What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-22 compared with 2021-02-19 · 370 added, 261 removed, 1185 unchanged (35% of the section changed)

16 unchanged sentences

Additional information required in response to this Item 8 is included under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included as Item 7 of this Form 10-K.

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Based on management’s assessment under the 2013 framework, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021.

The consolidated financial statements of the Company as of December 31, 2020 and 2019, and for each of the three years in the period ended December 31, 2020, and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report appears on the following page.

Management has excluded certain elements of the internal control over financial reporting of Lehigh Hanson, Inc.’s West Region business (Lehigh West Region) and Tiller Corporation (Tiller) from its assessment of the Company’s internal control over financial reporting as of December 31, 2021 because these businesses were acquired by the Company in purchase business combinations during 2021.

Subsequent to the acquisitions, certain elements of Lehigh West Region and Tiller’s internal control over financial reporting and related processes were integrated into the Company’s existing systems and internal control over financial reporting.

Those controls that were not integrated have been excluded from management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2021.

The excluded elements represent controls for $274.8 million of consolidated assets and $401.2 million of consolidated total revenues, of which $79.2 million is presented in earnings from discontinued operations, net of income tax expense, as of and for the year ended December 31, 2021.

The consolidated financial statements of the Company as of December 31, 2021 and 2020, and for each of the three years in the period ended December 31, 2021, and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report appears on the following pages.

Howard Nye, Chairman, President and Chief Executive Officer

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February 22, 2022

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note A to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Lehigh Hanson, Inc.’s West Region Business (Lehigh West Region) and Tiller Corporation from its assessment of internal control over financial reporting as of December 31, 2021 because they were acquired by the Company in purchase business combinations during 2021.

Subsequent to the acquisitions, certain elements of Lehigh West Region and Tiller Corporation’s internal control over financial reporting and related processes were integrated into the Company’s existing systems and internal control over financial reporting.

Those controls that were not integrated have been excluded from management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2021.

We have also excluded these elements of the internal control over financial reporting of Lehigh West Region and Tiller Corporation from our audit of the Company’s internal control over financial reporting.

The excluded elements represent controls for $274.8 million of consolidated assets and $401.2 million of the consolidated revenues, of which $79.2 million is presented in earnings from discontinued operations, net of income tax expense, as of and for the year ended December 31, 2021.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and

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that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

generally accepted accounting principles.

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the Projected Benefit Obligation

As described in Note K to the consolidated financial statements, the Company’s net projected benefit obligation for all defined benefit pension plans was $1,111.9 million as of December 31, 2020.

As disclosed by management, annually, as of December 31, management remeasures the defined benefit plans’ projected benefit obligation based on the present value of projected future benefit payments to all participants for services rendered to date, reflecting expected future pay increases through the participants’ expected retirement dates.

The key assumptions are the discount rate, the expected long-term rate of return on pension plan assets, the mortality table and mortality improvement scale, and the rate of increase in future compensation levels.

The discount rate is generally the most volatile and sensitive estimate.

Accordingly, a change in this assumption has the most significant impact on the projected benefit obligation.

The principal considerations for our determination that performing procedures relating to the valuation of the projected benefit obligation is a critical audit matter are (i) the significant judgment by management to determine the projected benefit obligation;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the discount rate assumption;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Acquisition of Lehigh Hanson Inc.’s West Region Business – Valuation of Mineral Reserves and Intangible Assets Related to Operating Permits and Customer Relationships

As described in Note D to the consolidated financial statements, on October 1, 2021, the Company completed the acquisition of Lehigh West Region for $2.28 billion, which resulted in $332.0 million of mineral reserves and $551.0 million of intangible assets being recorded.

The identifiable intangible assets were comprised of operating permits of $410.5 million ($237.0 million held for sale as of December 31, 2021) and customer relationships of $140.5 million ($27.9 million held for sale as of December 31, 2021).

As disclosed by management, the fair values of acquired mineral reserves and intangible assets are determined using an excess earnings approach, which requires significant judgment to estimate future cash flows based on available historical information and future expectations, as well as significant assumptions, which include forecasted revenue based on sales price and shipment volumes and forecasted expenses inclusive of production costs and capital needs.

The principal considerations for our determination that performing procedures relating to the valuation of mineral reserves and intangible assets related to operating permits and customer relationships in the acquisition of Lehigh West Region is a critical audit matter are the significant judgment by management when developing the estimated fair values of these acquired assets, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumption related to forecasted revenue.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the valuation of the projected benefit obligation, including controls over the discount rate assumption.

These procedures also included, among others, testing the completeness and accuracy of underlying data used in the valuation of the projected benefit obligation and the involvement of professionals with specialized skill and knowledge to assist in (i) testing management’s process for determining the projected benefit obligation, (ii) evaluating the appropriateness of the actuarial method, and (iii) evaluating the reasonableness of the discount rate assumption.

These procedures included testing the effectiveness of controls relating to acquisition accounting, including controls over management’s valuation of the mineral reserves, operating permits and customer relationships and the development of the significant assumption related to forecasted revenue.

These procedures also included, among others, (i) reading the purchase agreement and (ii) testing management’s process for estimating the fair values of mineral reserves, operating permits and customer relationships.

Testing management's process included evaluating the appropriateness of the excess earnings approach, testing the completeness and accuracy of data used by management, and evaluating the reasonableness of the significant assumption related to forecasted revenue.

Evaluating the reasonableness of the significant assumption related to forecasted revenue involved considering the (i) past performance of the acquired business;

(ii) historical growth rates of the Company;

and (iii) historical results of peer companies.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the excess earnings approach.

/s/ PricewaterhouseCoopers LLP

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We have served as the Company’s auditor since 2016.

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Other nonoperating (income) and expenses, net

Earnings before income tax expense

Earnings from continuing operations before income tax expense

Income tax expense

Earnings from continuing operations

Earnings from discontinued operations, net of income tax expense

Consolidated net earnings

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Net Earnings Attributable to Martin Marietta Per Common Share

Basic attributable to common shareholders

Diluted attributable to common shareholders

Basic from continuing operations attributable to

common shareholders

Basic from discontinued operations attributable to

common shareholders

Diluted from continuing operations attributable to

common shareholders

Diluted from discontinued operations attributable to

common shareholders

Weighted-Average Common Shares Outstanding

The accompanying Notes to the Financial Statements are an integral part of these statements.

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Consolidated Net Earnings

Other comprehensive (loss) earnings, net of tax:

Other comprehensive earnings (loss), net of tax:

Defined benefit pension and postretirement plans:

Net loss arising during period, net of tax of $( 8.7 ), $( 4.8 ) and

Net gain (loss) arising during period, net of tax of $ 16.8 , $( 8.7 ) and

$( 4.8 ), respectively

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net of tax of $ 0.0 , $ 0.9 and $ 0.0 , respectively

Foreign currency translation gain (loss)

Amortization of terminated value of forward starting interest rate swap

agreements into interest expense, net of tax of $ 0.0 , $ 0.0 and $ 0.2 ,

Foreign currency translation gain

Consolidated comprehensive earnings

2 unchanged sentences

The accompanying Notes to the Financial Statements are an integral part of these statements.

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Inventories, net

Current assets held for sale

Other current assets

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Operating lease right-of-use assets, net

Noncurrent assets held for sale

Other noncurrent assets

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Accrued other taxes

Current maturities of long-term debt

Accrued interest

Operating lease liabilities

Current liabilities held for sale

Other current liabilities

3 unchanged sentences

Noncurrent operating lease liabilities

Noncurrent liabilities held for sale

Other noncurrent liabilities

13 unchanged sentences

The accompanying Notes to the Financial Statements are an integral part of these statements.

