MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. As of March 31, 2023, the Company supplies aggregates (crushed stone, sand and gravel) through its network of approximately 350 quarries, mines and distribution yards in 28 states, Canada and The Bahamas. Martin Marietta also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services, in certain vertically-integrated structured markets where the Company has a leading aggregates position. In addition, the Company has one cement plant, related cement distribution terminals, cement import operations and ready mixed concrete operations in California that are classified as assets held for sale and reported as discontinued operations as of and for the three months ended March 31, 2023 and 2022. The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects. Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. The aggregates, cement, ready mixed concrete and asphalt and paving product lines are reported collectively as the “Building Materials” business.
The Company’s Building Materials business includes two reportable segments: the East Group and the West Group.
|
|
|
|
|
BUILDING MATERIALS BUSINESS (continuing operations only) |
Reportable Segments |
|
East Group |
|
West Group |
Operating Locations |
|
Alabama, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, Nova Scotia and The Bahamas |
|
Arizona, Arkansas, California, Colorado, Louisiana, Oklahoma, Texas, Utah, Washington and Wyoming |
|
|
Product Lines |
|
Aggregates and Asphalt |
|
Aggregates, Cement, Ready Mixed Concrete, Asphalt and Paving Services |
|
|
Facility Types |
|
Quarries, Mines, Asphalt Plants and Distribution Facilities |
|
Quarries, Cement Plants, Asphalt Plants, Ready Mixed Concrete Plants and Distribution Facilities |
|
|
Modes of Transportation |
|
Truck, Railcar, Ship and Barge |
|
Truck and Railcar |
The Building Materials business is significantly affected by weather patterns, seasonal changes and other climate-related conditions. Production and shipment levels for aggregates, cement, ready mixed concrete and asphalt materials correlate with general construction activity levels, most of which occur in the spring, summer and fall. Thus, production and shipment levels vary by quarter. Operations concentrated in the northern and midwestern United States generally experience more severe winter weather conditions than operations in the Southeast, Southwest and West. Excessive rainfall, and conversely excessive drought, can also jeopardize production, shipments and profitability in all markets served by the Company. Due to the potentially significant impact of weather on the Company’s operations, current-period results are not necessarily indicative of expected performance for other interim periods or the full year.
The Company has a Magnesia Specialties business with manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. The Magnesia Specialties business produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel and mining industries.
Page 21 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
CRITICAL ACCOUNTING POLICIES
The Company outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2022. There were no changes to the Company’s critical accounting policies during the three months ended March 31, 2023.
RESULTS OF OPERATIONS
Earnings from continuing operations before interest; income taxes; depreciation, depletion and amortization; earnings/loss from nonconsolidated equity affiliates; and acquisition and integration expenses (Adjusted EBITDA) is an indicator used by the Company and investors to evaluate the Company’s operating performance from period to period. Adjusted EBITDA is not defined by accounting principles generally accepted in the United States (GAAP) and, as such, should not be construed as an alternative to net earnings attributable to Martin Marietta, earnings from operations or operating cash flow. However, the Company’s management believes that Adjusted EBITDA may provide additional information with respect to the Company’s performance and is a measure used by management to evaluate the Company’s performance. Since Adjusted EBITDA excludes some, but not all, items that affect net earnings and may vary among companies, Adjusted EBITDA as presented by the Company may not be comparable with similarly titled measures of other companies.
