Page 163 - Martin Marietta - 2023 Proxy Statement

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

Building Materials Business’ Key Considerations
Growth markets with limited supply of indigenous stone must be served via a long‐haul distribution
network
The U.S. Department of the Interior identified possible sources of indigenous rock and documented its limited supply in certain
areas of the United States, including the coastal areas from Virginia to Texas. Further, certain interior United States markets
may experience limited availability of locally sourced aggregates resulting from increasingly restrictive zoning, permitting
and/or environmental laws and regulations. The Company’s long‐haul distribution network is used to supplement, or in many
cases, wholly supply, the local crushed stone needs of these areas.

The long‐haul distribution network can also diversify market risk for locations that engage in long‐haul transportation of
aggregates products. This is particularly true where a producing quarry serves a local market and transports products via rail,
water and/or truck to be sold in other markets. The risk of a downturn in one market may be somewhat mitigated by other
markets served by the location.
Product shipments are moved by rail, water and truck through the Company’s long‐haul distribution network. The Company’s
rail network primarily serves its Texas, Florida, Colorado and GulfCoast markets, while the Company’s Bahamas and Nova
Scotia locations transport materials via oceangoing ships. The Company’s strategic focus includes expanding inland and
offshore capacity and acquiring distribution yards and port locations to offload transported material. At December 31, 2022,
the distribution network available to the Company consisted of 78 aggregates yards and 11 cement terminals, of which six
cement terminals were classified as discontinued operations.
The Company’s increased rail shipments have made it more reliant on railroad operations, including track congestion, crew and
locomotive availability, the effects of adverse weather conditions and the ability to negotiate favorable railroad shipping
contracts. Further, changes in the operating strategy of rail transportation providers can create operational inefficiencies and
increased costs from the Company’s rail network.

A portion of railcars and all ships of the Company’s long‐haul distribution network are under short‐ and long‐term leases, some
with purchase options, and contracts of affreightment. The limited availability of water and rail transportation providers,
coupled with limited distribution sites, can adversely affect lease rates for such services and ultimately the freight rates.
The Company has long‐term agreements providing dedicated shipping capacityfrom its Bahamas and Nova Scotia operations
to its coastal ports. These contracts of affreightment are take‐or‐pay contracts with minimum and maximum shipping
requirements. The minimum requirements were met in 2022. The Company’s waterborne contracts of affreightment have
varying expiration dates ranging from 2023 to 2027 and generally contain renewal options. However, there can be no assurance
that such contracts can be renewed upon expiration or that terms will continue without significant increases.

Annual Report ♦ Page 59