,000 |
|
Gross
profit |
$ |
755,000 |
|
|
$ |
810,000 |
|
|
|
|
|
Cement |
|
|
|
Total
revenues |
$ |
420,000 |
|
|
$ |
450,000 |
|
Products and services revenues |
$ |
400,000 |
|
|
$ |
430,000 |
|
Freight revenues |
$ |
20,000 |
|
|
$ |
20,000 |
|
Gross
profit |
$ |
130,000 |
|
|
$ |
150,000 |
|
|
|
|
|
Ready Mixed Concrete and Asphalt and Paving |
|
|
|
Products
and services revenues |
$ |
1,240,000 |
|
|
$ |
1,310,000 |
|
Gross profit |
$ |
130,000 |
|
|
$ |
150,000 |
|
|
|
|
|
Magnesia Specialties Business |
|
|
|
Total
revenues |
$ |
290,000 |
|
|
$ |
300,000 |
|
Products and services revenues |
$ |
270,000 |
|
|
$ |
280,000 |
|
Freight revenues |
$ |
20,000 |
|
|
$ |
20,000 |
|
Gross profit |
$ |
100,000 |
|
|
$ |
105,000 |
|
* Guidance range represents the low end and
high end of the respective line items provided above.
1 2019 consolidated total revenues
exclude $270 million to $290 million related to estimated
interproduct sales.2 EBITDA is a non-GAAP financial
measure. See appendix to this earnings release for a
reconciliation to net earnings attributable to Martin
Marietta.3 Represents total aggregates volumes, which
includes approximately 10.9 million internal tons. Volume growth
ranges are in comparison with total volumes of 170.8 million tons
for the full year 2018, which included 10.6 million internal
tons.4 ASP growth range is in comparison with ASP of
$13.71 per ton for the full year 2018.
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 first-quarter 2019
earnings results on a conference call and an online web simulcast
today (April 30, 2019). The live broadcast of the Martin Marietta
conference call will begin at 11:00 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 5598123.
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, Colorado, North
Carolina, Georgia, Iowa 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, product and/or geographic mix
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 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; 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, 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 |
|
|
|
March 31, |
|
|
|
|
2019 |
|
|
|
2018 |
|
|
Products and services
revenues |
|
$ |
878,305 |
|
|
$ |
753,305 |
|
|
Freight revenues |
|
|
60,650 |
|
|
|
48,699 |
|
|
Total
revenues |
|
|
938,955 |
|
|
|
802,004 |
|
|
|
|
|
|
|
|
Cost of revenues -
products and services |
|
|
734,168 |
|
|
|
641,620 |
|
|
Cost of revenues -
freight |
|
|
61,880 |
|
|
|
49,992 |
|
|
Total
cost of revenues |
|
|
796,048 |
|
|
|
691,612 |
|
|
Gross Profit |
|
|
142,907 |
|
|
|
110,392 |
|
|
|
|
|
|
|
|
Selling general &
administrative expenses |
|
|
78,292 |
|
|
|
70,121 |
|
|
Acquisition-related
expenses, net |
|
|
144 |
|
|
|
711 |
|
|
Other operating
(income) and expenses, net |
|
|
(4,750 |
) |
|
|
479 |
|
|
Earnings
from operations |
|
|
69,221 |
|
|
|
39,081 |
|
|
|
|
|
|
|
|
Interest expense |
|
|
32,948 |
|
|
|
35,087 |
|
|
Other nonoperating
income, net |
