43 slides from Martin Marietta Materials's proxy contest presentation, May 1, 2012
Slide 1: Schedule 14A Proxy Statement Cover - Vulcan Materials Company
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant ¨ Filed by a Party other than the Registrant x Check the appropriate box: ¨ Preli
Slide 2: Update on Martin Marietta Materials' Proposed Combination with Vulcan Materials
Update on Martin Marietta Materials’ Proposed Combination with Vulcan Materials May 1, 2012 Rock Solid Fundamentals. Positioned for the Long Term.
Slide 3: Introduction: Martin Marietta Continues to Outperform Vulcan
Introduction: Martin Marietta Continues to Outperform Vulcan Martin Marietta’s net Vulcan Martin Marietta sales is growing at a Q1 2012 Results Q1 2012 Results faster rate than Vulcan’s… YoY Net Sales Growth 9.5% 12.5%1 …and generating Aggregates YoY Price (0.8%) 2.8% stronger margins Growth Vulcan'
Slide 4: Summary
Summary MARTIN MARIETTA MATERIALS
Slide 5: Vulcan Shareholders Should Show Their Support for Martin Marietta's Compelling Offer
Vulcan Shareholders Should Show Their Support for Martin Marietta's Compelling Offer Martin Marietta believes that: • There is undeniable strategic logic in the combination of Martin Marietta and Vulcan • Vulcan’s claims of undervaluation ignore the fact that Vulcan shareholders are not cashing out,
Slide 6: Martin Marietta's Proposal is a 100% Stock-for-Stock Combination, With Vulcan Shareholders Retaining ~58% Ownership
Martin Marietta’s Proposal is a 100% Stock-for-Stock Combination, With Vulcan Shareholders Retaining ~58% Ownership Vulcan’s statements about value for its shareholders fundamentally mischaracterize Martin Marietta’s proposal, ignoring the shared upside of a stock-for-stock combination The offer: –
Slide 7: We Agree With Vulcan's Assertion that "It All Comes Down to Value"
1 We Agree With Vulcan’s Assertion that “It All Comes Down to Value” … • Combination creates a “world-class” U.S.-based aggregates leader • Significantly increased scale Aggregates Leader • Complementary geographic footprint • Outstanding combined asset base, including 28 billion tons of mineral res
Slide 8: …But Management Credibility is Essential
…But Management Credibility is Essential Martin Marietta believes that: Vulcan has masked underperformance and value destruction: • Relied on flawed operating comparisons • Mischaracterized the historical performance of its businesses Vulcan continues to use “smokescreen” tactics to impede a transac
Slide 9: Can You Trust Today's Vulcan to Make the Right Transaction Decision?
Can You Trust Today’s Vulcan to Make the Right Transaction Decision? Acquisition of Florida Rock in Martin Marietta’s Proposal 2007 “The combined company will have “We do not believe that Martin enhanced earnings growth and a strong Marietta’s offer reflects the intrinsic cash flow profile to reduce
Slide 10: Vulcan's Underperformance Provides Little Evidence that Vulcan Management Can Deliver
Vulcan’s Underperformance Provides Little Evidence that Vulcan Management Can Deliver on its “Hope Plans” 1 Vulcan Gross Profit (% of Net Sales) Vulcan Adj. SG&A (% of Net Sales) (1,900 bps) 30.8% +270 bps 12.0% 9.3% 11.8% 2007 2011 2007 2011 2 3 Vulcan Adj. EBIT (% of Net Sales) Vulcan Net Income (
Slide 11: Vulcan's Underperformance Has Destroyed Significant Shareholder Value
Vulcan’s Underperformance Has Destroyed Significant Shareholder Value 1 Vulcan Share Price Performance Vulcan Dividend Level ($/share) $90 $80 $1.84 $70 $60 $50 $40 $30 $0.04 $20 2007 Q1 2012 annualized 2008 2009 2010 2011 Note 1: Vulcan’s share price performance for the period 12/31/2007 – 12/9/201
