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

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

OVERVIEW

Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. As of June 30, 2022, the Company supplies aggregates (crushed stone, sand and gravel) through its network of approximately 350 quarries, mines and distribution yards in 28 states, Canada and The Bahamas. Martin Marietta also provides cement and downstream products and services, namely, ready mixed concrete, asphalt and paving, in vertically-integrated structured markets where the Company has a leading aggregates position. In addition, the Company has one cement plant, cement distribution terminals and ready mixed concrete operations in California that are classified as assets held for sale and reported as discontinued operations as of and for the six months ended June 30, 2022. The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects. Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. The aggregates, cement, ready mixed concrete and asphalt and paving product lines are reported collectively as the “Building Materials” business.

The Company’s Building Materials business includes two reportable segments: the East Group and the West Group.

BUILDING MATERIALS BUSINESS (continuing operations only)
Reportable SegmentsEast GroupWest Group
Operating LocationsAlabama, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, Nova Scotia and The BahamasArizona, Arkansas, California, Colorado, Louisiana, Oklahoma, Texas, Utah, Washington and Wyoming
Product LinesAggregates and AsphaltAggregates, Cement, Ready Mixed Concrete, Asphalt and Paving Services
Facility TypesQuarries, Mines, Asphalt Plants and Distribution FacilitiesQuarries, Mines, Cement Plants, Asphalt Plants, Ready Mixed Concrete Plants and Distribution Facilities
Modes of TransportationTruck, Rail and ShipTruck, Rail and Ship

The Building Materials business is significantly affected by weather patterns and seasonal changes. Production and shipment levels for aggregates, cement, ready mixed concrete and asphalt materials correlate with general construction activity levels, most of which occur 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, southwest and west. Excessive rainfall, and conversely excessive drought, can also jeopardize production, shipments and profitability in all markets served by the Company. Due to the potentially significant impact of weather on the Company’s operations, current-period results are not necessarily indicative of expected performance for other interim periods or the full year.

Page 26 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

The Company has a Magnesia Specialties business with manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. The Magnesia Specialties business produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel and mining industries.

CRITICAL ACCOUNTING POLICIES

The Company outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2021. There were no changes to the Company’s critical accounting policies during the six months ended June 30, 2022.

RESULTS OF OPERATIONS

Earnings from continuing operations before interest; income taxes; depreciation, depletion and amortization; the earnings/loss from nonconsolidated equity affiliates; acquisition and integration expenses; the impact of selling acquired inventory after markup to fair value as part of acquisition accounting; and the nonrecurring gain on divestiture (Adjusted EBITDA) is an indicator used by the Company and investors to evaluate the Company’s operating performance from period to period. Adjusted EBITDA is not defined by accounting principles generally accepted in the United States and, as such, should not be construed as an alternative to net earnings, earnings from operations or cash provided by operating activities. However, the Company’s management believes that Adjusted EBITDA may provide additional information with respect to the Company’s performance and is a measure used by management to evaluate the Company’s performance. Because Adjusted EBITDA excludes some, but not all, items that affect net earnings and may vary among companies, Adjusted EBITDA as presented by the Company may not be comparable with similarly titled measures of other companies.

A reconciliation of net earnings from continuing operations attributable to Martin Marietta to Adjusted EBITDA is as follows:

Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
(Dollars in Millions)
Net earnings from continuing operations attributable to Martin Marietta$353.2$225.8$377.7$291.1
Add back (Deduct):
Interest expense, net of interest income42.228.282.755.5
Income tax expense for controlling interests104.462.2110.278.1
Depreciation, depletion and amortization and earnings/loss from nonconsolidated equity affiliates127.3106.1252.3201.9
Acquisition and integration expenses2.99.34.310.6
Impact of selling acquired inventory after markup to fair value as a part of acquisition accounting—7.6—7.6
Gain on divestiture(151.7)—(151.7)—
Adjusted EBITDA$478.3$439.2$675.5$644.8

Page 27 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Adjusted earnings from operations and adjusted earnings per diluted share from continuing operations represent non-GAAP financial measures and exclude acquisition and integration expenses; the impact of selling acquired inventory after its markup to fair value as part of acquisition accounting and the impact of the gain on divestiture. Management presents these measures for investors to evaluate and forecast the Company’s results, as the impact of these items are non-recurring.

