COMPANY ACHIEVED RECORD THIRD-QUARTER REVENUES,
GROSS PROFIT AND EARNINGS PER DILUTED SHARE

Double-Digit-Growth in Consolidated Revenues, Gross Profit and Net Earnings

Shipments and Pricing Increased for Aggregates, Cement and Ready Mixed Concrete

Cement Product Gross Margin Expanded 210 Basis Points

Magnesia Specialties Business Posted Record Revenues and Gross Profit

2018 Guidance Updated to Reflect Impact of Weather-Related Events

RALEIGH, N.C., Nov. 06, 2018 (GLOBE NEWSWIRE) -- Martin Marietta Materials, Inc. (NYSE:MLM) today reported results for the third quarter ended September 30, 2018. 

Highlights Include the Following:

($ in thousands, except per share)	Quarter ended September 30,
	2018		2017
Total revenues 1	$	1,219,640	$	1,087,732
Products and services revenues 2	$	1,142,218	$	1,022,487
Building Materials business products and services revenues	$	1,073,853	$	962,598
Magnesia Specialties business products and services revenues	$	68,365	$	59,889
Gross profit	$	312,984	$	291,678
Adjusted gross profit 3	$	321,333	$	291,678
Earnings from operations	$	240,662	$	226,964
Adjusted earnings from operations 4	$	256,213	$	228,278
Net earnings attributable to Martin Marietta	$	180,221	$	151,546
Adjusted EBITDA 5	$	348,984	$	303,276
Earnings per diluted share	$	2.85	$	2.39
1  Total revenues include the sales of products and services to customers (net of any discounts or allowances) and freight revenues.
2  Products and services revenues include the sales of aggregates, cement, ready mixed concrete, asphalt and Magnesia Specialties products, and paving services to customers, and exclude related freight revenues.
3  Adjusted gross profit excludes an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting.  See appendix to this earnings release for a reconciliation to reported gross profit under generally accepted accounting principles (GAAP).
4  Adjusted earnings from operations exclude acquisition-related expenses, net; an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting; and a restructuring charge.  See appendix to this earnings release for a reconciliation to reported earnings from operations under GAAP.
5  Adjusted EBITDA is a non-GAAP financial measure.  See appendix to this earnings release for a reconciliation to net earnings attributable to Martin Marietta.

Ward Nye, Chairman, President and CEO of Martin Marietta, stated, “Our record third-quarter results demonstrate Martin Marietta’s strong execution as we capitalized on the improving strength of the current construction cycle while successfully managing through near-term challenges. Aggregates, cement and ready mixed concrete shipments meaningfully accelerated in July and August under normal operating conditions.  Pricing also improved, highlighting robust product demand across our geographic footprint. In September, extraordinary weather challenges, including record Texas rainfall and devastation from Hurricane Florence, mostly in the Carolinas, adversely impacted our third quarter. As a result, Texas, our largest state by revenues, and North Carolina, our third-largest state by revenues and leading state by unit profitability, were disproportionately negatively affected during the industry’s busiest and most profitable period.  Despite these short-term disruptions, we remain on track to once again deliver record revenues and EBITDA (Earnings Before Interest, Taxes, and Depreciation and Amortization) for the full year, and we are well-positioned to continue our growth trajectory in 2019.  

“We believe the ongoing construction cycle will continue to promote sustainable and steady growth for the foreseeable future, fueled by strong underlying demand and the long-awaited arrival of increased public-sector activity.  A compelling need for greater infrastructure investment exists to address much-needed maintenance and improvements, support economic growth and rebuild from weather events. We are encouraged by the recent and ongoing actions state and local governments are taking to secure additional funding for transportation projects. Indeed, Martin Marietta is poised to benefit from an acceleration in public lettings and contract awards in key states such as Texas, Colorado, North Carolina, Georgia and Florida. We are prepared to meet these future market demands. Important catalysts to do so will come from increased contractor capacity and logistics improvements. While getting better, these bottlenecks have nonetheless contributed to project delays and constrained construction growth in recent years. That said, these factors are also extending the construction cycle and promoting steady growth.”

Mr. Nye concluded, “Assessing these macroeconomic factors holistically and applying them to Martin Marietta, we anticipate increased private-sector demand, improving infrastructure construction activity and favorable pricing trends throughout 2019. We expect our key states to benefit from continued, favorable construction growth due to their attractive economic drivers and population trends. Our strategic geographic footprint, leading market positions, disciplined execution of our strategic plan and world-class attributes across our business - including safety, efficiency and operational excellence - firmly position Martin Marietta for both further growth and shareholder value creation.”

