Martin Marietta Materials, Inc.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2005
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-12744
MARTIN MARIETTA MATERIALS, INC.
(Exact name of registrant as specified in its charter)
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North Carolina
(State or other jurisdiction of
incorporation or organization)
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56-1848578
(I.R.S. Employer
Identification No.) |
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2710 Wycliff Road, Raleigh, North Carolina
(Address of principal executive offices)
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27607-3033
(Zip Code) |
(919) 781-4550
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class
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Name of each exchange on which registered |
| Common Stock (par value $.01 per share) (including
rights attached thereto)
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New York Stock Exchange |
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| Securities registered pursuant to Section 12(g) of the Act:
None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes
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Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act.
Yes o
No þ
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 þ
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o
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As of June 30, 2005, the aggregate market value of the registrant’s common stock held by
non-affiliates of the registrant was $1,927,214,346.24 based on the closing sale price as reported
on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock on
the latest practicable date.
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Outstanding at February 21, 2006 |
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| Common Stock, $.01 par value per share
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45,771,571 shares |
DOCUMENTS INCORPORATED BY REFERENCE
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Parts Into Which Incorporated |
Annual Report to Shareholders for the Fiscal
Year Ended December 31, 2005 (Annual Report)
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Parts I, II, and IV |
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Proxy Statement for the Annual Meeting of
Shareholders to be held May 23, 2006 (Proxy
Statement)
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Part III |
TABLE OF CONTENTS
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2
PART I
ITEM 1. BUSINESS
General
Martin Marietta Materials, Inc. (the “Company”) is the United States’ second largest producer
of aggregates for the construction industry, including infrastructure, commercial, and residential.
The Company also manufactures and markets magnesia-based chemical products used in industrial,
agricultural, and environmental applications, and dolomitic lime sold primarily to the steel
industry, and is developing structural composite products for use in a wide variety of industries.
In 2005, the Company’s Aggregates segment accounted for 93% of the Company’s total net sales, and
the Company’s Specialty Products segment accounted for 7% of the Company’s total net sales.
The Company was formed in 1993 as a North Carolina corporation to serve as successor to the
operations of the materials group of the organization that is now Lockheed Martin Corporation. An
initial public offering of a portion of the Company’s Common Stock was completed in 1994, followed
by a tax-free exchange transaction in 1996 that resulted in 100% of the Company’s Common Stock
being publicly traded.
Initially, the Company’s operations were predominantly in the Southeast, with additional
operations in the Midwest. In 1995, the Company started its geographic expansion with the purchase
of an aggregates business that included an extensive waterborne distribution system along the East
and Gulf Coasts and the Mississippi River. Smaller acquisitions that year, including the
acquisition of the Company’s granite operations on the Strait of Canso in Nova Scotia, complemented
the Company’s new coastal distribution network.
Subsequent acquisitions in 1997 and 1998 expanded the Company’s aggregates business in the
middle of the country and added a leading producer of aggregates products in Texas, providing the
Company with access to an extensive rail network in Texas. These two transactions set the stage
for numerous additional expansion acquisitions in Ohio, Indiana, and the Southwest, with the
Company completing 29 smaller acquisitions between 1997 and 1999, which allowed the Company to
enhance and expand its presence in the aggregates marketplace.
In 1998, the Company made an initial investment in an aggregates business that would later
serve as the Company’s platform for further expansion in the southwestern and western United
States. In 2001, the Company completed the purchase of all of the remaining interests of this
business, which increased its ability to use rail as a mode of transportation.
Effective January 1, 2005, the Company formed a joint venture with Hunt Midwest Enterprises to
operate substantially all of the aggregates facilities of both companies in Kansas City and
surrounding areas. The joint venture was formed by the parties contributing a total of 15 active
quarry operations with production of approximately 7.5 million tons annually.
4
Between 2002 and 2005 the Company sold a number of underperforming operations, including
aggregates, asphalt, ready mixed concrete, trucking, and road paving operations of its Aggregates
segment and the refractories business of its Magnesia Specialties business. In 2005, the Company
divested underperforming facilities involved with its asphalt and road paving operations in
Arkansas and Texas and shut down underperforming aggregates facilities in North Carolina and Ohio.
In some of its divestitures, the Company concurrently enters into supply agreements to provide
aggregates at market rates to certain of these divested businesses. The Company will continue to
evaluate opportunities to divest underperforming assets during 2006 in an effort to redeploy
capital for other opportunities.
Business Segment Information
The Company operates in two reportable business segments: Aggregates and Specialty Products.
The Specialty Products segment includes the Magnesia Specialties business and the Structural
Composite Products business. Information concerning the Company’s total revenues, net sales,
earnings from operations, assets employed, and certain additional information attributable to each
reportable industry segment for each year in the three-year period ended December 31, 2005 is
included in “Note O: Business Segments” of the “Notes to Financial Statements” on pages 33 and 34
of the Company’s 2005 Annual Report to Shareholders (the “2005 Annual Report”), which information
is incorporated herein by reference.
Aggregates
The Company’s Aggregates segment processes and sells granite, limestone, sand, gravel, and
other aggregates products for use in all sectors of the public infrastructure, commercial, and
residential construction industries. The Aggregates segment also includes the operation of its
other construction materials businesses. These businesses, acquired through continued selective
vertical integration by the Company, include primarily asphalt, ready mixed concrete, and road
paving operations.
The Company is the United States’ second largest producer of aggregates. In 2005, the
Company’s Aggregates segment shipped 203.2 million tons of aggregates primarily to customers in 31
states, Canada, the Bahamas, and the Caribbean Islands, generating net sales and earnings from
operations of $1.6 billion and $299.2 million, respectively.
The Aggregates segment markets its products primarily to the construction industry, with
approximately 45% of its shipments made to contractors in connection with highway and other public
infrastructure projects and the balance of its shipments made primarily to contractors in
connection with commercial and residential construction projects. As a result of dependence upon
the construction industry, the profitability of aggregates producers is sensitive to national,
regional, and local economic conditions, and particularly to cyclical swings in construction
spending, which is affected by fluctuations in interest rates, demographic and population shifts,
and changes in the level of infrastructure spending funded by the public sector. The Company’s
Aggregates business covers a wide geographic area, with aggregates, asphalt products, and ready
mixed concrete sold and shipped from a network of approximately 325 quarries, distribution
facilities, and plants in 28 states, Canada, the Bahamas, and the Caribbean Islands, although the
Company’s five largest revenue-generating states (Texas, North Carolina, Georgia, Iowa, and
Florida) account for approximately 55% of total 2005 net sales by state of destination. The
Company’s business is accordingly affected by the
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economies in these regions and has been adversely affected in part by recessions and weaknesses in
these economies from time to time.
The Company’s aggregates business is also highly seasonal, due primarily to the effect of
weather conditions on construction activity within its markets. The Aggregates segment’s
operations that are concentrated in the northern region of the United States and Canada experience
more severe winter weather conditions than the segment’s operations in the Southeast and Southwest.
Due to these factors, the Company’s second and third quarters are the strongest, with the first
quarter generally reflecting the weakest results. Results in any quarter are not necessarily
indicative of the Company’s annual results. Similarly, the segment’s operations in the
southeastern and Gulf Coast regions of the United States and the Bahamas are at risk for hurricane
activity and have experienced weather-related losses in recent years. During 2005, aggregates
shipments in the Company’s southeastern and Gulf Coast markets were adversely affected by
Hurricanes Katrina and Rita and several other storms during the 2005 record-setting hurricane
season.
Aggregates can be found in abundant quantities throughout the United States, and there are
many producers nationwide. However, as a general rule, shipments from an individual quarry are
limited because the cost of transporting processed aggregates to customers is high in relation to
the value of the product itself. As a result, proximity of quarry facilities to customers is the
most important factor in competition for aggregates business and helps explain the highly
fragmented nature of the aggregates industry. As described below, the Company’s distribution
system mainly uses trucks, but also has access to a river barge and ocean vessel network, where the
per mile unit cost of transporting aggregates is much lower. In addition, acquisitions have
enabled the Company to extend its reach through increased access to rail transportation.
A growing percentage of the Company’s aggregates shipments are being moved by rail or water
through a distribution yard network. In 1994, 93% of the Company’s aggregates shipments were moved
by truck, while the balance of 7% was moved by rail. In contrast, the Company’s aggregates
shipments were moved 74% by truck, 16% by rail, and 10% by water in 2005. The Company has an
extensive network of aggregates quarries and distribution centers along the Mississippi River
system throughout the central and southern United States and in the Bahamas and Canada, as well as
distribution centers along the Gulf of Mexico and Atlantic coasts. The Gulf and Atlantic coastal
areas are being supplied in part from the Bahamas location, two large quarries on the Ohio River
system, and a Canadian quarry on the Strait of Canso in Nova Scotia. In addition, the Company’s
acquisitions have expanded its ability to ship by rail. Accordingly, the Company has enhanced its
reach through its ability to provide cost-effective coverage of coastal markets on the east and
gulf coasts, as well as geographic areas which can be accessed economically by the Company’s
expanded distribution system. In 2002 and 2004, the Company completed major projects to modernize
and expand the plant capacity at its Bahamas and Nova Scotia locations, respectively, which
provided the opportunity for the Company to capture future potential market growth and reduce costs
(although there can be no assurance of such growth and cost reductions). In 2005 the Company began
a major project to modernize and expand the plant capacity at its Three Rivers location, which,
when completed in 2006, will allow the consolidation of the Company’s two large quarries on the
Ohio River system.
As the Company continues to move more aggregates by rail and water, embedded freight costs
have consequently reduced gross margins. This typically occurs where the Company transports
aggregates from a production location to a distribution location by rail or water, and the customer
pays
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a selling price that includes a freight component. Margins are negatively affected because the
customer typically does not pay the Company a profit associated with the transportation component
of the selling price. Moreover, the Company’s expansion of its rail-based distribution network,
coupled with the extensive use of rail service in the Southwest and Southeast, increases the
Company’s dependence on and exposure to railroad performance, including track congestion, crew
availability, and power availability, and the ability to renegotiate favorable railroad shipping
contracts. The waterborne distribution network also increases the Company’s exposure to certain
risks, including the ability to negotiate favorable shipping contracts, demurrage costs, fuel
costs, barge or ship availability, and weather disruptions.
The Company experienced rail transportation shortages in Texas and parts of the Southeast in
2004 and, to a lesser extent, in 2005. These shortages resulted from the downsizing in personnel
and equipment made by certain railroads. In response to these issues, rail transportation
providers have focused on increasing the number of cars per unit train under transportation
contracts and are generally requiring customers, through the freight rate structure, to accommodate
larger unit train movements. A unit train is a freight train moving great tonnages of a single
bulk product between two points without intermediate yarding and switching. Certain of the
Company’s sales yards in the Southwest have the system capabilities to meet the unit train
requirement. During 2005, the Company added property and capital improvements to a number of its
sales yards in the Southwest in order to better accommodate unit train unloadings. The Company
also addressed certain of its railcar needs in 2005 by entering into a purchase agreement for the
construction of 780 railcars, which the Company is in the process of converting into two master
lease agreements.
In 2005, following Hurricanes Katrina and Rita, the Company experienced delays and shortages
relating to its transportation of barges along the Mississippi River system. As the Gulf Coast
started to recover, the Company’s barge traffic improved. By the end of 2005, the Company’s barge
distribution system substantially resumed normal operations, although the Company continues to
experience shortages of barges from time to time.
The Company’s management expects the multiple transportation modes that have been developed
with various rail carriers and via barges and deepwater ships should provide the Company with the
flexibility to effectively serve customers in the Southwest and Southeast.
The Company’s management believes the overall long-term trend for the construction aggregates
industry continues to be one of consolidation, although the consolidation trend has slowed as the
number of suitable acquisition targets shrinks. The Company’s Board of Directors and management
continue to review and monitor the Company’s strategic long-term plans, which include assessing
business combinations and arrangements with other companies engaged in similar businesses,
increasing market share in the Company’s core businesses, and pursuing new opportunities related to
the Company’s existing markets.
The Company became more vertically integrated with an acquisition in 1998 and subsequent
acquisitions, particularly in the Southwest, pursuant to which the Company acquired asphaltic
concrete, ready mixed concrete, paving construction, trucking, and other businesses, which
establish vertical integration that complement the Company’s aggregates business. These vertically
integrated operations accounted for approximately 6% of revenues in 2005. These operations have
lower gross margins than aggregates products, and are affected by volatile factors, including fuel
costs, operating
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efficiencies, and weather, to an even greater extent than the Company’s aggregates operations. The
road paving and trucking businesses were acquired as supplemental operations that were part of
larger acquisitions. As such, they do not represent core businesses of the Company. These
operations have typically resulted in losses that are insignificant to the Company as a whole. In
2005, the Company continued disposing of some of these operations. The Company continues to review
carefully these operations to determine if they represent opportunities to divest underperforming
assets in an effort to redeploy capital for other opportunities.
