<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding as of April 30, 1999
- ------------------------------------- --------------------------------
Common Stock, $.01 par value 46,692,445
Page 1 of 20
Exhibit Index is on Page 18
<PAGE> 2
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of
Earnings - Three Months Ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10
Part II. Other Information:
Item 1. Legal Proceedings. 17
Item 4. Submission of Matters to a Vote of Security Holders. 17
Item 5. Other Information. 17
Item 6. Exhibits and Reports on Form 8-K. 18
Signatures 19
Exhibit Index 20
</TABLE>
Page 2 of 20
<PAGE> 3
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents $ 8,987 $ 14,586
Accounts receivable, net 166,214 171,511
Inventories, net 172,316 157,104
Other current assets 28,090 26,187
----------- -----------
Total Current Assets 375,607 369,388
----------- -----------
Property, plant and equipment 1,524,502 1,502,512
Allowances for depreciation, depletion and
amortization (743,674) (724,984)
----------- -----------
Net property, plant and equipment 780,828 777,528
Cost in excess of net assets acquired 347,347 348,026
Other noncurrent assets 93,022 93,647
----------- -----------
Total Assets $ 1,596,804 $ 1,588,589
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities 156,459 152,233
Long-term debt and commercial paper 601,883 602,113
Other noncurrent liabilities 168,194 166,544
----------- -----------
Total Liabilities 926,536 920,890
----------- -----------
Shareholders' equity:
Common stock, par value $.01 per share 466 466
Additional paid-in capital 349,937 349,245
Retained earnings 319,865 317,988
----------- -----------
Total Shareholders' Equity 670,268 667,699
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,596,804 $ 1,588,589
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3 of 20
<PAGE> 4
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $ 241,061 $ 186,535
Cost of sales 201,319 157,056
------------ ------------
Gross Profit 39,742 29,479
Selling, general and administrative expenses 22,746 19,301
Research and development 932 746
------------ ------------
Earnings from Operations 16,064 9,432
Interest expense (9,246) (5,310)
Other income and (expenses), net 5,378 (82)
------------ ------------
Earnings before Taxes on Income 12,196 4,040
Taxes on income 4,256 1,404
------------ ------------
Net Earnings $ 7,940 $ 2,636
============ ============
Net earnings per share -Basic $ 0.17 $ 0.06
-Diluted $ 0.17 $ 0.06
Average number of common shares outstanding
-Basic 46,635,302 46,215,439
-Diluted 46,901,716 46,409,450
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4 of 20
<PAGE> 5
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net cash provided by operating activities $ 29,220 $ 12,886
Investing activities:
Additions to property, plant and equipment (29,002) (16,740)
Acquisitions, net 184 (37,715)
Other investing activities, net 730 2,533
-------- --------
Net cash used for investing activities (28,088) (51,922)
-------- --------
Financing activities:
Repayments of long-term debt, net (360) (227)
Dividends paid (6,063) (5,546)
Loans payable (1,000) 30,000
Issuance of common stock 692 178
-------- --------
Net cash (used for) provided by financing activities (6,731) 24,405
-------- --------
Net decrease in cash and cash equivalents (5,599) (14,631)
Cash and cash equivalents, beginning of period 14,586 18,661
-------- --------
Cash and cash equivalents, end of period $ 8,987 $ 4,030
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5 of 20
<PAGE> 6
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
of Martin Marietta Materials, Inc. (the "Corporation") have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to the
Quarterly Report on Form 10-Q and to Article 10 of Regulation S-X. The
Corporation has continued to follow the accounting policies set forth
in the audited consolidated financial statements and related notes
thereto included in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1998, filed with the Securities and
Exchange Commission on March 24, 1999. In the opinion of management,
the interim financial information provided herein reflects all
adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the results of operations for the interim
periods. The results of operations for the three months ended March
31, 1999, are not necessarily indicative of the results to be expected
for the full year.
2. Acquisition of Redland Stone Products Company
As of December 4, 1998, the Corporation purchased all of the
outstanding common stock of Redland Stone Products Company ("Redland
Stone") from an affiliate of Lafarge SA. The operating results of the
acquired business have been included with those of the Corporation
since that date.
The purchase price consisted of approximately $272 million in cash
plus normal balance sheet liabilities, subject to certain post-closing
adjustments relating to working capital, and approximately $8 million
estimated for certain other assumed liabilities and transaction costs.
