01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. reported a difficult 2009 as the economic recession drove steep declines in aggregates demand.
Net sales fell to $1.497 billiona from $1.860 billion in 2008, and earnings from operations dropped to $187.6 million from $323.4 million. Net earnings attributable to the Company were $85.5 million, or $1.91 per diluted share, compared with $176.3 million, or $4.18 per diluted share, in 2008. Aggregates shipments declined 22.6% to 123.4 million tons, while heritage aggregates pricing still rose 1.9%.
The Aggregates business generated 90% of 2009 net sales, and the Specialty Products segment delivered earnings from operations of $35.7 millionb. Balance sheet and liquidity remained a focus. Cash and cash equivalents rose to $263.6 million at December 31, 2009, and total equity increased to $1.406 billion, largely from the issuance of 3.8 million common shares that provided net proceeds of $293.4 million.
Long-term debt including current maturities was $1.250 billionc, and the company reported a consolidated debt-to-EBITDA ratio of 3.19 times against a covenant maximum of 3.75 to 1.00 for the period ending December 31, 2009, tightening to 3.50 to 1.00 from the quarter ending June 30, 2010. The company intends to use cash on hand and short-term credit capacity to repay $218 million of floating rate senior notes due April 2010.
Management's 2010 outlook anticipates a 2% to 4% increase in aggregates volume and flat to 2% aggregates pricing, with the American Recovery and Reinvestment Act expected to drive most infrastructure work in 2010 and beyond. Key risks flagged in the filing include the pace of federal and state highway funding, continued weakness in commercial and residential construction, a $11.9 milliond legal reserve related to the Greenwood, Missouri litigation, and covenant headroom in a weak volume environment.
02—Key points
Key Highlights
- Net sales fell 20% to $1.497 billion in 2009 from $1.860 billion in 2008, reflecting a 22.6% decline in aggregates shipments.
- Diluted earnings per share were $1.91, down from $4.18 in 2008, including an $0.18 per diluted share impact from an $11.9 million West Group legal reserve.
- Heritage aggregates pricing increased 1.9% in 2009 despite a 23.0% heritage volume decrease.
- Energy costs decreased $74.0 million in 2009, contributing $1.01 to earnings per diluted share.
- The Company issued 3.8 million common shares for net proceeds of $293.4 million and ended 2009 with $263.6 million in cash.
- Debt-to-EBITDA ratio of 3.19 times at December 31, 2009 under a covenant limit of 3.75 to 1.00 that tightens to 3.50 to 1.00 from June 30, 2010.
- Management expects 2010 aggregates volume to rise 2% to 4%, with pricing flat to up 2%, and expects the federal highway reauthorization to likely occur too late to meaningfully affect 2010 demand.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Martin Marietta Materials kept $0.05.
- Revenue$1.57B100.0%
- Cost of revenue−$1.24B78.9%
- Gross profit$331.6M21.1%
- Operating costs−$148.7M9.4%
- Operating income$182.9M11.6%
- Interest, other & tax−$97.5M6.2%
- Net income$85.5M5.4%
Where FY2009 revenue went
$1.57B- Cost of revenue: $1.24B, 79% of revenue
- Net income: $85.5M, 5.4% of revenue
- R&D: $373,000, 0.0% of revenue
- SG&A: $135.9M, 8.6% of revenue
- Other operating costs: $12.4M, 0.8% of revenue
- Interest, other & tax: $97.5M, 6.2% of revenue
Kept 5.4% as net incomeNet income $85.5M · 5.4%R&D $373,000 · 0.0%Other operating costs $12.4M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $1.57B$2.12B | −25.7% |
| Cost of Revenue | $1.24B$1.65B | −24.6% |
| Gross Profit | $331.57M$470.51M | −29.5% |
| R&D Expenses | $373K$596K | −37.4% |
| SG&A Expenses | $135.88M$151.35M | −10.2% |
| Operating Income | $182.91M$323.39M | −43.4% |
| Interest Expense | $73.45M$74.30M | −1.1% |
| Net Income | $85.46M$176.26M | −51.5% |
| EPS (Basic) | $1.92$4.20 | −54.3% |
| EPS (Diluted) | $1.91$4.18 | −54.3% |
| Shares Outstanding (Basic) | 44.00M41.37M | +6.4% |
| Shares Outstanding (Diluted) | 44.19M41.62M | +6.2% |
05—Questions
Frequently Asked Questions
How did Martin Marietta perform financially in 2009?
Net sales declined to $1.497 billion from $1.860 billion, and earnings from operations fell to $187.6 million from $323.4 million. Net earnings attributable to the Company were $85.5 million, or $1.91 per diluted share, versus $176.3 million, or $4.18 per diluted share, in 2008. The decline reflected lower aggregates shipments during the recession, partly offset by lower energy costs.
What is driving the aggregates business and what is the 2010 outlook?
Aggregates shipments fell 22.6% to 123.4 million tons in 2009 as construction markets weakened. Management expects 2010 aggregates volume to increase 2% to 4%, with commercial construction declining, and pricing flat to 2% higher. Infrastructure demand is expected to benefit from American Recovery and Reinvestment Act funding, with most stimulus project work occurring in 2010.
How strong is the company's balance sheet and debt position?
Total equity rose to $1.406 billion, and cash on hand was $263.6 million at December 31, 2009. Long-term debt including current maturities was $1.250 billion. The debt-to-EBITDA ratio was 3.19 times, within the 3.75 to 1.00 covenant that steps down to 3.50 to 1.00 from June 30, 2010. The company plans to repay $218 million of floating rate senior notes due April 2010 using cash and short-term borrowing capacity.
What are the main risks to investors identified in the filing?
Key risks include reduced state and federal highway funding, a continued decline in commercial construction, potential delays in stimulus and highway bill funding, and fuel and energy cost volatility. Other risks include rail and barge transportation availability, the $11.9 million legal reserve tied to the Greenwood, Missouri proceeding, potential goodwill impairment if stock prices or cash flows decline, and debt covenant pressure if volumes fall further.
Did the company return capital to shareholders in 2009?
Yes. The Board approved cash dividends of $1.60 per share in 2009, totaling $71.2 million, up from $1.49 per share in 2008. The company did not repurchase any shares in 2009 and had 5,041,871 shares remaining under its repurchase authorization at year end.
06—Continue