Martin Marietta Materials, Inc. Form 10-Q 9/30/00

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 September 30, 2000

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 [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 October 31, 2000

     
Common Stock, $.01 par value
      46,765,903

Page 1 of 21

Exhibit Index is on Page 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2000

INDEX

                 
Page

Part I.
  Financial Information:        
    Item 1.  
Financial Statements
       
       
Condensed Consolidated Balance Sheets — September 30, 2000 and December 31, 1999
    3  
       
Condensed Consolidated Statements of Earnings — Three-Months and Nine-Months Ended September 30, 2000 and 1999
    4  
       
Condensed Consolidated Statements of Cash Flows — Nine-Months Ended September 30, 2000 and 1999
    5  
       
Notes to Condensed Consolidated Financial Statements
    6  
    Item 2.  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    10  
 
Part II.
  Other Information:        
    Item 1.  
Legal Proceedings
    18  
    Item 4.  
Submission of Matters to a Vote of Security Holders
    18  
    Item 5.  
Other Information
    18  
    Item 6.  
Exhibits and Reports on Form 8-K
    19  
 
Signatures     20  
 
Exhibit Index     21  

Page 2 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
                     
September 30, December 31,
2000 1999


(Dollars in Thousands)
ASSETS
               
Current assets:
               
 
Cash & cash equivalents
  $ 5,355     $ 3,403  
 
Accounts receivable, net
    231,143       197,554  
 
Inventories, net
    192,381       172,865  
 
Other current assets
    34,632       29,543  
     
     
 
   
Total Current Assets
    463,511       403,365  
     
     
 
Property, plant and equipment
    1,764,517       1,653,208  
Allowances for depreciation, depletion and amortization
    (873,223 )     (806,215 )
     
     
 
Net property, plant and equipment
    891,294       846,993  
Cost in excess of net assets acquired
    375,399       375,327  
Other noncurrent assets
    124,084       116,889  
     
     
 
   
Total Assets
  $ 1,854,288     $ 1,742,574  
     
     
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Total current liabilities
  $ 216,577     $ 182,696  
Long-term debt and commercial paper
    601,313       602,011  
Other noncurrent liabilities
    187,798       183,861  
     
     
 
   
Total Liabilities
    1,005,688       968,568  
     
     
 
Shareholders’ equity:
               
 
Common stock, par value $.01 per share
    468       467  
 
Additional paid-in capital
    355,836       354,046  
 
Retained earnings
    492,296       419,493  
     
     
 
   
Total Shareholders’ Equity
    848,600       774,006  
     
     
 
   
Total Liabilities and Shareholders’ Equity
  $ 1,854,288     $ 1,742,574  
     
     
 

See accompanying notes to condensed consolidated financial statements.

Page 3 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                     
Three-Months Ended Nine-Months Ended
September 30, September 30,


2000 1999 2000 1999




(Dollars in Thousands, Except Per Share Data)
Net sales
  $ 380,305     $ 353,792     $ 1,018,910     $ 923,718  
Cost of sales
    284,879       254,131       782,294       694,088  
     
     
     
     
 
 
Gross Profit
    95,426       99,661       236,616       229,630  
 
Selling, general & administrative expense
    24,012       23,364       72,268       71,029  
Research and development
    570       685       1,783       2,114  
     
     
     
     
 
 
Earnings from Operations
    70,844       75,612       162,565       156,487  
 
Interest expense
    (10,680 )     (9,797 )     (31,500 )     (28,756 )
Other income and expenses, net
    1,688       2,229       6,844       16,261  
     
     
     
     
 
 
Earnings before Taxes on Income
    61,852       68,044       137,909       143,992  
Taxes on income
    19,801       24,093       46,406       50,828  
     
     
     
     
 
 
 
Net Earnings
  $ 42,051     $ 43,951     $ 91,503     $ 93,164  
     
     
     
     
 
Net earnings per share
                               
   
—Basic
  $ 0.90     $ 0.94     $ 1.96     $ 2.00  
     
     
     
     
 
   
—Diluted
  $ 0.90     $ 0.94     $ 1.95     $ 1.98  
     
     
     
     
 
Dividends per share
  $ 0.14     $ 0.13     $ 0.40     $ 0.39  
     
     
     
     
 
 
Average number of common shares outstanding
                               
   
—Basic
    46,763,155       46,677,260       46,746,598       46,665,751  
     
     
     
     
 
   
—Diluted
    46,962,201       46,990,461       46,964,281       46,974,517  
     
     
     
     
 

See accompanying notes to condensed consolidated financial statements.

