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Martin Marietta Materials Annual Report, Year Ended Dec 31, 2006

Filing Date
Filed February 28, 2007
Period End
December 31, 2006
Security
MLM
In the record · 2016–202610-K1210-Q328-K141

MLM filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 141 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Jun ’17Jun ’17
  2. Leadership change8-K · Jul ’19Jul ’19
  3. Material agreement8-K · Dec ’21Dec ’21
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed February 28, 2007. Cited figures are marked; the original filing is the authoritative source.

Martin Marietta Materials, Inc. describes itself as the second largest producer of aggregates for the construction industry in the United States, with a smaller Specialty Products segment (magnesia-based chemicals, dolomitic lime and structural composites).

In 2006 the Aggregates business accounted for 92% of total net sales and shipped 198.5 million tons, generating net sales and earnings from operations of $1.9 billiona and $400.3 million. The filing reports 2006 net sales of $1,942,897 thousand (up from $1,745,671 thousand in 2005), net earnings of $245.4 million, and record diluted earnings per share of $5.29 versus $4.08 in 2005. Gross margin excluding freight and delivery revenues rose to 26.9% from 24.3%, which management attributes to aggregates pricing gains (heritage aggregates price increase of 13.5%) partially offset by a 1.7% heritage volume decline.

The filing highlights continued exposure to cyclical construction spending, weather, and rail and barge logistics. Residential construction declined in 2006 and is expected to decline further in 2007, while public infrastructure funding under the $286.4 billionb SAFETEA-LU law and the outlook for commercial construction are cited as supports. Management expects 2007 aggregates pricing to rise 9% to 11% and projects 2007 diluted earnings per share in a range of $5.95 to $6.50.

The company returned $219 millionc to shareholders in 2006 through share repurchases and dividends, and is reviewing its capital structure with a view to adding leverage. The structural composites product line, which has not yet been profitable, has 2007 quarterly benchmarks to meet. Cash from operations was $338.2 million in 2006, with $266.0 million of property additions.

Long-term debt, including current maturities, was $705.3 milliond at year-end, and the debt-to-capitalization ratio was 36% on a total-debt basis (35% net of available cash and investments). Shareholders' equity was $1.254 billion, and the company held 4.2 million shares of repurchase authorization.

02—Key points

Key Highlights

  1. Net sales of $1,942,897 thousand in 2006, up from $1,745,671 thousand in 2005; total revenues were $2,206,401 thousand.
  2. Record diluted earnings per share of $5.29 in 2006, compared with $4.08 in 2005; net earnings were $245,422 thousand.
  3. Gross margin excluding freight and delivery revenues rose to 26.9% from 24.3%, driven by a 13.5% heritage aggregates price increase partly offset by a 1.7% volume decline.
  4. Aggregates accounted for 92% of 2006 net sales; the company shipped 198.5 million tons and is the second largest U.S. aggregates producer.
  5. 2007 outlook calls for aggregates pricing up 9% to 11% and diluted EPS of $5.95 to $6.50, with flat demand and softer residential construction in the first half.
  6. Returned $219 million to shareholders in 2006 ($173 million in share repurchases and $46 million in dividends); 4.2 million shares remain under repurchase authorization.
  7. Residential construction declined in 2006 and is expected to decline further in 2007; North Carolina and South Carolina infrastructure spending delays are expected to persist through 2007.

03—Questions

Frequently Asked Questions

  1. How did Martin Marietta's profitability change in 2006?

    Net earnings rose to $245.4 million, or $5.29 per diluted share, from $192.7 million, or $4.08 per diluted share, in 2005. Gross margin excluding freight and delivery revenues improved to 26.9% from 24.3%, and operating margin excluding freight and delivery revenues improved 230 basis points, primarily from pricing gains.

  2. What is the company's exposure to the residential construction market?

    Approximately 17% of 2006 aggregates product line shipments went to residential construction, which declined in 2006 and is expected to decline further in 2007. The filing says the downturn is likely to moderate during the latter part of 2007, but the company cannot be sure of the timing.

  3. What does the company expect for 2007?

    Management expects aggregates pricing to rise 9% to 11%, flat aggregates demand with a softer first half, and diluted EPS in a range of $5.95 to $6.50, with double-digit growth. Specialty Products is expected to contribute $33 million to $36 million in pretax earnings, compared with $22 million in 2006.

  4. How is the company returning cash and managing its balance sheet?

    In 2006 the company repurchased 1,874,200 shares for $172.9 million and paid $46.4 million in dividends. Its debt-to-capitalization ratio was 36% at year-end 2006, and management is reviewing the capital structure with the aim of establishing prudent leverage targets, to be announced with first-quarter 2007 results.

  5. What risks does the filing highlight for the company's structural composites business?

    The structural composites product line has not generated any profit since its inception. In 2006 it recorded a $13.2 million loss from operations, and management exited the composite truck trailer business. For 2007 it has set specific quarterly benchmarks to determine the business's viability, and there can be no assurance these technologies will become profitable.

04—Continue

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