The following table presents a reconciliation of net earnings from continuing operations attributable to Martin Marietta to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
(Dollars in Millions) |
|
Net earnings from continuing operations attributable to Martin Marietta |
|
$ |
134.3 |
|
|
$ |
24.5 |
|
Add back: |
|
|
|
|
|
|
Interest expense, net of interest income |
|
|
31.6 |
|
|
|
40.5 |
|
Income tax expense for controlling interests |
|
|
35.5 |
|
|
|
5.9 |
|
Depreciation, depletion and amortization expense and earnings/loss from nonconsolidated equity affiliates |
|
|
121.7 |
|
|
|
124.9 |
|
Acquisition and integration expenses |
|
|
0.8 |
|
|
|
1.4 |
|
Adjusted EBITDA |
|
$ |
323.9 |
|
|
$ |
197.2 |
|
Mix-adjusted average selling price (mix-adjusted ASP) is a non-GAAP measure that excludes the impacts of period-over-period product, geographic and other mix on average selling price. Mix-adjusted ASP is calculated by comparing current-period shipments to like-for-like shipments in the comparable prior period. Management uses this metric to evaluate the realization of pricing increases and believes this information is useful to investors as it provides same-on-same pricing trends. The following reconciles reported average selling price to mix-adjusted ASP and corresponding variances:
Page 22 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Aggregates: |
|
|
|
|
|
|
Reported average selling price |
|
$ |
19.83 |
|
|
$ |
16.17 |
|
Adjustment for impact of product, geographic and other mix |
|
|
(0.50 |
) |
|
|
|
Mix-adjusted ASP |
|
$ |
19.33 |
|
|
|
|
|
|
|
|
|
|
|
Reported average selling price variance |
|
|
22.6 |
% |
|
|
|
Mix-adjusted ASP variance |
|
|
19.6 |
% |
|
|
|
|
|
|
|
|
|
|
Cement - Continuing Operations: |
|
|
|
|
|
|
Reported average selling price |
|
$ |
170.65 |
|
|
$ |
129.11 |
|
Adjustment for impact of product, geographic and other mix |
|
|
(0.38 |
) |
|
|
|
Mix-adjusted ASP |
|
$ |
170.27 |
|
|
|
|
|
|
|
|
|
|
|
Reported average selling price variance |
|
|
32.2 |
% |
|
|
|
Mix-adjusted ASP variance |
|
|
31.9 |
% |
|
|
|
Quarter Ended March 31, 2023
Financial highlights for the quarter ended March 31, 2023 (unless noted, all comparisons are versus the prior-year quarter and for continuing operations):
♦Consolidated total revenues of $1.35 billion compared with $1.23 billion
♦Building Materials business total revenues of $1.27 billion compared with $1.15 billion
♦Magnesia Specialties total revenues of $83.4 million compared with $77.0 million
♦Consolidated gross profit of $302.8 million compared with $156.1 million
♦Consolidated earnings from operations of $196.1 million compared with $59.9 million
♦Net earnings from continuing operations attributable to Martin Marietta of $134.3 million compared with $24.5 million
♦Adjusted EBITDA of $323.9 million compared with $197.2 million
♦Earnings per diluted share from continuing operations of $2.16 compared with $0.39
The following tables present total revenues and gross profit (loss) for the Company and its reportable segments by product line for continuing operations for the three months ended March 31, 2023 and 2022. In each case, the data is stated as a percentage of revenues of the Company or the relevant segment or product line, as the case may be.
Page 23 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
|
2022 |
|
|
|
|
|
Amount |
|
|
|
|
Amount |
|
|
|
|
|
(Dollars in Millions) |
|
Total revenues: |
|
|
|
|
|
|
|
|
|
|
Building Materials business: |
|
|
|
|
|
|
|
|
|
|
East Group |
|
|
|
|
|
|
|
|
|
|
Aggregates |
|
$ |
530.1 |
|
|
|
|
$ |
419.2 |
|
|
|
Asphalt |
|
|
0.1 |
|
|
|
|
|
0.2 |
|
|
|
Less: Interproduct revenues |
|
|
(0.6 |
) |
|
|
|
|
(0.6 |
) |
|
|
East Group Total |
|
|
529.6 |
|
|
|
|
|
418.8 |
|
|
|
West Group |
|
|
|
|
|
|
|
|
|
|
Aggregates |
|
|
381.8 |
|
|
|
|
|
337.4 |
|
|
|
Cement |
|
|
168.6 |
|
|
|
|
|
138.3 |
|
|
|
Ready mixed concrete |
|
|
220.0 |
|
|
|
|
|
291.1 |
|
|
|
Asphalt and paving services |
|
|
57.9 |
|
|
|
|
|
56.6 |
|
