01—Abstract
Summary
Summary of the 10-K filed February 25, 2019. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. reported record total revenues of $4.24 billiona for 2018, up from $3.97 billion in 2017, and record consolidated EBITDA of $1.05 billion.
Net earnings attributable to Martin Marietta were $470.0 millionb, or $7.43 per diluted share, compared with $713.3 million, or $11.25 per diluted share, in 2017; the 2017 figure included a $258.1 million one-time tax benefit from the 2017 Tax Act. Management attributed weak volumes to excessive rainfall, hurricanes, government funding uncertainty, labor constraints and logistical challenges. Heritage aggregates pricing rose 3.0% while heritage volume was relatively flat.
The defining event of the year was the April 27, 2018 acquisition of Bluegrass Materials Company for $1,617,357,000c in cash, the largest privately held pure-play aggregates business in the United States. The company said it has surpassed its $15 million run-rate synergy target, and it divested the Forsyth quarry and Beaver Creek quarry under a Department of Justice agreement. Cash used for acquisitions was $1.64 billion, and long-term debt rose to $3.12 billion at year-end.
The company reported a 2.76 times consolidated net debt-to-EBITDA ratio under its credit agreement, against a 3.50x covenant. For 2019, the filing's guidance projects consolidated total revenues of $4.48 billion to $4.68 billiond, net earnings attributable to Martin Marietta of $520 million to $620 million, and EBITDA of $1.17 billion to $1.28 billion. Management also expects aggregates shipments to rise in the high-single digits for infrastructure and the mid- to high-single digits for nonresidential construction, with aggregates pricing growth in the mid-single digits.
02—Key points
Key Highlights
- Record total revenues of $4.24 billion in 2018, versus $3.97 billion in 2017, with record consolidated EBITDA of $1.05 billion.
- Diluted EPS fell to $7.43 from $11.25, largely because 2017 included a $258.1 million one-time tax benefit from the 2017 Tax Act.
- Acquired Bluegrass Materials Company on April 27, 2018 for $1.62 billion in cash; the company reports it has surpassed its $15 million run-rate synergy target.
- Aggregates product line pricing rose 1.9% overall and 3.0% for heritage operations, while heritage volumes were relatively flat amid record precipitation.
- Long-term debt increased to $3.12 billion; net debt-to-EBITDA was 2.76 times, within the 3.50x covenant.
- Operating cash flow was $705.1 million, and the company resumed share repurchases, buying 521,000 shares for $100.4 million.
- 2019 guidance calls for revenues of $4.48 to $4.68 billion and net earnings attributable to Martin Marietta of $520 to $620 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Martin Marietta Materials kept $0.11.
- Revenue$4.24B100.0%
- Cost of revenue−$3.28B77.2%
- Gross profit$966.6M22.8%
- Operating costs−$275.9M6.5%
- Operating income$690.7M16.3%
- Interest, other & tax−$220.7M5.2%
- Net income$470.0M11.1%
Where FY2018 revenue went
$4.24B- Cost of revenue: $3.28B, 77% of revenue
- Net income: $470.0M, 11% of revenue
- SG&A: $280.6M, 6.6% of revenue
- Interest, other & tax: $220.7M, 5.2% of revenue
Kept 11% as net incomeNet income $470.0M · 11%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 25, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $4.24B$3.97B | +7.0% |
| Cost of Revenue | $3.28B$2.99B | +9.5% |
| Gross Profit | $966.60M$971.90M | −0.5% |
| SG&A Expenses | $280.60M$262.10M | +7.1% |
| Operating Income | $690.70M$700.40M | −1.4% |
| Interest Expense | $137.10M$91.50M | +49.8% |
| Net Income | $470.00M$713.30M | −34.1% |
| EPS (Basic) | $7.46$11.30 | −34.0% |
| EPS (Diluted) | $7.43$11.25 | −34.0% |
| Shares Outstanding (Basic) | 62.90M62.90M | 0.0% |
| Shares Outstanding (Diluted) | 63.10M63.20M | −0.2% |
05—Questions
Frequently Asked Questions
What drove the decline in earnings per share in 2018?
Diluted EPS fell to $7.43 from $11.25. The 2017 results included a $258.1 million one-time income tax benefit from the remeasurement of deferred taxes under the 2017 Tax Act, which equated to $4.07 per diluted share. Earnings from operations were $690.7 million, compared with $700.4 million in 2017.
How did the Bluegrass acquisition affect the company's finances?
The company paid $1,617,357,000 in cash for Bluegrass and did not assume its debt. Cash used for acquisitions was $1.64 billion in 2018. Bluegrass contributed total revenues of $172.0 million and earnings from operations of $32.4 million to 2018 results. Interest expense rose to $137.1 million from $91.5 million, reflecting debt used to finance the deal.
What factors weighed on volumes in 2018?
The filing cites excessive rainfall during the peak construction season, including Hurricanes Florence and Matthew, record precipitation in Texas, government uncertainty about infrastructure funding, labor constraints and logistical challenges. Heritage aggregates shipments were relatively flat at 0.1%, while total aggregates volume rose 8.3% with acquisitions.
What is the company's balance sheet and capital allocation position?
Long-term debt including current maturities was $3.12 billion at December 31, 2018, and total equity was $4.95 billion. The company had $707.7 million of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility. It repurchased 521,000 shares for $100.4 million and paid dividends of $116.4 million, with 14.1 million shares remaining under its repurchase authorization.
What does management expect for 2019?
Management's guidance projects consolidated total revenues of $4.48 to $4.68 billion, consolidated gross profit of $1.11 to $1.21 billion, and EBITDA of $1.17 to $1.28 billion. It expects aggregates volume of 180 to 185 million tons and average selling price per ton of $14.15 to $14.40. Capital expenditures are expected to be $350 million to $400 million.
06—Continue