Operating Results
(All comparisons are versus the prior-year quarter unless noted otherwise)

	Quarter ended September 30, 2018
($ in thousands)	Revenues			Gross profit (loss)			Gross margin
Building Materials business:
Products and services:
Aggregates	$	687,800		$	209,082		30.4	%
Cement		98,223			32,543		33.1	%
Ready mixed concrete		254,686			20,632		8.1	%
Asphalt and paving		99,983			25,606		25.6	%
Less:  interproduct revenues		(66,839	)		---		---
Products and services		1,073,853			287,863		26.8	%
Freight		72,264			(47	)	NM
Total Building Materials business		1,146,117			287,816		25.1	%
Magnesia Specialties business:
Products and services		68,365			26,823		39.2	%
Freight		5,158			(1,076	)	NM
Total Magnesia Specialties business		73,523			25,747		35.0	%
Corporate		---			(579	)	NM
Total	$	1,219,640		$	312,984		25.7	%

 

	Quarter ended September 30, 2017
($ in thousands)	Revenues			Gross profit (loss)			Gross margin
Building Materials business:
Products and services:
Aggregates	$	590,312		$	187,065		31.7	%
Cement		88,470			27,459		31.0	%
Ready mixed concrete		240,222			23,913		10.0	%
Asphalt and paving		110,973			28,873		26.0	%
Less:  interproduct revenues		(67,379	)		---		---
Products and services		962,598			267,310		27.8	%
Freight		61,229			1,012		NM
Total Building Materials business		1,023,827			268,322		26.2	%
Magnesia Specialties business:
Products and services		59,889			21,272		35.5	%
Freight		4,016			(1,362	)	NM
Total Magnesia Specialties business		63,905			19,910		31.2	%
Corporate		---			3,446		NM
Total	$	1,087,732		$	291,678		26.8	%

Building Materials Business

Aggregates

Volume growth accelerated during the quarter’s first two months, reflecting strong underlying product demand, most notably in Texas, North Carolina, Georgia and Iowa. Despite clear market strength, extreme weather temporarily hindered construction activity. Record precipitation in Texas, compounded by disruptions from Hurricane Florence in the Carolinas, adversely impacted September’s aggregates shipment, production and overall efficiency levels.

Heritage aggregates volume and pricing improved 3.8 percent and 2.9 percent, respectively, excluding the third-quarter 2017 shipments from the Company’s Forsyth, Georgia, quarry that was divested in April 2018. 

• Shipments for the Mid-America Group heritage operations increased 5.4 percent, driven by several large public and private construction projects in North Carolina and windfarm activity in Iowa. This growth was partially offset by disruptions from Hurricane Florence. Weather and product mix limited heritage pricing gains to 2.8 percent.
   
• Shipments for the Southeast Group heritage operations increased 11.9 percent, excluding third-quarter 2017 shipments from the Forsyth, Georgia, quarry that was divested in April 2018. This improvement was driven by strong construction activity in North Georgia and improving long-haul shipments from Florida distribution yards. Product mix of the Group’s offshore shipments muted heritage pricing growth to 1.7 percent.
   
• West Group shipments declined slightly, driven by record precipitation in September in Dallas/Fort Worth and San Antonio, as well as project delays in Colorado. Notably, the Southwest Division achieved double-digit volume growth heading into September, underscoring the region’s healthy construction market. West Group pricing improved 3.1 percent, reflecting robust pricing in Colorado that was partially offset by product mix and a lower percentage of higher-priced rail-shipped volumes in Texas.

Martin Marietta’s third-quarter heritage aggregates shipments by end use are as follows (all comparisons are versus the prior-year quarter):

Infrastructure Market

• Aggregates shipments to the infrastructure market were flat as large public projects in North Carolina and Texas were weather delayed. The Company remains encouraged by the recent acceleration of state lettings and contract awards. As state Departments of Transportation (DOTs) and contractors continue to address labor constraints, and the broader industry benefits from further regulatory reform, management remains confident that infrastructure demand will continue to improve driven by funding provided by the Fixing America’s Surface Transportation Act (FAST Act) and numerous state and local transportation initiatives. While some contractors are reporting longer lag times between contract awards and project commencement, public construction projects, once awarded, are seen through to completion. Thus, delays from weather or other factors typically serve to extend the duration of the construction cycle for the Company’s single largest end-use market. Aggregates shipments to the infrastructure market comprised 41 percent of third-quarter aggregates volumes. On a year-to-date basis, the infrastructure market represented 39 percent of aggregates shipments, remaining below the Company’s most recent five-year average of 43 percent.

Nonresidential Market

• Aggregates shipments to the nonresidential market increased 5 percent, driven by both commercial and heavy industrial construction activity. Looking ahead, ongoing energy-sector project approvals, supported by higher oil prices, underpin management’s expectation that the next wave of these large projects, particularly along the Gulf Coast, will contribute to increased aggregates demand for the next several years. The nonresidential market represented 33 percent of third-quarter aggregates shipments.   

Residential Market

• Aggregates shipments to the residential market increased 7 percent. Florida, Texas, Colorado, North Carolina, South Carolina and Georgia, six of the Company’s key states, ranked in the top ten nationally for growth in single-family housing unit starts for the trailing twelve months ended August 31, 2018. The residential construction outlook across the Company’s geographic footprint remains positive for both single- and multi-family housing, driven by favorable demographics, job growth, land availability and efficient permitting. The residential market accounted for 20 percent of third-quarter aggregates shipments.

ChemRock/Rail Market

• The ChemRock/Rail market accounted for the remaining 6 percent of third-quarter aggregates shipments. Shipments to this sector increased 6 percent, reflecting improved ballast shipments for the Midwest and Rocky Mountain Divisions.

Aggregates product gross margin was 30.4 percent, inclusive of an $8.3 million negative impact on cost of revenues related to selling acquired inventory after its markup to fair value as part of acquisition accounting.  Excluding this impact, adjusted aggregates product gross margin was 31.6 percent.

