MLM 10-Q Quarterly Report Sept. 30, 2013 | Alphaminr
MARTIN MARIETTA MATERIALS INC

MLM 10-Q Quarter ended Sept. 30, 2013

MARTIN MARIETTA MATERIALS INC
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10-Q 1 d599431d10q.htm FORM 10-Q Form 10-Q
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

[    ] 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)

North Carolina 56-1848578

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification Number)

2710 Wycliff Road, Raleigh, NC

27607-3033
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code 919-781-4550

Former name:

None

Former name, former address and former fiscal year,

if changes since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Class

Outstanding as of October 30, 2013

Common Stock, $0.01 par value

46,248,559


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

Page

Part I. Financial Information:

Item 1. Financial Statements.

Consolidated Balance Sheets – September 30, 2013, December 31, 2012 and September  30, 2012

3

Consolidated Statements of Earnings and Comprehensive Earnings - Three and Nine Months Ended September  30, 2013 and 2012

4

Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2013 and 2012

5

Consolidated Statement of Total Equity - Nine Months Ended September 30, 2013

6

Notes to Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

51

Item 4. Controls and Procedures.

52

Part II. Other Information:

Item 1. Legal Proceedings.

53

Item 1A. Risk Factors.

53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

53

Item 4. Mine Safety Disclosures.

53

Item 6. Exhibits.

54

Signatures

55

Exhibit Index

56

Page 2 of 56


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,
2013
December 31,
2012
September 30,
2012
(Unaudited) (Audited) (Unaudited)
(Dollars in Thousands, Except Per Share Data)

ASSETS

Current Assets:

Cash and cash equivalents

$ 57,241 $ 25,394 $ 35,421

Accounts receivable, net

331,030 224,050 296,947

Inventories, net

350,438 332,311 335,092

Current deferred income taxes

77,005 77,716 79,758

Other current assets

29,955 40,930 37,889

Total Current Assets

845,669 700,401 785,107

Property, plant and equipment

3,942,138 3,812,587 3,775,320

Allowances for depreciation, depletion and amortization

(2,159,520) (2,059,346) (2,024,379)

Net property, plant and equipment

1,782,618 1,753,241 1,750,941

Goodwill

616,634 616,204 615,986

Other intangibles, net

49,035 50,433 51,330

Other noncurrent assets

43,149 40,647 39,840

Total Assets

$ 3,337,105 $ 3,160,926 $ 3,243,204

LIABILITIES AND EQUITY

Current Liabilities:

Bank overdraft

$ 10,437 $ - $ 102

Accounts payable

111,266 83,537 99,628

Accrued salaries, benefits and payroll taxes

20,655 19,461 17,436

Pension and postretirement benefits

1,992 6,851 6,442

Accrued insurance and other taxes

34,444 28,682 34,175

Income taxes

1,720 287 13,291

Current maturities of long-term debt and short-term facilities

6,169 5,676 6,671

Accrued interest

18,158 7,490 18,209

Other current liabilities

21,591 21,351 21,155

Total Current Liabilities

226,432 173,335 217,109

Long-term debt

1,107,192 1,042,183 1,092,117

Pension, postretirement and postemployment benefits

171,695 183,122 135,761

Noncurrent deferred income taxes

243,858 225,592 243,759

Other noncurrent liabilities

89,045 86,395 84,437

Total Liabilities

1,838,222 1,710,627 1,773,183

Equity:

Common stock, par value $0.01 per share

461 459 458

Preferred stock, par value $0.01 per share

- - -

Additional paid-in capital

431,122 414,657 408,898

Accumulated other comprehensive loss

(102,710) (106,169) (77,480)

Retained earnings

1,131,276 1,101,598 1,098,529

Total Shareholders’ Equity

1,460,149 1,410,545 1,430,405

Noncontrolling interests

38,734 39,754 39,616

Total Equity

1,498,883 1,450,299 1,470,021

Total Liabilities and Equity

$ 3,337,105 $ 3,160,926 $ 3,243,204

See accompanying notes to consolidated financial statements.

Page 3 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(In Thousands, Except Per Share Data)
(Unaudited)

Net Sales

$ 600,457 $ 537,507 $ 1,451,848 $ 1,376,944

Freight and delivery revenues

64,863 54,761 158,707 152,699

Total revenues

665,320 592,268 1,610,555 1,529,643

Cost of sales

457,349 413,485 1,188,923 1,126,532

Freight and delivery costs

64,863 54,761 158,707 152,699

Total cost of revenues

522,212 468,246 1,347,630 1,279,231

Gross Profit

143,108 124,022 262,925 250,412

Selling, general & administrative expenses

37,140 32,095 112,632 100,398

Business development costs

89 - 671 35,140

Other operating (income) and expenses, net

(2,964) 394 (5,535) (1,070)

Earnings from Operations

108,843 91,533 155,157 115,944

Interest expense

13,518 13,224 40,633 39,967

Other nonoperating expenses and (income), net

101 620 179 (1,277)

Earnings from continuing operations before taxes on income

95,224 77,689 114,345 77,254

Income tax expense

22,915 13,701 29,615 12,484

Earnings from Continuing Operations

72,309 63,988 84,730 64,770

Loss on discontinued operations, net of related tax benefit of $185, $371, $250 and $547, respectively

(271) (319) (454) (967)

Consolidated net earnings

72,038 63,669 84,276 63,803

Less: Net earnings (loss) attributable to noncontrolling interests

202 747 (1,028) 863

Net Earnings Attributable to Martin Marietta Materials, Inc.

$ 71,836 $ 62,922 $ 85,304 $ 62,940

Net Earnings Attributable to Martin Marietta Materials, Inc.

Earnings from continuing operations

$ 72,107 $ 63,241 $ 85,758 $ 63,907

Loss from discontinued operations

(271) (319) (454) (967)

$ 71,836 $ 62,922 $ 85,304 $ 62,940

Consolidated Comprehensive Earnings (See Note 1)

Earnings attributable to Martin Marietta Materials, Inc.

$ 75,384 $ 66,082 $ 88,763 $ 69,350

Earnings (Loss) attributable to noncontrolling interests

205 750 (1,020) 873

$ 75,589 $ 66,832 $ 87,743 $ 70,223

Net Earnings (Loss) Attributable to Martin Marietta Materials, Inc.

Per Common Share

Basic from continuing operations attributable to common shareholders

$ 1.56 $ 1.37 $ 1.85 $ 1.39

Discontinued operations attributable to common shareholders

(0.01) (0.01) (0.01) (0.02)

$ 1.55 $ 1.36 $ 1.84 $ 1.37

Diluted from continuing operations attributable to common shareholders

$ 1.55 $ 1.37 $ 1.85 $ 1.38

Discontinued operations attributable to common shareholders

(0.01) (0.01) (0.01) (0.02)

$ 1.54 $ 1.36 $ 1.84 $ 1.36

Weighted-Average Common Shares Outstanding

Basic

46,244 45,860 46,134 45,792

Diluted

46,349 45,992 46,261 45,929

Cash Dividends Per Common Share

$ 0.40 $ 0.40 $ 1.20 $ 1.20

See accompanying notes to consolidated financial statements.

Page 4 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended
September 30,
2013 2012
(Dollars in Thousands)
(Unaudited)

Cash Flows from Operating Activities:

Consolidated net earnings

$ 84,276 $ 63,803

Adjustments to reconcile consolidated net earnings to net cash provided by operating activities:

Depreciation, depletion and amortization

130,097 132,985

Stock-based compensation expense

5,408 5,947

Gains on divestitures and sales of assets

(1,003) (858)

Deferred income taxes

19,194 11,577

Excess tax benefits from stock-based compensation transactions

(1,990) -

Other items, net

(739) 2,314

Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:

Accounts receivable, net

(108,134) (93,198)

Inventories, net

(14,771) (12,486)

Accounts payable

27,729 7,077

Other assets and liabilities, net

25,578 4,883

Net Cash Provided by Operating Activities

165,645 122,044

Cash Flows from Investing Activities:

Additions to property, plant and equipment

(102,342) (105,941)

Acquisitions, net

(64,432) (132)

Proceeds from divestitures and sales of assets

3,208 7,871

Loan to affiliate

(3,402) -

Net Cash Used for Investing Activities

(166,968) (98,202)

Cash Flows from Financing Activities:

Borrowings of long-term debt

355,500 181,000

Repayments of long-term debt

(290,192) (142,651)

Debt issuance costs

(510) (300)

Change in bank overdraft

10,437 102

Dividends paid

(55,626) (55,302)

Distributions to owners of noncontrolling interests

- (800)

Issuances of common stock

11,571 3,508

Excess tax benefits from stock-based compensation transactions

1,990 -

Net Cash Provided by (Used for) Financing Activities

33,170 (14,443)

Net Increase in Cash and Cash Equivalents

31,847 9,399

Cash and Cash Equivalents, beginning of period

25,394 26,022

Cash and Cash Equivalents, end of period

$ 57,241 $ 35,421

Supplemental Disclosures of Cash Flow Information:

Cash paid for interest

$ 28,621 $ 29,255

Cash refunds for income taxes

$ 1,432 $ 3,170

See accompanying notes to consolidated financial statements.

Page 5 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENT OF TOTAL EQUITY

(Unaudited)

(in thousands)

Shares of
Common
Stock
Common
Stock
Additional
Paid-in Capital
Accumulated Other
Comprehensive Loss
Retained
Earnings
Total
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity

Balance at December 31, 2012

46,002 $ 459 $ 414,657 $ (106,169) $ 1,101,598 $ 1,410,545 $ 39,754 $ 1,450,299

Consolidated net earnings

- - - - 85,304 85,304 (1,028) 84,276

Other comprehensive earnings

- - - 3,459 - 3,459 8 3,467

Dividends declared

- - - - (55,626) (55,626) - (55,626)

Issuances of common stock for stock award plans

246 2 11,057 - - 11,059 - 11,059

Stock-based compensation expense

- - 5,408 - - 5,408 - 5,408

Balance at September 30, 2013

46,248 $ 461 $ 431,122 $ (102,710) $ 1,131,276 $ 1,460,149 $ 38,734 $ 1,498,883

See accompanying notes to consolidated financial statements.

Page 6 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

Organization

Martin Marietta Materials, Inc., (the “Corporation”) is engaged principally in the construction aggregates business. The Corporation’s aggregates product line, which accounted for 71% of consolidated 2012 net sales, includes crushed stone, sand and gravel, and is used primarily for construction of highways and other infrastructure projects, and in the nonresidential and residential construction industries. Aggregates products are also used in the railroad, environmental, utility and agricultural industries. These aggregates products, along with the asphalt products, ready mixed concrete and road paving construction services of the Corporation’s vertically-integrated operations (which accounted for 18% of consolidated 2012 net sales), are sold and shipped from a network of 303 quarries, distribution facilities and plants to customers in 33 states, Canada, the Bahamas and the Caribbean Islands. The aggregates and vertically-integrated operations are reported collectively as the Corporation’s “Aggregates business”.

