filings.toolsItem 1. Financial Statements.
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Item 1. Financial Statements.
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (In Millions, Except Par Value Data) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 135.7 | $ | 258.4 | ||||
| Restricted cash | — | 0.5 | ||||||
| Restricted investments (to satisfy discharged debt and related interest) | 704.6 | — | ||||||
| Accounts receivable, net | 1,011.7 | 774.0 | ||||||
| Inventories, net | 823.4 | 752.6 | ||||||
| Current assets held for sale | 79.5 | 102.2 | ||||||
| Other current assets | 92.4 | 137.9 | ||||||
| Total Current Assets | 2,847.3 | 2,025.6 | ||||||
| Property, plant and equipment | 10,400.0 | 10,370.0 | ||||||
| Allowances for depreciation, depletion and amortization | (4,246.2 | ) | (4,032.0 | ) | ||||
| Net property, plant and equipment | 6,153.8 | 6,338.0 | ||||||
| Goodwill | 3,640.4 | 3,494.4 | ||||||
| Other intangibles, net | 855.7 | 1,065.0 | ||||||
| Operating lease right-of-use assets, net | 397.3 | 426.7 | ||||||
| Noncurrent assets held for sale | 375.1 | 616.9 | ||||||
| Other noncurrent assets | 460.1 | 426.4 | ||||||
| Total Assets | $ | 14,729.7 | $ | 14,393.0 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 333.5 | $ | 356.2 | ||||
| Accrued salaries, benefits and payroll taxes | 77.1 | 86.6 | ||||||
| Accrued other taxes | 57.9 | 58.4 | ||||||
| Accrued interest | 41.1 | 48.0 | ||||||
| Current maturities of discharged long-term debt | 698.7 | — | ||||||
| Operating lease liabilities | 55.0 | 53.9 | ||||||
| Current liabilities held for sale | 4.6 | 7.5 | ||||||
| Other current liabilities | 151.8 | 142.0 | ||||||
| Total Current Liabilities | 1,419.7 | 752.6 | ||||||
| Long-term debt | 4,339.9 | 5,100.8 | ||||||
| Deferred income taxes, net | 886.0 | 895.3 | ||||||
| Noncurrent operating lease liabilities | 348.4 | 379.4 | ||||||
| Noncurrent liabilities held for sale | 23.8 | 53.5 | ||||||
| Other noncurrent liabilities | 774.1 | 673.8 | ||||||
| Total Liabilities | 7,791.9 | 7,855.4 | ||||||
| Equity: | ||||||||
| Common stock, par value $0.01 per share (62.1 shares and 62.4 shares outstanding at September 30, 2022 and December 31, 2021, respectively) | 0.6 | 0.6 | ||||||
| Preferred stock, par value $0.01 per share | — | — | ||||||
| Additional paid-in capital | 3,483.2 | 3,470.4 | ||||||
| Accumulated other comprehensive loss | (125.1 | ) | (97.6 | ) | ||||
| Retained earnings | 3,577.0 | 3,161.9 | ||||||
| Total Shareholders' Equity | 6,935.7 | 6,535.3 | ||||||
| Noncontrolling interests | 2.1 | 2.3 | ||||||
| Total Equity | 6,937.8 | 6,537.6 | ||||||
| Total Liabilities and Equity | $ | 14,729.7 | $ | 14,393.0 |
See accompanying notes to the consolidated financial statements.
Page 3 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (In Millions, Except Per Share Data) | ||||||||||||||||
| Products and services revenues | $ | 1,680.5 | $ | 1,462.7 | $ | 4,352.1 | $ | 3,679.9 | ||||||||
| Freight revenues | 131.2 | 94.6 | 332.1 | 237.7 | ||||||||||||
| Total Revenues | 1,811.7 | 1,557.3 | 4,684.2 | 3,917.6 | ||||||||||||
| Cost of revenues - products and services | 1,193.8 | 1,021.0 | 3,281.3 | 2,676.9 | ||||||||||||
| Cost of revenues - freight | 130.1 | 94.4 | 333.8 | 239.0 | ||||||||||||
| Total Cost of Revenues | 1,323.9 | 1,115.4 | 3,615.1 | 2,915.9 | ||||||||||||
| Gross Profit | 487.8 | 441.9 | 1,069.1 | 1,001.7 | ||||||||||||
| Selling, general & administrative expenses | 94.9 | 86.0 | 296.0 | 248.2 | ||||||||||||
| Acquisition and integration expenses | 1.8 | 7.4 | 6.1 | 18.0 | ||||||||||||
| Other operating income, net | (14.8 | ) | (8.4 | ) | (177.4 | ) | (28.2 | ) | ||||||||
| Earnings from Operations | 405.9 | 356.9 | 944.4 | 763.7 | ||||||||||||
| Interest expense | 42.8 | 44.3 | 126.4 | 99.9 | ||||||||||||
| Other nonoperating income, net | (7.3 | ) | (5.6 | ) | (40.1 | ) | (23.8 | ) | ||||||||
| Earnings from continuing operations before income tax expense | 370.4 | 318.2 | 858.1 | 687.6 | ||||||||||||
| Income tax expense | 79.2 | 63.6 | 189.4 | 141.7 | ||||||||||||
| Earnings from continuing operations | 291.2 | 254.6 | 668.7 | 545.9 | ||||||||||||
| Earnings from discontinued operations, net of income tax expense | 4.1 | — | 14.3 | — | ||||||||||||
| Consolidated net earnings | 295.3 | 254.6 | 683.0 | 545.9 | ||||||||||||
| Less: Net (loss) earnings attributable to noncontrolling interests | — | — | (0.2 | ) | 0.2 | |||||||||||
| Net Earnings Attributable to Martin Marietta | $ | 295.3 | $ | 254.6 | $ | 683.2 | $ | 545.7 | ||||||||
| Consolidated Comprehensive Earnings (Loss): | ||||||||||||||||
| Earnings attributable to Martin Marietta | $ | 298.3 | $ | 256.2 | $ | 655.7 | $ | 552.7 | ||||||||
| (Loss) Earnings attributable to noncontrolling interests | — | — | (0.2 | ) | 0.2 | |||||||||||
| $ | 298.3 | $ | 256.2 | $ | 655.5 | $ | 552.9 | |||||||||
| Net Earnings Attributable to Martin Marietta | ||||||||||||||||
| Per Common Share: | ||||||||||||||||
| Basic from continuing operations attributable to common shareholders | $ | 4.67 | $ | 4.08 | $ | 10.73 | $ | 8.74 | ||||||||
| Basic from discontinued operations attributable to common shareholders | 0.07 | — | 0.23 | — | ||||||||||||
| $ | 4.74 | $ | 4.08 | $ | 10.96 | $ | 8.74 | |||||||||
| Diluted from continuing operations attributable to common shareholders | $ | 4.67 | $ | 4.07 | $ | 10.69 | $ | 8.72 | ||||||||
| Diluted from discontinued operations attributable to common shareholders | 0.06 | — | 0.23 | — | ||||||||||||
| $ | 4.73 | $ | 4.07 | $ | 10.92 | $ | 8.72 | |||||||||
| Weighted-Average Common Shares Outstanding: | ||||||||||||||||
| Basic | 62.3 | 62.4 | 62.4 | 62.4 | ||||||||||||
| Diluted | 62.5 | 62.6 | 62.5 | 62.6 |
See accompanying notes to the consolidated financial statements.