Environmental and zoning regulations have made it increasingly difficult for the aggregates
industry to expand existing quarries and to develop new quarry operations. Although it cannot be
predicted what policies will be adopted in the future by federal, state, and local governmental
bodies regarding these matters, the Company anticipates that future restrictions will likely make
zoning and permitting more difficult, thereby potentially enhancing the value of the Company’s
existing mineral reserves.
Management believes the Aggregates segment’s raw materials, or aggregates reserves, are
sufficient to permit production at present operational levels for the foreseeable future. The
Company does not anticipate any material difficulty in obtaining the raw materials that it uses for
current production in its aggregates segment. The Company’s aggregates reserves on the average
exceed 50 years of production, based on current levels of activity. However, certain locations may
be subject to more limited reserves and may not be able to expand. Moreover, as noted above,
environmental and zoning regulations will likely make it harder for the Company to expand its
existing quarries or develop new quarry operations.
The Company uses various drilling methods, depending on the type of aggregate, to estimate
reserves that are economically mineable. The extent of drilling varies and depends on whether the
location is a potential new site (greensite), an existing location, or a potential acquisition.
More extensive drilling is performed for potential greensites and acquisitions, and in rare cases
the Company may rely on existing geological data or results of prior drilling by third parties.
Subsequent to drilling, selected core samples are tested for soundness, abrasion resistance, and
other physical properties relevant to the aggregates industry. If the reserves meet the Company’s
standards and are economically mineable, then they are either leased or purchased.
The Company estimates proven and probable reserves based on the results of drilling. Proven
reserves are reserves of deposits designated using closely spaced drill data, and based on that
data the reserves are believed to be relatively homogenous. Proven reserves have a certainty of
85% to 90%. Probable reserves are reserves that are inferred utilizing fewer drill holes and/or
assumptions about the economically mineable reserves based on local geology or drill results from
adjacent properties. The degree of certainty for probable reserves is 70% to 75%. In determining
the amount of reserves, the Company’s policy is to not include calculations that exceed certain
depths, so for deposits, such as granite, that typically continue to depths well below the ground,
there may be additional deposits that are not included in the reserve calculation. The Company
also deducts loss factors, such as property boundaries and plant configurations, as deemed
appropriate when estimating reserves. For additional information on the Company’s assessment of
reserves, see “Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Application of Critical Accounting Policies — Property, Plant and Equipment” on pages
64 and 65 of the 2005 Annual Report for discussion of reserves evaluation by the Company.
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The Company generally delivers products in its Aggregates segment upon receipt of orders or
requests from customers. Accordingly, there is no significant backlog information. Inventory of
aggregates is generally maintained in sufficient quantities to meet rapid delivery requirements of
customers.
Less than 1% of the Aggregates segment’s revenues are from foreign jurisdictions, principally
Canada and the Bahamas, with revenues from customers in foreign countries totaling $16.4 million,
$15.4 million, and $14.6 million during 2005, 2004, and 2003, respectively.
Specialty Products
The Company’s Specialty Products segment consists of the Magnesia Specialties business and the
Structural Composite Products business.
Magnesia Specialties Business. The Company manufactures and markets, through Magnesia
Specialties, dolomitic lime and magnesia-based chemicals products for industrial, agricultural, and
environmental uses. Given the high fixed costs associated with the operations of this business,
excess capacity negatively affects its results of operations. A significant portion of the costs
related to the production of dolomitic lime and magnesia-based products is of a fixed or semi-fixed
nature. In addition, the production of dolomitic lime and certain magnesia-based products requires
the use of natural gas, coal, and petroleum coke to fuel kilns. Year-over-year increases in
natural gas and other fuel prices directly affect operating results.
Magnesia Specialties’ dolomitic lime products are sold primarily to the steel industry.
Accordingly, the profitability of the Magnesia Specialties business is dependent on steel
production capacity utilization and the related marketplace. Magnesia Specialties’ products used
in the steel industry accounted for approximately 48% of the revenues of the business in 2005,
attributable primarily to the sale of dolomitic lime products. However, Magnesia Specialties’
management has shifted the strategic focus of its magnesia-based business to specialty chemicals
that can be produced at volume levels that support efficient operations. Moreover, in 2005, the
chemicals group portion of the Magnesia Specialties business continued to diversify in chemicals
used as flame retardants, in wastewater treatment, in pulp and paper production, and in other
environmental applications, and that business is not as dependent on the steel industry as is the
dolomitic lime portion of the Magnesia Specialties business.
The principal raw materials used in Magnesia Specialties’ products are dolomitic limestone and
alkali-rich brine. Management believes that its reserves of dolomitic limestone and brine are
sufficient to permit production at the current operational levels for the foreseeable future.
After the brine is used in the production process, the Magnesia Specialties business must
dispose of the processed brine. In the past, the business did this by reinjecting the processed
brine back into its underground brine reserve network around its facility in Manistee, Michigan.
The business has also sold a portion of this processed brine to third parties. In 2003, Magnesia
Specialties entered into a long-term processed brine supply agreement with The Dow Chemical Company
(“Dow”) pursuant to which Dow purchases processed brine from Magnesia Specialties, at market rates,
for use in Dow’s production of calcium chloride products. Magnesia Specialties also entered into a
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venture with Dow to construct, own, and operate a processed brine supply pipeline between the
Magnesia Specialties facility in Manistee, Michigan, and Dow’s facility in Ludington, Michigan.
Construction of such pipeline was completed in 2003, and Dow began purchasing processed brine from
Magnesia Specialties through the pipeline.
Magnesia Specialties generally delivers its products upon receipt of orders or requests from
customers. Accordingly, there is no significant backlog information. Inventory for the Magnesia
Specialties products is generally maintained in sufficient quantities to meet rapid delivery
requirements of customers.
Approximately 17% of the revenues of the Magnesia Specialties business are from foreign
jurisdictions, principally Canada, Mexico, Europe, South America, and the Pacific Rim, but no
single country accounts for 10% or more of the revenues of the business. Revenues from customers
in foreign countries totaled $19.6 million, $16.1 million, and $12.5 million 2005, 2004, and 2003,
respectively. As a result of these foreign revenues, the financial results of the Magnesia
Specialties business could be affected by changes in foreign currency exchange rates or weak
economic conditions in the foreign markets. To mitigate the short-term effects of changes in
currency exchange rates, the Magnesia Specialties business principally uses the U.S. dollar as the
functional currency in foreign transactions.
Structural Composite Products Business. The Company manufactures and markets, through Martin
Marietta Composites (“MMC”), structural composite products for use in a wide variety of industries.
Pursuant to various agreements, MMC has rights to commercialize certain proprietary technologies
related to the Company’s business. One of the agreements gives MMC the opportunity to pursue the
use of certain fiber-reinforced polymer composites technologies for products where corrosion
resistance and high strength-to-weight ratios are important factors, such as bridge decks, marine
applications, and other structures and applications. MMC continued its research and product
development activities during 2005 on these structural composites technologies and initiated or
continued manufacturing and marketing of selected products.
MMC is targeting several industries and the military for its fiber-reinforced polymer
composite materials: infrastructure, which includes pedestrian and vehicular bridge decks;
transportation, which includes specialty trucks, railcar components, and truck and trailer
components; construction, which includes wall panels, temporary structures, and industrial mats;
and military, which includes ballistic absorption panels, including orders received for
approximately $9 million. MMC has completed 30 successful installations of bridge decks in 13
states and 2 foreign countries utilizing these composite materials technologies. MMC has a
licensing agreement with a third party relating to a proprietary composite sandwich technology,
which MMC expects will play an important role in the product line related to flat panel
applications. In connection with this agreement, MMC is obligated to complete the purchase of an
additional flat panel machine in 2006.
MMC intends to continue to ramp up its Structural Composite Products business during 2006.
Product trials and commercialization continue to be the near-term focus of MMC. Improved
performance in 2006 is essential to continued investment in this business. MMC will continue to
evaluate a variety of military and commercial uses for composite materials. There can be no
assurance that these technologies will become profitable.
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Patents and Trademarks
As of February 21, 2006, the Company owns, has the right to use, or has pending applications
for approximately 92 patents pending or granted by the United States and various countries and
approximately 60 trademarks related to business. The Company believes that its rights under its
existing patents, patent applications, and trademarks are of value to its operations, but no one
patent or trademark or group of patents or trademarks is material to the conduct of the Company’s
business as a whole.
Customers
No material part of the business of either segment of the Company is dependent upon a single
customer or upon a few customers, the loss of any one of which would have a material adverse effect
on the segment. The Company’s products are sold principally to commercial customers in private
industry. Although large amounts of construction materials are used in public works projects,
relatively insignificant sales are made directly to federal, state, county, or municipal
governments, or agencies thereof.
Competition
Because of the impact of transportation costs on the aggregates business, competition in the
Aggregates segment tends to be limited to producers in proximity to the Company’s individual
production facilities. Although all of the Company’s locations experience competition, the Company
believes that it is generally a leading producer in the areas it serves. Competition is based
primarily on quarry location and price, but quality of aggregates and level of customer service are
also factors.
The Company is the second largest producer of aggregates in the United States based on tons
shipped. There are over 3,900 companies in the United States that produce aggregates. The largest
five producers account for approximately 27% of the total market. The Company in its Aggregates
segment competes with a number of other large and small producers. The Company believes that its
ability to transport materials by ocean vessels and river barges and its increased access to rail
transportation have enhanced the Company’s ability to compete in certain extended areas. Certain
of the Company’s competitors in the aggregates industry have greater financial resources than the
Company.
The Magnesia Specialties business of the Company’s Specialty Products segment competes with
various companies in different geographic and product areas principally on the basis of quality,
price, and technical support for its products. The Magnesia Specialties business also competes for
sales to customers located outside the United States, with revenues from foreign jurisdictions
accounting for approximately 13% of revenues for the Magnesia Specialties business in 2005,
principally in Canada, Mexico, Europe, South America, and the Pacific Rim. Certain of the
Company’s competitors in the Magnesia Specialties business have greater financial resources than
the Company.
The Structural Composite Products business of the Company’s Specialty Products segment is a
start-up business that competes or will compete with various companies in different geographic and
product areas principally on the basis of technological advances, quality, price, and technical
support.
11
The Structural Composite Products business competes or will compete for sales to customers located
outside the United States. Certain of the Company’s competitors in the Structural Composite
Products business have greater financial resources than the Company.
Research and Development
The Company conducts research and development activities principally for its Magnesia
Specialties business, at its plant in Manistee, Michigan, and for its Structural Composite Products
business, at its headquarters in Raleigh, North Carolina, and its plant in Sparta, North Carolina.
In general, the Company’s research and development efforts in 2005 were directed to applied
technological development for the use of its chemicals products and for its proprietary
technologies, including composite materials. The Company spent approximately $0.7 million in 2005,
$0.9 million in 2004, and $0.6 million in 2003 on research and development activities.
Environmental and Governmental Regulations
The Company’s operations are subject to and affected by federal, state, and local laws and
regulations relating to the environment, health and safety, and other regulatory matters. Certain
of the Company’s operations may from time to time involve the use of substances that are classified
as toxic or hazardous substances within the meaning of these laws and regulations. Environmental
operating permits are, or may be, required for certain of the Company’s operations, and such
permits are subject to modification, renewal, and revocation.
The Company records an accrual for environmental remediation liabilities in the period in
which it is probable that a liability has been incurred and the amounts can be reasonably
estimated. Such accruals are adjusted as further information develops or circumstances change.
The accruals are not discounted to their present value or offset for potential insurance or other
claims or potential gains from future alternative uses for a site.
The Company regularly monitors and reviews its operations, procedures, and policies for
compliance with existing laws and regulations, changes in interpretations of existing laws and
enforcement policies, new laws that are adopted, and new laws that the Company anticipates will be
adopted that could affect its operations. The Company has a full time staff of environmental
engineers and managers that perform these responsibilities. The direct costs of ongoing
environmental compliance were $3.5 million in 2005 and $5.3 million in 2004 and are related to the
Company’s environmental staff and ongoing monitoring costs for various matters (including those
matters disclosed in this Annual Report on Form 10-K). Capitalized costs related to environmental
control facilities were less than $3 million in 2005 and are expected to be at or below that amount
in 2006 and 2007. The Company’s capital expenditures for environmental matters were not material
to its results of operations or financial condition in 2005 and 2004. Despite these compliance
efforts, risk of environmental liability is inherent in the operation of the Company’s businesses,
as it is with other companies engaged in similar businesses, and there can be no assurance that
environmental liabilities will not have a material adverse effect on the Company in the future.