Acquired operations shipped 5.1 million tons despite Maryland’s wettest third quarter in history.  Selling prices for acquired operations are 10 percent to 15 percent below the corporate average.  Synergy realization is progressing ahead of plan.

Cement

Third-quarter cement shipments and pricing improved 7.6 percent and 3.3 percent, respectively. Both of the Company’s cement operations reported double-digit volume growth prior to September’s record rainfall, underscoring strong Texas demand. These factors, combined with increased production efficiencies, led to a 210-basis-point expansion in product gross margin to 33.1 percent.

Downstream businesses

Ready mixed concrete shipments increased 3.3 percent, with solid gains throughout the Rocky Mountain and Southwest Divisions, despite September’s record rainfall in Texas. Ready mixed concrete selling prices increased 2.7 percent. Project delays and permitting issues contributed to the 9.1 percent decrease in hot mixed asphalt shipments.  Asphalt pricing was essentially flat.

Magnesia Specialties Business

Magnesia Specialties product revenues increased 14.2 percent to a record $68.4 million with growth in both the chemicals and lime businesses. Operating efficiencies, together with lower unit energy costs, contributed to a 370-basis-point expansion in third-quarter product gross margin to 39.2 percent.   

Consolidated

Other operating expenses, net, included a $7.1 million restructuring charge related to the Company’s Southwest ready mixed concrete business. This primarily consists of asset impairment and related severance charges, as various ready mixed concrete locations are consolidated. These actions are anticipated to improve the long-term profitability of the Southwest ready mixed concrete business.

Liquidity and Capital Resources

Cash provided by operating activities for the nine months ended September 30, 2018 was $441.5 million compared with $418.1 million in the first nine months of 2017.

Cash paid for property, plant and equipment additions for the nine months ended September 30, 2018 was $262.2 million. The Company expects capital expenditures of $375 million for full-year 2018 as it continues to prudently deploy capital into the business.

During the third quarter of 2018, the Company contributed $150.0 million to its qualified defined benefit retirement plan and repurchased 305 thousand shares of its common stock for $60.4 million. Additionally, the Company extended the maturity date of its $400 million trade receivable facility to September 25, 2019.

At September 30, 2018, the Company’s ratio of consolidated net debt-to-consolidated EBITDA, as defined in the applicable credit agreement, for the trailing twelve months was 2.72 times. The Company expects to be modestly above its target leverage ratio of 2.0X to 2.5X by the end of 2018.

Commitment to Enhance Long-Term Shareholder Value

Martin Marietta is dedicated to disciplined capital allocation that preserves the Company’s financial flexibility and further enhances shareholder value. The Company’s capital allocation priorities remain unchanged and include value-enhancing acquisitions that promote the successful execution of the Company’s strategic growth plan, organic capital investment, and the return of cash to shareholders through a meaningful and sustainable dividend and share repurchases.

In August 2018, the Company increased its quarterly cash dividend by 9 percent. Additionally, the Company repurchased 305 thousand shares of common stock pursuant to its share repurchase authorization. The Company has now returned $1.3 billion to shareholders, in the form of dividend payments and share repurchases, since announcing a 20 million share repurchase authorization in February 2015. At September 30, 2018, 14.4 million shares remained under the current repurchase authorization and 62.7 million shares of Martin Marietta common stock were outstanding.

Outlook for 2018

Management has updated its full-year 2018 guidance to reflect current trends and expectations, including the impact of extraordinary weather-related events encountered during the third quarter.

Specifically: 

• Heritage aggregates average selling price is expected to increase in a range of 3 percent to 4 percent.
• Heritage aggregates volume is expected to be flat to up 1 percent and expected shipments by end-use market, both compared with 2017 levels and excluding shipments of the Company’s Forsyth, Georgia, quarry that was divested in April 2018, are as follows:
  • Infrastructure shipments to be relatively flat.
  • Nonresidential shipments to increase in the low- to mid-single digits.
  • Residential shipments to increase in the high-single digits.
  • ChemRock/Rail shipments to decrease.

