Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEWMartin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. As ofMarch 31, 2022 , the Company supplies aggregates (crushed stone, sand and gravel) through its network of approximately 350 quarries, mines and distribution yards in 28 states,Canada and TheBahamas . Martin Marietta also provides cement and downstream products and services, namely, ready mixed concrete, asphalt and paving, in vertically-integrated structured markets where the Company has a leading aggregates position. In addition, the Company has two cement plants, cement distribution terminals and ready mixed concrete operations primarily inCalifornia that are classified as assets held for sale and reported as discontinued operations as ofMarch 31, 2022 . The Company's heavy-side building materials are used in infrastructure, nonresidential and residential construction projects. Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. The aggregates, cement, ready mixed concrete and asphalt and paving product lines are reported collectively as the "Building Materials" business.
Of the society
BUILDING MATERIALS BUSINESS
(continuing operations only)
Reportable Segments East Group
Operating Locations Alabama, Florida, Georgia, Indiana, Arizona, Arkansas, California,
Iowa, Colorado, Louisiana, Oklahoma,
Kansas, Kentucky, Maryland, Texas, Utah,
Minnesota, Missouri, Nebraska, Washington and Wyoming
North Carolina, Ohio, Pennsylvania,
South Carolina, Tennessee, Virginia,
West Virginia, Nova Scotia and The
Bahamas
Product Lines Aggregates and Asphalt Aggregates, Cement, Ready
Mixed Concrete, Asphalt and
Paving Services
Facility Types Quarries, Mines, Asphalt Plants and Quarries, Mines, Cement
Distribution Facilities Plants, Asphalt Plants, Ready
Mixed Concrete Plants and
Distribution Facilities
Modes of Transportation Truck, Railcar and Ship Truck, Railcar and Ship
The Building Materials business is significantly affected by weather patterns
and seasonal changes. Production and shipment levels for aggregates, cement,
ready mixed concrete and asphalt materials correlate with general construction
activity levels, most of which occur in the spring, summer and fall. Thus,
production and shipment levels vary by quarter. Operations concentrated in the
northern and midwestern United States generally experience more severe winter
weather conditions than operations in the southeast, southwest and west.
Excessive rainfall, and conversely excessive drought, can also jeopardize
production, shipments and profitability in all markets served by the
Company. Due to the potentially significant impact of weather on the Company's
operations, current-period results are not necessarily indicative of expected
performance for other interim periods or the full year.
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.
Page 24 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the QuarterMarch 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CRITICAL ACCOUNTING POLICIES The Company outlined its critical accounting policies in its Annual Report on Form 10-K for the year endedDecember 31, 2021 . There were no changes to the Company's critical accounting policies during the three months endedMarch 31, 2022 . RESULTS OF OPERATIONS Earnings from continuing operations before interest; income taxes; depreciation, depletion and amortization; the earnings/loss from nonconsolidated equity affiliates; and acquisition and integration expenses; (Adjusted EBITDA) is an indicator used by the Company and investors to evaluate the Company's operating performance from period to period. Adjusted EBITDA is not defined by accounting principles generally accepted inthe United States and, as such, should not be construed as an alternative to net earnings, earnings from operations or cash provided by operating activities. However, the Company's management believes that Adjusted EBITDA may provide additional information with respect to the Company's performance and is a measure used by management to evaluate the Company's performance. Because Adjusted EBITDA excludes some, but not all, items that affect net earnings and may vary among companies, Adjusted EBITDA as presented by the Company may not be comparable with similarly titled measures of other companies.
