Page 120 - Martin Marietta - 2023 Proxy Statement

NOTES TO FINANCIAL STATEMENTS

Note A: Accounting Policies
Organization. Martin Marietta is a natural resource‐based building materials company. The Company supplies aggregates (crushed
stone, sand and gravel) through its network of approximately 350 quarries, mines and distribution yards in 28 states, Canada and
The Bahamas. Martin Marietta also provides cement and downstream products and services, namely, ready mixed concrete,
asphalt and paving, in vertically‐integrated structured markets where the Company also has a leading aggregates position.
Specifically, the Company has two cement plants and several cement distribution facilities in Texas; ready mixed concrete plants
in Arizona and Texas; and asphalt plants in Arizona, California, Colorado and Minnesota. Paving services are located in California
and Colorado. In addition, the Company also has one cement plant, related cement distribution terminals and ready mixed
concrete operations in California that are classified as assets held for sale and reported as discontinued operations as of and for
the years ended December 31, 2022 and 2021. 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, 2022, the Building Materials business contains the following reportable segments: East Group and West Group.
The East Group consists of the East and Central divisions and operates in Alabama, Florida, Georgia, Indiana, Iowa, Kansas,
Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West
Virginia, Nova Scotia and The Bahamas. The West Group is comprised of the Southwest and West divisions and operates in Arizona,
Arkansas, California, Colorado, Louisiana, Oklahoma, Texas, Utah, Washington and Wyoming. The following states accounted for
64% of the Building Materials business’ 2022 total revenues: Texas, Colorado, North Carolina, Minnesota and California.
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 for steel production and soil
stabilization. Magnesia Specialties’ production facilities are located in Ohio and Michigan, and products are shipped to customers
domestically and 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, which require 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 investments, accounts receivable, inventories, goodwill, other intangible assets and other long‐lived assets,
as well as assumptions used in the calculation of income tax expense, retirement and 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 changes in the economic environment, are
reflected in the consolidated financial statements for the period in which the change in estimate occurs.
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 using the cost method or the
equity method, 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.
Revenue Recognition. otal revenues include sales of products and services provided to customers, net of discounts or allowances,
if any, and include freight and delivery costs billed to customers. Product revenues are recognized when control of the promised
good is transferred to unaffiliated customers, typically when finished products are shipped. Intersegment and interproduct
revenues are eliminated in consolidation. Service revenues are derived from the paving business and are recognized using the
percentage‐of‐completion method under the cost‐to‐cost approach. Under the cost‐to‐cost approach, recognized contract
revenue is determined by multiplying the total estimated contract revenue by the estimated percentage of completion. Contract
costs are recognized as incurred. The percentage of completion is determined on a contract‐by‐contract basis using project costs
incurred to date as a percentage of total estimated project costs. The Company believes the cost‐to‐cost approach is appropriate,
as the use of asphalt in a paving contract is relatively consistent with the performance of the related paving services. Paving
contracts, notably with governmental entities, may contain performance bonuses based on quality specifications.

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