Page 159 - Martin Marietta - 2023 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Product Lines
Aggregates are an engineered, granular material consisting of crushed stone, sand and gravel, manufactured to specific sizes,
grades and chemistryfor use primarily in construction applications. The Company’s operations consist mostly of open pit
quarries; however, the Company is also the largest operator of underground aggregates mines in the United States, with 14
active underground mines located in the East Group. The Company’s aggregates reserves average approximately 75 years at
the 2022 annual production level.
Cement is the basic agent used to bind coarse aggregates, sand and water in the production of ready mixed concrete. The
Company has a strategic and leading cement position in the state of Texas, with production facilities in Midlothian, Texas, south
of Dallas/Fort Worth, and Hunter, Texas, centrally located along I‐35 between San Antonio and Austin. These two facilities
produce Portland limestone and specialty cements, have a combined annual capacity of approximately 4.5 million tons and
collectively operated at approximately 77% utilization for clinker production in 2022; clinker is the initial product of cement
production. The Midlothian plant has a permit that allows for annual capacity expansion of 0.8 million tons. The Company is
currently undertaking a finishing capacity expansion project at the Midlothian plant, which is expected to be completed in the
middle of 2024 and will provide 0.5 million tons of incremental annual capacity. Further, the Company is nearing completion
of converting its plants to manufacture a less carbon‐intensive Portland limestone cement, known as Type 1L, that has been
approved by the Texas Department of Transportation. In addition to the two production facilities, the Company operates
several cement distribution terminals.

Calcium carbonate in the form of limestone is the principal raw material used in the production of cement. The Company owns
more than 600 million tons of limestone reserves adjacent to its cement production plants in Texas. During 2021, the Company
purchased two cement plants in Redding and Tehachapi, California, and related distribution facilities as part of the acquisition
of Lehigh Hanson, Inc.'s West Region business (Lehigh West Region). The Redding plant and related distribution terminals were
sold on June 30, 2022. The Tehachapi plant and related distribution terminals were classified as assets held for sale and
discontinued operations as of and for the years ended December 31, 2022 and 2021. In August 2022, the Company announced
a definitive agreement to sell the Tehachapi plant and related distribution terminals, subject to regulatory approval and
customary closing conditions.
Ready mixed concrete is measured in cubic yards and specifically batched or produced for customers’ construction projects
and then typically transported by mixer trucks and poured at the project site. The coarse aggregates used for ready mixed
concrete are a washed material with limited amounts offines (i.e., dirt and clay). The Company operates ready mixed concrete
plants in Arizona, California and Texas. The California ready mixed concrete operations were classified as assets held for sale
and discontinued operations as of and for the years ended December 31, 2022 and 2021.
Asphalt is most commonly used in surfacing roads and parking lots and consists of liquid asphalt, or bitumen, the binding
medium, and aggregates. Similar to ready mixed concrete, each asphalt batch is produced to customer specifications. The
Company’s asphalt operations are located in Arizona, California, Colorado and Minnesota and paving services are offered in
California and Colorado. Market dynamics for these downstream product lines include a highly competitive environment and
lower barriers to entry compared with the Company’s upstream product lines of aggregates and cement.

End‐Use Trends

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 According to the latest available data published by the U.S. Geological Survey, for the nine months ended September
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30, 2022, estimated construction aggregates consumption increased 3.0% compared with the nine months ended
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September 30, 2021, and for the eleven months ended November 30, 2022, cement consumption increased 4.4%
versus the comparable prior‐year period.
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 National not seasonally adjusted construction spending statistics for the twelve months ended December 31, 2022
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versus the twelve months ended December 31, 2021, according to U.S. Census Bureau, reveal:
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- Total value of construction put in place increased 10%
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- Public construction spending increased 5%
- Private nonresidential construction market spending increased 9%
- Private residential construction market spending increased 13%
Annual Report ♦ Page 55