2018 GUIDANCE
($ and tons in thousands, except per ton)	Low *			High *
Consolidated
Total revenues 1	$	4,135,000		$	4,255,000
Products and services revenues	$	3,855,000		$	3,985,000
Freight revenues	$	250,000		$	270,000
Gross profit	$	960,000		$	1,000,000
Adjusted gross profit 2	$	980,000		$	1,020,000
Selling, general and administrative expenses (SG&A)	$	280,000		$	285,000
Interest expense	$	135,000		$	140,000
Estimated tax rate (excluding discrete events)		20%			20%
Net earnings attributable to Martin Marietta	$	460,000		$	505,000
Adjusted EBITDA 3	$	1,100,000		$	1,145,000
Capital expenditures	$	375,000		$	375,000
Building Materials Business
Aggregates
Volume (total tons) 4		167,000			170,000
% growth 4		6.0%			8.0%
Average selling price per ton (ASP)	$	13.75		$	13.85
% growth 5		2.0%			3.0%
Total revenues	$	2,530,000		$	2,600,000
Products and services revenues	$	2,320,000		$	2,370,000
Freight revenues	$	210,000		$	230,000
Gross profit	$	620,000		$	640,000
Adjusted gross profit 2	$	640,000		$	660,000
Cement
Total revenues	$	390,000		$	405,000
Products and services revenues	$	375,000		$	390,000
Freight revenues	$	15,000		$	15,000
Gross profit	$	120,000		$	130,000
Ready Mixed Concrete and Asphalt and Paving
Products and services revenues	$	1,205,000		$	1,235,000
Gross profit	$	125,000		$	130,000
Magnesia Specialties Business
Total revenues	$	280,000		$	285,000
Products and services revenues	$	255,000		$	260,000
Freight revenues	$	25,000		$	25,000
Gross profit	$	95,000		$	100,000
*  Guidance range represents the low end and high end of the respective line items provided above.
1 2018 consolidated total revenues exclude $270 million related to estimated interproduct sales.
2 Adjusted gross profit is a non-GAAP financial measure and in each case excludes a $20 million increase in costs of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting.
3 Adjusted EBITDA is a non-GAAP financial measure.  See appendix to this earnings release for a reconciliation to net earnings attributable to Martin Marietta.
4 Represents 2018 total aggregates volumes, which includes approximately 10.7 million internal tons. Volume growth ranges are in comparison with total volumes of 157.7 million tons reported for the full year 2017, which included 10.9 million internal tons and 0.9 million tons from the Company’s Forsyth, Georgia, quarry that was divested in April 2018.
5 ASP growth range is in comparison with ASP of $13.46 per ton reported for the full year 2017.  The 2% to 3% ASP growth shown above reflects the inclusion of legacy Bluegrass Materials pricing which is below the heritage corporate average.

Preliminary View of 2019

Management’s preliminary view of 2019 anticipates mid-single-digit growth in both aggregates pricing and shipments. Supported by third-party forecasts, Martin Marietta believes the current construction cycle will continue to expand at a steady pace in 2019 for each of its three primary construction end-use markets. Notably:

• Infrastructure construction activity should benefit from the funding provided by the FAST Act as state DOTs and contractors continue to address labor constraints and the benefits of further regulatory reform emerge. Additionally, state and local initiatives that support infrastructure funding, including gas tax increases, bond programs and other ballot initiatives, continue to garner voter approval at historically attractive levels and will play an expanded role in public-sector activity. Third-party forecasts support increased infrastructure investment in 2019 and beyond, particularly for aggregates-intensive highways and streets.
   
• Nonresidential construction activity should increase in both the commercial and heavy industrial sectors for the next several years across many of the Company’s key markets as supported by third-party forecasts. Continued federal regulatory approvals, supported by higher oil prices, should notably contribute to increased aggregates consumption from the next wave of energy-sector projects, particularly along the Gulf Coast. Construction activity for these projects is expected to begin in earnest in 2019 and beyond.
   
• Residential construction should continue to grow. Management believes a shortage of single-family housing units exists, particularly for entry-level homes; a need the homebuilding industry is now beginning to address. Martin Marietta’s leading positions in southeastern and southwestern states offer superior opportunities for gains in single-family housing driven by a multitude of factors, such as affordable land, lower taxes and fewer regulatory barriers. Residential housing starts of 1.2 million units for the trailing twelve months ended September 2018 remain below the 50-year average of 1.5 million annual starts. Continued strength in residential construction supports future infrastructure and nonresidential activity.

Martin Marietta remains confident in its near- and long-term outlooks given the disciplined execution of its strategic plan and its attractive geographic footprint. Throughout the Company’s portfolio, underlying market fundamentals, including employment, population growth and state fiscal health, are robust and the Company’s markets show no signs of either a slowdown or being overbuilt. 

Non-GAAP Financial Information

This earnings release contains financial measures that have not been prepared in accordance with GAAP.  Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the accompanying appendix to this earnings release. 

Conference Call Information

The Company will discuss its third-quarter 2018 earnings results on a conference call and an online web simulcast today (November 6, 2018). The live broadcast of the Martin Marietta conference call will begin at 2:00 p.m. Eastern Time today. An online replay will be available approximately two hours following the conclusion of the live broadcast. A link to these events will be available at the Company’s website. Additionally, the Company has posted supplemental information related to its third-quarter performance on its website. For those investors without online web access, the conference call may also be accessed by calling (970) 315-0423, confirmation number 1547199.

About Martin Marietta

Martin Marietta, a member of the S&P 500 Index, is an American-based company and a leading supplier of building materials, including aggregates, cement, ready mixed concrete and asphalt. Through a network of operations spanning 27 states, Canada and The Bahamas, dedicated Martin Marietta teams supply the resources necessary for building the solid foundations on which our communities thrive. Martin Marietta’s Magnesia Specialties business provides a full range of magnesium oxide, magnesium hydroxide and dolomitic lime products. For more information, visit www.martinmarietta.com or www.magnesiaspecialties.com.

Investor Contact:  
Suzanne Osberg
Vice President, Investor Relations
(919) 783-4691
Suzanne.Osberg@martinmarietta.com

MLM-E.

If you are interested in Martin Marietta Materials, Inc. 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 press release that relate to the future involve risks and uncertainties, and are based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results.  These statements, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995, give the investor the Company’s expectations or forecasts of future events.  You can identify these statements by the fact that they do not relate only to historical or current facts.  They may use words such as “anticipate”, “expect”, “should”, “believe”, “will”, and other words of similar meaning in connection with future events or future operating or financial performance.  Any or all of our forward-looking statements here and in other publications may turn out to be wrong.

