| Significant Accounting Policies | 1.
Significant Accounting Policies Organization Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. The Company supplies aggregates (crushed stone, sand and gravel) through its network of approximately 290 quarries, mines and distribution yards in 27 states, Canada and The Bahamas. In the southwestern and western United States, Martin Marietta also provides cement and downstream products and services, namely, ready mixed concrete, asphalt and paving, in vertically-integrated structured markets where the Company has a leading aggregates position. The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects. Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. 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, including consolidating its operational management and operating divisions, in connection with the retirement of two senior executives as of the end of the second quarter. Notably, the Mid-Atlantic Division and Southeast Division have been combined into the newly formed East Division. Additionally, the Southwest Aggregates Division and the Cement and Southwest Ready Mix Division have been combined into the newly formed Southwest Division. Subsequent to these changes, the Building Materials business consists of four divisions, which also includes the Central and West Divisions. Each division, as well as the Magnesia Specialties business, represents an operating segment. The Company’s Building Materials business includes two reportable segments: the East Group and the West Group. 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.
BUILDING MATERIALS BUSINESS
Reportable Segments
East Group
West Group
Operating Locations
Alabama, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, eastern
Arkansas, Colorado, Louisiana, western Nebraska, Nevada, Oklahoma, Texas, Utah, Washington and Wyoming
Product Lines
Aggregates
Aggregates, Cement, Ready Mixed Concrete, Asphalt and Paving The Company’s Magnesia Specialties business has manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. The Magnesia Specialties business produces magnesia-based chemicals products used in industrial, agricultural and environmental applications, and dolomitic lime sold primarily to customers in the steel and mining industries. Basis of Presentation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and in Article 10 of Regulation S-X. The Company has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In the opinion of management, the interim consolidated financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods. The consolidated results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The preparation of the Company’s consolidated financial statements requires management to make certain estimates and assumptions about future events. As future events and their effects, including the impact of the coronavirus (COVID-19) pandemic and the related responses, cannot be fully determined with precision, actual results could differ significantly from estimates. Changes in estimates are reflected in the consolidated financial statements in the period in which the change in estimate occurs. New Accounting Pronouncement Credit Losses Effective January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses The Company records an allowance for credit losses, which includes a provision for probable losses based on historical write-offs, Consolidated Comprehensive Earnings/Loss and Accumulated Other Comprehensive Loss Consolidated comprehensive earnings/loss and accumulated other comprehensive loss consist of consolidated net earnings or loss; 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 earnings and comprehensive earnings. Comprehensive earnings attributable to Martin Marietta is as follows:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
(Dollars in Millions)
Net earnings attributable to Martin Marietta
$
294.4
$
248.6
$
538.0
$
480.9
Other comprehensive earnings, net of tax
3.6
2.5
7.2
8.8
Comprehensive earnings attributable to Martin Marietta
$
298.0
$
251.1
$
545.2
$
489.7
Changes in accumulated other comprehensive loss, net of tax, are as follows:
(Dollars in Millions)
Pension and Postretirement Benefit Plans
Foreign Currency
Accumulated Other Comprehensive Loss
Three Months Ended September 30, 2020
Balance at beginning of period
$
(140.0
)
$
(2.2
)
$
(142.2
)
Other comprehensive earnings before reclassifications, net of tax
—
0.5
0.5
Amounts reclassified from accumulated other comprehensive earnings, net of tax
3.1
—
3.1
Other comprehensive earnings, net of tax
3.1
0.5
3.6
Balance at end of period
$
(136.9
)
$
(1.7
)
$
(138.6
)
Three Months Ended September 30, 2019
Balance at beginning of period
$
(136.0
)
$
(1.3
)
$
(137.3
)
Other comprehensive loss before reclassifications, net of tax
—
(0.2
)
(0.2
)