Effective January 1, 2013, the Corporation reorganized the operations and management reporting structure of its Aggregates business, resulting in a change to its reportable segments. The Corporation currently conducts its Aggregates business through three reportable segments as follows:

AGGREGATES BUSINESS

Reportable Segments

Mid-America Group Southeast Group West Group

Operating Locations

Indiana, Iowa,

Kentucky,

Maryland,

Minnesota,

eastern Nebraska,

North Dakota,

North Carolina,

Ohio,

South Carolina,

Virginia,
Washington and

West Virginia

Alabama, Florida, Georgia,

Mississippi,

Tennessee, Nova Scotia and the Bahamas

Arkansas,

Colorado, Kansas, Louisiana,

Missouri,

western Nebraska, Nevada,

Oklahoma, Texas,

Utah and

Wyoming

In addition to the Aggregates business, the Corporation has a Specialty Products segment, accounting for 11% of consolidated 2012 net sales, which produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel industry.

Page 7 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

1. Significant Accounting Policies (continued)

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Corporation have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and in Article 10 of Regulation S-X. The Corporation has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on February 22, 2013. In the opinion of management, the interim consolidated financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods. The consolidated results of operations for the three and nine months ended September 30, 2013 are not indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012.

Reclassifications

Prior-year segment information for the Aggregates business presented in Note 9 has been reclassified to conform to the presentation of the Corporation’s current reportable segments.

Page 8 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

1. Significant Accounting Policies (continued)

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss

Consolidated comprehensive earnings/loss for the Corporation consist of consolidated net earnings or loss; adjustments for the funded status of pension and postretirement benefit plans; foreign currency translation adjustments; and the amortization of the value of terminated forward starting interest rate swap agreements into interest expense.

Comprehensive earnings attributable to Martin Marietta Materials, Inc. are as follows:

Three Months Ended
September  30,
Nine Months Ended
September  30,
2013 2012 2013 2012
(Dollars in Thousands)

Net earnings attributable to Martin Marietta Materials, Inc.

$ 71,836 $ 62,922 $ 85,304 $ 62,940

Other comprehensive earnings, net of tax

3,548 3,160 3,459 6,410

Comprehensive earnings attributable to Martin Marietta Materials, Inc.

$ 75,384 $ 66,082 $ 88,763 $ 69,350

Comprehensive earnings (loss) attributable to noncontrolling interests, consisting of net earnings or loss and adjustments for the funded status of pension and postretirement benefit plans, are as follows:

Three Months Ended
September  30,
Nine Months Ended
September  30,
2013 2012 2013 2012
(Dollars in Thousands)

Net earnings (loss) attributable to noncontrolling interests

$ 202 $ 747 $ (1,028) $ 863

Other comprehensive earnings, net of tax

3 3 8 10

Comprehensive earnings (loss) attributable to noncontrolling interests

$ 205 $ 750 $ (1,020) $ 873

Page 9 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

1. Significant Accounting Policies (continued)

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

Changes in accumulated other comprehensive earnings, net of tax, are as follows:

(Dollars in Thousands)
Pension and
Postretirement
Benefit Plans
Foreign Currency Unamortized
Value of
Terminated
Forward Starting
Interest Rate
Swap
Accumulated
Other
Comprehensive
Loss

Three Months Ended September 30, 2013

Balance at beginning of period

$ (106,603) $ 4,153 $ (3,808) $ (106,258)

Other comprehensive earnings before reclassifications, net of tax

-- 993 -- 993

Amounts reclassified from accumulated other comprehensive loss, net of tax

2,387 -- 168 2,555

Other comprehensive earnings, net of tax

2,387 993 168 3,548

Balance at end of period

$ (104,216) $ 5,146 $ (3,640) $ (102,710)

Three Months Ended September 30, 2012

Balance at beginning of period

$ (81,407) $ 5,222 $ (4,455) $ (80,640)

Other comprehensive earnings before reclassifications, net of tax

117 1,435 -- 1,552

Amounts reclassified from accumulated other comprehensive loss, net of tax

1,451 -- 157 1,608

Other comprehensive earnings, net of tax

1,568 1,435 157 3,160

Balance at end of period

$ (79,839) $ 6,657 $ (4,298) $ (77,480)

Other comprehensive loss before reclassifications for pension and postretirement benefit plans is net of tax of $0 and $77,000 for the three months ended September 30, 2013 and 2012, respectively.

Page 10 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

1. Significant Accounting Policies (continued)

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

(Dollars in Thousands)
Pension and
Postretirement
Benefit Plans
Foreign Currency Unamortized
Value of
Terminated
Forward Starting
Interest Rate
Swap
Accumulated
Other
Comprehensive
Loss

Nine Months Ended September 30, 2013

Balance at beginning of period

$ (108,189) $ 6,157 $ (4,137) $ (106,169)

Other comprehensive loss before reclassifications, net of tax

(2,312) (1,011) -- (3,323)

Amounts reclassified from accumulated other comprehensive loss, net of tax

6,285 -- 497 6,782

Other comprehensive earnings (loss), net of tax

3,973 (1,011) 497 3,459

Balance at end of period

$ (104,216) $ 5,146 $ (3,640) $ (102,710)

Nine Months Ended September 30, 2012

Balance at beginning of period

$ (84,204) $ 5,076 $ (4,762) $ (83,890)

Other comprehensive (loss) earnings before reclassifications, net of tax

(349) 1,581 -- 1,232

Amounts reclassified from accumulated other comprehensive loss, net of tax

4,714 -- 464 5,178

Other comprehensive earnings, net of tax

4,365 1,581 464 6,410

Balance at end of period

$ (79,839) $ 6,657 $ (4,298) $ (77,480)

Other comprehensive loss before reclassifications for pension and postretirement benefit plans is net of tax of $1,514,000 and $225,000 for the nine months ended September 30, 2013 and 2012, respectively.

Page 11 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

1. Significant Accounting Policies (continued)

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

Changes in net noncurrent deferred tax assets recorded in accumulated other comprehensive loss are as follows:

(Dollars in Thousands)

Pension and
Postretirement
Benefit Plans
Unamortized
Value of
Terminated
Forward
Starting
Interest Rate
Swap
Net
Noncurrent
Deferred
Tax Assets

Three Months Ended September 30, 2013

Balance at beginning of period

$ 69,842 $ 2,492 $ 72,334

Tax effect of other comprehensive earnings

(1,566 ) (111 ) (1,677 )

Balance at end of period

$ 68,276 $ 2,381 $ 70,657

Three Months Ended September 30, 2012

Balance at beginning of period

$ 53,328 $ 2,915 $ 56,243

Tax effect of other comprehensive earnings

(1,026 ) (103 ) (1,129 )

Balance at end of period

$ 52,302 $ 2,812 $ 55,114

Nine Months Ended September 30, 2013

Balance at beginning of period

$ 70,881 $ 2,707 $ 73,588

Tax effect of other comprehensive earnings

(2,605 ) (326 ) (2,931 )

Balance at end of period

$ 68,276 $ 2,381 $ 70,657

Nine Months Ended September 30, 2012

Balance at beginning of period

$ 55,161 $ 3,116 $ 58,277

Tax effect of other comprehensive earnings

(2,859 ) (304 ) (3,163 )

Balance at end of period

$ 52,302 $ 2,812 $ 55,114

Page 12 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

1. Significant Accounting Policies (continued)

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss (continued)

Reclassifications out of accumulated other comprehensive loss are as follows:

Three Months Ended
September  30,
Nine Months Ended
September  30,

Affected line items in the

consolidated financial statements

2013 2012 2013 2012
(Dollars in Thousands)

Pension and postretirement benefit plans

Settlement charge

$ 729 $ 255 $ 729 $ 779

Amortization of:

Prior service credit

(702 ) (704 ) (2,104 ) (2,092 )

Actuarial loss

3,926 2,849 11,779 9,111

3,953 2,400 10,404 7,798

Cost of sales;

Selling, general & administrative expenses

Tax effect

(1,566 ) (949 ) (4,119 ) (3,084 ) Deferred income taxes

$ 2,387 $ 1,451 $ 6,285 $ 4,714

Unamortized value of terminated forward starting interest rate swap

Additional interest expense

$ 279 $ 260 $ 823 $ 768 Interest expense

Tax effect

(111 ) (103 ) (326 ) (304 ) Deferred income taxes

$ 168 $ 157 $ 497 $ 464

Page 13 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

1. Significant Accounting Policies (continued)

Earnings per Common Share

The numerator for basic and diluted earnings per common share is net earnings attributable to Martin Marietta Materials, Inc., reduced by dividends and undistributed earnings attributable to the Corporation’s unvested restricted stock awards and incentive stock awards. If there is a net loss, no amount of the undistributed loss is attributed to unvested participating securities. The denominator for basic earnings per common share is the weighted-average number of common shares outstanding during the period. Diluted earnings per common share are computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards to be issued to employees and nonemployee members of the Corporation’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive.

The following table reconciles the numerator and denominator for basic and diluted earnings per common share:

Three Months Ended
September  30,
Nine Months Ended
September  30,
2013 2012 2013 2012
(In Thousands)

Net earnings from continuing operations attributable to Martin Marietta Materials, Inc.

$ 72,107 $ 63,241 $ 85,758 $ 63,907

Less: Distributed and undistributed earnings attributable to unvested awards

265 336 374 386

Basic and diluted net earnings available to common shareholders from continuing operations attributable to Martin Marietta Materials, Inc.

71,842 62,905 85,384 63,521

Basic and diluted net loss available to common shareholders from discontinued operations

(271) (319) (454) (967)

Basic and diluted net earnings available to common shareholders attributable to Martin Marietta Materials, Inc.

$ 71,571 $ 62,586 $ 84,930 $ 62,554

Basic weighted-average common shares outstanding

46,244 45,860 46,134 45,792

Effect of dilutive employee and director awards

105 132 127 137

Diluted weighted-average common shares outstanding

46,349 45,992 46,261 45,929

Page 14 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

2. Business Combinations and Discontinued Operations

Business Combinations

On July 1, 2013, the Corporation acquired three aggregates quarries in the greater Atlanta, Georgia area. This transaction provides over 800 million tons of aggregates reserves and enhances the Corporation’s existing long-term position in this market. The operating results of the acquired locations are reported through the Corporation’s Southeast Group in the financial statements starting from the date of acquisition and the measurement period remains open.

Divestitures and Permanent Closures

Operations that are disposed of or permanently shut down represent discontinued operations, and, therefore, the results of their operations through the dates of disposal and any gain or loss on disposals are included in discontinued operations in the consolidated statements of earnings and comprehensive earnings. The results of operations for divestitures do not include Corporate overhead that was allocated during the periods the Corporation owned these operations. All discontinued operations relate to the Aggregates business.