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Deferred income taxes, net

Noncash portion of asset and portfolio rationalization charge

Other items, net

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Proceeds from divestitures and sales of assets

Payment of railcar construction advances

Reimbursement of railcar construction advances

Investments in life insurance contracts, net

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Payments on finance lease obligations

Payments on capital lease obligations

Dividends paid

Repurchases of common stock

Payments of deferred acquisition consideration

Purchase of the noncontrolling interest in the existing joint venture

Distributions to owners of noncontrolling interest

1 unchanged sentence

Shares withheld for employees’ income tax obligations

Net Cash Used for Financing Activities

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

Net Cash Provided by (Used for) Financing Activities

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash, beginning of year

1 unchanged sentence

The accompanying Notes to the Financial Statements are an integral part of these statements.

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Stock-based compensation expense

Noncontrolling interest acquired in

business combination

Purchase of the noncontrolling interest in the

existing joint venture

Distribution to owners of noncontrolling interest

Balance at December 31, 2019

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Stock-based compensation expense

Distribution to owners of noncontrolling interest

Balance at December 31, 2020

Consolidated net earnings

Other comprehensive loss

Other comprehensive earnings

Dividends declared ($ 2.36 per common share)

1 unchanged sentence

Shares withheld for employees’ income tax

Repurchases of common stock

Stock-based compensation expense

Distribution to owners of noncontrolling interest

Balance at December 31, 2021

The accompanying Notes to the Financial Statements are an integral part of these statements.

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The Company supplies aggregates (crushed stone, sand and gravel) through its network of approximately 350 quarries, mines and distribution yards in 28 states, Canada and The Bahamas.

In the western United States, Martin Marietta also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services, in markets where the Company also has a leading aggregates position.

Specifically, the Company has two cement plants and several cement distribution facilities in Texas and Louisiana, and 120 ready mixed concrete plants and eight asphalt plants in Texas, Colorado and Wyoming.

Asphalt operations and paving services are exclusively in Colorado.

Martin Marietta also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services, in markets where the Company also has a leading aggregates position.

Specifically, the Company has two cement plants and several cement distribution facilities in Texas;

ready mixed concrete plants in Arizona, Colorado and Texas;

and asphalt plants in Arizona, California, Colorado and Minnesota.

Paving services are located in Colorado and California.

In addition, the Company also has two cement plants, cement distribution terminals and ready mixed concrete operations in California that are classified as assets held for sale and discontinued operations as of December 31, 2021.

The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects.

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The aggregates, cement, ready mixed concrete and asphalt and paving product lines are reported collectively as the Building Materials business.

Effective July 1, 2020, the Company made organizational changes, consolidating its operational management and operating divisions in connection with the retirement of two senior executives as of the end of the second quarter.

The Mid-Atlantic Division and Southeast Division were combined to form the East Division.

Additionally, the Southwest Aggregates Division and the Cement and Southwest Ready Mix Division were combined to form the Southwest Division.

Subsequent to these changes, the Building Materials business consists of four divisions:

East, Central, Southwest and West.

Each division, as well as the Magnesia Specialties business, represents an operating segment.

As of December 31, 2021, the Building Materials business contains the following reportable segments:

East Group and West Group.

The East Group, whose operations were previously reported in the Mid-America and Southeast Groups, consists of the East and Central Divisions and operates in Alabama, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, eastern Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, Nova Scotia and The Bahamas.

The West Group is comprised of the Southwest and West Divisions and operates in Arkansas, Colorado, Louisiana, western Nebraska, Nevada, Oklahoma, Texas, Utah, Washington and Wyoming.

The East Group consists of the East and Central divisions and operates in Alabama, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, eastern Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, Nova Scotia and The Bahamas.

The West Group is comprised of the Southwest and West divisions and operates in Arizona, Arkansas, California, Colorado, Louisiana, western Nebraska, Oklahoma, Texas, Utah, Washington and Wyoming.

In addition to these states, the Company sells to customers in New York, Delaware, New Mexico and Mississippi.

The following states accounted for 68 % of the Building Materials business’ 2021 total revenues:

Texas, Colorado, North Carolina, Georgia and Iowa.

Effective January 1, 2020, the Company moved the management of its one quarry in the state of Washington from the East Group to the West Group, resulting in an immaterial change to its reportable segments.

Prior-year segment disclosures have been reclassified to conform to current-year presentation.

Texas, Colorado, North Carolina, Georgia and Minnesota.

The Company also operates a Magnesia Specialties business, which produces magnesia-based chemical products used in industrial, agricultural and environmental applications, and dolomitic lime sold primarily to customers for steel production and land stabilization.

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Changes in credit, equity and energy markets and changes in construction activity increase the uncertainty inherent in certain estimates and assumptions.

As future events and their effects, including the impact of the coronavirus (COVID-19) pandemic and the related responses, cannot be determined with precision, actual results could differ significantly from estimates.

As future events and their effects cannot be determined with precision, actual results could differ significantly from estimates.

Changes in estimates, including those resulting from changes in the economic environment, are reflected in the consolidated financial statements for the period in which the change in estimate occurs.

During the year ended December 31, 2019, the Company identified a prior-period error that overstated its earnings from a nonconsolidated equity affiliate.

The pretax noncash adjustment was deemed immaterial to prior periods and was therefore corrected as an out-of-period expense of $ 15.7 million

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that was recorded in other nonoperating expenses, consistent with the recurring classification of equity earnings from the nonconsolidated affiliate.

The pretax noncash adjustment was deemed immaterial to prior periods and was therefore corrected as an out-of-period expense of $ 15.7 million that was recorded in other nonoperating expenses, consistent with the recurring classification of equity earnings from the nonconsolidated affiliate.

Basis of Consolidation .

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Intercompany balances and transactions between subsidiaries have been eliminated in consolidation.

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Revenue Recognition .

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Cash equivalents are comprised of highly-liquid instruments with original maturities of three months or less from the date of purchase.

As of December 31, 2020, the Company had $ 97.1 million of restricted cash, which was invested in an account designated for the purchase of like-kind exchange replacement assets under Section 1031 of the Internal Revenue Code (Section 1031).

As of December 31, 2021 and 2020, the Company had $ 0.5 million and $ 97.1 million, respectively, of restricted cash, which was invested in an account designated for the purchase of like-kind exchange replacement assets under Section 1031 of the Internal Revenue Code.

The Company is restricted from utilizing the cash for purposes other than the purchase of the qualified assets for 180 days from receipt of the proceeds from the sale of the exchanged property.

Any unused cash at the end of the 180 days will be transferred to unrestricted accounts of the Company and can then be used for general corporate purposes.

The Company did not use $ 47.2 million within the allowable 180 -day period and transferred that amount to unrestricted cash in January 2021.

The Company has until March 9, 2021 to utilize the remaining funds to purchase qualified assets under Section 1031.

In connection with Accounting Standards Update (ASU) 2016-18, Statement of Cash Flows (Topic 230) , the statement of cash flows reflects cash flow changes and balances for cash, cash equivalents and restricted cash on an aggregated basis.

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The Company also establishes an allowance for parts over five years old and supplies over a year old.

A World-Class Organization Built for Success

Post-production stripping costs, which represent costs of removing overburden and waste materials to access mineral deposits, are a component of inventory production costs and recognized as incurred.

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Post-production stripping costs, which represent costs of removing overburden and waste materials to access mineral deposits, are a component of inventory production costs and recognized as incurred.

Property, Plant and Equipment .

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If none of these terms exist, the lease is an operating lease.

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L eases with an initial lease term of one year or less are not recorded on the balance sheet.

Leases with an initial lease term of one year or less are not recorded on the balance sheet.

Costs for these leases are expensed as incurred.

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In the consolidated statements of earnings, operating lease expense, which is recognized on a straight-line basis over the lease term, and the amortization of finance lease ROU assets are included in cost of revenues or selling, general and administrative expenses.

