mlm-10q_20180331.htm

 

 

 

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 March 31, 2018

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 May 2, 2018

Common Stock, $0.01 par value

 

62,951,453

 

 

 

 


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

 

 

Page

Part I. Financial Information:

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Consolidated Balance Sheets – March 31, 2018, December 31, 2017 and March 31, 2017

 

3

 

 

 

Consolidated Statements of Earnings and Comprehensive Earnings – Three-Months Ended March 31, 2018 and 2017

 

4

 

 

 

Consolidated Statements of Cash Flows – Three-Months Ended March 31, 2018 and 2017

 

5

 

 

 

Consolidated Statement of Total Equity – Three-Months Ended March 31, 2018

 

6

 

 

 

Notes to Consolidated Financial Statements

 

7

 

 

 

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

 

24

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

38

 

 

 

Item 4. Controls and Procedures

 

39

 

 

 

Part II. Other Information:

 

 

 

 

 

Item 1. Legal Proceedings

 

40

 

 

 

Item 1A. Risk Factors

 

40

 

 

 

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

 

40

 

 

 

Item 4. Mine Safety Disclosures

 

40

 

 

 

Item 6. Exhibits

 

41

 

 

 

Signatures

 

42

 

 

 

 

 

 

Page 2 of 42


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

2017

 

 

 

(Dollars in Thousands)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,422,373

 

 

$

1,446,364

 

 

$

55,418

 

Accounts receivable, net

 

 

466,465

 

 

 

487,240

 

 

 

479,215

 

Inventories, net

 

 

606,794

 

 

 

600,591

 

 

 

537,000

 

Other current assets

 

 

106,298

 

 

 

96,965

 

 

 

51,609

 

Total Current Assets

 

 

2,601,930

 

 

 

2,631,160

 

 

 

1,123,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

6,523,364

 

 

 

6,498,067

 

 

 

6,211,813

 

Allowances for depreciation, depletion and amortization

 

 

(2,940,870

)

 

 

(2,905,254

)

 

 

(2,744,168

)

Net property, plant and equipment

 

 

3,582,494

 

 

 

3,592,813

 

 

 

3,467,645

 

Goodwill

 

 

2,160,290

 

 

 

2,160,290

 

 

 

2,159,398

 

Operating permits, net

 

 

437,438

 

 

 

439,116

 

 

 

440,411

 

Other intangibles, net

 

 

61,338

 

 

 

67,233

 

 

 

67,318

 

Other noncurrent assets

 

 

104,560

 

 

 

101,899

 

 

 

135,777

 

Total Assets

 

$

8,948,050

 

 

$

8,992,511

 

 

$

7,393,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

162,328

 

 

$

183,638

 

 

$

188,399

 

Accrued salaries, benefits and payroll taxes

 

 

23,329

 

 

 

44,255

 

 

 

22,760

 

Pension and postretirement benefits

 

 

12,812

 

 

 

13,652

 

 

 

8,136

 

Accrued insurance and other taxes

 

 

52,413

 

 

 

64,958

 

 

 

49,535

 

Current maturities of long-term debt and short-term

   facilities

 

 

300,006

 

 

 

299,909

 

 

 

290,048

 

Accrued interest

 

 

39,720

 

 

 

19,825

 

 

 

23,649

 

Other current liabilities

 

 

60,371

 

 

 

67,979

 

 

 

49,031

 

Total Current Liabilities

 

 

650,979

 

 

 

694,216

 

 

 

631,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

2,728,102

 

 

 

2,727,294

 

 

 

1,556,246

 

Pension, postretirement and postemployment benefits

 

 

248,501

 

 

 

244,043

 

 

 

252,568

 

Deferred income taxes, net

 

 

413,570

 

 

 

410,723

 

 

 

667,160

 

Other noncurrent liabilities

 

 

227,068

 

 

 

233,758

 

 

 

210,305

 

Total Liabilities

 

 

4,268,220

 

 

 

4,310,034

 

 

 

3,317,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share

 

 

628

 

 

 

628

 

 

 

626

 

Preferred stock, par value $0.01 per share

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

3,381,280

 

 

 

3,368,007

 

 

 

3,349,813

 

Accumulated other comprehensive loss

 

 

(127,485

)

 

 

(129,104

)

 

 

(128,425

)

Retained earnings

 

 

1,422,207

 

 

 

1,440,069

 

 

 

851,354

 

Total Shareholders' Equity

 

 

4,676,630

 

 

 

4,679,600

 

 

 

4,073,368

 

Noncontrolling interests

 

 

3,200

 

 

 

2,877

 

 

 

2,586

 

Total Equity

 

 

4,679,830

 

 

 

4,682,477

 

 

 

4,075,954

 

Total Liabilities and Equity

 

$

8,948,050

 

 

$

8,992,511

 

 

$

7,393,791

 

 

See accompanying notes to the consolidated financial statements.

 

Page 3 of 42


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(In Thousands, Except Per Share Data)

 

 

 

 

 

Products and services revenues

 

$

753,305

 

 

$

792,316

 

Freight revenues

 

 

48,699

 

 

 

51,543

 

Total Revenues

 

 

802,004

 

 

 

843,859

 

 

 

 

 

 

 

 

 

 

Cost of revenues - products and services

 

 

641,620

 

 

 

644,617

 

Cost of revenues - freight

 

 

49,992

 

 

 

52,175

 

Total Cost of Revenues

 

 

691,612

 

 

 

696,792

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

110,392

 

 

 

147,067

 

 

 

 

 

 

 

 

 

 

Selling, general & administrative expenses

 

 

70,121

 

 

 

69,535

 

Acquisition-related expenses

 

 

711

 

 

 

22

 

Other operating expense, net

 

 

479

 

 

 

360

 

Earnings from Operations

 

 

39,081

 

 

 

77,150

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

35,087

 

 

 

20,851

 

Other nonoperating income, net

 

 

(8,503

)

 

 

(536

)

Earnings before income tax expense

 

 

12,497

 

 

 

56,835

 

Income tax expense

 

 

2,457

 

 

 

14,528

 

Consolidated net earnings

 

 

10,040

 

 

 

42,307

 

Less: Net earnings (loss) attributable to noncontrolling

   interests

 

 

17

 

 

 

(27

)

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

$

10,023

 

 

$

42,334

 

 

 

 

 

 

 

 

 

 

Consolidated Comprehensive Earnings:  (See Note 1)

 

 

 

 

 

 

 

 

Earnings attributable to Martin Marietta Materials, Inc.

 

$

11,642

 

 

$

44,596

 

Earnings (Loss) attributable to noncontrolling interests

 

 

17

 

 

 

(26

)

 

 

$

11,659

 

 

$

44,570

 

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

 

 

 

 

 

 

 

Per Common Share:

 

 

 

 

 

 

 

 

Basic attributable to common shareholders

 

$

0.16

 

 

$

0.67

 

Diluted attributable to common shareholders

 

$

0.16

 

 

$

0.67

 

 

 

 

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

62,957

 

 

 

63,024

 

Diluted

 

 

63,222

 

 

 

63,319

 

 

 

 

 

 

 

 

 

 

Cash Dividends Per Common Share

 

$

0.44

 

 

$

0.42

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 4 of 42


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Consolidated net earnings

 

$

10,040

 

 

$

42,307

 

Adjustments to reconcile consolidated net earnings to net cash

   provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

76,821

 

 

 

70,376

 

Stock-based compensation expense

 

 

9,760

 

 

 

10,275

 

(Gain) Loss on divestitures and sales of assets

 

 

(951

)

 

 

73

 

Deferred income taxes

 

 

2,029

 

 

 

2,827

 

Other items, net

 

 

(2,269

)

 

 

(179

)

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

   and divestitures:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

20,951

 

 

 

(21,305

)

Inventories, net

 

 

(8,873

)

 

 

(15,375

)

Accounts payable

 

 

7,925

 

 

 

8,536

 

Other assets and liabilities, net

 

 

(10,421

)

 

 

(23,670

)

Net Cash Provided by Operating Activities

 

 

105,012

 

 

 

73,865

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(96,259

)

 

 

(102,095

)

Proceeds from divestitures and sales of assets

 

 

2,528

 

 

 

539

 

Payment of railcar construction advances

 

 

(8,430

)

 

 

(37,011

)

Reimbursement of railcar construction advances

 

 

8,430

 

 

 

37,011

 

Investments in life insurance contracts, net

 

 

99

 

 

 

181

 

Net Cash Used for Investing Activities

 

 

(93,632

)

 

 

(101,375

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Borrowings of debt

 

 

 

 

 

205,000

 

Repayments of debt

 

 

(13

)

 

 

(45,012

)

Payments on capital lease obligations

 

 

(829

)

 

 

(761

)

Debt issuance costs

 

 

(3,194

)

 

 

 

Contributions by owners of noncontrolling interest

 

 

129

 

 

 

 

Dividends paid

 

 

(27,885

)

 

 

(26,560

)

Proceeds from exercise of stock options

 

 

2,801

 

 

 

3,917

 

Shares withheld for employees' income tax obligations

 

 

(6,380

)

 

 

(3,695

)

Repurchases of common stock

 

 

 

 

 

(99,999

)

Net Cash (Used for) Provided by Financing Activities

 

 

(35,371

)

 

 

32,890

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

(23,991

)

 

 

5,380

 

Cash and Cash Equivalents, beginning of period

 

 

1,446,364

 

 

 

50,038

 

Cash and Cash Equivalents, end of period

 

$

1,422,373

 

 

$

55,418

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 5 of 42


 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,334

 

 

 

42,334

 

 

 

(27

)

 

 

42,307

 

Other comprehensive earnings,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

2,262

 

 

 

 

 

 

2,262

 

 

 

1

 

 

 

2,263

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,560

)

 

 

(26,560

)

 

 

 

 

 

(26,560

)

Issuances of common stock for stock

   award plans

 

 

60

 

 

 

1

 

 

 

5,077

 

 

 

 

 

 

 

 

 

5,078

 

 

 

 

 

 

5,078

 

Repurchases of common stock

 

 

(458

)

 

 

(5

)

 

 

 

 

 

 

 

 

(99,994

)

 

 

(99,999

)

 

 

 

 

 

(99,999

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

10,275

 

 

 

 

 

 

 

 

 

10,275

 

 

 

 

 

 

10,275

 

Balance at March 31, 2017

 

 

62,778

 

 

$

626

 

 

$

3,349,813

 

 

$

(128,425

)

 

$

851,354

 

 

$

4,073,368

 

 

$

2,586

 

 

$

4,075,954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

 

62,873

 

 

$

628

 

 

$

3,368,007

 

 

$

(129,104

)

 

$

1,440,069

 

 

$

4,679,600

 

 

$

2,877

 

 

$

4,682,477

 

Consolidated net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,023

 

 

 

10,023

 

 

 

17

 

 

 

10,040

 

Other comprehensive earnings,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

1,619

 

 

 

 

 

 

1,619

 

 

 

 

 

 

1,619

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,885

)

 

 

(27,885

)

 

 

 

 

 

(27,885

)

Issuances of common stock for stock

   award plans

 

 

75

 

 

 

 

 

 

9,893

 

 

 

 

 

 

 

 

 

9,893

 

 

 

 

 

 

9,893

 

Shares withheld for employees' income

   tax obligations

 

 

 

 

 

 

 

 

(6,380

)

 

 

 

 

 

 

 

 

(6,380

)

 

 

 

 

 

(6,380

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

9,760

 

 

 

 

 

 

 

 

 

9,760

 

 

 

 

 

 

9,760

 

Contributions from owners of

   noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

306

 

 

 

306

 

Balance at March 31, 2018

 

 

62,948

 

 

$

628

 

 

$

3,381,280

 

 

$

(127,485

)

 

$

1,422,207

 

 

$

4,676,630

 

 

$

3,200

 

 

$

4,679,830

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

Page 6 of 42


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.

Significant Accounting Policies

Organization

Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. The Company supplies aggregates (crushed stone, sand and gravel) through its network of 282 quarries, mines and distribution yards to its customers in 30 states, Canada, the Bahamas and the Caribbean Islands.  In the western United States, Martin Marietta also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services, in vertically-integrated structured markets where the Company has a leading aggregates position.  The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects.  Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. The aggregates, cement, ready mixed concrete and asphalt and paving product lines are reported collectively as the “Building Materials” business.