3. Inventories, Net

September 30,
2013
December 31,
2012
September 30,
2012
(Dollars in Thousands)

Finished products

$ 366,558 $ 355,881 $ 356,849

Products in process and raw materials

19,924 16,442 18,918

Supplies and expendable parts

61,441 56,805 56,420

447,923 429,128 432,187

Less allowances

(97,485) (96,817) (97,095)

Total

$ 350,438 $ 332,311 $ 335,092

Page 15 of 56


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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

4. Long-Term Debt

September 30,
2013
December 31,
2012
September 30,
2012
(Dollars in Thousands)

6.6% Senior Notes, due 2018

$ 298,837 $ 298,677 $ 298,626

7% Debentures, due 2025

124,464 124,443 124,437

6.25% Senior Notes, due 2037

228,139 228,114 228,105

Term Loan Facility, due 2015, interest rate of 2.18% at September 30, 2013; 2.21% at December 31, 2012; and 1.87% at September 30, 2012

240,000 245,000 245,000

Revolving Facility, interest rate of 1.88% at September 30, 2013; 1.91% at December 31, 2012; and 1.62% at September 30, 2012

70,000 50,000 100,000

Trade Receivable Facility, interest rate of 0.78% at September 30, 2013

150,000 -- --

AR Credit Facility, interest rate of 1.00% at December 31, 2012 and September 30, 2012

-- 100,000 100,000

Other notes

1,921 1,625 2,620

Total debt

1,113,361 1,047,859 1,098,788

Less current maturities

(6,169) (5,676) (6,671)

Long-term debt

$ 1,107,192 $ 1,042,183 $ 1,092,117

The Corporation’s $100,000,000 secured accounts receivable credit facility (the “AR Credit Facility”) expired by its own terms on April 20, 2013.

On April 19, 2013, the Corporation, through a wholly-owned consolidated special purpose subsidiary, established a $150,000,000 trade receivable securitization facility with SunTrust Bank and certain other lenders that may become a party to the facility from time to time (the “Trade Receivable Facility”). The Trade Receivable Facility is backed by trade receivables originated by the Corporation, which the Corporation then sells to the wholly-owned consolidated special purpose subsidiary - the balance of which was $314,998,000 at September 30, 2013. Borrowings under the Trade Receivable Facility bear interest at a rate equal to one-month LIBOR plus 0.6% and are limited to the lesser of the facility limit or of “eligible” receivables, as defined. The Corporation continues to be responsible for the servicing and administration of the receivables purchased by the wholly-owned consolidated special purpose subsidiary. The Corporation has the option to request an increase in the commitment amount by up to an additional $100,000,000, in increments of no less than $25,000,000, subject to receipt of lender commitments for the increased amount. The Trade Receivable Facility matures on April 19, 2014. At September 30, 2013, outstanding borrowings under the Trade Receivable Facility were classified as long-term on the consolidated balance sheet as the Corporation has the intent and ability to refinance amounts outstanding. The Trade Receivable Facility contains a cross-default provision to the Corporation’s other debt agreements.

Page 16 of 56


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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

4. Long-Term Debt (continued)

The Corporation’s Credit Agreement, consisting of a $250,000,000 senior unsecured term loan (the “Term Loan Facility”) and a $350,000,000 senior unsecured revolving facility (the “Revolving Facility”), requires the Corporation’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined, for the trailing twelve month period (the “Ratio”) to not exceed 3.50x as of the end of any fiscal quarter, provided that the Corporation may exclude from the Ratio debt incurred in connection with certain acquisitions for a period of 210 days so long as the Corporation maintains specified ratings on its long-term unsecured debt and the Ratio calculated without such exclusion does not exceed 3.75x. Additionally, if no amounts are outstanding under the Revolving Facility, consolidated debt, including debt for which the Corporation is a co-borrower, may be reduced by the Corporation’s unrestricted cash and cash equivalents in excess of $50,000,000, such reduction not to exceed $200,000,000, for purposes of the covenant calculation. The Corporation was in compliance with this Ratio at September 30, 2013.

Available borrowings under the Revolving Facility are reduced by any outstanding letters of credit issued by the Corporation under the Revolving Facility. At September 30, 2013, the Corporation had $2,507,000 of outstanding letters of credit issued under the Revolving Facility.

Accumulated other comprehensive loss includes the unamortized value of terminated forward starting interest rate swap agreements. For the three and nine months ended September 30, 2013, the Corporation recognized $279,000 and $823,000, respectively, as additional interest expense. For the three and nine months ended September 30, 2012, the Corporation recognized $260,000 and $768,000, respectively, as additional interest expense. The ongoing amortization of the terminated value of the forward starting interest rate swap agreements will increase annual interest expense by approximately $1,000,000 until the maturity of the 6.6% Senior Notes in 2018.

Page 17 of 56


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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

5. Financial Instruments

The Corporation’s financial instruments include temporary cash investments, accounts receivable, notes receivable, bank overdraft, accounts payable, publicly-registered long-term notes, debentures and other long-term debt.

Temporary cash investments are placed primarily in money market funds, money market demand deposit accounts and Eurodollar time deposits with the following financial institutions: Branch Banking and Trust Company, Comerica Bank, Fifth Third Bank, JPMorgan Chase Bank, N.A., Regions Bank, and Wells Fargo Bank, N.A. The Corporation’s cash equivalents have maturities of less than three months. Due to the short maturity of these investments, they are carried on the consolidated balance sheets at cost, which approximates fair value.

Customer receivables are due from a large number of customers, primarily in the construction industry, and are dispersed across wide geographic and economic regions. However, customer receivables are more heavily concentrated in certain states (namely, Texas, North Carolina, Iowa, Colorado and Georgia). The estimated fair values of customer receivables approximate their carrying amounts due to the short-term nature of the receivables.

Notes receivable are primarily promissory notes with customers and are not publicly traded. Management estimates that the fair value of notes receivable approximates the carrying amount.

The bank overdraft represents amounts to be funded to financial institutions for checks that have cleared the bank. The estimated fair value of the bank overdraft approximates its carrying value.

Accounts payable represent amounts owed to suppliers and vendors. The estimated fair value of accounts payable approximates its carrying amounts due to the short-term nature of the payables.

The carrying values and fair values of the Corporation’s long-term debt were $1,113,361,000 and $1,152,906,000, respectively, at September 30, 2013; $1,047,859,000 and $1,105,650,000, respectively, at December 31, 2012; and $1,098,788,000 and $1,156,820,000, respectively, at September 30, 2012. The estimated fair value of the Corporation’s publicly-registered long-term notes was estimated based on level 1 of the fair value hierarchy using quoted market prices. The estimated fair value of other borrowings, which primarily represents variable-rate debt, approximates its carrying amount as the interest rates reset periodically.

Page 18 of 56


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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

6. Income Taxes

Nine Months Ended September 30,
2013 2012

Estimated effective income tax rate:

Continuing operations

25.9% 16.2%

Discontinued operations

35.5% 36.1%

Consolidated overall

25.8% 15.8%

The Corporation’s effective income tax rate reflects the effect of federal and state income taxes and the impact of differences in book and tax accounting arising from the net permanent benefits associated with the statutory depletion deduction for mineral reserves, the impact of foreign losses for which no tax benefit was realized and the domestic production deduction. The effective income tax rates for discontinued operations reflect the tax effects of individual operations’ transactions and are not indicative of the Corporation’s overall effective income tax rate.

On September 13, 2013, the U.S. Treasury Department and Internal Revenue Service issued final regulations addressing costs incurred in acquiring, producing or improving tangible property (the “tangible property regulations”). The tangible property regulations are generally effective for tax years beginning on or after January 1, 2014, and may be adopted in earlier years. The Corporation intends to early adopt the tax treatment of expenditures to improve tangible property and the capitalization of inherently facilitative costs to acquire tangible property as of January 1, 2013. The estimated tax impact of these accounting method changes reduces noncurrent deferred tax assets in the amount of $2,100,000, with a corresponding reduction in current taxes payable, and has been reflected in the consolidated balance sheet as of September 30, 2013. The tangible property regulations will require the Corporation to make additional tax accounting method changes as of January 1, 2014; however, management does not anticipate the impact of these changes to be material to the Corporation’s consolidated financial position and/or results of operations.

The Corporation’s unrecognized tax benefits, excluding interest, correlative effects and indirect benefits, are as follows:

Nine Months Ended
September 30, 2013
(Dollars in Thousands)

Unrecognized tax benefits at beginning of period

$        15,380

Gross increases – tax positions in prior years

4,520

Gross decreases – tax positions in prior years

(4,336)

Gross increases – tax positions in current year

1,176

Settlements with taxing authorities

(8,599)

Lapse of statute of limitations

(1,691)

Unrecognized tax benefits at end of period

$          6,450

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

6. Income Taxes (continued)

In August 2013, the Corporation filed the required amended returns and paid the tax due to settle the Advance Pricing Agreement (“APA”) it has with Canada that increased the sales price charged for intercompany shipments from Canada to the United States during the years 2005 through 2011. The Corporation also filed amended returns in the United States for the years 2005 through 2011 to request the compensating refunds allowed pursuant to the corresponding APA with the United States.

The Corporation anticipates that it is reasonably possible that unrecognized tax benefits may decrease up to $1,828,000 during the twelve months ending September 30, 2014 as a result of the expiration of the statute of limitations for the 2010 tax year.

At September 30, 2013, unrecognized tax benefits of $5,736,000 related to permanent income tax differences, net of federal tax expense, would have favorably affected the Corporation’s effective income tax rate if recognized.

The consolidated overall estimated effective income tax rate for the nine months ended September 30, 2012 included the estimated effects of the APA and a refund of federal tax and interest of $1,626,000 related to the 2006 tax year.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

7. Pension and Postretirement Benefits

The estimated components of the recorded net periodic benefit cost (credit) for pension and postretirement benefits are as follows:

Three Months Ended September 30,
Pension Postretirement Benefits
2013 2012 2013 2012
(Dollars in Thousands)

Service cost

$ 4,030 $ 3,074 $ 57 $ 57

Interest cost

5,756 5,561 253 309

Expected return on assets

(6,668 ) (5,617 ) -- --

Amortization of:

Prior service cost (credit)

112 110 (814 ) (814 )

Actuarial loss (gain)

3,920 2,920 6 (71 )

Settlement charge

729 255 -- --

Net periodic benefit cost (credit)

$ 7,879 $ 6,303 $ (498 ) $ (519 )

Nine Months Ended September 30,
Pension Postretirement Benefits
2013 2012 2013 2012
(Dollars in Thousands)

Service cost

$ 12,091 $ 9,813 $ 170 $ 171

Interest cost

17,268 17,754 760 926

Expected return on assets

(20,003 ) (17,935 ) -- --

Amortization of:

Prior service cost (credit)

337 350 (2,441 ) (2,442 )

Actuarial loss (gain)

11,760 9,323 19 (212 )

Settlement charge

729 779 -- --

Net periodic benefit cost (credit)

$ 22,182 $ 20,084 $ (1,492 ) $ (1,557 )

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

8. Commitments and Contingencies

Legal and Administrative Proceedings

The Corporation is engaged in certain legal and administrative proceedings incidental to its normal business activities. In the opinion of management and counsel, based upon currently-available facts, it is remote that the ultimate outcome of any litigation and other proceedings, including those pertaining to environmental matters, relating to the Corporation and its subsidiaries, will have a material adverse effect on the overall results of the Corporation’s operations, its cash flows or its financial position.