A reconciliation of consolidated earnings from operations to adjusted consolidated earnings from operations is as follows:

Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
(Dollars in Millions)
Consolidated earnings from operations in accordance with GAAP$478.6$307.5$538.4$406.8
Add back (Deduct):
Acquisition and integration expenses2.99.34.310.6
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting—7.6—7.6
Gain on divestiture(151.7)—(151.7)—
Adjusted consolidated earnings from operations$329.8$324.4$391.0$425.0

A reconciliation of earnings per diluted share from continuing operations to adjusted earnings per diluted share from continuing operations is as follows:

Three Months Ended June 30, 2022
PretaxIncome TaxAfter-TaxPer Share
(In Millions, Except per Share)
Earnings per diluted share from continuing operations in accordance with GAAP$5.65
Impact of acquisition and integration expenses$2.9$(0.6)$2.30.04
Impact of gain on divestiture$(151.7)$43.6$(108.1)(1.73)
Adjusted earnings per diluted share from continuing operations$3.96
Three Months Ended June 30, 2021
PretaxIncome TaxAfter-TaxPer Share
(In Millions, Except per Share)
Earnings per diluted share from continuing operations in accordance with GAAP$3.61
Impact of acquisition and integration expenses$9.3$(2.2)$7.10.11
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting$7.6$(1.9)$5.70.09
Adjusted earnings per diluted share from continuing operations$3.81

Page 28 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Six Months Ended June 30, 2022
PretaxIncome TaxAfter-TaxPer Share
(In Millions, Except per Share)
Earnings per diluted share from continuing operations in accordance with GAAP$6.04
Impact of acquisition and integration expenses$4.3$(0.9)$3.40.05
Impact of gain on divestiture$(151.7)$43.6$(108.1)(1.73)
Adjusted earnings per diluted share from continuing operations$4.36
Six Months Ended June 30, 2021
PretaxIncome TaxAfter-TaxPer Share
(In Millions, Except per Share)
Earnings per diluted share from continuing operations in accordance with GAAP$4.65
Impact of acquisition and integration expenses$10.6$(2.4)$8.20.13
Impact of selling acquired inventory after its markup to fair value as part of acquisition accounting$7.6$(1.9)$5.70.09
Adjusted earnings per diluted share from continuing operations$4.87

Mix-adjusted average selling price (mix-adjusted ASP) excludes the impacts of product, geographic and other mix from the current-period average selling price and is a non-GAAP measure. Mix-adjusted ASP is calculated by comparing current-period shipments to like-for-like shipments in the comparable prior period. Management uses this metric to evaluate the effectiveness of the Company’s pricing increases and believes this information is useful to investors as it provides same-on-same pricing trends.

Page 29 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

The following reconciles reported average selling price to mix-adjusted ASP and corresponding variances.

Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
Organic East Group - Aggregates:
Reported average selling price$16.79$15.59$16.91$15.86
Adjustment for favorable impact of product, geographic and other mix(0.08)(0.06)
Mix-adjusted ASP$16.71$16.85
Reported average selling price variance7.6%6.6%
Mix-adjusted ASP variance7.1%6.3%
Organic West Group - Aggregates:
Reported average selling price$15.67$14.03$15.37$13.93
Adjustment for favorable impact of product, geographic and other mix(0.47)(0.45)
Mix-adjusted ASP$15.20$14.92
Reported average selling price variance11.7%10.3%
Mix-adjusted ASP variance8.3%7.1%
Total Organic Aggregates:
Reported average selling price$16.40$15.07$16.34$15.17
Adjustment for favorable impact of product, geographic and other mix(0.20)(0.18)
Mix-adjusted ASP$16.20$16.16
Reported average selling price variance8.8%7.7%
Mix-adjusted ASP variance7.5%6.5%
Cement:
Reported average selling price$140.00$122.11$134.79$118.80
Adjustment for favorable impact of product, geographic and other mix(2.67)(2.04)
Mix-adjusted ASP$137.33$132.75
Reported average selling price variance14.7%13.5%
Mix-adjusted ASP variance12.5%11.7%

Page 30 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Quarter Ended June 30, 2022

Financial highlights for the quarter ended June 30, 2022 (unless noted, all comparisons are versus the prior-year quarter and for continuing operations):

♦

Consolidated total revenues of $1.64 billion compared with $1.38 billion

♦

Building Materials business products and services revenues of $1.45 billion compared with $1.23 billion

♦

Magnesia Specialties products revenues of $74.6 million compared with $70.0 million

♦

Consolidated gross profit of $425.2 million compared with $385.1 million

♦

Consolidated earnings from operations of $478.6 million compared with $307.5 million

♦

Adjusted consolidated earnings from operations of $329.8 million compared with $324.4 million

♦

Net earnings from continuing operations attributable to Martin Marietta of $353.2 million compared with $225.8 million

♦

Adjusted EBITDA of $478.3 million compared with $439.2 million

♦

Earnings per diluted share from continuing operations of $5.65 compared with $3.61

♦

Adjusted earnings per diluted share from continuing operations of $3.96 compared with $3.81

Page 31 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

The following tables present total revenues, gross profit (loss), selling, general and administrative (SG&A) expenses and earnings (loss) from operations data for the Company and its reportable segments by product line for continuing operations for the three months ended June 30, 2022 and 2021. In each case, the data is stated as a percentage of revenues of the Company or the relevant segment or product line, as the case may be. For the three months ended June 30, 2022, earnings from operations for the West Group include a $151.7 million nonrecurring gain on divested assets.