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, Asphalt and Paving

The Company has a Magnesia Specialties business with manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. The Magnesia Specialties business produces magnesia-based chemicals products used in industrial, agricultural and environmental applications, and dolomitic lime sold primarily to customers in the steel and mining industries.

 

Page 7 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(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 (GAAP) 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 required 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, 2017. 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-months ended March 31, 2018 are not indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP 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, 2017.

New Accounting Pronouncements

Revenue from Contracts with Customers

Effective January 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which changes the evaluation and accounting for revenue recognition under contracts with customers and enhances financial statement disclosures.  The Company implemented ASU 2014-09 using the modified retrospective approach.  The adoption resulted in insignificant changes to the Company’s policies in reporting revenues and had an immaterial impact on the Company’s financial position and results of operations but required new disclosures (see Note 2).  

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments

Effective January 1, 2018, the Company adopted ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which provides clarification or additional guidance on certain transactions and its classification on the statement of cash flows on a retrospective basis.  Notably, ASU 2016-15 states settlement proceeds from corporate-owned life insurance policies should be classified as investing activities and premiums paid may be presented as either investing or operating activities or a combination of both.  At March 31, 2017, the Company reclassified $181,000 from operating activities to investing activities.  

 

Page 8 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued)

Pending Accounting Pronouncement

Lease Standard

In February 2016, the Financial Accounting Standards Board (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.  The FASB recently proposed to eliminate the need for retrospective presentation of comparative financial statements and to allow the use of certain practical expedients in the adoption of the new standard.  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.

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

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Net earnings attributable to Martin Marietta Materials, Inc.

 

$

10,023

 

 

$

42,334

 

Other comprehensive earnings, net of tax

 

 

1,619

 

 

 

2,262

 

Comprehensive earnings attributable to Martin Marietta

   Materials, Inc.

 

$

11,642

 

 

$

44,596

 

 

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

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Net earnings (loss) attributable to noncontrolling interests

 

$

17

 

 

$

(27

)

Other comprehensive earnings, net of tax

 

 

 

 

 

1

 

Comprehensive earnings (loss) attributable to

   noncontrolling interests

 

$

17

 

 

$

(26

)

 

 

Page 9 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(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 March 31, 2018

 

Balance at beginning of period

 

$

(128,802

)

 

$

(22

)

 

$

(280

)

 

$

(129,104

)

Other comprehensive loss before

   reclassifications, net of tax

 

 

 

 

 

(587

)

 

 

 

 

 

(587

)

Amounts reclassified from accumulated

   other comprehensive earnings, net of tax

 

 

1,996

 

 

 

 

 

 

210

 

 

 

2,206

 

Other comprehensive earnings (loss), net of tax

 

 

1,996

 

 

 

(587

)

 

 

210

 

 

 

1,619

 

Balance at end of period

 

$

(126,806

)

 

$

(609

)

 

$

(70

)

 

$

(127,485

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended March 31, 2017

 

Balance at beginning of period

 

$

(128,373

)

 

$

(1,162

)

 

$

(1,152

)

 

$

(130,687

)

Other comprehensive earnings before

   reclassifications, net of tax

 

 

 

 

 

137

 

 

 

 

 

 

137

 

Amounts reclassified from accumulated

   other comprehensive earnings, net of tax

 

 

1,910

 

 

 

 

 

 

215

 

 

 

2,125

 

Other comprehensive earnings, net of tax

 

 

1,910

 

 

 

137

 

 

 

215

 

 

 

2,262

 

Balance at end of period

 

$

(126,463

)

 

$

(1,025

)

 

$

(937

)

 

$

(128,425

)

 

 

Page 10 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued)

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

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

 

 

 

(Dollars in Thousands)

 

 

 

Pension and

Postretirement

Benefit Plans

 

 

Unamortized

Value of

Terminated

Forward Starting

Interest Rate

Swap

 

 

Net Noncurrent

Deferred Tax

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended March 31, 2018

 

Balance at beginning of period

 

$

79,938

 

 

$

178

 

 

$

80,116

 

Tax effect of other comprehensive earnings

 

 

(658

)

 

 

(137

)

 

 

(795

)

Balance at end of period

 

$

79,280

 

 

$

41

 

 

$

79,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended March 31, 2017

 

Balance at beginning of period

 

$

82,044

 

 

$

749

 

 

$

82,793

 

Tax effect of other comprehensive earnings

 

 

(1,185

)

 

 

(141

)

 

 

(1,326

)

Balance at end of period

 

$

80,859

 

 

$

608

 

 

$

81,467

 

 

Page 11 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued)

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

Reclassifications out of accumulated other comprehensive loss are as follows:

 

 

 

Three-Months Ended

 

Affected line items in the consolidated

 

 

March 31,

 

statements of earnings and

 

 

2018

 

 

2017

 

comprehensive earnings

 

 

(Dollars in Thousands)

 

 

Pension and postretirement benefit plans

 

 

 

 

 

 

 

 

 

Amortization of:

 

 

 

 

 

 

 

 

 

Prior service credit

 

$

(585

)

 

$

(357

)

 

Actuarial loss

 

 

3,239

 

 

 

3,452

 

 

 

 

 

2,654

 

 

 

3,095

 

Other nonoperating income, net

Tax benefit

 

 

(658

)

 

 

(1,185

)

Income tax expense

 

 

$

1,996

 

 

$

1,910

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized value of terminated

   forward starting interest rate swap

 

 

 

 

 

 

 

 

 

Additional interest expense

 

$

347

 

 

$

356

 

Interest expense

Tax benefit

 

 

(137

)

 

 

(141

)

Income tax expense

 

 

$

210

 

 

$

215

 

 

Earnings per Common Share

The numerator for basic and diluted earnings per common share is net earnings attributable to Martin Marietta Materials, Inc. reduced by dividends and undistributed earnings attributable to certain of the Company’s stock-based compensation. If there is a net loss, no amount of the undistributed loss is attributed to unvested participating securities. The denominator for basic earnings per common share is the weighted-average number of common shares outstanding during the period. Diluted earnings per common share are computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards to be issued to employees and nonemployee members of the Company’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive. For the three-months ended March 31, 2018 and 2017, the diluted per-share computations reflect the number of common shares outstanding to include the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued.

 

 

Page 12 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

1.

Significant Accounting Policies (continued)

Earnings per Common Share

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

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(In Thousands)

 

Net earnings attributable to Martin Marietta Materials, Inc.

 

$

10,023

 

 

$

42,334

 

Less: Distributed and undistributed earnings

   attributable to unvested awards

 

 

63

 

 

 

153

 

Basic and diluted net earnings available to common shareholders

   attributable to Martin Marietta Materials, Inc.

 

$

9,960

 

 

$

42,181

 

 

 

 

 

 

 

 

 

 

Basic weighted-average common shares outstanding

 

 

62,957

 

 

 

63,024

 

Effect of dilutive employee and director awards

 

 

265

 

 

 

295

 

Diluted weighted-average common shares outstanding

 

 

63,222

 

 

 

63,319

 

 

2.

Revenue Recognition

Total revenues include sales of products and services to customers, net of any discounts or allowances, and freight revenues.  Product revenues are recognized when control of the promised good is transferred to the customer, typically when finished products are shipped. Intersegment and interproduct revenues are eliminated in consolidation. Service revenues are derived from the paving business and recognized using the percentage-of-completion method under the revenue-cost approach. Under the revenue-cost approach, recognized contract revenue is determined by multiplying the total estimated contract revenue by the estimated percentage of completion. Contract costs are recognized as incurred. The percentage of completion is determined on a contract-by-contract basis using project costs incurred to date as a percentage of total estimated project costs. The Company believes the revenue-cost approach is appropriate as the use of asphalt in a paving contract is relatively consistent with the performance of the paving service. Paving contracts, notably with governmental entities, may contain performance bonuses based on quality specifications. Given the uncertainty of meeting the criteria until the performance obligation is completed, performance bonuses are recognized as revenues when and if determined to be achieved. Performance bonuses are not material to the Company’s consolidated results of operations for the three-months ended March 31, 2018 and 2017.  Freight revenues reflect delivery arranged by the Company using a third party on behalf of the customer and are recognized consistent with the timing of the product revenues.  

Performance Obligations. Performance obligations are contractual promises to transfer or provide a distinct good or service for a stated price.  The Company’s product sales agreements are single-performance obligations that are satisfied at a point in time.  Performance obligations within paving service agreements are satisfied over time, primarily ranging from one day to 20 months. For product revenues and freight revenues, customer payment terms are generally 30 days from invoice date. Customer payments for the paving operations are based on a contractual billing schedule and are due 30 days from invoice date.

 

Page 13 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

2.Revenue Recognition (continued)

Future revenues from unsatisfied performance obligations at March 31, 2018 and 2017 were $88,054,000 and $145,921,000, respectively, where the remaining periods to complete these obligations ranged from one day to 20 months and one day to 11 months, respectively.  

Sales Taxes. The Company is deemed to be an agent when collecting sales taxes from customers.  Sales taxes collected are initially recorded as liabilities until remitted to taxing authorities and are not reflected in the consolidated statements of earnings as revenues and expenses.

Revenue by Category. The following table presents the Company’s total revenues by category for each reportable segment:

 

 

 

Three-Months Ended

 

 

 

March 31, 2018

 

(Dollars in Thousands)

 

Products and Services

 

Freight

 

Total

 

Mid-America Group

 

$

167,890

 

$

10,891

 

$

178,781

 

Southeast Group

 

 

77,563

 

 

2,676

 

 

80,239

 

West Group

 

 

442,983

 

 

30,739

 

 

473,722

 

Total Building Materials Business

 

 

688,436

 

 

44,306

 

 

732,742

 

Magnesia Specialties

 

 

64,869

 

 

4,393

 

 

69,262

 

Total

 

$

753,305

 

$

48,699

 

$

802,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

 

 

March 31, 2017

 

(Dollars in Thousands)

 

Products and Services

 

Freight

 

Total

 

Mid-America Group

 

$

177,407

 

$

11,612

 

$

189,019

 

Southeast Group

 

 

86,726

 

 

3,556

 

 

90,282

 

West Group

 

 

463,881

 

 

32,100

 

 

495,981

 

Total Building Materials Business

 

 

728,014

 

 

47,268

 

 

775,282

 

Magnesia Specialties

 

 

64,302

 

 

4,275

 

 

68,577

 

Total

 

$

792,316

 

$

51,543

 

$

843,859

 

 

Service revenues, which includes paving operations located in Colorado, were $11,143,000 and $16,000,000 for the three-months ended March 31, 2018 and 2017, respectively.

 

Page 14 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

2.Revenue Recognition (continued)

Contract Balances. Costs in excess of billings relate to the conditional right to consideration for completed contractual performance and are contract assets on the consolidated balance sheets. Costs in excess of billings are reclassified to accounts receivable when the right to consideration becomes unconditional. Billings in excess of costs relate to customers invoiced in advance of contractual performance and are contract liabilities on the consolidated balance sheets. The following table presents information about the Company’s contract balances:

(Dollars in Thousands)

 

March 31,

2018

 

December 31, 2017

 

March 31,

2017

 

Costs in excess of billings

 

$

2,827

 

$

1,310

 

$

1,815

 

Billings in excess of costs

 

$

6,136

 

$

7,204

 

$

5,953

 

 

Revenue recognized from beginning balance of contract liabilities for the three-months ended March 31, 2018 and 2017 were $4,199,000 and $3,835,000, respectively.

Retainage represents amounts that have been billed to customers but payment withheld until final acceptance of the performance obligation by the customer.  Included on the Company’s consolidated balance sheets, retainage was $4,824,000, $9,029,000 and $5,759,000 at March 31, 2018, December 31, 2017 and March 31, 2017, respectively.

Warranties. The Company’s construction contracts contain warranty provisions generally for a period of nine months to one year after project completion and cover materials, design or workmanship defects. Historically, the Company has not experienced material costs for warranties. The ready mixed concrete product line carries longer warranty periods, for which the Company has accrued an estimate of warranty cost based on experience with the type of work and any known risks relative to the project. In total, warranty costs were not material to the Company’s consolidated results of operations for the three-months ended March 31, 2018 and 2017.

