Martin Marietta Reports Fourth Quarter and Full Year 2018 Results
Company Achieved Full-Year Record Revenues and EBITDA
2018 Shipments and Pricing Improved for Aggregates, Cement and Ready Mixed Concrete
Magnesia Specialties Business Posted Record Revenues and Profitability
Growth in Company’s Top Ten States Expected to Outperform the Nation in 2019;
Guidance Reaffirmed for Mid-Single-Digit Growth in 2019 Aggregates Shipments and Pricing
Highlights include:
($ in thousands, except per share) | Quarter ended December 31, 2018 2017 |
Year ended December 31, 2018 2017 |
|||||||
Total revenues 1 | $ | 1,020,218 | $ | 970,478 | $ | 4,244,265 | $ | 3,965,594 | |
Products and services revenues 2 | $ | 956,051 | $ | 911,831 | $ | 3,980,351 | $ | 3,723,478 | |
Building Materials business | $ | 888,805 | $ | 849,027 | $ | 3,711,715 | $ | 3,470,756 | |
Magnesia Specialties business | $ | 67,246 | $ | 62,804 | $ | 268,636 | $ | 252,722 | |
Gross profit | $ | 227,284 | $ | 259,102 | $ | 966,577 | $ | 971,940 | |
Adjusted gross profit 3 | $ | 227,506 | $ | 259,102 | $ | 985,315 | $ | 971,940 | |
Earnings from operations | $ | 147,041 | $ | 183,413 | $ | 690,737 | $ | 700,381 | |
Adjusted earnings from operations 4 | $ | 159,542 | $ | 188,733 | $ | 741,792 | $ | 709,019 | |
Net earnings attributable to Martin Marietta 5 | $ | 94,378 | $ | 377,182 | $ | 469,998 | $ | 713,342 | |
Adjusted EBITDA 6 | $ | 251,850 | $ | 267,747 | $ | 1,103,765 | $ | 1,013,017 | |
Earnings per diluted share 5, 7 | $ | 1.50 | $ | 5.95 | $ | 7.43 | $ | 11.25 |
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 2018 fourth-quarter and full-year adjusted earnings from operations exclude an increase in cost of revenues from the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting; asset and portfolio rationalization charges; and acquisition-related expenses, net. 2017 fourth-quarter and full-year adjusted earnings from operations exclude acquisition-related expenses. See appendix to this earnings release for a reconciliation to reported earnings from operations under GAAP.
5 2017 fourth-quarter and full-year results include a one-time, non-cash benefit of
6 Adjusted EBITDA is a non-GAAP financial measure. See appendix to this earnings release for a reconciliation to net earnings attributable to Martin Marietta.
7 2018 full-year earnings per diluted share includes a loss of
“Even more noteworthy, we extended our lengthy history of record performance without meaningful shipment growth from our heritage
“Looking ahead, we expect 2019 to be another record year for Martin Marietta. The fundamentals of our business and underlying demand trends remain strong across our geographic footprint. We believe the combination of continued private-sector strength and the long-awaited arrival of increased public-sector activity in our key geographies will drive shipment, pricing and profitability growth in 2019. Leading employment and population growth across the Sunbelt should continue to bolster private-sector construction activity. Further, after a decade of underinvestment, infrastructure activity is poised for meaningful growth as evidenced by an acceleration in public lettings and contract awards in our key states of
Mr. Nye concluded, “We are confident in Martin Marietta’s outlook given our leading market positions, disciplined pricing strategy and proven execution of our strategic plan. For 2019, we anticipate construction growth in our key regions to outpace the nation as a whole, driven by attractive employment growth, population trends and favorable momentum from state Departments of Transportation. Additionally, widespread customer optimism and growing contractor backlogs support increased demand for our construction materials. With both the ability and capacity to meet future market demand, Martin Marietta remains committed to world-class attributes across our business - including safety, efficiency and operational excellence – and is well-positioned to deliver enhanced long-term value for our shareholders.”
Mr. Nye’s CEO Commentary and Market Perspective can be found on the Investor Relations section of the Company’s website.
