Page 122 - Martin Marietta - 2023 Proxy Statement

NOTES TO FINANCIAL STATEMENTS (Continued)

Property, Plant and Equipment. Property, plant and equipment are stated at cost.
The estimated service lives for property, plant and equipment are as follows:
Class of Assets Range of Service Lives
Buildings 5 to 30 years
Machinery & Equipment 2 to 20 years
Land Improvements 5 to 60 years

The Company begins capitalizing quarry development costs at a point when reserves are determined to be proven or probable,
economically mineable and when demand supports investment in the market. Capitalization of these costs ceases when production
commences. Capitalized quarry development costs are classified as land improvements and depreciated over the life of the
reserves.

The Company reviews relevant facts and circumstances to determine whether to capitalize or expense pre‐production stripping
costs when additional pits are developed at an existing quarry. If the additional pit operates in a separate and distinct area of the
quarry, these costs are capitalized as quarry development costs and depreciated over the life of the uncovered reserves.
Additionally, a separate asset retirement obligation is created for additional pits when the liability is incurred. Once a pit enters
the production phase, all post‐production stripping costs are charged to inventory production costs as incurred.
Mineral reserves and mineral interests acquired in connection with a business combination are valued using an income approach
for the estimated life of the reserves. The Company’s aggregates reserves average approximately 75 years based on the 2022
annual production level.
Depreciation is computed based on estimated service lives using the straight‐line method. Depletion of mineral reserves is
calculated based on proven and probable reserves using the units‐of‐production method on a quarry‐by‐quarry basis.
Property, plant and equipment are reviewed for impairment whenever facts and circumstances indicate that the carrying amount
of an asset group may not be recoverable. An impairment loss is recognized if expected future undiscounted cash flows over the
estimated remaining service life of the related asset group are less than the asset group’s carrying value.
Repair and Maintenance Costs. Repair and maintenance costs that do not substantially extend the life of the Company’s plant and
equipment are expensed as incurred.
Leases. If the Company determines a contract is or contains a lease at the inception of an agreement, the Company records a right‐
of‐use (ROU) asset, which represents the Company’s right to use an underlying leased asset, and a lease liability, which represents
the Company’s obligation to make lease payments. The ROU asset and lease liability are recorded on the consolidated balance
sheets at the present value of the future lease payments over the lease term at commencement date. The Company determines
the present value of lease payments based on the implicit interest rate, which may be explicitly stated in the lease, if available, or
may be the Company’s estimated collateralized incremental borrowing rate based on the term of the lease. Initial ROU assets also
include any lease payments made at or before commencement date and any initial direct costs incurred and are reduced by lease
incentives. Certain of the Company’s leases contain renewal and/or termination options. The Company recognizes renewal or
termination options as part of its ROU assets and lease liabilities when the Company has the unilateral right to renew or terminate
and it is reasonably certain these options will be exercised.
Some leases require the Company to pay non‐lease components, which may include taxes, maintenance, insurance and certain
other expenses applicable to the leased property, and are primarilyvariable costs. The Company accounts for lease and non‐lease
components as a single amount, with the exception of railcar and fleet vehicle leases, for which the Company separately accounts
for the lease and non‐lease components.
Leases are evaluated and determined to be either finance leases or operating leases. The lease is a finance lease if it transfers
ownership to the underlying asset by the end of the lease term; includes a purchase option that is reasonably certain to be
exercised; has a lease term for the major part of the remaining economic life of the underlying asset; has a present value of the
sum of the lease payments (including renewal options) that equals or exceeds substantially all of the fair value of the underlying
asset; or is for an underlying asset that is of a specialized nature and is expected to have no alternative use to the lessor at the end
of the lease term. If none of these terms exist, the lease is an operating lease.
Leases with an initial lease term of one year or less are not recorded on the consolidated balance sheets. Costs for these leases are
expensed as incurred.

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