1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 (I.R.S. Employer Identification Number)
incorporation or organization)
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 [X] 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 July 31, 1998
- ------------------------------------- -------------------------------
Common Stock, $.01 par value 46,478,763
Page 1 of 19
Exhibit Index is on Page 18
2
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
INDEX
Page
----
Part I. Financial Information:
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of
Earnings - Three Months and Six Months
Ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
Part II. Other Information:
Item 1. Legal Proceedings. 16
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 5. Other Information. 16
Item 6. Exhibits and Reports on Form 8-K. 16
Signatures 17
Exhibit Index 18
Page 2 of 19
3
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
----------- -----------
(Thousands of Dollars)
ASSETS
Current assets:
Cash and cash equivalents $ 15,873 $ 18,661
Accounts receivable, net 178,244 147,432
Inventories, net 154,659 132,583
Deferred income tax benefit 17,315 16,873
Other current assets 5,972 6,463
----------- -----------
Total Current Assets 372,063 322,012
----------- -----------
Property, plant and equipment 1,299,974 1,242,677
Allowances for depreciation, depletion and
amortization (688,204) (651,257)
----------- -----------
Net property, plant and equipment 611,770 591,420
Cost in excess of net assets acquired 170,150 148,481
Other intangibles 27,063 26,415
Other noncurrent assets 19,171 17,385
----------- -----------
Total Assets $ 1,200,217 $ 1,105,713
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 50,070 $ 49,599
Accrued salaries, benefits and payroll taxes 21,836 19,742
Accrued insurance and other taxes 22,342 16,440
Income taxes 4,889 4,691
Current maturities of long-term debt 1,536 1,431
Loans payable 40,000 --
Other current liabilities 17,166 16,332
----------- -----------
Total Current Liabilities 157,839 108,235
Long-term debt 311,739 310,675
Pension, postretirement, and postemployment benefits 66,002 63,070
Noncurrent deferred income taxes 51,285 50,008
Other noncurrent liabilities 12,868 11,889
----------- -----------
Total Liabilities 599,733 543,877
----------- -----------
Shareholders' equity:
Common stock, par value $.01 per share 465 462
Additional paid-in capital 346,542 335,766
Retained earnings 253,477 225,608
----------- -----------
Total Shareholders' Equity 600,484 561,836
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,200,217 $ 1,105,713
=========== ===========
See accompanying notes to condensed consolidated financial statements.
Page 3 of 19
4
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Dollars in Thousands, Except Per Share Data)
Net sales $ 277,737 $ 232,190 $ 464,272 $ 390,353
Cost of sales 194,502 166,703 351,558 294,722
------------ ------------ ------------ ------------
Gross Profit 83,235 65,487 112,714 95,631
Selling, general & administrative expense 20,876 16,313 40,177 31,612
Research and development 873 789 1,619 1,281
------------ ------------ ------------ ------------
Earnings from Operations 61,486 48,385 70,918 62,738
Interest expense (5,952) (3,564) (11,262) (5,765)
Other income and expenses, net (265) 2,178 (347) 3,647
------------ ------------ ------------ ------------
Earnings before Taxes on Income 55,269 46,999 59,309 60,620
Taxes on income 18,913 16,630 20,317 21,344
------------ ------------ ------------ ------------
Net Earnings $ 36,356 $ 30,369 $ 38,992 $ 39,276
============ ============ ============ ============
Net earnings per share -Basic $ 0.78 $ 0.66 $ 0.84 $ 0.85
============ ============ ============ ============
-Diluted $ 0.78 $ 0.66 $ 0.84 $ 0.85
============ ============ ============ ============
Dividends per share $ 0.12 $ 0.12 $ 0.24 $ 0.24
============ ============ ============ ============
Average number of common shares outstanding
-Basic 46,475,007 46,079,604 46,345,940 46,079,567
============ ============ ============ ============
-Diluted 46,832,368 46,143,970 46,621,626 46,149,237
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
Page 4 of 19
5
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
---------------------------
1998 1997
-------- ---------
(Thousands of Dollars)
Operating activities:
Net earnings $ 38,992 $ 39,276
Adjustments to reconcile earnings to cash
provided by operating activities:
Depreciation, depletion and amortization 46,268 34,800
Other items, net (250) (859)
Changes in operating assets and liabilities:
Accounts receivable (27,484) (36,217)
Inventories (18,189) (763)
Accounts payable (2,280) 3,874
Other assets and liabilities, net 12,714 16,169
-------- ---------
Net cash provided by operating activities 49,771 56,280
-------- ---------
Investing activities:
Additions to property, plant and equipment (46,155) (33,074)
Acquisitions, net (39,384) (275,168)
Transactions with Lockheed Martin Corporation -- 23,768
Other investing activities, net 4,169 2,112
-------- ---------
Net cash used for investing activities (81,370) (282,362)
-------- ---------
Financing activities:
(Repayments) borrowings of long-term debt, net (331) 149,885
Dividends (11,123) (11,059)
Loans payable 40,000 100,000
Issuance of common stock 265 --
-------- ---------
Net cash provided by financing activities 28,811 238,826
-------- ---------
Net (decrease) increase in cash and cash equivalents (2,788) 12,744
Cash balance (book overdraft), beginning of period 18,661 (4,260)
-------- ---------
Cash balance, end of period $ 15,873 $ 8,484
======== =========
See accompanying notes to condensed consolidated financial statements.