Page 4 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| (Dollars in Millions) | ||||||||
| Cash Flows from Operating Activities: | ||||||||
| Consolidated net earnings | $ | 683.0 | $ | 545.9 | ||||
| Adjustments to reconcile consolidated net earnings to net cash provided by operating activities: | ||||||||
| Depreciation, depletion and amortization | 380.3 | 320.0 | ||||||
| Stock-based compensation expense | 34.3 | 33.0 | ||||||
| Gain on divestitures, sales of assets and extinguishment of debt | (190.7 | ) | (26.6 | ) | ||||
| Deferred income taxes, net | (1.0 | ) | 25.7 | |||||
| Other items, net | (1.0 | ) | (8.3 | ) | ||||
| Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | ||||||||
| Accounts receivable, net | (237.9 | ) | (218.0 | ) | ||||
| Inventories, net | (87.0 | ) | 65.1 | |||||
| Accounts payable | 18.1 | 66.9 | ||||||
| Other assets and liabilities, net | (37.4 | ) | (23.4 | ) | ||||
| Net Cash Provided by Operating Activities | 560.7 | 780.3 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Additions to property, plant and equipment | (309.1 | ) | (321.3 | ) | ||||
| Acquisitions, net of cash acquired | 11.0 | (792.9 | ) | |||||
| Proceeds from divestitures and sales of assets | 679.1 | 41.4 | ||||||
| Purchase of restricted investments to discharge long-term debt | (704.6 | ) | — | |||||
| Investments in life insurance contracts, net | 2.2 | 13.9 | ||||||
| Other investing activities, net | (3.0 | ) | — | |||||
| Net Cash Used for Investing Activities | (324.4 | ) | (1,058.9 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Borrowings of debt | — | 2,896.6 | ||||||
| Repayments of debt | (54.5 | ) | (400.0 | ) | ||||
| Payments on finance lease obligations | (11.1 | ) | (7.6 | ) | ||||
| Debt issuance and extinguishment costs | (0.3 | ) | (6.1 | ) | ||||
| Distributions to owners of noncontrolling interest | — | (0.5 | ) | |||||
| Repurchases of common stock | (150.0 | ) | — | |||||
| Dividends paid | (118.1 | ) | (109.7 | ) | ||||
| Proceeds from exercise of stock options | 0.6 | 1.1 | ||||||
| Shares withheld for employees' income tax obligations | (26.1 | ) | (16.5 | ) | ||||
| Net Cash (Used for) Provided by Financing Activities | (359.5 | ) | 2,357.3 | |||||
| Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | (123.2 | ) | 2,078.7 | |||||
| Cash, Cash Equivalents and Restricted Cash, beginning of period | 258.9 | 304.4 | ||||||
| Cash, Cash Equivalents and Restricted Cash, end of period | $ | 135.7 | $ | 2,383.1 |
See accompanying notes to the consolidated financial statements.
Page 5 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF TOTAL EQUITY
| (In Millions, Except Per Share Data) | Shares of Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
| Balance at June 30, 2022 | 62.4 | $ | 0.6 | $ | 3,474.4 | $ | (128.1 | ) | $ | 3,423.1 | $ | 6,770.0 | $ | 2.1 | $ | 6,772.1 | ||||||||||||||||
| Consolidated net earnings | — | — | — | — | 295.3 | 295.3 | — | 295.3 | ||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | 3.0 | — | 3.0 | — | 3.0 | ||||||||||||||||||||||||
| Dividends declared ($0.66 per share) | — | — | — | — | (41.4 | ) | (41.4 | ) | — | (41.4 | ) | |||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (1.1 | ) | — | — | (1.1 | ) | — | (1.1 | ) | |||||||||||||||||||||
| Repurchases of common stock | (0.3 | ) | — | — | — | (100.0 | ) | (100.0 | ) | — | (100.0 | ) | ||||||||||||||||||||
| Stock-based compensation expense | — | — | 9.9 | — | — | 9.9 | — | 9.9 | ||||||||||||||||||||||||
| Balance at September 30, 2022 | 62.1 | $ | 0.6 | $ | 3,483.2 | $ | (125.1 | ) | $ | 3,577.0 | $ | 6,935.7 | $ | 2.1 | $ | 6,937.8 | ||||||||||||||||
| Balance at December 31, 2021 | 62.4 | $ | 0.6 | $ | 3,470.4 | $ | (97.6 | ) | $ | 3,161.9 | $ | 6,535.3 | $ | 2.3 | $ | 6,537.6 | ||||||||||||||||
| Consolidated net earnings (loss) | — | — | — | — | 683.2 | 683.2 | (0.2 | ) | 683.0 | |||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | (27.5 | ) | — | (27.5 | ) | — | (27.5 | ) | |||||||||||||||||||||
| Dividends declared ($1.88 per share) | — | — | — | — | (118.1 | ) | (118.1 | ) | — | (118.1 | ) | |||||||||||||||||||||
| Issuances of common stock for stock award plans | 0.1 | — | 4.7 | — | — | 4.7 | — | 4.7 | ||||||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (26.2 | ) | — | — | (26.2 | ) | — | (26.2 | ) | |||||||||||||||||||||
| Repurchases of common stock | (0.4 | ) | — | — | — | (150.0 | ) | (150.0 | ) | — | (150.0 | ) | ||||||||||||||||||||
| Stock-based compensation expense | — | — | 34.3 | — | — | 34.3 | — | 34.3 | ||||||||||||||||||||||||
| Balance at September 30, 2022 | 62.1 | $ | 0.6 | $ | 3,483.2 | $ | (125.1 | ) | $ | 3,577.0 | $ | 6,935.7 | $ | 2.1 | $ | 6,937.8 |
See accompanying notes to the consolidated financial statements.
Page 6 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF TOTAL EQUITY (Continued)
| (In Millions, Except Per Share Data) | Shares of Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
| Balance at June 30, 2021 | 62.4 | $ | 0.6 | $ | 3,451.1 | $ | (153.0 | ) | $ | 2,827.2 | $ | 6,125.9 | $ | 2.3 | $ | 6,128.2 | ||||||||||||||||
| Consolidated net earnings | — | — | — | — | 254.6 | 254.6 | — | 254.6 | ||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | 1.6 | — | 1.6 | — | 1.6 | ||||||||||||||||||||||||
| Dividends declared ($0.61 per share) | — | — | — | — | (38.4 | ) | (38.4 | ) | — | (38.4 | ) | |||||||||||||||||||||
| Issuances of common stock for stock award plans | — | — | 0.4 | — | — | 0.4 | — | 0.4 | ||||||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (0.4 | ) | — | — | (0.4 | ) | — | (0.4 | ) | |||||||||||||||||||||
| Stock-based compensation expense | — | — | 12.2 | — | — | 12.2 | — | 12.2 | ||||||||||||||||||||||||
| Balance at September 30, 2021 | 62.4 | $ | 0.6 | $ | 3,463.3 | $ | (151.4 | ) | $ | 3,043.4 | $ | 6,355.9 | $ | 2.3 | $ | 6,358.2 | ||||||||||||||||
| Balance at December 31, 2020 | 62.3 | $ | 0.6 | $ | 3,440.8 | $ | (158.4 | ) | $ | 2,607.7 | $ | 5,890.7 | $ | 2.6 | $ | 5,893.3 | ||||||||||||||||
| Consolidated net earnings | — | — | — | — | 545.7 | 545.7 | 0.2 | 545.9 | ||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | 7.0 | — | 7.0 | — | 7.0 | ||||||||||||||||||||||||
| Dividends declared ($1.75 per share) | — | — | — | — | (110.0 | ) | (110.0 | ) | — | (110.0 | ) | |||||||||||||||||||||
| Issuances of common stock for stock award plans | 0.1 | — | 6.0 | — | — | 6.0 | — | 6.0 | ||||||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (16.5 | ) | — | — | (16.5 | ) | — | (16.5 | ) | |||||||||||||||||||||
| Stock-based compensation expense | — | — | 33.0 | — | — | 33.0 | — | 33.0 | ||||||||||||||||||||||||
| Distributions to owners of noncontrolling interest | — | — | — | — | — | — | (0.5 | ) | (0.5 | ) | ||||||||||||||||||||||
| Balance at September 30, 2021 | 62.4 | $ | 0.6 | $ | 3,463.3 | $ | (151.4 | ) | $ | 3,043.4 | $ | 6,355.9 | $ | 2.3 | $ | 6,358.2 |
See accompanying notes to the consolidated financial statements.