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Generally, these costs are not discounted to their present value or offset for potential insurance or other claims or potential gains from future alternative uses for a site.

A World-Class Organization Built for Success

Income Taxes .

Deferred income taxes, net, on the consolidated balance sheets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for

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Income Taxes .

income tax purposes, net of valuation allowances.

The effect of changes in enacted tax rates on deferred income tax assets and liabilities is charged or credited to income tax expense in the period of enactment.

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Consolidated Comprehensive Earnings and Accumulated Other Comprehensive Loss .

Consolidated comprehensive earnings for the Company consist of consolidated net earnings, adjustments for the funded status of pension and postretirement benefit plans, foreign currency translation adjustments and the amortization of the value of terminated forward starting interest rate swap agreements into interest expense, and are presented in the Company’s consolidated statements of comprehensive earnings .

Consolidated comprehensive earnings for the Company consist of consolidated net earnings, adjustments for the funded status of pension and postretirement benefit plans and foreign currency translation adjustments , and are presented in the Company’s consolidated statements of comprehensive earnings .

Accumulated other comprehensive loss consists of unrecognized gains and losses related to the funded status of the pension and postretirement benefit plans and foreign currency translation, and is presented on the Company’s consolidated balance sheets.

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Benefit Plans

Forward Starting

Interest Rate

years ended December 31

(in millions)

Accumulated other comprehensive loss at beginning of

Other comprehensive (loss) earnings before

Accumulated other comprehensive loss at beginning of period

Other comprehensive earnings before

reclassifications, net of tax

1 unchanged sentence

comprehensive loss, net of tax

Other comprehensive (loss) earnings, net of tax

Other comprehensive earnings, net of tax

Accumulated other comprehensive loss at end of period

Cumulative noncurrent deferred tax assets at end

Accumulated other comprehensive loss at beginning of

Cumulative noncurrent deferred tax assets at end of period

Accumulated other comprehensive loss at beginning of period

Other comprehensive (loss) earnings before

4 unchanged sentences

Accumulated other comprehensive loss at end of period

Cumulative noncurrent deferred tax assets at end

Accumulated other comprehensive loss at beginning of

Other comprehensive loss before reclassifications,

Cumulative noncurrent deferred tax assets at end of period

Accumulated other comprehensive loss at beginning of period

Other comprehensive (loss) earnings before reclassifications,

Amounts reclassified from accumulated other

2 unchanged sentences

Accumulated other comprehensive loss at end of period

Cumulative noncurrent deferred tax assets at end

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Cumulative noncurrent deferred tax assets at end of period

Reclassifications out of accumulated other comprehensive loss are as follows:

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Income tax expense

Unamortized value of terminated forward starting

interest rate swap:

Additional interest expense

Interest expense

Income tax expense

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Earnings Per Common Share .

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Diluted earnings per common share is computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards issued to employees and nonemployee members of the Company’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive.

The following table reconciles the numerator and denominator for basic and diluted earnings per common share:

The following table reconciles the numerator and denominator for basic and diluted earnings from continuing operations per common share:

years ended December 31

(in millions)

Net earnings attributable to Martin Marietta

Net earnings from continuing operations attributable to

Martin Marietta

distributed and undistributed earnings attributable to

unvested participating securities

Basic and diluted net earnings attributable to common

shareholders attributable to Martin Marietta

Basic and diluted net earnings from continuing operations attributable

to common shareholders attributable to Martin Marietta

Basic weighted-average common shares outstanding

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Such reclassifications had no impact on the Company’s previously reported results of operations, financial position or cash flows.

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New Accounting Pronouncements

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and eliminates the disclosure of the estimated amounts in accumulated other comprehensive income/loss expected to be recognized in net periodic benefit costs over the next year.

Disclosures in Note K have been modified on a retrospective basis for all years presented.

Effective January 1, 2019 , the Company adopted ASC 842, which applies to virtually all leases, excluding mineral interest royalty agreements.

ASC 842 requires the modified retrospective transition approach, applying the new standard to all leases existing at the date of initial application.

It further states that an entity may use either 1) its effective date or 2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application.

The Company used the effective date as the date of initial application.

As such, financial information and disclosures required under ASC 842 are not provided for dates and periods prior to January 1, 2019.

The lease standard provides a number of practical expedients for transition accounting.

The Company elected the “package of practical expedients”, which permitted the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs.

The Company elected the practical expedients pertaining to the use of hindsight and to land easements.

Applying the hindsight practical expedient resulted in longer lease terms for many leases.

The adoption of ASC 842 resulted in the recognition of ROU assets and lease liabilities of $ 502.5 million and $ 501.6 million, respectively, for operating leases and $ 10.9 million and $ 12.1 million, respectively, for finance leases.

The adoption did not have a material impact on the Company’s consolidated statement of earnings or consolidated statement of cash flows .

Revenue Recognition

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The Company’s product sales agreements are single-performance obligations that are satisfied at a point in time.

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Performance obligations within paving service agreements are satisfied over time, primarily ranging from one day to two years .

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Customer payments for the paving operations are based on a contractual billing schedule and are due 30 days from invoice date.

Future revenues from unsatisfied performance obligations at December 31, 2020, 2019 and 2018 were $ 110.1 million, $ 136.1 million and $ 78.1 million, respectively, where the remaining periods to complete these obligations ranged from one month to 22 months .

Future revenues from unsatisfied performance obligations at December 31, 2021, 2020 and 2019 were $ 153.9 million, $ 110.1 million and $ 136.1 million, respectively, where the remaining periods to complete these obligations ranged from three months to 12 months .

The Company is deemed to be an agent when collecting sales taxes from customers.

Sales taxes collected are recorded as liabilities until remitted to taxing authorities and are not reflected in the consolidated statements of earnings as revenues and expenses.

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Revenue by Category.

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Magnesia Specialties

Service revenues, which solely include the paving operations located in Colorado, were $ 287.6 million, $ 250.6 million and $ 219.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Service revenues, which include paving operations located in California and Colorado, were $ 259.1 million, $ 287.6 million and $ 250.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Contract Balances.

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Revenues recognized from the beginning balance of contract liabilities for the years ended December 31, 2021 and 2020 were $ 13.6 million and $ 6.9 million, respectively.

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Retainage, which primarily relates to the paving services, represents amounts that have been billed to customers but payment withheld until final acceptance of the performance obligation by the customer.

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Further, the Company acts as a principal in the delivery arrangements and, as required by the revenue standard, the related revenues and costs are presented gross and are included in the consolidated statements of earnings.

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Goodwill and Other Intangible Assets

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Balance at beginning of period

Goodwill reclassified from/(allocated to) assets held for sale

Transfer of operations from East Group to West Group

Balance at end of period

Balance at beginning of period

Measurement period adjustments

Goodwill allocated to assets held for sale

Goodwill reclassified from/(allocated to) assets held for sale

Transfer of operations from East Group to West Group

Balance at end of period

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Use rights and other

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Intangible assets deemed to have an indefinite life that are therefore not amortized consist of the following:

Intangible assets deemed to have an indefinite life that are therefore not amortized consist of the following as of December 31, 2021 and 2020:

(in millions)

Operating permits

During 2020, the Company acquired $ 35.2 million of intangible assets, consisting of the following:

During 2021, the Company acquired $ 845.9 million of intangible assets, of which $ 264.9 million were classified as held for sale as of December 31, 2021 (see Note D).

Excluding the intangible assets classified as held for sale, acquired intangible assets consist of the following:

(in millions, except year data)

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Total subject to amortization

Not subject to amortization:

Total amortization expense for intangible assets for the years ended December 31, 2021, 2020 and 2019 was $ 24.0 million, $ 13.4 million and $ 13.0 million, respectively.