Page 5 of 19
6
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
of Martin Marietta Materials, Inc. (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 to 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, 1997, filed with the Securities and
Exchange Commission on March 30, 1998. In the opinion of management,
the interim financial information provided herein reflects all
adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the results of operations for the interim periods.
The results of operations for the six months ended June 30, 1998, are
not necessarily indicative of the results to be expected for the full
year.
2. Inventories
June 30, December 31,
1998 1997
--------- ---------
(Dollars in Thousands)
Finished products $ 128,170 $ 108,707
Product in process and raw materials 11,522 7,886
Supplies and expendable parts 23,270 23,161
--------- ---------
162,962 139,754
Less allowances (8,303) (7,171)
--------- ---------
Total $ 154,659 $ 132,583
========= =========
3. Long-Term Debt
June 30, December 31,
1998 1997
-------- --------
(Dollars in Thousands)
6.9% Notes, due 2007 $124,949 $124,948
7% Debentures, due 2025 124,199 124,195
Commercial paper, interest rates
approximating 5.65% 60,000 60,000
Acquisition notes, interest rates
ranging from 5% to 10% 2,712 1,337
Other notes 1,415 1,626
-------- --------
313,275 312,106
Less current maturities 1,536 1,431
-------- --------
Total $311,739 $310,675
======== ========
Page 6 of 19
7
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Long-Term Debt (continued)
No borrowings were outstanding under either of the Corporation's
revolving credit agreements at June 30, 1998. However, these agreements
support commercial paper borrowings of $100 million outstanding at June
30, 1998, of which $60 million has been classified as long-term debt on
the Corporation's consolidated balance sheet based on management's
ability and intention to maintain this debt outstanding for at least
one year. At August 1, 1998, $91 million remained outstanding under the
Corporation's commercial borrowing obligations. See the "Liquidity and
Capital Resources" discussion contained in the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on page
13 of this Form 10-Q.
The Corporation's interest payments were approximately $11.4 million in
1998 and $4.9 million in 1997 for the six months ended June 30.
4. Income Taxes
Deferred income tax assets and liabilities on the consolidated balance
sheet reflect the net of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
The Corporation's effective income tax rate for the first six months
was 34.3% in 1998 and 35.2% in 1997. The effective rate for the first
half of 1998 was slightly lower than the current federal corporate
income tax rate of 35% due to the effect of several offsetting factors.
The Corporation's effective tax rate reflects the effect of state
income taxes and the impact of differences in book and tax accounting
arising from the net permanent benefits associated with the depletion
allowances for mineral reserves, amortization of certain goodwill
balances, foreign operating earnings, and earnings from nonconsolidated
investments.
The Corporation's income tax payments were approximately $19.3 million
in 1998 and $21.5 million in 1997, for the six months ended June 30.
5. Contingencies
In the opinion of management and counsel, it is unlikely that the
outcome of 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 results of the
Corporation's operations or its financial position.
Page 7 of 19
8
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Other Matters
As of January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (the
"SFAS 130"). The SFAS 130 requires all non-owner changes in equity that
are excluded from net earnings under existing Financial Accounting
Standards Board standards be included as comprehensive income. The
Corporation presently does not have any transactions that directly
effect equity other than those transactions with owners in their
capacity as owners. Therefore, the provisions of the SFAS 130 are not
applicable.