A reconciliation of net income from continuing operations attributable to Martin Marietta to adjusted EBITDA is as follows:
Three Months Ended
March 31,
2022 2021
(Dollars in Millions)
Net Earnings from continuing operations
attributable to Martin Marietta $ 24.5 $ 65.3
Add back:
Interest expense, net of interest income 40.5
27.3
Income tax expense for controlling interests 5.9
15.8
Depreciation, depletion and amortization and earnings/loss from nonconsolidated equity affiliates 124.9
96.0
Acquisition and integration expenses 1.4 1.2 Adjusted EBITDA $ 197.2$ 205.6 Page 25 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter March 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Mix-adjusted average selling price (mix-adjusted ASP) excludes the impacts of product, geographic and other mix from the current-period average selling price and is a non-GAAP measure. Mix-adjusted ASP is calculated by comparing current-period shipments to like-for-like shipments in the comparable prior period. Management uses this metric to evaluate the effectiveness of the Company's pricing increases and believes this information is useful to investors as it provides same-on-same pricing trends. The following reconciles reported average selling price to mix-adjusted ASP and corresponding variances. Three Months Ended March 31, 2022 2021West Group - Aggregates: Reported average selling price$ 15.05 $ 13.81
Adjustment for favorable product impact,
geographic and other mix (0.58 ) Mix-adjusted ASP$ 14.47 Reported average selling price variance 9.0 % Mix-adjusted ASP variance 4.8 %
Quarter ended
Financial Highlights for the Quarter Ended
? Total consolidated turnover of
?
compared to
? Sales of Magnesia Specialties products of
million
? Consolidated gross margin of
? Consolidated operating profit of
million
? Net income from continuing operations attributable to Martin Marietta of
$24.5 million compared with$65.3 million ? Adjusted EBITDA of$197.2 million compared with$205.6 million
? Diluted earnings per share from continuing operations of
$1.04 Page 26 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter March 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The following tables present total revenues, gross profit (loss), selling, general and administrative (SG&A) expenses and earnings (loss) from operations data for the Company and its reportable segments by product line for continuing operations for the three months endedMarch 31, 2022 and 2021. In each case, the data is stated as a percentage of revenues of the Company or the relevant segment or product line, as the case may be. Three Months Ended March 31, 2022 2021 Amount Amount (Dollars in Millions) Total revenues: Building Materials business: Products and services East Group Aggregates$ 395.1 $ 372.5 Asphalt - - Less: Interproduct revenues (0.5 ) - East Group Total 394.6 372.5 West Group Aggregates 290.8 200.1 Cement 134.3 109.6 Ready mixed concrete 290.1 235.3 Asphalt and paving 54.8 12.2 Less: Interproduct revenues (87.6 ) (73.1 ) West Group Total 682.4 484.1 Products and services 1,077.0 856.6 Freight 76.8 54.9 Total Building Materials business 1,153.8 911.5 Magnesia Specialties: Products 70.8 65.3 Freight 6.2 5.6 Total Magnesia Specialties 77.0 70.9 Total$ 1,230.8 $ 982.4 Page 27 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter March 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Three Months Ended March 31, 2022 2021 Amount % of Revenues Amount % of Revenues (Dollars in Millions) Gross profit (loss): Building Materials business: Aggregates$ 101.9 14.9$ 121.8 21.3 Cement 27.3 20.3 15.3 14.0 Ready mixed concrete 21.1 7.3 19.4 8.3 Asphalt and paving (13.3 ) (24.3 ) (8.2 ) (67.4 ) Products and services 137.0 12.7 148.3 17.3 Freight 1.4 (0.3 ) Total Building Materials business 138.4 12.0 148.0 16.2 Magnesia Specialties: Products 26.8 37.8 28.4 43.5 Freight (1.2 ) (0.9 ) Total Magnesia Specialties 25.6 33.3 27.5 38.8 Corporate (7.9 ) (0.8 ) Total$ 156.1 12.7$ 174.7 17.8 Page 28 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter March 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Three Months Ended March 31, 2022 2021 % of % of Amount Revenues Amount Revenues (Dollars in Millions) Selling, general & administrative expenses: Building Materials business: East Group$ 28.8 $ 24.2 West Group 41.3 33.3 Total Building Materials business 70.1 57.5 Magnesia Specialties 4.0 3.7 Corporate 23.0 18.6 Total$ 97.1 7.9$ 79.8 8.1 Three Months Ended March 31, 2022 2021 Amount % of Revenues Amount % of Revenues (Dollars in Millions) Earnings (Loss) from operations: Building Materials business: East Group$ 28.0 $ 61.7 West Group 43.0 31.9 Total Building Materials business 71.0 93.6 Magnesia Specialties 21.5 23.5 Corporate (32.6 ) (17.8 ) Total$ 59.9 4.9$ 99.3 10.1Building Materials Business The following tables present aggregates volume and pricing variance data and shipments data by segment: Three Months Ended March 31, 2022 Volume Pricing Volume/Pricing Variance(1) East Group 1.1 % 5.1 % West Group 32.7 % 9.0 % Total aggregates operations(2) 13.4 % 5.6 % Organic aggregates operations(3) 2.5 % 6.5 % Page 29 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter March 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Three Months Ended March 31, 2022 2021 (Tons in Millions) Shipments East Group 23.0 22.7 West Group 19.1 14.4
