SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission File Number 1-12744

MARTIN MARIETTA MATERIALS, INC.

(Exact name of registrant as specified in its charter)

North Carolina		56-1848578
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
2710 Wycliff Road, Raleigh, NC		27607-3033
(Address of principal executive offices)		(Zip Code)

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

Former name:		None
		Former name, former address and former fiscal year, if changes since last report.

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

Yes þ No o

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

Yes o No o

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

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

Yes o No þ

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

Class		Outstanding as of April 30, 2010
Common Stock, $0.01 par value		45,434,153

 

 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

		Page
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets — March 31, 2010, December 31, 2009 and March 31, 2009			3
Consolidated Statements of Earnings - Three Months Ended March 31, 2010 and 2009			4
Consolidated Statements of Cash Flows - Three Months Ended March 31, 2010 and 2009			5
Consolidated Statement of Total Equity			6
Condensed Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk			33
Item 4. Controls and Procedures			34
Part II. Other Information:
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 6. Exhibits			36
Signatures			37
Exhibit Index			38
EX-31.01
EX-31.02
EX-32.01
EX-32.02

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		March 31,				December 31,				March 31,
		2010				2009				2009
		(Unaudited)				(Audited)				(Unaudited)
		(Dollars in Thousands, Except Per Share Data)
ASSETS
Current Assets:
Cash and cash equivalents		$	221,043			$	263,591			$	222,003
Accounts receivable, net			202,101				162,815				206,785
Inventories, net			322,027				332,569				324,949
Current deferred income tax benefits			72,921				60,303				56,177
Proceeds receivable for common stock issuances			—				—				37,612
Other current assets			36,619				37,582				44,413
Total Current Assets			854,711				856,860				891,939
Property, plant and equipment			3,500,655				3,465,978				3,349,606
Allowances for depreciation, depletion and amortization			(1,805,610	)			(1,773,073	)			(1,665,923	)
Net property, plant and equipment			1,695,045				1,692,905				1,683,683
Goodwill			624,224				624,224				623,810
Other intangibles, net			18,863				12,469				13,445
Other noncurrent assets			52,059				52,825				40,222
Total Assets		$	3,244,902			$	3,239,283			$	3,253,099
LIABILITIES AND EQUITY
Current Liabilities:
Bank overdraft		$	2,227			$	1,737			$	4,434
Accounts payable			67,281				52,107				77,029
Accrued salaries, benefits and payroll taxes			12,217				15,222				13,306
Pension and postretirement benefits			18,263				18,823				2,405
Accrued insurance and other taxes			26,128				24,274				27,009
Current maturities of long-term debt and short-term facilities			219,583				226,119				181,926
Accrued interest			27,948				12,751				28,282
Other current liabilities			21,699				22,520				13,261
Total Current Liabilities			395,346				373,553				347,652
Long-term debt			1,029,606				1,023,492				1,152,107
Pension, postretirement and postemployment benefits			159,154				160,354				213,517
Noncurrent deferred income taxes			192,299				195,946				175,806
Other noncurrent liabilities			95,602				79,527				79,830
Total Liabilities			1,872,007				1,832,872				1,968,912
Equity:
Common stock, par value $0.01 per share			453				453				445
Preferred stock, par value $0.01 per share			—				—				—
Additional paid-in capital			386,211				381,173				317,717
Accumulated other comprehensive loss			(70,528	)			(75,084	)			(99,753	)
Retained earnings			1,016,156				1,058,698				1,021,832
Total Shareholders’ Equity			1,332,292				1,365,240				1,240,241
Noncontrolling interests			40,603				41,171				43,946
Total Equity			1,372,895				1,406,411				1,284,187
Total Liabilities and Equity		$	3,244,902			$	3,239,283			$	3,253,099

See accompanying condensed notes to consolidated financial statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS

		Three Months Ended
		March 31,
		2010				2009
		(In Thousands, Except Per Share Data)
		(Unaudited)
Net Sales		$	295,561			$	329,842
Freight and delivery revenues			45,383				44,719
Total revenues			340,944				374,561
Cost of sales			275,948				281,307
Freight and delivery costs			45,383				44,719
Total cost of revenues			321,331				326,026
Gross Profit			19,613				48,535
Selling, general & administrative expenses			33,571				37,157
Research and development			13				136
Other operating (income) and expenses, net			(1,107	)			294
(Loss) Earnings from Operations			(12,864	)			10,948
Interest expense			17,616				18,525
Other nonoperating (income) and expenses, net			(600	)			1,022
Losss from continuing operations before taxes on income			(29,880	)			(8,599	)
Income tax benefit			(4,984	)			(2,174	)
Loss from Continuing Operations			(24,896	)			(6,425	)
Gain on discontinued operations, net of related tax expense of $38 and $20, respectively			148				52
Consolidated net loss			(24,748	)			(6,373	)
Less: Net loss attributable to noncontrolling interests			(568	)			(609	)
Net Loss Attributable to Martin Marietta Materials, Inc.		$	(24,180	)		$	(5,764	)
Net (Loss) Earnings Attributable to Martin Marietta Materials, Inc.
Loss from continuing operations		$	(24,328	)		$	(5,816	)
Discontinued operations			148				52
		$	(24,180	)		$	(5,764	)
Net Loss Attributable to Martin Marietta Materials, Inc.
Per Common Share
Basic from continuing operations attributable to common shareholders		$	(0.54	)		$	(0.14	)
Discontinued operations attributable to common shareholders			—				—
		$	(0.54	)		$	(0.14	)
Diluted from continuing operations attributable to common shareholders		$	(0.54	)		$	(0.14	)
Discontinued operations attributable to common shareholders			—				—
		$	(0.54	)		$	(0.14	)
Weighted-Average Common Shares Outstanding
Basic			45,400				41,863
Diluted			45,400				41,863
Cash Dividends Per Common Share		$	0.40			$	0.40