The Corporation plans to adopt the provisions of the Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of
an Enterprise and Related Information" and the Statement of Financial
Accounting Standards No. 132, "Employers' Disclosure about Pensions and
Other Postretirement Benefits" in its annual reporting on Form 10-K for
the year ending December 31, 1998. The impact of the adoption of these
accounting standards on the Corporation's financial reporting and
related disclosures is not expected to be material.
In February 1994, the Corporation was authorized by its shareholders
and the Board of Directors to repurchase up to 2,000,000 shares of the
Corporation's Common Stock for issuance under the Corporation's Amended
Omnibus Securities Award Plan, which amount was decreased to the
amount of grants made up until May 8, 1998, at which time the
shareholders of the Corporation approved a Stock-Based Award Plan, as
amended from time to time (the "Plan"). In connection with the Plan,
the Corporation was authorized to repurchase up to 5,000,000 shares of
the Corporation's Common Stock for issuance under the Plan. On May 3,
1994, the Board of Directors authorized the repurchase of an additional
500,000 shares for general corporate purposes. As of the date of this
quarterly report, there have been 68,200 shares of Common Stock
repurchased by the Corporation under these authorizations.
Page 8 of 19
9
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 1998 and 1997
OVERVIEW Martin Marietta Materials, Inc., (the "Corporation") operates in two
principal business segments: aggregates products and magnesia-based products.
The Corporation's sales and earnings are predominately derived from its
aggregates segment, which processes and sells granite, sandstone, limestone, and
other aggregates products from a network of more than 250 quarries and
distribution facilities in 20 states in the southeastern, midwestern and central
regions of the United States and in the Bahamas and Canada. The division's
products are used primarily by commercial customers principally in domestic
construction of highways and other infrastructure projects and for commercial
and residential buildings. The magnesia-based products segment produces
refractory materials and dolomitic lime used in domestic and foreign basic steel
production and produces chemicals products used in industrial, agricultural and
environmental applications. The magnesia-based products segment derives a major
portion of its sales and earnings from the products used in the steel industry.
RESULTS OF OPERATIONS Net sales for the quarter were $277.7 million, a 20%
increase over 1997 second quarter sales of $232.2 million. Earnings from
operations increased 27% to $61.5 million, while operating margin was 22.1%,
compared with 20.8% in the prior-year period. Net earnings for the quarter
increased 20% to $36.4 million, or $0.78 per diluted share, from 1997 second
quarter net earnings of $30.4 million, or $0.66 per diluted share. Increases in
both sales and earnings from operations reflect the acquisition of American
Aggregates Corporation ("American Aggregates"), which was completed in May 1997,
as well as several smaller acquisitions completed during 1997 and 1998.
Net sales for the first six months of 1998 increased 19% to $464.3
million, from $390.4 million for the year-earlier period. For the six-month
period ended June 30, 1998, net earnings declined slightly to $39.0 million, or
$0.84 per diluted share, from net earnings for the comparable prior-year period
of $39.3 million, or $0.85 per diluted share. Year-to-date 1998 earnings
continue to reflect the new seasonal earnings pattern resulting from 1997
acquisitions made in the Midwest and North Central regions of the country, as
well as the increased interest expense associated with acquisition activity.
The Aggregates division's sales increased 23% to $241.5 million for
the second quarter, compared with the year-earlier period, while the division's
earnings from operations for the quarter were $57.8 million, an increase of 30%
from the year-earlier period. This increase in sales and earnings reflects
record quarterly aggregates shipments of 38.9 million tons, coupled with average
pricing improvements of 5.3% at the heritage aggregates operations, when
compared to the same period in 1997. The division's results reflect the
acquisition of American Aggregates, which accounts for approximately two-thirds
of the increase in shipments during the first half of 1998.
Adverse weather conditions continued to hamper shipments,
particularly in North Carolina, Ohio, and Indiana. These states typically
account for more than 45% of the division's aggregates shipments. Management
continues to believe that overall growth will be experienced in the balance of
1998, when compared to the prior year, based on current economic forecasts
regarding growth within the construction industry, and the high level of backlog
of many of our major customers. However, growth will depend upon the
availability of labor, transportation, and continued good weather into the fall
and winter.
(Continued)
Page 9 of 19
10
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 1998 and 1997
Year-to-date sales of $393.2 million and earnings from operations of
$63.6 million exceeded the prior year by 23% and 13% respectively.
