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mlm-10q_20190331.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2019

☐	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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

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

Yes ☐ No ☑

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 April 25, 2019
Common Stock, $0.01 par value		62,594,087

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

	Page
Part I. Financial Information:

Item 1. Financial Statements

Consolidated Balance Sheets – March 31, 2019 and December 31, 2018		3

Consolidated Statements of Earnings and Comprehensive Earnings – Three Months Ended March 31, 2019 and 2018		4

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2019 and 2018		5

Consolidated Statement of Total Equity – Three Months Ended March 31, 2019 and 2018		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		40

Item 4. Controls and Procedures		41

Part II. Other Information:

Item 1. Legal Proceedings		42

Item 1A. Risk Factors		42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		42

Item 4. Mine Safety Disclosures		42

Item 6. Exhibits		43

Signatures		44

Page 2 of 44

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2019			2018
	(Dollars in Thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	37,357		$	44,892
Accounts receivable, net		550,607			523,276
Inventories, net		646,176			663,035
Other current assets		135,971			134,613
Total Current Assets		1,370,111			1,365,816

Property, plant and equipment		8,339,050			8,294,962
Allowances for depreciation, depletion and amortization		(3,192,368	)		(3,137,733	)
Net property, plant and equipment		5,146,682			5,157,229
Goodwill		2,397,483			2,399,118
Other intangibles, net		498,195			501,282
Operating lease right-of-use assets		498,233			—
Other noncurrent assets		137,703			127,974
Total Assets	$	10,048,407		$	9,551,419

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	184,844		$	210,808
Accrued salaries, benefits and payroll taxes		27,313			51,434
Pension and postretirement benefits		9,923			9,942
Accrued insurance and other taxes		52,895			63,543
Current maturities of long-term debt and short-term facilities		360,056			390,042
Accrued interest		31,844			17,176
Operating lease liabilities		50,776			—
Other current liabilities		39,986			43,805
Total Current Liabilities		757,637			786,750

Long-term debt		2,801,228			2,730,439
Pension, postretirement and postemployment benefits		138,049			134,469
Deferred income taxes, net		695,771			705,564
Noncurrent operating lease liabilities		446,128			—
Other noncurrent liabilities		234,098			244,785
Total Liabilities		5,072,911			4,602,007

Equity:
Common stock, par value $0.01 per share		625			624
Preferred stock, par value $0.01 per share		—			—
Additional paid-in capital		3,406,456			3,396,059
Accumulated other comprehensive loss		(140,324	)		(143,579	)
Retained earnings		1,705,717			1,693,259
Total Shareholders' Equity		4,972,474			4,946,363
Noncontrolling interests		3,022			3,049
Total Equity		4,975,496			4,949,412
Total Liabilities and Equity	$	10,048,407		$	9,551,419

See accompanying notes to the consolidated financial statements.

Page 3 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

	Three Months Ended
	March 31,
	2019			2018
	(In Thousands, Except Per Share Data)

Products and services revenues	$	878,305		$	753,305
Freight revenues		60,650			48,699
Total Revenues		938,955			802,004

Cost of revenues - products and services		734,168			641,620
Cost of revenues - freight		61,880			49,992
Total Cost of Revenues		796,048			691,612

Gross Profit		142,907			110,392

Selling, general & administrative expenses		78,292			70,121
Acquisition-related expenses, net		144			711
Other operating (income) expenses, net		(4,750	)		479
Earnings from Operations		69,221			39,081

Interest expense		32,948			35,087
Other nonoperating income, net		(1,562	)		(8,503	)
Earnings before income tax expense		37,835			12,497
Income tax (benefit) expense		(4,991	)		2,457
Consolidated net earnings		42,826			10,040
Less: Net (loss) earnings attributable to noncontrolling interests		(27	)		17
Net Earnings Attributable to Martin Marietta Materials, Inc.	$	42,853		$	10,023

Consolidated Comprehensive Earnings:
Earnings attributable to Martin Marietta Materials, Inc.	$	46,108		$	11,642
(Loss) Earnings attributable to noncontrolling interests		(27	)		17
	$	46,081		$	11,659
Net Earnings Attributable to Martin Marietta Materials, Inc.
Per Common Share:
Basic attributable to common shareholders	$	0.68		$	0.16
Diluted attributable to common shareholders	$	0.68		$	0.16

Weighted-Average Common Shares Outstanding:
Basic		62,584			62,957
Diluted		62,777			63,222

See accompanying notes to the consolidated financial statements.

Page 4 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS


	March 31,
	2019			2018
	(Dollars in Thousands)

Cash Flows from Operating Activities:
Consolidated net earnings	$	42,826		$	10,040
Adjustments to reconcile consolidated net earnings to net cash provided by operating activities:
Depreciation, depletion and amortization		89,211			76,821
Stock-based compensation expense		13,552			9,760
Gain on divestitures and sales of assets		(2,413	)		(951	)
Deferred income taxes		4,781			2,029
Other items, net		495			(2,269	)
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net		(26,059	)		20,951
Inventories, net		16,416			(8,873	)
Accounts payable		20,393			7,925
Other assets and liabilities, net		(41,338	)		(10,421	)
Net Cash Provided by Operating Activities		117,864			105,012

Cash Flows from Investing Activities:
Additions to property, plant and equipment		(130,056	)		(96,259	)
Proceeds from divestitures and sales of assets		2,927			2,528
Payment of railcar construction advances		—			(8,430	)
Reimbursement of railcar construction advances		—			8,430
Investments in life insurance contracts, net		193			99
Other investing activities, net		(600	)		—
Net Cash Used for Investing Activities		(127,536	)		(93,632	)

Cash Flows from Financing Activities:
Borrowings of debt		125,000			—
Repayments of debt		(85,000	)		(13	)
Payments on finance leases		(951	)		—
Payments on capital lease		—			(829	)
Debt issuance costs		—			(3,194	)
Contributions by owners of noncontrolling interest		—			129
Dividends paid		(30,395	)		(27,885	)
Proceeds from exercise of stock options		611			2,801
Shares withheld for employees' income tax obligations		(7,128	)		(6,380	)
Net Cash Provided by (Used for) Financing Activities		2,137			(35,371	)
Net Decrease in Cash and Cash Equivalents		(7,535	)		(23,991	)
Cash and Cash Equivalents, beginning of period		44,892			1,446,364
Cash and Cash Equivalents, end of period	$	37,357		$	1,422,373

See accompanying notes to the consolidated financial statements.

Page 5 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF TOTAL EQUITY

(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, 2017		62,873	$	628	$	3,368,007		$	(129,104	)	$	1,440,069		$	4,679,600		$	2,877		$	4,682,477
Consolidated net earnings		—		—		—			—			10,023			10,023			17			10,040
Other comprehensive earnings, net of tax		—		—		—			1,619			—			1,619			—			1,619
Dividends declared ($0.44 per share)		—		—		—			—			(27,885	)		(27,885	)		—			(27,885	)
Issuances of common stock for stock award plans		75		—		9,893			—			—			9,893			—			9,893
Shares withheld for employees' income tax obligations		—		—		(6,380	)		—			—			(6,380	)		—			(6,380	)
Stock-based compensation expense		—		—		9,760			—			—			9,760			—			9,760
Contributions from owners of noncontrolling interest		—		—		—			—			—			—			306			306
Balance at March 31, 2018		62,948	$	628	$	3,381,280		$	(127,485	)	$	1,422,207		$	4,676,630		$	3,200		$	4,679,830

Balance at December 31, 2018		62,515	$	624	$	3,396,059		$	(143,579	)	$	1,693,259		$	4,946,363		$	3,049		$	4,949,412
Consolidated net earnings		—		—		—			—			42,853			42,853			(27	)		42,826
Other comprehensive earnings, net of tax		—		—		—			3,255			—			3,255			—			3,255
Dividends declared ($0.48 per share)		—		—		—			—			(30,395	)		(30,395	)		—			(30,395	)
Issuances of common stock for stock award plans		78		1		3,973			—			—			3,974			—			3,974
Shares withheld for employees' income tax obligations		—		—		(7,128	)		—			—			(7,128	)		—			(7,128	)
Stock-based compensation expense		—		—		13,552			—			—			13,552			—			13,552
Balance at March 31, 2019		62,593		625		3,406,456			(140,324	)		1,705,717			4,972,474			3,022		$	4,975,496

See accompanying notes to the consolidated financial statements.

Page 6 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Significant Accounting Policies

Organization

Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. The Company supplies aggregates (crushed stone, sand and gravel) through its network of more than 300 quarries, mines and distribution yards to its customers in 31 states, Canada, the Bahamas and the Caribbean Islands. In the western United States, Martin Marietta also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services, in vertically-integrated structured markets where the Company has a leading aggregates position. 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 three reportable segments: the Mid-America Group, the Southeast Group and the West Group.

BUILDING MATERIALS BUSINESS
Reportable Segments	Mid-America Group	Southeast Group	West Group
Operating Locations	Indiana, Iowa, northern Kansas, Kentucky, Maryland, Minnesota, Missouri, eastern Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Virginia, Washington and West Virginia	Alabama, Florida, Georgia, Tennessee, Nova Scotia and the Bahamas	Arkansas, Colorado, southern Kansas, Louisiana, western Nebraska, Nevada, Oklahoma, Texas, Utah and Wyoming

Product Lines	Aggregates	Aggregates	Aggregates, Cement, Ready Mixed Concrete, Asphalt and Paving

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.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and in Article 10 of Regulation S-X. Other than the required adoption of Accounting Standards Codification 842 – Leases (ASC 842), the Company has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In the opinion of management, the interim consolidated financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods. The consolidated results of operations for the three months ended March 31, 2019 are not indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at

Page 7 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

December 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

New Accounting Pronouncement

Leases

Effective January 1, 2019, the Company adopted ASC 842, which requires virtually all leases, excluding mineral interest leases, to be recorded as right-of-use (ROU) assets and lease liabilities on the balance sheet and provides guidance on the recognition of lease expense and income. ASC 842 requires the modified retrospective transition approach, applying the new standard to all leases existing at the date of initial application. It further states that an entity may use either 1) its effective date or 2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company used the effective date as the date of initial application. As such, financial information and disclosures required under ASC 842 will not be provided for dates and periods prior to January 1, 2019.

The new standard provides a number of practical expedients for transition and policy elections for ongoing accounting. The Company elected the “package of practical expedients”, which permits the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs. The Company elected the practical expedients pertaining to the use of hindsight and to land easements. Applying the hindsight practical expedient resulted in longer lease terms for many leases. The standard provides policy election options for recognition exemption for short-term leases and separation of lease and non-lease components. The Company elected the short-term lease recognition exemption and elected not to separate lease and non-lease components for all underlying asset classes with the exceptions of railcars and fleet vehicle leases. The Company determines lease and non-lease components based on observable information, including rates provided by the lessor.

The adoption of ASC 842 resulted in the recognition of ROU assets and lease liabilities of $502.5 million and $501.6 million, respectively, for operating leases and $10.9 million and $12.1 million, respectively, for finance leases. The adoption did not have a material impact on the Company’s consolidated statement of earnings or consolidated statement of cash flows.

