Martin Marietta Materials, Inc. (NYSE:MLM) (“Martin Marietta” or
the “Company”) today reported results for the first quarter ended
March 31, 2020.
Highlights include:
|
Quarter
Ended March 31, |
|
($ in millions, except per share) |
2020 |
|
|
2019 |
|
Total revenues
1 |
$ |
958.2 |
|
|
$ |
939.0 |
|
Products and services revenues 2 |
$ |
891.0 |
|
|
$ |
878.3 |
|
Building Materials business |
$ |
831.1 |
|
|
$ |
809.1 |
|
Magnesia Specialties business |
$ |
59.9 |
|
|
$ |
69.2 |
|
Gross profit |
$ |
142.4 |
|
|
$ |
142.9 |
|
Earnings from operations |
$ |
57.8 |
|
|
$ |
69.2 |
|
Net earnings attributable to Martin Marietta |
$ |
25.9 |
|
|
$ |
42.9 |
|
Adjusted EBITDA 3 |
$ |
149.0 |
|
|
$ |
158.2 |
|
Earnings per diluted share |
$ |
0.41 |
|
|
$ |
0.68 |
|
1 Total revenues include the sales of
products and services to customers (net of any discounts or
allowances) and freight revenues.
2 Products and services revenues include
the sales of aggregates, cement, ready mixed concrete, asphalt and
Magnesia Specialties products, and paving services to customers,
and exclude related freight revenues.
3 Earnings Before Interest, Taxes,
Depreciation, Depletion and Amortization and the Noncash
Earnings/Loss from Nonconsolidated Equity Affiliates, or Adjusted
EBITDA, is a non-GAAP financial measure. See Appendix to this
earnings release for a reconciliation to net earnings attributable
to Martin Marietta.
Ward Nye, Chairman and CEO of Martin Marietta,
stated, “For the first three months of the year, Martin Marietta
delivered strong financial and operational performance, generating
Adjusted EBITDA of $149 million. We established a new first-quarter
record for consolidated revenues, as product demand led to improved
shipments and pricing across most of our Building Materials
business. Notably, production efficiencies improved our
year-over-year per unit aggregates cost. While this is what we aim
for, as lower unit costs improve operating margins, in the current
quarter, this lower unit cost served to reduce aggregates inventory
valuation. This year-over-year impact alone lowered earnings per
share by $0.18. Further, the prior-year’s first-quarter benefitted
from a change in tax election for a subsidiary of $0.21 per share.
Understanding those circumstances largely contextualizes our
impressive first-quarter 2020 performance. Additionally, we
strengthened the Company’s balance sheet and cash position through
the early March issuance of $500 million of 2.5% senior notes due
in 2030. While our solid first-quarter performance provided a
promising start to 2020, we recognize this will now be a
challenging year for our country, customers, communities and
industry as a whole. Thus, given the unprecedented level of
uncertainty surrounding the length, breadth and severity of the
coronavirus (COVID-19) pandemic, we have withdrawn our
previously-issued full-year 2020 guidance and will not update it at
this time. With that said, we remain confident that the attractive
underlying market fundamentals and long-term secular growth trends
in our key geographies, both of which underpinned the Company’s
record 2019 performance and strong first-quarter 2020 results,
remain intact and will be evident once again as the U.S. economy
stabilizes and recovers.
“Our Company’s commitment to operational
excellence, disciplined approach to growth and tradition of
preparedness have positioned us well to weather this period of
uncertainty. We have thoughtfully developed and consistently
executed on our strategic plans, positioning our business as an
aggregates leader in attractive high-growth geographies, aligning
our product offerings to leverage strategic cement and targeted
downstream opportunities and prudently allocating capital while
maintaining financial flexibility. In doing so, we have built a
business that is durable and resilient. While Martin Marietta is
not immune to the impact of COVID-19, we believe our Company is
well prepared to meet the current and coming challenges.
“Importantly, the Company’s balance sheet
remains healthy and we have ample liquidity for the foreseeable
future. Martin Marietta, along with our customers, continues to
operate as an “essential business” in most jurisdictions and,
through the end of April, we have seen minimal disruption to our
operations, workforce and supply chains from the effects of
COVID-19 and related government agency responses. Nonetheless, we
anticipate product demand will soften in the coming months, as
businesses and governments prioritize actions in response to
COVID-19. Our team has plans for a variety of scenarios and will
react appropriately to changing conditions. We will continue to
closely monitor the situation and focus on safeguarding our
stakeholders’ health and well-being, operating safely and
efficiently, preserving liquidity and aligning costs with customer
demand.”
Mr. Nye concluded, “Consistent with our values
of safety, integrity, excellence, community, and stewardship,
Martin Marietta is committed to providing the products and services
our communities need. I am enormously proud of the determination,
professionalism and devotion of our Martin Marietta employees who
are working each and every day. Their dedication supports our
communities and business partners who are persevering through the
impacts of the current crisis. We remain appropriately focused on
our tactical day-to-day responsibilities and ever mindful of the
values and strategies that have driven our long track-record of
success. Guided by our shared commitment to the world-class
attributes of our business, safety, operational excellence, cost
management, and the disciplined execution of our proven strategic
plan, Martin Marietta has the right strategies, priorities and team
to responsibly navigate through these challenging times and drive
sustainable long-term growth and shareholder value.”