Environmental and Governmental Regulations

The United States Environmental Protection Agency (“USEPA”) includes the lime industry as a national enforcement priority under the federal Clean Air Act (“CAA”). As part of the industry wide effort, the USEPA issued Notices of Violation/Findings of Violation (“NOVs”) to the Corporation in 2010 and 2011 regarding the Corporation’s compliance with the CAA New Source Review (“NSR”) program at its Specialty Products dolomitic lime manufacturing plant in Woodville, Ohio. The Corporation has been providing information to the USEPA in response to these NOVs and has had several meetings with the USEPA. The Corporation believes it is in substantial compliance with the NSR program. Because the enforcement proceeding is in its initial stage, at this time the Corporation cannot reasonably estimate what likely penalties or upgrades to equipment might ultimately be required. The Corporation believes that any costs related to any upgrades to capital equipment will be spread over time and will not have a material adverse effect on the Corporation’s operations or its financial condition, but can give no assurance that the ultimate resolution of this matter will not have a material adverse effect on the financial condition or results of operations of the Specialty Products segment of the business.

Co-Borrower Agreement with an Unconsolidated Affiliate

The Corporation had an unconditional guaranty of payment agreement with Fifth Third Bank (“Fifth Third”) to guarantee the repayment of amounts borrowed by an unconsolidated affiliate under a $24,000,000 revolving line of credit provided by Fifth Third that was replaced in August 2013 by a new $24,000,000 revolving line of credit agreement in which the Corporation became a co-borrower with the affiliate. This new line of credit expires in August 2015. The affiliate has agreed to reimburse and indemnify the Corporation for any payments and expenses the Corporation may incur from this agreement. The Corporation holds a lien on the affiliate’s membership interest in a joint venture as collateral for payment under the revolving line of credit.

Additionally, in September 2013, the Corporation loaned $3,402,000 to this affiliate to repay in full the outstanding balance of its loan with Bank of America, N.A. and entered into a loan agreement with the affiliate for monthly repayment of principal and interest of that loan amount through May 2016. The Corporation holds a lien on the affiliate’s property as collateral for payment under the loan and security agreement.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

9. Business Segments

The Corporation conducts its aggregates and vertically-integrated operations through three reportable business segments: Mid-America Group, Southeast Group and West Group. The Corporation also has a Specialty Products segment that includes magnesia-based chemicals products and dolomitic lime.

The following tables display selected financial data for continuing operations for the Corporation’s reportable business segments. Corporate loss from operations primarily includes depreciation on capitalized interest, expenses for corporate administrative functions, unallocated corporate expenses and other nonrecurring and/or non-operational adjustments. Prior-year segment information has been reclassified to conform to the presentation of the Corporation’s current reportable segments.

Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(Dollars in Thousands)

Total revenues:

Mid-America Group

$ 237,696 $ 212,164 $ 555,823 $ 538,881

Southeast Group

69,491 61,369 185,676 184,448

West Group

297,517 264,662 686,867 640,689

Total Aggregates Business

604,704 538,195 1,428,366 1,364,018

Specialty Products

60,616 54,073 182,189 165,625

Total

$ 665,320 $ 592,268 $ 1,610,555 $ 1,529,643

Net sales:

Mid-America Group

$ 216,361 $ 194,128 $ 508,999 $ 493,453

Southeast Group

64,871 57,021 171,456 171,027

West Group

263,431 236,911 603,798 560,838

Total Aggregates Business

544,663 488,060 1,284,253 1,225,318

Specialty Products

55,794 49,447 167,595 151,626

Total

$ 600,457 $ 537,507 $ 1,451,848 $ 1,376,944

Earnings (Loss) from operations:

Mid-America Group

$ 66,419 $ 56,357 $ 102,342 $ 94,959

Southeast Group

(1,386) (3,452) (14,949) (14,980)

West Group

32,302 23,666 38,402 29,183

Total Aggregates Business

97,335 76,571 125,795 109,162

Specialty Products

17,267 17,034 53,071 52,706

Corporate

(5,759) (2,072) (23,709) (45,924)

Total

$ 108,843 $ 91,533 $ 155,157 $ 115,944

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

9. Business Segments (continued)

Assets employed for the Mid-America and West Groups have been recast since prior year as a result of the Corporation’s reorganization of the operations of its Aggregates business (see Note 1).

September 30,
2013
December 31,
2012
September 30,
2012
(Dollars in Thousands)

Assets employed:

Mid-America Group

$ 1,161,756 $ 1,036,155 $ 1,074,451

Southeast Group

628,673 607,705 614,214

West Group

1,172,289 1,147,879 1,188,373

Total Aggregates Business

2,962,718 2,791,739 2,877,038

Specialty Products

153,334 157,673 154,155

Corporate

221,053 211,514 212,011

Total

$ 3,337,105 $ 3,160,926 $ 3,243,204

The Aggregates business includes the aggregates product line, along with the asphalt, ready mixed concrete and road paving product lines of its vertically-integrated operations. All vertically-integrated operations reside in the West Group. The following tables provide net sales and gross profit by product line for the Aggregates business and are reconciled to consolidated net sales and gross profit.

Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(Dollars in Thousands)

Net sales:

Aggregates

$ 411,206 $ 371,398 $ 1,016,238 $ 985,563

Asphalt

23,787 28,881 52,231 61,655

Ready Mixed Concrete

41,765 31,531 103,347 78,746

Road Paving

67,905 56,250 112,437 99,354

Total Aggregates Business

544,663 488,060 1,284,253 1,225,318

Specialty Products

55,794 49,447 167,595 151,626

Total

$ 600,457 $ 537,507 $ 1,451,848 $ 1,376,944

Gross profit (loss):

Aggregates

$ 108,166 $ 94,541 $ 189,171 $ 182,883

Asphalt

7,322 6,359 9,770 9,065

Ready Mixed Concrete

3,124 472 4,911 421

Road Paving

4,286 2,276 (285) 208

Total Aggregates Business

122,898 103,648 203,567 192,577

Specialty Products

19,919 19,744 60,784 59,057

Corporate

291 630 (1,426) (1,222)

Total

$ 143,108 $ 124,022 $ 262,925 $ 250,412

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

10. Supplemental Cash Flow Information

The components of the change in other assets and liabilities, net, are as follows:

Nine Months Ended
September 30,
2013 2012
(Dollars in Thousands)

Other current and noncurrent assets

$ (42) $ (9,694)

Accrued salaries, benefits and payroll taxes

(1,307) (1,270)

Accrued insurance and other taxes

5,761 7,767

Accrued income taxes

18,369 7,817

Accrued pension, postretirement and postemployment benefits

(10,431) (14,693)

Other current and noncurrent liabilities

13,228 14,956

$ 25,578 $ 4,883

The change in other current and noncurrent assets from 2012 to 2013 is driven by unrecognized tax benefits related to the settlement of the APA described in Note 6 and an increase in sales tax refunds in 2012.

The change in accrued income taxes is driven by an increase in the estimated current tax liability for 2013.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW    Martin Marietta Materials, Inc., (the “Corporation”) is the nation’s second largest producer of construction aggregates. The Corporation’s annual net sales and earnings are predominately derived from its Aggregates business, which processes and sells granite, limestone, and other aggregates products, including asphalt, ready mixed concrete and road paving construction services, from a network of 303 quarries, distribution facilities and plants to customers in 33 states, Canada, the Bahamas and the Caribbean Islands. The Aggregates business’ products are used primarily by commercial customers principally in domestic construction of highways and other infrastructure projects and for nonresidential and residential building development. Aggregates products are also used in the railroad, environmental, utility and agricultural industries.

Effective January 1, 2013, the Corporation reorganized the groups within its Aggregates business. The Corporation currently conducts its aggregates and vertically-integrated operations through three reportable business segments: Mid-America Group, Southeast Group and West Group. The Mid-America Group continues to include operations formerly reported in the Mideast Group, along with operations in Iowa, Minnesota, eastern Nebraska, North Dakota, and Washington (which were formerly reported in the West Group). The Southeast Group remains unchanged. With the exception of operations now reported in the Mid-America Group, there were no other changes to the West Group.

AGGREGATES BUSINESS
Reportable Segments Mid-America Group Southeast Group West Group
Operating Locations Indiana, Iowa, Kentucky,
Maryland, Minnesota,
eastern Nebraska, North
Dakota, North Carolina,
Ohio, South Carolina,
Virginia, Washington
and West Virginia
Alabama, Florida,
Georgia, Mississippi,
Tennessee, Nova
Scotia and the
Bahamas
Arkansas, Colorado,
Kansas, Louisiana,
Missouri, western
Nebraska, Nevada,
Oklahoma, Texas,
Utah and Wyoming
Primary Product Lines Aggregates (stone,
sand and gravel)
Aggregates (stone,
sand and gravel)
Aggregates (stone, sand
and gravel), asphalt,
ready mixed concrete
and road paving
Primary Types of
Aggregates Locations
Quarries and
Distribution Yards
Quarries and
Distribution Yards
Quarries and

Distribution Yards

Primary Modes of
Transportation for
Aggregates Product Line
Truck, Rail and
Water
Truck, Rail and
Water
Truck and Rail

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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The Corporation also has a Specialty Products segment that produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel industry.

CRITICAL ACCOUNTING POLICIES    The Corporation outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission (“SEC”) on February 22, 2013. There were no changes to the Corporation’s critical accounting policies during the nine months ended September 30, 2013.

RESULTS OF OPERATIONS

Except as indicated, the following comparative analysis in the Results of Operations section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects results from continuing operations and is based on net sales and cost of sales. However, gross margin as a percentage of net sales and operating margin as a percentage of net sales represent non-GAAP measures. The Corporation presents these ratios calculated based on net sales, as it is consistent with the basis by which management reviews the Corporation’s operating results. Further, management believes it is consistent with the basis by which investors analyze the Corporation’s operating results given that freight and delivery revenues and costs represent pass-throughs and have no profit mark-up. Gross margin and operating margin calculated as percentages of total revenues represent the most directly comparable financial measures calculated in accordance with generally accepted accounting principles (GAAP). The following tables present the calculations of gross margin and operating margin for the three and nine months ended September 30, 2013 and 2012 in accordance with GAAP and reconciliations of the ratios as percentages of total revenues to percentages of net sales:

Gross Margin in Accordance with GAAP

Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(Dollars in Thousands)

Gross profit

$ 143,108 $ 124,022 $ 262,925 $ 250,412

Total revenues

$ 665,320 $ 592,268 $ 1,610,555 $ 1,529,643

Gross margin

21.5% 20.9% 16.3% 16.4%

Page 27 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Gross Margin Excluding Freight and Delivery Revenues

Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(Dollars in Thousands)

Gross profit

$ 143,108 $ 124,022 $ 262,925 $ 250,412

Total revenues

$ 665,320 $ 592,268 $ 1,610,555 $ 1,529,643

Less: Freight and delivery revenues

(64,863) (54,761) (158,707) (152,699)

Net sales

$ 600,457 $ 537,507 $ 1,451,848 $ 1,376,944

Gross margin excluding freight and delivery revenues

23.8% 23.1% 18.1% 18.2%

Operating Margin in Accordance with GAAP

Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(Dollars in Thousands)

