01—Abstract
Summary
Summary of the 10-K filed February 24, 2014. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. (the "Company") reported 2013 net sales of $1.94 billiona, up from $1.83 billion in 2012, and total revenues of $2.16 billion.
Net earnings attributable to the Company were $121.3 millionb, or $2.61 per diluted share, compared with $84.5 million, or $1.83 per diluted share, in 2012. Earnings from operations rose to $218.0 million from $156.2 million, and 2012 results included $35.1 million of business development costs related to a Vulcan Materials transaction that was not consummated. The Aggregates business generated 88% of 2013 net sales, with the aggregates product line priced up 3.0% and volume flat at 0.1%.
Specialty Products reached record earnings from operations of $73.5 millionc. The most significant development is the January 27, 2014 merger agreement with Texas Industries, Inc. (TXI), under which each TXI share will be exchanged for 0.70 of a Company share. The Company expects the deal to close in the second quarter of 2014, subject to TXI stockholder approval, Company shareholder approval, and antitrust clearance.
Following the transaction, current Company shareholders are expected to own about 69% of the combined company. The merger agreement limits dividends to $0.40d per quarter and prohibits share repurchases until closing or termination. Moody's placed the Company's ratings under review for downgrade, and S&P placed them on CreditWatch with negative implications.
The filing also highlights exposure to federal highway funding. The MAP-21 highway bill expires September 30, 2014, and the filing cites uncertainty over successor funding and the Highway Trust Fund.
Infrastructure shipments fell 7% in 2013, while nonresidential shipments rose 8% and residential shipments rose 11%. Management's 2014 outlook anticipates aggregates product line shipments up 4% to 5% and pricing up 3% to 5%, excluding the TXI transaction.
02—Key points
Key Highlights
- 2013 net earnings attributable to the Company of $121.3 million, or $2.61 per diluted share, versus $1.83 per diluted share in 2012
- Net sales of $1.94 billion in 2013, up from $1.83 billion; earnings from operations of $218.0 million versus $156.2 million
- Pending merger with Texas Industries, Inc.: TXI holders receive 0.70 Company share per TXI share; closing expected in Q2 2014 and subject to shareholder, stockholder, and antitrust approvals
- Dividends limited to $0.40 per quarter and share repurchases prohibited until the TXI merger closes or the agreement terminates
- Aggregates product line pricing up 3.0% and volume up 0.1% in 2013; infrastructure shipments down 7%, nonresidential up 8%, residential up 11%
- Specialty Products segment delivered record earnings from operations of $73.5 million in 2013
- Credit ratings under review for downgrade by Moody's and placed on CreditWatch negative by S&P due to the TXI transaction; total debt of about $1.03 billion at year-end 2013
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Martin Marietta Materials kept $0.06.
- Revenue$2.16B100.0%
- Cost of revenue−$1.79B83.1%
- Gross profit$364.0M16.9%
- Operating costs−$146.0M6.8%
- Operating income$218.0M10.1%
- Interest, other & tax−$96.7M4.5%
- Net income$121.3M5.6%
Where FY2013 revenue went
$2.16B- Cost of revenue: $1.79B, 83% of revenue
- Net income: $121.3M, 5.6% of revenue
- SG&A: $150.1M, 7.0% of revenue
- Interest, other & tax: $96.7M, 4.5% of revenue
Kept 5.6% as net incomeNet income $121.3M · 5.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 24, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $2.16B$2.03B | +6.1% |
| Cost of Revenue | $1.79B$1.70B | +5.1% |
| Gross Profit | $363.96M$327.13M | +11.3% |
| SG&A Expenses | $150.09M$138.40M | +8.4% |
| Operating Income | $217.99M$156.17M | +39.6% |
| Interest Expense | $53.47M$53.34M | +0.2% |
| Net Income | $121.34M$84.47M | +43.6% |
| EPS (Basic) | $2.62$1.83 | +43.2% |
| EPS (Diluted) | $2.61$1.83 | +42.6% |
| Shares Outstanding (Basic) | 46.16M45.83M | +0.7% |
| Shares Outstanding (Diluted) | 46.28M45.97M | +0.7% |
05—Questions
Frequently Asked Questions
What is the proposed TXI transaction and when is it expected to close?
On January 27, 2014, the Company agreed to merge with Texas Industries, Inc. in a stock-for-stock deal in which each TXI share converts into 0.70 of a Company share. The Company expects closing in the second quarter of 2014, subject to TXI stockholder approval, Company shareholder approval of the share issuance, and expiration or termination of the HSR antitrust waiting period. The filing states the Company cannot assure closing by any particular date, if at all.
How does the TXI deal affect current shareholders?
The filing states that after the merger, current Company shareholders are expected to own approximately 69% of the common stock and former TXI stockholders approximately 31%. Shareholders will therefore have less influence over management and policies. The merger may also be dilutive to earnings per share, although the Company anticipates it will be accretive in 2014 excluding one-time costs, assuming refinancing of TXI's debt.
What are the key risks to the Company's 2014 outlook?
The filing identifies Congress's actions around the September 30, 2014 expiration of MAP-21 and the funding mechanism for the Highway Trust Fund as the most significant risk. Other risks include a further government shutdown, weather and hurricane activity, diesel and natural gas costs, rail availability, and a possible downgrade of the Company's composite credit rating. The outlook excludes the potential effects of the TXI combination.
How did the Company's business perform in 2013?
Net sales rose to $1.94 billion from $1.83 billion. Gross margin excluding freight and delivery revenues improved to 18.7% from 17.8%, and SG&A was 7.7% of net sales. Cash provided by operations was $309.0 million, capital expenditures were $155.2 million, and dividends paid were $74.2 million. The Company repurchased no shares in 2013 and had $42.4 million of cash at year-end.
What does the Company say about future infrastructure and construction demand?
Management expects nonresidential end-use shipments to increase in the mid-to-high single digits in 2014 and residential shipments to show double-digit volume growth, with total housing starts expected to exceed one million units for the first time since 2007. Infrastructure shipments are expected to increase slightly, contingent on MAP-21 funding. The Company also notes that TIFIA credit assistance, which expanded under MAP-21 to $1.0 billion in fiscal 2014, may boost state infrastructure programs.
06—Continue