First-Quarter Operating Results(All comparisons are versus the
prior-year quarter unless noted otherwise)
The COVID-19 pandemic and related public policy
responses largely began in mid-March in the United States. As such,
first-quarter results and trends described in this earnings release
may not be indicative of the Company’s future performance.
|
Quarter ended March 31, 2020 |
|
($ in millions) |
Revenues |
|
Gross profit(loss) |
|
Gross margin |
|
Building
Materials business: |
|
|
|
|
|
|
|
|
|
Products and services: |
|
|
|
|
|
|
|
|
|
Aggregates |
$ |
570.3 |
|
$ |
93.4 |
|
|
16.4 |
% |
Cement |
|
106.6 |
|
|
27.3 |
|
|
25.6 |
% |
Ready mixed concrete |
|
189.7 |
|
|
5.9 |
|
|
3.1 |
% |
Asphalt and paving |
|
18.1 |
|
|
(8.1 |
) |
NM |
|
Less: interproduct revenues |
|
(53.6 |
) |
|
— |
|
|
— |
|
Products and services |
|
831.1 |
|
|
118.5 |
|
|
14.3 |
% |
Freight |
|
61.4 |
|
|
(0.3 |
) |
NM |
|
Total Building
Materials business |
|
892.5 |
|
|
118.2 |
|
|
13.2 |
% |
Magnesia Specialties business: |
|
|
|
|
|
|
|
|
|
Products and services |
|
59.9 |
|
|
26.1 |
|
|
43.5 |
% |
Freight |
|
5.8 |
|
|
(0.9 |
) |
NM |
|
Total Magnesia Specialties business |
|
65.7 |
|
|
25.2 |
|
|
38.4 |
% |
Corporate |
|
— |
|
|
(1.0 |
) |
NM |
|
Total |
$ |
958.2 |
|
$ |
142.4 |
|
|
14.9 |
% |
|
Quarter ended March 31, 2019 |
|
($ in millions) |
Revenues |
|
Gross profit(loss) |
|
Gross margin |
|
Building
Materials business: |
|
|
|
|
|
|
|
|
|
Products and services: |
|
|
|
|
|
|
|
|
|
Aggregates |
$ |
544.9 |
|
$ |
98.0 |
|
|
18.0 |
% |
Cement |
|
99.0 |
|
|
13.8 |
|
|
13.9 |
% |
Ready mixed concrete |
|
211.2 |
|
|
14.5 |
|
|
6.9 |
% |
Asphalt and paving |
|
12.4 |
|
|
(8.3 |
) |
NM |
|
Less: interproduct revenues |
|
(58.4 |
) |
|
— |
|
|
— |
|
Products and services |
|
809.1 |
|
|
118.0 |
|
|
14.6 |
% |
Freight |
|
55.8 |
|
|
(0.2 |
) |
NM |
|
Total Building
Materials business |
|
864.9 |
|
|
117.8 |
|
|
13.6 |
% |
Magnesia Specialties business: |
|
|
|
|
|
|
|
|
|
Products and services |
|
69.2 |
|
|
26.5 |
|
|
38.5 |
% |
Freight |
|
4.9 |
|
|
(1.0 |
) |
NM |
|
Total Magnesia Specialties business |
|
74.1 |
|
|
25.5 |
|
|
34.5 |
% |
Corporate |
|
— |
|
|
(0.4 |
) |
NM |
|
Total |
$ |
939.0 |
|
$ |
142.9 |
|
|
15.2 |
% |
Building Materials Business
First-quarter operating results demonstrated the
strength of overall demand, most notably in Colorado, Iowa, Indiana
and Maryland, against a challenging prior-year comparison. The
aggregates, cement and downstream operations in Texas, the
Company’s largest state by revenue, experienced project delays as
the Dallas/Fort Worth area experienced record first-quarter
precipitation. Additionally, Georgia, the Company’s fourth-largest
state by revenue, experienced its sixth wettest first quarter in
125 years.
Aggregates
First-quarter aggregates shipments and pricing
improved 2.3 percent and 2.7 percent, respectively, compared with
the prior-year quarter.
- Shipments for the Mid-America Group increased 4.3 percent.
Robust warehouse and data center construction activity in Iowa and
Indiana more than offset the anticipated lower infrastructure
shipments in North Carolina. Geographic mix limited pricing growth
to 1.4 percent.
- Shipments for the Southeast Group decreased 3.2 percent as
significant rainfall hindered otherwise robust construction
activity. Pricing growth of 4.7 percent reflected the underlying
strength of the North Georgia and Florida markets.
- West Group shipments increased 2.5 percent, with double-digit
growth in Colorado partially offset by weather-impacted
construction delays in Texas. Pricing improved 3.7 percent.
Martin Marietta’s first-quarter aggregates
shipments by end use are as follows (all comparisons are versus the
prior-year quarter):
- Aggregates shipments to the infrastructure market increased,
driven by large projects in Texas, Colorado, Iowa and Indiana. The
infrastructure market accounted for 32 percent of first-quarter
aggregates shipments, which is below the Company’s most recent
ten-year annual average of 45 percent but consistent with
historical first-quarter trends.
- Aggregates shipments to the nonresidential market increased
modestly following double-digit growth in commercial and heavy
industrial construction activity in the prior-year quarter. The
Company continued to benefit from distribution center, warehouse
and data center projects in key geographies, including Texas,
Colorado, Georgia, Florida and Iowa, as well as the early phases of
several large energy-sector projects along the Gulf Coast. The
nonresidential market represented 36 percent of first-quarter
aggregates shipments.
- Aggregates shipments to the residential market declined
slightly when compared with the robust growth in homebuilding
activity in the prior-year quarter. Ongoing homebuilding activity
in Texas and Georgia was hindered by significant rainfall during
first-quarter 2020. The residential market accounted for 25 percent
of first-quarter aggregates shipments.
- The ChemRock/Rail market accounted for the remaining 7 percent
of first-quarter aggregates shipments. Volumes to this end use
increased, driven by improved ballast shipments to the Class I
western railroads and higher agricultural lime shipments.