See accompanying condensed notes to consolidated financial statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three Months Ended
		March 31,
		2010				2009
		(Dollars in Thousands)
		(Unaudited)
Cash Flows from Operating Activities:
Consolidated net loss		$	(24,748	)		$	(6,373	)
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:
Depreciation, depletion and amortization			44,968				42,619
Stock-based compensation expense			3,894				5,086
(Gains) Losses on divestitures and sales of assets			(1,133	)			796
Deferred income taxes			957				765
Excess tax benefits from stock-based compensation transactions			(145	)			(95	)
Other items, net			391				638
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net			(39,286	)			4,811
Inventories, net			10,681				(6,931	)
Accounts payable			15,077				14,436
Other assets and liabilities, net			16,465				9,002
Net Cash Provided by Operating Activities			27,121				64,754
Cash Flows from Investing Activities:
Additions to property, plant and equipment			(25,021	)			(40,316	)
Acquisitions, net			(28,026	)			(1,524	)
Proceeds from divestitures and sales of assets			1,588				5,082
Net Cash Used for Investing Activities			(51,459	)			(36,758	)
Cash Flows from Financing Activities:
Borrowings of long-term debt			50,000				—
Repayments of long-term debt			(50,560	)			(1,046	)
Repayments on short-term facilities, net			—				(20,000	)
Debt issuance costs			(80	)			—
Change in bank overdraft			490				(243	)
Payments on capital lease obligations			(29	)			(51	)
Dividends paid			(18,362	)			(16,821	)
Distributions to owners of noncontrolling interests			—				(1,000	)
Issuances of common stock			186				195,279
Excess tax benefits from stock-based compensation transactions			145				95
Net Cash (Used for) Provided by Financing Activities			(18,210	)			156,213
Net (Decrease) Increase in Cash and Cash Equivalents			(42,548	)			184,209
Cash and Cash Equivalents, beginning of period			263,591				37,794
Cash and Cash Equivalents, end of period		$	221,043			$	222,003
Noncash Investing and Financing Activities:
Proceeds receivable for common stock issuances		$	—			$	37,612
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest		$	1,914			$	3,377
Cash (refunds) payments for income taxes		$	(8,955	)		$	290

See accompanying condensed notes to consolidated financial statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF TOTAL EQUITY
(Unaudited)

		Shares of																				Total
		Common				Common				Additional				Accumulated Other				Retained				Shareholders’				Noncontrolling				Total
(in thousands)		Stock				Stock				Paid-in Capital				Comprehensive Loss				Earnings				Equity				Interests				Equity
Balance at December 31, 2009			45,399			$	453			$	381,173			$	(75,084	)		$	1,058,698			$	1,365,240			$	41,171			$	1,406,411
Consolidated net loss			—				—				—				—				(24,180	)			(24,180	)			(568	)			(24,748	)
Unrecognized actuarial losses and prior service costs related to pension and postretirement benefits, net of tax benefit of $1,411			—				—				—				3,901				—				3,901				—				3,901
Foreign currency translation gain			—				—				—				523				—				523				—				523
Amortization of terminated value of forward starting interest rate swap agreements into interest expense, net of tax benefit of $86			—				—				—				132				—				132				—				132
Consolidated comprehensive loss																							(19,624	)			(568	)			(20,192	)
Dividends declared			—				—				—				—				(18,362	)			(18,362	)			—				(18,362	)
Issuances of common stock for stock award plans			4				—				1,144				—				—				1,144				—				1,144
Stock-based compensation expense			—				—				3,894				—				—				3,894				—				3,894
Balance at March 31, 2010			45,403			$	453			$	386,211			$	(70,528	)		$	1,016,156			$	1,332,292			$	40,603			$	1,372,895

