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, 1998
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, 1998
- --------------------------------------------------------------------------------
Common Stock, $.01 par value 46,474,007
Page 1 of 18
Exhibit Index is on Page 18
2
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
INDEX
Page
----
Part I. Financial Information:
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statements of
Earnings - Three Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 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. 15
Item 4. Submission of Matters to a Vote of Security Holders. 15
Item 5. Other Information. 15
Item 6. Exhibits and Reports on Form 8-K. 16
Signatures 17
Exhibit Index 18
Page 2 of 18
3
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1998 1997
----------- -----------
(Thousands of Dollars)
ASSETS
Current assets:
Cash and cash equivalents $ 4,030 $ 18,661
Accounts receivable, net 130,038 147,432
Inventories, net 148,425 132,583
Deferred income tax benefit 17,098 16,873
Other current assets 7,206 6,463
----------- -----------
Total Current Assets 306,797 322,012
----------- -----------
Property, plant and equipment 1,289,279 1,242,677
Allowances for depreciation, depletion and
amortization (669,668) (651,257)
----------- -----------
Net property, plant and equipment 619,611 591,420
Cost in excess of net assets acquired 147,939 148,481
Other intangibles 27,302 26,415
Other noncurrent assets 20,070 17,385
----------- -----------
Total Assets $ 1,121,719 $ 1,105,713
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,936 $ 49,599
Accrued salaries, benefits and payroll taxes 19,009 19,742
Accrued insurance and other taxes 19,064 16,440
Income taxes -- 4,691
Current maturities of long-term debt 1,538 1,431
Loans payable 30,000 --
Other current liabilities 14,570 16,332
----------- -----------
Total Current Liabilities 123,117 108,235
Long-term debt 311,342 310,675
Pension, postretirement, and postemployment benefits 64,527 63,070
Noncurrent deferred income taxes 50,707 50,008
Other noncurrent liabilities 12,922 11,889
----------- -----------
Total Liabilities 562,615 543,877
----------- -----------
Shareholders' equity:
Common stock, par value $.01 per share 462 462
Additional paid-in capital 335,944 335,766
Retained earnings 222,698 225,608
----------- -----------
Total Shareholders' Equity 559,104 561,836
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,121,719 $ 1,105,713
=========== ===========
See accompanying notes to condensed consolidated financial statements.
Page 3 of 18
4
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended
March 31,
----------------------------------
1998 1997
------------ ------------
(Thousands of Dollars, Except Per Share Data)
Net sales $ 186,535 $ 158,163
Cost of sales 157,056 128,019
------------ ------------
Gross Profit 29,479 30,144
Selling, general and administrative expense 19,301 15,299
Research and development 746 492
------------ ------------
Earnings from Operations 9,432 14,353
Interest expense (5,310) (2,201)
Other income and expenses, net (82) 1,469
------------ ------------
Earnings before Taxes on Income 4,040 13,621
Taxes on income 1,404 4,714
------------
Net Earnings $ 2,636 $ 8,907
============ ============
Net earnings per share -Basic $ 0.06 $ 0.19
-Diluted $ 0.06 $ 0.19
Average number of common shares outstanding
-Basic 46,215,439 46,079,530
-Diluted 46,409,450 46,154,503
See accompanying notes to condensed consolidated financial statements.
