Martin Marietta Materials
MARTIN MARIETTA MATERIALS INC (Form: 10-Q, Received: 11/02/2017 16:45:22)

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2017

OR

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       No  

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       No  

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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act.         

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

Yes       No  

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 25, 2017

Common Stock, $0.01 par value

 

62,859,551

 

 

 

 


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2017

 

 

Page

Part I. Financial Information:

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Consolidated Balance Sheets – September 30, 2017, December 31, 2016 and September 30, 2016

 

3

 

 

 

Consolidated Statements of Earnings and Comprehensive Earnings – Three- and Nine-Months Ended September 30, 2017 and 2016

 

4

 

 

 

Consolidated Statements of Cash Flows – Nine-Months Ended September 30, 2017 and 2016

 

5

 

 

 

Consolidated Statement of Total Equity – Nine-Months Ended September 30, 2017

 

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

 

45

 

 

 

Item 4. Controls and Procedures

 

46

 

 

 

Part II. Other Information:

 

 

 

 

 

Item 1. Legal Proceedings

 

47

 

 

 

Item 1A. Risk Factors

 

47

 

 

 

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

 

47

 

 

 

Item 4. Mine Safety Disclosures

 

47

 

 

 

Item 6. Exhibits

 

48

 

 

 

Signatures

 

49

 

 

 

 

 

 

Page 2 of 49


 

PA RT I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2016

 

 

 

(Dollars in Thousands)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,219

 

 

$

50,038

 

 

$

60,684

 

Accounts receivable, net

 

 

582,532

 

 

 

457,910

 

 

 

566,425

 

Inventories, net

 

 

576,429

 

 

 

521,624

 

 

 

508,199

 

Other current assets

 

 

83,809

 

 

 

56,813

 

 

 

56,217

 

Total Current Assets

 

 

1,277,989

 

 

 

1,086,385

 

 

 

1,191,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

6,375,813

 

 

 

6,115,530

 

 

 

6,013,084

 

Allowances for depreciation, depletion and amortization

 

 

(2,854,236

)

 

 

(2,692,135

)

 

 

(2,633,471

)

Net property, plant and equipment

 

 

3,521,577

 

 

 

3,423,395

 

 

 

3,379,613

 

Goodwill

 

 

2,160,060

 

 

 

2,159,337

 

 

 

2,160,605

 

Operating permits, net

 

 

440,846

 

 

 

442,202

 

 

 

444,123

 

Other intangibles, net

 

 

63,740

 

 

 

69,110

 

 

 

70,927

 

Other noncurrent assets

 

 

102,573

 

 

 

120,476

 

 

 

126,408

 

Total Assets

 

$

7,566,785

 

 

$

7,300,905

 

 

$

7,373,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Bank overdraft

 

$

1,047

 

 

$

 

 

$

-

 

Accounts payable

 

 

163,597

 

 

 

178,598

 

 

 

192,738

 

Accrued salaries, benefits and payroll taxes

 

 

37,885

 

 

 

47,428

 

 

 

33,463

 

Pension and postretirement benefits

 

 

12,073

 

 

 

9,293

 

 

 

9,658

 

Accrued insurance and other taxes

 

 

70,323

 

 

 

60,093

 

 

 

67,822

 

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

 

 

80,038

 

 

 

180,036

 

 

 

228,025

 

Accrued interest

 

 

28,082

 

 

 

16,837

 

 

 

23,060

 

Other current liabilities

 

 

75,458

 

 

 

54,303

 

 

 

50,143

 

Total Current Liabilities

 

 

468,503

 

 

 

546,588

 

 

 

604,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

1,642,502

 

 

 

1,506,153

 

 

 

1,536,810

 

Pension, postretirement and postemployment benefits

 

 

230,212

 

 

 

248,086

 

 

 

200,152

 

Deferred income taxes, net

 

 

662,982

 

 

 

663,019

 

 

 

676,144

 

Other noncurrent liabilities

 