Page 7 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Significant Accounting Policies
Organization
Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. As of September 30, 2022, the Company supplies aggregates (crushed stone, sand and gravel) through its network of approximately 350 quarries, mines and distribution yards in 28 states, Canada and The Bahamas. Martin Marietta also provides cement and downstream products and services, namely, ready mixed concrete, asphalt and paving, in vertically-integrated structured markets where the Company has a leading aggregates position. In addition, the Company has one cement plant, related cement distribution terminals and ready mixed concrete operations in California that are classified as assets held for sale and discontinued operations as of and for the nine months ended September 30, 2022 and as of December 31, 2021. The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects. Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. The aggregates, cement, ready mixed concrete, asphalt and paving product lines are reported collectively as the “Building Materials” business.
The Company’s Building Materials business includes two reportable segments: the East Group and the West Group.
| BUILDING MATERIALS BUSINESS | ||||
| Reportable Segments | East Group | West Group | ||
| Operating Locations | Alabama, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, Nova Scotia and The Bahamas | Arizona, Arkansas, California, Colorado, Louisiana, Oklahoma, Texas, Utah, Washington and Wyoming | ||
| Product Lines | Aggregates and Asphalt | Aggregates, Cement, Ready Mixed Concrete, Asphalt and Paving |
The Company’s Magnesia Specialties business, which represents a separate reportable segment, has manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. The Magnesia Specialties business produces magnesia-based chemicals products used in industrial, agricultural and environmental applications, and dolomitic lime sold primarily to customers in the steel and mining industries.
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and in Article 10 of Regulation S-X. The Company has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, the interim consolidated financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods. The consolidated results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial
Page 8 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The preparation of the Company’s consolidated financial statements requires management to make certain estimates and assumptions about future events. As future events and their effects cannot be fully determined with precision, actual results could differ significantly from estimates. Changes in estimates are reflected in the consolidated financial statements in the period in which the change in estimate occurs.
Consolidated Comprehensive Earnings (Loss) and Accumulated Other Comprehensive Loss
Consolidated comprehensive earnings (loss) and accumulated other comprehensive loss consist of consolidated net earnings; adjustments for the funded status of pension and postretirement benefit plans; and foreign currency translation adjustments; and are presented in the Company’s consolidated statements of earnings and comprehensive earnings.
Consolidated comprehensive earnings (loss) attributable to Martin Marietta is as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Net earnings attributable to Martin Marietta | $ | 295.3 | $ | 254.6 | $ | 683.2 | $ | 545.7 | ||||||||
| Other comprehensive earnings (loss), net of tax | 3.0 | 1.6 | (27.5 | ) | 7.0 | |||||||||||
| Consolidated comprehensive earnings attributable to Martin Marietta | $ | 298.3 | $ | 256.2 | $ | 655.7 | $ | 552.7 |
Page 9 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Changes in accumulated other comprehensive loss, net of tax, are as follows:
| (Dollars in Millions) | ||||||||||||
| Pension and Postretirement Benefit Plans | Foreign Currency | Accumulated Other Comprehensive Loss | ||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||
| Balance at beginning of period | $ | (127.6 | ) | $ | (0.5 | ) | $ | (128.1 | ) | |||
| Other comprehensive loss before reclassifications, net of tax | — | (1.9 | ) | (1.9 | ) | |||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 4.9 | — | 4.9 | |||||||||
| Other comprehensive earnings (loss), net of tax | 4.9 | (1.9 | ) | 3.0 | ||||||||
| Balance at end of period | $ | (122.7 | ) | $ | (2.4 | ) | $ | (125.1 | ) | |||
| Three Months Ended September 30, 2021 | ||||||||||||
| Balance at beginning of period | $ | (153.5 | ) | $ | 0.5 | $ | (153.0 | ) | ||||
| Other comprehensive loss before reclassifications, net of tax | — | (0.6 | ) | (0.6 | ) | |||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 2.2 | — | 2.2 | |||||||||
| Other comprehensive earnings (loss), net of tax | 2.2 | (0.6 | ) | 1.6 | ||||||||
| Balance at end of period | $ | (151.3 | ) | $ | (0.1 | ) | $ | (151.4 | ) |
| (Dollars in Millions) | ||||||||||||
| Pension and Postretirement Benefit Plans | Foreign Currency | Accumulated Other Comprehensive Loss | ||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||
| Balance at beginning of period | $ | (97.6 | ) | $ | — | $ | (97.6 | ) | ||||
| Other comprehensive loss before reclassifications, net of tax | (33.0 | ) | (2.4 | ) | (35.4 | ) | ||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 7.9 | — | 7.9 | |||||||||
| Other comprehensive loss, net of tax | (25.1 | ) | (2.4 | ) | (27.5 | ) | ||||||
| Balance at end of period | $ | (122.7 | ) | $ | (2.4 | ) | $ | (125.1 | ) | |||
| Nine Months Ended September 30, 2021 | ||||||||||||
| Balance at beginning of period | $ | (158.1 | ) | $ | (0.3 | ) | $ | (158.4 | ) | |||
| Other comprehensive earnings before reclassifications, net of tax | — | 0.2 | 0.2 | |||||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 6.8 | — | 6.8 | |||||||||
| Other comprehensive earnings, net of tax | 6.8 | 0.2 | 7.0 | |||||||||
| Balance at end of period | $ | (151.3 | ) | $ | (0.1 | ) | $ | (151.4 | ) |
Page 10 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The $33.0 million, net of tax, other comprehensive loss before reclassifications in the Pension and Postretirement Benefit Plans for the nine months ended September 30, 2022 is driven by the remeasurement of the funded status of the Company’s qualified pension plan, required as a result of a plan amendment that provided an enhanced benefit for eligible hourly employees.
Changes in net noncurrent deferred tax assets related to accumulated other comprehensive loss are as follows:
| Pension and Postretirement Benefit Plans | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Balance at beginning of period | $ | 79.5 | $ | 87.9 | $ | 69.7 | $ | 89.4 | ||||||||
| Tax effect of other comprehensive (earnings) loss | (1.6 | ) | (0.8 | ) | 8.2 | (2.3 | ) | |||||||||
| Balance at end of period | $ | 77.9 | $ | 87.1 | $ | 77.9 | $ | 87.1 |
Reclassifications out of accumulated other comprehensive loss are as follows:
| Three Months Ended | Nine Months Ended | Affected line items in the | ||||||||||||||||
| September 30, | September 30, | consolidated statements of earnings | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | and comprehensive earnings | ||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||
| Pension and postretirement benefit plans | ||||||||||||||||||
| Settlement charge | $ | 4.5 | $ | — | $ | 4.5 | $ | — | ||||||||||
| Amortization of: | ||||||||||||||||||
| Prior service cost | 1.1 | — | 3.2 | — | ||||||||||||||
| Actuarial loss | 0.9 | 3.0 | 2.8 | 9.1 | ||||||||||||||
| 6.5 | 3.0 | 10.5 | 9.1 | Other nonoperating income, net | ||||||||||||||
| Tax benefit | (1.6 | ) | (0.8 | ) | (2.6 | ) | (2.3 | ) | Income tax expense | |||||||||
| $ | 4.9 | $ | 2.2 | $ | 7.9 | $ | 6.8 |
Earnings per Common Share
The numerator for basic and diluted earnings per common share is net earnings attributable to Martin Marietta reduced by dividends and undistributed earnings attributable to certain of the Company’s stock-based compensation arrangements. If there is a net loss, no amount of the undistributed loss is attributed to unvested participating securities. The denominator for basic earnings per common share is the weighted-average number of common shares outstanding during the period. Diluted earnings per common share are computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards to be issued to employees and nonemployee members of the Company’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive. For the three and nine months ended September 30, 2022 and 2021, the diluted per-share computations reflect the number of common shares outstanding including the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued.