The Magnesia Specialties division had second quarter 1998 net sales
of $36.2 million, which were slightly above the prior-year's net sales of $35.8
million. Six month 1998 net sales of $71.1 million increased 2% over six month
1997 net sales of $69.9 million, primarily as a result of the transfer of a
manufacturing facility that mills and grinds shells into calcium carbonate
products from the Aggregates division. Sales of lime and refractories shapes,
coupled with strong refractory demand, continue to offset the impact of reduced
shipments of periclase and industrial chemicals products. However, worldwide
competition in the periclase and industrial chemicals products areas has
intensified and management expects this competition to continue into the
foreseeable future.
Compared to the year-earlier period, the Magnesia Specialties
division's earnings from operations for the first six months of 1998 were $7.3
million, an increase of 12% over the prior year period. Earnings continue to
reflect strong, cost-effective operating performance during the first six months
of 1998 as compared to the year-earlier period, when the division incurred
significant downtime related to higher levels of maintenance and repairs. The
division's management continues to expect price weaknesses in this business for
the foreseeable future due to the fixed market limitations inherent within the
steel industry, which is the division's largest product market.
(Continued)
Page 10 of 19
11
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Second Quarter and Six Months Ended June 30, 1998 and 1997
The following table presents net sales, gross profit, selling,
general and administrative expense, and earnings from operations data for the
Corporation and each of its divisions for the three and six months ended June
30, 1998 and 1997. In each case, the data are stated as a percentage of net
sales, of the Corporation or the relevant division, as the case may be:
Three Months Ended
June 30,
--------------------------------------------------------
(Dollars in Thousands)
1998 1997
------------------------ -------------------------
% of % of
Amount Net Sales Amount Net Sales
------ --------- ------ ---------
Net sales:
Aggregates $241,480 100.0 $196,394 100.0
Magnesia Specialties 36,257 100.0 35,796 100.0
-------- ----- -------- -----
Total 277,737 100.0 232,190 100.0
Gross profit:
Aggregates 74,258 30.8 56,620 28.8
Magnesia Specialties 8,977 24.8 8,867 24.8
-------- ----- -------- -----
Total 83,235 30.0 65,487 28.2
Selling, general & administrative expense:
Aggregates 16,194 6.7 11,985 6.1
Magnesia Specialties 4,682 12.9 4,328 12.1
-------- ----- -------- -----
Total 20,876 7.5 16,313 7.0
Earnings from operations:
Aggregates 57,774 23.9 44,374 22.6
Magnesia Specialties 3,712 10.2 4,011 11.2
-------- ----- -------- -----
Total $ 61,486 22.1 $ 48,385 20.8
(Continued)
Page 11 of 19
12
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Second Quarter and Six Months Ended June 30, 1998 and 1997
Six Months Ended
June 30,
--------------------------------------------------------
(Dollars in Thousands)
1998 1997
------------------------ -------------------------
% of % of
Amount Net Sales Amount Net Sales
------ --------- ------ ---------
Net sales:
Aggregates $393,202 100.0 $320,477 100.0
Magnesia Specialties 71,070 100.0 69,876 100.0
-------- ----- -------- -----
Total 464,272 100.0 390,353 100.0
Gross profit:
Aggregates 94,652 24.0 79,628 24.9
Magnesia Specialties 18,062 25.4 16,003 22.9
-------- ----- -------- -----
Total 112,714 24.3 95,631 24.5
Selling, general & administrative expense:
Aggregates 30,610 7.8 23,180 7.2
Magnesia Specialties 9,567 13.5 8,432 12.1
-------- ----- -------- -----
Total 40,177 8.7 31,612 8.1
Earnings from operations:
Aggregates 63,562 16.2 56,187 17.5
Magnesia Specialties 7,356 10.4 6,551 9.4
-------- ----- -------- -----
Total $ 70,918 15.3 $ 62,738 16.1
Other income and expense, net, for the six months ended June 30, was
$347,000 in expense in 1998 and $3.6 million in income in 1997. Including
several offsetting amounts, other income and expenses, net, is comprised
generally of interest income, gains and losses associated with the selling of
certain assets, and equity earnings and losses from nonconsolidated investments.
The 1998 amount includes accruals under certain partnership agreements entered
into during late 1997 and costs associated with certain due diligence for
acquisitions not consummated. No significant additional partnership accruals are
due for the remainder of 1998. The 1997 amount included a business interruption
insurance recovery resulting from lost production time during Hurricane Fran in
late 1996 and from a fire at Magnesia Specialties' Woodville plant.
