01—Abstract
Summary
Summary of the 10-K filed February 24, 2017. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. reported record 2016 results, with net earnings attributable to Martin Marietta of $425.4 milliona, or $6.63 per diluted share, up from $288.8 million, or $4.29 per diluted share, in 2015.
Total revenues were $3.82 billionb and net sales were $3.58 billion, an increase of 9.4%. Earnings from operations rose to $667.3 million from $479.4 million, and consolidated EBITDA reached a record $971.6 million. Gross margin excluding freight and delivery revenues improved to 25.4% from 22.1%, driven by aggregates product line pricing growth of 7.3% and volume growth of 1.4%.
The Aggregates business contributed the majority of results, with net sales of $3.10 billionc and earnings from operations of $576.0 million, while Cement and Magnesia Specialties posted net sales of $364.4 million and $238.0 million, respectively. Cash flow and balance sheet activity were significant. Operating cash flow was $678.7 million, up 18.4%.
The company returned $364.2 milliond to shareholders through share repurchases of $259.2 million and dividends of $105.0 million, and the quarterly dividend was raised 5% to $0.42. Acquisitions included Rocky Mountain Materials (more than 500 million tons of mineral reserves) and the remaining interest in Ratliff Ready-Mix. Long-term debt was $1.69 billion at year end, and the consolidated net debt-to-EBITDA ratio was 1.7 times against a covenant maximum of 3.5 times.
Management's 2017 guidance projects net sales of $3.75 billion to $3.95 billion, gross profit of $1.00 billion to $1.10 billion, and EBITDA of $1.05 billion to $1.13 billion. Key risks cited include weather, federal and state infrastructure funding timing, low oil prices affecting energy-sector shipments, rising interest rates, and potential changes to U.S. corporate tax rules.
02—Key points
Key Highlights
- Record 2016 diluted EPS of $6.63 versus $4.29 in 2015; net earnings attributable to Martin Marietta of $425.4 million, an increase of 47%.
- Record consolidated EBITDA of $971.6 million versus $750.7 million; earnings from operations of $667.3 million, a 39% increase.
- Aggregates product line average selling price rose 7.3% and volume rose 1.4% in 2016.
- Operating cash flow of $678.7 million, up 18.4%; $364.2 million returned to shareholders via $259.2 million of buybacks and $105.0 million of dividends.
- Record Magnesia Specialties net sales of $238.0 million and earnings from operations of $79.1 million.
- 2017 guidance calls for net sales of $3.75 billion to $3.95 billion and EBITDA of $1.05 billion to $1.13 billion, with capital expenditures of $350 million to $400 million.
- Net debt-to-EBITDA of 1.73 times at year end, within the 3.5 times covenant maximum; $1.69 billion of total long-term debt including current maturities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Martin Marietta Materials kept $0.11.
- Revenue$3.82B100.0%
- Cost of revenue−$2.91B76.1%
- Gross profit$911.7M23.9%
- Operating costs−$234.5M6.1%
- Operating income$677.3M17.7%
- Interest, other & tax−$251.9M6.6%
- Net income$425.4M11.1%
Where FY2016 revenue went
$3.82B- Cost of revenue: $2.91B, 76% of revenue
- Net income: $425.4M, 11% of revenue
- SG&A: $241.6M, 6.3% of revenue
- Interest, other & tax: $251.9M, 6.6% of revenue
Kept 11% as net incomeNet income $425.4M · 11%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 24, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $3.82B$3.54B | +7.9% |
| Cost of Revenue | $2.91B$2.81B | +3.4% |
| Gross Profit | $911.74M$726.92M | +25.4% |
| SG&A Expenses | $241.61M$210.75M | +14.6% |
| Operating Income | $677.27M$494.17M | +37.1% |
| Interest Expense | $81.68M$76.29M | +7.1% |
| Net Income | $425.39M$288.79M | +47.3% |
| EPS (Basic) | $6.66$4.31 | +54.5% |
| EPS (Diluted) | $6.63$4.29 | +54.5% |
| Shares Outstanding (Basic) | 63.61M66.77M | −4.7% |
| Shares Outstanding (Diluted) | 63.86M67.02M | −4.7% |
05—Questions
Frequently Asked Questions
What drove the increase in 2016 earnings?
Gross profit rose $187.2 million to $909.0 million, supported by aggregates pricing strength of $138.3 million and volume growth of $26.4 million, along with improvements in the Cement and Magnesia Specialties businesses. Consolidated gross margin excluding freight and delivery revenues improved to 25.4% from 22.1%.
How is the company's infrastructure exposure expected to affect 2017?
Management expects the FAST Act, a $305 billion five-year highway bill signed in December 2015, to have meaningful impact beginning in 2017. Management's 2017 outlook anticipates infrastructure end-use demand to rise mid-single digits, while nonresidential demand is expected to increase in the low- to mid-single digits and residential demand in the mid- to high-single digits. Infrastructure shipments fell in 2016, accounting for 39% of aggregates product line shipments versus a five-year average of 44%.
What are the main risks to the business highlighted in the filing?
Key risks include weather, particularly heavy rainfall and hurricanes; the timing and level of federal and state infrastructure funding; a slowdown in energy-related construction after low oil prices reduced energy-sector shipments to about 1.5 million tons in 2016 from 3.6 million tons in 2015; rising interest rates; fuel and energy cost volatility; and potential changes to U.S. corporate tax rules. The company also noted that its aggregates-related downstream businesses carry lower margins.
How did the company deploy capital in 2016?
Capital expenditures were $387.3 million in cash, and acquisitions totaled $178.8 million. The company repurchased 1.6 million shares for $259.2 million and paid $105.0 million in dividends, with dividends per share of $1.64 for 2016. Remaining buyback authorization stood at 15.1 million shares at year end.
What is the company's debt and liquidity position?
Total long-term debt including current maturities was $1.69 billion at December 31, 2016. The company entered a new $700 million five-year senior unsecured revolving facility in December 2016 and had $658 million of combined unused capacity under its revolver and $300 million trade receivable facility. Cash on hand was $50.0 million.
06—Continue