01—Abstract
Summary
Summary of the 10-K filed February 17, 2009. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. is a leading producer of construction aggregates, and its Aggregates business accounted for 91%a of 2008 total net sales, with the Specialty Products segment making up the remaining 9%.
Net sales for 2008 were $1.863 billionb, down from $1.956 billion in 2007, and net earnings were $176.3 million, or $4.20 per diluted share, versus $262.7 million, or $6.06 per diluted share, in 2007. The filing attributes the decline mainly to the economic recession, with aggregates product line shipments down 12.6% to 159.4 million tons, higher petroleum-based product costs that lowered earnings by $0.65 per diluted share, and reduced gross margin excluding freight and delivery revenues of 25.2% versus 29.1% in 2007. The company reported total debt of $1.35 billion at December 31, 2008, after issuing $300 million of 6.6% Senior Notes due 2018 and borrowing $200 million under its credit agreement to finance the swap with Vulcan Materials Company and repay maturing notes.
Moody's downgraded the company's long-term rating to Baa3 from Baa1 in 2008, and Standard & Poor's reaffirmed its BBB+ senior unsecured rating but moved the outlook to negative. The company cut its workforce by 8% and reduced capital spending to $258 millionc in 2008, with 2009 spending expected to approximately $185 million.
Management's 2009 outlook, which the filing does not incorporate by reference into the 10-K, is for aggregates volumes down 9% to 12% excluding the economic stimulus plan, with pricing growth of 4% to 6% and earnings per diluted share of $3.70 to $4.30d. The filing also states that the American Recovery and Reinvestment Act of 2009, signed February 17, 2009, could increase demand, though the timing and extent of its impact remain uncertain.
02—Key points
Key Highlights
- 2008 net sales of $1.863 billion, down from $1.956 billion in 2007; net earnings of $176.3 million, or $4.20 per diluted share, versus $6.06 in 2007
- Aggregates business shipped 159.4 million tons in 2008, a 12.6% decline from 182.3 million tons in 2007, marking the eleventh consecutive quarter of declining volumes
- Aggregates product line pricing increased 6.9% for the Aggregates business in 2008, partially offsetting volume declines
- Petroleum-based product cost increases lowered 2008 net earnings by $0.65 per diluted share; liquid asphalt peaked above $800 per ton
- Total long-term debt including current maturities rose to $1.355 billion at year-end 2008 from $1.124 billion, with the consolidated debt-to-EBITDA ratio at 2.67 against a 3.25 covenant maximum
- Moody's downgraded long-term debt to Baa3 from Baa1 in 2008; Standard & Poor's reaffirmed BBB+ with a negative outlook
- Management expects 2009 aggregates volumes to decline 9% to 12% excluding the economic stimulus plan, with 2009 diluted EPS guidance of $3.70 to $4.30
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Martin Marietta Materials kept $0.08.
- Revenue$2.12B100.0%
- Cost of revenue−$1.65B77.8%
- Gross profit$470.5M22.2%
- Operating costs−$147.1M7.0%
- Operating income$323.4M15.3%
- Interest, other & tax−$147.1M7.0%
- Net income$176.3M8.3%
Where FY2008 revenue went
$2.12B- Cost of revenue: $1.65B, 78% of revenue
- Net income: $176.3M, 8.3% of revenue
- R&D: $596,000, 0.0% of revenue
- SG&A: $151.3M, 7.2% of revenue
- Interest, other & tax: $147.1M, 7.0% of revenue
Kept 8.3% as net incomeNet income $176.3M · 8.3%R&D $596,000 · 0.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 17, 2009Financial Statements
| Revenue | $2.12B |
| Cost of Revenue | $1.65B |
| Gross Profit | $470.51M |
| R&D Expenses | $596K |
| SG&A Expenses | $151.35M |
| Operating Income | $323.39M |
| Interest Expense | $74.30M |
| Net Income | $176.26M |
| EPS (Basic) | $4.20 |
| EPS (Diluted) | $4.18 |
| Shares Outstanding (Basic) | 41.37M |
| Shares Outstanding (Diluted) | 41.62M |
05—Questions
Frequently Asked Questions
How did Martin Marietta's 2008 financial performance compare with 2007?
Net sales fell to $1.863 billion from $1.956 billion, and net earnings declined to $176.3 million, or $4.20 per diluted share, from $262.7 million, or $6.06 per diluted share. The filing attributes the decline to the recession, lower shipment volumes and higher petroleum-based product costs.
What is the company's exposure to the construction industry and the economic stimulus plan?
Approximately 50% of Aggregates shipments went to public infrastructure projects and about 9% to residential construction. The filing says the American Recovery and Reinvestment Act of 2009 could increase demand, but states that funds will take at least several months to appropriate and cannot be assured in nature, extent or timing.
How did the company finance its 2008 activities and what is its debt position?
The company issued $300 million of 6.6% Senior Notes due 2018 and borrowed $200 million under its credit agreement, primarily to finance the Vulcan Materials swap and repay the $200 million 5.875% Notes. Total debt was $1.35 billion at December 31, 2008, and the company stated it was in compliance with its leverage covenant.
What risks does the filing highlight for investors?
Key risks include the cyclical nature of construction spending, weather and hurricane exposure, dependence on rail and barge transportation, volatile diesel and energy costs, environmental and zoning regulation, labor union contracts, and tightening credit markets that could limit access to financing or worsen credit ratings.
What is the company's 2009 outlook?
Management expects aggregates volumes to decline 9% to 12% excluding the stimulus plan, with pricing growth of 4% to 6%, and a 2009 diluted EPS range of $3.70 to $4.30. Management expects incremental volume of 8 million to 10 million tons from the stimulus plan, adding $0.50 to $0.75 per diluted share, and expects energy price relief to add $35 million to $50 million to operating profit.
06—Continue