Fourth-Quarter Operating Results
(All comparisons are versus the prior-year quarter unless noted otherwise)
Quarter ended December 31, 2018 | ||||||||
($ in thousands) | Revenues | Gross profit (loss) | Gross margin | |||||
Building Materials business: | ||||||||
Products and services: | ||||||||
Aggregates | $ | 577,549 | $ | 146,133 | 25.3 | % | ||
Cement | 87,277 | 28,631 | 32.8 | % | ||||
Ready mixed concrete | 213,346 | 7,950 | 3.7 | % | ||||
Asphalt and paving | 69,190 | 16,438 | 23.8 | % | ||||
Less: interproduct revenues | (58,557 | ) | --- | --- | ||||
Products and services | 888,805 | 199,152 | 22.4 | % | ||||
Freight | 59,438 | (173 | ) | NM | ||||
Total Building Materials business | 948,243 | 198,979 | 21.0 | % | ||||
Magnesia Specialties business: | ||||||||
Products and services | 67,246 | 26,151 | 38.9 | % | ||||
Freight | 4,729 | (944 | ) | NM | ||||
Total Magnesia Specialties business | 71,975 | 25,207 | 35.0 | % | ||||
Corporate | --- | 3,098 | NM | |||||
Total | $ | 1,020,218 | $ | 227,284 | 22.3 | % |
Quarter ended December 31, 2017 | ||||||||
($ in thousands) | Revenues | Gross profit (loss) | Gross margin | |||||
Building Materials business: | ||||||||
Products and services: | ||||||||
Aggregates | $ | 515,646 | $ | 160,637 | 31.2 | % | ||
Cement | 90,272 | 29,413 | 32.6 | % | ||||
Ready mixed concrete | 231,566 | 21,103 | 9.1 | % | ||||
Asphalt and paving | 76,918 | 20,248 | 26.3 | % | ||||
Less: interproduct revenues | (65,375 | ) | --- | --- | ||||
Products and services | 849,027 | 231,401 | 27.3 | % | ||||
Freight | 53,970 | 562 | NM | |||||
Total Building Materials business | 902,997 | 231,963 | 25.7 | % | ||||
Magnesia Specialties business: | ||||||||
Products and services | 62,804 | 24,625 | 39.2 | % | ||||
Freight | 4,677 | (1,075 | ) | NM | ||||
Total Magnesia Specialties business | 67,481 | 23,550 | 34.9 | % | ||||
Corporate | --- | 3,589 | NM | |||||
Total | $ | 970,478 | $ | 259,102 | 26.7 | % |
Building Materials Business
Unfavorable weather persisted across the Company’s geographic footprint and dampened construction activity during an already seasonally-restricted quarter.
Aggregates
Fourth-quarter heritage aggregates pricing improved 2.3 percent and shipments declined slightly. Excluding the fourth-quarter 2017 shipments from the Company’s
- Shipments for the
Mid-America Group heritage operations increased 1.6 percent, driven by heavy industrial projects in the Mideast Division. These gains were offset by weather-related delays in several large public and private construction projects in the Carolinas. Heritage pricing improved 2.1 percent.
- Shipments for the
Southeast Group heritage operations, as reported, decreased 3.2 percent; excluding fourth-quarter 2017 shipments from theForsyth, Georgia quarry, these shipments increased 1.9 percent. Weather hindered construction activity inGeorgia and Florida. Heritage pricing improved 7.4 percent, driven by strong gains inNorth Georgia and a higher percentage of long-haul shipments.
West Group shipments declined 1.2 percent, driven by Texas’ record October rainfall, as well as project delays inColorado .West Group pricing improved 0.5 percent, reflecting robust pricing inColorado that was partially offset by product mix inTexas .
Martin Marietta’s fourth-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 decreased 5 percent, as large public projects in
North Carolina ,South Carolina andTexas were delayed by weather. 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. The Company is encouraged by the acceleration of state lettings and contract awards in key states, includingTexas ,Colorado ,North Carolina ,Georgia andFlorida . 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. Aggregates shipments to the infrastructure market comprised 36 percent of fourth-quarter aggregates volumes. For the full year, the infrastructure market represented 39 percent of aggregates shipments, remaining below the Company’s most recent ten-year average of 46 percent.
Nonresidential Market
- Aggregates shipments to the nonresidential market increased 18 percent, driven by both commercial and heavy industrial construction activity. The Company continues to benefit from robust distribution center, warehouse, data center and wind turbine projects in key geographies. Notably, the Mideast Division, which experienced favorable weather during the quarter, reported double-digit volume growth as it continued to ship to the Mountaineer Xpress Pipeline project in
West Virginia . The nonresidential market represented 36 percent of fourth-quarter aggregates shipments.
Residential Market
- Aggregates shipments to the residential market declined 10 percent stemming from weather delays. Importantly,
Florida ,Texas ,Colorado ,North Carolina ,South Carolina andGeorgia , six of the Company’s key states, were ranked in the top ten nationally for growth in single-family housing unit starts for the trailing twelve months endedNovember 30, 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, steady interest rates and efficient permitting. The residential market accounted for 21 percent of fourth-quarter aggregates shipments.
ChemRock/Rail Market
- The ChemRock/Rail market accounted for the remaining 7 percent of fourth-quarter aggregates shipments. Volumes to this sector decreased 17 percent, driven by reduced agricultural lime shipments from weather-delayed corn and soybean harvests and a depressed farm economy. Ballast shipments declined due to lower maintenance spending by Class I railroads.
Aggregates product gross margin decreased 590 basis points to 25.3 percent, reflecting higher costs for production personnel, diesel, rail freight and depreciation combined with a lower inventory build.
Acquired operations shipped 4.4 million tons at selling prices that are 10 percent to 15 percent below the Company’s average, but in line with management’s expectations. Synergy realization has exceeded the Company’s expectations.
