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EX-31.01 - EX-31.01 - MARTIN MARIETTA MATERIALS INCmlm-ex3101_10.htm

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-12744

 

MARTIN MARIETTA MATERIALS, INC.

(Exact name of registrant as specified in its charter)

 

 North Carolina

 

56-1848578

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

2710 Wycliff Road, Raleigh, NC

 

27607-3033

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code 919-781-4550

Former name: None

Former name, former address and former fiscal year, if changes since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  þ    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 

þ

  

Accelerated filer

 

o

 

 

 

 

Non-accelerated filer

 

o  

  

Smaller reporting company

 

o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o    No   þ

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

 

Class

 

Outstanding as of October 30, 2015

Common Stock, $0.01 par value

 

66,140,560

 

 

 

 

 

 


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

 

Page

Part I. Financial Information:

 

 

Item 1. Financial Statements.

 

 

 

Consolidated Balance Sheets – September 30, 2015, December 31, 2014 and September 30, 2014

 

 

3

Consolidated Statements of Earnings and Comprehensive Earnings – Three and Nine Months Ended September 30, 2015 and 2014

 

 

 

4

Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2015 and 2014

 

 

5

Consolidated Statement of Total Equity - Nine Months Ended September 30, 2015

 

 

6

Notes to Consolidated Financial Statements

 

 

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

 

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

 

58

Item 4. Controls and Procedures.

 

 

59

Part II. Other Information:

 

 

 

Item 1. Legal Proceedings.

 

 

60

Item 1A. Risk Factors.

 

 

60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

 

60

Item 4. Mine Safety Disclosures.

 

 

60

Item 6. Exhibits.

 

 

61

Signatures

 

 

62

Exhibit Index

 

 

63

 

 

 

 

 

 

 

 

Page 2 of 63


 

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2014

 

 

 

(Unaudited)

 

 

(Audited)

 

 

(Unaudited)

 

 

 

(Dollars in Thousands, Except Per Share Data)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

436,429

 

 

$

108,651

 

 

$

73,597

 

Accounts receivable, net

 

 

577,424

 

 

 

421,001

 

 

 

523,928

 

Inventories, net

 

 

464,525

 

 

 

484,919

 

 

 

475,293

 

Current deferred income tax benefits

 

 

125,633

 

 

 

244,638

 

 

 

90,136

 

Other current assets

 

 

37,960

 

 

 

29,607

 

 

 

49,844

 

Total Current Assets

 

 

1,641,971

 

 

 

1,288,816

 

 

 

1,212,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

5,488,744

 

 

 

5,691,676

 

 

 

5,624,761

 

Allowances for depreciation, depletion and amortization

 

 

(2,415,210

)

 

 

(2,288,906

)

 

 

(2,246,810

)

Net property, plant and equipment

 

 

3,073,534

 

 

 

3,402,770

 

 

 

3,377,951

 

Goodwill

 

 

2,065,644

 

 

 

2,068,799

 

 

 

2,043,320

 

Operating permits, net

 

 

445,855

 

 

 

499,487

 

 

 

501,734

 

Other intangibles, net

 

 

65,556

 

 

 

95,718

 

 

 

97,488

 

Other noncurrent assets

 

 

145,888

 

 

 

108,802

 

 

 

105,567

 

Total Assets

 

$

7,438,448

 

 

$

7,464,392

 

 

$

7,338,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Bank overdraft

 

$

 

 

$

183

 

 

$

 

Accounts payable

 

 

226,837

 

 

 

202,476

 

 

 

230,206

 

Accrued salaries, benefits and payroll taxes

 

 

30,529

 

 

 

36,576

 

 

 

54,062

 

Pension and postretirement benefits

 

 

8,359

 

 

 

6,953

 

 

 

7,351

 

Accrued insurance and other taxes

 

 

70,509

 

 

 

58,356

 

 

 

70,653

 

Current maturities of long-term debt and short-term facilities

 

 

147,536

 

 

 

14,336

 

 

 

14,331

 

Accrued interest

 

 

22,414

 

 

 

16,136

 

 

 

22,317

 

Other current liabilities

 

 

69,208

 

 

 

61,632

 

 

 

38,078

 

Total Current Liabilities

 

 

575,392

 

 

 

396,648

 

 

 

436,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

1,557,616

 

 

 

1,571,059

 

 

 

1,603,944

 

Pension, postretirement and postemployment benefits

 

 

229,042

 

 

 

249,333

 

 

 

144,077

 

Noncurrent deferred income taxes

 

 

665,712

 

 

 

734,583

 

 

 

633,951

 

Other noncurrent liabilities

 

 

158,106

 

 

 

160,021

 

 

 

144,275

 

Total Liabilities

 

 

3,185,868

 

 

 

3,111,644

 

 

 

2,963,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share

 

 

660

 

 

 

671

 

 

 

671

 

Preferred stock, par value $0.01 per share

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

3,283,200

 

 

 

3,243,619

 

 

 

3,239,709

 

Accumulated other comprehensive loss

 

 

(112,742

)

 

 

(106,159

)

 

 

(43,281

)

Retained earnings

 

 

1,079,764

 

 

 

1,213,035

 

 

 

1,176,121

 

Total Shareholders' Equity

 

 

4,250,882

 

 

 

4,351,166

 

 

 

4,373,220

 

Noncontrolling interests

 

 

1,698

 

 

 

1,582

 

 

 

2,393

 

Total Equity

 

 

4,252,580

 

 

 

4,352,748

 

 

 

4,375,613

 

Total Liabilities and Equity

 

$

7,438,448

 

 

$

7,464,392

 

 

$

7,338,858

 

See accompanying notes to the consolidated financial statements.

 

Page 3 of 63


 

 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In Thousands, Except Per Share Data)

 

 

(In Thousands, Except Per Share Data)

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Net Sales

 

$

1,005,218

 

 

$

917,942

 

 

$

2,487,342

 

 

$

1,899,557

 

Freight and delivery revenues

 

 

77,031

 

 

 

85,781

 

 

 

207,672

 

 

 

202,021

 

Total revenues

 

 

1,082,249

 

 

 

1,003,723

 

 

 

2,695,014

 

 

 

2,101,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

742,713

 

 

 

722,349

 

 

 

1,950,424

 

 

 

1,542,527

 

Freight and delivery costs

 

 

77,031

 

 

 

85,781

 

 

 

207,672

 

 

 

202,021

 

Total cost of revenues

 

 

819,744

 

 

 

808,130

 

 

 

2,158,096

 

 

 

1,744,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

262,505

 

 

 

195,593

 

 

 

536,918

 

 

 

357,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general & administrative expenses

 

 

54,887

 

 

 

48,427

 

 

 

161,120

 

 

 

119,239

 

Acquisition-related expenses, net

 

 

2,087

 

 

 

26,118

 

 

 

5,783

 

 

 

41,178

 

Other operating expenses, net

 

 

26,033

 

 

 

5,092

 

 

 

27,963

 

 

 

313

 

Earnings from Operations

 

 

179,498

 

 

 

115,956

 

 

 

342,052

 

 

 

196,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

18,926

 

 

 

19,805

 

 

 

57,344

 

 

 

44,954

 

Other nonoperating (income) and expenses, net

 

 

(4,489

)

 

 

(1,841

)

 

 

(6,607

)

 

 

1,330

 

Earnings from continuing operations before taxes on income

 

 

165,061

 

 

 

97,992

 

 

 

291,315

 

 

 

150,016

 

Taxes on income

 

 

47,483

 

 

 

44,089

 

 

 

85,600

 

 

 

59,571

 

Earnings from Continuing Operations

 

 

117,578

 

 

 

53,903

 

 

 

205,715

 

 

 

90,445

 

Loss on discontinued operations, net of related tax benefit of

     $28 and $53, respectively

 

 

 

 

 

(69

)

 

 

 

 

 

(140

)

Consolidated net earnings

 

 

117,578

 

 

 

53,834

 

 

 

205,715

 

 

 

90,305

 

Less: Net earnings (loss) attributable to noncontrolling interests

 

 

34

 

 

 

91

 

 

 

108

 

 

 

(1,341

)

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

$

117,544

 

 

$

53,743

 

 

$

205,607

 

 

$

91,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Earnings (Loss) Attributable to Martin Marietta Materials, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

117,544

 

 

$

53,812

 

 

$

205,607

 

 

$

91,786

 

Loss from discontinued operations

 

 

 

 

 

(69

)

 

 

 

 

 

(140

)

 

 

$

117,544

 

 

$

53,743

 

 

$

205,607

 

 

$

91,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Comprehensive Earnings:  (See Note 1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings attributable to Martin Marietta Materials, Inc.

 

$

117,616

 

 

$

52,603

 

 

$

199,024

 

 

$

92,479

 

Earnings (Loss) attributable to noncontrolling interests

 

 

37

 

 

 

93

 

 

 

116

 

 

 

(1,337

)

 

 

$

117,653

 

 

$

52,696

 

 

$

199,140

 

 

$

91,142

 

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic from continuing operations attributable to common shareholders

 

$

1.75

 

 

$

0.80

 

 

$

3.05

 

 

$

1.71

 

Discontinued operations attributable to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1.75

 

 

$

0.80

 

 

$

3.05

 

 

$

1.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted from continuing operations attributable to common shareholders

 

$

1.74

 

 

$

0.79

 

 

$

3.03

 

 

$

1.70

 

Discontinued operations attributable to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1.74

 

 

$

0.79

 

 

$

3.03

 

 

$

1.70

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

66,830

 

 

 

67,086

 

 

 

67,203

 

 

 

53,342

 

Diluted

 

 

67,108

 

 

 

67,495

 

 

 

67,470

 

 

 

53,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Dividends Per Common Share

 

$

0.40

 

 

$

0.40

 

 

$

1.20

 

 

$

1.20

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 4 of 63


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

 

 

(Unaudited)

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Consolidated net earnings

 

$

205,715

 

 

$

90,305

 

Adjustments to reconcile consolidated net earnings to net cash

   provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

199,935

 

 

 

154,079

 

Stock-based compensation expense

 

 

10,722

 

 

 

6,381

 

Loss (gain) on divestitures and sales of assets

 

 

27,568

 

 

 

(47,815

)

Deferred income taxes

 

 

43,286

 

 

 

44,970

 

Excess tax benefits from stock-based compensation transactions

 

 

 

 

 

(2,354

)

Other items, net

 

 

(6,554

)

 

 

1,766

 

Changes in operating assets and liabilities, net of effects of acquisitions

   and divestitures:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(155,054

)

 

 

(120,139

)

Inventories, net

 

 

(17,650

)

 

 

1,283

 

Accounts payable

 

 

22,186

 

 

 

26,515

 

Other assets and liabilities, net

 

 

(10,575

)

 

 

46,637

 

Net Cash Provided by Operating Activities

 

 

319,579

 

 

 

201,628

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(212,447

)

 

 

(138,570

)

Acquisitions, net

 

 

(10,748

)

 

 

(174

)

Cash received in acquisition

 

 

 

 

 

59,887

 

Proceeds from divestitures and sales of assets

 

 

422,045

 

 

 

113,158

 

Repayments from affiliate

 

 

1,808

 

 

 

850

 

Payment of railcar construction advances

 

 

(25,341

)

 

 

(14,513

)

Reimbursement of railcar construction advances

 

 

25,234

 

 

 

14,513

 

Net Cash Provided by Investing Activities

 

 

200,551

 

 

 

35,151

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Borrowings of long-term debt

 

 

230,000

 

 

 

868,762

 

Repayments of long-term debt

 

 

(111,384

)

 

 

(1,024,052

)

Payments on capital lease obligations

 

 

(5,784

)

 

 

(2,177

)

Debt issuance costs

 

 

 

 

 

(2,402

)

Change in bank overdraft

 

 

(183

)

 

 

(2,556

)

Dividends paid

 

 

(81,219

)

 

 

(64,263

)

Purchase of remaining interest in existing subsidiaries

 

 

 

 

 

(19,480

)

Issuances of common stock

 

 

33,892

 

 

 

38,195

 

Repurchases of common stock

 

 

(257,674

)

 

 

 

Excess tax benefits from stock-based compensation transactions

 

 

 

 

 

2,354

 

Net Cash Used for Financing Activities

 

 

(192,352

)

 

 

(205,619

)

Net Increase in Cash and Cash Equivalents

 

 

327,778

 

 

 

31,160

 

Cash and Cash Equivalents, beginning of period

 

 

108,651

 

 

 

42,437

 

Cash and Cash Equivalents, end of period

 

$

436,429

 

 

$

73,597

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

47,069

 

 

$

56,162

 

Cash paid for income taxes

 

$

30,896

 

 

$

6,011

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 5 of 63


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF TOTAL EQUITY

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Shares of Common Stock

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Loss

 

 

Retained Earnings

 

 

Total Shareholders' Equity

 

 

Noncontrolling Interests

 

 

Total Equity

 

Balance at December 31, 2014

 

 

67,293

 

 

$

671

 

 

$

3,243,619

 

 

$

(106,159

)

 

$

1,213,035

 

 

$

4,351,166

 

 

$

1,582

 

 

$

4,352,748

 

Consolidated net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

205,607

 

 

 

205,607

 

 

 

108

 

 

 

205,715

 

Other comprehensive (loss) earnings,

     net of tax

 

 

 

 

 

 

 

 

 

 

 

(6,583

)

 

 

 

 

 

(6,583

)

 

 

8

 

 

 

(6,575

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(81,219

)

 

 

(81,219

)

 

 

 

 

 

(81,219

)

Issuances of common stock for stock

     award plans

 

 

434

 

 

 

4

 

 

 

28,859

 

 

 

 

 

 

 

 

 

28,863

 

 

 

 

 

 

28,863

 

Repurchases of common stock

 

 

(1,587

)

 

 

(15

)

 

 

 

 

 

 

 

 

(257,659

)

 

 

(257,674

)

 

 

 

 

 

(257,674

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

10,722

 

 

 

 

 

 

 

 

 

10,722

 

 

 

 

 

 

10,722

 

Balance at September 30, 2015

 

 

66,140

 

 

$

660

 

 

$

3,283,200

 

 

$

(112,742

)

 

$

1,079,764

 

 

$

4,250,882

 

 

$

1,698

 

 

$

4,252,580

 

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 6 of 63


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

1.

Significant Accounting Policies

Organization

Martin Marietta Materials, Inc. (the “Corporation” or “Martin Marietta”) is engaged principally in the construction aggregates business. The aggregates product line accounted for 58% of 2014 consolidated net sales and includes crushed stone, sand and gravel, and is used for construction of highways and other infrastructure projects, and in the nonresidential and residential construction industries. Aggregates products are also used in the railroad, agricultural, utility and environmental industries. These aggregates products, along with the Corporation’s aggregates-related downstream product lines, which accounted for 25% of 2014 consolidated net sales and include asphalt products, ready mixed concrete and road paving construction services, are sold and shipped from a network of more than 400 quarries, distribution facilities and plants in 26 states, Canada, the Bahamas and the Caribbean Islands. The aggregates and aggregates-related downstream product lines are reported collectively as the “Aggregates business”.

The Corporation currently conducts the Aggregates business through three reportable segments: the Mid-America Group, the Southeast Group and the West Group.

 

AGGREGATES BUSINESS

Reportable Segments

  

Mid-America Group

  

Southeast Group

  

West Group

Operating Locations

  

Indiana, Iowa,

northern Kansas, Kentucky, Maryland, Minnesota, Missouri,

eastern Nebraska, North Carolina, Ohio,

South Carolina,

Virginia, Washington and

West Virginia

  

Alabama, Florida, Georgia, Tennessee,
Nova Scotia and the Bahamas

  

Arkansas, Colorado, southern Kansas,

Louisiana, western Nebraska, Nevada, Oklahoma, Texas, Utah

and Wyoming

The Corporation has a Cement segment, which was acquired July 1, 2014 and accounted for 8% of 2014 consolidated net sales.  The Cement segment has production facilities located in Midlothian, Texas, south of Dallas/Fort Worth and Hunter, Texas, south of San Antonio.  The cement business produces Portland and specialty cements, such as masonry and oil well cements. Similar to the Aggregates business, cement is used in infrastructure projects, nonresidential and residential construction, and the railroad, agricultural, utility and environmental industries. The high calcium limestone reserves used as a raw material are a part of owned property adjacent to each of the plants.

The Corporation has a Magnesia Specialties segment with manufacturing facilities in Manistee, Michigan and Woodville, Ohio. The Magnesia Specialties segment, which accounted for 9% of 2014 consolidated net sales, produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel industry.

 

 

Page 7 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued) 

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Corporation have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and in Article 10 of Regulation S-X. The Corporation has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of management, the interim consolidated financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods. The consolidated results of operations for the three and nine months ended September 30, 2015 are not indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014.