 

228,604

 

 

 

194,469

 

 

 

196,788

 

Total Liabilities

 

 

3,232,803

 

 

 

3,158,315

 

 

 

3,214,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share

 

 

627

 

 

 

630

 

 

 

633

 

Preferred stock, par value $0.01 per share

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

3,362,744

 

 

 

3,334,461

 

 

 

3,326,531

 

Accumulated other comprehensive loss

 

 

(122,928

)

 

 

(130,687

)

 

 

(104,511

)

Retained earnings

 

 

1,090,778

 

 

 

935,574

 

 

 

932,679

 

Total Shareholders' Equity

 

 

4,331,221

 

 

 

4,139,978

 

 

 

4,155,332

 

Noncontrolling interests

 

 

2,761

 

 

 

2,612

 

 

 

3,066

 

Total Equity

 

 

4,333,982

 

 

 

4,142,590

 

 

 

4,158,398

 

Total Liabilities and Equity

 

$

7,566,785

 

 

$

7,300,905

 

 

$

7,373,201

 

 

See accompanying notes to the consolidated financial statements.

 

Page 3 of 49


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

 

 

 

Three-Months Ended

 

 

Nine-Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In Thousands, Except Per Share Data)

 

 

 

 

 

Net Sales

 

$

1,022,137

 

 

$

1,038,344

 

 

$

2,810,110

 

 

$

2,687,740

 

Freight and delivery revenues

 

 

65,595

 

 

 

65,557

 

 

 

185,006

 

 

 

182,194

 

Total revenues

 

 

1,087,732

 

 

 

1,103,901

 

 

 

2,995,116

 

 

 

2,869,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

730,459

 

 

 

745,037

 

 

 

2,097,272

 

 

 

2,001,752

 

Freight and delivery costs

 

 

65,595

 

 

 

65,557

 

 

 

185,006

 

 

 

182,194

 

Total cost of revenues

 

 

796,054

 

 

 

810,594

 

 

 

2,282,278

 

 

 

2,183,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

291,678

 

 

 

293,307

 

 

 

712,838

 

 

 

685,988

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general & administrative expenses

 

 

57,219

 

 

 

54,773

 

 

 

195,127

 

 

 

172,903

 

Acquisition-related expenses, net

 

 

1,314

 

 

 

306

 

 

 

3,319

 

 

 

853

 

Other operating expense (income), net

 

 

6,181

 

 

 

(4,441

)

 

 

(2,575

)

 

 

(7,309

)

Earnings from Operations

 

 

226,964

 

 

 

242,669

 

 

 

516,967

 

 

 

519,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

23,141

 

 

 

20,568

 

 

 

68,037

 

 

 

60,896

 

Other nonoperating income, net

 

 

(479

)

 

 

(8,246

)

 

 

(6,434

)

 

 

(12,016

)

Earnings before taxes on income

 

 

204,302

 

 

 

230,347

 

 

 

455,364

 

 

 

470,661

 

Taxes on income

 

 

52,763

 

 

 

70,869

 

 

 

119,277

 

 

 

144,014

 

Consolidated net earnings

 

 

151,539

 

 

 

159,478

 

 

 

336,087

 

 

 

326,647

 

Less: Net (loss) earnings attributable to noncontrolling

   interests

 

 

(7

)

 

 

(1

)

 

 

(72

)

 

 

121

 

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

$

151,546

 

 

$

159,479

 

 

$

336,159

 

 

$

326,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Comprehensive Earnings:  (See Note 1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings attributable to Martin Marietta Materials, Inc.

