Page 114 - Martin Marietta - 2023 Proxy Statement

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Cr C C itical Audit Matters
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The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts
or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Goodwill Impairment Assessment ‐ West Division Reporting Unit
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As described in Notes A and D to the consolidated financial statements, the Company’s consolidated goodwill balance was $3.6
billion as of December 31, 2022. The goodwill balance associated with the West Division reporting unit was $1.1 billion. The
carrying values of goodwill are reviewed for impairment annually, as of October 1. An interim review is performed between
annual tests iffacts and circumstances indicate potential impairment. As disclosed by management, the goodwill impairment
assessment requires management to apply judgment and make key assumptions. The fair value of the West Division reporting
unit was calculated using a discounted cash flow model. Key assumptions included management’s estimates of changes in
average selling price, shipment volumes and production costs, as well as assumptions offuture profitability, capital
requirements, discount rate and terminal growth rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment
of the West Division reporting unit is a critical audit matter are (i) the significant judgment by management when developing
the fair value estimate of the West Division reporting unit; (ii) a high degree of auditor judgment, subjectivity and effort in
performing procedures and evaluating management’s significant assumptions related to the discount rate and changes in
average selling price, shipment volumes and production costs, and (iii) the audit effort involved the use of professionals with
specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s goodwill impairment assessment, including controls over the valuation of the West Division reporting unit.
These procedures also included, among others (i) testing management’s process for developing the fair value estimate, (ii)
evaluating the appropriateness of the discounted cash flow model, (iii) testing the completeness and accuracy of underlying
data used in the model, and (iv) evaluating the reasonableness of the significant assumptions used by management related to
the discount rate and changes in average selling price, shipment volumes and production costs. Evaluating management’s
assumptions related to changes in average selling price, shipment volumes and production costs involved evaluating whether
the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit,
(ii) the consistency with external industry data, and (iii) whether the assumptions were consistent with evidence obtained in
other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness
of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
February 24, 2023
We have served as the Company’s auditor since 2016.

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