Revenue Recognition Standard

The FASB issued an accounting standard update that amends the accounting guidance on revenue recognition. The new standard intends to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The new standard is effective January 1, 2018 and can be applied on a full retrospective or modified retrospective approach. The Corporation is currently evaluating the impact of the provisions of the new standard, and at this time does not expect the impact to be material to its consolidated results of operations.

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss

Consolidated comprehensive earnings/loss for the Corporation consist of consolidated net earnings or loss; adjustments for the funded status of pension and postretirement benefit plans; foreign currency translation adjustments; and the amortization of the value of terminated forward starting interest rate swap agreements into interest expense, and are presented in the Corporation’s consolidated statements of earnings and comprehensive earnings.

Comprehensive earnings attributable to Martin Marietta is as follows:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Net earnings attributable to Martin Marietta

     Materials, Inc.

 

$

117,544

 

 

$

53,743

 

 

$

205,607

 

 

$

91,646

 

Other comprehensive earnings (loss), net of tax

 

 

72

 

 

 

(1,140

)

 

 

(6,583

)

 

 

833

 

Comprehensive earnings attributable to

     Martin Marietta Materials, Inc.

 

$

117,616

 

 

$

52,603

 

 

$

199,024

 

 

$

92,479

 

Page 8 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued) 

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

Comprehensive earnings (loss) attributable to noncontrolling interests, consisting of net earnings or loss and adjustments for the funded status of pension and postretirement benefit plans, is as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Net earnings (loss) attributable to noncontrolling interests

 

$

34

 

 

$

91

 

 

$

108

 

 

$

(1,341

)

Other comprehensive earnings, net of tax

 

 

3

 

 

 

2

 

 

 

8

 

 

 

4

 

Comprehensive earnings (loss) attributable to

     noncontrolling interests

 

$

37

 

 

$

93

 

 

$

116

 

 

$

(1,337

)

 

Accumulated other comprehensive loss consists of unrealized gains and losses related to the funded status of pension and postretirement benefit plans; foreign currency translation; and the unamortized value of terminated forward starting interest rate swap agreements, and is presented on the Corporation’s consolidated balance sheets.

Changes in accumulated other comprehensive loss, net of tax, are as follows:  

 

 

(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

Unamortized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terminated

 

 

Accumulated

 

 

 

Pension and

 

 

 

 

 

 

Forward Starting

 

 

Other

 

 

 

Postretirement

 

 

Foreign

 

 

Interest Rate

 

 

Comprehensive

 

 

 

Benefit Plans

 

 

Currency

 

 

Swap

 

 

Loss

 

 

 

Three Months Ended September 30, 2015

 

Balance at beginning of period

 

$

(111,663

)

 

$

1,219

 

 

$

(2,370

)

 

$

(112,814

)

Other comprehensive loss before reclassifications,

     net of tax

 

 

 

 

 

(1,757

)

 

 

 

 

 

(1,757

)

Amounts reclassified from accumulated other

     comprehensive loss, net of tax

 

 

1,636

 

 

 

 

 

 

193

 

 

 

1,829

 

Other comprehensive earnings (loss), net of tax

 

 

1,636

 

 

 

(1,757

)

 

 

193

 

 

 

72

 

Balance at end of period

 

$

(110,027

)

 

$

(538

)

 

$

(2,177

)

 

$

(112,742

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2014

 

Balance at beginning of period

 

$

(44,685

)

 

$

5,658

 

 

$

(3,114

)

 

$

(42,141

)

Other comprehensive loss before reclassifications,

     net of tax

 

 

 

 

 

(1,466

)

 

 

 

 

 

(1,466

)

Amounts reclassified from accumulated other comprehensive earnings, net of tax

 

 

146

 

 

 

 

 

 

180

 

 

 

326

 

Other comprehensive earnings (loss), net of tax

 

 

146

 

 

 

(1,466

)

 

 

180

 

 

 

(1,140

)

Balance at end of period

 

$

(44,539

)

 

$

4,192

 

 

$

(2,934

)

 

$

(43,281

)

Page 9 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued) 

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

 

 

 

(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

Unamortized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terminated

 

 

Accumulated

 

 

 

Pension and

 

 

 

 

 

 

Forward Starting

 

 

Other

 

 

 

Postretirement

 

 

Foreign

 

 

Interest Rate

 

 

Comprehensive

 

 

 

Benefit Plans

 

 

Currency

 

 

Swap

 

 

Loss

 

 

 

Nine Months Ended September 30, 2015

 

Balance at beginning of period

 

$

(106,688

)

 

$

3,278

 

 

$

(2,749

)

 

$

(106,159

)

Other comprehensive loss before

     reclassifications, net of tax

 

 

(10,845

)

 

 

(3,816

)

 

 

 

 

 

(14,661

)

Amounts reclassified from accumulated

     other comprehensive earnings, net of tax

 

 

7,506

 

 

 

 

 

 

572

 

 

 

8,078

 

Other comprehensive (loss) earnings, net of tax

 

 

(3,339

)

 

 

(3,816

)

 

 

572

 

 

 

(6,583

)

Balance at end of period

 

$

(110,027

)

 

$

(538

)

 

$

(2,177

)

 

$

(112,742

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

Balance at beginning of period

 

$

(44,549

)

 

$

3,902

 

 

$

(3,467

)

 

$

(44,114

)

Other comprehensive (loss) earnings before

     reclassifications, net of tax

 

 

(431

)

 

 

290

 

 

 

 

 

 

(141

)

Amounts reclassified from accumulated

     other comprehensive earnings, net of tax

 

 

441

 

 

 

 

 

 

533

 

 

 

974

 

Other comprehensive earnings, net of tax

 

 

10

 

 

 

290

 

 

 

533

 

 

 

833

 

Balance at end of period

 

$

(44,539

)

 

$

4,192

 

 

$

(2,934

)

 

$

(43,281

)

 

The other comprehensive loss before reclassifications for pension and postretirement benefit plans is net of tax of $6,793,000 and $280,000 for the nine months ended September 30, 2015 and 2014, respectively.

Page 10 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued) 

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

Changes in net noncurrent deferred tax assets recorded in accumulated other comprehensive loss are as follows:

 

 

(Dollars in Thousands)

 

 

 

Pension and Postretirement Benefit Plans

 

 

Unamortized Value of Terminated Forward Starting Interest Rate Swap

 

 

Net Noncurrent Deferred Tax Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2015

 

Balance at beginning of period

 

$

71,625

 

 

$

1,554

 

 

$

73,179

 

Tax effect of other comprehensive earnings

 

 

(1,042

)

 

 

(125

)

 

 

(1,167

)

Balance at end of period

 

$

70,583

 

 

$

1,429

 

 

$

72,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2014

 

Balance at beginning of period

 

$

29,287

 

 

$

2,039

 

 

$

31,326

 

Tax effect of other comprehensive earnings

 

 

(96

)

 

 

(120

)

 

 

(216

)

Balance at end of period

 

$

29,191

 

 

$

1,919

 

 

$

31,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

Balance at beginning of period

 

$

68,568

 

 

$

1,799

 

 

$

70,367

 

Tax effect of other comprehensive earnings

 

 

2,015

 

 

 

(370

)

 

 

1,645

 

Balance at end of period

 

$

70,583

 

 

$

1,429

 

 

$

72,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

Balance at beginning of period

 

$

29,198

 

 

$

2,269

 

 

$

31,467

 

Tax effect of other comprehensive earnings

 

 

(7

)

 

 

(350

)

 

 

(357

)

Balance at end of period

 

$

29,191

 

 

$

1,919

 

 

$

31,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 11 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued) 

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

Reclassifications out of accumulated other comprehensive loss are as follows:

 

 

Three Months Ended

 

 

Nine Months Ended

 

Affected line items in the consolidated

 

 

September 30,

 

 

September 30,

 

statements of earnings and

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

comprehensive earnings

 

 

(Dollars in Thousands)

 

 

Pension and postretirement

     benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service credit

 

$

(468

)

 

$

(703

)

 

$

(1,407

)

 

$

(2,107

)

 

Actuarial loss

 

 

3,146

 

 

 

945

 

 

 

13,691

 

 

 

2,835

 

 

 

 

 

2,678

 

 

 

242

 

 

 

12,284

 

 

 

728

 

Cost of sales; Selling, general

     and administrative expenses

Tax benefit

 

 

(1,042

)

 

 

(96

)

 

 

(4,778

)

 

 

(287

)

Taxes on income

 

 

$

1,636

 

 

$

146

 

 

$

7,506

 

 

$

441

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized value of terminated

     forward starting interest

     rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional interest expense

 

$

318

 

 

$

300

 

 

$

942

 

 

$

883

 

Interest expense

Tax benefit

 

 

(125

)

 

 

(120

)

 

 

(370

)

 

 

(350

)

Taxes on income

 

 

$

193

 

 

$

180

 

 

$

572

 

 

$

533

 

 

 

Earnings per Common Share

The numerator for basic and diluted earnings (loss) per common share is net earnings/loss from continuing operations attributable to Martin Marietta Materials, Inc. reduced by dividends and undistributed earnings attributable to the Corporation’s unvested restricted stock awards and incentive stock awards. If there is a net loss, no amount of the undistributed loss is attributed to unvested participating securities. The denominator for basic earnings per common share is the weighted-average number of common shares outstanding during the period. Diluted earnings per common share are computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards to be issued to employees and nonemployee members of the Corporation’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive. For the three and nine months ended September 30, 2015 and 2014, the diluted per-share computations reflect a change in the number of common shares outstanding to include the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued.

 

Page 12 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued) 

Earnings per Common Share (continued)

The following table reconciles the numerator and denominator for basic and diluted earnings per common share:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In Thousands)

 

Net earnings from continuing operations attributable to

      Martin Marietta Materials, Inc.

 

$

117,544

 

 

$

53,812

 

 

$

205,607

 

 

$

91,786

 

Less: Distributed and undistributed earnings attributable to

     unvested awards

 

 

479

 

 

 

213

 

 

 

897

 

 

 

372

 

Basic and diluted net earnings available to common

     shareholders from continuing operations attributable

     to Martin Marietta Materials, Inc.

 

 

117,065

 

 

 

53,599

 

 

 

204,710

 

 

 

91,414

 

Basic and diluted net loss available to common

     shareholders from discontinued operations

 

 

 

 

 

(69

)

 

 

 

 

 

(140

)

Basic and diluted net earnings available to common

     shareholders attributable to Martin Marietta Materials, Inc.

 

$

117,065

 

 

$

53,530

 

 

$

204,710

 

 

$

91,274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average common shares outstanding

 

 

66,830

 

 

 

67,086

 

 

 

67,203

 

 

 

53,342

 

Effect of dilutive employee and director awards

 

 

278

 

 

 

409

 

 

 

267

 

 

 

217

 

Diluted weighted-average common shares outstanding

 

 

67,108

 

 

 

67,495

 

 

 

67,470

 

 

 

53,559

 

 

2.

Business Combinations and Dispositions

The Corporation acquired Texas Industries, Inc. (“TXI”) on July 1, 2014.  For the three and nine months ended September 30, 2015, net sales of $290,918,000 and $736,450,000, respectively, and earnings from operations of $19,698,000 and $53,635,000, respectively, were attributable to TXI operations and are included in the Corporation’s consolidated statements of earnings and comprehensive earnings. Earnings from operations for the three and nine months ended September 30, 2015 reflect the loss and expenses related to the sale of the California cement operations.  Please see “Disposition of Assets” in this footnote for further details on the disposition.  For the three months ended September 30, 2014, net sales and earnings from operations, excluding termination benefit charges included in other operating expenses, net, attributable to TXI operations were $273,573,000 and $18,755,000, respectively.

Acquisition and integration expenses associated with TXI were $1,663,000 and $5,259,000 for the three and nine months ended September 30, 2015, respectively. For the three and nine months ended September 30, 2014, acquisition and integration expenses associated with TXI were $73,968,000 and $88,959,000, respectively.

Page 13 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

2.

Business Combinations and Dispositions (continued) 

Unaudited Pro Forma Financial Information

The pro forma financial information for the nine months ended September 30, 2014 reflects the elimination of business development and acquisition integration expenses and the gain on the required divestiture of assets.

The unaudited pro forma financial information for the nine months ended September 30, 2014 includes TXI’s historical operating results for the six months ended May 31, 2014 (due to a difference in TXI’s historical reporting periods) and the results of operations for the TXI locations from July 1, 2014, the acquisition date, to September 30, 2014.

The pro forma financial information presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of the earliest period presented.

 

 

 

Nine Months Ended

 

 

 

September 30, 2014

 

 

 

(Dollars in Thousands)

 

Net sales

 

$

2,309,104

 

Earnings from continuing operations attributable to

     controlling interest

 

$

84,267

 

 

Disposition of Assets

On September 30, 2015, the Corporation disposed of its California cement operations, which were reported in the Cement segment.  These operations were not in close proximity to other core assets of the Corporation and, unlike other marketplace competitors, were not vertically integrated with ready mixed concrete production.  

The divestiture primarily included a cement plant, two distribution terminals, mobile equipment, intangible assets and inventory.  In accordance with the asset purchase agreement, the liabilities assumed by the purchaser included asset retirement obligations.  The Corporation received proceeds of $420,000,000 and recognized a loss of $25,106,000 on the sale, inclusive of transaction-related accruals, and other disposal-related expenses of $4,782,000, of which $3,603,000 was expensed in the three months ending September 30, 2015 and the remaining portion of the expenses was recognized in the quarter ended June 30, 2015.  The loss and related expenses are included in other operating expenses, net, in the consolidated statements of earnings and comprehensive earnings.  

 

 

 

Page 14 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

3.

Goodwill  

 

The following table shows the changes in goodwill by reportable segment and in total:

 

(Dollars in Thousands)

 

 

Mid-America

 

Southeast

 

West

 

 

 

 

 

 

 

 

Group

 

Group

 

Group

 

Cement

 

Total

 

 

Nine Months Ended September 30, 2015

 

Balance at January 1, 2015

$

282,117

 

$

50,346

 

$

852,436

 

$

883,900

 

$

2,068,799

 

Adjustments to purchase price allocations

 

 

 

 

 

15,538

 

 

(18,634

)

 

(3,096

)

Acquisitions

 

 

 

 

 

655

 

 

 

 

655

 

Divestitures

 

(714

)

 

 

 

 

 

 

 

(714

)

Balance at September 30, 2015

$

281,403

 

$

50,346

 

$

868,629

 

$

865,266

 

$

2,065,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.

Inventories, Net

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2014

 

 

 

(Dollars in Thousands)

 

Finished products

 

$

420,027

 

 

$

413,766

 

 

$

397,684

 

Products in process and raw materials

 

 

59,005

 

 

 

65,250

 

 

 

58,678

 

Supplies and expendable parts

 

 

108,759

 

 

 

125,092

 

 

 

127,319

 

 

 

 

587,791

 

 

 

604,108

 

 

 

583,681

 

Less: Allowances

 

 

(123,266

)

 

 

(119,189

)

 

 

(108,388

)

Total

 

$

464,525

 

 

$

484,919

 

 

$

475,293

 

 

 

Page 15 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

5.

Long-Term Debt  

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2014

 

 

 

(Dollars in Thousands)

 

6.6% Senior Notes, due 2018

 

$

299,305

 

 

$

299,123

 

 

$

299,063

 

7% Debentures, due 2025

 

 

124,524

 

 

 

124,500

 

 

 

124,493

 

6.25% Senior Notes, due 2037

 

 

228,213

 

 

 

228,184

 

 

 

228,175

 

4.25 % Senior Notes, due 2024

 

 

395,614

 

 

 

395,309

 

 

 

395,211

 

Floating Rate Notes, due 2017, interest rate of 1.38%,

     1.33% and 1.34% at September 30, 2015, December 31, 2014

     and September 30, 2014, respectively

 

 

299,251

 

 

 

298,869

 

 

 

298,760

 

Term Loan Facility, due 2018, interest rate of 1.72% at September 30,

     2015; 1.67% at December 31, 2014; and 1.65% at September 30, 2014

 

 

227,121

 

 

 

236,258

 

 

 

239,304

 

Trade Receivable Facility, interest rate of 0.90% and 0.76% at

     September 30, 3015 and 2014, respectively

 

 

130,000

 

 

 

 

 

 

30,000

 

Other notes

 

 

1,124

 

 

 

3,152

 

 

 

3,269

 

Total debt

 

 

1,705,152

 

 

 

1,585,395

 

 

 

1,618,275

 

Less: Current maturities

 

 

(147,536

)

 

 

(14,336

)

 

 

(14,331

)

Long-term debt

 

$

1,557,616

 

 

$

1,571,059

 

 

$

1,603,944

 

 

The Corporation, through a wholly-owned special purpose subsidiary, has a $250,000,000 trade receivable securitization facility (the “Trade Receivable Facility”), which matures on September 30, 2016.  The Trade Receivable Facility, with SunTrust Bank, Regions Bank, PNC Bank, N.A. and certain other lenders that may become a party to the facility from time to time, is backed by eligible trade receivables, as defined, of $517,404,000, $369,575,000 and $477,535,000 at September 30, 2015, December 31, 2014 and September 30, 2014, respectively.  These receivables are originated by the Corporation and then sold to the wholly-owned special purpose subsidiary by the Corporation.  The Corporation continues to be responsible for the servicing and administration of the receivables purchased by the wholly-owned special purpose subsidiary.  Borrowings under the Trade Receivable Facility bear interest at a rate equal to one-month LIBOR plus 0.7% and are limited to the lesser of the facility limit or the borrowing base, as defined, of $425,733,000, $313,428,000 and $405,904,000 at September 30, 2015, December 31, 2014 and September 30, 2014, respectively.  The Trade Receivable Facility contains a cross-default provision to the Corporation’s other debt agreements.