See accompanying condensed notes to consolidated financial statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		Significant Accounting Policies
		Basis of Presentation
		The accompanying unaudited consolidated financial statements of Martin Marietta Materials, Inc. (the “Corporation”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and to Article 10 of Regulation S-X. The Corporation has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on February 26, 2010. In the opinion of management, the interim financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods. The results of operations for the quarter ended March 31, 2010 are not indicative of the results expected for other interim periods or the full year. The balance sheet at December 31, 2009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles (GAAP) for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009.
		Earnings per Common Share
		The numerator for basic and diluted earnings per common share is net earnings attributable to Martin Marietta Materials, Inc., reduced by dividends and undistributed earnings attributable to the Corporation’s unvested restricted stock awards and incentive stock awards. The denominator for basic earnings per common share is the weighted-average number of common shares outstanding during the period. Diluted earnings per common share are computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards to be issued to employees and nonemployee members of the Corporation’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive. The diluted per-share computations reflect a change in the number of common shares outstanding (the denominator) to include the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

1.		Significant Accounting Policies (continued)
		Earnings per Common Share (continued)
		The following table reconciles the numerator and denominator for basic and diluted earnings per common share:

		Three Months Ended
		March 31,
		2010				2009
		(In Thousands)
Net loss from continuing operations attributable to Martin Marietta Materials, Inc.		$	(24,328	)		$	(5,816	)
Less: Distributed and undistributed earnings attributable to unvested awards			(202	)			(235	)
Basic and diluted net loss from continuing operations attributable to common shareholders of Martin Marietta Materials, Inc.			(24,530	)			(6,051	)
Basic and diluted net earnings from discontinued operations attributable to common shareholders			148				52
Basic and diluted net loss attributable to common shareholders of Martin Marietta Materials, Inc.		$	(24,382	)		$	(5,999	)
Basic weighted-average common shares outstanding			45,400				41,863
Effect of dilutive employee and director awards			—				—
Diluted weighted-average common shares outstanding			45,400				41,863

Comprehensive Earnings/Loss

Consolidated comprehensive earnings/loss for the Corporation consist of consolidated net earnings or loss; amortization of actuarial losses and prior service costs related to pension and postretirement benefits; foreign currency translation adjustments; and the amortization of the value of terminated forward starting interest rate swap agreements into interest expense. Consolidated comprehensive loss for the three months ended March 31, 2010 and 2009 was $20,192,000 and $4,455,000, respectively.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

2.		Discontinued Operations
		Operations that are disposed of or permanently shut down represent discontinued operations, and, therefore, the results of their operations through the dates of disposal and any gain or loss on disposals are included in discontinued operations in the consolidated statements of earnings. All discontinued operations relate to the Aggregates business.
		Discontinued operations included the following net sales, pretax gain on operations, income tax expense and overall net earnings:

		Three Months Ended
		March 31,
		2010				2009
		(Dollars in Thousands)
Net sales		$	17			$	541
Pretax gain on operations		$	186			$	72
Income tax expense			38				20
Net earnings		$	148			$	52

3.

Inventories, Net

		March 31,				December 31,				March 31,
		2010				2009				2009
		(Dollars in Thousands)
Finished products		$	279,112			$	289,051			$	273,468
Products in process and raw materials			15,945				16,296				18,872
Supplies and expendable parts			47,483				47,554				51,622
			342,540				352,901				343,962
Less allowances			(20,513	)			(20,332	)			(19,013	)
Total		$	322,027			$	332,569			$	324,949

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

4.		Goodwill and Intangible Assets
		During the three months ended March 31, 2010, there were no changes in goodwill.
		During the three months ended March 31, 2010, the Corporation acquired use rights of $6,600,000 related to its Aggregates business. The use rights are deemed to have an indefinite life and are not being amortized.

5.

Long-Term Debt

		March 31,				December 31,				March 31,
		2010				2009				2009
		(Dollars in Thousands)
6.875% Notes, due 2011		$	242,100			$	242,092			$	249,901
6.6% Senior Notes, due 2018			298,154				298,111				297,986
7% Debentures, due 2025			124,376				124,371				124,355
6.25% Senior Notes, due 2037			247,858				247,851				247,829
Floating Rate Senior Notes, due 2010, interest rate of 0.4% at March 31, 2010			217,568				217,502				224,716
Term Loan, due 2012, interest rate of 3.29% at March 31, 2010			111,750				111,750				—
Credit Agreement, interest rate of 2.645% at March 31, 2009			—				—				180,000
Other notes			7,383				7,934				9,246
Total debt			1,249,189				1,249,611				1,334,033
Less current maturities			(219,583	)			(226,119	)			(181,926	)
Long-term debt		$	1,029,606			$	1,023,492			$	1,152,107

