Martin Marietta Materials, Inc.
Table of Contents

 
 
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
For the quarterly period ended June 30, 2007
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
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   (I.R.S. Employer Identification Number)
incorporation or organization)    
     
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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ            Accelerated filer o            Non-accelerated filer o
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 July 31, 2007
     
Common Stock, $0.01 par value   41,796,336
 
 

 


 

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
         
    Page  
Part I. Financial Information:
       
 
       
       
 
       
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 Exhibit 10.07
 Exhibit 31.01
 Exhibit 31.02
 Exhibit 32.01
 Exhibit 32.02
Page 2 of 39

 


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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
Item 1. Financial Statements.
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                         
    June 30,     December 31,     June 30,  
    2007     2006     2006  
    (Unaudited)     (Audited)     (Unaudited)  
    (Dollars in Thousands, Except Per Share Data)  
ASSETS
                       
Current Assets:
                       
Cash and cash equivalents
  $ 30,890     $ 32,282     $ 20,386  
Accounts receivable, net
    296,644       242,399       292,559  
Inventories, net
    297,800       256,287       243,714  
Current portion of notes receivable, net
    1,818       2,521       2,494  
Current deferred income tax benefits
    38,942       25,317       16,906  
Other current assets
    25,189       33,548       31,708  
 
                 
Total Current Assets
    691,283       592,354       607,767  
 
                 
 
                       
Property, plant and equipment
    2,846,337       2,739,327       2,641,697  
Allowances for depreciation, depletion and amortization
    (1,498,897 )     (1,443,836 )     (1,385,697 )
 
                 
Net property, plant and equipment
    1,347,440       1,295,491       1,256,000  
 
                       
Goodwill
    574,667       570,538       570,336  
Other intangibles, net
    10,307       10,948       16,846  
Noncurrent notes receivable
    8,812       10,355       10,836  
Other noncurrent assets
    35,218       26,735       40,231  
 
                 
 
                       
Total Assets
  $ 2,667,727     $ 2,506,421     $ 2,502,016  
 
                 
 
                       
LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
Current Liabilities:
                       
Bank overdraft
  $ 4,071     $ 8,390     $ 15,324  
Accounts payable
    92,351       85,237       99,526  
Accrued salaries, benefits and payroll taxes
    19,153       25,010       20,664  
Pension and postretirement benefits
    5,265       6,100       6,268  
Accrued insurance and other taxes
    35,285       32,297       43,442  
Income taxes
    36,034             24,088  
Current maturities of long-term debt and commercial paper
    127,068       125,956       13,989  
Other current liabilities
    34,144       32,082       27,275  
 
                 
Total Current Liabilities
    353,371       315,072       250,576  
 
                       
Long-term debt
    1,051,527       579,308       705,359  
Pension, postretirement and postemployment benefits
    109,418       106,413       97,056  
Noncurrent deferred income taxes and reserves for uncertain tax positions
    160,168       159,094       143,678  
Other noncurrent liabilities
    88,906       92,562       86,062  
 
                 
Total Liabilities
    1,763,390       1,252,449       1,282,731  
 
                 
 
                       
Shareholders’ Equity:
                       
Common stock, par value $0.01 per share
    417       448       453  
Preferred stock, par value $0.01 per share
                 
Additional paid-in capital
    72,195       147,491       205,529  
Accumulated other comprehensive loss
    (29,574 )     (36,051 )     (15,325 )
Retained earnings
    861,299       1,142,084       1,028,628  
 
                 
Total Shareholders’ Equity
    904,337       1,253,972       1,219,285  
 
                 
 
                       
Total Liabilities and Shareholders’ Equity
  $ 2,667,727     $ 2,506,421     $ 2,502,016  
 
                 
See accompanying condensed notes to consolidated financial statements.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
    (In Thousands, Except Per Share Data)  
    (Unaudited)  
Net Sales
  $ 534,622     $ 516,759     $ 948,634     $ 939,595  
Freight and delivery revenues
    60,479       70,274       108,174       129,807  
 
                       
Total revenues
    595,101       587,033       1,056,808       1,069,402  
 
                       
 
                               
Cost of sales
    356,600       363,619       676,980       701,825  
Freight and delivery costs
    60,479       70,274       108,174       129,807  
 
                       
Total cost of revenues
    417,079       433,893       785,154       831,632  
 
                       
 
                               
Gross Profit
    178,022       153,140       271,654       237,770  
 
Selling, general & administrative expenses
    44,309       37,148       82,582       73,309  
Research and development
    186       140       389       304  
Other operating (income) and expenses, net
    (3,068 )     (3,592 )     (5,583 )     (7,230 )
 
                       
Earnings from Operations
    136,595       119,444       194,266       171,387  
 
                               
Interest expense
    16,702       9,708       27,902       19,684  
Other nonoperating (income) and expenses, net
    (1,160 )     (306 )     (3,841 )     (2,402 )
 
                       
Earnings from continuing operations before income tax expense
    121,053       110,042       170,205       154,105  
Income tax expense
    38,436       34,155       55,044       48,096  
 
                       
 
                               
Earnings from continuing operations
    82,617       75,887       115,161       106,009  
Gain (Loss) on discontinued operations, net of related tax expense of $342, $125, $557 and $550 respectively
    335       (97 )     781       787  
 
                       
Net Earnings
  $ 82,952     $ 75,790     $ 115,942     $ 106,796  
 
                       
 
                               
Net Earnings Per Common Share:
                               
Basic from continuing operations
  $ 1.94     $ 1.66     $ 2.65     $ 2.32  
Discontinued operations
    0.01             0.02       0.02  
 
                       
 
  $ 1.95     $ 1.66     $ 2.67     $ 2.34  
 
                       
 
                               
Diluted from continuing operations
  $ 1.91     $ 1.63     $ 2.60     $ 2.27  
Discontinued operations
    0.01             0.02       0.02  
 
                       
 
  $ 1.92     $ 1.63     $ 2.62     $ 2.29  
 
                       
 
                               
Cash Dividends Per Common Share
  $ 0.275     $ 0.23     $ 0.55     $ 0.46  
 
                       
 
                               
Reconciliation of denominators for basic and diluted earnings per share computations:
                               
Basic weighted average number of common shares
    42,458       45,663       43,498       45,706  
Effect of dilutive employee and director awards
    683       960       723       998  
 
                       
Diluted weighted average number of common shares and assumed conversions
    43,141       46,623       44,221       46,704  
 
                       
See accompanying condensed notes to consolidated financial statements.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Six Months Ended  
    June 30,  
    2007     2006  
    (Dollars in Thousands)  
    (Unaudited)  
Net earnings
  $ 115,942     $ 106,796  
Adjustments to reconcile net earnings to cash provided by operating activities:
               
Depreciation, depletion and amortization
    73,407       66,622  
Stock-based compensation expense
    13,013       6,065  
Gains on divestitures and sales of assets
    (3,258 )     (5,142 )
Deferred income taxes
    2,612       (4,994 )
Excess tax benefits from stock-based compensation transactions
    (17,659 )     (9,375 )
Other items, net
    (1,516 )     (2,649 )
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
               
Accounts receivable, net
    (54,671 )     (67,547 )
Inventories, net
    (42,340 )     (21,065 )
Accounts payable
    7,114       6,080  
Other assets and liabilities, net
    47,362       39,088  
 
           
 
               
Net cash provided by operating activities
    140,006       113,879  
 
           
 
               
Investing activities:
               