Page 4 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   
Nine-Months Ended
September 30,

2000 1999


(Dollars in Thousands)
Net cash provided by operating activities
  $ 155,415     $ 146,594  
     
     
 
Investing activities:
               
 
Additions to property, plant and equipment
    (117,887 )     (102,694 )
 
Acquisitions, net
    (36,671 )     (58,506 )
 
Other investing activities, net
    6,930       (2,000 )
     
     
 
Net cash used for investing activities
    (147,628 )     (163,200 )
     
     
 
Financing activities:
               
 
Repayments on long-term debt
    (8,314 )     (260 )
 
Dividends paid
    (18,700 )     (18,205 )
 
Loans payable
    19,810       25,383  
 
Issuance of common stock
    1,369       1,636  
 
Repurchase of common stock
          (5,935 )
     
     
 
Net cash (used for) provided by financing activities
    (5,835 )     2,619  
     
     
 
Net increase (decrease) in cash and cash equivalents
    1,952       (13,987 )
Cash and cash equivalents, beginning of period
    3,403       14,586  
     
     
 
Cash and cash equivalents, end of period
  $ 5,355     $ 599  
     
     
 

See accompanying notes to condensed consolidated financial statements.

Page 5 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

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, 1999, filed with the Securities and Exchange Commission on March 27, 2000. 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 nine-months ended September 30, 2000, are not necessarily indicative of the results to be expected for the full year.
 
2. Proposed Acquisition of Meridian Aggregates Company.
 
On September 6, 2000, the Corporation announced that it will purchase the remaining interests of Meridian Aggregates Company (“Meridian”) under the purchase option terms of the original October, 1998 investment agreement. The purchase, which is structured as an asset transaction and is expected to be completed in early 2001, will give the Corporation 100% ownership of Meridian. The estimated $235 million purchase price, which is subject to actual results and certain other adjustments, includes the original October, 1998 investment of $42 million and assumes that the outstanding debt of Meridian will be repaid. In addition, the Corporation will assume normal balance sheet liabilities in connection with the acquisition. The business combination, when consummated, will be accounted for under the purchase method of accounting prescribed by Accounting Principles Board Opinion No. 16, “Accounting for Business Combinations”. The goodwill resulting from this transaction will be amortized over 30 years consistent with the Corporation’s accounting policy for a transaction of Meridian’s size.
 
3. Inventories
                 
September 30, December 31,
2000 1999


(Dollars in Thousands)
Finished products
  $ 162,752     $ 143,776  
Product in process and raw materials
    10,127       9,972  
Supplies and expendable parts
    27,325       25,862  
     
     
 
      200,204       179,610  
Less allowances
    (7,823 )     (6,745 )
     
     
 
Total
  $ 192,381     $ 172,865  
     
     
 

Page 6 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
 
4. Long-Term Debt
                 
September 30, December 31,
2000 1999


(Dollars in Thousands)
6.9% Notes, due 2007
  $ 124,959     $ 124,956  
7% Debentures, due 2025
    124,223       124,215  
5.875% Notes, due 2008
    199,120       199,059  
Commercial paper, interest rates ranging from 5.50% to 6.80%
    195,000       180,000  
Acquisition notes, interest rates ranging from 5.50% to 10.00%
    4,677       12,395  
Other notes
    5,773       1,108  
     
     
 
      653,752       641,733  
Less current maturities
    (52,439 )     (39,722 )
     
     
 
Total
  $ 601,313     $ 602,011  
     
     
 
 
No borrowings were outstanding under either of the Corporation’s revolving credit agreements at September 30, 2000. However, these agreements support commercial paper borrowings of $195 million outstanding at September 30, 2000, of which $150 million has been classified as long-term debt in the Corporation’s consolidated balance sheet based on management’s ability and intention to maintain this debt outstanding for at least one year. At November 1, 2000, $180 million was 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 9 of this Form 10-Q.
 
