MARTIN MARIETTA MATERIALS INC

Public infrastructure, historically the Company’s largest end-use market, is funded through a combination of federal, state and local sources

Transportation investments typically stimulate economic growth by creating jobs and enhancing mobility and access, which are priorities of many of the government’s economic plans. Public-sector transportation infrastructure projects are funded through a mix of federal, state and local sources. The current federal infrastructure legislation, the IIJ Act, provides annual funding for public-sector highway construction and includes spending authorizations, which represent the maximum financial obligation that will result from the immediate or future outlays of federal funds for highway and transit programs.

The federal government’s surface transportation programs are funded mostly through highway user taxes deposited into the Highway Trust Fund, which is divided into the Highway Account and the Mass Transit Account. Most of the Trust Fund’s revenue comes from the federal gas tax, taxes on certain other motor fuels, and interest on accumulated balances. Of the federal gas tax of $0.184 per gallon, which has remained unchanged since 1993, $0.15 is allocated to the Highway Account of the Highway Trust Fund.

Since most states are required to balance their budgets, reductions in revenues generally require a reduction in states’ expenditures. However, the impact of state revenue reductions on highway investment will vary depending on whether the monies come from dedicated revenue sources, such as highway user fees, or whether portions are paid for with general funds.

In addition to federal appropriations, each state typically funds its infrastructure investment from specifically allocated amounts collected from various user fees, typically gasoline taxes and vehicle fees. States have assumed a significantly larger role in funding infrastructure investment, including initiating special-purpose taxes and raising state gas taxes. Management believes that financing at the state and local levels, such as bond issuances, toll roads, vehicle miles-traveled fees and tax initiatives, will continue to grow and have a fundamental role in advancing infrastructure projects. State infrastructure investment generally leads to increased growth opportunities for the Company. The level of state public-works spending varies across the nation and is dependent upon individual state economies, therefore the degree to which the Company could be affected by a reduction or slowdown in infrastructure spending varies by state. The state economies of the Building Materials business’ ten-largest revenue-generating states may disproportionately affect the Company’s financial performance.

Governmental appropriations and expenditures are typically less interest-rate sensitive than private-sector spending. Obligations of federal funds are a leading indicator of highway construction activity in the United States. Before a state or local transportation department can solicit bids on an eligible construction project, it enters into an agreement with the Federal Highway Administration to obligate the federal government to pay its portion of the project cost. These Federal obligations are subject to annual funding appropriation reviews by Congress.

In addition to highways and bridges, transportation infrastructure includes aviation, mass transit, ports and waterways. Railroad construction continues to benefit from economic growth, which ultimately generates a need for additional maintenance and improvements.

Erratic weather can significantly impact operations

Production and shipment levels for the Building Materials business correlate with general construction activity, most of which occurs outdoors and, as a result, is affected by erratic weather, seasonal changes and other environmental conditions. Typically, due to a general slowdown in heavy construction activity during winter months, the first and fourth quarters experience lower production and shipment activity. As such, temperatures in the months of March and November can meaningfully affect the Company’s first- and fourth-quarter results, respectively, where warm and/or moderate temperatures in March and November allow the construction season to start earlier and end later, respectively. Additionally, extreme heat during summer months can impact construction activities, as outdoor work may be limited to protect the health and safety of construction workers.

Excessive rainfall jeopardizes production efficiencies, shipments and profitability in all markets served by the Company. In particular, the Company’s operations near the Atlantic Ocean and Gulf Coast regions of the United States and The Bahamas are at risk for hurricane activity from June through November, but most notably in August, September and October. The Company’s California operations are at risk for flooding, wildfire activity and water use restrictions in severe drought conditions.

Capital investment decisions are driven by capital intensity of the Building Materials business and focus on land

The Company’s organic capital program is designed to leverage construction market growth by investing in both permanent and portable facilities across its operations. Over the course of an economic cycle, the Company typically invests organic capital at an annual level that approximates depreciation expense. At mid-cycle and during cyclical peaks, organic capital investment generally exceeds depreciation expense as the Company addresses current capacity requirements and positions itself for future growth. Conversely, during cyclical troughs, capital investment may be reduced. Regardless of the economic environment, the Company prioritizes capital investments that ensure safe, environmentally responsible, and efficient operations, allow delivery of the highest quality of customer service, and establish a strong foundation for future growth.

The Company is diligent in evaluating land opportunities, including potential new sites (greensites) and expansions of existing locations. Land purchases are usually opportunistic and may involve acquiring property adjacent to or near existing quarry locations. Such property can serve as buffer land or provide additional mineral reserves, assuming regulatory requirements are met and the underlying geology supports economical aggregates mining. In either instance, acquiring land around an existing quarry typically allows the expansion of the quarry footprint and extends its operating life.

The Specialties business produces and sells dolomitic lime from its Woodville, Ohio facility and manufactures high-purity natural and synthetic magnesia-based products for environmental, industrial, agricultural, construction, consumer and specialty applications at its Manistee, Michigan; Woodville, Ohio; Gabbs, Nevada; Waynesville, North Carolina; Greendale, Indiana; and Aspers, Pennsylvania facilities. These magnesia-based products have varying uses, including flame retardants, wastewater treatment, pulp and paper production and other specialty applications. Dolomitic lime products sold to external customers are primarily used by the domestic steel industry as a fluxing agent, and in construction applications for soil stabilization, while the remaining lime shipments are used internally as a raw material for the manufacturing of synthetic magnesia-based products. On July 25, 2025, the Company acquired Premier Magnesia, LLC (Premier), a privately-owned producer and distributor of magnesia-based products, using cash on hand and credit-facility borrowings. Premier is the largest producer of natural magnesite and magnesium sulfate, or Epsom salt, in the United States. This transaction expands the Company's product offerings to new and existing customers and enhances the Specialties business.

With 33% of Specialties’ 2025 revenues related to products used in the steel industry, a portion of the segment’s revenues and profits is affected by production and inventory trends within the steel industry, which are guided by the rate of consumer consumption, the flow of offshore imports and other economic factors.

While revenues of the Specialties business were predominantly derived from domestic customers in 2025, financial results can be affected by foreign currency exchange rates, increasing transportation costs or weak economic conditions in foreign markets. To mitigate the short-term effect of currency exchange rates, foreign transactions are denominated in United States dollars.

A significant portion of the Specialties business’ costs is of a fixed or semi-fixed nature. The production process requires the use of natural gas, coal and petroleum coke; therefore, fluctuations in their pricing directly affect operating results. To help mitigate this risk, the Company has fixed-price agreements for 34% of its anticipated 2026 energy needs for coal, petroleum coke and natural gas. Given inherently high fixed costs, low-capacity utilization can negatively affect the segment’s results of operations, while providing a high degree of operating leverage in periods of high-capacity utilization. Management expects future organic profit growth to result from increased pricing, commercialization of new products, entry into new markets and optimization of overall product mix.

In 2025, direct production costs represented 82% of the Specialties business' total cost of revenues:

The Specialties business is highly dependent on rail transportation, particularly for movement of dolomitic lime from Woodville to Manistee, magnesite from Gabbs to processing plants in North Carolina, Indiana and Pennsylvania and direct customer shipments of dolomitic lime and magnesia products from Woodville, Manistee and Gabbs. The segment can be affected by the risks mentioned in the long-haul distribution discussion in the Building Materials Business’ Key Considerations section.