Page 185 - Martin Marietta - 2023 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 proper functioning of information technology and automated operating systems to manage or support operations;
 inflation and its effect on both production and interest costs;
 the concentration of customers in construction markets and the increased risk of potential losses on customer
receivables;
 the impact of the level of demand in the Company’s end‐use markets, production levels and management of
production costs on the operating leverage and therefore profitability of the Company;
 the possibility that the expected synergies from acquisitions will not be realized or will not be realized within the
expected time period, including achieving anticipated profitability to maintain compliance with the Company’s
leverage ratio debt covenant;
 changes in tax laws, the interpretation of such laws and/or administrative practices, including acquisitions and
divestitures, that would increase the Company’s tax rate;
 violation of the Company’s debt covenant if price and/or volumes return to previous levels of instability;
 downward pressure on the Company’s common stock price and its impact on goodwill impairment evaluations;
 the possibility of a reduction of the Company’s credit rating to non‐investment grade; and
 other risk factors listed from time to time found in the Company’s filings with the SEC.
Further, increased highway construction funding pressures resulting from either federal or state issues can affect profitability.
If these negatively affect transportation budgets more than in the past, construction spending could be reduced. Cement is
subject to cyclical supply and demand and price fluctuations.

The Company’s principal business serves customers in construction markets. This concentration could increase the risk of
potential losses on customer receivables; however, payment bonds normally posted on public projects, together with lien rights
on private projects, mitigate the risk of uncollectible receivables. The level of demand in the Company’s end‐use markets,
production levels and the management of production costs will affect the operating leverage of the Building Materials business
and, therefore, profitability. Production costs in the Building Materials business are also sensitive to energy and raw material
prices, both directly and indirectly. Diesel fuel, coal and other consumables change production costs directly through
consumption or indirectly by increased energy‐related input costs, such as steel, explosives, tires and conveyor belts.
Fluctuating diesel fuel pricing also affects transportation costs, primarily through fuel surcharges in the Company’s long‐haul
distribution network. The Magnesia Specialties business is sensitive to changes in domestic steel capacity utilization as well as
the absolute price and fluctuation in the cost of natural gas.

Transportation in the Company’s long‐haul network, particularly the supply of railcars and locomotive power and condition of
rail infrastructure to move trains, affects the Company’s efficient transportation of aggregates products in certain markets,
most notably Texas, Colorado, Florida, North Carolina and the GulfCoast. In addition, availability of railcars and locomotives
affects the Company’s movement of essential dolomitic lime for magnesia chemicals to both the Company’s plant in Manistee,
Michigan, and its customers. The availability of trucks, drivers and railcars to transport the Company’s product, particularly in
markets experiencing high growth and increased demand, is also a risk and pressures the associated costs.

All of the Company’s businesses are also subject to weather‐related risks that can significantly affect production schedules and
profitability. The first and fourth quarters are most adversely affected by winter weather. Hurricane and cyclone activity in the
Atlantic Ocean, Pacific Ocean and GulfCoast generally is most active during the second, third and fourth quarters.
Risks also include shipment declines resulting from economic events beyond the Company’s control.
In addition to the foregoing, other factors that could cause actual results to differ materiallyfrom the forward‐looking
statements in this Annual Report include but are not limited to those listed above in Item 1, “Business – Competition,” Item
1A, “Risk Factors,” and “Note A: Accounting Policies” and “Note O: Commitments and Contingencies” of the “Notes to Financial
Statements” of the audited consolidated financial statements included in this Form 10‐K.
You should consider these forward‐looking statements in light of risk factors discussed in the Company’s Annual Report on
Form 10‐K for the year ended December 31, 2022 and other filings made with the SEC. All of the Company’s forward‐looking
statements should be considered in light of these factors. In addition, other risks and uncertainties not presently known to the
Company or that the Company considers immaterial could affect the accuracy of its forward‐looking statements, or adversely
affect or be material to the Company. All forward‐looking statements are made as of the date offiling or publication and we
assume no obligation to update any such forward‐looking statements.

Annual Report ♦ Page 81