Cement
Cement product revenues for the fourth quarter decreased 3.3 percent as pricing growth of 2.6 percent was offset by a 5.9 percent volume decline. Fourth-quarter shipments reflect record precipitation in
Downstream businesses
Ready mixed concrete shipments decreased 10.9 percent, primarily driven by weather headwinds in
Magnesia Specialties Business
Magnesia Specialties product revenues increased 7.1 percent to a fourth-quarter record of
Consolidated
Other operating expenses, net, included an
Liquidity and Capital Resources
Cash provided by operating activities was
Cash paid for property, plant and equipment additions was
At
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.
The Company has returned
Outlook for 2019
Martin Marietta is confident in its 2019 outlook. The Company’s geographic footprint has attractive underlying market fundamentals, including notable employment gains, population growth and superior state fiscal health – all attributes that promote steady and sustainable construction growth for the foreseeable future. Supported by third-party forecasts, Martin Marietta believes the current construction cycle will expand further in 2019 for each of the Company’s three primary construction end-use markets. Notably:
- Infrastructure construction activity, particularly for aggregates-intensive highways and streets, should benefit from recent accelerations in state lettings and contract awards in key Martin Marietta states, continued FAST Act funding and regulatory reform allowing for reduced permitting time for large projects. Importantly, the partial federal government shutdown did not meaningfully delay awarded contracts and construction spending as the FAST Act, and not the federal general fund, supports federal transportation programs. Additionally, state and local initiatives that support infrastructure funding, including gas tax increases, bond programs and other ballot initiatives, will continue to play an expanded role in public-sector activity as they garner voter approval at historically high levels. Further, third-party forecasts also support increased infrastructure investment in 2019 and beyond.
- 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. Both the Architectural Billings Index and Dodge Momentum Index suggest commercial and institutional construction activity will remain healthy throughout 2019. Continued federal regulatory approvals should notably contribute to increased aggregates consumption from the next wave of large energy-sector projects, particularly along the
Gulf Coast . To date, management has not seen a slowdown in the regulatory permitting and investing decisions for these projects despite the recent pullback in oil prices. Construction activity for these projects is expected to begin in earnest in 2019 and continue for several years thereafter.
- Residential construction should continue to grow. While mortgage rate increases temporarily paused new residential construction, now stabilized, the residential market is expected to adapt and further strengthen. Housing starts remain below the 50-year average of 1.5 million annual starts despite notable population gains. Further, 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. Continued strength in residential construction supports future infrastructure and nonresidential activity.
Specifically:
• Aggregates shipments by end-use market compared with 2018 levels are as follows:
- Infrastructure shipments to increase in the high-single digits.
- Nonresidential shipments to increase in the mid- to high-single digits.
- Residential shipments to increase in the mid-single digits.
- ChemRock/Rail shipments to be up slightly.
2019 GUIDANCE |
|||||||
($ and tons in thousands, except per ton) | Low * | High * | |||||
Consolidated | |||||||
Total revenues 1 | $ | 4,480,000 | $ | 4,680,000 | |||
Products and services revenues | $ | 4,230,000 | $ | 4,380,000 | |||
Freight revenues | $ | 250,000 | $ | 300,000 | |||
Gross profit | $ | 1,110,000 | $ | 1,210,000 | |||
Selling, general and administrative expenses (SG&A) | $ | 300,000 | $ | 310,000 | |||
Interest expense | $ | 130,000 | $ | 140,000 | |||
Estimated tax rate (excluding discrete events) | 20 | % | 22 | % | |||
Net earnings attributable to Martin Marietta | $ | 520,000 | $ | 620,000 | |||
EBITDA 2 | $ | 1,170,000 | $ | 1,280,000 | |||
Capital expenditures | $ | 350,000 | $ | 400,000 | |||
Building Materials Business | |||||||
Aggregates | |||||||
Volume (total tons) 3 | 180,000 | 185,000 | |||||
% growth 3 | 6.0 | % | 8.0 | % | |||
Average selling price per ton (ASP) | $ | 14.15 | $ | 14.40 | |||
% growth 4 | 3.0 | % | 5.0 | % | |||
Total revenues | $ | 2,800,000 | $ | 2,910,000 | |||
Products and services revenues | $ | 2,590,000 | $ | 2,650,000 | |||
Freight revenues | $ | 210,000 | $ | 260,000 | |||
Gross profit | $ | 755,000 | $ | 810,000 | |||
Cement | |||||||
Total revenues | $ | 420,000 | $ | 450,000 | |||
Products and services revenues | $ | 400,000 | $ | 430,000 | |||
Freight revenues | $ | 20,000 | $ | 20,000 | |||
Gross profit | $ | 130,000 | $ | 150,000 | |||
Ready Mixed Concrete and Asphalt and Paving | |||||||
Products and services revenues | $ | 1,240,000 | $ | 1,310,000 | |||
Gross profit | $ | 130,000 | $ | 150,000 | |||
Magnesia Specialties Business | |||||||
Total revenues | $ | 290,000 | $ | 300,000 | |||
Products and services revenues | $ | 270,000 | $ | 280,000 | |||
Freight revenues | $ | 20,000 | $ | 20,000 | |||
Gross profit | $ | 100,000 | $ | 105,000 |
* Guidance range represents the low end and high end of the respective line items provided above.