Many of the requirements of the environmental laws are satisfied by procedures that the
Company adopts as best business practices in the ordinary course of its operations. For example,
plant equipment that is used to crush aggregates products may, as an ordinary course of operations,
have an
12
attached water spray bar that is used to clean the stone. The water spray bar also suffices
as a dust control mechanism that complies with applicable environmental laws. The Company does not
break out the portion of the cost, depreciation, and other financial information relating to the
water spray bar that is only attributable to environmental purposes, as it would be derived from an
arbitrary allocation methodology. The incremental portion of such operating costs that is
attributable to environmental compliance rather than best operating practices is impractical to
quantify. Accordingly, the Company expenses costs in that category when incurred as operating
expenses.
The environmental accruals recorded by the Company are based on internal studies of the
required remediation costs and estimates of potential costs that arise from time to time under
federal, state, and/or local environmental protection laws. Many of these laws and the regulations
promulgated under them are complex, and are subject to challenges and new interpretations by
regulators and the courts from time to time. In addition, new laws are adopted from time to time.
It is often difficult to accurately and fully quantify the costs to comply with new rules until it
is determined the type of operations to which they will apply and the manner in which they will be
implemented is more accurately defined. This process often takes years to finalize and changes
significantly from the time the rules are proposed to the time they are final. The Company
typically has several appropriate alternatives available to satisfy compliance requirements, which
could range from nominal costs to some alternatives that may be satisfied in conjunction with
equipment replacement or expansion that also benefits operating efficiencies or capacities and
carry significantly higher costs.
Management believes that its current accrual for environmental costs is reasonable, although
those amounts may increase or decrease depending on the impact of applicable rules as they are
finalized from time to time and changes in facts and circumstances. The Company believes that any
additional costs for ongoing environmental compliance would not have a material adverse effect on
the Company’s obligations or financial condition.
With respect to reclamation costs effective January 1, 2003, the Company adopted Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“FAS 143”).
See “Note N: Commitments and Contingencies” of the “Notes to Financial Statements” on pages 32 and
33 of the 2005 Annual Report. Under FAS 143, future reclamation costs are estimated using
statutory reclamation requirements and management’s experience and knowledge in the industry, and
are discounted to their present value using a credit-adjusted, risk-free rate of interest. The
future reclamation costs are not offset by potential recoveries. The Company is generally required
by state or local laws or pursuant to the terms of an applicable lease to reclaim quarry sites
after use. The Company performs activities on an ongoing basis that may reduce the ultimate
reclamation obligation. These activities are performed as an integral part of the normal quarrying
process. For example, the perimeter and interior walls of an open pit quarry are sloped and
benched as they are developed to prevent erosion and provide stabilization. This sloping and
benching meets dual objectives — safety regulations required by the Mine Safety and Health
Administration for ongoing operations and final reclamation requirements. Therefore, these types
of activities are included in normal operating costs and are not a part of the asset retirement
obligation. Historically, the Company has not incurred substantial costs in connection with the
closing of quarries. Reclaimed quarry sites owned by the Company are available for sale, typically
for commercial development or use as reservoirs.
The Company believes that its operations and facilities, both owned or leased, are in
substantial compliance with applicable laws and regulations and that any noncompliance is not
likely to have a
13
material adverse effect on the Company’s operations or financial condition. See “Legal
Proceedings” on pages 26 and 27 of this Form 10-K and “Note N: Commitments and Contingencies” of
the “Notes to Financial Statements” on pages 32 and 33 and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Environmental Regulation and Litigation” on pages
54 and 55 of the 2005 Annual Report. However, future events, such as changes in or modified
interpretations of existing laws and regulations or enforcement policies, or further investigation
or evaluation of the potential health hazards of certain products or business activities, may give
rise to additional compliance and other costs that could have a material adverse effect on the
Company.
In general, quarry sites must comply with air quality, water quality, and noise regulations,
zoning and special use permitting requirements, applicable mining regulations, and federal health
and safety requirements. As new quarry sites are located and acquired, the Company works closely
with local authorities during the zoning and permitting processes to design new quarries in such a
way as to minimize disturbances. The Company frequently acquires large tracts of land so that
quarry and production facilities can be situated substantial distances from surrounding property
owners. Also, the Company’s ability to transport material by rail and ship allows it to locate its
facilities further away from residential areas. The Company has established policies designed to
minimize disturbances to surrounding property owners from its operations.
As is the case with other companies in the same industry, some of the Company’s products
contain varying amounts of crystalline silica, a mineral commonly called quartz. Excessive,
prolonged inhalation of very small-sized particles of crystalline silica has been associated with
lung disease. The carcinogenic potential of crystalline silica was evaluated by the International
Agency for Research on Cancer and later by the U.S. National Toxicology Program. In 1987, the
agency found limited evidence of carcinogenicity in humans but sufficient evidence of
carcinogenicity in animals. The National Toxicology Program concluded in 1991 that crystalline
silica is “reasonably anticipated to be a carcinogen.” In October 1996, the International Agency
for Research on Cancer issued another report stating that “inhaled crystalline silica in the form
of quartz or cristobalite from occupational sources is carcinogenic to humans.” The Mine Safety
and Health Administration (MSHA) and the Occupational Safety and Health Administration (OSHA) both
listed the development of a crystalline silica standard as one of their priorities in the 2005
regulatory agenda. OSHA identified occupational overexposure to crystalline silica among its top
five health priorities and developed a draft regulation in 2003. The issue remains in the prerule
status, and OSHA is preparing a detailed risk assessment and plans to complete an external peer
review of a draft assessment by April 2006. MSHA lists the development of a respirable crystalline
silica standard as a long-term action and is considering several options to reduce miners’ exposure
to crystalline silica. No deadlines for action have been established by the agency. The Company,
through safety information sheets and other means, communicates what it believes to be appropriate
warnings and cautions to employees and customers about the risks associated with excessive,
prolonged inhalation of mineral dust in general and crystalline silica in particular.
The Clean Air Act Amendments of 1990 required the EPA to develop regulations for a broad
spectrum of industrial sectors that emit hazardous air pollutants, including lime manufacturing.
The new standards to be established would require plants in the targeted industries to install
feasible control equipment for certain hazardous air pollutants, thereby significantly reducing air
emissions. The Company and other lime manufacturers through the National Lime Association, the
leading industry trade association (“NLA”), worked with the EPA to define test protocols, better
define the
14
scope of the standards, determine the existence and feasibility of various technologies, and
develop realistic emission limitations and continuous emissions monitoring/reporting requirements
for the lime industry. The EPA received comments on its proposed technology-based standards for
the industry in November 2000, and a proposed rule for the national emission standards for lime
manufacturing plants was released on December 20, 2002. The proposed rules favorably addressed
many of the issues raised by NLA in the negotiation process. NLA and the Company submitted
comments on the proposed rules in February 2003. The EPA published the final rule in the Federal
Register on January 5, 2004, and facilities must be in compliance within three years after the date
of publication. The Company believes that there are several alternatives for achieving compliance
with the new technology-based standard, and that any costs associated with the upgrade and/or
replacement of equipment required to comply with the new regulations will not have a material
adverse effect on the Company’s operations or its financial condition, but can give no assurance
that the compliance costs will not have a material adverse effect on the financial condition or
results of the operations of the Magnesia Specialties business.
In February 1998, the Georgia Department of Natural Resources (“GDNR”) determined that both
the Company and the Georgia Department of Transportation (“GDOT”) are responsible parties for
investigation and remediation at the Company’s Camak Quarry in Thomson, Georgia, due to the
discovery of trichloroethene (“TCE”) above its naturally occurring background concentration in a
drinking water well on site. The Company provided the GDNR with information indicating that the
source of the release was either from an asphalt plant and associated GDOT testing laboratory that
was on the site in the early 1970’s or from a maintenance shop that was operated on the property in
the 1940’s and 1950’s before the Company purchased the property. The Company entered into a
Consent Order with GDNR to conduct an environmental assessment of the site and file a report of the
findings. The Company and GDOT signed an agreement to share evenly the costs of the assessment
work. The assessment report was completed and filed. Based upon the results of the assessment
report, GDOT withdrew from the cost sharing agreement and has indicated it will not share in any
future remediation costs. The Company submitted a corrective action plan to GDNR for approval on
December 9, 2002. GDNR requested additional information which was duly submitted. GDNR approved
the plan on June 28, 2005, and the Company is implementing it. The Company is funding the entire
cost of future investigations and remediation which will occur over several years. Management
believes any costs incurred by the Company associated with the site will not have a material
adverse effect on the Company’s operations or its financial condition.
In December 1998, the GDNR determined that the Company, the GDOT, and two former asphalt plant
operators are responsible parties for investigation and remediation of groundwater contamination at
the Company’s Ruby Quarry in Macon, Georgia. The Company was designated by virtue of its ownership
of the property. GDOT was designated because it operated a testing laboratory at the site. The
two other parties were designated because both entities operated asphalt plants at the site. The
groundwater contamination was discovered when the Company’s tenant vacated the premises and
environmental testing was conducted. The Company and GDOT signed an agreement to share the costs
of the assessment work. The report of the assessment work was filed with the GDNR. GDOT entered
into a Consent Order with GDNR agreeing to conduct additional testing and any necessary remediation
at the site. On May 21, 2001, GDNR issued separate Administrative Orders against the Company and
other responsible parties to require all parties to participate with GDOT to undertake additional
testing and any necessary remediation. The Company and GDOT submitted a corrective action plan to
GDNR for approval on May 20, 2002. GDNR requested additional information in
15
connection with its consideration of the submitted plan and subsequently approved the plan on July
19, 2004. GDOT filed an amendment to the plan, which was approved on June 28, 2005. GDOT has been
proceeding with remediation activities which will occur over a number of years. Under Georgia law,
responsible parties are jointly and severally liable, and therefore, the Company is potentially
liable for the full cost of funding any necessary remediation. If the Company is required to fund
the cost of remediation, the Company will pursue its right of contribution from the responsible
parties. Management believes any costs incurred by the Company associated with the site will not
have a material adverse effect on the Company’s operations or its financial condition.
In the vicinity of and beneath the Magnesia Specialties facility in Manistee, Michigan,
facility, there is an underground plume of material originating from adjacent property which
formerly was used by Packaging Corporation of America (“PCA”) as a part of its operations.
Magnesia Specialties believes the plume consists of paper mill waste. On September 8, 1983, the
PCA plume and property were listed on the National Priorities List (“NPL”) under the authority of
the Comprehensive Environmental Response, Compensation and Liability Act (the “Superfund” statute).
The PCA plume is subject to a Record of Decision issued by the U.S. Environmental Protection
Agency (“EPA”) on May 2, 1994, pursuant to which PCA’s successor, Pactiv Corporation (“Pactiv”), is
required to conduct annual monitoring. The EPA has not required remediation of the groundwater
contamination. On January 10, 2002, the Michigan Department of Environmental Quality (“MDEQ”)
issued Notice of Demand letters to Magnesia Specialties, PCA and Pactiv indicating that it believes
that Magnesia Specialties’ chloride contamination is commingling with the PCA plume which
originates upgradient from the Magnesia Specialties property. The MDEQ is concerned about possible
effects of these plumes, and designated Magnesia Specialties, PCA and Pactiv as parties responsible
for investigation and remediation under Michigan state law. The MDEQ held separate meetings with
Magnesia Specialties, PCA, and Pactiv to discuss remediation and reimbursement for past
investigation costs totaling approximately $700,000. Magnesia Specialties entered into an
Administrative Order with the MDEQ to pay for a portion of MDEQ’s past investigation costs and
thereby limit its liability for past costs in the amount of $20,000. Michigan law provides that
responsible parties are jointly and severally liable, and, therefore, Magnesia Specialties is
potentially liable for the full cost of funding future investigative activities and any necessary
remediation. Michigan law also provides a procedure whereby liability may be apportioned among
responsible parties if it is capable of division. The Company believes that the liability most
likely will be apportioned and that any such costs attributed to Magnesia Specialties’ brine
contamination will not have a material adverse effect on the Company’s operations or its financial
condition, but can give no assurance that the liability will be apportioned or that the compliance
costs will not have a material adverse effect on the financial condition or results of the
operations of the Magnesia Specialties business.
