Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Organization

Organization

Martin Marietta Materials, Inc., (the “Corporation”) is engaged principally in the construction aggregates business. The Corporation’s aggregates product line accounted for 69% of consolidated 2013 net sales and includes crushed stone, sand and gravel, and is used for construction of highways and other infrastructure projects, and in the nonresidential and residential construction industries. Aggregates products are also used in the railroad, agricultural, utility and environmental industries. These aggregates products, along with the Corporation’s vertically-integrated operations, which include asphalt products, ready mixed concrete and road paving construction services (and which accounted for 19% of consolidated 2013 net sales), are sold and shipped from a network of nearly 300 quarries, distribution facilities and plants to customers in 30 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, 2014, the Corporation made minor changes to the operations and management reporting structure of its Aggregates business, resulting in an immaterial 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, northern Kansas, Kentucky, Maryland, Minnesota, eastern Nebraska, North Carolina, Ohio, South Carolina, Virginia, Washington and West Virginia	Alabama, Florida, Georgia, Mississippi, Tennessee, Nova Scotia and the Bahamas	Arkansas, Colorado, southern Kansas, Louisiana, Missouri, western Nebraska, Nevada, Oklahoma, Texas, Utah and Wyoming

In addition to the Aggregates business, the Corporation has a Specialty Products segment, which accounted for 12% of consolidated 2013 net sales, that 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

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, 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 six months ended June 30, 2014 are not indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2013 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, 2013. These consolidated financial statements do not reflect the Corporation’s acquisition of Texas Industries, Inc. (“TXI”) on July 1, 2014, which is discussed further in Note 11.

Early Adoption of New Accounting Standard

Early Adoption of New Accounting Standard

Effective January 1, 2014, the Corporation early adopted the Financial Accounting Standard Board’s (the “FASB”) final guidance on reporting discontinued operations. The guidance is to be applied prospectively and redefines discontinued operations to be either 1) a component of an entity or group of components that has been disposed of or is classified as held for sale that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results or 2) a business that, upon acquisition, meets the criteria to be classified as held for sale. The adoption of the accounting standard did not have any effect on the Corporation’s financial position or results of operations.

Revenue Recognition Standard

Revenue Recognition Standard

The FASB issued an accounting standard update that amends the accounting guidance on revenue recognition. The amendments in this accounting standard update are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The amendments are to be applied on a full retrospective or modified retrospective approach. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after December 15, 2016. The Corporation is currently evaluating the impact of the provisions of the accounting standard update, and at this time does not expect the impact to be material to its results of operations.

Reclassifications

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 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, and are presented in the Corporation’s consolidated statements of earnings and comprehensive earnings.

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
	(Dollars in Thousands)
Net earnings attributable to Martin Marietta Materials, Inc.	$	59,521	$	41,308		$	37,904	$	13,468
Other comprehensive earnings (loss), net of tax		603		(1,309	)		1,973		(88	)
Comprehensive earnings attributable to Martin Marietta Materials, Inc.	$	60,124	$	39,999		$	39,877	$	13,380

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, is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
	(Dollars in Thousands)
Net earnings (loss) attributable to noncontrolling interests	$	103	$	259	$	(1,432	)	$	(1,230	)
Other comprehensive earnings, net of tax		1		3		2			5
Comprehensive earnings (loss) attributable to noncontrolling interests	$	104	$	262	$	(1,430	)	$	(1,225	)

Accumulated other comprehensive loss consists of unrealized gains and losses related to the funded status of pension and postretirement benefit plans; foreign currency translation; and the unamortized value of terminated forward starting interest rate swap agreements, and is presented on the Corporation’s consolidated balance sheets. Changes in accumulated other comprehensive loss, 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 June 30, 2014
Balance at beginning of period	$	(44,267	)	$	4,816		$	(3,293	)	$	(42,744	)
Other comprehensive earnings before reclassifications, net of tax		(426	)		842			—			416
Amounts reclassified from accumulated other comprehensive loss, net of tax		8			—			179			187
Other comprehensive earnings, net of tax		(418	)		842			179			603
Balance at end of period	$	(44,685	)	$	5,658		$	(3,114	)	$	(42,141	)
	Three Months Ended June 30, 2013
Balance at beginning of period	$	(106,296	)	$	5,323		$	(3,975	)	$	(104,948	)
Other comprehensive loss before reclassifications, net of tax		(2,278	)		(1,169	)		—			(3,447	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		1,971			—			167			2,138
Other comprehensive earnings, net of tax		(307	)		(1,169	)		167			(1,309	)
Balance at end of period	$	(106,603	)	$	4,154		$	(3,808	)	$	(106,257	)

The other comprehensive loss before reclassifications for pension and postretirement benefit plans is net of tax of $276,000 and $1,490,000 for the three months ended June 30, 2014 and 2013, respectively.