1 2019 consolidated total revenues exclude
2 EBITDA is a non-GAAP financial measure. See appendix to this earnings release for a reconciliation to net earnings attributable to Martin Marietta.
3 Represents 2019 total aggregates volumes, which includes approximately 10.9 million internal tons. Volume growth ranges are in comparison with total volumes of 170.8 million tons for the full year 2018, which included 10.6 million internal tons and 0.3 million tons from the Company’s
4 ASP growth range is in comparison with ASP of
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 fourth-quarter and full-year 2018 earnings results on a conference call and an online web simulcast today (
About Martin Marietta
Martin Marietta, a member of the
Investor Contact:
Vice President, Investor Relations
(919) 783-4691
Suzanne.Osberg@martinmarietta.com
MLM-E.
If you are interested in
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
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
MARTIN MARIETTA MATERIALS, INC. | |||||||||||||||
Unaudited Statements of Earnings | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Products and services revenues | $ | 956,051 | $ | 911,831 | $ | 3,980,351 | $ | 3,723,478 | |||||||
Freight revenues | 64,167 | 58,647 | 263,914 | 242,116 | |||||||||||
Total revenues | 1,020,218 | 970,478 | 4,244,265 | 3,965,594 | |||||||||||
Cost of revenues - products and services | 727,650 | 652,215 | 3,009,810 | 2,749,488 | |||||||||||
Cost of revenues - freight | 65,284 | 59,161 | 267,878 | 244,166 | |||||||||||
Total cost of revenues | 792,934 | 711,376 | 3,277,688 | 2,993,654 | |||||||||||
Gross Profit | 227,284 | 259,102 | 966,577 | 971,940 | |||||||||||
Selling general & administrative expenses | 70,922 | 67,001 | 280,554 | 262,128 | |||||||||||
Acquisition-related expenses, net | 554 | 5,320 | 13,479 | 8,638 | |||||||||||
Other operating expenses and (income), net | 8,767 | 3,368 | (18,193 | ) | 793 | ||||||||||
Earnings from operations | 147,041 | 183,413 | 690,737 | 700,381 | |||||||||||
Interest expense | 33,542 | 23,449 | 137,069 | 91,487 | |||||||||||
Other nonoperating income, net | (2,539 | ) | (3,600 | ) | (22,413 | ) | (10,034 | ) | |||||||
Earnings before income tax expense | 116,038 | 163,564 | 576,081 | 618,928 | |||||||||||
Income tax expense (benefit) | 21,557 | (213,734 | ) | 105,705 | (94,457 | ) | |||||||||
Consolidated net earnings | 94,481 | 377,298 | 470,376 | 713,385 | |||||||||||
Less: Net earnings attributable to noncontrolling interests | 103 | 116 | 378 | 43 | |||||||||||
Net Earnings Attributable to Martin Marietta Materials, Inc. | $ | 94,378 | $ | 377,182 | $ | 469,998 | $ | 713,342 | |||||||
Net earnings per common share attributable to common shareholders: | |||||||||||||||
Basic | $ | 1.50 | $ | 5.98 | $ | 7.46 | $ | 11.30 | |||||||
Diluted | $ | 1.50 | $ | 5.95 | $ | 7.43 | $ | 11.25 | |||||||
Dividends per common share | $ | 0.48 | $ | 0.44 | $ | 1.84 | $ | 1.72 | |||||||
Average number of common shares outstanding: | |||||||||||||||
Basic | 62,672 | 62,907 | 62,895 | 62,932 | |||||||||||
Diluted | 62,918 | 63,213 | 63,147 | 63,217 | |||||||||||
MARTIN MARIETTA MATERIALS, INC. | |||||||||||||||
Unaudited Financial Highlights | |||||||||||||||
(In thousands) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Total revenues: | |||||||||||||||
Building Materials Business: | |||||||||||||||
Mid-America Group | $ | 316,857 | $ | 264,936 | $ | 1,223,236 | $ | 1,053,326 | |||||||
Southeast Group | 104,633 | 85,081 | 423,382 | 362,555 | |||||||||||
West Group | 526,753 | 552,980 | 2,309,924 | 2,279,723 | |||||||||||
Total Building Materials Business | 948,243 | 902,997 | 3,956,542 | 3,695,604 | |||||||||||
Magnesia Specialties | 71,975 | 67,481 | 287,723 | 269,990 | |||||||||||
Total | $ | 1,020,218 | $ | 970,478 | $ | 4,244,265 | $ | 3,965,594 | |||||||
Gross profit (loss): | |||||||||||||||
Building Materials Business: | |||||||||||||||
Mid-America Group | $ | 96,458 | $ | 92,616 | $ | 366,918 | $ | 335,394 | |||||||
Southeast Group | 20,262 | 23,019 | 77,193 | 74,642 | |||||||||||
West Group | 82,259 | 116,328 | 416,212 | 465,596 | |||||||||||
