Page 179 - Martin Marietta - 2025 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
from thedateof acquisition.Any adjustmentstoassets acquired or liabilitiesassumedbeyondthe measurementperiodare
recordedthrough earnings.
Foradditional informationabout business combinations andpurchase price allocations, seeNote B to theconsolidated financial
statements.

Impairment Review of Goodwill
Goodwill is requiredtobetestedannuallyfor impairment by comparing a reporting unit’s fair value to itscarryingvalue.An
interim review is performedbetween annualtests iffactsand circumstancesindicatea potential impairment. Theimpairment
review of goodwill is acriticalaccountingestimatebecause goodwill (excluding any goodwill allocatedtoassets held forsale)
represented 21% of the Company’stotal assets at December 31,2024; the review requires managementtoapply judgment
and make keyassumptions; andan impairmentchargecould be material to the Company’s financialcondition and results of
operations.
As part of any qualitativeassessment, or Step-0 analysis,the Company evaluates macroeconomicconditions, industry and
marketconditions, cost factors, overallfinancial performanceand otherbusinessorreporting unit-specific events that could
impactthe fairvalues of its reporting units.
For reportingunits evaluatedusing aqualitativeassessment, or Step-1 analysis,the Company calculates its reportingunits'fair
valuesusing both an income and marketapproach. The incomeapproachdetermines fairvaluesbased on discounted cash flow
models whereas the marketapproach involvesthe applicationofrevenuesand EBITDA multiplesof comparablecompanies.
Significant assumptionsused inthe Company'sdiscountedcash flow model include management’sestimates of changes in
average selling price, shipment volumesand production costsaswellasassumptionsoffuture profitability, capital
requirements, discount ratesand aterminalgrowth rate. Price, cost and volumeassumptionsare basedon various factors,
including historical averages andcurrent forecasts, external sources, and marketconditions, whilealsoconsidering any
production capacity constraints. Future profitabilityand capital requirementsare,by their nature,estimates. Capital
requirements include maintenance-levelneeds andknown efficiency-and capacity-increasing investments. The calculationof
a reportingunit'sdiscount rate includesthe following components, which are primarily basedonpublishedsources: equity risk
premium, historical beta, risk-free interest rate, size premium andborrowing rate. Toassess the reasonablenessof the
reportingunits'fair values, the Company's compares thetotal of the reporting unit fair valuesto its market capitalization.
Changes in theseestimates andassumptions could materially affect thedetermination offairvalueand goodwill impairment.
Further, mineral reserves, which representunderlying assetsproducing the reporting units’cash flows forthe aggregates
product line, aredepleting assets by theirnature. Anypotential impairment charges from futureevaluations representa risk
to the Company.
Forthe 2024 annual impairmentevaluation, the Company performeda Step-0 analysis forall reportingunits as of October1,
2024 andconcludedthatitis more-likely-than-not that each of the reporting units’ fair value exceeded itscarryingvalue.
For additional informationabout goodwill, seeNote C to theconsolidated financialstatements.

2024 Annual Report ♦ Page 71