Employees
As of February 21, 2006, the Company has approximately 5,754 employees, of which 4,304 are
hourly employees and 1,450 are salaried employees. Included among these employees are 848 hourly
employees represented by labor unions (14.7% of the Company’s employees). Of such amount, 14.6% of
the Company’s Aggregates segment’s hourly employees are members of a labor union, while 98.2% of
the Specialty Products segment’s hourly employees are represented by labor unions. The Company’s
principal union contracts cover employees of the Magnesia Specialties business at the Manistee,
Michigan, magnesia-based chemicals plant and the Woodville, Ohio, lime plant. The Manistee
collective bargaining agreement expires in August 2007. The Woodville collective
16
bargaining agreement expires in June 2006. There can be no assurance that a successor agreement
will be reached at the Woodville location this year.
Available Information
The
Company maintains an Internet address at www.martinmarietta.com. The Company makes
available free of charge through its Internet web site its annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, if any, filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. These reports and any
amendments are accessed via the Company’s web site through a link with the Electronic Data
Gathering, Analysis, and Retrieval (“EDGAR”) system maintained by the Securities and Exchange
Commission (the “SEC”) at www.sec.gov. Accordingly, the Company’s referenced reports and any
amendments are made available as soon as reasonably practicable after the Company electronically
files such material with, or furnishes it to, the SEC, once EDGAR places such material in its
database.
The Company has adopted a Code of Ethics and Standards of Conduct that applies to all of its
directors, officers, and employees. The Company’s code of ethics is available on the Company’s
Internet address at www.martinmarietta.com. The Company intends to disclose on its Internet web
site any waivers of or amendments to its code of ethics as it applies to its directors and
executive officers.
The Company has adopted a set of Corporate Governance Guidelines to address issues of
fundamental importance relating to the corporate governance of the Company, including director
qualifications and responsibilities, responsibilities of key board committees, director
compensation, and similar issues. Each of the Audit Committee, the Management Development and
Compensation Committee, and the Nominating and Corporate Governance Committee of the Board of
Directors of the Company has adopted a written charter addressing various issues of importance
relating to each committee, including the committee’s purposes and responsibilities, an annual
performance evaluation of each committee, and similar issues. These Corporate Governance
Guidelines, and the charters of each of these committees, are available on the Company’s Internet
address at www.martinmarietta.com.
The Company will make paper copies of its filings with the SEC, its Code of Ethics and
Standards of Conduct, its Corporate Governance Guidelines, and the charters of its key committees,
available to its shareholders free of charge upon request by writing to: Martin Marietta
Materials, Inc., Attn: Corporate Secretary, 2710 Wycliff Road, Raleigh, North Carolina 27607-3033.
The Company’s Chief Executive Officer and Chief Financial Officer are required to file with
the SEC each quarter and each year certifications regarding the quality of the Company’s public
disclosure of its financial condition. The annual certifications are included as Exhibits to this
Annual Report on Form 10-K. The Company’s Chief Executive Officer is also required to certify to
the New York Stock Exchange each year that he is not aware of any violation by the Company of the
New York Stock Exchange corporate governance listing standards. The filing of these certifications
with the SEC and with the New York Stock Exchange is also disclosed in the Company’s 2005 Annual
Report.
17
ITEM 1A. RISK FACTORS AND FORWARD-LOOKING STATEMENTS
An investment in our common stock or debt securities involves risks and uncertainties. You
should consider the following factors carefully, in addition to the other information contained in
this Form 10-K, before deciding to purchase or otherwise trade our securities.
This Form 10-K and other written reports and oral statements made from time to time by the
Company contain statements which, to the extent they are not recitations of historical fact,
constitute forward-looking statements within the meaning of federal securities law. Investors are
cautioned that all forward-looking statements 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. Investors can identify these statements by the fact that they do
not relate only to historic or current facts. The words “anticipate,” “believe,” “estimate,”
“expect,” “forecast,” “intend,” “outlook,” “plan,” “project,” “scheduled,” and similar expressions
in connection with future events or future operating or financial performance are intended to
identify forward-looking statements. Any or all of the Company’s forward-looking statements in
this Form 10-K and in other publications may turn out to be wrong.
Statements and assumptions on future revenues, income and cash flows, performance, economic
trends, the outcome of litigation, regulatory compliance, and environmental remediation cost
estimates are examples of forward-looking statements. Numerous factors, including potentially the
risk factors described in this section, could affect our forward-looking statements and actual
performance.
Factors that the Company currently believes could cause its actual results to differ
materially from those in the forward-looking statements include, but are not limited to, those set
out below. In addition to the risk factors described below, we urge you to read our Management’s
Discussion and Analysis of Financial Condition and Results of Operations in our 2005 Annual Report
to Shareholders.
Our aggregates business is cyclical and depends on activity within the construction industry.
We sell most of our aggregate products to the construction industry, so our results depend on
the strength of the construction industry. Since our business depends on construction spending,
which can be cyclical, our profits are sensitive to national, regional, and local economic
conditions. Construction spending is affected by economic conditions, changes in interest rates,
demographic and population shifts, and changes in construction spending by federal, state, and
local governments. If economic conditions change, a recession in the construction industry may
occur and affect the demand for our aggregate products. Construction spending can also be
disrupted by terrorist activity and armed conflicts.
While our aggregate operations cover a wide geographic area, our earnings depend on the
strength of the local economies in which we operate because of the high cost to transport our
products relative to their price. If economic conditions and construction spending decline
significantly in one or more areas, particularly in our top five revenue-generating states of
Texas, North Carolina, Georgia, Iowa and Florida, our profitability will decrease.
18
Our aggregates business is seasonal and subject to the weather.
The construction aggregates business is conducted outdoors. Seasonal changes and other
weather conditions affect our business. Adverse weather conditions, including hurricanes and
tropical storms, cold weather, snow, and heavy or sustained rainfall, reduce construction activity
and the demand for our products. Adverse weather conditions also increase our costs and reduce our
production output as a result of power loss, needed plant and equipment repairs, time required to
remove water from flooded operations, and similar events. The construction aggregates business
production and shipment levels follow activity in the construction industry, which typically occur
in the spring, summer and fall. Because of the weather’s effect on the construction industry’s
activity, the aggregates business production and shipment levels vary by quarter. The second and
third quarters are generally the most profitable and the first quarter is generally the least
profitable.
Our aggregates business depends on the availability of aggregate products and our ability to mine
them economically.
Our challenge is to find aggregate deposits that we can mine economically, with appropriate
permits, near growing markets. As communities have grown, they have taken up attractive quarrying
locations and have imposed restrictions on mining. We try to meet this challenge by identifying
and permitting sites prior to economic expansion, buying more land around our existing quarries to
increase our mineral reserves, and developing a distribution network that transports aggregates
products by various transportation methods, including rail and water, that allows us to transport
our products longer distances than would normally be considered economical.
Our aggregates business is a capital-intensive business.
It is expensive to acquire property and machinery and produce our products. Therefore, we
must have access to large amounts of cash to operate our businesses. We believe we have adequate
cash to run our businesses. Because the business is capital intensive, a significant portion of
our operating costs is fixed in nature. Therefore, our financial results are sensitive to product
volume changes.
Our businesses face many competitors.
Our businesses have many competitors, some of whom are bigger and have more resources than we
do. Some of our competitors also operate on a worldwide basis. Our results are affected by the
number of competitors in a market, the production capacity that a particular market can
accommodate, the pricing practices of other competitors, and the entry of new competitors in a
market. We also face competition for some of our products from alternative products. For example,
our magnesia specialties business may compete with other chemical products that could be used
instead of our magnesia-based products.
Our future growth may depend in part on acquiring other businesses in our industry.
We expect to continue to grow, in part, by buying other businesses. While the pace of
acquisitions has slowed considerably over the last few years, we will continue to look for
strategic businesses to acquire. In the past, we have made acquisitions to strengthen our existing
locations,
19
expand our operations, and enter new geographic markets. We will continue to make selective
acquisitions, joint ventures, or other business arrangements we believe will help our company.
However, the continued success of our acquisition program will depend on our ability to find and
buy other attractive businesses at a reasonable price and our ability to integrate acquired
businesses into our existing operations. We cannot assume there will continue to be attractive
acquisition opportunities for sale at reasonable prices that we can successfully integrate into our
operations.
We may need to pay all or part of the purchase price of any future acquisition with shares of
our common stock. We may also use our stock to make strategic investments in other companies to
complement and expand our operations. If we use our common stock in this way, the ownership
interests of our shareholders will be diluted and the price of our stock may fall. We operate our
businesses with the objective of maximizing the long-term shareholder return.
We acquired 62 companies from 1995 through 2002. Some of these acquisitions were more easily
integrated into our existing operations and have performed as well or better than we expected,
while others have not. We have sold underperforming and other non-strategic assets, particularly
lower margin businesses like our asphalt plants in Houston and our road paving business in
Shreveport, Louisiana, and Texarkana, Arkansas.
Short supplies and high costs of fuel and energy affect our businesses.
Our businesses require a continued supply of diesel fuel, natural gas, coal, petroleum coke
and other energy. The financial results of these businesses have been affected at times by the
short supply or high costs of these fuels and energy. While we can contract for some fuels and
energy, significant increases in costs or fluctuations in supplies of these items have and may in
the future reduce our financial results.
Changes in legal requirements and governmental policies concerning zoning, land use, the
environment, and other areas of the law, and litigation relating to these matters, affect our
businesses. Our operations expose us to the risk of material environmental liabilities.
Many federal, state, and local laws and regulations relating to zoning, land use, the
environment, health, safety, and other regulatory matters govern our operations. We take great
pride in our operations and try to remain in strict compliance at all times with all applicable
laws and regulations. Despite our extensive compliance efforts, risk of liabilities, particularly
environmental liabilities, is inherent in the operation of our businesses, as it is with our
competitors. We cannot assume that these liabilities will not negatively affect us in the future.
We are also subject to future events, including changes in existing laws or regulations or
enforcement policies, or further investigation or evaluation of the potential health hazards of
some of our products or business activities, which may result in additional compliance and other
costs. We could be forced to invest in preventive or remedial action, like pollution control
facilities, which could be substantial.
Our operations are subject to manufacturing, operating, and handling risks associated with the
products we produce and the products we use in our operations, including the related storage and
transportation of raw materials, products, hazardous substances, and wastes. We are exposed to
20
hazards including storage tank leaks, explosions, discharges or releases of hazardous substances,
exposure to dust, and the operation of mobile equipment and manufacturing machinery.
These risks can subject us to potentially significant liabilities relating to personal injury
or death, or property damage, and may result in civil or criminal penalties, which could hurt our
productivity or profitability. For example, from time to time we investigate and remediate
environmental contamination relating to our prior or current operations, as well as operations we
have acquired from others, and in some cases we have been or could be named as a defendant in
litigation brought by governmental agencies or private parties.
We are involved from time to time in litigation and claims arising from our operations. While
we do not believe the outcome of pending or threatened litigation will have a material adverse
effect on our operations or our financial condition, we cannot assume that an adverse outcome in a
pending or future legal action would not negatively affect us.
Labor disputes could disrupt operations of our businesses.
Labor unions represent 14.6% of the hourly employees of our aggregates business and 98.2% of
the hourly employees of our specialty products business. Our collective bargaining agreements for
employees of our magnesia specialties business at the Woodville, Ohio lime plant and the Manistee,
Michigan magnesia chemicals plant expire in June 2006 and August 2007, respectively.
Disputes with our trade unions, or the inability to renew our labor agreements, could lead to
strikes or other actions that could disrupt our businesses, raise costs, and reduce revenues and
earnings from the affected locations. We believe we have good relations with all of our employees,
including our unionized employees.
Delays or interruptions in shipping products of our businesses could affect our operations.
Transportation logistics play an important role in allowing us to supply products to our
customers, whether by truck, rail, barge, or ship. Any significant delays, disruptions, or the
non-availability of our transportation support system could negatively affect our operations. For
example, in 2004 and partially in 2005, we experienced rail transportation shortages in Texas and
parts of the Southeast. In 2005, following Hurricanes Katrina and Rita, we experienced significant
barge transportation problems along the Mississippi River system.
Our earnings are affected by the application of accounting standards and our critical accounting
policies, which involve subjective judgments and estimates by our management. Our estimates and
assumptions could be wrong.
The accounting standards we use in preparing our financial statements are often complex and
require that we make significant estimates and assumptions in interpreting and applying those
standards. We make critical estimates and assumptions involving accounting matters like our
treatment of goodwill, our expenses and cash requirements for our pension plans, our estimated
income taxes, and how we account for our property, plant and equipment, and inventory. These
estimates and assumptions involve matters that are inherently uncertain and require our subjective
and complex
21
judgments. If we used different estimates and assumptions or used different ways to determine
these estimates, our financial results could differ.