Three Months Ended June 30,
20222021
AmountAmount
(Dollars in Millions)
Total revenues:
Building Materials business:
Products and services
East Group
Aggregates$590.6$554.2
Asphalt47.447.1
Less: Interproduct revenues(5.6)(4.8)
East Group Total632.4596.5
West Group
Aggregates364.6247.6
Cement157.9116.5
Ready mixed concrete226.1268.4
Asphalt and paving164.988.2
Less: Interproduct revenues(96.7)(91.9)
West Group Total816.8628.8
Products and services1,449.21,225.3
Freight110.876.8
Total Building Materials business1,560.01,302.1
Magnesia Specialties:
Products74.670.0
Freight7.15.8
Total Magnesia Specialties81.775.8
Total$1,641.7$1,377.9

Page 32 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Three Months Ended June 30,
20222021
Amount% of RevenuesAmount% of Revenues
(Dollars in Millions)
Gross profit (loss):
Building Materials business:
Aggregates309.032.3$273.034.0
Cement51.132.436.131.0
Ready mixed concrete14.36.319.17.1
Asphalt and paving26.412.428.721.2
Products and services400.827.7356.929.1
Freight(1.7)0.7
Total Building Materials business399.125.6357.627.5
Magnesia Specialties:
Products25.834.627.939.9
Freight(1.3)(0.9)
Total Magnesia Specialties24.530.027.035.6
Corporate1.60.5
Total$425.225.9$385.127.9

Page 33 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Three Months Ended June 30,
20222021
Amount% of RevenuesAmount% of Revenues
(Dollars in Millions)
Selling, general & administrative expenses:
Building Materials business:
East Group$28.7$26.3
West Group41.733.6
Total Building Materials business70.459.9
Magnesia Specialties4.03.7
Corporate29.718.8
Total$104.16.3$82.46.0
Three Months Ended June 30,
20222021
Amount% of RevenuesAmount% of Revenues
(Dollars in Millions)
Earnings (Loss) from operations:
Building Materials business:
East Group$210.6$197.8
West Group274.5101.8
Total Building Materials business485.1299.6
Magnesia Specialties20.323.1
Corporate(26.8)(15.2)
Total$478.629.2$307.522.3

Page 34 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Building Materials Business

The following tables present aggregates volume and pricing variance data and shipments data by segment:

Three Months Ended
June 30, 2022
VolumePricing
Volume/Pricing Variance(1)
East Group(1.0)%7.6%
West Group30.0%11.6%
Total aggregates operations(2)9.3%8.4%
Organic aggregates operations(3)1.8%8.8%
Three Months Ended
June 30,
20222021
(Tons in Millions)
Shipments
East Group35.035.4
West Group22.817.5
Total aggregates operations(2)57.852.9

(1) Volume/pricing variances reflect the percentage increase from the comparable period in the prior year.

(2) Total aggregates operations include acquisitions from the date of acquisition and divestitures through the date of disposal.

(3) Organic aggregates operations exclude volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and divestitures.

Page 35 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

The following table presents shipments data by product line for the Building Materials business:

Three Months Ended June 30,
20222021% Change
Shipments
Aggregates (in millions):
Tons to external customers53.548.8
Internal tons used in other product lines4.34.1
Total aggregates tons57.852.99.3%
Cement (in millions):
Tons to external customers0.80.5
Internal tons used in ready mixed concrete0.30.4
Total cement tons1.10.919.8%
Ready Mixed Concrete (in millions of cubic yards)1.82.3(22.6)%
Asphalt (in millions):
Tons to external customers1.91.2
Internal tons used in paving business0.70.6
Total asphalt tons2.61.840.2%

The average selling price by product line for the Building Materials business is as follows:

Three Months Ended June 30,
20222021% Change
Aggregates (per ton)$16.34$15.078.4%
Cement (per ton)$140.00$122.1114.7%
Ready Mixed Concrete (per cubic yard)$124.51$114.279.0%
Asphalt (per ton)$60.54$48.8324.0%

Aggregates End-Use Markets

Organic aggregates shipments to the infrastructure market increased 5%, primarily driven by increased highway projects in Indiana, Arkansas, Colorado and the Gulf Coast. The infrastructure market accounted for 35% of second-quarter organic aggregates shipments.

Organic aggregates shipments to the nonresidential market were flat compared to a strong prior-year quarter. The nonresidential market represented 35% of second-quarter organic aggregates shipments.

Organic aggregates shipments to the residential market increased 4%, reflecting strong demand in Texas and Colorado that was partially offset by supply chain issues and decreased housing starts in the East. The residential market accounted for 25% of second-quarter organic aggregates shipments.

The ChemRock/Rail market accounted for the remaining 5% of second-quarter organic aggregates shipments. Volumes to this end use decreased 10%, driven by lower ballast shipments to the Class I western railroads.