Earnings from operations

$ 108,843 $ 91,533 $ 155,157 $ 115,944

Total revenues

$ 665,320 $ 592,268 $ 1,610,555 $ 1,529,643

Operating margin

16.4% 15.5% 9.6% 7.6%

Operating Margin Excluding Freight and Delivery Revenues

Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(Dollars in Thousands)

Earnings from operations

$ 108,843 $ 91,533 $ 155,157 $ 115,944

Total revenues

$ 665,320 $ 592,268 $ 1,610,555 $ 1,529,643

Less: Freight and delivery revenues

(64,863) (54,761) (158,707) (152,699)

Net sales

$ 600,457 $ 537,507 $ 1,451,848 $ 1,376,944

Operating margin excluding freight and delivery revenues

18.1% 17.0% 10.7% 8.4%

Page 28 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Quarter Ended September 30

Significant items for the quarter ended September 30, 2013 (unless noted, all comparisons are versus the prior-year third quarter):

Earnings per diluted share of $1.54 compared with $1.36

Record consolidated net sales of $600.5 million, up 11.7%, compared with $537.5 million

Aggregates product line

— Volume up 8.1%

— Pricing up 2.3%

— Production cost per ton up 2.6%

Consolidated gross profit of $143.1 million

— Gross margin (excluding freight and delivery revenues) expansion of 70 basis points

Specialty Products record third-quarter

— Net sales of $55.8 million

— Earnings from operations of $17.3 million

Consolidated selling, general and administrative expenses (“SG&A”) of 6.2%, up 20 basis points as a percentage of net sales

Consolidated earnings from operations of $108.8 million compared with $91.5 million

Acquisition and successful integration of three aggregates quarries in the Atlanta, Georgia area

The following table presents net sales, gross profit (loss), selling, general and administrative expenses and earnings (loss) from operations data for the Corporation and its reportable segments for the three months ended September 30, 2013 and 2012. In each case, the data is stated as a percentage of net sales of the Corporation or the relevant segment, as the case may be.

Page 29 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Three Months Ended September 30,
2013 2012
Amount % of
Net Sales
Amount % of
Net Sales
(Dollars in Thousands)

Net sales:

Mid-America Group

$ 216,361 $ 194,128

Southeast Group

64,871 57,021

West Group

263,431 236,911

Total Aggregates Business

544,663 100.0 488,060 100.0

Specialty Products

55,794 100.0 49,447 100.0

Total

$ 600,457 100.0 $ 537,507 100.0

Gross profit (loss):

Mid-America Group

$ 77,030 35.6 $ 68,460 35.3

Southeast Group

2,545 3.9 1,070 1.9

West Group

43,323 16.4 34,118 14.4

Total Aggregates Business

122,898 22.6 103,648 21.2

Specialty Products

19,919 35.7 19,744 39.9

Corporate

291 -- 630 --

Total

$ 143,108 23.8 $ 124,022 23.1

Selling, general & administrative expenses:

Mid-America Group

$ 12,488 $ 12,906

Southeast Group

4,406 4,279

West Group

11,553 11,257

Total Aggregates Business

28,447 5.2 28,442 5.8

Specialty Products

2,582 4.6 2,175 4.4

Corporate

6,111 -- 1,478 --

Total

$ 37,140 6.2 $ 32,095 6.0

Earnings (Loss) from operations:

Mid-America Group

$ 66,419 $ 56,357

Southeast Group

(1,386) (3,452)

West Group

32,302 23,666

Total Aggregates Business

97,335 17.9 76,571 15.7

Specialty Products

17,267 30.9 17,034 34.4

Corporate

(5,759) -- (2,072) --

Total

$ 108,843 18.1 $ 91,533 17.0

Page 30 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The Corporation reported double-digit increases in both revenues and earnings in the third quarter of 2013. The Corporation’s performance was driven largely by the ongoing recovery in private sector construction activity, as well as diligent cost management. The combination of a 12% increase in consolidated net sales over the prior-year quarter and ongoing focus on controlling costs resulted in a 13% increase in earnings per diluted share. These results reflect both new third-quarter records for net sales and earnings from operations in the Specialty Products business, as well as volume and pricing growth in the aggregates product line.

Each of the reportable segments in the Aggregates business posted aggregates product line volume growth, led by an 8.1% increase in the Mid-America Group. Consistent with trends noted earlier in the year, private-sector construction generated this growth. The nonresidential market, which comprised 30% of third-quarter aggregates shipments, increased 19% and growth was notable in both commercial construction and the energy sector. The residential market achieved volume growth of 15% and accounted for 13% of quarterly shipments. Housing permits and starts, key indicators for residential construction activity, continued to have strong year-over-year improvement, which should help sustain the recovery in this market. The ChemRock/Rail market, 11% of aggregates volumes, reported higher ballast shipments and increased 13% over the prior-year quarter.

Management is encouraged by significant improvements in the Aggregates business’ markets and believes, as do most third-party forecasters, that significant upside potential remains in both the residential and nonresidential construction segments. Additionally, the Corporation’s Aggregates business will benefit from the current boom in shale gas production as well as planned follow-on development. Management is confident that these trends bode especially well for the business.

Shipments to the infrastructure end-use market, which represented the remaining 46% of the aggregates product line business, were essentially flat with the prior-year quarter. Federal budget and deficit disputes and the uncertainty over future highway funding levels beyond the September 2014 expiration of the Moving Ahead for Progress in the 21 st Century Act , or MAP-21, have contributed to the reluctance of many states and municipalities to commit to large scale projects. Additionally, while awards under the Transportation Infrastructure Finance and Innovation Act (TIFIA) component of MAP-21 have the ability to leverage up to $50 billion in financing for transportation projects of either national or regional significance, they continue to move at a slower pace versus earlier expectations with only two projects being awarded. While management still expects TIFIA to benefit several of the Aggregates business’ major markets - namely Texas, North Carolina and Florida - it does not expect any meaningful impact before the second half of 2014, and more notably in 2015.

Page 31 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Despite federal-level funding delays and concerns, management is encouraged by states’ recognition of the importance of sustained infrastructure investment. The Aggregates business has seen year-over-year growth in highway contract awards and construction employment in several of its key states, including Texas, Georgia, Colorado and Virginia. In Georgia, three regions in the southern part of the state began collecting a special-purpose local option sales tax on January 1, 2013. These monies are earmarked for transportation improvements, and management expects the pace of projects funded by this tax to accelerate as it moves into 2014. Additionally, management anticipates a significant reconstruction effort in Colorado as a result of the recent flooding. The Aggregates business is well-positioned to work with the local Colorado communities to repair and/or replace hundreds of miles of washed-out roads and the significant number of destroyed homes, businesses and bridges.

Pricing momentum in the Aggregates business continued with each of its product lines reporting growth. Importantly, for the third quarter in a row, each reportable segment achieved pricing improvement in the aggregates product line, resulting in an overall increase of 2.3%. The Corporation’s vertically-integrated businesses also achieved pricing growth, with the ready mixed concrete and asphalt product lines reporting increases of 7.0% and 1.6%, respectively.

Net sales by product line for the Aggregates business are as follows:

Three Months Ended
September 30,
2013 2012
(Dollars in Thousands)

Net sales 1 :

Aggregates

$ 411,206 $ 371,398

Asphalt

23,787 28,881

Ready Mixed Concrete

41,765 31,531

Road Paving

67,905 56,250

Total Aggregates Business

$ 544,663 $ 488,060

1 Net

sales by product line reflect the elimination of inter-product line sales.

Page 32 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The following tables present volume and pricing data and shipments data for the aggregates product line.

Three Months Ended
September 30, 2013
Volume/Pricing Variance (1) Volume Pricing

Heritage Aggregates Product Line (2) :

Mid-America Group

8.1% 2.8%

Southeast Group

4.8% 1.3%

West Group

6.5% 1.7%

Heritage Aggregates Operations (2)

7.0% 2.2%

Aggregates Product Line (3)

8.1% 2.3%

Three Months Ended
September 30,
2013 2012
(tons in thousands)

Shipments

Heritage Aggregates Product Line (2) :

Mid-America Group

19,172 17,742

Southeast Group

4,612 4,399

West Group

15,468 14,528

Heritage Aggregates Operations (2)

39,252 36,669

Acquisitions

379 --

Divestitures (4)

-- 5

Aggregates Product Line (3)

39,631 36,674

Three Months Ended
September 30,
2013 2012
(tons in thousands)

Shipments

Aggregates Product Line (3) :

Tons to external customers

38,109 35,254

Internal tons used in other product lines

1,522 1,420

Total aggregates tons

39,631 36,674

(1) Volume/pricing variances reflect the percentage increase/(decrease) from the comparable period in the prior year.
(2) Heritage Aggregates Product Line and Heritage Aggregates Operations exclude volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and exclude divestitures.
(3) Aggregates Product Line includes all acquisitions from the date of acquisition and divestitures through the date of disposal.
(4) Divestitures include the tons related to divested aggregates product line operations up to the date of divestiture.

Page 33 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The average per-ton selling price for the aggregates product line was $10.55 and $10.32 for the three months ended September 30, 2013 and 2012, respectively.

The Corporation’s vertically-integrated operations include asphalt, ready mixed concrete and road paving businesses in Arkansas, Colorado and Texas. Average selling prices by product line for the Corporation’s vertically-integrated operations are as follows:

Three Months Ended
September 30,
2013 2012

Asphalt

$ 41.76/ton $ 41.11/ton

Ready Mixed Concrete

$ 83.44/yd 3 $ 77.99/yd 3

Unit shipments by product line for the Corporation’s vertically-integrated operations are as follows:

Three Months Ended
September 30,
2013 2012
(in thousands)

Asphalt Product Line:

Tons to external customers

464 538

Internal tons used in road paving business

761 717

Total asphalt tons

1,225 1,255

Ready Mixed Concrete – cubic yards

496 418

The Aggregates business is significantly affected by erratic weather patterns, seasonal changes and other weather-related conditions. Aggregates production and shipment levels correlate with general construction activity levels, most of which occurs in the spring, summer and fall. Thus, production and shipment levels vary by quarter. Operations concentrated in the northern and midwestern United States generally experience more severe winter weather conditions than operations in the Southeast and Southwest. Excessive rainfall, and conversely excessive drought, can also jeopardize shipments, production and profitability in all markets served by the Corporation. Because of the potentially significant impact of weather on the Corporation’s operations, third-quarter results are not indicative of expected performance for other interim periods or the full year.

Page 34 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The Specialty Products business continued its strong performance, setting third-quarter records for both net sales and earnings from operations. Net sales of $55.8 million increased 12.8%, from growth in the dolomitic lime product line, including the contribution from the Woodville kiln that became operational during the fourth quarter of 2012. While margins (excluding freight and delivery revenues) were negatively affected by higher coal costs and a planned kiln outage for maintenance, the business generated third-quarter record earnings from operations of $17.3 million.