Page 4 of 18
5
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
--------------------------
1998 1997
-------- --------
(Thousands of Dollars)
Operating activities:
Net earnings $ 2,636 $ 8,907
Adjustments to reconcile earnings to cash provided by operating activities:
Depreciation, depletion and amortization 22,644 16,334
Other items, net (211) 175
Changes in operating assets and liabilities:
Accounts receivable 17,394 916
Inventories (15,085) (3,376)
Accounts payable (10,662) (6,742)
Other assets and liabilities, net (3,830) 1,138
-------- --------
Net cash provided by operating activities 12,886 17,352
-------- --------
Investing activities:
Additions to property, plant and equipment (16,740) (14,849)
Acquisitions, net (37,715) (9,159)
Transactions with Lockheed Martin Corporation -- 23,768
Other investing activities, net 2,533 1,216
-------- --------
Net cash (used for) provided by investing activities (51,922) 976
-------- --------
Financing activities:
Repayments of long-term debt, net (227) (114)
Dividends (5,546) (5,530)
Loans payable 30,000 --
Issuance of Common Stock 178 --
-------- --------
Net cash provided by (used for) financing activities 24,405 (5,644)
-------- --------
Net (decrease) increase in cash (14,631) 12,684
Cash balance (book overdraft), beginning of period 18,661 (4,260)
-------- --------
Cash balance, end of period $ 4,030 $ 8,424
======== ========
See accompanying notes to condensed consolidated financial statements.
Page 5 of 18
6
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
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, 1997, filed with the Securities and
Exchange Commission on March 30, 1998. 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, 1998, are not necessarily
indicative of the results to be expected for the full year.
2. Acquisition of American Aggregates Corporation
On May 28, 1997, the Corporation purchased all of the outstanding
common stock of American Aggregates Corporation and subsidiary
("American Aggregates") along with certain other assets from
American Aggregates' former parent, CSR America, Inc. The
operating results of the acquired business have been included
with those of the Corporation since that date. This business
combination is being accounted for under the purchase method of
accounting.
The purchase price consisted of approximately $242 million in
cash plus certain assumed liabilities. As of March 31, 1998,
approximately $104 million in goodwill has been recognized by the
Corporation after recording approximately $3 million in other
intangibles (representing the estimated fair market value of
certain assets) and other purchase adjustments necessary to
allocate the purchase price to the value of the assets acquired
and liabilities assumed. Goodwill is being amortized over a
30-year period and other intangibles are being amortized over
periods not exceeding 14 years.
The presentation of certain pro forma financial information for
the three months ended March 31, 1998, is not required for this
business combination since the transaction is reflected in the
Corporation's balance sheet at March 31, 1998, and in its results
of operations for the three-month period then ended. However, for
comparative purposes, the following unaudited pro forma summary
financial information presents the historical results of
operations of the Corporation and the American Aggregates
business for the three months ended March 31, 1997, with pro
forma adjustments as if the acquisition had been consummated as
of the beginning of the period presented. The pro forma
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 on
the following page 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 18
7
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Acquisition of American Aggregates Corporation (continued)
Pro Forma Information (Unaudited)
Three Months Ended
March 31, 1997
---------------------------------
(Dollars in Thousands, Except Per Share Data)
Net sales $173,901
Net earnings $ 4,039
Net earnings per share $ 0.09
3. Inventories
March 31, December 31,
1998 1997
--------- ---------
(Dollars in Thousands)
Finished products $ 122,388 $ 108,707
Product in process and raw materials 10,332 7,886
Supplies and expendable parts 23,500 23,161
--------- ---------
156,220 139,754
Less allowances (7,795) (7,171)
--------- ---------
Total $ 148,425 $ 132,583
========= =========
4. Long-Term Debt
March 31, December 31,
1998 1997
-------- --------
(Dollars in Thousands)
6.9% Notes, due 2007 $124,949 $124,948
7% Debentures, due 2025 124,197 124,195
Commercial paper, interest rates
approximating 5.65% 60,000 60,000
Acquisition notes, interest rates
ranging from 5% to 10% 2,318 1,337
Other notes 1,416 1,626
-------- --------
312,880 312,106
Less current maturities 1,538 1,431
-------- --------
Total $311,342 $310,675
======== ========
Page 7 of 18
8
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
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, 1998. However, these
agreements support commercial paper borrowings of $90 million
outstanding at March 31, 1998, of which $60 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,
1998, $110 million remained 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 12 of this Form 10-Q.