Policy Elections. When the Company arranges third party freight to deliver products to customers, the Company has elected the delivery to be a fulfillment activity rather than a separate performance obligation.  Further, the Company acts as a principal in the delivery arrangements and the related revenues and costs are included in the consolidated statements of earnings.

3.

Inventories, Net

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

2017

 

 

 

(Dollars in Thousands)

 

Finished products

 

$

563,315

 

 

$

552,999

 

 

$

495,793

 

Products in process and raw materials

 

 

62,857

 

 

 

62,761

 

 

 

61,815

 

Supplies and expendable parts

 

 

128,754

 

 

 

128,792

 

 

 

120,054

 

 

 

 

754,926

 

 

 

744,552

 

 

 

677,662

 

Less: Allowances

 

 

(148,132

)

 

 

(143,961

)

 

 

(140,662

)

Total

 

$

606,794

 

 

$

600,591

 

 

$

537,000

 

 

 

Page 15 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

4.

Long-Term Debt

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

2017

 

 

 

(Dollars in Thousands)

 

6.60% Senior Notes, due 2018

 

$

299,967

 

 

$

299,871

 

 

$

299,579

 

7% Debentures, due 2025

 

 

124,203

 

 

 

124,180

 

 

 

124,112

 

6.25% Senior Notes, due 2037

 

 

228,048

 

 

 

228,033

 

 

 

227,989

 

4.25% Senior Notes, due 2024

 

 

395,959

 

 

 

395,814

 

 

 

395,392

 

4.250% Senior Notes, due 2047

 

 

591,416

 

 

 

591,688

 

 

 

 

3.500% Senior Notes, due 2027

 

 

494,402

 

 

 

494,352

 

 

 

 

3.450% Senior Notes, due 2027

 

 

296,705

 

 

 

296,628

 

 

 

 

Floating Rate Senior Notes, due 2019, interest rate of 2.70%

   and 2.13% at March 31, 2018 and December 31, 2017,

   respectively

 

 

298,704

 

 

 

298,102

 

 

 

 

Floating Rate Notes, due 2020, interest rate of 2.55% and 2.10%

   at March 31, 2018 and December 31, 2017, respectively

 

 

298,408

 

 

 

298,227

 

 

 

 

Floating Rate Notes, due 2017, interest rate of 2.10% at

   March 31, 2017

 

 

 

 

 

 

 

 

298,878

 

Revolving Facility, due 2022, interest rate of 1.89% at March 31,

   2017

 

 

 

 

 

 

 

 

210,000

 

Trade Receivable Facility, interest rate of 1.51% at March 31,

   2017

 

 

 

 

 

 

 

 

290,000

 

Other notes

 

 

296

 

 

 

308

 

 

 

344

 

Total debt

 

 

3,028,108

 

 

 

3,027,203

 

 

 

1,846,294

 

Less: Current maturities of long-term debt and short-term

   facilities

 

 

(300,006

)

 

 

(299,909

)

 

 

(290,048

)

Long-term debt

 

$

2,728,102

 

 

$

2,727,294

 

 

$

1,556,246

 

 

The Company, through a wholly-owned special-purpose subsidiary, has a $300,000,000 trade receivable securitization facility (the Trade Receivable Facility) that is scheduled to mature September 26, 2018.  The Trade Receivable Facility, with SunTrust Bank, Regions Bank, PNC Bank, N.A., The Bank of Tokyo-Mitsubishi UFJ, LTD., New York Branch, and certain other lenders that may become a party to the facility from time to time, is backed by eligible trade receivables, as defined, and is limited to the lesser of the facility limit or the borrowing base, as defined, of $349,283,000, $338,784,000 and $362,693,000 at March 31, 2018, December 31, 2017 and March 31, 2017, respectively.  These receivables are originated by the Company and then sold to the wholly-owned special-purpose subsidiary by the Company.  The Company continues to be responsible for the servicing and administration of the receivables purchased by the wholly-owned special-purpose subsidiary.  Borrowings under the Trade Receivable Facility bear interest at a rate equal to one-month London Inter-bank Offered Rate, or LIBOR, plus 0.725%, subject to change in the event that this rate no longer reflects the lender’s cost of lending.  The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements.

 

Page 16 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

4.

Long-Term Debt (continued)

The Company has a $700,000,000 five-year senior unsecured revolving facility (the Revolving Facility) with JPMorgan Chase Bank, N.A., as Administrative Agent, Branch Banking and Trust Company (BB&T), Deutsche Bank Securities, Inc., SunTrust Bank and Wells Fargo Bank, N.A., as Co-Syndication Agents, and the lenders party thereto.  The Revolving Facility requires the Company’s ratio of consolidated debt-to-consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), as defined by the Revolving Facility, for the trailing-twelve months (the Ratio) to not exceed 3.50x as of the end of any fiscal quarter, provided that the Company may exclude from the Ratio debt incurred in connection with certain acquisitions during such quarter or the three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 3.75x. Additionally, if no amounts are outstanding under both the Revolving Facility and the Trade Receivable Facility, consolidated debt, including debt for which the Company is a co-borrower, may be reduced by the Company’s unrestricted cash and cash equivalents in excess of $50,000,000, such reduction not to exceed $200,000,000, for purposes of the covenant calculation.  The Company was in compliance with this Ratio at March 31, 2018.

Available borrowings under the Revolving Facility are reduced by any outstanding letters of credit issued by the Company under the Revolving Facility.  The Company had $2,301,000 of outstanding letters of credit issued under the Revolving Facility at March 31, 2018 and December 31, 2017 and $2,507,000 at March 31, 2017.

Accumulated other comprehensive loss includes the unamortized value of terminated forward starting interest rate swap agreements. For the three-months ended March 31, 2018 and 2017, the Company recognized $347,000 and $356,000, respectively, as additional interest expense. The amortization of the terminated value of the forward starting interest rate swap agreements will be complete with the maturity of the related debt in April 2018.

5.

Financial Instruments

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

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

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

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

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

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

 

Page 17 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

5.

Financial Instruments (continued)

The carrying values and fair values of the Company’s long-term debt were $3,028,108,000 and $3,037,069,000, respectively, at March 31, 2018; $3,027,203,000 and $3,144,902,000, respectively, at December 31, 2017; and $1,846,294,000 and $1,937,310,000, respectively, at March 31, 2017. The estimated fair value of the publicly-registered long-term notes was estimated based on Level 1 of the fair value hierarchy using quoted market prices. The estimated fair value of other borrowings, which primarily represents variable-rate debt, was based on Level 2 of the fair value hierarchy using quoted market prices for similar debt instruments, and approximates their carrying amounts as the interest rates reset periodically.  

6.

Income Taxes

The Company’s effective income tax rate for the three-months ended March 31, 2018 was 19.7%.  The effective income tax rate reflects the effect of federal and state income taxes and the impact of differences in book and tax accounting arising from the net permanent benefits associated with the statutory depletion deduction for mineral reserves.  For the three-months ended March 31, 2018, the effective income tax rate also reflects two discrete events: a favorable impact of $1,325,000, or 1,060 basis points, related to the vesting and exercise of stock-based compensation awards and an unfavorable impact of $1,097,000, or 880 basis points, related to an estimate of the transition tax on undistributed foreign earnings, a provision of the Tax Cuts and Jobs Act of 2017 (2017 Tax Act). The enactment of the 2017 Tax Act reduced the federal statutory corporate income tax rate from 35% to 21% beginning in 2018.  Therefore, the effective income tax rate of 25.6% for the three-months ended March 31, 2017 is not comparable.

The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118) to address situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act.  As such, due to the timing of the enactment date and the Company’s reporting periods, the Company recognized provisional amounts for the remeasurement of deferred tax assets and liabilities as of December 31, 2017 and transition tax on undistributed foreign earnings as of March 31, 2018, and continues to analyze and assess other provisions of the 2017 Tax Act.  In accordance with SAB 118, the Company may record additional provisional amounts during the measurement period not to extend beyond one year of the enactment date and expects the accounting to be complete when the Company’s 2017 U.S. corporate income tax return is filed in 2018. Any future measurement period adjustments will be recognized as income tax expense or benefit in 2018.

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

 

Page 18 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

7.

Pension and Postretirement Benefits

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

 

 

 

Three-Months Ended March 31,

 

 

 

Pension

 

 

Postretirement Benefits

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Service cost

 

$

8,148

 

 

$

6,572

 

 

$

22

 

 

$

24

 

Interest cost

 

 

8,361

 

 

 

9,008

 

 

 

125

 

 

 

185

 

Expected return on assets

 

 

(10,629

)

 

 

(9,936

)

 

 

 

 

 

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost (credit)

 

 

26

 

 

 

78

 

 

 

(611

)

 

 

(435

)

Actuarial loss (gain)

 

 

3,296

 

 

 

3,524

 

 

 

(57

)

 

 

(72

)

Net periodic benefit cost (credit)

 

$

9,202

 

 

$

9,246

 

 

$

(521

)

 

$

(298

)

 

The service cost component of net periodic benefit cost (credit) is included in cost of revenues – products and services and selling, general and administrative expenses while all other components are included in other nonoperating income, net, in the consolidated statements of earnings and comprehensive earnings.

 

8.

Commitments and Contingencies

Legal and Administrative Proceedings

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

Borrowing Arrangements with Affiliate

The Company is a co-borrower with an unconsolidated affiliate for a $15,500,000 revolving line of credit agreement with BB&T with a maturity date of March 2020. The affiliate has agreed to reimburse and indemnify the Company for any payments and expenses the Company may incur from this agreement. The Company holds a lien on the affiliate’s membership interest in a joint venture as collateral for payment under the revolving line of credit.

In addition, the Company has a $6,000,000 interest-only loan, due December 31, 2019, outstanding from this unconsolidated affiliate as of March 31, 2018, December 31, 2017 and March 31, 2017.  The interest rate is one-month LIBOR plus 1.75%.

 

Page 19 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

9.

Business Segments

The Building Materials business contains three reportable business segments: Mid-America Group, Southeast Group and West Group. The Company also has a Magnesia Specialties segment.  The Company’s evaluation of performance and allocation of resources are based primarily on earnings from operations. Consolidated earnings from operations include total revenues less cost of revenues, selling, general and administrative expenses, acquisition-related expenses, other operating income and expenses, net, and exclude interest expense, other nonoperating income and expenses, net, and taxes on income. Corporate loss from operations primarily includes depreciation on capitalized interest, unallocated expenses for corporate administrative functions, acquisition-related expenses, and other nonrecurring income and expenses excluded from the Company’s evaluation of business segment performance and resource allocation. All debt and related interest expense is held at Corporate.

The following table displays selected financial data for the Company’s reportable business segments. Total revenues, as well as the consolidated statements of earnings and comprehensive earnings, exclude intersegment revenues which represent sales from one segment to another segment, which are eliminated. Prior-year information has been reclassified to conform to current year revenue presentation.  

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Total revenues:

 

 

 

 

 

 

 

 

Mid-America Group

 

$

178,781

 

 

$

189,019

 

Southeast Group

 

 

80,239

 

 

 

90,282

 

West Group

 

 

473,722

 

 

 

495,981

 

Total Building Materials Business

 

 

732,742

 

 

 

775,282

 

Magnesia Specialties

 

 

69,262

 

 

 

68,577

 

Total

 

$

802,004

 

 

$

843,859

 

 

 

 

 

 

 

 

 

 

Products and services revenues:

 

 

 

 

 

 

 

 

Mid-America Group

 

$

167,890

 

 

$

177,407

 

Southeast Group

 

 

77,563

 

 

 

86,726

 

West Group

 

 

442,983

 

 

 

463,881

 

Total Building Materials Business

 

 

688,436

 

 

 

728,014

 

Magnesia Specialties

 

 

64,869

 

 

 

64,302

 

Total

 

$

753,305

 

 

$

792,316

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) from operations:

 

 

 

 

 

 

 

 

Mid-America Group

 

$

6,167

 

 

$

13,342

 

Southeast Group

 

 

2,041

 

 

 

10,115

 

West Group

 

 

34,951

 

 

 

61,232

 

Total Building Materials Business

 

 

43,159

 

 

 

84,689

 

Magnesia Specialties

 

 

21,237

 

 

 

19,881

 

Corporate

 

 

(25,315

)

 

 

(27,420

)

Total

 

$

39,081

 

 

$

77,150

 

 

 

Page 20 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

10.