	Pension and Postretirement Benefit Plans			Foreign Currency			Unamortized Value of Terminated Forward Starting Interest Rate Swap			Accumulated Other Comprehensive Loss
	Six Months Ended June 30, 2014
Balance at beginning of period	$	(44,549	)	$	3,902		$	(3,467	)	$	(44,114	)
Other comprehensive (loss ) earnings before reclassifications, net of tax		(430	)		1,756			—			1,326
Amounts reclassified from accumulated other comprehensive loss, net of tax		294			—			353			647
Other comprehensive earnings, net of tax		(136	)		1,756			353			1,973
Balance at end of period	$	(44,685	)	$	5,658		$	(3,114	)	$	(42,141	)
	Six Months Ended June 30, 2013
Balance at beginning of period	$	(108,189	)	$	6,157		$	(4,137	)	$	(106,169	)
Other comprehensive loss earnings before reclassifications, net of tax		(2,312	)		(2,003	)		—			(4,315	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		3,898			—			329			4,227
Other comprehensive earnings, net of tax		1,586			(2,003	)		329			(88	)
Balance at end of period	$	(106,603	)	$	4,154		$	(3,808	)	$	(106,257	)

The other comprehensive loss before reclassifications for pension and postretirement benefit plans is net of tax of $280,000 and $1,512,000 for the six months ended June 30, 2014 and 2013, 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 June 30, 2014
Balance at beginning of period	$	29,016		$	2,155		$	31,171
Tax effect of other comprehensive earnings		271			(116	)		155
Balance at end of period	$	29,287		$	2,039		$	31,326
	Three Months Ended June 30, 2013
Balance at beginning of period	$	69,641		$	2,600		$	72,241
Tax effect of other comprehensive earnings		201			(108	)		93
Balance at end of period	$	69,842		$	2,492		$	72,334
	Six Months Ended June 30, 2014
Balance at beginning of period	$	29,198		$	2,269		$	31,467
Tax effect of other comprehensive earnings		89			(230	)		(141	)
Balance at end of period	$	29,287		$	2,039		$	31,326
	Six Months Ended June 30, 2013
Balance at beginning of period	$	70,881		$	2,707		$	73,588
Tax effect of other comprehensive earnings		(1,039	)		(215	)		(1,254	)
Balance at end of period	$	69,842		$	2,492		$	72,334

Reclassifications out of accumulated other comprehensive loss are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,						Affected line items in
	2014			2013			2014			2013			the consolidated financial statements
	(Dollars in Thousands)
Pension and postretirement benefit plans
Amortization of:
Prior service credit	$	(791	)	$	(695	)	$	(1,404	)	$	(1,403	)
Actuarial loss		804			3,955			1,889			7,852
		13			3,260			485			6,449		Cost of sales; Selling, general & administrative expenses
Tax effect		(5	)		(1,289	)		(191	)		(2,551	)	Deferred income taxes
	$	8		$	1,971		$	294		$	3,898
Unamortized value of terminated forward starting interest rate swap
Additional interest expense	$	295		$	275		$	583		$	544		Interest expense
Tax effect		(116	)		(108	)		(230	)		(215	)	Deferred income taxes
	$	179		$	167		$	353		$	329

Earnings per Common Share

Earnings per Common Share

The numerator for basic and diluted earnings per common share is net earnings/loss 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. For the three and six months ended June 30, 2014 and 2013, the diluted per-share computations reflect a change in the number of common shares outstanding to include the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued.

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(In Thousands)
Net earnings from continuing operations attributable to Martin Marietta Materials, Inc.	$	59,577		$	41,203	$	37,974		$	13,651
Less: Distributed and undistributed earnings attributable to unvested awards		246			197		154			182
Basic and diluted net earnings available to common shareholders from continuing operations attributable to Martin Marietta Materials, Inc.		59,331			41,006		37,820			13,469
Basic and diluted net (loss) earnings available to common shareholders from discontinued operations		(56	)		105		(70	)		(183	)
Basic and diluted net earnings available to common shareholders attributable to Martin Marietta Materials, Inc.	$	59,275		$	41,111	$	37,750		$	13,286
Basic weighted-average common shares outstanding		46,395			46,129		46,355			46,079
Effect of dilutive employee and director awards		134			131		122			138
Diluted weighted-average common shares outstanding		46,529			46,260		46,477			46,217