 

$

154,524

 

 

$

161,036

 

 

$

343,918

 

 

$

327,637

 

Earnings (Loss) attributable to noncontrolling interests

 

 

1

 

 

 

19

 

 

 

(62

)

 

 

173

 

 

 

$

154,525

 

 

$

161,055

 

 

$

343,856

 

 

$

327,810

 

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic attributable to common shareholders

 

$

2.40

 

 

$

2.50

 

 

$

5.33

 

 

$

5.10

 

Diluted attributable to common shareholders

 

$

2.39

 

 

$

2.49

 

 

$

5.30

 

 

$

5.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

62,896

 

 

 

63,452

 

 

 

62,940

 

 

 

63,713

 

Diluted

 

 

63,158

 

 

 

63,723

 

 

 

63,218

 

 

 

63,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Dividends Per Common Share

 

$

0.44

 

 

$

0.42

 

 

$

1.28

 

 

$

1.22

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 4 of 49


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Nine-Months Ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

 

(Dollars in Thousands)

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Consolidated net earnings

 

$

336,087

 

 

$

326,647

 

Adjustments to reconcile consolidated net earnings to net cash

   provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

221,418

 

 

 

211,997

 

Stock-based compensation expense

 

 

23,698

 

 

 

17,167

 

(Gain) Loss on divestitures and sales of assets

 

 

(17,970

)

 

 

158

 

Deferred income taxes

 

 

6,543

 

 

 

59,834

 

Other items, net

 

 

(9,618

)

 

 

(17,797

)

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

   and divestitures:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(124,622

)

 

 

(133,848

)

Inventories, net

 

 

(54,804

)

 

 

(33,956

)

Accounts payable

 

 

3,182

 

 

 

12,422

 

Other assets and liabilities, net

 

 

34,484

 

 

 

(20,911

)

Net Cash Provided by Operating Activities

 

 

418,398

 

 

 

421,713

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(308,745

)

 

 

(285,481

)

Acquisitions, net

 

 

(7,200

)

 

 

(178,689

)

Cash received in acquisition

 

 

 

 

 

4,246

 

Proceeds from divestitures and sales of assets

 

 

33,138

 

 

 

5,216

 

Payment of railcar construction advances

 

 

(42,954

)

 

 

(37,370

)

Reimbursement of railcar construction advances

 

 

40,930

 

 

 

37,370

 

Net Cash Used for Investing Activities

 

 

(284,831

)

 

 

(454,708

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Borrowings of debt

 

 

1,011,244

 

 

 

360,000

 

Repayments of debt

 

 

(975,035

)

 

 

(168,267

)

Payments on capital lease obligations

 

 

(2,708

)

 

 

(2,463

)

Debt issuance costs

 

 

(1,989

)

 

 

(213

)

Change in bank overdraft

 

 

1,047

 

 

 

(10,235

)

Contributions by owners of noncontrolling interest

 

 

211

 

 

 

 

Dividends paid

 

 

(80,961

)

 

 

(78,295

)

Proceeds from exercise of stock options

 

 

10,017

 

 

 

21,876

 

Shares withheld for employees' income tax obligations

 

 

(10,213

)

 

 

(7,133

)

Repurchases of common stock

 

 

(99,999

)

 

 

(190,000

)

Net Cash Used for Financing Activities

 

 

(148,386

)

 

 

(74,730

)

Net Decrease in Cash and Cash Equivalents

 

 

(14,819

)

 

 

(107,725

)

Cash and Cash Equivalents, beginning of period

 

 

50,038

 

 

 

168,409

 

Cash and Cash Equivalents, end of period

 

$

35,219

 

 

$

60,684

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 5 of 49


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENT OF TOTAL EQUITY

 

(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, 2016

 

 

63,176

 

 

$

630

 

 

$

3,334,461

 

 

$

(130,687

)

 

$

935,574

 

 

$

4,139,978

 

 

$

2,612

 

 

$

4,142,590

 

Consolidated net earnings (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

336,159

 

 

 

336,159

 

 

 

(72

)

 

 

336,087

 

Other comprehensive earnings,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

7,759

 

 

 

 

 

 

7,759

 

 

 

10

 

 

 

7,769

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80,961

)

 

 

(80,961

)

 

 

 

 

 

(80,961

)