The Company’s outlook is subject to various risks and uncertainties, and is based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. Factors that the Company currently believes could cause actual results to differ materially from the forward-looking statements in this press release (including the outlook) include, but are not limited to: the performance of the United States economy; shipment declines resulting from economic events beyond the Company’s control; a 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, state or local transportation or infrastructure projects funding, most particularly in Texas, North Carolina, Iowa, Colorado, Georgia and Maryland; 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; 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 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, 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 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; continued 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. 

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, our Current Report on Form 8-K filed on March 16, 2018 and other periodic filings made with the SEC.  All of our forward-looking statements should be considered in light of these factors.  In addition, other risks and uncertainties not presently known to us or that we consider immaterial could affect the accuracy of our forward-looking statements, or adversely affect or be material to the Company.  The Company assumes no obligation to update any such forward-looking statements.

 

MARTIN MARIETTA MATERIALS, INC.
Unaudited Statements of Earnings
(In thousands, except per share amounts)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2018				2017				2018				2017
Products and services revenues		$	1,142,218			$	1,022,487			$	3,024,300			$	2,811,646
Freight revenues			77,422				65,245				199,747				183,470
Total revenues			1,219,640				1,087,732				3,224,047				2,995,116
Cost of revenues - products and services			828,110				730,459				2,282,159				2,097,272
Cost of revenues - freight			78,546				65,595				202,595				185,006
Total cost of revenues			906,656				796,054				2,484,754				2,282,278
Gross Profit			312,984				291,678				739,293				712,838
Selling general & administrative expenses			68,441				57,219				209,632				195,127
Acquisition-related expenses, net			89				1,314				12,925				3,319
Other operating expenses and (income), net			3,792				6,181				(26,960	)			(2,575	)
Earnings from operations			240,662				226,964				543,696				516,967
Interest expense			35,468				23,141				103,526				68,037
Other nonoperating income, net			(4,248	)			(479	)			(19,873	)			(6,434	)
Earnings before income tax expense			209,442				204,302				460,043				455,364
Income tax expense			29,089				52,763				84,147				119,277
Consolidated net earnings			180,353				151,539				375,896				336,087
Less: Net earnings (loss) attributable to noncontrolling interests			132				(7	)			275				(72	)
Net Earnings Attributable to Martin Marietta Materials, Inc.		$	180,221			$	151,546			$	375,621			$	336,159
Net earnings per common share attributable to common shareholders:
Basic		$	2.86			$	2.40			$	5.95			$	5.33
Diluted		$	2.85			$	2.39			$	5.93			$	5.30
Dividends per common share		$	0.48			$	0.44			$	1.36			$	1.28
Average number of common shares outstanding:
Basic			62,932				62,896				62,970				62,940
Diluted			63,167				63,158				63,224				63,218

 

MARTIN MARIETTA MATERIALS, INC.
Unaudited Financial Highlights
(In thousands)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2018				2017				2018				2017
Total revenues:
Building Materials Business:
Mid-America Group		$	377,005			$	308,472			$	906,377			$	788,390
Southeast Group			125,547				94,843				318,749				277,474
West Group			643,565				620,512				1,783,174				1,726,742
Total Building Materials Business			1,146,117				1,023,827				3,008,300				2,792,606
Magnesia Specialties			73,523				63,905				215,747				202,510
Total		$	1,219,640			$	1,087,732			$	3,224,047			$	2,995,116
Gross profit (loss):
Building Materials Business:
Mid-America Group		$	131,331			$	117,957			$	270,461			$	242,778
Southeast Group			30,783				18,371				56,933				51,623
West Group			125,702				131,994				333,949				349,267
Total Building Materials Business			287,816				268,322				661,343				643,668
Magnesia Specialties			25,747				19,910				73,476				65,849
Corporate			(579	)			3,446				4,474				3,321
Total		$	312,984			$	291,678			$	739,293			$	712,838
Selling, general and administrative expenses:
Building Materials Business:
Mid-America Group		$	14,113			$	12,671			$	41,260			$	39,934
Southeast Group			4,440				4,097				13,689				12,896
West Group			26,600				24,716				79,892				75,665
Total Building Materials Business			45,153				41,484				134,841				128,495
Magnesia Specialties			2,404				2,329				7,512				7,146
Corporate			20,884				13,406				67,279				59,486
Total		$	68,441			$	57,219			$	209,632			$	195,127
Earnings (Loss) from operations:
Building Materials Business:
Mid-America Group		$	120,344			$	106,235			$	235,221			$	204,939
Southeast Group			26,372				17,882				60,464				42,331
West Group			92,090				96,522				249,885				270,246
Total Building Materials Business			238,806				220,639				545,570				517,516
Magnesia Specialties			23,301				17,590				65,867				58,589
Corporate			(21,445	)			(11,265	)			(67,741	)			(59,138	)
Total		$	240,662			$	226,964			$	543,696			$	516,967

 