The acquisition has been accounted for under the purchase method of
accounting wherein the Corporation recognized approximately $165
million in costs in excess of net assets acquired after recording
other purchase adjustments necessary to allocate the purchase price to
the fair value of assets acquired and liabilities assumed. Goodwill is
being amortized over a 30-year period. Management expects that the
preliminary purchase price allocation will be adjusted during the
applicable period provided by Accounting Principles Bulletin No. 16
Business Combinations.
For comparative purposes, the following unaudited pro forma summary
financial information presents the historical results of operations of
the Corporation and the Redland Stone business for the three-months
ended March 31, 1998. The financial information reflects pro forma
adjustments as if the acquisition had been consummated as of the
beginning of the period presented. The pro forma financial information
is based upon certain estimates and assumptions that management of the
Corporation believes are reasonable in the circumstances. The
unaudited pro forma information presented below is not necessarily
indicative of what results of operations actually would have been if
the acquisition had occurred on the date indicated. Moreover, they are
not necessarily indicative of future results.
Page 6 of 20
<PAGE> 7
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Acquisition of Redland Stone Products Company (continued)
<TABLE>
<CAPTION>
Pro Forma Information (Unaudited)
Three Months Ended
March 31, 1998
---------------------------------------------
(Dollars in Thousands, Except Per Share Data)
<S> <C>
Net sales $215,127
Net earnings $ 1,720
Net earnings per share - Basic and Diluted $ 0.04
</TABLE>
3. Inventories
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ---------
<S> <C> <C>
(Dollars in Thousands)
Finished products $ 144,959 $ 127,904
Product in process and raw materials 10,803 12,342
Supplies and expendable parts 25,222 25,307
--------- ---------
180,984 165,553
Less allowances (8,668) (8,449)
--------- ---------
Total $ 172,316 $ 157,104
========= =========
</TABLE>
4. Long-Term Debt
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ---------
<S> <C> <C>
(Dollars in Thousands)
6.9% Notes, due 2007 $ 124,953 $ 124,952
7% Debentures, due 2025 124,207 124,204
5.875% Notes, due 2008 198,999 198,980
Commercial paper, interest rates
ranging from 4.94% to 5.75% 164,000 165,000
Acquisition notes, interest rates
ranging from 5.60% to 10.00% 3,052 3,299
Other notes 1,199 1,335
--------- ---------
616,410 617,770
Less current maturities (14,527) (15,657)
--------- ---------
Total $ 601,883 $ 602,113
========= =========
</TABLE>
Page 7 of 20
<PAGE> 8
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Long-Term Debt (continued)
No borrowings were outstanding under either of the Corporation's
revolving credit agreements at March 31, 1999. However, these
agreements support commercial paper borrowings of $164 million
outstanding at March 31, 1999, of which $150 million has been
classified as long-term debt in the Corporation's consolidated balance
sheet based on management's ability and intention to maintain this
debt outstanding for at least one year. At May 1, 1999, $162 million
was outstanding under the Corporation's commercial borrowing
obligations. See the "Liquidity and Capital Resources" discussion
contained in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 13 of this Form 10-Q.
As previously reported, the Corporation, on February 18, 1999,
registered its 5.875% Notes with the Securities and Exchange
Commission. The registration provided the initial purchasers in the
private placement offering the opportunity to exchange their
outstanding notes for registered notes with substantially identical
terms.
The Corporation's interest payments were approximately $6.4 million in
1999 and $5.4 million in 1998 for the three months ended March 31.
5. Income Taxes
The Corporation accounts for income taxes as prescribed in Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred income tax assets and liabilities on the consolidated
balance sheet reflect the net of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The Corporation's effective income tax rate for the first three months
was 34.9% in 1999 and 34.8% in 1998. The effective rate for the first
quarter of 1999 was slightly lower than the current federal corporate
income tax rate of 35% due to the effect of several offsetting
factors. The Corporation's effective tax rate reflects the effect of
state income taxes and the impact of differences in book and tax
accounting arising from the net permanent benefits associated with the
depletion allowances for mineral reserves, amortization of certain
goodwill balances, foreign operating earnings, and earnings from
nonconsolidated investments.
The Corporation's income tax payments were approximately $3.9 million
in 1999 and $5.9 million in 1998, for the three months ended March 31.
6. Contingencies
In the opinion of management and counsel, it is unlikely that the
outcome of litigation and other proceedings, including those
pertaining to environmental matters, relating to the Corporation and
its subsidiaries, will have a material adverse effect on the results
of the Corporation's operations or its financial position.