Subsequent to the date of adoption, the Company determines if a contract is or contains a lease at inception of the agreement. Operating and finance leases are recognized as ROU assets and the related obligations are recognized as current or noncurrent liabilities on the Company’s consolidated balance sheets. Leases with an initial lease term of one year or less are not recorded on the balance sheet.

ROU assets, which represent the Company’s right to use an underlying asset, and lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, are recognized based on the present value of the future lease payments over the lease term at commencement date. The ROU asset also includes any lease payments made at or before commencement date and any initial direct costs incurred and excludes lease incentives. Certain of the Company’s leases contain renewal and/or termination options. The Company recognizes renewal or termination options as part of its ROU assets and lease liabilities when the Company has the unilateral right to renew or terminate and it is reasonably certain these options will be exercised. The Company determines the present value of lease payments based on the implicit rate, which may be explicitly stated in the lease if available or the Company’s estimated collateralized incremental borrowing rate based on the term of the lease. For operating leases, lease expense is recognized on a straight-line basis over the lease term.

Page 8 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Some leases require the Company pay non-lease components, which may include taxes, maintenance, insurance and certain other expenses applicable to the leased property, and are primarily considered variable costs. The Company generally accounts for lease and non-lease components as a single amount. However, for railcars and fleet vehicle leases, the Company separately accounts for the lease and non-lease components.

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss

Consolidated comprehensive earnings/loss and accumulated other comprehensive loss 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, and are presented in the Company’s consolidated statements of earnings and comprehensive earnings.

Comprehensive earnings attributable to Martin Marietta is as follows:

	Three Months Ended
	March 31,
	2019		2018
	(Dollars in Thousands)
Net earnings attributable to Martin Marietta Materials, Inc.	$	42,853	$	10,023
Other comprehensive earnings, net of tax		3,255		1,619
Comprehensive earnings attributable to Martin Marietta Materials, Inc.	$	46,108	$	11,642

Comprehensive earnings attributable to noncontrolling interests consist of net earnings and adjustments for the funded status of pension and postretirement benefit plans. For the three months ended March 31, 2019 and 2018, there were no other comprehensive earnings attributable to noncontrolling interests.

Page 9 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 March 31, 2019
Balance at beginning of period	$	(141,505	)	$	(2,074	)	$	—		$	(143,579	)
Other comprehensive earnings before reclassifications, net of tax		—			497			—			497
Amounts reclassified from accumulated other comprehensive loss, net of tax		2,758			—			—			2,758
Other comprehensive earnings, net of tax		2,758			497			—			3,255
Balance at end of period	$	(138,747	)	$	(1,577	)	$	—		$	(140,324	)

	Three Months Ended March 31, 2018
Balance at beginning of period	$	(128,802	)	$	(22	)	$	(280	)	$	(129,104	)
Other comprehensive loss before reclassifications, net of tax		—			(587	)		—			(587	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		1,996			—			210			2,206
Other comprehensive earnings (loss), net of tax		1,996			(587	)		210			1,619
Balance at end of period	$	(126,806	)	$	(609	)	$	(70	)	$	(127,485	)

Page 10 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 March 31, 2019
Balance at beginning of period	$	84,207		$	—		$	84,207
Tax effect of other comprehensive earnings		(868	)		—			(868	)
Balance at end of period	$	83,339		$	—		$	83,339

	Three Months Ended March 31, 2018
Balance at beginning of period	$	79,938		$	178		$	80,116
Tax effect of other comprehensive earnings		(658	)		(137	)		(795	)
Balance at end of period	$	79,280		$	41		$	79,321

Reclassifications out of accumulated other comprehensive loss are as follows:

	Three Months Ended						Affected line items in the consolidated
	March 31,						statements of earnings and
	2019			2018			comprehensive earnings
	(Dollars in Thousands)
Pension and postretirement benefit plans
Amortization of:
Prior service credit	$	(188	)	$	(585	)
Actuarial loss		3,814			3,239
		3,626			2,654		Other nonoperating income, net
Tax benefit		(868	)		(658	)	Income tax (benefit) expense
	$	2,758		$	1,996

Unamortized value of terminated forward starting interest rate swap
Additional interest expense	$	—		$	347		Interest expense
Tax benefit		—			(137	)	Income tax (benefit) expense
	$	—		$	210

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 certain of the Company’s stock-based compensation. If there is a net loss, no amount of the undistributed loss is attributed to unvested

Page 11 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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 Company’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive. For the three months ended March 31, 2019 and 2018, the diluted per-share computations reflect the number of common shares outstanding to include the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued.

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

	Three Months Ended
	March 31,
	2019		2018
	(In Thousands)
Net earnings attributable to Martin Marietta Materials, Inc.	$	42,853	$	10,023
Less: Distributed and undistributed earnings attributable to unvested awards		86		63
Basic and diluted net earnings available to common shareholders attributable to Martin Marietta Materials, Inc.	$	42,767	$	9,960

Basic weighted-average common shares outstanding		62,584		62,957
Effect of dilutive employee and director awards		193		265
Diluted weighted-average common shares outstanding		62,777		63,222

2.	Revenue Recognition

Total revenues include sales of products and services to customers, net of any discounts or allowances, and freight revenues. Product revenues are recognized when control of the promised good is transferred to the customer, typically when finished products are shipped. Intersegment and interproduct revenues are eliminated in consolidation. Service revenues are derived from the paving business and recognized using the percentage-of-completion method under the revenue-cost approach. Freight revenues reflect delivery arranged by the Company using a third party on behalf of the customer and are recognized consistent with the timing of the product revenues.

Performance Obligations. Performance obligations are contractual promises to transfer or provide a distinct good or service for a stated price. The Company’s product sales agreements are single-performance obligations that are satisfied at a point in time. Performance obligations within paving service agreements are satisfied over time, primarily ranging from one day to 20 months. For product revenues and freight revenues, customer payment terms are generally 30 days from invoice date. Customer payments for the paving operations are based on a contractual billing schedule and are due 30 days from invoice date.

Future revenues from unsatisfied performance obligations at March 31, 2019 and 2018 were $149.4 million and $88.1 million, respectively, where the remaining periods to complete these obligations ranged from one month to 21 months and one month to 20 months, respectively.

Page 12 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Revenue by Category. The following table presents the Company’s total revenues by category for each reportable segment:

	Three Months Ended
	March 31, 2019
(Dollars in Thousands)	Products and Services		Freight		Total
Mid-America Group	$	230,308	$	18,505	$	248,813
Southeast Group		115,312		3,925		119,237
West Group		463,511		33,320		496,831
Total Building Materials Business		809,131		55,750		864,881
Magnesia Specialties		69,174		4,900		74,074
Total	$	878,305	$	60,650	$	938,955

	Three Months Ended
	March 31, 2018
(Dollars in Thousands)	Products and Services		Freight		Total
Mid-America Group	$	167,890	$	10,891	$	178,781
Southeast Group		77,563		2,676		80,239
West Group		442,983		30,739		473,722
Total Building Materials Business		688,436		44,306		732,742
Magnesia Specialties		64,869		4,393		69,262
Total	$	753,305	$	48,699	$	802,004

Service revenues, which include paving operations located in Colorado, were $9.9 million and $11.1 million for the three months ended March 31, 2019 and 2018, respectively.

Contract Balances. Costs in excess of billings relate to the conditional right to consideration for completed contractual performance and are contract assets on the consolidated balance sheets. Costs in excess of billings are reclassified to accounts receivable when the right to consideration becomes unconditional. Billings in excess of costs relate to customers invoiced in advance of contractual performance and are contract liabilities on the consolidated balance sheets. The following table presents information about the Company’s contract balances:

(Dollars in Thousands)	March 31, 2019		December 31, 2018
Costs in excess of billings	$	2,238	$	1,975
Billings in excess of costs	$	5,814	$	6,743

Revenues recognized from the beginning balance of contract liabilities for the three months ended March 31, 2019 and 2018 were $3.8 million and $4.2 million, respectively.

Retainage, which primarily relates to the paving services, represents amounts that have been billed to customers but payment withheld until final acceptance of the performance obligation by the customer. Included on the Company’s consolidated balance sheets, retainage was $5.4 million and $7.5 million at March 31, 2019 and December 31, 2018.

Page 13 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Warranties. The Company’s construction contracts generally contain warranty provisions typically for a period of nine months to one year after project completion and cover materials, design or workmanship defects. Historically, the Company has not experienced material costs for warranties. The ready mixed concrete product line carries longer warranty periods, for which the Company has accrued an estimate of warranty cost based on experience with the type of work and any known risks relative to the project. In total, warranty costs were not material to the Company’s consolidated results of operations for the three months ended March 31, 2019 and March 31, 2018.

Policy Elections. When the Company arranges third party freight to deliver products to customers, the Company has elected the delivery to be a fulfillment activity rather than a separate performance obligation. Further, the Company acts as a principal in the delivery arrangements and, as required by the accounting standard, the related revenues and costs are presented gross and are included in the consolidated statements of earnings.

3.	Inventories, Net

	March 31,			December 31,
	2019			2018
	(Dollars in Thousands)
Finished products	$	605,785		$	615,719
Products in process and raw materials		63,114			66,920
Supplies and expendable parts		136,792			139,566
		805,691			822,205
Less: Allowances		(159,515	)		(159,170	)
Total	$	646,176		$	663,035

Page 14 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

4.	Long-Term Debt

	March 31,			December 31,
	2019			2018
	(Dollars in Thousands)
4.25% Senior Notes, due 2024	$	396,547		$	396,398
7% Debentures, due 2025		124,296			124,272
3.450% Senior Notes, due 2027		297,019			296,939
3.500% Senior Notes, due 2027		494,888			494,765
6.25% Senior Notes, due 2037		228,110			228,094
4.250% Senior Notes, due 2047		591,583			591,541
Floating Rate Notes, due 2019, interest rate of 3.13%, 3.29% and 2.70% at March 31, 2019 and December 31, 2018, respectively		299,446			299,260
Floating Rate Notes, due 2020, interest rate of 3.31%, 3.30% and 2.55% at March 31, 2019 and December 31, 2018, respectively		299,139			298,956
6.60% Senior Notes, due 2018		—			—
Revolving Facility, due 2023, interest rate of 3.59% at March 31, 2019		70,000			—
Trade Receivable Facility, interest rate of 3.21% and 3.07% at March 31, 2019 and December 31, 2018, respectively		360,000			390,000
Other notes		256			256
Total debt		3,161,284			3,120,481
Less: Current maturities of long-term debt and short-term facilities		(360,056	)		(390,042	)
Long-term debt	$	2,801,228		$	2,730,439

The Company, through a wholly-owned special-purpose subsidiary, has a $400 million trade receivable securitization facility (the Trade Receivable Facility). The Trade Receivable Facility, with SunTrust Bank, Regions Bank, PNC Bank, N.A., The Bank of Tokyo-Mitsubishi UFJ, LTD. (New York Branch), and certain other lenders that may become a party to the facility from time to time, is backed by eligible trade receivables, as defined, and is limited to the lesser of the facility limit or the borrowing base, as defined. These receivables are originated by the Company and then sold to the wholly-owned special-purpose subsidiary by the Company. The Company continues to be responsible for the servicing and administration of the receivables purchased by the wholly-owned special-purpose subsidiary. Borrowings under the Trade Receivable Facility bear interest at a rate equal to one-month London Interbank Offered Rate, or LIBOR, plus 0.725%, subject to change in the event that this rate no longer reflects the lender’s cost of lending. The Trade Receivable Facility, which contains a cross-default provision to the Company’s other debt agreements, matures on September 25, 2019.