|
|
Less: Interproduct revenues |
|
|
(87.2 |
) |
|
|
|
|
(88.4 |
) |
|
|
West Group Total |
|
|
741.1 |
|
|
|
|
|
735.0 |
|
|
|
Total Building Materials business |
|
|
1,270.7 |
|
|
|
|
|
1,153.8 |
|
|
|
Total Magnesia Specialties |
|
|
83.4 |
|
|
|
|
|
77.0 |
|
|
|
Total |
|
$ |
1,354.1 |
|
|
|
|
$ |
1,230.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
Amount |
|
|
% of Revenues |
|
|
Amount |
|
|
% of Revenues |
|
|
|
(Dollars in Millions) |
|
Gross profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Building Materials business: |
|
|
|
|
|
|
|
|
|
|
|
|
Aggregates |
|
|
238.1 |
|
|
|
26.1 |
|
|
$ |
102.8 |
|
|
|
13.6 |
|
Cement |
|
|
47.1 |
|
|
|
28.0 |
|
|
|
26.9 |
|
|
|
19.4 |
|
Ready mixed concrete |
|
|
11.2 |
|
|
|
5.1 |
|
|
|
21.9 |
|
|
|
7.5 |
|
Asphalt and paving services |
|
|
(20.5 |
) |
|
|
(35.4 |
) |
|
|
(13.2 |
) |
|
|
(23.2 |
) |
Total Building Materials business |
|
|
275.9 |
|
|
|
21.7 |
|
|
|
138.4 |
|
|
|
12.0 |
|
Magnesia Specialties |
|
|
25.0 |
|
|
|
30.0 |
|
|
|
25.6 |
|
|
|
33.3 |
|
Corporate |
|
|
1.9 |
|
|
|
|
|
|
(7.9 |
) |
|
|
|
Total |
|
$ |
302.8 |
|
|
|
22.4 |
|
|
$ |
156.1 |
|
|
|
12.7 |
|
Page 24 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Building Materials Business
The following table presents shipments data by product line for the Building Materials business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
% Change |
|
|
|
(In Millions) |
|
|
|
|
Aggregates tons |
|
|
41.7 |
|
|
|
42.1 |
|
|
|
(0.8 |
)% |
Cement tons |
|
|
1.0 |
|
|
|
1.0 |
|
|
|
(6.8 |
)% |
Ready Mixed Concrete cubic yards |
|
|
1.5 |
|
|
|
2.4 |
|
|
|
(37.1 |
)% |
Asphalt tons |
|
|
0.5 |
|
|
|
0.7 |
|
|
|
(25.1 |
)% |
The average selling price and pricing variances by product line for the Building Materials business are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
% Change |
|
Aggregates (per ton) |
|
$ |
19.83 |
|
|
$ |
16.17 |
|
|
|
22.6 |
% |
Cement (per ton) |
|
$ |
170.65 |
|
|
$ |
129.11 |
|
|
|
32.2 |
% |
Ready Mixed Concrete (per cubic yard) |
|
$ |
145.06 |
|
|
$ |
120.71 |
|
|
|
20.2 |
% |
Asphalt (per ton) |
|
$ |
68.53 |
|
|
$ |
62.39 |
|
|
|
9.9 |
% |
First-quarter aggregates shipments decreased slightly, while pricing increased 22.6%, or 19.6% on a mix-adjusted basis, over the prior-year quarter, reflecting the impact of 2022 and 2023 price increases. First-quarter aggregates gross profit improved 131.7% to $238.1 million, while gross margin expanded 1,250 basis points to a first-quarter record of 26.1%, as strong pricing growth more than offset lower shipments and increased costs.
Cement shipments of 1.0 million tons decreased 6.8% driven by wet and cold weather in Texas. Pricing increased 32.2%, reflecting the cumulative effects of 2022 and 2023 price increases. Cement gross profit grew to a first-quarter record $47.1 million, an increase of 75.4%, and gross margin expanded 860 basis points to 28.0%, as pricing gains more than offset lower shipments and higher raw materials and maintenance costs.
Ready mix pricing increased 20.2% due to pricing actions implemented in all Arizona and Texas markets. Ready mix shipments, revenues and gross profit from continuing operations declined 37.1%, 24.4% and 48.9%, respectively, driven primarily by the divestiture of the Company’s Colorado and Central Texas ready mixed concrete businesses on April 1, 2022.
Total asphalt shipments decreased 25.1% and pricing increased 9.9%, respectively. Total asphalt and paving revenues increased 2.1%. However, consistent with the Company's historical first-quarter trends, the business posted a gross loss of $20.5 million due to seasonal winter operational shutdowns in Minnesota.
Aggregates End-Use Markets
While aggregates shipments to the infrastructure market decreased 1.3%, the value of state and local government highway, bridge and tunnel contract awards, a leading indicator for future demand, is meaningfully higher year-over-year. The infrastructure market accounted for 32% of first-quarter aggregates shipments.