|
|
(1,562 |
) |
|
|
(8,503 |
) |
|
Earnings
before income tax expense |
|
|
37,835 |
|
|
|
12,497 |
|
|
Income tax (benefit)
expense |
|
|
(4,991 |
) |
|
|
2,457 |
|
|
Consolidated net
earnings |
|
|
42,826 |
|
|
|
10,040 |
|
|
Less: Net (loss)
earnings attributable to noncontrolling interests |
|
|
(27 |
) |
|
|
17 |
|
|
Net Earnings
Attributable to Martin Marietta Materials, Inc. |
|
$ |
42,853 |
|
|
$ |
10,023 |
|
|
|
|
|
|
|
|
Net earnings per common
share attributable to common shareholders: |
|
|
|
|
|
Basic |
|
$ |
0.68 |
|
|
$ |
0.16 |
|
|
Diluted |
|
$ |
0.68 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
Dividends per common
share |
|
$ |
0.48 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
Average number of
common shares outstanding: |
|
|
|
|
|
Basic |
|
|
62,584 |
|
|
|
62,957 |
|
|
Diluted |
|
|
62,777 |
|
|
|
63,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Financial Highlights |
(In thousands) |
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
March 31, |
|
|
|
|
2019 |
|
|
|
2018 |
|
|
Total revenues: |
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
Mid-America Group |
|
$ |
248,813 |
|
|
$ |
178,781 |
|
|
Southeast
Group |
|
|
119,237 |
|
|
|
80,239 |
|
|
West
Group |
|
|
496,831 |
|
|
|
473,722 |
|
|
Total
Building Materials Business |
|
|
864,881 |
|
|
|
732,742 |
|
|
Magnesia
Specialties |
|
|
74,074 |
|
|
|
69,262 |
|
|
Total |
|
$ |
938,955 |
|
|
$ |
802,004 |
|
|
|
|
|
|
|
|
Gross profit
(loss): |
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
Mid-America Group |
|
$ |
45,231 |
|
|
$ |
18,255 |
|
|
Southeast
Group |
|
|
26,245 |
|
|
|
6,167 |
|
|
West
Group |
|
|
46,363 |
|
|
|
60,197 |
|
|
Total
Building Materials Business |
|
|
117,839 |
|
|
|
84,619 |
|
|
Magnesia
Specialties |
|
|
25,542 |
|
|
|
23,889 |
|
|
Corporate |
|
|
(474 |
) |
|
|
1,884 |
|
|
Total |
|
$ |
142,907 |
|
|
$ |
110,392 |
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses: |
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
Mid-America Group |
|
$ |
15,593 |
|
|
$ |
13,130 |
|
|
Southeast
Group |
|
|
5,377 |
|
|
|
4,416 |
|
|
West
Group |
|
|
29,278 |
|
|
|
26,132 |
|
|
Total
Building Materials Business |
|
|
50,248 |
|
|
|
43,678 |
|
|
Magnesia
Specialties |
|
|
2,865 |
|
|
|
2,602 |
|
|
Corporate |
|
|
25,179 |
|
|
|
23,841 |
|
|
Total |
|
$ |
78,292 |
|
|
$ |
70,121 |
|
|
|
|
|
|
|
|
Earnings
(Loss) from operations: |
|
|
|
|
|
Building
Materials Business: |
|
|
|
|
|
Mid-America Group |
|
$ |
30,955 |
|
|
$ |
6,167 |
|
|
Southeast
Group |
|
|
21,134 |
|
|
|
2,041 |
|
|
West
Group |
|
|
19,936 |
|
|
|
34,951 |
|
|
Total
Building Materials Business |
|
|
72,025 |
|
|
|
43,159 |
|
|
Magnesia
Specialties |
|
|
22,642 |
|
|
|
21,237 |
|
|
Corporate |
|
|
(25,446 |
) |
|
|
(25,315 |
) |
|
Total |
|
$ |
69,221 |
|
|
$ |
39,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
Unaudited Financial Highlights
(Continued) |
(In thousands) |
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