The Company has a $700 million five-year senior unsecured revolving facility (the Revolving Facility), which expires on December 5, 2023, with JPMorgan Chase Bank, N.A., as Administrative Agent, Branch Banking and Trust Company (BB&T), Deutsche Bank Securities, Inc., SunTrust Bank and Wells Fargo Bank, N.A., as Co-Syndication Agents, and the lenders party thereto. Borrowings under the Revolving Facility bear interest, at the Company’s option, at rates based upon LIBOR or a base rate, plus, for each rate, a margin determined in accordance with a ratings-based pricing grid. The Revolving Facility requires the Company’s ratio of consolidated debt-to-consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), as defined by the Revolving Facility, for the trailing-twelve

Page 15 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

months (the Ratio) to not exceed 3.50x 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 such quarter or the three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 3.75x. Additionally, if no amounts are outstanding under both the Revolving Facility and the Trade Receivable Facility, consolidated debt, including debt for which the Company is a co-borrower, may be reduced by the Company’s unrestricted cash and cash equivalents in excess of $50 million, such reduction not to exceed $200 million, for purposes of the covenant calculation. The Company was in compliance with this Ratio at March 31, 2019.

Available borrowings under the Revolving Facility are reduced by any outstanding letters of credit issued by the Company under the Revolving Facility. The Company had $2.3 million of outstanding letters of credit issued under the Revolving Facility at March 31, 2019 and December 31, 2018.

The Floating Senior Rate Notes due 2019 are classified as noncurrent long-term debt on the consolidated balance sheets as of March 31, 2019 and December 31, 2018 as the Company has the ability and intent to refinance the notes on a long-term basis.

5.	Financial Instruments

The Company’s financial instruments include cash equivalents, accounts receivable, notes receivable, accounts payable, publicly-registered long-term notes, debentures and other long-term debt.

Cash equivalents are placed primarily in money market funds, money market demand deposit accounts and Eurodollar time deposits. The Company’s cash equivalents have original 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.

Accounts receivable are due from a large number of customers, primarily in the construction industry, and are dispersed across wide geographic and economic regions. No single customer accounted for 10% or more of consolidated total revenues. The estimated fair values of accounts receivable approximate their carrying amounts due to the short-term nature of the receivables.

Notes receivable are not publicly traded. Management estimates that the fair value of notes receivable approximates the carrying amount due to the short-term nature of the receivables.

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

The carrying values and fair values of the Company’s long-term debt were $3.16 billion and $3.13 billion, respectively, at March 31, 2019 and $3.12 billion and $3.01 billion, respectively, at December 31, 2018. The estimated fair value of the publicly-registered long-term notes was estimated based on Level 2 of the fair value hierarchy using quoted market prices. The estimated fair value of other borrowings approximate their carrying amounts as the interest rates reset periodically.

Page 16 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

6.	Income Taxes

The effective income tax rate reflects the effect of federal and state income taxes on earnings and the impact of differences in book and tax accounting arising from the net permanent tax benefits associated with the statutory depletion deduction for mineral reserves. Additionally, for the three months ended March 31, 2019, the effective income tax rate includes a $13.2 million discrete benefit from a change in the tax status of a subsidiary from a partnership to a corporation, contributing to an overall tax benefit of $5.0 million.

The Company records interest accrued in relation to unrecognized tax benefits as income tax expense. Penalties, if incurred, are recorded as operating expenses in the consolidated statements of earnings and comprehensive earnings.

7.	Pension and Postretirement Benefits

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

	Pension						Postretirement Benefits
	Three Months Ended March 31,
	2019			2018			2019			2018
	(Dollars in Thousands)
Service cost	$	7,872		$	8,148		$	15		$	22
Interest cost		9,395			8,361			131			125
Expected return on assets		(11,966	)		(10,629	)		—			—
Amortization of:
Prior service cost (credit)		2			26			(190	)		(611	)
Actuarial loss (gain)		3,932			3,296			(118	)		(57	)
Net periodic benefit cost (credit)	$	9,235		$	9,202		$	(162	)	$	(521	)

The service cost component of net periodic benefit cost (credit) is included in cost of revenues – products and services and selling, general and administrative expenses. All other components are included in other nonoperating income, net, in the consolidated statements of earnings and comprehensive earnings.

8.	Commitments and Contingencies

Legal and Administrative Proceedings

The Company 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 Company and its subsidiaries, will have a material adverse effect on the overall results of the Company’s operations, its cash flows or its financial position.

Borrowing Arrangements with Affiliate

The Company is a co-borrower with an unconsolidated affiliate for a $15.5 million revolving line of credit agreement with BB&T, of which $12.8 million was outstanding as of March 31, 2019 and has a maturity date of March 2020. The affiliate has agreed to reimburse and indemnify the Company for any payments and expenses the Company may

Page 17 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

incur from this agreement. The Company holds a lien on the affiliate’s membership interest in a joint venture as collateral for payment under the revolving line of credit.

In addition, the Company has a $6.0 million interest-only loan, due December 31, 2022, outstanding from this unconsolidated affiliate as of March 31, 2019 and December 31, 2018. The interest rate is one-month LIBOR plus a current spread of 1.75%.

Letters of Credit

In the normal course of business, the Company provides certain third parties with standby letter of credit agreements guaranteeing its payment for certain insurance claims, contract performance and permit requirements. At March 31, 2019, the Company was contingently liable for $36.1 million in letters of credit, of which $2.3 million were issued under the Company’s Revolving Facility.

Employees

The Company maintains collective bargaining agreements relating to the union employees within the Building Materials business and Magnesia Specialties segment. Of the Magnesia Specialties segment, 100% of its hourly employees are represented by labor unions. The Manistee collective bargaining agreement expires in August 2019. The Woodville collective bargaining agreement expires June 2022.

9.	Business Segments

The Building Materials business contains three reportable business segments: Mid-America Group, Southeast Group and West Group. The Company also has a Magnesia Specialties segment. The Company’s evaluation of performance and allocation of resources are based primarily on earnings from operations. Consolidated earnings from operations include total revenues less cost of revenues; selling, general and administrative expenses; acquisition-related expenses, net; other operating income and expenses, net; and exclude interest expense; other nonoperating income and expenses, net; and taxes on income. Corporate loss from operations primarily includes depreciation on capitalized interest; unallocated expenses for corporate administrative functions; acquisition-related expenses, net; and other nonrecurring income and expenses excluded from the Company’s evaluation of business segment performance and resource allocation. All debt and related interest expense are held at Corporate.

The following table displays selected financial data for the Company’s reportable business segments. The Bluegrass Materials Company (Bluegrass) operations, acquired in April 2018, are located in the Mid-America Group and Southeast Group. Total revenues, as well as the consolidated statements of earnings and comprehensive earnings, exclude intersegment revenues which represent sales from one segment to another segment, which are eliminated.

Page 18 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

	Three Months Ended
	March 31,
	2019			2018
	(Dollars in Thousands)
Total revenues:
Mid-America Group	$	248,813		$	178,781
Southeast Group		119,237			80,239
West Group		496,831			473,722
Total Building Materials Business		864,881			732,742
Magnesia Specialties		74,074			69,262
Total	$	938,955		$	802,004

Products and services revenues:
Mid-America Group	$	230,308		$	167,890
Southeast Group		115,312			77,563
West Group		463,511			442,983
Total Building Materials Business		809,131			688,436
Magnesia Specialties		69,174			64,869
Total	$	878,305		$	753,305

Earnings (Loss) from operations:
Mid-America Group	$	30,955		$	6,167
Southeast Group		21,134			2,041
West Group		19,936			34,951
Total Building Materials Business		72,025			43,159
Magnesia Specialties		22,642			21,237
Corporate		(25,446	)		(25,315	)
Total	$	69,221		$	39,081

	March 31, 2019		December 31, 2018
Assets employed:	(Dollars in thousands)
Mid-America Group	$	2,848,652	$	2,788,454
Southeast Group		1,443,597		1,299,469
West Group		5,280,109		4,989,639
Total Building Materials Business		9,572,358		9,077,562
Magnesia Specialties		170,833		156,106
Corporate		305,216		317,751
Total	$	10,048,407	$	9,551,419

Page 19 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

10.	Revenues and Gross Profit

The Building Materials business includes the aggregates, cement, ready mixed concrete and asphalt and paving product lines. All cement, ready mixed concrete and asphalt and paving product lines reside in the West Group. The following table, which is reconciled to consolidated amounts, provides total revenues and gross profit by product line.

	Three Months Ended
	March 31,
	2019			2018
	(Dollars in Thousands)
Total revenues:
Building Materials Business:
Products and services:
Aggregates	$	541,473		$	425,016
Cement		99,017			89,183
Ready mixed concrete		211,156			218,537
Asphalt and paving services		15,846			16,365
Less: interproduct revenues		(58,361	)		(60,665	)
Products and services		809,131			688,436
Freight		55,750			44,306
Total Building Materials Business		864,881			732,742
Magnesia Specialties:
Products and services		69,174			64,869
Freight		4,900			4,393
Total Magnesia Specialties		74,074			69,262
Total	$	938,955		$	802,004

Gross profit (loss):
Building Materials Business:
Products and services:
Aggregates	$	97,562		$	53,002
Cement		13,779			23,734
Ready mixed concrete		14,492			15,641
Asphalt and paving services		(7,829	)		(7,639	)
Products and services		118,004			84,738
Freight		(165	)		(119	)
Total Building Materials Business		117,839			84,619
Magnesia Specialties:
Products and services		26,607			25,063
Freight		(1,065	)		(1,174	)
Total Magnesia Specialties		25,542			23,889
Corporate		(474	)		1,884
Total	$	142,907		$	110,392

Page 20 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

11.

Leases

The Company has leases primarily for equipment, railcars, fleet vehicles, office space, land and information technology equipment and software. The Company’s leases have remaining lease terms of one year to 54 years, some of which may include options to extend the leases for up to 30 years, and some of which may include options to terminate the leases within one year.