Amounts reclassified from accumulated other comprehensive loss, net of tax
2.7
—
2.7
Other comprehensive earnings (loss), net of tax
2.7
(0.2
)
2.5
Balance at end of period
$
(133.3
)
$
(1.5
)
$
(134.8
)
(Dollars in Millions)
Pension and Postretirement Benefit Plans
Foreign Currency
Accumulated Other Comprehensive Loss
Nine Months Ended September 30, 2020
Balance at beginning of period
$
(144.9
)
$
(0.9
)
$
(145.8
)
Other comprehensive loss before reclassifications, net of tax
—
(0.8
)
(0.8
)
Amounts reclassified from accumulated other comprehensive loss, net of tax
8.0
—
8.0
Other comprehensive earnings (loss), net of tax
8.0
(0.8
)
7.2
Balance at end of period
$
(136.9
)
$
(1.7
)
$
(138.6
)
Nine Months Ended September 30, 2019
Balance at beginning of period
$
(141.5
)
$
(2.1
)
$
(143.6
)
Other comprehensive earnings before reclassifications, net of tax
—
0.6
0.6
Amounts reclassified from accumulated other comprehensive earnings, net of tax
8.2
—
8.2
Other comprehensive earnings, net of tax
8.2
0.6
8.8
Balance at end of period
$
(133.3
)
$
(1.5
)
$
(134.8
) Changes in net noncurrent deferred tax assets related to accumulated other comprehensive loss are as follows:
Pension and Postretirement Benefit Plans
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
(Dollars in Millions)
Balance at beginning of period
$
83.6
$
82.4
$
85.2
$
84.2
Tax effect of other comprehensive earnings
(1.1
)
(0.9
)
(2.7
)
(2.7
)
Balance at end of period
$
82.5
$
81.5
$
82.5
$
81.5
Reclassifications out of accumulated other comprehensive loss are as follows:
Three Months Ended
Nine Months Ended
Affected line items in the consolidated
September 30,
September 30,
statements of earnings and
2020
2019
2020
2019
comprehensive earnings
(Dollars in Millions)
Pension and postretirement benefit plans
Amortization of:
Prior service credit
$
—
$
(0.2
)
$
(0.1
)
$
(0.6
)
Actuarial loss
4.2
3.8
10.8
11.5
4.2
3.6
10.7
10.9
Other nonoperating (income) and expenses, net
Tax benefit
(1.1
)
(0.9
)
(2.7
)
(2.7
)
Income tax expense
$
3.1
$
2.7
$
8.0
$
8.2
Earnings per Common Share The numerator for basic and diluted earnings per common share is net earnings attributable to Martin Marietta reduced by dividends and undistributed earnings attributable to certain of the Company’s stock-based compensation. If there is a net loss, no amount of the undistributed loss is attributed to unvested participating securities. The denominator for basic earnings per common share is the weighted-average number of common shares outstanding during the period. Diluted earnings per common share are computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards to be issued to employees and nonemployee members of the Company’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive. For the three and nine months ended September 30, 2020 and 2019, the diluted per-share computations reflect the number of common shares outstanding to include the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued. The following table reconciles the numerator and denominator for basic and diluted earnings per common share:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
(In Millions)
Net earnings attributable to Martin Marietta
$
294.4
$
248.6
$
538.0
$
480.9
Less: Distributed and undistributed earnings attributable to unvested awards
0.3
0.3
0.5
0.9
Basic and diluted net earnings available to common shareholders attributable to Martin Marietta
$
294.1
$
248.3
$
537.5
$
480.0
Basic weighted-average common shares outstanding
62.3
62.5
62.3
62.6
Effect of dilutive employee and director awards
0.1
0.2
0.1
0.1
Diluted weighted-average common shares outstanding
62.4
62.7
62.4
62.7
Restricted Cash As of September 30, 2020, the Company had restricted cash of $77.1 million, which is invested in an account designated for the purchase of like-kind exchange replacement assets under Section 1031 of the Internal Revenue Code (Section 1031). 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 has until January 27, 2021, to purchase qualified assets under Section 1031. In October 2020, the Company transferred an additional $45.1 million from asset sales completed in the third quarter 2020 into a restricted Section 1031 account and has until March 9, 2021, to reinvest the funds in qualifying assets. In connection with ASU 2016-18, Statement of Cash Flows (Topic 230), The following table reconciles cash, cash equivalents and restricted cash as reported on the consolidated balance sheets to the aggregated amounts presented on the consolidated statements of cash flows:
September 30,
January 1,
September 30,
January 1,
2020
2020
2019
2019
(Dollars in Millions)
Cash and cash equivalents
$
116.6
$
21.0
$
49.1
$
44.9
Restricted cash
77.1
—
—
—
Total cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows
$
193.7
$
21.0
$
49.1
$
44.9 |