The Corporation’s interest payments were approximately $29.5 million in 2000 and $24.5 million in 1999 for the nine-months ended September 30.
 
5. Income Taxes
 
The Corporation’s effective income tax rate for the first nine months was 33.6% in 2000 and 35.3% in 1999. 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 $33.9 million in 2000 and $45.7 million in 1999, for the nine months ended September 30.

Page 7 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
 
6. 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.
 
7. Other Matters
 
Effective July 1, 2000, the Corporation adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”) as amended by Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133 (“FAS 137”) and Statement of Financial Accounting Standards No. 138, Accounting for Derivative Instruments and Hedging Activities an Amendment of FASB Statement No.  133, (“FAS 138”). The adoption of FAS 133 and FAS 138 did not have an impact on net earnings or the financial position of the Corporation, because the Corporation does not have any hedging activities, derivatives instruments or material contracts that were subject to these accounting standards.
 
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”), is required to be adopted during the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Corporation expects to adopt SAB 101 for the quarter ended December 31, 2000. The Corporation recognizes substantially all revenues, net of discounts, if any, when finished products are shipped to customers or services have been rendered, with appropriate provision for uncollectible amounts. Therefore, the adoption of SAB 101 should have no effect on the Corporation’s current or previously reported net sales, net earnings or financial position.
 
The Corporation expects to adopt Emerging Issues Task Force Issue No. 00-10: Accounting for Shipping and Handling Fees and Costs (“EITF 00-10”), beginning with the fourth quarter 2000 reporting. EITF 00-10 requires that amounts billed to customers for shipping and handling should be classified as revenue and that the related costs should be included in costs of goods sold. Generally, the Corporation’s customers accept the aggregates products that they purchase at the quarry location using their own transportation. However, in certain circumstances, the Corporation will arrange for transportation of the purchased aggregates products to the customer. In such cases, the customer is billed for certain freight and delivery charges.

Page 8 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)
 
The Corporation currently offsets the collected revenue related to freight and delivery charges against the freight and delivery costs billed from the transportation provider. Freight and delivery costs for the nine-months ended September 30, 2000 and 1999, were $155.9 million and $147.9 million, respectively. Full year 1999 freight and delivery costs were $201.1 million. The Corporation will report freight and delivery charges as net sales and the related cost of freight and delivery will be reported as cost of sales beginning with the reporting of the operating results for the quarter and year ended December 31, 2000. While gross profit is not expected to change from amounts that would have been reported prior to the adoption of EITF 00-10, gross profit margins are expected to decrease as a result of an increase in reported net sales. Prior annual and quarterly periods will be restated upon adoption.
 
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities (“FAS 140”). FAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 and should be applied prospectively. Certain disclosures for securitized financial assets are required for the December 31, 2000 annual reporting. The adoption of FAS 140 is not expected to have a significant impact, if any, on net earnings or the financial position of the Corporation.
 
8. Reclassifications
 
Certain amounts for the prior year have been reclassified to conform to the 2000 presentation with no affect on previously reported net earnings or financial position.

Page 9 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter and Nine-Months Ended September 30, 2000 and 1999

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 approximately 300 quarries and distribution facilities in more than 20 states in the southeastern, southwestern, midwestern and central regions of the United States and in the Bahama Islands 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 Corporation vertically integrated in other construction materials businesses in Louisiana, Arkansas and Texas, as a result of acquisitions of asphalt production, ready mixed concrete operations and road construction companies. 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  Consolidated net sales for the quarter were $380.3 million, a 7% increase over 1999 third quarter sales of $353.8 million. Consolidated earnings from operations were $70.8 million for the quarter ended September 30, 2000 compared with $75.6 million for the quarter ended September 30, 1999. Consolidated net earnings for the quarter were $42.1 million, or $0.90 per diluted share, compared to 1999 third quarter net earnings of $44.0 million, or $0.94 per diluted share. Sales increased as a result of strong price increases and acquisition activity in 1999 and 2000. However, high energy-related costs continued to have a negative impact on earnings during the quarter.