The Corporation leveraged its sales growth into a 70-basis-point expansion of consolidated gross margin (excluding freight and delivery revenues). In fact, each of the Aggregates business’ three reportable segments achieved gross margin improvement, with the Southeast and West Groups each reporting a 200-basis-point expansion. Growth in the Mid-America Group was led by the Mid-Atlantic Division, which once again leveraged an increase in aggregates shipments into an incremental gross margin (excluding freight and delivery revenues) exceeding management’s publicly-stated expectations.

The following presents a reconciliation of consolidated gross profit (dollars in thousands):

Consolidated gross profit, quarter ended September 30, 2012

$ 124,022

Aggregates product line:

Volume strength

26,645

Pricing strength

13,163

Cost increases, net

(26,183)

Increase in aggregates product line gross profit

13,625

Vertically-integrated operations

5,625

Specialty Products

175

Corporate

(339)

Increase in consolidated gross profit

19,086

Consolidated gross profit, quarter ended September 30, 2013

$ 143,108

Cost increases, net, for the aggregates product line reflect incremental production costs for the recently-acquired quarries in Georgia, higher repair costs, increased workers compensation costs for claims incurred during the quarter, costs related to the September flooding in Denver, Colorado, as well as increased production volume.

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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Gross profit by business is as follows:

Three Months Ended
September 30,
2013 2012
(Dollars in Thousands)

Gross profit:

Aggregates

$ 108,166 $ 94,541

Asphalt

7,322 6,359

Ready Mixed Concrete

3,124 472

Road Paving

4,286 2,276

Total Aggregates Business

122,898 103,648

Specialty Products

19,919 19,744

Corporate

291 630

Total

$ 143,108 $ 124,022

Consolidated SG&A expenses were 6.2% of net sales, up 20 basis points compared with the prior-year quarter. On an absolute basis, SG&A increased $5.0 million, resulting from higher pension expense, incentive compensation and costs for professional services. The Corporation’s information systems upgrade was successfully completed in October 2013.

Among other items, other operating income and expenses, net, includes gains and losses on the sale of assets; recoveries and writeoffs related to customer accounts receivable; rental, royalty and services income; accretion expense, depreciation expense and gains and losses related to asset retirement obligations; and research and development costs. For the third quarter, consolidated other operating income and expenses, net, was income of $3.0 million in 2013 compared with expense of $0.4 million in 2012. Third quarter 2013 included higher gains on the sale of assets and bad debt recoveries compared with 2012 and a $1.8 million gain for the revision of cost estimates for asset retirement obligations.

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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Nine Months Ended September 30

Significant items for the nine months ended September 30, 2013 (unless noted, all comparisons are versus the prior-year nine-month period):

Earnings per diluted share of $1.84 compared with $1.36 (prior-year period includes $0.46 per diluted share charge for business development costs)

Consolidated net sales of $1.452 billion, up 5.4%, compared with $1.377 million

Aggregates product line

— Pricing up 2.9%;

— Volume up 0.2%

— Production cost per ton up 2.6%

Specialty Products net sales of $167.6 million and earnings from operations of $53.1 million

Consolidated SG&A up 50 basis points as a percentage of net sales

Consolidated earnings from operations of $155.2 million compared with $115.9 million (prior-year period includes $35.1 million of business development costs)

Successful integration of three aggregates quarries acquired in the Atlanta, Georgia area

The following table presents net sales, gross profit (loss), selling, general and administrative expenses and earnings (loss) from operations data for the Corporation and its reportable segments for the nine months ended September 30, 2013 and 2012. In each case, the data is stated as a percentage of net sales of the Corporation or the relevant segment, as the case may be.

Page 37 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Nine Months Ended September 30,
2013 2012
Amount % of
Net Sales
Amount % of
Net Sales
(Dollars in Thousands)

Net sales:

Mid-America Group

$ 508,999 $ 493,453

Southeast Group

171,456 171,027

West Group

603,798 560,838

Total Aggregates Business

1,284,253 100.0 1,225,318 100.0

Specialty Products

167,595 100.0 151,626 100.0

Total

$ 1,451,848 100.0 $ 1,376,944 100.0

Gross profit (loss):

Mid-America Group

$ 136,544 26.8 $ 131,682 26.7

Southeast Group

(2,911) (1.7) 348 0.2

West Group

69,934 11.6 60,547 10.8

Total Aggregates Business

203,567 15.9 192,577 15.7

Specialty Products

60,784 36.3 59,057 38.9

Corporate

(1,426) -- (1,222) --

Total

$ 262,925 18.1 $ 250,412 18.2

Selling, general & administrative expenses:

Mid-America Group

$ 37,433 $ 39,927

Southeast Group

13,375 13,690

West Group

34,481 33,464

Total Aggregates Business

85,289 6.6 87,081 7.1

Specialty Products

7,602 4.5 6,900 4.6

Corporate

19,741 -- 6,417 --

Total

$ 112,632 7.8 $ 100,398 7.3

Earnings (Loss) from operations:

Mid-America Group

$ 102,342 $ 94,959

Southeast Group

(14,949) (14,980)

West Group

38,402 29,183

Total Aggregates Business

125,795 9.8 109,162 8.9

Specialty Products

53,071 31.7 52,706 34.8

Corporate

(23,709) -- (45,924) --

Total

$ 155,157 10.7 $ 115,944 8.4

Page 38 of 56


Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Consolidated net sales increased 5.4% over the comparable 2012 period, driven primarily by pricing improvements for all reportable groups and product lines of the Aggregates business, as well as record net sales achieved by the Specialty Products business.

Pricing momentum in the aggregates product line continued with each reportable group achieving pricing growth. The West Group reported a 3.9% improvement, primarily due to price increases implemented over the past year. The Mid-America and Southeast Groups reported average selling price increases of 2.6% and 2.4%, respectively, for the aggregates product line. The Corporation’s vertically-integrated businesses also achieved pricing growth, with the ready mixed concrete and asphalt product lines reporting increases of 7.9% and 3.1%, respectively.

The aggregates product line experienced year-to-date volume growth of 0.2% driven by positive trends in private-sector construction and related employment. Aggregates shipments to all of the Corporation’s end-use markets increased, with the exception of infrastructure. Infrastructure shipments declined 6.0% resulting from the effects of weather-delayed shipments in the first half of 2013 and lackluster public-sector demand.

Net sales by product line for the Aggregates business are as follows:

Nine Months Ended
September 30,
2013 2012
(Dollars in Thousands)

Net sales 1 :

Aggregates

$ 1,016,238 $ 985,563

Asphalt

52,231 61,655

Ready Mixed Concrete

103,347 78,746

Road Paving

112,437 99,354

Total Aggregates Business

$ 1,284,253 $ 1,225,318

1

Net sales by product line reflect the elimination of inter-product line sales.

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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The following tables present volume and pricing data and shipments data for the aggregates product line.

Nine Months Ended
September 30, 2013
Volume/Pricing Variance (1) Volume Pricing

Heritage Aggregates Product Line (2) :

Mid-America Group

0.4% 2.6%

Southeast Group

(4.7%) 2.4%

West Group

0.8% 3.9%

Heritage Aggregates Operations (2)

(0.2%) 2.8%

Aggregates Product Line (3)

0.2% 2.9%

Nine Months Ended
September 30,
2013 2012
(tons in thousands)

Shipments

Heritage Aggregates Product Line (2) :

Mid-America Group

44,387 44,216

Southeast Group

12,705 13,334

West Group

39,489 39,183

Heritage Aggregates Operations (2)

96,581 96,733

Acquisitions

402 --

Divestitures (4)

3 36

Aggregates Product Line (3)

96,986 96,769

Nine Months Ended
September 30,
2013 2012
(tons in thousands)

Shipments

Aggregates Product Line (3) :

Tons to external customers

93,516 93,380

Internal tons used in other product lines

3,470 3,389

Total aggregates tons

96,986 96,769

(1) Volume/pricing variances reflect the percentage increase / (decrease) from the comparable period in the prior year.
(2) Heritage Aggregates Product Line and Heritage Aggregates Operations exclude volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and exclude divestitures.
(3) Aggregates Product Line includes all acquisitions from the date of acquisition and divestitures through the date of disposal.
(4) Divestitures include the tons related to divested aggregates product line operations up to the date of divestiture.

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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The per-ton average selling price for the aggregates product line was $10.62 and $10.33 for the nine months ended September 30, 2013 and 2012, respectively.

Average selling prices by product line for the Corporation’s vertically-integrated operations are as follows:

Nine Months Ended
September 30,
2013 2012

Asphalt

$ 42.11/ton $ 40.84/ton

Ready Mixed Concrete

$ 82.59/yd 3 $ 76.55/yd 3

Unit shipments by product line for the Corporation’s vertically-integrated operations are as follows:

Nine Months Ended
September 30,
2013 2012
(in thousands)

Asphalt Product Line:

Tons to external customers

1,072 1,329

Internal tons used in road paving business

1,257 1,203

Total asphalt tons

2,329 2,532

Ready Mixed Concrete – cubic yards

1,261 1,062

For 2013, Specialty Products’ net sales of $167.6 million increased $16.0 million, or 10.5%, over the prior-year period. Sales growth reflects dolomitic lime shipments from the new lime kiln which became operational in November 2012, partially offset by the loss of higher-margin sales from a customer that filed for bankruptcy. While margins (excluding freight and delivery revenues) were negatively affected by higher coal costs and a planned kiln outage for maintenance, the business generated earnings from operations of $53.1 million in 2013. Earnings from operations of $52.7 million in 2012 included a $1.2 million favorable litigation settlement.

Consolidated gross margin (excluding freight and delivery revenues) was 18.1% for 2013 versus 18.2% for 2012 and was negatively impacted by higher repair costs, including $1.7 million in costs associated with unplanned repairs for a shiploader/reclaimer for the Southeast Group, incremental production costs for the recently-acquired quarries in Georgia, increased workers compensation costs for incurred claims and costs related to the September flooding in Denver, Colorado.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The following presents a reconciliation of consolidated gross profit (dollars in thousands):

Consolidated gross profit, nine months ended September 30, 2012

$ 250,412

Aggregates product line:

Pricing strength

28,370

Volume strength

2,305

Cost increases, net

(24,387)

Increase in aggregates product line gross profit

6,288

Vertically-integrated operations

4,702

Specialty Products

1,727

Corporate

(204)

Increase in consolidated gross profit

12,513

Consolidated gross profit, nine months ended September 30, 2013

$ 262,925

Gross profit (loss) by business is as follows:

Nine Months Ended
September 30,
2013 2012
(Dollars in Thousands)

Gross profit (loss):

Aggregates

$ 189,171 $ 182,883

Asphalt

9,770 9,065

Ready Mixed Concrete

4,911 421

Road Paving

(285) 208

Total Aggregates Business

203,567 192,577

Specialty Products

60,784 59,057

Corporate

(1,426) (1,222)

Total

$ 262,925 $ 250,412

Consolidated SG&A expenses were 7.8% of net sales, up 50 basis points compared with the prior-year period. On an absolute basis, SG&A increased $12.2 million, due to incremental costs for the Corporation’s information systems upgrade that was successfully completed in October 2013 and increased professional services.

