(Raleigh, North Carolina)  — Martin Marietta Materials, Inc. (NYSE: MLM) today announced that Chairman and CEO Stephen P. Zelnak, Jr., 64, will retire mid-year 2010 after leading the Company for over 27 years, first as a division of the aerospace company that is now Lockheed Martin Corporation, and since 1994 as a publicly traded company listed on the New York Stock Exchange.

Mr. Zelnak will continue as executive Chairman of the Board until his retirement and then become non-executive Chairman of the Board.
Full article can be found here.

Meanwhile, we were receiving many inquiries about Congress’ failure to repeal the $8.7 billion rescission that took effect today in the absence of congressional action.  This is not an issue that NSSGA or the TCC have ignored.  The entirety of the TCC has been anxious about September 30, 2009, recognizing that the rescission contained in SAFETEA-LU would take effect when the law expired.  We have specifically brought this up in our meetings and correspondences in February 2009 and again in April, again at the TCC fly in May and again at our NSSGA fly-in last week.  We’ve been repeatedly assured in the Senate that the matter would be handled; Senators Bond (R-Mo.) and Inhofe (R-Okla.) tried several times and Boxer (D-Calif.) promised to deal with the rescission before the law expired.  But, in the waning hours of the fiscal year, it didn’t happen.

Inhofe’s been on the floor of the Senate today talking about the problem this has caused and the loss of jobs which is ironic since at the full House T&I Committee hearing today, members said little if anything about the rescission, but were talking about its positive employment impacts.  House staff is distressed but a blame game is going on as well as politics (DeMint, Shelby, and Coburn were the chief problems in the Senate at the last minute, barring a CBO affirmation of the TARP pay-go offset suggested).  Yet it was Oberstar and the D’s in the House who didn’t make this enough of a priority to gain the support of Pelosi to fix it.

If a new highway law was in place (or at the very least a 3-month extension of the current one) $36 billion in new formula apportionments would be available as of Oct. 1 for FY 2010 (averaging out to $3 billion per month.)  Under the one-month Continuing Resolution, only $2 billion in formula apportionments will go out this month making for a $1 billion cut which will lead certain states to have contract authority cash flow problems in some highway funding categories. (See attached chart.)

Some legislators hope to “make states whole” from the rescission in the next highway bill extension.  However, any extra dollars given to states to compensate for the rescission would come at the expense of other states’ apportionments, creating winners and losers thus destabilizing the highway funding formulas set by SAFETEA-LU, which is certain to cause problems among members of Congress who will fight for their fair share.   States could only be made whole by increasing total program spending and giving the states that lost funding via the rescission some extra.  Both the House and Senate’s proposed extensions would freeze FY 2010 contract authority and obligation totals at the FY 2009 levels, which would appear to close off that avenue as a possibility to rectify the situation.

A spokesman for House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-Minn.) previously stated that repeal of the rescission was left out of the House extension because House “pay-go” rules would require an offset to pay for it through higher taxes or reduced spending elsewhere. However, since the measure moved under a procedure known as suspension of the rules, the rescission repeal could have been included in the bill without requiring it to meet “pay-go” standards, but Oberstar’s spokesman stated that House leadership would not permit it.  Senate action last evening to address the problem would have been moot as there was no time for the House to consider revised Senate legislation nor was there any indication that House leadership had changed their minds.

We will keep you advised of developments.

Ward Nye Remarks To House Transportation & Infrastructure Committee

Good morning Chairman Oberstar and Ranking Member Mica:

My name is Ward Nye and I am president of Raleigh, N.C.-based Martin Marietta Materials, Inc., one of the nation’s leading producers of construction aggregates.  I thank you for the opportunity to appear before the committee today and to present to you the industry’s perspective of the American Recovery and Reinvestment Act (ARRA) and to discuss its impact on our industry.

By way of background, Martin Marietta is a New York Stock Exchange company, with 2008 sales revenue in excess of two billion dollars, engaging principally in the construction aggregates business.  We have been in the aggregates business through our predecessor companies since 1939.  By construction “aggregates” I mean that we mine, process and sell crushed stone, sand and gravel for use in the construction of highways and other infrastructure projects, as well as in the domestic commercial and residential construction industries.  Aggregates products are also used in the railroad, environmental and agricultural sectors.  These aggregates products, along with asphalt products, ready mixed concrete and road paving materials, are sold and shipped from Martin Marietta’s network of over 288 quarries, distribution facilties and plants to customers in 29 states, Canada, the Bahamas and the Caribbean Islands.