      Sales for the first nine months of 2000 increased 10% to $1.019 billion, from $923.7 million for the year-earlier period. Earnings from operations increased 4% to $162.6 million for the nine-months ended September 30, 2000, compared with $156.5 million for the same period in 1999. Year-to-date 2000 net earnings were $91.5 million, or $1.95 per diluted share, compared with $93.2 million, or $1.98 per diluted share, for the year-earlier period. Interest expense of $31.5 million for the nine-months ended 2000 increased 10% when compared with 1999 due to the effect of the current interest rate environment and higher levels of debt.

      Sales for the Aggregates division increased 8% during the third quarter of 2000 to $347.0 million from 1999 third quarter sales of $320.4 million. Earnings from operations for the third quarter of 2000 were $68.9 million, compared with $72.6 million during third quarter 1999. Gross margin as a percentage of sales at heritage operations for aggregates and asphalt products combined was slightly better than the prior-year period in spite of cost pressures from energy. Selling, general and administrative expenses improved to 5.7% of Aggregates division sales for the quarter compared with 5.9% for the previous year’s third quarter. Operating margin for the division was 19.9%, compared with 22.7% in the prior year’s quarterly period, principally due to the negative impact of energy-related costs and lower margins related to certain acquired operations.

(Continued)

Page 10 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
Third Quarter and Nine-Months Ended September 30, 2000 and 1999

Energy-related costs include diesel fuel used to operate trucks and loaders in quarry production, natural gas and liquid asphalt used in asphalt production, and waterborne freight costs. The estimated combined cost of oil and natural gas-based products used in the Company’s heritage business increased $6.4 million in the third quarter and $15.2 million year-to-date when compared with the prior year period. In addition, waterborne freight costs have increased an estimated $3.4 million for the nine-month period, primarily as a result of an increase in fuel prices.

      Total shipments for the quarter of 46.9 million tons remained relatively flat when compared with the third quarter 1999. However, heritage aggregates shipments volume during the third quarter declined 4.6% to 44.4 million tons as a result of lower demand for commercial and residential construction due to rising interest rates, as well as slower-than-anticipated rollout of TEA-21 infrastructure demand. Wet weather conditions in North Carolina also had a negative impact. Average selling prices for heritage aggregates operations have increased almost 4% for the quarter and nine-months ended September 30, 2000.

                                 
Three-Months Ended Nine-Months Ended
September 30, 2000 September 30, 2000


Volume Pricing Volume Pricing




Aggregates Products Operations
                               
Volume/Pricing Variance (1)
                               
 
Heritage Aggregates Operations (2)
    (4.6 %)     3.8 %     (1.9 %)     3.8 %
Aggregates division (3)
    (0.4 %)     3.9 %     3.0 %     3.5 %
                                   
Three-Months Ended Nine-Months Ended
September 30, September 30,


2000 1999 2000 1999




Shipments (000’s tons)
                               
 
Heritage Aggregates Operations (2)
    44,434       46,567       118,977       121,251  
 
Acquisitions
    2,514       555       6,598       640  
     
     
     
     
 
 
Aggregates division (3)
    46,948       47,122       125,575       121,891  
     
     
     
     
 

      Year-to-date sales of $919.7 million and earnings from operations of $155.4 million exceeded the prior-year period by 11% and 2%, respectively.

(1) Volume/pricing variances reflect the percentage increase/(decrease) from the comparable period in the prior year.
(2) Heritage aggregates operations exclude acquisitions that have not been included in prior-year operations for a full year.
(3) Aggregates division includes all acquisitions from the date of acquisition.

(Continued)

Page 11 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
Third Quarter and Nine-Months Ended September 30, 2000 and 1999

      Seasonal changes and other weather-related conditions significantly affect the Aggregates division’s business. Therefore, the Aggregates division’s production and shipment levels coincide with general construction activity levels, most of which occur in the division’s markets typically during the spring, summer, and fall seasons. Unusually wet weather experienced, principally in North Carolina, in the second quarter 2000 continued into July, the early part of August as well as in September. Further softening in commercial construction in some market areas, and unexpected delays in the ramp-up of TEA-21 spending on a state-by-state basis continues to negatively impact construction activity levels. Therefore, management believes that heritage annual aggregates shipments growth will decline slightly for 2000. Management also continues to believe that average selling prices for the year 2000 for heritage aggregates operations will increase 3% to 4%. Costs will continue at present levels due to significant increases for diesel fuel, liquid asphalt and natural gas.

      The outlook for 2001 is positive for highways and other infrastructure projects, even though the rate of ramp-up related to TEA-21 spending will vary from state to state. However, residential and commercial construction building is expected to decline from current levels. The net result, based on current forecasts, is a flat to 2% volume growth for heritage aggregates operations in 2001, coupled with a 3% to 4% price increase. Management expects that production costs per ton for heritage aggregates operations will increase based on a moderate inflationary effect, assuming no reduction in energy-related costs. However, the rate of increase in the production costs per ton will be less than the expected increase in average selling prices. The Corporation expects, in 2001, to emphasize increasing operating cash flows. As part of this emphasis, the Corporation will, among other things, focus on controlling the increase in inventory levels, which were $18.2 million and $13.8 million for the nine-months ended September 30, 2000 and 1999, respectively. Due to the high level of fixed costs associated with aggregates production, operating leverage can be substantial. Therefore, attempts to control increases in inventory levels, if achieved, would impact earnings. Management cannot guarantee that its efforts will increase operating cash flows in 2001. As announced in its September 6, 2000, press release, management expects that the acquisition of Meridian will be neutral to slightly accretive to 2001 earnings.

      Management cannot guarantee that the Corporation will achieve its expectations for 2001. The achievement of the 2001 expectations would be affected by many factors including, but not limited to, near-term general economic conditions, energy prices, and the interest rate environment. In addition, management’s outlook for 2001 is dependent on the economic, climatic, and construction-related environment in the Corporation’s markets, particularly in our largest revenue-generating states, namely North Carolina, Texas, Ohio, Iowa, Georgia and Indiana.

      The Magnesia Specialties division’s third quarter 2000 sales of $33.3 million which were flat, as expected, when compared with the year-earlier period. The division’s third quarter earnings from operations were $1.9 million and $3.0 million, respectively, for 2000 and 1999. The decline in operating earnings results principally from higher energy-related costs for natural gas. Year-to-date sales were $99.2 million and earnings from operations were $7.2 million, increases of 1% and 69%, respectively.

      The Magnesia Specialties division is not core to the Corporation. Therefore, the Corporation’s management continues to evaluate its strategic alternatives with respect to the Magnesia Specialties division, and in that regard, the Corporation has retained Banc of America Securities to act as financial advisors in connection with a possible sale of the division. However, there can be no assurance that management will complete a sale of the division.

(Continued)

Page 12 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine-Months Ended September 30, 2000 and 1999

      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 nine-months ended September 30, 2000 and 1999. In each case, the data is stated as a percentage of net sales, of the Corporation or the relevant division, as the case may be:

                                     
Three-Months Ended
September 30,

(Dollars in Thousands)
2000 1999


% of % of
Amount Net Sales Amount Net Sales




Net sales:
                               
 
Aggregates
  $ 347,050       100.0     $ 320,436       100.0  
 
Magnesia Specialties
    33,255       100.0       33,356       100.0  
     
     
     
     
 
   
Total
    380,305       100.0       353,792       100.0  
Gross profit:
                               
 
Aggregates
    88,711       25.6       91,692       28.6  
 
Magnesia Specialties
    6,715       20.2       7,969       23.9  
     
     
     
     
 
   
Total
    95,426       25.1       99,661       28.2  
Selling, general & administrative expense:
                               
 
Aggregates
    19,681       5.7       18,986       5.9  
 
Magnesia Specialties
    4,331       13.0       4,378       13.1  
     
     
     
     
 
   
Total
    24,012       6.3       23,364       6.6  
Earnings from operations:
                               
 
Aggregates
    68,955       19.9       72,631       22.7  
 
Magnesia Specialties
    1,889       5.7       2,981       8.9  
     
     
     
     
 
   
Total
  $ 70,844       18.6     $ 75,612       21.4  

(Continued)

Page 13 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine-Months Ended September 30, 2000 and 1999

                                     
Nine-Months Ended
September 30,

(Dollars in Thousands)
2000 1999


% of % of
Amount Net Sales Amount Net Sales




Net sales:
                               
 
Aggregates
  $ 919,720       100.0     $ 825,357       100.0  
 
Magnesia Specialties
    99,190       100.0       98,361       100.0  
     
     
     
     
 
   
Total
    1,018,910       100.0       923,718       100.0  
Gross profit:
                               
 
Aggregates
    215,149       23.4       210,643       25.5  
 
Magnesia Specialties
    21,467       21.6       18,987       19.3  
     
     
     
     
 
   
Total
    236,616       23.2       229,630       24.9  
Selling, general & administrative expense:
                               
 
Aggregates
    59,493       6.5       58,043       7.0  
 
Magnesia Specialties
    12,775       12.9       12,986       13.2  
     
     
     
     
 
   
Total
    72,268       7.1       71,029       7.7  
Earnings from operations:
                               
 
Aggregates
    155,413       16.9       152,262       18.4  
 
Magnesia Specialties
    7,152       7.2       4,225       4.3  
     
     
     
     
 
   
Total
  $ 162,565       16.0     $ 156,487       16.9  

(Continued)

Page 14 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine-Months Ended September 30, 2000 and 1999

      Other income and expenses, net, for the quarter ended September 30, was $1.7 million in income in 2000 compared with $2.2 million in income in 1999. In addition to several offsetting amounts, other income and expenses, net, are comprised generally of interest income, gains and losses associated with the disposition of certain assets, gains and losses related to certain amounts receivable, income from non-operating services, costs associated with the commercialization of certain new technologies, and net equity earnings from non-consolidated investments. Other income and expenses, net, for the nine-months ended September 30, was $6.8 million in income in 2000 and $16.3 million in income in 1999. In 2000, other income includes a nonrecurring insurance settlement related to Hurricane Floyd, while other income and expenses, net, in 1999, included a nonrecurring settlement from an antitrust claim.

      Interest expense was $10.7 million in the third quarter, compared to $9.8 million in the third quarter of 1999.

      The Corporation’s estimated effective income for the first nine months was 33.6% in 2000 and 35.3% in 1999. The reduction in the estimated effective tax rate to 33.6% reflects the benefit of better-than-anticipated percentage depletion from the Redland Stone acquisition, credit carry forwards on certain other acquisitions, as well as continued focus on appropriate tax minimization strategies. See Note 5 of the Notes to Condensed Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES  Net cash flow provided by operating activities during the nine-months ended September 30, 2000 was $155.4 million compared with $146.6 million in the comparable period of 1999. The cash flow for both 2000 and 1999 was principally from earnings, before deducting depreciation, depletion and amortization, offset by working capital requirements. Depreciation, depletion and amortization was as follows (amounts in thousands):

                                 
Three-Months Nine-Months
Ended Ended
September 30, September 30,


2000 1999 2000 1999




Depreciation
  $ 27.2     $ 24.8     $ 80.7     $ 72.3  
Depletion
    1.4       1.3       3.7       3.9  
Amortization
    5.9       4.7       17.0       13.7  
     
     
     
     
 
    $ 34.5     $ 30.8     $ 101.4     $ 89.9  
     
     
     
     
 

(Continued)

Page 15 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine-Months Ended September 30, 2000 and 1999

      The seasonal nature of the construction aggregates business impacts quarterly net cash provided by operating activities when compared with the year. Full year 1999 net cash provided by operating activities was $223.7 million, compared with $146.6 million provided by operations in the nine-months ended September 30, 1999.

      Nine-month capital expenditures, exclusive of acquisitions, were $117.9 million in 2000 and $102.7 million in 1999. Capital expenditures are expected to be approximately $175 million for 2000, exclusive of acquisitions. Comparable full-year capital expenditures were $137.8 million in 1999. During the first nine-months ended September 30, 2000, the Corporation spent $36.7 million for acquisitions in continuation of its expansion strategy.

      The Corporation continues to rely upon internally generated funds and access to capital markets, including 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, management has the authority to file a universal shelf registration statement with the Commission for up to $500 million in issuance of either debt or equity securities. 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. 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 2000. The Corporation will initially finance the acquisition of Meridian through its existing commercial paper program; however, the Corporation may access the public markets to reduce the increased amount of commercial paper obligations resulting from this transaction.

Page 16 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine-Months Ended September 30, 2000 and 1999

Further, the Corporation may be required to obtain additional levels of financing in order to fund certain strategic acquisitions, in addition to Meridian, 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-2” by Standard & Poor’s, “P-2” by Moody’s and “F-1” by Fitch-The International Rating Agency. The Corporation’s senior unsecured debt was downgraded from “A” to “A-” and its commercial paper obligations were lowered from “A-1” to “A-2” by Standards & Poor’s, as a result of the additional debt required to finance the acquisition of Meridian. Fitch-The International Rating Agency has placed the Corporation on Rating Watch Negative, also as a result of the pending Meridian acquisition. 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.

ACCOUNTING CHANGES  The accounting changes that currently impact the Corporation are included in Note 7 to the Condensed Consolidated Financial Statements.

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 Securities and Exchange Commission.

Page 17 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

PART II — OTHER INFORMATION

Item 1.  Legal Proceedings.

Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 1999.

Item 4.  Submission of Matters to Vote of Security Holders.

No matters were submitted to a vote of security holders during the third quarter of 2000.

Item 5.  Other Information.

On August 18, 2000, the Corporation announced that the Board of Directors had declared a regular quarterly cash dividend of $0.14 per share on the Corporation’s common stock. This dividend, which represents a cash payout of $0.56 per share on an annualized basis, was payable September 29, 2000, to shareholders of record at the close of business on September 30, 2000.

On August 24, 2000, the Corporation announced that it had made an additional investment in Industrial Microwave Systems, Inc. (IMS), as a part of Series C financing for this startup company, which is located in Morrisville, NC. IMS manufactures patented microwave systems for industrial drying and food processing applications.

On September 6, 2000, the Corporation announced that it will purchase the remaining interests of Meridian Aggregates Company under the purchase option terms of the original October, 1998 investment agreement. The purchase which is structured as an asset transaction and is expected to be completed in late 2000 or early 2001, will give the Corporation 100% ownership of Meridian.

On October 4, 2000, the Corporation announced that it expects operating earnings to be lower than the record 1999 earnings.

On October 17, 2000, the Corporation reported financial results for the third quarter and nine-months ended September 30, 2000.

Page 18 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

PART II — OTHER INFORMATION

(Continued)

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

         
Exhibit
 No. Document


  11.01     Martin Marietta Materials, Inc. and Consolidated Subsidiaries Computation of Earnings per Share for the Quarter ended September 30, 2000 and 1999
  27.01     Financial Data Schedule (for Securities and Exchange Commission use only)

Page 19 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

SIGNATURES

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

  MARTIN MARIETTA MATERIALS, INC.
 
  (Registrant)

Date: November 14, 2000

  By:     /s/ JANICE K. HENRY
 
  Janice K. Henry
  Senior Vice President and Chief
    Financial Officer

Page 20 of 21


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q
For the Quarter Ended September 30, 2000

EXHIBIT INDEX

         
Exhibit No. Document


  11.01     Martin Marietta Materials, Inc. and Consolidated Subsidiaries Computation of Earnings per Share for the Quarter Ended September 30, 2000 and 1999
  27.01     Financial Data Schedule (for Securities and Exchange Commission use only)

Page 21 of 21

1 Exhibit 11.01 MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE For the Quarter and Nine-Months Ended September 30, 2000 and 1999 (Dollars in Thousands, Except Per Share Data) Three-Months Ended Nine-Months Ended September 30, September 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net earnings $ 42,051 $ 43,951 $ 91,503 $ 93,164 =========== =========== =========== =========== Weighted average number of common shares outstanding: Basic earnings per share 46,763,155 46,677,260 46,746,598 46,665,751 Effect of dilutive securities 199,046 313,201 217,683 308,766 ----------- ----------- ----------- ----------- Diluted earnings per share 46,962,201 46,990,461 46,964,281 46,974,517 =========== =========== =========== =========== Net earnings per share - basic $ 0.90 $ 0.94 $ 1.96 $ 2.00 =========== =========== =========== =========== - diluted $ 0.90 $ 0.94 $ 1.95 $ 1.98 =========== =========== =========== ===========

  

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 5,355 0 236,059 4,916 192,381 463,511 1,764,517 873,222 1,854,288 216,577 601,313 0 0 468 848,132 1,854,288 1,018,910 1,018,910 782,294 856,345 (7,941) 1,097 31,500 137,909 46,406 91,503 0 0 0 91,503 1.96 1.95