March 31, |
|
|
|
|
2019 |
|
|
|
2018 |
|
|
Total revenues: |
|
|
|
|
|
Building
Materials business products and services: |
|
|
|
|
|
Aggregates |
|
$ |
541,473 |
|
|
$ |
425,016 |
|
|
Cement |
|
|
99,017 |
|
|
|
89,183 |
|
|
Ready
Mixed Concrete |
|
|
211,156 |
|
|
|
218,537 |
|
|
Asphalt
and paving |
|
|
15,846 |
|
|
|
16,365 |
|
|
Less: Interproduct sales |
|
|
(58,361 |
) |
|
|
(60,665 |
) |
|
Subtotal |
|
|
809,131 |
|
|
|
688,436 |
|
|
Freight |
|
|
55,750 |
|
|
|
44,306 |
|
|
Total
Building Materials Business |
|
|
864,881 |
|
|
|
732,742 |
|
|
Magnesia
Specialties business: |
|
|
|
|
|
Products
and services |
|
|
69,174 |
|
|
|
64,869 |
|
|
Freight |
|
|
4,900 |
|
|
|
4,393 |
|
|
Total
Magnesia Specialties Business |
|
|
74,074 |
|
|
|
69,262 |
|
|
Consolidated total revenues |
|
$ |
938,955 |
|
|
$ |
802,004 |
|
|
|
|
|
|
|
|
Gross profit
(loss): |
|
|
|
|
|
Building
Materials business products and services: |
|
|
|
|
|
Aggregates |
|
$ |
97,562 |
|
|
$ |
53,002 |
|
|
Cement |
|
|
13,779 |
|
|
|
23,734 |
|
|
Ready
Mixed Concrete |
|
|
14,492 |
|
|
|
15,641 |
|
|
Asphalt
and paving |
|
|
(7,829 |
) |
|
|
(7,639 |
) |
|
Subtotal |
|
|
118,004 |
|
|
|
84,738 |
|
|
Freight |
|
|
(165 |
) |
|
|
(119 |
) |
|
Total
Building Materials Business |
|
|
117,839 |
|
|
|
84,619 |
|
|
Magnesia
Specialties business: |
|
|
|
|
|
Products
and services |
|
|
26,607 |
|
|
|
25,063 |
|
|
Freight |
|
|
(1,065 |
) |
|
|
(1,174 |
) |
|
Total
Magnesia Specialties Business |
|
|
25,542 |
|
|
|
23,889 |
|
|
Corporate |
|
|
(474 |
) |
|
|
1,884 |
|
|
Consolidated gross profit |
|
$ |
142,907 |
|
|
$ |
110,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
|
Balance Sheet Data |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
2019 |
|
2018 |
|
|
|
(Unaudited) |
|
(Audited) |
|
ASSETS |
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
37,357 |
|
$ |
44,892 |
|
Accounts
receivable, net |
|
|
550,607 |
|
|
523,276 |
|
Inventories, net |
|
|
646,176 |
|
|
663,035 |
|
Other
current assets |
|
|
135,971 |
|
|
134,613 |
|
Property,
plant and equipment, net |
|
|
5,146,682 |
|
|
5,157,229 |
|
Intangible assets, net |
|
|
2,895,678 |
|
|
2,900,400 |
|
Operating
lease right-of-use assets |
|
|
498,233 |
|
|
- |
|
Other
noncurrent assets |
|
|
137,703 |
|
|
127,974 |
|
Total
assets |
|
$ |
10,048,407 |
|
$ |
9,551,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
Current
maturities of long-term debt and short-term facilities |
|
$ |
360,056 |
|
$ |
390,042 |
|
Other
current liabilities |
|
|
397,581 |
|
|
396,708 |
|
Long-term
debt (excluding current maturities) |
|
|
2,801,228 |
|
|
2,730,439 |
|
Other
noncurrent liabilities |
|
|
1,514,046 |
|
|
1,084,818 |
|
Total
equity |
|
|
4,975,496 |
|
|
4,949,412 |
|
Total
liabilities and equity |
|
$ |
10,048,407 |
|
$ |
9,551,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
|
Unaudited Statements of Cash
Flows |
|
(In thousands) |
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
|
2019 |
|
|
|
