<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A -- AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number 1-12744
MARTIN MARIETTA MATERIALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1848578
- ---------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2710 Wycliff Road, Raleigh, NC 27607-3033
- ---------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 919-781-4550
--------------------------
Former name: None
----------------------------------------------------------------
Former name, former address and former fiscal year,
if changes since last report.
The undersigned registrant hereby amends the following information contained in
its Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 (its
"Form 10-Q"), which was filed with the Securities and Exchange Commission on
November 14, 1996, as set forth in the attached pages hereto:
(The financial information described below contains a typographical error in
the caption of a table that presents certain net sales, gross profit, selling,
general and administrative expense and earnings from operations data for the
nine month periods ended September 30, 1996 and 1995. The table is found on
page 12 of the above referenced Form 10-Q.)
Part I. Financial Information:
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Page 1 of 9
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 1996 and 1995
OVERVIEW Martin Marietta Materials, Inc., (the "Corporation") was created
after the Board of Directors of Lockheed Martin Corporation ("Lockheed Martin")
approved a plan under which Lockheed Martin transferred to the Corporation its
ownership interest in the construction aggregates business along with its
ownership of 100% of the common stock of Martin Marietta Magnesia Specialties
Inc. The Corporation was incorporated on November 12, 1993, and consummated an
initial public offering of 8,797,500 shares of its Common Stock in February
1994. Upon completion of the initial public offering, Lockheed Martin's
beneficial ownership of the Corporation's Common Stock was reduced to
approximately 81% of the Corporation's outstanding Common Stock. Lockheed
Martin disposed of its remaining ownership interest in the Corporation in
October 1996, by means of a split-off, an exchange offer pursuant to which
Lockheed Martin stockholders were given the opportunity to exchange some or all
of their shares of Lockheed Martin common stock for a certain number of shares
of the Corporation's Common Stock (the "Exchange Offer") on a tax-free basis.
As a result of this transaction, all of Lockheed Martin's
approximately 81% interest in the Corporation's Common Stock was exchanged with
Lockheed Martin stockholders who participated in the Exchange Offer.
Consummation of the Exchange Offer did not impact the Corporation's financial
position or its results of operations as of the consummation date of the
transaction and for the period then ended. For additional discussion in
connection with the Exchange Offer, see "Other Matters" on page 15.
The Corporation reports operations in two industry reporting segments,
aggregates and magnesia-based products. The Corporation is the United States'
second largest producer of aggregates used for the construction of highways and
other infrastructure projects and for commercial and residential construction.
The Corporation's Aggregates division processes or ships aggregates, primarily
crushed stone, from a network of approximately 200 quarries and distribution
facilities in 19 states in the southeastern, midwestern and central regions of
the United States and in the Bahamas and Canada. The Corporation also
manufacturers and markets magnesia-based products, including heat-resistant
refractory products for the steel industry and magnesia-based chemical products
for industrial, agricultural and environmental uses, including wastewater
treatment and acid neutralization.
The Corporation continued in excellent overall financial condition
during the third quarter of 1996 and has adequate capital resources to operate,
compete and grow in an increasingly challenging and competitive environment.
Net earnings for the third quarter of 1996 were $27.5 million, or $0.60 per
share, an increase of 17% over 1995 third-quarter earnings of $23.4 million,
or $0.51 per share.
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<PAGE> 3
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Third Quarter and Nine Months Ended September 30, 1996 and 1995
At September 30, 1996, total shareholders' equity reached $466.5
million, and the Corporation's ratio of debt to total capitalization was 23%,
compared with a debt-to-capitalization ratio of 35% at year-end 1995. Total
debt at year-end reflected a temporary increase in long-term debt associated
with the December 1995 sale of the Corporation's $125 million 7% Debentures.
The proceeds from the sale of these Debentures were used ultimately to repay
the $100 million aggregate principal amount of the Corporation's 8-1/2% Notes
upon their maturity on March 1, 1996.