Total Building Materials Business | 198,979 | 231,963 | 860,323 | 875,632 | |||||||||||
Magnesia Specialties | 25,207 | 23,550 | 98,682 | 89,398 | |||||||||||
Corporate | 3,098 | 3,589 | 7,572 | 6,910 | |||||||||||
Total | $ | 227,284 | $ | 259,102 | $ | 966,577 | $ | 971,940 | |||||||
Selling, general and administrative expenses: | |||||||||||||||
Building Materials Business: | |||||||||||||||
Mid-America Group | $ | 14,516 | $ | 14,002 | $ | 55,775 | $ | 53,937 | |||||||
Southeast Group | 5,037 | 4,249 | 18,727 | 17,144 | |||||||||||
West Group | 27,721 | 26,984 | 107,613 | 102,650 | |||||||||||
Total Building Materials Business | 47,274 | 45,235 | 182,115 | 173,731 | |||||||||||
Magnesia Specialties | 2,487 | 2,391 | 9,999 | 9,537 | |||||||||||
Corporate | 21,161 | 19,375 | 88,440 | 78,860 | |||||||||||
Total | $ | 70,922 | $ | 67,001 | $ | 280,554 | $ | 262,128 | |||||||
Earnings (Loss) from operations: | |||||||||||||||
Building Materials Business: | |||||||||||||||
Mid-America Group | $ | 83,918 | $ | 79,849 | $ | 319,139 | $ | 284,789 | |||||||
Southeast Group | 15,377 | 18,907 | 75,840 | 61,238 | |||||||||||
West Group | 45,915 | 90,298 | 295,801 | 360,544 | |||||||||||
Total Building Materials Business | 145,210 | 189,054 | 690,780 | 706,571 | |||||||||||
Magnesia Specialties | 22,196 | 20,842 | 88,063 | 79,431 | |||||||||||
Corporate | (20,365 | ) | (26,483 | ) | (88,106 | ) | (85,621 | ) | |||||||
Total | $ | 147,041 | $ | 183,413 | $ | 690,737 | $ | 700,381 | |||||||
MARTIN MARIETTA MATERIALS, INC. | |||||||||||||||
Unaudited Financial Highlights (Continued) | |||||||||||||||
(In thousands) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Total revenues: | |||||||||||||||
Building Materials business products and services: | |||||||||||||||
Aggregates | $ | 577,549 | $ | 515,646 | $ | 2,355,673 | $ | 2,134,927 | |||||||
Cement | 87,277 | 90,272 | 387,830 | 371,233 | |||||||||||
Ready Mixed Concrete | 213,346 | 231,566 | 963,770 | 936,037 | |||||||||||
Asphalt and paving | 69,190 | 76,918 | 268,679 | 292,571 | |||||||||||
Less: Interproduct sales | (58,557 | ) | (65,375 | ) | (264,237 | ) | (264,012 | ) | |||||||
Subtotal | 888,805 | 849,027 | 3,711,715 | 3,470,756 | |||||||||||
Freight | 59,438 | 53,970 | 244,827 | 224,848 | |||||||||||
Total Building Materials Business | 948,243 | 902,997 | 3,956,542 | 3,695,604 | |||||||||||
Magnesia Specialties business: | |||||||||||||||
Products and services | 67,246 | 62,804 | 268,636 | 252,722 | |||||||||||
Freight | 4,729 | 4,677 | 19,087 | 17,268 | |||||||||||
Total Magnesia Specialties Business | 71,975 | 67,481 | 287,723 | 269,990 | |||||||||||
Consolidated total revenues | $ | 1,020,218 | $ | 970,478 | $ | 4,244,265 | $ | 3,965,594 | |||||||
Gross profit (loss): | |||||||||||||||
Building Materials business products and services: | |||||||||||||||
Aggregates | $ | 146,133 | $ | 160,637 | $ | 606,759 | $ | 599,670 | |||||||
Cement | 28,631 | 29,413 | 126,213 | 117,021 | |||||||||||
Ready Mixed Concrete | 7,950 | 21,103 | 74,175 | 91,646 | |||||||||||
Asphalt and paving | 16,438 | 20,248 | 52,917 | 64,693 | |||||||||||
Subtotal | 199,152 | 231,401 | 860,064 | 873,030 | |||||||||||
Freight | (173 | ) | 562 | 259 | 2,602 | ||||||||||
Total Building Materials Business | 198,979 | 231,963 | 860,323 | 875,632 | |||||||||||
Magnesia Specialties business: | |||||||||||||||
Products and services | 26,151 | 24,625 | 102,905 | 94,050 | |||||||||||
Freight | (944 | ) | (1,075 | ) | (4,223 | ) | (4,652 | ) | |||||||
Total Magnesia Specialties Business | 25,207 | 23,550 | 98,682 | 89,398 | |||||||||||
Corporate | 3,098 | 3,589 | 7,572 | 6,910 | |||||||||||
Consolidated gross profit | $ | 227,284 | $ | 259,102 | $ | 966,577 | $ | 971,940 | |||||||
MARTIN MARIETTA MATERIALS, INC. | |||||||
Balance Sheet Data | |||||||
(In thousands) | |||||||
December 31, | December 31, | ||||||
2018 | 2017 | ||||||
(Unaudited) | (Audited) | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 44,892 | $ | 1,446,364 | |||
Accounts receivable, net | 523,276 | 487,240 | |||||
Inventories, net | 663,035 | 600,591 | |||||
Other current assets | 134,613 | 96,965 | |||||
Property, plant and equipment, net | 5,157,229 | 3,592,813 | |||||