Page 8 of 20
<PAGE> 9
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Other Matters
In April 1998, the American Institute of Certified Public Accountants
(the "AICPA") issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires that all
costs related to start-up activities, including organizational costs,
be expensed as incurred effective January 1, 1999. The Corporation
currently expenses all appropriate start-up costs; therefore, SOP 98-5
will not impact the Corporation's net earnings or financial position.
In June 1998, the FASB issued the Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("FAS 133"), which is required to be adopted in years
beginning after June 15, 1999. Because of the Corporation's minimal
use of derivatives, if any, management does not anticipate that the
adoption of FAS 133 will have a significant impact on net earnings or
the financial position of the Corporation.
Further, in March 1998, the AICPA issued Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use ("SOP 98-1"). The Corporation adopted the SOP on
January 1, 1999. SOP 98-1 requires the capitalization of certain costs
incurred after the date of adoption in connection with developing or
obtaining software for internal use. The Corporation expensed such
costs as incurred for the year ended December 31, 1998. The adoption
of SOP 98-1 has not materially impacted the Corporation.
Page 9 of 20
<PAGE> 10
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 1999 and 1998
OVERVIEW Martin Marietta Materials, Inc., (the "Corporation") operates in two
principal business segments: aggregates products and magnesia-based products.
The Corporation's sales and earnings are predominately derived from its
aggregates segment, which processes and sells granite, sandstone, limestone,
and other aggregates products from a network of more than 275 quarries and
distribution facilities in more than 20 states in the southeastern,
southwestern, midwestern and central regions of the United States and in the
Bahamas and Canada. The division's products are used primarily by commercial
customers principally in domestic construction of highways and other
infrastructure projects and for commercial and residential buildings. The
Corporation has vertically integrated positions, in other construction
materials businesses, in Louisiana, Arkansas and Texas as a result of 1998
acquisitions of asphalt production and ready mixed concrete operations and a
road construction company. The magnesia-based products segment produces
refractory materials and dolomitic lime used in domestic and foreign basic steel
production and produces chemicals products used in industrial, agricultural and
environmental applications. The magnesia-based products segment derives a major
portion of its sales and earnings from the products used in the steel industry.
RESULTS OF OPERATIONS Consolidated net sales for the quarter were $241.1
million, a 29% increase over 1998 first quarter sales of $186.5 million.
Consolidated earnings from operations were $16.1 million in the first three
months of 1999 compared with $9.4 million in the first three months of 1998.
Consolidated net earnings for the quarter were $7.9 million, or $0.17 per
diluted share, an increase of $5.3 million from 1998 first quarter net earnings
of $2.6 million, or $0.06 per diluted share. This performance was achieved as a
result of the Redland Stone acquisition, and nine smaller acquisitions, strong
performance from the Corporation's heritage aggregates operations and in spite
of expected declines experienced in the Magnesia Specialties division's sales
and earnings.
Sales for the Aggregates division increased 38% to $208.9 million for
the first quarter of 1999, compared with the year-earlier period. The
division's operating profits were $15.6 million for the period compared to the
prior year's first quarter earnings from operations of $5.8 million. The
acquisition of Redland Stone accounted for greater than 60% of the Aggregates
division's sales increase. Further, excellent performance in the Corporation's
heritage aggregates operations was underpinned by an approximately 4.5%
increase in shipments and an approximately 3.0% increase in net selling prices
when compared to the year-earlier period. The strong performance from Redland
Stone also helped mitigate the Corporation's exposure to the winter seasonality
typically experienced in the Midwest and North Central regions of the country.
The Aggregates division's business is significantly impacted by
seasonal changes and other weather-related conditions. Consequently, the
Aggregates division's production and shipment levels coincide with general
construction activity levels, most of which occur in the division's markets
typically during the spring, summer, and fall seasons.
(Continued)
Page 10 of 20
<PAGE> 11
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 1999 and 1998
Management believes the construction industry's overall aggregates
annual consumption level and the Corporation's annual production and shipments,
excluding acquisitions, will experience moderate overall growth for the full
year 1999, compared with the prior year.
