Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Organization

Organization

Martin Marietta (the “Corporation”) is engaged principally in the construction aggregates business. The Corporation’s aggregates product line 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 aggregates-related downstream product lines, which include asphalt products, ready mixed concrete and road paving construction services, are sold and shipped from a network of approximately 420 quarries, distribution facilities and plants to customers in 30 states, Canada, the Bahamas and the Caribbean Islands. The aggregates and aggregates-related downstream product lines are reported collectively as the “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 the Aggregates business through three reportable segments: the Mid-America Group, the Southeast Group and the West Group.

AGGREGATES BUSINESS

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

The Corporation has a Cement segment, which is comprised of cement operations acquired from Texas Industries, Inc. (“TXI”) with production facilities located in Midlothian, Texas, south of Dallas/Fort Worth; Hunter Texas, south of San Antonio; and Oro Grande, near Los Angeles, California. See Note 2 for additional information on the acquisition. The cement business produces Portland and specialty cements, such as masonry and oil well cements. Similar to the Aggregates business, cement is used in infrastructure projects, nonresidential and residential construction, and the railroad, agricultural, utility and environmental industries. The limestone reserves used as a raw material are located on owned property adjacent to each of the plants. The Corporation also operates cement terminals, a packaging facility at the Crestmore plant near Riverside, California, and its Portland cement grinding facility on an as needed basis.

The Corporation has a Specialty Products segment with manufacturing facilities in Manistee, Michigan and Woodville, Ohio. 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.

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. Other than the adoption of a new accounting standard (see page 9), 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 nine months ended September 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.

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 new standard intends to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The new standard is effective for interim and annual reporting periods beginning after December 15, 2016 and can be applied on a full retrospective or modified retrospective approach. The Corporation is currently evaluating the impact of the provisions of the new standard, 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 10 has been reclassified to conform to the presentation of the Corporation’s current reportable segments. In addition, certain other reclassifications have been made to prior year amounts to conform to the current year presentation.

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 is as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014		2013
	(Dollars in Thousands)
Net earnings attributable to Martin Marietta	$	53,743		$	71,836	$	91,646	$	85,304
Other comprehensive (loss) earnings, net of tax		(1,140	)		3,548		833		3,459
Comprehensive earnings attributable to Martin Marietta	$	52,603		$	75,384	$	92,479	$	88,763

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014			2013
	(Dollars in Thousands)
Net earnings (loss) attributable to noncontrolling interests	$	91	$	202	$	(1,341	)	$	(1,028	)
Other comprehensive earnings, net of tax		2		3		4			8
Comprehensive earnings (loss) attributable to noncontrolling interests	$	93	$	205	$	(1,337	)	$	(1,020	)

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 September 30, 2014
Balance at beginning of period	$	(44,685	)	$	5,658		$	(3,114	)	$	(42,141	)
Other comprehensive loss before reclassifications, net of tax		—			(1,466	)		—			(1,466	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		146			—			180			326
Other comprehensive earnings (loss), net of tax		146			(1,466	)		180			(1,140	)
Balance at end of period	$	(44,539	)	$	4,192		$	(2,934	)	$	(43,281	)
	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	)

	(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, 2014
Balance at beginning of period	$	(44,549	)	$	3,902		$	(3,467	)	$	(44,114	)
Other comprehensive (loss ) earnings before reclassifications, net of tax		(431	)		290			—			(141	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		441			—			533			974
Other comprehensive earnings, net of tax		10			290			533			833
Balance at end of period	$	(44,539	)	$	4,192		$	(2,934	)	$	(43,281	)
	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	)

The other comprehensive loss before reclassifications for pension and postretirement benefit plans is net of tax of $280,000 and $1,514,000 for the nine months ended September 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 September 30, 2014
Balance at beginning of period	$	29,287		$	2,039		$	31,326
Tax effect of other comprehensive earnings		(96	)		(120	)		(216	)
Balance at end of period	$	29,191		$	1,919		$	31,110
	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
	Nine Months Ended September 30, 2014
Balance at beginning of period	$	29,198		$	2,269		$	31,467
Tax effect of other comprehensive earnings		(7	)		(350	)		(357	)
Balance at end of period	$	29,191		$	1,919		$	31,110
	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

Reclassifications out of accumulated other comprehensive loss are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Affected line items in
	2014			2013			2014			2013			the consolidated financial statements
	(Dollars in Thousands)
Pension and postretirement benefit plans Settlement expense	$	—		$	729		$	—		$	729
Amortization of:
Prior service credit		(703	)		(702	)		(2,107	)		(2,104	)
Actuarial loss		945			3,926			2,835			11,779
		242			3,953			728			10,404		Cost of sales; Selling, general & administrative expenses
Tax effect		(96	)		(1,566	)		(287	)		(4,119	)	Deferred income taxes
	$	146		$	2,387		$	441		$	6,285
Unamortized value of terminated forward starting interest rate swap
Additional interest expense	$	300		$	279		$	883		$	823		Interest expense
Tax effect		(120	)		(111	)		(350	)		(326	)	Deferred income taxes
	$	180		$	168		$	533		$	497

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 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 nine months ended September 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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(Dollars in Thousands)
Net earnings from continuing operations attributable to Martin Marietta	$	53,812		$	72,107		$	91,786		$	85,758
Less: Distributed and undistributed earnings attributable to unvested awards		213			265			372			374
Basic and diluted net earnings available to common shareholders from continuing operations attributable to Martin Marietta		53,599			71,842			91,414			85,384
Basic and diluted net loss available to common shareholders from discontinued operations		(69	)		(271	)		(140	)		(454	)
Basic and diluted net earnings available to common shareholders attributable to Martin Marietta	$	53,530		$	71,571		$	91,274		$	84,930
Basic weighted-average common shares outstanding		67,086			46,244			53,342			46,134
Effect of dilutive employee and director awards		409			105			217			127
Diluted weighted-average common shares outstanding		67,495			46,349			53,559			46,261