Issuances of common stock for stock

   award plans

 

 

141

 

 

 

2

 

 

 

4,585

 

 

 

 

 

 

 

 

 

4,587

 

 

 

 

 

 

4,587

 

Repurchases of common stock

 

 

(458

)

 

 

(5

)

 

 

 

 

 

 

 

 

(99,994

)

 

 

(99,999

)

 

 

 

 

 

(99,999

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

23,698

 

 

 

 

 

 

 

 

 

23,698

 

 

 

 

 

 

23,698

 

Contributions by owners of

   noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

211

 

 

 

211

 

Balance at September 30, 2017

 

 

62,859

 

 

$

627

 

 

$

3,362,744

 

 

$

(122,928

)

 

$

1,090,778

 

 

$

4,331,221

 

 

$

2,761

 

 

$

4,333,982

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 6 of 49


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2017

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.

Significant Accounting Policies

Organization

Martin Marietta Materials, Inc. (the Company or Martin Marietta) is engaged principally in the building materials business, including aggregates, cement, ready mixed concrete and asphalt and paving product lines, collectively reported as the Building Materials business. The aggregates product line is sold and shipped from a network of more than 270 quarries and distribution facilities in 26 states, Nova Scotia and the Bahamas. The cement, ready mixed concrete and asphalt and paving product lines are located in strategic, vertically integrated markets, predominantly Texas and Colorado.  Building materials are used for construction of highways and other infrastructure projects, and in the nonresidential and residential construction industries. Aggregates and cement products are also used in the railroad, agricultural, utility and environmental industries.

Effective January 1, 2017, the Company reorganized the operations and management reporting structure of its Texas-based aggregates, cement and ready mixed concrete product lines, resulting in a change to its reportable segments.  As a result, the cement product line is reported in the West Group.   The Company’s Building Materials business includes three reportable segments: the Mid-America Group, the Southeast Group and the West Group.

 

BUILDING MATERIALS 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

 

 

 

 

 

 

 

 

 

Product Lines

 

Aggregates

 

Aggregates

 

Aggregates, cement, ready mixed concrete and asphalt and paving

 

 

 

 

 

 

 

Products and Services

 

Crushed stone, sand and gravel

 

Crushed stone, sand and gravel

 

Crushed stone, sand and gravel; Portland and specialty cements; ready mixed concrete and asphalt and paving

The Company has a Magnesia Specialties segment with manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. The Magnesia Specialties segment 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 49


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2017

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued)

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company 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. Other than the adoption of two new accounting pronouncements described below, the Company has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of management, the interim consolidated financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair statement 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, 2017 are not indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2016 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

New Accounting Pronouncements

Share-Based Payment Accounting

Effective January 1, 2017, the Company adopted Accounting Standards Update (ASU) 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09) , which simplifies certain aspects of accounting guidance and requirements for share-based transactions.  ASU 2016-09 requires shares withheld for employees’ income tax obligations to be presented as a financing activity in the statement of cash flows, with retrospective presentation.  For the nine-months ended September 30, 2016, the Company reclassified a use of $2,635,000 from operating activities to financing activities on the statement of cash flows.  Additionally, excess tax benefits from stock-based compensation transactions are presented as an operating activity with retrospective presentation.  The Company previously presented excess tax benefits from stock-based compensation transactions as a financing activity and, for the nine-months ended September 30, 2016, reclassified a source of $5,010,000 to operating activities on the statement of cash flows.  ASU 2016-09 also requires excess tax benefits and tax deficiencies to be recognized prospectively as income tax benefits or expense in the period awards vest or are exercised.  For the three- and nine-months ended September 30, 2017, the Company recognized excess tax benefits of $854,000 and $6,113,000, respectively.  