The Magnesia Specialties division had first quarter 1999 sales of
$32.1 million, a decrease of approximately 8% compared with the first three
months of 1998. The division's first quarter earnings from operations decreased
to $0.5 million from $3.6 million in the first quarter of 1998. Results from
Magnesia Specialties were negatively impacted by continued declines in net
sales and operating earnings in the refractories, dolomitic lime and chemicals
products areas. Global uncertainties continue to plague the division, which is
highly dependent on current business and economic trends within the steel
industry. As the steel industry continues to experience economic uncertainty,
the Magnesia Specialties division is exposed to receivables losses from
bankruptcies in the steel-related marketplace. Management, in its normal
operations, has provided what it believes to be a reasonable allowance for
uncollectible receivables. However, there is a possibility that receivables
loss exposure exists beyond the allowance provided. The refractories and
dolomitic lime products areas continue to be adversely effected by foreign
steel imports, principally from Asia, Russia and Brazil, while the
industrial-chemicals products areas are experiencing continued competitive
pricing pressures. Further, as expected, the division's first quarter 1999
operating earnings were negatively impacted as production rates slowed to meet
declining sales volume and reduce the level of finished products in inventory.
Management expects these market trends to continue and expects the Magnesia
Specialties division's product sales and earnings to decline, as compared to
prior year, throughout 1999.
(Continued)
Page 11 of 20
<PAGE> 12
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1999 and 1998
The following table presents 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 months ended March 31, 1999
and 1998. 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
March 31,
-------------------------------------------------
(Dollars in Thousands)
1999 1998
---------------------- ------------------------
% of % of
Amount Net Sales Amount Net Sales
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales:
Aggregates $208,943 100.0 $151,722 100.0
Magnesia Specialties 32,118 100.0 34,813 100.0
-------- ----- -------- -----
Total $241,061 100.0 $186,535 100.0
======== ========
Gross profit:
Aggregates $ 34,335 16.4 $ 20,394 13.4
Magnesia Specialties 5,407 16.8 9,085 26.1
-------- ----- -------- -----
Total $ 39,742 16.5 $ 29,479 15.8
======== ========
Selling, general & administrative expense:
Aggregates $ 18,419 8.8 $ 14,416 9.5
Magnesia Specialties 4,327 13.5 4,885 14.0
-------- ----- -------- -----
Total $ 22,746 9.4 $ 19,301 10.4
======== ========
Earnings from operations:
Aggregates $ 15,598 7.5 $ 5,788 3.8
Magnesia Specialties 466 1.5 3,644 10.5
-------- ----- -------- -----
Total $ 16,064 6.7 $ 9,432 5.1
======== ========
</TABLE>
(Continued)
Page 12 of 20
<PAGE> 13
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1999 and 1998
Other income and expenses, net, for the quarter ended March 31, were
$5.4 million in income in 1999 compared with $0.1 million in expense in 1998.
In addition to several offsetting amounts, other income and expenses, net, is
comprised generally of interest income, gains and losses associated with the
disposition of certain assets, gains and losses related to certain amounts
receivable, income from non-operating services, costs associated with the
commercialization of certain new technologies, and net equity earnings from
non-consolidated investments. Further, in 1999, other income and expenses, net,
includes a non-recurring settlement from an antitrust claim.
Interest expense was $9.2 million in the first quarter, approximately
$3.9 million above the first quarter of 1998. The increased interest expense in
1999 resulted from the effect of additional indebtedness and borrowings
incurred by the Corporation associated primarily with its acquisition of the
Redland Stone business in December 1998.
The Corporation's estimated effective income tax rate for the first
three months was 34.9% in 1999 and 34.8% in 1998. See Note 5 of the Notes to
Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating activities
during the first quarter of 1999 was $29.2 million compared with $12.9 million
in the comparable period of 1998. The cash flow for both 1999 and 1998 was
principally from earnings, before deducting depreciation, depletion and
amortization, offset by working capital requirements. Depreciation, depletion
and amortization was $29.4 million and $22.6 million for the three months ended
March 31, 1999 and 1998, respectively. Amortization expense was $4.5 million and
$2.5 million for the three-months ended March 31, 1999 and 1998, respectively.
The seasonal nature of the construction aggregates business impacts quarterly
net cash provided by operating activities when compared with the year. Full year
1998 net cash provided by operating activities was $222.6 million, compared with
$12.9 million provided by operations in the first quarter of 1998.
First quarter capital expenditures, exclusive of acquisitions, were
$29.0 million in 1999 and $16.7 million in 1998. Capital expenditures are
expected to be approximately $170 million for 1999, exclusive of acquisitions.
Comparable capital expenditures were $124 million in 1998.
