Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Significant Accounting Policies

1. Significant Accounting Policies

Organization

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

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

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

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

Basis of Presentation

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

Reclassifications

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

Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss

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

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

	Three Months Ended September  30,				Nine Months Ended September  30,
	2013		2012		2013		2012
		(Dollars in Thousands)
Net earnings attributable to Martin Marietta Materials, Inc.	$	71,836	$	62,922	$	85,304	$	62,940
Other comprehensive earnings, net of tax		3,548		3,160		3,459		6,410
Comprehensive earnings attributable to Martin Marietta Materials, Inc.	$	75,384	$	66,082	$	88,763	$	69,350

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

	Three Months Ended September  30,				Nine Months Ended September  30,
	2013		2012		2013		2012
		(Dollars in Thousands)
Net earnings (loss) attributable to noncontrolling interests	$	202	$	747	$	(1,028)	$	863
Other comprehensive earnings, net of tax		3		3		8		10
Comprehensive earnings (loss) attributable to noncontrolling interests	$	205	$	750	$	(1,020)	$	873

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

	(Dollars in Thousands)
	Pension and   Postretirement   Benefit Plans		Foreign Currency		Unamortized Value of Terminated Forward Starting Interest Rate Swap		Accumulated Other Comprehensive Loss
		Three Months Ended September 30, 2013
Balance at beginning of period	$	(106,603)	$	4,153	$	(3,808)	$	(106,258)
Other comprehensive earnings before reclassifications, net of tax		--		993		--		993
Amounts reclassified from accumulated other comprehensive loss, net of tax		2,387		--		168		2,555
Other comprehensive earnings, net of tax		2,387		993		168		3,548
Balance at end of period	$	(104,216)	$	5,146	$	(3,640)	$	(102,710)

	Three Months Ended September 30, 2012
Balance at beginning of period	$	(81,407)	$	5,222	$	(4,455)	$	(80,640)
Other comprehensive earnings before reclassifications, net of tax		117		1,435		--		1,552
Amounts reclassified from accumulated other comprehensive loss, net of tax		1,451		--		157		1,608
Other comprehensive earnings, net of tax		1,568		1,435		157		3,160
Balance at end of period	$	(79,839)	$	6,657	$	(4,298)	$	(77,480)

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

	(Dollars in Thousands)
	Pension and   Postretirement   Benefit Plans		Foreign Currency		Unamortized Value of Terminated Forward Starting Interest Rate Swap		Accumulated Other Comprehensive Loss
		Nine Months Ended September 30, 2013
Balance at beginning of period	$	(108,189)	$	6,157	$	(4,137)	$	(106,169)
Other comprehensive loss before reclassifications, net of tax		(2,312)		(1,011)		--		(3,323)
Amounts reclassified from accumulated other comprehensive loss, net of tax		6,285		--		497		6,782
Other comprehensive earnings (loss), net of tax		3,973		(1,011)		497		3,459
Balance at end of period	$	(104,216)	$	5,146	$	(3,640)	$	(102,710)

	Nine Months Ended September 30, 2012
Balance at beginning of period	$	(84,204)	$	5,076	$	(4,762)	$	(83,890)
Other comprehensive (loss) earnings before reclassifications, net of tax		(349)		1,581		--		1,232
Amounts reclassified from accumulated other comprehensive loss, net of tax		4,714		--		464		5,178
Other comprehensive earnings, net of tax		4,365		1,581		464		6,410
Balance at end of period	$	(79,839)	$	6,657	$	(4,298)	$	(77,480)

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

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

	(Dollars in Thousands)
	Pension and Postretirement Benefit Plans			Unamortized Value of Terminated Forward Starting Interest Rate Swap			Net Noncurrent Deferred Tax Assets
		Three Months Ended September 30, 2013
Balance at beginning of period	$	69,842		$	2,492		$	72,334
Tax effect of other comprehensive earnings		(1,566	)		(111	)		(1,677	)
Balance at end of period	$	68,276		$	2,381		$	70,657
		Three Months Ended September 30, 2012
Balance at beginning of period	$	53,328		$	2,915		$	56,243
Tax effect of other comprehensive earnings		(1,026	)		(103	)		(1,129	)
Balance at end of period	$	52,302		$	2,812		$	55,114
		Nine Months Ended September 30, 2013
Balance at beginning of period	$	70,881		$	2,707		$	73,588
Tax effect of other comprehensive earnings		(2,605	)		(326	)		(2,931	)
Balance at end of period	$	68,276		$	2,381		$	70,657
		Nine Months Ended September 30, 2012
Balance at beginning of period	$	55,161		$	3,116		$	58,277
Tax effect of other comprehensive earnings		(2,859	)		(304	)		(3,163	)
Balance at end of period	$	52,302		$	2,812		$	55,114

Reclassifications out of accumulated other comprehensive loss are as follows:

	Three Months Ended September  30,						Nine Months Ended September  30,						Affected line items in the consolidated financial statements
	2013			2012			2013			2012
		(Dollars in Thousands)
Pension and postretirement benefit plans
Settlement charge	$	729		$	255		$	729		$	779
Amortization of:
Prior service credit		(702	)		(704	)		(2,104	)		(2,092	)
Actuarial loss		3,926			2,849			11,779			9,111
		3,953			2,400			10,404			7,798		Cost of sales; Selling, general & administrative expenses
Tax effect		(1,566	)		(949	)		(4,119	)		(3,084	)	Deferred income taxes
	$	2,387		$	1,451		$	6,285		$	4,714
Unamortized value of terminated forward starting interest rate swap
Additional interest expense	$	279		$	260		$	823		$	768		Interest expense
Tax effect		(111	)		(103	)		(326	)		(304	)	Deferred income taxes
	$	168		$	157		$	497		$	464

Earnings per Common Share

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

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

	Three Months Ended September  30,				Nine Months Ended September  30,
	2013		2012		2013		2012
		(In Thousands)
Net earnings from continuing operations attributable to Martin Marietta Materials, Inc.	$	72,107	$	63,241	$	85,758	$	63,907
Less: Distributed and undistributed earnings attributable to unvested awards		265		336		374		386
Basic and diluted net earnings available to common shareholders from continuing operations attributable to Martin Marietta Materials, Inc.		71,842		62,905		85,384		63,521
Basic and diluted net loss available to common shareholders from discontinued operations		(271)		(319)		(454)		(967)
Basic and diluted net earnings available to common shareholders attributable to Martin Marietta Materials, Inc.	$	71,571	$	62,586	$	84,930	$	62,554
Basic weighted-average common shares outstanding		46,244		45,860		46,134		45,792
Effect of dilutive employee and director awards		105		132		127		137
Diluted weighted-average common shares outstanding		46,349		45,992		46,261		45,929