2018 |
|
|
Operating
activities: |
|
|
|
|
|
Consolidated net earnings |
|
$ |
42,826 |
|
|
$ |
10,040 |
|
|
Adjustments to reconcile consolidated net earnings to net cash
provided by operating activities: |
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
89,211 |
|
|
|
76,821 |
|
|
Stock-based compensation expense |
|
|
13,552 |
|
|
|
9,760 |
|
|
Gains on
divestitures and sales of assets |
|
|
(2,413 |
) |
|
|
(951 |
) |
|
Deferred
income taxes |
|
|
4,781 |
|
|
|
2,029 |
|
|
Other
items, net |
|
|
495 |
|
|
|
(2,269 |
) |
|
Changes
in operating assets and liabilities, net of effects of acquisitions
and divestitures: |
|
|
|
|
|
Accounts
receivable, net |
|
|
(26,059 |
) |
|
|
20,951 |
|
|
Inventories, net |
|
|
16,416 |
|
|
|
(8,873 |
) |
|
Accounts
payable |
|
|
20,393 |
|
|
|
7,925 |
|
|
Other
assets and liabilities, net |
|
|
(41,338 |
) |
|
|
(10,421 |
) |
|
Net cash provided by
operating activities |
|
|
117,864 |
|
|
|
105,012 |
|
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
|
Additions
to property, plant and equipment |
|
|
(130,056 |
) |
|
|
(96,259 |
) |
|
Proceeds
from divestitures and sales of assets |
|
|
2,927 |
|
|
|
2,528 |
|
|
Investments in life insurance contracts, net |
|
|
193 |
|
|
|
99 |
|
|
Payment
of railcar construction advances |
|
|
- |
|
|
|
(8,430 |
) |
|
Reimbursement of railcar construction advances |
|
|
- |
|
|
|
8,430 |
|
|
Other
investing activities, net |
|
|
(600 |
) |
|
|
- |
|
|
Net cash used for
investing activities |
|
|
(127,536 |
) |
|
|
(93,632 |
) |
|
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
|
Borrowings of long-term debt |
|
|
125,000 |
|
|
|
- |
|
|
Repayments of long-term debt |
|
|
(85,000 |
) |
|
|
(13 |
) |
|
Payments
on capital leases |
|
|
- |
|
|
|
(829 |
) |
|
Payments
on finance leases |
|
|
(951 |
) |
|
|
- |
|
|
Dividends
paid |
|
|
(30,395 |
) |
|
|
(27,885 |
) |
|
Proceeds
from exercise of stock options |
|
|
611 |
|
|
|
2,801 |
|
|
Shares
withheld for employees' income tax obligations |
|
|
(7,128 |
) |
|
|
(6,380 |
) |
|
Debt
issue costs |
|
|
- |
|
|
|
(3,194 |
) |
|
Contributions by owners of noncontrolling interest |
|
|
- |
|
|
|
129 |
|
|
Net cash provided by
(used for) financing activities |
|
|
2,137 |
|
|
|
(35,371 |
) |
|
|
|
|
|
|
|
Net decrease in cash
and cash equivalents |
|
|
(7,535 |
) |
|
|
(23,991 |
) |
|
Cash and cash
equivalents, beginning of period |
|
|
44,892 |
|
|
|
1,446,364 |
|
|
Cash and cash
equivalents, end of period |
|
$ |
37,357 |
|
|
$ |
1,422,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARTIN MARIETTA MATERIALS, INC. |
|
Unaudited Operational Highlights |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
March 31, 2019 |
|
|
|
|
Volume |
|
Pricing |
|
|
Volume/Pricing
Variance (1) |
|
|
|
|
|
|
Heritage Operations:
(2) |
|
|
|
|
|
|
Mid-America Group |
|
|
18.4 |
% |
|
|
3.1 |
% |
|
|
Southeast
Group |
|
|
16.7 |
% |
|
|
6.2 |
% |
|
|
West
Group |
|
|
6.3 |
% |
|
|
2.7 |
% |
|
|
Total
Heritage Aggregates Product Line |