RESULTS OF OPERATIONS Net sales for the quarter were $201.5 million, a
5% increase over 1995 third quarter sales of $191.1 million. Net sales for the
first nine months of 1996 were $538.5 million, an increase of 8% over net sales
for the year-earlier period of $497.0 million. Earnings from operations were
up $6.0 million, or 16%, to $43.1 million for the third quarter of 1996 over
the same period in 1995, with earnings from operations up $8.9 million, to
$91.5 million for the first nine months of 1996, compared with the first nine
months of 1995. Consolidated net earnings for the quarter increased 17% to
$27.5 million, or $0.60 per share, from 1995 third quarter net earnings of
$23.4 million, or $0.51 per share. For the nine-month period ended September
30, 1996, consolidated net earnings were $58.6 million, or $1.27 per share.
This represents an increase of 14% over net earnings for the first nine months
of 1995 of $51.6 million, or $1.12 per share.
Sales for the Aggregates division increased 6% to $169.5 million for
the third quarter, compared with the year-earlier period. The division's
sales increased 9% to $440.8 million for the first nine months of 1996,
compared with the first nine months of 1995. This increase in sales reflects
record year-to-date aggregates shipments of 75.3 million tons and an increase
in the division's average net selling price, when compared to the same period
in 1995. The division's third quarter operating profits were $40.5 million, an
increase of 18% over operating profits for the year-earlier period of $34.4
million. The division's operating profits for the first nine months of 1996
increased 9% to $83.7 million from $76.8 million for the first nine months of
1995, despite the effect of Hurricane Fran and subsequent heavy rainfall during
September in the southeast and the effect of the adverse weather conditions
that existed within most of the markets served by the division during the first
quarter of 1996. The Corporation's aggregates business is highly seasonal, due
primarily to the effect of weather conditions on construction activity levels,
most of which occurs typically in the spring, summer, and early fall.
Production costs were negatively affected by the severe winter weather
conditions experienced during the first quarter, along with the hurricane and
related wet conditions that existed during the third quarter of this year.
Management continues to believe that the Corporation's annual production and
shipments, excluding any acquisition activities, will see some improvement for
the full year ending December 31, 1996, compared with the prior year.
The Magnesia Specialties division had third quarter 1996 sales of
$32.0 million, a slight increase over the third quarter sales of 1995, and had
nine month 1996 sales of $97.7 million, an increase of 4% in 1996 over 1995.
The division's operating earnings for the third quarter of $2.5 million were 3%
below the operating results for the prior-year period as a result of an
explosion and fire in an electrical substation, which occurred at the
Woodville, Ohio, lime plant during the latter part of the second quarter of
this year. For the nine-month period, the division's earnings from operations
increased substantially from $5.9 million in 1995 to $7.8 million in 1996.
This increase principally reflects the negative effect of the strike which
occurred during 1995 at a major operating location.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Third Quarter and Nine Months Ended September 30, 1996 and 1995
The following tables present net sales, gross profit, selling, general
and administrative expense, and earnings from operations data for the
Corporation and each of its divisions for the three and nine months ended
September 30, 1996 and 1995. In each case, the data is stated as a percentage
of net sales, of the Corporation or the relevant division, as the case may be:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------------------------------------------
(Dollars in Thousands)
1996 1995
------------------------- -----------------------
% of % of
Amount Net Sales Amount Net Sales
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales:
Aggregates $169,485 100.0 $159,206 100.0
Magnesia Specialties 32,019 100.0 31,888 100.0
-------- ----- ------ -----
Total $201,504 100.0 $191,094 100.0
Gross profit:
Aggregates $ 51,381 30.3 $ 43,929 27.6
Magnesia Specialties 7,166 22.4 7,831 24.6
--------- ----- -------- -----
Total $ 58,547 29.1 $ 51,760 27.1
Selling, general & administrative
expense:
Aggregates $ 10,859 6.4 $ 9,518 6.0
Magnesia Specialties 4,171 13.0 4,752 14.9
-------- ----- -------- -----
Total $ 15,030 7.5 $ 14,270 7.5
Earnings from operations:
Aggregates $ 40,521 23.9 $ 34,410 21.6
Magnesia Specialties 2,530 7.9 2,615 8.2
-------- ----- -------- -----