That said, I am testifying today on behalf of the National Stone, Sand & Gravel Association (often referred to as “NSSGA” or “the association”), which represents the aggregate industry.  According to the U.S. Geological Survey (USGS), NSSGA is the largest mining association by product volume in the world.  Our association member companies produce more than 90 percent of the crushed stone and more than 70 percent of the sand and gravel consumed annually in the United States.  There are more than 10,000 construction aggregate operations nationwide.  Almost every congressional district is home to a crushed stone, sand or gravel operation.  Due to high product transportation costs, proximity to market is critical; thus, 70 percent of our nation’s counties include an aggregates operation.

Large amounts of stone, sand and gravel are used to construct the built environment.  For example, about 400 tons are used in an average home (not counting the required subdivision work), 15,000 tons are used in an average school and 38,000 tons are used to construct one mile of highway.  Accordingly, while largely invisible to the individual end-user, aggregates are an absolutely essential product making an important and lasting contribution to the nation’s economic well-being.  Yet, despite the large amounts of aggregates used for all sorts of construction, I am here to report that the industry is facing another year of economic turmoil and difficulty.

According to the USGS, an estimated 492 metric tons of total aggregates were produced and shipped for consumption in the United States in the second quarter of 2009, a decrease of 28 percent compared with that of the same period in 2008.  The estimated production for consumption in the first six months of 2009 was 831 metric tons, a 27 percent decrease over the same period in 2008.  This decreased usage of aggregates in 2009 was on top of previous declines in 2008 and 2007.

Despite the downturn, there is evidence to suggest that the American Recovery & Reinvestment Act helped maintain the market, even if it was not entirely visible.  While there was an intense effort to make sure states did not simply swap their infrastructure funds with ARRA funds, anecdotal evidence suggests some states did.  I commend this committee for its efforts to ensure that this did not happen as well as the continued oversight of the expenditure of ARRA funds. Further, I applaud the chairman for wanting to know the details – good, bad and otherwise.

Early this year, as the likelihood that Congress would pass an economic stimulus grew, optimism across the industry that an infusion of infrastructure funding would be forthcoming also increased.  In some instances, companies geared up for the year by investing in new equipment and rehiring employees in anticipation of a high level of construction activity in the year ahead.

One NSSGA member company located in the Northeast is a good example of a business that has had identifiable success with the ARRA funds.  This past August, the company paved New Hampshire Route 4 with ARRA funds, which required new equipment purchases and through the process hired numerous subcontractors.  This type of activity is exactly what the stimulus funds were meant to do.  The trickle down effect worked.

In California, another construction aggregates company secured 10 projects worth nearly 25 million dollars.  These projects are estimated to have saved 12 salaried and 230 craft positions.  Their experience in Nevada was similar after securing four projects worth nearly 18 million dollars.  This work saved 30 salaried and 85 craft positions.  These numbers are preliminary approximations but provide an anecdotal estimate of the domino-impact of new projects on many segments of the economy.

Similarly, in Martin Marietta’s second quarter 2009 earnings call, we reported having received purchase orders for stimulus-financed jobs in virtually every state in which we operate.  We noted stimulus jobs in North Carolina and Iowa with project-specific aggregates tonnages in excess of 150,000 tons with 80 percent of those volumes moving in 2009.  However, we also stated that such timing was an anomaly as the aggregate shipping on those cited jobs were moving more quickly than we have otherwise experienced.

While the stimulus funds have had a positive impact on state transportation budgets, our members report that, at the same time, many states have reduced their transportation budgets—in some cases severely as they grapple with reduced tax revenues.  Next year looks even worse for most state transportation programs.

In preparation for this hearing, NSSGA disseminated a quick survey to its producer members.  The results revealed some relevant facts.  More than 90 percent of respondents say they have not seen a noticeable increase in sales over the last three months.   For those who did see an increase, it was between one percent and 10 percent.

Asked if they expected an increase in orders in the fourth quarter of 2009, 71 percent said no, and only 16 percent responded yes.  The remaining 13 percent said they did not know.

Thirty-one percent of respondents think 2010 will bring an increase in sales, but half disagreed and feared there would not be an increase; 19 percent were unsure.  When asked about their 2010 state transportation budget, half responded that it is expected to be down, while 38 percent expected it to be level with 2009.  The remaining 12 percent were hopeful it would increase.

It is important to note that, on average, roads and bridges constitute 40 percent of the industry’s market.  The remaining 60 percent is equally divided among residential housing, industrial buildings and public works projects.  Due to the continued weakness in the residential and industrial markets in 2009, the transportation market has increased in importance to our members.