|
|
12.5 |
% |
|
|
4.0 |
% |
|
|
Total Aggregates
Product Line (3) |
|
|
24.2 |
% |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
March 31, |
|
|
Shipments (tons in thousands) |
|
2019 |
|
2018 |
|
|
Heritage Operations:
(2) |
|
|
|
|
|
|
Mid-America Group |
|
|
13,585 |
|
|
|
11,473 |
|
|
|
Southeast
Group (4) |
|
|
5,141 |
|
|
|
4,405 |
|
|
|
West
Group |
|
|
15,036 |
|
|
|
14,142 |
|
|
|
Total
Heritage Aggregates Product Line |
|
|
33,762 |
|
|
|
30,020 |
|
|
|
Acquisitions |
|
|
3,524 |
|
|
|
- |
|
|
|
Total Aggregates
Product Line (3) |
|
|
37,286 |
|
|
|
30,020 |
|
|
|
|
|
|
|
|
|
|
(1)
Volume/pricing variances reflect the percentage increase (decrease)
from the comparable period in the prior year. |
|
(2)
Heritage Aggregates Product Line and Heritage Aggregates Operations
exclude volume and pricing data for acquisitions that |
|
have not been included in prior-year operations for the
comparable period. |
|
|
|
|
(3)
Aggregates Product Line includes acquisitions from the date of
acquisition and divestitures through the date of disposal. |
|
(4) 2018
shipments include the Forsyth, Georgia operation, which was
divested in April 2018. |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
March 31, |
|
|
|
|
2019 |
|
2018 |
|
|
Shipments (in thousands) |
|
|
|
|
|
|
Aggregates tons - external customers |
|
|
35,256 |
|
|
|
27,877 |
|
|
|
Internal
aggregates tons used in other product lines |
|
|
2,030 |
|
|
|
2,143 |
|
|
|
Total
aggregates tons |
|
|
37,286 |
|
|
|
30,020 |
|
|
|
|
|
|
|
|
|
|
Cement
tons - external customers |
|
|
589 |
|
|
|
527 |
|
|
|
Internal
cement tons used in other product lines |
|
|
296 |
|
|
|
298 |
|
|
|
Total
cement tons |
|
|
885 |
|
|
|
825 |
|
|
|
|
|
|
|
|
|
|
Ready
Mixed Concrete - cubic yards |
|
|
1,932 |
|
|
|
2,009 |
|
|
|
|
|
|
|
|
|
|
Asphalt
tons - external customers |
|
|
142 |
|
|
|
116 |
|
|
|
Internal
asphalt tons used in road paving business |
|
|
51 |
|
|
|
76 |
|
|
|
Total
asphalt tons |
|
|
193 |
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
Average unit
sales price by product line (including internal
sales): |
|
|
|
|
|
|
Aggregates (per ton): |
|
|
|
|
|
|
Heritage |
|
$ |
14.61 |
|
|
$ |
14.04 |
|
|
|
Acquisition |
|
$ |
12.02 |
|
|
$ |
- |
|
|
|
Total |
|
$ |
14.36 |
|
|
$ |
14.04 |
|
|
|
Cement
(per ton) |
|
$ |
110.93 |
|
|
$ |
106.86 |
|
|
|
Ready
Mixed Concrete (per cubic yard) |
|
$ |
106.84 |
|
|
$ |
106.34 |
|
|
|
Asphalt
(per ton) |
|
$ |
41.12 |
|
|
$ |
42.81 |
|
|
|
|
|
|
|
|
|
|
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
March 31, 2019, 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, 2019, for the trailing-12 months
EBITDA. For supporting calculations, refer to the Company's website
at www.martinmarietta.com. |
|
|
|
|
|
|
|
|
|
Twelve Month Period |
|
|
|
|
|
April 1, 2018
to |
|
|
|
|
|
March 31, 2019 |
|
|
|
Earnings from
continuing operations attributable to Martin Marietta Materials,
Inc. |
|
$ |
502,828 |
|
|
|
|