Intangible assets, net | 2,900,400 | 2,666,639 | |||||
Other noncurrent assets | 127,974 | 101,899 | |||||
Total assets | $ | 9,551,419 | $ | 8,992,511 | |||
LIABILITIES AND EQUITY | |||||||
Current maturities of long-term debt and short-term facilities | $ | 390,042 | $ | 299,909 | |||
Other current liabilities | 396,708 | 394,307 | |||||
Long-term debt (excluding current maturities) | 2,730,439 | 2,727,294 | |||||
Other noncurrent liabilities | 1,084,818 | 888,524 | |||||
Total equity | 4,949,412 | 4,682,477 | |||||
Total liabilities and equity | $ | 9,551,419 | $ | 8,992,511 | |||
MARTIN MARIETTA MATERIALS, INC. | |||||||
Unaudited Statements of Cash Flows | |||||||
(In thousands) | |||||||
Twelve Months Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Operating activities: | |||||||
Consolidated net earnings | $ | 470,376 | $ | 713,385 | |||
Adjustments to reconcile consolidated net earnings to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 344,033 | 297,162 | |||||
Stock-based compensation expense | 29,253 | 30,460 | |||||
Gains on sales of assets | (39,260 | ) | (19,366 | ) | |||
Deferred income taxes | 85,063 | (239,056 | ) | ||||
Noncash portion of asset and portfolio rationalization charge | 16,970 | - | |||||
Other items, net | (8,891 | ) | (13,437 | ) | |||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | |||||||
Accounts receivable, net | (10,617 | ) | (29,329 | ) | |||
Inventories, net | (21,984 | ) | (78,966 | ) | |||
Accounts payable | 20,148 | (17,874 | ) | ||||
Other assets and liabilities, net | (179,943 | ) | 14,619 | ||||
Net cash provided by operating activities | 705,148 | 657,598 | |||||
Investing activities: | |||||||
Additions to property, plant and equipment | (375,954 | ) | (410,325 | ) | |||
Acquisitions, net of cash acquired | (1,642,137 | ) | (12,095 | ) | |||
Proceeds from divestitures and sales of assets | 69,114 | 35,941 | |||||
Investments in life insurance contracts, net | 771 | 280 | |||||
Payment of railcar construction advances | (79,351 | ) | (43,594 | ) | |||
Reimbursement of railcar construction advances | 79,351 | 43,594 | |||||
Net cash used for investing activities | (1,948,206 | ) | (386,199 | ) | |||
Financing activities: | |||||||
Borrowings of long-term debt | 1,000,000 | 2,408,830 | |||||
Repayments of long-term debt | (910,052 | ) | (1,065,048 | ) | |||
Payments of deferred acquisition consideration | (6,707 | ) | (2,774 | ) | |||
Payments on capital leases | (3,486 | ) | (3,543 | ) | |||
Debt issue costs | (3,892 | ) | (2,204 | ) | |||
Contributions by noncontrolling interest to joint venture | - | 212 | |||||
Repurchases of common stock | (100,377 | ) | (99,999 | ) | |||
Dividends paid | (116,436 | ) | (108,852 | ) | |||
Purchase of the noncontrolling interest in the existing joint venture | (12,800 | ) | - | ||||
Proceeds from exercise of stock options | 7,201 | 10,110 | |||||
Shares withheld for employees' income tax obligations | (11,865 | ) | (11,805 | ) | |||
Net cash (used for) provided by financing activities | (158,414 | ) | 1,124,927 | ||||
Net (decrease) increase in cash and cash equivalents | (1,401,472 | ) | 1,396,326 | ||||
Cash and cash equivalents, beginning of period | 1,446,364 | 50,038 | |||||
Cash and cash equivalents, end of period | $ | 44,892 | $ | 1,446,364 | |||
MARTIN MARIETTA MATERIALS, INC. | |||||||||||||||
Unaudited Operational Highlights | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, 2018 | December 31, 2018 | ||||||||||||||
Volume | Pricing | Volume | Pricing | ||||||||||||
Volume/Pricing Variance (1) | |||||||||||||||
Heritage Operations:(2) | |||||||||||||||
Mid-America Group | 1.6 | % | 2.1 | % | 1.5 | % | 3.8 | % | |||||||
Southeast Group | (3.2 | %) | 7.4 | % | (1.3 | %) | 3.0 | % | |||||||
West Group | (1.2 | %) | 0.5 | % | (1.0 | %) | 2.0 | % | |||||||
Total Heritage Aggregates Product Line | (0.1 | %) | 2.3 | % | 0.1 | % | 3.0 | % | |||||||
Total Aggregates Product Line (3) | 11.4 | % | 0.5 | % | 8.3 | % | 1.9 | % | |||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
Shipments (tons in thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Heritage Operations:(2) | |||||||||||||||
Mid-America Group | 18,195 | 17,915 | 73,647 | 72,539 | |||||||||||