The intangible assets classified as held for sale are not being amortized.

The estimated amortization expense for intangible assets for each of the next five years and thereafter is as follows:

(in millions)

Business Combinations

In August 2020, the Company acquired certain assets, including a sand and gravel plant and four ready mixed concrete operations.

This acquisition provides customer expansion in the Dallas/Fort Worth, Texas market and the ability to internally source ready mixed concrete raw materials from the Company’s legacy aggregates and cement operations.

The Company determined fair values of the assets acquired and liabilities assumed.

As of December 31, 2020, the measurement period is closed.

The impact of this acquisition is not material to the Company’s operating results;

therefore, pro-forma financial information is not included.

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Business Combinations and Discontinued Operations

Lehigh Hanson West Region.

On October 1, 2021 , the Company completed the acquisition of Lehigh Hanson, Inc.’s West Region business (Lehigh West Region) for $ 2.28 billion in cash.

The acquisition was primarily financed using proceeds from the issuance of publicly traded debt.

Lehigh West Region has a portfolio of 17 active aggregates quarries, two cement plants with related distribution terminals, and targeted downstream operations in four states.

These operations provide a new upstream, materials-led growth platform across several of the nation’s largest and fastest growing megaregions in California and Arizona, solidifying the Company’s position as a leading coast-to-coast aggregates producer.

The acquisition is reported in the Company’s West Group.

The acquisition represents a stock transaction where the Company acquired 100 % of the voting interest of the legal entities that comprise the Lehigh West Region.

However, for tax purposes, the acquisition is being treated as an asset transaction.

The Company determined the acquisition-date fair values of assets acquired and liabilities assumed.

Although initial accounting for the business combination has been recorded, the fair values of these amounts are subject to change during the measurement period, which extends no longer than one year from consummation date depending on additional reviews, such as asset verification.

Specific amounts subject to ongoing purchase accounting adjustments include, but are not limited to, inventories;

property, plant and equipment;

lease assets and liabilities;

intangible assets;

asset retirement obligations;

and other liabilities.

Therefore, the measurement period remains open as of December 31, 2021.

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

The following is a summary of the estimated fair values of the assets acquired and the liabilities assumed as of October 1, 2021 :

(in millions)

Property, plant and equipment 1

Intangible assets, other than goodwill

Asset retirement obligations

Operating and finance lease liabilities

Other liabilities

Total Liabilities

Total Consideration

Includes mineral reserves of $ 332.0 million.

The acquired intangible assets consist of the following:

(in millions, except year data)

Weighted-average

amortization period

Subject to amortization:

Customer relationships

Operating permits

Total subject to amortization

Classified as held for sale and not subject to amortization:

Customer relationships

Operating permits

Total classified as held for sale

Goodwill represents the excess purchase price over the fair values of assets acquired and liabilities assumed and reflects projected operating synergies from the transaction, including expected overhead savings.

The goodwill generated by the transaction is deductible for income tax purposes.

The Company did not acquire any of Lehigh West Region’s cash, cash equivalents or accounts receivable nor did it assume any accounts payable, outstanding debt, or pension obligation.

The unaudited pro forma financial information summarizes the combined results of operations for the Company and Lehigh West Region as though the companies were combined as of January 1, 2020.

Financial information for periods prior to the October 1, 2021 acquisition date included in the pro forma earnings does not reflect any cost savings or associated costs to achieve such savings from operating efficiencies or synergies that result from the combination.

Consistent with the assumed acquisition date of January 1, 2020, the pro forma financial results for the year ended December 31, 2020 include acquisition-related expenses of $ 46.8 million.

The unaudited pro forma financial information does not purport to project the future financial position or operating results of the combined company.

The following pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place as of January 1, 2020:

years ended December 31

(in millions, except for per share data)

Total revenues

Net earnings from continuing operations attributable to Martin Marietta

Diluted net earnings from continuing operations per share

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Form 10-K ♦ Page 89

Part II ♦ Item 8 – Financial Statements and Supplementary Data

The pro forma financial information excludes the cement and California ready mix businesses, which are classified as discontinued operations.

Southern Crushed Concrete.

On July 30, 2021 , the Company acquired assets of Southern Crushed Concrete (SCC).

SCC is a leading producer of recycled concrete in the Houston area.

Recycled concrete is principally used as a base aggregates product in infrastructure, commercial and residential construction applications.

The Company acquired inventories;

property, plant and equipment;

intangible assets (including goodwill);

and lease ROU assets.

The Company assumed asset retirement obligations;

lease obligations;

and other liabilities.

The goodwill generated by the transaction is deductible for income tax purposes.

Although initial accounting for the business combination has been recorded, the fair values of these amounts are subject to change during the measurement period, which remains open as of December 31, 2021.

The acquisition is reported in the Company’s West Group, but is immaterial for pro-forma financial statement disclosures.

Tiller Corporation.

On April 30, 2021 , the Company completed the acquisition of Tiller Corporation (Tiller), a leading aggregates and hot mix asphalt supplier in the Minneapolis/St.

Paul region, one of the largest and fastest growing midwestern metropolitan areas.

The Tiller acquisition complements the Company’s existing product offerings in the surrounding areas.

Additionally, Tiller sells asphalt solely as a materials provider, and does not offer paving or other associated services.

The Company financed the acquisition using available cash and borrowings under its credit facilities.

The Company has recorded preliminary fair values of the assets acquired and liabilities assumed;

however, these amounts are subject to change during the measurement period, which remains open as of December 31, 2021.

The goodwill generated by the transaction is deductible for income tax purposes.

The acquisition is reported in the Company’s East Group, but is immaterial for pro-forma financial statement disclosures.

Total revenues and earnings from operations attributable to all continuing operations acquired in 2021 which are included in the consolidated statement of earnings for the year ended December 31, 2021 were $ 338.6 million and $ 12.1 million, respectively.

Total acquisition-related expenses, primarily related to the Lehigh West Region transaction, were $ 57.9 million for the year ended December 31, 2021.

Discontinued Operations.

The Company’s discontinued operations are comprised of the cement and California ready mix businesses acquired as part of the Lehigh West Region transaction.

The Company did no t record any amortization or depreciation expense related to these businesses from the date of acquisition, October 1, 2021, through December 31, 2021, as these are classified as assets held for sale.

Discontinued operations for the year ended December 31, 2021 include the following:

(in millions)

Total revenues

Earnings from operations

Pretax earnings

Income tax expense

Total cash used for operating and investing activities for the discontinued operations was $ 11.9 million for the year ended December 31, 2021.

For the year ended December 31, 2021, non-cash operating and investing activities related to the discontinued operations were $ 14.8 million and $ 19.7 million of right-of-use assets obtained in exchange for new finance and operating lease liabilities, respectively.

Capital expenditures for the discontinued operations for the period of the Company’s ownership are immaterial.

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

Assets Held for Sale.

Assets and liabilities held for sale as of December 31 were as follows:

(in millions)

Inventories, net

Property, plant and equipment

Intangible assets, excluding goodwill

Total current assets held for sale

Property, plant and equipment

Intangible assets, excluding goodwill

Operating lease right-of-use assets

Valuation allowance for loss on sale

Total noncurrent assets held for sale

Asset retirement obligations

Lease obligations

Total current liabilities held for sale

Asset retirement obligations

Lease obligations

Total noncurrent liabilities held for sale

Accounts Receivable, Net

14 unchanged sentences

Inventories, net

SOAR to a Sustainable Future

Form 10-K ♦ Page 91

Part II ♦ Item 8 – Financial Statements and Supplementary Data

Property, Plant and Equipment, Net

9 unchanged sentences

Depreciation, depletion and amortization expense related to property, plant and equipment was $ 422.4 million, $ 376.3 million and $ 354.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Depreciation, depletion and amortization expense for 2020 and 2019 includes amortization of right-of-use assets from finance leases and for 2018 includes amortization of machinery and equipment under capital leases.