For this reason, we cannot draw a straight line conclusion as to the effectiveness of the stimulus bill in creating jobs in our industry.  Having said that, large and small companies are reporting that few, if any, jobs have been created.  However, some report that employees have been retained or rehired because of the road work stimulated by the ARRA.  Unfortunately, about an equal number are saying that people have been let go due to the weakness of the market.

Since the vast number of aggregates operations are typically in the open, facilities located in cold climates usually close for the winter.  Historically, employees work extra hours during warmer periods in anticipation of winter layoffs.  The extra pay they earn allows them to prepay health care premiums and save money to carry them through to spring.  Without the extra hours, many employees will be struggling this winter to make ends meet.  So while some workers have been retained, hours (regular and overtime) and overall pay have been reduced.

Here are some specific comments regarding the stimulus from NSSGA producer members that I thought should be shared with you.

One respondent reported:

We haven’t seen any stimulus money in our market yet.  However, the value I’ve seen is that the general consumer believes that a stimulus package will be forthcoming and because of that, they have more confidence in the economy and are therefore increasing their spending—at least that’s what I see.  So, the stimulus package has helped indirectly.  We haven’t seen an increase in sales, but we haven’t lost as much as I think we would have if the stimulus package was not out there.

Another member said:

Our business is approaching 2008 volume.  Without the stimulus, we would not be any where near current revenue.  We have not increased revenue for 2009 vs. 2008.  Also, we have made very few capital expenditures due to no clear transportation fund bill.  Without the ability to grow the top line, spending can only go on so long.  This is what our government needs to understand.

A third member noted:

We have seen a net decrease in sales over the past three months.  In spite of that, we have seen some increase in sales to our asphalt customers as a result in the stimulus bill but the overall market continues to decline.  We have seen no new construction jobs in our market area as a result of the stimulus bill.

Drawing from these and other responses, I can tell you that jobs have been retained, but few jobs have been created in our industry due to the stimulus bill.  Further, while sales have declined, without the stimulus it would have been worse.  Finally, and I cannot underscore this point enough, without a six-year transportation bill providing predictable future funding, things will get worse.

NSSGA also took the opportunity to ask its members if passage of a well-funded, six year transportation authorization bill would improve the outlook of their business.  A strong 93 percent said it would have a positive impact, while the remaining seven percent were unsure.  This is important when considering that 90 percent thought that a series of extensions would harm their business, while only seven percent thought a series of extensions would cause no harm.  It is safe to conclude that across the industry, we are in agreement that a six-year surface transportation authorization bill is necessary and needed.

Mr. Chairman, the aggregates industry in the United States has seen an average 20 percent decline in business; in some regions the decline has been as much as 60 percent.  Without the stimulus, which we supported and believe, like you, should have had more funding devoted to transportation infrastructure for real job creation, the decline in our industry would be far greater.  Nevertheless, all of this is offered against a backdrop in which our industry’s percentage volume decline has been more pronounced than during any economic period since the Great Depression.

Already the construction coalition and those that help fund the system are in agreement that Congress needs to quickly pass a well-funded six-year authorization bill.  Just last week four major national associations, the U.S. Chamber of Commerce, American Automobile Association, the American Trucking Association, and the National Association of Manufacturers, joined in a joint letter to the president and Congress calling for a robust, multi-year reauthorization and endorsed an increase in the user fee on gasoline to ensure the level of funding necessary to meet the needs of the system.  I would respectfully ask that the joint letter be inserted in the record of this hearing.

The referenced letter also underscores a clear and well-articulated message of the USGS:

Infrastructure, such as roads, airports, utilities, and many other facilities, is vital to the growth of any populated area.  Much of the nation’s infrastructure built during the 1950’s and 1960’s has deteriorated.  In many areas of rapid population growth, the infrastructure is becoming inadequate, and new roads, streets, and sewage systems must be built to meet the increased needs.  Maintenance and development of the infrastructure requires large volumes of natural aggregates.

That volume supply is something the aggregates industry is fully prepared to deliver – for our nation and our stakeholders.

In conclusion let me be clear: the aggregates industry believes any momentum generated by the ARRA will be lost if Congress fails to act, sooner rather than later, on a well-funded, multi-year surface transportation authorization bill.  An 18-month extension of the law just kicks the can down the road, so to speak.  Our transportation infrastructure is the foundation of America’s economic stability and growth, and has fostered its global competitiveness. Congress needs to make our nation’s transportation infrastructure a priority and we must work together to build the transportation network of the 21^st Century.

