01—Abstract
Summary
Summary of the 10-K filed February 23, 2016. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. reported 2015 net sales of $3.27 billiona, up from $2.68 billion in 2014, and total revenues of $3.54 billion.
Earnings from operations rose to $479.4 millionb from $314.9 million, and net earnings attributable to Martin Marietta were $288.8 million, or $4.29 per diluted share, compared with $2.71 in 2014. Excluding the loss on the sale of the California cement operations and the gain on the San Antonio asphalt sale, adjusted earnings per diluted share were $4.50 versus $3.74 in 2014. The Aggregates business generated 82% of 2015 consolidated net sales, with the Cement business at 11% and Magnesia Specialties at 7%.
Management reports that the TXI integration was completed in 2015 with synergy guidance increased to $120 millionc per year. Operating cash flow was $573.2 million, and the company returned $627.4 million to shareholders through $520.0 million of share repurchases and $107.4 million of dividends. Consolidated debt-to-EBITDA was 1.9 times against a covenant maximum of 3.5 times, and long-term debt totaled $1.573 billion at year-end.
Weather was a significant headwind in 2015, with record precipitation in key markets, which management says created a backlog of construction activity expected to be completed in 2016. For 2016, management guides to aggregates product line pricing growth of 6% to 8% and volume growth of 5% to 7%, with consolidated net sales of $3.5 billion to $3.7 billiond and EBITDA of $930 million to $980 million. The company also cites the five-year, $305 billion FAST Act highway bill signed in December 2015 as a support for infrastructure demand, with meaningful impact not expected before the second half of 2016.
02—Key points
Key Highlights
- Net sales rose to $3.27 billion in 2015 from $2.68 billion in 2014; earnings from operations increased to $479.4 million from $314.9 million.
- Diluted EPS was $4.29 (adjusted $4.50) versus $2.71 in 2014 (adjusted $3.74).
- Operating cash flow of $573.2 million; $520.0 million spent on share repurchases and $107.4 million on dividends.
- Aggregates product line pricing increased 8.0% and volume 7.1%; heritage aggregates volume rose 2.1% despite record rainfall.
- TXI integration completed in 2015, with synergy guidance raised to $120 million per year.
- Consolidated debt-to-EBITDA of 1.9 times, within the 3.5 times covenant maximum; long-term debt of $1.573 billion.
- 2016 outlook calls for net sales of $3.5 billion to $3.7 billion and EBITDA of $930 million to $980 million, supported by the FAST Act highway bill.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Martin Marietta Materials kept $0.08.
- Revenue$3.54B100.0%
- Cost of revenue−$2.81B79.5%
- Gross profit$726.9M20.5%
- Operating costs−$232.8M6.6%
- Operating income$494.2M14.0%
- Interest, other & tax−$205.4M5.8%
- Net income$288.8M8.2%
Where FY2015 revenue went
$3.54B- Cost of revenue: $2.81B, 79% of revenue
- Net income: $288.8M, 8.2% of revenue
- SG&A: $210.8M, 6.0% of revenue
- Other operating costs: $22.0M, 0.6% of revenue
- Interest, other & tax: $205.4M, 5.8% of revenue
Kept 8.2% as net incomeNet income $288.8M · 8.2%Other operating costs $22.0M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 23, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $3.54B$2.96B | +19.7% |
| Cost of Revenue | $2.81B$2.44B | +15.5% |
| Gross Profit | $726.92M$522.36M | +39.2% |
| SG&A Expenses | $210.75M$169.25M | +24.5% |
| Operating Income | $494.17M$314.87M | +56.9% |
| Interest Expense | $76.29M$66.06M | +15.5% |
| Net Income | $288.79M$155.60M | +85.6% |
| EPS (Basic) | $4.31$2.73 | +57.9% |
| EPS (Diluted) | $4.29$2.71 | +58.3% |
| Shares Outstanding (Basic) | 66.77M56.85M | +17.4% |
| Shares Outstanding (Diluted) | 67.02M57.09M | +17.4% |
05—Questions
Frequently Asked Questions
What drove the increase in 2015 profitability?
Earnings from operations rose 52% to $479.4 million, driven by a full year of TXI operations, aggregates pricing gains of 8.0%, and a 260-basis-point improvement in consolidated gross margin excluding freight and delivery revenues. The filing also notes a $29.1 million loss on the California cement sale, partly offset by a $13.1 million gain on the San Antonio asphalt sale.
How is the company returning capital to shareholders?
In 2015 the company repurchased 3.3 million shares for $520.0 million and paid $107.4 million in dividends at $1.60 per share. Remaining repurchase authorization was 16.7 million shares at year-end, and for 2016 management expects to allocate excess free cash flow to additional repurchases, subject to a leverage target of 2.0 times debt-to-EBITDA.
What is the outlook for federal infrastructure funding?
The FAST Act, a five-year, $305 billion highway bill signed December 4, 2015, reauthorizes federal highway programs and stabilizes the Highway Trust Fund. Its $207.4 billion of formula apportionments rise 5.1% in 2016, with meaningful impact not expected before the second half of 2016. Management projects aggregates demand to peak in 2018.
How exposed is the company to weather and seasonality?
The business is highly seasonal, with the first quarter typically weakest. 2015 brought record precipitation in key markets, including the wettest year on record for Texas and Oklahoma, which reduced profitability and created a backlog of construction activity expected to be completed in 2016.
What are the main risks tied to the Magnesia Specialties and Cement segments?
Magnesia Specialties depends on steel industry utilization, with dolomitic lime performing best at 70% or greater steel capacity utilization, and faces currency pressure from a strong U.S. dollar. Cement is a commodity sensitive to supply, price, and energy costs, which represent approximately one-third of production costs; the Texas cement plants operated at about 70% utilization in 2015.
06—Continue