The Corporation’s $325,000,000 five-year revolving credit agreement, $130,000,000 unsecured term loan (the “Term Loan”) and $100,000,000 three-year secured accounts receivable credit facility (the “AR Credit Facility”) are subject to a leverage ratio covenant. The covenant requires the Corporation’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined, for the trailing twelve months (the “Ratio”) to not exceed 3.75 to 1.00 as of March 31, 2010 and to not exceed 3.50 to 1.00 as of the end of any fiscal quarter ending on or after June 30, 2010. Furthermore, the covenant allows the Corporation to exclude debt incurred in connection with acquisitions from the Ratio for a period of 180 days so long as the Corporation maintains specified ratings on its long-term unsecured debt and the Ratio calculated without such exclusion does not exceed the maximum Ratio plus 0.25. Certain other nonrecurring items and noncash items, if they occur, can also be excluded from the Ratio. The Corporation was in compliance with the Ratio at March 31, 2010.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

5.		Long-Term Debt (continued)
		The Corporation unwound two forward starting interest rate swap agreements with a total notional amount of $150,000,000 (the “Swap Agreements”) in April 2008. The Corporation made a cash payment of $11,139,000, which represented the fair value of the Swap Agreements on the date of termination. The accumulated other comprehensive loss, net of tax, at the date of termination is being recognized in earnings over the life of the 6.6% Senior Notes. For the three months ended March 31, 2010 and 2009, the Corporation recognized $218,000 and $203,000, respectively, as additional interest expense. The ongoing amortization of the terminated value of the Swap Agreements will increase annual interest expense by approximately $1,000,000 until the maturity of the 6.6% Senior Notes in 2018. The accumulated other comprehensive loss related to the Swap Agreements was $5,755,000, net of cumulative noncurrent deferred tax assets of $3,765,000, at March 31, 2010; $5,887,000, net of cumulative noncurrent deferred tax assets of $3,852,000, at December 31, 2009; and $6,271,000, net of cumulative noncurrent deferred tax assets of $4,102,000, at March 31, 2009.
		In April 2010, the Corporation repaid $217.6 million of Floating Rate Senior Notes through the use of cash and short-term borrowings.

6.		Financial Instruments
		The Corporation’s financial instruments include temporary cash investments, accounts receivable, notes receivable, bank overdraft, publicly registered long-term notes, debentures and other long-term debt.
		Temporary cash investments are placed primarily in money market funds and Eurodollar time deposits with the following financial institutions: Bank of America, N.A., Branch Banking and Trust Company, JP Morgan Chase Bank, N.A. and Wells Fargo Bank, N.A.. The Corporation’s cash equivalents have maturities of less than three months. Due to the short maturity of these investments, they are carried on the consolidated balance sheets at cost, which approximates fair value.
		Customer receivables are due from a large number of customers, primarily in the construction industry, and are dispersed across wide geographic and economic regions. However, customer receivables are more heavily concentrated in certain states (namely, Texas, North Carolina, Georgia, Iowa and Louisiana which accounted for approximately 56% of the Aggregate business’ 2009 net sales). The estimated fair values of customer receivables approximate their carrying amounts.
		Notes receivable are primarily related to divestitures and are not publicly traded. However, using current market interest rates, but excluding adjustments for credit worthiness, if any, management estimates that the fair value of notes receivable approximates the carrying amount.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

6.		Financial Instruments (continued)
		The bank overdraft represents the float of outstanding checks. The estimated fair value of the bank overdraft approximates its carrying value.
		The estimated fair value of the Corporation’s publicly registered long-term notes and debentures at March 31, 2010 was $1,158,501,000, compared with a carrying amount of $1,130,056,000 on the consolidated balance sheet. The fair value of this long-term debt was estimated based on quoted market prices. The estimated fair value of other borrowings, including the Corporation’s Term Loan, was $119,133,000 at March 31, 2010 and approximates its carrying amount.
		The carrying values and fair values of the Corporation’s financial instruments are as follows:

		March 31, 2010
		Carrying Value				Fair Value
		(Dollars in Thousands)
Cash and cash equivalents		$	221,043			$	221,043
Accounts receivable, net		$	202,101			$	202,101
Notes receivable, net		$	12,661			$	12,661
Bank overdraft		$	2,227			$	2,227
Long-term debt		$	1,249,189			$	1,277,634

7.		Income Taxes
		Income tax benefit/expense reported in the Corporation’s consolidated statements of earnings includes income tax benefit/expense on earnings attributable to both the Corporation and its noncontrolling interests.