Interest expense of $ 4.2 million, $ 5.1 million and $ 3.0 million was capitalized during 2020, 2019 and 2018, respectively.

Depreciation, depletion and amortization expense includes amortization of ROU assets from finance leases.

Interest of $ 5.6 million, $ 4.2 million and $ 5.1 million was capitalized during 2021, 2020 and 2019, respectively.

At December 31, 2021 and 2020, $ 44.9 million and $ 46.0 million, respectively, of the Building Materials business’ property, plant and equipment, net, were located in foreign countries, namely The Bahamas and Canada.

A World-Class Organization Built for Success

Form 10-K ♦ Page 85

Part II ♦ Item 8 – Financial Statements and Supplementary Data

Long-Term Debt

1 unchanged sentence

0.650 % Senior Notes, due 2023

4.25 % Senior Notes, due 2024

7 % Debentures, due 2025

4 unchanged sentences

6.25 % Senior Notes, due 2037

Floating Rate Senior Notes, due 2020 , interest rate of 2.55 %

at December 31, 2019

Trade Receivable Facility, interest rate of 2.42 % at December 31, 2019

4.250 % Senior Notes, due 2047

3.200 % Senior Notes, due 2051

current maturities

Long-term debt

On July 2, 2021, the Company issued $ 700.0 million aggregate principal amount of 0.650% Senior Notes due 2023 (the 0.650 % Senior Notes), $ 900.0 million aggregate principal amount of 2.400 % Senior Notes due 2031 (the 2.400% Senior Notes) and $ 900.0 million aggregate principal amount of 3.200 % Senior Notes due 2051 (the 3.200% Senior Notes), pursuant to a base indenture, dated as of May 22, 2017 (the Base Indenture), as amended and supplemented from time to time, including by the Fourth Supplemental Indenture, dated as of July 2, 2021 and, together with the Base Indenture (the Indenture) between the Company and Regions Bank, as trustee, governing these notes.

On the consolidated balance sheets, these notes are carried net of original issue discount, which will be amortized using the effective interest method over the lives of the issues.

The Company used the net proceeds of the 2.400% Senior Notes, the 3.200% Senior Notes and the 0.650% Senior Notes to pay the consideration for the acquisition of the Lehigh West Region business and for general corporate purposes.

See Note D for more information on the Lehigh West Region acquisition, which was consummated on October 1, 2021.

Form 10-K ♦ Page 92

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

Prior to July 2, 2022 (the 2023 Par Call Date), the Company may redeem the 0.650% Senior Notes, at its option, at any time in whole or from time to time in part at a price equal to the greater of:

(i) 100 % of the principal amount of the 0.650% Senior Notes to be redeemed and (ii) the sum of the present values of the principal amount of the 0.650% Senior Notes to be redeemed and the remaining scheduled payments of interest thereon after the date of optional redemption (a 2023 Optional Redemption Date) through the 2023 Par Call Date (assuming, for this purpose, that the 0.650% Senior Notes are scheduled to mature on the 2023 Par Call Date), excluding interest, if any, accrued thereon to such 2023 Optional Redemption Date, discounted to such 2023 Optional Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Indenture) plus 10 basis points (or 0.100%) plus, in each case, unpaid interest, if any, accrued thereon to, but excluding, such 2023 Optional Redemption Date.

On or after the 2023 Par Call Date and prior to maturity, the Company may redeem the 0.650% Senior Notes at any time in whole or from time to time in part at a price equal to 100 % of the principal amount of the 0.650% Senior Notes, at its option, to be redeemed, plus unpaid interest, if any, accrued thereon to, but excluding, the 2023 Optional Redemption Date.

Prior to April 15, 2031 (the 2031 Par Call Date), the Company may redeem the 2.400% Senior Notes, at its option, at any time in whole or from time to time in part at a price equal to the greater of:

(i) 100 % of the principal amount of the 2.400% Senior Notes to be redeemed and (ii) the sum of the present values of the principal amount of the 2.400% Senior Notes to be redeemed and the remaining scheduled payments of interest thereon after the date of optional redemption (a 2031 Optional Redemption Date) through the 2031 Par Call Date (assuming, for this purpose, that the 2.400% Senior Notes are scheduled to mature on the 2031 Par Call Date), excluding interest, if any, accrued thereon to such 2031 Optional Redemption Date, discounted to such 2031 Optional Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Indenture) plus 15 basis points (or 0.150%) plus, in each case, unpaid interest, if any, accrued thereon to, but excluding, such 2031 Optional Redemption Date.

On or after the 2031 Par Call Date and prior to maturity, the Company may redeem the 2.400% Senior Notes at any time in whole or from time to time in part at a price equal to 100 % of the principal amount of the 2.400% Senior Notes, at its option, to be redeemed, plus unpaid interest, if any, accrued thereon to, but excluding, the 2031 Optional Redemption Date.

Prior to January 15, 2051 (the 2051 Par Call Date), the Company may redeem the 3.200% Senior Notes, at its option, at any time in whole or from time to time in part at a price equal to the greater of:

(i) 100 % of the principal amount of the 3.200% Senior Notes to be redeemed and (ii) the sum of the present values of the principal amount of the 3.200% Senior Notes to be redeemed and the remaining scheduled payments of interest thereon after the date of optional redemption (a 2051 Optional Redemption Date) through the 2051 Par Call Date (assuming, for this purpose, that the 3.200% Senior Notes are scheduled to mature on the 2051 Par Call Date), excluding interest, if any, accrued thereon to such 2051 Optional Redemption Date, discounted to such 2051 Optional Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Indenture) plus 20 basis points (or 0.200%) plus, in each case, unpaid interest, if any, accrued thereon to, but excluding, such 2051 Optional Redemption Date.

On or after the 2051 Par Call Date and prior to maturity, the Company may redeem the 3.200% Senior Notes at any time in whole or from time to time in part at a price equal to 100 % of the principal amount of the 3.200% Senior Notes, at its option, to be redeemed, plus unpaid interest, if any, accrued thereon to, but excluding, the 2051 Optional Redemption Date.

On March 5, 2020, the Company issued $ 500.0 million aggregate principal amount of 2.500 % Senior Notes due 2030 (the 2.500% Senior Notes).

3 unchanged sentences

The Company used the net proceeds for general corporate purposes, including the repayment of $ 300.0 million of Floating Rate Senior Notes at maturity in May 2020.

At December 31, 2019, the Floating Rate Senior Notes due May 2020 were classified as noncurrent long-term debt on the consolidated balance sheet as the Company had the intent and ability to refinance the notes on a long-term basis.

The Company’s 4.25 % Senior Notes due 2024 , 7 % Debentures due 2025 , 3.450 % Senior Notes due 2027 , 3.500 % Senior Notes due 2027 , 2.500 % Senior Notes due 2030 , 6.25 % Senior Notes due 2037 and 4.250 % Senior Notes due 2047 (collectively, the Senior Notes) are senior unsecured obligations of the Company, ranking equal in right of payment with the Company’s existing and future unsubordinated indebtedness.

Upon a change-of-control repurchase event and a resulting below-investment-grade credit rating, the Company would be required to make an offer to repurchase all outstanding Senior Notes, with the exception of the 7% Debentures due 2025, at a price in cash equal to 101 % of the principal amount of the Senior Notes, plus any accrued and unpaid interest.

The Senior Notes are carried net of original issue discount, which is being amortized by the effective interest method over the life of the issue.

The Senior Notes are redeemable prior to their respective maturity dates at a make-whole redemption price.