During the nine months ended September 30, 2012, the Corporation incurred $35.1 million of business development costs related to a proposed significant business combination that was not consummated.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

For the first nine months, consolidated other operating income and expenses, net, was income of $5.5 million in 2013 compared with income of $1.1 million in 2012, due in part to higher bad debt recoveries in 2013 and a $1.8 million gain for the revision of cost estimates for asset retirement obligations in 2013.

In addition to other offsetting amounts, other nonoperating income and expenses, net, are comprised generally of interest income and net equity earnings from nonconsolidated investments. Consolidated other nonoperating income and expenses, net, for the nine months ended September 30 was an expense of $0.2 million in 2013 compared with income of $1.3 million in 2012. Nonoperating income for 2012 included a gain on debt repurchased at a discount and a gain on foreign currency transactions (compared with a loss in 2013), which were partially offset by lower earnings on nonconsolidated equity investments.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities for the nine months ended September 30, 2013 was $165.6 million compared with $122.0 million for the same period in 2012. The improvement is attributable to the absence of significant business development costs incurred in 2012 and a larger increase in payables. Operating cash flow is primarily derived from consolidated net earnings, before deducting depreciation, depletion and amortization, and offset by working capital requirements. Depreciation, depletion and amortization were as follows:

Nine Months Ended
September 30,
2013 2012
(Dollars in Thousands)

Depreciation

$ 122,129 $ 125,534

Depletion

3,920 3,446

Amortization

4,048 4,005

$ 130,097 $ 132,985

The seasonal nature of the construction aggregates business impacts quarterly operating cash flow when compared with the full year. Full-year 2012 net cash provided by operating activities was $222.7 million compared with $122.0 million for the first nine months of 2012.

During the nine months ended September 30, 2013, the Corporation invested $102.3 million of capital into its business. Full-year capital spending, exclusive of acquisitions, if any, is expected to be approximately $155.0 million in 2013. Comparable full-year capital expenditures were $151.0 million in 2012.

During the third quarter of 2013, the Corporation acquired three aggregates quarries in Atlanta, Georgia.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

On April 19, 2013, the Corporation, through a wholly-owned consolidated special purpose subsidiary, established a $150 million trade receivable securitization facility with SunTrust Bank and certain other lenders that may become a party to the facility from time to time (the “Trade Receivable Facility”). Borrowings under the Trade Receivable Facility are limited based on the balance of the Corporation’s accounts receivable and bear interest at a rate equal to the one-month LIBOR plus 0.6%. The Corporation has the option to request an increase in the commitment amount by up to an additional $100 million in increments of no less than $25 million, subject to receipt of lender commitments for the increased amount. The Corporation has the intent and ability to refinance amounts outstanding when the Trade Receivable Facility matures on April 19, 2014.

The Corporation can repurchase its common stock through open-market purchases pursuant to authority granted by its Board of Directors. The Corporation did not repurchase any shares of common stock during the nine months ended September 30, 2013 and 2012. Management currently has no intent to repurchase any shares of the Corporation’s common stock. At September 30, 2013, 5,042,000 shares of common stock were remaining under the Corporation’s repurchase authorization.

The Credit Agreement (which consisted of a $250 million Term Loan Facility and a $350 million Revolving Facility at September 30, 2013) requires the Corporation’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined, for the trailing twelve month period (the “Ratio”) to not exceed 3.50x as of the end of any fiscal quarter, provided that the Corporation may exclude from the Ratio debt incurred in connection with certain acquisitions for a period of 210 days so long as the Corporation, as a consequence of such specified acquisition, does not have its ratings on long-term unsecured debt fall below BBB by Standard & Poor’s or Baa2 by Moody’s and the Ratio calculated without such exclusion does not exceed 3.75x. Additionally, if there are no amounts outstanding under the Revolving Facility, consolidated debt, including debt for which the Corporation is a co-borrower, will be reduced for purposes of the covenant calculation by the Corporation’s unrestricted cash and cash equivalents in excess of $50 million, such reduction not to exceed $200 million.

The Ratio is calculated as debt, including debt for which the Corporation is a co-borrower, divided by consolidated EBITDA, as defined, for the trailing twelve months. Consolidated EBITDA is generally defined as earnings before interest expense, income tax expense, and depreciation, depletion and amortization expense for continuing operations. Additionally, stock-based compensation expense is added back and interest income is deducted in the calculation of consolidated EBITDA. Certain other nonrecurring noncash items, if they occur, can affect the calculation of consolidated EBITDA.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

At September 30, 2013, the Corporation’s ratio of consolidated debt to consolidated EBITDA, as defined, for the trailing twelve months EBITDA was 3.06 times and was calculated as follows:

Twelve Month Period
October 1, 2012 to
September 30, 2013
(Dollars in thousands)

Earnings from continuing operations attributable to Martin Marietta Materials, Inc.

$ 106,761

Add back:

Interest expense

54,005

Income tax expense

33,949

Depreciation, depletion and amortization expense

169,579

Stock-based compensation expense

7,242

Deduct:

Interest income

(301)

Consolidated EBITDA, as defined

$ 371,235

Consolidated debt, including debt for which the Corporation is a co-borrower, at September 30, 2013

$ 1,135,327

Deduct:

Unrestricted cash and cash equivalents in excess of $50,000 at September 30, 2013

--

Consolidated net debt, as defined, at September 30, 2013

$ 1,135,327

Consolidated debt to consolidated EBITDA, as defined, at September 30, 2013 for the trailing twelve months EBITDA

3.06X

The Trade Receivable Facility contains a cross-default provision to the Corporation’s other debt agreements. In the event of a default on the Ratio, the lenders can terminate the Credit Agreement and Trade Receivable Facility and declare any outstanding balances as immediately due.

Cash on hand, along with the Corporation’s projected internal cash flows and availability of financing resources, including its access to debt and equity capital markets, is expected to continue to be sufficient to provide the capital resources necessary to support anticipated operating needs, cover debt service requirements, meet capital expenditures and discretionary investment needs, fund certain acquisition opportunities that may arise and allow for payment of dividends for the foreseeable future. At September 30, 2013, the Corporation had $277 million of unused borrowing capacity under its Revolving Facility, subject to complying with the related leverage covenant.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

The Corporation may be required to obtain financing to fund certain strategic acquisitions, if any such opportunities arise, or to refinance outstanding debt. Any strategic acquisition of size for cash would likely require an appropriate balance of newly-issued equity with debt in order to maintain a composite investment-grade credit rating. Furthermore, the Corporation is exposed to the credit markets, through the interest cost related to its variable-rate debt, which included borrowings under its Revolving Facility, Term Loan Facility and Trade Receivable Facility at September 30, 2013. The Corporation is currently rated by three credit rating agencies; two of those agencies’ credit ratings are investment-grade level and the third agency’s credit rating is one level below investment grade. The Corporation’s composite credit rating remains at investment-grade level, which facilitates obtaining financing at lower rates than noninvestment-grade ratings. While management believes its composite credit ratings will remain at an investment-grade level, no assurance can be given that these ratings will remain at current levels, particularly if any opportunities arise to consummate strategic acquisitions.

TRENDS AND RISKS     The Corporation outlined the risks associated with its business in its Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on February 22, 2013. Management continues to evaluate its exposure to all operating risks on an ongoing basis.

OUTLOOK

As noted above, management is encouraged by various positive trends in the Corporation’s business and markets – especially in private-sector employment and construction. Management anticipates volumes in the nonresidential end-use market to increase in the mid-single digits given that the Architecture Billings Index, or ABI, a leading economic indicator for nonresidential construction spending activity, remains at a strong level and has shown consistent growth over the last year. Residential construction is experiencing a level of growth not seen since late 2005 with seasonally-adjusted starts ahead of any period since 2008. Management believes this trend in housing starts will continue and the residential end-use market will experience high single-digit volume growth. By contrast, the weather-related slowdown in aggregates shipments experienced in the first half of the year, coupled with the hesitancy created by the uncertainty of future federal highway funding levels, leads management to expect aggregates shipments to the infrastructure end-use market to be down in the mid-single digits for the full year. The ChemRock/Rail end-use market is expected to be flat compared with 2012.

Cumulatively, dependent on fourth-quarter weather, management anticipates full-year aggregates product line shipments will be flat to slightly up as compared with 2012 levels. Management currently expects aggregates product line pricing to increase 2% to 4% for the full year. A variety of factors beyond the Corporation’s direct control may continue to exert pressure on volumes, and forecasted pricing increase will not be uniform across the company.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

Management expects the vertically-integrated businesses to generate between $335 million and $355 million of net sales and $18 million to $20 million of gross profit.

Aggregates product line direct production costs per ton should be up slightly compared with 2012. SG&A expenses, excluding costs in 2013 and 2012 related to the information systems upgrade, as a percentage of net sales are expected to remain relatively flat.

Net sales for the Specialty Products segment are expected to be between $220 million and $230 million, generating $81 million to $85 million of gross profit. Steel utilization and natural gas prices are two key factors for this segment.

Interest expense is expected to remain relatively flat compared with 2012. The Corporation’s effective tax rate is expected to approximate 26%, excluding discrete events. Capital expenditures are forecast at $155 million.

Management has started framing a preliminary 2014 outlook for the Aggregates business’ end-use markets and, while the current environment in Washington, DC reduces clarity, it has formed an initial view based on internal observations in conjunction with McGraw Hill Construction’s recent economic forecast. Management currently expects shipments to the infrastructure end-use market to increase slightly. Management anticipates the nonresidential end-use market to increase in the mid-to-high single digits, led by strength in the commercial component and energy sector. Management believes the recent positive trend in housing starts will continue and the residential end-use market will experience double-digit volume growth. Finally, management expects the ChemRock/Rail end-use market to be up low single digits compared with 2013.

The full-year 2013 and preliminary 2014 outlook include management’s assessment of the likelihood of certain risk factors that will affect performance. The most significant risk to the Corporation’s performance will be the United States economy and its impact on construction activity. While transportation investment is mostly exempt from spending cuts, the impact of sequester may may increase in future periods. While both MAP-21 and TIFIA credit assistance are excluded from the federal budget sequester and the U.S. debt ceiling limit, the ultimate resolution of these issues may have a significant impact on the economy and, consequently, construction activity. In addition, the recent government shutdown may further erode consumer confidence, which may negatively impact investment in construction projects. Other risks related to the Corporation’s future performance include, but are not limited to, both price and volume and include a recurrence of widespread decline in aggregates volume negatively affecting aggregates price; the termination, capping and/or reduction of the federal and/or state gasoline tax(es) or other revenue related to infrastructure construction; a significant change in the funding patterns for traditional federal, state and/or local infrastructure projects; a reduction in defense spending, and the subsequent impact on construction activity on or near military bases; a decline in nonresidential construction, a decline in

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

energy-related drilling activity resulting from certain regulatory or economic factors, a slowdown in the residential construction recovery, or some combination thereof; and a reduction in ChemRock/Rail shipments resulting from the uncertainty as to the timing and funding of the domestic farm bill and declining coal traffic on the railroads. Further, increased highway construction funding pressures resulting from either federal or state issues can affect profitability. If these negatively affect transportation budgets more than in the past, construction spending could be reduced. North Carolina, a state that disproportionately affects the Corporation’s revenue and profitability, is among the states experiencing these fiscal pressures, although recent statistics indicate that transportation and tax revenues are increasing. The Specialty Products business essentially runs at capacity; therefore any unplanned changes in costs or customers introduce volatility to the earnings of this segment.