 

Page 8 of 49


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2017

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Pol icies (continued)

New Accounting Pronouncements

Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07) , which revises the financial statement presentation for periodic pension and postretirement expense or credit, other than service cost.  ASU 2017-07 requires net periodic benefit cost or credit, with the exception of service cost, to be presented retrospectively as nonoperating expense.  As permitted by ASU 2017-07, the Company used the pension and other postretirement benefit plan disclosures for the comparative prior periods as a practical expedient to estimate amounts for retrospective application.  Service cost will remain a component of earnings from operations and represent the only cost of pension and postretirement expense eligible for capitalization, notably in the Company’s inventory standards. The Company early adopted this standard effective January 1, 2017.  For the three-months ended September 30, 2016, the Company reclassified $739,000 and $1,575,000 from cost of sales and selling, general and administrative expenses, respectively, to nonoperating expense.  For the nine-months ended September 30, 2016, the Company reclassified $2,084,000, $4,815,000 and $774,000 from cost of sales; selling, general and administrative expenses; and other operating income and expenses, respectively, to nonoperating expense.

Pending Accounting Pronouncements

Revenue Recognition Standard

The FASB issued an accounting standards 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 Company has completed its initial assessment of the provisions of the new standard and, at this time, does not expect the impact to be material to its results of operations and expects to adopt using the full retrospective approach.

Lease Standard

In February 2016, the FASB issued a new accounting standard, Accounting Codification Standard 842 – Leases, intending to improve financial reporting of leases and to provide more transparency into off-balance sheet leasing obligations.  The guidance requires virtually all leases, excluding mineral interest leases, to be recorded on the balance sheet and provides guidance on the recognition of lease expense and income.  The new standard is effective January 1, 2019 and must be applied on a modified retrospective approach.  The Company is currently assessing the impact of the new standard on the Company’s financial statements. The Company believes the new standard will have a material effect on its balance sheet but has not quantified the impact at this time.

Reclassifications

Prior-year information has been reclassified to conform to the presentation of the Company’s current reportable segments and for the adoption of the two aforementioned accounting pronouncements.

 

Page 9 of 49


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2017

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued)

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss

Consolidated comprehensive earnings/loss and accumulated other comprehensive loss 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 Company’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,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(Dollars in Thousands)

 

Net earnings attributable to Martin Marietta Materials, Inc.

 

$

151,546

 

 

$

159,479

 

 

$

336,159

 

 

$

326,526

 

Other comprehensive earnings, net of tax

 

 

2,978

 

 

 

1,557

 

 

 

7,759

 

 

 

1,111

 

Comprehensive earnings attributable to Martin Marietta

   Materials, Inc.

 

$

154,524

 

 

$

161,036

 

 

$

343,918

 

 

$

327,637

 

 

Comprehensive earnings attributable to noncontrolling interests, consisting of net earnings 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,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(Dollars in Thousands)

 

Net (loss) earnings attributable to noncontrolling interests

 

$

(7

)

 

$

(1

)

 

$

(72

)

 

$

121

 

Other comprehensive earnings, net of tax

 

 

8

 

 

 

20

 

 

 

10

 

 

 

52

 

Comprehensive earnings (loss) attributable to

   noncontrolling interests

 

$

1

 

 

$

19

 

 

$

(62

)

 

$

173

 

 

 

Page 10 of 49


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2017

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued)

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

Changes in accumulated other comprehensive earnings (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, 2017

 

Balance at beginning of period

 

$

(124,553

)

 

$

(636

)

 

$

(717

)

 

$

(125,906

)

Other comprehensive earnings before

   reclassifications, net of tax

 

 

 

 

 

838

 

 

 

 

 

 

838

 

Amounts reclassified from accumulated

   other comprehensive earnings, net of tax

 

 

1,918

 

 

 

 

 

 

222

 

 

 

2,140

 

Other comprehensive earnings, net of tax

 

 

1,918

 

 

 

838

 

 

 

222

 

 

 

2,978

 

Balance at end of period

 

$

(122,635

)

 

$

202

 

 

$

(495

)

 

$

(122,928

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended September 30, 2016