Edgar Filing: MARTIN MARIETTA MATERIALS INC

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

mlm-10q_20180630.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-12744

MARTIN MARIETTA MATERIALS, INC.

(Exact name of registrant as specified in its charter)

North Carolina

56-1848578

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

2710 Wycliff Road, Raleigh, NC		27607-3033
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 919-781-4550

Former name: None

Former name, former address and former fiscal year, if changes since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Class		Outstanding as of July 23, 2018
Common Stock, $0.01 par value		63,011,972

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended June 30, 2018

	Page
Part I. Financial Information:

Item 1. Financial Statements

Consolidated Balance Sheets – June 30, 2018, December 31, 2017 and June 30, 2017		3

Consolidated Statements of Earnings and Comprehensive Earnings – Three- and Six-Months Ended June 30, 2018 and 2017		4

Consolidated Statements of Cash Flows – Six-Months Ended June 30, 2018 and 2017		5

Consolidated Statement of Total Equity – Six-Months Ended June 30, 2018		6

Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30

Item 3. Quantitative and Qualitative Disclosures About Market Risk		53

Item 4. Controls and Procedures		54

Part II. Other Information:

Item 1. Legal Proceedings		55

Item 1A. Risk Factors		55

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		55

Item 4. Mine Safety Disclosures		55

Item 6. Exhibits		56

Signatures		57

Page 2 of 57

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,			June 30,
	2018			2017			2017
	(Dollars in Thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	33,779		$	1,446,364		$	36,722
Accounts receivable, net		675,570			487,240			570,618
Inventories, net		650,917			600,591			549,865
Other current assets		96,887			96,965			87,092
Total Current Assets		1,457,153			2,631,160			1,244,297

Property, plant and equipment		8,118,705			6,498,067			6,306,083
Allowances for depreciation, depletion and amortization		(3,005,279	)		(2,905,254	)		(2,800,823	)
Net property, plant and equipment		5,113,426			3,592,813			3,505,260
Goodwill		2,401,505			2,160,290			2,160,060
Operating permits, net		435,761			439,116			437,713
Other intangibles, net		78,925			67,233			65,526
Other noncurrent assets		109,982			101,899			103,004
Total Assets	$	9,596,752		$	8,992,511		$	7,515,860

LIABILITIES AND EQUITY
Current Liabilities:
Bank overdraft	$	—		$	—		$	3,794
Accounts payable		188,761			183,638			187,227
Accrued salaries, benefits and payroll taxes		38,870			44,255			36,202
Pension and postretirement benefits		13,089			13,652			8,802
Accrued insurance and other taxes		61,615			64,958			59,958
Current maturities of long-term debt and short-term facilities		320,046			299,909			140,037
Accrued interest		15,696			19,825			18,746
Other current liabilities		71,056			67,979			79,559
Total Current Liabilities		709,133			694,216			534,325

Long-term debt		2,898,876			2,727,294			1,641,944
Pension, postretirement and postemployment benefits		249,967			244,043			253,908
Deferred income taxes, net		644,469			410,723			663,414
Other noncurrent liabilities		238,837			233,758			221,738
Total Liabilities		4,741,282			4,310,034			3,315,329

Equity:
Common stock, par value $0.01 per share		629			628			627
Preferred stock, par value $0.01 per share		—			—			—
Additional paid-in capital		3,389,028			3,368,007			3,355,992
Accumulated other comprehensive loss		(125,883	)		(129,104	)		(125,906	)
Retained earnings		1,579,674			1,440,069			967,058
Total Shareholders' Equity		4,843,448			4,679,600			4,197,771
Noncontrolling interests		12,022			2,877			2,760
Total Equity		4,855,470			4,682,477			4,200,531
Total Liabilities and Equity	$	9,596,752		$	8,992,511		$	7,515,860

See accompanying notes to the consolidated financial statements.