Total aggregate operations(2) 42.1 37.1
(1) Volume/pricing variances reflect the percentage increase from the comparable period in the prior year. (2) Total aggregates operations include acquisitions from the date of acquisition and divestitures through the date of disposal. (3) Organic aggregates operations exclude volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and divestitures. The following table presents shipments data by product line for theBuilding Materials business: Three Months Ended March 31, 2022 2021 % Change Shipments Aggregates (in millions): Tons to external customers 38.6 34.5 Internal tons used in other product lines 3.5 2.6 Total aggregates tons 42.1 37.1 13.4 % Cement (in millions): Tons to external customers 0.7 0.6 Internal tons used in ready mixed concrete 0.3 0.3 Total cement tons 1.0 0.9
10.0%
14.8%
Asphalt (in millions): Tons to external customers 0.7 0.1 Internal tons used in paving business - - Total asphalt tons 0.7 0.1 509.1 % The average selling price by product line for theBuilding Materials business is as follows: Three Months Ended March 31, 2022 2021 % Change Aggregates (per ton)$ 16.17 $ 15.31 5.6 % Cement (per ton)$ 129.11 $ 115.49 11.8 % Ready Mixed Concrete (per cubic yard)$ 120.71 $ 112.12 7.7 % Asphalt (per ton)$ 62.39 $ 49.04 27.2 % Page 30 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the QuarterMarch 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Aggregates End-Use Markets
Organic aggregate shipments to the infrastructure market increased 6.2%, primarily due to increased freeway widening projects in
Organic aggregates shipments to the nonresidential market were flat, with strong warehousing demand inOhio ,Indiana andTexas offset by a decrease in major projects in North andSouth Carolina . The nonresidential market represented 36% of first-quarter organic aggregates shipments.
Organic aggregate shipments to the residential market were down 2% from a strong year-ago quarter, reflecting supply chain issues, rising costs and labor shortages. The residential market accounted for 26% of first quarter organic aggregate shipments.
TheChemRock /Rail market accounted for the remaining 6% of first-quarter organic aggregates shipments. Volumes to this end use increased 20%, driven by increased aglime shipments inIowa and increased ballast demand inTexas spurred by long-deferred railroad maintenance projects.
building materials company
First-quarter organic aggregates shipments increased 2.5%, reflecting growing public and private product demand at the onset of construction season, while organic pricing increased 6.5%. Inclusive of acquired operations, aggregates shipments grew 13.4% compared with prior-year quarter and pricing increased 5.6%. Overall, East Group total shipments increased 1.1%, reflecting increased infrastructure construction activity in the Southeast and Midwest, while pricing increased 5.1%.West Group total shipments increased 32.7%, driven by robust underlying demand inTexas and shipments from acquired operations that more than offsetColorado weather-related shipment shortfalls.West Group pricing increased 9.0%, or 4.8% on a mix-adjusted basis, benefitting from improving long-haul shipments from higher-priced distribution yards and higher selling prices at acquired operations. Aggregates product gross margin decreased 640 basis points to 14.9%, as year-over-year price increase impacts were more than offset by higher diesel fuel costs of approximately$12 million , increased supplies, repair costs, contract service cost of approximately$20 million , higher internal freight costs of$9 million and the impact of Tiller winter shut down, which did not impact prior year quarter as the operations were acquiredApril 30, 2021 .Texas cement shipments increased 10.0%, supported by robust product demand and tight supply throughout the Texas Triangle. Cement pricing improved 11.8%, benefitting from the carryover of 2021 mid-year price increases and improving demand for higher-priced specialty oil-well cement products. Product gross margin expanded 630 basis points to 20.3% compared with the prior-year quarter, which was negatively impacted by incremental costs and inefficiencies resulting from the TexasDeep Freeze . Organic ready mixed concrete shipments declined slightly, driven by timing of project completions and weather-relatedColorado shipment declines. Organic pricing grew 8.2% in first quarter 2022 compared with first quarter 2021, following the implementation of annual price increases early in the year. Inclusive of the acquiredArizona operations, ready mixed concrete shipments and pricing increased 14.8% and 7.7%, respectively. Product gross margin declined 100 basis points to 7.3%, driven primarily by higher raw material and diesel costs which more than offset price increases. Seasonal winter weather conditions inColorado contributed to a 3.1 percent decrease in organic asphalt shipments. Organic pricing increased 5.8 percent. Including contributions from the acquiredWest Coast operations, total asphalt