Slide 12: Vulcan's Valuation Analysis Appears to be Based on Flawed Assumptions Regarding its Recovery
Vulcan’s Valuation Analysis Appears to be Based on Flawed Assumptions Regarding its Recovery ($M) Vulcan Claimed“Profit- $1,306 Enhanced”Mid-CycleEBITDA:¹ $1,179 $1,143 $1,006 Actual Vulcan Average EBITDA (’05-’11): $780 $800 $516 $352 $338 PF2005 PF2006 PF2007 2008 2009 2010 2011 Vulcan EBITDA Aver
Slide 13: Timing of Vulcan's Recovery Remains Highly Uncertain
Timing of Vulcan’s Recovery Remains Highly Uncertain To calculate its “Profit-Enhanced Mid-Cycle” EBITDA, Vulcan added $100 million to an estimate that already appeared aggressive Vulcan EBITDA¹ ($M) How long to achieve Analyst consensus estimates Vulcan’s “Profit Enhanced” mid- cycle EBITDA?² Note
Slide 14: Proposal Already Incorporates Analysts' Views of the Eventual Cyclical Recovery
Martin Marietta's Proposal, as Reflected in Vulcan's TEV/EBITDA Multiple, Already Incorporates Analysts' Views of the Eventual Cyclical Recovery And Future Performance Total Enterprise Value / EBITDAMultiple ¹ 18.0x 16.7x 16.0x At the proposed exchange ratio, Vulcan is valued at a premium to Martin
Slide 15: Martin Marietta's Proposal Appears to Have Driven Up Vulcan's Stock Price
Martin Marietta’s Proposal, and Not the Profit Enhancement Plan, Appears to Have Driven Up Vulcan’s Stock Price Stock Price Performance Since 12/9/2011 Martin Marietta 12/12/2011: Changevs. S&P 500: +16.8%¹ Positive price reaction to Martin Marietta proposal 12/19/2011: Change vs. S&P 500: (2.5%)1 V
Slide 16: Through a Combination, Vulcan Shareholders Would Realize Immediate Balance Sheet Improvement
Through a Combination, Vulcan Shareholders Would Realize Immediate Balance Sheet Improvement… Vulcan Standalone Leverage¹ Combined Financials 3/31/2012 MARTIN VULCAN Combined ² ($M) MARIETTA Debt $1,135 $2,814 $3,949 “In the absence of a combination, we expect credit measures to remain weak LTM Adj.
Slide 17: …And an Immediate Return to a Meaningful Dividend
…And an Immediate Return to a Meaningful Dividend Vulcan Dividend Per Share ($) 1.96 1.84 1.48 1.48 Vulcan 1.16 recently cut 1.00 its quarterly dividend to 1 0.76 $0.01 0.80 per share 0.04 2005 2006 2007 2008 2009 2010 2011 Q1 2012 Implied annual Annualized dividend after combination The dramatic 3-
Slide 18: Vulcan Shareholders Should Send a Strong Message to Their Board
Vulcan ShareholdersShould Senda Strong Messageto Their Board 1) Elect Martin Marietta’s independent nominees to the Vulcan Board – Martin Marietta has nominated four highly qualified independent director nominees to replace the four incumbent Vulcan directors seeking re-election – Nominees are indep
Slide 19: Addressing Vulcan's Most Recent Mischaracterizations
Addressing Vulcan's Most Recent Mischaracterizations 18
Slide 20: Vulcan's Tactics Are a Smokescreen to Impede the Proposed Transaction
Vulcan’s Tactics Are a Smokescreen to Impede the Proposed Transaction In its March 2012 presentation, “The Vulcan Value Proposition,” Vulcan appears to have: 1 Asked its shareholders to believe in the Profit Enhancement Plan, and overlook the unfulfilled promises following the acquisition of Florida
Slide 21: Vulcan Overpromised and Underdelivered Following the Florida Rock Acquisition
Vulcan Overpromised and Underdelivered Following the Florida Rock Acquisition Adjusted EBITDA and % EBITDA Margin What Vulcan Said in 2007: ($M) $2B targeted EBITDA “Anticipated average annual EBITDA of more than $2 billion over the next 3 years, enabling rapid debt reduction.” (Vulcan Investor Pres