Aggregates product gross margin declined 160
basis points despite improved operating leverage, largely driven by
geographic mix and a $15.2 million, or 260-basis-point,
year-over-year impact of lower unit production costs on inventory
standard cost revaluation.
Cement
First-quarter cement shipments increased 5.2
percent, driven by strong underlying demand in South Texas that was
partially offset by extreme precipitation in the Dallas/Fort Worth
area. Pricing improved 2.6 percent. Cement product gross margin
expanded 1,170 basis points to 25.6 percent driven by revenue
growth, enhanced production efficiencies from increased shipment
and production levels and lower maintenance costs.
Downstream businesses
Ready mixed concrete shipments decreased 14.1
percent, resulting from weather-impacted project delays in Texas
that more than offset double-digit growth in Colorado. Ready mixed
concrete selling prices increased 4.6 percent, with solid pricing
gains in Texas and Colorado. Colorado asphalt shipments increased
80.6 percent compared with an extremely weather-challenged
prior-year quarter. Asphalt pricing declined 1.1 percent due to
unfavorable product mix.
Magnesia Specialties Business
Magnesia Specialties product revenues decreased
13.4 percent to $59.9 million, consistent with expectations and
driven by continued declines in chemicals products as international
customers rationalize inventory levels. Lime shipments to the steel
industry were flat. Effective cost containment measures, coupled
with lower energy costs, led to a 500-basis-point expansion in
product gross margin to 43.5 percent.
Consolidated
Total cost of revenues for first-quarter 2020
included $2.0 million of expense for the implementation of a new
paid time off policy for employees.
Other operating income, net, for the prior-year
quarter included the reversal of $4.2 million of accruals for
unclaimed property contingencies.
Other nonoperating expense, net, for
first-quarter 2020 included $5.6 million to finance third-party
railroad maintenance in exchange for a federal income tax benefit
of $6.9 million.
The Company recorded a discrete income tax
benefit of $13.2 million in the prior-year quarter related to a
change in tax election for a subsidiary.
Earnings per diluted share declined $0.27,
primarily driven by the year-over-year impact of lower unit
production costs on aggregates inventory standards of $0.18 per
share and the prior-year benefit from a change in tax election for
a subsidiary of $0.21 per share.
Liquidity and Capital Resources
Cash provided by operating activities was $106.7
million in first-quarter 2020 compared with $117.9 million for the
same period in 2019.
Cash paid for property, plant and equipment
additions was $104.1 million in 2020.
In March 2020, the Company issued $500 million
of 2.5 percent senior notes due in 2030. The Company intends to use
the net proceeds for the repayment of $300 million of floating rate
notes maturing in May 2020 and general corporate purposes.
The Company had $424.0 million of cash on hand,
along with $757.7 million of unused borrowing capacity on its
existing credit facilities as of March 31, 2020. Excluding the $300
million earmarked for the May 2020 debt repayment, the Company had
approximately $880 million of available liquidity at March 31,
2020.
Commitment to Enhance Long-Term Shareholder
Value
Martin Marietta is dedicated to disciplined
capital allocation that preserves the Company’s financial
flexibility and further enhances shareholder value. The Company’s
capital allocation priorities currently remain unchanged and
include value-enhancing acquisitions that promote the successful
execution of the Company’s strategic growth plan, organic capital
investment and the return of cash to shareholders through
meaningful and sustainable dividends and share repurchases.
The Company has returned $1.7 billion to
shareholders in the form of dividend payments and share repurchases
since announcing a 20 million share repurchase authorization in
February 2015. During first-quarter 2020, the Company repurchased
210,600 shares of common stock pursuant to its share repurchase
authorization. As of March 31, 2020, 13.5 million shares remained
under the current repurchase authorization and 62.2 million shares
of Martin Marietta common stock were outstanding.
Full-Year Outlook
The Company has withdrawn its 2020 full-year
guidance issued on February 11, 2020, given the economic
disruptions driven by the COVID-19 pandemic and the multiple
measures put in place to treat and minimize the spread of the
virus. We cannot reliably forecast the impact these disruptions
will have on the U.S. economy, the timing and benefits of related
governmental actions and, more specifically, demand for the
Company’s products and services. While most jurisdictions have
deemed the supply of construction materials as an essential
business, Martin Marietta believes its industry will likely
experience lower overall demand during the COVID-19 crisis.
However, the magnitude of decline and speed and rate of recovery
are likely to vary by construction end-use market and
geography.
- Of the Company’s three primary end uses, the outlook for
infrastructure construction, particularly for aggregates-intensive
highways and streets, is expected to be the most near-term
resilient. While the majority of the United States has currently
been ordered to shelter in place, most state Departments of
Transportation (DOTs) are currently operational and continue to
advance transportation projects, capitalizing on the reduction of
vehicles on the road and related traffic congestion. Florida, for
example, recently announced plans to accelerate $2.1 billion of
critical transportation projects. That said, state DOTs are
experiencing lower revenue collections and states may have other
short-term funding needs relating to the COVID-19 impact that may
decrease the scale and/or postpone the timing of future
construction. Industry representatives are actively engaging with
Congress to address surface transportation infrastructure in the
“Phase 4” emergency relief and economic recovery COVID-19
legislation, including an immediate $49.95 billion in flexible
federal funding to offset an estimated 30 percent loss in state
transportation revenues in the next 18 months and the passage of a
comprehensive major surface transportation reauthorization
package.