		Three Months Ended
		March 31,
		2010				2009
Estimated effective income tax rate:
Continuing operations			16.7	%			25.3	%
Discontinued operations			20.4	%			27.5	%
Consolidated Overall			16.7	%			25.3	%

The Corporation’s effective income tax rate reflects the effect of federal and state income taxes and the impact of differences in book and tax accounting arising from the net permanent benefits associated with the depletion allowances for mineral reserves and the domestic production deduction. The effective income tax rates for discontinued operations reflect the tax effects of individual operations’ transactions and are not indicative of the Corporation’s overall effective income tax rate.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

7.		Income Taxes (continued)
		On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. Among other things, the PPACA reduces the tax benefits available to an employer that receives the Medicare Part D subsidy. Employers that receive the Medicare Part D subsidy recognize the deferred tax effects of the reduced deductibility of the postretirement prescription drug coverage in continuing operations in the period of enactment. The effects of changes in tax law are recognized as discrete events in the period of enactment. Accordingly, the overall estimated effective income tax rate for the three months ended March 31, 2010 includes the effect to the Corporation of the PPACA. Management expects the overall effective tax rate for the full year, inclusive of the effects of PPACA, to be approximately 28%.
		The following table summarizes changes in the Corporation’s unrecognized tax benefits, excluding interest and correlative effects, for the three months ended March 31, 2010 (dollars in thousands):

Unrecognized tax benefits at beginning of period		$	16,722
Gross increases — tax positions in prior years			18,128
Gross decreases — tax positions in prior years			(1,910	)
Gross increases — tax positions in current year			376
Unrecognized tax benefits at end of period		$	33,316

		At March 31, 2010, unrecognized tax benefits of $9,592,000, net of federal tax benefits and related to interest accruals and permanent income tax differences, would have favorably affected the Corporation’s effective tax rate if recognized.
		The Corporation anticipates that it is reasonably possible that unrecognized tax benefits may significantly change during the twelve months ended March 31, 2011 as a result of the settlement of unresolved issues related to the 2004 and 2005 tax years, settlement of the Internal Revenue Service audit for the 2007 tax year and the expiration of the statute of limitations for federal examination of the 2006 tax year. The Corporation estimates that these events could result in a reasonably possible change in unrecognized tax benefits of up to $10,082,000.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

8.		Pension and Postretirement Benefits
		The following presents the estimated components of the recorded net periodic benefit cost for pension and postretirement benefits (dollars in thousands):

		Three Months Ended March 31,
		Pension								Postretirement Benefits
		2010				2009				2010				2009
Service cost		$	3,074			$	3,022			$	157			$	154
Interest cost			5,829				5,715				711				695
Expected return on assets			(5,255	)			(4,080	)			—				—
Amortization of:
Prior service cost (credit)			146				164				(372	)			(372	)
Actuarial loss (gain)			2,605				3,958				15				(21	)
Settlement charge			99				—				—				—
Total net periodic benefit cost		$	6,498			$	8,779			$	511			$	456

9.		Contingencies
		The Corporation is a named party in various legal proceedings in both federal and state courts relating to its Greenwood, Missouri, operation as discussed in “Note N: Commitments and Contingencies” of the “Notes to Financial Statements” of the 2009 Financial Statements included under Item 8 of in its Annual Report on Form 10-K for the year ended December 31, 2009, which discussion is incorporated herein by reference. In April 2010, the Corporation requested that the United States Supreme Court accept an appeal of the damages award rendered against it in one of these proceedings with respect to which Corporation had established an $11,900,000 legal reserve as of December 31, 2009, which remains at March 31, 2010.
		In the opinion of management and counsel, it is unlikely that the outcome of any other litigation and other proceedings, including those pertaining to environmental matters, relating to the Corporation and its subsidiaries, will have a material adverse effect on the results of the Corporation’s operations, its cash flows or its financial position.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

10.		Business Segments
		The Corporation conducts its aggregates operations through three reportable business segments: Mideast Group, Southeast Group and West Group. The Corporation also has a Specialty Products segment that includes magnesia-based chemicals products and dolomitic lime.
		The following tables display selected financial data for continuing operations for the Corporation’s reportable business segments. Corporate loss from operations primarily includes depreciation on capitalized interest, expenses for corporate administrative functions, unallocated corporate expenses and other nonrecurring and/or non-operational adjustments.

		Three Months Ended
		March 31,
		2010				2009
		(Dollars in Thousands)
Total revenues:
Mideast Group		$	89,342			$	86,555
Southeast Group			83,967				114,221
West Group			121,808				137,015
Total Aggregates Business			295,117				337,791
Specialty Products			45,827				36,770
Total		$	340,944			$	374,561
Net sales:
Mideast Group		$	83,345			$	81,842
Southeast Group			68,120				95,310
West Group			102,370				119,534
Total Aggregates Business			253,835				296,686
Specialty Products			41,726				33,156
Total		$	295,561			$	329,842
Earnings (Loss) from operations:
Mideast Group		$	2,095			$	5,205
Southeast Group			(9,099	)			8,156
West Group			(12,262	)			44
Total Aggregates Business			(19,266	)			13,405
Specialty Products			11,212				6,342
Corporate			(4,810	)			(8,799	)
Total		$	(12,864	)		$	10,948

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

10.		Business Segments (continued)
		The asphalt, ready mixed concrete, road paving and other product lines are considered internal customers of the core aggregates business. Product lines for the Specialty Products segment consist of magnesia-based chemicals, dolomitic lime and other. Net sales by product line are as follows:

		Three Months Ended
		March 31,
		2010				2009
		(Dollars in Thousands)
Aggregates		$	237,630			$	275,998
Asphalt			8,659				9,065
Ready Mixed Concrete			5,625				8,078
Road Paving			1,659				2,481
Other			262				1,064
Total Aggregates Business			253,835				296,686
Magnesia-Based Chemicals			26,776				24,386
Dolomitic Lime			14,698				8,523
Other			252				247
Specialty Products			41,726				33,156
Total		$	295,561			$	329,842

11.		Supplemental Cash Flow Information
		The following table presents the components of the change in other assets and liabilities, net:

		Three Months Ended
		March 31,
		2010				2009
		(Dollars in Thousands)
Other current and noncurrent assets		$	(1,912	)		$	(3,953	)
Accrued salaries, benefits and payroll taxes			(2,193	)			(4,795	)
Accrued insurance and other taxes			1,853				3,590
Accrued income taxes			3,127				(1,835	)
Accrued pension, postretirement and postemployment benefits			733				8,094
Other current and noncurrent liabilities			14,857				7,901
		$	16,465			$	9,002

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010

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

OVERVIEW Martin Marietta Materials, Inc. (the “Corporation”), conducts its operations through four reportable business segments: Mideast Group, Southeast Group, West Group (collectively, the “Aggregates business”) and Specialty Products. The Corporation’s annual net sales and earnings are predominately derived from its Aggregates business, which processes and sells granite, limestone, and other aggregates products from a network of 286 quarries, distribution facilities and plants to customers in 31 states, Canada, the Bahamas and the Caribbean Islands. The Aggregates business’ products are used primarily by commercial customers principally in domestic construction of highways and other infrastructure projects and for commercial and residential building development. The Specialty Products segment produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel industry.

CRITICAL ACCOUNTING POLICIES The Corporation outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on February 26, 2010. There were no changes to the Corporation’s critical accounting policies during the quarter ended March 31, 2010.

RESULTS OF OPERATIONS

Except as indicated, the following comparative analysis in the Results of Operations section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects results from continuing operations and is based on net sales and cost of sales. The Corporation’s heritage aggregates product line excludes volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and divestitures.

Gross margin as a percentage of net sales and operating margin as a percentage of net sales represent non-GAAP measures. The Corporation presents these ratios calculated based on net sales, as it is consistent with the basis by which management reviews the Corporation’s operating results. Further, management believes it is consistent with the basis by which investors analyze the Corporation’s operating results given that freight and delivery revenues and costs represent pass-throughs and have no profit mark-up. Gross margin and operating margin calculated as percentages of total revenues represent the most directly comparable financial measures calculated in accordance with generally accepted accounting principles (GAAP). The following tables present the calculations of gross margin and operating margin for the three months ended March 31, 2010 and 2009 in accordance with GAAP and reconciliations of the ratios as percentages of total revenues to percentages of net sales (dollars in thousands):

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010
(Continued)

Gross Margin in Accordance with GAAP

		Three Months Ended
		March 31,
		2010				2009
Gross profit		$	19,613			$	48,535
Total revenues		$	340,944			$	374,561
Gross margin			5.8	%			13.0	%

Gross Margin Excluding Freight and Delivery Revenues

		Three Months Ended
		March 31,
		2010				2009
Gross profit		$	19,613			$	48,535
Total revenues		$	340,944			$	374,561
Less: Freight and delivery revenues			(45,383	)			(44,719	)
Net sales		$	295,561			$	329,842
Gross margin excluding freight and delivery revenues			6.6	%			14.7	%

Operating Margin in Accordance with GAAP

		Three Months Ended
		March 31,
		2010				2009
(Loss) Earnings from operations		$	(12,864	)		$	10,948
Total revenues		$	340,944			$	374,561
Operating margin			(3.8	%)			2.9	%

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010
(Continued)

Operating Margin Excluding Freight and Delivery Revenues

		Three Months Ended
		March 31,
		2010				2009
(Loss) Earnings from operations		$	(12,864	)		$	10,948
Total revenues		$	340,944			$	374,561
Less: Freight and delivery revenues			(45,383	)			(44,719	)
Net sales		$	295,561			$	329,842
Operating margin excluding freight and delivery revenues			(4.4	%)			3.3	%

Quarter Ended March 31

Notable items for the quarter ended March 31, 2010 included:

•		Net sales of $295.6 million compared with $329.8 million for the 2009 first quarter
•		Heritage aggregates product line volume down 11.9% for the quarter; up 9% for the month of March
•		Heritage aggregates product line pricing down 3.1%
•		Record Specialty Products operating margin (excluding freight and delivery revenues) of 26.9%, up 780 basis points
•		Loss from operations of $12.9 million compared with earnings from operations of $10.9 million for the prior-year quarter
•		Loss per diluted share of $0.54 compared with a loss per diluted share of $0.14 for the prior-year quarter
•		Acquired deep-water port operation located at Port Canaveral, Florida

The following table presents net sales, gross profit, selling, general and administrative expenses and earnings (loss) from operations data for the Corporation and its reportable segments for the three months ended March 31, 2010 and 2009. In each case, the data is stated as a percentage of net sales of the Corporation or the relevant segment, as the case may be.