Page 11 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table reconciles the denominator for basic and diluted earnings from continuing operations per common share:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (In Millions) | ||||||||||||||||
| Basic weighted-average common shares outstanding | 62.3 | 62.4 | 62.4 | 62.4 | ||||||||||||
| Effect of dilutive employee and director awards | 0.2 | 0.2 | 0.1 | 0.2 | ||||||||||||
| Diluted weighted-average common shares outstanding | 62.5 | 62.6 | 62.5 | 62.6 |
Restricted Cash
At December 31, 2021, the Company had restricted cash of $0.5 million, which was invested in an account designated for the purchase of like-kind exchange replacement assets under Section 1031 of the Internal Revenue Code and related IRS procedures (Section 1031). The Company was restricted from utilizing the cash for purposes other than the purchase of the qualified assets for a designated period from receipt of the proceeds from the sale of the exchanged property. There was no restricted cash at September 30, 2022.
In connection with Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230), the statement of cash flows reflects cash flow changes and balances for cash, cash equivalents and restricted cash on an aggregated basis.
The following table reconciles cash, cash equivalents and restricted cash as reported on the consolidated balance sheets to the aggregated amounts presented on the consolidated statements of cash flows:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Dollars in Millions) | ||||||||
| Cash and cash equivalents | $ | 135.7 | $ | 258.4 | ||||
| Restricted cash | — | 0.5 | ||||||
| Total cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows | $ | 135.7 | $ | 258.9 |
Restricted Investments
At September 30, 2022, the Company had $704.6 million of restricted investments, representing assets irrevocably transferred to an escrow trust account to satisfy and discharge the Company’s $700 million of 0.650% Senior Notes due 2023 (the 2023 Notes) (see Note 6). The assets in the escrow trust account may not be used for any purpose other than to satisfy the remaining interest payments on the 2023 Notes and to repay the principal amount of the 2023 Notes on the maturity date of July 15, 2023. The assets transferred to the escrow trust account are invested in a U.S. Treasury securities fund (see Note 7) and investment returns on those trust assets are for the account of the Company (after satisfaction of all amounts payable in connection with the 2023 Notes). The Company has consolidated the trust account on its balance sheet at September 30, 2022.
Page 12 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
Revenue Recognition
Total revenues include sales of products and services to customers, net of any discounts or allowances, and freight revenues. Product revenues are recognized when control of the promised good is transferred to the customer, typically when finished products are shipped. Intersegment and interproduct revenues are eliminated in consolidation. Service revenues are derived from the paving business and are recognized using the percentage-of-completion method under the cost-to-cost approach. Freight revenues reflect delivery arranged by the Company using a third party on behalf of the customer and are recognized consistently with the timing of the product revenues.
Performance Obligations. Performance obligations are contractual promises to transfer or provide a distinct good or service for a stated price. The Company’s product sales agreements are single-performance obligations that are satisfied at a point in time. Performance obligations within paving service agreements are satisfied over time, primarily ranging from one day to two years. For product revenues and freight revenues, customer payment terms are generally 30 days from invoice date. Customer payments for the paving operations are based on a contractual billing schedule and are due 30 days from invoice date.
Future revenues from unsatisfied performance obligations at September 30, 2022 and 2021 were $304.3 million and $183.0 million, respectively, where the remaining periods to complete these obligations ranged from less than one month to 37 months and one month to 21 months, respectively.
Revenue by Category. The following table presents the Company’s total revenues by category for each reportable segment.
| Three Months Ended | ||||||||||||
| September 30, 2022 | ||||||||||||
| Products and Services | Freight | Total | ||||||||||
| (Dollars in Millions) | ||||||||||||
| East Group | $ | 728.5 | $ | 45.1 | $ | 773.6 | ||||||
| West Group | 883.0 | 79.4 | 962.4 | |||||||||
| Total Building Materials business | 1,611.5 | 124.5 | 1,736.0 | |||||||||
| Magnesia Specialties | 69.0 | 6.7 | 75.7 | |||||||||
| Total | $ | 1,680.5 | $ | 131.2 | $ | 1,811.7 | ||||||
| Three Months Ended | ||||||||||||
| September 30, 2021 | ||||||||||||
| Products and Services | Freight | Total | ||||||||||
| (Dollars in Millions) | ||||||||||||
| East Group | $ | 641.8 | $ | 42.3 | $ | 684.1 | ||||||
| West Group | 749.0 | 45.8 | 794.8 | |||||||||
| Total Building Materials business | 1,390.8 | 88.1 | 1,478.9 | |||||||||
| Magnesia Specialties | 71.9 | 6.5 | 78.4 | |||||||||
| Total | $ | 1,462.7 | $ | 94.6 | $ | 1,557.3 |
Service revenues, which include paving services located in California and Colorado, were $138.7 million and $100.5 million for the three months ended September 30, 2022 and 2021, respectively, and are reported in the West Group.
Page 13 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
| Nine Months Ended | ||||||||||||
| September 30, 2022 | ||||||||||||
| Products and Services | Freight | Total | ||||||||||
| (Dollars in Millions) | ||||||||||||
| East Group | $ | 1,755.5 | $ | 111.4 | $ | 1,866.9 | ||||||
| West Group | 2,382.2 | 200.7 | 2,582.9 | |||||||||
| Total Building Materials business | 4,137.7 | 312.1 | 4,449.8 | |||||||||
| Magnesia Specialties | 214.4 | 20.0 | 234.4 | |||||||||
| Total | $ | 4,352.1 | $ | 332.1 | $ | 4,684.2 | ||||||
| Nine Months Ended | ||||||||||||
| September 30, 2021 | ||||||||||||
| Products and Services | Freight | Total | ||||||||||
| (Dollars in Millions) | ||||||||||||
| East Group | $ | 1,610.9 | $ | 103.5 | $ | 1,714.4 | ||||||
| West Group | 1,861.9 | 116.3 | 1,978.2 | |||||||||
| Total Building Materials business | 3,472.8 | 219.8 | 3,692.6 | |||||||||
| Magnesia Specialties | 207.1 | 17.9 | 225.0 | |||||||||
| Total | $ | 3,679.9 | $ | 237.7 | $ | 3,917.6 |
Service revenues for the nine months ended September 30, 2022 and 2021 were $252.1 million and $182.7 million, respectively.
Contract Balances. Costs in excess of billings relate to the conditional right to consideration for completed contractual performance and are contract assets on the consolidated balance sheets. Costs in excess of billings are reclassified to accounts receivable when the right to consideration becomes unconditional. Billings in excess of costs relate to customers invoiced in advance of contractual performance and are contract liabilities on the consolidated balance sheets. The following table presents information about the Company’s contract balances:
| (Dollars in Millions) | September 30, 2022 | December 31, 2021 | ||||||
| Costs in excess of billings | $ | 19.9 | $ | 4.3 | ||||
| Billings in excess of costs | $ | 9.9 | $ | 7.8 |
Revenues recognized from the beginning balance of contract liabilities for the three months ended September 30, 2022 and 2021 were $4.1 million and $7.1 million, respectively, and for the nine months ended September 30, 2022 and 2021 were $7.4 million and $11.9 million, respectively.