(Continued)
Page 12 of 19
13
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Second Quarter and Six Months Ended June 30, 1998 and 1997
Interest expense for the six months ended June 30, 1998 and 1997 was
$11.3 million and $5.8 million, respectively. The borrowings associated
primarily with the Corporation's acquisition of American Aggregates increased
interest expense, as indicated in earlier disclosure.
The Corporation's estimated effective income tax rate for the first six
months was 34.3% in 1998 and 35.2% in 1997. See Note 4 of the Notes to Condensed
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating activities
during the first six months of 1998 was $49.8 million compared with $56.3
million in the comparable period of 1997. The cash flow for both 1998 and 1997
was principally from earnings, before deducting depreciation, depletion and
amortization, offset by working capital requirements. Working capital changes
during the first half of 1998 were primarily the result of increases in
inventory balances, as well as increases in trade accounts receivable. The
Corporation, principally in its Aggregates division, rebuilt inventory through
the first six months of 1998 in order to satisfy anticipated demand in the
second half of 1998. The seasonal nature of the construction aggregates business
impacts quarterly net cash provided by operating activities when compared with
the year. Full year 1997 net cash provided by operating activities was $195.6
million, compared with $56.3 million provided by operations in the first half of
1997.
First six months capital expenditures, exclusive of acquisitions,
were $46.2 million in 1998 and $33.1 million in 1997. Capital expenditures are
expected to be approximately $130 million for 1998, exclusive of acquisitions.
Comparable capital expenditures were $86.4 million in 1997.
The Corporation continues to rely upon internally generated funds and
access to capital markets, including funds obtained under its two revolving
credit agreements and a cash management facility, to meet its liquidity
requirements, finance its operations, and fund its capital requirements. With
respect to the Corporation's ability to access the public market, currently the
Corporation has an effective shelf registration on file with the Securities and
Exchange Commission (the "Commission") for the offering of up to $50 million of
debt securities, which may be issued from time to time. Presently, management
has the authority to file another shelf registration statement with the
Commission. It should be noted, however, that the Corporation has not determined
the timing when, or the amount for which, it may file such shelf registration.
(Continued)
Page 13 of 19
14
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Second Quarter and Six Months Ended June 30, 1998 and 1997
On May 26, 1998, the Corporation amended its revolving credit
agreement with a group of domestic and foreign banks, which extended its terms
and provides for borrowings of up to $150 million for general corporate purposes
through May 25, 1999. Borrowings under this agreement are unsecured and bear
interest, at the Corporation's option, at rates based upon: (i) the Euro-Dollar
rate (as defined on the basis of a LIBOR); (ii) a bank base rate (as defined on
the basis of a published prime rate or the Federal Funds Rate plus 1/2 of 1%);
or (iii) a competitively determined rate (as defined on the basis of a bidding
process). This short-term revolving credit agreement contains several covenants,
including specific financial covenants related to leverage, limitation on
encumbrances, and provisions that relate to certain changes of the Corporation's
control. The Corporation is required to pay a loan commitment fee to the bank
group.
The Corporation's ability to borrow or issue debt securities is
dependent, among other things, upon prevailing economic, financial and market
conditions.
Based on prior performance and current expectations, the
Corporation's management believes that cash flows from internally generated
funds and its access to capital markets are expected to continue to be
sufficient to provide the capital resources necessary to fund the operating
needs of its existing businesses, cover debt service requirements, and allow for
payment of dividends in 1998. The Corporation may be required to obtain
additional levels of financing in order to fund certain strategic acquisitions
if any such opportunities arise. Currently, the Corporation's senior unsecured
debt is rated "A" by Standard & Poor's and "A3" by Moody's. The Corporation's
commercial paper obligations are rated "A-1" by Standard & Poor's, "P-2" by
Moody's and "F-1" by Fitch IBCA, Inc. While management believes its credit
ratings will remain at an investment-grade level, no assurance can be given that
these ratings will remain at the above-mentioned levels.
The Corporation may repurchase up to 6.5 million shares of its common
stock under authorizations from the Corporation's Board of Directors for use in
its option plans and for general corporate purposes. As of May 1, 1998, there
have been 68,200 shares repurchased under these authorizations.