The principal amount, effective interest rate and maturity date for the Senior Notes are as follows:

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

Th e Senior Notes and the notes issued in 2021 are carried net of original issue discount, which is being amortized by the effective interest method over the life of the issue.

The principal amount, effective interest rate and maturity date for the Senior Notes and the notes issued in 2021 are as follows :

(in millions)

1 unchanged sentence

0.650% Senior Notes

July 15, 2023

4.25% Senior Notes

7% Debentures

6 unchanged sentences

2.400% Senior Notes

July 15, 2031

6.25% Senior Notes

4.250% Senior Notes

December 15, 2047

The Company has a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent, Truist Bank, Deutsche Bank Securities, Inc., and Wells Fargo Bank, N.A., as Co-Syndication Agents, and the lenders party thereto (the Credit Agreement), which provides for a $ 700.0 million five-year senior unsecured revolving facility (the Revolving Facility).

3.200% Senior Notes

July 15, 2051

The Company has a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent, Deutsche Bank Securities, Inc., PNC Bank, Truist Bank and Wells Fargo Bank, N.A., as Syndication Agents, and the lenders party thereto (the Credit Agreement), which provides for a $ 800.0 million five-year senior unsecured revolving facility (the Revolving Facility).

Borrowings under the Revolving Facility bear interest, at the Company’s option, at rates based upon the London Inter-bank Offered Rate (LIBOR) or a base rate, plus, for each rate, a margin determined in accordance with a ratings-based pricing grid.

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

The Credit Agreement requires the Company’s ratio of consolidated net debt-to-consolidated earnings before interest, taxes, depreciation, depletion and amortization, as defined, for the trailing-twelve months (the Ratio) to not exceed 3.50 x as of the end of any fiscal quarter, provided that the Company may exclude from the Ratio debt incurred in connection with certain acquisitions during the quarter or three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 3.75 x.

Additionally, if no amounts are outstanding under both the Revolving Facility and the trade receivable securitization facility (discussed later), consolidated debt, including debt for which the Company is a co-borrower (see Note O), shall be reduced by the Company’s unrestricted cash and cash equivalents in excess of $ 50.0 million, such reduction not to exceed $ 200.0 million, for purposes of the covenant calculation.

The Company was in compliance with the Ratio at December 31, 2020.

The Revolving Facility expires on December 5, 2024 , with any outstanding principal amounts, together with interest accrued thereon, due in full on that date.

There were no borrowings outstanding under the Credit Agreement as of December 31, 2021 and 2020.

The Credit Agreement expires on December 21, 2026 , with any outstanding principal amounts, together with interest accrued thereon, due in full on that date.

Available borrowings under the Revolving Facility are reduced by any outstanding letters of credit issued by the Company under the Revolving Facility.

At December 31, 2020 and 2019, the Company had $ 2.6 million and $ 2.3 million, respectively, of outstanding letters of credit issued under the Revolving Facility and $ 697.4 million and $ 697.7 million, respectively, available for borrowing under the Revolving Facility.

At December 31, 2021 and 2020, the Company had $ 2.6 million of outstanding letters of credit issued under the Revolving Facility and $ 797.4 million and $ 697.4 million, respectively, available for borrowing under the Revolving Facility.

The Company paid the bank group an upfront loan commitment fee that is being amortized over the life of the Revolving Facility.

The Revolving Facility includes an annual facility fee.

Additionally, if no amounts are outstanding under both the Revolving Facility and the trade receivable securitization facility (discussed later), consolidated debt, including debt for which the Company is a co-borrower (see Note O), shall be reduced in an amount equal to the lesser of $ 500.0 million or the sum of the Company’s unrestricted cash and temporary investments, for purposes of the covenant calculation.

The Company was in compliance with the Ratio at December 31, 2021.

The Company, through a wholly-owned special-purpose subsidiary, has a $ 400.0 million trade receivable securitization facility (the Trade Receivable Facility).

On September 22, 2021, the Company extended the maturity to September 21, 2022 .

The Trade Receivable Facility, with Truist Bank, Regions Bank, PNC Bank, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, and certain other lenders that may become a party to the facility from time to time, is backed by eligible trade receivables, as defined.

The Trade Receivable Facility, with Truist Bank, Regions Bank, PNC Bank, N.A., MUFG Bank, Ltd., New York Branch, and certain other lenders that may become a party to the facility from time to time, is backed by eligible trade receivables, as defined.

Borrowings are limited to the lesser of the facility limit or the borrowing base, as defined.

3 unchanged sentences

The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements.

At December 31, 2020, there were no borrowings outstanding under the Trade Receivable Facility and $ 340.0 million of borrowings outstanding at December 31, 2019.

At December 31, 2021 and 2020, there were no borrowings outstanding under the Trade Receivable Facility.

Form 10-K ♦ Page 94

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

The Company’s long-term debt maturities for the five years following December 31, 2021, and thereafter are:

7 unchanged sentences

Due to the short-term nature of this account, the fair value of restricted cash approximates its carrying value.

A World-Class Organization Built for Success

Form 10-K ♦ Page 87

Part II ♦ Item 8 – Financial Statements and Supplementary Data

Accounts receivable are due from a large number of customers, primarily in the construction industry, and are dispersed across wide geographic and economic regions.

However, accounts receivable are more heavily concentrated in certain states, namely Texas, Colorado, North Carolina, Georgia and Iowa .

However, accounts receivable are more heavily concentrated in certain states, namely Texas, Colorado, North Carolina, Georgia and Minnesota.

The estimated fair values of accounts receivable approximate their carrying amounts.

4 unchanged sentences

The carrying values and fair values of the Company’s long-term debt were $ 5.10 billion and $ 5.45 billion, respectively, at December 31, 2021 and $ 2.63 billion and $ 3.08 billion, respectively, at December 31, 2020.

The estimated fair value of the Company’s publicly-registered long-term debt was estimated based on Level 2 of the fair value hierarchy using quoted market prices.

The estimated fair value of the Company’s publicly-registered long-term debt was estimated using quoted market prices.

The estimated fair values of other borrowings, which primarily represent variable-rate debt, approximate their carrying amounts as the interest rates reset periodically.

The components of the Company’s income tax expense are as follows:

SOAR to a Sustainable Future

Form 10-K ♦ Page 95

Part II ♦ Item 8 – Financial Statements and Supplementary Data

The components of the Company’s income tax expense from continuing operations are as follows:

years ended December 31

7 unchanged sentences

Income tax expense

For the year ended December 31, 2018, the benefit related to the utilization of federal net operating loss (NOL) carryforwards, reflected in current tax expense, was $ 5.8 million.

Additionally, for the year ended December 31, 2018, the Company completed the accounting for the impact of the 2017 Tax Cuts and Jobs Act and recorded a net income tax benefit of $18.9 million, primarily related to the accelerated deductions for pension funding, inventory and insurance prepayments that were claimed on the Company’s 2017 income tax returns.

For the years ended December 31, 2021, 2020 and 2019, foreign pretax earnings were $ 7.5 million, $ 8.9 million and $ 15.1 million, respectively.

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

The Company’s effective income tax rate varied from the statutory United States income tax rate because of the following

tax differences:

The Company’s effective income tax rate on continuing operations varied from the statutory United States income tax rate because of the following tax differences:

years ended December 31

3 unchanged sentences

State income taxes, net of federal tax benefit

Railroad track maintenance credits

Federal tax credits

Change in tax status of subsidiary

Impact from 2017 Tax Cuts and Jobs Act

Effective income tax rate

1 unchanged sentence

Due to these limitations, the impact of changes in the sales volumes and earnings may not proportionately affect the Company’s statutory depletion deduction and the corresponding impact on the effective income tax rate.

In 2020, the Company financed third-party railroad track maintenance.

In exchange, the Company received a federal income tax credit and deduction.