 

Page 16 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

5.

Long-Term Debt (continued) 

The Corporation’s Credit Agreement, which provides a $250,000,000 senior unsecured term loan (the “Term Loan Facility”) and a $350,000,000 five-year senior unsecured revolving facility (the “Revolving Facility”), requires the Corporation’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”), as defined by the Credit Agreement, for the trailing twelve months (the “Ratio”) to not exceed 3.50x as of the end of any fiscal quarter, provided that the Corporation may exclude from the Ratio debt incurred in connection with certain acquisitions for a period of 180 days so long as the Corporation, as a consequence of such specified acquisition, does not have its rating on long-term unsecured debt fall below BBB by Standard & Poor’s or Baa2 by Moody’s and the Ratio calculated without such exclusion does not exceed 3.75x. Additionally, if no amounts are outstanding under both the Revolving Facility and the Trade Receivable Facility, consolidated debt, including debt for which the Corporation is a co-borrower, may be reduced by the Corporation’s unrestricted cash and cash equivalents in excess of $50,000,000, such reduction not to exceed $200,000,000, for purposes of the covenant calculation.

In 2014, the Corporation amended the Credit Agreement to ensure the impact of the business combination with TXI does not impair liquidity available under the Term Loan Facility and the Revolving Facility. The amendment adjusts consolidated EBITDA to add back fees, costs or expenses relating to the TXI business combination incurred on or prior to the closing of the combination not to exceed $95,000,000 and any integration or similar costs or expenses related to the TXI business combination incurred in any period prior to the second anniversary of the closing of the TXI business combination not to exceed $70,000,000. The Corporation was in compliance with this Ratio at September 30, 2015.

Available borrowings under the Revolving Facility are reduced by any outstanding letters of credit issued by the Corporation under the Revolving Facility. At September 30, 2015, December 31, 2014 and September 30, 2014, the Corporation had $2,507,000 of outstanding letters of credit issued under the Revolving Facility.

Accumulated other comprehensive loss includes the unamortized value of terminated forward starting interest rate swap agreements. For the three and nine months ended September 30, 2015, the Corporation recognized $318,000 and $942,000, respectively, as additional interest expense. For the three and nine months ended September 30, 2014, the Corporation recognized $300,000 and $883,000, respectively, as additional interest expense. The ongoing amortization of the terminated value of the forward starting interest rate swap agreements will increase annual interest expense by approximately $1,200,000 until the maturity of the 6.6% Senior Notes in 2018.

6.

Financial Instruments

The Corporation’s financial instruments include cash equivalents, accounts receivable, notes receivable, bank overdraft, accounts payable, publicly-registered long-term notes, debentures and other long-term debt.

Cash equivalents are placed primarily in money market funds, money market demand deposit accounts and Eurodollar time deposits. The Corporation’s cash equivalents have maturities of less than three months. Due to the short maturity of these investments, they are carried on the consolidated balance sheets at cost, which approximates fair value.

Page 17 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

6.

Financial Instruments (continued) 

Accounts receivable are due from a large number of customers, primarily in the construction industry, and are dispersed across wide geographic and economic regions. However, accounts receivable are more heavily concentrated in certain states (namely, Texas, Colorado, North Carolina, Iowa and Georgia). The estimated fair values of accounts receivable approximate their carrying amounts due to the short-term nature of the receivables.

Notes receivable are not publicly traded. Management estimates that the fair value of notes receivable approximates the carrying amount due to the short-term nature of the receivables.

The bank overdraft represents amounts to be funded to financial institutions for checks that have cleared the bank. The estimated fair value of the bank overdraft approximates its carrying value due to the short-term nature of the overdraft.

Accounts payable represent amounts owed to suppliers and vendors. The estimated fair value of accounts payable approximates its carrying amount due to the short-term nature of the payables.

The carrying values and fair values of the Corporation’s long-term debt were $1,705,152,000 and $1,781,152,000, respectively, at September 30, 2015; $1,585,395,000 and $1,680,584,000, respectively, at December 31, 2014; and $1,618,275,000 and $1,707,920,000, respectively, at September 30, 2014. The estimated fair value of the publicly-registered long-term notes was estimated based on Level 1 of the fair value hierarchy using quoted market prices. The fair value of the Notes was based on Level 2 of the fair value hierarchy using quoted market prices for similar debt instruments. The estimated fair value of other borrowings, which primarily represents variable-rate debt, approximates its carrying amount as the interest rates reset periodically.

7.

Income Taxes

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

Estimated effective income tax rate:

 

 

 

 

 

 

 

 

Continuing operations

 

 

29.4

%

 

 

39.7

%

Consolidated overall

 

 

29.4

%

 

 

39.7

%

The Corporation’s effective income tax rate reflects the effect of federal and state income taxes and the impact of differences in book and tax accounting arising from the net permanent benefits associated with the statutory depletion deduction for mineral reserves and the domestic production deduction. The prior year rate reflects the impact of acquisition-related expenses, net, which includes the gain on the required divestiture.  

The Corporation records interest accrued in relation to unrecognized tax benefits as income tax expense. Penalties, if incurred, are recorded as operating expenses in the consolidated statements of earnings and comprehensive earnings.

As of September 30, 2015, the Corporation recorded a $3,176,000 valuation reserve for certain state net operating loss carry forwards, which was driven by the sale of the California cement operations.

 

Page 18 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

8.

Pension and Postretirement Benefits  

The estimated components of the recorded net periodic benefit cost (credit) for pension and postretirement benefits are as follows:

 

 

 

Three Months Ended September 30,

 

 

 

Pension

 

 

Postretirement Benefits

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Service cost

 

$

5,752

 

 

$

4,996

 

 

$

34

 

 

$

57

 

Interest cost

 

 

8,287

 

 

 

7,979

 

 

 

232

 

 

 

302

 

Expected return on assets

 

 

(9,095

)

 

 

(8,627

)

 

 

 

 

 

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost (credit)

 

 

106

 

 

 

111

 

 

 

(574

)

 

 

(814

)

Actuarial loss (gain)

 

 

3,223

 

 

 

1,011

 

 

 

(77

)

 

 

(66

)

Special termination benefit

 

 

382

 

 

 

13,680

 

 

 

 

 

 

 

Net periodic benefit cost (credit)

 

$

8,655

 

 

$

19,150

 

 

$

(385

)

 

$

(521

)

 

 

 

Nine Months Ended September 30,

 

 

 

Pension

 

 

Postretirement Benefits

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Service cost

 

$

17,257

 

 

$

12,129

 

 

$

103

 

 

$

150

 

Interest cost

 

 

24,863

 

 

 

20,952

 

 

 

696

 

 

 

861

 

Expected return on assets

 

 

(27,285

)

 

 

(24,030

)

 

 

 

 

 

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost (credit)

 

 

317

 

 

 

334

 

 

 

(1,724

)

 

 

(2,441

)

Actuarial loss (gain)

 

 

13,923

 

 

 

3,034

 

 

 

(232

)

 

 

(199

)

Special termination benefit

 

 

1,844

 

 

 

13,680

 

 

 

 

 

 

 

Net periodic benefit cost (credit)

 

$

30,919

 

 

$

26,099

 

 

$

(1,157

)

 

$

(1,629

)

 

The Corporation currently estimates that it will contribute $53,725,000 to its pension and SERP plans in 2015.

 

 

Page 19 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

9.

Commitments and Contingencies  

Legal and Administrative Proceedings

The Corporation is engaged in certain legal and administrative proceedings incidental to its normal business activities. In the opinion of management and counsel, based upon currently-available facts, it is remote that the ultimate outcome of any litigation and other proceedings, including those pertaining to environmental matters, relating to the Corporation and its subsidiaries, will have a material adverse effect on the overall results of the Corporation’s operations, its cash flows or its financial position.

Borrowing Arrangements with Affiliate

The Corporation is a co-borrower with an unconsolidated affiliate for a $25,000,000 revolving line of credit agreement with BB&T Bank. The affiliate has agreed to reimburse and indemnify the Corporation for any payments and expenses the Corporation may incur from this agreement. The Corporation holds a lien on the affiliate’s membership interest in a joint venture as collateral for payment under the revolving line of credit.

In 2013, the Corporation loaned $3,402,000 to this unconsolidated affiliate to repay in full the outstanding balance of the affiliate’s loan with Bank of America, N.A. in 2013 and entered into a loan agreement with the affiliate for monthly repayment of principal and interest of that loan amount. The loan was repaid in full during first quarter 2015.  As of December 31, 2014 and September 30, 2014, the amounts due from the affiliate related to this loan was $1,808,000 and $1,605,000, respectively.

In addition, the Corporation has a $6,000,000 outstanding loan due from this unconsolidated affiliate as of September 30, 2015, December 31, 2014 and September 30, 2014.

Employees

Approximately 10% of the Corporation’s employees are represented by a labor union.  All such employees are hourly employees.  The Corporation maintains collective bargaining agreements relating to the union employees with the Aggregates business and Magnesia Specialties segments.  For the Magnesia Specialties segment located in Manistee, Michigan and Woodville, Ohio, 100% of its hourly employees are represented by labor unions. The Manistee collective bargaining agreement expires in August 2019, and the Woodville collective bargaining agreement expires in May 2018.

10.

Business Segments

The Aggregates business contains three reportable business segments: Mid-America Group, Southeast Group and West Group. The Corporation also has Cement and Magnesia Specialties segments. Corporate loss from operations primarily includes depreciation on capitalized interest, expenses for certain corporate administrative functions, business development and integration expenses, unallocated corporate expenses and other nonrecurring and/or non-operational adjustments. Intersegment sales represent net sales from one segment to another segment.

Page 20 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

10.

Business Segments (Continued) 

The following tables display selected financial data for continuing operations for the Corporation’s reportable business segments. Total revenues and net sales in the table below, as well as the consolidated statements of earnings and comprehensive earnings, do not include intersegment sales as these sales are eliminated.  

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Total revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

289,735

 

 

$

271,096

 

 

$

688,217

 

 

$

627,331

 

Southeast Group

 

 

82,949

 

 

 

73,217

 

 

 

229,144

 

 

 

208,205

 

West Group

 

 

531,256

 

 

 

479,323

 

 

 

1,263,063

 

 

 

956,921

 

Total Aggregates Business

 

 

903,940

 

 

 

823,636

 

 

 

2,180,424

 

 

 

1,792,457

 

Cement

 

 

116,135

 

 

 

115,743

 

 

 

324,134

 

 

 

115,743

 

Magnesia Specialties

 

 

62,174

 

 

 

64,344

 

 

 

190,456

 

 

 

193,378

 

Total

 

$

1,082,249

 

 

$

1,003,723

 

 

$

2,695,014

 

 

$

2,101,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

265,653

 

 

$

244,309

 

 

$

632,772

 

 

$

569,545

 

Southeast Group

 

 

78,283

 

 

 

68,042

 

 

 

214,536

 

 

 

194,148

 

West Group

 

 

493,505

 

 

 

437,398

 

 

 

1,156,075

 

 

 

848,402

 

Total Aggregates Business

 

 

837,441

 

 

 

749,749

 

 

 

2,003,383

 

 

 

1,612,095

 

Cement

 

 

110,519

 

 

 

109,521

 

 

 

307,489

 

 

 

109,521

 

Magnesia Specialties

 

 

57,258

 

 

 

58,672

 

 

 

176,470

 

 

 

177,941

 

Total

 

$

1,005,218

 

 

$

917,942

 

 

$

2,487,342

 

 

$

1,899,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

85,693

 

 

$

71,185

 

 

$

148,385

 

 

$

116,703

 

Southeast Group

 

 

7,576

 

 

 

329

 

 

 

10,845

 

 

 

(7,084

)

West Group

 

 

87,525

 

 

 

92,115

 

 

 

151,201

 

 

 

125,069

 

Total Aggregates Business

 

 

180,794

 

 

 

163,629

 

 

 

310,431

 

 

 

234,688

 

Cement

 

 

2,758

 

 

 

18,278

 

 

 

37,455

 

 

 

18,278

 

Magnesia Specialties

 

 

16,996

 

 

 

17,697

 

 

 

53,537

 

 

 

54,976

 

Corporate

 

 

(21,050

)

 

 

(83,648

)

 

 

(59,371

)

 

 

(111,642

)

Total

 

$

179,498

 

 

$

115,956

 

 

$

342,052

 

 

$

196,300

 

 

For the three and nine months ended September 30, 2014, earnings from operations for the West Group reflect $40,756,000 of nonrecurring earnings, net.  For the three and nine months ended September 30, 2015, earnings from operations for the Cement segment include the loss on the sale of the California cement operations and other related expenses, net, of $28,709,000 and $29,888,000, respectively.

Page 21 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

10.

Business Segments (continued) 

Cement intersegment sales, which are to the ready mixed concrete product line in the West Group, were $25,349,000 and $64,304,000 for the three and nine months ended September 30, 2015. Cement intersegment sales were $22,061,000 for the three months ended September 30, 2014. The Cement business was acquired July 1, 2014.

 

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2014

 

 

 

(Dollars in Thousands)

 

Assets employed:

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

1,347,706

 

 

$

1,290,833

 

 

$

1,313,472

 

Southeast Group

 

 

597,018

 

 

 

604,044

 

 

 

604,261

 

West Group

 

 

2,659,024

 

 

 

2,444,400

 

 

 

1,897,626

 

Total Aggregates Business

 

 

4,603,748

 

 

 

4,339,277

 

 

 

3,815,359

 

Cement

 

 

1,973,686

 

 

 

2,451,799

 

 

 

3,038,802

 

Magnesia Specialties

 

 

147,217

 

 

 

150,359

 

 

 

150,068

 

Corporate

 

 

713,797

 

 

 

522,957

 

 

 

334,629

 

Total

 

$

7,438,448

 

 

$

7,464,392

 

 

$

7,338,858

 

 

The assets employed at December 31, 2014 reflect a reclassification of approximately $600 million of goodwill from the Cement segment to the West Group segment compared with the amounts presented in the Segments note (Note O) to the consolidated financial statements in the 2014 Form 10-K.  This correction had no impact on the consolidated balance sheet as of December 31, 2014, or the consolidated statements of earnings (including earnings per diluted share), comprehensive earnings, total equity and cash flows for the year then ended.  Further, goodwill by reportable segment was correctly presented in the Goodwill and Intangible Assets note (Note B) to the 2014 consolidated financial statements.

Page 22 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

10.