Southeast Group | 4,695 | 4,849 | 20,161 | 20,429 | |||||||||||
West Group | 14,912 | 15,094 | 64,099 | 64,730 | |||||||||||
Total Heritage Aggregates Product Line | 37,802 | 37,858 | 157,907 | 157,698 | |||||||||||
Acquisitions | 4,371 | - | 12,929 | - | |||||||||||
Total Aggregates Product Line (3) | 42,173 | 37,858 | 170,836 | 157,698 | |||||||||||
(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 | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Shipments (in thousands) | |||||||||||||||
Aggregates tons - external customers | 39,750 | 35,201 | 160,259 | 146,818 | |||||||||||
Internal aggregates tons used in other product lines | 2,423 | 2,657 | 10,577 | 10,880 | |||||||||||
Total aggregates tons | 42,173 | 37,858 | 170,836 | 157,698 | |||||||||||
Cement tons - external customers | 519 | 524 | 2,286 | 2,271 | |||||||||||
Internal cement tons used in other product lines | 256 | 300 | 1,222 | 1,196 | |||||||||||
Total cement tons | 775 | 824 | 3,508 | 3,467 | |||||||||||
Ready Mixed Concrete - cubic yards | 1,886 | 2,116 | 8,685 | 8,559 | |||||||||||
Asphalt tons - external customers | 272 | 260 | 1,076 | 1,123 | |||||||||||
Internal asphalt tons used in road paving business | 437 | 552 | 1,857 | 2,167 | |||||||||||
Total asphalt tons | 709 | 812 | 2,933 | 3,290 | |||||||||||
Average unit sales price by product line (including internal sales): | |||||||||||||||
Aggregates (per ton): | |||||||||||||||
Heritage | $ | 13.86 | $ | 13.55 | $ | 13.86 | $ | 13.46 | |||||||
Acquisition | $ | 11.49 | $ | - | $ | 11.79 | $ | - | |||||||
Total | $ | 13.61 | $ | 13.55 | $ | 13.71 | $ | 13.46 | |||||||
Cement (per ton) | $ | 111.00 | $ | 108.23 | $ | 109.38 | $ | 105.97 | |||||||
Ready Mixed Concrete (per cubic yard) | $ | 110.55 | $ | 107.07 | $ | 108.83 | $ | 107.27 | |||||||
Asphalt (per ton) | $ | 45.27 | $ | 44.42 | $ | 44.60 | $ | 43.41 | |||||||
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 December 31, 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 December 31, 2018, for the trailing-12 months EBITDA. For supporting calculations, refer to the Company's website at www.martinmarietta.com. | |||||||||||||||
Twelve Month Period | |||||||||||||||
January 1, 2018 to | |||||||||||||||
December 31, 2018 | |||||||||||||||
Earnings from continuing operations attributable to Martin Marietta Materials, Inc. | $ | 469,998 | |||||||||||||
Add back: | |||||||||||||||
Interest expense | 137,069 | ||||||||||||||
Income tax expense | 105,637 | ||||||||||||||
Depreciation, depletion and amortization expense | 339,858 | ||||||||||||||
Stock-based compensation expense | 29,253 | ||||||||||||||
Acquisition-related expenses, net | 32,040 | ||||||||||||||
Bluegrass EBITDA - Pre-Acquisition (January 1, 2018 to April 27, 2018) | 16,607 | ||||||||||||||
Noncash portion of asset and portfolio rationalization charge | 16,970 | ||||||||||||||
Deduct: | |||||||||||||||
Interest income | (7,027 | ) | |||||||||||||
Consolidated EBITDA, as defined by the Company's Credit Agreement | $ | 1,140,405 | |||||||||||||
Consolidated Debt, as defined and including debt for which the Company is a co-borrower, at December 31, 2018 | $ | 3,144,071 | |||||||||||||
Consolidated Debt-to-Consolidated EBITDA, as defined by the Company's Credit Agreement, at December 31, 2018, for the trailing-12 months EBITDA | 2.76 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 | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Consolidated Earnings Before Interest, Income Taxes, Depreciation, Depletion and Amortization (EBITDA) | $ | 239,349 | $ | 262,427 | $ | 1,052,710 | $ | 1,004,379 | |||||||
A Reconciliation of Net Earnings Attributable to Martin Marietta to Consolidated EBITDA is as follows: | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net Earnings Attributable to Martin Marietta | $ | 94,378 | $ | 377,182 | $ | 469,998 | $ | 713,342 | |||||||
Add back: | |||||||||||||||
Interest Expense | 33,542 | 23,449 | 137,069 | 91,487 | |||||||||||
Income Tax Expense (Benefit) for Controlling Interests | 21,567 | (213,647 | ) | 105,637 | (94,401 | ) | |||||||||
Depreciation, Depletion and Amortization Expense | 89,862 | 75,443 | 340,006 | 293,951 | |||||||||||
