SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
Commission File Number 1-12744
MARTIN MARIETTA MATERIALS, INC.
Registrant’s telephone number, including area code 919-781-4550
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
Page 1 of 32
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIESFORM 10-QFor the Quarter Ended September 30, 2003
Page 2 of 32
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
See accompanying notes to consolidated financial statements.
Page 3 of 32
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF EARNINGS
Page 4 of 32
MARTINS MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
Page 5 of 32
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 6 of 32
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Page 7 of 32
Page 8 of 32
Page 9 of 32
Page 10 of 32
Page 11 of 32
Page 12 of 32
Page 13 of 32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSThird Quarter and Nine Months Ended September 30, 2003 and 2002
OVERVIEW Martin Marietta Materials, Inc. (the “Corporation”), operates in two principal business segments: aggregates products and magnesia-based products. The Corporation’s net sales and earnings are predominately derived from its aggregates segment, which processes and sells granite, limestone, and other aggregates-related products from a network of approximately 340 quarries, distribution facilities and plants in 28 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 magnesia-based products segment produces magnesia-based chemicals products used in industrial, agricultural and environmental applications, and dolomitic lime sold primarily to customers in the steel industry.
CRITICAL ACCOUNTING POLICIES The Corporation outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission on March 27, 2003.
Pension Expense-Selection of Assumptions. The discount rate assumption selected at December 31, 2002 for the Corporation’s defined benefit pension plans was 6.75%. This assumption, combined with certain other assumptions and actual results for 2002, resulted in the Corporation recording a minimum pension liability of $12.2 million, which required a direct charge to shareholders’ equity at December 31, 2002 of $7.4 million, net of taxes. Pension expense for 2003, which is determined using the same assumptions, is estimated to be approximately $15.1 million for the year, representing an increase of $4.5 million over 2002 pension expense. In 2003, the average yield on high quality bonds, which is the basis of the discount rate assumption, has decreased approximately 50 basis points. If the discount rate selected at December 31, 2003 is 6.25%, and assuming an actual return on assets for the year of 8%, the Corporation expects the minimum pension liability to increase by approximately $8 million at December 31, 2003. This would require a net after-tax charge to shareholders’ equity of approximately $5 million for 2003. Any difference in the actual return on assets for the year as compared to 8% will impact the minimum pension liability, with a higher return resulting in a lower liability and vice versa. The discount rate at December 31, 2003 and the actual return on pension assets for the year then ended will be factors in determining 2004 pension expense.
Asset Retirement Obligations – Selection of Assumptions and Estimates.Effective January 1, 2003, the Corporation adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“FAS 143”). This pronouncement requires recognition of a liability that represents an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. A corresponding amount is capitalized as part of the fixed asset. FAS 143 is limited to obligations that are legally enforceable, whether due to law or statute, an oral or written contract, or under the doctrine of promissory estoppel. The Corporation, through its Aggregates segment, incurs reclamation obligations at most of its quarries.
Page 14 of 32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSThird Quarter and Nine Months Ended September 30, 2003 and 2002(Continued)
The selection of asset retirement obligations as a critical accounting policy is due to the significant assumptions and estimates made by management in determining the asset retirement liability and the cumulative effect of the change in accounting principle. Further, the adoption of FAS 143 will result in additional depreciation expense and accretion expense annually.
The significant assumptions and estimates required in the adoption of FAS 143 include the following:
Using these estimates and assumptions, the cumulative effect of the change in accounting principle, fixed asset, accumulated depreciation and the asset retirement obligation were calculated for each of the Corporation’s locations that have an asset retirement obligation. At January 1, 2003, the following amounts were recorded in connection with the adoption of FAS 143:
Page 15 of 32
Subsequent to the adoption of FAS 143, the Corporation will recognize annual depreciation expense, currently estimated at approximately $0.8 million, related to the fixed assets. Further, the Corporation will recognize annual accretion expense, currently estimated at approximately $1.0 million, as the asset retirement obligation is accreted to its future value. The assumptions and estimates related to FAS 143 will be updated as facts and circumstances change. Any changes will affect annual depreciation and accretion expenses.
RESULTS OF OPERATIONS Consolidated net sales for the quarter were $450.1 million, an increase of 7.7 percent over 2002 third quarter net sales of $417.8 million. Consolidated earnings from operations for the quarter increased 9.0 percent and were $74.7 million as compared to $68.5 million in the third quarter 2002. Earnings for the quarter were positively affected by increases in aggregates shipments in the majority of the Corporation’s markets coupled with pricing increases. Improved operating efficiency favorably affected aggregates production costs resulting in cost per ton declining about 1 percent as compared to the prior year quarter. Interest expense decreased 2 percent to $10.9 million for the third quarter 2003. Other nonoperating income and expenses, net, was income of $1.5 million compared to an expense of $0.6 million in the prior year. Consolidated after-tax earnings from continuing operations for the quarter were $45.5 million, or $0.93 per diluted share, compared to $38.8 million, or $0.80 per diluted share, in the third quarter 2002.