Again, thank you Mr. Chairman for this opportunity to testify today.  I will be happy to respond to any questions.

July 2009 Newsletter

Jul 9, 2009 1:10 PM

On July 6, President Obama ended the speculation about who would run the Mine Safety and Health Administration by sending long-time union man Joseph Main’s name to the Senate for confirmation.

Given the Democrats strong majority in the Senate, conformation is likely. Main is in line to replace Bush appointee Richard Stickler as assistant secretary of labor for mine safety and health.

Main began his career in coal mining in 1967 and was hired by the United Mine Workers of America in 1974 as special assistant to the international president. He took his first safety position two years later, and in 1982, he was named administrator of the UMWA Occupational Health and Safety Department; he held that position until 2004. He is currently a mining safety consultant.

UMWA was happy with the nomination and anticipating a heavier-handed regulatory agency.

“Joe is perhaps the most knowledgeable person about mine safety and health in the nation, and his experience was gained where it counts the most – fighting every day for over 30 years on behalf of miners’ health and safety,” said UMWA President Cecil Roberts in a prepared statement. “Joe has his work cut out for him. The Mine Safety and Health Administration has not lived up to its mandate from Congress to vigorously enforce mine health and safety laws and regulations the last eight years. The previous administration put mine production and company profitability ahead of miner safety. Fortunately, President Obama has sent a clear and consistent message that health and safety comes first in his administration.”

Rep Ben Chandler (D-Ky) threw his support behind Main in April when Main, former MSHA chief Davitt McAteer and Tony Mayville, director of Illinois’ Office of Land Management, were believed to be the leading candidates for the post.

Road money splits state

Allocation pits metro Atlanta against rest.Atlanta’s per-capita advantage riles some, makes sense to others.

By Ariel Hart

The Atlanta Journal-Constitution

Tuesday, July 14, 2009

Stimulus projects pull in low bids

Roads plans may cost 43% less than expected.State transportation officials consider how to spend remaining funds.

By Ariel Hart

The Atlanta Journal-Constitution

Saturday, June 06, 2009

(WASHINGTON, D.C.)  –  The Obama administration is warning lawmakers that the trust fund that pays for highway construction will go broke in August unless Congress approves an infusion of as much as $7 billion.

Sen. Barbara Boxer, chairman of the Senate Environment and Public Works Committee, said at a hearing Tuesday that the administration has told senators the Federal Highway Trust Fund will need an estimated $5 billion to $7 billion to keep current construction projects going.

The California Democrat said another $8 billion to $10 billion will be needed to keep the fund solvent through the year ending Sept. 30, 2010.

Transportation Department spokeswoman Jill Zuckman confirmed those figures.

“The administration is working closely with Congress to solve this difficult problem and ensure that states have the resources they need to maintain our roads and highways,” Zuckman said.

A decline in driving that began in late 2007 has reduced federal gas tax revenue, the primary source of trust fund dollars.

The trust fund is separate from the $48 billion in transportation projects included in the economic recovery law enacted by Congress and signed by President Barack Obama earlier this year.

Congress approved an emergency transfer of $8 billion in general treasury dollars last fall to make up a projected shortfall — the first time in the program’s history that had happened. The fund dates back to creation of the federal interstate highway program in 1956.

Sen. George Voinovich, R-Ohio, said it’s clear that Congress must raise the federal gas tax, which is now 18.4 cents per gallon.

“I know that doesn’t go down so well with some folks,” but it’s “the reality of the situation,” Voinovich said at the hearing, which was on Obama’s nomination of former Arizona highways director Victor Mendez to head the Federal Highway Administration.

“That will be one of my highest priorities, to get on that very quickly,” Mendez said of the trust fund.

The law that authorizes federal highway programs is due to expire at the end of September, but the issue hasn’t been on Congress’ front burner. There is a consensus among transportation experts and lawmakers that there will have to be some form of a tax increase — always unpopular, but especially so in a recession — to make up for the lower gas tax revenues and to address a backlog of crumbling and congested highways, bridges and public transit systems.

Two congressionally mandated commissions have called for an immediate increase in the gas tax. The first commission, which issued its report in early 2008, recommended a 40-cent per gallon hike. The second panel, which issued its report earlier this year, recommended the tax be increased 10 cents per gallon for gas and 15 cents per gallon for diesel, and that both be indexed to inflation.

The two panels also said fuel taxes are not a sustainable source of revenue over the long term as drivers shift to more fuel efficient vehicles. Both panels recommended Congress find a new revenue source to pay for highway and transit programs.