Consolidated EBITDA | $ | 239,349 | $ | 262,427 | $ | 1,052,710 | $ | 1,004,379 | |||||||
Aggregates shipments in the Southeast Group for January through April of 2018 and the year ended December 31, 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 | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Southeast Group: | |||||||||||||||
Reported heritage aggregates shipments | 4,695 | 4,849 | 20,161 | 20,429 | |||||||||||
Less: Aggregates shipments for the Forsyth, Georgia quarry during periods of Martin Marietta ownership | - | (243 | ) | (230 | ) | (927 | ) | ||||||||
Adjusted heritage aggregates shipments | 4,695 | 4,606 | 19,931 | 19,502 | |||||||||||
Heritage aggregates volume variance excluding shipments for the Forsyth, Georgia quarry | 1.9 | % | 2.2 | % | |||||||||||
Total Heritage Business: | |||||||||||||||
Reported heritage aggregates shipments | 37,802 | 37,858 | 157,907 | 157,698 | |||||||||||
Less: Aggregates shipments for the Forsyth, Georgia quarry during periods of Martin Marietta ownership | - | (243 | ) | (230 | ) | (927 | ) | ||||||||
Adjusted heritage aggregates shipments | 37,802 | 37,615 | 157,677 | 156,771 | |||||||||||
Heritage aggregates volume variance excluding shipments for the Forsyth, Georgia quarry | 0.5 | % | 0.6 | % | |||||||||||
MARTIN MARIETTA MATERIALS, INC. | |||||||||||
Non-GAAP Financial Measures (continued) | |||||||||||
(Dollars in thousands) | |||||||||||
Adjusted consolidated gross profit, adjusted consolidated earnings from operations and adjusted consolidated EBITDA for the three months and year ended December 31, 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 the asset and portfolio rationalization charge. 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 the asset and portfolio rationalization charge are nonrecurring. | |||||||||||
The following reconciles consolidated gross profit in accordance with GAAP to adjusted consolidated gross profit: | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Consolidated gross profit in accordance with GAAP | $ | 227,284 | $ | 259,102 | $ | 966,577 | $ | 971,940 | |||
Add back: | |||||||||||
Impact of selling acquired inventory due to the markup to fair value as part of acquisition accounting | 222 | - | 18,738 | - | |||||||
Adjusted consolidated gross profit | $ | 227,506 | $ | 259,102 | $ | 985,315 | $ | 971,940 | |||
The following reconciles consolidated earnings from operations in accordance with GAAP to adjusted consolidated earnings from operations: | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Consolidated earnings from operations in accordance with GAAP | $ | 147,041 | $ | 183,413 | $ | 690,737 | $ | 700,381 | |||
Add back: | |||||||||||
Acquisition-related expenses, net | 554 | 5,320 | 13,479 | 8,638 | |||||||
Impact of selling acquired inventory due to the markup to fair value as part of acquisition accounting | 222 | - | 18,738 | - | |||||||
Asset and portfolio rationalization charge | 11,725 | - | 18,838 | - | |||||||
Adjusted consolidated earnings from operations | $ | 159,542 | $ | 188,733 | $ | 741,792 | $ | 709,019 | |||
The following reconciles consolidated EBITDA to adjusted consolidated EBITDA: | |||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Consolidated EBITDA | $ | 239,349 | $ | 262,427 | $ | 1,052,710 | $ | 1,004,379 | |||
Add back: | |||||||||||
Acquisition-related expenses, net | 554 | 5,320 | 13,479 | 8,638 | |||||||
Impact of selling acquired inventory due to the markup to fair value as part of acquisition accounting | 222 | - | 18,738 | - | |||||||
Asset and portfolio rationalization charge | 11,725 | - | 18,838 | - | |||||||
Adjusted consolidated EBITDA | $ | 251,850 | $ | 267,747 | $ | 1,103,765 | $ | 1,013,017 | |||
The following is a reconciliation of the GAAP measure to the midpoint of the 2019 EBITDA guidance: | |||||||||||
Net Earnings Attributable to Martin Marietta | $ | 570,000 | |||||||||
Add back: | |||||||||||
Interest Expense | 135,000 | ||||||||||
Taxes on Income | 150,000 | ||||||||||
Depreciation, Depletion and Amortization Expense | 370,000 | ||||||||||
EBITDA | $ | 1,225,000 | |||||||||
Source: Martin Marietta Materials, Inc.