Total $ 43,051 21.4 $ 37,025 19.4
</TABLE>
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<PAGE> 5
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Third Quarter and Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------------------------------------------
(Dollars in Thousands)
1996 1995
------------------------- -----------------------
% of % of
Amount Net Sales Amount Net Sales
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales:
Aggregates $440,787 100.0 $403,068 100.0
Magnesia Specialties 97,702 100.0 93,882 100.0
-------- ----- -------- -----
Total $538,489 100.0 $496,950 100.0
Gross profit:
Aggregates $115,780 26.3 $105,561 26.2
Magnesia Specialties 21,902 22.4 21,522 22.9
-------- ----- -------- -----
Total $137,682 25.6 $127,083 25.6
Selling, general & administrative
expense:
Aggregates $ 32,099 7.3 $ 28,777 7.1
Magnesia Specialties 12,664 13.0 14,307 15.2
-------- ----- -------- -----
Total $ 44,763 8.3 $ 43,084 8.7
Earnings from operations:
Aggregates $ 83,681 19.0 $ 76,784 19.0
Magnesia Specialties 7,820 8.0 5,857 6.2
-------- ----- -------- -----
Total $ 91,501 17.0 $ 82,641 16.6
</TABLE>
Other income and expenses, net, for the nine months ended September 30, were
$5.2 million in income in 1996 and $4.4 million in income in 1995. In addition
to several offsetting amounts, the 1996 amount included nonrecurring pretax
gains of approximately $1.2 million associated with the selling of certain
assets and approximately $1.2 million of interest income from affiliates loans.
The 1995 amount also included a nonrecurring pretax gain of approximately $1.4
million related to certain
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Third Quarter and Nine Months Ended September 30, 1996 and 1995
asset dispositions in connection with one of the Corporation's equity
investments and $0.9 million of interest income from loans to affiliates. It
should be noted that interest income from loans to Lockheed Martin has remained
classified with transactions with affiliates for financial reporting purposes.
Interest expense was approximately $1.0 million, or 16%, higher in the
first nine months of 1996 over 1995. The increase in 1996 resulted from the
net effect of the additional long-term borrowings by the Corporation in
December 1995, when the Corporation publicly offered and sold its $125 million
7% Debentures, offset by the reduction of long-term debt during the period
caused by the repayment of the 8 1/2% Notes on March 1, 1996, and the reduced
amounts outstanding during the period that were due to Lockheed Martin under
the credit agreement.
The Corporation's estimated effective income tax rate for the first
nine months was 33.9% in 1996 and 35.5% in 1995. See Note 4 of the Notes to
Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating
activities during the first nine months of 1996 was $71.9 million, compared
with $85.5 million in the comparable period of 1995. The cash flow from
operating activities for both 1995 and 1996 was principally from earnings,
before deducting depreciation, depletion and amortization, offset by increased
demand for working capital. Working capital increases during the first nine
months of 1996 were principally due to an increase in accounts receivable
balances as a result of growth in aggregates demand. The increased demand on
working capital during the first nine months of 1995 was primarily the result
of increases in inventory and accounts receivable balances, both of which were
offset somewhat by increased trade accounts payable and other liabilities
balances. The seasonal nature of the construction aggregates business impacts
quarterly net cash provided by operating activities when compared with the
year. Accordingly, full year 1995 net cash provided by operating activities
was $128.6 million, compared with the $85.5 million provided by operations in
the first nine months of 1995. Capital expenditures are expected to be
approximately $83 million for 1996, exclusive of acquisitions. Comparable
capital expenditures, were $71.6 million in 1995.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Third Quarter and Nine Months Ended September 30, 1996 and 1995
The Corporation relies, for its liquidity requirements, upon
internally generated funds, access to capital markets, and funds obtained under
its cash management agreement and credit agreement, each with its former
majority shareholder, Lockheed Martin. Prospectively, management may choose to
borrow from third-party lenders or through the Corporation's access to capital
markets. The above-referenced credit agreement with Lockheed Martin, which may
be extended by mutual consent of both parties, provides for borrowings of up to
$55 million. Loans outstanding under the credit agreement bear interest at a
published prime interest rate or at LIBOR plus a graduated rate.
