01—Abstract
Summary
Summary of the 10-K filed February 24, 2015. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. reported 2014 results that were shaped by the July 1, 2014 acquisition of Texas Industries, Inc. (TXI), which added a Cement segment and expanded its West Group.
Net sales rose to $2.68 billiona from $1.94 billion, an increase of 38%, with $511.6 million of net sales from acquired operations and $2.17 billion from heritage operations. Net earnings attributable to Martin Marietta were $155.6 million, or $2.71 per diluted share, compared with $121.3 million, or $2.61 per diluted share, in 2013. Management's adjusted earnings per diluted share, which exclude TXI acquisition-related expenses and a one-time inventory markup, were $3.74, and it reported consolidated EBITDA of $537.0 million and adjusted EBITDA of $590.8 million.
The Aggregates business generated 83% of 2014 consolidated net sales. Heritage aggregates shipments rose 7.5% and heritage aggregates pricing rose 4.1%, while the aggregates product line's volume growth including acquisitions was 13.7%. Long-term debt rose to $1.585 billionb from $1.031 billion, and total equity rose to $4.353 billion from $1.575 billion, mainly from the issuance of 20.3 million shares to TXI shareholders.
The company's 2015 outlook calls for aggregates product line shipments to increase 10% to 12%, pricing to increase 4% to 6%, consolidated EBITDA of $825 million to $875 millionc, and capital expenditures of approximately $320 million. Management also said it expects to allocate up to $300 million to share repurchases in 2015. The most significant risks cited are federal highway funding, since MAP-21 was extended only through May 31, 2015, and uncertainty over the Highway Trust Fund.
Other risks include the integration of TXI, energy and fuel costs, and the cyclical construction market. The company's debt-to-EBITDA covenant ratio was 2.46 times at year-end against a 3.50 times maximum.
02—Key points
Key Highlights
- Net sales increased 38% to $2.68 billion, including $511.6 million from acquired operations (principally TXI).
- Reported diluted EPS was $2.71 versus $2.61 in 2013; adjusted diluted EPS, excluding TXI acquisition-related expenses and inventory markup, was $3.74.
- Consolidated EBITDA was $537.0 million and adjusted EBITDA was $590.8 million; the covenant debt-to-EBITDA ratio was 2.46 times against a 3.50 times maximum.
- Heritage aggregates shipments rose 7.5% and heritage aggregates pricing rose 4.1%; Magnesia Specialties posted record net sales of $236.1 million and earnings from operations of $74.8 million.
- The TXI acquisition, completed July 1, 2014 for total consideration of $2.757 billion, added a Cement segment with net sales of $209.6 million for the second half of 2014.
- Long-term debt rose to $1.585 billion from $1.031 billion after $700 million of new notes were issued to refinance TXI debt, and total equity rose to $4.353 billion.
- 2015 guidance calls for aggregates shipments up 10% to 12%, pricing up 4% to 6%, consolidated EBITDA of $825 million to $875 million, and capital expenditures of about $320 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Martin Marietta Materials kept $0.05.
- Revenue$2.96B100.0%
- Cost of revenue−$2.44B82.3%
- Gross profit$522.4M17.7%
- Operating costs−$207.5M7.0%
- Operating income$314.9M10.6%
- Interest, other & tax−$159.3M5.4%
- Net income$155.6M5.3%
Where FY2014 revenue went
$2.96B- Cost of revenue: $2.44B, 82% of revenue
- Net income: $155.6M, 5.3% of revenue
- SG&A: $169.2M, 5.7% of revenue
- Other operating costs: $38.2M, 1.3% of revenue
- Interest, other & tax: $159.3M, 5.4% of revenue
Kept 5.3% as net incomeNet income $155.6M · 5.3%Other operating costs $38.2M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 24, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $2.96B$2.16B | +37.2% |
| Cost of Revenue | $2.44B$1.79B | +35.9% |
| Gross Profit | $522.36M$363.96M | +43.5% |
| SG&A Expenses | $169.25M$150.09M | +12.8% |
| Operating Income | $314.87M$217.99M | +44.4% |
| Interest Expense | $66.06M$53.47M | +23.5% |
| Net Income | $155.60M$121.34M | +28.2% |
| EPS (Basic) | $2.73$2.62 | +4.2% |
| EPS (Diluted) | $2.71$2.61 | +3.8% |
| Shares Outstanding (Basic) | 56.85M46.16M | +23.2% |
| Shares Outstanding (Diluted) | 57.09M46.28M | +23.3% |
05—Questions
Frequently Asked Questions
How did the TXI acquisition change Martin Marietta's business in 2014?
The July 1, 2014 acquisition of Texas Industries, Inc. added a Cement business with production facilities in Texas and California, which the company reports as a separate segment. It also added aggregates and ready mixed concrete operations reported in the West Group. The company issued 20.3 million common shares to former TXI stockholders, with total purchase consideration of $2.757 billion, and it expects annual synergies of $100 million by 2016.
What drove the increase in 2014 earnings and margins?
Consolidated gross profit rose to $522.4 million from $364.0 million, and gross margin excluding freight and delivery revenues increased to 19.5% from 18.7%. The filing attributes this to aggregates volume and pricing growth, record Magnesia Specialties results, and contributions from acquired businesses. Reported earnings were reduced by $42.7 million of TXI acquisition-related expenses and a $11.1 million one-time inventory markup.
What are the main risks to the company's outlook?
Management identifies Congress's actions on federal highway funding and the Highway Trust Fund as the most significant risk, since MAP-21 was extended only through May 31, 2015. Other cited risks include declines in consumer confidence, the success of TXI integration and synergy targets, energy and diesel fuel costs, weather, and the cyclical nature of construction spending.
How leveraged is the company after the acquisition?
Long-term debt was $1.585 billion at December 31, 2014, up from $1.031 billion, and the company had $108.7 million of cash. Its covenant debt-to-EBITDA ratio was 2.46 times against a maximum of 3.50 times. The company had $347.5 million of unused borrowing capacity under its Revolving Facility and $250.0 million available under its Trade Receivable Facility.
What capital return plans did management describe?
The board authorized repurchases of up to 20 million shares after year end, including 15 million new shares, and management expects to allocate up to $300 million to share repurchases in 2015. The company paid $1.60 per share in cash dividends, totaling $91.3 million in 2014, and it did not repurchase any shares during 2014.
06—Continue