Page 164 - Martin Marietta - 2023 Proxy Statement

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

The multiple transportation modes that have been developed with various rail carriers and deep‐water ships provide the
Company with the flexibility to effectively serve customers primarily in the Southwest and Southeast coastal markets.

Public infrastructure, historically, the Company’s largest end‐use market, is funded through a
combination of federal, state and local sources
ransportation investments generally boost the national economy by enhancing mobility and access and creating jobs, which
are priorities of many of the government’s economic plans. Public‐sector construction related to transportation infrastructure
is funded through a combination offederal, state and local sources. The federal highway bill, currently the IIJ Act, provides
annual funding for public‐sector highway construction projects and includes spending authorizations, which represent the
maximum financial obligation that will result from the immediate or future outlays offederal funds for highway and transit
programs. The federal government’s surface transportation programs are funded mostly through the receipts of highway user
taxes placed in the Highway Trust Fund, which is divided into the Highway Account and the Mass Transit Account. Revenues
credited to the Highway Trust Fund are primarily derived from a federal gas tax, a federal tax on certain other motor fuels and
interest on the accounts’ accumulated balances. Of the currently imposed federal gas tax of $0.184 per gallon, which has been
static since 1993, $0.15 is allocated to the Highway Account of the Highway Trust Fund.
Since most states are required to balance their budgets, reductions in revenues generally require a reduction in states’
expenditures. However, the impact of state revenue reductions on highwayinvestment will vary depending on whether the
monies come from dedicated revenue sources, such as highway user fees, or whether portions are paid for with general funds.

In addition to federal appropriations, each state typicallyfunds its infrastructure investment from specifically allocated
amounts collected from various user fees, typically gasoline taxes and vehicle fees. Over the past several years, states have
assumed a significantly larger role in funding infrastructure investment, including initiating special‐purpose taxes and raising
gas taxes. Management believes that financing at the state and local levels, such as bond issuances, toll roads, vehicle miles
traveled fees and tax initiatives, will continue to grow and have a fundamental role in advancing infrastructure projects. State
infrastructure investment generally leads to increased growth opportunities for the Company. The level of state public‐works
spending is varied across the nation and dependent upon individual state economies, and the degree to which the Company
could be affected by a reduction or slowdown in infrastructure spending varies by state. The state economies of the Building
Materials business’ ten largest revenue‐generating states may disproportionately affect the Company’s financial performance.
Governmental appropriations and expenditures are typically less interest rate‐sensitive than private‐sector spending.
Obligations offederal funds are a leading indicator of highway construction activity in the United States. Before a state or local
department of transportation can solicit bids on an eligible construction project, it enters into an agreement with the Federal
Highway Administration to obligate the federal government to pay its portion of the project cost. Federal obligations are subject
to annual funding appropriations byCongress.
The need for surface transportation improvements continues to significantly outpace the amount of available funding. A large
number of roads, highways and bridges built following the establishment of the Interstate Highway System in 1956 now require
major repair or reconstruction. According to the latest information available from The Road Information Program (TRIP), a
national transportation research group, vehicle travel on the nation's roads increased 26% from 2000 to 2019, while new lane
road mileage increased only 9% over the same period. TRIP also reports that 40% of the nation’s major roads are in poor or
mediocre condition, while 7% of the nation’s bridges are in poor/structurally deficient condition. Additionally, there is an
estimated backlog of $123 billion of improvements to the nation’s highway system that requires an increase in annual
investment of $23 billion to $57 billion for the next 20 years to address these improvements and meet mobility and
modernization needs. Management believes infrastructure activity for 2023 and beyond should benefit from the IIJ Act and
additional state and local infrastructure initiatives.

In addition to highways and bridges, transportation infrastructure includes aviation, mass transit, and ports and waterways.
Railroad construction continues to benefit from economic growth, which ultimately generates a need for additional
maintenance and improvements.

Erratic weather can significantly impact operations
Production and shipment levels for the Building Materials business correlate with general construction activity, most of which
occurs outdoors and, as a result, is affected by erratic weather, seasonal changes and other climate‐related conditions.
Typically, due to a general slowdown in construction activity during winter months, the first and fourth quarters experience
lower production and shipment activity. As such, temperatures in the months of March and November can meaningfully affect

Page 60 ♦ Annual Report