ACCOUNTING CHANGES As of January 1, 1998, the Corporation adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (the
"SFAS 130"). The SFAS 130 requires all non-owner changes in equity that are
excluded from net earnings under existing Financial Accounting Standards Board
standards be included as comprehensive income. The Corporation presently does
not have any transactions that directly effect equity other than those
transactions with owners in their capacity as owners. Therefore, the provisions
of the SFAS 130 are not applicable.
(Continued)
Page 14 of 19
15
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Second Quarter and Six Months Ended June 30, 1998 and 1997
The Corporation plans to adopt the provisions of the Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" and the Statement of Financial Accounting Standards No.
132, "Employers' Disclosure about Pensions and Other Postretirement Benefits" in
its annual reporting on Form 10-K for the year ending December 31, 1998. The
impact of the adoption of these accounting standards on the Corporation's
financial reporting and related disclosures is not expected to be material.
OTHER MATTERS Investors are cautioned that statements in this Quarterly Report
on Form 10-Q that relate to the future are, by their nature, uncertain and
dependent upon numerous contingencies - including political, economic,
regulatory, climatic, competitive, and technological - any of which could cause
actual results and events to differ materially from those indicated in such
forward-looking statements. Additional information regarding these and other
risk factors and uncertainties may be found in the Corporation's other filings
which are made from time to time with the Commission.
Page 15 of 19
16
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta
Materials, Inc. Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
Reference is made to Part II. Item 4. Submission of Matters to a Vote of
Security Holders of the Martin Marietta Materials, Inc. Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1998.
Item 5. Other Information.
On June 3, 1998, the Corporation announced it purchased two sand and gravel
operations with annual capacity of approximately 1.5 million tons. One operation
is in Northern Kentucky near Petersburg, while the other is located between
Dayton and Cincinnati, Ohio. The transaction was a purchase of assets for cash
and includes swap of surplus real estate by the Corporation as part of the
consideration. The purchase price was not disclosed.
On July 30, 1998, the Corporation announced it purchased a granite quarry near
Lenoir, North Carolina, from Caldwell Stone Company, Inc. Annual shipments from
this location are expected to be approximately 500,000 tons. Mineral reserves
are in excess of 20 million tons. The transaction was a purchase of assets for
cash. The purchase price was not disclosed.
On August 4, 1998, the Corporation announced it purchased the assets of a
limestone quarry near Barnhart, Missouri. The quarry has annual capacity of
approximately 800,000 tons and access to the Missouri River. The purchase was a
cash transaction, terms of which were not disclosed.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
No. Document
--- --------
10.01 Amended and Restated 364 Day Credit Agreement, dated May 26, 1998,
among Martin Marietta Materials, Inc. and Morgan Guaranty Trust
Company of New York, as Agent Bank
11.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries
Computation of Earnings Per Share for the Quarter and Six Months Ended
June 30, 1998 and 1997
27.01 Financial Data Schedule
(for Securities and Exchange Commission use only)
Page 16 of 19
17
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
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: August 12, 1998 By: /s/ JANICE K. HENRY
---------------------- ----------------------------------
Janice K. Henry
Vice President, Chief Financial
Officer and Treasurer
Page 17 of 19
18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1998
EXHIBIT INDEX
Exhibit No. Document Page
- ----------- -------- ----
10.01 Amended and Restated 364 Day Credit Agreement, dated May 26,
1998, among Martin Marietta Materials, Inc., and Morgan
Guaranty Trust Company of New York, as Agent Bank
11.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries
Computation of Earnings Per Share for the Quarter and Six
Months Ended June 30, 1998 and 1997 19
27.01 Financial Data Schedule
(for Securities and Exchange Commission use only)
Page 18 of 19
1
EXHIBIT 10.1
EXECUTION COPY
AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT
AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT dated as of May 26,
1998 among MARTIN MARIETTA MATERIALS, INC., the BANKS listed on the signature
pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of May 27, 1997 (the "Agreement");
WHEREAS, at the date hereof, there are no Loans outstanding under the
Agreement; and
WHEREAS, the parties hereto desire to amend the Agreement as set
forth herein and to restate the Agreement in its entirety to read as set forth
in the Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; Reference. Unless otherwise specifically
defined herein, each capitalized term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Agreement shall from and after the date hereof refer
to the Agreement as amended and restated hereby. The term "Notes" defined in the
Agreement shall include from and after the date hereof the New Notes (as defined
below).
