01—Abstract
Summary
Summary of the 10-K filed February 22, 2022. Cited figures are marked; the original filing is the authoritative source.
Martin Marietta Materials, Inc. is a natural resource-based building materials company supplying aggregates (crushed stone, sand and gravel) through approximately 350 quarries, mines and distribution yards in 28 states, Canada and The Bahamas.
In 2021 it also operated cement and downstream operations (ready mixed concrete, asphalt and paving) and a Magnesia Specialties business. Aggregates product gross profit represented 67% of consolidated product and services gross profit in 2021. Total revenues were $5.41 billiona in 2021 versus $4.73 billion in 2020, and net earnings from continuing operations attributable to Martin Marietta were $702.0 million, or $11.22 per diluted share, compared with $721.0 million, or $11.54 per diluted share, in 2020.
Consolidated Adjusted EBITDA from continuing operations rose to $1.53 billionb from $1.39 billion. The defining event of 2021 was the $2.28 billion cash acquisition of the Lehigh Hanson West Region business on October 1, 2021, which added 17 active aggregates quarries and two cement plants in California and Arizona. The company invested $3.11 billion in acquisitions during the year, including Tiller Corporation and Southern Crushed Concrete.
To fund these deals, it issued $2.50 billionc of publicly traded long-term debt, bringing long-term debt to $5.10 billion at December 31, 2021. The company states it finances acquisitions with the goal of returning leverage (consolidated debt to EBITDA) to a range of 2.0 to 2.5 times within a reasonable period after a debt-financed transaction. The cement plants and California ready mixed concrete operations from Lehigh West Region are classified as held for sale and discontinued operations.
Management highlighted record safety performance, a tenth consecutive year of growth in products and services revenues, adjusted gross profit and Adjusted EBITDA, and an increase in the quarterly dividend of 7% in August 2021, with total dividends paid of $147.8 milliond, or $2.36 per share. Key risks noted in the filing include the cyclicality of construction and public infrastructure funding, weather exposure, energy cost volatility, environmental and climate-related regulation, reliance on rail transportation, and integration risk from acquisitions.
02—Key points
Key Highlights
- Record 2021 total revenues of $5.41 billion (up from $4.73 billion) and record consolidated gross profit of $1.35 billion, with Adjusted EBITDA from continuing operations of $1.53 billion.
- Net earnings from continuing operations attributable to Martin Marietta were $702.0 million, or $11.22 per diluted share, versus $721.0 million, or $11.54 per diluted share, in 2020.
- Acquired Lehigh Hanson West Region for $2.28 billion in cash on October 1, 2021, adding 17 active aggregates quarries and two cement plants in California and Arizona; total 2021 acquisition spending was $3.11 billion.
- Issued $2.50 billion of publicly traded long-term debt in 2021 at a weighted-average interest rate of 2.2%; long-term debt, including current maturities, was $5.10 billion at year-end.
- Aggregates pricing rose 2.1% (2.7% mix-adjusted) and aggregates volume rose 7.9% total (3.8% organic) in 2021; cement reported average selling price variance of 7.3%.
- Cement and California ready mixed concrete operations from Lehigh West Region are classified as held for sale and discontinued operations, with discontinued operations contributing $0.5 million of net earnings.
- Quarterly dividend increased 7% in August 2021, with total dividends paid of $147.8 million ($2.36 per share); no share repurchases were made in 2021, leaving 13.5 million shares authorized.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Martin Marietta Materials kept $0.13.
- Revenue$5.41B100.0%
- Cost of revenue−$4.07B75.1%
- Gross profit$1.35B24.9%
- Operating costs−$374.6M6.9%
- Operating income$973.8M18.0%
- Interest, other & tax−$271.0M5.0%
- Net income$702.8M13.0%
Where FY2021 revenue went
$5.41B- Cost of revenue: $4.07B, 75% of revenue
- Net income: $702.8M, 13% of revenue
- SG&A: $351.0M, 6.5% of revenue
- Interest, other & tax: $271.0M, 5.0% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 22, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $5.41B$4.73B | +14.5% |
| Cost of Revenue | $4.07B$3.48B | +16.9% |
| Gross Profit | $1.35B$1.25B | +7.6% |
| SG&A Expenses | $351.00M$305.90M | +14.7% |
| Operating Income | $973.80M$1.01B | −3.1% |
| Interest Expense | $142.70M$118.10M | +20.8% |
| Net Income | $702.77M$721.00M | −2.5% |
| EPS (Basic) | $11.26$11.56 | −2.6% |
| EPS (Diluted) | $11.22$11.54 | −2.8% |
| Shares Outstanding (Basic) | 62.40M62.30M | +0.2% |
| Shares Outstanding (Diluted) | 62.60M62.40M | +0.3% |
05—Questions
Frequently Asked Questions
How did the Lehigh Hanson West Region acquisition change the company?
The company paid $2.28 billion in cash on October 1, 2021, for a portfolio of 17 active aggregates quarries, two cement plants with related distribution terminals, and targeted downstream operations in California, Arizona, Nevada and Oregon. The filing describes it as a new upstream, materials-led growth platform in several of the nation's largest megaregions and reports it in the West Group. Its cement plants and California ready mixed concrete operations are classified as held for sale.
How is the company financing its acquisitions and what is its debt position?
In July 2021 the company issued $2.50 billion of senior notes, including $700.0 million of 0.650% notes due 2023, $900.0 million of 2.400% notes due 2031 and $900.0 million of 3.200% notes due 2051. Long-term debt, including current maturities, was $5.10 billion at December 31, 2021, up from $2.63 billion a year earlier. The company had $1.20 billion of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility and reported compliance with its leverage ratio covenant at year-end.
What are the main risks to demand for the company's products?
Demand depends on construction spending, which the filing describes as cyclical and sensitive to interest rates, credit availability and public infrastructure funding. Weather is also a significant factor because heavy-side construction is conducted outdoors, and hurricanes, precipitation and drought can disrupt production and shipments. In 2021, 34% of organic aggregates shipments went to public infrastructure and 25% to residential construction.
What does the company say about its exposure to energy and climate-related regulation?
Energy represented approximately 23% of the cement production cost profile in 2021, and a hypothetical 10% change in energy prices in 2022 would change energy expense by $33.3 million. The filing states that greenhouse gas regulation is not expected to have a material adverse effect on the Magnesia Specialties or Building Materials businesses, though future costs are not currently estimable. Management also notes that increased operating costs at Woodville and cement facilities would likely be passed on to customers, while the Manistee facility may have to absorb some costs.
What is the company's capital return policy?
The company's stated long-standing capital allocation priorities are acquisitions, organic capital investment, and return of cash to shareholders through dividends and share repurchases. In 2021 it paid $147.8 million in dividends and repurchased no shares, while in 2020 it repurchased 0.2 million shares for $50.0 million. At December 31, 2021, 13.5 million shares remained under the 20 million share repurchase authorization, and future repurchases are at management's discretion.
06—Continue