shipments and pricing increased 509.1 percent and 27.2 percent, respectively. As anticipated, theMinnesota -based asphalt facilities, which were acquired onApril 30, 2021 , were closed during the first quarter given the construction season does not begin until late spring. Consistent with the Company's historical first-quarter trends, the asphalt and paving business posted an overall loss. Page 31 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the QuarterMarch 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Magnesia Specialties Business Magnesia Specialties first-quarter product revenues increased 8.5% to$70.8 million , driven by robust global demand for magnesia-based chemical products as well as improving domestic steel production in the latter half of the quarter. Product gross profit was$26.8 million compared with$28.4 million . Product gross margin decreased 570 basis points to 37.8% as higher costs for energy, supplies and raw materials more than offset revenue growth. First-quarter earnings from operations were$21.5 million in 2022 compared with$23.5 million in 2021.
Consolidated operating results
Consolidated SG&A for first quarter 2022 was 7.9% of total revenues compared with 8.1% in the prior-year quarter, an improvement of 20 basis points. Earnings from operations for the quarter were$59.9 million in 2022 compared with$99.3 million in 2021, the decrease driven by higher costs for energy, supplies, freight and personnel, which more than offset year over year price increases.
income tax expense
For the three months ended
CASH AND CAPITAL RESOURCES
Cash provided by operating activities for the three months endedMarch 31, 2022 and 2021 was$169.9 million and$191.9 million , respectively. Operating cash flow is primarily derived from consolidated net earnings before deducting depreciation, depletion and amortization, and the impact of changes in working capital. Depreciation, depletion and amortization were as follows: Three Months Ended March 31, 2022 2021 (Dollars in Millions) Depreciation$ 101.8 $ 84.7 Depletion 11.8 6.8 Amortization 14.6 7.1 Total$ 128.2 $ 98.6
The seasonal nature of construction activities impacts the Company’s interim operating cash flows as compared to the full year. The net cash generated by operating activities for the year 2021 was
In the three months ended
The Company can repurchase its common stock through open-market purchases pursuant to authority granted by its Board of Directors or through private transactions at such prices and upon such terms as the Chief Executive Officer deems appropriate. The Company repurchased 130,551 shares of common stock during the first three months of 2022 at an aggregate cost of$50.0 million . AtMarch 31, 2022 , 13,390,401 shares of common stock can be purchased under the Company's repurchase authorization. Page 32 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the QuarterMarch 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Company, through a wholly-owned special-purpose subsidiary, has a$400 million trade receivable securitization facility (the Trade Receivable Facility) that matures onSeptember 21, 2022 . The Trade Receivable Facility contains a cross-default provision to the Company's other debt agreements. The Company has an$800 million five-year senior unsecured revolving facility (the Revolving Facility), which expires inDecember 2026 . The Revolving Facility requires the Company's ratio of consolidated debt-to-consolidated EBITDA, as defined, for the trailing-twelve-month period (the Ratio) to not exceed 3.50x 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 4.00x. Additionally, if there are no amounts outstanding under the Revolving Facility and the Trade Receivable Facility, consolidated debt, including debt for which the Company is a co-borrower, may be reduced in an amount equal to the lesser of$500.0 million or the sum of the Company's unrestricted cash and temporary investments, for purposes of the covenant calculation. The Company was in compliance with the Ratio atMarch 31, 2022 . In the event of a default on the Ratio, the lenders can terminate the Revolving Facility and Trade Receivable Facility and declare any outstanding balances as immediately due. There were no amounts outstanding under the Trade Receivable Facility or the Revolving Facility as ofMarch 31, 2022 . Cash on hand, along with the Company's projected internal cash flows and availability of financing resources, including its access to debt and equity capital markets, is expected to continue to be sufficient to provide the capital resources necessary to support anticipated operating needs, cover debt service requirements, address near-term debt maturities, meet capital expenditures and discretionary investment needs, fund certain acquisition opportunities that may arise, allow the repurchase of shares of the Company's common stock and allow for payment of dividends for the foreseeable future. AtMarch 31, 2022 , the Company had$1,197.4 million of unused borrowing capacity under its Revolving Facility and Trade Receivable Facility, subject to complying with the related leverage covenant. Historically, the Company has successfully extended the maturity dates of these credit facilities. Further, as ofMarch 31, 2022 , the Company does not have any publicly-traded debt that matures prior to 2023. The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law inMarch 2020 and provided liquidity support for businesses. Through the CARES Act, the Company deferred payment of$27.6 million , representing the 6.2% employer share ofSocial Security taxes for the period fromMarch 27, 2020 throughDecember 31, 2020 . Half of the deferred obligation was repaid in 2021 and the remaining half is dueDecember 31, 2022 . There will be no interest assessed on amounts deferred.