Page 3 of 57

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

	Three-Months Ended						Six-Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
	(In Thousands, Except Per Share Data)

Products and services revenues	$	1,128,777		$	996,843		$	1,882,082		$	1,789,159
Freight revenues		73,626			66,681			122,325			118,224
Total Revenues		1,202,403			1,063,524			2,004,407			1,907,383

Cost of revenues - products and services		812,430			722,195			1,454,049			1,366,813
Cost of revenues - freight		74,056			67,235			124,049			119,410
Total Cost of Revenues		886,486			789,430			1,578,098			1,486,223

Gross Profit		315,917			274,094			426,309			421,160

Selling, general & administrative expenses		71,070			68,373			141,191			137,908
Acquisition-related expenses, net		12,126			1,982			12,836			2,004
Other operating income, net		(31,232	)		(9,113	)		(30,752	)		(8,754	)
Earnings from Operations		263,953			212,852			303,034			290,002

Interest expense		32,971			24,045			68,059			44,896
Other nonoperating income, net		(7,122	)		(5,420	)		(15,626	)		(5,956	)
Earnings before income tax expense		238,104			194,227			250,601			251,062
Income tax expense		52,601			51,986			55,058			66,514
Consolidated net earnings		185,503			142,241			195,543			184,548
Less: Net earnings (loss) attributable to noncontrolling interests		126			(38	)		143			(65	)
Net Earnings Attributable to Martin Marietta Materials, Inc.	$	185,377		$	142,279		$	195,400		$	184,613

Consolidated Comprehensive Earnings: (See Note 1)
Earnings attributable to Martin Marietta Materials, Inc.	$	186,979		$	144,798		$	198,621		$	189,394
Earnings (Loss) attributable to noncontrolling interests		126			(37	)		144			(63	)
	$	187,105		$	144,761		$	198,765		$	189,331
Net Earnings Attributable to Martin Marietta Materials, Inc.
Per Common Share:
Basic attributable to common shareholders	$	2.94		$	2.26		$	3.10		$	2.92
Diluted attributable to common shareholders	$	2.92		$	2.25		$	3.08		$	2.91

Weighted-Average Common Shares Outstanding:
Basic		63,021			62,858			62,989			62,961
Diluted		63,285			63,141			63,253			63,246

Cash Dividends Per Common Share	$	0.44		$	0.42		$	0.88		$	0.84

See accompanying notes to the consolidated financial statements.

Page 4 of 57

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six-Months Ended
	June 30,
	2018			2017
	(Dollars in Thousands)

Cash Flows from Operating Activities:
Consolidated net earnings	$	195,543		$	184,548
Adjustments to reconcile consolidated net earnings to net cash provided by operating activities:
Depreciation, depletion and amortization		163,545			146,102
Stock-based compensation expense		17,098			17,727
Gain on divestitures and sales of assets		(33,527	)		(17,514	)
Deferred income taxes		14,986			2,464
Other items, net		(4,757	)		(4,669	)
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net		(157,603	)		(112,708	)
Inventories, net		(7,133	)		(28,240	)
Accounts payable		44,266			11,663
Other assets and liabilities, net		5,615			29,950
Net Cash Provided by Operating Activities		238,033			229,323

Cash Flows from Investing Activities:
Additions to property, plant and equipment		(188,270	)		(216,089	)
Acquisitions, net		(1,645,698	)		(2,200	)
Proceeds from divestitures and sales of assets		58,213			32,089
Payment of railcar construction advances		(28,306	)		(40,930	)
Reimbursement of railcar construction advances		28,306			40,930
Investments in life insurance contracts, net		424			276
Net Cash Used for Investing Activities		(1,775,331	)		(185,924	)

Cash Flows from Financing Activities:
Borrowings of debt		665,000			941,244
Repayments of debt		(475,025	)		(845,023	)
Payments of deferred acquisition consideration		(1,426	)		-
Payments on capital lease obligations		(1,725	)		(1,752	)
Debt issuance costs		(3,194	)		(1,055	)
Change in bank overdraft		—			3,795
Contributions by owners of noncontrolling interest		—			211
Dividends paid		(55,795	)		(53,135	)
Proceeds from exercise of stock options		6,943			7,937
Shares withheld for employees' income tax obligations		(10,065	)		(8,938	)
Repurchases of common stock		—			(99,999	)
Net Cash Provided by (Used for) Financing Activities		124,713			(56,715	)
Net Decrease in Cash and Cash Equivalents		(1,412,585	)		(13,316	)
Cash and Cash Equivalents, beginning of period		1,446,364			50,038
Cash and Cash Equivalents, end of period	$	33,779		$	36,722

See accompanying notes to the consolidated financial statements.

Page 5 of 57

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF TOTAL EQUITY

(in thousands)	Shares of Common Stock		Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings		Total Shareholders' Equity		Noncontrolling Interests			Total Equity
Balance at December 31, 2016		63,176	$	630	$	3,334,461	$	(130,687	)	$	935,574	$	4,139,978	$	2,612		$	4,142,590
Consolidated net earnings		—		—		—		—			184,613		184,613		(65	)