Slide 22: Potential Divestitures Build a Stronger Enterprise Versus Vulcan's Planned Asset Sales
Potential Divestitures in the Business Combination Build a Stronger Enterprise, Versus Vulcan’s Planned Asset Sales to Reduce Excessive leverage Divestitures • Discussions with the DOJ continue; optimistic that outstanding issues will be resolved in the next several weeks • Numerous buyers have expr
Slide 23: Flawed Comparisons
3 Flawed Comparisons VULCAN CLAIM MARTIN MARIETTA’S POSITION • Both companies well positioned to benefit from estimated long term demographic growth • Weighted average estimated population growth of 16.3% for Martin Marietta and 14.8% for Vulcan 1 VULCAN MARTIN MARIETTA 2010 – 2020 2010 – 2020 % of
Slide 24: Flawed Comparisons (continued)
3 Flawed Comparisons (continued) VULCAN CLAIM MARTIN MARIETTA’S POSITION • For a meaningful comparison, SG&A should be evaluated as a percentage of sales rather than on an absolute basis • Vulcan’s EBITDA per employee has been significantly below Martin Marietta’s Adj. SG&A(%of Net Sales)¹ 2 EBITDA
Slide 25: Relevant Metrics Show Martin Marietta has Clearly Outperformed Vulcan
Relevant Metrics Show Martin Marietta has Clearly Outperformed 4 Vulcan Gross Profit (% of Net Sales) Adj. SG&A (% of Net Sales) ¹ Adj. EBIT (% of Net Sales) ² Net Income (% of Net Sales) ³ Confronted with the same downturn in the construction market, Martin Marietta has outperformed Vulcan Note 1:
Slide 26: Revisiting the Compelling Nature of the Proposal
Revisiting the Compelling Nature of the Proposal 25
Slide 27: Undeniable Strategic Logic for a Combination
Undeniable Strategic Logic for a Combination Martin Marietta believes that a combination: • Creates a “world-class” U.S.-based aggregates leader Aggregates • Significantly increased scale Leader • Complementary geographic footprint • Outstanding combined asset base, including 28 billion tons of mine
Slide 28: Combined Company Will Have the Most Extensive Aggregates Footprint
Combined Company Will Have the Most Extensive Aggregates Footprint WA MT ND ME OR MN VT NH Nova Scotia ID SD WI NY MA WY MI CT RI IA PA NJ NV NE OH DE IL IN UT MD CA CO WV KS MO VA U.S. aggregates producers KY (by shipments) ¹ NC TN 2,3 OK AZ NM AR SC AL GA MS LA 4 TX FL States with Martin Marietta
Slide 29: Creates a "World-Class" U.S.-Based Aggregates Leader
Creates a “World-Class” U.S.-Based Aggregates Leader Aggregates Shipments by Tonnage U.S. Global Combination creates the “must own” U.S. heavy building materials stock Note: Fiscal year 2011 annual shipments measured in millions of short tons and based on publicly available information. Excludes div
Slide 30: Realization of $200 - 250M in Annual Cost Synergies
Realization of $200 - 250M in Annual Cost Synergies Improved Purchasing Efficiencies from Greater Scale $50 – 60M • Goods and services • Distribution network Duplicative Operating Functions $50 – 60M • Realigned organizational structure • Management, facility, sales force and production overhead int
Slide 31: Significant Shareholder Value Creation
Significant Shareholder Value Creation Estimated $200 - $250 million Efficiencies gained 1 in annual synergies from size and scale Continued focus on Meaningful dividend operational excellence Significant Balance sheet well- positioned for shareholder value creation Stronger platform cyclical recove
Slide 32: Martin Marietta is Committed to Making This Combination a Reality