TRENDS AND RISKS
The company described the risks associated with its business in its Annual Report on Form 10-K for the year ended
OTHER TOPICS
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 theSecurities 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 theSEC are accessible through the Company's website at www.martinmarietta.com and are also available at theSEC's website at www.sec.gov. You may also write or call the Company's Corporate Secretary, who will provide copies of such reports. Page 33 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the QuarterMarch 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Investors are cautioned that all statements in this Form 10-Q that relate to the future involve risks and uncertainties, and are based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. These statements, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995, provide the investor with the Company's expectations or forecasts of future events. You can identify these statements by the fact that they do not relate only to historical or current facts. They may use words such as "anticipate," "may," "expect," "should," "believe," "project," "intend," "will," and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of management's forward-looking statements here and in other publications may turn out to be wrong. The Company's outlook is subject to various risks and uncertainties, and is based on assumptions that the Company believes in good faith are reasonable but which may be materially different from actual results. Factors that the Company currently believes could cause actual results to differ materially from the forward-looking statements in this Form 10-Q (including the outlook) include, but are not limited to: the ability of the Company to face challenges, including those posed by the COVID-19 pandemic and implementation of any such related response plans; fluctuations in COVID-19 cases inthe United States and the extent that geography of outbreak primarily matches the regions in which the Company'sBuilding Materials business principally operates; the resiliency and potential declines of the Company's various construction end-use markets; the potential negative impact of the COVID-19 pandemic on the Company's ability to continue supplying heavy-side building materials and related services at normal levels or at all in the Company's key regions; the duration, impact and severity of the impact of the COVID-19 pandemic on the Company, including the markets in which the Company does business, its suppliers, customers or other business partners as well as the Company's employees; the economic impact of government responses to the pandemic; the performance ofthe United States economy, including the impact on the economy of the COVID-19 pandemic and governmental orders restricting activities imposed to prevent further outbreak of COVID-19; shipment declines resulting from economic events beyond the Company's control; a widespread decline in aggregates pricing, including a decline in aggregates shipment volume negatively affecting aggregates price; the history of both cement and ready mixed concrete being subject to significant changes in supply, demand and price fluctuations; the termination, capping and/or reduction or suspension of the federal and/or state gasoline tax(es) or other revenue related to public construction; the level and timing of federal, state or local transportation or infrastructure or public projects funding, most particularly inTexas ,Colorado ,California ,North Carolina ,Georgia ,Minnesota ,Iowa ,Florida ,Indiana andMaryland ; the impact of governmental orders restricting activities imposed to prevent further outbreak of COVID-19 on travel, potentially reducing state fuel tax revenues used to fund highway projects; theUnited States Congress' inability to reach agreement among themselves or with the Administration on policy issues that impact the federal budget; the ability of states and/or other entities to finance approved projects either with tax revenues or alternative financing structures; levels of construction spending in the markets the Company serves; a reduction in defense spending and the subsequent impact on construction activity on or near military bases; a decline in the commercial component of the nonresidential construction market, notably office and retail space, including a decline resulting from economic distress related to the COVID-19 pandemic; a decline in energy-related construction activity resulting from a sustained period of low global oil prices or changes in oil