MARTIN MARIETTA MATERIALS, INC.
Unaudited Financial Highlights (Continued)
(In thousands)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2018				2017				2018				2017
Total revenues:
Building Materials business products and services:
Aggregates		$	687,800			$	590,312			$	1,778,124			$	1,619,282
Cement			98,223				88,470				300,554				280,961
Ready Mixed Concrete			254,686				240,222				750,424				704,471
Asphalt and paving			99,983				110,973				199,489				215,652
Less:  Interproduct sales			(66,839	)			(67,379	)			(205,681	)			(198,638	)
Subtotal			1,073,853				962,598				2,822,910				2,621,728
Freight			72,264				61,229				185,390				170,878
Total Building Materials Business			1,146,117				1,023,827				3,008,300				2,792,606
Magnesia Specialties business:
Products and services			68,365				59,889				201,390				189,918
Freight			5,158				4,016				14,357				12,592
Total Magnesia Specialties Business			73,523				63,905				215,747				202,510
Consolidated total revenues		$	1,219,640			$	1,087,732			$	3,224,047			$	2,995,116
Gross profit (loss):
Building Materials business products and services:
Aggregates		$	209,082			$	187,065			$	460,624			$	439,032
Cement			32,543				27,459				97,582				87,608
Ready Mixed Concrete			20,632				23,913				66,226				70,542
Asphalt and paving			25,606				28,873				36,479				44,446
Subtotal			287,863				267,310				660,911				641,628
Freight			(47	)			1,012				432				2,040
Total Building Materials Business			287,816				268,322				661,343				643,668
Magnesia Specialties business:
Products and services			26,823				21,272				76,756				69,425
Freight			(1,076	)			(1,362	)			(3,280	)			(3,576	)
Total Magnesia Specialties Business			25,747				19,910				73,476				65,849
Corporate			(579	)			3,446				4,474				3,321
Consolidated gross profit		$	312,984			$	291,678			$	739,293			$	712,838

 

MARTIN MARIETTA MATERIALS, INC.
Balance Sheet Data
(In thousands)
		September 30,			December 31,			September 30,
			2018			2017			2017
		(Unaudited)			(Audited)			(Unaudited)
ASSETS
Cash and cash equivalents		$	53,961		$	1,446,364		$	35,219
Accounts receivable, net			644,835			487,240			582,532
Inventories, net			651,295			600,591			576,429
Other current assets			104,717			96,965			83,809
Property, plant and equipment, net			5,103,395			3,592,813			3,521,577
Intangible assets, net			2,908,410			2,666,639			2,664,646
Other noncurrent assets			121,558			101,899			102,573
Total assets		$	9,588,171		$	8,992,511		$	7,566,785
LIABILITIES AND EQUITY
Current maturities of long-term debt and short-term facilities		$	380,041		$	299,909		$	80,038
Other current liabilities			392,645			394,307			388,465
Long-term debt (excluding current maturities)			2,829,657			2,727,294			1,642,502
Other noncurrent liabilities			1,043,500			888,524			1,121,798
Total equity			4,942,328			4,682,477			4,333,982
Total liabilities and equity		$	9,588,171		$	8,992,511		$	7,566,785

 

MARTIN MARIETTA MATERIALS, INC.
Unaudited Statements of Cash Flows
(In thousands)
	Nine Months Ended
	September 30,
		2018				2017
Operating activities:
Consolidated net earnings	$	375,896			$	336,087
Adjustments to reconcile consolidated net earnings to net cash provided by operating activities:
Depreciation, depletion and amortization		253,200				221,418
Stock-based compensation expense		23,084				23,698
Gain on divestitures and sales of assets		(35,167	)			(17,970	)
Deferred income taxes		68,833				6,543
Other items, net		(2,107	)			(9,894	)
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net		(132,176	)			(124,622	)
Inventories, net		(8,015	)			(54,804	)
Accounts payable		42,995				3,182
Other assets and liabilities, net		(145,005	)			34,484
Net cash provided by operating activities		441,538				418,122
Investing activities:
Additions to property, plant and equipment		(262,155	)			(308,745	)
Acquisitions, net of cash acquired		(1,640,698	)			(7,200	)
Proceeds from divestitures and sales of assets		63,460				33,138
Investments in life insurance contracts, net		771				276
Payment of railcar construction advances		(56,033	)			(42,954	)
Reimbursement of railcar construction advances		56,033				40,930
Net cash used for investing activities		(1,838,622	)			(284,555	)
Financing activities:
Borrowings of long-term debt		875,000				1,011,244
Repayments of long-term debt		(695,039	)			(975,035	)
Payments of deferred acquisition consideration		(6,707	)			-
Payments on capital leases		(2,589	)			(2,708	)
Debt issue costs		(3,194	)			(1,989	)
Change in bank overdraft		-				1,047
Contributions by noncontrolling interest to joint venture		-				211
Repurchases of common stock		(60,377	)			(99,999	)
Dividends paid		(86,190	)			(80,961	)
Purchase of remaining interest in existing joint venture		(12,800	)			-
Proceeds from exercise of stock options		6,993				10,017
Shares withheld for employees' income tax obligations		(10,416	)			(10,213	)
Net cash provided by (used for) financing activities		4,681				(148,386	)
Net decrease in cash and cash equivalents		(1,392,403	)			(14,819	)
Cash and cash equivalents, beginning of period		1,446,364				50,038
Cash and cash equivalents, end of period	$	53,961			$	35,219

 