Revenues and Gross Profit

The Building Materials business includes the aggregates, cement, ready mixed concrete and asphalt and paving product lines. All cement, ready mixed concrete and asphalt and paving product lines reside in the West Group. The following table, which is reconciled to consolidated amounts, provides total revenues and gross profit by product line.  

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Total revenues:

 

 

 

 

 

 

 

 

Building Materials Business:

 

 

 

 

 

 

 

 

Products and services:

 

 

 

 

 

 

 

 

Aggregates

 

$

425,016

 

 

$

451,055

 

Cement

 

 

89,183

 

 

 

93,554

 

Ready mixed concrete

 

 

218,537

 

 

 

222,378

 

Asphalt and paving services

 

 

16,365

 

 

 

21,737

 

Less: interproduct revenues

 

 

(60,665

)

 

 

(60,710

)

Products and services

 

 

688,436

 

 

 

728,014

 

Freight

 

 

44,306

 

 

 

47,268

 

Total Building Materials Business

 

 

732,742

 

 

 

775,282

 

Magnesia Specialties:

 

 

 

 

 

 

 

 

Products and services

 

 

64,869

 

 

 

64,302

 

Freight

 

 

4,393

 

 

 

4,275

 

Total Magnesia Specialties

 

 

69,262

 

 

 

68,577

 

Total

 

$

802,004

 

 

$

843,859

 

 

 

 

 

 

 

 

 

 

Gross profit (loss):

 

 

 

 

 

 

 

 

Building Materials Business:

 

 

 

 

 

 

 

 

Products and services:

 

 

 

 

 

 

 

 

Aggregates

 

$

53,002

 

 

$

78,954

 

Cement

 

 

23,734

 

 

 

30,780

 

Ready mixed concrete

 

 

15,641

 

 

 

19,790

 

Asphalt and paving services

 

 

(7,639

)

 

 

(4,740

)

Products and services

 

 

84,738

 

 

 

124,784

 

Freight

 

 

(119

)

 

 

407

 

Total Building Materials Business

 

 

84,619

 

 

 

125,191

 

Magnesia Specialties:

 

 

 

 

 

 

 

 

Products and services

 

 

25,063

 

 

 

23,354

 

Freight

 

 

(1,174

)

 

 

(1,039

)

Total Magnesia Specialties

 

 

23,889

 

 

 

22,315

 

Corporate

 

 

1,884

 

 

 

(439

)

Total

 

$

110,392

 

 

$

147,067

 

 

Page 21 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

 

11.

Supplemental Cash Flow Information

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

 

 

 

 

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Other current and noncurrent assets

 

$

(9,032

)

 

$

(22,914

)

Accrued salaries, benefits and payroll taxes

 

 

(13,833

)

 

 

(21,335

)

Accrued insurance and other taxes

 

 

(12,545

)

 

 

(10,557

)

Accrued income taxes

 

 

7,357

 

 

 

3,330

 

Accrued pension, postretirement and postemployment benefits

 

 

6,273

 

 

 

6,421

 

Other current and noncurrent liabilities

 

 

11,359

 

 

 

21,385

 

 

 

$

(10,421

)

 

$

(23,670

)

 

Noncash investing and financing activities are as follows:

 

 

 

 

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Accrued liabilities for purchases of property, plant and equipment

 

$

35,639

 

 

$

34,666

 

Acquisition of assets through capital lease

 

$

192

 

 

$

149

 

 

Supplemental disclosures of cash flow information are as follows:

 

 

 

 

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Cash paid for interest

 

$

12,458

 

 

$

12,216

 

Cash (refund of) paid for income taxes

 

$

(7,527

)

 

$

6,240

 

 

 

Page 22 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

12.

Subsequent Events

Debt Repayment

The Company repaid the $300,000,000 of 6.60% Senior Notes with cash on hand on April 16, 2018, the maturity date.

Facility Limit Increase

On April 17, 2018, the Company and its wholly-owned subsidiary amended its Trade Receivable Facility to increase the facility limit to $400,000,000.

Bluegrass Acquisition

On April 27, 2018, the Company successfully completed its previously announced acquisition of Bluegrass Materials Company (Bluegrass), the largest privately-held, pure-play aggregates company in the United States, for $1,625,000,000 in cash.  Bluegrass’ operations include 23 active sites with more than 125 years of strategically-located, high-quality reserves, in Georgia, South Carolina, Tennessee, Maryland, Kentucky and Pennsylvania.  These operations complement the Company’s existing southeastern footprint and provides a new growth platform within the southern portion of the Northeast Megaregion.  The Company reached an agreement with the U.S. Department of Justice (DOJ), approved by the district court for the District of Columbia, which resolves all competition issues with respect to the acquisition.  Under the terms of the agreement with the DOJ, Martin Marietta divested its Forsyth aggregates quarry north of Atlanta, Georgia, and will divest Bluegrass’ Beaver Creek aggregates quarry in western Maryland.  

The acquisition reflects a stock transaction where the Company acquired 100% of the voting interest.  The Company acquired accounts receivable; inventories; property, plant and equipment; intangible assets; prepaid and other assets; and assumed accounts payable; accrued liabilities and deferred tax assets and liabilities.  The Company did not acquire any of Bluegrass’ cash and cash equivalents nor did it assume any of Bluegrass’ outstanding debt.  The Company is in the process of determining the fair value of assets acquired and liabilities assumed, and as of May 8, 2018, the initial accounting for the business combination has not been completed.  

 

 

Page 23 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

 

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

OVERVIEW

Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. The Company supplies aggregates (crushed stone, sand and gravel) through its network of 282 quarries, mines and distribution yards to its customers in 30 states, Canada, the Bahamas and the Caribbean Islands.  In the western United States, Martin Marietta also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services, in vertically-integrated structured markets where the Company has a leading aggregates position.  The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects.  Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. The aggregates, cement, ready mixed concrete and asphalt and paving product lines are reported collectively as the “Building Materials” business.

The Company conducts its Building Materials business through three reportable business segments: Mid-America Group, Southeast Group and 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, Asphalt and Paving

 

 

 

 

Plant Types

  

Quarries, Mines and Distribution Facilities

  

Quarries, Mines and Distribution Facilities

  

Quarries, Mines, Plants and

Distribution Facilities

 

 

 

 

Modes of Transportation

  

Truck and Railcar

  

Truck, Railcar and Water

  

Truck and Railcar

 

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

CRITICAL ACCOUNTING POLICIES

The Company outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2017. There were no changes to the Company’s critical accounting policies during the three-months ended March 31, 2018.

 

Page 24 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

RESULTS OF OPERATIONS

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

Earnings before interest, income taxes, depreciation and amortization (EBITDA) is a widely accepted financial indicator of a company’s ability to service and/or incur indebtedness.  EBITDA is not defined by generally accepted accounting principles and, as such, should not be construed as an alternative to net earnings, operating earnings or operating cash flow.  However, the Company’s management believes that EBITDA may provide additional information with respect to the Company’s performance or ability to meet its future debt service, capital expenditures or working capital requirements.  Because EBITDA excludes some, but not all, items that affect net earnings and may vary among companies, EBITDA presented by the Company may not be comparable to similarly titled measures of other companies.

A reconciliation of net earnings attributable to Martin Marietta Materials, Inc. to consolidated EBITDA is as follows:

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in thousands)

 

Net Earnings Attributable to Martin Marietta Materials, Inc.

 

$

10,023

 

 

$

42,334

 

Add back:

 

 

 

 

 

 

 

 

Interest expense

 

 

35,087

 

 

 

20,851

 

Income tax expense for controlling interests

 

 

2,438

 

 

 

14,522

 

Depreciation, depletion and amortization expense

 

 

75,714

 

 

 

70,007

 

Consolidated EBITDA

 

$

123,262

 

 

$

147,714

 

 

Page 25 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

Significant items for the quarter ended March 31, 2018 (unless noted, all comparisons are versus the prior-year quarter):

 

Consolidated total revenues of $802.0 million compared with $843.9 million

 

Building Materials business products and services revenues of $688.4 million compared with $728.0 million and Magnesia Specialties product revenues of $64.9 million compared with $64.3 million

 

Consolidated gross profit of $110.4 compared with $147.1 million

 

Consolidated earnings from operations of $39.1 million compared with $77.2 million

 

Net earnings attributable to Martin Marietta of $10.0 million compared with $42.3 million

 

EBITDA of $123.3 million compared with $147.7 million

 

Earnings per diluted share of $0.16 compared with $0.67

The following table presents total revenues, gross profit (loss), selling, general and administrative expenses and earnings (loss) from operations data for the Company and its reportable segments for the three-months ended March 31, 2018 and 2017. In each case, the data is stated as a percentage of total revenues of the Company or the relevant segment, as the case may be. Prior-year information has been reclassified to conform to current year revenue presentation.

 

 

 

Three-Months Ended March 31,

 

 

 

2018

 

 

2017

 

 

 

Amount

 

 

% of Total Revenues

 

 

Amount

 

 

% of Total Revenues

 

 

 

(Dollars in Thousands)

 

Total revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building Materials Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

178,781

 

 

 

100.0

 

 

$

189,019

 

 

 

100.0

 

Southeast Group

 

 

80,239

 

 

 

100.0

 

 

 

90,282

 

 

 

100.0

 

West Group

 

 

473,722

 

 

 

100.0

 

 

 

495,981

 

 

 

100.0

 

Total Building Materials Business

 

 

732,742

 

 

 

100.0

 

 

 

775,282

 

 

 

100.0

 

Magnesia Specialties

 

 

69,262

 

 

 

100.0

 

 

 

68,577

 

 

 

100.0

 

Total

 

$

802,004

 

 

 

100.0

 

 

$

843,859

 

 

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 26 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

 

 

Three-Months Ended March 31,

 

 

 

2018

 

 

2017

 

 

 

Amount

 

 

% of Total Revenues

 

 

Amount

 

 

% of Total Revenues

 

 

 

(Dollars in Thousands)

 

Gross profit (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building Materials Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

18,255

 

 

 

10.2

 

 

$

26,285

 

 

 

13.9

 

Southeast Group

 

 

6,167

 

 

 

7.7

 

 

 

14,369

 

 

 

15.9

 

West Group

 

 

60,197

 

 

 

12.7

 

 

 

84,537

 

 

 

17.0

 

Total Building Materials Business

 

 

84,619

 

 

 

11.5

 

 

 

125,191

 

 

 

16.1

 

Magnesia Specialties

 

 

23,889

 

 

 

34.5

 

 

 

22,315

 

 

 

32.5

 

Corporate

 

 

1,884

 

 

 

 

 

 

 

(439

)

 

 

 

 

Total

 

$

110,392

 

 

 

13.8

 

 

$

147,067

 

 

 

17.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general & administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building Materials Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

13,130

 

 

 

7.3

 

 

$

13,544

 

 

 

7.2

 

Southeast Group

 

 

4,416

 

 

 

5.5

 

 

 

4,352

 

 

 

4.8

 

West Group

 

 

26,132

 

 

 

5.5

 

 

 

25,074

 

 

 

5.1

 

Total Building Materials Business

 

 

43,678

 

 

 

6.0

 

 

 

42,970

 

 

 

5.5

 

Magnesia Specialties

 

 

2,602

 

 

 

3.8

 

 

 

2,388

 

 

 

3.5

 

Corporate

 

 

23,841

 

 

 

 

 

 

 

24,177

 

 

 

 

 

Total

 

$

70,121

 

 

 

8.7

 

 

$

69,535

 

 

 

8.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building Materials Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-America Group

 

$

6,167

 

 

 

3.4

 

 

$

13,342

 

 

 

7.1

 

Southeast Group

 

 

2,041

 

 

 

2.5

 

 

 

10,115

 

 

 

11.2

 

West Group

 

 

34,951

 

 

 

7.4

 

 

 

61,232

 

 

 

12.3

 

Total Building Materials Business

 

 

43,159

 

 

 

5.9

 

 

 

84,689

 

 

 

10.9

 

Magnesia Specialties

 

 

21,237

 

 

 

30.7

 

 

 

19,881

 

 

 

29.0

 

Corporate

 

 

(25,315

)

 

 

 

 

 

 

(27,420

)

 

 

 

 

Total

 

$

39,081

 

 

 

4.9

 

 

$

77,150

 

 

 

9.1

 

 

Page 27 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

Building Materials Business

Products and services revenues by product line for the Building Materials business are as follows:

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Products and services revenues:

 

 

 

 

 

 

 

 

Aggregates

 

$

425,016

 

 

$

451,055

 

Cement

 

 

89,183

 

 

 

93,554

 

Ready Mixed Concrete

 

 

218,537

 

 

 

222,378

 

Asphalt and Paving

 

 

16,365

 

 

 

21,737

 

Less: Interproduct revenues

 

 

(60,665

)

 

 

(60,710

)

Total Building Materials Business

 

$

688,436

 

 

$

728,014

 

 

The following tables present aggregates products volume and pricing variance data and shipments data by segment:

 

 

 

Three-Months Ended

 

 

 

March 31, 2018

 

 

 

Volume

 

 

Pricing

 

Volume/Pricing variance (1)

 

 

 

 

 

 

 

 

Mid-America Group

 

 

(9.9

)%

 

 

4.9

%

Southeast Group

 

 

(12.4

)%

 

 

2.2

%

West Group

 

 

(4.7

)%

 

 

0.8

%

Aggregates Product Line

 

 

(7.9

)%

 

 

2.3

%

(1)

Volume/pricing variances reflect the percentage increase/(decrease) from the comparable period in the prior year.