Additions to property, plant and equipment
    (114,984 )     (157,699 )
Acquisitions, net
    (12,117 )     (2,939 )
Proceeds from divestitures and sales of assets
    7,151       22,613  
Proceeds from sale of investments
          25,000  
Railcar construction advances
          (32,077 )
Repayments of railcar construction advances
          32,077  
 
           
 
               
Net cash used for investing activities
    (119,950 )     (113,025 )
 
           
 
               
Financing activities:
               
Net borrowings (repayments) of long-term debt
    471,625       (415 )
Net (repayments) borrowings on commercial paper and line of credit
    (537 )     13,539  
Debt issuance costs
    (807 )      
Change in bank overdraft
    (4,319 )     8,034  
Payments on capital lease obligations
    (87 )     (69 )
Dividends paid
    (24,343 )     (21,251 )
Repurchases of common stock
    (493,552 )     (83,180 )
Issuances of common stock
    12,913       16,754  
Excess tax benefits from stock-based compensation transactions
    17,659       9,375  
 
           
 
               
Net cash used for financing activities
    (21,448 )     (57,213 )
 
           
 
               
Net decrease in cash and cash equivalents
    (1,392 )     (56,359 )
Cash and cash equivalents, beginning of period
    32,282       76,745  
 
           
 
               
Cash and cash equivalents, end of period
  $ 30,890     $ 20,386  
 
           
 
               
Noncash investing and financing activities:
               
Issuance of notes payable for acquisition of land
  $ 3,252     $  
Repurchases of common stock to be settled
  $ 1,608     $  
Supplemental disclosures of cash flow information:
               
Cash paid for interest
  $ 25,375     $ 23,596  
Cash payments for income taxes
  $ 1,906     $ 12,233  
See accompanying condensed notes to consolidated financial statements.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
                                                 
    Shares of                                     Total  
    Common     Common     Additional     Accumulated Other     Retained     Shareholders’  
(in thousands)   Stock     Stock     Paid-in-Capital     Comprehensive Loss     Earnings     Equity  
 
Balance at December 31, 2006
    44,851     $ 448     $ 147,491     $ (36,051 )   $ 1,142,084     $ 1,253,972  
Increase in reserves for uncertain tax positions for FIN 48 adoption
                            (1,407 )     (1,407 )
 
                                               
Net earnings
                            115,942       115,942  
Amortization of unrecognized actuarial losses, prior service costs and transition assets related to pension and postretirement benefits, net of tax
                      1,137             1,137  
Foreign currency translation gain, net of tax
                      1,995             1,995  
Change in fair value of forward starting interest rate swap agreements, net of tax
                      3,345             3,345  
 
                                             
Comprehensive earnings
                                            122,419  
 
                                               
Dividends declared
                            (24,343 )     (24,343 )
Issuances of common stock for stock award plans
    526       5       35,838                   35,843  
Repurchases of common stock (1)
    (3,585 )     (36 )     (124,147 )           (370,977 )     (495,160 )
Stock-based compensation expense
                13,013                   13,013  
     
Balance at June 30, 2007
    41,792     $ 417     $ 72,195     $ (29,574 )   $ 861,299     $ 904,337  
     
 
(1)  
Repurchases of common stock in excess of the value of additional paid-in-capital were recorded against retained earnings. Additional paid-in-capital at June 30, 2007 represents the pool of excess tax benefits, the expensed portion of restricted stock awards and incentive stock awards, and unissued shares of common stock earned as compensation but deferred by the Corporation’s Board of Directors.
See accompanying condensed notes to consolidated financial statements.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
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, 2006, filed with the Securities and Exchange Commission on February 28, 2007. 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 for the interim periods. The results of operations for the six months ended June 30, 2007 are not indicative of the results expected for the full year.
Retirement Plans and Postretirement Benefits
On December 31, 2006, the Corporation adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FAS 87, 88, 106 and 132(R) (“FAS 158”) prospectively. In connection with the adoption, the Corporation increased accumulated other comprehensive loss by $20,418,000, net of tax, at December 31, 2006 for the net unrecognized actuarial losses, unrecognized prior service costs and unrecognized transition obligations remaining from the initial adoption of FAS 87 and FAS 106. During the six months ended June 30, 2007, $1,137,000, net of tax, of these unrecognized amounts was recognized as a component of net periodic benefit cost pursuant to the Corporation’s historical accounting policy for amortizing such amounts.
Uncertain Tax Positions
Effective January 1, 2007, the Corporation adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FAS 109 (“FIN 48”). FIN 48 requires the recognition of a tax benefit when it is “more-likely-than-not,” based on the technical merits, that the position would be sustained upon examination by a taxing authority. The amount to be recognized should be measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Significant Accounting Policies (continued)
Uncertain Tax Positions (continued)
In connection with the adoption of FIN 48, the Corporation increased its reserves for uncertain tax positions and reduced retained earnings at January 1, 2007 by $1,407,000, primarily as a result of providing interest accruals on uncertain temporary tax positions related to temporary or timing differences.
The adoption of FIN 48 affected the Corporation’s results of operations as follows:
                 
    Three Months Ended   Six Months Ended
    June 30, 2007   June 30, 2007
Increased income tax expense and decreased net earnings by:
  $ 539,000     $ 1,431,000  
Decreased basic earnings per share by:
  $ 0.01     $ 0.03  
Decreased diluted earnings per share by:
  $ 0.01     $ 0.03  
At January 1, 2007, the total amount of gross unrecognized tax benefits, excluding interest, was $29,248,000. Unrecognized tax benefits of $10,577,000, net of federal tax benefits, related to interest accruals and permanent income tax differences would favorably affect the Corporation’s effective tax rate if recognized. There have been no significant changes to these amounts during the six months ended June 30, 2007.
The Corporation anticipates that it is reasonably possible that the total amounts of unrecognized tax benefits may significantly change within the succeeding twelve months as a result of the expiration of the federal statute of limitations for examination of the 2003 tax year and the settlement of the Internal Revenue Service audits for the 2004 and 2005 tax years. The Corporation estimates that these events could result in a reasonably possible change in unrecognized tax benefits ranging from $8,278,000 to $27,772,000.
The Corporation records interest accrued in relation to unrecognized tax benefits as income tax expense and penalties, if incurred, are recorded as operating expenses in the consolidated statement of earnings. Accrued interest of $6,081,000 was recorded as a current FIN 48 liability in the Corporation’s consolidated balance sheet at June 30, 2007.
The Corporation’s open tax years that are subject to examination are 2003 through 2006. The Internal Revenue Service is currently auditing the Corporation’s consolidated federal income tax returns for the years ended December 31, 2005 and 2004.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Significant Accounting Policies (continued)
Comprehensive Earnings
Comprehensive earnings for the three and six months ended June 30, 2007 were $88,601,000 and $122,419,000, respectively, and consisted of net earnings, foreign currency translation adjustments, changes in the fair value of forward starting interest rate swap agreements and the amortization of unrecognized amounts related to pension and postretirement benefits. For the three and six month periods ended June 30, 2006, comprehensive earnings did not differ from net earnings.
2. Divestitures and Discontinued Operations
In 2007, the Corporation disposed of or permanently shut down certain underperforming operations in the following markets:
     
Reportable Segment
 
Markets
Mideast Group
  West Virginia
West Group
  Iowa, Kansas and New Mexico
These divestitures 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 on the consolidated statements of earnings.
The discontinued operations included the following net sales, pretax gain or loss on operations, pretax gain on disposals, income tax expense and overall net earnings or loss (dollars in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
Net sales
  $ 183     $ 1,654     $ 703     $ 3,324  
 
                       
 
                               
Pretax gain (loss) on operations
  $ 46     $ 28     $ (253 )   $ (884 )
Pretax gain on disposals
    631             1,591       2,221  
 
