01—Abstract
Summary
Summary of the 10-K filed February 29, 2012. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. (MLM) reported 2011 total revenues of $1.71 billiona and net sales of $1.52 billion, with net earnings attributable to the Company of $82.4 million, or $1.78 per diluted share, down from $97.0 million, or $2.10 per diluted share, in 2010.
Results included $0.25b per diluted share of business development costs, largely tied to the proposed business combination with Vulcan Materials Company. The Aggregates business generated 87% of net sales, with net sales of $1.32 billion and earnings from operations of $127.5 million for continuing operations, while Specialty Products set record net sales of $200.6 million and earnings from operations of $66.3 million. Aggregates shipments declined 3.8% to 125.1 million tons, while heritage aggregates pricing rose 2.7%.
The central event in the filing is the December 12, 2011 stock-for-stock exchange offer to acquire all outstanding Vulcan common stock at 0.50 of a Martin Marietta share per Vulcan share, which the filing states has the unanimous support of the Company's Board and would give former Vulcan shareholders about 58% of the combined company. Vulcan's board has recommended that its shareholders reject the offer, and the companies are engaged in litigation in Delaware, New Jersey and Alabama. The filing also discloses a $1.06 billionc debt balance, a 3.25x debt-to-EBITDA ratio against a 3.50x covenant (temporarily raised to 3.95x for March and June 2012), $26.0 million of year-end cash, and a dividend of $1.60 per share maintained for 2011.
For 2012, management guided to a 3% to 4% increase in heritage aggregates shipments and 2% to 4% heritage aggregates pricing, with Specialty Products earnings expected near $66 milliond and capital expenditures of about $155 million. The outlook excludes the potential effects of the Vulcan combination.
02—Key points
Key Highlights
- Net earnings attributable to the Company fell to $82.4 million ($1.78 per diluted share) in 2011 from $97.0 million ($2.10) in 2010, including $0.25 per diluted share of business development costs.
- Total revenues were $1.71 billion and net sales were $1.52 billion, up from $1.65 billion and $1.48 billion in 2010; net sales growth of 3.0% was reported.
- Aggregates shipments decreased 3.8% to 125.1 million tons, with heritage aggregates shipments down 3.5% and heritage pricing up 2.7%.
- Specialty Products delivered record earnings from operations of $66.3 million on net sales of $200.6 million.
- Proposed all-stock combination with Vulcan Materials (0.50 MLM share per Vulcan share) would give former Vulcan holders about 58% of the combined company; Vulcan's board recommended rejecting the offer and litigation is pending.
- Debt of $1.06 billion; debt-to-EBITDA of 3.25x versus a 3.50x covenant, with the covenant temporarily relaxed to 3.95x for March and June 2012; $26.0 million cash at year-end.
- Quarterly dividend of $0.40 per share ($1.60 annually) was maintained in 2011, and management intends to maintain the dividend for the combined company.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Martin Marietta Materials kept $0.05.
- Revenue$1.71B100.0%
- Cost of revenue−$1.41B82.4%
- Gross profit$302.0M17.6%
- Operating costs−$141.0M8.2%
- Operating income$161.0M9.4%
- Interest, other & tax−$78.6M4.6%
- Net income$82.4M4.8%
Where FY2011 revenue went
$1.71B- Cost of revenue: $1.41B, 82% of revenue
- Net income: $82.4M, 4.8% of revenue
- SG&A: $124.1M, 7.2% of revenue
- Other operating costs: $16.9M, 1.0% of revenue
- Interest, other & tax: $78.6M, 4.6% of revenue
Kept 4.8% as net incomeNet income $82.4M · 4.8%Other operating costs $16.9M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 29, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $1.71B$1.65B | +3.7% |
| Cost of Revenue | $1.41B$1.33B | +6.0% |
| Gross Profit | $302.00M$321.65M | −6.1% |
| SG&A Expenses | $124.14M$130.42M | −4.8% |
| Operating Income | $161.01M$198.31M | −18.8% |
| Interest Expense | $58.59M$68.44M | −14.4% |
| Net Income | $82.38M$97.01M | −15.1% |
| EPS (Basic) | $1.79$2.11 | −15.2% |
| EPS (Diluted) | $1.78$2.10 | −15.2% |
| Shares Outstanding (Basic) | 45.65M45.48M | +0.4% |
| Shares Outstanding (Diluted) | 45.79M45.66M | +0.3% |
05—Questions
Frequently Asked Questions
Why did earnings per diluted share decline in 2011?
Diluted EPS fell to $1.78 from $2.10 in 2010. The filing attributes the decline to lower gross margin in the Aggregates business from higher energy, liquid asphalt and internal freight costs, and to $18.6 million of business development expenses, partly offset by record Specialty Products results and lower SG&A.
What is the proposed Vulcan transaction and what is its status?
On December 12, 2011, the Company proposed a stock-for-stock, tax-free business combination with Vulcan Materials in which each Vulcan share would be exchanged for 0.50 of a Martin Marietta share, with an exchange offer commenced at the same ratio. The filing states the offer has the unanimous support of the Company's Board, but Vulcan's board has determined to recommend that Vulcan shareholders reject it, and litigation is pending in Delaware, New Jersey and Alabama.
How is the Company's balance sheet positioned for the Vulcan transaction and existing debt?
Consolidated debt was $1.06 billion at December 31, 2011, and the debt-to-EBITDA ratio was 3.25x against a 3.50x maximum. The Company amended the covenant to a 3.95x maximum for March and June 2012. Management expects to refinance certain facilities and notes if required, and states that a holding company structure or change of control could trigger repurchase obligations on certain notes.
What is the 2012 outlook for the core aggregates business?
Management expects heritage aggregates shipments to rise 3% to 4% and heritage aggregates pricing to increase 2% to 4% in 2012. Infrastructure volume is expected to be slightly down, nonresidential volume is expected to grow at a double-digit rate, and the outlook assumes the Company on a stand-alone basis without the Vulcan combination.
What are the main risks highlighted for aggregates demand?
The filing cites dependence on construction spending, uncertainty over long-term federal highway funding (operating under continuing resolutions through March 31, 2012), weather exposure, concentration in Texas, North Carolina, Iowa, Georgia and South Carolina (57% of Aggregates net sales), and the high fixed-cost structure, with fixed costs over 70% of production costs in 2011.
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