01—Abstract
Summary
Summary of the 10-K filed February 22, 2013. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. (NYSE: MLM) reported 2012 net sales of $1.84 billiona, up from $1.52 billion in 2011, and net earnings attributable to the company of $84.5 million, or $1.83 per diluted share, compared with $1.78 in 2011.
The results include $35.1 millionb of business development costs tied to a proposed business combination with Vulcan Materials Company that was not consummated, which reduced earnings by $0.46 per diluted share. The Aggregates business, the second largest U.S. producer of aggregates, generated 89% of 2012 net sales. Its gross margin excluding freight and delivery revenues declined to 15.5% from 17.4%, mainly because of lower-margin vertically-integrated operations acquired in Colorado and Texas and internal freight costs from rail and water distribution.
The Specialty Products segment, which makes magnesia-based chemicals and dolomitic lime, reported record gross profit and earnings from operations of $68.5 millionc. Management expects 2013 heritage aggregates shipments to rise 4% to 6% and heritage aggregates pricing to rise 2% to 4%, supported by the MAP-21 federal highway bill, which maintains highway spending at about $40 billion per year through September 30, 2014. Cash on hand was $25.4 million at year-end, with $297 million of unused revolving credit capacity and a consolidated debt-to-EBITDA ratio of 3.21x against a covenant that was temporarily raised to 3.75x through June 2013.
The filing also notes that one rating agency reduced the company's rating to one level below investment grade in July 2012, while the composite rating remained investment grade. Shipments to the infrastructure market were flat in 2012, while residential and nonresidential shipments rose.
02—Key points
Key Highlights
- Net sales rose 21.0% to $1.84 billion in 2012, and diluted EPS was $1.83 versus $1.78 in 2011.
- Business development costs of $35.1 million related to a terminated proposed combination with Vulcan Materials reduced 2012 EPS by $0.46.
- Aggregates gross margin excluding freight fell to 15.5% from 17.4%, mainly due to vertically-integrated operations (a 260-basis-point negative impact) and internal freight costs (290 basis points).
- Heritage aggregates shipments grew 2.9% and pricing rose 2.5%; management guides to 4% to 6% shipment growth and 2% to 4% pricing growth in 2013.
- Specialty Products reported record earnings from operations of $68.5 million, with a new Woodville, Ohio lime kiln adding $3.1 million of 2012 net sales.
- The company held $25.4 million of cash and had $297 million of unused revolver capacity, with debt-to-EBITDA of 3.21x against a temporarily relaxed 3.75x covenant.
- Dividends of $1.60 per share totaled $73.8 million, and the company repurchased no shares in 2012.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Martin Marietta Materials kept $0.04.
- Revenue$2.03B100.0%
- Cost of revenue−$1.70B83.9%
- Gross profit$327.1M16.1%
- Operating costs−$171.0M8.4%
- Operating income$156.2M7.7%
- Interest, other & tax−$71.7M3.5%
- Net income$84.5M4.2%
Where FY2012 revenue went
$2.03B- Cost of revenue: $1.70B, 84% of revenue
- Net income: $84.5M, 4.2% of revenue
- SG&A: $138.4M, 6.8% of revenue
- Other operating costs: $32.6M, 1.6% of revenue
- Interest, other & tax: $71.7M, 3.5% of revenue
Kept 4.2% as net incomeNet income $84.5M · 4.2%Other operating costs $32.6M · 1.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 22, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $2.03B$1.71B | +18.6% |
| Cost of Revenue | $1.70B$1.41B | +20.8% |
| Gross Profit | $327.13M$302.00M | +8.3% |
| SG&A Expenses | $138.40M$124.14M | +11.5% |
| Operating Income | $156.17M$161.01M | −3.0% |
| Interest Expense | $53.34M$58.59M | −9.0% |
| Net Income | $84.47M$82.38M | +2.5% |
| EPS (Basic) | $1.83$1.79 | +2.2% |
| EPS (Diluted) | $1.83$1.78 | +2.8% |
| Shares Outstanding (Basic) | 45.83M45.65M | +0.4% |
| Shares Outstanding (Diluted) | 45.97M45.79M | +0.4% |
05—Questions
Frequently Asked Questions
What drove the decline in Aggregates gross margin in 2012?
The filing attributes the decline to a 260-basis-point negative impact from vertically-integrated asphalt, ready mixed concrete and road paving operations, which have lower margins, and a 290-basis-point impact from internal freight on rail and water distribution. Higher diesel, resale material and internal freight costs also contributed.
How much did the terminated Vulcan Materials combination cost?
The company incurred business development costs of $35.1 million in 2012 and $18.6 million in 2011, mainly for a proposed business combination with Vulcan Materials Company that was not consummated. The 2012 costs reduced diluted EPS by $0.46.
What is the outlook for 2013?
Management expects heritage aggregates shipments to rise 4% to 6% and pricing to rise 2% to 4%. Vertically-integrated net sales are expected at $350 million to $375 million, Specialty Products net sales at $220 million to $230 million, and capital expenditures at $155 million. The effective tax rate is expected to be about 26%, excluding discrete events.
How strong is the company's liquidity and debt position?
At year-end 2012 the company had $25.4 million of cash and $297 million of unused revolving credit capacity, and its debt-to-EBITDA ratio was 3.21x. The covenant maximum was temporarily raised to 3.75x for the December 2012, March 2013 and June 2013 test dates before returning to 3.50x in September 2013. The company was in compliance at year-end.
Is federal highway funding a major risk?
Yes. The filing says that the Congressional Budget Office projects the Highway Account will be unable to meet its obligations sometime during fiscal 2015, and that about half of the Aggregates business's net sales to the infrastructure market depend on federal funding authorizations, including state matching funds.
06—Continue