Edgar Filing: MARTIN MARIETTA MATERIALS INC

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

mlm-10q_20180930.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 September 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth 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 November 1, 2018
Common Stock, $0.01 par value		62,712,073

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2018

	Page
Part I. Financial Information:

Item 1. Financial Statements

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

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

Consolidated Statements of Cash Flows – Nine-Months Ended September 30, 2018 and 2017		5

Consolidated Statement of Total Equity – Nine-Months Ended September 30, 2018 and 2017		6

Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3. Quantitative and Qualitative Disclosures About Market Risk		51

Item 4. Controls and Procedures		52

Part II. Other Information:

Item 1. Legal Proceedings		53

Item 1A. Risk Factors		53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		53

Item 4. Mine Safety Disclosures		53

Item 6. Exhibits		54

Signatures		55

Page 2 of 55

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,			September 30,
	2018			2017			2017
	(Dollars in Thousands)
ASSETS
Current 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
Total Current Assets		1,454,808			2,631,160			1,277,989

Property, plant and equipment		8,183,412			6,498,067			6,375,813
Allowances for depreciation, depletion and amortization		(3,080,017	)		(2,905,254	)		(2,854,236	)
Net property, plant and equipment		5,103,395			3,592,813			3,521,577
Goodwill		2,399,434			2,160,290			2,160,060
Operating permits, net		434,177			439,116			440,846
Other intangibles, net		74,799			67,233			63,740
Other noncurrent assets		121,558			101,899			102,573
Total Assets	$	9,588,171		$	8,992,511		$	7,566,785

LIABILITIES AND EQUITY
Current Liabilities:
Bank overdraft	$	—		$	—		$	1,047
Accounts payable		191,381			183,638			163,597
Accrued salaries, benefits and payroll taxes		45,234			44,255			37,885
Pension and postretirement benefits		9,292			13,652			12,073
Accrued insurance and other taxes		69,513			64,958			70,323
Current maturities of long-term debt and short-term facilities		380,041			299,909			80,038
Accrued interest		31,708			19,825			28,082
Other current liabilities		45,517			67,979			75,458
Total Current Liabilities		772,686			694,216			468,503

Long-term debt		2,829,657			2,727,294			1,642,502
Pension, postretirement and postemployment benefits		108,454			244,043			230,212
Deferred income taxes, net		692,881			410,723			662,982
Other noncurrent liabilities		242,165			233,758			228,604
Total Liabilities		4,645,843			4,310,034			3,232,803

Equity:
Common stock, par value $0.01 per share		626			628			627
Preferred stock, par value $0.01 per share		—			—			—
Additional paid-in capital		3,391,133			3,368,007			3,362,744
Accumulated other comprehensive loss		(121,491	)		(129,104	)		(122,928	)
Retained earnings		1,669,126			1,440,069			1,090,778
Total Shareholders' Equity		4,939,394			4,679,600			4,331,221
Noncontrolling interests		2,934			2,877			2,761
Total Equity		4,942,328			4,682,477			4,333,982
Total Liabilities and Equity	$	9,588,171		$	8,992,511		$	7,566,785

See accompanying notes to the consolidated financial statements.

Page 3 of 55

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

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

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 (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

Consolidated Comprehensive Earnings: (See Note 1)
Earnings attributable to Martin Marietta Materials, Inc.	$	184,613		$	154,524		$	383,234		$	343,918
Earnings (Loss) attributable to noncontrolling interests		132			1			276			(62	)
	$	184,745		$	154,525		$	383,510		$	343,856
Net Earnings Attributable to Martin Marietta Materials, Inc.
Per Common Share:
Basic attributable to common shareholders	$	2.86		$	2.40		$	5.95		$	5.33
Diluted attributable to common shareholders	$	2.85		$	2.39		$	5.93		$	5.30

Weighted-Average Common Shares Outstanding:
Basic		62,932			62,896			62,970			62,940
Diluted		63,167			63,158			63,224			63,218

Cash Dividends Per Common Share	$	0.48		$	0.44		$	1.36		$	1.28

See accompanying notes to the consolidated financial statements.

Page 4 of 55

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine-Months Ended
	September 30,
	2018			2017
	(Dollars in Thousands)

Cash Flows from 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

Cash Flows from Investing Activities:
Additions to property, plant and equipment		(262,155	)		(308,745	)
Acquisitions, net		(1,640,698	)		(7,200	)
Proceeds from divestitures and sales of assets		63,460			33,138
Payment of railcar construction advances		(56,033	)		(42,954	)
Reimbursement of railcar construction advances		56,033			40,930
Investments in life insurance contracts, net		771			276
Net Cash Used for Investing Activities		(1,838,622	)		(284,555	)

Cash Flows from Financing Activities:
Borrowings of debt		875,000			1,011,244
Repayments of debt		(695,039	)		(975,035	)
Payments of deferred acquisition consideration		(6,707	)		-
Payments on capital lease obligations		(2,589	)		(2,708	)
Debt issuance costs		(3,194	)		(1,989	)
Change in bank overdraft		—			1,047
Contributions by owners of noncontrolling interest		—			211
Dividends paid		(86,190	)		(80,961	)
Proceeds from exercise of stock options		6,993			10,017
Shares withheld for employees' income tax obligations		(10,416	)		(10,213	)
Purchase of remaining interest in existing joint venture		(12,800	)		—
Repurchases of common stock		(60,377	)		(99,999	)
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

See accompanying notes to the consolidated financial statements.

Page 5 of 55

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		—		—		—