 

The average selling price by product line for the Building Materials business is as follows:

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

% Change

 

Aggregates (per ton)

 

$

14.04

 

 

$

13.73

 

 

 

2.3

%

Cement (per ton)

 

$

106.86

 

 

$

102.54

 

 

 

4.2

%

Ready Mixed Concrete (per cubic yard)

 

$

106.34

 

 

$

105.84

 

 

 

0.5

%

Asphalt (per ton)

 

$

42.81

 

 

$

37.97

 

 

 

12.7

%

Average selling prices improved across all product lines and geographies despite lower shipment volumes.  Aggregates average selling price improvement was led by a 4.9% increase in the Mid-America Group, driven by continued price discipline and favorable product mix.  

 

Page 28 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Tons in Thousands)

 

Shipments

 

 

 

 

 

 

 

 

Mid-America Group

 

 

11,473

 

 

 

12,738

 

Southeast Group

 

 

4,405

 

 

 

5,028

 

West Group

 

 

14,142

 

 

 

14,845

 

Aggregates Product Line

 

 

30,020

 

 

 

32,611

 

 

The following table presents shipments data for the Building Materials business by product line.

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Shipments

 

 

 

 

 

 

 

 

Aggregates Product Line (in thousands):

 

 

 

 

 

 

 

 

Tons to external customers

 

 

27,877

 

 

 

30,418

 

Internal tons used in other product lines

 

 

2,143

 

 

 

2,193

 

Total aggregates tons

 

 

30,020

 

 

 

32,611

 

 

 

 

 

 

 

 

 

 

Cement (in thousands):

 

 

 

 

 

 

 

 

Tons to external customers

 

 

527

 

 

 

606

 

Internal tons used in ready mixed concrete

 

 

298

 

 

 

299

 

Total cement tons

 

 

825

 

 

 

905

 

 

 

 

 

 

 

 

 

 

Ready Mixed Concrete (in thousands of cubic yards)

 

 

2,009

 

 

 

2,056

 

 

 

 

 

 

 

 

 

 

Asphalt (in thousands):

 

 

 

 

 

 

 

 

Tons to external customers

 

 

116

 

 

 

153

 

Internal tons used in paving business

 

 

76

 

 

 

124

 

Total asphalt tons

 

 

192

 

 

 

277

 

 

Aggregates shipments returned to levels more in-line with historical trends and patterns.  Winter weather traditionally limits the ability of outdoor contractors to perform work. First quarter aggregates shipments declined 7.9% compared with the prior-year quarter when the weather was unseasonably favorable. Additionally, the volume decline was impacted by transportation logistics issues in the first quarter 2018.  

 

Page 29 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

Aggregates shipments to the infrastructure market decreased 11% as significant precipitation and cold temperatures delayed the start to the construction season. As state Departments of Transportation (DOTs) and contractors continue to address labor constraints and the construction industry benefits from further regulatory reform, management remains confident that infrastructure demand will improve from the funding provided by the Fixing America’s Surface Transportation Act (FAST Act) and numerous state and local transportation initiatives. Overall, aggregates shipments to the infrastructure market comprised 36% of first-quarter aggregates volumes, well below the Company’s most recent five-year average of 43%.

Aggregates shipments to the nonresidential market decreased 10% overall, driven by weather-impacted challenges in office and retail construction activity.  Notably, the Mideast Division, and more specifically, the Ohio District, reported strong heavy industrial growth, as a large pipeline project commenced construction after obtaining long-awaited federal clearance.  Continued project approvals, coupled with higher oil prices, underpins management’s expectation that the next wave of large energy-sector projects, particularly along the Gulf Coast, should notably contribute to increased aggregates consumption.  The nonresidential market represented 31% of first-quarter aggregates shipments.

Aggregates shipments to the residential market, which tends to be the least weather-constrained end use, were flat for the first quarter. The outlook for residential construction remains robust across the Company’s geographic footprint, driven by favorable demographics, job growth, land availability and efficient permitting.  Notably, Texas, Florida, North Carolina, Georgia, Colorado and South Carolina, key geographies for the Building Materials business, comprised six of the top ten states for growth in single-family housing unit starts for the trailing-twelve-months ended March 2018.  The residential market accounted for 24% of first-quarter aggregates shipments.

Aggregates shipments to the ChemRock/Rail market declined 11% versus the prior-year quarter. Lower ballast shipments reflect weather constraints and the timing of certain purchases by East Coast railroads in the prior-year quarter.  Additionally, in line with expectations, agricultural lime shipments declined 8%, driven by more typical winter precipitation. The ChemRock/Rail market accounted for the remaining 9% of first-quarter aggregates shipments.

Magnesia Specialties Business

Magnesia Specialties reported first-quarter total revenues of $69.3 million compared with $68.6 million.  Gross profit was $23.9 million compared with $22.3 million and earnings from operations were $21.2 million compared with $19.9 million.  Lower contract services and maintenance costs contributed to increased profitability.  

 

Page 30 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

Gross Profit

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

 

Consolidated gross profit, quarter ended March 31, 2017

 

$

147,067

 

Aggregates product:

 

 

 

 

Volume

 

 

(36,976

)

Pricing

 

 

10,956

 

Cost increase, net

 

 

68

 

Change in aggregates product gross profit

 

 

(25,952

)

Cement products and downstream products and services

 

 

(14,094

)

Magnesia Specialties products

 

 

1,709

 

Corporate

 

 

2,323

 

Freight

 

 

(661

)

Change in consolidated gross profit

 

 

(36,675

)

Consolidated gross profit, quarter ended March 31, 2018

 

$

110,392

 

 

Gross profit (loss) by business is as follows:

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Gross profit (loss):

 

 

 

 

 

 

 

 

Products and services:

 

 

 

 

 

 

 

 

Building Materials Business

 

 

 

 

 

 

 

 

Aggregates

 

$

53,002

 

 

$

78,954

 

Cement

 

 

23,734

 

 

 

30,780

 

Ready Mixed Concrete

 

 

15,641

 

 

 

19,790

 

Asphalt and Paving

 

 

(7,639

)

 

 

(4,740

)

Products and services

 

 

84,738

 

 

 

124,784

 

Freight

 

 

(119

)

 

 

407

 

Total Building Materials Business

 

 

84,619

 

 

 

125,191

 

Magnesia Specialties

 

 

 

 

 

 

 

 

Products and services

 

 

25,063

 

 

 

23,354

 

Freight

 

 

(1,174

)

 

 

(1,039

)

Total Magnesia Specialties

 

 

23,889

 

 

 

22,315

 

Corporate

 

 

1,884

 

 

 

(439

)

Total

 

$

110,392

 

 

$

147,067

 

 

 

Page 31 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

Cement outage costs, which reflect planned and unplanned plant shutdowns, were $7.3 million for the quarter compared with $4.4 million for the prior-year quarter.  

Consolidated Operating Results

Consolidated SG&A was 8.7% of total revenues compared with 8.2% in the prior-year quarter. The increase of 50 basis points reflects the negative impact of weather on total revenues.  Earnings from operations for the quarter were $39.1 million compared with $77.2 million in 2017.  

Among other items, other operating expense, net, includes gains and losses on the sale of assets; recoveries and writeoffs related to customer accounts receivable; rental, royalty and services income; accretion expense, depreciation expense and gains and losses related to asset retirement obligations. For the first quarter, consolidated other operating expense, net, was $0.5 million in 2018 and $0.4 million in 2017.  

Other nonoperating income, net, includes interest income; pension and postretirement benefit cost, excluding service cost; foreign currency transaction gains and losses; equity in earnings or losses of nonconsolidated affiliates and other miscellaneous income.  For the first quarter, nonoperating income, net, was $8.5 million and $0.5 million in 2018 and 2017, respectively.  Nonoperating income, net, for 2018 reflects a $5.2 million increase in interest income and an increase in equity investment income.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities for the three-months ended March 31 was $105.0 million in 2018 compared with $73.9 million in 2017.  Operating cash flow is primarily derived from consolidated net earnings before deducting depreciation, depletion and amortization, and the impact of changes in working capital.  Depreciation, depletion and amortization were as follows:

 

 

 

Three-Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(Dollars in Thousands)

 

Depreciation

 

$

69,151

 

 

$

62,988

 

Depletion

 

 

3,141

 

 

 

3,436

 

Amortization

 

 

4,529

 

 

 

3,952

 

 

 

$

76,821

 

 

$

70,376

 

 

The seasonal nature of construction activity impacts the Company’s quarterly operating cash flow when compared with the full year. Full-year 2017 net cash provided by operating activities was $657.6 million, reflective of the reclassification of net proceeds and payments of corporate-owned life insurance of $0.3 million from operating activities to investing activities, compared with $73.9 million for the first three months of 2017.

During the three-months ended March 31, 2018, the Company paid $96.3 million for capital investments. Full-year capital spending is expected to approximate $450 million to $500 million.

The Company can repurchase its common stock through open-market purchases pursuant to authority granted by its Board of Directors or through private transactions at such prices and upon such terms as the Chief Executive Officer

 

Page 32 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

deems appropriate. The Company did not make any repurchases of common stock during the first quarter.  At March 31, 2018, 14,669,000 shares of common stock were remaining under the Company’s repurchase authorization.  

On April 27, 2018, the Company successfully completed its previously announced acquisition of Bluegrass Materials Company (Bluegrass), the largest privately-held, pure-play aggregates company in the United States, for $1.625 billion in cash.  Bluegrass’ operations include 23 active sites with more than 125 years of strategically-located, high-quality reserves in Georgia, South Carolina, Tennessee, Maryland, Kentucky and Pennsylvania.  These operations complement the Company’s existing southeastern footprint and provides a new growth platform within the southern portion of the Northeast Megaregion.  The Company reached an agreement with the U.S. Department of Justice (DOJ), approved by the district court for the District of Columbia, which resolves all competition issues with respect to the acquisition.  Under the terms of the agreement with the DOJ, Martin Marietta divested its Forsyth aggregates quarry north of Atlanta, Georgia, and will divest Bluegrass’ Beaver Creek aggregates quarry in western Maryland.  The acquisition reflects a stock transaction where the Company acquired 100% of the voting interest.  The Company did not acquire any of Bluegrass’ cash and cash equivalents nor did it assume any of Bluegrass’ outstanding debt.  The Company expects to realize annual synergies of approximately $15 million within twelve months of the transaction’s close date.  

The $700 million Revolving Facility requires the Company’s ratio of consolidated debt-to-consolidated EBITDA, as defined, for the trailing-twelve-month period (the Ratio) to not exceed 3.50x as of the end of any fiscal quarter, provided that the Company may exclude from the Ratio debt incurred in connection with certain acquisitions during the quarter or the three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 3.75x. Additionally, if there are no amounts outstanding under the Revolving Facility and the $300 million Trade Receivable Facility, consolidated debt, including debt for which the Company is a co-borrower, may be reduced by the Company’s unrestricted cash and cash equivalents in excess of $50 million, such reduction not to exceed $200 million, for purposes of the covenant calculation.

