Page 163 - Martin Marietta - 2024 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
A portion of railcars and all ships in 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 capacity from its Bahamas and Nova Scotia operations to
its coastal ports that expire in 2026 and 2027, respectively. These contracts of affreightment are take‐or‐pay contracts with
minimum and maximum shipping requirements. The minimum requirements were met in 2023. There can be no assurance that
such contracts will be renewed upon expiration or that terms will continue without significant increases.

Public infrastructure, historically, the Company’s largest end‐use market, is funded through a combination
of federal, state and local sources
Transportation investments generally boost the economy by creating jobs and enhancing mobility and access, 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 orfuture 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 highway investment will vary depending on whether the monies
come from dedicated revenue sources, such as highway userfees, 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 fromvarious userfees, typically gasoline taxes and vehicle fees. States have assumed a significantly larger role in funding
infrastructure investment, including initiating special‐purpose taxes and raising state 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 18% from 2000 to 2022, while new lane road mileage
increased only 9% over a similar 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 from $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 2024 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, ports and waterways. Railroad
construction continues to benefit from economic growth, which ultimately generates a need for additional maintenance and
improvements.

2023 Annual Report ♦ Page 61