Certain of the Company’s lease agreements include payments based upon variable rates, including but not limited to hours used, tonnage processed and factors related to indices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease cost are as follows:

	Three Months Ended
	March 31, 2019
	(Dollars in Thousands)
Operating lease cost	$	19,966
Finance lease cost:
Amortization of right-of-use assets		935
Interest on lease liabilities		148
Variable lease cost		4,667
Short-term lease cost		8,118
Total lease cost	$	33,834

The balance sheet classifications of operating and finance leases are as follows:

	Three Months Ended
	March 31, 2019
	(Dollars in Thousands)
Operating Leases:
Operating lease right-of-use assets	$	498,233

Current operating lease liabilities	$	50,776
Noncurrent operating lease liabilities		446,128
Total operating lease liabilities	$	496,904

Finance Leases:
Property, plant and equipment	$	11,143
Accumulated depreciation		(935	)
Property, plant and equipment, net	$	10,208

Other current liabilities	$	3,456
Other noncurrent liabilities		7,862
Total finance lease liabilities	$	11,318

Page 21 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The estimated incremental borrowing rate range used was 3.5% to 5.5%. Weighted-average remaining lease terms and discount rates are as follows:

	March 31, 2019
Weighted-average remaining lease term (years):
Operating leases		15.0
Finance leases		8.2

Weighted-average discount rate:
Operating leases		4.3	%
Finance leases		5.1	%

Future lease payments under leases as of March 31, 2019 are as follows:

	Operating			Finance
	Leases			Leases
	(Dollars in Thousands)
2019	$	53,014		$	2,956
2020		63,870			3,243
2021		52,674			1,951
2022		48,376			1,094
2023		45,912			779
Thereafter		429,013			4,176
Total lease payments		692,859			14,199
Less: imputed interest		(195,593	)		(2,881	)
Present value of lease payments		497,266			11,318
Less: current lease obligations		(50,776	)		(3,456	)
Total long-term lease obligations	$	446,490		$	7,862

As of March 31, 2019, the Company has additional operating leases, primarily for equipment and land, that have not yet commenced of $1.7 million. These operating leases will commence in fiscal year 2019 with lease terms of two years to ten years. These leases are included in the preceding table.

Page 22 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Other lease information is as follows:

	Three Months Ended
	March 31, 2019
	(Dollars in Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	19,512
Operating cash flows used for finance leases	$	148
Financing cash flows used for finance leases	$	951
Right-of-use assets obtained in exchange for new operating lease liabilities	$	16,924
Right-of-use assets obtained in exchange for new finance lease liabilities	$	217

Lease disclosures for the full year December 31, 2018, as reported:

Total lease expense for operating leases was $122.5 million for the year ended December 31, 2018. Total royalties, principally for leased properties, were $52.5 million, for the year ended December 31, 2018. The Company also has capital lease obligations for machinery and equipment. Future minimum lease and royalty commitments for all noncancelable agreements and capital lease obligations as of December 31, 2018 were as follows:

	Capital Leases			Operating Leases		Royalty Commitments
	(Dollars in Thousands)
2019	$	3,718		$	105,955	$	14,614
2020		2,695			70,478		11,364
2021		1,735			60,382		10,335
2022		1,004			57,531		9,545
2023		713			56,511		8,109
Thereafter		3,893			318,147		65,981
Total		13,758		$	669,004	$	119,948
Less: imputed interest		(2,879	)
Present value of minimum lease payments		10,879
Less: current capital lease obligations		(3,249	)
Long-term capital lease obligations	$	7,630

Page 23 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

12.	Supplemental Cash Flow Information

Noncash investing and financing activities are as follows:

	March 31,
	2019		2018
	(Dollars in Thousands)
Noncash investing and financing activities:
Accrued liabilities for purchases of property, plant and equipment	$	20,629	$	35,639
Acquisition of assets through swap	$	1,114	$	—
Note receivable issued in connection with sale of property, plant and equipment	$	1,272	$	—
Acquisition of assets through capital lease	$	—	$	192

Supplemental disclosures of cash flow information are as follows:

	March 31,
	2019		2018
	(Dollars in Thousands)
Cash paid for interest	$	17,750	$	12,458
Cash paid for (refund of) income taxes	$	3,905	$	(7,527	)

13.	Bluegrass Acquisition

In April 2018, the Company acquired Bluegrass, the largest privately-held, pure-play aggregates company in the United States for $1.62 billion. These operations complement the Company’s existing southeastern footprint in its Mid-America and Southeast Groups and provide new growth platforms within Maryland and Kentucky.

The Company determined fair values of the assets acquired and liabilities assumed. Although initial accounting for the business combination has been recorded, these amounts are subject to change during the measurement period which extends no longer than one year from the consummation date based on additional reviews, such as completion of deferred tax estimates based on the determination of the historic tax basis in assets acquired. Specific accounts subject to ongoing purchase accounting adjustments include goodwill and deferred income tax liabilities, net. Therefore, the measurement period remains open as of March 31, 2019. The following is a summary of the preliminary estimated fair values of the assets acquired and the liabilities assumed (dollars in thousands):

Page 24 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Assets:
Cash	$	1,159
Receivables		25,479
Inventory		46,635
Other current assets		1,029
Property, plant and equipment		1,519,289
Intangible assets, other than goodwill		20,150
Goodwill		242,981
Total assets		1,856,722

Liabilities:
Accounts payable and accrued expenses		17,978
Deferred income tax liabilities, net		212,386
Noncontrolling interest		9,001
Total liabilities		239,365

Total consideration	$	1,617,357

The unaudited pro forma financial information summarizes the combined results of operations for the Company and Bluegrass as though the companies were combined as of January 1, 2017. The pro forma earnings does not reflect any cost savings or associated costs to achieve such savings from operating efficiencies or synergies that result from the combination. Consistent with the assumed acquisition date of January 1, 2017, expenses related to the acquisition would be reflected in the pro forma results for the year ended December 31, 2017. The pro forma financial information does not purport to project the future financial position or operating results of the combined company. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2017.

The following presents pro forma results for the quarter ended March 31, 2018:

(Dollars in Thousands, except per share data)
Total revenues	$	840,909
Net earnings attributable to Martin Marietta	$	2,988
Diluted EPS	$	0.05

Page 25 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

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

OVERVIEW

The Company conducts its Building Materials business through three reportable business segments: Mid-America Group, Southeast Group and West Group.

BUILDING MATERIALS BUSINESS
Reportable Segments	Mid-America Group	Southeast Group	West Group
Operating Locations	Indiana, Iowa, northern Kansas, Kentucky, Maryland, Minnesota, Missouri, eastern Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Virginia, Washington and West Virginia	Alabama, Florida, Georgia, Tennessee, Nova Scotia and the Bahamas	Arkansas, Colorado, southern Kansas, Louisiana, western Nebraska, Nevada, Oklahoma, Texas, Utah and Wyoming

Product Lines	Aggregates	Aggregates	Aggregates, Cement, Ready Mixed Concrete, Asphalt and Paving

Plant Types	Quarries, Mines and Distribution Facilities	Quarries, Mines and Distribution Facilities	Quarries, Mines, Plants and Distribution Facilities

Modes of Transportation	Truck and Railcar	Truck, Railcar and Ship	Truck and Railcar

The Company also has a Magnesia Specialties business that produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel and mining industry.

CRITICAL ACCOUNTING POLICIES

The Company outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2018. There were no changes to the Company’s critical accounting policies during the three months ended March 31, 2019.

Page 26 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

RESULTS OF OPERATIONS

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 and paving 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 and southwest. 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 and year-to-date results are not indicative of expected performance for other interim periods or the full year.

Earnings before interest, income taxes, depreciation and amortization (EBITDA) is a widely accepted financial indicator of a company’s ability to service and/or incur indebtedness. EBITDA is not defined by generally accepted accounting principles and, as such, should not be construed as an alternative to net earnings, operating earnings or operating cash flow. However, the Company’s management believes that EBITDA may provide additional information with respect to the Company’s performance or ability to meet its future debt service, capital expenditures or working capital requirements. Because EBITDA excludes some, but not all, items that affect net earnings and may vary among companies, EBITDA as presented by the Company may not be comparable to similarly titled measures of other companies.

A reconciliation of net earnings attributable to Martin Marietta Materials, Inc. to consolidated EBITDA is as follows:

	Three Months Ended
	March 31,
	2019			2018
	(Dollars in thousands)
Net Earnings Attributable to Martin Marietta Materials, Inc.	$	42,853		$	10,023
Add back:
Interest expense		32,846			35,087
Income tax (benefit) expense for controlling interests		(5,001	)		2,438
Depreciation, depletion and amortization expense		88,187			75,714
Consolidated EBITDA	$	158,885		$	123,262

Significant items for the quarter ended March 31, 2019 (unless noted, all comparisons are versus the prior-year quarter):

♦

Consolidated total revenues of $939.0 million compared with $802.0 million, an increase of 17%

♦

Building Materials business products and services revenues of $809.1 million compared with $688.4 million and Magnesia Specialties products revenue of $69.2 million compared with $64.9 million

♦

Consolidated gross profit of $142.9 million compared with $110.4 million, an increase of 30%

♦

Consolidated earnings from operations of $69.2 million compared with $39.1 million, an increase of 77%

♦

Net earnings attributable to Martin Marietta of $42.9 million compared with $10.0 million

♦

EBITDA of $158.9 million compared with $123.3 million, an increase of 29%

♦

Earnings per diluted share of $0.68 compared with $0.16

Page 27 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

The following table presents 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 the three months ended March 31, 2019 and 2018. 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.

	Three Months Ended March 31,
	2019					2018
	Amount			% of Revenues		Amount			% of Revenues
	(Dollars in Thousands)
Total revenues:
Building Materials Business:
Products and services
Mid-America Group
Aggregates	$	230,308			100.0	$	167,890			100.0
Southeast Group
Aggregates		115,312			100.0		77,563			100.0
West Group
Aggregates		195,853			100.0		179,563			100.0
Cement		99,017			100.0		89,183			100.0
Ready mixed concrete		211,156			100.0		218,537			100.0
Asphalt and paving		15,846			100.0		16,365			100.0
Less: Interproduct revenues		(58,361	)				(60,665	)
Products and services		809,131			100.0		688,436			100.0
Freight		55,750					44,306
Total Building Materials Business		864,881			100.0		732,742			100.0
Magnesia Specialties Business:
Products		69,174			100.0		64,869			100.0
Freight		4,900					4,393
Total Magnesia Specialties Business		74,074			100.0		69,262			100.0
Total	$	938,955			100.0	$	802,004			100.0

Page 28 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

	Three Months Ended March 31,
	2019						2018
	Amount			% of Revenues			Amount			% of Revenues
	(Dollars in Thousands)
Gross profit (loss):
Building Materials Business:
Products and services
Mid-America Group
Aggregates	$	45,254			19.6		$	18,379			10.9
Southeast Group
Aggregates		26,562			23.0			6,573			8.5
West Group
Aggregates		25,746			13.1			28,050			15.6
Cement		13,779			13.9			23,734			26.6
Ready mixed concrete		14,492			6.9			15,641			7.2
Asphalt and paving		(7,829	)		(49.4	)		(7,639	)		(46.7	)
Products and services		118,004			14.6			84,738			12.3
Freight		(165	)					(119	)
Total Building Materials Business		117,839			13.6			84,619			11.5
Magnesia Specialties Business:
Products		26,607			38.5			25,063			38.6
Freight		(1,065	)					(1,174	)
Total Magnesia Specialties Business		25,542			34.5			23,889			34.5
Corporate		(474	)					1,884
Total	$	142,907			15.2		$	110,392			13.8