While we believe our estimates and assumptions are correct, we could be wrong, and our
financial results could be different, either higher or lower, if our estimates and assumptions are
wrong. We urge you to read about our critical accounting policies in our Management’s Discussion
and Analysis of Financial Condition and Results of Operations in our 2005 Annual Report to
Shareholders.
The adoption of new accounting standards may affect our financial results.
The accounting standards we apply in preparing our financial statements are reviewed by
regulatory bodies and are changed from time to time. New or revised accounting standards could
change our financial results either positively or negatively. For example, beginning in 2006, we
are required under new accounting standards to expense the fair value of stock options we award our
management and key employees as part of their compensation. This will result in a reduction in our
earnings and will make comparisons between financial periods more difficult. We urge you to read
about our accounting changes in Note A of our 2005 financial statements.
We depend on the recruitment and retention of qualified personnel, and our failure to attract and
retain such personnel could affect our business.
Our success depends to a significant degree upon the continued services of our key personnel
and executive officers. Our prospects depend upon our ability to attract and retain qualified
personnel for our operations. Competition for personnel is intense, and we may not be successful
in attracting or retaining qualified personnel, which could negatively affect our business.
Our magnesia specialties business depends in part on the steel industry and the supply of
reasonably priced fuels.
Our magnesia specialties business sells some of its products to companies in the steel
industry. While we have reduced this risk over the last few years, this business is still
dependent, in part, on the strength of the highly-cyclical steel industry. The magnesia
specialties business also requires significant amounts of natural gas, coal, and petroleum coke and
financial results are negatively affected by high fuel prices or shortages.
Our structural composite products business is a start-up business that has not generated any
profits since its inception.
Our structural composite products business faces many challenges before it becomes break-even
or generates a profit. While it received its first significant orders in 2005, we cannot ensure
the future profitability of this business.
* * * * * * * * * * * * * *
Investors are also cautioned that it is not possible to predict or identify all such factors.
Consequently, the reader should not consider any such list to be a complete statement of all
potential risks or uncertainties. Other factors besides those listed may also adversely affect the
Company and
22
may be material to the Company. The forward-looking statements in this document are intended to be
subject to the safe harbor protection provided by Sections 27A and 21E. These forward-looking
statements are made as of the date hereof based on management’s current expectations, and the
Company does not undertake an obligation to update such statements, whether as a result of new
information, future events, or otherwise.
For a discussion identifying some important factors that could cause actual results to vary
materially from those anticipated in the forward-looking statements, see the Company’s Securities
and Exchange Commission filings, including, but not limited to, the discussion under the heading
“Risk Factors and Forward-Looking Statements” on pages 18-23 of this Form 10-K, the discussion of
“Competition” on pages 11 and 12 of this Annual Report on Form 10-K, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” on pages 36-71 of the 2005 Annual Report
and “Note A: Accounting Policies” and “Note N: Commitments and Contingencies” of the “Notes to
Financial Statements” on pages 17-21 and pages 32 and 33, respectively, of the Audited Consolidated
Financial Statements included in the 2005 Annual Report.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Aggregates
As of December 31, 2005, the Company processed or shipped aggregates from 310 quarries and
distribution yards in 28 states and in Canada and the Bahamas, of which 98 are located on land
owned by the Company free of major encumbrances, 62 are on land owned in part and leased in part,
139 are on leased land, and 11 are on facilities neither owned nor leased, where raw materials are
removed under an agreement. The Company’s aggregates reserves on the average exceed 50 years of
production, based on current levels of activity. However, certain locations may be subject to more
limited reserves and may not be able to expand. In addition, as of December 31, 2005, the Company
processed and shipped ready mixed concrete and/or asphalt products from 15 properties in 3 states,
of which 12 are located on land owned by the Company free of major encumbrances, 1 is on land owned
in part and leased in part, and 2 are on leased land.
Set forth in the tables below are the Company’s estimates of reserves of recoverable
aggregates of suitable quality for economic extraction, shown on a state-by-state basis, and the
Company’s total annual production for the last 3 years, along with the Company’s estimate of years
of production available, shown on a region-by-region basis. In determining the amount of reserves,
the Company’s policy is to not include calculations that exceed certain depths, so for deposits,
such as granite, that typically continue to depths well below the ground, there may be additional
deposits that are not included in the reserves calculations.
23
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of aggregate |
|
Percent of |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
reserves located at an |
|
aggregate reserves |
|
|
| |
|
Number of |
|
Tonnage of reserves for each general |
|
existing quarry, and |
|
on land that has |
|
Percent of reserves |
| |
|
Producing |
|
type of aggregate at 12/31/05 |
|
reserves not located at an |
|
not been zoned for |
|
owned and percent |
| State |
|
Quarries |
|
(add 000) |
|
existing quarry |
|
quarrying |
|
leased |
| |
|
2005 |
|
Hard Rock |
|
S & G |
|
At Quarry |
|
Not at Quarry |
|
|
|
|
|
Owned |
|
Leased |
Alabama |
|
|
8 |
|
|
|
50,479 |
|
|
|
12,080 |
|
|
|
100 |
% |
|
|
|
|
|
|
0 |
% |
|
|
42 |
% |
|
|
58 |
% |
Arkansas |
|
|
3 |
|
|
|
307,927 |
|
|
|
0 |
|
|
|
73 |
% |
|
|
27 |
% |
|
|
0 |
% |
|
|
25 |
% |
|
|
75 |
% |
California |
|
|
1 |
|
|
|
35,755 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
30 |
% |
|
|
70 |
% |
Florida |
|
|
2 |
|
|
|
132,062 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
100 |
% |
Georgia |
|
|
9 |
|
|
|
724,395 |
|
|
|
0 |
|
|
|
84 |
% |
|
|
16 |
% |
|
|
0 |
% |
|
|
62 |
% |
|
|
38 |
% |
Illinois |
|
|
3 |
|
|
|
1,293,814 |
|
|
|
0 |
|
|
|
72 |
% |
|
|
28 |
% |
|
|
0 |
% |
|
|
9 |
% |
|
|
91 |
% |
Indiana |
|
|
15 |
|
|
|
552,463 |
|
|
|
56,030 |
|
|
|
90 |
% |
|
|
10 |
% |
|
|
15 |
% |
|
|
43 |
% |
|
|
57 |
% |
Iowa |
|
|
27 |
|
|
|
724,867 |
|
|
|
45,982 |
|
|
|
99 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
13 |
% |
|
|
87 |
% |
Kansas |
|
|
25 |
|
|
|
211,683 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
35 |
% |
|
|
65 |
% |
Kentucky |
|
|
3 |
|
|
|
626,403 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
15 |
% |
|
|
85 |
% |
Louisiana |
|
|
1 |
|
|
|
0 |
|
|
|
2,500 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
100 |
% |
Maryland |
|
|
2 |
|
|
|
100,575 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
100 |
% |
|
|
0 |
% |
Minnesota |
|
|
2 |
|
|
|
367,532 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
84 |
% |
|
|
16 |
% |
Mississippi |
|
|
2 |
|
|
|
0 |
|
|
|
32,139 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
100 |
% |
|
|
0 |
% |
Missouri |
|
|
10 |
|
|
|
517,313 |
|
|
|
0 |
|
|
|
78 |
% |
|
|
12 |
% |
|
|
0 |
% |
|
|
40 |
% |
|
|
60 |
% |
Nebraska |
|
|
3 |
|
|
|
95,070 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
24 |
% |
|
|
76 |
% |
Nevada |
|
|
3 |
|
|
|
17,307 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
100 |
% |
North Carolina |
|
|
42 |
|
|
|
2,445,628 |
|
|
|
2,000 |
|
|
|
86 |
% |
|
|
14 |
% |
|
|
3 |
% |
|
|
68 |
% |
|
|
32 |
% |
Ohio |
|
|
19 |
|
|
|
185,367 |
|
|
|
217,666 |
|
|
|
72 |
% |
|
|
28 |
% |
|
|
3 |
% |
|
|
97 |
% |
|
|
3 |
% |
Oklahoma |
|
|
10 |
|
|
|
540,841 |
|
|
|
5,685 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
45 |
% |
|
|
55 |
% |
South Carolina |
|
|
5 |
|
|
|
332,799 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
19 |
% |
|
|
76 |
% |
|
|
24 |
% |
Tennessee |
|
|
1 |
|
|
|
0 |
|
|
|
14,760 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
100 |
% |
Texas |
|
|
18 |
|
|
|
1,566,461 |
|
|
|
194,286 |
|
|
|
63 |
% |
|
|
37 |
% |
|
|
33 |
% |
|
|
60 |
% |
|
|
40 |
% |
Virginia |
|
|
4 |
|
|
|
365,594 |
|
|
|
0 |
|
|
|
84 |
% |
|
|
16 |
% |
|
|
1 |
% |
|
|
69 |
% |
|
|
31 |
% |
Washington |
|
|
4 |
|
|
|
34,232 |
|
|
|
0 |
|
|
|
85 |
% |
|
|
15 |
% |
|
|
0 |
% |
|
|
7 |
% |
|
|
93 |
% |
West Virginia |
|
|
2 |
|
|
|
101,139 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
20 |
% |
|
|
80 |
% |
Wisconsin |
|
|
1 |
|
|
|
4,296 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
100 |
% |
Wyoming |
|
|
1 |
|
|
|
101,317 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
100 |
% |
U.S. Total |
|
|
226 |
|
|
|
11,435,321 |
|
|
|
583,128 |
|
|
|
|
|
|
|
|
|
|
|
9 |
% |
|
|
48 |
% |
|
|
52 |
% |
Non-U.S. |
|
|
2 |
|
|
|
943,947 |
|
|
|
0 |
|
|
|
100 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
97 |
% |
|
|
3 |
% |
Grand Total |
|
|
228 |
|
|
|
12,379,266 |
|
|
|
583,128 |
|
|
|
80 |
% |
|
|
20 |
% |
|
|
8 |
% |
|
|
52 |
% |
|
|
48 |
% |
24
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total Annual Production (in tons) |
|
|
| |
|
For year ended December 31 |
|
|
| |
|
|
|
|
|
(add 000) |
|
|
|
Number of years of production |
| Region |
|
2005 |
|
2004 |
|
2003 |
|
available at December 31, 2005 |
| |
Mideast |
|
|
70,367 |
|
|
|
67,986 |
|
|
|
64,122 |
|
|
|
75.6 |
|
Northwest |
|
|
35,927 |
|
|
|
29,824 |
|
|
|
30,434 |
|
|
|
60.0 |
|
Southeast |
|
|
51,037 |
|
|
|
50,242 |
|
|
|
44,569 |
|
|
|
56.3 |
|
Southwest |
|
|
42,276 |
|
|
|
38,811 |
|
|
|
39,305 |
|
|
|
61.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
199,607 |
|
|
|
186,863 |
|
|
|
178,430 |
|
|
|
64.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty Products
The Magnesia Specialties business currently operates major manufacturing facilities in
Manistee, Michigan, and Woodville, Ohio, and a smaller processing plant in Bridgeport, Connecticut.
All of these facilities are owned.
The Structural Composite Products business leases a 185,000 square foot facility in Sparta,
North Carolina, which serves as the assembly and manufacturing hub for the Structural Composite
Products business of Martin Marietta Composites.
Other Properties
The Company’s principal corporate office, which it owns, is located in Raleigh, North
Carolina. The Company owns and leases various administrative offices for its two reportable
business segments.
The Company’s principal properties, which are of varying ages and are of different
construction types, are believed to be generally in good condition, are generally well maintained,
and are generally suitable and adequate for the purposes for which they are used. During 2005, the
principal properties were believed to be utilized at average productive capacities of approximately
80% and were capable of supporting a higher level of market demand.
ITEM 3. LEGAL PROCEEDINGS
From time to time claims of various types are asserted against the Company arising out of its
operations in the normal course of business, including claims relating to land use and permits,
safety, health, and environmental matters (such as noise abatement, vibrations, air emissions, and
water discharges). Such matters are subject to many uncertainties, and it is not possible to
determine the probable outcome of, or the amount of liability, if any, from, these matters. In the
opinion of management of the Company (which opinion is based in part upon consideration of the
opinion of counsel), it is unlikely that the outcome of these claims will have a material adverse
effect on the Company’s operations or its financial condition. However, there can be no assurance
that an adverse outcome in any of such litigation would not have a material adverse effect on the
Company or its operating segments.
25
The Company was not required to pay any penalties in 2005 for failure to disclose certain
“reportable transactions” under Section 6707A of the Internal Revenue Code.