Business Segments (continued) 

The Aggregates business includes the aggregates product line and aggregates-related downstream product lines, which include asphalt, ready mixed concrete and road paving product lines. All aggregates-related downstream product lines reside in the West Group. The following tables, which are reconciled to consolidated amounts, provide net sales and gross profit by line of business: Aggregates (further divided by product line), Cement and Magnesia Specialties.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

$

529,993

 

 

$

478,834

 

 

$

1,343,821

 

 

$

1,164,692

 

Asphalt

 

 

26,817

 

 

 

26,873

 

 

 

55,358

 

 

 

59,998

 

Ready Mixed Concrete

 

 

209,608

 

 

 

183,715

 

 

 

486,931

 

 

 

274,103

 

Road Paving

 

 

71,023

 

 

 

60,327

 

 

 

117,273

 

 

 

113,302

 

Total Aggregates Business

 

 

837,441

 

 

 

749,749

 

 

 

2,003,383

 

 

 

1,612,095

 

Cement

 

 

110,519

 

 

 

109,521

 

 

 

307,489

 

 

 

109,521

 

Magnesia Specialties

 

 

57,258

 

 

 

58,672

 

 

 

176,470

 

 

 

177,941

 

Total

 

$

1,005,218

 

 

$

917,942

 

 

$

2,487,342

 

 

$

1,899,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

$

166,166

 

 

$

119,277

 

 

$

344,857

 

 

$

229,471

 

Asphalt

 

 

10,794

 

 

 

7,356

 

 

 

13,644

 

 

 

10,799

 

Ready Mixed Concrete

 

 

23,557

 

 

 

18,628

 

 

 

34,981

 

 

 

28,554

 

Road Paving

 

 

11,263

 

 

 

6,897

 

 

 

11,529

 

 

 

2,665

 

Total Aggregates Business

 

 

211,780

 

 

 

152,158

 

 

 

405,011

 

 

 

271,489

 

Cement

 

 

38,244

 

 

 

24,194

 

 

 

87,642

 

 

 

24,194

 

Magnesia Specialties

 

 

19,391

 

 

 

20,043

 

 

 

60,793

 

 

 

62,192

 

Corporate

 

 

(6,910

)

 

 

(802

)

 

 

(16,528

)

 

 

(845

)

Total

 

$

262,505

 

 

$

195,593

 

 

$

536,918

 

 

$

357,030

 

 

Page 23 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

11.

Supplemental Cash Flow Information  

The components of the change in other assets and liabilities, net, are as follows:

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Other current and noncurrent assets

 

$

(4,579

)

 

$

3,998

 

Accrued salaries, benefits and payroll taxes

 

 

(11,829

)

 

 

27,911

 

Accrued insurance and other taxes

 

 

12,152

 

 

 

10,510

 

Accrued income taxes

 

 

13,143

 

 

 

7,096

 

Accrued pension, postretirement and postemployment benefits

 

 

(24,232

)

 

 

(2,136

)

Other current and noncurrent liabilities

 

 

4,770

 

 

 

(742

)

 

 

$

(10,575

)

 

$

46,637

 

 

The change in accrued salaries, benefits and payroll taxes in 2015 is primarily attributable to payments of severance expense.  The change in accrued pension, postretirement and postemployment benefits in 2015 is predominately due to increased plan contributions.

 

Noncash investing and financing activities are as follows:

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Acquisition of assets through capital lease

 

$

1,445

 

 

$

7,788

 

Acquisition of land through seller financing

 

 

 

 

 

1,500

 

Acquisition of assets through asset exchange

 

 

5,000

 

 

 

2,091

 

Acquisition of TXI assets and liabilities assumed through

     issuances of common stock and options

 

 

 

 

 

2,691,986

 

 

 

 

 

Page 24 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

Martin Marietta Materials, Inc. (the “Corporation” or “Martin Marietta”) is a leading supplier of aggregates products (crushed stone, sand and gravel) and heavy building materials for the construction industry, including infrastructure, nonresidential, residential, railroad ballast, agricultural and chemical grade stone used in environmental applications. The Corporation’s annual consolidated net sales and operating earnings are predominately derived from its Aggregates business, which mines, processes and sells granite, limestone, sand, gravel and other aggregates-related downstream products, including asphalt, ready mixed concrete and road paving construction services for use in all sectors of the public infrastructure, environmental industries, nonresidential and residential construction industries, as well as agriculture, railroad ballast, chemical, utility and other uses. The Aggregates business shipped and delivered aggregates, asphalt products and ready mixed concrete from a network of more than 400 quarries, underground mines, distribution facilities and plants in 26 states, Canada, the Bahamas and the Caribbean Islands. The Aggregates business’ products are used primarily by commercial customers principally in domestic construction of highways and other infrastructure projects and for nonresidential and residential building development. Aggregates products are also used in the railroad, agricultural, utility and environmental industries.

The Corporation currently conducts its Aggregates business through three reportable business segments: Mid-America Group, Southeast Group and West Group.

AGGREGATES BUSINESS

Reportable Segments

 

Mid-America Group

 

Southeast Group

 

West Group

Operating Locations

  

Indiana, Iowa, northern Kansas, Kentucky, Maryland, Minnesota, Missouri, eastern Nebraska, North Carolina, Ohio, South Carolina, Virginia, Washington and West Virginia

  

Alabama, Florida, Georgia, Tennessee, Nova Scotia and the Bahamas

  

Arkansas, Colorado, southern Kansas, Louisiana, western Nebraska, Nevada, Oklahoma, Texas, Utah and Wyoming

 

 

 

 

Primary Product Lines

  

Aggregates (crushed stone, sand and gravel)

  

Aggregates (crushed stone, sand and gravel)

  

Aggregates (crushed stone, sand and gravel), asphalt, ready mixed concrete and road paving

 

 

 

 

Primary Types of Aggregates Locations

  

Quarries and Distribution Facilities

  

Quarries and Distribution Facilities

  

Quarries, Plants and

Distribution Facilities

 

 

 

 

Primary Modes of Transportation for Aggregates Product Line

  

Truck and Rail

  

Truck, Rail and Water

  

Truck and Rail

 

Page 25 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The Cement business produces Portland and specialty cements, such as masonry and oil well cements. Similar to the Aggregates business, cement is used in infrastructure projects, nonresidential and residential construction, and the railroad, agricultural, utility and environmental industries. The production facilities are located in Midlothian, Texas, south of Dallas/Fort Worth and Hunter, Texas, between Austin and San Antonio. The limestone reserves used as a raw material are located on property, owned by the Corporation, adjacent to each of the plants. In addition to the manufacturing facilities, the Corporation operates three cement distribution terminals. On September 30, 2015, the Corporation sold its California cement operations.  

The Corporation also has a Magnesia Specialties segment that produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel industry.

CRITICAL ACCOUNTING POLICIES

The Corporation outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2014. There were no changes to the Corporation’s critical accounting policies during the nine months ended September 30, 2015.

RESULTS OF OPERATIONS

Except as indicated, the comparative analysis in this Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects results from continuing operations and is based on net sales and cost of sales. Gross margin and operating margin calculated as percentages of total revenues represent the most directly comparable financial measures calculated in accordance with generally accepted accounting principles (“GAAP”). However, gross margin as a percentage of net sales and operating margin as a percentage of net sales represent non-GAAP measures. The Corporation presents these ratios calculated based on net sales, as it is consistent with the basis by which management reviews the Corporation’s operating results. Further, management believes it is consistent with the basis by which investors analyze the Corporation’s operating results given that freight and delivery revenues and costs represent pass-throughs and have no profit mark-up. The following tables present the calculations of gross margin and operating margin for the three and nine months ended September 30, 2015 and 2014 in accordance with GAAP and reconciliations of the ratios as percentages of total revenues to percentages of net sales.

Consolidated Gross Margin in Accordance with GAAP

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Gross profit

 

$

262,505

 

 

$

195,593

 

 

$

536,918

 

 

$

357,030

 

Total revenues

 

$

1,082,249

 

 

$

1,003,723

 

 

$

2,695,014

 

 

$

2,101,578

 

Gross margin

 

 

24.3

%

 

 

19.5

%

 

 

19.9

%

 

 

17.0

%

 

 

Page 26 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Consolidated Gross Margin Excluding Freight and Delivery Revenues

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Gross profit

 

$

262,505

 

 

$

195,593

 

 

$

536,918

 

 

$

357,030

 

Total revenues

 

$

1,082,249

 

 

$

1,003,723

 

 

$

2,695,014

 

 

$

2,101,578

 

Less: Freight and delivery revenues

 

 

(77,031

)

 

 

(85,781

)

 

 

(207,672

)

 

 

(202,021

)

Net sales

 

$

1,005,218

 

 

$

917,942

 

 

$

2,487,342

 

 

$

1,899,557

 

Gross margin excluding freight and delivery revenues

 

 

26.1

%

 

 

21.3

%

 

 

21.6

%

 

 

18.8

%

 

Consolidated Operating Margin in Accordance with GAAP

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Earnings from operations

 

$

179,498

 

 

$

115,956

 

 

$

342,052

 

 

$

196,300

 

Total revenues

 

$

1,082,249

 

 

$

1,003,723

 

 

$

2,695,014

 

 

$

2,101,578

 

Operating margin

 

 

16.6

%

 

 

11.6

%

 

 

12.7

%

 

 

9.3

%

 

Consolidated Operating Margin Excluding Freight and Delivery Revenues

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

Earnings from operations

 

$

179,498

 

 

$

115,956

 

 

$

342,052

 

 

$

196,300

 

Total revenues

 

$

1,082,249

 

 

$

1,003,723

 

 

$

2,695,014

 

 

$

2,101,578

 

Less: Freight and delivery revenues

 

 

(77,031

)

 

 

(85,781

)

 

 

(207,672

)

 

 

(202,021

)

Net sales

 

$

1,005,218

 

 

$

917,942

 

 

$

2,487,342

 

 

$

1,899,557

 

Operating margin excluding freight and delivery revenues

 

 

17.9

%

 

 

12.6

%

 

 

13.8

%

 

 

10.3

%

 

Page 27 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Cement Business Gross Margin in Accordance with Generally Accepted Accounting Principle

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Gross profit

 

$

38,244

 

 

$

24,194

 

Total revenues

 

$

116,135

 

 

$

115,743

 

Gross margin

 

 

32.9

%

 

 

20.9

%

 

Cement Business Gross Margin Excluding Freight and Delivery Revenues

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Gross profit

 

$

38,244

 

 

$

24,194

 

Total revenues

 

$

116,135

 

 

$

115,743

 

Less: Freight and delivery revenues

 

 

(5,616

)

 

 

(6,222

)

Net sales

 

$

110,519

 

 

$

109,521

 

Gross margin excluding freight and delivery revenues

 

 

34.6

%

 

 

22.1

%

 

The earnings per diluted share impact of acquisition-related expenses, net, related to the TXI acquisition, represents a non-GAAP measure.  It is presented for investors and analysts to evaluate and forecast the Corporation’s ongoing financial results, as acquisition-related expenses, net, related to TXI are nonrecurring.  

 

The following shows the calculation of the impact of acquisition-related expenses, net, related to the combination with TXI on the loss per diluted share for the three and nine months ended September 30, 2014 (in thousands except per share data).

 

 

 

Three Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

Acquisition-related expenses, net, related to the business combination with TXI

 

$

26,064

 

 

$

41,055

 

Income tax expense

 

 

11,539

 

 

 

7,462

 

After-tax impact of acquisition-related expenses, net, related to the

     business combination with TXI

 

$

37,603

 

 

$

48,517

 

Diluted average number of common shares outstanding

 

 

67,495

 

 

 

53,559

 

Per diluted share impact of acquisition-related expenses, net, related

     to the business combination with TXI

 

$

(0.56

)

 

$

(0.91

)

 

Page 28 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The following shows the calculation of the earnings per diluted share impact of selling acquired inventory due to the markup to fair value as part of accounting for the TXI acquisition for the three and nine months ended September 30, 2014:

 

 

Three Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

Earnings impact of selling acquired inventory due to markup to fair value as part of

     accounting for the TXI acquisition

 

$

(10,873

)

 

$

(10,873

)

Income tax benefit

 

 

4,018

 

 

 

4,018

 

After-tax impact of selling acquired inventory due to markup to fair value as part of

     accounting for the TXI acquisition

 

$

(6,855

)

 

$

(6,855

)

Diluted weighted average number of common shares outstanding

 

 

67,495

 

 

 

53,559

 

Per diluted share impact of selling acquired inventory due to markup to fair value as

     part of accounting for the TXI acquisition

 

$

(0.10

)

 

$

(0.13

)

The following shows the calculation of the total earnings per diluted share impact of the acquisition-related expenses, net, and the inventory markup related to the TXI business combination:

 

 

Three Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

Earnings per diluted share in accordance with generally accepted accounting principles

     for the period ended September 30, 2014

 

$

0.79

 

 

$

1.70

 

Acquisition-related expenses, net impact

 

 

0.56

 

 

 

0.91

 

Inventory markup impact

 

 

0.10

 

 

 

0.13

 

Adjusted earnings per diluted share for the period ended September 30, 2014

 

$

1.45

 

 

$

2.74

 

The following reconciles earnings from operations as reported to adjusted earnings from operations, which excludes acquisition-related expenses, net, and the impact of selling acquired inventory marked up to fair value at the acquisition date for the quarter ended September 30, 2014 (dollars in thousands):

 

 

Three Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

Earnings from operations, as reported

 

$

115,956

 

 

$

196,300

 

Acquisition-related expenses, net, related to the business combination with TXI

 

 

26,118

 

 

 

41,055

 

Impact of selling acquired inventory due to markup to fair value as part of accounting

     for the TXI acquisition

 

 

10,873

 

 

 

10,873

 

Adjusted earnings from operations

 

$

152,947

 

 

$

248,228

 

Page 29 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Incremental gross margin (excluding freight and delivery revenues) is a non-GAAP measure.  The Corporation presents this metric to enhance analysts’ and investors’ understanding of the impact of increased net sales on profitability.  The following shows the calculation of incremental gross margin (excluding freight and delivery revenues) for the consolidated business and the Aggregates business for the quarter ended September 30, 2015 (dollars in thousands).

 

Consolidated business net sales for the quarter ended September 30, 2015

 

$

1,005,218

 

Consolidated business net sales for the quarter ended September 30, 2014

 

 

917,942

 

Incremental net sales

 

$

87,276

 

 

 

 

 

 

Consolidated gross profit for the quarter ended September 30, 2015

 

$

262,505

 

Consolidated gross profit for the quarter ended September 30, 2014

 

 

195,593

 

Incremental gross profit

 

$

66,912

 

 

 

 

 

 

Consolidated incremental gross margin (excluding freight and delivery revenues) for quarter ended

     September 30, 2015

 

 

76.7

%

 

 

 

 

 

 

 

 

 

 

Aggregates business net sales for the quarter ended September 30, 2015

 

$

837,441

 

Aggregates business net sales for the quarter ended September 30, 2014

 

 

749,749

 

Incremental net sales

 

$

87,692

 

 

 

 

 

 

Aggregates business gross profit for the quarter ended September 30, 2015

 

$

211,780

 

Aggregates business gross profit for the quarter ended September 30, 2014

 

 

152,158

 

Incremental gross profit

 

$

59,622

 

 

 

 

 

 

Aggregates business incremental gross margin (excluding freight and delivery revenues) for quarter

     ended September 30, 2015

 

 

68.0

%

Page 30 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

 

The Corporation presents the earnings per diluted share impact and operating earnings impact of the loss on the sale of the California cement operations, including related expenses.  This non-GAAP measure is presented for investors and analysts to evaluate and forecast the Corporation’s ongoing financial results, as the loss on the divestiture and related expenses is nonrecurring.

The following shows the calculation of the impact of the loss on the sale of the California cement operations and other related expenses on earnings per diluted share for the three and nine months ended September 30, 2015 (in thousands except per share data):

 

 

Three Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

Loss on the sale of the California cement operations and other related expenses

 

$

28,709

 

 

$

29,888

 

Income tax benefit

 

 

(11,856

)

 

 

(12,227

)

After-tax impact of the loss on the sale of the California cement operations and other

     related expenses

 

$

16,853

 

 

$

17,661

 

Diluted average number of common shares outstanding

 

 

67,108

 

 

 

67,470

 

Per diluted share impact of the loss on the sale of the California cement operations and

     other related expenses

 

$

(0.25

)

 

$

(0.26

)

Per diluted share impact of recording a valuation allowance for certain net operating

     loss carry forwards as a result of the sale of the California cement operations

 

 

(0.05

)

 

 

(0.05

)

Total per diluted share impact of the loss on the sale of the California cement

     operations and related expenses

 

$

(0.30

)

 

$

(0.31

)

 

The following shows the calculation of the impact of the loss on the sale of the California cement operations and related expenses on operating earnings for the three and nine months ended September 30, 2015 (dollars in thousands):

 

 

Three Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

Earnings from operations, as reported

 

$

179,498

 

 

$

342,052

 

Loss on the sale of the California cement operations and other related expenses

 

 

28,709

 

 

 

29,888

 

Adjusted earnings from operations

 

$

208,207

 

 

$

371,940

 

 

Page 31 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

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 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. Further, adjusted EBITDA excludes the impact of the loss on the sale of the California cement operations and other related expenses.