The Company recognized a net tax benefit from the change in tax status of a subsidiary from a partnership to a corporation in 2019, which reduced income tax expense and increased consolidated net earnings by $ 15.2 million, or $ 0.24 per diluted share.

In 2021 and 2020, the Company financed third-party railroad track maintenance.

In exchange, the Company received federal income tax credits and tax deductions.

Form 10-K ♦ Page 96

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

The principal components of the Company’s deferred tax assets and liabilities are as follows:

18 unchanged sentences

Deferred income taxes, net

The Company had $ 3.1 million and $ 4.1 million of domestic federal NOL carryforwards at December 31, 2020 and 2019, respectively.

The Company had $ 1.3 million and $ 3.1 million of domestic federal net operating loss (NOL) carryforwards at December 31, 2021 and 2020, respectively.

The Company had domestic state NOL carryforwards of $ 40.7 million and $ 137.1 million at December 31, 2021 and 2020, respectively.

1 unchanged sentence

At December 31, 2021 and 2020, deferred tax assets associated with these carryforwards were $ 2.6 million and $ 9.0 million, respectively, net of the federal benefit of the state deduction, for which valuation allowances of $ 2.2 million and $ 8.1 million, respectively, were recorded.

The reduction in state NOL carryforwards and corresponding valuation allowances in 2021 primarily resulted from the liquidation of a subsidiary and a change in North Carolina state tax law.

The Company also had domestic state tax credit carryforwards of $ 0.9 million and $ 1.0 million at December 31, 2021 and 2020, respectively, which have various expiration dates through 2041 .

At December 31, 2021 and 2020, deferred tax assets associated with these carryforwards were $ 0.7 million and $ 0.8 million, respectively, net of the federal benefit of the state deduction.

A World-Class Organization Built for Success

Form 10-K ♦ Page 89

Part II ♦ Item 8 – Financial Statements and Supplementary Data

Deferred tax liabilities for property, plant and equipment result from accelerated depreciation methods being used for income tax purposes as compared with the straight-line method for financial reporting purposes.

2 unchanged sentences

The Company believes that the tax liability that would be incurred upon repatriation is immaterial at December 31, 2021.

SOAR to a Sustainable Future

Form 10-K ♦ Page 97

Part II ♦ Item 8 – Financial Statements and Supplementary Data

The following table summarizes the Company’s unrecognized tax benefits, excluding interest and correlative effects of $ 0.2 million, $ 0.2 million and $ 1.7 million for the years ended December 31, 2021, 2020 and 2019 respectively:

12 unchanged sentences

For the year ended December 31, 2021, $ 1.6 million was reversed into income upon the statute of limitations expiration for the 2017 and all prior open tax years.

For the year ended December 31, 2020, $ 9.7 million was reversed into income upon the statute of limitations expiration for 2016.

Management believes its accrual for unrecognized tax benefits is sufficient to cover uncertain tax positions reviewed during audits by taxing authorities.

The Company anticipates that it is reasonably possible that its unrecognized tax benefits may decrease up to $ 4.4 million, excluding interest and correlative effects, during the twelve months ending December 31, 2021, due to the expiration of the statutes of limitations for the 2017 tax year.

The Company anticipates that it is reasonably possible that its unrecognized tax benefits may decrease up to $ 3.1 million, excluding interest and correlative effects, during the twelve months ending December 31, 2022, due to the settlement of the 2017 tax year and the expiration of the statutes of limitations for the 2018 tax year.

The Company’s tax years subject to federal, state or foreign examinations are 2017 through 2021.

6 unchanged sentences

Defined Benefit Retirement Plans.

Retirement plan assets are invested in listed stocks, bonds, hedge funds, real estate and cash equivalents.

Retirement plan assets are invested in listed stocks, bonds, real estate, hedge funds, private infrastructure and cash equivalents.

Defined retirement benefits for salaried employees are based on each employee’s years of service and average compensation for a specified period of time before retirement.

3 unchanged sentences

When these benefit payments exceed the sum of the service and interest costs for the SERP during a year, the Company recognizes a pro rata portion of the SERP’s unrecognized actuarial loss as settlement expense.

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Form 10-K ♦ Page 98

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

15 unchanged sentences

(in millions)

Actuarial loss

Actuarial (gain) loss

Net prior service cost

12 unchanged sentences

Interest cost

Actuarial loss

Plan amendments

Actuarial (gain) loss

Gross benefits paid

Net projected benefit obligation at end of year

A World-Class Organization Built for Success

Actuarial gains in 2021 are primarily attributable to a higher-than-expected return on pension assets.

Actuarial losses in 2020 were primarily attributable to lower discount rates compared with the prior year.

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

Actuarial losses in 2020 and 2019 are primarily attributable to lower discount rates compared with the prior year.

The Company’s change in plan assets, funded status and amounts recognized on the Company’s consolidated balance sheets are as follows:

8 unchanged sentences

Funded status of the plan at end of year

Accrued benefit cost

Accrued benefit credit (cost)

(in millions)

4 unchanged sentences

Net amount recognized at end of year

The accumulated benefit obligation for all defined benefit pension plans was $ 974.0 million and $ 878.7 million at December 31, 2020 and 2019, respectively.

The accumulated benefit obligation for all defined benefit pension plans was $ 1.00 billion and $ 974.0 million at December 31, 2021 and 2020, respectively.

Benefit obligations and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets are as follows:

13 unchanged sentences

The no-collar table was used for salaried participants and the blue-collar table was used for hourly

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Form 10-K ♦ Page 100

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Part II ♦ Item 8 – Financial Statements and Supplementary Data

1 unchanged sentence

both tables were adjusted to reflect the experience of the Company’s participants.

The Company used the MP-2020 and MP-2018 mortality improvement scale for the years 20 20 and 201 9, respectively .

The Company used the MP-2020 mortality improvement scale for the years 20 2 1 and 20 20 .

The target allocation for 2021 and the actual pension plan asset allocation by asset class are as follows:

3 unchanged sentences

Private infrastructure

The Company’s investment strategy is for approximately 45 % of equity securities, excluding hedge funds and real estate, to be invested in mid-sized to large capitalization U.S.

funds, with the remaining invested in small capitalization, emerging markets and international funds.

The Company’s investment strategy is for equity securities, excluding real estate, to be invested in mid-sized to large capitalization U.S.

funds, small capitalization, emerging markets and international funds.

Debt securities, or fixed income investments, are invested in funds benchmarked to the Barclays U.S.

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Core fixed income

Private Infrastructure

Cash equivalents

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Real estate investments are stated at estimated fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair values of real estate

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Real estate investments are

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investments generally do not reflect transaction costs that may be incurred upon disposition of the real estate investments and do not necessarily represent the prices at which the real estate investments would be sold or repaid, since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller.

An independent valuation consultant is employed to determine the fair value of the real estate investments.

The value of hedge funds is based on the values of the sub-fund investments.

In determining the fair value of each sub-fund’s investment, the hedge funds’ Board of Trustees uses the values provided by the sub-funds and any other considerations that may, in its judgment, increase or decrease such estimated value.

valued at NAV based on the plan’s proportionate shares of the real estate funds’ fair value as recorded by the Trustees.

The funds are real estate investment trust based funds that offer participation in an actively managed, primarily core portfolio of equity real estate.

The funds allocate gains, losses and expenses to investors based on the ownership percentage to determine the NAV.

Private infrastructure assets represent investments in a fund that is stated at fair value.

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For investments in the fund for which there is no quoted market price, fair value is determined by the Trustees/General Partner based on discounted expected future cash flows prepared by third-party professionals.

The value of hedge funds is based on the values of the sub-fund investments.

In 2021 and 2020, the Company made combined pension plan and SERP contributions of $ 82.8 million and $ 88.4 million, respectively.