                       
Pretax gain
    677       28       1,338       1,337  
Income tax expense
    342       125       557       550  
 
                       
Net earnings (loss)
  $ 335     $ (97 )   $ 781     $ 787  
 
                       
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Inventories
                         
    June 30,     December 31,     June 30,  
    2007     2006     2006  
    (Dollars in Thousands)  
Finished products
  $ 250,937     $ 213,302     $ 199,529  
Products in process and raw materials
    20,461       19,271       18,195  
Supplies and expendable parts
    41,541       37,935       37,845  
 
                 
 
    312,939       270,508       255,569  
Less allowances
    (15,139 )     (14,221 )     (11,855 )
 
                 
Total
  $ 297,800     $ 256,287     $ 243,714  
 
                 
4. Goodwill
The following table shows changes in goodwill, all of which relate to the Aggregates business, by reportable segment and in total (dollars in thousands):
                                 
    Three Months Ended June 30, 2007
    Mideast   Southeast   West    
    Group   Group   Group   Total
     
Balance at beginning of period
  $ 106,757     $ 60,494     $ 408,419     $ 575,670  
Divestitures
                (1,003 )     (1,003 )
     
Balance at end of period
  $ 106,757     $ 60,494     $ 407,416     $ 574,667  
     
                                 
    Six Months Ended June 30, 2007
    Mideast   Southeast   West    
    Group   Group   Group   Total
     
Balance at beginning of period
  $ 106,757     $ 60,494     $ 403,287     $ 570,538  
Acquisitions
                5,132       5,132  
Divestitures
                (1,003 )     (1,003 )
     
Balance at end of period
  $ 106,757     $ 60,494     $ 407,416     $ 574,667  
     
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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Long-Term Debt
                         
    June 30,     December 31,     June 30,  
    2007     2006     2006  
    (Dollars in Thousands)  
6.875% Notes, due 2011
  $ 249,844     $ 249,829     $ 249,814  
5.875% Notes, due 2008
    203,157       204,224       205,265  
6.9% Notes, due 2007
    124,999       124,995       124,992  
7% Debentures, due 2025
    124,321       124,312       124,304  
6.25% Senior Notes, due 2037
    247,782              
Floating Rate Senior Notes, due 2010
    224,256              
Commercial paper and line of credit, interest rates ranging from 5.35% to 5.83%
          537       13,539  
Acquisition notes, interest rates ranging from 2.11% to 8.00%
    684       702       769  
Other notes
    3,552       665       665  
 
                 
 
    1,178,595       705,264       719,348  
Less current maturities
    (127,068 )     (125,956 )     (13,989 )
 
                 
Total
  $ 1,051,527     $ 579,308     $ 705,359  
 
                 
On April 25, 2007, the Corporation issued $250,000,000 of 6.25% Senior Notes due in 2037 and $225,000,000 of Floating Rate Senior Notes due in 2010 (collectively, the “Senior Notes”). The 6.25% Senior Notes may be redeemed in whole or in part prior to their maturity at a “make whole” redemption price. The Floating Rate Senior Notes bear interest at a rate equal to the three-month LIBOR (5.355% at June 30, 2007) plus 0.15% and may not be redeemed prior to maturity. Upon a change of control repurchase event, the Corporation will be required to make an offer to repurchase all outstanding Senior Notes at a price in cash equal to 101% of the principal amount of the Senior Notes, plus any accrued and unpaid interest to, but not including, the purchase date.
The carrying values of the Notes due in 2008 included $3,341,000, $4,469,000 and $5,570,000 at June 30, 2007, December 31, 2006 and June 30, 2006, respectively, for the unamortized value of terminated interest rate swaps.
The Corporation entered into two forward starting interest rate swap agreements in September 2006 related to $150,000,000 of the Corporation’s anticipated refinancing of its $200,000,000 5.875% Notes due in 2008 (the “Swap Agreements”). At June 30, 2007, the fair value of the Swap Agreements was an asset of $3,583,000 and was included in other noncurrent assets in the Corporation’s consolidated balance sheet. Other comprehensive earnings/loss for the three and six months ended June 30, 2007 included a gain of $3,143,000 and $3,345,000, respectively, net of tax, for the change in fair value of the Swap Agreements. At December 31, 2006, the fair value of the Swap Agreements was a liability of $1,951,000.
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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Long-Term Debt (continued)
No commercial paper borrowings were outstanding at June 30, 2007 and December 31, 2006. Borrowings of $10,000,000 were outstanding under the commercial paper program at June 30, 2006.
At December 31, 2006 and June 30, 2006, borrowings of $537,000 and $3,539,000, respectively, were outstanding under a $10,000,000 line of credit. No such borrowings were outstanding at June 30, 2007.
On April 17, 2007, the Corporation entered into an amendment of its $250,000,000 five-year revolving credit agreement, which modified the leverage ratio covenant in the agreement. As modified, 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 to not exceed 2.75 to 1.00 as of the end of any fiscal quarter. The covenant has certain exceptions related to qualifying acquisitions, as defined.
6. Income Taxes
                 
    Six Months Ended June 30,  
    2007     2006  
Estimated effective income tax rate:
               
Continuing operations
    32.3 %     31.2 %
 
           
Discontinued operations
    41.6 %     41.1 %
 
           
Overall
    32.4 %     31.3 %
 
           
The Corporation’s effective tax rate reflects the effect of 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, the domestic production deduction and the tax effect of nondeductibility of goodwill related to asset sales. 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 tax rate.
The increase in the Corporation’s effective tax rate for continuing operations for the six months ended June 30, 2007 as compared with the prior-year period results from the discrete tax impact of stock option exercises during the period, tax on certain foreign source income and the effect of applying FIN 48. The effective income tax rate increased 75 basis points during the first six months of 2007 as a result of the evaluation of the Corporation’s tax positions in accordance with FIN 48.
The change in the year-to-date estimated overall effective income tax rate during the second quarter of 2007, when compared with the year-to-date effective tax rate as of March 31, 2007, increased net earnings for the six months ended June 30, 2007 by $2,400,000, or $0.05 per diluted share.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. Pension and Postretirement Benefits
The following presents the estimated components of the recorded net periodic benefit cost for pension and postretirement benefits for the three months ended June 30 (dollars in thousands):
                                 
    Pension     Postretirement Benefits  
    2007     2006     2007     2006  
Service cost
  $ 3,478     $ 3,072     $ 124     $ 134  
Interest cost
    5,553       4,540       544       652  
Expected return on assets
    (6,322 )     (4,904 )            
Amortization of:
                               
Prior service cost (credit)
    191       219       (251 )     (340 )
Actuarial loss (gain)
    1,258       650       (19 )     (98 )
 
                       
Total net periodic benefit cost
  $ 4,158     $ 3,577     $ 398     $ 348  
 
                       
The following presents the estimated components of the recorded net periodic benefit cost for pension and postretirement benefits for the six months ended June 30 (dollars in thousands):
                                 
    Pension     Postretirement Benefits  
    2007     2006     2007     2006  
Service cost
  $ 6,182     $ 6,104     $ 320     $ 276  
Interest cost
    9,870       9,054       1,401       1,339  
Expected return on assets
    (11,237 )     (9,810 )            
Amortization of:
                               
Prior service cost (credit)
    339       371       (647 )     (648 )
Actuarial loss (gain)
    2,237       1,430       (48 )     (119 )
 