The Corporation’s principal business serves customers in aggregates-related construction markets. This concentration could increase the risk of potential losses on customer receivables; however, payment bonds normally posted on public projects, together with lien rights on private projects, help to mitigate the risk of uncollectible receivables. The level of aggregates demand in the Corporation’s end-use markets, production levels and the management of production costs will affect the operating leverage of the Aggregates business and, therefore, profitability. Production costs in the Aggregates business are also sensitive to energy and raw materials prices, both directly and indirectly. Diesel fuel and other consumables change production costs directly through consumption or indirectly by increased energy-related input costs, such as, steel, explosives, tires and conveyor belts. Fluctuating diesel fuel pricing also affects transportation costs, primarily through fuel surcharges in the Corporation’s long-haul distribution network. The Specialty Products business is sensitive to changes in domestic steel capacity utilization and the absolute price and fluctuations in the cost of natural gas.

Transportation in the Corporation’s long-haul network, particularly rail cars and locomotive power to move trains, affects its ability to efficiently transport material into certain markets, most notably Texas, Florida and the Gulf Coast. The availability of trucks and drivers to transport the Corporation’s product, particularly in markets experiencing increased demand due to energy sector activity, is also a risk. The Aggregates business is also subject to weather-related risks that can significantly affect production schedules and profitability. The first and fourth quarters are most adversely affected by winter weather. Hurricane activity in the Atlantic Ocean and Gulf Coast generally is most active during the third and fourth quarters.

Risks to the outlook include shipment declines as a result of economic events beyond the Corporation’s control. In addition to the impact on nonresidential and residential construction, the Corporation is exposed to risk in its estimated outlook from credit markets and the availability of and interest cost related to its debt.

The Corporation’s future performance is also exposed to risk from tax reform at the federal and state levels.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

OTHER MATTERS     If you are interested in Martin Marietta Materials, Inc. stock, management recommends that, at a minimum, you read the Corporation’s current Annual Report and Forms 10-K, 10-Q and 8-K reports to the SEC over the past year. The Corporation’s recent proxy statement for the annual meeting of shareholders also contains important information. These and other materials that have been filed with the SEC are accessible through the Corporation’s website at www.martinmarietta.com and are also available at the SEC’s website at www.sec.gov. You may also write or call the Corporation’s Corporate Secretary, who will provide copies of such reports.

Investors are cautioned that all statements in this Quarterly Report that relate to the future involve risks and uncertainties, and are based on assumptions that the Corporation believes in good faith are reasonable but which may be materially different from actual results. Forward-looking statements give the investor the Corporation’s expectations or forecasts of future events. You can identify these statements by the fact that they do not relate only to historical or current facts. They may use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of the Corporation’s forward-looking statements here and in other publications may turn out to be wrong.

Factors that the Corporation currently believes could cause actual results to differ materially from the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, the performance of the United States economy and the resolution and impact of the debt ceiling and sequestration issues; widespread decline in aggregates pricing; the termination, capping and/or reduction of the federal and/or state gasoline tax(es) or other revenue related to infrastructure construction; the level and timing of federal and state transportation funding, including federal stimulus projects and most particularly in North Carolina and Texas, two of the Corporation’s largest and most profitable states, and Iowa, Colorado and Georgia, which when coupled with North Carolina and Texas, represented 57% of 2012 net sales of the Aggregates business; the ability of states and/or other entities to finance approved projects either with tax revenues or alternative financing structures; levels of construction spending in the markets the Corporation serves; a decline in defense spending, and the subsequent impact on construction activity on or near military bases; a decline in the commercial component of the nonresidential construction market, notably office and retail space; a slowdown in energy-related drilling activity; a slowdown in residential construction recovery; a reduction in shipments due to decline in funding under the domestic farm bill; unfavorable weather conditions, particularly Atlantic Ocean hurricane activity, the late start to spring or the early onset of winter and the impact of a drought or excessive rainfall in the markets served by the Corporation; the volatility of fuel costs, particularly diesel fuel, and the impact on the cost of other consumables, namely steel, explosives, tires, conveyor belts, and with respect to the Specialty Products segment, natural gas; continued increases in the cost of other repair and supply parts; transportation availability, notably the availability of railcars and locomotive power to move trains to supply the Corporation’s Texas, Florida and Gulf Coast markets; increased transportation costs, including increases from higher passed-through energy and other costs to comply with tightening

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2013

(Continued)

regulations as well as higher volumes of rail and water shipments; availability and cost of construction equipment in the United States; weakening in the steel industry markets served by the Corporation’s dolomitic lime products; inflation and its effect on both production and interest costs; reduction of the Corporation’s credit rating to noninvestment-grade resulting from strategic acquisitions; ability to successfully integrate acquisitions quickly and in a cost-effective manner and achieve anticipated profitability to maintain compliance with the Corporation’s leverage ratio debt covenant; changes in tax laws, the interpretation of such laws and/or administrative practices that would increase the Corporation’s tax rate; violation of the Corporation’s debt covenant if price and/or volumes returns to previous levels of instability; downward pressure on the Corporation’s common stock price and its impact on goodwill impairment evaluations; and other risk factors listed from time to time found in the Corporation’s filings with the SEC.

Other factors besides those listed here may also adversely affect the Corporation, and may be material to the Corporation. The Corporation assumes no obligation to update any such forward-looking statements.

INVESTOR ACCESS TO COMPANY FILINGS     Shareholders may obtain, without charge, a copy of Martin Marietta Materials, Inc.’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2012, by writing to:

Martin Marietta Materials, Inc.

Attn: Corporate Secretary

2710 Wycliff Road

Raleigh, North Carolina 27607-3033

Additionally, Martin Marietta Materials, Inc.’s Annual Report, press releases and filings with the Securities and Exchange Commission, including Forms 10-K, 10-Q, 8-K and 11-K, can generally be accessed via the Corporation’s website. Filings with the Securities and Exchange Commission accessed via the website are available through a link with the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system. Accordingly, access to such filings is available upon EDGAR placing the related document in its database. Investor relations contact information is as follows:

Telephone: (919) 788-4367

Website address: www.martinmarietta.com

Information included on the Corporation’s website is not incorporated into, or otherwise create a part of, this report.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Corporation’s operations are highly dependent upon the interest rate-sensitive construction and steelmaking industries. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs.

Management has considered the current economic environment and its potential impact to the Corporation’s business. Demand for aggregates products, particularly in the nonresidential and residential construction markets, could decline if companies and consumers are unable to obtain financing for construction projects or if economic uncertainty causes delays or cancellations to capital projects. Additionally, declining tax revenues and state budget deficits have negatively affected states’ abilities to finance infrastructure construction projects.

Demand in the residential construction market is affected by interest rates. The Federal Reserve kept the federal funds rate near zero percent during the nine months ended September 30, 2013. The residential construction market accounted for 13% of the Corporation’s aggregates product line shipments for the nine months ended September 30, 2013.

Aside from these inherent risks from within its operations, the Corporation’s earnings are affected also by changes in short-term interest rates as a result of any temporary cash investments, including money market funds and Eurodollar time deposit accounts; any outstanding variable-rate borrowing facilities; and defined benefit pension plans. Additionally, the Corporation’s earnings are affected by energy costs. The Corporation has no material counterparty risk or foreign currency risk.

Variable-Rate Borrowing Facilities. At September 30, 2013, the Corporation had a $600 million Credit Agreement, comprised of a $350 million Revolving Facility and $250 million Term Loan Facility, and a Trade Receivable Facility. Borrowings under these facilities bear interest at a variable interest rate. A hypothetical 100-basis-point increase in interest rates on borrowings of $460.0 million, which was the collective outstanding balance at September 30, 2013, would increase interest expense by $4.6 million on an annual basis.

Pension Expense. The Corporation’s results of operations are affected by its pension expense. Assumptions that affect pension expense include the discount rate and, for the defined benefit pension plans only, the expected long-term rate of return on assets. Therefore, the Corporation has interest rate risk associated with these factors. The impact of hypothetical changes in these assumptions on the Corporation’s annual pension expense is discussed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on February 22, 2013.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

Energy Costs .    Energy costs, including diesel fuel and natural gas, represent significant production costs for the Corporation. The Corporation’s Specialty Products business has fixed price agreements for the supply of coal and approximately 25% of its natural gas needs in 2013. A hypothetical 10% change in the Corporation’s energy prices in 2013 as compared with 2012, assuming constant volumes, would impact annual 2013 pretax earnings by approximately $18.8 million.

Aggregate Risk for Interest Rates and Energy Costs. Pension expense for 2013 is calculated based on assumptions selected at December 31, 2012. Therefore, interest rate risk in 2013 is limited to the potential effect related to the Corporation’s borrowings under variable-rate facilities. The effect of a hypothetical increase in interest rates of 1% on $460.0 million of variable-rate borrowings outstanding at September 30, 2013 would increase interest expense on an annual basis by $4.6 million. Additionally, a 10% change in energy costs would impact annual pretax earnings by $18.8 million.

Item 4.  Controls and Procedures

As of September 30, 2013, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Corporation’s disclosure controls and procedures were effective as of September 30, 2013. There were no changes in the Corporation’s internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

PART II-OTHER INFORMATION

Item 1.  Legal Proceedings.

Reference is made to Part I . Item 3. Legal Proceedings of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 2012.

Item 1A.  Risk Factors.

Reference is made to Part I. Item 1A. Risk Factors and Forward-Looking Statements of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 2012.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds .

ISSUER PURCHASES OF EQUITY SECURITIES

Period Total Number of
Shares Purchased
Average Price
Paid per Share
Total Number of Shares
Purchased as Part of
Publicly  Announced
Plans or Programs
Maximum Number of
Shares that May Yet
be Purchased Under
the  Plans or Programs

July 1, 2013 –

July 31, 2013

-- $ -- -- 5,041,871

August 1, 2013 –

August 31, 2013

-- $ -- -- 5,041,871

September 1, 2013 –

September 30, 2013

-- $ -- -- 5,041,871

Total

-- $ -- -- 5,041,871

The Corporation’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.

Item 4.  Mine Safety Disclosures.

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

PART II-OTHER INFORMATION

(Continued)

Item 6.  Exhibits.

Exhibit
No.

Document

31.01 Certification dated November 7, 2013 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 November 7, 2013 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 Written Statement dated November 7, 2013 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 Written Statement dated November 7, 2013 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95 Mine Safety Disclosures
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MARTIN MARIETTA MATERIALS, INC.
(Registrant)
Date: November 7, 2013 By: /s/ Anne H. Lloyd
Anne H. Lloyd
Executive Vice President and
Chief Financial Officer

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2013

EXHIBIT INDEX

Exhibit
No.

Document

31.01 Certification dated November 7, 2013 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 November 7, 2013 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 Written Statement dated November 7, 2013 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 Written Statement dated November 7, 2013 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95 Mine Safety Disclosures
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase

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