The Corporation continues to rely upon internally generated funds and
access to capital markets, including funds obtained under its two revolving
credit agreements and a cash management facility, to meet its liquidity
requirements, finance its operations, and fund its capital requirements. With
respect to the Corporation's ability to access the public market, currently the
Corporation has an effective shelf registration on file with the Securities and
Exchange Commission (the "Commission") for the offering of up to $50 million of
debt securities, which may be issued from time to time. Presently, management
has the authority to file a universal shelf registration statement with the
Commission for up to $500 million in issuance of either debt or equity
securities. It should be noted, however, that the Corporation has not
determined the timing when, or the amount for which, it may file such shelf
registration.
(Continued)
Page 13 of 20
<PAGE> 14
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1999 and 1998
The Corporation's ability to borrow or issue debt securities is
dependent, among other things, upon prevailing economic, financial and 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
in 1999. 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 & Poor's and "A3" by Moody's. The Corporation's
commercial paper obligations are rated "A-1" by Standard & Poor's, "P-2" by
Moody's and "F-1" by Fitch IBCA, Inc. 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.
YEAR 2000 ISSUE As more fully described in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1998, the Corporation is modifying its
software and hardware to enable operations beyond December 31, 1999. The
Corporation has continued to make progress in the remediation, testing and
implementation phases of its conversion to information technology that is year
2000 compliant. As previously disclosed, the Corporation has completed its
remediation, testing and implementation of its information systems critical to
ongoing operations. During the first quarter, the Corporation successfully
converted its year 2000 testing environment to a live production environment for
all of its operating systems. The critical information systems are currently
running under the live year 2000 production environment.
Currently, management is focused on remediation, testing and
installation, into the live production environment, of its non-critical
information systems, principally the Corporation's legacy accounting and
reporting information systems software. Management continues to believe that
the year 2000 conversion of its non-critical information systems will be
complete by June 30, 1999.
The Corporation has no significant single supplier, vendor or customer
("external agents") that is critical to ongoing operations. The Corporation
completed, during the first quarter, its query of major external agents,
principally financial institutions, insurance companies, energy suppliers and
other third party employee benefit related providers. While the Corporation has
no means of ensuring that its external agents will be year 2000 ready, the
results of the external agent query indicated that there were no major issues
requiring additional follow-up by the Corporation.
(Continued)
Page 14 of 20
<PAGE> 15
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1999 and 1998
During the quarter, the Corporation continued its work on the
conversion of the information systems and non-information systems technology at
its newly acquired Redland Stone business. The mainframe and server operating
systems are year 2000 compliant, as well as, the general ledger system
software. The personal computer systems and software are expected to be
complete during the third quarter. The Corporation expects that the assessment
of year 2000 compliance for plant operating systems and legacy systems,
including some operational and financial systems, will be completed during the
second quarter. Remediation and testing of these systems will begin in the
third quarter. Management continues to expect that Redland Stone's information
and non-information systems will be year 2000 compliant by the end of the year.
The Corporation continues to estimate that the total internal and
external costs of the Year 2000 Issue will approximate $4.1 million, including
$500,000 for Redland Stone. To date, the Corporation has spent $2.9 million,
$0.3 million in 1999 and $2.6 million in 1998, all funded from operating cash
flows.
The Corporation currently has no formal contingency plan in place in
case it does not complete all phases of its Year 2000 Issue. The potential
operating disruption to the Corporation is somewhat mitigated by the winter
seasonality of its normal operations, the ability to build inventory to supply
winter and early spring demands and the fact that the operations do not require
significant raw materials from external agents. The Corporation's overall plan,
including the need for a formal contingency plan, will continue to evolve as new
information becomes available as the Corporation continues its year 2000
conversion.
Management of the Corporation believes it has an effective program in
place to resolve the impact of the Year 2000 Issue in a timely manner and does
not expect the Year 2000 Issue to have a material adverse effect on the
Corporation. But, as noted above, the Corporation has not yet completed the
conversion of all information technologies identified in its year 2000 program.
In addition, the ultimate effectiveness of the remediated information technology
will be unknown until January 1, 2000. While management anticipates no major
interruption of the Corporation's business activities, it cannot assure that it
has eliminated all year 2000 risks nor can it assure that the ultimate effect of
the year 2000 will not impact the Corporation's operating results.
Further, disruptions in the economy generally resulting from Year 2000
Issues could have a material adverse effect on the Corporation. The amount of
the potential liability and lost revenue, if any, resulting from these risks
cannot be reasonably estimated at this time.