- Nonresidential construction activity on existing projects has
continued in most regions. However, according to an April 2020
survey published by the Associated General Contractors of America,
an overwhelming number of respondents indicated that commercial
projects in the design or planning stages are being delayed or
canceled. Unlike commercial activity, industrial construction is
not expected to experience significant near-term disruption from
COVID-19. Warehouses, distribution centers and data centers are
expected to perform relatively well in the current environment as
businesses increase e-commerce activity, secure regional supply
chains and become more reliant on cloud and network services.
Similarly, large energy-sector projects along the Gulf Coast of
Texas that are actively underway are expected to
continue.
- Residential construction activity is expected to decline in
2020, as homebuilders and homebuyers delay plans in the wake of
unprecedented economic uncertainty. Supported by third-party
forecasts, management believes the residential decline will be
widespread but not as persistent as the period of low activity seen
during the Great Recession as Freddie Mac estimates that 2.5
million housing units are needed to address the current nationwide
housing shortage. This situation is particularly evident in states
with significant undersupply, including Texas, Colorado, North
Carolina and Florida. On a national level, housing starts remain
below the 50-year annual average of 1.5 million despite notable
population gains.
Non-GAAP Financial Information
This earnings release contains financial
measures that have not been prepared in accordance with generally
accepted accounting principles (GAAP). Reconciliations of non-GAAP
financial measures to the closest GAAP measures are included in the
accompanying Appendix to this earnings release. Management believes
these non-GAAP measures are commonly used financial measures for
investors to evaluate the Company’s operating performance, and when
read in conjunction with the Company’s consolidated financial
statements, present a useful tool to evaluate the Company’s ongoing
operations, performance from period to period and anticipated
performance. In addition, these are some of the factors the Company
uses in internal evaluations of the overall performance of its
businesses. Management acknowledges that there are many items that
impact a company’s reported results and the adjustments reflected
in these non-GAAP measures are not intended to present all items
that may have impacted these results. In addition, these non-GAAP
measures are not necessarily comparable to similarly titled
measures used by other companies.
Conference Call Information
The Company will discuss its first-quarter 2020
earnings results on a conference call and an online web simulcast
today (May 5, 2020). The live broadcast of the Martin Marietta
conference call will begin at 11:00 a.m. Eastern Time. An online
replay will be available approximately two hours following the
conclusion of the live broadcast. A link to these events will be
available at the Company’s website. For those investors without
online web access, the conference call may also be accessed by
calling (970) 315-0423, confirmation number 6637338. Additionally,
the Company has posted supplemental information related to its
first-quarter performance on its website.
About Martin Marietta
Martin Marietta, a member of the S&P 500
Index, is an American-based company and a leading supplier of
building materials, including aggregates, cement, ready mixed
concrete and asphalt. Through a network of operations spanning 27
states, Canada and The Bahamas, dedicated Martin Marietta teams
supply the resources necessary for building the solid foundations
on which our communities thrive. Martin Marietta’s Magnesia
Specialties business provides a full range of magnesium oxide,
magnesium hydroxide and dolomitic lime products. For more
information, visit www.martinmarietta.com or
www.magnesiaspecialties.com
Investor Contact:
Suzanne Osberg Vice President,
Investor Relations(919)
783-4691Suzanne.Osberg@martinmarietta.com
MLM-E.
If you are interested in Martin Marietta stock,
management recommends that, at a minimum, you read the Company’s
current annual report and Forms 10-K, 10-Q and 8-K reports to the
Securities and Exchange Commission (SEC) over the past year. The
Company’s recent proxy statement for the annual meeting of
shareholders also contains important information. These and other
materials that have been filed with the SEC are accessible through
the Company’s website at www.martinmarietta.com and are also
available at the SEC’s website at www.sec.gov. You may also write
or call the Company’s Corporate Secretary, who will provide copies
of such reports.
Investors are cautioned that all statements in
this release that relate to the future involve risks and
uncertainties, and are based on assumptions that the Company
believes in good faith are reasonable but which may be materially
different from actual results. These statements, which are
forward-looking statements under the Private Securities Litigation
Reform Act of 1995, give the investor the Company’s expectations or
forecasts of future events. You can identify these statements by
the fact that they do not relate only to historical or current
facts. They may use words such as “guidance”, “anticipate”,
“expect”, “should”, “believe”, “will”, and other words of similar
meaning in connection with future events or future operating or
financial performance. Any or all of our forward-looking statements
here and in other publications may turn out to be wrong.