Earnings from operations include research and development expense and other operating income and expenses, net. Research and development expense for the Corporation was $0.1 million for the quarter ended March 31, 2009. Consolidated other operating income and expenses, net, was income of $1.1 million and expense of $0.3 million for the quarters ended March 31, 2010 and 2009, respectively.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010
(Continued)

		Three Months Ended March 31,
		2010								2009
						% of								% of
		Amount				Net Sales				Amount				Net Sales
		(Dollars in Thousands)
Net sales:
Mideast Group		$	83,345							$	81,842
Southeast Group			68,120								95,310
West Group			102,370								119,534
Total Aggregates Business			253,835				100.0				296,686				100.0
Specialty Products			41,726				100.0				33,156				100.0
Total		$	295,561				100.0			$	329,842				100.0
Gross profit (loss):
Mideast Group		$	11,872							$	16,020
Southeast Group			(2,885	)							14,868
West Group			(2,943	)							10,740
Total Aggregates Business			6,044				2.4				41,628				14.0
Specialty Products			14,073				33.7				8,674				26.2
Corporate			(504	)			—				(1,767	)			—
Total		$	19,613				6.6			$	48,535				14.7
Selling, general & administrative expenses:
Mideast Group		$	10,447							$	11,142
Southeast Group			6,414								6,521
West Group			10,665								10,693
Total Aggregates Business			27,526				10.8				28,356				9.6
Specialty Products			2,931				7.0				2,354				7.1
Corporate			3,114				—				6,447				—
Total		$	33,571				11.4			$	37,157				11.3
Earnings (Loss) from operations:
Mideast Group		$	2,095							$	5,205
Southeast Group			(9,099	)							8,156
West Group			(12,262	)							44
Total Aggregates Business			(19,266	)			(7.6	)			13,405				4.5
Specialty Products			11,212				26.9				6,342				19.1
Corporate			(4,810	)			—				(8,799	)			—
Total		$	(12,864	)			(4.4	)		$	10,948				3.3

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010
(Continued)

This was a predictably difficult first quarter as the Corporation expected any benefits that would flow from the American Recovery and Reinvestment Act (“ARRA” or “Stimulus”) would not occur during the early part of 2010. This proved to be the case; however, heritage aggregates product line volume increased 9% for the month of March. This marks the first month of volume growth compared with the prior-year month in the past several years. Perhaps more importantly, this volume trend continued through April with double-digit volume increases for the month, marking the first back-to-back months of volume growth since February and March 2006. This improvement in shipments coincided with the initiation of the construction season and is being largely fueled by Stimulus, as money is reaching the states, and projects are beginning. Looking at the quarter, heritage aggregates product line volume was down 11.9% compared with the prior-year period. This was not a surprise, as historically, the first quarter is the weakest and most volatile quarter for the Corporation’s Aggregates business. Still, this quarter’s volatility was particularly exacerbated by unprecedented precipitation and cold temperatures during January and February, including snowfalls in even the Corporation’s most southern markets. While it is difficult to quantify the shipments lost due specifically to weather, the impact is evident given that heritage aggregates shipments for the quarter were at the lowest level since 1999 despite March’s 9% shipment increase.

Overall, heritage aggregates product line pricing decreased 3.1% compared with the prior-year quarter. Consistent with recent trends, pricing varied significantly by market and ranged from an increase of 12% to a decrease of 30%. While the effect of weather was more acutely evident in the quarter’s volume profile, it also contributed to the wide range of price fluctuation as it affected the timing of reopening quarries closed for the winter, placed varying hardships on certain long-haul markets, and inevitably delayed the initiation of new construction. As in 2009, two of the hardest hit geographic areas in terms of quarterly volume and pricing decline were the Corporation’s Florida and River markets. In addition, the Aggregates business is seeing pricing pressure in a growing number of geographic areas; however, this is consistent with the Corporation’s view of a more challenging pricing environment in 2010 due not only to competitive forces but also the impact of both geographic and product mix. That said, the historically low level of aggregates shipments and customary first-quarter volatility make it difficult to use first-quarter pricing trends as a meaningful projection for the balance of the year.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010
(Continued)

The following tables present volume and pricing data and shipments data for the aggregates product line. Heritage aggregates operations exclude volume and pricing data for acquisitions that were not included in prior-year operations for the comparable period and divestitures.