See also “Note N: Commitments and Contingencies” of the “Notes to Financial Statements” on
pages 32 and 33 of the 2005 Annual Report and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Environmental Regulation and Litigation” on pages 54 and 55
of the 2005 Annual Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 2005.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information regarding the executive officers of Martin
Marietta Materials, Inc. as of February 21, 2006:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Year Assumed |
|
Other Positions and Other Business |
| Name |
|
Age |
|
Present Position |
|
Present Position |
|
Experience Within the Last Five Years |
| |
Stephen P. Zelnak, Jr. |
|
61 |
|
Chairman of the |
|
1997 |
|
|
|
|
|
|
Board of Directors; |
|
|
|
|
|
|
|
|
President and Chief |
|
1993 |
|
|
|
|
|
|
Executive Officer; |
|
|
|
|
|
|
|
|
President of Aggregates |
|
1993 |
|
|
|
|
|
|
Segment; |
|
|
|
|
|
|
|
|
Chairman of Magnesia |
|
2005 |
|
|
|
|
|
|
Specialties Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip J. Sipling |
|
58 |
|
Executive Vice President; |
|
1997 |
|
Chairman of Magnesia Specialties |
|
|
|
|
Executive Vice President of |
|
1993 |
|
Business (1997-2005) |
|
|
|
|
Aggregates Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel G. Shephard |
|
47 |
|
Executive Vice President; |
|
2005 |
|
Vice President-Business Development |
|
|
|
|
Chief Executive Officer |
|
2005 |
|
and Capital Planning (2002-2005); |
|
|
|
|
of Magnesia Specialties |
|
|
|
Senior Vice President (2004-2005); |
|
|
|
|
Business |
|
|
|
Regional Vice President and General |
|
|
|
|
|
|
|
|
Manager-MidAmerica Region (2003-2005); |
|
|
|
|
|
|
|
|
President of Magnesia Specialties Business |
|
|
|
|
|
|
|
|
(1999-2005); |
|
|
|
|
|
|
|
|
Vice President-Marketing (2002-2004); |
|
|
|
|
|
|
|
|
Vice President and Treasurer (2000-2002) |
|
|
|
|
|
|
|
|
|
Roselyn R. Bar |
|
47 |
|
Senior Vice President; |
|
2005 |
|
Vice President (2001-2005); |
|
|
|
|
General Counsel; |
|
2001 |
|
Deputy General Counsel (2001); |
|
|
|
|
Corporate Secretary |
|
1997 |
|
Associate General Counsel (1998-2001) |
|
|
|
|
|
|
|
|
|
Janice K. Henry |
|
54 |
|
Senior Vice President; |
|
1998 |
|
Chief Financial Officer (1994-2005) |
|
|
|
|
Treasurer |
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
Anne H. Lloyd |
|
44 |
|
Senior Vice President and |
|
2005 |
|
Vice President and Controller (1998-2005) |
|
|
|
|
Chief Financial Officer; |
|
|
|
|
|
|
|
|
Chief Accounting Officer |
|
1999 |
|
|
26
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Year Assumed |
|
Other Positions and Other Business |
| Name |
|
Age |
|
Present Position |
|
Present Position |
|
Experience Within the Last Five Years |
| |
Donald M. Moe |
|
60 |
|
Senior Vice President; |
|
2001 |
|
Vice President (1999-2001) |
|
|
|
|
Senior Vice President of |
|
1999 |
|
|
|
|
|
|
Aggregates Segment; |
|
|
|
|
|
|
|
|
President-Mideast Division |
|
1996 |
|
|
|
|
|
|
of Aggregates Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan T. Stewart |
|
57 |
|
Senior Vice President, |
|
2001 |
|
Vice President, Human Resources |
|
|
|
|
Human Resources |
|
|
|
(1993-2001) |
|
|
|
|
|
|
|
|
|
David S. Watterson |
|
44 |
|
Vice President, Marketing; |
|
2006 |
|
Vice President, Information Services |
|
|
|
|
Vice President and Chief |
|
2003 |
|
(1999-2003) |
|
|
|
|
Information Officer |
|
|
|
|
PART II
|
|
|
| ITEM 5. |
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES |
Market Information, Holders, and Dividends
The Company’s Common Stock, $.01 par value, is traded on the New York Stock Exchange (Symbol:
MLM). Information concerning stock prices and dividends paid is included under the caption
“Quarterly Performance (Unaudited)” on page 72 of the 2005 Annual Report, and that information is
incorporated herein by reference. There were approximately 1,024 holders of record of the
Company’s Common Stock as of February 21, 2006.
Recent Sales of Unregistered Securities
None.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required in response to this subsection of Item 5 is included in Part III,
under the heading “Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters,” on page 31 of this Form 10-K.
27
Issuer Purchases of Equity Securities
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Total Number of |
|
Maximum Number of |
| |
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
Shares that May Yet |
| |
|
Total Number of |
|
|
|
|
|
Part of Publicly |
|
be Purchased Under |
| |
|
Shares |
|
Average Price |
|
Announced Plans or |
|
the Plans or |
| Period |
|
Purchased |
|
Paid per Share |
|
Programs(1) |
|
Programs |
| |
October 1, 2005 — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2005 |
|
|
0 |
|
|
$ |
— |
|
|
|
0 |
|
|
|
2,125,198 |
|
November 1, 2005 — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2005 |
|
|
480,000 |
|
|
$ |
74.33 |
|
|
|
480,000 |
|
|
|
1,645,198 |
|
December 1, 2005 — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
540,000 |
|
|
$ |
76.00 |
|
|
|
540,000 |
|
|
|
1,105,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,020,000 |
|
|
$ |
75.21 |
|
|
|
1,020,000 |
|
|
|
1,105,198 |
|
|
|
|
| (1) |
|
The Company’s initial stock repurchase program, which authorized the repurchase of 2.5
million shares of common stock, was announced in a press release dated May 6, 1994, and has
been updated as appropriate. The program does not have an expiration date. The Company
announced in a press release dated February 22, 2006 that its Board of Directors had
authorized the repurchase of an additional 5 million shares of common stock. |
ITEM 6. SELECTED FINANCIAL DATA
The information required in response to this Item 6 is included under the caption “Five Year
Summary” on page 73 of the 2005 Annual Report, and that information is incorporated herein by
reference.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required in response to this Item 7 is included under the caption
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages
36-71 of the 2005 Annual Report, and that information is incorporated herein by reference, except
that the information contained under the caption “Management’s Discussion and Analysis of Financial
Condition and Results of Operations-Outlook 2006” on page 57 of the 2005 Annual Report is not
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required in response to this Item 7A is included under the caption
“Management’s Discussion and Analysis of Financial Condition and Results of Operations-
Quantitative and Qualitative Disclosures About Market Risk” on pages 69 and 70 of the 2005 Annual
Report, and that information is incorporated herein by reference.
28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required in response to this Item 8 is included under the caption
“Consolidated Statements of Earnings,” “Consolidated Balance Sheets,” “Consolidated Statements of
Cash Flows,” “Consolidated Statements of Shareholders’ Equity,” “Notes to Financial Statements,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and
“Quarterly Performance (Unaudited)” on pages 13-72 of the 2005 Annual Report, and that information
is incorporated herein by reference.
|
|
|
| ITEM 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE |
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of December 31, 2005, an evaluation was performed under the supervision and with the
participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures and the Company’s internal control over financial reporting.
Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the
Company’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 December 31,
2005 and further concluded that the Company’s internal control over financial reporting was
effective in providing reasonable assurance regarding the reliability of financial reporting and
the preparation of the Company’s financial statements for external purposes in accordance with
generally accepted accounting principles as of December 31, 2005.
The Company’s management, including the CEO and CFO, does not expect that the Company’s
control system will prevent all error and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of
two or more people, or by management override of the control. The design of any system of controls
also is based in part upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
The Company’s management has issued its annual report on the Company’s internal control over
financial reporting, which included management’s assessment that the Company’s internal control
29
over financial reporting was effective at December 31, 2005. The Company’s independent registered
public accounting firm has issued an attestation report agreeing with management’s assessment that
the Company’s internal control over financial reporting was effective at December 31, 2005.
Management’s report on the Company’s internal controls and the related attestation report of the
Company’s independent registered public accounting firm appear on pages 10 and 11 of the 2005
Annual Report, and those reports are hereby incorporated by reference in this Form 10-K. See also
“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Internal
Control and Accounting and Reporting Risk” on pages 56 and 57 of the 2005 Annual Report.
Included among the Exhibits to this Annual Report on Form 10-K are forms of “Certifications”
of the Company’s CEO and CFO as required in accordance with Section 302 of the Sarbanes-Oxley Act
of 2002 (the “Section 302 Certification”). The Section 302 Certifications refer to this evaluation
of the Company’s disclosure policies and procedures and internal control over financial reporting.
The information in this section should be read in conjunction with the Section 302 Certifications
for a more complete understanding of the topics presented.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors of the Company, the Audit Committee of the Board of
Directors, and the Audit Committee financial expert serving on the Audit Committee, all as required
in response to this Item 10, is included under the captions “Corporate Governance Matters” and
“Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy
statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within
120 days after the close of the Company’s fiscal year ended December 31, 2005 (the “2006 Proxy
Statement”), and that information is hereby incorporated by reference in this Form 10-K.
Information concerning executive officers of the Company required in response to this Item 10 is
included in Part I, under the heading “Executive Officers
of the Registrant,” on pages 26 and 27 of
this Form 10-K. The information concerning the Company’s code of ethics required in response to
this Item 10 is included in Part I, under the heading
“Available Information,” on page 17 of this
Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item 11 is included under the captions “Executive
Compensation,” “Corporate Governance Matters,” “Report of the Management Development and
Compensation Committee on Executive Compensation,” “Comparison of Cumulative Total Return, Martin
Marietta Materials, Inc., S&P 500, and S&P Materials Indices,” and “Compensation Committee
Interlocks and Insider Participation in Compensation Decisions” in the Company’s 2006 Proxy
Statement, and that information, except for the information required by Items 402(k) and (l) of
Regulation S-K, is hereby incorporated by reference in this Form 10-K.
30
|
|
|
| ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS |
The information required in response to this Item 12 is included under the captions “General
Information,” “Security Ownership of Certain Beneficial Owners and Management,” and “Securities
Authorized for Issuance Under Equity Compensation Plans” in the Company’s 2006 Proxy Statement, and
that information is hereby incorporated by reference in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this Item 13 is included under the captions
“Compensation Committee Interlocks and Insider Participation in Compensation Decisions” and
“Independent Directors” in the Company’s 2006 Proxy Statement, and that information is hereby
incorporated by reference in this Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required in response to this Item 14 is included under the caption
“Independent Auditors” in the Company’s 2006 Proxy Statement, and that information is hereby
incorporated by reference in this Form 10-K.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) List of financial statements filed as part of this Form 10-K.
The following consolidated financial statements of Martin Marietta Materials, Inc. and
consolidated subsidiaries, included in the 2005 Annual Report, are incorporated by reference
into Item 8 on page 30 of this Form 10-K. Page numbers refer to the 2005 Annual Report:
| |
|
|
|
|
| |
|
Page |
|
| |
Consolidated Statements of Earnings—
for years ended December 31, 2005, 2004 and 2003 |
|
|
13 |
|
|
|
|
|
|
Consolidated Balance Sheets—
at December 31, 2005 and 2004 |
|
|
14 |
|
|
|
|
|
|
Consolidated Statements of Cash Flows—
for years ended December 31, 2005, 2004 and 2003 |
|
|
15 |
|
|
|
|
|
|
Consolidated Statements of Shareholders’ Equity—
Balance at December 31, 2005, 2004 and 2003 |
|
|
16 |
|
|
|
|
|
|
Notes to Financial Statements— |
|
|
17-35 |
|
31
| (2) |
|
List of financial statement schedules filed as part of this Form 10-K |
The following financial statement schedule of Martin Marietta Materials, Inc. and
consolidated subsidiaries is included in Item 15(d). The page numbers refer to this Form
10-K.
| |
Schedule II — Valuation and Qualifying Accounts |
35-36 |
All other schedules have been omitted because they are not applicable, not required, or the
information has been otherwise supplied in the financial statements or notes to the
financial statements.
The report of the Company’s independent registered public accounting firm with respect to
the above-referenced financial statements appears on page 12 of the 2005 Annual Report, and
that report is hereby incorporated by reference in this Form 10-K. The report on the
financial statement schedule and the consent of the Company’s independent registered public
accounting firm are attached as Exhibit 23.01 to this Form 10-K.