Add back: |
|
|
|
|
|
Interest
expense |
|
|
134,930 |
|
|
|
|
Income
tax expense |
|
|
98,197 |
|
|
|
|
Depreciation, depletion and amortization expense |
|
|
352,336 |
|
|
|
|
Stock-based compensation expense |
|
|
33,044 |
|
|
|
|
Acquisition-related expenses, net |
|
|
46,218 |
|
|
|
|
Bluegrass
EBITDA - Pre-Acquisition (April 1, 2018 to April 27, 2018) |
|
|
7,858 |
|
|
|
|
Noncash
portion of asset and portfolio rationalization charge |
|
|
16,970 |
|
|
|
|
Deduct: |
|
|
|
|
|
Interest
income |
|
|
(1,853 |
) |
|
|
|
Gain on
divestiture |
|
|
(14,785 |
) |
|
|
|
Consolidated EBITDA, as
defined by the Company's Credit Agreement |
|
$ |
1,175,743 |
|
|
|
|
|
|
|
|
|
|
Consolidated Debt, as
defined and including debt for which the Company is a co-borrower,
at March 31, 2019 |
|
$ |
3,185,353 |
|
|
|
|
|
|
|
|
|
|
Consolidated
Debt-to-Consolidated EBITDA, as defined by the Company's Credit
Agreement, at March 31, 2019, for the trailing-12 months
EBITDA |
|
2.71 times |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Before Interest, Income Taxes, Depreciation, Depletion
and Amortization (EBITDA) is a widely accepted financial indicator
of a company's ability to service and/or incur indebtedness.
EBITDA and adjusted EBITDA are not defined by generally accepted
accounting principles and, as such, should not be construed as
alternatives to net earnings or operating cash flow. For
further information on EBITDA, refer to the Company's website at
www.martinmarietta.com. EBITDA and adjusted EBITDA are as
follows: |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
March 31, |
|
|
|
2019 |
|
2018 |
|
Consolidated EBITDA (adjusted EBITDA for 2018) |
$ |
158,885 |
|
|
$ |
123,973 |
|
|
|
|
|
|
|
A
Reconciliation of Net Earnings Attributable to Martin Marietta to
Consolidated Adjusted EBITDA is as follows: |
|
|
|
Three Months
Ended |
|
|
|
March 31, |
|
|
|
2019 |
|
2018 |
|
Net Earnings
Attributable to Martin Marietta |
|
$ |
42,853 |
|
|
$ |
10,023 |
|
Add back: |
|
|
|
|
|
Interest
Expense |
|
|
32,846 |
|
|
|
35,087 |
|
Income
Tax (Benefit) Expense for Controlling Interests |
|
|
(5,001 |
) |
|
|
2,438 |
|
Depreciation, Depletion and Amortization Expense |
|
|
88,187 |
|
|
|
75,714 |
|
Consolidated
EBITDA |
|
|
158,885 |
|
|
|
123,262 |
|
Add back: |
|
|
|
|
|
Bluegrass
Acquisition-Related Expenses |
|
|
- |
|
|
|
711 |
|
Consolidated Adjusted
EBITDA |
|
$ |
158,885 |
|
|
$ |
123,973 |
|
|
|
|
|
|
|
The following
is a reconciliation of the GAAP measure to the 2019 EBITDA
guidance: |
|
|
|
|
|
|
|
Low Point of Range |
|
High Point of Range |
|
Net Earnings
Attributable to Martin Marietta |
|
$ |
520,000 |
|
|
$ |
620,000 |
|
Add back: |
|
|
|
|
|
Interest
Expense |
|
|
140,000 |
|
|
|
130,000 |
|
Taxes on
Income |
|
|
145,000 |
|
|
|
155,000 |
|
Depreciation, Depletion and Amortization Expense |
|
|
365,000 |
|
|
|
375,000 |
|
EBITDA |
|
$ |
1,170,000 |
|
|
$ |
1,280,000 |
|
|
|
|
|
|
|
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