Aggregates shipments to the nonresidential market increased 3.2%, driven by several large manufacturing, data center and energy projects in Georgia, the Carolinas and the Gulf Coast. The nonresidential market represented 38% of first-quarter aggregates shipments.
Page 25 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Aggregates shipments to the residential market decreased 2.6%, however, multi-family construction remained resilient, partially offsetting the single-family affordability concerns in the Company's geographies. The residential market accounted for 25% of first-quarter aggregates shipments.
The ChemRock/Rail market accounted for the remaining 5% of first-quarter aggregates shipments. Volumes to this end use decreased 14.5%, driven by primarily lower ballast shipments, but wet weather also negatively impacted aglime shipments.
Magnesia Specialties Business
Magnesia Specialties first-quarter total revenues increased 8.4% to $83.4 million, driven by increased lime demand as well as higher pricing for all product lines. Gross profit declined 2.7% to $25.0 million reflecting higher supplies and contract services costs.
Consolidated Operating Results
Consolidated SG&A for the first quarter of 2023 was 7.7% of total revenues compared with 7.9% in the prior-year quarter, a 20-basis-point improvement.
Among other items, other operating expense (income), net, includes gains and losses on the sale of assets; recoveries and losses related to certain customer accounts receivable; rental, royalty and services income; and accretion expense, depreciation expense and gains and losses related to asset retirement obligations. For the first quarter, consolidated other operating expenses (income), net, was an expense of $1.6 million in 2023 and income of $2.3 million in 2022.
Earnings from operations for the quarter were $196.1 million in 2023 compared with $59.9 million in 2022, with the increase driven by the cumulative impact of price increases in 2022 and 2023.
Other nonoperating income, net, includes interest income; pension and postretirement benefit cost (excluding service cost); foreign currency transaction gains and losses; equity earnings or losses from nonconsolidated affiliates; and other miscellaneous income and expenses. For the first quarter, other nonoperating income, net, was $16.1 million and $10.8 million in 2023 and 2022, respectively. The increase was driven by higher interest income.
Income Tax Expense
For the three months ended March 31, 2023 and 2022, the effective income tax rates for continuing operations were 20.9% and 19.3%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the three months ended March 31, 2023 and 2022 was $160.5 million and $169.9 million, respectively. Operating cash flow is substantially derived from consolidated net earnings before deducting depreciation, depletion and amortization, and changes in working capital requirements.
Depreciation, depletion and amortization were as follows:
Page 26 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
(Dollars in Millions) |
|
Depreciation |
|
$ |
100.7 |
|
|
$ |
101.8 |
|
Depletion |
|
|
9.4 |
|
|
|
11.8 |
|
Amortization |
|
|
13.5 |
|
|
|
14.6 |
|
Total |
|
$ |
123.6 |
|
|
$ |
128.2 |
|
The seasonal nature of construction activity impacts the Company’s interim operating cash flow when compared with the full year. Full-year 2022 net cash provided by operating activities was $991.2 million.
During the three months ended March 31, 2023 and 2022, the Company paid $173.9 million and $139.8 million, respectively, for property, plant and equipment.
The Company can repurchase its common stock through open-market purchases pursuant to authority granted by its Board of Directors or through private transactions at such prices and upon such terms as the Chief Executive Officer deems appropriate. The Company repurchased 203,770 shares of common stock at an aggregate cost of $75.0 million during the first three months of 2023. At March 31, 2023, 12.9 million shares of common stock remain under the Company’s repurchase authorization.
On September 29, 2022, the Company satisfied and discharged its $700 million of 0.650% Senior Notes due 2023 (the 2023 Notes). In connection with the satisfaction and discharge, the Company irrevocably deposited funds in an amount sufficient to satisfy all remaining principal and interest payments on the 2023 Notes with Regions Bank (the Trustee). The funds are invested in a fund that invests exclusively in U.S. Treasury securities and are classified as Restricted investments (to satisfy discharged debt and related interest) on the consolidated balance sheets at March 31, 2023 and December 31, 2022. Holders of the 2023 Notes will receive payment of principal on the scheduled maturity date and payment of interest at the per annum rate (and on the dates) set forth in the 2023 Notes indenture. The Company utilized existing cash resources to fund the satisfaction and discharge. As a result of the satisfaction and discharge, the obligations of the Company under the indenture with respect to the 2023 Notes have been terminated, except those provisions of the indenture that, by their terms, survive the satisfaction and discharge. The 2023 Notes remain on the Company’s consolidated balance sheet at March 31, 2023 and will continue to accrete to their par value over the period until maturity in July 2023.