Page 29 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

	Three Months Ended March 31,
	2019					2018
	Amount			% of Revenues		Amount			% of Revenues
	(Dollars in Thousands)
Selling, general & administrative expenses:
Building Materials Business:
Mid-America Group	$	15,593				$	13,130
Southeast Group		5,377					4,416
West Group		29,278					26,132
Total Building Materials Business		50,248					43,678
Magnesia Specialties		2,865					2,602
Corporate		25,179					23,841
Total	$	78,292			8.3	$	70,121			8.7

Earnings (Loss) from operations:
Building Materials Business:
Mid-America Group	$	30,955				$	6,167
Southeast Group		21,134					2,041
West Group		19,936					34,951
Total Building Materials Business		72,025					43,159
Magnesia Specialties		22,642					21,237
Corporate		(25,446	)				(25,315	)
Total	$	69,221			7.4	$	39,081			4.9

Page 30 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

Building Materials Business

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

	Three Months Ended
	March 31, 2019
	Volume			Pricing
Volume/Pricing variance⁽¹⁾
Heritage Operations:⁽²⁾
Mid-America Group		18.4	%		3.1	%
Southeast Group		16.7	%		6.2	%
West Group		6.3	%		2.7	%
Total Heritage Aggregates Operations		12.5	%		4.0	%
Total Aggregates Operations⁽⁴⁾		24.2	%		2.3	%

	Three Months Ended
	March 31,
	2019		2018
	(Tons in Thousands)
Shipments
Heritage Operations:⁽²⁾
Mid-America Group		13,585		11,473
Southeast Group ⁽³⁾		5,141		4,405
West Group		15,036		14,142
Heritage Aggregates Operations		33,762		30,020
Acquisitions		3,524		—
Total Aggregates Operations⁽⁴⁾		37,286		30,020

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

⁽²⁾ Heritage aggregates operations exclude acquisitions that have not been included in prior-year operations for the comparable period.

⁽³⁾ 2018 shipments include the Forsyth, Georgia operation, which was divested in April 2018.

⁽⁴⁾ Total aggregates operations include acquisitions from the date of acquisition and divestitures through the date of disposal.

First-quarter operating results demonstrate the robust underlying demand that was masked in 2018 by weather, contractor capacity and logistics disruptions. While winter weather traditionally limits the ability of outdoor contractors to perform work, the Company experienced relatively better weather during the first three months of 2019. This allowed contractors to begin addressing backlogs with an earlier-than-normal start to the construction season. The notable exception was in the Company’s second-largest state by revenues, Colorado, which experienced one of its harshest winters on record, delaying the onset of meaningful construction activity.

Aggregates shipments to the infrastructure market increased 2% as modestly improved weather, particularly in the Southeast, allowed contractors to advance transportation-related projects earlier in the construction season. Following more than a decade of underinvestment, management remains confident that infrastructure demand is poised for meaningful growth. Funding provided by the Fixing America’s Surface Transportation Act (FAST Act), combined with

Page 31 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

numerous state and local transportation initiatives, has resulted in an acceleration in lettings and contract awards in key states, including Texas, Colorado, North Carolina, Georgia and Florida. For the quarter, the infrastructure market represented 33% of aggregates shipments, which is below the Company’s most recent ten-year average of 46% but consistent with first-quarter historical trends.

Aggregates shipments to the nonresidential market increased 33%, driven by both commercial and heavy industrial construction activity. The Company continued to benefit from robust distribution center, warehouse, data center and wind turbine projects in key geographies, including Texas, the Carolinas, Georgia and Iowa. The nonresidential market represented 37% of first-quarter aggregates shipments.

Aggregates shipments to the residential market increased 8%, driven by weather-deferred homebuilding activity in the Carolinas, Georgia and Florida. Despite the recent slowdown in housing unit starts at the national level, the residential construction outlook across the Company’s geographic footprint remains positive for both single- and multi-family housing, driven by favorable demographics, job growth, land availability, steady interest rates and efficient permitting. On a national level, housing starts remain below the 50-year annual average of 1.5 million despite notable population gains. The residential market accounted for 23% of first-quarter aggregates shipments.

The ChemRock/Rail market accounted for the remaining 7% of first-quarter aggregates shipments. Volumes to this sector decreased 9%, driven by reduced agricultural lime shipments from a depressed farm economy. Additionally, ballast shipments declined due to lower maintenance spending by western Class I railroads.

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

	Three Months Ended
	March 31,
	2019		2018		% Change
Aggregates - heritage (per ton)	$	14.61	$	14.04		4.0	%
Aggregates - acquisition (per ton)	$	12.02	$	—
Cement (per ton)	$	110.93	$	106.86		3.8	%
Ready Mixed Concrete (per cubic yard)	$	106.84	$	106.34		0.5	%
Asphalt (per ton)	$	41.12	$	42.81		(3.9	)%

Page 32 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

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

	Three Months Ended
	March 31,
	2019		2018
Shipments
Aggregates (in thousands):
Heritage:
Tons to external customers		31,732		27,877
Internal tons used in other product lines		2,030		2,143
Total heritage aggregates tons		33,762		30,020
Acquisitions:
Tons to external customers		3,524		—
Internal tons used in other product lines		—		—
Total acquisition aggregates tons		3,524		—

Cement (in thousands):
Tons to external customers		589		527
Internal tons used in ready mixed concrete		296		298
Total cement tons		885		825

Ready Mixed Concrete (in thousands of cubic yards)		1,932		2,009

Asphalt (in thousands):
Tons to external customers		142		116
Internal tons used in paving business		51		76
Total asphalt tons		193		192

Cement shipments and pricing increased 7.3% and 3.8%, respectively, as these operations benefitted from solid underlying demand in Texas, a new Houston-area sales yard and enhanced product line. Extended maintenance outages, including the acceleration of maintenance activities originally planned for later in the year, and higher transportation costs contributed to the 1,270-basis-point reduction in product gross margin to 13.9%.

Ready mixed concrete shipments decreased 3.8%, driven by cold and wet winter weather in Colorado. Overall, ready mixed concrete prices improved 0.5% for the quarter, led by a 3.0% increase in Colorado. Restructuring initiatives implemented in 2018 have improved profitability for the Southwest ready mixed concrete business despite relatively flat shipments. Colorado asphalt shipments declined while pricing improved 3.9%.

Page 33 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

Magnesia Specialties Business

Magnesia Specialties reported record first-quarter total products revenue of $69.2 million, an increase of 6.6%, compared with $64.9 million, attributable to continued benefit from strong domestic steel production and increased global demand for magnesia chemical products. Products gross profit was $26.6 million compared with $25.1 million. Product gross margin was relatively flat at 38.5% as pricing gains and production efficiencies were offset by higher costs for supplies and contract services. Earnings from operations were $22.6 million compared with $21.2 million.

Gross Profit

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

Consolidated gross profit, quarter ended March 31, 2018	$	110,392
Aggregates products:
Volume		33,022
Pricing		11,935
Operational performance⁽¹⁾		(397	)
Change in aggregates products gross profit		44,560
Cement products and downstream products and services		(11,294	)
Magnesia Specialties products		1,544
Corporate		(2,358	)
Freight		63
Change in consolidated gross profit		32,515
Consolidated gross profit, quarter ended March 31, 2019	$	142,907

(1)	Inclusive of cost increases/decreases, product and geographic mix and other operating impacts

Aggregates product gross margin increased 550 basis points to 18.0%, reflecting improved operating leverage from increased shipment and production levels. Extended cement maintenance outages, including the acceleration of maintenance activities originally planned for later in the year, and higher rail freight costs contributed to the 1,270-basis-point reduction in product gross margin to 13.9%.

Consolidated Operating Results

Consolidated SG&A was 8.3% of total revenues compared with 8.7% in the prior-year quarter. Earnings from operations for the quarter were $69.2 million in 2019 compared with $39.1 million in 2018.

Among other items, other operating income (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. For the first quarter, consolidated other operating income (expenses), net, was income of $4.8 million in 2019 and expense of $0.5 million in 2018. The 2019 amount reflects the reversal of a $4.2 million purchase accounting accrual related to the Texas Industries, Inc. acquisition and higher gains on the sales of assets.

Other nonoperating income, net, includes interest income; pension and postretirement benefit cost, excluding service cost; foreign currency transaction gains and losses; equity in earnings or losses of nonconsolidated affiliates and other miscellaneous income. For the first quarter, other nonoperating income, net, was $1.6 million and $8.5 million in 2019 and 2018, respectively. The decrease in 2019 is primarily due to higher interest income in 2018.

Page 34 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

Income Tax Benefit

For the three months ended March 31, 2019, the effective income tax rate includes a $13.2 million discrete benefit from a change in the tax status of a subsidiary from a partnership to a corporation, contributing to an overall tax benefit of $5.0 million.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities for the three months ended March 31 was $117.9 million in 2019 compared with $105.0 million in 2018. 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:

	Three Months Ended
	March 31,
	2019		2018
	(Dollars in Thousands)
Depreciation	$	78,069	$	69,151
Depletion		5,925		3,141
Amortization		5,217		4,529
	$	89,211	$	76,821

The seasonal nature of construction activity impacts the Company’s quarterly operating cash flow when compared with the full year. Full-year 2018 net cash provided by operating activities was $705.1 million.

During the three months ended March 31, 2019, the Company paid $130.1 million for capital investments. Full-year capital spending is expected to range from $350 million to $400 million.

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 did not repurchase any shares of common stock during the first three months of 2019. At March 31, 2019, 14,147,751 shares of common stock were remaining under the Company’s repurchase authorization.

The $700 million 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 3.50x 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 3.75x. Additionally, if there are no amounts outstanding under the Revolving Facility and the $400 million Trade Receivable Facility, consolidated debt, including debt for which the Company is a co-borrower, may be reduced by the Company’s unrestricted cash and cash equivalents in excess of $50 million, such reduction not to exceed $200 million, for purposes of the covenant calculation.

The Ratio is calculated as debt, including debt for which the Company is a co-borrower, divided by consolidated EBITDA, as defined by the Company’s Revolving Facility, for the trailing-twelve months. Consolidated EBITDA is generally defined as earnings before interest expense, income tax expense, and depreciation and amortization expense for continuing

Page 35 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

operations. Additionally, stock-based compensation expense is added back and interest income is deducted in the calculation of consolidated EBITDA. During periods that include an acquisition, pre-acquisition adjusted EBITDA of the acquired company is added to consolidated EBITDA as if the acquisition occurred on the first day of the calculation period. Certain other nonrecurring items, if they occur, can affect the calculation of consolidated EBITDA.