 

 

Three Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

$

117,544

 

 

$

205,607

 

Add back:

 

 

 

 

 

 

 

 

Interest expense

 

 

18,926

 

 

 

57,344

 

Income tax expense for controlling interests

 

 

47,483

 

 

 

85,600

 

Depreciation, depletion and amortization expense

 

 

64,289

 

 

 

197,787

 

Consolidated EBITDA

 

$

248,242

 

 

$

546,338

 

Loss on the sale of California cement operations and other related expenses

 

 

28,709

 

 

 

29,888

 

Adjusted Consolidated EBITDA

 

$

276,951

 

 

$

576,226

 

Significant items for the quarter ended September 30, 2015 (unless noted, all comparisons are versus the prior-year quarter):

 

 

·

Record consolidated net sales of $1.0 billion compared with $917.9 million, an increase of 9.5%

 

·

Aggregates product line volume increase of 5.4%; aggregates product line price increase of 5.4%

 

·

Cement business net sales of $110.5 million and gross profit of $38.2 million

 

·

Magnesia Specialties net sales of $57.3 million and earnings from operations of $17.0 million

 

·

Consolidated gross margin (excluding freight and delivery revenues) of 26.1%, an increase of 480 basis points

 

·

Consolidated selling, general and administrative expenses (“SG&A”) of $54.9 million, or 5.5% of net sales

 

·

Consolidated adjusted earnings from operations of $208.2 million (which excludes a $25.1 million loss on the sale of the California cement operations and an additional $3.6 million of related expenses) compared with $153.0 million (which excludes $37.0 million of one-time expenses related to the TXI acquisition); reported earnings from operations of $179.5 million compared with $116.0 million

 

·

Adjusted earnings per diluted share of $2.04 (which excludes the $0.30 per diluted share impact of the sale of the California cement operations and related expenses) compared with $1.45 (which excludes the $0.66 per diluted share impact of one-time net expenses related to the TXI acquisition); reported earnings per diluted share of $1.74 compared with $0.79

 

 

Page 32 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The following table presents net sales, gross profit (loss), selling, general and administrative expenses and earnings (loss) from operations data for the Corporation and its reportable segments for the three months ended September 30, 2015 and 2014. In each case, the data is stated as a percentage of net sales of the Corporation or the relevant segment, as the case may be.

 

 

 

Three Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

 

Amount

 

 

% of

Net Sales

 

 

Amount

 

 

% of

Net Sales

 

 

 

(Dollars in Thousands)

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

264,624

 

 

 

 

 

 

$

244,309

 

 

 

 

 

Southeast Group

 

 

78,283

 

 

 

 

 

 

 

68,042

 

 

 

 

 

West Group

 

 

312,005

 

 

 

 

 

 

 

273,346

 

 

 

 

 

Total Heritage Aggregates Business

 

 

654,912

 

 

 

100.0

 

 

 

585,697

 

 

 

100.0

 

Magnesia Specialties

 

 

57,258

 

 

 

100.0

 

 

 

58,672

 

 

 

100.0

 

Total Heritage Consolidated

 

 

712,170

 

 

 

100.0

 

 

 

644,369

 

 

 

100.0

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – Mid-America Group

 

 

1,029

 

 

 

100.0

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

181,500

 

 

 

100.0

 

 

 

164,052

 

 

 

100.0

 

Cement

 

 

110,519

 

 

 

100.0

 

 

 

109,521

 

 

 

100.0

 

Total Acquisitions

 

 

293,048

 

 

 

100.0

 

 

 

273,573

 

 

 

100.0

 

Total

 

$

1,005,218

 

 

 

100.0

 

 

$

917,942

 

 

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

96,978

 

 

 

36.6

 

 

$

82,929

 

 

 

33.9

 

Southeast Group

 

 

11,468

 

 

 

14.6

 

 

 

4,650

 

 

 

6.8

 

West Group

 

 

78,822

 

 

 

25.3

 

 

 

54,596

 

 

 

20.0

 

Total Heritage Aggregates Business

 

 

187,268

 

 

 

28.6

 

 

 

142,175

 

 

 

24.3

 

Magnesia Specialties

 

 

19,391

 

 

 

33.9

 

 

 

20,043

 

 

 

34.2

 

Corporate

 

 

(6,537

)

 

 

 

 

(248

)

 

 

Total Heritage Consolidated

 

 

200,122

 

 

 

28.1

 

 

 

161,970

 

 

 

25.1

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – Mid-America Group

 

 

409

 

 

 

39.7

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

24,103

 

 

 

13.3

 

 

 

9,983

 

 

 

6.1

 

Cement

 

 

38,244

 

 

 

34.6

 

 

 

24,194

 

 

 

22.1

 

Corporate

 

 

(373

)

 

 

 

 

 

(554

)

 

 

 

Total Acquisitions

 

 

62,383

 

 

 

21.3

 

 

 

33,623

 

 

 

12.3

 

Total

 

$

262,505

 

 

 

26.1

 

 

$

195,593

 

 

 

21.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 33 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

 

Amount

 

 

% of

Net Sales

 

 

Amount

 

 

% of

Net Sales

 

 

 

(Dollars in Thousands)

 

Selling, general & administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

12,937

 

 

 

 

 

 

$

12,943

 

 

 

 

 

Southeast Group

 

 

4,515

 

 

 

 

 

 

 

4,436

 

 

 

 

 

West Group

 

 

11,832

 

 

 

 

 

 

 

10,814

 

 

 

 

 

Total Heritage Aggregates Business

 

 

29,284

 

 

 

4.5

 

 

 

28,193

 

 

 

4.8

 

Magnesia Specialties

 

 

2,351

 

 

 

4.1

 

 

 

2,379

 

 

 

4.1

 

Corporate

 

 

9,987

 

 

 

 

 

 

2,041

 

 

 

 

Total Heritage Consolidated

 

 

41,622

 

 

 

5.8

 

 

 

32,613

 

 

 

5.1

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

4,761

 

 

 

2.6

 

 

 

3,403

 

 

 

2.1

 

Cement

 

 

6,809

 

 

 

6.2

 

 

 

6,292

 

 

 

5.7

 

Corporate

 

 

1,695

 

 

 

 

 

 

6,119

 

 

 

 

Total Acquisitions

 

 

13,265

 

 

 

4.5

 

 

 

15,814

 

 

 

5.8

 

Total

 

$

54,887

 

 

 

5.5

 

 

$

48,427

 

 

 

5.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

85,284

 

 

 

 

 

 

$

71,185

 

 

 

 

 

Southeast Group

 

 

7,576

 

 

 

 

 

 

 

329

 

 

 

 

 

West Group(1)

 

 

68,053

 

 

 

 

 

 

 

85,206

 

 

 

 

 

Total Heritage Aggregates Business

 

 

160,913

 

 

 

24.6

 

 

 

156,720

 

 

 

26.8

 

Magnesia Specialties

 

 

16,996

 

 

 

29.7

 

 

 

17,697

 

 

 

30.2

 

Corporate

 

 

(18,797

)

 

 

 

 

 

(63,536

)

 

 

 

Total Heritage Consolidated

 

 

159,112

 

 

 

22.3

 

 

 

110,881

 

 

 

17.2

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – Mid-America Group

 

 

409

 

 

 

39.7

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

19,472

 

 

 

10.7

 

 

 

6,909

 

 

 

4.2

 

Cement(2)

 

 

2,758

 

 

 

2.5

 

 

 

18,278

 

 

 

16.7

 

Corporate

 

 

(2,253

)

 

 

 

 

 

(20,112

)

 

 

 

Total Acquisitions

 

 

20,386

 

 

 

7.0

 

 

 

5,075

 

 

 

1.9

 

Total

 

$

179,498

 

 

 

17.9

 

 

$

115,956

 

 

 

12.6

 

(1) West Group results for the three months ended September 30, 2014 reflect $40,756,000 of nonrecurring earnings, net.

(2) Cement segment results for the three months ended September 30, 2015 include the loss on the sale of the California cement operations and related expenses of $28,709,000.

Page 34 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Aggregates Business

Net sales by product line for the Aggregates business, which reflect the elimination of inter-product line sales, are as follows:

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Net sales:

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

Aggregates

 

$

484,396

 

 

$

442,021

 

Asphalt

 

 

26,817

 

 

 

26,873

 

Ready Mixed Concrete

 

 

72,676

 

 

 

56,476

 

Road Paving

 

 

71,023

 

 

 

60,327

 

Total Heritage

 

 

654,912

 

 

 

585,697

 

Acquisitions

 

 

182,529

 

 

 

164,052

 

Total Aggregates Business

 

$

837,441

 

 

$

749,749

 

 

The following tables present volume and pricing data and shipments data for the aggregates product line.

 

 

 

Three Months Ended

 

 

 

September 30, 2015

 

 

 

Volume

 

 

Pricing

 

Volume/Pricing Variance (1)

 

 

 

 

 

 

 

 

Heritage Aggregates Product Line (2):

 

 

 

 

 

 

 

 

Mid-America Group

 

 

4.2

%

 

 

4.1

%

Southeast Group

 

 

9.1

%

 

 

5.8

%

West Group

 

 

5.3

%

 

 

5.2

%

Heritage Aggregates Operations(2)

 

 

5.2

%

 

 

4.8

%

Aggregates Product Line (3)

 

 

5.4

%

 

 

5.4

%

Page 35 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Tons in Thousands)

 

Shipments

 

 

 

 

 

 

 

 

Heritage Aggregates Product Line (2):

 

 

 

 

 

 

 

 

Mid-America Group

 

 

21,842

 

 

 

20,971

 

Southeast Group

 

 

5,406

 

 

 

4,954

 

West Group

 

 

15,553

 

 

 

14,764

 

Heritage Aggregates Operations(2)

 

 

42,801

 

 

 

40,689

 

Acquisitions

 

 

4,720

 

 

 

4,419

 

Aggregates Product Line (3)

 

 

47,521

 

 

 

45,108

 

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Tons in Thousands)

 

Shipments

 

 

 

 

 

 

 

 

Heritage Aggregates Product Line (2):

 

 

 

 

 

 

 

 

Tons to external customers

 

 

40,880

 

 

 

38,982

 

Internal tons used in other product lines

 

 

1,921

 

 

 

1,707

 

Total heritage aggregates tons

 

 

42,801

 

 

 

40,689

 

 

 

 

 

 

 

 

 

 

Acquisitions:

 

 

 

 

 

 

 

 

Tons to external customers

 

 

3,604

 

 

 

3,174

 

Internal tons used in other product lines

 

 

1,116

 

 

 

1,245

 

Total acquisition aggregates tons

 

 

4,720

 

 

 

4,419

 

(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 operations for a full fiscal year.

(3)

Aggregates Product Line includes all acquisitions from the date of acquisition and divestitures through the date of disposal.

Third-quarter results reflect the considerable earnings power resulting from the continued successful execution of management’s strategic plan and what is believed to be the beginnings of a construction-centric recovery in the Corporation’s geographic markets as evidenced by the growing demand for construction materials and favorable pricing that led to consolidated net sales of more than $1 billion, a milestone for the Corporation.  Continued focus on operational excellence and cost discipline enabled the Corporation to leverage those sales into a 480-basis-point increase in its gross margin, generating a consolidated incremental gross margin (excluding freight and delivery revenues) of 77%.

Page 36 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Aggregates product line shipments to the infrastructure market comprised 43% of quarterly volumes and increased 5%. Each reportable group achieved an increase, led by growth of 8% in the West Group.  Major project activity in Texas, Florida, Georgia and North Carolina continues to accelerate, as states take increased responsibility for funding infrastructure investments.  In fact, highway awards for the trailing twelve months through July were at their highest level since 2000, despite federal funding being provided under a Congressional continuing resolution.  The provisions of the Moving Ahead for Progress in the 21st Century, or MAP-21, have been extended through November 20, 2015.  Management continues to anticipate that Congress will pass and the President will sign a new multi-year bill later this year.  Presently, relevant committees in both the House and Senate have proposed six-year bills that each provide increased funding levels serving to alleviate state-level uncertainty currently hampering the pace of construction activity; this is particularly relevant for rural construction markets.  

The nonresidential market represented 30% of quarterly aggregates product line shipments and were relatively flat.  The light nonresidential component, which includes the commercial sector, increased in each reportable group and reported overall growth of 29%.  This improvement was offset by a decline in the heavy nonresidential component, which includes the industrial and energy sectors. Texas continues to lead the nation in nonresidential construction, with the benefits of multi-year, energy-related projects offsetting direct shipments to the shale fields that are currently lower due to reduced oil prices.  Notwithstanding the challenging commodity price environment, the Corporation continues to expect energy-related activity to remain strong, supported by more than $100 billion of planned projects along the Gulf Coast with a significant portion of these projects in Texas.  On a national scale, Florida, North Carolina and South Carolina each rank in the top fifteen in growth (based on dollars invested) in nonresidential construction.

The residential end-use market accounted for 18% of quarterly aggregates product line shipments, and volumes within this market increased 15%.  Nationally, residential starts increased 10% for the trailing twelve months ended September 2015.  Florida and Georgia each rank in the top five states for growth in total residential starts while Texas, Colorado, North Carolina and South Carolina each rank in the top ten states for single-family housing starts. Consistent with the National Association of Homebuilders latest market index in October, the Corporation continues to witness strong residential subdivision development in nearly all of its relevant markets.  The ChemRock/Rail market accounted for the remaining 9% of aggregates product line shipments.  Volumes to this end use increased 7%, attributable to higher ballast shipments.

The average per-ton selling price for the heritage aggregates product line was $11.62 and $11.09 for the three months ended September 30, 2015 and 2014, respectively.  Heritage aggregates product line pricing grew in all reportable groups, led by the 5.8% increase in the Southeast Group. The West Group and Mid-America Group reported increases of 5.2% and 4.1%, respectively, with notable improvement in Central and South Texas. Pricing trends reflect mid-year increases in certain markets.  The average per-ton selling price for the acquired aggregates product line was $13.02 and $11.83 for the three months ended September 30, 2015 and 2014, respectively. The acquired aggregates product line selling price reflects the impact of higher priced sand and gravel, as well as freight for tons sold through rail yards, which combined accounted for over 70% of shipments.

Page 37 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The Corporation’s aggregates-related downstream product lines include asphalt, ready mixed concrete and road paving businesses in Arkansas, Colorado, Texas and Wyoming. Average selling prices by product line for the Corporation’s aggregates-related downstream product lines are as follows:

 

 

Three Months Ended

 

 

September 30,

 

 

2015

 

2014

Heritage:

 

 

 

 

Asphalt

 

$43.00/ton

 

$41.24/ton

Ready Mixed Concrete

 

$103.30/yd³

 

$94.72/yd³

Acquisitions:

 

 

 

 

Ready Mixed Concrete (4)

 

$95.65/yd³

 

$86.10/yd³

 

Unit shipments by product line for the Corporation’s aggregates-related downstream product lines are as follows:

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

Asphalt Product Line (in thousands):

 

 

 

 

 

 

 

 

Tons to external customers

 

 

473

 

 

 

476

 

Internal tons used in road paving business

 

 

783

 

 

 

777

 

Total asphalt tons

 

 

1,256

 

 

 

1,253

 

Ready Mixed Concrete (in thousands of cubic yards):

 

 

 

 

 

 

 

 

Heritage

 

 

690

 

 

 

580

 

Acquisitions

 

 

1,421

 

 

 

1,466

 

Total cubic yards

 

 

2,111

 

 

 

2,046

 

The heritage ready mixed concrete product line reported a 19% increase in shipments and a 9% increase in average selling price, which led to a 29% increase in net sales and a gross margin expansion of 240-basis-points (excluding freight and delivery revenues).  For the quarter, the legacy TXI ready mixed concrete operations contributed $137 million of net sales, an increase of 8%. The hot mixed asphalt product line reported a slight increase in average selling price and $27 million of net sales.

The Aggregates business is significantly affected by erratic weather patterns, seasonal changes and other weather-related conditions. Production and shipment levels for aggregates, asphalt, ready mixed concrete and road paving materials correlate with general construction activity levels, most of which occurs in the spring, summer and fall. Thus, production and shipment levels vary by quarter. Operations concentrated in the northern and midwestern United States generally experience more severe winter weather conditions than operations in the southeast and southwest. Excessive rainfall, and conversely excessive drought, can also jeopardize shipments, production and profitability in all markets served by the Corporation. Because of the potentially significant impact of weather on the Corporation’s operations, current period and year to date results are not indicative of expected performance for other interim periods or the full year.

