Page 129 - Martin Marietta - 2025 Proxy Statement

NOTES TO FINANCIAL STATEMENTS (Continued)
The Company’s reportingunits,which representthe levelat which goodwill is tested for impairment, arebased on theoperating
segmentsof the Building Materialsbusiness.Goodwill is assigned to the respective reporting unit(s) basedonthe location of
acquisitionsatthe time of consummation.If subsequent organizational changes result inoperationsbeing transferredtoa different
reporting unit, a proportionate amount of goodwill is transferred fromthe former to thenew reportingunit. Fordivestitures,
goodwill is allocatedona proportional basisbased on the relative fairvaluesof the portionof the reportingunit being disposed of
and the portion of the reporting unit remaining. There is no goodwill relatedtothe Magnesia Specialtiesbusiness.
Goodwill is tested for impairment by comparing each reportingunit’s fairvalue to itscarrying value, which represents aStep-1
approach.However, prior to Step 1, the Company mayperform aqualitativeassessmentand evaluate macroeconomicconditions,
industry and market conditions,cost factors,overall financial performance andother businessor reporting unit-specificevents
thatcontributetothe fair valueof a reportingunit. If the Company concludes, basedon its qualitativeassessment, it is more-likely-
than-not (i.e., alikelihood of more than 50%) that a reporting unit’s fair value is higher than itscarrying value,the Companyisnot
requiredtoperform anyfurther goodwill impairment testing for that reportingunit. Otherwise, the Company proceedstoStep1,
and if a reporting unit’s fairvalue exceeds its carrying value, there isno impairment. A reporting unit witha carrying value in excess
ofits fairvalue results in an impairment charge equaltothe difference.Whenthe Company validates itsconclusionbymeasuring
fair value, it mayresume performing a qualitativeassessment for a reporting unit inany subsequent period.The Companymay
bypassthe qualitativeassessment for any reporting unit inany period andproceed directly with the quantitativecalculation in
Step 1. The Company performs aStep1 analysis forall its reporting units everythree years.
The Companyreviews thecarryingvaluesof goodwilland other indefinite-lived intangible assets for impairmentasof October 1,
which represents the annualevaluationdate. An interim reviewisperformed betweenannualtests iffactsand circumstances
indicate potential impairment. Thecarryingvalue of otheramortizable intangible assets is reviewed iffactsand circumstances
indicate potential impairment. If a reviewindicatesthe carrying value is impaired, a charge is recorded equaltothe amount by
whichthe carrying valueexceedsthe fairvalue.
Retirement Plans and Postretirement Benefits. The Company sponsors definedbenefit retirement plansand provides other
postretirement benefits. The Company recognizes the fundedstatus, definedasthe difference between the fairvalue of plan
assets andthe benefitobligation, of itspension plansand otherpostretirement benefitsasanassetorliability onthe consolidated
balance sheets. The measurement date forthe Company’sdefined benefitplans andpostretirement benefit plans is December31.
Actuarial gainsorlossesthatarise duringthe year are recognizedasa componentof accumulated othercomprehensive earnings
orloss. Thoseamounts areamortized over the participants’ average remaining service periodand recognized as acomponent of
net periodic benefitcost. Theamountamortized is determined on aplan-by-planbasis using a corridorapproach and represents
theexcessover10% of the greater of the projected benefitobligationorpension plan assets.
Insurance Reserves. The Company has insurance coverage with largedeductibles for workers’compensation, automobile liability,
marineliability and generalliability claims, and isalsoself-insured for health claims. The Companyrecords insurance reserves
based on an actuarially-determinedanalysis, whichcalculatesdevelopment factorsthatare appliedtototal case reserves within
the insurance programs.While the Company believesthe assumptionsusedtocalculate theseliabilitiesare appropriate, significant
differences in actual experience and/or significantchanges in theseassumptions may materially affect insurancecosts.

Stock-Based Compensation. The Company hasstock-based compensation plans for employees and its BoardofDirectors. The
Company recognizes all forms of stock-basedawardsthatvestascompensationexpense. The compensation expense isthe fair
valueof the awards at the measurement date and is recognizedoverthe requisite service period. Forfeituresare recognized as
they occur.
The fairvalue of restricted stockawards, incentivecompensationstock awards and Board of Directors’ fees paid in the formof
commonstock arebased on theclosing priceof the Company’scommonstock on the grant dates. The fair value of performance
stock awards as of the grant dates isdeterminedusing aMonte Carlosimulation methodology.
Environmental Matters. The Company recordsa liabilityfor an asset retirementobligationat fairvalue in the period in which it is
incurred. Theasset retirementobligation is recordedatthe acquisitiondateof a long-lived tangible asset if the fairvaluecan be
reasonablyestimated.A corresponding amount is capitalizedaspartof the asset’scarrying amount. The fairvalue isaffected by
management’sassumptions regarding thescope of the work, inflation rates andasset retirement dates.

Further, the Company recordsanaccrual for otherenvironmental remediationliabilities inthe period in which it isprobablethat
a liabilityhas been incurredand theappropriate amountscan be estimated reasonably. Such accruals areadjustedas further
informationdevelopsorcircumstances change.Generally,these costsare not discountedtotheir present value or offset for
potential insuranceorother claims or potentialgains fromfuture alternativeuses for asite.

024 Annual Report ♦ Page 21