Page 183 - Martin Marietta - 2024 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As discussed earlier, the Company’s operations are highly dependent upon the interest rate‐sensitive construction and steelmaking
industries. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising
interest rates or escalating costs (see Business Environment section included under Item 7 – MD&A of this Form 10‐K).
Management has considered the current economic environment and its potential impact to the Company’s business. Demand for
aggregates products, particularly in the infrastructure construction market, is affected byfederal, state and local budget and deficit
issues. Further, delays or cancellations of capital projects in the nonresidential and residential construction markets could occur if
companies and consumers are unable to obtain affordable financing for construction projects or if consumer confidence is eroded
by economic uncertainty.

Demand in the nonresidential and residential construction markets, which combined accounted for 59% of the Company's 2023
aggregates shipments, is affected by interest rates. During 2023, the Federal Reserve raised the target federal funds rate 100 basis
points.
Aside from these inherent risks fromwithin its operations, the Company’s earnings are also affected by changes in short‐term
interest rates and changes in enacted tax laws.
Variable‐Rate Borrowing Facilities

At December 31, 2023, the Company had an $800.0 million Revolving Facility and a $400.0 million Trade Receivable Facility.
Borrowings under these facilities bear interest at a variable interest rate. As of December 31, 2023, the Company did not have any
outstanding variable‐rate debt. However, anyfuture borrowings under the credit facilities or outstanding variable‐rate debt are
exposed to interest rate risk.

Pension Expense

The Company’s results ofoperations are affected by its pension expense. Assumptions that affect pension expense include the
discount rate and, for the qualified defined benefit pension plan only, the expected long‐term rate of return on pension assets.
Therefore, the Company has interest rate risk associated with these factors. The impact of hypothetical changes in these
assumptions on the Company’s annual pension expense and accrued pension obligation is discussed in the Critical Accounting
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Policies and Estimates – Pension Expense – Selection of Assumptions section included under Item 7 – MD&A of this Form 10‐K.
Income Tax
Any changes in enacted tax laws, rules or regulatory or judicial interpretation, or any change in the pronouncements relating to
accounting for income taxes, could materially impact the Company's effective tax rate, tax payments, financial condition and results
of operations.

Energy Costs
Energy costs, including diesel fuel, natural gas, electricity, coal, petroleum coke and liquid asphalt, represent significant production
costs of the Company. The Company may be unable to pass along increases in the costs of energy to customers in the form of price
increases for the Company’s products. The cement product line and Magnesia Specialties business each have varying fixed‐price
agreements for a portion of their future energy requirements. A hypothetical 10% change in the Company’s energy prices in 2024
as compared with 2023, assuming constant volumes, would change 2024 energy expense by $40.5 million.

Commodity Risk

Cement is a commodity and competition is based principally on price, which is highly sensitive to changes in supply and demand.
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Prices are often subject to material changes in response to relatively minor fluctuations in supply and demand, general economic
conditions and other market conditions beyond the Company’s control. Increases in the production capacity of industry
participants or increases in cement imports tend to create an oversupply of such products leading to an imbalance between supply
and demand, which can have a negative impact on product prices. There can be no assurance that product prices will not decline
in the future or that such declines will not have a material adverse effect on the Company’s business, financial condition and results
of operations. Using full‐year 2023 cement revenues of $725.5 million as a baseline, a hypothetical 10% change in average selling
price of the cement product line would impact full‐year cement product line revenues by $72.6 million.

2023 Annual Report ♦ Page 81