At March 31, 2019, the Company’s ratio of consolidated debt-to-consolidated EBITDA, as defined by the Company’s Revolving Facility, for the trailing-twelve months was 2.71 times and was calculated as follows:

	April 1, 2018 to
	March 31, 2019
	(Dollars in thousands)
Earnings from continuing operations attributable to Martin Marietta	$	502,828
Add back:
Income tax expense		98,197
Interest expense		134,930
Depreciation, depletion and amortization expense		352,336
Stock-based compensation expense		33,044
Acquisition-related expenses, net		46,218
Bluegrass EBITDA - Pre-Acquisition (April 1, 2018 - April 27, 2018)		7,858
Noncash portion of restructuring expenses		16,970

Deduct:
Interest income		(1,853	)
Gain on divestiture		(14,785	)
Consolidated EBITDA, as defined by the Company’s Revolving Facility	$	1,175,743
Consolidated net debt, as defined and including debt for which the Company is a co-borrower, at March 31, 2019	$	3,185,353
Consolidated debt-to-consolidated EBITDA, as defined by the Company’s Revolving Facility, at March 31, 2019 for the trailing-twelve months EBITDA	2.71 times

The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements. 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. Outstanding amounts on the Trade Receivable Facility have been classified as a current liability on the Company’s consolidated balance sheet.

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. Any future significant strategic acquisition for cash would likely require an appropriate balance of newly-issued equity with debt in order to maintain a composite investment-grade credit rating. At March 31, 2019, the Company had

Page 36 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

$667.7 million of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility, subject to complying with the related leverage covenant. The Revolving Facility and Trade Receivable Facility expire on December 5, 2023 and September 25, 2019, respectively.

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, 2018. Management continues to evaluate its exposure to all operating risks on an ongoing basis.

OUTLOOK

The Company remains confident in its previously announced full-year outlook. The Company’s geographic footprint has attractive underlying market fundamentals, including notable employment gains, population growth and superior state fiscal health – all attributes promoting steady and sustainable construction growth. Supported by robust underlying demand and third-party forecasts, the Company believes the current construction cycle will continue for the foreseeable future and expand further this year for each of the Company’s three primary construction end-use markets.

Based on current trends and expectations, management has reaffirmed its full-year guidance. Aggregates shipments by end-use market compared with 2018 levels are as follows:

•

Infrastructure shipments to increase in the high-single digits.

•

Nonresidential shipments to increase in the mid- to high-single digits.

•

Residential shipments to increase in the mid-single digits.

•

ChemRock/Rail shipments to be up slightly.

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, give the investor the Company’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,” “expect,” “should be,” “believe,” “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 Form 10-Q (including the outlook) include, but are not limited to: the performance of the United States economy;

Page 37 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

shipment declines resulting from economic events beyond the Company’s control; a widespread decline in aggregates pricing, including a decline in aggregates 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 infrastructure construction; the level and timing of federal, state or local transportation or infrastructure projects funding, most particularly in Texas, Colorado, North Carolina, Georgia, Iowa and Maryland; the United States Congress’ inability to reach agreement among themselves or with the current 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 the commercial component of the nonresidential construction market, notably office and retail space; a decline in energy-related construction activity resulting from a sustained period of low global oil prices or changes in oil production patterns in response to this decline, particularly in Texas; a slowdown in residential construction recovery; unfavorable weather conditions, particularly Atlantic Ocean and Gulf Coast 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 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, 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; increasing governmental regulation, including environmental laws; 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, North Carolina and the 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 construction equipment in the United States; weakening in the steel industry markets served by the Company’s dolomitic lime products; a trade dispute 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 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; continued downward pressure on the Company’s common stock price and its impact on goodwill impairment evaluations; 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.

Page 38 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter March 31, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

First Quarter Ended March 31, 2019

(Continued)

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, 2018 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.

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, 2018, by writing to:

Martin Marietta

Attn: Corporate Secretary

2710 Wycliff Road

Raleigh, North Carolina 27607-3033

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) 510-4776

Website address: www.martinmarietta.com

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

Page 39 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company’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 Company’s business. Demand for aggregates products, particularly in the infrastructure construction market, is affected by federal and state budget and deficit issues. Further, delays or cancellations of capital projects in the nonresidential and residential construction markets could occur if companies and consumers are unable to obtain financing for construction projects or if consumer confidence continues to be eroded by economic uncertainty.

Demand in the residential construction market is affected by interest rates. The Federal Reserve did not change interest rates during the quarter ended March 31, 2019. The federal funds rate at March 31, 2019 was 2.4%. The residential construction market accounted for 22% of the Company’s aggregates product line shipments in 2018.

Aside from these inherent risks from within its operations, the Company’s earnings are also affected by changes in short-term interest rates. However, rising interest rates are not necessarily predictive of weaker operating results. Historically, the Company’s profitability increased during periods of rising interest rates. In essence, the Company’s underlying business generally serves as a natural hedge to rising interest rates.

Variable-Rate Borrowing Facilities. At March 31, 2019, the Company had a $700 million Revolving Facility and a $400 million Trade Receivable Facility. The Company also has $600 million variable-rate senior notes. Borrowings under these facilities bear interest at a variable interest rate. A hypothetical 100-basis-point increase in interest rates on borrowings of $1.03 billion, which was the collective outstanding balance at March 31, 2019, would increase interest expense by $10.3 million on an annual basis.

Pension Expense. The Company’s results of operations are affected by its pension expense. Assumptions that affect pension expense include the discount rate and, for the qualified defined benefit pension plan only, the expected long-term rate of return on assets. Therefore, the Company has interest rate risk associated with these factors. The impact of hypothetical changes in these assumptions on the Company’s annual pension expense is discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Energy Costs. Energy costs, including diesel fuel, natural gas, coal and liquid asphalt, represent significant production costs of the Company. The cement operations and Magnesia Specialties business have fixed price agreements covering 100% of its 2019 coal requirements. Energy costs for the three months ended March 31, 2019 increased approximately 6% over the prior-year period. A hypothetical 6% change in the Company’s energy prices for the full year 2019 as compared with 2018, assuming constant volumes, would change full year 2019 energy expense by $17.0 million.

Commodity Risk. Cement is a commodity and competition is based principally on price, which is highly sensitive to changes in supply and demand. Prices are often subject to material changes in response to relatively minor fluctuations in supply and demand, general economic conditions and other market conditions beyond the Company’s control. Increases in the production capacity of industry participants or increases in cement imports tend to create an oversupply of such products leading to an imbalance between supply and demand, which can have a negative impact on product prices. There can be no assurance that prices for products sold will not decline in the future or that such declines will not have a material adverse effect on the Company’s business, financial condition and results of operations. Assuming total revenues for cement for full-year 2019 of $420 million to $450 million, a hypothetical 10% change in sales price would impact net sales by $42.0 million to $45.0 million.

Page 40 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

(Continued)

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As of March 31, 2019, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2019.

Changes in Internal Control Over Financial Reporting. Beginning January 1, 2019, the Company implemented Accounting Standard Codification 842, Leases (ASC 842). Although the adoption of the new accounting standard did not materially impact its Consolidated Statement of Earnings and Comprehensive Earnings or Consolidated Statement of Cash Flows for the three months ended March 31, 2019, the Company implemented changes to its internal controls related to the implementation of ASC 842. These changes included a comprehensive lease scoping analysis to identify and evaluate each of its leases and an implementation of a new lease accounting application to calculate values for its right-of-use assets and lease liabilities. There were no other changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Page 41 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

PART II- OTHER INFORMATION

Item 1. Legal Proceedings.

Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta Annual Report on Form 10-K for the year ended December 31, 2018.

Item 1A. Risk Factors.

Reference is made to Part I. Item 1A. Risk Factors and Forward-Looking Statements of the Martin Marietta Annual Report on Form 10-K for the year ended December 31, 2018.

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

ISSUER PURCHASES OF EQUITY SECURITIES

					Total Number of Shares		Maximum Number of
					Purchased as Part of		Shares that May Yet
	Total Number of		Average Price		Publicly Announced		be Purchased Under
Period	Shares Purchased		Paid per Share		Plans or Programs		the Plans or Programs
January 1, 2019 - January 31, 2019		—	$	—		—		14,147,751
February 1, 2019 - February 28, 2019		—	$	—		—		14,147,751
March 1, 2019 - March 31, 2019		—	$	—		—		14,147,751

Reference is made to the press release dated February 10, 2015 for the December 31, 2014 fourth-quarter and full-year results and announcement of the share repurchase program. The Company’s Board of Directors authorized a maximum of 20 million shares to be repurchased under the program. 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.

Page 42 of 44

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended March 31, 2019

PART II- OTHER INFORMATION

(Continued)

Item 6. Exhibits.

Exhibit No.		Document

31.01		Certification dated May 1, 2019 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 May 1, 2019 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 May 1, 2019 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 May 1, 2019 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 – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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

Page 43 of 44

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: May 1, 2019	By:	/s/ James A. J. Nickolas
		James A. J. Nickolas
		Sr. Vice President and
		Chief Financial Officer

Page 44 of 44

mlm-ex3101_10.htm

EXHIBIT 31.01

CERTIFICATION PURSUANT TO SECURITIES AND EXCHANGE ACT OF 1934 RULE 13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, C. Howard Nye, certify that:

I have reviewed this Form 10-Q of Martin Marietta Materials, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2019	By:	/s/ C. Howard Nye
		C. Howard Nye
		Chairman, President and
		Chief Executive Officer

mlm-ex3102_9.htm

EXHIBIT 31.02

CERTIFICATION PURSUANT TO SECURITIES AND EXCHANGE ACT OF 1934 RULE 13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, James A. J. Nickolas, certify that:

I have reviewed this Form 10-Q of Martin Marietta Materials, Inc.;

all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2019	By:	/s/ James A. J. Nickolas
		James A. J. Nickolas
		Sr. Vice President and
		Chief Financial Officer

mlm-ex3201_8.htm

EXHIBIT 32.01

Written Statement Pursuant to 18 U.S.C. 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the period ended March 31, 2019 (the “Report”) of Martin Marietta Materials, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, C. Howard Nye, the Chief Executive Officer of the Registrant, certify, to the best of my knowledge, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ C. Howard Nye

C. Howard Nye

Chairman, President and

Chief Executive Officer

Dated: May 1, 2019

A signed original of this written statement required by Section 906 has been provided to Martin Marietta Materials, Inc. and will be retained by Martin Marietta Materials, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

mlm-ex3202_6.htm

EXHIBIT 32.02

Written Statement Pursuant to 18 U.S.C. 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the period ended March 31, 2019 (the “Report”) of Martin Marietta Materials, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, James A. J. Nickolas, the Chief Financial Officer of the Registrant, certify, to the best of my knowledge, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ James A. J. Nickolas

James A. J. Nickolas

Sr. Vice President and

Chief Financial Officer

Dated: May 1, 2019

mlm-ex95_7.htm

EXHIBIT 95

MINE SAFETY DISCLOSURES

The operation of the Corporation’s domestic aggregates quarries and mines is subject to regulation by the federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977 (the Mine Act). MSHA inspects the Corporation’s quarries and mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. Whenever MSHA issues a citation or order, it also generally proposes a civil penalty, or fine, related to the alleged violation. Citations or orders may be contested and appealed, and as part of that process, are often reduced in severity and amount, and are sometimes dismissed.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the Corporation is required to present information regarding certain mining safety and health citations which MSHA has issued with respect to its aggregates mining operations in its periodic reports filed with the Securities and Exchange Commission (SEC). In evaluating this information, consideration should be given to factors such as: (i) the number of citations and orders will vary depending on the size of the quarry or mine and types of operations (underground or surface), (ii) the number of citations issued will vary from inspector to inspector and location to location, and (iii) citations and orders can be contested and appealed, and in that process, may be reduced in severity and amount, and are sometimes dismissed.