The Company, through a wholly-owned special-purpose subsidiary, has a $400 million trade receivable securitization facility (the Trade Receivable Facility) that matures on September 20, 2023. The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements.
The Company has an $800 million five-year senior unsecured revolving facility (the Revolving Facility), which matures in December 2027. The Revolving Facility requires the Company’s ratio of consolidated net debt-to-consolidated EBITDA, as defined, for the trailing-twelve-month period (the Ratio) to not exceed 3.50 times as of the end of any fiscal quarter, provided that the Company may exclude from the Ratio debt incurred in connection with certain acquisitions during the quarter or the three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 4.00 times. Additionally, if there are no amounts outstanding under the Revolving Facility and the Trade Receivable Facility, consolidated debt, including debt for which the Company is a guarantor, shall be reduced in an amount equal to the lesser of $500.0 million or the sum of the Company’s unrestricted cash and temporary investments, for purposes of the covenant calculation. The Company was in compliance with the Ratio at March 31, 2023.
Page 27 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
In the event of a default on the Ratio, the lenders can terminate the Revolving Facility and Trade Receivable Facility and declare any outstanding balances as immediately due. There were no amounts outstanding under the Trade Receivable Facility or the Revolving Facility at March 31, 2023.
Cash on hand and restricted investments, along with the Company’s projected internal cash flows and availability of financing resources, including its access to debt and equity capital markets, is expected to continue to be sufficient to provide the capital resources necessary to support anticipated operating needs, cover debt service requirements, address near-term debt maturities, meet capital expenditures and discretionary investment needs, fund certain acquisition opportunities that may arise, allow for payment of dividends for the foreseeable future and allow the repurchase of shares of the Company’s common stock. At March 31, 2023, the Company had $1.20 billion of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility, subject to complying with the related leverage covenant. Historically, the Company has successfully extended the maturity dates of these credit facilities.
TRENDS AND RISKS
The Company outlined the risks associated with its business in its Annual Report on Form 10-K for the year ended December 31, 2022. Management continues to evaluate its exposure to all operating risks on an ongoing basis.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Based on the Company’s current analysis of the provisions, management does not believe this legislation will have a material impact on the Company’s consolidated financial statements.
OTHER MATTERS
If you are interested in Martin Marietta stock, management recommends that, at a minimum, you read the Company’s current annual report and Forms 10-K, 10-Q and 8-K reports to the Securities and Exchange Commission (SEC) over the past year. The Company’s recent proxy statement for the annual meeting of shareholders also contains important information. These and other materials that have been filed with the SEC are accessible through the Company’s website at www.martinmarietta.com and are also available at the SEC’s website at www.sec.gov. You may also write or call the Company’s Corporate Secretary, who will provide copies of such reports.
Investors are cautioned that all statements in this Form 10-Q that relate to the future involve risks and uncertainties, and are based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. These statements, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995, provide the investor with the Company’s expectations or forecasts of future events. You can identify these statements by the fact that they do not relate only to historical or current facts. They may use words such as “anticipate,” “may,” “expect,” “should,” “believe,” “project,” “intend,” “will,” and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of management’s forward-looking statements here and in other publications may turn out to be wrong.