Page 38 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

During the first half of 2015, weather significantly affected the Corporation’s revenues and results of operations.  Namely, severe late winter weather in many markets and the wettest second quarter in Texas in recorded weather history, according to the National Oceanic and Atmospheric Administration (“NOAA”), resulted in the deferral of an estimated $115 million in net sales and $40 million to $50 million in deferred gross profit.  In late September/early October 2015, Hurricane Joaquin sat just offshore of the Bahamas for several days delivering flooding rains.  Across the southeastern United States, a separate Hurricane Joaquin-influenced weather system delivered torrential rains.  Notably, South Carolina, one of the Corporation’s top ten revenue states, experienced over 24 inches of rain over a period of five days.  The Corporation’s operations in South Carolina were significantly affected with one quarry in Columbia completely immersed and another operation damaged by earth movement.  However, these operations are shipping product out of inventory and continue to move materials by rail and offshore through the Corporation’s long-haul network.  The Corporation is self-insured for flood-related losses in its coastal markets and is unable to determine the extent of loss, if any, at this time.  Further, significant rainfall in Texas in late October has hampered production efficiencies.  Depending on the timing and extent of any weather disruptions, shipments may be delayed to later in the year or deferred until the following year.

Cement Business

The Cement business is benefitting from continued strength in Texas markets, where pricing advances are proving more impactful than near-term demand dynamics. Average selling price increased 16.3%, reflective of price increases over the past twelve months coupled with the impact of the expiration of legacy TXI cement contracts with below-market pricing.  The Corporation expects the remainder of the legacy TXI contracts to roll off by the end of the year. For the quarter, the business generated $110.5 million of net sales and $38.2 million of gross profit.  Third-quarter cement gross margin expanded 1,250 basis points to 34.6%, including $5.4 million in planned cement kiln maintenance costs, which are expected to double in the fourth quarter.  

On September 30, 2015, the Corporation sold its California cement operations to CalPortland Cement Company for $420 million.  The Corporation recognized a $25.1 million loss on the sale and incurred an additional $3.6 million of related charges.

Average selling price per-ton for the cement operations for the three months ended September 30, 2015 and 2014 was $99.95 and $85.95, respectively.

Cement shipments for the three months ended September 30, 2015 were (tons in thousands):

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

Tons to external customers

 

 

1,081

 

 

 

1,272

 

Internal tons used in other product lines

 

 

256

 

 

 

253

 

Total cement tons

 

 

1,337

 

 

 

1,525

 

 

Over 70%, or 138,000 tons, of the decline in cement shipments during the quarter resulted from the sale of the California cement plant operations.  Upon announcement of the sale of those operations, as expected, certain

Page 39 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

customers realigned their volumes to other suppliers.  Excluding the impact of the sale of the California cement operations, cement shipments declined 4% with half resulting from loss of direct shipments into the energy sector and half from the expiration of certain legacy TXI cement contracts, priced well below the then current market and the well-publicized introduction of new cement capacity in Texas.

The Portland Cement Association, or PCA, forecasts continued favorable supply/demand imbalance in Texas over the next several years.  Further, the PCA currently forecasts growth each year through 2019.  

Magnesia Specialties Business

Magnesia Specialties continued to deliver strong performance and generated third-quarter net sales of $57.3 million and a gross margin (excluding freight and delivery revenues) of 33.9%.  Net sales reflect lower domestic steel production, which is down almost 8% year-to-date versus the comparable period of 2014. Third-quarter earnings from operations were $17.0 million compared with $17.7 million.

Consolidated Operating Results

Consolidated SG&A was 5.5% of net sales compared with 5.3% in the prior-year quarter. The increase reflects higher pension expenses in 2015. During the third quarter of 2015, the Corporation incurred a loss of $25.1 million on the sale of the California Cement business and $3.6 million of related expenses subsequent to the transaction.  Exclusive of these charges, earnings from operations for the quarter were $208.2 million compared with $153.0 million in the prior-year period, which excludes $37.0 million of nonrecurring TXI acquisition-related expenses, net.

Excluding discrete events, the 2015 estimated effective income tax rate for the year-to-date period was 30%, in line with annual guidance. Income tax expense for the third quarter includes a $3.2 million charge to reserve certain state net operating loss (“NOL”) carry forwards as a result of the California Cement business sale. For the year, the Corporation expects to utilize the $509 million remaining allowable NOL carry forwards acquired with TXI.  The Corporation will have fully utilized the approximately $530 million of NOL carry forwards one-year ahead of planned utilization.

Page 40 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The following presents a rollforward of consolidated gross profit (dollars in thousands):

 

Consolidated gross profit, quarter ended September 30, 2014

 

$

195,593

 

Heritage aggregates product line:

 

 

 

 

Volume strength

 

 

21,071

 

Pricing strength

 

 

21,856

 

Cost increases, net

 

 

(9,969

)

Increase in heritage aggregates product line gross profit

 

 

32,958

 

Heritage aggregates-related downstream product lines

 

 

12,135

 

Acquired Aggregates business operations

 

 

14,529

 

Increase in Cement

 

 

14,050

 

Decrease in Magnesia Specialties

 

 

(652

)

Decrease in Corporate

 

 

(6,108

)

Increase in consolidated gross profit

 

 

66,912

 

Consolidated gross profit, quarter ended September 30, 2015

 

$

262,505

 

 

Gross profit (loss) by business is as follows:

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Gross profit (loss):

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

Aggregates

 

$

151,922

 

 

$

118,964

 

Asphalt

 

 

10,794

 

 

 

7,356

 

Ready Mixed Concrete

 

 

13,289

 

 

 

8,958

 

Road Paving

 

 

11,263

 

 

 

6,897

 

Total Aggregates Business

 

 

187,268

 

 

 

142,175

 

Magnesia Specialties

 

 

19,391

 

 

 

20,043

 

Corporate

 

 

(6,537

)

 

 

(248

)

Total Heritage

 

 

200,122

 

 

 

161,970

 

Acquisitions:

 

 

 

 

 

 

 

 

Aggregates

 

 

14,244

 

 

 

313

 

Ready Mixed Concrete

 

 

10,268

 

 

 

9,670

 

Cement

 

 

38,244

 

 

 

24,194

 

Corporate

 

 

(373

)

 

 

(554

)

Total Acquisitions

 

 

62,383

 

 

 

33,623

 

Total

 

$

262,505

 

 

$

195,593

 

Page 41 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The consolidated heritage gross margin (excluding freight and delivery revenues) for the quarter was 28.1%, a 300-basis-point improvement compared with the prior-year quarter. The prior-year quarter gross profit was reduced by $10.9 million for the write up of inventory acquired with TXI to fair value at the acquisition date and subsequent sale during the three months ended September 30, 2014.  The decline in heritage Corporate gross profit is attributable to unfavorable charges related to fixed energy contracts where in the prior-year quarter, these contracts did not exist.  

During the quarter, the Corporation incurred acquisition-related expenses of $2.1 million, which is in line with management’s expectations.  Earnings from operations for the quarter were $179.5 million compared with $116.0 million in the prior-year quarter.

Among other items, other operating income and expenses, net, includes gains and losses on the sale of assets; recoveries and writeoffs related to customer accounts receivable; rental, royalty and services income; accretion expense, depreciation expense and gains and losses related to asset retirement obligations. For the third quarter, consolidated other operating income and expenses, net, was an expense of $26.0 million in 2015 and expense of $5.1 million in 2014. Third quarter 2015 reflects $28.7 million of loss and related expenses in connection with the sale of the California cement operations.

Other nonoperating income and expenses, net, includes foreign currency translation gains and losses, interest and other miscellaneous income and equity adjustments for nonconsolidated affiliates.  The $2.6 million increase in other nonoperating income, net, in 2015 primarily reflects higher earnings from nonconsolidated companies compared with 2014.

Income tax expense for the quarter ended September 30, 2015 includes $3.3 million to establish a valuation allowance for certain state NOL carry forwards as a result of the sale of the California cement operations.

Page 42 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Significant items for the nine months ended September 30, 2015 (unless noted, all comparisons are versus the prior-year period):

 

·

Consolidated net sales of $2.5 billion compared with $1.9 billion, an increase of 31%

 

·

Aggregates product line volume increase of 8.9%; aggregates product line price increase of 7.9%

 

o

Heritage aggregates produce line volume increase of 2.2%

 

·

Cement business net sales of $307.5 million and gross profit of $87.6 million

 

·

Magnesia Specialties net sales of $176.5 million and earnings from operations of $53.5 million

 

·

Consolidated gross margin (excluding freight and delivery revenues) of 21.6%, an increase of 280 basis points

 

·

Consolidated SG&A of $161.1 million, or 6.5% of net sales

 

·

Consolidated adjusted earnings from operations of $371.9 million (which excludes a $25.1 million loss on the sale of the California cement operations and $4.8 million of related expenses) compared with $248.2 million (which excludes $51.9 million of one-time expenses related to the TXI acquisition); reported earnings from operations of $342.1 million compared to $196.3 million

 

·

Earnings per diluted share of $3.34 (which excludes the $0.31 per diluted share impact of the loss on the sale of the California cement operations and related expenses) compared with $2.74 (which excludes the $1.04 per diluted share impact of one-time net expenses related to the TXI acquisition and the impact of selling acquired inventory that was marked up to fair value at the acquisition date); reported earnings per diluted share of $3.03 compared to $1.70

The following table presents net sales, gross profit (loss), selling, general and administrative expenses and earnings (loss) from operations data for the Corporation and its reportable segments for the nine months ended September 30, 2015 and 2014. In each case, the data is stated as a percentage of net sales of the Corporation or the relevant segment, as the case may be.

Page 43 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

 

 

Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

 

Amount

 

 

% of

Net Sales

 

 

Amount

 

 

% of

Net Sales

 

 

 

(Dollars in Thousands)

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

630,776

 

 

 

 

 

 

$

569,545

 

 

 

 

 

Southeast Group

 

 

214,536

 

 

 

 

 

 

 

194,148

 

 

 

 

 

West Group

 

 

723,139

 

 

 

 

 

 

 

684,350

 

 

 

 

 

Total Heritage Aggregates Business

 

 

1,568,451

 

 

 

100.0

 

 

 

1,448,043

 

 

 

100.0

 

Magnesia Specialties

 

 

176,470

 

 

 

100.0

 

 

 

177,941

 

 

 

100.0

 

Total Heritage Consolidated

 

 

1,744,921

 

 

 

100.0

 

 

 

1,625,984

 

 

 

100.0

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – Mid-America Group

 

 

1,996

 

 

 

100.0

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

432,936

 

 

 

100.0

 

 

 

164,052

 

 

 

100.0

 

Cement

 

 

307,489

 

 

 

100.0

 

 

 

109,521

 

 

 

100.0

 

Total Acquisitions

 

 

742,421

 

 

 

100.0

 

 

 

273,573

 

 

 

100.0

 

Total

 

$

2,487,342

 

 

 

100.0

 

 

$

1,899,557

 

 

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

184,529

 

 

 

29.3

 

 

$

149,975

 

 

 

26.3

 

Southeast Group

 

 

24,060

 

 

 

11.2

 

 

 

4,836

 

 

 

2.5

 

West Group

 

 

158,049

 

 

 

21.9

 

 

 

106,695

 

 

 

15.6

 

Total Heritage Aggregates Business

 

 

366,638

 

 

 

23.4

 

 

 

261,506

 

 

 

18.1

 

Magnesia Specialties

 

 

60,793

 

 

 

34.4

 

 

 

62,192

 

 

 

35.0

 

Corporate

 

 

(14,835

)

 

 

 

 

(291

)

 

 

Total Heritage Consolidated

 

 

412,596

 

 

 

23.6

 

 

 

323,407

 

 

 

19.9

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – Mid-America Group

 

 

179

 

 

 

9.0

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

38,192

 

 

 

8.8

 

 

 

9,983

 

 

 

6.1

 

Cement

 

 

87,644

 

 

 

28.5

 

 

 

24,194

 

 

 

22.1

 

Corporate

 

 

(1,693

)

 

 

 

 

 

(554

)

 

 

 

Total Acquisitions

 

 

124,322

 

 

 

16.7

 

 

 

33,623

 

 

 

12.3

 

Total

 

$

536,918

 

 

 

21.6

 

 

$

357,030

 

 

 

18.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 44 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

 

Amount

 

 

% of

Net Sales

 

 

Amount

 

 

% of

Net Sales

 

 

 

(Dollars in Thousands)

 

Selling, general & administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

39,187

 

 

 

 

 

 

$

39,068

 

 

 

 

 

Southeast Group

 

 

13,307

 

 

 

 

 

 

 

13,221

 

 

 

 

 

West Group

 

 

34,054

 

 

 

 

 

 

 

32,493

 

 

 

 

 

Total Heritage Aggregates Business

 

 

86,548

 

 

 

5.5

 

 

 

84,782

 

 

 

5.9

 

Magnesia Specialties

 

 

7,109

 

 

 

4.0

 

 

 

7,294

 

 

 

4.1

 

Corporate

 

 

28,649

 

 

 

 

 

 

11,349

 

 

 

 

Total Heritage Consolidated

 

 

122,306

 

 

 

7.0

 

 

 

103,425

 

 

 

6.4

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

14,303

 

 

 

3.3

 

 

 

3,403

 

 

 

2.1

 

Cement

 

 

20,131

 

 

 

6.5

 

 

 

6,292

 

 

 

5.7

 

Corporate

 

 

4,380

 

 

 

 

 

 

6,119

 

 

 

 

Total Acquisitions

 

 

38,814

 

 

 

5.2

 

 

 

15,814

 

 

 

5.8

 

Total

 

$

161,120

 

 

 

6.5

 

 

$

119,239

 

 

 

6.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

148,207

 

 

 

 

 

 

$

116,703

 

 

 

 

 

Southeast Group

 

 

10,845

 

 

 

 

 

 

 

(7,084

)

 

 

 

 

West Group(1)

 

 

126,854

 

 

 

 

 

 

 

118,160

 

 

 

 

 

Total Heritage Aggregates Business

 

 

285,906

 

 

 

18.2

 

 

 

227,779

 

 

 

15.7

 

Magnesia Specialties

 

 

53,537

 

 

 

30.3

 

 

 

54,976

 

 

 

30.9

 

Corporate

 

 

(51,924

)

 

 

 

 

 

(91,530

)

 

 

 

Total Heritage Consolidated

 

 

287,519

 

 

 

16.5

 

 

 

191,225

 

 

 

11.8

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates Business – Mid-America Group

 

 

178

 

 

 

8.9

 

 

 

 

 

 

 

Aggregates Business – West Group

 

 

24,347

 

 

 

5.6

 

 

 

6,909

 

 

 

4.2

 

Cement(2)

 

 

37,455

 

 

 

12.2

 

 

 

18,278

 

 

 

16.7

 

Corporate

 

 

(7,447

)

 

 

 

 

 

(20,112

)

 

 

 

Total Acquisitions

 

 

54,533

 

 

 

7.3

 

 

 

5,075

 

 

 

1.9

 

Total

 

$

342,052

 

 

 

13.8

 

 

$

196,300

 

 

 

10.3

 

(1) West Group results for the nine months ended September 30, 2014 reflect $40,756,000 of nonrecurring earnings, net.

(2) Cement segment results for the nine months ended September 30, 2015 includes the loss on the sale of the California cement operations and related expenses of $29,888,000.

Page 45 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Net sales by product line for the Aggregates business are follows:

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Net sales:

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

Aggregates

 

$

1,230,139

 

 

$

1,127,879

 

Asphalt

 

 

55,358

 

 

 

59,998

 

Ready Mixed Concrete

 

 

165,681

 

 

 

146,864

 

Road Paving

 

 

117,273

 

 

 

113,302

 

Total Heritage

 

 

1,568,451

 

 

 

1,448,043

 

Acquisitions

 

 

434,932

 

 

 

164,052

 

Total Aggregates Business

 

$

2,003,383

 

 

$

1,612,095

 

The following tables present volume and pricing data and shipments data for the aggregates product line.  

 

 

Nine Months Ended

 

 

 

September 30, 2015

 

 

 

Volume

 

 

Pricing

 

Volume/Pricing Variance (1)

 

 

 

 

 

 

 

 

Heritage Aggregates Product Line (2):

 

 

 

 

 

 

 

 

Mid-America Group

 

 

5.9

%

 

 

4.6

%

Southeast Group

 

 

6.0

%

 

 

4.6

%

West Group

 

 

(3.3

)%

 

 

10.5

%

Heritage Aggregates Operations(2)

 

 

2.2

%

 

 

7.1

%

Aggregates Product Line (3)

 

 

8.9

%

 

 

7.9

%

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Tons in Thousands)

 

Shipments

 

 

 

 

 

 

 

 

Heritage Aggregates Product Line (2):

 

 

 

 

 

 

 

 

Mid-America Group

 

 

50,991

 

 

 

48,147

 

Southeast Group

 

 

14,769

 

 

 

13,931

 

West Group

 

 

40,805

 

 

 

42,203

 

Heritage Aggregates Operations(2)

 

 

106,565

 

 

 

104,281

 

Acquisitions

 

 

11,855

 

 

 

4,419

 

Aggregates Product Line (3)

 

 

118,420

 

 

 

108,700

 

 

Page 46 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Tons in Thousands)

 

Shipments

 

 

 

 

 

 

 

 

Heritage Aggregates Product Line (2):

 

 

 

 

 

 

 

 

Tons to external customers

 

 

102,359

 

 

 

100,117

 

Internal tons used in other product lines

 

 

4,206

 

 

 

4,164

 

Total heritage aggregates tons

 

 

106,565

 

 

 

104,281

 

 

 

 

 

 

 

 

 

 

Acquisitions:

 

 

 

 

 

 

 

 

Tons to external customers

 

 

8,968

 

 

 

3,174

 

Internal tons used in other product lines

 

 

2,887

 

 

 

1,245

 

Total acquisition aggregates tons

 

 

11,855

 

 

 

4,419

 

(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 operations for a full fiscal year.