The Corporation has provided the information below in response to the SEC’s rules and regulations issued under the provisions of the Dodd-Frank Act. The disclosures reflect U.S. mining operations only, as the requirements of the Dodd-Frank Act and the SEC rules and regulations thereunder do not apply to the Corporation’s quarries and mines operated outside the United States.

The Corporation presents the following items regarding certain mining safety and health matters for the three months ended March 31, 2019:

•

Total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard under section 104 of the Mine Act for which the Corporation has received a citation from MSHA (hereinafter, “Section 104 S&S Citations”). If MSHA determines that a violation of a mandatory health or safety standard is likely to result in a reasonably serious injury or illness under the unique circumstance contributed to by the violation, MSHA will classify the violation as a “significant and substantial” violation (commonly referred to as an S&S violation). MSHA inspectors will classify each citation or order written as an S&S violation or not.

•

Total number of orders issued under section 104(b) of the Mine Act (hereinafter, “Section 104(b) Orders”). These orders are issued for situations in which MSHA determines a previous violation covered by a Section 104(a) citation has not been totally abated within the prescribed time period, so a further order is needed to require the mine operator to immediately withdraw all persons (except authorized persons) from the affected area of a quarry or mine.

•	Total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under Section 104(d) of the Mine Act (hereinafter, “Section 104(d) Citations and Orders”). These violations are similar to those described above, but the

standard is that the violation could significantly and substantially contribute to the cause and effect of a safety or health hazard, but the conditions do not cause imminent danger, and the MSHA inspector finds that the violation is caused by an unwarranted failure of the operator to comply with the health and safety standards.

•

Total number of flagrant violations under section 110(b)(2) of the Mine Act (hereinafter, “Section 110(b)(2) Violations”). These violations are penalty violations issued if MSHA determines that violations are “flagrant”, for which civil penalties may be assessed. A “flagrant” violation means a reckless or repeated failure to make reasonable efforts to eliminate a known violation of a mandatory health or safety standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury.

•

Total number of imminent danger orders issued under section 107(a) of the Mine Act (hereinafter, “Section 107(a) Orders”). These orders are issued for situations in which MSHA determines an imminent danger exists in the quarry or mine and results in orders of immediate withdrawal of all persons (except certain authorized persons) from the area of the quarry or mine affected by its condition until the imminent danger and the underlying conditions causing the imminent danger no longer exist.

•

Total dollar value of proposed assessments from MSHA under the Mine Act. These are the amounts of proposed assessments issued by MSHA with each citation or order for the time period covered by the reports. Penalties are assessed by MSHA according to a formula that considers a number of factors, including the mine operator’s history, size, negligence, gravity of the violation, good faith in trying to correct the violation promptly, and the effect of the penalty on the operator’s ability to continue in business.

•

Total number of mining-related fatalities. Mines subject to the Mine Act are required to report all fatalities occurring at their facilities unless the fatality is determined to be “non-chargeable” to the mining industry. The final rules of the SEC require disclosure of mining-related fatalities at mines subject to the Mine Act. Only fatalities determined by MSHA not to be mining-related may be excluded.

•

Receipt of written notice from MSHA of a pattern (or a potential to have such a pattern) of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of other mine health or safety hazards under Section 104(e) of the Mine Act. If MSHA determines that a mine has a “pattern” of these types of violations, or the potential to have such a pattern, MSHA is required to notify the mine operator of the existence of such a thing.

•	Legal actions before the Federal Mine Safety and Health Review Commissions pending as of the last day of period.

•	Legal actions before the Federal Mine Safety and Health Review Commissions initiated during period.

•	Legal actions before the Federal Mine Safety and Health Review Commissions resolved during period.

The Federal Mine Safety and Health Review Commission (the Commission) is an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. The cases may involve, among other questions, challenges by operators to citations, orders and penalties they have received from MSHA, or complaints of discrimination by miners under Section 105 of the Mine Act. Appendix 1 shows, for each of the Corporation’s quarries and mines identified, as of March 31, 2019, the number of legal actions pending before the Commission, along with the number of legal actions initiated before the Commission during the quarter as well as resolved during the quarter. In addition, Appendix 1 includes a footnote to the column for legal actions before the Commission pending as of the last day of the period, which footnote breaks down that total number of legal actions pending by categories according to the type of proceeding in accordance with various categories established by the Procedural Rules of the Commission.

Appendix 1 attached.

Appendix 1

Location	MSHA ID	Section 104 S&S Citations (#)	Section 104(b) Orders (#)	Section 104(d) Citations and Orders (#)	Section 110(b)(2) Violations (#)	Section 107(a) Orders (#)	Total Dollar Value of MSHA Assessment/ $Proposed		Total Number of Mining Related Fatalities (#)	Received Notice of Pattern of Violation Under Section 104(e) (yes/no)	Received Notice of Potential to have Pattern under Section 104(e) (yes/no)	Legal Actions Pending as of Last Day of Period (#)*	Legal Actions Instituted During Period (#)	Legal Actions Resolved During Period (#)
Amelia Quarry	4407372	0	0	0	0	0	$	-	0	no	no	0	0	0
American Stone	3100189	0	0	0	0	0	$	121	0	no	no	0	0	0
Anderson Creek Quarry	4402963	1	0	0	0	0	$	-	0	no	no	0	0	0
Arrowood Quarry	3100059	0	0	0	0	0	$	-	0	no	no	0	0	0
Asheboro Quarry	3100066	0	0	0	0	0	$	-	0	no	no	0	0	0
Bakers Quarry	3100071	0	0	0	0	0	$	-	0	no	no	0	0	0
Belgrade Quarry	3100064	0	0	0	0	0	$	-	0	no	no	0	0	0
Benson Quarry	3101979	0	0	0	0	0	$	-	0	no	no	0	0	0
Berkeley Quarry	3800072	0	0	0	0	0	$	242	0	no	no	0	0	0
Bessemer City Quarry	3101105	0	0	0	0	0	$	-	0	no	no	0	0	0
Black Ankle Quarry	3102220	0	0	0	0	0	$	-	0	no	no	0	0	0
Bonds Quarry	3101963	0	0	0	0	0	$	-	0	no	no	0	0	0
Boonesboro Quarry	1800024	0	0	0	0	0	$	-	0	no	no	0	0	0
Burlington Quarry	3100042	0	0	0	0	0	$	-	0	no	no	0	0	0
Caldwell Quarry	3101869	0	0	0	0	0	$	-	0	no	no	0	0	0
Calhoun Sand	3800716	0	0	0	0	0	$	-	0	no	no	0	0	0
Castle Hayne Quarry	3100063	0	0	0	0	0	$	-	0	no	no	0	0	0
Cayce	3800016	0	0	0	0	0	$	-	0	no	no	0	0	0
Central Rock Quarry	3100050	0	0	0	0	0	$	-	0	no	no	0	0	0
Charlotte Quarry	3100057	0	0	0	0	0	$	-	0	no	no	0	0	0
Churchville Quarry	1800012	0	0	0	0	0	$	-	0	no	no	0	0	0
Clarks Quarry	3102009	0	0	0	0	0	$	-	0	no	no	0	0	0
Cumberland Quarry	3102237	0	0	0	0	0	$	-	0	no	no	0	0	0
Denver Quarry	3101971	0	0	0	0	0	$	242	0	no	no	0	0	0
Doswell Quarry VA	4400045	0	0	0	0	0	$	-	0	no	no	0	0	0
East Alamance Quarry	3102021	0	0	0	0	0	$	-	0	no	no	0	0	0

Appendix 1

Edmund Sand	3800662	$	-	no	no	0	0
Fountain Quarry	3100065	$	-	no	no	0	0
Franklin Quarry	3102130	$	-	no	no	0	0
Frederick Quarry	1800013	$	-	no	no	0	0
Fuquay Quarry	3102055	$	-	no	no	0	0
Garner Quarry	3100072	$	-	no	no	0	0
Georgetown II Quarry	3800525	$	121	no	no	0	0
Hickory Quarry	3100043	$	-	no	no	0	0
Hicone	3102088	$	-	no	no	0	0
Jamestown Quarry	3100051	$	-	no	no	0	0
Kannapolis Quarry	3100070	$	-	no	no	0	0
Kent Sand & Gravel	1800745	$	-	no	no	0	0
Kings Mountain Quarry	3100047	$	-	no	no	0	0
Lemon Springs Quarry	3101104	$	-	no	no	0	0
Loamy Sand Gravel	3800721	$	-	no	no	0	0
Maiden Quarry	3102125	$	-	no	no	0	0
Mallard Creek Quarry	3102006	$	-	no	no	0	0
Matthews Quarry	3102084	$	-	no	no	0	0
Medford Quarry	1800035	$	-	no	no	0	0
Midlothian Quarry	4403767	$	-	no	no	0	0
Misc Greensboro District	B8611	$	-	no	no	0	0
North Columbia	3800146	$	-	no	no	1	1
North East Quarry	1800417	$	-	no	no	0	0
Old Charleston Sand	3800702	$	-	no	no	0	0
Onslow Quarry	3102120	$	-	no	no	0	0
Pinesburg Quarry	1800021	$	-	no	no	0	0
Pomona Quarry	3100052	$	-	no	no	0	0
Raleigh Durham Quarry	3101941	$	-	no	no	0	0
Red Hill Quarry	4400072	$	-	no	no	0	0
Reidsville Quarry	3100068	$	-	no	no	0	0
Rock Hill Quarry	3800026	$	-	no	no	0	0
Rocky Point Quarry	3101956	$	-	no	no	0	0
Rocky River Quarry	3102033	$	-	no	no	0	0
Salem Stone	3102038	$	121	no	no	0	0