The
list of Exhibits on the accompanying Index of Exhibits on pages 32-35 of this Form 10-K
is hereby incorporated by reference. Each management contract or compensatory plan or
arrangement required to be filed as an exhibit is indicated by asterisks.
| |
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
|
3.01
|
|
—
|
|
Restated Articles of Incorporation of the
Company, as amended (incorporated by reference to
Exhibits 3.1 and 3.2 to the Martin Marietta
Materials, Inc. Current Report on Form 8-K, filed
on October 25, 1996) (Commission File No. 1-12744) |
|
|
|
|
|
3.02
|
|
—
|
|
Restated Bylaws of the Company, as amended (incorporated by reference
to Exhibit 3.02 to the Martin Marietta Materials, Inc. Annual Report on Form
10-K for the fiscal year ended December 31, 2003) (Commission File No. 1-12744) |
|
|
|
|
|
4.01
|
|
—
|
|
Specimen Common Stock Certificate (incorporated
by reference to Exhibit 4.01 to the Martin
Marietta Materials, Inc. Annual Report on Form
10-K for the fiscal year ended December 31, 2003)
(Commission File No. 1-12744) |
|
|
|
|
|
4.02
|
|
—
|
|
Articles 2 and 8 of the Company’s Restated
Articles of Incorporation, as amended
(incorporated by reference to Exhibit 4.02 to the
Martin Marietta Materials, Inc. Annual Report on
Form 10-K for the fiscal year ended December 31,
1996) (Commission File No. 1-12744) |
|
|
|
|
|
4.03
|
|
—
|
|
Article I of the Company’s Restated Bylaws, as
amended (incorporated by reference to Exhibit 4.03
to the Martin Marietta Materials, Inc. Annual
Report on Form 10-K for the fiscal year ended
December 31, 1996) (Commission File No. 1-12744) |
|
|
|
|
|
4.04
|
|
—
|
|
Indenture dated as of December 1, 1995 between
Martin Marietta Materials, Inc. and First Union
National Bank of North Carolina (incorporated by
reference to Exhibit 4(a) to the Martin Marietta
Materials, Inc. registration statement on Form S-3
(SEC Registration No. 33-99082)) |
32
| |
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
|
4.05
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 7% Debenture due 2025 (incorporated by reference to Exhibit 4(a)(i) to the Martin Marietta
Materials, Inc. registration statement on Form S-3 (SEC Registration No. 33-99082)) |
|
|
|
|
|
4.06
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 6.9% Notes due 2007 (incorporated by reference to Exhibit 4(a)(i) to the Martin Marietta
Materials, Inc. registration statement on Form S-3 (SEC Registration No. 33-99082)) |
|
|
|
|
|
4.08
|
|
—
|
|
Indenture dated as of December 7, 1998 between Martin Marietta Materials, Inc. and First Union National Bank (incorporated by
reference to Exhibit 4.08 to the Martin Marietta Materials, Inc. registration statement on Form S-4 (SEC
Registration No. 333-71793)) |
|
|
|
|
|
4.09
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 5.875% Note due December 1, 2008 (incorporated by reference to Exhibit 4.09 to the Martin
Marietta Materials, Inc. registration statement on Form S-4 (SEC Registration No. 333-71793)) |
|
|
|
|
|
4.10
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 6.875% Note due April 1, 2011 (incorporated by reference to Exhibit 4.12 to the Martin
Marietta Materials, Inc. registration statement on Form S-4 (SEC Registration No. 333-61454)) |
|
|
|
|
|
10.01
|
|
—
|
|
Rights Agreement, dated as of October 21, 1996, between the Company and
First Union National Bank of North Carolina, as Rights Agent, which includes the
Form of Articles of Amendment With Respect to the Junior Participating
Class A Preferred Stock of Martin Marietta
Materials, Inc., as Exhibit A, the Form of Rights
Certificate, as Exhibit B, and the Summary of
Rights to Purchase Preferred Stock, as Exhibit C
(incorporated by reference to Exhibit 1 to the
Martin Marietta Materials, Inc. registration
statement on Form 8-A, filed with the Securities
and Exchange Commission on October 21, 1996) |
|
|
|
|
|
10.02
|
|
—
|
|
Amendment No. 1 to the Rights Agreement, dated as of May 3, 2004, between the Company and Wachovia Bank, N.A. (as successor to First
Union National Bank of North Carolina) (incorporated by references to Exhibit 10.01 to the Martin Marietta
Materials, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (Commission File No. 1012744)) |
|
|
|
|
|
10.03
|
|
—
|
|
$250,000,000 Five-Year Credit Agreement dated as of June 30, 2005, among Martin Marietta Materials, Inc., the banks parties thereto,
and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.01 to the Martin
Marietta Materials, Inc. Form 8-K filed on June 30, 2005) (Commission File No. 1-12744) |
|
|
|
|
|
10.04
|
|
—
|
|
Form of Martin Marietta Materials, Inc. Second Amended and Restated Employment Protection Agreement (incorporated by
reference to Exhibit 10.05 to the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year
ended December 31, 2003) (Commission File No. 1-12744)** |
|
|
|
|
|
10.05
|
|
—
|
|
Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors (incorporated by reference to Exhibit 10.10 to the Martin Marietta
Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 1996) (Commission File No.
1-12744)** |
|
|
|
|
|
10.06
|
|
—
|
|
Amendment No. 1 to the Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors
(incorporated by reference to Exhibit 10.01 to the Martin Marietta Materials, Inc. Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004) (Commission File No. 1-12744)** |
|
|
|
|
|
10.07
|
|
—
|
|
Martin Marietta Materials, Inc. Amended and Restated Executive Incentive Plan (incorporated by reference to Exhibit 10.01
to the Martin Marietta Materials, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2003)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.08
|
|
—
|
|
Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to the Martin Marietta
Materials, Inc. Form 10-Q for the quarter ended June 30, 1995) (Commission File No. 1-12744)** |
33
| |
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
|
10.09
|
|
—
|
|
Amendment No. 1 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended September 30, 1997) (Commission File No.
1-12744)** |
|
|
|
|
|
10.10
|
|
—
|
|
Amendment No. 2 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.13 to
the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 1999)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.11
|
|
—
|
|
Amendment No. 3 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended June 30, 2000) (Commission File No.
1-12744)** |
|
|
|
|
|
10.12
|
|
—
|
|
Amendment No. 4 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.14 to
the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.13
|
|
—
|
|
Amendment No. 5 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.03 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended June 30, 2001) (Commission File No.
1-12744)** |
|
|
|
|
|
10.14
|
|
—
|
|
Amendment No. 6 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended September 30, 2003) (Commission File No.
1-12744)** |
|
|
|
|
|
*10.15
|
|
—
|
|
Amendment No. 7 to the Martin Marietta Materials, Inc. Incentive Stock Plan** |
|
|
|
|
|
10.16
|
|
—
|
|
Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan (incorporated by reference to Exhibit 10.15 to
the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.17
|
|
—
|
|
Amendment No. 1 to the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan (incorporated by
reference to Exhibit 10.15 to the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year
ended December 31, 2001) (Commission File No. 1-12744)** |
|
|
|
|
|
10.18
|
|
—
|
|
Martin Marietta Materials, Inc. Amended Omnibus Securities Award Plan (incorporated by reference to Exhibit 10.16 to the
Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.19
|
|
—
|
|
Martin Marietta Materials, Inc. Supplemental Excess Retirement Plan (incorporated by reference to Exhibit 10.16 to the
Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ending December 31, 1999)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.20
|
|
—
|
|
Form of Option Award Agreement under the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan
(incorporated by reference to Exhibit 10.01 to the Martin Marietta Materials, Inc. Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005) (Commission File No. 1-12744)** |
|
|
|
|
|
10.21
|
|
—
|
|
Form of Restricted Stock Unit Agreement under the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award
Plan (incorporated by reference to Exhibit 10.02 to the Martin Marietta Materials, Inc. Quarterly Report on Form
10-Q for the quarter ended June 30, 2005) (Commission File No. 1-12744)** |
|
|
|
|
|
*12.01
|
|
—
|
|
Computation of ratio of earnings to fixed charges for the year ended December 31, 2005 |
|
|
|
|
|
*13.01
|
|
—
|
|
Martin Marietta Materials, Inc. 2005 Annual Report to Shareholders, portions of which are incorporated by reference in
this Form 10-K. Those portions of the 2005 Annual Report to Shareholders that are not incorporated by reference
shall not be deemed to be “filed” as part of this report. |
|
|
|
|
|
*21.01
|
|
—
|
|
List of subsidiaries of Martin Marietta Materials, Inc. |
|
|
|
|
|
*23.01
|
|
—
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm for Martin Marietta Materials, Inc. and
consolidated subsidiaries |
|
|
|
|
|
*24.01
|
|
—
|
|
Powers of Attorney (included in this Form 10-K at page 37) |
34
| |
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
|
*31.01
|
|
—
|
|
Certification dated February 21, 2006 of Chief
Executive Officer pursuant to Securities and
Exchange Act of 1934, rule 13a-14, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
|
|
*31.02
|
|
—
|
|
Certification dated February 21, 2006 of Chief
Financial Officer pursuant to Securities and
Exchange Act of 1934, rule 13a-14, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
|
|
*32.01
|
|
—
|
|
Certification dated February 21, 2006 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
*32.02
|
|
—
|
|
Certification dated February 21, 2006 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
Other material incorporated by reference:
Martin Marietta Materials, Inc.’s 2006 Proxy Statement filed pursuant to Regulation 14A,
portions of which are incorporated by reference in this Form 10-K. Those portions of the
2006 Proxy Statement which are not incorporated by reference shall not be deemed to be
“filed” as part of this report.
|
|
|
| * |
|
Filed herewith |
| |
| ** |
|
Management contract or compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 14(c) of Form 10-K |
| (c) |
|
Financial Statement Schedule |
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Col A |
|
Col B |
|
|
Col C |
|
|
Col D |
|
|
Col E |
|
| |
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
(1) |
|
|
(2) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Charged |
|
|
Charged to |
|
|
|
|
|
|
|
|
| |
|
Balance at |
|
|
to costs |
|
|
other |
|
|
|
|
|
|
Balance at |
|
| |
|
beginning |
|
|
and |
|
|
accounts |
|
|
Deductions |
|
|
end of |
|
| Description |
|
of period |
|
|
expenses |
|
|
describe |
|
|
describe |
|
|
period |
|
| |
|
(Amounts in Thousands) |
|
Year ended December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Allowance for doubtful accounts |
|
$ |
7,242 |
|
|
$ |
58 |
|
|
|
|
|
|
$ |
960 |
(a) |
|
$ |
6,340 |
|
Inventory valuation allowance |
|
|
5,463 |
|
|
|
6,638 |
|
|
|
|
|
|
|
|
|
|
|
12,101 |
|
| |
Accumulated amortization of
intangible |
|
|
29,605 |
|
|
|
3,964 |
|
|
|
|
|
|
|
1,328 |
(b) |
|
|
29,399 |
|
assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,842 |
(c) |
|
|
|
|
| |
Year ended December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Allowance for doubtful
accounts and uncollectible
notes receivable |
|
$ |
5,196 |
|
|
$ |
2,103 |
|
|
|
|
|
|
$ |
57 |
(a) |
|
$ |
7,242 |
|
| |
Inventory valuation allowance |
|
|
5,990 |
|
|
|
945 |
|
|
|
|
|
|
|
1,393 |
(a) |
|
|
5,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
(b) |
|
|
|
|
| |
Accumulated amortization of
intangible |
|
|
28,356 |
|
|
|
4,677 |
|
|
|
|
|
|
|
2,119 |
(b) |
|
|
29,605 |
|
assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,309 |
(c) |
|
|
|
|
35
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Col A |
|
Col B |
|
|
Col C |
|
|
Col D |
|
|
Col E |
|
| |
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
(1) |
|
|
(2) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Charged |
|
|
Charged to |
|
|
|
|
|
|
|
|
| |
|
Balance at |
|
|
to costs |
|
|
other |
|
|
|
|
|
|
Balance at |
|
| |
|
beginning |
|
|
and |
|
|
accounts |
|
|
Deductions |
|
|
end of |
|
| Description |
|
of period |
|
|
expenses |
|
|
describe |
|
|
describe |
|
|
period |
|
| |
|
(Amounts in Thousands) |
|
Year ended December 31, 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Allowance for doubtful accounts |
|
$ |
8,282 |
|
|
$ |
488 |
|
|
|
|
|
|
$ |
3,574 |
(d) |
|
$ |
5,196 |
|
Inventory valuation allowance |
|
|
5,659 |
|
|
|
675 |
|
|
|
|
|
|
|
87 |
(a) |
|
|
5,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191 |
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
(e) |
|
|
|
|
| |
Accumulated amortization of
intangible |
|
|
27,505 |
|
|
|
5,840 |
|
|
|
|
|
|
|
3,556 |
(b) |
|
|
28,356 |
|
assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,433 |
(c) |
|
|
|
|
|
|
|
| (a) |
|
To adjust allowance for change in estimates. |
| |
| (b) |
|
Divestitures. |
| |
| (c) |
|
Write off of fully amortized intangible assets. |
| |
| (d) |
|
Write off of uncollectible accounts against allowance. |
| |
| (e) |
|
Write off of fully reserved inventory. |
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Roselyn R. Bar |
|
|
|
|
|
|
Roselyn R. Bar
|
|
|
|
|
|
|
Senior Vice President, General Counsel |
|
|
|
|
|
|
and Corporate Secretary |
|
|
Dated: February 21, 2006 |
|
|
|
|
|
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below appoints
Roselyn R. Bar and M. Guy Brooks, III, jointly and severally, as his or her true and lawful
attorney-in-fact, each with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any and all amendments to this
Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact, jointly and severally, full power and authority to do and perform each in
connection therewith, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact, jointly and severally, or
their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
37
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the capacities and on the dates
indicated:
| |
|
|
|
|
|
|
| Signature |
|
Title |
|
Date |
| |
/s/
|
|
Stephen P. Zelnak, Jr.