In 2002 and 2003, the Corporation divested of certain nonstrategic operations within its Aggregates operating segment with the 2003 divestitures being uncertain as of December 31, 2002. As such, the Corporation had a continuing financial interest in this certain group of assets and the related market served by these operations during 2002 and through the 2003 date of disposal. In the first quarter 2003, the divestiture resulted in discontinued operations. The results of operations for this and other divestitures through the dates of disposal and any gains or losses on disposals are included in “(Loss) Earnings from discontinued operations” on the consolidated statements of earnings. The results of discontinued operations during the quarter and nine months ended September 30, 2002 have been reclassified, as required, to conform to the 2003 presentation. For the quarter ended September 30, the discontinued operations included net sales of $4.4 million and $11.4 million in 2003 and 2002, respectively, and a pretax loss of $0.1 million in 2003 and a pretax gain of $0.4 million in 2002. The pretax loss for the quarter ended September 30, 2003 included net losses on disposal of $0.7 million. The pretax gain for the quarter ended September 30, 2002 included a gain on disposal of $0.4 million.
Net earnings for the quarter ended September 30 were $45.5 million, or $0.93 per diluted share, in 2003 and $38.9 million, or $0.80 per diluted share, in 2002.
Consolidated net sales for the first nine months of 2003 were $1.14 billion compared to $1.10 billion for the year-earlier period. On a year-to-date basis, consolidated earnings from operations were $135.0 million in 2003 compared with $148.5 million in 2002. Other nonoperating income and expenses, net, was income of $1.2 million in 2003 and an expense of $9.0 million in 2002. Interest expense decreased 5 percent to $31.9 million in 2003 as compared to the prior year. Consolidated earnings from continuing operations for the nine months ended September 30 were $72.0 million, or $1.47 per diluted share, in 2003 compared to $73.3 million, or $1.50 per diluted share, in 2002.
Page 16 of 32
For the nine months ended September 30, the discontinued operations included net sales of $17.7 million and $43.7 million in 2003 and 2002, respectively, and a pretax loss of $1.4 million in 2003 and a pretax gain of $19.8 million in 2002. For the nine months ended September 30, the discontinued operations had a net loss on disposal of $0.8 million in 2003 and a net gain on disposal of $22.4 million in 2002.
During the first quarter 2003, the Corporation recorded a $6.9 million, or $0.14 per diluted share, net charge as the cumulative effect of an accounting change related to the adoption of FAS 143. The first nine months of 2002 were restated to reflect the $11.5 million, or $0.23 per diluted share, charge recorded as the cumulative effect of an accounting change related to the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. Consolidated net earnings for the first nine months were $64.3 million, or $1.31 per diluted share, in 2003 as compared to $70.2 million, or $1.44 per diluted share, in 2002.
Except as indicated, the following comparative analysis in the Results of Operations section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on results from continuing operations.
Net sales for the Aggregates division were $428.1 million for the third quarter of 2003, a 7.0 percent increase over third quarter 2002 net sales of $399.9 million. Aggregates volume at heritage locations was up 6.0 percent while pricing increased 2.0 percent at heritage locations. Inclusive of acquisitions and divestitures, aggregates pricing increased 2.3 percent and aggregates shipments increased 4.2 percent. Gross margin for the division was 23.7 percent in 2003 compared with 23.6 percent in the year-earlier period, with an increase in the aggregates product line being partially offset by a decrease in the asphalt product line.
The following tables present volume and pricing data and shipments data for heritage operations, acquisitions and discontinued operations:
Page 17 of 32
Selling, general and administrative expenses as a percentage of net sales declined from 6.8 percent in the third quarter of 2003 to 6.5 percent in the prior year quarter. The change reflected operating efficiencies and overhead cost reductions from the recent restructuring of the Aggregates business partially offset by increased pension and healthcare costs. The Aggregates division’s earnings from operations were $74.0 million in the third quarter of 2003 as compared to $67.3 million in the third quarter of 2002.
The Aggregates division’s business is significantly affected 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. Further because of the potentially significant impact of weather on the Corporation’s operations, nine month results are not indicative of expected performance for the year.
Magnesia Specialties’ third quarter net sales of $22.0 million increased 23 percent when compared to the year-earlier period as the division generated increased sales from water treatment products, a new product line for the pulp and paper industry and strong lime shipments. The earnings from operations for the third quarter were $0.8 million for 2003 as compared to $1.3 million in 2002, primarily due to higher natural gas prices. For the nine months ended September 30, net sales were $63.9 million and $56.3 million in 2003 and 2002, respectively. Earnings from operations for the first nine months were $2.9 million in 2003 and $4.2 million in 2002.
Page 18 of 32
The following tables present net sales, gross profit, selling, general and administrative expenses, and earnings from operations data for the Corporation and each of its divisions for the three months and nine months ended September 30, 2003 and 2002. 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.
Earnings from operations include research and development expense and other operating income and expenses. Research and development expense for the Corporation was $245,000 and $12,000 for the quarter ended September 30, 2003 and 2002, respectively. Other operating income and expenses, net, for the Corporation, was income of $424,000 and $65,000 for the quarter ended September 30, 2003 and 2002, respectively.
For the nine months ended September 30, 2003 and 2002, research and development expense for the Corporation was $415,000 and $232,000, respectively. Other operating income and expenses, net, for the Corporation, was an expense of $1,936,000 and income of $620,000 for the nine months ended September 30, 2003 and 2002, respectively.
Page 19 of 32
Interest expense was $10.9 million in the third quarter 2003, compared to $11.2 million in the third quarter of 2002, primarily due to lower average outstanding debt offset by lower capitalized interest. Additionally, the impact of interest rate swaps was more favorable in the third quarter of 2002.
Page 20 of 32
Other nonoperating income and expenses, net, for the quarter ended September 30, was income of $1.5 million in 2003 compared with $0.6 million in expense in 2002. In addition to other offsetting amounts, other income and expenses, net, is comprised generally of interest income, gains and losses related to certain amounts receivable, costs associated with the commercialization of certain new technologies and net equity earnings from nonconsolidated investments. For the quarter ended September 30, 2003, the amount included income related to nonrecurring settlements and $1.7 million of start-up costs related to the structural composites business. For the nine months ended September 30, 2003, the amount included structural composites business start-up costs of $3.3 million. For the nine months ended September 30, 2002, the amount included $6.6 million of expenses related to legal settlements and to reserve an investment related to certain microwave technologies. During the nine months ended September 30, the Corporation wrote off net customer bad debts of approximately $2.2 million and $1.6 million in 2003 and 2002, respectively. In 2003, $1.8 million of the net write offs were applied against the allowance for doubtful accounts while net write offs in 2002 were charged to expense. At September 30, 2003, management considers the allowance for doubtful accounts to be adequate.
The Corporation reached agreement on a successor collective bargaining agreement at its Manistee, Michigan facility during the third quarter of 2003. There was no work stoppage and the new agreement expires in August, 2007.
LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating activities during the nine months ended September 30, 2003 was $171.4 million compared with $132.3 million in the comparable period of 2002. The cash flow for both 2003 and 2002 was principally from earnings, before deducting depreciation, depletion and amortization, offset by working capital requirements. Depreciation, depletion and amortization was as follows (amounts in millions):
Net cash flow provided by operating activities increased in 2003 due to the timing of income tax payments and inventory control measures partially offset by higher pension plan contributions and higher accounts receivable.
Page 21 of 32
The seasonal nature of the construction aggregates business impacts quarterly net cash provided by operating activities when compared with the year. Full year 2002 net cash provided by operating activities was $203.6 million, compared with $132.3 million provided by operations in the first nine months of 2002.
Capital expenditures, exclusive of acquisitions, for the first nine months were $82.4 million in 2003 and $109.3 million in 2002. Comparable full-year capital expenditures were $152.7 million in 2002.
In May 2003, the Corporation terminated the interest rate swap agreements that it had entered into in May, 2002 and received a cash payment of $12.6 million, which represented the fair value of the Swaps on the date of termination. The Corporation also received accrued interest of $2.1 million, which represented the difference in the interest rate between the fixed interest received and the variable interest paid from the previous interest payment date to the termination date. In accordance with generally accepted accounting principles, the carrying amount of the related Notes on the date of termination, which includes adjustments for changes in the fair value of the debt while the Swaps were in effect, will be accreted back to its par value over the remaining life of the Notes. The accretion will decrease annual interest expense by approximately $2 million until the maturity of the Notes in 2008.
In August 2003, the Corporation entered into interest rate swap agreements (the “Swaps”) for interest related to $100 million of the $200 million Notes due in 2008. The Corporation will receive a 5.875% fixed annual interest rate and pay a floating annual rate equal to six-month London Inter Bank Offer Rate (“LIBOR”) plus 1.50%. The critical terms of the Swaps and the related Notes agree and other conditions of Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (“FAS 133”) have been met; accordingly, the hedge is considered perfectly effective and qualifies for the shortcut method of accounting. The Corporation is required to record the fair value of the Swaps and the corresponding change in the fair value of the related Notes in its consolidated balance sheet. At September 30, 2003, the fair value of the Swaps was $3.5 million. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk” on pages 26 and 27 of this Form 10-Q.
The Corporation declared a $0.03 per share increase in its regular quarterly dividend to $0.18 per share effective for the dividend paid on June 30, 2003. The increased dividend on an annual basis is $0.72 per share and is expected to require additional cash of $6 million on an annual basis at the current level of outstanding common shares.
The Corporation continues to rely upon internally generated funds and access to capital markets, including its revolving credit agreement, a cash management facility and a leasing line of credit to meet its liquidity requirements, finance its operations and fund its capital requirements.
Page 22 of 32
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, fund pension contributions and allow for payment of dividends in 2003.
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-2” by Standard & Poor’s and “P-2” by Moody’s. In July 2001, Standard and Poor’s revised its outlook for the Corporation to negative from stable while reaffirming its ratings. 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.
Contractual Obligations
In 2003, the Corporation entered into new equipment operating leases with aggregate future commitments of $19.9 million. The Corporation intends to continue entering into operating leases, primarily for mobile equipment, in its ordinary course of business. The Corporation also enters into equipment rentals on a regular basis to meet shorter term, nonrecurring and intermittent needs.
The Corporation made contributions of $19.1 million to the pension plan during the third quarter. Total pension plan contributions during 2003 are expected to be approximately $21 million.
ACCOUNTING CHANGES The accounting changes that currently impact the Corporation are included in Notes 8 and 9 to the Consolidated Financial Statements.
OUTLOOK 2003 The outlook for the Aggregates business for the remainder of 2003 hinges primarily on weather conditions in the fourth quarter. Assuming moderate conditions, the Corporation expects it customers to continue to work against backlogs, which should generate positive operating results. Management expects fourth quarter 2003 net earnings to range from $0.45 to $0.60 per diluted share.
Page 23 of 32
OTHER MATTERS If you are interested in Martin Marietta Materials, Inc. stock, management recommends that, at a minimum, you read the Corporation’s current annual report and 10-K, 10-Q and 8-K reports to the SEC over the past year. The Corporation’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 Corporation’s Web site at www.martinmarietta.com and are also available at the SEC’s Web site at www.sec.gov. You may also write or call the Corporation’s Corporate Secretary, who will provide copies of such reports.
Investors are cautioned that all statements in this Quarterly Report that relate to the future involve risks and uncertainties, and are based on assumptions that the Corporation believes in good faith are reasonable but which may be materially different from actual results. Forward-looking statements give the investor our 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,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of our forward-looking statements here and in other publications may turn out to be wrong.
Factors that the Corporation currently believes could cause actual results to differ materially from the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, business and economic conditions and trends in the markets the Corporation serves; the level and timing of federal and state transportation funding; levels of construction spending in the markets the Corporation serves; unfavorable weather conditions; ability to recognize increased sales and quantifiable savings from internal expansion projects; ability to successfully integrate acquisitions quickly and in a cost-effective manner and achieve anticipated profitability; fuel costs; transportation costs; competition from new or existing competitors; successful development and implementation of the structural composite technological process and strategic products for specific market segments; unanticipated costs or other adverse effects associated with structural composite revenue levels, products pricing, and cost associated with manufacturing ramp-up; the financial strength of the structural composite customers and suppliers; business and economic conditions and trends in the trucking and composites industries in various geographic regions; possible disruption in commercial activities related to terrorist activity and armed conflict, such as reduced end-user purchases relative to expectations; and other risk factors listed from time to time found in the Corporation’s filings with the Securities and Exchange Commission. Other factors besides those listed here may also adversely affect the Corporation, and may be material to the Corporation. The Corporation assumes no obligation to update any such forward-looking statements.
Page 24 of 32
INVESTOR ACCESS TO COMPANY FILINGS Shareholders may obtain, without charge, a copy of Martin Marietta Materials’ Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2002, by writing to:
Additionally, Martin Marietta Materials’ 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 Corporation’s Web site. Filings with the Securities and Exchange Commission accessed via the Web site 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:
Page 25 of 32
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation’s operations are highly dependent upon the interest rate-sensitive construction and steelmaking industries. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs. Aside from these inherent risks from within its operations, the Corporation’s earnings are affected also by changes in short-term interest rates, as a result of its temporary cash investments, including overnight investments in Eurodollars; outstanding commercial paper obligations; interest rate swaps; and defined benefit pension plans.
Commercial Paper Obligations. The Corporation has a $275 million commercial paper program in which borrowings bear interest at a variable rate based on LIBOR. At September 30, 2003, there were no outstanding commercial paper borrowings. Due to commercial paper borrowings bearing interest at a variable rate, there is interest rate risk when such debt is outstanding.
Interest Rate Swaps. In August 2003, the Corporation entered into interest rate swap agreements (the “Swaps”) for interest related to $100 million of the $200 million Notes due in 2008 to increase the percentage of its long-term debt that bears interest at a variable rate. The Swaps are fair value hedges designed to hedge against changes in the fair value of the Notes due to changes in LIBOR, the designated benchmark interest rate. The terms of the Swaps include the Corporation receiving a fixed annual interest rate of 5.875% and paying a variable annual interest rate based on six-month LIBOR plus 1.50%.
The Corporation is required to record the fair value of the Swaps and the change in the fair value of the related Notes in its consolidated balance sheet. In accordance with Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities, no gain or loss is recorded for the changes in fair values. At September 30, 2003, the fair market value of the Swaps is $3.5 million.
As a result of the Swaps, the Corporation has increased interest rate risk associated with changes in the LIBOR rate. A hypothetical decrease in interest rates of 1% would decrease annual interest expense by $1 million and also increase the fair market value of the debt covered by the Swaps by approximately $4.5 million. A hypothetical increase in interest rates of 1% would increase annual interest expense by $1 million and also decrease the fair market value of the debt covered by the Swaps by approximately $5.6 million.
Page 26 of 32
Pension Expense. The Corporation sponsors noncontributory defined benefit pension plans which cover substantially all employees. Therefore, the Corporation’s results of operations are affected by its pension expense. Assumptions that affect this expense include the discount rate and the expected long-term rate of return on assets. The selection of the discount rate is based on the yields on high quality, fixed income investments. The selection of the expected long-term rate of return on assets is based on general market conditions and related returns on a portfolio of investments. Therefore, the Corporation has interest rate risk associated with these factors. The impact of hypothetical changes in these assumptions on the Corporation’s annual pension expense is discussed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission on March 27, 2003.
Aggregate Interest Rate Risk. The pension expense for 2003 is calculated based on assumptions selected at December 31, 2002. Therefore, interest rate risk in 2003 is limited to the potential effect related to interest rate swaps and outstanding commercial paper. Assuming that no commercial paper is outstanding, which is consistent with the balance at September 30, 2003, the aggregate effect of a hypothetical 1% increase in interest rates would increase interest expense and decrease pretax earnings by $1.0 million.
Page 27 of 32
Item 4. CONTROLS AND PROCEDURES
As of September 30, 2003, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Corporation’s disclosure controls and procedures were effective in ensuring that all material information required to be disclosed is made known to them in a timely manner as of September 30, 2003. Management has made some changes since September 30, 2003 that are designed to improve the Corporation’s internal controls, however, there have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect the internal controls.
Page 28 of 32
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, 2002.
Item 4. Submission of Matters to Vote of Security Holders.
No matters were submitted to a vote of security holders during the third quarter of 2003.
Item 5. Other Information.
On July 23, 2003, the Corporation announced that it will release its financial results for the second quarter and six months ended June 30, 2003 on July 30, 2003.
On July 30, 2003, the Corporation reported its financial results for the second quarter and six months ended June 30, 2003.
On August 20, 2003, the Corporation announced that the Board of Directors had declared a regular quarterly cash dividend of $0.18 per share of the Corporation’s common stock. The dividend, which represents a cash payout of $0.72 per share on an annual basis, was payable to shareholders of record at the close of business on August 29, 2003.
On September 19, 2003, the Corporation announced that it did not sustain any significant damage to its quarry operations from Hurricane Isabel and reaffirmed its third quarter earnings guidance of $0.80 to $0.92 per diluted share.
On October 1, 2003, the Corporation announced the election of Dennis L. Rediker to its Board of Directors.
On October 21, 2003, the Corporation announced that it will release its financial results for the third quarter and nine months ended September 30, 2003 on October 30, 2003.
On October 30, 2003, the Corporation reported its financial results for the third quarter and nine months ended September 30, 2003.
Page 29 of 32
PART II- OTHER INFORMATION(Continued)
Item 6. Exhibits and Reports on Form 8-K
Page 30 of 32
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.
Page 31 of 32
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIESFORM 10-QFor the quarter ended September 30, 2003
EXHIBIT INDEX
Page 32 of 32