The Company’s outlook is subject to risks and uncertainties and is based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. Factors that the Company currently believes could cause actual results to differ materially from the forward-looking statements in this Form 10-Q include, but are not limited to: the ability of the Company to face challenges, including shipment declines resulting from economic events beyond the Company’s control; a widespread decline in aggregates pricing, including a decline in aggregates shipment volume negatively affecting aggregates price; the history of both cement and ready mixed concrete being subject to significant changes in supply, demand and price fluctuations; the termination, capping and/or reduction or
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
suspension of the federal and/or state gasoline tax(es) or other revenue related to public construction; the level and timing of federal, state or local transportation or infrastructure or public projects funding, most particularly in Texas, Colorado, North Carolina, Minnesota, California, Georgia, Arizona, Iowa, Florida and Indiana; the United States Congress’ inability to reach agreement among themselves or with the Administration on policy issues that impact the federal budget; the ability of states and/or other entities to finance approved projects either with tax revenues or alternative financing structures; levels of construction spending in the markets the Company serves; a reduction in defense spending and the subsequent impact on construction activity on or near military bases; a decline in energy-related construction activity resulting from a sustained period of low global oil prices or changes in oil production patterns or capital spending in response to this decline, particularly in Texas and West Virginia; increasing residential mortgage rates and other factors that could result in a slowdown in residential construction; unfavorable weather conditions, particularly Atlantic Ocean, Pacific Ocean and Gulf of Mexico storm and hurricane activity, the late start to spring or the early onset of winter and the impact of a drought or excessive rainfall in the markets served by the Company, any of which can significantly affect production schedules, volumes, product and/or geographic mix and profitability; the volatility of fuel costs and energy, particularly diesel fuel, electricity, natural gas and the impact on the cost, or the availability generally, of other consumables, namely steel, explosives, tires and conveyor belts, and with respect to the Company’s Magnesia Specialties business, natural gas; continued increases in the cost of other repair and supply parts; construction labor shortages and/or supply chain challenges; unexpected equipment failures, unscheduled maintenance, industrial accident or other prolonged and/or significant disruption to production facilities; the resiliency and potential declines of the Company’s various construction end-use markets; the potential negative impacts of a resurgence of a global health crisis such as COVID-19 and its variants; increasing governmental regulation, including environmental laws and climate change regulations; transportation availability or a sustained reduction in capital investment by the railroads, notably the availability of railcars, locomotive power and the condition of rail infrastructure to move trains to supply the Company’s Texas, Colorado, Florida, Carolinas and the Gulf Coast markets, including the movement of essential dolomitic lime for magnesia chemicals to the Company’s plant in Manistee, Michigan and its customers; increased transportation costs, including increases from higher or fluctuating passed-through energy costs or fuel surcharges, and other costs to comply with tightening regulations, as well as higher volumes of rail and water shipments; availability of trucks and licensed drivers for transport of the Company’s materials; availability and cost of construction equipment in the United States; weakening in the steel industry markets served by the Company’s dolomitic lime products; potential impact on costs, supply chain or other matters relating to the conflict between Russia and Ukraine; trade disputes with one or more nations impacting the U.S. economy, including the impact of tariffs on the steel industry; unplanned changes in costs or realignment of customers that introduce volatility to earnings, including that of the Magnesia Specialties business that is running at capacity; proper functioning of information technology and automated operating systems to manage or support operations; inflation and its effect on both production and interest costs; the concentration of customers in construction markets and the increased risk of potential losses on customer receivables; the impact of the level of demand in the Company’s end-use markets, production levels and management of production costs on the operating leverage and therefore profitability of the Company; the possibility that the expected synergies from acquisitions will not be realized or will not be realized within the expected time period, including achieving anticipated profitability to maintain compliance with the Company’s leverage ratio debt covenant; changes in tax laws, the interpretation of such laws and/or administrative practices, including acquisitions and divestitures, that would increase the Company’s tax rate; violation of the Company’s debt covenant if price and/or volumes return to previous levels of instability; downward pressure on the Company’s common stock price and its impact on goodwill impairment evaluations; the possibility of a reduction of the Company’s credit rating to non-investment grade; and other risk factors listed from time to time found in the Company’s filings with the SEC.
You should consider these forward-looking statements in light of risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and other periodic filings made with the SEC. All of the Company’s forward-looking statements should be considered in light of these factors. In addition, other risks and uncertainties not
Page 29 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
presently known to the Company or that the Company considers immaterial could affect the accuracy of its forward-looking statements, or adversely affect or be material to the Company. The Company assumes no obligation to update any such forward-looking statements.
Page 30 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
INVESTOR ACCESS TO COMPANY FILINGS
Shareholders may obtain, without charge, a copy of Martin Marietta’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2022, by writing to:
Martin Marietta
Attn: Corporate Secretary
4123 Parklake Avenue
Raleigh, North Carolina 27612
Additionally, Martin Marietta’s Annual Report, press releases and filings with the Securities and Exchange Commission, including Forms 10-K, 10-Q, 8-K and 11-K, can generally be accessed via the Company’s website. Filings with the Securities and Exchange Commission accessed via the website are available through a link with the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Accordingly, access to such filings is available upon EDGAR placing the related document in its database. Investor relations contact information is as follows:
Telephone: (919) 510-4736
Website address: www.martinmarietta.com
Information included on the Company’s website is not incorporated into, or otherwise creates a part of, this report.
Page 31 of 36
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2023