Retainage, which primarily relates to the paving services, represents amounts that have been billed to customers but payment withheld until final acceptance by the customer of the performance obligation. Retainage, which is included in Other current assets on the Company’s consolidated balance sheets, was $13.9 million and $10.5 million at September 30, 2022 and December 31, 2021, respectively.
Policy Elections. When the Company arranges third-party freight to deliver products to customers, the Company has elected the delivery to be a fulfillment activity rather than a separate performance obligation. Further, the Company
Page 14 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
acts as a principal in the delivery arrangements and, as required by the accounting standard, the related revenues and costs are presented gross and are included in the consolidated statements of earnings.
3.
Business Combinations, Discontinued Operations, Divestitures and Assets and Liabilities Held for Sale
Business Combinations
In October 2021, the Company completed the acquisition of Lehigh Hanson, Inc.’s West Region business (Lehigh West Region) for $2.26 billion. The acquisition was primarily financed using proceeds from the issuance of publicly traded debt. These operations provided a new upstream, materials-led growth platform across several of the nation’s largest and fastest-growing megaregions in California and Arizona. The results from the acquired business are included in the Company’s West Group.
The Company determined the acquisition-date fair values of assets acquired and liabilities assumed. Although the initial accounting for the business combination has been recorded, these amounts are subject to change during the measurement period, which extends no longer than one year from the consummation date, based on additional reviews. Notably, during the quarter ended September 30, 2022, the Company reduced the acquisition-date fair value of intangible assets, other than goodwill, by $119.5 million; increased the acquisition-date fair value of asset retirement obligations and other liabilities assumed by $50.9 million; and increased goodwill by $171.4 million. While the determination of the acquisition-date fair values of assets acquired and liabilities assumed is substantially complete as of September 30, 2022, the measurement period remains open for asset retirement obligations and other liabilities. The Company does not expect any material measurement period adjustments to be recorded during the quarter ending December 31, 2022. Amortization of the goodwill generated by the transaction is deductible for income tax purposes.
The following is a summary of the preliminary estimated fair values of the assets acquired and liabilities assumed as of October 1, 2021 (dollars in millions):
| Assets: | ||||
| Inventories | $ | 91.2 | ||
| Property, plant and equipment | 849.9 | |||
| Intangible assets, other than goodwill | 431.5 | |||
| Goodwill | 1,213.2 | |||
| Other assets | 54.4 | |||
| Total assets | 2,640.2 | |||
| Liabilities: | ||||
| Asset retirement obligations | 234.7 | |||
| Operating and finance lease liabilities | 57.5 | |||
| Other liabilities | 83.4 | |||
| Total liabilities | 375.6 | |||
| Total consideration | $ | 2,264.6 |
In July 2021, the Company acquired the assets of Southern Crushed Concrete (SCC) in the Houston area. SCC was a leading producer of recycled concrete, which is principally used as a base aggregates product in infrastructure, commercial and residential construction applications. The Company determined the acquisition-date fair values of the assets acquired and liabilities assumed. During the quarter ended September 30, 2022, the Company reduced the acquisition-date fair value of intangible assets, other than goodwill, by $64.0 million and increased goodwill by $64.5 million. The measurement period is closed as of September 30, 2022. Amortization of the goodwill generated by the
Page 15 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
transaction is deductible for income tax purposes. The results from the acquired business are included in the Company’s West Group, but are immaterial for pro-forma financial statement disclosures.
In April 2021, the Company completed the acquisition of Tiller Corporation (Tiller), a leading aggregates and hot mix asphalt supplier in the Minneapolis/St. Paul area, which is one of the largest and fastest-growing midwestern metropolitan areas. The Tiller acquisition complemented the Company’s existing product offerings in the surrounding areas. Amortization of the goodwill generated by the transaction is deductible for income tax purposes. The results from the acquired business are included in the Company’s East Group, but are immaterial for pro-forma financial statement disclosures.
Discontinued Operations
Discontinued operations include the cement and California ready mixed concrete businesses acquired as part of the Lehigh West Region acquisition.
Discontinued operations include the following:
| Three Months Ended | Nine Months Ended | |||||||
| September 30, 2022 | ||||||||
| (Dollars in Millions) | ||||||||
| Total revenues | $ | 62.4 | $ | 268.8 | ||||
| Pretax earnings from operations | $ | 4.7 | $ | 21.1 | ||||
| Pretax gain (loss) on divestiture | 0.7 | (0.3 | ) | |||||
| Pretax earnings | $ | 5.4 | $ | 20.8 | ||||
| Income tax expense | 1.3 | 6.5 | ||||||
| Earnings from discontinued operations, net of income tax expense | $ | 4.1 | $ | 14.3 |
Total cash provided by operating and investing activities for the discontinued operations was $200.9 million, including $249.9 million of proceeds from divestitures and $13.2 million of cash used for capital expenditures, for the nine months ended September 30, 2022. Non-cash items related to operating and investing activities for the discontinued operations were immaterial for the nine months ended September 30, 2022.
Divestitures
On August 9, 2022, the Company announced a definitive agreement to sell the Tehachapi, California cement plant and related distribution terminals for $350.0 million in cash, subject to regulatory approval and customary closing conditions.
In June 2022, the Company completed the sale of the Redding, California cement plant, related cement distribution terminals and 14 California ready mix operations for $235.0 million in cash. In addition, on July 15, 2022, the Company sold its interest in a joint venture that operates a cement distribution terminal for $15.0 million. These businesses were previously classified as assets held for sale.
In April 2022, the Company divested its Colorado and Central Texas ready mixed concrete operations to Smyrna Ready Mix Concrete LLC. This opportunity optimized the Company’s aggregates-led portfolio and improved its ability to generate more attractive margins over the long term by reducing both business cyclicality and exposure to raw material cost inflation. The transaction resulted in a pretax gain of $151.9 million, which is included in Other operating income, net, for the nine months ended September 30, 2022 and is inclusive of expenses incurred due to the divestiture. The divested operations and the gain on divestiture are all reported in the West Group.
Page 16 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Assets and Liabilities Held for Sale
Assets and liabilities held for sale at September 30, 2022 include a cement plant in Tehachapi, California; related cement distribution terminals; the California ready mixed concrete plants not sold as part of the aforementioned Redding transaction; and certain investment properties. At December 31, 2021 assets and liabilities held for sale also included the California cement and California ready mix operations that have been sold in 2022. Assets and liabilities held for sale at September 30, 2022 and December 31, 2021 are as follows:
| September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Continuing Operations | Discontinued Operations | Total | Continuing Operations | Discontinued Operations | Total | |||||||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||||||||
| Inventories, net | $ | — | $ | 37.2 | $ | 37.2 | $ | — | $ | 53.1 | $ | 53.1 | ||||||||||||
| Investment land | 42.0 | — | 42.0 | 32.7 | — | 32.7 | ||||||||||||||||||
| Other assets | — | 0.3 | 0.3 | — | 16.4 | 16.4 | ||||||||||||||||||
| Total current assets held for sale | $ | 42.0 | $ | 37.5 | $ | 79.5 | $ | 32.7 | $ | 69.5 | $ | 102.2 | ||||||||||||
| Property, plant and equipment | $ | — | $ | 127.2 | $ | 127.2 | $ | — | $ | 226.0 | $ | 226.0 | ||||||||||||
| Intangible assets, excluding goodwill | — | 208.5 | 208.5 | — | 264.9 | 264.9 | ||||||||||||||||||
| Operating lease right-of-use assets | — | 12.7 | 12.7 | — | 18.1 | 18.1 | ||||||||||||||||||
| Goodwill | — | 31.8 | 31.8 | — | 109.3 | 109.3 | ||||||||||||||||||
| Other assets | — | — | — | — | 4.6 | 4.6 | ||||||||||||||||||
| Valuation allowance for loss on sale | — | (5.1 | ) | (5.1 | ) | — | (6.0 | ) | (6.0 | ) | ||||||||||||||
| Total noncurrent assets held for sale | $ | — | $ | 375.1 | $ | 375.1 | $ | — | $ | 616.9 | $ | 616.9 | ||||||||||||
| Lease obligations | $ | — | $ | (4.6 | ) | $ | (4.6 | ) | $ | — | $ | (7.5 | ) | $ | (7.5 | ) | ||||||||
| Total current liabilities held for sale | $ | — | $ | (4.6 | ) | $ | (4.6 | ) | $ | — | $ | (7.5 | ) | $ | (7.5 | ) | ||||||||
| Asset retirement obligations | $ | — | $ | (17.4 | ) | $ | (17.4 | ) | $ | — | $ | (31.5 | ) | $ | (31.5 | ) | ||||||||
| Lease obligations | — | (6.4 | ) | (6.4 | ) | — | (22.0 | ) | (22.0 | ) | ||||||||||||||
| Total noncurrent liabilities held for sale | $ | — | $ | (23.8 | ) | $ | (23.8 | ) | $ | — | $ | (53.5 | ) | $ | (53.5 | ) |
Page 17 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
Goodwill
The following table shows the changes in goodwill by reportable segment and in total:
| East | West | |||||||||||
| Group | Group | Total | ||||||||||
| (Dollars in Millions) | ||||||||||||
| Balance at January 1, 2022 | $ | 759.4 | $ | 2,735.0 | $ | 3,494.4 | ||||||
| Acquisitions | — | 3.7 | 3.7 | |||||||||
| Adjustments to purchase price allocations | 5.0 | 288.8 | 293.8 | |||||||||
| Divestitures | — | (159.7 | ) | (159.7 | ) | |||||||
| Goodwill reclassified from assets held for sale | — | 8.2 | 8.2 | |||||||||
| Balance at September 30, 2022 | $ | 764.4 | $ | 2,876.0 | $ | 3,640.4 |
5.
Inventories, Net
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Dollars in Millions) | ||||||||
| Finished products | $ | 878.0 | $ | 713.3 | ||||
| Products in process | 13.3 | 30.1 | ||||||
| Raw materials | 72.4 | 69.6 | ||||||
| Supplies and expendable parts | 145.3 | 153.9 | ||||||
| 1,109.0 | 966.9 | |||||||
| Less: Allowances | (285.6 | ) | (214.3 | ) | ||||
| Total | $ | 823.4 | $ | 752.6 |
6.
Long-Term Debt
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Dollars in Millions) | ||||||||
| 0.650% Senior Notes, due 2023 (discharged) | $ | 698.7 | $ | 697.4 | ||||
| 4.250% Senior Notes, due 2024 | 398.8 | 398.3 | ||||||
| 7% Debentures, due 2025 | 124.6 | 124.6 | ||||||
| 3.450% Senior Notes, due 2027 | 298.2 | 297.9 | ||||||
| 3.500% Senior Notes, due 2027 | 491.4 | 496.4 | ||||||
| 2.500% Senior Notes, due 2030 | 470.3 | 491.1 | ||||||
| 2.400% Senior Notes, due 2031 | 888.4 | 891.8 | ||||||
| 6.25% Senior Notes, due 2037 | 228.4 | 228.3 | ||||||
| 4.250% Senior Notes, due 2047 | 590.1 | 592.1 | ||||||
| 3.200% Senior Notes, due 2051 | 849.7 | 882.9 | ||||||
| Other notes | — | 0.1 | ||||||
| Total debt | 5,038.6 | 5,100.9 | ||||||
| Less: Current maturities | (698.7 | ) | (0.1 | ) | ||||
| Long-term debt | $ | 4,339.9 | $ | 5,100.8 |
Page 18 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On September 29, 2022, the Company satisfied and discharged the 2023 Notes. In connection with the satisfaction and discharge, the Company irrevocably deposited with Regions Bank (the Trustee) funds in an amount sufficient to satisfy all remaining principal and interest payments on the 2023 Notes. Holders of the 2023 Notes will receive payment of principal on the scheduled maturity date of the 2023 Notes and payment of interest at the per annum rate (and on the dates) set forth in the 2023 Notes indenture. The Company utilized existing cash resources to fund the satisfaction and discharge. As a result of the satisfaction and discharge of the 2023 Notes, the obligations of the Company under the indenture in respect of the 2023 Notes have been terminated, except those provisions of the indenture that, by their terms, survive the satisfaction and discharge. Because the discharge did not represent a legal defeasance, the 2023 Notes remain on the Company’s consolidated balance sheet at September 30, 2022 and will continue to accrete to their par value over the period until maturity in July 2023. Additionally, the related trust assets are included in Restricted investments (to satisfy discharged debt and related interest) on the Company’s consolidated balance sheet at September 30, 2022.
During the nine months ended September 30, 2022, the Company repurchased $67.7 million (par value) of its Senior Notes.
The Company, through a wholly-owned special-purpose subsidiary, has a $400 million trade receivable securitization facility (the Trade Receivable Facility). On September 21, 2022, the Company extended the maturity to September 20, 2023. The Trade Receivable Facility, with Truist Bank, Regions Bank, PNC Bank, N.A., MUFG Bank, Ltd., New York Branch, and certain other lenders that may become a party to the facility from time to time, is backed by eligible trade receivables, as defined, and is limited to the lesser of the facility limit or the borrowing base, as defined. These receivables are originated by the Company and then sold by the Company to the wholly-owned special-purpose subsidiary. The Company continues to be responsible for the servicing and administration of the receivables purchased by the wholly-owned special-purpose subsidiary. Borrowings under the Trade Receivable Facility bear interest at a rate equal to asset-backed commercial paper costs of conduit lenders plus 0.65% for borrowings funded by conduit lenders and Adjusted Term Secured Overnight Financing Rate (Adjusted Term SOFR), as defined, plus 0.7%, subject to change in the event that this rate no longer reflects the lender’s cost of lending, for borrowings funded by all other lenders. The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements. Subject to certain conditions, including lenders providing the requisite commitments, the Trade Receivable Facility may be increased to a borrowing base not to exceed $500 million. There were no borrowings outstanding under the Trade Receivable Facility at September 30, 2022 and December 31, 2021.
The Company has a $800 million five-year senior unsecured revolving facility (the Revolving Facility) with JPMorgan Chase Bank, N.A., as Administrative Agent, Deutsche Bank Securities, Inc., PNC Bank, Truist Bank and Wells Fargo Bank, N.A., as Syndication Agents, and the lenders party thereto (the Credit Agreement). Borrowings under the Revolving Facility bear interest, at the Company’s option, at rates based upon LIBOR or a base rate, plus, for each rate, a margin determined in accordance with a ratings-based pricing grid. There were no borrowings outstanding under the Credit Agreement at September 30, 2022 or December 31, 2021. The Credit Agreement requires the Company’s ratio of consolidated net debt-to-consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined by the Revolving Facility, for the trailing-twelve months (the Ratio) to not exceed 3.50 times as of the end of any fiscal quarter, provided that the Company may exclude from the Ratio debt incurred in connection with certain acquisitions during such quarter or the three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 4.00 times. Additionally, if there are no amounts outstanding under both the Revolving Facility and the Trade Receivable Facility, consolidated debt, including debt for which the Company is a guarantor (see Note 10), may be reduced in an amount equal to the lesser of $500 million or the sum of the Company’s unrestricted cash and temporary investments, for purposes of the covenant calculation. The Company was in compliance with this covenant at September 30, 2022.
Page 19 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Revolving Facility expires on December 21, 2026, with any outstanding principal amounts, together with interest accrued thereon, due in full on that date. Available borrowings under the Revolving Facility are reduced by any outstanding letters of credit issued by the Company under the Revolving Facility. The Company had $2.6 million of outstanding letters of credit issued under the Revolving Facility at September 30, 2022 and December 31, 2021.
7.
Financial Instruments
The Company’s financial instruments include temporary cash investments, restricted cash, restricted investments, accounts receivable, notes receivable, accounts payable, publicly-registered long-term notes, debentures and other long-term debt.
Temporary cash investments are placed primarily in money market funds, money market demand deposit accounts and Eurodollar time deposits. The Company’s cash equivalents have original maturities of less than three months. Due to the short maturity of these investments, they are carried on the consolidated balance sheets at cost, which approximates fair value.
Restricted cash is held in a trust account with a third-party intermediary. Due to the short-term nature of this account, the fair value of restricted cash approximates its carrying value.
Restricted investments are held in a fund that invests solely in U.S. Treasury securities. The estimated fair value of the fund is valued at net asset value, which the fund seeks to maintain at one dollar per share. As such, the estimated fair value of the restricted investments approximate their carrying value. The Company is restricted from accessing the investments, which will be used to settle the 2023 Notes and related interest payments.
Accounts receivable are due from a large number of customers, primarily in the construction industry, and are dispersed across wide geographic and economic regions. No single customer accounted for 10% or more of consolidated accounts receivable at September 30, 2022 and December 31, 2021. The estimated fair values of accounts receivable approximate their carrying amounts due to the short-term nature of the accounts.
Notes receivable are primarily promissory notes with customers and are not publicly traded. Management estimates that the fair value of notes receivable approximates the carrying amount.
Accounts payable represent amounts owed to suppliers and vendors. The estimated fair value of accounts payable approximates the carrying amount due to the short-term nature of the payables.
The carrying values and fair values of the Company’s long-term debt were $5.04 billion and $4.23 billion, respectively, at September 30, 2022 and $5.10 billion and $5.45 billion, respectively, at December 31, 2021. The estimated fair value of the publicly-registered long-term notes was estimated using quoted market prices. The estimated fair values of other borrowings approximate their carrying amounts as the interest rates reset periodically.
8.
Income Taxes
The effective income tax rate reflects the effect of federal and state income taxes on earnings and the impact of differences in book and tax accounting arising primarily from the permanent tax benefits associated with the statutory depletion deduction for mineral reserves. The effective income tax rates for continuing operations were 22.1% and 20.6% for the nine months ended September 30, 2022 and 2021, respectively. The higher 2022 effective income tax rate versus 2021 was driven by the impact of the divestiture of the Colorado and Central Texas ready mixed concrete businesses.
The Company records interest accrued in relation to unrecognized tax benefits as income tax expense. Penalties, if incurred, are recorded as operating expenses in the consolidated statements of earnings and comprehensive earnings.
Page 20 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9.
Pension and Postretirement Benefits
During the nine months ended September 30, 2022, the Company amended its qualified pension plan and provided an enhanced benefit for eligible hourly active participants who retire subsequent to April 30, 2022. The amendment required a pension remeasurement. The Company elected the use of a practical expedient to perform the pension remeasurement as of February 28, 2022, the month-end closest to the approval of the plan amendment. The discount rate for the remeasurement was 3.75% compared with 3.23% prior to the remeasurement. The enhanced benefit and remeasurement resulted in higher pension expense for full-year 2022 compared with the initial estimate of the annual pension expense for the qualified plan.
The estimated components of the recorded net periodic benefit cost (credit) for pension and postretirement benefits are as follows:
| Pension | Postretirement Benefits | |||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Service cost | $ | 12.0 | $ | 11.6 | $ | — | $ | — | ||||||||
| Interest cost | 10.3 | 8.9 | 0.1 | 0.1 | ||||||||||||
| Expected return on assets | (19.3 | ) | (17.7 | ) | — | — | ||||||||||
| Amortization of: | ||||||||||||||||
| Prior service cost (credit) | 1.3 | 0.2 | (0.2 | ) | (0.2 | ) | ||||||||||
| Actuarial loss (gain) | 1.0 | 3.0 | (0.1 | ) | — | |||||||||||
| Settlement charge | 4.5 | — | — | — | ||||||||||||
| Net periodic benefit cost (credit) | $ | 9.8 | $ | 6.0 | $ | (0.2 | ) | $ | (0.1 | ) |
| Pension | Postretirement Benefits | |||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Service cost | $ | 36.1 | $ | 34.7 | $ | — | $ | — | ||||||||
| Interest cost | 30.9 | 26.7 | 0.2 | 0.2 | ||||||||||||
| Expected return on assets | (58.0 | ) | (52.8 | ) | — | — | ||||||||||
| Amortization of: | ||||||||||||||||
| Prior service cost (credit) | 3.7 | 0.5 | (0.5 | ) | (0.5 | ) | ||||||||||
| Actuarial loss (gain) | 3.0 | 9.2 | (0.2 | ) | (0.1 | ) | ||||||||||
| Settlement charge | 4.5 | — | — | — | ||||||||||||
| Net periodic benefit cost (credit) | $ | 20.2 | $ | 18.3 | $ | (0.5 | ) | $ | (0.4 | ) |
The service cost component of net periodic benefit (credit) cost is included in Cost of revenues – products and services and Selling, general & administrative expenses. All other components are included in Other nonoperating income, net, in the consolidated statements of earnings and comprehensive earnings.
Page 21 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Commitments and Contingencies
L****egal and Administrative Proceedings
The Company is engaged in certain legal and administrative proceedings incidental to its normal business activities, including matters relating to environmental protection. The Company considers various factors in assessing the probable outcome of each matter, including but not limited to the nature of existing legal proceedings and claims, the asserted or possible damages, the jurisdiction and venue of the case and whether it is a jury trial, the progress of the case, existing law and precedent, the opinions or views of legal counsel and other advisers, the Company’s experience in similar cases and the experience of other companies, the facts available to the Company at the time of assessment, and how the Company intends to respond to the proceeding or claim. The Company’s assessment of these factors may change over time as proceedings or claims progress. The Company believes the probability is remote that the outcome of any currently pending legal or administrative proceeding will result in a material loss to the Company as a whole, based on currently available facts.
Borrowing Arrangements with Affiliate
The Company is a guarantor with an unconsolidated affiliate for a $15.0 million revolving line of credit agreement with Truist Bank that has a maturity date of March 2024, of which $3.6 million was outstanding at September 30, 2022. The affiliate has agreed to reimburse and indemnify the Company for any payments and expenses the Company may incur from this agreement. The Company holds a lien on the affiliate’s membership interest in a joint venture as collateral for payment under the revolving line of credit.
In addition, the Company has a $6.0 million interest-only loan receivable, due December 31, 2024, outstanding from this unconsolidated affiliate at September 30, 2022 and December 31, 2021. The interest rate is one-month LIBOR plus a current spread of 1.63%.
Letters of Credit
In the normal course of business, the Company provides certain third parties with standby letter of credit agreements guaranteeing payment for certain insurance claims, contract performance and permit requirements. At September 30, 2022, the Company was contingently liable for $21.8 million in letters of credit.
11. Business Segments
The Building Materials business contains two reportable segments: the East Group and the West Group. The Company also has a Magnesia Specialties segment. The Company’s evaluation of performance and allocation of resources are based primarily on earnings from operations. Consolidated earnings from operations include total revenues less cost of revenues; selling, general and administrative expenses; acquisition and integration expenses; other operating income and expenses, net; and exclude interest expense; other nonoperating income and expenses, net; and income taxes. Corporate loss from operations primarily includes depreciation; expenses for corporate administrative functions; acquisition and integration expenses; and other nonrecurring income and expenses not reported in one of the operating segments. All long-term debt and related interest expense are held at Corporate.
Page 22 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table displays selected financial data for the Company’s reportable segments. Total revenues, as presented on the consolidated statements of earnings and comprehensive earnings, exclude intersegment revenues, which represent sales from one segment to another segment and are eliminated in consolidation. Total revenues, product and services revenues, and earnings (loss) from operations reflect continuing operations only. For the nine months ended September 30, 2022, earnings from operations for the West Group include a nonrecurring gain on a divestiture of $151.9 million.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Total revenues: | ||||||||||||||||
| East Group | $ | 773.6 | $ | 684.1 | $ | 1,866.9 | $ | 1,714.4 | ||||||||
| West Group | 962.4 | 794.8 | 2,582.9 | 1,978.2 | ||||||||||||
| Total Building Materials business | 1,736.0 | 1,478.9 | 4,449.8 | 3,692.6 | ||||||||||||
| Magnesia Specialties | 75.7 | 78.4 | 234.4 | 225.0 | ||||||||||||
| Total | $ | 1,811.7 | $ | 1,557.3 | $ | 4,684.2 | $ | 3,917.6 | ||||||||
| Products and services revenues: | ||||||||||||||||
| East Group | $ | 728.5 | $ | 641.8 | $ | 1,755.5 | $ | 1,610.9 | ||||||||
| West Group | 883.0 | 749.0 | 2,382.2 | 1,861.9 | ||||||||||||
| Total Building Materials business | 1,611.5 | 1,390.8 | 4,137.7 | 3,472.8 | ||||||||||||
| Magnesia Specialties | 69.0 | 71.9 | 214.4 | 207.1 | ||||||||||||
| Total | $ | 1,680.5 | $ | 1,462.7 | $ | 4,352.1 | $ | 3,679.9 | ||||||||
| Earnings (Loss) from operations: | ||||||||||||||||
| East Group | $ | 239.4 | $ | 205.8 | $ | 478.0 | $ | 465.3 | ||||||||
| West Group | 159.7 | 150.6 | 477.2 | 284.2 | ||||||||||||
| Total Building Materials business | 399.1 | 356.4 | 955.2 | 749.5 | ||||||||||||
| Magnesia Specialties | 16.5 | 23.1 | 58.4 | 69.8 | ||||||||||||
| Corporate | (9.7 | ) | (22.6 | ) | (69.2 | ) | (55.6 | ) | ||||||||
| Total | $ | 405.9 | $ | 356.9 | $ | 944.4 | $ | 763.7 |
Page 23 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. Revenues and Gross Profit
The Building Materials business includes the aggregates, cement, ready mixed concrete and asphalt and paving product lines. Cement and ready mixed concrete product lines and paving services reside only in the West Group. The following table, which is reconciled to consolidated amounts, provides total revenues and gross profit (loss) by product line and reflects continuing operations only.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Total revenues: | ||||||||||||||||
| Building Materials business: | ||||||||||||||||
| Products and services: | ||||||||||||||||
| Aggregates | $ | 1,015.7 | $ | 857.1 | $ | 2,656.8 | $ | 2,231.5 | ||||||||
| Cement | 163.2 | 132.3 | 455.4 | 358.4 | ||||||||||||
| Ready mixed concrete | 227.4 | 320.8 | 743.6 | 824.5 | ||||||||||||
| Asphalt and paving services | 309.8 | 195.9 | 576.9 | 343.5 | ||||||||||||
| Less: interproduct revenues | (104.6 | ) | (115.3 | ) | (295.0 | ) | (285.1 | ) | ||||||||
| Products and services | 1,611.5 | 1,390.8 | 4,137.7 | 3,472.8 | ||||||||||||
| Freight | 124.5 | 88.1 | 312.1 | 219.8 | ||||||||||||
| Total Building Materials business | 1,736.0 | 1,478.9 | 4,449.8 | 3,692.6 | ||||||||||||
| Magnesia Specialties: | ||||||||||||||||
| Products | 69.0 | 71.9 | 214.4 | 207.1 | ||||||||||||
| Freight | 6.7 | 6.5 | 20.0 | 17.9 | ||||||||||||
| Total Magnesia Specialties | 75.7 | 78.4 | 234.4 | 225.0 | ||||||||||||
| Total | $ | 1,811.7 | $ | 1,557.3 | $ | 4,684.2 | $ | 3,917.6 | ||||||||
| Gross profit (loss): | ||||||||||||||||
| Building Materials business: | ||||||||||||||||
| Products and services: | ||||||||||||||||
| Aggregates | $ | 330.3 | $ | 292.9 | $ | 741.2 | $ | 687.7 | ||||||||
| Cement | 67.7 | 49.9 | 146.1 | 101.3 | ||||||||||||
| Ready mixed concrete | 18.7 | 31.4 | 54.1 | 69.9 | ||||||||||||
| Asphalt and paving services | 50.5 | 38.9 | 63.6 | 59.4 | ||||||||||||
| Products and services | 467.2 | 413.1 | 1,005.0 | 918.3 | ||||||||||||
| Freight | 2.1 | 1.3 | 1.7 | 1.7 | ||||||||||||
| Total Building Materials business | 469.3 | 414.4 | 1,006.7 | 920.0 | ||||||||||||
| Magnesia Specialties: | ||||||||||||||||
| Products | 21.6 | 28.1 | 74.3 | 84.4 | ||||||||||||
| Freight | (1.0 | ) | (1.1 | ) | (3.4 | ) | (3.0 | ) | ||||||||
| Total Magnesia Specialties | 20.6 | 27.0 | 70.9 | 81.4 | ||||||||||||
| Corporate | (2.1 | ) | 0.5 | (8.5 | ) | 0.3 | ||||||||||
| Total | $ | 487.8 | $ | 441.9 | $ | 1,069.1 | $ | 1,001.7 |
Page 24 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Supplemental Cash Flow Information
Noncash investing and financing activities are as follows:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| (Dollars in Millions) | ||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | $ | 10.2 | $ | 177.8 | ||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 23.4 | $ | 17.3 | ||||
| Accrued liabilities for purchases of property, plant and equipment | $ | 51.8 | $ | 28.6 | ||||
| Remeasurement of operating lease right-of-use assets | $ | (4.9 | ) | $ | (12.4 | ) | ||
| Remeasurement of finance lease right-of-use assets | $ | (11.4 | ) | $ | — |
For the nine months ended September 30, 2021, the right-of-use assets obtained in exchange for new finance lease liabilities balance were primarily attributable to the lease of the new corporate headquarters, production equipment, and leases assumed as part of the Tiller acquisition.
Supplemental disclosures of cash flow information are as follows:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| (Dollars in Millions) | ||||||||
| Cash paid for interest, net of capitalized amount | $ | 126.3 | $ | 68.7 | ||||
| Cash paid for income taxes, net of refunds | $ | 160.0 | $ | 101.1 |
During the nine months ended September 30, 2021, the Company received proceeds of $13.9 million, related to its company-owned life insurance policies. The proceeds are included in the Investments in life insurance contracts, net, in the investing activities of the consolidated statements of cash flows.
14. Other Operating Income, Net
For the nine months ended September 30, 2022, other operating income, net, included a $151.9 million pretax gain on the divestiture of the Colorado and Central Texas ready mixed concrete operations. Other operating income, net, for the nine months ended September 30, 2021 included a $12.3 million pretax gain on the sale of the Company’s former corporate headquarters.
15. Other Nonoperating Income, Net
Other nonoperating income, net, for the nine months ended September 30, 2022 included a $12.0 million pretax gain related to the repurchase of the Company’s debt and higher interest income compared with the prior-year period.
Page 25 of 53
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.