MARTIN MARIETTA MATERIALS, INC.
Unaudited Operational Highlights
	Three Months Ended								Nine Months Ended
	September 30, 2018								September 30, 2018
	Volume				Pricing				Volume				Pricing
Volume/Pricing Variance (1)
Heritage Operations:(2)
Mid-America Group		5.4	%			2.8	%			1.5	%			4.5	%
Southeast Group		6.2	%			1.7	%			(0.7	%)			1.7	%
West Group		(0.6	%)			3.1	%			(0.9	%)			2.4	%
Total Heritage Aggregates Product Line		3.2	%			2.9	%			0.2	%			3.3	%
Total Aggregates Product Line  (3)		14.9	%			1.5	%			7.4	%			2.3	%
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
Shipments (tons in thousands)		2018				2017				2018				2017
Heritage Operations:(2)
Mid-America Group		22,533				21,371				55,453				54,624
Southeast Group		5,682				5,349				15,465				15,579
West Group		16,979				17,085				49,186				49,637
Total Heritage Aggregates Product Line		45,194				43,805				120,104				119,840
Acquisitions		5,130				-				8,558				-
Total Aggregates Product Line  (3)		50,324				43,805				128,662				119,840
(1)  Volume/pricing variances reflect the percentage increase (decrease) from the comparable period in the prior year.
(2)  Heritage aggregates operations exclude acquisitions that were not included in prior-year operations for a full year.
(3) Aggregates Product Line includes acquisitions from the date of acquisition and divestitures through the date of disposal.
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2018				2017				2018				2017
Shipments (in thousands)
Aggregates tons - external customers		47,442				40,787				120,509				111,617
Internal aggregates tons used in other product lines		2,882				3,018				8,154				8,223
Total aggregates tons		50,324				43,805				128,663				119,840
Cement tons - external customers		587				523				1,767				1,749
Internal cement tons used in other product lines		292				294				966				895
Total cement tons		879				817				2,733				2,644
Ready Mixed Concrete - cubic yards		2,232				2,160				6,799				6,442
Asphalt tons - external customers		394				385				803				863
Internal asphalt tons used in road paving business		709				829				1,420				1,615
Total asphalt tons		1,103				1,214				2,223				2,478
Average unit sales price by product line (including internal sales):
Aggregates (per ton):
Heritage	$	13.79			$	13.40			$	13.87			$	13.43
Acquisition	$	11.86			$	-			$	11.95			$	-
Total	$	13.60			$	13.40			$	13.74			$	13.43
Cement (per ton)	$	110.63			$	107.11			$	108.92			$	105.26
Ready Mixed Concrete (per cubic yard)	$	112.14			$	109.22			$	108.36			$	107.34
Asphalt (per ton)	$	44.40			$	44.73			$	44.39			$	43.08

 

MARTIN MARIETTA MATERIALS, INC.
Non-GAAP Financial Measures
(Dollars in thousands)
The ratio of Consolidated Debt-to-Consolidated EBITDA, as defined, for the trailing-12 months is a covenant under the Company's revolving credit facility and accounts receivable securitization facility.  Under the terms of these agreements, as amended, the Company's ratio of Consolidated Debt-to-Consolidated EBITDA as defined, for the trailing-12 months cannot exceed 3.50 times as of September 30, 2018, with certain exceptions related to qualifying acquisitions, as defined.
The following presents the calculation of Consolidated Debt-to-Consolidated EBITDA, as defined by the Company's Credit Agreement, at September 30, 2018, for the trailing-12 months EBITDA. For supporting calculations, refer to the Company's website at www.martinmarietta.com.
					Twelve Month Period
					October 1, 2017 to
					September 30, 2018
Earnings from continuing operations attributable to Martin Marietta Materials, Inc.					$	752,804
Add back:
Interest expense						126,976
Depreciation, depletion and amortization expense						325,410
Stock-based compensation expense						29,846
Acquisition-related expenses, net						36,656
Bluegrass EBITDA - Pre-Acquisition (October 1, 2017 to April 27, 2018)						43,417
Noncash portion of restructuring expenses						5,245
Deduct:
Income tax benefit						(129,691	)
Interest income						(7,149	)
Consolidated EBITDA, as defined by the Company's Credit Agreement					$	1,183,514
Consolidated Net Debt, as defined and including debt for which the Company is a co-borrower, at September 30, 2018					$	3,224,046
Consolidated Debt-to-Consolidated EBITDA, as defined by the Company's Credit Agreement, at September 30, 2018, for the trailing-12 months EBITDA					2.72 times
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 or operating cash flow.  For further information on EBITDA, refer to the Company's website at www.martinmarietta.com.  EBITDA is as follows:
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2018				2017				2018				2017
Consolidated Earnings Before Interest, Income Taxes, Depreciation, Depletion and Amortization (EBITDA)	$	333,433			$	301,962			$	813,361			$	741,974
A Reconciliation of Net Earnings Attributable to Martin Marietta to Consolidated EBITDA is as follows:
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2018				2017				2018				2017
Net Earnings Attributable to Martin Marietta	$	180,221			$	151,546			$	375,621			$	336,159
Add back:
Interest Expense		35,468				23,141				103,526				68,037
Income Tax Expense for Controlling Interests		29,051				52,744				84,070				119,247
Depreciation, Depletion and Amortization Expense		88,693				74,531				250,144				218,531
Consolidated EBITDA	$	333,433			$	301,962			$	813,361			$	741,974
Aggregates shipments in the Southeast Group for January through April of 2018 and the nine months ended September 30, 2017 include the Forsyth, Georgia operation, which was divested in April 2018.
The following table presents aggregates shipment data and volume variance excluding the Forsyth, Georgia operation from the periods of Martin Marietta's ownership to provide a more comparable analysis of aggregates volume variance (tons in 000s).
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2018				2017				2018				2017
Southeast Group:
Reported heritage aggregates shipments		5,682				5,349				15,465				15,579
Less:  Aggregates shipments for the Forsyth, Georgia quarry during periods of Martin Marietta ownership		-				(272	)			(229	)			(680	)
Adjusted heritage aggregates shipments		5,682				5,077				15,236				14,899
Heritage aggregates volume variance excluding shipments for the Forsyth, Georgia quarry		11.9	%							2.3	%
Total Heritage Business:
Reported heritage aggregates shipments		45,194				43,805				120,104				119,840
Less:  Aggregates shipments for the Forsyth, Georgia quarry during periods of Martin Marietta ownership		-				(272	)			(229	)			(680	)
Adjusted heritage aggregates shipments		45,194				43,533				119,875				119,160
Heritage aggregates volume variance excluding shipments for the Forsyth, Georgia quarry		3.8	%							0.6	%