		Three Months Ended
		March 31, 2010
		Volume				Pricing
Volume/Pricing Variance (1)
Heritage Aggregates Product Line (2):
Mideast Group			3.3	%			(1.3	%)
Southeast Group			(23.1	%)			(6.5	%)
West Group			(13.0	%)			(2.9	%)
Heritage Aggregates Operations			(11.9	%)			(3.1	%)
Aggregates Product Line (3)			(11.1	%)			(3.1	%)

		Three Months Ended
		March 31,
		2010				2009
		(tons in thousands)
Shipments
Heritage Aggregates Product Line (2):
Mideast Group			6,905				6,681
Southeast Group			6,122				7,961
West Group			10,220				11,744
Heritage Aggregates Operations			23,247				26,386
Acquisitions			226				—
Divestitures (4)			3				14
Aggregates Product Line (3)			23,476				26,400

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

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010
(Continued)

The Specialty Products business contributed significantly to the Corporation’s first-quarter results, expanding its operating margin (excluding freight and delivery revenues) 780 basis points to 26.9% for the quarter. This business segment had volume growth in all product lines. Notably, in March, the Specialty Products business had the largest shipping month for dolomitic lime in recent history which eclipsed the previous monthly shipment record established in April 2008. The Specialty Products business has continued to focus on operational efficiency initiatives, which, along with increased shipments and capacity utilization, drove its record quarterly profitability. Earnings from operations of $11.2 million increased $4.9 million compared with the prior-year quarter.

The Corporation’s results also reflected its ability to control costs. The Corporation’s operating team continued its focus on cost containment, and, consequently, consolidated cost of sales decreased $5.4 million, or 2%, for the quarter. With the exception of depreciation, which increased $2.8 million, or 7%, and energy costs, which increased $4.2 million, or 15%, the Corporation again reduced cost of sales in every significant category. The increase in energy costs was driven in large part by diesel expense. For the quarter, the Corporation paid $2.03 per gallon for diesel, a 59% increase as compared with the prior-year quarter.

The following presents a rollforward of the Corporation’s gross profit (dollars in thousands):

Consolidated gross profit, quarter ended March 31, 2009		$	48,535
Aggregates Business:
Pricing weakness			(7,470	)
Volume weakness			(35,381	)
Cost decreases, net			7,267
Decrease in Aggregates Business gross profit			(35,584	)
Specialty Products			5,399
Corporate			1,263
Decrease in consolidated gross profit			(28,922	)
Consolidated gross profit, quarter ended March 31, 2010		$	19,613

Selling, general and administrative expenses were down $3.6 million for the quarter compared with the 2009 first quarter due to declining personnel costs. The Corporation’s objective is to hold selling, general and administrative expenses flat with 2009, excluding required payments under certain retirement plans.

Among other items, other operating income and expenses, net, includes gains and losses on the sale of assets; gains and losses related to accounts receivable; rental, royalty and services income; and the accretion and depreciation expenses related to asset retirement obligations. For the first quarter, consolidated other operating income and expenses, net, was income of $1.1 million in 2010 compared with an expense of $0.3 million in 2009.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2010

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter Ended March 31, 2010
(Continued)

Interest expense was $17.6 million for the first quarter 2010 as compared with $18.5 million for the prior-year quarter. The decrease primarily resulted from both lower outstanding borrowings and a lower interest rate on the Corporation’s Floating Rate Senior Notes during the three months ended March 31, 2010 as compared with the prior-year quarter.

In addition to other offsetting amounts, other nonoperating income and expenses, net, are comprised generally of interest income and net equity earnings from nonconsolidated investments. Consolidated other nonoperating income and expenses, net, for the quarter ended March 31, was income of $0.6 million in 2010 compared with an expense of $1.0 million in 2009, primarily as a result of higher interest income and a larger gain on foreign currency transactions.

The consolidated overall estimated effective income tax rate for the three months ended March 31, 2010 was 16.7% compared with 25.3% for the first quarter 2009. The 2010 overall effective tax rate includes the reduction of tax benefits for the Medicare Part D subsidy resulting from the enactment of the Patient Protection and Affordable Care Act. Management expects the overall effective tax rate for the full year to be approximately 28%.

LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities during the three months ended March 31, 2010 was $27.1 million compared with $64.8 million in the comparable period of 2009. Operating cash flow is primarily from consolidated net earnings, before deducting depreciation, depletion and amortization, offset by working capital requirements. Net cash provided by operating activities for the first three months of 2010 as compared with the year-earlier period reflects lower consolidated net earnings before depreciation, depletion and amortization and a $39.3 million build in accounts receivable in the quarter ended March 31, 2010 resulting from increased sales occurring in the last two weeks of March, offset by a reduction in inventories. Management currently expects this trend to continue through the balance of the year.

Depreciation, depletion and amortization were as follows:

		Three Months Ended
		March 31,
		2010				2009
		(Dollars in Thousands)
Depreciation		$	43,493			$	41,193
Depletion			620				709
Amortization			855				717
		$	44,968			$	42,619