ACCOUNTING CHANGES The accounting changes that currently impact the
Corporation are included in Note 7 to the Condensed Consolidated Financial
Statements.
(Continued)
Page 15 of 20
<PAGE> 16
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1999 and 1998
OTHER MATTERS Investors are cautioned that statements in this Quarterly Report
on Form 10-Q that relate to the future are, by their nature, uncertain and
dependent upon numerous contingencies - including political, economic,
regulatory, climatic, competitive, and technological - any of which could cause
actual results and events to differ materially from those indicated in such
forward-looking statements. Additional information regarding these and other
risk factors and uncertainties may be found in the Corporation's other filings,
which are made from time to time with the Securities and Exchange Commission.
Page 16 of 20
<PAGE> 17
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta
Materials, Inc. Annual Report on Form 10-K for the year ended December 31,
1998.
Item 4. Submission of Matters to a Vote of Security Holders.
(b) No matters were submitted to a vote of security holders during the first
quarter of 1999.
Item 5. Other Information.
On March 23, 1999, the Corporation announced that it had extended the
expiration of its offer to exchange up to $200,000,000 in aggregate principal
amount of its 5.875% Notes Due 2008 for up to $200,000,000 in aggregate
principal amount of its outstanding 5.875% Notes Due 2008 (the "Old Notes") to
5:00 pm, New York City time on Thursday, March 25, 1999, unless extended. The
extension was made to allow holders of Old Notes who have not yet tendered
their Old Notes to do so.
On April 26, 1999, the Corporation announced that it had completed three
transactions that expand its business in Alabama, Mississippi and Arkansas. The
Corporation completed a long-term agreement to process and sell into South
Alabama, aggregates and agricultural lime from The Georgia Marble Company's
Sylacauga Quarry. In Mississippi, the Corporation purchased a water
distribution terminal at Vicksburg which will expand the Corporation's
shipments of aggregates transported via barge on the Mississippi River. Also,
the Corporation purchased an asphalt plant near Little Rock, Arkansas.
Page 17 of 20
<PAGE> 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
PART II - OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Document
- ------- --------
11.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries
Computation of Earnings per Share for the Quarter ended March
31, 1999 and 1998
27.01 Financial Data Schedule (for Securities and Exchange
Commission use only)
Page 18 of 20
<PAGE> 19
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
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: May 13, 1999 By: /s/ JANICE K. HENRY
------------ --------------------------------
Janice K. Henry
Senior Vice President, Chief
Financial Officer and Treasurer
Page 19 of 20
<PAGE> 20
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1999
EXHIBIT INDEX
Exhibit
No. Document Page
- ------- -------- ----
11.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries
Computation of Earnings per Share for the Quarter ended March
31, 1999 and 1998 _ _
27.01 Financial Data Schedule (for Securities and Exchange
Commission use only) _ _
Page 20 of 20
<PAGE> 1
Exhibit 11.01
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
For the Three Months Ended March 31, 1999 and 1998
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999 1998
----------- -----------
<S> <C> <C>
Net earnings $ 7,940 $ 2,636
=========== ===========
Weighted average number of shares outstanding:
Basic earnings per share 46,635,302 46,215,439
Effect of dilutive securities 266,414 194,011
----------- -----------
Diluted earnings per share 46,901,716 46,409,450
=========== ===========
Net earnings per common share -Basic $ 0.17 $ 0.06
=========== ===========
-Diluted $ 0.17 $ 0.06
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 AND THE RELATED
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED MARCH
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,987
<SECURITIES> 0
<RECEIVABLES> 166,214
<ALLOWANCES> 4,280
<INVENTORY> 172,316
<CURRENT-ASSETS> 375,607
<PP&E> 1,524,502
<DEPRECIATION> 743,674
<TOTAL-ASSETS> 1,596,804
<CURRENT-LIABILITIES> 156,459
<BONDS> 601,883
0
0
<COMMON> 466
<OTHER-SE> 669,802
<TOTAL-LIABILITY-AND-EQUITY> 1,596,804
<SALES> 241,061
<TOTAL-REVENUES> 241,061
<CGS> 201,319
<TOTAL-COSTS> 224,997
<OTHER-EXPENSES> (5,693)
<LOSS-PROVISION> 315
<INTEREST-EXPENSE> 9,246
<INCOME-PRETAX> 12,196
<INCOME-TAX> 4,256
<INCOME-CONTINUING> 7,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,940
<EPS-PRIMARY> $0.17
<EPS-DILUTED> $0.17
</TABLE>