SECTION 2. Extension of Facility. The date "May 26, 1998" in the
definition of "Termination Date" in Section 1.01 of the Agreement is changed to
"May 25, 1999."
SECTION 3. Updated Representations. (a) Each reference to "1995" in
Section 4.04(a) of the Agreement is changed to "1997."
(b) Section 4.04(b) is amended to read in its entirety: "(b)
[Reserved]."
2
(c) The reference to "September 30, 1996" in Section 4.04(c) is
changed to "December 31, 1997."
(d) Each reference to "1995" in the definition of "Borrower's 1995
Form 10-K" is changed to "1997."
(e) The reference to "December 31, 1995" in Section 4.14 is changed
to "December 31, 1997."
SECTION 4. Representations and Warranties. The Borrower hereby
represents and warrants that as of the date hereof and after giving effect
hereto:
(a) no Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower set forth in
the Agreement after giving effect to this Amendment and Restatement is true and
correct as though made on and as of such date.
SECTION 5. Governing Law. This Amendment and Restatement shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts; Effectiveness. This Amendment and
Restatement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Amendment and Restatement shall become effective
as of the date hereof when each of the following conditions shall have been
satisfied:
(a) receipt by the Agent of duly executed counterparts hereof signed
by each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, the Agent shall have received
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party)
(b) the Agent shall have received a duly executed Note for each of
the New Banks (a "New Note"), dated on or before the date of effectiveness
hereof and otherwise in compliance with Section 2.05 of the Agreement;
(c) receipt by the Agent of an opinion of such counsel for the
Borrower as may be acceptable to the Agent, substantially to the effect of
Exhibits E-1 and E-2 to the Agreement with reference to this Amendment and
Restatement and the Agreement as amended and restated hereby; and
2
3
(d) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Borrower, the corporate authority for and the
validity of the Agreement as amended and restated hereby, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent;
provided that this Amendment and Restatement shall not become effective or
binding on any party hereto unless all of the foregoing conditions are satisfied
not later than May 29, 1998. The Agent shall promptly notify the Borrower and
the Banks of the effectiveness of this Amendment and Restatement, and such
notice shall be conclusive and binding on all parties hereto.
3
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Restatement to be duly executed by their respective authorized officers as of
the day and year first above written.
MARTIN MARIETTA MATERIALS, INC.
By: /s/ Janice K. Henry
---------------------------------
Name: Janice K. Henry
Title: VP, CFO-Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Diana H. Imhof
---------------------------------
Name: Diana H. Imhof
Title: Vice President
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ W. Walter Ricks
---------------------------------
Name: W. Walter Ricks
Title: Senior Vice President
5
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: /s/ Roberts A. Bass
---------------------------------
Name: Roberts A. Bass
Title: Vice President
BANK OF MONTREAL
By: /s/ Brian L. Banks
---------------------------------
Name: Brian L. Banks
Title: Director
NATIONSBANK, N.A.
By: /s/ Johns N. Ellington
---------------------------------
Name: Johns N. Ellington
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Gary Franke
---------------------------------
Name: Gary Franke
Title: Vice President & Manager
6
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent
By: /s/ Diana H. Imhof
---------------------------------
Name: Diana H. Imhof
Title: Vice President
1
Exhibit 11.01
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
For the Quarter and Six Months Ended June 30, 1998 and 1997
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net earnings $ 36,356 $ 30,369 $ 38,992 $ 39,276
=========== =========== =========== ===========
Weighted average number of shares outstanding:
Basic earnings per share 46,475,007 46,079,604 46,345,940 46,079,567
Effect of dilutive securities 357,361 64,366 275,686 69,670
----------- ----------- ----------- -----------
Diluted earnings per share 46,832,368 46,143,970 46,621,626 46,149,237
=========== =========== =========== ===========
Net earnings per share - basic $ 0.78 $ 0.66 $ 0.84 $ 0.85
=========== =========== =========== ===========
- diluted $ 0.78 $ 0.66 $ 0.84 $ 0.85
=========== =========== =========== ===========
Page 19 of 19
5
1,000
6-MOS
DEC-31-1998
JAN-01-1998
JUN-30-1998
15,873
0
178,244
0
154,659
372,063
1,299,974
688,204
1,200,217
157,839
311,739
0
0
465
600,019
1,200,217
464,272
464,272
351,558
393,354
(89)
436
11,262
59,309
20,317
38,992
0
0
0
38,992
.84
.84