Appendix 1

Statesville Quarry	3100055	0	$	-	no	no	0	0
Texas Quarry	1800009	2	$	4,484	no	no	2	2
Thomasville Quarry	3101475	0	$	-	no	no	0	0
Warfordsburg Quarry	3600168	0	$	-	no	no	0	0
Wilmington Sand	3101308	0	$	-	no	no	0	0
Wilson Quarry	3102230	0	$	-	no	no	0	0
Woodleaf Quarry	3100069	0	$	-	no	no	0	0
(45) North Indianapolis SURFACE	1200002	0	$	-	no	no	0	0
Apple Grove S G	3301676	0	$	-	no	no	0	0
Belmont Sand	1201911	0	$	-	no	no	0	0
Bowling Green North Quarry	1500065	0	$	-	no	no	0	0
Bowling Green South Quarry	1500025	0	$	-	no	no	0	0
Burning Springs Mine	4608862	1	$	242	no	no	0	0
Carmel Sand	1202124	0	$	-	no	no	0	0
Cedarville Quarry	3304072	0	$	-	no	no	1	1
Cloverdale Quarry	1201744	0	$	-	no	no	0	0
Cumberland Quarry	1500037	0	$	-	no	no	0	0
E Town Sand Gravel	3304279	0	$	-	no	no	0	0
Fairfield Quarry	3301396	0	$	-	no	no	0	0
Franklin Gravel	3302940	0	$	-	no	no	0	0
Harlan Quarry	1500071	0	$	-	no	no	0	0
Hartford Quarry	1500095	0	$	-	no	no	0	0
Kentucky Ave Mine	1201762	3	$	2,669	no	no	0	0
Kokomo Mine	1202105	0	$	-	no	no	0	0
Kokomo Sand	1202203	0	$	-	no	no	0	0
Kokomo Stone	1200142	0	$	-	no	no	0	0
Noblesville Sand	1201994	0	$	-	no	no	0	0
Noblesville Stone	1202176	1	$	574	no	no	1	1
North Indianapolis Quarry	1201993	1	$	725	no	no	0	0
Petersburg, Ky Gravel	1516895	0	$	-	no	no	0	0
Phillipsburg Quarry	3300006	0	$	-	no	no	0	0
Shamrock SG	3304011	0	$	-	no	no	0	0
Spring Valley Cook Rd SG	3304534	0	$	-	no	no	0	0

Appendix 1

Troy Gravel	3301678	$	-	no	no	0	0
Waverly Sand	1202038	$	-	no	no	0	0
Xenia Gravel	3301393	$	-	no	no	0	0
Appling Quarry	901083	$	-	no	no	0	0
Auburn Al Quarry	100006	$	-	no	no	0	0
Auburn, GA Quarry	900436	$	-	no	no	0	0
Augusta, GA Quarry	900065	$	-	no	no	0	0
Ball Ground Quarry	900955	$	-	no	no	0	0
Calhoun Quarry	4003395	$	-	no	no	0	0
Chattanooga Quarry	4003159	$	121	no	no	0	0
Cumming Quarry	900460	$	-	no	no	0	0
Douglasville Quarry	900024	$	-	no	no	0	0
Edgefield Quarry	3800738	$	-	no	no	0	0
Jefferson Quarry	901106	$	-	no	no	0	0
Junction City Quarry	901029	$	-	no	no	0	0
Lithonia Quarry	900023	$	302	no	no	0	0
Maylene Quarry	100634	$	-	no	no	0	0
Morgan County	901126	$	-	no	no	0	0
Newton Quarry	900899	$	-	no	no	0	0
O'Neal Plant Co 19	103076	$	-	no	no	0	0
Paulding Quarry	901107	$	-	no	no	0	0
Perry Quarry	801083	$	-	no	no	0	0
Red Oak Quarry	900069	$	-	no	no	0	0
Ruby Quarry	900074	$	-	no	no	0	0
Six Mile Quarry	901144	$	-	no	no	1	0
St. Marys Sand Company	901199	$	-	no	no	0	0
Tyrone Quarry	900306	$	-	no	no	0	0
Vance Quarry Co 19	0103022	$	-	no	no	0	0
Warrenton Quarry	900580	$	-	no	no	0	0
Alden Portable Plant #2	1302033	$	-	no	no	0	0
Alden Portable Sand	1302037	$	-	no	no	0	0
Alden Quarry	1300228	$	-	no	no	0	0
Ames Mine	1300014	$	777	no	no	2	2
Cedar Rapids Quarry	1300122	$	-	no	no	0	0

Appendix 1

Des Moines Portable	1300150	0	$	-	no	no	0
Dubois Quarry	2501046	0	$	-	no	no	0
Durham Mine	1301225	0	$	363	no	no	0
Earlham Quarry	1302123	1	$	242	no	no	0
Ferguson Quarry	1300124	0	$	-	no	no	0
Fort Calhoun Quarry	2500006	0	$	-	no	no	0
Fort Calhoun UG	2501300	0	$	-	no	no	0
Fort Dodge Mine	1300032	0	$	-	no	no	0
Greenwood Quarry New	2300141	0	$	-	no	no	0
Iowa Grading 2	1302316	0	$	-	no	no	0
Linn County Sand	1302208	0	$	-	no	no	0
Malcom Mine	1300112	0	$	-	no	no	0
Marshalltown Sand	1300718	0	$	-	no	no	0
Midwest Division OH	A2354	0	$	-	no	no	0
Moore Quarry	1302188	1	$	610	no	no	0
New Harvey Sand	1301778	0	$	-	no	no	0
North Valley Sand	2501271	0	$	-	no	no	0
Ottawa Quarry New	1401590	0	$	-	no	no	0
Pacific Quarry	4500844	0	$	-	no	no	0
Parkville Mine New	2301883	0	$	-	no	no	0
Pedersen Quarry	1302192	0	$	-	no	no	0
Plant 854	1302126	0	$	-	no	no	0
Portland Quarry	1302122	0	$	-	no	no	0
Raccoon River Sand	1302315	0	$	-	no	no	0
Randolph Deep Mine	2302308	0	$	363	no	no	0
Reasnor Sand	1300814	0	$	-	no	no	0
Saylorville Sand	1302290	0	$	-	no	no	0
St Cloud Quarry	2100081	0	$	-	no	no	0
Stamper Mine	2302232	0	$	121	no	no	0
Sully Mine	1300063	0	$	-	no	no	0
Sunflower Qy Co 61	1401556	0	$	121	no	no	0
Weeping Water Mine	2500998	0	$	-	no	no	1
West Center Sand	2501231	0	$	-	no	no	0
Yellow Medicine Quarry	2100033	0	$	-	no	no	0

Appendix 1

Beckmann Quarry	4101335	0	$	7,064	no	no	2
Bedrock Sand Gravel	4103283	0	$	-	no	no	2
Bells Savoy SG	4104019	0	$	-	no	no	0
Black Rock Quarry	300011	0	$	-	no	no	0
Black Spur Quarry	4104159	0	$	-	no	no	0
Blake Quarry	1401584	0	$	-	no	no	1
Bridgeport Stone	4100007	0	$	-	no	no	0
Broken Bow SG	3400460	0	$	-	no	no	0
Chico Quarry	4103360	0	$	335	no	no	0
Davis Quarry	3401299	0	$	-	no	no	0
Garfield SG	4103909	1	$	-	no	no	0
Garwood Gravel	4102886	0	$	543	no	no	0
GMS TXI	C335	0	$	-	no	no	0
Hatton Quarry	301614	0	$	-	no	no	0
Helotes	4103137	0	$	-	no	no	0
Highway 211 Quarry	4103829	0	$	-	no	no	1
Hondo	4104708	0	$	-	no	no	1
Hondo West	4104090	0	$	-	no	no	0
Hugo Quarry	3400061	0	$	-	no	no	0
Hunter Stone	4105230	1	$	-	no	no	0
Idabel Quarry	3400507	0	$	-	no	no	0
Jena Aggregates	1601298	0	$	-	no	no	0
Jones Mill Quarry	301586	0	$	-	no	no	0
Koontz McCombs Pit	4105048	0	$	-	no	no	0
Medina Rock Rail	4105170	1	$	5,229	no	no	0
Mill Creek Limestone	3401859	0	$	-	no	no	0
Mill Creek Quarry	3401285	0	$	-	no	no	1
Perryville Aggregates	1601417	0	$	-	no	no	0
Poteet Sand	4101342	0	$	-	no	no	0
Rio Medina	4103594	0	$	-	no	no	0
San Pedro Quarry	4101337	0	$	-	no	no	0
Sawyer Quarry	3401634	0	$	-	no	no	0
Smithson Valley Quarry	4104108	0	$	-	no	no	0
Snyder Quarry	3401651	0	$	-	no	no	0

Appendix 1

South Texas Port #2	4104204	0	0		$	-	no	no	0	0	0
Tin Top SG	4102852	0	0		$	-	no	no	0	0	0
Washita Quarry	3402049	0	0		$	-	no	no	0	0	0
Webberville	4104363	1	0		$	-	no	no	0	0	0
Woodworth Aggregates	1601070	0	0		$	-	no	no	0	0	0
Cottonwood Sand Gravel	504418	0	0		$	-	no	no	0	0	0
Fountain Sand Gravel	503821	0	0		$	-	no	no	0	0	0
Granite Canyon Quarry	4800018	0	0		$	-	no	no	0	0	0
Greeley 35th Ready Mix	503215	0		0	$	-	no	no	0	0	0
Greeley 35th Sand Gravel	504613	0		0	$	-	no	no	0	0	0
Guernsey Quarry	4800004	0		0	$	-	no	no	0	0	0
Milford Quarry Utah	4202177	0		0	$	-	no	no	0	0	0
Parkdale Quarry	504635	0		0	$	-	no	no	0	0	0
Parsons Sand Gravel	504382	0		0	$	-	no	no	0	0	0
PC Portable Plant 4	4801565	0		0	$	-	no	no	0	0	0
Penrose Sand and Gravel	504509	0		0	$	-	no	no	0	0	0
Portable Crushing	503984	0		0	$	-	no	no	0	0	0
Portable Plant 1	504359	0		0	$	-	no	no	0	0	0
Portable Plant 21	504520	0		0	$	-	no	no	0	0	0
Red Canyon Quarry	504136	0		0	$	-	no	no	0	0	0
Riverbend Sand Gravel	504841	0		0	$	-	no	no	0	0	0
Spanish Springs Quarry Co 2	2600803	0		0	$	-	no	no	2	2	0
Spec Agg Quarry	500860	0		0	$	-	no	no	0	0	0
Taft Sand Gravel	504526	0		0	$	-	no	no	0	0	0
Taft Shop	504735	0		0	$	-	no	no	0	0	0
Hunter Cement	4102820	0		0	$	-	no	no	0	0	2
Midlothian Cement	4100071	1		0	$	-	no	no	1	0	2
Geology and Exploration	B7127	0		0	$	-	no	no	0	0	0
Salisbury Shop	3101235	0		0	$	-	no	no	0	0	0
Woodville Stone	3300156	2		0	$	-	no	no	1	1	1
TOTAL		18	0		$	25,732			13	10	13

* Of the 13 legal actions pending on March 31, 2019, 7 were contests of citations or orders referenced in Subpart B of CFR Part 2700, which includes contests of citations and orders issued under Section 104 of the Mine Act and contests of imminent danger orders under Section 107 of the Mine Act and 6 were contests of

Appendix 1

proposed penalties referenced in Subpart C of 29 CFR Part 2700, which are administrative proceedings before the Commission challenging a civil penalty that MSHA has proposed for the violation contained in a citation or order.