|
|
Chairman of the Board,
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Stephen P. Zelnak, Jr.
|
|
President and Chief Executive
Officer |
|
|
|
|
|
|
|
|
|
/s/
|
|
Anne H. Lloyd
|
|
Senior Vice President,
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Anne H. Lloyd
|
|
Chief Financial Officer, and |
|
|
|
|
|
|
Chief Accounting Officer |
|
|
|
|
|
|
|
|
|
/s/
|
|
Marcus C. Bennett
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Marcus C. Bennett |
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Sue W. Cole
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Sue W. Cole |
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
David G. Maffucci
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
David G. Maffucci |
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
William E. McDonald
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
William E. McDonald |
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Frank H. Menaker, Jr.
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Frank H. Menaker, Jr. |
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Laree E. Perez
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Laree E. Perez |
|
|
|
|
38
| |
|
|
|
|
|
|
| Signature |
|
Title |
|
Date |
| |
/s/
|
|
Dennis L. Rediker
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Dennis L. Rediker |
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
William B. Sansom
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
William B. Sansom |
|
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Richard A. Vinroot
|
|
Director
|
|
February 21, 2006 |
| |
|
|
|
|
|
|
Richard A. Vinroot |
|
|
|
|
39
EXHIBITS
| |
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
|
| |
3.01
|
|
—
|
|
Restated Articles of Incorporation of the
Company, as amended (incorporated by reference to
Exhibits 3.1 and 3.2 to the Martin Marietta
Materials, Inc. Current Report on Form 8-K, filed
on October 25, 1996) (Commission File No. 1-12744) |
|
|
|
|
|
3.02
|
|
—
|
|
Restated Bylaws of the Company, as amended (incorporated by reference
to Exhibit 3.02 to the Martin Marietta Materials, Inc. Annual Report on Form
10-K for the fiscal year ended December 31, 2003) (Commission File No.
1-12744) |
|
|
|
|
|
4.01
|
|
—
|
|
Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.01 to the Martin Marietta Materials, Inc. Annual Report on
Form 10-K for the fiscal year ended December 31,
2003) (Commission File No. 1-12744) |
|
|
|
|
|
4.02
|
|
—
|
|
Articles 2 and 8 of the Company’s Restated
Articles of Incorporation, as amended
(incorporated by reference to Exhibit 4.02 to the
Martin Marietta Materials, Inc. Annual Report on
Form 10-K for the fiscal year ended December 31,
1996) (Commission File No. 1-12744) |
|
|
|
|
|
4.03
|
|
—
|
|
Article I of the Company’s Restated Bylaws, as
amended (incorporated by reference to Exhibit 4.03
to the Martin Marietta Materials, Inc. Annual
Report on Form 10-K for the fiscal year ended
December 31, 1996) (Commission File No. 1-12744) |
|
|
|
|
|
4.04
|
|
—
|
|
Indenture dated as of December 1, 1995 between
Martin Marietta Materials, Inc. and First Union
National Bank of North Carolina (incorporated by
reference to Exhibit 4(a) to the Martin Marietta
Materials, Inc. registration statement on Form S-3
(SEC Registration No. 33-99082)) |
|
|
|
|
|
4.05
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 7% Debenture due 2025 (incorporated by reference to Exhibit 4(a)(i) to the Martin Marietta
Materials, Inc. registration statement on Form S-3 (SEC Registration No. 33-99082)) |
|
|
|
|
|
4.06
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 6.9% Notes due 2007 (incorporated by reference to Exhibit 4(a)(i) to the Martin Marietta
Materials, Inc. registration statement on Form S-3 (SEC Registration No. 33-99082)) |
|
|
|
|
|
4.08
|
|
—
|
|
Indenture dated as of December 7, 1998 between Martin Marietta Materials, Inc. and First Union National Bank (incorporated by
reference to Exhibit 4.08 to the Martin Marietta Materials, Inc. registration statement on Form S-4 (SEC
Registration No. 333-71793)) |
|
|
|
|
|
4.09
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 5.875% Note due December 1, 2008 (incorporated by reference to Exhibit 4.09 to the Martin
Marietta Materials, Inc. registration statement on Form S-4 (SEC Registration No. 333-71793)) |
|
|
|
|
|
4.10
|
|
—
|
|
Form of Martin Marietta Materials, Inc. 6.875% Note due April 1, 2011 (incorporated by reference to Exhibit 4.12 to the Martin
Marietta Materials, Inc. registration statement on Form S-4 (SEC Registration No. 333-61454)) |
|
|
|
|
|
10.01
|
|
—
|
|
Rights Agreement, dated as of October 21, 1996, between the Company and
First Union National Bank of North Carolina, as Rights Agent, which includes the
Form of Articles of Amendment With Respect to the Junior Participating
Class A Preferred Stock of Martin Marietta
Materials, Inc., as Exhibit A, the Form of Rights
Certificate, as Exhibit B, and the Summary of
Rights to Purchase Preferred Stock, as Exhibit C
(incorporated by reference to Exhibit 1 to the
Martin Marietta Materials, Inc. registration
statement on Form 8-A, filed with the Securities
and Exchange Commission on October 21, 1996) |
|
|
|
|
|
10.02
|
|
—
|
|
Amendment No. 1 to the Rights Agreement, dated as of May 3, 2004, between the Company and Wachovia Bank, N.A. (as successor to First
Union National Bank of North Carolina) |
40
| |
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
|
| |
|
|
|
|
(incorporated by references to Exhibit 10.01 to the Martin Marietta
Materials, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (Commission File No. 1012744)) |
|
|
|
|
|
10.03
|
|
—
|
|
$250,000,000 Five-Year Credit Agreement dated as of June 30, 2005, among Martin Marietta Materials, Inc., the banks parties thereto,
and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.01 to the Martin
Marietta Materials, Inc. Form 8-K filed on June 30, 2005) (Commission File No. 1-12744) |
|
|
|
|
|
10.04
|
|
—
|
|
Form of Martin Marietta Materials, Inc. Second Amended and Restated Employment Protection Agreement (incorporated by
reference to Exhibit 10.05 to the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year
ended December 31, 2003) (Commission File No. 1-12744)** |
|
|
|
|
|
10.05
|
|
—
|
|
Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors (incorporated by reference to Exhibit 10.10 to the Martin Marietta
Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 1996) (Commission File No.
1-12744)** |
|
|
|
|
|
10.06
|
|
—
|
|
Amendment No. 1 to the Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors
(incorporated by reference to Exhibit 10.01 to the Martin Marietta Materials, Inc. Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004) (Commission File No. 1-12744)** |
|
|
|
|
|
10.07
|
|
—
|
|
Martin Marietta Materials, Inc. Amended and Restated Executive Incentive Plan (incorporated by reference to Exhibit 10.01
to the Martin Marietta Materials, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2003)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.08
|
|
—
|
|
Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to the Martin Marietta
Materials, Inc. Form 10-Q for the quarter ended June 30, 1995) (Commission File No. 1-12744)** |
|
|
|
|
|
10.09
|
|
—
|
|
Amendment No. 1 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended September 30, 1997) (Commission File No.
1-12744)** |
|
|
|
|
|
10.10
|
|
—
|
|
Amendment No. 2 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.13 to
the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 1999)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.11
|
|
—
|
|
Amendment No. 3 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended June 30, 2000) (Commission File No.
1-12744)** |
|
|
|
|
|
10.12
|
|
—
|
|
Amendment No. 4 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.14 to
the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.13
|
|
—
|
|
Amendment No. 5 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.03 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended June 30, 2001) (Commission File No.
1-12744)** |
|
|
|
|
|
10.14
|
|
—
|
|
Amendment No. 6 to the Martin Marietta Materials, Inc. Incentive Stock Plan (incorporated by reference to Exhibit 10.01 to
the Martin Marietta Materials, Inc. Form 10-Q for the quarter ended September 30, 2003) (Commission File No.
1-12744)** |
|
|
|
|
|
*10.15
|
|
—
|
|
Amendment No. 7 to the Martin Marietta Materials, Inc. Incentive Stock Plan** |
|
|
|
|
|
10.16
|
|
—
|
|
Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan (incorporated by reference to Exhibit 10.15 to
the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
(Commission File No. 1-12744)** |
41
| |
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
|
| |
10.17
|
|
—
|
|
Amendment No. 1 to the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan (incorporated by
reference to Exhibit 10.15 to the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year
ended December 31, 2001) (Commission File No. 1-12744)** |
|
|
|
|
|
10.18
|
|
—
|
|
Martin Marietta Materials, Inc. Amended Omnibus Securities Award Plan (incorporated by reference to Exhibit 10.16 to the
Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.19
|
|
—
|
|
Martin Marietta Materials, Inc. Supplemental Excess Retirement Plan (incorporated by reference to Exhibit 10.16 to the
Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ending December 31, 1999)
(Commission File No. 1-12744)** |
|
|
|
|
|
10.20
|
|
—
|
|
Form of Option Award Agreement under the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan
(incorporated by reference to Exhibit 10.01 to the Martin Marietta Materials, Inc. Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005) (Commission File No. 1-12744)** |
|
|
|
|
|
10.21
|
|
—
|
|
Form of Restricted Stock Unit Agreement under the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award
Plan (incorporated by reference to Exhibit 10.02 to the Martin Marietta Materials, Inc. Quarterly Report on Form
10-Q for the quarter ended June 30, 2005) (Commission File No. 1-12744)** |
|
|
|
|
|
*12.01
|
|
—
|
|
Computation of ratio of earnings to fixed charges for the year ended December 31, 2005 |
|
|
|
|
|
*13.01
|
|
—
|
|
Martin Marietta Materials, Inc. 2005 Annual Report to Shareholders, portions of which are incorporated by reference in
this Form 10-K. Those portions of the 2005 Annual Report to Shareholders that are not incorporated by reference
shall not be deemed to be “filed” as part of this report. |
|
|
|
|
|
*21.01
|
|
—
|
|
List of subsidiaries of Martin Marietta Materials, Inc. |
|
|
|
|
|
*23.01
|
|
—
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm for Martin Marietta Materials, Inc. and
consolidated subsidiaries |
|
|
|
|
|
*24.01
|
|
—
|
|
Powers of Attorney (included in this Form 10-K at page 37) |
|
|
|
|
|
*31.01
|
|
—
|
|
Certification dated February 21, 2006 of Chief
Executive Officer pursuant to Securities and
Exchange Act of 1934, rule 13a-14, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
|
|
*31.02
|
|
—
|
|
Certification dated February 21, 2006 of Chief
Financial Officer pursuant to Securities and
Exchange Act of 1934, rule 13a-14, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
|
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*32.01
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—
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|
Certification dated February 21, 2006 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
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|
*32.02
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—
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|
Certification dated February 21, 2006 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
Other material incorporated by reference:
Martin Marietta Materials, Inc.’s 2006 Proxy Statement filed pursuant to Regulation 14A,
portions of which are incorporated by reference in this Form 10-K. Those portions of the
2006 Proxy Statement which are not incorporated by reference shall not be deemed to be
“filed” as part of this report.
|
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| * |
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Filed herewith |
| |
| ** |
|
Management contract or compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 14(c) of Form 10-K |
42