(3)

Aggregates Product Line includes all acquisitions from the date of acquisition and divestitures through the date of disposal.

Shipments in the West Group for the prior year period include the three locations divested in the third quarter 2014.  The following table reflects volume variance and total shipments excluding the three divested locations from the prior year balances (tons in thousands).

 

 

West Group

 

 

Aggregates Business

 

Reported heritage aggregates product line shipments for the nine months ended

     September 30, 2014

 

 

42,203

 

 

 

104,281

 

Less:  aggregates product line shipments for three operations divested in third

     quarter of 2014

 

 

(2,301

)

 

 

(2,301

)

Adjusted heritage aggregates product line shipments for the nine months ended

     September 30, 2014

 

 

39,902

 

 

 

101,980

 

Reported heritage aggregates product line shipments for the nine months ended

     September 30, 2015

 

 

40,805

 

 

 

106,565

 

Change in 2015 heritage aggregates product line shipments over adjusted shipments

     for the nine months ended September 30, 2014

 

 

2.3

%

 

 

4.5

%

 

The per-ton average selling price for the aggregates product line was $11.78 and $10.99 for the nine months ended September 30, 2015 and 2014, respectively.  

Page 47 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

Average selling prices by product line for the Corporation’s aggregates-related downstream operations are as follows:

 

 

Nine Months Ended

 

 

September 30,

 

 

2015

 

2014

Heritage:

 

 

 

 

Asphalt

 

$42.80/ton

 

$41.68/ton

Ready Mixed Concrete

 

$101.63/yd³

 

$92.39/yd³

Acquisitions:

 

 

 

 

Ready Mixed Concrete (4)

 

$90.93/yd³

 

$86.10/yd³

Unit shipments by product line for the Corporation’s aggregates-related downstream operations are as follows:

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

Asphalt Product Line (in thousands):

 

 

 

 

 

 

 

 

Tons to external customers

 

 

1,042

 

 

 

1,182

 

Internal tons used in road paving business

 

 

1,296

 

 

 

1,347

 

Total asphalt tons

 

 

2,338

 

 

 

2,529

 

Ready Mixed Concrete (in thousands of cubic yards):

 

 

 

 

 

 

 

 

Heritage

 

 

1,587

 

 

 

1,539

 

Acquisitions(4)

 

 

3,501

 

 

 

1,466

 

Total cubic yards

 

 

5,088

 

 

 

3,005

 

(4) 

TXI ready mixed concrete operations acquired on July 1, 2014.

Average selling price per-ton for the cement operations for the nine months ended September 30, 2015 was $97.48.

Cement shipments for the nine months ended September 30, 2015 were (tons in thousands):

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

Tons to external customers

 

 

3,100

 

 

 

1,272

 

Internal tons used in other product lines

 

 

657

 

 

 

253

 

Total cement tons

 

 

3,757

 

 

 

1,525

 

 

For 2015, Magnesia Specialties reported net sales of $176.5 million, relatively flat compared with the prior-year period.  Earnings from operations were $53.5 million compared with $55.0 million.  

Consolidated gross margin (excluding freight and delivery revenues) was 21.6% for 2015 versus 18.8% for 2014.  The

Page 48 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

following presents a rollforward of the Corporation’s gross profit (dollars in thousands):

Consolidated gross profit, nine months ended September 30, 2014

 

$

357,030

 

Heritage aggregates product line:

 

 

 

 

Volume strength

 

 

24,651

 

Pricing strength

 

 

78,199

 

Cost increases, net

 

 

(16,186

)

Increase in heritage aggregates product line gross profit

 

 

86,664

 

Heritage aggregates-related downstream product lines

 

 

18,468

 

Acquired aggregates business operations

 

 

28,390

 

Increase in Cement

 

 

63,448

 

Decrease in Magnesia Specialties

 

 

(1,399

)

Decrease in Corporate

 

 

(15,683

)

Increase in consolidated gross profit

 

 

179,888

 

Consolidated gross profit, nine months ended September 30, 2015

 

$

536,918

 

Gross profit (loss) by business is as follows:

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Gross profit (loss):

 

 

 

 

 

 

 

 

Heritage:

 

 

 

 

 

 

 

 

Aggregates

 

$

315,822

 

 

$

229,158

 

Asphalt

 

 

13,644

 

 

 

10,799

 

Ready Mixed Concrete

 

 

25,643

 

 

 

18,884

 

Road Paving

 

 

11,529

 

 

 

2,665

 

Total Aggregates Business

 

 

366,638

 

 

 

261,506

 

Magnesia Specialties

 

 

60,793

 

 

 

62,192

 

Corporate

 

 

(14,835

)

 

 

(291

)

Total Heritage

 

 

412,596

 

 

 

323,407

 

Acquisitions:

 

 

 

 

 

 

 

 

Aggregates

 

 

29,035

 

 

 

313

 

Ready Mixed Concrete

 

 

9,338

 

 

 

9,670

 

Cement

 

 

87,642

 

 

 

24,194

 

Corporate

 

 

(1,693

)

 

 

(554

)

Total Acquisitions

 

 

124,322

 

 

 

33,623

 

Total

 

$

536,918

 

 

$

357,030

 

Consolidated SG&A expenses were 6.5% of net sales, up 20 basis points compared with the prior-year period, driven by higher pension expense.

Page 49 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

For the first nine months, consolidated other operating income and expenses, net, was an expense of $28.0 million in 2015 compared with expense of $0.3 million in 2014, predominantly due to the loss and related expenses recognized with the sale of the California cement operations.  

In addition to other offsetting amounts, other nonoperating income and expenses, net, are comprised generally of interest income and net equity earnings from nonconsolidated investments.  Consolidated other nonoperating income and expenses, net, for the nine months ended September 30, 2015 was income of $6.6 million in 2015 compared with expense of $1.3 million in 2014, primarily driven by increased income from nonconsolidated affiliates in 2015.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities for the nine months ended September 30, 2015 was $319.6 million compared with $201.6 million for the same period in 2014. The increase was primarily attributable to higher earnings before depreciation, depletion and amortization expense, partially offset by increased working capital requirements and cash payments in 2015 for 2014 taxes that were ineligible for NOL utilization. Operating cash flow is primarily derived from consolidated net earnings before deducting depreciation, depletion and amortization, and the impact of changes in working capital. Depreciation, depletion and amortization were as follows:

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

(Dollars in Thousands)

 

Depreciation

 

$

176,634

 

 

$

140,778

 

Depletion

 

 

10,529

 

 

 

6,300

 

Amortization

 

 

12,772

 

 

 

7,001

 

 

 

$

199,935

 

 

$

154,079

 

 

The increase in depreciation, depletion and amortization expense is attributable to the acquired property, plant and equipment and other intangible assets from business combinations, primarily TXI.

The seasonal nature of the construction aggregates business impacts quarterly operating cash flow when compared with the full year. Full-year 2014 net cash provided by operating activities was $381.7 million compared with $201.6 million for the first nine months of 2014. For the year, the Corporation expects to utilize allowable federal net operating loss carry forwards of $509 million acquired with TXI.  

During the first nine months ended September 30, 2015, the Corporation invested $212.4 million of capital into its business. Full-year capital spending is expected to range from $330 million to $350 million, including $80 million for the Medina Rock and Rail (“Medina”) capital project. With a budgeted cost of $163 million, the Medina project is the largest capital expansion project in the Corporation’s history.  The project, located outside of San Antonio, consists of building a rail-connected limestone aggregates processing facility with the capability of producing in excess of 10 million tons per year.  Initially, shipments from Medina will primarily replace volumes currently being served by the Corporation’s other existing locations.

Page 50 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The Corporation can repurchase its common stock through open-market purchases pursuant to authority granted by its Board of Directors or through private transactions at such prices and upon such terms as the Chief Executive Officer deems appropriate. The Corporation received $420 million from the sale of its California cement operations.  In anticipation of the sale, during the third quarter the Corporation repurchased 917,000 shares of common stock for $157.7 million and expects to use the remaining net proceeds to repurchase additional shares of its stock.  At September 30, 2015, 18,413,000 shares of common stock were remaining under the Corporation’s repurchase authorization.  

The Credit Agreement (which consists of a $250 million Term Loan Facility and a $350 million Revolving Facility) requires the Corporation’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”), as defined, for the trailing twelve month period (the “Ratio”) to not exceed 3.50x as of the end of any fiscal quarter, provided that the Corporation may exclude from the Ratio debt incurred in connection with certain acquisitions for a period of 180 days so long as the Corporation, as a consequence of such specified acquisition, does not have its ratings on long-term unsecured debt fall below BBB by Standard & Poor’s or Baa2 by Moody’s and the Ratio calculated without such exclusion does not exceed 3.75x. Additionally, if there are no amounts outstanding under the Revolving Facility, consolidated debt, including debt for which the Corporation is a co-borrower, will be reduced for purposes of the covenant calculation by the Corporation’s unrestricted cash and cash equivalents in excess of $50 million, such reduction not to exceed $200 million.

The Ratio is calculated as debt, including debt for which the Corporation is a co-borrower, divided by consolidated EBITDA, as defined by the Credit Agreement, for the trailing twelve months. Consolidated EBITDA is generally defined as earnings before interest expense, income tax expense, and depreciation, depletion and amortization expense for continuing operations. Additionally, stock-based compensation expense is added back and interest income is deducted in the calculation of consolidated EBITDA. Certain other nonrecurring noncash items, if they occur, can affect the calculation of consolidated EBITDA.

In 2014, the Corporation amended the Credit Agreement to ensure the impact of the business combination with TXI does not impair liquidity available under the Term Loan Facility and the Revolving Facility. The amendment adjusts consolidated EBITDA to add back fees, costs or expenses relating to the TXI business combination incurred on or prior to the closing of the combination not to exceed $95,000,000 and any integration or similar costs or expenses related to the TXI business combination incurred in any period prior to the second anniversary of the closing of the TXI business combination not to exceed $70,000,000.

Page 51 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

At September 30, 2015, the Corporation’s ratio of consolidated debt to consolidated EBITDA, as defined, for the trailing twelve months EBITDA was 2.21 times and was calculated as follows:

 

 

 

October 1, 2014 to

 

 

 

September 30, 2015

 

 

 

(Dollars in thousands)

 

Earnings from continuing operations attributable to Martin Marietta

 

$

269,459

 

Add back:

 

 

 

 

Interest expense

 

 

78,447

 

Income tax expense

 

 

120,798

 

Depreciation, depletion and amortization expense

 

 

264,173

 

Stock-based compensation expense

 

 

13,334

 

Acquisition-related expenses, net, related to the TXI acquisition

 

 

6,884

 

Loss on divestiture and related expenses

 

 

29,888

 

Deduct:

 

 

 

 

Interest income

 

 

(369

)

Consolidated EBITDA, as defined

 

$

782,614

 

Consolidated debt, including debt for which the Corporation is a co-borrower,

   at September 30, 2015

 

$

1,730,591

 

Consolidated debt to consolidated EBITDA, as defined, at September 30, 2015

   for the trailing twelve months EBITDA

 

2.21x

 

 

The Trade Receivable Facility contains a cross-default provision to the Corporation’s other debt agreements. In the event of a default on the Ratio, the lenders can terminate the Credit Agreement and Trade Receivable Facility and declare any outstanding balances as immediately due.

Cash on hand, along with the Corporation’s projected internal cash flows and availability of financing resources, including its access to debt and equity capital markets, is expected to continue to be sufficient to provide the capital resources necessary to support anticipated operating needs, cover debt service requirements, meet capital expenditures and discretionary investment needs, fund certain acquisition opportunities that may arise and allow for payment of dividends for the foreseeable future. At September 30, 2015, the Corporation had $470 million of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility, subject to complying with the related leverage covenant. The Revolving Facility expires on November 29, 2018 and the Trade Receivable Facility expires on September 30, 2016.

The Corporation may be required to obtain financing to fund certain strategic acquisitions, if any such opportunities arise, or to refinance outstanding debt. Any strategic acquisition of size for cash would likely require an appropriate balance of newly-issued equity with debt in order to maintain a composite investment-grade credit rating. Furthermore, the Corporation is exposed to the credit markets, through the interest cost related to its variable-rate debt, which included borrowings under its Term Loan Facility at September 30, 2015. The Corporation is currently rated by three credit rating agencies; two of those agencies’ credit ratings are investment-grade level and the third agency’s credit

Page 52 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

rating is one level below investment grade. The Corporation’s composite credit rating remains at investment-grade level, which facilitates obtaining financing at lower rates than noninvestment-grade ratings.

CONTRACTUAL AND OFF BALANCE SHEET OBLIGATIONS

During the second quarter of 2015, the Corporation entered into an 18-month fixed price fuel contract which totaled $55.4 million and a 15-year railcar lease which totaled $24.8 million.  

 

(Dollars in Thousands)

Total

 

< 1 Year

 

1 to 3 Years

 

3 to 5 Years

 

> 5 Years

 

Off Balance Sheet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease - rail

$

24,793

 

$

1,653

 

$

3,306

 

$

3,306

 

$

16,528

 

Purchase commitment - energy

 

55,409

 

 

36,939

 

 

18,470

 

 

 

 

 

Total

$

80,202

 

$

38,592

 

$

21,776

 

$

3,306

 

$

16,528

 

TRENDS AND RISKS

The Corporation outlined the risks associated with its business in its Annual Report on Form 10-K for the year ended December 31, 2014. Management continues to evaluate its exposure to all operating risks on an ongoing basis.

OUTLOOK

The Corporation is encouraged by positive trends in its business and markets, notably:

 

·

Nonresidential construction is expected to grow in both the heavy industrial and commercial sectors. The Dodge Momentum Index remains high and signals continued growth.

 

·

Energy-related economic activity, including follow-on public and private construction activities in the Corporation’s primary markets, is anticipated to remain strong.  Residential construction is expected to continue to grow, driven by historically low levels of construction activity over the previous several years, employment gains, low mortgage rates, significant lot absorption, higher multi-family rental rates and rising housing prices.

 

·

For the public sector, authorized highway funding from MAP-21 should remain stable compared with 2014. Additionally, state initiatives to finance infrastructure projects, including support from TIFIA, are expected to grow and continue to play an expanded role in public-sector activity.

The significant amount of rainfall during the first half of the year coupled with capacity constraints is expected to delay a portion of weather-delayed shipments into 2016.  Based on this expectation and external trends, the Corporation anticipates the following for the full year, which reflects the sale of the California cement operations:

 

·

Aggregates end-use markets compared to 2014 levels are as follows:

 

o

Infrastructure market to increase in the low-single digits.

 

o

Nonresidential market to increase in the mid-single digits.

 

o

Residential market to experience a double-digit increase.

Page 53 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

 

o

ChemRock/Rail market to remain relatively flat. 

 

·

Aggregates product line shipments to increase by 7% to 10% compared with 2014 levels.

 

o

Heritage aggregates shipments to increase 3% to 5%.

 

·

Aggregates product line pricing to increase by 7% to 9% compared with 2014.

 

·

Aggregates product line production cost per ton shipped to remain relatively flat.

 

·

Aggregates-related downstream product lines to generate between $875 million and $925 million of net sales and $80 million to $85 million of gross profit.

 

·

Net sales for the Cement segment to be between $375 million and $400 million, generating $105 million to $110 million of gross profit.

 

·

Net sales for the Magnesia Specialties segment to be between $235 million and $240 million, generating $80 million to $85 million of gross profit.

 

·

SG&A expenses as a percentage of net sales to be slightly above 6.0%, inclusive of an $18 million increase in heritage pension costs that resulted from lower discount rate.

 

·

Interest expense to approximate $75 million to $80 million.

 

·

Estimated effective income tax rate to approximate 31%, excluding discrete events.

 

·

Consolidated EBITDA to range from $800 million to $820 million, exclusive of the loss on the California cement sale and related expenses and absent the early onset of winter weather in the Corporation’s markets

 

·

Cash taxes paid to approximate $65 million.

 

·

Capital expenditures to range from $330 million to $350 million, including $35 million of synergy-related capital and approximately $80 million for Medina limestone quarry.

The Corporation has started framing a preliminary 2016 outlook for its aggregates end-use markets based on its internal observations in conjunction with McGraw Hill Construction’s economic forecast.  The Corporation currently expects the following:

 

Infrastructure market to increase slightly.

 

Nonresidential market to increase slightly.

 

Residential market to experience a double-digit increase.

 

ChemRock/Rail market to remain relatively flat.

While the Corporation is optimistic regarding the passage of a multi-year highway bill, it has excluded any increase in infrastructure construction activity in its 2016 outlook.

The Corporation’s outlook for the cement industry is largely consistent with PCA’s forecast.  Cement demand in Texas is forecasted to be up 4% in 2016.  

Page 54 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

The outlook includes management’s assessment of the likelihood of certain risks and uncertainties that will affect performance.  The most significant risks to the Corporation’s performance will be Congress’ actions and timing surrounding federal highway funding and uncertainty over the funding mechanism for the Highway Trust Fund.  Congress recently extended federal highway funding through continuing resolution through November 20, 2015.  Additionally, all of the Corporation’s businesses are also subject to weather-related risks that can significantly affect production schedules and profitability. The first and fourth quarters are most adversely affected by winter weather. Hurricane activity in the Atlantic Ocean and Gulf Coast generally is most active during the third and fourth quarters. Further, a decline in consumer confidence may negatively impact investment in construction projects. While both MAP-21 and TIFIA credit assistance are excluded from the U.S. debt ceiling limit, this issue may have a significant impact on the economy and, consequently, construction activity. Other risks and uncertainties related to the Corporation’s future performance include, but are not limited to: both price and volume, and a recurrence of widespread decline in aggregates volume negatively affecting aggregates price; the termination, capping and/or reduction of the federal and/or state gasoline tax(es) or other revenue related to infrastructure construction; a significant change in the funding patterns for traditional federal, state and/or local infrastructure projects; a reduction in defense spending, and the subsequent impact on construction activity on or near military bases; a decline in nonresidential construction; a decline in energy-related drilling activity resulting from a sustained period of low global oil prices or changes in oil production patterns in response to this decline and certain regulatory or other economic factors; a slowdown in the residential construction recovery, or some combination thereof; a reduction in economic activity in the Corporation’s Midwest states resulting from reduced funding levels provided by the Agricultural Act of 2014 and a reduction in capital investment by the railroads; an increase in the cost of compliance with governmental laws and regulations; unexpected equipment failures, unscheduled maintenance, industrial accident or other prolonged and/or significant disruption to the Corporation’s cement production facilities; and the possibility that certain expected synergies and operating efficiencies in connection with the TXI acquisition are not realized within the expected time frames or at all. Further, increased highway construction funding pressures resulting from either federal or state issues can affect profitability. If these negatively affect transportation budgets more than in the past, construction spending could be reduced. Cement is subject to cyclical supply and demand and price fluctuations. The Magnesia Specialties business essentially runs at capacity; therefore, any unplanned changes in costs or realignment of customers introduce volatility to the earnings of this segment.

The Corporation’s principal business serves customers in aggregates-related construction markets.  This concentration could increase the risk of potential losses on customer receivables; however, payment bonds normally posted on public projects, together with lien rights on private projects, help to mitigate the risk of uncollectible receivables.  The level of aggregates demand in the Corporation’s end-use markets, production levels and the management of production costs will affect the operating leverage of the Aggregates business and, therefore, profitability.  Production costs in the Aggregates business are also sensitive to energy and raw material prices, both directly and indirectly.  Diesel fuel and other consumables change production costs directly through consumption or indirectly by increased energy-related input costs, such as steel, explosives, tires and conveyor belts.  Fluctuating diesel fuel pricing also affects transportation costs, primarily through fuel surcharges in the Corporation’s long-haul distribution network.  The Cement business is also energy intensive and fluctuations in the price of coal affects costs.  The Magnesia Specialties business is sensitive to changes in domestic steel capacity utilization and the absolute price and fluctuations in the cost of natural gas.

Transportation in the Corporation’s long-haul network, particularly the supply of railcars and locomotive power and condition of rail infrastructure to move trains, affects the Corporation’s ability to efficiently transport aggregate into

Page 55 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

certain markets, most notably Texas, Florida and the Gulf Coast.  The Corporation’s new Medina limestone quarry is dependent on rail-movement for substantially all of its products.  In addition, availability of railcars and locomotives affects the Corporation’s ability to move dolomitic lime, a key raw material for magnesia chemicals, to both the Corporation’s plant in Manistee, Michigan, and customers.  The availability of trucks, drivers and railcars to transport the Corporation’s products, particularly in markets experiencing high growth and increased demand, is also a risk and pressures the associated costs.  

Risks to the outlook also include shipment declines as a result of economic events beyond the Corporation’s control.  In addition to the impact on nonresidential and residential construction, the Corporation is exposed to risk in its estimated outlook from credit markets and the availability of and interest cost related to its debt.

The Corporation’s future performance is also exposed to risks from tax reform at the federal and state levels.

OTHER MATTERS

If you are interested in Martin Marietta stock, management recommends that, at a minimum, you read the Corporation’s current annual report and Forms 10-K, 10-Q and 8-K reports to the Securities and Exchange Commission (SEC) over the past year.  The Corporation’s recent proxy statement for the annual meeting of shareholders also contains important information.  These and other materials that have been filed with the SEC are accessible through the Corporation’s website at www.martinmarietta.com and are also available at the SEC’s website at www.sec.gov.  You may also write or call the Corporation’s Corporate Secretary, who will provide copies of such reports.

Investors are cautioned that all statements in this Form 10-Q that relate to the future involve risks and uncertainties, and are based on assumptions that the Corporation believes in good faith are reasonable but which may be materially different from actual results.  Forward-looking statements give the investor management’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 be," "believe," “will”, and other words of similar meaning in connection with future events or future operating or financial performance.  Any or all of management’s forward-looking statements here and in other publications may turn out to be wrong.

Factors that the Corporation currently believes could cause actual results to differ materially from the forward-looking statements in this Form 10-Q include, but are not limited to, Congress’ actions and timing surrounding federal highway funding and uncertainty over the funding mechanism for the Highway Trust Fund; the performance of the United States economy and the resolution and impact of the debt ceiling and sequestration issues; widespread decline in aggregates pricing; the history of both cement and ready mixed concrete, to be subject to significant changes in supply, demand and price; the termination, capping and/or reduction of the federal and/or state gasoline tax(es) or other revenue related to infrastructure construction; the level and timing of federal and state transportation funding, most particularly in Texas, North Carolina, Iowa, Colorado and Georgia; the ability of states and/or other entities to finance approved projects either with tax revenues or alternative financing structures; levels of construction spending in the markets the Corporation serves; a reduction in defense spending, and the subsequent impact on construction activity on or near military bases; a decline in the commercial component of the nonresidential construction market, notably office and retail space; a slowdown in energy-related drilling activity, particularly in Texas; a slowdown in residential construction recovery; a reduction in construction activity and related shipments due to a decline in funding under the domestic farm

Page 56 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2015

(Continued)

 

bill; unfavorable weather conditions, particularly Atlantic Ocean hurricane activity, the late start to spring or the early onset of winter and the impact of a drought or excessive rainfall in the markets served by the Corporation; the volatility of fuel costs, particularly diesel fuel, and the impact on the cost of other consumables, namely steel, explosives, tires and conveyor belts, and with respect to the Magnesia Specialties and Cement businesses, natural gas; continued increases in the cost of other repair and supply parts; unexpected equipment failures, unscheduled maintenance, industrial accident or other prolonged and/or significant disruption to cement production facilities; increasing governmental regulation, including environmental laws; transportation availability, notably the availability of railcars and locomotive power to move trains to supply the Corporation’s Texas, Florida and Gulf Coast markets; increased transportation costs, including increases from higher passed-through energy and other costs to comply with tightening regulations as well as higher volumes of rail and water shipments; availability of trucks and licensed drivers for transport of the Corporation’s materials, particularly in areas with significant energy-related activity, such as Texas and Colorado; availability and cost of construction equipment in the United States; weakening in the steel industry markets served by the Corporation’s dolomitic lime products; proper functioning of information technology and automated operating systems to manage or support operations; inflation and its effect on both production and interest costs; ability to successfully integrate acquisitions quickly and in a cost-effective manner and achieve anticipated profitability to maintain compliance with the Corporation’s leverage ratio debt covenant; changes in tax laws, the interpretation of such laws and/or administrative practices that would increase the Corporation’s tax rate;  violation of the Corporation’s debt covenant if price and/or volumes return to previous levels of instability; downward pressure on the Corporation’s common stock price and its impact on goodwill impairment evaluations; reduction of the Corporation’s credit rating to non-investment grade resulting from strategic acquisitions; and other risk factors listed from time to time found in the Corporation’s filings with the SEC.  Other factors besides those listed here may also adversely affect the Corporation, and may be material to the Corporation.  The Corporation assumes no obligation to update any such forward-looking statements.

INVESTOR ACCESS TO COMPANY FILINGS

Shareholders may obtain, without charge, a copy of Martin Marietta’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2014, by writing to:

Martin Marietta

Attn: Corporate Secretary

2710 Wycliff Road

Raleigh, North Carolina 27607-3033

Additionally, Martin Marietta’s Annual Report, press releases and filings with the Securities and Exchange Commission, including Forms 10-K, 10-Q, 8-K and 11-K, can generally be accessed via the Corporation’s website. Filings with the Securities and Exchange Commission accessed via the website are available through a link with the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system. Accordingly, access to such filings is available upon EDGAR placing the related document in its database. Investor relations contact information is as follows:

Telephone: (919) 783-4540

Website address: www.martinmarietta.com

Information included on the Corporation’s website is not incorporated into, or otherwise create a part of, this report.

 

Page 57 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Corporation’s operations are highly dependent upon the interest rate-sensitive construction and steelmaking industries. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs.

Management has considered the current economic environment and its potential impact to the Corporation’s business. Demand for aggregates products, particularly in the infrastructure construction market, has already been negatively affected by federal and state budget and deficit issues and the uncertainty over future highway funding levels beyond the expiration of MAP-21 which has been extended via several continuing resolutions, the latest of which expires November 20, 2015. Further, delays or cancellations to capital projects in the nonresidential and residential construction markets could occur if companies and consumers are unable to obtain financing for construction projects or if consumer confidence continues to be eroded by economic uncertainty.

Demand in the residential construction market is affected by interest rates. The Federal Reserve kept the federal funds rate near zero percent during the nine months ended September 30, 2015, unchanged since 2008. The residential construction market accounted for 14% of the Corporation’s aggregates product line shipments in 2014.

Aside from these inherent risks from within its operations, the Corporation’s earnings are also affected by changes in short-term interest rates. However, rising interest rates are not necessarily predictive of weaker operating results. In fact, since 2007, the Corporation’s profitability increased when interest rates rose, based on the last twelve months quarterly historical net income regression versus a 10-year U.S. government bond. In essence, the Corporation’s underlying business generally serves as a natural hedge to rising interest rates.

Variable-Rate Borrowing Facilities. At September 30, 2015, the Corporation had a $600 million Credit Agreement, comprised of a $350 million Revolving Facility and $250 million Term Loan Facility, and a $250 million Trade Receivable Facility. Borrowings under these facilities bear interest at a variable interest rate. A hypothetical 100-basis-point increase in interest rates on borrowings of $357.1 million, which was the collective outstanding balance at September 30, 2015, would increase interest expense by $3.6 million on an annual basis.

Pension Expense. The Corporation’s results of operations are affected by its pension expense. Assumptions that affect pension expense include the discount rate and, for the defined benefit pension plans only, the expected long-term rate of return on assets. Therefore, the Corporation has interest rate risk associated with these factors. The impact of hypothetical changes in these assumptions on the Corporation’s annual pension expense is discussed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014.

Energy Costs. Energy costs, including diesel fuel, natural gas, coal and liquid asphalt, represent significant production costs of the Corporation. The Corporation entered into a fixed price arrangement for 40% of its diesel fuel to reduce its diesel fuel price risk. The Magnesia Specialties business has fixed price agreements covering half of its 2015 coal requirements and the cement business has fixed pricing agreements on 100% of its 2015 coal requirements. A hypothetical 10% change in the Corporation’s energy prices in 2015 as compared with 2014, assuming constant volumes, would change 2015 energy expense by $27.9 million. However, the impact would be partially offset by the change in the amount capitalized into inventory standards.

 

Page 58 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

(Continued)

 

Commodity risk. Cement is a commodity and competition is based principally on price, which is highly sensitive to changes in supply and demand. Prices are often subject to material changes in response to relatively minor fluctuations in supply and demand, general economic conditions and other market conditions beyond the Corporation’s control. Increases in the production capacity of industry participants or increases in cement imports tend to create an oversupply of such products leading to an imbalance between supply and demand, which can have a negative impact on product prices. There can be no assurance that prices for products sold will not decline in the future or that such declines will not have a material adverse effect on the Corporation’s business, financial condition and results of operations.  Based on forecasted net sales for the Cement business for full-year 2015 of $375 million to $400 million, a hypothetical 10% change in sales price would impact net sales by $37.5 million to $40 million.

Item 4. Controls and Procedures

As of September 30, 2015, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Corporation’s disclosure controls and procedures were effective as of September 30, 2015. There were no changes in the Corporation’s internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

 

 

Page 59 of 63


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

PART II- OTHER INFORMATION

 

 

Item 1. Legal Proceedings.

Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta Annual Report on Form 10-K for the year ended December 31, 2014.

 

 

Item 1A. Risk Factors.

Reference is made to Part I. Item 1A. Risk Factors and Forward-Looking Statements of the Martin Marietta Annual Report on Form 10-K for the year ended December 31, 2014.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

 

 

 

 

 

 

 

 

 

 

 

Total Number of Shares

 

 

Maximum Number of

 

 

 

 

 

 

 

 

 

 

 

Purchased as Part of

 

 

Shares that May Yet

 

 

 

Total Number of

 

 

Average Price

 

 

Publicly Announced

 

 

be Purchased Under

 

Period

 

Shares Purchased

 

 

Paid per Share

 

 

Plans or Programs

 

 

the Plans or Programs

 

July 1, 2015 - July 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

19,330,082

 

August 1, 2015 - August 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

19,330,082

 

September 1, 2015 - September 30, 2015

 

 

917,376

 

 

$

171.80

 

 

 

917,376

 

 

 

18,412,706

 

 

Reference is made to the press release dated February 10, 2015 for the December 31, 2014 fourth-quarter and full-year results and announcement of the new share repurchase program. The Corporation’s Board of Directors authorized a maximum of 20 million shares to be repurchased under the program.  The program does not have an expiration date.

 

 

Item 4. Mine Safety Disclosures.

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

 

 

 

Page 60 of 63


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

PART II- OTHER INFORMATION

(Continued)

 

Item 6. Exhibits.

 

Exhibit No.

  

Document

 

 

31.01

  

Certification dated November 5, 2015 of Chief Executive Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.02

  

Certification dated November 5, 2015 of Chief Financial Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

32.01

  

Written Statement dated November 5, 2015 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.02

  

Written Statement dated November 5, 2015 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

95

  

Mine Safety Disclosures

 

 

101.INS

  

XBRL Instance Document

 

 

101.SCH

  

XBRL Taxonomy Extension Schema Document

 

 

101.CAL

  

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.LAB

  

XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE

  

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

101.DEF

  

XBRL Taxonomy Extension Definition Linkbase

 

 

 

 

 

 

Page 61 of 63


 

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

MARTIN MARIETTA MATERIALS, INC.

 

 

 

            (Registrant)

 

 

 

 

Date: November 5, 2015

By:

 

/s/ Anne H. Lloyd

 

 

 

Anne H. Lloyd

 

 

 

Executive Vice President and

 

 

 

   Chief Financial Officer

 

 

 

Page 62 of 63


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2015

EXHIBIT INDEX

 

Exhibit No.

  

Document

 

 

31.01

  

Certification dated November 5, 2015 of Chief Executive Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.02

  

Certification dated November 5, 2015 of Chief Financial Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

32.01

  

Written Statement dated November 5, 2015 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.02

  

Written Statement dated November 5, 2015 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

95

  

Mine Safety Disclosures

 

 

101.INS

  

XBRL Instance Document

 

 

101.SCH

  

XBRL Taxonomy Extension Schema Document

 

 

101.CAL

  

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.LAB

  

XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE

  

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

101.DEF

  

XBRL Taxonomy Extension Definition Linkbase

 

Page 63 of 63