Page 36 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Building Materials Business

Second-quarter organic aggregates shipments increased 1.8%, as healthy underlying public and private product demand was partially constrained by supply chain and logistics-related bottlenecks. Organic pricing increased 8.8%, or 7.5% on a mix-adjusted basis, over the prior-year quarter as the Company began to benefit from April 1 price increases. Including acquired operations, total aggregates shipments and pricing grew 9.3% and 8.4%, respectively. East Group total shipments decreased 1.0%, as strong underlying demand was negatively impacted from unfavorable weather in April, coupled with rail and marine-shipping challenges. East Group pricing increased 7.6%. West Group total shipments improved 30.0%, driven primarily by contributions from acquired operations and strong Texas customer demand. West Group pricing, inclusive of acquisitions, increased 11.6%. West Group organic pricing increased 11.7%, or 8.3% on a mix-adjusted basis, benefitting from increased sales of higher-priced clean stone and long-haul shipments from higher-priced distribution yards. Second-quarter aggregates product gross profit improved 13.2% to $309.0 million while gross margin declined 170 basis points to 32.3%, primarily due to significantly higher energy, contract services, supplies and internal freight costs.

Cement shipments increased 19.8% to a new quarterly record of 1.1 million tons while pricing increased 14.7%, or 12.5% on a mix-adjusted basis, driven by continued strong demand and tight cement supply in Texas. Cement product gross profit grew to $51.1 million, an increase of 41.7%, and gross margin expanded 140 basis points to 32.4%, driven by volume and pricing gains but partially offset by significant energy-related headwinds and unplanned kiln outages at both the Midlothian and Hunter plants.

On an organic basis, ready mix shipments and pricing increased 3.4% and 17.4%, respectively, driven by strong demand in Dallas/Fort Worth, Austin and San Antonio. Ready mix product revenues and gross profit from continuing operations declined 15.8% and 25.1%, respectively, driven primarily by the divestiture of our Colorado and Central Texas ready mix concrete businesses on April 1, which was partially offset by acquired operations in Arizona.

Including contributions from the acquired West Coast operations, total asphalt shipments and pricing increased 40.2% and 24.0%, respectively. However, rapid cost acceleration of liquid asphalt, or bitumen, contributed to the gross margin compression of 880 basis points in the second quarter.

Magnesia Specialties Business

Magnesia Specialties second-quarter product revenues increased 6.6% to $74.6 million, driven by continued strong global demand for magnesia-based chemical products. Product gross profit declined 7.6% to $25.8 million, as higher energy costs pressured margins in the quarter.

Consolidated Operating Results

Consolidated SG&A for second quarter 2022 was 6.3% of total revenues compared with 6.0% in the prior-year quarter, an increase of 30 basis points. Earnings from operations for the quarter were $478.6 million in 2022 compared with $307.5 million in 2021, with the increase driven by the $151.7 million gain on the divestiture of the Colorado and Central Texas ready-mixed concrete operations and year-over-year price increases, partially offset by higher costs for energy, supplies, freight and personnel.

Among other items, other operating income, net, includes gains and losses on the sale of assets; recoveries and write-offs related to customer accounts receivable; rental, royalty and services income; accretion expense, depreciation expense and gains and losses related to asset retirement obligations. For the second quarter, consolidated other operating income, net, was income of $160.4 million in 2022 and $14.1 million in 2021. The increase in other operating income, net, was primarily attributable to the $151.7 million gain on the divestiture of the Colorado and Central Texas ready-mixed concrete

Page 37 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

operations. Other operating income, net, for the three months ended June 30, 2021 included a $12.3 million gain on the sale of the Company’s former corporate headquarters.

Other nonoperating income, net, includes interest income; pension and postretirement benefit cost excluding service cost; foreign currency transaction gains and losses; equity earnings or losses from nonconsolidated affiliates and other miscellaneous income and expenses. For the second quarter, other nonoperating income, net, was $22.0 million and $8.7 million in 2022 and 2021, respectively. The 2022 amount included an $11.6 million pretax gain related to repurchases of the Company’s debt.

Six Months Ended June 30, 2022

Financial highlights for the six months ended June 30, 2022 (unless noted, all comparisons are versus the prior-year period:

♦

Consolidated total revenues of $2.87 billion compared with $2.36 billion

♦

Building Materials business products and services revenues of $2.53 billion compared with $2.08 billion

♦

Magnesia Specialties products revenues of $145.4 million compared with $135.2 million

♦

Consolidated gross profit of $581.3 million compared with $559.8 million

♦

Consolidated earnings from operations of $538.4 million compared with $406.8 million

♦

Adjusted consolidated earnings from operations of $391.0 million compared with $425.0 million

♦

Net earnings from continuing operations attributable to Martin Marietta of $377.7 million compared with $291.1 million

♦

Adjusted EBITDA of $675.5 million compared with $644.8 million

♦

Earnings per diluted share from continuing operations of $6.04 compared with $4.65

♦

Adjusted earnings per diluted share of $4.36 compared with $4.87

Page 38 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

The following tables present total revenues, gross profit (loss), selling, general and administrative (SG&A) expenses and earnings (loss) from operations data for the Company and its reportable segments by product line for continuing operations for the six months ended June 30, 2022 and 2021. In each case, the data is stated as a percentage of revenues of the Company or the relevant segment or product line, as the case may be. For the six months ended June 30, 2022, earnings from operations for the West Group include a $151.7 million nonrecurring gain on divested assets.