The Corporation's interest payments were approximately $5.4
million in 1998 and $0.1 million in 1997 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 34.8% in 1998 and 34.6% in 1997. The effective rate
for the first quarter of 1998 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 $5.9
million in 1998 and $7.6 million in 1997, 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 18
9
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Other Matters
As of January 1, 1998, the Corporation adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (the "SFAS 130"). The SFAS 130 requires all non-owner
changes in equity that are excluded from net earnings under
existing Financial Accounting Standards Board standards be
included as comprehensive income. The Corporation presently does
not have any transactions that directly effect equity other than
those transactions with owners in their capacity as owners.
Therefore, the provisions of the SFAS 130 are not applicable.
The Corporation plans to adopt the provisions of the Statement of
Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" and the
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits" in
its annual reporting on Form 10-K for the year ended December 31,
1998. The impact of the adoption of these accounting standards on
the Corporation's financial reporting and related disclosures is
not expected to be material.
In February 1994, the Corporation was authorized by its
shareholders and the Board of Directors to repurchase up to
2,000,000 shares of the Corporation's Common Stock for issuance
under the Corporation's Amended Omnibus Securities Award Plan. On
May 3, 1994, the Board of Directors authorized the repurchase of
an additional 500,000 shares for general corporate purposes. As
of the date of this quarterly report, there have been 68,200
shares of Common Stock repurchased by the Corporation under these
authorizations.
Page 9 of 18
10
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 1998 and 1997
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 250 quarries and
distribution facilities in 20 states in the southeastern, 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 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 $186.5
million, an 18% increase over 1997 first quarter sales of $158.2 million.
Consolidated earnings from operations were $9.4 million in the first three
months of 1998 compared with $14.4 million in the first three months of 1997.
Consolidated net earnings for the quarter were $2.6 million, or $0.06 per share
(diluted), a decrease of $6.3 million from 1997 first quarter net earnings of
$8.9 million, or $0.19 per share (diluted). The increase in net sales reflects
the impact of the nine acquisitions made during 1997, while earnings were
reduced by the seasonal weather patterns of the newly acquired operations in the
Midwestern and North Central regions of the United States.
Sales for the Aggregates division increased 22% to $151.7 million
for the first quarter of 1998, compared with the year-earlier period. This
increase reflects the inclusion of the nine acquisitions completed during 1997,
together with a 5.5% increase in the division's average net selling price at
heritage locations, when compared to the same period in 1997. The division's
operating profits were $5.8 million for the period compared to the prior year's
first quarter earnings from operations of $11.8 million. First quarter earnings
were negatively impacted by the higher level of exposure to cold weather
climates as a result of the second quarter 1997 acquisition of American
Aggregates, as well as several smaller acquisitions also completed during 1997.
These operations which are concentrated principally in the Midwest, generally
experience more severe winter weather conditions than the division's operations
in the Southeast. Consequently, these businesses typically operate at very low
levels in the first quarter, consistent with adverse weather patterns, and
accordingly incur losses in the first quarter. Generally they operate at a high
level for the remainder of the year with earnings skewed accordingly. 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 1998, compared with
the prior year.
The Magnesia Specialties division had first quarter 1998 sales of
$34.8 million, an increase of approximately 2% over the first three months of
1997. During the quarter, increases in refractories and lime products were
offset by reductions in sales of periclase. The division's first quarter
earnings from operations increased 44% to $3.6 million from $2.5 million in the
first quarter of 1997. Results from Magnesia Specialties were positively
impacted by strong, cost-effective production during the first quarter of 1998,
compared with the first quarter of 1997, which was negatively impacted by
decreased production levels and higher costs principally related to
manufacturing downtime associated with scheduled repair and maintenance
activities.