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(in millions)

Actuarial loss (gain)

Actuarial (gain) loss

Amortization of:

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Actuarial gain

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Participants’ contributions

Actuarial loss

Actuarial (gain) loss

Gross benefits paid

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both tables were adjusted to reflect the experience of the Company’s participants.

The Company used the MP-2020 and MP-2018 mortality improvement scales for the years 2020 and 2019, respectively.

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The Company used the MP-2020 mortality improvement scale for the years 2021 and 2020.

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Additionally, an incentive compensation stock plan has been adopted under the Plans whereby certain participants may elect to use up to 50 % of their annual incentive compensation to acquire units representing shares of the Company’s common stock at a 20 % discount to the market value on the date of the incentive compensation award.

Certain executive officers are required to participate in the incentive compensation stock plan at established minimum levels.

Participants receive unrestricted shares of common stock in an amount equal to their respective units generally at the end of a 34-month period of additional employment from the date of award or at retirement beginning at age 62.

All rights of ownership of the common stock convey to the participants upon the issuance of their respective shares at the end of the ownership-vesting period.

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As part of approving

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Stock-based compensation expense is included in Selling, general and administrative expenses in the Company’s consolidated statements of earnings.

The Company has leases, primarily for equipment, railcars, fleet vehicles, office space, land and information technology equipment and software.

The Company has leases, primarily for equipment, railcars, fleet vehicles, office space, land, information technology equipment and software.

The Company’s leases have remaining lease terms of one year to 98 years, some of which may include options to extend the leases for up to 30 years , and some of which may include options to terminate the leases within one year .

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The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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The Company has royalty agreements that are prescriptively excluded from the scope of ASC 842 and generally require royalty payments based on tons produced, tons sold or total sales dollars and also contain minimum payments.

Royalty expense was $ 60.8 million and $ 58.2 million for the years ended December 31, 2020 and 2019, respectively.

Royalty expense was $ 52.5 million for the year ended December 31, 2018.

Royalty expense was $ 67.1 million, $ 60.8 million and $ 58.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The balance sheet classifications of operating and finance leases are as follows:

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Finance leases

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Present value of lease payments

leases classified as held for sale

current lease obligations

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The undiscounted fixed payment commitments of leases entered into but not yet commenced as of December 31, 2021 was $ 2.0 million.

These commitments include a lease for the Company’s corporate headquarters in Raleigh, North Carolina, and assumes the Company will exercise the renewal options in the agreement.

Total lease expense for operating leases was $ 122.5 million for the year ended December 31, 2018.

The Company also had capital lease obligations for machinery and equipment of $ 3.2 million.

Shareholders’ Equity

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Pursuant to authority granted by its Board of Directors, the Company can repurchase up to 20.0 million shares of common stock.

The Company repurchased 0.2 million, 0.4 million and 0.5 million shares of common stock during 2020, 2019 and 2018, respectively.

Future share repurchases are at the discretion of management and were temporarily paused in March 2020 in light of the COVID-19 pandemic.

Management may resume share repurchases as circumstances dictate.

The Company made no share repurchases during 2021.

During 2020 and 2019, the Company repurchased 0.2 million and 0.4 million shares of common stock.

Future share repurchases are at the discretion of management.

At December 31, 2021, 13.5 million shares of common stock were remaining under the Company’s repurchase authorization.

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Total accretion and depreciation expenses for 2021, 2020 and 2019 were $ 11.9 million, $ 14.5 million and $ 9.1 million, respectively, and are included in Other operating income, net , in the consolidated statements of earnings.

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The following shows the changes in the asset retirement obligations:

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Revisions in estimated cash flows

Liabilities reclassified to held for sale

Balance at end of year

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Other Environmental Matters .

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(in millions)

A World-Class Organization Built for Success

Capital expenditures in 2021, 2020 and 2019 that were purchase commitments as of the prior year end were $ 99.0 million, $ 77.0 million and $ 106.7 million, respectively.

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Capital expenditures in 2020, 2019 and 2018 that were purchase commitments as of the prior year end were $ 77.0 million, $ 106.7 million and $ 79.3 million, respectively.

Contracts of Affreightment and Royalty Commitments.

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The Manistee collective bargaining agreement expires in August 2027 .

During 2020, the Company made organizational changes to its Building Materials business.

As of December 31, 2021, the Building Materials business is comprised of four divisions that represent individual operating segments.

These divisions are consolidated into two reportable segments, the East Group and the West Group, for financial reporting purposes as they meet the aggregation criteria.

Additional information on reportable segment changes is provided in Note A.

Prior-year reportable segment information has been reclassified to conform to the current-year presentation.

The Magnesia Specialties business represents an individual operating and reportable segment.

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investments and other assets not directly identifiable with a reportable segment.

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Total revenues, as well as the consolidated statements of earnings and comprehensive earnings, reflect the elimination of intersegment revenues.

Total revenues;

gross profit;

selling, general and administrative expenses and earnings from operations reflect continuing operations only.

years ended December 31

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Magnesia Specialties

Earnings from operations for the West Group include nonrecurring gains on sales of investment land and divested assets of $ 69.9 million in 2020 and an asset and portfolio rationalization charge of $ 18.8 million in 2018.

Earnings from operations for the West Group include nonrecurring gains on sales of investment land and divested assets of $ 69.9 million in 2020.

(in millions)

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Magnesia Specialties

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Interproduct revenues represent sales from the aggregates product line to the ready mixed concrete and asphalt and paving product lines and sales from the cement product line to the ready mixed concrete product line.

Total revenues and gross profit reflect continuing operations only.

years ended December 31

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Consolidated total revenues

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Acquisition of assets through asset exchange

Acquisition of assets through capital lease

Supplemental disclosures of cash flow information are as follows:

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Financing cash flows used for finance leases

These disclosures are required by ASC 842, which was adopted on January 1, 2019.

During the year ended December 31, 2020, the Company repaid $ 112.3 million of loans related to its company-owned life insurance policies.

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These net amounts represented income of $ 34.3 million, $ 59.8 million and $ 9.1 million in 2021, 2020 and 2019, respectively.

For 2021, other operating income, net, included $ 21.6 million of nonrecurring gains on land sales and divested assets, including the Company’s former corporate headquarters.

Other operating income, net for 2020 included $ 69.9 million of nonrecurring gains on the sales of investment land and divested assets in Austin, Texas;

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2019 income included the reversal of $ 6.9 million of accruals for sales tax and unclaimed property contingencies.

The 2018 amount reflected $ 18.8 million of asset and portfolio rationalization charges, reported in the West Group, related to the Company’s evaluation of the recoverability of certain long-lived assets for underperforming ready mixed concrete operations, offset by $ 7.7 million in net gains on legal settlements and $ 25.3 million in gains on the sale of assets, primarily excess land.

Other Nonoperating (Income) and Expenses, Net

For the year ended December 31, 2020, other nonoperating (income) and expenses, net, included $ 11.4 million of third-party railroad track maintenance expense.

Additionally, other nonoperating (income) and expenses, net, for the year ended December 31, 2020 reflects an $ 8.1 million reduction in pension expense compared with 2019.

For the year ended December 31, 2021, other nonoperating (income) and expenses, net, included $ 7.7 million of third-party railroad track maintenance expense and reflected a $ 19.4 million reduction in pension expense compared with 2020.

Other nonoperating (income) and expenses, net, for the year ended December 31, 2020 included $ 11.4 million of third-party railroad track maintenance expense and reflected an $ 8.1 million reduction in pension expense compared with 2019.

For the year ended December 31, 2019, other nonoperating (income) and expenses, net, included a $ 15.7 million ($ 12.0 million net of tax) out-of-period correction of a Company-identified overstatement of the investment balance for a nonconsolidated equity affiliate.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data