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 <TABLE> <CAPTION> March 31, December 31, 1998 1997 ----------- ----------- (Thousands of Dollars) <S> <C> <C> 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 =========== =========== </TABLE> 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 <TABLE> <CAPTION> Three Months Ended March 31, ---------------------------------- 1998 1997 ------------ ------------ (Thousands of Dollars, Except Per Share Data) <S> <C> <C> 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 </TABLE> 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 <TABLE> <CAPTION> Three Months Ended March 31, -------------------------- 1998 1997 -------- -------- (Thousands of Dollars) <S> <C> <C> 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 ======== ======== </TABLE> 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) <TABLE> <CAPTION> Pro Forma Information (Unaudited) Three Months Ended March 31, 1997 --------------------------------- (Dollars in Thousands, Except Per Share Data) <S> <C> Net sales $173,901 Net earnings $ 4,039 Net earnings per share $ 0.09 </TABLE> 3. Inventories <TABLE> <CAPTION> March 31, December 31, 1998 1997 --------- --------- (Dollars in Thousands) <S> <C> <C> 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 ========= ========= </TABLE> 4. Long-Term Debt <TABLE> <CAPTION> March 31, December 31, 1998 1997 -------- -------- (Dollars in Thousands) <S> <C> <C> 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 ======== ======== </TABLE> 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: <TABLE> <CAPTION> Three Months Ended March 31, ------------------------------------------------------- (Dollars in Thousands) 1998 1997 ------------------------- ------------------------ % of % of Amount Net Sales Amount Net Sales ------ --------- ------ --------- <S> <C> <C> <C> <C> 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 </TABLE> (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