(Continued)
Page 10 of 18
11
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1998 and 1997
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, 1998
and 1997. 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:
Three Months Ended
March 31,
-------------------------------------------------------
(Dollars in Thousands)
1998 1997
------------------------- ------------------------
% of % of
Amount Net Sales Amount Net Sales
------ --------- ------ ---------
Net sales:
Aggregates $151,722 100.0 $124,083 100.0
Magnesia Specialties 34,813 100.0 34,080 100.0
-------- ----- -------- -----
Total 186,535 100.0 158,163 100.0
Gross profit:
Aggregates 20,394 13.4 23,008 18.5
Magnesia Specialties 9,085 26.1 7,136 20.9
-------- ----- -------- -----
Total 29,479 15.8 30,144 19.1
Selling, general & administrative expense:
Aggregates 14,416 9.5 11,195 9.0
Magnesia Specialties 4,885 14.0 4,104 12.0
-------- ----- -------- -----
Total 19,301 10.4 15,299 9.7
Earnings from operations:
Aggregates 5,788 3.8 11,813 9.5
Magnesia Specialties 3,644 10.5 2,540 7.5
-------- ----- -------- -----
Total $ 9,432 5.1 $ 14,353 9.1
(Continued)
Page 11 of 18
12
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1998 and 1997
Other income and expenses, net for the quarter ended March 31,
were $0.1 million in expenses in 1998 compared with $1.5 million in income in
1997. Including several offsetting amounts, other income and expenses, net, is
comprised generally of interest income, gains and losses associated with the
selling of certain assets, gains and losses related to certain amounts
receivable, and net equity earnings from non-consolidated investments.
Interest expense was $5.3 million in the first quarter,
approximately $3.1 million above the first quarter of 1997. The increased
interest expense in 1998 resulted from the effect of additional indebtedness and
borrowings incurred by the Corporation associated primarily with its acquisition
of the American Aggregates business in May 1997.
The Corporation's estimated effective income tax rate for the
first three months was 34.8% in 1998 and 34.6% in 1997. 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 1998 was $12.9 million compared with net cash
provided by operations of $17.4 million in the comparable period of 1997. The
cash flow for both 1998 and 1997 was principally from earnings, before deducting
depreciation, depletion and amortization, offset by working capital
requirements. Working capital increases during the first quarter of 1998 and
1997 were primarily the result of increases in inventory balances, as well as
decreases in trade accounts payable. The seasonal nature of the construction
aggregates business impacts quarterly net cash provided by operating activities
when compared with the year. Full year 1997 net cash provided by operating
activities was $195.6 million, compared with $17.4 million provided by
operations in the first quarter of 1997.
First quarter capital expenditures, exclusive of acquisitions,
were $16.7 million in 1998 and $14.8 million in 1997. Capital expenditures are
expected to be approximately $130 million for 1998, exclusive of acquisitions.
Comparable capital expenditures were $86.4 million in 1997.
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 another shelf registration statement with the
Commission. 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 12 of 18
13
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1998 and 1997
In May 1997, the Corporation entered into a revolving credit
agreement with a group of domestic and foreign banks, which provides for
borrowings of up to $150 million for general corporate purposes through May 26,
1998. Borrowings under this agreement are unsecured and bear interest, at the
Corporation's option, at rates based upon: (i) the Euro-Dollar rate (as defined
on the basis of a LIBOR); (ii) a bank base rate (as defined on the basis of a
published prime rate or the Federal Funds Rate plus 1/2 of 1%); or (iii) a
competitively determined rate (as defined on the basis of a bidding process).
This short-term revolving credit agreement contains several covenants, including
specific financial covenants related to leverage, limitation on encumbrances,
and provisions that relate to certain changes of the Corporation's control. The
Corporation is required to pay a loan commitment fee to the bank group. It is
currently management's intent to extend this agreement.
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 1998. 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 Investors Service, L.P. 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 May 1, 1998, there have been 68,200 shares repurchased under
these authorizations.
ACCOUNTING CHANGES As of January 1, 1998, the Corporation adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (the
"SFAS 130"). The SFAS 130 requires all non-owner changes in equity that are
excluded from net earnings under existing Financial Accounting Standards Board
standards be included as comprehensive income. The Corporation presently does
not have any transactions that directly effect equity other than those
transactions with owners in their capacity as owners. Therefore, the provisions
of the SFAS 130 are not applicable.