                       
Total net periodic benefit cost
  $ 7,391     $ 7,149     $ 1,026     $ 848  
 
                       
8. Contingencies
In the opinion of management and counsel, it is unlikely that the outcome of 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 or its financial position.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Business Segments
In the fourth quarter of 2006, the Corporation reorganized the operations and management of its Aggregates business, which resulted in a change to its reportable segments. Currently, 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 chemicals, dolomitic lime and targeted activity in structural composites.
The following tables display selected financial data for the Corporation’s reportable business segments (dollars in thousands). 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. Prior year information has been reclassified to conform to the presentation of the Corporation’s current reportable segments.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
Total revenues:
                               
Mideast Group
  $ 183,302     $ 167,148     $ 307,006     $ 294,065  
Southeast Group
    162,022       170,316       311,310       319,699  
West Group
    206,302       209,097       352,633       369,872  
 
                       
Total Aggregates Business
    551,626       546,561       970,949       983,636  
Specialty Products
    43,475       40,472       85,859       85,766  
 
                       
Total
  $ 595,101     $ 587,033     $ 1,056,808     $ 1,069,402  
 
                       
 
                               
Net sales:
                               
Mideast Group
  $ 170,903     $ 153,545     $ 288,106     $ 270,828  
Southeast Group
    143,368       144,438       276,681       270,601  
West Group
    180,627       182,348       305,591       320,329  
 
                       
Total Aggregates Business
    494,898       480,331       870,378       861,758  
Specialty Products
    39,724       36,428       78,256       77,837  
 
                       
Total
  $ 534,622     $ 516,759     $ 948,634     $ 939,595  
 
                       
 
                               
Earnings (Loss) from operations:
                               
Mideast Group
  $ 73,272     $ 56,531     $ 108,003     $ 85,795  
Southeast Group
    33,816       27,596       60,815       43,251  
West Group
    31,888       34,457       30,351       40,673  
 
                       
Total Aggregates Business
    138,976       118,584       199,169       169,719  
Specialty Products
    8,114       7,065       15,491       13,989  
Corporate
    (10,495 )     (6,205 )     (20,394 )     (12,321 )
 
                       
Total
  $ 136,595     $ 119,444     $ 194,266     $ 171,387  
 
                       
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
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 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 306 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 buildings. The Specialty Products segment produces magnesia-based chemicals products used in industrial, agricultural and environmental applications; dolomitic lime sold primarily to customers in the steel industry; and structural composite products.
CRITICAL ACCOUNTING POLICIES The Corporation outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007.
Prior to the three months ended June 30, 2007, the Corporation valued its finished goods inventories using standards that were updated annually during the fourth quarter. During the three months ended June 30, 2007, the Corporation recorded a $9.0 million inventory valuation adjustment to reflect increasing production costs and transportation costs to distribution yards. The adjustment, which increased the carrying value of inventories and reduced cost of sales, increased quarterly net earnings by $5.5 million, or $0.13 per diluted share.
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.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
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 and six months ended June 30, 2007 and 2006 in accordance with GAAP and reconciliations of the ratios as percentages of total revenues to percentages of net sales (dollars in thousands):
Gross Margin in Accordance with GAAP
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
Gross profit
  $ 178,022     $ 153,140     $ 271,654     $ 237,770  
 
                       
 
                               
Total revenues
  $ 595,101     $ 587,033     $ 1,056,808     $ 1,069,402  
 
                       
 
                               
Gross margin
    29.9 %     26.1 %     25.7 %     22.2 %
 
                       
Gross Margin Excluding Freight and Delivery Revenues
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
Gross profit
  $ 178,022     $ 153,140     $ 271,654     $ 237,770  
 
                       
 
                               
Total revenues
  $ 595,101     $ 587,033     $ 1,056,808     $ 1,069,402  
Less: Freight and delivery revenues
    (60,479 )     (70,274 )     (108,174 )     (129,807 )
 
                       
Net sales
  $ 534,622     $ 516,759     $ 948,634     $ 939,595  
 
                       
 
                               
Gross margin excluding freight and delivery revenues
    33.3 %     29.6 %     28.6 %     25.3 %
 
                       

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
Operating Margin in Accordance with GAAP
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
Earnings from operations
  $ 136,595     $ 119,444     $ 194,266     $ 171,387  
 
                       
 
                               
Total revenues
  $ 595,101     $ 587,033     $ 1,056,808     $ 1,069,402  
 
                       
 
                               
Operating margin
    23.0 %     20.3 %     18.4 %     16.0 %
 
                       
Operating Margin Excluding Freight and Delivery Revenues
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2006     2007     2006  
Earnings from operations
  $ 136,595     $ 119,444     $ 194,266     $ 171,387  
 
                       
 
                               
Total revenues
  $ 595,101     $ 587,033     $ 1,056,808     $ 1,069,402  
Less: Freight and delivery revenues
    (60,479 )     (70,274 )     (108,174 )     (129,807 )
 
                       
Net sales
  $ 534,622     $ 516,759     $ 948,634     $ 939,595  
 
                       
 
                               
Operating margin excluding freight and delivery revenues
    25.5 %     23.1 %     20.5 %     18.2 %
 
                       
Quarter Ended June 30
Notable items for the quarter ended June 30, 2007 included:
  Earnings per diluted share of $1.92, up 18% from the prior-year quarter
 
  Net sales of $534.6 million, up 3% compared with the prior-year quarter
 
  Consolidated operating margin excluding freight and delivery revenues of 25.5%, up 240 basis points over prior-year quarter
 
  Heritage aggregates pricing up 13%; heritage volume decreased 9%
 
  Heritage aggregates product line gross margin excluding freight and delivery revenues up 450 basis points
 
  Specialty Products earnings from operations up 15%
 
  Repurchased 1,250,000 shares of common stock at an average price of $154.54 per share

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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
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 June 30, 2007 and 2006. 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 $0.2 million and $0.1 million for the quarters ended June 30, 2007 and 2006, respectively. Consolidated other operating income and expenses, net, was income of $3.1 million and $3.6 million for the quarters ended June 30, 2007 and 2006, respectively.
                                 
    Three Months Ended June 30,  
    2007     2006  
            % of           % of  
    Amount     Net Sales     Amount     Net Sales  
    (Dollars in Thousands)  
Net sales:
                               
Mideast Group
  $ 170,903             $ 153,545          
Southeast Group
    143,368               144,438          
West Group
    180,627               182,348          
 
                           
Total Aggregates Business
    494,898       100.0       480,331       100.0  
Specialty Products
    39,724       100.0       36,428       100.0  
 
                       
Total
  $ 534,622       100.0     $ 516,759       100.0  
 
                       
 
                               
Gross profit:
                               
Mideast Group
  $ 83,125             $ 64,642          
Southeast Group
    40,498               33,698          
West Group
    41,871               44,248          
 
                           
Total Aggregates Business
    165,494       33.4       142,588       29.7  
Specialty Products
    10,946       27.6       9,843       27.0  
Corporate
    1,582             709        
 
                       
Total
  $ 178,022       33.3     $ 153,140       29.6  
 
                       
 
                               
Selling, general & administrative expenses:
                               
Mideast Group
  $ 10,646             $ 10,273          
Southeast Group
    7,694               6,958          
West Group
    11,528               11,182          
 
                           
Total Aggregates Business
    29,868       6.0       28,413       5.9  
Specialty Products
    2,653       6.7       2,697       7.4  
Corporate
    11,788             6,038        
 
                       
Total
  $ 44,309       8.3     $ 37,148       7.2  
 
                       

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Table of Contents

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
                                 
    Three Months Ended June 30,  
    2007     2006  
            % of           % of  
    Amount     Net Sales     Amount     Net Sales  
    (Dollars in Thousands)  
Earnings (Loss) from operations:
                               