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

 

Page 33 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

At March 31, 2018, the Company’s ratio of consolidated debt-to-consolidated EBITDA, as defined by the Company’s Revolving Facility, for the trailing-twelve months was 1.62 times and was calculated as follows:

 

 

 

April 1, 2017 to

 

 

 

March 31, 2018

 

 

 

(Dollars in thousands)

 

Earnings from continuing operations attributable to Martin Marietta

 

$

681,031

 

Add back:

 

 

 

 

Interest expense

 

 

105,723

 

Depreciation, depletion and amortization expense

 

 

299,822

 

Stock-based compensation expense

 

 

29,945

 

Acquisition-related expenses

 

 

9,292

 

Deduct:

 

 

 

 

Interest income

 

 

(5,814

)

Income tax benefit

 

 

(106,599

)

Consolidated EBITDA, as defined by the Company’s Revolving Facility

 

$

1,013,400

 

Consolidated net debt, as defined and including debt for which the

     Company is a co-borrower, at March 31, 2018

 

$

1,643,372

 

Consolidated debt-to-consolidated EBITDA, as defined by the Company’s

     Revolving Facility, at March 31, 2018 for the trailing-twelve

     months EBITDA

 

1.62x

 

 

The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements. In the event of a default on the Ratio, the lenders can terminate the Revolving Facility and Trade Receivable Facility and declare any outstanding balances as immediately due.  Outstanding amounts on the Trade Receivable Facility have been classified as a current liability on the Company’s consolidated balance sheet.

Cash on hand, along with the Company’s projected internal cash flows and availability of financing resources, including its access to debt and equity capital markets, is expected to continue to be sufficient to provide the capital resources necessary to support anticipated operating needs, cover debt service requirements, address near-term debt maturities, meet capital expenditures and discretionary investment needs, and certain acquisition opportunities that may arise and allow for payment of dividends for the foreseeable future.  The Company financed the Bluegrass acquisition using proceeds from issuances of senior notes in December 2017 and borrowings under credit facilities.  Any future significant strategic acquisition for cash would likely require an appropriate balance of newly-issued equity with debt in order to maintain a composite investment-grade credit rating. Subsequent to borrowings made to partially finance the Bluegrass acquisition, the Company had $502.7 million of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility, subject to complying with the related leverage covenant.  The Revolving Facility expires on December 5, 2021 and the Trade Receivable Facility expires on September 26, 2018.  

The Company repaid the $300 million of 6.60% Senior Notes with cash on hand on April 16, 2018, the maturity date.

On April 17, 2018, the Company and its wholly-owned subsidiary amended its Trade Receivable Facility to increase the facility limit to $400,000,000.

 

Page 34 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

On May 22, 2017, the Company issued $300 million aggregate principal amount of Floating Rate Senior Notes due in 2020 and $300 million aggregate principal amount of 3.450% Senior Notes due in 2027.  On December 20, 2017, the Company issued $300 million aggregate principal amount of Floating Rate Senior Notes due 2019, $500 million aggregate principal amount of 3.500% Senior Notes due 2027 and $600 million aggregate principal amount of 4.250% Senior Notes due 2047.  The Company repaid $300 million aggregate principal amount of Floating Rate Senior at its maturity in June 2017.

The Company is exposed to the credit markets, through the interest cost related to its variable-rate debt, which included borrowings under its Revolving Facility and Trade Receivable Facility and the obligations in respect of the Floating Rate Notes.  The Company is currently rated at an investment-grade level by all three credit rating agencies.

TRENDS AND RISKS

The Company outlined the risks associated with its business in its Annual Report on Form 10-K for the year ended December 31, 2017.  Management continues to evaluate its exposure to all operating risks on an ongoing basis.

OUTLOOK

The Company remains optimistic about the Company’s about its near-term and long-term outlook given its continued ability to successfully execute its strategic business plan and the largely positive trends in the markets it serves.  The Company expects growth in all three primary construction end-use markets as the current broad-based recovery continues on a steady and extended basis.  

Management reaffirms its full-year 2018 guidance for its legacy business.  Specifically:

 

Heritage aggregates average selling price is expected to increase in a range of 3% to 5% and shipments by end-use market compared with 2017 levels are as follows:

 

Infrastructure shipments to increase in the mid-single digits.

 

Nonresidential shipments to increase in the low- to mid-single digits.

 

Residential shipments to increase in the high-single digits.

 

ChemRock/Rail shipments to remain stable.

 

OTHER MATTERS

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

Investors are cautioned that all statements in this Form 10-Q that relate to the future involve risks and uncertainties, and are based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results.  These statements, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995, give the investor the Company’s expectations or forecasts of future events.  You can identify these statements by the fact that they do not relate only to historical or current facts.  They may use words such

 

Page 35 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

as "anticipate," "expect," "should be," "believe," “will,” and other words of similar meaning in connection with future events or future operating or financial performance.  Any or all of management’s forward-looking statements here and in other publications may turn out to be wrong.

The Company’s outlook is subject to various risks and uncertainties, and is based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. Factors that the Company currently believes could cause actual results to differ materially from the forward-looking statements in this Form 10-Q (including the outlook) include, but are not limited to: include, the performance of the United States economy, including shipment declines resulting from economic events beyond the Company’s control; widespread decline in aggregates pricing, including a decline in aggregates volume negatively affecting aggregates price; the history of both cement and ready mixed concrete being subject to significant changes in supply, demand and price fluctuations; the termination, capping and/or reduction or suspension of the federal and/or state gasoline tax(es) or other revenue related to infrastructure construction; the level and timing of federal, and  state or local transportation funding, most particularly in Texas, North Carolina, Iowa, Colorado, Georgia and Maryland, including a significant change in the funding patterns for federal, state and/or local infrastructure projects or the United States Congress’ inability to reach agreement among themselves or with the current Administration on policy issues that impact the federal budget; the ability of states and/or other entities to finance approved projects either with tax revenues or alternative financing structures; levels of construction spending in the markets the Company serves, volatility in the commencement of infrastructure projects and other funding pressures that impact profitability; a reduction in defense spending, and the subsequent impact on construction activity on or near military bases; a decline in the commercial component of the nonresidential construction market, notably office and retail space; a slowdown decline in energy-related construction activity  resulting from a sustained period of low global oil prices or changes in oil production patterns in response to this decline, particularly in Texas; a slowdown in residential construction recovery; unfavorable weather conditions, particularly Atlantic Ocean and Gulf Coast hurricane activity, the late start to spring or the early onset of winter and the impact of a drought or excessive rainfall in the markets served by the Company, any of which can significantly affect production schedules, volumes and profitability; the volatility of fuel costs, particularly diesel fuel, and the impact on the cost, or the availability generally, of other consumables, namely steel, explosives, tires and conveyor belts, and with respect to the Company’s Magnesia Specialties business, natural gas; continued increases in the cost of other repair and supply parts;  construction labor shortages and/or supply‐chain challenges; unexpected equipment failures, unscheduled maintenance, industrial accident or other prolonged and/or significant disruption to production facilities; increasing governmental regulation, including environmental laws; transportation availability or a sustained reduction in capital investment by the railroads, notably the availability of railcars, and locomotive power and the condition of rail infrastructure to move trains to supply the Company’s Texas, Colorado, Florida, North Carolina and the Gulf Coast markets, including the movement of essential dolomitic lime for magnesia chemicals to the Company’s plant in Manistee, Michigan and its customers; increased transportation costs, including increases from higher or fluctuating passed-through energy costs or fuel surcharges, and other costs to comply with tightening regulations, as well as higher volumes of rail and water shipments; availability of trucks and licensed drivers for transport of the Company’s materials; availability and cost of construction equipment in the United States; weakening in the steel industry markets served by the Company’s dolomitic lime products;  a trade dispute with one or more nations impacting the U.S. economy, including the impact of tariffs on the steel industry; unplanned changes in costs or realignment of customers that introduce volatility to earnings, including that of the Magnesia Specialties business that is running at capacity; proper functioning of information technology and automated operating systems to manage or support operations; inflation and its effect on both production and interest costs;  the concentration of customers in construction markets and the

 

Page 36 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2018

(Continued)

 

increased risk of potential losses on customer receivables; the impact of the level of demand in the Company’s end-use markets, production levels and management of production costs on the operating leverage and therefore profitability of the Company;  the possibility that the expected synergies from acquisitions (including the acquisition of Bluegrass) will not be realized or will not be realized within the expected time period, including achieving anticipated profitability to maintain compliance with the Company’s leverage ratio debt covenant; changes in tax laws, the interpretation of such laws and/or administrative practices that would increase the Company’s tax rate; violation of the Company’s debt covenant if price and/or volumes return to previous levels of instability; downward pressure on the Company’s common stock price and its impact on goodwill impairment evaluations; reduction of the Company’s credit rating to non-investment grade resulting from strategic acquisitions; and other risk factors listed from time to time found in the Company’s filings with the SEC.  Other factors besides those listed here may also adversely affect the Company, and may be material to the Company.  The Company assumes no obligation to update any such forward-looking statements.

You should consider these forward-looking statements in light of risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2017, the Current Report on Form 8-K filed on March 16, 2018 and other periodic filings made with the SEC.  All of the Company’s forward-looking statements should be considered in light of these factors.  In addition, other risks and uncertainties not presently known to the Company or that the Company considers immaterial could affect the accuracy of the Company’s forward-looking statements.

INVESTOR ACCESS TO COMPANY FILINGS

Shareholders may obtain, without charge, a copy of Martin Marietta’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2017, by writing to:

Martin Marietta

Attn: Corporate Secretary

2710 Wycliff Road

Raleigh, North Carolina 27607-3033

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

Telephone: (919) 510-4776

Website address: www.martinmarietta.com

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

 

 

 

 

Page 37 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Management has considered the current economic environment and its potential impact to the Company’s business. Demand for aggregates products, particularly in the infrastructure construction market, is affected by federal and state budget and deficit issues. Further, delays or cancellations of capital projects in the nonresidential and residential construction markets could occur if companies and consumers are unable to obtain financing for construction projects or if consumer confidence continues to be eroded by economic uncertainty.

Demand in the residential construction market is affected by interest rates. The Federal Reserve raised the federal funds rate to 1.7% during the three-months ended March 31, 2018. The residential construction market accounted for 21% of the Company’s aggregates product line shipments in 2017.

Aside from these inherent risks from within its operations, the Company’s earnings are also affected by changes in short-term interest rates. However, rising interest rates are not necessarily predictive of weaker operating results. Historically, the Company’s profitability increased during periods of rising interest rates.  In essence, the Company’s underlying business generally serves as a natural hedge to rising interest rates.

Variable-Rate Borrowing Facilities. At March 31, 2018, the Company had a $700 million Credit Agreement and a $300 million Trade Receivable Facility. The Company also has $600 million variable-rate senior notes.  Borrowings under these facilities bear interest at a variable interest rate. A hypothetical 100-basis-point increase in interest rates on borrowings of $600.0 million, which was the collective outstanding balance at March 31, 2018, would increase interest expense by $6.0 million on an annual basis.

Pension Expense. The Company’s results of operations are affected by its pension expense. Assumptions that affect pension expense include the discount rate and, for the qualified defined benefit pension plan only, the expected long-term rate of return on assets. Therefore, the Company has interest rate risk associated with these factors. The impact of hypothetical changes in these assumptions on the Company’s annual pension expense is discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Energy Costs. Energy costs, including diesel fuel, natural gas, coal and liquid asphalt, represent significant production costs of the Company.  The cement operations and Magnesia Specialties business have fixed price agreements covering 100% of its 2018 coal requirements.  Energy prices for the three-months ended March 31, 2018 increased 20% over the prior-year quarter.  A hypothetical 20% change in the Company’s energy prices for the full year 2018 as compared with 2017, assuming constant volumes, would change full year 2018 energy expense by $50.0 million.  

