Page 17 - 2019 Annual Report

NOTES TO FINANCIAL STATEMENTS

Note A: Accounting Policies

Organization. Martin Marietta (the “Company”) is a natural resource‐based building materials company. The Company supplies
aggregates (crushed stone, sand and gravel) through its network of more than 300 quarries, mines and distribution yards in 27
states, Canada and the Bahamas. In the western United States, Martin Marietta also provides cement and downstream
products, namely, ready mixed concrete, asphalt and paving services, in markets where the Company also has a leading
aggregates position. Specifically, the Company has two cement plants and several cement distribution facilities in Texas and
Louisiana, and 141 ready mixed concrete plants and seven asphalt plants in Texas, Colorado, Louisiana, Arkansas and Wyoming.
Paving services are exclusively in Colorado. The Company’s heavy‐side building materials are used in infrastructure,
nonresidential and residential construction projects. Aggregates are also used in agricultural, utility and environmental
applications and as railroad ballast. The aggregates, cement, ready mixed concrete and asphalt and paving product lines are
reported collectively as the “Building Materials” business. As of December 31, 2019, the Building Materials business contains
the following reportable segments: Mid‐America Group, Southeast Group and West Group. The Mid‐America Group operates
in Indiana, Iowa, northern Kansas, Kentucky, Maryland, Minnesota, Missouri, eastern Nebraska, North Carolina, Ohio,
Pennsylvania, South Carolina, Virginia, Washington and West Virginia. The Southeast Group has operations in Alabama, Florida,
Georgia, southwestern South Carolina, Tennessee, Nova Scotia and the Bahamas. The West Group operates in Arkansas,
Colorado, southern Kansas, Louisiana, western Nebraska, Nevada, Oklahoma, Texas, Utah and Wyoming. In addition to these
operations, the Company sells to customers in New York, Delaware, New Mexico and Mississippi. The following states
accounted for 72% of the Building Materials business’ 2019 total products and services revenues: Texas, Colorado, North
Carolina, Georgia and Iowa.
The Company also operates a Magnesia Specialties business, which produces magnesia‐based chemical products used in
industrial, agricultural and environmental applications, and dolomitic lime sold primarily to customers in the steel and
mining industries. Magnesia Specialties’ production facilities are located in Ohio and Michigan, and products are shipped to
customers worldwide.

Basis of Presentation and Use of Estimates. The Company’s consolidated financial statements are presented in conformity
with accounting principles generally accepted in the United States (U.S. GAAP), which requires management to make certain
estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets
and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses.
Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible assets and other long‐lived assets
and assumptions used in the calculation of income tax expense (benefit), retirement and other postemployment benefits,
stock‐based compensation, the allocation of the purchase price to the fair values of assets acquired and liabilities assumed as
part of business combinations and revenue recognition for service contracts. These estimates and assumptions are based on
management’s judgment. Management evaluates estimates and assumptions on an ongoing basis using historical experience
and other factors, including the current economic environment, and adjusts such estimates and assumptions when facts and
circumstances dictate. Changes in credit, equity and energy markets and changes in construction activity increase the
uncertainty inherent in certain estimates and assumptions. As future events and their effects cannot be determined with
precision, actual results could differ significantly from estimates. Changes in estimates, including those resulting from
continuing changes in the economic environment, are reflected in the consolidated financial statements for the period in which
the change in estimate occurs.
During the year ended December 31, 2019, the Company identified a prior‐period error that overstated its earnings from a
nonconsolidated equity affiliate. The overstatement was not deemed material to the current period or any previously reported
periods and was therefore corrected as an out‐of‐period expense of $15.7 million. The pretax noncash adjustment is
recorded in other nonoperating expenses, consistent with the recurring classification of equity earnings from the
nonconsolidated affiliate.

Basis of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly‐owned and
majority‐owned subsidiaries. Partially‐owned affiliates are either consolidated or accounted for at cost or as equity
investments, depending on the level of ownership interest or the Company’s ability to exercise control over the affiliates’
operations. Intercompany balances and transactions between subsidiaries have been eliminated in consolidation.

Celebrating 25 Years as a Public Company Annual Report ♦ Page 15