Six Months Ended June 30,
20222021
AmountAmount
(Dollars in Millions)
Total revenues:
Building Materials business:
Products and services
East Group
Aggregates$985.6$926.8
Asphalt47.547.1
Less: Interproduct revenues(6.1)(4.8)
East Group Total1,027.0969.1
West Group
Aggregates655.5447.6
Cement292.2226.1
Ready mixed concrete516.2503.7
Asphalt and paving219.6100.5
Less: Interproduct revenues(184.3)(165.0)
West Group Total1,499.21,112.9
Products and services2,526.22,082.0
Freight187.6131.6
Total Building Materials business2,713.82,213.6
Magnesia Specialties:
Products145.4135.2
Freight13.311.5
Total Magnesia Specialties158.7146.7
Total$2,872.5$2,360.3

Page 39 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Six Months Ended June 30,
20222021
Amount% of RevenuesAmount% of Revenues
(Dollars in Millions)
Gross profit (loss):
Building Materials business:
Aggregates$410.925.0$394.728.7
Cement78.526.951.422.7
Ready mixed concrete35.46.938.67.7
Asphalt and paving13.14.920.413.9
Products and services537.921.3505.124.3
Freight(0.4)0.5
Total Building Materials business537.519.8505.622.8
Magnesia Specialties:
Products52.636.256.341.7
Freight(2.4)(1.9)
Total Magnesia Specialties50.231.654.437.1
Corporate(6.4)(0.2)
Total$581.320.2$559.823.7
Six Months Ended June 30,
20222021
Amount% of Total RevenuesAmount% of Total Revenues
(Dollars in Millions)
Selling, general & administrative expenses:
Building Materials business:
East Group$57.5$50.5
West Group83.066.9
Total Building Materials business140.5117.4
Magnesia Specialties8.07.4
Corporate52.737.4
Total$201.27.0$162.26.9
Earnings (Loss) from operations:
Building Materials business:
East Group$238.5$259.5
West Group317.6133.6
Total Building Materials business556.1393.1
Magnesia Specialties41.846.7
Corporate(59.5)(33.0)
Total$538.418.7$406.817.2

Page 40 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Building Materials Business

The following tables present aggregates volume and pricing variance data and shipments data by segment:

Six Months Ended
June 30, 2022
VolumePricing
Volume/Pricing Variance(1)
East Group(0.1)%6.6%
West Group31.2%10.4%
Total aggregates operations(2)11.0%7.2%
Organic aggregates operations(3)2.4%7.7%
Six Months Ended
June 30,
20222021
(Tons in Millions)
Shipments
East Group58.058.1
West Group41.931.9
Total aggregates operations(2)99.990.0

(1) Volume/pricing variances reflect the percentage increase from the comparable period in the prior year.

(2) Total aggregates operations include acquisitions from the date of acquisition and divestitures through the date of disposal.

(3) Organic aggregates operations exclude volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and divestitures.

Page 41 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

The following table presents shipments data for the Building Materials business by product line:

Six Months Ended June 30,
20222021% Change
Shipments
Aggregates (in millions):
Tons to external customers92.183.3
Internal tons used in other product lines7.86.7
Total aggregates tons99.990.011.0%
Cement (in millions):
Tons to external customers1.41.2
Internal tons used in ready mixed concrete0.70.7
Total cement tons2.11.914.9%
Ready Mixed Concrete (in millions of cubic yards)4.24.4(4.9)%
Asphalt (in millions):
Tons to external customers2.61.3
Internal tons used in paving business0.70.6
Total asphalt tons3.31.967.4%

The average selling price by product line for the Building Materials business is as follows:

Six Months Ended June 30,
20222021% Change
Aggregates (per ton)$16.27$15.177.2%
Cement (per ton)$134.79$118.8013.5%
Ready Mixed Concrete (per cubic yard)$122.34$113.258.0%
Asphalt (per ton)$60.93$48.8524.7%

Aggregates End-Use Markets

Organic aggregates shipments to the infrastructure market increased 6%, primarily driven by increased highway projects across many of the Company’s key markets. The infrastructure market accounted for 34% of year-to-date organic aggregates shipments.

Organic aggregates shipments to the nonresidential market were flat compared with strong prior-year activity. The nonresidential market represented 35% of year-to-date organic aggregates shipments.