Commodity Risk. Cement is a commodity and competition is based principally on price, which is highly sensitive to changes in supply and demand. Prices are often subject to material changes in response to relatively minor fluctuations in supply and demand, general economic conditions and other market conditions beyond the Company’s control. Increases in the production capacity of industry participants or increases in cement imports tend to create an oversupply of such products leading to an imbalance between supply and demand, which can have a negative impact on product prices. There can be no assurance that prices for products sold will not decline in the future or that such declines will not have a material adverse effect on the Company’s business, financial condition and results of operations.  Assuming total revenues for cement for full-year 2018 of $415 million to $445 million, a hypothetical 10% change in sales price would impact net sales by $41.5 million to $44.5 million.

 

Page 38 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

(Continued)

 

Item 4. Controls and Procedures

As of March 31, 2018, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2018. There were no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

Page 39 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

PART II- OTHER INFORMATION

 

Item 1. Legal Proceedings.

Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta Annual Report on Form 10-K for the year ended December 31, 2017.

 

Item 1A. Risk Factors.

Reference is made to Part I. Item 1A. Risk Factors and Forward-Looking Statements of the Martin Marietta Annual Report on Form 10-K for the year ended December 31, 2017.

 

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

ISSUER PURCHASES OF EQUITY SECURITIES

 

 

 

 

 

 

 

 

 

 

 

Total Number of Shares

 

 

Maximum Number of

 

 

 

 

 

 

 

 

 

 

 

Purchased as Part of

 

 

Shares that May Yet

 

 

 

Total Number of

 

 

Average Price

 

 

Publicly Announced

 

 

be Purchased Under

 

Period

 

Shares Purchased

 

 

Paid per Share

 

 

Plans or Programs

 

 

the Plans or Programs

 

January 1, 2018 - January 31, 2018

 

 

 

 

$

 

 

 

 

 

 

14,668,891

 

February 1, 2018 - February 28, 2018

 

 

 

 

$

 

 

 

 

 

 

14,668,891

 

March 1, 2018 - March 31, 2018

 

 

 

 

$

 

 

 

 

 

 

14,668,891

 

 

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

 

Item 4. Mine Safety Disclosures.

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

 

Page 40 of 42


MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2018

PART II- OTHER INFORMATION

(Continued)

 

Item 6. Exhibits.

 

Exhibit No.

  

Document

 

 

31.01

  

Certification dated May 8, 2018 of Chief Executive Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.02

  

Certification dated May 8, 2018 of Chief Financial Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

32.01

  

Written Statement dated May 8, 2018 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.02

  

Written Statement dated May 8, 2018 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

95

  

Mine Safety Disclosures

 

 

101.INS

  

XBRL Instance Document

 

 

101.SCH

  

XBRL Taxonomy Extension Schema Document

 

 

101.CAL

  

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.LAB

  

XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE

  

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

101.DEF

  

XBRL Taxonomy Extension Definition Linkbase

 

 

 

 

 

 

 

Page 41 of 42


 

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: May 8, 2018

By:

 

/s/ James A. J. Nickolas

 

 

 

James A. J. Nickolas

 

 

 

Sr. Vice President and

 

 

 

   Chief Financial Officer

 

 

 

Page 42 of 42

mlm-ex3101_10.htm

 

 

 

EXHIBIT 31.01

 

 

CERTIFICATION PURSUANT TO SECURITIES AND EXCHANGE ACT OF 1934 RULE 13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

 

 

I, C. Howard Nye, certify that:

 

 

1.

I have reviewed this Form 10-Q of Martin Marietta Materials, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


 


 

 

 

 

 

 

 

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

Date:  May 8, 2018

 

By:

 

/s/ C. Howard Nye

 

 

 

 

C. Howard Nye

 

 

 

 

Chairman, President and

 

 

 

 

   Chief Executive Officer

 

 

mlm-ex3102_7.htm

 

 

 

EXHIBIT 31.02

 

 

CERTIFICATION PURSUANT TO SECURITIES AND EXCHANGE ACT OF 1934 RULE 13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

 

 

I, James A. J. Nickolas, certify that:

 

 

1.

I have reviewed this Form 10-Q of Martin Marietta Materials, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


 


 

 

 

 

 

 

 

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 8, 2018

 

By:

 

/s/ James A. J. Nickolas

 

 

 

 

James A. J. Nickolas

 

 

 

 

Sr. Vice President and

 

 

 

 

   Chief Financial Officer

 

 

mlm-ex3201_8.htm

EXHIBIT 32.01

 

Written Statement Pursuant to 18 U.S.C. 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report on Form 10-Q for the period ended March 31, 2018 (the “Report”) of Martin Marietta Materials, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, C. Howard Nye, the Chief Executive Officer of the Registrant, certify, to the best of my knowledge, that:

 

 

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ C. Howard Nye

C. Howard Nye

Chairman, President and

   Chief Executive Officer

 

Dated:  May 8, 2018

 

A signed original of this written statement required by Section 906 has been provided to Martin Marietta Materials, Inc. and will be retained by Martin Marietta Materials, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

mlm-ex3202_6.htm

EXHIBIT 32.02

 

Written Statement Pursuant to 18 U.S.C. 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report on Form 10-Q for the period ended March 31, 2018 (the “Report”) of Martin Marietta Materials, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, James A. J. Nickolas, the Chief Financial Officer of the Registrant, certify, to the best of my knowledge, that:

 

 

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ James A. J. Nickolas

James A. J. Nickolas

Sr. Vice President and

   Chief Financial Officer

 

Dated:  May 8, 2018

 

A signed original of this written statement required by Section 906 has been provided to Martin Marietta Materials, Inc. and will be retained by Martin Marietta Materials, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

mlm-ex95_9.htm

EXHIBIT 95

 

MINE SAFETY DISCLOSURES

 

The operation of the Corporation’s domestic aggregates quarries and mines is subject to regulation by the federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977 (the Mine Act).  MSHA inspects the Corporation’s quarries and mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act.  Whenever MSHA issues a citation or order, it also generally proposes a civil penalty, or fine, related to the alleged violation.  Citations or orders may be contested and appealed, and as part of that process, are often reduced in severity and amount, and are sometimes dismissed.

 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the Corporation is required to present information regarding certain mining safety and health citations which MSHA has issued with respect to its aggregates mining operations in its periodic reports filed with the Securities and Exchange Commission (SEC).  In evaluating this information, consideration should be given to factors such as: (i) the number of citations and orders will vary depending on the size of the quarry or mine and types of operations (underground or surface), (ii) the number of citations issued will vary from inspector to inspector and location to location, and (iii) citations and orders can be contested and appealed, and in that process, may be reduced in severity and amount, and are sometimes dismissed.  

 

The Corporation has provided the information below in response to the SEC’s rules and regulations issued under the provisions of the Dodd-Frank Act.  The disclosures reflect U.S. mining operations only, as the requirements of the Dodd-Frank Act and the SEC rules and regulations thereunder do not apply to the Corporation’s quarries and mines operated outside the United States.

 

The Corporation presents the following items regarding certain mining safety and health matters for the three months ended March 31, 2018:

 

Total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard under section 104 of the Mine Act for which the Corporation has received a citation from MSHA (hereinafter, “Section 104 S&S Citations”).  If MSHA determines that a violation of a mandatory health or safety standard is likely to result in a reasonably serious injury or illness under the unique circumstance contributed to by the violation, MSHA will classify the violation as a “significant and substantial” violation (commonly referred to as an S&S violation).  MSHA inspectors will classify each citation or order written as an S&S violation or not.

Total number of orders issued under section 104(b) of the Mine Act (hereinafter, “Section 104(b) Orders”).  These orders are issued for situations in which MSHA determines a previous violation covered by a Section 104(a) citation has not been totally abated within the prescribed time period, so a further order is needed to require the mine operator to immediately withdraw all persons (except authorized persons) from the affected area of a quarry or mine.

 

Total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under Section 104(d) of the Mine Act (hereinafter, “Section 104(d) Citations and Orders”).  These violations are similar to those described above, but the

 

 


standard is that the violation could significantly and substantially contribute to the cause and effect of a safety or health hazard, but the conditions do not cause imminent danger, and the MSHA inspector finds that the violation is caused by an unwarranted failure of the operator to comply with the health and safety standards.

 

Total number of flagrant violations under section 110(b)(2) of the Mine Act (hereinafter, “Section 110(b)(2) Violations”). These violations are penalty violations issued if MSHA determines that violations are “flagrant”, for which civil penalties may be assessed. A “flagrant” violation means a reckless or repeated failure to make reasonable efforts to eliminate a known violation of a mandatory health or safety standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury.

 

Total number of imminent danger orders issued under section 107(a) of the Mine Act (hereinafter, “Section 107(a) Orders”).  These orders are issued for situations in which MSHA determines an imminent danger exists in the quarry or mine and results in orders of immediate withdrawal of all persons (except certain authorized persons) from the area of the quarry or mine affected by its condition until the imminent danger and the underlying conditions causing the imminent danger no longer exist.

 

Total dollar value of proposed assessments from MSHA under the Mine Act.  These are the amounts of proposed assessments issued by MSHA with each citation or order for the time period covered by the reports. Penalties are assessed by MSHA according to a formula that considers a number of factors, including the mine operator’s history, size, negligence, gravity of the violation, good faith in trying to correct the violation promptly, and the effect of the penalty on the operator’s ability to continue in business.

 

Total number of mining-related fatalities.  Mines subject to the Mine Act are required to report all fatalities occurring at their facilities unless the fatality is determined to be “non-chargeable” to the mining industry.  The final rules of the SEC require disclosure of mining-related fatalities at mines subject to the Mine Act.  Only fatalities determined by MSHA not to be mining-related may be excluded.

 

Receipt of written notice from MSHA of a pattern (or a potential to have such a pattern) of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of other mine health or safety hazards under Section 104(e) of the Mine Act.  If MSHA determines that a mine has a “pattern” of these types of violations, or the potential to have such a pattern, MSHA is required to notify the mine operator of the existence of such a thing.

 

Legal actions before the Federal Mine Safety and Health Review Commissions pending as of the last day of period.

 

Legal actions before the Federal Mine Safety and Health Review Commissions initiated during period.

 

Legal actions before the Federal Mine Safety and Health Review Commissions resolved during period.

 

 

 


The Federal Mine Safety and Health Review Commission (the Commission) is an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. The cases may involve, among other questions, challenges by operators to citations, orders and penalties they have received from MSHA, or complaints of discrimination by miners under Section 105 of the Mine Act.  Appendix 1 shows, for each of the Corporation’s quarries and mines identified, as of March 31, 2018, the number of legal actions pending before the Commission, along with the number of legal actions initiated before the Commission during the quarter as well as resolved during the quarter. In addition, Appendix 1 includes a footnote to the column for legal actions before the Commission pending as of the last day of the period, which footnote breaks down that total number of legal actions pending by categories according to the type of proceeding in accordance with various categories established by the Procedural Rules of the Commission.

 

Appendix 1 attached.