(Continued)
Page 13 of 18
14
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
First Quarter Ended March 31, 1998 and 1997
The Corporation plans to adopt the provisions of the Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" and the Statement of Financial Accounting Standards No.
132, "Employers' Disclosure about Pensions and Other Postretirement Benefits" in
its annual reporting on Form 10-K for the year ended December 31, 1998. The
impact of the adoption of these accounting standards on the Corporation's
financial reporting and related disclosures is not expected to be material.
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 14 of 18
15
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
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, 1997.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Shareholders held on May 8, 1998, the shareholders of
Martin Marietta Materials, Inc.:
(a) Elected Richard G. Adamson, Marcus C. Bennett and Bobby F. Leonard to
the Board of Directors of the Corporation to terms expiring at the
Annual Meeting of Shareholders in the year 2001. The following table
sets forth the votes for each director.
Votes Cast For Withheld
-------------- --------
Richard G. Adamson 40,277,039 726,959
Marcus C. Bennett 40,275,570 728,428
Bobby F. Leonard 40,275,965 728,033
(b) Approved the Stock-Based Award Plan. The voting results were:
25,437,743 -- For; 11,744,670 -- Against; and 246,886 -- Abstained.
(c) Ratified the selection of Ernst & Young LLP, as independent auditors for
the year ending December 31, 1998. The voting results for this
ratification were 40,957,350 -- For; 24,751 -- Against; and 21,897 --
Abstained.
Item 5. Other Information.
On April 2, 1998 the Corporation announced it purchased Mid-State Construction &
Materials, Inc., which is headquartered in Hot Springs, Arkansas. Mid-State
operates two granite quarries, four ready mixed concrete plants, three asphalt
plants, and a small construction company. The transaction involved an exchange
of common stock plus cash consideration. Cash was transferred on March 31, 1998,
and 253,415 shares of Martin Marietta Materials common stock were issued on
April 1, 1998, the effective date of this transaction.
On May 11, 1998, the Corporation announced that the Board of Directors of Martin
Marietta Materials, Inc., declared a regular quarterly cash dividend on the
Corporation's Common Stock of $0.12 a share, payable June 30, 1998, to
shareholders of record at the close of business on June 1, 1998.
Page 15 of 18
16
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
PART II - OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Document
--- --------
10.01 Martin Marietta Materials, Inc. Stock-Based Award Plan, as
amended
10.02 Martin Marietta Materials, Inc. Amended and Restated Omnibus
Securities Award Plan
10.03 Amended and Restated Martin Marietta Materials, Inc. Common
Stock Purchase Plan for Directors, as amended
11.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries
Computation of Earnings per Share for the Quarter ended March
31, 1998 and 1997
12.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries
Computation of Ratio of Earnings to Fixed Charges for the
Quarter ended March 31, 1998
27.01 Financial Data Schedule (for Securities and Exchange Commission
use only)
Page 16 of 18
17
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
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: 5/15/98 By: /s/ JANICE K. HENRY
------------------------- ---------------------------------------
Janice K. Henry
Vice President, Chief Financial
Officer and Treasurer
Page 17 of 18
18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 1998
EXHIBIT INDEX
Exhibit
No. Document Page
--- -------- ----
10.01 Martin Marietta Materials, Inc. Amended and Restated --
Stock-Based Award Plan
10.02 Martin Marietta Materials, Inc. Amended and Restated Omnibus --
Securities Award Plan
11.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries --
Computation of Earnings per Share for the Quarter ended March
31, 1998 and 1997
12.01 Martin Marietta Materials, Inc. and Consolidated Subsidiaries --
Computation of Ratio of Earnings to Fixed Charges for the
Quarter ended March 31, 1998
27.01 Financial Data Schedule (for Securities and Exchange Commission
use only)
Page 18 of 18