Mideast Group
  $ 73,272             $ 56,531          
Southeast Group
    33,816               27,596          
West Group
    31,888               34,457          
 
                           
Total Aggregates Business
    138,976       28.1       118,584       24.7  
Specialty Products
    8,114       20.4       7,065       19.4  
Corporate
    (10,495 )           (6,205 )      
 
                       
Total
  $ 136,595       25.5     $ 119,444       23.1  
 
                       
Net sales for the Aggregates business for the 2007 second quarter were $494.9 million, a 3.0% increase over 2006 second-quarter sales of $480.3 million. Aggregates pricing at heritage locations was up 13.3%, while volume decreased 9.0%. Inclusive of acquisitions and divestitures, aggregates pricing for the quarter increased 13.1% and aggregates product line volume decreased 9.0%. Pricing improvements continued to hold in the Aggregates business in spite of greater than expected volume declines. During the quarter, the level of residential construction spending in the United States reached its lowest point since April 2004 as reported by the U.S. Census Bureau. Although residential construction contributed only 17% of the Corporation’s aggregates product line shipments in 2006, sales into this end-use sector have diminished in virtually every market. In addition, commercial construction activity in the South Central United States’ markets, notably, Alabama, Mississippi and Tennessee, is weak.
Weather also plagued performance during the second quarter. The West Group, particularly Texas, southern Oklahoma and Kansas, experienced near historic levels of rainfall and flooding which affected both shipments and operations. Volumes declined 9.4% in these areas and negatively contributed to financial performance during the quarter. Management does not believe that any significant construction projects have been permanently delayed and expects the volume for commercial and infrastructure to return to expected levels when weather conditions normalize.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
The following tables present volume and pricing data and shipments data for heritage aggregates operations, acquisitions and divested operations. Heritage aggregates operations exclude acquisitions that were not included in prior-year operations for the comparable period and divestitures.
                 
    Three Months Ended
    June 30, 2007
Volume/Pricing Variance (1)   Volume   Pricing
Heritage Aggregates Product Line (2):
               
Mideast Group
    (3.7 %)     15.7 %
Southeast Group
    (14.2 %)     15.7 %
West Group
    (9.4 %)     8.9 %
Heritage Aggregates Operations
    (9.0 %)     13.3 %
Aggregates Business (3)
    (9.0 %)     13.1 %
                 
    Three Months Ended  
    June 30,  
    2007     2006  
Shipments (tons in thousands)
               
Heritage Aggregates Product Line (2):
               
Mideast Group
    17,016       17,676  
Southeast Group
    13,774       16,049  
West Group
    19,131       21,115  
 
           
Heritage Aggregates Operations
    49,921       54,840  
Acquisitions
    99        
Divestitures(4)
    22       162  
 
           
Aggregates Business (3)
    50,042       55,002  
 
           
 
(1)  
Volume/pricing variances reflect the percentage increase/(decrease) from the comparable period in the prior year.
 
(2)   Heritage Aggregates product line excludes acquisitions that have not been included in prior-year operations for the comparable period and divestitures.
 
(3)   Aggregates Business includes all acquisitions from the date of acquisition and divestitures through the date of disposal.
 
(4)   Divestitures include the tons related to divested operations up to the date of divestiture.
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. Furthermore, excessive rainfall can also jeopardize shipments, production and profitability. Because of the potentially significant impact of weather on the Corporation’s operations, second quarter results are not indicative of expected performance for the year.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
Second-quarter results for the Specialty Products segment, which includes magnesia chemicals, dolomitic lime and targeted activity in structural composites, were positive. Specialty Products’ net sales were $39.7 million for the second quarter 2007 compared with $36.4 million for the prior-year period. Earnings from operations for the quarter were $8.1 million compared with $7.1 million in the year-earlier period. Management has established specific quarterly benchmarks for 2007 to evaluate the viability of the remaining components of the structural composites product line.
Selling, general and administrative expenses for the quarter ended June 30, 2007 was $44.3 million versus $37.1 million in the 2006 period. This increase of $7.2 million was primarily related to a $5.3 million increase in performance-based incentive compensation.
Among other items, other operating income and expenses, net, includes gains and losses on the sale of assets; gains and losses related to certain accounts receivable; rental, royalty and services income; and the accretion and depreciation expenses related to Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations. For the second quarter, consolidated other operating income and expenses, net, was income of $3.1 million in 2007 compared with $3.6 million in 2006, primarily as a result of higher gains on the sales of assets in 2006.
During the quarter, the Corporation revised its finished goods inventory valuation standards to match finished goods inventory values with the significant escalation in cost, particularly related to the transportation of material to distribution yards. Historically, the Corporation has updated inventory standards once a year in the fourth quarter. However, given the magnitude of the cost change and since the Corporation’s inventory turns about once a quarter, this revaluation, which increased inventory values by $9.0 million, more closely approximates cost of sales. Management will continue to review its inventory standards on an ongoing basis.
Consolidated interest expense was $16.7 million for the second quarter 2007 as compared with $9.7 million for the prior-year quarter. The increase primarily resulted from the accrual of $4.7 million of interest for the 6.25% Senior Notes and Floating Rate Senior Notes issued in April 2007 and a lower amount of capitalized interest related to major plant expansion and efficiency projects in 2007 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, net equity earnings from nonconsolidated investments and eliminations of minority interests for consolidated non-wholly owned subsidiaries. Consolidated other nonoperating income and expenses, net, for the quarter ended June 30, was income of $1.2 million in 2007 compared with $0.3 million in 2006, primarily as a result of higher interest income in 2007.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
Six Months Ended June 30
Notable items for the six months ended June 30, 2007 included:
  Earnings per diluted share of $2.62, up 14% from the prior-year period
 
  Net sales of $948.6 million, up 1% when compared with the prior-year period
 
  Consolidated operating margin excluding freight and delivery revenues of 20.5%, up 230 basis points over prior-year period
 
  Heritage aggregates pricing up 14%; heritage volume decreased 11%
 
  Heritage aggregates product line gross margin excluding freight and delivery revenues up 400 basis points
 
  Specialty Products earnings from operations up 11%
 
  Repurchased 3,585,000 shares of common stock, nearly 8% of shares outstanding at the beginning of the year, at an average price of $138.12 per share

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
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 six months ended June 30, 2007 and 2006. 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 $0.4 million and $0.3 million for the six months ended June 30, 2007 and 2006, respectively. Consolidated other operating income and expenses, net, was income of $5.6 million and $7.2 million for the six months ended June 30, 2007 and 2006, respectively.
                                 
    Six Months Ended June 30,  
    2007     2006  
            % of           % of  
    Amount     Net Sales     Amount     Net Sales  
    (Dollars in Thousands)  
Net sales:
                               
Mideast Group
  $ 288,106             $ 270,828          
Southeast Group
    276,681               270,601          
West Group
    305,591               320,329          
 
                           
Total Aggregates Business
    870,378       100.0       861,758       100.0  
Specialty Products
    78,256       100.0       77,837       100.0  
 
                       
Total
  $ 948,634       100.0     $ 939,595       100.0  
 
                       
 
                               
Gross profit:
                               
Mideast Group
  $ 127,469             $ 100,853          
Southeast Group
    74,364               55,646          
West Group
    50,317               61,620          
 
                           
Total Aggregates Business
    252,150       29.0       218,119       25.3  
Specialty Products
    21,133       27.0       19,427       25.0  
Corporate
    (1,629 )           224        
 
                       
Total
  $ 271,654       28.6     $ 237,770       25.3  
 
                       
 
                               
Selling, general & administrative expenses:
                               
Mideast Group
  $ 21,088             $ 20,064          
Southeast Group
    15,050               13,735          
West Group
    22,946               22,867          
 
                           
Total Aggregates Business
    59,084       6.8       56,666       6.6  
Specialty Products
    5,341       6.8       5,445       7.0  
Corporate
    18,157             11,198        
 
                       
Total
  $ 82,582       8.7     $ 73,309       7.8  
 
                       

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
                                 
    Six Months Ended June 30,  
    2007     2006  
            % of           % of  
    Amount     Net Sales     Amount     Net Sales  
    (Dollars in Thousands)  
Earnings (Loss) from operations:
                               
Mideast Group
  $ 108,003             $ 85,795          
Southeast Group
    60,815               43,251          
West Group
    30,351               40,673          
 
                           
Total Aggregates Business
    199,169       22.9       169,719       19.7  
Specialty Products
    15,491       19.8       13,989       18.0  
Corporate
    (20,394 )           (12,321 )      
 
                       
Total
  $ 194,266       20.5     $ 171,387       18.2  
 
                       
Net sales for the Aggregates business for the six months ended June 30 were $870.4 million in 2007, a 1.0% increase over 2006 net sales of $861.8 million. Aggregates pricing at heritage locations was up 14.1%, while volume decreased 11.4%. Inclusive of acquisitions and divestitures, aggregates pricing for the six months ended June 30, 2007 increased 14.0% and aggregates product line volume decreased 11.5%. Shipment volumes reflect a significant decline in the residential construction market and inclement weather experienced by the West Group.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
The following tables present volume and pricing data and shipments data for heritage aggregates operations, acquisitions and divested operations. Heritage aggregates operations exclude acquisitions that were not included in prior-year operations for the comparable period and divestitures.
                 
    Six Months Ended
    June 30, 2007
Volume/Pricing Variance (1)   Volume   Pricing
Heritage Aggregates Product Line (2):
               
Mideast Group
    (10.0 %)     18.3 %
Southeast Group
    (12.0 %)     16.3 %
West Group
    (12.1 %)     7.8 %
Heritage Aggregates Operations
    (11.4 %)     14.1 %
Aggregates Business (3)
    (11.5 %)     14.0 %
                 
    Six Months Ended  
    June 30,  
    2007     2006  
Shipments (tons in thousands)
               
Heritage Aggregates Product Line (2):
               
Mideast Group
    27,759       30,854  
Southeast Group
    26,184       29,765  
West Group
    32,201       36,624  
 
           
Heritage Aggregates Operations
    86,144       97,243  
Acquisitions
    103        
Divestitures(4)
    75       348  
 
           
Aggregates Business (3)
    86,322       97,591  
 
           
 
(1)  
Volume/pricing variances reflect the percentage increase/(decrease) from the comparable period in the prior year.
 
(2)  
Heritage Aggregates product line excludes acquisitions that have not been included in prior-year operations for the comparable period and divestitures.
 
(3)  
Aggregates Business includes all acquisitions from the date of acquisition and divestitures through the date of disposal.
 
(4)  
Divestitures include the tons related to divested operations up to the date of divestiture.
Selling, general and administrative expenses for the six months ended June 30, 2007 was $82.6 million versus $73.3 million in the 2006 period. This increase of $9.3 million was primarily related to a $6.9 million increase in performance-based incentive compensation.
For the six months ended June 30, other operating income and expenses, net, was income of $5.6 million in 2007 compared with $7.2 million in 2006, primarily as a result of income from a $2.1 million judgment in favor of the Corporation in a land condemnation and higher gains on the sales of assets in 2006. These were partially offset by a higher gain on receivables in 2007.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
Consolidated interest expense was $27.9 million for the six months ended June 30, 2007 compared with $19.7 million for the prior-year period. The increase resulted from the accrual of $4.7 million of interest for the 6.25% Senior Notes and Floating Rate Senior Notes issued in April 2007 and a lower amount of capitalized interest related to major plant expansion and efficiency projects in 2007 as compared with the prior-year period.
LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities during the six months ended June 30, 2007 was $140.0 million compared with $113.9 million in the comparable period of 2006. Operating cash flow is generally from net earnings, before deducting depreciation, depletion and amortization, offset by working capital requirements. Net cash provided by operating activities for the first six months of 2007 as compared with the year-earlier period reflects higher earnings, a higher accrual for income tax obligations and a lower increase in accounts receivable in 2007 resulting from better collection results, and was partially offset by a higher build up of inventories due to declining shipment volumes and increased tax benefits from stock option exercise activity.
Depreciation, depletion and amortization was as follows (amounts in millions):
                 
    Six Months Ended  
    June 30,  
    2007     2006  
Depreciation
  $ 69.8     $ 62.4  
Depletion
    2.1       2.2  
Amortization
    1.5       2.0  
 
           
 
  $ 73.4     $ 66.6  
 
           
The increase in depreciation expense is primarily due to the completion of several large capital projects, including new plants at the Three Rivers operations in Kentucky and North Troy operations in Oklahoma.
The seasonal nature of the construction aggregates business impacts quarterly operating cash flow when compared with the year. Full year 2006 net cash provided by operating activities was $338.2 million, compared with $113.9 million for the first six months of 2006.
First six months capital expenditures, exclusive of acquisitions, were $115.0 million in 2007 and $157.7 million in 2006. Capital expenditures during the first six months of 2006 included work on several major plant expansion and efficiency projects. Comparable full-year capital expenditures were $266.0 million in 2006. Full-year capital spending is expected to approximate $235.0 million for 2007, including the Hunt Martin joint venture and exclusive of acquisitions. Additionally, in 2007, the Corporation expects to enter into a lease agreement for 50 barges with a total commitment of approximately $24.0 million.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
During the first six months of 2006, the Corporation received repayment of a $12.5 million note receivable related to the divestiture of its Houston asphalt operations. The Corporation continues to have a continuing financial interest in the Houston asphalt market via a supply agreement and therefore continues to include the divested locations in continuing operations.
During 2007, the Corporation continued its common stock repurchase plan through open-market purchases pursuant to authority granted by its Board of Directors. For the quarter ended June 30, 2007, the Corporation repurchased 1,250,000 shares at an aggregate cost of $193.2 million. During the six months ended June 30, the Corporation repurchased 3,585,000 shares at an aggregate cost of $495.2 million in 2007 compared with 914,400 shares at an aggregate cost of $83.2 million in 2006. At June 30, 2007, 646,000 shares of common stock were remaining under the Corporation’s repurchase authorization. The Corporation currently intends to review its share repurchase authorization.
The Corporation’s $125 million 6.9% Notes will mature in August 2007. Management currently intends to refinance the 6.9% Notes using the proceeds from the Corporation’s offering of public debt in April 2007. Those proceeds were utilized on an interim basis to repay short-term commercial paper incurred for common stock repurchases during the first quarter of 2007. Therefore, the Corporation will issue new commercial paper debt upon refinancing the 6.9% Notes.
In September 2006, the Corporation entered into two forward starting interest rate swap agreements (the “Swap Agreements”) related to $150 million of the Corporation’s anticipated refinancing of its $200 million 5.875% Notes due in 2008. The change in fair value of the Swap Agreements, net of income taxes, is recorded directly in shareholders’ equity as other comprehensive earnings/loss. At June 30, 2007, the fair value of the Swap Agreements was an asset of $3.6 million and was included in other noncurrent assets in the Corporation’s consolidated balance sheet. Other comprehensive earnings/loss for the six months ended June 30, 2007 included a gain of $3.3 million, net of tax, for the change in fair value of the Swap Agreements.
On April 17, 2007, the Corporation entered into an amendment of its $250 million five-year revolving credit agreement, which modified the leverage ratio covenant in the agreement. As modified, 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 to not exceed 2.75 to 1.00 as of the end of any fiscal quarter. The covenant has certain exceptions related to qualifying acquisitions, as defined. At June 30, 2007, the Corporation’s ratio of consolidated debt to consolidated EBITDA, as defined, was 2.03.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
On April 25, 2007, the Corporation issued $250 million of 6.25% Senior Notes due in 2037 and $225 million of Floating Rate Senior Notes due in 2010 (collectively, the “Senior Notes”). The 6.25% Senior Notes may be redeemed in whole or in part prior to their maturity at a “make whole” redemption price. The Floating Rate Senior Notes bear interest at a rate equal to the three-month LIBOR plus 0.15% and may not be redeemed prior to maturity. Upon a change of control repurchase event, the Corporation will be required to make an offer to repurchase all outstanding Senior Notes at a price in cash equal to 101% of the principal amount of the Senior Notes, plus any accrued and unpaid interest to, but not including, the purchase date.
The management team and Board of Directors have focused on establishing prudent leverage targets that provide for value creation through strong operational performance, continued investment in internal growth opportunities, financial flexibility to support opportunistic and strategic acquisitions and a return of cash to shareholders through sustainable dividends and share repurchase programs while maintaining a solid investment grade rating. Given these parameters, in the ordinary course of business, the Corporation expects to manage its leverage within a range of 2.0 to 2.5 times consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined by the underlying credit agreement.
Based on prior performance and current expectations, the Corporation’s management believes that cash flows from internally generated funds and its access to capital markets are expected to continue to be sufficient to provide the capital resources necessary to fund the operating needs of its existing businesses, cover debt service requirements, and allow for payment of dividends in 2007.
The Corporation may be required to obtain additional levels of financing in order to fund certain strategic acquisitions, if any such opportunities arise. Currently, the Corporation’s senior unsecured debt is rated “BBB+” by Standard & Poor’s and “Baa1” by Moody’s. The Corporation’s commercial paper obligations are rated “A-2” by Standard & Poor’s and “P-2” by Moody’s. While management believes its credit ratings will remain at an investment-grade level, no assurance can be given that these ratings will remain at those levels.
Contractual Obligations
Upon adoption of FIN 48 at January 1, 2007, the Corporation had gross unrecognized tax benefits, excluding interest, of $29.2 million. The Corporation anticipates settlement of $27.8 million with the taxing authorities in the upcoming twelve months and settlement of $1.4 million in one to three years.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
At June 30, 2007, the Corporation’s contractual obligations related to its Senior Notes issued in April 2007 are as follows (amounts in thousands). Interest on the Floating Rate Senior Notes has been calculated assuming a three-month LIBOR rate equal to the June 30, 2007 rate of 5.355%.
                                                 
    Total   < 1 yr   1-3 yrs.   3-5 yrs.   > 5yrs.        
     
Long-term debt
  $ 475,000     $     $ 225,000     $     $ 250,000          
Interest (off balance sheet)
    505,909       28,011       71,648       46,875       359,375          
     
Total
  $ 980,909     $ 28,011     $ 296,648     $ 46,875     $ 609,375          
     
ACCOUNTING CHANGES As discussed in Note 1 to the Consolidated Financial Statements, effective January 1, 2007, the Corporation adopted FIN 48 and reduced retained earnings by $1.4 million.
TRENDS AND RISKS The Corporation outlined the risks associated with its business in its Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007. Management continues to evaluate its exposure to all operating risks on an ongoing basis.
In July 2007, the state of North Carolina approved the issuance of $300 million of Grant Anticipation Revenue vehicles, or GARVEE bonds, to fund various road projects statewide. The bonds will be repaid with federal money the state expects to receive for highway and interstate projects in future years. Management currently expects construction to begin on these projects in 2008.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
OUTLOOK 2007 Based upon the Corporation’s strong first-half 2007 performance, management continues to have a positive outlook on the remainder of the year. Aggregates product line pricing is expected to increase 11% to 12% for the year, which is higher than earlier guidance. However, aggregates shipments are more difficult to estimate for the balance of the year. Management currently expects volume to decrease 4% to 6% for the year with the degree of decline predicated on a longer-than-expected correction in the residential construction market, in addition to commercial construction weakness in the Mississippi River markets. The Specialty Products segment, which includes magnesia chemicals, dolomitic lime and focused activity in structural composites, is expected to contribute $33 million to $36 million in pretax earnings in 2007 compared with $22 million in 2006. Management expects the magnesia chemicals business to continue to grow and demand for dolomitic lime from the steel industry to be flat or down slightly.
With this backdrop, management currently expects net earnings per diluted share for the third quarter to range from $1.95 to $2.25 and the range for the year is $6.15 to $6.65. In the third quarter, the overall effective tax rate is expected to be below 30%, which will bring the higher rate of the first two quarters in line with management’s 32% expectation for the year.
OTHER MATTERS If you are interested in Martin Marietta Materials, Inc. stock, management recommends that, at a minimum, you read the Corporation’s current Annual Report and Forms 10-K, 10-Q and 8-K reports to the SEC over the past year. The Corporation’s recent proxy statement for the annual meeting of shareholders also contains important information. These and other materials that have been filed with the SEC are accessible through the Corporation’s web site at www.martinmarietta.com http://www.martinmarietta.com and are also available at the SEC’s web site at www.sec.gov. You may also write or call the Corporation’s Corporate Secretary, who will provide copies of such reports.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
Investors are cautioned that all statements in this Quarterly Report that relate to the future involve risks and uncertainties, and are based on assumptions that the Corporation believes in good faith are reasonable but which may be materially different from actual results. Forward-looking statements give the investor our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate only to historical or current facts. They may use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of our forward-looking statements here and in other publications may turn out to be wrong.
Factors that the Corporation currently believes could cause actual results to differ materially from the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, the level and timing of federal and state transportation funding, particularly in North Carolina, one of the Corporation’s largest and most profitable states; levels of construction spending in the markets the Corporation serves; the severity of a continued decline in the residential construction market and the unfavorable weather conditions, particularly Atlantic Ocean hurricane activity; the volatility of fuel costs; continued increases in the cost of repair and supply parts; transportation availability, notably barge availability on the Mississippi River system and the availability of railcars and locomotive power to move trains to supply the Corporation’s Texas and Gulf Coast markets; increased transportation costs, including increases from higher passed-through energy costs and higher volumes of rail and water shipments; continued strength in the steel industry markets served by the Corporation’s dolomitic lime products; successful development and implementation of the structural composite technological process, commercialization of strategic products for specific market segments, and the generation of earnings streams sufficient enough to support the recorded assets of the structural composites product line; the effect of credit concerns on the overall economy; and other risk factors listed from time to time found in the Corporation’s filings with the Securities and Exchange Commission. Other factors besides those listed here may also adversely affect the Corporation and may be material to the Corporation. The Corporation assumes no obligation to update any forward-looking statements.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2007
(Continued)
INVESTOR ACCESS TO COMPANY FILINGS Shareholders may obtain, without charge, a copy of Martin Marietta Materials’ Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2006, by writing to:
Martin Marietta Materials, Inc.
Attn: Corporate Secretary
2710 Wycliff Road
Raleigh, North Carolina 27607-3033
Additionally, Martin Marietta Materials’ Annual Report, press releases and filings with the Securities and Exchange Commission, including Forms 10-K, 10-Q, 8-K and 11-K, can generally be accessed via the Corporation’s web site. Filings with the Securities and Exchange Commission accessed via the web site are available through a link with the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system. Accordingly, access to such filings is available upon EDGAR placing the related document in its database. Investor relations contact information is as follows:
Telephone: (919) 783-4660
Email: investors@martinmarietta.com
Web site address: www.martinmarietta.com

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Corporation’s operations are highly dependent upon the interest rate-sensitive construction and steelmaking industries. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs. Since June 30, 2004, the Federal Reserve Board has increased the federal funds rate from 1.00% to 5.25% at June 30, 2007. This increase has affected the residential construction market, which accounted for approximately 17% of the Corporation’s aggregates product line shipments in 2006. Aside from these inherent risks from within its operations, the Corporation’s earnings are affected also by changes in short-term interest rates, as a result of its temporary cash investments, including money market funds and overnight investments in Eurodollars; any outstanding commercial paper obligations; Floating Rate Senior Notes; defined benefit pension plans; and energy costs. Additionally, the shareholders’ equity of the Corporation is affected by changes in the fair value of forward starting interest rate swap agreements.
Commercial Paper Obligations. The Corporation has a $250 million commercial paper program in which borrowings bear interest at a variable rate based on LIBOR. At June 30, 2007, there were no commercial paper borrowings outstanding. As commercial paper borrowings bear interest at a variable rate, the Corporation has interest rate risk when such debt is outstanding.
Floating Rate Senior Notes. The Corporation has $225 million of Floating Rate Senior Notes that bear interest at a rate equal to the three-month LIBOR plus 0.15%. As the Floating Rate Senior Notes bear interest at a variable rate, the Corporation has interest rate risk. The effect of a hypothetical 100 basis point increase in interest rates on borrowings of $225 million would increase interest expense by $2.3 million on an annual basis.
Pension Expense. The Corporation’s results of operations are affected by its pension expense. Assumptions that affect this expense include the discount rate and the expected long-term rate of return on assets. Therefore, the Corporation has interest rate risk associated with these factors. The impact of hypothetical changes in these assumptions on the Corporation’s annual pension expense is discussed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007.
Energy Costs. Energy costs, including diesel fuel, natural gas and liquid asphalt, represent significant production costs for the Corporation. Increases in these costs generally are tied to energy sector inflation. In 2006, energy costs increased significantly, with fuel price increases lowering earnings per diluted share by $0.36. A hypothetical 10% change in the Corporation’s energy prices in 2007 as compared with 2006, assuming constant volumes, would impact 2007 pretax earnings by approximately $17.8 million.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
Aggregate Risk for Interest Rates and Energy Sector Inflation. The pension expense for 2007 is calculated based on assumptions selected at December 31, 2006. Therefore, interest rate risk in 2007 is limited to the potential effect related to outstanding commercial paper, none of which is currently outstanding, and the Corporation’s Floating Rate Senior Notes. Assuming outstanding Floating Rate Senior Notes of $225 million, the impact of a hypothetical 100 basis point increase in interest rates would increase interest expense and decrease pretax earnings by $2.3 million. Additionally, a 10% change in energy costs would impact annual pretax earnings by $17.8 million.
Forward Starting Interest Rate Swap Agreements. In September 2006, the Corporation entered into forward starting interest rate swap agreements (the “Swap Agreements”) for the anticipated refinancing of $150.0 million of its $200.0 million 5.875% Notes due in 2008. In accordance with Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (“FAS 133”), the fair values of the Swap Agreements are recorded as an asset or liability in the consolidated balance sheet. The change in fair value is recorded directly in shareholders’ equity, net of taxes, as other comprehensive earnings/loss. At June 30, 2007, the fair value of the Swap Agreements was an asset of $3.6 million and was included in other noncurrent assets in the Corporation’s consolidated balance sheet.
As a result of the Swap Agreements, the Corporation’s comprehensive earnings/loss will be affected by changes in the LIBOR rate. A hypothetical change in interest rates of 100 basis points would change other comprehensive earnings/loss by approximately $9 million, which is net of taxes of $6 million.
Item 4. Controls and Procedures
As of June 30, 2007, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Corporation’s disclosure controls and procedures were effective as of June 30, 2007. There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect the internal controls subsequent to June 30, 2007.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 2006.
Item 1A. Risk Factors.
Reference is made to Part I. Item 1A. Risk Factors and Forward-Looking Statements of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
ISSUER PURCHASES OF EQUITY SECURITIES
                                 
                    Total Number of Shares   Maximum Number of
                    Purchased as Part of   Shares that May Yet be
    Total Number of   Average Price   Publicly Announced   Purchased Under the
Period   Shares Purchased   Paid per Share   Plans or Programs   Plans or Programs
April 1, 2007 -
                               
April 30, 2007
    283,000     $ 137.55       283,000       1,612,998  
 
                               
May 1, 2007 -
                               
May 31, 2007
    236,900     $ 152.37       236,900       1,376,098  
 
                               
June 1, 2007 -
                               
June 30, 2007
    730,100     $ 161.83       730,100       645,998  
 
                               
 
                               
Total
    1,250,000     $ 154.54       1,250,000       645,998  
The Corporation’s initial stock repurchase program, which authorized the repurchase of 2.5 million shares of common stock, was announced in a press release dated May 6, 1994, and has been updated as appropriate. The program does not have an expiration date.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
PART II-OTHER INFORMATION
(Continued)
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Shareholders held on May 22, 2007, the shareholders of Martin Martin Marietta Materials Inc.:
(a)  
Elected Marcus C. Bennett, Laree E. Perez and Dennis L. Rediker to the Board of Directors of the Corporation to terms expiring at the Annual Meeting of Shareholders in the year 2010. The following table sets forth the votes for each director.
                 
    Votes Cast For   Withheld
Marcus C. Bennett
    31,450,498       6,641,247  
Laree E. Perez
    31,453,099       6,638,646  
Dennis L. Rediker
    31,450,196       6,641,549  
(b)  
Ratified the selection of Ernst & Young LLP as independent auditors for the year ending December 31, 2007. The voting results for this ratification were 37,788,836 — For; 85,219 - Against; and 217,690 — Abstained.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
PART II-OTHER INFORMATION
(Continued)
Item 6. Exhibits.
     
Exhibit    
No.  
Document
 
   
*10.07
  Martin Marietta Materials, Inc. Amended and Restated Executive Incentive Plan (which replaces the exhibit filed as Exhibit 10.07 to the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2006, correcting a typographical error) Commission File No. 1-12744**
 
   
31.01
  Certification dated August 7, 2007 of Chief Executive Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
31.02
  Certification dated August 7, 2007 of Chief Financial Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
32.01
  Written Statement dated August 7, 2007 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.02
  Written Statement dated August 7, 2007 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
*  
Filed herewith
 
**  
Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
             
        MARTIN MARIETTA MATERIALS, INC.
                        (Registrant)  
 
           
Date: August 7, 2007
  By:   /s/ ANNE H. LLOYD
 
   
 
      Anne H. Lloyd    
 
      Senior Vice President and
    Chief Financial Officer
   

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2007
EXHIBIT INDEX
     
Exhibit No.   Document
 
* 10.07
  Martin Marietta Materials, Inc. Amended and Restated Executive Incentive Plan (which replaces the exhibit filed as Exhibit 10.07 to the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2006, correcting a typographical error) Commission File No. 1-12744**
 
   
31.01
  Certification dated August 7, 2007 of Chief Executive Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
31.02
  Certification dated August 7, 2007 of Chief Financial Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
32.01
  Written Statement dated August 7, 2007 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.02
  Written Statement dated August 7, 2007 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
*  
Filed herewith
 
**  
Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K

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