 

MARTIN MARIETTA MATERIALS, INC.
Non-GAAP Financial Measures (continued)
(Dollars and number of shares in thousands)
Adjusted consolidated gross profit, adjusted consolidated earnings from operations and adjusted consolidated EBITDA for the three months ended September 30, 2018 and 2017, exclude the impact of acquisition-related expenses, net; the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting; and the impact of restructuring charges.  Acquisition-related expenses, net, consist of acquisition and integration expenses and the nonrecurring gain on the required divestiture of a legacy Martin Marietta quarry in Georgia as part of the acquisition of Bluegrass Materials.  Adjusted consolidated gross profit, adjusted consolidated earnings from operations and adjusted EBITDA represent non-GAAP financial measures. Management presents these measures for investors and analysts to evaluate and forecast the Company's financial results, as acquisition-related expenses, net; the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting; and restructuring charges are nonrecurring.
The following reconciles consolidated gross profit in accordance with GAAP to adjusted consolidated gross profit for the three months ended September 30:
												2018				2017
Consolidated gross profit in accordance with GAAP											$	312,984			$	291,678
Add back:
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting												8,349				-
Adjusted gross profit											$	321,333			$	291,678
The following reconciles consolidated earnings from operations in accordance with GAAP to adjusted consolidated earnings from operations for the three months ended September 30:
												2018				2017
Consolidated earnings from operations in accordance with GAAP											$	240,662			$	226,964
Add back:
Acquisition-related expenses, net												89				1,314
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting												8,349				-
Restructuring charge												7,113				-
Adjusted consolidated earnings from operations											$	256,213			$	228,278
The following reconciles consolidated EBITDA to adjusted consolidated EBITDA for the three months ended September 30:
												2018				2017
Consolidated EBITDA											$	333,433			$	301,962
Add back:
Acquisition-related expenses, net												89				1,314
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting												8,349				-
Restructuring charge												7,113				-
Adjusted consolidated EBITDA											$	348,984			$	303,276
Adjusted gross margin for aggregates products excludes the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting and is a non-GAAP measure.  Management presents this measure for investors and analysts to evaluate and forecast the Company's financial results, as the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting is nonrecurring.
The following reconciles gross margin for aggregates products to adjusted gross margin for aggregates products for the three months ended September 30, 2018:
												2018				2017
Gross profit for aggregates products											$	209,082			$	187,065
Total revenues for aggregates products											$	687,800			$	590,312
Gross margin for aggregates products in accordance with GAAP												30.4	%			31.7	%
Gross profit for aggregates products in accordance with GAAP											$	209,082
Add back:
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting											$	8,349
Adjusted gross profit for aggregates products											$	217,431
Total revenues for aggregates products											$	687,800
Adjusted gross margin for aggregates products												31.6	%

 

MARTIN MARIETTA MATERIALS, INC.
Non-GAAP Financial Measures (continued)
(Dollars in thousands)
The following are reconciliations of the GAAP measure for the midpoints of the 2018 guidance to the midpoints of the adjusted metrics included in the 2018 guidance:
2018 Guidance - Consolidated gross profit:
Consolidated gross profit in accordance with GAAP											$	980,000
Add back:
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting												20,000
Adjusted consolidated gross profit											$	1,000,000
2018 Guidance - Aggregates product gross profit:
Aggregates product gross profit in accordance with GAAP											$	630,000
Add back:
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting												20,000
Adjusted aggregates product gross profit											$	650,000
2018 Guidance - Adjusted EBITDA
Net Earnings Attributable to Martin Marietta											$	482,500
Add back:
Interest Expense												137,500
Taxes on Income												120,500
Depreciation, Depletion and Amortization Expense												340,000
EBITDA											$	1,080,500
Add back:
Bluegrass acquisition-related expenses, net												15,000
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting												20,000
Restructuring charge												7,000
Adjusted EBITDA											$	1,122,500

 

Source: Martin Marietta Materials, Inc.