production patterns or capital spending, particularly inTexas ; increasing residential mortgage interest rates and other factors that could result in a slowdown in residential construction; unfavorable weather conditions, particularlyAtlantic Ocean andGulf of Mexico hurricane activity, wildfires, the late start to spring or the early onset of winter and the impact of a drought or excessive rainfall in the markets served by the Company, any of which can significantly affect production schedules, volumes, product and/or geographic mix and profitability; whether the Company's operations will continue to be treated as "essential" operations under applicable government orders restricting business activities imposed to prevent further outbreak of COVID-19 or, even if so treated, whether site-specific health and safety concerns might otherwise require certain of the Company's operations to be halted for some period of time; the volatility of fuel costs, particularly diesel fuel, notably related to the current conflict betweenRussia andUkraine , and the impact on the cost, or the availability generally, of other consumables, namely steel, explosives, Page 34 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the QuarterMarch 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 supplychain challenges; unexpected equipment failures, unscheduled maintenance, industrial accident or other prolonged and/or significant disruption to production facilities; increasing governmental regulation, including environmental laws; the failure of relevant government agencies to implement expected regulatory reductions; transportation availability or a sustained reduction in capital investment by the railroads, notably the availability of railcars, locomotive power and the condition of rail infrastructure to move trains to supply the Company'sTexas ,Colorado ,Florida , Carolinas andGulf Coast markets, including the movement of essential dolomitic lime for magnesia chemicals to the Company's plant inManistee, 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 (leading to reduced profit margins when compared with aggregates moved by truck); availability of trucks and licensed drivers for transport of the Company's materials; availability and cost of construction equipment inthe United States ; weakening in the steel industry markets served by the Company's dolomitic lime products; changes in steel capacity utilization; trade disputes with one or more nations impacting theU.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 the Magnesia Specialties business; proper functioning of information technology and automated operating systems to manage or support operations; inflation and its effect on both production and interest costs; the concentration of customers in construction markets and the increased risk of potential losses on customer receivables; the impact of the level of demand in the Company's end-use markets, production levels and management of production costs on the operating leverage and therefore profitability of the Company; the possibility that the expected synergies from acquisitions will not be realized or will not be realized within the expected time period, including achieving anticipated profitability to maintain compliance with the Company's leverage ratio debt covenant; changes in tax laws, the interpretation of such laws and/or administrative practices, including acquisitions or divestitures, that would increase the Company's tax rate; violation of the Company's debt covenant if price and/or volumes return to previous levels of instability; downward pressure on the Company's common stock price and its impact on goodwill impairment evaluations; the possibility of a reduction of the Company's credit rating to non-investment grade; and other risk factors listed from time to time found in the Company's filings with theSEC . 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 endedDecember 31, 2021 and other periodic filings made with theSEC . All of the Company's forward-looking statements should be considered in light of these factors. In addition, other risks and uncertainties not presently known to the Company or that the Company considers immaterial could affect the accuracy of its forward-looking statements, or adversely affect or be material to the Company. The Company assumes no obligation to update any such forward-looking statements. Page 35 of 41
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the QuarterMarch 31, 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
INVESTOR ACCESS TO COMPANY DEPOSITS
Shareholders may obtain, free of charge, a copy of Martin Marietta’s Annual Report on Form 10-K, as filed with the
Martin Marietta Attn: Corporate Secretary4123 Parklake Avenue Raleigh, North Carolina 27612
In addition, Martin Marietta’s annual report, press releases and filings with the
Telephone: (919) 783-4691 Website address: www.martinmarietta.com
Information included on the Company’s website is not incorporated into or otherwise part of this report.
Page 36 of 41
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FORM 10-Q
For the Quarter Ended March 31, 2022
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