 

 

 

 


Appendix 1

 

Location

MSHA ID

Section 104 S&S Citations (#)

Section 104(b) Orders (#)

Section 104(d) Citations and Orders (#)

Section 110(b)(2) Violations (#)

Section 107(a) Orders (#)

Total Dollar Value of MSHA Assessment/$ Proposed

 

Total Number of Mining Related Fatalities (#)

Received Notice of Pattern of Violation Under Section 104(e) (yes/no)

Received Notice of Potential to have Pattern under Section 104(e) (yes/no)

Legal Actions Pending as of Last Day of Period (#)*

Legal Actions Instituted During Period (#)

Legal Actions Resolved During Period (#)

Alexander Quarry

BN5

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Amelia Quarry

4407372

0

0

0

0

0

$

-

 

0

no

no

0

0

0

American Stone

3100189

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Anderson Creek Quarry

4402963

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Arrowood Quarry

3100059

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Asheboro Quarry

3100066

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Bakers Quarry

3100071

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Belgrade Quarry

3100064

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Benson Quarry

3101979

1

0

0

0

0

$

118

 

0

no

no

0

0

0

Berkeley Quarry

3800072

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Bessemer City Quarry

3101105

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Black Ankle Quarry

3102220

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Bonds Quarry

3101963

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Boonesboro Quarry

1800024

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Burlington Quarry

3100042

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Caldwell Quarry

3101869

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Castle Hayne Quarry

3100063

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Cayce

3800016

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Central Rock Quarry

3100050

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Charlotte Quarry

3100057

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Clarks Quarry

3102009

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Denver Quarry

3101971

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Doswell Quarry  VA

4400045

0

0

0

0

0

$

118

 

0

no

no

0

0

0

East  Alamance Quarry

3102021

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Fountain Quarry

3100065

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Franklin Quarry

3102130

1

0

0

0

0

$

208

 

0

no

no

0

0

0

 

 


Appendix 1

 

Fuquay Quarry

3102055

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Garner Quarry

3100072

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Georgetown II Quarry

3800525

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Hickory Quarry

3100043

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Hicone

3102088

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Jamestown Quarry

3100051

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Kannapolis Quarry

3100070

0

0

0

0

0

$

128

 

0

no

no

0

0

0

Kings Mountain Quarry

3100047

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Lemon Springs Quarry

3101104

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Loamy Sand  Gravel

3800721

0

0

0

0

0

$

151

 

0

no

no

0

0

0

Maiden Quarry

3102125

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Mallard Creek Quarry

3102006

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Matthews Quarry

3102084

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Midlothian Quarry

4403767

0

0

0

0

0

$

399

 

0

no

no

0

0

0

North Columbia

3800146

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Onslow Quarry

3102120

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Pinesburg Quarry

1800021

0

0

0

0

0

$

406

 

0

no

no

0

0

0

Pomona Quarry

3100052

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Raleigh Durham Quarry

3101941

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Red Hill Quarry

4400072

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Reidsville Quarry

3100068

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Rock Hill Quarry

3800026

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Rocky Point Quarry

3101956

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Rocky River Quarry

3102033

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Salem Stone

3102038

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Statesville Quarry

3100055

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Thomasville Quarry

3101475

0

0

0

0

0

$

867

 

0

no

no

0

0

0

Wilmington Sand

3101308

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Wilson Quarry

3102230

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Woodleaf Quarry

3100069

0

0

0

0

0

$

607

 

0

no

no

0

0

0

(45) North Indianapolis SURFACE

1200002

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Apple Grove S  G

3301676

0

0

0

0

0

$

256

 

0

no

no

0

0

0

Belmont Sand

1201911

0

0

0

0

0

$

236

 

0

no

no

0

0

0

 

 


Appendix 1

 

Burning Springs Mine

4608862

0

0

0

0

0

$

-

 

0

no

no

0

0

1

Carmel Sand

1202124

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Cedarville Quarry

3304072

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Cloverdale Quarry

1201744

0

0

0

0

0

$

-

 

0

no

no

0

0

0

E Town Sand  Gravel

3304279

1

0

0

0

0

$

208

 

0

no

no

0

0

0

Fairfield Quarry

3301396

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Franklin Gravel

3302940

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Kentucky Ave Mine

1201762

0

0

0

0

0

$

2,799

 

0

no

no

0

0

0

Kokomo Mine

1202105

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Kokomo Sand

1202203

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Kokomo Stone

1200142

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Noblesville Sand

1201994

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Noblesville Stone

1202176

1

0

0

0

0

$

2,110

 

0

no

no

1

0

0

North Indianapolis Quarry

1201993

1

0

0

0

0

$

361

 

0

no

no

1

0

0

Petersburg, Ky Gravel

1516895

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Phillipsburg Quarry

3300006

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Shamrock SG

3304011

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Spring Valley Cook Rd SG

3304534

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Troy Gravel

3301678

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Waverly Sand

1202038

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Xenia Gravel

3301393

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Appling Quarry

901083

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Auburn Al Quarry

100006

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Auburn, GA Quarry

900436

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Augusta, GA Quarry

900065

0

0

0

0

0

$

705

 

0

no

no

0

0

0

Chattanooga Quarry

4003159

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Forsyth Quarry

901035

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Jefferson Quarry

901106

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Junction City Quarry

901029

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Lithonia Quarry

900023

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Maylene Quarry

100634

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Morgan County

901126

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Newton Quarry

900899

0

0

0

0

0

$

118

 

0

no

no

0

0

0

O'Neal Plant   Co 19

103076

0

0

0

0

0

$

-

 

0

no

no

0

0

0

 

 


Appendix 1

 

Paulding Quarry

901107

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Perry Quarry

801083

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Red Oak Quarry

900069

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Ruby Quarry

900074

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Six Mile Quarry

901144

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Tyrone Quarry

900306

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Vance Quarry   Co 19

103022

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Warrenton Quarry

900580

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Alden Portable Plant #1

1302031

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Alden Portable Plant #2

1302033

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Alden Portable Sand

1302037

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Alden Quarry

1300228

2

0

0

0

0

$

840

 

0

no

no

0

0

0

Ames Mine

1300014

0

0

0

0

0

$

351

 

0

no

no

0

0

0

Cedar Rapids Quarry

1300122

1

0

0

0

0

$

343

 

0

no

no

0

0

0

Des Moines Portable

1300150

0

0

0

0

0

$

726

 

0

no

no

0

0

1

Dubois Quarry

2501046

0

0

0

0

0

$

118

 

0

no

no

0

0

2

Durham Mine

1301225

0

0

0

0

0

$

1,683

 

0

no

no

0

0

0

Plant 862 (Earlham Quarry)

1302123

0

0

0

0

0

$

336

 

0

no

no

0

0

0

Ferguson Quarry

1300124

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Fort Calhoun Quarry

2500006

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Fort Calhoun UG

2501300

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Fort Dodge Mine

1300032

4

0

0

0

0

$

4,380

 

0

no

no

1

0

0

Greenwood Quarry  New

2300141

0

0

0

0

0

$

-

 

0

no

no

1

0

0

Inactive Iowa Grading

1302126

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Iowa Grading

1302316

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Linn County Sand

1302208

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Malcom Mine

1300112

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Marshalltown Sand

1300718

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Midwest Division OH

A2354

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Moore Quarry

1302188

0

0

0

0

0

$

-

 

0

no

no

0

0

0

New Harvey Sand

1301778

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Ottawa Quarry   New

1401590

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Pacific Quarry

4500844

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Parkville Mine   New

2301883

1

0

0

0

0

$

361

 

0

no

no

0

0

0

 

 


Appendix 1

 

Pedersen Quarry

1302192

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Alden Portable Wash (Portland Quarry)

1302122

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Raccoon River Sand

1302315

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Randolph Deep Mine

2302308

1

0

0

0

0

$

128

 

0

no

no

1

0

2

Reasnor Sand

1300814

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Saylorville Sand

1302290

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Smithson Valley Quarry

4104108

0

0

0

0

0

$

-

 

0

no

no

0

0

0

St Cloud Quarry

2100081

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Stamper Mine

2302232

2

0

0

0

0

$

4,309

 

0

no

no

2

0

1

Sully Mine

1300063

0

0

0

0

0

$

208

 

0

no

no

0

0

0

Sunflower Qy   Co 61

1401556

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Weeping Water Mine

2500998

0

0

0

0

0

$

1,828

 

0

no

no

1

1

1

Yellow Medicine Quarry

2100033

1

0

0

0

0

$

163

 

0

no

no

0

0

0

Augusta, KS Quarry

1400126

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Beckmann Quarry

4101335

0

0

0

0

0

$

3,050

 

0

no

no

1

1

0

Bedrock Sand  Gravel

4103283

0

0

0

0

0

$

-

 

0

no

no

1

1

0

Bells Savoy SG

4104019

0

0

0

0

0

$

354

 

0

no

no

0

0

0

Black Rock Quarry

300011

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Black Spur Quarry

4104159

0

0

0

0

0

$

1,677

 

0

no

no

1

1

0

Blake Quarry

1401584

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Bridgeport Stone

4100007

0

0

0

0

0

$

354

 

0

no

no

0

0

0

Broken Bow SG

3400460

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Chico Quarry

4103360

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Davis Quarry

3401299

1

0

0

0

0

$

264

 

0

no

no

0

0

0

Garfield SG

4103909

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Garwood Gravel

4102886

4

0

0

0

0

$

-

 

0

no

no

0

0

0

GMS   TXI

C335

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Hatton Quarry

301614

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Helotes

4103137

0

0

0

0

0

$

927

 

0

no

no

1

1

0

Highway 211 Quarry

4103829

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Hondo #2

4104708

0

0

0

0

0

$

862

 

0

no

no

1

1

0

Hondo #1 (West)

4104090

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Hugo Quarry

3400061

0

0

0

0

0

$

118

 

0

no

no

0

0

0

 

 


Appendix 1

 

Hunter Stone

4105230

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Idabel Quarry

3400507

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Jena Aggregates

1601298

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Jones Mill Quarry

301586

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Medina Rock  Rail

4105170

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Mill Creek Limestone

3401859

0

0

0

0

0

$

191

 

0

no

no

0

0

0

Mill Creek Quarry

3401285

0

0

0

0

0

$

-

 

0

no

no

1

1

0

Perryville Aggregates

1601417

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Poteet Sand

4101342

0

0

0

0

0

$

397

 

0

no

no

0

0

0

Rio Medina

4103594

0

0

0

0

0

$

118

 

0

no

no

0

0

0

San Pedro Quarry

4101337

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Sawyer Quarry

3401634

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Snyder Quarry

3401651

0

0

0

0

0

$

236

 

0

no

no

0

0

1

Portable Crusher #2 (South Texas Port #2)

4104204

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Tin Top SG

4102852

0

0

0

0

0

$

985

 

0

no

no

0

0

0

Washita Quarry

3402049

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Webberville

4104363

0

0

0

0

0

$

594

 

0

no

no

0

0

0

Woodworth Aggregates

1601070

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Cottonwood Sand  Gravel

504418

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Fountain Sand  Gravel

503821

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Granite Canyon Quarry

4800018

0

0

0

0

0

$

618

 

0

no

no

0

0

0

Greeley 35th Ready Mix

503215

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Greeley 35th Sand  Gravel

504613

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Guernsey Quarry

4800004

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Milford Quarry   Utah

4202177

0

0

0

0

0

$

118

 

0

no

no

0

0

0

Parkdale Quarry

0504635

0

0

0

0

0

$

236

 

0

no

no

0

0

0

Northern Portable Plant #19 (Parsons Sand  Gravel)

504382

1

0

0

0

0

$

756

 

0

no

no

0

0

0

PC Portable Plant 4

4801565

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Penrose Sand and Gravel

504509

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Portable  Crushing

503984

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Portable Plant 1

504359

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Portable Plant 21

504520

0

0

0

0

0

$

-

 

0

no

no

0

0

0

 

 


Appendix 1

 

Red Canyon Quarry

504136

0

0

0

0

0

$

1,685

 

0

no

no

0

0

0

Riverbend Sand  Gravel

504841

0

0

0

0

0

$

1,016

 

0

no

no

0

0

0

Spanish Springs Quarry Co 2

2600803

0

0

0

0

0

$

399

 

0

no

no

0

0

0

Spec Agg Quarry

500860

13

0

0

0

0

$

5,082

 

0

no

no

0

0

0

Northern Portable Plant #12 (Taft Sand  Gravel)

504526

0

0

0

0

0

$

354

 

0

no

no

0

0

0

Taft Shop

504735

0

0

0

0

0

$

354

 

0

no

no

0

0

0

Hunter Cement

4102820

1

0

0

0

0

$

6,691

 

0

no

no

0

0

0

Midlothian Cement

4100071

1

0

0

0

0

$

4,567

 

0

no

no

3

0

0

Geology and Exploration

B7127

0

0

0

0

0

$

-

 

0

no

no

0

0

0

Woodville   Stone

3300156

0

0

0

0

0

$

472

 

0

no

no

5

1

0

TOTALS

 

38

0

0

0

0

$

61,230

 

0

 

 

22

8

9

*Of the 22 legal actions pending on March 31, 2018, 15 were contests of citations or orders referenced in Subpart B of CFR Part 2700, which includes contests of citations and orders issued under Section 104 of the Mine Act and contests of imminent danger orders under Section 107 of the Mine Act and seven were contests of proposed penalties referenced in Subpart C of 29 CFR Part 2700, which are administrative proceedings before the Commission challenging a civil penalty that MSHA has proposed for the violation contained in a citation or order.