Organic aggregates shipments to the residential market increased 2%, reflecting strong demand in Texas that was muted by supply chain issues and labor shortages. The residential market accounted for 26% of year-to-date organic aggregates shipments.

The ChemRock/Rail market accounted for the remaining 5% of year-to-date organic aggregates shipments. Volumes to this end use increased 4%, driven by increased agricultural lime shipments in Iowa that were partially offset by lower ballast shipments to Class I railroads.

Page 42 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

Building Materials Business

Year-to-date organic aggregates shipments increased 2.4%, reflecting healthy underlying public and private product demand partially constrained by supply chain and logistics-related bottlenecks, while organic pricing increased 7.7%, or 6.5% on a mix-adjusted basis. Inclusive of acquired operations, aggregates shipments grew 11.0% compared with the comparable prior-year period and pricing increased 7.2%. Overall, East Group total shipments remained relatively flat, reflecting unfavorable weather and timing of jobs in current year versus the prior-year period, while pricing increased 6.6%. West Group total shipments increased 31.2%, driven by robust underlying demand in Texas and Colorado and shipments from acquired operations. West Group pricing, inclusive of acquisitions, increased 10.4%, while organic West Group pricing increased 10.3%, or 7.1% on a mix-adjusted basis, reflecting periodic pricing increases, a higher percentage of shipments from higher-priced distribution yards and higher selling prices at acquired operations. Aggregates product gross margin decreased 370 basis points to 25.0%, as year-over-year price increase impacts were more than offset by higher costs for energy, fuel, supplies, repairs and contract services.

Texas cement shipments increased 14.9%, supported by robust product demand, tight supply and favorable weather. Cement pricing improved 13.5%, or 11.7% on a mix-adjusted basis, benefitting from price increases. Product gross margin expanded 420 basis points to 26.9% compared with the prior-year comparable period, which was negatively impacted by incremental costs and inefficiencies from the Texas Deep Freeze.

Organic ready mixed concrete shipments increased 1.4%. Organic pricing grew 13.0% in the first half of 2022 compared with the first half of 2021. Consolidated ready mixed concrete shipments decreased 4.9% and pricing increased 8.0%. Product gross margin declined 80 basis points to 6.9%, driven primarily by higher raw material and diesel costs which more than offset price increases.

Organic asphalt shipments remained flat. Organic asphalt pricing increased 16.3%. Including contributions from the acquired West Coast operations, total asphalt shipments and pricing increased 67.4% and 24.7%, respectively. Product and services gross margin declined 900 basis points to 4.9%, driven by a later start to the construction season in Minnesota and higher liquid asphalt costs in Colorado.

Magnesia Specialties Business

Magnesia Specialties product revenues increased 7.5% to $145.4 million for the six months ended June 30, 2022, driven by robust global demand for magnesia-based chemical products. Product gross profit was $52.6 million compared with $56.3 million. Product gross margin decreased 550 basis points to 36.2%, as higher costs for energy, supplies and raw materials more than offset revenue growth.

Consolidated Operating Results

Consolidated SG&A for six months ended June 30 was 7.0% of total revenues in 2022 compared with 6.9% in the prior-year period. Earnings from operations for the six months ended June 30 were $538.4 million in 2022 compared with $406.8 million in 2021, with the increase driven by the $151.7 million gain on the divestiture of the Colorado and Central Texas ready-mixed concrete operations and year-over-year price increases, partially offset by higher costs for energy, fuel, supplies, freight and personnel.

Among other items, other operating income, net, includes gains and losses on the sale of assets; recoveries and write-offs related to customer accounts receivable; rental, royalty and services income; accretion expense, depreciation expense and gains and losses related to asset retirement obligations. For the six months ended June 30, consolidated other operating income, net, was income of $162.6 million in 2022 and $19.8 million in 2021. The increase in other operating income, net, was primarily attributable to the $151.7 million gain on the divestiture of the Colorado and Central Texas

Page 43 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

ready-mixed concrete operations. Other operating income, net, for the six months ended June 30, 2021 included a $12.3 million gain on the sale of the Company’s former corporate headquarters.

Other nonoperating income, net, includes interest income; pension and postretirement benefit cost excluding service cost; foreign currency transaction gains and losses; equity earnings or losses from nonconsolidated affiliates and other miscellaneous income and expenses. For the six months ended June 30, other nonoperating income, net, was $32.9 million and $18.2 million in 2022 and 2021, respectively. The 2022 amount included an $11.6 million pretax gain related to repurchases of the Company’s debt.