During the fourth quarter of 1996, management expects to establish a
revolving credit facility with a syndicate of banks to replace the current
credit agreements with Lockheed Martin. It should be noted, however, that the
Corporation has not determined the specific timing when, or method by which, it
may establish and access such a banking credit facility. Further, while any
such borrowings may be used initially to provide necessary working capital
funds, it is anticipated that the Corporation will repay the funds borrowed
under its credit agreement with Lockheed Martin with such bank borrowings.
Additionally, management may choose at some future time to further access the
public debt markets through the issuance of commercial paper or other debt
securities. Again, it should be noted that the Corporation has not determined
the method or methods by which it may further access the public market.
With respect to the Corporation's ability to access the public market,
it has an effective shelf registration on file with the Securities and Exchange
Commissions for the offering of up to $175 million of debt securities, which
may be issued from time to time. The Corporation's ability to issue such debt
securities at any time is dependent, among other things, upon market
conditions.
Based on prior performance and current expectations, the Corporation's
management believes that cash flows from internally generated funds and its
access to capital markets are expected to continue to be sufficient to provide
the capital resources necessary to fund the operating needs of its existing
businesses, cover debt service requirements, and allow for payment of
dividends. The Corporation may be required to obtain additional levels of
financing in order to fund certain strategic acquisitions if any such
opportunities arise. Currently, the Corporation's senior unsecured debt is
rated "A" by Standard &
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Third Quarter and Nine Months Ended September 30, 1996 and 1995
Poor's and "A3" by Moody's. In an October 1996 press release, Standard &
Poor's affirmed the Corporation's "A" senior debt rating and removed it from
CreditWatch -- an action that was taken in March 1996 as a result of its then
81% ownership by Lockheed Martin. Standard & Poor's announced that the October
rating action reflects the completion of Lockheed Martin's split-off of its
ownership interest in the Corporation. While management believes its credit
ratings will remain at an investment-grade level, no assurance can be given
that these ratings will remain at the above-mentioned levels.
The Corporation may repurchase up to 2.5 million shares of its common
stock under authorizations from the Corporation's Board of Directors for use in
the Amended Omnibus Securities Award Plan and for general corporate purposes.
As of November 1, 1996, there have been 68,200 shares repurchased under these
authorizations.
OTHER MATTERS In connection with the Exchange Offer, the Corporation's Board
of Directors adopted a shareholder rights plan that became effective, and
certain terms of which were established, upon consummation of the split-off
from Lockheed Martin. The shareholder rights plan provides, among other
things, that if any person or group of persons becomes the beneficial owner of
15% or more of the Corporation's Common Stock, all holders of rights issued
pursuant to the plan (other than such person or group of persons and their
affiliates, associates and transferees) will have the right to acquire shares
of the Corporation's Common Stock at 50% of the then current market value.
Also in connection with the Exchange Offer, the Board of Directors
adopted, and recommended that the shareholders of the Corporation approve at a
special meeting called for such purpose, certain amendments to the
Corporation's Articles of Incorporation. The amendments reduce the
vulnerability of the Corporation to an unsolicited takeover proposal,
particularly one that is made at an inadequate price or does not contemplate
the acquisition of all of the Corporation's Common Stock. The special meeting
of the shareholders to approve such amendments was held on September 27, 1996,
and all amendments were approved as proposed.
This Quarterly Report on Form 10-Q contains statements which, to the
extent that they are not recitations of historical fact, constitute "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. All forward
looking statements involve risks and uncertainties. The forward looking
statements in this document are intended to be subject to the safe harbor
protection provided by Sections 27A and 21E. Political, climatic, currency,
regulatory, technological, competitive and other factors could cause actual
results to vary materially from those anticipated in the forward looking
statements. Additional information regarding these risk factors and
uncertainties is detailed from time to time in the Corporation's filings with
the Securities and Exchange Commission.
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<PAGE> 9
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q/A -- AMENDMENT NO. 1
For the Quarter Ended September 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARTIN MARIETTA MATERIALS, INC.
(Registrant)
Date: December 6, 1996 By: /s/ Edward D. Miles
----------------------------------
Edward D. Miles
Vice President, Controller and
Chief Accounting Officer
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