Martin Marietta is Committed to Making This Combination a Reality 31
Slide 33: The Election of Martin Marietta's Independent Director Nominees is The Important Next Step
The Election of Martin Marietta’s Independent Director Nominees is The Important Next Step for a Successful Transaction • Martin Marietta has nominated 4 independent director candidates to the Vulcan Board who would replace the 4 incumbent Vulcan directors seeking re-election • Election of Martin Ma
Slide 34: Qualified and Independent Board Nominees
Qualified and Independent Board Nominees • Martin Marietta has proposed qualified, independent Board nominees • Each nominee has been carefully screened to ensure independence – No affiliation with Martin Marietta, Vulcan or any of their subsidiaries • Board nominees have a broad set of skills and e
Slide 35: Now is the Time for Vulcan Shareholders to Act
Now is the Time for Vulcan Shareholders to Act Vote the blue proxy card or blue voting instruction form today and communicate your support for the proposal to the Vulcan Board 34
Slide 36: Appendix
Appendix 8 LON e ie OR kel OKe ARAN OEP) STOO e (ellen ete cel ene tenereijer ese) ©
Slide 37: Qualified Independent Board Nominees
Qualified Independent Board Nominees Board Nominees Selected Qualifications Expertise - Senior VP and Chief Administrative Officer of Time Warner, Corporate Governance Inc. (1991-1998) Securities and Philip R. Lochner, Jr. - Commissioner of the SEC (1990-1991) Disclosure - Currently serves as direct
Slide 38: Martin Marietta EBITDA & EBIT Reconciliation
Martin Marietta EBITDA & EBIT Reconciliation For the Quarter Ended (dollars in millions) March 31, LTM For the Year Ended December 31, 2012 2011 3/31/2012 2011 2010 2009 2008 2007 Net earnings attributable to entity $ (36.7) $ (17.4) $ 63.1 $ 82.4 $ 97.0 $ 85.5 $ 176.3 $ 262.7 Add back: Interest exp
Slide 39: Vulcan EBITDA & EBIT Reconciliation
Vulcan EBITDA & EBIT Reconciliation For the Quarter Ended (dollars in millions) March 31, LTM For the Year Ended December 31, 2012 2011 3/31/2012 2011 2010 2009 2008 2007 2006 2005 Net (loss) earnings $ (52.1) $ (54.7) $ (68.1) $ (70.8) $ (96.5) $ 30.3 $ 0.9 $ 450.9 $ 470.2 $ 470.2 Add back: Interes
Slide 40: Florida Rock EBITDA Reconciliation
Florida Rock EBITDA Reconciliation For the 9 months (dollars in millions) ended Sept. 30, For the Year Ended December 31, 2007 2006 2005 Net (loss) earnings $ 96.7 $ 213.7 $ 169.6 Add back: Interest expense (income) (1.1) (3.6) (0.5) Income tax (benefit) expense 52.2 119.2 104.7 Depreciation, deplet
Slide 41: Vulcan SG&A Reconciliation
Vulcan SG&A Reconciliation (dollars in millions) For the Year Ended December 31, 2011 2010 2009 2008 2007 SG&A, as reported $ 290.0 $ 327.5 $ 321.6 $ 342.6 $ 289.6 R&D expense, as disclosed in notes to financials 1.1 1.6 1.5 1.5 1.6 Adjusted SG&A $ 288.9 $ 326.0 $ 320.1 $ 341.0 $ 288.0 Net Sales $ 2
Slide 42: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation may include "forward-looking statements." Statements that include words such as "anticipate," "expect," "should be," "believe," "will," and other words of similar meaning in connection with future events or future operating or fi
Slide 43: Important Additional Information
Important Additional Information This presentation relates to the Exchange Offer by Martin Marietta to exchange each issued and outstanding share of common stock of Vulcan for 0.50 shares of Martin Marietta common stock. This presentation is for informational purposes only and does not constitute an