Income Tax Expense

For the six months ended June 30, 2022 and 2021, the effective income tax rates for continuing operations were 22.6% and 21.2%, respectively. The higher 2022 effective income tax rate versus 2021 was driven by the impact of the divestiture of the Colorado and Central Texas ready mixed concrete businesses.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities for the six months ended June 30, 2022 and 2021 was $286.2 million and $441.2 million, respectively. Operating cash flow is primarily derived from consolidated net earnings before deducting depreciation, depletion and amortization, and the impact of changes in working capital. Depreciation, depletion and amortization were as follows:

Six Months Ended
June 30,
20222021
(Dollars in Millions)
Depreciation$199.0$172.4
Depletion28.617.5
Amortization29.016.6
Total$256.6$206.5

The seasonal nature of construction activity impacts the Company’s interim operating cash flow when compared with the full year. Full-year 2021 net cash provided by operating activities was $1.14 billion.

During the six months ended June 30, 2022 and 2021, the Company paid $220.7 million and $213.0 million, respectively, for capital investments.

The Company can repurchase its common stock through open-market purchases pursuant to authority granted by its Board of Directors or through private transactions at such prices and upon such terms as the Chief Executive Officer deems appropriate. The Company repurchased 130,551 shares of common stock during the first six months of 2022 at an aggregate cost of $50.0 million. At June 30, 2022, 13,390,401 shares of common stock can be purchased under the Company’s repurchase authorization.

During the six months ended June 30, 2022, the Company repurchased $60.5 million (par value) of its Senior Notes, resulting in a pretax gain of $11.6 million.

The Company, through a wholly-owned special-purpose subsidiary, has a $400 million trade receivable securitization facility (the Trade Receivable Facility) that matures on September 21, 2022. The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements.

Page 44 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

The Company has an $800 million five-year senior unsecured revolving facility (the Revolving Facility), which expires in December 2026. The Revolving Facility requires the Company’s ratio of consolidated debt-to-consolidated EBITDA, as defined, for the trailing-twelve-month period (the Ratio) to not exceed 3.50 times as of the end of any fiscal quarter, provided that the Company may exclude from the Ratio debt incurred in connection with certain acquisitions during the quarter or the three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 4.00 times. Additionally, if there are no amounts outstanding under the Revolving Facility and the Trade Receivable Facility, consolidated debt, including debt for which the Company is a co-borrower, may be reduced in an amount equal to the lesser of $500.0 million or the sum of the Company’s unrestricted cash and temporary investments, for purposes of the covenant calculation. The Company was in compliance with the Ratio at June 30, 2022.

In the event of a default on the Ratio, the lenders can terminate the Revolving Facility and Trade Receivable Facility and declare any outstanding balances as immediately due. There were no amounts outstanding under the Trade Receivable Facility or the Revolving Facility as of June 30, 2022.

Cash on hand, along with the Company’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, address near-term debt maturities, meet capital expenditures and discretionary investment needs, fund certain acquisition opportunities that may arise, allow the repurchase of shares of the Company’s common stock and allow for payment of dividends for the foreseeable future. At June 30, 2022, the Company had $1,197.4 million of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility, subject to complying with the related leverage covenant. Historically, the Company has successfully extended the maturity dates of these credit facilities. Further, as of June 30, 2022, the Company does not have any publicly-traded debt that matures prior to 2023.

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law in March 2020 and provided liquidity support for businesses. Through the CARES Act, the Company deferred payment of $27.6 million, representing the 6.2% employer share of Social Security taxes for the period from March 27, 2020 through December 31, 2020. Half of the deferred obligation was repaid in 2021 and the remaining half is due December 31, 2022. There will be no interest assessed on amounts deferred.

TRENDS AND RISKS

The Company outlined the risks associated with its business in its Annual Report on Form 10-K for the year ended December 31, 2021. Management continues to evaluate its exposure to all operating risks on an ongoing basis.

OTHER MATTERS

If you are interested in Martin Marietta stock, management recommends that, at a minimum, you read the Company’s current annual report and Forms 10-K, 10-Q and 8-K reports to the Securities and Exchange Commission (SEC) over the past year. The Company’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 Company’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 Company’s Corporate Secretary, who will provide copies of such reports.

Investors are cautioned that all statements in this Form 10-Q that relate to the future involve risks and uncertainties, and are based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. These statements, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995, provide the investor with the Company’s expectations or forecasts of future events. You can identify

Page 45 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

these statements by the fact that they do not relate only to historical or current facts. They may use words such as “anticipate,” “may,” “expect,” “should,” “believe,” “project,” “intend,” “will,” and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of management’s forward-looking statements here and in other publications may turn out to be wrong.