The Company’s outlook is subject to various
risks and uncertainties, and is based on assumptions that the
Company believes in good faith are reasonable but which may be
materially different from actual results. Factors that the Company
currently believes could cause actual results to differ materially
from the forward-looking statements in this release (including the
outlook) include, but are not limited to: the ability of the
Company to face challenges, including those posed by the COVID-19
pandemic and implementation of any such related response plans; the
resiliency and potential declines of the Company’s various
construction end-use markets; the potential negative impact of the
COVID-19 pandemic on the Company’s ability to continue supplying
heavy-side building materials and related services at normal levels
or at all in the Company’s key regions; the duration, impact and
severity of the impacts of the COVID-19 pandemic on the Company,
including the markets in which we do business, our suppliers,
customers or other business partners as well as on our employees;
the economic impact of government responses to the pandemic; the
performance of the United States economy, including the impact on
the economy of the COVID-19 pandemic and governmental orders
restricting activities imposed to prevent further outbreak of
COVID-19; shipment declines resulting from economic events beyond
the Company’s control; a widespread decline in aggregates pricing,
including a decline in aggregates shipment volume negatively
affecting aggregates price; the history of both cement and ready
mixed concrete being subject to significant changes in supply,
demand and price fluctuations; the termination, capping and/or
reduction or suspension of the federal and/or state gasoline
tax(es) or other revenue related to public construction; the level
and timing of federal, state or local transportation or
infrastructure or public projects funding, most particularly in
Texas, Colorado, North Carolina, Georgia, Iowa and Maryland; the
impact of governmental orders restricting activities imposed to
prevent further outbreak of COVID-19 on travel, potentially
reducing state fuel tax revenues used to fund highway projects; the
United States Congress’ inability to reach agreement among
themselves or with the Administration on policy issues that impact
the federal budget; the ability of states and/or other entities to
finance approved projects either with tax revenues or alternative
financing structures; levels of construction spending in the
markets the Company serves; a reduction in defense spending and the
subsequent impact on construction activity on or near military
bases; a decline in the commercial component of the nonresidential
construction market, notably office and retail space, including a
decline resulting from economic distress related to the COVID-19
pandemic; a decline in energy-related construction activity
resulting from a sustained period of low global oil prices or
changes in oil production patterns or capital spending in response
to this decline, particularly in Texas; increasing residential
mortgage rates and other factors that could result in a slowdown in
residential construction; unfavorable weather conditions,
particularly Atlantic Ocean and Gulf of Mexico hurricane activity,
the late start to spring or the early onset of winter and the
impact of a drought or excessive rainfall in the markets served by
the Company, any of which can significantly affect production
schedules, volumes, product and/or geographic mix and
profitability; whether the Company’s operations will continue to be
treated as “essential” operations under applicable government
orders restricting business activities imposed to prevent further
outbreak of COVID-19 or, even if so treated, whether site-specific
health and safety concerns might otherwise require certain of the
Company’s operations to be halted for some period of time; the
volatility of fuel costs, particularly diesel fuel, and the impact
on the cost, or the availability generally, of other consumables,
namely steel, explosives, tires and conveyor belts, and with
respect to the Company’s Magnesia Specialties business, natural
gas; continued increases in the cost of other repair and supply
parts; construction labor shortages and/or supply‐chain challenges;
unexpected equipment failures, unscheduled maintenance, industrial
accident or other prolonged and/or significant disruption to
production facilities; increasing governmental regulation,
including environmental laws; the failure of relevant government
agencies to implement expected regulatory reductions;
transportation availability or a sustained reduction in capital
investment by the railroads, notably the availability of railcars,
locomotive power and the condition of rail infrastructure to move
trains to supply the Company’s Texas, Colorado, Florida, Carolinas
and the Gulf Coast markets, including the movement of essential
dolomitic lime for magnesia chemicals to the Company’s plant in
Manistee, Michigan and its customers; increased transportation
costs, including increases from higher or fluctuating
passed-through energy costs or fuel surcharges, and other costs to
comply with tightening regulations, as well as higher volumes of
rail and water shipments; availability of trucks and licensed
drivers for transport of the Company’s materials; availability and
cost of construction equipment in the United States; weakening in
the steel industry markets served by the Company’s dolomitic lime
products; trade disputes with one or more nations impacting the
U.S. economy, including the impact of tariffs on the steel
industry; unplanned changes in costs or realignment of customers
that introduce volatility to earnings, including that of the
Magnesia Specialties business that is running at capacity; proper
functioning of information technology and automated operating
systems to manage or support operations; inflation and its effect
on both production and interest costs; the concentration of
customers in construction markets and the increased risk of
potential losses on customer receivables; the impact of the level
of demand in the Company’s end-use markets, production levels and
management of production costs on the operating leverage and
therefore profitability of the Company; the possibility that the
expected synergies from acquisitions will not be realized or will
not be realized within the expected time period, including
achieving anticipated profitability to maintain compliance with the
Company’s leverage ratio debt covenant; changes in tax laws, the
interpretation of such laws and/or administrative practices that
would increase the Company’s tax rate; violation of the Company’s
debt covenant if price and/or volumes return to previous levels of
instability; downward pressure on the Company’s common stock price
and its impact on goodwill impairment evaluations; the possibility
of a reduction of the Company’s credit rating to non-investment
grade; and other risk factors listed from time to time found in the
Company’s filings with the SEC.
You should consider these forward-looking
statements in light of risk factors discussed in our Annual Report
on Form 10-K for the year ended December 31, 2019 and other
periodic filings made with the SEC. All of our forward-looking
statements should be considered in light of these factors. In
addition, other risks and uncertainties not presently known to us
or that we consider immaterial could affect the accuracy of our
forward-looking statements, or adversely affect or be material to
the Company. The Company assumes no obligation to update any such
forward-looking statements.
MARTIN
MARIETTA MATERIALS, INC. |
Unaudited
Statements of Earnings |
(In millions, except
per share data) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2020 |
|
|
2019 |
|
Products and
services revenues |
|
$ |
891.0 |
|
$ |
878.3 |
|
Freight
revenues |
|
|
67.2 |
|
|
60.7 |
|
Total revenues |
|
|
958.2 |
|
|
939.0 |
|
|
|
|
|
|
Cost of
revenues - products and services |
|
|
747.4 |
|
|
734.2 |
|
Cost of
revenues - freight |
|
|
68.4 |
|
|
61.9 |
|
Total cost of revenues |
|
|
815.8 |
|
|
796.1 |
|
Gross
profit |
|
|
142.4 |
|
|
142.9 |
|
|
|
|
|
|
Selling
general & administrative expenses |
|
|
78.7 |
|
|
78.3 |
|
Acquisition-related expenses |
|
|
0.3 |
|
|
0.1 |
|
Other
operating expenses and (income), net |
|
|
5.6 |
|
|
(4.7 |
) |
Earnings from operations |
|
|
57.8 |
|
|
69.2 |
|
|
|
|
|
|
Interest
expense |
|
|
29.8 |
|
|
32.9 |
|
Other
nonoperating expenses and (income), net |
|
|
2.0 |
|
|
(1.6 |
) |
Earnings before income tax expense (benefit) |
|
|
26.0 |
|
|
37.9 |
|
Income tax
expense (benefit) |
|
|
0.1 |
|
|
(5.0 |
) |
Consolidated
net earnings |
|
|
25.9 |
|
|
42.9 |
|
Less: Net
earnings attributable to noncontrolling interests |
|
|
- |
|
|
- |
|
Net Earnings
Attributable to Martin Marietta Materials, Inc. |
|
$ |
25.9 |
|
$ |
42.9 |
|
|
|
|
|
|
Net earnings
per common share attributable to common shareholders: |
|
|
|
|
Basic |
|
$ |
0.42 |
|
$ |
0.68 |
|
Diluted |
|
$ |
0.41 |
|
$ |
0.68 |
|
|
|
|
|
|
Dividends
per common share |
|
$ |
0.55 |
|
$ |
0.48 |
|
|
|
|
|
|
Average
number of common shares outstanding: |
|
|
|
|
Basic |
|
|
62.3 |
|
|
62.6 |
|
Diluted |
|
|
62.5 |
|
|
62.8 |
|
|
|
|
|
|
|
|
|
|
|
MARTIN
MARIETTA MATERIALS, INC. |
Unaudited
Financial Highlights |
(In millions) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2020 |
|
|
|
2019 |
|
Total
revenues: |
|
|
|
|
Building Materials Business: |
|
|
|
|
Mid-America Group (1) |
|
$ |
260.8 |
|
|
$ |
248.1 |
|
Southeast Group |
|
|
121.1 |
|
|
|
119.2 |
|
West Group (1) |
|
|
510.6 |
|
|
|
497.6 |
|
Total Building Materials Business |
|
|
892.5 |
|
|
|
864.9 |
|
Magnesia Specialties |
|
|
65.7 |
|
|
|
74.1 |
|
Total |
|
$ |
958.2 |
|
|
$ |
939.0 |
|
|
|
|
|
|
Gross
profit: |
|
|
|
|
Building Materials Business: |
|
|
|
|
Mid-America Group (1) |
|
$ |
38.1 |
|
|
$ |
44.9 |
|
Southeast Group |
|
|
21.5 |
|
|
|
26.2 |
|
West Group (1) |
|
|
58.6 |
|
|
|
46.7 |
|
Total Building Materials Business |
|
|
118.2 |
|
|
|
117.8 |
|
Magnesia Specialties |
|
|
25.2 |
|
|
|
25.5 |
|
Corporate |
|
|
(1.0 |
) |
|
|
(0.4 |
) |
Total |
|
$ |
142.4 |
|
|
$ |
142.9 |
|
|
|
|
|
|
Selling,
general and administrative expenses: |
|
|
|
|
Building Materials Business: |
|
|
|
|
Mid-America Group (1) |
|
$ |
17.8 |
|
|
$ |
15.6 |
|
Southeast Group |
|
|
6.9 |
|
|
|
5.3 |
|
West Group (1) |
|
|
33.4 |
|
|
|
29.3 |
|
Total Building Materials Business |
|
|
58.1 |
|
|
|
50.2 |
|
Magnesia Specialties |
|
|
3.5 |
|
|
|
2.9 |
|
Corporate |
|
|
17.1 |
|
|
|
25.2 |
|
Total |
|
$ |
78.7 |
|
|
$ |
78.3 |
|
|
|
|
|
|
Earnings
(Loss) from operations: |
|
|
|
|
Building Materials Business: |
|
|
|
|
Mid-America Group (1) |
|
$ |
20.8 |
|
|
$ |
30.6 |
|
Southeast Group |
|
|
14.0 |
|
|
|
21.1 |
|
West Group (1) |
|
|
22.7 |
|
|
|
20.3 |
|
Total Building Materials Business |
|
|
57.5 |
|
|
|
72.0 |
|
Magnesia Specialties |
|
|
21.7 |
|
|
|
22.6 |
|
Corporate |
|
|
(21.4 |
) |
|
|
(25.4 |
) |
Total |
|
$ |
57.8 |
|
|
$ |
69.2 |
|
|
|
|
|
|
(1) 2019 amounts
are restated from amounts presented in the 2019 first-quarter
earnings release to reflect the transfer of the Company's one
quarry in the state of Washington from the Mid-America Group to the
West Group to conform with 2020 presentation. |
|
|
|
|
|
MARTIN
MARIETTA MATERIALS, INC. |
Unaudited
Financial Highlights (Continued) |
(In millions) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2020 |
|
|
|
2019 |
|
Total
revenues: |
|
|
|
|
Building Materials business products and services: |
|
|
|
|
Aggregates (1) |
|
$ |
570.3 |
|
|
$ |
544.9 |
|
Cement |
|
|
106.6 |
|
|
|
99.0 |
|
Ready mixed concrete |
|
|
189.7 |
|
|
|
211.2 |
|
Asphalt and paving (1) |
|
|
18.1 |
|
|
|
12.4 |
|
Less: Interproduct sales |
|
|
(53.6 |
) |
|
|
(58.4 |
) |
Subtotal |
|
|
831.1 |
|
|
|
809.1 |
|
Freight |
|
|
61.4 |
|
|
|
55.8 |
|
Total Building Materials Business |
|
|
892.5 |
|
|
|
864.9 |
|
Magnesia Specialties business: |
|
|
|
|
Products and services |
|
|
59.9 |
|
|
|
69.2 |
|
Freight |
|
|
5.8 |
|
|
|
4.9 |
|
Total Magnesia Specialties Business |
|
|
65.7 |
|
|
|
74.1 |
|
Consolidated
total revenues |
|
$ |
958.2 |
|
|
$ |
939.0 |
|
|
|
|
|
|
Gross profit
(loss): |
|
|
|
|
Building Materials business products and services: |
|
|
|
|
Aggregates (1) |
|
$ |
93.4 |
|
|
$ |
98.0 |
|
Cement |
|
|
27.3 |
|
|
|
13.8 |
|
Ready mixed concrete |
|
|
5.9 |
|
|
|
14.5 |
|
Asphalt and paving (1) |
|
|
(8.1 |
) |
|
|
(8.3 |
) |
Subtotal |
|
|
118.5 |
|
|
|
118.0 |
|
Freight |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
Total Building Materials Business |
|
|
118.2 |
|
|
|
117.8 |
|
Magnesia Specialties business: |
|
|
|
|
Products and services |
|
|
26.1 |
|
|
|
26.5 |
|
Freight |
|
|
(0.9 |
) |
|
|
(1.0 |
) |
Total Magnesia Specialties Business |
|
|
25.2 |
|
|
|
25.5 |
|
Corporate |
|
|
(1.0 |
) |
|
|
(0.4 |
) |
Consolidated
gross profit |
|
$ |
142.4 |
|
|
$ |
142.9 |
|
|
|
|
|
|
(1) Reflects the 2019 reclassification of two cold mix
asphalt plants from the asphalt product line to the aggregates
product line to conform with 2020 presentation. |
|
MARTIN
MARIETTA MATERIALS, INC. |
Balance
Sheet Data |
(In millions) |
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
|
(Unaudited) |
|
(Audited) |
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
424.0 |
|
$ |
21.0 |
Accounts receivable, net |
|
|
562.8 |
|
|
573.7 |
Inventories, net |
|
|
700.5 |
|
|
690.8 |
Other current assets |
|
|
145.7 |
|
|
141.2 |
Property, plant and equipment, net |
|
|
5,185.4 |
|
|
5,206.0 |
Intangible assets, net |
|
|
2,880.4 |
|
|
2,883.6 |
Operating lease right-of-use assets, net |
|
|
477.9 |
|
|
481.9 |
Other noncurrent assets |
|
|
126.7 |
|
|
133.4 |
Total assets |
|
$ |
10,503.4 |
|
$ |
10,131.6 |
|
|
|
|
|
LIABILITIES
AND EQUITY |
|
|
|
|
Current maturities of long-term debt and short-term facilities |
|
$ |
639.9 |
|
$ |
340.0 |
Other current liabilities |
|
|
435.7 |
|
|
498.5 |
Long-term debt (excluding current maturities) |
|
|
2,623.9 |
|
|
2,433.6 |
Other noncurrent liabilities |
|
|
1,504.5 |
|
|
1,506.2 |
Total equity |
|
|
5,299.4 |
|
|
5,353.3 |
Total liabilities and equity |
|
$ |
10,503.4 |
|
$ |
10,131.6 |
|
|
|
|
|
MARTIN
MARIETTA MATERIALS, INC. |
Unaudited
Statements of Cash Flows |
(In millions) |
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2020 |
|
|
|
2019 |
|
Operating
activities: |
|
|
|
|
Consolidated net earnings |
|
$ |
25.9 |
|
|
$ |
42.9 |
|
Adjustments to reconcile consolidated net earnings to net cash
provided by operating activities: |
|
|
|
Depreciation, depletion and amortization |
|
|
95.0 |
|
|
|
89.2 |
|
Stock-based compensation expense |
|
|
12.5 |
|
|
|
13.5 |
|
Gains on divestitures and sales of assets |
|
|
(1.5 |
) |
|
|
(2.4 |
) |
Deferred income taxes, net |
|
|
3.2 |
|
|
|
4.8 |
|
Other items, net |
|
|
(0.4 |
) |
|
|
0.5 |
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures: |
|
|
|
|
Accounts receivable, net |
|
|
10.2 |
|
|
|
(26.1 |
) |
Inventories, net |
|
|
(9.6 |
) |
|
|
16.4 |
|
Accounts payable |
|
|
4.9 |
|
|
|
20.4 |
|
Other assets and liabilities, net |
|
|
(33.5 |
) |
|
|
(41.3 |
) |
Net cash
provided by operating activities |
|
|
106.7 |
|
|
|
117.9 |
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Additions to property, plant and equipment |
|
|
(104.1 |
) |
|
|
(130.1 |
) |
Proceeds from divestitures and sales of assets |
|
|
15.9 |
|
|
|
3.0 |
|
Investments in life insurance contracts, net |
|
|
(7.2 |
) |
|
|
0.2 |
|
Other investing activities, net |
|
|
(0.1 |
) |
|
|
(0.6 |
) |
Net cash
used for investing activities |
|
|
(95.5 |
) |
|
|
(127.5 |
) |
|
|
|
|
|
Financing
activities: |
|
|
|
|
Borrowings of long-term debt |
|
|
618.0 |
|
|
|
125.0 |
|
Repayments of long-term debt |
|
|
(127.0 |
) |
|
|
(85.0 |
) |
Payments on finance lease obligations |
|
|
(0.8 |
) |
|
|
(1.0 |
) |
Debt issuance costs |
|
|
(1.1 |
) |
|
|
- |
|
Dividends paid |
|
|
(34.8 |
) |
|
|
(30.4 |
) |
Repurchases of common stock |
|
|
(50.0 |
) |
|
|
- |
|
Proceeds from exercise of stock options |
|
|
0.2 |
|
|
|
0.6 |
|
Shares withheld for employees' income tax obligations |
|
|
(12.7 |
) |
|
|
(7.1 |
) |
Net cash
provided by financing activities |
|
|
391.8 |
|
|
|
2.1 |
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents |
|
|
403.0 |
|
|
|
(7.5 |
) |
Cash and
cash equivalents, beginning of period |
|
|
21.0 |
|
|
|
44.9 |
|
Cash and
cash equivalents, end of period |
|
$ |
424.0 |
|
|
$ |
37.4 |
|
|
|
|
|
|
MARTIN
MARIETTA MATERIALS, INC. |
Unaudited
Operational Highlights |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, 2020 |
|
|
Volume |
|
Pricing |
Volume/Pricing Variance (1) |
|
|
|
|
Mid-America Group (2) |
|
|
4.3 |
% |
|
|
1.4 |
% |
Southeast Group |
|
|
(3.2 |
%) |
|
|
4.7 |
% |
West Group (2), (3) |
|
|
2.5 |
% |
|
|
3.7 |
% |
Total
Aggregates Product Line (4) |
|
|
2.3 |
% |
|
|
2.7 |
% |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
Shipments (tons in millions) |
|
|
2020 |
|
|
|
2019 |
|
Mid-America Group (2) |
|
|
16.5 |
|
|
|
15.8 |
|
Southeast Group |
|
|
6.2 |
|
|
|
6.4 |
|
West Group (2), (3) |
|
|
15.6 |
|
|
|
15.2 |
|
Total
Aggregates Product Line (4) |
|
|
38.3 |
|
|
|
37.4 |
|
|
|
|
|
|
(1) Volume/pricing
variances reflect the percentage increase from the comparable
period in the prior year. |
(2) Reflects the
reclassification of 2019 shipments, when compared with amounts
presented in the 2019 first-quarter earnings release, to reflect
the transfer of the Company's one quarry in the state of Washington
from the Mid-America Group to the West Group to conform with 2020
presentation. |
(3) Reflects the
reclassification of 2019 shipments for two cold mix asphalt plants
from the asphalt product line to the aggregates product line to
conform with 2020 presentation. |
(4) Aggregates
Product Line includes acquisitions from the date of acquisition and
divestitures through the date of disposal. |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
|
2020 |
|
|
|
2019 |
|
Shipments (in millions) |
|
|
|
|
Aggregates
tons - external customers(1) |
|
|
36.0 |
|
|
|
35.4 |
|
Internal
aggregates tons used in other product lines |
|
|
2.3 |
|
|
|
2.0 |
|
Total
aggregates tons(1) |
|
|
38.3 |
|
|
|
37.4 |
|
|
|
|
|
|
Cement tons
- external customers |
|
|
0.7 |
|
|
|
0.6 |
|
Internal
cement tons used in other product lines |
|
|
0.2 |
|
|
|
0.3 |
|
Total cement
tons |
|
|
0.9 |
|
|
|
0.9 |
|
|
|
|
|
|
Ready mixed
concrete - cubic yards |
|
|
1.7 |
|
|
|
1.9 |
|
|
|
|
|
|
Asphalt tons
- external customers(1) |
|
|
0.1 |
|
|
|
- |
|
Internal
asphalt tons used in road paving business |
|
|
0.1 |
|
|
|
0.1 |
|
Total
asphalt tons(1) |
|
|
0.2 |
|
|
|
0.1 |
|
|
|
|
|
|
Average unit sales price by product line (including
internal sales): |
|
|
|
|
Aggregates
(per ton)(1) |
|
$ |
14.80 |
|
|
$ |
14.42 |
|
Cement (per
ton) |
|
$ |
113.77 |
|
|
$ |
110.93 |
|
Ready mixed
concrete (per cubic yard) |
|
$ |
114.35 |
|
|
$ |
109.28 |
|
Asphalt (per
ton)(1) |
|
$ |
45.43 |
|
|
$ |
45.92 |
|
|
|
|
|
|
(1) Reflects the
reclassification of 2019 shipments for two cold mix asphalt plants
from the asphalt product line to the aggregates product line to
conform with 2020 presentation. |
|
MARTIN
MARIETTA MATERIALS, INC. |
Non-GAAP
Financial Measures |
(Dollars in
millions) |
|
|
|
|
|
Earnings before
interest; income taxes; depreciation, depletion and amortization
expense and the noncash earnings/loss from nonconsolidated equity
affiliates (Adjusted EBITDA) is an indicator used by the Company
and investors to evaluate the Company's operating performance from
period to period. Adjusted EBITDA is not defined by generally
accepted accounting principles and, as such, should not be
construed as an alternative to earnings from operations, net
earnings or operating cash flow. For further information on
Adjusted EBITDA, refer to the Company's website at
www.martinmarietta.com. |
|
|
|
|
|
A Reconciliation of Net Earnings Attributable to Martin
Marietta to Consolidated Adjusted EBITDA is as
follows: |
|
|
|
Three Months
Ended |
|
|
December 31, |
|
|
|
2020 |
|
2019 (1) |
Net earnings attributable to Martin Marietta |
|
$ |
25.9 |
|
$ |
42.9 |
|
Add back
(deduct): |
|
|
|
|
Interest expense, net of interest income |
|
|
29.6 |
|
|
32.8 |
|
Income tax expense (benefit) for controlling interests |
|
|
0.1 |
|
|
(5.0 |
) |
Depreciation, depletion and amortization expense and noncash
earnings/loss from nonconsolidated equity affiliates |
|
|
93.4 |
|
|
87.5 |
|
Consolidated
adjusted EBITDA |
|
$ |
149.0 |
|
$ |
158.2 |
|
|
|
|
|
|
(1) 2019 EBITDA, when compared with the amount presented in
the first-quarter 2019 earnings release, has been restated to
conform to the 2020 calculation methodology. |
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