Their top recommendation was to tax motorists based on how many miles they drive. That would require equipping cars and trucks with devices that use GPS technology to record not only how many miles the vehicle was driven, but whether the driving occurred on interstate highways or secondary roads and whether it was during peak travel periods. The device would calculate the amount of tax owed and the bill could be downloaded.

A mileage-based tax system would take about 10 years to implement.

By JOAN LOWY

Homing in on a new DOT commissioner

5:56 pm June 2, 2009, by Jim Galloway

Bill Kuhlke, chairman of the board that (sort of) governs the state Department of Transportation, said eight formal applications have been received for the job of DOT commissioner. A search committee will interview candidates next week, and a decision is expected by June 18.

But Dick Anderson, director of the Georgia Regional Transportation Authority, has told my AJC colleague Ariel Hart that he has taken his name out of contention for the post.

That means means state Rep. Vance Smith, chairman of the House Transportation Committee, has the inside track. Smith sought the commissioner’s job in 2007, but lost to Gov. Sonny Perdue’s choice, Gena Abraham.

Also, the following was from Dick Pettys with InsiderAdvantage:

Vance Smith Rated Likely To Be Next DOT Commissioner

By Dick Pettys
InsiderAdvantage Georgia

(5/27/09) When you dig around a bit in the business of the DOT board, you emerge mostly with rumors, guess work and off-the-record, background information. That said, however, the conventional wisdom at this point puts state Rep. Vance Smith in a strong position to get the vacant DOT commissioner’s job when it is filled by the board, probably next month.

Following the governor’s signing of SB 200 <http://www.legis.ga.gov/legis/2009_10/versions/sb200_AP_14.htm> , the next commissioner won’t have as much power as his predecessors. Some of the clout will go to a new director of planning – an official the governor gets to appoint with the approval of the House Transportation Committee, currently chaired by the same Vance Smith under consideration as DOT commissioner. And some of the clout – particularly over money – will go to the Legislature.

But weaker than in the past or not, the post still is one that Smith wants. At last count, it appeared three others also wanted the job, but it is now less certain that all of them will remain in the running.

There’s no good speculation yet on who Perdue will appoint as planning director and, in fact, that decision doesn’t seem to have been made yet.

At any rate, we’re clearly nearing some kind of turning point for DOT, but exactly what that produces remains to be seen. The agency has been under fire for months from legislators and the public for what critics contends is a failure to get the job done.

In February, the board fired Commissioner Gena Evans after a tumultuous
16 months on the job. Her election in October 2007 had been a major point of division between Gov. Sonny Perdue, who supported her, and House Speaker Glenn Richardson, who even then was pushing for Vance Smith’s election as commissioner.

In early April, the Legislature went home without passing a transportation tax increase that road advocates and consumer groups had been pushing for two years straight. But at least in part because of a crisis in confidence in DOT operations, particularly as expressed by the governor and the lieutenant governor, the Legislature passed – and Perdue later signed – the bill that separates DOT’s planning functions from its operational functions.

The bill does, however, keep the DOT board – elected by caucuses of legislators – intact, and gives it the power to name the commissioner.
But to some extent it may be a sullen board that makes the decision about a new commissioner next month; its members fought the transportation makeover bill as hard as they could.

Old grudges aren’t easily put aside, and we’ve even picked up on some chatter about the board possibly selecting Smith as commissioner and then encouraging his old House committee to dilly-dally about confirming whoever Perdue selects as planning director, perhaps postponing it indefinitely But that’s not being taken too seriously among some we talked with for this article. “When you start down that road, it’s genocide,” one observer told us.

Still, this is a board that Perdue does not control, as is obvious by its decision to fire Gena Evans. And, as a result, we hear he has not expressed a preference for commissioner.

Whether he has or not, some board members are said to feel that he would prefer to see Dick Anderson, currently head of the Georgia Regional Transportation Authority, as commissioner. And that, naturally, is a strike against Anderson in their minds. Anderson is said to be – or to have been – one of the four under consideration.

Another under consideration is said to be Gerald Ross, the interim commissioner. He’s won favorable marks from many board members for his performance so far. But he’s also within a few years of earning one of those lucrative DOT pensions. Taking the commissioner’s slot – a job whose tenure in recent years hasn’t been all that secure or long – could be financially disadvantageous to him.

One long-time board observer said the board is split 5-5 between Smith and Ross with 3 undecided. Another said he believes Smith has at least 9 votes right now. A third said he believes it is close with Smith the likely winner if the vote were held now.

April 2009 Newsletter