The Company’s outlook is subject to various risks and uncertainties and is based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. Factors that the Company currently believes could cause actual results to differ materially from the forward-looking statements in this release (including the outlook) include, but are not limited to: the ability of the Company to face challenges, including shipment declines resulting from economic events beyond the Company’s control; a widespread decline in aggregates pricing, including a decline in aggregates shipment volume negatively affecting aggregates price; the history of both cement and ready mixed concrete being subject to significant changes in supply, demand and price fluctuations; the termination, capping and/or reduction or suspension of the federal and/or state gasoline tax(es) or other revenue related to public construction; the level and timing of federal, state or local transportation or infrastructure or public projects funding, most particularly in Texas, Colorado, California, North Carolina, Georgia, Minnesota, Iowa, Florida, Indiana and Maryland; the United States Congress’ inability to reach agreement among themselves or with the Administration on policy issues that impact the federal budget; 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 Company serves; a reduction in defense spending and the subsequent impact on construction activity on or near military bases; a decline in energy-related construction activity resulting from suspension of the gas tax or a sustained period of low global oil prices or changes in oil production patterns or capital spending, particularly in Texas and West Virginia; increasing residential mortgage interest rates and other factors that could result in a slowdown in residential construction; unfavorable weather conditions, particularly Atlantic Ocean and Gulf of Mexico hurricane activity, wildfires, 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 Company, any of which can significantly affect production schedules, volumes, product and/or geographic mix and profitability; the volatility of fuel costs, particularly diesel fuel, notably related to the current conflict between Russia and Ukraine, and the impact on the cost, or the availability generally, of other consumables, namely steel, explosives, tires and conveyor belts, and with respect to the Company’s Magnesia Specialties business, natural gas; continued increases in the cost of other repair and supply parts; construction labor shortages and/or supply‐chain challenges; unexpected equipment failures, unscheduled maintenance, industrial accident or other prolonged and/or significant disruption to production facilities; the resiliency and potential declines of the Company’s various construction end-use markets; the potential negative duration, severity and impact of a resurgence of the COVID-19 pandemic on the Company’s ability to continue supplying heavy-side building materials and related services at normal levels or at all in the Company’s key regions, including the markets in which it does business, its suppliers, customers or other business partners as well as on its employees; the economic impact of government responses to a resurgence of COVID-19; the performance of the United States economy; the impact of governmental orders restricting activities imposed to prevent further outbreak of COVID-19 on travel, potentially reducing state fuel tax revenues used to fund highway projects; a decline in the commercial component of the nonresidential construction market, notably office and retail space, including a decline resulting from economic distress related to the COVID-19 pandemic; increasing governmental regulation, including environmental laws; the failure of relevant government agencies to implement expected regulatory reductions; transportation availability or a sustained reduction in capital investment by the railroads, notably the availability of railcars, locomotive power and the condition of rail infrastructure to move trains to supply the Company’s Texas, Colorado, Florida, Carolinas and Gulf Coast markets, including the movement of essential dolomitic lime for magnesia chemicals to the Company’s plant in Manistee, Michigan and its customers; increased transportation costs, including increases from higher or fluctuating passed-through energy costs or fuel surcharges, and other costs to comply with tightening regulations, as well as higher volumes of rail and water shipments; availability of trucks and licensed drivers for transport of the Company’s materials; availability and cost of

Page 46 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

construction equipment in the United States; weakening in the steel industry markets served by the Company’s dolomitic lime products; trade disputes with one or more nations impacting the U.S. economy, including the impact of tariffs on the steel industry; unplanned changes in costs or realignment of customers that introduce volatility to earnings, including that of the Magnesia Specialties business that is running at capacity; proper functioning of information technology and automated operating systems to manage or support operations; inflation and its effect on both production and interest costs; the concentration of customers in construction markets and the increased risk of potential losses on customer receivables; the impact of the level of demand in the Company’s end-use markets, production levels and management of production costs on the operating leverage and therefore profitability of the Company; the possibility that the expected synergies from acquisitions will not be realized or will not be realized within the expected time period, including achieving anticipated profitability to maintain compliance with the Company’s leverage ratio debt covenant; changes in tax laws, the interpretation of such laws and/or administrative practices, including acquisitions or divestitures, that would increase the Company’s tax rate; violation of the Company’s debt covenant if price and/or volumes return to previous levels of instability; downward pressure on the Company’s common stock price and its impact on goodwill impairment evaluations; the possibility of a reduction of the Company’s credit rating to non-investment grade; and other risk factors listed from time to time found in the Company’s filings with the SEC.

You should consider these forward-looking statements in light of risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and other periodic filings made with the SEC. All of the Company’s forward-looking statements should be considered in light of these factors. In addition, other risks and uncertainties not presently known to the Company or that the Company considers immaterial could affect the accuracy of its forward-looking statements, or adversely affect or be material to the Company. The Company assumes no obligation to update any such forward-looking statements.

Page 47 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter June 30, 2022

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

(Continued)

INVESTOR ACCESS TO COMPANY FILINGS

Shareholders may obtain, without charge, a copy of Martin Marietta’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2021, by writing to:

Martin Marietta

Attn: Corporate Secretary

4123 Parklake Avenue

Raleigh, North Carolina 27612

Additionally, Martin Marietta’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 Company’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) 510-4736

Website address: www.martinmarietta.com

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

Page 48 of 53

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended June 30, 2022

Previous: Item 1. Financial Statements. · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk.